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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BIO: August Biniaz is the Co-founder and Chief Investment Officer of CPI Capital. CPI Capital is a real estate private equity firm with the mandate to acquire multifamily assets while partnering with passive investors as limited partners.

STORY: Upon looking back and reflecting on the worst investment decision August has ever made, he says it’s his time, shiny object syndrome, getting excited about new investment ideas, and then putting a lot of time into learning about those ideas and losing that time.

LEARNING: Don’t be a jack of all trades and a master of none. Focus on your primary business. Stay in your lane.

August Biniaz is the Co-founder and Chief Investment Officer of CPI Capital. CPI Capital is a real estate private equity firm with the mandate to acquire multifamily assets while partnering with passive investors as limited partners. August was instrumental in the closing of over $208 million of multifamily assets since inception.

August educates real estate investors through webinars, YouTube shows, weekly newsletters, and one-on-one coaching. He is the host of Real Estate Investing Demystified PodCast.

Upon looking back and reflecting on the worst investment decision August has ever made, he says it’s his time, shiny object syndrome, getting excited about new investment ideas, and then putting a lot of time into learning about those ideas and losing that time.

In one incident, when crypto came around, August got involved in the crypto world, trying to connect with investors, creating businesses within the crypto world, and putting his brainpower and time into learning about this new asset class. However, August went down a rabbit hole that took him away from his main focus.

In another incident, an asset class came across his desk. This was the build-to-rent single-family rentals or BTRSFR. After the great financial crisis in 2008, single-family homes in the US were selling for pennies on the dollar. Wall Street got involved, knowing that the market would eventually turn around, and started buying portfolios of single-family homes. However, as they managed these properties, they realized they were handled similarly to multifamily ones. So, they created this new asset class: build to rent single-family rentals.

August brought this idea to investors in his database and invested in a development project. It was a former purchase contract in which August partnered with a developer. This deal created some difficulties for his investors, partners, and himself. He never closed on that deal. This deal diverted August’s focus from his main business, and he lost opportunities there.

• Being a specialist is very important if you’re dealing with investors and have partners. Don’t be a jack of all trades and a master of none.
• Focus on your primary business.
• Stay in your lane.
• Have tunnel vision in the business that you’re part of
• Understand what’s happening in macro, economic, and political situations.

When things aren’t working well, it’s apparent that you may need to find something else or double down on your efforts to fix them.

If you’re in

BIO: William Browder is the CEO of Hermitage Capital Management, Head of the Global Magnitsky Justice Campaign, and author of Red Notice and Freezing Order.

STORY: Bill moved to Moscow at the age of 31 and was the only Westerner there with any Wall Street skills. That led him to become the largest foreign investor in the country. His decision to go to Russia was the worst investment of his life. Although Bill made a fortune for his clients and a smaller portion for himself, he wishes he never moved to Russia because a lot of people have died, and a lot of lives have been ruined.

LEARNING: Don’t go to Russia.

William Browder is the CEO of Hermitage Capital Management, Head of the Global Magnitsky Justice Campaign, and author of Red Notice and Freezing Order.

Bill was once Russia’s largest foreign portfolio investor until being declared “a threat to national security” in 2005 for exposing corruption in Russian state-owned companies.

In 2008, Mr. Browder’s lawyer, Sergei Magnitsky, uncovered a massive fraud committed by Russian government officials stealing US$230 million of state taxes and was subsequently arrested, imprisoned without trial, and systematically tortured.

Sergei Magnitsky died in prison on November 16, 2009. Ever since, Bill Browder has led the Global Magnitsky Campaign for governments around the world to impose targeted visa bans and asset freezes on human rights abusers and highly corrupt officials, introducing the passage of the Sergei Magnitsky Accountability Act in 2012, & the Global Magnitsky Human Rights Accountability Act 2016. Which has since been adopted by 11 countries, including the USA, UK, Canada, and New Zealand.

During his teenage rebellion, Bill faced a unique challenge, how to rebel from a family of communists. Undeterred, he hatched a daring plan to don a suit and tie and embrace capitalism. His graduation from Stanford Business School in 1989 coincided with the fall of the Berlin Wall, a moment that sparked a profound realization. With his grandfather’s communist legacy and the Berlin Wall’s collapse, Bill set his sights on an audacious goal to become the leading capitalist in Eastern Europe.

Bill aimed to become the largest investor in that part of the world. He eventually achieved that goal at the very young age of 25. Bill discovered the Russian privatization program, which basically gave everything away for free.

Bill moved to Moscow at the age of 31 in 1986, and he was the only Westerner there with any Wall Street skills. That led him to become the largest foreign investor in the country.

While initially lucrative, Bill’s decision to move to Russia proved to be a double-edged sword. He made a fortune for his clients and a smaller portion for himself, but the cost was high. Lives were lost, and many were left in ruins. Bill reflects on this, considering it the worst investment of his life.

• There are two choices for people who want to rebuild Russia: You can either go back and become part of the criminal enterprise or don’t go back. If you go back and try to fix it, you’ll become an enemy of the regime and go to jail. So, you can either become imprisoned or become a...

In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. Today, they discuss three chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this series, they discuss mistake number 32: Are You Subject to the Money Illusion? Mistake 33: Do You Believe Demographics Are Destiny? And mistake 34: Do You Follow a Prudent Process When Choosing a Financial Advisory Firm?

LEARNING: Understand how the money illusion works to avoid making financial mistakes. Focus on managing risk and not trying to manage returns. Past performance is meaningless for active managers.

In this episode of Investment Strategy Made Simple (ISMS), Andrew gets into part two of his discussion with Larry Swedroe: Ignorance is Bliss. 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 three chapters of Larry’s book Investment Mistakes Even Smart Investors Make and How to Avoid Them. In this series, they discuss mistake number 32: Are You Subject to the Money Illusion? Mistake 33: Do You Believe Demographics Are Destiny? And mistake 34: Do You Follow a Prudent Process When Choosing a Financial Advisory Firm?

According to Larry, one of the illusions with great potential for creating investment mistakes is the money illusion. Money illusion occurs when people confuse inflation returns, nominal or real returns, and how the economy is impacted differently. It has great potential for creating mistakes because it relates to one of the most popular indicators used by investors to determine if the market is undervalued or overvalued, known as the Fed Model.

The problem with the Fed Model, leading to a false conclusion, is that it fails to consider that inflation has a different impact on corporate earnings than it does on the return on fixed-income instruments. Over the long term, the nominal growth rate of corporate earnings has been in line with the economy’s nominal growth rate, and the real growth rate of corporate earnings has been in line with the economy’s real growth. Thus, the real growth rate of earnings is not impacted by inflation in the long term. On the other hand, the yield to maturity on a 10-year bond is a nominal return, and, therefore, the real return on the bond will be negatively impacted by inflation. The error of comparing a number that is not impacted by inflation to one that is leads to the “money illusion.”

Larry says the empirical evidence and logic are pretty simple: Corporate earnings grow in line with the GDP. If they grew much faster, they would dominate the whole economy, and there’d be nothing left for wages.

While gaining knowledge of how a magical illusion works has the negative effect of ruining the illusion, understanding the “magic” of financial illusions is beneficial to investors as it should help...

BIO: Chris Ball started his career in 2004 as a tax adviser with KPMG LLP. He then transitioned and founded Hoxton Capital Management in 2018. The group’s sole emphasis is helping HNW and UHNW clients with borderless global financial advice. Chris’ specialty is assisting individuals with their retirement planning needs.

STORY: When Chris started his career young and fresh, he got into spread betting. That didn’t go so well, and he lost 10,000 pounds, which was a lot of money in 2008. In terms of business, he wasted over $750,000 on bad hiring decisions.

LEARNING: Don’t enter markets that you don’t understand. If someone is not 100% right, don’t hire them.

Chris Ball started his career in 2004 as a tax adviser with KPMG LLP. After seven years with KPMG, Chris moved to the Middle East to join the deVere Group, where he continued his work as an IFA. He started in their Abu Dhabi offices and eventually headed up the Qatar operations for the group, which dealt with HNW and UHNW individuals.

Chris then transitioned and founded Hoxton Capital Management in 2018. The group’s sole emphasis is helping HNW and UHNW clients with borderless global financial advice. Chris’ specialty is assisting individuals with their retirement planning needs.

Chris has three children with his wife.

When Chris started his career young and fresh, he got into spread betting. That didn’t go so well, and he lost 10,000 pounds, which was a lot of money in 2008. In terms of business, he wasted over $750,000 on bad hiring decisions.

• Don’t enter markets that you don’t understand.
• If someone is not 100% right, don’t hire them.
• Playing at things never produces good results. You have to be 100% dedicated and focused on your work.

Hire and fire quickly. If someone is not suitable and you spot it, fire immediately. Don’t keep giving people a chance after chance.

Chris recommends using his recently launched Hoxton Wealth App, available on iTunes, Apple App Store, Google Store, and the company’s website. It’s completely free. The app enables people with accounts in different countries to live link those accounts and view them in a currency of their choice. It also has cash flow modeling, which enables people to see if they have enough money saved for various goals.

Chris’s number one goal for the next 12 months is to launch a wealth app and attract 100,000 users.

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BIO: Vivek Raina is a seasoned veteran with over two decades of experience in the broadband industry. As the CEO and Co-Founder of Excitel, he leads the mission to connect BHARAT, propelling the company to the top three ISPs in India—a remarkable feat in just eight years.

STORY: Vivek spent 10 years finding an investor to fund his business idea. He wishes he had spent these years advancing his corporate career.

LEARNING: Working for somebody is fragile. Every failure teaches you something and makes you a better version of yourself. Do something you’re passionate about.

Vivek Raina is a seasoned veteran with over two decades of experience in the broadband industry. As the CEO and Co-Founder of Excitel, he leads the mission to connect BHARAT, propelling the company to the top three ISPs in India—a remarkable feat in just eight years. With a million subscribers spanning 55+ cities, Vivek’s leadership has revolutionized lives through pioneering unlimited internet broadband.

Vivek hails from Kashmir and is now based in Delhi. His journey includes impactful roles at Hathway, Reliance, and Pacenet, highlighting his exceptional leadership skills.

Within two years of employment, Vivek had decided he would not stay employed—he would do something independently. Vivek started showing his ideas to people, hoping that someone would be interested in funding him. Some of the ideas were really bad, while others were good. Vivek didn’t manage to get an investor. Most people would offer him a salary or some incentives to work with him. It took Vivek 10 years to convince somebody to invest money in his idea. It took another three years to convince them to start a company, and in 2014, he got his first investment.

Vivek considers the 10 years he spent making this foundation his worst investment ever because if he had concentrated on a corporate job instead, he would be a millionaire by now. It’s also his best investment because if he had not gone through the grind and learned what he learned, he wouldn’t have been the successful entrepreneur he is today.

• Working for somebody is fragile.
• Every failure teaches you something and makes you a better version of yourself.
• Do something you’re passionate about—nobody can beat you at what you’re good at.

• Don’t be too harsh on yourself when you fail. Remember, you did your best with what you knew at the time.

To succeed, you need to be where the action is. Secondly, decide what to do because this is a once-in-a-lifetime shot. If you get it wrong, you lose many years. So choose carefully, and pick the stuff you’re naturally good at.

If you’re interested in startups and want to be successful in business, Vivek recommends reading Nicholas Taleb’s Taleb’s books. They will change your perspective.

If you need to be aware of your own biases and how your mind plays with you, read Daniel Kahneman’s Thinking, Fast and Slow, and The Almanack of Naval Ravikant: A Guide to...