Efficient Market Theory

EMT is one of the theories to explain the way stock behave. Alternative known as efficient market hypothesis. The theory states that at any give time, stock always trade at their fair value at the stock exchange, making it impossible for the investors to beat the market. The only way to beat the market was to take make bets on riskier investments.

The theory was widely taught in finance courses. The theory is controversial to some extent. Market runs more on the psychology of human minds than on human rationale.

As the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, Peter Lynch averaged a 29.2% annual return, consistently more than doubling the S&P 500 stock market index and making it the best-performing mutual fund in the world. During his 13 year tenure, assets under management increased from $18 million to $14 billion.

Wikipedia

From the above stats it is clear the theory fails, if the market was efficient all the time. How was Lynch able to have such an amazing portfolio. Not just for a year or two but for 13 year. We have another living legend with us the Oracle of Omaha, Warren Buffet.

Mr Buffet has beaten the market for such a long period of time. There are numerous more example. The one thing was common among these fellow mates and it is Intelligent Investing. After all it is the least competitive field in the present world, where every job is so competitive in nature.