We Study Billionaires - The Investor’s Podcast Network - TIP184: Momentum Investing w/ Dr. Richard Smith (Investing Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, how's everyone doing out there? So on today's show, we have an amazing guest that's taken the fundamentals of statistical analysis and applied it to a system for being a successful momentum investor. Our guest's name is Dr. Richard Smith, and he's a graduate of UC Berkeley and other esteemed institutions with a degree in mathematics and system science. He's the founder of a highly successful investment website called Trade Stops, and his site provides recommendations for entry and exit points on stocks completely based on the price action.

Starting point is 00:00:33 Now, we've heard about this approach from previous guests like Wesley Gray, James and Patrick O'Shaughnessy, but it'll be interesting to have a discussion with Dr. Smith because his platform specializes in this approach, which is very different than the typical fundamental in value investing strategies that we often talk about on this show. As a side note, Stig was out of town and wasn't able to join us for this discussion, but he'll be back with us again in the future episodes. So without further delay, we bring you the thoughtful Dr. Richard Smith. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for

Starting point is 00:01:14 the unexpected. All right. So awesome to have everyone with us here. And I'm joined with Dr. Richard Smith right now. And so Richard, welcome to the show. Preston, it is great to be here. I've been following your work for a couple of years now. I love your show. I couldn't be happier to be on here with you and your audience. Well, thank you very much, Richard. We're very humbled to have you with us here today. So let's go ahead and start off the show by talking about your background. What was the driving factor in your life that led you to put all the time and effort into creating your own momentum-based investing website? Because this is a lot of work, which you've done. And I'm kind of curious to hear what your inspiration was. Well, I started out investing myself in the late 90s.

Starting point is 00:02:12 There was a lot of momentum going on in the markets then, right? Yeah, absolutely. Followed by March of 2000 when the momentum turned in the other direction. But really, I stumbled upon it because I just observed myself as an investor. And I kept noticing how I got stuck in big losing positions and I never got stuck in big winning positions correspondingly, right? So that was like, wait a minute, you know, I'm a reasonably intelligent guy, you know, I studied math at Berkeley. I got my PhD in a field called System Science. And, you know, how come this keeps happening to me over and over again? It didn't make sense. It didn't add up, right? So then I started looking into what tools could help me reverse this pattern I saw in my own investing. And the first thing

Starting point is 00:03:04 I came upon was a simple trailing stop strategy, literally a 25% trailing stop strategy. And I started back testing this against my own portfolios, other portfolios, and it kept improving the performance. And, you know, why is that? What's going on there? And then I came across the work of Daniel Kahneman and Amos Diverski. It's called Prospect Theory. But basically, you know, I found out that this has been, you know, very well documented since at least the early 1990s that psychologically, when we get underwater on a position, we want to take more risk to try to get back to break even because we hate losing.

Starting point is 00:03:50 We are averse to losses. We have loss aversion. So that, you know, kind of behavioral bias towards taking more risk when we're underwater is what makes us get stuck in our losers. And then, but on the flip side, when it comes to our winners, we are, we don't have any behavioral biases to getting stuck in our winners. We actually are risk averse when we're, when we have gains. We want to take those gains off the table as quick as possible.

Starting point is 00:04:21 You know, we, we don't want to lose those gains. Okay. So literally, we are risk-seeking when it comes to our losses and we are risk-averse when it comes to our gains. And in my mind, that explains 50% of the chronic underperformance that the individual investor experiences in the markets. That investing is really a behavioral challenge as much, if not more, as it is an information challenge. So everybody spends all this time, you know, trying to get as much information as possible. But in the end, it's the behavior that, you know, the bad habits that we have as investors, you know, really, they're habits that apply in other areas of life correctly, you know, like buying things at a discount, right?

Starting point is 00:05:05 You know, but psychologically in the markets, it just trips us up, you know, and then you combine it with the media's constant hammering on us and trying to get our attention every day and, you know, work us up into a lather so that we'll look at their advertising. Well, so what's interesting is you're talking about how you how you stumbled upon understanding why you were psychologically making mistakes. Right. So then your approach to solving that was, let's turn to mathematics here. And let's try to develop a protocol or a procedure so that when this happens, I'm going to trust the math and not my emotions.

Starting point is 00:05:44 Right. Yeah. And so, okay, so describe what you built. So I started out with trailing stops and then I started saying, well, there's, you shouldn't use the same. same trailing stop on every stock, I'm sure. So I came up with a volatility-based trailing stop strategy to measure the historical volatility on pretty much any stock, and to use that as the basis of how much noise or uncertainty is in this stock, if I want to hold it for at least 12 to 18 months. So if a person's hearing that, they're going to immediately

Starting point is 00:06:17 think, well, that's an exit strategy, but how about an entry strategy? How do I know when to get into something based on this momentum in the volatility? Absolutely. And that was the next step. So I had a good system for getting out of a stock now. And then I needed a good system for getting into a stock or back into a stock that I had gotten stopped out of. And so I use that same principle of volatility.

Starting point is 00:06:41 So if something is in a downtrend, the first thing that I want to see is that it has a very, you know, solid up move off of its downtrend. and that it moves up more than its sort of normal expected volatility. Because I don't want to get caught in dead cat bounces. So then where the momentum piece really came in was actually combining that with a trend, momentum-based trend indicator to make sure that I wasn't getting whipsod too much. So that combination of one, you know, what's the normal expected volatility for this stock? What's the normal noise that I should be okay with?

Starting point is 00:07:18 you know, if this stock's going up, right? How much noise should I allow it, expect in the stock to tell like, hey, this is just normal movement in this stock. But if it gets noisier than that, then, you know, something else is going on and the trend might be changing. And then the same thing when it's in a downtrend, how much noise can I ignore, you know, how much noise does it need to trigger on the way up in order to tell me, hey, this is more than just the normal noise in this stock.

Starting point is 00:07:45 So basically, I quantified noise. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year,

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Starting point is 00:12:08 biggest problems with value investing is when a company is a great value pick, it's also usually something that's heavily out of favor. And if for anyone that's conducted a value investing strategy before, there's, there are these times when you'll buy a company that has maybe a great accounting fundamentals and it looks really cheap, but the price action is very difficult to endure and it might just keep going down for the next three months and then it's testing your temperament. And so we're trying to first identify companies with the great fundamentals, but then only by those companies once we see a statistical change in the price momentum, which suggests that the pain is starting to subside and it's not going to be so painful from a vantage point

Starting point is 00:12:52 where it's really testing our temperament. So I'm kind of curious to hear your thoughts on that idea. I love it when you, you know, you're identifying your own basket of ideas, right, from one source or another, right? Your own analysis, maybe following the billionaires, but somehow, and this is what I do myself. I've identified my favorite stock pickers, basically, that I get my ideas from. I put together my basket of ideas, and then, you know, I will not try to catch a falling knife. I will watch those indicators. And when I see something basically turn green that I really like, you know, I'm all over it quick. incredible story for you, all right? Yeah, let's hear it. Brent Vine developed a search engine company back in the late 90s was a publicly traded company on the NASDAQ, right? At the peak of the NASDAQ, his company was generating like $5,000 in revenue a day or $5,000 of profits a day. Yeah. And stock was $20. At the bottom of the NASDAQ, his stock was worth $1, and his company was generating $100,000 a day in revenue.

Starting point is 00:13:58 It's unreal. So sometimes the markets throw the babies out with the bathwater, you know, and that can happen in sectors, it can happen in industries. And, you know, as I think it's John Maynard Keynes, I'm not sure he's the one, but it's usually attributed to him. The markets can stay irrational longer than we can remain solvent. You have to have some kind of fundamental foundation. And I think for the individual investor, right, you know, we're not Warren Buffett necessarily.

Starting point is 00:14:26 We're not going to hold stocks for 20, 30 years. So to combine great stock picking good momentum strategy, something like that, I think it's the way individual investors pretty much have to go. Hey, so I'm curious. So people listen into this. They might be interested in just hearing where are you seeing momentum trends today? in the end of March 2018, what are you seeing as good momentum trends? Consumer discretionary and financials and technology are still in the green.

Starting point is 00:14:58 I look at the spider select sector ETFs, right, that break the S&P 500 up into different sectors. So consumer discretionary, financials and technology are still in the green. And by the way, those happen to be the three sectors that the billionaire investors that I follow really love and have their biggest weights in. consumer discretionary financials and technology. On the downside, consumer staples, health and utilities are all in the red. And I'd be staying away from those. How about commodities? I am bullish on oil. Gold has been in an uptron now for at least 12 to 18 18 to 24 months. And oil is one that I always had trouble investing in oil, especially when I first started investing, and I was even doing a little work in the futures markets,

Starting point is 00:15:49 and I would just always get beat up by oil. And what I found from my own research was that oil as a commodity is surprisingly volatile. You know, I came up with this metric, the volatility quotient or the VQ. And on oil, it's usually above 30 percent, you know, so then you see these articles in the media, oh, oil, you know, fell more than 10 percent. It's in a bare market. No, it's not. you know, oil has to fall 30, 35% before it's in a bare market. Anything less than 30% is just noise in oil. So it may be at 60 bucks, you know, but it's got to fall $15, $20, you know, in order for it to be anything other than just noise, basically, something that you can

Starting point is 00:16:30 ignore, right? So oil falling from $60 to $50 is no big deal. That's just the normal expected behavior for oil, right? So that kind of insight using that mathematics basically to say, no, this is something I can ignore or no, this is something I really need to pay attention to, has been immensely helpful to me. So I've been bullish on oil for two years now, you know, and it thrashes around a bit, but it thrashes around within its normal expected range, you know, but that can be quite a bit, you know, but oil at 60, falling down to 50, eh.

Starting point is 00:17:05 I, you know, some of the long-term trends that I'm still keeping a close eye on, the downtrend in long-term treasury yields, right? So 30-year treasury yields, obviously that's a big question for the markets right now. We're in a 30-year downtrend, you know, and that downtrend has not been broken to the upside. With respect to yield, you're saying. With respect to yield, right? Treasuries are in an uptrend, yields are in a downtrend. You know, long-term interest rates, I'm not sold.

Starting point is 00:17:35 on the idea yet that long-term interest rates are headed higher. I still think there's going to be some flight to safety movements coming up. And so, you know, I think the long-term downtrend in long-term interest rate yields is still intact. And we're seeing the inversion of the yield curve. You know, typically at the end of the credit cycle, you always see the short end of the yield curve coming up and the long tail just kind of hold and put. So that's interesting. Hey, talk to us about the, you were, you mentioned in this billionaire filter. I've seen this on your platform. Tell us more about this because this is fascinating and I absolutely love this tool. And I think people hearing this are going to be pretty, this is neat stuff.

Starting point is 00:18:19 Well, like I said, you know, I'm not a stock picker myself, right? I really, I need a way to narrow the choices, my investment choices down from a universe of 10,000 different, you know, publicly traded stocks down to maybe, you know, a couple hundred. stocks that I feel somebody who knows what they're doing has really looked at carefully. So, you know, who better than that? Who better than some of the world's greatest investors to do that for me? So, and all of that information is basically, you know, published for free. What's Warren Buffett in, in terms of publicly traded companies?

Starting point is 00:18:56 What's Seth Clarman, David Einhorn, Carl Icahn, George Soros? So they're all have to publish their stocks, that they're publicly held stocks. So I started basically digging into that data and finding out what investments those guys were in. And then looking at that for my universe of investment ideas. So I'm following about 15 different billionaires right now. You know, that collectively is three to 400 different investment ideas at any one time. And basically then I apply my. my momentum strategies, which in trade stops, boils down to a red light, yellow light, green light system

Starting point is 00:19:38 now. And, you know, I say, hey, if Warren Buffett likes it and it's green, then I'm seriously considering it. And a great example right now is TiVa, Tiva pharmaceuticals. So Buffett bought Tiva in the fourth quarter of 2017, and Tiva just recently turned green in my system. So Tiva has moved to the top of my list of candidate stock ideas, basically, because, hey, if Buffett likes it, that's good enough for me. And I recently turned green in my system. So I'm paying close attention to that stock and considering adding it to my portfolio. I love it. So you're basically outsourcing your fundamental analysis. I like to say Warren Buffett works for me. Warren Buffett is my stock analyst. I like it. It works great. It works great.

Starting point is 00:20:32 And it gives you confidence, right? And confidence is such an important thing to have in the markets, you know? It's like you have to be able to live through the storms. You have to be able to live through the turbulence, the whipsaws, right? So one, kind of quantifying your noise factor. How much, you know, noise or uncertainty do I have to live with in a stock like Tiva? But then knowing that, hey, Buffett's in Tiva, you know, it's got to be, you know, a pretty good idea. And you need confidence as an investor in the market.

Starting point is 00:21:02 I think that's a great way to build your confidence, find great stocks, and then get in them at the right time. So talk to us about portfolio construction. So when you're thinking through the volatility piece and you're thinking through all the risks that's kind of associated with various picks and different sectors and stuff, how do you construct your portfolio? How do you think through that difficult problem? I try to keep it as simple as possible. I've mentioned how I came up with a measure of volatility on individual equities that I've done. call the volatility quotient trait. Well, I also came up with a way to measure that volatility on your whole portfolio. So just like you can say, you know, hey, Johnson and Johnson has a 12% volatility quotient, which means that if I want to hold that stock for 12 to 18 months at a minimum, then I need to be just fine if Johnson and Johnson falls 10%, you know, and turns back up. So then, but to be able to

Starting point is 00:21:59 measure that on your portfolio as a whole is really important. How do all the pieces of your portfolio fit together basically in terms of correlation, right? So some stocks are going up while other stocks are going down. So, you know, Ray Dalio, I believe, said that the holy grail of investing is 15 good uncorrelated investment ideas. So finding investment ideas that are all good, but that some are going up while others are going down, that's a very powerful way to put together your portfolio. And so in trade stops, I came up with something that I call the portfolio VQ

Starting point is 00:22:34 or the portfolio volatility quotients, basically takes the stocks in your portfolio, how much you've got in each one, how volatile each one is, projects back for three years, what the performance of that portfolio would have been, and then measures the volatility of that equity curve. And so now you have a new,

Starting point is 00:22:53 investment idea, you can add it to your portfolio just as a test and see if it increases or decreases the overall volatility of your portfolio. It's really one of the huge pieces of the way I put portfolios together. And then I also use volatility to help me decide how much to invest. So when we're talking about volatility, you're not going to find anything that's probably more volatile than Bitcoin or some of these cryptocurrencies. I'm curious, is this something that you have dabbled in? Because I know I've owned some Bitcoin. And I'm kind of curious if you have and how you can approach it with all your volatility tools that you're using. I have indeed gotten involved myself. I've really become a big believer in the cryptocurrency and blockchain movement. And I'm really excited about it.

Starting point is 00:23:46 I think it's an incredible opportunity for individual investors. And I think that, you know, my work applies a lot because essentially if I boil my work down into a nutshell, Preston, it's like, how do individual investors who are busy who have other lives, right? But, you know, who have been successful in their lives enough to accumulate some capital, right, that they have the opportunity to deploy that capital into financial markets and into speculative opportunities. and that's a very important function in our economy. And so my work boils down to how do successful people deploy their capital in the financial markets in an intelligent way that still allows them to sleep at night? Because I think the worst position to be in in the markets is when you're unsure about what you're doing, when the volatility is getting away from you and you start to get emotional

Starting point is 00:24:40 in your decision making. Well, so I'm curious to hear how the results of some of your analysis has worked because we had this massive upturn in Bitcoin in December. It got clear up to 20,000. I think it was at 20,000 for, you know, less than 12 hours or something. I think you could probably say the high was more around like 18,000. I'm curious how your platform performed through that. And, you know, were you invested through that 10x, jump. I'm assuming that you had very strong momentum indicators through that. But I'm also curious where you saw a thing, because I mean, we've been in a bare market. I think the price of Bitcoin right now is clear down to $8,000 with a $12,000 pull off per Bitcoin. When were you starting to see momentum signs saying that you hit a top and that it was time to not be holding a position? Because I'm assuming right now you're not holding a position. In terms of my red light, yellow light, green light system, you know, the volatility quotient on Bitcoin was about 40%. Wow. So that means,

Starting point is 00:25:45 you know, hey, that's how much noise you got to be okay with, right? So when Bitcoin made a top at $20,000, you know, the 40% below that is $12,000. So literally, you know, but still, my, my system got into Bitcoin at around $2,000. So a ride up to $20,000 and a ride back down to $12,000 was, you know, what you needed to be okay with. in order to use this system to be long Bitcoin. Now, I had some other indicators that aren't part of my trade stop system. I've been a big follower of time cycles analysis for 10 years now. And I had some other reasons to believe that Bitcoin was going to top in late December

Starting point is 00:26:27 and frankly, possibly bottom in late March right about now. So I actually like the action that we're seeing in Bitcoin today. We saw a low back in early February. We saw a higher low recently, you know, last weekend. I've been expecting a near term bottom in Bitcoin right about now. But more broadly, you know, I think just what's going on with crypto is incredibly exciting. I think it's incredibly important. I was actually at the IBM Think conference earlier this week in Las Vegas.

Starting point is 00:26:59 I met with two vice president-level executives at IBM, who basically told me that IBM is all over blockchain. and, you know, there's private blockchain and there's public blockchain. Obviously, IBM is doing a lot in private blockchain, but they can't, you know, they told me they can't get away from the public blockchain either, right? I mean, I think a big part of the crypto and blockchain movement is about trust, right? We're seeing a lot of lack of trust in big institutions, you know, what happened with Facebook this week is an incredible indicator, you know, when you can get, you know, too big and too powerful. lose that trust almost overnight of a massive amount of people, right? And so that new model of trust that blockchain and crypto represent, I think, is a paradigm shift. It's something that I think

Starting point is 00:27:49 is very worth investors' attention. And it is something that I've applied my tools to, basically to help investors know how to be in this space and be in it for the long term, right? know how much uncertainty are noise to expect, to be comfortable with so that you can be in this space and ultimately capitalize on the potential of this space as an investor, you know, and not just get whipsod and lose your money. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up.

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Starting point is 00:31:39 Back to the show. Yeah. No, I think that the volatility on that one, man, you better really be prepared for some wild swings. Yeah. My indicators are basically saying, you know, if. It's stormy seas in crypto right now. We're not out of the woods.

Starting point is 00:31:55 I personally think, you know, it's an interesting time to do some bottom dipping right now, you know, and you may be catching a falling knife, but as long as you're not putting more money into it, then you're comfortable not seeing for a year or two. I think it's an interesting time to be doing some bottom dipping. But some of my favorite cryptos and altcoins in the space, I actually really like light coin right now. And Manero, which is in just an unbelievable lot. uptrend that was hardly dented by the recent downturn at all. You know, there's a site called coincheckup.com and they have an algorithm ranking system there

Starting point is 00:32:31 that looks at the teams and the public support of the network essentially, you know, the past track record of the teams, what their model is, what their ideas, and Ether Classic and Monero and Bitcoin rank at the top of that algorithmic. It's like corporate governance for crypto. You have to be looking into, you know, because you're basically betting on these teams and on these networks and on these ideas at this point. You know, there isn't, you know, Warren Buffett is not in crypto because there is no way to fundamentally value, you know, what amounts to a new paradigm at this point. You know, so it is a bet on the teams and on the ideas and on the people that are attracted to that new business model, essentially, right? So I think Ether Classic and Monero both have some great technical encouraging signs, though.

Starting point is 00:33:23 They're both in the red right now according to my system. So, you know, this is definitely bottom fishing here. You know, this is not, hey, we're waiting until it turns green and it just turned green, right? But I think those are a couple that people would be well served looking into. Okay. Interesting. Hey, so when we were talking, and this is a little bit of a plug, sorry, guys. This is a little bit of a plug for our Berkshire meeting.

Starting point is 00:33:45 but we had lunch, I asked Richard, I said, Richard, you're going to come out to the Berkshire meeting in May? And he said, you know what? I think I will do that. So I'm kind of curious. Are you excited for the meeting? I'm very excited about it. I'm very excited. It's been time with you and your colleagues. And I've never been to the Berkshire meeting. And, you know, I really started focusing on the billionaires in the past 18 to 24 months. Buffett obviously stands out. By the way, just for your readers, a benefit, my favorite billionaire to follow is David Einhorn, and I don't want to get too far off the track of Buffett here. Charlie Munger was one of the first people that really turned me on to the psychology of investing. There's a YouTube video

Starting point is 00:34:29 of Charlie Munger giving a talk at Harvard about the work of Robert Chaldini, you know, who wrote influence, right, and then persuasion now. And I had come across Chaldingy's work through looking into marketing myself, being a business owner, right? You have to know a little bit about marketing. And then later on seeing Charlie Munger talk about the psychology of investing, basically, and how he learned about it from reading this book by Professor Chaldini was very influential on me and, you know, really told, really, you know, gave me a heads up to how smart Charlie Munker really is. Yeah. It's funny you were talking about Einhorn because I read his book, fooling some of the people all of the time.

Starting point is 00:35:14 And you can see how just in his writing of that book, how smart that dude is. Yeah. I mean, he is a smart dude. And I mean, just a diatribe of a book about one stock that he was investing in through all this painful experience and just clobbering the corporate governance and the company. It was a fascinating read. I don't know if we could do it on the show. I don't know that it would be a good fit for reviewing on the show. But if anyone wants to read a really interesting book, go ahead and read Einhorn's book.

Starting point is 00:35:48 It's pretty cool. Going back to Buffett for just a minute, you know, one of the stocks that Buffett has been buying recently is Apple, right? So he first bought Apple back in 2016. And then Apple has been, you know, at around $100 maybe average price. He's still buying Apple today at $170 a share. So he's actually adding to his winners on the way up. But as individual investors, most people tend to add to their losers, right?

Starting point is 00:36:17 You're doubling down on your losers, right? So going to this momentum thing, right? And wanting to get away from being risk-seeking with my losses to being risk-seeking with my gains instead. And if you think about it in terms of businesses, we're owners of businesses as investors, right? So essentially when we're putting more money into the businesses that are losing us money and taking money out of the businesses that are making us money, that's, it's not logical, right? But you see Buffett putting more money into the businesses that are making him money, right? Apple's going up

Starting point is 00:36:52 and he still feels it's a good value. He's buying on the way up. And it's the exact opposite of what most investors do, especially individual investors. You know, they just keep buying on the way down, I'm feeling better and better about, you know, oh, I'm getting a lower, you know, cost basis. You know, and I understand dollar cost averaging. I think it's a very valid way of going about investing, but that's not what most of us are doing. You know, we're doubling down because we are risk-seeking when it comes to our losses. We want to get back to break-even as quickly as possible, you know, and the break-even theory actually won last year's Nobel Prize in Economics from Richard Thaler.

Starting point is 00:37:30 He followed up on Daniel Kahneman's work. who also got a Nobel Prize, you know, and Richard Thaler basically showed, yeah, you know, we do try to get back to break even and, uh, and we'll take extra risk in order to do that, right? So we got to get past that. Watching Buffett buy Apple on the way up and add to his winners is another thing that just kind of changes my confidence as an investor that that's the right way to do things. So Richard, I'm curious, because I can see behind you, you read a lot of books. I mean, your, your bookshelf behind you is just loaded with.

Starting point is 00:38:03 with books. I love that. I'm curious, you know, for the, for the topics we were talking about today with the using statistics and volatility and investing and, you know, Ray Dalio's approach, what book out there would you recommend to the audience that you think really kind of encapsulates a lot of the stuff we were talking about today? Well, a lot of the stuff I read tends to be surprisingly a little more on the psychological side. So, you know, I think the work of, Taleb around, you know, his black swan ideas and just understanding risk in the markets and the way that that interacts with us psychologically, right? A lot of the work on booms and busts. And, you know, we have, there's big booms and busts and there's many booms and busts in our

Starting point is 00:38:53 portfolio, mini, M-I-N-I, small booms and busts, right? In our own portfolios. So kind of understanding the psychology of investing, again, I really believe that investors, is largely a behavioral challenge. There's so much good information out there right now, Preston. There's so many good tools. You can find good sources of investment ideas. You can find good tools. What you really need are good investor habits.

Starting point is 00:39:18 And there's a lot of good information out today about how habits are formed and how to develop new habits. I think it was maybe the power of habit by Charles D. Higg. There's a lot of great insights today about how to develop great habits. And we need great habits as investors. That's what is really going to make the difference between success and failure. So I think reading about successful investors, it's an old book, but the market wizard books, right? That was another place where I learned, you know, hey, individual, I mean, successful investors, they'll tell you, hey, 95% of the stuff I do ends up being a wash.

Starting point is 00:39:53 And 5% of my decisions lead to, you know, 80 to 90% of my gains. And unfortunately, for investors, it's the other way around. 5% of our decisions lead to 80 to 90% of losses. And so reversing that, you know, imitating great investors, reading the work of great investors, really that gets you in the mindset of being a great investor. And that's what you really need. Love it. So Richard, tell the audience where they can find you.

Starting point is 00:40:25 I don't know if you're on Twitter, but just tell people where they could reach out to you. So trade stops.com, T-R-A-D-E-S-T-O-P-S. dot com. That's my service online. I also post a couple articles a week there on the blog. We are on Facebook, Twitter. I'm not very active on social media right now. I tend to be a more private person. But I am in business, so I know I got to get out there a little bit. But the blog at Trade Stops is a great place and just to learn about the product and our offerings there. That is awesome. Well, Richard, all I can say is thank you so much for coming on the show. You know, I'm a fan of your work. and it was really fun for me to sit down and chat with you to kind of hear how you got to where you're at today and your mindset and how you've designed your platform.

Starting point is 00:41:12 So this was really a lot of fun. Thank you for your time. Well, Preston, I think you are a great voice out there for the individual investor. I think individual investors actually have advantages over big investors and institutions that we don't fully appreciate. And so I love the work that you're doing. And it's been a real honor to be on your show. Thank you. Thank you so much, sir. appreciate that. All right. So that concludes our interview here with Richard Smith. We appreciate

Starting point is 00:41:38 your time and we look forward to talking with you guys next week. Thanks for listening to TIP. To access the show notes, courses or forums, go to theinvestorspodcast.com. To get your questions played on the show, go to Asktheinvestors.com and win a free subscription to any of our courses on TIP Academy. This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP184: Momentum Investing w/ Dr. Richard Smith (Investing Podcast)

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