Outsmarting the Next Investor Never Works

I have done my independent research; it has taken me years to accomplish, but the evidence is clear.

Investors don’t have to out-smart someone else in order to win. Investing isn’t a Zero-Sum Game where there is a loser for every winner. Yet, that is the way most would-be investing pundits operate.

No one has a monopoly on smart strategies, or when to use them. For every seller, there is a buyer, probably just as smart, and informed.

The fact is, there is also no perfect investment strategy. Sticking to one’s disciplined strategy is the answer. Discipline is the solution because it logically helps tilt odds for investment success in your favor.

Adjusting the odds for success favorably is the ultimate investment goal. Discipline of strategy, rather than constant changing of investment ideas does the trick over the long run. ( See the Earl J Weinreb NewsHole® comments.)

The Media’s Failure to Educate

The financial and general media are to blame for not explaining what they report as blurbs. They talk about regulation without putting it in laymen’s terms. They do not properly explain financial risk.

Risk was never overcome by regulation and the media can more fully explain this, if they ever truly tried to find facts out for themselves and report them so the average person could understand.

Example: Fannie Mae and Freddie Mac were risky semi-government agencies who were instrumental in our subprime debacle. There was no lack of regulation. But the financial meltdown has now resulted in even more useless and restrictive regulation.

Media Financial Experts

Financial experts are all around the media. But no one is vetting them for their expertise. So be careful.

That can be dangerous for longer-term investors who permit themselves to be impressed by the advice the media offers.

No Wall Street or financial community commentator or analyst has had to pass a genuine business-achievement test to determine expertise.

Forget about some of those fancy letters that many have attached after their names. They’re supposed to signify the experts had passed some test, or belong to a group who have. The public assumes this testing and association bestows a knowledge that members know what they are talking about when it comes to financial business operations. Passing a test of conventional thinking doesn’t necessarily confirm expertise.( See the Earl J Weinreb NewsHole® comments.)

The Real Federal Debt Burden

USA TODAY has just reported information many of us have known for some time; the U.S. is spending itself into its own version of a bankrupt Greece. The problem is, unlike Greece, the whole free world depends on us and the sanctity of our dollar and its convertibility.

The USA Today report says, in part: "The (federal) debt only tells us what the government owes to the public. It doesn't take into account what's owed to seniors,veterans and retired employees," according toaccountant Sheila Weinberg, founder of the Institute for Truth in Accounting, a group that advocates better financial reporting. "Without accurate accounting, wecan't make good decisions."

The report goes on: The federal government financial condition worsened drastically last year, beyond the $1.5 trillion in new debt taken on to meet the budget deficit. There was $5.3 trillion in new obligations in 2010, for Medicare and Social Security. That added a $61.6 trillion to the total of Uncle Sam’s financial IOUs.

The deficit between spending commitments and revenues last year now equals more than one-third of the America’s gross domestic product.

Corporations would be required to count these new liabilities when they are taken on, borrowed for everything else.

Liberals and members of the Obama administrations still insist that future growth will cover this gap. But we are talking about years and years of at least 5% to 7% annual GDP growth. This is unlikely when there is nothing in the future to entice a vibrant economy but job-defeating inflation, higher interest rates that accompany inflation and the specter of higher taxes and regulation from the left.

Media-Preferred Securities

Media-preferred securities lists are good for filling space in newspapers, magazines and blogs. They make good reading for investors thinking of ideas.

Those lists do little for investors who take the advice because those who devise lists are usually off the mark.

It’s very difficult to pick securities that are going to go up in a short time. Top executives in the companies themselves know little about how well their corporate securities will do in the marketplace, where conditions other than their company’s fortunes affect market value. How can you depend upon a analyst working from a perspective outside the company?

That is why index funds so often outperform managed security portfolios. ( See the Earl J Weinreb NewsHole® comments.)

Timing Securities Transactions

Buying, selling or holding securities evaluations are not simple to make. They’re often the basis of media articles because they fill space. And the media invariably get explanations wrong.

The strategy an investor should use will depend on the original investment intent when the securities are purchased. What is the purpose of the purchase? What is the reasoning in terms of investor age, goals, risk accommodation, and psychology?

And, most importantly, the extent of discipline the investor has decided to employ to keep to that strategy.

Provided, the investor is one of the few who can be really disciplined. ( See the Earl J Weinreb NewsHole® comments.)

Investment Advisers Are Back

Despite getting burned in 2008, investors keep coming back to advisers who cost them as much as 25% or more of their investment income. (Calculate the average fee of 1½% of investment assets against average investment income and you get an idea of what money advisers get from clients each year.)

The trend for using investment advisers appears to be growing; the fact these same folks were generally unable to help prevent the damage from past market debacles has not hurt adviser reputations.

You can easily invest in low-cost index mutual funds and ETFs, using common sense as I always recommend. Avoid advisers, except for necessary lawyers, accountants and tax experts you may need. ( See the Earl J Weinreb NewsHole® comments.)