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The Wall Street Self-defense Manual: A Consumer’s Guide to Intelligent Investing
Henry Blodget
By
Published: Jan 01, 2007
Category:
Money
The Wall Street Self-defense Manual: A Consumer’s Guide to Intelligent Investing
Henry Blodget
If I could help you make more money, would that be of interest to you?
Thought so.
First, though, I have to let you in on the joke. Henry Blodget, the author of this book — you know who he is? Yes, that’s right: the guy whose relentlessly upbeat recommendations may have cost you bigtime as the Internet bubble was bursting.
What did Blodget do? Well, first he did something right. In December 1998, he predicted that Amazon.com — then trading around $200 — would zoom to $400. Many scoffed at this junior analyst. But it wasn’t long before Amazon.com broke the $400 price target — and Henry Blodget, suddenly famous, got hired at Merrill Lynch.
Blodget rode the Internet bubble and became a god. He also saw that much of the prosperity was bogus. In 2000, he sent an e-mail to colleagues: "ATHM (At Home Excite) is such a piece of crap!" That was not his official position; the same day, Blodget’s team gave ATHM an "accumulate/buy" rating. Later that year, Blodget wrote that Lifeminders was “a POS (you can figure it out).” Two weeks later, however, his team ranked that stock “accumulate/buy."
When New York State Attorney General Eliot Spitzer got his hands on those e-mails, he made Blodget the poster boy for the hypocrisy and greed of Wall Street. Blodget was permanently barred from the financial markets — and fined $4 million for his offenses.
For the past few years, Blodget has been writing about investing. I read many of his pieces; they seemed sharp, self-critical, helpful. Now he has published a book that alerts you to the pitfalls of speculation and guides you toward making smart investments.
Why should we listen to a guy who, many thought, ought to be in jail? Because no one is more honest than the drunk who gets religion at Alcoholics Anonymous. And no one is wiser about the shady side of Wall Street than the guy who was once on the inside.
So what does Blodget have to say? In three words: Don’t do it.
What is “it”?
Whatever clever investment scheme you have in mind.
But you’ve researched! You’ve talked to experts! This is a sure thing!
Wrong, wrong, wrong. You are an amateur, Blodget reminds you. And you are in a professional’s game. The likelihood that you have come across an opportunity that the entire market has missed is very small.
But it’s worse than that: You see yourself as an active investor. You’re going to get in at the low, get out at the high. And if that stock purchase works, you’ll take another shot at the equity markets, just because you now have a track record of success.
Forget all that, says Blodget. “The only part of your return you can control is your costs.” And: “Most investors who seem skillful are just lucky.” And: “Investing in stocks will almost certainly not make you rich.”
Here’s how you win: “Diversify your assets, reduce your costs, and get out of the way.” Got $200,000? Invest it in a low-cost equity index fund. Fifty years later, cash it in — for about $22 million.
This is called “passive investing.” It is not sexy. It is not even very interesting. But it works. (In The Only Investment Guide You’ll Ever Need, Andrew Tobias — a writer and investor so virtuous he’s probably never received a traffic ticket — offers very much the same advice.)
But buying a stock-index fund — or diversifying in mutual funds — is not so simple. Blodget explains why past performance is meaningless. He shows how Wall Street can shave you on costs. And he takes you through a few funds, so you can see how the big boys make the big bucks on your investment.
Self-defense is a useful metaphor when talking about Wall Street. Unless you’re very savvy, you don’t see the hidden costs coming your way. Or the other charges, all of which are disclosed in the fine print you don’t have the patience to read.
Luckily for you, Henry Blodget has read all the footnotes. He’s seen the pitfalls. And in clear, straightforward prose, he can help you stop yourself from blowing yourself up.
This book, unlike many others, will not make you feel smart. Just the opposite — it will tell you what you’ve long suspected: that you are meat for the big investment houses. If you’re tired of making money for guys who are already making millions, this $12.95 paperback is the book to buy.
To buy “The Wall Street Self-defense Manual” from Amazon.com, click here.
