\u201cWith Spacex\u2019s recent IPO and other upcoming IPOs and the changes that the index fund providers are making, would it be more advantageous right now (until at least things calm down a bit) to mix my own choice of domestic\/international funds versus going with a \u2018pre-mixed\u2019 blend fund like VT, target date, or something like AOA?\u201d<\/p>\n<\/blockquote>\n
It\u2019s always the case that if you have a prediction that you think is better than the market\u2019s collective prediction \u2014 and you turn out to be right \u2014 then doing something other than a boring market-weighted index fund would have given you better results. The challenge of course is somehow managing, on your own, to know better than the market\u2019s collective knowledge.<\/p>\n
My prior article, \u201cWhy Stock Prices Are Still Volatile in an Efficient Market<\/a>,\u201d is applicable here. Here\u2019s the relevant part, edited for brevity:<\/p>\n The idea of an efficient stock market isn\u2019t that the stock market can predict the future. Nobody knows what is ultimately going to happen with any given stock.<\/p>\n That is, the market price for a stock doesn\u2019t mean that this is where the price will stay; it\u2019s simply the consensus best estimate, given the information that is currently available.<\/p>\n By way of analogy, imagine that I\u2019m hosting a raffle, in which the winner gets $100. I\u2019m going to sell exactly 100 tickets to the raffle. How much is each ticket worth?<\/p>\n Each ticket is worth $1, because each ticket has a 1% chance of winning $100.<\/p>\n Of course, the reality is that, of the 100 tickets, 99 of them will turn out to be completely worthless, and one lucky ticket will turn out to be worth $100. But we don\u2019t know in advance which ticket will be the lucky one, so until the raffle actually happens, each ticket is worth $1.<\/p>\n The point of the efficient market concept isn\u2019t that an efficient market would successfully predict which raffle ticket will be the winning ticket. Rather, the point is that an efficient market would successfully price each ticket at $1 prior to the raffle.<\/p>\n<\/blockquote>\n With regard to SpaceX\u2019s market price, it\u2019s a similar concept. Everybody knows that the current price is not the ultimate \u201cright\u201d price. But the challenge is that there\u2019s a pretty good chance the company will turn out to never be profitable and thus the shares will ultimately be worthless or nearly so. And then there\u2019s also a small chance that it will someday be wildly profitable, possibly even the most profitable company in the world. So the current market price is the market\u2019s attempt to probability-weight those two potential outcomes (as well as potential outcomes in between).<\/p>\n And of course nobody really<\/em> knows the percentage probabilities of any of those outcomes, nor does anybody have a good way of calculating how<\/em> profitable the company would be in the best scenarios. So there\u2019s a lot of guesswork going on here. But:<\/p>\n Read the answers to this question and several other Social Security questions in my latest book:<\/p>\n\n
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What is the Best Age to Claim Social Security?<\/h3>\n
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<\/a><\/td>\nSocial Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less<\/strong><\/em>\n