My Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this seventh episode, they talk about mistake number 11: Do you let the price paid affect your decision to continue to hold an asset? And mistake number 12: Are you subject to the fallacy of the hot streak?LEARNING: Look at everything you own from an economic perspective and decide whether to keep holding or selling. Avoid FOMO (fear of missing out) and stock picking; build a diversified portfolio. “One of the biggest values of a good advisor is to educate people on rational economic decision-making so they can make informed investment decisions.”Larry Swedroe In today’s episode, Andrew continues his discussion with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. 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 a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this sixth episode, they talk about mistake number 9: Do you avoid admitting your investment mistakes? And mistake number 10: Do you pay attention to the experts?Missed out on previous mistakes? Check them out:ISMS 8: Larry Swedroe – Are You Overconfident in Your Skills?ISMS 17: Larry Swedroe – Do You Project Recent Trends Indefinitely Into the Future?ISMS 20: Larry Swedroe – Do You Extrapolate From Small Samples and Trust Your Intuition?ISMS 23: Larry Swedroe – Do You Allow Yourself to Be Influenced by Your Ego and Herd Mentality?ISMS 24: Larry Swedroe – Confusing Skill and Luck Can Stop You From Investing WiselyISMS 25: Larry Swedroe – Admit Your Mistakes and Don’t Listen to Fake ExpertsMistake number 11: Do you let the price paid affect your decision to continue to hold an asset?According to Larry, people value things more when they own them. This is due to the endowment effect, which causes people to put extra value emotionally and make decisions based on this. This type of decision-making is utterly irrational from an economic perspective.The endowment effect is a big mistake that investors make, especially when they get gifted stocks or other investment instruments from a parent, spouse, relative, friend, etc. They then hold on to this concentrated risk when diversification is the best investment method.Whenever you receive an investment as a gift, look at it from an economic perspective and ask yourself if you had money equivalent to the value of that gift would you invest in it? If the answer is no, then sell the gifted investment. If it’s yes, then keep it.Larry also mentions another reaction to the endowment effect, where people think things familiar to them are safer. So, for example, a US investor will overweight US stocks, a Japanese investor will overweight Japanese stocks, or a French investor will think French stocks are the highest-performing and safest investments.Mistake number 12: Are you subject to the fallacy of the hot streak?Larry explains the fallacy of the hot streak as the habit of placing an overwhelming amount of value on what has happened recently. This common fallacy is closely related to recency bias.According to Larry, we confuse skill with luck leading to the fallacy of a hot streak. If you find yourself amused by an investment’s recent success, first do statistical tests to see whether this was a random outcome above the expected average. For example, over a 20-year period, you would expect 2% of fund managers to outperform randomly. So if the actual number is 1%, we know fewer outperform than randomly expected. Therefore, we shouldn’t attach any value to the ones who did.To deal with the fallacy of the hot streak, avoid FOMO and build a diversified portfolio. Also, avoid picking individual stocks that have far more to do with speculation than with investing.About Larry SwedroeLarry Swedroe is 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 SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedLarry Swedroe and RC Balaban, Investment Mistakes Even Smart Investors Make and How to Avoid ThemPhilip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know?Carol Tavris and Elliot Aronson, Mistakes Were Made (But Not by Me): Third Edition: Why We Justify Foolish Beliefs, Bad Decisions, and Hurtful ActsRichard Lawrence, The Model: 37 Years Investing in Asian Equities

BIO: Vishal Bhardwaj is a serial entrepreneur and founder of Predictions For Success, Engineer By Mistake, and Passionate Management Services.STORY: Vishal gained immediate success when he started his company and had about 100,000 followers. He thought this indicated that people loved what he was doing, so he decided to sell a corporate gift for Diwali 15 days before the festival. He didn’t do any market research, so when he went to sell the product, no one would buy it as they had ordered their gifts months in advance.LEARNING: Do proper research before you jump into anything. Don’t let emotions run your business for you. Timing is as important as pricing. “You may have a lot of good audiences, but those may not be the people who will purchase the products you introduce.”Vishal Bhardwaj Guest profileVishal Bhardwaj is a serial entrepreneur and founder of Predictions For Success, Engineer By Mistake, and Passionate Management Services. He loves to inspire students and aspiring entrepreneurs and has been at TED Talks, TCS, Money Control, Bakstage, and others.For any personal guidance on career and relationships, Vishal is reachable on WhatsApp.Worst investment everVishal started Predictions for Success in 2014 and got around 100,000 followers. This immediate success motivated him to leverage everything, and he thought that whatever he touched would turn into gold because people loved what he was doing. Vishal and his team thought selling something would be a good idea.Diwali was just 15 days away, and Vishal suggested to his partner that they sell corporate gifts for the famous Indian festival. They started shopping for things even though they had no idea what the people would want. They thought having something in the range of $10 would be easy to crack. While at the market, Vishal suggested that rather than purchasing everything at a wholesale rate, they should buy something a little pricey but as a sample. So, if it didn’t get sold, they would only have a little inventory sitting idle. His partner was against the suggestion. He thought they should buy cheap and in bulk. Vishal insisted that they forget about profits and try to learn something.They invested 100,000 rupees (about US$1,200) and purchased products in bulk. They did a professional photoshoot, and everything was exciting until it came time to sell the products. They talked to the companies to see if they were interested in purchasing the products, but the prices they quoted were less than even what the company had bought the products for. They couldn’t sell even a single product and had to give them out as gifts to their customers for the next three years. Vishal still has a couple of them lying around in his backyard.Lessons learnedDo proper research before you jump into anything.Emotions can overwhelm you, but do not let them run your business for you.Having an audience and having a customer who will purchase are two very different stages.The timing of your launch is as important as the pricing of your product.Andrew’s takeawaysYour audience isn’t necessarily there to buy. It could be there for the experience.Start slow, think carefully, test the market, and test the response before you act.Actionable adviceWhen you hear any idea, even a unicorn idea, wait seven days before acting on it. If you feel great about that idea after seven days, it’s good to go. If your emotions decrease daily, you either take more time to think about it or let go of the idea.Vishal’s recommendationVishal recommends reading The Bhagavad Gita to learn the world within you to quickly discover the world outside.If you’re looking for any guidance regarding your personal or professional life or if you’re stuck and don’t know where to go, connect to Predictions for Success on WhatsApp, and Vishal and his team will help you tackle the problems you’re facing right now.No.1 goal for the next 12 monthsVishal’s number one goal for the next 12 months is to read into the spirituality of one billion people. [spp-transcript] Connect with Vishal BhardwajLinkedInTwitterWhatsAppAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Harjeet Khanduja is an international speaker, author, poet, visionary, inventor, influencer, and HR Leader. He is an alumnus of IIT Roorkee and INSEAD. He is currently working with Reliance Jio. STORY: Harjeet regrets wasting so much of his life working hard instead of working smart. Though he succeeded in his career, he completely ignored his family and led an unbalanced life. LEARNING: Learn how to delegate so you can have time to focus on other things in your life. You must care for your family and inner self to be more productive.  “When you harness everyone’s energy, then you can work in a broader environment and grow. When you’re happy, you can do more things in life, not just for your business.” Harjeet Khanduja  Guest profile Harjeet Khanduja is an international speaker, author, poet, visionary, inventor, influencer, and HR Leader. He is an alumnus of IIT Roorkee and INSEAD. He is currently working with Reliance Jio.  He is an SAP HCM consultant, Six Sigma Green Belt, and Assessor for Predictive Index. He has 3 published patents, and his book “Nothing About Business” has been a best-seller on Amazon. Harjeet has been conferred with the HR Leadership Award, Pride of Nation Award, HR Personality of the Year, Global Digital Ambassador, Global Learning Award, ET HR Influencer of 2022, and Top 200 Global Leadership Voices of 2022. Harjeet has been a LinkedIn Power Profile, TEDx speaker, Guest Faculty at IIM Ahmedabad, Board Member of the Federation of World Academics, Member of the CII HR IR committee, and Co-chair of Nasscom Diversity Committee. Worst investment ever The first investment mistake Harjeet ever made was opening a PPF account because his father asked him to. Harjeet kept investing in that account year after year without knowing why he was investing. He regrets never having control over that decision. Harjeet also regrets wasting so much of his life working hard instead of working smart. In every company Harjeet worked for, he’d work himself to the bone trying to prove his abilities. Even though he achieved massive success in every position he took up, his life outside work suffered. Harjeet barely had any time to spend with his family. After all the time and effort he put into his work, Harjeet soon realized his life was not balanced.  In 2012, Harjeet started looking at life holistically rather than unidimensional. Now his life is better, and his wife is happier. Lessons learned Your team can solve problems on their own. You don’t need to hold their hands constantly; delegate and only assist where necessary.  You must care for your family and inner self to be more productive. Andrew’s takeaways Life is a balance of opposing forces, and we’re constantly making trade-offs. Actionable advice Learn to delegate and trust. It will take time for others to catch up to your quality or delivery standards. But if you don’t start delegating, you’ll never have time to focus on other important parts of your life. Parting words  “It’s okay to fail. Just believe in yourself. Whatever you’ve got, nobody can take it from you.” Harjeet Khanduja Connect with Harjeet KhandujaLinkedInTwitterInstagramYouTubeBlogBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Laurens Swinkels is an Associate Professor of Finance at Erasmus University in Rotterdam and Executive Director and Head of Quant Strategy at Robeco’s Sustainable Multi-Asset Strategies team.STORY: Lauren bought a house in Rotterdam. Just five years later, he had to move to Norway. Laurens managed to sell the house in the Netherlands many years later at a loss.LEARNING: Liquidity is very important even when investing long-term. Remove emotions from your decision-making. “Even though you’re a long-term investor and you think you’re really long-term, there may be things that cross your path that require liquidity.”Laurens Swinkels Guest profileLaurens Swinkels is an Associate Professor of Finance at Erasmus University in Rotterdam and Executive Director and Head of Quant Strategy at Robeco’s Sustainable Multi-Asset Strategies team. His areas of expertise include allocation research and empirical asset pricing. He teaches Finance courses and has published his academic work in peer-reviewed journals such as the Journal of Financial Economics. Laurens holds a Ph.D. in Finance and a Master’s in Econometrics from Tilburg University in the Netherlands.Worst investment everWhen Laurens started his masters in Tilburg, Netherlands, he decided to move out of his parent’s home. He was torn between buying an apartment and renting one because the real estate prices were quite favorable for buyers then. He decided to rent since he would only be in school for a few years.After completing his master’s, Laurens decided to do a Ph.D. and stayed another five years in Tilburg. He was still renting his apartment. After graduating, Laurens moved to Amsterdam, where the house prices were unimaginably high. Hoping that the prices would go down, he rented an apartment. But the prices just kept going up. Laurens had to commute daily from Amsterdam to Rotterdam. After getting tired of the commute, Laurens decided to buy a house in Rotterdam, where the prices were lower than in Amsterdam.Laurens didn’t foresee that he would have to move to Norway five years after that decision. At this point, the house he’d bought was 25% underwater. The investment in this house made a large part of his wealth, so taking a 25% loss was tough for Laurens. He managed to sell the house only two years ago.Lessons learnedThe liquidity that allows you to sell and buy a house in another location whenever you want is very valuable.Even when you’re investing long-term, liquidity is still essential.Remove emotions from your decision-making.Andrew’s takeawaysBuying a house is a trap because you may lack liquidity.Home buying comes with the risk of not realizing the final capital gain that you thought you would.Actionable adviceIf you’re not yet ready to buy a home or don’t know where to buy, you can first get exposure to real estate through listed markets.Lauren’s recommendationsLaurens recommends his data page on the university website, where you can download datasets if you want to do number crunching when investing. You can also check out Google Scholar or SSRN, where people post their latest thoughts. You can set alerts and get notified when papers on topics you’re interested in are published. If you don’t have the time for that, there are several people, like Larry Swedroe, that have blogs that summarize the papers for you and make them easily digestible.No.1 goal for the next 12 monthsLauren’s number one goal for the next 12 months is to discover things he doesn’t know yet so he can change his prior ideas on how financial markets work.Parting words “Till next time, take care of yourselves and each other.”Laurens Swinkels [spp-transcript] Connect with Laurens SwinkelsLinkedInTwitterBlogAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Spencer Jakab is the global editor of the Wall Street Journal’s financial and economic analysis column, Heard on the Street. Prior to becoming a financial journalist 20 years ago, he was a top-rated emerging market stock analyst.STORY: Spencer took investment advice without doing due diligence and ended up losing his entire investment.LEARNING: Don’t take investment tips from people; do your due diligence. Diversify your portfolio. Don’t invest more than you can lose. “Don’t take investment tips from people because those who tell don’t know, and those who know, don’t tell.”Spencer Jakab Guest profileSpencer Jakab is the global editor of the Wall Street Journal’s financial and economic analysis column, Heard on the Street. Prior to becoming a financial journalist 20 years ago, he was a top-rated emerging market stock analyst. He has written two books, the most recent being “The Revolution That Wasn’t,” about novice investors caught up in GameStop mania.Worst investment everSpencer moved to Hungary in the early 90s because he was very excited about all the changes due to the fall of the Berlin Wall and the opening up of the Eastern European region. Spencer wanted to make money and also see history being made.After writing to many investment banks looking, he got a couple of interviews with local accountants and banks. Spencer accepted a job as a country analyst in Hungary. He had no idea what he was doing.The job was to meet fund managers who were wealthy, nicely dressed, and suave, talking about all these things they had done and how much money they’d made from various investments. He thought they were so clever and believed that if he followed their lead, he’d be rich too. At the time, Spencer had saved $5,000. He invested half the money in a Southeast Asia fund and the other half in a US bond fund. The market became bearish, and Spencer lost most of his investment.Later, Spencer met a suave, sophisticated fund manager who convinced him to invest in a Canadian company. The company made permanent magnets. The company had a PE ratio of about nine, which is very low. Spencer looked the company up and read the annual report. He still couldn’t figure out what a permanent magnet was, but it sounded impressive and very high-tech. The company also had all these PhDs working for them. So Spencer decided to invest in it. He also told his good friend about it, who also invested.Some time went by, and one day as Spencer read the newspaper, he came across a story of how the FBI had raided the offices of the magnet company. The company was run by Russian mobsters and was just a front. Obviously, the stock went to zero after the expose. Spencer and his friend lost all their investment.Lessons learnedDon’t take investment tips from people; do your due diligence.Do your own research.Diversify your portfolio.Only invest what you can lose.If you want to be a stock picker, do it with a small amount of your money.Invest in diversified, low-cost funds, hold for the long term, and don’t try to time the market. You’ll do better than 85% of fund managers over any 10-year period.Andrew’s takeawaysOnly buy a stock recommended by a person after researching it.Focus on taking care of yourself, but be very careful about starting to promote something to other people because it can backfire on you.Actionable adviceStop looking for the needle in the haystack; buy the whole haystack. This way, you’ll buy into a big diversified pool of investments and do okay even if there’s inflation.Spencer’s recommendationsSpencer recommends using robo-advisors because it’s a cheap way of monitoring your investment portfolio, especially if you’re starting out.No.1 goal for the next 12 monthsSpencer’s number one goal for the next 12 months is to make sense of the current economy, understand what’s going on, be nuanced, and not get caught in a head fake.Parting words “My motto in investing is to be cheap and lazy. That’s the formula for success.”Spencer Jakab [spp-transcript] Connect with Spencer JakabLinkedInTwitterWebsiteBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Charles Rotblut, CFA, is a vice president and financial analyst at the American Association of Individual Investors (AAII).STORY: Charles bought a Dotcom stock in 1998. A week later, the stock had tripled. His dad advised him to take the profits, but he insisted the stock would keep going up. Three days later, the stock lost almost all its value. Charles sold the stock and made very little profit.LEARNING: Don’t confuse luck with skill. Utilize a rolling stop loss to manage risk. Always have a diversified portfolio. “The market has an uncanny ability to make you look silly. It doesn’t matter how smart you are, how skilled you are, the market can and will make you look stupid, and not just on one occasion, but on several occasions.”Charles Rotblut Guest profileCharles Rotblut, CFA, is a vice president and financial analyst at the American Association of Individual Investors (AAII). He is the editor of the AAII Journal, created both the PRISM Wealth-Building Process and VMQ Stocks, and authors the weekly AAII Investor Update email. His book, “Better Good than Lucky: How Savvy Investors Create Fortune With the Risk-Reward Ratio,” was published in November 2010. Charles holds the Chartered Financial Analyst (CFA) designation and has analyzed both publicly traded and privately held companies.Worst investment everCharles bought a Dotcom stock in 1998, right before Thanksgiving. The stock took off, and he made triple-digit gains. On Thanksgiving day, Charles told his dad about the stock, and he advised him to take the profits. Charles insisted that the stock could run even higher. The following Monday, he got to work, logged into his computer just as the market opened, and saw that the stock had increased. On checking on the stock again a few hours later, it had lost almost all its value. All the profits had pretty much vanished.Charles got out of the stock and made just a slight gain, but nothing near what he could have made had he listened to his dad.Lessons learnedIt’s easy to confuse skill with luck, so be conscious of when luck happens.If you don’t want to sell your stock, take some of your profits and hold a little.Put the gains you take in an index fund.Andrew’s takeawaysWhenever you get to a point where a stock has gone up or down so much that you’re starting to question your situation, sell 50% of your position.Utilize a rolling stop loss to manage risk.Always have a diversified portfolio.Charles’s recommendationsCharles recommends using a stock screen to find stocks with all the traits you seek that nobody else is discussing.No.1 goal for the next 12 monthsCharles’s number one goal for the next 12 months is to save more than last year. He also wants to get onto the TED Talk stage.Parting words “Just be disciplined. Think about simple strategies. If all you do is write down very simple buy and sell rules and follow those routinely, you’ll have returns that are far in excess of the average investor.”Charles Rotblut [spp-transcript] Connect with Charles RotblutLinkedInTwitterInstagramYouTubeWebsiteBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedJames O’Shaughnessy, What Works on Wall Street, Fourth Edition: The Classic Guide to the Best-Performing Investment Strategies of All TimeJohn P. Reese and Todd O. Glassman, The Market Gurus: Stock Investing Strategies You Can Use From Wall Street’s Best

BIO: Arjun Murti has over 30 years of experience as an equity research analyst, senior advisor, and board member, with global expertise covering traditional oil & gas and new energy technologies.STORY: Arjun made a call that oil prices would quintuple from $20 a barrel in the 90s to $105 in the 2000s and stay there for at least five years. The price averaged $100 a barrel from 2000 to 2014, entirely consistent with Arjun’s call. However, after the 2008 financial crisis, the return on capital in the energy sector started falling. Arjun made excuses and continued to ride the wave all the way down.LEARNING: Let go of your ego and get out of the battle at some point. Frameworks need to grow, evolve and adjust to circumstances. Understand and inculcate reversion to the mean into your thinking. “At some point, you got to get out of your own ego and get out of the battle.”Arjun Murti Guest profileArjun Murti has over 30 years of experience as an equity research analyst, senior advisor, and board member, with global experience covering traditional oil & gas and new energy technologies.The bulk of his Wall Street career was at Goldman Sachs, where he retired as a partner in 2014. He recently “un-retired” to join Veriten, an energy research, strategy, and investing firm. Arjun publishes Super-Spiked, a Substack blog focused on the messy energy transition era.He is on the board of ConocoPhillips, a senior advisor at Warburg Pincus, and on the advisory boards for ClearPath and the Center on Global Energy Policy.Worst investment everAt the height of his career, Arjun made a call that oil was going to go from the $15 to $20 a barrel range it had been in from the mid-80s. He said the price would rise to between $50 to $105 in the 2000s and stay there for at least five years. And with that, the returns on capital and profitability in energy as a sector would do very well. Arjun called this the super spike.In 2002, the market started becoming bullish, and oil went from the 20-dollar range everyone thought the sector would be at forever to ultimately as high as $147 in 2008. The price averaged $100 a barrel from 2000 to 2014, entirely consistent with the high end of the range of Arjun’s original call. He was pretty excited about the sector’s profitability and experienced an ego boost after being proven right for five years.However, the returns on capital started rolling over, and Arjun made excuses for it. From 2006 to 2008, oil went from $65 to $100 a barrel, but returns on capital for the sector fell from 22% to 19%. 19% is still an excellent number, and that’s the excuse Arjun used to continue riding the call. The sector then got interrupted by the great financial crisis of 2008, which Arjun never viewed as an energy event. The industry rebounded dramatically off those 2008 and 2009 lows, but the returns on capital had now fallen to 16%. Arjun kept making excuses as the returns continued to fall and never got off. Making excuses for his framework the entire way down became his worst investment mistake ever.Lessons learnedAt some point, you’ve to get let go of your ego and get out of the battle.Frameworks need to grow, evolve and adjust to circumstances.Andrew’s takeawaysUnderstand and inculcate reversion to the mean into your thinking.Understand what the average is. Ride the wave but remember the numbers will go down to the average and, in some cases, below.Research shows that high returns on invested capital tend to revert toward the mean. However, that’s not the case with cyclical industries like oil.Actionable adviceYou can do all the data analysis in the world and project the future, but what’s probably most important is understanding the emotion and psychology of investing.Arjun’s recommendationsArjun strongly advocates energy literacy and therefore recommends subscribing to his substack Super-Spiked, which is free. He also recommends reading The Prize: The Epic Quest for Oil, Money & Power to understand the history of oil, why we use it, and its critical importance. You can also check out books by Vaclav Smil, an actual scientist who provides authentic fundamental understandings of energy.No.1 goal for the next 12 monthsArjun’s number one goal for the next 12 months is to speak up and engage more in pragmatic energy discussions.Parting words “I’m very excited to be alumni of your academy. Thank you so much.”Arjun Murti [spp-transcript] Connect with Arjun MurtiLinkedInTwitterYouTubeWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedJack Weatherford, Genghis Khan and the Making of the Modern World

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry discuss two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this sixth episode, they talk about mistake number 9: Do you avoid admitting your investment mistakes? And mistake number 10: Do you pay attention to the experts?LEARNING: You’ll only learn from mistakes if you admit that you made them. Just because someone is famous and confident in what they’re saying doesn’t mean they’re experts who know what they’re saying. “If you could admit a mistake when it’s the size of an acorn, it’s easier to repair than when it’s the size of a tree with deep, wide-ranging roots.”Larry Swedroe In today’s episode, Andrew continues his discussion with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. 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 a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this sixth episode, they talk about mistake number 9: Do you avoid admitting your investment mistakes? And mistake number 10: Do you pay attention to the experts?Missed out on previous mistakes? Check them out:ISMS 8: Larry Swedroe – Are You Overconfident in Your Skills?ISMS 17: Larry Swedroe – Do You Project Recent Trends Indefinitely Into the Future?ISMS 20: Larry Swedroe – Do You Extrapolate From Small Samples and Trust Your Intuition?ISMS 23: Larry Swedroe – Do You Allow Yourself to Be Influenced by Your Ego and Herd Mentality?ISMS 24: Larry Swedroe – Confusing Skill and Luck Can Stop You From Investing WiselyMistake number 9: Do you avoid admitting your investment mistakes?As human beings, we’re hardwired to avoid admitting mistakes. And, of course, you can’t correct a mistake unless you acknowledge that your behavior was a mistake in the first place. A typical investment mistake most people make is engaging in actively managed funds and stock picking, even though there’s hard evidence that a vast majority of active managers fail persistently to outperform over the long term.According to Larry, when you’ve made an investment mistake and have a poorly performing asset, the right thing to do is count your losses and substitute the asset with a superior choice. However, many people don’t want to sell because they’ll hurt their ego. Selling means they have to admit that they were wrong in the first place in making that investment.So for most people, ego and their inability to acknowledge that they’re wrong are the number one reason they’re stuck in bad investments. Most people, when directly confronted, even with proof that they’re wrong, don’t change their point of view. In fact, they tend to defend it more aggressively. They’ll selectively gather evidence or recall information and interpret it biasedly to reinforce their established beliefs.Mistake number 10: Do you pay attention to the experts?According to Larry, you shouldn’t listen to experts. But here, he means experts forecasting what the stock market and the economy will do. You should instead listen to experts quoting scientific or empirical evidence in peer-reviewed journals.When someone’s telling you exactly what’s going to happen, they’re doing it because they’re overconfident. There’s a good chance they don’t know what they’re saying. In Larry’s opinion, only one thing correlates with the ability to make forecasts; fame. The more famous someone is, the worse their predictions are, probably because they’re just overconfident in their skill sets. People fall for such ‘experts’ thinking they know what they’re talking about because they say things with confidence. Larry insists on ignoring such experts. To drive the point home, Larry quotes the authors of Mistakes Were Made (but Not By Me):“When experts are wrong, the centerpiece of their professional identity is threatened. Therefore, the more self-confident and famous they are, the less likely they’ll admit mistakes. They Just come up with statements to justify the forecast and explain if only this has happened. If only the timing was different, I would have been right. It was some unfortunate event that occurred that wasn’t forecast. So, of course, that’s why you can’t make forecasts. We can’t predict the future with any persistence better than the market does.” About Larry SwedroeLarry Swedroe is 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 SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedLarry Swedroe and RC Balaban, Investment Mistakes Even Smart Investors Make and How to Avoid ThemPhilip E. Tetlock, Expert Political Judgment: How Good Is It? How Can We Know?Carol Tavris and Elliot Aronson, Mistakes Were Made (But Not by Me): Third Edition: Why We Justify Foolish Beliefs, Bad Decisions, and Hurtful ActsKathryn Schulz, Being Wrong: Adventures in the Margin of Error

BIO: Sir Steven Wilkinson is the founder and CEO of Good & Prosper and has been involved in business finance and investment for the best part of 30 years, having started working for Merrill Lynch Investment Bank in Munich, Germany, in 1987 at the age of 24.STORY: Steven entered a successful partnership that saw them take a stock from 50 cents to 400 euros. They made so much money from their business, but the problem was Steve wasn’t ready for that kind of success. He had no system for dealing with the wealth he created and eventually lost all his money.LEARNING: Being successful is 100% dependent on you. Working on yourself is the key to having whatever it is that you want to have. “You’ve got to be the owner in order to do the things that owners do and thereby to have the things that owners have.”Steven Wilkinson Guest profileSir Steven Wilkinson is the founder and CEO of Good & Prosper and has been involved in business finance and investment for the best part of 30 years, having started working for Merrill Lynch Investment Bank in Munich, Germany, in 1987 at the tender age of 24.Good & Prosper is an advisory and investment company through which Steven acts as a thinking partner for business leaders and owners, supporting them as a generalist business expert across the fields of finance, leadership, and culture.Good & Prosper is also a knowledge platform teaching finance to entrepreneurs with a focus on Small & Medium sized businesses, primarily in the English-speaking world.Steven founded the publishing business Pitchfork Press and publishes a weekly essay, “Pitchfork Papers,” via Substack to a rapidly growing and diverse international audience.Worst investment everSteven started his investment business in 1998 and had an excellent first couple of years. This was because, as a value investor, he had no interest in any of the new economy stocks. Steven stuck with stocks in the public markets, mainly because that’s all he could afford. Steven had a couple of stocks that were mind-bogglingly great investments. And so his business did quite well, and capital increased substantially over the following years.Steven met an American gentleman who invited him to be on the board of a company he was considering setting up. The gentleman was working for one of the more famous German companies. This publishing company profited enormously from the new economy boom. He’d been in charge of managing what was a promiscuously bought portfolio of new economy businesses.The gentleman invited a senior law firm partner and a guy with deep restructuring experience to join his board. The gentleman set up the initial board meeting to get to know each other. The meeting was at the lawyer’s office. The gentleman never showed up, and the lawyer had to return to work. So Steven and the restructuring guy chatted and were fascinated by each other’s stories. They decided to stay in touch.The restructuring guy had made much money with his previous partnership and wanted to see what he could do on a bigger stage. That’s how Steven got into a partnership with him. The guy was impressed by Steven’s capital markets intelligence and excellent networks. And Steve saw the guy as an absolutely focused money maker and restructuring genius, which he undoubtedly was.The two new partners came up with the idea of buying a shell company, an empty stock-exchange-listed company. The thinking behind this idea was that they were coming into a time when they could buy assets cheaply. And if they could generate the sort of returns they thought they could return, the share price would reflect that reasonably quickly. Then they could determine through rights issues or shares issues how much money to take in and how much control to give up.So they found a shell company that had been formed for a spa in a little village and bought 90% of it. The deal was that Steve would take 40% of the shares, be the chairman and help with strategy, investors, and networks. His partner would take 60% and do all the work. The company was phenomenally successful. They took the share price from 50 cents to 400 euros.While this should have been Steve’s most successful investment, it turned out to be his worst because he was not ready for that kind of success and had no system for dealing with the wealth he had created. In 2007 everything blew up. Steve lost all his partnership and his money. He was also left with a wealth-destroying amount of debt.Lessons learnedBeing successful in business, being good at investing, and being a good owner is 100% dependent on you.You have to be ready, deserving of wealth, and be in a position of giving to receive.Working on yourself is the key to having whatever it is that you want to have.Whatever you experience results from your own self-reflection, self-development, and maturity. [spp-transcript] Connect with Steven WilkinsonLinkedInTwitterWebsiteSubstack Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Shawn O’Malley is the chief editor and writer of the We Study Markets newsletter from The Investor’s Podcast Network, the world’s largest stock-investing podcast with over 110 million downloads.STORY: Shawn wanted to hedge inflation during the COVID pandemic, so he invested in the Russian ETF at the end of 2021. The ETF performed well, and Shawn was happy. Then rumors of Russia invading Ukraine started. The invasion happened in February, and the Russian ETF stopped trading, taking Shawn’s investment to zero.LEARNING: Understand how geopolitical events and domestic politics affect investments. You won’t be compensated for lack of knowledge. “Investing is all about continuous learning and getting comfortable with the risks that we take.”Shawn O’Malley Guest profileShawn O’Malley is the chief editor and writer of the We Study Markets newsletter from The Investor’s Podcast Network, which is the world’s largest stock-investing podcast with over 110 million downloads.He writes for an audience of over 30,000 readers daily, breaking down the most important stories in financial markets with longer write-ups exploring financial history, the economics behind everyday life, and insights from legendary investors.Shawn hopes to help keep people informed about current news while adding the perspective of a long-term investor.Worst investment everIn April 2020, Shawn was sent home from school because of the COVID lockdowns. He was a junior in college at the time. He spent a few weeks doing nothing productive but soon realized this would be an extended lockdown. Shawn decided to find valuable ways to manage his time. He started taking long walks while listening to the We Study Billionaires podcast, which interested him in value investing.At the time, oil prices were negative. Shawn didn’t understand the futures market or know anything about oil. Still, it felt like an opportunity since he believed oil prices wouldn’t stay negative forever. Shawn bought into some oil and gas stocks and held them.Over the next year or so, Shawn developed this sort of outlook that some of the inflationary pressures of the lockdown would eventually manifest. So he started thinking more about how to hedge inflation to have exposure to energy prices. Shawn naively started looking for the most undervalued energy stocks in Russia. At the end of 2021, he bought into the Russia ETF as a creative and cheap way to play this inflation and energy price spike he was trying to foresee.Shawn held that investment for a year, and things were looking good. The inflation manifested, and the energy stocks started to rally. At this point, Shawn thought he was pretty clever. In January 2022, all these rumors about Russian troops gathering around Ukraine for an invasion started. Shawn believed it was just a conspiracy theory. He played down the risk and held down his investment. The attack happened in February, and the Russian ETF stopped trading, taking Shawn’s investment to zero.Lessons learnedUnderstand how geopolitical events and domestic politics affect investments.Andrew’s takeawaysIt takes time to become aware that risks are everywhere, and your first job is to understand them.You won’t be compensated for lack of knowledge.When you build a portfolio of international stocks, you’re not investing in global stocks but in a currency. So you have to at least understand the currency impact.Actionable adviceYou have to learn investment lessons for yourself. But, there are a lot of investment mistake stories from investing legends such as Warren Buffett. Read those archives, and you’ll learn a lot about investing mistakes, how to run or find great businesses, excellent management, compounding goodwill, and treating people well.No.1 goal for the next 12 monthsShawn’s goal for the next 12 months is to hit 100,000 subscribers for the We Study Markets newsletter and make financial markets understandable to as many people as possible.Parting words “Thank you for having me on the show. I hope I can count on your listeners as readers of my newsletter one day.”Shawn O’Malley [spp-transcript] Connect with Shawn O'MalleyLinkedInTwitterYouTubePodcastWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedJeremy J. Siegel (September 2022), Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies