I stand out on the Aptus team for having not played major college basketball, but as an avid fan I can at least contribute to the banter. Complementing the content put out by my playing partners at The Backcourt Report, I periodically share my “Starting Five” posts highlighting the best I can find in the areas of investment management, behavioral finance, and the advisory business. I also throw in a favorite podcast episode, and an “oldie but goodie” post that warrants a new read. Enjoy, subscribe, share!
Martin Short’s Nine Categories of Self-Evaluation: we could all use a system of “gratitude and balance”. I thought this was a great, simple way to shape the way we think about success and benchmarks, great find by Ben.
No One is Crazy: Morgan Housel finds yet another way to relate pop culture(in this case, buying MegaMillions tickets) to our decision-making, how it’s easier to recognize other people’s mistakes than our own. As he puts it so well “A lot of decisions are statistically wrong but intuitively right for the person making them.”
Asset Diversification in a Flat World: Larry Swedroe dissects a paper whose primary conclusion is “After 2000, we uncover a marked and near ubiquitous decline in diversification, which coincides with sharply higher levels of investment risk.” Sobering for those relying on popular diversification approaches, though Swedroe’s take is that diversifying globally is worth doing simply to reduce the risk of one’s home country suffering a long-term bear market.
The Biggest Failure in Investment Management: How Smart Beta Can Make It Better or Worse: “The oft-cited negative alpha of active versus passive equity management, what we’ll call the manager returns gap, obscures a far larger performance issue—the investor returns gap.” A long-ish read by Research Affiliates, with great graphics showing the harm that investors can inflict on themselves with performance chasing. Smart beta(hate that phrase) can be very helpful to investor outcomes, but only if the investor understands that there are periods when it doesn’t look so smart.
Impact and Behavior Gap: more on the damage investors can do to themselves when volatility grabs the spotlight from long-term evidence. Education can help, strategy diversification can help, but ultimately it’s a focus on goals over “news” that empowers the investor to grab every bit of return the market offers them.
*Off the Bench: Ted Seides interviewed Michael Lombardi, and wow did the time fly listening to this. Thirty years of NFL experience, under Bill Walsh, Al Davis, and Bill Belichick, packed with insights on leadership, decision-making, process, and preparation. Five stars and then some, enough to get me to buy the book!
**Throwback: I’ve probably read Alpha or Assets a dozen times, and grab a new nugget each time. Timeless thought process, great graphics, useful insight. Key takeaway is that large asset managers have no interest in straying from the indexes, it can’t move the needle economically to justify the effort. If you really want to capture the factor tailwind, you need to look beyond the diluted offerings from the big asset managers.
Hope you enjoy this edition of my Starting Five, join the updates here!