Efficient Market Theory

Q: How do you feel about the accuracy of the Efficient Market Theory? I've been reading some fascinating material from the company Eugene Fama is associated with, DFA.

A: I’m familiar with DFA and they seem to have good performance.

Unlike them, though, I don’t believe that it’s the only way to invest. For instance, look at... American Funds. The AF approach is diametrically opposed to the DFA approach. Is one right and the other wrong? No. They are just different strategies.

Different strategies work better/worse in different markets. I view my job as employing multiple strategies in an account based on the part of the business cycle I believe we are in.

A: Do you remember what happened to the stock market between 2000 and 2002?

If you're like most investors, it's a time you would like to forget!

You may have seen losses of 30%, 40%, even 50% or more. It takes years to recover from those kinds of losses.

No one wants to go through that again.

But here's the question: What are you doing differently now from what you were doing then?

What systems or strategies do you have in place to prevent those kinds of losses from happening again?


The reason that people lost so much money during those years wasn't because of the type of investments they had (stocks, bonds, mutual funds), but because of the type of advisor and the strategies being used.

Probably 98% of advisors follow the Buy and Hold strategy.

Buy and Hold is a wonderful strategy for markets like those we had in 1998 and 1999. But that same strategy is devastating in bear markets like 2000 - 2002.

Did your advisor just tell you to 'hang in there'?

Are you still using that same advisor? Or another one that will do the same thing?

If so, then you should be concerned. Very concerned.

But it doesn't have to be that way.

It takes a lot of hard work, time and effort to manage a client's money. Most advisors don't do what it takes because they are more focused on getting new clients than satisfying their existing ones.

I believe that it's important to diversify a portfolio between cash, bonds, real estate and equities. But it is JUST AS IMPORTANT to diversify a portfolio by strategy. Just as it's wrong to put 100% of your money in a single investment, it's wrong to put 100% of your money at risk by using a single strategy.

That's why I correctly diversify a portfolio--by country, by size of company, by type of business, by type of investment AND BY STRATEGY. I use multiple strategies in my client's accounts. And I adjust the strategies used based on market and economic conditions.

We all know that there's no such thing as a perfect investment or a perfect strategy.

I serve as the personal, private money manager to my clients. I utilize proprietary and hard-to-find strategies designed to let them get the most from the good times--strategies you won't find at your typical advisor. Moreover, I have spent the last 4 years and almost $100,000 developing and perfecting sophisticated technology that monitors each market-based investment in every client's account EVERY 5 SECONDS.

My clients accounts receive multiple levels of protection. Wouldn't you feel more comfortable if your accounts did to?

They can be.

Your posted comments on this and other questions are welcome.
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