Finance Talks

Today in my finance class, my professor was trying to explain to us the difference between passive and active investing in the market. Listening to him talk about the subject reminds me why I choose to pursue business back in high school. It was interesting, captivating and so human. As I grow older it seems that greed and corporate culture is what plagues Wall Street, but it doesn't have to be that way. If we go back to the fundamentals, it becomes very relevant to the way we live. And it becomes obvious to me through this very simple point:

Competition drives efficiency in the market. Competition is created by active investors who all always searching for trading data and information that will give them a return that is greater than the average. However, when efficiency is actually achieved, the passive strategy becomes the best strategy. Then the circle continues, and irony sets in. And at that point, it's not about data or analyzing the fundamentals of a company, it's just luck.

But to think of the wealth that 1% of luck can bring. That's crazy. The emphasis is not so much on the wealth but on the idea and concept behind the market and what keeps it going forward.