Investing Meetup Report (Part 4)

I left off explaining what the Meetup presenters did that left me wanting.

I just asked whether Dimensional Fund Advisors was a company like Blackrock.

For the record, I am very skeptical about the supposed “DFA advantage” that Dimensional Fund Advisors advertises. It was never my intent to argue about whose funds were better.

Rather than just saying “yes, DFA is another fund company,” they gave me an unnecessary/lackluster attempt at sales. By pooh-poohing DFA out of ignorance, they implied superiority of their product. This certainly doesn’t sound like an objective Fee-Only advisor to me. A Fee-Only advisor should do what is in my best interest and that would require knowing what else is out there! If they were going to deliver a sales pitch then they should have had a politically correct response why Blackrock is as good for me or better than DFA. Their ignorance does not mean theirs is better if they are simply fools.

And their ignorance did suggest to me that they may simply be fools. DFA has been a subject for discussion in Forbes, by CBS, on CNBC and MSNBC: they are world renowned. Their list of “Academic Leaders” (board members) is a veritable Who’s Who of options, investing, and risk analysis: Eugene Fama, Kenneth French, Robert Merton, Myron Scholes, Roger Ibbotson… are you kidding me?! How could our presenters not know about DFA? Despite my skepticism, even I am awestruck by the celebrity of DFA’s board members and the level of “expertise” they represent. To plead ignorance strikes me as utter incompetence on the part of the presenters.

I’ll wrap this up in the next post.

Investing Meetup Report (Part 3)

Last time I reviewed Mr. Know It All’s contribution to my recent Meetup experience. Today I discuss the presenters: a financial advisory team headquartered just across the street.

Yes, they were actually financial advisors! I can see your jaw on the floor so I’ll wait just a moment for you to pick that up.

One advertised purpose of this Meetup was to teach. How can they aim to teach gratis and work to financially advise us, which entails teaching for a fee? Without the fee, would they teach enough to enable us to invest on our own? No…

Another advertised purpose was for networking. Do they really want prospective investors to meet and potentially collaborate when that may preclude us from hiring financial advisors? No! Only if good feelings from meeting others translates to gratitude and perhaps the eventual hire of their company has the Meetup achieved its true marketing purpose.

For these reasons, I consider this Meetup to be a significant conflict of interest. If the organizers knew beforehand that no Meetup attendees would ever become clients then I doubt they would ever spend the money to create and fund this group.

In the presentation, one topic they discussed was “questions to ask potential financial advisors.” They discussed Commission-Only, Fee-Based, and Fee-Only advisors. They were eager to identify themselves as Fee-Only advisors. They said Fee-Only advisors have a fiduciary responsibility to the client and don’t make money off the particular funds sold. Fee-Only advisors pursue the client’s best interests at all times.

For me, the presentation fell apart when I asked about Dimensional Fund Advisors (DFA). I noticed their slides had “Blackrock” (a financial services company) in the lower left-hand corner. I asked if DFA is a competitor of Blackrock. The speaker looked around at his two colleagues and shrugged his shoulders. He explained something about how he sticks with the funds that trade in largest volume, that have the best and most experienced management, etc. He did not answer my question nor did he even acknowledge DFA.

What is wrong with this picture?

Investing Meetup Report (Part 2)

Today I continue reviewing a Meetup I attended earlier this week.

Three of the six attendees were totally new to investing. From speaking to many beginners over the years, they are often in search of “holy grail” type knowledge. As I compliment them for taking the time, they feel they are gaining edge over others who make no effort to learn. They seem motivated to soak up everything they hear and they seem to believe anyone who seems credible or authoritative.

Aside from the Organizers, Mr. Know It All seemed most credible the other night! He spoke dogmatically and two of the newbies were quite taken by his words.

Since Mr. Know It All mentioned that he trades futures, I went over to him afterward. I eventually interrupted his monologue and asked point-blank whether he makes money. He responded negatively. He said he’s retired, he does this “just as a hobby,” and he expects to lose.

This gambler’s mentality is not uncommon. Many people go to Vegas with hopes of striking it rich while expecting to lose. I hope most have a reasonable limit in mind of how much they will lose before they quit. Whether responsible or not with this limit, for someone like me who trades for a living this gambler’s mentality is appalling.

The problem I have with Mr. Know It All spouting “knowledge” to beginners is that he loses money. He clearly likes to talk and he enjoys when others listen but why should they: so they can lose money too? Unfortunately, I think people are often so ignorant about financial literacy that even if told someone loses money they will listen anyway. At the very least, beginners may figure he’s further along the path to wealth than they are so they might as well grab onto his coattails.

We really don’t know if Mr. Know It All is on the rainbow walking toward the pot of gold or whether he is caught in a vicious cycle with a mistaken belief that every subsequent loss teaches him something critically new. As an irresponsible gambler, he may be prepared to lose all his money until he starts to see gains and no beginner should ever be exposed to toxicity like this.

Investing Meetup Report (Part 1)

I have attended several trading/investing Meetups over the years. Because I perceived an inherent conflict of interest between the Organizers and the attendees, I used to be very put off by these events. I have since developed an appreciation for networking in this business, however.

The other night, I attended a new Meetup. The advertisement for this Meetup specifically included a time slot for networking. This felt different to me. For this reason and the promise of free appetizers, I decided to go.

In the end, I found this Meetup to be very typical of others in my experience. I will review the evening in this blog series.

I arrived 15 minutes early and found the auditorium to be locked. An older man, dressed business casual in a coat and button-down shirt, was also present. He was another attendee and in short order he began spouting off “knowledge” about the markets, how investments work, ETFs, etc. I didn’t ask any basic questions or do anything to suggest I was looking for him for any answers.

This guy definitely fell into the “know-it-all” classification. He started talking about “market truths.” First, everything about the markets is random. Things have a 50/50 chance of going up or down. Second, over the long-term things will go up. “Believe in the power of humanity,” he suggested. Believe that innovation and productivity will continue, earnings will grow, new inventions will be created, etc. I wonder if this guy had ever seen a dystopian movie?

His third truth was John Maynard Keynes’ “markets can remain irrational longer than you can stay solvent” concept. I asked if he was therefore a trend-follower.

“Absolutely,” he said.

“What happens when the markets revert to the mean?”

“Well sometimes when you have a fractal trading within a fractal and something gets overextended…”

I’m not kidding: he honestly started talking about a fractal within a fractal. I could virtually see the stinky brown, gushy stuff overflowing from his brain compartment.

I will continue in the next post.