My Best Investment Advice Is Turn Off the TV

NEW YORK ( TheStreet) -- Back in the 1990s, I wrote a piece for Salon they called "Night of the Living Day Traders." (The site no longer accepts links to its archives, as Reuters reported, but a Google search still lists it.)

I saw guys in their 30s and 40s renting workstations, bandwidth and analytics from trading houses around Atlanta, fighting to pick up the eighths or sixteenths dropped on the floor in each day's trading.

The smart ones were, anyway. The dumb ones were refusing to close out their bad bets. They tried to will the market to move the way they wanted it to. They were in over their heads, and after I filed my story one of them (a man I never met) snapped. It was all over CNN.

Since then, those dimes and quarters have disappeared from public view. High Frequency Trading programs now scoop them up, all of them. If there's a move, big or small, in virtually any market, the big boys are taking the profits and leaving small investors with nothing.

It's even worse than that. The hot new investment booms, whether yesterday's social boom or (as the Bend Bulletin copies The New York Times) today's computer security boom, are also getting gobbled by venture capitalists and private equity firms.

Unless your "mad money" fund has at least eight figures in it, you're not getting a taste. These guys won't come public until the boom has crested, as with Facebook ( FB) and Zynga ( ZNGA). As I noted recently here at TheStreet.com, small investors need not apply.

So what is the small investor to do? (Other than agitate for reform, which would be a different column, something more political than I want to take on here.)

First, turn off the TV. They're talking about trading there, about trends the pros aren't letting you in on.

Second, slow down and look for growth. There are steady growth sectors in this economy. Read up on the macro trends and look for the leaders. Companies like Coca-Cola ( KO), Home Depot ( HD), Google ( GOOG)and IBM ( IBM) have been delivering good returns for years and are likely to continue to do so.

Third, invest with the pros. Index funds fell hard in 2008, but they're back and in normal times they do OK. Low-cost mutual fund companies like Vanguard, which don't advertise heavily, are my favorite way to go. In fact the less a mutual fund company advertises, the more likely you are to profit with it. Oh, and I sat still during the crash. I'm already whole again.

Fourth, avoid most bonds. They won't give you a yield and the boom is starting to look like a bubble. Look for instruments that let you take advantage of rising interest rates, when they arrive, and whether the economy is going up (more competition for money) or down (lots of defaults and creditor losses) yields are bound to get better over time.

My view of the fundamentals is that we're in a typical fight between creditors and debtors. The creditors keep pushing debtors to the wall, the debtors empty out their pockets, but once that's done the creditor has to admit they've made a bad loan and write it off. Write-offs and the creation of new money for investment (rather than bailouts) is what you're waiting for. It will happen. It's a grieving process. Give it time.

Fifth, and most important, relax. There are collapses, about once in a generation, and we're still pulling out of the latest one. There are always Cassandras out there, warning that disaster is around the next corner, and 99% of the time they're wrong. A stopped clock is only right twice a day and investing clocks move slowly.

Returns won't be stellar if you use my rules, but you'll be able to get on with life, and that's a lot more fun than anything I (or anyone else in the financial press) can tell you. If you must read touts like me, look for trends, things that will work over three to five years. Ignore the headlines and you'll do fine.

At the time of publication, the author was long KO, HD, GOOG and IBM.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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