Naked Investing

For years, my local stockbroker and my newly-rich neighbors hounded me to buy stocks. Just put your money down, they said, and let the market do the rest. Well, I did — and it did. I sent a check to my broker, then watched as the market quickly put my money to rest. In fact, the stocks my broker bought are now resting quite comfortably near the zero mark.

Since I didn’t want to watch the stock market anymore, I had plenty of time on my hands, so I decided to do a little research.

Like sports, investing is easy when you only see it from the outside: The highlights of Patrick Mahomes’ incredible passes, Stephen Curry’s magic baskets from every angle, have been shown so often they’ve become reality. Rarely do we see footage of passes into the cheap seats or airballs. On the investment side, rarely do our neighbors tell us how they lost their shirt on a hot tip. Instead, we hear their highlights, how they’ve made a bundle on this stock and a fortune on that one, that the only reason they’re still driving their old car is that they’re so modest. It’s as if they keep using video clips of the only good golf shot they’ve ever made to prove what good players they are. It’s taking luck and calling it skill.

Okay, so maybe your neighbors have more hot air than hot tips. What about the professionals? Well, there once was a time when a smart money manager had a good chance of making money — say, back in the early 60’s, when most of the buying and selling on Wall Street was done by individuals. Savvy professionals were in the minority then. They could wait and watch — more like lions than bulls or bears — and pounce on any attractive opportunities that strolled by. The financial world is a different place now; it’s ruled by large institutions with legions of hard-working, intelligent professionals who do nothing but search for investment bargains and strike with lightning speed (literally) with their supercomputers when they find one.

But think about it: The only way one investment firm can buy a stock is if another one is willing to get rid of it. In other words, the buyer is buying a stock he thinks is undervalued from the seller who thinks it’s overvalued. Both can’t be right.

So what chance do you have of guessing correctly every time? Maybe investing your hard earned money is best left to the experts who actually know what they’re doing.

Last month it looked like the Dow was heading straight for 36,000 no matter what happened in the real world. Everyone was a financial genius and could make a lot of money for you. But, as Warren Buffett said, “you only find out who is swimming naked when the tide goes out.”

What will your stockbroker be wearing?