Summary:

In this episode of Courage Over Convention, Woody Wiegmann talks about the social influence con behind investment management. He argues that many financial advisors still rely on the same old passive investment strategies that may seem unique but are strikingly similar to what everyone else has. He emphasizes that the key to successful investing lies in embracing diversification and seeking strategies that serve your best interests.

Transcript:

Welcome to another episode of Courage Over Convention, a podcast aimed at challenging the cons behind conventional wisdom. Before we dive in, I want to emphasize that this podcast is not investment advice. We encourage you to do your own research and consult with a financial professional before making any investment decisions.

Today's episode is aimed at helping you avoid the social influence con behind investment management. The narrative is from a recent blog post of mine titled "𝗪𝗵𝗲𝗻 𝗦𝗶𝗺𝗽𝗹𝗶𝗰𝗶𝘁𝘆 𝗟𝗲𝗮𝘃𝗲𝘀 𝗮 𝗠𝗮𝗿𝗸: 𝗛𝗼𝘄 𝗖𝗼𝘂𝗻𝘁𝗲𝗿𝗳𝗲𝗶𝘁 𝗢𝗰𝗰𝗮𝗺'𝘀 𝗥𝗮𝘇𝗼𝗿𝘀 𝗖𝘂𝘁 𝗗𝗲𝗲𝗽."

Despite the dramatic losses in bonds (record-setting losses last year), it's baffling that the memetic power of oversimplified investment strategies remains unshaken.

And yet many financial advisors are still capitalizing on the same old meme: the best approach is a passive, buy-and-forget mentality.

With their eyes on the prize of client retention, they're still serving up the same one-size-fits-all portfolio that, at first glance, seems unique but is strikingly similar to what everyone else has.

Maybe they added a 2% position in commodities. What a fiduciary! Thanks!

They're still playing it safe, catering to the echo chamber, and steering clear of the added effort required to maintain a "different" portfolio. In other words, they're playing the social influence game at your expense.

The classic X% stock, X% bond (perhaps with a sprinkle of REITs or gold) portfolio may seem like the epitome of simplicity, but it's far from it.

Contrary to what the proponents of this approach might want you to believe, a truly "simple" allocation would hold every asset in the investable universe.

And here's where things get interesting: when we embrace the idea of diversification as our guiding principle, we discover strategies that may appear "complicated" but hold the key to reducing risk and enhancing returns.

Take, for example, systematic managed futures or CTA strategies. These investments involve a diverse range of markets and bet types (meaning they will take long or short positions depending on a given market's trend).

This adds an additional layer of diversification beyond market diversification.

Adding these elements to your portfolio can limit the severity of drawdowns and enhance long-term investment returns.

The bottom line? Don't be fooled by the counterfeit Occam razor the financial world sells you. True simplicity lies in embracing diversification and seeking strategies that serve your best interests.

Keywords: Courage Over Convention, investment management, diversification, financial advisors, passive investment, social influence, one-size-fits-all portfolio, risk reduction, enhancing returns, systematic