St. Louis or Houston? Places To Go, People To See

We sure had fun last July, sharing some history from Houston and St. Louis. Who knew at the time that Hurricane Harvey was on its way? Today, we’d like to reinforce that we remain as proud as ever of our respective hometowns, where there are still plenty of places to go and things to do when you come visit. Of course, we hope your first stop will be at our local Hill Investment Group office, so we can join you for a personalized tour.

Foodies (Where to even begin?!)

• Houston – Etoile Cuisine et Bar, Café Annie, Tiny Boxwoods, Kiran’s, Pondi Cheri, Local Foods, Southwell’s Burgers, beef BBQ at Roegels, El Tiempo (Matt’s favorite), fajitas at Lupe Tortilla, and many, many, many more.
• St. Louis – Tony’s, Bar Les Freres, Paul Manno’s, Winslow’s Home, Claverach Farms, Truffles, Stone Soup Cottage … let’s not forget BBQ – Sugarfire, Pappys, and Vernon’s.

Outdoor Theater

• St. Louis – The St. Louis Municipal Opera (The Muny) – America’s oldest and largest outdoor theatre. The Muny turns 100 years old in 2018, while its president and CEO Dennis Reagan (our very own John Reagan’s dad!) celebrates his 50^th year as a member of the Muny team.
• Houston – The Miller Outdoor Theatre – open year-round due to Houston’s usually mild climate, our treasured venue experienced only minimal damage from Hurricane Harvey.

Parks and Recreation

• Houston – Besides the Miller Outdoor Theatre, Hermann Park is home to the Houston Zoo, several museums, a golf course and plenty of space for hiking, biking or just chilling out.
• St. Louis – Host to the 1904 World’s Fair (with several original structures still intact), Forest Park is the original “Meet me in St. Louis” venue and among the country’s largest urban parks, hosting the Muny, the Saint Louis Zoo, the Saint Louis Art Museum, and so much more.

The Green Scene

• St. Louis – St. Louis is home to the Missouri Botanical Gardens. Established in 1859 as one of the nation’s oldest botanical gardens, it offers stunning public displays, as well as a world-class research library of rare botanical books and specimens.
• Houston – While at Hermann Park, you can take in the formal McGovern Centennial Gardens and an exotic Japanese Garden before skipping over to Memorial Park for a run, a round of golf and a burger at Beck’s Prime.

For the Young or Young at Heart

• Houston – What kid (or inner child) doesn’t get a large charge out of space rockets? Space Center Houston should be just the ticket for the entire family to have a blast in our fair city.
• St. Louis – The name may seem plain, but St. Louis’ City Museum was just voted #1 among Trip.Com’s 2017 Family Tribe Top Attractions. All recycled, all interactive, all imaginative – there’s nowhere else quite like it. (PS: Houston Zoo was voted #5; not too shabby either.)

Batter Up! (St. Louis and Houston)

So, we’ve already mentioned that my HIG colleagues may sometimes sit on opposite sides of the field when the Houston Astros and St. Louis Cardinals face off. But we thought it would be nice to wrap today’s installment by pointing out that our two favorite teams share common ground as well. Most notably, Astros’ current GM Jeff Luhnow came to the team by way of the Cardinals’ administration. And lucky for us, Luhnow is a friend and a fan of Matt Hall’s Odds On, regardless of where he calls home … not unlike all of us here at HIG!

Carl Richards is a friend of our firm and has been for years, even before he became The New York Times “Sketch Guy.” This may well be one of Carl’s earliest drawings connecting money and emotion, but it’s still one of our all-time favorites.

Quick, what’s the difference between a market-cap-, equal- and price-weighted stock market index? Fortunately, if you’re not sure, our friends at Dimensional Fund Advisors just published an excellent piece on this very subject. We invite you to read it here, but here’s our overview.

If you think of a market as a big box, there are several ways each stock that belongs in that box might “weigh in” to help fill it:

Market-Cap Weighted – If we fill a market box according to each stock’s market capitalization (share price multiplied by shares outstanding), the stocks with the biggest market caps (e.g., Apple stock –  AAPL) weigh the heaviest, or occupy the most space, as Dimensional depicted here:

Equal Weighted – If, each security is instead given equal space in the box regardless of its market-cap, an equal-weighted market will look more like this:

Price Weighted – As described in this recent New York Times piece (which may require a subscription to access), the Dow Jones Industrial Average is the only popular index that uses price weighting, where the highest-priced stocks take up the most space. (Almost everyone agrees, price-weighting is pretty arbitrary, especially since the Dow tracks only 30 U.S. stocks to begin with. But as the world’s first and oldest index, the venerable Dow essentially gets to do as it pleases.)

So what does all this mean to you as an investor? As Dimensional’s illustrations depict:

• If you were to invest all of your money in a single market-cap-weighted index fund, you’d end up holding a much heavier allocation to large-cap stocks, be they value or growth.
• If you were to invest everything in an equal-weighted index fund, you’d end up holding more small-cap stocks than would otherwise be warranted by their cap-weighted presence in the total market.

Now, here’s where things get a little complicated, so bear with me. At first glance, you might conclude you’d be best off investing in an equal-weighted index fund, to capture more of the higher expected small-cap value premium. After all, that’s where the biggest small-cap value “blob” appears, right?

Not so fast. First, we’ve got to remember that an index is just a theoretical collection of stocks. When an investor or fund manager seeks to replicate an index by placing actual trades on those stocks, they run into real-life trading constraints. This is especially so when tracking an equal-weighted index, where far more frequent trading is likely to be the norm.

Put plainly, keeping up with the evolving components in an equal-weighted index can get very expensive, very fast.

Dimensional explains:

“[U]sing a systematic and purposeful approach that takes into consideration real-world constraints is more likely to increase your chances for investment success. Considerations for such an approach include things like: understanding the drivers of returns and how to best design a portfolio to capture them, what a sufficient level of diversification is, how to appropriately rebalance, and last but not least, how to manage the costs associated with pursuing such a strategy.”

Which brings us back to evidence-based investing as we know it. Want to know more? Here’s a past post on index- vs. evidence-based investing. Or just give me a call to continue the conversation.

End notes:
Exhibit 1: For illustrative purposes only. Illustration includes constituents of the Russell 3000 Index as of December 31, 2016, on a market-cap weighted basis segmented into Large Value, Large Growth, Small Value, and Small Growth. Source: Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. See Appendix (on page 3) for additional information.

Exhibit 2: For illustrative purposes only. Illustration includes the constituents of the Russell 3000 Index as of December 31, 2016 on an equal-weighted basis segmented into Large Value, Large Growth, Small Value, and Small Growth. Source: Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. See Appendix (on page 3) for additional information.