- Random Words: The Investing Unscripted Newsletter
- Posts
- A Framework for Stuff on the Internet, and Personal Finance Meets Scuba Diving
A Framework for Stuff on the Internet, and Personal Finance Meets Scuba Diving
Why Jason Being a Better Stock Picker Doesn’t Matter
![](https://media.beehiiv.com/cdn-cgi/image/fit=scale-down,format=auto,onerror=redirect,quality=80/uploads/asset/file/6f4bd52f-8798-4a3c-809d-4e9436bf5447/Random_Words_Thumbnail.png?t=1687526065)
Jeff’s Random Words
I hope everyone enjoyed yesterday’s podcast episode with Brian Feroldi. If you’re not already following Brian on Twitter, I would encourage you to do that. Having Brian on the pod got me thinking about financial information that’s available on the internet. It’s actually one of the things we talked about on the podcast. We discussed whether the age of the internet and social media has been a net positive or a net negative for individual investors. We all agreed that on balance it’s been a positive, but that there are downsides as well.
But I have a few more thoughts about that. First of all, utilizing free resources is fantastic. There’s likely a free article or write-up on just about any company you might be interested in. You may even be interested in this recent video on Lemonade (NYSE:LMND) featuring a very smart analyst and Jason. But I can tell you there is almost no barrier to entry for a video like this. Literally, anyone can start posting written, audio, or video content on investing and there’s no real way to know if it’s coming from any kind of informed source. That’s not always fantastic.
So what should we all do?
The same thing we need to do when consuming any information, be a skeptical optimist. Read that article or watch that video on your favorite stock, but think of it as a data point and not an instruction manual. Be a contrarian, question everything, ask more people, read more articles, watch more videos. If you watched that video on Lemonade I referenced above and liked it, try to find more content that offers a different point of view or analysis. It takes more work, but it will prevent making a bad decision based on an uninformed (or worse) source of information. Here are some quick frameworks I live by when consuming things on the internet (free OR paid):
If the author sounds certain, I am cautious
If the author is presenting both sides of the case, that’s likely a good signal
If it’s too good to be true, it is
If it’s being presented as a guarantee, it’s not
Look for humility because investing is humbling
If Jason said it, do the opposite
This isn’t an exhaustive list, but it’s a good start. These are also things you probably already know. The bottom line is that being a discerning consumer of information is a life skill whether you’re talking about investing or anything else.
Jeff
Jason’s Random Words
Jeff may be one of the most cynical people I have ever met. If you come to our in-person event in Alexandria, VA on August 18, Money Collaborative 2023, you can find out for yourself! He's amazing at hiding it on the podcast. I bet you can bait him into showing his true colors. I'll help!
Seriously, I do hope many of you can attend. It will be a lot of fun. Jeff isn't a cynic, and his words about skeptical optimism, especially with investing and personal finance content online and on social media, is spot-on. I particularly agree with his point about finding contrarian points of view. Nonetheless, I'm a much better stock picker than he is.
Despite that, I have thought a lot about Brian Feroldi's point on this week's podcast about the relative importance of picking stocks – or maybe the over-emphasis we put on it – in our personal financial lives.
Specifically, Brian was talking about his "financial order of operations," a list of 16 priorities for his financial life. The ways most of us buy individual stocks – Roth/IRAs, taxable brokerage accounts – are #9 and #14 on his list! Things that are ahead of it in the priority list include emergency savings, maxing out company match in retirement savings, optimizing insurance, just to name a few.
Before parenthood, I was an avid scuba diver. I have several hundred dives in my log, and was certified as a divemaster. During my training, which included some first responder and rescue diver training, there was one thing that was constantly stressed. In emergency situations, you have to be able to save yourself first. If there's one thing worse than a diver at risk or in need of a rescue, it's two. In an underwater crisis, nobody needs heroes. They need people who are well-trained and prepared to handle the crisis safely, and not make the situation worse.
And as we saw in 2022, stock picking is an inexact science, and even great companies lose value sometimes. Being too exposed to stocks and not taking care of the other priorities in your financial life is like a diver spending excessive money on the latest dive computer but not maintaining their regulators or carrying the proper amount of dive weights. Or worse, diving without enough air in their tanks.
In other words, they're one unexpected event away from a potential crisis under water.
What about you, on dry land? Are you really prepared for the bad times? I really hope you are ready to profit from my superior (to Jeff) stock-picking wisdom, but not if it means you're at risk from life's unexpected changes. Whether it's a bear market, a recession, a job loss, illness, divorce, or a car accident, shit happens. And it happens on its own schedule. Make sure you're prepared for the bad times, too.
Jason
Reply