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What I Learned on my Recent Visit to Alaska: You Can’t Escape Investor Biases
People are on a never-ending quest to find the investing information that they believe will give them an edge.
For the last week, I was on vacation in Alaska. Well, it was more of an adventure than a vacation. My wife and I spent seven days riding the Alaska Railroad from Fairbanks down to Seward then back up to Anchorage. It was a blast, but it was non-stop. I’ll post some pictures on Monument’s Instagram.
One of the interesting parts of the trip was sharing the experiences with total strangers. We ate with a different couple on every train ride, flew on small planes with skis with a few other strangers to land on glaciers, and rode for 8 hours on a boat to see an amazing glacier while sharing a seated table with two total strangers.
There was a lot of hurrying and waiting, which afforded us all an opportunity to make small talk and chat with each other. When the inevitable question of “So Dave, what do you do?” surfaced, I fought my desire to reply with “I’m a race car driver!” because as soon as I respond, I know I’m going to engage in some sort of discussion about the market, the economy, or investments.
So, as you read that, it may seem like I got annoyed. I didn’t, but I was on an adventure/vacation so I was more like, “Meh.” BUT, I will say that all the different conversations we had were interesting when reflected on as a whole.
Everyone wants to find an edge—or thinks they can. They think there is some tweak or adjustment. They think that there is some way I can identify an opportunity for them, or they are looking to see if I believe they missed one.
None of them, NOT ONE, asked me about the mundane and boring aspects of successful investing…the long-term stuff. None of them were interested in the future of their wealth in 10, 20, or even 30 years from now.
In fact, one person in their late 30’s emphatically stated, “When I get home, I’m firing my advisor because they didn’t do anything to protect my portfolio in Jan of 2022! I mean, what am I paying him for? Do you think you could do better?”
Total facepalm. My wife even kicked me under the table because she’s fluent in “Dave body language.”
In my head I screamed, “DUDE – you have 20 fucking years until you can even GET that money out of your IRA penalty-free AND your recovery is likely closing in on the previous all-time high of your account!” Instead, I just replied, “No.” to avoid having to tell him we don’t take people like him as clients. You know, the people whose main goal is MORE, their number one priority is performance, and they dismiss the bigger picture. I probably should have also told him to send his advisor some cookies or something as it sounds like he may have kept him from doing something stupid.
Some things in investing never change: Investor overconfidence, emotions (both fear and greed), recency bias (I wrote about that here and here), loss aversion, mental accounting and confirmation bias (I wrote about that here). Especially confirmation bias…people are on a never-ending quest to find the investing information that aligns with their beliefs.
But here’s the real secret…the real edge…the REAL opportunity… none of it matters.
All the information people seek or think they have is already priced in. There are six billion people on this planet, and there is no (legally) actionable information or intellectual edge that exists or really matters.
Because it’s all priced in…it’s all baked into the cake.
The real edge comes from chopping wood and carrying water – the hard, unglamorous, repetitive, mundane chores that must be done.
Master the basics because the basics aren’t actually basic. Stop looking for the bright shiny object, the ‘hot hedge fund manager’, the undiscovered investment opportunity, the quant manager that thinks they have some secret algorithm, or the new ‘new idea.’
Simplify things, understand those things, be a better investor, and reach out if you are sick of hearing B.S.
In a world focused on niches, our niche is working with people who are sick and tired of getting bad advice from financial salespeople. Unfiltered opinions and straightforward advice is our value proposition.
Keep looking forward,
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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