I advise people how to invest in the stock market. My books empower people to take charge of their investing: determine their asset allocation, buy a globally diversified portfolio of low cost index funds, and avoid brokers.
Frankly, it's a tough sell. Investors want the risk of risk-free investments, but the returns that come with taking significant risks. Most brokers and the financial media are more than eager to help them try to do so.
As Dr. Phil would say: How is this working for you?
It's not just about the current market meltdown. There is ample data indicating that, over the long term, the average equity investor makes a significantly lower return than he or she could obtain from FDIC insured Certificates of Deposit or Treasury Bills, with far less risk. This is a fairly predictable result, caused by stock picking, manager picking and market timing, all of which are peddled to gullible investors.
Historically, stock market investing has been the only way to keep pace with inflation and taxes. Nevertheless, it really is a lazy way to make money. You write a check, deposit it in an account and hope that it will grow into a bigger check so you can take it out some day and retire.
The really successful people I know have made their money in one of two ways: Building up their own business and investing in real estate.
Both require a lot of hard work and some luck.
With unemployment rates projected to be as high as 10%, the new generation might want to think about their approach to accumulating wealth.
Maybe it's time to focus on a good education and developing marketable skills that will permit you to invest in yourself, work hard and really take charge of your financial future.
That's an investment you could believe in.
Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).
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