On Not Writing Essays and the Big Scam

I have recently been toying with writing more "essay" type pieces on the site here. But, (squinching my brow), it seems like a bunch of work doing all that research. Why not just list the ideas, do a brief explanation and be done with it?

So, anyway, on to the Big Scam. A relative of mine approached me last week and started talking about purchasing shares in different companies. The relative was using the age-old approach to buying stocks: personal experience. The Common Wisdom there is that you buy companies that appear successful based on what you see every day. For example, Starbucks is always packed and you don't see any reason it won't be packed with customers going forward, therefore it is a good investment to buy their stock. As you might guess, this gives no consideration to the price of the stock. I didn't have the heart to point the problem with the Common Wisdom. Perhaps this is an example of why most people avoid talking about money with relatives...

So, this interaction prompted a culmination of the thinking I've been developing for some time about the stock market, mutual funds, and professional "investment advisors." This article was also interesting to read: http://cbs.marketwatch.com/news/story.asp?guid=%7B954AA053-F953-43F3-BBC8-63D351A3BF2A%7D&siteid=google&dist=google. The litany of scams perpetrated against the general public just continues on and on. And that's just illegal parts of the scheme. The legal parts are just as bad. Why do we actually believe that stock market investing is a good deal?

The argument from the "sellers" of stock and mutual funds always roll out the "past history" of the stock market as the results. "If you put $10k in the stock market in 1962 it would be work $X today." So what? The thing that isn't investing in the stock market is a bad thing, but there are two things not mentioned by those offering these investments:

1) They're going to skim off the top, both legally and illegally. Legally: outrageous management fees. 1% yearly for holding money for a mutual fund? 2% commissions? Give me a break. Illegally: Read the news. Examples: Dick Greco's salary. After hours mutual fund trading. Lying analysts for investment banks. And so on and that's just the last six months.

2) You can get better returns elsewhere. Where? Real estate. Investing in a small business are two examples.

Oh well, perhaps I'm just figuring out what everyone else already knows (again).