A Tale of Two Moscow Mules: Donald Trump Jr & The Average Stock Picker

Individual stock pickers – STOP IT!

This is what we think we are going to look like when we pick individual stocks…


This is what we actually look like when we pick individual stocks…


CNBC reports that actively managed funds underperform passive funds 87 percent of the time on a five year timeline ending in 2015, and 82 percent of the time on a ten year timeline.  – Investmentzen


There are 2 major mistakes that we see the average stock picker make on a regular basis.

1. Fundamental Misjudgments of the Stock Market

A good friend of mine threw $6,000 into lululemon stock (LULU) the day before their Q1 earnings call earlier this year. He had a small position in lulu prior to this, but he happened to have one of those feelings about the call… you know that feeling.


Yeah, that one. That giddy feeling when you know something that nobody else knows. He was about to make a killing.

Well, that was until the earnings report came out and lulu’s stock dropped from $66 per share to $50 per share over night.

There went $1,500 bones he’ll never see again.

Fundamentally misjudging the next market move is almost guaranteed. Portfolio managers spend hundreds of thousands of dollars a year on analytical tools that STILL end up yielding poor decisions. You want to invest your money, not gamble with it. 

2. Emotional Misjudgments of the Stock Market

Earlier this morning, some not so pleasant news broke about Donald Trump Jr and his relationship with certain Russian trouble makers. It seems as though our boy Donny Jr has been quite the Moscow mule – or so it would seem.

Punny right?

An excerpt from this New York Times article explains that…

The documents “would incriminate Hillary and her dealings with Russia and would be very useful to your father,” read the email, written by a trusted intermediary, who added, “This is obviously very high level and sensitive information but is part of Russia and its government’s support for Mr. Trump.”

Take a look at how the S&P 500 reacted to this news story.

Screen Shot 2017-07-11 at 2.03.01 PM

See that sharp dip around 11:30am? There is zero fundamental reason for that dip! And here’s the funny part. Look at where the index is at as of 2:00pm… right back where it started.

The dip occurred as a result of the emotional response to the Donny T. Jr news. Nothing more, nothing less. 3 hours later, the market has already forgotten about the news.

If you’re looking for rationality in the stock market, you’re wasting your time… literally.

So individual stock pickers – STOP IT!

You can’t control the media, and you certainly can’t control the emotions of fellow investors. In addition, if professional stock pickers are losing money at this game, you probably will too. Sure, you may get lucky every now and again – but in the aggregate, you will lose.


Make sure to subscribe to The Cincinnati Financial Planner blog! If you’re looking for some help, or want someone to confirm that you’re 100% on the right track, then check us out at TruWealth Planning and schedule a free intro consultation.

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