Part II of Winning against Wall Street's New Weapons of Mass Manipulation

'Lazy' portfolios beat benchmarks again; here are top performers - MarketWatch

In the first part I talked about the term Behavioral Economics and how Wall Street is using math formulas to take advantage of investor irrationality.

In the second part I once again link to Paul Farrell-click above link-who writes on financial matters at MarketWatch.com Farrell in this article says the way to beat Wall Street rigging the game is to set up "Lazy Portfolios."

Farrell says Lazy Portfolios or "lazy investing is nothing more than the good old "Modern Portfolio Theory" put into action." He suggests investing in 3 to 11 no-load(that means no sales fee in English) index funds, either mutual funds or ETFs. Since Wall Street can't make enough money off of fees from these type of funds it doesn't push this "Nobel Prize-winning strategy" on to investors.

However, Farrell is tracking a few of these lazy portfolios. And they seem to be delivering excellent returns.

There is the Aronson Lazy fund, set up by Ted Aronson fo AJO Partners-they manage about $28 billion-according to Farrel. And his 5-year annualized return of %13.30 is pretty amazing.

Farrell also points to the portfolio set up by Dr. William Bernstein, who has written two books on investing, "Intelligent Asset Allocator" and "The Four Pillars of Investing."

And then notes the portfolio run by Bill Schultheis, who wrote the book "The Coffeehouse Investor."

I am not sure which one is the better portfolio, you should check with your financial adviser. I like these because they run automatically once they are set up, have decent returns, and don't cost alot in terms of sales fees, set up fees, and any other fee Wall Street and its brokers can dream up. Though, I am sure they are dreaming up ways around this. Get educated or get an honest broker.

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Winning against Wall Street's New Weapon Part I

Wall Street unleashes its 'weapons of mass manipulation' on you - Market Watch
If anyone wants to handle their own investing, I suggest they learn the term BEHAVIORAL FINANCE. It is also known as behavioral econ, or quant trading, or neuro investing. It has been around awhile but as Paul Farrell points out in the article linked to above, there is a new component to the the study of investor behavioral. A component which focuses on the "irrationality" behind investor buying, holding and selling.

The science of this studying has been "dominated by psychologists studying irrational human behavior.' However, Farrell says the field is now becoming dominated by mathematicians, chiefly, "University of Chicago finance professor Richard Thaler."

In his article Farrell explains that "unlike psychologists Thaler and the quant mathematicians are not interested in WHY investors are irrational." Instead they assume ". . . . financial markets and investors are irrational and always will be" [Emphasis mine].

According to Farrell the quants-as he refers to them-want to take advantage of investors' irrationality as the market goes through its up and down cycle, through use of "sophisticated quant math programs." Only investment banks, institutional investors and wealthy individuals with the resources can afford to implement these "quant programs." And so most of us smaller investors are once again left out in the investment hinterlands.

Part II looks at "Lazy Portfolios" which are Farrell's solution to the game being rigged

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