First there was the chimpanzee that picked stocks. Then there was the blind-folded dart toss at listed equities. Oh, and let’s not forget the Ohio women’s investment club that made stock picks according to how crowded store parking lots were.
The new flavor of the day is Wikinvest.com, a free investment advice site.
The bottom of the market must be in, because they’re ringing the dinner bell here.
The premise: a Level 101 investment site for the novice trader. Although not new, the concept has attracted the curious investor, due by and large to the awful drubbing the market -- and ultimately, the investor -- has endured over the last 18 months. This, in conjunction with the utter distrust between financial advisors and the public, has led to the cry, “I can do better than this!”
Is Wikinvest worthy of the attention? To answer that question, let’s take a closer look at what we mean by trading and investing.
Trading is something that requires great vigilance. Wikinvest seems geared toward that type of viewer. Here’s the rub: The market information is not live, and it’s on a 15-minute delay. Real-time quotes are the only possible way to trade successfully. There is absolutely no substitute.
Investing allows the market participant the luxury of a time horizon they choose to designate. Some issues arise here that are more far-reaching than that of trading. Here’s a short list of essential elements not provided by Wikinvest:
A financial plan tailored to each individual specifically
A financial plan that takes into account asset allocation, according to age, number, and age of children, educational aspirations, income, and other retirement vehicles already owned
A financial plan that incorporates one’s risk tolerance
A financial plan with two must-haves: an entry strategy and, more importantly, an exit strategy
These are only a few of the considerations that go into investing. There’s also the concept of diversification. If you were bullish on technology in 2000 or bullish on oil and financials in 2008 and put all your investment capital into these sectors, today you’re broke.
It is paramount that a portfolio be diversified among fixed income (bonds, bills), equities, commodities, and foreign currencies. You also must have investments allocated according to your age. A common formula is to set the ratio of stocks to bonds according to your age: If you are 30 years old, you might have 30 percent in bonds, 70 percent in stocks. If you are 50, 50 percent bonds, 50 percent stocks, etc. (Oh, and no more than 10 percent of your investment capital should ever be allocated to commodities and foreign currencies.)
Wikinvest may be for the novice. The unfortunate part is that the information can come from the novice, too. Like Wikipedia, the site doesn’t guarantee the information, which is anonymous. That means no accountability. Front-running and rumor mongering can take place.
As punishing as the past two years have been for the whole investment community, there is no substitute for a professionally licensed financial advisor. Would you go to a software developer to have your brakes aligned? Would you allow a locksmith to perform angioplasty?
Proceed with caution.
— Chris Poley has been a professional trader for over 20 years
Elie Weisel, Frank Lautenberg -- countless others -- I'm betting most of these investors blew right past an IRS "investigation" that led to nothing. Instead, they saw the marquee value of the other investors and thought, "Well, if it's good enough for Steven Spielberg..."
No enforcement, no accountability, no trust. This is a helluva way to have a market.
Chris makes a very good point - the average person has put far more time into researching a plasma TV or new laptop. Sadly, this allows for such wool to be generated by some and pulled over the innocent investor's eyes by others - a bad combination!
That same saying was like a mantra I heard growing up. Better words to invest by are hard to come by. Funny how you repeat it; i guess truth is unbreakable!
Terry, One of the most disturbing revelations that has come out of the Madoff scandal, was he was investigated as far back as 1998 by SEC regulators and I beleive the IRS on a number of occations. The watch dog agencies shuffled a few papers around but obviously never did their job.
To your point, more of these ponzi schemes are sure to surface. But isn't it frightening that when someone comes forward and alerts the regulatory bodies that police this industry and what do they do? DROP THE BALL!
What recourse do we have? I stick with going into short term Government securities and my matress, until someone gets a handle on this industry.
Points well taken, Chris... but how much negative or suspicious information would have been turned up on Bernie Madoff, even 6 months ago? I'm sure you've heard the same market rumblings that there are more big fish like him with equally sterling performance records behind them, how ever falsified they may be.
You're sadly right about shattered trust -- this is going to spook investors for years, especially if other Madoff-like schemes are indeed uncovered.
Mary, Now your talking!!! People need to due diligence with their advisor. You can check their performance and security violations. Many people put far more research into buying a 50" plasma TV than, the person who is determining how their retirement years are going to be spent.
I hope the public finally understands the rules of engagement, we are ultimately responsible for ourselves. The trust is shattered, and I think that in the end it will change the way Wall Street treats Main St.
Cynical or not, I don't think investors will ever be content to leave their money in the hands of advisors again without a lot more information about those advisors in hand -- and without keeping much closer watch on what the advisors do once the money's in the bank. Too much trust has been breached, too many times.
When you enter the automobile showroom, you assume you're going to meet someone whose vested interest you'll have to navigate. People are now wise to the fact that financial advisors work are commission salespeople, just like car dealers. There are solid ones, and there are the equivalent of the proverbial used car dealer. Either way, there's an agenda. Buyer beware!
Mary, I think your being too cynical. Many advisors are paid a percentage of profits made from clients. The old churn and burn brokerage days are long gone, in fact there are SEC regulations about churning.
The truth of the matter is people lost money because this generation of traders didn't know what to do. Wall Street is corupt and full of greed. But for the 10 years prior to the meltdown, no one was complaining about how fat their 401 K's got.
One last thought, if everyone invested their own money, and this financial tsunami hit, it would be far uglier than it already is. Chris
That was a very hard story to read. I have seen many a saavy trader, get stubborn with a position and go under. The difference to thinking your wrong and knowing your wrong is a very thin line. You are never bigger or smarter than the market. My final cliche is "Bulls and Bears make money and pigs get slaughtered."
Well said, SteveGNYC! I think many "financial advisors" failed to let their clients know when to get out. What's more, in the case of larger firms, it behooved them to keep clients in the running even though they may have known the signs were poor. They wanted to keep their jobs.
Back to my original point: I still see the value of dispassionate advice versus advice from someone with a vested interest. If it weren't for advisors encouraging folk to get into financial deep water unwisely, we might not be in the mess we're in today.
The ThinkerNet does not reflect the views of TechWeb. The ThinkerNet is an informal means of communication to members and visitors of the Internet Evolution site. Individual authors are chosen by Internet Evolution to blog. Neither Internet Evolution nor TechWeb assume responsibility for comments, claims, or opinions made by authors and ThinkerNet bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
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