AWM Insights Financial and Investment News

Can hiring skilled active managers help you outperform the market?

The premise of active management is that with enough skill, one can consistently outperform the market, or the benchmark on a risk-adjusted basis.

Active managers boast their strategies can deliver. What does the evidence say?

For the 11th consecutive one-year period, the majority (60%) of Active Large Cap funds underperformed the S&P 500. The long-term stats are even worse, 70%+ underperformed over 10 years and 85%+ over 20 years. This is pervasive across all public asset classes and markets.

The verdict is clear, relatively few active managers add real value. 

The evidence supports that markets seem to be very efficient, are unpredictable, and are hard to beat through individual stock picking and market timing.

But it doesn't mean you can't beat the market.

At AWM, we believe portfolios can be designed and managed that can outperform the market without having to out guess it. 

Listen as Erik and Justin discuss how to avoid the traps of active managers and implement what you can do to capture the returns you deserve.

Timestamps

• (00:54) One year since the Covid market bottom, drop in unemployment numbers, and other investment and financial news from the week
• (2:08) Tax implications of cryptocurrency
• (4:01) How important are professional active managers in the public markets?
• (4:58) Looking at the data
• (10:02) Can you figure out who will outperform in public markets ahead of time?
• (11:19) Should we all just move to passive investment?
• (15:23) A better option than paying for active management
• (16:33) What are value drivers in the world of investing?
• (17:36) The importance of portfolio management rules
• (18:36) Why you need an independent advisor – not Wall Street.

More resources at awmcap.co/insights55

In this episode, Justin and Brandon discuss the week in finance and investment news including the $1.9 trillion stimulus that recently started getting divvied out, a “status quo” Fed meeting, and new inflation worries riding on the tails of a slight interest rate jump. 

However, the big news this past week – and our main discussion for the episode – is of the digital artist Beeple selling his work The First 5,000 Days as an NFT (non-fungible token) at Christie’s for $69.3 million. Christie’s reported 64% of the bidders for this digital piece of art were under the age of 40.

The NFT excitement has hit new highs and we’ve had clients asking about whether they should incorporate them into their portfolios. Justin and Brandon discuss what exactly an NFT is, the arguments from crypto maximalists, and the biggest questions to consider before getting into NFTs, Bitcoin, and other cryptocurrency.

Episode Highlights

• (2:13) How are we helping our clients implement their desire to be in the NFT space?
• HBO’s Last Week Tonight’s John Oliver describes NFTs as “Everything you don’t understand about money combined with everything you don’t understand about computers.”
• (3:17) What is an NFT?
• (4:13) Beeple’s NFT The First 5000 Days sells for $69 million
• (5:31) Should you be a crypto maximalist?
• (7:02) The valuation formula
• (9:13) The two reactions to Beeple’s NFT sale
• (9:56) Questions to consider before getting into NFTs and cryptocurrency
• (13:24) Should you just stick your head in the sand? 
• (15:11) Bitcoin’s fork
• (18:14) Getting your priorities in place

More info at awmcap.co/insights54

In this episode, we take a break from the usual discussions of financial and investment news over the past week to take a deeper dive into private markets. With all the excitement over the past year around individual stock picking, the entrance of new forms of cryptocurrency and NFTs (non-fungible tokens), we thought it’d be good to spend some time on private markets because we think they are where you can capture some of the highest drivers of returns.

Justin, Erik, and Brandon discuss what private markets are and why they typically capture some of the highest returns, whether skill is a factor in private markets, and getting access to the best deals.

Episode Highlights

• (00:12) Going deeper into the private markets
• (1:38) The additional risks that come with private market investing
• (4:07) Are public markets more attributable to luck or skill?
• (4:40) Out performance in the private markets
• (5:09) “Not all venture, not all private equity, is created equal.” – Brandon Averill
• (7:17) Due diligence questions to ask
• (9:18) How do we actually get access to the top 25%?
• (9:48) The building block considerations
• (13:01) Understanding your finance goals
• (15:24) Putting it all together in a holistic integrated plan
• (15:44) What factors should be in place before you consider entering private markets?
• (19:52) Types of private markets

More resources at awmcap.co/insights53

The most recent jobs report was released last Friday with data looking far more positive than previously predicted, which seems to suggest the economy is recovering. However, as we’ve discussed before, the economy and stock market are not connected. So, while the jobs report pointed to good news, the NASDAQ dropped four out of five trading days last week with big companies like Tesla, Apple and Netflix taking a downturn.

In the midst of market downturns, Dave Portnoy of Barstool Sports announced the launch of BUZZ ETF, which uses AI to track popular stocks, and has encouraged people to buy in.

Is this technology and methodology new? In our world of media personalities like Portnoy telling you how and where to invest your money – who should you trust?

In this week’s episode, Brandon, Justin and Erik break down the financial and investment news from the past week, dissect BUZZ ETF, and discuss how to set up a long-term financial framework that works.

EPISODE HIGHLIGHTS

• (1:55) Why the Dave Portnoy ETF news made Brandon smile
• (3:34) Why you should take your source into consideration when it comes to investment advice
• (4:14) Is Portnoy doing the same thing he said he was fighting against?
• (5:09) Trading on “Momentum”
• (8:24) Should likelihood of success factor in investment decisions?
• (10:21) Are celebrity endorsed products special?
• (12:20) How to reorient in the midst of the marketing/advertising machine information age
• (13:39) What research says about how often the stock market “performs”
• (14:41) Headline stocks like Tesla, Apple and Netflix take a downturn
• (16:22) Why we don’t just sharpshoot specific companies
• (18:02) What are the sources of return?

RESOURCES

• https://www.dimensional.com/us-en/insights/tuning-out-the-noise
• https://www.mydimensional.com/video/2294/independent-objective-advice
• https://www.mydimensional.com/video/2437/the-value-of-advice

Are there days you feel like everyone is making money, except for you? The stories of friends turned day traders, the insane rise of the NBA’s Top Shop NFT (non-fungible tokens) craze and of course, Bitcoin skyrocketing can leave even the most seasoned investor with a bit of FOMO.

Open Twitter, Reddit or YouTube and everyone is spewing advice on what to invest in next.  In this information age, there is practically an infinite number of places and people giving financial advice.

As Warren Buffett famously says, “It’s only when the tide goes out that you learn who has been swimming naked.”

Everyone appears to be an expert until they’re not. How do you know who to trust? We breakdown the answers in this week’s podcast.

Episode Highlights

• (02:33): Where are you getting your advice? What are their incentives?
• (04:32): Study of where people go to for their investment advice
• (08:32): Questions you should ask before accepting advice
• (15:50): How to conduct real due diligence on investment advisors
• (22:04): Advice every investor deserves

It’s been another eventful week in the markets with a stronger than expected earnings season, Bitcoin continuing to reach new highs despite China testing their own digital currency called the e-yuan, and a SPAC bonanza.

As mentioned last week, Erik, Brandon and Justin spend the majority of this episode discussing how to think about risk, return and allocating capital over the long-term including a framework of how to practically think about risk and return, how to approach long-term investing like a pro, and why ultimately your outcomes matter more than participating in the latest investment fad.

Episode Highlights

• (2:04) How to practically think about risk and return
• (2:46) The basic valuation formula
• (3:57) Valuing uncertainty
• (6:23) The building blocks of risk
• (7:19) Equities
• (9:13) Municipal bonds
• (12:08) Interest rates impact
• (16:33) Will we return to normal at some point?
• (17:13) Resource: Josh Brown, The Reformed Broker
• (18:24) Engineered risk
• (19:16) Manager skill

While every front office executive surely doesn’t look like Brad Pitt in Moneyball, sports are now driven by analytics.

Why?

Teams are trying to figure out a way to predict who is going to be successful inside the structure of the given game. How to construct a portfolio, i.e. a team of players that's going to produce wins that results in profits for the company (team).

Teams are investing millions of dollars into players for a desired return. Analytics removes the guesswork. Players are chosen based on data not emotion. The data explains what “drives return.”

Juxtapose that with fantasy sports. Fans fill their fantasy teams based on familiarity, gut feel and likability. There's a big difference between you running your fantasy team and the front office of the Seahawks. It’s amateur versus professional.

The professional relies on the analytics, the evidence, the drivers of return.

Sound familiar?

Listen in as we breakdown the pro moves surrounding Bitcoin, day trading and the markets.

Episode Highlights

•  (2:14): How Many Traders Make Money?
•  (5:02): Where do returns really come from?
•  (7:05): Fantasy Sports & Investing
•  (10:23): Why we invest.
•  (14:11): Keys to being a successful investor

More resources at AWMInsights.com

Last week we saw the S&P 500 close with its best week since November 2020. We also saw GameStop plunge 80.4%. How can these two things exist at the same time?

Is the market broken? Is it too risky?

To the contrary, the stock market is still and will most likely always be one of the greatest ways to grow generational wealth. However, not everyone will succeed. Those who approach investing as amateurs are most likely to meet the fate of the gambler headed to Vegas.

The good news, the house has taught us how to win.

Today, Brandon, Erik & Justin layout the fundamentals of how to build your wealth. They specifically discuss stacking the deck in your favor so that YOUR house always wins.

Episode Highlights

• (03:20): The economy is not the market.
• (04:16): Is the market broken?
•  (05:57): The fundamentals of building wealth.
• (09:51):What is the stock market?
• (13:46): No such thing as a free trade.
• (16:27): Passive Income and Equity.
• (18:21): Ownership is the key to wealth.
• (19:26): Is the market a casino?
• (20:20): Probability of stock market returns.
• (24:44): Risk and return are related.
• (26:22): We are not Wall Street.
• (28:37): Your custom investment plan.

There is only one topic we can possibly talk about this week. It has set the investing world ablaze. It's GameStop, AMC, Robinhood, meme stocks, hedge funds, short squeezes, and of course good versus evil - retail versus Wall Street.

On today’s Insights podcast, Erik, Brandon and Justin cover everything you need to know ranging from, “is this a once-in-a-lifetime opportunity?” to “how the best investors in the world are responding” and everything in between.

The investment world has been changed forever. Listen to today’s episode to understand why.

Episode Highlights

• (00:59): What is a hedge fund?
• (02:32): What is a short?
• (04:49): What are options?
• (07:25): How the Gamestop saga started.
• (10:05): Why we are wired to do everything wrong in investing.
• (12:02): Trading versus investing.
• (12:59): Are you a pro or an amateur? It applies to both trading & investing.
• (17:01): Investing versus speculating.
• (20:46): What’s a short-squeeze?
• (26:29): Is it ever appropriate to invest in crazy ideas like this?
• (30:16): How Kevin Rose and Tim Ferriss invest.

President Biden wasted no time making international news. With the third executive order of his new administration, President Joe Biden put the US back into the Paris Agreement. President Biden also pledge $2 Trillion toward creating a clean energy future. In tandem, Christina Figueres, the creator the Paris Agreement joins the board of Impossible Foods.

With companies and governments focusing on climate change how should that impact the way you invest?

Research shows the answer could mean higher returns with less risk. Sound too good to be true?

Listen in on this week’s AWM Insights, as Erik, Brandon and Justin dive into what is ESG Investing, how it can potentially drive higher returns and what Biden’s future plans may mean to your portfolio.

Episode Highlights

• (03:49): Justin defines ESG Investing
• (06:34): Erik discusses how, where, and what we invest in goes far beyond financial returns.
• (10:12): Research shows there's no financial trade-off in returns and actually demonstrates lower downside risk when implementing ESG Investing.
• (12:56): Do you have a purpose of how we're deploying your family's capital?
• (17:04): The advice you deserve. Evidence based.