Beware investing advice from the media


Commentary: What this columnist learned from interviews with experts

By Chuck Jaffe, MarketWatch

Last Update: 8:05 AM ET May 3, 2013

This week, my radio show MoneyLife with Chuck Jaffe celebrates its one-year anniversary. With four guests an hour each weekday, that means there have been roughly 1,000 interviews on the program. Those chats are different from the conversations I have with assorted experts when Im writing a column. For the show, Im frequently asking market strategists for their most current take on where to invest, what to buy or sell and when to make those purchases. Hearing varied experts with vastly different viewpoints and styles cover that kind of ground nearly every day, quite honestly, has sometimes had me worried.

In a 24-hour news environment where everyone seems to be looking for something they can act on now, its easy to get so caught up in what someone just said that you miss the bigger point of the conversation.

With that in mind, here are seven bedrock financial lessons for investors, gleaned from the first year of MoneyLife:

1. There is no one right way to invest.

Disagreement makes a market. Typically, there is a buyer for every seller, and they dont see a trade turning out the same way. One is presumably expecting better days and share prices ahead, while the other thinks he would be better off elsewhere. Both can be right, to some extent. A stock can continue to grow, for example, but at a rate that is too slow to make the seller happy.

For average investors, the arguments over what to buy and when, and what to avoid, come down to each individuals goals and style. What really matters is that you reach your goals on your time frame and with the ability to sleep at night. If another approach is better in theory, but you cant live it in practice, then its not the right way for you to invest.

2. Investing is not a competition.

Mutual fund managers may have to worry about posting a better track record than their competitors, but average investors only need to be concerned with generating returns they can live with and survive on.

Try not to get sidetracked by what you hear about others and their returns. If you start running around looking for the fastest horse in an effort to keep up with or out-do the competition you may never catch a ride to the finish line.

3. Youre not playing the market when its your money.

Investing feels like a game when youre chasing after and catching winners, but its not play money when it affects your ability to live comfortably in retirement. The less you think of it like a game, the more likely you are to really strategize about the right moves to make, rather than buying on a hunch, a tip or an experts prognostication on a radio show.

4. Real life doesnt always fit nicely into formulas.

As consumers and savers, we want answers. We want rules that guide us to our goals.

Its not that simple.

Every rule comes with its own set of rules, as in This will enable you to reach your goals if you are saving 10% of your gross salary. Fall short of that requisite standard and, over time, the rule fails to deliver.

While quick answers are good, youll need more details to ensure that the best-laid plans dont go astray.

5. You wont find out whether easy equals good until its too late.

Acting on stock tips and rumors is easy. But the talking heads making the buy and sell recommendations are not in tune with your finances and risk tolerance.

So dont take the easy way out; tips should be seen as nothing more than suggestions, a starting point where you run your intelligence on the advice before taking it.

It will be a lot harder for you to live with bad results from a bum tip than it will be for the guy who made the mistake on air.

6. You cant avoid being wrong; you can only hope you are right enough to make up for the mistakes.

No investor has a perfect track record. Most have stretches where they are right and others where they are troubled. If you keep your mistakes small and work hard to have more winners than losers, things should turn out your way. If you try to avoid ever being wrong, you will likely make so many maneuvers that each little error digs you deeper into a hole.

7. Dont buy, buy, buy without knowing why, why, why.

Every expert brings his viewpoint and methodology to the mix. In the first year of MoneyLife, we have had countless times when one guest said to buy or sell a specific stock, mutual fund or ETF, and another guest came on within days to go the opposite way.

If you dont know why someone makes a recommendation maybe one money manager is a momentum trader and another is a value manager you dont know enough to act on it.

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