How to invest your money and beat the stock market

When people find out that I'm a business journalist, they invariably ask me for stock tips.

After all, I'm probably sitting on tons of juicy corporate insider dope that my editors won't print so as not to offend advertisers, right?

First of all, not true. Any inside dope I've got, has been printed. I've been lucky with editors all my life -- in 15 years as a journalist, I've never had a story pulled due to advertiser influence. It's true. I've had stories pulled because they sucked, but that's a different matter.

Secondly, I'm not allowed to give stock tips. There are regulations out there about insider trading. If I do find something out, I either have to tell everybody, or nobody at all.

Finally, if even the employees at Enron didn't know that their company was going down the tubes, how would a journalist who spends a few minutes on the phone with an exec and some analysts know anything at all? Those employees pretty much lived at that company. They knew what was going on. They heard all the gossip. But they still lost their shirts.

But, despite all this, I still know the secret of how to beat the stock market. It's the only strategy that works.

We journalists don't write about it much because it conflicts with the news cycle.

Here's the problem: there's only one good way to invest your money. Everybody knows what it is. But you can't run the same story every day. You need to say something different, something interesting, something new. So we write about what various sectors are doing, how the economy is shaping up, give advice on what company to put your money in. Most of this advice is no more useful than the latest Britney Spears gossip.

But people want it, so we write it.

Take, for example, this month's cover story in Fortune: "What Warren Thinks..." It's not online yet, or I'd give a link to it.

Here's Buffett's advice on investing:

...they should just stay with index funds. Any low-cost index fund. And they should buy it over time... It's a positive-sum game, long term. And the only way an investor can get killed is by high fees or by trying to outsmart the market.

Then, if you turn the page, the very next article is titled "Where to Put Your Money Now" -- advice to investors on how to outsmart the market.

Journalists are not evil. But sometimes it does look that way, doesn't it?

So here's the best strategy. Only one guaranteed to beat the stock market:

1. Index Funds

Index funds sound boring. Basically, they're a fund that includes every company of a certain type. Your best bet is the biggest fund that there is. You want to bet on the whole US economy, not just on one company. Or on the whole world. Over time, the whole world is getting more efficient, more productive, and richer. Index funds reflect this. And the best thing with index funds is that you're not paying multi-million-dollar salaries for fund managers who do no better than monkeys throwing darts. Sure, by chance, some managers do well some of the time. But they're no more likely to do well the following year than anyone else. In fact, the more clever the story behind some manager's strategy -- whether it's a mutual fund, hedge fund, or some crazy new plan -- the more likely it is to lose you money.

Stick with index funds. Go for the cheapest ones. If you don't like saying "cheap" because it sounds... well ... cheap, then say "no load index fund." Now you're no longer cheap, you're a savvy investor.

2. Invest Over Time

If you want to sound fancy, you can call it "dollar cost averaging." For example, you might want to take $100 out of each paycheck and invest it in your index fund.

The key here is not to look at the news. Don't put in more when the market is hot. Don't put in less when it's down. Just set up the investment strategy and then don't look at it again... oh, for the next thirty years.

At the end of the thirty years, you'll find that you've beaten the market. Why? Because when the market is down, that $100 bought you more stock. When the market was up, that $100 bought you less stock. In other words, you were automatically investing more during the best times to invest - when the stocks were less expensive.

If you try to do this deliberately, chances are you will fail. People have a hard time guessing what the market will do, and even the best fund managers get caught up by investment fads and bubbles -- and by panic, as well.

By not looking at your investment, you take the emotions out of the equation.

There is one big drawback to the "index fund-invest over time" strategy. You have nothing to talk about with your buddies. Some guy will say, "I bet everything on big oil and war profiteers, and now I'm up $10 million!" and what have you got? "I'm in index funds." That sounds so lame. (Now you see the problem that journalists have.)

If you're desperate to play the market, then take some of your entertainment budget and play with it. Think of it as going to Las Vegas -- you'll lose everything, but you'll have fun doing it and you'll have some stories to tell. Except to your spouse. He or she won't want to hear these stories.

Then, when you tell your friends that you lost your shirt betting on pork bellies you will have literally lost just the price of your shirt.

Still in Shanghai,

Maria

Nostalgic for My Shanghai

I'm going to be heading off to the U.S. on July 15 -- and coming back in the fall -- but I'm already nostalgic for the Shanghai of today.

I was down in the French Concession area this afternoon, one of the nicest parts of Shanghai.

After having a quick bite at Abbey Road with journalist friend Bill Marcus -- of Marketplace fame -- I walked up Dongping Lu to buy some bread on the way home.

I walked into Paul's, a new French bakery chain in town. I love their Xintiandi location -- small, but drowning in a sea of real crusty French breads. Not the typical Wonder white-bread-style bread you get here in Shanghai. During nice weather, you can sit outside, sidewalk-cafe style.

The location on Dongping Lu is a full-scale sit-down restaurant. So although I walked in for a loaf of crusty whole wheat bread, I immediately saw that they had one croissant amande left in the bakery display.

I first had one of these when visiting a friend in Paris. They're sweet, filled with almond paste and sprinkled with sliced almonds and a light dusting of powdered sugar.

As I rode the taxi home, I was overcome with a wave of nostalgia. Shanghai will never again be the way it is today. The beautiful weather, the cafes popping up all over town. The laid-back lifestyle.

Bill says that the longer people stay in China, the less they work. Finally, they're just coasting along, moving around from one wifi-equipped cafe to another, blogging and twittering, pretending that they're doing something, until finally they're living on no money at all.

You can do that in Shanghai.

Bill is not an example of this -- he actually seems to be working pretty hard.

But I do know guys -- and gals -- who come to Shanghai with sky-high hopes and business plans then somehow get off the career track. Or never get on it in the first place.

Pretty soon, they're doing a little teaching or copyediting or corporate copywriting for a few hours a week. Just enough to pay rent on their part of a bachelor pad, and to buy a few beers and coffees during the week.

Next thing you know, they're in their mid-40s with potbellies, still coasting along on the coolness of being expats.

One mid-40s guy I know copyedits a couple of hours per week. The rest of the time, he told me, he spends dating. His dates are all hot young Chinese girls. He himself looks like the Big Lebowski, from the film of the same title. Well, a little dumpier.

Another guy -- in his late 40s -- somehow married and reproduced without leaving the Shanghai slacker mode. He teaches English some of the time. The rest of the time he spends working on his business plan. With each iteration the business plan becomes more grandiose, all-encompassing, and impossible to actually execute. If you want to hear about his idea, he'll make you sign a non-disclosure agreement. Don't be surprised if his idea seems familiar to you -- I've seen it on House.

Then there's a group of guys married to rich women. All in their mid-40s. Most pot-bellied. (To be fair, so am I.) Some seriously balding. (Not me. I've got tons of hair. Long. Blonde. Lustrous.) They tell people that they're running online businesses. These are one-man operations, involving an occasional consulting gig. Maybe some search engine optimization. Or web design. Their wives do the heavy lifting, bringing-home-the-bacon wise, leaving the hubbies to the cafes and beer gardens. Have wifi, will drink.

If you think you recognize yourself in this description by the way -- it's not you. It's somebody else. It's that other guy -- you know, that guy you hate.

I love these guys. They always have time to hang out. They're cool and laid back. They'll sit around and argue politics and solve all the world's problems over a couple of slices of pizza and some beer. They never have to rush off for an appointment, and never seem to have any deadlines to meet.

I'll miss them when I leave.

Once I move my family back to the States, I'll be back in Shanghai only on business. I'll probably pack my days here full of staff meetings, and interviews, and bureaucratic get-togethers with government officials. There will be stacks of papers to sign, new hires to interview and train, budgets to go through, cashflows to plan. I won't have as much time to just hang out in cafes, enjoy the free wireless, and blog about life in Shanghai.

It's too bad -- it's a beautiful life. Someone should make a movie about it.

Still in Shanghai,

Maria

Journalism vs. PR

Just came back from a nice lunch at KABB, in Shanghai's people-watching mecca Xintiandi. Hose Mitamura (author of China s Environment 2008, available from Amazon) and I discussed the differences between journalism and PR.

As my staff constantly reminds me, I tend to believe passionately in whatever I heard most recently. In my case, this is Law and Order -- I was watching reruns of the show the night before.

(I'm not going to say how, except to mention that I was shocked -- SHOCKED -- to find that there were illegally uploaded TV shows available through surfthechannel.com. Don't people know there is intellectual property violation going on? The horror!)

Anyway, on Law and Order -- and in every show that depicts an American-style legal system -- every legal case has two sides. There's the prosecutor, who tries to make the accused look as bad and guilty as possible, within the constraints of the law. And there's the defense attorney, who tries to make the accused look all harmless and innocent. There's a judge there, to keep things moving along, and the jury makes the final decision.

That's the media landscape in a nutshell as well.

The journalists try to print as much of the scandal and wrong-doing that they can dig up. Sure, they present ordinary facts as well -- so do prosecutors. But we all know what we're there for -- the blood and gore.

The PR guys try to make their clients seem sweet and wholesome. They also present some actual facts, but these are shaded in such a way as to tell the most flattering story about their client.

Sure, a good defense attorney will advise a client not to commit the crime in the first place, or, if the crimes are ongoing, to stop as quickly as possible. But once the crime is done, the defense lawyer is supposed to go all out to get the client off -- whether or not the client deserves to be punished.

So, a PR agency will usually advise clients to clean up their acts. But, barring that, the PR folks will do all they can to keep the bad acts from being publicized -- or, if they're already out, to put the best possible spin on them.

In this analogy, the jury is the reading public and the judges are the libel courts.

I don't mind working with PR people. They perform a useful public function. They get me in touch with company executives. They hook me up with customers, and send me background information and research reports. They suggest story ideas.

I regularly read PR blogs. One of my favorites is the China Law Blog. Yes, it's a PR vehicle for the law firm that sponsors it, Harris & Moure. But there's excellent information in the blog as well. PR Newswire is also a great source of information, sources, and story ideas, and they have a Chinese version through a partnership with Xinhua. Their Profnet service is by far the best way to find sources. I occasionally browse through their database of experts, but, more often, I post queries about articles I'm working on. Especially for tech-related stories, this is a great way to immediately get interviews with high-ranking executives at major companies, since their PR agents subscribe to these queries.

So I love PR guys. I used to be married to one. In fact, my ex still works in PR.

Would I want to be a PR guy? Be forced to say nice things about people? Never. Shoot me first.

Fortunately, PR work and journalism require such different personality skills, such different characters, such different approaches to morality, that there doesn't really have to be a conflict on a personal level. I can't do their jobs -- they can't do my job. And we wouldn't want to.

It's the old "Jack Sprat could eat no fat, his wife could eat no lean" thing.

I believe that the greater good is that which benefits society as a whole. This means, exposing corruption and injustice whenever it happens. If a few innocent people get hurt in the process -- well, that's just too bad for them.

Other people believe in the rights of the individual. Better that a hundred guilty people go free than an innocent guy go to jail. This is also a noble sentiment. In fact, if I was a lawyer, I might be torn about deciding whether I wanted to be a defense attorney or a prosecutor.

One of the things that appeals to be most about journalism -- and about prosecutors -- is that we are heroes. The mafia lawyers and the corporate attorneys -- they make the big money, but they don't get much respect from the public.

With PR, it's the same way. Sure, they have better haircuts. And better clothes. And better food at their parties. Their drinks are more expensive, and their cars are newer and flashier. But who really respects them?

The worst that can be said of good journalists is that in our zeal, we sometimes step over the line.

That brings me to the final parallel between PR and law. In the legal profession, the worst that can happen is for money to cross the line between the defense and prosecution. Whether it's the defense attorney paying off the prosecutor, or the prosecutor paying off the defense, if there's an exchange of cash there's corruption going on and the minute it comes to light the careers of everyone involved are over, and the respective organizations will suffer major PR blows.

On the media side, any exchange of money or favors between PR folks and journalists -- regardless of the direction that the money flows -- is a scandal. The bigger the money, of course, the bigger the scandal. If someone buys me lunch to pick my brain, no problem. If we're discussing possible stories over dinner, however, them I'm picking up at least half the tab.

I've worked for many media organizations. I've never seen a case in which they paid money to sources, or in which they accepted payments for PR people in return for editorial coverage. There was one case, of a very small-circulation local business magazine, that preferred to quote advertisers in stories and write flattering pieces about them.

In the competitive American media climate, it is hard for publications like that to become successful -- after all, who wants to pay for articles that are composed exclusively of advertising blather? Especially if there's an alternative publication that gives you the straight scoop, the solid dope, the inside dirt. Which one of us wouldn't take the dirt over the puff piece any time?

Since, over time, the average media climate tends to become more competitive, not less, I would guess that the demarcation line between PR and journalism will become increasingly clear in every region.

And this means that people who are just getting into the media field should be clear from the start about which side of the line they want to be on.

There's nothing wrong with being either a journalist or a PR guy. But the folks who try to cross the lines are vilified by both sides, and by the reading public.

When the public gets upset at either PR people or journalists it's when they confuse the functions that the two groups serve. At various times, the PR guys are the bad ones because they're trying to make evil corporations look good. At other times, the journalists are the bad guys because they're only looking for bad news.

In some emerging markets, where the media and PR functions are conflated together, the end results can be extremely messy. But I believe that over time, as the two functions are separated due to market pressures -- as well as increasing professionalism on both sides -- this situation will be resolved as well.

It pays to be clean.

In Shanghai,

Maria

One week of Twitter

I've been using Twitter for about a week now. I keep all the tweets in a column on the side of my browser windows (using Twitbin). It feels like being in a chatroom populated exclusively by your friends -- the friends who Twitter, that is.

My Twitter handle is Maria_Trombly if anyone wants to follow me.

I'm not the only journalist who's using Twitter this way.

ReadWriteWeb just ran a nice article titled How We Use Twitter for Journalism.

In Shanghai,
Maria

Summer has come to Shanghai

Today I left the house and stepped into what, in Massachusetts, would be considered a pretty hot summer day - 77 degrees Farenheit (25 Celsius).

So much for the one week of nice, spring weather. From now, it's only going to get worse and worse. I plan to stay inside for the next two months with the air conditioning cranked up, stepping out only in the evenings.

In other good news, I made the top-ten most sought-after speakers list at ChinaBiz Speakers, China's premiere -- and, as far as I know, only -- speakers' bureau. You can check out my speaker's profile.

The speaking business is actually picking up. There was that trip to Bangkok, to talk about Chinese pet food. And a talk on marketing to a local business group.

Earlier this week, the folks from the International Channel Shanghai send me a DVD of the five days I was a guest on their Culture Matters program -- I've got permission to post excerpts and will do so as soon as we get the 2.5 hours of film edited down to 15 or so minutes.

I still haven't seen it. If I think my voice sounds weird on tape, how much worse is it to see yourself on TV?

In Shanghai,

Maria

Editorial Process Outsourcing

I don't see a lot of hits for "editorial process outsourcing" in Google -- but this is exactly what we do.

Publications have been doing outsourcing for a long, long time. Mostly, they just outsource the development of content. They use freelance writers and freelance photographers, and they buy photos and articles from agencies.

Editorial process outsourcing takes this a step further, by providing additional services on top of the content itself.

For example, Relaxnews is a Paris-based outfit that provides high-end lifestyle content -- they can do a complete magazine for you, writing, art, photos, layout, the whole thing. I'm currently working with one of their former editors, Fanny Landrieu, to start a similar agency in Shanghai.

This is different from bespoke news agencies, such as Israel-based Abbey Content, which provides editorial services for US newspapers, and U.K.-based International News Services Ltd., which provides high-end financial articles and other content written specifically for individual clients.

We did start out as a bespoke news agency, covering the emerging markets for individual US publications. Today, however, we provide more services -- we run entire bureaus for our clients, including accreditation, recruiting, training and managing staff, covering beats, assigning articles, copyediting and fact-checking.

Here at Trombly Ltd. (at tromblyltd dot com) we cover mostly emerging markets for US business publications. In addition to providing articles, we also do photos, fact-checking, and copyediting for our clients, and are rapidly moving up the value chain to provide more services. With writers and editors in China, India, the Philippines, we cover Asia extensively, but also handle Russia and Eastern Europe, Latin America and the Middle East through an ever-expanding pool of trained freelancers.

In the U.S. and Europe, many providers do even more -- they will produce an entire publication, or supplement, for a client.

This is not something that's talked a lot about. Publications tend to want to control the content they publish. As a result, many of these outsourcing projects are limited to special sections, supplements, or advertorial inserts. Outsourcing these sections helps to distance them from the main editorial content of the publication, which is especially important for advertorial sections.

But outsourcing can also bring in additional expertise that in-house staff might not have, and can reduce fixed costs. At a time when advertising can increase or decrease sharply, outsourcing parts of a publication can reduce the number of staff on long-term contracts, and reduce the need for layoffs during downturns.

Yesterday, I met with Kerry Kennery, of ITV-Asia, for lunch. Before starting up his online business channel, he used to launch magazines for a living. He's got about a dozen magazines off the ground in his previous life. He says that magazine publishers need to be aware of the business they're in -- they're in the advertising sales business. Everything else can be outsourced.

Too many publishers, he says, spend too much time micromanaging content.

I agree with him. Publishers are highly-paid people. Their time is worth a lot -- they should be spending it where it's going to have the most impact. That means, meeting with potential advertisers.

Editors and writers are low-paid people. They're artistic, creative types. Pick the best team you can for the budget you've got, set clear objectives, then let them go do their thing.

As an additional bonus, the less interference from advertising into the editorial process, the better the editorial content will be, and the more trust the readers will have in what they read.

In the old days, a publication had to keep everything in-house because the logistics of coordinating advertising and layout and distribution were unwieldy unless everyone was in the same building.

Today, with electronic delivery of documents and virtual workflows, there's no reason for publishing companies to remain vertically integrated.

In Shanghai.