There has been a lot of talk in Washington DC recently as to whether all financial advisors should be held to a “fiduciary duty” in their dealings with investors. From my point of view, it is hard to see what could possibly be controversial about insisting that those who guide others […]
Almost two years ago, I wrote a piece entitled “Do We Really Need A Special Tax Break for Hedge Fund Managers?” After briefly explaining how “carried interest” works, it argued that anyone less rich and powerful trying to pull of such a capital gains switcheroo would end up in jail. I took particular pleasure […]
In a recent speech, President Obama announced support for a Department of Labor initiative to impose a fiduciary duty on those who give advice about tax deferred retirement investments such as IRA accounts. It is a modest proposal. Judging by the howls emanating from an industry fearing it could cut into profits, though, you might […]
There are a great many practices, behaviors, and skills that set great negotiators apart from more typical bargainers. Indeed, enough to fill an entire book. Probably the single most important of these, however, is preparation. To put it plainly, the best negotiators prepare fully and carefully for any important negotiation. It is no surprise […]
Most of what you do in your financial life involves negotiating. In particular, investing is a series of negotiations. As an investor, you seek a deal in which you will exchange payment for some instrument that (hopefully) will appreciate in value. This may be a stock (an ownership interest in an enterprise), a bond (debt), or some sort of commodity (a thing that has value). Or the object of the deal may be some derivative or combination of these things.
I sometimes ponder how brokers and advisors choose this fund over that one.
After all, economic theory suggests that they all tend to perform in tandem with others investing in the same asset class. In such a case, the lion’s share of performance variation will be attributable to how much is charged to run the fund. Absent the advisor’s own pecuniary interests, I wonder if the choice isn’t totally arbitrary. Sort of akin to reaching into a barrel of monkeys and pulling out the first one you grab hold of.
When contemplating a potential investment, how can you know if it is fairly priced? Such a determination is critically important since even the best company will prove a poor investment if its stock is purchased too dear. Paying a fair price for an investment vehicle is just as important as not overpaying for a house, […]
If the expected return from two similar stocks is the same, how should an investor decide in which one to invest? The best answer is she shouldn’t. In most cases, the wiser choice is to buy some of each. The two investments will offer the same theoretical expected return but with lower overall risk. This […]
It seems safe to assume that almost no two individual stocks will bring the exact same return to an investor over the next decade. Those differences in return, however, will be explained by unpredictable and unexpected events that will occur in the future. Based only on what is known right now, the stocks of two […]
Strengthening your best alternative is the surest way to increase your negotiating power. This concept may seem counterintuitive; after all, our best alternative to the current deal is the offer we anticipate turning down. We hope, instead, to fashion the deal currently being discussed into one that best meets our needs and interests. Why work […]
Steven G. Blum
Steven G. Blum has been teaching in the Department of Legal Studies and Business Ethics at the Wharton School of Business of the University of Pennsylvania since 1994.
In addition to teaching semester-long courses for undergraduate and MBA students, Mr. Blum has taught in Wharton Executive Education programs, lectured and consulted widely, and frequently leads seminars and educational forums. Mr. Blum has five times won the William G. Whitney Award for outstanding teaching.
Negotiating Your Investments: Use Proven Negotiation Methods to Enrich Your Financial Life (Hardcover)
Investing is best understood as a series of negotiations. The ability to conduct that bargaining with skill and confidence is worth a fortune. Read More