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Wednesday, 20 February 2008

Take the Bait, Ruin Your Investing Life

by Ben Stein

We're currently in very stormy seas investment-wise. There have been dramatic moves downward on every index I know of. The media is filled with tales of gloom and doom.

In such times, we all need advice on how best to ruin our investing lives. With that in mind, try the following:

1. Panic.

That's right, get scared. Get really freaked out. Let the panic mongers on TV sell you on their points of view.

2. Sell everything you have in the market.

Even if it's at a loss. Even if you were doing great with it until now, sell, sell, sell. Get the heck out. Just dump everything and go to cash.

3. Believe that "this time, it's different."

Yes, even though markets always recover, especially in times of aggressive repair work by central banks, believe that this time it's different and this time the market will go down, stay down, and never come back.

This time, alone among postwar markets, the market will never rally, never rebound, never reach new heights. Yes, this time, things are so bad that stocks will never come back, so sell out and stay out.

4. Believe that the short-sellers on TV are sincere.

No, they're not just trying to scare you into selling to knock down the market so they can make money. They're not just ginning up phony metrics to scare you and make money on their shorts. They're really trying to help you.

5. Trust the major newspapers to know more than Warren Buffett.

Yes, Buffett's the best investor in history, and says to stay in the market and buy index funds. He also says now is the time that stupid money is leaving the market.

But pay no attention to that fool! Pay attention only to some new young gunslinger at The Wall Street Journal or Barron's who tells you it's time to sell. Even pay attention when someone with no investing track record tells you to sell out of Berkshire Hathaway, one of the most successful investments of all time.

No, don't trust Buffett or other "geniuses" like John Bogle. Trust whoever comes across as the smartest-aleck and most glib, "on whom assurance sits, as a silk hat on a Bradford millionaire" (to quote T.S. Eliot).

6. Trust that you can get back in before the next big move upward.

You may have heard that you can never know such things, and that if you miss the first huge days of a rally you can never catch up. But in your bones, you'll know when the move is coming and you'll get in just in time.

7. Buy only stocks your friends tip you about.

Don't buy indexes. Don't buy broadly based mutual funds. Just buy individual stocks you've heard about in your gym's locker room.

Unhappy Endings

I could go on, but you get the point.

None of us is a genius except Buffett. None of us knows when the market will turn. We do know we make more money if we buy when stocks are down. We do know we make more money by patient, ongoing investing.

But pay no attention. After all, your goal is to be old and poor, right? Right! So listen to what the short-sellers are telling you and put all your money under the mattress for 15 years -- you'll be really glad you did.

After all, when did market manipulators ever lie to you? When did slow, patient acquiring of broad indexes ever make a buck? No, believe the slickest guy in the room. And exit crying.

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