Investment - How difficult is it to make an informed and "proper" decision?

The Nobel Prize-winning economist Herbert Simon said, "Information consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention." Receiving information and using it wisely are two entirely different things.

Psychologists Daniel Simons and Christopher Chabris are co-authors of "The Invisible Gorilla," a book explaining why humans so often fail to observe information that should be obvious. Prof. Chabris suggests that the more comprehensive a prospectus seems, the more likely investors are to conclude, "All you need to pay attention to is within the four corners of this document." That, in turn, may lull investors out of any urge to do further research and exercise independent judgment.

Every investor also should rely on a standardized checklist of questions that must be answered before any purchase. Perhaps the most important: If I am buying, someone else is selling. What, exactly, do I know that this other person may have overlooked?

Benjamin Graham, perhaps the most astute analyst Wall Street has ever produced, was once asked whether he thought disclosure was adequate. Graham replied that the quantity of disclosure "makes me ill." He added, "I don't know if there is any solution … I suppose [a prospectus] would have to say in big red-letter words, THIS [SECURITY] IS NOT WORTH WHAT IT IS SELLING FOR. I don't know if that would make any difference either … somebody [would just say], 'What the hell, it is going up anyway.'"

The excerpts from the WSJ (http://online.wsj.com/article/SB10001424052748704388304575202280469112698.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird)