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Reconsidering Investing’s “Conventional Wisdom”

Reconsidering Investing’s “Conventional Wisdom”

May 31, 2017 | Blog

Gimme Some Truth

Be sure to check out our latest “Gimme Some Truth” podcast! This week, we focus on some of the “alternative facts” we hear from clients. You can find us on iTunes or SoundCloud, and be sure to subscribe!

Conventional Wisdom

Over Memorial Day weekend it was only appropriate that I put my grilling skills to the test with some strip steaks. Conventional wisdom is a common occurrence, especially in cooking. However, I decided to take a less conventional route this year. It’s a technique called “reverse searing”. I started the steaks on indirect heat and finished them on the heat side of the grill quickly to get the nice sear marks. It does not require a large resting period, ensures more even cooking, and allows for an easier way to monitor temperature. It is simply a better way to cook a steak, albeit not typical.

Conventional wisdom also is common in investing. Most people tend to trust their pre-existing beliefs and hold to them tightly. There are many examples we all can probably think of when we used to believe something that we once did, and in many cases, what we now think of is a fact was directly opposite of a viewpoint we held.

In investing, here are just a few beliefs that are commonly held that we may need to reconsider:

Gold is a protection against inflation. Or deflation.

(Or maybe it’s just a shiny little fear bar? )

Value investing is widely accepted as being preferable to growth.

The numbers over the last 15 years show us that there is little difference in rate of return. Even Warren Buffett himself, the value investing king, has bought technology stocks over the past few years.  

Stock splits give you more shares but do not change the value of your shares and therefore there is no advantage to buying splitting companies.

Here’s one that even got the financial advisors……the data says otherwise.  (Maybe we need to look into this one even further!)

Moving Forward

It’s important that every investor (and grillmaster) continues to reconsider their previously held positions. Eventually, you may find a better way that you never knew existed, or come to an alternative conclusion. You should also seek out professionals that have intellectual curiosities in order to help you solve problems over your lifetime. Whether it be a landscaper, estate planning attorney, or financial advisor, questioning conventional wisdom is an important attribute to possess.

(My next step is learning how to sous vide…..wish me luck!)

–  Clint

Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented in this piece is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Information in this piece does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.