Ep. 79 - The Power of Data-Driven Decision Making with Stuart Kruse The Art of Winning

Stuart Kruse is a seasoned professional with over two decades of experience in the investment industry. During his time with Lehmann Brothers and Bear Stearns, he honed his skills in investment management and became a CFA charter holder in 2005. Kruse's success in finance led him to create Kruse Asset Management, a firm that uses a quantitative approach to investments. His first book, "License to Steal," reflects his vast knowledge of the industry and his passion for helping investors make informed decisions. Despite his busy schedule, Kruse makes time for his hobbies, including skydiving, beach volleyball, and traveling with his wife. If you want to use data to make smarter decisions on the financial market, check out Kruse Asset Management!
 
In this episode, Stuart discusses why using math and big data makes better decisions in all aspects of life. He shares an example of using data to decide about paying off his mortgage early, why it's not always the best choice based on numbers, and his approach to holding the investment industry to higher standards. Stuart also enjoys beach volleyball, bungee jumping, and traveling. The conversation emphasizes the importance of using data to make better decisions and suggests seeking to understand and find commonalities instead of arguing against extreme positions. They discuss taxation, asset management, stocks, bonds, and mutual funds, including a strategy that tends towards outperformance. The conversation ends with a discussion on Bitcoin and crypto as an asset class and the importance of diversification and regulation.
 
[00:00 - 15:26] Using Data to Make Better Life Choices
·       Stuart Kruse is introduced to the show.
·       Stuart is a quantitative asset manager who uses math and statistics to invest. He aims to hold the investment industry to a higher standard by relying on data, not just relationships
·       He provides real-world examples of how data can inform decisions, such as paying off a mortgage early
 
[15:26 - 43:53] The Future of Finance and Finding the Optimal Point
·       Providing resistance to someone's thought process strengthens their resistance. Seeking to understand breaks down barriers and allows for clear thinking and communication.
·       By forming bridges and commonalities, it is possible to move beyond extreme positions and find an optimal point.
·       There must be an optimal point for everything, but nobody talks about it.
Consistency with identity is the number one thing people do. Identity can be an underestimated, powerful motivator in our world. The S&P 500 is a market cap-weighted index that includes top companies like Apple, Google, Facebook, and Microsoft. These top companies account for 25% of the S&P 500 waiting. The market moves when these companies are added or removed from the S&P 500. Equally weighted indexes, such as the RSP, are a better investment strategy as they are not reliant on the performance of a few top companies. If a company trades at a higher price-to-earnings ratio than it historically has, it is overvalued. Overvalued companies need to grow faster to make more money than the market, which may not be possible. Equally weighted indexes may not always outperform, but they almost always do over the long term. [43:53 – 52:28] Closing Segment
·       What is your favorite way to create wealth or invest?
o   Stuart's favorite way to build wealth is to start investing early and consistently, putting money into assets that grow over time, such as the S&P and diversified portfolios. He recommends buying dividend-paying stocks for passive income and aiming for a portfolio that can throw off both income and growth. Stuart believes that Bitcoin should be a portion of every investor's portfolio, as it is a non-correlated asset class and can serve as a store of value.
·       How do you know whether you're winning or not?
o   Stuar