The lure of fast money makes you think active, but the record proves you’re better off passive.
– The Speculation Blues6
n the Martin Scorsese film, The Wolf of Wall Street, the senior broker at L.F. Rothschild, Mark Hanna, delivers broker training to Jordan Belfort over a cocaine and martini lunch. “The name of the game is to move the money from your client’s pocket into your pocket. Number one rule of Wall Street: I don’t care if you’re Warren Buffett or if you’re Jimmy Buffett, nobody knows if a stock is gonna go up, down, sideways or in [expletive deleted] circles, least of all stockbrokers. It’s all a fugayzi… It’s a fake.” Hanna goes on to highlight the lack of fiduciary duty to clients when he explains how clients keep trading with the broker because the clients are addicted to the process of trading. Hanna further explains that a broker needs to keep coming up with “brilliant ideas” to keep clients’ money at the firm and that clients will keep trading “again, again and again” because they are addicted. Meanwhile, the client thinks he is getting rich, but that is only on paper, while the broker takes home “cold hard cash” via commissions. “That’s incredible sir”, exclaims Belfort, “I can’t tell you how excited I am.” Hanna: “You should be.” Of course, the excitement of the broker equates to the despair of the client. My purpose in writing this book is to show you how to avoid becoming a victim to either an unscrupulous broker or to your own self-destructive behavioral tendencies that draw you into
Published on Jun 1, 2015
This book reveals the potential land mines and pitfalls of active investing and educates readers on the benefits of passive investing with i...