By Jack Forehand, CFA, CFP® (@practicalquant) —
One of the things many podcasts have in common is a standard closing question that they ask all their guests. For most of the history of Excess Returns, we didn’t do that. We just couldn’t find a question that we were happy with and we didn’t want to put one in just for the sake of doing it. But earlier this year, we finally came up with something we were happy with. It wasn’t anything groundbreaking. But we did think it got at the root of what we are trying to do with the podcast, which is taking the insights of investors who have been successful over the long-term and extracting the lessons we can learn from them.
The question we came up with is the following:
Based on your experience in the markets, it you could impart one piece of wisdom or teach one lesson to your average investor, what would it be?
Now that we have asked the question of over a dozen people, I thought it would be a good time to take a look back and summarize some of the best answers we have gotten.
Here are the top 5 lessons we have learned from our guests:
 Rob Arnott – Discipline is Needed in Both Buy and Sell Decisions
One of the biggest errors investors (myself included) make is focusing on only one side of the buy and sell decision. In most cases, having a sell discipline is the part investors miss, but it can work both ways. In the most popular interview we have done on our podcast, Research Affiliates founder Rob Arnott highlighted this as the one lesson he would teach investors. Rob made the point that a sell discipline can be the most neglected area for growth investors, as they often think growth will continue indefinitely and don’t consider valuation. For value investors, buying is often the most difficult part because they can get caught trying to catch a falling knife. He suggested using momentum as a helpful tool in avoiding that.
Full interview with Rob Arnott.
 Robert Hagstrom and Gregg Fisher – Have the Patience to Do Nothing
We are currently in a market where many investors haven’t needed too much patience to generate big returns. But that isn’t usually the case. This is the point that Robert Hagstrom, author of “The Warren Buffett Way” made when we asked him this question. We are wired as investors to want to do something. We think that making changes to our portfolio will enhance our returns. But the opposite is usually true. Extreme levels of patience have certainly been a big key to Buffett’s success, and all of us can learn something from that.
Full interview with Robert Hagstrom
Quent Capital founder Gregg Fisher also made a similar point. His advice for investors was that it is important to learn to “sit on your hands”. Doing nothing is sometimes the hardest thing, but it is also often the right one.
Full interview with Gregg Fisher
 Ryan Krueger – Play the Long Game
We all want things to be easy. We want to have our cake and eat it too. We want to generate the returns we desire from our portfolios without paying the price that sometimes come with that. Ryan Krueger of Freedom Day Solutions pointed this out when we asked him this question. Ryan talked about the increasing number of shortcuts that are available to us as investors. But taking those shortcuts usually costs us more than it benefits us. This can sometimes be a difficult lesson to keep in mind in a world where all of us are seeing investors making very large returns in very short periods of time, but those that play the long game almost always are the eventual winners.
Full interview with Ryan Krueger
 Harin de Silva – Know Where Your Return is Coming From
Most of us want to think our returns are driven by our own skill. But statistics show that the odds of using skill to beat the market over time are not high. In our interview with him, Harin de Silva pointed out the importance of focusing on returns that come from systematic sources. Those types of returns that don’t rely on skill are usually more repeatable in the future and therefore more reliable. In investing, you want to swim with the tide rather than against it and Harin pointed out that focusing on systematic sources of return like value, quality and leverage rather than skill can help do that.
Full interview with Harin de Silva
 Ben Inker – Understand Why You Should Get Paid
The market is not in the business of handing out free money. If you are getting paid in the form of increased returns from a particular investment strategy, there should be a reason for it. This is the point GMO Head of Asset Allocation Ben Inker made when we spoke to him. And it isn’t just understanding why you should get a return. It is also understanding why someone would give it to you. For an investor to make a sustainable return, the person on the other side of the trade has to have some reason to make the trade to provide that return. As Ben pointed out, investors buying one month call options on meme stocks are very unlikely to generate a positive long-term return because there is no reason for the person on the other side to give it to them. But this can apply to all our investment strategies. If we expect an excess return, it is important to understand who is on the other side, and why they have a reason to give it to us.
Full Interview with Ben Inker
My favorite part of hosting a podcast has been having an opportunity to talk to great investors and to try to learn from them. Asking this simple question has provided an opportunity to get at the heart of some of the most important lessons they have learned.
Jack Forehand is Co-Founder and President at Validea Capital. He is also a partner at Validea.com and co-authored “The Guru Investor: How to Beat the Market Using History’s Best Investment Strategies”. Jack holds the Chartered Financial Analyst designation from the CFA Institute. Follow him on Twitter at @practicalquant.