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