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Author: Matt Hall
A Championship for Houston, and a Victory for Patience and Discipline
All of us at Hill Investment Group are still buzzing about the Houston Astros’ incredible World Series victory on November 1. This is the first World Series title for the franchise since it was founded in 1962, and we know how much this championship means for a city still recovering from the devastation of Hurricane Harvey.
We’re also thrilled for Astros General Manager Jeff Luhnow, who is also a good friend and was one of the first people to read and endorse my book, Odds On. When Jeff took over in 2011, the Astros were the worst team in baseball. Now, they’re World Champions, and they got there by taking down the three richest, most formidable teams: The Boston Red Sox, the New York Yankees and the Los Angeles Dodgers.
Any way you look at it, this was a monumental achievement. And even without these personal connections I’d still be thrilled by Houston’s victory, because of the way they did it: They adopted a rational, evidence-based strategy, and then had the patience and discipline to let it pay off.
The first thing Jeff and the Astros did to become winners was to take the long view: They didn’t have the budget to rebuild the team overnight with expensive players—and they probably wouldn’t have done that if they could because it wasn’t a sustainable approach. Instead, they decided to develop talent from the ground up, using advanced statistics to draft the best young players and to find veterans whose unique skill sets would diversify and strengthen the roster. Then they waited… losing a lot of games while slowly transforming themselves into a competitive team. Even as some fans grumbled about the losing, the team stuck with the plan and continued to make adjustments as needed, until their commitment was rewarded with the ultimate payoff.
This story should sound familiar to Hill Investment Group clients, because it’s a good analogy for what we’re doing in the investment world. Like the Astros, we’re taking on big, deep-pocketed competition. We’re also using a rational, data-driven approach that seeks to truly understand the factors that drive success. And once we’ve used those insights to develop a plan, we’re committed to see it through—trusting our process even in the face of temporary difficulties. Because as the Astros have proven, achieving the ultimate long-term goal sometimes requires short-term sacrifices.
So once again, Hill Investment Group offers our congratulations to Jeff Luhnow, the Houston Astros, and all of their fans. Nothing makes me happier than seeing people make brave choices, and then have the discipline to stand by those choices until they’re rewarded with greatness.
Take the long view,
Matt
The Top 5 Takeaways from Odds On
Dear friends,
It’s been 18 months since the release of Odds On, and every day since then I’ve been amazed and humbled by the response the book has generated. I could tell you some incredible stories about how Odds On is changing people’s lives by opening up the world of evidence-based investing. But the one thing that seems to resonate most with readers is how engaging and accessible the book is—how we’ve managed to humanize a topic that might otherwise seem technical and boring.
That was my goal from the start, but even after publishing the book I’ve wanted to make the lessons of Odds On even more accessible. To that end, I’ve highlighted the most important messages I hoped readers would discover in the book. Whether you’ve read it already and need a quick refresher or haven’t yet picked up a copy and are wondering what it’s all about, here are the key takeaways.
Takeaway #1. The traditional financial services industry (embodied by the giant Wall Street firms) is not about service. Wall Street is a sales machine, focused primarily on making money for itself by pushing actively-managed financial products with high fees that don’t necessarily serve the client’s best interests—or help them achieve their long-term goals.
Takeaway #2. Fortunately, there is a better way to invest. You can adopt an investment philosophy that’s based on logic, data and evidence to put the odds of success on your side. Thanks to smart academic researchers, we now understand where value comes from in the global financial markets (and where it doesn’t), and can put those findings to work in portfolios that offer exposure to the real drivers of long-term performance. In other words, investors can rely on science, not sales pitches and guesswork.
Even more heartening: Our philosophy is rapidly gaining ground against the old, sales-driven model. Just study the money moving each year into passively managed mutual funds and ETFs, as well as the flight from big brokerage houses to independent advisory firms, where true fiduciaries work in the best interest of their clients.
Takeaway #3. While the science is clear, our emotions are complicated. Human nature abhors change, and there is a lot of inertia behind investing behavior—whether we think we have to invest the way our parents and grandparents did or are still hanging on to old notions that “expert” stock pickers have the secret to long-term success. Some people can’t resist the idea that if they just read more articles about the best stocks or mutual funds or spend more time managing their investments, they’ll somehow beat the market.
But at some point you have to understand that evolving to evidence-based investing is not giving up control over your future—you’re actually taking control by accepting the science and embracing the course it lays out for us.
Takeaway #4. Even with academic evidence on your side, the world is unpredictable. Investment returns will fluctuate over time—sometimes painfully (remember 2008?). But you get rewarded precisely for taking those risks. The key to long-term success is not just embracing an evidence-based investment strategy, but staying disciplined and sticking with your plan in the face of short-term uncertainty. If you can’t do it on your own, you can work with someone who helps you stay disciplined. Remember, we’re playing the long game, and investors who are disciplined in the face of short-term chaos are the ones who are most likely to achieve their long-term goals.
Takeaway #5. Evidence-based investing improves your chances of better investment returns, but the greatest return of all is the freedom you gain. Reducing the time you spend obsessing over your investments or worrying about what’s going to happen to the markets tomorrow means you have more time to focus on what really matters to you—all those important things you’re saving and investing for in the first place. It’s liberating.
I hope these highlights have helped you understand a little more about why I wrote the book and what I believe everyone can gain when they embrace a rational, understandable investment approach. And if you or anyone else you know wants a copy of Odds On, just reach out to us by clicking below and we’ll send you one (hardback, kindle or audio). We want to change as many lives as we can, and Odds On has made that journey simpler and faster.
Thanks for taking the long view,
Matt
*All 2017 proceeds from sales of Odds On go to charity.
Apollo Lands at HIG
We were pleased to have Dimensional’s Vice President Apollo Lupescu, PhD at a pair of events we held in Houston and St. Louis. Apollo spoke about the historical context of modern investing, the essence of an evidence-based approach, and the future of our community.
What does history tell us about how the financial future might look? Be on the look-out for a recorded version of Apollo’s St. Louis presentation, which we’ll be sharing soon via our blog/newsletter.
Dimensional Fund Advisors is a hugely important alliance for Hill Investment Group, and yet this is the first event we’ve done with a member of their team conversing directly with HIG’s clients and friends. Despite having a low profile, Dimensional currently manages $518 USD billion across eight countries (as of June 30, 2017). How have they done it? Through sharing ideas that make sense and by creating solutions that reflect their beliefs (and ours).
We also respect Dimensional as a thought leader, regularly publishing content that helps change the way investors think. We like one of their recent pieces, “Lessons for the Next Crisis,” which points out we’re nearing the ten-year anniversary of the beginning of the Great Recession. That’s not exactly an event to celebrate, but it’s important to apply what we learned from it the next time we’re in a bear market, once again feeling like there’s no end in sight. As Dimensional says (and buttresses with evidence-based illustrations):
“Capital markets have rewarded investors over the long term, and having an investment approach you can stick with—especially during tough times—may better prepare you for the next crisis and its aftermath.”
Well said, Dimensional.