Four Lessons From Andy Berkin and Larry Swedroe

Four Lessons From Andy Berkin and Larry Swedroe

As a factor investor, there are a handful of people I have always wanted to interview for our podcast. We have been lucky to have been able to interview two of them in the past couple of months. Andy Berkin and Larry Swedroe are co-authors of probably the best book I have ever read on factor investing, “Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today.” We spoke to each of them separately for Excess Returns in recent episodes.

Here are the four biggest lessons I took from our interviews with them:

1 – Investing Factors That Work Share Common Characteristics

The discovery of investing factors has gone too far in many ways. We have gone from core factors like value, momentum, quality and low volatility to a world where everyone is trying to find the latest great factor. And many of these new factors don’t stand up to the test of what makes a factor continue to work over time.

When we interviewed Andy Berkin, we asked him about the excellent framework they offered in the book for the characteristics of a factor that is likely to persist.

He outlines that framework here.

2 – Inflation is Personal

We are all worried about inflation. But it is important to keep in mind that it impacts every one of us in different ways. Our incomes are affected differently. And our expenses are too. Even though policy makers use standard inflation rates to make their policy decisions, those rates might vary widely from what we each see in our own lives. Larry Swedroe explained why this is really important to keep in mind when we build our portfolios.

3 – Investors Can Learn a Lot from Other Disciplines

One of the things we have noticed about many investors that have appeared on our podcast is that they often didn’t start out in investing. Andy is a great example of this. He was trained in physics and has translated the lessons he learned there into the investing world.

We asked him about the biggest lessons he took from physics that have helped him as an investor.

4 – When the Evidence Disagrees with the Theory, Throw Out the Theory

The future cash flows of growth stocks lie more in the future. The future cash flows of value stocks lie more in the present. So it would seem logical that when interest rates are high, value stocks should be worth more. But the evidence isn’t that clear. Larry explained this in our interview with him.

If you are interested in the full interviews with Larry and Andy, I have included links below.

Andy Berkin

A Complete Guide to Factor Investing with Andy Berkin

Larry Swedroe

An Evidence-Based Approach to Markets with Larry Swedroe


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.