Love your thoughts, particularly surrounding basic investing classes for high school students. It is a shame that most kids graduate high school (and often times, college) without an understanding of what to do with their savings, and how to protect it or grow it.

It is also a shame that the institutions such as exchanges, S.R.O.’s, and other regulatory authorities have not worked to make better access available to individuals to learn about investing. Many young people I speak with have credit cards, but few have money markets or basic ETF’s or any other investment instrument. So we teach them how to borrow, but not how to invest.

It’s sad.

Love your thoughts, particularly surrounding basic investing classes for high school students. It is a shame that most kids graduate high school (and often times, college) without an understanding of what to do with their savings, and how to protect it or grow it.

It is also a shame that the institutions such as exchanges, S.R.O.’s, and other regulatory authorities have not worked to make better access available to individuals to learn about investing. Many young people I speak with have credit cards, but few have money markets or basic ETF’s or any other investment instrument. So we teach them how to borrow, but not how to invest.

It’s sad.

Most working stiffs have no concept of what the market actually is or what kind of volatility is possible there. They think it’s the difference between gaining or losing 4% in a given year, and could not conceive of the possibility of losing 30% in a year prior to now.

I really think that society would benefit from teaching mandatory market analysis and stock trading in high school. Not only would they emerge capable of having a financial discussion without needing crayons, but they’d learn an immense amount about how the world is interconnected and actually works. This would help them evaluate not only investment and business decisions, but politics and social policy as well. Our nation as a whole would be better able to make rational choices rather than pandering to the beliefs of people that don’t know what is going on.

The way it is now, any attempt to teach an average joe about markets, is more likely to scare them away unnecessarily than it is to help them. You’d be changing their whole worldview, not just teaching a single topic.

Cookie cutter buy-and-hold and diversify advice is probably the best you can do for someone who is financially illiterate, unwilling to learn or pay attention, and both adverse to risk and uninformed about the nature of risk they are actually stepping into.

Try to come up with any advice you can give someone else that will work no matter what the circumstances or market conditions are like, doesn’t require much learning, and can handle probably getting the timing/entry price wrong. The problem with almost any strategy is that at some point it will change or cease to be valid, or even worse, depends on competent execution.

If you sat a top flight manager beside a regular investor, it wouldn’t produce useful advice. I suppose it could be possible to have a very competent advisor do a partial job, and instead of looking for the best returns, just created a path suitable for “bus turn” investment in some kind of vague sector rotation style or something. The issue there, is anyone good enough to do that is also good enough to give more accurate advice producing better results (but requiring competent execution). Most top investors don’t waste their day thinking about how to guide somebody’s grandmother through the market intact, so they probably would not have any advice to give an average investor without having to do even more work on top of their own.

Most working stiffs have no concept of what the market actually is or what kind of volatility is possible there. They think it’s the difference between gaining or losing 4% in a given year, and could not conceive of the possibility of losing 30% in a year prior to now.

I really think that society would benefit from teaching mandatory market analysis and stock trading in high school. Not only would they emerge capable of having a financial discussion without needing crayons, but they’d learn an immense amount about how the world is interconnected and actually works. This would help them evaluate not only investment and business decisions, but politics and social policy as well. Our nation as a whole would be better able to make rational choices rather than pandering to the beliefs of people that don’t know what is going on.

The way it is now, any attempt to teach an average joe about markets, is more likely to scare them away unnecessarily than it is to help them. You’d be changing their whole worldview, not just teaching a single topic.

Cookie cutter buy-and-hold and diversify advice is probably the best you can do for someone who is financially illiterate, unwilling to learn or pay attention, and both adverse to risk and uninformed about the nature of risk they are actually stepping into.

Try to come up with any advice you can give someone else that will work no matter what the circumstances or market conditions are like, doesn’t require much learning, and can handle probably getting the timing/entry price wrong. The problem with almost any strategy is that at some point it will change or cease to be valid, or even worse, depends on competent execution.

If you sat a top flight manager beside a regular investor, it wouldn’t produce useful advice. I suppose it could be possible to have a very competent advisor do a partial job, and instead of looking for the best returns, just created a path suitable for “bus turn” investment in some kind of vague sector rotation style or something. The issue there, is anyone good enough to do that is also good enough to give more accurate advice producing better results (but requiring competent execution). Most top investors don’t waste their day thinking about how to guide somebody’s grandmother through the market intact, so they probably would not have any advice to give an average investor without having to do even more work on top of their own.

I know of two people close to me that are able to do this on a consistent basis – over a 10-15 year horizon. Perhaps you are the third? In that case, you are the minority. Most people do not have the knowledge, nor the time, nor the mental fortitude to handle what the market throws at them on a daily, monthly, or yearly basis.

I know of two people close to me that are able to do this on a consistent basis – over a 10-15 year horizon. Perhaps you are the third? In that case, you are the minority. Most people do not have the knowledge, nor the time, nor the mental fortitude to handle what the market throws at them on a daily, monthly, or yearly basis.

Thanks for dropping by and commenting

I think small investors have trouble sifting through the mountain of information, like you said, have trouble keeping up with what’s going on after their jobs.

The problem I have with this is that too many small investors are over-invested in the market. Top flight mangers or not will most likely come up with pretty similar ideas when it comes to where the money can go – there are only so many markets, so many classes and so many investment groups.

But they will probably give more personalized advice on how money should be allocated depending one’s portfolio and cash flow obligations (a portfolio made up of more than cash and stock market/mutual fund holdings – physical assets, real estate, art, etc) . They may also carry out more unconventional trades that are unpalatable to the small investors in order to recover if the market disappoints: i.e. work with options and warrants, going short.

I’m not sure most easily accessible funds and walk-in financial advisors would provide that kind of service.

Thanks for dropping by and commenting

I think small investors have trouble sifting through the mountain of information, like you said, have trouble keeping up with what’s going on after their jobs.

The problem I have with this is that too many small investors are over-invested in the market. Top flight mangers or not will most likely come up with pretty similar ideas when it comes to where the money can go – there are only so many markets, so many classes and so many investment groups.

But they will probably give more personalized advice on how money should be allocated depending one’s portfolio and cash flow obligations (a portfolio made up of more than cash and stock market/mutual fund holdings – physical assets, real estate, art, etc) . They may also carry out more unconventional trades that are unpalatable to the small investors in order to recover if the market disappoints: i.e. work with options and warrants, going short.

I’m not sure most easily accessible funds and walk-in financial advisors would provide that kind of service.

It is so hard for small investors to get ahead, and in many ways that tends to have much less to do with the pros only working with the wealthy and much more to do with the fact that individuals are busy working their jobs and raising their families. They don’t have the financial cushion that presents the opportunity to stay informed at all times, or hire the hordes of advisors paid to do that for them.

But don’t be mistaken about performance or attribution. Many professionals lose money for their clients at an astounding rate. Individuals who stick to low cost (ETFs vs. Funds) options and individual stocks typically can far outperform just handing their money over to an advisor or mutual funds. Much of what is typically lost is not due to bad ideas or investment concepts, but poor timing (as you point out) and emotional, reactionary trading. And the biggest barrier is staying informed at all times. It’s hard to compete, when you don’t know the game has changed or that it is even being played until after you finish your day job at 6:54pm.

One other thing. You state,

This I must protest. I have worked with over 450 independent research firms in the last 10 years, documenting their performance. Some are humans, some are computers. The reality is that the computers typically dominate performance wise. It’s the outlier situations that only humans can understand that provide the alpha from the quick-thinking manager. In other words, the computer is more often than not correct in when to buy airline stocks. But the computer cannot react instantaneously to an airline crash, assimilate that news into its investment criteria, and make the appropriate decision the way a human can. So the trick is to use computers (or more accurately mathematics) and overlay an informed approach.

Honestly, the only thing a “top-flight” manager will definitely get you, is a 1% to 2% loss off the top, which goes in their pocket.

It is so hard for small investors to get ahead, and in many ways that tends to have much less to do with the pros only working with the wealthy and much more to do with the fact that individuals are busy working their jobs and raising their families. They don’t have the financial cushion that presents the opportunity to stay informed at all times, or hire the hordes of advisors paid to do that for them.

But don’t be mistaken about performance or attribution. Many professionals lose money for their clients at an astounding rate. Individuals who stick to low cost (ETFs vs. Funds) options and individual stocks typically can far outperform just handing their money over to an advisor or mutual funds. Much of what is typically lost is not due to bad ideas or investment concepts, but poor timing (as you point out) and emotional, reactionary trading. And the biggest barrier is staying informed at all times. It’s hard to compete, when you don’t know the game has changed or that it is even being played until after you finish your day job at 6:54pm.

One other thing. You state,

This I must protest. I have worked with over 450 independent research firms in the last 10 years, documenting their performance. Some are humans, some are computers. The reality is that the computers typically dominate performance wise. It’s the outlier situations that only humans can understand that provide the alpha from the quick-thinking manager. In other words, the computer is more often than not correct in when to buy airline stocks. But the computer cannot react instantaneously to an airline crash, assimilate that news into its investment criteria, and make the appropriate decision the way a human can. So the trick is to use computers (or more accurately mathematics) and overlay an informed approach.

Honestly, the only thing a “top-flight” manager will definitely get you, is a 1% to 2% loss off the top, which goes in their pocket.