Wall Street is not rigged. The problem is that it provides the tools for small investors to shoot themselves in the foot, said Spencer Jakab, author of Heads I Win, Tails I Win “People’s performance is extremely poor and its self-inflicted,” said Jakab. “The weapons are given to you and you load them and fire them. It’s shocking because people really have no idea how poorly they do at investing.” Jakab write an edits the “Heard on the Street” column for The Wall Street Journal. Prior to becoming a journalist, Jakab was a top-rated stock analyst covering emerging markets at Credit Suisse. Jakab said individual investors should invest passively in index products, as opposed to betting on last year’s star fund manager who will likely see performance revert to the mean. “It’s essentially a coin flip and you are paying over a percentage point of your returns for him to do it,” said Jakab, adding that in this low-return world “a percentage point means a lot” over many years. Jakab said so-called robo-advisors may be good for some investors if they need asset allocation and don’t need to be comforted by a human being when markets get rocky. But he contends they certainly do not need to put their money with pricey hedge fund managers or add confusing alternative funds to their portfolios. “Even the pension funds are figuring out it’s not a very good value to invest in hedge funds,” said Jakab. “It’s just marketing.” Jakab also said investors should not reach for yield, even in this low-yield einvironment. He points to the fact that many investors lost huge dollars investing in supposedly safe pipeline MLPs when oil prices collapsed. “Whatever pays a very high return, there is a lot of risk embedded in it. You don’t get something for nothing,” said Jakab.
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