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When you're dealing with people, uh generally, but especially when you're dealing with people's money, um they're not academics, they're not robots, right? There's emotional and emotions involved in it. So you have to be able to, I think, as an advisor, um, and specifically really in the world of investing, you have to be able to say, look, there's a a very specific way that we're going to build a portfolio. There's a very, you know, there's academics here, there's statistics, it's a science. And people are people. And so you have to have a little bit of latitude. Um, you can't be super, super rigid. That being said, there are some non-negotiables that I just I won't violate. Um, not so much for me, but for but for you, for the client. Um, and you you want me to hold that line. And this came about uh in my brain. Yeah, I've so I've been speaking now for 20 years. I've been uh flying around the country, going to big events. Some are small, some are big. Uh, we just had one recently in Atlanta. Uh there were just about a thousand people there, just under a thousand people, the largest group I've ever spoken to. And um it's fun. I like doing it. I I have a I have a good time doing it. And what's a little bit strange about that kind of a large crowd is you you really need to sit in the audience and listen to what's going on, who's saying what, what, how is the crowd reacting, you know, and kind of take it from there. So I don't do PowerPoint, I don't do anything like that. I don't do any real preset speech. It's just not the way I operate. Um, and so I'm I'm sitting in the crowd and I'm listening, and um, you know, there were there were some dry some dry moments, as you can probably imagine. We're talking money, we're talking taxes, we're talking insurance, we're talking stocks, you know, all that kind of stuff. And what hit me in listening is that um the advisors were asking questions of the of this through the presenters of like, well, what do you do with this? And what do you do with that? And there were a lot of these um it depends answers. And that kind of gave me the topic of what I was gonna talk about. So when I got up there, uh I spoke for about an hour and 20 minutes or so, and it just kind of in my brain, what I came up with was look, we can talk latitude, you know, we can talk it depends, we can do all of that, but let's not do that. Let's talk about the non-negotiables, let's talk about the things that have to be in order for, in my opinion, clients to be successful. And I'm I'm specifically talking about portfolios right now. So here are the non-negotiabs for me, as I will behave for you, you know, how will I operate for you? And it's essentially one main thing broken down into three telltale signs as to whether or not I'm doing that. So, number one, first and foremost, I will not speculate and gamble with your money. And I will not allow you to do the same. I'm not gonna facilitate it. I'm not gonna say it's okay. I'm not gonna say, sure, you can go gamble with a little bit of your money, you know, and and and and put at risk a little bit of your money. I'm not gonna do that. I'm not saying that I am better than anybody. I'm just saying there's gotta be a line in the sand. And when I'm dealing with your money, which is to, you know, the purpose of your money is to fully fund your financial plan, which holds all of your hopes and dreams and desires and legacies, it's pretty dang important. I am not gonna facilitate anybody, myself or you, speculating and gambling with your money. That's a non-negotiable for me. And so what came from that as I was speaking to the audience is um there were some great questions. And really the questions are, well, how do you how do you determine that? Like, what does that mean? You know, define speculating and gambling. And that was easy. You know, that was like throwing me a softball because there's there's three telltale signs that I've been talking about for decades that I was talked about or taught by my mentor um 15, 20 years ago. And and so, in no particular order, here is how you know if you are speculating or gambling with your investment money or if your advisor is um stock picking, track record investment, uh investing, or timing the market. Right. So if you're if you're doing any of those three things, if you're stock picking, if you're track record investing, or if you are timing the market, then you're speculating and gambling. You don't have to be doing all three, it could be one of them. And so when I start talking about that, of course, you know, these advisors, because they don't they don't necessarily have the same view, or maybe they haven't been taught the same view, it's just not something that's kind of been they've been confronted with. They were asking great follow-up questions, which honestly clients do too. And you probably might be just listening to uh or watching this podcast. And so, well, Joe, how how is individual stock picking, how is that gambling? Um, and what I would tell you, and and I'll kind of make this abbreviated, um, but it's pretty clear, like in order to invest in a single company. So Warren Buffett and people like him have been famous for saying, only invest in things you know. And I think we've talked about this on this podcast before. People say, Well, I really know Fill in the Blank Company, you know, I really know Apple. Yeah, I've I've I've studied it, I really know it. And I would and I would challenge people on that. Yeah, so whatever stock they're thinking of, I'm like, well, okay, who is the CEO? And in Apple's case, everybody pretty much knows, you know, Tim Cook, most people know that. Great. Okay, so you know who the CEO is. Do you know who the CFO is? And they don't. What about the COO? And they don't. How many employees do they have? And they're people will guess, but they're usually off by a factor of dozens, you know, multiple, like 10x, 20x. Um, we what was their last quarterly free cash flow? You know, you so you could ask anything. And it's not to be a gotcha, it's just to show like how little we actually, we all of us really know about any of these individual companies that we talk about that are in the news. What we know is the story. We know the marketing story. We know about Apple, we know Tesla. You know, Tesla and Elon Musk is putting people on the moon and or and in on Mars and the Boring Company and uh SpaceX and Electric. We know the story, but we don't really know the company. And so if that's the case, then you can't buy individual securities without gambling. It really is a gamble. It's not to say the gamble won't pay off. It just doesn't make a lot of sense to me to put any large amount of capital in any individual position when the point of the money is to fully fund your hopes, dreams, desires, and legacies. Like we don't need 40 and 50 and 60 percent moonshot returns year over year in order to, in order to fully fund your legacy and desires. We don't. We need we need sixes and sevens and eights and nines, and those can be accomplished um in a much more diversified manner by buying markets and allocating correctly. So for me, it's a non-negotiable. I'm not gonna buy individual securities for my clients because I know they don't know those individual companies. And I can tell you I don't know those individual companies. I just don't have the time uh or the bandwidth, nor do you, to sit down and go through the entire quarterly reports of these companies and let alone dozens of them, you know, in order to build a diversified portfolio. So, number one, we are not gonna uh individual stock pick. What's another sign that you're speculating and gambling, which is our non-negotiable? Well, another one would be track record investing. And, you know, I would say that this is the one that trips people up the most, especially advisors, because they're like, whoa, whoa, whoa, whoa, whoa. All right. So let me get this straight, Joe. You're saying that we're gonna build portfolios using statistics and using, you know, math and science, and to say, okay, risk premiums exist in areas like small companies over large companies and value companies over growth companies, and the highly profitable versus the lower profitable, and on and on and on. And I say, it's exactly what we're gonna do. You know, we're gonna use those historical risk premiums in order to build a portfolio that will get you the return, the efficient return based on the risk you're willing to take. And the advisor comes back to me, and you might be thinking this too is isn't that track record investing? Joe, small company growth stocks has a track record. You're looking at it and saying, oh, it's higher than you know, large growth companies, and so therefore we're gonna allocate more money to that. No, it's not track record investing, and this is not semantics, okay? There's a huge difference. Track record investing is not saying a certain risk premium can be demonstrated using statistical analysis. Okay, that's that's what the academics and that's what the Nobel's uh award-winning uh science is based on statistics and and and and beta and alpha and T stats and all this kind of cool stuff, all this math. Track record investing is not that. Track record investing is saying, hey, this manager of this fund has beaten the market, whatever market it is that they're talking about, over the last 10 years. And so obviously he or she knows what she's doing. Look at their track record, and so we're gonna allocate our money to that person. And the reason why I say that that's just another sign of speculating and gambling is the fact that somebody has beaten the market over X amount of years, an individual person, is not a good indicator of what they're gonna do over the next 10 years. In other words, we don't know, we can't really disseminate whether or not that was luck or skill in that manager's ability. And what we can say is that over long, long periods of time, you know, it's usually luck uh if somebody were to beat the market. In fact, if you tell me a manager has beaten the market over a certain period of time, a good length of time, um, you know, I just kind of look at that and say, that's not good information. Good information would be you telling me who's going to beat the market in the future, which is predictive and nobody knows the future, right? So um going back to that track record investing, also the industry can really play games with that. And so if you think along these lines, follow me here, and this is what we did at the uh at the conference too. I said, look, if I take five people on the front row, these five random people, and I run um an asset management firm and I hire all five of these people out of you know some Ivy League school and I give them each a hundred million dollars to manage, okay? And and I say, this is a competition. In five years, one of you is gonna be standing and you're gonna be the winner. Well, the first person, let's say at the end of the first year, has really bad numbers. They just didn't do well. So what I do as the portfolio manager is I fire them and I take whatever money's left and I roll it up into the other four. And the the bad return of that manager in that first year, I just kill that. That doesn't exist anymore. We shut down that fund, right? So those numbers don't get reported anywhere. We have four left. And we're just gonna keep doing this until we wind up at the end of the year with the last person standing who happened to just win over those five people. All of the money of the other managers wound up in that person's fund. And none of those bad numbers exist anymore. Only this one person's numbers existed, right? And so then what I do is I take those numbers and I advertise them. I say, look how amazing we are at managing this person's money. It's just survivorship bias. Again, from looking at just statistics, that's known as survivorship bias. It doesn't mean that that person was actually the most amazing manager on the planet. They just happen to win. But nobody could have picked that person ahead of time. So, no, we do not track record invest. We don't look at individual managers and say, oh, he or she did you know XYZ better than whatever market, and therefore we're allocating money to that. No, we are looking at markets, we're looking at asset categories and how they've behaved in some cases over a hundred plus years. And we're saying we don't know what's gonna happen in the future, but we're gonna allocate capital to those markets, to those asset categories, because they've demonstrated statistically risk premiums do pop up in those areas. Okay, so that so so far we've said, okay, stock picking, nah, we're not gonna do that. Track record investing, nah, we're not gonna do that. Non-negotiable. The third one is market timing. Now, market timing can get kind of um, you know, it it's it's uh it can it can sneak up on you. So an easy example of market timing is somebody to say, uh, hey, I uh my politician that I wanted to have win didn't win, and I think uh the next year, the next four years are gonna be really, really bad. And so I'm gonna pull my money out and put it in cash, and I'm gonna wait until the markets drop, and then I'm gonna put the money back in. And you so they try to time it. Um, and it can be politics, it can be uh you know something the Fed is doing, it could, it could be anything, it could be any, you know, any feeling that you have out there, and even if you've got data around it, you saying I'm gonna pull out of the market and then get the money back in, and I'm gonna do that over and over and over and try to time when I want my capital deployed, the the analytics on that are not good. The statistics tell us that time timing markets doesn't work over long periods of time. Um, because again, we can't predict the future. So if you're gonna time a market, you have to time it twice. You have to know when to get out, and you have to know when to get back in, and you have to do that every time. And we've just not been able to demonstrate anybody being able to do that rather than just staying invested the whole time. That's timing the market. But here's a sneaky way of timing the market because many of you are gonna be thinking or hearing this, and um, you might be clients of mine too, and say, Oh, I would never do that. You know, Joe's taught me so well over the last you know, 15 plus years, I'm not gonna do that. Well, here's another way you're timing the market, maybe. You don't even think about it this way. I'll get a phone call or an email from a client, and they'll say, Um, hey, the the markets are dropping, you know, because of the war in Iran. Uh, and I should is now a good time to put $200,000 into the market. And my question is always, well, where was the $200,000 before? Like, why didn't you put it in before? Was it sitting there waiting for this? Or does that $200,000 have a job to do? Is it supposed to be your emergency fund? Is it supposed to pay for college or the down payment on a new home? If that's the case, no, we're not going to invest it. It doesn't matter what's happening in the market. We need a we need a long period of time to take safe money and put it at risk in order to get a return. They might say, no, I've just been sitting on the cash waiting for a good opportunity. That's timing the market. Um, the worst thing that can happen to a gambler, by the way, whether you were track record investing or timing the market or picking individual stocks, is you actually are right once in a while. Just like when you sit at the blackjack table and you're looking at the cards and you're saying, Oh man, I know I'm supposed to hit on this 16, but uh, it just doesn't feel right. And you don't hit and it turns out you were right, you think you have a pattern now, but you don't. Math is math. Science is science, statistics falls in the area of uh statistical science and math, not speculating, not gambling. And so that's how we taught. We talked about that for about an hour and 20 minutes with these advisors. That that's a non-negotiable. Um, we will not speculate and gamble with your money. We will not facilitate it. We will not tell you it's okay for you to do it. And those are our non-negotiables.

SPEAKER_00 14:41

Joseph Delisi is a registered representative and financial advisor, Park Avenue Securities, LLCOSJ 5280, Carol Canyon Road, 300 San Diego, California, 92121, 619, 6486400. Securities, products, and advisory services offered through PAS, Member Fenra SIPC, financial representative of the Guardian Life Insurance Company of America, Guardian, New York, New York. PAS is a whole owned subsidiary of Guardian. WestPQL Partners LLC is not an infoliate or subsidiary of PAS or Guardian. Insurance products offered through West Packworth Partners and Insurance Services LLC and DBA of West Packworth Partners LLC. CA Insurance License number 0 D34103. This podcast is for informational purposes only and is not to be construed as tax legal or investment advice. Although information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian and subsidiaries, agents and employees do not provide tax legal or accounting advice. Guardian and subsidiaries do not issue or advice with regard to mortgages, property and casualty insurance, and or car insurance. Consult your tax legal or accounting professional regarding your individual situation. All investments and investment strategies contain risk and may lose value. Diversification does not guarantee profit or protect against market loss. Equities may decline in value due to both real and perceived general market economic and industry conditions. Investing in securities of smaller companies tend to be more volatile and less liquid than securities of large companies. Investing in the bond market is subject to certain risks, including market interest rate, issuer credit and inflation risk. This material is intended for general use. By providing this content, parking securities LSC or financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise active in fiduciary capacity. Past performance does not guarantee future results. In cities are unmanaged and one cannot invest directly in an index.