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5 Stupid Questions Asked on Wall Street

Ignore these 5 queries. They're either pointless, or they've been answered a hundred times over.

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This is stupid. You buy BRB.B to have Warren Buffett allocate some of your capital for you, because he is a much better investor than you.

Warren Buffett has given long, complicated reasons for why Berkshire doesn’t pay a dividend, but from the point of view of the holder of BRK.B, the answer is simple. Sure, Berkshire could take some of its excess cash and give it to shareholders, but Warren Buffett can generate a better return on that same cash by doing something else with it.

Ultimately, it’s even simpler than that. No, Warren Buffett isn’t perfect. He’s the first one to admit it. But he knows what he’s doing. That’s why you gave him your capital.

Telling Warren Buffett how to invest money is like a drunk armchair quarterback telling Tom Brady how to throw a football.

#4: Should I Invest in Bitcoin?

As the great financial crisis proved repeatedly, it’s incredibly stupid to invest in something complicated that you don’t understand. If you don’t understand what Bitcoins are and where they come from, just stop right there.

And even if you do understand what Bitcoins are, it’s stupid to bet on them because it’s stupid to speculate with your hard-earned money. That goes double for an asset as volatile as Bitcoin. Anything that jumps around so much only increases the risk that you’ll buy high and sell low.

True, speculation is a big part of various markets, especially in things like futures and currencies. But it is best left to the professionals, who are going to eat you alive if you try to gamble against them. Pros are pros because they make money on their trades, and there’s no easier mark than an amateur and his “play” money.

You might get lucky in the casino, but you can’t routinely beat the house.

#5: Will (Insert Company Name) Be the Next Apple (or Google or Facebook)?

As with market crashes, no one can predict the future. Of course you want a piece of the next big thing to make you rich. But it’s probably not going to happen.

Promising companies fail, stocks crash. That’s why it’s critically important to have a diversified portfolio. Part of it might tumble, but everything is unlikely to go down all at once.

Finally, there’s this Wall Street saying: “How do you make a great fortune? Invest a little one.” You have to make a huge bet on a single stock to get rich. If you invested a million dollars in Facebook (FB), you’d have $2 million by now. But it’s more likely that you only were able to invest something like 10 grand in FB stock. So now you have $20,000.

That’s nice, but as you can see, even “the next Facebook” hardly brings you life-changing money.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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