"You can never be too cynical in this business," a friend told me recently over dinner.
He's a smart guy. Honest. Capable.
But he's a stockbroker.
Being a stockbroker is a difficult job, but not for the reason you might think.
Put simply… being a stockbroker is difficult because investing is not.
To be clear, investing is not a cakewalk, but it's not difficult. It requires, more than anything, patience and discipline.
Being a stockbroker is difficult because, to make money for yourself, you have to convince your clients to become impatient and impulsive.
Buy this, sell that. Flip these shares, dump this stock, buy these bonds. That's how they generate commissions and give the appearance of earning their fees. As my stockbroker friend said as he chomped into his salad…
"You want to do the right thing, but this business isn't set up to serve clients. It's set up to serve the brokers."
This echoes the observation of the title of the 1940 investing advice book, Where Are the Customers' Yachts?
Learning to invest on your own — without using a full service stockbroker — is easier than you think.
If you have an account with Commsec, E*Trade, Westpac or nabtrade, you're already set up to invest by yourself.
The next step is to use those platforms to choose your own ASX shares to buy. Do it yourself, or subscribe to a stock tipping service like Motley Fool Dividend Investor and just follow Andrew Page's advice.
Based on his track record to date, the $198 for a TWO YEAR subscription (50% off) could be the best investment you ever make.
Once you start, you'll never look back.
Here's a list of extremely helpful things you — the individual investor — can do that professional investors and stockbrokers can't.
1. You can say, "I don't know."
The world is complicated. There are things we just can't know, like what stocks will do in the short run.
But professional investors can't say, "I don't know." They're paid to know.
When you're asked to have opinions about things that are unknowable, you are forced to make stuff up.
Watch Sky News Business reporters ask their guests where the market is going to be a year from now.
You may as well ask a goldfish for his one-year market forecast, and everyone knows this. But that's not the point. The point is that the analyst is paid to have an opinion, and they would love to share it with you.
As economist John Kenneth Galbraith said, "Pundits forecast not because they know, but because they are asked."
The worst part is that people forced to have an opinion about unknowable things begin taking their own opinions seriously.
That's dangerous, because overconfidence in things that are unknowable inevitably leads to misbehaviour.
2. You can do nothing when nothing needs to be done
"Do nothing" is one of the most important phrases in investing.
Buying a portfolio of stocks and not touching it for years can be a great option for most investors.
But if investing is your full-time job, doing nothing isn't an option.
Most professional investors know deep down that doing nothing — just letting compound returns do their thing — is the most rational investment approach.
But no one can justify big fees for watching paint dry. So they trade, rotate, take money off the table, worry, overreact, and generally make fools of themselves.
Both Warren Buffett and Motley Fool CEO Tom Gardner have said that their lifetime returns would be higher if they never sold a single share of stock they purchased.
That's the power of doing nothing.
3. You can change your mind when your mind needs to be changed
I feel bad for investors who work at organisations called "Peak Prosperity," "The Gloom, Boom, and Doom Report," "Euro-Pacific Capital," "The Active Bear," or "Shadow Stats" (all real companies).
Their investing opinions are already made up and can't be changed even when the world around them does — they'd literally have to rename their company.
Not being attached to a market theme, or a broad worldview, is so important to becoming a good investor.
The world doesn't care if you're a card-carrying bull, bear, Keynesian, Austrian, Right or Left. Anytime you say, "I'm a …" you're doing yourself a disservice as an investor.
"I'm flexible and I understand the world changes" is the only rational stance. And it's one individual investors can have.
4. You can not care about your reputation
Many investment managers — especially small, newer ones — devote enormous time and effort to finding new clients and raising more money.
Perception can be bigger than performance, and professional investors know this. So you see some crazy behaviour among professional investors, like fund managers selling declining stocks at the end of the tax year just to avoid disclosing in their annual reports that they owned losers.
You're probably managing money for yourself and no one else. That's great. Being able to not care what other people think of your investments is a huge advantage.
Use that advantage. Be yourself, not your stockbroker. Invest better, and live happily ever after.
