The book I recently reviewed focuses on investing in index funds and letting the portfolio sit for decades—“buy and hold.” It’s a strategy that has been popular since the market took a downward spin when the tech bubble gave out. Not everyone agrees that it’s the best strategy.
Mark Cuban, outspoken owner of the Dallas Mavericks and founder of Broadcast.com (which was later sold to Yahoo) believes the stock market is for suckers. According to Cuban, most of those who invest in the stock market aren’t buying real ownership, they are mostly buying a tiny portion of shares discarded by those closer to the company. The only real investment is buying a material percentage of a company, and if you can’t afford to do that, you’re better off in less risky investments like bonds and CDs.
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Too bad we aren’t billionaires who can heckle in the first row at the basketball game like he is. I can’t believe that’s good advice. The risk to return in the long term stock market seems reasonable. Invest at 4% in grandmas CD, or seek 9-10% returns in the market long term? I’m going to take the risk for an extra 5% and then just try to time my withdrawal from the market as I get close to retirement.
Hazzard
Did you read the whole article? His points were pretty valid. Would you be better off investing the money in yourself like starting your own business, or making sure that your investments are guaranteed not to lose money? I understand that the stock market is a fairly safe bet, but Cuban’s argument is that it is a bet- strictly gambling, unless you can invest enough to have a controlling interest. Should gambling be part of your retirement plan?
I read the entire blog entry. I wasn’t giving an opinion on the matter, just pointing out that Cuban believes “buy and hold” to be a marketing gimmick… an opinion generally bestowed upon salesman and those who favor “active trading.” Cuban talks more about investing in yourself and in low-risk CDs and bonds for those who can’t afford to buy controlling portions of companies.
“Not everyone agrees that it’s the best strategy.”
You?
Based on the data I’ve seen, “buy and hold” has (or would have) worked for most situations in the last century, on average. I can’t predict whether it’s going to work for me, but all I have to go on is past performance. Cuban makes great points—such as the fact that “buy and hold” doesn’t take real life issues into account, issues like major emergencies that necessitate withdrawals whether the market is up or down.
The biggest issue I see is while averages say one thing, the world is full of varying individuals and no one is “average.”
I am sure the investors who had the equivalent of a controlling interest in Cuban’s reality show flop felt like they had made a horrible gamble. Was his money involved in that?
I can see both sides. If you are looking to start a business, invest in yourself. If you are not, however, stocks have been a viable option for investments. Period. People have become quite wealthy off of buying and holding…. just because Mark got lucky once… he thinks he is an expert (although I am being a synic, I do had a great deal of respect for him).
“most of those who invest in the stock market aren’t buying real ownership, they are mostly buying a tiny portion of shares discarded by those closer to the company. The only real investment is buying a material percentage of a company”
This kind of sounds like something I wrote about recently in my own blog about overpaid CEOs. Yes, the CEOs and other execs and insiders make more money than you do by buying a tiny percentage of the company.
But for the astute contrarian investor who knows what he’s doing, there’s a world of money to be made by investing in stocks. Although I’d agree that people who buy individual stocks and who don’t know how to read a balance sheet, those people are suckers.
Stocks are still a good investment. Investors just need to do research before investing. Everyone has their own opinions and can do what they want with their money.
I know this is an old article, but I want to say that the stock market isn’t everyone’s answer to retirement. Some people invest in real estate (not just homes) and do fine. Others take a different route.
I’m very wary of the herd mentality when it comes to the “right way” to retire with ease. Who knows: maybe the next 15 years will be the worst in the history of the stock market. There’s always a first time.