PERSONAL FINANCE
The Only Investing “Secrets” Are Consistency & Common Sense
Boring as can be—and that’s the point.
My parents took an interest in the stock market a little over a decade ago.
They have attended weeks of increasingly “advanced” (i.e., upsold) seminars, consumed a prodigious amount of material on “surefire strategies” to “profit in any market,” and forked out what I believe to be five figures for the “expertise” of a smarmy charlatan from the radio.
To date, they have never placed a single brokerage order.
My point is not to lambast their judgment or even to shame the questionable advisors who preyed on their naivety. It’s to highlight a deeper and more insidious theme:
Nothing good happens when you desire certainty (which doesn’t exist) and assume others possess the secrets to certainty (which they can’t).
That mindset is a surefire way to get fooled, to convince yourself you’re incapable, to stress over the wrong things altogether, and ultimately to lose (or leave on the table) a great deal of money.
Here’s a better way.
I’m not a financial professional. This is purely opinion and entertainment, not advice. Do what’s right for you, and if in doubt about what that is, then it’s important to find someone who’s legally able to tell you.
Nobody knows anything, so embrace it
We eventually profit in the market because unknowns work out in our favor. It might play out through split-second arbitrage or through decades of capital appreciation, but either way, the unknown essentially is our profits.
No ambiguity? No profits.
Our desire for certainty is a great instinct for self-preservation, but it’s out of place when we’re navigating a manmade system that’s largely useful because of—not despite—its fundamental uncertainty.
For our purposes, that means three things:
- A foolproof investment strategy is categorically impossible. Period. I’m keenly aware that some approaches work in multiple market conditions—even in all conditions to some degree—but genuinely can’t-lose strategies don’t exist over any sustained period.
- Anyone who promises true certainty is misguided at best. They may genuinely think they offer certainty, but thinking it doesn’t make it so. Whether foolish or predatory, they cannot offer that which cannot exist.
- It’s OK. It doesn’t mean you’re ignorant and in need of hand-holding. You know who else isn’t certain about strategies and returns? All the rest of us who aren’t named Bernie Madoff.
Pursue diligence over alpha
Eye-popping returns are a great way to make money. They’re also unlikely to happen.
It’s critical to avoid situations where compounding has worked against you for so long that only a lucky break can save the day.
The solution is simple, perhaps disappointingly so.
Focus your energy on earning and invest cash each month, then let it compound at market-average rates while you keep on earning.
Why is that?
I emphasize early and consistent saving and investing not just because it makes life easier—which it clearly does—but because it helps avoid desperation for “one weird trick” to make up for lost time. Desperation has a way of displacing common sense.
I’m not saying you can’t do better than throwing everything in a broad-based index fund.
I am saying that’s a smart move if it frees up time for more productive pursuits.
Keep it simple to help you sleep
There are no guarantees, but I’d argue that three pieces of common sense can push the odds of above-average returns in your favor—no elaborate seminars or fancy software required.
- Avoid assets you don’t fully understand. Hype is contagious, but the best antidote is the self-awareness to say “I’m out of my depth here.” Other opportunities will come, and you’ll sleep better when they do.
- Keep showing up. The market has a way of rewarding those who buy in early and often. Growth often happens in spurts, and upward trends can run for years before the inevitable crash comes (and goes).
- Don’t neglect the power of dividends. You probably won’t snag any “ten-baggers,” but it’s hard to go wrong with companies that have printed cash every quarter for decades on end. After all, a bird in the hand…
The secret is there isn’t one
I’ve run the numbers on the opportunity cost of my folks’ investing “education” and they’re not pretty.
But the idea of foolproof secret knowledge is so tantalizing that some folks simply can’t let it go. It’s too easy to shut off our otherwise intelligent, rational brains the moment we think someone can show us the glitch in the matrix.
The good news?
Experience remains the greatest teacher. It disabuses us of those gnostic fantasies, and continually shows that diligence and common sense are the only viable responses to uncertainty.
And if you’re thinking that sounds like life advice disguised as investing strategy…you’re absolutely right.
