How Not to Invest

The ideas, numbers, and behavior that destroy wealth—and how to avoid them

Barry Ritholtz

• Publisher: Harriman House
• Year: 2025
• eBook ISBN:
  9781804091203
• Topic: Personal Development
• Subtopic: Personal Finance

This book was designed to reduce mistakes. Your mistakes with money. Tiny errors, epic fails and everything in between. You can do thousands of things right, but make just a few of the errors we discuss, and you destroy much of your portfolio. If you could learn how to avoid the unforced errors investors make all the time, you would make your life so much richer and less stressful. The counterintuitive truth is avoiding errors is much more important than scoring wins. How Not To Invest shows you a few simple tools and models that will help you avoid the most common mistakes people make with their money. Learn these, and you are ahead of 98% of your peers. Make fewer errors, end up with more money. How Not To Invest lays out the most common errors investors make. Barry Ritholtz reveals his favorite mistakes, including the lessons we can learn from some of the wealthiest and most error-prone investors. We all make mistakes. The goal with this book is to help you make fewer of them, and to have the mistakes you do make be less expensive.

Table of contents

• Cover
• Title Page
• Dedication
• Contents
• Praise for How Not to Invest
• Foreword by Morgan Housel
• Preface: Consistently Not Stupid
• How to Use This Book
• Part 1: Bad Ideas
• Section 1: Poor Advice
• Who do you listen to?
• The Halo Effect
• Nobody Knows Anything
• “Ladies and Gentlemen, The Beatles”
• Hong Kong Gun Fu
• Squid Games
• Broke Boomers?!
• Dow 36,000
• The Big Short
• Rich Author, Poor Readers
• More Bad Advice: The Wrong Crowd
• The End of Prediction, Inc.?
• Forecasting Chaos
• What are they Selling?
• Section 2: Media Madness
• 24/7 Financial Advice
• Lose the News
• TikTokInvestors
• “No matter how you cut it, you’ve got to own Cisco.”
• Why the Apple Store Will Fail. . .
• “Forget the iPhone: BlackBerry is still the one to beat”
• Can Anyone Catch Nokia?
• What Do Magazine Covers Tell Us?
• Gell-Mann Amnesia
• How News Looks When It’s Old
• Signal-to-Noise Ratio
• Use the News: Reengineer Your Media Diet
• Section 3: Sophistry: The Study of Bad Ideas
• Defining Investing: The Study of Human Decision-Making
• What Do You Believe? Why?
• On the Value of Not Knowing
• Learning to say “I Don’t Know”
• When Bad Ideas Don’t Die
• Shift Your Perspective
• The Good Ideas That Shaped My Investment Philosophy
• Part 2: Bad Numbers
• Section 1: Economic Innumeracy
• (Mis)Understanding Numbers
• Denominator Blindness
• Death, Taxes, and Layoffs
• An Epidemic of Selfie Deaths
• The Hidden World of Failure: What if Everything is survivorship bias?
• Survivorship Bias In Frames and On Wheels
• What Models Don’t Know
• There is Always a Recession Coming. . .
• Dollars Are For Spending and Investing, Not Saving
• Home Alone With Inflation (But No Wages)
• Denominator Blindness: Monthly Nonfarm Payroll Reports Edition
• Gradually, Then Suddenly
• The Plural of Anecdote is Data
• Section 2: Market Mayhem
• (Re)Defining Bull and Bear Markets
• The Significance of Secular Markets
• Secular vs. Cyclical Markets
• How Much Should Fair Value Matter to Investors?
• Earnings or Multiple Expansion?
• Mr. Market Is Rational After All
• How Externalities Affect Systems
• Do Externalities End Secular Bull or Bear Markets?
• Lessons From the 2022 Post-Covid Bear
• Living Through a Bubble Crash
• Excuses for Bad Crash Predictions
• The Secret to Perfect Market Forecasts
• How Many Bear Markets Have You Lived Through?
• Section 3: Stock Shocks
• Winner Takes All Applies to Stocks, Too
• Find the Best-Performing Stocks by Buying Them All
• Fund Managers Are Good Buyers but Terrible Sellers
• World’s Greatest Stock Trader®?
• What Do Traders Lie To Themselves About?
• My Worst Trades
• Sold 10% of Apple in 1976
• Learning From a Bad Trade
• How to Succeed in Active Management
• Finding the Needle in the Haystack
• Part 3: Bad Behavior
• Section 1: Avoidable Mistakes
• The Biggest Mistakes the Wealthy (and not so Wealthy) Make
• The Unlucky Billionaires’ Trifecta from Hell
• Don’t Put Half of Your Net Worth Into Anything
• Avoiding a Classic Investment Error
• Their. Advisors. Became. Billionaires.
• The Dangers of Sudden Cash Windfalls
• Risk-free Annual Returns of 50%
• Not Well Endowed. . .
• Outcomes Versus Process
• Your Biggest Unforced Errors
• Section 2: Emotional Decision-Making
• Blame Your Limbic System
• Risk Is Unavoidable. Panic Is Optional.
• Why Politics and Investing Don’t Mix
• Quit Doling Out That Bad-Economy Line
• Love or Hate Trump, It’s No Way to Invest
• After A Recession, The Least Rational Rise (Temporarily) To Prominence. Ignore Them.
• Here Comes Another Crash!
• The Spock Market
• Kiss Your Assets Goodbye When Certainty Reigns
• Do’s and Don’ts of Market Crashes
• Wall Street Pros Panic Over Covid While Mom and Pop Buy
• Section 3: Cognitive Deficits
• You’re Only Human; Here’s How That Hurts Your Portfolio
• Neuroeconomics
• Metacognition
• Epistemic Trespass
• Cognitive Dissonance Hurts Your Returns
• Everybody Loves A Good Story
• The Unpersuadables: Your Mental Models of Investing
• Reasons to be Humble
• Your Brain Wasn’t Built For This
• Part 4: Good Advice
• The Best Financial Advice I Can Give You
• 10 Steps To Becoming A Better Investor
• Avoid Mistakes
• The Amateur Advantage
• Have A Plan. Stick To It.
• Get Good Advice
• Index!
• Avoid Regret: How And When To Sell Big Winners
• Do You Need Bonds?
• Manage Your Taxes
• Offsetting Big Capital Gains
• Alternative Investments: HF/VC/PE
• Please Buy Yourself A New Car
• Buy Yourself A F*^king Latte
• Fail Thee Well
• Understand What You Control
• How To Get Rich In The Markets
• Conclusion
• Acknowledgments
• Footnotes
• Endnotes
• Index
• About the Author
• Copyright