| Course | FIN 340 Fundamentals of Investments |
|---|---|
| Module | Module 5 |
| Paper type | undergraduate discussion post on market efficiency and active investing |
| Length | About 360 words, 3 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Finance |
| Updated | October 2026 |
Free sample paper for FIN 340 Module 5
Module Five Discussion
Should Gordon Pick His Own Stocks in Retirement?
Gordon Abernathy, one of our composite clients, is a 57-year-old civil engineer who reads annual reports for fun. He owns three engineering stocks and wants to manage the couple's entire $860,000 himself once he retires, saving the advisory fee. The question is whether he can expect to beat a low-cost index fund.
The efficient market hypothesis holds that prices reflect available information. At the weak level, yesterday's price path tells you nothing useful about tomorrow, so chart patterns should not pay. In its semi-strong form, prices adjust quickly to public news, so reading annual reports, as Gordon does, should not give an edge after the market has absorbed them. The strong form adds private information, which few believe fully holds, given that insider trading is profitable enough to be illegal.
Fama and French (2010) compared U.S. mutual fund returns with what luck alone would produce and found that, after costs, very few funds showed evidence of skill. Carhart (1997) found that funds with the best returns in one year rarely stayed on top, apart from the worst funds, which tended to stay at the bottom. For individuals the picture is worse: Barber and Odean (2000) studied more than 60,000 households at a discount broker and found that those who traded most earned about 11.4 percent a year against 17.9 percent for the market in the same period, largely because of trading costs.
Gordon is unlikely to beat an index fund with the whole portfolio, and a bad run early in retirement would be expensive. His three engineering holdings already show the risk: they are tied to the same industry that pays his salary, and his returns on them have never been compared with an index. I would suggest he keep about 90 percent in index funds and manage a stock account of no more than 10 percent, tracking its return against an index each year. If he trails the index for three years, the money goes back into the fund.
How many years of beating the market would convince you that an investor has skill rather than luck?
References
Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773-806. https://doi.org/10.1111/0022-1082.00226
Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), 57-82. https://doi.org/10.1111/j.1540-6261.1997.tb03808.x
Fama, E. F., & French, K. R. (2010). Luck versus skill in the cross-section of mutual fund returns. The Journal of Finance, 65(5), 1915-1947. https://doi.org/10.1111/j.1540-6261.2010.01598.x
What the FIN 340 Module 5 instructions ask for
The FIN 340 Module Five discussion usually centers on market efficiency: what the efficient market hypothesis says, whether its weak, semi-strong and strong forms hold and what that means for active and passive investing. Prompts may ask whether professional managers or individual investors can consistently beat the market, how anomalies or bubbles fit the theory or whether you would choose index funds or stock picking for your own savings. The most effective posts state a position, support it with research rather than anecdotes and apply it to a real decision. Keep the initial post to a few hundred words and use replies to test whether a classmate's example of beating the market reflects skill or luck.
How this FIN 340 Module 5 discussion example is built
This sample applies the theory to a decision the course's composite clients face. Gordon Abernathy, 57, enjoys researching stocks and wants to run the couple's $860,000 himself after retiring. The post explains the three forms of market efficiency, then reports what three well-known studies found: few mutual funds show skill beyond luck after costs, top-performing funds rarely repeat, and households that traded the most earned far less than the market. It concludes that Gordon is unlikely to beat an index fund over time, but it proposes a practical compromise: a stock-picking account capped at about 10 percent of savings, with the rest in index funds. It asks classmates how they would judge skill.
Where the FIN 340 Module 5 rubric puts the points
Instructors grading this exchange usually look for a correct account of the efficiency hypothesis, research rather than anecdote, a real investing choice it is applied to, a stated position and replies with substance. Higher-scoring posts distinguish the forms of efficiency, cite research on fund or investor performance and recognize that a market can be hard to beat without being perfectly efficient. Posts lose points for presenting a single successful investor as proof the market is inefficient, for defining the forms without applying them and for replies that do not engage with the evidence. Some instructors also look for awareness that costs, not only skill, determine whether active investing pays.
FIN 340 Module 5 help: the mistakes that cost points
Many posts on this topic are either a summary of the three forms of efficiency or a story about someone who made money on a stock. Do both jobs: explain the theory briefly, then apply it to an actual choice between active and passive investing for a specific person. Use at least one study of performance rather than relying on famous investors, whose success may reflect luck among millions of people trying. Remember that costs matter as much as skill, since even a skilled manager must beat the market by more than fees and trading costs. A balanced conclusion, such as a small share for active choices, often reads more convincingly than an absolute answer. Ask classmates how many years of results would convince them a manager has skill.
Get FIN 340 Module 5 written to your instructions
Post your FIN 340 Module 5 prompt and say which side you lean toward. We weigh market efficiency against the evidence on active investing, apply it to one investor and close with a question that sparks replies. Allow two days; your first post is on the house. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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FIN 340 Module 5 questions, answered
Where can I find a free FIN 340 Module 5 Discussion sample?
The complete FIN 340 Module 5 post is on this page, weighing a retiree's plan to pick his own stocks against market efficiency and the research evidence.
How do the three levels of market efficiency differ?
Weak form: prices reflect all past price data. Semi-strong form: prices reflect all public information. Strong form: prices reflect all information, including private information.
Can individual investors beat the market?
Some do in a given year, but studies of many investors find that most, especially frequent traders, earn less than the market after costs over time.
Do actively managed funds outperform index funds?
On average they do not after fees, and the funds that outperform in one period rarely continue to do so in the next.
Is the stock market perfectly efficient?
Probably not, as bubbles and some anomalies suggest, but it is efficient enough that exploiting mispricing after costs is very difficult.