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Recently, a retired financial advisor asked me a favor. He wanted me to share his investment newsletter with you.
He’s a nice guy. A solid writer. Before he retired, he was, I must admit, wildly successful in his professional career at gathering client assets. He worked for a commission broker/dealer you all have heard of.
But I have a philosophical impasse with his newsletter. A problem that cannot be overcome.
He writes the classic “hot stock / cold stock” newsletter. Each week, he shares why these 3 stocks are poised for a massive breakout, while those 3 stocks are going down the toilet.
That is the antithesis of my investment philosophy.
But you know what?
His reasoning for each stock pick makes sense and sounds smart.
And that’s the problem.
They All Sound Smart
Ask yourself this:
What happens to the stock-pickers who sound dumb?
It’s not a trick question.
The dumb ones convince nobody of their ideas, gather no client assets, and never get off the ground. They find different jobs. They go out of business. There are no dumb-sounding stock pickers – at least not for long.
The stockpickers who last years and decades – the only ones who get to share their ideas in newsletters – all sound smart. It’s a requirement. “Sounding smart” is table stakes. You cannot sound dumb.
But there’s a difference between sounding smart and being smart. Or at least, being smarter than the market. I’m sure some of them actually are smart, too. They have the brains to back up their writing. I know it’s possible to beat the market. It must be. Some people are genuinely smart enough to do so.
But…
The Results…Aren’t Good
But the market-beating results don’t look good. If we look at large-cap mutual funds, such as those seeking to beat the S&P 500, over the 20 years leading up to 2026…
Over 20 years: 93% underperform the S&P
Over 15 years: 97% underperform
Over 10 years: 96% underperform
Over 1 year (i.e. just 2025): 76% underperformed.
My point is that all of these funds – 100% of them – are full of smart people, with smart ideas and smart rationale about why their stock-picking decisions are best.
They all sound smart.
Yet, what do the results say?
“Smart” Isn’t a Good Filter
A common line from a lay-investor might sound like,
“You should listen to my money guy. He was telling me yesterday why Ford is actually going to define the car industry for the next 25 years. We took a big position in it.”
Lots of people hear lots of “smart” stories that convince them how to pick winners and losers.
A big portion of the population is still convinced that superior investing is about having smart ideas about stocks.
My point, though, is that of course your guy sounds smart talking about Ford. Everyone’s “guy,” regardless of any talent, has a smart-sounding narrative to explain their rationale. When everyone sounds smart, it provides zero differentiation. “Sounding smart” is a poor filter.
The only “smart” decision is to not outsmart the market in the first place.
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