“A penny saved is a penny earned.”
“Money doesn’t grow on trees.”
“You can’t take it with you.”
These money clichés have been passed down for generations. They stick because they capture timeless wisdom in a few words (even if pennies are no longer minted!).
But not every cliché is helpful. Some can mislead. This month, we highlight 10 Unhelpful Investing Clichés...and offer “new and improved” versions of our own.
1. “Be Fearful When Others Are Greedy, and Greedy When Others are Fearful”
OK, we admit it: We’re being provocative by choosing this one! Warren Buffett’s famous line has helped countless investors and may be the best investing cliché of all.
But truth be told: we’ve never told a client to be greedy or fearful. Emotions shouldn’t drive investment decisions.
Of course, Buffett didn’t mean it literally, but rather as a reminder to avoid following the crowd.
In this case, we won’t try to improve on Buffett. He’s the master!
2. “The Four Most Dangerous Words in Investing: It’s Different This Time”
In fact, it’s the opposite. The world changes. Expecting history to replay exactly can be more dangerous than ignoring it.
A better cliché: The Five Most Dangerous Words in Investing: It’s NOT Different This Time
3. “Buy Low, Sell High”
This cliché assumes the market is a like a thermometer that moves up and down. But the stock market doesn’t have a fixed upper limit. It’s more like a tree that has the potential to grow continually. Selling just because the market is up can be mistake.
A better cliché: Buy Low, Hold Tight
4. “The Market Hates Uncertainty”
When is the future ever certain? Never. Uncertainty is constant. Sitting on the sidelines waiting for “certainty” often means missing the rebound. Markets fall not because of uncertainty, but because of a lack of confidence.
A better cliché: Uncertainty Creates Opportunity
5. “Don’t Fight the Fed”
The Federal Reserve matters, but it isn’t the only force driving markets. Corporate earnings often matter much more. We’ve seen investors focus too much on the Fed, and stay out of bull markets for fear of rising rates, likely missing out on more gains than the actual downturn would have cost them!
A better cliché: Don’t Bet Against Corporate America
6. “Don’t Put All Your Eggs in One Basket”
Diversifying your investments is good advice. But some investors diversify too much by hiring multiple advisors. That can create confusion, redundancy, and undermines the very goal of good financial planning: simplifying your life. Multiple baskets aren't necessarily better.
A better cliché: Too Many Baskets Creates Clutter
7. “Cash Is Trash”
This cliché is less common now that interest rates are higher. But even when cash earns little, it still plays a role in a portfolio as part of a “bucket” approach alongside stocks and bonds. It lets you cover expenses without selling investments in a downturn. It can also help you sleep at night, which is sometimes the most valuable return of all.
A better cliché: A Cash Cushion Makes a Soft Pillow
8. “Never Catch a Falling Knife”
This can be good advice for individual stocks in free fall…they sometimes go to zero! But when the entire market is panicking, history shows that’s often the best time for long-term investors to buy.
A better cliché: Catch a Falling Star and Put it in Your Portfolio
9. Don’t Let the Tax Tail Wag the Dog
This cliché is generally true: don’t hold on to bad investments just to avoid taxes. But tax laws now play a bigger role in financial decisions, from timing big purchases to managing income around phase-out thresholds. Sometimes, tax considerations should shape investment strategy.
A better cliché: Smart Dogs Know When to Follow their Tail
10. “Fortune Favors the Bold”
It sometimes does, as when an investor buys low. More often, however, bold market predictions backfire. A better approach: avoid making big bets and simply let the markets do their thing.
A better cliché: Fortune Favors the Patient
Thanks for reading this month’s Top of Mind! Our hope: the next time you hear a tired piece of investment “wisdom,” you’ll smile and say: That’s so cliché!...and then make the decision that’s right for you.
We’ll write again next month. Until then, we hope you have a wonderful rest of your summer.
Warm regards,
Kurt, Cassidy, Ken, Teresa, Brian, and Jacque