The Invested Dads take on their first-ever fantasy stock draft! Josh and Austin each draft 10 different stocks in 10 different sectors with $100,000 (hypothetical) dollars. For the next 6 months, they will compete and the winner will receive not only bragging rights, but delicious donuts. Listen now to see which stocks each guy picked and some other insights into investing in stocks.
(stock picks posted at the bottom of the page)
Main Talking Points
[1:16] – Ground Rules for Stock Draft
[3:48] – Pick #1 of Stock Draft
[5:53] – Pick #2 of Stock Draft
[7:12] – Pick #3 of Stock Draft
[8:46] – Pick #4 of Stock Draft
[9:47] – Pick #5 of Stock Draft
[11:10] – Pick #6 of Stock Draft
[12:58] – Pick #7 of Stock Draft
[14:45] – Pick #8 of Stock Draft
[16:41] – Pick #9 of Stock Draft
[18:17] – Pick #10 of Stock Draft
[20:17] – How the Stock Draft is Different from Reality
[24:58] – Dad Joke of the Week
[25:25] – Things to Consider When Choosing Stocks
Links & Resources
005: Dividend Investing for Dummies
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast. Simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey. Hey. Hey, welcome back to The Invested Dads Podcast, the podcast where we take you on a journey to better your financial future today. Josh, we are going to be creating a stock draft for the remainder of the year, or really about six months.
Josh Robb:
Yeah, stock draft. That’s where a stock gets really close behind another stock so that the wind resistance isn’t there.
Austin Wilson:
Well, that’s kind of funny because formula one, starts on July 5th is the Sunday of the July 4th weekend, I believe. And there’s drafting involved there.
Josh Robb:
There is a lot of drafting.
Austin Wilson:
After all of this COVID business, my life has been without racing largely for four months. So it’s time. Let’s get it on.
Josh Robb:
NASCAR’s going.
Austin Wilson:
I mean, real racing is what I’m talking about here. No offense to our NASCAR fans.
Josh Robb:
Fans. It’s not real racing.
[1:16] – Ground Rules for Stock Draft
Austin Wilson:
So anyway, that is the wrong kind of draft. Today, we are going to be creating a fictional account for each of us. And we’re going to see who picks the better stocks. So ground rules.
Josh Robb:
Rules.
Austin Wilson:
Josh, take us away.
Josh Robb:
I like rules. All right. So this is going to be hypothetical. No real money involved.
Austin Wilson:
Dang it.
Josh Robb:
We’re going to each have $100,000.
Austin Wilson:
Really dang it.
Josh Robb:
Yes, I know. I wish we did. $100,000 to invest. To make this simple, we’re going to invest in 10 stocks.
Austin Wilson:
10 stocks.
Josh Robb:
Each stock has to be in a different sector and we’re going to use GIC sectors for reference point.
Austin Wilson:
Global Industry Classification standards.
Josh Robb:
Yep. And so that means you’ll have 10 stocks from 10 sectors. Now there’s more than 10 sectors,
Austin Wilson:
There’s 11.
Josh Robb:
There’s 11. So you can choose which one to leave out.
Austin Wilson:
Ooh, I like power.
Josh Robb:
So we’ll buy stocks today, figuratively. So we’re going to use the end of yesterday’s price, the 25th.
Austin Wilson:
6/25 close.
Josh Robb:
So the close of 6/25 is our starting point. No trading from here forward. We’re just picking 10 stocks. And then at the end of the year, we will see who did well. So 10 names, 10% each. Am I…
Austin Wilson:
Yes. 10 names. You’re banging on the table.
Josh Robb:
That’s me hitting the table.
Austin Wilson:
Yes.
Josh Robb:
I was wondering what that noise was. It was me.
Austin Wilson:
So 10 names, 10 different sectors. You’re choosing not to hold one of the sectors. Here are some other rules. No mutual funds, no ETFs, no cryptocurrency-
Josh Robb:
He didn’t say no closed end funds.
Austin Wilson:
Oh, I did not. Well, it is. A closed end fund is a mutual fund.
Josh Robb:
Yes. You’re right. I’m just teasing.
Austin Wilson:
There’s open and close. So no crypto, no commodities, no precious metals directly have any of those, no options and their derivatives.
Josh Robb:
The two times leveraged, three times leverage.
Austin Wilson:
Triple leveraged oil ETF. Actually there is, there’s a triple leverage NASDAQ ETF.
Josh Robb:
That’s probably like-
Austin Wilson:
That’s been doing really well.
Josh Robb:
-20% or something.
Austin Wilson:
Highest total return as of the close on 6/25, we’re going to do it through Christmas. So it’s exactly six months.
Josh Robb:
12/25. Yeah.
Austin Wilson:
Yeah. Or that’s what I meant. 12/25, six months from our draft, wins donuts. So the loser buys the winner donuts.
Josh Robb:
That sounds good to me.
Austin Wilson:
Now Josh briefly, we actually had an episode about this, which we’ll throw in the show notes, but briefly describe total return.
Josh Robb:
All right. So total return is what it sounds like, the total return mean everything included. So the other option would be price returns. So the difference between those two price return does not include dividends or any kind of payout to the shareholders. Total return does. So if you choose a stock that pays a dividend, we will count that at the end as part of the return.
Austin Wilson:
Correct. And that will not be reinvested in any way, shape or form.
Josh Robb:
No, we’ll just add that as pay out. Yep.
[3:48] – Pick #1 of Stock Draft
Austin Wilson:
Okay. So here we go. First pick. Josh, I will let you have the first pick. Oh, I forgot to say another rule is we can’t pick the same names.
Josh Robb:
Yes. So once it’s gone, it’s gone.
Austin Wilson:
Once it’s gone, it is gone. Which means there’s slightly more than 10 names trading on the stock market.
Josh Robb:
We should be all right.
Austin Wilson:
We should be okay.
Josh Robb:
I don’t think any sector has only one company. So we should be okay.
Austin Wilson:
That would be funny.
Josh Robb:
So it’s kind of like when you do a fantasy draft for football, if you remember what football was before COVID-19.
Austin Wilson:
Wait, wait. So we can do a two person snake draft?
Josh Robb:
Yeah. We’ll go back and forth, back and forth. But you got to say like, do I pick my linebacker first? My quarterback?
Austin Wilson:
I know.
Josh Robb:
So here we go. I want to start by saying kind of my mindset and kind of what my thought process was. Is one of the things that we believe in here is invest in what you know. And so I kind of thought, okay, not all these companies I know of. I had to look them up because I’m not familiar with some of these, but I’m going to start with one. I know. All right. I’m actually going to skip past my first one, because this is the one I want. Fiat Chrysler.
Austin Wilson:
Oh yeah, yeah. You’re a Jeep Chrysler guy.
Josh Robb:
Because they make Jeeps. And so I own a Jeep Wrangler. I liked Jeep Wranglers.
Austin Wilson:
Your van.
Josh Robb:
And I do own a Chrysler Town and Country van as well. And so that’s going to be my first pick, is the Jeep. So it’s … I don’t know what category is this?
Austin Wilson:
That would be consumer discretionary.
Josh Robb:
Discretionary. Okay. This was consumer cyclical and nothing I print out, which is a different sector classification.
Austin Wilson:
Well, we will double check that sector classification.
Josh Robb:
I had it in discretionary. That was the category I was pulling it out of.
Austin Wilson:
That’s good. So next, my first pick, invest in what you know, I’m picking Amazon.
Josh Robb:
Amazon.
Austin Wilson:
Because I just think that they are doing an incredible job and taking market share. And it’s amazingly run company, they’re diversified. And just, If you invest in what you know, I know Amazon because I order from them at least once a week. So those little brown boxes or white envelope packages, they’re always on my porch. So Amazon off the table as well.
[5:53] – Pick #2 of Stock Draft
Josh Robb:
Sounds good. I’m going to follow that up with Microsoft.
Austin Wilson:
Microsoft is your tech pick.
Josh Robb:
That is my tech pick. I liked them. And that is also one of my, I’m going to call it a defensive play. If COVID comes back. I think that one will do well. If people are working from home and will continue to shine. Now I did see they were on some news today. We’re recording this on the 26th, Friday, that they’re closing a lot of their stores.
Austin Wilson:
All of their retail operations.
Josh Robb:
Which I’m indifferent to that.
Austin Wilson:
Do you really go to a Microsoft store?
Josh Robb:
Yeah. No.
Austin Wilson:
So Microsoft off the table as well. Yeah. That is a good … That does have diversified play as well because you get hardware, you get softwares, is big thing, and you get cloud. Which is another reason I liked Amazon with AWS.
Austin Wilson:
So my next pick, I’m going to follow it up with another tech pick as well. I’m going with it Nvidia.
Josh Robb:
Nvidia.
Austin Wilson:
N-V-D-A is the ticker. They make the best graphics chips that you can own.
Josh Robb:
Yep, good chip company.
Austin Wilson:
I mean, they’re like the Frito Lay chip of computers.
Josh Robb:
And you’re in a good kind of cycle of renewal with the 5G coming out. And there’s a lot of new hardware.
Austin Wilson:
And they make the artificial intelligence chips, the gaming chips, the autonomous vehicle chips. I just think that it’s going to be a good play for me.
[7:12] – Pick #3 of Stock Draft
Josh Robb:
Good call. I’m going to go from one of my more defensive pieces with Microsoft being pretty stable, to go with kind of a hope guess here. I’m going to go with Delta.
Austin Wilson:
Delta.
Josh Robb:
Which is an industrial. So Delta Airlines is obviously an airline. And I think if the recovery happens, they’ve been beat down really hard. There’s a chance for some recovery there. So that’s the hope that we don’t see a second round during the six months during the stock picking timeframe.
Austin Wilson:
Now, that is my favorite airline to travel.
Josh Robb:
It’s mine as well.
Austin Wilson:
I feel like the planes are clean and well kept. And I like everything about it.
Josh Robb:
You know what I like about it? Is the onboard entertainment for kids. It’s free, they have movies and it keeps kids entertained while you’re flying.
Austin Wilson:
That two-hour flight to Florida is a blink when your kid has a little movie to watch or whatever like that.
Austin Wilson:
All right. I am going to pick my consumer staple pick for the day. I am picking Dollar General.
Josh Robb:
Okay. That was on my list. That was a good one.
Austin Wilson:
I’m not from Findlay. I work in Findlay. I live in Findlay. Findlay’s a big city for me, but it’s really not a big city, but I’m from a very small town. And I drive through a lot of small towns to get to my small town, where my parents live. And I see Dollar Generals popping up in every small town on my way there, which is insane. And Findlay has like three of them or something.
Josh Robb:
Oh, yeah. It’s crazy.
Austin Wilson:
It’s insane. So I’m going Dollar General because I just see a theme. And I think that there’s going to be some traction there. So Dollar General off the table.
[8:46] – Pick #4 of Stock Draft
Josh Robb:
Good choice. All right. Well, if you’re shopping at dollar general, I’m going to shop at Target.
Austin Wilson:
Target.
Josh Robb:
Target.
Austin Wilson:
I love that place.
Josh Robb:
I mean, I know my wife, anytime we’re traveling … We don’t have a Target here in Findlay. Anytime we travel to any city that has a Target, somehow it’s on our agenda to stop at Target while we’re there.
Austin Wilson:
Whether you need something or not.
Josh Robb:
It’s just crazy. So Target, which is-
Austin Wilson:
It’s like Costco.
Josh Robb:
Yeah. And that’s a consumer defensive, according to my thing.
Austin Wilson:
Yeah, that’ll be our staple-
Josh Robb:
Our staple, yeah.
Austin Wilson:
Probably play. Yep. I am going to pick a healthcare company.
Josh Robb:
Ooh. Okay.
Austin Wilson:
And I’m going with a healthcare company that’s diversified and it’s pretty well known. I’m going to pick Johnson and Johnson.
Josh Robb:
Johnson and Johnson.
Austin Wilson:
J and J. They’re stable. They’ve been around for over a hundred years. They’re doing really well. And they have some feet in the water for the COVID-19 vaccine treatment or vaccine.
Josh Robb:
There you go.
Austin Wilson:
So I like that that is a part of it. But I also like that’s not all the company is about, so they won’t be as hopefully volatile. It’s pretty stable.
[9:47] – Pick #5 of Stock Draft
Josh Robb:
All right. For me, I’m thinking through, I think what I’m going to pull is real estate.
Austin Wilson:
Real estate.
Josh Robb:
And I’m going to go with American Tower. That’s why I wanted to grab it. I thought that might be on your list.
Austin Wilson:
That was on my list.
Josh Robb:
So American Tower, they are real estate company. They own the towers that cell phone companies, they use it for their signal. And so they rent or pay to use it.
Austin Wilson:
Yeah, so like Verizon would lease-
Josh Robb:
Lease the tower to get their signal across. So with 5G coming out, there’s more demand as constantly more and more people using smartphones. I’m doing American Tower.
Austin Wilson:
That is a great play. I should have drafted it one earlier, but I did not. So good job, Josh. American Tower.
Austin Wilson:
I am going to go with … There’s a couple of holdings that I’m going to say that are there for what I anticipate to be some pretty choppy stock market environment throughout the rest of the year, at least. One of those is a company called MarketAxess Holdings. It’s a financial company. And it’s a financial company that really, they are the leader in electronically trading bonds. So what happens when stock market goes wonky and people get scared? They go to bonds. Typically, what happens when there’s a lot of volatility is that that stock does pretty well. If I anticipate volatility, especially considering it’s an election year, that could increase volatility as well. I’m going with MarketAxess.
[11:10] – Pick #6 of Stock Draft
Josh Robb:
That’s a good call, especially with volatility. I’m going to … Some of these are long plays. Some of these are a little more, again, since it’s fictional money, I’m taking some chances. So this is for my communication services or telecommunication. Lion’s Gate Entertainment. So they’re in entertainment. They make movies and they big television programs.
Austin Wilson:
They have to be beat down right now.
Josh Robb:
They’re beat down. But my thought is as they’ve seen some success in going direct to digital release, I think there may be some movie companies that have been sitting on some movies waiting for theaters to open up that may go that route and still get a decent return. And so, again, a play in it. I know movie theaters are opening back up. We’ll see what happens, but Trolls World Tour did this. Where they did it just direct to digital. And they had a pretty good success for it, for our follow up movie. So that’s where I’m going, seeing what happens there.
Austin Wilson:
To continue with my defensive theme …
Josh Robb:
Defensive.
Austin Wilson:
I am going to draft a materials company. And this materials company is called Newmont Corp.
Josh Robb:
Ooh.
Austin Wilson:
N-E-M is the ticker. And they are a precious metals mining company. So if I anticipate volatility to be around, through the rest of the year, at least. I anticipate that gold will probably be at least stable if not favorable to a lot of people during this time. And when gold does well, the mining companies that generally … And this company does gold, silver, other things as well, but that should be a good, safe play if gold continues to go higher. These are a couple speculative moves on some anticipated volatility. I’m hoping that some of the growthy names will kind of offset and we’ll have a well balanced portfolio going forward.
[12:58] – Pick #7 of Stock Draft
Josh Robb:
Sounds good. I like that. I’m going to go to healthcare. And in my healthcare sector, I’m doing Cooper Industries or Cooper Companies.
Austin Wilson:
Cooper Companies. Tell me about Cooper.
Josh Robb:
C-O-O. Cooper is, they have two sections. One is think of like contact lenses, they make the little contact lenses. And so that’s a big piece of their revenue. They also do some international stuff for that as well. They also manufacture diagnostic and surgical stuff for gynecologist, including like preventative stuff. So they’re in the healthcare side. But there may be some of the stuff that people have to have, like contact lenses.
Austin Wilson:
Right. Regardless of-
Josh Robb:
Regardless of COVID-19, if wherever I’m at, I still need to order my contact lenses. And so that’s my play in healthcare.
Austin Wilson:
Okay. Yeah. I like it. I like it.
Austin Wilson:
So you’ve got seven, I’ve got six names down. My seventh pick is going to be Google.
Josh Robb:
Google.
Austin Wilson:
That’s my communication services. I think that compared to the rest of Fang, they really have not done as well. They’ve done well, but they haven’t done as well as the rest of Fang. And I think that there’s going to be some mean reversion and they could stand to do a little bit better than their competitors going forward. And I still feel like they are the king of search. That’s huge. And they’ve got a lot of different things going on that I think could really benefit them going forward. So Google, I think that they have fantastic products and I think that’s going to be-
Josh Robb:
And they have a far superior mapping system than Apple maps.
Austin Wilson:
That is what people say, but I’ve never had a problem with Apple maps.
Josh Robb:
But you just don’t even know what you’re missing.
Austin Wilson:
That’s true. I don’t.
Josh Robb:
You don’t get walked to the door and it opens for you by Google maps. It’s incredible.
Austin Wilson:
It just knows. That’s a good call though.
[14:45] – Pick #8 of Stock Draft
Josh Robb:
So Google. All right. So I got three left. It looks like I have a couple of sectors I need to choose from. So invest in what you know. And I know across the street is a energy company from where our office is. Marathon Petroleum. So I was looking at a couple of energy options and I thought, you know what? Energy in general has taken a beating this year and actually part of last year as well. As people are getting out, driving more, I think we’ll see, at least get a little bit of recovery. That’s the hope. So it was between that and then a tanker company, which holds this stuff. And I was debating, but I like Marathon because they’re the refining and the distribution side of things. So Marathon Petroleum.
Austin Wilson:
Continuing with the energy theme. I also think that there’s some opportunity there. It definitely has risk too, because if we, for some reason, well, for COVID reason had a bigger or longer or more extended continued shutdown or whatever, oil prices would for sure tank again. But I am with you too. I think that if that happens, it’s going to be kind of limited to maybe areas or something like that. So we probably won’t have a nationwide one. And I think that there is some opportunity in energy.
That being said, I am drafting a company, ticker M-M-P, Magellan Midstream Partners.
Josh Robb:
I almost went with that limited partnership. You get a nice dividend out of this.
Austin Wilson:
Yeah. So I get a 9% yield, which I’m going to get half. So I’m going to get four and a half percent yield. It’s a pipeline company, as most MLPs are in this industry. So while a lot of the bigger oil companies for at least this year are going to be losing money. This company is projected to continue to earn a profit amidst all of this. So I like that. I like profitability. And I think that with the combined effect of the hopefully increased demand, potential probable profitability and the decent yield, I think it’s going to be a good play.
[16:41] – Pick #9 of Stock Draft
Josh Robb:
Good call. Good call. All right. Down to the last two. This is one that I didn’t know anything about. It’s a basic materials company and it’s called AdvanSix, A-S-I-X is the ticker. I just went and looked up. But they do polymer resin. So that is in everything.
Austin Wilson:
It’s plastic.
Josh Robb:
I mean, it’s in everything. I mean, they do it for engineered plastics, fibers, filaments. They do an in film, automotive, electronics, carpets. That’s the big one. So like, when you think of like that Scotchgard type of thing, it’s that stain resistant carpet. Sporting apparel, fishing nets, everything you think of, the stuff is in there. So from a material standpoint, it’s being used a lot. So going that route.
Austin Wilson:
I am going with an industrial myself and I’m going with WD-40.
Josh Robb:
Oh yes.
Austin Wilson:
And this idea, I think it came from a … It was from one of the Ritholtz Wealth Management guys. I forget who posted an article. And they were like, “Hey, think WD-40 is boring? Let’s look at the historical returns since 2000.”
Josh Robb:
Is it crazy?
Austin Wilson:
It’s crazy. It’s something that you invest in what you know. I use WD-40 on everything. I think it smells amazing. I use it as cologne.
Josh Robb:
It does have a unique smell. That’s true.
Austin Wilson:
But really, I think that as things open up and manufacturing and industries continue to grow. And people start working on things, that the demand is going to pick up for that product as well. So WD-40, ticker W-D-F-C.
Josh Robb:
It should do well if we have a smooth, well-oiled economy.
Austin Wilson:
That’s right. It’s a well-oiled economy.
[18:17] – Pick #10 of Stock Draft
Josh Robb:
All right. My last one is financial services. So what that meant, I left utilities out for those keeping track. I’m going with investing in what you know. I know nothing about this company, but I do know the ticker is N-O-A-H. Noah. So-
Austin Wilson:
Fair enough.
Josh Robb:
My oldest son, that’s his name. So I know that. And so I’m buying that. But what it is, it’s Noah Holdings and they are a wealth management firm that’s overseas a lot in China area. So as China’s developing, you get more and more people with wealth, they do asset management, wealth management, financial planning over there. So again, know nothing about this company, but I liked the ticker and I have a theory on well-named tickers. So I’m going that play.
Austin Wilson:
Hey, that’s okay. And my last pick, pick 10 of 10. Because you took my original RIT. I was going to get a utility instead, but I think utilities don’t have enough growth for what I’m looking for in this environment and-
Josh Robb:
For this play.
Austin Wilson:
Yeah. So I’m going to get a RIT myself. I’m going to invest in with my hypothetical money, D-L-R, Digital Realty Trust. It’s a RIT, a real estate investment trust that focuses on data centers. And data centers are huge right now, as we are in a world of big data. And all of the data on all of the internet has to be stored and transferred and move it around and manipulated somewhere. And where that happens is at data centers, which are pretty much big pieces of land with big buildings, with a lot of air conditioners and a lot of super computers inside.
Josh Robb:
That’s true.
Austin Wilson:
That demand’s only growing. So Digital Realty Trust is my last pick.
Josh Robb:
Sounds good. All right. So we got those written down. Austin’s going to create a cool, awesome spreadsheet for him and I to track.
Austin Wilson:
It’s nerdy. It’s cool.
[20:17] – How the Stock Draft is Different from Reality
Josh Robb:
And we’ll do a podcast on this at the end of the year when we look at how we did. But after talking and getting those in, and I think in the show notes, we can even put our two little draft picks so you can see them if we went too fast for you with the tickers and stuff. But we wanted to talk about, okay, this is fun, fantasy drafting, fake money. It’s a good time. It’s different than what we preach and talk about and how we’re actually invested.
So the first thing is diversification. And so this is 10 stocks, all in the US, traded on the exchange. You’re not very diversified. Although we did choose 10 different sectors, you’re still all equity, all US equity. And very growth for the most part. So diversification.
Josh Robb:
And also we’re talking about, I always like to say, if you’re happy with everything in your portfolio, you’re not diversified. You should always be unhappy with something in your portfolio, because that means they’re not all moving in the same direction.
Austin Wilson:
Because it’s great when things go up at the same time.
Josh Robb:
If everything moves up, that’s awesome. But that means they’ll probably all move down together. And so when it comes to diversification, the key there is you’re spreading your risk out in things that don’t all react to the same triggers. And so easily from a high level, you got cash, you got fixed income with your bonds, and then you have equity. They tend to be uncorrelated to each other. Big word, just meaning they don’t get the same thing.
Austin Wilson:
Or inversely correlated.
Josh Robb:
Some are inversely. Yep. And so, I would say cash and bonds are probably a little more correlated to each other. But in general, they don’t usually do the same thing as each other.
And then what comes underneath those? So equities, you could have US, you could have international, you could have emerging market. There’s all different types. Large cap, small cap, growth, value. Being diversified while if you are awesome and can pick the right things, diversification will mute your returns, but also mute your volatility. And so what it does, it allows people to stay invested over the long run because they’re not seeing the full extreme volatility of owning one stock and hoping it works out. Or in our case, 10 stocks. And so that’s the first thing.
The other thing too, is we’re talking six months. We’re investing for now. And our goal is just to win in six months. Again, if that’s your time horizon, stocks probably aren’t your best choice. Because a six month window is a very volatile time. As we saw at the beginning of this year, this last six months were intense.
Austin Wilson:
I would not have wanted to start this six months ago.
Josh Robb:
And so looking at that, we believe stocks are designed for long-term investor. Because if you look over the long run, the longer you own stocks, the higher your chances of having positive returns. And so we know that historically the stocks are positive three out of every four years, if you’re looking at calendar years. But that one year is down. And we don’t know which of those years it’s going to be. But the longer you go, you go five years out, you have a higher probability. 10 years out, even more. 20 years out, there’s never been a 20 year timeframe that you’ve lost money in the stock market. So the longer you hold stocks, the less volatile they are from a return standpoint.
And so, again, we’re having fun here. It’ll be fun to track, but from an actual investment standpoint, diversification is key. And then also your time horizon. Make sure your investments match your time horizon.
Austin Wilson:
Yeah. And it’s important to keep in mind that we’re not using real money. So this is completely hypothetical money. As much as much as I would like to just dish out a hundred grand each to go have fun and invest in the market for this, that’s not reality. So this is not real money.
Josh Robb:
There’s names we picked for me, especially like Noah. I mean, there’s just no reason I picked that because I found the ticker.
Austin Wilson:
Well, exactly. And these are risks that we are able to take with money that’s not real because of that.
Josh Robb:
If we go to zero, I did not lose any sleep.
Austin Wilson:
Nothing.
Josh Robb:
I did not lose any sleep.
Austin Wilson:
You lost that donut. That’s okay.
Josh Robb:
Yeah. And even that, I’m going to buy two. I’m going to eat one anyways. So it doesn’t matter.
Austin Wilson:
That’s right. So we’re going to be good. We’re going to be good. So the market, it is really volatile. And we just need everyone to understand that there are risks and there are potential rewards. And balancing that risk reward relationship is key. And just note that choosing one stock from 10 sectors as we did, we could miss out on really good companies that are in that sector that we did not pick. Or we could also miss out on really bad companies in that sector. And that’s just the risk of being really not so diversified. You’ve got 10 names, 10 names is still a lot of your assets in one name.
So yeah, overall keep a long-term goal and invest for the long-term with a well-diversified portfolio. And you’ll be able to sleep at night. Your financial advisor will thank you because they’ll be able to sleep at night and everyone wins. So that’s the key. We’re not necessarily doing this in real life. This is just an entertaining exercise. But in the real world, we’re going to change things a little bit and keep a long-term horizon.
But I think there are some things to consider when choosing stocks.
[24:58] – Dad Joke of the Week
Josh Robb:
Before you do that though …
Austin Wilson:
Before I do that.
Josh Robb:
Let’s do a dad joke.
Austin Wilson:
Ooh, okay. Yeah, this is about to get serious.
Josh Robb:
All right. People are probably getting ready to fall asleep and that’s waking back up. Dad joke. So crazy story. One of my kids swallowed a bunch of Scrabble tiles the other day.
Austin Wilson:
Oh, I don’t know. I kind of know where this-
Josh Robb:
Yeah. They tend to go to the bathroom, that could spell disaster.
Austin Wilson:
That’s really gross.
Josh Robb:
Spell disaster.
Austin Wilson:
But honestly, a lot of dogs eat those things and-
Josh Robb:
Dogs eat this.
Austin Wilson:
That’s gross.
[25:25] – Things to Consider When Choosing Stocks
Austin Wilson:
Okay. Back to things to consider when choosing stocks. So this is kind of what people in our industry, a lot of people do, they pick stocks. And there’s a couple of things to look for when you’re looking at particular companies. So number one, where are we in the economic cycle? Are we in an expansion? Are we in a contraction? Are we in a recession like we are right now? That’s a good thing to know. So some names and certain industries are going to do well in recessions. And some names and industries are going to do well in times of expansion. So more like defensive staple names are going to do well in a recessionary time. Discretionary names or things that people buy when they have extra money are going to do well in times of expansion. So that’s something to think about.
Also really important to keep in mind, fundamentals drive the market over time. Over time is the key there because in a short term, the market can be all over the place. But fundamentals drive stock prices over time. So things to look for, are they growing revenue? Are they making a profit? Are they going to continue to grow revenue and make a profit going forward? Do you understand the catalysts that are driving that? Do they pay a dividend? And if so, is it a safe dividend that’s not at threat of being cut? Or is it a growing dividend? Those are good things. Think about the industry that they’re in. Are they giving up or taking market share? Do they have any competitive advantages? So those are all really good things to look at, but also try and look at the portfolio in total.
Think about that diversified portfolio we talked about. Do you have exposure to multiple sectors that are going to be able to withstand different periods where certain sectors are better, certain sectors are worse? Those kinds of things. So kind of an overall gauge where you can get some ideas is look at the overall. So for example, the S&P 500 market sector weightings as a percent of the total and see how the market sees how things are going to move. And then you can adjust overweight sectors or underweight sectors from there based on your convictions and where you think things are going like that. You can even completely omit sectors, kind of like what we did. And this can be tough. And it really is honestly better done sometimes by a professional with a lot of fancy computers and a lot of research at their fingertips.
But those are some things to look at that we look at when we’re picking stocks and companies for our clients. And yeah, I think the key thing is that fundamentals are really important to understand. So if you don’t really have a good grasp on specifically the statements that a company reports every quarter. At least here in the US, that would be an income statement, a balance sheet, and a cashflow statement. If you do not understand those, probably worth looking into to. Watch some YouTube videos and you can kind of get a good understanding on what’s happening over time. So that is my two cents on stock-picking in the real world.
Josh Robb:
Yeah. And that’s a lot. So we just barely scratched the surface. Obviously there’s people that do this for a living, us included. And we’re thinking to do this successfully, you do need to spend the time to research and get a good understanding of what you’re putting your money in. Because when you buy a stock, you’re buying ownership in that company, you’re betting on that company to do well.
And so if that’s too much for you, that’s why we always say a financial advisor can really help. Because that’s same as wherever you work, you’re an expert in your field because you spend your time day in and day out learning and becoming an expert there. That’s what an advisor is for. They’re there to continue to learn and educate on what’s going on around them to help out their clients.
Austin Wilson:
So thanks for taking the time to listen today. We hope it was entertaining and that you learned a little something, I guess we’re just going to have to see who fared the best or perhaps the least bad.
Josh Robb:
The least worstest.
Austin Wilson:
In December, but as always check out our free gift to you. It’s a brief list of eight timeless principles of investing. These are overarching investment themes meant to keep you on track to meet your long-term goals. It’s free on our website, check it out.
Josh Robb:
So Austin, what else can they do? They can subscribe to our podcast. They can email us at hello@TheInvestedDads. What else? What do we need the most? We need ideas, right?
Austin Wilson:
Yes, we would love it if you would send us ideas for new episodes to that email address Josh just talked about, hello@TheInvestedDads.com. Any questions totally welcome. We’re happy to reply. And we read email that comes in. Also, if you could leave us a review on Apple podcasts. And share this episode, if you enjoyed it with friends and family, we’d appreciate it.
Josh Robb:
All right, thank you guys.
Austin Wilson:
Thanks.
Josh Robb:
We look forward to seeing how these stock picks do and talk with you next week.
Austin Wilson:
Bye.
Josh Robb:
Bye.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to TheInvestedDads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson worked for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin or any podcast guest are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
Draft Picks
