Should You Invest When the Market Feels Too High? SB1812
Episode
47 min
Read time
2 min
Topics
Investing, Fundraising & VC, Leadership
AI-Generated Summary
Key Takeaways
- ✓Market timing cost: The SPY ETF tracking the S&P 500 traded at $190 per share in 2016 when panelists debated whether markets were too high. That same fund trades near $700 today, excluding reinvested dividends. Investors who waited for a "safer" entry point missed roughly a 270% gain over ten years.
- ✓Exit strategy framework: Before buying any individual stock, define your exit conditions in advance — for example, sell if the position drops 10–15% or gains 20–50%, regardless of news or emotion. Pre-committing to these thresholds removes the psychological difficulty of deciding in real time whether a holding is a loser or winner.
- ✓Defining a losing stock: Indicators that a stock is a permanent loser include consecutive quarters of negative returns, no viable path to profitability, no government support, and leadership opacity — such as a company that refuses to disclose its CEO's name. Duration of losses matters: Amazon lost money for years but showed sustained revenue growth and market dominance.
- ✓Media and market noise: Financial television reports daily market moves of 0.1–0.2% as headline news, which has no actionable relevance for long-term investors. Checking portfolio performance monthly rather than daily prevents reactionary decisions. Tips broadcast on widely available cable channels are already priced in by the time retail investors hear them.
- ✓Cash versus credit strategy: Using rewards credit cards for most purchases captures airline miles and provides merchant dispute protection unavailable with cash. Carrying small denominations of cash — ones and fives — specifically for tipping handles situations where cards are impractical. When dining in large groups, calculating and paying your exact share in cash prevents subsidizing others' alcohol or appetizers.
What It Covers
A 2016 roundtable replay featuring Len Penzo, Paula Pant, and Greg McFarland examines whether to invest when markets feel overvalued. The SPY ETF traded at $190 then versus nearly $700 today, demonstrating that fears about sky-high markets rarely justify sitting out long-term investing.
Key Questions Answered
- •Market timing cost: The SPY ETF tracking the S&P 500 traded at $190 per share in 2016 when panelists debated whether markets were too high. That same fund trades near $700 today, excluding reinvested dividends. Investors who waited for a "safer" entry point missed roughly a 270% gain over ten years.
- •Exit strategy framework: Before buying any individual stock, define your exit conditions in advance — for example, sell if the position drops 10–15% or gains 20–50%, regardless of news or emotion. Pre-committing to these thresholds removes the psychological difficulty of deciding in real time whether a holding is a loser or winner.
- •Defining a losing stock: Indicators that a stock is a permanent loser include consecutive quarters of negative returns, no viable path to profitability, no government support, and leadership opacity — such as a company that refuses to disclose its CEO's name. Duration of losses matters: Amazon lost money for years but showed sustained revenue growth and market dominance.
- •Media and market noise: Financial television reports daily market moves of 0.1–0.2% as headline news, which has no actionable relevance for long-term investors. Checking portfolio performance monthly rather than daily prevents reactionary decisions. Tips broadcast on widely available cable channels are already priced in by the time retail investors hear them.
- •Cash versus credit strategy: Using rewards credit cards for most purchases captures airline miles and provides merchant dispute protection unavailable with cash. Carrying small denominations of cash — ones and fives — specifically for tipping handles situations where cards are impractical. When dining in large groups, calculating and paying your exact share in cash prevents subsidizing others' alcohol or appetizers.
Notable Moment
Len Penzo argued that a fully cashless society would be a banker's dream because it eliminates the possibility of bank runs — institutions could freeze accounts instantly. Combined with nominal negative interest rates already present in parts of Europe, this scenario would effectively trap depositors inside the financial system.
Episode Transcript
This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate see. According to Indeed data, sponsored jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit at indeed.com/podcast. Terms and conditions apply. This is your fix. I am your host, Stassi Schroeder. Welcome to Tell Me Lies, the official podcast. What's the most unhinged thing of season three? Steven. Because he's so evil. I do think he is misunderstood. You see everyone face consequences. It's intoxicating. The writers just know how to trick you. There's always a twist in this show. Tell Me Lies, the official podcast, January 6, and stream the new season of Tell Me Lies, January 13, on Hulu and Hulu on Disney plus. Hey, Stackers. You know, on Monday, we talked about courage with, Jen Drummond. An amazing story of climbing the second highest peaks around the world. But the focus really on you having the courage to go reach whatever those goals are that you've set for yourself. On Wednesday, we talked about retirement and travel fusing the two of those ideas together in a fascinating discussion with George Georgi. And we're gonna end our greatest hits week today with a little time travel. We're going way back to 2016. And before you hit well, I don't wanna hear 2016. You gotta check this out. The name of the episode was called investing in a sky high stock market, which ten years later at the time, we thought that the stock market was really high. The SPY, we call it the spider. It's an exchange traded fund that tracks the S and P 500, the 500 biggest stocks in America. You can buy that and just own a little piece, by the way, of all 500 stocks. A lot of people do that. Good choice for your large company stocks and your four zero one k if that meets your goals. But, back then, I just did a little homework. It was trading at a $190 a share if you were buying it. Today, it's trading just below $700 a share ten years later. You would have bought it for $1.90. Today, 700. And by the way, I didn't even look at reinvesting dividends, what your actual return was, but from less than 200 to 700, that's a big reason why I wanted to play this. But you'll also yours actually talk about a bunch of different headlines, so it was hard to name this show at the time. I actually, it's funny. I remember trying to name this because there are a few different, fusion points that we, baked into this particular episode. But what strikes me is that there's always something to worry about. This …
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