Speaker 1: Welcome to Had of Money. I'm Joel and I am Matt,
Speaker 1: and today we're asking the question how complicated should investing be? Yeah, So,
Speaker 1: speaking of investing, did you realize I didn't realize this
Speaker 1: until recently, until a couple of weeks ago, but we
Speaker 1: just exited the longest bear market since nineteen forty eight?
Speaker 1: Oh wow, isn't that crazy? That is crazy to think
Speaker 1: about it. So here's fail that long Agough ultimately it
Speaker 1: really did.
Speaker 2: And this is so the reason I'll bring this up
Speaker 2: is because I love the fact that we didn't even
Speaker 2: really notice that, and hopefully listeners didn't notice that either,
Speaker 2: because they were just continuing to invest like clockwork, continuing
Speaker 2: to plug money into the market. But oftentimes folks aren't
Speaker 2: doing that because they are over complicating things. They're making
Speaker 2: it a little too complex, is keeping them from their
Speaker 2: financial goals. And so we're going to try to make
Speaker 2: sure that does not happen from here on out if
Speaker 2: you're listening to this podcast. Yeah, and there's a couple
Speaker 2: things I think that might make sense to complicate a
Speaker 2: little bit on the investing front. But how complex you
Speaker 2: get and what you you know, what you choose to investor.
Speaker 2: We're going to talk about a bunch of different ways
Speaker 2: you can complicate things and maybe it's good, and then
Speaker 2: other ways in which you can overdo it. So that's
Speaker 2: the that you should completely avoid. That's the theme of
Speaker 2: this of this combo in this episode. What's this You
Speaker 2: wanted to talk about getting beers last night or something? Okay,
Speaker 2: So we got beers with a friend last night, Uh huh.
Speaker 2: And there's free parking all around where we hang but
Speaker 2: there's also a paid parking lot when all the free
Speaker 2: parking's taken really close to this particular establishment. Yes, And
Speaker 2: I was driving from across town and they were I
Speaker 2: couldn't find a free parking spot, and I did want
Speaker 2: to be a jerk and be late when when we'd
Speaker 2: had this hang plan for a little while. So I
Speaker 2: paid five bucks for parking.
Speaker 1: And I hate that. There's like not much I hate
Speaker 1: more than that. And so, but then we were walking
Speaker 1: to the car after hanging out, and he pointed out
Speaker 1: a couple of free spots. I didn't know about it.
Speaker 1: He's like, these are the this is the low hanging fruit.
Speaker 1: No one's ever spots. So hopefully I'll never have to
Speaker 1: do it again.
Speaker 2: Okay, So I got a couple of follow ups and okay,
Speaker 2: so when you were meeting up, yeah, like with a
Speaker 2: friend for beers, how late is too late because there's
Speaker 2: like a certain amount of window unless like you're it's
Speaker 2: a business meeting and like you're meeting a client. Obviously,
Speaker 2: if you're if you're on time, you're late, Like basically
Speaker 2: you need to get there early. But when it comes
Speaker 2: to like friend hangs, what's your window of time.
Speaker 1: I'd be in past ten minutes late, feels just oh yeah, rude, Okay,
Speaker 1: I totally if you're like three to five minutes late,
Speaker 1: it's it's probably not.
Speaker 2: A three to five which is why because I saw
Speaker 2: you walking into the place last night and I was like,
Speaker 2: oh crap, do I need to go ahead and pay
Speaker 2: for parking as well? And it was it was like
Speaker 2: four or five minutes after and so I was like,
Speaker 2: all right, I'm gonna circlecle the blog more time. And okay,
Speaker 2: so so you found a free spot five spot I
Speaker 2: paid like an idiot. So okay, what are your thoughts
Speaker 2: on how do you feel about questionable parking spots like
Speaker 2: spots that obviously if something is marked and it says
Speaker 2: no parking. I don't. You're not gonna park there. There's
Speaker 2: a good chance you might get towed whatever. Make somebody upset.
Speaker 2: But I guess I mentioned this because I feel like
Speaker 2: for years I have parked in spots that are like, oh,
Speaker 2: I'm not totally sure this is a legit spot. It
Speaker 2: doesn't say no parking, it's not right in front of
Speaker 2: a fire hydrant, there's no red curb that kind of thing.
Speaker 2: And I can't remember the last time I got a
Speaker 2: parking ticket.
Speaker 1: Yeah, it's a you gotta know what you're risking, right,
Speaker 1: and exactly I think I talk a risk I'm willing
Speaker 1: to take. A couple of years ago, when I was
Speaker 1: meeting a friend down by the airport, he was in
Speaker 1: town for a second. We grab beers and I parked
Speaker 1: in I think where like they the valet would park cars.
Speaker 1: But it was raining super hard, there was nobody out there,
Speaker 1: and there were plenty of spots, and so I risked
Speaker 1: it and I didn't get a ticket, which is great,
Speaker 1: but I also knew I might get a ticket or
Speaker 1: somebody might say something to me.
Speaker 2: Did you had you said something to the valet was there?
Speaker 2: When they're like a valet there and you're like.
Speaker 1: Hey, or is this an So I don't think there
Speaker 1: was anybody there, which is why I was like, all,
Speaker 1: I'm just gonna give it a shot. But yeah, well,
Speaker 1: paying for parking is a pet piat of mine. Every
Speaker 1: once in a you gotta know what you're willing to risk. Yeah,
Speaker 1: all right, let's mention the beer we're having on this episode.
Speaker 1: This one's called Symptom of Progeny. It's a golden sour
Speaker 1: ale that you picked up Matt at burial.
Speaker 2: So and not only did I pick one up for us,
Speaker 2: I actually picked up three additional bottles for Kate and
Speaker 2: I because we held this at the brewery and we
Speaker 2: liked it that much. At the time, I was thinking,
Speaker 2: this is a perfect barrel aged golden ale. So I'm
Speaker 2: looking forward to sharing it with you today.
Speaker 1: Same here. All right, Well, let's get to the subject
Speaker 1: of hand. Matt. We're talking about how complicated investing should be,
Speaker 1: and it just made me think back when we were
Speaker 1: renovating our home before we made the move to the Burbs,
Speaker 1: and I'd never really done that massive of a renovation
Speaker 1: and it was kind of fun to pick out specific
Speaker 1: finishes for all the stuff we were doing like the tile.
Speaker 2: Yeah, the tile in particular was top yea, and.
Speaker 1: It was just it was a fun endeavor up until
Speaker 1: a point, and then it started started to kind of
Speaker 1: get old after a while. Right, there were endless options
Speaker 1: of everything, and even picking out that tile, it took
Speaker 1: a lot of searching and looking to find the exact
Speaker 1: kind that we wanted. Then, so at a certain point
Speaker 1: in the process I kind of got decision fatigue, right,
Speaker 1: discussing paint colors and toilets even which who knew that
Speaker 1: you could really go down a rabbit hole of toilets,
Speaker 1: but yes you can, especially these days online. There's so many,
Speaker 1: so many different toilets you could get, and at some
Speaker 1: point you just stop caring which toilet suit your vibe
Speaker 1: the best right and investment choices I think can be
Speaker 1: similar to that kind of process of when you're renovating
Speaker 1: and all the choices you have, the choice overload. There's
Speaker 1: so many directions you can go in on the investing front,
Speaker 1: all sorts of options that you can consider, and I
Speaker 1: do think it for some things in life, more can
Speaker 1: be merrier, right, but it can also backfire, and things
Speaker 1: that could be fun or could be energizing ways in
Speaker 1: which more choice can be beneficial well as possible for
Speaker 1: it to go too far, especially especially when we're talking
Speaker 1: about building wealth. And so we would say, and something
Speaker 1: we talk about on the show regularly is that complicating
Speaker 1: things doesn't always make them better, and in fact, the
Speaker 1: opposite is typically true, and especially on the investing front.
Speaker 1: That's right.
Speaker 2: Yeah, So you even said the term decision fatigue, and
Speaker 2: that's when basically you are spending an inordinate amount of
Speaker 2: time trying to decide which of the many, many options
Speaker 2: you have available to you is going to suit you best.
Speaker 2: And when it comes to investing specifically, there are so
Speaker 2: many options, so many distractions that can keep us from
Speaker 2: investing the way that we should with the vast majority
Speaker 2: of our money. And you know, when there is that
Speaker 2: much noise, which is often coming from the talking heads
Speaker 2: in financial media, it is no wonder that we start thinking,
Speaker 2: Like we start asking ourselves, well, maybe I should be
Speaker 2: investing internationally, right, Like I should probably diversify more value
Speaker 2: stocks in my portfolio, invest in wine and art as well.
Speaker 2: I've heard that the returns on ESG funds they're pretty solid,
Speaker 2: So maybe that's the direction I should be going. But
Speaker 2: many of those questions and considerations, they don't actually help
Speaker 2: all that much, and in fact, they end up distracting
Speaker 2: us from from doing what it is that we should
Speaker 2: be doing. But that doesn't necessarily mean that we should
Speaker 2: barrier bury our heads in the sand. We think it
Speaker 2: is important to know what the other options out there
Speaker 2: are and then why it is that we should either
Speaker 2: consider them or ignore them all together.
Speaker 1: That's part of the reason we like Aldi Matt is
Speaker 1: because there's just fewer things, fewer choices right at your disposal.
Speaker 1: There's like one ketchup and so you just get the
Speaker 1: ketchup as you're walking by, and the simplicity, even though
Speaker 1: is it Berman's right, I think it's right lines yeah,
Speaker 1: And it's just nice to know, okay, cool, I need
Speaker 1: ketchup and I don't have to look at the price
Speaker 1: pronounce and different brand names and which one's on sale
Speaker 1: right now. You just grab the ketchup and it's so easy.
Speaker 1: So I think, yeah, we could stand to have a
Speaker 1: little more like al They in the way we think
Speaker 1: about investing. And part of the reason we're talking about
Speaker 1: this today is because when market conditions are good, there's
Speaker 1: even more of an inclination to shake things up, to
Speaker 1: start overthinking things. And you mentioned, hey, guess what, now,
Speaker 1: we've we've ended that longest bear run and we're in
Speaker 1: a bowld market right now. When we are in that
Speaker 1: bear market, though, when things are going badly, when the
Speaker 1: stock market is performing poorly, nobody wants to discuss smart
Speaker 1: investing methods. Everyone's just kind of like covering their head.
Speaker 1: They're grinning and bearing it. The assumption is that the
Speaker 1: market is going to continue to drop, and so why
Speaker 1: would you start investing if things are going to continue
Speaker 1: along the same path. Yeah, but then again, when things
Speaker 1: are going gangbusters, everybody's got an opinion, right. And so
Speaker 1: now that we are officially in this bowl market, we're
Speaker 1: up twenty percent from from those lows. We're seeing certain
Speaker 1: stocks popping in a big way, and I think more
Speaker 1: people are more inclined to start fiddling with their portfolio.
Speaker 1: It holds a greater allure right now when things are
Speaker 1: going up up into the right and the boring index
Speaker 1: fund route, it seems more intelligent, I think when the
Speaker 1: market is going down, but on the way up, it
Speaker 1: just it feels kind of like you should be making
Speaker 1: moves to amplify those gains, right, Why settle for average
Speaker 1: when certain things are popping off to greater degrees. But
Speaker 1: just because it's more exciting or just because it's more enticing,
Speaker 1: that doesn't mean it's the direction you should be heading in.
Speaker 2: That's right. Yeah. And also we're not just talking about
Speaker 2: the you know, that part of your portfolio that you
Speaker 2: want to speculate with that five percent or less that
Speaker 2: you'll hear us mention here on the show as a
Speaker 2: pressure relief valve. Now, we still think that this is
Speaker 2: a good rule of thumb, good thing to maintain. And
Speaker 2: for a lot of folks who do like to tinker,
Speaker 2: I think having a negligible amount of money that you
Speaker 2: can trade just for funzis helps them to stay the
Speaker 2: course and to keep doing the boring, old standard, bland
Speaker 2: thing with the bulk of their investment dollars. So eat
Speaker 2: your heart out with that small percentage of play investment dollars, go.
Speaker 1: To town, do the funkiest things you can.
Speaker 2: Think of the money though, that you're willing to completely lose. Right,
Speaker 2: But what we're talking about today is the other ninety
Speaker 2: five percent of your portfolio. A few specific temptations and
Speaker 2: then why it is that most of them should probably
Speaker 2: be avoided.
Speaker 1: Yeah, it's not that we have a problem with folks
Speaker 1: getting a little wild and a little speculative. It's just
Speaker 1: like five percent wild exactly. You just can't let it
Speaker 1: infect all the other areas that you're trying to do
Speaker 1: the boring, proven method of building wealth, right, and so
Speaker 1: totally if you leg it out of hand, I feel
Speaker 1: like it can kind of tank the majority of what
Speaker 1: of your assets that are going to be doing just
Speaker 1: the standard normal thing, which is investing in a total
Speaker 1: overall stock market kind of thing. Right, And we're also
Speaker 1: we're not going to focus too much on timing today, right,
Speaker 1: whether now is a good time to start investing if
Speaker 1: you haven't already, because for most people, dollar cost averaging
Speaker 1: is the best approach, right sticking your money into your
Speaker 1: four one K, your IRA, or your HSA your Health
Speaker 1: Save mus account, which we always talk about as being
Speaker 1: an awesome investment vehicle. Most people don't think of it
Speaker 1: that way.
Speaker 2: Talked about it on Monday. Yeah, we've been hitting it
Speaker 2: more lately. Yeah, Yeah, it's a good thing. It is
Speaker 2: because people need to know that. And if you're investing
Speaker 2: in each of those vehicles like clockwork. Every time you
Speaker 2: get paid without giving in a second thought. This is
Speaker 2: the best way to go, right. And so when it
Speaker 2: comes to timing, it's not something that we're fans of,
Speaker 2: and in fact, it's really easy to screw that up
Speaker 2: and actually shoot yourself in the foot as you're trying
Speaker 2: to time your entrance into the market in a given
Speaker 2: through year. But this strategy, the dollar cost averaging strategy,
Speaker 2: it works because you're able to remove your emotions from
Speaker 2: the equation, and our emotions can get the best of us.
Speaker 2: But that being said, if you really want to optimize
Speaker 2: for the highest returns, the data show that lump some
Speaker 2: investing at the beginning of the year or as soon
Speaker 2: as you're able to fund a retirement account is the
Speaker 2: way to go. And I guess the reason we talk
Speaker 2: about dollar cost averaging is and not lump some, it's
Speaker 2: just because that's how most people get paid. That's the
Speaker 2: way it makes most sense. But most folks aren't sitting
Speaker 2: on like a massive.
Speaker 1: Pile, you know. But if you are, if you do
Speaker 1: have the money in January to fully fund your roth
Speaker 1: IRA or something like that, go for it. Go to town.
Speaker 1: That's a better thing. To do than do the doing
Speaker 1: the dollar cost averaging approach. It's just that specifically, with
Speaker 1: something like a four toh one K, it makes sense
Speaker 1: to deploy it every single paycheck. So really the timing
Speaker 1: that we're talking about is the sooner the better, and
Speaker 1: the more regular the better too.
Speaker 2: Yeah, and I mean, I do think it's worth maybe
Speaker 2: trying to work towards that lump some kind of mindset
Speaker 2: if you're able to slowly over time over the years,
Speaker 2: kind of get ahead of it, right, So as opposed
Speaker 2: to you get paid, do you invest a portion of
Speaker 2: that but stockpiling that ahead type, So if you're able
Speaker 2: to max that out, make that payment that year, but
Speaker 2: then slowly over time you build up essentially like a
Speaker 2: little war chest, so that when the new year does
Speaker 2: hit and you are able to invest in those retirement
Speaker 2: accounts for the next year. The ability to make that
Speaker 2: happen sooner rather than later, it does over the long
Speaker 2: haul return you higher returns. But then when it comes
Speaker 2: to the actual securities or the actual investments that we're making,
Speaker 2: there's also a lot of nuance involved. Some things are
Speaker 2: going to be more negotiable than others, and some of
Speaker 2: the things we're going to mention today might actually be
Speaker 2: worth considering. So we'll talk about some of those alongside
Speaker 2: some ways that folks are attempted to invest their money
Speaker 2: right now that we think are going to be a
Speaker 2: distraction at best, but it actually could be damaging your
Speaker 2: future returns at worst.
Speaker 1: Yeah, and it feels like we have more investment options
Speaker 1: at our disposal than ever before. So it's like the
Speaker 1: opposite of all the like I was talking about, Matt. Now,
Speaker 1: it's just like plethora of this range, and not just
Speaker 1: inside of our four oh one K, but then even
Speaker 1: all of these exterior alternative investment possibilities that we could
Speaker 1: partake in that we're getting pitched right and left in
Speaker 1: different places, whether it's a newsletter that you read, or
Speaker 1: whether it's commercials that you see or social media advertisements.
Speaker 2: Just talking with friends. I feel like it's a conversation
Speaker 2: I have more often as I've gotten older. Folks, and
Speaker 2: rightly so, are more interested in investing. But just because
Speaker 2: folks are talking about it doesn't mean that it's something
Speaker 2: that you that you should be considering, because but it's.
Speaker 1: All enticing and it's like, yeah, your eyes can get
Speaker 1: as wide as saucers. You're like, wait, I can't invest
Speaker 1: in that or this or that. That's amazing, But then
Speaker 1: you I think a lot of people lose the plot
Speaker 1: if they start to go down that rabbit hole, and
Speaker 1: maybe they miss out on the main course. So yeah,
Speaker 1: let's talk about some of those added investing complications, when
Speaker 1: to say yes, when to say no. We'll get to
Speaker 1: more on that right after this.
Speaker 2: All right, we are back and we're talking about the
Speaker 2: many different forms that investing can take. And we're gonna
Speaker 2: kick this off with international stocks, because this is one
Speaker 2: I feel like it's kind of gained some steam lately. Joel.
Speaker 2: Neither you nor I have much exposure to international stocks ourselves,
Speaker 2: and we actually feel pretty good about our decision. But
Speaker 2: there are a lot of smart folks out there who
Speaker 2: have a different take. And again, yeah, it's a topic
Speaker 2: worth discussing because we get the question from listeners sometimes
Speaker 2: as well. But Jack Bogel, he's the founder.
Speaker 1: Of Van Guard.
Speaker 2: He's a pretty brilliant dude.
Speaker 1: Passed away what a year or two ago, Yeah.
Speaker 2: Went all that long ago. But he was famously not
Speaker 2: a big fan of international diversification for a number of reasons,
Speaker 2: and the truth is, so many of the companies that
Speaker 2: you own in either a total stock Market index fund
Speaker 2: or an SMP five hundred index fund, they do business overseas.
Speaker 2: And that was, honestly, that was Bogel's main argument. Something
Speaker 2: like forty percent of s and P five hundred revenues
Speaker 2: come from other countries come from overseas, and so folks
Speaker 2: who have diversified to more international holdings they haven't done
Speaker 2: as well.
Speaker 1: But of course past results.
Speaker 2: Are not indicative of future returns, and so we're not
Speaker 2: saying that like, oh, yeah, things, you should only be
Speaker 2: investing in US companies. This isn't like a Even though
Speaker 2: we love America for many reasons, we think that our
Speaker 2: country is a very fertile ground that comes to starting
Speaker 2: new industries and the ability for companies to get ahead,
Speaker 2: that doesn't necessarily mean that over the long haul that
Speaker 2: international stocks may not do better than the total US
Speaker 2: stock market. Yeah.
Speaker 1: Well, and the truth is our country is really only
Speaker 1: four percent of the world's population, but we have our
Speaker 1: stock market. The global wealth is something close to a
Speaker 1: quarter of it. So it turns out then when you
Speaker 1: look at the numbers, international stocks are relatively inexpensive these days.
Speaker 1: Which is part of the reason we're probably seeing more
Speaker 1: headlines about them in front of the show. Ben Carlson
Speaker 1: Matt who's just a brilliant mind of love reading his blog,
Speaker 1: he recently articulated his use on why folk should have
Speaker 1: more international stock exposure, and he said, global diversification is
Speaker 1: about accepting good enough returns to avoid the potential for
Speaker 1: terrible returns at an inopportune time. And I think it's
Speaker 1: a really good way of thinking about it. You're not
Speaker 1: necessarily if you do choose to invest internationally, doing it
Speaker 1: because you're looking for outsized mega returns or anything like that,
Speaker 1: and you might see better returns over the next decade,
Speaker 1: who knows, But yeah, I think investing internationally it's not
Speaker 1: a necessity. But given the outperformance that the US stock
Speaker 1: market has seen recently in the past decade plus, international
Speaker 1: stocks do look cheaper and more attractive right now. This
Speaker 1: is one of those things where I think you can
Speaker 1: complicate your life a little bit and add international stocks
Speaker 1: to your portfolio. But it's also not a have to.
Speaker 2: Yeah. I think Ben's argument it's more from like a
Speaker 2: wealth preservation standpoint, as opposed to him saying that like
Speaker 2: oh things are going to be gangbusters overseas in the
Speaker 2: coming decade.
Speaker 1: And some folks would point to Japan, whose stock market
Speaker 1: was rocket and rolling in the nineteen eighties, and I
Speaker 1: think finally just got to nineteen eighty levels like in
Speaker 1: recent weeks. So multiple decades, yeah, so like last decades really,
Speaker 1: which you know could happen if you're too heavy into
Speaker 1: one country.
Speaker 2: Yeah. But so even if you do want some international exposure,
Speaker 2: don't go overboard and don't make massive changes quickly, like
Speaker 2: all at once. I would consider keeping your portfolio as
Speaker 2: it is, keep it intact, but then start investing any
Speaker 2: new dollars into either target date funds or into another
Speaker 2: international fund like Vanguard's Total World Market Fund. That ticker
Speaker 2: symbol for that one is VT. And what's great about
Speaker 2: those two, well, especially Vanguards, the costs are so incredibly low.
Speaker 2: That's one of the things you get with Vanguard.
Speaker 1: You get that international international exposure, but you're barely paying
Speaker 1: more than what you pay for just an S and
Speaker 1: P five hundred andX fund.
Speaker 2: It is a little bit more on the target date funds,
Speaker 2: but they're I think it's fair because you are getting
Speaker 2: an added benefit with those target date funds as it's
Speaker 2: changing its allocation over the years.
Speaker 1: And this is and it truly is the most set
Speaker 1: it and briget it approach.
Speaker 2: Yeah, well exactly, because I mean, I don't know if
Speaker 2: we were planning even to talk about bonds, but a
Speaker 2: big part of that too is it changes how much
Speaker 2: of its holdings are in bonds, because when you're looking
Speaker 2: really really far out, like bonds are more conservative and
Speaker 2: so they're there oftentimes is a hedge two stocks. But
Speaker 2: then especially with the target date funds that are that
Speaker 2: we're quickly approaching, say like at twenty thirty fund, you're
Speaker 2: going to see a much higher percentage of the allotment
Speaker 2: of the portfolio towards bonds. But that doesn't necessarily mean
Speaker 2: though that you should be going out and also buying
Speaker 2: a bond index fund, because, especially if you are earlier
Speaker 2: on in the wealth building stage of your investing life,
Speaker 2: you can afford you can handle to weather out those
Speaker 2: the volatility, those storms of ups and downs, and in fact,
Speaker 2: you can't afford to not be investing in actual stocks
Speaker 2: over the long haul. The closer you get to retirement, yeah,
Speaker 2: maybe you do want to de risk a little bit
Speaker 2: and see more consistent returns, but you just need to
Speaker 2: know that those returns are going to be slightly less
Speaker 2: than if it was fully in stocks, but.
Speaker 1: It's going to smooth out the bumps, which, yeah, especially
Speaker 1: as you're getting closer to withdrawing those funds, you want
Speaker 1: those moms to be smoothed out, because it's going to
Speaker 1: be really disheartening and potentially destroying to your lifestyle if
Speaker 1: you're let's say your portfolio declined twenty percent or something
Speaker 1: in a year you had a twenty twenty two style
Speaker 1: year as you are leaving employment. That's a tough pill
Speaker 1: to swallow. But let's talk about another thing mat that
Speaker 1: can complicate people's portfolios, and that's investing in a socially
Speaker 1: responsible way, opting for ESG funds, which is becoming more
Speaker 1: and more popular. We're seeing a lot of people kind
Speaker 1: of start to sock more of their money into these
Speaker 1: kinds of funds. And there's ESG.
Speaker 2: Stands for Environmental, social and governance, so the way a
Speaker 2: company is run.
Speaker 1: Yeah, and there's just a lot more interest now in
Speaker 1: these funds, and there's kind of a push to get
Speaker 1: people to stick their money into these funds which claim
Speaker 1: to be investing in ways that are better for the
Speaker 1: environment and for other social reasons. But our take really
Speaker 1: is that ESG is largely in the eye of the beholder,
Speaker 1: and you can't make this up, Matt. But something I
Speaker 1: saw last week Philip Morris, which is a company that
Speaker 1: makes cigarettes that have killed so many people, millions of people,
Speaker 1: They're scoring higher in the ESG ratings than TESLA, like
Speaker 1: significantly higher ESG, I know. And so it's just like,
Speaker 1: what in the world is ESG trying to accomplish? And
Speaker 1: a similar thing, right, companies who are hijacking our attention,
Speaker 1: they're making products with slave labor overseas, Like many of
Speaker 1: those companies are also ESG darlings. They score well on
Speaker 1: these ESG fronts. So I think the lack of defineability
Speaker 1: is a massive problem on the ESTREE front. And it's
Speaker 1: been sold is this way to do good with your
Speaker 1: investment dollars, But that's not necessarily the way it shakes
Speaker 1: out in reality.
Speaker 2: Yeah, And ESG funds they actually so they not only
Speaker 2: perform more poorly in a financial sense, offering worse returns
Speaker 2: to investors, which is the main goal of investing, but
Speaker 2: they're also actually worse on these ESG metrics than what
Speaker 2: it does these funds say that they're trying to achieve.
Speaker 2: This is according to research out of Columbia University. We'll
Speaker 2: linked to that in the show notes, but there are
Speaker 2: other studies as well that have come to similar conclusions.
Speaker 2: Opting for these ESG funds, it's not doing anything much
Speaker 2: for the environment or to change corporate governance. And these
Speaker 2: these funds, again, you know, they perform more poorly because
Speaker 2: they come with higher fees oftentimes not to mention worse results.
Speaker 2: So for a while there it seemed like ESG funds
Speaker 2: were actually performing better and it's just like, all right,
Speaker 2: if that's the direction you want to go based on
Speaker 2: past performance. But we're actually seeing that shift recently. But
Speaker 2: all of those things are eating into your returns significantly
Speaker 2: over time, and we think that most most folks should
Speaker 2: actually avoid some of these newer ESG funds and instead
Speaker 2: stick to traditional index funds. It's so difficult to define
Speaker 2: what it is that these different ESG funds are trying
Speaker 2: to achieve. So much of it it's not objective, it's subjective.
Speaker 2: And so again for you as an individual, you might
Speaker 2: hold different values than what it is that Meta is
Speaker 2: trying to accomplish, or Microsoft or or any company regardless
Speaker 2: of where they are on the ESG scale. And it's
Speaker 2: my subjective view that electric cars are better than cigarettes
Speaker 2: for people over time. So I'm just it's I'm curious.
Speaker 2: I don't really know how. It feels like there's like
Speaker 2: the Wizard of Oz making these decisions about behind some
Speaker 2: sort of curtain about which of these companies qualify for
Speaker 2: their funds and which ones don't. And until we get
Speaker 2: more clarity on that, and until I don't know, it
Speaker 2: seems like the funds that actually at the companies that
Speaker 2: actually get included in some of those funds are companies.
Speaker 1: That are doing more good. And even then it might
Speaker 1: not be in people's best interest as from.
Speaker 2: Financially, like they might be checking all the boxes from
Speaker 2: from an ESG standpoint, like maybe Philip Morris doesn't get
Speaker 2: to did they not change their name to Atria or whatever.
Speaker 1: That might be Peru.
Speaker 2: I don't know, But regardless, I would say good for
Speaker 2: them because somehow they were able to kind of greenwash
Speaker 2: their way onto one of these funds. And unfortunately, that's
Speaker 2: what it seems like a lot of these companies are
Speaker 2: trying to do.
Speaker 1: Yeah, so when we're talking about complicating your investments, there's
Speaker 1: some things that might be worth it. Maybe you're saying, oh,
Speaker 1: the international stocks thing, that makes sense, and over time,
Speaker 1: I do think I want a little more exposure there,
Speaker 1: But on the ESG front, I don't think there's really
Speaker 1: any reason to complicate things further and basically sign yourself
Speaker 1: up for higher fees by stocking more of your money
Speaker 1: into these ESG style index funds. Let's talk about something
Speaker 1: else that people might do to complicate their investing strategy,
Speaker 1: and that would be to incorporate more real estate into
Speaker 1: their investing plan. And that's certainly a more complicated form
Speaker 1: of investing that you know, we get asked about fairly regularly,
Speaker 1: especially because you and I we are real estate investors.
Speaker 1: We're mom and popular estate investors. We each own a
Speaker 1: handful of properties in the Atlanta area. And the thing
Speaker 1: is we're kind of mostly talking about the passive style
Speaker 1: investing on this episode, and you and I we think
Speaker 1: of real estate investing is more like taking on a
Speaker 1: part time job, because it kind of is right not
Speaker 1: only in the identifying and purchasing of that property, but
Speaker 1: in the managing of that property too. And so if
Speaker 1: you're not up for that, if you're not up for
Speaker 1: all of the extra work that it's going to take
Speaker 1: to own and manage that rental property, that fixes the
Speaker 1: calls that you're going to have to get from the tenant,
Speaker 1: the things you're gonna have to do to keep up
Speaker 1: with that property, you should avoid becoming a landlord. And
Speaker 1: you know, like I said this, so we're mostly talking
Speaker 1: about the simple forms of investing that most people are
Speaker 1: doing with every paycheck. So buying real estate is just
Speaker 1: this other ball of wax altogether. It's not a bad one.
Speaker 1: It's not something we would necessarily steer people away from.
Speaker 1: And in fact, we've done episodes in the past. We'll
Speaker 1: link to one or two in the show notes if
Speaker 1: you want about investing in real estate and how it
Speaker 1: can be a powerful wealth builder. We're happy real estate
Speaker 1: investors ourselves. But the truth is there are other more
Speaker 1: passive ways to invest in real estate besides buying a
Speaker 1: duplex down the street in the town where you live
Speaker 1: or whatever. And so if you do want to add
Speaker 1: real estate exposure to your investments and you don't want
Speaker 1: to go with the part time job route, Matt, you
Speaker 1: want to talk about maybe kind of some other ways
Speaker 1: to do that.
Speaker 2: You can do that by investing in reates.
Speaker 1: So that's how you say it.
Speaker 2: But it stands for real estate investment trusts, and so
Speaker 2: there are the public rates, there are private rates, and
Speaker 2: so we're not completely against the private ones, but they
Speaker 2: do come with higher fees unless liquidity. Oftentimes your money
Speaker 2: is locked up for years at a time. So because
Speaker 2: of that we avoid them ourselves. But even publicly traded
Speaker 2: reads they're kind of cool. They can give you some
Speaker 2: diverse exposure to real estate that you can easily dollar
Speaker 2: cost average into. You don't have to plunk down a
Speaker 2: large amount of cash, like twenty five thousand dollars is
Speaker 2: oftentimes sort of like the minimum amount required to go
Speaker 2: into some of.
Speaker 1: These private routs. During like a cocktail hang or something,
Speaker 1: you can tell people, oh, I own an apartment building in
Speaker 1: New York City, or I own this with that because
Speaker 1: you have like this small small sliver, but you do
Speaker 1: I've investment in that project, Like yeah, I own some
Speaker 1: of Tesla because I own right Boo. But some of
Speaker 1: the other reut funds, like Vanguard's V and Q, they
Speaker 1: are attractive because they're incredibly low cost. But still even
Speaker 1: still most folks they don't need real estate exposure because
Speaker 1: the average American homeowner, they have most of their net
Speaker 1: worth tied up in their home, in their primary residence.
Speaker 1: And guess what last I checked, that's real estate. Yeah,
Speaker 1: and so we would.
Speaker 2: Rather see that kind of person more focused on investing
Speaker 2: within stocks via index funds. And even if you don't
Speaker 2: own your own home, and you're like, well, maybe I
Speaker 2: should be investing within a read, I don't own my
Speaker 2: my own property. Reads, they actually make up about five
Speaker 2: percent of the total stock market. And so guess what,
Speaker 2: if you own a total stock market index fund, you're
Speaker 2: probably invested in a red but boom, you just didn't
Speaker 2: even even realize it.
Speaker 1: Yeah, you have you own real estate.
Speaker 2: You didn't know it.
Speaker 1: Yeah, that's right. Even even if you're a renter, you
Speaker 1: own some real estate via your other investments. And we
Speaker 1: hung out with somebody recently and he was asking about
Speaker 1: investing in real estate or passive income, and of course
Speaker 1: we try to dispel the myth that passive income it
Speaker 1: is super easy to come by, but we even told yeah, hey,
Speaker 1: investing in real estate might make sense for you and
Speaker 1: we try to go through all the nitty gritty and
Speaker 1: all the details, but it's a harder thing for most
Speaker 1: people to accomplish. You have to save up a ton
Speaker 1: of money, and then numbers don't always make sense, and
Speaker 1: they make sense a lot less in today's environment than
Speaker 1: they have than they did years ago. So it's it's
Speaker 1: harder for people to get into the real estate game.
Speaker 1: But that brings up like one other I guess way
Speaker 1: that you can invest in real estate, and that is
Speaker 1: syndication funds and indication deals. Yeah, so those are interesting too,
Speaker 1: they're sexy, well they're yeah, I think they get some press,
Speaker 1: especially on Instagram. I follow some real estate investors and
Speaker 1: they're talking about syndication deals all the time. But there
Speaker 1: are good syndication deals, a bad syndication deals, and all
Speaker 1: the final realick. They're basically like, just imagine someone buying
Speaker 1: an apartment complex. Well, it's truly hard to do on
Speaker 1: your own. So you get a group of investors to
Speaker 1: pool their money together to buy this apartment complex and
Speaker 1: then you start, you know, paying all the investors out
Speaker 1: as you profit from that apartment complex doing well. And
Speaker 1: so the thing is typically you have to have big
Speaker 1: money to get in the game, and you have to
Speaker 1: be an accredited investor, which means a net worth of
Speaker 1: a million dollars or I think an annual income of
Speaker 1: like two hundred and fifty k or something like that.
Speaker 1: So it's hard to even qualify for that much less
Speaker 1: save up the fifty k that it would take to
Speaker 1: get in on that one syndication deal. And most people
Speaker 1: over complicating their lives and they're probably getting to real
Speaker 1: estate heavy in with their investments by partaking a syndication deal.
Speaker 1: That's unless they have been like maxing out those retirement
Speaker 1: accounts for years and years and years and still they've
Speaker 1: got extra money and they just really want to go
Speaker 1: down this hole. There's also a lot of pitfalls investing
Speaker 1: in the syndication route. We're already seeing some of these
Speaker 1: syndications go bust, a lot of investors losing all their money.
Speaker 1: That doesn't happen in the stock market nearly to the
Speaker 1: same degree.
Speaker 2: That's right, Yeah, I think a lot of folks just
Speaker 2: they just want to be able to refer to themselves
Speaker 2: as syndicates because that has a nice ring to it
Speaker 2: as well. But that is one way that folks could
Speaker 2: potentially overcomplicate their investing lies. But how do you untie that? Knot?
Speaker 2: What is the simplest and easiest way for you to
Speaker 2: invest for your future? We will get to that right
Speaker 2: after this.
Speaker 1: All right, Matt, let's keep talking about simple investing in
Speaker 1: some of the ways, maybe we try to complicate those investments,
Speaker 1: some of which might make sense, in others which don't
Speaker 1: make any sense at all.
Speaker 2: And I don't know.
Speaker 1: It makes me think about the game of life. You
Speaker 1: remember that game back in the day, you spin the wheel.
Speaker 1: You'd like it, never owned it, but I remember playing it, okay,
Speaker 1: And like you got a different job which had a
Speaker 1: different salary. You maybe had a family, or maybe you
Speaker 1: stayed a bachelor. I mean, there's all these different choices
Speaker 1: you make along the way.
Speaker 2: It's like the American rat race. Yeah, exactly, it's the
Speaker 2: negative way to see it.
Speaker 1: Yeah, well, but there were so many different options. And
Speaker 1: the same thing is true in the world investing, like
Speaker 1: you can go down a bunch of different paths. Which
Speaker 1: one makes sense for you might depend on and largely
Speaker 1: does depend on individual circumstances. But I think even still,
Speaker 1: there's a lot of broad based advice that we can
Speaker 1: give simplicity is typically in the investing world, a better
Speaker 1: way to go. And it just makes me think of
Speaker 1: like all these super niche platforms that exist now, like
Speaker 1: you can invest in farmland, you can invest in wine,
Speaker 1: you can invest in whiskey, you can invest in crypto NFTs,
Speaker 1: and I mean think about how the n FT's done
Speaker 1: over the past eight to twelve months. I mean, I
Speaker 1: think that first tweet of Jack Dorsey's went for mega
Speaker 1: dollars and now the guy I can't even resell it, right,
Speaker 1: and so I think he did resell it, but for
Speaker 1: a whole lot less. Yeah, for like pennies on the dollar. Yeah,
Speaker 1: unfortunately lost a lot or fortunately because like if what
Speaker 1: we would not have wanted was for things to continue
Speaker 1: to spiral out of control and continue to but for
Speaker 1: that person, for them, yes exactly. But like conveniently we're
Speaker 1: hearing nothing nothing about some of those categories these days.
Speaker 1: But we actually did a deep dive of some of
Speaker 1: those different online investing platforms back in episode four forty six,
Speaker 1: if you want to go back and listen, and we
Speaker 1: kind of covered the fees but also the returns that
Speaker 1: you're likely to get on some of those things. And
Speaker 1: and uh yeah, for most folks, all of these more vibrant,
Speaker 1: i'll say ways of investing your money, they're just a
Speaker 1: massive distraction from the tried and true investing methods, that's right.
Speaker 2: Yeah, If you're not maxing out your roth IRA, if
Speaker 2: you're not maxing your four ohine k socking away basically
Speaker 2: thirty thousand dollars annually into index funds within those tax
Speaker 2: advantage accounts, then you shouldn't even be considering any of
Speaker 2: these alternative platforms where you can invest in whiskey or wine.
Speaker 1: Like we were just talking about real estate, and I
Speaker 1: think that that's the first thing I would push back
Speaker 1: on somebody who's looking to do that. I would say,
Speaker 1: have you done all the border the low hanging fruit
Speaker 1: of those two accounts. Are you crushing it there? If so,
Speaker 1: we can talk about next steps. But if not, like
Speaker 1: real estate probably shouldn't be a consideration.
Speaker 2: Sure, yeah, I mean, if you've got money left over
Speaker 2: and you just love the novelty of it, then like
Speaker 2: it's not the worst thing in the world that you
Speaker 2: could dip your toes into. But most people who are
Speaker 2: investing in some of these random ways that have popped
Speaker 2: up in the past few years, they're just reducing their
Speaker 2: meat and potatoes style investing, and that's what we are
Speaker 2: trying to make sure that folks aren't taking care of
Speaker 2: first in order to funnel dollars into this direction. That's
Speaker 2: what we don't want folks to do. They're getting distracted
Speaker 2: from the like the bigger prize, and honestly, like this
Speaker 2: is to point out that most of the things that
Speaker 2: we've talked about aren't necessarily inherently bad investments, except for
Speaker 2: like crypto and NFTs, But like some of these other platforms,
Speaker 2: there's still investments. It's not like their MLMs or anything
Speaker 2: like that where you're totally going to get scammed.
Speaker 1: It's just that there are other.
Speaker 2: Priorities that you we want you to focus on first.
Speaker 2: If the alternative is to mindlessly blow that money, is
Speaker 2: to mindlessly consume, then I might even say, okay, well
Speaker 2: make sure, yeah, maybe you should invest in this platform
Speaker 2: if that's if that keeps you from blowing money that
Speaker 2: you otherwise would have invested, I think maybe in that
Speaker 2: scenario it could actually make sense. But we just want
Speaker 2: to make sure that you are eating your veggies, your
Speaker 2: mean potatoes first before you start focusing on the exotic.
Speaker 1: Desserts off to the side. I think that's a good
Speaker 1: way of putting It's not that these things are inherently bad,
Speaker 1: although maybe NFTs are.
Speaker 2: But yeah, but like and crypto Yeah, yet to be determined.
Speaker 1: Some of these sites like I don't mind that their existence, yeah, exactly,
Speaker 1: It's just that they are for investors who are doing
Speaker 1: the right thing with a ton of their income before
Speaker 1: even thinking about crossing the threshold into investing in some
Speaker 1: of the random things you can invest in now online.
Speaker 1: And let's talk about hiring an advisor for a second, man.
Speaker 1: I think that's something that the people might think that
Speaker 1: is either going to help them uncomplicate their finances or
Speaker 1: they think it might bring more complication. But they think
Speaker 1: it might bring some necessary complication their life life. And
Speaker 1: it's not that we think that hiring a human is
Speaker 1: a bad idea, right, that that a financial advisor can't
Speaker 1: stiry in the right direction, can't give you good advice.
Speaker 2: We like humans. We like people. Mostly, it's not all
Speaker 2: about we're not doubling down.
Speaker 1: Right. If human advisors were less expensive, I think it
Speaker 1: can make sense for more people, but for everyday folks. Again,
Speaker 1: I think the hiring an advisor question that pursuit can
Speaker 1: be a deviation from what they should really be focused
Speaker 1: on and focusing on. If you're barely snagging the match
Speaker 1: in your four to one K, you just don't need
Speaker 1: to spend hundreds or thousands of dollars to get advice
Speaker 1: from a professional. That's something that you can do before
Speaker 1: you talk to a profession right, right, It would be
Speaker 1: so much better to funnel that money into those accounts,
Speaker 1: more money into those accounts to grow for your future.
Speaker 1: I think an advisor makes sense for some folks whose
Speaker 1: situation is getting more complicated, but even then, we want
Speaker 1: folks to only consider fee only financial planners. X Y
Speaker 1: Planning Network is probably the best side out there to
Speaker 1: find one of those. But I think people like they
Speaker 1: start to learn about money and they're like, oh, it
Speaker 1: must be time to hire the advisor.
Speaker 2: I need a guy.
Speaker 1: Yeah, girl. The truth is you probably don't unless you're
Speaker 1: crushing it. You've been crushing it for years on end. Yeah.
Speaker 2: And I would say based on the fact that you
Speaker 2: if you are hearing a say this, that means you're
Speaker 2: listening to the podcast, which means like that tells me
Speaker 2: that I think you are the kind of person who's
Speaker 2: going to proactively take charge of your finances. And I
Speaker 2: think that that's a good thing, because what we don't
Speaker 2: want are folks to just by default thinking like, basically,
Speaker 2: I don't want you to be like me when I
Speaker 2: got my first real job and started earning money. I
Speaker 2: don't know if I've ever actually talked about this, sure
Speaker 2: new podcast logan don't be like that. But I went down.
Speaker 2: I was like, oh, man, I'm earning real money now
Speaker 2: I'm gonna go talk to this Edward Jones guy. And
Speaker 2: so I walked down to walked out, you know, and
Speaker 2: drove down the street and went in there and started
Speaker 2: talking to him. But even at that point, I realized,
Speaker 2: this seems pretty expensive, and I think I can do
Speaker 2: what you're talking about with without paying you.
Speaker 1: And I actually just looked this up because I was
Speaker 1: curious what it is that they.
Speaker 2: Charge on the first two hundred and fifty thousand dollars.
Speaker 2: They charge one point.
Speaker 1: Three five percent.
Speaker 2: Wow, that is expensive, man, And especially for somebody who
Speaker 2: is just getting started with their investing, that is not
Speaker 2: a fee that they need to be and they need
Speaker 2: to be paying. But so one of the ways around
Speaker 2: hiring an actual person are is ai it is the
Speaker 2: all the robo advisors out there, and some folks were
Speaker 2: saying that, you know, this is a happy medium for
Speaker 2: a lot of folks, but are those a good choice
Speaker 2: and what would make someone opt to go in that direction.
Speaker 2: And this is the second time we've referenced Monday's episode,
Speaker 2: but we talked about the tax lost harvesting abilities of
Speaker 2: a robo advisor like Betterment, which we would say it's
Speaker 2: it's probably one of the best ones out there. It
Speaker 2: might be the best of the bunch within the robo
Speaker 2: advising category. And this is largely because of the like
Speaker 2: the behavioral finance elements that they've built into the service.
Speaker 1: Where they're able to help folks to stay the course.
Speaker 1: It's not like they offer superior fun choices or anything
Speaker 1: like that. There's no there's no secret sauce, right, It's
Speaker 1: it's those kind of advisory elements that they will they
Speaker 1: help you stay the course, which is really important. That's
Speaker 1: one of the best things an advisor can do.
Speaker 2: Right, Yeah, And well then they actually do have advisors
Speaker 2: and so like their fees range from like zero point
Speaker 2: twenty five percent for kind of like their standard digital plan,
Speaker 2: but if you pay a little bit more point four percent,
Speaker 2: which I don't like seeing. But with that premium service,
Speaker 2: you get access to professional financial planners actual cfps, which
Speaker 2: can go a long way when it comes to, you know,
Speaker 2: planning out your finals.
Speaker 1: When you think about when you compare it to something
Speaker 1: like Edward Jones that you just mentioned.
Speaker 2: That's a third of the price shoving an entire point. Yeah,
Speaker 2: for one hundred points a full percentage point, it seems
Speaker 2: like it seems like a pretty good deal. What do
Speaker 2: you think about on those terms? Yeah, you're paying a
Speaker 2: little more, certainly for a robo advisor than if you
Speaker 2: were to be doing it yourself, but it's still pretty
Speaker 2: inexpensive compared to hiring a traditional human advisor. And no
Speaker 2: hate to all those Edward Jones folks.
Speaker 1: Out there, Yeah no, I mean, I'm some people want that.
Speaker 1: I guess, like that's not our jam, and that's not
Speaker 1: we recommend people. It's a different Yeah, it's a different service,
Speaker 1: and some folks kind of want that assistance. They want
Speaker 1: to sit down in person, you know, going through that
Speaker 1: whole thing. I think if you're going to go the
Speaker 1: robo advisor direction, like I don't know. I think Betterments, Yeah,
Speaker 1: is one of the best. And that combo of human
Speaker 1: advice with the kind of robo platform helping you on
Speaker 1: the tax front and on the advice front, I think
Speaker 1: it's pretty cool, and you know, for some people it's
Speaker 1: worth paying the extra money. But let's talk about Matt
Speaker 1: just kind of some guideline, some basics. When we talk
Speaker 1: about simplification of investing and how over complicating things, and
Speaker 1: of course there are a million ways that you can
Speaker 1: complicate your investing strategy, but we really believe that it
Speaker 1: doesn't need to be. It shouldn't have to be, and
Speaker 1: it shouldn't be terribly complicated. And I think the more
Speaker 1: complicated you make it, the less likely people are to
Speaker 1: partake in that action. Right when you say there's ten
Speaker 1: hoops to jump through, people are going to just walk
Speaker 1: away before they start. When the belief is that investing
Speaker 1: is hard, a lot of folks decide to skip out altogether.
Speaker 1: And so that does so much more harm than maybe
Speaker 1: not having quite enough international exposure or missing out on
Speaker 1: some years where real estate had super good returns something
Speaker 1: like that. Doing the thing, even doing it imperfectly and
Speaker 1: doing it regularly is the key it comes down to
Speaker 1: the crux of the matter is don't let perfect be
Speaker 1: the enemy of good if you're trying to you're just
Speaker 1: starting out, and you're like, I want to invest the
Speaker 1: exact right way, the perfect way for future returns, and
Speaker 1: the perfect way so that I stay the course. I mean,
Speaker 1: I think my advice would be get started and then
Speaker 1: continue learning and you can iterate over time if you want.
Speaker 1: But simplicity is better than perfection.
Speaker 2: So this kind of makes me think of why I
Speaker 2: don't necessarily like talking about my budget in the fact
Speaker 2: that we've made it available, which I guess I'm doing
Speaker 2: that by even sharing this example. But the reason I
Speaker 2: don't necessarily like pushing it out there for folks is
Speaker 2: because it's too complicated for most folks. It's not something that,
Speaker 2: especially if you've never budgeted before, this shouldn't be your
Speaker 2: first step towards tracking your expenses and budgeting for the months.
Speaker 2: And so, in a similar way, we want folks to
Speaker 2: be successful rather than you know, having all the i's dotted,
Speaker 2: all the t's crossed, and have anything's perfect, where you
Speaker 2: end up kind of, you know, falling off the wagon.
Speaker 2: And so we want folks to opt for what we
Speaker 2: would call a minimalist portfolio. We've always said that a
Speaker 2: total stock market or at S and P five hundred
Speaker 2: fund it gets folks who are in the wealth building
Speaker 2: phase of their lives basically what it is that they
Speaker 2: need without overthinking it. And target date funds they are
Speaker 2: another great set it and forget it approach for money
Speaker 2: that you're stalking away inside of your retirement accounts. And
Speaker 2: so it's not that you can't diversify further. You know,
Speaker 2: if you wanted to say, add some a little more
Speaker 2: real estate exposure via a rate, If you want to
Speaker 2: do that, that's great, you do you. It's just that
Speaker 2: the minimalist route, investing within a single fund or maybe
Speaker 2: two that are already well diversified, this is an effective
Speaker 2: strategy that will get you where it is that you
Speaker 2: want to be. Yeah, man, I love that. A like
Speaker 2: the idea of just keeping it as simple as possible,
Speaker 2: keeping it minimalist, and then doing the right thing over
Speaker 2: and over right. So the next thing would we mentioned
Speaker 2: is to have that plan and then stick to it,
Speaker 2: because the best plan is something that you can stick to,
Speaker 2: and it's it's easy to make complicated plans and then it.
Speaker 2: But it's easier to break those plans too, right, because
Speaker 2: you're like, wait a second, I got to step three.
Speaker 2: There's thirty more steps. I'm just gonna bow out right now.
Speaker 2: And that's what makes like, it makes me think of
Speaker 2: the app Couch to five K. Heard someone talking about
Speaker 2: that recently and how it changed their life. They were
Speaker 2: nervous to start running. But with that app, it's specifically
Speaker 2: it like slowly changes the amount of time where you're
Speaker 2: running and walking so that you don't feel overwhelmed. After
Speaker 2: two days of You're like, if you try to go
Speaker 2: run a five k and you've been like, haveing run
Speaker 2: at all in years, good luck? Right, you're probably gonna
Speaker 2: get demoralized. But if you take this couch to five
Speaker 2: k route and you try to build up over I
Speaker 2: don't know, the course of something like three months, you
Speaker 2: are in all likelihood gonna running awesome five k a
Speaker 2: recipe for success. Yeah you might even keep going go
Speaker 2: ten k pretty soon, right, But yeah, So the same
Speaker 2: is true with your investments. The most important thing is
Speaker 2: shoveling money into those retirement accounts, consistently getting those dollars
Speaker 2: invested in a diversified manner. So come up with the plan,
Speaker 2: and hopefully that plan is minimalist in nature, and then
Speaker 2: stick to it, do it regularly, do it religiously. That's
Speaker 2: where dollar cost averaging comes in, right. If you just
Speaker 2: kind of keep doing it with every paycheck, then without overthinking,
Speaker 2: without overthinking it, you're going to be ahead, vastly ahead
Speaker 2: of the majority of your peers on the investing front. Yeah,
Speaker 2: and so you said kind of shoveling money into those accounts,
Speaker 2: Which makes me think of the fact that especially early on,
Speaker 2: when you are just getting started with your investing, when
Speaker 2: you see fluctuations in the market, and especially like we've
Speaker 2: seen over the past several weeks we've seen a booming market,
Speaker 2: if you are just getting started with your investments, you're
Speaker 2: not going to see much change when it comes to
Speaker 2: the size of your portfolio because you're just getting started. Truly,
Speaker 2: what has the biggest impact, what moves the needle of
Speaker 2: the most is your savings rate and how much money
Speaker 2: you are able to sock away versus you like we've
Speaker 2: been investing for like ten fifteen, like coming up on
Speaker 2: twenty years, and we've got bigger nest eggs. That's bottom
Speaker 2: line than when we started investing fifteen twenty years ago,
Speaker 2: and now when the market goes up, it's a little
Speaker 2: more fun, right Like, it's a little more fun to
Speaker 2: see the balances increase a little bit when you check
Speaker 2: it at the end of the month. But that would
Speaker 2: not have happened if we weren't sacrificing, cutting back on expenses,
Speaker 2: finding ways to invest more while we were younger. Basically,
Speaker 2: you kind of have to like pay your dues a
Speaker 2: little bit. And once that nest egg gets to be
Speaker 2: a certain size, well market fluctuations and a growing market,
Speaker 2: that's when you get to see the beauty of the
Speaker 2: compound of compounding returns, because compounding returns and interest doesn't
Speaker 2: make a huge dent in those early years. On the
Speaker 2: back end is when you start to see that.
Speaker 1: You can totally split hairs about how much money you've
Speaker 1: got allocated international, how much exposure you have to real estate,
Speaker 1: whether or not you're investing in vintage lines, whatever. I mean,
Speaker 1: you can split hairs over all that stuff, and what
Speaker 1: the exact right percentage is for every single thing. Do
Speaker 1: I need more small cap value in my portfolio? Bloody
Speaker 1: bloody blah. And it's not that those conversations are completely worthless.
Speaker 1: But you're right, Like, the biggest change that we can
Speaker 1: make most easily that comes with the less stress and
Speaker 1: the most likelihood of follow through is to keep it
Speaker 1: simple and to just ramp up the percentage that we're
Speaker 1: that we're dedicating each and every month, each every paycheck
Speaker 1: to those accounts, Like that is the spigot that we
Speaker 1: can turn on the most that's going to lead to
Speaker 1: the largest growth in nest egg. You can try to
Speaker 1: get that perfect allocation, create the most diverse investment account possible,
Speaker 1: but the reality is then you're probably not quite as
Speaker 1: focused on that more important lever and ultimately, yeah, you
Speaker 1: might have the most diverse portfolio on earth, but you're
Speaker 1: the perfectly diverse. Yeah, but you're missing out than on
Speaker 1: the most important thing. It's kind of like, well we
Speaker 1: talked about back not too long ago with frugality, how
Speaker 1: it has to men wishing returns.
Speaker 2: Same thing. People.
Speaker 1: If you're so focused on frugal, you're probably not going
Speaker 1: to be as thoughtful about ramping up your income. And
Speaker 1: this is true too. I think the more you think
Speaker 1: about how your portfolio is allocated, boom, you've lost the
Speaker 1: plot and you're focused too much on the little things.
Speaker 1: You're majoring on the miners, that's right.
Speaker 2: Yeah, And then and finally too, I mean, so one
Speaker 2: of the reasons we're talking about this today is because
Speaker 2: of the timeliness of it.
Speaker 1: Right, So, as the.
Speaker 2: Market is booming and we've seen some you know, fluctuation recently,
Speaker 2: but folks, it becomes something that folks want to talk
Speaker 2: about more. And what we want to encourage you to
Speaker 2: do is like, once you do have this plan you've
Speaker 2: heard us talk through, Hey, maybe you should just be
Speaker 2: looking at a total stock market index fund or an
Speaker 2: SMP five hundred index fund, or maybe a target date fund.
Speaker 2: Once you have that plan, ignore everything else. We want
Speaker 2: you to put the blinders on. We want you to
Speaker 2: limit the noise, especially when it comes to the different
Speaker 2: headlines that you read. But when the market is tanking,
Speaker 2: folks are like you batten down the hatches, right, Like
Speaker 2: you are not interested in taking some of these risks.
Speaker 2: But like you were saying earlier, when things are booming,
Speaker 2: everybody feels brilliant, everybody feels rich, and they're thinking, ah, well,
Speaker 2: what else can I do in order to make this
Speaker 2: ride last even longer? Basically, and we that is the
Speaker 2: opposite of what you actually should be doing. And so
Speaker 2: while everyone else is out there figuring out different ways
Speaker 2: that they can invest in the latest sexy thing like
Speaker 2: and who knows what the next iteration of distracting investment
Speaker 2: opportunities are going to come down.
Speaker 1: The pike, right like, they'll come they oh, they.
Speaker 2: Absolutely will, but they are not things that you need
Speaker 2: to be paying attention to. And so, yeah, we wanted
Speaker 2: to talk about the different ways that you can simplify
Speaker 2: how it is that you invest in. Truly, it does
Speaker 2: not need to be all that complicated.
Speaker 1: Agreed and simple doesn't mean unsophisticated, right, Simple can still
Speaker 1: be diverse, and it can it can give you exactly
Speaker 1: what you need without ever thinking if.
Speaker 2: You think the S and P five hundred NIX fund
Speaker 2: or the total stock market in NIX fund is unsophisticated.
Speaker 1: Log into all of.
Speaker 2: The different companies that make up sure that that fund
Speaker 2: consists of.
Speaker 1: Back to see and go back and listen maybe to
Speaker 1: our episode with Robin Wigglesworth about his book Trillions and
Speaker 1: how Jack Bobol kind of really started the index fund
Speaker 1: movement and it's been a powerful one. So yeah, it's
Speaker 1: investing is the one thing where the more effort you
Speaker 1: put in, the worst your returns get. Typically, simplicity makes
Speaker 1: a whole lot of sense. We'll link to that interview
Speaker 1: as well. Yeah, all right, Matt let's mention as come
Speaker 1: back to the beer we had. This one is called
Speaker 1: Symptom of Progeny. It's a golden sour ale fermented with
Speaker 1: spontaneous culture. What were your thoughts on this one? I
Speaker 1: really like it.
Speaker 2: What do you think about it?
Speaker 1: I really, I guess I say it's like brightly tart.
Speaker 1: It's got chris. I know there's no fruit in this.
Speaker 1: It's got peach fuzzy elements. Oh yeah, big time dude.
Speaker 1: So truly.
Speaker 2: I was curious because we've been drinking some really big,
Speaker 2: really sweet stouts from Burial recently, and because of that,
Speaker 2: this one almost seems like a touch to tart. But
Speaker 2: I think it's because of all the sweet beers that
Speaker 2: we've been drinking like this. It's still such a bright, crisp, refreshing,
Speaker 2: perfectly aged, perfectly oky golden ale. It's exactly what I
Speaker 2: want out of a golden golden ail. And it's I mean,
Speaker 2: there's a good reason why Kate and I mean we
Speaker 2: picked up several bottles of us to bring back home
Speaker 2: to enjoy, because we certainly enjoyed this one.
Speaker 1: It just makes me think Burial does some of the
Speaker 1: best beers in every genre.
Speaker 2: Oh yeah, before we were talking about just how they're
Speaker 2: crushing it. They crush it with their their New England
Speaker 2: hazes and obviously there are stouts that we've been enjoying recently.
Speaker 2: But yes, this is a barely age sour.
Speaker 1: Do they make bad beers? I don't think so. Not
Speaker 1: completely knock out of the park. Yeah for sure. All right,
Speaker 1: that's gonna do it for this episode. You can find
Speaker 1: links to some of the stuff we mentioned up on
Speaker 1: the show notes at our website howtomoney dot com, and
Speaker 1: of course you can sign up for our how to
Speaker 1: Money newsletter. One came out just yesterday. You missed it,
Speaker 1: but you'll make that next one if you go sign
Speaker 1: up at hoddam money dot com slash newsletter or.
Speaker 2: You didn't miss it because you're one of the select few.
Speaker 2: You're one of the chosen.
Speaker 1: No, it's growing. It's a growing list.
Speaker 2: There's a lot of people in there, but we just
Speaker 2: want we're not selective everybody to get anybody and everybody
Speaker 2: the free glory that is the Hadding Money newsletter. But
Speaker 2: that's right man, all right. So that's gonna be it
Speaker 2: for this one until next time. Best friends Out, Best
Speaker 2: Friends Out,