It never ceases to amaze me how many different ways Wall Street’s Opacity Protection Team has of saying “there is no need for transparency because investors are stupid”.

For example, the Opacity Protection Team will claim “too much disclosure is as bad as opacity as it will confuse investors (alternatively, too much disclosure is as bad as opacity as it makes it hard for investors to find the really important information)”.

Claims like this are based on the unstated assumption investors are stupid.  It is true that not every investor can independently assess the information that should be disclosed about every investment.  However, investors are not restricted in their assessment of the disclosed information to doing it themselves.  Investors are fully capable of and have shown repeatedly that they will hire trusted third party experts to assess the disclosed information for them.

This point needs to be repeated:

Investors aren’t stupid. They can and do use experts to assess disclosed information so the investors can know what they own or are thinking of buying.

The entire asset management industry is an excellent example of investors using experts.  Experts who portray themselves as being capable of assessing all the information that should be disclosed for each investment or of hiring independent third party experts to do it for them.

One of the reasons the Transparency Label Initiative™ was formed is investors aren’t stupid.  Investors know they are entitled to the disclosure necessary so they can know what they own or are thinking of buying.  Investors know blindly gambling doesn’t consistently produce good investment decisions.