Naked Truth Investing: Pick a card. Any card.

This is the part of a new series of columns called "The Naked Truth," by retirement expert Dan Solin. Please bring him your questions, in the comments box, and he will answer as many as he can.

If that headline conjures up an image of a circus barker, you have hit the nail on the head.

Yet every day, millions of investors engage in the same kind of activity when they make investment decisions that are critical to their retirement planning.

These investors listen to a dizzying array of conflicting opinions about the merits of this stock or that one, the ability of the current "hot" fund manager, predictions about which sector will outperform other sectors, and no end of prognostications about the direction of the markets.

The securities industry and the financial media hype these stories. The industry wants your business and the media wants you to buy their magazines and watch their programs.

Let me give you a couple of examples:

In 2007, the MSCI Japan Index was down 4.23%. Bad year for those investors. But in 2005, it was up 25.52%. Great year for those investors.

In 2001 it was down 29.40%. Disaster time.

In 2007 the Russell 2000 value index was down 9.78%. But the year before, in 2006, it was up 23.48%.

What about those high dividend stocks?

In 2007, the Morningstar Dividend Leaders Index, which "captures the performance of the 100 highest yielding stocks that have a consistent record of dividend payment and have the ability to sustain their dividend payments" was down 10.34%. But in 2006, it was up 25.64%.

I could go on, but I am sure you get the point.

If you are investing based on the advice of your broker or financial adviser who claims to have the ability to "beat the markets" by picking "winners," you might as well be at the circus and succumbing to the entreaties of the carnival barker.

Fortunately, there is a better way.

Fire your "market beating" broker or adviser. Determine your asset allocation. Invest in a globally diversified portfolio of low cost index stock and bond funds. You can purchase these funds directly from well known fund families like Vanguard, Fidelity and T. Rowe Price.

Over $4 trillion of the world's smartest money invests this way.

They don't try to "pick a card."

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008). Visit his website at
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