I had the pleasure of hearing Dan Solin speak recently about investing. He is the author of the Smartest series of books and is an outspoken critic of the investing industry.
Solin’s main message is that if you pay attention to the science of investing, there is no conclusion to draw other than investors should invest in low-cost broadly-diversified indexes rather than chase the dream of beating the market. Almost everyone who tries to beat the market over a decade or more fails.
Some small-time investors think that rich people have some sort of secret access to better investments, but Solin says that the only difference between rich people and poor people is that rich people have more money to lose if they trust their brokers.
He says that the entire active investing industry is a “giant scam” and “there is a huge amount of money invested in keeping you ignorant.” The wealth management industry exists to “transfer your wealth to themselves.”
On the subject of alternative investments such as hedge funds, Solin says they are just a way for rich people to lose money.
Solin’s shortest answer to an audience question came when he was asked whether we should be buying gold. His answer: “don’t”.
Some of the audience questions made it clear that they did not really get Solin’s message. He doesn’t believe that anyone has any useful insight into future investment prices, and that we should all just seek to capture market returns at an appropriate level of risk. Yet questioners asked about market timing and the future of various specific investments.
Solin believes that you should ask your advisor “what besides investing are you going to do for me?” Given that advisors are useless for picking stocks or mutual funds that will beat the market, you should be getting tax planning and other useful services from your advisor.