The Mailbag: Your Investing Questions Answered

One of the most satisfying parts of my job is to answer the emails that show up in my figurative mailbag. I’m always impressed by the sheer variety of topics. You come from all walks of life, with investment skills that range from novice to sophisticated.

All too often, financial editors provide advice according to preconceived notions that are disconnected from the real needs of their followers. Your feedback helps me keep this newsletter in touch with your actual investment goals.

Today’s a good time to answer some of your latest letters. I edit letters for the sake of concision, clarity and civility, but I try to keep my revisions to a minimum.

Spotting the next Madoff…

Below is an excerpt of an email that I received this week concerning my Mind Over Markets article, “10 Ways to Spot Financial Scam Artists” (May 31). The reader is eloquent and makes points that I feel compelled to share with the rest of you. His email was too long for me to reproduce in its entirety, so here are the salient passages:

“It’s not all about money. Money may be a shining example of the problem but in general the nation seems to be having a problem with accountability. Money just quickly demonstrates the problem because it can be added up and proved that things don’t make sense.

What about a lack of accountability in things which can’t be easily calculated? Like political accountability where a representative decided to do his own thing and not support the will of his voters? Recall petitions are at an all-time high as voters suddenly realize the person they elected mislead them….

Why is it that people are selling, preaching, building and investing in things at record levels that aren’t real? Large banks totally corrupt. Wall Street living a fantasy. Madoff was just one of the first accounts of the financial free-for all…

I see these criminals attracted to the easy money fantasy and the danger. It is a sign of a society that has spiraled to spectacular heights and turned to decadent decline. With its citizens doing things to their neighbors that they would never want done to themselves.” — Donald J.

Well put, Donald. Poor ethics and lack of accountability continue to bedevil society.

Case in point: Remember collateralized debt obligations, aka CDOs? They were the villains of the financial crisis of 2008 and helped trigger the global meltdown. Well, they’re coming back into vogue. The re-emergence of highly risky CDOs doesn’t seem to bother anyone on Wall Street or in government. And so history repeats itself. That’s why, at Investing Daily, we look out for the interests of individual investors.

Read my May 2 article, “Wolves of Wall Street: How Fund Managers Lie to You.”

Donald Trump frightens me. I’m afraid that his impulsiveness will cause the stock market to crash. Should I sell my stocks and go completely to cash until he’s out of office?— Paul L.

Whether you admire President Trump or think our Tweeter-in-Chief is dangerously out of control, remember one important fact: capitalism will continue to thrive, no matter who occupies the White House. Political parties move in and out of power, but the profit motive never wanes.

Consider this: When President Barack Obama was first elected, many investors viewed him as the anti-Christ and they dumped their stocks in fear. But even in this era of post-truth politics, the math doesn’t lie. During Obama’s two-term tenure as president, the U.S. stock market, as measured by the S&P 500, returned 235%, or 16.4% annualized. Investors who bailed out of the market because Obama was elected left a lot of money on the table. Same principle applies to Donald Trump, who has presided over a stunning rally as well.

To be sure, investors will continue to witness Trump-induced volatility, especially when the president posts tweets about the trade war. Additional market sell-offs are ahead. But over the long haul, the markets will bounce back and reward patience. Stick to your investment plan, with modest adjustments along the way.

Read my May 23 article: “Making Sense of Headline Risk

The rich are different…

“How do I invest and whom do I trust? How does an individual like me, who is middle class and working paycheck to paycheck, begin to invest and buy-and-sell the little money that I have saved? Can I do it on my own over the Internet, or do I have to have a broker? I want to avoid the middleman but I am not well versed in investing and need some trustworthy help. Rich people have different skills, I guess.” — Margaret K.

Your last sentence reminds me of a famous exchange between two great novelists.

F. Scott Fitzgerald once remarked to his fellow writer and drinking buddy Ernest Hemingway: “The rich are different than you and me.” To which Papa Hemingway replied: “Yes, they have more money.”

Margaret, let’s make you more money.

First, you’ll need to find a suitable broker. There’s a wide range of brokers, from full service who offer advice and hand-holding to deep discounters who are bare bones and leave you on your own. Before choosing, you must gauge your degree of confidence in making your own investment decisions against how much you’re willing to pay. As with everything in life, you get what you pay for.

Discount brokers may charge about $5 to $15 per trade; mid-priced brokers typically charge $15-$30 per trade; and high-end brokers can charge $100-$200 per trade.

The discounters are online-based platforms; the mid- and high-service brokers offer both online trading as well as polite and knowledgeable assistance over the phone.

For beginners such as you, customer service is important because you’ll doubtless need to speak with an actual human being to get urgent questions answered. A simple Google search will unearth the names of the big brand name brokers you can trust.

Once you’ve found a broker who meets your needs, the fun starts: picking investments. Start investing amounts that you can afford, while continuing to read our investment advice. We’ll guide you every step of the way. And feel free to drop me a line now and then, as you have questions.

A no nonsense view…

“Just wanted to drop you a quick note of encouragement and to let you know yours (Mind Over Markets) is one of the most enjoyable newsletters I read. I like the way you wade thru the hoopla and pessimism and give a no nonsense view of the markets. Keep up the good work. Your perspective is always entertaining, educational and enlightening. God Bless!” — Ben G.

Ben, it’s always nice to be appreciated. Thanks for your kind words and loyal readership.

Got a comment or question? Send me an email:

John Persinos is the managing editor of Investing Daily.