30 of 40
BACK NEXT
You don't know more than the market knows
David Laibson
Professor of economics, Harvard University

Back in the early 1980s, at the beginning of the bull market, I had a high school teacher who was a stock picker, and he was very bullish on a housing stock, Kaufman & Broad. I was an impressionable teenager, and I invested my very limited wealth in this stock. It went through the roof. I concluded as a consequence of this experience - during a bull market, of course - that I was a brilliant investor. I start buying and selling stocks, going long, going short, going nuts.

This went on until I was in college. I made some money, and then I lost a lot of it. The real cure was the 1987 crash. It's easy to trick yourself into thinking you can outplay the market. In watching my confident investments go sour, I learned that I don't know more than the market and, thankfully, I learned that with only a few thousand dollars. Now I buy diversified portfolios through mutual funds and ETF s.

NEXT: The less you pay, the more you keep

Last updated July 22 2008: 11:27 AM ET
More Galleries
10 things you'll love about Windows 10 There's a lot to like about Windows 10. Here are our favorite features in Microsoft's soon-to-be-released operating system. More
Warren Buffett's gone cold. How his top 10 stocks are doing The Oracle of Omaha is an investing legend. But several of Berkshire Hathaway's biggest investments are off to a lousy start in 2015. Will shareholders complain at the annual meeting in Omaha on Saturday? More
BMW's M235i doesn't compromise BMW's new M235i gives you the performance of an M car for a lot less money. More

Special Offer