In the sports world, there are coaches and legends like basketball’s John Wooden, for example, one of the most famous and well-respected coaches of all time, and football’s Bill Belichick, along with many others of that ilk.
If you were to ask what their professional careers were like and what they accomplished, no one knows. I don’t think experience is necessarily the driving force behind the ability to do something or to show others.
In other words, experience is not the same as expertise. Experience is acquired over time. Expertise has nothing to do with time. It is more about the skill that results from practice.
Younger Than the Industry Average
At Hefren-Tillotson we have, relative to the industry, a younger core of financial advisors. Our average age is younger than the industry average by quite a bit, which actually works in our favor in two ways: (1) we are able to work with clients without the threat of retiring. I can tell my clients, “I am going to be with you for a long time,” and (2) we have a youthful energy, vibrancy, if you will, with smart people who have gained a lot of experience.
Some people say, “Well, you’ve never lived through multiple market cycles,” or, “You’ve never experienced these particular market conditions.” When you think about it, in the industry, who makes the big-time investment decisions? People with experience.
Think back to all of the various crises we’ve been through over the years. Who has made the most impactful mistakes leading up to those crises, like the great financial crisis of 2008? Who made a lot of the mistakes that contributed to that crisis? People with experience. Who has made some of the most impactful mistakes since that crisis? People with experience. Experience is not the same thing as expertise.
For every investor who has learned from past mistakes and experiences with different market environments, there are probably five or six that are still “stuck” in the mud from fighting whatever the last war was. They are prisoners in their own minds who cannot get out of that mindset. What they think directly affects how they feel and how they behave.
A Young Investor Who Lived Through:
The 1930s – would assume the stock market is the last place to put your money.
The 1940s – would assume world wars are par for the course and the resulting inflation.
The 1950s – would assume the stock market is great, and their parents, who lived through the Great Depression, were crazy for not trusting the stock market.
The 1960s – would assume the only way to properly invest is through buying blue chip growth stocks.
The 1970s – would assume stocks go nowhere, there is sky-high inflation, there’ll be deep recessions and lots of different risks.
The 1980s – thinks investing is easy, except stocks can crash up to 20 percent in one day.
The 1990s – would assume that 20 percent annual returns are normal.
The 2000s – assumes market crashes, recessions and crises occur on a regular basis.
We Are Products of Our Environment
For this very reason, it is important to have a different mix. You have people who were brought up in one environment who will always carry that mindset with them. Think about the times that we’ve seen investment managers or various retail ads say, “We have a combined 100 years’ experience.” Well, really. What does that tell you?
Talent and intelligence are also, to an extent, overrated, especially when it comes to investing. It’s not always the “best and brightest,” it’s really those who have the best temperament, patience, self-awareness, humility, discipline and philosophy that are really underrated, and I think, also contribute the most to success. Experience can certainly help with these things, but it’s not the only driving force.
What Have You Done for Me Lately?
The saying today goes, “Young investors have never experienced an environment like we find ourselves in today.” That’s true. Neither have experienced investors. Every market is different. It’s always uncharted territory whether you have experience or not. No two market environments are ever the same, and history often rhymes but doesn’t often repeat itself. The things that are constant in our world are risk and human nature.
Young investors are jumping into the markets with both feet. Look at the success of Robinhood, with over 25 million new brokerage accounts opened. People are jumping in with crypto as well. Whether they are jumping in properly or as they should is a separate discussion due to a lot of speculating, a lot of trading, and things of that nature going on. But all of this goes back to the environment they were raised in.
Millennials saw their parents go through two recessions, in 2001 and 2008. So, let’s be honest. It’s been a pretty easy ride since then with this crazy-long bull market, save for March 2020 being the exception. We are products of our environment to the point where an ever-rising Dow – for Millennials – is their birthright.
At Hefren-Tillotson, while we do have some of the smartest people, we aren’t necessarily only guided by our own sense of intelligence. We apply several over-arching investment principles to encompass our conservative, long-term investment philosophy. These include discipline, focusing on fundamentals, valuation, diversification and collaboration. We are guided proudly by a philosophy and a time-tested approach, and we can do that whether we have 50 years’ or 5 years’ experience.