Financial Reflections

With the start of the new year, comes everybody’s (or at least every magazine’s) preview of the new year.  Finance magazines aren’t any different.  They all have their own Mutual Fund Guide, How to Make Money guide or, for those of us who are broke, a Best Places to Work guide.

But while looking through the pages of hot money making tips, I became completely confused.

Right below the articles on mutual funds, Roth 401(k)s, and the like was an article from someone who hates mutual funds.  Well, he doesn’t hate them for everyone, just for people who have less than, say 1.6 million dollars or so (that the article’s author states as the average net worth of his readers) to invest.

Of course, that contraticts other advice I’ve heard about stocks, especially a quote from Mark Cuban (who’s made just a little bit of money from stocks), who seems to think that unless one can buy at least 5% of a company’s stock, one should stay out of the way.

I think I can safely assume that 1.6 million dollars won’t buy 5% of the stock in most publicly held companies.  That would only get one 5% of a company with a market capitalization of 32 million, which seems like chicken feed when looking at companies like Microsoft, GE or the latest big money player, Google.

So what does Cuban recommend as his investment advice for 2006?  In two words, “avoid risk,” at least for those of us who can’t walk away from our jobs.  That’s right, the maverick who became a multi-millionaire on stocks wants people to avoid risk.  In fact, he recommended things like bank CDs or money market funds for those who can’t get the CEO’s attention with our stock purchases.  That way we can be sure our money is there next year.

As well thought out as all those articles are, I’m picking “none of the above.”  Every dollar I pay down in high interest debt will move my net worth up that much and shed an investment that is forcing me to leak cash at -X% a year.