I came across this article “Six Lessons for Investors” from The Wall St Journal last week and didn’t have the chance to read it until last night, but was very disappointed after I was finished. This is supposed to be one of the most highly respected names in investing and this was definately not one of their better pieces. Here I was expecting to get some pearl of wisdom, something I can use in my trading, anything but what I got. Let me save you the time of reading it and I’ll sum up their valuable lessons.
Beware of market forecasts, even by experts.
Never underrate the importance of asset allocation.
Mutual funds with superior performance records often falter
Owning the market remains the strategy of choice.
Look before you leap into alternative asset classes.
Beware of financial innovation.
Now, I’m no expert, but here’s my take on each of the above lessons.
- Beware of anybody and manage your money yourself. Nobody is going to look out for you as much as you do. Be active in your retirement savings and educate yourself about the options that are out there. I don’t believe in forecasting in the sense of trying to figure out where the Dow will close in 2009.It’s all guesses and everybody always has an excuse as to why their pathetic forecast didn’t work out the way the foresaw it.
- This is so obvious it’s not even worth commenting on. All you have to do is reference the old saying “Don’t keep your eggs all in one basket” to figure out this is good ole common sense.
- Refer to #1. Don’t trust anybody. If you don’t have time to do the work yourself, start with Covestor. The investors there are trading their own money. Of course they have a vested interest in doing well.
- Really, ask anybody who shorted the market last year if they “owned the market.” Well…they kind of did own the market, just in a different way. Besides, owning whatever market is going up or down is the way to go whether it’s stocks, bonds, precious metals, etc.
- Again, common sense, nothing new here.
- This is about the only one on the list I half agree with. For example, all of the 2x, 3x levereged etf’s are a scam to me. In all of the years the markets have been open, why is it all of the sudden that so many of these are popping up now. It seems like every other week a new ishare, spyder, or etf is being created. One has to be very careful when trading these as your timing has to be impeccable or you can really get hurt. I just have a problem with so many of these being created out of thin air as we aren’t actually trading a company that has real value. There seems to be something wrong with the Wall St. machine and their solution is always to find ways to keep us busy. In some ways, trading is really starting to become like gambling and that’s not a good thing.