Stay away from Wall Street!

Yogi Berra, that often quoted sage who played catcher for the New York Yankees back in the 1950's and 60's, once remarked, "You can observe a lot by just watching."  How true, Yogi, how true.  The next time you have a few minutes to waste, check out the folks at the CNBC cable network, and you will observe Wall Street on display.  On second thought, don't waste your time watching them.  Just let me give you a quick heads up on what you're likely to see on any given day.  One so-called expert after another will appear to give you his or her prediction on where the economy is headed and what the stock market is likely to do.  Of course, these experts all differ in their opinions, and each will give you convincing evidence for believing the way they do.  Sometimes several experts will appear at one time, and they will duke it out for their particular view.  I guess this makes for good TV, but if you're tuned in to try to get informed on news you can use, forget it.  Whose opinion do you go with, the guru who talks the fastest with the loudest voice?

The economists and stock analysts on the show are bad enough. (George Bernard Shaw is quoted as saying that if you laid all the economists in the world end to end, they still couldn't reach a conclusion.)  But the traders and the stock pickers are the ones who really kill me. They provide seemingly endless tips on how to make money in the market.  For instance, making money by buying stock on "the dips," buying shares of  Can't Miss, Inc. because the stock is undervalued and share prices are bound to go up because the company has just come out with a startling new innovation, selling shares of Big Bust, Inc. because the stock is at its 52-week high, investing your money in the health care sector of the market because it is hot, and on and on and on.  Late in the day, here are a panel of traders and pickers giving their picks and ploys to help you make money in the market. Of course, they can't agree on the best picks and strategies, but never mind, just trade and eventually you'll hit a home run. Then you can set up shop on Easy Street. 

 Please believe me when I tell you that it is in your best interest to ignore all the information from Wall Street.  A tiny minority of investors may have taken a direct route from Wall Street to Easy Street, but the vast majority of investors who have tried to get rich quick have either gotten severely side tracked or have crashed completely.  Wall Street caters primarily to two emotions:  greed and fear.  It's how professionals on Wall Street make their money.  One group of  "experts" will convince you their product or service will make you fabulously wealthy while another group (heck, sometimes its the same group) will tell you the sky is falling, and you need to employ their product or service to protect your investment nest egg.  Plus, they have literally millions and millions of dollars to promote their products.  If the 2008 market meltdown and the subsequent Great Recession of 2009 has taught us anything, it's that all the contrivances and connivance of the wizards of Wall Street are aimed at enriching themselves at the peril of the entire U.S. economy and financial markets. Is this too harsh an indictment?  Have you looked at your 401(k) lately?  Better yet, have you seen the latest unemployment report?

Well, if you have to stay away from Wall Street, where can you go to invest in the stock market?  It's not so much where you go to invest as it as how you invest.  What's the better way?  I think I can suggest to you a proven common sense way to invest to meet your financial goals.  Go to a reputable fee-only financial planner who will invest your hard-earned money in low-cost index mutual funds from a reputable investment company such as Vanguard Investments.  He are she will develop a financial plan tailored to your specific goals, time frame, and tolerance for risk and allocate your assets accordingly. By going with index funds you will be able to capture each asset class (such as large cap growth and value stocks, small cap growth and value stocks, short and intermediate term bonds, etc.) and have instant diversification by owning hundreds and even thousands of stocks or bonds in one mutual fund.  If you've never heard of a fellow named Warren Buffet, suffice it to say that he is a multi-billion investor who is considered to be one to the most brilliant investment minds ever. What does Mr. Buffet suggest the average investor do?  "The best way in my view is to buy a low cost index fund and keep buying it regularly because you'll be buying into a wonderful industry, which is in effect, all of American industry."

 With this strategy, you won't have to worry about every little dip in the stock market, or even large corrections in the stock market, because your portfolio will be allocated in the proper stock/bond ratio according to your tolerance for risk.  Now don't get me wrong, you will not enjoy any large corrections in the stock market.  Nobody does.  But that is part of the risk in getting into stocks.  The long term performance of stocks, however, justifies the inclusion of stocks in any but the most conservative of portfolios.  And with proper financial planning and investment advice, as the time approaches for the achievement of your investment goal, you will have transitioned away from a large stock position to a more conservative allocation which would have you with a larger proportion of bonds.  You'll be far better off with this long term strategy than a short term trading strategy based on the noise coming from the canyons of Wall Street.  I'll end this blog with a quote from Laurence J. Peter, American educator and writer and the originator of the "Peter Principle".  The quote applies specifically to economists, but I think you could apply it to many of the so-called experts on Wall Street:  "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."  Don't you wish you had a job like that?

Signing off,
Randy Moore