00:00:00
Does the fire community and the
00:00:01
bogleheads community and online diyers,
00:00:04
do they have a selection bias issue? And
00:00:07
when we talk about needles and hay
00:00:08
stacks as a metaphor for stockpicking,
00:00:10
well, what do the numbers of the stock
00:00:12
market say about the frequency of those
00:00:14
needles? And then last, make sure you
00:00:16
stick around today for a light-spirited
00:00:18
fun debate about 10 retirement planning
00:00:20
topics with Andrew Giancola. Welcome to
00:00:23
personal finance for long-term
00:00:24
investors, where we believe Benjamin
00:00:26
Franklin's advice that an investment in
00:00:28
knowledge pays the best interest both in
00:00:31
finances and in your life. Every episode
00:00:34
teaches you personal finance and
00:00:35
long-term investing in simple terms.
00:00:38
Now, here's your host, Jesse Kramer.
00:00:41
Welcome to Personal Finance for
00:00:42
Long-Term Investors, episode 139. I'm
00:00:44
Jesse Kramer. I'm a financial planner
00:00:46
working with retirees and busy
00:00:48
professionals thinking about retirement
00:00:49
from all across the USA. You can learn
00:00:51
more at planwithjesse.com.
00:00:53
That's planwithjesse.com.
00:00:56
Hey, a quick review of the week. Davek,
00:00:59
thank you for the five-star review on
00:01:00
Apple Podcast. Please drop me an email
00:01:02
00:01:04
so I can get a super soft t-shirt sent
00:01:06
out to you. And on with the show. First,
00:01:09
I'm convinced the fire community, the
00:01:11
bogheads community, so you know, the
00:01:13
online DIYer communities have what's
00:01:15
called a selection bias issue. So, what
00:01:17
is selection bias? Selection bias is a
00:01:20
systematic error occurring when data
00:01:22
points are not randomly selected making
00:01:24
the sample unrepresentative of a total
00:01:26
population. This creates a distorted
00:01:28
unreliable conclusion because the
00:01:30
analyzed group differs significantly
00:01:32
from the population intended to be
00:01:34
studied. What I know of my listeners
00:01:36
here, what I know of you all is that a
00:01:38
lot of us are DIYers. A lot of us are
00:01:41
bogheads. A lot of us are aware of or
00:01:43
consider ourselves part of the fire
00:01:45
financial independence movement. And I
00:01:47
think we are a group of people who have
00:01:48
self- selected to be DIYers, to be
00:01:51
financial experts. You know, we love
00:01:52
getting in the weeds of our financial
00:01:54
plans all the way down to the little
00:01:56
details. And I certainly come from the
00:01:58
same ranks as you. I've read those
00:02:00
books. I've read those blogs. I listen
00:02:02
to that podcast. My portfolio looks a
00:02:05
lot like yours. And I think naturally we
00:02:08
are going to be very pro DIYers. A lot
00:02:10
of us understandably might lean away
00:02:13
from ever hiring a professional, at
00:02:14
least when it comes to this financial
00:02:16
planning world, and I think that's
00:02:18
totally understandable. However, it's
00:02:19
important to know that the more we
00:02:21
interact with people like us, the more
00:02:23
we can convince ourselves that everyone
00:02:26
is this way. And I think some of that it
00:02:28
really is the online echo chamber
00:02:30
effect. It's driven by confirmation
00:02:32
bias, by the false consensus effect, and
00:02:34
just by conformity. But we should be
00:02:36
aware of selection bias and those other
00:02:38
biases I just mentioned too because it
00:02:40
can distort our understanding of the
00:02:42
world and more importantly how we
00:02:43
communicate and help the rest of the
00:02:45
population. So I felt some inspiration
00:02:48
for this little monologue when I saw an
00:02:49
online commentator say and I quote, "The
00:02:52
entire financial advice industry is a
00:02:54
scam bar none. Literally every adviser,
00:02:57
coach, planner, etc. is a scam. Just buy
00:02:59
index funds and wait." End quote. And
00:03:02
when I saw this comment, I thought of
00:03:04
that Dunning Krueger effect, the Dunning
00:03:06
Krueger curve, which shows competence on
00:03:09
the X-axis and confidence on the Yaxis.
00:03:12
And what the Dunning Krueger effect
00:03:14
shows is that there's this really sharp
00:03:15
peak early on when someone has really,
00:03:18
really high confidence, even though
00:03:20
technically speaking, their competence
00:03:22
isn't that high at all yet. And the kind
00:03:25
of comment that calls the entire
00:03:26
industry a scam. Clearly, it's an
00:03:29
imperfect industry, but not the entire
00:03:30
industry is a scam. But that type of
00:03:32
comment comes from someone who I think
00:03:34
has high confidence but low competence.
00:03:36
And we've all been there at some point.
00:03:38
Now, I think many of us thankfully have
00:03:40
kind of matured from that point. But
00:03:42
when I saw that comment, I thought to
00:03:44
myself, I come here to help people make
00:03:46
better financial decisions. I want to
00:03:48
help fellow fire folks and bogleheads
00:03:50
and diyers, and I want to help other
00:03:51
people, too. And what have I found
00:03:54
interacting with hundreds and hundreds
00:03:56
if not even thousands of readers and
00:03:58
listeners, like literal one-to-one
00:03:59
interactions via email and talking to
00:04:01
you on the phone and that kind of thing.
00:04:03
What I found is that there's a huge part
00:04:04
of our population, our friends, our
00:04:06
family, our colleagues, our peers who
00:04:08
want nothing to do with bogalheading,
00:04:11
diying, being a diehard fire person or
00:04:14
or any variation thereof. They do want
00:04:17
best practices in their life and in
00:04:19
their retirement. Absolutely. But they
00:04:21
do not want to navigate the weeds like
00:04:22
you and me. And I think when we
00:04:24
encounter these people, there are two
00:04:25
ways to possibly respond. The first way
00:04:27
is to say, "Yeah, you're saying that,
00:04:30
but you're actually wrong. You say you
00:04:32
don't want to be a DIYer, but trust me,
00:04:34
you do want to be a DIYer." Or the
00:04:37
second way you can respond is, "You know
00:04:38
what? I get it. Some of us might enjoy
00:04:41
diying our long-term finances, but yeah,
00:04:43
that's not for everybody. If someone
00:04:46
wanted to hire a health coach to help
00:04:47
them get in shape, would you tell them,
00:04:49
"No, no, you don't need a health coach.
00:04:50
Just keep on white knuckling it because
00:04:52
that's what I did." I think that advice
00:04:54
assumes that our experience is the only
00:04:56
path. It can ignore how tough the
00:04:59
process can be for someone else. It
00:05:01
comes off a little bit as, you know, I
00:05:02
struggled here and you should struggle
00:05:04
too rather than offering help that could
00:05:06
make things easier or safer. And we need
00:05:08
a reminder. Sometimes our biases hurt
00:05:11
our cause. And so the conclusion here, I
00:05:14
think, is simple. We all enjoy a shared
00:05:16
path together, but not everybody is like
00:05:19
us. And now I want to pivot to the
00:05:21
really cool ideas about stock market
00:05:23
investing. And I originally wrote an
00:05:25
article in 2023 called the needle in the
00:05:27
haststack. We'll link to that in the
00:05:28
show notes. And was based on some data
00:05:30
that a professor I think from the
00:05:32
University of Arizona, Henrik
00:05:33
Bessbinder, some data that he put out in
00:05:35
22 or 2023. Really interesting data. But
00:05:38
in March of 2026, just recently, he put
00:05:41
out even more data, new data, and it is
00:05:43
even more interesting than what he did
00:05:45
in 2022. And the results, the new
00:05:48
results, similar to the old results is
00:05:49
very, very clear. And that result is,
00:05:51
man, good luck if you want to pick
00:05:53
individual stocks over the long run.
00:05:55
Some highlights of the new study that I
00:05:57
think are really cool. So he looked at
00:05:59
was professor Besson binder that is
00:06:00
looked at 29,081
00:06:03
stocks. So over 29,000 stocks that were
00:06:06
publicly traded at some point between
00:06:08
1926 and 2025, a full 100 years of data.
00:06:12
And that full data set yields a compound
00:06:15
average return of 10.1% per year, which
00:06:18
is somewhat in line with what a lot of
00:06:19
us have heard about stock investing for
00:06:21
the long run. Yeah, it's about 10% per
00:06:23
year. Now, of the 29,000 stocks, only
00:06:26
48%, so a little less than half,
00:06:28
generated any sort of positive return.
00:06:31
And only 41% of the stocks generated a
00:06:34
positive return that was greater than
00:06:36
one-mon treasury bills, the so-called
00:06:38
risk-free rate. And then last, only 28%
00:06:42
of the stocks actually outperformed the
00:06:44
market, actually outperformed that 10.1%
00:06:47
year average. So very very few winners,
00:06:50
so to speak. But then Bessinbinder goes
00:06:52
a little bit deeper. He introduces a new
00:06:54
term that he calls shareholder wealth
00:06:56
creation. And more or less shareholder
00:06:59
wealth creation is just a way to measure
00:07:01
performance. Bess &Binder does put a few
00:07:03
small twists on kind of classic
00:07:05
performance data. So it's not quite
00:07:07
apples to apples, but by and large
00:07:08
shareholder wealth creation is simply a
00:07:10
way of measuring how stocks create
00:07:12
wealth for their investors. And the
00:07:14
total shareholder wealth creation from
00:07:16
1926 to 2025 across the 29,000 companies
00:07:20
over the last 100 years totaled to $91
00:07:23
trillion. But the specific data about
00:07:26
that $91 trillion is is really amazing
00:07:29
because only 46 companies out of 29,000
00:07:33
total, only 46 companies account for 50%
00:07:38
of the 91 trillion. That's.16%
00:07:41
of the companies account for half of the
00:07:44
wealth creation. And then a,000
00:07:46
companies, 1,082 companies technically
00:07:50
account for 100% of the 91 trillion in
00:07:53
wealth creation. and 1,082 companies out
00:07:56
of the total that's 3.7%.
00:07:58
So the question might be well how could
00:08:00
3.7% of the companies create all the
00:08:03
wealth in the stock market and I think
00:08:05
the way to explain this I mean let's
00:08:06
start by thinking about the very worst
00:08:08
companies first. So besson binder found
00:08:10
that 17,197
00:08:13
companies 17,000 companies actually
00:08:15
reduced shareholder value. They
00:08:17
destroyed wealth in this study and they
00:08:20
did so by a total of $10.67 trillion.
00:08:23
So, starting with the worst 17,000 and
00:08:26
change companies, we're in the red.
00:08:28
We're below zero. And then the study
00:08:30
found that it took the next best 10,800
00:08:34
decent companies to generate a positive
00:08:36
$10.67 trillion, bringing the net value
00:08:40
creation back to zero. So if you sum up
00:08:42
those two groups, you have 27,999
00:08:46
companies generating a total of zero net
00:08:49
wealth enhancement as they collectively
00:08:51
matched Treasury bill outcomes. 28,000
00:08:54
of the 29,000 total companies basically
00:08:57
get you the same exact return as
00:08:59
Treasury bills. And that leaves the
00:09:01
remaining 1,082 best companies in the
00:09:04
study, which account for all of 100% of
00:09:08
the 91 trillion of positive wealth
00:09:10
creation. Now, the most charitable
00:09:12
conclusion from the study is that well,
00:09:14
59% of the haystack is rotten. Those are
00:09:17
the companies destroying value. But at
00:09:19
least 41% of the haystack is semidecent
00:09:22
with this sliver of that 41% that is
00:09:25
outright terrific. And that's the most
00:09:27
charitable conclusion is that more than
00:09:29
half the haststack is rotten. But I
00:09:31
actually think the more accurate, the
00:09:32
more realistic conclusion is that 96% of
00:09:35
the haystack is basically just a waste
00:09:37
of time, getting you the same exact
00:09:38
returns as as treasury bills. Less than
00:09:41
4% of the haystack provides the true
00:09:44
long-term return on investment that we
00:09:47
are all looking for. The stock market
00:09:49
has very very few needles. You know, 4%
00:09:52
of the stock market are those true
00:09:53
needles and missing out on those needles
00:09:56
negates the purpose of stock market
00:09:57
investing in the first place. So that's
00:09:59
why I think your best bet literally is
00:10:01
simply buying the whole haystack. It's
00:10:03
just like John Bogle said, right? Don't
00:10:05
look for the needles, just buy the whole
00:10:07
haystack. Here's a quick ad and then
00:10:10
we'll get back to the show. Did you know
00:10:12
my written blog, The Best Interest, was
00:10:14
nominated for 2022 personal finance blog
00:10:17
of the year and it's been highlighted in
00:10:19
the Wall Street Journal, Yahoo Finance,
00:10:20
and on CNBC. I love writing, especially
00:10:24
when that writing is to share financial
00:10:25
education. And I usually write one or
00:10:28
two articles per week. You can read them
00:10:30
all at bestinterest.blog.
00:10:33
Again, the web address is
00:10:35
bestinterest.blog.
00:10:37
Check it out. And now I want to invite
00:10:39
Andrew Giancola onto the show for a fun
00:10:41
debate, a fun debate that he and I had
00:10:42
about some controversial opinions in the
00:10:44
retirement planning community. Andrew is
00:10:46
the host of the Personal Finance
00:10:48
Podcast, and I think you'll hear today
00:10:50
why his show and his audience is one of
00:10:51
the biggest, most popular in the world
00:10:53
of personal finance podcasts. So without
00:10:55
further ado, here's Andrew Gola.
00:11:02
>> What the audience might not know is that
00:11:04
you and I, you know, 30, 45 minutes ago,
00:11:06
we're like, "Hey, what what are we going
00:11:08
to talk about today?" And we kind of
00:11:10
brainstormed this fun idea on the fly.
00:11:12
So, I'm going to work through this list
00:11:14
of 10, you could call them controversial
00:11:17
takes, 10 retirement and long-term
00:11:20
investing topics that, yeah, maybe
00:11:21
different people have some pretty
00:11:22
different opinions on. And we are going
00:11:24
to intentionally, we'll say, take
00:11:26
different sides or at least one of us
00:11:28
will will argue for something. One of us
00:11:30
might play devil's advocate and argue
00:11:31
against it. But I think it'll just be a
00:11:33
really stimulating and interesting
00:11:35
conversation for the audience. We'll
00:11:37
start with this one. Number one, target
00:11:40
date funds are good enough for almost
00:11:42
everyone. What do you think about target
00:11:44
date funds, Andrew? So, target date
00:11:46
funds, I think, are fantastic in certain
00:11:48
scenarios for certain people, but I
00:11:50
think for a lot of folks, they're not
00:11:51
always a one-sizefits-all solution. And
00:11:54
the reason for this is because they
00:11:55
assume that most people are going to
00:11:57
have one the same risk tolerance. And
00:11:59
so, they're looking at this and saying,
00:12:00
"Okay, across the board, if you buy this
00:12:02
target date retirement fund at this
00:12:04
certain date, then every single person
00:12:05
has the same exact risk tolerance." And
00:12:08
so this is something where I think
00:12:10
personal finance and especially when it
00:12:12
comes to investing in portfolio design
00:12:14
is very personal and it depends on how
00:12:16
you feel about the market, how you react
00:12:18
to market conditions and a lot of other
00:12:20
factors that are in play and if you go
00:12:22
with the target date retirement fund
00:12:24
that does not factor in that risk
00:12:25
tolerance overall. The second thing is
00:12:27
thinking through retirement age. And I
00:12:29
think retirement age is a big deal for a
00:12:31
lot of folks where it is probably way
00:12:33
too conservative in my opinion. For a
00:12:35
lot of people out there who are
00:12:37
aggressive investors or looking to grow
00:12:40
their portfolio over time, it gets way
00:12:42
too conservative as time goes on. That
00:12:44
glide path becomes more and more
00:12:45
conservative as they get closer to
00:12:48
retirement age. Whereas for me
00:12:49
specifically, I would rather be in a
00:12:51
larger portion of stocks. That's the way
00:12:52
my risk tolerance is. whereas if I were
00:12:55
in a, you know, a target state
00:12:56
retirement fund, you know, I'd have a
00:12:58
huge allocation of bonds. And so for me,
00:13:00
that would be a big difference there.
00:13:02
The third one is it's assuming that
00:13:04
everyone has the same income sources.
00:13:05
And I think that is a big deal when it
00:13:07
comes to folks, maybe you're invested in
00:13:09
real estate, maybe you have some other
00:13:10
assets into play. And so if you have
00:13:12
other income sources coming in, it
00:13:14
doesn't really help optimize for that.
00:13:16
And I think that's a huge deal when it
00:13:18
comes to looking at each person's
00:13:20
individual situation and then also their
00:13:22
tax situation because the tax situation
00:13:24
could be different for each individual.
00:13:26
And so that is something where a
00:13:28
one-sizefits-all approach can be great
00:13:30
for automatic investors, but for me
00:13:32
specifically, I think each person needs
00:13:34
an individual portfolio and they need to
00:13:36
make it work for their specific risk
00:13:38
tolerance. In addition, the mix of asset
00:13:40
classes that you have in target date
00:13:42
retirement funds may not always be
00:13:43
optimal depending on where you're
00:13:44
getting that target date retirement
00:13:46
fund. And so, it's very important for a
00:13:47
lot of folks out there to kind of look
00:13:49
at, you know, a number of different, you
00:13:51
know, asset classes and what they want
00:13:52
to have in place. And so, this is just a
00:13:54
big big deal for most people who have
00:13:57
these individual situations, especially
00:13:58
as your financial situation gets a
00:14:00
little bit more complicated, you really
00:14:02
want to have a portfolio designed for
00:14:04
exactly what you want. In my heart of
00:14:06
hearts, of course, I agree with
00:14:08
everything you just said, right? But for
00:14:10
the sake of the conversation, the way
00:14:12
I'll push back is I'll say, you know,
00:14:14
when I think about the aunt Ethel out
00:14:16
there, the people who just, hey, we're
00:14:18
we're going about our lives. We don't
00:14:20
want to know about this investing thing.
00:14:22
We just want to make sure we're doing
00:14:23
something good enough. I don't care
00:14:24
about the complexity. Don't give me a
00:14:26
thousand flavors of ice cream. Just give
00:14:28
me two flavors of ice cream. Give me
00:14:29
chocolate and vanilla and let me make my
00:14:31
choice. For those people out there, I
00:14:34
think a target date fund is good enough.
00:14:36
It's certainly not perfect. It's good
00:14:38
enough. I'm glad they exist. Take your
00:14:40
typical 401k plan. You've got some
00:14:42
mid20s person earning a paycheck for the
00:14:44
first time. They they have to make an
00:14:45
investment decision and they look at
00:14:47
these things and they say, "Oh, this
00:14:48
fund says if I'm supposed to retire in
00:14:50
in60, this is the fund for me." Well,
00:14:53
I'm going to retire in60, let me pick
00:14:54
that one. Hey, it might not be that
00:14:56
person's portfolio forever. It's
00:14:58
probably good enough for the start. I do
00:15:00
agree with what you said. Eventually,
00:15:02
almost everybody, I would say, needs to
00:15:04
get a point where they say, graduate
00:15:06
beyond a target date fund and find a a
00:15:08
longerterm portfolio and financial plan
00:15:10
that's more more specific to their
00:15:12
situation. 100%. I agree. And I think
00:15:14
the big thing with target date
00:15:15
retirement funds for most people out
00:15:17
there listening is if you are brand new
00:15:18
to investing, if you're like just
00:15:20
getting started, it's a great starting
00:15:21
point. like if your 401k offers it,
00:15:23
sure, you can start at that point in
00:15:24
time and then kind of start to get a a
00:15:26
financial education or talk to an
00:15:28
adviser so you can kind of get this ball
00:15:29
rolling in the right direction. Let's go
00:15:32
to number two now. International
00:15:34
diversification is overrated. I'll go
00:15:37
first on this one. Well, I think this is
00:15:39
a funny thing cuz a lot of people have
00:15:40
been saying this for what, the last 15
00:15:42
or so years with US stocks, the US stock
00:15:44
market really not only outperforming but
00:15:46
trouncing international markets. That
00:15:48
seems to have changed over the last 16
00:15:50
or so months. And my take on this is no.
00:15:53
I don't think international
00:15:54
diversification is overrated. I think it
00:15:56
is properly rated maybe is the better
00:15:58
way because my take on this and what I
00:16:00
will explain to people if you zoom out
00:16:02
over the longest period of time that you
00:16:04
can. So you zoom out back to World War
00:16:06
II and you look at international markets
00:16:08
versus domestic markets you will see
00:16:10
this long-term oscillation back and
00:16:13
forth of over and underperformance.
00:16:15
long-term meaning it'll be you know in
00:16:17
say 5 to 15 year periods where
00:16:19
international will be outperforming okay
00:16:21
and then it pivots back and now US is
00:16:23
outperforming back and forth back and
00:16:24
forth and if you are a long-term
00:16:26
investor like you and I are Andrew and I
00:16:28
think like most of our listeners are
00:16:30
it's very hard to predict when those
00:16:33
oscillations will swing back and forth
00:16:35
and I think the the safest smartest most
00:16:37
handsoff easiest to implement way of
00:16:40
investing is to own both own domestic
00:16:43
own international hold them for the long
00:16:45
run and accept the fact that at any
00:16:47
given time you you do know that one will
00:16:49
be underperforming the other. What's
00:16:50
your take? So I agree with a lot of what
00:16:53
you're saying there, but for the
00:16:54
argument sake here, what I want to talk
00:16:55
through is when I look at international
00:16:57
funds, a lot of times I will look at an
00:16:59
international fund and I'll compare the
00:17:00
top 10 holdings in an international fund
00:17:02
to the top 10 holdings in say VTI or VO,
00:17:06
which is the total stock market index
00:17:07
fund or the S&P 500. And when I compare
00:17:10
those two, I look at those top 10
00:17:11
holdings and I'm like, man, I would much
00:17:13
rather hold the top 10 holdings inside
00:17:15
of the S&P 500 than of that
00:17:18
international fund because you can go
00:17:19
look at it and like what are the top 10
00:17:21
holdings for example in an international
00:17:22
fund is typically something like Nestle.
00:17:23
And so you look between those two and
00:17:25
you can see oh my goodness that is a
00:17:27
very very interesting differential
00:17:29
there. But the second thing that I would
00:17:31
say is that a lot of these index funds
00:17:33
out there, VO and VTI, they have
00:17:35
international exposure because they do
00:17:37
business across and overseas. And so a
00:17:40
lot of the tech companies do business ac
00:17:41
overseas, a lot of these big large
00:17:44
companies are really getting that
00:17:45
international exposure there. I think a
00:17:47
lot of times I think of JL Collins when
00:17:49
he says in the simple path to wealth, he
00:17:50
only invests in VTI and doesn't add
00:17:52
international funds. I think he's added
00:17:53
some sense but doesn't add international
00:17:56
funds because they have a lot of
00:17:58
business happening overseas. And so this
00:18:00
is one of those areas where I think that
00:18:02
could be something that someone looks
00:18:04
into. There's also that currency risk
00:18:06
when you look at some of the
00:18:07
international exposure where you are
00:18:09
depending on other currencies that may
00:18:10
not be as strong as the US currency
00:18:12
although we've seen that kind of shift a
00:18:13
little bit over the course of the last
00:18:15
couple of months. And then there's
00:18:16
geopolitical risk meaning there's a lot
00:18:18
of risk out there in terms of what are
00:18:20
the international funds kind of invested
00:18:22
in? what are they heavily weighted in
00:18:23
and are there going to be wars that
00:18:25
happen? Are there going to be other
00:18:26
things that are out of your control that
00:18:27
you really are going to have to kind of
00:18:30
ride that wave during that time frame?
00:18:32
But the biggest overall one is obviously
00:18:34
over the course of the last 15 to 20
00:18:36
years, international exposure has
00:18:38
significantly underperformed US exposure
00:18:41
and so a lot of folks are not investing
00:18:43
international as much as they would have
00:18:45
because of this and so the
00:18:47
underperformance has been a big deal.
00:18:48
Well, it's been something like four or
00:18:49
5% in comparison to what the US stocks
00:18:52
have done over the last 15 years around
00:18:54
10%. So, I think that's just a big
00:18:55
difference as well. And that is where if
00:18:58
you're looking between the two, how I
00:18:59
would think about that. I'm trying to
00:19:01
maintain my faith in John Bogle.
00:19:02
Reversion to the mean, man. Reversion to
00:19:04
the mean. But let's go on to number
00:19:06
three now. Number three on this list.
00:19:08
Cash is a terrible long-term asset
00:19:11
always. What are your thoughts on cash,
00:19:13
Andrew? So cash is something that I am
00:19:17
very bullish on for a number of
00:19:19
different things. I love cash for
00:19:21
security. I love cash for sleeping well
00:19:23
at night. I call it coming up with your
00:19:25
swan number, your sleep well at night
00:19:27
number. But if you're going to hold cash
00:19:29
for the long term, meaning holding a ton
00:19:31
of cash on hand and maybe you have one
00:19:33
to two years of cash in your cash bucket
00:19:35
longer term, it is losing value to
00:19:38
inflation every single year. And so I
00:19:40
like to get my cash working outside of
00:19:41
my emergency fund. I like to have that
00:19:43
cash working as much as I possibly can.
00:19:45
And so if you look at cash and you hold
00:19:47
it in that high yield savings account,
00:19:48
you could be losing 3 4 5% on a yearly
00:19:51
basis depending on whatever that
00:19:53
specific inflation rate is. But at the
00:19:56
same time, I also think that when you
00:19:59
hold cash longterm, you're losing out on
00:20:01
opportunity cost. And opportunity cost
00:20:03
is the biggest overall thing that we
00:20:05
want to look at when we get our dollars
00:20:07
going. And so you can invest in real
00:20:09
estate, you can invest in the stock
00:20:10
market, you can invest in businesses,
00:20:12
whatever you are trying to do in
00:20:13
whatever part of the life cycle you are
00:20:14
currently in right now. Cash sitting in
00:20:17
cash is not going to help your money
00:20:19
grow. And so you need to make sure that
00:20:20
you are investing those dollars going
00:20:22
forward and making sure that you have
00:20:24
these assets. They're compounding. In
00:20:26
the age of AI, I think ownership and
00:20:28
assets are even more important than they
00:20:30
have ever been. And so this is something
00:20:32
where for most people really holding
00:20:34
cash is just going to erode away your
00:20:36
purchasing power over the course of the
00:20:39
next couple of years. We just did a a
00:20:40
whole thing where we looked at, hey, if
00:20:42
you got a 10% rate of return, how much
00:20:44
would every single dollar that you
00:20:46
invested be worth 20 years from today
00:20:49
and it was $6.73.
00:20:51
And so every single dollar that you have
00:20:53
in place that you are keeping long term
00:20:57
over the course of that 20 years in
00:20:58
cash, you are losing out on that
00:21:00
opportunity cost of that dollar turning
00:21:01
into $6.73.
00:21:03
And so this is something I think that a
00:21:05
lot of people need to think through when
00:21:06
they are holding cash. It's great for
00:21:08
short-term emergencies. It's great to
00:21:10
have as an emergency fund. It reduces
00:21:11
your stress and anxiety, but once you
00:21:13
get past that number, I think it's very
00:21:14
important to make sure you're investing
00:21:15
your dollars. Again, challenging to
00:21:18
argue with that. And I will say that the
00:21:19
premise itself, cash is a terrible
00:21:21
long-term asset. Maybe I worded that
00:21:24
poorly because everything you just said
00:21:25
is correct. And I think to myself, yeah,
00:21:27
cash is a terrible long-term asset. And
00:21:30
you even alluded to it in your answer,
00:21:32
Andrew, where you said, but it's a
00:21:33
short-term asset. As an emergency fund
00:21:35
asset, as a swan, sleep well at night
00:21:38
number asset, it's a great asset. And
00:21:39
when I think about retirees, when I
00:21:41
think about some of our listeners, I
00:21:42
think about sequence of returns risk.
00:21:44
For example, I think about these things
00:21:46
where you say, "Okay, if something bad
00:21:48
happens with my long-term assets, like
00:21:50
my stocks or my real estate, my business
00:21:53
ownership, whatever that may be, if
00:21:54
something bad happens on that side of
00:21:56
the ledger, I still need to have enough
00:21:58
security on the other side of my ledger
00:22:00
to get through the next six months, to
00:22:02
get through the next 24 months,
00:22:03
something like that. And that's where
00:22:05
those cash and cash equivalents, maybe
00:22:07
like a really short duration bond or
00:22:09
something like that's where those things
00:22:10
play a vital role. So yes, I think we
00:22:12
are in agreement that cash is a terrible
00:22:14
long-term asset, but I don't think that
00:22:16
anybody out there should write off cash
00:22:19
as a asset overall because I think as a
00:22:21
short-term asset, it's perfect. It does
00:22:23
exactly a job that we need it to do in
00:22:25
our financial plans. Exactly. I think
00:22:27
like what you talk about like your
00:22:29
bucketing method where you talk about,
00:22:30
you know, having those short-term, m
00:22:32
medium-term, and long-term, you know,
00:22:33
methodology. I think that is really
00:22:35
really powerful and cash is a huge
00:22:36
portion of that. I think you should have
00:22:37
especially for retirees out there I
00:22:39
think they need to have a couple of
00:22:40
years of cash on hand in order to
00:22:42
protect against sequence of return risk
00:22:44
and I think that's the biggest thing
00:22:45
overall. Perfect. Let's go to another
00:22:47
interesting asset class debatable topic.
00:22:50
The fourth one on our list here is you
00:22:52
don't need alternatives like real
00:22:54
estate, commodities, gold and silver,
00:22:56
private equity. Stocks and bonds are
00:22:58
enough. What are your thoughts on that?
00:23:00
I know you're a real estate guy. I mean,
00:23:01
what are what are your thoughts on all
00:23:03
the different options for alternative
00:23:04
investments out there and which ones
00:23:06
make the most sense to you? I will. So,
00:23:08
here's the big one with this with this
00:23:10
argument here is I could see both sides
00:23:12
and this is something that I'm going to
00:23:14
actually dive into the opposite of what
00:23:16
I've actually done. So, I am going to
00:23:18
look at this in a way where I invest in
00:23:20
real estate personally, I invest in
00:23:22
businesses personally, and I invest in
00:23:23
the market. Now, this has been something
00:23:26
over time that if you want some of these
00:23:29
alternative assets and you're looking at
00:23:31
buying gold or maybe you're buying
00:23:32
crypto and some of these other stuff, I
00:23:34
think that it could over complicate your
00:23:37
financial situation where I think stocks
00:23:38
and bonds are a great proven asset that
00:23:41
over the course of the last 100 years
00:23:43
have driven a return that outpaces
00:23:45
inflation and has a little bit extra on
00:23:48
top of that. And in addition is
00:23:49
something that we have seen hundreds if
00:23:52
not millions of people over the course
00:23:54
of just the last decade alone that have
00:23:57
been able to retire just on stocks and
00:23:58
bonds. And this is something where if
00:24:00
you look at some of the studies out
00:24:01
there of like Ramsay Solutions did that
00:24:03
study where they did like the largest
00:24:04
millionaire study and 80% of those folks
00:24:07
became millionaires just in their 401k
00:24:09
just on stocks and bonds. And I think
00:24:10
you can have a perfectly fine retirement
00:24:13
portfolio with just stocks and bonds and
00:24:15
it is going to be the simple way to do
00:24:18
this. I cannot tell you how many
00:24:19
headaches I've had just from investing
00:24:21
in real estate. There's a lot more work
00:24:22
and sweat equity involved in real estate
00:24:24
than most people realize if you've never
00:24:25
done it. Or how many headaches and this
00:24:27
is 10x real estate of buying businesses
00:24:29
and having to manage people and having
00:24:31
to manage employees and all these
00:24:32
different things. Now you can look at
00:24:34
commodities, you can look at REITs, you
00:24:36
can look at some other ways to invest in
00:24:38
business and have these alternative
00:24:39
assets, but historically stocks have
00:24:41
outperformed all these other
00:24:42
commodities. And I a lot of times I'll
00:24:44
look at Warren Buffett and I'll say,
00:24:45
"Well, Warren Buffett's putting his
00:24:46
family's money in a 90% portfolio of the
00:24:49
S&P 500 and 10% in bonds." And so if
00:24:52
that is good enough for Warren Buffett
00:24:54
and his family, why is it not good
00:24:55
enough for me? And I think this is one
00:24:57
of those things where it simplifies your
00:24:59
life, it makes life so much easier, it
00:25:02
is truly a passive way to invest your
00:25:04
dollars. It is one of the the only
00:25:05
passive ways out there to invest your
00:25:07
dollars. And a lot of times when it
00:25:08
comes to stocks and bonds, they have
00:25:10
intrinsic value. And I think this is a
00:25:11
very important thing for most people to
00:25:13
note is that stocks and bonds are going
00:25:15
to have companies and backed by
00:25:17
companies are going to be balance sheets
00:25:18
and P&Ls and different things that they
00:25:20
own. And this is going to be a very
00:25:21
important metric for a lot of people to
00:25:23
think through. Whereas if you look at
00:25:24
gold, if you look at crypto, it does not
00:25:26
have anything backing it. It is only
00:25:28
worth what someone else is willing to
00:25:29
pay for it. And so this is why I am okay
00:25:33
with just having stocks and bonds in my
00:25:35
portfolio. It reduces complication. It
00:25:37
reduces honestly stress and anxiety. you
00:25:39
have to worry less because if you're a
00:25:40
long-term investor, you know what
00:25:42
direction that market has gone
00:25:43
historically and it has gone in one
00:25:45
direction over the long term. There's a
00:25:47
guy I know here in Rochester who is now
00:25:49
retired and to call him a real estate
00:25:52
investor might be underelling what he
00:25:54
did. I mean, he was a commercial
00:25:55
landlord, a residential commercial
00:25:57
landlord for 40 years. And by the time
00:25:58
he quote unquote retired, he owns like
00:26:01
80 units around a nice neighborhood in
00:26:03
Rochester and and essentially sold his
00:26:05
real estate business for tens of
00:26:07
millions of dollars. And I think of that
00:26:09
guy and it's like, hey, I don't own any
00:26:11
investment cash flowing real estate. But
00:26:14
to that guy, it was like the only
00:26:15
investment option he knew and understood
00:26:17
and would ever have put his money in.
00:26:19
And even now, when I talk to him about
00:26:21
what I'm doing here at work, he's like,
00:26:22
"Yeah, I'm not really big on the stock
00:26:24
market." And what when I think of that
00:26:26
guy, the takeaway I have is you should
00:26:29
to some extent invest in what you know
00:26:30
and invest in what you're comfortable
00:26:32
with. And that doesn't necessarily mean
00:26:35
that all investments are equal. Like I I
00:26:37
like you, Andrew, like I I don't own or
00:26:39
I shouldn't say this, that intrinsic
00:26:40
versus exttrinsic argument that you made
00:26:42
just made about gold and silver. That's
00:26:44
an argument that I very much believe in
00:26:46
too. And for me, that's enough of an
00:26:47
argument for me like, yeah, I don't
00:26:49
really want to put my money in gold. But
00:26:51
there are other people out there. Shout
00:26:53
out Alexandra. I know Alexander's
00:26:55
listening to this. She's written to me
00:26:57
some fantastic arguments pro gold. And
00:26:59
I'm like, you know what, that you make a
00:27:00
really good point. There's some
00:27:01
intellectual arguments about risk parity
00:27:03
and all-weather portfolios. There's this
00:27:05
longevity argument about like gold is
00:27:07
about the oldest investment on planet
00:27:09
Earth, if you want to think of it that
00:27:10
way. And you're like, okay, I could see
00:27:12
how someone can convince themselves with
00:27:14
some really intelligent arguments that
00:27:16
like I believe in this investment and
00:27:18
I'm going to buy it. I'm gonna hold it
00:27:19
for a long period of time. And I think
00:27:21
over that period of time, this
00:27:22
investment is going to do the thing that
00:27:24
I need it to do for me. And as long as
00:27:27
you're not going to be buying and
00:27:29
selling and flipping and doing all these
00:27:30
things that we know tend to be bad
00:27:32
behaviors for investors of all stripes,
00:27:35
as long as you're willing to stay the
00:27:36
course, okay, I think that at least your
00:27:38
head is in the right place. So, when it
00:27:40
comes to alternatives, especially maybe
00:27:42
more exotic alternatives, that's what I
00:27:44
think is if you've truly convinced
00:27:45
yourself of the merits of what you're
00:27:47
about to do, I get it. But if you're
00:27:49
just chasing the hot thing because it's
00:27:51
the hot thing, I think we pump the
00:27:53
brakes. I couldn't agree more. And I
00:27:54
think that is honestly, I could see both
00:27:56
sides. And really, it comes down to kind
00:27:58
of what we talked about earlier is that
00:27:59
it is all down to your personal
00:28:01
situation. And I think your situation is
00:28:03
going to dictate where you go with that
00:28:05
portfolio. Let's go to number five.
00:28:07
Market timing is simply impossible 100%
00:28:10
of the time. I've got some thoughts on
00:28:12
market timing here, Andrew. I'll take
00:28:14
the first stab at this one. I more or
00:28:16
less do agree with this statement.
00:28:18
Market timing is simply impossible 100%
00:28:20
of the time. I think that investors
00:28:22
would be better served if they all
00:28:24
assumed that this statement was true.
00:28:27
Because in my heart of hearts, I
00:28:28
actually think the statement probably
00:28:30
isn't true. I think there probably are
00:28:31
some times where you can look at the
00:28:33
circumstances and say, "Yeah, something
00:28:36
here is wrong. This market is really
00:28:38
overvalued. This market is really
00:28:39
undervalued. I probably ought to be
00:28:41
doing X, Y, and Z right now." But for
00:28:44
you to be able to identify those times
00:28:46
and act on those times and be consistent
00:28:48
with how good you are at identifying and
00:28:50
acting on those times, that's where the
00:28:52
rubber really meets the road. And that's
00:28:53
where the difficulty is. And that's why
00:28:55
I say I think people would be better
00:28:56
served if they assumed that market
00:28:58
timing was impossible. One quick example
00:29:01
and then I'll pass the baton over to
00:29:02
you. If an investor were to look at the
00:29:05
what's called the cycllically adjusted
00:29:06
PE ratio, some people call it the
00:29:08
Schiller cape ratio, CAP. It basically
00:29:11
says, let's look at a company or the
00:29:13
stock market's price to earnings. So
00:29:15
it's kind of its valuation, how
00:29:17
expensive the market is, but let's
00:29:18
adjust it over time based on kind of
00:29:20
inflation and let's average it out over
00:29:22
a decade. Cyclically adjust that PE
00:29:25
ratio. If you look at that and then you
00:29:28
look at the future returns of the
00:29:29
market. So you go back in history, we
00:29:31
say what was the cyclally adjusted PE
00:29:33
ratio in 1980 and then what were the
00:29:36
next 10 years of returns from 1980 going
00:29:38
forward. And you do that over and over
00:29:39
again month by month over time. You see
00:29:41
a pattern and the pattern basically says
00:29:44
when the market is overvalued the future
00:29:47
returns are lower and when the market is
00:29:49
undervalued the future returns are
00:29:52
higher. And that should make sense. We
00:29:55
kind of know this about the market. Of
00:29:56
course, if something is overvalued and
00:29:58
people are paying too much for it,
00:30:00
eventually it's going to revert to the
00:30:01
mean, and that basically means some
00:30:03
stagnant or negative returns. And vice
00:30:05
versa, if it's undervalued, eventually
00:30:07
it's going to revert to the mean, and
00:30:08
you're going to have great returns to
00:30:09
bring it back up. I think of that data
00:30:12
point as an example, and I say, well, an
00:30:14
investor out there could make some
00:30:16
educated decisions about when they buy
00:30:17
or sell based on the cyclically adjusted
00:30:20
PE ratio. and there's a legitimate
00:30:22
pattern there that might say that market
00:30:24
timing could work for them. It's easy to
00:30:26
look back in time and see that data.
00:30:28
It's hard to be sitting here and and
00:30:30
we're talking in March of 2026 and say,
00:30:31
"Okay, Andrew, which one of these
00:30:33
thousand data points are we right now?
00:30:35
Are we going to be the one that actually
00:30:36
has negative returns or are we going to
00:30:38
be the one that has mild but still
00:30:40
pretty good positive returns?" And for
00:30:41
an investor to sell right now, they
00:30:44
might just end up regretting it. So,
00:30:45
what are your thoughts on that? I'll
00:30:46
pass the baton to you. To be 100%
00:30:48
honest, I I 100% agree with you and I
00:30:50
think that's kind of the area. I spend
00:30:52
actually an entire year as a full-time
00:30:54
day trader and I know a lot just about
00:30:56
market timing and kind of how to think
00:30:57
about that over the course of a year.
00:30:58
So, I have a lot of data points. But I
00:30:59
will flip it on the other side and kind
00:31:01
of see exactly where we can go with this
00:31:03
because I think overall
00:31:04
>> if you look at the way to time markets,
00:31:07
well, what is the biggest deal that most
00:31:09
people can do? Well, most people can
00:31:10
kind of tell you when to get in. Most
00:31:11
people can kind of tell you, okay, the
00:31:13
market pulled back 20 to 30% and we're
00:31:15
looking at this situation and we're
00:31:16
saying to ourselves, well, if the market
00:31:18
pulls back 20% and someone had some cash
00:31:20
on hand and they invested those dollars,
00:31:22
a lot of times they're going to come out
00:31:23
in a great situation. And so, this is
00:31:26
something where market timing could work
00:31:27
on macro trends. It could work on things
00:31:30
like tightening financial conditions
00:31:31
where we see a difference in some of
00:31:32
these financial conditions and you see
00:31:34
the market pull back. Well, maybe that's
00:31:36
an opportunity to buy. And so Warren
00:31:38
Buffett always says this, buy low and
00:31:40
sell high. But most people never
00:31:41
actually do it. And so this is one of
00:31:43
those things where I think that if you
00:31:46
have a really really good indication and
00:31:49
you have a really wellressearched
00:31:51
indication of what a company is doing,
00:31:54
what their profit and loss statements
00:31:55
are, you really dive deep into the
00:31:57
company's valuations. You are following
00:31:58
every single 10K. You understand what
00:32:00
that company is doing and you have a
00:32:02
handful of companies that you're
00:32:03
following like this. This could be
00:32:04
something where market timing could
00:32:06
work. Let me give you an example of this
00:32:07
is recently over the course of the last
00:32:09
couple of months AI is moving really
00:32:11
quickly. All of us non-stop all we hear
00:32:12
about is AI left and right. Well, a lot
00:32:15
of these AI companies are in this huge
00:32:17
battle. But there are some out there
00:32:18
like Meta or Google or these big
00:32:21
behemoth of companies that have huge
00:32:25
investments that are going into AI.
00:32:26
Well, a lot of people don't like how
00:32:27
much they are spinning on AI and so for
00:32:30
them some of these companies are getting
00:32:32
beat down or pulled back. Amazon is
00:32:34
another great example of this where
00:32:35
there's these big magnificent seven
00:32:37
companies that are spending dollars on
00:32:38
AI. Well, a lot of these have had some
00:32:40
pullbacks during that time frame 20 to
00:32:42
30%. But if you know and understand that
00:32:44
these companies are not going anywhere
00:32:45
anytime soon and you invest those
00:32:47
dollars while they are doing having
00:32:49
these pullbacks that could be a great
00:32:50
situation. Whereas a lot of other folks
00:32:52
out there who don't know what they're
00:32:54
doing, they try to day trade on
00:32:56
stochastic models or they're looking at
00:32:57
candlesticks. They're looking at all
00:32:58
these different things trying to figure
00:33:00
out, you know, how to get in and out of
00:33:01
some of these investments. And if you go
00:33:02
that route where you're looking at it
00:33:04
and saying I'm going to get in right
00:33:05
here and then in a couple hours I'm
00:33:07
going to get out on the same day. I
00:33:08
think that's a lot more difficult
00:33:10
argument to make even for me. But for
00:33:12
most people out there I think you can
00:33:14
look at something like this with some of
00:33:15
these big companies and if you have an
00:33:17
understanding of the background of those
00:33:18
companies you could try to perform this
00:33:20
as a mini Warren Buffett or Mesh PBI or
00:33:23
whoever else kind of be the person that
00:33:24
that you model this after. And I think
00:33:26
that is one where there could be some
00:33:28
indications of market timing. But again,
00:33:30
all in all, I I ultimately agree with
00:33:32
you.
00:33:32
>> Listeners, let us know your market
00:33:34
timing, successes, and failures. And
00:33:36
now, let's let's pivot to more of a
00:33:38
maybe a little less about what's going
00:33:39
on in the portfolio and a little more
00:33:41
about the financial plan and the
00:33:43
retirement plan. So, here with number
00:33:45
six, we're going to go into retirement
00:33:46
planning a little bit. The 4% rule needs
00:33:49
a total makeover. What are your thoughts
00:33:51
on the 4% rule and safe withdrawal
00:33:53
rules, Andrew? Well, I completely agree
00:33:56
that the 4% rule does need a total
00:33:57
makeover. I think this is something
00:33:59
where it is maybe the safe number for a
00:34:01
lot of people to start with and one of
00:34:02
the conservative numbers for a lot of
00:34:04
people to start with but I think more so
00:34:06
a lot of folks out there if you read
00:34:07
Bill Bangan's newest book he has a the
00:34:09
guy the creator of the 4% rule wrote a
00:34:11
book and basically said hey the 4% rule
00:34:13
is now something that you can spend a
00:34:15
little more and I think his new number
00:34:16
is like 4.7% or 4.8% 8% something
00:34:19
somewhere in that range. And for a lot
00:34:21
of folks out there, I like the
00:34:22
guardrails approach. I like to look at
00:34:23
guardrails and I like to say, "Hey, in
00:34:25
some years we're going to be spending a
00:34:27
little more because the market has been
00:34:28
up and it's been improving over time.
00:34:30
Some years when the market is down and
00:34:31
it has these pullbacks, we're going to
00:34:32
spend a little less." And when you have
00:34:34
flexibility with the amount that you're
00:34:35
spending in retirement, I think that is
00:34:37
the most powerful place to be because
00:34:39
flexibility allows you to make shifts
00:34:41
and adjustments over time. And
00:34:43
specifically when you have this approach
00:34:45
in place, as long as you have cash on
00:34:46
hand, you have some additional things
00:34:48
that can help you with sequence of
00:34:49
returns risk, I think this can be a very
00:34:51
powerful way to look at your portfolio.
00:34:53
Now, the 4% rule had a lot of different
00:34:55
assumptions. It had a lot of different
00:34:57
assumptions about income levels. It had
00:34:59
assumptions about, you know, what your
00:35:00
portfolio return was going to be. And
00:35:02
those assumptions have shifted over the
00:35:04
course of the last 15 to 20 years. And
00:35:06
so, because of this, I think the 4% rule
00:35:09
is a conservative approach and someone
00:35:11
can start there. But at the same time, I
00:35:13
think having more flexibility based on
00:35:15
what the market is giving you is the
00:35:16
best way to do this. You know, I use a
00:35:18
sports analogy when I think about this.
00:35:20
You know, you take what the defense is
00:35:21
giving you. You take what the market is
00:35:22
giving you and you enable yourself to
00:35:24
have these guard rails of high high and
00:35:26
low spending and that's going to help
00:35:28
you optimize your spending so you don't
00:35:30
fall short of your spending limits. The
00:35:31
last thing I want to do is get to the
00:35:33
end of life and know I could have spent
00:35:35
a lot more spent time with my family on
00:35:37
vacations or spent time with my family
00:35:39
doing specific things. But instead, I
00:35:41
decided to hoard this cash because of
00:35:43
one specific rule that was just static
00:35:46
and I could not move from this rule. As
00:35:48
you pointed out, the retirement research
00:35:50
community has made a lot of interesting
00:35:52
steps forward say over the last decade
00:35:54
with things like yeah the guardrails
00:35:56
guardrail rules. It's a terrific example
00:35:57
of just another option out there that
00:35:59
exists for retirees. The 4% rule, the
00:36:02
poor 4% rule. I lament the 4% rule. I
00:36:06
feel like it's misunderstood in a way.
00:36:08
We think about uh the right tool for the
00:36:10
job. And you know, if I'm out there,
00:36:12
let's say I've got this nice 50ft boat.
00:36:14
I don't I'm not a big boat guy, but
00:36:16
let's imagine I've got this nice 50ft
00:36:17
boat and I'm trying to pull that boat
00:36:19
down to the marina using my little lawn
00:36:22
tractor, my little green John Deere lawn
00:36:24
tractor, right? and you'd look at it and
00:36:26
go, "Oh my gosh, that tractor is not the
00:36:28
right tool for the job." Well, it's not
00:36:30
the tractor's fault, right? It's my
00:36:32
fault for using the tractor in the wrong
00:36:33
way. And I feel like similarly, a lot of
00:36:36
the retirement community and maybe a lot
00:36:37
of content creators, a lot of the fire
00:36:39
community, for example, they've took the
00:36:41
4% rule and they've said, "This is the
00:36:45
thing we're using to plan our
00:36:46
retirement." And if you just like you
00:36:48
alluded to Andrew, if you go back to
00:36:50
Bill Ben's original research, if you go
00:36:52
back to the original Trinity study, if
00:36:54
you look at some of the research that
00:36:55
Dr. WDE FA has done on safe withdrawal
00:36:57
rates, what you realize is that the 4%
00:36:59
rule is a it's kind of there to help you
00:37:01
with back of the napkin math. And B,
00:37:04
it's there to help you with absolute
00:37:06
worst case. you set the floor of your
00:37:09
retirement using the 4% rule. But then
00:37:12
hopefully you build up from the floor in
00:37:14
some way into some more flexible
00:37:16
strategy or some higher withdrawal rate
00:37:18
strategy. And one of the problems that I
00:37:20
see is we took this thing that was there
00:37:22
to set the floor. And certain people out
00:37:24
there have said, "No, no, this is the
00:37:25
tool for the job. This is the one only
00:37:27
thing I'm ever going to use for the rest
00:37:28
of my life." I do think the 4% rule does
00:37:32
need some sort of rebrand. And it's just
00:37:33
to remind ourselves of what the tool is
00:37:36
versus what the tool isn't? And I think
00:37:38
all of our listeners would be better
00:37:39
served with some of that knowledge. And
00:37:40
it's certainly something we've talked
00:37:42
about here before. Here's a quick ad and
00:37:44
then we'll get back to the show. Serious
00:37:47
question. Why do podcasters constantly
00:37:49
ask for ratings and reviews? Yes, they
00:37:52
do help highlight our shows to new
00:37:53
listeners. They help strangers find us
00:37:55
on Apple Podcasts and Spotify. It's
00:37:57
totally true and a good reason to ask
00:37:59
for ratings and reviews. But I have
00:38:01
something more important, at least more
00:38:03
important to me. I want to know if you
00:38:05
like this stuff. I want to know if you
00:38:07
like my podcast episodes, my monologues,
00:38:10
my guests, the information I share with
00:38:11
you and the stories I tell. I want to
00:38:13
improve and make your listening more
00:38:15
enjoyable in the process. So yeah, I
00:38:17
would love to read your reviews. And
00:38:19
sure, if you throw a rating in there,
00:38:21
too, that's great. If you like what I'm
00:38:23
doing, please share it with me. It's
00:38:25
such a great feeling to read your
00:38:27
feedback. I'd love to read your review
00:38:29
or see a rating on Apple Podcast or
00:38:32
Spotify. Thank you. Let's go on now to
00:38:34
number seven. Number seven, again,
00:38:36
sticking with retirement planning a
00:38:38
little bit, is plan to spend more in
00:38:40
your 60s and less later. Intentionally
00:38:43
plan your early retirement years to be
00:38:46
the years where you spend more because
00:38:47
you know you're going to spend less
00:38:49
later on. What's your thoughts on
00:38:51
deumulation, Andrew? I think for a lot
00:38:53
of folks, there's been a lot of research
00:38:54
done on, you know, the retirement
00:38:56
spending smile. And I think this is
00:38:58
something where I've seen a lot of folks
00:38:59
kind of come up in where you spend more
00:39:01
in your early years, then kind of the
00:39:03
middle portion of your retirement, maybe
00:39:05
you, you know, you get to your 60s.
00:39:06
Let's say you retire. Let's say you
00:39:08
retire at 60. And so you get to your 60s
00:39:11
and over the course of the next decade,
00:39:12
you decide, okay, I want to travel. I
00:39:14
want to have fun. I want to enjoy life
00:39:16
during this decade. And so you start to
00:39:18
spend a little more during your 60s. And
00:39:20
then all of a sudden you're like, I'm
00:39:21
over this kind of stuff. I want to spend
00:39:22
more time with the grandkids or spend
00:39:24
more time with family. And so you spend
00:39:25
less in the middle portion of your
00:39:27
retirement. And then as you age, well,
00:39:29
obviously health care costs are going to
00:39:31
rise and expenses are going to rise and
00:39:32
maybe long-term care is going to rise
00:39:34
and so you start to spend more again.
00:39:36
And so I think this is something where
00:39:38
there's been a lot of studies showing
00:39:39
that the retirement smile is kind of the
00:39:41
spending pattern for a lot of retirees.
00:39:43
And for most folks out there, that's
00:39:46
kind of the the approach or the way that
00:39:48
I think about it because it just makes
00:39:49
sense. It makes sense for a lot of
00:39:50
people. And if you can figure out
00:39:52
exactly where you're going to land, this
00:39:53
could be a great ordeal. Now, the one
00:39:55
thing to factor in is inflation and
00:39:57
understanding where inflation is going.
00:39:58
If you have really high inflation years
00:40:00
during the middle of your retirement
00:40:01
smile, then that could make a shift like
00:40:03
we had during COVID to now. And so, that
00:40:05
is something to definitely consider. But
00:40:07
I think for a lot of folks, your younger
00:40:08
years, the years that you can spend more
00:40:11
time traveling and you're agile and you
00:40:13
have your health span in place where you
00:40:15
can do a lot of different things is a
00:40:16
great time to spend more. Then during
00:40:18
the middle you kind of relax, rest, do
00:40:21
you use that time for that frame and
00:40:23
then you know as time goes on then you
00:40:25
will spend more on healthcare. So that's
00:40:26
the way I think about it at least. But I
00:40:27
would love to hear your thoughts.
00:40:29
>> It's a similar thought process and it
00:40:30
goes back almost to the 4% rule. The 4%
00:40:32
rule is this uh very uh one-sizefits-all
00:40:36
way of planning your retirement
00:40:37
spending. But the actual way that people
00:40:39
spend retirement is variable. It changes
00:40:42
not only year-over-year, it changes
00:40:43
decade over decade. And one of the
00:40:46
things that I think most people working
00:40:48
in an actual retirement planning field,
00:40:50
working with clients, working in wealth
00:40:52
management, will do is they'll say, "We
00:40:54
want to try to project your cash flow on
00:40:56
a year-by-year basis. We want to
00:40:58
understand all the money that's coming
00:40:59
in and going out of your life." And and
00:41:02
here's a great heristic that you,
00:41:03
Andrew, and listeners, I think
00:41:05
everybody, it's helpful to think of
00:41:06
this. The average retired couple goes
00:41:09
through four major gates that really
00:41:12
affect their retirement spending to some
00:41:14
extent, their retirement income, maybe
00:41:16
their retirement taxes. And those gates
00:41:18
are before and after you actually
00:41:20
retire. Okay, makes sense. Before you
00:41:22
retire, you have income. After you
00:41:23
retire, you don't. before and after you
00:41:25
collect social security, which maybe as
00:41:27
a couple is actually two different gates
00:41:29
because they're staggering their social
00:41:30
security claiming in some way before and
00:41:32
after RMDs start. So that's usually in
00:41:35
the early to mid70s. And then the last
00:41:37
one is uh before and after the first
00:41:39
spouse passes away. That's a big change
00:41:41
between filing singly and filing joint.
00:41:44
And there's some other changes there
00:41:45
too. My point there is that retirement
00:41:47
can't be thought of as any sort of
00:41:49
static spending because man, there are
00:41:50
these big changes that every couple will
00:41:52
go through, let alone the travel versus
00:41:56
not traveling, the following the
00:41:57
grandkids versus not following the
00:41:59
grandkids, the long-term care versus not
00:42:01
long-term care, all those things that
00:42:02
you alluded to, Andrew. So my point is
00:42:04
that on an individual basis, it's really
00:42:06
important to think through all these
00:42:08
different dials on, dials off, flipping
00:42:10
it on, flipping it off, trying to
00:42:12
project your unique cash flow throughout
00:42:14
retirement and then building a financial
00:42:17
plan from there. So yes, should someone
00:42:19
plan to spend more in their 60s and less
00:42:21
later? Probably most people, I think the
00:42:23
answer is yes, they should. And that
00:42:24
should be reflected in their kind of
00:42:26
unique cash flow projection. All right,
00:42:28
let's stick with some uh decisions that
00:42:30
I would say for most retirees occur
00:42:31
earlier in retirement. A lot of retirees
00:42:34
say, "I really need that retirement
00:42:36
paycheck. Social Security is there to be
00:42:38
my retirement paycheck." So, the
00:42:40
controversial take here for number eight
00:42:41
is taking Social Security early people
00:42:45
more than it helps people. Social
00:42:47
Security claiming strategies. Go ahead,
00:42:49
Andrew. What What do you tell people
00:42:50
about when to claim Social Security?
00:42:52
Well, overall, I could see both sides of
00:42:54
this argument. And I guess it's more so
00:42:56
on your personal, you know, your
00:42:57
personal finances more than anything.
00:42:59
But for a lot of folks out there, I'm
00:43:01
going to take the side on this one of
00:43:03
taking it a little bit later. And Jesse
00:43:05
actually made this, we had this
00:43:06
conversation on our podcast, too
00:43:08
recently where we were talking through
00:43:09
social security and kind of thinking
00:43:10
about this, but there is nowhere out
00:43:12
there where if you take social security
00:43:15
later that you could get a guaranteed 8%
00:43:18
rate of return. Meaning your social
00:43:19
security is going to be adjusted at 8%
00:43:21
every single year the later you take it.
00:43:23
And I think this is going to be
00:43:24
something where a lot of folks can get
00:43:26
that guaranteed rate of return if you
00:43:28
don't need the money early. Now, if you
00:43:29
need the money early, that's a different
00:43:30
situation. But if you don't need the
00:43:31
money early, you built up your portfolio
00:43:33
in place and you have this portfolio
00:43:35
where you can draw down in this
00:43:36
portfolio and live off that money early
00:43:38
in the year, early in your retirement,
00:43:40
that is a very very powerful place to
00:43:42
be. And so you can delay some of these
00:43:43
social security payments and have the
00:43:45
ability to go out and get that
00:43:47
guaranteed rate of return. So I think
00:43:49
this is the biggest argument overall for
00:43:50
a lot of folks. then you can enjoy that
00:43:52
money later on or use it for long-term
00:43:53
care or healthcare, whatever other big
00:43:55
expenses that you have in life. And so
00:43:57
for some folks out there, delaying this
00:43:59
is going to give you that guaranteed
00:44:01
rate of return. Yeah, no doubt about
00:44:03
what you just said there, Andrew. The
00:44:05
other side, and this is something that I
00:44:07
will hear, I I don't always agree with
00:44:09
it, but this is the argument that I
00:44:10
hear, so I'll play devil's advocate a
00:44:11
little bit, is someone will say, "Well,
00:44:13
a couple things, Andrew. A is I don't
00:44:15
trust it's going to be there if I'm
00:44:16
going to delay, so I'm going to claim it
00:44:17
early." Okay, it's a fair argument. I'm
00:44:19
not sure I agree with it, but it's a
00:44:21
fair argument. The other one is I just
00:44:23
really sleep better at night knowing I
00:44:24
have that guaranteed paycheck. So, I'm
00:44:26
choosing to retire at 63 and I'm going
00:44:28
to turn on social security the next day.
00:44:30
Okay, I don't know if that's
00:44:31
mathematically optimal, but it's maybe
00:44:33
it's some swan. It's helping them sleep
00:44:35
at night a little bit. And then the last
00:44:37
one that this one I I genuinely do agree
00:44:39
with is well first off I think as a
00:44:41
couple a very triedand-rue tactic if you
00:44:44
have a married couple who are claiming
00:44:45
social security is that the lesser
00:44:47
benefit claims earlier and the person
00:44:50
with the greater benefit claims later
00:44:52
that's fine. And then and then the last
00:44:54
thing again and I think this one has a
00:44:56
lot of merit is if someone's looking at
00:44:57
themselves and they say my mom and dad
00:44:59
both passed away in their 50s. I've
00:45:01
already had a couple cancer scares. I
00:45:03
just have bad genetics. I'm not a
00:45:05
particularly healthy person and for me
00:45:08
to delay. They tell me that my break
00:45:10
even age is 80. Well, I don't think I'm
00:45:13
going to live to 80. So, I'm going to
00:45:14
claim it as early as I can and at least
00:45:16
get something. I think that's a very
00:45:18
fair argument. And I think actually if
00:45:20
that person ends up dying earlier, say
00:45:22
before 75, before their late '7s,
00:45:25
mathematically they're going to be glad
00:45:26
that they claimed early. So, I I don't
00:45:29
necessarily think that taking Social
00:45:30
Security early, does it hurt more people
00:45:33
than it helps? Well, maybe it does hurt
00:45:34
more people than it helps on average.
00:45:36
But I do think there are still plenty of
00:45:38
very legitimate reasons to claim early.
00:45:41
And certainly what maybe what we've
00:45:43
settled on here is that it deserves a
00:45:44
lot of thought and strategy as to when
00:45:47
you claim social security. I think it's
00:45:49
one of the most strategic things that
00:45:50
you need to do when it comes to
00:45:51
retirement is to kind of think through
00:45:53
this whole scenario because for a lot of
00:45:55
folks out there and the number one
00:45:56
question I get is, hey, should I take it
00:45:57
early and invest those dollars? Well,
00:45:59
again, you can't get that guaranteed
00:46:00
rate of return. What if the market has a
00:46:01
a dip? What if there's a drop? And so
00:46:03
there's things like that where it
00:46:05
depends on your personal situation. Now,
00:46:06
there's a lot of people out there in
00:46:07
this country right now who need social
00:46:09
security. For most of you listening to
00:46:10
this podcast, if you're listening to
00:46:12
this podcast, you're likely setting up a
00:46:13
financial plan and you are good with
00:46:15
money. And so overall, this is something
00:46:17
I think that is is one of the most
00:46:19
important things that you need to talk
00:46:21
to someone about when you are planning
00:46:22
out that retirement. I mean, that really
00:46:24
is a great point. I think your average
00:46:26
listener, my average listener is in a
00:46:28
place where social security is less
00:46:30
impactful to them. And maybe to some
00:46:32
extent this message that we just shared
00:46:33
back and forth, it would be best heard
00:46:35
by the people who aren't listening here.
00:46:37
Maybe that's a uh a problem on my end
00:46:39
for not advertising this podcast well
00:46:40
enough. I know we'll do a quick plug
00:46:42
here in the middle of the podcast, the
00:46:43
personal finance podcast. Andrew, I
00:46:45
mean, your listenership is huge. How
00:46:46
many people are listening on a regular
00:46:48
basis? Uh we have a little over 500,000
00:46:50
downloads a month. So that's kind of
00:46:51
where we stand right now.
00:46:52
>> That's fantastic. So listeners go check
00:46:54
it out. And now we will continue the
00:46:56
show and we will go on to number nine.
00:46:58
Number nine here is that number chasing
00:47:01
in retirement. Number chasing is just a
00:47:04
distraction from life design. Where do
00:47:07
you find that the balance between the
00:47:08
math versus life in retirement planning?
00:47:11
I think this is a great one and I think
00:47:14
overall I could see both sides of this
00:47:15
argument. A lot of these I could see
00:47:16
both sides and I could probably argue
00:47:18
both sides uh pretty easily. So I will
00:47:20
just kind of look for one and take one
00:47:21
here. Here's the thing about the
00:47:23
retirement number. I think a lot of
00:47:24
people don't set it up and track it
00:47:26
properly. I think it's actually a very
00:47:28
important number and it's a number that
00:47:30
most people need to think about more
00:47:32
often. Whereas, if you are younger and
00:47:34
if you are someone out there who's in
00:47:35
your 20s, maybe you're in the 30s, your
00:47:37
40s and you are not close enough to
00:47:39
retirement yet to kind of think through
00:47:41
what exactly you're going to be spending
00:47:42
every single year. I think it is very
00:47:45
very important for those folks to decide
00:47:47
actually I'm going to track my
00:47:49
retirement number on a yearly basis. I
00:47:51
think most people just track it too
00:47:52
loosely, which is why they don't get the
00:47:54
lifestyle design that they want. But if
00:47:56
you track your retirement number on a
00:47:57
yearly basis, this is going to do a
00:47:59
number of different things. Number one
00:48:00
is it's going to help you figure out
00:48:03
exactly what shifts are happening
00:48:05
throughout the entire year. So when I
00:48:06
was in my 20s, I was very frugal. I
00:48:09
didn't spend a lot of money and my
00:48:10
ultimate goal was to become LeanFire. If
00:48:12
I was at my leanfire number right now,
00:48:14
I'd be miserable. I'd be miserable in
00:48:16
life and I wouldn't want to do exactly
00:48:17
what I'm doing now. Why? Because things
00:48:19
change. Well, first I got married and so
00:48:21
my spending decisions have changed
00:48:23
dramatically ever since I got married.
00:48:25
Then I had my first child, my second
00:48:27
child, and my third child. And every
00:48:28
single time that I had a big lifestyle
00:48:31
change like that, all of a sudden, my
00:48:32
spending increased. And so I had this
00:48:34
increased spending over that time frame.
00:48:36
And I'm saying to myself, okay, well, my
00:48:38
retirement number has shifted because of
00:48:40
this. Now, will all of these expenses be
00:48:42
in place when I reach retirement age?
00:48:44
Absolutely not. But I think as time goes
00:48:46
on, when you just change the dial
00:48:49
slowly, it is a very slow change every
00:48:52
single year, you'll be able to get to
00:48:54
exactly where you want to go, and you're
00:48:55
probably going to get there faster than
00:48:56
than most people would if they weren't
00:48:58
tracking this on a yearly basis. And so,
00:49:00
a lot of times I tell all the people
00:49:01
that listen to our show, hey, you need
00:49:03
to track this on a yearly basis. We do
00:49:04
this at the end of every single year so
00:49:06
that you know exactly where you stand.
00:49:07
Look at your burn rate and figure out
00:49:09
how much you're spending every single
00:49:10
year. The easy math is to use the 4%
00:49:12
rule math and multiply that by 25 as
00:49:14
your baseline.
00:49:15
>> That's the back of the napkin math where
00:49:17
you can figure this out. Obviously,
00:49:18
there's other factors that come into
00:49:19
play that we talk about. But then all of
00:49:21
a sudden, you get to your number and you
00:49:22
can track it on a yearly basis. And as
00:49:24
time goes on and as you get closer to
00:49:26
that retirement age, especially when
00:49:27
you're 5 to 10 years out, that's when it
00:49:28
becomes very important to know exactly
00:49:30
where you stand with this number. But I
00:49:32
think on that yearly basis, it makes
00:49:34
sure that a you're not getting way too
00:49:36
far outside of the range that you're
00:49:37
you're supposed to be in because a lot
00:49:38
of people will like track it every 10
00:49:40
years and then all of a sudden they
00:49:41
don't know where they stand. Instead,
00:49:42
this keeps you on top of it so you can
00:49:44
make adjustments on the fly instead of
00:49:46
getting way too far behind or way too
00:49:47
far ahead. So, I think the retirement
00:49:49
number is a very important number to
00:49:50
track and you can integrate lifestyle
00:49:52
design based on tracking that number. I
00:49:55
swear this is a related question,
00:49:57
Andrew. When you have a peanut butter
00:49:58
and jelly sandwich, are you more of a
00:50:00
peanut butter guy or are you more of a
00:50:02
jelly guy?
00:50:03
>> I'm more of a peanut butter guy.
00:50:04
>> So am I. See, I'm more of a peanut
00:50:06
butter guy. And I'm convinced that when
00:50:08
it comes to the numbers of retirement
00:50:11
and the life design of retirement, it's
00:50:13
a peanut butter and jelly sandwich. If
00:50:15
you're all peanut butter, if you're all
00:50:17
money, let's say, well, then it's just a
00:50:19
peanut butter sandwich. It's fine, but
00:50:21
it's not quite the same as peanut butter
00:50:22
jelly. And if you're just a life design
00:50:24
person, then it's just a jelly sandwich.
00:50:26
And again, it's not complete and you
00:50:28
need to find the balance between the
00:50:29
two. And it's okay to prefer a little
00:50:31
bit of one over the other. I think of
00:50:33
these archetypes of literally of clients
00:50:35
I work with where I know they are more
00:50:37
focused on the numbers and I know some
00:50:39
others are much more focused on the
00:50:41
lifestyle. And when someone's really
00:50:43
focused on the numbers, I feel like my
00:50:45
job is to say, "Hey, your your numbers
00:50:47
are actually looking good. You got
00:50:48
plenty of peanut butter on that bread.
00:50:50
Let's start thinking about the jelly."
00:50:52
And then vice versa. when someone when
00:50:54
all they want to do is they're thinking
00:50:55
about all the amazing trips they're
00:50:56
going to take in retirement. They've got
00:50:58
that taken care of. But then I'm looking
00:50:59
at the numbers and saying, "Okay, this
00:51:01
isn't quite adding up. I need to pull
00:51:03
them over to the peanut butter side and
00:51:04
say, "Listen, you got plenty of jelly
00:51:06
there. Let's think about the peanut
00:51:07
butter. You know, crunchy or creamy,
00:51:08
Peter Pan or GIF. What's going on here?"
00:51:10
I think the same thing happens here. So,
00:51:12
is number chasing a distraction from
00:51:14
life design? For some retirees, 100%.
00:51:18
But then for other retirees, it's the
00:51:19
other way. Life design is a distraction
00:51:21
from the fact that they're actually
00:51:22
behind on their numbers. So, to each
00:51:24
their own. I apologize for a little bit
00:51:26
of the non-answer. I just hope the
00:51:27
peanut butter and jelly metaphor was
00:51:29
entertaining along the way. I loved it.
00:51:30
I think that is spot on. I think that's
00:51:32
kind of what it is. You need to have
00:51:33
both and you need to have both
00:51:35
integrated together as one peanut butter
00:51:37
and jelly sandwich. And like you say,
00:51:38
and I think that's just the most
00:51:39
important thing that most people need to
00:51:41
realize is that you need both in order
00:51:43
to really have a complete plan.
00:51:45
Listeners, you can send your pictures of
00:51:47
sandwiches to jesse at
00:51:48
bestinterest.blog. uh block. And that
00:51:50
brings us to number 10, a juicy one. I
00:51:53
left this one for the end and I it it
00:51:54
hits a really sweet spot for me. Number
00:51:56
10 is most financial adviserss add
00:52:00
negative value. I know we've had some
00:52:02
conversations offline, Andrew, about
00:52:04
about this financial advisory industry.
00:52:06
What are your thoughts on how most
00:52:08
financial advisers interact with people,
00:52:10
long-term investors and and retirees?
00:52:12
>> Well, I'll take the case for this
00:52:14
argument so that you can set yourself up
00:52:16
here on this.
00:52:16
>> No, no, it's okay. I cuz I'll tell you
00:52:18
I'm going to stay middle of the road.
00:52:20
I'm going to tell it as I see it and I'm
00:52:21
going to say middle of the road. But go
00:52:22
ahead.
00:52:23
>> I think out there there's a number of
00:52:25
adviserss who are salesreated. All they
00:52:27
want to do is make sure they make the
00:52:28
sale for you and ensure that you know
00:52:31
they are putting you into products that
00:52:32
are going to make them the most money.
00:52:34
In fact, I've had folks in my life who I
00:52:36
have owned businesses with, got to know
00:52:38
them better, and got to know them in
00:52:40
terms of like, for example, I've had a a
00:52:42
business partner in the past who was a
00:52:44
an adviser, and he was someone who would
00:52:48
put people into specific products
00:52:49
because the commissions were higher. And
00:52:51
I think that was a situation where I
00:52:52
realized pretty quickly, oh, you got to
00:52:54
make sure you understand who your
00:52:55
adviser is before you are going to go
00:52:58
out and hire someone. So, you need to
00:53:00
make sure you're interviewing those
00:53:01
adviserss and understanding what their
00:53:02
philosophies are and understanding how
00:53:03
they can help you because there are
00:53:05
adviserss out there who are just
00:53:06
salesreated. There's another one that I
00:53:07
interned for. I remember when I was in
00:53:09
college, I interned at an advisory and
00:53:11
this specific adviser did the same exact
00:53:13
thing. He wanted a certain amount of
00:53:15
clients. He wanted to just put them into
00:53:16
these specific products. Like, for
00:53:17
example, he'd put as many of them as
00:53:19
possible into annuities. Put as many of
00:53:20
them as possible into ILS and those
00:53:23
types of things. And so this was one of
00:53:25
those areas where he'd make a really
00:53:26
really high commission and he was just
00:53:28
trying to get as many people into those
00:53:29
products as possible because of that
00:53:30
commission. It may not have been the
00:53:31
best thing for them. Instead, he was
00:53:33
looking at the commission. Now, he would
00:53:34
never say this, but behind closed doors,
00:53:36
he was saying this to us. And so, this
00:53:37
is one of those things where I think a
00:53:39
lot of those types of adviserss give
00:53:41
most other advisors a bad rap because
00:53:43
they have this sales mentality and they
00:53:46
work at a place where sales is
00:53:47
everything. But instead, if you have an
00:53:50
adviser like that, you'd be better off
00:53:51
having a lowcost index fund than just
00:53:52
kind of having that advisor in place.
00:53:54
So, that's one of those things. But
00:53:55
again, I am very middle ground when it
00:53:57
comes to this, just like you. In
00:53:58
reality, there are just bad apples out
00:54:00
there, like there are every other
00:54:01
industry. I'm going to continue my
00:54:03
peanut butter and jelly fixation.
00:54:06
Sorry. So, imagine, let's imagine we
00:54:08
have people out there who are really
00:54:10
hungry. They're in dire straits. They're
00:54:12
really hungry. And I decide to open up a
00:54:14
shop selling peanut butter jelly
00:54:15
sandwiches. and I buy some Wonderbread,
00:54:18
which we know is pretty cheap, store
00:54:20
brand peanut butter, store brand jelly,
00:54:21
and I start whipping up some sandwiches
00:54:23
and I say, "Hey, 15 bucks each. Come get
00:54:25
your sandwich." Now, you and I and all
00:54:28
the listeners know that's not a $15
00:54:30
sandwich. And if anything, I might be
00:54:32
taking advantage of the people who are
00:54:34
hungry by selling them. I mean, sure,
00:54:36
I'm selling them something they need.
00:54:38
They need some sustenance, but I'm not
00:54:40
exactly sure this is a fair business
00:54:42
model to all involved. And I think
00:54:44
there's a parallel there. The way I take
00:54:46
it is, you know, the statement was most
00:54:48
financial advisors add negative value. I
00:54:51
think many do, but I think the way that
00:54:53
those many justify themselves is they
00:54:56
say, well, listen, this person was
00:54:57
starving without me. So, even though
00:54:59
this product might be suboptimal, maybe
00:55:02
I'm not using the best ingredients, I'm
00:55:04
certainly charging too much for it. At
00:55:06
least they're not starving anymore. I am
00:55:08
doing them a service. They're not
00:55:10
starving anymore. And sure, maybe
00:55:13
there's a way to justify that to
00:55:14
themselves. and maybe in some grand
00:55:16
cosmic sense they're able to say it's
00:55:19
better than starving out on the street.
00:55:20
I think we have graduated beyond that
00:55:22
point. I do think that there are many
00:55:24
adviserss that add negative value. I
00:55:26
also know for a fact there are many
00:55:27
adviserss that add positive value. And I
00:55:29
also think a big part of the function
00:55:31
and something I try to hit home here on
00:55:33
the podcast is I know a lot of the
00:55:34
listeners here are DIYers. I know a lot
00:55:37
of the listeners here really enjoy
00:55:39
learning this stuff and to some extent
00:55:41
just all do it themselves. And if that's
00:55:44
you, going back to the peanut butter and
00:55:45
jelly metaphor, it's like, listen,
00:55:47
you've got a full stomach. You're
00:55:48
cooking all your own food. Of course,
00:55:50
you're not going to pay someone 15 bucks
00:55:52
for a peanut butter and jelly sandwich.
00:55:54
You might not even accept a free peanut
00:55:56
butter and jelly sandwich cuz you're
00:55:58
cooking gourmet meals at home. But now
00:56:00
we say, "Well, what if there's someone
00:56:01
out there where you say, "Hey, you're
00:56:02
really hungry. I'm going to cook you a
00:56:05
really nice burger, some fries on the
00:56:07
side, really good ingredients, and I'm
00:56:09
going to sell it to you for $17." Does
00:56:10
that seem fair? I think some people out
00:56:12
there be like, "Yeah, that seems like a
00:56:14
pretty fair deal to me." And that's
00:56:16
where that sweet spot is. Is you say,
00:56:18
"Hey, some people out there really need
00:56:20
help. They really need to get the stuff
00:56:21
right. Is there someone out there who's
00:56:23
going to serve them well for a fair
00:56:25
cost? Will the fee match the value?" All
00:56:27
those kind of things. Are they not just
00:56:29
sticking them in products for the heck
00:56:30
of it, like you said, Andrew, because of
00:56:32
the highest commission? I mean, that's
00:56:33
BS. That's where our industry needs to
00:56:35
get to. And and thankfully, there there
00:56:37
are some advisers out there who do that.
00:56:39
So, that's my answer there. Maybe I
00:56:41
focused on food too much, but it's I'm
00:56:43
hungry. I haven't had breakfast yet.
00:56:44
It's my job. I think that was a great
00:56:46
perfect analogy because that's exactly
00:56:48
what and that is the biggest argument I
00:56:49
heard is like every single time those
00:56:51
advisers will say, "Well, these people
00:56:52
have no idea what they're doing, so I'm
00:56:53
at least helping them in some way,
00:56:54
shape, or form." And that was the big
00:56:56
thing and you nailed that. I think
00:56:57
that's exactly what what is happening in
00:56:59
a lot of situations.
00:57:00
>> Well, listeners, thank you very much.
00:57:02
This episode has been sponsored by
00:57:03
Smuckers. You can get Smuckers at your
00:57:05
local
00:57:07
Andrew, thank you so much for coming on.
00:57:09
This was super fun. This was a hundred
00:57:11
times more fun than I thought it would
00:57:12
be. And I had a feeling this was going
00:57:13
to be pretty fun. If listeners though,
00:57:15
when they want to check out more of your
00:57:17
takes, more of your topics, you do a
00:57:18
really good job of distilling this stuff
00:57:20
down into like actionable and
00:57:22
understandable next steps. Where can
00:57:24
people find they can join maybe the
00:57:26
500,000 people per month listening to uh
00:57:29
the personal finance podcast? Yes. So,
00:57:31
you can listen to any podcast player
00:57:33
that is out there wherever you wherever
00:57:34
you listen here. We're on YouTube as
00:57:36
well. and any podcast player that's out
00:57:37
there. We have the personal finance
00:57:39
podcast there and our entire goal is to
00:57:40
make money as simple as possible. So we
00:57:42
have big frameworks that we break down
00:57:44
into simple actionable things that you
00:57:45
can do. So Jesse, really appreciate you
00:57:47
having me on here and we have two
00:57:48
episodes with Jesse on there. If you
00:57:50
want to check out those interviews, I
00:57:51
think those are fantastic. We talked
00:57:53
about all different things retirement
00:57:54
and on both those episodes and so I
00:57:56
think that's a great place to start.
00:57:58
>> Awesome. Andrew Giancola of the Personal
00:58:00
Finance Podcast, thanks for stopping by.
00:58:02
Personal finance for long-term
00:58:03
investors. Thank you so much for having
00:58:05
me.
00:58:06
>> Thanks for tuning in to this episode of
00:58:08
Personal Finance for Long-Term
00:58:09
Investors. If you have a question for
00:58:11
Jesse to answer on a future episode,
00:58:14
send him an email over at his blog, The
00:58:16
Bestinest. His email address is
00:58:18
00:58:20
Again, that's jessevestinterest.blog.
00:58:24
Did you enjoy the show? Subscribe, rate,
00:58:26
and review the podcast wherever you
00:58:28
listen. This helps others find the show
00:58:30
and invest in knowledge themselves. and
00:58:33
we really appreciate it. We'll catch you
00:58:35
on the next episode of Personal Finance
00:58:37
for Long-Term Investors. Personal
00:58:40
Finance for Long-Term Investors is a
00:58:41
personal podcast meant for education and
00:58:44
entertainment. It should not be taken as
00:58:46
financial advice and it's not
00:58:47
prescriptive of your financial
00:58:49
situation.
