Scrappy
Member
Investing Genius: No Big Deal!
March 24, 2009 - 2:00am
After critically viewing Michelangelo's magnificent sculpture of David, considered by many to be the most beautiful statue in the world, a skeptical American said he wasn't that impressed. "Could you do it?" a friend asked.
"Sure", the guy replied. "How?" says friend.
"Simple. All you do is get a really good piece of marble and chip away all the parts that don't look like David!"
Okay. Now we know!
Some people have the same approach toward investing. They think it is nothing to it: You buy low and sell high. Period.
The problem many-most-all market-timers have is getting it right twice: knowing when to get out and when to come back in.
Financial planner Alan Roth believes investing should be dull. He thinks that if you get excited, either happy or morose, you are probably doing something wrong. Roth has just published his book "How a Second Grader Beats Wall Street." The second-grader is his son.
Here are his five tips for long-term investment survival:
Five Dumb Things Adult Investors Do
By second grade, we all learn some simple and truthful lessons about the world around us and how to navigate it. As life goes on, however, what we continue to learn is less about making us smart and more about making us outsmart ourselves in investing.
Though we can still outsmart ourselves, the Thrift Savings Plan offers some simple low-cost choices. The book "How A Second Grader Beats Wall Street" points out some of the dumb things that adult investors do...
March 24, 2009 - 2:00am
After critically viewing Michelangelo's magnificent sculpture of David, considered by many to be the most beautiful statue in the world, a skeptical American said he wasn't that impressed. "Could you do it?" a friend asked.
"Simple. All you do is get a really good piece of marble and chip away all the parts that don't look like David!"
Okay. Now we know!
Some people have the same approach toward investing. They think it is nothing to it: You buy low and sell high. Period.
The problem many-most-all market-timers have is getting it right twice: knowing when to get out and when to come back in.
Financial planner Alan Roth believes investing should be dull. He thinks that if you get excited, either happy or morose, you are probably doing something wrong. Roth has just published his book "How a Second Grader Beats Wall Street." The second-grader is his son.
Here are his five tips for long-term investment survival:
Five Dumb Things Adult Investors Do
By second grade, we all learn some simple and truthful lessons about the world around us and how to navigate it. As life goes on, however, what we continue to learn is less about making us smart and more about making us outsmart ourselves in investing.
Though we can still outsmart ourselves, the Thrift Savings Plan offers some simple low-cost choices. The book "How A Second Grader Beats Wall Street" points out some of the dumb things that adult investors do...
- They love to buy high and sell low. They buy after the market is up and then panic and sell when the market falls.
- They think strangers want to help them. We teach our children the dangers of talking to strangers, then turn around as adults and hand over our nest egg to strangers that claim they want to help us. They're helpful alright, helpful in transferring our money to them.
- They follow the herd. They're heat-seeking missiles, going after whatever has been hot. They get into markets like China and India just in time to see them collapse. Remember the rule "don't put all of your eggs in one basket?"
- They watch too much financial TV. Conventional wisdom tells us that a little knowledge is a dangerous thing, but so is too much information. Especially when it comes from the screaming, sound effect guy. Believing that the gurus on TV actually have a good track record, and are giving good advice, is folly with a capital "F."
- They spend their investing lives in a futile attempt to disprove second grade arithmetic. They think 10 - 2 = 12, as in if the market earns 10% and they pay helpers 2% of that return, then they will get 12%. Anyone knows 10 - 2 = 8.
"I particularly like comparing watching Sponge Bob Square Pants to Cramer's Mad Money. One's an actual cartoon character that never knows what's going on in the market, and the other is a human cartoon character who rants about buying and selling and encourages others to engage in foolishness. Kevin at least knows the Sponge Bob characters aren't real, which is more than I can say for some of Cramer's followers betting their nest egg."
For those I may have offended by comparing Cramer to a cartoon character, I offer the following Public Apology . . . to SpongeBob Square Pants. The sculptor Brancusi said, "Simplicity is complexity resolved." Does your investing pass the Second Grader test? As Mike Causey and I like to say, when it comes to investing, "Dare To Be Dull!"
