Is Your Friend Really the Best Stock Picker? The Truth Behind Market Hype

Do you have a friend or colleague who is always boasting about his returns on that one stock he bought when no one else knew about it? (Notice that I’m using the male pronoun 😊). It invariably makes you feel not as smart, lucky, or successful. You might also notice that this chatter is more common when the market is doing well rather than during a bear market.

In my decades of reviewing tax returns, I have seldom seen these gains reflected in incomes. Often, I see tens of thousands of dollars in capital losses that people carry forward on their taxes (you can only deduct $3,000 of losses each year that exceed the gains). People usually share their successes more often than their losses, which is the case most of the time.

So, the next time you hear about an amazing stock that will change the world, take heart in your boring portfolio that steadily grows over time. Consistent, long-term growth often beats the highs and lows of risky investments.