Details Are Part of Our Difference
Embracing the Evidence at Anheuser-Busch – Mid 1980s
529 Best Practices
David Booth on How to Choose an Advisor
The One Minute Audio Clip You Need to Hear
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.
On the Other Side of Equifax
I’m sure by now you have heard of Equifax’s recent data breach. When faced with situations like this, we like to think about our good friend Carl Richards’ sketch that encourages us to focus on what we can control. With this in mind, we point you toward resources that help protect your data in the post-Equifax-hack world. Also, we’ll share a little backstage information on our own cybersecurity efforts.
What To Do
While there isn’t a magic bullet, below are a few resources we’ve shared with our clients. These resources provide both checklist actions, as well as general information and important questions to consider.
- The Federal Trade Commission (FTC) page is a good start and will likely be kept current over time.
- New York Times “Your Money” columnist Ron Lieber has been covering the beat extensively. Search on “Equifax” and you’ll find his ongoing advice and comments. We like one of his most recent updates from September 21.
- In “Our Thoughts on Security,” Wealthfront provided a helpful overview, including a “What You Can Do For You” list of actions to consider.
As time marches on, the steps you could or should take are likely to evolve. We are staying informed, so keep an eye out for updates in subsequent newsletters.
Here at HIG
While no system is impregnable, we have long been taking strong measures to protect against hackers and identity thieves.
This year, we participated in a 12-week Schwab Cybersecurity Engagement to assess our current readiness, identify room for improvement, and formalize our action plan. Since then, we’ve been upgrading our infrastructure, engaging in ongoing education, and continually implementing checks and updates.
As this wise educator observed in reflecting on the Equifax breach, “Security isn’t a product. It’s a process.” As cybersecurity requirements continuously evolve, so will we. We would be happy to talk with you directly if you would like to learn more about our cybersecurity procedures.
Who’s in Your Corner?
At Hill Investment Group, we love to ask questions – to get to know you upon initial meeting and discover more about you as we go. But what questions should investors be asking? Here are “The 19 Questions to Ask Your Financial Advisor” (or a prospective advisor) according to Jason Zweig of The Wall Street Journal. At the highest level, these 19 questions seek to establish the rhetorical question: Are you paying your advisor to serve YOUR best interests or their own?
“The obligation of those who give investment advice to serve clients, not themselves, is called fiduciary duty. That obligation is far from universal and, in some ways, is in retreat,” says Zweig (emphasis ours).
The challenge, however, is merely asking an advisor if they are a fiduciary may not suffice. Zweig’s queries will help you differentiate fake fiduciary “talk” from a real fiduciary “walk.”
Zweig also provides the answers he feels are most appropriate, while leaving #12 (“What is your investment philosophy?”) curiously blank. We agree wholeheartedly with nearly all of his suggested responses, although there are a couple we would qualify. And of course we have quite a lot to say about that curiously blank one. Here, we’ll simply add the words of Dimensional Fund Advisors’ co-founder Rex Sinquefield, as he describes evidence-based investing: “This investment approach is easy to communicate, is verifiable, and is eminently defensible.”
This and many other great insights are found in Dimensional’s recently published “35 Quotations on a Better Way to Invest.” Want a copy of it, or would you like to know where else we differ on Zweig’s other questions (and why)? Just ask!
Oh, by the way, YES, we are a fiduciary firm – in name and practice.
