CNN Money recently had an article titled “21 Best Money Tips Ever,” showing money tips from various well known pundits. They included staples from the personal finance and investing world, with sage advice from both Jack Bogle and Warren Buffet. After going through all the words of wisdom, my favorite came from Mark Cuban:
“Unless you think you’ve done more research and have better insight on a stock than a multibillion-dollar hedge fund, why are you trading?”
Too many people participate in trading stocks, looking to make a quick buck based on a minutiae of the information available. Yes, on any given day, you can beat the market. Just like on any given day, you can call a coin flip correctly. But you’re not going to be able to do it consistently and in the long run you will lose.
The worst advice, not surprisingly, came from CNBC and one of its anchors, Maria Bartiromo:
“You need to be adaptable. As it relates to your portfolio, if you regularly put money into your 401(k) or invest in mutual funds, you might have to change your strategy as the economic times change around you.”
While this sounds good in theory, what it means in practice is emotion based stock trading and market timing strategies. Most personal finance pundits will tell you that it’s more important to be consistent than “adaptable.” Investing theory is simple really: the market is pretty efficient and your chances of beating it are low. It’s investing discipline that’s difficult to master. The first step to discipline is to turn off CNBC.