Years ago, when I wrote a popular financial makeover feature for a major national newspaper, one of our subjects asked if he should be plowing his more than $50,000 in savings into gold. It was 1997 and gold was trading at a little more than $300 an ounce. The financial planner assisting with the piece laughed dismissively, and the question never made it into the final write-up. Well, my bad. As I write, gold is hovering around $900 an ounce.
For more than two decades, as income inequality increased and job security decreased, Americans lapped up personal finance columns, books, and television shows. We thrilled to stock tips and swooned at sensible strategies for using dollar-cost averaging to invest in no-load index funds. Buy and hold, my friends! The annualized gain for the S&P 500 stock index over time is more than 10 percent! You, too, can turn into the millionaire next door. Carpe diem, folks! Seize the financial day!
The advice proffered by the vast majority of analysts, would-be gurus, and television pundits came down to one word: stocks. Some, like CNBC’s infamous Jim Cramer, advocated stock-picking strategies. Others encouraged mutual funds. But very few—at least of those that could get publicity via mainstream outlets—doubted the efficacy of the market.
On the subject of the failure of the investment advice business, also see:
“WSJ: Advisers Ditch ‘Buy and Hold’ For New Tactics”, Top Gun FP, April 30, 2009
“Atlantic Monthly Cover Story: Why I Fired My Broker”, Top Gun FP, April 23, 2009
“S-H-O-C-K-I-N-G: Berkshire Portfolio Below Cost Basis”, Top Gun FP, March 3, 2009
“Dimensional Fund Advisors And The Efficient Market Religion”, Top Gun FP, November 27, 2007
“The Myth of Buy And Hold”, Top Gun FP, November 13, 2007