7 financial words of wisdom that every investor big and small should immediately follow

Neil Kay
5 min readDec 16, 2020


2020 has been a year that taught everyone countless lessons about perseverance and reflection. As investors enter the holiday season and reflect on their 2020 portfolios and plan for 2021, here are 7 financial words of wisdom that every investor big and small should immediately follow to improve their long-term investment success.

1: Never get sold an annuity or whole life insurance policy. NEVER. I’m not talking about term life insurance to support your family if you are hit by a bus — I’m talking about insurance products disguised as “investments.” Whole life/universal life insurance policies and annuities are all expensive and highly commissioned investment products. The insurance company and the slick salesperson with the shiny shoes make all the money, lock you into some long term (some 10+ years), guarantee you’ll underperform the market over the long-term and make huge up front commissions. The only exception are very rare estate planning strategies(estate tax minimization for extremely wealthy) and tax-efficient income strategies for older investors.

Be cautious of guarantees, insurance products, lock up periods, and shiny shoes

2: Outside of your active company 401(k), avoid mutual funds at almost all times (some cheap bond funds and ESG funds would be the exception here.) Mutual funds are overpriced and often highly commissioned products. Some passive index funds (especially through Vanguard) are ok, but they can still pay out taxable capital gain distributions even if your fund is down that year due to the structure of the mutual funds. Instead of a mutual fund, you should invest instead in a low cost, tax efficient indexed ETF (exchange traded fund.)

3: Avoid active management and instead stick to low cost passive indexed solutions. The majority of active managers and active mutual funds consistently underperform the broad market and are just another way to charge more fees to investors. S&P Global puts together a regular research report called the SPIVA Report that tracks the number of managers that outperform/underperform and every single year the majority of managers underperform. Also important to note here is that the active managers who did outperform in the past do not usually continue to outperform in the future. So if you think you can found a manager with a great 5 year track record of outperformance, statistically speaking they are likely to underperform over the next 5 years! Here is a great link to this research: https://www.spindices.com/spiva/#/reports


4: Never take investment advice from someone who works at the same firm that holds your money. (This includes Merrill Lynch, Morgan Stanley, UBS, JPMorgan, Wells Fargo, any bank actually, Fidelity, and Charles Schwab.) (SHOTS FIRED, but true!) These “advisors” are highly compensated by their firm to recommend company products to meet their monthly/quarterly sales goals to obtain their commission and big bonuses. Think it is a coincidence that your JPMorgan Chase advisor in the pretty building puts you into a portfolio with all JPMorgan mutual funds!? Nope. Banks often rope clients into their product-filled managed accounts by offering them a low interest rate on a mortgage and the clients get stuck paying unknown high fees for the investment products (at least until they read this article!) However, once your mortgage is closed, you almost always can immediately move those funds to a different low-cost custodian and keep the lower interest rate. Instead of falling victim to these negative conflicts of interest, always work with a fiduciary who is separate from the institution/custodian holding the money. Want a very simple litmus test? Does the “advisor you’ve known for years” work at the same company that holds your money and gives you statements? If you open your statement or log into your account, do you see any mutual funds? If the answer to either of these is yes, might be time to do further due diligence.

The institution holding your money should not be the one giving you advice.

5: Don’t try to to pick hot stocks. If Harvard/Stanford PhDs and Goldman Sachs/BlackRock’s multi billion dollar computer systems and algorithms can’t beat the market, neither can you, Yahoo Finance, and your Excel spreadsheets Mr. Engineer. Instead focus on broad diversification and the lowest cost, tax efficient custom index solutions. Individual hot stock picking does not work long-term. (This applies to all those “geniuses on Facebook who put $5,000 into Tesla or Amazon or Zoom, but for some reason don’t tell you about the tens of thousands they lost trading options or losing stocks! (I’ll address this in a future post on the fascinating subject of investor psychology.)) Individual stock picking is statistically proven to lead to increased risk and over time, underperformance. Accumulating company stock as compensation is a great way to build significant wealth, but you also need to know how/when to diversify and manage your risk. SF tech investor whose entire net worth is in their successful company stocks only need to look at what happened to Exxon Mobile or even Enron investors and evaluate how to manage away from single stock concentration.

6: Max out your retirement accounts every single year. Small business owners and entrepreneurs have unique ways to put away $58,000/year and they should be maximizing them. This should start with your first job at age 18 and never stop. It’s strange to see 35 year olds not contributing to a 401k yet they wear Gucci.

7: Owning real estate is good but it’s not passive. Real estate on average returns 5%-7% per year over the long-term (a little more than inflation.) Stocks return 8%-10% per year on average. Real estate IS NOT passive. You have to fix broken pipes, replace roofs, pay high realtor commissions, and deal with tenants/vacancies. Stocks are highly passive and completely liquid. Real estate returns seem bigger because they are typically leveraged with a mortgage. This leverage can also work against you in major sell offs like we saw in 2001 and 2009 but you can really amplify your real estate returns in today’s low interest rate environment through leverage. Owning real estate gives a sense of pride and is important diversification in a broad portfolio, but investors should know that stocks outperform and require faaaar less work/headache.

There are many more intricate words of wisdom we can share at Old Vine Capital especially around the benefits of tax-efficiency, company stock diversification/risk management, un-correlated alternative investments, custom indexing, and more, but these 7 simple tips are great things to consider as you review your 2020 investments this holiday season.



Old Vine Capital is a Registered Investment Advisory firm founded in San Francisco providing fiduciary investment guidance and portfolio management to select families, individuals, foundations and institutions.



Neil Kay

Investor, Traveler, Fundraiser, Dog Whisperer, Husband, Father. Managing Partner of Old Vine Capital, a private investment advisory firm based in Austin.