Just Stop! On "Beating" and "Timing" the Market (E96)

Talking solo, Jesse tackles two important, ever-present investing questions in today's monologue.

Should I try to time the market?

How do I beat the market?

The truth is, the timeless advice stands: diversify your portfolio, steer clear of speculation, and invest early and often. Diversifying is like buying the haystack, rather than looking for the needle, because, the truth is, you probably won't find the needle. Speculative stock-picking is like picking out some straw and hoping it'll turn out to be the needle. To illustrate the benefits of consistent investing - rather than attempted market timing - Jesse tells the tale of Bad Timing Bill, Normal Nick, and Good Timing Gary. Bill and Gary both tried to time the market. This episode is packed with insight you'll want to return to again and again.

Key Takeaways:
• Don't look for the needle in the haystack. Buy the haystack. Most stock pickers stumble into success.
• There's no such thing as skilled stock picking because we can never know the entire market.
• Just because a business is massive and visible, doesn't mean it will forever make good decisions.
• How to sort out a fair price for something. A good burger isn't worth 100 dollars!
• What are CAPE and PE ratios?
• The story of Bill, Nick, and Gary: Why you shouldn't try to time the market. 

Key Timestamps:
(00:00) The Best Interest Year in Review
(08:02) The Evergreen Question: Is Now the Right Time to Invest?
(11:58) The Case for Index Investing
(25:16) Understanding Market Efficiency
(29:13) The Starbucks Dilemma: Diversification vs. Concentration
(32:01) The Importance of Price
(32:39) Warren Buffett's Wisdom on Fair Prices
(33:37) The Risks of Overconcentration in a Single Stock
(34:14) Diversification and Risk Management
(35:36) The Concept of Timing the Market
(36:08) The CAPE Ratio Explained
(46:39) Dollar Cost Averaging vs. Lump Sum Investing
(51:27) The Complexity of Market Movements

Key Topics Discussed:
The Best Interest, Jesse Cramer, Rochester New York, financial planner, financial advisor, wealth management, retirement planning, tax planning, personal finance, stock picking, speculation, index funds, mutual funds, stock market, DIY investing

Mentions:
Wealth Creation in the U.S. Public Stock Markets 1926 to 2019 by Hendrik Bessembinder https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3537838 

The Needle in the Haystack:  https://bestinterest.blog/the-needle-in-the-haystack/

Yes, You Can Beat the Market, But...:  https://bestinterest.blog/yes-you-can-beat-the-market/

Good Company, Bad Stock:  https://bestinterest.blog/good-company-bad-stock/

The CAPE Ratio vs. Future Returns: https://bestinterest.blog/cape-vs-future-returns/

More of The Best Interest:
Check out the Best Interest Blog at bestinterest.blog
Contact me at [email protected]

The Best Interest Podcast is a personal podcast meant for educational and entertainment. It should not be taken as financial advice, and is not prescriptive of your financial situation.