Wes Gray, founder of Alpha Architect, discusses his personal portfolio principles and major assets. He shares his views on portfolio management, biggest investment mistakes, and long-term investing goals. They also explore topics like living in Puerto Rico for tax benefits, trend following strategy, and finding fulfillment in non-financial investments. Fishing for Dorado and lessons learned from building a portfolio are also discussed.
Importance of evidence-based investing and a long-term perspective.
Prioritizing personal financial goals such as peace of mind, funding their business, and providing for their family's well-being.
Designing a portfolio that is all-weather, focuses on diversification, and has exposure to trend-following strategies.
Deep dives
Portfolio Philosophy and First Principles
The speaker emphasizes the importance of evidence-based investing and having a long-term perspective. They believe in creating a portfolio that is robust to chaos and does not focus on strong relative performance. The speaker argues that the traditional 60% stocks, 40% bonds portfolio is inadequate and highlights the risks of relying solely on broad market indices like the S&P 500.
Personal Financial Goals
The speaker outlines their personal financial goals, which include not having to stress about money, ensuring enough capital for their business, and being able to afford a comfortable retirement and college education for their children. They prioritize peace of mind, funding their business, and providing for their family's well-being, including access to healthy food, opportunities for exercise, and the ability to host events without financial constraints.
Asset Allocation and Investment Strategy
The speaker discusses their allocation across various asset classes, including cash, real estate (specifically their primary residence), tail risk products, private short-term investments, trend equity strategies (simple and complex), managed futures, private long-term investments (such as private equity or venture capital), and their own business (Alpha Architect). They express disdain for traditional bond investing and argue that trend following should be a key component of equity investing. They also mention their focus on having skin in the game by investing in the same assets they recommend to clients.
Investing in ETF operators personally
The speaker mentions starting a little syndicate with his friend and Princeton PhD, Ray McLeady. They invest in ETF operators who need capital to fund their lives. The speaker believes that while he hates private equity, this unique circumstance allows him to invest more in ETF operators and potentially help their platform.
Portfolio design and inflation
The speaker discusses his portfolio and explains that it is designed to be all-weather and does not require any changes for different economic conditions, including inflation. He emphasizes the importance of having a solid strategic investment plan that can withstand future uncertainties. The speaker also mentions that he focuses on diversification, balancing assets that are long volatility with assets that are short volatility, and having exposure to trend-following strategies.
In this episode of Show Us Your Portfolio we speak with Alpha Architect founder Wes Gray. We discuss the three principles he uses to build his personal portfolio and take a detailed look the major assets within it. We also discuss his general views on portfolio management, his biggest investment mistakes and how he thinks about his long-term investing goals.
We hope you enjoy the discussion.
ABOUT THE PODCAST
Excess Returns is an investing podcast hosted by Jack Forehand (@practicalquant) and Justin Carbonneau (@jjcarbonneau), partners at Validea. Justin and Jack discuss a wide range of investing topics including factor investing, value investing, momentum investing, multi-factor investing, trend following, market valuation and more with the goal of helping those who watch and listen become better long term investors.
