30 minute portfolios

26Sep06

Bill Buford, author of Heat, has a fascinating piece in the New Yorker on the history and evolution of the Food Network. Buford notes that in its quest to become a mass market cable mainstay, the network has shifted its culinary compass. It has transformed itself from a chef-dominated, educational network into something more akin to fast food. In closing Buford writes:

Ours is a different audience from the one that watched Julia Child. In 1962, “microwave oven” and “fast food” hadn’t entered the national lexicon. And restaurants were more expensive. Tim Zagat, the publisher of Zagat Guides, points out that for more than two decades the cost of going to restaurants or getting takeout has risen less than the annual rate of inflation—that it’s much less expensive today than at any other moment in our history to pay other people to prepare our dinner. Never in our history as a species have we been so ignorant about our food. And it is revealing about our culture that, in the face of such widespread ignorance about a human being’s most essential function—the ability to feed itself — there is now a network broadcasting into ninety million American homes, entertaining people with shows about making coleslaw.

Let’s take a minute and think about the world of investing today. At no time in history has it been easier (or cheaper) to assemble a indexed, low cost, globally diversified portfolio.  This is one of the great accomplishments of the ETF revolution.  The vast majority of investors would be well-served in this approach. However the majority of the media output reaching investors serves to tell an entirely different story.

From CNBC, to infomercials to brokerage ads we are constantly bombarded with the notion that investment success is simply a click away. Any one who has read this blog for a period of time knows that we are in the camp that active investing is far from easy, indeed active investing is, in fact, hard. That should not deter an individual from pursuing investment expertise, but they should do so with their eyes wide open.

There is nothing wrong with striving to be an average investor. A simple portfolio assembled with “off the shelf” parts that avoids the pitfalls of overtrading and market timing can be quite satisfactory. Following this approach can (paradoxically) make one, after expenses and taxes, an above average investor when all is said and done. However to become a superior investor it takes education and experience. One will not get that by watching “business news” all day long.

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