Capitalism is not a Ponzi scheme. Capitalism is a scheme of free markets.
I'd be the first to agree that capitalism bestows its blessings unevenly. But that wouldn't persuade me to think it was a good idea to do away with those blessings in their entirety. That said, there is lots of work to be done to make capitalism work better, and to broaden its blessings far more widely not only in America, but all over the globe.
Ask yourself: Am I an investor, or am I a speculator? An investor is a person who owns business and holds it forever and enjoys the returns that U.S. businesses, and to some extent global businesses, have earned since the beginning of time. Speculation is betting on price. Speculation has no place in the portfolio or the kit of the typical investor.
Don't look for the needle in the haystack. Just buy the haystack!
Income earned by the sweat of your brow should be taxed at the lowest rates, not the highest. Capital gains should be taxed at a higher rate.
The business has some problems, substantial problems. You go fix it, you young people. That's what you're there for. Don't believe what the old generation tells you. We don't know a damn thing, including Bogle.
The idea that a bell rings to signal when investors should get into or out of the stock market is simply not credible. After nearly fifty years in this business, I do not know of anybody who has done it successfully and consistently. I don't even know anybody who knows anybody who has done it successfully and consistently. Yet market timing appears to be increasingly embraced by mutual fund investors and the professional managers of fund portfolios alike.
I believe - deeply and profoundly - that speculation is a loser's game.
It's very difficult for any particular segment of the stock market to sustain superior performance. The watch word for our financial markets is, "reversion to the mean" i.e. what goes up must come down, and it's true more often than you can imagine.
Reversion to the mean is the iron rule of the financial markets.
But whatever the consensus on the EMH, I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of EMH: The stock market itself is a demanding taskmaster. It sets a high hurdle that few investors can leap.
If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks.
The transfer of Wall Street from private ownership to public ownership has been a big step backward.
It's 1450 out of 1500 ETF funds that I just wouldn't touch because they're not diversified enough. Or they have some huge speculative twist to them that if you can guess the markets right you will do very well for a day or two but who can do that? Nobody.
Fund investors are confident that they can easily select superior fund managers. They are wrong.
"Now you can trade the S&P 500 Index in real time" was the slogan in the newspapers for the first ETF. What kind of nut would do that?
My biggest prediction for the future is that people are going to start looking after individual investors.
Speculation leads you the wrong way. It allows you to put your emotions first, whereas investment gets emotions out of the picture.
I would always advise young people to follow their star - not my star. They have to live their own life. If they decide they want to go into the investment business, do it, but make it a better business than it is today.
We need a federal government commission to study the way our financial services system is working - I believe it is working badly - and we also need more educated investors. There are good long term low-priced mutual funds - my favorite is a total stock market index fund - and bad short term highly priced mutual funds. If investors would get themselves educated, and invest in the former - taking their money out of the latter - we would see some automatic improvements in the system, and see them fairly quickly.
The principal role of the mutual fund is to serve its investors.
Your success in investing will depend in part on your character and guts, and in part on your ability to realize at the height of ebullience and the depth of despair alike that this too shall pass.
Time is your friend; impulse is your enemy.
In the long run, investing is not about markets at all. Investing is about enjoying the returns earned by businesses.
I believe that the mutual fund industry's biggest shortcoming is too much focus on the momentary price of a stock - an illusion - and too little focus on the intrinsic value of the corporation - the ultimate reality. I'm comforted by the fact that Warren Buffett feels the same way.
Surprise! The returns reported by mutual funds aren't actually earned by mutual fund investors.
Our capitalistic scheme in the latter years of the 20th century seems to have lost its way. We've had a "pathalogical change" from traditional owners capitalism where most of the rewards have gone to those who make the investments and assume the risks to a new and deeply flawed system of managers capitalism where the managers of our corporations our investment system, and our mutual funds are simply take too large a share of the returns generated by our corporations and mutual funds leaving the last line investors - pension beneficiaries and mutual fund owners at the bottom of the food chain.
In Las Vegas we all know that it's the croupiers who win. At the race track, it's those who control the handle who win. State lotteries, does anybody think the participants in the lottery win? No. The state wins.
Successful investing is about owning businesses and reaping the huge rewards provided by the dividends and earnings growth of our nation's - and, for that matter, the world's - corporations.
Managed funds are astonishingly tax-inefficient.
If you're very talented and keep winning, you'll do just fine. It may take a while. But the talent is hard to identify and talent is hard to tell from luck. There's an awful lot of luck in this business. Past performance is not helpful in judging future performance.
The multiple failings of our flawed financial sector are jeopardizing, not only the retirement security of our nation's savers but the economy in which our entire society participates.
I was born in an earlier generation and, as a group, my classmates at Blair Academy and Princeton University were as ethical, straightforward, and integrity laden as you could possibly imagine - perhaps not a 100% - but the overwhelming majority. I've been in business a long, long time and I simply cannot imagine seeking out cheating, greedy people.
The fund scandals shined the spotlight on the fact that mutual fund managers were putting their interests ahead of the fund shareholders who trusted them, which had much more substantial consequences in the form of excessive fees and the promotion - as the market moved into the stratosphere - of technology funds and new economy funds which were soon to collapse.
The stock market is a giant distraction to the business of investing.
I believe Washington should be a more active participant focusing on the issue of why corporate shareholders and mutual fund shareholders are not given fair treatment by corporate management and mutual fund management. We need to develop a national standard of fiduciary duty to ensure that these agents, if you will, are adequately representing the principles - pension beneficiaries and mutual fund shareholders - whom they are duty bound to serve.
Corporate leaders surely have their problems, I believe that most CEOs are doing their best to hew to the ethical line. The problem is that that line has gotten blurred and that our moral standard seems to be "if everybody else is doing it, it's okay". That's not good enough for me.
I'm not an expert on Islam, but I think there are lots of noble religions whose basic principles could stand considerably more observation in the world of business.
The miracle of compounding returns has been overwhelmed by the tyranny of compounding costs.
Index funds eliminate the risks of individual stocks, market sectors, and manager selection. Only stock market risk remains.
Thomas Aquinas defined the human soul as the core of our being, and the power that brings our characteristics into unity so the soul of capitalism - in its own temporal world as contrasted to the spiritual world of human beings - is what defines the core of the system and the factors that unify to produce the wonderful world that we are blessed to live in.
Hint: money flows into most funds after good performance, and goes out when bad performance follows.
Sure there are some companies at the margins of our society that probably do that and I think we all have the responsibility as consumers and as investors to avoid them like the plague. If we do, they won't last very long. Doing what's right is the only possible formula for long-term - I emphasize long term - business success.
While I haven't read economist Robin Hahnel's work, replacing capitalism would be at the very bottom of my list of priorities - to be considered only after everything else had been tried. Improving our capitalistic system however, is at the top of my list and is of course the major theme of "The Battle for the Soul of Capitalism."
Yes, the investor is often his own worst enemy. Yes, the marketing colossus known as the mutual fund industry provides the weaponry which enables investors to indulge their suicidal instincts. No, the fund industry was hardly an innocent bystander in the market boom and the subsequent carnage. "We have met the enemy and he is us"... all of us.
If it is hard to imagine that 20% of losses on the stock market, you should never participate
Rely on the ordinary virtues that intelligent, balanced human beings have relied on for centuries: common sense, thrift, realistic expectations, patience, and perseverance.
If your fund doesn't last for the long term, how can you invest for the long term?
I'm not currently into economic textbooks, but my grandchildren tell me that the book by Gregory Mankiw, former head of the white house council of economic advisers is a model of intelligence and clarity. Why not try that one.
So the misplaced assumption is that we have this whole new institutional element where these [financial] institutions are looking after their own financial interests before the financial interests of the principals, princi-pals whose interests they are really bound to observe first.
The historical data support one conclusion with unusual force: To invest with success, you must be a long-term investor.
The returns we read about in the industry sales literature vastly diminish when we move from the theoretical world of market indexes to the real world of actually investing.
If the data do not prove that indexing wins, well, the data are wrong.
On balance, the financial system subracts value from society
I think we all ought to be careful about too much generalization on this issue, even as I confess to painting with a pretty broad brush myself!
The courage to press on regardless - regardless of whether we face calm seas or rough seas, and especially when the market storms howl around us - is the quintessential attribute of the successful investor.
The general systems of money management today require people to pretend to do something they can't do and like something they don't. It's a funny business because on a net basis, the whole investment management business together gives no value added to all buyers combined. That's the way it has to work. Mutual funds charge two percent per year and then brokers switch people between funds, costing another three to four percentage points. The poor guy in the general public is getting a terrible product from the professionals.
You know the rule of 72, divide the number into 72, any number you want, and that's how long it will take your money to double.
I think it's fairly easy to provide a moral defense of capitalism. It has been - over the last 200 years - the underlying basis for enormous increases in productivity and human welfare and rising living standards, particularly in the United States, and in the industrialized nations but in fact, in most parts of the world.
I think it's gone much too far. Most of them are not worth the powder to blow them to hell.
The relationship between executive CEO pay, stock performance is tenuous and not easily unscrambled, just one of myriad factors that affect the price of a stock.
Among my greatest disappointments about the mutual fund industry - in addition to excessive costs and excessive focus on the short-term - is that fund managers have been passive participants in corporate governance.
Without getting into brothels, there are ethical capitalists the problem is that there aren't enough of them. It is not "just a few bad apples" that have been evident in our corporations, our investment bankers and our mutual funds, but so many that one has to concede that the barrel itself needs some work.
We need to reorganize our entire system of retirement plan investing and to develop federal standards of fiduciary duty for pension trustees and fund managers. These require "top down" intervention. But we also need investors to look after their own economic interests, a bottom up approach to our problems that is well within our individual power to undertake.
I believe that the behavior of too many of our corporations investment bankers and fund managers has jeopardized some of the trust that investors have had. It's not the economic engine that we need to focus on, but the need to make sure that our investors receive their fair share of the returns that that great economic system produces.
We live in a very risky world and investors should not get "carried away" with excessive allocations to equities, or for that matter, real estate. As always asset allocation and low cost and broad diversification will be essential in earning one's fair share of whatever returns our financial markets are generous enough to bestow upon us.
Learn every day, but especially from the experiences of others. It's cheaper!
Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.
The mistakes we make as investors is when the market's going up, we think it's going to go up forever. When the market goes down, we think it's going to go down forever. Neither of those things actually happen. Doesn't do anything forever. It's by the moment.
While the apostles of the new so-called "behavioral" theory present ample evidence of how often human beings make irrational financial decisions, it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily and economically capitalize.
I will create value for society, rather than extract it.
The grim irony of investing, then, is that we investors as a group not only don't get what we pay for, we get precisely what we don't pay for. So if we pay for nothing, we get everything.
It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it.
The mutual fund industry has been built, in a sense, on witchcraft.
We need a mutual fund industry with both vision and values; a vision of fiduciary duty and shareholder service, and values rooted in the proven principles of long-term investing and of trusteeship that demands integrity in serving our clients.
We are facing incredible challenges in the economy of the U.S. and the economy of the globe, but the stock market, we never know whether it's over-discounted or under-discounted or got exactly right its anticipation.
