Monday, March 12, 2012

Why In the World Hire an "Investment Broker"?

Craig Newmark discovers the answer to one of life's most difficult questions: why would anyone hire an "investment broker"?

Brokers, after all, make people.... broker. They sell products they don't understand to yokels they don't care about.

But, as Craig notes, now there is an answer.

Got a call from an investment broker the other day myself. I made two claims, rather loudly.

1. No one can make predictions about the stock market, or super normal returns in assets, unless they inside information. And if they had same, they would TRADE on that information, borrowing all the money they can scoop up. They wouldn't call an idiot like me and GIVE me the information over the phone.

2. Idiot or not, I went 100% cash and short bonds in August 2007. And went back about 50% into stocks in April 2009. How many of your clients did you advise to do THAT, Mr. Investment Broker?

We didn't talk long after that.

7 comments:

Pelsmin said...

Corollary to Munger's law: Any complex product offered by a bank is designed by people who get paid to do Monte Carlo simulations all day and did better in math than you. My Broker at Merrill called to offer me their new investment product: If the market goes up by X%, I get X%, up to Y limit. If it goes down by X%, I only lose half of X%, and on and on. It sounded like a great deal, and he assured me it was. I called back and told him I wanted in, with one change; I wanted the bank's side of the deal. Hmm. No takers.

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BR said...

Proper investing isn't entirely about predicting the future. For most, it's just about getting a better return than from a CD or savings account. I'd hire somebody to take care of that for me, and I'm not exactly a kindergarten teacher. Tough thing is finding someone who actually knows what they're doing. As this study suggests some folks are better than others - not sure whether that means they beat the market though.

http://www.nytimes.com/2012/02/26/business/what-high-iq-investors-do-differently-economic-view.html

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