Investors waste tons of time searching for “the best” stocks, mutual funds, money managers, etc. These efforts are usually counterproductive and ignore the core findings of financial market science. This doesn’t make financial sense.There is, or rather should be, very little debate about how investors can position themselves to capture long-term stock market returns. Decades of market evidence and academic research show the way. That doesn’t mean the financial services firms follow along. In fact, quite the contrary.
Financial Nonsense
I started out my career as a broker 38 years ago with the national firm Bache, Halsey, Stuart, and Shields. I recall a very successful broker in the office that had a couple sales assistants making phone calls all day pitching “The 20 Best Stocks Under $20.” They would offer to mail a brochure on the stocks and then schedule a follow-up call.Once the sales assistant had someone who was interested on the line, the broker would hop on the phone and make the sale. This was in the days of minimum commission charges. He did a lot of business with folks who were investing $10-20k, absorbing $1000 or more in commissions (minimum commission charges of $50-75 per trade on 20 trades) on just the buy side of the transaction. The investors would incur the same charges later when the 20 stocks were sold.Nonsense would be a nice word for that practice, although there may be better and stronger words that fit. The broker made huge amounts of money for himself and the firm, but the investors...not much!
Magic serves the purposes of the magician, while everyone else gets fooled. Magic Isn’t A Strategy
Fast forward to the sales practices of the typical financial services/brokerage firm today. While the manner of delivery might be different, these firms and their brokers, (ahem...financial consultants), are largely pushing the same drivel that I witnessed decades ago.The main product then and now is the same...magic. These firms want you to believe that somehow they have the power to predict the future. If you fall into the trap, you are doomed financially. There is a better way.The starting place on the path forward is to completely reject the false notion that brokers or anyone else in the financial services realm can identify “the best” stocks. This first step provides the foundation for everything that follows. If you continue to cling to the idea that these firms can predict the future, you simply cannot continue along the path toward financial security.
Find Your Path
Numerous studies show that fewer than 30% of all investors planning for retirement feel secure in their financial plan. The majority of investors go around in circles by continuing to rely on brokers for financial advice. The truth now is the same as it was decades ago when I was a broker:
magic serves the purposes of the magician, while everyone else gets fooled. Related: What If Investments Don't Matter Much, but Savings and Behavior Do? The two most critical decisions investors make are 1. Who can you trust? and 2. What path should you take? We’re here to be your guide. Start there.
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