“Any time anybody offers you anything with a big commission and a 200 page prospectus, don’t buy it.” – Charlie Munger

These aren’t written in stone, but they give you a good idea about some of the unfortunate realities of the investment business.

All else equal, a talented sales staff will trump a talented investment staff when attracting capital from investors. There are organizations that can have both, but typically the firms with the best sales teams or tactics will end up bringing in the most money from investors. A well-thought-out narrative by an intelligent, experienced marketing department with the right pitch book can do wonders at persuading investors to hand over their hard-earned money. It’s difficult to admit we can be so easily persuaded but it’s true.

The products that sound the best are often the worst ones to invest in. This one goes hand-in-hand with a good salesforce as they are able to craft a story for consumers of financial products. There can be a custom-made product for just about anything these days. Many, but not all, play up the fact that investors love to invest in (1) something that has performed extremely well in the recent past or (2) a risk factor that just caught many by surprise. Promises of upside participation without the downside volatility fall into this camp as well. There is no silver bullet but if there was a Silver Bullet ETF with promises of easy riches people would buy it.

There are way too many investment products to choose from. According to the Investment Company Institute (ICI) there are currently over 77,000 mutual funds worldwide. There’s no way that investors need that many fund options to choose from.

It can be difficult to find good advice. There are hundreds of certifications and licenses in the financial industry. Some of them are legitimate while others are just letters behind someone’s name. It can be helpful to work with an accredited professional but it doesn’t guarantee they will have your best interests in mind. It’s still a case by case basis and some of the best financial professionals are self-trained.

Increased activity does not necessarily lead to better results. There are many professions or industries where you can simply outwork your competition. The investment industry is not necessarily one of them. Staying active or busy doesn’t always lead to better investment performance. Investing is one of the few professions that being lazy (in a sense) and making fewer decisions with less activity can work out better for you in the end.

Specialists are not always the solution. You can find a specialist for just about anything on Wall Street – there are experts on asset classes, sectors, individual companies, investment strategies, etc. While finding a professional that specializes in a particular area of interest could be helpful, the views expressed can also be extremely biased. Specialists can become overconfident in their knowledge and abilities in their narrow field of expertise. Generalists with a more diverse skill-set usually fare much better in the field of portfolio management. This is the lattice of mental models approaches laid out by Charlie Munger.

You don’t always get what you pay for. There are certain areas of life where paying for higher quality goods and services makes sense and you get what you pay for. This is not always the case in the investment world. In fact, most of the time it’s the opposite as John Bogle has reminded investors that, “We investors as a group get exactly what we don’t pay for.”

It’s very difficult to understand the total amount of costs you are paying. Mutual fund and ETF expense ratios are really the only fees that are easy to determine on your own. If you use an advisor or a consultant you are likely paying a percentage of assets, but you don’t write a quarterly check for these fees; they are simply deducted from your account. There are also transaction costs, the market impact from trading, 401(k) administrative fees, taxes and the ever-present opportunity costs of your decisions.

The stock market is not nearly as rigged as our emotions. Ask a group of average investors that have had a bad experience in the stock market and at least one of them will likely tell you that the market is rigged against the little guy. Unfortunately these are the investors that have gotten bad advice or made untimely investment decisions at the wrong point in a boom or a bust. It’s our human nature that causes these poor decisions, not the market structure, the big banks or the government.

There are no guarantees. It doesn’t matter how intelligent someone is or how great of a track record they have. There are no guarantees in the financial markets because no one can predict the future. Admitting this is usually the first step in understanding how the investment world works.