Should Investors Only Care About Total Return? | Ep. 22
Audio Brief
Show transcript
This episode explores the critical role of emotional discipline and a personalized investment strategy, especially during periods of market highs.
Listeners will find four key takeaways: first, the necessity of maintaining emotional discipline and a long-term mindset; second, the importance of developing a personal investor playbook; third, the significant danger of adopting "stolen conviction" from others; and fourth, a cautious approach to new, complex financial products.
Maintaining emotional discipline means avoiding overreaction to market highs and lows. A long-term mindset ensures focus on strategic goals rather than short-term volatility.
Developing a personal investor playbook is essential for defining individual goals, risk tolerance, and strategy. This framework prevents impulsive decisions driven by market hype.
The danger of "stolen conviction" highlights the risks of blindly copying others' investment strategies. Without personal due diligence, investors lack resolve during volatility, especially when social media popularity is mistaken for genuine expertise.
Investors should critically evaluate new, complex high-yield ETFs, which may not suit long-term buy-and-hold strategies. These products often differ significantly from time-tested, stable funds like SCHD.
By embracing these principles, investors can build a more resilient and personally aligned financial future.
Episode Overview
- The episode features dividend investor Craig Sutton and emphasizes the importance of maintaining emotional discipline and a long-term mindset, especially during market all-time highs.
- A central theme is the necessity of creating a personal "investor playbook" that aligns with one's own goals and risk tolerance.
- The discussion warns against the dangers of "stealing conviction" by blindly copying social media influencers without conducting personal due diligence.
- The conversation contrasts traditional, stable investments like SCHD with riskier growth stocks and new, complex high-yield ETFs, questioning their suitability for long-term investors.
Key Concepts
- Emotional Discipline & Long-Term Mindset: Maintain a level-headed approach to investing, avoiding overreaction to short-term market highs and lows while focusing on a long-term strategy.
- Personal Investor Playbook: The necessity of defining personal goals, risk tolerance, and strategy before investing, rather than acting impulsively based on hype.
- The Danger of "Stolen Conviction": A core theme warning against blindly copying others' investment strategies, as this leads to a lack of resolve during market volatility and leaves one vulnerable when others sell.
- The Illusion of Expertise: The flawed perception on social media where high follower counts are often mistaken for credible, expert financial advice.
- Due Diligence is Non-Negotiable: The importance of conducting your own research on any investment, whether it's a company or an ETF, to build genuine personal conviction.
- Growth vs. Stability: The debate between choosing volatile growth assets and stable, income-producing funds like SCHD, which can provide psychological benefits by reducing the urge to panic-sell.
- Traditional vs. New Financial Products: A critical look at new, complex high-yield ETFs, questioning their sustainability and suitability for long-term, buy-and-hold investors compared to time-tested funds.
Quotes
- At 2:55 - "You can't get too high and you can't get too low when it comes to this investing." - Craig Sutton shares his investment philosophy, stressing the need to remain emotionally level-headed and avoid reacting to short-term market fluctuations.
- At 21:26 - "What's your investor playbook?" - The speaker uses a sports analogy to stress the importance of having a pre-defined investment strategy rather than investing impulsively.
- At 24:57 - "You can't steal somebody else's conviction because you have no idea what happens in the next 24 hours of their life." - A powerful statement highlighting the risk of following others' investment moves, as you will never have the same information or context for their decisions to buy or sell.
- At 49:01 - "A certain subscriber count or follower count is misconstrued as... expert status." - Ryan points out the flawed perception on social media where popularity is often mistaken for credible expertise.
- At 58:50 - "They are not your buy-and-hold ETFs." - Ari distinguishes newer, complex high-yield funds from traditional ETFs, noting they are often built for trading and have different objectives than what long-term investors might assume.
Takeaways
- Develop a personal "investor playbook" by defining your goals and risk tolerance before you invest, ensuring your strategy is your own.
- Never "steal conviction" from others; build your own through personal research and due diligence to withstand market volatility.
- Critically evaluate financial advice on social media, as popularity and follower counts are not substitutes for genuine expertise.
- Maintain emotional discipline by focusing on your long-term plan rather than reacting to short-term market fluctuations.
