Jumping Into The Deep End? Learning How To Invest | Brandon Averill, Justin Dyer, & Zach Miller | AWM Insights #63
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Episode Summary
There’s been plenty of conversations online, in the media, and in locker rooms about which stocks to buy and why crypto is a sure bet, but how do you sift through the FOMO and educate yourself enough to form your own wealth plan?
One of the most asked questions our team gets is how to actually go about getting educated on investing – how to set learning goals, available resources to tap into, and more – so this week, Brandon and Justin are joined by Super Bowl champ turned advisor Zach Miller to discuss this topic in depth.
Episode Highlights
The big events happening in the markets (00:59)
Should you just open a Robinhood account and start trading? (1:49)
The first question to ask (2:28)
What is investing? (3:00)
“Investing is taking your hard earned capital, usually from your human capital, those hours, the effort you've put in on the field, off the field, in the boardroom, starting your company, whatever the case may be, converting that into financial capital and putting it into the markets so the market can use it in its most efficient way to further grow companies and the economy, that is investing” – Justin Dyer
Day trading vs Investing (3:32)
“Why are you investing? Are you actually investing for a reason? Are you just trying to get returns? Because if you’re just trying to get returns, you’re going to be taking a lot of risks that maybe you don’t know, and don’t understand.” -Zach Miller (6:25)
Financial FOMO talk in the locker rooms
Playing catch at a tailgate vs playing in the NFL (7:02)
The resources to learn how to invest (7:45)
Minimizing the FOMO (9:11)
Investing for athletes (11:06)
“Why should I expect to have any additional insight into the future of Apple than the other 50 analysts who are covering that individual stock?” -Justin Dyer (12:38)
Who are you playing against? (13:57)
+ Read the Transcript
Brandon Averill (00:09): Welcome to AWM Insights. It's your power three. At least the new power three. We got a CPWA, a CFA, and a Super Bowl champ turned adviser, we're Zach, Brandon, and Justin. Here at AWM, we're a community of athletes, founders, and investors on a journey to be the best of what we do. And we believe you deserve the same when it comes to your wealth. As you know, each week, we cut through the noise of what Wall Street is selling you to bring you the knowledge, skills, and access you need to invest like a pro. Today we're tackling a topic that we hear all the time, how to actually educate yourself about investing. We're going to dive deep into that. But before we do, let's recap on some of the big events that are happening in the markets. The big news out COVID cases on decline.
Brandon Averill (00:59): This has been the lowest amount that we've seen since the start of the pandemic. I can tell you, at least for me, I can't welcome this enough. It's been a great thing to start to see. We're starting to see things open up. I know everybody's excited for it. We've also seen pretty exciting event. The G7 is actually nearing a global corporate tax. Something that I personally didn't think we'd see so quickly, but could have big ramifications across the markets. And then of course, the crypto crack down coming out from China. We got Elon coming in, the pump and dumps. We got all kinds of stuff going on. But definitely been fascinating to watch this asset climate value, crater and value come back. It's definitely kept us on that rollercoaster ride. and then last but not least, we've had earning season.
Brandon Averill (01:49): It's all been wrapped up now. I think it's 95% of companies of the S&P 500 have reported, and it's been one of the best and most recent memory. So as we start to jump in here and we're going to start talking about how to actually educate yourself about investing. You got to start to ask yourself if, we've had all these earnings come through, are you taking that into account? So Justin, I'd love to hear from you. When we have these clients that call and say, for instance, "Hey, I want to open up a brokerage account. I'll maybe open up a Robinhood account and start to trade a little bit so I can learn." I'd love to hear your take on that. And maybe what questions that people should be considering.
Justin Dyer (02:28): Yeah. Well, first and foremost, I mean, got to ask yourself why. Why are you investing? Are you just doing it to keep up with the Joneses? Are you doing it because you have a family priority or a value that you're trying to accomplish and reach? That list of questions is almost endless, but you should start there. If you're just trying to keep up with the Joneses, you're not investing. I think that's a pretty good point to focus on, first and foremost here, right? What is investing? Investing is taking your hard earned capital, usually from your human capital, those hours, the effort you've put in on the field, off the field, in the boardroom, starting your company, whatever the case may be, converting that into financial capital and putting it into the markets so the market can use it in its most efficient way to further grow companies and the economy, that is investing.
Justin Dyer (03:32): If you're just saying, "Hey, I want to take this $1 and turn it into two overnight." I mean, that's all but gambling, right? Or playing the lottery. So you really have to bifurcate, and define what is investing? What is day trading? What is gambling? Day trading, gambling, speculating, those are all kind of similar categories, similar flavors of the exact same thing. Investing is way, way, way, way different than that. Are you going to take the time, the effort to understand a specific company's financial statements? What the bottom line? The earnings, going back to the earning season. What that company's earnings were this past quarter? What they're expected to be next quarter and way into the future? And what price you're willing to pay for those earnings, right?
Justin Dyer (04:19): That's kind of the basic building block when it comes to investing in a single company. And there's all sorts of risks that we can get into with that specific investing application, which we do time and time again, in the lower probability outcomes that you can have if you're investing in a single company. But that is investing, right? Again, I'm going to circle back to this idea of why are you investing? Make sure you understand what the true definition of investing actually means. And then educate yourself. There's so many resources. We love to be a resource to our clients as well around this topic. And we have other groups within our network that provide both structured and unstructured educational opportunities to explain, educate, and teach, and kind of open up the complexities of the markets overall to clients.
Justin Dyer (05:17): I mean, I'll stop there, but those are some critical things to think about and take a step back before you even go down this route of, okay, should I open a brokerage account? Should I hire an advisor? Should I... Whatever, some blend of those two things together. Don't even go there until you have those in-depth conversations ideally with your family or your partner, whoever they may be to figure out what that is.
Zach Miller (05:46): I'll jump in. I think as a player, it's a huge deal to be an informed investor to understand, and you don't need to know the gritty details, but you need to understand. I mean, there is a talented professionals in the investing game, and it's made it so easily with Robinhood, no transaction fees to trade, like there used to be. With COVID, guys were at home and I was talking to NFL players last week, and I mean, they want to get into the markets because they always seen as the rally. They've only been in since post March. So they only know straight up basically, and that's not realistic going forward. So one of the biggest things is just, why are you investing? Are you actually investing for a reason? Are you just trying to get returns?
Zach Miller (06:33): Because if you're trying to just get returns, you're going to be taking a lot of risks that maybe you don't know, and you don't understand. And then you add in leverage. So there's so many things that the guys can get caught up with in the locker room with the FOMO. I mean, FOMO is real right now. You see it in the Bitcoin market, you see it in all crypto. It's just being talked about in the locker rooms a lot. And unless you have a firm understanding of the whole investment world, it's very easy for a player to get off track.
Brandon Averill (07:02): I think that's a great point, Zach. And one thing I think about quite a bit is sometimes going and opening that brokerage account, buying a couple of stocks, it's, what are you really learning through that process? I think you make a great analogy. You made it before we even got on this call was, it's like going out and throwing the football around with your buddies at a tailgate. That's a lot different than going playing in the NFL. I know that's an extreme example, but at the same token also, it's what effort are you actually putting in to learn about this? So going on opening a brokerage account, buying a couple stocks, quite frankly, is the lazy way of doing it. And you're probably not setting yourself up to learn.
Brandon Averill (07:45): If you really want to learn, it's take advantage of the opportunities that Justin mentioned. It's go to a dimensional fund advisor investor symposium, sit through the two days and learn about all the academic research that supports investing. Or if you want to learn about venture capital, there's venture firms such as Next Play that put on these educational events. Go and do those things. If you really want to learn, right?
Zach Miller (08:10): I can attest... I'm going to interrupt you then. I just got done with the Next Play fellowship program. They only pick 20 guys. You got to apply for it there. Look, I think they're going to do it every year. I recommend the program because it teaches you, over two weeks, slams in as much as it can about venture capital in two weeks. That even with my finance undergrad and the certified financial planner education, I still learned a ton. And there's active NFL players in there. There's other guys, other athletes from other sports in there. And that's how you really learn. You learn it the right way, the process. The process is what differentiates good returns from bad returns. I'll go back to towards the end of my career, I was trying to be a stock picker and investing in... I got lucky and was picking texts. So in 2012, 13, that did pretty good. Then I charted myself against the NASDAQ index, and yeah, I just could have bought the NASDAQ in whatever played video games or something.
Justin Dyer (09:11): Yeah. And I think it's good to underscore why this is important. And I don't think people would necessarily question why educating yourself is important, although, in this day and age, who knows. But the better you understand the investing landscape and why you're doing something, the better you'll be able to contextualize your portfolio. You'll be able to, you'll minimize the FOMO that Zach mentioned. And it's not just unique to athletes. I think everyone does it. We talk about our crock brains, if you will, and it's almost hard-coded in to have that FOMO. If you're hearing about somebody who, whatever, bought Bitcoin at 10,000, and now it's 38,000 or 40,000, wherever it is today. And it's hard not to be jealous of that. Now, in most cases, that same person who's highlighting their Bitcoin trade or whatever other trade they're highlighting, chances are they have a couple others in their portfolio that didn't do so well.
Justin Dyer (10:14): But if you are really comfortable and understand why you're investing, what you're trying to accomplish, then it gives you the tools to take that information and have less of that fear of missing out or have less of that, ah, I got to scratch this itch. Or if you still have that itch to scratch, you do it in a way that doesn't destroy your ability to meet your goals and what's important in your life. Right? So I think it's really important to go back to that context of why we're having this conversation, I guess, at the end of the day. Not only do we totally encourage educating yourself, but we also think it makes for more fulfilled clients, more fulfilled investors, more fulfilled human beings, if you will.
Zach Miller (11:06): Yeah. I think for athletes it's, if you're going to have to do that stock picking or think you can outperform the market, do it with a small enough amount of money, it doesn't matter. Less than five grand, whatever that might be and be okay with underperforming, because that's what the data shows. You'll probably underperform. And I compare it to, when I was in Seattle, the year we won the Super Bowl, Kenny Chesney came out to practice and we got him a uniform, put all this stuff on and he went and ran routes because he had to be wide receiver, because he's about 5'5". We didn't go live on him. Luckily he didn't get tackled, but he got to run a slant and caught a slant from Russell Wilson. And everyone's like, yeah, I mean, he's not an NFL player. He's not a professional and it's no different in investing.
Zach Miller (11:54): You're stepping into the arena with... There's someone on the other side of your trades, probably an algorithm or a robot these days, but you're probably not going to beat them. So you just got to be a little humble about it and accept that there's a professional and then you step into that arena, just be ready that you're probably not going to outperform.
Justin Dyer (12:16): Yeah. Well, even at that, here's an interesting question to throw out there, rhetorical question. But six, seven years ago, I was at some conference and listening to a portfolio manager talk. He managed couple of billion dollar U.S. equity fund of some kind. I don't recall the specifics, but I do recall he said something along the lines of why should I expect to have any additional insight into the future of Apple than the other 50 analysts who are covering that individual stock?
Justin Dyer (12:53): I mean, it takes a little bit of humility for someone managing billions of dollars to say that, but he understands, he's educated. He looks at the playing field. He's like, "You know what, the odds over there, they just don't make sense. I'm going to try and play in over here in this other sandbox. And I think the odds are stacked in my favor." He did in that specific case, but right, that's an educated comment to make where so many guys or day traders, if you will are saying, "Oh well, wait, I know what Apple's going to do next quarter. Or Amazon's undervalued," right? These large cap companies that are covered, I mean, every waking minute of the day is basically you can find some little tweet about Apple or tweet about Amazon and there's so much information. Why do you think in those specific examples, you should have some unique insight that could potentially add value? Aside from luck, right? Aside from luck. So yeah, step back and think through that one.
Brandon Averill (13:57): Yeah. And you might get lucky. Right? But I think that's the big question, who are you playing against? And then how are you going to measure yourself? Right? I mean, we've all been there. I mean, Zach got to the pinnacle, but it's like, "Oh, you're a pretty good high school player." And then you go to college and you're like, "Shoot, I'm not as good as I thought I was." And then you get to Pro Bowl, it's like, "Man, this is really freaking hard." And you got all along the wild. Right? Just understand who you're measuring yourself against and the same thing goes with investing. Who's on the other side of the ball? And then how are you actually measuring yourself? We get the comment all the time like, "Oh, I made 20% last year. What was that even good?" Who knows? Are you comparing yourself to the S&P 500? Are you comparing yourself to the Russell 3000?
Brandon Averill (14:40): Okay. Well you had five stocks, you had so much more risk in your portfolio than the Russell 3000 did. So if a Russell 3000 returned 20%, you probably should have returned 30 to be compensated for what you just took on. So I think it's just understanding those things. Probably not going to figure that out just by going and opening a brokerage account. We want you to be educated. We want you to go through that process. So lean on the resources that you have. You certainly have us, ping us any time. These podcasts are free, you guys and gals, so we encourage the questions. Help us to form what we cover on the rest of these podcasts. And then, as always, we encourage you to head over to AWMinsights.com, download our 10 Key Principles to Investing Like a Pro. There's a place there to shoot us a question. For those of you that have our phone numbers, text us. We love to get back to you that way as well. So with that, until next time, own your wealth, make an impact, and always be a pro.
Brandon Averill (15:55): The information in this podcast is educational and general in nature, and does not take into consideration the listener's personal circumstances. Therefore, it is not intended to be a substitute for specific, individualized, financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.