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Speaker 1: Welcome to Hod of Money. I'm Joel, I'm Matt, and

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Speaker 1: today we're talking turning thousands into millions with Paul Merriman.

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Speaker 1: That's right.

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Speaker 2: Our guest today hails from the beautiful Bainbridge Island out

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Speaker 2: there in Washington State, right across the water there from Seattle,

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Speaker 2: and he is the I would say, the foremost expert

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Speaker 2: when it comes to DIY investing. Paul Merriman, he started

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Speaker 2: Merryman Wealth Management back in the eighties. He did that

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Speaker 2: for about thirty years, and then he founded the Merriman

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Speaker 2: Financial Education Foundation a little over a decade ago. Of course,

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Speaker 2: the foundation, it's a nonprofit. It's and this is straight

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Speaker 2: from the website. It's dedicated to providing comprehensive financial education

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Speaker 2: to investors at all stages of life, which we're all about.

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Speaker 2: Paul is the author of eight Bucks. He's got a

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Speaker 2: regular column over at market Watch. He also has his

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Speaker 2: own podcast, Sound Investing, and we are honored and privileged

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Speaker 2: to have him here on our podcast podcast today. Paul,

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Speaker 2: thank you for coming on to How to Money.

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Speaker 3: It is wonderful to be here. It is it's a

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Speaker 3: kick having a chance to reach out to what I

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Speaker 3: expect are a lot of young investors and that's that's

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Speaker 3: the best.

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Speaker 1: Yes, Oh no, we definitely have a bunch of young

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Speaker 1: investors here on the show, and I think you're going

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Speaker 1: to get to why that's the case. We're gonna have hopefully,

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Speaker 1: I think a lot of wisdom from you, Paul. You've

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Speaker 1: been doing it for so long, but your passion remains,

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Speaker 1: which is something that we that enthusiasm is contagious. The

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Speaker 1: first question we ask anybody who comes on the podcast, though,

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Speaker 1: is about what they like to splour je On, Matt

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Speaker 1: and I. We splurge on craft beer, and it's something

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Speaker 1: that we spend quite a bit of money on. Some

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Speaker 1: people would say too much, while we're trying to be

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Speaker 1: why save and invest for our future? So what is

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Speaker 1: that for you? What do you like to splurge on

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Speaker 1: that most people might think, Oh, that's like a little

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Speaker 1: abnormal or a little crazy.

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Speaker 3: Well, I don't know that I'm abnormal or crazy. But

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Speaker 3: there is very little that I need or want or

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Speaker 3: spend on myself. But I have found that if I

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Speaker 3: spend whatever my wife needs or wants, that pays the

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Speaker 3: biggest dividends of all. So no, I spurge when my

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Speaker 3: wife wants to travel or she wants to whatever it is,

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Speaker 3: I'm ready to go. But for myself, I got this.

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Speaker 3: I love what I'm doing and helping people take care

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Speaker 3: of their investments.

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Speaker 1: See you've taken that happy wife, happy life too. It's extreme. Yeah,

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Speaker 1: that's right, like you.

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Speaker 2: Said, sometimes it is the extreme, hopefully not too often.

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Speaker 2: But like jol said, yeah, a fount of wisdom that

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Speaker 2: we're speaking with today. But Paul, let's dive into your

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Speaker 2: history a little bit, like what is it that got

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Speaker 2: you into the work of financial planning investing? Yeah, I

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Speaker 2: guess year is why it is that you're so intent

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Speaker 2: on helping specifically like the average investors that every day

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Speaker 2: kind of folks. So, yeah, can you talk about how

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Speaker 2: you got into it initially and then why it is

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Speaker 2: that you took the approach that you're now taking.

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Speaker 3: Well, I kind of fell in love with the investment

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Speaker 3: process itself at about age nineteen, and I had no

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Speaker 3: intentions of teaching anything because I didn't know anything. But

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Speaker 3: I did really appreciate it and I thought it was

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Speaker 3: very exciting. But it wasn't really until I was oh,

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Speaker 3: and I was a stockbroker for a couple of years.

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Speaker 3: Before I discovered the conflicts of interest that you have

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Speaker 3: there in order to help your clients. It's not an

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Speaker 3: easy trip if you try to do what's in the

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Speaker 3: interest only of your client. But then when I turned

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Speaker 3: forty and I had enough, I thought to retire. I

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Speaker 3: decided I wanted to spend the rest of my life

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Speaker 3: teaching people how to invest and to be an investment advisor.

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Speaker 3: And by the way, I was never a financial planner.

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Speaker 3: That's a whole other commitment to helping people. My focus

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Speaker 3: was first and foremost still is on the investment part

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Speaker 3: of that process. And when I started a very small

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Speaker 3: investment advisory firm and we had no money under management

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Speaker 3: in the beginning, took about a year to raise the

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Speaker 3: first million dollars. And I would help anybody. If you

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Speaker 3: had two thousand dollars, I was your guy. I would

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Speaker 3: give you advice because I was doing it for fun. Yes,

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Speaker 3: And I gave free seminars workshops, and if you would

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Speaker 3: sit through a free three hour or six hour workshop,

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Speaker 3: I would sit down, take a look at where you

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Speaker 3: were in your life, tell you what you should do

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Speaker 3: on your own, and if you didn't want to do it,

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Speaker 3: I felt it was too complex or emotional. We were

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Speaker 3: willing to do it and do it for what we

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Speaker 3: thought was a fair price.

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Speaker 1: And you're kind of like fire before it was cool then,

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Speaker 1: I guess, Paul, right, is that at age forty?

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Speaker 3: Yeah, by the way, I did not, I did not

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Speaker 3: know the term fire. Then. Well, you know something that's

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Speaker 3: interesting because when I went into the industry in the

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Speaker 3: mid sixties, there were no financial planners that were on

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Speaker 3: the street like today. There were people in the brokerage

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Speaker 3: industry where they were just really being paid for transactions,

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Speaker 3: and if you really wanted to get financial planning, you

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Speaker 3: had to have a lot of money and you go

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Speaker 3: to a bank trust department maybe, But of course that

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Speaker 3: has all developed today where there's everybody who's in the

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Speaker 3: business it's supposed to know taxes and investments and insurance

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Speaker 3: and all of that. So it's a very different world

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Speaker 3: today from when it was.

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Speaker 1: Yeah, and on that note of just kind of different world,

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Speaker 1: I'm curious, you know, when you started in the industry,

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Speaker 1: the like Vanguard index fund wasn't really well known or

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Speaker 1: it hadn't even really been invented, right, was I mean?

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Speaker 1: When we're talking about with so a lot has changed

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Speaker 1: in the accessibility of investing for everyday investors. There used

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Speaker 1: to be kind of this shrouded in secrecy. Not to

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Speaker 1: mention just obviously higher fees and all that kind of stuff,

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Speaker 1: but it was almost impossible for the average investor to

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Speaker 1: figure out how to invest for their future. And now, yeah,

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Speaker 1: there's some jargon and lingo and some things that people

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Speaker 1: need to learn, but it's a whole lot easier to

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Speaker 1: help educate well.

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Speaker 3: And I think it's fair to say that compared to

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Speaker 3: the sixties, when everything was in favor of the house

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Speaker 3: instead of the instead of the gamblers or the speculators

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Speaker 3: or the investors, load funds almost exclusively load funds, regulated commissions.

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Speaker 3: Nobody knew what a small cap or a lot I mean,

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Speaker 3: we didn't think that way. It was the academic community

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Speaker 3: that really forced us into the kind of thinking that

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Speaker 3: we have today. But it has never ever been as

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Speaker 3: efficient today for the first time investor, not even close. Really, Really,

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Speaker 3: you can invest like a millionaire when you've got one

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Speaker 3: hundred dollars, and that's that's not just a cheap sales pitch.

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Speaker 3: That's the truth.

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Speaker 2: That's the truth, because you're not selling anything, Paul, you

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Speaker 2: you truly are out there to help individuals. And yeah,

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Speaker 2: what what you're saying is.

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Speaker 3: But you still need the products, yes, and that's the beauty.

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Speaker 3: I mean, the no load funds, the index funds, the

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Speaker 3: the ETFs, all of these things are are a pathway

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Speaker 3: to much higher returns. But what we've got to make

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Speaker 3: sure is we we don't get caught up in the

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Speaker 3: sales pitch of the assurance industry or the brokerage industry.

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Speaker 3: You really need if you want to if you want

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Speaker 3: to hit the biggest home run, whatever that might be,

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Speaker 3: you need to learn how to do it for yourself,

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Speaker 3: not because you need to be a genius, but because

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Speaker 3: you don't want to pay the price that the Wall

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Speaker 3: Street's going to charge it it's yours. You can keep

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Speaker 3: that extra profit and it makes a huge difference.

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Speaker 1: That's right.

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Speaker 2: Yeah, and we are going to talk about how you

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Speaker 2: can turn not just thousands into millions, but even one

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Speaker 2: thousand dollars a year into millions of dollars in retirement.

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Speaker 2: But it's funny that you mentioned that you are not

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Speaker 2: like a personal finance guy quite as much, because so

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Speaker 2: like in your book, like we're talking millions, that's the.

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Speaker 1: Title of it. Your latest book.

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Speaker 2: It is all about becoming a millionaire, but you don't

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Speaker 2: start with investing, Like the first thing you mentioned in

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Speaker 2: chapter one actually is about cutting spending, which is a

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Speaker 2: little more personal. Financie, can you just touch quickly on

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Speaker 2: why it is that you started with that.

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Speaker 3: Well, it's the foundation if you if you look at

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Speaker 3: the process of investing, just look at the map. So

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Speaker 3: you start putting away Let's say the first year you

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Speaker 3: put away one thousand dollars. Let's say the market's up

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Speaker 3: ten percent, So let's say the thousand is eleven hundred.

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Speaker 3: You you can be happy that you have eleven hundred,

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Speaker 3: but eleven hundred basically came from you. And if you

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Speaker 3: don't build that foundation, yes, exactly, And that's the way

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Speaker 3: investing works. And after a while, in fact, we have

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Speaker 3: great tables that show how this works. But after a while,

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Speaker 3: all of a sudden, the money that you're putting in

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Speaker 3: is small compared to what the portfolio is worth. And

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Speaker 3: then you're on in essence to the next journey. And

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Speaker 3: that is that leverage of compound return that it just

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Speaker 3: it really boggles the mind to think that for a

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Speaker 3: dollar a day over sixty five years that could become

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Speaker 3: worth two million dollars a dollar a day from birth.

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Speaker 3: I'm talking now that I think is amazing, but it

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Speaker 3: has to start with that first three hundred and sixty

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Speaker 3: five dollars.

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Speaker 1: So pregnant women should play this episode on their belly

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Speaker 1: to help their newborns get accustomed to these ideas, these

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Speaker 1: concepts right now, right.

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Speaker 3: I'm always one of my ideas in the bellies.

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Speaker 1: Yes, yes, thank you, yes, well okay, So I'm curious

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Speaker 1: to hear your thoughts on this, Paul. There was a

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Speaker 1: Yale economist who came out with this term consumption smoothing,

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Speaker 1: basically saying that, hey, there's no need to start in

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Speaker 1: investing super young. We know that, yes, compounding returns. The

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Speaker 1: earlier you start, the more that's going to build up,

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Speaker 1: the more your money's gonna be working on your behalf.

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Speaker 1: But you're always going to make more money in the future,

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Speaker 1: and you know what, you can increase the amount that

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Speaker 1: you're investing later on in your forties when you're more

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Speaker 1: secure in your career. And to Matt and I that

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Speaker 1: feels like a behavioral miss. Maybe in a perfect economic

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Speaker 1: cycle it would work out for people, but it's also

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Speaker 1: not ideal. So talk to me about starting early and

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Speaker 1: whether or not kind of that idea of taking out

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Speaker 1: a little more debt when you're younger and investing less

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Speaker 1: if that makes sense or.

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Speaker 3: Not, Well, it's not what it's not what I preach,

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Speaker 3: because my belief is is that that first five years,

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Speaker 3: assuming that you invested basically the same amount of money

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Speaker 3: over a long period of time, that first five years

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Speaker 3: can be worth forty percent of what you have to

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Speaker 3: live on by the time that you are sixty five

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Speaker 3: at retirement. And on top of that, when you're very young,

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Speaker 3: you really can afford to take more risk, smart risk,

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Speaker 3: always smart risk, but more risk than when you get older.

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Speaker 3: And so those early dollars, they are absolutely magic. And

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Speaker 3: what if what if you're fortunate enough to either have

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Speaker 3: a parent, a grandparent or a company that will match

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Speaker 3: what you're putting in And if you do now you

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Speaker 3: are are showing this high responsibility in the eyes of

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Speaker 3: the company or the parent, the grandparent, and they're willing

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Speaker 3: to help you along. Boy, if you don't take advantage

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Speaker 3: of that, you were kissing. This is just talking about

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Speaker 3: bending over and picking up money off the ground. You

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Speaker 3: can't pass it up.

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Speaker 2: Yeah, and the folks who preach the message of that

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Speaker 2: consumption smoothing, they're also counting on the best case scenario happening.

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Speaker 1: And here I always predict that.

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Speaker 2: And you can yes, that's not always going to happen

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Speaker 2: as opposed to And this is why I feel it

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Speaker 2: was worth highlighting the fact that cutting back on your

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Speaker 2: spending and cutting expenses is such a clutch move is

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Speaker 2: because that is something that you actually do have control over.

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Speaker 2: That's something that is within your own sphere of influence

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Speaker 2: as opposed to investing. And there is a certain degree

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Speaker 2: of luck that comes with investing, depending on when it

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Speaker 2: is that you first started investing, with the market's doing then,

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Speaker 2: or what the market's doing when you first retire, Yes,

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Speaker 2: whence returns risk, So you have all these X factors,

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Speaker 2: but the ability for you to sock money away is

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Speaker 2: something that is completely within your control.

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Speaker 3: Well. And if you happen to hit the home run

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Speaker 3: like nineteen ninety five and nineteen ninety nine, is your

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Speaker 3: first five years compound rate of return of the S

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Speaker 3: and P five hundred over twenty eight percent a year.

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Speaker 3: If you started after that, and for the next twenty years,

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Speaker 3: the compound rate of return was about six percent. Boy,

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Speaker 3: I mean there's you don't know the future and the

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Speaker 3: sequence of returns. As you mentioned, that can be the

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Speaker 3: luck that you need to be able to take advantage of.

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Speaker 3: And I don't I'm not suggesting. I'm sure you're not

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Speaker 3: suggesting that people not have enjoy their life. But every

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Speaker 3: study shows that most people who pay themselves first, have

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Speaker 3: the money go into the savings first, don't even miss

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Speaker 3: it because they don't see it as part of what

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Speaker 3: they have to live on. But of course the corporations

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Speaker 3: want every bit that you get in their pocket, not

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Speaker 3: on in yours. So you're fighting an uphill battle to

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Speaker 3: say no, I want to save for the future.

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Speaker 1: Yeah, that's right, Okay, talk to me about about how

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Speaker 1: important fees are. There was a comment in the how

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Speaker 1: to Money Facebook group recently and they said, oh, half

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Speaker 1: a percent on that fund. That's that's a topic of

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Speaker 1: a deal, right. But you would beg to differ, Paul,

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Speaker 1: and you would say half a percent is going to

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Speaker 1: radically reduce the amount of money you have to spend

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Speaker 1: in the future.

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Speaker 3: And let me give you the numbers. Follow the math.

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Speaker 3: Six thousand dollars a year for forty years, two hundred

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Speaker 3: and forty thousand dollars, and then you go into retirement,

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Speaker 3: take money out, and then after thirty years you die. Okay,

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Speaker 3: what do you leave and what did you spend? The

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Speaker 3: difference between eight and eight and a half percent during

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Speaker 3: the accumulation period and six and six and a half

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Speaker 3: percent during the distribution period, that's the half a percent

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Speaker 3: you're talking about is one point five million dollars.

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Speaker 2: That's an entire retirement for somebody else.

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Speaker 1: It seems so small in the moment, right like that,

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Speaker 1: what's the difference between point oh five and point five

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Speaker 1: But like that one tenth of a decimal place can

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Speaker 1: be life changing.

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Speaker 3: Well, and people who are selling load products, they'll say,

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Speaker 3: you only have to pay once. I mean, this is

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Speaker 3: not like this is going to impact you for a lifetime.

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Speaker 3: That's totally false. A five point seventy five percent commission

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Speaker 3: load on a fund, on an equity fund actually costs

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Speaker 3: you about a half a percent a year in lower

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Speaker 3: expenses over a lifetime. So you know they're they're smarter

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Speaker 3: than you are if you don't take the time to

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Speaker 3: find these things out. But once you know them, you're

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Speaker 3: going to be a defender of the family fortune here

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Speaker 3: and just understand those little bits become fortunes later on.

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Speaker 2: And just a second ago, you mentioned basically if we

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Speaker 2: are to invest, to save and invest before that money

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Speaker 2: even truly hits our spending accounts or our checking accounts,

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Speaker 2: that you don't really even miss it. Talk to us

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Speaker 2: a little bit about the wroth versus the traditional debate,

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Speaker 2: because you talk about the need to reduce and to

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Speaker 2: minimize taxes.

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Speaker 1: Yes, just curious to hear your take on.

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Speaker 2: Yeah, the roth versus traditional like whether or not you

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Speaker 2: should pay tax now and then enjoy tax free growth

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Speaker 2: or vice versa.

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Speaker 3: Well, my belief is having started in this industry and

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Speaker 3: marginal tax rates the first year that I got in

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Speaker 3: the industry seventy percent, the year before ninety percent. What

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Speaker 3: we have no idea is what tax rates are going

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Speaker 3: to be thirty forty to fifty years from now. My

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Speaker 3: heart and my gut tell me they're going to be higher.

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Speaker 3: At some point, we're going to have to pay the

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Speaker 3: bills that were accruing, and at that point, they were

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Speaker 3: paying the bills that were accruing, and people gotten along

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Speaker 3: just fine. That's the part that's so fascinating to me

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Speaker 3: is while people didn't like it, they were living a

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Speaker 3: pretty dog one good life. And how do we know

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Speaker 3: that while we may have a relatively low tax rate

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Speaker 3: now that later on, if we put away money that

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Speaker 3: cannot be attached by the government and make it tax free,

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Speaker 3: that could be a bonanza. And then it has to

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Speaker 3: do with what you leave others, because you can also

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Speaker 3: make that roth bonanza flow through to your airs. And so, yes,

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Speaker 3: you don't get the refund. But let me tell you.

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Speaker 3: I've talked to a lot of kids and I've said, hey,

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Speaker 3: what do you do with that refund? Oh, we went

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Speaker 3: on a trip, or we went you know, we did

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Speaker 3: something fun. There's nothing wrong with having fun. But I'm

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Speaker 3: just saying that you just lost that money's tax free

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Speaker 3: growth for the rest of your life. But that's always

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Speaker 3: this thing. We have to decide what do we give

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Speaker 3: up to have more later? As my friend Paul Hayes

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Speaker 3: is a free book that we now offer on our

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Speaker 3: website called Spending Your Way to Wealth, and he reminds

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Speaker 3: us saving is actually spending for later.

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Speaker 1: Yeah, yeah, yeah, deferred consumption. I love what you said

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Speaker 1: two about tax rates. I feel like that's really a

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Speaker 1: really important siteration when we're talking about growing deficit, that's

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Speaker 1: what we think, Yeah, and a growing national debt. I

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Speaker 1: agree with you that it's a really important thing to

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Speaker 1: keep in mind, as you know, whether you're putting in

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Speaker 1: traditional versus wroth accounts. But we've got more questions we

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Speaker 1: want to get to on you and including we want

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Speaker 1: to talk about the two fund for life strategy. We

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Speaker 1: want to talk about simple ways to grow that wealth

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Speaker 1: for your future. We'll get to some questions with Paul

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Speaker 1: on that. Right after this.

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Speaker 2: We are back for the break and we are again

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Speaker 2: joined by Paul Merriman, and we're discussing how you can

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Speaker 2: turn thousands of dollars into millions of dollars. And Paul,

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Speaker 2: I guess we kind of talk more about the overall

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Speaker 2: sort of philosophy, different approach. I guess we kind of

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Speaker 2: dove into some of the specifics as well. But we're

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Speaker 2: now going to talk about the actual investments, the actual funds.

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Speaker 2: Like you said earlier, the products. Yeah, you set the

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Speaker 2: table nicely. Now let's dig in right exactly. The table

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Speaker 2: has been said. You encourage folks to own stocks, but

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Speaker 2: specifically to buy all of them. We see more videos

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Speaker 2: floating around where there are supposed money influencers. They're just

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Speaker 2: saying that only a few stocks make up most of

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Speaker 2: the gains of the overall stock market, so which is

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Speaker 2: actually true. So why not just buy those specific stocks.

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Speaker 2: That's what we should be doing.

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Speaker 1: Right, It's that easy, right, it.

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Speaker 3: Is that it is that easy, But the outcome is

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Speaker 3: not that easy. Because we had when I was young,

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Speaker 3: we had it in the early seventies, the nifty to fifty,

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Speaker 3: and these were the fifty companies that generally were regarded

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Speaker 3: as companies you could put aside and just leave that

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Speaker 3: those certificates in the lock box, the safety deposit box,

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Speaker 3: and when you were ready to retire, just reach in,

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Speaker 3: take a few shares, you know, and sell them as

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Speaker 3: you go. Well, it turns out that owning all of

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Speaker 3: the companies in the S and P five hundred since

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Speaker 3: nineteen seventy two produced a higher rate of return, not

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Speaker 3: because some of these companies weren't good. But believe it

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Speaker 3: or not, when I mean, we look at Eastman Kodak,

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Speaker 3: you look at Polaroid. In fact, ge Ge was considered

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Speaker 3: a darling for a long long time until it wasn't.

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Speaker 3: So what the academics say that the more stocks you

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Speaker 3: have in your portfolio, the higher the potential return. Because

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Speaker 3: people aren't very good, even professional money managers aren't very

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Speaker 3: good at picking the best stocks. But I want to

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Speaker 3: hit on one thing and make it very clear, because

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Speaker 3: we kind of went right over it and went from

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Speaker 3: bonds to stocks. There are some I don't know, twenty

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Speaker 3: to twenty five percent of millennials that do not want

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Speaker 3: to go into the stock market because the stock market

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Speaker 3: is risky. Well, I mentioned that a half of percent

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Speaker 3: equals over a million the difference in the return of

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Speaker 3: bonds over the last ninety five years. I'm talking intermediate

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Speaker 3: maturities and the return of the stock market the S

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Speaker 3: and P five hundred five percent for bonds, ten percent

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Speaker 3: for the S and P five hundred, That is five percent.

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Speaker 3: That is ten one half of percent. That means it

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Speaker 3: is legitimately a ten million dollar decision to go to

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Speaker 3: where you think the safety is. And yet if you

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Speaker 3: look at the average return of the S and P

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Speaker 3: five hundred for all the forty year periods, the average

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Speaker 3: is eleven percent. If you looked at the best, it

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Speaker 3: was twelve and a half. If you looked at the

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Speaker 3: worst it was eight point nine. So anybody who thinks

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Speaker 3: that they're going to go into bonds and that's going

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Speaker 3: to be the safe place to be, you are based

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Speaker 3: on all history leaving a bonanza on the table. But

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Speaker 3: what you must do is you must understand the volatility

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Speaker 3: that goes with that. And once you understand it and

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Speaker 3: are willing to live with it, I think you're on

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Speaker 3: your way. But you need to go after that extra

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Speaker 3: ten million dollars.

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Speaker 1: Yeah, I like that. And well, and the other thing

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Speaker 1: that people are tempting to do right now is yields

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Speaker 1: have gone up on cash. People are saying, oh, I

404
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Speaker 1: might just like stick a little more in the highl

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Speaker 1: savs account, keep moore cash in the bank.

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Speaker 3: Well, what you're doing you don't maybe don't even realize.

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Speaker 3: You're chasing returns. And one of the biggest mistakes that

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Speaker 3: investors make is chasing what's been doing well lately. As

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Speaker 3: a matter of fact, it's kind of hard for people

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Speaker 3: to believe, but those things that have been doing worse

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Speaker 3: lately are apt to make more over the long term.

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Speaker 3: And so that is a change of thinking, and it

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Speaker 3: is one of the aspects of investing that makes it difficult,

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Speaker 3: and that is that what is counterintuitive is normally the

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Speaker 3: right thing to do. And I'm hoping that people will

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Speaker 3: see a struggling If we had a struggling stock market,

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Speaker 3: that's not a time to be a concern. We're not

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Speaker 3: talking about now. We're talking about many, many decades from now.

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Speaker 3: Lower prices are good for young investors because you get

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Speaker 3: to buy more shares and that's a point of celebration,

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Speaker 3: not sadness and fear.

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Speaker 1: It's like a favorite pair of shoes me in sixty

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Speaker 1: percent off. You'd rather buy them then than when they're

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Speaker 1: full price.

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Speaker 3: Exactly.

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Speaker 2: Everyone's going for the doors when there's a massive sale

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Speaker 2: and we fail to see the opportunity in front of us.

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Speaker 2: So you've advocated actually for something called the ultimate buy

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Speaker 2: and hold strategy for decades, but then meeting with Jack Bogel,

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Speaker 2: the founder of Vanguard, that caused you to reconsider that

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Speaker 2: a bit. Can you talk to us about the two

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Speaker 2: funds for life strategy?

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Speaker 3: Sure? And just to fill in the gap there. When

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Speaker 3: I was an investment advisor and in my own personal

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Speaker 3: account with my wife, we have ten different equity funds.

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Speaker 3: It's hugely diversified, big small value growth reads, emerging markets,

437
00:24:23,480 --> 00:24:27,280
Speaker 3: all of that stuff. But what I met with with

438
00:24:27,560 --> 00:24:31,720
Speaker 3: the John Vogel, he really gave me a talking to.

439
00:24:33,280 --> 00:24:36,960
Speaker 3: He believes in all those things too, and that's all

440
00:24:37,320 --> 00:24:40,919
Speaker 3: comes out of the academic community. That part is not

441
00:24:41,480 --> 00:24:44,040
Speaker 3: a big deal. What he says is a big deal

442
00:24:44,840 --> 00:24:48,600
Speaker 3: is that you've got to give them an investment strategy

443
00:24:48,920 --> 00:24:51,520
Speaker 3: that they if it's for do it yourself ors. I'm

444
00:24:51,560 --> 00:24:55,879
Speaker 3: not trying to help advisors. I'm trying to help people

445
00:24:55,880 --> 00:24:58,480
Speaker 3: who don't want advisors or they want to be their

446
00:24:58,520 --> 00:25:04,200
Speaker 3: own advisors. So he really motivated us to look more carefully,

447
00:25:04,200 --> 00:25:07,400
Speaker 3: how could we produce the same kind of returns at

448
00:25:07,440 --> 00:25:12,760
Speaker 3: about the same risk, but only hold two funds instead

449
00:25:12,760 --> 00:25:16,240
Speaker 3: of ten or in some cases three or four. But

450
00:25:16,760 --> 00:25:20,679
Speaker 3: the bottom line is is to make it simpler. And

451
00:25:20,840 --> 00:25:25,639
Speaker 3: about a year before my meeting with Vogel, a fellow

452
00:25:25,760 --> 00:25:31,560
Speaker 3: Chris Petterson, and we're all volunteers. Chris volunteered to work

453
00:25:31,640 --> 00:25:37,399
Speaker 3: with our foundation and he came up with this strategy

454
00:25:37,440 --> 00:25:41,520
Speaker 3: that I think is one of the most clever strategies

455
00:25:41,600 --> 00:25:45,640
Speaker 3: I've ever seen are portfolios, and that is to combine

456
00:25:46,440 --> 00:25:51,000
Speaker 3: a target date fund, which is a wonderful way for

457
00:25:51,280 --> 00:25:53,880
Speaker 3: people who don't want to fool around where their investments,

458
00:25:53,920 --> 00:25:55,960
Speaker 3: don't want to worry, just want to put the hands

459
00:25:56,560 --> 00:25:59,000
Speaker 3: the money in the hands of professionals and let them

460
00:25:59,040 --> 00:26:02,639
Speaker 3: do it the way they think is best. Forever target

461
00:26:02,760 --> 00:26:07,880
Speaker 3: date funds plus one other fund that has a history

462
00:26:08,440 --> 00:26:13,119
Speaker 3: of making substantially higher returns with a small part of

463
00:26:13,119 --> 00:26:19,119
Speaker 3: the portfolio, and those two funds together they make it

464
00:26:19,240 --> 00:26:22,679
Speaker 3: possible for somebody truly to be able to hit what

465
00:26:22,720 --> 00:26:25,760
Speaker 3: I would call a home run in terms of long

466
00:26:25,880 --> 00:26:31,240
Speaker 3: term return. And that second investment is what's called a

467
00:26:31,320 --> 00:26:36,240
Speaker 3: small cap value fund, and they've been studied going back

468
00:26:36,280 --> 00:26:40,119
Speaker 3: to nineteen twenty eight. They make a three four percent

469
00:26:40,240 --> 00:26:44,280
Speaker 3: better than the S and P five hundred hat more risk.

470
00:26:44,359 --> 00:26:47,879
Speaker 3: I mean, this is not a gimme. You're going to

471
00:26:48,400 --> 00:26:52,040
Speaker 3: be taking more risk with that small part of your portfolio,

472
00:26:52,320 --> 00:26:55,600
Speaker 3: but it's a very small part of your portfolio.

473
00:26:55,920 --> 00:26:59,760
Speaker 1: I love the two funds because you're right, it's really simple,

474
00:27:00,080 --> 00:27:01,760
Speaker 1: the kind of behavioral thing that a lot of people

475
00:27:01,760 --> 00:27:03,080
Speaker 1: can follow through. It's like, oh, I just need to

476
00:27:03,080 --> 00:27:05,240
Speaker 1: buy these two things. Great, let me go on about

477
00:27:05,240 --> 00:27:06,520
Speaker 1: my day. It's kind of like when Matt and I

478
00:27:06,520 --> 00:27:08,679
Speaker 1: wouldn't we shop at aldi and there's not forty two

479
00:27:08,720 --> 00:27:11,880
Speaker 1: ketchups to choose from, there's one. And it just makes

480
00:27:11,880 --> 00:27:14,360
Speaker 1: it a whole lot easier to not waste a whole

481
00:27:14,359 --> 00:27:16,040
Speaker 1: bunch of time and a whole bunch of money standing

482
00:27:16,080 --> 00:27:17,680
Speaker 1: there staring at the ketchups, which is the kind of

483
00:27:17,680 --> 00:27:19,600
Speaker 1: thing I would do at a normal grocery store. Right,

484
00:27:19,640 --> 00:27:22,320
Speaker 1: So behaviorally it makes sense. That's actually kind of what

485
00:27:22,359 --> 00:27:25,880
Speaker 1: the Target Date Fund was designed for in and of itself,

486
00:27:26,160 --> 00:27:28,199
Speaker 1: was to be this one stop shop for people. So

487
00:27:28,320 --> 00:27:31,120
Speaker 1: why is it in your estimation that the Target Date

488
00:27:31,240 --> 00:27:35,480
Speaker 1: Fund isn't quite enough? Isn't isn't really cutting it for

489
00:27:35,680 --> 00:27:38,200
Speaker 1: a whole lot of investors, including younger investors, And why

490
00:27:38,240 --> 00:27:40,280
Speaker 1: is it that they need to add the small cap

491
00:27:40,320 --> 00:27:41,120
Speaker 1: value exposure.

492
00:27:41,359 --> 00:27:43,800
Speaker 3: Well, you used a magic word, and it was a

493
00:27:43,840 --> 00:27:49,960
Speaker 3: magic word to John bogl isn't quite enough? In fact,

494
00:27:50,800 --> 00:27:56,920
Speaker 3: a target date fund by itself, it's probably the best

495
00:27:56,960 --> 00:28:02,160
Speaker 3: investment product that's ever been created, and it will give

496
00:28:02,240 --> 00:28:10,159
Speaker 3: you enough. The question becomes is enough going to be enough?

497
00:28:10,920 --> 00:28:13,720
Speaker 3: Or should we be trying to get what I would

498
00:28:13,760 --> 00:28:16,520
Speaker 3: call more than enough? And the reason this is not

499
00:28:16,600 --> 00:28:20,920
Speaker 3: about greed or wanting to be rich or anything it's

500
00:28:20,960 --> 00:28:25,040
Speaker 3: about helping you make a return that might make up

501
00:28:25,119 --> 00:28:28,639
Speaker 3: for mistakes that happen along the way, or maybe you

502
00:28:28,720 --> 00:28:31,800
Speaker 3: don't get the best sequence of returns, you don't have

503
00:28:31,880 --> 00:28:36,680
Speaker 3: the best luck. I believe that if most of us

504
00:28:36,720 --> 00:28:41,600
Speaker 3: are plans could somehow be reconstructed to get a slightly

505
00:28:41,680 --> 00:28:44,200
Speaker 3: higher rate of return, so that if we don't get

506
00:28:44,240 --> 00:28:48,000
Speaker 3: that return that we want, that will get that return

507
00:28:48,080 --> 00:28:51,440
Speaker 3: that we need. And if we fire too low, it

508
00:28:51,560 --> 00:28:54,240
Speaker 3: may be something will happen in your life that will

509
00:28:54,480 --> 00:28:57,520
Speaker 3: keep you from getting where you want to be. And

510
00:28:57,640 --> 00:29:01,040
Speaker 3: let me tell you why I do belie target date

511
00:29:01,120 --> 00:29:05,720
Speaker 3: fund is enough. There was a study done by Wharton

512
00:29:06,440 --> 00:29:11,160
Speaker 3: and they did it in cooperation with Vanguard. They looked

513
00:29:11,160 --> 00:29:17,160
Speaker 3: at one point two million accounts retirement accounts at Vanguard.

514
00:29:17,880 --> 00:29:22,840
Speaker 3: Some of them had no target date funds, some of

515
00:29:22,880 --> 00:29:27,760
Speaker 3: them had all target date funds, and the studies were

516
00:29:27,800 --> 00:29:31,560
Speaker 3: done and the result is this, those people on average

517
00:29:31,920 --> 00:29:36,720
Speaker 3: who use target date funds were likely to get about

518
00:29:36,720 --> 00:29:41,240
Speaker 3: two point three percent more return than those people who

519
00:29:41,240 --> 00:29:45,320
Speaker 3: were doing it themselves. Because there are so many mistakes

520
00:29:45,440 --> 00:29:49,280
Speaker 3: a well meeting do it yourself investor can make, and

521
00:29:49,440 --> 00:29:54,680
Speaker 3: most of those mistakes are driven by our emotions, and

522
00:29:55,240 --> 00:29:58,560
Speaker 3: so the beauty of that target date fund it just

523
00:29:58,640 --> 00:30:03,360
Speaker 3: takes all of those emotion motions out of that process.

524
00:30:04,000 --> 00:30:07,840
Speaker 3: But I still, if you have the stomach for it,

525
00:30:08,000 --> 00:30:10,640
Speaker 3: I still think adding a little bit of small cap

526
00:30:10,720 --> 00:30:15,280
Speaker 3: value ten percent, twenty percent, I can make the case

527
00:30:15,360 --> 00:30:19,080
Speaker 3: for fifty percent, but you don't have to go to fifty.

528
00:30:19,800 --> 00:30:23,120
Speaker 3: But even ten or twenty percent, I think it's going

529
00:30:23,160 --> 00:30:26,920
Speaker 3: to be a life changer. Keeping in mind that nobody,

530
00:30:27,200 --> 00:30:31,120
Speaker 3: absolutely nobody knows where this market's going to be thirty

531
00:30:31,200 --> 00:30:32,800
Speaker 3: or forty years from now exactly.

532
00:30:32,920 --> 00:30:33,120
Speaker 1: Yeah.

533
00:30:33,160 --> 00:30:36,000
Speaker 2: Okay, So on that note, if you're like, okay, I'm

534
00:30:36,000 --> 00:30:39,560
Speaker 2: a robot. If I think I can handle the volatility,

535
00:30:39,600 --> 00:30:42,560
Speaker 2: like would somebody who believes that who feels that way,

536
00:30:43,080 --> 00:30:45,600
Speaker 2: how comfortable would you be with them going all in

537
00:30:46,160 --> 00:30:48,400
Speaker 2: on small cap value? And by the way, small cap

538
00:30:48,480 --> 00:30:51,120
Speaker 2: value it's more volatile. Historically, it's been more volatile than

539
00:30:51,480 --> 00:30:54,200
Speaker 2: the S and P five hundred, and without volatility you

540
00:30:54,200 --> 00:30:56,160
Speaker 2: get higher returns than the S and P five hundred

541
00:30:56,200 --> 00:30:59,440
Speaker 2: as well. But are there folks out there who you

542
00:30:59,440 --> 00:31:01,800
Speaker 2: think should take this more aggressive strategy?

543
00:31:01,960 --> 00:31:03,040
Speaker 1: They've got like an iron stomach.

544
00:31:03,240 --> 00:31:06,840
Speaker 3: Yeah, you know, I my wife and I every time

545
00:31:06,880 --> 00:31:10,960
Speaker 3: we have a grandchild, they get a check, and that

546
00:31:11,040 --> 00:31:15,360
Speaker 3: check is to underwrite their retirement savings for as long

547
00:31:15,440 --> 00:31:19,120
Speaker 3: as it lasts in terms of going into either into

548
00:31:19,160 --> 00:31:22,760
Speaker 3: a wroth Ira or hopefully a wroth four oh one K.

549
00:31:23,880 --> 00:31:27,240
Speaker 3: But what we have recommended to our kids to do

550
00:31:27,320 --> 00:31:32,200
Speaker 3: with that money until it's time that those grandchildren qualify

551
00:31:32,320 --> 00:31:36,120
Speaker 3: for a retirement account, it's just split it half in

552
00:31:36,200 --> 00:31:39,680
Speaker 3: the S and P five hundred and half in small

553
00:31:39,720 --> 00:31:42,480
Speaker 3: cap value. Okay, now they're going to leave a lot

554
00:31:42,520 --> 00:31:45,960
Speaker 3: of money on the table. But here's the problem. People

555
00:31:46,040 --> 00:31:49,640
Speaker 3: get disappointed way more easily than we imagine. You said,

556
00:31:49,680 --> 00:31:53,040
Speaker 3: be a robot. Well, I do think if you were

557
00:31:53,080 --> 00:31:57,160
Speaker 3: a robot, I would still probably I would still probably

558
00:31:57,280 --> 00:32:00,960
Speaker 3: just try to defend you emotionally suggest half and half.

559
00:32:01,320 --> 00:32:04,920
Speaker 3: You get about two percent more than just the S

560
00:32:04,960 --> 00:32:07,240
Speaker 3: and P five hundred if you were fifty to fifty

561
00:32:07,600 --> 00:32:09,800
Speaker 3: and by the way, the idea that it's more risky.

562
00:32:10,440 --> 00:32:13,080
Speaker 3: A guy that I have the highest respect for, guy

563
00:32:13,160 --> 00:32:19,000
Speaker 3: named Ben Felix. He has some wonderful educational YouTube pieces.

564
00:32:19,280 --> 00:32:22,680
Speaker 3: He did a study recently. He went back to nineteen

565
00:32:22,800 --> 00:32:26,080
Speaker 3: twenty seven and he looked at all of the ten

566
00:32:26,200 --> 00:32:31,520
Speaker 3: year periods, every hundred and twenty consecutive months. How many

567
00:32:32,440 --> 00:32:35,120
Speaker 3: of those one hundred and twenty month periods did the

568
00:32:35,240 --> 00:32:38,920
Speaker 3: S and P five hundred lose money? One hundred and

569
00:32:39,000 --> 00:32:44,680
Speaker 3: forty five times. That's amazing. I had no idea it

570
00:32:44,760 --> 00:32:48,360
Speaker 3: was that many times, and the average loss was two

571
00:32:48,440 --> 00:32:51,200
Speaker 3: point three three percent. Now you're not at first, you're

572
00:32:51,240 --> 00:32:52,959
Speaker 3: not going to believe what I'm about to tell you,

573
00:32:53,600 --> 00:32:56,320
Speaker 3: But the academics have gone back and they dug out

574
00:32:56,360 --> 00:33:00,440
Speaker 3: the returns of small cap value. In one hundred eight

575
00:33:01,320 --> 00:33:04,240
Speaker 3: of those one hundred and forty five losing periods for

576
00:33:04,320 --> 00:33:08,960
Speaker 3: the S and P five hundred, small cap value made money.

577
00:33:09,640 --> 00:33:11,959
Speaker 3: And if you look at all one hundred and forty

578
00:33:12,000 --> 00:33:15,800
Speaker 3: five of those losing one hundred and twenty month periods

579
00:33:15,800 --> 00:33:19,400
Speaker 3: for the S and P five hundred, the average gain

580
00:33:20,000 --> 00:33:23,560
Speaker 3: for small cap value was over six and a half percent.

581
00:33:24,920 --> 00:33:27,560
Speaker 3: So it isn't just that small cap value gives a

582
00:33:27,560 --> 00:33:30,920
Speaker 3: better long term return that we're looking at here, but

583
00:33:31,080 --> 00:33:39,080
Speaker 3: it's also a hugely historically successful balancing kind of of

584
00:33:39,120 --> 00:33:41,640
Speaker 3: that's what you're after. I mean, you have why do

585
00:33:41,680 --> 00:33:44,240
Speaker 3: you have many stocks in a portfolio because you can't

586
00:33:44,240 --> 00:33:48,360
Speaker 3: trust one might you want some small and some value

587
00:33:48,440 --> 00:33:53,480
Speaker 3: instead of having everything in large and mostly growth. Yes,

588
00:33:53,560 --> 00:33:58,080
Speaker 3: you would, because it's more diversification. And that's one of

589
00:33:58,080 --> 00:34:01,520
Speaker 3: the reasons that I'm not worried about the long term. Sure,

590
00:34:01,560 --> 00:34:05,440
Speaker 3: I'm worried about the short term, always about the stock market.

591
00:34:05,520 --> 00:34:08,160
Speaker 3: I'm eighty years old almost, so I don't want any

592
00:34:08,239 --> 00:34:11,480
Speaker 3: long term peer market. But again, if I were a

593
00:34:11,480 --> 00:34:14,480
Speaker 3: young person, I would just put that worry out of

594
00:34:14,520 --> 00:34:20,200
Speaker 3: your mind. Do it fifty to fifty and we actually

595
00:34:20,200 --> 00:34:23,040
Speaker 3: will have tables up on our site within a couple

596
00:34:23,040 --> 00:34:26,919
Speaker 3: of months looking at every year since nineteen twenty eight.

597
00:34:27,160 --> 00:34:29,000
Speaker 1: All right, well, talk to me, Talk to me about

598
00:34:29,480 --> 00:34:32,200
Speaker 1: you just said about like, you're not worried right about

599
00:34:32,239 --> 00:34:35,120
Speaker 1: small cap value producing outsize returns for people who have

600
00:34:35,160 --> 00:34:39,000
Speaker 1: more exposure to it over the decades. But I will

601
00:34:39,000 --> 00:34:41,000
Speaker 1: say there have been a whole lot of hit pieces

602
00:34:41,040 --> 00:34:44,360
Speaker 1: on small cap value recently in financial publications, in the

603
00:34:44,360 --> 00:34:47,480
Speaker 1: Wall Street Journal, market Watch, those kind of places, talking about, oh,

604
00:34:47,640 --> 00:34:50,319
Speaker 1: small cap value, it's been in a slump, is it dead?

605
00:34:50,920 --> 00:34:53,400
Speaker 1: So I guess my question for you is it sounds

606
00:34:53,440 --> 00:34:55,640
Speaker 1: like you still retain faith that more exposure to value

607
00:34:55,640 --> 00:35:00,000
Speaker 1: stocks can help people outperform, even though we've had more

608
00:35:00,239 --> 00:35:03,960
Speaker 1: recent history where small cap value has underperformed. Yeah.

609
00:35:04,040 --> 00:35:06,480
Speaker 3: Well, this is another part of the story that I

610
00:35:06,520 --> 00:35:11,719
Speaker 3: will be telling next week, and it shows. There's a

611
00:35:11,760 --> 00:35:17,520
Speaker 3: table called a telltale chart. The telltale chart compares the

612
00:35:17,680 --> 00:35:20,839
Speaker 3: relative return to the S and P five hundred going

613
00:35:20,880 --> 00:35:25,080
Speaker 3: back to nineteen twenty seven. When that telltale chart is

614
00:35:25,120 --> 00:35:29,560
Speaker 3: going down, it means that the S and P five

615
00:35:29,680 --> 00:35:33,960
Speaker 3: hundred was doing better. When it's going up, it means

616
00:35:34,000 --> 00:35:39,760
Speaker 3: that small cap value is doing better. There were three

617
00:35:39,800 --> 00:35:47,719
Speaker 3: periods that the small cap value underperformed the S and

618
00:35:47,760 --> 00:35:54,279
Speaker 3: P five hundred of seventeen to nineteen years. That is

619
00:35:54,360 --> 00:35:58,320
Speaker 3: the way it is, and so right now we happen

620
00:35:58,360 --> 00:36:01,560
Speaker 3: to be in one of those periods where small cap

621
00:36:01,680 --> 00:36:04,920
Speaker 3: value hasn't done it as well. The problem is we

622
00:36:05,040 --> 00:36:07,160
Speaker 3: wait for something to get hot to get on.

623
00:36:08,040 --> 00:36:10,240
Speaker 2: Well, this goes back to what you're saying about chasing returns.

624
00:36:10,320 --> 00:36:13,880
Speaker 3: Yeah, exactly. And if I told you there's a possibility

625
00:36:13,960 --> 00:36:17,120
Speaker 3: that getting in at the peak could mean you wait

626
00:36:17,239 --> 00:36:20,279
Speaker 3: seventeen years to an essence break even I don't by

627
00:36:20,280 --> 00:36:22,680
Speaker 3: the way, I don't mean that you won't have made money.

628
00:36:23,080 --> 00:36:25,120
Speaker 3: I'm just saying that you would have been better off

629
00:36:25,160 --> 00:36:28,319
Speaker 3: than the S and P five hundred. But here's the

630
00:36:28,440 --> 00:36:33,160
Speaker 3: end result. The end result over that ninety five or

631
00:36:33,200 --> 00:36:37,240
Speaker 3: so years is that the small cap value was worth

632
00:36:37,400 --> 00:36:42,040
Speaker 3: thirteen times what the S and P five hundred was.

633
00:36:42,920 --> 00:36:47,600
Speaker 3: But you had to have a lot of patience or

634
00:36:47,640 --> 00:36:51,200
Speaker 3: you needed to have time on your side. And here

635
00:36:51,239 --> 00:36:54,560
Speaker 3: I am at eighty and I'm saying I'm not sure

636
00:36:55,360 --> 00:36:58,239
Speaker 3: I have that time. And my wife asked me, wait

637
00:36:58,280 --> 00:37:00,680
Speaker 3: a minute, is this money for us or is it

638
00:37:00,719 --> 00:37:06,560
Speaker 3: for our kids? Oh? Yeah, she's right. It doesn't matter

639
00:37:06,680 --> 00:37:09,200
Speaker 3: that it doesn't do what I want it to right now.

640
00:37:09,320 --> 00:37:10,480
Speaker 2: It doesn't matter for you.

641
00:37:10,120 --> 00:37:12,120
Speaker 3: You know, I'm just being emotional.

642
00:37:12,320 --> 00:37:16,160
Speaker 2: Gosh, this is making me possibly reevaluate what I've got

643
00:37:16,160 --> 00:37:19,440
Speaker 2: going on, Paul, because I guess I'll be financially.

644
00:37:19,040 --> 00:37:20,000
Speaker 1: Naked a little bit here.

645
00:37:20,040 --> 00:37:22,320
Speaker 2: But all of my money that's invested in the market,

646
00:37:22,840 --> 00:37:25,040
Speaker 2: so aside from real estate, it is in the S

647
00:37:25,080 --> 00:37:27,399
Speaker 2: and P five hundred, and so if I'm looking ahead,

648
00:37:27,440 --> 00:37:30,000
Speaker 2: I'm looking decades and decades down the road. If I

649
00:37:30,040 --> 00:37:33,759
Speaker 2: am interested in incorporating some small cap value, how would

650
00:37:33,800 --> 00:37:36,000
Speaker 2: I go about that? Would I just start buying up

651
00:37:36,040 --> 00:37:39,000
Speaker 2: some of that and rather than vo which is the

652
00:37:39,200 --> 00:37:40,279
Speaker 2: S and P five hundred.

653
00:37:40,160 --> 00:37:41,719
Speaker 3: I'm going to make it easier and I'm going to

654
00:37:41,800 --> 00:37:45,239
Speaker 3: make it better than Vanguard. Okay, now, when I say that,

655
00:37:45,440 --> 00:37:49,040
Speaker 3: obviously I'm not talking about the future. But based on everything,

656
00:37:49,120 --> 00:37:53,719
Speaker 3: we know what kind of small cap factors give the

657
00:37:53,760 --> 00:37:58,320
Speaker 3: best return over the long term. It isn't a Vanguard fund,

658
00:37:58,719 --> 00:38:02,279
Speaker 3: but it's a fund that's available at Vanguard on a

659
00:38:02,320 --> 00:38:09,600
Speaker 3: commission free basis. And Chris Petterson every two years updates

660
00:38:09,640 --> 00:38:16,040
Speaker 3: his list of best in class ETFs and the one

661
00:38:16,040 --> 00:38:18,879
Speaker 3: that has been at the top of the list is

662
00:38:19,160 --> 00:38:26,680
Speaker 3: a v u V, the Avanta Small Cap Value Fund.

663
00:38:27,880 --> 00:38:31,920
Speaker 3: And so you can compare it to VBR or v

664
00:38:32,160 --> 00:38:36,880
Speaker 3: io v or or the company. Yeah, there's there's about

665
00:38:36,920 --> 00:38:40,759
Speaker 3: three of them. I believe that are ETFs at at Vanguard.

666
00:38:41,160 --> 00:38:45,240
Speaker 3: Now it's not that it's better because these people are magic.

667
00:38:45,960 --> 00:38:50,800
Speaker 3: It's better because, for example, VBR, the average sized company

668
00:38:50,880 --> 00:38:54,640
Speaker 3: is six billion dollars more than twice the average sized

669
00:38:54,680 --> 00:38:59,880
Speaker 3: company in a v u V, Plus the companies in

670
00:39:00,120 --> 00:39:06,200
Speaker 3: ABUV are higher quality, better earnings within the small cap

671
00:39:06,400 --> 00:39:11,000
Speaker 3: value arena. So the question is are you better than

672
00:39:11,280 --> 00:39:14,080
Speaker 3: to go ahead and do that right? Now, or do

673
00:39:14,120 --> 00:39:17,120
Speaker 3: it over time. Well, here's the problem. If you do

674
00:39:17,200 --> 00:39:20,960
Speaker 3: it over time on a dollar cost average basis, you

675
00:39:21,000 --> 00:39:23,640
Speaker 3: could take the next twelve or twenty four months to

676
00:39:23,680 --> 00:39:27,759
Speaker 3: do that and everything would be going just fine. And

677
00:39:27,800 --> 00:39:31,280
Speaker 3: then at the end of twenty four months, the VBR

678
00:39:31,400 --> 00:39:33,920
Speaker 3: turns out to be the big performer for the next

679
00:39:34,040 --> 00:39:38,080
Speaker 3: ten years. A year or two years is a random event.

680
00:39:38,800 --> 00:39:41,080
Speaker 3: This is so hard for people, I think a lot

681
00:39:41,080 --> 00:39:44,960
Speaker 3: of people to understand. If you base your decisions on

682
00:39:45,400 --> 00:39:48,279
Speaker 3: even ten years performance, what do you do with the

683
00:39:48,400 --> 00:39:51,760
Speaker 3: S and P five hundred after it loses one percent

684
00:39:51,800 --> 00:39:54,560
Speaker 3: a year for ten years, Why would you ever invest

685
00:39:54,600 --> 00:39:57,560
Speaker 3: in that? Well, because over the long run they'll tell

686
00:39:57,600 --> 00:40:01,000
Speaker 3: you it will do better than that, but it doesn't

687
00:40:01,160 --> 00:40:05,800
Speaker 3: change the decision. Dollar cost average, go ahead and and

688
00:40:05,880 --> 00:40:09,160
Speaker 3: and get it right right now, I would say, go

689
00:40:09,200 --> 00:40:12,600
Speaker 3: ahead and get it right or better. Yet, if you

690
00:40:12,640 --> 00:40:16,759
Speaker 3: don't really trust that, take half your money and do

691
00:40:16,880 --> 00:40:19,920
Speaker 3: it that way now, and dollar cost average in the

692
00:40:20,000 --> 00:40:20,680
Speaker 3: other half.

693
00:40:21,120 --> 00:40:22,520
Speaker 1: All right, Yeah, well I like it, Paul.

694
00:40:22,520 --> 00:40:24,480
Speaker 2: We've got a few more questions we're gonna get to. Actually,

695
00:40:24,600 --> 00:40:27,200
Speaker 2: I might have a little small one there about kids

696
00:40:27,280 --> 00:40:29,799
Speaker 2: and investing. We've got a couple other questions to get to.

697
00:40:29,960 --> 00:40:36,200
Speaker 2: We'll get to all that right after the break.

698
00:40:41,960 --> 00:40:44,120
Speaker 1: We're actually talking with Paul Merriman. We're talking about turning

699
00:40:44,160 --> 00:40:47,200
Speaker 1: thousands into millions, and I love that we're kind of

700
00:40:47,200 --> 00:40:49,480
Speaker 1: going into depth on the two funds for life approach.

701
00:40:49,520 --> 00:40:52,480
Speaker 1: It's it's so good and I think it's it's helpful

702
00:40:52,520 --> 00:40:56,120
Speaker 1: for people because it's it's simple, but it hopefully for

703
00:40:56,239 --> 00:40:59,200
Speaker 1: most young folks who have a long timeline, will accelerate

704
00:40:59,239 --> 00:41:02,279
Speaker 1: your returns. Mean, we got more money in retirement. But Paul,

705
00:41:02,600 --> 00:41:04,239
Speaker 1: we're talking about how a lot of the money that

706
00:41:04,280 --> 00:41:07,080
Speaker 1: you've got invested is for kids, is potentially even for

707
00:41:07,120 --> 00:41:09,640
Speaker 1: grand kids, which is awesome. A lot of folks who

708
00:41:09,760 --> 00:41:12,279
Speaker 1: are nearing retirement age, that's money that they need to

709
00:41:12,320 --> 00:41:14,880
Speaker 1: live on, right, And so you talk about how the

710
00:41:14,920 --> 00:41:18,719
Speaker 1: biggest risk in the index fund only strategy is the

711
00:41:18,760 --> 00:41:21,520
Speaker 1: ability to reduce risk in those later years, and that

712
00:41:21,560 --> 00:41:24,200
Speaker 1: your two fund strategy creates a better glide path that

713
00:41:24,239 --> 00:41:26,799
Speaker 1: makes it easier to start drawing down on those retirement funds.

714
00:41:26,840 --> 00:41:30,239
Speaker 3: How is that, Well, what happens in a target date

715
00:41:30,320 --> 00:41:34,520
Speaker 3: fund is that the people who manage it, they know

716
00:41:34,640 --> 00:41:36,759
Speaker 3: when you want to retire, if you're sitting in a

717
00:41:36,840 --> 00:41:40,520
Speaker 3: twenty sixty five target date fund. That's how they work,

718
00:41:40,600 --> 00:41:44,120
Speaker 3: and so they are going to look not at you personally,

719
00:41:44,200 --> 00:41:46,839
Speaker 3: but at people like you, and they're going to be conservative.

720
00:41:47,080 --> 00:41:49,719
Speaker 3: Just got to understand that they're not going to take

721
00:41:49,760 --> 00:41:52,480
Speaker 3: a lot of extra risk, but they are going to

722
00:41:53,120 --> 00:41:56,200
Speaker 3: They're going to manage the money very similar to how

723
00:41:56,239 --> 00:41:59,279
Speaker 3: a pension fund would manage the money. And as you

724
00:41:59,320 --> 00:42:03,160
Speaker 3: get closer your retirement, because it now instead of needing

725
00:42:03,200 --> 00:42:07,839
Speaker 3: to produce growth, also needs to produce income, they will

726
00:42:07,880 --> 00:42:11,600
Speaker 3: be transitioning part of the portfolio to where you might

727
00:42:11,640 --> 00:42:15,360
Speaker 3: be forty percent in bonds or fifty percent in bonds.

728
00:42:15,600 --> 00:42:17,520
Speaker 3: And that's what my wife and I were fifty to

729
00:42:17,560 --> 00:42:20,799
Speaker 3: fifty stocks and bonds because we don't want to take

730
00:42:20,840 --> 00:42:25,720
Speaker 3: the risk of an all equity portfolio on the short term.

731
00:42:25,920 --> 00:42:28,440
Speaker 3: So that's the beauty of a target date fund. Not

732
00:42:28,480 --> 00:42:30,879
Speaker 3: only can you be twenty one years old and start

733
00:42:30,960 --> 00:42:34,040
Speaker 3: putting your one hundred dollars a month into this fund,

734
00:42:34,480 --> 00:42:37,680
Speaker 3: but you can when you retire start taking money out

735
00:42:37,680 --> 00:42:41,160
Speaker 3: of the same fund until you die. It's an amazing

736
00:42:41,280 --> 00:42:44,080
Speaker 3: thing to be able to have and you never have

737
00:42:44,239 --> 00:42:47,799
Speaker 3: to make a decision except when you think you're going

738
00:42:47,840 --> 00:42:48,440
Speaker 3: to retire.

739
00:42:48,880 --> 00:42:49,319
Speaker 1: I love it.

740
00:42:49,360 --> 00:42:52,759
Speaker 2: Okay, So, Paul, you mentioned how you've got grandkids and

741
00:42:53,080 --> 00:42:55,880
Speaker 2: you basically I think you said, you're underwriting their retirement.

742
00:42:56,360 --> 00:43:00,160
Speaker 2: Basically it's like seed money, the head start essentially. And

743
00:43:00,239 --> 00:43:03,239
Speaker 2: think about that. I guess I find myself wondering if

744
00:43:03,440 --> 00:43:06,399
Speaker 2: money that is set aside, not only for kids, but

745
00:43:06,480 --> 00:43:09,799
Speaker 2: like you said, grandkids, where man, that is going to

746
00:43:09,800 --> 00:43:11,920
Speaker 2: be a substantial amount of money off in the future.

747
00:43:11,920 --> 00:43:15,719
Speaker 2: Do you are you ever concerned that legacy wealth that

748
00:43:15,719 --> 00:43:19,000
Speaker 2: you're passing down that it'll undermine kid's ambition.

749
00:43:19,560 --> 00:43:22,520
Speaker 3: Let me give you a really easy one that it's

750
00:43:22,760 --> 00:43:27,919
Speaker 3: just it's outrageous. A child is born, you give them

751
00:43:28,000 --> 00:43:32,160
Speaker 3: the first year three hundred and sixty five dollars, and

752
00:43:32,160 --> 00:43:35,880
Speaker 3: that is invested in small cap value if you wanted to,

753
00:43:37,040 --> 00:43:40,600
Speaker 3: and in essence, that three hundred and sixty five is

754
00:43:40,640 --> 00:43:43,719
Speaker 3: going to find its way into a roth ira as

755
00:43:43,760 --> 00:43:47,760
Speaker 3: soon as possible. Now, if that three hundred and sixty

756
00:43:47,800 --> 00:43:53,160
Speaker 3: five dollars and grows at twelve percent, the compound rate

757
00:43:53,200 --> 00:43:57,280
Speaker 3: of return of the average forty year period for small

758
00:43:57,320 --> 00:44:01,080
Speaker 3: cap value sixteen percent. Going back to nineteen twenty eight

759
00:44:01,320 --> 00:44:03,080
Speaker 3: that I don't think is going to happen again. But

760
00:44:03,160 --> 00:44:05,880
Speaker 3: I will say that I think twelve percent if the

761
00:44:05,960 --> 00:44:09,360
Speaker 3: S and P five hundred makes ten is a legitimate return.

762
00:44:09,520 --> 00:44:13,239
Speaker 3: If you get twelve percent and that money sets there

763
00:44:13,680 --> 00:44:16,920
Speaker 3: for seventy years, don't ever add anything to it. Just

764
00:44:16,960 --> 00:44:19,960
Speaker 3: get it into that roth Ira. It would be worth

765
00:44:20,640 --> 00:44:25,560
Speaker 3: about a million dollars, and if it had compounded at

766
00:44:25,600 --> 00:44:29,440
Speaker 3: ten percent, it would be worth about four eighty eight Okay,

767
00:44:29,480 --> 00:44:33,920
Speaker 3: four hundred and eighty eight thousand. Now that's the income

768
00:44:34,640 --> 00:44:38,760
Speaker 3: for when the child is seventy how about funding seventy

769
00:44:38,800 --> 00:44:42,000
Speaker 3: one great at their first birthday, you put in another

770
00:44:42,040 --> 00:44:45,839
Speaker 3: three hundred and sixty five. You open a separate account

771
00:44:45,960 --> 00:44:49,640
Speaker 3: that is meant to be the retirement at age seventy two.

772
00:44:50,680 --> 00:44:54,880
Speaker 3: So by the time they're eighteen or twenty one years old,

773
00:44:55,680 --> 00:44:58,600
Speaker 3: what you'd explained to the kid is that you've started

774
00:44:58,640 --> 00:45:03,120
Speaker 3: this for them. This money is your gift to them.

775
00:45:03,480 --> 00:45:07,319
Speaker 3: And I even recommend that you, like for this granddaughter

776
00:45:07,360 --> 00:45:09,719
Speaker 3: that was just born, for us, she is going to

777
00:45:09,800 --> 00:45:11,640
Speaker 3: get a letter from us, She's going to get a

778
00:45:11,719 --> 00:45:15,000
Speaker 3: video from us, she's going to get a podcast from us,

779
00:45:15,320 --> 00:45:17,879
Speaker 3: so that when she's eighteen, because we'll be gone, more

780
00:45:17,920 --> 00:45:21,120
Speaker 3: than likely that she will know what was the dream

781
00:45:21,239 --> 00:45:23,920
Speaker 3: that we had for her. This is not a get

782
00:45:24,120 --> 00:45:29,600
Speaker 3: rich quick scheme. This is a get rich slowly And

783
00:45:30,520 --> 00:45:33,279
Speaker 3: if you did that for eighteen years, you have, in

784
00:45:33,520 --> 00:45:39,799
Speaker 3: essence help fund ages seventy through eighty eight in retirement.

785
00:45:40,280 --> 00:45:42,759
Speaker 1: No. I think that's great because I think what you're

786
00:45:42,760 --> 00:45:45,600
Speaker 1: speaking to is the fact that not only are you

787
00:45:45,640 --> 00:45:48,320
Speaker 1: helping with the seed money, but you're offering the education

788
00:45:48,680 --> 00:45:51,480
Speaker 1: and the reason why you're doing it too, which I

789
00:45:51,480 --> 00:45:54,960
Speaker 1: think helps complete the picture. And sometimes for some parents

790
00:45:55,040 --> 00:45:58,640
Speaker 1: it's all about like that concept of generational wealth I

791
00:45:58,640 --> 00:46:00,040
Speaker 1: think can be a good one, but it can be

792
00:46:00,120 --> 00:46:03,279
Speaker 1: taken too far, and so you have to think about

793
00:46:03,320 --> 00:46:05,960
Speaker 1: how you're passing on the education. That's almost more important

794
00:46:05,960 --> 00:46:07,640
Speaker 1: than the money. Yeah, but if you can pass on,

795
00:46:07,920 --> 00:46:11,359
Speaker 1: you know, some seed money early on too, that can

796
00:46:11,400 --> 00:46:13,600
Speaker 1: be helpful for sure and make a big difference in

797
00:46:13,640 --> 00:46:15,920
Speaker 1: their in their long term future. Paul, I'm curious to

798
00:46:15,960 --> 00:46:20,719
Speaker 1: hear your thoughts about the financial advice industry, and you've

799
00:46:20,760 --> 00:46:23,560
Speaker 1: worked so hard for so many years to make this

800
00:46:23,640 --> 00:46:27,920
Speaker 1: sort of investment advice easy for folks to understand and

801
00:46:27,960 --> 00:46:31,560
Speaker 1: to implement. But you also talked earlier about how financial

802
00:46:31,560 --> 00:46:34,399
Speaker 1: advisors are expected to do more. They need to have

803
00:46:34,760 --> 00:46:38,479
Speaker 1: specific like tax knowledge, and they they're therefore behavioral help

804
00:46:38,719 --> 00:46:41,000
Speaker 1: as well along the way. Do you feel like the

805
00:46:41,160 --> 00:46:45,200
Speaker 1: value proposition of financial advisors has gone down in an

806
00:46:45,280 --> 00:46:48,760
Speaker 1: era of DIY investing that is so cheap and simple

807
00:46:48,800 --> 00:46:49,919
Speaker 1: to actually pull off.

808
00:46:50,400 --> 00:46:54,279
Speaker 3: Well, my belief is that if a person can learn

809
00:46:54,280 --> 00:46:58,160
Speaker 3: how to do this on their own, it is a

810
00:46:58,400 --> 00:47:02,480
Speaker 3: two to three million dollars payoff. So having said that,

811
00:47:03,320 --> 00:47:07,680
Speaker 3: I have been on a diet since the fifth grade,

812
00:47:08,080 --> 00:47:13,799
Speaker 3: I have lost thousands and thousands of pounds. I know

813
00:47:14,080 --> 00:47:18,439
Speaker 3: how to lose weight, and yet I am still at

814
00:47:18,480 --> 00:47:24,360
Speaker 3: almost age eighty thirty pounds over weight. I have four stints,

815
00:47:24,480 --> 00:47:27,560
Speaker 3: I have high blood pressure, I have high cholesterol, I

816
00:47:27,640 --> 00:47:32,040
Speaker 3: have diabetes. I have every motivation to do this right,

817
00:47:33,239 --> 00:47:37,560
Speaker 3: but I just love to eat and to celebrate today.

818
00:47:37,640 --> 00:47:40,919
Speaker 3: Now I can't. I have never been able to put

819
00:47:40,960 --> 00:47:44,640
Speaker 3: it on automatic. But I will tell you that to

820
00:47:44,680 --> 00:47:48,920
Speaker 3: the extent that you can put it on automatic and

821
00:47:49,200 --> 00:47:53,319
Speaker 3: just let it ride, the payoff is huge. But if

822
00:47:53,360 --> 00:47:57,880
Speaker 3: you can't, if you're afraid to invest, a good advisor

823
00:47:57,920 --> 00:48:00,640
Speaker 3: will do that for you. It doesn't mean they know

824
00:48:00,719 --> 00:48:04,400
Speaker 3: the future any better than you do. They don't, they can't.

825
00:48:04,880 --> 00:48:07,960
Speaker 3: They don't know anything about the future. They know a

826
00:48:08,000 --> 00:48:12,320
Speaker 3: lot about the past. We have over two hundred tables

827
00:48:12,360 --> 00:48:16,320
Speaker 3: of numbers that are trying to help people understand the past.

828
00:48:16,840 --> 00:48:19,719
Speaker 3: But if you don't get it and you can't take it,

829
00:48:19,800 --> 00:48:23,160
Speaker 3: and it's just too much to ask, then you have

830
00:48:23,320 --> 00:48:26,640
Speaker 3: somebody else do it. And having said that, my wife

831
00:48:26,719 --> 00:48:29,759
Speaker 3: and I have an advisor. Now. Part of it is

832
00:48:29,800 --> 00:48:34,760
Speaker 3: for the other stuff that go beyond just the investment part.

833
00:48:35,400 --> 00:48:39,040
Speaker 3: And I want to make sure that my wife if

834
00:48:39,080 --> 00:48:41,239
Speaker 3: I go first, and she's a few years younger, and

835
00:48:41,280 --> 00:48:46,080
Speaker 3: I'm likely to that she'll be taken care of. But

836
00:48:46,520 --> 00:48:50,320
Speaker 3: I don't want to even think about my own money.

837
00:48:51,080 --> 00:48:54,000
Speaker 3: We simply ask for a check the first of each year.

838
00:48:55,280 --> 00:48:59,080
Speaker 3: That is a percentage of the money we have. We

839
00:49:00,440 --> 00:49:03,359
Speaker 3: try to give away thirty percent of it. And it's

840
00:49:03,400 --> 00:49:06,360
Speaker 3: really easy to give away thirty percent because our foundation

841
00:49:07,080 --> 00:49:09,680
Speaker 3: needs lots of money, and so I write a lot

842
00:49:09,719 --> 00:49:14,359
Speaker 3: of checks. And by the way, Western Washington University will

843
00:49:14,360 --> 00:49:18,759
Speaker 3: be announcing a program that we are underwriting that will

844
00:49:18,800 --> 00:49:24,800
Speaker 3: give financial literacy required about forty hours of required classes

845
00:49:25,520 --> 00:49:29,279
Speaker 3: before you can graduate from Western and I think it

846
00:49:29,320 --> 00:49:33,600
Speaker 3: is it's unusual, and we're not there to teach people

847
00:49:33,600 --> 00:49:36,160
Speaker 3: how to buy stocks. We don't want them to learn

848
00:49:36,200 --> 00:49:38,440
Speaker 3: how to buy stocks. We want them to be in

849
00:49:38,440 --> 00:49:41,200
Speaker 3: index funds. We want them to understand budgeting. We want

850
00:49:41,239 --> 00:49:44,840
Speaker 3: them to understand borrowing money. We want them to understand

851
00:49:44,840 --> 00:49:47,160
Speaker 3: a four h one K plan. We want to make

852
00:49:47,200 --> 00:49:50,920
Speaker 3: sure they have the language so that they're not going

853
00:49:50,960 --> 00:49:55,640
Speaker 3: to be over emotionally overwrought with having to face stuff

854
00:49:55,680 --> 00:50:00,920
Speaker 3: they don't understand. They will understand the basics. And so

855
00:50:01,040 --> 00:50:03,279
Speaker 3: my hope is that we're going to help a lot

856
00:50:03,320 --> 00:50:07,280
Speaker 3: of young people do this better and that other universities

857
00:50:07,680 --> 00:50:09,400
Speaker 3: will do what we're doing.

858
00:50:09,480 --> 00:50:10,279
Speaker 1: That's great. I love it.

859
00:50:10,440 --> 00:50:14,840
Speaker 2: Yeah, whether that's assistance with financial literacy and financial education,

860
00:50:15,000 --> 00:50:17,399
Speaker 2: or like you're saying, when it comes to advisors, if

861
00:50:17,440 --> 00:50:19,319
Speaker 2: you are not able to take that initial step to

862
00:50:19,600 --> 00:50:22,040
Speaker 2: provide some sort of action, because it doesn't matter if

863
00:50:22,520 --> 00:50:25,040
Speaker 2: your returns are less because you're paying a small fee

864
00:50:25,040 --> 00:50:27,840
Speaker 2: to an advisor, if the alternative is that you're not

865
00:50:27,880 --> 00:50:30,439
Speaker 2: going to save and invest at all, right, and so

866
00:50:30,760 --> 00:50:32,760
Speaker 2: you kind of have to look at the whole picture, Paul,

867
00:50:33,480 --> 00:50:35,799
Speaker 2: your Foundation does an excellent job at doing that, and.

868
00:50:35,800 --> 00:50:37,120
Speaker 1: We really appreciate you.

869
00:50:37,120 --> 00:50:39,480
Speaker 2: You're speaking with us today and for folks who want

870
00:50:39,520 --> 00:50:41,319
Speaker 2: to learn. I mean, like you said, you have an

871
00:50:41,320 --> 00:50:46,840
Speaker 2: incredible resource being your website, some of the different tables

872
00:50:46,840 --> 00:50:48,280
Speaker 2: and information that you have up there.

873
00:50:48,680 --> 00:50:51,560
Speaker 3: Yeah, and I have to say that book. We're talking

874
00:50:51,640 --> 00:50:56,400
Speaker 3: millions where we have the free PDF. The reason that

875
00:50:56,480 --> 00:51:00,960
Speaker 3: pdf is free is because that way you can you

876
00:51:01,000 --> 00:51:04,160
Speaker 3: can forward it to everybody that you know that might

877
00:51:04,200 --> 00:51:07,440
Speaker 3: be helped by that book. Sure, it'd be nice to

878
00:51:07,480 --> 00:51:10,640
Speaker 3: have the Royalty use it at Amazon, but I'd much

879
00:51:10,719 --> 00:51:13,799
Speaker 3: rather have somebody have that book and be able to

880
00:51:13,840 --> 00:51:15,240
Speaker 3: share it with others.

881
00:51:15,840 --> 00:51:19,320
Speaker 1: That is impressive and your life's work. It has helped

882
00:51:19,360 --> 00:51:20,960
Speaker 1: so many people and it's going to help a lot

883
00:51:21,000 --> 00:51:23,120
Speaker 1: of people today. So thank you so much for joining us. Man.

884
00:51:23,160 --> 00:51:23,840
Speaker 1: We really appreciate.

885
00:51:23,880 --> 00:51:25,839
Speaker 3: Good luck and you're in your venture. You guys are

886
00:51:25,840 --> 00:51:26,800
Speaker 3: doing a great job.

887
00:51:27,120 --> 00:51:28,520
Speaker 1: Thank you, Paul Joel.

888
00:51:28,800 --> 00:51:31,000
Speaker 2: You know, like there are multiple folks who say, oh,

889
00:51:31,120 --> 00:51:32,560
Speaker 2: you guys are doing a great job, but I think

890
00:51:32,560 --> 00:51:34,879
Speaker 2: when Paul says it, he really means it, and it's

891
00:51:34,920 --> 00:51:37,840
Speaker 2: because I think we do have such a similar mission

892
00:51:37,960 --> 00:51:41,480
Speaker 2: and how it is that we're approaching not only personal finance,

893
00:51:41,480 --> 00:51:43,000
Speaker 2: but paulsk specifically investing.

894
00:51:43,040 --> 00:51:44,160
Speaker 1: We're just not as smart as Paul.

895
00:51:44,239 --> 00:51:47,319
Speaker 2: No, no, we're I was going to say maybe half

896
00:51:47,320 --> 00:51:50,520
Speaker 2: as smart because we're basically half his age, but I

897
00:51:50,600 --> 00:51:54,000
Speaker 2: don't even know. But I mean, I'm going to cut

898
00:51:54,000 --> 00:51:56,239
Speaker 2: straight to it. I think my big takeaway is that

899
00:51:56,520 --> 00:51:58,319
Speaker 2: I am going to have to figure out how I'm

900
00:51:58,320 --> 00:52:02,120
Speaker 2: going to start implementing some small cap into my investment portfolio.

901
00:52:02,239 --> 00:52:03,600
Speaker 2: I don't know if I'm going to pull the switch

902
00:52:03,680 --> 00:52:06,319
Speaker 2: and go fifty to fifty he like he has for

903
00:52:06,360 --> 00:52:08,719
Speaker 2: his grandkids right now, half the S and p f

904
00:52:08,760 --> 00:52:11,840
Speaker 2: F hundred half small cap, specifically of the one that

905
00:52:11,880 --> 00:52:15,960
Speaker 2: he mentioned with av UV. That's right, We've got to

906
00:52:16,000 --> 00:52:17,239
Speaker 2: figure out a better way ave of.

907
00:52:17,440 --> 00:52:17,799
Speaker 1: I don't know.

908
00:52:17,960 --> 00:52:20,320
Speaker 2: It doesn't really flow off the tongue like FC Rocks

909
00:52:20,960 --> 00:52:24,600
Speaker 2: or even VOU, but I yeah, I'm not exactly sure

910
00:52:24,880 --> 00:52:27,320
Speaker 2: how it is I'm going to start implementing that. But man,

911
00:52:27,360 --> 00:52:29,719
Speaker 2: I am most definitely going to be taking another look

912
00:52:29,760 --> 00:52:34,319
Speaker 2: basically because yeah, nobody knows the future. And if you think, oh, well, yeah,

913
00:52:34,360 --> 00:52:37,520
Speaker 2: small cap value is dead, you're guessing. But what is

914
00:52:37,600 --> 00:52:41,120
Speaker 2: fact is looking at history, looking at the past and

915
00:52:41,200 --> 00:52:43,920
Speaker 2: knowing what it is, knowing the performance of something like

916
00:52:43,960 --> 00:52:47,040
Speaker 2: small Cat Valgue versus the SMP over the past one

917
00:52:47,120 --> 00:52:47,719
Speaker 2: hundred years.

918
00:52:48,480 --> 00:52:50,880
Speaker 1: I love the two funds approached thing because you and

919
00:52:50,880 --> 00:52:53,520
Speaker 1: I were all about simple. The reason is is because

920
00:52:53,520 --> 00:52:55,000
Speaker 1: a whole lot of people they start to hear a

921
00:52:55,000 --> 00:52:58,160
Speaker 1: lot of gobbledygook from in so called investment experts and

922
00:52:58,239 --> 00:53:01,600
Speaker 1: they're recommended to start their money away in twelve fourteen,

923
00:53:01,719 --> 00:53:04,560
Speaker 1: fifteen ETFs and they're like, I don't know what I'm doing,

924
00:53:04,600 --> 00:53:06,520
Speaker 1: I don't even know what I'm buying, and it just

925
00:53:06,560 --> 00:53:09,560
Speaker 1: over it muddies and muddies the water, and so oftentimes

926
00:53:09,600 --> 00:53:12,640
Speaker 1: over complicated. Oftentimes what happens is they walk away from

927
00:53:12,640 --> 00:53:15,000
Speaker 1: that meeting and they don't do anything. And that is

928
00:53:15,080 --> 00:53:15,800
Speaker 1: part of our reason.

929
00:53:15,840 --> 00:53:18,000
Speaker 2: And then folks end up going turning to advisors and

930
00:53:18,040 --> 00:53:20,800
Speaker 2: they're paying out the nose. But yes, that is better

931
00:53:20,880 --> 00:53:24,440
Speaker 2: than not investing at all. Sure, but there is a simple.

932
00:53:24,200 --> 00:53:26,960
Speaker 1: Path, simple way, and so that's why we've always talked

933
00:53:26,960 --> 00:53:29,600
Speaker 1: about like that simple index fund strategy approach for people

934
00:53:29,600 --> 00:53:31,640
Speaker 1: in the wealth building phase of their life. And this

935
00:53:31,840 --> 00:53:34,200
Speaker 1: I feel like this two fund strategy really helps keep

936
00:53:34,200 --> 00:53:38,160
Speaker 1: it simple for DIY investors while adding some potential upside

937
00:53:38,160 --> 00:53:40,760
Speaker 1: benefit from from returns right over the years.

938
00:53:41,080 --> 00:53:43,439
Speaker 2: So I love it, and I think it historically better

939
00:53:43,520 --> 00:53:46,680
Speaker 2: returns something like just moving forward with a total stock

940
00:53:46,719 --> 00:53:48,760
Speaker 2: market in tax fund or even the US and people.

941
00:53:48,680 --> 00:53:50,520
Speaker 1: And it makes it easier than when you're in the

942
00:53:50,600 --> 00:53:52,680
Speaker 1: draw down phase of your life too, like he talked

943
00:53:52,719 --> 00:53:54,840
Speaker 1: about towards the end. So but I love too what

944
00:53:54,880 --> 00:53:58,000
Speaker 1: he said about the first five years of investing can

945
00:53:58,480 --> 00:54:00,600
Speaker 1: be the equivalent of forty percent of what you live

946
00:54:00,640 --> 00:54:04,040
Speaker 1: on in retirement. And so that idea of consumption smoothing

947
00:54:04,040 --> 00:54:06,160
Speaker 1: you and I have kind of taken it to task

948
00:54:06,239 --> 00:54:08,480
Speaker 1: multiple times on the show because we just think it's

949
00:54:09,120 --> 00:54:12,239
Speaker 1: the antithesis of the right behavioral moves to be making

950
00:54:12,360 --> 00:54:14,040
Speaker 1: if you want to grow a significant nest egg for

951
00:54:14,080 --> 00:54:16,560
Speaker 1: your future. And to say I get started ten fifteen

952
00:54:16,600 --> 00:54:19,680
Speaker 1: years from now, but will you? Will you? Actually? And

953
00:54:19,760 --> 00:54:23,120
Speaker 1: so I think that knowing that those first five years

954
00:54:23,160 --> 00:54:25,719
Speaker 1: are so important, That's why I'm so energized when I

955
00:54:25,719 --> 00:54:29,160
Speaker 1: hear listeners who are in their teens and twenties getting started,

956
00:54:29,160 --> 00:54:31,400
Speaker 1: because I'm saying, man, after it, that head start is

957
00:54:31,880 --> 00:54:34,200
Speaker 1: going to catapult you above the rest, and it's going

958
00:54:34,239 --> 00:54:37,040
Speaker 1: to make it actually so much easier in future years

959
00:54:37,080 --> 00:54:41,000
Speaker 1: when your expenses grow, and will say, maybe you start

960
00:54:41,040 --> 00:54:44,239
Speaker 1: a family or something like that. It just having done it,

961
00:54:44,520 --> 00:54:47,360
Speaker 1: being an investor, doing it consistently over a longer period

962
00:54:47,400 --> 00:54:49,239
Speaker 1: of time is going to be better. You're going to

963
00:54:49,239 --> 00:54:51,200
Speaker 1: be better off in the long run. Absolutely. Yeah.

964
00:54:51,239 --> 00:54:53,400
Speaker 2: And I will say I don't have as much wisdom

965
00:54:53,440 --> 00:54:57,840
Speaker 2: as Paul does, right, But that being said, every season

966
00:54:57,880 --> 00:55:00,759
Speaker 2: of life that I've entered into, I'm so glad that

967
00:55:00,800 --> 00:55:02,879
Speaker 2: we saved as much as we did early on. Yes,

968
00:55:02,960 --> 00:55:05,399
Speaker 2: every year that passes, I want to spend a little

969
00:55:05,400 --> 00:55:07,359
Speaker 2: bit more money than I used to. I don't want

970
00:55:07,400 --> 00:55:10,120
Speaker 2: to rain that spending in necessarily, because, like you said,

971
00:55:10,160 --> 00:55:12,399
Speaker 2: we've started a family and there's just other experiences. Even

972
00:55:12,400 --> 00:55:15,239
Speaker 2: if you don't have kids, do you not now want

973
00:55:15,280 --> 00:55:18,120
Speaker 2: to in your late thirties start doing a little more

974
00:55:18,160 --> 00:55:21,920
Speaker 2: traveling with your significant other or your spouse. The ability

975
00:55:21,960 --> 00:55:23,480
Speaker 2: and the flexibility that you have.

976
00:55:23,560 --> 00:55:24,920
Speaker 1: To live life a.

977
00:55:24,880 --> 00:55:27,640
Speaker 2: Little more on your own terms. Even let's forget travel,

978
00:55:27,680 --> 00:55:30,080
Speaker 2: let's just say what you're saying yes to when it

979
00:55:30,080 --> 00:55:32,920
Speaker 2: comes to your job or your career. It just opens

980
00:55:33,000 --> 00:55:36,439
Speaker 2: up so many opportunities to you, and that is so

981
00:55:36,520 --> 00:55:38,040
Speaker 2: incredibly valuable.

982
00:55:38,080 --> 00:55:40,399
Speaker 1: And what's the biggest risk. There's the occasional person that's

983
00:55:40,440 --> 00:55:42,839
Speaker 1: like hardcore in the fire crowd that says, oh man,

984
00:55:43,160 --> 00:55:45,480
Speaker 1: I save too much. That is not the majority, that

985
00:55:45,480 --> 00:55:47,280
Speaker 1: it is a rare exception. That is a rare exception.

986
00:55:47,320 --> 00:55:48,839
Speaker 1: We don't want you to be that person either, because

987
00:55:48,840 --> 00:55:50,680
Speaker 1: we want to be balanced and enjoy spending things on

988
00:55:51,480 --> 00:55:53,279
Speaker 1: enjoy spending money on the things you care about in

989
00:55:53,320 --> 00:55:54,320
Speaker 1: the here and now also, which.

990
00:55:54,200 --> 00:55:56,840
Speaker 2: Is why we quite literally put our money where our

991
00:55:56,880 --> 00:55:58,759
Speaker 2: mouth is. Yeah, I almost said that when you said

992
00:55:58,760 --> 00:56:02,440
Speaker 2: that earlier, and I kept myself from interrupting you. But

993
00:56:02,560 --> 00:56:06,400
Speaker 2: because we are drinking a beer during this episode, quite fittingly,

994
00:56:06,520 --> 00:56:10,759
Speaker 2: actually we're enjoying a discipline. This is a double by

995
00:56:11,160 --> 00:56:11,799
Speaker 2: bold Monk.

996
00:56:12,280 --> 00:56:13,880
Speaker 1: What were your thoughts on this beer? And not a

997
00:56:13,920 --> 00:56:17,799
Speaker 1: double ipadu Bell like in the Belgian sense, right, that's

998
00:56:17,800 --> 00:56:19,360
Speaker 1: how the Belgians, which which is kind of like a

999
00:56:19,440 --> 00:56:21,880
Speaker 1: light brown with some of those Belgian yeasts and spices.

1000
00:56:21,960 --> 00:56:23,960
Speaker 1: I thought this was a pretty light on the spices,

1001
00:56:23,960 --> 00:56:26,600
Speaker 1: I would say, but just a great representation of a

1002
00:56:26,680 --> 00:56:28,319
Speaker 1: d bell. And so if you're like trying to an

1003
00:56:28,320 --> 00:56:31,520
Speaker 1: animal double pronouncing him right. But yeah, but if.

1004
00:56:31,440 --> 00:56:34,920
Speaker 2: You're American, American, is is it?

1005
00:56:35,200 --> 00:56:39,480
Speaker 1: Doubles do? Bells and and quads are my favorite styles

1006
00:56:39,719 --> 00:56:43,560
Speaker 1: of Belgian beers that well, aside from the spontaneously fermented.

1007
00:56:43,840 --> 00:56:46,120
Speaker 1: But I love a good quad too, And this is

1008
00:56:46,160 --> 00:56:47,719
Speaker 1: kind of like the lighter version of a quad. It's

1009
00:56:47,760 --> 00:56:49,680
Speaker 1: got some of those notes going on, but it's super

1010
00:56:49,719 --> 00:56:52,239
Speaker 1: accessible for lots of folks. So I really dug this

1011
00:56:52,280 --> 00:56:52,920
Speaker 1: one totally.

1012
00:56:53,040 --> 00:56:57,120
Speaker 2: Yeah, think about a Dubell as a European brown ale.

1013
00:56:57,680 --> 00:57:00,360
Speaker 2: Like in America, we've got browns. If you are looking

1014
00:57:00,400 --> 00:57:03,759
Speaker 2: for an exotic brown, look to the Belgian shelf and

1015
00:57:04,160 --> 00:57:04,920
Speaker 2: pick yourself up a.

1016
00:57:04,920 --> 00:57:07,040
Speaker 1: Dubell maybe a little more refined too. I don't know,

1017
00:57:07,760 --> 00:57:08,120
Speaker 1: I don't know.

1018
00:57:08,160 --> 00:57:10,479
Speaker 2: Maybe there's some there's some really good brown, nice browns

1019
00:57:10,520 --> 00:57:12,160
Speaker 2: out there, folks. That's not a style that a lot

1020
00:57:12,160 --> 00:57:16,080
Speaker 2: of American craft breweries have latched onto, though, interestingly enough,

1021
00:57:16,240 --> 00:57:19,640
Speaker 2: there's just fewer notes that you can draw out of it.

1022
00:57:19,960 --> 00:57:22,400
Speaker 1: A good brown, though, like especially like an Imperial brown

1023
00:57:22,600 --> 00:57:26,120
Speaker 1: is now in October, is an ideal, ideal beverage to

1024
00:57:26,120 --> 00:57:26,680
Speaker 1: be consuming.

1025
00:57:26,720 --> 00:57:28,560
Speaker 2: We need to find more of those. Yeah, for the

1026
00:57:28,640 --> 00:57:31,160
Speaker 2: rest of this year, but we will include some of

1027
00:57:31,200 --> 00:57:33,600
Speaker 2: the different resources we mentioned during this episode up in

1028
00:57:33,640 --> 00:57:37,280
Speaker 2: our show notes. And yes, we will link to and

1029
00:57:37,320 --> 00:57:41,920
Speaker 2: post the telltale chart that Paul was referencing during our conversation,

1030
00:57:42,080 --> 00:57:43,480
Speaker 2: but you can find that up on the website at

1031
00:57:43,520 --> 00:57:46,320
Speaker 2: hodomoney dot com. But buddy, that's gonna be it for

1032
00:57:46,680 --> 00:57:48,600
Speaker 2: this one. Until next time.

1033
00:57:48,440 --> 00:57:50,520
Speaker 1: Best friends out, Best Friends out

1034
00:58:00,160 --> 00:58:02,040
Speaker 3: It, don't do Hope,