Thinking Outside The Street Podcast – Episode 5 – Dumb Money Vs. Smart Money


In This Episode:  Paul and Cliff discuss the mistakes many investors make by investing emotionally and not rationally.

  • Most investors wait until it is too late to enter the markets and then exit much  later than they should.
  • The emotional and psychological dynamics of investing are probably the hardest to master.
  • One can always find a justification for the mistakes one is making at any given time.
  • Many investors resort to buy and hold or sit-in-cash strategies because they don’t know any other way to invest.
  • The cocktail party tip approach to investing rarely works in the short term and is not a good long term strategy. How many cocktail parties are you planning on attending?


  • John Nofsinger. The Psychology of Investing. A good book about the psychological dynamics that play into the trading of your account.
Source - Stephan Cheplick

Source – Stephan Cheplick

Volatility is back in the Markets

Wow! A 4% drop in the S&P500 in 4 days! Is this the beginning of the next big bear market?

Wait a minute! Let’s not start trying to predict what is going to happen. Don’t let emotion drive your investing decisions. No one knows what is likely to happen next. This pullback in the markets is part of normal ups and downs (albeit, it is a little volatile right now).

Also, let’s not play the game based on definitions set by others. Whether this is the beginning of a bear or part of a normal Bull market pattern shouldn’t matter to you. You need to control the risk in your portfolio based on how much pain you can tolerate in the form of lost value. The only way to do that is to have a carefully planned exit strategy that will move you (at least partly) to the sidelines when the markets drop too much.

In the realm of technical indicators, the S&P500 did break below its 50 day moving average yesterday, and many strategists use that as a sign to lower their allocations to equities in case it drops further. But, be sure you have a re-entry strategy as well. Because, if you step to the sidelines, you might get caught sitting there way too long if you don’t know when to get back into the game.

Uncommon Knowledge Conference is just around the corner

The National Association of Active Investment Managers National Conference is coming soon.

UK Conference

Conference in Fort Lauderdale

Next week we will be interviewing Jason Wilder the incoming president of NAAIM about what the conference will offer for attenders. Be sure to come back and listen to the podcast next week.

NAAIM is an organization dedicated to the promotion and understanding of Active Investment Management. Their goal is to help professionals and individuals achieve excellence in managing their portfolios through innovative and dynamic management techniques.

Their conference is usually like drinking from a fire hose in all that is presented. Be sure to attend if you can!