Quote · My First Million
Brutally honest guide to not losing money in the market
Where this was said
The cowboy account
At 6:01 · chapter starts 4:43
Sam Parr draws the analogy to cheat meals on a diet — is the Cowboy account just a concession to human weakness, or does it serve a real purpose? Ritholtz says both. The core problem is that financial media, which is 90% entertainment and 0% 'own a diversified portfolio and check back in a few years,' creates a relentless fire hose of excitement that has to go somewhere. [1] — Barry Ritholtz "Giving clients a small 'Cowboy account' to speculate with is the cheat meal that keeps them on the diet. Financial media is 90% entertainme…" 05:02 Rather than let that impulse contaminate the core portfolio, you give it a small sandbox to play in. But it's the gardening channel metaphor that really lands: a bucolic tree-cam channel gets bought by private equity, and suddenly every episode is manufactured conflict — wrong soil, too much water, not deep enough. The tree, meanwhile, just keeps growing and couldn't care less. That's the broad index. It just quietly compounds while financial media generates fake drama. Vanguard and BlackRock's combined $25 trillion in AUM is the ultimate refutation — investors voted with their capital, and passive won. The chapter also covers how the 2008 financial crisis was the psychological turning point that drove the over-40 generation permanently toward passive investing.
Giving clients a small 'Cowboy account' to speculate with is the cheat meal that keeps them on the diet. Financial media is 90% entertainment — if you don't give the impulse somewhere to go, it blows up your whole portfolio.
Vanguard's VOO ETF became the first ETF to surpass $1 trillion in assets, exemplifying the dominance of low-cost broad index investing.
Vanguard and BlackRock collectively hold $25 trillion in assets, the result of dominating low-cost index investing, especially after the 2008 financial crisis drove retail investors away from active management.
The Peloton CEO was worth $2–3 billion on paper, leveraged to the hilt, owned a $60 million East Hampton property — and then watched it all unravel when the pandemic trade reversed. Any individual stock can go to zero, and the CEOs are not immune.
Research by Hendrik Bessembinder at Arizona State found that the entire value creation in the stock market comes from just 1–2% of individual stocks, making stock-picking a 50-to-1 or 100-to-1 long shot.
Sam Parr described Lloyd Blankfein admitting he day-trades and has 70% of his net worth in individual picks. Barry Ritholtz responded in real time: 70% should be in muni bonds, and the rest can be a 'dick around' account. Even titans of Wall Street fall for the same behavioral traps.
