Efficient market hypothesis is nonsense. A lot of institutional investors are long-only. That is their mandate. All the information they may have does not change that fact.
It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world. Ultimately, stock picking is just a less diversified version of buying an index.
> It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Sure, I should have phrased my claim more carefully: You cannot beat the market consistently every year. Beating it by chance is irrelevant when what you're looking for are sustainable, continuous profits.
> A lot of institutional investors are long-only. That is their mandate. All the information they may have does not change that fact.
There are also lots of institutional investors that are involved in day trading. My claim merely was that: 1) There are enough of them for new information to get priced in faster than average private individuals could take advantage of them on a consistent basis. 2) Private individuals are not likely to beat institutional day traders.
> Efficient market hypothesis is nonsense.
As with all real-world applications of science, the match between theory and practice is not perfect. IMO it is good enough, though. If it were possible to foresee stock prices on a consistent basis, then we'd see tons of successful investors. I have yet to hear of an investor or a fund manager, though, who consistently beats the market. All instances where an investor has been able to do that over, say, a 10-year period can be explained by statistical outliers. (In the sense that, yes, there will always be outliers but unfortunately, it's impossible to predict who it's going to be and how long their run is going to last. There are countless fund managers who were successful for a number of years, only to be very unsuccessful during the following years.)
> Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world.
That's true, I was being a bit sloppy here. I was referring to MSCI-like indices as, compared to smaller indices, they minimize risk due to additional diversification and still yield higher profits on average. (This is the usual paradox: diversification usually leads to lower risk and higher profits. It's the only free lunch you'll ever get.)
> Ultimately, stock picking is just a less diversified version of buying an index.
Sure, but in contrast to stock picking, there are 140 years of world market history backing the claim that long-term investments (over at least ~15-20 years) in "the" world market (i.e. MSCI-like indices) will, on average, yield profits in the order of 4-8% p.a., depending on what exactly your definition of "world market" is. There is no such data supporting investments in single stocks.
>I have yet to hear of an investor or a fund manager, though, who consistently beats the market.
Renaissance Technologies? Funny enough, it's always the people outside the industry with the least amount of information who believe in EMH.
To be clear, there are other great many firms that consistently crush it (including mine), but you probably haven't heard of them, or they are proprietary trading operations vs mutual/hedge funds.
But regardless, the point of a hedge fund manager isn't to beat the market anyways: it's to provide uncorrelated return.
> I have yet to hear of an investor or a fund manager, though, who consistently beats the market.
Renaissance's Medallion fund is one such outlier. They have averaged crazy returns over decades now, but they are likely only able to achieve such returns by being a small employee-only fund.
It is unlikely that you will beat the market in the long run and if you do, it may well be down to chance, but it is possible, because the market is not perfect.
Furthermore, you can not "buy the market" in the first place. You can buy ETFs replicating stock indices, but that is not the same. If you bought the S&P you will have performed differently than if you had bought MSCI world. Ultimately, stock picking is just a less diversified version of buying an index.