Don't Take the Bait

I have fished in my day. I’m not a fisherman by any means but I’m familiar with the techniques. The concept is really simple, the execution less so. All you have to do is put bait on the hook and wait for a bite. It sounds easy doesn’t it?

Well I’m sad to say that people are no different than fish. As a matter of fact fish have an advantage over people because we have something the fish don’t. Confidence. The fish don’t think that worm is going to set them up for life, it’s just dinner. Fish don’t fantasize either, they’re not dreaming that one worm will turn into an endless supply of worms that will mean they no longer have to work for food.

There’s a reason internet scams have come to be known as Phishing, and who do you think the phish are? I’ve written about scams before and I’ve also sought out people who might be able to relay their experience with these scams but still people take the bait.

What is the bait? Well it’s the American Dream, the hook is the promise of easy money. I’ve said it before and I’ll say it again – there is no easy money. The smart fish knows the difference between food and bait – it’s the hook.

But it won’t happen to you right? You’re smarter than that. That’s exactly what everyone who has lost money thought when they took the bait. I’m different. I know the difference between a scam and a good plan. Yeah right. The only way to prove that is to swim by the hook.

On wall street the bait is cleverly disguised as something that must be taken, fees and commissions. We just don’t have a choice do we? I mean how can you buy a stock without paying a commision? Even if that commission is small you have to pay something right? Well if you’re buying stocks that’s true. But who says stocks are the best bet?

This post on the stock picking prowess of Jim Cramer is all the evidence I need that even hotshot professionals aren’t the investing Gods we think they are. When the only brokerage account I had was E-Trade I decided to follow the advice in The Coffeehouse Investor and buy index mutual funds with very low fees. The problem was that whenever I bought one of these funds, E-Trade would charge me $24. But if I bought the funds through a Vanguard account the commissioin was zero, so why would I keep paying E-Trade for something I could get for free?

The subtitle of the Coffeehouse Investor is How to Build Wealth Ignore Wall Street and Get on with Your Life. And that is exactly what I’ve done. Yes I still update my portfolio in Quicken every day but instead of worrying how things are going and researching whether to buy or sell the next big stock, I update the info and move on to something else. I have a life.

I swim by the hooks baited with tips on the next great stock and still beat the venerable experts. Isn't it time you stopped taking the bait?