Are You a Victim of the Big Investment Con?

07/07/2009 08:48 pm 20:48:52 | Updated May 25, 2011

If you think you're going to get rich investing in the stock market, you are a victim of the biggest investing con.

According to a study by Dalbar, Inc., over the last 20 years, the annualized returns of equity investors was 1.87%, which was less than inflation of 2.89%.

The markets weren't the cause of these dismal returns. The S&P 500 had an average rate of return of 8.35%.

Why the difference?

Investors rely on brokers to tell them when to buy, when to sell and how to pick hot performing mutual funds. The premise is they can add value. The reality is they don't.

There is another insidious factor at play. I didn't appreciate it until I made an appearance on CNBC to discuss the relative merits of 401(k) plans. My position was that these plans are rife with excessive fees and costs, poor investment choices and conflicts of interest. The other guest didn't quarrel with these views, but encouraged employees to invest anyway because "it is so easy."

Brokers, advisors and the financial media encourage you to invest in the markets because it is good for their business.

In this week's video, I discuss alternatives to investing in the stock market. They involve hard work, personal discipline, living frugally and believing and investing in yourself.

It reflects the values upon which this country was built.

There is nothing "easy" about it.

And that's precisely the point.

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