LESS MONEY FOR WALL STREET MORE MONEY FOR MAIN STREET

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 A paradigm is the way we think that the various elements of our lives work.  Or, more precisely, the way we think they should work. Paradigms help us make decisions as we interact with the world around us. But just because we think the world works a certain way, that doesn't mean that it does. Nor does it mean that everybody thinks and acts the same way. 

 There are two main stock market paradigms. The first one is the Wall Street paradigm. Wall Street is a synonym for the traditional financial services industry. The cornerstone of the Wall Street paradigm is that the stock market is a calculating, rational machine. Proponents of the paradigm believe that individual stock prices are determined by the economic value of the underlying company. They further believe that Wall Street professionals are uniquely equipped to determine that underlying value. Therefore, they are able to predict stock prices and the market’s movement. They believe they are the markets gatekeeper. Mortals should not be allowed to make investment decisions without their assistance. Because of their exalted position, they are entitled to significant compensation for stooping down and dealing with the hoi polloi. 

The alternative to the Wall Street paradigm is the Mr. Market paradigm. This paradigm is the brainchild of Ben Graham. Graham gave the stock market a human persona he calls Mr. Market. Mr. Market is an emotional investor who constantly offers to buy and sell stocks to any interested party. Mr. Market is a tongue-in-cheek recognition of the fact that the markets pricing actions are based on the human emotions fear and greed rather than rational, calculated reasoning. 

Mr. Market’s price quotations are usually arbitrary. At times, Mr. Market feels euphoric and can only see the favorable factors affecting the world of finance. When in that mood, he names a very high price to sell his stocks because he fears that you will snap up his offer and rob him of potential gains. At other times, he is depressed and can see nothing but trouble ahead for both the economy and the world. On these occasions, he will name a very low price to buy your stock, since he is terrified that you will unload your worthless stocks on him. Because his actions are dominated by his emotions, Mr. Markets moves are unpredictable and any effort to do so is a waste of time and money.

So, does this mean that the stock market is a casino and only gamblers need apply? NOT!! Over 80 million investors understand that by investing in index funds they can manage Mr. Market's mood swings and profit from his love of the Great American Economic Engine.

The Mission of Morgan Investor Education is to educate investors about index funds and train them how to use them so that they can spend their golden years spoiling grand kids and swatting pickleballs.