7investing CEO Simon Erickson looks back on 7investing's history and shares the importance of making investing personal.
July 5, 2023
Today, my message is not a stock pick or a marketing promotion. It’s a retrospective look at 7investing’s 40-month history, and the most important things I’ve found valuable and worth sharing with you.
When we started 7investing three years ago, we noticed something was missing.
There were already thousands of investing newsletters being published on a daily basis. We had entered a business with zero obvious barriers to entry. Anyone could set up a free account with SeekingAlpha or Substack, publish a newsletter, and start making stock picks.
As you’d expect, the internet soon became a flood of stock ideas. Tickers and buy alerts began buzzing around like a highly-caffeinated swarm of bees.
Yet only a small minority of these stockpickers were actually keeping score. It was easy to rapid-fire ideas to a captive audience to gain attention or to grow an audience. But were those stock picks well-researched and should you trust them? And were they actually outperforming a broader market index fund?
A performance-measuring mechanism was badly needed. There needed to be a way to draw a clear line between “investing” and “entertainment”.
The quintessential example was Jim Cramer’s Mad Money. The well-known show with the popular lightning round is immediately-recognizable to millions of people. Yet eyebrows have risen over the years about the performance of the stocks recommended. “Inverse Cramer” has gone from being a snarky meme to an official ETF. The numbers began to emerge that showed a rapid-fire “Buy Buy Buy” approach to investing wasn’t suitable or sustainable.
Additionally, several newsletters were also taking a narrow and biased view of the investing world. They were typically a single analyst’s opinion, who framed the market based on their own individual perspective.
This led to a litany of thematic styles. “Multibagger investing”, “crypto investing”, or “SaaS investing” became common names for newsletter services. They focused on small slivers of the market and appealed to investors who wanted exposure to those themes.
Other publishers jumped on this bait like a great white shark who was hungry for a feast. They charged thousands of dollars for new services that were promoted using direct marketing response, focusing on sexy themes like “5G”, “cannabis”, or “AI”.
Those themed newsletters sounded exciting and punchy, but the Hype Cycle then did what it does best. It took those headline-grabbing trends directly to the woodshed.
Millions of dollars invested solely in 3D printing, crypto, or cannabis quickly lost their luster and led to massive portfolio impairments. Investors learned that financially supporting innovation is very different than chasing the Hype Cycle.
So we felt it was necessary for 7investing to have a checks-and-balances structure within our team. We didn’t want to assemble a group of like-minded analysts who were all forced to choose stocks of a certain theme.
It would be more valuable to put on the gloves and to get in the ring. To allow, and even encourage, analysts to challenge one another’s thinking and also their stock picks.
We put together a group from a diversity of backgrounds. Our advisor team over the years has purposely included both growth-style investors and value investors. We’ve had top-down analysts who look at how markets are changing, and bottoms-up analysts who dig into specific company fundamentals. We’ve had former banking executives, research institute directors, health care VPs, cloud computing consultants, and English literature professors.
This gave us an opportunity to search across the full gamut of investing styles. And from there, we would hand the baton to our subscribers to choose which of those were the fit best for their own personal interests.
We also agreed to be evaluated in real-time. We would have a report card that would ruthlessly judge our decisions and would display the returns of every stock pick we ever made.
This led us to think differently than other newsletters. We discussed newsworthy events and earnings collectively as a team, rather than grinding out recaps as individuals. We had the freedom to respectfully challenge one another and to course-correct where our previous thinking may have been wrong.
We implemented “Red Flags” quarterly meetings, where we’d discuss the warning signs that were appearing for some of our recommendations. Any advisor could challenge any pick from any other advisor; so long as the reasons were based on data rather than conjecture.
We then sold any previous recommendations that we no longer believed in. Sometimes things change in the market. Investing should adapt to those changes.
And the final cherry on top was our willingness to transparently share all of the above with our subscribers. We weren’t going to be cheerleaders who were running TV shows for ratings or went fishing for likes or followers on Twitter. We were investors who were being honest with ourselves and were looking out for other investors.
We still follow our same seven 7investing principles to this day.
No one else was doing that. It may have been a crowded pond, but 7investing was the only fish picking seven stocks a month from a diversity of sectors, transparently displaying its consolidated results, and then interacting about them with subscribers.
This approach served us incredibly well during the bull market of 2020 and 2021. Our scorecard shot to the moon right out of the gate.
Six months after we opened our doors for business, our average pick had provided more than a 70% total return and was outperforming the broader S&P 500 by more than 50%. Within a year, things got even better. One of our recommendations had even nearly become a 10-bagger!
We had a lot of fun in those years. We started a program to make a public-facing toast to celebrate our multibaggers (i.e. any time one of our stock picks returned more than 100% from its initial recommendation price). We expanded our team and were soon 19 people on four continents. We hit the million-dollar revenue threshold just 18 months after we opened. I started getting unsolicited calls from venture capitalists. Life was good and we were on top of the world.
Yet we also injected a dose of caution into our optimism. We purposely cut back on our marketing budget and even warned everyone when it felt like the bull market’s run was getting out of hand.
That caution was indeed justified. Like several other epic stories, we faced a very challenging upcoming conflict. Ours took the form of the most severe selloff of the 21st century.
2022 was a year most investors would like to forget. America experienced its fastest rate of inflation in four decades and the Fed countered it with its fastest pace of interest rate hikes of all time.
The economy began to slide into a freefall. Fast-growing Silicon Valley companies slammed on the brakes and laid off tens of thousands of employees.
Silicon Valley Bank imploded. The Nasdaq lost a third of its value. “Growth style” and “crypto” investors who’d become accustomed to being the life of cocktail parties suddenly became pariahs. Those who publicly boasted about their returns in 2021 suddenly went quiet in 2022.
The investing world was becoming disillusioned with the stock market. Many questioned whether the risk of investing in individual companies was worth it any more. The average individual investor lost 30% in 2022. One in five closed their brokerage accounts entirely.
Our fully-transparent approach suddenly became a doubled-edged sword. The market selloff caused many of our high-flying stocks to crash right back down to Earth. Our scorecard took a hit, from being deep in the green to being deep in the red. It became much more challenging to attract new investors.
7investing was also much more exposed to this market selloff than larger entities. We are not owned or controlled by a larger publisher; we’ve always been independent and are entirely self-funded.
That meant we got hit harder than others who had deeper pockets or vaster cash reserves. We had to cut back on our campaigns and promotions. We lost several good people through staff reduction or turnover.
This led to a fair amount of external criticism. There was a lingering sting of comments about some of our stock picks that had underperformed. Or from newer investors who had lost money during the downturn.
It was a tough time to be a CEO. 2022 brought very few public-facing cheers and congratulations. It was much less fun navigating through choppy waters.
Yet I remained guided by an unshakable optimism. Of knowing that the market is cyclical and that the pendulum would eventually swing the other way.
This year has proven to be much more enjoyable for investors. Those who had the grit and the courage to invest during the selloff have been rewarded by a 15%+ broader market return in 2023. Several individual stocks have increased by 100% or more.
The beauty of investing is that it’s a lifelong journey. There are good times and there are bad times, but it’s a new sunrise every morning.
We never intended to attempt to manage the short-term returns of our scorecard. Whether we were up 70% or we were down 25%, we always focused on looking forward. Our scorecard’s return would be the long-term representation of all of the decisions we’ve made up to today.
Our goal has been to improve that decision-making process over a long period of time. No one becomes an expert investor overnight. Those who compound wealth efficiently do it by learning more every month, every year, every decade. They then celebrate their successes by retiring early, building their dream home, or paying for their kids to go to law school (which are all actual testimonials shared by 7investing teammates or subscribers).
As a blessing in disguise, the market downturn unveiled one of our most important differentiators: our relentless and methodical process. We’ve fed the 7investing machine seven new data points every month. And we’ve continually crunched the numbers to figure out what works and what does not.
That diligent process has rewarded us this year. In 2023, every single one of our monthly investing cohorts is collectively outperforming the broader market. And our monthly Best Buy portfolios are doing even better.
Business is a lot like investing. People are what create the culture of an organization, and their decisions are what set the trajectory of the company’s success.
Investing is similarly personal. Your style, your knowledge, and your mindset will guide your decisions and set up the trajectory of your long-term performance success. You know yourself better than anyone else ever will.
There is also an importance of community. None of us needs to go at this alone. Join our Subscriber Calls and ask our advisors questions you wouldn’t feel safe to ask elsewhere. Talk with other investors on our Community Forum about what they’re learning and what stocks they’re buying. Reach out to us on Twitter. You’ll improve even more as an investor if you recognize how to avoid landmines and if you learn from others’ mistakes.
I personally still find a thrill in the chase. I only get one official pick every month, so I’m going to make it count. That means scouring the entire market to find the very best, which is most worthy of our hard-earned money. I buy or own every active recommendation of mine on our scorecard.
I love being on a team of multiple advisors. They’ve made me a better investor and have opened my eyes to things I would have never before considered. FDA trials for drugmakers, embedding AI into software, and battery storage for energy share more in common than might immediately be obvious. Knowledge is power that is meant to be compounded. We’ve done that transparently for the past forty months. It’s also a heck of a lot more fun to go on a journey as a team, rather than trying to figure it all out alone.
We’ll continue to prioritize trust and to focus on our long-term mission of empowering others. We’ll further strengthen that through a few new partnerships we’ll announce in the coming months. Many of these “break the rules” of traditional investing newsletters, yet I consider them to be supportive of our mission. 7investing continues to evolve and I’m always excited to share each step of our progress.
So I’d like to offer a few final points of encouragement. Find your own investing curiosity and don’t be afraid to learn new things. Embrace your mistakes and share what you learn with others. Establish a process and improve it every month. Be honest when evaluating your performance and make changes when you need to.
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