Page 182 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

‘Quant’ Playbook Failed”). In other words, A students received Fs. The
article states:

Even if they don’t share the same statistical models, quant funds share
similar approaches to the market. They are schooled in the same
statistical methods, pore over the same academic papers, and use the

same historical data. As a result, they can easily come to similar
conclusions about how to invest.

In other words, Wall Street hires academic geniuses, A students and
graduates of the world’s best business schools who use sophisticated
computer models to invest billions of dollars, and they all come to the same
answer. When their models say “buy” they all buy the same stocks, causing
a boom, and when the models say “sell” they sell en masse, crashing the

market. This is not financial intelligence.

Not Diversified . . . but Thinking They Are

Diversified

I have two very smart classmates who both went on to graduate from
Stanford University with PhDs. Both have high-paying jobs, one with a

bank and the other with an oil company. After the stock market crashed
following 9/11, both lost a lot of money even though both were diversified.
Over the years, I talked to them individually. I asked about their investment

strategy. Both said, “I invested in a well-diversified portfolio of stocks,
bonds, and mutual funds.”
Although I did not say it, I wanted to point out to them that they were
not really diversified. Instead of being diversified, they were 100 percent
invested in paper assets, primarily the stock market. They were not in

investment-grade real estate, privately held businesses, or commodities
such as oil production. When the market went down, it all came down.
They were not diversified, but they thought they were. They had above-

average academic IQs, but below-average financial IQs.