A lot of what he had to say, most of you have heard before:
- The small investor is the worst informed and the most gullible.
- The SEC has no teeth and its regulators are useless.
- If you don’t understand an investment, don’t own it.
- And, of course, the advice we hear most often, and routinely ignore: If it looks it good to be true, it is. Madoff should know.
Here’s where the MarketWatch interview got interesting.
Madoff said the individual investor is the last to get any information. I’ve been saying that for 20 years. And they are up against market pros, which makes it very easy to be scared out of the market.
Next, the SEC is grossly underfunded and acts as a training ground for regulators who move on to better jobs once they are trained. He said any qualified regulator should have discovered his con years earlier.
As for brokers… brokerage firms’ and their clients’ money should be held by independent custodians. If they were, Madoff said he would have been caught much sooner – in fact, he wouldn’t have been able to scam anyone.
He thinks the best chance an individual has to make money is in broad market index funds and only with major public firms. This is where he thinks you get the greatest safety and the best chance the firm will follow all the rules.
But his best advice was…
If you’re unsure what to do, leave your money in savings or money markets. At least you won’t be losing money.
Madoff thinks you should educate yourself before you even attempt to invest. I have said for years everyone should be required to pass a test to demonstrate minimum competency before they are allowed to manage their own money.
Last – this is original – ask for your money back every once in a while to make sure your money is really there. I never thought of that. Also, if you’re new at this, have your attorney or accountant ask the questions for you.
This may not be earth-shattering news for some of you, but everyone should be paying strict attention to all of this advice.