Thread by @itsKostasOnFIRE

9 Secrets Wall Street "Gurus" Will Never Tell You

/THREAD/

1. They can't predict the market

No matter what they tell you, they don't actually know what the market will do in the short-term

9 out of 10 times, their predictions are euphoric to get you in the market and make you invest more

Ignore whatever predictions they make

2. They don't work for you

Their pitch to you will probably be about

• Partnership
• Cooperation
• Mutual benefits

In reality, you are not equal partners

You are just a customer who pays for their lavish lifestyle with hefty fees

3. Their fees will rip you off

They will tell you that their 1-2% fees are small and nothing to worry about

But if you do the math you'll see that they are robbing you blind

• A 1% fee eats away around 1/3 of your earnings
• A 2% fee eats away more than half of your earnings

4. They are not experts

Their degrees do not guarantee expertise in

• Spotting new trends
• Evaluating management
• Finding quality companies

"Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway"

-@WarrenBuffett

@WarrenBuffett 5. Their analysis is garbage

Their analysis is not an objective evaluation of a company

99% of them are praising a company so that you buy the stock

They also have corporate clients that pay them a lot of money to get a rating on their stock

@WarrenBuffett If they give a "sell" rating and not a "buy" one, their corporate clients will simply go to another firm

Also, if they have bought shares from a company to sell in the market (via IPO or new issuance of stocks) they will try to pump up the price to earn more from their fees

@WarrenBuffett 6. Their returns suck

90% of mutual funds underperform the S&P 500

And even the 10% that has better returns, does not achieve them consistently

You have better chances of winning the lottery than finding a Wall Street broker that will give you better returns than an index fund

@WarrenBuffett 7. They sell shitty stocks to you

Even if they have stocks from shitty companies, they will never tell you that

They will just sell to you as a great investment to get it off their books and laugh all the way to the bank

@WarrenBuffett The biggest example of this was during the 2008 mortgage crisis

When Lehman Brothers realized that their mortgage securities were worthless, they simply sold them to their clients as sound investments

In private, they were saying to each other "This is a shitty deal"

@WarrenBuffett 8. They are salesmen first

They are salesmen with quarterly quotas to reach

The biggest part of their training is not about finance and economics

It's about

• Promotion
• Persuasion
• Manipulation
• Public speaking
• High-pressure sales tactics

@WarrenBuffett 9. They can't manage your money better than you

They try to convince you that personal finance and investing is very sophisticated and difficult to handle successfully

They are the only ones who can take care of it for you

The truth?

@WarrenBuffett You can do it yourself and have better results by using

• A basic spreadsheet for budgeting
• Grade-school math
• Index funds

"All the math you need in the stock market, you get it in fourth grade"

-Peter Lynch

@WarrenBuffett To summarize, stockbrokers:

1. Can't predict the market
2. Don't work for you
3. Their fees will rip you off
4. Are not experts
5. Their analysis is garbage
6. Their returns suck
7. Sell shitty stocks to you
8. Are salesmen first
9. Can't manage your money better than you

/END/

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