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

    18 NOV

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

    11 NOV

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

    28 OCT

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

    21 OCT

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

    14 OCT

    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
  6. Damon Pistulka - The Role of Technology in Business Growth

    9 OCT

    Damon Pistulka - The Role of Technology in Business Growth

    BIO: Damon Pistulka, co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits. STORY: Damon explains his journey into understanding technology and its role in business growth. LEARNING: Stay informed and adapt to changing industry trends. Adapt to changing customer expectations and preferences.   “The simple things we can do with technology today make the customer experience so much better.”Damon Pistulka  Guest profileDamon Pistulka, co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits. With over 20 years of experience, Damon is dedicated to transforming businesses, enhancing profitability, and helping founders create lasting legacies​​. Technology is your business allyIn today’s episode, Damon, who previously appeared on the podcast on episode Ep649: Be Careful of Concentration Risk, discusses the value of technology in running a business. He emphasizes the importance of robotic process automation, CRMs, and AI in modern business operations to accelerate value. In his opinion, technology allows businesses to do simple things that improve customer experience. Damon highlights a couple of threats businesses face today that could be dealt with by adopting technology. Rapid innovation is outpacing businesses. Those lagging behind will be overtaken by competitors who have adopted new technologies.Aging workforce with limited new talent. There’s an aging workforce and limited new talent. As more people retire, businesses increasingly find it hard to replace the retirees with educated and qualified people.Customers now expect top-tier service levels. Buyers are now demanding businesses provide instant feedback and real-time updates. Businesses that don’t meet customer expectations will not stay competitive. Using technology to deal with the threatsDamon explains his approach to helping clients develop business growth strategies. He emphasizes the importance of starting with small, manageable changes and gradually scaling up. Damon cautions entrepreneurs from trying to do it all. Instead, he advises starting with simple, practical changes, often referred to as ‘low-hanging fruits’—these are the tasks or opportunities that are the easiest to achieve and provide the quickest benefits. Gradually, as these are implemented, more complex systems can be adopted. Seek out experts who can help you advanceFurther, Damon advises seeking out experts who can help you advance in the particular area you’re focusing on. Then, work your way up as you get your company, your people, and your supplier base comfortable with these changes. Get educated before adopting new technologyDamon also underscores the importance of getting educated before adopting new technology. He advises becoming familiar and comfortable enough with it to try it, enabling you to identify potential areas where the technology could help your business. This approach instills a sense of preparedness and confidence. Then, he suggests hiring an expert to help you implement your new technologies and strategies. Move fastAnother way to deal with the business threats is to move fast. Damon says that speed sells, and businesses must adopt a speed and...

    35 min
  7. Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe

    23 SEPT

    Enrich Your Future 15: Individual Stocks Are Riskier Than You Believe

    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 15: Individual Stocks Are Riskier Than Investors Believe. LEARNING: Don’t invest in individual stocks. Instead, diversify your portfolio to reduce your risk.   “Diversification has been said to be the only free lunch in investing. Unfortunately, most investors fail to use the full buffet available.”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 15: Individual Stocks Are Riskier Than Investors Believe. Chapter 15: Individual Stocks Are Riskier Than Investors BelieveIn this chapter, Larry reveals the stark reality of investing in individual stocks, highlighting the significant risks involved. His aim is to help investors understand the potential pitfalls of this high-stakes game and why they should avoid it. Given the apparent benefits of diversification, it’s baffling why investors don’t hold highly diversified portfolios. According to Larry, one reason is that most investors likely don’t understand how risky individual stocks are compared to owning a broad selection of hundreds or thousands of stocks. Evidence that individual stocks are very riskyLarry notes that the stock market has returned roughly 10% per year over the last 100 years, and the standard deviation on an annual basis of a portfolio of a broad market of stocks has been about 20%. He observes that most people don’t understand that the average individual stock has a standard deviation of more than twice that. In another study from 1983 to 2006 that covered the top 3,000 stocks, the stock market returned almost 13% per annum, but the median return was just 5.1%, nearly 8% below the market’s return. The mean annualized return was -1.1%. This means that if you randomly pick one stock, the odds would say you’re more likely to get -1.1%. However, if you own hundreds or thousands of stocks, the odds are in your favor, and you’ll get very close to that mean return. Larry shares another stark example of the riskiness of individual stocks. Despite the 1990s being one of the greatest bull markets of all time, with the Russell 3000 providing an annualized return of 17.7% and a cumulative return of almost 410%, 22% of the 2,397 U.S. stocks in existence throughout the decade had negative absolute returns. This means they underperformed by at least 410%. Over the decade, inflation was a cumulative 33.5%, meaning they lost at least 33.5% in real terms. In another study by Hendrik Bessembinder of all common stocks listed on the NYSE, Amex, and NASDAQ exchanges from 1926 through 2015 and

    17 min
  8. Ava Benesocky - Commit and Take Action on Your Investment

    18 SEPT

    Ava Benesocky - Commit and Take Action on Your Investment

    BIO: Ava Benesocky is an author, public speaker, educator, CEO, and Co-Founder of CPI Capital, a uniquely innovative real estate private equity firm that helps investors invest in multifamily assets. STORY: Ava became passionate about real estate when she was young. At 15, she convinced her parents to invest $13,000 in a course by Scott McGillivray on renovating and selling homes. Ava never did anything with the course, which made it the worst investment ever. LEARNING: If you invest in anything, ensure you’re ready to be committed, take action, and focus completely on it. Beware of shiny object syndrome.   “If you’re ever going to invest in something, you have to take action, or else it’s a total waste of time and money. And what’s the point?”Ava Benesocky  Guest profileAva Benesocky is an author, public speaker, educator, CEO, and Co-Founder of CPI Capital, a uniquely innovative real estate private equity firm that helps investors invest in multifamily assets. She is the Host of Real Estate Investing Demystified with August Biniaz, who was Ep 784. Ava has been featured in publications such as Forbes, Yahoo Finance, and numerous PodCasts and YouTube shows. Ava helps busy professionals earn passive income through Multifamily Real Estate investments. Worst investment everAva became passionate about real estate when she was young. At 15, she convinced her parents to invest $13,000 in a course by Scott McGillivray on renovating and selling homes. Ava never did anything with the course, which made it the worst investment ever. She tried to get it started, but there were so many moving components, and the process was so convoluted that she got scared. It all fell through the cracks. Ava never ended up taking action on it. Lessons learnedIf you invest in anything, ensure you’re ready to be committed, take action, and focus completely on it.Beware of shiny object syndrome. Andrew’s takeawaysEmbrace boring, dull, consistent, and regular assets.Before buying a course, ask yourself if you have the time to commit to it or if it is better to get someone to help you achieve what you could if you took the course. Actionable adviceRefrain from being impulsive when buying courses. Take your time and ask yourself if you have time for it. Can you block it off on your calendar? If not, do not get it. Ava’s recommendationsAva recommends listening to her podcast Real Estate Investing Demystified, where she shares her personal experiences, interviews industry experts, and provides advice on real estate investing and other investment opportunities. No.1 goal for the next 12 monthsAva’s number one goal for the next 12 months is to continue building a couple of departments in the company and closing on a couple more assets. On a personal level, she will continue taking care of her mind, body, and family. Parting words  “Thank you so much for letting me be

    29 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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