Avoiding Wall Street Fads – Investing Locally and Creatively

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We’ve all heard the same old story from time immemorial: build up your wealth slowly with low-risk investments, and put it somewhere safe until you’re old enough to retire comfortably. For such a tame concept, it certainly has a lot of pull. Just look at all the people throughout the United States who pour their money into mutual funds and 401ks every year. All of them are looking forward to cashing in on the compound interest years down the road, and enjoying a giant nest egg once they find themselves in a lower tax bracket. It’s a pleasant, reassuring idea, except for one small detail: it doesn’t work. At least, it certainly doesn’t work as often as most people are led to believe it will, which is an increasingly nasty shock depending on how much time you’ve sunk into it before that epiphany strikes.

Of course, Wall Street has been pushing the myth on people for ages, and, why shouldn’t they? After all, it makes them oodles of money. To be honest, I find it surprising that so many people seem willing to trust big banks for financial advice. It’s a bit like asking a professional cat burglar to give you tips on home security. If that sounds a bit hyperbolic to you, think back a few years to the beginning of the new millennium. Remember how many people lost their investments when Enron tanked? That’s to say nothing of those who lost pensions or retirement plans. Yet, even while chief executives of the company were rushing to sell their shares, they continued to disseminate information telling investors to keep buying—in effect, to remain on board a sinking ship while the crew were busy reserving spots on the lifeboats.