- Wells Fargo’s chief investment officer of wealth and investment management, Darrell Cronk, shares 15 lessons for his younger self—it's based on over thirty years of market musings.
Hitting a career milestone can often be a point of nostalgic reflection. One Wells Fargo executive is sharing some words of investment wisdom to celebrate 10 years in his top position at the Wall Street bank.
Wells Fargo’s chief investment officer of wealth and investment management, Darrell Cronk, just sent his clients a 15-point list of his market musings over decades, according to a copy obtained by Fortune.
Although he has climbed Wells Fargo’s ranks since 1992, according to his LinkedIn, the note marks the ten-year anniversary of Wells Fargo Investment Institute, an investment advisor and subsidiary of the bank—and Cronk has been its president since its inception.
It also came out shortly ahead of Wells Fargo’s earnings calls this morning, which positively reported the bank’s profits beating fourth-quarter expectations and shares surging by 3.5%.
“I hope at least a few of these principles will be useful for you, and useful for the generation of investors who follow,” Cronk wrote.
Advice for ruling the markets
When it comes to the ins and outs of the market, Cronk has over thirty years of experience.
As a seasoned investment leader, Cronk has learned to go all-in as a confident investor, view the markets as an “apex predator,” and become relevant in areas of growth to cash in. Cronk advises to grow comfortable with the fact that certainty is out the window, and be actively curious about uncharacteristic ways that the market diverges.
Here are his top seven tips for timing the market, investing with confidence, and working the markets to one’s best advantage.
- “Just because the market is efficient doesn't mean it's right.”
- “The best investment strategy can turn into the worst if you don't have the resolve to see it through with discipline.”
- “Your level of confidence as an investor is inversely proportional to the amount of capital you have at risk in the market. Those who commit little are very confident. Those with much committed have the uneasiness to understand what can go wrong.”
- “Stay attuned to unusual market divergences, prices that move in counter-intuitive ways. They don't always lead to great opportunities, but they are the places to start looking and asking: Why the divergence? What might it tell us?”
- “Often investors are reminded that, as powerful as we think central bankers or politicians may be, markets, like the lion on land and orca in the sea, are the ultimate apex predator. When things get out of balance, markets will often restore this balance quickly, savagely, and without regard to stability.”
- “The wisest investors dig to find out where growth resides and capital needs to go, and then they make sure they become relevant in that space.”
- “We need to remind ourselves as investors that historically the two best phases of a secular bull market have been the first 25% of its life, and the final 25%. (The middle 50% has often been mush.) Get those right, history tells us, and you can put yourself in position to capture much of the return the market offers.”
Advice for not letting your human emotions get the better of you
Sometimes it's not the market getting in the way of big returns—it's you. Sticking to the game plan and becoming comfortable by continually making safe choices is no way to work the markets, Cronk cautions. Here are his four top tips for making bold investment choices and not sabotaging your own potential.
- “Human beings are often emotional rather than objective investors. They tend to sell low and buy high, and at the time, they believe it to be for good reasons. It cannot be otherwise, or else they would not do it.”
- “Greed, hubris, leverage, illiquidity, and lack of imagination all lead to the inevitable. Each possesses a gravitational pull for investors. Each, in excess, leads to demise.”
- “Always believing the same rules apply is easy—and fraught with mistakes. Adapting to the conditions of today is what remains hard and yet rewarding.”
- “Don't fear strength. One of the enduring lessons of this business is that your best ideas often reach and then blow through your targets much faster than you thought possible, while the bad ideas languish and frustrate and fizzle.”
Advice for investing novices
Some of the wisdom that Cronk shares could even be applied by “at-home” investors.
When it comes to understanding investing and the markets, Cronk hammers home the basics: giving attention to the initial objective, abandoning a mindset of certainty, and understanding that investing is about risk. That at the end of the day, no matter what prices the market trades at, it’s rarely at fair value.
- “The single most important consideration when investing is your starting point. It's what drives your return, your risk, and the distance to your ultimate objective. Understand that, and half the battle is won.”
- “Investing is not about returns, although many mistake it to be. It's about risk—understanding how much to take, how to calibrate it, how to manage it, and what is a good risk versus a bad risk to take. Returns are simply a byproduct of risks consumed.”
- “The illusion of certainty: Better to strive for conviction than certainty. Certainty lives in a world of absolutes. Conviction approaches markets with a high degree of humility. This requires asking questions, continuously testing our convictions, and recognizing that conditions and circumstances can and will change.”
- “Markets rarely trade at fair value. Most of the time, they trade at prices above or below their fair value fundamentals. Learn to understand this, get comfortable with it, and where possible use it to your advantage.”
