Tag Archives: social-media

ETF Stats For April 2016: Smart Beta ETFs Surpass 600

Twenty-six new ETFs came to market in April, producing the briskest pace of the past six months. Only five delistings occurred during the month, and the net increase of 21 results in a tie for the largest increase of the past nine months. April ended with 1,884 listed products, consisting of 1,681 exchange-traded funds (“ETFs”) and 203 exchange-traded notes (“ETNs”). Assets rose by $37.6 billion to a new high of $2.2 trillion. Inflows accounted for $12.5 billion of the increase, while the other $25.1 billion was the result of market gains. The year-to-date percentage increase in assets is relatively modest at 4.2%, and the year-over-year gain is just 3.7%. Asset gains are not keeping pace with the 10.6% increase in product count over the past 12 months. Smart-beta, or alternative-beta, funds were once again prevalent among the new ETFs in April, numbering 16 in all. Three of the closures fit the alternative-beta category, pushing the overall count 13 higher to 607. Of the 69 new ETFs introduced so far this year, 47 (68%) are smart-beta funds, 10 are actively managed, and 12 track traditional cap-weighted indexes. However, the dozen traditional ETFs aren’t all vanilla, as six are either leveraged or inverse funds, and three use adaptive currency-hedging techniques. Actively managed ETFs took a big jump in April, increasing their ranks by seven to 143. Two of the new actively managed ETFs are “gold-hedged” from new sponsor REX. They are both fund-of-funds ETFs that use an overlay of gold futures to effectively hedge away exposure to the U.S. dollar. Although REX claims to be the “first” to offer gold-hedged ETFs, UBS has been offering the ETRACS S&P 500 Gold Hedged Index ETN (NYSEARCA: SPGH ) for more than six years. However, investors will likely prefer the ETF structure of the REX Gold Hedged S&P 500 (NYSEARCA: GHS ) over the ETN structure of SPGH. The most notable closure during April was the forced delisting of the DB Commodity Long ETN (NYSEARCA: DPU ). It is notable because Deutsche Bank has no plans to liquidate the product and return the money to owners of the notes. The NYSE suspended trading and delisted the product because DPU was not meeting the minimum market value of $400,000 required for continued listing. The good news is that this ETN is so small that very few investors will be affected. The bad news is the notes do not mature for another 22 years. If owners are not willing to wait that long, then they will have to pursue a sale in the over-the-counter markets. Additionally, if owners happen to hold 100 ETNs, or multiples thereof, then they can possibly partake in DB’s monthly small-lot redemption. Good luck with that. Trading activity declined 12.0% for the month, marking the third consecutive month of double-digit drops. These three months combined to produce a 31.9% plunge in trading activity to $1.28 trillion from January’s $2.2 trillion in ETF dollar volume. April’s activity saw just 10 products averaging more than $1 billion a day, although these 10 represented an impressive 48.7% market share. The quantity of products averaging more than $100 million a day in trading activity dropped from 97 to 94 and accounted for 86.4% of trading activity. April 2016 Month End ETFs ETNs Total Currently Listed U.S. 1,681 203 1,884 Listed as of 12/31/2015 1,644 201 1,845 New Introductions for Month 26 0 26 Delistings/Closures for Month 4 1 5 Net Change for Month +22 -1 +21 New Introductions 6 Months 107 6 113 New Introductions YTD 63 6 69 Delistings/Closures YTD 26 4 30 Net Change YTD +37 +2 +39 Assets Under Management $2,184 B $23.2 B $2,208 B % Change in Assets for Month +1.7% +9.8% +1.7% % Change in Assets YTD +4.2% +8.0% +4.2% Qty AUM > $10 Billion 54 0 54 Qty AUM > $1 Billion 258 5 263 Qty AUM > $100 Million 785 36 821 % with AUM > $100 Million 46.7% 17.3% 43.6% AUM Flows for Month $11.97 B $0.55 B $12.51 B AUM Flows YTD $47.77 B $1.38 B $49.14 B Monthly $ Volume $1,412 B $66.2 B $1,478 B % Change in Monthly $ Volume -12.4% -2.6% -12.0% Avg Daily $ Volume > $1 Billion 9 1 10 Avg Daily $ Volume > $100 Million 88 6 94 Avg Daily $ Volume > $10 Million 317 10 327 Actively Managed ETF Count (w/ change) 143 +7 mth +6 ytd Actively Managed AUM $25.1 B +1.6% mth +9.4% ytd Data sources: Daily prices and volume of individual ETPs from Norgate Premium Data. Fund counts and all other information compiled by Invest With An Edge. New products launched in April (sorted by launch date): Dhando Junoon ETF (NYSEARCA: JUNE ), launched on 4/4/16, seeks to track a rules-based index of approximately 100 U.S. securities selected from three event-driven categories: Share buybacks will receive a 75% allocation, select value manager holdings via 13F filings will get a 20% weighting, and spin-offs get the remaining 5%. The ETF has an expense ratio of 0.75%. ( JUNE overview ) JPMorgan Diversified Return Europe Currency Hedged ETF (NYSEARCA: JPEH ), launched on 4/4/16, seeks to track the performance of the FTSE Developed Europe Diversified Factor 100% Hedged to USD Index. Its top-down risk allocation framework equally distributes portfolio risk across 10 sectors. The bottom-up multi-factor stock-ranking process combines value, quality, and momentum factors. The fund hedges out the currency exposure and has an expense ratio capped at 0.49%. ( JPEH overview ) JPMorgan Diversified Return International Currency Hedged ETF (NYSEARCA: JPIH ), launched on 4/4/16, seeks to track the performance of the FTSE Developed ex North America Diversified Factor 100% Hedged to USD Index. Its top-down risk allocation framework equally distributes portfolio risk across 40 regional sectors. The bottom-up multi-factor stock-ranking process combines value, size, momentum, and low volatility factors. The fund hedges out the currency exposure and has an expense ratio capped at 0.49%. ( JPIH overview ) REX Gold Hedged FTSE Emerging Markets ETF (NYSEARCA: GHE ), launched on 4/5/16, is an actively managed fund-of-funds ETF that holds the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ) and overlays the portfolio with gold futures contracts via a Cayman subsidiary. The ETF will issue 1099 tax forms and caps its expense ratio at 0.65%. ( GHE overview ) REX Gold Hedged S&P 500 ETF , launched on 4/5/16, is an actively managed fund-of-funds ETF holding the Vanguard S&P 500 ETF (NYSEARCA: VOO ) and overlays the portfolio with gold futures contracts via a Cayman subsidiary. The ETF will issue 1099 tax forms and caps its expense ratio at 0.48%. ( GHS overview ) Direxion Daily Energy Bear 1x Shares ETF (NYSEARCA: ERYY ), launched on 4/7/16, seeks investment results that are 100% inverse the daily performance of the Energy Select Sector Index. The new ETF caps its expense ratio at 0.45%. ( ERYY overview ) Direxion Daily Financial Bear 1x Shares ETF (NYSEARCA: FAZZ ), launched on 4/7/16, seeks investment results that are 100% inverse the daily performance of the Financial Select Sector Index. FAZZ will cap its expense ratio at 0.45%. ( FAZZ overview ) Direxion Daily Technology Bear 1x Shares ETF (NYSEARCA: TECZ ), launched on 4/7/16, seeks investment results that are 100% inverse the daily performance of the Technology Select Sector Index. The fund caps its expense ratio at 0.45%. ( TECZ overview ) WisdomTree Emerging Markets Dividend ETF (BATS: DVEM ), launched on 4/7/16, tracks a fundamentally weighted index that measures the performance of dividend-paying stocks selected from 17 emerging market nations. It weights companies by annual cash dividends paid. The fund has an estimated yield of 3.8% and an expense ratio of 0.32%. ( DVEM overview ) WisdomTree International Quality Dividend Growth Fund (BATS: IQDG ), launched on 4/7/16, tracks a fundamentally weighted index that provides exposure to dividend-paying developed market companies. It is composed of the top 300 companies from the WisdomTree International Equity Index with the best combined rank of growth and quality factors. The growth factor ranking focuses on long-term earnings growth expectations. The quality factor ranking is based on three-year return on equity and return on assets. It then weights companies by annual cash dividends paid. The new ETF has an estimated yield of 2.4%, and its expense ratio is capped at 0.38%. ( IQDG overview ) First Trust RiverFront Dynamic Asia Pacific ETF (NASDAQ: RFAP ), launched on 4/14/16, is an actively managed ETF holding equity securities of developed market Asia-Pacific companies, while utilizing a dynamic (0-100%) currency hedging strategy. The manager quantitatively scores geographies on fundamental and technical momentum, and combines this with a qualitative assessment. A geographic and thematic rotation strategy is established, and a proprietary valuation model gauges markets for relative and absolute value. The portfolio manager combines the outputs of the quantitative and qualitative processes to select the most attractive regions and securities. The fund has an expense ratio of 0.83%. ( RFAP overview ) First Trust RiverFront Dynamic Developed International ETF (NASDAQ: RFDI ), launched on 4/14/16, is an actively managed ETF holding equity securities from developed markets outside of North America, while utilizing a dynamic (0-100%) currency hedging strategy. The manager quantitatively scores geographies on fundamental and technical momentum, and combines this with a qualitative assessment. A geographic and thematic rotation strategy is established, and a proprietary valuation model gauges markets for relative and absolute value. The portfolio manager combines the outputs of the quantitative and qualitative processes to select the most attractive regions and securities. RFDI currently holds more than 400 stocks and has an expense ratio of 0.83%. ( RFDI overview ) First Trust RiverFront Dynamic Europe ETF (NASDAQ: RFEU ), launched on 4/14/16, is an actively managed ETF holding equity securities of developed market European companies, while utilizing a dynamic (0-100%) currency hedging strategy. The manager quantitatively scores geographies on fundamental and technical momentum, and combines this with a qualitative assessment. A geographic and thematic rotation strategy is established, and a proprietary valuation model gauges markets for relative and absolute value. The portfolio manager combines the outputs of the quantitative and qualitative processes to select the most attractive regions and securities. The ETF has an expense ratio of 0.83%. ( RFEU overview ) SPDR DoubleLine Emerging Markets Fixed Income ETF (BATS: EMTL ), launched on 4/14/16, is an actively managed ETF that seeks to provide high total return from current income and capital appreciation. The five-step investment process combines bottom-up research with sovereign macro overlays. The fund’s manager, DoubleLine, links credit fundamentals with market valuation to guide portfolio construction and investment decisions. It uses a research-driven process with a focus on countries, sectors, and companies believed to have improving fundamentals and ratings. EMTL has a current yield of 5.3%, an effective duration of 5.4 years, and an expense ratio capped at 0.65%. ( EMTL overview ) SPDR DoubleLine Short Duration Total Return Tactical ETF (BATS: STOT ), launched on 4/14/16, is an actively managed ETF that seeks to maximize current income with an effective duration between one and three years. The fund’s manager, DoubleLine, believes that active asset allocation is of paramount importance in its efforts to mitigate risk and achieve better risk-adjusted returns. DoubleLine also believes an active approach is best suited to navigate the divergence and uncertainty in global interest rates and economic activity. The lower duration (one to three years) seeks to limit drawdowns relative to a global broad market fixed-income portfolio. STOT has a current yield of 3.4%, an effective duration of 2.4 years, and an expense ratio capped at 0.45%. ( STOT overview ) Deutsche X-trackers FTSE Emerging Comprehensive Factor ETF (NYSEARCA: DEMG ), launched on 4/19/16, tracks an index designed to provide core exposure to emerging market equities, based on five factors: quality, value, momentum, low volatility, and size. The value score is calculated on a company’s valuation ratios, including cash flow yield, earnings yield, and country relative sales to price. The momentum score is calculated on each company’s cumulative 11-month return. The quality score is calculated from a company’s leverage and profitability. The low-volatility score is calculated from the standard deviation of five years of weekly local total returns. DEMG has an expense ratio of 0.50%. ( DEMG overview ) Global X S&P 500 Catholic Values Index ETF (NASDAQ: CATH ), launched on 4/19/16, tracks an index that excludes companies involved in activities perceived to be inconsistent with Catholic values as set out by the U.S. Conference of Catholic Bishops, including screens for weaponry and child labor. It seeks to minimize tracking error by matching the sector weightings of the broader S&P 500 Index, and its expense ratio is capped at 0.29%. ( CATH overview ) Guggenheim Large Cap Optimized Diversification ETF (NYSEARCA: OPD ), launched on 4/19/16, will track the Wilshire Large Cap Optimized Diversification Index, which combines differentiated return streams from low-correlated stocks. The benchmark index is methodically constructed via a proprietary algorithm where individual stocks are added only up to the point that they contribute to diversification. The fund seeks to manage risk by constraining stock and sector levels relative to the parent index. OPD has an expense ratio of 0.40%. ( OPD overview ) Sprott BUZZ Social Media Insights ETF (NYSEARCA: BUZ ), launched on 4/19/16, tracks the BUZZ Social Media Insights Index, which identifies the 25 most bullish U.S. stocks based on investment insights derived from social media. It processes more than 50 million unique stock-specific data points from social media comments, news articles, and blog posts on a monthly basis. The data is filtered through an analytics model composed of patented natural language processing algorithms and artificial intelligence frameworks. BUZ has an expense ratio of 0.75%. ( BUZ overview ) Amplify Online Retail ETF (NASDAQ: IBUY ), launched on 4/20/16, is a portfolio of companies generating significant (70%) revenue from online and virtual sales. The underlying EQM Online Retail Index segregates holdings into three categories: traditional retail, marketplace, and travel. The index is equal-weighted, with a maximum of 25% exposure to non-U.S. stocks and ADRs. Any excess weight will be allocated equally to all U.S.-domiciled index members. The expense ratio is 0.65%. ( IBUY overview ) iShares Sustainable MSCI Global Impact ETF (NASDAQ: MPCT ), launched on 4/22/16, seeks to track the investment results of an index composed of positive impact companies that derive a majority of their revenue from products and services that address at least one of the world’s major social and environmental challenges as identified by the United Nations Sustainable Development Goals. The ETF currently has 93 holdings and an expense ratio of 0.49%. ( MPCT overview ) CrowdInvest Wisdom ETF (NYSEARCA: WIZE ), launched on 4/26/16, seeks to track the CrowdInvest Wisdom Index, which is composed of U.S.-listed equities weighted by sentiment, built by an independent, diverse crowd. It will attempt to harness “the wisdom of the crowd” from user votes on the CrowdInvest mobile app. The users’ bullish or bearish opinions on any U.S.-traded stock determine which equities will be included. The ETF has an expense ratio of 0.95%. ( WIZE overview ) WisdomTree Fundamental U.S. Corporate Bond Fund (BATS: WFIG ), launched on 4/27/16, tracks a rules-based alternatively weighted index designed to capture the performance of selected issuers in the U.S. investment-grade corporate bond market that are deemed to have attractive fundamental and income characteristics. The methodology employs a multi-step process that screens on fundamentals and then tilts to those with attractive income characteristics. The new ETF has an estimated yield of 2.7%, an effective duration of 6.8 years, and an expense ratio capped at 0.18%. ( WFIG overview ) WisdomTree Fundamental U.S. High Yield Corporate Bond Fund (BATS: WFHY ), launched on 4/27/16, tracks a rules-based alternatively weighted index designed to capture the performance of selected issuers in the U.S. high yield corporate bond market that are deemed to have attractive fundamental and income characteristics. The methodology employs a multi-step process that screens on fundamentals and then tilts to those with attractive income characteristics. WFHY has an estimated yield of 6.2%, an effective duration of 4.5 years, and an expense ratio capped at 0.38%. ( WFHY overview ) WisdomTree Fundamental U.S. Short-Term Corporate Bond Fund (BATS: SFIG ), launched on 4/27/16, tracks a rules-based alternatively weighted index designed to capture the performance of selected issuers in the U.S. investment-grade corporate bond market that are deemed to have attractive fundamental and income characteristics. The methodology employs a multi-step process that screens on fundamentals and then tilts to those with attractive income characteristics. Selected debt securities must have fixed coupons and a remaining maturity of at least one year, but not more than five years. SFIG has an estimated yield of 1.6%, an effective duration of 2.3 years, and an expense ratio capped at 0.18%. ( SFIG overview ) WisdomTree Fundamental U.S. Short-Term High Yield Corporate Bond Fund (BATS: SFHY ), launched on 4/27/16, tracks a rules-based alternatively weighted index designed to capture the performance of selected issuers in the U.S. high-yield corporate bond market that are deemed to have attractive fundamental and income characteristics. The methodology employs a multi-step process that screens on fundamentals and then tilts to those with attractive income characteristics. Selected debt securities must have fixed coupons and a remaining maturity of at least one year, but not more than five years. SFHY has an estimated yield of 6.6%, an effective duration of 2.5 years, and an expense ratio capped at 0.38%. ( SFHY overview ) Product closures in April and last day of listing: Highland HFR Equity Hedge ETF (NYSEARCA: HHDG ) – 4/11/16 Highland HFR Event-Driven ETF (NYSEARCA: DRVN ) – 4/11/16 Highland HFR Global ETF (NYSEARCA: HHFR ) – 4/11/16 DB Commodity Long ETN – 4/15/16 – delisted, but not liquidated Global X GF China Bond ETF (NYSEARCA: CHNB ) – 4/18/16 Product changes in April: The ProShares 30 Year TIPS/TSY Spread ETF (NYSEARCA: RINF ) became the ProShares Inflation Expectations ETF ( RINF ) with a new underlying index effective April 15 . Announced product changes for coming months: Van Eck Global will unite all of its investment products under the VanEck brand , with the Market Vector ETFs becoming VanEck Vectors ETFs effective May 1. The First Trust Indxx Global Agriculture ETF (NASDAQ: FTAG ) and the First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) will undergo 1-for-5 reverse splits effective May 2. Previous monthly ETF statistics reports are available here . Disclosure: Author has no positions in any of the securities, companies, or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.

A Few Reasons Why Investors Need Advisors: Financial Advisors’ Daily Digest

Wealthfront, one of the big three robo-advisors, says low fees aren’t everything – an excellent arrow for human advisors’ quivers as well. Evan Powers exemplifies the benefit of having an advisor (and listening to him), as he recounts the sorry tale of Prince’s recent passing without a will. Michelle Waymire provides the bottom line for FAs’ social media usage, and Lance Roberts recounts the experiences of clients on their first day of retirement. Today’s Seeking Alpha Financial Advisors’ Daily Digest provides an embarrassment of riches for advisors, so I’ll try to keep this brief before getting to the links. First, I was struck by Wealthfront’s latest post. Of course, the robo-advisor par excellence is supposed to be advisors’ chief nemesis, and indeed the article is not shy about extolling its offerings as an investor’s ultimate solution. Yet, in arguing that ” investment fees matter, but taxes matter even more,” I believe the robo-advisor is perhaps unintentionally offering a pretty juicy bone to human advisors by saying, in essence, don’t sweat the small stuff like fees. And as if to prove that point, comes along one of SA’s newer contributors, Evan Powers, with an article about how Prince’s untimely intestate passing will cost his heirs hundreds of millions of dollars in avoidable fees and taxes. Powers is an investment advisor, not an estate attorney, and yet his highly intelligent and informed framing of the issue is a clear reminder of the value of having an advisor’s counsel. And speaking of intelligent and well-informed new contributors, Michelle M. Waymire offers a highly readable and clear description of what advisors need to know about using social media. I admit I’ve seen a fair amount of kitschy stuff on that topic, but Michelle has done the homework of going through the rulebooks and provides a bottom line in a simple and pleasant way. Before moving on to today’s links, it is my strong recommendation that you follow Evan’s and Michelle’s feeds straightaway to avoid the risk of missing their next articles. And as I mentioned, we’ve got some really great advisor content today: Your comments, as always, are welcome below.

The Psychology Of Investing

The longer that I’ve been at this investing thing, the more convinced I am that the difference between an average investor and a good investor is all in the mind. I’ve been investing for over 15 years now and I’ve learned a lot along the way. I think it took me the better part of a decade to work out what makes a good business and a quality investment. The much harder aspect of investing is to summon the courage to commit your capital in the face of hundreds of other people telling you otherwise. These people can be respected investment analysts, talking heads on TV, and even your own friends and family. I now have a pretty good idea of what makes my cut as a high-quality business. That tends to be a business that produces high returns on equity in excess of 20%, strong free cash flow generation and conversion of revenue to free cash flow, all combined with a strong market opportunity and rapidly growing topline growth. Now these businesses aren’t necessarily easy to find; however, when you do identify them they are easy to spot. The harder aspect of investing is to commit your capital to these high-quality opportunities that you’ve identified in the face of 101 reasons not to do so. I’ll give you an example. Celgene (NASDAQ: CELG ) is an exceptionally high-quality business with strong rates of revenue growth and good cash flow generation. However, when you look at the stock, it’s had a rough go of things over the last three months. My own purchase is down a good 10% from where I made it. There are all manner of concerns with the stock, most of which I believe will prove to be relatively immaterial over the next five years. The biggest threat is the regulation of drug pricing under the Democrats. There is also the threat that Celgene may be unsuccessful in diversifying its revenue base away from Revlimid, its chief moneymaker. All those things are likely to be unfounded. It’s not in the Democrats’ best interest to make drug discovery unattractive to commercial interests. That will just dry up funding and investment into areas of medicine that have a real human need. Celgene also managed to negotiate a deal with the generic drug manufacturer that will effectively push out its window of exclusivity to almost 2025. That’s almost 9 years for the company to explore new partnerships, invest in new R&D and acquire potential companies that can diversify its revenue base. Yet, despite of this, the company’s stock price remains stubbornly near one-year lows while other companies are now routinely making 52-week highs. I’ve committed capital to Celgene; however, I feel I twang of remorse whenever I check my trading account and see this position solidly in the red while most of my other recent growth investments are now well in the green. I was thinking further about exactly why that is in my case. I don’t think it’s an aversion to losses. Rather I believe that in general we all have a desire for positive affirmation. That’s true for us with our friends with family and even in the workplace. We all want validation that we’ve made the right choices in all aspects of my life. Unfortunately in investing, things don’t this work that way unless you happen to ride a solid growth stock that just consistently appreciates month after month and year after year. You’re not going to get positive reinforcement of your investment decision continually. If you’re looking at taking deep value positions where you have the potential for the greatest upside, you need to lose the desire for positive affirmation and that’s not easy. In fact, it’s really hard because when you see that position continuously in the red, it makes you think that others in the market know something that you don’t or that you have missed something in your analysis. Deep value investing is a pretty lonely game. Invariably it means going against the crowd in almost every bet that you make. And this is where Buffett really stands out for me . More than any other investor, he has shown a unique ability to shut out external influences on his thinking and just go with his gut conviction in purchases of American Express (NYSE: AXP ), Solomon Brothers and to a lesser extent Coca-Cola (NYSE: KO ). These investments were all done at times when those companies were on the nose. American Express suffered from the effects of a salad oil scandal which effectively cut the company’s share price in half. Solomon Brothers suffered from a devastating bond trading scandal which at one point threatened it with bankruptcy. Even Coca-Cola ( KO ) looked like a business that was heading for a sustained slowdown at the point when Buffett invested, with annual revenue growth declining from 17.1% the decade earlier to just 5.2%. I look at my own current list of holdings, and there are more than a few that have suffered or are suffering through crises where investors doubt their ability to make a comeback. CochLear ( OTC:CHEOF ) was the most recent example of a situation where a devastating company event was successfully overcome by the company. Before 2011, CochLear was a high-quality, high-growth business delivering cochlear implants across the world. In fact, the business was the market leader for implants. Unfortunately in 2011, the company suffered from a product recall that sent the company’s share price down by almost 40%. When you are a healthcare company with a reputation for high quality, a product recall event could potentially be a devastating reputational blow. I recognized the opportunity and went in guns blazing . CochLear subsequently recovered lost market share and continues to grow strongly. The net result is that the share price has more than doubled from the lows that it reached during this period of crisis. However, it wasn’t smooth sailing. In fact, the company’s share price was depressed for a period of six months after I made my investment and there was more than an occasion there where I had to reflect and think about whether I’d made the right move. In more recent times, investors have been making assumptions that Chinese economic growth is going to slide to a standstill, and with that, the prospects of Baidu (NASDAQ: BIDU ) and Alibaba (NYSE: BABA ), two of China’s great growth stories will be heading down the toilet. However, both these companies have such strong competitive advantages that I took the view that they will likely prosper for a long time and proceeded to buy. In less than a month, the market subsequently reassessed its view of the Chinese recession and, more importantly, the long-term prospects of Baidu and Alibaba, and I find both positions up more than 17% from where I made my initial investment. The one remaining position that I have which is a real test of my conviction in the company and its ability to overcome adversity is my investment in Chipotle (NYSE: CMG ) that I’ve written about here extensively. The company has significant problems in regaining customer confidence in relation to its E. coli and norovirus scandals. This is a play where you have to believe that customers will ultimately forget these incidents over time, and the company can bring back customer trust and reestablish its position as a provider of high-quality food. However, it’s hard to see this as a long-term outcome when you’re bombarded with images of empty stores and constant analyst downgrades and reminders of incidents on social media of customers getting ill. I look at this investment as a test of my long-term ability to pick a company that has the potential to rebound after significant negative company events, and also as a test of my ability to stick with a position whose outcome is uncertain but which has the potential for significant upside. Investing is as much a test of your character as anything else. It tests the level of conviction that you have in your research and your ideas, and it’s the ultimate test because you literally have to put your money where your mouth is and be prepared to wait a long time to see if your conviction was correctly placed. Those that have the ability to master their emotions and drown out the noise truly have the qualities to be successful long-term investors. Given his track record of making many such successful contrarian plays in the presence of significant negative events and placing large amounts of capital in these plays, I place Warren Buffett at the very top of investors with the greatest mastery of their psychology. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.