These messes have been around for as long as we’ve had markets. I love reading the really really old stuff from the turn of the previous century, and seeing that what Mark Twain says is true: “History doesn’t repeat itself, but it rhymes”.

Long term, stock market profits will equate to dividends and capital appreciation, and it will, long term, reflect the overall rising intrinsic value of businesses as an aggregate–after fees.

With fees as high as they are, for active management, I think there could potentially be only two types of long term losers, relative to the market’s performance.

The first type are going to be those who think they can beat the market by buying overpriced actively managed products. The second type will be those who try “timing” the market by thinking they can figure out when the best time to “get in” and “get out” will be.

I’m with Jack Bogle on this one. The best way to ensure your share of stock market profits is to have money in the markets all the time, diversify, and keep costs as low as possible, because picking active managers to do it for you (statistically, in comparison) is a loser’s game (in Charles Ellis’ words). What role would Goldman Sachs play in this game? Perhaps its stock would represent .00001% of your portfolio if you were nicely diversified. And you’d keep away from its active managers and suggestions if you invested in a fully low cost, diversified manner, and not like a gambler.

Whether one investment group tries to pull “fast ones” on investors shouldn’t matter for those buying the entire haystack through diversified indexes.

I have sympathies for the people who get hurt, but if research overwhelming suggests that we stand the best chances of living a long time by eating fruits and vegetables, we can feel badly for those eating at McDonalds and smoking, but it’s not as if the information wasn’t out there.

McDonalds = expensive active management, trying to pick individudal stocks and market timing.

Fruits and veggies = diversified indexing with stocks and bonds

The fact that George Burns lived nearly a century on cigars and fatty foods shouldn’t tempt us as much as it (metaphorically) seems to.

And if Goldman contributes to a “tip of the iceburg” deck of cards, things will fall. Sure. Young people can celebrate by buying cheaply into the stock market–perhaps for years to come. Retirees should have the bulk of their money in guaranteed certificates and triple A rated bonds so they won’t be too adversely affected by a widespread decline.

Invest like a Buddha.

Andrew
.-= Andrew Hallam´s last blog ..No joke—I think I just cracked a rib running! =-.