Thursday, January 15, 2009

How to Build Wealth Part II

100 Reasons Why Managing Your Own Money is the Safest & Quickest Way to Build Wealth

Part II

(11) Reason #(10) is true because major firms coverage of small and micro cap stocks are appallingly light. Firms must provide extensive coverage of large cap stocks , the Genentechs, the IBMs, the McDonalds, the General Electrics of the world to appease their clients. However, the Microsofts of the future are small and micro cap stocks now. You can't build wealth buying and holding the IBMS of the global stock world. Yes, I know that the great Warren Buffet was a buy and hold man, but today's investment world is much different than it was 50 years ago, or even 20 years ago. The explosion of derivative instruments and many more investment vehicles have formed a certain interdependency among assets that never existed before. Furthermore, the actions of some nation's banks have introduced a very tangible fragility into the global economy today. Nothing in this world is static. Certainly, the global climate is not the same today as it was 50 years ago. The temperatures of the world's oceans are not the same is they were even 20 years ago. And financial markets are not the same today. Buy and hold blue chip stocks if you want. But you will never build wealth this way today.

(12) Information technology and the flattening of the information world now makes it easier for you to be much more knowledgeable than any financial consultant employed by any of the major investment firms.

(13) Financial consultants, because of the payout grid that dictates their salaries, are often motivated by selling you the highest commission based products, not necessarily what is in your best interest.

(14) Investors that have actually built wealth through investing like Warren Buffet, George Soros, even Mark Cuban, have all managed their own money. Investors that have already amassed great wealth employ money managers. That should tell you something about what's necessary to build wealth.

(15) Even large global investment houses only have the resources to track about 1,500 stocks. There are estimated to be over 75,000 stocks that trade globally. Investors want coverage of the most popular stocks in their country which means that the great majority of stocks that firms' analysts cover are large cap domestic stocks. You want to own the best stocks in the world, you have to manage your own money. Give your money to someone else to manage, and chances are very very high that you will never own the best stocks and opportunities in the world.

(16) When was the last time you heard a truly unique approach to investing from a financial consultant anywhere? If you have spoken to 10 different consultants at 5 different firms, most likely their pitches will sound like broken records. Now think about this? How can it be that in an arena as creative as investing, that different financial consultants from different firms that live on different continents all apply the same principles and strategies when managing your money if these similar approaches are not sales driven but return driven?

(17) If you utilize a money manager to handle your money, the great majority of financial consultants don't understand anything more than you do about investing. Most people don't realize this because they don't know the proper questions to ask their financial consulants. Take care to learn the proper questions and you will reveal their weaknesses.

(18) The great majority of financial consultants can be summed up in one word. Salesman. Enough said.

(19) Investment firms convince you to do so many things that are not in your best interest. We'll list these things now.

(20) If you don't want to buy in bull markets, buy in bear markets, buy during corrections, and buy during market tops, learn to manage your own money.

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