Myths are a waste of time. They prevent progression.

Barbra Streisand

It’s still GameStop week out here in markets-land with the senate hearings last week. It’s time to bust some myths with regards to retail investing and investment products.

Myth 1 – If only everybody had access

If only every person had access to all the financial products that insert demographic <Rich people, smart people, boomers> have access to, we would be able to invest better and get better returns. Access to opportunities is important, but isn’t this is bit overblown? Not every investment opportunity is an opportunity. Should a retail investor directly participate in private equity? Illiquid distressed funds? Access has to be calibrated to the risk that you can take. I understand the, you can only learn by losing money argument. However just because you learn safety by shooting a gun, should you be given access to a bazooka?

Myth 2 – If only everybody had education

Do you know what’s holding us back? Education. If everybody was educated in how to invest they would make better investors. This argument is a diversion from the real problem of unnecessary complexity. We clamor for education because the investment products are complex and opaque. But do they need to be? Isn’t it better if we focus our energies on making investment products simpler and transparent? Making education the sole solution is also is a convenient way of making a your problem into a them problem. It’s not that our products are bad, but it’s that you are not educated. Let me educate you. This is a very condescending approach.

Myth 3 – If only people paid for investment advice/investment products, free is bad.

If you are free you are the product is the meme of the day. I know it’s fashionable to hate payment for order flow, but as an individual investor/trader I am extremely happy for the liquidity it provides. PFOF has reduced spreads considerably! Investment products have a fundamental problem of delayed value. Investment is a time horizon game – the longer the horizon the better. Consumers have a hard time paying upfront for something whose value they see far into the future. By expecting folks to pay for products you are in effect working against this core human behavior. Free products increase access!

The fundamental tension

Engagement vs Patience is the core tension. Engagement = Speculation/trading, weaving in and out of markets. Patience = Investment, long time horizons, lots of time spent doing nothing. Building investment products to optimize for engagement while thinking that you are building for patience is the ultimate logical fallacy – the ultimate myth. The best investment product is the one that is literally invisible and in the background!

Why aren’t we talking about more income?

Why do we invest? We do it for financial security, money is the intermediary to meet our goals. The more money we have the more secure we feel. The best way to do this is to increase your income! If you want to solve the investment conundrum – build products that help/educate/train/enable people to increase their income. More income? more assets to invest ? better financial outcomes ? better financial security.

It has to start with increasing income.