Investing without Wall Street: The Five Essentials of Financial Freedom

CHAPTER 6

Developing Media Expertise

As we have just seen in Part One, investing is inherently simple. Unfortunately, investing is complicated by those with a financial interest in catering to investors. What is presented as analysis may be biased by salesmanship, the advancement of narrow interests, alarmism, or, very frequently, just the desire to be entertaining.

Along the way, you will encounter two kinds of advice: helpful advice that can make you a better investor; and, unhelpful advice that may be interesting reading, but in the end, offers no specific benefit.

Here are some guidelines for recognizing helpful advice, the kind that you can actually implement with positive results.

Guideline #1: Take advice only from people who know more about a particular subject than you. (This is true in life in general, not just investing.) This guideline ought to be obvious, but it's remarkable how often it's ignored.

Recognize that there are many different areas of financial expertise including economic forecasting, market forecasting, asset allocation strategies, and specific stock- or fund-picking skills. Each discipline requires concentrated focus. Many advisors are thought to be generalists, but it's more likely they are far stronger in one discipline than in others.

I once met a woman who was the manager of an Arizona municipal bond fund. I asked her what I thought was a simple question: If you had to choose, which would be better, an Arizona or New York bond fund? (I live in ...