-advertisement -
Financial Literacy - Financial tuneup
National poll results
Americans admit there's a lot to be confused about in investment matters.
Investment tuneup

Half of Americans say investing is confusing

"There is a comfort zone for most people when they are doing the same things with their money that people that are close to them are," he says. "The challenge is whether they can look beyond that to determine if the family member's advice is on target with their specific needs or not."

Fees make a big impact
Read more about Bogle's views on fees.
Paying high fees is one of our top 10 investing blunders.

Investors who manage their own portfolios are likely on the right track, says Bogle, who cites a recent study in his book, "The Little Book of Common Sense Investing."

"Some professors at Harvard found out that investors who invested their own portfolio did substantially better than those who used financial advisers," says Bogle. The study concluded that funds held by investors who listened to advisers, excluding charges paid, averaged just 2.9 percent per year compared to 6.6 percent earned by do-it-yourselfers.

"Professional investors in a professional market are, on average, average," says Bogle. "What else could they be? We're not in Lake Wobegone here where everybody is above average. When you deduct the costs of their services, whether it's money managers, the turnover costs money managers incur, the turnover costs direct investors incur, the cost of financial advice, the cost of management fees and mutual fund advertising which you pay for yourself -- you can't win as a group."

Upshot: simplify, educate
Taken as a whole, Bankrate's poll results point to an increased need for investor education.

The challenge is whether they can look beyond that to determine if the family member's advice is on target with their specific needs or not.

"For five out of 10 people to feel like investing is a foreign area to them ... that is a bit alarming and therefore proves that investing knowledge has to be improved at all levels: grade school, secondary schools and by employers that sponsor retirement programs," says Pallaria.

Bogle believes the answer to investment stress lies in worrying less about the latest market-beating angle and relying instead on the time-proven, logic-driven strategy of investing in business while paying lower fees.

"My plea is if we can just get people to think about simplicity, they would do much better. I know the world likes complexity; you want to think you're smarter than everybody else. That's what behavioral science tells us ... But I think we're all average."

-- Posted: Oct. 22, 2007
index | previous article | next article
Page | 1 | 2 | 3 | 4 | 5 |

- advertisement -
- advertisement -