On Giving Stock Advice
Dec 5th, 2008 by Nut
Every now and then I catch myself talking about the stock market to family and friends and the first thing that comes to mind are those little disclaimers you see on almost every personal-finance blog out there:
The above content is an expression of my opinion only, and should not be substituted for legal or professional advice. (taken from FrugalDad.com)
Usually I’ll throw in a lot of “I think” and “In my opinion” because I want to be perfectly clear that it’s my opinion and I’m not telling anyone what they should or shouldn’t be doing. I’m not an expert, I’m just a guy with a blog that has ducks at the top of it who has read and thought about this stuff quite a bit, and so I’m probably more knowledgeable that your average guy off the street. By the way, it doesn’t take much to know more than your “average guy.” Which is unfortunate, but not really the point of this post.
Anyway, here is the gist of what I’ve been saying when people ask me what I think:
- The Market has done this before and will do it again: History is of great comfort to me. Knowing about the tulip craze in 1637 and all the things that have happened since puts today into some much-needed perspective. Instead of coming as a shock and a surprise, it’s just business as usual. Does that mean I’m immune to the loss of capital? I wish—I’ve lost money just like everyone else.
- This is a great opportunity: Stocks are cheaper and people are afraid. The big money has sold a lot of their stocks due to margin calls and their need to show quarterly results. When the big boys pull out of the market, it sinks. When they pour back in—which will happen eventually—stocks will rise. This isn’t a theory, it’s just the way Wall Street works.
- Think long term: Refer to the last chart from this post. There’s a stat out there that goes something like this: over a 20-year period, stocks have never lost money. Ever. Not sure if I got that right, but the gist is that a basket of stocks (like an index fund) held for the long term will make you money.
I am not a stock-market pro. I am no expert. I am just a person who has read a lot about stocks and has come to a sensible conclusion about them: The most reliable way to make money is to invest in a diversified basket of stocks that are held over the long term. People may ask me “but what about this or that,” and I just say: “This isn’t a get-rich-quick scheme, this is just the most sensible conclusion I (and many other people) have come to. Take it or leave it.”
P.S. As I re-read this post I realize that one thing I did not get across is the difference between writing my opinions on this site and actually talking to someone face to face and expressing those same opinions. In person my words seem to have more gravity and carry more weight.
Religion and Stocks: What do you believe in?…
There are two schools of thought here: are the markets efficient and therefore un-exploitable or can you pay 50 cents on the dollar for some companies?…
Ha–thanks for including my disclaimer! I’ve often wondered if I should make that more prominent because people tend to believe anything and everything they read online, and follow the advice blindly. I am about as far from an “expert” as you can get, but I don’t mind sharing my “regular guy” opinions from time to time.
On Giving Stock Advice…
Giving stock advice feels pretty weird when all you are is a “PF Blogger,” but there is still some good info you can pass along….
Hey! Is that my photo? Not really complaining — just asking. Sure looks like one of mine. And I certainly know where it was taken, if it’s not.
Hey JD, I’m not sure if it’s yours or not. I got it cached from Google I believe. I tried going to the original site it was found on, this one. But it looks like the blog no longer exists (or isn’t working), so I was like, “This picture is too good to pass up.” But if it’s one of yours, for sure I’ll take it down or at least put in an attribution.