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.