Every market call is wrong

Assuming everyone is wrong will save your portfolio

Part of avoiding speculation is to assume that all investment tips are wrong.

The worst thing you can do is buy or sell something because of a sound bite you heard on CNBC or read online. In investing, it’s a recipe for disaster. Because even if the call works out for the person you heard it from, it might not work out at all for you.

First of all, you can’t trust anything that you hear. Fund Manager A might be on CNBC touting a stock position. But let’s be clear about something—Fund Manager A doesn’t give a crap about your portfolio. You might think that Fund Manager A doesn’t want to look like a fool on national TV, and so she’s surely going to offer up one of her best ideas, right? Wrong. Fund Manager A cares about one thing and one thing only: making money for her investors, and therefore for herself. And if she’s on CNBC touting a stock, there’s a better than 50/50 chance that while you are rushing to your broker to buy shares, she’s the one selling them to you.

Think that’s unfair? So sorry. This is the way the game is played. It’s vicious.

The market is dynamic—new facts arise daily, and investors change their minds as new evidence appears. And they won’t go back on TV to tell you. There’s a good chance that Fund Manager B no longer owns the hot stock he was pumping a few months ago, which is now down over 50 percent. But you’re still in it, because you bought it on a whim and don’t want to take the loss. He is under no obligation to go back on TV to tell you that he sold, and even if he did, you might have been watching a Seinfeld rerun that day and missed it.

For safety and sanity’s sake, just assume that every investment tip you receive is wrong.