MarketWatch's Mark Hulbert takes a brilliant look at the real reasons that people hire financial advisers: They want to feel good, and they want confirmation of what they already believe to be true. An adviser quoted in Hulbert's piece describes losing clients whenever he changes his mind about the direction of the market.

Hulbert concludes the pieces by saying, "To be sure, there's nothing wrong with feeling good. But, if that is your primary motivation in your selection of an adviser, don't later complain when your portfolio lags the market."

I know several investors who have told me that they work with a financial adviser to "feel better" and that they're aware that it's unlikely that they're getting what they pay for in terms of financial benefits. But does this make sense? I believe that one of the first things investors should do is realize that they don't have much control over the market, and that their goal should be to come as close to matching the performance of the market as possible.

So where does hiring a financial adviser, who also has no control over the market, come in? It looks to me like a case of transferring responsibility: If you have little confidence in your own abilities, you'd probably rather ride in a car being driven 140 miles per hour by a stranger than you would drive at that speed yourself.

So before you waste money on a financial adviser (unless your financial situation is very complex, a financial adviser is very likely a waste of money), repeat after me: I may not know what I'm doing, but neither does the adviser: There are numerous ways that I can construct a portfolio that will perform just as well as the one he would construct, without paying him.

So if you want to feel good about yourself, go see a therapist, not a financial adviser. If you want your investments to do well, log on to Vanguard.com, and set up a life-cycle account, or just buy some index funds. You'll outperform most financial advisers. I guarantee it.

Mark Hulbert discussed an interesting new study in Sunday's New York Times. He sums it up: "Don't even consider holding actively managed mutual funds unless you're willing to switch funds often. All other fund investors should simply buy and hold an index fund for the long term."

The author of the study argues that mutual funds underperform over the long-term not because of the inability of professional managers to pick stocks, but because of the way money flows into funds affects returns. That's right! Blame yourself for the poor performance of your funds! Basically, Jonathan Berk, the University of California professor who wrote the paper, argues that managers who perform well attract greater investments and so the funds stop performing well.

The professor suggests a complicated method of checking your funds regularly and selling bottom-performing funds and buying top-performing ones -- sounds to me a lot like performance-chasing. It also seems to run contrary to Berk's complaint that managers who perform well take on too much in the way of assets. Isn't performance-chasing what causes that problem?

Particularly given the costs of switching funds frequently (mainly taxes), I think investors will still do far better owning index funds. It's a lot easier too, isn't it?

Marketwatch's Mark Hulbert wrote an interesting piece, in which he argued that high margin levels aren't enough to trigger a bear market. Many investors believe that high margin levels are a sign of rampant speculative excess, and therefore a pretty good contrarian indicator: Just like many experts believe that when polls show that most people are bullish about the market, that's a sign of a top.

But back to the margin issue. It makes logical sense, to me at least, that it would be a negative signal. Think about it: In order for markets to soar, new money has to come in -- People have to take money out of fixed income instruments etc. and use it to make a bet on the stock market. When people are so deep into the market that they're borrowing money to put more in, where is the new money going to come from? Expecting a market rally to continue when margin debt is at a high seems like expecting the pot to get bigger in a poker game when everyone at the table is all in.

Historically it seems, margin levels are a good indicator. As we all know, they reached record levels leading up to the Great Crash of 1929, and they are currently the highest they've been since March of 2000, and we know what happened there.

Mark Hulbert, the newsletter guru's guru, had an interesting piece on Markewatch today. While numerous media sources have attributed Tuesday's market's drop to shaky consumer confidence, Hulbert looked at the data objectively rather than subjectively. Here's what he found out, based on an analysis of 30 years worth of economic and market data:

In a column in Sunday's New York Times, newsletter guru Mark Hulbert makes the case that small-cap stocks are significantly overvalued, and that large caps are undervalued. His argument is based on expanding price/earnings multiple for small-cap stocks, while the average large-cap P/E is down to one third of what it was seven years ago. This, in part, explains the underperformance of stocks like Home Depot Inc. (NYSE:HD) and Wal-Mart Stores(NYSE:WMT), whose CEOs have taken some heat for their heavy compensation in the midst of a flat stock price. These companies have provided consistent earnings growth, but the multiples have contracted to the point where the stock has remained relatively flat.

But are these companies on the verge of reward, or at least avoiding the downturn that Hulbert seems to be predicting for small-caps? I wonder. The piece does not provide any data on this going back earlier than 2000. In his book The Only Three Questions that Count, Ken Fisher made the case that the price/earnings ratio of the market is not an accurate predictor of whether stocks will move up or down. In fact, stocks seem to move higher when they exhibit high P/E ratios. I wonder if this phenomenon would hold true for the spread in the P/Es between small-caps and large-caps.

Before you go off and dump your small-caps to buy General Electric Co. (NYSE:GE) and Exxon Mobile Corp.(NYSE:XOM), remember this: While small-caps may underperform large-caps as a whole, the predictive value of this for any one stock is almost nonexistent; there will be underperformers and out-performers in both categories. I believe that investors will find the most success with stock picking in small-caps and micro-caps, where research is more likely to pay off (with large-caps, everything is often already factored into the price).