The Crowd

Soren Kierkegaard remarked about crowds, "No witness to the truth gets involved with the crowd. His work is to be involved with all people, if possible, but always individually, speaking with each and every person on the sidewalk and on the streets – in order to split apart. He avoids the crowd, especially when it is treated as authoritative in matters of the truth or when its applause, or hissing, or balloting are regarded as judges. He avoids the crowd with its herd mentality more than a decent young girl avoids the bars on the harbor. Those who speak to the crowd, coveting its approval, those who deferentially bow and scrape before it must be regarded as being worse than prostitutes. They are instruments of untruth."

I have been thinking recently about the danger of following the crowd. I have discovered that most people would rather be mainstream than right. Many people believe that it is safer to be in herds. The crowd mentality shapes everything we do- how we spend money; how we invest; how we do church; how we invest time; what kind of work we choose; exercise and dietary habits. The crowd is quietly whispering in our ear, "Conform, conform. Don't expose yourself. Play it safe."

I am sometimes asked- not very often- what voices I listen to when it comes to investing? The answer to that question is: I like people that have humble hearts, intelligence, wise perspective and aren't afraid to stand on convictions despite the mood of the crowd. Some examples of this in the investment world are: Rusty Leonard, John Mauldin, Lincoln Anderson, Jeremy Grantham and David Swensen. These five men are examples of thoughtful analysis and men who aren't afraid to stand alone on their convictions. Therefore, their advice is worth consideration.

Then there are some voices that many people listen to who I consider fools. One of those voices is: Robert Kiyosaki. Kiyosaki is the author of Rich Dad/Poor Dad. This book has sold millions of copies due in large part to his devout allegiance to the multi-level marketing industry. The book has many flaws from an advice standpoint. Those flaws are detailed at this website: http://www.johntreed.com/Kiyosaki.html. I won't repeat the bad advice here, because John Reed has done an excellent job.

How did Kiyosaki ever obtain an advice colum on Yahoo Finance? Two of Kiyosaki's recent columns were titled: "Why Mutual Funds Are Such Lousy Long-Term Investments" and one of his all-time classics "Why Savers Are Losers." Despite the fact that many long-term investors have averaged over 10% per year after fees in stock mutual funds for long periods of time, Kiyosaki says they are lousy investments. He prefers great long-term investments like gold- which has averaged close to 4% per year over long periods of time. I am not saying that a small portion of gold in a portfolio is not wise as a hedge. I am merely pointing out Kiyosaki's foolish advice to avoid a portion of investing that can produce great long-term results.

In his "Why Savers are Losers" column, Kiyosaki exposits on why people who save money in liquid cash reserves are stupid. He says cash is trash due to the imminent decline of the dollar. Really? And why is Kiyosaki such an economics expert all of sudden? Because he wrote a best-selling book about get-rich quick real estate strategies at the height of the real estate boom? I fear that many people who listen to this man's "expert" advice have been selling stock funds, liquidating cash and piling into real estate and commodities. This is herd mentality at its best.

Beware of the fools that play to the crowd. They feed on fear and greed. And the advice they dispense is often dangerous to your pocketbook.

For His Glory,

Ashley Hodge