Financial Adviser Solin: 5 Investment Myths

Wednesday, 27 Aug 2014 08:01 AM

By Dan Weil

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A lot of opinions course through the investment world, and many of them are myths.

"The securities industry spends hundreds of millions of dollars annually sponsoring all forms of financial media, a great portion of which is little more than an infomercial for its services," says Daniel Solin, a wealth adviser for Buckingham Asset Management.

In an article for U.S. News & World Report, Solin identifies five myths.

Editor’s Note:
5 Shocking Reasons the Dow Will Hit 60,000


1. "You are in control." While you obviously make your own investment decisions, "you may not be aware that the securities industry, through powerful advertising methods, may be sending you a message that causes you to subconsciously act in a way that is not in your best interest," Solin writes.

2. "Positive personal traits are indicative of investing skill." Just because an investment manager has a good reputation doesn't mean he/she is good — see Bernie Madoff.

3. "Investment pros are skilled in beating the market." Very few money managers beat the market over long time periods.

4. "Investment clubs are a source of sound investment advice." A study by Brad Barber and Terrance Odean, showed that 60 percent of investment clubs underperform the market.

5. "Alternative investments are good choices." Both stocks and Treasury bonds have outperformed hedge funds during the past 10 years.

"All of these disseminated myths share a common goal. They are calculated to get you to take action based on short-term information," Solin explains. "In addition to creating fear and anxiety, the securities industry has another way to get you to trade. They tempt you with new products that promise increased return without additional risk."

Meanwhile, CNNMoney cites four common investment mistakes you should avoid.
  • Failing to invest in stocks. They offer the best long-term returns of standard assets, yet many Americans are afraid of them after their 2008-09 plunge.
  • Investing in riskier assets.
  • Short-term thinking. Investors often purchase assets based on past returns rather than future potential.
  • Forgetting inflation.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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