I Will Teach You To Be Rich: No guilt, no excuses - just a 6-week programme that works

by Ramit Sethi

How Financial Experts Hide Poor Performance As I’ve shown, the “experts” are often wrong, but even more irritatingly, they know how to cover their tracks so we don’t catch on to their failures. In fact, the financial industry – including both companies that administer mutual funds and so-called experts – are sneakier than you’d imagine. One of the biggest tricks they use is to never admit they were wrong. Daniel Solin, author of The Smartest Investment Book You’ll Ever Read, describes a study that illustrates how financial ratings companies like Morningstar – which provides stock ratings that investors can use to get a quick take on many stocks’ performance – continue to give thumbs-up ratings even as the companies they purport to be evaluating crater and lose billions of dollars of shareholder value. The study found the following: Forty-seven of the fifty [advisory] firms continued to advise investors to buy or hold shares in the companies up to the date the companies filed for bankruptcy. Twelve of the nineteen companies continued to receive “buy” or “hold” ratings on the actual date they filed for bankruptcy. Companies like Morningstar offer ratings of funds that are supposedly simple reflections of their value, but the idea of Morningstar’s five-star ratings is actually complete nonsense. Why? For two reasons: ccc First, receiving five golden stars doesn’t actually predict success. A study by researchers Christopher Blake and Matthew Morey showed that although the low-...