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In Case You’ve Forgotten – 3 Reasons to Invest Outside of Wall Street

HeroicInvesting.comWe didn’t wake up one morning and decide it was a good decade to trash Wall Street’s stock selling machine. Believe us, we wished we could trust and recommend it as a good investment, but the truth is that the nature of the beast has changed fundamentally over the past several decades. While the United States stock market has always been the playground of the Big Operators, it used to be that it was also a decent place for Mr. and Mrs. Middle America to dollar cost average their way into a comfortable retirement, picking up regular dividend payments along the way, and counting on a rate of return that at least stayed ahead of inflation.

Those days are gone. Today’s stock market suffers not only from a wildly fluctuating tide of speculation, but also the following three flaws which, in our opinion, are dealbreakers, and cause us to always seek to invest outside of Wall Street.

1. Your broker might be a crook. Logically, an investor might choose to think that the few names who find themselves plastered across the headlines all around the world, and later successfully prosecuted for some sort of malfeasance, are the exception. We believe the opposite is true. For every Enron and Bernie Madoff that bites the dust, there are likely dozens of others skating by with the same crime, yet never discovered. The reward is too high and chances of being caught to slim to prevent a certain type of person from indulging in criminal behavior that could have a deleterious effect on your portfolio.

2. Your broker might be incompetent. Sheer financial/investing incompetence probably applies to an even larger percentage of people employed in the stock investing industry. A fancy office, expensive suit, glib tongue, and the auspices of a national firm really mean nothing. The scary truth is your broker might know zilch about products he recommends, and only pushes what the company suggests.

3. Administrative costs. As usual, the devil is in the fine print. Transaction commissions, annual fees, and various penalties can add up over time, and it all comes straight out of your profit, which could easily turn a good year of returns into a break-even or worse experience. Once you take into account that the true inflation rate runs between 5% and 15% (in our estimation), it becomes even more critical to reduce expenses.

Some people aren’t even aware of the fact they can invest outside of Wall Street; the stock industry has done a great job at promoting their product, but if advertising teaches us anything, it’s that the product making the biggest splash is not always the one you should buy.

The Heroic Investing Team


Flickr / Shiny Things