By: Gene Walden, Senior Finance Editor November 21, 2017
Lively banter can be the hallmark of a holiday gathering, but sometimes the conversation turns to finance and investing. If you’re like many Americans, that’s a topic that can make your eyes glaze over faster than the tryptophan in your holiday turkey.
Whether it's wild investment predictions from your uncle Leo, or unfounded advice about investing from aunt Patty, it can feel like everyone thinks they're an expert.
But you don’t have to feel left out of the conversation next time your guests start passing hot stock tips along with the hot crossed buns. This season, you can flip the script, gain some street cred, and take back the holiday from your dinner table gurus – even if you don’t know a tech stock from turkey stock.
Remember this: Predictions about specific stocks, bonds or investment markets are mere conjecture. While many investment professionals and experienced individual investors may have a good grasp of sound investment principles, such as diversification and risk management, no one can see the future, no matter what your uncle Leo says. No matter how self-assured your guests may sound, no matter how plausible a case they make for the future performance of any investment, the reality is, they’re just faking it. The future is unknowable.
The next time the dinner talk turns to investing, here are some conversation starters designed to call the bluff of any relative with a hunch on the market. You may not know anything about the markets or the economy, but you don't need to. If you deliver your lines convincingly, those posers may start to doubt their own convictions and look at you with a whole new sense of awe.
Start with this question:
Question 1: “If you had to buy one put right now, what would it be?”
Regardless of their answer (there’s no single correct answer to this), you can start bluffing your way to respectability – while chipping away at their pretentions – with a response like this:
“Really? That’s what you’d do? Well, you’re a braver man/woman than me! But hey, to each his/her own.”
Chances are, with a response like this, your guests will demand to hear what you would do instead. That’s an ideal time to set them up by demurely deferring to their acumen with a comment like: “Oh gosh, I’m just trying to glean some insights from your vast expertise. You’re the Wall Street wizard. Let me ask you this….”
“If you had to buy one put right now, what would it be?”
Translation: A put is an options contract that gives the investor the right to sell shares of a stock (or other underlying security) at a set price within a set time period. For example, if an investor believed XYZ stock was going to drop in price in the next few weeks, they might buy a put option on that stock at the current price – let’s say $30. If XYZ dropped from $30 to $20, they would gain about $10 per share (minus the cost of the put option and other transaction costs) by exercising their option. If the stock didn’t drop in price, or they failed to exercise their option, the put option would expire and the investor would have a loss equal to the cost of the put. Options are considered to be riskier than individual stocks and would not be suitable for most investors.
Question 2: Which do you prefer, fundamental or technical analysis?
Again, whatever their answer, be ready with a follow-up designed to further sow the seeds of doubt, like:
“You’re joking, I hope. Do you really think that’s a good idea? I mean….just sayin’, but hey, it’s your money, not mine, right?”
“Which do you prefer, fundamental or technical analysis?”
Translation: These are two popular techniques for analyzing stocks. Technical analysts base their buying and selling decisions on factors such as price trends of the stock, trading volumes and chart patterns, whereas fundamental analysts are more concerned with the financial performance of the company behind the stock, basing their decisions on factors such as the company’s assets, sales, earnings, and management. Some analysts use a combination of both fundamental and technical analysis in assessing the value of stocks.
Question 3: If you had to short one stock right now, what would it be?
Again, whatever their answer, be ready to come back at them with something like this:
“That’s your plan? Honestly? Now you’re starting to scare me. But hey, good luck with that one.”
“If you had to short one stock right now, what would it be?
Translation: To “short” a stock is to bet against it by essentially borrowing shares (through a broker) and immediately selling them at the current price in the hope that you can buy them back later at a lower price. In the process, you would make a profit on the difference between the sell price and the buy price. But if the stock goes up, you would lose money – in fact you could lose a considerable amount. For instance, if you short 100 shares at $20 a share ($2,000 total), and the price of the stock doubles to $40, buying back the shares would cost you double -- $4,000 – giving you a $2,000 loss on the trade. You can short many types of investments including stocks and commodities. Selling short is considered risky and would not be suitable for most investors.
At this point in the conversation, you’ll likely be pressed again to give your opinion on the subject – which makes for the perfect time to slip in the clincher to seal the deal. Without hesitation and with all the brashness you can muster, offer this simple plug: “Short the pound, of course. No-brainer.”1 Then wish them a happy holiday, and head to the dessert table for a nice slice of mincemeat pie – a market genius in their eyes.
You don’t have to be a market genius to participate in the investment markets. In fact, even investment neophytes can own a stake in a professionally managed, diversified portfolio of stocks or bonds – or a combination of both – through mutual funds. Thrivent Mutual Funds offers more than 20 mutual funds that give investors the opportunity to participate in the stock or bond markets with the convenience of broad diversification and professional management. (See: Asset Allocation Funds Can Help Tame Volatility)
One other important benefit of Thrivent Mutual Funds is that you don’t have to be rich to begin investing. You can start with an investment plan of as little as $50 a month.2
1 This is in no way meant to be construed as an endorsement of “shorting the pound” or any other investment strategy, but merely an example of a whimsical, hypothetical response someone might give within the context and intent of this illustrative exchange. Other similar responses, such as “Short the shekel;” “Go green;” or simply, “One word: ‘plastics’,” are all potential hypothetical responses in this context, with the understanding that the future is unknowable and that your suggestions are merely unsubstantiated conjecture offered in the spirit of whim and holiday cheer.
2 New accounts with a minimum investment amount of $50 are offered through the Thrivent Mutual Funds "automatic purchase plan." Otherwise, the minimum initial investment requirement is $2,000 for non-retirement accounts and $1,000 for IRA or tax-deferred accounts, minimum subsequent investment requirement is $50 for all account types.
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