This series is essentially a primer on Efficient Market Theory and passive “indexing” investing, whether implemented through index mutual funds or exchange-traded funds (ETFs). The title of the series is derived from Charles Ellis’s classic book on indexing: Winning the Loser’s Game.
The gist of this fourth video is that In order for a transaction to occur, a buyer and seller must agree on a price. The transaction will be completed if the buyer and the seller reach an equilibrium, that is to say that they both perceive that they are getting value from the deal.
A transaction on the stock markets is no different. But in the case of the stock markets, the buyer and seller are each making a different bet, the buyer believing the price will go up, the seller believing the price will go down.
Both feel that the stock is mispriced and are seeking to profit from it, at the expense of their counterpart. This raises the question of who will win this loser’s game. Who will be right and who will be wrong? Let’s watch and find out.
After watching the video if you want to learn more, download the free guide, 12 Essential Ideas For Building Wealth.