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The folly of efficient market theory

Dec 27, 2013

Here is today's recommended reading list from Equitymaster...

Inflation 101
What is Inflation? The common answer is: 'rising prices is inflation'. However it is not so simple. As this brilliant article points out, Inflation is not an increase in the price level but the cause of it. Inflation itself is a very different thing. So what exactly is it? Read on to find out. ( Safehaven)

Troubled times for emerging markets
Over-interference of government in economies, increasing reliance on commodities and unfavorable demographic trends are the trouble areas brewing for emerging economies according to Goldman Sachs. And emerging markets are expected to underperform for another 5-10 years. To get more details, refer the link below that summarizes well the recent Goldman Sachs research on trends in emerging markets. (Zacks)

The three common characteristics of Buffett's best investments...
Under legendary investor Warren Buffett's brilliant stewardship, Berkshire Hathaway has snowballed into a gigantic US$ 290 bn company. This has been possible because of Mr Buffett's excellent capital allocation skills. This article discusses three common characteristics between some of Buffett's greatest investments... Read on to find out what those characteristics are... (

How to become wealthy
Becoming fabulously wealthy is a dream of many people. Yet very few know how to achieve it. This is because most people are confused about where to start. If the basics of wealth creation interests you, then this very helpful article is for you... (Beginnersinvest)

The folly of efficient market theory
Passive index investing is based largely on the premise that markets are largely efficient. It is extremely difficult to find underpriced stocks because markets price in all the future growth prospects. This fallacy has been proven to be wrong but many still believe it to be true. In this insightful article the author explains how he unlearned this folly. Read on to find out more... (Morningstar)

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1 Responses to "The folly of efficient market theory"

Kirandeep Atwal

Dec 28, 2013

Warren Buffet is right in his argument. But, markets are inefficient in very long term. There are very few people who can remain invested for such a long period of time. Most of the fund managers get assessed on quarterly result. Therefore, they will lose job if they invest like Warren Buffet. An excellent example in India is real estate. Most of the people who made fortune from real estate had invested in it for more than ten years. If you are investing in real estate for less than 5 years then returns from it will converge to inflation.

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