When Michael Steinhardt was running his famous hedge fund, he was asked to reveal the most important thing the average investor could learn from him. “That I’m their competition,” he said.

Think about THAT the next time you decide to buy or sell a stock based on a hunch (though better a hunch than a tip, I’ve found).

Of course, trading amongst tiny companies, like a few I dabble in, you won’t find the Steinhardts or many other big-time pros — one of my current favorites had a market cap of just $6 million until recently, which means Steinhardt or his ilk would have had to buy the whole thing to make it even vaguely interesting. But tiny companies carry lots of risk and, often, high spreads between the price you have to pay to buy them and the price, seconds, later, you would realize selling them.

Yet another argument for low-expense no-load mutual funds.

Tomorrow: Your Kids and the Twentieth Century Giftrust


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