The process of investing in financial markets can be baffling and complicated, but it need not be. Indeed, sometimes friends who are not involved in the financial markets or know about investing discuss the issue in terms of complicated, ambiguous uncertainties, as if investing their savings were equivalent to stepping into some unknown abyss. Clearly, this is not the case. There is no doubt that there are plenty of unknowns in the markets, and not much can be taken for granted, but this is not the end of the story.
There are plenty of good ideas about how financial markets work, how to minimize the risks one faces when investing, and how to succeed as a small investor. Understanding the financial markets is not out of the reach of anyone willing to spend some time and effort learning about where his or her money is going. All it takes to be a good investor is the willingness to take responsibility for one’s decisions and the patience to learn and understand the available alternatives. Clearly, this is not some extraordinary obstacle that the average individual is incapable of overcoming. Most people do tremendous amounts of research and learn all about breeds and breeders before buying a dog. How many of us have not read and learned about diets and health or about cars? The natural response that individuals have when making a big decision, such as what dog to buy, what car to buy, or what sort of diet they want, is to learn about the alternatives available. The same should apply for picking stocks on the market and for investment information in general.
The difference between dogs or cars and financial investing is that there is an enormous intermediary layer in financial investing that benefits directly from people not knowing too much about their investment alternatives. These financial professionals are only too willing to step in and help people with their investment decisions and take the decision-making process out of their hands. In this way, every time one of these investment professionals decides that a purchase or sale of stock needs to be made, the “cha-ching” sound of the cash register is heard as he or she nets the commissions and fees. And the best part for such professionals is that regardless of whether the decision to buy or sell is completely obtuse or not, they charge the customer the fee anyway. A broker, for example, bears none of the risk associated with the purchase or sale of stocks on behalf of his or her customers. As a result, the customer ends up putting his or her financial stake in the hands of an individual who profits from the transactions carried out on the account but not from the gains of the customer.
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