MrVargas wrote:I don't know anything about anything and I can find a flaw in your arguments. Every single one. IT'S ALREADY PRICED IN! The thousands of investors, many with high iq's, ivy league degrees, decades of experience and look at these numbers daily have spoken and about half the money thinks prices are too high and about half think the prices are just right or too low. Why do you believe that you are smarter than their collective wisdom?
This argument only works when information is equally available and insider trading and price manipulation aren't factors.
When information is not equally available, and people act upon informational advantages, the argument falls apart. There is an effective way to outguess the market: Insider knowledge. If you sat on the FDA approval committee and were willing and able to break laws, I guarantee you'd be able to far outperform a pharmaceutical index fund.
Insider information and the ability of some to manipulate price are bigger factors in China than in the US. Much of the market is owned by government entities. Only recently have they started to crack down in insider trading by private individuals, and there is a lot more still to crack down on.
So what, you say. You'll follow the index. That way you reap part of the advantage that insiders have. That makes sense if liquidity is equal. But liquidity is not equal. There are restrictions on how often different sets of investors, including index fund managers, can trade. If everyone else except a certain fund can sell, then that fund will perform worse than everyone else even if it's an index fund.
With China, the biggest concern for me is currency risk. They've been messing with their currency lately. If they try to prop up the market by devaluing their currency, then gains in terms of RMB will not translate to gains after conversion to USD.