1 00:00:11,400 --> 00:00:14,840 Speaker 1: Investing is a complicated problem. What if I told you 2 00:00:14,880 --> 00:00:19,120 Speaker 1: a beautiful solution has been found? Investing is not easy. 3 00:00:19,400 --> 00:00:22,599 Speaker 1: How do you pick the correct asset class? Which sectors 4 00:00:22,640 --> 00:00:24,159 Speaker 1: do you buy? How do you know which are the 5 00:00:24,239 --> 00:00:27,120 Speaker 1: right stocks or bonds to own? Do you use leverage? 6 00:00:27,400 --> 00:00:30,360 Speaker 1: Do you hedge? Do you time? What about private equity, 7 00:00:30,360 --> 00:00:34,919 Speaker 1: hedge funds, venture capital? It's really complicated, or is it? 8 00:00:35,320 --> 00:00:38,600 Speaker 1: I'm Barry Redults and on today's edition of At the Money, 9 00:00:38,960 --> 00:00:43,360 Speaker 1: we're going to discuss investing as a problem that's been solved. 10 00:00:43,440 --> 00:00:45,320 Speaker 1: To help us unpack all of this and what it 11 00:00:45,400 --> 00:00:49,159 Speaker 1: means for your portfolio, Let's bring in Dave Kndig. He 12 00:00:49,479 --> 00:00:53,920 Speaker 1: is financial futurist at VETIFI and a well known ETF 13 00:00:54,080 --> 00:00:58,960 Speaker 1: industry pioneer. So I love this quote of yours investing 14 00:00:59,040 --> 00:01:00,840 Speaker 1: is a problem that's been solved. 15 00:01:01,560 --> 00:01:04,800 Speaker 2: Explain well, what I mean by that quote, Barry, is 16 00:01:04,840 --> 00:01:07,360 Speaker 2: that I think a lot of people spend a lot 17 00:01:07,400 --> 00:01:11,440 Speaker 2: of time and energy and frankly emotion caught up in 18 00:01:11,520 --> 00:01:14,600 Speaker 2: the idea that they have to figure out investing. Right. 19 00:01:14,680 --> 00:01:17,120 Speaker 2: They have ten thousand dollars, they have one hundred thousand dollars. 20 00:01:17,200 --> 00:01:19,679 Speaker 2: They want to grow that for some purpose five ten 21 00:01:19,800 --> 00:01:22,240 Speaker 2: hundred years out, whatever it is, and they feel like 22 00:01:22,360 --> 00:01:25,240 Speaker 2: their job is to solve this puzzle and get all 23 00:01:25,240 --> 00:01:27,040 Speaker 2: those pieces just right, and if they get it right, 24 00:01:27,480 --> 00:01:30,240 Speaker 2: they win, and if they get it wrong, they're destitute. 25 00:01:30,360 --> 00:01:33,479 Speaker 2: And I think that's the wrong approach. The core of 26 00:01:33,520 --> 00:01:36,760 Speaker 2: investing is in fact, a solve problem mathematically. If you've 27 00:01:36,760 --> 00:01:40,000 Speaker 2: got a set of assets you can invest in. For 28 00:01:40,200 --> 00:01:44,240 Speaker 2: almost sixty eighty years, we've understood the fund fundamental math 29 00:01:44,280 --> 00:01:46,920 Speaker 2: of how you put that portfolio together to get a 30 00:01:46,920 --> 00:01:49,440 Speaker 2: certain pattern of returns for a certain level of risk. 31 00:01:49,720 --> 00:01:53,520 Speaker 2: There's nothing really all that interesting or complicated about that. 32 00:01:53,600 --> 00:01:55,600 Speaker 2: You can do all the math on your phone. There's 33 00:01:55,600 --> 00:01:58,040 Speaker 2: one hundred different apps you could download that will make 34 00:01:58,080 --> 00:02:01,320 Speaker 2: a model portfolio for you. That's not the part people 35 00:02:01,320 --> 00:02:05,840 Speaker 2: should be focusing on. I contrast that to advice. The 36 00:02:05,920 --> 00:02:08,520 Speaker 2: knowing what to do, when to do it, how to 37 00:02:08,560 --> 00:02:11,480 Speaker 2: do it. That's the really hard problem. That's where people 38 00:02:11,480 --> 00:02:12,560 Speaker 2: should be putting their energy. 39 00:02:12,639 --> 00:02:16,200 Speaker 1: So let's break this up into a couple of different pieces. 40 00:02:16,720 --> 00:02:19,800 Speaker 1: If I say to the average lay person, investing is 41 00:02:19,800 --> 00:02:22,320 Speaker 1: a problem that's been solved, they're going to say, great, 42 00:02:22,440 --> 00:02:23,160 Speaker 1: what's the solution. 43 00:02:23,720 --> 00:02:27,040 Speaker 2: Well, the problem with your question is that an advisor 44 00:02:27,080 --> 00:02:28,919 Speaker 2: then would turn around and say, great, how much money 45 00:02:28,960 --> 00:02:30,359 Speaker 2: do you have to invest? When do you need it back? 46 00:02:30,360 --> 00:02:33,480 Speaker 2: What's your tolerance for risk? There's another fifty questions you 47 00:02:33,560 --> 00:02:37,119 Speaker 2: have to ask before you get to the investment part. 48 00:02:37,320 --> 00:02:40,160 Speaker 2: Once you've gotten to the end of that chain of questions, 49 00:02:40,440 --> 00:02:43,080 Speaker 2: you know, oh, this, I have one hundred thousand dollars, 50 00:02:43,240 --> 00:02:46,120 Speaker 2: I need this in fifteen years because that's when my 51 00:02:46,200 --> 00:02:48,720 Speaker 2: kids are going to go to college. I understand my 52 00:02:48,800 --> 00:02:50,760 Speaker 2: tax situation, and oh I can put some of that 53 00:02:50,800 --> 00:02:53,160 Speaker 2: in a five twenty nine or I can't. Once you've 54 00:02:53,200 --> 00:02:56,800 Speaker 2: answer all of those questions, then constructing that portfolio, what 55 00:02:56,919 --> 00:02:59,919 Speaker 2: do I own to get a pattern of returns deliver 56 00:03:00,240 --> 00:03:01,959 Speaker 2: me the maximum chance of being able to put my 57 00:03:02,040 --> 00:03:04,880 Speaker 2: kids through college in fifteen years. Honestly, you can do 58 00:03:04,919 --> 00:03:07,040 Speaker 2: that in a target date fund, and that's most of 59 00:03:07,080 --> 00:03:10,120 Speaker 2: the math baked in for you. Anything you do other 60 00:03:10,160 --> 00:03:12,520 Speaker 2: than that is trying to get a different pattern of 61 00:03:12,520 --> 00:03:15,680 Speaker 2: returns that is inherently going to have more risk associated 62 00:03:15,760 --> 00:03:16,000 Speaker 2: so with. 63 00:03:16,040 --> 00:03:18,640 Speaker 1: Target date fund For listeners who may not be familiar 64 00:03:18,720 --> 00:03:23,560 Speaker 1: with this, these typically are the default settings for a 65 00:03:23,639 --> 00:03:28,960 Speaker 1: one k's. They're managed by big fund managers, Fidelity, Vanguard, etc. 66 00:03:29,760 --> 00:03:32,320 Speaker 1: And they start out with a certain percentage of equities 67 00:03:32,320 --> 00:03:36,160 Speaker 1: and a certain percentage of bonds depending on how far 68 00:03:36,240 --> 00:03:40,119 Speaker 1: out eighty twenty, seventy thirty, whatever, And as time goes by, 69 00:03:40,440 --> 00:03:44,160 Speaker 1: they gradually lower the risk by raising the percentage of 70 00:03:44,200 --> 00:03:45,920 Speaker 1: bonds and lowering the percentage of equity. 71 00:03:46,440 --> 00:03:49,840 Speaker 2: Fair enough to statement, absolutely, and it's very easy to 72 00:03:49,880 --> 00:03:52,440 Speaker 2: criticize those things. They're very naive, right, I buy a 73 00:03:52,480 --> 00:03:55,680 Speaker 2: twenty thirty fund, Okay, Well, how much is precisely in cash? 74 00:03:55,680 --> 00:03:58,720 Speaker 2: How much is precisely in international equities. There is a 75 00:03:58,760 --> 00:04:01,720 Speaker 2: decent amount of variation in between the Vanguard and black Rock, 76 00:04:01,760 --> 00:04:04,480 Speaker 2: and everybody's got a version of these things, So there 77 00:04:04,480 --> 00:04:07,280 Speaker 2: are differences between them. But the point is they're all 78 00:04:07,360 --> 00:04:10,000 Speaker 2: trying to do the same thing, and they're all basing 79 00:04:10,040 --> 00:04:13,320 Speaker 2: it on the same fundamental understanding of how asset classes 80 00:04:13,400 --> 00:04:16,680 Speaker 2: interact with each other. So that part of the problem 81 00:04:16,760 --> 00:04:20,159 Speaker 2: is not actually the difficult one. Making the decision to 82 00:04:20,320 --> 00:04:23,480 Speaker 2: do that and then sticking with it is the difficult part. 83 00:04:23,560 --> 00:04:26,080 Speaker 1: Let's stick with the portfolio part, because when I hear 84 00:04:26,120 --> 00:04:29,040 Speaker 1: you say investing is a problem that's solved and knowing 85 00:04:29,120 --> 00:04:32,080 Speaker 1: your background working in the ETF industry and what you've 86 00:04:32,120 --> 00:04:37,480 Speaker 1: done for so many decades. I think of a low cost, 87 00:04:37,600 --> 00:04:45,040 Speaker 1: diversified portfolio of ETFs consisting of broad indices, rebalance once 88 00:04:45,080 --> 00:04:48,000 Speaker 1: a year. You're done. Am I making it to simple? 89 00:04:48,360 --> 00:04:51,440 Speaker 2: I think it's actually that simple. I think that the 90 00:04:51,640 --> 00:04:55,320 Speaker 2: value of going further than that is fine tuning it 91 00:04:55,400 --> 00:04:58,760 Speaker 2: to your individual needs. Is rebalancing that once a year. 92 00:04:58,839 --> 00:05:01,000 Speaker 2: The best answer is rebound it once a quarter of 93 00:05:01,040 --> 00:05:03,839 Speaker 2: the right answer, there's a different answer for different people. 94 00:05:03,960 --> 00:05:06,440 Speaker 2: Is the honest answer there. But the math about how 95 00:05:06,440 --> 00:05:10,159 Speaker 2: you do it very straightforward. For most people, as you said, 96 00:05:10,240 --> 00:05:15,240 Speaker 2: a diversified portfolio of low cost indexed ETFs is going 97 00:05:15,279 --> 00:05:18,040 Speaker 2: to get you ninety percent of the way there. That 98 00:05:18,279 --> 00:05:21,159 Speaker 2: last ten percent, you know, do you get an active 99 00:05:21,200 --> 00:05:23,640 Speaker 2: manager to run to your bond fund. Do you put 100 00:05:23,640 --> 00:05:26,279 Speaker 2: a little bit of money in commodities or crypto or 101 00:05:26,279 --> 00:05:29,040 Speaker 2: real estate or something that's a little spicy. Those things 102 00:05:29,080 --> 00:05:31,600 Speaker 2: are really all about getting that last ten percent, those 103 00:05:31,680 --> 00:05:34,560 Speaker 2: last three miles of the marathon and having some energy there. 104 00:05:34,920 --> 00:05:37,520 Speaker 2: That's what that's all about. But the base of it 105 00:05:37,600 --> 00:05:40,000 Speaker 2: that the eighty ninety percent of your returns is just 106 00:05:40,040 --> 00:05:41,880 Speaker 2: about getting your money in the market and not making 107 00:05:41,920 --> 00:05:45,960 Speaker 2: any dumb mistakes. Big low cost ETFs are really good 108 00:05:46,000 --> 00:05:47,400 Speaker 2: at keeping you from making dumb mistakes. 109 00:05:47,600 --> 00:05:49,800 Speaker 1: So I'm glad you brought it up that way because 110 00:05:51,120 --> 00:05:54,039 Speaker 1: Charlie Ellis wrote a wonderful book years ago, Winning the 111 00:05:54,120 --> 00:05:58,760 Speaker 1: Losers Game, where he makes the analogy to tennis. And 112 00:05:58,800 --> 00:06:02,919 Speaker 1: when you look at professional tennis players, they win by 113 00:06:02,960 --> 00:06:08,280 Speaker 1: scoring points. Sounds obvious, right now. You compare the professionals 114 00:06:08,320 --> 00:06:12,160 Speaker 1: to the amateurs, and they don't win by scoring points. 115 00:06:12,680 --> 00:06:17,039 Speaker 1: They lose by all these unforced errors. And what you're 116 00:06:17,080 --> 00:06:21,159 Speaker 1: describing is don't worry about the points, just avoid the 117 00:06:21,160 --> 00:06:23,080 Speaker 1: big mistakes. You're ahead of. 118 00:06:23,040 --> 00:06:25,599 Speaker 2: Most people, absolutely, and it has nothing to do with 119 00:06:25,640 --> 00:06:27,080 Speaker 2: how smart you are. I think this is the other 120 00:06:27,160 --> 00:06:30,160 Speaker 2: thing people sometimes get upset about is when you say 121 00:06:30,160 --> 00:06:32,240 Speaker 2: something like this, they're like, well, but I'm smarter than that. 122 00:06:32,440 --> 00:06:35,080 Speaker 2: I can figure out something better than just buying a 123 00:06:35,080 --> 00:06:37,919 Speaker 2: target date fund. It has nothing to do with being smart. 124 00:06:37,960 --> 00:06:40,200 Speaker 2: It has to do with whether or not you're actually 125 00:06:40,240 --> 00:06:43,080 Speaker 2: going to be doing this every single day. So it's 126 00:06:43,120 --> 00:06:46,920 Speaker 2: those unforced errors. It's the panicking because the market went down, 127 00:06:46,960 --> 00:06:50,080 Speaker 2: so you sell out of everything, it's the thinking the 128 00:06:50,120 --> 00:06:52,200 Speaker 2: markets are a little bit too pricey, so you stay 129 00:06:52,200 --> 00:06:54,720 Speaker 2: out for six months and you miss a rally. Those 130 00:06:54,839 --> 00:06:58,000 Speaker 2: unforced errors really suck most of the returns out of 131 00:06:58,080 --> 00:07:02,039 Speaker 2: individual investor portfolios. And even at the institutional level, even 132 00:07:02,040 --> 00:07:05,280 Speaker 2: the folks that get paid to play the game, their 133 00:07:05,360 --> 00:07:07,279 Speaker 2: hit rates on these things are like measured in the 134 00:07:07,400 --> 00:07:10,400 Speaker 2: fifty one to forty nine percent rate. Nobody hits home 135 00:07:10,480 --> 00:07:14,720 Speaker 2: runs over and over again. Really good institutional active managers 136 00:07:15,080 --> 00:07:19,520 Speaker 2: hit singles more reliably than they should, and that's considered magic. 137 00:07:19,600 --> 00:07:21,640 Speaker 2: So the idea that an individual investor is going to 138 00:07:21,680 --> 00:07:24,280 Speaker 2: somehow do better than that is ridiculous. 139 00:07:24,440 --> 00:07:29,200 Speaker 1: And I'm always fascinated by the concept of intelligence because 140 00:07:29,560 --> 00:07:33,920 Speaker 1: my experience almost thirty years in the markets, intelligence is 141 00:07:34,000 --> 00:07:36,520 Speaker 1: table stakes. Just to sit down at the table. Hey, 142 00:07:36,640 --> 00:07:40,440 Speaker 1: everybody doing this is really smart, and some people are 143 00:07:40,600 --> 00:07:44,160 Speaker 1: really really smart. But if it was just intellectual horsepower 144 00:07:44,200 --> 00:07:47,400 Speaker 1: that mattered and nothing else did well, then long term 145 00:07:47,440 --> 00:07:51,080 Speaker 1: capital management wouldn't have blown up as spectacularly as it did, 146 00:07:51,640 --> 00:07:54,640 Speaker 1: nor any of the past dozen funds that blew up. 147 00:07:54,680 --> 00:07:58,240 Speaker 1: These are filled with MIT and Harvard whiz kids who 148 00:07:58,280 --> 00:08:00,840 Speaker 1: are brilliant, right, But it's not just about intelligence. 149 00:08:00,880 --> 00:08:03,280 Speaker 2: Well, it's not, because there's so much luck involved, right, 150 00:08:03,320 --> 00:08:06,160 Speaker 2: And I think people in the business are very reluctant 151 00:08:06,200 --> 00:08:09,880 Speaker 2: to point out how uncertain finance is. I'm not saying 152 00:08:09,880 --> 00:08:12,200 Speaker 2: that it's luck. Whether Tesla stock goes up or down. 153 00:08:12,200 --> 00:08:15,600 Speaker 2: There's always a reason, right, And gosh, the financial media 154 00:08:15,640 --> 00:08:17,920 Speaker 2: is really good at telling you the reason whatever happened 155 00:08:17,960 --> 00:08:20,640 Speaker 2: in the market happened. They'll tell you why, even if 156 00:08:20,640 --> 00:08:21,600 Speaker 2: they're just making it up. 157 00:08:21,800 --> 00:08:25,120 Speaker 1: Well, that's the narrative fallacy large right, Hey here, let 158 00:08:25,120 --> 00:08:27,440 Speaker 1: me explain to you what just happens that I was 159 00:08:27,520 --> 00:08:29,440 Speaker 1: unable to warn you about an advance because I had 160 00:08:29,480 --> 00:08:30,160 Speaker 1: no idea. 161 00:08:29,920 --> 00:08:32,960 Speaker 2: Right, So something as simple as market timing, like, oh gosh, 162 00:08:33,000 --> 00:08:34,960 Speaker 2: the market seems expensive, maybe I should take them off 163 00:08:35,000 --> 00:08:37,760 Speaker 2: the table. A very common sort of retail investor reaction 164 00:08:38,120 --> 00:08:41,120 Speaker 2: to seeing a lot of headlines. Whether you get that right, 165 00:08:41,320 --> 00:08:43,320 Speaker 2: and the math proves this over and over again, is 166 00:08:43,400 --> 00:08:46,400 Speaker 2: blind luck whether or not you actually time the market 167 00:08:46,400 --> 00:08:48,959 Speaker 2: correctly as a coin flip, and generally you're going to 168 00:08:49,000 --> 00:08:50,160 Speaker 2: get it wrong because you're going to be on the 169 00:08:50,200 --> 00:08:54,240 Speaker 2: wrong side of sentiment. So that uncertainty is the reason 170 00:08:54,320 --> 00:08:57,520 Speaker 2: why intelligence only gets you so far, because the way 171 00:08:57,559 --> 00:09:00,520 Speaker 2: you mitigate uncertainty is not by being smarter, it's by 172 00:09:00,600 --> 00:09:04,720 Speaker 2: being unemotional and managing risk really well. And for most investors, 173 00:09:04,800 --> 00:09:06,520 Speaker 2: the way you do that is you give the money 174 00:09:06,520 --> 00:09:09,079 Speaker 2: to a giant index fund and don't think about it 175 00:09:09,120 --> 00:09:10,400 Speaker 2: for as long as you can. 176 00:09:10,840 --> 00:09:13,240 Speaker 1: That's really fascinating, you know, when you speak to certain 177 00:09:14,200 --> 00:09:18,480 Speaker 1: people like Annie Duke, who wrote the book Thinking and Bets, 178 00:09:19,080 --> 00:09:22,840 Speaker 1: one of the things that poker players where there's an 179 00:09:22,960 --> 00:09:26,560 Speaker 1: unbelievable amount of luck involved. One o the thing that 180 00:09:26,600 --> 00:09:30,040 Speaker 1: Annie Duke talks about all the time is avoiding resulting, 181 00:09:30,280 --> 00:09:33,280 Speaker 1: meaning looking at the outcome, looking at the results and 182 00:09:33,320 --> 00:09:36,680 Speaker 1: try and extrapolate backwards. What you need to do is 183 00:09:36,720 --> 00:09:40,800 Speaker 1: focus on the process. And sometimes a really good hitter 184 00:09:40,840 --> 00:09:44,000 Speaker 1: is going to strike out, and sometimes wood gets hit 185 00:09:44,400 --> 00:09:47,160 Speaker 1: on the ball and you get a double triple home run. 186 00:09:47,520 --> 00:09:51,880 Speaker 1: But a good swing with a well thought out strategy 187 00:09:51,920 --> 00:09:55,640 Speaker 1: at the plate doesn't guarantee anything, and people seem to 188 00:09:55,640 --> 00:09:56,320 Speaker 1: lose track of that. 189 00:09:56,600 --> 00:09:58,920 Speaker 2: Yeah, and one of my favorite books, I think she 190 00:09:58,960 --> 00:10:00,319 Speaker 2: has a whole thing in there about learning to deal 191 00:10:00,360 --> 00:10:02,840 Speaker 2: with bad beats? Right, how do you deal emotionally with 192 00:10:03,240 --> 00:10:05,640 Speaker 2: you know, again and again doing the right thing, having 193 00:10:05,640 --> 00:10:08,240 Speaker 2: the right hand, and somebody who's just an idiot just 194 00:10:08,400 --> 00:10:10,320 Speaker 2: hits it out of the park and you lose, and 195 00:10:10,320 --> 00:10:12,920 Speaker 2: then you lose again. And that is a very common 196 00:10:12,960 --> 00:10:16,120 Speaker 2: story in investing. And I think that people, particularly folks 197 00:10:16,160 --> 00:10:20,240 Speaker 2: who who think about investing, who are attracted to individual investing, 198 00:10:20,280 --> 00:10:24,120 Speaker 2: they think about stocks and performance and fundamentals. I think 199 00:10:24,200 --> 00:10:26,360 Speaker 2: those types of folks are the ones that are most 200 00:10:26,480 --> 00:10:29,200 Speaker 2: in danger of making bad mistakes because you can be 201 00:10:29,280 --> 00:10:33,000 Speaker 2: wrong on fundamentals for a very long time. Even if 202 00:10:33,040 --> 00:10:35,720 Speaker 2: you were right on the underlying truth right, the market 203 00:10:35,760 --> 00:10:39,120 Speaker 2: cannot reward you for a very long time. Your brilliant 204 00:10:39,200 --> 00:10:41,800 Speaker 2: stock can go from a PE of twenty to a 205 00:10:41,840 --> 00:10:44,640 Speaker 2: pe of eight for reasons you don't understand right. 206 00:10:45,120 --> 00:10:48,679 Speaker 1: There's an old expression, never confuse a bullmarket with brains. 207 00:10:48,720 --> 00:10:51,680 Speaker 1: The flip side of that is a rampaging bull market 208 00:10:51,800 --> 00:10:55,880 Speaker 1: covers up a lot of errors. I love the way 209 00:10:55,960 --> 00:10:59,160 Speaker 1: the book thinking in bet starts. I don't remember which 210 00:10:59,360 --> 00:11:01,360 Speaker 1: team it was and whether it was a Super Bowl 211 00:11:01,480 --> 00:11:04,320 Speaker 1: or I think it was a conference game where the 212 00:11:04,440 --> 00:11:07,040 Speaker 1: coach goes on goes for it on fourth and one 213 00:11:07,800 --> 00:11:09,920 Speaker 1: stopped at the goal line. The other team gets the 214 00:11:09,920 --> 00:11:14,000 Speaker 1: ball and scores, and the coaches excortiated, why don't you 215 00:11:14,080 --> 00:11:18,280 Speaker 1: go for a field goal? But she defends that decision 216 00:11:18,320 --> 00:11:22,120 Speaker 1: as statistically speaking, this is your best outcome. Hey, you're 217 00:11:22,160 --> 00:11:24,560 Speaker 1: down by seven. If you're not going to get the 218 00:11:24,559 --> 00:11:26,480 Speaker 1: ball in now, what makes you think you get a 219 00:11:26,480 --> 00:11:29,080 Speaker 1: field goal and then march all the way down the 220 00:11:29,120 --> 00:11:33,000 Speaker 1: field and score again. It was the right process, and 221 00:11:33,120 --> 00:11:36,280 Speaker 1: unfortunately it's not guaranteed. You had a bad outcome. You 222 00:11:36,360 --> 00:11:39,080 Speaker 1: have to work past that and stick with the good process. 223 00:11:39,120 --> 00:11:41,520 Speaker 2: And you have no alternative as an investor, right, I mean, 224 00:11:41,559 --> 00:11:43,520 Speaker 2: the insurance industry would try to sell you a lot 225 00:11:43,520 --> 00:11:46,200 Speaker 2: of products that guarantee you things, but there aren't no 226 00:11:46,280 --> 00:11:50,520 Speaker 2: free lunches, and you certainly cannot guarantee market returns. If 227 00:11:50,520 --> 00:11:52,319 Speaker 2: you're going to be an investor and you're going to 228 00:11:52,360 --> 00:11:54,800 Speaker 2: do something other than just clip coupon's on your thirty 229 00:11:54,880 --> 00:11:57,319 Speaker 2: year treasuries for the rest of your life, you have 230 00:11:57,400 --> 00:12:00,120 Speaker 2: to be willing to accept some level of uncertainty. 231 00:12:00,559 --> 00:12:03,200 Speaker 1: And that's just the way it is. And investing is 232 00:12:03,240 --> 00:12:09,160 Speaker 1: a probabilistic exercise, using imperfect information to make decisions about 233 00:12:09,160 --> 00:12:12,760 Speaker 1: an unknowable future. That sounds to me like the definition 234 00:12:12,840 --> 00:12:14,200 Speaker 1: of uncertainty exactly. 235 00:12:14,280 --> 00:12:16,240 Speaker 2: And when I say it's a solve problem, I mean 236 00:12:16,280 --> 00:12:19,000 Speaker 2: the overlaps with quantum physics are endless. Right, we are 237 00:12:19,000 --> 00:12:22,719 Speaker 2: working living in a probabilistic world. Investors have to get 238 00:12:22,760 --> 00:12:25,560 Speaker 2: comfortable with that. That's why it's a solved problem. We 239 00:12:25,679 --> 00:12:30,320 Speaker 2: understand the parameters, we understand how historically things have reacted 240 00:12:30,480 --> 00:12:32,960 Speaker 2: alongside of each other, but that doesn't mean that's how 241 00:12:33,000 --> 00:12:34,440 Speaker 2: they're going to react tomorrow. 242 00:12:34,920 --> 00:12:39,600 Speaker 1: So let's sum this up. Investing is complicated, especially if 243 00:12:39,640 --> 00:12:42,280 Speaker 1: we make it complicated. But if we want to take 244 00:12:42,320 --> 00:12:46,959 Speaker 1: a simple solution, it's not that difficult. Own a globally 245 00:12:47,000 --> 00:12:54,160 Speaker 1: diversified set of low cost index ETFs, rebalance those ETFs 246 00:12:54,280 --> 00:12:58,480 Speaker 1: once a year, have a good night. That's all that's necessary. Sure, 247 00:12:58,559 --> 00:13:00,760 Speaker 1: we can make it more complicated, we can think about 248 00:13:00,760 --> 00:13:04,400 Speaker 1: lots of other aspects to this, but that solution will 249 00:13:04,440 --> 00:13:09,440 Speaker 1: work for the vast majority of investors. And as Dave suggested, 250 00:13:10,080 --> 00:13:14,360 Speaker 1: that solution isn't even the most important aspect of your investing. 251 00:13:14,559 --> 00:13:17,720 Speaker 1: It's why are you investing? What are your goals, what 252 00:13:17,760 --> 00:13:21,240 Speaker 1: are your risk talentses? And how does this portfolio fit 253 00:13:21,400 --> 00:13:25,080 Speaker 1: into what you hope to accomplish. That's the variables that 254 00:13:25,120 --> 00:13:29,640 Speaker 1: are complicated, but investing itself, it's a problem that's been solved. 255 00:13:35,559 --> 00:13:38,480 Speaker 1: You can listen to At the Money every week, finding 256 00:13:38,559 --> 00:13:42,320 Speaker 1: in our Masters and Business feed at Apple podcasts. Each 257 00:13:42,320 --> 00:13:44,839 Speaker 1: week we'll be here to discuss the issues that matter 258 00:13:44,960 --> 00:13:48,680 Speaker 1: most to you as an investor. I'm Barry Ritolts. You've 259 00:13:48,720 --> 00:13:52,480 Speaker 1: been listening to At the Money on Bloomberg Radio.