Myth 2: You can't beat the market

This myth was started back in the 1970s, by researchers who concluded that nobody beats the market. It's based on a concept called Efficient Market Theory (EMT), which claims the financial markets are efficient. In other words, the market quickly prices stocks according to their value. The ups and downs in a stock market are caused by rational investors responding immediately to the events that may affect their investments. As a result, EMT states that it's not possible to consistently outperform the market by using any information that the market already knows, except through luck.

When the market is irrational, the market or index can be very hard to "beat". Often, the only way to beat an irrational market is by what is known as "the greater fool theory". This means that some indexes, in particular, the TSX, aren't "investible" indexes.

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For example, in 2000, the Technology sector had a market weight of over 40%, and Nortel made up 35% of that weighting! Today Energy and Materials make up over 44% of the Index, versus a more properly positioned index or market like the MSCI, which is substantially less.

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