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Jason Zweig: Temperament Is Everything for Most Investors

The author and The Wall Street Journal columnist discusses the current trading frenzy, the scorn for expertise, the road to a fiduciary standard, and more.

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Our guest on the podcast this week is The Wall Street Journal columnist and author Jason Zweig. Jason became a personal finance columnist for The Wall Street Journal in 2008. His weekly column, “The Intelligent Investor,” is a must-read for people inside and outside of the investment industry. Jason is also the editor of the revised edition of Benjamin Graham's The Intelligent Investor. And he is the author of Your Money and Your Brain, which explores the neuroscience of investing. He also wrote the Devil's Financial Dictionary, which is a satirical glossary of Wall Street.

Background

Bio

Jason’s twitter handle: @jasonzweigwsj

Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

The Devil’s Financial Dictionary

Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel

Life and Fateby Vasily Grossman

Palace Walk: The Cairo Trilogy by Naguib Mahfouz

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happinessby Morgan Housel

Matt Levine, Bloomberg Opinion Columnist

Jesse Livermore, Philosophical Economics

Nick Maggiulli, Ritholtz Wealth Management

Michael Batnick, Ritholtz Wealth Management

Ben Carlson, Ritholtz Wealth Management

Joe Weisenthal, Bloomberg

Tracy Alloway, Bloomberg

Robin Wigglesworth, Financial Times

Research Institute: Credit Suisse Global Investment Returns, Yearbook 2021 Summary Edition

Georgarakos, D. & Pasini, G. 2011. Trust, Sociability and Stock Market Participation,” Review of Finance, Vol. 15, No. 4, P. 693. 

Thinking, Fast and Slow by Daniel Kahneman

Investment Policy and the Competent Stranger,” speech by Charles D. Ellis, empireclub.org, April 7, 1988.

Feynman, R.P. 1974.“Cargo Cult Science,” Engineering and Science.

Bogleheads

Investing

Stock Market 101: Teaching the Wrong Lessons?” by Jason Zweig, Jasonzweig.com, May 8, 2015.

How to Keep Your Cool When Markets Are Sizzling,” by Jason Zweig, wsj.com, April 23, 2021.

Why You Shouldn’t Buy Bitcoin When You’re Hungry,” by Jason Zweig, wsj.com, May 21, 2021.

You Can’t Invest Without Trading. You Can Trade Without Investing,” by Jason Zweig, wsj.com, June 18, 2021.

Robinhood Trader’s Battle Cry: ‘It’s All Just a Game to Me,' " by Jason Zweig, wsj.com, March 26, 2021.

Jason Hsu: China Is ‘the Last Great Remaining Alpha Reservoir,' " The Long View Podcast, morningstar.com, April 20, 2021.

ETFs and Index Funds

The Stock Got Crushed. Then the ETFs Had to Sell,” by Jason Zweig, Jasonzweig.com, Jan. 31, 2020.

The Story Behind the Market’s Hottest Funds,” by Jason Zweig, wsj.com, Jan. 15, 2021.

ETFs: What They Are and How They Can Fit Into Your Investment Portfolio,” by Jason Zweig, wsj.com, May 20, 2021.

Retirement

Jason Zweig’s Proposal to Scrap 401(k)s,” by John Rekanthaler, Morningstar.com, Feb. 26, 2019.

Wishful Thinking in a World Without Yield,” by Jason Zweig, wsj.com, June 18, 2021.

The Safe, High-Return Trade Hiding in Plain Sight,” by Jason Zweig, wsj.com, May 28, 2021.

The Funds That Make You Buy Low and Sell High,” by Jason Zweig, wsj.com, Aug. 30, 2019.

Financial Advice

The Intelligent Investor: Saving Investors From Themselves,” by Jason Zweig, wsj.com, July 1, 2013.

The First Line of Investing Defense? You,” by Jason Zweig, wsj.com, March 8, 2019.

Looking for a Financial Planner? The Go-To Website Often Omits Red Flags,” by Jason Zweig and Andrea Fuller, wsj.com, July 30, 2019.

Financial Advisor Fee Trends and the Fee Compression Mirage,” by Michael Kitces, kitces.com, Feb. 8, 2021.

Want to Get Rich Quick? Who Can Stop You?” by Jason Zweig, wsj.com, May 7, 2021.

Transcript

Jeff Ptak: Hi, and welcome to The Long View. I'm Jeff Ptak, chief ratings officer for Morningstar Research Services.

Christine Benz: And I'm Christine Benz, director of personal finance for Morningstar.

Ptak: Our guest on the podcast this week is Wall Street Journal columnist and author Jason Zweig. Jason became a personal finance columnist for The Wall Street Journal in 2008. In his weekly column, “The Intelligent Investor” is a must-read for people inside and outside of the investment industry. Jason is also the editor of the revised edition of Benjamin Graham's The Intelligent Investor. And he is the author of Your Money and Your Brain, which explores the neuroscience of investing. He also wrote the Devil's Financial Dictionary, which is a satirical glossary of Wall Street.

Before joining the journal, Jason was a senior writer for Money magazine, and a guest columnist for Time magazine and CNN.com. Prior to that, he was the mutual funds editor at Forbes. He has a B.A. from Columbia College, and he also spent a year studying Middle Eastern history and culture at the Hebrew University in Jerusalem.

Jason, welcome to The Long View.

Jason Zweig: Great to be with you guys. Thanks for having me.

Ptak: It's our pleasure. So, we wanted to start off with investing. It seems like a natural place to start. Maybe with a big-picture question. We're in a phase where it seems like we're celebrating those who break the rules or flout orthodoxy; for instance, meme stocks and joke cryptocurrencies, trollish CEOs who tout joke cryptos and meme stocks. None of these things really conform to a playbook. When you look at this, do you see it as just the latest manifestation of late-cycle manic-type of behavior that we've seen before? Or is this something new?

Zweig: Yes. That was an either/or question. And I think the answer is an “and” answer. I think it's both of those things. My hope is that as the economy reopens after the pandemic lockdown and people go back to work, they go back to more productive activities, they won't find trading as entertaining as it has been over the past year. And all of this activity will damp down a little bit.

It is worrisome and unhealthy and unwholesome. And, to paraphrase Abraham Lincoln: fondly do we hope--fervently do we pray--this scourge will speedily pass away. I would not miss it if it disappeared from the landscape.

Benz: One feature of the current trading frenzy is this instinct to be dismissive of experts. For example, people like us who might say it's better to simply buy index funds and call it a day. What does expertise mean? And why have people become so distrustful of experts, not just in the investment context, but seemingly in other areas as well?

Zweig: Well, obviously, we can't disentangle that from broader trends in society. And we've seen this in the political realm and the economics, obviously, in public health. And, I think some of it comes from the fact that anybody can Google anything and get a superficial understanding of even the most complicated issues, and that's a new phenomenon. For most of human history, knowledge was the ultimate scarce good. And, a 1,000 years ago, 10,000 years ago, even a couple 100 years ago, most people knew almost nothing about the world outside the confines of their own home or village. But today, of course, you can, with Google and other online tools, you carry an encyclopedia in your pocket that didn't exist a couple of decades ago, even a decade ago, for that matter.

But some of it, I think, also comes from the tendency of experts to overstate the certainty of their knowledge and to be overconfident and also not to communicate clearly. If you look at COVID, it's almost the test case for why people distrust experts. The whole controversy about wearing masks, for example--the CDC gave mixed signals. And most people don't understand that one of the things that expertise means is to change your mind when new information comes in. And people confuse consistency with knowledge and expertise. And they are under the belief that if you are an expert, you know the answer, and you never change the answer because you know it; when, in fact, to be an expert means that you change your mind frequently as new information comes in. That's what a good Bayesian does, or for people who don't know what that means, that's what a person with common sense and good judgment does when new information comes in.

So, one of the key tests for whether somebody is an expert is whether they're willing to say, I don't know, or I believe, or this is probable or likely, rather than giving answers that are all about certainty.

Ptak: I wanted to shift and talk about what you could argue is one way in which the rejection of expertise is expressing itself and that's in how we're seeing young people invest. They're speculating, at least in some pockets. So, the question is, how do we help these younger investors transition from being speculators to adopting an investor mindset? I think one question that's come up is whether speculating and losing money is an essential part of the learning curve. What's your take?

Zweig: I wrote a column recently where I chastised The Wall Street Journal, my employer, for calling everyone an investor, even when many of the people we reflexively call investors are obviously, traders at best, and speculators at worst. And that's the first step I think is for the financial media for all organizations that are involved in helping the public invest, which would include brokerage firms, mutual fund companies, financial advisors, asset managers of all types. Everyone has to get on the same page and reinforce the recognition that somebody who has made a couple of trades is not an investor, just by dint of having made a couple of trades any more than I'm a basketball player, if I take a basketball and go out on to a basketball court. I'm someone who is playing basketball, but that doesn't make me a basketball player--because, I can assure you, I am not a basketball player, although I enjoy picking up a basketball every once in a while. And those distinctions are really critical. And that's where I would start, and you always have to start with terminology. All of us have taken a college-level course in something. And the first thing every advanced class begins with is the most basic principles. We have to define what it means to be an investor. And if you grab your phone and you sign up for Robinhood, and you immediately trade as soon as you see the confetti, you're not by virtue of having done that, an investor; so far, you're just a trader. So that's where I would start.

But, more importantly, there are structural changes that have to occur. For decades, the brokerage industry has supported something called the stock market game, which is typically presented in mass classes to young kids who are still in school, they are all pre-college kids. And the objective of the game is to earn the highest possible amount of money in an incredibly short period of time. I think it's typically about six weeks. And so, this effectively teaches young kids to trade extremely volatile, high-risk stocks as fast as possible to earn the greatest amount of money in the shortest imaginable time. So, it's no surprise that when these kids become a few years older, the first thing they want to do is grab their phone and open a Robinhood account and start trading, because they've been taught by the brokerage industry that that's how you should invest. And, if I could snap my fingers, I would make the stock market game go away and I would make it be replaced with a curriculum that centers on compounding and principles of behavioral finance that would teach young people about overconfidence and the illusion of control. And, other principles--other psychological principles that would not only help them be better investors but would help them lead more productive and satisfying lives. So, we need to start with the definition of what it means to be an investor. And then we need to heal the ways we've gone wrong as a society in encouraging speculative behavior.

Benz: You've referenced how trading has gotten easier. It seems like a positive because this lowers barriers to entry and then allows some people into the market who might not have been able to be there before. But it seems dangerous, too, as you've alluded to. So have the removal of these frictions, has that been a positive on balance?

Zweig: Yeah,if you don't use them. Being able to trade for free is great, if you do it a few times a decade, or a few times a year, to be more realistic. But, if you're doing it a few times a day or a few times a week, it's terrible. Obviously, whatever you tax you get less of. And in the days when brokerage costs were much higher, people traded much less because it was like a tax. And there is zero evidence that people who trade more earn higher returns, and there is substantial evidence that the more you trade, the less money you'll make. So, making trading cheaper, or making it free, is beneficial only for people who use it extremely rarely and judiciously. If you're going to shoot yourself in the foot, using a pistol is a much better idea than using a machine gun.

Ptak: Do you think the removal of these barriers and frictions has implications for the cost of capital in the kinds of returns investors can expect to earn in things like stocks and bonds?

Zweig: Yeah, I think it does. And Elroy Dimson and his colleagues at London Business School and University of Cambridge have shown that the reduction in ownership costs and the ease of diversification that were brought about by the popularization of mutual funds in the second half of the 20th century, almost certainly led to more-diversified portfolios, and a long-term rise in the valuation of the stock market, not just in the U.S., but globally. Although I think the best evidence is for the U.S.

So, the extent that free trading makes stock trading nearly universal, I think it would almost certainly lead to lower returns in the future. Not just because people will trade to their own detriment, but because a greater number of people will end up participating in the stock market as a whole.

Benz: We talked to Jason Hsu recently about investing in China. The investing climate that he described seemed reminiscent of the late '90s here, where investors speculate a lot and they chase performance. In a way this is to be expected as China's risen so in such a meteoric way. But does it surprise you that even a country as advanced as China that we see unbridled investing behavior like this? And more generally, why don't investing best practices propagate across societies more rapidly?

Zweig: Well, I'm not sure we're in a position to point fingers that anybody else for speculative behavior, we in the U.S., there seems to be plenty of it here to go around. But I also think that speculation is a human activity. It's not just an American one or a Chinese one. There are significant cultural differences, though. Places like China, Taiwan, South Korea, do have a long tradition of what I believe the locals call punting--treating the local stock market as a casino or a racetrack and engaging in lots of speculative trading. So, that does go on in Asia quite a bit.

I think what's interesting about some of the cultural differences you see in portfolio turnover rates around the world is I think some of it has to do with the extent to which societies are highly trusting. There has been great research done on the importance of trust, to healthy financial markets and societies where the typical person is deeply trusting of more than a handful of their closest family members and friends tend to have healthier financial markets and political systems for that matter. And societies where people are highly distrustful--which could be places like Russia, lots of countries in the Middle East, Latin America, some countries in Africa--where trust tends to be much lower, participation in the stock market also is lower. And for that matter, political systems tend to be more authoritarian and public participation in politics tends to be more fragile.

Now, it isn't totally clear which direction the causality goes whether people participate less in public institutions because they are less trusting, or they are less trusting because they don't participate much in public institutions. But certainly, the more we can encourage everyone to participate in a healthy way in the financial markets, the better off societies will be.

Ptak: You've studied, written about, and collaborated with some of the most consequential people in the investing and behavioral finance fields--Ben Graham, Warren Buffett, Danny Kahneman--all were driven in charismatic in their own ways, but they were different in terms of temperament. What lessons has that conferred about the role temperament plays in success or innovation in your view?

Zweig: Well, I should start by noting that, yes, I collaborated with Ben Graham, but he was dead at that point. He was certainly the easiest collaborator I've ever had. When I was working on the Intelligent Investor book in 2002 and 2003, Graham, well, he died in 1976, so he gave me no trouble, there was no pushback. But he was an extraordinary man. And certainly, some of the other great investors and thinkers I've gotten to know over the years have all been extraordinary in their own right.

I think temperament is incredibly important. The great investment consultant Charley Ellis gave a remarkable speech in Toronto many years ago, where he talked about the three ways an investor can achieve superior performance. And if I remember right, the first was what he called physical excellence, which basically means outworking everybody else. I mean, you can just try harder. And if you have superpowers, you can get up at 4 in the morning and work until 10 or 11 at night, reading annual reports and financial statements and doing all kinds of other fundamental research maybe you can just outwork everybody else. There aren't a lot of examples of people who've done that, but I'm sure there are some.

The other was intellectual superiority, where you're just smarter than almost everybody else. And there is lots of examples of people like that. But what Charley Ellis said in his speech was—and, of course, this wasn't completely accurate in his case, but it certainly is in mine--he said, since I can't outwork everybody else, and I'm not all that smart, I choose the third way, which is the emotionally difficult way. And I think he really put his finger on something, which is that having the right temperament is pretty much everything for--I don't know if it's 99% of investors, maybe it's 95%, maybe it's 90%, although I imagine it's higher--probably at least 95% of all investors. For most of us--the vast majority of us--intellectual superiority is out of reach, physical superiority isn't feasible. So, the one choice we have left is trying to be emotionally superior investors. And that just boils down to a handful of things. It means you exhibit self-control and you avoid self-delusion. You don't lie to yourself, and you play your own game instead of trying to play somebody else's game. And it sounds so easy, but it is incredibly difficult. And really to cultivate that kind of self-control and self-discipline, and lack of self-delusion is the work of a lifetime. And you can backslide and go down the slippery slope toward chasing the next hot dot in the wink of an eye.

And, as Richard Feynman, the physicist, said, “The easiest thing you can do is to fool yourself because you were the easiest person to fool.” And that's vitally important for everybody to remember. And you can't be vigilant some of the time, you have to be vigilant all the time, or at least you have to try.

So, temperament is, for most investors, everything, but it's the thing nobody wants to work on, because it's hard work, it's hard to measure progress. And most of the time, it's unrewarding and unsatisfying, because self-discipline mainly involves watching other people party and saying, I'm not going to participate.

Benz: We've seen dramatic inflows into exchange-traded funds. You've long been in the camp of telling individual investors to buy index funds and call it a day. So, it seems like you'd consider this a great development. But do you think ETFs benefits versus traditional index funds are a bit overdone? Is the stampede into ETFs specifically, a bit overdone relative to just the traditional index funds?

Zweig: Yeah, I still like traditional index funds. And I'm not sure anybody has ever asked me before, but I don't own any ETFs. That's primarily because when I was building my index portfolio--this goes back many years, I won't put a date on it, because it's embarrassing. But in the old days back before the Civil War, when I got started, you had to pay a brokerage commission to reinvest your dividends on an ETF. And I just said, that's ridiculous, I'm not doing that. Because as somebody who has dollar-cost averaged into a handful of index funds for many, many years, I was not going to pay a commission every month to do that--or every quarter, I should say. And I wasn't going to pay a commission to reinvest quarterly dividends or to reinvest monthly dollar-cost-averaging commitments.

Today, that friction has been removed, but it may be a little too easy to trade ETFs. This, as most of our audience I'm sure knows, this was Jack Bogle's criticism of ETFs from the start--that they were too easy to trade. And I think to their credit, most individual investors use ETFs quite conservatively. And the vast majority of the ETF portfolio that the typical individual holds, is in core long-term holdings of basic building-block index ETFs. And that's very, that's as it should be. But to the extent that people are doing short-term trading of specialty ETFs, then that's not really a good thing.

And I guess here, I should pause for a second and make a point that I think sometimes gets overlooked. And we should emphasize, which is that I think I often sound kind of puritanical, and Calvinistic about the way people should invest. There's nothing wrong with having a small portion of your portfolio that you use for entertainment. If you enjoy researching individual stocks, and you get fun and satisfaction out of learning about them, and even trading them for that matter, there is nothing wrong with that. If every once in a while you want to buy a sector ETF, or a thematic ETF, and you're basically making a bet that over the next year or few months, or whatever it might be, next couple of years, it's going to do well. That's OK. I don't do it. Personally, I don't think most people really should. But if holding a handful of index funds is just too darn boring for you, and the occasional trade or speculation, lets off some of the steam that you might otherwise be letting off with something like market-timing or even worse tendencies, then it's OK. The key is, you have to segregate that money, you have to have what I like to call a “funny money” account. Ideally, you should have it at a completely separate firm from your core portfolio, and as Ben Graham said, “You should never mingle your speculative and investing accounts.” And that's the hill I would die on.

Ptak: I wanted to shift gears and talk retirement. One of the most vexing aspects of the current market environment is for retirees who have to try to extract cash flows from their portfolios in the current year of very low yields. What advice would you give them?

Zweig: There are no simple solutions or easy answers. There is a few things you can do. One is you can treat your equity portfolio as if it were an income portfolio. You can manufacture what financial economists have long called homemade dividends, you can effectively just say, I'm going to take 4% a year, or whatever it might be, out of my stock portfolio each year. And treat that as income for my retirement. And you can get roughly half of that in the form of actual dividends today in a broad market portfolio, and if you have an Energy ETF or an Energy Index Fund, you could probably do quite a bit better from that portfolio. A high-dividend index fund is going to pay you a little more, although not very much because a lot of people are doing that strategy right now.

So, that's the first thing you can do. You could add in something like an immediate income annuity, which will help. You can get tiny amounts of income out of something like I-Bonds or a TIPS portfolio, although those are not very satisfying solutions. Honestly, the single most powerful asset you have would be whatever savings you made before you retired. If you were prudent and thrifty in your accumulation years, and lucky, then you should have some assets that you can drawdown. Now, of course, a lot of that depends on your earning power. And people who are middle income, lower-middle income, or poor, really face no palatable choices right now, other than spending down some of your portfolio and hoping that before too much longer, interest rates will go back up, and you'll be able to earn a decent yield on a fixed-income portfolio.

Benz: Do you think we need some kind of a target-date fund equivalent for retirement? And I know there are some retirement-income funds, but maybe a smarter version of them to make it simpler for retirees who are trying to figure this out? It just seems so complicated, and we're handing people a pot of money at a time in their lives when we know cognitive decline is an issue among some older adults. What's your take on that? Like whether there can be a simple solution?

Zweig: Yeah, we absolutely need that. As you've written many times, Christine, target-date funds are not ideal, but they may well be optimal for a lot of people. Ben Graham talked a lot about the difference between what investors ought to do and what they can do. And he emphasized the importance of giving people, not just advice that's good for them, but advice they can actually follow. And the great thing about target-date funds for people who are accumulating assets for retirement is sure, they're not ideal, they don't work perfectly well; a lot of them barely work at all. But, on average, they work well enough for a lot of people to get most of the way where they want to go. And that's a great innovation.

And Jack Bogle used to like to say that the only important innovations in finance in the past, I don't know, decades, were the ATM and the index fund, and ETFs, too, for that matter, but the target-date fund has been a hugely positive innovation. And we really do need something like that for people who are in retirement, not just for people who are approaching it. And the thing that concerns me the most is, not only do we combine complexity with the problems of cognitive decline, and the fact that people's ability to make good decisions declines very rapidly once they're past the age of 60 or so. But there is another problem, which is that there is a massive wave of financial advisors and brokers waiting to exploit those vulnerabilities. And, yes, most of those people are intelligent, honest, confident, well-meaning, and care about their clients. But there is a minority of them circling like vultures, waiting for people to retire, get a 401(k) rollover, that's the biggest amount of money they've ever seen at one time in their lives, and pick them to pieces. And we desperately need, as a society, solutions that are sophisticated under the surface, but simple to the eye, and the ear, and the mind of the people using them. And I know people are working on it, but I wish they would work on it a lot faster than they already are.

Ptak: What about a uniform fiduciary standard for anyone offering financial advice? Do you think we'll see something like that in our lifetimes or are the moneyed interests that oppose it simply too powerful?

Zweig: Well, I wish I knew how to handicap that. I would hope so. It is very complicated. And when you get into the nitty-gritty of who should be a fiduciary, and how to draw the lines, that's how the SEC ended up with a proposal for Regulation Best Interest that was, whatever it was, 900 pages long, because it's not as simple as in the Bible--Solomon proposing to chop the baby in half. And say, all you guys over here, your brokers, and all of you people over here, your fiduciaries, is very complicated. But, yes, I think we would be better off if we could get to the point where the distinctions are clear. And anyone handling money for someone who has entrusted it to them must act as a fiduciary.

Lauren Willis, who is a law professor at, I believe, it's Loyola University in Los Angeles, has proposed a federal license for anyone who would give financial advice to the public. And I don't love that idea, for a whole variety of reasons, but I like it a lot better than what we have now. Like anyone who drives a car, we operate on the principle that that person is taking their own lives in their hands and also putting the lives of other people at risk by getting behind the wheel. And we license doctors. It's inconceivable that anybody would ever want to go to a doctor who isn't licensed. And maybe we should have a licensing procedure for financial advisors that is centralized and standardized, that might get us a fair amount toward where we would--I think most of us would agree--we would like to be without the difficulties of trying to write the fiduciary rule that would draw the bright lines in the right places. It's not a great solution, but I think it's a heck of a lot better than what we have now.

Benz: For several years, we've been hearing the assertion that financial advisor fees are the next frontier in the fee wars, and that we’ll inevitably see some downward pressure on them. But Michael Kitces published some research earlier this year that showed that fee compression hasn't happened across most business models. Do you think it will? And what do you think will be the catalysts for that?

Zweig: In January 2000, I had the good fortune of interviewing Warren Buffett about something and at the end, I asked him, “So many people are calling you a dinosaur right now. Are you? And will this period ever end when speculative stocks return so much more than the kind of things you have in your portfolio?” I don't think he even paused for a second. He just said very calmly and quietly, “I know what will happen, I just don't know when.”

And I feel the same way about this question, Christine. I know what will happen, I don't know when. But I am as confident of this as I am of just about anything--the fees financial advisors charge are going to fall and they're going to fall by a lot, because if they don't, the existing financial advisory industry will go away because it will have to. What industry can any of us name that charge 1% a year for its services 30 years ago, 20 years ago, 10 years ago, and still does. And I'm exaggerating a little, because I know the numbers have come down somewhat, but they haven't come down much. And technology, and informed consumers, and competition from places like Vanguard are going to drive those costs down. And financial advisors who believe that they can continue to charge what they've always charged, because they've charged it, are kidding themselves. It will last a while longer, but it will not last much longer. And the notion that you can charge 100 basis points a year to put people into a portfolio of investments that cost a fraction of 100 basis points a year is not a sustainable business model, it's just not.

Ptak: For consumers who are trying to sort out how to find an advisor and how to pay for that service, do you have any advice? What advice model do you think makes the most sense for consumers, if you had to pick one?

Zweig: Well, I think people have to start by asking what their needs are. And, of course, discussing that with the advisors, they would interview to fill the job. If you mainly want portfolio management, then you probably should either go with a robo-advisor, or someone who charges by the hour, or frankly, somebody working for a traditional brokerage firm who'll charge you on a commission basis. And if you're only making a handful of trades a year, and you trust a traditional broker to do it for you, it's probably cheaper than paying somebody 100 basis points a year to do it on your behalf. But if you need true financial advice, which I don't think portfolio management really is, then you want somebody who is more of a financial planner than a portfolio manager. And then you do probably want somebody who is fee-only. And, again, you would have to think hard about whether you want to pay that person a percentage of assets under management, which is a fee structure that I think doesn't always make sense for the consumer.

Benz: One question I wrestle with is whether everyone needs some kind of paid financial advice, or is it possible for people to be successful on their own with a bit of education and self-discipline? What do you think about that?

Zweig: Well, I certainly think it's possible to manage your own portfolio without a financial advisor, and lots of people do that. And the entire Bogleheads community, which is really an ecosystem at this point--there are thousands upon thousands of people following those principles, not just in the U.S., but worldwide. And they've succeeded amazingly well. Well, actually it doesn't amaze me, but it might amaze a lot of other people. I think investment management is something the typical person can learn how to do very well with a few years of study and some practice and lots of reading and thinking about the topic. And you can probably do it better than most professionals. Assuming that you have self-control and self-discipline, because you're not being paid for activity the way professionals are.

As to whether you can do all your own financial planning, that depends. If you are the kind of person who does your own taxes, and you never get audited, and you never get a giant refund or a big penalty, because you're always filing your taxes with close to impeccable accuracy every year, then you could probably handle a bunch of other financial-planning issues as well, just as accurately. But for most people, financial planning has a lot of moving parts. As soon as you make a change to how you're handling your estate, that has impact on your taxes, your portfolio management, your retirement planning, and your savings program. And I think it can be very helpful to have a financial planner who watches over you or gives you advice on those aspects of your financial life. And, frankly, I think the industry really lost something when it changed its professional description from financial planner to financial advisor, because financial advisor is too easily confused with investment advisor and has led to many former financial planners to think what they really are is portfolio managers. And the more the industry can get back to its roots in helping people plan their financial lives and manage their financial lives, the better off the advisors would be. And certainly the better off the clients would be.

Ptak: What we were chatting in advance of the podcast, you noted that one topic on your mind lately is that a lot of people seem to have trouble taking criticism, they have very thin skin. Is having a thick skin useful? And, importantly, is it a quality that a person can seek to develop in your view?

Zweig: Yes, I think it's hugely useful. I know a lot of people talk about the younger generation--millennials and people in their 20s, even teenagers. What's the term I've heard used--teacups and krispies? People whose feelings are hurt incredibly easily, who need safe spaces and all of that stuff, because they get triggered and they can't hear criticism.

But I don't think that's a problem just among young people, it seems to have become endemic in our society. Part of the loss of incivility and the increase in aggressiveness and rudeness that has come with social media, and the universal spread of the Internet and online communities is, I can be rude to other people, but it's terrible when they are rude to me. And that sort of makes no sense. If you want to dish it out, then you darn well ought to be able to take it. And certainly, good journalists, not every journalist, but any decent journalist understands that if you're in the business of criticizing other people, then you have to be open to having them criticize you. And, when I write a column that's skeptical or critical, or some people might regard as negative, and any one questions what I said or my evidence or why I said it the way I said it, those emails, or direct messages on Twitter, or those phone calls--I bring those to the top of my screen, because the first thing I want to see is did I make a mistake? Was I wrong? Jeff, you might not remember this, but a while ago, I made a mistake in a column I wrote and you pointed it out, and I immediately went and checked and realized that you were right and I was wrong. And I immediately flagged it to my editors and at the Journal, as at every good journalistic organization we have an incredibly strict procedure for making corrections, which is if anybody points out that something we wrote has a factual error in it, we are professionally obligated to look into it. And if the person pointing it out is right, and we're wrong, we have to correct it.

And if there is anything more humiliating than having to point out to 2.5 million people that something you said was wrong, I don't know what it is. But the Journal has--maybe we have 3 million subscribers at this point--but it's a terrible feeling. But when you are wrong, you have to say you are wrong. And you have to be open to the fact that you could be wrong. I'm not interested in hearing from a bunch of people who agree with everything I say. Why do I want an amen corner of people who tell me that I'm right, or that I'm smart; I can't learn from that, because they already agree with me. I can only learn from people who disagree with me. So, if you treat people who disagree with you as your enemy, you're going through the lifelong effort of trying to learn about the world with your hands tied behind your back. You have to open yourself to criticism and disagreement, so you can learn from other people, and not just live in an echo chamber. That's incredibly important.

Benz: You're an avid reader, I know. So, what have you read lately that has knocked your socks off? Perhaps you can give us one business-related book idea and one nonfinance book?

Zweig: So in the past few years the best book I've read is one of the books I've ever read in my life, which was an enormous, epic Russian novel, and I'm sure a lot of people just closed their phone and turned off this podcast. But it was a great novel called Life and Fate by Vasily Grossman. And this book was written in the ‘40s and ‘50s, and originally published in the West, I think, in the 1960s. It's one of the greatest novels ever written. And I had never heard of Grossman or of his book, Life and Fate, until a few years ago, when a friend of mine said to me, “Whatever you're doing, you need to stop doing it, buy this book, and start reading it.” And I did, and I loved it. it's an amazing book. It took me several months to read, but it's just phenomenal. It's an amazing, amazing book. I loved it.

The other wonderful novel that I read with the book club I'm in, and I highly recommend a good book club to everybody, was a book called Palace Walk by the Egyptian writer Naguib Mahfouz who won the Nobel Prize in Literature, I guess about 20 years ago. And for anyone following along Mahfouz is spelled M-A-H-F-O-U-Z. And it's just a wonderful novel about life in Egypt around World War I, and it's beautifully written and just full of insights about human behavior that I really loved. And I liked it best because I knew nothing about him or the book, and it really felt like a revelation when I read it because it was so wonderful.

And then I guess the best business book I've read in the past year or so is the choice I'm sure of a lot of people, which would be on The Psychology of Money by Morgan Housel, which is just great. And certainly, everybody interested in investing and personal finance should read that book. And I think it's so good that 25 or 50 years from now people will still be reading it.

Ptak: Your weekly column is a must-read for many people in the investment world, including Christine and me. Who are your must-reads, or in the case of podcasts, must-listens each week?

Zweig: Well, I have kind of eclectic taste. I just mentioned Morgan Housel and his book, but I also follow his blogposts very closely. He is terrific. A bunch of the bloggers at Ritholtz are really good. And I should immediately interject your question as the kind of question where, as soon as we get off our discussion, I'll realize I forgot about 50 people. It's not meant to be inclusive, it's just whatever pops in my head at the moment.

But people like Nick Maggiulli, Michael Batnick, Ben Carlson--those guys are great. Matt Levine is probably the best daily commentator in the whole financial world, and his newsletter at Bloomberg is indispensable. I also pay close attention to Joe Weisenthal and Tracy Alloway at Bloomberg, Robin Wigglesworth at the FT.

And Jesse Livermore, who blogs Philosophical Economics. And there are just dozens of other people who are doing great work every day and every week.

The real challenge for investors right now is not figuring out what to read, but rather figuring out what not to read. Because if you had no job, and your only task was just to read and do nothing else, you could not read all the good stuff that comes out every day. And obviously, I read the two of you guys and John Rekenthaler, and a bunch of other great people at Morningstar as well. And what I've settled on--because it seems to be the only solution that works is if you are drinking from a firehose, which we all are--the only sensible thing you can really do is just let it run. There is no point trying to put your face in front of the firehose and open your mouth as wide as you can and just try to take it all in. In 10 seconds, you'll be drowned. So, what I do is I just let the fire hose run. And then once or twice a day, I take a little teacup, and I kind of dip it into the firehose and pull it out and see if I like what I found. And so, I'll do that through my email, through my Twitter feed. And just by poking around on the Internet. And I do it once in the morning and once in the afternoon, and that's all I can handle. And I know I'm missing the vast majority of what's out there. But that's the only way it seems to work.

Ptak: Well, Jason, this has been such an enjoyable conversation. We really appreciate your time and insights. Thanks for chatting with us today. We really appreciate it.

Zweig: Well, thanks for having me, guys. It was great to be with you.

Benz: Thank you so much.

Ptak: Thanks for joining us on The Long View. If you liked what you heard, please subscribe to and rate The Long View from Morningstar on iTunes, Google Play, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Syouth1, which is S-Y-O-U-T-H and the number 1.

Benz: And @Christine_Benz.

Ptak: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com. Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)