Maximizing investments is not easy when economy is unsettled

The general conclusion from an analysis of the stock market is that nearly all of the investment schemes everybody talks about are really quite worthless for getting rich.

A few will make money by using a plan.

Luck has something to do with making money in the stock market as it does with winning with a lottery ticket or a gambling casino. People have tried to get rich by investing in the previous year’s biggest losers with the expectation of a rebound; others hope to capitalize on a continuation of momentum or by copying moves by a fund manager. Individual research may help.

A sure-fire way to make money is to write a newsletter. Subscribers will pay for it, and one can benefit. Therefore, a very special cynical approach would be to mail out a newsletter, listing the stocks that have risen in value, and discarding the ones that have declined, thereby revealing the “fantastic” gains.

Almost without exception most newsletters produce results no better than a random selection, or what could have been made on one’s own initiative.

Undoubtedly, the first step to maximize investment is to choose a well-regarded commissioned adviser. Of course, one must be mindful of conflicts of interest. An unscrupulous consultant may recommend stocks, not because they may suit his clients, but because they generate the highest commissions.

There are many honest, hard-working investment counsellors who have their clients interests at heart, but there are dishonest ones who churn accounts. The head of one of the largest banks in the United States told his sales personnel to get clients to buy a certain product that they had on the shelf, despite knowing it was, to put it politely, junk.

Anecdotal evidence indicates there are many individuals who have dealt with someone who lost all of their money.

Some have been attracted to the investment industry because they had no alternative careers.

Nowadays, it must be recognized that it is very difficult to make money in the equity market.

For instance, common stocks currently stand almost exactly at their level 12 years ago. In good markets gains have been generated, only to see them evaporate in bear markets. Now, too, the economic outlook is poor.

What is essential at the present time is to discover a first-rate economist, who objectively can determine the correct state of the economy. With that background one can be reasonably confident that investments will follow if the situation is favourable.

Unfortunately, currently major pitfalls loom ahead, so equity markets are fraught with huge risks. Let buyers beware.

 

Bruce Whitestone

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