Phil Town is from Gwinnett County Ga and is the author of the new book PAYBACK TIME

Phil Town wants you to imagine that you are a new to investing and you get this advice:  Buy businesses that you don’t understand, which don’t have a track record that you can make any kind of coherent prediction from, and which big institutions are buying but you don’t know why.  Oh, and don’t even consider what the business is worth or whether the numbers make any sense at all.  Just invest in it anyway.  It could go up fast and you don’t want to miss the boat on this investment.

This was the advice many people were hearing from brokers and investing gurus in 1999-2000.  This advice cost so many people so much money that it is truly amazing to see it in print so soon after the 2007-2008 market melt-down.  But there it is, in black and white, at IBD’s Investor’s Corner on Friday.

The investing article starts off with about as stupid a statement as a PAYBACK TIME investor could ever make regarding your research into a business that you plan on buying: “Ignorance is bliss.”

Actually, the author may be right given that what he is proposing isn’t investing at all – it’s pure speculation.  Speculators, by definition, are working the greater fool theory of investing — buying with the hope that an even bigger and even more blissfully ignorant fool will come along to buy this thing from them for more than they paid.  For a born-to-lose speculator, ignorance is, indeed, bliss because knowing that they are about to get nailed for their money would be all too painful.  Better to just stay stupid and hope everything just goes up.

Don’t hold your breath while you’re waiting for this market to launch.  It could be another 15 years of nowhere.

The RULE #1 investing strategy that has compounded money at 20% plus for the last 80 years and will continue to do so for the next 80 years takes the view that the market might not just go up.  Therefore you must buy investments as a business, know the value of the business you are buying, wait for the inevitable market flucuation, and a buy it at a big discount to value.

Ignorance is bliss?  Not with Payback TIme investments it isn’t.

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