Marketplace Roundtable: Getting Finances In Order

Shutterstock photo

By SA Marketplace :

It comes either as a given or as a result of the way we've built Seeking Alpha, but a lot of what goes on here is discussions on how to invest better in the day to day. Is stock XYZ a buy or a sell? Is a dividend growth strategy the right one, or should one invest in ETFs? Where is the economy headed and what can investors do about it?

But that is all built on a foundation. The cliche "takes money to make money" is there for a reason; savings matter. So does knowing whom to trust, how to balance one's accounts, and so forth.

Which brings us to a few of our authors on the Marketplace who are focused more on personal finance fundamentals rather than the ins and outs of where to invest. We've launched three services focused on these aspects in 2017, and we interview those authors to share their views on how they manage the balance between a hyperkinetic market and the need to focus on the fundamentals and the long term.

Our panelists:

SA Marketplace: What is your general approach to working with readers to help them work on their investing?

Gil Weinreich , author of Wealth Watchers : I try to offer my readers some genuine insight that will help in their efforts at building wealth - by casting some light on something they may not have observed or thought about, or by enabling them to view something more mundane but from a new angle. In other words, I either reframe things for them or address something so unremarkable as to have escaped critical inquiry. There are plenty of people out there offering stock ideas and the like. I don't do that. I am hoping to help people learn to think things through and make more intelligent decisions through a broader perspective.

John Lohr , author of The Fiduciary Sale :

There are three systemic problems in the investor world:

1. Sophisticated retirement planning is a waste of time unless you know your expiration date.

2. There is a significant disconnect between the motivations of financial advisors and the behavioral psychology of investors.

3. The mainstream media sources of financial information are biased and uninformed. Don't watch them.

Maybe we can help with investment education for Mom and Pop.

Neal Frankle , author of Your 401k Advisor : I believe it's malpractice for anyone to invest without having an overall financial plan. When people do that, it's like they are driving a car without having a destination in mind. A financial plan answers the "why?" we invest. And without the "why", you can't answer "how".

That being said, my general approach is to encourage readers to first create that plan even if they do it themselves before investing. The plan clarifies what they want to achieve and when. Once they understand that, it makes it easier to determine the least cost/risk way to invest in order to enhance the chances of achieving those all-important goals.

SA Marketplace: One of the inherent tensions we hear from authors and readers on Seeking Alpha is that on the one hand, good investing involves patience, a long-term outlook, and not getting wrapped up in day-to-day market prices, and on the other hand, we're publishing articles every day with new ideas (and while we're aware of this as editors, it's also just a reality of the industry, as five minutes of CNBC will remind us). How do you address this tension?

GW: That is exactly the raison d'etre for my articles on both the public site - and even more so with my Marketplace offering. Funny enough, I just took down the CNBC approach to market analysis in my Thursday article , and my antipathy toward "getting wrapped up in day-to-day market prices" spared not even Nobel Prize winning economist Robert Shiller. My Marketplace articles dwell heavily on how to apply a long-term outlook to investing.

JL: The daily "tips" are useful from a financial literacy point of view. They are well thought out, well written and rational (for the most part). While some investors may profess to believe in an investing process with objectives, goals, measurement techniques, look at the investor comments on the more "holistic, have a plan" articles and they all revert back to performance, performance, too much in fees and what can you do for me today. I think the particular type of investor who is a regular reader of SA likes the daily idea news. I'll bet not many of the ideas are acted upon the day they come out. On the other hand, some ideas may be incorporated into the investor portfolios eventually. It does not seem to me that the investors on SA are reactive, but want ideas. In the actively managed Separately Managed account arena, the very best are stock pickers who work for their clients.

I think it would be really interesting to construct a managed portfolio using selected SA "tips". Run it for 12 months as an active portfolio (model/hypothetical) and see how it does.

NF: Great question. Every investment strategy involves trade-offs. Nothing is perfect. You have to consider the benefits and costs of your investment strategy. My experience tells me that it's imprudent to "buy and hold" because markets change as do investors' needs. At the same time, I have noticed that increased trading leads to lower returns.

The way I try to remedy this is to have objective, data-driven markers to determine if the market supports staying invested or not and to track my holdings to see if they still deserve a place in the portfolio. My approach, like any other is not perfect. It will not outperform in every market. It will not always make money. And it will not always shield investors from losing money. But, over many years, I have found that the tradeoffs are well worth it for myself and my investors.

SA Marketplace: What is the most frustrating common mistake you see made among readers or clients and how do you advise people to work through it?

GW: These are still early days for Wealth Watchers, so I can't be totally sure of a single unifying theme in the challenges readers have shared with me, but if there is one, I would venture to say that it is a profound - and understandable - lack of objectivity about investors' personal financial situation. The same unhelpful framing of issues we find in the financial media to which you alluded in your previous question encourages people to want to make imprudent investing decisions - even people who are doing perfectly fine and should therefore just keep on keeping on.

JL: Focusing on performance and fees. The "hot dot" chasers are their own worst enemies by being reactive. Low fees do not make a good investment either and should not be the main reason for choosing an investment.

Investors spend more time in researching their next washing machine than they do improving their financial literacy. That's a mistake. It's a very hard thing to correct because that mentality is hard-wired. The only thing we can do is listen to those investors and make subtle suggestions as to how to deal with their complaints. I advise them to get a real Advisor (not a broker, and most investors do not know the difference) who will customize an investment strategy for them, and pay the fee. Put it away and do not look at account statements for a year (three years would be better). But you have to spend the time to really research Advisors, and most investors are not so inclined. Like I said, hard to correct.

NF: I do not get frustrated easily. The one behavior that does trouble me is when investors try to justify flawed long-term investment decisions based on their interpretation of current events.

What I do is remind them:

  1. There have been many examples of similar circumstances with different results than they expect.
  2. Remind them of their long-term goals and how that should be the focus.
  3. Reinforce the importance of investing based on a well-articulated strategy rather than gut feelings.
  4. I also talk about the problem of relying on feelings to invest going forward. In other words, even if they get it right this time, odds are good if they switch their system to relying on their feelings to invest going forward, it will likely be very expensive.

SA Marketplace: If we can address today's market briefly: the market is trading near all-time highs even as the "direction" has become a little less clear over the past few weeks. Do you have an outlook on the market, and even if not, how do you approach the market, especially at extremes whether high or low?

GW: I don't think anyone is capable of determining when markets will crash, how long bull markets will endure, and the like. My approach is to focus on long-term solvency, which a broadly diversified and flexible portfolio can accomplish. Even at extreme highs, there is nevertheless always something the market is offering on sale - in that sense, I embrace the perspective of value investors. And low valuations are the time to put to work the cash you accumulate when value is hard to come by. A flexible financial planning system enables investors to pivot to the opportunities that will most enhance long-term outcomes.

JL: I think market outlooks and speculations as to where they are going are worthless. There are a couple of good momentum analysts out there (Fred Lange is the best I've ever seen), and those who are very good do not publish their advice; they use it to manage their own money (like Fred). The market is going to go up, down or sideways, and there is nothing anyone can do to change that direction, so let it happen and don't overreact. I have my assets managed by a professional stock picker and I do not even look at what he does. He says he buys into declines and takes profits when he can; staying around 65% invested in equities - never 100%; never 0. He does good enough that both my kids have him manage their IRAs. Using a true stock picker to me means that market movement will happen, so let it.

NF: Again, a great question. I completely ignore this. I don't think it's a good marker for investment tops. I rely on other data and my method allows good markets to run. Instead, I look at the price position against a channel. If the price violates that channel, I make a buy or sell decision. I use certain proprietary models which have historically successfully filtered out the noise to avoid false positives (in many though not all cases) yet gotten important shifts right.

Of course, the past is no guarantee of future results.

SA Marketplace: What's the biggest lesson you've learned in the investment world, and how have you applied it to your approach?

GW: Maybe it's simply that everybody has the ability to succeed as investors if they keep a distance from the I-can-outsmart-the-market talking heads and adopt a simple and sensible long-term approach that involves disciplined saving and resolute investing. In that sense, character is key to successful investing.

JL: I've been in or near this business since 1972, so I know enough to know that I do not know enough to manage my own money, let alone somebody else's. Hire the best professional you have implicit trust in, and let him/her do their full time job. That's what I do.

NF: There is no one lesson - and I keep learning every day. The big improvement in my results came when I found an investment approach that works for me and the clients I work with. There is no one best system. My goals are to grow money safely so investors don't have to worry about their finances. That means taking advantage of positive situations and trying to avoid dangerous ones. Of course, I can't do that perfectly, but the methods I use are designed around those goals.

What's important to me and my clients is to avoid the "big mistakes". That means a system that is designed to provide good performance in strong markets and to exit bad markets before they become catastrophic. This has trade-offs as I've said. And maybe that's the second most important lesson; to accept that nothing is perfect and to accept the flaws and trade-offs.


Thanks to Gil, John, and Neal for joining us! Hopefully that gave a few good ideas for how to keep one's eye on the ball. If you are interested in their work, please check out the links below:

Please follow the SA Marketplace account either above or below if you'd like to get our weekly Roundtable in your inbox as well as any other relevant updates on the platform. We've crossed the 100 author threshold and are excited to share more great services with readers over the coming months.

Next week's Roundtable guest: Rida Morwa of High Dividend Opportunities

See also Energy Recap: Coal Vs. Renewable Energy on

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.