Ordinary Americans get a lesson in low finance.

[randomness]

From Michael Lewis, at Bloomberg:

Our willingness to believe that we can hire some expert to tell us how to outperform markets is a big problem, with big consequences. It underpins Wall Street's brokerage operations, for instance, and leads to a lot more people giving out financial advice than should be giving out financial advice.

Thanks to the current panic many Americans have learned that the experts who advise them what to do with their savings are, at best, fools. Merrill Lynch & Co., Morgan Stanley, Citigroup Inc. and all the rest persuaded their most valuable customers to buy auction-rate bonds, telling them the securities were as good as cash.

Those customers will now think twice before they listen to their brokers ever again.

Comments

[allyphoe.livejournal.com]

Our willingness to believe that we can hire some expert to tell us how to outperform markets

Client: Can you tell me what to invest my IRA in?
Me: If I knew the answer to that, I'd be making my money trading stock, not giving advice.

I've got a broker client who's the investment advisor for a bunch of other clients. Those folks are invariably in professionally-managed (by someone other than the broker) accounts with hundreds or thousands of trades a year, often with a good number of exotic products in the mix. The broker himself? Plain-vanilla investments, buy and hold.

[evilmagnus]

Statistically, unless you've got millions already and access to insider private investments, buy and hold is the best way to build investment wealth.

It's not sexy, though, and doesn't make commissions.