Trent Reznor of Nine Inch Nails (NIN) fame kicked some music label butt in this past couple of weeks by releasing a 36 track album on his own using only the web as a means of distribution. He racked up sales of a cool $1.6 million. I think this is a strong message for the record companies that things are changing and the middle-man is not required anymore. As usual, I looked at this from an individual investor perspective and came away with this learning:
The more people involved with your investments the less control you have and the less money you get to keep for yourself.
Ok, I admit I may be stretching things here looking for a logical connection between NIN and my dividend investing portfolio. However, I want to break this down into its two components and talk about each to make my point.
The record companies try to convince artists that without them they will be destined to low sales and poor album performance. Think of all the advertisements you see from banks and mutual fund companies that try to convince you that you will be a lost and poor investor without them. Sounds the same doesn’t it? Record companies and investment managers try to do the same thing – they sell fear and the believe that artists and investors cannot possibly do the job without them. I think NIN proved them wrong and I think investors can too.
Less Fees = More Money For The Investor (or Artist)
One thing Trent didn’t talk about but I am sure he achieved was that more of that $1.6 million he made went to him as opposed to middle men or record companies. Traditionally the record companies would get a large percentage of this money as marketing, promotion, and distribution costs. The same happens in investing – you give your money to a commissioned broker and he/she takes a large chunk of money right up front to invest your money for you. By choosing to invest for yourself in index funds you can avoid these middle-man costs and keep more of your gains for yourself.
Investment success depends a lot on knowing how to invest your money and then by keeping fees as low as possible. Both of these things can be done on your own, without the help of a middle man, broker, record company, or otherwise! It just takes some dedication, a willingness to learn and some strong planning.