One of the side effects of my working experience at Yahoo was that I got stock options from the company and for a couple of years I was somehow “interested” in the share development.
The Yahoo share started at 1,4$, at its peak was worth bit more than 100$, now it’s down to 14$. Which price was the right one?
The economist call the stock market a “random walk with a trend”, meaning that rational people would buy shares today if it was obvious that they would go up tomorrow and sell if it was obvious that they would fall. But this means that any forecast will be wrong: share will rise today instead because people will buy them. In fact, rational investors should be able to second-guess any predictable movements but that means there won’t any predictable share movements at all, all should be sucked out of the stock market very quickly because all trends will be anticipated. The only thing left is unpredictable news, as a result the market should fluctuate completely at random.
More correctly, on average edge up as the months go past so that it’s competitive compared with other potential investments. Agile, informed and experienced investors will be a bit better than the rest of us, but not by much.
So, what’s this tiny edge over?