This blog is a random collection of information, partly in support of my quotations web site. Other topics include wine, military news, economics, history, libertarianism, and other random things which happen to strike my fancy. Backup site is at http://quotulatiousness.blogspot.com/ (if there are no posts showing, hit the backup blog for explanation). Comments have been turned off, as the spam was getting too much to handle. Comments can be emailed to me for posting.

September 30, 2008

Would you take investment advice from a sports writer?

Gregg Easterbrook tells you how to invest your money (assuming you've got any left after the cataclysmic events of this week so far):

Then again, even if you've come into money, chances are you do not need a financial adviser. Follow this non-secret strategy that turns on buy-and-hold — buy-and-hold being the strategy endorsed by Warren Buffett. Place $100,000, the maximum federally insured amount, into a CD, to have some money that will always be secure; max out whatever retirement instrument you qualify for; ignore gold, art and similar investments that are volatile; ignore commodities options, short selling, derivatives and similar complex investments that often trip up even specialists; ignore anything that's "securitized" (assets packaged into securities, there is no chance you can evaluate the underlying assets); buy real estate or real property only if your plan is to hold it for many years; place the remainder of your funds in a plain-vanilla 60-40 Standard & Poor's index fund (one that invests 60 percent in blue chip stocks, 40 percent in corporate bonds and Treasury bills); buy that fund from any reputable investment firm open to the public; let the money in the 60/40 fund simply sit there, regardless of what's happening in the markets. For goodness sake, don't make frequent stock trades trying to "beat the market" — studies show that only about a third of investors and brokers who actively pick stocks do better than simply buying and holding the Standard & Poor's. For goodness sake, hang up on anyone promising "confidential tax avoidance strategies" or "a once in a lifetime opportunity." For goodness sake, never deal with any funds or money managers who say they use "secrets" or have "exclusive information." For goodness sake, don't purchase real estate, or any form of real property, thinking you will "flip" it. For goodness sake, don't panic and sell just because the market is falling. If the market is falling, do nothing — at some point the market will rise. A few years ago, Buffett had his brokers calculate how Berkshire Hathaway would have done had the company not made a single stock trade all year, and merely held its positions. The answer was the company would have come out ahead. This paragraph contains all the investment advice most people will ever need. Send TMQ a one-third percent commission when you get a decent return and don't lose any money.

Actually, aside from sending the one-third percent commission, this is all pretty good advice . . .

Posted by Nicholas at September 30, 2008 12:45 PM
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