In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 1: The Determinants of the Risk and Return of Stocks and Bonds.

LEARNING: Look for key metrics, traits, or characteristics that help them identify stocks that will outperform the market.

In this episode of Investment Strategy Made Simple (ISMS), Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories Larry has developed over the 30+ years he’s been trying to help investors. Larry is the head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.

Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 1: The Determinants of the Risk and Return of Stocks and Bonds.

In this chapter, Larry looks at research that revolutionized how people think about investing and how to build a winning portfolio. The goal is to help investors learn how to look for key metrics, traits, or characteristics that help them identify stocks that will outperform the market, at least in terms of delivering higher returns, not necessarily higher risk-adjusted returns.

The first research Larry talks about is by Eugene Fama and Kenneth French. Their paper “The Cross-Section of Expected Stock Returns” in The Journal of Finance focused on research that produced what has become known as the three-factor model. A factor is a common trait or characteristic of a stock or bond. The three factors explained by Fama and French are:

1. Market beta (the return of the market minus the return on one-month Treasury bills)
2. Size (the return on small stocks minus the return on large stocks)
3. Value (the return on value stocks minus the return on growth stocks).

The model can explain more than 90% of the variation of returns of diversified US equity portfolios. The research shows that ensemble funds are superior to individual funds. It’s better to have a multi-factor portfolio. So you could own, say, five different funds that have exposure to each individual factor, or you own one fund that gives you exposure to all those factors. The ensemble strategies always tend to do better.

Larry also highlights a second model by professors Fama and French, the two-factor model that explains the variation of returns of fixed-income portfolios. The two risk factors are term and default (credit risk). According to the model, the longer the term to maturity, the greater the risk; the lower the credit rating, the greater the risk. Markets compensate investors for taking risks with higher expected returns. As with equities, individual security selection and market timing do not play a significant role in explaining returns of fixed-income portfolios and thus should not be expected to add value.

Another significant academic research publication is the study “Buffett’s Alpha.” The authors, Andrea...

BIO: Mark Kohler, M.PR.A., C.P.A., J.D., is a highly respected Founding and Senior Partner at KKOS Lawyers, specializing in tax, legal, wealth, estate, and asset protection planning.

STORY: Mark and his partner bought two properties to put up on Airbnb. The first property needed just a bit of modification, but the second one required far more. It took them more time and money than expected to get it ready for renting.

LEARNING: Take ownership of your mistakes. If a problem occurs, admit it, step up, and try to solve it—don’t run away or stick your head in the sand. The majority of trouble we face in our lives will be caused by ourselves.

Mark Kohler, M.PR.A., C.P.A., J.D., is a highly respected Founding and Senior Partner at KKOS Lawyers, specializing in tax, legal, wealth, estate, and asset protection planning.

With a reputation as a YouTube personality, best-selling author, and national speaker, Mark is dedicated to guiding clients through complex legal and financial landscapes to achieve their American Dream.

He also serves as the co-founder and Board Member of the Directed IRA Trust Company and has launched the Main Street Certified Tax Advisor Program to train CPAs and Enrolled Agents nationwide.

As the co-host of The Main Street Business Podcast and The Directed IRA Podcast, he simplifies intricate topics like legal and tax strategy, asset protection, retirement, investing, and wealth growth.

Mark Kohler’s commitment to helping entrepreneurs and small business owners attain success and financial security has made him a trusted expert in the field. He has helped countless individuals and businesses navigate the financial and business world with confidence.

Mark and his partner bought two properties in Arizona to turn into Airbnbs. They aimed to modify them over two to three months and set them up on the Airbnb platform. They hoped to start renting them out during the winter, which is a great Airbnb season. The first property was beautiful and simply needed yard furnishings.

At the same time, 10 blocks away was the other property, which they thought would need some minor work, just like the first property. A few weeks later, they realized the property would take a ton of work, but the train had left the station, and there was no turning back. And so the damage began. The two partners added a lot of value to this property, but it was far more than they wanted to bite off and chew. Modifying the property took more time and money than expected.

• You can make a good investment, and something outside your control happens.
• Take ownership of what you’re doing wrong.
• If a problem occurs, admit it, step up, and try to solve it—don’t run away or stick your head in the sand.

• The majority of trouble we face in our lives will be caused by ourselves.
• When you do something wrong, admit it to yourself as a first step.
• If you cause damage to another person, you must amend and resolve it.
• You can’t get help on...

BIO: Jusper Machogu is a farmer in rural Kenya, an agricultural engineer by profession, and an advocate for Fossil Fuels for Africa.

STORY: In this episode of My Wost Podcast Ever, Andrew and Jusper discuss the potential of fossil fuels to drive economic growth and development in Africa.

LEARNING: Africa needs more fossil fuels not aid.

Jusper Machogu is a farmer in rural Kenya, an agricultural engineer by profession, and an advocate for Fossil Fuels for Africa.

In this episode of My Wost Podcast Ever, Andrew and Jusper discuss the potential of fossil fuels to drive economic growth and development in Africa. Jusper argued that reliable and affordable energy is crucial for progress. Jusper is all about economic development in Africa and wants Africans to have what the rest of the world has. He wants Africa to be able to feed itself, to have access to reliable, abundant energy, lots of food, and economic development.

Jusper says that Africa needs lots of fossil fuels to achieve this, and Africans have plenty of them, so they don’t need much aid. What they need is investors in Africa. For instance, Africans can use fossil fuels to power their industries, such as manufacturing and agriculture, leading to job creation and economic growth. Africans can also use fossil fuels to generate electricity, which will improve access to energy and enhance productivity. These are just a few examples of how fossil fuels can be harnessed for African self-sufficiency and empowerment.

Jusper emphasizes that once Africa utilizes nitrogenous fertilizer, it will not only produce more food but also significantly improve livelihoods and economic development. He points out that Africa has ample fossil fuels to produce the fertilizer it needs, underlining the importance of African self-sufficiency in this crucial development aspect.

According to Jusper, another way Africa can attain economic development is by adding value to the food it produces and employing its people.

Jusper sheds light on the detrimental influence of international organizations like the IMF and World Bank in African countries. He argues that their policies, instead of fostering development, have led to increased hunger and economic hardship. This stark reality underscores the urgent need for change and a shift in focus towards empowering Africans to drive their own development.

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