Sometimes the Market Is Wrong
But broad-market index funds are still great investments.
A version of this article previously appeared in the September 2019 issue of Morningstar ETFInvestor. Download a copy here.
The efficient-market hypothesis, or EMH, implies that the market quickly and accurately incorporates all information regarding a stock's actual value into its price. Investors can't gain an informational advantage and shouldn't try to beat the market. Instead, they should simply track the market through a broad market index fund.
Daniel Sotiroff has a position in the following securities mentioned above: SCHB. Find out about Morningstar’s editorial policies.