By Steven M. Sears

In the beginning, hedge fund managers have the experience and clients have the money. At the end, clients have the experience and hedge fund managers have the money.

Remember that when you listen to investment experts. This is especially relevant now.

It's hard to remember a time in the markets that was harder to analyze, yet there's a bull market in expert advice even as thoughtful people are pondering President Donald Trump's efforts to change the framework that has governed commerce since World War II.

International markets, which have long existed in America's shadow, are suddenly being touted as smart ways to reduce Trump-related risk. The fervor is reminiscent of the enthusiasm that recently characterized copper. Analysts, strategists, and pundits confidently said the commodity would surge on demand for electric vehicles and clean energy. Copper still trades near its late-2011 price.

Juxtapose the advice givers against investors with decades of success. When was the last time Jeff Yass publicly said anything about what others should buy? Never. Most people don't know Yass is a founder of Susquehanna International Group, which started trading options and now dominates markets all over the world.

Warren Buffett, whom everyone knows, reportedly reads all day and says he listens to far more investment ideas than he buys.

The difference between Buffett and Yass, and the Wall Street experts, is the nature of their money. Experts risk other people's money -- often because they don't have much themselves.

Let that -- and the hedge fund quip -- remind you that it's OK to fight the feeling that you must be in constant motion, buying this or selling that to keep pace with market shifts.

Instead, be introspective, especially as the close of corporate earnings season will be followed by a more demanding market. Investors must now wrangle with economic reports, more tariff news, and the Federal Reserve's interest-rate policy.

Each economic report is a complicated puzzle piece. Tariff diplomacy is brutal and opaque. The facts shift daily, making forecasting interest rates difficult.

So, rather than making some seemingly bold change touted by Wall Street's marketing machine, assess your portfolio and your previous decisions. Ask why you own what you own. Check your cost basis. Compare stock performance against relevant benchmarks.

Let's use Baxter International as an example of how to get paid to cull underperformers from your portfolio.

The widely owned pharmaceutical stock trades at about the same price as it did at the end of 2011. Its 2.23% dividend yield is far less than that of most money-market funds. The stock has lagged behind the S&P 500 index for ages.

With Baxter's stock at $30.09, an investor who wanted to be paid to sell it could get about 40 cents for selling the June $31 call option. (Calls give holders the right to buy a security at a set price and time.)

If the stock is at $31 at expiration, the effective sales price is $31.40 (strike price plus premium). If the stock is below the strike at expiration, the strategy can be repeated or the stock can be sold.

This prosaic approach is a handy tool for investors as they shrug off the nonsense that often masquerades as expertise. The key risk: The stock rises from the dead and then sharply declines, leaving you holding less-valuable shares.

At day's end, a hallmark of enduring investment success is ignoring the malodorous stream of -- in deference to erudite readers, let's just call it nonsense -- peddled by those who know that convincing nonprofessional investors to buy into "the next big thing" is one of the easiest ways in the world to make money.

Email: editors@barrons.com

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June 04, 2025 01:45 ET (05:45 GMT)

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