Big Business Magazines Got It Wrong

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Anya Kamenetz

Posted Sep. 19, 2008
Tagged: Money, MoneyTips, Economy

Gawker has a good bit of media criticism posted on how the big business magazines, in relatively recent issues, touted stock in AIG, Merrill Lynch, and Lehman Brothers. (Nationalized, fire sale, and bankruptcy, in case you haven't been following the news.)

This goes to reinforce the idea that it's not so smart to read magazines for stock tips. I am really glad that the business magazine that I work for doesn't tout stocks because the whole idea is irresponsible. The typical small investor like you and me, trying to grow her nest egg, shouldn't even be buying individual stocks, or really, even mutual funds. The smart long term investment is low cost index funds--period.

On the other hand, I've heard from friends and acquaintances that they are panicked by what's going on and want to get out of the market altogether. This is understandable, but it's also the wrong idea. I'm not even going to check my performance for the next few weeks, although I am reallocating investments to make sure I'm diversified. The secret to successful wealth building is to live beneath your means, save, diversify, buy, and hold. You definitely want a solid rainy day fund in CDs and FDIC-insured savings accounts (AKA cash), but if your retirement is more than 20 years off, it should be a small proportion of your total assets. You have to stay in the game or you'll miss the comeback.

Since graduating from Yale University in 2002, Kamenetz has worked as a journalist in New York City. In 2004, the Village Voice nominated her for a Pulitzer Prize in feature writing for her work on the feature series, “Generation Debt: The New Economics of Being Young.” Today, she reaches millions with the “Generation Debt” column as a personal finance expert for Yahoo! Finance. She covers the future of business, including sustainability and social entrepreneurship, as a staff writer for Fast Company magazine. And she appears on major news networks, including CBS, ABC, CNN, MSNBC, Fox News, CNBC, CSPAN, and NPR’s “Bryant Park Project”, commenting on financial, social, and political issues faced by young people.

Generation Debt (Riverhead Books, 2006), is her first book. She writes about the startling range of economic upheavals facing young people in their 20s and 30s: the rising cost of higher education, soaring student loan and credit card debt, an increasingly uncertain job market, health care and retirement worries, and international competition. She asks the question: What is the new future-focused economic compact we need to restore the promise of America as a true meritocracy? See akamenetz's other posts and profile.

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2 Comments

Alex Fisher
11/04/08 08:07 PM

I pretty much agree, but I have to admit there are some options better than investing 100% in something like the Vanguard S&P 500 Index-- Berkshire Hathaway. Even Class B is expensive at 3 or 4K a share, but it's far out performed VFINX over the last decade or so and I expect it will continue to in the long run because of how Warren Buffett and his friends have design their portfolio of companies (almost like an index fund on steroids)!

the weakonomist
09/19/08 10:36 AM

Well said Anya.

The day to day happenings of the stock market should only concern a few thousand people.

If you're like me and get company stock in your 401(k), dump it every few months for mutual funds. I sell every 6 months and buy more Target Retirement funds from Vanguard.

This is especially true these days for me. I work for one of those banks that is always in the news. If we're next, I don't want to lose everything like AIG, Enron, and Bear Stearns employees did as the company failed.