Episodes
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 18: Black Swans and Fat Tails.
LEARNING: Never treat the unlikely as impossible. Diversify your portfolio to withstand black swans.
“If you build a portfolio that can withstand the black swans and is highly diversified, then psychological or economic events won’t force you to sell.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 18: Black Swans and Fat Tails.
Chapter 18: Black Swans and Fat TailsIn this chapter, Larry explains the importance of never treating the unlikely as impossible and ensuring your plan includes the near certainty that black swan events will appear. Thus, your plan should consider their risks and how to address them.
Understanding the risk of fat tailsIn terms of investing, Larry says, fat tails are distributions in which very low and high values are more frequent than a normal distribution predicts. In a normal distribution, the tails to the extreme left and extreme right of the mean become smaller, ultimately reaching zero occurrences.
However, the historical evidence on stock returns is that they demonstrate occurrences of low and high values that are far greater than theoretically expected by a normal distribution. Thus, understanding the risk of fat tails is essential to developing an appropriate asset allocation and investment plan. Unfortunately, Larry notes, many investors fail to account for the risks of fat tails.
History of the black swansWith the publication of Nassim Nicholas Taleb’s 2001 book Fooled by Randomness, the term black swan became part of the investment vernacular—virtually synonymous with the term fat tail. In his second book, The Black Swan, published in 2007, Taleb called a black swan an event with three attributes:
It is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility.It carries an extreme impact.Despite its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.Taleb went on further to show that stock returns have big fat tails. Their distribution of returns is not normally distributed, and fat tails mean that what people think are unlikely events are much more likely to occur than people believe will.
To illustrate this, Larry uses an example: if you take stock returns, and in the last 100 years, you cut out one best month per year, which is 1% of the...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 17: There is Only One Way to See Things Rightly.
LEARNING: Consider the overall impact of investments rather than focusing on individual metrics.
"There is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant."Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 17: There is Only One Way to See Things Rightly.
Chapter 17: There is Only One Way to See Things RightlyIn this chapter, Larry enlightens us on the benefits of considering the overall impact of investments rather than focusing on individual metrics. This holistic approach empowers investors and advisors to make more informed decisions.
Don’t view an asset class’s returns and risk in isolationA common mistake that investors and even professional advisors often make is viewing an asset class’s returns and risk in isolation. Larry emphasizes this point by giving the example of Vanguard’s popular index funds, the largest index funds in their respective categories, to make us all more cautious and aware of the potential pitfalls of this approach.
From 1998 through 2022, the Vanguard 500 Index Fund (VFINX) returned 7.53% per annum, outperforming Vanguard’s Emerging Markets Index Fund (VEIEX), which returned 6.14% per annum. VFINX also experienced lower volatility of 15.7% versus 22.6% for VEIEX. The result was that VFINX produced a much higher Sharpe ratio (risk-adjusted return measure) of 0.43 versus 0.30 for VEIEX.
Why more volatile emerging markets have a higher returnAccording to Larry, despite including an allocation to the lower returning and more volatile VEIEX, a portfolio of 90% VFINX/10% VEIEX, rebalanced annually, would have outperformed, returning 7.59%. And it did so while also producing the same Sharpe ratio of 0.43. Perhaps surprisingly, a 20% allocation to VEIEX would have done even better, returning 7.61% with a 0.43 Sharpe ratio.
Even a 30% allocation to VEIEX would have returned 7.59%, higher than the 7.53% return of VFINX (though the Sharpe ratio would have fallen slightly to 0.42 from 0.43). The portfolios that included an allocation to the lower-returning and more volatile emerging markets benefited from the imperfect correlation of returns (0.77) between the S&P 500 Index and the MSCI Emerging Markets Index.
The right way to build a portfolioLarry says there is only one right way to build a portfolio—by recognizing that the risk and return of any asset class by itself should be irrelevant. The only thing that should matter is considering how adding an asset class impacts the risk and return of the entire...
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Quick takeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 16: All Crystal Balls are Cloudy.
LEARNING: Estimated return is not always inevitable.
“If returns are negative early on, don’t withdraw large amounts because when the market eventually recovers, you won’t have that money to earn your returns.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 16: All Crystal Balls are Cloudy.
Chapter 16: All crystal balls are cloudyIn this chapter, Larry illustrates why past returns are not crystal balls that predict future returns.
According to Larry, the problem with all forecasts that deal with estimations of probabilities is that people tend to think of them in a deterministic way. He says that as an investor, you should think about returns with the idea that distribution and estimate are only the middle points.
Your plan has to be prepared for either the good tail to show up, which is easy to deal with and usually will allow you to take chips off the table and reduce your risk because you’ll be well ahead of your goal. But if the bad tail shows up, you may have to either work longer, plan on saving more, or rebalance, which means buying stocks at a tough time.
The threat of sequence riskTo demonstrate the danger of sequence risk, Larry asks us to imagine it’s 1973, and stocks have returned 8% in real terms and 10% in nominal returns. We’ve had similar results over the next 50 years. Say an investor in that time frame decides to withdraw 7% yearly from their portfolio in real terms because they know with their clear crystal ball that they will get 8% for the next 50 years.
This means if they take out, say, $100,000 in the first year, and inflation is 3%, to keep their actual spending the same, they have to take out $103,000. According to Larry, this investor will be bankrupt within 10 years due to the sequence of returns, which is the order in which the returns occur, not the returns themselves.
As you can see in the table below, despite providing an 8.7% per annum real return over the 27 years, because the S&P 500 Index declined by more than 37% from January 1973 through December 1974, withdrawing an inflation-adjusted 7% per annum in the portfolio caused it to be depleted by the end of 1982—in just 10 years! (Note that from January 1973 through October 1974, when the bear market ended, the...
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BIO: Damon Pistulka, co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits.
STORY: Damon explains his journey into understanding technology and its role in business growth.
LEARNING: Stay informed and adapt to changing industry trends. Adapt to changing customer expectations and preferences.
“The simple things we can do with technology today make the customer experience so much better.”Damon Pistulka
Guest profileDamon Pistulka, co-founder of Exit Your Way, is known for his hands-on, practical approach to helping business owners maximize value and achieve successful exits. With over 20 years of experience, Damon is dedicated to transforming businesses, enhancing profitability, and helping founders create lasting legacies.
Technology is your business allyIn today’s episode, Damon, who previously appeared on the podcast on episode Ep649: Be Careful of Concentration Risk, discusses the value of technology in running a business. He emphasizes the importance of robotic process automation, CRMs, and AI in modern business operations to accelerate value. In his opinion, technology allows businesses to do simple things that improve customer experience.
Damon highlights a couple of threats businesses face today that could be dealt with by adopting technology.
Rapid innovation is outpacing businesses. Those lagging behind will be overtaken by competitors who have adopted new technologies.Aging workforce with limited new talent. There’s an aging workforce and limited new talent. As more people retire, businesses increasingly find it hard to replace the retirees with educated and qualified people.Customers now expect top-tier service levels. Buyers are now demanding businesses provide instant feedback and real-time updates. Businesses that don’t meet customer expectations will not stay competitive.
Using technology to deal with the threatsDamon explains his approach to helping clients develop business growth strategies. He emphasizes the importance of starting with small, manageable changes and gradually scaling up.
Damon cautions entrepreneurs from trying to do it all. Instead, he advises starting with simple, practical changes, often referred to as ‘low-hanging fruits’—these are the tasks or opportunities that are the easiest to achieve and provide the quickest benefits. Gradually, as these are implemented, more complex systems can be adopted.
Seek out experts who can help you advanceFurther, Damon advises seeking out experts who can help you advance in the particular area you’re focusing on. Then, work your way up as you get your company, your people, and your supplier base comfortable with these changes.
Get educated before adopting new technologyDamon also underscores the importance of getting educated before adopting new technology. He advises becoming familiar and comfortable enough with it to try it, enabling you to identify potential areas where the technology could help your business.
This approach instills a sense of preparedness and confidence. Then, he suggests hiring an expert to help you implement your new technologies and strategies.
Move fastAnother way to deal with the business threats is to move fast. Damon says that speed sells, and businesses must adopt a speed and...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 15: Individual Stocks Are Riskier Than Investors Believe.
LEARNING: Don’t invest in individual stocks. Instead, diversify your portfolio to reduce your risk.
“Diversification has been said to be the only free lunch in investing. Unfortunately, most investors fail to use the full buffet available.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 15: Individual Stocks Are Riskier Than Investors Believe.
Chapter 15: Individual Stocks Are Riskier Than Investors BelieveIn this chapter, Larry reveals the stark reality of investing in individual stocks, highlighting the significant risks involved. His aim is to help investors understand the potential pitfalls of this high-stakes game and why they should avoid it.
Given the apparent benefits of diversification, it’s baffling why investors don’t hold highly diversified portfolios. According to Larry, one reason is that most investors likely don’t understand how risky individual stocks are compared to owning a broad selection of hundreds or thousands of stocks.
Evidence that individual stocks are very riskyLarry notes that the stock market has returned roughly 10% per year over the last 100 years, and the standard deviation on an annual basis of a portfolio of a broad market of stocks has been about 20%. He observes that most people don’t understand that the average individual stock has a standard deviation of more than twice that.
In another study from 1983 to 2006 that covered the top 3,000 stocks, the stock market returned almost 13% per annum, but the median return was just 5.1%, nearly 8% below the market’s return. The mean annualized return was -1.1%. This means that if you randomly pick one stock, the odds would say you’re more likely to get -1.1%. However, if you own hundreds or thousands of stocks, the odds are in your favor, and you’ll get very close to that mean return.
Larry shares another stark example of the riskiness of individual stocks. Despite the 1990s being one of the greatest bull markets of all time, with the Russell 3000 providing an annualized return of 17.7% and a cumulative return of almost 410%, 22% of the 2,397 U.S. stocks in existence throughout the decade had negative absolute returns. This means they underperformed by at least 410%. Over the decade, inflation was a cumulative 33.5%, meaning they lost at least 33.5% in real terms.
In another study by Hendrik Bessembinder of all common stocks listed on the NYSE, Amex, and NASDAQ exchanges from 1926 through 2015 and
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BIO: Ava Benesocky is an author, public speaker, educator, CEO, and Co-Founder of CPI Capital, a uniquely innovative real estate private equity firm that helps investors invest in multifamily assets.
STORY: Ava became passionate about real estate when she was young. At 15, she convinced her parents to invest $13,000 in a course by Scott McGillivray on renovating and selling homes. Ava never did anything with the course, which made it the worst investment ever.
LEARNING: If you invest in anything, ensure you’re ready to be committed, take action, and focus completely on it. Beware of shiny object syndrome.
“If you’re ever going to invest in something, you have to take action, or else it’s a total waste of time and money. And what’s the point?”Ava Benesocky
Guest profileAva Benesocky is an author, public speaker, educator, CEO, and Co-Founder of CPI Capital, a uniquely innovative real estate private equity firm that helps investors invest in multifamily assets.
She is the Host of Real Estate Investing Demystified with August Biniaz, who was Ep 784.
Ava has been featured in publications such as Forbes, Yahoo Finance, and numerous PodCasts and YouTube shows. Ava helps busy professionals earn passive income through Multifamily Real Estate investments.
Worst investment everAva became passionate about real estate when she was young. At 15, she convinced her parents to invest $13,000 in a course by Scott McGillivray on renovating and selling homes. Ava never did anything with the course, which made it the worst investment ever.
She tried to get it started, but there were so many moving components, and the process was so convoluted that she got scared. It all fell through the cracks. Ava never ended up taking action on it.
Lessons learnedIf you invest in anything, ensure you’re ready to be committed, take action, and focus completely on it.Beware of shiny object syndrome.
Andrew’s takeawaysEmbrace boring, dull, consistent, and regular assets.Before buying a course, ask yourself if you have the time to commit to it or if it is better to get someone to help you achieve what you could if you took the course.
Actionable adviceRefrain from being impulsive when buying courses. Take your time and ask yourself if you have time for it. Can you block it off on your calendar? If not, do not get it.
Ava’s recommendationsAva recommends listening to her podcast Real Estate Investing Demystified, where she shares her personal experiences, interviews industry experts, and provides advice on real estate investing and other investment opportunities.
No.1 goal for the next 12 monthsAva’s number one goal for the next 12 months is to continue building a couple of departments in the company and closing on a couple more assets. On a personal level, she will continue taking care of her mind, body, and family.
Parting words
“Thank you so much for letting me be -
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 14: Stocks Are Risky No Matter How Long the Horizon.
LEARNING: Stocks are risky no matter the length of your investment horizon
“Investors should never take more risk than is appropriate to their personal situation.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 14: Stocks Are Risky No Matter How Long the Horizon.
Chapter 14: Stocks Are Risky No Matter How Long the HorizonIn this chapter, Larry illustrates why stocks are risky no matter how long the investment horizon is.
According to Larry, the claim that stocks are not risky if one’s horizon is long is based on just one set of data (the U.S.) for one period (albeit a long one). It could be that the results were due to a ‘lucky draw.’ In other words, if stocks are only risky when one’s horizon is short, we should see evidence of this in other markets. Unfortunately, investors in many different markets did not receive the kind of returns U.S. investors did.
Historical examples of stock market risksLarry presents evidence from several markets, reinforcing the historical data that stocks are also risky over the long term.
First, Larry looks at U.S. equity returns 20 years back from 1949. The S&P 500 Index had returned 3.1 percent per year, underperforming long-term government bonds by 0.8 percent per year—so much for the argument that stocks always beat bonds if the horizon is 20 years or more.
In 1900, the Egyptian stock market was the fifth largest in the world, attracting significant capital inflows from global investors. However, those investors are still waiting for the return ON their capital, let alone the return OF their capital.
In the 1880s, two promising countries in the Western Hemisphere received capital inflows from Europe for development purposes: the U.S. and Argentina. One group of long-term investors was well rewarded, while the other was not.
Finally, in December 1989, the Nikkei index reached an intraday all-time high of 38,957. From 1990 through 2022, Japanese large-cap stocks (MSCI/Nomura) returned just 0.2 percent a year—a total return of just 6 percent. Considering cumulative inflation over the period was about 15 percent, Japanese large-cap stocks lost about 9 percent in real terms over the 33 years.
Taking the risk of equity ownershipLarry notes that the most crucial lesson investors need to learn from this evidence is that while it is true that the longer your investment horizon, the greater your ability to take the risk of investing in stocks (because you have a greater ability to wait out a bear market without having to sell to raise capital), stocks are risky no matter the length of your...
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BIO: Pritesh Ruparel is the CEO of ALT21, a leading tech company in hedging and currency solutions.
STORY: Pritesh found a good trade and invested 100% in it. His manager later advised him to liquidate that position because it was too concentrated. A day after Pritesh liquidated, a natural disaster occurred, and the spread went from $10 to $250 in an hour.
LEARNING: Put yourself in a position to get lucky. Never decide against your gut. Stay grounded between the highs and the lows.
“The worst thing you can do is to trade on something or to make a decision that you don’t 100% agree with.”Pritesh Ruparel
Guest profilePritesh Ruparel is the CEO of ALT21, a leading tech company in hedging and currency solutions. With two decades of expertise in financial derivatives and structured finance, he leverages technology to make financial products accessible and affordable, aiming to save small and medium-sized enterprises (SMEs) millions annually on international transactions.
Worst investment everPritesh’s first trading role was as a market maker in commodity relatives. One summer, he put a ton of analysis into a particular commodity spread trade. Pritesh thought the risk-to-reward looked good, but the trade was not doing anything. Nobody was marking the trade. Pritesh thought this was insane, so he went all in. He had the biggest position possible in that trade and it was 100% of his portfolio.
A manager advised Pritesh to liquidate the position because it was too concentrated. A day after Pritesh liquidated, a natural disaster occurred. The position benefited from this disaster and went from $10 to $250 in an hour. Unfortunately, Pritesh could have earned so much if only he had not liquidated.
Lessons learnedPut yourself in a position to get lucky.When you start any role, listen, learn as much as possible, and take advice.Never decide against your gut.Never make a decision that you don’t agree with 100%.
Actionable adviceStay grounded between the highs and the lows. Ultimately, you’ll be fine if you make decisions that align with what you believe in. This can give you a sense of confidence and conviction in your decisions.
Pritesh’s recommendationsPritesh recommends building systems, processes, or resources that suit your risk appetite, emotional intelligence, and patience. This can enhance your decision-making and risk management, as it aligns with your personal attributes.
No.1 goal for the next 12 monthsPritesh’s number one goal for the next 12 months is to have repeatable, scalable processes for his go-to-market and use that to make an impact globally.
Parting words
“Remember, it’s a marathon, not a sprint.”Pritesh Ruparel[spp-transcript]
Connect with Pritesh RuparelLinkedInWebsite
Andrew’s booksHow to Start Building Your Wealth Investing in the Stock Market -
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 13: Between a Rock and a Hard Place.
LEARNING: Past performance is not a strong predictor of future performance.
“If you must invest actively, find active funds that design their strategies more intelligently to take advantage of the problems and at least avoid pitfalls.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 13: Between a Rock and a Hard Place.
Chapter 13: Between a Rock and a Hard PlaceIn this chapter, Larry illustrates why past performance is not a strong predictor of future performance.
Academic research has found that prominent financial advisors, investment policy committees, and pension and retirement plans engage top academic practitioners to help them identify future managers who will outperform the market. Such entities only hire managers with a track record of outperforming. They analyze their performance to see if it is statistically significant.
However, research also shows that, on average, the active managers chosen based on outstanding track records have failed to live up to expectations. The underperformance relative to passive benchmarks invariably leads decision-makers to fire the active manager. And the process begins anew.
A new round of due diligence is performed, and a new manager is selected to replace the poorly performing one. And, almost invariably, the process is repeated a few years later. So whenever pension plans interview Larry and he notices this hiring pattern, he always asks them what their hiring process is and what they’re doing differently this time since, you know, the same process failed persistently, causing regular turnover of managers. Nobody has ever answered that question.
According to Larry, many individual investors go through the same motions of picking a manager and end up with the same results—a high likelihood of poor performance.
Doing the same thing over and over expecting a different result is insanityLarry observes that the conventional wisdom that past performance is a strong predictor of future performance is so firmly ingrained in our culture that it seems almost no one stops to ask if it is correct, even in the face of persistent failure. Larry wonders why investors aren’t asking themselves: “If the process I used to choose a manager that would deliver outperformance failed, and I use the same process the next time, why should I expect anything but failure the next time?”
The answer is painfully apparent. If you don’t do anything different, you should expect the same result. Yet, so many investors do not ask this simple question.
Larry insists that it is essential to understand that neither the purveyors of active...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 12: Outfoxing the Box.
LEARNING: You don’t have to engage in active investing; instead, accept market returns by investing passively.
“You don’t have to play the game of active investing. You don’t have to try to overcome abysmal odds—odds that make the crap tables at Las Vegas seem appealing. Instead, you can outfox the box and accept market returns by investing passively.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 12: Outfoxing the Box.
Chapter 12: Outfoxing the BoxIn this chapter, Larry aims to guide investors toward a winning investment strategy: accepting market returns. He uses Bill Schultheis’s “Outfoxing the Box.” This is a simple game that you can choose to either play or not play. The box contains nine percentages, each representing a rate of return your financial assets are guaranteed to earn for the rest of your life.
As an investor, you have the following choice: Accept the 10 percent rate of return in the center box or be asked to leave the room. The boxes will be shuffled around, and you will have to choose a box, not knowing what return each box holds. You quickly calculate that the average return of the other eight boxes is 10 percent.
Thus, if thousands of people played the game and each chose a box, the expected average return would be the same as if they all decided not to play. Of course, some would earn a return of negative 3 percent per annum, while others would earn 23 percent. This is like the world of investing: if you choose an actively managed fund and the market returns 10 percent, you might be lucky and earn as much as 23 percent per annum, or you might be unlucky and lose 3 percent per annum. A rational risk-averse investor should logically decide to “outfox the box” and accept the average (market) return of 10 percent.
In all the years Larry has been an investment advisor, whenever he presents this game to an investor, not once has an investor chosen to play. Everyone decides to accept par or 10 percent. While they might be willing to spend a dollar on a lottery ticket, they become more prudent in their choice when it comes to investing their life’s savings.
Active investing is a loser’s gameActive investing is a game with low odds of success that many would consider a losing battle. It’s a game that, when compared to the ‘outfoxing the box’ game, seems like a futile endeavor. Larry’s advice is to avoid this game altogether.
In the “outfoxing the box” game, the average return of all choices was the same 10 percent as the 10 percent that would have been earned by choosing not to play. And 50 percent of those choosing to play would be expected to...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 11: The Demon of Chance.
LEARNING: Don’t always attribute skill to success, sometimes it could be just luck.
“Just because there is a correlation doesn’t mean causation. You must be careful not to attribute skill and not luck to success.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 11: The Demon of Chance.
Chapter 11: The Demon of ChanceIn this chapter, Larry discusses why investors confuse skill with what he calls “the demon of luck,” a term he uses to describe the random and unpredictable nature of market outcomes.
Larry cautions that before concluding that because an investment strategy worked in the past, it will work in the future, investors should be aware of the uncertainty and ask if there is a rational explanation for the correlation between the outcome and strategy.
According to Larry, the assumption is that while short-term outperformance might be a matter of luck, long-term outperformance must be evidence of skill. However, a basic knowledge of statistics is crucial in understanding that with thousands of money managers playing the game, the odds are that a few, not just one, will produce a long-term performance record.
Today, there are more mutual funds than there are stocks. With so many active managers trying to win, statistical theory shows that it’s expected that some will likely outperform the market. However, beating the market is a zero-sum game before expenses since someone must own all stocks. And, if some group of active managers outperforms the market, there must be another group that underperforms. Therefore, the odds of any specific active manager being successful are, at best, 50/50 (before considering the burden of higher expenses active managers must overcome to outperform a benchmark index fund).
Skill or “the demon of luck?From probability, it’s expected that randomly, half the active managers would outperform in any one year, about one in four to outperform two years in a row, and one in eight to do so three years in a row. Fund managers who outperform for even three years in a row are often declared to be gurus by the financial media. But are they gurus, or is it just luck? According to Larry, it is hard to tell the difference between the two. Without this knowledge of statistics investors are likely to confuse skill with “the demon of luck.”
Bill Miller, the Legg Mason Value Trust manager, was acclaimed as the next Peter Lynch. He managed to do what no current manager has done—beat the S&P 500 Index 15 years in a row (1991–2005). Indeed, that could be luck. You can’t rely on that performance as a predictor of future greatness. Larry turns to academic...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 10: When Even the Best Aren’t Likely to Win the Game.
LEARNING: Refrain from the futile pursuit of trying to beat the market.
“Only play the game of active management if you can truly identify an advantage you have, like inside information, but you have to be careful because it’s illegal to trade on it. Also, play only if you place a very high value on the entertainment.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 10: When Even the Best Aren’t Likely to Win the Game.
Chapter 10: When Even the Best Aren’t Likely to Win the GameIn this chapter, Larry illustrates why individual investors should refrain from the futile pursuit of trying to beat the market.
It seems logical to believe that if anyone could beat the market, it would be the pension plans of the largest U.S. companies. Larry lists a few reasons this is a reasonable assumption:
These pension plans control large sums of money. They have access to the best and brightest portfolio managers, each clamoring to manage the billions of dollars in these plans (and earn hefty fees). Pension plans can also invest with managers that most individuals don’t have access to because they don’t have sufficient assets to meet the minimums of these superstar managers.Pension plans always hire managers with a track record of outperforming their benchmarks or, at the very least, matching them. Not the ones with a record of underperformance.Additionally, pension plans will always choose the manager who makes an excellent presentation, explaining why they succeeded and would continue to succeed.Many, if not the majority, of these pension plans hire professional consultants such as Frank Russell, SEI, and Goldman Sachs to help them perform due diligence in interviewing, screening, and ultimately selecting the very best of the best. These consultants have considered every conceivable screen to find the best fund managers, such as performance records, management tenure, depth of staff, consistency of performance (to make sure that a long-term record is not the result of one or two lucky years), performance in bear markets, consistency of implementation of strategy, turnover, costs, etc. It is unlikely that there is something that you or your financial advisor would think of that they had not already considered.As individuals, we rarely have the luxury of personally interviewing money managers and performing as thorough a due diligence as these consultants. We generally do not have professionals helping us avoid mistakes in the process.The fees they pay for active management are typically lower than the fees individual investors... -
BIO: Andrew Pek is a co-founder of Amiko XR Inc., a groundbreaking company that leverages VR and AI technologies to create immersive, personalized learning experiences available 24/7.
STORY: Andrew shared his worst investment ever story on episode 376: Build Revenue in Your Startup Before You Build Up Cost. Today, he discusses his new business.
LEARNING: Learning can be more immersive, sparking curiosity and excitement.
“Thank you so much, Andrew, for having me on your podcast. It’s great to see you. I am excited about the future.”Andrew Pek
Guest profileAndrew Pek is a co-founder of Amiko XR Inc., a groundbreaking company that leverages VR and AI technologies to create immersive, personalized learning experiences available 24/7. He is a recognized C-Suite advisor on innovation and human transformation. Andrew’s insights on leadership and design thinking have been featured in prominent media outlets such as ABC, NBC, Forbes, and Entrepreneur.
Andrew shared his worst investment ever story on episode 376: Build Revenue in Your Startup Before You Build Up Cost. Today, he discusses his new business.
Worst investment everMuch of Andrew’s work has involved teaching leadership, innovation, product design, and business development skills. He’s always seeking new ways that technology can engage people to absorb learning and become more engaged—not just a boring, traditional training program, but something that would really involve learners in a more immersive way, sparking their curiosity and excitement.
Andrew and his team successfully prototyped a solution in which learners get an immersive learning experience through a headset and talk to a coach avatar who can teach just about anything.
So, if you’re interested in finance, investing, sales, leadership, career preparation, and just about any topic matter, you’ll find it on the app. This includes job-related skills, general management and leadership courses, and personal development topics.
You can obtain information at your fingertips through generative AI and large language models. What sets the application apart is the combination of artificial intelligence and a VR experience. Through simulations, role plays, or evaluation, learners can master any particular topic or get support in any particular challenge. Unlike mobile device applications, VR experiences significantly reduce distractions, leading to more focused and practical engagement.
The solution is also unique because it is curated and configured to the expert level. You teach the avatar, and the avatar then teaches others. It ingests your content to become a master in your subject and attain the same level of intelligence as you.
Learners who use the solution talk to someone as if they’re talking to you in an interactive, dynamic environment. If something is unclear or learners want to probe further or even get additional guidance or resources, the solution will facilitate that. Learners get videos and information transcripts and don’t have to take notes.
Andrew’s solution is a smart choice for mid-to-large-sized corporations or even smaller corporations that can’t afford expensive training or trainers. It’s a cost-effective solution for those looking to provide any training, such as onboarding new employees. Employees can use the application on an ongoing basis to access courses specific to their...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 09: The Fed Model and the Money Illusion.
LEARNING: Just because there is a correlation doesn’t mean that there’s causation.
“Just because there is a correlation doesn’t mean that there’s causation. The mere existence of a correlation doesn’t necessarily give it predictive value.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 09: The Fed Model and the Money Illusion.
Chapter 09: The Fed Model and the Money IllusionIn this chapter, Larry illustrates why the Fed Model should not be used to determine whether the market is at fair value and that the E/P ratio is a much better predictor of future real returns.
The FED modelThe stock and bond markets are filled with wrongheaded data mining. David Leinweber of First Quadrant famously illustrated this point with what he called “stupid data miner tricks.”
Leinweber sifted through a United Nations CD-ROM and discovered the single best predictor of the S&P 500 Index had been butter production in Bangladesh. His example perfectly illustrates that a correlation’s mere existence doesn’t necessarily give it predictive value. Some logical reason for the correlation is required for it to have credibility. Without a logical reason, the correlation is just a mere illusion.
According to Larry, the “money illusion” has the potential to create investment mistakes. It relates to one of the most popular indicators used by investors to determine whether the market is under or overvalued—what is known as “the Fed Model.”
The Federal Reserve was using the Fed model to determine if the market was fairly valued and how attractive stocks were priced relative to bonds. Using the “logic” that bonds and stocks are competing instruments, the model uses the yield on the 10-year Treasury bond to calculate “fair value,” comparing that rate to the earnings-price, or E/P, ratio (the inverse of the popular price-to-earnings, or P/E, ratio).
Larry points out two major problems with the Fed Model. The first relates to how the model is used by many investors. Edward Yardeni, at the time a market strategist for Morgan, Grenfell & Co. speculated that the Federal Reserve used the model to compare the valuation of stocks relative to bonds as competing instruments.
The model says nothing about absolute expected returns. Thus, stocks, using the Fed Model, might be priced under fair value relative to bonds, and they can have either high or low expected returns. The expected return of stocks is not determined by their relative value to bonds.
Instead, the expected real return is determined by the current dividend yield plus the expected real growth in dividends. To get the...
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BIO: Pavan Sukhdev’s remarkable journey from scientist to international banker to environmental economist has brought him to the forefront of the sustainability movement.
STORY: Pavan ignored his investment rules and invested in a bond, which caused him to lose almost his entire investment.
LEARNING: Don’t make exceptions; the rules are the essence. Set up concentration risk limits. Diversify.
“A lot of investment mistakes are about not following your own disciplines. Had I followed my own disciplines, I wouldn’t be telling you this story.”Pavan Sukhdev
Guest profilePavan Sukhdev’s remarkable journey from scientist to international banker to environmental economist has brought him to the forefront of the sustainability movement. As CEO and Founder of GIST Impact, he collaborates with corporations and investors, leveraging impact economics and technology to measure a business’s holistic value contribution to the world.
Worst investment everPavan is a relatively disciplined investor who always tries to maintain his money’s principal value by investing it wisely. For this reason, Pavan follows a couple of personal investment rules.
First, wherever he invests, he either makes friends or has friends. Second, Pavan follows a strict logic when investing in financial assets—he only invests in sovereign bonds. Third, Pavan has set up a concentration risk limit of $100,000 for a single sovereign emerging market. He never invests more than $50,000 on a credit. Fourth, Pavan always reads about the company he wants to invest in to understand what it does and its credit rating. Fifth, Pavan typically invests in sectors where he would be above average in reading and knowledge about that company.
Once, a friend came along and asked Pavan if he knew of a particular company with a bond earning 8.75%. Pavan hadn’t heard about it. But he happened to know the family that owned it, and he was interested in it. Pavan decided to invest $100,000 instead of putting his maximum concentration of $50,000.
As part of his investment strategy, Pavan reads about companies. A news flash said that the company was involved in a contract in Malaysia. Pavan thought this was great, but that was that.
He never followed up on the news. It happens that the company lost the contract. Losing the contract was a big thing that caused the bond price to go down to $75 from $88. At this point, Pavan should have reduced his exposure by bringing the $100,000 down to $50,000, but he didn’t. He continued to sit on the losses and hung on, and the price kept dropping. Finally, at some point, when it was just too low for it to make any difference, the company stopped paying coupons.
Lessons learnedDon’t make exceptions; the rules are the essence.Set up concentration risk limits and reflect the volatility of that asset.DiversifyDon’t sit on losses.
Andrew’s takeawaysFollow and stick to a stop-loss system.Don’t buy something just because you’ve sold something else.
Actionable adviceSet your concentration risk limits, put your trading style in place, and diversify.
No.1 goal for the next 12 monthsPavan’s number one goal for the next 12 months is to get his company profitable because it’s nice to be right, but it’s better to be profitable.
Parting words
“All the best, guys. Invest wisely and invest well, and when it works, do... -
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 08: Be Careful What You Ask For.
LEARNING: High growth rates don’t always mean high stock returns.
“Emerging markets are very much like the rest of the world’s capital markets—they do an excellent job of reflecting economic growth prospects into stock prices.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 08: Be Careful What You Ask For.
Chapter 08: Be Careful What You Ask ForIn this chapter, Larry cautions people to be careful what they wish for in investing. He emphasizes the daunting challenge of active management, a path many choose in the belief that they can accurately forecast market trends.
However, as Larry points out, the reality is far from this ideal. The unpredictability of the market makes it almost impossible to predict with 100% accuracy, a fact that investors should be acutely aware of.
High growth rates don’t always mean high stock returnsIt’s important to note that high growth rates don’t always translate into high stock returns, underscoring the unpredictability of market outcomes. According to Larry, for today’s investors, the equivalent of the “Midas touch” (the king who turned everything he touched into gold) might be the ability to forecast economic growth rates.
If investors could forecast with 100% certainty which countries would have the highest growth rates, they could invest in them and avoid those with low growth rates. This would lead to abnormal profits—or, perhaps not.
Nobody can predict with that accuracy. Even if one could make such a prediction, they may still not make the profits they think they will. This is because, as Larry explains, experts have found that there has been a slightly negative correlation between country growth rates and stock returns.
A 2006 study on emerging markets by Jim Davis of Dimensional Fund Advisors found that the high-growth countries from 1990 to 2005 returned 16.4%, and the low-growth countries returned the same 16.4%.
Such evidence has led Larry to conclude that it doesn’t matter if you can even forecast which countries will have high growth rates; the market will make the same forecast and adjust stock prices accordingly.
Therefore, to beat the market, you must be able to forecast better than the market already expects, and to do so, you need to gather information at a cost. In other words, you can’t just be smarter than the market; you have to be smarter than the market enough to overcome all your expenses of gathering information and trading costs.
Larry emphasizes that emerging markets are very much like the rest of the world’s capital markets—they do an excellent job of reflecting economic growth...
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In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 07: The Value of Security Analysis.
LEARNING: Smart investors, like smart businesspeople, care about results, not efforts.
“Smart investors, like smart businesspeople, care about results, not efforts. That is why “smart money” invests in “passively managed,” structured portfolios that invest systematically in a transparent and replicable manner.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over the 30 years to help investors as the head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 07: The Value of Security Analysis.
Chapter 07: The Value of Security AnalysisIn this chapter, Larry explains how to test the efficiency of the market by looking at how good security analysts are at predicting the future. If they can outsmart the markets, then the markets are not efficient.
Do investors who follow security analysts's recommendations outperform the market?In business, results are what matters— not effort. The same is true in investing because we cannot spend efforts, only results. The basic premise of active management is that, through their efforts, security analysts can identify and recommend undervalued stocks and avoid overvalued ones. As a result, investors who follow their recommendations will outperform the market. Is this premise myth or reality?
To answer this question, Larry relies on the robust findings of academic research in the paper Analysts and Anomalies. The authors meticulously examined the recommendations of U.S. security analysts over the period 1994 through 2017. Their findings debunk the myth of analysts' infallibility and shed light on the surprising ways analysts' predictions conflict with well-documented anomalies. They also found that buy recommendations did not predict returns, though sell recommendations did predict lower returns. Another intriguing finding was that among the group of "market" anomalies (such as momentum and idiosyncratic risk), which are based only on stock returns, price, and volume data, analysts produce more favorable recommendations and forecast higher returns among the stocks that are stronger buys according to market anomalies. This is perhaps surprising, as analysts are supposed to be experts in firms' fundamentals. Yet, they performed best with anomalies not based on accounting data.
The evidence in this academic paper suggests that analysts even contribute to mispricing, as their recommendations are systematically biased by favoring overvalued stocks according to anomaly-based composite mispricing scores. The authors concluded: "Analysts today are still overlooking a good deal of valuable, anomaly-related...
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Click here to get the PDF with all charts and graphs
Introducing emerging marketsOur FVMR frameworkFundamentals: Emerging markets are about 20% less profitableValuation: Emerging markets are about 41% cheaperAsset class and region/country allocations
Introducing emerging marketsOur FVMR framework
Fundamentals: Emerging markets are about 20% less profitableValuation: Emerging markets are about 41% cheaperUK: Cheap and high profitabilityGermany and Korea: Cheap and low profitabilityAustralia and US: Expensive but high profitability
Asset class and region/country allocationsThis isnot
a
recommendation
My next rebalance is in early SeptemberEverything could change then
This is not a recommendationMy next rebalance is in early SeptemberEverything could change then
Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 Points
Andrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your Goals
Connect with Andrew Stotz: -
BIO: Justus Hammer is the Group CEO and Co-founder of Mad Paws. Over the past two years, he has invested in over 45 startups. He has served as an advisor and early investor in Airtasker and a founding investor and advisor to VICE Golf.
STORY: Justus developed an idea to make real estate buying easier. He wanted to expand outside of Australia when COVID hit. Justus took a pause, thinking that the market would tank further. Instead, property prices doubled in the next 18 months.
LEARNING: What works in one asset class will not necessarily work in another. The real estate market dynamics are very different in each market. Timing matters, but you can never really know whether your timing is right until after.
“I don’t think there is a single truth or strategy that works for everyone. Just think about it and ask yourself what you want to achieve and what the most likely scenario is for you to get there.”Justus Hammer
Guest profileJustus Hammer is the Group CEO and Co-founder of Mad Paws. He has invested in over 45 startups over the past two years, serving as an advisor and early investor to Airtasker and a founding investor and advisor to VICE Golf. He has not only been involved in starting more than ten companies in the tech space, like Spreets and Mad Paws, but has also developed a growing interest in cash flow businesses over the past ten years.
Worst investment everJustus saw a big opportunity in the real estate space to improve and make purchasing a property easier. There’s a whole lot of angst that goes with that, and many people are very scared about the process and sometimes get it wrong. So, Justus and his company wanted to create a better way to get buyers from property A into property B.
They spent time building the idea and even had some of Australia’s biggest real estate companies backing them. In the beginning, the company was working and managed to transact around 40 properties.
But it was a tough time in Australia’s real estate market, so Justus ran into many issues. One particular issue was timing. The market was going down, so they had to buy properties, try to improve them, and sell them quickly.
They also ran into the problem of not being aggressive enough on the buying side, so they couldn’t get many properties. Still, they made money on about 60 or 70% of their properties. But they also had a couple that really killed them.
Justus believed the market would improve, so they sat through it. The market kept dropping, and they started looking for other opportunities. They began to look closer into the numbers, the unit economics, and what had been working. They realized the model was working pretty well outside Australia.
His company decided to expand into Europe, but before they did, COVID hit. COVID changed the dynamics completely. Debt facility providers pulled back and refused to give them a loan. Their real estate partners decided to figure out the situation first, believing the market value would go down. The market turned out to be the opposite, and property prices doubled in the next 18 months.
Lessons learnedWhat works in one asset class will not necessarily work in another.The real estate market dynamics are very different in the US, Europe, and Australia.You can’t have regrets in investing. You’ve got to take the good and the bad.There isn’t a single truth or strategy that works for everyone.
Andrew’s takeawaysTiming matters, but you can never really know whether your timing is right until after.Transferring a business model doesn’t -
In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 06: Market Efficiency and the Case of Pete Rose.
LEARNING: Don’t try to pick stocks or time the market.
“The evidence is very clear. The stocks retail investors buy underperform after they buy them, and the stocks they sell go on to outperform.”Larry SwedroeIn this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over the 30 years to help investors as the head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.
Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 06: Market Efficiency and the Case of Pete Rose.
Chapter 06: Market Efficiency and the Case of Pete RoseMany people have difficulty understanding why smart investors working hard cannot gain an advantage over average investors who simply accept market returns. In this chapter, Larry uses an analogy in the world of sports betting to explain why the “collective wisdom of the market” is a difficult competitor.
The case of Pete RosePete Rose was one of the greatest players in the history of baseball, finishing his career with more hits than any other player. It seems logical that Rose would have a significant advantage over other baseball bettors.
Rose had 24 years of experience as a player and four years as a manager. In addition to having inside information on his own team, as a manager, he also studied the teams he competed against. Yet, despite these advantages, Rose lost $4,200 betting on his own team, $36,000 betting on other teams in the National League, and $7,000 betting on American League games.
This reveals that if an expert like Rose, who had access to private information, could not “beat the market,” then it’s very unlikely that ordinary individuals without similar knowledge would be able to do so.
Sports betting market efficiencyLarry shares other examples of the efficiency of sports betting markets. One such example is a study covering six NBA seasons in which Professor Raymond Sauer found that the average difference between point spreads and actual point differences was astonishingly low—less than one-quarter of one point.
In horse racing, the final odds, which reflect the judgment of all bettors, reliably predict the outcome—the favorite wins most often, the second favorite is next most likely to win, and so on. This predictability of the market further emphasizes the futility of trying to exploit mispricings and the need for a more reliable investment strategy.
Larry goes on to quote James Surowiecki, author of “The Wisdom of Crowds,” who demonstrated that as long as people are acting independently (not in...
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