00:00:01
welcome to the best interest podcast
00:00:04
where we believe Benjamin Franklin's
00:00:06
advice that an investment in knowledge
00:00:08
pays the best interest both in finances
00:00:11
and in your life every episode teaches
00:00:13
you personal finance and investing in
00:00:16
simple terms now here's your host Jesse
00:00:19
Kramer hello and welcome to episode 100
00:00:23
yes episode 100 of the best interest
00:00:26
podcast my name is Jesse Kramer today is
00:00:28
going to be a fun a little of a pot PRI
00:00:30
episode we've got a few different things
00:00:32
there's a reflection on the past there's
00:00:34
the forecasted and the highly
00:00:36
anticipated branding change and a little
00:00:38
bit of talk about why we're doing that
00:00:40
there's a shout out from previous guests
00:00:42
you'll hear from some of the awesome
00:00:44
famous well-known intelligent guests
00:00:46
we've had on here in the past and then I
00:00:49
asked my listeners for some of their
00:00:51
favorite episodes from the past so we're
00:00:53
going to play some of the best Clips
00:00:55
some of the very best clips from the
00:00:57
best 100 episodes of the best interest
00:01:00
so far however as we start most of our
00:01:03
episodes these days we do have a review
00:01:05
of the week this one comes from lsse 587
00:01:08
who left us a five-star review on Apple
00:01:10
podcasts and LSC said I love this
00:01:13
podcast I listen to podcasts at the gym
00:01:15
and on walks Jesse makes the time fly by
00:01:18
He Is knowledgeable and very easy to
00:01:20
understand and I've sent him a few
00:01:21
questions via email not only has he
00:01:23
replied back but he has incorporated my
00:01:25
questions into his blog and podcast
00:01:27
thank you Jesse well LSC 587 thanks for
00:01:30
the kind words shoot me an email to
00:01:32
Jesse bestin interest. blog we'll get
00:01:34
you hooked up with a super soft bestest
00:01:36
t-shirt and yes listeners as you will
00:01:39
hear later today as you might already be
00:01:41
familiar with I really enjoy and I'm
00:01:44
going to do more and more of these AMA
00:01:46
episodes where we get interesting
00:01:49
intricate sometimes unique or kind of
00:01:51
strange questions questions that you
00:01:53
might not have heard before from the
00:01:55
world of financial planning questions
00:01:57
like the ones that LSC 587 sent in
00:02:00
and it makes for such interesting
00:02:02
content I enjoy putting them together
00:02:04
we've gotten great feedback from our
00:02:05
listeners on the AMA episodes and there
00:02:07
are certainly a lot more of them to come
00:02:09
in the next 100 episodes and far beyond
00:02:12
and as I just alluded to you will hear
00:02:14
various former guests give us some shout
00:02:16
outs say hi in today's episode and
00:02:19
they'll let you know where you can go
00:02:20
back and listen to them here on the
00:02:22
podcast again a lot of really good
00:02:24
episodes in the backlog and also where
00:02:26
you can go check them out on their own
00:02:28
channels because I encourage you guys to
00:02:30
go far and wide and deep when it comes
00:02:32
to educating yourselves on Personal
00:02:34
Finance investing Financial Planning and
00:02:36
I really think that is the way to
00:02:38
eventually formulate your own expert
00:02:40
opinions is by hearing what a lot of
00:02:42
other people think synthesizing it
00:02:44
figuring out how it applies to your own
00:02:46
situation your own life and boom there
00:02:48
you have your opinion so let's start off
00:02:50
with our first shout out here hey Jesse
00:02:53
you know what I heard you have reached
00:02:56
100 episodes and I know what everybody's
00:02:58
thinking man if Jesse can do it then I
00:03:00
can do it too and you know what you
00:03:02
probably can't because frankly the
00:03:04
average podcast lasts seven episodes and
00:03:07
the fact that you made it to 100 well
00:03:09
frankly all of us in the basement we're
00:03:11
high-fiving you mom has made a cake so
00:03:13
you got to come back over and hang out
00:03:15
with us I hung out with you on episodes
00:03:18
73 and 93 off the top of my head I think
00:03:22
those were probably the best episodes in
00:03:24
the entire catalog of those 100 don't
00:03:27
you think they probably probably are but
00:03:29
any anyway congratulations on 100
00:03:31
episodes here's to a hundred more big
00:03:35
guy and uh we'll see you back here in
00:03:37
Mom's basement for more stacking
00:03:39
Benjamin's fun as well thank you for
00:03:41
those kind words Joe and now listeners
00:03:44
let's go on a little bit of a reflection
00:03:46
on the Journey of the best interest
00:03:47
podcast and just the best interest in
00:03:49
general and my thought immediately goes
00:03:51
back to the Bill Gates quote most people
00:03:53
overestimate what we can do in two years
00:03:55
but we underestimate what we can do in
00:03:57
10 years and 10 years ago
00:04:00
2015 Not only was the best interest not
00:04:03
on my radar at all but I wouldn't even
00:04:06
say I knew that much about personal
00:04:08
finance and investing in the first place
00:04:10
but right about that time is when I got
00:04:12
hooked on this content and I read 20 or
00:04:16
30 books on the topic per year for a few
00:04:18
years in that 2016 2017 2018 timeline I
00:04:23
obviously must have been a really fun
00:04:24
guy to talk to great at parties with my
00:04:27
all all I would do in my free time was
00:04:28
read about money but then eventually I
00:04:31
started offering up my ideas or just
00:04:33
what I had learned to my engineering
00:04:35
colleagues back in my old career
00:04:37
aerospace engineering and people would
00:04:39
ask me questions about their 401k or you
00:04:41
know I was talking about this stuff at
00:04:43
the water cooler eventually I would
00:04:44
write my colleagues emails with these
00:04:46
you know hopefully clear explanations on
00:04:49
my thought process or what I was doing
00:04:51
why I was doing it what I think they
00:04:53
might want to consider and one of those
00:04:55
colleagues said Jesse this is basically
00:04:58
a blog post what you've just written in
00:04:59
this email it's basically a blog post so
00:05:02
why don't you make a website a Blog and
00:05:04
just share it with the internet and boom
00:05:06
the best interest was born the name of
00:05:09
course coming from Ben Franklin's quote
00:05:11
an investment in knowledge pays the best
00:05:12
interest along with this idea of wanting
00:05:15
to you know operate in the best interest
00:05:17
of my readers and listeners and then of
00:05:20
course there's just the triple meaning
00:05:21
if you will of here we are in this
00:05:23
investing world and whatever we can do
00:05:25
to earn the most interest on our money
00:05:28
is something we ought to consider so
00:05:30
boom okay that's how the name happened
00:05:31
the best interest the best interest
00:05:33
podcast started in 2021 and that was its
00:05:36
own unique Journey first just learning
00:05:38
the logistics of recording and editing
00:05:40
and Publishing this podcast on my own
00:05:43
second getting better at talking into
00:05:45
the microphone and talking smoothly the
00:05:47
early episodes if you don't know simply
00:05:50
aren't that good I do not encourage you
00:05:52
to go back to those early episodes of
00:05:54
the podcast you can go back and listen
00:05:55
if you're just curious and you want to
00:05:57
see how much it's changed over time if
00:05:59
you start in the early episodes if
00:06:01
that's where you started on this podcast
00:06:02
you might have not have made it to
00:06:03
episode 100 I wouldn't blame you for
00:06:05
turning the podcast off and in fact some
00:06:08
of you might not know this we went back
00:06:10
in time about six months ago and
00:06:12
re-recorded a new intro for episode one
00:06:15
that simply says hey this is an early
00:06:18
episode of the podcast some of you might
00:06:20
have heard of the best interest you
00:06:22
decided to go back and start at episode
00:06:23
one because that's the way you like to
00:06:25
do things and if you did choose that
00:06:27
you're going to realize that episode one
00:06:29
maybe in the first few dozen episodes
00:06:31
aren't that good and you probably should
00:06:32
just skip ahead to the later episodes
00:06:34
anyway but then there's the journey too
00:06:36
of just the content itself and me trying
00:06:39
to figure out how I wanted to present
00:06:41
these episodes and what I wanted to talk
00:06:42
about in these episodes you know whether
00:06:45
it was interviews with experts or
00:06:47
Roundtable discussions or just me going
00:06:49
solo on the microphone or asking me
00:06:51
anything episodes over time I I think
00:06:53
I've narrowed in on the episodes that
00:06:56
you all enjoy more just that I'm getting
00:06:58
better and better feedback on episodes
00:07:00
that you're learning more from and also
00:07:02
episodes that I enjoy putting together I
00:07:04
think that's an important part of the
00:07:05
process too now what's really
00:07:08
interesting is that the podcast
00:07:09
essentially died at one point so I said
00:07:12
I I started in 2021 and I made 37
00:07:15
episodes of the podcast over the first
00:07:17
30 weeks of 2021 and then I got a little
00:07:20
bit burnt out I I didn't love the
00:07:22
direction that I was taking the podcast
00:07:24
in I just it was really timec consuming
00:07:26
my heart just wasn't into it at that
00:07:28
point and so over the following 11
00:07:31
months I made one episode and to anyone
00:07:34
on the outside and even to me uh living
00:07:36
in that moment the podcast was no longer
00:07:39
a living project uh I still loved
00:07:41
personal finance and investing and
00:07:42
financial planning I still used the blog
00:07:45
a lot during that time I was still
00:07:47
writing at least one sometimes two
00:07:49
articles per week and eventually I I
00:07:51
used the blog to act as my resume to
00:07:54
change careers right now I'm working in
00:07:56
financial planning wealth management So
00:07:58
Not only was I creating content around
00:08:00
these ideas but I also started helping
00:08:02
families Implement these Ideas Daily
00:08:04
into their own lives and by the end of
00:08:06
2022 during the doldrum period of this
00:08:08
podcast when it really wasn't alive
00:08:10
anymore that's when I started looking
00:08:12
around and I thought a few different
00:08:14
things first there are quite a few
00:08:16
podcasts out there run by financial
00:08:18
planners like me some of them are great
00:08:20
some of them though I thought were maybe
00:08:22
a bit lacking or I thought I could do
00:08:23
something pretty unique in this space
00:08:25
something that not many other people are
00:08:26
doing and then the more I listened to
00:08:29
these podcasts the more confident I
00:08:31
began to feel in my own teaching
00:08:32
abilities we talked about this on
00:08:34
episode 92 with Dan otter because that
00:08:36
episode was all about teachers and 403bs
00:08:38
and what school teachers can be doing
00:08:40
differently that both my parents were
00:08:42
School teachers and I acted as a
00:08:44
teaching assistant throughout College I
00:08:46
think you know whatever eight or 10
00:08:47
different college courses on some pretty
00:08:49
complex engineering topics and I always
00:08:51
got good feedback on my ability to
00:08:53
explain complex topics and so suddenly
00:08:56
the the image started to come into focus
00:08:58
a little bit more that I could use this
00:09:00
podcast as a teaching platform I could
00:09:02
bring on some experts who can explain
00:09:04
their expertise I could share stories
00:09:06
and answers from within the the wealth
00:09:08
management practice that I work at every
00:09:10
single day ultimately a rising tide
00:09:13
lifts All Ships right I think we all do
00:09:14
better that if I'm providing a better
00:09:17
product and you all are learning more
00:09:20
everyone's benefiting and then if I do a
00:09:22
good enough job that good things could
00:09:24
happen in my professional life too so
00:09:27
putting that idea into practice starting
00:09:29
at the beginning of 2023 I began working
00:09:32
with an outside podcast production team
00:09:34
simple pod Studio shout out to Justin
00:09:36
and Kyle who make not only make this
00:09:38
podcast just sound better and they save
00:09:41
me tons of time on the editing and
00:09:42
production side but we had a simple
00:09:44
experimental goal together of let's try
00:09:46
to publish 26 episodes every other week
00:09:49
in 2023 every episode on time we can
00:09:52
figure out the content itself you know
00:09:54
why am I here what am I talking about
00:09:56
etc etc and not only did we hit that
00:09:58
goal but then we kept the momentum
00:09:59
rolling into 2024 and now here into 2025
00:10:03
so episode 44 of this podcast and onward
00:10:07
has a new level of quality to it and
00:10:09
sure enough with that consistency and
00:10:11
that quality and that new vision for the
00:10:13
podcast a lot of you listeners have
00:10:15
jumped on the bandwagon and and followed
00:10:17
along two years ago when we started on
00:10:19
this this new version of the podcast
00:10:21
I'll call it I'd be lucky if 500 people
00:10:24
tuned in every month well that number is
00:10:27
compounding every single month
00:10:29
right now we're on Pace as I sit here
00:10:31
and record in January we're probably
00:10:33
going to Eclipse 7,500 listeners this
00:10:35
month probably by the end of this year
00:10:38
we'll easily Eclipse 10,000 listeners
00:10:40
every month that'll for all I know
00:10:41
that'll happen this spring and yes the
00:10:44
professional benefits are occurring too
00:10:46
now I won't rehash all the details I
00:10:48
discussed in episode 96 when it comes to
00:10:50
the overlap of my professional wealth
00:10:53
management practice and the podcast but
00:10:55
the summary is that some of you
00:10:57
listening are reaching out to me for
00:10:58
professional health some of you
00:11:00
listening are referring in your friends
00:11:01
and your family to me for professional
00:11:03
help and when it's a good fit which
00:11:05
certainly doesn't happen every time I
00:11:06
know that but when it's a good fit when
00:11:09
I know that myself and my colleagues
00:11:11
here can deliver the financial planning
00:11:13
and investing answers to you to your
00:11:15
important questions then yeah we end up
00:11:18
working together and you get trusted
00:11:20
advice and I get to do my job and again
00:11:22
a rising tide lifts All Ships back in
00:11:26
2015 10 years ago none of this was even
00:11:29
a twinkle in my eye back in December
00:11:31
2018 when I wrote the first blog post on
00:11:34
the best interest none of this was on my
00:11:36
mind in February 2021 when I made the
00:11:38
very first podcast episode I had no idea
00:11:41
I even wanted to change careers so I
00:11:44
suppose my big takeway here combines you
00:11:46
know the Nike idea of just do it with
00:11:49
the Bill Gates idea of most people
00:11:52
underestimate what they can accomplish
00:11:53
in 10 years and then I sprinkle in a
00:11:55
little bit of Bilbo baggin and Jr tolken
00:11:57
from The Lord of the Rings where from
00:11:59
The Hobbit where he says you know it's a
00:12:01
dangerous business froto going out your
00:12:03
door you step onto the road and if you
00:12:05
don't keep your feet there's no knowing
00:12:07
where you'll be swept off to so this
00:12:09
project swept me off to here and who
00:12:12
knows where it's going to sweep me off
00:12:14
to next but mostly thank you all for
00:12:16
listening on a weekly basis it feels
00:12:18
like I get to express my gratitude to
00:12:21
one of you who writes in with something
00:12:23
heartfelt I'll say something similar
00:12:25
here which is that there's nothing quite
00:12:27
so energizing as your emails as your
00:12:29
gratitude for my work your awesome
00:12:31
podcast reviews whatever it may be it
00:12:33
truly is one of the most unique feelings
00:12:35
and one of the most unique fuels that
00:12:37
keeps me going here on this project I
00:12:39
got this note over the holidays the the
00:12:41
2024 holiday season and I I just wanted
00:12:45
to share it with you so so here it goes
00:12:47
hi Jesse I just wanted to say thank you
00:12:48
so much for all the work you do with the
00:12:50
best interest I always thought of myself
00:12:52
as someone who's bad with finances I was
00:12:54
raised by a single mother who did not
00:12:55
have much money and growing up we were
00:12:57
constantly being told we didn't have
00:12:58
enough my mom has not had a full-time
00:13:00
job in years she has a lot of credit
00:13:02
card debt I know this has had a huge
00:13:04
influence on how I view money and
00:13:05
finances and why money makes me so
00:13:08
incredibly anxious for the longest time
00:13:10
I've basically ignored it and avoided
00:13:12
dealing with my finances because of this
00:13:14
anxiety recently my therapists and I
00:13:16
have done a lot of work on the idea that
00:13:17
gathering information and education
00:13:19
myself about things that make me anxious
00:13:22
is actually the best way to alleviate
00:13:24
this anxiety for the past few months
00:13:26
I've been working hard on doing this
00:13:28
with my personal finan and money I
00:13:30
started by listening to the how to money
00:13:32
podcast and that's how I found you and
00:13:34
the best interest I've been listening to
00:13:36
your podcast and reading your blog ever
00:13:37
since and it has been by far the most
00:13:39
helpful resource for me you are a great
00:13:41
teacher and you have simplified so many
00:13:43
things that I thought I would never
00:13:44
understand I love that you always
00:13:46
discuss such relevant and relatable
00:13:48
topics and do it in a way that is
00:13:49
helpful for the average person trying to
00:13:51
learn the basics of personal finance you
00:13:53
have no idea how much your blog and
00:13:54
podcast have taught me and helped me
00:13:56
face my personal finance fears your
00:13:58
education and work have made me feel so
00:14:00
empowered and have alleviated a lot of
00:14:02
my anxiety I cannot tell you how
00:14:03
grateful I am for your work and
00:14:05
commitment to teaching and sharing your
00:14:06
knowledge thank you so much I look
00:14:08
forward to continuing to learn from you
00:14:11
so that listeners I'm not sure how to
00:14:13
describe how that note makes me feel how
00:14:15
good it makes me feel that this note
00:14:17
represents listeners like you and that
00:14:19
my little waves in the ocean are not
00:14:21
only reaching your Shores but carrying
00:14:24
an important message that helps you in
00:14:25
your lives and speaking of that I find
00:14:28
it so cool that I can say this sentence
00:14:29
this very sentence one time and that
00:14:32
through modern technology it will reach
00:14:33
thousands and thousands of you at your
00:14:35
own pace through your speakers through
00:14:37
your headphones as you drive to work as
00:14:39
you walk your dog or cook that meal
00:14:42
literally all over the world it is
00:14:44
awesome so from the bottom of my heart
00:14:46
thank you for joining me on this journey
00:14:48
hey this is Brad Barrett you can hear me
00:14:50
and Jesse back on episode 54 of the best
00:14:52
interest podcast and you can learn more
00:14:54
about the life-changing power of
00:14:56
financial independence by listening to
00:14:58
my podcast choose fi that's choose like
00:15:01
make a choice fi for financial
00:15:04
Independence hey everyone this is Nick
00:15:06
muli you can hear Jesse and I back on
00:15:08
episode 60 of the best interest podcast
00:15:10
and you can check out more of my work at
00:15:12
ofd dolland dat.com thank you all right
00:15:15
so now I want to talk about a minor or
00:15:18
maybe a major maybe maybe a really
00:15:20
important rebranding of this podcast
00:15:23
because on one hand I love I love love
00:15:26
love the name the best interest and I
00:15:29
know that's how many of you know of this
00:15:31
podcast right you know the name well you
00:15:33
you share it with other people the brand
00:15:35
has done its job and it's stuck out with
00:15:37
you but someone I I really admire in the
00:15:40
podcasting World said something
00:15:41
interesting to me six months ago or so
00:15:44
they said Jesse I think your content is
00:15:46
as good as anyone out there with a
00:15:48
finance or investing podcast it's just a
00:15:50
matter of making sure that more people
00:15:53
actually have the chance actually have
00:15:54
the opportunity to listen to your
00:15:57
podcast and on that front list listeners
00:15:59
here's a little bit of of inside
00:16:00
baseball knowledge maybe something you
00:16:02
you didn't necessarily sign up for to
00:16:03
learn but when the title of a podcast
00:16:07
doesn't do enough to describe the
00:16:09
content of the podcast it it can turn a
00:16:11
lot of listeners away or people just
00:16:13
they don't feel the need to tune in in
00:16:15
the first place and now just a few
00:16:17
minutes ago kind of coincidentally you
00:16:19
heard in that one listener email to me
00:16:22
she first heard of me on an episode of
00:16:24
the podcast how to money now what a
00:16:26
great example you know the how to money
00:16:28
guys Matt and Joel they have an awesome
00:16:31
podcast but when you hear a podcast
00:16:34
that's titled how to money what do you
00:16:36
think that is about that is a amazingly
00:16:39
descriptive title for their personal
00:16:41
finance content it it matches the
00:16:43
content perfectly now the best interest
00:16:46
it's a great name I really like the name
00:16:48
but only after you've discovered what
00:16:50
the podcast is about after I make you
00:16:52
aware of the double meanings of the
00:16:54
cutesy language there and I was
00:16:57
introduced a couple months ago to a
00:16:58
podcast marketing expert and he said
00:17:01
that the best interest is the perfect
00:17:03
example of what he calls a too cute
00:17:05
title it's cute it's nice but only after
00:17:09
you understand what the podcast is
00:17:10
actually about if you're an outsider
00:17:12
looking in and you just saw that title
00:17:14
the best interest I'm not sure if you'd
00:17:16
know what it was about I maybe you all
00:17:19
listening because you are investing
00:17:20
people maybe you'd make the connection
00:17:22
to you know the fiduciary standard the
00:17:24
best interest of a client maybe you'd
00:17:26
make the connection to Benjamin
00:17:27
Franklin's quote but maybe not like if
00:17:29
you were an attorney for example if you
00:17:31
actually Google the best interest right
00:17:33
now a lot of the top results have to do
00:17:36
with in family courts the best interest
00:17:38
of the child of of a decision being made
00:17:41
in the best interest of the child right
00:17:43
my point is the best interest is not an
00:17:46
extremely descriptive title for what
00:17:48
this content what we talk about is
00:17:50
actually about so instead that's what I
00:17:53
needed to find a podcast title that
00:17:55
could be very descriptive of what we
00:17:56
actually talk about here and ideally
00:17:58
that means that the title is also very
00:18:00
searchable in podcast players on Google
00:18:02
stuff like that and so for all those
00:18:04
reasons the podcast title moving forward
00:18:07
is going to be less flashy but much more
00:18:09
descriptive it's going to be personal
00:18:12
finance for long-term investors now
00:18:15
doesn't that neatly encapsulate what we
00:18:16
talk about here and know okay it's not
00:18:18
as cute as the best interest podcast but
00:18:21
personal finance for longterm investors
00:18:24
I know it'll take a little while for us
00:18:25
to get the best interest out of all our
00:18:27
brains mostly my own and so conveniently
00:18:30
I can keep the best interest on as an
00:18:32
official subtitle of the podcast if you
00:18:35
will so it'll still remain searchable in
00:18:37
that way when you see this on your
00:18:39
podcast players you're going to start
00:18:41
seeing it as personal finance for
00:18:43
long-term investors hyphen the best
00:18:45
interest okay it'll show up there
00:18:48
eventually I'll probably drop that
00:18:49
subtitle because I hope there comes a
00:18:52
point when more people know of this as
00:18:54
personal finance for long-term investors
00:18:57
then know of it as the best interest
00:18:59
now it's a little bit nerve-wracking for
00:19:00
sure it might be a little bit like
00:19:02
renaming your child but I know that in a
00:19:05
few months or a year or two I'll look
00:19:08
back at this moment in time I'll look
00:19:09
back at this particular name change and
00:19:12
I know that it will be the right move
00:19:14
the best interest podcast got me here
00:19:16
it'll always be close to my heart but
00:19:18
yes starting with today's outro you will
00:19:21
hear our new name personal finance for
00:19:23
long-term investors hey best interest
00:19:26
listeners this is Justin Peters you can
00:19:28
hear Jesse and I debate the golden rules
00:19:30
of personal finance back on episode 78
00:19:33
of the best interest podcast if you're
00:19:35
looking for more personal finance
00:19:37
content check out my podcast the
00:19:39
struggle is real on your favorite
00:19:40
podcast player with the rebranding
00:19:42
behind us I want to recap some of the
00:19:45
very best Clips some of the highlights
00:19:47
from the first 100 episodes of the best
00:19:49
interest podcast oh sorry from personal
00:19:52
finance for long-term investors see I
00:19:54
need to start using the right title I'll
00:19:56
allow it for now uh long story short I
00:19:58
reached out to my newsletter subscribers
00:20:00
in planning for this episode and ask
00:20:02
them for their favorite episodes and
00:20:04
clips from podcast history and the top
00:20:07
answers were relatively uniform it was
00:20:09
pretty easy to pick out the top three so
00:20:12
first we're going to go back to episode
00:20:13
70 with Jeremy Schneider from personal
00:20:15
finance Club who talked about the seven
00:20:18
sins of investing hello Millionaires and
00:20:20
future millionaires this is Jeremy
00:20:22
Schneider you can hear Jesse and I back
00:20:24
on episode 70 of the best interest
00:20:27
podcast and you can find my fun daily
00:20:30
personal finance infographics on
00:20:31
Instagram ersonal Finance Club I saw a
00:20:35
really cool post of yours it caught my
00:20:37
eye because you called it the seven sins
00:20:40
of investing what are those sins Jeremy
00:20:44
the seven sins of investing so I've been
00:20:46
helping people learn about investing for
00:20:47
a long time and it's really simple as
00:20:51
core spend lesson you make invest Buy
00:20:53
and Hold index funds for a long period
00:20:55
of time but I always see people making
00:20:57
these seven mistakes and let's go
00:20:59
through quickly SIN number one is
00:21:01
holding cash in a retirement account and
00:21:05
I I made a post once that said my
00:21:06
nightmares are fueled by by Young
00:21:08
investors holding cash in retirement
00:21:10
accounts because it's as insanely common
00:21:14
and insanely devastating mistake which
00:21:15
is you open up a Roth IRA you put a
00:21:18
bunch of money in you like put your
00:21:19
hands over your head say I have a Roth
00:21:21
IRA I put money and I've done it I win
00:21:24
and a few years go by and you look in
00:21:26
your Roth IRA and you put in $5,000 you
00:21:28
again and it's there's like $52 in there
00:21:31
and you're like what's this I thought
00:21:33
this was supposed to grow and what what
00:21:34
happened is when you put money into a
00:21:37
retirement account or any investment
00:21:38
account it's just cash sitting there you
00:21:41
have to take a second step which is to
00:21:43
actually take that cash cash and
00:21:45
purchase something with it like an index
00:21:47
fund and so if you ever look inside of
00:21:49
your investment accounts and you see any
00:21:51
words like cash sweep core default money
00:21:55
market anything that and there's it is a
00:21:58
little bit
00:21:59
confusing because they can use a bunch
00:22:00
of different words to mean the same
00:22:01
thing but anything that sounds like cash
00:22:04
if you see any amount of money sitting
00:22:06
there over like a dollar then you should
00:22:08
be investing that you should take that
00:22:09
money and go buy your fund so that's s
00:22:11
number one sin number two is picking
00:22:13
individual stocks actually I don't know
00:22:15
if this one kind of pains me because I
00:22:18
think choosing individual stocks has a
00:22:21
benefit which is it it's enticing it's
00:22:23
encourages people into get people
00:22:25
involved right and it's it's relatable
00:22:28
oh home Depot I go there all the time I
00:22:30
should buy stock in their company it's
00:22:31
almost a little bit nostalgic like
00:22:33
that's what our grandparents did they
00:22:35
owned they own 10 shares of seirs robu
00:22:38
and they you know they sold it 50 years
00:22:40
later I I consider to be a sin because
00:22:43
it basically opens you up to risk of
00:22:45
these companies going into business
00:22:47
without higher expected returns since we
00:22:49
can't know ahead of time which stocks
00:22:51
going to do better when you're picking
00:22:52
individual stocks you're adding risk
00:22:54
without getting higher expected returns
00:22:56
and that's a bad deal in investing
00:22:58
what's your take on individual stocks
00:23:01
yeah it's it's similar I think for the
00:23:02
average person you are exposing yourself
00:23:05
to more errors than you would ever
00:23:07
expose yourself to if you are owning an
00:23:10
index fund quite simply do I think that
00:23:13
if you want to have a little bit of fun
00:23:15
and you want to take 1% of your money
00:23:17
and buy Burkshire hathway because you
00:23:19
like Warren Buffett I get it I'm not
00:23:21
going to tell you that that's the
00:23:22
optimal investing decision but I I can
00:23:25
understand that but I think the the
00:23:27
average scenarios that you and I here
00:23:28
Jeremy are the ones where people say
00:23:30
yeah I've got a diversified portfolio
00:23:32
I'm onethird Apple onethird Tesla
00:23:34
onethird
00:23:35
Nvidia huge US tech companies correct
00:23:39
they're all very similar that's the
00:23:40
scary scenario and it's also a little
00:23:42
scary I see on your Instagram post for
00:23:44
this SIN number two one of the companies
00:23:46
that you highlight out of maybe 10 is my
00:23:49
beloved Kodak here in Rochester New York
00:23:51
poor Kodak it used to be the lifel of
00:23:53
our community had 880,000 local
00:23:56
employees out of a city I mean the
00:23:58
population of Rochester is 250 in the
00:24:01
city itself 250,000 about a million when
00:24:03
you do the whole metro area so if you
00:24:05
think of a million local citizens
00:24:07
880,000 of them worked at Kodak in about
00:24:10
1990 that's 30 years ago today it's 1500
00:24:14
wow so in 30 years Kodak went from
00:24:17
880,000 employees to 1500 and the
00:24:19
business is you know essentially went
00:24:21
out of business stock owners who if they
00:24:23
held the whole time lost all of their
00:24:24
money right that is one of the risks you
00:24:26
run owning an individual stock and if we
00:24:30
took ourselves back to like 1995 or
00:24:32
something you would have every reason to
00:24:34
think Kodak would continue to crush it
00:24:36
for decades to come people have been
00:24:38
taking more photos every single year
00:24:40
photos are become becoming cheaper
00:24:42
population's growing you could make like
00:24:43
50 arguments why Kodak was going to
00:24:45
continue growing but the unexpected
00:24:48
thing happens right digital photography
00:24:50
comes out Kodak doesn't adapt whatever
00:24:52
and if you look at the biggest companies
00:24:54
of the 90s we might see names like IBM
00:24:57
Sears General Motors General Electric
00:24:59
and you know these all didn't go as
00:25:02
poorly as Kodak did but they're not not
00:25:04
in the top 10 anymore right right and so
00:25:06
when you're picking individual stocks
00:25:08
based on how they've done in fact this
00:25:10
leads us very nicely into s number three
00:25:12
SIN number three is don't chase past
00:25:15
performance or I guess the sin would be
00:25:17
chasing past performance because if you
00:25:19
looked at codak stock in 1995 and said
00:25:22
oh my gosh this stock has been crushing
00:25:24
it for 15 years I want the stock that
00:25:26
crushes it so I to buy codc when you
00:25:29
look backwards and buy what just did
00:25:31
well you're missing what's about to do
00:25:33
well and so today you could make a
00:25:35
similar argument the biggest companies
00:25:37
in the US Apple Amazon Google Facebook
00:25:40
Microsoft Tesla you know these are
00:25:43
superstars today but if we fast forward
00:25:45
20 years are they going to still all be
00:25:47
in the top 10 I can almost guarantee
00:25:49
that they all won't be in this top 10
00:25:51
maybe one or two will we don't know the
00:25:52
future but when you're just looking at
00:25:54
what just recently did well you're
00:25:56
missing out on that new startup you
00:25:58
missing out on you know the '90s we were
00:26:00
buying codec but we weren't buying
00:26:02
Netflix or something you know the the
00:26:03
unexpected thing that's going to do
00:26:05
really well and so don't buy your
00:26:07
Investments based on what did well in
00:26:09
the past buy broad index funds based on
00:26:13
what will do well what we you know to
00:26:15
guarantee ourselves that we're going to
00:26:16
own whatever happens to do well going
00:26:18
forward and I I agree with what you said
00:26:19
earlier by the way which is yeah I I
00:26:21
actually have a 10% rule with 90% of
00:26:23
your portfolio Buy and Hold index funds
00:26:26
but with 10% go nuts if you want to buy
00:26:29
individual stocks you want to buy some
00:26:31
crypto you want to buy some ETFs
00:26:34
whatever go for it and I when I say ETFs
00:26:37
I mean you know like actively manag or
00:26:39
narrow sector ETFs you know ETFs are
00:26:41
fantastic to buy for their low cost and
00:26:44
Broad nature of the uh the index on
00:26:46
versions but yeah don't don't be
00:26:48
speculating with your whole portfolio
00:26:49
because if you're constantly buying what
00:26:50
just did well you're going to miss
00:26:52
what's about to do well yeah J John
00:26:54
Bogle famously said actually not
00:26:56
famously said I think it's one of his
00:26:57
lesser known quotes but there's an
00:26:59
excellent speech essay he did about it
00:27:01
the quote is the iron rule of investing
00:27:04
is reversion to the mean it always rears
00:27:07
its head reversion to the mean that
00:27:09
which is high will eventually come back
00:27:10
to average that which is low will
00:27:12
eventually come back to average and he's
00:27:14
essentially restating your sin number
00:27:16
three there Jeremy what is sin number
00:27:18
four yeah on that reversion of the mean
00:27:21
right now everyone hates International
00:27:22
stocks everyone's like how' you buy
00:27:24
International S&P 500 tech stocks that's
00:27:27
the way like those are was doing great
00:27:29
but I'm like you know it's really hard
00:27:31
for me to push this narrative it's not
00:27:32
popular but personally with my money I
00:27:35
have like 35 to 40% of my portfolio in
00:27:38
non US stocks and yeah they've done
00:27:40
poorly the last 10 years but is is the
00:27:43
next 10 years going to look like the
00:27:43
last 10 probably not and like you said
00:27:45
reversion of the mean I don't you know
00:27:47
it's hard to give you a very compelling
00:27:50
argument that like the US markets not
00:27:52
going to do well and international
00:27:53
markets are going to do well but I kind
00:27:55
of think maybe International markets are
00:27:57
underpriced Maybe there's a little bit
00:27:58
too much speculation built into the US
00:28:00
tech tech stocks and fast forward 10
00:28:03
years oh International markets have been
00:28:04
averaging 12% a year while us has been
00:28:06
averaging seven suddenly I look pretty
00:28:09
smart for buying International all right
00:28:11
sorry I'm longwinded I love talking
00:28:14
about investing so number four is timing
00:28:17
the market everyone kind of just like
00:28:20
what I was talking about everyone loves
00:28:21
to guess what's about to happen and
00:28:23
right now is no better example in fact
00:28:25
2023 is a great example which is at the
00:28:27
beginning of 2023 you could find endless
00:28:30
headlines about the gloom and doom
00:28:33
coming to the economy inflation
00:28:35
recession the Market's crashing we had a
00:28:38
bad 2022 blah blah blah you know
00:28:40
meanwhile the Market's up I think like
00:28:42
16% or something this year and so people
00:28:45
were moving their money into Cash like
00:28:47
oo High yeld savings accounts are paying
00:28:49
4% i g to get my 4 per. if you put your
00:28:51
money to a high old savings count in
00:28:53
2023 and got 4% and not the year's not
00:28:55
even over so maybe at like 3% so far you
00:28:58
missed you underperformed the market to
00:29:00
date by like 14% like underperforming by
00:29:03
14% is devastating and right and that's
00:29:07
what timing the market can do and so
00:29:09
timing the market is any sort of
00:29:11
decision based on what you think is
00:29:13
going to happen or what is happening
00:29:15
move my money in move my money out move
00:29:17
to bonds move to stocks move this move
00:29:18
that and it's a really tough pill for an
00:29:21
investor to swall that you kind of need
00:29:22
to ignore all that it seems like and
00:29:25
again I kind of go back to human
00:29:26
evolution we're designed as humans to
00:29:28
react to stimulus if we hear a twig
00:29:31
break break in the jungle a tiger might
00:29:34
be looming and we should run but if we
00:29:36
hear a scary stock headline we shouldn't
00:29:39
pull our money in fact like you said
00:29:41
probably the opposite you know as
00:29:42
everyone else is running out we should
00:29:43
probably be running in and so you kind
00:29:45
of have to ignore ignore don't don't
00:29:47
time the market don't don't do something
00:29:50
just stand there another John Bal quote
00:29:53
and another Shameless plug only because
00:29:55
I I literally published it this morning
00:29:57
an article about a terrific real life
00:29:59
stock lesson from just the last two
00:30:01
weeks that the real world stock market
00:30:04
provided us uh against trying to time
00:30:06
the market a lesson of just zoom out and
00:30:08
wait for things to happen simply because
00:30:11
the market was down something like 10%
00:30:14
from the end of July through the end of
00:30:16
October now down 10% in three months
00:30:18
doesn't feel good nobody's having fun
00:30:21
and it would be very human to say I'm
00:30:22
sick of this I'm going to cross my
00:30:25
fingers sell just wait wait it out till
00:30:28
the market recovers before I put my
00:30:30
money makes perfect makes perfect sense
00:30:32
on the face of it and and little would
00:30:34
that investor have known that the
00:30:37
Federal Reserve Jay Powell the chairman
00:30:38
was about to come out and say yeah we
00:30:41
think we're done with interest rate
00:30:43
hikes and the market popped for 6% in
00:30:46
one week well if you sat out that week
00:30:48
because you you were just sick of it
00:30:50
missing 6% is not as bad as the example
00:30:53
that that you gave of of underperforming
00:30:55
by 13% but % sucks if that's what you
00:30:59
missed out on right yeah if you're
00:31:01
waiting for the market to recover you'll
00:31:03
miss it you know you have to you have to
00:31:05
be investing when it's down that's when
00:31:06
you want to be buying when it's down and
00:31:08
you know that's a great example hey
00:31:10
what's going on this is Doug Hunnington
00:31:13
and you could hear Jesse and I back on
00:31:15
episode number 72 you could hear more of
00:31:18
my ramblings over at the mile high five
00:31:21
podcast what's the number five Jeremy
00:31:23
the number five is paying high fees and
00:31:27
you and I we live in a world of
00:31:29
financial educated people but in in the
00:31:32
real world if you walk into any Town USA
00:31:35
and ask people what they're doing
00:31:37
oftentimes they are investing via some
00:31:40
sort of high fee mutual fund or advisor
00:31:45
or 401k or you know and if you walk into
00:31:48
like a strip mall financial advisor
00:31:50
anywhere in the US they will put you
00:31:53
into some real crappy products with real
00:31:55
high fees they won't they won't fully or
00:31:58
correctly disclose any of that and it's
00:32:00
very hard for you to even know without
00:32:01
kind of really looking hard into where
00:32:04
your money is going and so just as an
00:32:06
example if you if you pay a 2% annual
00:32:08
fee and some advisor will like that's
00:32:10
really high but I see 4% annual fees I
00:32:13
see five and six% you know loads on
00:32:16
purchases and you know it's right very
00:32:18
easy to find people who are in this
00:32:19
range of a 2% annual fee a 2% annual fee
00:32:22
over the course of a 40-year investing
00:32:24
career Cuts your investment about in
00:32:26
half so if you would have had $2 million
00:32:29
you'd have $1 million just for that fee
00:32:31
that you're paying that adviser and a
00:32:33
lot of people will say I don't want to
00:32:34
do it myself I want to figure it out
00:32:36
it's not worth a million dollars to you
00:32:38
you know like the few hours it's going
00:32:40
to take to open account and put the
00:32:42
money in yourself I mean I'm not trying
00:32:44
to dismiss the value of an adviser but
00:32:46
you should at least understand the
00:32:48
impact of the fees because there may be
00:32:50
no more valuable three hours of your
00:32:53
life financially speaking than looking
00:32:56
into your fees and figureing out if you
00:32:57
can minimize them
00:32:58
totally totally and and something I've
00:33:00
I've learned in my doing this Jeremy you
00:33:02
know the best interest working with
00:33:04
clients as well is there's such a wide
00:33:07
range of quote unquote advice and
00:33:10
Advising and it absolutely behooves
00:33:13
anybody out there if you're considering
00:33:15
to getting professional financial help
00:33:17
know what you're paying for and know
00:33:19
what you're paying because some of the
00:33:22
cases I've seen before you're talking
00:33:23
about mutual funds with one plus percent
00:33:27
advis is charging commissions to sell
00:33:29
them getting five to six% load fees
00:33:32
upfront and then what does the client
00:33:34
get out of that a 30 minute phone call
00:33:37
once a year right so you're talking
00:33:38
about from someone whose incentive is to
00:33:40
sell not toide advice correct correct
00:33:43
correct so you're talking if someone has
00:33:44
a $500,000 account in that case they
00:33:47
might be paying $10,000 a year plus 5%
00:33:52
anytime they make any trades in exchange
00:33:55
for 30 minutes of advice and talk about
00:33:58
a raw deal so I hear you there's some
00:34:01
there's some nasty stuff out there so
00:34:03
everybody know know what your fees are
00:34:05
and know what you're getting for them no
00:34:07
see see if it's worthwhile we've got to
00:34:10
think long term Jeremy and that brings
00:34:12
us to sin number six that's right SIN
00:34:14
number six is thinking short term we all
00:34:17
know people like this who are trying to
00:34:20
get rich quick or live for the weekend
00:34:23
or I just constantly hear from people
00:34:25
who are I I I give them this pitch I'm
00:34:27
like hey hey few hundred bucks a month
00:34:29
spend less than you make throw it in
00:34:30
next fund leave it there don't touch it
00:34:32
minimize fees let it Let It Go they're
00:34:33
like no bro I don't want to be I want to
00:34:36
be rich I when I'm old I'm like you want
00:34:37
to be broke and you're old because
00:34:38
you're gonna be and so I think you know
00:34:40
they're like no I'm gonna you know
00:34:42
Dogecoin is the future or no I'm gonna
00:34:44
put it on Tesla or you know I L talked
00:34:47
to someone the other day who who had
00:34:51
$500,000 and didn't want to get rich the
00:34:53
slow way $500,000 you put an index fund
00:34:56
doubles every seven years you know 7
00:34:59
years that's 1 million 14 years that's 2
00:35:02
million 21 years that's 4 million so 21
00:35:04
years they'd have four million bucks
00:35:07
that's that's insane right but instead
00:35:10
they bought some they chased P
00:35:13
performance they picked stocks they
00:35:14
committed all the sins right they
00:35:15
committed every sin thought thought
00:35:18
short term how can I turn this 500,000
00:35:19
into a million in a year and that
00:35:21
500,000 became 100,000 they lost 80% of
00:35:24
the value and they asked me like how do
00:35:27
I get it back I'm like if I knew how to
00:35:28
5x money overnight I'd be doing that all
00:35:31
day right right like and you thought you
00:35:33
did and you learned the harder way that
00:35:34
you didn't because you you do all your
00:35:35
money if you want to through 10% sure
00:35:37
you know if they if they took 10% 50,000
00:35:40
and turn that 50,000 to 5,000 then that
00:35:43
would have sucked but they'd still
00:35:45
450,000 growing with the market over
00:35:47
time don't try to get rich quick and if
00:35:49
you do keep it to a you know very small
00:35:52
portion of your portfolio right and and
00:35:54
that example there 500,000 down to
00:35:58
100,000 based on the fact that they were
00:36:00
coming to you with that story it sounds
00:36:02
like they suffered the permanent
00:36:04
impairment of capital which is something
00:36:06
that Warren Buffett would say is the
00:36:08
number one biggest risk that investors
00:36:10
can face and and it's something that
00:36:12
investing in a diversified Index Fund
00:36:15
you completely negate that risk save for
00:36:18
one potential exception if you invest in
00:36:20
an index fund and an asteroid hits the
00:36:23
world and destroys the global economy
00:36:26
you have permanently impaired your
00:36:27
Capital that's true short of that
00:36:29
example that the natural diversification
00:36:31
of an index fund will prevent that fate
00:36:33
from occurring and that's talk about a
00:36:36
terrible fate I mean going from 500,000
00:36:38
to 100,000 essentially your portfolio
00:36:41
will be limping for the rest of your
00:36:43
life yeah and yeah and then they asked
00:36:45
me should I keep doing this to to to win
00:36:47
it back it's almost like turns into into
00:36:49
like gamblers mentality which is I can
00:36:53
just win it back but we all know how
00:36:55
that turns out for gamblers they just
00:36:56
lose more they go into debt and then you
00:36:58
have to hit rock bomb like you know my
00:36:59
advice was like take your 100,000 throw
00:37:02
Index Fund you just you just spent
00:37:04
$400,000 on education it was an
00:37:06
expensive lesson but better than lose
00:37:09
100,000 and you lost all better than
00:37:11
going to debt trying to win back right
00:37:13
so it's it's a tough bu to SL though
00:37:15
right so our listeners they're not going
00:37:16
to commit that sin they are going to be
00:37:19
slow and steady investors they're also
00:37:21
not going to commit SIN number seven
00:37:22
which is it is the most deadly sin maybe
00:37:25
you know I said one was maybe the worst
00:37:27
but this one is even worse than number
00:37:28
one so number seven is not investing
00:37:30
early and often I kind of gave you an
00:37:32
example earlier in the show where I said
00:37:34
if you invest 250 bucks a year for 10
00:37:38
years you have like 3,000 bucks because
00:37:41
you didn't invest very often you only
00:37:43
invested for 10 years that's enough but
00:37:45
if you invest 250 bucks for 40 years
00:37:48
you'll have never done worse than a
00:37:49
million dollars and so everything else
00:37:52
we talked about the fees the performance
00:37:54
the stock picking the you know
00:37:56
everything all the sins they are
00:37:58
irrelevant if you're not putting money
00:38:00
in you know if you could if you're the
00:38:02
optimal perfect investor every fee every
00:38:05
every tax break everything right and
00:38:07
then you're putting in a hundred bucks a
00:38:08
year doesn't matter you might as well
00:38:10
not even do it almost you know but if
00:38:12
you are just a mediocre investor and
00:38:14
you're picking some random stocks and
00:38:16
some random mutual funds and getting
00:38:19
some random taxes on them but you're
00:38:20
putting in a thousand bucks a month
00:38:22
you're going to be extremely wealthy and
00:38:23
so I think some people get so academic
00:38:25
about it they forget what matters most
00:38:28
which is just how much money put in
00:38:29
that's how you get rich hey best
00:38:31
interest listeners this is Joel arzgard
00:38:33
from the how to money podcast you can
00:38:35
hear Jesse and I back on episode 59 of
00:38:38
the best interest podcast massive
00:38:41
congrats to one of the best fellas in
00:38:43
the personal finance podcasting space
00:38:45
Jesse here's to hundreds of more Killer
00:38:48
episodes to come my friend okay always
00:38:51
good to hear Jeremy and what he has to
00:38:53
say now for our second clip this one
00:38:55
goes back to a more recent episode
00:38:57
episode 96 which I hope will go down as
00:39:00
an altimer as an evergreen episode that
00:39:02
really covers two important ideas the
00:39:05
first one is why we lean towards
00:39:09
indexing in the first place and you know
00:39:11
not just because everyone says so I mean
00:39:14
that's one thing but I really wanted to
00:39:15
open up the hood and explain to you the
00:39:18
the actual rationale the logic for
00:39:21
indexing or diversifying at the very
00:39:23
least as opposed to trying to pick a
00:39:26
winning stock or as opposed to hoping
00:39:28
that someone can pick a winning stock
00:39:29
for you and the other thing we talked
00:39:31
about in episode 96 is the idea behind
00:39:33
timing the market right why timing the
00:39:36
market tends to be so hard again not
00:39:38
just because everyone says so I know
00:39:39
there are a lot of there are a lot of
00:39:41
sayings out there right time in the
00:39:43
market versus timing the market that's
00:39:46
great that's fine but why can we explain
00:39:49
why it makes sense to try to not time
00:39:51
the market so inspired by a terrific
00:39:54
listener question we recorded episode 9
00:39:58
and now I want to uh play to you one of
00:40:00
the best clips from that episode hey
00:40:02
money nerds this is Paula from a Ford
00:40:05
anything you can hear Jesse and I back
00:40:07
on episode 75 and learn more about
00:40:10
strategic splurging over at afford
00:40:13
anything.com where we believe in saying
00:40:16
yes to the best and no to the rest cuz
00:40:19
your wallet can handle anything but just
00:40:21
not all at once I want to explain the
00:40:23
concepts around timing the market this
00:40:26
explanation will include little sidebars
00:40:28
like lump sum investing dollar cost
00:40:30
averaging the PE Ratio or the cape ratio
00:40:33
so going back to Lynn's question Lyn's
00:40:35
original question it makes so much sense
00:40:37
right with the market at all-time highs
00:40:39
right now like it is here on December
00:40:41
12th of 2024 why is right now a good
00:40:44
time to invest right surely we should be
00:40:46
buying low and selling high but you want
00:40:48
me to buy High you want me to buy at an
00:40:50
all-time high okay first I want to
00:40:52
explain the cape ratio Cape cyclically
00:40:55
adjusted price to earnings it's very
00:40:57
much related to the price to earnings
00:40:59
ratio which I think we touched on before
00:41:01
it's a way of measuring what stocks are
00:41:02
selling for their price against how well
00:41:05
those companies are doing financially
00:41:06
their earnings and the cape ratio is
00:41:09
smooth out over time to account for
00:41:11
inflation that's the cyclically adjusted
00:41:14
part of it cap cyclically adjusted price
00:41:17
to earnings ratio now logically speaking
00:41:19
Lynn has a pretty good point here we
00:41:21
know that the S&P 500 price is at an
00:41:23
all-time high and we know that price is
00:41:25
one of the great equalizers in
00:41:26
determining if an investment is good or
00:41:28
not right our Honda Civic example or the
00:41:30
hamburger example are Burgers good yeah
00:41:33
hamburgers are good would I pay $100 for
00:41:35
a hamburger no I wouldn't price matters
00:41:38
okay quality is one thing but price is
00:41:40
important too historically the S&P 500
00:41:43
Cape ratio oscillates between 10 and 25
00:41:46
and generally though not always the
00:41:48
lower the PE the better the
00:41:50
forward-looking investment opportunity
00:41:53
that makes intuitive sense or at least I
00:41:55
think it should the lower the price that
00:41:57
I'm purchasing my investment the better
00:41:59
my long-term returns will be but does
00:42:01
that mean that we should avoid investing
00:42:04
in any sort of stock market altogether
00:42:06
simply because the PE the price of
00:42:08
earnings or the cape ratio is high the
00:42:11
answer there is no not really just
00:42:13
because the cape ratio is high it still
00:42:15
might be smart to invest and we're going
00:42:17
to link something in the show notes an
00:42:18
article I wrote called timing the future
00:42:21
Market Cape versus future returns and in
00:42:24
that article you'll see some pretty
00:42:25
interesting graphs that I put together
00:42:27
where we could point to plenty of times
00:42:29
where the cape ratio was 25 or 30 very
00:42:32
much on the high end and the future
00:42:34
inflation adjusted 10 year returns or 20
00:42:36
or 30 year returns were a perfectly
00:42:38
normal and acceptable five six seven 8%
00:42:42
just because the cape ratio is high
00:42:44
there is no Golden Rule stating that you
00:42:46
must avoid investing for reference right
00:42:49
now as of this recording the cape ratio
00:42:51
is at 38 which is very very high by
00:42:54
historical standards and again going
00:42:56
back to Lyn's point if I'm paying a very
00:42:59
very high price for the stock market
00:43:01
compared to historical standards surely
00:43:03
that can't be a good thing surely I must
00:43:05
be spending $100,000 on a Honda Civic
00:43:08
right now well I hear you Lynn now the
00:43:12
cape ratio hasn't been below 25 since
00:43:14
the year 2014 and that has some people
00:43:17
seriously concerned are we in this
00:43:19
massive 10-year bubble of high
00:43:21
valuations and at some point is that
00:43:23
bubble going to pop maybe I might not
00:43:25
know enough to have an answer that
00:43:26
question question but I do know the
00:43:28
counterargument here I think it makes a
00:43:30
lot of sense and I'm going to try to lay
00:43:32
it out Simply 100 years ago the American
00:43:34
economy was pretty Hands-On
00:43:36
manufacturing production factories
00:43:38
buildings stuff that is expensive to
00:43:40
make and expensive to scale meaning if
00:43:43
Ford let's say Ford wanted to double its
00:43:45
car creation capacity it had to buy new
00:43:48
land and build new factories and train
00:43:50
new people and put in new assembly lines
00:43:53
and all of that is really expensive for
00:43:55
a company to do and It ultimately eats
00:43:57
into that company's earnings and growth
00:43:59
in other words it was really hard for
00:44:01
those kind of companies to rapidly
00:44:03
expand their profit margins but today
00:44:06
many of our biggest companies work much
00:44:08
differently than that if Microsoft wants
00:44:11
to sell 20% more office licenses they
00:44:14
don't need any additional Capital
00:44:16
overhead to do so they just sell more
00:44:18
licenses many companies in today's
00:44:20
digital age they work the same or at
00:44:23
least very similar ways to Microsoft
00:44:25
right they don't have these massive
00:44:26
Capital re requirements to grow like the
00:44:28
ones that existed 30 or 50 or 100 years
00:44:30
ago and as such those companies can grow
00:44:32
their earnings much faster than
00:44:34
historical standards and if that's true
00:44:36
maybe I am perfectly okay to pay a 38
00:44:39
times Cape ratio today because I believe
00:44:42
the earnings portion of that equation is
00:44:43
likely to rapidly increase in the coming
00:44:45
years turning today's price into quite
00:44:48
the bargain the point being that while
00:44:50
the cape Ratio or the PE Ratio is
00:44:52
generally helpful it's not necessarily
00:44:54
smart to believe that the PE ratios of
00:44:56
the 19 50s ought to instruct how we
00:44:59
invest today and then going back to the
00:45:01
main point of today just because a PE
00:45:03
ratio is high we can still have strong
00:45:06
long-term future returns going forward
00:45:08
it's hard to time the stock market based
00:45:10
on PE ratio alone instead there a couple
00:45:13
simple tried andr techniques when it
00:45:15
comes to investing your money into the
00:45:16
stock market probably some things that
00:45:18
you might have heard of before to start
00:45:20
I want to tell you a story from 2022
00:45:22
which was in the middle of a bad year
00:45:23
for both stocks and bonds and those kind
00:45:25
of bare markets they make you question
00:45:27
should I just wait for the bottom before
00:45:29
I invest and reader of the blog pson he
00:45:31
wrote in during that year and he said
00:45:33
Jesse I'm not tempted to sell anything
00:45:35
in my 401k or Roth IRA but I don't know
00:45:38
why I should continue buying at least
00:45:39
not at this point with the market doing
00:45:41
what it's doing it's not going up
00:45:42
anytime soon can I contribute money to
00:45:45
those accounts as cash and then wait to
00:45:46
invest once the market hits its bottom
00:45:49
it was a great question and yeah you
00:45:50
could try pson you know that's what I
00:45:52
responded to him but I don't think he
00:45:54
should and there are a few reasons why
00:45:56
and these reasons apply to you listening
00:45:57
today because timing the market in the
00:45:59
way that pulson suggested first it
00:46:02
barely affects your future portfolio
00:46:04
second it's really hard to execute well
00:46:07
and third it makes your life
00:46:08
demonstrably worse along the way hey
00:46:11
there friends this is Andy Hill you can
00:46:13
hear Jesse and I back on episodes 66 and
00:46:16
84 of the best interest podcast feeling
00:46:19
very grateful that Jesse asked me back
00:46:21
twice and you can check out more family
00:46:24
financial Independence tips over at my
00:46:27
podcast marriage kidsand money and on
00:46:30
our website marriage kidsand money.com
00:46:32
so here's a story of three hypothetical
00:46:35
fictional investors mostly they're
00:46:37
identical investors we've got normal
00:46:38
Nick we've got good timing Gary we have
00:46:41
bad timing bill normal Nick good timing
00:46:44
Gary bad timing Bill all three investors
00:46:46
started their investing in 1985 when
00:46:48
they were 22 years old they're now 59
00:46:50
and they're approaching retirement and
00:46:52
some other facts about them all three of
00:46:54
them use the S&P 500 index funds for
00:46:56
their stock inv Ms all three invested
00:46:58
$200 a month in 1985 and then increased
00:47:01
their contributions by 5% per year until
00:47:03
today so now they invest around $1,200 a
00:47:06
month and all three invest via dollar
00:47:09
cost averaging we'll dive into that term
00:47:11
in a couple minutes the point being is
00:47:13
they invest whether the markets are high
00:47:15
they invest whether the markets are low
00:47:16
and they buy in between as well except
00:47:19
for one time now during the great
00:47:21
financial crisis that threw a small
00:47:22
wrench into their plans Nick normal Nick
00:47:25
well he stayed the course and continued
00:47:27
his monthly contributions but Bill and
00:47:29
Gary they wanted to try something
00:47:30
different good time and Gary with his
00:47:32
good timing he managed to time the
00:47:34
market perfectly he stopped investing
00:47:37
just like Paulson wants to with the
00:47:38
question that inspired this article Gary
00:47:40
stopped investing at the market top in
00:47:42
2007 he saved all his cash he then
00:47:45
perfectly timed the market bottom in
00:47:46
March of 2009 deploying all of his cash
00:47:49
into the stock market so he timed the
00:47:51
market to Perfection twice he stopped
00:47:54
investing at the perfect top and then he
00:47:56
began in investing again at the perfect
00:47:58
bottom bad timing Bill also timed the
00:48:00
market top with Gary but when the true
00:48:03
bottom hit in March 2009 bill was
00:48:05
convinced that there was more room to
00:48:06
drop so as the market recovered Bill
00:48:08
waited and waited and waited he thought
00:48:10
a new bottom would eventually come so he
00:48:12
didn't deploy his cash until 2013 when
00:48:14
the market price had fully recovered to
00:48:16
2007 levels and his wise wife screamed
00:48:18
at him to get back into the market now
00:48:21
fast forward I wrote this article in
00:48:22
2022 how different were Nicks and
00:48:25
Garry's and Bill's portfolio at that
00:48:27
point well Gary was best after all he
00:48:28
timed the market perfectly twice and he
00:48:31
had $1.46 million bill was worst after
00:48:35
all he missed many buying opportunities
00:48:37
for about five years but he had $1.38
00:48:40
million and then Nick was right in the
00:48:41
middle at .42 million so again Gary with
00:48:46
the best perfect timing 1.46 bill with
00:48:49
the worst $1.38 and nicked in the middle
00:48:52
at
00:48:53
1.42 the perfect Market timing around
00:48:55
2008 which was a huge crisis right that
00:48:58
got Gary a 3% Edge over normal Nick and
00:49:01
Bill messed up big time yet Gary only
00:49:04
has a 6% Edge over him in the long run
00:49:08
Gary's perfect Market timing wasn't
00:49:10
actually that important now notably
00:49:12
though Bill and Gary when they chose to
00:49:15
time the market they didn't sell any of
00:49:17
their old Investments all they did was
00:49:19
choose not to buy new Investments if
00:49:22
they had sold their old Investments
00:49:23
though and then re-bought later our
00:49:25
conclusion would be much different bill
00:49:28
would have lost another 20% of his total
00:49:30
portfolio as of today despite perfectly
00:49:33
timing the market top okay he sold at
00:49:36
the perfect time but because he didn't
00:49:38
buy back in until it was three or four
00:49:40
years too late his portfolio would be
00:49:42
down about 20% today and Gary who was
00:49:45
perfect twice at the top at the bottom
00:49:47
his portfolio would be about 50% higher
00:49:50
today so it just goes to show if you're
00:49:52
only perfect once with Market timing you
00:49:55
could be down 20%
00:49:57
like bad timing bill you have to be
00:49:59
perfect twice like Gary to actually be
00:50:02
up a large amount and that begs a
00:50:04
question do you feel that lucky
00:50:06
personally I like where normal Nick is
00:50:08
at he didn't worry at all about timing
00:50:10
the market zero skill zero luck and also
00:50:13
zero stress he just kept on buying and
00:50:15
he's in a great place this is a scenario
00:50:17
where the juice simply isn't worth the
00:50:19
squeeze the squeeze again is double
00:50:22
Perfection you have to be right twice if
00:50:24
you manage to be right the first time
00:50:26
see ing your buys before the market
00:50:28
bottom you'll likely be plagued by bad
00:50:30
timing bills issue when the market is at
00:50:33
Peak pessimism right when the market is
00:50:35
truly at the bottom that's Peak
00:50:36
pessimism do you have the skill and the
00:50:39
knowledge and the balls of steel to
00:50:40
deploy your money into that market or
00:50:43
are you a dumb wouldbe Market timer like
00:50:45
the rest of us are and then what's the
00:50:47
juice you get for that squeeze well it's
00:50:49
a 3% boost on your final portfolio or
00:50:52
maybe this time will be different maybe
00:50:53
you'll get a five or six or a 7% boost
00:50:56
on your final portfolio and while your
00:50:58
money is out of the market sitting on
00:51:00
the sidelines what will you be thinking
00:51:02
are you just going to be chilled out and
00:51:03
relaxed with ice in your veins or are
00:51:06
you going to be a nervous wreck worried
00:51:07
about when to get back into the market
00:51:09
not only can this squeeze cost you money
00:51:11
but its psychological cost is
00:51:13
unavoidable Gary sure he gained 3% but
00:51:16
he also gained some white hair he was
00:51:18
out of the market for 18 months 18
00:51:20
months is a really long time are you
00:51:22
willing to wait 6 12 18 24 months or
00:51:25
more for a bare Market to end
00:51:27
now personally I'm not trying to time
00:51:29
the market over that period of time I
00:51:31
don't want to sit on my thumbs and hope
00:51:33
that I time it perfectly who knows how
00:51:36
long it'll take for us to return to
00:51:37
all-time highs when the next bare Market
00:51:39
hits I don't want to test my skill with
00:51:41
timing the market I don't want to test
00:51:43
my blood pressure by staying out of the
00:51:44
market so that story introduces an idea
00:51:47
dollar cost averaging many of us are
00:51:50
doing it without even realizing it that
00:51:52
term interestingly it it kind of has two
00:51:54
definitions though they're somewhat
00:51:55
related the first definition of dollar
00:51:57
cost averaging is to make a series of
00:51:59
investing contributions on regular
00:52:01
intervals such as the way that many of
00:52:03
us might contribute to our 401K accounts
00:52:05
every two weeks $500 comes out of my
00:52:07
paycheck into my 401k and it's invested
00:52:09
into a Target date fund that's dollar
00:52:11
cost averaging now the second definition
00:52:13
though it involves starting with a large
00:52:15
sum of money and then making the
00:52:17
decision to deploy that money into an
00:52:19
investment over a specific period of
00:52:20
time now that in my opinion is a great
00:52:23
idea for Lynn to consider today rather
00:52:26
than dumping 100% of her new investable
00:52:28
money into the S&P 500 today perhaps she
00:52:32
decides to contribute 10% of that money
00:52:34
every single month for the next 10
00:52:36
months that way if the market does tank
00:52:38
in February or whatever some of her
00:52:41
money will benefit from that future
00:52:43
price drop now both of those definitions
00:52:45
of dollar cost averaging share in common
00:52:47
the idea that you're buying assets
00:52:49
regardless of price that you're willing
00:52:52
to accept that sometimes you might buy
00:52:53
High other times you might buy low and
00:52:55
in the long run it's all going to
00:52:57
average out either way you are not
00:52:59
timing the market that all said we
00:53:01
should cover an interesting piece of
00:53:03
math and a term called lump sump
00:53:05
investing in short if we look back on
00:53:07
Market history would we be better off
00:53:09
taking that Lin approach of 10 deposits
00:53:11
over 10 months or should we invest it
00:53:13
all at once as soon as possible looking
00:53:16
back in history about 34s of the time
00:53:18
you would have wished you made the lump
00:53:20
sum investment upfront that should make
00:53:22
sense I think because if we look at
00:53:24
Market history we can easily see that it
00:53:25
has a terrific habit of going up over
00:53:28
time as such any sort of waiting to
00:53:30
invest that we do well historically it's
00:53:33
worked against us the market goes up and
00:53:35
if we're waiting it's going up away from
00:53:37
us in general if I knew that regret was
00:53:40
not a human emotion I would always
00:53:42
always always recommend that people
00:53:44
invest their money in a lump sum as soon
00:53:46
as possible but regret is a human
00:53:48
emotion and we must be aware of that
00:53:50
fact and it feels pretty bad to lump
00:53:52
suum your investment today only for the
00:53:54
market to go down next week therefore if
00:53:57
you're worried about investing
00:53:58
Everything at Once then dollar cost
00:54:00
averaging can be your friend allowing
00:54:02
you to slowly but surely get your money
00:54:03
into the market over time depending on
00:54:05
your level of hesitancy you could dollar
00:54:07
cost average for months or even years so
00:54:10
that's how and why we should continue
00:54:12
investing even during frothy markets
00:54:14
like this one because we don't know
00:54:16
whether it's a bubble that's about to
00:54:17
pop or simply another stair higher on a
00:54:19
long staircase that could go on for
00:54:21
years or decades into the future hello
00:54:23
everyone this is Steve atock you could
00:54:25
hear Jesse and I back on episode 91 of
00:54:28
the best interest podcast check out my
00:54:30
book millionaire habits for everything
00:54:33
you need to know about how millionaires
00:54:35
build wealth and keep wealth available
00:54:37
on Amazon borders Barnes & Noble and
00:54:40
other book sellers okay and for the
00:54:43
final clip today we're going to go back
00:54:44
to episode 81 that was the very first
00:54:46
AMA episode I did and just to highlight
00:54:49
some of the awesome AMA questions I've
00:54:51
gotten in the past year or so I wanted
00:54:53
to share with you this question and
00:54:55
answer where a listener wrote in and
00:54:57
they basically said Jesse my portfolio
00:54:59
has been doing great it's also 100%
00:55:02
invested in the S&P 500 so can you
00:55:05
please try your best to talk me off this
00:55:07
ledge why am I doing something wrong why
00:55:10
do I need to diversify at all why do I
00:55:12
need other asset classes why do I need
00:55:15
other types of stocks when just look at
00:55:18
my track record the S&P 500 is doing
00:55:20
just fine it's an awesome question and I
00:55:22
hope what I provided was a great answer
00:55:24
to that question hey wise listeners this
00:55:27
is Dan otter you can hear Jesse and I
00:55:30
back on episode 92 of the best interest
00:55:34
podcast and check out more teacher
00:55:37
retirement plan talk at the teach and
00:55:40
retire Rich Podcast and on the website
00:55:44
403b wise.org G says I'm close to 100%
00:55:49
large cap stocks in my portfolio and
00:55:52
it's worked great for me for quite a few
00:55:54
years now as time has gone by I sold
00:55:57
more and more of my small cap my midcap
00:55:59
my International and I've gone all in on
00:56:01
large cap stocks and it's working it's
00:56:04
hard for me to see why this isn't a good
00:56:06
strategy going forward I'm close to
00:56:08
retirement but why should I change so G
00:56:11
thanks for the question since you and I
00:56:14
went back and forth via email about this
00:56:16
and I know a little bit about ug I'm
00:56:18
going to use a unique Western New York
00:56:20
analogy as part of my answer so imagine
00:56:22
I replaced the words large cap stocks in
00:56:24
your question with Kodak and uh let's
00:56:26
say it's 1985 so you're a person in 1985
00:56:29
and you say I'm close in my portfolio to
00:56:31
being 100% in Kodak stock and it's
00:56:33
worked great for me for quite a few
00:56:35
years now as time has gone by I've sold
00:56:37
more and more of my other companies my
00:56:39
small midcap my International companies
00:56:40
my International stocks and I've gone
00:56:42
all in on Kodak and it's working it's
00:56:45
hard for me to see why this isn't a good
00:56:47
strategy going forward now my example
00:56:49
sounds a little bit crazy I know because
00:56:52
we're smart investors here we would
00:56:53
never go 100% into one single company
00:56:56
and of course I've intentionally
00:56:58
cherry-picked a company that we all know
00:57:00
went bankrupt but some of the underlying
00:57:02
principles of why that codc statement is
00:57:04
kind of crazy should ring true for your
00:57:07
portfolio G maybe not to the same degree
00:57:10
but the same underlying principles are
00:57:12
there you are going further and further
00:57:15
into one single asset class large cap
00:57:17
stocks so there's no bonds in your
00:57:19
portfolio despite approaching retirement
00:57:22
granted I know as we discussed G and and
00:57:24
the listeners don't know this G will be
00:57:26
receiving a pension of some sort and
00:57:28
it's worth knowing that a pension serves
00:57:30
as fixed income which should lessen G's
00:57:33
need for any Bonds in their portfolio
00:57:36
but it's still it's worth a second look
00:57:38
to understand I mean you have no other
00:57:40
diversifying assets outside of large cap
00:57:42
stocks you're all in on the US there's
00:57:45
no Geographic diversification there's no
00:57:47
International stocks for example if you
00:57:49
look at Market history and and when you
00:57:50
look at what someone might consider a
00:57:52
diversified or balanced portfolio a lot
00:57:54
of times you're going to see something
00:57:55
along the lines of a 7030 portfolio in
00:57:58
the stock portion meaning 70% US Stocks
00:58:02
30% International stocks maybe 6535
00:58:05
maybe even 6040 60% US Stocks 40%
00:58:09
International stocks and one of the
00:58:10
reasons why is because when you zoom out
00:58:13
which we need to do here when you zoom
00:58:14
out over Market history you would see
00:58:16
that the best risk adjusted Returns come
00:58:19
from that mix of us and international
00:58:22
stocks somewhere between 6040 and 7030
00:58:25
another thing
00:58:26
is that you're all in large cap stocks
00:58:28
you know no small caps no uh mediumsized
00:58:31
companies just the few hundred biggest
00:58:34
US companies and nothing else now it's
00:58:36
far far far from the worst asset
00:58:39
allocation I've ever seen But I do
00:58:41
really think it needs some polishing
00:58:43
some pretty important polishing we
00:58:45
cannot and we should not say that the
00:58:48
recent past has been this one specific
00:58:50
way and therefore I'm going to assume
00:58:52
that the future will be that exact same
00:58:54
way or using specifics here you know the
00:58:57
recent past has been most beneficial for
00:58:59
investors in 100% large cap stocks and
00:59:02
therefore the future will also be most
00:59:04
beneficial for investors in large cap
00:59:06
stocks it could be that way but I highly
00:59:09
highly doubt it and I don't only doubt
00:59:11
it because it's you know it's not like
00:59:13
there's some randomization here that
00:59:15
it's like oh you rolled double sixes now
00:59:17
and what are the odds you rolled double
00:59:18
sixes again that's not it at all and yes
00:59:20
we do need to accept that fact that we
00:59:22
can't predict the future and we need to
00:59:23
accept that fact especially in investing
00:59:26
that the past does not dictate the
00:59:27
future but there's something even more
00:59:30
important G and I want to impart John
00:59:33
bogle's famous what he calls the iron
00:59:35
rule of investing and the iron rule of
00:59:37
investing is reversion to the mean
00:59:40
reversion to the mean mean meaning
00:59:42
average reversion meaning in time all
00:59:45
things tend to track back to the average
00:59:48
in investing no asset class can
00:59:51
outperform forever that's a big part of
00:59:53
what John ble was saying asset classes
00:59:55
they could outper perform for a year for
00:59:57
a few years maybe even for a decade but
00:59:59
the asset classes that tend to
01:00:00
outperform for a decade well they tend
01:00:02
to underperform the next decade and in
01:00:05
the long run an asset class that has a
01:00:07
similar risk profile to one another so
01:00:09
say domestic stocks and international
01:00:11
stocks they're both equities they have a
01:00:13
relatively similar risk profile to one
01:00:15
another they will tend to have a similar
01:00:17
reward profile to one another in the
01:00:19
long run meaning when their reward
01:00:21
profiles fall out of sync for a certain
01:00:23
period of time eventually they will
01:00:26
likely revert and we're coming off a
01:00:28
period to G's defense from 2009 to
01:00:32
basically today May of 2024 where US
01:00:35
Stocks have been crushing International
01:00:38
stocks specifically us large cap stocks
01:00:40
the S&P 500 has been one of if not the
01:00:43
best performing Equity asset classes for
01:00:46
the last 15 years and that's terrific
01:00:49
but what John ble has preached to us and
01:00:51
John Bogle is not the only one I mean
01:00:52
most people who who talk about
01:00:54
diversification would agree with this
01:00:56
idea the idea is that nothing can
01:00:58
outperform forever I think I used that
01:01:00
that term before and the fact that large
01:01:03
cap stocks have been so good for the
01:01:05
past 15 years I don't think we should
01:01:07
abandon them all together because we
01:01:08
can't predict the future but it also
01:01:11
doesn't mean that we should put all of
01:01:12
our chips into large cap stocks in fact
01:01:15
if anything it might be time to dial
01:01:17
down that risk diversification is the
01:01:19
way we don't know what the best
01:01:21
performing asset classes are going to be
01:01:23
in the next six months the next six
01:01:25
years the next 60 years we're not
01:01:27
exactly sure but eventually all asset
01:01:29
classes revert back to the mean at least
01:01:32
they have so far in history again hard
01:01:34
to tell what the future will hold but
01:01:36
this is where some basic financial
01:01:38
planning comes into play for G now I
01:01:40
would start G by developing your net
01:01:42
worth statement maybe you've already
01:01:44
done that and a 10-year projected cash
01:01:46
flow maybe you've already done that that
01:01:48
cash flow would if I were looking at it
01:01:50
it would help me understand what your
01:01:51
outbound cash needs are from your
01:01:53
portfolio in the short term you know the
01:01:56
next couple years the medium- term and
01:01:57
eventually in the long term and I'd want
01:01:59
to understand questions about what you
01:02:01
want to do with your money over the rest
01:02:03
of your life and even what you hope to
01:02:04
do with your money after you pass away
01:02:06
now all of those types of input would
01:02:08
then allow us to to back into a more
01:02:10
appropriate asset class for you it might
01:02:13
involve different asset classes of of
01:02:15
equities right diversifying into
01:02:17
different midcap small cap International
01:02:19
those kind of things it might involve
01:02:21
some bonds for some fixed income it
01:02:23
might involve some Alternatives real
01:02:25
estate what ever it may be without
01:02:27
knowing too much more of your your story
01:02:29
G I am pretty hesitant to to suggest
01:02:32
something like 100% large cap S&P 500
01:02:36
stocks I understand how well it has
01:02:38
worked for you for the past 15 years or
01:02:40
however long that's been your portfolio
01:02:42
design and one of the most challenging
01:02:44
things in investing is this thought
01:02:47
process that occurs when something goes
01:02:48
really really well for us in investing
01:02:50
and we go oh we figured it out let's put
01:02:52
more of our chips into that specific bet
01:02:55
oh amazing the S&P 500 has done so well
01:02:57
for me I'm going to put more there and
01:02:59
more there and more there and if there's
01:03:01
anything we can learn from investing
01:03:03
history from Market history from the
01:03:05
wisest people involved in investing that
01:03:08
can be a dangerous game Warren Buffett's
01:03:10
pretty good at it Warren Buffett is very
01:03:12
famous for saying when you find a good
01:03:14
investment you go all in but what Warren
01:03:16
Buffett is doing the way that he's able
01:03:18
to analyze and understand the models of
01:03:21
specific businesses right Warren
01:03:23
Buffett's very much a person who invests
01:03:25
in specific businesses and his analysis
01:03:27
techniques and his patience and his
01:03:29
mindset his temperament is what makes
01:03:32
him really unique he's not the only one
01:03:34
right many there are many individual
01:03:35
investors out there who have found great
01:03:38
success with similar tactics no offense
01:03:40
to anybody out there listening one thing
01:03:42
that those investors aren't doing is
01:03:44
writing in DIY emails to a podcast
01:03:46
saying hey I've got all my chips on this
01:03:49
bet tell me why I'm wrong the idea is if
01:03:52
you're here listening if you're like me
01:03:53
which is you're kind of a diyer maybe
01:03:56
you've got that little extra expertise
01:03:58
diversification is your friend it
01:04:00
reduces the range of potential outcomes
01:04:04
that you have and that that's really big
01:04:06
when it comes to financial planning if
01:04:07
you've already won the game so to speak
01:04:09
if you've put yourself in this great
01:04:11
position in terms of your asset size as
01:04:13
you go into retirement and all you want
01:04:15
to do is is live that successful
01:04:16
retirement you don't have to worry too
01:04:18
much about whether your portfolio is way
01:04:20
up or way down you need to reduce your
01:04:22
range of potential outcomes and the way
01:04:24
you do that is through divers I
01:04:25
ification the S&P 500 and maybe this
01:04:28
will be my last point cuz I know I'm
01:04:29
kind of beating it to death but the S&P
01:04:31
500 is very capable of losing 20 to 40%
01:04:35
over a couple years it's also very
01:04:36
capable of going up 20 to 40% over a
01:04:38
couple years but one thing I would hate
01:04:40
to see happen to you g is to see this
01:04:43
sudden shocking reversion to the mean
01:04:46
over the next six or 12 or 18 months
01:04:49
where the S&P 500 essentially starts to
01:04:52
underperform the rest of the world where
01:04:54
stocks drastic underperform bonds and
01:04:58
you're sitting there 100% into the S&P
01:05:00
500 and maybe you lose 30% of your net
01:05:03
worth over the next 18 months if you
01:05:05
hold for the long run maybe most of that
01:05:08
30% drop Will recover but it's going to
01:05:10
be pretty hard mentally to live through
01:05:13
that and it's going to be pretty hard
01:05:15
mentally to live through that knowing
01:05:16
that you could have been in a little bit
01:05:17
more of a balanced place so anyway that
01:05:20
is the argument that's one of many
01:05:22
arguments for a little bit of
01:05:23
diversification a little bit of balance
01:05:25
remembering John bogle's lesson of
01:05:27
reversion to the mean G since I know
01:05:29
that we've had a conversation before by
01:05:32
all means feel free to reach out to me
01:05:33
and and we can discuss it again but I
01:05:36
hope that answer helps you think about
01:05:38
what you should be doing moving forward
01:05:39
hey listeners this is Brian faly you can
01:05:41
hear Jesse and I back on episode 74 of
01:05:44
the best interest podcast and check out
01:05:46
more of my financial education content
01:05:48
at long-term
01:05:49
mindset. and with that listeners I want
01:05:52
to uh thank you all that's all I've got
01:05:54
here for episode 100 100 of personal
01:05:57
finance for long-term investors or is it
01:05:59
episode one of personal finance for
01:06:01
long-term investors no I think it's
01:06:02
episode 100 but I want to thank you all
01:06:05
I want to thank first off all my guests
01:06:07
wonderful guests that we had on the
01:06:08
first 99 or 100 episodes of the best
01:06:12
interest podcast and I'm hoping many of
01:06:14
them will come back for the next hundred
01:06:15
episodes of personal finance for
01:06:18
long-term investors I wouldn't do this
01:06:20
without you listeners thank you
01:06:21
listeners again for 100 great episodes
01:06:24
and hey here's to 100 more episodes I
01:06:27
hope you will join us I hope you will
01:06:29
continue to tune in and share and learn
01:06:32
here on Personal Finance for long-term
01:06:34
investors thanks for tuning in to this
01:06:36
episode of personal finance for
01:06:38
long-term investors if you have a
01:06:40
question for Jesse to answer on a future
01:06:42
episode send him an email over at his
01:06:44
Blog the best interest his email address
01:06:47
is Jesse bestter interest. blog again
01:06:50
that's Jesse bestter interest. blog did
01:06:54
you enjoy the show subscribe rate and
01:06:56
review the podcast wherever you listen
01:06:58
this helps others find the show and
01:07:00
invest in knowledge themselves and we
01:07:03
really appreciate it we'll catch you on
01:07:04
the next episode of personal finance for
01:07:07
long-term investors personal finance for
01:07:09
long-term investors is a personal
01:07:11
podcast meant for education and
01:07:13
entertainment it should not be taken as
01:07:15
Financial advice and it's not
01:07:17
prescriptive of your financial situation
