Abnormal Returns – The Interview


“For most investors making decisions is a difficult process.  The more decisions you have to make the harder it’s going to be.”

– Tadas Viskanta

After reading his book Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere I  asked to speak to Tadas to see what additional insight he was willing to provide me and the audience here at Learn Bonds.  He was kind enough to accept, and here are some of the things we discussed.

The Average Investor and Psychological Risk

Tadas feels that its a great time to be an individual investor, something which he has also written about on his blog.  He summed the idea up with the following two points:

  1. “Costs have come down significantly.  Individuals can now trade ETFs for free on many brokerage platforms.  Commissions have come down a great deal as well.  Strategies that were cost prohibitive to all but institutional investors before are now available to the individual investor”.
  2. “Another aspect is information. Much more info freely available to the individual investor and being able to ask questions and interact with people regarding that information on places like Stocktwits is much easier than at any time in the past”.

With greater access however comes greater responsibilities which brought us to the quote at the top of this article, and the concept of “psychological risk.”  Psychological risk, or the risk that an investor will make a bad decision in the heat of the moment, is one of the biggest risks to the individual investor.   Its also the risk that is the least talked about, because the active investor, (who is also the most active consumer of information) is making decisions all the time.  As Tadas points out in the introduction to his book however, the active investor and trader represents perhaps 1% of the population.  The other 99% have their attention focused elsewhere and are simply trying to “earn a modest return on their hard earned savings”.

Because its such a great time to be an individual investor I asked Tadas whether he thought the average investor would be better with a financial advisor or doing things on their own to which he said:

“I don’t have an answer for that, its really something that every individual has to decide for themselves.  There’s great advisors and there are some not so good ones.  You have to think about where your interests and strengths lie.  That being said you still have to take responsibility for every decision you make, whether you’re hiring an advisor or doing it yourself.  So, even if you go through a financial advisor you still need to have some minimum education in order to choose the advisor and make sure that the advice they provide makes sense for you.

On The Lens That Every Investor Looks Through

Our conversation then turned to how people look at the markets where Tadas commented:

“People’s experience with markets is very generational.  How we internalize the history of the market and our own experiences requires a fair amount of perspective of not only our own history but our own interaction with that history.  Sometimes we internalize the right messages and sometimes we internalize the wrong messages.”

Tadas also mentioned that there is a book by Michael Mauboussin coming out shortly which expands on the above thought called “A mix of skill and luck”.

“When most investors evaluate performance they think that if a manager overperforms its all skill and if they underperform its a lack of skill.  To look at things through the right lense its important to realize that we are all living in  a world that is some mix of skill and luck.  That helps temper our expectations.  That doesn’t mean you can’t continue to build up your skills, but recognizing that there is a significant element of luck involved.”

On investing in bonds

Tadas starts the fixed income chapter of the book by talking about people who like to say that you may want to avoid bonds altogether with the following two points:

  • One is that by doing so they are implicitly betting against a large part, by one measure approximately 75%, of the global capital markets.
  • Second, this ignores entirely the insurance like aspects of risk-free bonds like Treasuries.

So I asked him if he thought the current environment warranted an adjustment in the way people think about bonds.  He started by saying that:

“We are of course living in interesting times.  Intervention in the markets by the Fed and global central banks of this size is unprecedented.  Although uncertainty rules the day currently, there are two competing ideas in regards to fixed income, one of which is forward looking and one of which is backwards looking:

  1. The naysayers who say interest rates have nowhere to go but up so you can’t own bonds right now.
  2. The performance chasers who are piling into bond funds still because their performance over the last decade or more has been phenomenal.

 The bottom line is that abandoning bonds in total does not make sense. You would have to have some real foresight into the future to say that, rather than just interest rates are too low.  What a bond investor needs to do now is look at their unique situation and see how they can find any extra yield wherever they can without taking too much risk.”

I was also pleased to see that Tadas mentioned defined maturity bond funds in his book as an investment worth considering.  We are big fans of defined maturity bond funds here at Learn Bonds as well.  You can learn more about them here.

On Blogging and how he got into it

Tadas’ blog is the most famous for his twice daily list of links to all the best stories that day which relate to finance and markets from around the web.  There are normally at least 30 links included when you combine the two posts and they come out 7 days a week.  I was curious how he goes about putting together so many links every day so I asked him.  While he did not give me the secret sauce, he did say that he goes through many many links each day to pull the ones for the blog and has a good idea of the content on everything he posts.

I also asked him what it takes to be a successful blogger to which he replied:

“The best bloggers find themselves a niche and develop their own voice.  Successful blogging comes back to repetition, it requires a consistent effort.  You aren’t going to be able to do it if its not your passion.  The best bloggers are the ones that have an intersection between their interests and an avocation and have a desire to communicate that passion.”

Thanks again to Tadas for taking the time to speak with me.  I hope our audience enjoyed reading this as much as I enjoyed speaking with Tadas and compiling his insights.

If you haven’t already done so I highly recommend checking out the book which you can purchase below:


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