Why Access to Global Economic and Investment Opportunities is Never Equal for Everyone
Many clients rely on good-old investment philosophy such as Value-Investing or Fundamental Analysis. Some clients who are keen on price movements, charting and patterns, may employ the use of technical analysis.
For wealth & investment professionals, such as traditional Fund Managers and Chief Investment Officers, they rely heavily on Modern Portfolio Theory.
Given the popularity and evidential-effectiveness of Value-Investing, Fundamental analysis, and Modern Portfolio Theory, shouldn’t clients, wealth & investment professionals be doing better or at least matching the benchmark easily?
Or is the Efficient Market Hypothesis proving right that one can’t beat the market? Or do Hedge Fund Managers know something that everyone else doesn’t?
Or perhaps, access to global economic and investment opportunities is not equal for everyone?
- What is Value-Investing?
- What is Fundamental Analysis?
- What is Efficient Market Hypothesis?
- What is Modern Portfolio Theory?
No. 1 The Efficient Market Hypothesis in Question
The Efficient Market Hypothesis states that it is not possible to beat the market because all relevant news & information are already known, and that the price is already reflected in the market.
As beauty lies in the eyes of beholders, everyone’s perception of a fair valuation or price of an investment is different. This means ideally if all rational and irrationally investors participate in the price discovery, with the ensuing market reflecting the price, the price should vary widely, instead of around a single price (+/-).
Why is it Not Equal for Everyone: Ignorance or Simply Lazy – The theory didn’t state if all investors and professionals are avid readers of the relevant news. The theory also ignore if everyone have access to the tools, having the required knowledge to use the tools correctly, and the accessibility to the investments. Eg, we may be sleeping when something happens.
No. 2 The Fallacy of Great Investment Opportunities to Everyone
Should great investment opportunities be shared with the laziest person or the richest person? Or should it be made publicly available so that everyone has the opportunity to review the investment opportunity?
Why is it Not Equal for Everyone: The people (business owners / consultants / financial advisors / investment bankers) who put up the investment proposals would probably go to the investors willing to pay the most money with the least information & disclosure required – Not to the ones that ask questions such as what is the forward P/E, FCV, NPV and NAV. (We deliberately omit the explanation of the abbreviations to be on the side of 95% or more of population / investors who have no idea what these means).
Or perhaps they decided to market to small investors instead? It is all subject to the strategy of the business owners and the investment brokers.
No. 3 The Perspective of Rate of Return
No. 4 Dealing with Money Flow
No. 5 Transactional & Executional Expertise
- The world’s dumbest bank transferred €300 Million to Lehman
- Investor sue DBS over options
- Dinner with Goldman Sachs cost him $34 Million
- MF Global Account leaves clients scrambling
- Barclays fined for £72m over running the risk of laundering money or finance terrorism
No. 6 Safety in numbers. The Herd Mentality
- The World’s Population
- The Number of Investors in Apple Inc
- The Number Investors in Alibaba Inc
- The Number Banks in United States
- The Number of Banks in the World
- The Number of CFA Holders
No. 7 Does Good Investment Opportunities Exists?
- 3 Reasons Why Good Investment Idea may be a Bad Idea
- 8 Reasons why Clients prefer to place Money in Deposits than Investments
- Restricted: The Fundamental Flaw in Allocating Assets and Reviewing Investment Opportunities
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