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4 marks) “In an efficient market, money managers and investment advisers have little value to investors.”  ...

4 marks) “In an efficient market, money managers and investment advisers have little value to investors.”   Do you agree or disagree with this statement? Explain.

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Answer #1

Yes, I agree with this statement. In an efficient market, all available information (both public & private) pertaining to an asset is factored in its price.In this market a money manager or investment adviser can overperform compared to the market as whole. In a scenario where all information of a financial instrument is completely available to everyone, means that analysis doesn't help an investor to outperform the market.

Even in an Efficient Market however there will be outliers those who may act differently and do well, but there will be an equal number who will act different and lose. Thus on average everybody will perform as per the market as a whole. In such a case it is better to maintain a passive investment strategy & active investment management through investment advisors may add less value.

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