5 Stupid Questions Asked on Wall Street

Ignore these 5 queries. They're either pointless, or they've been answered a hundred times over.

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5 Stupid Questions Asked on Wall Street

Some people say there’s no such thing as a stupid question. Others say there are no stupid questions, only stupid people.

question 5 Stupid Questions Asked on Wall Street

The latter is straight-up arrogant — if you don’t ask questions, how are you supposed to learn anything? — and the first one is flat-out untrue. Stupid questions do exist, and we in the media ask them all the time.

Sometimes it’s for the audience, sometimes it’s for our own egos, but the questions are stupid nonetheless because they’ve already been answered. Many times.

Stupid questions are also stupid because they indicate that the person asking them doesn’t really know what he or she is talking about. They either reveal a dangerous ignorance or a failure to grasp the most basic concepts of investing, like diversification and risk vs. return.

There are plenty of stupid questions, and they pop up depending on what the market or economy is doing. Indeed, there are too many to count. But, for the sake of brevity, here are five stupid questions you’ve probably heard recently, and that you should just ignore.

#1: What Did the Dow Jones Do Today?

Asking about the Dow Jones Industrial Average is doubly stupid.

First — and most importantly — unless you’re a professional, watching the market on a day-to-day basis is a stupid idea. It only increases the risk that you’ll do something emotional with your money or rack up fees by trading too much.

Secondly, the Dow Jones serves as a shorthand for U.S. stock performance only for amateurs who don’t really know what they’re talking about. When pros talk about “the market,” they’re talking about the S&P 500.

The Dow Jones is comprised of only 30 companies, so it’s too constrained to represent the massive U.S. stock market. Even worse, it’s price-weighted rather than market cap-weighted, so it doesn’t reflect accurately the size of the companies it contains. A smaller company with a high share price is more important than a giant company with a lower share price.

The Dow Jones might be venerable, but it’s also close to useless.

#2: Is the Stock Market Going to Crash?

Of course the market is going to crash. The market has crashed many, many times. Stocks have nosedived nine times since 1929.

When you see this question, what’s really being asked is, “When is the market going to crash?” And the answer to that is nobody knows.

Nobody.

Even a prognosticator who gets it right once won’t be able to replicate the call enough to make for reliable market-timing. Legions of technical analysts have spent the last century trying to divine upcoming market crashes. Not one of them has come up with something accurate enough to bet on. Fundamental investors, newsletter peddlers, economists and algorithms have likewise failed.

It’s impossible to time the market because no one can predict the future. That’s why you need an investing plan that you stick with in good times and bad.

#3: Why Doesn’t Berkshire Hathaway Pay a Dividend?

Periodically, some investors and the media clamor for Berkshire Hathaway (BRK.B) to start paying a dividend. In fact, a Berkshire Hathaway dividend will be put to a vote in a couple months.


Article printed from InvestorPlace Media, http://investorplace.com/2014/03/5-stupid-questions/.

©2014 InvestorPlace Media, LLC

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