My Worst Investment Ever Podcast

BIO: Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst.STORY: Luke put a large position in a private equity investment because it had a great founder who had previously created and sold some tech companies. Additionally, one of Luke’s dearest friends went to work there. However, he didn’t realize that the company was overvalued, so when the founder couldn’t raise funding, the company collapsed, and Luke lost all his money.LEARNING: Position sizing is crucial. Don’t get too excited and emotionally invested in an investment. Be careful when investing in illiquid assets because you can easily get trapped. “Start small; you can always get bigger. You’re better off chasing a higher valuation down the road of a more successful operation than starting too big and then having to put in more money or be stuck.”Luke Gromen Guest profileLuke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America. FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic, and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients.Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.Worst investment everLuke’s worst investment ever was a private equity investment he made. He started investing in it in early 2001, relatively early in his career when the US was already in recession. The investment was in a tech company similar to Amazon but for construction supplies. It had a database targeting the industrial B2B space.The company had a great founder who had previously created and sold some tech companies. Some friends of Luke knew him and spoke highly of him. Additionally, one of Luke’s dearest friends went to work in the company, so he had somebody on the inside telling him the company was going well. All this made Luke overconfident, and he went in too big. The investment was about 30% of his entire net worth. Luke didn’t think anything wrong was going to come up. Then Luke met the founder and realized he was not a very good salesperson. He didn’t think much about it anyway.One day, Luke talked about his investment with a tech analyst at work. When he mentioned the initial valuation, the analyst told him he would lose all his money. This is because the initial valuation was too high. Luke was perplexed by the analyst’s declaration, but he still believed he’d made a good investment.Luke was still hearing from his buddy at the company, who kept reassuring him that the company was going well. The company had a deal with a major international conglomerate to be acquired. Luke would have made about 8x his money from this sale, but the founder dilly-dallied, and 9/11 happened. There was a funding recession due to 9/11, so the deal never happened, and Luke lost all his money.Lessons learnedPosition sizing is crucial.Don’t get too excited and emotionally invested in an investment.When choosing a founder, they must blow your socks off on numerous aspects, not just the product. They should also be good at many things, such as marketing and sales.Andrew’s takeawaysBe careful when investing in illiquid investments because you can easily get trapped.Actionable advicePosition sizing is so critical because you can easily be wrong or unpredictable things like 9/11 can happen and burn down your investment. So when position sizing, start small and go big later. You’re better off chasing a higher valuation down the road of a more successful operation than starting too big and then getting stuck in a bad investment.Luke’s recommendationsLuke recommends checking out FFTT, LLC, to learn more about his various research product offerings.No.1 goal for the next 12 monthsLuke’s number one goal for the next 12 months is to maintain a healthy balance of helping clients, engaging in markets, and spending time with the people who matter: his wife and three boys.Parting words “I’d like to thank everybody for listening; I appreciate it. I really enjoyed talking with you about my worst investment. It was therapeutic.”Luke Gromen [spp-transcript] Connect with Luke GromenLinkedInTwitterYouTubeWebsiteAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Jason Brown is the founder of Power Trades University and the Brown Report. He has over a decade of stock & options trading experience, is a podcast host, and is a YouTuber. Jason believes anyone can profit from the stock market, even if they’ve lost money before.STORY: At 24, Jason had about $250,000 in a trading account. Jason wanted to buy a condo and pay cash for it. Condos were like $500,000. He figured that he could use the $250,000 to trade and make enough to pay cash for the condo. So he risked a quarter million trying to make half a million and lost it all.LEARNING: You never go broke taking a profit. There’s no one trade that’ll make you rich, but there is one trade that will blow up your entire account. Don’t set unrealistic or obsessive goals. “You never go broke taking a profit. So, if you’re up, it’s better to take that money off the table and go into your next investment with the house’s money versus trying to make everything at once.”Jason Brown Guest profileJason Brown is the founder of Power Trades University and the Brown Report. He has over a decade of stock & options trading experience, is a podcast host, and is a YouTuber. Jason believes anyone can profit from the stock market, even if they’ve lost money before. They just need to know how to identify the best time to buy and sell and the correct option strategies that can supercharge returns and minimize risk. Jason helps people go from nervous beginners to confident stocks & options traders. Check out his Free Stock Market Starter Pack and Premium courses and coaching.Worst investment everAt 21, Jason had an account with $113,000. He felt smarter than everybody. He’d made a six-figure income without a degree or a job. Jason went into full-time trading for the next two years and grew the account to about $300,000. But since he was living off some of the money, he had a balance of $250,000.Jason decided to buy a condo downtown Royal Oak, Michigan, and pay cash for it. Condos were like $500,000. Jason figured that he could use the $250,000 to trade and make enough to pay cash for the condo. So he risked a quarter million trying to make half a million and lost it all. Jason didn’t lose the money all at once. In fact, he was up $100,000 in that trade, but he wanted to make half a million in one trade. So, he ended up blowing his entire account. That was Jason’s worst investment because he already had a good life. He had a nice place to stay and a nice car. He didn’t need to risk his entire account to buy some condo in cash. It just wasn’t smart. This investment made Jason lose everything. He had to sell his car, move out of his place, and return home to live with his mom.Lessons learnedYou never go broke taking a profit.There’s no one trade that’ll make you rich, but there is one trade that will blow up your entire account.You’re stronger and better than your worst day.It’s OK to have an astronomical goal, but also be OK with the astronomical risks of the goal not working out.Andrew’s takeawaysDon’t set unrealistic or obsessive goals.Don’t let your worst days define you; grab power from having faced loss.Actionable adviceStop and take time to think. Also, seek out mentors who have succeeded in a similar path before.Jason’s recommendationsJason recommends the book Think and Grow Rich because people often think making money is about learning this one skill. However, what’s missing is the mindset, the belief that they can do it and be right on their investments.Jason also recommends his free resource, The Stock Market Starter Pack, which teaches people how to start reading stock charts, how to open their first account, and when to buy or sell.No.1 goal for the next 12 monthsJason’s number one goal for the next 12 months is to complete a book he’s working on so that he can help many more people.Parting words “You never go broke taking a profit. So when you’re up, take the money off the table.”Jason Brown [spp-transcript] Connect with Jason BrownLinkedInTwitterFacebookYouTubePodcastWebsiteAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Today, they discuss two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this twelfth series, they discuss mistake number 22: Do You Confuse Great Companies with High-Return Investments? And mistake number 23: Do You Understand How the Price Paid Affects Returns?LEARNING: Great companies are not always high-return investments. Understand how the price paid affects returns. Rebalance your portfolio regularly. “Rebalancing forces you to do the opposite of what most people do, which is dumbly chasing returns and ignoring the historical evidence. They ignore the fact that typically, over the longer term, prices tend to revert to some mean.”Larry Swedroe In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Larry is the 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 two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this twelfth series, they discuss mistake number 22: Do You Confuse Great Companies with High-Return Investments? And mistake number 23: Do You Understand How the Price Paid Affects Returns?Did you miss 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 ExpertsISMS 26: Larry Swedroe – Are You Subject to the Endowment Effect or the Hot Streak Fallacy?ISMS 27: Larry Swedroe – Familiar Doesn’t Make It Safe and You’re Not Playing With the House’s MoneyISMS 29: Larry Swedroe – The Shiny Apple is Poisonous and Information is Not KnowledgeISMS 30: Larry Swedroe – Do You Believe Your Fortune Is in the Stars or Rely on Misleading Information?ISMS 34: Larry Swedroe – Consider All Hidden Costs Before You InvestMistake number 22: Do You Confuse Great Companies with High-Return Investments?According to Larry, if you ask most investors if they’d rather own companies that have had an average return on assets of roughly 9% and a higher growth rate in earnings or companies that have an average return on assets of about 4% and lower earnings growth, 99% of investors would choose the high return and fast growth companies. One of the most persistent and incorrect beliefs among investors is that “growth” stocks have provided (and are expected to provide) higher returns than “value” stocks. But that shows a lack of understanding of how markets work.Larry says you should buy the safer investment unless the expected return from the worse investment is much higher to compensate for the extra risk because the market is pricing for risk. He reminds investors that just because value companies have lower growth in earnings and lower returns on their assets doesn’t make them bad investments. It just makes them less glamorous and attractive companies.When you identify a great company, that’s only one bit of the story. Larry says you have to ask yourself, what’s the price you’re paying? What do you know that the market doesn’t know? And suppose the answer is nothing, which it almost certainly is. In that case, the price already reflects all that great information, which means the PE ratio is likely high, meaning the expected return generally will be lower. If you’re going to buy growth stocks or small stocks, make sure that you’re screening out the ones with high investment but low profitability because they’re not burning cash with high investment, and they can turn around.Mistake number 23: Do You Understand How the Price Paid Affects Returns?When forecasting investment returns, many individuals make the mistake of simply extrapolating recent returns into the future. Bull markets lead investors to expect higher future returns, and bear markets lead them to expect lower future returns. However, you need to understand the price you pay for an asset impacts future returns.Larry says the best investment strategy is not to try to time the markets but instead rebalance. When you do well, and the PEs are going up, you’ll put less into equities and more into bonds or even sell some stocks to buy bonds. And when the PEs are low because stocks have done poorly, you’ll put more money into stocks or even sell bonds to buy stocks. Rebalancing will give you an astronomical diversification benefit.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?Gary Belsky and Thomas Gilovich, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral EconomicsLarry Swedroe, Think, Act, and Invest Like Warren Buffett: The Winning Strategy to Help You Achieve Your Financial and Life Goals

BIO: Chris Vermeulen shares a different way of investing that doesn’t use diversification or the buy-and-hold method. In his new book, “Asset Revesting - How To Exclusively Hold Assets Rising In Value, Profit During Bear Markets, And Continue Building Wealth In Retirement,” he explains why this approach is the way forward.STORY: Chris and his father imported infrared saunas from China only to discover they were not certified in Canada after arrival. Chris had invested over $250,000 that went down the drain.LEARNING: Find what you’re passionate about. Invest in what you’re familiar with. Start small, test things out, and then go big. “You might not make as much doing something you’re passionate about, but if you’re a creative person, you’ll find a way to make it work and eventually become highly successful.”Chris Vermeulen Guest profileChris Vermeulen shares a different way of investing that doesn’t use diversification or the buy-and-hold method. In his new book, “Asset Revesting - How To Exclusively Hold Assets Rising In Value, Profit During Bear Markets, And Continue Building Wealth In Retirement,” he explains why this approach is the way forward. He believes that investing should be about capital preservation first and growth second. By doing this, there will always be capital to invest and consistent account growth.With over 25 years of investment experience and data working with 20,000 self-directed investors, Chris is confident that this will become the new industry standard investment model.Worst investment everChris made enough money in the last year of college trading. Since his parents paid for his college education, he was debt-free and could start investing immediately after college. His dad happened to be helping a friend who was selling generators. The guy was importing them into the country.He suggested to his dad to buy these same generators from China. They flew to China and went to the Canton World Fair, where there were over 40,000 products and manufacturers of everything you can imagine. They’d visit the warehouses daily, and every time they saw a product they liked, they’d take the pamphlet and keep it. At the night’s end, they’d sort the brochures into yes, no, and maybes. They did this for four days.Eventually, they came across infrared saunas; at the time, no one was selling them in Canada. They put in a big order. Chris borrowed $250,000, ready to take over the world.When the products arrived in Canada months later, they set one up and realized they had more or less been scammed. The products weren’t certified by the Canadian Electrical Code. The Canadian Electrical Safety Authority came, checked them out, and refused to approve them. They had to put the products in the dump and pay to get rid of them, making a complete loss. It took them over a year and a half to get the next batch of products that were actually certified.Lessons learnedFind what you’re passionate about.Invest in what you’re familiar with.Andrew’s takeawaysStart small, test things out, and then go big.Actionable adviceDo something you’re passionate about because, eventually, you’ll run into tough times. You only have to be really good at one thing, and you can be as wealthy as you could ever imagine—if you can help enough people with whatever product or something you’re good at.Chris’s recommendationsChris recommends reading Stan Weinstein’s Secrets For Profiting in Bull and Bear Markets. The book teaches the four stages that the stock market goes through, how to identify the stages, and the strategy to use for each. If you understand these stages, you can apply that to whatever you’re investing in.No.1 goal for the next 12 monthsChris’s number one goal for the next 12 months is to preserve capital.Parting words “Protect your capital. Don’t get caught up thinking stocks are the only asset available, and buy a bunch of them. There are many more things out there to invest in.”Chris Vermeulen [spp-transcript] Connect with Chris VermeulenLinkedInFacebookTwitterYouTubeWebsiteBooksAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Kenny Rose is the Chicago-based founder and CEO of FranShares, a platform that democratizes franchise investing.STORY: Kenny invested in an aviation stock and hit the jackpot. Feeling lucky, he invested in a company dealing with processors and microchips, an industry he knew nothing about. He bought the stock at $4. About a year later, the stock went down to $2.50. Kenny panicked and sold his stocks. The stock is trading at over $100 today.LEARNING: Before you invest, think about how much you’re willing to lose, what your time horizon is, and what your maximum loss might be. Educate yourself about what you want to invest in. Outsource what you don’t know to professionals who know those spaces better. “Be educated, pick an investment style you know, and stick with it. Outsource what you don’t know to professionals who know those spaces better.”Kenny Rose Guest profileKenny Rose is the Chicago-based founder and CEO of FranShares, a platform that democratizes franchise investing. With over a decade of experience in the franchise industry, Kenny has worked with over 600 franchise brands in more than 100 industries. He is an expert on franchise evaluation and has helped individuals identify the best ways to deploy capital into franchise ownership to maximize return on investment and operations.Kenny founded FranShares to allow individuals to invest in a diversified portfolio of franchises with as little as $500. Backed by Chicago Ventures, his platform aims to create passive income streams for investors.Worst investment everIn 2013, after Kenny graduated college, he became a financial advisor at Merrill Lynch in San Francisco. At the time, American Airlines and US Airways merged. The Justice Department challenged the merger, and both stocks plummeted. US Airways stocks went from $2.50 to about a quarter per share. Kenny had a bit of knowledge of the aviation industry from his pilot brother. So Kenny believed that the government would eventually allow the merger. He threw every nickel and dime he had at those stocks. As Kenny had predicted, the deal went through, and the stock went up to $12. It was an absolute home run for this young graduate.Kenny was feeling very proud and excited about his next big investment. He talked to another financial advisor, a friend of his, who asked him if he had heard of AMD. Kenny hadn’t heard of it but was curious to know more. The friend told him about the world of processors and microchips, which Kenny found fascinating.Though Kenny didn’t understand most of what the friend was saying, he was interested in the investment bit. He bought the AMD stock at $4. About a year later, the stock went down to $2.50. Kenny panicked and sold his AMD stocks. The stock is trading at over $100 today.Lessons learnedBefore you invest, think about how much you’re willing to lose, what your time horizon is, and what your maximum loss might be.Educate yourself about what you want to invest in.Pick an investment style, and stick with it.Outsource what you don’t know to professionals who know those spaces better.Andrew’s takeawaysBuild a diversified portfolio either of individual stocks or an index.Stop and think about how you will build the habit of learning.Actionable adviceDo not invest in anything you have not become fully educated in.Kenny’s recommendationsIf you’re interested in the franchise world, FranShares has created an investor guide to help people get educated on franchises. Kenny also recommends subscribing to the ExecSum newsletter by the financial meme group Litquidity. The daily newsletter curates major news from Wall Street to Silicon Valley, with a touch of humor and memes.No.1 goal for the next 12 monthsKenny’s number one goal for the next 12 months is to bring on another 10+ franchise brands and get FranShares to 100 million in gross investment volume.Parting words “Keep an open eye; you never know what’s good until you research it. I think people like to hop on the ball that’s already rolling instead of rolling up their own.”Kenny Rose [spp-transcript] Connect with Kenny RoseLinkedInTwitterFacebookInstagramYouTubeWebsiteAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Today, they discuss two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this eleventh series, they discuss mistake number 20: Do You Only Consider the Operating Expense Ratio When Selecting a Mutual Fund? And mistake number 21: Do You Fail to Consider the Costs of an Investment Strategy?LEARNING: Don’t focus solely on the operating expense ratio when buying a mutual fund; consider hidden costs, too. Always consider the costs of an investment strategy, such as bid-offer spreads, market impact costs, taxes, etc. “Successful active management, as I like to explain it, sews the seeds of its own destruction.”Larry Swedroe In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Larry is the 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 two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this eleventh series, they discuss mistake number 20: Do You Only Consider the Operating Expense Ratio When Selecting a Mutual Fund? And mistake number 21: Do You Fail to Consider the Costs of an Investment Strategy?Did you miss 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 ExpertsISMS 26: Larry Swedroe – Are You Subject to the Endowment Effect or the Hot Streak Fallacy?ISMS 27: Larry Swedroe – Familiar Doesn’t Make It Safe and You’re Not Playing With the House’s MoneyISMS 29: Larry Swedroe – The Shiny Apple is Poisonous and Information is Not KnowledgeISMS 30: Larry Swedroe – Do You Believe Your Fortune Is in the Stars or Rely on Misleading Information?Mistake number 20: Do you only consider the operating expense ratio when selecting a mutual fund?According to Larry, a lot of investors are aware that there is at least some relationship between expense ratios and returns of mutual funds. Sadly, too many people ignore that because they believe that active management will likely add value despite the evidence against it.Further, many investors only consider the operating expense ratio when selecting a mutual fund. Larry says this is just one of many costs associated with investing and often not the most significant. He emphasizes that investors should look out for other hidden costs, such as:The “cost of cash” – when a fund holds cash instead of being fully invested.Trading expenses such as commissions and market impact costs.Taxes on gains.These costs can significantly impact returns, with high turnover and tax inefficiency leading to lower after-tax returns. So, don’t focus solely on the operating expense ratio.If you’re trying to decide whether to buy an ETF or a mutual fund, Larry says the rule is for a taxable account: buy the ETF because it’s more tax efficient. If you’re in a tax-advantaged account, buy the mutual fund because you don’t pay a bid-offer spread, and you don’t care about the tax efficiency in the fund. Also, if you’re going to buy an ETF, don’t trade first thing in the morning or last thing at the end of the day. You can get really screwed by price movements. Trade at the middle of the day.Mistake number 21: Do you fail to consider the costs of an investment strategy?Investors are often drawn to market-beating investment strategies but should exercise caution. Larry notes that when you see returns on a strategy, they often don’t include costs. What you usually see is a strategy that encourages you to buy stocks by looking at the day’s closing prices. Then, you sell at the closing price later. Such a strategy ignores bid-offer spreads, market impact costs, taxes, etc. Moreover, implementing such a strategy incurs costs that can erode your returns.Larry adds that most people think that the past performance of active funds predicts future performance. As successful funds see their assets under management (AUM) grow, investors might think it’s a good sign. However, research shows there are diseconomies of scale in active management because the bigger the funds get, the higher their market impact costs go. Therefore, you should always remember that past performance does not always indicate future success, and some strategies may be based on luck rather than skill.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?Gary Belsky and Thomas Gilovich, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral EconomicsLarry Swedroe, Think, Act, and Invest Like Warren Buffett: The Winning Strategy to Help You Achieve Your Financial and Life Goals

BIO: Chong Ser Jing is the Portfolio Manager and Co-Founder of Compounder Fund, an investment fund that invests in stocks around the world.STORY: In October 2010, Ser Jing bought six stocks. Two of these were companies in the oil industry. By the time he was selling these stocks, he had a loss of 77% and 31% from the two companies, respectively.LEARNING: Some sectors may not be worth investing in because they tend to historically generate poor returns on invested capital. Pay careful attention to the drivers of a company’s business results. Understand the difference between internal and external drivers. “There are companies whose business fortunes do not depend on the price movement of commodities. And then there are those who do. That’s a really important distinction.”Chong Ser Jing Guest profileChong Ser Jing is the Portfolio Manager and Co-Founder of Compounder Fund, an investment fund that invests in stocks around the world. Ser Jing graduated with an engineering degree in 2012, but having been bitten by the investing bug since he was in his late teens, he decided to pursue investing as a career. From January 2013 to October 2019, Ser Jing served in Motley Fool Singapore as a writer as well as a co-leader of the investing team. One of his career highlights with Fool Singapore was to help its flagship investment newsletter outperform a global stock market benchmark by nearly 2x over a 3.5-year period. Besides running Compounder Fund today with his co-founder Jeremy Chia, both of them also have an investing blog, The Good Investors, where they share their thoughts about investing and life.Worst investment everIn October 2010, Ser Jing bought six stocks. Two of these were companies in the oil industry. One company owned oil rigs, while the other supplied parts and equipment that helped keep oil rigs running. By the time he was selling these stocks, he had a loss of 77% and 31% from the two companies, respectively.Ser Jing considers these two stocks his worst investment ever because he had no idea what he was doing. He invested in them because he wanted to be diversified according to sectors. Ser Jing believed that oil and gas was a sector that was worth investing in since the oil demand would likely remain strong for a long time. His view was actually right. But, in hindsight, he was only right to a small extent and wrong in two critical areas.First, some sectors may not be worth investing in in the long run because their economic characteristics are poor. The second thing is that the global oil demand grew quite strongly from 2010 to 2016.The annual oil consumption increased from around 86 million barrels to about 97 million barrels in that period. But oil prices also fell significantly over that over the same timeframe. So, Ser Jing could not predict the oil price level. When he invested in the two companies, he completely missed out on the crucial fact that the oil price would have an outsized impact on both companies’ fortunes.Lessons learnedSome sectors may not be worth investing in because they tend to historically generate poor returns on invested capital.Pay careful attention to the drivers of a company’s business results.Andrew’s takeawaysUnderstand the difference between internal and external drivers.Actionable adviceLook deeply at what has historically driven the price of a commodity if you’re trying to invest in a company whose business results depend on the commodity’s price.Ser Jing’s recommendationsSer Jing recommends Robert Shiller’s historical database on US interest rates, US inflation, validation price, and dividend data for US stocks. The database is an incredible trove of data for investors to learn about market history to have some base rates about how stocks, interest rates, and inflation have performed in the past.No.1 goal for the next 12 monthsSer Jing has no goals for the next 12 months or the future. He has processes in place that will make him a better person and a better investor.Parting words “Most people will think about their worst investments as the stocks they bought but fell tremendously in price, maybe because of a high initial valuation. But I think a timing component also needs to be brought into the picture when thinking about this issue.”Chong Ser Jing [spp-transcript] Connect with Chong Ser Jing LinkedInBlogWebsiteAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

BIO: James M. Dahle, MD, is a practicing emergency physician who took an interest in personal finance and investing in residency after getting ripped off by every financial professional he came into contact with. He founded The White Coat Investor in 2011 to help fellow docs get a fair shake on Wall Street.STORY: James got sold a whole life insurance policy in medical school. He invested in it, thinking it would be a good option, only to realize seven years later that it was not. When he pulled out of the policy, he lost 33% of the premiums he had paid.LEARNING: You must understand anything you buy. Don’t buy more insurance than you need. Focus on one catastrophe-related insurance product that’s reasonable. “Insurance is expensive, so don’t buy more than you need.”James M. Dahle Guest profileJames M. Dahle, MD, is a practicing emergency physician who took an interest in personal finance and investing in residency after getting ripped off by every financial professional he came into contact with. He founded The White Coat Investor in 2011 to help his fellow docs get a fair shake on Wall Street.Worst investment everWhen James was a medical student with minimal income, a friend interning with a large mutual life insurance company convinced him to buy a whole life insurance policy.Looking back, what James really needed as far as insurance went was a term life insurance policy. At that point, he was married with no kids, and his wife was designing her life around his financial future as a doctor. The insurance policy James invested in, partially as an investment, was a whole life insurance policy. He held on to that policy for about seven years when he realized this was not a good deal for him. Not only was it not the insurance James needed, but it was a lousy investment.By the time James surrendered that policy, his cumulative return was minus 33% of the premiums he had paid. So he walked away with only two-thirds of the money he had paid into it.Lessons learnedYou must understand anything you buy, especially if it has a long commitment.Don’t buy more insurance than you need.Andrew’s takeawaysFocus on one catastrophe-related insurance product that’s reasonable, find the best price on it, and set it up to protect your family against that catastrophe. Then, build a solid investment plan with the remainder of your money.Actionable adviceWhile you don’t want to get paralysis analysis, you do need to take the time to understand what you’re buying, whether it’s an insurance policy or an investment. You need to know how it works and how it’s likely to perform over the long term so you’re not disappointed and end up bailing out.James’s recommendationsJames recommends evaluatelifeinsurance.org if you’re already in a whole life insurance policy and trying to decide whether it’s worth keeping it, even though maybe you shouldn’t have bought it originally. He also recommends the Fire Your Financial Advisor, designed to help you write a financial plan to go from zero to 60.No.1 goal for the next 12 monthsJames’s number one goal for the next 12 months is to help as many doctors as possible reach a situation where they feel good about their finances, whether that’s achieving financial independence or just feeling like they have their financial ducks in a row. James wants them to be able to quit worrying about their money so they can concentrate on the things that matter most in life.Parting words “Keep your head up and your shoulders back. You’ve got this.”James M. Dahle [spp-transcript] Connect with James M. DahleLinkedInTwitterInstagramFacebookYouTubeWebsiteBooksPodcastAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Harley Bassman is an industry thought leader and commentator on macroeconomic issues spanning decades.STORY: In 2019, Harley bought some calls and sold some puts on Citibank stock for a cost strategy. He believed the stocks would increase because all its peers were trading above their book value. When COVID came, the stocks went south, causing Harley to make his biggest loss ever.LEARNING: When something trades well below what you think its value is, consider why that’s the case. Size the investment. “Forget timing; size the investment. Pick the size such that you’ll make enough if you’re right, and if you’re wrong, you won’t get wiped out.”Harley Bassman Guest profileHarley Bassman is an industry thought leader and commentator on macroeconomic issues spanning decades. He spent 26 years at Merrill Lynch. From 2014 to 2017, Harley was an Executive VP and Portfolio Manager at PIMCO. In 2011, he joined Credit Suisse’s Global Rates. In 2006, he built the RateLab, a full spectrum US Rates Trading Desk Strategy Group.Presently, Harley is a Managing Partner at Simplify Asset Management. He continues to pen an episodic macroeconomic Commentary as well as manage a “hedge fund of one.”Harley has a B.A. in management science from the University of California, San Diego, and an MBA in finance and marketing from the University of Chicago.Worst investment everIn 2019, Harley bought some calls and sold some puts on Citibank stock for a cost strategy. He believed the stocks would increase because all its peers were trading above their book value. Harley put more into this trade than he logically should have. He was hung up on the value construct and wasn’t thinking about why the stock traded under tangible.When COVID came, the stocks went south, causing Harley to make his biggest loss ever.Lessons learnedWhen something trades well below what you think its value is, consider why that’s the case.Size the investment. When you make an investment, invest enough so that your gain can be worthwhile.Sizing is more critical than entry-level.Andrew’s takeawaysBe very careful when investing in banks because if their equity gets hit, the value of their assets could fall.Actionable adviceDon’t fall into a value trap. Be careful of single names because there’s always a lottery effect that you can never predict.Harley’s recommendationsHarley recommends reciting his Maven mantra: Number one, it’s always about character. Number two, it’s never different this time. And number three, you’re born, you live, and then you die. Prioritize your life.No.1 goal for the next 12 monthsHarley’s number one goal for the next 12 months is to focus and spend more time with his family.Parting words “Just be careful and stay safe.”Harley Bassman [spp-transcript] Connect with Harley BassmanLinkedInTwitterBlogWebsiteAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Mike Philbrick is the CEO of ReSolve Asset Management. He has over 30 years of experience in investment management, serving in senior investment industry positions with several major financial services firms, and is responsible for investment decisions, coaching, and strategic leadership.STORY: Mike learned of a mining stock at the urinal. He invested, and the stock performed well because the mining industry was on fire. And so encouraged by early success and massive ignorance, Mike wiped all of those gains in no time.LEARNING: Don’t over-leverage. Understand what kind of investor you are. Ensure you have some protection before you go all-in in an investment. “Just because you’re winning doesn’t mean you’re smart or you’re good at these things.”Mike Philbrick Guest profileMike Philbrick is the Chief Executive Officer of ReSolve Asset Management. He has over 30 years of experience in investment management, serving in senior investment industry positions with several major financial services firms, and is responsible for investment decisions, coaching, and strategic leadership. He has co-authored the book Adaptive Asset Allocation: Dynamic Global Portfolios to Profit in Good Times – and Bad (Wiley), as well as several whitepapers and research focused on adding new insights to the quantitative global asset allocation space.Adaptive Asset Allocation and Return Stacked Portfolio Solutions have been popularized by him and his team at ReSolve.Preceding his investment career, Mike played professional football in the CFL, winning the Grey Cup Championship in 1999 and being inducted into the Hamilton Tiger-Cat Walk of Fame in 2015.Worst investment everBack in the early 90s, there was a lot of mining going on in Canada, and so mining stocks were becoming popular. Mike had started noticing the stocks but had yet to invest. One day, he’s at a urinal, and a guy tells him about a particular mining stock. Mike figured it was a good idea to invest in the stock. He didn’t do any research; he just took the man’s word for it.The stock wins, and Mike gets a couple more wins from the stock, not because he was a genius but because the mining industry was on fire. And so emboldened with early success and massive ignorance, Mike wiped all of those gains in no time.Lessons learnedUnderstand what kind of investor you are. Can you withstand a 90% decline?Can you buy something and then ignore it long-term?Don’t over-leverage.Andrew’s takeawaysEnsure you have some protection before you go all-in in an investment, particularly when you don’t know much about it.Actionable adviceAlways remember that you don’t know as much as you think, so take different approaches such as diversifying, being less confident, managing risk with stop losses, or managing risk at the portfolio level on an ongoing basis. You don’t need to own more of what’s going well. Just do less of what’s dragging your portfolio from a momentum factor that enhances returns.Mike’s recommendationsMike recommends his book Adaptive Asset Allocation: Dynamic Global Portfolios to Profit in Good Times – and Bad, which goes through steps that you would take to maximize diversification and how to use the factor of momentum to enhance that.No.1 goal for the next 12 monthsMike’s number one goal for the next 12 months is to get his firm 1.5 billion dollars in assets under management.Parting words “Stay true to yourself.”Mike Philbrick [spp-transcript] Connect with Mike PhilbrickLinkedInTwitterYouTubePodcastWebsiteBookAndrew’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.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedRobert M. Pirsig, Zen and the Art of Motorcycle Maintenance: An Inquiry Into Values.