Boring Wealth

Nobody likes boring.

Boring people, boring conferences, boring sporting events, boring shows.

Boring sucks…

But… is boring what we need?


As a society, we have lost patience. Any kind of patience….

  • When the gas pump takes longer to put gas in the car
  • When our internet connect slows down
  • When a text message won’t send
  • When customer service tell us to hold for more than a minute

And as the technology age advances, the lag time in our decision making is almost completely eradicated…

  • Venmo lets us send money to anyone we want…instantly
  • Instagram lets us post anything about our lives…instantly
  • Twitter shares us the news from any part of the globe…instantly
  • And Robinhood lets us trade stocks…instantly

I could go on for hours with more examples of instant gratification we receive.

Now, all of those platforms have dramatically increased the quality of our lives but at the same time they are building in habits that are difficult to break. If you reread my post on making investing a habit, it takes almost 21 days to build a habit. And it takes longer to break a habit. So, how the heck are we going to be patient enough to let our investments grow?


In the investing world, we talk at nauseum about compound interest. Simply put, your investment earns money, reinvests that money, then the next round of earnings should have compounded on themselves. Here is a chart for those visual learners who already lost patience reading this article.


Source: Google Images

My point being, if we have instant access to do just about anything we want with our investments, how do we let compound interest do its thing? The key to compound interest is time and the amount we trade negatively impacts the amount of time we are compounding.

There are also millions of signs that investors are losing patience. Those signs are in the form of trading volumes which continue to grow out of control. Investors are trading at higher and higher volumes almost every year.


Source: CNBC

With boring investing, you really need to find quality companies to own for the long hall. If that’s too hard, find your favorite index fund and call it a day. There is a lot of wealth that can be generated outside of the sexy AI, machine learning, and biotech companies investors flocks towards. Sometimes a little bit of patience coupled with a great product is all investors need.



Take WD-40 for example. My guess is almost everyone reading this article didn’t even realize this was a public company. Also, probably everyone reading this article doesn’t know what the product they sell actually is. Most of us just think of “WD-40” the same way we think of Goo Gone, Velcro or Bubble Wrap. Its become a verb.

“I have no idea what I’m spraying on my door hinges but it works!”

Everyone owns the product but nobody knows what the heck it actually is. BUT, for those investors who spend the time sifting through the misinformation, an amazing investment has compounded on itself for over 30 years.


Source: Koyfin – WDFC

I know its boring.

We all know its boring.

But leave your investments alone and focus your instant gratification elsewhere.


Please ignore typo’s, I will be editing grammar as I go!
I have no positions in any securities discuss or plan to initiate positions in any securities discussed in the next 30 days.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

Craft Advice

Beer - Thompson

In Florida, craft beer has completely dominated the marketplace and it’s literally impossible to find a restaurant menu without something from a local brewery. If I rewind back to my college years, there was no option besides Budweiser, Miller Light, or maybe Coors when it came to ordering a beer.

What has occurred over the past decade has been nothing short but amazing. Within about 10 years, craft breweries have popped up all across America and consumed a serious chunk out of the market share of the goliaths (Anheuser-Busch, MillerCoors, Heineken, Pabst, and Diageo, which owns Guinness).

Source: CraftBeer.com

Craft beer went from being a hobby in the mid-90’s to one of the hottest markets shortly after 2012. And with this revolution, came ancillary benefits in job creation for towns across America.

Capture

According to Bart Watson, chief economist at the Brewers Association, “We’ve seen three main markers in the rise of craft beer—fuller flavor, greater variety, and more intense support for local businesses.”

Instead of heading down to your local chain restaurant, this “craft” movement has been picking up steam. From craft restaurants to craft cocktails, everyone is chasing after the concept of locally sourced and created themes.


So, what does this have to do with financial advisors?

In my job, I am lucky enough to be able to speak with advisors from all across the country. From insurance experts to asset managers, estate planners to small business experts, everyone has started facing the trends of fee compression, automation, and artificial intelligence. A large portion of the advisors I speak with see these as threats and think the profession is dead in just a few years.

But I tend to look at the financial advice industry a lot like craft beer. The beauty of craft beer is that some entrepreneur, deeply embedded in the local culture, understands the tastes, interests, and feelings of their community. Most of these breweries are now central hubs of their towns and provide a valuable gathering place for community members. The beers, all

Financial advice is exactly the same. The same way American Express incentivizes “shopping local”, investors prefer to “invest local”. We see small micro-networks of clients, attorneys, accountants and advisors, working together to share this craft advice. Yes, the ideas may be nationwide or even global, but it’s no different than a brewery getting a seed investment from Sam Adams or Anheiser-Busch.

The Misinformation Age


Peter Lynch is famously quoted saying “buy what you know”. A simple statement to help investors find a path forward among the confusion of the investing world. In the 1970’s, when Peter Lynch ran Fidelity’s Magellan fund, investing was a platform for the ultra rich and highly educated. Today, anyone with a smartphone can trade complex options with about 3 clicks.

Investing has never been easier…

Yet, investing has never been more confusing…


A few years back, I wrote a piece about Information Overload. The idea was that as we enter the information age, we are completely overwhelmed on every possible topic. Whether trying to set our fantasy football team or finding a good recipe for dinner, the available information is absolutely insane. Some of it creates a sort of confirmation bias, while the other makes us immediately regret our decisions.

This year, as soon as my fantasy football draft was completed, the Yahoo Sports algorithm immediately scored my picks and gave me a B-. All that time researching my team, and Yahoo comes along and tells you “your a B- student”. Did I pick the wrong players?!?

Source: Yahoo

Since March, I probably get 5-10 messages a week from some client asking about company they know or admire. This is following the Peter Lynch approach of buying what you know, however, the confusion is shocking. Enter Tesla..

Source: Tesla

Tesla is a remarkable company. Revolutionizing the automotive and electrical industry with a focus on saving the planet. Elon Musk, the visionary founder, is adored by investors everywhere. He is quoted in the past as saying Tesla is his experiment to force sustainability change across the globe. Simply put, the only way to get the automotive industry to focus on saving our planet is to beat them at their game. This approach has now been replicated with the launch of Impossible Foods and Beyond Meat and will surely be replicated over and over again.

Now, Tesla makes fantastic cars, amazing software, and has extremely innovative take on roofing but a great company and a great stock are two different things. Over the past year, Tesla is up an astonishing 800%+. A large portion of that run up came shortly after its breakout in May.

Source: Koyfin – 2020 YTD Chart of TSLA

At the start of June, Tesla broke out of its trading range and seemed to “rocket” higher almost every day. From $150 to $200, to $300 to $400+ per share, the stock kept climbing. (split adjusted)

Now, for stocks to move, they need some sort catalyst. Some surprise earnings news or some new product, but really the only major news was almost from another planet…

Source: Nasa

To close out May, SpaceX has the first successful private launch of astronauts in history. No longer were major governments the only organizations launching astronauts into space, now private capital is funding our future expansion into outer space. A huge accomplishment for society but unfortunately, a lot of investors confused SpaceX and Tesla as the same thing. See Barron’s article from June:

SpaceX Makes Tesla Stock Look Even Better. Just Ask Wall Street.

The success for SpaceX was seen as a success for Tesla, even though they are separate companies. Now, for a Wall Street firm to extrapolate success across businesses is one thing. But for the average “mom and pop” investors, the lines are so blurry that any misinformation just fuels the confusion. This is where the “buy what you know” theory flies out of control.

Was Peter Lynch saying buy companies we know of?

Or are he saying buy companies we know well?


Misinformation is something investors face daily and I would expect no slowdown anytime soon. I guess you could look at it through the same lens as fake news. How can you really be sure the news you are reading is going to impact an investment you are looking to make?

All investment decisions you make should be vetted just as well as you would prepare for a home or car purchase. However, the majority of investors buy a investment off the advice of a comment on Reddit, Yahoo Message Boards, or Twitter. Decisions that should be informed and should take weeks to evaluate are instead decided within seconds.

I would recommend investors begin with Peter Lynch’s advice and research companies we already know. Instead of blinding throwing money at companies, start to learn more about the businesses you already know. You will then evolve from knowing companies to knowing companies well and identify many new avenues for investment.


Please ignore typo’s, I will be editing grammar as I go!
I have no positions in any securities discuss or plan to initiate positions in any securities discussed in the next 30 days.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

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