Friday, May 09, 2008

Final Words of Wisdom

This is from Jim Parker's column, Outside the Flags, April 2008:

One of the world's more insightful finance journalists has quit the media after a quarter of a century. But before taking up his new job in the corporate sector, Jonathan Clements has offered some final words of wisdom.

For 14 years, Clements used his popular column in The Wall Street Journal to rail against a financial services industry that spends more time thinking about its fat fees than the welfare of the people who entrust it with their money.

For his final column before taking a job as an education director at Citigroup, Clements assembled a list of some of his favourite pieces from over the years. They include some great advice for investors everywhere.

In one article entitled 'Twenty Tips for No-Nonsense Investing', Clements blasted the notion of so-called "sophisticated" investment strategies.

"Sophistication is usually an excuse for Wall Street to charge fat fees," he wrote. "If you don't understand an investment, don't buy it. Most folks can do just fine with a handful of plain-vanilla mutual funds, preferably market-tracking index funds."

Unusually for a journalist, Clements also spotted that "excitement" and having a good investment experience were not necessarily compatible concepts.

"If an investment is exciting, it probably won't be especially profitable," he wrote. "Investors love to buy hot growth companies, trade mutual funds and take a flier on initial public stock offerings. Before you join the fun, however, consider how much you might lose."

As to the financial media itself, Clements didn't recommend his readers ignore the news so much as realise that their own portfolio decisions should not be driven by the events of the day.

"Sound investment strategies don't change with the news," he said. "By all means, read the personal finance magazine's . . . market prediction and listen to the television reporter's breathless dispatch from the floor of the New York Stock Exchange. But for goodness sake, don't act on this nonsense."

As a former financial journalist myself, I have to tell you he's got it right.