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Speaker 1: What's up, everybody. Welcome to Financial Heresy, where we talk

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Speaker 1: about how many works you can make more, keep more,

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Speaker 1: and give more. Today, in this episode, I'm going to

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Speaker 1: be teaching you guys what you need to do to

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Speaker 1: bulletproof your portfolio. I have a course on this in

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Speaker 1: my membership program Heresy Financial University. I'm going to be

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Speaker 1: spilling all of the secrets with you guys today and

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Speaker 1: giving you the exact breakdown of the proper portfolio that

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Speaker 1: will I call it the bulletproof portfolio. This is what

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Speaker 1: you can do to make sure that you can weather

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Speaker 1: any storm no matter what happens in the markets, with inflation,

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Speaker 1: with deflation, with the dollar, with geopolitics, anything that goes on.

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Speaker 1: This is what I call the bulletproof portfolio. There have

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Speaker 1: been dozens of very high level professional attempts at a

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Speaker 1: type of portfolio like this, a permanent portfolio. The most

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Speaker 1: famous one is Bridge Waters Ray Dalio's hedge fund. They

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Speaker 1: are all weather portfolio. This is going to be a

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Speaker 1: very similar portfolio that I'm breaking down for you to

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Speaker 1: all of those. There's going to be obviously my twists

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Speaker 1: on it, because this is my portfolio, so it's going

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Speaker 1: to have my ideas intertwined into it. Basically, the differences

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Speaker 1: come down to some of the macro views and where

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Speaker 1: the proper balance of risk versus reward lies. And so

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Speaker 1: that's gonna be. That's gonna be what we're talking about today.

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Speaker 1: Take this, do what you want with it. We're going

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Speaker 1: to spend about, you know what, forty five minutes in

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Speaker 1: this episode giving you everything you need to do to

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Speaker 1: boltproof your portfolio. Although because it's so quick, we're not

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Speaker 1: going to be able to go into all of the

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Speaker 1: exact tactics of like the types of accounts to open

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Speaker 1: and the types of funds to choose and things like that.

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Speaker 1: So I'm going to give you the general like bullet

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Speaker 1: points of hey, do this, this, this, and this. Here's

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Speaker 1: the portfolio breakdown and why. But obviously this is forty

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Speaker 1: five minutes. The entire course is a couple of hours.

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Speaker 1: So if you want the exact steps on like literally

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Speaker 1: the account openings and the reasons why and the math

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Speaker 1: and some of the you know, the PDF breakdowns, become

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Speaker 1: a member. Join Herese Financial University. It's nine and nine bucks.

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Speaker 1: You get access to literally every single course that I make.

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Speaker 1: Everyone that's out, everyone that comes out in the future.

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Speaker 1: It's like, you know, the the ultimate access to this

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Speaker 1: training library of financial education. There's other stuff on there, obviously,

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Speaker 1: like debt, getting out of debt, options, advanced options, strategies,

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Speaker 1: fundamental analysis. I got one coming out soon for everything

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Speaker 1: you need to know about retirment accounts and how to

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Speaker 1: use them effectively. So if you like what you hear

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Speaker 1: in this episode, go check that out. Become a member

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Speaker 1: and to get access to everything as long as you're

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Speaker 1: a member, and you can cancel any time, all right.

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Speaker 1: So the Bulletproof Portfolio how to allocate your portfolio in

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Speaker 1: a way that you are not at risk of all

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Speaker 1: the crazy things going on in this world. The typical

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Speaker 1: portfolios are going to be things like the sixty to

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Speaker 1: forty stock portfolio, which puts sixty percent of your money

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Speaker 1: in stocks forty percent of your money in bonds. In

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Speaker 1: my opinion, bonds are not worth the risk because there's

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Speaker 1: risk of default and the reward is fixed at the

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Speaker 1: interest rate that you're getting paid, and when you account

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Speaker 1: for inflation, those interest rates are very low. There are

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Speaker 1: certain forms of debt out there that I think are great,

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Speaker 1: certain forms of private debt, debt that is collateralized by

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Speaker 1: real estate things like that. But for the most part,

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Speaker 1: bonds that you're buying on the public markets, like treasuries

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Speaker 1: and things like that, there's just not enough juice for

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Speaker 1: the squeeze right now. Stocks right now are also similarly

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Speaker 1: flawed because value are a like record highs. The economy

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Speaker 1: is in like worse place than it's been in for decades.

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Speaker 1: So we're not in a place right now that I

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Speaker 1: think doing a standard sixty to forty portfolio is going

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Speaker 1: to perform well over the coming decades, especially considering the

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Speaker 1: fact that when you look at interest rates for the

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Speaker 1: last forty years, they've been declining. That impacts things like

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Speaker 1: stocks valuations, It impacts things like bonds, It impacts things

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Speaker 1: like inflation, It impacts all sorts of things. But guess what.

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Speaker 1: Interest rates on deck can't go below zero. They can

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Speaker 1: kind of a little bit temporarily, but they don't just

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Speaker 1: keep on going past zero, especially to the extent that

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Speaker 1: interest rate has been dropping for the past forty years.

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Speaker 1: So we've bottomed. We're heading into an inflationary cycle, multi

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Speaker 1: decade long cycle here where inflation will be elevated, interest

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Speaker 1: rates where will continue to rise for the coming decades.

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Speaker 1: I'm talking thirty years, forty years. Look at what happened

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Speaker 1: before the seventies, and then look at what happened after

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Speaker 1: the seventies. So since nineteen eighty, inflation has been coming down,

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Speaker 1: interest rates have been coming down. We've been loading up

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Speaker 1: on debt that's been pushing asset valuations high. We've come

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Speaker 1: to the end of that cycle. We are now reversing

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Speaker 1: that cycle. We are seeing decreasing globalization, we are seeing

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Speaker 1: interest rates going to be going up. Inflation is going

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Speaker 1: to be going up. We're gonna have sovereign debt crises

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Speaker 1: where we're going to have either outright defaults or technical

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Speaker 1: defaults through inflation monetizing the debt, and that's going to

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Speaker 1: push interest rates across the board up even higher in

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Speaker 1: order to compensate for that higher inflation. So there's no

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Speaker 1: way around it. We are heading into a cycle that

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Speaker 1: is the reverse of the last forty years, which is

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Speaker 1: the same cycle that preceded the last forty years. And

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Speaker 1: so we need to have an investment portfolio that is

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Speaker 1: built to thrive during the coming forty years, not one

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Speaker 1: built on thriving based on the data from the last

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Speaker 1: forty years. So what's the breakdown we're gonna give you.

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Speaker 1: I'll give you the quick and dirty, real quick. Then

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Speaker 1: we're going to break down into the components. So the

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Speaker 1: first section here is one third in business, the next

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Speaker 1: is one third in real estate, and the next is

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Speaker 1: one third in reserves. Now, once we dive into this,

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Speaker 1: you're going to see that it's not exactly when third.

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Speaker 1: It's a little bit smaller. So first part is business.

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Speaker 1: We've got thirty percent, not thirty three and thirty percent

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Speaker 1: thirty three percent in business? What does business mean? Uh?

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Speaker 1: For the average person, this is going to be the

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Speaker 1: S and P five hundred, the NASDAK, the Doubt. It's

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Speaker 1: not my favorite, but it's acceptable to choose a couple

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Speaker 1: uh index funds. It's it's acceptable because that's what's available

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Speaker 1: to most people. Most people have most of their money

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Speaker 1: in their four to one K, so it's like you're

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Speaker 1: not going to be able to do much with that

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Speaker 1: other than just putting it in the major index funds.

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Speaker 1: I would prefer it if in your four one K

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Speaker 1: you chose like an active stock fund, a value stock fund.

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Speaker 1: Those are going to perform a lot better over the

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Speaker 1: next twenty years than the index funds. Well, but if

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Speaker 1: you only have the index funds available to you, that's okay.

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Speaker 1: We're going to talk about how to deal with that

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Speaker 1: at the in the last section. So we're gonna have

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Speaker 1: thirty percent of our money in business, so that's going

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Speaker 1: to be stocks for the most part. And if you're

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Speaker 1: in stocks and you have the ability to choose something

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Speaker 1: other than just you know, the S and P. Five hundred,

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Speaker 1: we're going to focus on fundamentals. What are fundamentals. Fundamentals

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Speaker 1: are looking well into your investments. That's basically it. Instead

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Speaker 1: of just throwing money at something and saying, hey, well

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Speaker 1: they say over the long term, this is going to

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Speaker 1: go up. No, we're actually going to look well into

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Speaker 1: our investments. We're going to take a look at this

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Speaker 1: and look at the balance sheet. We're going to look

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Speaker 1: at the management. We're going to look at the track record.

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Speaker 1: We're going to look at the economic mote, we're going

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Speaker 1: to look at the intrinsic value. We're going to look

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Speaker 1: at some of the basic metrics and learn how to

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Speaker 1: use them. Look at some of the basic metrics so

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Speaker 1: we can choose stocks that we think have a certain

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Speaker 1: high certainty of two things. Number one, we are buying

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Speaker 1: them at a price that is lower than their true value.

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Speaker 1: Number two, that they have a high certainty of the

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Speaker 1: market realizing that true value at some point in the future.

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Speaker 1: If we can say we're pretty certain of those two things,

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Speaker 1: then we're gonna, for the most part, be choosing pretty

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Speaker 1: good investments. Here's an example of what not to do.

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Speaker 1: You take a look at the stock in video right now.

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Speaker 1: In video right now, simple Envda is on a tear.

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Speaker 1: It is on I don't know in May. It popped

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Speaker 1: up from all the artificial intelligence stuff that's been coming out.

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Speaker 1: The problem is, the price to earnings ratio of Nvidia

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Speaker 1: is like two hundred right now, let's see what it is.

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Speaker 1: Oh my gosh, it's two hundred and twenty. Okay, So

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Speaker 1: this is your first lesson in fundamental analysis. The price

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Speaker 1: to earnings ratio. The price to earnings ratio tells you

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Speaker 1: how long it would take for you to get your

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Speaker 1: money back if the company hand it out one hundred

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Speaker 1: percent of its profits. So let's say in Vidia from

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Speaker 1: this point forward says every dollar you know, businesses, you've

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Speaker 1: got revenue and uh and profits. Here's the difference revenue

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Speaker 1: is every dollar they make. Profit is every dollar they keep.

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Speaker 1: So of all of your revenue, you're going to have expenses.

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Speaker 1: So the business makes a billion dollars, but they spend

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Speaker 1: a billion dollars, they have zero profits. It doesn't matter

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Speaker 1: how much money they make in revenue, they've got zero

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Speaker 1: left over because they spend it all. Anything left over

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Speaker 1: is their profit. So let's say in Vidia says, all

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Speaker 1: of our profits, we are going to pay back out

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Speaker 1: to all of our investors one hundred percent of profits,

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Speaker 1: so we're not keeping anything. It would take them, assuming

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Speaker 1: that everything stays the same their profits and they're spent

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Speaker 1: fences and everything like that, it would take them two

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Speaker 1: hundred and twenty years for them to pay you back

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Speaker 1: the amount you invested in the company. That is what's

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Speaker 1: called a bubble. That is what is known as overvalued.

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Speaker 1: That is not a good value. So you want to

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Speaker 1: find companies that are the opposite of this, where given

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Speaker 1: their profit history and given their the change in the

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Speaker 1: valuation of their business over the last ten years, you

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Speaker 1: have a high degree of certainty that you are buying

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Speaker 1: the stock at a price that is lower than what

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Speaker 1: its real value is now. Some of this is a

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Speaker 1: little bit subjective. These are not fully subjective metrics, because

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Speaker 1: one person will take a look at Nvidia and say, yes,

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Speaker 1: it's overvalued by today's standards, but I think in video

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Speaker 1: is going to make so much money in the future

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Speaker 1: that it's going to make these current numbers look puny.

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Speaker 1: Tesla would be a good example of that. For a

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Speaker 1: long time people said it was incredibly overvalued, and the

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Speaker 1: people who said no, they're going to be worth a

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Speaker 1: lot more in the future because of X, Y and

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Speaker 1: Z ended up being right. So there is a little

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Speaker 1: bit of subjectivity to this, but for the most part,

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Speaker 1: you want to answer the question how much am I

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Speaker 1: paying for the money printer? Because that's whatever business is,

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Speaker 1: that's what debt is as well. It's a money printer.

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Speaker 1: So if you have a money printer that is going

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Speaker 1: to print out one hundred dollars for you every year,

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Speaker 1: how much would you pay for that money printer? Would

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Speaker 1: you pay fifty dollars for a money printer that prints

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Speaker 1: out one hundred dollars every year? Absolutely everybody would. You'd

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Speaker 1: want to buy as many of those as possible. That's

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Speaker 1: a fantastic valuation. You're paying fifty dollars to get back

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Speaker 1: one hundred dollars in a year and every year going forward.

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Speaker 1: That's fantastic. But let's be honest. If there was a

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Speaker 1: money printer that was on sale for fifty dollars and

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Speaker 1: it said it was going to print out one hundred

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Speaker 1: dollars every year, then you might have to ask the

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Speaker 1: question why is it being sold for fifty dollars, because

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Speaker 1: then you ask, well, what are the chances that it

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Speaker 1: actually pays prints out that hundred dollars for every year

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Speaker 1: into the future. What are the chances that that number

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Speaker 1: that it prints out is less? What are the chances

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Speaker 1: that the money printer breaks? And so you have to

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Speaker 1: ask why it's being sold at that price, And then

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Speaker 1: you have to do a little digging. You have to look,

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Speaker 1: is this printer broken? To do? Is somebody mismanaging it?

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Speaker 1: Did it just get a fix and somebody fixed it?

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Speaker 1: But because everybody's so scared it was broken in the

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Speaker 1: past that they don't believe it's fixed right now. And

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Speaker 1: I can look at it and I can say, you

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Speaker 1: know what, actually, no, I think this really is fixed.

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Speaker 1: I think it is going to print out one hundred

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Speaker 1: dollars every year. Then buying it at fifty bucks is

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Speaker 1: a steal. You're that's a good valuation. You're buying it

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Speaker 1: at less than its real value. Now, would you pay

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Speaker 1: one thousand dollars for a money printer that prints out

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Speaker 1: one hundred dollars every year, Well, then it would take

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Speaker 1: you ten years to get your money back. Now you

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Speaker 1: may say that's a terrible investment. You may say absolutely not.

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Speaker 1: But if a money printer is printing out one hundred

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Speaker 1: dollars every year and it's selling for a thousand bucks,

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Speaker 1: then there's a good chance that that money printer is

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Speaker 1: extremely solid and it's been printing out one hundred dollars

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Speaker 1: for a very long time, and there's some degree of

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Speaker 1: evidence to say that it won't break for a very

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Speaker 1: long time. So there's a high degree of certainty it'll

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Speaker 1: continue to do that. And so that's all fundamental analysis is.

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Speaker 1: It's taking a look at a company which is a

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Speaker 1: money printer and asking those questions, what is the track record,

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Speaker 1: what is a chance that it continues to print the

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Speaker 1: amount of money that it's been printing, where the chances

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Speaker 1: it increases the amount of money it's been printing, And

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Speaker 1: based on all that, given the current price, is that

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Speaker 1: a good price to pay for that, or is that

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Speaker 1: a bad price to pay for that. So that's fundamental analysis,

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Speaker 1: and that's where I would like everybody to be, but

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Speaker 1: it does take some time. The other place that I

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Speaker 1: really like people to be is technical analysis. Technical analysis

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Speaker 1: is the study of the visual patterns that appear based

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Speaker 1: off of aggregate group behavior. So that's a long way

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Speaker 1: of saying you're looking at the charts. When you look

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Speaker 1: at the chart of a company you or a stock index,

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Speaker 1: you notice patterns that pop up. And these patterns have

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Speaker 1: been discovered, they have not been invented. So people have

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Speaker 1: noticed that when certain patterns form, there's a little bit

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Speaker 1: of a higher likelihood of a specific movement happening. For instance,

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Speaker 1: if a stock falls down to one hundred dollars and

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Speaker 1: then bounces off one hundred dollars and goes up from there,

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Speaker 1: and it has done that six times, well, for some reason,

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Speaker 1: everybody who is a potential investor in that stock looks

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Speaker 1: at one hundred dollars and says that's a good price

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Speaker 1: to buy this company at. And so because everybody buys

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Speaker 1: when it hits one hundred dollars, the price doesn't stay

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Speaker 1: at one hundred dollars or go down lower than that

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Speaker 1: because so many people want to buy at that price

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Speaker 1: or lower, so it bounces up from there. What you

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Speaker 1: notice when you look at a chart like that is

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Speaker 1: that you notice a floor. Basically, it looks like there's

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Speaker 1: an invisible floor underneath the chart at one hundred dollars

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Speaker 1: that every time that chart hits one hundred, it bounces

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Speaker 1: off of that. So that's all technical aounts is. It's

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Speaker 1: looking at a chart noticing these patterns. And there are

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Speaker 1: many of these patterns. There's support, which I just described.

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Speaker 1: There's the opposite of that, which is resistance, which is

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Speaker 1: when it hits an invisible ceiling. There are you know,

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Speaker 1: there's consolidation, there's wedges, there's heads and shoulders. There's a

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Speaker 1: bunch of different patterns that you can look out for

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Speaker 1: and they give you an indication that something might happen.

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Speaker 1: So you're watching the stock and you see, okay, every

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Speaker 1: time it hits one hundred dollars, it bounces off of that. Well,

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Speaker 1: then you put in a buy order out one hundred

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Speaker 1: bucks because next time it or maybe one hundred one dollars,

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Speaker 1: so that that way, next time it gets down close

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Speaker 1: to one hundred bucks, you buy it, you've got a

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Speaker 1: high degree of certainty it's going to go up from

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Speaker 1: there because everybody else is buying it at that price too,

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Speaker 1: So you don't need to know anything about the actual company,

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Speaker 1: but you just know based on the pattern that happens

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Speaker 1: that everybody else who does know a lot about this

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Speaker 1: company is buying when it hits one hundred, so it's

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Speaker 1: probably a good deal. Now you want to make sure

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Speaker 1: you're increasing your risk management if you're investing or trading

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Speaker 1: based off of technical analysis, and so if it then

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Speaker 1: goes down to ninety nine and it falls below one

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Speaker 1: hundred bucks for the first time in five years, well

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Speaker 1: maybe something has changed with the company, so you don't

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Speaker 1: want to actually hold it anymore. You want to sell,

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Speaker 1: so you'll take a little bit of a loss, but

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Speaker 1: at least you won't write it all the way back

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Speaker 1: down to eighty or seventy. So technical analysis is another

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Speaker 1: way to invest in businesses. Remember this is all about

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Speaker 1: doing this in an intelligent way, using wisdom, using experience,

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Speaker 1: using knowledge, and not just throwing money at something hoping

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Speaker 1: it goes up in the future. The last way to

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Speaker 1: do this is with private businesses. I really like investing

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Speaker 1: in private businesses for a couple of reasons. Number one,

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Speaker 1: there's more control, so you know, there's some ways to

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Speaker 1: do it where it's very easy and hands off. There's

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Speaker 1: websites like seed invest and I think angel invest is one,

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Speaker 1: and I can't remember them off the top of my head,

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Speaker 1: but there's a bunch of websites out there that allow

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Speaker 1: you to invest in private companies, and the websites make

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Speaker 1: it really easy to do this, so it's very similar

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Speaker 1: to just investing in a regular stock, like a publicly

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Speaker 1: traded stock through like an online brokerage. But something that

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Speaker 1: most people don't consider is if you outright buy a

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Speaker 1: business like on biz, buysell dot com, and you have

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Speaker 1: control of that business. Now you have the ability to

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Speaker 1: control it. You can grow it, you can make management changes,

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Speaker 1: you can put your own expertise into the business, and

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Speaker 1: you can actually change the value of it because you

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Speaker 1: control it. You can't do anything to affect Apple. You

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Speaker 1: just hope Tim Cook keeps on making good decisions if

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Speaker 1: you invest in Apple. That's why when you invest in

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Speaker 1: public companies, you have to do fundamental analysis and you

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Speaker 1: have to do technical analysis in order to make sure

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Speaker 1: that you're buying something that is because it's outside of

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Speaker 1: your control. You have to de risk from the standpoint

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Speaker 1: of where am I buying and where am I selling.

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Speaker 1: With private businesses that you have control over, you de

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Speaker 1: risk yourself by injecting your own skills and having control

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Speaker 1: over what happens, and therefore you have the ability to

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Speaker 1: actually influence the value of that company. And my favorite,

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Speaker 1: absolute favorite way to do this is with your own business.

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Speaker 1: You start your own business, do your own thing, become

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Speaker 1: a consultant, start a side hustle, grow that thing into

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Speaker 1: an actual business. And the returns that you'll get from

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Speaker 1: any time or money investment into a private business that

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Speaker 1: you start yourself, most of the time will have the

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Speaker 1: potential to far outweigh the returns that you can get

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Speaker 1: in the public stock market. And so if you run

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Speaker 1: your own business, it is perfectly acceptable to just grow

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Speaker 1: that because at the end of the day, it's still business.

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Speaker 1: This is the poor of your portfolio where you get

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Speaker 1: capital appreciation. This generates the long term wealth. It has

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Speaker 1: a higher risk, higher volatility, but this is the portion

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Speaker 1: that generates your long term wealth, so it's perfectly acceptable

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Speaker 1: to have have it be public, or to have it

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Speaker 1: be pride, to have it be your own business. We

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Speaker 1: want to keep this to thirty percent of our portfolio,

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Speaker 1: though this is going to be hardest for most people

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Speaker 1: because most people have one hundred percent of their net

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Speaker 1: worth in you know, publicly traded stocks outside of their

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Speaker 1: personal residence. We want to keep this down to thirty percent.

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Speaker 1: Next we're going to have thirty percent in real estate.

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Speaker 1: Real estate is a scarce resource that has been around

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Speaker 1: through all of human history and they're not making any

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Speaker 1: more of it, and people have always wanted as much

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Speaker 1: of it as possible. So from a Lendy perspective, the

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Speaker 1: you know, the longer something has been around, the longer

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Speaker 1: it will be around. You know, the Pyramids will outlast

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Speaker 1: the Eiffel Tower, the UH I don't know, the internal

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Speaker 1: combustion engine will outlast the lithium ion electric battery engine,

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Speaker 1: electric vehicle. Most likely when you just take a look

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Speaker 1: at the longer technology or an idea or a theme

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Speaker 1: or a practice has been around, the more things it

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Speaker 1: stood the test of time longer, and it's lived through more.

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Speaker 1: Therefore it has more robustness. Real estate is that way,

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Speaker 1: It's always been here. It always will be. People have

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Speaker 1: always wanted as much of it as possible, and there's

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Speaker 1: an absolute finite amount of it. Number two. Many times

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Speaker 1: it's a cash flowing asset because it is useful for

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Speaker 1: just general life. That's why people want it. So you

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Speaker 1: can put a house on it and rent it out

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Speaker 1: for people to live in. You can put cows on

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Speaker 1: it and produce food and sell the food. You can

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Speaker 1: put corn on it and sell the corn land. Real

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00:22:01,600 --> 00:22:06,680
Speaker 1: estate itself is useful for what people need to live

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Speaker 1: and so real estate being a scarce freesource and being

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Speaker 1: useful is something that should generally increase in value over

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Speaker 1: time and produce cash flow for you. So this is

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Speaker 1: one of those assets that it's not going to generate

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Speaker 1: that massive capital appreciation that business will, but it provides

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Speaker 1: you with a moat. It gives you that safety net,

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Speaker 1: It gives you the predictable income, the predictable cash flow.

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Speaker 1: You don't have to worry about major crashes most of

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Speaker 1: the time, unless you're investing in the middle of a

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Speaker 1: bubble with like you know, too much supply of single

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Speaker 1: family homes things like that. And then the last piece

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Speaker 1: about real estate is that especially this is going to

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Speaker 1: be mostly for the United States. It's heavily advantaged for

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Speaker 1: debt and taxes. So United States is the only place

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Speaker 1: in the world where you can get a thirty year

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Speaker 1: fixed straight mortgage on a home. You can't do that

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Speaker 1: most other places. There are variable interest rate loans and

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Speaker 1: they reset every five to seven years. And so the

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00:23:14,960 --> 00:23:18,320
Speaker 1: ability to have a thirty year fixed rate mortgage allows

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Speaker 1: you to effectively shorten the dollar because you're borrowing as

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00:23:22,440 --> 00:23:24,479
Speaker 1: long as you get your interest right below the rate

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Speaker 1: of inflation. You're borrowing dollars, you're exchanging them for an asset,

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Speaker 1: and then you're paying them back in the future. And

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00:23:33,680 --> 00:23:36,440
Speaker 1: so you can profitably short the dollar as long as

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00:23:36,480 --> 00:23:39,840
Speaker 1: the fixed interest rate on the debt is lower than

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Speaker 1: the rate of inflation. Now, if it's higher than the

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Speaker 1: rate of inflation, let's say you get a mortgage for

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Speaker 1: seven percent and inflation is only five percent, you're still

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Speaker 1: shorting the dollar. You're just doing it ineffectively. You're losing

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Speaker 1: on that trade, and that's because you're borrowing dollars at

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Speaker 1: seven percent and they're only losing five percent of their value.

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Speaker 1: So you're paying back dollar that are worth more in

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Speaker 1: the future. You're basically paying back more purchasing power when

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00:24:07,400 --> 00:24:10,720
Speaker 1: everything is said and done, versus the other way around.

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Speaker 1: If you have a three percent mortgage and inflation is

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Speaker 1: you know, ten percent, then you're paying back less purchasing

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Speaker 1: power than you borrowed. And so that's the key. You

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Speaker 1: want to make sure that if you borrow for real estate,

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Speaker 1: that you have a fixed rate mortgage, that it's long term,

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Speaker 1: and that the interest rate is below the at rate

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Speaker 1: of inflation throughout the life the mortgage. It's also heavily

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Speaker 1: advantaged for taxes, and so the American tax code allows

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Speaker 1: for depreciation on your real estate, which is heavily advantaged

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00:24:44,600 --> 00:24:48,960
Speaker 1: compared to other assets. And so because of those two things,

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00:24:48,960 --> 00:24:50,879
Speaker 1: the debt and the taxes, it allows you to get

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00:24:50,920 --> 00:24:56,800
Speaker 1: outsized returns on your real estate. So real estate I

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Speaker 1: put at thirty percent of my portfolio. It gives you

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00:24:59,600 --> 00:25:04,520
Speaker 1: that safety net, that predictable income, that scarce resource, and

432
00:25:04,760 --> 00:25:07,360
Speaker 1: kind of that moat to fall back on, that castle

433
00:25:07,440 --> 00:25:10,920
Speaker 1: to retreat to if you need to. And so we've

434
00:25:10,920 --> 00:25:13,960
Speaker 1: got thirty percent of business, thirty percent in real estate,

435
00:25:14,520 --> 00:25:17,520
Speaker 1: and then we need thirty percent in reserves. Now, this

436
00:25:17,560 --> 00:25:19,399
Speaker 1: is going to be the hardest part. For most people

437
00:25:19,440 --> 00:25:23,480
Speaker 1: to have thirty percent in reserves. But here's why. When

438
00:25:23,520 --> 00:25:27,520
Speaker 1: you're investing, most people look at something called average annual returns.

439
00:25:27,560 --> 00:25:29,520
Speaker 1: Whether you look at real estate, whether you look at stocks,

440
00:25:29,520 --> 00:25:31,280
Speaker 1: but whatever you're looking at, most people are just look

441
00:25:31,320 --> 00:25:33,879
Speaker 1: at average annual returns. So say, okay, the S and

442
00:25:33,920 --> 00:25:36,880
Speaker 1: P five hundred is a return ten percent on average

443
00:25:36,960 --> 00:25:43,399
Speaker 1: for the last thirty years. But while that is true

444
00:25:43,680 --> 00:25:50,320
Speaker 1: from one math equation, basically you take the price it

445
00:25:50,560 --> 00:25:54,080
Speaker 1: was no, you take you're What they're doing is they're

446
00:25:54,119 --> 00:25:58,439
Speaker 1: taking every year's performance and then just averaging them out together.

447
00:25:58,520 --> 00:26:01,359
Speaker 1: So one year it does fifteen, one year it does

448
00:26:01,840 --> 00:26:04,480
Speaker 1: five down. One year it does five up. One year

449
00:26:04,520 --> 00:26:06,560
Speaker 1: it does twenty down, one year it does twenty up.

450
00:26:07,240 --> 00:26:11,159
Speaker 1: They take all of those yearly performances and they average

451
00:26:11,200 --> 00:26:14,600
Speaker 1: them together, and they come out with ten percent average

452
00:26:14,640 --> 00:26:18,200
Speaker 1: annual returns for the last thirty years. What's the problem

453
00:26:18,240 --> 00:26:22,720
Speaker 1: with that calculation. Well, the problem is if you go

454
00:26:22,760 --> 00:26:26,720
Speaker 1: and back test that number and you say, okay, thirty

455
00:26:26,800 --> 00:26:29,879
Speaker 1: years ago, if I put a thousand bucks in and

456
00:26:29,920 --> 00:26:34,639
Speaker 1: then compound that at ten percent every year, then today,

457
00:26:35,040 --> 00:26:37,520
Speaker 1: let's say I would have a million bucks. But if

458
00:26:37,560 --> 00:26:40,199
Speaker 1: I actually go back and back test this in the

459
00:26:40,320 --> 00:26:43,480
Speaker 1: actual market that they're saying average ten percent a year,

460
00:26:43,960 --> 00:26:46,400
Speaker 1: and I run the same test one thousand bucks thirty

461
00:26:46,440 --> 00:26:49,119
Speaker 1: years ago, I only end up with six hundred and

462
00:26:49,119 --> 00:26:53,639
Speaker 1: fifty thousand dollars. So what gives? Why is it different?

463
00:26:53,720 --> 00:26:56,240
Speaker 1: Why did reality turn out one way when the math

464
00:26:56,280 --> 00:26:58,280
Speaker 1: said it should have turned out another way? And it's

465
00:26:58,280 --> 00:27:02,440
Speaker 1: because you're using the equation. When you take the average

466
00:27:02,440 --> 00:27:05,760
Speaker 1: annual returns, you're doing something called the arithmetic average. And

467
00:27:05,840 --> 00:27:11,600
Speaker 1: this works in a different context. For example, a classroom.

468
00:27:12,119 --> 00:27:15,439
Speaker 1: So you have twenty students that all get different scores

469
00:27:15,440 --> 00:27:18,960
Speaker 1: on their test. One student gets five percent, one student

470
00:27:18,960 --> 00:27:22,000
Speaker 1: gets ninety five percent, one student gets eighty percent, one

471
00:27:22,000 --> 00:27:27,480
Speaker 1: student gets seventy percent. You have an average classroom performance

472
00:27:27,800 --> 00:27:33,760
Speaker 1: of let's say eighty five percent. That is accurate. It

473
00:27:33,840 --> 00:27:37,280
Speaker 1: does not work for the stock market, though, because each

474
00:27:37,400 --> 00:27:43,720
Speaker 1: year does not happen simultaneously. They happen consecutively, So you

475
00:27:43,800 --> 00:27:47,159
Speaker 1: actually have to use a different equation to get the

476
00:27:47,240 --> 00:27:53,439
Speaker 1: right number. This is called the geometric average in finance.

477
00:27:53,760 --> 00:27:59,720
Speaker 1: This is the CGR, the Kager, the keeger, the compounded

478
00:27:59,800 --> 00:28:03,439
Speaker 1: in and you will grow rate. So that's the number

479
00:28:03,480 --> 00:28:06,840
Speaker 1: you want to look for not the average annual returns,

480
00:28:07,200 --> 00:28:10,200
Speaker 1: because that will give you a number that is irrelevant

481
00:28:10,680 --> 00:28:14,680
Speaker 1: because it's classroom. What you need is the compounded annual

482
00:28:14,720 --> 00:28:18,159
Speaker 1: growth rate the geometric averages. The way that that works

483
00:28:19,480 --> 00:28:23,080
Speaker 1: is it accounts for the fact that the result of

484
00:28:23,200 --> 00:28:27,560
Speaker 1: each year's performance is where the next year starts off.

485
00:28:29,080 --> 00:28:32,080
Speaker 1: So here's why that. Here's here's an example of that.

486
00:28:32,440 --> 00:28:34,840
Speaker 1: Start off with one hundred bucks in your mind. You've

487
00:28:34,840 --> 00:28:39,440
Speaker 1: got one hundred bucks. Now go down by ten percent.

488
00:28:40,800 --> 00:28:44,160
Speaker 1: Where are you at? You're at ninety Now go up

489
00:28:44,200 --> 00:28:47,920
Speaker 1: by ten percent. Where are you at? You're not back

490
00:28:47,920 --> 00:28:51,640
Speaker 1: at one hundred, You're only at ninety nine. So if

491
00:28:51,640 --> 00:28:54,320
Speaker 1: you go up ten percent and then down ten percent

492
00:28:54,520 --> 00:28:56,720
Speaker 1: or down ten percent, then up ten percent doesn't matter

493
00:28:56,760 --> 00:29:05,040
Speaker 1: the order. Then you lose one percent because percent are

494
00:29:05,120 --> 00:29:08,880
Speaker 1: from the hole. So obviously an equal size percent, ten

495
00:29:08,920 --> 00:29:11,400
Speaker 1: percent of a larger number is going to equal a

496
00:29:11,480 --> 00:29:14,320
Speaker 1: larger number, and then ten percent of a smaller number

497
00:29:14,360 --> 00:29:17,040
Speaker 1: is going to equal smaller number. So if you go

498
00:29:17,160 --> 00:29:20,480
Speaker 1: up ten percent, then down ten percent, or vice versa,

499
00:29:20,680 --> 00:29:23,400
Speaker 1: then you're going up by a smaller amount than you

500
00:29:23,480 --> 00:29:28,320
Speaker 1: are going down. So when you have performance play out

501
00:29:28,360 --> 00:29:32,040
Speaker 1: over the long term, any year that you go down,

502
00:29:32,680 --> 00:29:36,320
Speaker 1: you are now starting from a smaller base than you

503
00:29:36,360 --> 00:29:41,320
Speaker 1: were before. So if you have a twenty percent down year,

504
00:29:42,160 --> 00:29:45,640
Speaker 1: you don't just need a twenty percent up year to

505
00:29:45,720 --> 00:29:48,920
Speaker 1: get back to even. You now need a twenty five

506
00:29:49,080 --> 00:29:53,640
Speaker 1: percent up year to get back to even. If you

507
00:29:53,720 --> 00:29:57,320
Speaker 1: go down fifty percent in one year, you don't need

508
00:29:57,360 --> 00:29:59,920
Speaker 1: a fifty percent to get back to even. You need

509
00:30:00,000 --> 00:30:04,200
Speaker 1: need a one hundred percent to get back to even.

510
00:30:05,320 --> 00:30:09,560
Speaker 1: So what this highlights is the larger the draw down,

511
00:30:09,920 --> 00:30:14,560
Speaker 1: the harder it is to recover. And some draw downs

512
00:30:14,880 --> 00:30:20,240
Speaker 1: are so severe that they ruin your ability to come

513
00:30:20,280 --> 00:30:28,360
Speaker 1: back ever. For instance, you have a hunch that a

514
00:30:28,480 --> 00:30:33,800
Speaker 1: new electric truck company is going to be the next Tesla.

515
00:30:34,440 --> 00:30:37,800
Speaker 1: Their name is even similar, their name is Nikola, And

516
00:30:37,880 --> 00:30:39,880
Speaker 1: you think this company is the next thing that's going

517
00:30:39,920 --> 00:30:43,720
Speaker 1: to take over the world. And guess what you're in

518
00:30:43,840 --> 00:30:49,480
Speaker 1: luck because you just found out they're a publicly traded company.

519
00:30:49,600 --> 00:30:52,920
Speaker 1: So you start to hear about them on the news,

520
00:30:53,680 --> 00:30:58,440
Speaker 1: and they put out a video their semi truck is

521
00:30:58,520 --> 00:31:02,560
Speaker 1: driving pulling a load behind it. It's on video. You

522
00:31:02,640 --> 00:31:06,400
Speaker 1: take the bait and you say, well, geez, Tesla's been

523
00:31:06,400 --> 00:31:08,880
Speaker 1: working on this for years and they still haven't been

524
00:31:08,880 --> 00:31:11,040
Speaker 1: able to do this. But Nikola is the new kid

525
00:31:11,080 --> 00:31:13,840
Speaker 1: on the block and they're already there. They're going to

526
00:31:14,080 --> 00:31:19,640
Speaker 1: far surpass Tesla very quickly. Tesla's worth a ton, Nikola's

527
00:31:19,640 --> 00:31:22,560
Speaker 1: going to be worth a ton more. So you invest,

528
00:31:23,040 --> 00:31:26,800
Speaker 1: and you just happen to invest right around the seventy

529
00:31:26,880 --> 00:31:32,680
Speaker 1: dollars mark. Seventy dollars per share. You're so sure about this,

530
00:31:33,320 --> 00:31:35,440
Speaker 1: and you think I only have one hundred grand to

531
00:31:35,520 --> 00:31:39,680
Speaker 1: my name, but so it you know, it's it's really

532
00:31:40,080 --> 00:31:42,120
Speaker 1: it's really not that much in long term. You know,

533
00:31:42,120 --> 00:31:45,600
Speaker 1: it's not enough to Retyron. But if this thing goes off,

534
00:31:45,880 --> 00:31:49,000
Speaker 1: you know I'm winning the lottery. So you put your

535
00:31:49,120 --> 00:31:52,600
Speaker 1: entire net worth into Nicola at seventy bucks a share,

536
00:31:53,400 --> 00:31:55,520
Speaker 1: you think, what's the worst that can happen? They're not

537
00:31:55,560 --> 00:32:00,200
Speaker 1: going to fall fifty percent, right, Well, turns out they

538
00:32:00,240 --> 00:32:03,720
Speaker 1: faked that video. It's all a fraud, that that semi

539
00:32:03,800 --> 00:32:06,840
Speaker 1: truck was actually just rolling down hill and they turned

540
00:32:06,880 --> 00:32:09,360
Speaker 1: their camera so that it didn't look like a hill,

541
00:32:09,440 --> 00:32:13,720
Speaker 1: it looked like a flat road. So in June of

542
00:32:13,760 --> 00:32:18,840
Speaker 1: twenty twenty, Nikola is worth seventy bucks a share. Well,

543
00:32:18,920 --> 00:32:25,400
Speaker 1: guess what, by the bye, let's see when did it happen?

544
00:32:26,360 --> 00:32:28,880
Speaker 1: By January of twenty twenty two, So a year and

545
00:32:28,920 --> 00:32:34,120
Speaker 1: a half later, it's worth seven dollars per share. That

546
00:32:34,280 --> 00:32:40,960
Speaker 1: is a ninety percent drop ninety percent. Now you still

547
00:32:41,000 --> 00:32:44,000
Speaker 1: don't sell because you think, well, what's the worst that

548
00:32:44,080 --> 00:32:48,920
Speaker 1: can happen. Can't fall another fifty percent from here, it's

549
00:32:48,920 --> 00:32:54,000
Speaker 1: already fallen ninety percent. Well guess what, it actually falls

550
00:32:54,080 --> 00:32:58,840
Speaker 1: another ninety percent from there, from seven dollars a share

551
00:32:59,320 --> 00:33:03,480
Speaker 1: down to seventy cents per share by May of twenty

552
00:33:03,520 --> 00:33:10,200
Speaker 1: twenty three. So you see that in a situation like this, Well,

553
00:33:10,280 --> 00:33:12,920
Speaker 1: it fell ninety percent and then it fell another ninety percent.

554
00:33:13,400 --> 00:33:15,480
Speaker 1: So what would it take for it to get back

555
00:33:15,520 --> 00:33:17,440
Speaker 1: to where you could sell it just at break even?

556
00:33:18,480 --> 00:33:23,080
Speaker 1: It would take thousands of percents. Like, it's not even

557
00:33:23,120 --> 00:33:25,520
Speaker 1: one hundred percent, it's not two hundred percent. It's at

558
00:33:25,520 --> 00:33:28,840
Speaker 1: a dollar forty three right now, So you have to

559
00:33:28,880 --> 00:33:33,000
Speaker 1: add a zero and then another zero to the number.

560
00:33:33,520 --> 00:33:38,440
Speaker 1: Percentage wise, that's just that's almost certainly never going to happen.

561
00:33:39,240 --> 00:33:42,640
Speaker 1: You can't recover from this. That one hundred grand is gone.

562
00:33:43,520 --> 00:33:46,760
Speaker 1: The only way forward is to make new money and

563
00:33:46,800 --> 00:33:51,479
Speaker 1: invest the new money that investment is now gone. This

564
00:33:51,600 --> 00:33:57,000
Speaker 1: is important to understand how this works because when you're investing,

565
00:33:57,360 --> 00:34:01,320
Speaker 1: there are only four outcomes. You can make a lot,

566
00:34:01,760 --> 00:34:04,560
Speaker 1: or you can make a little. You can lose a lot,

567
00:34:04,800 --> 00:34:08,040
Speaker 1: or you can lose a little. When you're investing, your

568
00:34:08,080 --> 00:34:12,400
Speaker 1: small losses and your small gains will cancel each other out.

569
00:34:12,840 --> 00:34:19,080
Speaker 1: But your large gains and your large losses will also

570
00:34:19,680 --> 00:34:23,959
Speaker 1: cancel themselves out. So if you only do one thing,

571
00:34:24,840 --> 00:34:30,239
Speaker 1: and that one thing is stopping your large losses, then

572
00:34:30,239 --> 00:34:35,200
Speaker 1: your large gains will drive your account. Every one of

573
00:34:35,280 --> 00:34:39,160
Speaker 1: the most successful investors in traders throughout history have had

574
00:34:39,200 --> 00:34:44,719
Speaker 1: the exact same number one rule. They implement that rule differently,

575
00:34:46,080 --> 00:34:49,120
Speaker 1: but they've all had the same rule, and that rule

576
00:34:49,320 --> 00:34:54,040
Speaker 1: is don't lose money. No matter what you do, manage

577
00:34:54,200 --> 00:34:59,360
Speaker 1: your downside risk. Make sure that you never expose yourself

578
00:34:59,400 --> 00:35:03,239
Speaker 1: to the potenti of blow up of risking a large loss.

579
00:35:03,560 --> 00:35:06,399
Speaker 1: That is the number one rule. And as long as

580
00:35:06,520 --> 00:35:08,879
Speaker 1: you take care of your losses, your gains will take

581
00:35:08,880 --> 00:35:11,520
Speaker 1: care of themselves. Why am I hammering home on this

582
00:35:11,640 --> 00:35:15,239
Speaker 1: on the reserves portion, well, because that's what this is

583
00:35:15,440 --> 00:35:21,040
Speaker 1: for Number one, if you go from one hundred down

584
00:35:21,040 --> 00:35:24,880
Speaker 1: to ninety, now you need an eleven percent return just

585
00:35:24,920 --> 00:35:27,480
Speaker 1: to get back up to even. But if you have

586
00:35:27,520 --> 00:35:30,799
Speaker 1: some dry powder that you can add back into the pot,

587
00:35:30,920 --> 00:35:37,640
Speaker 1: then suddenly those arithmetic averages are for you now because

588
00:35:37,680 --> 00:35:40,840
Speaker 1: you're going to go up on the recovery from the

589
00:35:41,080 --> 00:35:46,320
Speaker 1: larger base that you had before. That dry powder allows

590
00:35:46,360 --> 00:35:48,960
Speaker 1: you to buy things when they're on sale, meaning you

591
00:35:48,960 --> 00:35:53,480
Speaker 1: don't have to worry about those draw downs that average,

592
00:35:53,520 --> 00:35:56,720
Speaker 1: the regular draw downs hampering your performance in the future,

593
00:35:56,960 --> 00:35:59,920
Speaker 1: because when stuff goes down, you can add dry powder

594
00:35:59,880 --> 00:36:02,880
Speaker 1: back in, and then when it goes back up you

595
00:36:02,920 --> 00:36:06,280
Speaker 1: can take some gains. And by doing this, not only

596
00:36:06,320 --> 00:36:10,080
Speaker 1: are you smoothing out your returns, but you are also

597
00:36:10,680 --> 00:36:14,160
Speaker 1: making more money in the long run, because every recovery

598
00:36:14,200 --> 00:36:18,960
Speaker 1: is off the larger base rather than from the bottom.

599
00:36:19,280 --> 00:36:22,520
Speaker 1: All Right, So how do we divide up our reserves?

600
00:36:22,600 --> 00:36:24,879
Speaker 1: Because I don't want you to just keep this all

601
00:36:24,920 --> 00:36:27,840
Speaker 1: in US dollars because then inflation will be crushing you.

602
00:36:28,520 --> 00:36:31,760
Speaker 1: We're gonna have thirty percent in reserves, but we're gonna

603
00:36:31,760 --> 00:36:34,200
Speaker 1: break this apart. So of that thirty percent, we're gonna

604
00:36:34,239 --> 00:36:37,200
Speaker 1: have twenty percent in gold, so twenty percent of your

605
00:36:37,200 --> 00:36:40,080
Speaker 1: whole portfolio, not twenty percent of the thirty percent, So

606
00:36:40,239 --> 00:36:44,920
Speaker 1: twenty percent is in gold. The reason why is not

607
00:36:45,000 --> 00:36:46,920
Speaker 1: because you're gonna make a ton of money with gold.

608
00:36:47,160 --> 00:36:49,960
Speaker 1: You're not. It's gonna be the best vehicle to preserve

609
00:36:50,000 --> 00:36:53,840
Speaker 1: your purchasing power. When you look at how much stuff

610
00:36:53,840 --> 00:36:57,080
Speaker 1: you can buy with gold, the same amount of gold,

611
00:36:57,120 --> 00:37:01,160
Speaker 1: like one ounce of gold. Throughout history it for most things,

612
00:37:01,239 --> 00:37:04,600
Speaker 1: it stays the same or grows a little bit. So

613
00:37:04,800 --> 00:37:07,879
Speaker 1: today you can buy a little bit more gold, I'm sorry.

614
00:37:07,920 --> 00:37:10,040
Speaker 1: You can buy a little bit more milk with one

615
00:37:10,080 --> 00:37:12,280
Speaker 1: ounce of gold then he used to be able to.

616
00:37:12,280 --> 00:37:15,200
Speaker 1: Today you can buy a little bit more gasoline with

617
00:37:15,280 --> 00:37:17,440
Speaker 1: an ounce of gold than he used to be able to.

618
00:37:17,440 --> 00:37:21,000
Speaker 1: Today you can buy a little bit more food, a

619
00:37:21,040 --> 00:37:23,319
Speaker 1: little bit more of a haircut, a little bit more

620
00:37:23,320 --> 00:37:25,280
Speaker 1: of a suit, a little bit more of a car

621
00:37:25,560 --> 00:37:30,440
Speaker 1: than he used to be able to with gold. Not

622
00:37:30,600 --> 00:37:32,719
Speaker 1: a lot. So you're not going this isn't gonna make

623
00:37:32,719 --> 00:37:36,240
Speaker 1: you wealthy. But over the long term, the purchasing power

624
00:37:36,239 --> 00:37:39,040
Speaker 1: of gold is very stable. That's what reserves are for.

625
00:37:39,640 --> 00:37:42,440
Speaker 1: So the price will change like if the stock market crashes,

626
00:37:43,080 --> 00:37:45,279
Speaker 1: then there's a good chance the price of gold comes

627
00:37:45,320 --> 00:37:48,440
Speaker 1: down to but it's not going to come down more

628
00:37:48,560 --> 00:37:51,520
Speaker 1: than the stocks. Your purchasing power is going to stay

629
00:37:51,560 --> 00:37:53,800
Speaker 1: the same or maybe increase a little bit. So maybe

630
00:37:53,840 --> 00:37:56,480
Speaker 1: gold drops a little bit less than stocks do. That

631
00:37:56,560 --> 00:37:59,279
Speaker 1: gives you dry powder. That's what it's there for. You

632
00:37:59,320 --> 00:38:02,600
Speaker 1: can then use it to buy stocks. It doesn't matter

633
00:38:02,600 --> 00:38:05,359
Speaker 1: if the gold crashed. You have the ability to use

634
00:38:05,400 --> 00:38:08,960
Speaker 1: that to buy an asset that is on sale. But

635
00:38:09,000 --> 00:38:10,920
Speaker 1: we don't want everything in gold. It's a little bit

636
00:38:11,000 --> 00:38:14,960
Speaker 1: less liquid, harder to access, it is somewhat volatile, and

637
00:38:15,160 --> 00:38:19,399
Speaker 1: prices are not denominated in gold. So we want five

638
00:38:19,480 --> 00:38:22,480
Speaker 1: percent of our portfolio in bitcoin. Now, this is not

639
00:38:22,520 --> 00:38:26,160
Speaker 1: for dry powder. This is because bitcoin has a decent

640
00:38:26,280 --> 00:38:31,279
Speaker 1: enough chance at becoming global reserve base money in the

641
00:38:31,280 --> 00:38:35,160
Speaker 1: future that it's worth having a small allocation too. And

642
00:38:35,239 --> 00:38:37,160
Speaker 1: this is in the reserves portion because you're not going

643
00:38:37,200 --> 00:38:40,040
Speaker 1: to touch this. This is there to preserve your purchasing power.

644
00:38:40,040 --> 00:38:42,680
Speaker 1: If the dollar fails bitcoin or places it, it's like

645
00:38:43,040 --> 00:38:46,560
Speaker 1: your cash will fill, your stocks will have a huge impact.

646
00:38:46,800 --> 00:38:49,200
Speaker 1: So this is going to be the reserve reserves portion.

647
00:38:49,560 --> 00:38:51,000
Speaker 1: But you're just not going to touch it. You're gonna

648
00:38:51,000 --> 00:38:52,640
Speaker 1: put five percent in bitcoin, and you're not going to

649
00:38:52,640 --> 00:38:54,120
Speaker 1: touch it. You're not going to rebalance it. You're just

650
00:38:54,160 --> 00:38:57,160
Speaker 1: gonna You're just gonna let it sit there. If bitcoin

651
00:38:57,200 --> 00:39:00,760
Speaker 1: becomes money in the future, it'll be it'll it'll triple

652
00:39:00,800 --> 00:39:04,440
Speaker 1: your portfolio. That five percent allocation will triple your portfolio

653
00:39:04,600 --> 00:39:08,680
Speaker 1: in purchasing power, not in dollars, in person power, which

654
00:39:08,719 --> 00:39:13,120
Speaker 1: is important because if hyper inflation sets in, your portfolio

655
00:39:13,160 --> 00:39:16,640
Speaker 1: may triple just from the number. But that doesn't mean

656
00:39:16,680 --> 00:39:18,680
Speaker 1: the purchasing power goes up because the cost of everything

657
00:39:18,680 --> 00:39:21,480
Speaker 1: else might go up more. But the value of the bitcoin,

658
00:39:22,239 --> 00:39:25,560
Speaker 1: if that happens, we'll far outpace it and will triple

659
00:39:25,560 --> 00:39:28,919
Speaker 1: your purchasing power. And then we're going to have five

660
00:39:28,960 --> 00:39:32,680
Speaker 1: percent in cash also, and this is because prices are

661
00:39:32,680 --> 00:39:36,120
Speaker 1: denominated in cash. You want to have enough for rainy

662
00:39:36,200 --> 00:39:40,000
Speaker 1: day fund, for expenses. You want to have it there

663
00:39:40,120 --> 00:39:42,520
Speaker 1: just in case we have deflation, because cash is where

664
00:39:42,520 --> 00:39:45,520
Speaker 1: you want to be. If we have deflation, Asset prices

665
00:39:45,560 --> 00:39:48,160
Speaker 1: go down, bond prices go down. Cash stays the same, though,

666
00:39:48,160 --> 00:39:51,000
Speaker 1: so your purchasing power increases drastically with cash. So you

667
00:39:51,040 --> 00:39:52,360
Speaker 1: want to have a little bit of cash just in

668
00:39:52,400 --> 00:39:54,520
Speaker 1: case we have deflation, and there's a good chance that

669
00:39:54,560 --> 00:39:59,040
Speaker 1: short term we will. All Right, Now onto the last

670
00:39:59,080 --> 00:40:03,360
Speaker 1: section we have have speculation and hedging. Now this is

671
00:40:03,360 --> 00:40:05,759
Speaker 1: going to get into options, which I have a podcast

672
00:40:05,880 --> 00:40:08,640
Speaker 1: episode about options. You can go back and find that

673
00:40:08,680 --> 00:40:11,480
Speaker 1: it's I don't know, a couple of months ago. And

674
00:40:11,600 --> 00:40:14,280
Speaker 1: I also have a whole course in my Inheriting Financial

675
00:40:14,360 --> 00:40:19,680
Speaker 1: University Membership program on that. And so you're gonna want

676
00:40:19,719 --> 00:40:22,520
Speaker 1: to learn how to use options, just even the basic

677
00:40:22,600 --> 00:40:28,239
Speaker 1: strategies because these are contracts. That's what options are, the

678
00:40:28,360 --> 00:40:33,160
Speaker 1: contracts that allow you to make I don't want to

679
00:40:33,160 --> 00:40:36,080
Speaker 1: say the word bets because that gives the that implies

680
00:40:36,120 --> 00:40:38,399
Speaker 1: that you're gambling here that it allows you to set

681
00:40:38,400 --> 00:40:41,080
Speaker 1: a contract so that something happens, then there's a result.

682
00:40:41,840 --> 00:40:45,080
Speaker 1: So you're gonna have about you have like five per

683
00:40:45,320 --> 00:40:48,160
Speaker 1: what is it you have ten percent left over right now?

684
00:40:48,239 --> 00:40:50,560
Speaker 1: I think, yeah, so you're gonna use five percent for

685
00:40:50,600 --> 00:40:53,680
Speaker 1: speculation and then five percent for hedging. The five percent

686
00:40:53,719 --> 00:40:55,920
Speaker 1: that you have for hedging, that's gonna be like, you know,

687
00:40:56,000 --> 00:40:58,319
Speaker 1: you buy puts on the SP five hundred long term

688
00:40:58,400 --> 00:41:00,759
Speaker 1: out of the money, so that If the S and

689
00:41:00,760 --> 00:41:04,440
Speaker 1: P five hundred drops, then you make money on your puts.

690
00:41:04,719 --> 00:41:06,960
Speaker 1: So it's like fire insurance for your portfolio. If the

691
00:41:07,040 --> 00:41:09,200
Speaker 1: value of your stocks drop, then the value of your

692
00:41:09,239 --> 00:41:11,799
Speaker 1: hedges increases to compensate you for that, so you don't

693
00:41:11,800 --> 00:41:14,120
Speaker 1: have to worry about crashes anymore. Imagine that. Did you

694
00:41:14,160 --> 00:41:17,080
Speaker 1: know you could do that? You like, you can buy

695
00:41:17,080 --> 00:41:18,759
Speaker 1: insurance on your car. If you crash your car, you

696
00:41:18,800 --> 00:41:20,520
Speaker 1: get the money back. You buy insurance on your house,

697
00:41:20,560 --> 00:41:21,960
Speaker 1: if it burns down, you get the money back. You

698
00:41:22,000 --> 00:41:24,080
Speaker 1: buy insurance on your life. If you die, your family

699
00:41:24,080 --> 00:41:27,839
Speaker 1: gets the money back. But nobody knows you can do

700
00:41:27,880 --> 00:41:31,040
Speaker 1: that with stocks. You can. You just buy insurance on it.

701
00:41:31,040 --> 00:41:33,760
Speaker 1: It's called a put, and so if the stock market crashes,

702
00:41:34,120 --> 00:41:36,200
Speaker 1: then the put pays you for the amount that a

703
00:41:36,239 --> 00:41:39,640
Speaker 1: crash buy. It's a little bit more technical than that,

704
00:41:39,760 --> 00:41:41,440
Speaker 1: like you have to make sure that you know you're

705
00:41:41,440 --> 00:41:43,800
Speaker 1: buying the right ones. There's dates associated with them in

706
00:41:43,840 --> 00:41:47,400
Speaker 1: different prices and different contracts available. But it's all very basic.

707
00:41:47,440 --> 00:41:49,160
Speaker 1: You can anybody can learn how to do it. It's

708
00:41:49,239 --> 00:41:52,440
Speaker 1: not complicated. It just takes a couple hours of focused learning,

709
00:41:54,120 --> 00:41:56,480
Speaker 1: and it's worth it to protect the value of your

710
00:41:56,600 --> 00:42:01,080
Speaker 1: I mean, your stock market portfolio might fall twenty percent

711
00:42:01,120 --> 00:42:03,520
Speaker 1: this year. How much would it be worth you to

712
00:42:03,560 --> 00:42:06,920
Speaker 1: prevent that? How much is your portfolio worth? Let's say

713
00:42:06,920 --> 00:42:09,200
Speaker 1: you've got five hundred grand in the stock market. If

714
00:42:09,200 --> 00:42:11,920
Speaker 1: it drops ten percent, you just lost fifty grand. So

715
00:42:11,960 --> 00:42:14,600
Speaker 1: would it be worth it to pay a grand to

716
00:42:14,680 --> 00:42:17,640
Speaker 1: learn how to use options and then another five grand

717
00:42:17,800 --> 00:42:21,319
Speaker 1: to buy the insurance on it? The puts, Well, that

718
00:42:21,360 --> 00:42:24,280
Speaker 1: costs you six grand, but you saved yourself from losing

719
00:42:24,360 --> 00:42:27,080
Speaker 1: fifty grand, So is that worth it? Now? What if

720
00:42:27,080 --> 00:42:29,920
Speaker 1: the stock market drops twenty percent, then you're saving yourself

721
00:42:29,920 --> 00:42:32,080
Speaker 1: from losing one hundred grand. So you see how this

722
00:42:32,120 --> 00:42:35,080
Speaker 1: adds up extremely quickly, and so it's worth it to

723
00:42:35,160 --> 00:42:37,359
Speaker 1: learn how to use these advanced tools that are not

724
00:42:37,400 --> 00:42:39,439
Speaker 1: really that advanced. They're just, you know, seem a little

725
00:42:39,440 --> 00:42:41,239
Speaker 1: complicated first because they use language that you may have

726
00:42:41,280 --> 00:42:43,799
Speaker 1: never heard of before. So you want to use five

727
00:42:43,840 --> 00:42:46,399
Speaker 1: percent of your portfolio for hedging, want to make sure

728
00:42:46,400 --> 00:42:48,200
Speaker 1: that you're protected. You can do this with your real

729
00:42:48,280 --> 00:42:51,120
Speaker 1: estate too. You've got a bunch of rental properties. Guess

730
00:42:51,160 --> 00:42:54,960
Speaker 1: what you can buy puts on publicly traded companies that

731
00:42:55,200 --> 00:42:58,720
Speaker 1: invest in rental properties. So if the rental market crashes,

732
00:42:58,800 --> 00:43:01,879
Speaker 1: guess what your puts make you money. So it doesn't

733
00:43:01,920 --> 00:43:04,160
Speaker 1: matter if your house is losing money, you make up

734
00:43:04,200 --> 00:43:06,600
Speaker 1: for it with your hedges. So you want to be

735
00:43:06,680 --> 00:43:09,400
Speaker 1: investing smartly like this. You don't want to be just

736
00:43:09,440 --> 00:43:11,600
Speaker 1: throwing money at the into the wind and hoping it

737
00:43:11,640 --> 00:43:13,840
Speaker 1: works out. You want to head your downside. Remember the

738
00:43:13,880 --> 00:43:16,480
Speaker 1: number one rules, don't lose money, So you can do that.

739
00:43:16,960 --> 00:43:20,120
Speaker 1: You can guarantee that if everything crashes, then you have

740
00:43:20,160 --> 00:43:21,880
Speaker 1: something that will make you money on that crash to

741
00:43:21,920 --> 00:43:25,200
Speaker 1: compositate you for your losses. And then the last portion,

742
00:43:25,280 --> 00:43:28,400
Speaker 1: the five percent, is going to be speculation. So everybody

743
00:43:28,520 --> 00:43:31,600
Speaker 1: sees those news stories, they get wind of those companies,

744
00:43:31,640 --> 00:43:34,319
Speaker 1: they hear the tips, and they think, oh, man, I

745
00:43:34,320 --> 00:43:36,600
Speaker 1: think the stock is going to go. I think it's

746
00:43:36,600 --> 00:43:39,480
Speaker 1: gonna blow up. So what do you do? Do you

747
00:43:39,719 --> 00:43:43,359
Speaker 1: sell your stocks that are safe and go into these

748
00:43:43,400 --> 00:43:48,480
Speaker 1: speculative trades. Most people do. Not us. We're gonna be

749
00:43:48,480 --> 00:43:52,320
Speaker 1: smart about this. Instead of getting rid of our good

750
00:43:52,320 --> 00:43:55,560
Speaker 1: investments that we've researched a lot and gambling them away,

751
00:43:56,120 --> 00:44:01,040
Speaker 1: We're going to do small bets on these options like

752
00:44:01,160 --> 00:44:06,600
Speaker 1: call options. That way, if what we thought may happen happens,

753
00:44:06,960 --> 00:44:11,560
Speaker 1: we win big. If it doesn't, we lose small. It's

754
00:44:11,680 --> 00:44:13,640
Speaker 1: kind of like imagine these like you can do little

755
00:44:13,680 --> 00:44:17,839
Speaker 1: lottery tickets on different stocks. And so there's a little stock,

756
00:44:17,920 --> 00:44:20,200
Speaker 1: let's say Nicolat that you think is going to go,

757
00:44:20,640 --> 00:44:23,319
Speaker 1: and instead of putting one hundred grand into it, you

758
00:44:23,360 --> 00:44:27,400
Speaker 1: spend one thousand dollars on call options on these and

759
00:44:27,440 --> 00:44:30,480
Speaker 1: guess what, Nicola's a fraud. They fall, so you lose

760
00:44:30,520 --> 00:44:34,560
Speaker 1: your entire thousand dollars. That's true, and you saved yourself

761
00:44:34,600 --> 00:44:37,239
Speaker 1: from losing one hundred grand or actually I should say

762
00:44:37,280 --> 00:44:39,640
Speaker 1: ninety nine grand, because it fell ninety percent the ninety percent,

763
00:44:39,719 --> 00:44:41,640
Speaker 1: so if you held it, you didn't lose the whole thing.

764
00:44:42,920 --> 00:44:45,360
Speaker 1: But if you would have used a call option instead

765
00:44:45,360 --> 00:44:47,640
Speaker 1: of losing ninety nine grand, you would have lost one grand.

766
00:44:47,719 --> 00:44:50,319
Speaker 1: Does that suck? Yes? Does it suck a lot less

767
00:44:50,320 --> 00:44:53,960
Speaker 1: than losing one hundred grand. Absolutely. And so that's what

768
00:44:54,000 --> 00:44:56,200
Speaker 1: this is about. It's not about becoming a gambler and

769
00:44:56,239 --> 00:44:59,320
Speaker 1: speculating in a dangerous way to lose money. This is

770
00:44:59,360 --> 00:45:04,080
Speaker 1: about taking safe, small bets with leverage, using a very

771
00:45:04,120 --> 00:45:08,879
Speaker 1: small amount on very highly leveraged bets, so that if

772
00:45:09,080 --> 00:45:12,560
Speaker 1: one of these hits and happens the way you think

773
00:45:12,600 --> 00:45:15,920
Speaker 1: it will, then you'll make you know, a ten x

774
00:45:16,040 --> 00:45:18,280
Speaker 1: or a twenty x return on that one little investment.

775
00:45:18,520 --> 00:45:20,560
Speaker 1: It's not going to make you rich because you made

776
00:45:20,600 --> 00:45:23,640
Speaker 1: a very small bet on it, but it maybe it

777
00:45:23,680 --> 00:45:27,320
Speaker 1: grows your portfolio by two or three percent, five percent

778
00:45:27,560 --> 00:45:30,319
Speaker 1: in a really good scenario, ten percent, Well that's all

779
00:45:30,360 --> 00:45:34,399
Speaker 1: you needed for the year. Compound ten percent, and here

780
00:45:34,400 --> 00:45:37,560
Speaker 1: where you need to be in thirty years. So this

781
00:45:37,640 --> 00:45:39,680
Speaker 1: is not about becoming a gambler. This is not about

782
00:45:39,680 --> 00:45:43,200
Speaker 1: becoming a day trader. This is not about speculating wildly

783
00:45:43,239 --> 00:45:46,080
Speaker 1: and dangerously. This is about being smart with your money,

784
00:45:46,680 --> 00:45:51,000
Speaker 1: using leverage to make your investments safer, not more dangerous.

785
00:45:51,040 --> 00:45:54,880
Speaker 1: We're eliminating the downside risk, we're playing the upside while

786
00:45:54,920 --> 00:45:59,040
Speaker 1: minimizing the potential that we could lose. Now, keep in mind,

787
00:45:59,080 --> 00:46:01,600
Speaker 1: there are ways to use options in a way that

788
00:46:02,120 --> 00:46:03,719
Speaker 1: is the reverse of this, where you take on a

789
00:46:03,760 --> 00:46:05,680
Speaker 1: massive amount of risk for a very small amount of gain.

790
00:46:05,920 --> 00:46:07,680
Speaker 1: We don't want to do that. You want to stay

791
00:46:07,680 --> 00:46:11,800
Speaker 1: away from that. In summary, we're gonna have thirty percent

792
00:46:11,800 --> 00:46:14,440
Speaker 1: of business thirty percent in real estate, thirty percent in reserves.

793
00:46:14,600 --> 00:46:16,600
Speaker 1: That reserves portion is going to be five percent bitcoin,

794
00:46:16,680 --> 00:46:19,399
Speaker 1: twenty percent goal, five percent cash. Then we have five

795
00:46:19,440 --> 00:46:23,200
Speaker 1: percent leftover for hedging and then five percent left over

796
00:46:23,360 --> 00:46:28,240
Speaker 1: for speculating. You do this, you focus, look into your investments. Well,

797
00:46:28,840 --> 00:46:33,759
Speaker 1: you will become a professional investor. You will have maximized

798
00:46:33,800 --> 00:46:37,399
Speaker 1: your long term returns, and in the end you're gonna

799
00:46:37,400 --> 00:46:38,879
Speaker 1: be a lot safer. I have a lot of smoother ride,

800
00:46:38,920 --> 00:46:41,120
Speaker 1: less volatility, and have a lot more money in the end.

801
00:46:41,160 --> 00:46:42,799
Speaker 1: And that's what it's all about. The only thing that

802
00:46:42,840 --> 00:46:47,120
Speaker 1: matters with investing is maximizing your long term wealth. That's

803
00:46:47,200 --> 00:46:50,480
Speaker 1: that's the only metric that matters. And this will This

804
00:46:50,520 --> 00:46:52,759
Speaker 1: will get you there. So I hope you enjoyed it.

805
00:46:52,800 --> 00:46:54,560
Speaker 1: If you want the breakdown, because that was only forty

806
00:46:54,560 --> 00:46:59,000
Speaker 1: five minutes, If you want the full breakdown where I

807
00:46:59,040 --> 00:47:01,839
Speaker 1: go into every single one of those categories in much

808
00:47:01,840 --> 00:47:04,440
Speaker 1: more detail, explain it in much more detail. If there

809
00:47:04,440 --> 00:47:05,799
Speaker 1: were any parts of that might have been a little

810
00:47:05,800 --> 00:47:08,800
Speaker 1: bit confusing, you want to go deeper into the option

811
00:47:08,960 --> 00:47:10,879
Speaker 1: side of it, or the different types of accounts to open,

812
00:47:11,000 --> 00:47:12,600
Speaker 1: or the different types of index funds that you can

813
00:47:12,719 --> 00:47:15,680
Speaker 1: choose and all the details that you might be wondering.

814
00:47:16,680 --> 00:47:21,200
Speaker 1: It's a couple hours on portfolio allocation inside here see

815
00:47:21,239 --> 00:47:26,160
Speaker 1: financial University, and I also ot you also will get

816
00:47:26,200 --> 00:47:28,560
Speaker 1: access to all of the other courses in there. It's

817
00:47:28,560 --> 00:47:31,680
Speaker 1: a whole training library. I'm adding new courses all the

818
00:47:31,719 --> 00:47:33,400
Speaker 1: time to it. As soon as I finish one, I

819
00:47:33,440 --> 00:47:36,440
Speaker 1: throw it up in there. I'm making one on retirement

820
00:47:36,480 --> 00:47:38,560
Speaker 1: accounts right now. I've got one on destroying your debt,

821
00:47:38,760 --> 00:47:42,720
Speaker 1: got one on options, fundamental analysis for investing in bear markets.

822
00:47:43,560 --> 00:47:45,799
Speaker 1: So if you're interested, it's nine and en bucks. You

823
00:47:45,800 --> 00:47:47,959
Speaker 1: get access to everything, and as long as you're a member,

824
00:47:48,000 --> 00:47:50,320
Speaker 1: you get access to it all and all the future events,

825
00:47:51,160 --> 00:47:54,640
Speaker 1: future courses, and then it's a membership so you can

826
00:47:54,640 --> 00:47:57,879
Speaker 1: cancel any time, no contracts, nothing like that. So check

827
00:47:57,920 --> 00:48:00,239
Speaker 1: it out links in the description below. Really appreciate guys,

828
00:48:00,239 --> 00:48:01,759
Speaker 1: thanks so much for listening. Talk to you next time.