The Ignorant Investor

If there is one quality that every blog should possess - and every other piece of writing, too- that quality is originality. I usually forgive writers who can't avoid being long-winded or dull. Most of us can't shut up about our own ideas and manage to be at all engaging only occasionally, and awkward and mediocre writing may still contain insights missing from more smoothly written and professional prose. But simply repeating what other people have written elsewhere, or worse, what one has already written before, is a literary crime that deserves the severest form of punishment a reader can inflict on a writer: to stop reading and go watch television.

When it comes to blogs on investing, having an original thought isn't easy. After a hundred or so years of investment commentary by thousands of writers, there is nothing that I can say about investing that hasn't been said before. The three basic rules of investing I listed below are not profound. Yes, they would earn the rapt attention only of those readers who know only two basic rules of investing. But since everyone already knows the one about buying low and selling high, the chance of finding someone who doesn't know at least a couple of other rules is very small.

The standard test of originality is to ask whether anyone has ever written the same thing at any time in the past, but as an alternative measure we could think of originality subjectively from the position of the reader. In other words, if the reader hasn't read the same thing elsewhere, the piece will seem original to that reader. Thus, my writing about such well-worn concepts as diversification, the buy-and-hold strategy, the merits of index funds, realistic expectations of return, and simple prudence may appear original if only the reader doesn't know anything about investing at all.

Yet where does one find such ignorant readers?* Americans are all very sophisticated investors. We know this because if you ask most people whether they are capable of managing their money, they will say quite confidently that they know all about investing. Some of them have even taken seminars with people who tell them how to day-trade or buy real estate with no money down or pick stocks better than the pros with all their so-called experience and knowledge. Many of them, if the frequency with which I receive a certain secret e-mail from a certain banker in Nigeria, know how to smuggle millions in cash from third world nations. In fact, one of the most humbling experiences I had during the last ten years was watching in 2000 when all those people who held shares in tech stocks sold them right at the top of the market, which they timed with extraordinary and widespread prescience. Who would have done that except someone who thought that the NASDAQ wouldn't grow 50% or so a year indefinitely?

So I am going keep writing this blog even as if I remain one of the few ignorant investors in the market. Yes, I admit that I do not know where the DOW will be in 2006, or even at the end of 2005. I do not know what will happen to corporate profits in the next twelve months. Or whether interest rates will soon rise, or if the yield curve will invert. If anyone does, will they please tell me?


*The more significant question is how one finds a reader, since so far this blog doesn't have even that many, but as not having any readers saves me from having to proofread, that's one question I refuse to ask.