Stop Investing Like They Tell You: Discover and Overcome the 16 Mainstream Myths Keeping You from True Financial Freedom

By Stephen Spicer, CFP®, AEP®, CL

The Wall Street Journal–bestselling guide to personal investing that flies in the face of standard, outdated financial advice. 

Working under the umbrella of a large brokerage firm, certified financial planner Stephen Spicer began to see the flaws in the traditional advice he was supposed to give his clients. Unafraid to challenge the paradigms of a broken system, Stephen built Spicer Capital to share his own personal investment strategies—ones that directly address contemporary investment and financial planning concerns.

In Stop Investing Like They Tell You, Stephen guides investors through a comprehensive understanding of the sixteen most egregious myths that get repeated throughout the financial industry. It is a master class in savvy investing with practical advice on how to protect and grow your life savings in today’s chaotic, ever-shifting market.

• Language: English
• Publisher: Open Road Integrated Media
• Release date: Aug 31, 2021
• ISBN: 9781631956324

Stephen Spicer, CFP®, AEP®, CL

Stephen Spicer, CFP®, AEP®, CLU® is the Founder and CEO of Spicer Capital, LLC—a financial planning firm he built after realizing that his personal investment strategy was incongruent with what he was supposed to, or even allowed to, recommend under the umbrella of one of the largest brokerage firms in the world. He is married to his high school sweetheart, and they live with their four beautiful children in Fayetteville, Arkansas. Stephen is passionate about education and finding the absolute best solutions to the financial industry’s problems. He is a Certified Financial Planner®, an Accredited Estate Planner®, and a Chartered Life Underwriter®.

Book preview

Introduction

I am not a doomsayer. Although it may sound this way at first, I have no wish to be alarmist.

I am merely an advocate for prudent asset stewardship. More than a decade in the investment and financial planning industry has left me concerned for the investments of my family, friends, and fellow humans—I’m talking about the vast majority of investors and billions of dollars in the market.

See, I told you I’d come off as an extremist doomsayer … but bear with me, and you’ll see I’m not.

First, you must know it’s not your fault that you and your investment dollars are at risk; it’s the poor advice you’ve received. It’s the poor advice everyone receives: the investment paradigms commonly taught in schools and preached over the airwaves, and whose proponents include more than one Nobel laureate.

See? Not your fault. It’s hard to argue with such a compelling force. Who would be crazy enough to question the dogmas preached by such highly esteemed authorities?

Who Am I?

My name is Stephen Spicer. I have dedicated my career to helping people understand this potentially ruinous reality. And, after realizing that merely spotlighting all the flaws wasn’t enough, I became obsessed with finding the absolute best solutions.

Why am I putting up such a fuss? It can’t actually be that bad … can it?

It’s tempting to think that. I wanted to think that; it would make my life substantially easier. I could follow the cookie-cutter solutions to which most people subscribe, continue to market my services in the same way as other advisors, and do very well for myself and my family. In fact, I was on that path and making good money. Proceeding with that course would have been much less stressful.

There was just one problem (at least, it started as one problem): I kept discovering issues with the traditional investment paradigm—potentially devastating flaws in the logic. As I made these discoveries, I adjusted the investments I managed, only to find another flaw.

After years of searching for better solutions to each of these problems, I reached a point where I felt my investments could better withstand the unpredictable yet inevitable market chaos and stress without compromising the growth of a traditional portfolio.

I sighed a breath of relief …

… and then looked around and realized almost nobody else had adapted. Nobody else was dedicating any time to challenging the traditional investment paradigms. They all just continued to argue about the same old inconsequential issues: which stocks will perform better tomorrow, the exact implication of a particular word uttered by the Fed Chair, or the residual repercussions of Donald Trump’s most recent tweetstorm.

A Galilean Task

In the early 17th century, the majority of educated people subscribed to the Aristotelian view that the Earth was the center of the universe. Galileo Galilei’s research suggested otherwise. His writings on the subject of heliocentrism—the astronomical model where the Earth and planets revolve around the Sun—was met with harsh criticism from other scholars (read: experts) of the time.

In 1615, Galileo’s views on this issue were submitted to the Roman Inquisition, which officially declared the theory to be foolish and absurd.¹ Ultimately, it was Galileo’s pursuit of truth on this matter that led to him being sentenced to house arrest for the final decade of his life.

Challenging prevailing wisdom is no easy task. And, although I think an understanding of the movement of heavenly bodies is important, the concepts I am speaking out against will play a much more meaningful role in the quality of life of tens of millions.

At the same time, you won’t need a grasp of astrophysics (or complex financial topics, for that matter) to understand—just an ability to consider things logically and with an open mind.

Understanding the resistance faced by Galileo, and the many others who have challenged a traditional way of doing things, will help provide you with context for some of the feelings you may experience throughout this book.

The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of a doubt, what is laid before him.

—Leo Tolstoy

Agree?

I’ve spoken with many people for whom this book gave life to concerns they were suppressing. For them, this study has been the beginning of a financial planning journey that has resulted in a much happier, lower stress, financial life.

Disagree?

There are also those who vehemently disagree—they stick to their academic-endorsed guns. That’s totally okay and to be expected (think: Galileo and the Roman Inquisition—there was a strong authoritative opposition even when, as we now know, Galileo was entirely correct). For those who can’t see it any other way and find fault in my research and logic, I welcome a healthy debate. I know that through civil discourse I will continue to put myself in an ever-improving position to find the absolute truth and couple it with the absolute best solutions.

You see, I’m not done; I’m not sure I ever will be. I don’t claim to have all the answers already. As you make your way through this text, you’ll discover that I’ve clearly cataloged the biggest problems with the way everyone tells you to invest. The solutions,² on the other hand, are merely the best I’ve found thus far for myself and my clients.³

Somewhere in Between?

For everyone else:

Those who deep down—whether they outwardly admit it yet or not— know something just isn’t quite right.

Those who long for an investment strategy that doesn’t take years off their life due to stress.

Those who are open-minded and willing to hear, learn, and consider counterpoints to some of the most widely held beliefs about investing.

More than anyone else, this book is for you!

The Myths

I’ve spoken with many of you. The challenge for me is: you come from all walks of life.

From financial advisors thrilled to finally hear another professional clearly articulate the problems they themselves were struggling with as they tried to help their clients …

All the way to concerned lay investors with their life savings on the line, vigilantly just trying to find hope in this foreign-to-them world of investments.

It’s for this reason the book is structured the way that it is.

Myths 1–10 build on each other to destroy the prevailing stock-and-bond, buy-and-hold investment model that is taught by everyone from university professors to YouTube gurus.

Myths 11–12 evaluate the quality of the expert advice available to you within the industry and offer recommendations as to how to best navigate all the voices screaming for your attention.

Myths 13–14 challenge the industry’s recommendations regarding retirement planning and propose a more sensible approach.

Myths 15–16 explore the best alternative strategies⁴ you could incorporate in order to overcome these potentially ruinous investment flaws, empowering you to better protect and grow your hard-earned assets.

Footnotes and Additional Guidance

As these myths build upon each other, we’ll journey as deep as needed into the world of finance in order for you to fully understand the problems and potential solutions available to you. There are a handful of very basic concepts (e.g., stocks, bonds, Modern Portfolio Theory, etc.) with which every reader should be familiar.

To that end, I’ve created several supplemental video and text resources⁵ to guide you along the way—from explaining some of those relatively basic financial concepts to diving deeper into some more-advanced side topics only briefly mentioned in this text to providing you with our most up-to-date research and potential solutions.

You’ll find direct links for those resources along with other helpful insights⁶ in the detailed footnotes throughout the text; skipping them entirely would be ill-advised.

Who Is This Book For?

This book is for anybody with money invested in the market who cannot afford to lose a substantial portion (say, more than 50%) of their portfolio’s value for an extended period (like, decades).

The investment reality I’ll bring to your attention can be as harsh and unsettling as the childhood discovery that Santa isn’t real … except with your life savings at risk.

There it is again—that doomsayer rhetoric! I promise that by the end of this you’ll see where I’m coming from. My logic is simple and sound. My concerns are real. In fact, I’m confident that by just a chapter or two in—if you’re not there already—you’ll begin to question your own portfolio makeup and crave better solutions, just as I did.

What Will You Gain by Reading This Book?

Don’t worry. The goal of this book is not to leave you feeling anxious and helpless.

In addition to openly presenting some specific potential solutions for you and your life savings,⁷ as best I can, I’ll help you reframe your understanding of investing for your long-term goals. You’ll discover what true financial freedom could look like (hint: it doesn’t involve crossing your fingers and hoping the stock market does well!).

My purpose is to start you on your path to a much more confident, stress-free financial future.

Who Should Not Read This Book?

But hold up … Before you proceed with this book, I feel compelled to include a word of caution.

You see, most people want things to be easy. That’s a message that sells. That’s the reason the mainstream advice—the advice which we’ll be disproving throughout this text—is repeated over and over again. That message of set it and forget it is simple, and simple is comforting. People want it to be true. Unfortunately, the traditional investment paradigm is fundamentally flawed—a fact that, if you do decide to continue reading, will soon become abundantly clear. Naturally, as you discover this reality—especially if you have a significant portion of your assets exposed to the market in this way—you will become more stressed. You’ll come to realize that your hard-earned money is at risk. You’ll want to do something about it; you’ll want to find a better way.

But unfortunately, the potential solutions discussed at the end of this book are not simple. Yes, they are the best solutions I’ve found to these problems, but even the simplest of them is nowhere near as easy as that traditional buy-and- hold strategy. Now, there will be some readers interested in this type of thing— with the personality, experience, and willingness to spend however many hours it may take for them to figure out how to implement these alternative strategies. But for most individuals, do it yourself will be out of reach, and the help of a qualified professional will be required. That is not what most people will want to hear; that is a message that will frustrate many.

And make no mistake, after reading through these myths, you will hunger for something better. And if you’re expecting easy solutions to replace the flawed mainstream ones you have today, you will be frustrated.

So, to avoid that stress and frustration, it may be easier for you to just stay in the dark on all this … I won’t blame you. I understand. And, if this is where we part ways, I wish you all the best. I hope things do just happen to work out for you in spite of everything. Good luck!

For everyone else: you’ve been warned; now let’s get started!

MYTH 1

The Stock Market Averages 12% Per Year

Do you hate extreme temperatures— numbing cold and scorching heat? I do. If I were looking for a new place to live or a nice vacation destination, I’d want to avoid those extremes. At first blush, I might be attracted to a city boasting an average annual temperature of 65 degrees Fahrenheit. Sounds nice.

In reality, however, that singular summary data point is not helpful. If the city in question frequently gets as freezing cold as 20 degrees below zero and at other times as blistering hot as 120 degrees, I wouldn’t find it quite so appealing a destination.

A city could experience those extremes and still average out to an apparently comfortable temperature. A single number is almost never enough to adequately convey the information you need to know to make an informed decision.

Or what about this one: you learn that scientists have created a pill to increase life expectancy. It’s been used by hundreds of thousands of people all over the world over the last couple of decades. On average, the pill has been increasing lifespan by 4 years!

Would you take it?

Would it change your mind to learn that the worst impact of the drug could be a loss of 14 years of life with a maximum gain of only 8 years?

The details matter.

Summary statistics almost never convey the entire story.

There are three kinds of lies: lies, damned lies, and statistics.

—Popularized by Mark Twain

Making life-impacting decisions based on statistics alone—no matter how accurate—is a dangerous practice. You often need more information coupled with logic and critical thought to fully understand the implications and ultimately formulate your own educated conclusion.

Investment Return Statistics

So, what about with your own investments? How do you expect your market investments to perform over the years? C’mon, if you had to throw out a number here on the spot, what would it be? What are you anticipating? What rule-of-thumb percentage do you have in your head?

Some readers will have no idea. If you fall into that category, don’t feel bad. In fact, most people—even otherwise extremely intelligent people—who have money invested in the stock market (often just automatically through their company’s retirement plan) have no idea what rate of return they should expect.⁸ They’re just all-in on the market because of yet another investing myth: that this is all just part of adulting.⁹

So, if a number did pop into your head when I asked those questions, what is it?

Don’t worry. I’m not going to judge you. If it ends up being way wrong, so what. That’s what we’re here for—to correct these misconceptions, giving you a more accurate understanding of what the financial future may hold. Besides, that number is probably one you’ve heard touted by some advisors or other financial experts anyway—so, even if you are way off … it’s not your fault.

So, what is it? 10%? I hear that a lot.

Twelve percent, maybe? There are, after all, several notable financial personalities aggressively defending this one with some pretty convincing data. Realizing an annualized 12% return would be great, right?!

Or maybe your advisor has offered the conservative 8%? Good for her!

Which is it? Which of these percentages should you reasonably depend on as the projected average annual return that your investment portfolio will realize as you prepare for or enter retirement? And what does that really mean for how much you will actually have when you want or need it?

Now, keep that percentage in your head as we break down this misunderstanding (and, at times, misrepresentation) of the facts. You see, all of these figures—12%, 10%, 8%—could be proven using historical stock market returns, yet none of them is correct. This, of course, just adds to the confusion.

The Reality

Even if we were able to come up with a reasonable percentage here, the reality is so much more complicated. Approaching your financial future with a simple rule-of-thumb expectation like this could leave you devastated, just as it has countless disciplined savers in the past.

The reality for most investors will likely be much lower than these figures. Your reality, in fact, could even be a shockingly dreadful negative average annual return for the decade and a half leading up to your retirement.¹⁰

Let’s dig into this so that you can have a much clearer idea of what to expect.

Source of the Myth

At the beginning of my career as a financial advisor more than a decade ago, I would assure clients that, historically speaking,¹¹ they could expect the stock market to average somewhere around 8–10% per year throughout their investing lives.¹²

To prove this, I’d just cite the historical returns of the stock market. Let’s do that, shall we?

The Market

First off, we should probably define the market as there are, in fact, many markets in the world of investments. In most cases—in most finance-themed conversations where the market is mentioned—people are referring specifically to the stock¹³ market.

The S&P 500

The S&P 500 is the benchmark by which most investors measure. Made up of the 500 largest US companies—representing roughly 80%¹⁴ of the total US stock market—this index¹⁵ is one of the most representative of the US (and world, for that matter) economy in general.

Originally consisting of 90 of the largest companies in the United States, Standard & Poor’s started tracking this index back in 1926. In 1957, it was expanded to the 500-company composite we recognize today.

Here’s the year-by-year return breakdown.

Table 1

S&P 500 Historical Annual Returns

To calculate a simple average, we just need to add all these returns together and then divide by the number of years (95). This calculation reveals that from 1926 through the end of 2020, the S&P 500 has averaged a 12.1% annual return.

Boom!

There you have it. Case closed! Twelve percent per year is what you should expect in the market. And look at my-old-financial-planner-self from earlier taking care of you by presenting such a conservative bar for your expectations— with my 6%, 8%, or even 10% projections.

It’s true: the simple average of the market’s annual returns comes out to 12.1%!

An advisor trying to bring his point home might continue with, And sure, everyone knows that the stock market falls sometimes. Right? But until 2008, it had never realized a negative annual return over any 10-year period, and even then, that was only a 1% average annual loss.¹⁶ They could continue, And when averaged with the decade prior, you would have realized a respectable 8% annualized return. Pretty great how that works out, right?!¹⁷

I started my career with one of the largest financial planning firms in the country. I was trained to show people that over any 15-year period, the stock market has never lost money! (Over the last 95 years at least.)¹⁸

Figure 1

S&P 500 15-Year Annualized Returns

Note: Average annual returns for the 15-year periods ending in 1941 (1926–1941) through 2020.

Before the crash in 2008, one could have created compelling marketing material making a similar claim except for every 10-year period. Note how easy it is to manipulate statistics: when the 10-year data are no longer helpful to prove a point, a slight adjustment can be made in order to continue selling the same story.

All these numbers are true. And if my goal was to just convince you that you should invest in the market and let it ride no matter what—that buy-and-hold strategy (which we’ll debunk soon¹⁹)—these data present a compelling case. It especially does so for the everyday investors who are not really interested in, and don’t have the time to, thoroughly read between the lines. They just want someone they can trust to help them know what meaningful action they should take today in order to most efficiently achieve their goals as soon and as safely as possible.

Industry Use of This Myth

These are the facts taught in universities and industry certification courses. They’re the facts shared by financial professionals. They’re the facts regurgitated by pundits and other finance personalities.

Those figures lead you to conservatively expect at least a 10% return on your market investment dollars over time. Right? It almost makes you think an 8% assumption would be playing it super safe. Don’t you think? But more than anything, it can make you feel like where else can I so easily get such a high consistent return?!

That’s how the data are used—and they’re used masterfully.

When presented with the data of such high average annual returns, it almost seems foolish to not invest in stocks. Almost seems like you kind of have to—I mean, you’re so far from your money goals and where else could you expect such quick growth?

When you see those charts of the market never losing money over the long run, well … it almost feels like a sort of guarantee. The safe long-term bet. A sure thing even.

This information is used to convince you that you’d be silly to not keep your money invested in the market, no matter what—no matter how chaotic the price movements may be.

Conflicted Interest

Why would anyone care whether or not you’re invested in the market?

Before we explore the reality of these investment return figures, let’s take a moment to consider who stands to gain from you—the collective you, the investing masses—being invested in the market and why.

When you pull your money out of the market or an individual stock, your actions, in a very small way, put downward pressure on the price per share of that stock and on the valuation of the market as a whole. The more people who pull their money out of the market and move to other investments, the more downward pressure there will be.

The opposite is also true: as you invest more and more of your money into stocks and the market in general (think: automated contributions to your retirement accounts²⁰) this pushes stock prices higher.

Consider the many powerful corporations who derive their value from their respective stock’s price. Think of the benefit to these companies as the masses mindlessly push their stock higher by buying their shares without any thoughtful evaluation. Many executives at these corporations have incentivized compensation directly linked to their stocks’ price.

Consider the many influential people with hundreds of millions to tens of billions of their own dollars tied up in the stock market or with an individual company (think: Jeff Bezos with Amazon²¹ or Elon Musk with Tesla²²—the two wealthiest people in the world both derive more than 90% of their net worth from their company’s stock—the list goes on).

If investors en masse decide that the stock market is not, in fact, where they would like to just mindlessly store their accumulating wealth … some extremely rich and very influential people and corporations stand to lose a lot of money.

Beyond all that, think about the massive financial industrial complex …

Consider the billions of dollars raked in each year from investment firms’ and their advisors’ management fees.²³

Consider the billions of dollars earned by fund companies—where millions of individuals have trillions of dollars invested (Vanguard and Blackrock, for example, both generate hundreds of billions of dollars each year from their funds).

And that’s not even all …

Consider the more recent political ownership of the stock market’s performance—how the market is used as a barometer of how well people think the economy or a president is performing.

There are countless influential individuals and institutions who benefit from you (or at least, the collective you) investing in and staying in the stock market.

When you understand that, it’s not hard to believe that these same people and companies might want to massage the data in order to influence (read: manipulate) the way you think about investing … as uncomfortable as this reality is to fully take in.

The Reality

The reality is it’s not as easy as just calculating a simple average. This is one of the big problems with throwing out loose expectations and glossing over the details. What else can you (as the potential investor) do with them? Are you expected to take them with a grain of salt? To do your own research to understand the real nuanced connection between market movements and their potentially disastrous effect on your retirement?

Maybe you are expected to do all that … or, at least, maybe you should.

Regardless, it’s safe to say that most do not. Most don’t know that they should. And if they do, they don’t know where to begin. Most individual investors don’t know how to crack the protective and complex surface of the machine I’ve just described

John and Mary

You’ve already met John. When he and Mary were younger and newly married, they were determined to make adult financial decisions. Good for them!

At that point, John was making a slightly-above-average starting income of $50,000. He expected annual raises to the tune of 3%. They wanted to be able to retire at age 65 (they were 22 then) and pull out the inflation-adjusted equivalent of $50,000 every year thereafter (assuming the historically based 2.5% inflation²⁴).

Figure 2

John and Mary’s Retirement Savings Plan

John read several popular books about planning for retirement. He listened to the podcasts of some prominent financial personalities. Several of the experts he was following had proven the stock market’s