Wall Street closing bell ceremony is always funny. Why?

At the closing bell ceremony all participants are always, always, clapping with a very big smile. Even if the Market fall down of 5% that day.

Have you ever asked Why?

Well it is quite simple. Most of people investing in the Stocks made these persons’ fortune. Brokers and portfolio managers usually are not paid by the performances they achieve. They earn money on the transaction fees.

In other words, they earn when you move your money buying and selling stocks using their services. A minus 4% is almost the same to a plus 4% for them: they enjoy at every ringing closing bell not for the performances but for the transactions you have done!

Portfolio managers have to move their portfolio quite often too, in order to justify their activity and, more important, their fees. A portfolio manager hardly could be a long term value investor because he cannot follow some golden rules as:
-practice inactivity more than activity
-buy and hold forever (if company still stays into buying original parameters).
Practicing inactivity means wait for very long time before finding the great opportunity. Who is the portfolio manager who can stay one or two years with a lot of cash unexploited just in wait of a good occasion? No one!

Let’s focus on two persons: Prince Alwaleed Bin Talal and our big friend Buffett. Would you like to be their broker?
Ok, nowadays maybe yes because of the huge amount of money they move, so the percentage is still interesting, but in some decades ago: definitely no. You will be bankrupt. They buy and sell businesses, not stocks, that means no day by day speculation but long term growth expectation: so few transactions.
The philosophy, especially for Buffett, is "Buy and Hold forever" because "The Stock Market is designed to transfer money from the Active to the Patient.": this is their vision. That means no more than one good stock picking every one or two years in average!

This philosophy can also be read as: less money to taxes and less money to brokers -> more money for us.

Once you have found your portfolio of great companies (less than 10!!) the holding period should be ‘almost forever’ and you will sell a company only when it will not fit to your investment criteria anymore (always define an exit strategy).

Value Finance Portfolio stands up against frequent money movement!

Let’s finish this post with a Buffett’s quote about the guys in Stock Exchange: "Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway."

PS: if someone try to became your advisor, broker, portfolio manager saying that he will beat the market with an extremely ‘active’ portfolio management: go away, he is trying to pay his wife hairdresser with your transaction fees!