Of Investing and then some ...


Looking for news on what the Fed finally did with interest rates, I found this little gem of an article on CNN.

Some aspects of the investing problem apply closely to real life as well .... have a look.

"... One thing, however, hasn't changed over the past 35 years: human nature. In 1972, Benjamin Graham was finishing the revise of his seminal work, "The Intelligent Investor," in which he reminded readers that "the investor's chief obstacle - indeed, his worst enemy - is likely to be himself."

Then, as now, investors got in trouble by acting on impulse: either getting carried away by greed or being paralyzed by fear. And solutions like indexing have always seemed a little unsatisfying. You want investing to be more complex so you can feel special when you figure it out. And Wall Street wants it to be more complex so it can make more money off your attempts to figure it out.

Thus in the first seven months of 2007, more than 130 ETFs were created to invest in commodities, foreign currencies and single-industry sectors. You can bet on the Swedish krona, buy a basket of carbon-emissions trading credits or attempt to gain twice as much as mid-size stocks lose when they go down. There's now a fund for every conceivable need - and for plenty of inconceivable needs too....

Three rules to invest by

So how do you put all the innovations of the past 35 years to the best use for you, not Wall Street? Follow these rules:

• If there's a cheap way and an expensive way to solve an investing problem, stick with the cheap one. ...

• High returns and low risks don't come in the same package. ...

• If you are presented with too many choices, you'll end up afraid to choose at all. Psychologists have shown that having to pick among dozens of options not only makes it much harder for us to make up our minds, but it also fills us with regret. No matter what we choose, we worry that another choice must have been better. ...."