The Investment Scientist

Posts Tagged ‘beat the market

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One very very sharp reader of my blog sent an email to me, and here is what it said:

Aren’t these 2 philosophies opposites of each other? If the market prices correctly based on all available information, how can the stock price be different from the expected dividend? Aren’t these 2 prize winning economists speaking in opposites?

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New York Stock Exchange

When talking to prospective clients, I am upfront about what I can and can not do. I can NOT beat the market.

Recently, that straightforwardness caused me to lose a prospective client to a major Wall Street firm. Apparently, the financial advisor from that firm was able to convince him that with their exclusive location, expensive brochure, and nice Armani suits, they could beat the market.

This led me to do a mental exercise.

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Last month, I was approached by a plastic surgeon whose money was with Morgan Stanley Smith Barney. He was looking for someone who could beat the market: not just promise to beat the market, like his financial advisor, but actually deliver.

I told him that I can’t beat the market, I can only help him capture the market. I could see a wisp of disappointment flash across his face.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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