Understanding our Money

“You just don’t understand.”

When your spouse or other close relation tells you this, pay attention. Chances are there’s something important going on. But if you’re evaluating an investment and the seller says this, grab your wallet. Either they’re pulling one over on you, or the investment idea is too complicated for its own good.

Over the past decade dozens of companies have maintained that their business was too sophisticated for the average person to comprehend. Enron, WebVan, Lehman—they were all touted as a new way of doing business. But famous investors say that you should look to invest in firms that any idiot can run, because eventually one will! If the business plan can’t be written in crayon, it’s probably too complex.

A big part of the Financial Crisis was the abstruse nature of the instruments sold by Wall Street. Unsound mortgages were put through some kind of Rube Goldberg financial structure to try to spin straw into gold-plated AAA bonds. When this failed, it took the economy down with it.

When family or friends tell you that you don’t understand, it’s time to listen harder. When someone in the market says the same thing, it may be time to walk away.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:34:18+00:00 May 9th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment