By Jack Forehand —
With so many great investing podcasts out there, it can be difficult to identify the best ones. Through our new Podcasts of the Week segment, I will try to help filter out the most interesting episodes and identify the podcasts I learned the most from each week. In addition, we will also take a look at a great podcast from the past via the From the Archives section.
Best Episodes This Week
This episode is technically from last week, but I just got to listen to it and it was excellent, so it is worth featuring a week late. I have been a listener to the Investors Podcast, which is hosted by Preston Pysh and Stig Brodersen, for a long time now and really enjoy their take on investing.
Despite listening to many episodes of the podcast, I didn’t know a lot about Preston’s background and what he did before he got into investing. That turns out to be a really interesting story.
Preston served multiple tours in Iraq as an attack helicopter pilot and the stories from that are not only pretty amazing on their own, but they also provide principles that relate directly to investing. It is hard to imagine how much stress piloting a helicopter in war must entail, and Preston talks about how the ability to control that stress is key to being successful. The same is true in investing, albeit on a much smaller and less important scale. His discussion of the use of after action analysis (or review) of missions also directly relates to investing. Many investors would likely be well served doing the same type of thing in an effort to not repeat mistakes.
He also highlights some great principles from his favorite book Life After Life by Raymond Moody. The title may sound a little corny, but the idea is that the author talked to many people who had near death experiences and looked for commonalities among the things they took away from them.
The three main takeaways were things I think all of us can learn from.
- We are all connected – the intention you put out in life comes back to you.
- Love is a very powerful force.
- Education is incredibly important – spend as much time as you can learning.
Whether you are a follower of the Investors Podcast or not, I recommend you listen to this interview. I think anyone can benefit from Preston’s thoughts on investing and life in general.
When it comes to quantitative and factor-based investing, my two go to resources are Cliff Asness and Rob Arnott. So when either of them does an in depth podcast interview, I always make sure to pay attention.
This interview was a little different than previous ones I have seen Rob do, and there were some useful things I hadn’t heard before.
The topic of economic weighted indexes is one that has always intrigued me. Creating an index using something like sales is a great way to weight each company’s contribution to the economy instead of just its size. And it has the added benefit of outperforming market-cap weighted indices over time. Rob spends some time talking about this approach and others that break the link with market-cap in index construction and can boost performance over time.
Factor timing is also a hot topic these days. The issue of whether you can enhance returns by adding exposure to factors that are cheap historically and reducing exposure to expensive factors has been a big focus on our internal research recently and is also something Research Affiliates has been looking at. They get into some of the details on this research on the podcast.
As I wrote about in a recent article, I am a big believer that all else being equal, simple is better in quantitative investing. Rob talks about why Research Affiliates also tries to create the simplest solution they can for any given investment approach and how that can be beneficial.
From the Archives
With Richard Thaler winning a well-deserved Nobel Prize this week, I thought it would be a great time to revisit one of the best interviews I have seen him do from Masters is Business with Barry Ritholtz.
So much of economic theory is rooted in people behaving in the ways the models suggest they should. The problem is that never happens in the real world. Richard Thaler is a leading voice in Behavioral Economics, which looks at how people actually behave and how it affects the economy, markets and investment returns.
There are so many examples of how people act in ways that are completely contrary to what economic theory would suggest. For instance, he discusses the closed end fund with the ticker CUBA on the podcast. When President Obama eased the sanctions on Cuba, this fund skyrocketed. The only problem is that it has nothing to do with Cuba. So investors saw the ticker symbol and bid up the price without bothering to look at the actual holdings.
When you manage client money, one of the first things you learn is that your most important job is to prevent clients’ behavior from adversely affecting their investment returns. This ends up having more impact on performance than the investing strategy you follow because human behavior can detract so much from returns over time. As I have looked at this problem, the research of Richard Thaler has been a great asset. If you want to learn more about how your own behavior can adversely affect the outcomes you desire to achieve, whether it be in investing or in life, I recommend you listen to this podcast and take a look at his other research and his books (highlighted below)
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Photo: Copyright: bryljaev / 123RF Stock Photo
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.