But IFO contends that doing a tiny bit of research, paying attention to your holdings, and listening to us, will prevent financial disaster. Not to say your net worth will follow a straight line up into the heavens, but it will grow, with little hiccups along the way.
Kind of the way index funds go. Take a look at this chart comparing the three main stock indexes and the Russell 2000 Index Fund (IWM). Lots of volatility, eh? Google any mutual fund or index fund and check its chart on Yahoo any other financial site. How would you know which one to pick? Do you think an “expert” would know better than you?
Now, let’s look at Eastman Kodak (EK), one of America’s premier companies with a long and proud history of aiding the development of photographic technology and photocopying. Now it is almost dead. Did any investor notice the trajectory of digital cameras? Did EK adopt that technology? Did EK help their best customers, professional and serious hobby photographers, by continuing to produce the film they wanted? What was their management doing over the past 20 years?
Anyone investing in that company’s stock had many opportunities to notice what was happening and sell their holdings.
Here’s another one in the news these days: MF Global (MF), which has just declared bankruptcy and is being investigated by a host of government financial regulatory agencies. Go to their website and read “About MF Global.” Do you know what they do/did? We don’t, either. We did learn 10 years ago that any company that used the word “solutions” in their mission statement was almost guaranteed to fail.
These are the little hints and tips individual investors need to keep in mind, rather than search for an “expert” who is smarter than they are to do their thinking for them. Nothing makes IFO grit her teeth more than to hear her girlfriends saying airily, “Oh, I don’t know anything about investing. I leave that all up to my broker.”
Investment lesson: No one is smarter than you are when it comes managing to your own money!