Why Warren Buffett Calls This Common Investing Approach a ‘Terrible, Terrible Mistake’
The legendary investor Warren Buffett has repeatedly denounced the efficient market hypothesis (EMH), which claims that stock prices reflect all relevant information and always trade at their fair value. Beyond simple luck, this should make it impossible to consistently beat the market. Pointing to his own success, Buffett instead argues that savvy investors can achieve superior results through meticulous analysis and disciplined investing strategies.
Yet, Buffett has long promoted the view that retail investors should mostly use index funds, which seems to conflict with his critiques of the EMH since that passive strategy tends to align with EMH principles. We take you through how he resolves this seeming contradiction below.
