My friend, Moom, had a wonderfully brilliant comment on my last posting, which you can see here. In that posting I asserted that the purported purpose of so many personal finance blogs - to create a public leader board of one's financial progress (and thus enhance accountability) - had been corrupted by a misled desire to convert said blogs into media empires.
Moom mentioned this "I actually see quite a lot of financially unsuccessful people taking advice from each other online...."
So the question I have for you is this:
Do you evaluate the blogger who's advice you are considering? Who's advice may influence your investments for the next 30 years?
Far too often bloggers read each other's blogs without care, criticism or peer review (that would be rude - right?) and rush ahead on any seemingly acceptable direction. Do they pay attention to who they're listening to (to whom they're reading)? Is the writer someone who has proven success in their purported approach or is merely hypothesizing? A hypothesis is a very week financial foundation.
More often than not, blogs circulate untried and unproven ideas that although appealing are often downright wrong and foolish. I can think of no better metaphor than lemmings rushing thoughtlessly over a cliff.
Here's an example: how many bloggers chase 0% interest credit card advances or transfers with the hope of investing the balance for 5%? How may realize how vulnerable they are to the daunting and complex language the credit contract imposes? How many miss the exchange date and owe retroactive interest - destroying their arbitrage benefit? Here's a dose of reality - most credit card arbitragers will seldom obtain more than $10,000. 5% interest for an entire year is only $500.00! Virtually anyone capable of obtaining a $10,000 credit limit can find part time, side work or something to sell that will earn them an additional $500, without the downside risk of 9 months of retro 18-25% interest. Frankly speaking, it's alot of work to obtain easy money that in the end is not so easy.
How many PF Bloggers have even bothered to read any of the major books on investing or personal finances? I'm not talking about Money Magazine, Smart Money or other finance magazines which entice mutual fund advertisers with rotating "xx Mutual Funds you MUST have!" - sounds like a used car commercial. Frankly speaking Kiwosaki, et. al. are more along the lines of motivational speakers than true finance writers and a distraction from those truly interested in maturing their financial knowledge. Bernstein wisely wrote that most personal finance journalists learn by reading each other's writings rather than scientific / academic research. It certainly explains the sorry state of popular financial journalism and unfortunately the poor quality of financial advice amongst PF Bloggers.
I strongly recommend Barry Barnitz's blogs - he has several, but here's one on asset allocation theory. Barry uses his blogs to aggregate peer financial reviewed academic research. The articles are often quite fascinating and certainly never as exciting as "The five mutual funds you can hold until you die," etc.... As mundane as they may be, they very well may help educate the reader and demonstrate the true value of blogs by providing access to valuable information that may not easily be available in books.
One line of thinking does successfully challenge my criticism here - it's the Journeyman's adventure. Everyone loves reading stories about young people naively entering the world of personal finance and investing, making mistakes and learning what they must until they achieve success. It's a form of emotional (and financial) voyeurism, but many people love these stories - look at the popularity of mm's site at pfblog.com.
However, it is essential to distinguish the trial and error laden path of a journeyman from the wisdom of a successful practitioner. I assure you, although I studied anatomy in high school and might be able to follow surgical directions, you do not want me removing your appendix - even if I'm a fast learner. Odd how so many are willing to protect their appendix, but put their retirement at risk.
Next time a blogger recommends a method of earning money, I would post a comment asking him to validate the approach. I wonder what he (or she) will say.