Tuesday, July 29, 1997
Ignorance Isn't Bliss;
It's Costly
by
[email protected]
I am a young engineer working for a major jet engine manufacturer. Recently, I have overheard many disturbing conversations about investing in the stock market. With the great success of the markets as a whole over the past 5-7 years, everyone has his own idea about how to take advantage of it. But I wonder if most people really understand what they are saying.
I work with some very intelligent people. They know a great deal about how to design gas turbines. They have studied aerodynamics, fluid mechanics, solid mechanics, and other technical subjects in order to team up to produce a product. A good percentage of the people around here have advanced degrees, so I would characterize them as very smart. But frankly, I have heard so many dumb things come out of their mouths I am amazed.
For example, a fellow engineer asked a colleague, "Got any good tips?" Once they got to talking, I learned that many of his investments were down significantly. Apparently he bought a lot of high flyers because they were high flyers. He had no idea what he was investing in. Instead, he was captivated by the lure of quick, high returns (as pushed by his discount broker). He is a senior professional engineer who spends hours paying attention to every small detail within his design in order to protect the people who will use the product, and yet he spends virtually no time learning about the companies in which he invests his hard-earned money. That kind of thinking is very disturbing and obviously very expensive.
My point is that even very smart people are often blinded by false hopes of quick, high returns. In addition, their egos sometimes prevent them from seeing the mistakes that they are making as they feel they already know all there is to know. With everything in life, you should take some time to educate yourself. It is always in your best interest to gain knowledge, especially in investing as you will be risking your hard-earned money. Even if you use a broker, be sure that his advice is good by checking up on the stocks that he recommends to you. A little bit of time spent educating yourself (especially here at The Motley Fool) could save you a great deal of money. Ignorance isn't bliss; when it comes to investments, it's costly.