The Stock Market Myths Most Lawyers Fall For (Ep. 140)

Written By Adedayo Adekunle

If you’re a law firm owner with an analytical mind and a drive for success, chances are you’ve wondered if you could “beat the market.” Wall Street is flush with gurus promising secret formulas to pick the perfect stock or time the market just right. But the truth is, much of what we’re taught about investing is misleading and falling for these myths can cost you serious money.

In this episode, I break down the most common investing mistakes lawyers make, why they matter, and how you can set yourself up for genuine financial freedom.

Market Myths That Law Firm Owners Fall For

You know how vital it is to optimize every part of your business. The same goes for your investments. As Darren Wurz explains, even a seemingly small difference missing out on 1% in returns annually can add up to a 25% difference in your wealth after 30 years. Imagine growing your nest egg to $3 million versus $4 million simply by investing smarter.

That’s why understanding the real truth about the stock market is critical for every law firm owner committed to lasting success.

The Two Most Dangerous Stock Market Myths

Myth 1: You Can Out-Smart the Market with Technical Analysis

Technical analysis relies on the idea that if you study price charts closely enough, you’ll spot patterns that reveal the next big winner. Sounds logical for an attorney used to dissecting evidence. But in reality, technical analysis simply doesn’t hold up over time.

Why?

  • Patterns are easy to spot in hindsight, but buy/sell signals usually come too late.

  • The more people use these techniques, the less effective they become—until they stop working altogether.

  • Stock prices react to information almost instantly. There’s no “insider edge” for most investors.

It’s tempting to chase the latest trend, like the so-called “January Effect,” but as soon as everyone’s in on the secret, the opportunity dries up.

Myth 2: Fundamental Analysis Guarantees Success

Fundamental analysis is more respected on Wall Street, with pundits promoting stocks based on earnings, revenue, and growth projections. However, Darren Wurz points out several reasons this strategy falls short:

  • Company data can be inaccurate or even manipulated (“adjusted earnings,” creative accounting, and occasional fraud).

  • Valuations rely on assumptions and long-term projections that can be wildly off.

  • Market analysts are often influenced by investment banking relationships, not just pure analysis.

  • Random events—pandemics, lawsuits, natural disasters—can derail even the most “solid” company.

  • A stock may never reach its supposed ‘true’ value, no matter how sound the analysis.

What’s the Smarter Approach for Law Firm Owners?

The stock market is unpredictable, especially in the short term. Chasing hot stocks or trying to outwit the crowd is rarely a winning strategy. Instead, Darren Wurz advocates for a disciplined, patient approach:

  • Focus on broad market growth:
    Build a low-cost, diversified portfolio designed to capture as much of the market’s average return as possible.

  • Don’t get distracted by investment fads or peer pressure:
    Just as you wouldn’t copy another firm’s marketing playbook blindly, don’t chase the latest stock tip.

  • Recognize the role of luck:
    Success (in law and investing) often involves chance. Respect this and avoid overconfidence.

  • Keep things simple:
    Simplicity outperforms complexity. You don’t need exotic products or “genius” picking; you need a proven plan.

Resources:

 

Connect with Darren Wurz:

 

Transcript:

Darren Wurz [00:00:00]:

Hey friend, thanks for joining me today. I'm glad that you're here with me. We're going to be talking about a topic that's really near and dear to my heart, which is the truth about beating the market. You know, as a lawyer, you're trained to analyze and that's a great gift. You analyze, you look for patterns, you find the flaw, you find the precedent, you find the argument. You're good at taking complex pieces of information and boiling it down and figuring out what's really going on. But you know, when you bring that mindset to investing, it can actually work against you. Okay, so friend, we're going to be doing a little three part series here on this topic.

Darren Wurz [00:00:46]:

And today we're going to talk about the stock market myths that most lawyers find fall for. In fact, most people, let's be honest. But I think if you are, have an analytical mind, these could be, you could be most prone to some of these mistakes. I think that is probably true. So we're going to uncover some of these truths. And all of this, by the way, is coming from the book that we're currently reading in the Lawyer Millionaire Masterclass series, which is a random walk down Wall Street. So what are we talking about today? Well, today we're talking about how Wall street tells us they can pick stocks and they can time the market. And we're going to talk about why all of that is bullshit.

Darren Wurz [00:01:35]:

So we're going to dive into the two ways that Wall street looks at the market and tries to beat the market. And we're going to look at the actual record and see what's actually true. And then we're going to talk about what actually makes sense and how you actually can be successful in investing. And I think you'll really get a lot out of this. If you've ever been tempted to play the game of stock market picking and it is the biggest game in town, then this episode will be highly relevant to you. Now, there's nothing wrong with stock picking. There's nothing wrong with gambling, but it may not be the most effective way to model your investment portfolio. And why should you care about this? Well, you know, I find a lot of law firm owners do like to pick stocks because maybe you are a little bit more analytically minded and you want to look for the winners, you want to try and pick the winners.

Darren Wurz [00:02:28]:

There's nothing wrong with that. But there's a bigger reason that this topic is so, so, so important. Because as Warren Buffett said, if you don't find a way to make money while you sleep, you'll work until you die. And so at the end of the day, what we're trying to do is help you get the most market returns possible. We're trying to get you the most growth in your portfolio possible so that you can more quickly get to the place where your money's working while you sleep. And you don't have to work until you die. I know maybe you're young and you're in your 30s and you're like, yeah, I can work forever. Well, talk to me.

Darren Wurz [00:03:09]:

Thirty years later, you may change your tune. But let's be real about the impact here. There's a real, real serious impact about why it's so, so, so important to optimize your investment portfolio and not to make mistakes with your investments. Here's the thing, right? I can afford not to be a stock genius. I can afford to not be the person who picks the next Tesla, right, and rides it to the moon. I mean, wouldn't that be great, right? To pick the next hot stock as, you know, pick the next Amazon as if it's 2001 and just ride it forever. That really would be fantastic, wouldn't it? But, you know, that's a little bit unlikely. Here's the bigger thing.

Darren Wurz [00:03:53]:

I can't afford to be a bad investor because that will really, really suck. And here's a little example for you. A 1% difference. A 1% loss in market growth per year. That might seem like a small amount, okay? We're talking about the difference between a 7% rate of return and an 8% rate of return. 1%. If you just lose out on 1% of market gains each year over 30 years, that adds up to a 25% difference in wealth. A 25% difference in wealth, right.

Darren Wurz [00:04:38]:

So you could take two people who have the same amount of savings. Let's say one of them grows that savings to 3 million over 30 years. If you just got 1% more return over those 30 years, you would have an extra mil. 4 million. Okay, so that's the difference here. That's what we're talking about. And if you love this topic, you really should join our next masterclass Live. The link is in the show Notes.

Darren Wurz [00:05:11]:

We have a masterclass live event every month where we discuss the current book that we're reading. And we dive into all of this and you get a great opportunity to connect with other lawyers and law firm owners from across the country. So let's get into the specifics. Okay? There are two ways that investors try to Beat the market or try to determine what stocks they should buy or when they should buy the market and when they should sell. Okay, the first is what we call technical analysis. Now, a lot of people out there think that technical analysis is wizardry and witchcraft. Well, I would tend to agree, but I'll tell you why. What is technical analysis? Well, technical analysis is looking for patterns in charts of stock market prices.

Darren Wurz [00:06:07]:

If you've ever looked at a chart of the stock market over an extended period of time, or the stock of any individual company and you look at its price over time, you can kind of see, hey, you know, it looks like there's patterns here. You know, the market for a time was kind of going up in this nice straight line, and then something happened, and then it went kind of wobbly and it went sideways, and then it went down for a while, and it looks like this. There are patterns. Ooh. So what technical analysis does is it tries to determine what's happening in the charts to determine what's going to happen next. And there's some theory that kind of undergirds this. And the theory that undergirds this is the concept that everything that can be known about a stock is reflected in. In its stock price.

Darren Wurz [00:07:06]:

So the only thing we need to do, we don't need to look at any data, any earnings, any revenue or anything like that. We just need to look at the chart, because the chart tells us how investors are behaving as it relates to this stock. And that is the only thing that matters, okay? We call this the castles in the air theory of stock valuation. It's this idea that the only thing that matters is in determining the value of a stock is how other investors think of it. And so a stock is going, going, going. You know, investors are building castles in the air. You know, they're. They're building things that don't exist yet.

Darren Wurz [00:07:46]:

That's where the castles in the air comes from. Okay? But there's a few problems. There are three big reasons why technical analysis does not work. Now, I know you may hear a story here and there about a chart that somebody used, and they were able to trade off of it and make a lot of money. And. But here's the thing, right? Individual. You're. You're a lawyer, right? Think about this, right? Anecdotal evidence is not evidence.

Darren Wurz [00:08:21]:

We want to look at the data in aggregate, okay? Mary sue in Oklahoma got rich on a stock by looking at its chart, okay? Big whoop, dee doo. That doesn't mean that it's an effective Way to trade stocks or to determine what stocks to buy or when to buy them, we need to look at the aggregate data. And the aggregate data shows the technical analysis just doesn't work. And there are three big reasons why. Number one, the analysts, or chartists as they're called, only buys the stock after the trend has been established. So here's the problem. Yeah, you can see it looks like there's patterns, it looks like there's trends. But the buy or sell recommendation happens only after the trend has been established.

Darren Wurz [00:09:16]:

Oftentimes you're too late, it's the end, the pattern's over. And sharp reversals can occur suddenly and without warning. Point number two, such techniques are self defeating. Well, what does that mean, self defeating? Well, the more people use technical analysis or stock market signals or things like that, the more people use these things, the less effective they become until the point where they just stop working entirely. A lot of great examples. Maybe an easier example to understand could be something called the January effect. January effect is this idea that stocks go up in January and so you should buy stocks at the end of the year or the beginning of January because of the January effect. Well, here's the problem.

Darren Wurz [00:10:13]:

The more people see this as something to take advantage of, they're going to start buying earlier. Why buy at the end of December? I buy at the middle of December. Oh, why buy at the middle of December? I'll buy at the beginning of December. Okay. And then it keeps moving back and back and back to the point where the January effect just doesn't work anymore. Right. So the more these things become public and the more people start to use them, the less effective they become. They become self defeating.

Darren Wurz [00:10:43]:

And that leads into the third thing, which is profit maximizing behavior. Traders anticipate moves and signals before they even happen, before they even materialize. The same thing happens with information. Information is acted upon instantaneously, sometimes even before it's released. And so there's no way to make money on new information that comes out about a company, because as soon as it goes public, the stock instantaneously reacts or has already reacted. And so, you know, if a stock can go to $40 tomorrow, why shouldn't it go to $40 today? Right. That's profit maximizing behavior. People want to get ahead, they want to get ahead of the crowd.

Darren Wurz [00:11:31]:

So for those reasons, technical analysis does not work. Well, lucky for you, there is another way. Okay, so charts don't work well. How about information? How about fundamental analysis? Surely the smart people can analyze a company's financials and know whether or not it's a good buy. Right? Wrong. This is called the research myth. Okay? And this, you know, fundamental analysis is based on the idea that stocks have an intrinsic value that can be calculated mathematically based on dividend and earnings growth. So the capacity of the company to reward investors in the future.

Darren Wurz [00:12:25]:

We can extrapolate that information. We can calculate mathematically what a stock is worth because a stock has certain risk. And we can compare the risk of a stock to, to what's called the risk free rate of return, essentially the rate of return on very, very short term bonds or money markets. Right. Okay, well, sounds great. Right? And fundamental analysis is a lot more respected in Wall Street. You'll see them on cnbc. They have their price targets.

Darren Wurz [00:13:01]:

Such and such company is a buy. Such and such company is a sell or a hold rating. All total bullshit. And here's why. Four reasons. Number one, information is not always correct. And we can't calculate precise figures from undetermined data or estimates. Most of the information we get from companies is in the form of estimates.

Darren Wurz [00:13:32]:

Okay? And estimates are just that, they're estimates. There's also a nice little phrase that Wall street likes to use called adjusted earnings. Ooh, what's adjusted earnings? Earnings that are adjusted earnings. You know, company takes its profit and says it actually should have been higher because, you know, we spent a lot on this thing and that thing happened last quarter and normally those things don't happen. So our earnings is only X, but actually our adjusted earnings is Y. Okay, you know, a whole bunch of malarkey. We don't have good information. And even, you know, even if that's the worst, you know, there are worse things that happen.

Darren Wurz [00:14:21]:

Enron, WorldCom, in 2000, 2001, we completely cooking the books. Those are probably the most famous examples. But companies cook the books all the time and get into trouble for it. So there's a lot of accounting fraud. And even if it's not fraud necessarily, there's a lot of accounting wizardry that happens to make earnings look better when they actually don't. Right. Gosh. In a random walk down Wall Street, I think it was in the 60s.

Darren Wurz [00:14:56]:

Yes, I think so. In the 60s there was the conglomerate boom. It was all the rage. Take two companies that have, each one has earnings of, I don't know, let's make up some numbers. $5 per share. But if we put them together and do some accounting magic, we can create one company that has earnings of $6 a share. And this went on for a long time until the music stopped playing, the conglomerate boom of the 60s, and it was all just accounting wizardry. All right, all right, point number two.

Darren Wurz [00:15:32]:

Even if the information we have is correct, the analyst's estimate of value could be faulty because there are so many assumptions. It sounds great, it sounds very concrete and mathematical, fundamental analysis, but guess what? There are a lot of assumptions. There are a lot of expectations that go into it. And expectations about future growth cannot be proven in the present. Furthermore, analysts are error prone and sometimes a little bit lazy. Okay? So as we all are as human beings, so their, you know, valuations may very well be faulty. But there's a bigger problem. And the problem is this.

Darren Wurz [00:16:15]:

The securities analysts, the security analysis industry is tainted and heavily influenced by the investment banking industry. Okay? Investment banking is the industry that brings stocks to public IPOs, new issues of new stock, issues of new securities. Okay? The investment banking industry heavily influences the security analysis industry. Often they're in the same company. So if BP is a big client of our company and they issue a lot of new stock and we make a lot of money from bp, we're sure as hell not going to ever give a sell rating to bp. We don't want to piss off our biggest client. And this is evident by the wide disparity in buy recommendations versus sell recommendations. Even during bear markets.

Darren Wurz [00:17:17]:

Even during the worst markets, buy recommendations outnumber sell recommendations by far. But there are two more problems. Point number three is there are random events that happen. Random things happen. Natural disasters, terrorist attacks, pandemics. And fundamental analysis simply cannot tell us when those random events are going to happen. Random events can happen to individual companies, right? There is a problem in the manufacturing, right? There is a lawsuit. There's any number of things can happen to a company that can really, really make things not turn out as expected.

Darren Wurz [00:18:04]:

But the last thing, and maybe the most important is this. Even if you have great information and you have great analysis and you're able to come up with the perfect ideal intrinsic value for a stock, the stock may never converge upon that true value. Let's say your stock is trading at $50 and your analysis says it should be $100. And your analysis is perfect, by the way. Well, who cares? Because the public may never view it the same way and the stock may never hit $100 or, or it might take a really, really, really long time. So that is the other big, big problem. Here's the truth, my friend. Market movements are random, heavily influenced by investor psychology and the mood of the day.

Darren Wurz [00:19:07]:

But the day to day movements of the market. The day to day movements of individual stock prices are random in that past movements cannot be used to predict future movements and cannot be predicted at all, essentially other than to know what the long term expected rate of return of the broad total market is or should be. Okay, in next week's episode, we're going to be talking about why your brain is literally wired to believe that you can beat randomness and why this works against you. So here's some takeaways for you. Don't chase hot stocks. I know it's tempting. Your friend made a killing in Tesla last year and you missed out. Dagnabbit.

Darren Wurz [00:20:07]:

But don't get sucked in. Don't chase the most recent hot marketing tactics or trends either. Let's apply this to your business because it all relates just like with Just like. We don't want to chase the hottest stocks because they might not be the best thing for us. We don't want to chase the thing that the law firm owner down the street is doing just because they're doing it and we feel like we might miss out. Hmm, let's think about that. I think that happens a lot in marketing. You don't need that billboard just because you see.

Darren Wurz [00:20:45]:

Oh man, John got that billboard across the street. I need to get a billboard too. No, we need to think about what's best for you. Second thing, we need to understand you can be too smart for your own good. I've experienced this myself. Hey, I've been an investor a long time. I. I've made my own share of personal investing blunders trying to outsmart the market in my own personal accounts.

Darren Wurz [00:21:14]:

And so I've seen it doesn't work too well. You know, it's possible to be too smart. Sometimes the simplest things are the things that work the most effectively. The problem with being a really smart person like me, and yes, I am a really smart person, is that we tend to overcomplicate things. And sometimes the best things in life are simple. And third, understand the role of randomness and luck in business. Yes, skill can take you a long way. But you know what? At the end of the day, randomness and luck play a huge role in the success of our business.

Darren Wurz [00:22:00]:

I'm sure that you can think of at least one client that you land or one great opportunity that you seized that you had no idea was coming. Randomness and luck play a huge role in our lives and we should respect that, we should understand it, and we should be humble about it. Okay. Success in investing, my friend, isn't about luck. It's about discipline and patience. And we're going to be diving into more of that in the upcoming episodes. And you know, here at the Lawyer Millionaire, we help law firm owners just like you create an investment strategy that works for you, not for Wall Street. You know what that means? It means no fancy, exotic, high priced, high fee products.

Darren Wurz [00:22:54]:

It means simplicity. It means a low cost but broadly diversified, optimized portfolio that's going to get you as much of the market's generous returns as possible. And that is how you become wealthy. If you're not sure about your portfolio, you want a second pair of eyes to look over it. Book some time with me using the link below. I'll take a look. I'll give you my honest feedback. And if you haven't signed up yet for our next Masterclass live event, it's one you're not going to miss, not going to want to miss.

Darren Wurz [00:23:32]:

We're going to be talking more about this and you'll also have a great chance to connect with other lawyers and law firm owners from across the country. Now remember, my friend, the ultimate form of wealth is freedom. I'm your host, Darren Wurz. Thanks for joining me. I'll see you next time.

Adedayo Adekunle
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