Famed former Wall Street broker Jordan Belfort revealed the “ultimate strategy” for investors to make smart decisions and avoid the “sucker’s game” in investing.
“I strongly urge you not to be trading all day and buying and selling and investing in individual stocks. That is playing the sucker’s game. That’s the darker side of Wall Street,” Belfort said on “The Brian Kilmeade Show” Thursday.
Belfort argued “the better, more elegant way to invest” is to focus on long-term investment opportunities and avoid getting “caught up in the nonsense.”
“There’s a couple of different positions you want to own, but they’re long term positions, and you want to be reinvesting your dividends, adding on to these positions slowly over time,” he said.
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“By doing that, you get to extract all those massive dollars being created in the economy while protecting yourself against all the crap that Wall Street swings at you to try to get you to trade short term and buy options on the next shiny object.”
Belfort expanded on why focusing on long-term investment options is the “ultimate strategy” for all investors. He pointed investors specifically to the S&P 500.
“When I was on Wall Street, I was in that wild game of churning, burning almost public venture capital. I would never, like as an older and wiser man, I would never suggest that someone do that to make money,” Belfort said. “I’m talking about basically exposing yourself to all the best companies in America.”
The wolf argued using the long-term investments in the S&P will help maximize profits and avoid getting caught up in the Wall Street “corrupt casino.”
“Their index committee is literally poring over every company document, every report, and they’re replacing the index. So the 500 companies that are there today, are not going to be the same 500 companies that are there in 90 days. There might be one or two that changed over 10 years. Many of them change. So what happens is by buying an index, you’re getting exposure to at any given moment, all the best companies that are out there in the world.”
Belfort added that investing in the S&P will create dividends that an individual should reinvest back into long-term investments.
“Also by adding a little bit of money each month, each quarter, whenever you can… You could start off with little $10,000 or even less and end up in millions waiting for you when you’re ready to retire. And that’s through the process of long term compounding dividend reinvestment and adding a little bit each month to your portfolio. You’re not going to do that by buying individual stocks,” he said.
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He added that while Wall Street can create massive value, investors can lose big with short-term strategies and trying to time the market.
“Wall Street does create massive value. The problem is on the other side and then take it away. It’s like a corrupt casino. So not only [are] the odds stacked against you, but the dice are loaded. So you really can’t win. That’s when you play for the short term. The way you sidestep all that is by going to the long term and exposing yourself to the biggest companies and balancing out with another investment,” he said.
“You’re going to get whipsawed more often than not. If you be right one time, eventually you’re going to get a role in snake eyes, and it’s over.”
Short-term investing and focusing on individual stocks is a “dead end game,” Belfort argues. He added that even if an investor was a “professional” at the highest level,” “you’re probably not even going to get close to matching the performance of the S&P 500.”
Given the economic outlook and inflation fears, many investors may be fearful to commit to long-term investments. Belfort, however, encouraged individuals to “stay the course” and remember U.S. markets are the “best bad option” available.
“Markets go up, markets go down. Recessions happen, expansions happen. But if you look over the last 150 years, if you just simply stay the course and don’t buy and sell and don’t keep triggering taxable events, you’re going to end up making a ton of money because the U.S. economy over time expands.”
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“You can say we have all these problems, and we do. There’s problems with lots of debt and an interest rate too high. But you know what? We’re the best bad option out there.”
Belfort shared his market outlook as well, noting that while the U.S. could see a slight drop for a year or so, he remains optimistic that the U.S. economy will continue to expand.
“I’ve traveled all over the world, I’ve spoken all over the world, mentored people, and there’s something about the United States, the work ethic, the entrepreneurship. I don’t think we’re going anywhere down. We could go down for a year or two, but I think over the long term, the trend will continue.”