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?
Speaker 2: Yeah, So, speaking of investing, did you realize I didn't realize.
Speaker 1: This until recently, until a couple of weeks.
Speaker 2: Ago, but we just exited the longest bear market since
Speaker 2: nineteen forty eight? Oh wow, isn't that crazy? I'm just
Speaker 2: crazy to think about it. So here's feel that long ago.
Speaker 2: Ultimately it really did. And this is so the reason
Speaker 2: I'll bring this up is because I love the fact
Speaker 2: that we didn't even really notice that, and hopefully listeners
Speaker 2: didn't notice that either, because they were just continuing to
Speaker 2: invest like clockwork, continuing to plug money into the market.
Speaker 2: But oftentimes folks aren't doing that because they are over
Speaker 2: complicating things. They're making it a little too complex, is
Speaker 2: keeping them from their financial goals. And so we're going
Speaker 2: to try to make sure that does not happen from
Speaker 2: here on out if you're listening to this podcast. Yeah,
Speaker 2: and there's a couple things I think that might make
Speaker 2: sense to complicate a little bit on the investing front.
Speaker 2: But how complex you get and what you you know,
Speaker 2: what you choose to investment. We're going to talk about
Speaker 2: a bunch of different ways you can complicate things and
Speaker 2: maybe it's good, and then other ways in which you
Speaker 2: can overdo it. So that's the that you should completely avoid.
Speaker 2: That's the theme of this of this combo in this episode.
Speaker 2: What's this You wanted to talk about getting beers last
Speaker 2: night or something? Okay, So we got beers with a
Speaker 2: friend last night, Uh huh. And there's free parking all
Speaker 2: around where we hang but there's also a paid parking
Speaker 2: lot when all the free parking's taken really close to
Speaker 2: this particular establishment. Yes, And I was driving from across
Speaker 2: town and they were I couldn't find a free parking spot,
Speaker 2: and I did want to be a Jurrik and be
Speaker 2: and be late when when we'd had this hang plan
Speaker 2: for a little while, so I paid five bucks for
Speaker 2: parking and I hate that.
Speaker 1: There's like not much I hate more than that. And
Speaker 1: so but then we were walking to the car after
Speaker 1: hanging out, and he pointed out a couple of free spots.
Speaker 1: I didn't know about it. He's like, these are the
Speaker 1: this is the low hanging fruit. No one's ever spots.
Speaker 1: So hopefully I'll never have to do it again.
Speaker 2: Okay, So I got a couple of follow ups then, 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: Think i'd be in past ten minutes late? Feels just
Speaker 1: oh yeah, rude, Okay, I totally if you're like three
Speaker 1: to five minutes late, it's it's probably not.
Speaker 2: Three to five, which is why because I saw you
Speaker 2: 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 circle the blog more time. And okay,
Speaker 2: So I so you heard a free spot firee spot.
Speaker 2: I paid like an idiot. So okay, what are your
Speaker 2: thoughts on how do you feel about questionable parking spots
Speaker 2: like spots that obviously if something is marked and it
Speaker 2: says no parking. I don't. You're not gonna park there.
Speaker 2: There's a good chance you might get towed whatever, make
Speaker 2: somebody upset. But I guess I mentioned this because I
Speaker 2: feel like for years I have parked in spots that
Speaker 2: are like, oh, I'm not totally sure this is a
Speaker 2: legit spot. It doesn't say no parking, it's not right
Speaker 2: in front of a fire hydrant, there's no red curb,
Speaker 2: that kind of thing. And I can't remember the last
Speaker 2: time I got a parking ticket. Yeah, it's a you
Speaker 2: gotta know what you're risking, right, and exactly I think
Speaker 2: I took a risk I'm willing to take a couple
Speaker 2: of years ago, when I was meeting a friend down
Speaker 2: by the airport, he was in town for a second.
Speaker 2: We grab beers and I parked in I think where
Speaker 2: like they the valet.
Speaker 1: Would park cars. But it was raining super hard, there
Speaker 1: was nobody out there, and there were plenty of spots,
Speaker 1: and so I risked it and I didn't get a ticket,
Speaker 1: which is great, but I also knew I might get
Speaker 1: a ticket or somebody might say something to me.
Speaker 2: Did you had you said something to the valet? Was
Speaker 2: there when they're like a valet there and you're.
Speaker 1: Like, hey, or is this a thing? So I don't
Speaker 1: think there was anybody there, which is why I was like,
Speaker 1: all right, I'm just gonna give it a shot. But yeah, well,
Speaker 1: paying for parking is a pet pia mine. Every once
Speaker 1: in a while, 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 So.
Speaker 2: 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 had 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 maybe think back when we were renovating
Speaker 1: 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.
Speaker 1: Top and it was just it was a fun endeavor
Speaker 1: up until a point, and then it started started to
Speaker 1: kind of get old after a while. Right, there were
Speaker 1: endless options of everything, and even picking out that tile,
Speaker 1: it took a lot of searching and looking to find
Speaker 1: the exact kind that we wanted. Then, so at a
Speaker 1: certain point 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 carring 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 would we would say, And
Speaker 1: something we talk about on the show regularly is that
Speaker 1: complicating things doesn't always make them better, and in fact,
Speaker 1: the 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.
Speaker 1: More value stocks in my portfolio, invest.
Speaker 2: In wine and art as well. I've heard that the
Speaker 2: returns on ESG funds they're pretty solid, So maybe that's
Speaker 2: the direction I should be going. But many of those
Speaker 2: questions and considerations they don't actually help all that much,
Speaker 2: and in fact, they end up distracting us from from
Speaker 2: doing what it is that we should be doing. But
Speaker 2: that doesn't necessarily mean that we should bury our heads
Speaker 2: in the sand. We think it is important to know
Speaker 2: what the other options out there are and then why
Speaker 2: it is that we should either consider them or ignore
Speaker 2: 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 know
Speaker 1: what is it? Burman's lines, Yeah, and it's just nice
Speaker 1: to know, Okay, cool, I need ketchup, and I don't
Speaker 1: have to look at the price pronounce and different brand
Speaker 1: names and which ones on sale right now. You just
Speaker 1: grab the ketchup and it's so easy. So I think, yeah,
Speaker 1: we could stand to have a little more like Aldi
Speaker 1: in the way we think about investing. And part of
Speaker 1: the reason we're talking about this today is because when
Speaker 1: market conditions are good, there's even more of an inclination
Speaker 1: to shake things up to start overthinking things, and you mentioned, hey,
Speaker 1: guess what, now we've ended that longest bear run and
Speaker 1: we're in a bold market right now. When we are
Speaker 1: in that bear market, though, when things are going badly,
Speaker 1: when the stock market is performing poorly, nobody wants to
Speaker 1: discuss smart investing methods. Everyone's just kind of like covering
Speaker 1: their head. They're grinning and bearing it.
Speaker 2: The assumption is that the market is going to continue
Speaker 2: to drop, and so why would you start investing if
Speaker 2: things are going to continue along the same path.
Speaker 1: Yeah, But then again, when things start going gangbusters, everybody's
Speaker 1: got an opinion, right. And so now that we are
Speaker 1: officially in this bowl market, we're up twenty percent from
Speaker 1: from those lows. We're seeing certain stocks popping in a
Speaker 1: big way, and I think more people are more inclined
Speaker 1: to start fiddling with their portfolio. It holds a greater
Speaker 1: allure right now when things are going up up into
Speaker 1: the right and the boring index fund route, it seems
Speaker 1: more intelligent, I think when the market is going down,
Speaker 1: but on the way up, it just it feels kind
Speaker 1: of like you should be making moves to amplify those gains, right,
Speaker 1: Why settle for average, when certain things are popping off
Speaker 1: to greater degrees. But just because it's more exciting or
Speaker 1: just because it's more enticing, that doesn't mean it's the
Speaker 1: direction you should be heading in. That's right, Yeah.
Speaker 2: And also we're not just talking about the you know,
Speaker 2: that part of your portfolio that you want to speculate
Speaker 2: with that five percent or less that you'll hear us
Speaker 2: mention here on the show as a pressure relief valve. Now,
Speaker 2: we still think that this is a good rule of thumb,
Speaker 2: good thing to maintain. And for a lot of folks
Speaker 2: who do like to tinker, I think having a negligible
Speaker 2: amount of money that you can trade just for funzis
Speaker 2: helps them to stay the course and to keep doing
Speaker 2: the boring, old standard, bland thing with the bulk of
Speaker 2: their investment dollars. So eat your heart out with that
Speaker 2: small percentage of play investment dollars.
Speaker 1: Go 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.
Speaker 1: A few specific.
Speaker 2: Temptations, and then why it is that most of them
Speaker 2: should probably 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 hand, I feel like
Speaker 1: it can kind of tank the majority of what of
Speaker 1: your assets that are going to be doing just the
Speaker 1: standard normal thing, which is investing in total overall stock
Speaker 1: market kind of thing. Right. And we're also we're not
Speaker 1: going to focus too much on timing today, right, whether
Speaker 1: now is a good time to start investing if you
Speaker 1: haven't already, because for most people, dollar cost averaging is
Speaker 1: the best approach, right sticking your money into your four
Speaker 1: one K, your IRA, or your HSA your Health Save
Speaker 1: mus account, which we always talk about as being an
Speaker 1: awesome investment vehicle. Most people don't think of it 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 it 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: on 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 pile when this.
Speaker 1: You know. But if you are, if you do have
Speaker 1: the money in January to fully fund your roth IRA
Speaker 1: 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 to oh one k, it makes
Speaker 1: sense to deploy it every single paycheck. So really the
Speaker 1: timing that we're talking about is the sooner the better,
Speaker 1: and the more regular the better too. Yeah, and I mean,
Speaker 1: I do think it's worth maybe trying to work towards
Speaker 1: that lump some kind of mindset. If you're able to
Speaker 1: slowly over time over the years, kind of get ahead
Speaker 1: of it, right, So as opposed to you get paid,
Speaker 1: do you invest a portion of that but stockpiling that
Speaker 1: ahead time, So if you're able to max that out,
Speaker 1: make that payment that year, but then slowly over time
Speaker 1: you build up essentially like a little war chest, so
Speaker 1: that when the new year does hit and you are
Speaker 1: able to invest in those retirement accounts for the next year.
Speaker 1: The ability to make that happen sooner rather than later,
Speaker 1: it does over the long haul return you higher returns.
Speaker 1: 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 plethor 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 1: just talking with friends.
Speaker 2: I feel like it's a conversation I have more often
Speaker 2: as I've gotten older. Folks and rightly so, are more
Speaker 2: interested in investing. But just because folks are talking about
Speaker 2: it doesn't mean that it's something that you that you
Speaker 2: should be considering, because but it's all enticing and it's like, yeah,
Speaker 2: your eyes can get as wide.
Speaker 1: As saucer as you're like, wait, I cant invest in
Speaker 1: that or this or that. That's amazing, but then you
Speaker 1: I think a lot of people lose the plot if
Speaker 1: they start to go down that rabbit hole, and maybe
Speaker 1: they miss out on the main course. So yeah, let's
Speaker 1: talk about some of those added investing complications, when to
Speaker 1: say yes, when to say no. We'll get to more
Speaker 1: 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 of Van Guard.
Speaker 2: He's a pretty brilliant dude.
Speaker 1: Passed away what a year or two ago.
Speaker 2: Yeah, went all that long ago. But he was famously
Speaker 2: not a big fan of international diversification for a number
Speaker 2: of reasons. And the truth is, so many of the
Speaker 2: companies that you own in either a total stock market
Speaker 2: index fund or an SMP five hundred index fund. They
Speaker 2: do business overseas, and that was, honestly, that was Bogel's
Speaker 2: main argument. Something like forty percent of s and P
Speaker 2: five hundred revenues come from other countries come from overseas,
Speaker 2: and so folks who have diversified to more international holdings
Speaker 2: they haven't done as well. 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 and it turns out then when
Speaker 1: you look at the numbers, international stocks are relatively inexpensive
Speaker 1: these days, which is part of the reason we're probably
Speaker 1: seeing more headlines about them in front of the show,
Speaker 1: Ben Carlson Matt Who's just a brilliant mind of love
Speaker 1: rereading his blog, he recently articulated his ues on why
Speaker 1: folk should have more international stock exposure, and he said,
Speaker 1: global diversification is about accepting good enough returns to avoid
Speaker 1: the potential for terrible returns at an inopportune time. And
Speaker 1: I think it's a really good way of thinking about it.
Speaker 1: You're not necessarily if you do choose to invest internationally,
Speaker 1: doing it because you're looking for outsized mega returns or
Speaker 1: anything like that, and you might see better returns over
Speaker 1: the next decade, who knows, But yeah, I think investing
Speaker 1: internationally it's not a necessity. But given the outperformance that
Speaker 1: the US stock market has seen recently in the past
Speaker 1: decade plus, international stocks do look cheaper and more attractive
Speaker 1: right now. This is one of those things where I
Speaker 1: think you can complicate your life a little bit and
Speaker 1: add international stocks to your portfolio. But it's also not
Speaker 1: a have to. Yeah.
Speaker 2: I think Ben's argument it's more from like a wealth
Speaker 2: preservation standpoint, as opposed to him saying that like, oh,
Speaker 2: things are going to be gangbusters overseas in the coming decade.
Speaker 1: Some folks would point to Japan, whose stock market was
Speaker 1: rocket and rolling in the nineteen eighties, and I think
Speaker 1: finally just got back to nineteen navy 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 x 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 bring out 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 as 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, these 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 bumps 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 stock 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, Well,
Speaker 1: they're scoring higher in the ESG ratings than TESLA, like
Speaker 1: significantly higher. Yes, G, 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 front So I think the lack of defineability
Speaker 1: is a massive problem on the estre front. And it's
Speaker 1: been sold as 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 seem 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 any company, regardless of
Speaker 2: where they are on the ESG scale. And it's my
Speaker 2: subjective view that electric cars are better than cigarettes for
Speaker 2: people over time. So I'm just it's I'm curious. I
Speaker 2: don't really know how. It feels like there's like the
Speaker 2: Wizard of Oz making these decisions about behind some sort
Speaker 2: of curtain about which of these companies qualify for their
Speaker 2: funds and which ones don't. And until we get more
Speaker 2: clarity on that, and until I don't know, it seems
Speaker 2: like the funds that actually the companies that actually get
Speaker 2: included in some of those funds are companies that are
Speaker 2: doing more good. And even then it might not be
Speaker 2: in people's best interest as intand from financially, like they
Speaker 2: might be checking all the boxes from from an ESG standpoint,
Speaker 2: like maybe Philip Morris doesn't get to did they not
Speaker 2: change their name to Atria or whatever?
Speaker 1: That might be cree you.
Speaker 2: I don't know, but regardless, I would say good for
Speaker 2: them because somehow they were able to kind of green
Speaker 2: wash their way onto one of these funds. And unfortunately,
Speaker 2: that's what it seems like a lot of these companies
Speaker 2: are 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. And let's talk about
Speaker 1: something 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 popular estate investors. We each own a handful of
Speaker 1: properties in the Atlanta area. And the thing is we're
Speaker 1: kind of mostly talking about the passive style investing on
Speaker 1: this episode, and you and I we think of real
Speaker 1: estate investing is more like taking on a part time job,
Speaker 1: because it kind of is right not only in the
Speaker 1: identifying and purchasing of that property, but in the managing
Speaker 1: of that property too. And so if you're not up
Speaker 1: for that. If you're not up for all of the
Speaker 1: extra work that it's going to take to own and
Speaker 1: manage that rental property, the fixes, the calls that you're
Speaker 1: going to have to get from the tenant, the things
Speaker 1: you're going to have to do to keep up with
Speaker 1: that property, you should avoid becoming a landlord. And you know,
Speaker 1: like I said this, so we're mostly talking about the
Speaker 1: simple forms of investing that most people are doing with
Speaker 1: every paycheck. So buying real estate is just this other
Speaker 1: ball of wax all together. 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, do
Speaker 1: you want to talk about maybe kind of some other
Speaker 1: ways to do that.
Speaker 2: You can do that by investing in rates. So that's
Speaker 2: how you say it, but it stands for real estate
Speaker 2: investment trusts, and so there are the public rates, there
Speaker 2: are private rates, and so we're not completely against the
Speaker 2: private ones, but they do come with higher fees unless liquidity.
Speaker 2: Oftentimes your money is locked up for years at a time.
Speaker 2: So because of that we avoid them ourselves. But even
Speaker 2: publicly trader reads they're kind of cool. They can give
Speaker 2: you some diverse exposure to real estate that you can
Speaker 2: easily dollar cost average into. You don't have to plunk
Speaker 2: down a large amount of cash, like twenty five thousand
Speaker 2: dollars is oftentimes sort of like the minimum amount required
Speaker 2: to go to some of these private routs.
Speaker 1: During like a cocktail hang or something, you can tell people, oh,
Speaker 1: I own apartment building in New York City, or I
Speaker 1: own this with that because you have like this small
Speaker 1: small sliver, but you do I've investment in that project,
Speaker 1: Like yeah, I own some.
Speaker 2: Of Tesla because I own right Boo. But some of
Speaker 2: the other reut funds, like Vanguard's V and Q, they
Speaker 2: are attractive because they're incredibly low cost, but still even
Speaker 2: still most folks. They don't need real estate exposure because
Speaker 2: the average American homeowner, they have most of their net
Speaker 2: worth tied up in their home, in their primary residence.
Speaker 2: And guess what last I checked, that's real estate. Yeah,
Speaker 2: and so we would rather see that kind of person
Speaker 2: more focused on investing within stocks via index funds. And
Speaker 2: even if you don't own your own home, and you're like, well,
Speaker 2: maybe I should be investing within a read. I don't
Speaker 2: own my my own property. Reads, they actually make up
Speaker 2: about five percent of the total stock market. And so
Speaker 2: guess what, if you own a total stock market index fund,
Speaker 2: you're probably invested in a reate. But boom, you just
Speaker 2: didn't even even realize it.
Speaker 1: Yeah, have you own real estate?
Speaker 2: You didn't know it?
Speaker 1: Yeah, that's right. Even if you're a renter, you own
Speaker 1: some real estate via your other investments. And we hung
Speaker 1: out with somebody recently and he was asking about investing
Speaker 1: in real estate or passive income, and of course we
Speaker 1: try to dispel the myth that passive income is super
Speaker 1: easy to come by, but we even told it, yeah, hey,
Speaker 1: investing in real estate might make sense for you. And
Speaker 1: we're 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 in a
Speaker 1: syndication deal. That's unless they have been like maxing out
Speaker 1: those retirement accounts for years and years and years and
Speaker 1: still they've got extra money and they just really want
Speaker 1: to go down this hole. There's also a lot of
Speaker 1: pitfalls investing in the syndication route. We are already seeing
Speaker 1: some of these syndications go bust, a lot of investors
Speaker 1: losing all their money. That doesn't happen in the stock
Speaker 1: market nearly to the 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,
Speaker 2: that knot. What is the simplest and easiest way for
Speaker 2: you to invest for your future? We will get to
Speaker 2: that right 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. And I don't know. It
Speaker 1: makes me think about the game of life. You remember
Speaker 1: that game back in the day, you spin the wheel.
Speaker 1: You'd like 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. It's like the.
Speaker 2: American rat race.
Speaker 1: Yeah, exactly, it's.
Speaker 2: The 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 give.
Speaker 1: Simplicity is typically in the investing world, a better way
Speaker 1: to go. And it just makes me think of like
Speaker 1: all these super niche platforms that exist now, Like you
Speaker 1: can invest in farmland, you can invest in wine, you
Speaker 1: 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 dollars,
Speaker 1: and now the guy can't even resell it, right, and
Speaker 1: so I think he did resell it, but for a
Speaker 1: whole lot less. Yeah, for like pennies on the dollar.
Speaker 2: Yeah, unfortunately lost a lot or fortunately because like if
Speaker 2: what we would not have wanted was for things to
Speaker 2: continue to spiral out of control and continue to but
Speaker 2: for that.
Speaker 1: Person, for them, yes exactly. But like conveniently we're hearing
Speaker 1: nothing nothing about some of those categories these days. But
Speaker 1: we actually did a deep dive of some of those
Speaker 1: 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 to ohine k socking away
Speaker 2: basically thirty thousand dollars annually into index funds within those
Speaker 2: tax advantage accounts, then you shouldn't even be considering any
Speaker 2: of these alternative platforms where you can invest in whiskey
Speaker 2: 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 don't want folks to do. They're getting
Speaker 2: distracted from the like the bigger prize, and honestly, like
Speaker 2: this is to point out that most of the things
Speaker 2: that we've talked about aren't necessarily inherently bad investments, except
Speaker 2: for like crypto and NFTs, But like some of these
Speaker 2: other platforms, there's still investments. It's not like they're MLMs
Speaker 2: or anything like that where you're totally going to get scammed.
Speaker 2: It's just that there are other priorities that we want
Speaker 2: you to focus on first. If the alternative is to
Speaker 2: mindlessly blow that money, is to mindlessly consume, then I
Speaker 2: might even say, okay, well make sure, yeah, maybe you
Speaker 2: should invest in this platform if that's if that keeps
Speaker 2: you from blowing money that you otherwise would have invested,
Speaker 2: I think maybe in that scenario it could actually make sense.
Speaker 2: But we just want to make sure that you are
Speaker 2: eating your veggies, your mean potatoes first before you start
Speaker 2: focusing on.
Speaker 1: The exotic desserts off to the side. I think that's
Speaker 1: a good way of putting it. It's not that these
Speaker 1: things are inherently bad, although maybe NFTs are. But yeah,
Speaker 1: but like and crypto Yeah, yet to be determined. Some
Speaker 1: of these sites, like I don't minded 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: stry 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 that 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. I need a guy. Yeah, girl.
Speaker 1: The truth is you probably don't unless you're crushing it.
Speaker 1: 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
Speaker 2: down I was like, oh, man, I'm earning real money
Speaker 2: now I'm gonna go talk to this Edward Jones guy.
Speaker 2: And so I walked down to walked out, you know,
Speaker 2: and drove down the street and went in there and
Speaker 2: started 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. And I
Speaker 2: actually just looked this up because I was curious what
Speaker 2: it is that they charge on the first two hundred
Speaker 2: and fifty thousand dollars. They charge one point three five percent. Wow,
Speaker 2: that is expensive, man, And especially for somebody who is
Speaker 2: just getting started with their investing, that is not a
Speaker 2: fee that they need to be and they need to
Speaker 2: be paying. But so one of the ways around hiring
Speaker 2: an actual person are is ai it is the all
Speaker 2: the robo advisors out there, and sometimes we say that,
Speaker 2: you know, this is a happy medium for a lot
Speaker 2: of folks, but are those a good choice and what
Speaker 2: would make someone opt to go in that direction. And
Speaker 2: this is the second time we've referenced Monday's episode, but
Speaker 2: we talked about the tax lost harvesting abilities of a
Speaker 2: robo advisor like Betterment, which we would say it's it's
Speaker 2: probably one of the best ones out there. It might
Speaker 2: be the best of the bunch within the robo advising category.
Speaker 2: And this is largely because of the like the behavioral
Speaker 2: finance elements that they've built into the.
Speaker 1: Service 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: two 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, that's a.
Speaker 2: Third of the price, saving an entire point. Yeah, for
Speaker 2: one hundred points a full percentage point, it seems like
Speaker 2: it seems like a pretty good deal. What do you
Speaker 2: think about on those terms? Yeah, you're paying a little more,
Speaker 2: certainly for a robo advisor than if you were to
Speaker 2: be doing it yourself, but it's still pretty inexpensive compared
Speaker 2: to hiring a traditional human advisor. And no hate to
Speaker 2: 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: what we recommend people. It's a different Yeah, it's a
Speaker 1: different service, and some folks kind of want that assistance.
Speaker 1: They want to sit down in person, you know, going
Speaker 1: through that whole thing. I think if you're going to
Speaker 1: go the robo advisor direction, like I don't know, I
Speaker 1: think Betterments, Yeah, is one of the best and that
Speaker 1: combo of human advice with the kind of robo platform
Speaker 1: helping you on the tax front and on the advice front.
Speaker 1: I think it's pretty cool, and you know, for some
Speaker 1: people it's worth paying the extra money. But let's talk
Speaker 1: about Matt just kind of some guideline, some basics. When
Speaker 1: we talk about simplification of investing and how over complicating things,
Speaker 1: and of course there are a million ways that you
Speaker 1: can complicate your investing strategy, but we really believe that
Speaker 1: it doesn't need to be. It shouldn't have to be,
Speaker 1: and it shouldn't be terribly complicated. And I think the
Speaker 1: more complicated you make it, the less likely people are
Speaker 1: to partake in that action. Right when you say there's
Speaker 1: ten hoops to jump through, people are going to just
Speaker 1: walk away before they start. When the belief is that
Speaker 1: investing is hard, a lot of folks decide to skip
Speaker 1: out altogether. And so that does so much more harm
Speaker 1: than maybe not having quite enough international exposure or missing
Speaker 1: out on some years where real estate had super good
Speaker 1: return something like that. Doing the thing, even doing it
Speaker 1: imperfectly and doing it regularly is the key. It comes
Speaker 1: down to. The crux of the matter is don't let
Speaker 1: perfect be the enemy of good if you're trying to
Speaker 1: you're just starting out, and you're like, I want to
Speaker 1: invest the exact right way, the perfect way for future returns,
Speaker 1: and the perfect way so that I stay the course.
Speaker 1: I mean, I think my advice would be get started
Speaker 1: and then continue learning, and you can iterate over time
Speaker 1: if you want. 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.
Speaker 1: For most folks.
Speaker 2: It's not something that, especially if you've never budgeted before,
Speaker 2: this shouldn't be your first step towards tracking your expenses
Speaker 2: and budgeting for the month. And so, in a similar way,
Speaker 2: we want folks to be successful rather than you know,
Speaker 2: having all the i's dotted, all the tea's crossing, and
Speaker 2: have anything's perfect, where you end up kind of, you know,
Speaker 2: falling off the wagon. And so we want folks to
Speaker 2: opt for what we would call a minimalist portfolio. We've
Speaker 2: always said that a total stock market or at S
Speaker 2: and P five hundred fund it gets folks who are
Speaker 2: in the wealth building phase of their lives basically what
Speaker 2: it is that they need without overthinking it. And target
Speaker 2: date funds they are another great set it and forget
Speaker 2: it approach for money that you're stalking away inside of
Speaker 2: your retirement accounts. And so it's not that you can't
Speaker 2: diversify further, you know, if you wanted to say, add
Speaker 2: some a little more real estate exposure via a rate,
Speaker 2: If you want to do that, that's great, you do you.
Speaker 2: It's just that the minimalist route, investing within a single
Speaker 2: fund or maybe two that are already well diversified, this
Speaker 2: is an effective strategy that will get you where it
Speaker 2: is that you want to be. Yeah, man, I love that.
Speaker 2: Like 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've 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
Speaker 2: it but it's easier to break those plans too, right,
Speaker 2: because 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 gone run an awesome five k
Speaker 2: a recipe for success. Heck, you might even keep going
Speaker 2: go ten k pretty soon. Right.
Speaker 1: But yeah, So the same is true with your investments.
Speaker 1: The most important thing is shoveling money into those retirement accounts,
Speaker 1: consistently getting those dollars invested in a diversified manner. So
Speaker 1: come up with the plan and hopefully that plan is
Speaker 1: minimalist in nature, and then stick to it, do it regularly,
Speaker 1: do it religiously. That's where dollar cost averaging comes in, right.
Speaker 1: If you just kind of keep doing it with every paycheck,
Speaker 1: then without overthinking, without overthinking it, you're going to be ahead,
Speaker 1: vastly ahead of the majority of your peers on the
Speaker 1: investing front. Yeah, and so you said kind of shoveling
Speaker 1: money into those accounts, which makes me think of the
Speaker 1: fact that especially early on, when you are just getting
Speaker 1: started with your investing, when you see fluctuations in the market,
Speaker 1: and especially like we've seen over the past several weeks
Speaker 1: we've seen a booming market, if you are just getting
Speaker 1: started with your investments, you're not going to see much
Speaker 1: change when it comes to the size of your portfolio
Speaker 1: because you're just getting started. Truly, what has the biggest impact,
Speaker 1: what moves the needle of the most is your savings
Speaker 1: rate and how much money you are able to sock
Speaker 1: away versus.
Speaker 2: Like we've been investing for like ten fifteen, coming up
Speaker 2: on twenty years, and we've got bigger nest eggs, that's
Speaker 2: bottom 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.
Speaker 1: That you can totally split hairs about how much money
Speaker 1: you've got allocated international, how much exposure you have to
Speaker 1: real estate, whether or not you're investing in vintage lines, whatever.
Speaker 1: I mean, you can split hairs over all that stuff,
Speaker 1: and what the exact right percentage is for every single thing.
Speaker 1: Do I need more small cap value in my portfolio?
Speaker 1: Bloody bloody blah. And it's not that those conversations are
Speaker 1: completely worthless, but you're right, like the biggest change that
Speaker 1: we can make most easily that comes with the less
Speaker 1: stress and the most likelihood of follow through is to
Speaker 1: keep it simple and to just ramp up the percentage
Speaker 1: that we're that we're dedicating each and every month, each
Speaker 1: every paycheck to those accounts, Like that is the spigot
Speaker 1: that we can turn on the most that's going to
Speaker 1: lead to the largest growth in nest egg. You can
Speaker 1: try to get that perfect allocation, create the most diverse
Speaker 1: investment account possible, but the reality is then you're probably
Speaker 1: not quite as focused on that more important lever and ultimately, yeah,
Speaker 1: you might have the most diverse portfolio on earth, but
Speaker 1: you're the perfectly diverse Yeah, but you're missing out than
Speaker 1: on the most important thing. It's kind of like, well,
Speaker 1: we talked about back not too long ago with frugality,
Speaker 1: how it has to be wishing returns. Same thing. People.
Speaker 1: If you're so focused on frugality, 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. Right, So, as the market
Speaker 2: 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, do you batten down the hatches?
Speaker 1: Right?
Speaker 2: Like 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 the pike, right like
Speaker 2: they'll come they, oh, they absolutely will, but they are
Speaker 2: not things that you need to be paying attention to.
Speaker 2: And so, yeah, we wanted to talk about the different
Speaker 2: ways that you can simplify how it is that you
Speaker 2: invest in. Truly, it does not need to be all
Speaker 2: 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 2: log into all of the different companies that make up
Speaker 2: sure that that fund 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: ye movement and it's been a powerful one. So yeah,
Speaker 1: it's investing is the one thing where the more effort
Speaker 1: you put in the worst your returns get typically simplicity
Speaker 1: makes a whole lot of sense. We'll link to that
Speaker 1: interview as well. Yeah, all right, Matt, let's mention as
Speaker 1: go back to the beer we had. This one is
Speaker 1: called Symptom of Progeny. It's a golden sour ale fermented
Speaker 1: with spontaneous culture. What were your thoughts on this one?
Speaker 2: I really like it.
Speaker 1: What do you think about it? I really like guess
Speaker 1: I say, it's like brightly tart, Chris. I know there's
Speaker 1: no fruit in this. It's got peach fuzzy elements. Oh yeah,
Speaker 1: big time, dude. 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 there's
Speaker 2: I mean, there's a good reason why Kate and I mean,
Speaker 2: we picked up several bottles of us to bring back
Speaker 2: home to enjoy, because we certainly enjoyed this one.
Speaker 1: That it just makes me think Burial does some of
Speaker 1: the best beers in every genre.
Speaker 2: Yeah, oh yeah, before we were talking about just how
Speaker 2: they're crushing it. They crush it with their their New
Speaker 2: England hazes and obviously there's stouts that we've been enjoying recently.
Speaker 1: But yes, this is a barely age sour. Do they
Speaker 1: make bad beers? I don't think so.
Speaker 2: Not completely knock out of the park. Yeah for sure.
Speaker 1: All right, that's gonna do it for this episode. You
Speaker 1: can find links to some of the stuff we mentioned
Speaker 1: up on the show notes at our website howtomoney dot com,
Speaker 1: and of course you can sign up for our how
Speaker 1: to Money newsletter. One came out just yesterday. You missed it,
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Speaker 1: up at hoda 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
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Speaker 2: the free glory that is.
Speaker 1: The had of Money Newsletter. But that's right man, all right.
Speaker 2: So that's gonna be it for this one until next time.
Speaker 2: Best Friends Out, Best Friends Out,