This is my favourite investing book title of all time. The book was written by Fred Schwed, Jr. in 1940 and many of its anecdotes and admonitions are as true today as they were 65 years ago. Its title is taken from an investor's experience as he was being shown by his guide, firstly, around the New York financial district and, then, around the Yacht Club. The guide informed the investor that all the yachts were owned by the bankers and brokers. Thus the investor posed his naive question: Where are the customers’ yachts?

I keep this anecdote in mind when I deal with brokerage firms. I have nothing against paying fair value for services of value. However, when I place this story beside studies showing that up to 80% of mutual funds fail to match relevant indexes, I wonder why I should pay mutual fund managers 2% or more of my money each year when the odds are that they cannot match the index.

Two weeks ago I had occasion to meet a new stockbroker. I was referred to him on the advice of a friend – not because I wanted him to manage my money, but because he and his firm were able to accommodate, at no charge, a particular type of investment I wanted to make. As we were opening the account he asked me – “What do you expect from me?” I didn’t have the heart to tell him that I didn’t want anything from him except the flexibility his firm’s account gave me. I just don’t think he can do any better than I could on my own.
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