This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Question: Can I find inefficiencies in the pricing of small and microcap stocks?

Answer: A common misconception is that small cap and small value stocks provide fertile territory for "making a killing" by finding mispriced stocks. However, the data tells a different story.

One study of the performance of 157 small cap value funds over a five -year period found that almost 90% of them under performed a small cap value index.

Another study of 53 small value mutual funds over a 15-year period found that 89% of them under performed a small cap value index.

If the highly paid managers of these funds, with all the resources available to them, can't out perform the index, what are the chances that individual investors will be able to do so?

A more intriguing question is: Why are you doing this?

The volatility of a small value stock (as measured by standard deviation) is about 75%. But its expected return is roughly the same as the index, which has a risk of only 30%. Why would you take significantly more than twice the risk to achieve the same expected return? You would be much better off just buying the index.

I understand the lure: You might hit it big with a huge return. If this is what motivates you, go ahead and take a shot, but realize that you are speculating, with an expected return of zero, minus costs.

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, June 24, 2008). Visit his website at Smartestinvestmentbook.com.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Question: What about those "experts" who investing/trading only when temporary catalysts create irrational prices? Such as when a company like Kentucky USA Energy (KYUS) with no actual business spends millions on spam mailers...Or when broker margin calls force short sellers to buy into stock like Mexco Energy (MXC) and the sleepy stock surges from $3 to $50 within a few weeks--once the mailers and margin calls stop, would the odds not overwhelmingly favor a drop in stock price? (my strategy)

Answer: All of the information about listed companies is public. It is scrutinized by tens of thousands of professional traders and by millions of investors. This includes the kind of information you set forth in your question.

Ask yourself: Is it really likely that the professional traders at Goldman Sachs and other world class investment bankers have missed the significance of this information and that these stocks are not efficiently priced?

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

Every survey I have seen indicates that saving for retirement is the number one goal of Americans.

Given the extreme importance of this subject, it is puzzling why investors continue to look for investment advice in all the wrong places.

Case in point: Many investors rely on Jim Cramer's stocks picks. Yet academic analysis clearly demonstrates that the stocks he recommends have an initial bump in price, but reverse their gains less than two weeks after his recommendation. These studies show that Cramer can move markets, but only for a very short period of time.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

There is no doubt that the coming retirement tsunami will make $4.00 a gallon gas look cheap.

In a thought provoking article, entitled Common Cents, by benefits consultant, Brooks Hamilton, the author notes these signs of impending crisis:

• The majority of American either have no retirement plan or don't participate in the one they have;
• Those that do participate, don't contribute early enough and don't make adequate contributions;
• The returns earned by participants are dismal.

This perfect storm for retirement disaster is exacerbated by longer life expectancy and sharply increasing health care costs.