Buy investment bank products or Buy the investment bank?

Buy investment bank products or be the investment bank? What's the difference? One of my favorite authors David Foster sheds some light.

If you buy investment products, managed by the investment bank, and these investments perform poorly, the investment bank still takes their commissions or management fees from your money. Not only have you taken up all the risk of losing your money, you also paid for management fees regardless how poorly your investment performed.

On the other hand, if you were the owner of the investment bank, investing the money of other people, not only do you transfer the risk of losing money to these other people, you also collect management fees no matter how the market or these investments perform.

Consumers of investment products are at the receiving end of the musical chairs game of risk.

David Foster further adds, these glamorous office buildings, expensive cars driven by CEOs are actually bought from YOUR money.

This is not to say all investment banks are like this. Some do merit talent in their investing prowess.