Taking Financial Advice from a Chained Slut Whore

First of all I wanted to let you know that I really liked some of the comments that people made about my last post. It was great to hear that some of you are going to make more of an effort to give something back. I've been saying that the more you put into it, the more you get out of it. It's totally true. Whether its money you put into it by enjoying the extra benefits or your time and then you get some great discussions going on the forums or in the comments or you inspire me to write some really cool stuff too. See, its all good!

Anyway, today I'm not talking about sex or fetish or anything. I guess I could but you know how I am. Sometimes I do and sometimes I don't. Most of you don't know this but I also post sometimes on a few message boards that are totally not sex related but investment related. This is because I've done a lot of study over the years about investments, markets and stuff. Hey, call me a nerd (but a sexy one) but I just think that sort of thing is very cool to know. Besides, it all started from the basic idea that no one else will ever be as comitted to making your money work hard for you as you will be. The first loyalty any of those guys out there, mutual funds, advisors, etc. have is putting money in their own pockets first and if you get a little too, well that's fine as well. I'd rather know what to do and put money in my pocket first and if those who help me with the transactions, whether real estate brokers, stock brokers, advisors or whatever make a fair profit for fair work, well that's fine too.

One of the things that was very difficult for me to accept for a long time was the fact that almost every piece of financial advice you hear on TV or read in the newspapers is ass backwards. See, most people are conditioned by the "Wall Street machine" over the course of their lives to believe certain things to be truths. So they sometimes get very resistant to the idea that these "truths" are put out there not because they're the best way to make money for you but because its the best way to make money for the people on the other side of the transaction. I've had some people argue with me about this but I've usually found its because they aren't seeing the big picture with an open mind and so they still cling to the old way of looking at things.

I'll give you some examples. Buy and hold. This one is classic. They tell you that you should buy a stock or mutual fund and hold it forever. Of course this is flawed because it assumes that over time, the value of anything you buy will always go up. Sure, the markets in general might have gone up an average of 9 or 10 percent over the last 10 or 20 years or whatever, but that doesn't mean every stock will and just because a stock goes down doesn't mean it will go back up and that doesn't make it cheap. Sometimes a stock (or mutual fund even) goes down for the count and never really gets back up. Besides the money you lose in something like that, there's the lost opportunity cost. In other words, while you're sitting in an investment that's going no where and isn't likely to, you could have had your money in something else that was growing. How many times have you heard "you can't time the market". They tell you this right about the time they say there's no point in trying to buy and sell to time the market. Of course the phrase that ALWAYS follows you can't time the market is "you can't buy at the price bottom or sell at the precise top". See, that's the qualifier. You can time the market in generalities, just not specifics. In other words, it is possible to tell the general trend of the market and whether that trend is changing. Certainly you'll almost never get out at the exact top or in at the exact bottom, but you don't have to. As long as you hit it reasonably close, that's all that matters.

Besides using such qualifiers, they also use omissions of information. I was reading a book the other night by Arthur Levitt called "Take on the Street" (yes, when I'm not playing with my pussy I do read) and he said if you missed the 15 best up days, your return over whatever 10 year period would have been 5% instead of like 18% if you had just bought and held. Well duh. If you take out the best days and leave the rest, of course it will be lower. Gah. You don't have to be a former SEC chairman to figure that out. A more fair assessment would have been to take out the 15 best days AND the 15 worst days. Since we're timing the market, its fair to assume if we miss the best, maybe we'll miss the worst too right? According to Investors Business Daily, if you did that over the same period your return would be close to 25% and if you did successfully time the broader market trends and missed the 15 worst days, your return would be over 30% for that period. Of course all the pundits tell you about are taking out the 10 or 15 best days. That's just not fair. Markets go up, they go down, they recover. It has more to do with human behavior and psychology than anything and over time that doesn't really change. People are hopefully and greedy when they should be fearful (of losing even more of their money) and they should be hopefully and greedy when they are fearful (of losing what little profit they've gotten). If you use the same investment strategies as the average person, if you follow average advise and if you do what everyone else seems to be doing, you WILL be average. That's how it works! That wouldn't be a bad thing except average really isn't cutting it in terms of getting your money to work for YOU, not for someone else.

Here's another gem I like from the investment machine. Diversify. Sometimes they'll say it three times as though that makes it even more important. They'll say the three most important things in investing is diversify, diversify, diversify. Um, no, no and no. Even, Warren Buffett said that diversification was protection against ignorance (meaning if you study and learn and know what you're doing, there's no reason to diversify) and he also said "put all your eggs in one basket and watch that basket very, very closely". I'm not against diversification per se, but it has to be done right. Owning 50 mutual funds is not diversification. They're all stocks! If the stock market tanks (like 2000-2002), then you're going down, period. If you're going to diversify it should be between asset classes, not within them. So you might own a few stocks, real estate and business investments. So if one falters, the other two might do okey (case in point, if half your money was in stocks in 2000 and the other half was in real estate, you'd be ahead of the game big time now. On the other hand, if you were "diversified" in mutual funds in 2000, you still would probably be underwater). The key is knowing what you're doing or at least having an advisor you can trust to put your interests first who knows what he's doing. The only thing diversification within an asset class does is water down your gains. In other words, look at it from a risk/reward point of view. By buying a bunch of mutual funds, your risk is only slightly lower than stocks but your reward is lowered big time (mutual funds are very limited in what they can do and 98% of mutual funds do not significantly beat the market anyway but carry fees of 1-2% which can erode your compounded profits over time by as much as 66%, for example, over 40 years in a mutual fund with 8% average annual return, starting with say 1000 you would have 24,000, but after fees it's only 11,000). You took the risk, it was your money, but they got most of it and you got the small piece. What the hell happened there?

The fact is, the best way to reduce risk is to increase knowledge and information. The more info you have, the less risk you have because you can make better decisions. A lot of people just don't want to be bothered with it and that's fine, but look at it this way: you go out and work all day to earn money right? Well, your money should go out and work too. Most people let their money just sit and be lazy or not do their jobs properly. The job of your money is to work hard and multiply, but in order to make sure they're doing their jobs right, you or someone you trust has to supervise them. This brings us to the last little point I want to make. Most people don't realize it but if you're not making at least a 6% average annual return, you're losing money. Seriously, letting your money sit in a "safe and low risk" account at say 4% is VERY risky because you're LOSING money! You don't think you are, but you are. Look at it this way. 6% is break even. A third or so will likely go to taxes leaving you with 4% and inflation lately has run 3-5% per year (the last several years have seen a historically low inflation rate so if we were in more historical levels, even 6% wouldn't cut it). So the only way you will come out with more money in the future (in terms of buying power, not actual dollars) than today is to get more than 6% on average.

There are a lot of other lies, misinformation and manipulations that I've learned about but I don't want to overburden you with information and besides, I know you come here for sex and fetish and talk about me sucking cocks and licking pussies so I don't want to freak you out or anything. I'm just passionate about this subject so when I start ranting about it I kind of go off. I think the bottom line is that you can't listen to others. Not the TV, the newspaper, your friends or even me. You can't take hot stock or real estate or business tips. You just have investigate things yourself and see if the risk/reward scenerio makes sense. Not enough people are willing to do that I think and its too bad because if you ever want to truly let your money work for you instead of you working for your money, that's one of the best ways to do it. Anyway, that's enough financial talk for now, there may be more another time but next time I'll try to make up for it by talking about cum or strap ons or me on a leash or something. Sound fair?