As I discussed in my Best Investing Podcasts article last week, podcasts have become a great source of investing knowledge for me. The format allows for conversations with much more depth than traditional mediums like TV and radio and I tend to learn at least one thing I didn’t know before from each episode.
Given that there are many podcasts, and most people lack the time to listen to all of them, I will be featuring my favorite episodes each week here, in addition to some of my favorite episodes from the past via the From the Archives section.
Since I didn’t feature any podcasts last week, I will cover podcasts for the past two weeks in this edition.
Best Episodes This Week
The Tim Ferriss Show introduced me to podcasts. He does a tremendous job of breaking down the methods and tactics used by successful people to achieve their success. I have learned a lot from this show, but most of it has related to health and exercise and other areas separate from investing, so I didn’t expect to feature this podcast here. But that was before he did the first long form interview I have seen with Ray Dalio, who is among the most successful investors of all time.
This podcast covers so much that I can’t cover even a small portion of it here, but I really liked how he broke down success into the following 3 principles.
- Have Audacious Goals
- Deal With Reality and Learn From Your Mistakes
- Have Determination
There is also some great discussion about how to evaluate your own opinion, how to look at correlation in investing and analyzing markets by looking at the buyers and sellers and their motivations.
I think I get the most out of listening to people with non-consensus opinions (and opinions different than my own) because they make me think about things and re-evaluate my current view. Kyle Bass’s views on China are a good example of that. I don’t pretend to be an expert on China and certainly can’t put forth a more informed opinion than experts in the area about whether he is right, but his thoughts on credit expansion and its potential impacts for China and the world are certainly worth listening to.
Another interesting aspect of this podcast is the discussion of position sizing and the patience required to wait out being wrong for extended periods of time before you are right. If you have a long-term investment thesis, but things go against you in the shorter term, you need to have the proper position sizing and patience or you run the risk of not being around long enough for your thesis to play out. This podcast includes some interesting discussion of both of those things in relation to Bass’ thesis on China.
Our mission at Validea is to identify the best quantitative, factor-based investment strategies. Rather than create them ourselves, we follow published models already created by successful investors and extract them from their books or white papers. I mention this because the Foolish 8 growth strategy we extracted from the Motley Fool Investment Guide by Tom and David Gardner has produced the best performance of any strategy we follow (out of 40 strategies) since we began tracking it in 2003. Our Small-Cap Growth Investor model based on their book has outperformed the market by a wide margin and has only trailed the S&P 500 in 3 of the 15 calendar years we have tracked it.
So when Patrick O’Shaughnessy had him on to talk growth investing, I was very excited to hear the discussion – and it did not disappoint. They discuss the Motley Fool Rule Breaker methodology that the Fool uses to identify attractive growth stocks. Given that Patrick is primarily a value investor, it is interesting to hear them talk about the very different discipline of growth investing, which is characterized by lower odds of success on individual positions, but much larger individual positive outcomes when things go right. The podcast also features a discussion of the business side of the Motley Fool, how it started, and how it has grown over time.
From the Archives
One of the most interesting areas of investing right now for me is Behavioral Finance. Despite all the increases in technology and improved investor education, investors continue to make the same mistakes and let their emotions get the best of them. Dan Egan and Betterment are at the forefront of trying to fix that. Since Betterment looks at itself as a software company that happens to manage money and not an investment company, they come at the problem from a unique perspective and have come up with some innovative solutions. This podcast and Dan’s articles on the Betterment website are a great resource for understanding how we all can make better investment decisions.
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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.