Building a Winning Portfolio | AWM Insights #191
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Episode Summary
What does it take to build a Winning Portfolio? The answer has a significant amount of overlap with how a GM would build a winning team.
It starts with expertise and knowledge. You need to assemble a group that understands what winning is, what it takes to win, and how to get there.
Compiling a cohesive team and continuously coaching and improving the team is needed, but also utilizing those players effectively and efficiently with a proper game strategy and playbook are the only ways to get the most out of your resources.
Finally, plans and strategies must be constantly evaluated and updated for changing conditions. Building and maintaining a successful personal portfolio follows the same logical framework!
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Episode Highlights:
00:00 - Intro
01:01 - The "game" of investing
02:13 - Having the proper expertise, coaching, and team to win
02:57 - Developing a playbook for investing based on data and historical lessons
03:51 - The impact of missing the best days in the market
05:38 - Building your all-star investment roster
07:38 - Text Us!
+ Read the Transcript
Justin Dyer (00:03): Welcome back everyone. We're happy to be here. Mena, sitting in again for Brandon. Welcome back to another episode of AWM Insights. There's been a lot of sporting events over the last couple of weeks. We've had the Super Bowl, Waste Management Open, Riviera, NBA All-star game. So we're going to use these bigger sporting events to guide the conversation. That conversation topic we're going to focus on today is how winning happens, but how winning happens when it comes to investing. Our little twist on it. And so starting off this conversation, I'm going to give us high level overview of where we would start. This is not rocket science at all. If you want to win a game, you have to know the game you're playing. And in our view, our definition when it comes to investing, there's a number of different investing games you can play.
Justin Dyer (01:01): You can play it for entertainment and go speculate and play with meme stocks. You can day trade. You can do all sorts of different things. A lot of those are foolish, by the way. There's plenty of data that supports that statement. If you're curious, let us know. But really the game we're playing, kind of all joking aside, is really to use money as a tool to optimize your priorities. To make sure your money, your hard earned financial resources are allocated in the highest confidence manner to drive success, drive your priorities. We call this a human-centered approach to financial design or to investing really. We're trying to drive a much more flourishing life for you guys, all our clients listening. And so that's really how we define the game we're playing. We want to make sure our win is clients being able to do what's important, at least what they've expressed as what's important to them in life. So that's the game we're playing.
Mena Hanna (02:13): And I would say also to actually win, after you determine what game you're playing, you need the proper expertise. You need the proper coaching, you need the right equipment, the right staff around you to enable you to execute on what you're trying to do. And ultimately that's win. And you also need to have winners on your team. People that have won before know how to win again, they know everything that's needed to win and what it takes. And ultimately that really helps you and helps you achieve your goals.
Justin Dyer (02:46): Yeah, for sure. The discipline, the knowledge of what it takes is incredibly important to have great play.
Mena Hanna (02:54): Yeah, we saw them in the Super Bowl for sure.
Justin Dyer (02:57): Okay. So we know that the game we're playing, we got to develop a playbook to actually play this game. The way in which we go about this is asking a pretty simple question, and it's surprising how often overlooked it can be, but what does the data say? What does history tell us? You can't always say that history is going to repeat itself. It will not. But there's a ton of lessons that we can really learn if we look at the data in the right way. Applying this to kind of a sports analogy, I mentioned this in one of the recent podcasts, but take an average NFL game. There's roughly 153 plays per game, but how many actually matter? Go to the Super Bowl. How many are we actually still talking about today? Very few, right? Less than 10, probably. Maybe enough that fit on a single hand.
Justin Dyer (03:51): And markets are no different. So you need to be exposed and invested. This is public market investing. You need to be exposed and invested because if you miss the best day, it's incredibly damaging on returns, especially from a relative standpoint. You're missing one out of X number of trading days throughout the year and it can really, really damage you. If you miss five, it's even more so. So here's some interesting numbers. So looking at the S&P 500 from 1990 to 2022, if you would've invested $1,000, it would've grown to the end of 2022 to $21,555. You miss one single day, the best day, it would've been $19,317. Pretty substantial. You miss five, almost slicing it in half to $13,614. Guessing when those best days are going to happen, again, nearly impossible. So you stay disciplined, you look at what the data says, you don't try and time the public markets.
Justin Dyer (04:55): The private markets, and we've got a lot of podcasts on that. We're not going to spend a ton of time on it today, but private markets really are a lot different. Data says there's a little bit more inefficiency in the marketplace. Doesn't mean you should still time the markets. We're not advocating for that whatsoever, but we take a little bit of a different tact and manager skill relationships and networks work a little bit differently within the private market. So that's really high level what the data says and how we're developing our playbook to really support, again, the game we're playing. Your priorities. But then we need to develop a team on the field and that's really kind of portfolio construction, which Mena you do on a daily basis. So why don't you unpack that for us.
Mena Hanna (05:38): Yeah. And taking a step back, I think we view every client as sort of the team owner. And team owners want to be successful, they want to have successful organizations, they want to win. We kind of slot into that coach GM role, sort of the Bill Belichick style and our are to assemble the right team given your goal and given your targets to win. To win with a budget and to win effectively. So you can think about assembling a football team. Maybe you start with your lineman, your offensive line is sort of your protective reserve. That's the rock. That's literally where the ball-
Justin Dyer (06:19): Foundational building block. Yeah.
Mena Hanna (06:20): Yeah. It's where the ball starts. And around that your receivers, your quarterback, your running back, they all work and they all produce because your O line ideally takes care of things. So you can think about your other players, some of those attacking players as an offensive weapon, as your equities, both public and private equity. So we really do take a building blocks approach, making sure that everything is taken care of upfront and enables you to actually play offense and play offense hopefully well.
Justin Dyer (06:57): Yeah. And play offense to really, really grow your wealth at the end of the day. Yeah, yeah, that's a great analogy. And then to bring it kind of full circle, you also still need that strong coach. Not also, you need that strong coach to make sure the players on the field are allocated in the right way or positioned rather, in the sports analogy sense, to make the right play when the time comes. You're not going to necessarily get it each and every time, but you're playing this long-term game, right? You're playing for 153 plays on average, ready to break out when that best market day happens, or there's that scoring opportunity essentially.
Justin Dyer (07:38):So that's kind of how we can put all this together to drive a winning approach to investing. Hopefully this was a fun little conversation to apply some of the tenants in the sports world. Obviously most of our clients listening here are professional athletes, but applying some of these tenants that you guys are probably all really, really familiar regardless of sport into the investing world, there's a lot of very similar principles when it comes to both of them. So if you have any questions, definitely reach out to us. But until next time, own your wealth, make an impact, and always be a pro.