Mark Pearson of Nepsis: “Avoid an addiction to prediction”

Avoid an addiction to prediction. No one really believes the future can be predicted, yet investors are so fearful of the future that they will listen to anyone that appeases their anxiety. Incorporating flexibility and transparency into your investment process, will provide much greater clarity for your decision-making than futile predictions will. As a part […]

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Avoid an addiction to prediction. No one really believes the future can be predicted, yet investors are so fearful of the future that they will listen to anyone that appeases their anxiety. Incorporating flexibility and transparency into your investment process, will provide much greater clarity for your decision-making than futile predictions will.

As a part of my series about the The 5 Essentials of Smart Investing, I had the pleasure of interviewing Mark Pearson.

Mark Pearson is the Founder, President and Chief Investment Officer of Nepsis, Inc., an SEC registered investment advisor firm based in Minnesota. With over 30 years of financial and high-technology industry experience, Mark is responsible for the firm’s strategic vision, research, and trading decisions. His passion for portfolio management compelled him to develop a unique back-to-basics investment philosophy he calls Invest with Clarity®. Through this process, Mark advocates for investors to invest like they are business owners — that is knowing what they own in their portfolios and why they own it for the long-term.

Mark shares his perspective and insight with various publications and has been featured in the TD Ameritrade Institutional Solutions Magazine for his excellence in technology and client service. A gifted speaker, he ties motivation and investment together while addressing community and industry audiences. In his Investing for Success blog and weekly podcast, he covers the principles of portfolio management, as well as on market trends and expectations. Through spoken and written word, Mark is driven to provide the power of clarity to the individual investor so that they can accomplish their investment and planning goals.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

While working on my degree in speech communications at the University of Minnesota, I became intrigued with the stock market and investing. By the time I graduated I knew that I wanted to start and operate my own business one day, but I wasn’t quite ready, yet. So, I spent eight years exploring the high-tech industry and learning as much as I could about sales, finance and what it takes to operate a sustainable company. Then I served as president of the financial planning division of a bank holding company, authored numerous articles and financial presentations, and worked at raising capital for corporate acquisitions. By 1994 I was ready to strike out on my own, so I founded Anchor Capital Management, which I later renamed Nepsis. Nepsis is a Greek word that means clarity and I believe that success in investing, as in life, comes from having clarity.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

I actually think the most interesting story is unfolding right now. We have been invested in our largest holding for over eight years. It is an agricultural technology firm working to reduce waste in the fresh-food supply chain. The interesting part of this story came into play in 2018 when the company announced it was filing a lawsuit against one of the largest retailers in the world. The multi-billion-dollar lawsuit claims include fraud, unjust enrichment, and misappropriation of trade secrets, to name a few. This is a genuine David vs Goliath tale and the outcome has the potential to positively impact the company’s shareholders in a significant manner. While waiting for the suit to resolve, the stock value experienced some fluctuation, and that always seems to cause chatter by investors who allow emotions and prognostication to interfere with strategy. The lessons coming out of this experience validates the power of strategic cost averaging and importance of sticking to your buy and hold discipline. The fundamental key to successful investing is about buying great companies, owning the companies over time and continually investing in them when volatility allows you to buy more of it when it is on sale.

Are you working on any exciting new projects now? How do you think that will help people?

We are in the final stages of rolling out our Clarity Road Map. This is our own proprietary financial planning process which deeply integrates with our investment process and our technology platform that is built on the Salesforce platform. We believe this process allows advisors to be more productive and compliant with SEC regulations. At the same time, it also provides an enhanced level of investment and planning transparency that elevates the experience for our clients.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

I think these numbers are so poor because the basic financial principles needed to manage personal finances are not being taught in school or at home. We simply aren’t teaching everyone about budgeting, saving, cash flow or time value of money. Also, Americans could benefit from learning about their behavioral tendencies when it comes to money. I think the more people understand how they make decisions, combined with basic money skills, the greater their ability to manage financial responsibilities and goals.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

If I had the power, schools would incorporate basic financial literacy within existing K-8 lessons, and would add a personal finance course requirement for high school graduation. The younger grades would cover budgeting, saving, spending, and needs vs wants. By high school, students need to be able to open and manage bank accounts, understand how credit cards and loans work, and strategies for long-term savings. Plus, we need to explain how the market and bonds work so that students know what happens with their invested money. Teaching about business ownership is also critical for understanding economic development.

Next, I would recommend that all families start teaching their children about money at a very young age. Pay them for small jobs. Have them save the money they earn to buy their own treats at the store. Gradually introduce the concepts of saving for short and long-term goals, as well as the value of donating money. Eventually you can help older children buy some stock in a company that you research together. They will learn the importance of work, the ability to delay gratification, and the value of sharing, along with vital financial concepts.

While I believe parents are our first and most important teachers, too many generations have missed out on this type of education. Consequently, their children and grandchildren are learning the wrong lessons. So lastly, I would recommend increasing access to adult financial education and mentors to help stop the cycle of money mismanagement. Get our churches, social services, and even financial institutions involved. There are numerous online programs and apps to help fill in the knowledge gap, too. Teach a man and woman to fish by equipping them with the information they need to succeed.

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing what would you say? Can you please give a story or an example for each?

Here are five non intuitive essentials for smart investing that I share with my adult children, their friends, and anyone who seeks my advice.

  1. Adhere to a philosophy. For example, at Nepsis our philosophy entails a belief in diversification, but not over-diversification, which is why our portfolios consists of no more than 25 to 40 selected companies instead of the numbers within mutual funds and ETFs. We also believe that volatility creates opportunity and is necessary for long-term investment success.
  2. Stick with a professionally-developed investment strategy. This is not the same as a philosophy. A strategy provides the process for achieving results. Our strategy utilizes fundamental analysis, not market timing. We also ensure that no one position can make or break your portfolio. Remember that process comes before progress.
  3. Be flexible. Flexibility offers you the ability to use volatility in a strategic manner to continually purchase more shares in great businesses over time. We call this Strategic Cost Averaging® at Nepsis.
  4. Demand transparency. You should always be able to see all of the activity in your accounts — including any made by third-party custodians who might oversee your investments and assets. Separately Managed Accounts (SMAs) allow a complete and vivid picture of exactly how your unique portfolio is constructed, along with every change that is made and why
  5. Avoid an addiction to prediction. No one really believes the future can be predicted, yet investors are so fearful of the future that they will listen to anyone that appeases their anxiety. Incorporating flexibility and transparency into your investment process, will provide much greater clarity for your decision-making than futile predictions will.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I cannot begin to thank all the many people in my life who have helped me get to where I am without first thanking my father, who taught me more than I can list. That said, when I graduated from college, my father introduced me to Dr. Jim Lynn. The man I affectionately refer to as Uncle Jimmy, became my mentor. By working alongside Uncle Jimmy, I received a master education in all things related to business, communication, success and hard work. Thirty plus years later, I still recite many of the phrases I learned while under his wing. I am eternally grateful for everything he taught me.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

“Common sense is uncommon.” My father used this quote quite often while I was growing up. Unfortunately, I find it to be entirely true and relevant in today’s investing climate. It is my job to help people make informed decisions about their investments. When investors allow their emotions or their addiction to financial predictions to influence their decisions, they aren’t using common sense. However, I’ve found that once people have transparency and clarity, their decisions naturally embrace common sense.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

I’ve given a name to the movement I would like to inspire, and that is Invest with Clarity®. It is the back-to-basics investment philosophy I developed to encourage people to invest like they are business owners. This requires knowing what you own in your portfolio and why you own it. Investing with this type of clarity offers a process that is easy to understand and stick with. The more likely an investor is to stick to their process, the more successful their portfolio is likely to be over time.

The reason this movement would bring the most amount of good to the greatest number of people is simple. When more people have success with their portfolios, and the more successful those portfolios become, then the more people have to share with others. The opportunities to support worthwhile causes locally and across the world increases exponentially.

This isn’t a new concept. It comes from The Parable of Talents (Matthew 25:14–30) in which Christians are urged to use their God-given gifts in the service of God, and these gifts can be anything from personal abilities to personal wealth. So, the more I can help others grow their financial gifts, the more benefits there are to be shared.

Thank you for the interview. We wish you continued success!

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