Okay, so that title probably sounds a little bit moronic. I don’t think anyone can avoid the fraud we’ve seen on Wallstreet over the years. Here are a few of my favorites:
It seems that the only limit to the amount of fraud on Wall street is people’s ability to imagine it. From energy manipulation to massive Hedge fund ponzi schemes, how the heck can the average investor protect themselves?
My answer has been to invest in a diversified set of index funds with low costs. By dollar cost averaging every two weeks in a set of index funds I’m buying during the peaks and most importantly during the valleys. As tempting as it has been to hunker down and slow down my 401k contributions (in order to build up our emergency fund further) I won’t do it. I like buying low and selling high.
I find myself not trusting too many people these days when it comes to the financial markets. I’d like to say I still trust Warren Buffet’s judgement but I’m not even sure I can bring myself to do that, and he’s never given me any reason not to trust him. (Not that he cares whether I trust him or not).
Anyway, I’m feeling more and more motivated to completely walk away from the concept of investing in individual companies. The SEC seems less and less capable of tracking down fraud in these companies and their accounting practices seem to offer more and more ways to manipulate earnings reports. I know that the majority of companies are acting ethically and doing their best to portray their results accurately. The only problem is that I don’t which companies those are.
So, I’m going to continue embracing dollar cost averaging in index funds. By doing this I believe I’m diversifying my risk adequately enough that I feel I can ride out any of the scandals by buying as the market dips on the scandals and improves as recoveries are made.
Filed under: Investing, Links to Love, Saving
