Not to beat a dead horse, or bull in this case, but Wall Street as we know it seems to be gone. As a child of the 80's, I watched my share of Charlie Sheen/Michael Douglas/Michael J Fox movies. Wall Street was the place where kids with big dreams went to make it.
Michael Lewis wrote Liar's Poker as an expose of Wall Street. Instead of a warning, it became a recruitment manual for the next generation of financiers. Liar's Poker covers Lewis's 3 years on the street.
Lewis has written a piece for portfolio covering the end of the longest bull market in history. Lewis is amazed the game went on as long as it did.
I'm always amazed how little people know or understand about Wall Street. By definition all investors as a group earn the return that the stock market makes. This return is earnings growth plus dividends.
All of that return would go to right to investors. However, Wall Street has found a way to intercede and skim a healthy percentage of the returns. Again, by definition, investors earn less than they could without Wall Street's advise.
That's the point Lewis tries to get across. The people selling you stocks, bonds, mutual funds, etc, really don't know much more than you do. No one can predict the market, so you're paying someone for something that technically no one call do (at least in the long run).
Do yourself a favor: get a a nice low cost index fund and forget about beating the market. Study something useful instead. Learn how to draw or paint or play an instrument or write a novel. Invest in yourself and forget about beating the market. No one's done it in the long run so just accept the fact and move on.
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Comments
2 Comments so far
Well, the idea that this or that adviser is going to beat the market is not sensible. But they can add value by ensuring that your portfolio is consistenly balanced, reflects your appetite for risk or social sensibilities. That everyone should just go out and buy a index fund is bad advice, especially older people who need fixed income and less exposure to risk. It's not like we need to either be intellectually invested in this madness or mutual fund picking and hedge fund insanity or buy stocks and hold them untill we die. There are some sensible compromises.
If Wall Street is broken, then the market is broken and any index fund you buy is going to sink with the whole bloody ship. Why would you buy a ticket on the Titanic? It's written, right there, on the side, in big letters – TITANIC!
Anyone wanting to preserve capital and grow what they have to any extend should stay as far away from stocks and mutual funds as possible. Government bonds is the only safety I see for now. Beyond that, invest in the tangibles – art, coins, gold.
The corrupt powers that be on Wall Street manipulate the market and the corporations so that it's all smoke and mirrors. I don't trust any numbers including the earnings reported by these vulture CEO's. It's legalized criminal behaviour and I can't believe people will still give their money to this polluted system.