60 Minutes recent declaration that the stock market is rigged (based on Michael Lewis’ new book Flash Boys) isn’t much of a revelation.
My book – Rigged, Unlearning Mainstream Financial Propaganda and Building Your Personal Fortune – has been out for over a year and reveals a whole myriad of other Wall Street shenanigans that are far more devastating to us as average investors than the High Frequency Trading scam detailed in their story.
Here is a quick summary of some of the themes in my book – things that impact our wealth every day.
- Most people agree that the stock market is one of the best places to grow wealth over time. Most people also agree that the stock market is one of the best places to lose money in a hurry. How can it be both? And more important, is there a way to capture the market’s upside potential but eliminate its downside risk at the same time? I’ve been screaming “Yes” for years!
- Wall Street promotes strategies like dollar-cost-averaging, mutual funds, and a balanced/blended portfolio – in the name of “diversification.” But diversification is completely unnecessary if we eliminate losses as a potential outcome in the first place. Diversification drives trading activity – which drives fees and commissions – which is the lifeblood of Wall Street. So are they preaching diversification for our benefit – or their own?
- Mutual Funds are a joke. Not only do they play mathematical tricks to pump up their performance (average returns vs. compound returns); but they are hugely expensive (we give up 25% of our growth when a fund grows by 6% but has a management fee of 1.5%). They are extremely tax-inefficient, and the overlap of holdings from fund-to-fund largely destroys their purported diversification advantages.
There are a dozen others in the book – which I (shamelessly) encourage you to pick up. The real point is that stock markets are not bad – they have no conscience or ability to think or reason in a way that takes advantage of us.
What’s bad is the rule set by which Wall Street forces the unknowing and unsuspecting (us) to access those markets – rules like diversification, mutual funds, and risk-reward.
We can make all those obsolete by accessing the market under our own rule set – rules favor us first. An when we do so, we can win the investing game with certainty!
That’s my Wall Street message. So move over 60 minutes.
