MW Investors love Buffett and then ignore what he says. How to avoid these mistakes made in 2024.

By Barbara Kollmeyer

Larry Swedroe preaches discipline and accepting unpredictable markets

The S&P 500 might be ready to break with its worst losing streak since the start of the year if Nvidia can come through for Wall Street later.

No pressure, Jensen.

It's back to basics with our call of the day, from Larry Swedroe, who wrote several investing books and spent 28 years as principal and director of research at Buckingham Strategic Wealth. Speaking on the Excess Returns podcast, he chatted about common mistakes and big lessons from 2024.

No one can consistently get market and economic forecasts right. His top lesson expands on those annual Wall Street predictions, which last year largely undershot how well the S&P 500 SPX would do.

Swedroe said many investors might point to Peter Lynch or Warren Buffett as great investors yet take the opposite of their advice.

"Peter Lynch said he never tried to time the market, he was 100% invested in stocks. Buffett has told people that you shouldn't try to time the market, but if you can't resist, buy when everyone else is panic-selling and sell when everyone else is greedy," he said, adding that Buffett also once said he hadn't looked at an economic forecast in decades, because they were worthless.

"We have no good forecasts...at least when it comes to the stock market," he said. The only value is the "the fact they have a very, very wide dispersion of possible outcomes." MarketWatch's unofficial compilation of forecasts calls for the S&P 500 to end the year at 6,600.

Stay patient and disciplined through periods of poor performance. Not adhering to this advice is "one of the top and worst mistakes investors can make," he said, adding that pros are also guilty of not giving investments enough time to work.

Many investors consider three years or five years as long enough to judge an investment's performance, and others see 10 years as far too long. They don't understand that an underperformance can often mean favorable valuations and higher future expected returns, he explained.

"What investors have to understand is that your horizon had better be at least 10 years, should be longer, or you shouldn't be investing in any risk assets," he said, adding that every single risk asset "must go through long periods of bad performance."

Swedroe noted that the S&P 500 had three lengthy periods of underperforming T-bills - from 1929 to 1943, from 1966 to 1982, and then 2000 through 2012. There were great periods around those awful ones, if investors stuck it out, he said.

Investors who can't ride those out should diversify, which would create much smaller waves of ups and downs, and those "have much higher odds of success, especially for retirees."

The big takeaway? "Diversification is much more important when your horizon is short," he said. Note that diversification is swinging back into vogue for 2025, as investors dip back into China and Europe stocks and gains across markets spread beyond major technology names.

Another lesson: "Even with a clear crystal ball, markets are unpredictable." Swedroe asked what would happen if investors could have seen into the future before investing in 2023, which ended with a 23% gain for the S&P 500. Just some of what they would have seen: no resolution to the Ukraine war, escalating conflicts in the Middle East, interest rates remaining much higher for longer amid stubborn inflation, the manufacturing sector in a recession and the 10-year Treasury yield rising.

"I doubt a single, maybe one economist might have forecast that...so that shows you here's what really happened. Ask yourself would you have been able to ignore all of that and follow Buffett's advice to stay the course?"

One more lesson to share from Swedroe: Last year's winners are just as likely to be this year's dogs. This ties into one investor mistake made often: chasing performance. He said winners and losers can repeat what they did the prior year, or they can switch places.

"The only prudent strategy is to diversify and then rebalance staying the course because when something does poorly and ends at the bottom of your list, you're going to have to buy more...but eventually you are likely to be rewarded. Selling high to rebalance and buying low to rebalance is a far superior strategy," he said.

Read: The 'vibes' on Wall Street are starting to sour. Just look at these six charts.

The markets

U.S. stock futures (ES00) (YM00) are pointing higher, led by tech (NQ00) ready to turn around Tuesday's drop, as Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y inch up.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              5983.25    -2.15%  -0.48%  1.73%   18.02% 
   Nasdaq Composite                                                     19,286.92  -3.69%  -0.28%  -0.12%  20.72% 
   10-year Treasury                                                     4.317      -23.90  -22.10  -25.90  1.58 
   Gold                                                                 2952.4     2.03%   7.63%   11.86%  44.65% 
   Oil                                                                  70.24      -0.47%  -3.91%  -2.27%  -9.48% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Nvidia $(NVDA)$ will report results after Tuesday's close and investors are jittery. Salesforce $(CRM)$ and eBay $(EBAY)$ will also report later.

Lowe's stock $(LOW)$ is climbing after an earnings beat and same-stores sales growth.

AMC Entertainment $(AMC)$ shares are up after the movie-theater chain and meme stock posted a revenue surprise.

Super Micro Computer $(SMCI)$ shares soared after it made overdue financial filings.

New-home sales are due at 10 a.m. Eastern.

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The chart

Steven Blitz, chief U.S. economist at TS Lombard, provided the above chart, which shows changes in government and white-collar employment from Jan. 2023 to Jan. 2025. He said the economy tends to rise and fall with private employment, notably higher-skilled jobs, while government jobs tend to matter less. "The drop in government jobs is unlikely to be the negative some are positing," he said.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   SMCI    Super Micro Computer 
   PLTR    Palantir 
   GME     GameStop 
   TSM     Taiwan Semiconductor Manufacturing 
   BABA    Alibaba 
   AAPL    Apple 
   AMZN    Amazon.com 
   HOLO    MicroCloud Hologram 

Random reads

Internet loses its mind after two chatbots strike up a conversation.

Puppy Mountain high.

-Barbara Kollmeyer

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February 26, 2025 07:02 ET (12:02 GMT)

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