Sunday, April 19, 2009

buy and die

this is an interesting story about a dichotomy for the average investor. Do i buy an investment and keep it forever, or do i try to pick a time to take my profits and find something else?

this applies to all asset classes, stocks, bonds, mutual funds, GICs, real estate.....

What i like to do, as a reader, is probe deeply in this article. to see the hidden context behind this article and so many others like it.
manipulation. Though it is the deliberate attempt of no author, editor or publisher to undermine you and your confidence, this is exactly what happens when we begin to follow the advice published in the easiest places to find advice.

The problem lies not necessarily with the media, the editors, producers and researchers, though they have an important role to play. The problem lies with the interview subjects and how they are approached. These are people who are asked to give insight into an educational exposition on personal finance.
So the newspaper decides to interview the head of this or that mutual fund, this or that 'investment strategist'.
This seems like a logical thing to do. However this is where the newspaper becomes lazy and the interview subject becomes deceptive.

The newspaper has taken on an act of complicity by publishing an article, or opinion piece, and supposedly backed it up with the informed opinions of these interview subjects, whose credentials are given.
The problem is that not only are we given no insight into their past or present performance as experts in their respective fields, we are given ZERO context that these observations could pose a clear conflict of interest. They go off to their client and say "look, you don't need to believe me, I'm in the paper talking about how you need to sell the bank stock you inherited because clearly the evidence shows buy-and-hold is dead, and even the paper says I'm the authority"

This is just one average, and not particularly thrilling example from one average, and not particularly thrilling article.

But my wider point remains that the majority of 'education' on the field of personal finance and investing is largely miseducation. the analysis and breakdown of market activity is one of the worse forms of pseudo-science alongside with creationism. Taken in aggregate, it leads uneducated investors down a path of personal insecurity where questioning the reasoning, and motives of an investment advisor, strategist, or guru, is heresy and only ever allowed in hindsight- when half your money has already evaporated. In this situation the little guy is asked to sacrifice his savings and investments to the will of the strategist and the market.

Now that i think about it, investment strategists and creationists share quite a lot in common. Much like God, with all the power in His hands, could create the world and a beautiful garden within which Adam and Eve could freely spend their years. In our example, the forbidden fruit wouldn't be an apple, but acting in your best interest... or knowledge, i guess (i guess financial gurus have more in common with God than i thought). 'Investment strategists' believe that if an investment advisor is given all-powerful control over your financial universe they know how to create a garden of Eden of finance. If you are humble, and never question your mighty investment advisor and never seek the forbidden fruit of knowledge, then you can run around naked all you like, i suppose. Most likely, you and Eve will get foreclosed and evicted before the cable gets cut off.

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