Q&A With Charles Kirk

One of the easiest ways to build a larger audience as a blogger is to have someone who has already made it link to your work or recommend your material to their readers. You can also get a sense of who the most respected people are based on how loyal their readership is because of the response you receive from your new audience.

Over the past couple of years Charles Kirk has included some of my work in his daily missive, The Kirk Report. I’ve received a number of comments from readers who have told me that in their eyes I had basically made it as a blogger when they saw my work on his website. This says way more about Kirk’s body of work than mine, so I always take it as a compliment that he has linked to my blog over the years.

So I was excited when Charles reached out to me a few months ago to ask me to participate in a Q&A for his site. We traded emails back and forth for a couple months. When we finally finished up it turned out his site was undergoing some big changes and he wouldn’t be able to post it there for quite a while so he gave me permission to post it here. It’s quite long so I’m going to break it up into two parts. Here’s the first part of our conversation on a wide range of topics:

CK:  For those who may not know you, please begin by providing a brief introduction

BC: I live in Grand Rapids, MI with my wife and 20 month old daughter. I’ve spent my entire career managing institutional investment portfolios. A couple years ago I started the blog A Wealth of Common Sense and have since had a book published by the same name.

CK:  Please tell us more about the big news about your new job. What will you be doing there and what it is about this new opportunity that interests you the most?

BC: A few weeks ago I started my new role as Director of Institutional Asset Management for Ritholtz Wealth Management (RWM). It’s a great opportunity to take what I’ve learned managing large institutional investment portfolios and apply it to the small and mid-sized institutional fund universe. Most of the organizations with smaller endowments, foundations and pension plans don’t have the internal capabilities, resources, time or expertise to devote their full attention to an institutional investment portfolio and plan. My goal will be to fill that void by offering personalized advice to these organizations to help them achieve their goals.

I also get to work with Barry Ritholtz, Josh Brown and the rest of the great team at RWM, all of whom I really respect, so this was a perfect fit for me. It also allows me to bring in some individual clients to our financial planning practice, something I’ve wanted to do for some time now.

CK:  You have been managing institutional investment portfolios since 2005. Can you tell us a little more about your job and what it entails? 

I’ve spent my career managing portfolios for different organizations including hospitals, insurance companies and charitable organizations. These organizations have pension plans, endowments, foundations and operating funds that I was tasked with managing. This entails creating comprehensive investment plans, implementing portfolio strategies, creating long-term spending policies and periodic reporting to the boards and executives to update them on the investment progress over time.

CK:  What do you most enjoy about it?

BC: I love solving problems and having the opportunity to work with different organizations has been really interesting for me. Each organization has a unique need or liability that they’re trying to meet over time. They all have their own risk profile, time horizon(s) and organizational quirks. Not only do you have to create a personalized investment plan, but there is ongoing advice and support required based on the market’s movements or organizational changes. Helping these organizations accomplish their mission through the use of their finances is very gratifying.

CK:  What is the most challenging aspect of your job?

BC: One of the most challenging aspects of managing institutional portfolios is that it can be a very competitive industry. I’m a competitive person, but it’s possible to take the peer comparisons too far in this space. It can be difficult for some executives or boards to pay attention to their own needs and goals instead of worrying about what their competitors in the institutional space are doing with their portfolios. The herd mentality on this side of the business can be quite strong. You really have to understand that you’re not only managing portfolios, but you’re also managing people and their expectations to some extent.

CK:  How did you know this was what you wanted to do for a career?

BC: I had no idea what I wanted to do for my career until after college. I was something of a late bloomer to the investment world. I was never one of those prodigies who would read Barron’s on the weekend as a teenager. I’ve always been good with numbers and interested in finance, but the thing that really attracted me to working in the markets is the human element. I learned early on that the markets are basically one giant experiment on human nature. The interplay between news, fundamentals, expectations and a huge group of people, all with different goals and time horizons is something that’s always fascinated me. It’s also fascinating to watch people who are perfectly rational in other aspects of their lives become completely irrational when it comes to their portfolios because emotions play such a large role in shaping people’s investment decisions.

I didn’t necessarily plan on working on the institutional side of the business from the start. It just so happened that my first job out of college was on the institutional side and I immediately found it to be a very interesting area to work in. There are so many large pools of capital out there (charities, colleges, hospitals, governments, insurance companies, etc.), all with different goals and needs. But the constant is that every organization needs a plan in place that takes into account their unique assets and liabilities. I really enjoy making decisions and creating portfolios to meet those different needs.

CK:  How did you begin to learn about the market and investing?

BC: The best education I received was simply through reading as many books as I could get my hands on. Early on in my career my favorite question to ask people from the industry who I interacted with was, “What are some of your favorite investment books?” I think spending $10-$20 on a book that comes with years or even decades of someone else’s lessons and experience is a pretty good deal.

Some of my all-time favorites that I regularly visit: Poor Charlie’s Almanack, The Warren Buffett Portfolio, The Most Important Thing, Your Money & Your Brain, Simple Wealth, Inevitable Wealth and Thinking, Fast and Slow.

But there’s also something to be said for experience in the markets, so at the outset of my career one of the best ways to get up to speed was to learn as much as I could about market history. The biggest thing that stood out to me right away was the fact that, although markets are constantly changing and evolving, human nature is the constant. The reasons are usually different, but the cycle of fear and greed has always persisted across the various iterations of the markets. Standing on the shoulders of giants is a great way to learn about investments, but studying the mistakes other have made in the past is also invaluable.

CK:  Can you provide an example of something you thought was true early on and now believe is wrong?

BC: I always assumed that the smartest person in the room had to automatically be the best investor. The most eloquent, brilliant person had to have the best performance, right? I’ve since come to realize that there are always going to be people who are smarter than you in the markets. That doesn’t automatically make them a better investor. In fact, people who assume they’re smarter than everyone else often fail at investing because it’s so easy for them to become overconfident in their abilities.

In my book, I list six traits that I have found good investors share. They are not comprehensive, but it’s been my experience that they are very important. They are, in no particular order: emotional intelligence, patience, the willingness to admit their limitations, an understanding of history, discipline and a calm demeanor during times of chaos.

Attributes such as self-awareness, humility, temperament and common sense can trump a high IQ in this business. Temperament is more important than textbook smarts. I’ve witnessed many very smart people perform terribly in the markets because they didn’t have control of their emotions when making portfolio decisions.

In the past, I was the first one to believe everything the smartest person in the room had to say about the markets. Now I’m much more likely to seek out the opinion of the person who is willing to admit what they don’t know. Those who can admit their limitations will have a much longer shelf-life in this business.

CK:  Were there any mentors or teachers along the way that helped you? If so, what did important things did you learn from them?

BC: I’ve been lucky to have a handful of great bosses throughout my career. Here are a few things that stick out in my mind that I’ve learned from them over that past decade or so:

  • Never try to predict the direction of interest rates. Maybe a few people can do this. Even if they can, they’ll likely miss the timing or the magnitude. Your time is better spent elsewhere.
  • You don’t have to have an opinion about everything that’s going on in the markets. It’s okay to not care about certain things that are out of your control.
  • Most of the stuff you learn now won’t have any meaning for a number of years. Always keep an open mind.

CK:  What inspired you to do your blog “A Wealth Of Common Sense?”

BC: Over the years I’ve always received a number of questions or concerns from friends, family members and co-workers about their portfolios and finances. When I first started the site I was mainly writing to try to answer many of those recurring questions. It actually turned out to be a great strategy because I’ve found people really like it when you’re able to explain complex topics in a way that everyone can understand them. I’ve always tried to keep my message simple enough that people outside the world of finance could understand it.

I also thought the blog would be a great way to gather my thoughts and see how they evolved over time. Writing is a great way to figure out what you really think about something and I wanted to start documenting my thoughts over time.

CK:  Among all of your excellent posts, what three are your personal top favorites and why?

BC:

  1. What If You Only Invested at Market Peaks: Probably my most popular post. I think the reason this one has worked so well is because I used a simple story to illustrate my point about thinking and acting for the long-term in the markets.
  2. Observations From a Decade in the Investment Business: This one is a good summary of many of the big lessons I’ve learned over the years.
  3. My Time on the Sell Side: I’m a big fan of learning from past experiences and this post on my time interning for a group of sell side analysts really shaped the way I look at much of the financial industry and how it works.

CK:  Have you been surprised or disappointed by the reaction to any of your posts?

BC: I’m constantly surprised at which posts end up with a huge number of readers and which one don’t have much of an impact or reaction. There are some posts that I’ll put hours and hours into, only to receive a collective ‘meh’ from readers. Others are quick, one-off topics that I don’t put a ton of time into and they end up being shared all over the place. It’s like forecasting which way the market will go in the short-term.

People are quick to complain about Internet commenters, but the majority of my interaction with readers has been positive. I get tons of great feedback, new ideas and different perspectives from the reactions of my posts. But I think part of that stems from the fact that I’m very non-confrontational in the topics I write about.

Check back tomorrow for part two.

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