My Worst Investment Ever Podcast

Andrew Stotz
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My Worst Investment Ever Podcast

Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it. Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth. To find more stories like this, previous episodes, and resources to help you reduce your risk, visit https://myworstinvestmentever.com/

  1. Craig Cecilio - From Trust to Turmoil: Lesson on Friendship and Business

    4 DAYS AGO

    Craig Cecilio - From Trust to Turmoil: Lesson on Friendship and Business

    BIO: Craig Cecilio is a visionary disruptor and CEO of DiversyFund, dedicated to democratizing wealth building. He has broken barriers in private markets, raising over $1 billion and offering investment opportunities once reserved for the elite. STORY: Craig had a potential business partner introduced to him by a friend. The partner had a land deal and convinced Craig to invest $10,000. A couple of other people joined in and deposited about $250,000 into the land development deal in New Mexico. A week went by, and the investors got ghosted by the land deal owner. LEARNING: Don’t mix friendship with business. Do your due diligence on all the parties involved in the transaction.   “Assume everybody is a crook and work backward. That’s the key to underwriting and any investment.”Craig Cecilio  Guest profileCraig Cecilio is a visionary disruptor and CEO of DiversyFund, dedicated to democratizing wealth-building. He has broken barriers in private markets, raising over $1 billion and offering investment opportunities once reserved for the elite. Craig empowers others to reclaim financial control and make meaningful, lasting impact. DiversyFund offers a unique opportunity to invest in multifamily real estate, making wealth-building accessible to everyone. By investing in DiversyFund, your audience can take part in a diversified real estate portfolio typically reserved for high-net-worth investors—no accreditation needed. Worst investment everCraig had a potential business partner, and they were doing a land deal. The partner always liked to chase big deals, while Craig is a singles hitter. However, he decided to invest $10,000 in this deal. A couple of other people joined the deal and deposited about $250,000 into the land development deal in New Mexico. A week went by, and the investors got ghosted by the land deal owner. Realizing the gravity of the situation, Craig took it upon himself to investigate the deal. He delved into the intricacies of the financial system, learning about wire transfers and the sequence of events. His thorough examination of the circumstances and the paperwork revealed crucial oversights in basic information and essential due diligence items. While Craig lost $10,000, losing that potential partner and the trust was the biggest loss. Craig had to sever that relationship as well. Lessons learnedWhen underwriting, ensure all the boxes get checked, and ask those questions a little more.Don’t mix friendship with business. Andrew’s takeawaysBefore you transfer any money, stop and go through a checklist to make sure you know what you are doing. You have to assume that once it’s gone, it’s gone. Actionable adviceDo your due diligence on all the parties involved in the transaction, and if it sounds too good to be true, it is not.Assume everybody is the crook and work backward. That’s the key to underwriting and any investment. Craig’s recommendationsCraig recommends checking out the online courses he plans to launch next month. He also recommends his upcoming book, You Know What You Got To Do. No.1 goal for the next 12 monthsCraig’s number one goal for the next 12 months is to launch his online courses. He also plans to put them on the map. Parting words  “Just get started. Lean into it and get started. Take the first step. Read about it. You have so many...

    23 min
  2. Enrich Your Future 21: Think You Can Beat the Market? Think Again

    DEC 11

    Enrich Your Future 21: Think You Can Beat the Market? Think Again

    In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 21: You Can’t Handle the Truth. LEARNING: Overconfidence leads to poor investment decisions. Measure your returns against benchmarks.   “If you think you can forecast the future better than others, you’re going to ignore risks that you shouldn’t ignore because you’ll treat the unlikely as possible.”Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 21: You Can’t Handle the Truth. Chapter 21: You Can’t Handle the TruthIn this chapter, Larry discusses how investors delude themselves about their skills and performance, leading to persistent and costly investment mistakes. The deluded investorAccording to Larry, evidence from the field of behavioral finance suggests that investors persist in deluding themselves about their skills and performance. This persistent self-deception leads to costly investment mistakes, emphasizing the need for continuous vigilance in investment decisions. Larry quotes a New York Times article in which professors Richard Thaler and Robert Shiller noted that individual investors and money managers persist in believing that they are endowed with more and better information than others and can profit by picking stocks. This insight helps explain why individual investors think they can: Pick stocks that will outperform the market.Time the market, so they’re in it when it’s rising and out of it when it’s falling.Identify the few active managers who will beat their respective benchmarks. The overconfident investorLarry adds that even when individuals acknowledge the difficulty of beating the market, they are buoyed by the hope of success. He quotes noted economist Peter Bernstein: “Active management is extraordinarily difficult because there are so many knowledgeable investors and information does move so fast. The market is hard to beat. There are a lot of smart people trying to do the same thing. Nobody’s saying that it’s easy. But possible? Yes.” This slim possibility keeps hope alive. Overconfidence, fueled by this hope, leads investors to believe they will be among the few who succeed. Why investors spend so much time and money on actively managed mutual fundsLarry also examined another study, Positive Illusions and Forecasting Errors in Mutual Fund Investment Decisions,...

    18 min
  3. Michael Episcope - Investing Is About How You Behave and Not What You Know

    DEC 2

    Michael Episcope - Investing Is About How You Behave and Not What You Know

    BIO: Michael Episcope is the co-CEO of Origin Investments. He co-chairs its investment committee and oversees investor relations and capital raising. STORY: Michael invested in a multi-family property in Austin with a friend who had vouched for somebody else. Unbeknownst to Michael, the guy in Austin had taken a loan against his property to save other properties in his portfolio. LEARNING: Do not justify the red flags because an investment opportunity looks great. Investing is about how you behave and not what you know.   “When looking at an investment opportunity, do not justify the red flags because the investor investment opportunity looks so great.”Michael Episcope  Guest profileMichael Episcope is the co-CEO of Origin Investments. He co-chairs its investment committee and oversees investor relations and capital raising. Prior to Origin, Michael had a prolific derivatives trading career and was twice named one of the top 100 traders in the world. Michael earned his undergraduate and master’s degrees from DePaul University. He has more than 30 years of investment and risk management experience. Worst investment everIn 2004, Michael, a commodities trader, ventured into an investment with a friend’s recommendation. His friend’s assurance and Michael’s financial stability made him believe he was impervious to mistakes. The investment was a multi-family property in Austin, Texas. Michael trusted his friend and thought he did the due diligence, but he did not. The deal was okay, as they had the right city and the right piece of land. But then the communication from the individual in Austin was not going very well, and things just weren’t adding up. But Michael’s friend kept insisting everything was good. Still, something didn’t sit well with Michael, so he went online and Googled his property. He saw his property was sitting on a bridge lender site. The guy in Austin had taken a loan against Michael’s property to save other properties in his portfolio. The whole thing just went sideways. Michael took a lot of time and effort to wrangle away from that investment, wasting a year of his life. He got pennies on the dollar back from that investment. Lessons learnedInvesting is about people.When looking at an investment opportunity, do not justify the red flags because the investment opportunity seems so great.Investing is about how you behave and not what you know. Andrew’s takeawaysEven though you may sometimes have the wrong outcome, it doesn’t mean you didn’t do the right thing. Actionable adviceDo as much due diligence as possible. When investing with someone, ask yourself:Do they have something to lose if the investment fails?Do they have their skin in the game?Do they have a balance sheet?Do they have something here at risk more than you do? Michael’s recommendationsMichael recommends that anyone wanting to learn about personal finance read Morgan Housel’s books. He also recommends downloading his free Comprehensive Guide to Real Estate Investing. No.1 goal for the next 12 monthsMichael’s number one goal...

    41 min
  4. Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management

    NOV 18

    Enrich Your Future 20: Passive Investing Is the Key to Prudent Wealth Management

    In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 20: A Higher Intelligence. LEARNING: Choose passive investing over active investing.   “Passive investing involves systematic, transparent, and replicable strategies without individual stock selection or market timing. It’s the more ethical way to go.”Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 20: A Higher Intelligence. Chapter 20: A Higher IntelligenceIn this chapter, Larry discusses prudent investing. The Uniform Prudent Investor ActThe Uniform Prudent Investor Act, a cornerstone of prudent investment management, offers two key benefits. Firstly, it underscores the importance of broad diversification in risk management, empowering trustees and investors to make informed decisions. Secondly, it promotes cost control as a vital aspect of prudent investing, providing a clear roadmap for those who may lack the necessary knowledge, skill, time, or interest to manage a portfolio effectively. Ethical malfeasance and misfeasance in investingIn this chapter, Larry sheds light on Michael G. Sher’s insights. Sher extensively discusses ethical malfeasance and misfeasance. He says ethical malfeasance occurs when an investment manager does something deliberately or conceals it (e.g., the manager knows that he’s too drunk to drive but drives anyway). For example, consider the manager who invests intentionally at a higher level of risk than the client chose without informing them and then generates a subsequently higher return. The manager attributes the alpha or the excess return to his superior skill instead of the reality that he was taking more risk, so it was just more exposure to beta, not alpha. On the other hand, ethical misfeasance occurs when an investment manager does something by accident (e.g., the manager really believes that he’s sober enough to drive). Thus, the manager doesn’t know what he’s doing and shouldn’t be managing money. Avoid active investingLarry highly discourages active investing because the evidence shows that active managers who tend to outperform on average outperform by a little bit, and the ones that underperform tend to underperform by a lot. Either they don’t have the skill, and they have higher expenses, and the ones who have enough skills to beat the market, most of that skill is offset by their higher costs. So it’s still really tough to generate alpha. Passive investing is the ethical way to goAccording to Sher, managing money in an efficient market without investing passively is investment malfeasance.

    19 min
  5. Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe

    NOV 11

    Enrich Your Future 19: The Gold Illusion: Why Investing in Gold May Not Be Safe

    In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 19: Is Gold a Safe Haven Asset? LEARNING: Do not allocate more than 5% of gold to your portfolio.   “I don’t have a problem with people allocating a very small amount of gold to their portfolio, but they should only do it if they’re prepared to earn lousy returns most of the time.”Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 19: Is Gold a Safe Haven Asset? Chapter 19: Is Gold a Safe Haven Asset?In this chapter, Larry explains why you should not buy gold because you think it’s a good inflation hedge. While he is fine with people allocating a minimal amount of gold to their portfolio, Larry cautions that they should only do it if they’re prepared to earn lousy returns most of the time. Gold as an investment assetGold has long been used as a store of value, a unit of exchange, and as jewelry. More recently, many investors have come to believe that gold should be considered an investment asset, playing a potential role in the asset allocation decision by providing a hedge against currency risk, a hedge against inflation, and a haven of safety during severe economic recessions. Larry reviews various research findings to determine if the evidence supports those beliefs. The evidenceIn their June 2012 study, “The Golden Dilemma,” Claude Erb and Campbell Harvey found that in terms of being a currency hedge, changes in the real price of gold were largely independent of the change in currency values—gold is not a good hedge against currency risk. This means that the value of gold does not necessarily increase or decrease in response to changes in currency values, making it a less effective hedge than commonly believed. Erb and Harvey also found gold isn’t quite the safe haven many investors think it is, as 17% of monthly stock returns fell into the category where gold dropped while stocks posted negative returns. If gold acted as a true safe haven, we would expect very few, if any, such observations. Still, 83% of the time, on the right side isn’t a bad record. Gold is not an inflation hedge, no matter the trading horizonThe following example provides the answer regarding gold’s value as an inflation hedge. On January 21, 1980, the price of gold reached a then-record high of US$850. On March 19, 2002, gold traded at US$293, well below its price two decades earlier. The inflation rate for the period from 1980 through 2001 was 3.9%. Thus, gold’s loss in real purchasing power, which refers to the amount of goods or services that can be purchased with a unit of gold, was

    33 min
  6. Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans

    OCT 28

    Enrich Your Future 18: Build a Portfolio That Can Withstand the Black Swans

    In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 18: Black Swans and Fat Tails. LEARNING: Never treat the unlikely as impossible. Diversify your portfolio to withstand black swans.   “If you build a portfolio that can withstand the black swans and is highly diversified, then psychological or economic events won’t force you to sell.”Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 18: Black Swans and Fat Tails. Chapter 18: Black Swans and Fat TailsIn this chapter, Larry explains the importance of never treating the unlikely as impossible and ensuring your plan includes the near certainty that black swan events will appear. Thus, your plan should consider their risks and how to address them. Understanding the risk of fat tailsIn terms of investing, Larry says, fat tails are distributions in which very low and high values are more frequent than a normal distribution predicts. In a normal distribution, the tails to the extreme left and extreme right of the mean become smaller, ultimately reaching zero occurrences. However, the historical evidence on stock returns is that they demonstrate occurrences of low and high values that are far greater than theoretically expected by a normal distribution. Thus, understanding the risk of fat tails is essential to developing an appropriate asset allocation and investment plan. Unfortunately, Larry notes, many investors fail to account for the risks of fat tails. History of the black swansWith the publication of Nassim Nicholas Taleb’s 2001 book Fooled by Randomness, the term black swan became part of the investment vernacular—virtually synonymous with the term fat tail. In his second book, The Black Swan, published in 2007, Taleb called a black swan an event with three attributes: It is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility.It carries an extreme impact.Despite its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. Taleb went on further to show that stock returns have big fat tails. Their distribution of returns is not normally distributed, and fat tails mean that what people think are unlikely events are much more likely to occur than people believe will. To illustrate this, Larry uses an example: if you take stock returns, and in the last 100 years, you cut out one best month per year, which is 1% of the...

    32 min
  7. Enrich Your Future 17: Take a Portfolio Approach to Your Investments

    OCT 21

    Enrich Your Future 17: Take a Portfolio Approach to Your Investments

    In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 17: There is Only One Way to See Things Rightly. LEARNING: Consider the overall impact of investments rather than focusing on individual metrics.   "There is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant."Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 17: There is Only One Way to See Things Rightly. Chapter 17: There is Only One Way to See Things RightlyIn this chapter, Larry enlightens us on the benefits of considering the overall impact of investments rather than focusing on individual metrics. This holistic approach empowers investors and advisors to make more informed decisions. Don’t view an asset class’s returns and risk in isolationA common mistake that investors and even professional advisors often make is viewing an asset class’s returns and risk in isolation. Larry emphasizes this point by giving the example of Vanguard’s popular index funds, the largest index funds in their respective categories, to make us all more cautious and aware of the potential pitfalls of this approach. From 1998 through 2022, the Vanguard 500 Index Fund (VFINX) returned 7.53% per annum, outperforming Vanguard’s Emerging Markets Index Fund (VEIEX), which returned 6.14% per annum. VFINX also experienced lower volatility of 15.7% versus 22.6% for VEIEX. The result was that VFINX produced a much higher Sharpe ratio (risk-adjusted return measure) of 0.43 versus 0.30 for VEIEX. Why more volatile emerging markets have a higher returnAccording to Larry, despite including an allocation to the lower returning and more volatile VEIEX, a portfolio of 90% VFINX/10% VEIEX, rebalanced annually, would have outperformed, returning 7.59%. And it did so while also producing the same Sharpe ratio of 0.43. Perhaps surprisingly, a 20% allocation to VEIEX would have done even better, returning 7.61% with a 0.43 Sharpe ratio. Even a 30% allocation to VEIEX would have returned 7.59%, higher than the 7.53% return of VFINX (though the Sharpe ratio would have fallen slightly to 0.42 from 0.43). The portfolios that included an allocation to the lower-returning and more volatile emerging markets benefited from the imperfect correlation of returns (0.77) between the S&P 500 Index and the MSCI Emerging Markets Index. The right way to build a portfolioLarry says there is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant. The only thing that should matter is considering how adding an asset class impacts the risk and return of the entire...

    16 min
  8. Enrich Your Future 16: The Estimated Return Is Not Inevitable

    OCT 14

    Enrich Your Future 16: The Estimated Return Is Not Inevitable

    Listen onApple | Listen Notes | Spotify | YouTube | Other Quick takeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 16: All Crystal Balls are Cloudy. LEARNING: Estimated return is not always inevitable.   “If returns are negative early on, don’t withdraw large amounts because when the market eventually recovers, you won’t have that money to earn your returns.”Larry Swedroe  In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks. Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 16: All Crystal Balls are Cloudy. Chapter 16: All crystal balls are cloudyIn this chapter, Larry illustrates why past returns are not crystal balls that predict future returns. According to Larry, the problem with all forecasts that deal with estimations of probabilities is that people tend to think of them in a deterministic way. He says that as an investor, you should think about returns with the idea that distribution and estimate are only the middle points. Your plan has to be prepared for either the good tail to show up, which is easy to deal with and usually will allow you to take chips off the table and reduce your risk because you’ll be well ahead of your goal. But if the bad tail shows up, you may have to either work longer, plan on saving more, or rebalance, which means buying stocks at a tough time. The threat of sequence riskTo demonstrate the danger of sequence risk, Larry asks us to imagine it’s 1973, and stocks have returned 8% in real terms and 10% in nominal returns. We’ve had similar results over the next 50 years. Say an investor in that time frame decides to withdraw 7% yearly from their portfolio in real terms because they know with their clear crystal ball that they will get 8% for the next 50 years. This means if they take out, say, $100,000 in the first year, and inflation is 3%, to keep their actual spending the same, they have to take out $103,000. According to Larry, this investor will be bankrupt within 10 years due to the sequence of returns, which is the order in which the returns occur, not the returns themselves. As you can see in the table below, despite providing an 8.7% per annum real return over the 27 years, because the S&P 500 Index declined by more than 37% from January 1973 through December 1974, withdrawing an inflation-adjusted 7% per annum in the portfolio caused it to be depleted by the end of 1982—in just 10 years! (Note that from January 1973 through October 1974, when the bear market ended, the...

    36 min
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About

Welcome to My Worst Investment Ever podcast hosted by Your Worst Podcast Host, Andrew Stotz, where you will hear stories of loss to keep you winning. In our community, we know that to win in investing you must take the risk, but to win big, you’ve got to reduce it. Your Worst Podcast Host, Andrew Stotz, Ph.D., CFA, is also the CEO of A. Stotz Investment Research and A. Stotz Academy, which helps people create, grow, measure, and protect their wealth. To find more stories like this, previous episodes, and resources to help you reduce your risk, visit https://myworstinvestmentever.com/

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