Invest. Don't be sold to.

Matt has shared a great reading list that included Michael Batnick, author of the Irrelevant Investor blog who is also great to follow on Twitter (@michaelbatnick).

Batnick recently shared his suggested reading list, which is great and has a bunch of great quotes from some of the best ever investors.

Batnick's posts often surprise me initially but soon, after thinking about them, make great sense. Like today's, which points out that in a given year, 73% of investors' funds that flow from one fund to another flow into new funds with no track record! During the past decade, over 57,000 funds have been created so financial firms can sell them to individual investors.

From the Morningstar report Batnick refers to. Link to download here.

Well buyer beware. I would think that even though "performance chasing" is real and often detrimental to performance, the one "screen" that would dominate among buyers of mutual funds would be that it at least have some history! And Morningstar, the creator of the report that is the source of the 73% statistic, seems to share my amazement at the figure. From the report's introduction section:

More from the report:

But as illogical as the idea is, to Morningstar and me, of new funds with no track records getting most of investors' "flows," I do get it. Products are made by producers to sell to consumers, or in this case investors. So common sense dictates that the sellers of these products will be successful persuading even this large a percentage of people to buy even such products as investment funds with no track records.

In theory I understand Batnick's prescription for investors who don't want to be sold what's best for the seller: get a good financial advisor to save you from playing this loser's game. But as he pointed out earlier in his post, the "bad advisors (my words)" are the intermediaries who influence the 73% now. So I think it would be hard to decide ahead of time first which financial advisor isn't just selling me junk and disregarding my interests, and second whether this advisor, even if he has my best interests in mind, will be worth what I'll pay him anyway.

I'll repeat here over and over that not paying people, or diligently limiting what you pay them, to help you invest is very effective in reaching your financial goals. So I suppose that's a bias of mine. The opportunity to be sold from an array of 57,000+ new funds these past 12 years is something I'm glad I missed.