In the 44th edition of our award-winning Best of the Best Blogger series, I was thrilled for the opportunity to sit down with Mike Piper from Oblivious Investor.
While Mike’s path with Oblivious Investor has been very linear, it has been impressive nevertheless. His first job out of college was as a financial adviser with Edward Jones. To his utter disappointment, he quickly learned that his brand new job was less about financial advising and much more about selling Edward Jones financial products and services.
Piper was really looking for a legitimate opportunity to help people with his true passion of investment research and tax planning because, as he describes it, “knocking on doors and making cold calls” was not exactly what he had envisioned as a career path.
Coupled with the disillusionment of his new found career, along came the stock market crash of 2008 and a few panicked phone calls and emails from family and friends. Alas, Oblivous Investor was born.
Along the way, Mike has built quite a reputation as a prolific writer, authoring 8 book titles to date, including “Can I Retire?” and “Investing Made Simple“. All of his books have garnered exceptional Amazon reviews, commonly being described on the site as “concise”, “easy to understand” and “very informative”.
His investment philosophy is all about minimizing costs, diversifying and ignoring all of the endless investment chatter out in the marketplace. But boiling it all down, the underlying tenet of Mike’s philosophy can be summarized quite simply with KISS: keep it simple stupid.
We sat down with Mike recently to talk about passive investing, diversified portfolios and the stock market lottery.
What motivated you the most to start the Oblivious Investor? Was it cold calling as a newly minted financial adviser or the desperate pleas from panicked friends in the financial crisis?
The “buy-and-hold” strategy of investing made so famous by the likes of Peter Lynch and Warren Buffett has been heavily criticized recently in the wake of the financial crisis. How can a buy-and-hold strategy stand up in today’s investment environment that seems to be driven so heavily by hedge funds, ETF’s and high frequency trading?
I don’t mean to sound argumentative here, but I see all of those things as positives for passive investors. The hedge funds and high frequency traders help to keep the markets (mostly) efficient. That works out well for passive investors because we get to know that the prices we pay or receive for our investments are approximately appropriate.
And while ETFs can certainly be misused, they can also be a great tool for putting together a low-cost, diversified portfolio.
Your investment approach focuses heavily on minimizing expenses and diversification, which would seem to favor index investing. From your view, is there any room for individual stock picking in the average consumer’s portfolio?
For the most part, no, not unless you’re doing it strictly for fun. For most investors (including me), using individual stocks just increases the risk level of the portfolio without a corresponding increase in expected return.
There is one noteworthy exception though: An investor with a large taxable account who doesn’t mind regularly checking up on his/her portfolio can do well via actively tax-loss harvesting a diversified portfolio of individual stocks. It’s worth noting, however, that the stocks themselves shouldn’t be selected with the intention to outperform the market. (In fact, I’d suggest consciously attempting to put together a market-esque portfolio.) The benefit comes from the active tax management.
Hard assets, such as gold and commodities, along with blue chip dividend yielding stocks seems to be the soup-dujour investment strategy favored by investing pundits like Jim Cramer. While it’s been a pretty successful strategy overall in the past few years, how long do you think a strategy like that will have legs?
I never have any idea how long any particular asset class will continue to perform well (or poorly). My strategy is to invest in such a way that doesn’t require me to make predictions — choose an allocation that’s appropriate for my risk tolerance, then stick with it.
With regard to dividend stocks though, that strategy has never made much sense to me. The data I’ve seen (here and here, for instance) suggest that it’s just a suboptimal way to achieve a value (as opposed to growth) tilt for a portfolio. And it often comes with higher costs than a simple index-fund-implemented value tilt.
Would you describe your investment philosophy as more growth-oriented, value-oriented or income-oriented?
How can we make peace over the long haul in an investment climate that presupposes returns more on par with 3-5% a year rather than the 8-10% yearly return expectation that’s been burned into the investing public’s consciousness over the years?
Lastly, what has surprised you the most about your blogging experience with Oblivious Investor?
I’d like to thank Mike for his brevity and his candor. I’m really looking forward to more of Oblivious Investor’s bullsh*t free advice … as well as Mike’s next book.