5 (More) Wall Street Expressions You Should Know
We continue our review of classic financial expressions, maxims and sayings every investor and money nerd should be familiar with.
“Buy when there is blood on the street”
Most investors buy and mostly sell based on their emotions, so they tend to buy high and sell low. This means that they buy stocks (or mutual funds) close to the peak of the market, when everybody is happy and excited and cocky. When the tide turns, they hang on for too long and often sell near the bottom of the market.
Of course, buying low and selling high is a much more rewarding strategy…
The expression “Buy when there is blood on the street” means that successful investors have the intestinal fortitude to buy when nobody wants to. They “buy low.” They buy when stocks are on sale.
“Stupid money vs. smart money”
Individual investors are often called “dumb money,” whereas institutional investors (major financial institutions, mutual fund companies and other Wall Street types) are labeled “smart money.”
Why? Basically because individual investors typically don’t have access to an entire research division, or a team of financial analysts, or years worth of financial data to make investment decisions. So they often invest based on instinct, hunches and emotions.
“Don’t confuse a bull market with brains”
What this means is that anybody can make money when the market is high and keeps going higher. You don’t need brains. But it doesn’t mean you’re a good investor. It only means that your investment choices are supported by a hot market. Don’t confuse the two.
“Don’t get pigitis”
“Rate pigitis” affects “income” investors, i.e. those who are trying to get high yields or high interest rates on their investments.
They see a stock or mutual fund paying a dividend of 10 or 15% and rush to buy it. Sadly, it doesn’t mean that the high yield is sustainable or the company or fund is viable. Sometimes, it’s actually a sign that the company executives are so worried about the sustainability of their business, that they try to incentivize investors by offering a high yield.
Bottom line: they look for the highest interest they can get, and forget all of the other criteria of a balanced portfolio: ratings, diversification, risk, position sizing etc.
Sadly, high interest is usually created to reward investors for the higher risk they take.
Sometimes it works out in your favor… and sometimes it doesn’t.
Rate pigitis is also called “chasing yield”.
On that note, there is another classic expression: “Bulls make money, bears make money, pigs get slaughtered.” This is an old Wall Streetism about sloppy and greedy investors. It means that you can make money in a market going up (bull market) or down (bear market), but sloppy investors will lose money in any market.
“When in doubt, stay out”
If your gut tells you not to invest, definitely don’t do it! If you have any doubt about putting your money into a new investment, don’t do it! Instead, keep reading and learning. That keeps your investing “tuition cost” way down!
There are many other expressions on Wall Street. Most were created based on decades of experience and observations, so most of them are well-founded. So believe them before you invest!
Phil Zeltzman, DVM, DACVS
Meredith Jones, DVM
Co-Founders of Veterinary Financial Summit