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COVID-19 Update

Alliant Wealth Advisors is an "essential business" under Virginia state law and we remain fully operational during the COVID-19 crisis.

To keep our clients, staff and colleagues safe we are currently holding all meetings via video conferencing. And we are alternating a small number of staff in our office while the majority serve you from their home.

Speaking of our office. Our headquarters in Prince William will relocate to the Signal Hill Professional Center at 9161 Liberia Avenue, Suite 100, Manassas, VA 20110 effective Monday, April 20, 2020.

Whether we are virtual or in person, we are here for you. Please keep safe.

Best Regards,

John Frisch, CPA/PFS, CFP®, AIF®, PPC®

President

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Smart People, Smarter Groups, Smartest Investing

June 21, 2019 - I’ve been writing these posts for two-plus years, dancing around a subject that warrants its own discussion: Why is it so hard for individual investors to consistently “beat the market”?

It has to do with how stock prices are continuously set and re-set, all day, every day. Those prices, as well as the price of a stock index like the S&P 500, are determined by group intelligence, or the collective wisdom of all investors.

How does group intelligence work? Thanks to today’s technological ability to instantly disseminate all known information to almost anyone paying attention, the “group,” or “market” almost always has more trading information than any individual can possess. This makes the group/market incredibly efficient at setting fair prices.
 
Then there’s you and me. If you decide you’d like to try outsmarting group intelligence, you must make your investment decisions based on what you, and maybe your stock-picking guru, happen to know. If you think an asset’s price will go up, you’re betting the group has underpriced it.  If you think a price will go down, you believe the group has overpriced it. (By the way, trading on “insider information” is illegal. For example, if the public company you work for is about to announce a swell, but secret new product, you might be committing a felony if you traded on that tidbit.)
 

In short, to believe you can outsmart the market is to believe you are smarter than the collective wisdom of all other investors combined, and/or, you have public information the group does not. For example, you would not only have to know what Donald Trump’s next tweet will be, you’d have to know how all market participants will react to it. Now multiply that data point by the $400+ billion in global trades taking place daily, and that’s how smart you’d need to be to consistently profit from trying to “beat the market.”

Understanding group intelligence and how it governs market pricing is a first step in more consistently earning the returns any given market is expected to deliver. Instead of trying to beat the market’s group intelligence, you can take advantage of it by simply investing in index- or index-like funds and holding them long-term. That seems like a smart thing to do.

Written by John A. Frisch, CPA/PFS, CFP®, AIF®, PPC®

 

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