Seek, and You Shall Find… Conflicting Investment Advice

The run of this current Raging Bull of a stock market has been exceptionally long: eight-plus years. (The average bull market has lasted four years, nine months.) In response there has been great conjecture by investment firms, financial advisers, brokers, and market pundits in Pittsburgh about how much longer the market may rage.

These opinions have tended to be as sharply divided as the Republicans and Democrats in Congress. Some local investment professionals think the market will continue its bullish stampede as long as the U.S. economy and corporate earnings continue to grow at least modestly. Others think the market is richly valued by historical standards and will collapse in exhaustion.

Of course no one knows how the market will perform over the coming weeks, months, or years. All that can be safely said is that stocks in aggregate have been the best-performing investment in the long run, rising about 10% annually on average since 1928, albeit with sharp fluctuations along the way. And absent an Armageddon-caliber political or financial catastrophe, stocks are likely to remain the best investment over time.

At any rate, it’s not the first time that investment professionals have had conflicting views about the market. Over the years the investment world has constructed a Great Pyramid of advice that passes for investment wisdom. The sheer massiveness of this pyramid is such that much of the advice is contradictory—and consequently is perhaps more ironically humorous than useful.

Here’s a sampling of conflicting investment advice offered over the years that, if nothing else, may lighten the hearts of investors who are now fretful about the market’s future course:

Advice: Bulls make money, bears make money, but pigs get slaughtered.

Contradictory advice: Cut your losses, but let your profits run.

Advice: The trend is your friend.

Contradictory advice: Never follow the crowd.

Advice: Whatever you do, don’t sell IBM (or—choose one, depending on the time frame—Microsoft, Polaroid, General Motors, Xerox, Intel, Apple, Facebook, Netflix, Alphabet or Amazon.com).

Contradictory advice: No stock investment is forever.

Advice: Buy low, sell high.

Contradictory advice: No price is too high for a great stock.

Advice: Your first loss is your best loss.

Contradictory advice: Get out when you get even.

Advice: Don’t chase a bad stock with good money.

Contradictory advice: It’s not a loss; it’s a buying opportunity. Buy on the dips.

Advice: Investing is a loser’s game; avoiding big losses is the key.

Contradictory advice: Investing is a winner’s game; picking stocks that can go through the roof is the key.

Advice: Diversify—there’s safety in numbers.

Contradictory advice: Put all your eggs in one basket, and watch that basket.

Advice: If market returns are abnormally high or low, they won’t be sustained.

Contradictory advice: This time (fill in the current market extremity) is different.

Perhaps the best thing to do is tune out any such advice/contradictory advice and stay invested in stocks, no matter whether you believe the market is headed up or down. Admittedly, this, as with many practices in everyday life, is easy to say but harder to do. But by staying invested in stocks, you can fully capitalize on the market’s general rise over time; the value of the S&P 500 Index of stocks, according to the Morningstar research firm, soared from 17.72 in January 1928 to 1,320.28 in December 2000, a 73-fold gain.

Alas, instead of staying invested in stocks, many investors try to “time” the market (to get out of stocks when they think the market has peaked and to invest in stocks again when they think the market has bottomed). Numerous studies have shown that timing the market is exceedingly difficult to do, comparable to going an entire day in Pittsburgh without reading, watching, or hearing something in the media about the Steelers.

Market timing is so hard to do because you have to make two clairvoyant decisions: when to get out of the market and when to get back in. And unfortunately the market never has the common courtesy to bang a gong or shoot up a flare to signal when it reaches a peak or a trough. As a result successful market timers have been far, far more rare than other atypical groups such as successful restaurant entrepreneurs.

Successful investing in stocks has more to do with temperament, with emotional stability and objectivity, than it does with well-meaning advice or market timing. So if you simply must have your own personal pyramid of an investing principle to help keep your bearings, perhaps you should embrace Rudyard Kipling’s sentiment in his celebrated poem “If”: keep your head when all about you are losing theirs.