Goldman Sachs, Bernard Madoff, MF Global, etc. There seems to be a lot of opportunity today for people to lose money on bad investments. In spite of investing for years, I still don’t understand what these people are (or were) selling. Did the investors? Why would you invest money in something you don’t understand? No question that banks and hedge funds and mutual funds all need to be clear about how they are using your money. But what about the people who bought what they were selling? Shouldn’t they take some of the responsibility?
If some of these sellers were cheating investors by lying to them, that’s one thing. We don’t need new laws to deal with that. We already have laws against fraud. But fraud is hard to prove (it’s all right there in the fine print). We don’t though, have any laws against being stupid. The sellers say “trust me” and the buyers say “OK, here’s my money”. What! What happened to common sense? PT Barnum said “There’s one born every minute” (he was referring to suckers, not bankers).
Maybe the people who lost money weren’t stupid, maybe they were just lazy. Still not a good excuse. It’s pretty hard to cheat people who are willing to do their homework. Instead people buy because their relatives or friends have recommended the investment (bad idea). Or because the salesman has shown them a color glossy with the investment history of continuous profitable returns (worse idea).
People don’t buy individual stocks or bonds because its hard to accumulate a portfolio to accomplish a certain objective without a lot of work. A good mutual fund company will do a better job, and charge you a reasonable amount for their work. But how many people research the fund before they buy? What are the underlying securities that compose the fund?
There’s really no excuse anymore for not doing your homework. Just about any information you need about companies or mutual funds is available on the web. Corporate history, financial information, profit projections, annual reports, whatever.
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