You can lead a horse to water ...

{link » Bright Side of a Total Financial Market Collapse: Michael Lewis}

Ordinary Americans get a lesson in low finance

It's been expensive but, then, so is kindergarten.

Our willingness to believe that we can hire some expert to tell us how to outperform markets is a big problem, with big consequences. It underpins Wall Street's brokerage operations, for instance, and leads to a lot more people giving out financial advice than should be giving out financial advice.

Thanks to the current panic many Americans have learned that the experts who advise them what to do with their savings are, at best, fools. [They] persuaded their most valuable customers to buy auction-rate bonds, telling them the securities were as good as cash.

Those customers will now think twice before they listen to their brokers ever again. [emphasis added]

You do know that Lewis is being facetious, yes? In my experience, most "investors" would die of thirst while drowning. Moreover, so would their advisors.

There is only one lesson to be learned: outperforming the market is analogous to beating the house at roulette. There are many ways to do it, only one of which is legal: quit while you're ahead, AKA timing. Nobody can time the market successfully for long, for the same reason that nobody can beat the house over the long haul. Also, almost nobody can quit while they're ahead: it's called greed.

So what's a poor slob to do in the face of human nature (and stupidity)? Try to emulate not beat the market:

• allocate asset classes in fixed proportions among equities, bonds, and cash equivalents;
• diversify each asset class;
• rebalance asset classes at regular intervals;
• stay fully invested, especially through hell or high water;
• settle for modest earnings to keep pace with inflation and perhaps exceed bank interest in the long run.

The only question that remains is: can you overcome your humanity? I wouldn't bet on it.