I've heard it said that you just can't fix stupid, and while I certainly agree with that assessment, it still blows my mind how highly intelligent people can still say the dumbest things when it comes to the stock market. It's true; even people with above average IQ's and a PhD have still said the following items on the list below. While I highly doubt any of MY readers would say any of the following statements, you will now have intelligent comebacks in case someone else makes silly remarks when it comes to investing. Go show them how it's done!
1. "I made ($X,000) in the stock market today."
My follow-up question of course is, did you sell the stock(s)? Nine times out of ten they didn't sell that day and just let the market close out the day on a positive note. In other words, they didn't make any money at all. You could be ahead in a poker game or in roulette, but until you cash out, you didn't really win anything. This is a classic example of counting your chickens before they hatch. What they should say INSTEAD: "A stock(s) in my portfolio gained $X,000 today, but I have reason to believe that it's headed higher in the long term so I decided to hold".
2. "Of course my portfolio is diversified; I own mutual funds that track the major indexes."
You can diversify WITH mutual funds that track the major indexes, but on their own, they only represent one kind of security. One typically uses index funds as a way to put extra cash to work in a portfolio while you wait to buy something else. The returns are meant to be relatively stable over time, however the returns are never really anything impressive. What they should say INSTEAD: "I diversified my portfolio with some index mutual funds but I know I shouldn't stop there. Instead I'm looking to buy a few stocks in each sector to ensure that I'm really diversified".
3. "I have a new broker who guarantees that I'll beat the market!"
A) A broker is never necessary to do well in the stock market, and B) if you have a broker who guarantees ANYTHING, you may want to reconsider hiring that broker. And if it is true that your broker is 100% right 100% of the time, you may want to place a call to the SEC (that's the Securities and Exchange Commission). What they should say INSTEAD: I have a new broker who comes highly recommended because they help their clients to outperform their designated benchmarks on an annual basis. BONUS: Even SMARTER thing to say: "I've been reading GradMoney every day to learn how to invest stocks properly for my own goals and needs!"
4. "The stock market is TERRIBLE right now, I would NOT buy anything."
The old adage of 'buy low, sell high' is not a joke - it's precisely what you should be doing. While the stock market sinks to 52-week lows, it will not be in free fall forever. Buying at the bottom will set up your retirement and investing on the right path much sooner than if you're already riding stocks higher at the top. What they should say INSTEAD: The market is now at new lows and I've created a buy list to execute once the market looks like its leveling out.
5. "I just bought stock in a new company because it’s a SURE THING."
The only two sure things in life are, in the immortal words of Benjamin Franklin, death and taxes. That's it. If someone told you that a stock is a "sure thing" I would greatly question the source. If was your broker, I would see the statement above. If it were a friend or family member, I would highly question their source. What they should say INSTEAD: I have done lots of research, analysis, and due diligence on this new company and all evidence leads me to believe that the stock will perform well over the next year.
Greetings, GradMoney Readers!
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