Article 25

One Giant Numbers Game

If you asked me to tell you how much money I have to my name, I wouldn't have a clue.

Well, that's not entirely true. I'm sure one valid answer would be "less than I did yesterday."

I've got my cash pigeon-holed away in more places than I can even remember half the time. Sure, I've got the usual savings account and checking account. I even have a money market account, which earns me about 1% more interest. Then I've got my handful of meager IRA funds for retirement, some mutual funds, and a plate full of individual stocks.

One might think that anyone with that many accounts must have a decent amount of money. Oh, how I wish that were true.

The fact is, I'm a pretty lousy investor. Not by design or for lack of effort, either. I do my homework on stuff. I'm pretty investment savvy when it comes to facts. I know how money should be invested. I don't buy into "hot tips" or other ploys aimed at gulliable people with money falling out of their hats.

The problem is that every stock I touch turns into crap.

It usually starts off well enough. I research a company, like its products, think it has a future. So I buy some stock. Then the value goes up a bit, probably on purpose as a cruel joke. Then it begins plummeting for no good reason, until sooner or later it's worth less than half what I paid for it. Then I hold onto it for about two years, finally selling it about a week before it spikes upward on some fresh news that no one expected.

I've learned my lessons with individual stocks, and the lesson is that I'm better off just walking down a dimly-lit alley at 3am and losing my money the fast, relatively painless way. At least then I would have a good story, or perhaps teach myself how to get urine out of a good pair of pants.

So I decided that mutual funds were the way to go. That way my personal bad luck is diluted signifigantly by billions upon billions of other people's money. This money is controlled by one or two guys who are good at the stock market game, which is a good thing to be when you control billions and billions of other people's money. Again, I research things first. A lot. Then I pick a fund, mail in my money, and watch it sink like a boat made out of HandiWipes.

At least the stock market is down for everyone right now. My misery has so much company that you need reservations. It's enough to wonder what the heck all of us were thinking in the first place.

When the stock market first began, people bought stock on a gamble that the company would make a profit. The company would reward these stock owners, who essentially loaned money to the company for free, by slicing out part of the profit and paying out dividends.

Sadly, this is rarely the case anymore. Some giant corporations have stopped paying dividends altogether. Why bother when they can just pocket the cash instead, right? And the crazy thing is, investors don't seem to mind. So why does anyone buy stock in these companies?

The best analogy for the stock market I've heard is the "Greater Fools Theory." If you're unfamiliar with it, it basically states that the whole reason to buy stock is to hope that later on you can sell them higher to an even greater fool. Nowadays this theory makes even more sense.

Me? I'm one of the fools. Unless you're a market genius, or dealing with mutual funds, you probably are too. Even our meager gains are generally wiped out by trading costs on both ends of the transactions. What is the point of holding 100 shares when a larger party can control the stock price on a whim by dumping 100,000 shares whenever it feels like it?

It's all just a game of speculation. A numbers game. Stocks worth $100 one day can be worth 10 cents the day after. It makes about as much sense to me as people who invest in baseball cards with plans to sell them at a huge profit in some convoluted fantasyland future. It's nearly as bad as the media "journalists" who write stories with headlines like "Weak Numbers Make Investors Skittish" or "Stocks Rally As Confidence Soars" as though they actually surveyed 50 million people about their feelings instead of just looking at a chart and drafting a snappy phrase.

So what's my advice? Do what I don't, and you'll probably win. That means you should go with any hot tip that you overhear on the subway, or mash your keyboard until you get a few random stock symbols. I'll stick to mutual funds and money market accounts, so you should go bet all of your savings on a single hand of baccarat. Or take it to the dog tracks. Heck, bet on a baccarat-playing dog, I'm sure you'll win double.

When you're counting your winnings, please think of me. Some of my money is probably in that pile.