6 Why investors do not know the cost to buy hold or sell Spe

#6. Why investors do not know the cost to buy, hold or sell (Specifically Stocks, Bonds, ETF’s and Treasuries) investments.

Solution

Investors do not know the cost to buy, hold, sell investments because of the frequent price fluctuations.

According to Professor Eugene Fama, Effieient markets are those in which there is competetion among many participants, leading to a situation where the prices of stock reflect the effects of information based on the events that have occured and also the events that are going to occur subsequently.

Basically, the prices of stocks should reflect the intrinsic value. Intrinsic value of a stock depends on various factors like Economy, Industry and Company. All together, it is known as \"Fundamental Analysis\".

Though markets are at disequilibrium i.e.; market price is different from intrinsic value, over the long term the market price would get back to intrinsic value.

Since the markets quickly and correctly adjusts to new information, it becomes difficult for investors to know the cost to buy/hold/sell.