Investing

Why do so many investors attempt to beat the market each year when research clearly shows their odds of success are extremely low?

According to bestselling author, Michael Lewis, “the stock market is rigged.” Lewis’ claims likely helped sales of his new book, Flash Boys, but shouldn’t cause long-term investors much despair.

In early February, investors withdrew record amounts from U.S. stock mutual funds, as fears spread over declining global growth, stubborn unemployment, and political and economic troubles in emerging markets. Such turbulence highlights the role safe bonds can play in a portfolio.

The NCAA Basketball “March Madness” Tournament offers plenty of investment parallels. After the entries are submitted and the tournament is completed, a winner is crowned. Does the “winner” have more skill than others – or is it just luck?

In the 1960’s, Professor Eugene Fama of the University of Chicago coined the term “efficient market” to describe a world in which no investor can consistently beat the market without taking greater risk. Today, he’s a Nobel Prize-winner.