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Trusted Filters

The best recent addition to my regular podcast rotation is hands down Patrick O’Shaughnessy’s “Invest Like The Best” series. He’s only four episodes deep, but has already built an impressive archive featuring interviews with a veritable “who’s who” of leading practitioners and commentators from the world of finance. If you’re at all interested in ways to better manage your money and your time, do yourself a favor and subscribe to this FREE podcast now. Go ahead, I’ll wait…

Oh hey, you’re back!

In the latest episode, Patrick interviewed Morgan Housel, former columnist at The Motley Fool and now applying his craft at venture capital shop The Collaborative Fund. Their conversation covered a lot of ground, but my favorite nugget was their discussion on the utter importance of having trusted filters in a world where information is infinite and knowledge is scarce. As an investment professional, it’s very easy to succumb to paralysis by analysis if you don’t develop a reliance on trusted filters.

Some of my filters come in the form of industry peers. Take Patrick, for example. In addition to managing portfolios, writing a blog and recording podcasts, he also (somehow) finds the time to read about 100 books a year. As a service to the readers of his blog, Patrick not only set up a monthly book club for his readers but also compiled this monster list of every book he has recommended. I love to read but I naturally gravitate to certain types of books, namely business and investment-focused ones. Having a trusted filter like Patrick has helped me get out of my comfort zone and expand my horizons as a reader. Several of the titles on that list now adorn my bookshelf at home. Absent that conviction in his recommendations, I would have certainly missed out on a few gems.

Another example of a trusted filter I have in my daily professional life is the website Abnormal Returns. If you’re a finance pro that is either active on social media or reads/writes regularly, I’ll bet dollars to doughnuts that you’re intimately familiar with the site and the treasure trove of curated content it provides. Here’s Morgan discussing the site during his interview with Patrick (emphasis mine):

“There’s so much material out there that you need a filter and some curation. And you need a trusted list of people who are going to point to other sources. People like Tadas Viskanta and his website Abnormal Returns. I trust that everything he links to in that blog post is going to be worth my time to read.

Couldn’t agree more. I can honestly say that I would be a lesser investment professional if Tadas’ website didn’t exist. It’s impossible to quantify the amount of knowledge I have gained over the years that I otherwise wouldn’t have if I wasn’t an avid reader of his blog. Scrolling through each day’s links is as much a part of my daily routine as brushing my teeth.

Outside of other people, one of the more underappreciated filters one can have in our industry is a well-documented investment philosophy. It sounds simple, but you’d be surprised at just how many advisors don’t have a true understanding of the why behind how they invest their clients’ money. With tens of thousands of investment products to choose from, dozens of wholesalers emailing and calling with the latest and greatest fund du jour, and a never-ending stream of white papers, articles and trade publications to sift through, distraction will reign supreme if you take your eye off the ball. As they saying goes: when you stand for nothing, you fall for everything. For those that consistently adhere to a deep-rooted, evidence-based investment philosophy, 99% of what hits their inbox won’t pass the initial smell test.

Individual investors also deserve and need trusted filters that they can depend on for safeguarding their life savings. A great financial advisor serves several distinct roles when it comes to helping people navigate their financial goals – Teacher, Coach, Architect, etc. Just as important as all of those is an advisor’s ability to act as a Bouncer, keeping nefarious people and toxic investments behind the velvet rope that guards your wealth. Josh Brown had this to say on the topic:

But in today’s day and age, I believe that one of the critical functions of a fiduciary is to say “no” to our clients’ worst instincts, such as searching for risk-free reward or chasing hot investments right off a cliff. The bouncer function of an advisor is a very underrated part of the value-add, in my opinion.

The information we digest has a direct influence over how we think and behave. The utilization of trusted filters in investing – and in life – can be the difference between drinking from a fire hose and drinking from a water fountain.

Thinking and Walking – Morgan Housel [Invest Like the Best EP.04]

About the author

Phil Huber, CFA, CFP®

Phil is the Head of Portfolio Solutions for Cliffwater, a leading alternative investment adviser and fund manager. Prior to joining Cliffwater in 2024, Phil was the Chief Investment Officer for Savant Wealth Management, a multi-billion dollar wealth management firm. Phil has been involved in the financial services industry since 2007. He earned a bachelor’s degree in finance from the Kelley School of Business at Indiana University. He is a member of the CFA Society of Chicago. More about me here. Twitter: @bpsandpieces

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