The Traders Journal

ETF Guru Retires: Leaves Us with Six Key Lessons

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This is a salute to Ben Johnson, the departing editor of Morningstar’s ETF Investor publication. Over the years, I’ve come to look forward to his pithy observations about the ETF marketplace. To use his own words in describing his replacement, Alex Bryan, he wrote “He’s bright, articulate and capable of distilling concepts that are lofty and sometimes near unintelligible into insights that are readily consumable.”  Those are words which are spot-on in describing Ben Johnson himself. In other words, I’ve made money based on his insights — thank you very much! 

In waiving us goodbye, he leaves by sharing a handful of lessons that individual investors would be well-served to abide by. Here are his essential takeaways, followed by a few comments of my own.

Lesson #1:

“Investing is an inherently personal affair. We’re each running our own race.”

My many sermons on this topic are well documented. Yes indeed, each investor must understand his or her own different circumstances and skill set. Chapter 3 in our book, Tensile Trading, is precisely about this topic. For example, another one of my often-repeated proclamations is to “know your investing timeframe.” Long-term investors will not do themselves any favors by talking to day traders. 

Lesson #2:

“Every penny you can save on fees is one that will continue to compound along the course between you and your finish line.”

Another favorite sermon of mine! As John Bogle says, “the investing arena is the only place where you get what you don’t pay for.”  For example, you can buy an S&P 500 ETF from Vanguard (VOO) with a  cost of 0.04% or a dozen other ETFs that hold exactly the same S&P 500 portfolio for much higher expenses. Pay attention! This is not rocket science. I like ETF.com for this research. 

Similarly, in the mutual fund arena, you can buy American Funds Growth Fund (AGTHX) in 17 difference fee configurations. Some with front-end loads of 5.75%, some with deferred loads of 1.00%, some with expense ratios of 1.48%, others with 12b-1 fees as high as 1.00% a year. Pay attention — or you can buy the same fund (ticker RGAGX) with an expense ratio of 0.33% and NONE of these other fees. Folks, all 17 ticker symbols invest in exactly the same stocks. It’s free money compounding in your pocket as long as you do a little homework and pick the right ticker. I’ll show you exactly how to do this on December 5th when I join Tom and Erin on the MarketWatchers LIVE show.

Lesson #3:

“Preaching the benefits of good behavior is one thing. Practicing what you preach is another.”

The most certain way to lose your investing equilibrium is to ignore the “investor self” part of the money management equation. Yes — once more you should refer to Chapter 3 in our book.  Beginner investors often refuse to accept the reality that they themselves will determine 80% of their profits. The Investor Self is indeed that important.

Lesson #4:

“Tuning out the noise  has likely yielded meaningful benefits for my personal portfolio — preventing me from doing silly things.”

I interpret this to mean that you should believe the charts — they don’t lie. Tune out the talking heads on television. Tune out the newsletter writers who don’t invest their own money.  Tune out the disinformation media machine that’s trying to get you to do the wrong thing at the wrong time for the wrong reasons.  Focus on what the charts are telling you, not the why.

Lesson #5:

“I’ve come to more fully appreciate the power of compounding. The value of saving early and often is a piece of wisdom I’ve begun trying to impart.”

Not long ago,  my son and I spoke to the AAII chapter in Portland, Oregon. In his presentation, Grayson claimed that one of the key lessons I taught him was to embrace the power of compounding. At my age, I can attest to the miracle of compounding. Or as Warren Buffet called it  — the 9th wonder of the world!

Lesson #6:

“I always tell the students in business school they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision they used up one of those punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five, or three, or seven, and you can get rich off five or three or seven. But what you can’t get rich doing is trying to get one every day.”

This is Ben Johnson quoting Warren Buffett. My take on this quote is that it’s probably correct if your definition of “great” is limited to ten-baggers such as Amazon, Apple, Google or Microsoft. But I maintain that there are hundreds of wonderful “good” stocks such as Square, Ross Stores, Ulta Beauty or Amgen that can make your bottomline pretty attractive and make your mother proud! 

Bon Voyage, Ben Johnson!  Thanks for your lessons!


Mark Your Calendars...

I’ll be presenting on MarketWatchers LIVE – Wednesday, December 5th at 12:00 pm EST.

I’ll be showing you how I use Morningstar to save money, to make money and to make “Best of Breed” choices.


 

Trade well; trade with discipline!
Gatis Roze, MBA, CMT

StockMarketMastery.com

Gatis Roze
About the authors: , CMT, holds an MBA from the Stanford Graduate School of Business and is a past president of the Technical Securities Analysts Association (TSAA). He is also the co-author of Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). A full-time investor for over 25 years, Gatis has taught sold-out investment courses throughout the Pacific Northwest and beyond since 2000. Learn More

Grayson Roze
is the author of Trading for Dummies (Wiley, 2017) and Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). He has worked in the financial services industry for StockCharts.com since 2012, and now serves as the Business Manager for the company. He holds a Bachelor's degree from Swarthmore College. Learn More
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