Motley Fool Hidden Gems Investing - Ben Carlson on Why It’s Better to Avoid a Strikeout Than to Swing for a Home run

Episode Date: April 19, 2026

We at The Motley Fool are proponents of investing in individual stocks. But does that result in betting your financial future on too few companies? In this second of a two-part conversation, Motley Fool Senior Advisor Robert Brokamp speaks with Ben Carlson about the risks of investing in individual stocks, market valuations, balancing saving for the future vs. enjoying life today, and the career advice we give our kids. Ben is the Director of Institutional Asset Management at Ritholtz Wealth Management, the writer behind the “A Wealth of Common Sense” blog, the co-host of the Animal Spirits podcast, and the author of “Risk and Reward: How to Handle Market Volatility and Build Long-Term Wealth,” which will be available on May 12. Listen to our April 18 episode for Part 1 of this conversation. Host: Robert Brokamp, CFP®, EAGuest: Ben Carlson, CFAEngineers: Lauren Budabin, Bart Shannon Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement.We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode.Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

They've been beat over the head for so many years and decades of people telling them and people like you at The Motley Fool and there's people like me in a blog, hey, when stocks go down, you don't run out of the store because they're on sale, you rush in to buy. And it seems like people have actually learned. And so I make the case all the time that I think investor behavior has actually gotten better over time. That was Ben Carlson, author of the Wealth of Common Sense blog, co-host of the Animal Spirits podcast, and the author of the upcoming book, Risk and Reward, How to Handle Market Volatility and Build Long-Term Wealth. I'm Robert Brokamp, and today is part two of my conversation with Ben, during which we discuss the risks of investing in individual stocks, market valuations, balancing saving for the future versus enjoying life today, and the career advice we give our kids.

we've been talking about the performance of broad asset classes here right which you can get exposure to through a low-cost index fund but what about individual stocks which a lot of our listeners own because even though the u.s stock market has always recovered from every downturn not every stock does how do you approach investing in individual stocks yeah and i highlight the work of hendrick bess and binder in here and he's a professor at the university of arizona state and he talks about the fact that over the long haul the concentration of the u.s stock market is probably be more than you think. His definition of long-term is even longer than mine, probably. He's looking at like 100 years of data. And he says, basically, 60% or so of the companies

fail to keep up with T-bills or cash, right? Over the very long term. The other 30% and change, kind of more or less keep up with that, maybe a little better. And then something like 4% of all stocks are account for all the gain. So it's the big ones you know, Apple and Exxon and Amazon and Google and Nvidia. And these huge stocks, from a market cap perspective, have given investors all their gains over the past 100 years or whatever. And his point is, there's a lot of different ways to look at it. The one way to look at it is if you own just one of these winners, you're probably set. All of your other losers, you can offset all of them. So if you're an individual stock picker, as long as you have, again, that intestinal fortitude to stick with a long-term winner

like that, that can pay off a lot of bets. And it's almost like a VC portfolio, a power law. If you've owned Apple for about 20 years, it didn't matter how bad you did in your other portfolio picks. That one offset all of the losers. I think that back to the diversification piece, casting a wide enough net helps too, that you want to make sure that you are able to get some of these winners and have them in your portfolio in some way.

And so that's the diversification piece, is if you happen to miss out on a lot of these big winners, it's going to be tough. And the other thing is, obviously, he's looking at 100 years of data. So a lot of these companies that ended up going under and not making it, you could have gotten fantastic returns for one, two, three, five, seven years before these companies petered out, right? We're seeing now some huge brand name stocks, Nike and Disney,

and some of these really well-known companies that are doing really poorly right now, but owning them historically could have given you fantastic returns, right? So the timing of the ownership too, and sort of when you get in and get out, obviously that can matter too. But my personal takeaway is just like casting a wide enough net to make sure that you own these winners and finding a strategy that sort of forces your hand to hold them and not give up on them because it's easy to buy. I think it's easy to sell for an investment, right?

I think the holding is the hard part for a lot of people because no matter the company, no matter the index, no matter the asset class, you're going to have drawdowns eventually. And then you question yourself, do I lean into the pain and buy more? Do I sell it here and try to just recruit my losses elsewhere? but I think that's the hard part for people is just knowing when to get in, when to get out, and when to really hold still and not do anything. Talk about investing in the stock market. You just talked about buying and selling. The buying is, of course, with whatever you decide to buy something or with your 401k contributions, the money's always going in. But then there's the decision

about the selling. In your book, you bring up valuations to a degree. You mentioned how high they got during the dot-com bubble and way higher during the Japanese bubble. And these periods usually follow some pretty good years with some pretty good returns. And right now, the CAPE ratio out at the third highest level ever, partially thanks to the S&P 500 returning 13% a year over the past 15 years. Good bit above average. So is there a point where you think investors should say, you know, things are getting a little pricey. Perhaps I should take some chips off the table and is now one of those times? I think that is a very intelligent sounding argument that basically never works.

And the hard part is, Peter Bernstein talked about this in his book, Against the Gods. I really leaned on him heavily for the ideas of mean reversion. And he said the hard part about mean reversion is when the mean is moving. It's a moving target, right?

And I think you can make the case that the valuation, especially for the U.S. stock market, has been a moving target over time. It's slowly but surely moved up over time. And the thing is, to your earlier point about this time is different, this time really is different

because there's just more tech stocks than there were in the past. They're more efficient. They're not having to spend a ton of money on this property plan equipment that goes away really quickly. A lot of it is intangible assets and their margins are really high. They don't need as many employees as companies did in the past. Shiller's data goes back to 1871. Imagine comparing the stocks back then, these conglomerates and these railroad companies that had to have massive physical outlay of assets. It was hard work and it required a lot of labor and people spending on that labor. and you don't need that as much anymore with tech stocks.

So I think the fact that valuations have been trending higher actually makes sense. And you mentioned the 401k piece. I think that's another part of it. Barriers to entry were so much higher in the past to invest. Even when I first started out, I was telling someone this story recently. I wanted to buy a Vanguard index fund

my first year out of college. And I couldn't because the minimum was $3,000. I didn't have $3,000. Now, there are no commissions, right? If you want to buy a stock, it's free at your brokerage. you can buy fractional shares. The minimums are effectively eliminated, right? You used to have to go down to a brick and mortar place and fill out some paperwork and write a check and wait a few days and then invest. And usually you invested based on whatever that broker told you to invest

in. Now you can, on your smartphone, open an account, hook up your bank account, put some money in, invest within minutes. And so I think for young people, breaking down those barriers to entry has been great. And then you have this automatic investing revolution of money constantly going in, in 401ks, in brokerage accounts, in IRAs, having a consistent buyer of stocks, that has to change the shape of valuations as well. And that's something that's happened over the past 40 years or so. And I think even in the past 10 years, the reduction in costs and the ease of access to the market has to change the valuations. That's why I think trying to time these things, this is a long-winded answer to explain your question, trying to time these

things on valuations is very, because you have people who pick a line in the sand and go, all right, I'll buy when it gets back to the historical average of 16 times earnings or whatever. And then you realize, okay, that happened once in 2009 for like six months. And then it hasn't happened again since. Again, because that average is slowly but surely moving up. So I think trying to time based on valuations, it sounds really intelligent. Geez, stocks feel really expensive here. I'm going to sell. You could have made that same argument for the past 10 years, every year. So I do think that trying to do that, you can use valuations to set expectations, I think. I think that's perfectly reasonable. You know, valuations are way higher as they should be

because we've been in a long bull market. Maybe my returns will be lower in the future, but does it mean that you should all of a sudden turn off your contributions and sell stocks? And I think that's a harder proposition to get to for me. You've got to try breakfast at A&W. You've got to try breakfast at A&W. And what better way than with a delicious Pret organic coffee? Starting at just $1 all day, every day, now until December 31st. You've got to try breakfast at A&W.

At participating A&W locations in Ontario. Toward the end of your book, you include 10 ways to lose money as an investor, and one is to fight the last war. And you explain in the book what that means, right? You know, hedging the big risk after it just happened, buying a black swan fund after the crash already happened, getting an inflation hedge after prices have already risen, basically looking in the rearview mirror for your investing decisions. What's the last war that you think people now might be at the risk of mistakenly fighting. Well, it's interesting. I feel like this decade has sort of replaced the great financial crisis, which is music to my ears because I worked in the institutional

nonprofit space. And after 2008, everyone wanted to sell a black swan fund or a hedge fund or something that would hedge your downside risk. And it was fun. Everyone, all these big, huge institutions controlling billions and billions of dollars. That's all they wanted to invest in is these things that were take all the volatility away, hedge my downside. And they weren't concerned it all with the upside, right? There was no like, okay, what happens if things keep going up and working? It's like, no, this is career risk. I lost a lot of money. I'm not going to do that again. And that's when I learned about fighting the last war. I'm like, oh, I'm going to invest in what I wish I would have invested before this happened. If we could do it all over again,

here's what I would have done. Now I'm going to do it again. And the last risk is rarely the next risk, right? So I actually think it's interesting because I think what investors have been conditioned to do now is the opposite of that. It's no, we buy every dip. We go in. You saw it last year during the Liberation Day thing where the S&P fell almost 20%. In April, a ton of money poured in. It's funny. They've been beat over the head for so many years and decades of people telling them and people like you at The Motley Fool and there's people like me in a blog, hey, when stocks go down, you don't run out of the store because they're on sale. You rush in to buy. And it seems like people have actually learned. And so I make the case all the time that I think

investor behavior has actually gotten better over time. I think people are becoming better investors, especially individuals. Mom and pop forever was this nomenclature you use to talk about an unsophisticated investor, right? Oh, they're DIY mom and pop, retail investor. We're the pros. We know what we're doing. If anything, that's changed. The smart money, I think, now resides in retail in a lot of ways. But I think there are a lot of new investors who haven't experienced an extended bear market. 2022 was kind of a decent run of the mill bear market. We were down 25% and it lasted a year and a half to get back to the highs or whatever. But I think this extended drawn out where you have all these dead cat bounces and it feels painful and you're

down 35, 40%. There are a lot of investors that have experienced that. So I think you see what happens when people, they run out of dry powder. Wait a minute, I bought all the dips, now it's dipping again. Now what do I do? I think that's an interesting scenario to think about. When we have an actual recession, we haven't had a real recession in 17 years. We had that one month period in COVID, which was essentially manmade. We turned the Nintendo off, blew on the cartridge, put it back in, turn it back on again. And we threw a bunch of money at us. So that wasn't really a real recession, even though unemployment went up. So I think that's going to be interesting to see how... I don't know what the psychology will be for people when we have a real recession

and a real drawn out bear market. To, of course, invest, you have to save money. And you've written a book about retirement. And when I was starting out in my career in my 20s, it was all save, save, save. Now that I'm getting older in my 50s, I'm wondering about the balance there. And I'm bringing this up now because you cited a cartoon in your book by Randy Glasberger. It was basically a guy in a financial advisor's office. And the guy says to the financial advisor, explain to me why enjoying life when I retire is more important than enjoying life now. You've probably seen this in your life. I know I've seen it in mine where people stay for retirement for decades and then something happens. They have poor health or they don't actually get

the retirement they were looking for. They don't get to enjoy it. So for you as someone both who thinks about this stuff, has written a book about retirement and is in the financial wealth advice industry. What do you think is the balance there on enjoying life today versus saving for the future? Yeah. And I love that cartoon because it does perfectly encapsulate it. Like you, I was always an early saver. I think it was just the way I was brought up, my personality. I was frugal to a fault in my 20s and 30s. And it probably helped me get ahead in many ways. But I think that mindset can be taken too far. And I think the big change for me was having kids and realizing like, oh, they're not going to be

young forever. And at some point, they're going to want to leave the house. They're going to want nothing to do with me probably, right? Or when they're teenagers. So my wife and I had to make a concerted change of, no, we have to enjoy some of this now. What's the point of having a big nest egg when you're older and not enjoying it now? So I think there does have to be some balance. And working in the wealth management field, I've seen countless stories of people who ran a business their whole life. Great, we're going to sell the business. We're going to get a ton of money. Now we're going to enjoy ourselves because I've worked for 80 hours a week for 30 years. And we had a client who passed away not long after they sold the business. We had clients who were

going to retire early and sail around the world. And one of them got cancer and passed away. And so I've seen these stories where you do all this planning and then life throws you a curveball, right? The old saying, like, make plans and God laughs, right? So I do think that there has to be more balance. And that getting older to that, that's been a big thing for me is just seeing this stuff, losing loved ones and dealing with kids and all this stuff, that there does have to be and balance. And with our clients, we tell them the whole reason that you delay gratification is to enjoy it, right? So find ways to enjoy it, to find those things in your life that you're going to enjoy. It's not just about seeing number go up, right? Up and to the right, and I can never

spend it. There's a lot of people who for 40 years, they scrimp and they save and they have this mindset and then retirement hits and they go, I can't see the value of this portfolio go down now. It's got to just keep going up. And you have to kind of retrain your brain to enjoy the money. So I do think giving yourself little pleasures along the way and prioritizing the things that matter to you and spending on those things, you have to make sure you do that along the way too, because if you get too far along the way, it's hard to turn that mindset around. Let's move on to business and career advice, because I sort of feel like I didn't have maybe a front row seat, but I was in the auditorium to see the growth of Ritholtz

Wealth Management and your career. I was an early reader of Barry Ritholtz's blog. I interviewed him way back in 2009. And I've been an early reader of your blog and listener to your Animal Spirits podcast, which you co-host with Michael Batnick. And it's genuinely one of my favorite podcasts. So let's start with Ritholtz Wealth Management. What do you think is the secret sauce to the firm's success? It's funny. I wish we could have looked back and go, you know what? From day one, this is how we plan for things to go, right? But I read Barry back in the day too. He was one of the first blogs I read. I read him during the Grave Hunter crisis and Josh coming out of that right at the reform broker. And I was reading those guys and they kind of inspired me to start

writing. And I think the one, if there is a secret sauce, I don't think there really is, because I think so much of, it's really hard to give career advice because so much of it is just happenstance and chance. And I look at my career and it could have forked off in three different ways. I would have made one different decision. Right. And I never would have thought that like for me, even perusing content was even a possibility back in the day. So sometimes the timing just has to be right. But we all started writing because we enjoyed this stuff, not because we set out to like build a brand and start a company. Right. I think people now see the potential benefits of it and we get questions all the time from people like hey i want to start

doing content too and i want to build an audience i want to build a brand and i want to do all these things and i tell people like i went into this with zero expectations i was not trying to build an audience i was just i had felt like i had i needed an outlet i had something i had to say um i was in a career path where i wasn't really not that i wasn't enjoying it but it didn't align with my values my philosophy i'm kind of a principled person i think there's a right way to do things in a wrong way. And I wanted to do things my way. And so I was kind of butting heads with the organization I was with. And I thought, you know, I need an outlet. So I'm going to start writing. And it was kind of cathartic for me. But I did it because I enjoyed it. And if I didn't

enjoy it, I never was stuck with it. Because when I first started writing, no one was reading my stuff. But that also gave me a long runway to like get better at it. Because I wasn't very good when I first started. I think you can get better at this stuff, right? I was really bad at podcasting when I started. But we worked at it and tried to get better, you know. And I think a lot of these things. Some people are just born with this, these kinds of things, right? Some people are born to be great writers. They're born to speak. I don't think I was born with either of those gifts. I think I had to work at it. I think that's something is for people, but my only advice to someone is just put in the time and effort because a lot of people won't do that. And I think that's

probably even more important in the age of AI where the shortcuts are going to be easier than ever. And I think if you actually do put the time and effort in and you can kind of stand out from the crowd, I think that's the way to do it. And it's funny, once we all decided like, oh, people are coming to us. And it's funny, when I started writing, I had these financial publications and financial advisors coming to me saying, hey, I like the way that you explain this stuff in plain English. Can I use this for my clients? I never thought of that when I first did it. The audience I had in mind was my friends and my family, right? I'm writing for my father-in-law and my mother, so they understand this stuff. That's why I tried to like speak in plain English and sort of not

dumb it down, but just simplify and make these complex topics more digestible. And a lot of advisors were going, yeah, our clients, they're not finance people like us that are in this stuff all the time. They have regular lives. They're normal people. They don't have time. They need to look better and understand this stuff. And I think we just realized that in the financial services industry, you're not producing a product where you hand someone the widget at the end of the day, right? This went through our factory. We built it along the way, all the steps. Here's your widget. It's a service that requires trust. In a trust-based, faith-based business, people want to work with others that they sort of like and respect and communicating with people, whether

it's through writing or a podcast or video, is a great way to build that trust. And that's what we learned. And again, we didn't have that figured out on day one. But once we did figure it out, we said, okay, what are ways that we can do this even better? I think that's what we figured out is just the trust factor. You kind of narrow the window between a yes and a no from a client, right? Yes, this is a person or organization I work with or not. Now that I see what's behind the curtain. I don't really want to, but thanks anyway. So I think that's what we learned is just how important trust is in this whole process. Because financial planning is something that's just never done. You don't just hand someone a binder and go, here you go, go do it. It's a

process. You got to make sure that you want to work with these people for the long haul. That's a long-term relationship too. Yeah. I had a civil story. I was a financial advisor with what was then Prudential Securities. And the immediate people I worked with were good people. But otherwise I was put in positions where I was encouraged to sell things that I didn't believe And so I left and started working at the Motley Fool. I started as an editor, was not a great writer at the beginning, and then just improved it over time. And the podcast part is interesting, too, because I wrote literally hundreds of articles before I ever did the podcast. And then I would go to member events, and people would always bring up the podcast, because I think it's the personal connection, right? Yeah. Where it's on a page, you have personality. We're the Motley Fool.

You have a lot of personality in your articles. But it's not the same as that personal connection of having someone feeling like they're talking to you about their investments. And it builds that trust. Yeah. And I think we underestimated that part of it too. Yeah, you get feedback on your blogs, but you can kind of tailor your blogs and you edit it along the way.

But when you're sharing your own stuff and your people hear you talk, then yeah, you're right. It breaks down those walls even further. And on a podcast, they end up feeling like they know you, right? So yeah, you're right. The feedback you get is almost 10 times stronger than something that you write because, yeah, people, they can hear the inflections and hear what kind of person you are and your personality.

And I probably should have known this because I'm a listener of podcasts, right? But it's something that you kind of don't understand. And I guess if we're bringing this back to investment analogies, it's kind of a diversification strategy, right? You're casting a wide net to get in front of people. Some people just prefer to read. They want something in their inbox. They want to read it.

I hate to be like a generational person here, but the generations of, it's older investors tend to still be readers. And I still get emails from people all the time like, hey, how do I print out your article so I can read it on paper, you know? I think I know how old you are probably by saying that. And maybe it's younger, middle-aged people who are more into podcasting. Very young people are more into YouTube and stuff. And so, I think one of the things we've learned is you have to kind of go where people are, right? You can't force someone to consume your content just because you think it's great. You have to kind of find people where they're going to consume it. You gotta try breakfast at A&W

And what better way than with a delicious Pret Organic coffee, starting at just $1 all day, every day, now until December 31st. You gotta try breakfast at A&W At participating A&W locations in Ontario. Final question here, still related to your career. I don't think you're, first of all, giving yourself enough credit for your success, but you pointed out in your book that the best career advice you've ever received is to become indispensable to whoever you're working for.

And the way I've expressed it to my kids is always be looking for ways to add value. Don't do just what's expected of you. And you found a way to do that. Yeah, I think someone told me earlier in my career, go to your boss and figure out like the 20% of their job that they hate to do and take it off their plate for them. And especially, like you say, as a young person, I'm thinking of my kids too, like what kind of career advice am I going to give them, especially in an ever-changing world of AI? Because all these stories about what AI is going to do to the nature of work and that stuff does

terrify me thinking about what it's going to mean for my kids someday. So yeah, you're right. Even if you can't like plan out your career advice to a T, like I'm going to go down this path and I'm going to get this job and this, you know, yeah, I think being indispensable and just being a person that can be relied on. And I think just solving people's problems. We hired a guy in the last year or so at our firm who came to us and said, I can make the best charts for you. He sent us a chart book. He said, here, check out this chart book. And we were just in the process of overhauling our presentations, kind of saying, we need to make this look better. He says, here, let me do it for you. And we didn't even look for it. He became indispensable to us because he was doing something

that we couldn't do better and he could do it better than we could. And now he's part of the firm and we hired him on as like a temp at first. And he became so good that we couldn't let him go. Right? So I think that's the kind of thing that matters is just solving people's problems and making their life easier. Because people aren't going to necessarily go out of their way to be a mentor to you. Sometimes you have to make your own way and figure it out. And I think that's the point as a young person. Well, Motley Fool listeners, if you want to learn more from Ben, check out his blog, A Wealth of Common Sense, his Animal Spirits podcast, and pick up a copy of his new book, Risk and Reward, How to Handle Market Volatility and Build Long-Term Wealth, available

on May 12th. Ben, this has been great. Thanks so much for joining us. Thanks for having me. Thank you for listening. And thank you to Bart Shannon, the engineer for this episode. As always, people on the program may have interests in the investments they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes.

I'm Robert Brokamp. Fool on, everybody! We'll be right back.