You Are What You Read

by James & Miel on April 1, 2010 · 2 comments

Folks,

Main point of today’s posting is: you are what you read.

There is a ton of finance and investing information out there. Don’t pollute your mind with bad investing strategies and philosophies. The quality of what you read and listen to is far more important than the quantity. So it makes sense to learn to evaluate the quality of what you read and hear.

Regarding this, here are some thoughts:

1) Tune out network programming in favor of classic books. MSNBC is fine, but MSNBC and most broadcast cable news programs don’t really provide a whole lot of insight or education – they produce a combination of commentary and entertainment. Instead, what makes more sense would be to invest some time in reading classic works which facilitate building wealth. The Intelligent Investor by Jim Graham or The Millionaire Next Door are good starting places.

2) Take pessimistic gurus with a grain of salt. A couple of examples of pessimistic gurus are guys like Swiss economist Nouriel Roubini and American investor Jim Rogers. Both of these persons have publicly made pessimistic comments about the economy, arguing that hyperinflation is sure to impact the dollar or that farmland is the best asset to hold in the future.

While its true that the economy has been challenged over the past couple of years, some people make a mistake by putting too much stock in a pessimistic perspective. For example, had you listened to Roubini and Rogers, you might have sold dollar denominated assets or bought gold or silver in 2009 and thus missed very profitable opportunities in stocks over the past year. Basically, take pessimists with a grain of salt. If you buy into their perspective too much, it can blind you to important investing opportunities.

3) Ignore most personal finance blogs. Being a personal finance blogger, I know this sound like a criticism of the blogging community. However, unless the blogger you are reading is willing to make their networth public and they have above average wealth, don’t bother with their blog.

The reason for this is you have no way of judging the quality of bloggers writing for your own wealth building. A great way to judge the quality of someones reasoning regarding wealth is if they are able to implement correct strategies to significantly build their own net worth. Bottom line, if they don’t disclose and aren’t richer than you, ignore them. Most bloggers don’t disclose and aren’t richer than you, therefore you can safely ignore their writing.

Bottom line: you are what you read. Carefully evaluate the quality of the information you take in.

Best,

James



{ 2 comments… read them below or add one }

1 Blair MacGregor April 1, 2010 at 12:53 pm

Hey James –

I agree with a lot of this. People do need to take every financial opinion with a grain of salt and most importantly, do their own research! Too many people just blindly turn their finances over to mutual fund managers & buy into whatever conventional wisdom is being parroted by the financial industry without understanding its implications.

As far as pessimism goes however, I would argue that Jim & others that share his view are pessimistic for a reason and it's imperative (once again) to understand why he's pessimistic on the US dollar and most of the service sector economy…even if you might disagree with his thesis.

The other thing to remember is that on the side of every pessimist is an optimistic view on another asset class. Jim might be bearish on the dollar & US real estate but he's very bullish on commodities and hard assets like gold & silver. Generally speaking, these tend to trade against one another so that while one is increasing in value, the other is going down. The financial commentators tend to throw around the word "permabear" when describing this perspective but I think its far from it: they're just bullish on other markets and other countries at the moment.

Great starting point for discussion though!

-B

2 DC April 4, 2010 at 9:32 pm

I agree with "you are what you read" but your attitude towards Jim Rogers and other pessimistic finance gurus (I'll throw Peter Schiff in the mix) is unfortunate. Of course the dollar might have value today, but long term it will not. Schiff is giving you advice of how to attack the inevitable: the devaluation of the U.S. dollar. Sure gold and silver might lose value in the short term, but long term it will increase in value and at the very least remain as a store of value (as it has for thousands of years)

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