Player FM - Internet Radio Done Right
74 subscribers
Checked 1d ago
Added seven years ago
Content provided by Andrew Stotz. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by Andrew Stotz or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://player.fm/legal.
Player FM - Podcast App
Go offline with the Player FM app!
Go offline with the Player FM app!
Podcasts Worth a Listen
SPONSORED
T
Travis Makes Money


1 Make Money with AI Appointment Setting | Matt Deseno 32:38
32:38
Play Later
Play Later
Lists
Like
Liked32:38
Matt Deseno is the founder of multiple award winning marketing businesses ranging from a attraction marketing to AI appointment setting to customer user experience. When he’s not working on the businesses he teaches marketing at Pepperdine University and he also teaches other marketing agency owners how they created a software company to triple the profitability for the agency. Our Sponsors: * Check out Kinsta: https://kinsta.com * Check out Mint Mobile: https://mintmobile.com/tmf * Check out Moorings: https://moorings.com * Check out Trust & Will: https://trustandwill.com/TRAVIS * Check out Warby Parker: https://warbyparker.com/travis Advertising Inquiries: https://redcircle.com/brands Privacy & Opt-Out: https://redcircle.com/privacy…
My Worst Investment Ever Podcast
Mark all (un)played …
Manage series 2406056
Content provided by Andrew Stotz. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by Andrew Stotz or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://player.fm/legal.
Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it. Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth. To find more stories like this, previous episodes, and resources to help you reduce your risk, visit https://myworstinvestmentever.com/
…
continue reading
859 episodes
Mark all (un)played …
Manage series 2406056
Content provided by Andrew Stotz. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by Andrew Stotz or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://player.fm/legal.
Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it. Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth. To find more stories like this, previous episodes, and resources to help you reduce your risk, visit https://myworstinvestmentever.com/
…
continue reading
859 episodes
כל הפרקים
×
1 Fabrizio Poli – When Passion Meets Poor Partnership 44:18
44:18
Play Later
Play Later
Lists
Like
Liked44:18
BIO: Fabrizio has always wanted to fly jets and has had a career flying both private jets and for various airlines worldwide. He has shared the cockpit with pilots from over 65 nationalities, giving him a broader perspective on people and life. STORY: Fabrizio invested in a luxury car business in Italy but chose the wrong person to run the show, and because of this, he lost all his money and a very good friend. LEARNING: Do not mix business with friendship. Hire the right people. “Business decisions need to be made to make money. If that money helps people as well, great. But trying to mix charity with business is a very bad idea.” Fabrizio Poli Guest profile Fabrizio Poli has always wanted to fly jets and has had a career flying both private jets and for various airlines worldwide. He has shared the cockpit with pilots from over 65 nationalities, giving him a broader perspective on people and life. For the last 14 years, Fabrizio has been buying, selling, leasing, and chartering private jets for the ultra-wealthy. Fabrizio is the author of “ The Quantum Economy ” and other books . He often shares his aviation expertise in the media and is featured in the Financial Times, Bloomberg, Social Media Examiner, and Chicago Tribune. Worst investment ever Being in the private jet business, Fabrizio decided to venture into the car business a few years ago. He figured people who buy private jets also collect cars. Fabrizio teamed up with a friend of his in Italy. The idea was to buy Vespers, Alfa Romeos, and Ferraris in Italy and sell them internationally. They bought a bunch of cars and opened a showroom in Italy on the road where the first Ferrari was driven. However, Fabrizio was in England at the time. He assumed that his friend was doing things properly. Since the showroom was on a popular road with all these flashy cars parked outside, many people were walking into the showroom, unfortunately not to buy but to look at them. Fabrizio sent over a web designer to help tweak the website and suggested that his partner let people into the showroom by appointment only. This way, he’d avoid spending 90% of his day talking to people who are not there to buy a car. The friend did not heed his advice, and eventually, the business went under. Fabrizio had invested in the right business but in the wrong person, and because of this, he lost all his money and a very good friend. Lessons learned Hire the right people and create a supportive environment for them. Separate business decisions from personal emotions and make independent evaluations. The product and the process can be great, but if you pick the wrong people to run it, they’ll screw the whole thing up. Andrew’s takeaways Find an independent, objective, knowledgeable third party to help pick a business partner. Separate the business idea from the person in charge of bringing it to life. Actionable advice If you are going to invest with your friend, you are emotionally engaged, and that’s dangerous. Bring somebody else to play the bad guy, someone who can make tough decisions and keep emotions in check if you cannot take the emotion out. Fabrizio’s recommendations Fabrizio recommends reading a lot—both fiction and nonfiction—to open up new possibilities and perspectives. He also recommends listening to other business leaders to learn from their experiences. This practice can inspire and inform your business decisions. No.1 goal for the next 12 months Fabrizio’s number one goal for the next 12 months is to start and launch a new business by September. He is also planning on publishing another book this year. Parting words “Fly high. Think high.” Fabrizio Poli [spp-transcript] Connect with Fabrizio Poli LinkedIn Podcast YouTube Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 24: Why Smart People Do Dumb Things 28:58
28:58
Play Later
Play Later
Lists
Like
Liked28:58
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 24: Why Do Smart People Do Dumb Things? LEARNING: Past performance does not guarantee future results. Change the criteria you use to select managers. “There are only two things that are infinite, the universe and man’s capacity for stupidity.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 24: Why Do Smart People Do Dumb Things? Chapter 24: Why Do Smart People Do Dumb Things? In this chapter, Larry discusses why investors still make mistakes despite multiple SEC warnings. The past performance delusion Larry explains that it’s normal for most investors to make mistakes when investing, often due to behavioral errors like overconfidence. Being overconfident can cause investors to take too much risk, trade too much, and confuse the familiar with the safe . Those are explainable errors. However, there’s one mistake that Larry finds hard to explain. Most investors ignore the SEC’s required warning that accompanies all mutual fund advertising: “Past performance does not guarantee future results.” Despite an overwhelming body of evidence, including the annual S&P’s Active Versus Passive Scorecards, that demonstrates that active managers’ past mutual fund returns are not prologue and the SEC’s warning, investors still flock to funds that have performed well in the past. Today’s underperforming manager may be tomorrow’s outperformer According to Larry, various researchers have found that the common selection methodology is detrimental to performance. The greater benchmark-adjusted return to investing in ‘loser funds’ over ‘winner funds’ is statistically and economically large and robust to reasonable variations in the evaluation and holding periods and standard risk adjustments. Additionally, the standard practice of firing managers who have recently underperformed actually eliminates those managers who are more likely to outperform in the future. Why Are Warnings Worthless? Larry quotes the study “ Worthless Warnings? Testing the Effectiveness of Disclaimers in Mutual Fund Advertisements ,” which provided some interesting results. The authors found that people viewing the advertisement with the current SEC disclaimer were just as likely to invest in a fund and had the exact expectations regarding a fund’s future returns as people viewing the advertisement with no disclaimer whatsoever. The authors concluded that the SEC-mandating disclaimer is completely ineffective. The disclaimer neither reduces investors’ propensity to invest in advertised funds nor diminishes their expectations regarding future returns. The current SEC disclaimer is too weak The authors noted that the current disclaimer fails because it is too weak. It only conveys that high past returns don’t guarantee high future returns and that investors in the fund could lose money, things that almost all investors already know. It fails to convey what investors need to understand: high past returns are a poor predictor of high future returns. In the authors’ opinion, a stronger disclaimer—one that informs investors that high fund returns generally don’t persist (they are often a matter of chance)—would be much more effective. The insane investor In conclusion, Larry observes that many investors do the same thing over and over again and expect a different outcome. Most seem never to stop and ask: If the managers I hired based on their past outperformance have underperformed after being hired, why do I think the new managers I hire to replace them will outperform if I use the same criteria that have repeatedly failed? And, if I am not doing anything different, why should I expect a different outcome? Change the criteria you use to select managers Larry advises investors to change the criteria they use to select managers. Instead of relying mainly, if not solely, on past performance, they should use criteria such as fund expenses and the fund’s degree of exposure to well-documented factors (such as size, value, momentum, profitability, and quality) that have been shown to have provided premiums. These premiums should have evidence that they have been persistent, pervasive, robust to various definitions, implementable (they survive transaction costs) and that they have intuitive explanations for why you should expect the premium to persist. By using criteria that lead to superior results, investors can avoid actively managed funds and significantly increase their chances of achieving better investment outcomes. Further reading Itzhak Ben-David, Jiacui Li, Andrea Rossi, and Yang Son, “ Advice-Driven Demand and Systematic Price Fluctuations ,” February 2021. Bradford Cornell, Jason Hsu and David Nanigian, “ Does Past Performance Matter in Investment Manager Selection? ” Journal of Portfolio Management, Summer 2017. Rob Bauer, Rik Frehen, Hurber Lum and Roger Otten, “ The Performance of U.S. Pension Plans ,” 2008. Amit Goyal and Sunil Wahal, “ The Selection and Termination of Investment Management Firms by Plan Sponsors ,” Journal of Portfolio Management (August 2008). Molly Mercer, Alan R. Palmer and Ahmed E. Taha, “ Worthless Warnings? Testing the Effectiveness of Disclaimers in Mutual Fund Advertisements ,” Journal of Empirical Legal Studies (September 2010). Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management Part III: Behavioral Finance: We Have Met the Enemy and He Is Us Enrich Your Future 21: Think You Can Beat the Market? Think Again Enrich Your Future 22: Some Risks Are Not Worth Taking Enrich Your Future 23: Seeing Through the Frame: Making Better Investment Decisions About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn X Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Jimmy Milliron - Lessons From Love, Money, and Missed Opportunities 22:52
22:52
Play Later
Play Later
Lists
Like
Liked22:52
BIO: James “Jimmy” Milliron is Co-Founder & President of National Brokerage Atlantic, specializing in Wealth Enhancement, Estate Planning, and Asset Protection. STORY: Jimmy wanted to invest $100,000 in Bitcoin, but when he couldn’t find an easy way to do it, he bought a car instead. LEARNING: Research and learn all you can about investment opportunities before investing. “Don’t be afraid to pick up the phone and make a few calls. There’s nothing like picking up the phone and talking to a real person on the other end instead of just texting them.” Jimmy Milliron Guest profile James “Jimmy” Milliron is Co-Founder & President of National Brokerage Atlantic, specializing in Wealth Enhancement, Estate Planning, and Asset Protection. An insurance veteran, he previously served as Executive Vice President at NexTier Bank, building a $400 million premium finance portfolio. He holds a BA from VMI and various securities and insurance licenses. Worst investment ever Jimmy’s worst investment is a mix between marrying a second wife and buying a car in 2016. He invested many resources in his second marriage, but it did not last that long. When Jimmy married his second ex-wife, he wanted to invest about $100,000 in Bitcoin. But he was busy and did not have time to research and learn more about Bitcoin. When Jimmy could not find an easy way to do it, he purchased a car instead with that cash. Lessons learned Go the extra mile in research and learning about investment opportunities before investing. Consider all the investment options available. Actionable advice If you’re young, seek advice from a mentor or your parents about what they would do instead of arbitrarily investing in a make-me-feel-good investment. Their guidance can be invaluable in navigating the complex world of investments. Jimmy’s recommendations Jimmy recommends reading Donald Trump’s Art of the Deal as a valuable resource for negotiation and decision-making. No.1 goal for the next 12 months Jimmy’s number one goal for the next 12 months is losing weight. Parting words “Thank you very much. Andrew and I wish everyone well.” Jimmy Milliron [spp-transcript] Connect with Jimmy Milliron LinkedIn Website Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 23: Seeing Through the Frame: Making Better Investment Decisions 21:50
21:50
Play Later
Play Later
Lists
Like
Liked21:50
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 23: Framing the Problem. LEARNING: Understand how each indexed annuity feature works before buying one. “I would never buy an annuity that didn’t give me full inflation protection.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 23: Framing the Problem. Chapter 23: Framing the Problem In this chapter, Larry discusses how we, as human beings, are subject to biases and mistakes that we’re almost certainly not aware of. He introduces the concept of ‘framing’ in the context of behavioral finance, which refers to how a question or a problem is presented and how this presentation can influence our decision-making, often leading us to answer how the questioner wants us to. Examples of framing Larry shares the following examples from Jason Zweig’s book Your Money & Your Brain to support the theory of framing in decision-making. These examples illustrate how the same information, when presented in different ways, can lead to significantly different decisions, highlighting the impact of framing on our perceptions and choices. A group of people was told ground beef was “75% lean.” Another was told the same meat was “25% fat.” The “fat” group estimated the meat would be 31% lower in quality and taste 22% worse than the “lean” group estimated. Pregnant women are more willing to agree to amniocentesis if told they face a 20% chance of having a Down syndrome child than if told there is an 80% chance they will have a “normal” baby. A study asked more than 400 doctors whether they would prefer radiation or surgery if they became cancer patients themselves. Among the physicians who were informed that 10% would die from surgery, 50% said they would prefer radiation. Among those who were told that 90% would survive the surgery, only 16% chose radiation. The evidence from the three examples shows that if a situation is framed from a negative viewpoint, people focus on that. On the other hand, if a problem is framed positively, the results are pretty different. The indexed annuities fallacy Larry Swedroe goes on to connect the concept of framing to investing, particularly in the context of indexed annuities. He explains how annuities are often presented with hidden costs and benefits, leading to misleading conclusions for investors. According to Larry, indexed annuities are products that salesmen describe as providing “the best of both worlds”—the potential rewards of equity investing without the downside risks. Unfortunately, indexed annuities contain many negative features, making them an unfavorable investment option. The SEC’s warning against indexed annuities Larry points out that the typical indexed annuity is so intricate and filled with negative features that it is challenging for most investors to fully comprehend. He highlights a bulletin warning issued by the SEC in July 2020, urging people to be cautious about investing in indexed annuities, fostering a sense of careful consideration. The bulletin advised investors to read the contract before buying an indexed annuity and, if the annuity is a security, to read the prospectus. Investors should understand how each feature works and what impact it and the other features may have on the annuity’s potential return. The SEC also suggested asking an insurance agent, broker, or other financial professional questions to understand how the annuity works. The agency also reminded investors that indexed annuity contracts commonly allow the insurance company to periodically change some of these features, such as the rate cap. Such changes can affect your return. So, read your contract carefully to determine what changes the insurance company may make to your annuity. So why do investors still love indexed annuities? Despite the negatives, why do investors continue to be drawn to this product, purchasing tens of billions year after year? Larry offers a straightforward explanation. The insurance industry presents the investment decision in a way that directs investors’ attention to the potential for significant gains, the principal protection, and the guaranteed minimum return offered by annuities, instilling a sense of hope. Further, all the products sold by the typical insurance company and Wall Street firms are laden with glitzy features. In each case, you’re paying an excessive fee to get that benefit, but they’re framing it, and you’re getting it without being told that the costs far exceed the mathematical odds of your getting it. This makes you lose sight of the costs and the lost upside potential. In other words, “you’ve been framed.” Better alternatives to indexed annuities Larry advises investors and financial advisors to frame problems in a way that allows for analysis from various perspectives. This is the best way to ensure investors consider all the pros and cons. He emphasizes that financial advisors can add value by understanding how human beings make mistakes and helping them avoid them, instilling a sense of responsibility. He also discusses alternative ways to create a similar financial outcome to annuities, such as investing in Treasury Inflation-Protected Securities (TIPS). Further reading Jason Zweig, Your Money & Your Brain (Simon & Schuster 2007), pp. 134–5. Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management Part III: Behavioral Finance: We Have Met the Enemy and He Is Us Enrich Your Future 21: Think You Can Beat the Market? Think Again Enrich Your Future 22: Some Risks Are Not Worth Taking About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn X Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Mitch Russo - Sell It First Before You Build It 43:41
43:41
Play Later
Play Later
Lists
Like
Liked43:41
BIO: Mitch Russo is a serial entrepreneur who built and sold his first software company for eight figures, scaled a $25M business with Tony Robbins and Chet Holmes, and was twice nominated for Inc. Entrepreneur of the Year. STORY: Mitch bought several Amazon stores to make passive income, which he did for a while. Unfortunately, the lucky streak ended after Amazon significantly reduced the commissions it paid to its resellers, and Google changed its algorithm. Now, Mitch’s SEO pages were not working, and nobody was finding them. LEARNING: Never start a business without knowing who will buy the product. Try to sell your product/service before you build it. “Please do not create a product until you understand exactly what the client needs. Try and sell it first before you build it.” Mitch Russo Guest profile Mitch Russo is a serial entrepreneur who built and sold his first software company for eight figures, scaled a $25M business with Tony Robbins and Chet Holmes, and was twice nominated for Inc. Entrepreneur of the Year. He’s the author of four books and the creator of ClientFol.io. Worst investment ever Mitch highlighted two particular investments that have left a lasting mark on his life as an investor. The Amazon stores A couple of years ago, Mitch embarked on an exhilarating journey to create recurring revenue by investing in businesses that required minimal participation. The Amazon stores, a hot trend at the time, became his focus. With significant investments, these stores flourished, and Mitch was able to generate a substantial monthly income of $18,000 to $20,000, almost passively. Then the whole thing came crashing down. Two things happened simultaneously: Amazon significantly reduced the commissions it paid to its resellers, and Google changed its algorithm. Now, Mitch’s SEO pages were not working, and nobody was finding them. The peer-to-peer accountability platform Mitch created an earlier version of ClientFol.io called resultsbreakthrough.com, a peer-to-peer accountability platform. Mitch had to invent some technology to do it. At the time, the platform worked fantastic. To succeed with the the peer-to-peer accountability platform, Mitch poured his heart and soul into it. He was deeply passionate about what he had created. However, the platform did not receive the response he had hoped for. Despite his belief in the platform’s potential, it remained unsold, a stark reminder that success is not guaranteed, no matter how brilliant the idea. Lessons learned Never start a business without knowing who will buy the product first. Try to sell your product/service before you build it. It’s never over until you quit. Hire a coach to accelerate business growth and learn valuable lessons quickly. Andrew’s takeaways Solving a problem is not enough; you must ensure your target customer can pay for the product. Is the pain valuable enough that they’ll pay high enough prices? Actionable advice If you are smart and you can see what’s happening around you, you can make almost any mistake, recover from it, learn from it, and grow from it. Mitch’s recommendations Mitch recommends reading Crossing the Chasm , which beautifully encapsulates the power of focus. No.1 goal for the next 12 months Mitch’s number one goal for the next 12 months is to continue building recurring revenue through internet processes and funnels, a path he is deeply passionate about. Additionally, he is on the verge of publishing two fiction books, one of which he believes will be adapted into a movie. He is actively working to lay the groundwork for this promising future. Parting words “Keep on tracking.” Mitch Russo [spp-transcript] Connect with Mitch Russo LinkedIn X Facebook Instagram Website Podcast Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 22: Some Risks Are Not Worth Taking 18:28
18:28
Play Later
Play Later
Lists
Like
Liked18:28
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 22: Some Risks are Not Worth Taking. LEARNING: Don’t put all your eggs in one basket; diversify your portfolio. “Once you have enough to live a high-quality life and enjoy things, taking unwarranted risks becomes unnecessary.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 22: Some Risks are Not Worth Taking. Chapter 22: Some Risks Are Not Worth Taking In this chapter, Larry discusses the importance of investors knowing which risks are worth taking and which are not. The $10 million bet that almost didn’t pay off To kick off this episode, Larry shared a story of an executive who put his entire $10 million portfolio in one stock. Around the late 1999 and early 2000s, Larry was a consultant to a registered investment advisor in Atlanta, and one of their clients was a very senior Intel executive. This executive’s net worth was about $13 million, and $10 million was an Intel stock. To Larry’s shock, the executive would not consider selling even a small%age of his stock to diversify his portfolio. He was confident that this stock was the best company despite acknowledging the risks of this concentrated strategy. It was, in fact, the NVIDIA of its day. It was trading at spectacular levels. The executive had watched it go up and up and up. Learning from the past Larry pointed out that there were similar situations not long ago, from the 60s, for example, when we had the Nifty 50 bubble , and, once great companies like Xerox, Polaroid Kodak, and many others disappeared, and these were among the leading stocks. Like this executive, many had invested all their money in a single company and had seen their net worth suffer greatly when these companies crumbled. This history serves as a powerful lesson, enlightening us about the risks of overconfidence and the importance of diversification. The Intel stock comes tumbling down Since he was a senior executive, he believed he would know if Intel was ever in trouble. Larry went ahead and told him some risks were not worth taking. He advised him to sell most of his stock and build a nice, safe, diversified portfolio, mostly even bonds. The executive could withdraw half a million bucks a year from it pretty safely because interest rates were higher, and that was far more than he needed. Larry’s advice didn’t matter—he couldn’t convince him. Within two and a half years, Intel’s stock was trading at about $10, falling about 75%. It was not until late in 2017 that it once again reached $40. Some risks are just not worth taking Over the period from March 2000 through September 2020, while an investment in Vanguard’s 500 Index Fund (VFINX) returned 6.4% per annum, Intel returned just 1.8% per annum. This stark contrast highlights the consequences of overconfidence and the importance of diversification, making it clear that some risks are simply not worth taking. Overconfidence blurs out the risk Larry advises against such overconfidence, stressing the importance of considering the consequences of being wrong. He points out that investing is about taking risks. However, prudent investors know some risks are worth taking, and some are not. And they know the difference. Thus, Larry adds, when the cost of a negative outcome is greater than you can bear, you should not take the risk, no matter how great the odds appear to be of a favorable outcome. In other words, the consequences of your investment decisions should dominate the probabilities, no matter how favorable you think the odds are. Marginal utility of wealth Larry also discusses the marginal utility of wealth, explaining that once basic needs are met, additional wealth provides little extra value. He argues that taking unwarranted risks becomes unnecessary once you have enough to live comfortably. Larry emphasizes the importance of considering both the ability to take risks and the potential consequences of being wrong. He explains that while youth provides a longer investment horizon, the cost of being wrong is higher when young. He recommends a balanced approach that includes some risk-taking and a stable investment plan, encouraging the audience to think carefully about their investment strategies. Further reading Laurence Gonzalez, Deep Survival (W. W. Norton & Company, October 2003). Wall Street Journal, “Portrait of a Loss: Chicago Art Institute Learns Tough Lesson About Hedge Funds,” (February 1, 2002). Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management Part III: Behavioral Finance: We Have Met the Enemy and He Is Us Enrich Your Future 21: Think You Can Beat the Market? Think Again About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn X Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Craig Cecilio - From Trust to Turmoil: Lesson on Friendship and Business 22:44
22:44
Play Later
Play Later
Lists
Like
Liked22:44
BIO: Craig Cecilio is a visionary disruptor and CEO of DiversyFund, dedicated to democratizing wealth building. He has broken barriers in private markets, raising over $1 billion and offering investment opportunities once reserved for the elite. STORY: Craig had a potential business partner introduced to him by a friend. The partner had a land deal and convinced Craig to invest $10,000. A couple of other people joined in and deposited about $250,000 into the land development deal in New Mexico. A week went by, and the investors got ghosted by the land deal owner. LEARNING: Don’t mix friendship with business. Do your due diligence on all the parties involved in the transaction. “Assume everybody is a crook and work backward. That’s the key to underwriting and any investment.” Craig Cecilio Guest profile Craig Cecilio is a visionary disruptor and CEO of DiversyFund , dedicated to democratizing wealth-building. He has broken barriers in private markets, raising over $1 billion and offering investment opportunities once reserved for the elite. Craig empowers others to reclaim financial control and make meaningful, lasting impact. DiversyFund offers a unique opportunity to invest in multifamily real estate, making wealth-building accessible to everyone. By investing in DiversyFund, your audience can take part in a diversified real estate portfolio typically reserved for high-net-worth investors—no accreditation needed. Worst investment ever Craig had a potential business partner, and they were doing a land deal. The partner always liked to chase big deals, while Craig is a singles hitter. However, he decided to invest $10,000 in this deal. A couple of other people joined the deal and deposited about $250,000 into the land development deal in New Mexico. A week went by, and the investors got ghosted by the land deal owner. Realizing the gravity of the situation, Craig took it upon himself to investigate the deal. He delved into the intricacies of the financial system, learning about wire transfers and the sequence of events. His thorough examination of the circumstances and the paperwork revealed crucial oversights in basic information and essential due diligence items. While Craig lost $10,000, losing that potential partner and the trust was the biggest loss. Craig had to sever that relationship as well. Lessons learned When underwriting, ensure all the boxes get checked, and ask those questions a little more. Don’t mix friendship with business. Andrew’s takeaways Before you transfer any money, stop and go through a checklist to make sure you know what you are doing. You have to assume that once it’s gone, it’s gone. Actionable advice Do your due diligence on all the parties involved in the transaction, and if it sounds too good to be true, it is not. Assume everybody is the crook and work backward. That’s the key to underwriting and any investment. Craig’s recommendations Craig recommends checking out the online courses he plans to launch next month. He also recommends his upcoming book, You Know What You Got To Do . No.1 goal for the next 12 months Craig’s number one goal for the next 12 months is to launch his online courses. He also plans to put them on the map. Parting words “Just get started. Lean into it and get started. Take the first step. Read about it. You have so many tools in your hand. So just get started.” Craig Cecilio [spp-transcript] Connect with Craig Cecilio LinkedIn Instagram Website Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 21: Think You Can Beat the Market? Think Again 17:45
17:45
Play Later
Play Later
Lists
Like
Liked17:45
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 21: You Can’t Handle the Truth. LEARNING: Overconfidence leads to poor investment decisions. Measure your returns against benchmarks. “If you think you can forecast the future better than others, you’re going to ignore risks that you shouldn’t ignore because you’ll treat the unlikely as possible.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 21: You Can’t Handle the Truth. Chapter 21: You Can’t Handle the Truth In this chapter, Larry discusses how investors delude themselves about their skills and performance, leading to persistent and costly investment mistakes. The deluded investor According to Larry, evidence from the field of behavioral finance suggests that investors persist in deluding themselves about their skills and performance. This persistent self-deception leads to costly investment mistakes, emphasizing the need for continuous vigilance in investment decisions. Larry quotes a New York Times article in which professors Richard Thaler and Robert Shiller noted that individual investors and money managers persist in believing that they are endowed with more and better information than others and can profit by picking stocks. This insight helps explain why individual investors think they can: Pick stocks that will outperform the market. Time the market, so they’re in it when it’s rising and out of it when it’s falling. Identify the few active managers who will beat their respective benchmarks. The overconfident investor Larry adds that even when individuals acknowledge the difficulty of beating the market, they are buoyed by the hope of success. He quotes noted economist Peter Bernstein : “Active management is extraordinarily difficult because there are so many knowledgeable investors and information does move so fast. The market is hard to beat. There are a lot of smart people trying to do the same thing. Nobody’s saying that it’s easy. But possible? Yes.” This slim possibility keeps hope alive. Overconfidence, fueled by this hope, leads investors to believe they will be among the few who succeed. Why investors spend so much time and money on actively managed mutual funds Larry also examined another study, Positive Illusions and Forecasting Errors in Mutual Fund Investment Decisions , which sought to find out why investors spend so much time and money on actively managed mutual funds despite passively managed index funds outperforming the vast majority of these funds. The authors concluded that the reason was that investors deluded themselves. They found that most participants had consistently overestimated their investments’ future and past performance. In fact, more than a third who believed they had beaten the market had actually underperformed by at least 5 percent, and at least a fourth lagged by at least 15 percent. Biases such as this contribute to suboptimal investment decisions. You are better off accepting market returns While Larry agrees that it is undoubtedly possible for investors to outperform the market, the evidence demonstrates that the vast majority would be better off aligning their expectations with reality and simply accepting market returns. At the very least, investors should know the odds of outperforming. Unfortunately, most investors delude themselves about those odds, highlighting the necessity of aligning expectations with reality. One reason, Larry says, might be that investors are unaware of the evidence. Another is that they don’t know their own track records. Larry notes that this self-delusion helps explain why investors exhibit the common human trait of overconfidence. Most people want to believe they are above average. Thus, the disconnect investors have between reality and illusion persists. Always measure your investment returns In conclusion, Larry advises investors to measure their investment returns and compare them to appropriate benchmarks. Doing so will force you to confront reality rather than allow an illusion to undermine your ability to achieve your financial objectives. Further reading Jason Zweig, Your Money & Your Brain , (Simon & Schuster 2007). Jonathan Fuerbringer, “ Why Both Bulls and Bears Can Act So Bird-Brained ,” New York Times, March 30, 1997. Jonathan Burton, Investment Titans , (McGraw-Hill, 2000). Money, “ Did You Beat the Market? ” (January 1, 2000). Don A. Moore, Terri R. Kurtzberg, Craig R. Fox, and Max H. Bazerman, “ Positive Illusions and Forecasting Errors in Mutual Fund Investment Decisions ,” Harvard Business School Working Paper. Markus Glaser and Martin Weber, “ Why Inexperienced Investors Do Not Learn: They Don’t Know Their Past Portfolio Performance ,” (July 21, 2007). Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn X Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Michael Episcope - Investing Is About How You Behave and Not What You Know 40:37
40:37
Play Later
Play Later
Lists
Like
Liked40:37
BIO: Michael Episcope is the co-CEO of Origin Investments. He co-chairs its investment committee and oversees investor relations and capital raising. STORY: Michael invested in a multi-family property in Austin with a friend who had vouched for somebody else. Unbeknownst to Michael, the guy in Austin had taken a loan against his property to save other properties in his portfolio. LEARNING: Do not justify the red flags because an investment opportunity looks great. Investing is about how you behave and not what you know. “When looking at an investment opportunity, do not justify the red flags because the investor investment opportunity looks so great.” Michael Episcope Guest profile Michael Episcope is the co-CEO of Origin Investments . He co-chairs its investment committee and oversees investor relations and capital raising. Prior to Origin, Michael had a prolific derivatives trading career and was twice named one of the top 100 traders in the world. Michael earned his undergraduate and master’s degrees from DePaul University. He has more than 30 years of investment and risk management experience. Worst investment ever In 2004, Michael, a commodities trader, ventured into an investment with a friend’s recommendation. His friend’s assurance and Michael’s financial stability made him believe he was impervious to mistakes. The investment was a multi-family property in Austin, Texas. Michael trusted his friend and thought he did the due diligence, but he did not. The deal was okay, as they had the right city and the right piece of land. But then the communication from the individual in Austin was not going very well, and things just weren’t adding up. But Michael’s friend kept insisting everything was good. Still, something didn’t sit well with Michael, so he went online and Googled his property. He saw his property was sitting on a bridge lender site. The guy in Austin had taken a loan against Michael’s property to save other properties in his portfolio. The whole thing just went sideways. Michael took a lot of time and effort to wrangle away from that investment, wasting a year of his life. He got pennies on the dollar back from that investment. Lessons learned Investing is about people. When looking at an investment opportunity, do not justify the red flags because the investment opportunity seems so great. Investing is about how you behave and not what you know. Andrew’s takeaways Even though you may sometimes have the wrong outcome, it doesn’t mean you didn’t do the right thing. Actionable advice Do as much due diligence as possible. When investing with someone, ask yourself: Do they have something to lose if the investment fails? Do they have their skin in the game? Do they have a balance sheet? Do they have something here at risk more than you do? Michael’s recommendations Michael recommends that anyone wanting to learn about personal finance read Morgan Housel’s books . He also recommends downloading his free Comprehensive Guide to Real Estate Investing . No.1 goal for the next 12 months Michael’s number one goal for the next 12 months is to deliver a great product and service to his investors. On the personal side, Michael has two kids in college and one still at home. He aims to spend as much time as possible with the son still at home and then enjoy life after kids as an empty nester with his wife. Parting words “Thank you so much for having me on today. It’s been great.” Michael Episcope [spp-transcript] Connect with Michael Episcope LinkedIn X YouTube Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads X YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management 18:36
18:36
Play Later
Play Later
Lists
Like
Liked18:36
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 20: A Higher Intelligence. LEARNING: Choose passive investing over active investing. “Passive investing involves systematic, transparent, and replicable strategies without individual stock selection or market timing. It’s the more ethical way to go.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 20: A Higher Intelligence. Chapter 20: A Higher Intelligence In this chapter, Larry discusses prudent investing. The Uniform Prudent Investor Act The Uniform Prudent Investor Act , a cornerstone of prudent investment management, offers two key benefits. Firstly, it underscores the importance of broad diversification in risk management, empowering trustees and investors to make informed decisions. Secondly, it promotes cost control as a vital aspect of prudent investing, providing a clear roadmap for those who may lack the necessary knowledge, skill, time, or interest to manage a portfolio effectively. Ethical malfeasance and misfeasance in investing In this chapter, Larry sheds light on Michael G. Sher’s insights. Sher extensively discusses ethical malfeasance and misfeasance. He says ethical malfeasance occurs when an investment manager does something deliberately or conceals it (e.g., the manager knows that he’s too drunk to drive but drives anyway). For example, consider the manager who invests intentionally at a higher level of risk than the client chose without informing them and then generates a subsequently higher return. The manager attributes the alpha or the excess return to his superior skill instead of the reality that he was taking more risk, so it was just more exposure to beta, not alpha. On the other hand, ethical misfeasance occurs when an investment manager does something by accident (e.g., the manager really believes that he’s sober enough to drive). Thus, the manager doesn’t know what he’s doing and shouldn’t be managing money. Avoid active investing Larry highly discourages active investing because the evidence shows that active managers who tend to outperform on average outperform by a little bit, and the ones that underperform tend to underperform by a lot. Either they don’t have the skill, and they have higher expenses, and the ones who have enough skills to beat the market, most of that skill is offset by their higher costs. So it’s still really tough to generate alpha. Passive investing is the ethical way to go According to Sher, managing money in an efficient market without investing passively is investment malfeasance. He also notes that not knowing that such a market is efficient is investment misfeasance because you should know it. It’s in the law books. Sher concludes that passive investing is a systematic, transparent, and replicable strategy that is more ethical. Further reading W. Scott Simon, The Prudent Investor Act (Namborn Publishing, 2002) Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn Twitter Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe 32:30
32:30
Play Later
Play Later
Lists
Like
Liked32:30
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 19: Is Gold a Safe Haven Asset? LEARNING: Do not allocate more than 5% of gold to your portfolio. “I don’t have a problem with people allocating a very small amount of gold to their portfolio, but they should only do it if they’re prepared to earn lousy returns most of the time.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 19: Is Gold a Safe Haven Asset? Chapter 19: Is Gold a Safe Haven Asset? In this chapter, Larry explains why you should not buy gold because you think it’s a good inflation hedge. While he is fine with people allocating a minimal amount of gold to their portfolio, Larry cautions that they should only do it if they’re prepared to earn lousy returns most of the time. Gold as an investment asset Gold has long been used as a store of value, a unit of exchange, and as jewelry. More recently, many investors have come to believe that gold should be considered an investment asset, playing a potential role in the asset allocation decision by providing a hedge against currency risk, a hedge against inflation, and a haven of safety during severe economic recessions. Larry reviews various research findings to determine if the evidence supports those beliefs. The evidence In their June 2012 study, “ The Golden Dilemma ,” Claude Erb and Campbell Harvey found that in terms of being a currency hedge, changes in the real price of gold were largely independent of the change in currency values—gold is not a good hedge against currency risk. This means that the value of gold does not necessarily increase or decrease in response to changes in currency values, making it a less effective hedge than commonly believed. Erb and Harvey also found gold isn’t quite the safe haven many investors think it is, as 17% of monthly stock returns fell into the category where gold dropped while stocks posted negative returns. If gold acted as a true safe haven, we would expect very few, if any, such observations. Still, 83% of the time, on the right side isn’t a bad record. Gold is not an inflation hedge, no matter the trading horizon The following example provides the answer regarding gold’s value as an inflation hedge. On January 21, 1980, the price of gold reached a then-record high of US$850. On March 19, 2002, gold traded at US$293, well below its price two decades earlier. The inflation rate for the period from 1980 through 2001 was 3.9%. Thus, gold’s loss in real purchasing power, which refers to the amount of goods or services that can be purchased with a unit of gold, was about 85%. This means that the value of gold, in terms of what it can buy, decreased significantly over this period. Gold cannot be considered an inflation hedge over most investors’ horizons when it lost 85% in real terms over 22 years. Gold is not as attractive an asset as many may think Investors are often attracted to gold because they believe it provides hedging benefits—hedging inflation, hedging currency risk, and acting as a haven of safety in bad times. The evidence demonstrates that investors should be wary. While gold might protect against inflation in the long run, 10 or 20 years is not the long run; you need a longer investment horizon to make actual returns. And there is no evidence that gold acts as a hedge against currency risk. As to being a safe haven, gold is a volatile investment capable and likely to overshoot or undershoot any notion of fair value. Evidence of gold’s short-term volatility is that over the 17 years (2006-2022), the annual standard deviation of the iShares Gold Trust ETF (IAU), at 17.2%, was higher than the 15.6% annual standard deviation of Vanguard’s 500 Index Investor Fund (VFINX). In addition, gold experienced a maximum drawdown of almost 43%—safe havens don’t experience losses of that magnitude. Don’t allocate more than 5% gold in your portfolio With this evidence in mind, Larry advises investors never to own more than 5% of gold in their portfolio. Further, investors should remember that gold only acts as a safe haven on occasion, but there are also many times when it doesn’t. Historically, the probability is close to a 50/50 coin toss, slightly favoring gold. Alternative assets to own instead of gold Larry says investors are better off owning real assets than gold because they have expected actual returns. So, for example, real estate prices over the long term go up because part of the cost is land and buildings, making real estate an excellent long-term hedge. Another asset Larry suggests instead of gold is infrastructure ETFs that, for example, own toll roads and water facilities. Such assets raise their prices with the inflation rate and can act as a hedge. Further reading Claude Erb and Campbell Harvey, “ The Golden Dilemma ,” Financial Analysts Journal (July/August 2013). Claude Erb and Campbell Harvey, “ The Golden Constant ,” May 2019. Goldman Sachs, “ Over the Horizon ,” 2013 Investment Outlook. Pim van Vliet and Harald Lohre, “ The Golden Rule of Investing ,” Jun 2023. Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn Twitter Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans 32:21
32:21
Play Later
Play Later
Lists
Like
Liked32:21
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 18: Black Swans and Fat Tails. LEARNING: Never treat the unlikely as impossible. Diversify your portfolio to withstand black swans. “If you build a portfolio that can withstand the black swans and is highly diversified, then psychological or economic events won’t force you to sell.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 18: Black Swans and Fat Tails. Chapter 18: Black Swans and Fat Tails In this chapter, Larry explains the importance of never treating the unlikely as impossible and ensuring your plan includes the near certainty that black swan events will appear. Thus, your plan should consider their risks and how to address them. Understanding the risk of fat tails In terms of investing, Larry says, fat tails are distributions in which very low and high values are more frequent than a normal distribution predicts. In a normal distribution, the tails to the extreme left and extreme right of the mean become smaller, ultimately reaching zero occurrences. However, the historical evidence on stock returns is that they demonstrate occurrences of low and high values that are far greater than theoretically expected by a normal distribution. Thus, understanding the risk of fat tails is essential to developing an appropriate asset allocation and investment plan. Unfortunately, Larry notes, many investors fail to account for the risks of fat tails. History of the black swans With the publication of Nassim Nicholas Taleb’s 2001 book Fooled by Randomness , the term black swan became part of the investment vernacular—virtually synonymous with the term fat tail. In his second book, The Black Swan , published in 2007, Taleb called a black swan an event with three attributes: It is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility. It carries an extreme impact. Despite its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. Taleb went on further to show that stock returns have big fat tails. Their distribution of returns is not normally distributed, and fat tails mean that what people think are unlikely events are much more likely to occur than people believe will. To illustrate this, Larry uses an example: if you take stock returns, and in the last 100 years, you cut out one best month per year, which is 1% of the distribution, the assumption is that you wouldn’t lose all that much of the returns. But the fact is, you lose most of the returns. So that’s the good fat tails. Similarly, if you avoid the worst months, your returns become spectacular. Do not try to time the market However, Larry cautions investors that trying to time the market because of unpredictable events is the wrong strategy. The fact that you have fat tails in the data doesn’t mean you should try to time the market or engage in an active management strategy because evidence shows that it doesn’t work. What it means, very simply put, is that your investment strategy, investment policy, and asset allocation decisions must take into account that these fat tails exist; they’re unpredictable, and therefore, don’t take more risks than you can stomach. Further, Larry adds, you must be prepared to rebalance the portfolio to take advantage of those drops and buy more when things are down. Active management will not protect you from fat tails The existence of fat tails doesn’t change the prudent strategy of being a passive buy, hold, and rebalance investor. Active managers have demonstrated no ability to protect investors from fat tails. However, the existence of fat tails is significant because of their effect on portfolios. The risks of black swans and the damage they can do to portfolios, especially for those in the withdrawal phase, must be considered when designing your asset allocation. With that in mind, Larry offers the following advice: Make sure your investment plan accounts for the existence of fat tails. Don’t take more risks than you have the ability, willingness, or need to take. Never treat the unlikely as impossible or the likely as certain. Further reading Nassim Nicholas Taleb, Fooled by Randomness , Texere, 2001. Javier Estrada, “ Black Swans and Market Timing: How Not to Generate Alpha ,” November 2007. Nassim Nicholas Taleb, The Black Swan , Random House, 2007. Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable Enrich Your Future 17: Take a Portfolio Approach to Your Investments About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn Twitter Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 17: Take a Portfolio Approach to Your Investments 16:23
16:23
Play Later
Play Later
Lists
Like
Liked16:23
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 17: There is Only One Way to See Things Rightly. LEARNING: Consider the overall impact of investments rather than focusing on individual metrics. "There is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant." Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 17: There is Only One Way to See Things Rightly. Chapter 17: There is Only One Way to See Things Rightly In this chapter, Larry enlightens us on the benefits of considering the overall impact of investments rather than focusing on individual metrics. This holistic approach empowers investors and advisors to make more informed decisions. Don’t view an asset class’s returns and risk in isolation A common mistake that investors and even professional advisors often make is viewing an asset class’s returns and risk in isolation. Larry emphasizes this point by giving the example of Vanguard’s popular index funds, the largest index funds in their respective categories, to make us all more cautious and aware of the potential pitfalls of this approach. From 1998 through 2022, the Vanguard 500 Index Fund (VFINX) returned 7.53% per annum, outperforming Vanguard’s Emerging Markets Index Fund (VEIEX), which returned 6.14% per annum. VFINX also experienced lower volatility of 15.7% versus 22.6% for VEIEX. The result was that VFINX produced a much higher Sharpe ratio (risk-adjusted return measure) of 0.43 versus 0.30 for VEIEX. Why more volatile emerging markets have a higher return According to Larry, despite including an allocation to the lower returning and more volatile VEIEX, a portfolio of 90% VFINX/10% VEIEX, rebalanced annually, would have outperformed, returning 7.59%. And it did so while also producing the same Sharpe ratio of 0.43. Perhaps surprisingly, a 20% allocation to VEIEX would have done even better, returning 7.61% with a 0.43 Sharpe ratio. Even a 30% allocation to VEIEX would have returned 7.59%, higher than the 7.53% return of VFINX (though the Sharpe ratio would have fallen slightly to 0.42 from 0.43). The portfolios that included an allocation to the lower-returning and more volatile emerging markets benefited from the imperfect correlation of returns (0.77) between the S&P 500 Index and the MSCI Emerging Markets Index. The right way to build a portfolio Larry says there is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant. The only thing that should matter is considering how adding an asset class impacts the risk and return of the entire portfolio. Further, Larry stresses the importance of global diversification, a strategy that can reassure and instill confidence in investors and advisors. He points out that if markets are efficient, all risky assets should have very similar risk-adjusted returns. This argument for broad global diversification, avoiding the home country bias, is a logical starting point for you to consider in your investment strategies. Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe Enrich Your Future 16: The Estimated Return Is Not Inevitable About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn Twitter Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…

1 Enrich Your Future 16: The Estimated Return Is Not Inevitable 36:04
36:04
Play Later
Play Later
Lists
Like
Liked36:04
Listen on Apple | Listen Notes | Spotify | YouTube | Other Quick take In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . In this series, they discuss Chapter 16: All Crystal Balls are Cloudy. LEARNING: Estimated return is not always inevitable. “If returns are negative early on, don’t withdraw large amounts because when the market eventually recovers, you won’t have that money to earn your returns.” Larry Swedroe In this episode of Enrich Your Future , Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing . The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks . Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 16: All Crystal Balls are Cloudy. Chapter 16: All crystal balls are cloudy In this chapter, Larry illustrates why past returns are not crystal balls that predict future returns. According to Larry, the problem with all forecasts that deal with estimations of probabilities is that people tend to think of them in a deterministic way. He says that as an investor, you should think about returns with the idea that distribution and estimate are only the middle points. Your plan has to be prepared for either the good tail to show up, which is easy to deal with and usually will allow you to take chips off the table and reduce your risk because you’ll be well ahead of your goal. But if the bad tail shows up, you may have to either work longer, plan on saving more, or rebalance, which means buying stocks at a tough time. The threat of sequence risk To demonstrate the danger of sequence risk, Larry asks us to imagine it’s 1973, and stocks have returned 8% in real terms and 10% in nominal returns. We’ve had similar results over the next 50 years. Say an investor in that time frame decides to withdraw 7% yearly from their portfolio in real terms because they know with their clear crystal ball that they will get 8% for the next 50 years. This means if they take out, say, $100,000 in the first year, and inflation is 3%, to keep their actual spending the same, they have to take out $103,000. According to Larry, this investor will be bankrupt within 10 years due to the sequence of returns, which is the order in which the returns occur, not the returns themselves. As you can see in the table below, despite providing an 8.7% per annum real return over the 27 years, because the S&P 500 Index declined by more than 37% from January 1973 through December 1974, withdrawing an inflation-adjusted 7% per annum in the portfolio caused it to be depleted by the end of 1982—in just 10 years! (Note that from January 1973 through October 1974, when the bear market ended, the S&P 500 lost 48%.) Sacrificing expected returns Larry says this example shows the danger of sequence risk and illustrates that the order of returns matters significantly in the decumulation phase because systematic withdrawals work like a dollar-cost averaging program in reverse—market declines are accentuated. This can cause principal loss, which the portfolio may never recover from. In this case, the combination of the bear market and relatively high inflation caused the portfolio to shrink by almost 56% in the first two years. For the portfolio to be restored to its original $1 million level, the S&P 500 Index would have had to return 127% in 1975. And because of the inflation experienced, the amount to be withdrawn would have needed to increase from $70,000 to over $90,000. In such cases, the odds of outliving one’s assets significantly increase if you don’t adjust the plan (such as increasing savings, delaying retirement, or reducing the spending goal). The order of returns matters According to Larry, our investor made the mistake of treating the single-point estimate as if it were an inevitable outcome and not a single potential outcome within a broad spectrum of potential outcomes. Another mistake our investor made was failing to consider that his investment experience might be different from the return over the entire period because of the impact of his withdrawals. In other words, the order of returns matters, not just the returns over the entire period. Estimated return is not inevitable Larry insists that since we live in a world with cloudy crystal balls, and all we can do is estimate returns, it is best to avoid treating a portfolio’s estimated return as inevitable. Consider the possible dispersion of likely returns and calculate the odds of successfully achieving the financial goal. The goal is generally, though not always, defined as achieving and maintaining an acceptable lifestyle—not running out of money while still alive. In other words, the goal is not to retire with as much wealth as possible but to ensure you do not retire poor and risk running out of assets while still alive. Using a Monte Carlo simulator to forecast the potential dispersion of returns Larry says that forecasting the potential dispersion of returns is best accomplished through a Monte Carlo simulator—a computer simulation that uses random processes to model the impact of risk and uncertainty in financial and investment forecasting. This tool allows one to see the probabilities of different possible outcomes of an investment strategy. The computer program will produce numerous random iterations (usually at least 1,000 and often many thousands), letting one see the odds of meeting a goal. Since thousands of iterations are run, one must think about probabilities instead of just one outcome. Projecting the likelihood of success Divide the Monte Carlo simulation based on your investment life into an accumulation phase when you’re working and making contributions and a distribution phase that begins when you retire and lasts as long as you live. The inputs into the Monte Carlo simulation are: The investment assumptions (expected returns, standard deviations, and correlations) Future deposits into the investment account The desired annual withdrawal amount The years the account must last The output is summarized by assigning probabilities to the various investment outcomes. The ultimate goal is to ensure you are comfortable with the projected likelihood of success—the odds you can withdraw sufficient funds from the portfolio each year and still achieve your financial goal. Nobody can predict the future when people are involved In conclusion, Larry reminds investors that crystal balls will always be cloudy when forecasting the future, be it the weather or stock market returns. He quotes Alan Greenspan’s advice: “Learn everything you can, collect all the data, crunch all the numbers before making a prediction or a financial forecast. Even then, accept and understand that nobody can predict the future when people are involved.” However, Larry adds that the inability to forecast the future accurately does not render forecasting useless. It just means we must accept this shortcoming and take it into account. Another essential investment advice is to never make the mistake of treating even the highly likely as if it were inevitable. Further reading Didier Sornette, Why Stock Markets Crash (Princeton University Press 2002), p. 322. Did you miss out on the previous chapters? Check them out: Part I: How Markets Work: How Security Prices are Determined and Why It’s So Difficult to Outperform Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and Bonds Enrich Your Future 02: How Markets Set Prices Enrich Your Future 03: Persistence of Performance: Athletes Versus Investment Managers Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find? Enrich Your Future 05: Great Companies Do Not Make High-Return Investments Enrich Your Future 06: Market Efficiency and the Case of Pete Rose Enrich Your Future 07: The Value of Security Analysis Enrich Your Future 08: High Economic Growth Doesn’t Always Mean High Stock Market Return Enrich Your Future 09: The Fed Model and the Money Illusion Part II: Strategic Portfolio Decisions Enrich Your Future 10: You Won’t Beat the Market Even the Best Funds Don’t Enrich Your Future 11: Long-Term Outperformance Is Not Always Evidence of Skill Enrich Your Future 12: When Confronted With a Loser’s Game Do Not Play Enrich Your Future 13: Past Performance Is Not a Predictor of Future Performance Enrich Your Future 14: Stocks Are Risky No Matter How Long the Horizon Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe About Larry Swedroe Larry Swedroe was head of financial and economic research at Buckingham Wealth Partners . Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “ The Only Guide to a Winning Investment Strategy You’ll Ever Need .” He has authored or co-authored 18 books. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets. Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect , Advisor Perspectives , and Wealth Management . [spp-transcript] Connect with Larry Swedroe LinkedIn Twitter Website Books Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…

1 Damon Pistulka - The Role of Technology in Business Growth 35:14
35:14
Play Later
Play Later
Lists
Like
Liked35:14
BIO: Damon Pistulka, co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits. STORY: Damon explains his journey into understanding technology and its role in business growth. LEARNING: Stay informed and adapt to changing industry trends. Adapt to changing customer expectations and preferences. “The simple things we can do with technology today make the customer experience so much better.” Damon Pistulka Guest profile Damon Pistulka , co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits. With over 20 years of experience, Damon is dedicated to transforming businesses, enhancing profitability, and helping founders create lasting legacies. Technology is your business ally In today’s episode, Damon, who previously appeared on the podcast on episode Ep649: Be Careful of Concentration Risk , discusses the value of technology in running a business. He emphasizes the importance of robotic process automation, CRMs, and AI in modern business operations to accelerate value. In his opinion, technology allows businesses to do simple things that improve customer experience. Damon highlights a couple of threats businesses face today that could be dealt with by adopting technology. Rapid innovation is outpacing businesses. Those lagging behind will be overtaken by competitors who have adopted new technologies. Aging workforce with limited new talent. There’s an aging workforce and limited new talent. As more people retire, businesses increasingly find it hard to replace the retirees with educated and qualified people. Customers now expect top-tier service levels. Buyers are now demanding businesses provide instant feedback and real-time updates. Businesses that don’t meet customer expectations will not stay competitive. Using technology to deal with the threats Damon explains his approach to helping clients develop business growth strategies. He emphasizes the importance of starting with small, manageable changes and gradually scaling up. Damon cautions entrepreneurs from trying to do it all. Instead, he advises starting with simple, practical changes, often referred to as ‘low-hanging fruits’—these are the tasks or opportunities that are the easiest to achieve and provide the quickest benefits. Gradually, as these are implemented, more complex systems can be adopted. Seek out experts who can help you advance Further, Damon advises seeking out experts who can help you advance in the particular area you’re focusing on. Then, work your way up as you get your company, your people, and your supplier base comfortable with these changes. Get educated before adopting new technology Damon also underscores the importance of getting educated before adopting new technology. He advises becoming familiar and comfortable enough with it to try it, enabling you to identify potential areas where the technology could help your business. This approach instills a sense of preparedness and confidence. Then, he suggests hiring an expert to help you implement your new technologies and strategies. Move fast Another way to deal with the business threats is to move fast. Damon says that speed sells, and businesses must adopt a speed and innovation culture. This culture is about encouraging and rewarding quick decision-making, rapid implementation of ideas, and a constant drive for improvement. Technology will help you do things in half the time and stay efficient and competitive in your operations, which is a key aspect of this culture. Just get started Finally, according to Damon, just get started. Business owners wake up knowing what they have to do every day. By cutting the distractions and focusing on your core strengths and capabilities, you can stay reassured and focused. As Damon says, there’s a lot of time in your day if you throw out the junk. [spp-transcript] Connect with Damon Pistulka Linkedin Twitter Facebook YouTube Website Andrew’s books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Transform Your Business with Dr.Deming’s 14 Points Andrew’s online programs Valuation Master Class The Become a Better Investor Community How to Start Building Your Wealth Investing in the Stock Market Finance Made Ridiculously Simple FVMR Investing: Quantamental Investing Across the World Become a Great Presenter and Increase Your Influence Transform Your Business with Dr. Deming’s 14 Points Achieve Your Goals Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Threads Twitter YouTube My Worst Investment Ever Podcast…
Welcome to Player FM!
Player FM is scanning the web for high-quality podcasts for you to enjoy right now. It's the best podcast app and works on Android, iPhone, and the web. Signup to sync subscriptions across devices.