[tw]

Originally Posted by lookout123

I dealt with this fallacy in the previous thread that you were unable to respond to.

Everything you posted had been answered in posts preceding. Meanwhile, four years of data and other sources demonstrate a fundamental fact. Stock brokers, on average, underperform the market. Index funds and ETFs are how to match the market. Legendary investors such as Warren Buffet and Peter Lynch describe how to beat the market - know the product and its industry.

Even the cable guy (whoever that showman is) that does Mad Money says better investment information is found on the front page of the NY Times; not in financial publications. Why? Product information is more often discussed there.

More facts that potential or learning investors should know. From The Economist of 22 Mar 2008:

At first this growth was built on the solid foundation of rising asset prices. The 18 years to 2000 witnessed an unparalleled bull market for shares and bonds. Corporate restructuring, wage competition and a revolution in information technology boosted profits. A typical portfolio of shares, bonds, and cash gave real annual yields of over 14% ... almost four times the norm of earlier decades.

Again, think product. During this period massive innovations including, so many pioneered and stifled in the 1970s, suddenly became hot and profitable marketable commodities. Innovation was similar to before, during, and after the 1950s.

But something changed in 2001, when the dotcom bubble burst. America's GDP growth since then has been weaker than in any cycle since the 1950s, barring the double-dip recovery in 1980-81. Stephen King and Ian Morris of HSBC point out that growth in consumer spending, total investment, and exports in this cycle has been correspondingly feeble. ... The industry has defied gravity by using debt, securitisation, and proprietary trading to boost fee income and profits. Investors hungry for yield have willingly gone along. Since 2000, .... the value of assets held in hedge funds, with their high fees and higher leverage, has quintupled. ...
This process has turned investment banks into debt machines that trade heavily on their own accounts. Goldman Sachs is using about $40 billion of equity as the foundation for $1.1trillion of assets. At Merrill Lynch, the most leveraged, $1 trillion of assets is teetering on around $30billion of equity. ...
Sooner or later, though, the music stops. And when it does, the very mechanisms that create abundant credit will also destroy it.

Expect growth rates to return to more traditional levels. Suddenly those high fees (ie 2% management fee on a mutual fund) removes a massive portion of those expected returns.

Even Wal-Mart has reorganized for a potential downturn. Investors might do same with Wal-mart style investments using index funds or ETFs and using discount brokers. With reduced growth expectations, management fees cost too much especially when those industry professionals, on average, underperform the market.

Do you have major investments and complex tax problems? Then industry investment professionals have a purpose. Tax laws, in particular, are so complex that even the better legal minds and lawmakers don't grasp them all. Common investor does not have these (unnecessary due to politicians) complex problems.