Investing is so much simpler than people in the investment community portray it to be.
Let’s use an analogy to illustrate this. Have you noticed how car buying has changed? In the old days, you pulled up to a car dealership at a major disadvantage, because you had no idea what the car was worth. There was a sticker price on the vehicle, and you knew that was probably not a fair price to pay. But it was all the information you had. So you bought the car and left the dealership wondering if you paid a fair price. Maybe you even tried to haggle, or do the dance with the dealer. But more often than not, you felt like you were being taken advantage of—because you most likely were. The salesperson had more information than you, and therefore, they had the upper hand.
But now, you can go online to several websites and figure out exactly what that car is worth. You can figure out ahead of time what you should pay for the car you want. If you do the research, you can walk out of the car dealership knowing you paid a fair price. The balance of power has changed. You have just as much information as the car salesperson now. The experience at the car dealership is efficient for you, because you have all the available information about that car’s cost.
The stock market is not any different than the car buying experience. There was a time when stockbrokers had information on companies and could find ones that were mispriced and buy them for you—and it might have given you an advantage. But those days are gone, because now, with the advent of computers just 50 years ago and programs that track every single detail about a company and make those details available to the general public, all information about all companies is available to the millions of stock market participants every day. There is no longer an advantage trying to pick winning or mispriced stocks because the stock market is now efficient, just like car buying.
However, most firms are still trying to sell the idea that they can find mispriced stocks or time the market. That is not the way we approach investing at Fortress Planning. The foundation of our investment approach is that markets are efficient. Fortress Planning principal Scott Wellens, CFP® spent hundreds of hours and combed through dozens of academic peer reviewed research papers to discover this. Why it matters for you: If you already know that markets are priced fairly, then you can turn your attention to other ways to gain a competitive advantage in the market. That’s what we aim to do at Fortress Planning.