5 Stock Trading Secrets: Hype or Legit?
I’ve taken a look at some touted insider investor secrets by Liz Clayman, a former Business Fox anchor, and explain whether they’re just hype or grounded in good advice.
Rule #1: Start Now
Quick Take: Strongly valid.
The earlier you begin investing, the more time compound interest has to work in your favor.
Starting young helps smooth out market volatility and gives your capital more runway for growth. Even small, consistent contributions over time can outperform larger, late investments.
This advice aligns with virtually every sound investing philosophy, including dollar-cost averaging and retirement planning.
Verdict: Highly credible and foundational advice.
Rule #2: Don’t Pay Someone to Invest Your Money
Quick Take: Mixed; context matters.
Claman likely means that high-fee active managers often fail to beat the market net of fees, which is statistically true, on average.
DIY investing using low-cost ETFs or index funds is a great alternative.
However, not everyone has the temperament, time, or knowledge to invest solo. A good fiduciary financial advisor can help with tax strategy, estate planning, insurance strategies, behavioral coaching, and other matters beyond index investing. All of which can be worth paying for.
Also, “beating the market” isn’t everyone’s goal and just because a manager doesn’t do that doesn’t mean they don’t add value. It’s all about meeting the client’s goals, whatever they may be. For example, a client might want to outperform their domestic inflation rate by 3% per year net of fees at half the volatility of equities and with a drawdown cap of 15%.
If a manager has the ability to do that, that can be worth paying for. To that type of client, what the broader stock market does and whether their portfolio over- or underperforms that particular benchmark isn’t relevant to them.
Verdict: Can be valid for many index fund investors, but too generalized. Quality advice can be worth the fee.
Rule #3: Wait for the Sales
Quick Take: Sound in principle, risky in timing.
This is a nod to value investing; in other words, buying when stocks are “on sale.” But most investors lack the discipline to buy during sharp declines.
Instead of “waiting,” dollar-cost averaging over time tends to be a more realistic strategy. In other words, using their savings rate to consistently invest and maintain their target allocations. Still, buying when valuations are low is statistically correlated with higher long-term returns.
Verdict: Philosophically solid, but should be paired with risk management and long horizons.
Rule #4: Understand the 110 Rule
Quick Take: Traditional heuristic, but overly simplified.
The “110 rule” suggests subtracting your age from 110 to determine your stock allocation. For example, a 30-year-old would be 80% in stocks, 20% in bonds. While it offers a simple starting point, it doesn’t account for individual risk tolerance and goals.
Modern portfolio theory and retirement planning tools now focus on risk capacity, sequence of returns risk, and dynamic glidepaths. Many advisors recommend staying more aggressive longer, especially with rising life expectancy.
Verdict: A bit of an outdated heuristic, but still sometimes viewed as a conceptual starting point; customize to your needs.
Rule #5: Don’t Run from the Bear — Hug It
Quick Take: Smart mindset, if you can handle it.
Bear markets are part of the cycle. Historically, they’ve always been followed by recoveries as indexes heavily represent profit-making companies that collectively grow their value over time. “Hug the bear” means embrace volatility, stay invested, and even increase your position if possible. This behavior differentiates successful long-term investors from emotional ones who sell at the bottom.
Behavioral finance research shows that loss aversion leads many to sell during downturns, missing the rebound. So this rule is more psychological than tactical, but incredibly important.
Also, focus more on what your portfolio earns you organically (i.e., the underlying earnings of the asset mix), rather than fluctuations in nominal values.
Verdict: Good mental framing, especially for investors prone to panic.
Bottom Line
They’re general principles that outperform hype.
Overall, Claman’s five rules reflect classic long-term investing wisdom with a strong behavioral foundation. Some advice (like Rule #2 and Rule #4) can be oversimplified or misapplied, but the core principles – start early, stay invested, ignore noise, buy when others are fearful, and keep fees low – are solid.