💐 The investing advice you actually need

Hey hey, happy Monday!

Today, a 6-minute takedown of Wall Street’s classic investing advice, and why our industry (and your investing approach) doesn’t have to be strictly practical.

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I read a piece from Morgan Housel a few days ago on “magazine architects”, or those who design buildings that prioritize beauty at the sake of functionality.

In Morgan’s words:

Who among us hasn’t admired an intricate, antique chair at our grandma’s house that everyone is too scared to sit in? Or spent our life savings on a gorgeous bathroom remodel, only to realize our open, white granite-tiled shower would take hours to clean?

It doesn’t matter if you’re talking about chairs, roofs, cars, or your fancy crystal china—sometimes the most beautiful items aren’t the most practical. Often, what you get in intricacy you pay for in functionality.

I am neither an architect nor an interior designer, but I can’t stop thinking about Morgan’s point in this manic moment for my personal Mona Lisa – the stock market.

When people ask for financial advice, they often want to know what to buy and sell. They want the golden ticket stock that’s about to rocket higher, or the complex trading strategy that promises a lofty gain with little loss. A beautiful, shiny object that draws vulnerable eyes in.

Plenty of so-called experts are willing to play that game. Get on TikTok and you’ll see swarms of snake oil finfluencers hawking memecoins, options trading courses and hollow single-stock targets. 

Obviously, this isn’t the way to go. Any self-respecting financial professional will tell you this. I said as much in this post from a few months ago. Building wealth requires small, consistent victories from taking healthy amounts of risk. That beautiful shortcut isn’t as easy or glamorous as it seems.

Stay the course, Wall Street says. It’s that easy.

This statement is technically correct. C’mon, how could you argue with these numbers?

But that’s not the advice you need either.

Sure, you can live in a drab apartment with sanitized white walls if it has a ceiling, bathroom, kitchen, a bed and running water. But you’re not actually going to do that, are you?

Morgan’s conclusion was that too many people gravitate towards beauty in their financial plans when they really need practicality.

I used to be a disciple of strict practicality. The solid brick houses with sturdy hardwood floors, the 'stay invested, set-it-and-forget-it' crowd.

I’ve changed my mind on this, though, and I’m probably going to tick a few people with what I’m about to say.

Practical advice is a good foundation, but everybody needs a bit of beauty.

Especially in moments of panic, like the one we find ourselves in today.

I’ve always believed Wall Street relies too much on one-liners and snappy, cherry-picked statistics. I get it: you can’t be too prescriptive with financial advice unless you know the ins and outs of a financial situation, so you stay vague and inspirational. Very live, laugh, love.

But we’re talking about investing for years—and often decades—through different conditions and circumstances. The good, the bad, and the ugly. 

This can’t just be a strategy that you gag down every morning like a horse-sized pill with a few gulps of water. It has to be realistic. And 'staying invested' simply isn’t realistic anymore.

Why do I say that? Because markets move faster than ever. Take the current selloff: From February 19 to March 13, the S&P 500 dropped 10% in unusually dramatic fashion. Over that period, the index moved 1% or more in 56% of days, making this the third most-turbulent correction since 1950.

This isn’t a Trump-fueled anomaly either. Markets have been swinging violently since the 1990s.

Also, the world is louder than ever. Social media is a collection of algorithm-curated worlds designed to evoke emotion (and that addicting dopamine hit). It’s never been easier to make a mistake, and that’s why pretending you won’t make one is foolish.

Ritholtz has helped shape my thinking on this. I’ve had countless conversations with our 30-odd advisors over the past 10 months about how to best guide clients through market drops and recessions. Everybody has their own style, but more often than not, I hear my colleagues discuss short-term portfolio changes when prices start swinging. The opposite of what you’d hear from the “stay invested” crowd.

I’m not talking about major, sweeping decisions. Instead, think thoughtful, precise actions at the margins of the portfolio to help their clients stay the course. Actions like pulling forward a scheduled investment if a selloff reaches a certain level. Raising cash at certain price levels before the storm hits. Converting an IRA to a Roth under certain circumstances – like a drop, plus enough runway in the investment plan to make up for the tax bill.

We even have a tactical portfolio at Ritholtz, aptly named Goaltender, that adjusts stock allocations based on where certain indexes are trading relative to moving averages. My colleague Josh Brown wrote a great explainer about Goaltender here. In short, it’s our clients’ “emotional release valve” in times of extreme stress.

And lest you think I’m a hypocrite, I want you to know that I put my money where my mouth is. Over the past several years, I’ve religiously invested twice a month, but I’ve broken the cycle by adding extra cash during every S&P 500 drop of 10% or more. 

Why is 10% my line? Because historically, a 10% drop has been an unusually large move in the stock market, yet it rarely signals that a recession is underway.

I also maintain portfolio targets for every asset I hold – stocks, bonds, crypto and cash – and I’ll often buy or sell if a certain investment moves quickly in either direction. Over the past year, I’ve sold big chunks of my crypto investments because prices have rocketed higher so quickly.

I stay invested, with active moves here and there when the numbers make sense.

What can I say? I’m type A+++ and I like to feel a sense of control in chaotic times.

Target and threshold-based moves may make you nervous. But that’s why this is my perfect mix of beauty and practicality.

It works for me. That’s what matters.

If you’re in a particularly miserable part of your investing journey, remember how much agency you have. Create a process that works for you and stick to it. It doesn’t have to be perfect, it just has to be repeatable.

There’s a mile-wide gap between beauty and practicality.

Your portfolio’s sweet spot is probably somewhere in the middle.

Thanks for reading!

Callie

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