There may be no “I” in team, but we do think there’s still room for individuality. Teamwork doesn’t get us very far if we lose sight of our values in the process, so it matters whether each player is able to trust her gut. What does megastar Taylor Swift have to teach us about this topic? More, in this week’s video.
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Taylor Swift has made a name for herself as a songwriter, pop star, and fashion icon, but now she’s making headlines for another role: as an effective investor.
Recently, Taylor was featured in the news for making a wise financial decision. She had a chance to be a paid sponsor for a—let’s say—questionable product. Instead of diving into a high-risk, high-reward situation, she asked questions, did her research, and declined the offer.
Whether or not Taylor’s music is for you, we admire her curiosity and commitment to herself. Her influence reaches all over the world, and she showed that she was not going to stand behind something she didn’t believe in. And every investor has the power to do that work. We do the research so that we know exactly what we own, why we own it, and how it fits into the big picture.
We at 228Main.com might not have the cumulative reach of Taylor—yet 😊—but we know how important it is to act by our values, no matter who is watching. It’s our responsibility.
Taylor seems to know hers, too, but it took determination to build the reputation she has. You don’t achieve that pop sensation status overnight! She has worked her entire adult life to build her empire, and she was not going to risk throwing it away based on someone else’s opinion or make a quick buck (or a hundred million).
One rash decision can cause a huge ripple effect, and most of the time, the impulse to do the trendy thing is not worth it. There are always going to be temptations in life, but it doesn’t mean any opportunity that comes along will work for us. Only we are in charge of keeping an eye on our future.
We don’t mind going against the crowd. At 228 Main, we consider all the angles of an opportunity, with our own critical eye. We don’t rely on others’ opinions. (When the cattle are all getting steered together, it rarely ends well for the cattle.) Certain products might be getting a lot of attention, but that does not mean they are necessarily great investments.
Please do ask your questions when you have them, and we’ll think about the potential outcomes together. We try to make informed decisions, in the direction of our goals.
So be your inquisitive, confident self. Like Taylor says in her song “The Lucky One,” “In the real world, if you have something that makes you different, you’re lucky.”
Dare to be different? Call or email us, anytime.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is not a guarantee of future results.
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Play the audio version of this post below:
Years ago, the Wall Street firm of E.F. Hutton advertised “We make money the old-fashioned way. We earn it.” This tag line evoked a world of indepth research into securities and markets, and investment analysis by experienced professionals.
E.F. Hutton disappeared into a series of mergers, and making money the old-fashioned way is increasingly scarce. One popular theory now is that security selection does not matter, only the allocation of money across the different sectors of the market.
Combined with the idea that past patterns of volatility and past returns by sector should dictate what one should own for the future, many modern ‘investment advisors’ pay no attention to individual company stocks or bonds.
It seems to us that owning stock in a failing chain of department stores is a lot different than owning the world’s largest online retailer. A few automakers survived, hundreds did not. Buying a corporate bond for 50 cents on the dollar is a totally different proposition than selling it for 50 cents on the dollar. Owning some of everything is different than being selective.
Our experience says security selection DOES matter.
One of our strategies is to try to find ownership in great companies at decent prices, to buy and hold. Looking for cyclical companies at low points in the cycle is another strategy. And simply seeking bargains anywhere in the investment universe is a third.
This is not easy. Conditions are always uncertain. There are no guarantees. It takes a lot of effort and energy. There is no assurance that the old-fashioned way will make money, as E.F. Hutton claimed.
But we are trying.
Clients, if you would like to talk about this or anything else, please email us or call.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Last week I was describing an investment opportunity, or ‘table-pounding bargain’ as I prefer to think of it, to a client. The client was not exactly skeptical, but she had a question. “Do you own it?”
This is a brilliant question. ‘Skin in the game’ is an extremely vital indicator. When someone is personally invested in an idea or concept, they are more likely to be focused on the potential for success or possibility of failure. Alleged leaders who do not share in the consequences of their actions are notoriously inept. (Congress and health care, for example?)
Modern philosopher Nassim Taleb (author of The Black Swan) takes it a step further and talks about soul in the game. Perhaps my level of compulsion, commitment to work to age 92, and obsession with your outcomes is evidence of ‘soul in the game.’ I’m not sure how I could possibly be more involved with my work.
Do I own it? Lady, I am loaded down with the stuff. I cannot in good conscience inflict the kinds of concentrations on you that I am willing to face. After all, few of you want to work to age 92 as I do, and between you and me, I am in the best position to knowingly run larger risks. So the most volatile accounts in the shop, upside and downside, are my own.
Let me clarify: we offer no guarantees. The fact that I own the ideas we talk about does NOT provide any tangible value to you. When your account grows, our revenues rise—it is win-win—and that provides an economic incentive to act in good faith. But whether or not I own something is no guarantee of anything.
My purpose in writing this is simply to say we may be right or wrong on any recommendation—but we are always sincere. I want you to know, that idea I’m talking most about, YES I own it!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The opinions expressed in this material do not necessarily reflect the views of LPL Financial.
Investing involves risk, including possible loss of principal.
There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes.
One of the staples of conventional investing wisdom is asset allocation—the choosing of broad market sectors, determines investment outcomes. Supposedly, the selection of individual securities within each sector barely matters.
We will explain where the flaw is after a little history. The theory dates back to 1986 when the Financial Analysts Journal published a paper, ‘Determinants of Portfolio Performance.’ The authors concluded that asset allocation explained 93.6% of the variation in portfolio quarterly returns.
Since then, others have concluded that as much as 100% of returns are explained by asset allocation, that security selection doesn’t matter at all.
This version of reality is convenient for some financial planners, who are thereby relieved of the work of actually researching securities and managing portfolios based on that research. If it doesn’t matter what you own, only the category, you simply need to choose your pie chart of sectors and buy stuff to fill it up!
Here is the flaw: all securities are owned all the time, by someone. If you look at the aggregate of all investors (or many investors), security selection appears not to matter. But the individual does not own all securities – and the specific selection of what he or she does own has a huge impact on outcomes.
Investor A buys a security for $100, sells it later for $25 to Investor B. Investor B holds it while it recovers to $100. One has a 75% loss, the other a 300% gain. Security selection matters. In the aggregate, the security started at $100 and ended at $100. But that leaves out the loss for one and the gain for another.
One of Warren Buffett’s earliest investors put $15,000 in, back in the 1950s. Today his name is on the home of the symphony orchestra in Omaha, a beautiful performing arts facility he donated to the community. Security selection matters.
We offer no guarantees about the outcome of our work. But we believe the selection of individual securities is the biggest factor in those outcomes. If you would like to discuss this topic or anything else at greater length, email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Investing involves risk, including possible loss of principal.
Asset allocation does not ensure a profit or protect against a loss.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
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