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Should You Fire Your Investment Adviser?

22 Feb

In previous posts we’ve described the basic elements of engineering thinking. Properly applied, ET gives you a significant advantage in life, by helping you to avoid emotional blockages and to apply logical thinking.

As mentioned previously, ET does not guarantee the best decisions, but it does greatly improve the odds for very good decisions. For human beings, that’s about as good as it gets. ET can help you avoid potential scams, improve relationships, and even protect your health and your life.

Since we’ve previously established the basic principles of ET, we’re going to provide more practical ET applications. To start, let’s consider investments. The advice below may save you a bundle.

Should You Fire Your Investment Adviser?

If your investment adviser uses charts, graphs, and other “technical indicators” to make investment decisions, you may as well fire him/her and throw darts at a list of stocks in the Wall Street Journal.

Why? Because there is no scientific evidence to support the belief that prior performance (as displayed in graphs) has anything to do with future performance.

There are no sure things. There is no way to absolutely predict success in an investment. All you can do is play the odds, but not random or casino odds. The odds you want to play should be based primarily on the inherent value of the stock, which includes a lot of factors, but not graphs or charts of its prior price.

So if your investment adviser Charlie calls you up and says something like, “You should buy stock XYZ! It’s just experienced a double top point and breakout, which means its price is about to explode, blah blah blah..,” ET recommends: fire him.

-Ed Walker

 

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One response to “Should You Fire Your Investment Adviser?

  1. William Emener

    February 23, 2011 at 3:14 pm

    You have no idea how many times I left my office, after seeing clients all day, and thought, “It’s a good thing we don’t put people in jail for how they think.”

     

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