"Avoid cliches like the plague." That excellent piece of writing advice is something I've tried to take to heart (oops, that's one) in my own efforts over the years.
It's doubly difficult, though, in the world of finance and investing. Far from avoiding cliches, the industry seems to live for them. If I was feeling generous, I'd suggest that jargon and cliches are a form of verbal and written shortcut that help improve communication. Less generously, perhaps it's because such language is the indispensable toolkit of the financial salesman whose job it is to part you from your money.
![Anyone can make money in a bull market – but why wouldn't you try to beat the index?](/web/20170216084312im_/http://www.smh.com.au/content/dam/images/g/u/a/b/4/e/image.related.articleLeadwide.620x349.guddnu.png/1487205465274.gif)
The worst one is "blue chip". In theory, it should mean the very best companies that present the lowest risk investments; the stocks that belong in the portfolios of widows and orphans. In reality, it's applied to about 10 times as many companies as it should, and has become a by-word for "a well known company that the client will buy without thinking, because it's old and everyone knows its name".
There are plenty of others, but perhaps my second-least favourite is the phrase "it's a stock-picker's market". In other words, if you want to make money, you have to be good at what you do. The inference is that sometimes the whole market just goes up, and any Tom, Dick or Harriet can make money. But in a "stock-picker's market", gains aren't so broad-based, and stock selection becomes important.
Like all cliches, it has a kernel of truth at the core. Yes, almost anyone can make money on the ASX when the bulls are running hard. And yes, when the market is going nowhere (or down) there will always be those companies that buck the trend. And a good stock picker might just be able to identify them.
But it's a lazy cliche. After all, even if a "rising tide lifts all boats" (see what I did there?), who wouldn't want to do even better than the market? And in a flat or falling market, why would that change? It also neatly (but fallaciously) suggests that such a stock picker can simply read the tea leaves and do well over any time period (from days to decades) and irrespective of what happens more broadly on the ASX.
Oh, that's the inherent promise, of course. Or at least the inference the salesman wants you to draw: "It's a stock picker's market and – wouldn't you know it – I'm a stock picker. What are the odds? I guess I'll take it from here…".
Here's the real truth: you have two very decent options. You can either accept that it's always a stock-picker's market and try to beat the index. After all, if you have the time, interest and/or someone you trust to help you, why wouldn't you try to get the best possible result, regardless of what the market is doing? Or you can eschew stock-picking, buy a very low-cost ETF that mimics the performance of the ASX, and get the market return with zero effort and no fuss.
Foolish takeaway
If you had matched the market return over the last three decades, you could have turned $10,000 into over $150,000, according to index fund manager Vanguard. And, frankly, that's a lower return than long-term averages suggest. If you tried to beat the market, you took additional risk but with the potential for additional upside. Either is a perfectly sensible strategy. But listening to someone tell you when it is – and isn't – a stock-picker's market?
Well that cliche is just as dumb as a box of hammers.
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Scott Phillips is the Motley Fool's director of research. You can follow Scott on Twitter @TMFScottP. The Motley Fool's purpose is to educate, amuse and enrich investors.