tag:blogger.com,1999:blog-4371913454013675123.post3911380653837040141..comments2024-02-07T07:45:32.901-08:00Comments on JamulBlog: Fail: conventional investing wisdom...Anonymoushttp://www.blogger.com/profile/14166805213771898518noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-4371913454013675123.post-25884286504218328422015-12-29T10:49:57.876-08:002015-12-29T10:49:57.876-08:00Many years ago, a coworker told me he was putting ...Many years ago, a coworker told me he was putting his money under professional management. I asked what that costs, he said they either a) charge per transaction or b) based on how much money they manage for you. Not knowing much about this stuff I asked him if you choose a, won't they be incentivized to trade a lot? even if just small numbers of shares? and if b, they take a cut regardless of whether they make you any money, and they even take a cut of the starting amount which they had nothing to do with accumulating. It seems like they make money regardless of their competence. Eventually he choose a, and sure enough it wasn't long before he would see statements with a significant number of stock trades every month, in very, very small numbers. sometimes just a couple of shares each trade and he started losing money slowly. (He didn't really have that much money to start with). If you pay a few bucks per trade, then the stocks have to make back those fees before you can even start to see profit from them. Also, the stock market is rigged against the little guy. When I learned that during an Initial Public Offering (IPO) there are prices for large investors and then the prices for everyone else. So when I bought on the IPO of UPS, there was a loss already built in for me because there were other people getting a better price. They already had a profit, at my expense. When I was trading stocks and could see "after hours trading" going on I was astonished. Or when you hear about people trading on knowledge not generally available. Or high frequency traders taking advantage of differences in speed connecting in. sigh. Larryhttps://www.blogger.com/profile/10054083093402660087noreply@blogger.com