ISMS 30: Larry Swedroe – Do You Believe Your Fortune Is in the Stars or Rely on Misleading Information?

In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Today, they discuss two chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this tenth series, they discuss mistake number 18: Do you believe your fortune is in the stars? And mistake number 19: Do you rely on misleading information?

LEARNING: Stop thinking about having your fortune in the stars. Avoid actively managed funds. Be cautious when evaluating claims about fund performance.

“Stop thinking about having your fortune in the stars. Morningstar won’t help you.”

Larry Swedroe

In today’s episode, Andrew continues his discussion with Larry Swedroe, head of financial and economic research at Buckingham Wealth Partners. 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 a chapter of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this tenth series, they discuss mistake number 18: 18: Do you believe your fortune is in the stars? And mistake number 19: Do you rely on misleading information?

Did you miss out on previous mistakes? Check them out:

• ISMS 8: Larry Swedroe – Are You Overconfident in Your Skills?
• ISMS 17: Larry Swedroe – Do You Project Recent Trends Indefinitely Into the Future?
• ISMS 20: Larry Swedroe – Do You Extrapolate From Small Samples and Trust Your Intuition?
• ISMS 23: Larry Swedroe – Do You Allow Yourself to Be Influenced by Your Ego and Herd Mentality?
• ISMS 24: Larry Swedroe – Confusing Skill and Luck Can Stop You From Investing Wisely
• ISMS 25: Larry Swedroe – Admit Your Mistakes and Don’t Listen to Fake Experts
• ISMS 26: Larry Swedroe – Are You Subject to the Endowment Effect or the Hot Streak Fallacy?
• ISMS 27: Larry Swedroe – Familiar Doesn’t Make It Safe and You’re Not Playing With the House’s Money
• ISMS 29: Larry Swedroe – The Shiny Apple is Poisonous and Information is Not Knowledge

Mistake number 18: Do you believe your fortune is in the stars?

According to Larry, people are still relying heavily on Morningstar ratings. When Morningstar increases its rating, cash tends to flow in, and money flows out when it lowers its rating. Morningstar’s ratings