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Henry Blodget | Illustration by Von

Second Life

Disgraced stock analyst turned financial writer Henry Blodget talks about index funds, socially responsible investing, and his reputation.

Five years ago this month, the SEC banned Internet-bubble-blower Henry Blodget from the securities industry for life. Today, he's back in the investing game as a writer. His work has run in Slate, The Atlantic, and The New York Times, and he's editor-in-chief of the multiauthor blog Silicon Alley Insider, which launched last year.

Why are you still covering investing?

It turns out that, in business and the markets, experience is helpful. One benefit of missing a downturn is that it makes it easier to spot one coming the next time. We've been warning Silicon Alley Insider readers to prepare for a recession since last summer.

You began as a freelance journalist and wrote an (unpublished) book about your postcollege life in Japan. Why be a writer?

I apparently had a perverse desire to have people tell me I am a moron.

What effect does your past have on your authority and credibility?

People initially have some skepticism, and I certainly don't blame them. If all I knew about me was what I had read, I'd be skeptical too. That said, most people have been willing to give me a chance to earn back their trust, and I will be forever grateful for that.

Why have you fashioned yourself as a defender of the common man and of commonsense investment strategies such as diversifying and buying index funds?

After I left Wall Street, I studied a lot of academic research, and I was startled to discover that stock picking, market timing, and other popular investment activities usually hurt investors rather than help them. This is an indisputable fact, but it's actually not common sense. On the contrary, most people think it's ridiculous. Most people assume that index funds only do well because most investors are stupid -- which is delusional. Until you understand why indexing works, you'll always be wasting money and time searching in vain for the next great stock-market guru.

Will a downturn make your call for responsible investing easier for people to hear?

Investors expect the same thing in the future that they've seen in the recent past, and this often leads to bad asset-allocation decisions -- we buy what has been working and sell what hasn't. But there are going to be very long periods -- decades -- in which stocks are flat or worse. The last thing you want to do at that point is give up on them.

You've written about the challenges of socially responsible investing (SRI), including lower returns. Are SRI funds a responsible choice for average investors?

One of the main rewards of SRI is putting your money where your beliefs are, and for a lot of people, that's more important than earning the highest possible return. That isn't to say you won't also do very well from an investment perspective -- many SRI funds do.

What's the ultimate goal for Silicon Alley Insider -- and your estimation of its worth?

To become a daily (or even hourly) read for everyone who cares about digital business. SAI is the first site in what will eventually be a multisite network. We're not looking to sell, but if Mr. Murdoch offered $100 million, we might take it.

Henry Blodget | Illustration by Von

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