Market Efficiency: Wisdom, Wealth and Wellness

Jonathan Satovsky
CFP®, ChFC®, CIMA®, CPWA®, CDFA®, DACFP

Good morning. Good afternoon. Good evening. Depending on the part of the world you’re in, this is Jonathan Satovsky of Satovsky Asset Management.

On today’s episode of seeking Wisdom, Wealth and Wellness I want to talk about truth. Is it true that markets are efficient? Is it true that markets are impossible to beat? Well, the broad S&P 500 over the last decade has been extraordinarily tough to beat1. I would say that it’s likely that 99% of the population net of fees, taxes, and behavior have likely underperformed the S&P 500.

However, that doesn’t mean that the markets are always efficient. In fact, there are risk premiums that do exist. Investing in smaller companies have historically provided a 2% premium2. Investing in profitable businesses, small, cheap and profitable businesses, all have been factors that have provided evidence that under robust, sustainable and persistent patterns of performance do outperform over long periods of time.

They don’t perform all the time, but over time. So the issue is, is it objective truth that the markets are efficient? Yes, the markets are efficient. You can get an advantage, however, if you have a tremendous amount of patience. But, it’s better off just believing that the markets are impossible to beat because during periods when you’re underperforming or when you’re lagging in the market because whatever factor you’re exposed to is underperforming, most people behaviorally want to abandon the path, want to change trajectories, so it’s just best off assuming that things are efficient, so you can stay on a path for your wisdom, wealth and wellness.

Have a great day.

1 https://www.spglobal.com/spdji/en/research-insights/spiva/

2 https://www.forbes.com/sites/katestalter/2021/03/30/small-cap-value-takes-leadership-over-small-growth-in-2021/

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Video Recorded November 14th, 2021
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Disclosures

This blog post is not intended to be, nor should it be construed or used as, an offer to sell, or a solicitation or offer to buy any securities or interests in any strategy offered by Satovsky Asset Management, LLC (“SAM”). SAM is a registered investment advisor with the Securities and Exchange Commission – for more information see www.adviserinfo.sec.gov. Please remember that different types of investments involve varying degrees of risk, and that past performance is not indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy (including the strategies recommended or undertaken by SAM) will be profitable. Market index information shown herein is included to show relative market performance for the periods indicated and not as standards of comparison. The market volatility, liquidity and other characteristics of SAM’s portfolio composition are materially different from the securities listed on public market indices. Market index information was compiled from sources that SAM believes to be reliable. No representation of guarantee is made hereby with respect of the accuracy or completeness or such data. Opinions are as of date of video and are subject to change. A copy of SAM’s current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request. SAM undertakes no duty to update information presented herein.

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