Tag Archive for: investment commentary writing

ESG opinions can enliven your commentary

/in /by

ESG investing is hot. More and more individual and institutional investors are considering companies’ strength in terms of their environmental, social, and corporate governance characteristics. This is a topic you might want to discuss in your client communications.

“Which Corporate ESG News Does the Market React To?” (membership required to view complete text) is a 2022 Financial Analysts Journal article that can spark some ideas for your commentary. The article suggests that investors respond to unexpected news and that “investors are motivated by financial rather than nonpecuniary motive as they differentiate in their reactions based on whether the news is likely to affect fundamentals.” Also, “This price reaction is larger for ESG news that is positive, receives more news coverage, and relates to social capital issues relative to natural or human capital issues.”

You can start your discussion by using the techniques I originally discussed in “Investment commentary topic: ETF controversy.” (See “3 ways you can use a Financial Analysts Journal article for investment commentary” image below.)

3 ways you can use a Financial Analysts Journal article for investment commentary

1. Discuss  whatever this article makes you think about

You can run with the questions suggested to you by the article. If you have opinions about ESG-related drivers of stock prices, share ’em.

Or, use the article to spur your discussion of ESG-related issues that don’t necessarily relate to stock prices. Perhaps you think it’s far more important to look at the impact of your stock choices on ESG-related corporate activities and social justice than to understand what moves stock prices. It’s helpful for your clients and prospects to know if you think, “Who cares what drives stock prices? We need to save the world.”

2. Discuss why the article is right about ESG investing

You can go deeper than the article, or you can explain how it applies to the investments your firm uses.

If you’ve observed the phenomena discussed in the article in specific stocks or industries, that makes for an interesting story that gives insights into your approach to investing. Of course, make sure your firm’s compliance professionals approve (and provide appropriate disclosures) for any discussion of specific stocks. Also, don’t cherry-pick only positive examples of your firm’s analysis (or use appropriate disclosures if you only discuss positive examples).

If your firm invests in funds that are adept at using positive ESG-related news in their stock selection, that’s another good topic for your client communications.

3. Disagree with the article

If you discover flaws in the authors’ arguments, identify those flaws and say why they should matter to your clients.

Your ability to evaluate information critically is important to your clients. That’s especially true when you tie your analysis to its impact on your clients’ WIIFM (what’s in it for me).

Credit your source for this ESG topic

You must credit the Financial Analysts Journal article as your source. That’s especially true if you cite data from it. But mention it even if it was merely the article title that sparked your ideas. Your clients and prospects like to know that you read reputable sources of research to stay up on investing.

 

 

 

5 steps for rewriting your investment commentary

/in /by

Investment commentary authors often know the markets well, but lack writing and editing expertise. After all, they’re earning big bucks to manage money, not to write. You don’t want me to run your portfolio, but I’ve learned some lessons about how to edit investment commentary. I’ve edited and written commentary for a diverse group of clients.

My experience has inspired this list of steps for anyone who’d like to edit investment commentary or other articles.

5 steps for rewriting your investment commentary inforgraphic

Step 1. Analyze overall structure

Before you dig into the details of your commentary, look at its overall structure. Your analysis may lead you to delete or move entire sections to make the structure more reader-friendly.

First, identify the main themes of your commentary. You may decide after a quick reading that your themes are something like the following:

  1. This was a volatile quarter, due mainly to disappointing corporate earnings and instability in the Middle East.
  2. Corporate earnings are likely to recover for three reasons.
  3. Instability in the Middle East will continue, and here’s how it affects our investing.
  4. Here’s why these six stocks are the portfolio’s biggest winners or losers for the quarter.

If a simple read-through doesn’t identify your main themes, you can try mind mapping your commentary’s content. I sometimes use mapping when editing complex client documents. Mapping gives me a bird’s eye perspective that helps me spot clusters of ideas that form themes. For more on mapping, please see my book Financial Blogging: How to Write Powerful Posts That Attract Clients.

Once you’ve identified the themes, delete any paragraphs that aren’t relevant. Also, move your paragraphs so your argument builds in a logical order.

Step 2. Provide guideposts for your readers

Once you’ve identified your commentary’s themes, you can make it easy for your readers to absorb them. Three key tools are your title, introduction, and headings. Each of these components should manage your readers’ expectations.

Titles should communicate your main topic. Simply writing “Third Quarter Review” isn’t enough. It doesn’t distinguish this quarter’s review from all that preceded it. Nor does it distinguish your review from those of your competitors. At a minimum, name your main topic in your subject line. For example, “Third Quarter Rocked by Earnings and Middle East Conflict.”

As for your introduction, I believe it should say exactly what you’ll cover. This lets your readers quickly assess whether your commentary interests them.

Next, use your headings as milestones for your commentary. Express your opinion or conclusion, if possible. For example, instead of using “corporate earnings” as your heading, consider something like “corporate earnings disappoint, but rebound likely.”

Step 3. Work within paragraphs

Once you’ve completed your “big picture” edits, dig into your individual paragraphs. Strong topic sentences will ensure that today’s busy readers can skim what you read, using their quick scan to zero in on the content that most interests them.

A strong topic sentence covers the paragraph’s main point. Everything that follows in a specific paragraph should relate to the topic sentence. If not, then cut it. This isn’t the only correct way to write, but it’s the best way to write for online readers and readers suffering from information overload.

For more on this topic, read my blog post about the first-sentence check.

Step 4. Examine your individual sentences

The next step is to make what professionals call “line edits.” This means correcting and improving your sentences for grammar, punctuation, vocabulary choices, and other issues in your writing style.

Working down to small items from “big picture” items is efficient. It means that you don’t waste time improving your word choices in a sentence or paragraph that you ultimately cut from your draft.

Step 5. Proofread and check statistics

Once you’ve completed your editing, it’s time to proofread. I’ve blogged in “5 proofreading tips for quarterly investment reports” about my best proofreading tips. Also, check the accuracy of your statistics, such as index returns. If possible, get someone else to proofread your work. After you’ve lived with a document for a while, it becomes hard to spot errors that would smack you in the face on a first reading.

 

 

If you follow these five steps, you’ll attract more readers. That’s your goal, right?

 

 

 

Note: I edited this on Sept. 30, 2022.

Discuss your mistakes like Warren Buffett

/in , /by

It’s not a sign of weakness to discuss your mistakes. At least, it’s not if you discuss your mistakes like Warren Buffett.

Benefit of discussing your mistakes

“Berkshire investors gain confidence because Buffett doesn’t gloss over his mistakes,” writes L.J. Rittenhouse, in Buffett’s Bites: The Essential Investor’s Guide to Warren Buffett’s Shareholder Letters. She shares several examples of mistakes that Warren Buffett has discussed in Berkshire Hathaway’s annual shareholder letters.

“These public postmortems may not reduce the number of his mistakes—he is human—but he is less likely to repeat them,” says Rittenhouse.

How to discuss your mistakes

Buffett is a big fan of using plain language in writing about financial topics. He speaks plainly about his mistakes. Referring to Dexter Shoe Company, he wrote, as quoted by Rittenhouse,”To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future—you can bet on that.” You can’t get plainer than that.

Buffett uses some humor in discussing his mistakes. For example, says Rittenhouse, “He described his biggest all-time blunder in his 2007 letter in a reference to a Bobby Bare country western lyric about going to bed with good-looking women and waking up to find they are ugly.” I think that putting down women’s appearance risks offending today’s readers. However, the use of analogy is a powerful technique.

It’s safer to poke fun at oneself. Buffett described his failure to do a big deal, saying, “The only explanation is that my brain had gone on vacation and forgotten to notify me.”

Try discussing mistakes in your performance reviews

I’ve discussed the importance of discussing mistakes in “Four lessons from Wasatch Funds on reporting underperformance.” By explaining what went wrong, you give your clients and prospects more confidence in how you’ll manage things in the future. After all, if you can’t recognize your mistakes, how can you fix them. Try it!

 

Disclosure:  If you click on an Amazon link in this post and then buy something, I will receive a small commission. I provide links to books only when I believe they have value for my readers.

Writing question: how do you know when you have too many details?

/2 Comments/in /by

How do you know when you have too many details in your writing? That question from a participant in my investment commentary webinar made me think of these six tips. Try them if your writing gets bogged down by details.

1. Go with your gut

Seasoned writers rely on their instincts to know when they’ve stuffed too much into their drafts. They look at the rhythm of the piece or simply go with their guts. That’s fine for experienced writers who’ve honed their instincts through feedback from teachers or editors. But it’s not much help for non-professional writers. That’s why I provide more suggestions for identifying when you have too many details.

2. Word count

How long is your draft and its components? To oversimply, if you’ve written a 20,000-word blog post or a 1,000-word sidebar, it’s too long. It probably includes too many details.

3. What advances your argument?

Too many details may overwhelm your readers instead of convincing them. To cut the excess, ask “What’s the absolutely minimum of details that will make my point?”

Pare your story back to the basics. If it’s compelling, you’re finished.

4. Rule of Three

Examples work better in groups of three as I discussed in “What number of examples is ideal for persuasion?” Do your examples comply with the Rule of Three?

The Rule of Three isn’t an absolute. There’ll be many times when more is better. But it’s a way to filter for easy cuts to your excessive details.

5. Ask what your readers want

Do you have family or friends who are members of your target audience? Show them your draft. Ask them for feedback, including suggestions for what you can cut.

6. Are your sections balanced?

If your piece has three sections and one section is way longer than the others, it’s possible that section is too long. But that’s not always the case. Use your judgment.

Your suggestions?

If you have suggestions for how to recognize when your writing has too many details, please let me know.

Image courtesy of iosphere at FreeDigitalPhotos.net.

Are financial predictions too risky for investment commentary writers?

/5 Comments/in /by

Is it a bad idea to make predictions in your investment commentary because clients will slam you when you’re wrong? Whenever you make predictions, you run the risk of being wrong. But being wrong isn’t a problem, in my mind, if your prediction reflects good thinking.

Lesson from my winning prediction

Accurate predictions alone don’t make you seem smart. I remember the time I was forced to participate in a betting pool with members of an investment policy committee. I had to guess where a certain number—probably the 10-year Treasury rate—would be one quarter later.

Guess what! I won. However, it wasn’t knowledge of Federal Reserve policy or the economy that inspired my winning bet. It was that I deliberately picked a rate 25 basis points (0.25%) lower than any other committee member’s bet.

Did I respect the losers less after I won my bet? No. They had well thought-out ideas about the factors driving bond yields. As a result, I continued to think highly of them.

The lesson is that smart people can and will be wrong. After all, look at any major investment firm’s quarterly predictions of statistics such as the fed funds rate, gross domestic product (GDP) growth, or the consumer price index. Most of the time they are wrong. Heck, the federal government revises its GDP numbers as new data comes in.

Why you should make predictions

Investment commentary that only reports facts is often boring. Plus, unless you’re pumping out commentary instantaneously, you’re not telling your readers anything they couldn’t already learn online or in The Wall Street Journal. They have no reason to read your factual, unopinionated commentary.

Keeping your clients interested isn’t the only reason to make predictions—or, at a minimum, express opinions. When you support your predictions with carefully reasoned arguments, you give clients insights into your firm’s thought processes. That’s valuable.

Imagine, for example, that you predict that the Federal Open Market Committee will boost its fed funds target later in the year. By itself, that’s not so interesting. What makes it valuable is why you think that’s true and what you recommend based on that prediction.

Unexpected events—war, natural disasters and the like—can sabotage your predictions. However, they may only delay your predictions coming true. Clients will find comfort in the soundness of your thinking.

What if you’re repeatedly wrong?

Repeatedly making big predictions that don’t pan out can bring client criticism and even defections. But sometimes the strength of your convictions means you must stick with them to remain true to your investment philosophy and process, as well as for the good of your clients.

For example, some asset management firms shunned dot-com stocks during their heyday, predicting a price collapse that ultimately occurred. The clients who stuck with them benefited over the long run.

My suggestions for your financial predictions

I have some suggestions for you.

  1. Don’t make flashy predictions simply to attract attention. One day, or even one month, of fame on social media or in the news isn’t worthwhile.
  2. Do make predictions that are grounded in careful analysis. You need to be able to explain predictions.
  3. Explain your predictions. Help your readers to understand why you made your predictions and why the predictions are important for client portfolios.

Whenever possible, relate what you write to its impact on client portfolios. For example, if you foresee a rebound in the Russian ruble, explain how this might affect sectors your portfolios hold or avoid.

  1. Hedge when necessary. To keep the Securities and Exchange Commission happy, you can’t guarantee anything. Use language such as “we believe” to make it clear you’re expressing an opinion.

Hedging language also helps readers grasp that you understand there are factors that can derail the most likely scenario. You’re not pigheaded. You consider the relevant factors.

  1. Use personality if you lack opinions. If you lack provocative opinions, but you want people to read your commentary, use your personality. Writing in a distinctive style and tailoring your content to your clients’ unique needs can help you get attention from your target audience.

What about YOU?

I’m interested in learning from you. How do you balance the benefits of expressing your opinions vs. the risks of being wrong? Please comment.

 

Image courtesy of Salvatore Vuono at FreeDigitalPhotos.net

Help employees write financial content for publication

/in /by

Publishing investment and financial content isn’t just for the big names any more. In the old days, only chief investment officers and senior executives put their names on articles published by investment, wealth management, and financial planning firms. This was true even when junior employees, marketing communications staff, or freelancers did the writing. Today, the needs of search engine optimization, social media and blogging, plus the demand for more personal, less bland content are changing the rules. Firms are asking more employees to write for their blogs, newsletters, and other publications.

This creates challenges, as well as opportunities, for financial firms. How can they engage more employees in writing for publication? How can they ensure that the content is good enough?

Most financial services employees aren’t hired for their writing skills. Some are gifted idea generators and wordsmiths. Others don’t enjoy writing and haven’t been trained to write well.

I have suggestions on how to inspire your employees to write more and better. If you need practical help right away, send your employees to my webinar on “How to Write Investment Commentary People Will Read,” scheduled for June 22, 2015 (Early Bird rate ends June 3).

1. Set a good example at the top

Employees notice senior executives’ actions. When your executives publish regularly, they set a good example for the rest of the firm.employee social media sharing stats byNeal Schaffer

Senior management can also help by recognizing the contributions of their juniors. Recognition can take many forms:

  • Sharing content on social media—by the way, don’t underestimate the value of you and your employees sharing on social media, as my photo from social media expert Neal Schaffer’s May 7, 2015 presentation shows.
  • Praising individuals for their contributions
  • Featuring contributions by junior employees, as well as senior management, in a newsletter or blog
  • Including writing as part of job descriptions and performance reviews

2. Offer ideas to jumpstart employee writing

Some people, even veteran writers, get stuck at the stage of generating ideas or starting to put words on the page. You can help them by suggesting topics or providing models for their pieces.

A. Suggest specific topics

When you suggest topics, try to be as specific as possible, especially if you’re helping a new writer. Instead of suggesting the broad topic of “market timing,” you might suggest

  • Why market timing isn’t right for retirees
  • Market timing or buy-and-hold—which is best?
  • Three reasons why market timing doesn’t work
  • Research shows benefits of market timing

A narrower suggestion gives your direction to your newbie writers. Of course, it requires you to have some knowledge of the topic so you don’t steer them wrong.

B. Provide models

Facing a blank page can intimidate writers at all levels of experience. To relieve their stress, provide your writers with models to follow. Give them examples of articles that you like. The examples can be from your firm or elsewhere. I provide one fill-in-the-blanks model on my blog.

3. Train your employees to write

Investment commentary webinar June 22, 2015

Click on image to register

Training can help your employees to overcome their fear of writing and to write better and faster. I train corporate clients and members of professional societies to write better. However, any kind of writing class, even at a local education program can help. I got much of my early training in programs offered by the Boston, Cambridge, and Newton adult ed programs.

If you’d like online training, check out my webinar on “How to Write Investment Commentary People Will Read.”

It’s also good to provide training about compliance rules. For example, writers can’t guarantee returns or promise that certain things will happen. Also, some topics, especially discussion of specific products, may demand disclosures. Consider providing your employees with compliance checklists so they avoid violating compliance rules.

4. Provide editing and proofreading

Typos and other mistakes undercut the credibility of your content. It’s hard for most writers to proofread themselves. This is why I suggest you use a proofreader-copy editor.

If your budget permits, hire a professional proofreader-copy editor. This could be someone in your marketing department or a freelancer. If it’s a freelancer, think about whether you want someone with financial expertise who can catch content problems. If your budget is tight, go for someone who only knows grammar and usage.

5. Reward participation

Employees like to do things that are rewarded and praised. When you recognize the contributions of your employee-writers, you’ll encourage more participation.

YOUR thoughts

How do you encourage your investment or wealth management professionals to write? Please tell me.

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Should your investment commentary be different?

/6 Comments/in , /by

“Should your investment commentary present a distinctive point of view?” That’s the great question posed by a participant in one of my presentations on “How To Write Investment Commentary People Will Read.”

My answer? It depends.

What is the distinctive point of view?

If a distinctive point of view means ideas that hold their own vs. leading investment strategies, that’s easier said than done. Not everyone can be an original thinker.

Another challenge: Competing with top investment strategists may also require access to world-class data to support your contentions. That may be tough if you’re at a small company with limited resources.

On the other hand, ideas aren’t the only way to distinguish yourself. You can stand out with the way you express your ideas, instead of the actual content of your commentary. Perhaps you show some personality or you’re an elegant or humorous writer.

Your audience matters

Investment commentary that displays thought leadership appeals to some audiences more than others.

For example, if you sell your firm’s tactical asset allocation services, readers will care about the originality and accuracy of how you assess markets. In short, thought leadership matters if it is an important part of your appeal as an investment manager.

Some readers won’t care whether your ideas are original or common. This is particularly true of individual investors. I believe they’d rather know that you understand them and their needs. In their case, investment commentary explaining how a recent event or trend affects their portfolio may be more powerful than groundbreaking commentary on the stock market.

What do YOU think?

I’m curious to learn your thoughts on this topic. Please comment.

Famous quotes make your commentary memorable

/in /by

It’s hard to make your investment commentary stand out. After all, everybody’s writing about the same facts. However, adept use of quotes can make your commentary memorable.

For example, here’s how The Wall Street Journal’s “Ahead of the Tape” column started with a quote from the Bible (Matthew 20:16) on June 30, 2014:

Similarities between Scripture and financial markets are rare, but one verse seems to be a recurring theme: “The first shall be last, and the last shall be first.”

The writer, Spencer Jakab, explained the quote’s application in his column’s second paragraph.

Pundits and investors alike have a tendency to extrapolate the recent past into future expectations. That often is a recipe for disappointment.

The rest of the column discussed examples of Jakab’s theme. For example, commodities, which disappointed in 2013, were rebounding at the time of his article. Readers may remember Jakab’s quote—and the related lesson—long after they’ve forgotten which asset classes lag or outperform.

The column concluded by circling back to the Bible, saying “to everything there is a season,” a reference to a famous passage from Ecclesiastes. Nice symmetry there!