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More than just keeping up with the Dow Joneses

By Vitaliy Katsenelson, CFA

Financial Times – May 25, 2007

Wall Street is inherently short-termist. This is not because it is dumb. Quite the contrary, some of the brightest minds in the country labour in the investment industry. But as the mutual fund industry has grown, the desire for short-term gratification has altered the focus, turning an investment business into a marketing one.

There is nothing wrong with marketing; some of my good friends are marketeers. But a good marketeer’s job is to discover what customers want and try to meet that need. Unfortunately, the investing public wants instant gratification. They want to keep up with the (Dow) Joneses, and for their fund to "beat" the other funds and comparable indices on a short-term basis – quarterly and annually. That is not what investing is about; it is about reaching long-term financial goals without taking unnecessary risks.