Wes Gray is a no-holds-barred researcher who’s always looking to uncover investment strategies that are actually useful in making investors money.
He joins us this week on Tradestreaming Radio to discuss some of his recent research on expert community, SumZero and Joel Greenblatt’s Magic Formula, and lots more.
Continue reading “Slaying sacred cows, researching profitable trading strategies – with Wes Gray”
I live and breathe this investing stuff.
So, sometimes I take my insane fervor interest in investing for granted.
But a lot of people aren’t me (thankfully). Many are either too busy, too distracted, or uninterested in investing. That’s a shame — because outside of building your own wealth, there isn’t an easier way to protect your (small) fortune and grow it over time.
So, why are so many closed out of investing? Why do 40% of 18-30 year olds NEVER want to participate in the stock market??
That’s a post for another time. For now, I want to focus on how to get more interested in the stock market, assuming that’s a worthy goal (I think it is).
How do you create interest in something you aren’t quite interested in to begin with?
1. Get seriously informed about the market: In 1921, Harry Kitson wrote a book he thought was destined to help college students improve their study habits. Nah, it’s really a book about the science (hey, it’s close to 100 years young) of learning. How to Use Your Mind addresses the hard question of finding inspiration in learning. For Kitson, people don’t generally start with inspiration about learning. It’s about perspiration — working hard to learn a bit about a subject. The passion soon follows. (Source: How to Use Your Mind)
2. Look deeper: So much of what we know about the stock market is through our perception and personal histories. Maybe our parents were involved or maybe they were disinterested. But to create true, motivated interest in a subject, it takes changing our mental image, looking at investing differently. My grandfather was a Buffett-like figure but the markets today would have completely confounded him. I know is sounds kind of Zen-y but, “If you’re really paying attention, you can always go deeper, continuously. If you do, new worlds open for you..” (Source: Quora)
3. Think good thoughts about the market: Negativity totally breeds negativity. Sometimes that may be warranted but most of the time, it clouds our thinking. The best investors I’ve met are always objective about their investing approach. They don’t let bad decisions wrack them. They move on, learning from their mistakes. The market is a great teacher and it demands its participants visualize success. Learning with passion about the market requires:
4. Find friends who like the market: Not only does this stimulate a desire to learn about and participate in the market, it may improve your results. All else equal, social 
households — those who interact with their neighbors, or who attend church — are more likely to invest in the stock market than non-social households. It even extends to where you live — people living in states where people are likely to invest are themselves more likely to invest. Mutual fund managers who live in the same state are also more likely to trade the same stocks. We’re social animals and we learn from our friends. Investing ideas and education spread epidemically. We’re influenced by others’ behavior. Want to learn more about investing? Surround yourself with people who do, too. (Source: Social Interaction and Stock Market Participation)
5. Use resources at work to dive in to investing: Just like having neighbors you can shoot the sh*t with about stocks, the market, and investing, your work environment can impact your learning about the market. Sure enough, employers that offer seminars on investing find their employees more educated about investing and more likely to invest. (Source: The Effects of Financial Education in the Workplace)
6. Try some new tools: The finance industry is not your father’s finance industry. You don’t have to work with cigar-smoking old dudes who wear suspenders. Platforms like Betterment simplify investing and make it easier to focus on the important things. Others like Personal Capital make it easier to get professional investment advice online. SigFig, Jemstep, and FutureAdvisor help to find waste in your portfolios and optimize them for performance. There’s a renaissance of investing tools that can help.
Don’t feel bad if you’re not all that into the markets. That distance is actually a good thing — it can make you a smarter, more objective investor. But like everything worthwhile in life, investing is a lifelong process of learning: learning about your own behavior and others.
You can do it, Slugger.
Insider trading has been top of mind for the past few months with Galleon and Congressional insider trading blanketing the news. While illegal insider trading is being taken to the woodshed, there’s plenty to do with legal insider trading. By following the smart money, investors can follow the cookie crumbs back to the investing profits.
So, here are 12 ways investors can use insider trading data and information to make better, smarter, investment decisions.
Continue reading “12 ways investors can profit via legal insider trading”
A lot of people don’t invest because it’s seemingly too complicated.
So many decisions to make, so much jargon, who to trust?
Jon Stein is the founder and CEO of Betterment which he describes as a mix between Apple and Vanguard. It’s extremely easy to design a fine portfolio.
By removing much of the noise that distracts investors, Betterment has developed a 95% solution for 95% of investors. Plus, the firm is rolling out some functionality for investors who want a little more flexibility.
Jon’s growing an online asset manager from the ground up. He shared with me that Betterment has almost 10,000 customers already with mid-$20M under management (AUM), with many of them using the goals and planning tools the site has developed.
Jon joins us for this week’s episode of Tradestreaming Radio.
Continue reading “Making investing simpler – with Jon Stein”
Newspapers, magazine, bloggers — the financial press — get up every morning of every day (yeah, I’ll include weekends) to try and figure out what the future has in store for investors.
When my kids ask me what I do, I tell ’em and receive comments like “Why can’t you run a supermarket?” They understand inventory and selling products. They don’t understand investing and why it’s so hard to predict what the future has in store for markets and individual assets.
I frequently come back to the question and tell them that I’m like a financial weatherman, trying to determine what type of economic weather we’ll have next week, next month and next year.
They sort of get it and at least their eyes stop glazing over.
But, it’s an interesting metaphor — investing and weather forecasting.
Like meteorology (another famously frustrating trade), forecasting the markets, the unknown is tricky.
But unlike the investing field — which keeps reams of historical data for comfort and scientific value, you’ll be surprised to know that until relatively recently, meteorologists didn’t even keep historical data.
Eric Floehr monitors weather forecasts for a living. Here’s what he had to say about when he started researching the accuracy of weather forecasters:
I have this data back to 2004. It’s funny, but most weather forecasting companies historically have not kept their forecasts. Their bread-and-butter is the forecast in the future. Once that future becomes the past, they saw no value in that data until recently.
For weathermen, what matters is uncertainty. Outside of taking a cruise during a typhoon or getting rained out of a golf match, getting the weather wrong doesn’t really impact my life ALL that much.
Unlike investing where bad bets can be ruinous.
As I wrote about measuring investment risk, risk is more than just uncertainty. When we invest and make decisions based upon an unknown future, we also have to factor in what would happen if we get it wrong.
That’s the difference between losing some short-term money and having to push off retirement for many years.
Part of our struggle with getting our hands around risk is our relationship with time. It’s easy to plan for tomorrow, which is why accuracy for The Weather Channel is MUCH higher in predicting the following day’s weather than it is for the 7-10 day forecast).
Time and risk are two sides of the same coin:
Time is the dominant factor in gambling. Risk and time are opposite sides of the same coin, for if there were no tomorrow there would be no risk. Time transforms risk, and the nature of risk is shaped by the time horizon: the future is the playing field.
Peter L. Bernstein. Against the Gods: The Remarkable Story of Risk (Kindle Locations 187-189).
Investing is a very complicated game. At risk is our future but the future defines how much risk we’re going to take on today.
So-called financial experts are merely signposts along the way, providing frequently misleading and oftentimes, wrong advice on how to navigate through the uncertainty.
Understanding risk — and really, it’s about personalizing risk (my risk is different than your risk for the same time frame) — means understanding that the future is the playing field of risk. Most of the bloggers and financial media are just noise along the way.
Building on this theme of risk that’s capturing my attention as of late, I wanted to drill down a bit further into this discussion of risk.
One of the things I’ve discussed on my podcast has been how traditional tools used by financial advisors and RIAs aren’t sufficient to get a real handle on our risk.
Risk questionnaires, like the kinds Vanguard uses (one of the better ones by the way), don’t accurately capture our real relationship with risk. There are a variety of reasons why that’s the case but for this post, I wanted to focus on just one aspect of risk and that’s our inability to measure it.
I’m hosting a webinar tomorrow on insider trading strategies — following the corporate insider smart money.
You’ll learn about:
Insider trading (talking about legal insider trading, of course) typically beats the stock market by 10% — per year.
For those of you who’ve been following Tradestreaming for the past couple of years (and read my book), you know that I’m a fan of following the smart money.
By following the tradestream of hedge funds or the activity of corporate insiders, investors can create portfolios and strategies that have at least been proven in the literature to make money.
Insider trading is a treasure-trove of potentially-profitable information. Top managers at their firms are in the best seats to determine the future prospects for their stocks. If they reach into their wallets and buy their firms’ stocks, well, that’s an incredible useful signal.
There’s been some amazing research into insider trading. Recent studies have found that investors can mimic the returns of insiders to beat the market by 7 – 10% a year.
I wrote the 20+ page, The Harvard Guide to Insider Trading to describe these strategies and provide a quick blueprint to create portfolios comprised of the most useful insider trading.
AND, to teach you how to use insider trading strategies for your own trading/investing.
You can download it freely here.
I hope you like it — let me know (via email or in the comments) what you think.
I know, I know…It may be trite but I thought it would be a fun post to write.
One of the holy grails of financial research is to be able to identify those traits that make for better investors.
Why?
Because if we can isolate those skills top investors have, we can strengthen our own investment activity accordingly.
A recent study looked at the connection between IQ and stock market participation.
The real results aren’t what everyone is focused on…
