The allure of stock picking is undeniable. Tales of investors who made millions by picking the right stocks at the right time are captivating and inspire many to try their hand at this seemingly lucrative endeavor. However, the reality of stock picking is far less glamorous. In fact, the overwhelming majority of individual investors and professionals alike fail to beat the market consistently. We will discuss the problems with stock picking, explore alternative investment strategies, and provide practical advice for achieving long-term financial success.
The Problem with Stock Picking
The track record of stock pickers is abysmal. According to numerous studies, over 80% of actively managed funds underperform their benchmark indices over the long run. This failure can be attributed to several factors, including the psychological traps that plague investors. Confirmation bias, overconfidence, and the illusion of control lead individuals to make irrational decisions when picking stocks. Additionally, the impact of taxes significantly erodes returns, further disadvantaging stock pickers in their quest for market-beating performance.
Why Diversification is Key
Diversification is the cornerstone of a sound investment strategy. By spreading your investments across various asset classes, sectors, and geographic regions, you can reduce the overall risk of your portfolio while maintaining the potential for attractive returns. To effectively diversify, consider investing in structured funds with proper asset allocation. This approach allows you to capture market returns while controlling costs and mitigating the risks associated with individual stock picking.
The Role of Structured Asset Class Investing
Structured asset class investing is an investment approach that aims to capture the returns of specific asset classes, such as stocks, bonds, and real estate, through a disciplined, rules-based methodology. This strategy has several advantages over individual stock picking, including lower costs, greater diversification, and a more systematic approach to capturing market returns.
It is important not to confuse asset class funds with index funds. Asset class funds target specific risk dimensions and premiums of a particular asset category (such as large stocks, small stocks, value stocks, microcap stocks) unlike retail index funds that buys stocks to track a particular market index.
The Case for Structured Asset Class Investing
Structured asset class investing sits between active investing and indexing. This approach combines the benefits of both strategies, offering cost-effective diversification, and a more targeted approach to capturing market returns and risk premiums. This type of investing is based on years of academic research and science. At Ballentine Capital Advisors we utilize a structured asset class methodology to construct a diversified portfolio that aligns with an investors financial plan and goals based on their risk preference and tolerance. Our goal is not to subject investors to unnecessary risk but to create a detailed plan and strategy based on an investor’s goals and financial needs.
Understanding Risk and Return
Risk and return are inextricably linked; higher potential returns typically come with higher levels of risk. To manage risk in your portfolio, it’s essential to diversify across asset classes, sectors, and regions, as well as maintaining a long-term perspective. Market volatility is a natural part of investing, but investors who remain disciplined and focused on the long term are more likely to achieve their financial goals.
Behavioral Finance and Investing
Emotions play a significant role in investing, often leading to suboptimal decisions. Cognitive biases, such as loss aversion, herd mentality, and anchoring, can negatively impact investment decisions and lead to poor performance. To avoid these common behavioral pitfalls, we adopt a systematic approach to investing, focus on the long-term, and walk with investors so they have the confidence in any type of market to avoid emotional decision-making.
In conclusion, stock picking is a gamble that most investors can’t win. Despite the allure of picking individual stocks, the track record of stock pickers is abysmal, with the overwhelming majority failing to beat the market consistently. Instead, a sound investment strategy involves diversifying across various asset classes, sectors, and geographic regions to reduce overall risk while maintaining the potential for attractive returns.
Structured asset class investing offers a disciplined, rules-based approach to capturing market returns, combining the benefits of both active and passive investing. To achieve long-term financial success, it’s essential to manage risk, maintain a long-term perspective, and avoid common behavioral pitfalls through systematic investing and seeking guidance from a trusted and capable financial advisor. By adopting these strategies, investors can increase their chances of achieving their financial goals and avoiding the pitfalls of stock picking.
Have a great weekend!
Source: Ballentine Capital Advisors
Golf Tip of the Week
Masters 2023: Jon Rahm’s Masters Moment
Augusta, Ga. — They roamed with purpose, Jon Rahm and Brooks Koepka, big and powerful and inevitable, like water buffalos on the hunt. The Masters is usually more romantic and less pugilistic. But romance went out the window after Friday’s 30-degree temperature drop and Saturday’s second coming of Noah’s Ark washed away the meek. And though there were others after the same prize, from the start of Sunday’s marathon, the field of 51 was really down to two, Rahm and Koepka, together in isolation, both knowing there was enough for just one to eat.
It wasn’t pretty, because hunts rarely are. It wasn’t dramatic, because hunts are only dramatic on Animal Planet. The thing about hunts is they are not won by the quickest or most ferocious. Those are assets, but the true arbiter of a hunt is a refusal to surrender. As his opponent lost his breath and succumbed to fatigue, Rahm stayed steady, remained patient and struck with precision. And for that he captured the 87th Masters Tournament.
“Hard to put it into words. Obviously we all dream of things like this as players, and you try to visualize what it’s going to be like and what it’s going to feel like,” Rahm said after authoring a final-round 69 for a four-shot win at 12 under over Koepka, who closed with a 75, and Phil Mickelson (65). “And when I hit that third shot on the green [at the 18th], and I could tell it was close by the crowd’s reaction, just the wave of emotion of so many things just overtook me. Never thought I was going to cry by winning a golf tournament, but I got very close on that 18th hole.”
Rahm established himself as a big-game hunter well before this week. He won the U.S. Open in 2021 and owns nine top-10 finishes at majors. He was a one-man wrecking crew for Europe’s losing side at the pandemic-delayed 2021 Ryder Cup. He had 19 worlwide victories, six of them coming since last year’s trip to Augusta. The only thing that briefly extinguished his early-season heater was a stomach bug at the Players Championship. He returned to No. 1 in the world on Sunday and certified his reputation as one of this generation’s certified alphas, a standing he cemented on Thursday when bouncing back from a four-putt double bogey at the first to turn in a 65.
He’s also that rare talent who is judged not against his peers but to the past, forever linked with his fellow countryman, the great Seve Ballesteros, and that comparison casts a mighty shadow. In some ways, it is a lazy analog. OK, Rahm shares the spirit for competition that Seve did, and possesses the soft touch capable of conjuring magic around the greens. But Rahm’s game is more consistent and measured and total, a game that produces rounds that can come off as plodding in the best possible connotation. He knows what he needs to do, then sticks to the plan. Ballesteros? A tortured artist whose work sometimes went way outside the canvas.
Conversely, though that creativity came at the expense of results, there was no doubt the beauty of what Seve produced. Perhaps it’s no surprise that one of the few critiques of Rahm is that it would behoove him to deviate from script and recognize that golf calls for bravado and occasionally a bit of wild cowboy. He had reached the sport’s apex with that U.S. Open victory, and whatever happens after doesn’t supersede the climb. However, there are a select few that are held to a different standard. That one mountain isn’t enough. Their talents beget more summits to reach, and failing to add to that total is seen as squandered potential. The standards are vicious, but that is the deal with stardom. Rahm is blessed with that curse, those top-10s seen by some not as a display of Rahm’s talent but an indictment that when the golf matters the most, Rahm’s golf routinely falls just short. That includes at the Masters, where Rahm finished T-9 or better four times but never contended late.
Sunday offered the chance for Rahm to rewrite his story and do so with vigor. Multiple weather delays meant 30 holes were on tap for the final day at Augusta National, and though the green jacket is never conferred, it would take a special type of fortitude to don it this time. Resuming his third round on the seventh green, Rahm’s four-shot deficit to Koepka was cut to two as they walked to the eighth, Rahm making birdie to Koepka’s bogey. Any aspirations of a Sunday morning charge, however, were quickly erased.
It was no longer raining in Augusta and the dulcet tones that bounced off the loblolly pines assured the SubAir systems were at work, but the grounds remained wet and the sky remained cold, so the course played long and tough. It was unwise to be aggressive and those who tried were punished.
“It was a tough day out there. It was windy, and all those wind gusts are not easy,” Rahm said. “You can hit good shots that are going to end up in bad spots, and it happened to everybody.”
That included Sam Bennett, the amateur paired with Koepka and Rahm who for two days held his own with the pros but suddenly looked like a boy among men and became nothing more than a bystander as the morning went on. Both Koepka and Rahm played steady, albeit unspectacular golf over their final 11 holes, putting the two in the final group for the afternoon, a heavyweight billing that major championships often hype but rarely deliver.
Except, despite the sun finally realizing it had a tee time to make, Augusta National remained mean in Round 4. This would be a heavyweight fight, all right. Only the winner would not be decided by who dished out the most heat but who would be the last man standing. Rahm struck first with a birdie at the third and Koepka bogeyed the fourth, and with 14 holes the duel seemed to be on.
Only Koepka, who for the previous three days appeared to be the Koepka of old, looked like a Koepka who could not get the stick out of neutral. Maybe it was the long day to a body whose impressive physique belies its mileage and scars, or a bit of competitive atrophy from the friendly confines and 54-hole limits at LIV Golf. Or it was just one of those days where every bounce is bad, when the wind goes up when you think it’s down, when the flag posts a sign that says “Sorry, we’re closed,” when it seems like there are higher forces at work and for some reason they are working against you.
Whatever the reason, Sunday was not Koepka’s day.
Koepka bogeyed the sixth, parred the very birdieable eighth, and made a mess around the ninth green for 5. There was a nice up-and-down at the 10th, but another short-game miscue at the 12th. After reaching 12 under at one point, he left Amen Corner at minus seven to give Rahm a three-shot lead and ending Koepka’s Masters chances.
“Obviously, it’s super disappointing. Didn’t play good enough to win. Hit some shots where I also feel like I didn’t get some good breaks,” said Koepka, who closed with 73-75. “Didn’t feel like I did too much wrong, but that’s how golf goes sometimes.”
Far ahead, Jordan Spieth and Mickelson cobbled together runs that, while not quite applying pressure, assured Rahm could not commence his victory parade, at least not yet. What followed from Rahm was not flashy and certainly without the flair of Ballesteros; there was no hitting from other fairways or finding windows through walls of pine. That’s also not what the situation called for. He made the turn in one under, managed pars at the tough 10th, 11th and 12th, then put the tournament on ice with birdies at the 13th and 14th.
Plodding, sure. Today, plodding was good. The only issue in doubt over the final hour was the final margin.
“When I’m out there, I have a job to do,” Rahm said. “I’m also never going to give up. Even if I shoot myself out of contention, whatever, and I can finish strong to give myself a possibility to finish fourth … it’s always going to be better than anything. So I wouldn’t be able to live with myself if I didn’t try my hardest on every shot, so maybe that’s where it comes from.”
So what do we make of Rahm? Two majors and 20 wins, all before age 29. The first European to grab both the Masters and U.S. Open. The type of tour de force performance that fulfilled the lofty ambitions his talents promised and instills wonders of where he might ultimately go. That’s all well and good. It’s also worth appreciating the moment for what it is and what it means.
For Rahm, who has always been liked and respected, but not exactly beloved, it was watching that admiration turn into something more this weekend at Augusta National. To know he was no longer a curiosity, the fledgling talent with prodigious skills and sometimes prodigious temper. Over the past year in golf’s civil war, Rahm has proven to be one of its most astute and reasoned voices, speaking with poise on a matter that tends to get heated. He let us know what he believed was right without saying who was wrong. His heightened play certainly aids his popularity, but that fans now have a better idea of the man doing the performing doesn’t hurt.
Maybe that’s why the patrons were so strong and loud in Rahm’s corner. They know what this tournament means to him, how much he wanted it, so they let him know they were here to carry him home.
“The support was pretty incredible all throughout, and I kept hearing, “Seve! Seve! Seve! Do it for Seve!,” Rahm said. “I heard that the entire back nine. That might have been the hardest thing to control today, is the emotion of knowing what it could be if I were to win; that might have been the hardest thing.”
Ah, yes, Seve. The ghost Rahm will forever chase. It was noted often that Sunday marked the 40th anniversary of Ballesteros’ last Masters win, and a day that would have been Ballesteros’ birthday. Turns out there was some romanticism at this Masters after all.
Seve would have liked a day like this Masters marathon, because it separated those who pretend to be bad men from those who are. You better believe Jon Rahm is a bad man, because it is Sunday night at Augusta National, and he is the last one standing.
Tip adapted from golfdigest.comi
Recipe of the Week
Stuffed Lasagna Pie
- Kosher salt
- One 16-ounce box dried curly-edge lasagna noodles (not no-bake)
- 2 tablespoons breadcrumbs
- 3/4 cup plus 2 tablespoons grated Parmesan
- Nonstick cooking spray
- 3 cloves garlic, crushed
- 1 carrot, cut into chunks
- 1 stalk celery, cut into chunks
- 1/2 onion, cut into chunks
- 2 tablespoons extra-virgin olive oil, plus more for brushing
- 4 links sweet Italian sausage (just under 1 pound)
- 1 pound 80-percent lean ground beef
- 1 pound ground pork
- 1/2 cup tomato paste
- 1 teaspoon dried oregano
- 1/4 teaspoon crushed red pepper flakes
- 1/2 cup dry white wine
- 1 pound fresh ricotta
- 1 large egg, beaten
- 1/2 cup fresh basil leaves, chopped, plus sprigs for garnish
- 1/2 cup fresh Italian parsley leaves, chopped
- 8 ounces low-moisture mozzarella, sliced
- 2 cups marinara sauce, warmed
- Preheat the oven to 400 degrees F. Bring a large pot of salted water to a boil. Cook the noodles until pliable but still very al dente, about 3 minutes less than the package cooking time. Drain, but do not rinse. (The starch from the noodles will help them stick to the sides of the pan.) Spread on a baking sheet. Cut 4 of the noodles crosswise into thirds.
- Toss the breadcrumbs and 2 tablespoons Parmesan together in a small bowl. Spray a 10-inch tube pan with cooking spray. Coat with the Parmesan breadcrumbs, tapping out the excess.
- Combine the garlic, carrot, celery and onion in a food processor or mini food processor and process to a paste.
- Heat 1 tablespoon olive oil in a large skillet over medium heat. Prick each sausage with a fork and cook until browned, 5 to 6 minutes; remove and set aside. Add the remaining tablespoon olive oil to the skillet and crumble in the beef and pork. Cook, breaking up with a wooden spoon, until browned, about 4 minutes. Add the aromatic paste from the food processor. Cook, stirring occasionally, until it dries out, about 3 minutes. Make a space in the middle of the pan and add the tomato paste. Cook, stirring the tomato paste until it darkens a shade or two, about 2 minutes, then stir into the meat. Season with the oregano, red pepper flakes and 1/2 teaspoon salt. Add the white wine and cook until reduced by half, about 1 minute. Add 1 cup water and simmer rapidly until very thick, 4 to 5 minutes.
- Combine the ricotta, egg, basil, parsley and 1/2 cup Parmesan in a medium bowl.
- Line the prepared pan with the whole lasagna noodles, overlapping slightly. Spread about half of the meat sauce in the bottom of the pan on top of the noodles. Nestle the sausages into the meat sauce, pressing down to submerge them about halfway. Top with a third of the sliced mozzarella, breaking the slices to fit. Top with half of the cut noodle pieces and press down gently. Spread the ricotta mixture over the noodles and top with another third of the mozzarella. Top with the remaining cut noodles and press again. Spread over the remaining meat sauce and top with the remaining mozzarella. Fold over the noodles used to line the pan to encase the filling and brush with olive oil. Sprinkle with the remaining 1/4 cup Parmesan.
- Cover the timpano with foil and bake until heated through, 30 to 35 minutes. Uncover and bake until the top is crisp and golden-brown, about 30 minutes more. Let rest 45 minutes to 1 hour before unmolding. Run an offset spatula or butter knife around the edges of the pan to ensure it can be removed with ease. Unmold the lasagna by inverting it onto a serving platter. Arrange the basil sprigs in the middle. Slice with a serrated knife and serve with the marinara on the side.
Recipe adapted from foodnetwork.comii
Health Tip of the Week
Study Offers Dozens of Reasons to Cut Sugar
A new compilation of nearly all research to date on the health impacts of sugar offers dozens of reasons to cut back now.
Researchers from China and the U.S. rounded up 8,601 scientific studies on sugar and combined them to evaluate its impact on 83 health outcomes. The studies accounted for decades of research on the topic, stretching back to the beginning of the largest electronic databases for scientific papers.
The result is a list that cites the world’s most common health problems like heart disease, diabetes, obesity, high blood pressure, heart attack, high cholesterol, cancer, and depression. The findings were published this week in the journal BMJ. Researchers looked at studies that evaluated the impacts of consuming free sugars, which means any food that contains processed or naturally occurring sugars like table sugar, honey, or maple syrup. Sugar found in whole fruits and vegetables and in milk is not free sugar.
U.S. dietary guidelines recommend getting no more than 10% of daily calories from added sugars. For a typical 2,000-calorie-per-day diet, that equals no more than 200 calories, or about 12 teaspoons. The CDC reports that the average person consumes 17 teaspoons per day, with the largest sources being sugar-sweetened beverages, desserts, and snacks. (For context: one 12-ounce can of soda contains the equivalent of 9 teaspoons of sugar, according to beverage maker Coca-Cola.)
The new analysis also found links between sugary beverage consumption and other diet and lifestyle characteristics that may contribute to health problems.
“People who consumed sugar sweetened beverages more frequently were likely to ingest more total and saturated fat, carbohydrate, and sodium and less fruit, fiber, dairy products, and wholegrain foods,” the authors wrote. “This dietary pattern was also associated with more frequent smoking and drinking, lower physical activity levels, and more time spent watching television. Therefore, the role of these confounding factors should be taken into consideration when explaining the association between sugar consumption and burden of disease.”
Recommendations for limiting sugar consumption are in place worldwide, the authors noted. They concluded that more needs to be done given the known health dangers of sugar.
“To change sugar consumption patterns, especially for children and adolescents, a combination of widespread public health education and policies worldwide is urgently needed,” they said.
Tip adapted from webmd.comiii
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