Evan Barnard: Welcome to “The Investor Coaching Show.” This is Evan Barnard and Dan Hill in. We are covering for Paul Winkler, who is taking a very well-deserved 4th of July vacation. I think he’s taken one vacation in the last three years.
The Value of Experience
Dan and I work in the Cool Springs and Columbia and Dickson offices, just to introduce ourselves there. And we’re looking forward to a great show. Dan, and a lot of times we get technical on the show, which is a good thing because we invest based on evidence for our clients.
We invest based on evidence.
There’s a difference between handing someone a book and saying, “Here, read this about investing,” or, “Here, read this about Israel,” and having someone there that’s been there, that’s lived that, that really understands the stories behind it and can make it come alive.
When we’re talking to clients, how do you view that as opposed to, we’re not just teaching, but we’re helping them really experience investing in a new way.
Dan Hill: Yeah, so kind of what you said earlier, is that keeping it from Wall Street down on Main Street. I was just taking some notes as you were doing the intro, there’s kind of a disconnect between the actual returns of the market because of Wall Street, in reality of what’s going on in our economy.
Now I know Nashville because of my brother’s business, which is real estate, is a hot market. I think we all know that because we live here, it’s a little bit different from other markets. We were the third-fastest growing economy a few years ago, I don’t know where we’re at now. And a lot of people are moving here.
And look out there, if there’s traffic and whatever, things are good. When you don’t see traffic, you don’t see a line at McDonald’s or Starbucks, you don’t see cranes, then we have an issue.
EB: Exactly. And so coming back to this being a guide, is there is a difference between thinking you know about investing. And maybe you do know some stuff about investing. We work with a lot of educated clients, they’ve done some studying. Very few people are just starting out.
Although, it’s fun, we’re starting to have a lot of clients, 18, 19, 20, that are getting started on the right track. It’s going to be exciting to see where they end up 40 years from now. But just because you have some knowledge doesn’t mean you can understand the history behind it or the emotions that go with investing and some things like that.
The Power of Metrics
And so there was another item that jumped out at me, thinking about the movie Moneyball, and how is this going to tie in to investing? And I know you’re a baseball fan and coached baseball for years, but there’s this scene early on in the show, I won’t ruin the entire movie for you if you haven’t seen it, where all these baseball scouts are in a room and they’re talking with the general manager about, “Okay, who are we going to try to draft or recruit for the team?” And you’ll probably laugh at some of my sports terms, so you can clean this up if I get too far afield.
I’m more on the military side, you’ve got more of the athletic side. And so these scouts are talking about, “Well, so and so, he’s got troubles at home and well, this person, he’s a southpaw and we need a southpaw. And well, this person, he’s going to be a number one draft pick and he’s got a drinking problem,” whatever. But they all have these stories about why they think this particular player is going to be good for the team or bad for the team. And it’s all opinion. They’re all trying to predict the future.
Predicting the future is futile.
And so the general manager at one point kind of slams his clipboard on the table or something, and basically says, “You guys are just all full of it, because you don’t know how players are going to turn out. You’ve been scouting this way for years. You’ve had some players that worked, you’ve had some players that didn’t do well. And so we are now going to manage this team using data.”
He has this Yale grad that has crunched the numbers on baseball, and they totally change how they’re going to build the Oakland A’s, using historical data of how the players actually perform.
And here I would be crossing a party line, I am referencing past performance, but I’m really focusing on the evidence that was available of, “Okay, this person got on base,” or, “This person got X amount of hits.” And not just that he was tall, he was short, etc. And it turns out that the team did quite well, and he really revolutionized the game.
Separate Good Advice from Bad Advice
DH: Yeah. But what you were saying kind of revolutionized it. And also, it just expanded, now where they kind of invented some new metrics and now there’s even more metrics that they look at.
And where you’re right, like we say, past performance is not indicative of future results. It might be good for restaurants and it might be good for baseball and other sports, but it’s not good for investing.
EB: For stock picking.
DH: Because it’s pure random luck. But yeah, so it’s a crazy thing and it seems to work. I still watch a lot of baseball as I’m sitting at my desk at night. And since you brought it up, I used to be a big fan of Cincinnati Reds, it’s the Big Red Machine. It’s hard now because teams change so much, based on these stats.
Investing principles are actually relatively easy to understand.
Where we spend a lot of time with clients is creating an analogies that just help resonate. You may never want to really understand the nuts and bolts of the intricacies of maintaining a portfolio, when to rebalance and so forth, and we’ll be talking about that. But we want to teach general principles because there is so much disinformation and wrong information that’s out there, that you really need to be prepared to know how to separate good advice from bad advice.
I mean, if anything, the 24-hour news cycle, telephones, iPads, there’s just messages being thrown at you constantly. And what was it this past week? The Supreme Court weighed in with the government in stifling free speech. And this is not to make a political statement, it’s all going to be out there. Free speech means I have to really pay attention to what I’m listening to. I don’t want to just take everything at face value.
Peace of Mind
And so that’s I think where the strength of having a guide that’s been in the land, an investor coach that’s been doing that for a long amount of time and can explain it to you so you understand it, so that you can just go live your life.
EB: That’s right. So to close this little segment, it is important that you work with someone on the investing side that has been there. You don’t really want to do it on your own, but you do want to understand it to get the most out of that, because at the end of the day, you care about your own money more than anyone will care about it.
As a firm, we’re set apart from the rest.
We love our clients, we care about our clients, but you’re the one opening the statement and you’re the one writing checks, sending your child to school or paying for a wedding or something like that. And so you want to have peace of mind around that. And having that great relationship and understanding it I think is one of the things that really sets us apart as a firm.
Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.
