Barry Ritholtz - How Not to Invest | Prof G Conversations

About this video

• Video Title: Barry Ritholtz - How Not to Invest | Prof G Conversations
• Channel: The Prof G Pod – Scott Galloway
• Speakers: Scott Galloway, Barry Ritholtz
• Duration: 44:07

Overview

This video features a conversation between Scott Galloway and Barry Ritholtz, discussing Ritholtz's new book, "How Not to Invest." They explore common investing mistakes categorized into bad ideas, bad numbers, and bad behavior, and delve into topics like emotional investing, diversification, the role of fees, alternative investments, and global market perspectives. Ritholtz also shares insights on the impact of geopolitical events and technological advancements like AI on investment strategies, along with personal reflections on luck, gratitude, and life lessons.

Key takeaways

• Investing Mistakes: Ritholtz categorizes common investing errors into three buckets: "bad ideas" (holding false beliefs), "bad numbers" (misunderstanding market/economic data), and "bad behavior" (self-destructive actions).
• Emotional Investing: Human emotions, driven by primal survival instincts, are often detrimental to making sound investment decisions. Successful investing requires managing these emotions and employing a more rational, long-term approach (Thinking Slow, as described in Kahneman's work).
• Diversification is Key: Despite being a seemingly "boring" strategy, diversification is crucial for managing risk and achieving stable, long-term gains. Over-concentration in any single asset or sector can lead to devastating losses, as Ritholtz experienced.
• The Cost of Fees: High fees, particularly in alternative investments, significantly erode returns. Ritholtz argues that many actively managed funds and hedge funds, despite high talent, have historically underperformed benchmarks after fees.
• Core and Satellite Approach: Ritholtz advocates for a core-satellite investment strategy, where the core is built on broad, low-cost index funds (like Vanguard) providing market beta, and satellites are used for targeted bets on specific sectors or themes.
• Geopolitical and Technological Impacts: The conversation touches on how geopolitical shifts (like changes in US foreign policy and European realignment) and technological advancements (like AI) can create both risks and opportunities in investment portfolios.
• The Role of Luck: Many successful investors acknowledge that luck and serendipity play a significant role in their achievements, in addition to hard work and intelligence.
• Gratitude and Avoiding Comparison: A key life lesson shared is the importance of gratitude for what one has and avoiding constant comparison to others, which can lead to unhappiness and poor decision-making.