I’m a big fan of the music service Spotify. Their algorithms have steered me to younger and more obscure artists that have enriched my enjoyment of music. There’s so much great music beyond the superstars and core genre I grew up with (classic rock), but experiencing it beyond what the major radio stations and entertainment establishment were willing to offer was difficult—until Spotify and apps like it appeared on my phone.
Spotify opened the whole market of music to me. Blues, outlaw country, Southern, classic, and modern rock, and blends of all these genres fill my playlists today. Newly discovered artists are starting to dominate these lists, including those who have released incredible covers of old classics. And, importantly, a much larger and more diverse population of artists is being financially (and intellectually, spiritually…) rewarded by this more equitable sharing of the wealth.
Increasing competition, along with diminishing control and dominance of the self-appointed entertainment “elites,” is allowing the market in music to move closer to its full potential and offer greater value to people like me.
The same kind of thing has been happening in the investment industry over the past 30 years or so. Once dominated by stodgy old bank trust departments and Wall Street elites (firms like Wells Fargo and Merrill, for example), which concentrated investor capital in a very small number of elite and powerful corporations, our industry today is far more competitive, varied, forward looking, and science-based.
Credit academics, their students, and research institutes such as the University of Chicago’s Center for Research in Security Prices (CRSP), as well as non-establishment firms like Vanguard and Dimensional Fund Advisors for fueling this progress. By educating and encouraging a new breed of financial advisor who has shunned the me-centered culture of commission-based product sales, these firms have created the environment for spreading much greater value among a much greater percentage of the investing public.
This could not have come at a better time. With the demise of poorly managed and severely underfunded pension plans and the rise of defined contribution plans, more investors of all income levels are better able to control their investments and make good, long-term decisions with far better investment choices.
We are no longer dependent on the financial elites or their media lapdogs. We no longer have to be emotional puppets dancing to their “Buy!” and “Sell!” commands or be impressed and manipulated by their guru-of-the-day idolization.
We can all build far better portfolios at far lower costs with tools not controlled by the clingers to the old “science.” The clingers increasingly are exposed as less educated charlatans with only one real talent—salesmanship.
Markets work. Like Spotify, they allow us to own, appreciate, and enrich our lives (less stress and higher expected returns, for example) with a much wider and diverse selection of companies managed by risk-taking, highly motivated entrepreneurs.
Investing more broadly within the market context and structure to include smaller companies and those in some level of (hopefully) temporary distress (value stocks), investors and these lesser-known entrepreneurs and managers benefit far more than from the old way of investing.
Financial markets spread wealth more equitably, creating more value for everyone. Markets are leaving the financial elites in their dust, outperforming 80% of them over time while creating a more certain, less stressful long-term investing experience for those of us who embrace them.
Equius is proud to be part of this extraordinary movement away from the Wall Street culture.
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