Podcast Summary: "How Not To Invest"

Episode Details:

• Title: How Not To Invest
• Host: Jill Schlesinger, CFP®
• Guest: Barry Ritholtz, Co-founder of Ritholtz Wealth Management
• Release Date: June 6, 2025

1. Introduction to Barry Ritholtz and His New Book (03:32 – 07:00)

The episode begins with Jill Schlesinger welcoming Barry Ritholtz, co-founder of Ritholtz Wealth Management, to discuss his latest book titled "How Not to Invest: The Ideas, Numbers, and Behaviors that Destroy Wealth and How to Avoid Them." Jill draws parallels between her own book, "Dumb Things Smart People Do with Their Money," and Barry's work, highlighting their shared focus on the intersection of numbers and emotions in finance.

Notable Quote:

Jill Schlesinger [03:32]: "I think that as much as you and I both have been trained by the numbers, we understand that so much of the world of finance is based on emotions."

2. The Timing Behind Writing "How Not To Invest" (04:09 – 05:45)

Barry explains the motivation and timing for releasing his new book. After establishing Ritholtz Wealth Management in 2013 and following his first book "Bailout Nation" 15 years ago, Barry felt the need to address recurring financial misconceptions amplified by events like the pandemic and rapid Fed rate hikes. He describes the organic development of the book's concepts through meticulous organization using traditional methods like bulletin boards and index cards.

Notable Quote:

Barry Ritholtz [04:51]: "It's just something about manual old school thumbtacks on a bulletin board... the stuff... self organized itself."

3. The Impact of Recent Economic Events on Investing Behaviors (05:45 – 10:53)

Jill and Barry delve into how the tumultuous economic landscape of the past five years—marked by events like the dot-com bust, 9/11, the financial crisis, the pandemic, and unprecedented Fed rate hikes—has influenced investor behaviors. Barry emphasizes the unchanging nature of human emotions in finance, regardless of external circumstances.

Notable Quote:

Barry Ritholtz [08:10]: "Human nature is exactly what human nature is. People are going to make the same mistakes they make."

4. Navigating Financial Media and Separating Signal from Noise (10:53 – 16:53)

Barry critiques the overwhelming and often misleading financial media landscape. Drawing inspiration from Sturgeon's Law, he advises listeners to be selective and critically assess the information and advice being presented. He underscores the importance of focusing on reputable sources and understanding the intentions behind financial pundits' recommendations.

Notable Quote:

Barry Ritholtz [08:46]: "Ask yourself, what is this person selling? What is their history? Am I taking candy from a stranger?"

5. Advice for Younger Investors and Learning Through Experience (16:53 – 27:01)

The conversation shifts to younger investors who may lack firsthand experience with severe economic downturns. Barry candidly states that some lessons can only be learned through personal experience, though he offers guidance to mitigate common pitfalls. He also addresses the rise of meme stock trading, emphasizing the inherent risks and low likelihood of long-term success for most traders.

Notable Quote:

Barry Ritholtz [26:54]: "They have to burn their hand on the hot stove to learn to not."

6. The Passive vs. Active Investing Debate (27:01 – 34:56)

Jill steers the discussion towards investment strategies, particularly passive versus active management. Barry defends passive investing, citing extensive research that demonstrates the underperformance of active managers over extended periods. He explains the concept of "beta" (market returns) versus "alpha" (excess returns) and highlights the difficulty of consistently outperforming the market.

Notable Quote:

Barry Ritholtz [32:16]: "Beta is what the market gives you. If you just own the whole market, here's what you get each year."

7. Practical Investment Strategies and Organizational Alpha (34:56 – 41:02)

Barry outlines practical strategies for investors to optimize their portfolios without succumbing to the allure of active management. He introduces the concept of "organizational alpha," which involves leveraging technology and strategic account placement to enhance returns and reduce taxes. Barry also emphasizes the importance of working with fiduciaries who prioritize clients' best interests.

Notable Quote:

Barry Ritholtz [38:25]: "Don't blow me up... we harvested all these tax losses through direct indexing."

8. Managing Emotions and Information Hygiene (41:02 – 43:51)

In the concluding segment, Barry discusses the importance of "information hygiene"—filtering out irrelevant or harmful media consumption to maintain emotional stability in investing. He encourages listeners to focus on controllable aspects of their financial lives, such as personal behavior, expenses, and ethical considerations, rather than external market noise.

Notable Quote:

Barry Ritholtz [43:51]: "Focus on what you can actually manage... don't rely on [the media] to make investing decisions."

Key Takeaways:

1. Understand the Emotional Aspect of Investing: Recognize how emotions influence financial decisions and strive to manage them effectively.
2. Be Selective with Financial Advice: Critically evaluate the sources of financial information and prioritize reputable, data-driven advice.
3. Embrace Passive Investing: Given the challenges of consistently outperforming the market, a broad, low-cost index fund approach is generally advisable.
4. Optimize Through Strategy, Not Speculation: Utilize strategies like tax-loss harvesting and proper account placement to enhance returns without taking on unnecessary risk.
5. Maintain Information Hygiene: Limit exposure to overwhelming and often misleading financial media to focus on controllable aspects of your financial life.

Conclusion: In this insightful episode, Jill Schlesinger and Barry Ritholtz provide listeners with a comprehensive guide on avoiding common investment pitfalls. By emphasizing the importance of emotional control, selective information consumption, and strategic passive investing, they offer actionable advice aimed at building and preserving wealth effectively.