From the category archives:
Everybody in the personal finance industry (myself included) has a business interest in getting you to believe one thing or another.
Mutual fund companies have a vested interest in convincing you that mutual funds in general (and their funds specifically) can beat the market.
Discount brokerage firms have an interest in convincing you that it’s profitable to [...]
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That’s all CNBC, The Motley Fool, and all the get-rich-quick blogs, newsletters, and books are doing. Nobody wants to be told that successful investing usually requires decades of:
living below your means,
investing regularly,
removing any and all excitement from your portfolio, and
sticking it out through scary markets.
We’d rather hear that there’s a way to:
become wealthy in a [...]
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Administrative note: There will be no new post tomorrow–taking the day off for Thanksgiving. And on that note, thanks to each of you for the roles you play here (whether buying one of my books, sharing the blog with others, or participating in the discussion). Being able to do this full-time is literally a dream [...]
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Year after year, decade after decade, the actively managed fund industry fails to deliver on its promises. Yet year after year, decade after decade, investors hand their money over to actively managed fund companies in the hopes that they’ll earn above-market returns.
Why is this? As far as I can tell, it has to do with:
The [...]
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I know that I’m unlikely to die in a plane crash. But when I fly, if the turbulence gets a bit nasty, it still freaks me out. One part of my brain knows something (“traveling via plane is relatively safe”), yet another part of my brain is not convinced.
In contrast, my dad is completely undisturbed [...]
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I write a lot about blocking out the noise from the media:
What the market did today,
What this or that analyst expects the market to do next month,
What this or that stock did over the last few weeks.
The way I see it, all that stuff is just noise.
But every bit as dangerous is the noise from [...]
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It’s no wonder that people find the topic of investing to be confusing. Everyday we receive conflicting messages about how to be a successful investor.
The mutual fund industry and the stock-tip-newsletter industry tell us that:
Picking stocks successfully is difficult for the average investor, but
A professional has a good chance of picking stocks that will outperform.
A [...]
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The diagram admittedly leaves out the whole “everybody thinks that they’re above average” psychological aspect. But I think that it still conveys one important part of the issue.
If you like the diagram, feel free to use it on your own blog.
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…as opposed to competing for accuracy.
That’s the state of media in general, and the financial media is no exception. (In fact, it could very well be the single worst offender.) This competition for attention is a reality whether we’re talking about books, blogs, TV, or newspapers.
Of course, it’s no surprise. A media company’s revenue is [...]
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Kyle over at Amateur Asset Allocator recently had a few words to say about this yahoo finance article claiming that diversification is no longer an effective strategy.
Kyle did a great job explaining why diversification is still a wise strategy, and I had initially planned to leave it at that. But after reading the original article, [...]
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Wall Street tells us that the ways to build wealth are to:
pick stocks,
pick the best fund manager,
and time the market.
Unfortunately, each of these things has a less than 50% probability of increasing your returns.
But I’m starting to think that an even bigger problem than the ineffectiveness of those strategies is the fact that the focus [...]
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