Over three decades as a trader, strategist, and asset manager, I have been sharing my thoughts about markets in public and in real time. I wanted to organize those ideas and experiences into something especially useful for other investors.
Finding a useful structure was the first task: Between The Washington Post, Bloomberg, and TheStreet.com, I have written nearly 1,000 columns on money and investing. Add in 43,158 posts published at The Big Picture as of December 31, 2024, and that useful structure proved elusive.
After my last vacation, I was sifting through all these columns and blog posts, and a pattern emerged: I’ll be damned if every other piece wasn’t debunking some piece of investment bullshit3 or another. Since the 1990s, dissecting behavioral errors and revealing money myths has been the heart of my work. If only investors could ignore the doomsayers, forget the predictions, steer clear of Wall Street, lose unreliable sources of information, and skip listening to their brother-in-law’s stock tips, they would all be better off.
My list of investing “Nos” went on and on: Avoid pricey products, steer clear of most SPACs and IPOs, understand your portfolio (why do you own commodities?), be skeptical of active managers. You can’t even trust your own brain—it wasn’t built for this, and more often than not, it will fool you into making mistakes that will lose you money.
As I plowed through the list of DON’TS, the structure of the book revealed itself: How Not To Invest. A simple guide to avoiding the myths, mistakes, and errors investors make all the time.
Despite how much we have learned over the past century about capital markets and risk, about human nature and our behavior, too many people still do quite poorly when it comes to investing.
The short reason is simply too many mistakes.
The facts are unassailable: It’s not that most investors aren’t great, it’s that they make too many avoidable errors. In baseball, a low batting average is not caused by the lack of home runs, but rather, by too many pop-ups, groundouts, and strikeouts. Or, back to Charlie Munger, not smarter, but less stupid.
That is the subtle but crucial secret to your success as an investor. As I have watched my own investing improve over the decades, I attribute that success to being less stupid rather than to becoming smarter.
More than a few people warned me, “Don’t use a negative statement in a book title!” I hope to make up for that faux pas by filling this book with lots of good advice as to what you can do to avoid these problems. For each of the lists of what not to do, there are just as many suggestions of what TO DO. You will find these lists useful.
I divided the book into four parts: Bad Ideas, Bad Numbers, Bad Behavior, and Good Advice. Each of those Bad sections is subdivided into three subsections. Bad Ideas looks at money-losing advice, the media through which it spreads, and the sophistry used to deceive us. Bad Numbers explains how our discomfort with numbers, statistics, and probability creates a poor understanding of how stocks, markets, and the economy operate in real life. Bad Behavior? That is where those bad numbers and ideas show up—in how we think about and act around money.
As we progress through each, we move from problems to solutions, from negatives to positives. Pointing out the mistakes we make is easy—but of the most value to you as an investor are the ways you can avoid making these expensive errors.
The last section, Good Advice, offers a summation designed to help you minimize these mistakes, including specific strategies. The goal is to put what you learn in a usable set of solutions. It will be a great improvement to your personal finances and investment success.
Follow the lessons from all four parts of the book, then send me a thank you from your new higher tax bracket and/or your happy retirement.
3 I originally pitched the idea of calling this book Debunking Investment Bullshit, but my proper British editors would tolerate none of that American coarseness.