The Tribes of Finance

 

There are two very distinct tribes within the world of finance, a distinction that is not very apparent at first.

The first are the people who actually invest their own money and try to make a profit for themselves.
The second are the people who play with OTHER people's money, usually from the first group, and earn their income from commissions from trades and by offering stock advice.

While the two fields might seem similar, as an investor, it's very important to be aware of this distinction.
There are honest and dishonest people in both groups. A lot of people work in both, investing other people's money as well as their own.

But the majority of stock market advice, recommendations and research originates from the second group - the players and the advisors.
Note that this group actually takes no major risks on its own, except for the minor ones to their jobs and reputations which can easily be replaced. They don't lose their fortunes and life's savings when their bets go wrong. They lose someone else's.

Most of their incomes are based on commissions from the number of TRADES, not from profits. So regardless of whether their clients make a profit of not, they usually get paid as long as they can convince their clients to keep trading.

While this might seem very short-sighted and actually gives the stock market a bad name, this approach has lasted for close to a century now.
One might even argue that while this harms the industry on the whole by scaring away the majority of potential common investors, the players actually make up by making the cyclical crop of high-yield traders trade more.
The trading public, as it is well known, has a notoriously short memory. There's one born every minute, as they say.

Anyway, if people don't care who they give their hard-earned money to play with, who are we to argue with them?

All one can offer by way of advice is that - if you're taking investment advice from someone, or giving them your money to play with, at least make sure they are making the same bets with their own money. Maybe not even then. They may just be heading for disaster and not know it.

The best approach is to find someone with a history of successful money management that goes back at least a couple of decades/market crashes, or just manage your money yourself.