4 ms·

Quite frankly I am surprised by the tone of some of the advice here. I see the point for informing yourself, but following it should undoubtedly teach you to ne

by deyan 17y ago

Quite frankly I am surprised by the tone of some of the advice here. I see the point for informing yourself, but following it should undoubtedly teach you to never try to beat the market and "do it yourself" - unless you plan to make this your life. Instead, I would shift the advice slightly to: inform yourself, find someone who knows this kind of stuff and give them your business, trusting but also verifying them. Far too many people think they can build that one model which guarantees success only to be burned. Granted, using a professional can still get you burned (uncertainty is a fundamental principle of our life and universe) but you at least increase your odds.

nostrademons 17y ago
The problem with using a professional is that you have less information available for choosing professionals than you do for choosing stocks. If you pick one and he gets good returns, was it because of luck or skill? If he gets poor returns for the first 5 years, is it because he's investing in good values that are overlooked by the rest of the market (a long-term winning strategy) or because he's investing in the hot stock of the month that gets dumped soon after (a long-term losing strategy)? It's really hard to "verify" performance when that performance depends upon so many factors outside of the professional's control. With individual stocks, companies are at least required to give a detailed report to the market every quarter. It's a lot of work to keep up on all the information that may be relevant to a company's performance (some would probably say it's impossible), but at least the information is out there. That's not the case when you're looking for information about a financial professional's performance. If you really don't have time to spend on this yourself, I'd recommend passive investments. Index funds, treasuries, munis. When you buy an index fund, you're basically hiring the services of all financial professionals, everywhere, to do your research for you. And paying a significantly lower fee than if you'd actually hired one.
barmstrong 17y ago
I agree, I think this is perhaps a better question: how can I find a competent money manager? As many other posters (correctly) pointed out, typical money managers may not have your interests at heart.
- bjoernw 17y ago
  If someone promises to beat the market for you, don't hire them. Go with someone who applies academic theory. I spent last summer interning with a firm in Maryland. I learned a ton about the academics behind it and am writing my senior thesis on portfolio theory right now. He takes clients by referral only but here is his Web site: http://www.marylandcapitaladvisors.com http://www.marylandcapitaladvisors.com with lots of interesting articles.

by deyan 17y ago

nostrademons 17y ago

The problem with using a professional is that you have less information available for choosing professionals than you do for choosing stocks. If you pick one and he gets good returns, was it because of luck or skill? If he gets poor returns for the first 5 years, is it because he's investing in good values that are overlooked by the rest of the market (a long-term winning strategy) or because he's investing in the hot stock of the month that gets dumped soon after (a long-term losing strategy)? It's really hard to "verify" performance when that performance depends upon so many factors outside of the professional's control. With individual stocks, companies are at least required to give a detailed report to the market every quarter. It's a lot of work to keep up on all the information that may be relevant to a company's performance (some would probably say it's impossible), but at least the information is out there. That's not the case when you're looking for information about a financial professional's performance. If you really don't have time to spend on this yourself, I'd recommend passive investments. Index funds, treasuries, munis. When you buy an index fund, you're basically hiring the services of all financial professionals, everywhere, to do your research for you. And paying a significantly lower fee than if you'd actually hired one.

barmstrong 17y ago

I agree, I think this is perhaps a better question: how can I find a competent money manager? As many other posters (correctly) pointed out, typical money managers may not have your interests at heart.

bjoernw 17y ago
If someone promises to beat the market for you, don't hire them. Go with someone who applies academic theory. I spent last summer interning with a firm in Maryland. I learned a ton about the academics behind it and am writing my senior thesis on portfolio theory right now. He takes clients by referral only but here is his Web site: http://www.marylandcapitaladvisors.com http://www.marylandcapitaladvisors.com with lots of interesting articles.