Nothing is more American than Mom, apple pie, Nascar racing, and the stock market, right? Except for that last one. You’d have better odds for success investing in a neighborhood poker game on Friday night. Don’t get us wrong – we like a healthy market. It means companies are doing well. But playing the stock market is not a yellow brick road for the average investor.
We really could have made this a ridiculously short entry and simply said, “Enron and Bernie Madoff.” These two financial fiascoes should be all the proof a thinking person needs to run the other direction, but let’s break it down further. There are three reason you should avoid the stock market like the plague.
1. Your broker might be a crook. Seriously. Enronesque escapades happen so often that it’s a wonder anyone feels safe handing over their money. Our advice: Don’t do it.
2. Your broker might be incompetent. Only slightly less egregious than the crook but equally risky to your portfolio is the broker who doesn’t know what the heck he’s doing or has no experience. Our advice: Run far, run fast.
3. Your broker is killing you with fees. Maybe your broker isn’t a crook and he’s not incompetent. A whole bunch, and we mean a WHOLE bunch of brokerage houses charge administrative fees, trade execution fees, annual fees, advice fees, gouge you before you wise up fees – it seems to never stop. It’s simple. These fees can annihilate your annual return.
In case you’re wondering what the moral of this story is – stay away from investing in the stock market. No, we don’t suggest you bury all your money in mayonnaise jars in the back yard. We wouldn’t be here if there wasn’t a better way and we thought you’d never ask.
The Heroic Investing Team
Flickr / Bob B. Brown