Wall Street for Dummies Jan 3, 2025

I am a Cornhusker, true blue, tried and true. While less than one-tenth of one percent of true-blue cornhuskers have ever shucked an ear of corn, we all have one thing in common: We are fanatical about Nebraska football.

Nebraska football has a 135-year history as a competitive program. We have had great times, and we have had not so great times. We play to win; we don’t play for participation trophies. In order to know who's winning, you have to know the score.?

Now to the financial connection. As an investor you can sit on the sidelines and watch the game, or you can be an active participant and make an effort to maximize your results. As in football, you need to have a way to measure success. For Nebraska football, it’s a bowl game. For investors its market returns. ?

In both football and investing there are many metrics that go into creating a winning team. A critical data point for two Cornhusker football icons, Bob Devany and Tom Osborn, was turnovers. You can’t score if you don’t have the football. The investing equivalent of a takeaway are the fees you pay for investment expertise and transactions.

Corn is a commodity. A commodity is where all producers output is identical. Four decades ago, financial data on publicly traded companies was costly and only available to professionals. Back in the day, money could buy expertise. There were money managers who were financial Heisman Trophy winners. But the internet and electron trading has made investment advice a commodity. No need to pay big bucks for something you can get for free.

Which brings us to another Cornhusker icon, Warren Buffett. Buffett introduced individual investors to index funds. Warren didn’t invent them, but he gave give them credibility as the investment of choice for ordinary investors. Investor can now get market returns for free, another investment takeaway eliminated.

Forty years ago, the Wall Street legacy firms were the gatekeepers to the exchanges and charged a hefty fee for passage. Then along came another Cornhusker financial guru, Joe Ricketts and the discount brokerage firm was born so todays independent inventors trade for free. Another investors takeaway vanishes into the Nebraska night sky.

As we begin a new year it is time to check your score board. The market’s 2024 score was 25 percent. If you held a S&P 500 index fund for the year, you are headed to a bowl game. If not, you need to work on eliminating takeaways. ?

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