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Embrace market efficiency from "summary" of The Little Book of Common Sense Investing by John C. Bogle
To succeed in the investment business, we must embrace market efficiency. This concept is at the core of smart investing. Market efficiency means that the prices of stocks and bonds fully reflect all available information. In other words, the market is always right. Trying to beat the market by picking individual stocks or trying to time the market is a fool's errand. Market efficiency is not about predicting the future or outsmarting other investors. It is about accepting the reality that we cannot consistently beat the market. This may sound counterintuitive, but it is the truth. The evidence is overwhelming that most investors who try to beat the market end up worse off than if they had simply invested in a low-cost index fund. Instead of fighting against market efficiency, we should embrace it. By investing in a broad market index fund, we can capture the market's returns at a low cost. This strategy is not only simple but also highly effective. It eliminates the need for constant monitoring, trading, and speculation. It allows us to focus on the things that really matter, such as our long-term financial goals and our personal well-being. Market efficiency is not a new concept. It has been around for decades, and yet many investors still resist it. They believe that they can outsmart the market or that they have some special insight that others do not. This is a dangerous mindset that can lead to poor investment decisions and costly mistakes. In the end, embracing market efficiency is about humility and discipline. It is about recognizing our limitations as investors and staying true to a proven strategy. By letting go of our ego and embracing the wisdom of the market, we can achieve our financial goals with confidence and peace of mind.
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