A Product Manager’s Approach to Securities Investing

As a product manager, you should get paid well. It is a great stable profession that continues to increase in total compensation each year including up front signing bonuses, yearly bonuses, and stock options. However, little has been written about applying the product manager thought process to building an investment portfolio. Several new companies have launched in the FinTech space to try to address these needs. However, I’ve found that there are still many gaps in the tools available to translate the complexity and vast investing landscape into digestible and actionable information. As a product manager I’ve been able to dive deep into the investment landscape to create a diversified and growing portfolio that I expect to help my retirement income by several orders of magnitude by the time I get to that point. I hope these tips work for you, and please let me know other topics that could be helpful as you go through this journey too!
Core concepts
  • Dividend: basically free money. It’s a percent of the per-stock value that is paid as direct revenue to each stockholder. The percent is usually somewhere from 1-5%, with the 4-5% range being excellent. From a stock perspective you make revenue on both gains in stock value and also the dividend, which is paid quarterly. You usually only find dividends on very mature stocks that are unlikely to grow, like utlities. However, some Pharma companies (eg AMGEN) have grown and pay dividends.Look to balance your portfolio with a decent amount of these as they tend to be stable growth and guaranteed dividends help to ensure a floor to your portfolio growth each year.
  • ETF: An exchange traded fund (ETF) is a combinaed asset that usually tracks an index or sector of stocks or bonds. For example, the S&P 500 is an ETF of the 500 largest companies on the American stock exchange. Over the last 20 years, for example, GE has had massive company devaluation while others (Google, Apple, Amazon, FB) have rapidly grown in market share. Owning shares in the S&P mean that you’d have been able to invest in a fund that shifts it’s ownership to keep up with the companies and ratios of these big companies. It allows you to pick more of a general sector you feel will grow and have some simple low cost maintenance will shift the exact ownership to match the performance of that sector. These can often work really well as low-cost alternatives to mutual funds. My experience is that mutual funds don’t perform much better and are much more overhanded in their capital management. So you’re paying several percentage points to maintain and getting a lower return. What a life, huh? Some interesting ETFs I have in my portfolio are S&P (when in doubt, this is probably the best overall investment. For more convincing, check Warren Buffets famous bet that the S&P would outperform the best hedge fund managers.) QQQ (focuses on the largest tech companies), CGW (tracks global water utilities, which I feel has good long term potential even though short term results have been poor), and VGU (I’ve a lot of confidence in utilities, and this is an ETF across the utility sector. These are good recession-resistant stocks that help balance a more tech / risk focused portfolio).
  • P/E ratio: Stands for price to earning ratio. Price refers to stock price, and earnings refer to company earnings. It’s one of the most common metrics to review a stock.There’s a lot of fancy math behind it, most of which I (and many in the industry) don’t see it having a major consequence on the stock price or growth. However, it can be an important factor to check, especially when you look into certain companies you might be excited about purchasing. One example of failed use of this is with AMZN. Traditionally, analysts used p/e to determine how well-valued a company is. Amazon really broke this mold as it was continually trading at over 100 times earnings, and is still at 90. Apple, for example, is at 14. So when you look at this, do you think that Apple can achieve 14x it’s current earnings, and Amazon 90? Maybe yes maybe no, but Amazon stock has also grown so rapidly over the past 10 years and has shown time and again the ability to grow it’s business landscape effortlessly. If you were afraid of the p/e ratio, like many analysts were, when Amazon was a mere retail giant that was losing money then you lost out on AWS impact. Maybe if you fail to invest now you’ll miss out on an even greater rise in Prime, or any number of their other new businesses. Another use case is to look at Chipotle Mexican Grill (CMG), with a stock p/e of nearly 70. For me, I was never going to be an investor because while I absolutely love the company and food, I couldn’t see how they would be able to grow the business so much to match that value. In the past years we’ve seen that their attempts to rapidly expand has had massive impact on their food quality. Therefore, I feel comfortable to stay away from the stock.
  • Mutual funds: My recommendation is to avoid them. I put some money in mutual funds thinking it would be safer and lost money every time. HATE. ETFs are better, cheaper, and have fewer meddling finance wolf of wallstreet types that are looking to make a name for themselves on your cash.
  • Beware “trends”: I’ve lost money on the cannabis stock craze, 3d printing, and a few others. It won’t always work out if you put your money in. Be aware and cautious, and cut bait quickly. I’ve found my niche risk tolerance is that I’m willing to miss out on a big rise, so long as I also miss out on the big falls. Find your risk tolerance and stay away from trends or companies without depth or strong reasoning.
  • Diversify: Means to balance your overall portfolio for managed risk. For me, it means making a few big upside plays balanced with a good amount of safety. Better to have some money across a range than all money tied to one company or industry. The world changes so quickly this is the best way to manage. Think about the way the world is moving, who will be the winners and losers of tomorrow. Oil companies could be big losers, or they could increase their grip on increasing global power needs and continue to be a strong and safe investment. Also, think a bit about your long term goals. Are you going to expect major returns in a year or two, or are you willing to wait 15, 25, 35 years? Based on that, invest in companies and industries you feel will be around and grow in that timeframe. Greater short-term returns are usually tied to greater risk.
  • Be careful: only invest what you can afford to lose. There’s nothing that’s a sure thing. Never become over leveraged. Treat the first few years as an investment in yourself, a learning journey, and a lifelong process to build a strong portfolio.
  • “Don’t let no one know how much doh you hold” – BIG – don’t outsource your money management unless you have a huge amount of money and severe lack of time. Your money is you and your family’s welfare. The shit part of our world is money is important (my “americanized” take). And a little bit now can have a huge impact later when disaster strikes. Don’t let someone else manage something that could become so important at some point. Do the work, spend the time, and look for the smart plays. Make it a game, use it as a tool to learn more about the global economy, learn more about human nature and the way we value things. The market is driven by huge amount of perception, so you’ll need to balance use of numbers and instincts. This is why product managers have a great leg up on this game.
  • Track a stock for at least a few weeks, maybe a few months, before buying: get a sense of how a stock performs and how it changes. Each company reports earnings, by law, every quarter. Watch the news around that company, how does the stock move. What is the market analysis. Look for good opportunities to buy. But also don’t wait too long. Even if you might save a few hundred dollars waiting for a downturn, in the landscape of 10yrs owning the stock that will be negated anyway. Get a general sense, look for the right opportunity, and buy.
  • Compare both sides: for any stock, look for an article promoting and detracting it. Then make your own mind. There are always positives and negatives. Get used to making a case on both sides and then go with the more compelling.
Good stocks to review
  • Tech stocks, especially as they’re in a downturn right now. I still think tech is the future. But they’re higher risk, higher reward, low or no dividend.
  • Pharma – specifically, I bought up a good amount of Amgen. It’s grown almost 40% and has a 4% dividend.
  • Utilities like Duke Power and ConEd, for the reasons mentioned above.
  • Water utilities – water will become more important in the climate change era. This is a longer term play I put maybe 5% of my money in.
  • S&P 500 – pretty much the smartest thing you can do is invest in this. It’s not as exciting but it beats even the big boy hedge fund managers. Here’s more info on Warren buffet’s big bet. I’d probably have made more money if I just invested there.
  • Banks: I’ve had a mixed experience with banks (BofA, Chase, etc). Made a lot, then lost some, then made some more. It’s been quite volatile over the last few years. But mostly, they’re going to keep going up because they’re a necessary evil and usually have decent dividends. Look for good banks that might be undervalued – maybe Wells Fargo based on all the bad press? BofA is on the come up, and possibly JP Morgan.
  • Emerging markets: Develop a hypothesis about how emerging markets will play in the future of the global economy. Do you take the side that they are going to continue to grow and go the route of America / China? If you do, there’s a huge opportunity to make money as an investor. There’s several ETFs and companies that track the general growth of emerging markets, Asian markets, etc. They’ve been volatile, just look at Turkey, Argentina, and African countries. But it does seem to trend towards growth still. EEM, and FXI are two examples you can start research with.
  • Waste management – similar to utilities, these companies are quite safe and have high dividends. Plus maybe they’re doing kickbacks and money laundering too, which could help their bottom lines 😉 WM is a main one.
Good tools to track performance / finance
  • TD ameritrade I like and have been using for years, so I’m pretty much committed.
  • Robinhood is free and all reviews are extremely positive. Low fees and also includes crypto trading.
  • Coinbase for crypto if you want the ultimate adrenaline rush 🙂
  • Motley Fool site for recommendations. They sometimes have poor recommendations but at least open interesting ideas to do your own research on.
  • Yahoo finance app.
  • Seeking Alpha app and site. Lots of good contributors and notifications on companies you follow.
  • Google: start looking at different companies that you think are interesting. Research their stock performance over the last months and years. Once I had a fantastic experience with customer service at T-Mobile and immediately bought a significant chunk of stock. It’s doubled since then.
  • Personal Finance or Mint: this type of app tracks all your different accounts to provide a single visualization of your net worth. When you introduce more accounts, it can be hard to tell if you’re winning or losing. I also track my finances across accounts, since I have then in different countries also, to make sure the overall trend is increasing.
  • Investopedia: like wikipedia but… you get it. Has a lot of reliable core concept definitions in common english.
  • Reddit: r/personalfinance and other threads are great general resources and good discussions.

About Author

Co-founder of productmanagerclub.com, ex-Audible (Amazon), AmEx and TribalScale Product Management leader, currently living in Portugal leading product management of vertical expansion for automotive within OLX. Mike has built products and coached teams all over the world.

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