Motley Fool Money – Interview with Barry Ritholtz: How Not To Invest

Release Date: October 5, 2025
Host: The Motley Fool (Matt Greer, Andy Cross, Jason Moser)
Guest: Barry Ritholtz (Co-founder, Ritholtz Wealth Management; Author, How Not To Invest)

Episode Overview

This episode features a deep-dive interview with Barry Ritholtz about his latest book, How Not To Invest. Instead of focusing on traditional “how-to-invest” advice, Ritholtz shares his philosophy of minimizing unforced errors and avoiding classic investor mistakes. Drawing from decades of experience and behavioral finance research, he explains why understanding and managing your own behavior—especially the urge for action and selling mistakes—matter more than stock-picking prowess. The discussion is rich with anecdotes, research, and practical insights aimed at helping investors of all ages and skill levels avoid the most damaging missteps.

Key Discussion Points & Insights

1. Why Focus on Mistakes? (Bad Ideas, Bad Numbers, Bad Behavior)

• Ritholtz’s Approach:
  Rather than another “how-to” guide, Barry wrote How Not To Invest to address why, despite the wealth of investment advice, most people remain mediocre investors.

  • Quote:
    “But hey, how about how not to invest? How about if you could just avoid these mistakes, how much better off you'll be?” (02:04)

• Core Framework:
  The book organizes common pitfalls into three categories:

  • Bad ideas
  • Bad numbers
  • Bad behavior

• Behavioral Focus:
  The wisdom in the book is as much about behavioral finance as numbers or strategy (01:35).

2. Tennis, Driving, and the Investor’s Game

• Amateurs vs. Professionals Analogy:
  Ritholtz uses tennis and racing metaphors to explain investor mistakes.
  • Quote:
    “The problems happen when we try and operate out of our skill set and expertise.” (03:50)
  • Amateurs ‘lose’ by unforced errors; professionals win by skill.
    For non-experts: the goal should be to minimize mistakes, not to imitate professionals by trying to “hit the line.” (03:50–05:47)

3. Passive vs. Active Investing

• Ritholtz’s Take:

  • Core Portfolio: Use passive index funds as the foundation (the ‘Christmas tree’).
  • Active Bets: Add select individual stocks as “ornaments.”
    • Quote:
      “You can't get alpha if you aren't at least starting with beta... So I love the idea of making the core of a portfolio. I describe it as your Christmas tree should be your passive portfolio and your active selections are the garland, the lights, the ornaments all around that.” (06:15)

• Stock Picking is Hard:
  “The data shows professional managers are really good stock pickers. They're really bad stock sellers or stockholders.” (06:15)

• Hold Through Drawdowns:
  Ritholtz highlights that even today’s trillion-dollar giants like Apple, Amazon, and Microsoft endured huge drawdowns; success required holding through difficult periods. (06:15–08:41)

4. Common Mistakes—How Not To Invest

Segment Start: [09:54]

• For Young Investors:
  Too Little Risk.
  Many young people (20s-40s), with decades-long horizons, stay underinvested.

  • “You should be pretty much—if not all equity—because... mostly equity for the long haul...” (10:10)

• For Older Investors:
  Too Much (Concentrated) Risk.
  Many older investors are overly concentrated in a single stock (from work or inheritance), exposing themselves to unnecessary risk.

  • “Throttle back. So those are two of the bigger allocation mistakes we see.” (10:10)

• Not Having a Plan:
  Investing for the sake of “more money” is undirected.

  • “It's got to be, what do you want this money for? Once you figure out your goal, hey, then you could figure out the appropriate risk tolerance to get to that goal over time.” (10:10, also an echo of the episode-opening point at 00:05)

• Chasing 'More' Leads to Too Much Leverage:
  Hedge funds or individuals who simply pursue “more” tend to over-leverage and blow up.

5. Why Selling is Harder Than Buying

Segment Start: [12:55]

• Research Findings:
  A study on institutional portfolios showed that portfolios that sold randomly did better than the choices of professional managers, highlighting poor selling discipline.

  • “The random cells outperformed the portfolio of active cells by 50 to 100 basis points over the following year.” (12:55)

• Bessembinder Study:
  1% of stocks drive almost all of the market’s long-term returns (the “monopolists of returns”).

• Why Selling Fails:

  • Buying is Rational, Quantitative.
    “The buying process is quantitative and rational... There are a lot of different schools of thought you can sift through to try and identify those tiny percentage of stocks that do well.” (13:40)
  • Selling is Emotional, Squishy.
    “The selling part becomes really squishy.” (13:40)
  • Portfolio managers often sell winners too early (to make room for new picks), or panic-sell during drawdowns, or stubbornly ride losers too long.

6. Psychology & Behavioral Traps

• Emotion Rules Selling:
  Behavioral factors—fear, panic, and loss aversion—often trump rationality on the sell side.

  • Quote:
    “The behavioral side to the decisions on the selling side is arguably more important than on the buying side.”
    “Look, the reality is all of us investors are humans and we're filled with flaws.” (16:01–16:11)

• Panic Selling’s Cost:
  Ritholtz details how mass panic-selling during market crashes (2002–03, 2008–09) leads to underperformance, with a third of people never returning to equities.

  • Quote:
    “There's another study I reference in the book that says when people panic sell about a third of them, never return to equities.” (16:11)

7. The Dunning-Kruger Effect & Overconfidence

Segment Start: [18:59]

• Definition:
  The Dunning-Kruger effect is our poor ability to accurately self-assess, especially when skills are low.

  • “In the beginning, our metacognition of our skill set when we have really poor skills is awful.” (19:22)

• Newbie Mistakes:
  Cites the pandemic-era meme stock boom as an example of inexperience and overconfidence.

  • Evolutionary Roots: Our inclination to action and overconfidence is hard-wired; it’s useful for survival, but dangerous in investing.

• Developing Skillful (and Honest) Self-Evaluation:
  Experts eventually become aware of just how tough investing is, and sometimes underestimate their abilities as a result, while novices overrate themselves.

Notable Quotes & Memorable Moments

• On Planning and Purpose:
  “More money for the sake of more money doesn't really do anything. It's gotta be, what do you want this money for?” — Barry Ritholtz [00:05, repeated 10:10]

• On Errors:
  “Just be less stupid.” — Quoting Charlie Munger [03:24]

• On Amateurs and Experts:
  “If you want to win when you're playing the amateur game, not the professional game, just make less mistakes. Just don't try and overpower the ball. Don't try and be too fancy.” — Barry Ritholtz [03:50]

• On Portfolio Construction:
  “Your Christmas tree should be your passive portfolio and your active selections are the garland, the lights, the ornaments all around that.” — Barry Ritholtz [06:15]

• On Why It's Hard to Sell:
  “Buying is rational, it's logical, it's quantitative... The selling part becomes really squishy.” — Barry Ritholtz [13:40]

• On Behavioral Biases:
  “All of us investors are humans and we're filled with flaws. We weren't built for this... Deciding how long to hold the stock was not part of our evolutionary history.” — Barry Ritholtz [16:11]

• On Overconfidence:
  “It's more than just overconfidence, it's how hard can it be?... We have this tendency to a bias towards action. Of course I think we could do this. Why wouldn't I? How hard can it be?” — Barry Ritholtz [19:22]

Important Timestamps

• 00:05: The importance of goals, risk tolerance, and planning.
• 02:04: Why focus on investor mistakes instead of more “how-to” advice.
• 03:24: Starting with Munger’s “just be less stupid.”
• 03:50: Tennis/driving metaphors for investing; minimizing unforced errors.
• 06:15: Passive as the portfolio core; actives as the trimming.
• 09:54: Overview of common investor mistakes by age/group.
• 12:55: The (counterintuitive) research on why selling is harder than buying.
• 16:11: Behavioral traps, panic-selling, and market underperformance.
• 18:59: The Dunning-Kruger effect and why self-assessment matters.
• 19:22: Real-world examples from pandemic-era investing.

Takeaways for Listeners

• Success in investing is less about seeking brilliance and more about minimizing classic errors—particularly emotional, behavioral ones.
• Construct a plan with clear purpose and risk assessment tied to your goals.
• Use a broad passive index as your portfolio’s core, with any “active” ideas kept as manageable add-ons.
• Selling discipline—when to let go—is more art than science, and prone to costly mistakes.
• Self-awareness, humility, and recognizing the limits of one’s skill are essential—overconfidence is a recurring behavioral pitfall.

For both beginners and veterans, Ritholtz’s advice is a reminder that the key to better investment outcomes is often to “just be less stupid”—focus on planning, keep emotions in check, and avoid the most common behavioral traps.