Strategy Lab: Why invest in this market anyway?

January 21, 2009 1:34 am

stratlabOver the past few months, there have been many voices shouting out about the need for investors to get into the market, as pricing is now considered “cheap.” Warren Buffett spoke up about it in October — Berkshire Hathaway  is down 10% more in 2009 — as did a few other astute pundits. I would not want to take anything away from them, as they are much wiser and wealthier than I. But how about a dose of reality and a touch less self-serving blather?

Just Tuesday morning, I was watching Vanguard’s John Bogle discuss the need for a transaction tax on investments. Now doesn’t that seem to be a commenter who is hoping to move more people into a buy-and-hold (aka, till-death-do-us-part) strategy? That’s the same strategy that has pummeled the average investor over the past 12 months. Why would Bogle even consider something so radical?

Oh, that’s right, he runs a company that earns it keep by providing low-cost index funds with low turnover. Of course, low turnover would provide protection against a trading tax and hurt those pesky advisors who attempt to get out of the way of a speeding truck, also known as a market correction.

Where do we go from here?

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