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My Sunday Washington Post Business Section column is out. This morning, we look at how Muppet portfolios develops, and advise readers to Avoid Being a Wall Street Muppet.

Here’s an excerpt from the column:

“About 10 percent of the new accounts that we see are muppet portfolios. These typically hold hundreds of positions. Mind you, these are not from a family office with $150 million, but a portfolio 1 percent of that size. There is no rational reason for these sorts of assemblages to be holding 100-plus positions.

How does this happen? As Brown explained, brokers are constantly barraged by the Street’s financial wholesalers. These are the mutual fund families, the exchange-traded funds merchants, the product providers who spend their days making presentations to financial retailers.

The broker goes to some conference room or hotel, where over a free lunch of rubber chicken the product du jour is pitched. The explanation of why the product even exists is made, a hypothetical historical performance flashes by, a clip of the manager on TV is played. Afterward, the brokers return to their offices, where they start “smiling and dialing.” Every client gets the smooth sales pitch, filled with those sexy details the broker only learned existed an hour earlier. Repeat every month, and after a few years you end up with muppet portfolios.”>

The full column is worth reading . .  .
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Source:
How to avoid being a Wall Street muppet
Barry Ritholtz
Washington Post, August 25, 2013  
http://www.washingtonpost.com/business/barry-ritholtz-how-to-avoid-being-a-wall-street-muppet/2013/08/22/0659493c-06d5-11e3-9259-e2aafe5a5f84_story.html

Category: Apprenticed Investor, Investing

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3 Responses to “Don’t Be a Wall Street Muppet”

  1. Greg0658 says:

    sorta like sitting in the doctors waitingRoom and watch the salesReps go right-in to peddle freeSamples and stuff

  2. milbank says:

    From the full WaPo article. . .

    “A better way to view the investing world, in my opinion, is to break it down to 15 broad asset classes and own all of them.”

    Barry, would you please list all “15 broad asset classes”? TIA