Someone Should Check On Him
I had a doomed conversation in early April. One of my friends, a self-described investing expert (but with a bunch of suffixes after his name to back up his mouth), made a dire proclamation to me. In his words, "the stock market meltdown has begun.....it's time to go all cash." Translation: He, in all his brilliance, was predicting an immediate, all-out stock market crash and planned to sell all his investments to avoid losing money. Further, with his masterful wisdom, he was telling everyone around him (including me) to do the same.
Here's some added context. When he shared his "expertise" with me, it was in the midst of the great tariff scare of 2025. The stock market had experienced a few bad weeks, and people were anxious. The overall stock market was down nearly 20% from the all-time high it experienced just six weeks prior. That's when he sold.
My buddy had personally lost $200,000 (around 17%) and was now sitting on about $1,000,000 of cash in his portfolio. According to him, he was going to let the market continue to crash, and he would swoop back in to "buy the dip."
Five months have passed since he made this decision. Wanna know where we stand today? The market is up approximately 40% since he sold all his investments. 40%!!! The market has hit 24 new all-time highs since his bold proclamation, including a new one yesterday afternoon.
Had he simply done what actual wise investors do (nothing!), his $1M portfolio would be up by $400,000. In his desire to be smarter than everyone else and try to play games with the market, he lost out on $400,000 (!!!!) of upside. All he had to do was nothing. Literally, nothing. When I explained to him that his strategy has a terrible historical track record, he laughed. Today, he's $400,000 poorer because of it.
Someone should check on him. Well, I actually did yesterday. Let's just say "frustrated" would be a gross understatement to describe his state of being. He was so sure he was going to outsmart the market this time. He would have bet his life savings on it. Strike that, he did bet his life savings on it.....and lost.
He's at a loss on how to move forward. Does he now wait until the market falls? Does he just lick his wounds and get the money back working for him? Both options feel like a loss to him. These are the psychological implications of trying to play these sorts of games.
Here's what I told him: "What's done is done. You can't go back and get a redo. However, you can promise yourself you'll never do this again. Call it an expensive lesson. Humble yourself. Don't try to be smarter than everyone else. Invest your money and leave it invested. The market will take care of the rest....eventually."
We'll see where he goes from here, but it's a cautionary tale for all of us. The best investors in the world are the ones who know they aren't smarter than the market. Patience beats brains every day of the week. I have 155 years of history to prove it. Today is a great day to do nothing, and tomorrow is a great day to do nothing, too.
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