How to Identify the Best Personal Investing Strategy

Your perception of how efficient the stock market is in processing relevant data over stocks current prices will determine if it is worth to fix a strategy on an active or passive portfolio. If you decide the stock market can provide you with trustworthy and updated data, that is being efficient in providing information, you will find it reflected in stocks and bonds prices in the market. Just then you would start developing a passive investing strategy. This is how it is supposed to be because when there are stocks and bonds below their real price every buyer will start buying them making them raise up to a reasonable price. Consequently, there will always be very few under-valuated stocks and bonds in an efficient stock market.

An efficient stock market means that very few investors will have the opportunity of continuously profit from market returns based on agreed risks (searching larger returns than those of the market by buying securities and bonds with the same risk level.)  Those investors that think stock markets are efficient are looking forward to making successful business as the average market does; knowing that they’ll never be over it.

If investors think stock markets are inefficient (slow processing of prices) there’ll be many under-valuated stocks; therefore investors will use diverse tools and financial strategies to locate those stocks in order to profit some more than what they normally do. This involves an active stock buying strategy when under-valuated and selling when boosted.