Those who finally abandon trying to pick the best funds are
tempted to pursue an even more difficult strategy. They attempt to beat
the market by timing market cycles. Surprisingly, it is often the best-in-
formed investors who fall into this trap. With the abundance of financial
news, information, and commentary at our beck and call, it is extraordi-
narily difficult to stay aloof from market opinion. As a result, one’s im-
pulse is to capitulate to fear when the market is plunging or to greed
when stocks are soaring.
Many try to resist this impulse. The intellect may say “Stay the
course!” but this is not easy to do when one hears so many others—in-
cluding well-respected “experts”—advising investors to beat a hasty
retreat. It is easier to follow what everyone else is doing rather than act
independently. And as John Maynard Keynes aptly stated in The Gen-
eral Theory, “Worldly wisdom teaches that it is better for reputation to
fail conventionally than to succeed unconventionally.”^3 Standing
against the crowd is hard because failing by following the advice of
other “experts” is far more acceptable than failing by rejecting the in-
vestment consensus.
What does all this mean to the reader of this book? Proper invest-
ment strategy is as much of a psychological as an intellectual challenge.
As with other challenges in life, it is often best to seek professional help
to structure and maintain a well-diversified portfolio. If you should de-
cide to seek help, be sure to select a professional investment advisor who
agrees with the basic principles of diversification and long-term invest-
ing that I have espoused in these chapters. It is within the grasp of all to
avoid investing pitfalls and reap the generous rewards that are available
in equities.
CONCLUDING COMMENT
The stock market is exciting. Its daily movements dominate the financial
press and mark the flows of billions of dollars of investment capital.
But stock markets are far more than the quintessential symbol of
capitalism or repositories of wealth. Stock markets are now found in vir-
tually every country in the world, be it communist or capitalist. They are
the driving forces behind the allocation of the world’s capital and the
fundamental engines of economic growth. They are the key to enriching
364 PART 5 Building Wealth through Stocks
(^3) John Maynard Keynes, The General Theory of Employment, Interest, and Money, New York: Harcourt,
Brace & World, 1965, First Harbinger Edition, p. 158. (The book was originally published in 1936 by
Macmillan & Co.)