jump to navigation

Anger, the internet, and a dying idea! The logic of the herd! June 15, 2009

Posted by shaferfinancial in Finance.
Tags: , ,

I have wasted some of my precious time posting on some of the DIY investing sites.  But I thought it was worth it to point out the failure of what these amateur investors were saying.  Most think you should invest in low-expense mutual funds and asset allocate over several funds.  They like to talk about the studies that say this is the way to reduce investment risk.  There is also the idea that anyone can do as good as the professional investor as long as they listen to the advice on these blogs and in the media.  But what is really interesting is how hard they take it when someone advocates a different investment strategy.  A few go on the attack, while others keep pointing to their mythical portfolio’s.  I thought is would be useful for folks to have a succinct list of the mainstream way of thinking to compare to my thinking.

1.  Efficient market hypothesis means that no one can beat the market over time [if they do it is just luck and over time they will be have lower returns in the future to make up for this luck]

2. Fees are rarely worth paying since no one can beat the market over time

3. Any one that charges a fee or gets a commission or a bonus or a high salary in the financial services field is ripping off their customers

4.  You don’t have to spend much time or make any effort to understand investing in order to be successful

5. Anyone that posts an alternative position on these blogs are suspect and must prove they are not somehow benefiting from their position or be labeled “troll”

6. Real returns from real people are not important compared to hypothetical returns on portfolios

7. Dueling theories are always settled in favor of the prevailing ideology

8. Warren Buffett was just lucky, along with anyone else that beat the market

9. Getting rich slowly is the way to wealth

10. When Warren Buffett says he thinks most people should invest in index funds that means that Warren Buffett thinks that is the best way to invest and yet he does not invest in index funds

11. When Warren Buffett says “diversification is for the ignorant” that doesn’t mean us folks that invest in mutual funds [who he is referring to is not quite clear]

12. When millions of people sell their equity mutual funds in a bear market for a low price it has nothing to do with the veracity of the buy-and-hold theology

13. When millions of people buy equity mutual funds at the height of bull markets for a high price,  it has nothing to do with emotions of investors nor the veracity of the buy-and-hold theology

14.  The price you buy a stock or a mutual fund at has nothing to do with your future returns

15.  If you retire into a bear market and have to adjust your income down severely, it just means you didn’t save enough.

16.  There are no  other investment strategies nor asset classes that could possibly help folks to a comfortable retirement

17.  Experts are just a waste of money

OK, a few of those were tongue-in-cheek, but you get my point.  Look at the logic of these ideas.  Think.  Then turn off the herd’s noise if you don’t want to head to where the herd is going.

I am heading to New Hampshire for my summer home via Washinton DC to do some museums for my son.  There will be a few golden oldie posts up over the next week since I will be traveling.  Talk to you soon.

David Shafer



No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: