The 10th Man

The Beginning Of Your Investing Career

January 4, 2018

I got a call from my former assistant a few weeks ago—she’s off working at an accounting firm, after successfully completing a year of service at The Daily Dirtnap. She’s saving real money for the first time, in her 401(k), and wanted to know what to invest in.


This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with this must-read report from Jared Dillian.

It’s the hardest question in the world to answer. Impossible. As Commodus said in Gladiator: “It vexes me. I’m terribly vexed.”  Now is actually the worst time to begin your investing career, because stocks and bonds are overvalued, and most people are constrained to investing in stocks and bonds. For sure, there are pockets of value here and there—and that’s what I try to focus on in my letters—but certainly nothing that’s going to be an option in a 401(k) plan.

Being an Alpha Society member can help you…

Build a profitable portfolio

Build relationships with John Mauldin and the Mauldin team

Build a legacy you can bestow to your kids

Find out more

In fact, her 401(k) defaulted her to a 2060 target retirement date fund, which isn’t unreasonable, but a 2060 retirement date fund is going to be a lot of stocks, and in particular, a lot of growth stocks. To make matters worse, if there is a stable value option, it isn’t going to yield diddly.

Here is the sad reality: your starting point matters. Say you’ve cobbled together $10,000 to invest. If you invested it all in the summer of 2007, you are very unhappy. If you were lucky enough to have a starting point of March 2009, you are extremely happy. Actually, we can quantify it.

We ran some numbers here internally, and if by pure chance you began your investing career in the summer of 2007, and put it all in the S&P 500, you’ve annualized at about 6%. If by pure chance you began your investing career at the lows in 2009, you have annualized…16.5%. That is a massive difference, entirely due to luck.

So what is the answer?  What do you tell someone who is chomping at the bit, ready to deploy that cash?  Wait for two years?  What if the market is higher in two years?

It is really, really hard.

Dollar Cost Averaging

You can’t tell people to wait, because the future is unknowable. What you can tell them is to not plop it in the market all at once.

In the old days, like the 90s, the wisdom was that you should dollar-cost average into your investments. You should send a $300 check every month, whether the market was up or down. Timing the market is something that should only be attempted by a handful of people, so instead of timing it, make continuous contributions. In practice, it can be hard to do, because people get excited by higher prices and contribute more, and demoralized by lower prices and contribute less.

The same applies here. If a novice investor had a $10,000 nest egg to start with, my advice would be to piece it out $1,000 at a time for ten months, which would reduce the risk of dumping it all in at the highs.

There is a lot to be learned here. Even if you are a tactical investor like myself, there is a lot of risk around entry and exit points. As I’ve gotten older, I’ve learned to average into trades and average out of them. After all, it’s not like I’m sitting on a trading floor anymore. I have no particular edge in finding the precise point to enter a trade.

What About Valuations?

But what about the idea that equity valuations are objectively high?  Buying expensive stocks isn’t always a bad idea, but it’s a lower expected value trade.

Well, one way around this is to focus on stocks that are cheap. Lucky for us, there is a factor for this: value stocks. In 2017, growth stocks massively outperformed value stocks, so investing in value would be a kind of hedge against a market downturn. Of course, even value stocks are overvalued by historical standards, but it’s a good option in the spirit of doing less harm.

You can also find sectors that are overvalued, but you’re taking on a lot more idiosyncratic risk.

You can also diversify into other asset classes. Like bonds, but be specific about which types of bonds. One thing that people like myself are paying close attention to is the fact that commodities (hard assets) are more undervalued relative to financial assets than at any point in recent history. Commodity investing is fraught with all kinds of complex risks, but investing in companies that produce commodities is relatively straightforward.

The trouble with beginning your investing career when everything is expensive is that you are a novice, and you’re not yet sophisticated enough or creative enough to figure out workarounds. So most people are just going to have to take it on the chin.

This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with The 5 ETF Trading Strategies You Should Know About Before Investing, from Jared Dillian.

The good news is that if you were the unluckiest person in the world, and you put it all in play at the top in ’07, you still made 6% over the last 10 years, which is better than a kick in the pants!

Speaking of a kick in the pants, check out this month’s episode of The Monthly Dirtcast where we talk to Vancouver real estate agent, blogger, and noted bear Steve Saretsky, who has some stories that will melt your brain.

Jared Dillian
Jared Dillian


Get Thought-Provoking Contrarian
Insights from Jared Dillian

Discuss This


We welcome your comments. Please comply with our Community Rules.


Dallas Kennedy

Jan. 7, 11:46 a.m.

Most 401k’s allow you to open a self-directed brokerage account. If so, and if the canned choices are not great, that’s what to do.

Jared’s got good advice here. I would add one more comment, which is to go global. There are plenty of equity markets around the world that are objectively, absolutely undervalued. Reduce your home bias.

Jan. 5, 12:53 p.m.

If her 401k is like most other peoples, she has less than a dozen run-of-the-mill, steady-eddie funds and some targeted retirement funds. Maybe her question was, “With so few, lame account options, what do I do with my 401k investments?”. Perhaps you can answer that one next week.

jack goldman

Jan. 4, 11:19 a.m.

Markets do 16% a year. Main Street man gets 2% or less. Wealth is transferred from Main Street to Wall Street using globalism, technology, immigration, counterfeit currency, and war. Real wages in silver money are down 40% from 1966 to 2016. Nobody cares.

Use of this content, the Mauldin Economics website, and related sites and applications is provided under the Mauldin Economics Terms & Conditions of Use.

Unauthorized Disclosure Prohibited

The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Mauldin Economics reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited.
Participation in such activity is grounds for immediate termination of all subscriptions of registered subscribers deemed to be involved at Mauldin Economics’ sole discretion, may violate the copyright laws of the United States, and may subject the violator to legal prosecution. Mauldin Economics reserves the right to monitor the use of this publication without disclosure by any electronic means it deems necessary and may change those means without notice at any time. If you have received this publication and are not the intended subscriber, please contact


The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, ETF 20/20, Just One Trade, Transformational Technology Alert, Rational Bear, The 10th Man, Connecting the Dots, This Week in Geopolitics, Stray Reflections, and Conversations are published by Mauldin Economics, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments.
John Mauldin, Mauldin Economics, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.
Mauldin Economics, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Mauldin Economics publication or website, any infringement or misappropriation of Mauldin Economics, LLC’s proprietary rights, or any other reason determined in the sole discretion of Mauldin Economics, LLC.

Affiliate Notice

Mauldin Economics has affiliate agreements in place that may include fee sharing. If you have a website or newsletter and would like to be considered for inclusion in the Mauldin Economics affiliate program, please go to Likewise, from time to time Mauldin Economics may engage in affiliate programs offered by other companies, though corporate policy firmly dictates that such agreements will have no influence on any product or service recommendations, nor alter the pricing that would otherwise be available in absence of such an agreement. As always, it is important that you do your own due diligence before transacting any business with any firm, for any product or service.

© Copyright 2018 Mauldin Economics