Challenging One of the Best

I’ve been reading Ben Carlson’s blog since 2018. I own all his books and have already pre-ordered his next one. I also listen to his podcasts weekly.

I look up to him as a financial writer. He writes a lot about current events but always adds historical context.

I morphed his belief of “simple beats complex” into one of HWM’s principles (simple is tough but best), and I send his YouTube video about Bob, the World’s Worst Market Timer, to all potential clients after a first meeting. He was also the first finance podcaster I listened to who mentioned my favourite economic history book, “A Splendid Exchange.”

His post this past weekend deserves a challenge, though. Here’s my best shot at a critique.

Ben says, “There is a difference between good advice and effective advice,” and that “there’s plenty of good advice anywhere you look these days but lots of people simply ignore it because it’s not easy to follow.”

But advice you ignore isn’t good advice. Ben uses two phrases as examples of what he considers good advice (i.e., ignorable advice): “stay the course” and “ignore the noise.”

In isolation, both phrases are bad advice. Not ignorable advice. Bad advice.

Let me transform both phrases into good, effective advice with a bit of context. We’ll assume our client, the one who needs to stay the course and ignore the noise, has every penny of their investments in the S&P 500.*

Every single time we communicate with this client, we remind them of the S&P 500’s historical return.**

“Your investments could grow at around ten percent. That means $100,000 invested could be worth almost $1.75 million in thirty years. It sounds nice, doesn’t it? But there’s a high price to pay for that kind of growth.

“Expect an intrayear decline of 15% every year. It might not happen every year but it could. And expect, on average, a 35% drop every five years. There could even be times when it drops by 50%.

“And whenever those drops take place, whether 15% or 35% or 50%, everyone will want you to do something. The media, social media, family, friends, colleagues—everything and everyone that makes noise—will try to scare you into doing something.

“But those who endure the drops. Those who stick to their long-term plan. Those who—you knew it was coming—stay the course and ignore the noise. They’re the ones who get wealthy. They just need to go through hell every once in a while.”

Without that context, Ben is right.

*We use the S&P 500 because it has the most available and reliable data.

**The past is no guarantee of future results.

The em dashes are mine.