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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Doctor mind have seen the year. It's so great? Ee

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Speaker 2: that fight? Now I want to understand.

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Speaker 3: Are you a do it yourself investor whose needs have

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Speaker 3: become more complex? Is the world making you concerned about

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Speaker 3: your portfolio? How do you know when it's time to

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Speaker 3: bring in some professional help to help us unpack all

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Speaker 3: of this and what it might mean for your portfolio.

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Speaker 3: Let's bring in doctor Jordan Grummitt, a physician whose specialty

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Speaker 3: is the intersection of money, mortality, purpose, and regret. He's

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Speaker 3: trained and worked in both internal medicine and hospice care.

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Speaker 3: His prior books include Taking Stock, a hospice Doctor's advice

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Speaker 3: on Financial independence and Living a Regret Free Life, and

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Speaker 3: The Purpose Code. So, doc g let's just start very basically,

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Speaker 3: what does it mean to fire yourself as a DIY investor?

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Speaker 1: Well, Barry, I grew up in the financial independence retire

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Speaker 1: early movement. These are the young, scrappy people who are

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Speaker 1: trying to save enough so that they never have to

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Speaker 1: work again. And so we were kind of cheap back

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Speaker 1: in the day, right, This idea of why pay someone

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Speaker 1: else to do what you can do for yourself? That

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Speaker 1: was good in a sense because it made us deeply

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Speaker 1: understand our investments. But as I get older, I realized

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Speaker 1: that sometimes it makes sense to fire yourself. In other words,

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Speaker 1: bring in the help when you need it because you

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Speaker 1: can't know everything.

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Speaker 3: So I know you've worked with other financial advisors. What

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Speaker 3: has your own experience taught you about what financial advice

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Speaker 3: should and should not address.

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Speaker 1: I had Roger Whitney the other day on my podcast,

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Speaker 1: and he is one of the financial advisors I really respect,

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Speaker 1: and we're talking about this idea of the balcony of

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Speaker 1: your life, this idea that you want to stand on

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Speaker 1: that balcony with your financial advisor, look out at your

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Speaker 1: future and start to plan. This doesn't look like, boy,

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Speaker 1: I want my net worth to be this many millions

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Speaker 1: of dollars. It's more a question of how do I

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Speaker 1: see the landscape of my life appearing in the future.

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Speaker 1: That has to do with money, but that also has

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Speaker 1: to do with family, it has to do with travel,

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Speaker 1: it has to do with career, and so it's really

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Speaker 1: this holistic approach. As a doctor, we used to see

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Speaker 1: people and we talked about the biopsychosocial model, the idea

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Speaker 1: of not just seeing what's hurting a patient, but how

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Speaker 1: they fit in their environment and their needs. And I

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Speaker 1: think with the financial advisor it's actually very similar.

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Speaker 3: Huh, really really interesting. What are the tasks that are

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Speaker 3: smart yourself investor can probably handle by themselves, and what

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Speaker 3: areas do they tend to run into trouble?

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Speaker 1: So the truth of the matter is, when you are

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Speaker 1: young and you're in the accumulation phase, it's almost hard

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Speaker 1: to mess up, right. You have to do it, Nickma

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Speaker 1: Julie says, just keep buying, and so when we're young,

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Speaker 1: there's lots of room for airs. So starting to understand

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Speaker 1: the stock market, starting to understand index investing, writing out

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Speaker 1: your investor statement or plan, basically accumulation is really something

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Speaker 1: that most people can manage. Now, the caveat is that

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Speaker 1: you have to be able to control your emotions, right,

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Speaker 1: So anyone who's going to sell the minute the stock

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Speaker 1: market drops on any given day probably needs financial advice

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Speaker 1: right away. But assuming that you have the solidity of

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Speaker 1: your character enough to be able to realize, Okay, the

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Speaker 1: market dropped, but I'm going to stay where I am

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Speaker 1: and leave my money where it is. Long as you

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Speaker 1: can pass that hurdle, A lot of accumulation and being

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Speaker 1: young is quite possible to do it yourself.

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Speaker 3: So how can a do it yourself investor recognize the

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Speaker 3: difference between being reasonably capable and becoming overconfident? What are

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Speaker 3: the red flags that they should be paying attention to.

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Speaker 1: Well, here's something I think we don't normally think about

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Speaker 1: when we're talking about building wealth. What we're really talking

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Speaker 1: about is concentrating risk. And for your average person, you're

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Speaker 1: going to be concentrating risk in your career, right, You're

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Speaker 1: going to be building and getting promotions and making more.

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Speaker 1: You're going to be concentrating risk in your business if

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Speaker 1: you're a founder or if you have a side hustle.

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Speaker 1: What you don't want to be doing unless you're a

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Speaker 1: professional is concentrating risk in the stock market. So over

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Speaker 1: confident people seek alpha, right, They're saying, boy, I don't

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Speaker 1: want to just take what the market has to give

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Speaker 1: me beta, but I'm going to seek alpha and that's

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Speaker 1: exceedingly hard. So some of the sign you're zooming in

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Speaker 1: and out of positions. You're looking at lots of multiple

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Speaker 1: stocks instead of thinking about index funds. You're falling into

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Speaker 1: the trap of fomo. Right, You're starting to fear missing out,

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Speaker 1: and so you're making very reactive decisions. So you know,

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Speaker 1: if you're setting in forgetting it and maybe evaluating every

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Speaker 1: six to twelve months, you're probably on the right track.

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Speaker 1: But if you're looking at that stock market every day

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Speaker 1: and buying and selling on a regular basis, you're probably overconfident.

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Speaker 3: So this conversation is a giant exercise in confirmation bias.

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Speaker 3: For me, I've spent I don't know three decades telling

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Speaker 3: people you can do it yourself. But there's an important caveat.

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Speaker 3: You have to have a plan, you have to be discipline,

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Speaker 3: and when things start to head south, you must manage

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Speaker 3: your own behavior. Is that oversimplifying advice to do it

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Speaker 3: yourselfers or is that more or less a path to

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Speaker 3: success that you've watched in your career.

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Speaker 1: No, I think it's a beautiful assessment of how things

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Speaker 1: should be. Really, there are two things you need to

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Speaker 1: watch out for as a young person. The first is

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Speaker 1: your own behavior, which we just talked about, and then

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Speaker 1: the other thing is when you go from accumulation to decumulation.

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Speaker 1: That's a hard stop in my brain. That's when you

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Speaker 1: should really say, Okay, do I need some professional help.

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Speaker 1: But when you're a young person, those are really the

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Speaker 1: two red flags, and I think if you can keep

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Speaker 1: those under control, doing it yourself is very reasonable.

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Speaker 3: You know, we've built a firm over the past thirteen years,

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Speaker 3: and perhaps the biggest surprise to me has been how

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Speaker 3: difficult it's been to get people with plenty of money,

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Speaker 3: lots of runway they'll never outlive their cash, to actually

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Speaker 3: turn around and spend the money when they want, whether

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Speaker 3: it's taking the whole family back to the old country

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Speaker 3: to see where they came from, or buying a vacation

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Speaker 3: property or a boat, or I got a phone call

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Speaker 3: from somebody who wanted to buy a ferrari. And I'm

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Speaker 3: not exaggerating. He could buy a ferrari every month for

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Speaker 3: the rest of his life and never run out of money.

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Speaker 3: And so it's shocking to me how challenging that is.

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Speaker 3: Why is that deccumulation phase. Why is that spending the

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Speaker 3: money that's there to spend, even if it's setting up

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Speaker 3: trust for your kids and grandkids or giving it to philanthropy.

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Speaker 3: Why is that so challenging?

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Speaker 1: So I have this theory and I call it escape velocity.

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Speaker 1: If you listen to personal finance gurus. If you sit

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Speaker 1: there and debate the four percent rule and talk about

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Speaker 1: safe with your all rates and all those kind of things,

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Speaker 1: you're under the assumption that the whole idea behind building

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Speaker 1: a net worth is to have enough money so then

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Speaker 1: you can decumulate during retirement. I think that's all false.

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Speaker 1: I think actually all of our talk of safe with

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Speaker 1: your all rates and net worth, all it is is

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Speaker 1: it's the amount of money that gives you enough courage

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Speaker 1: to walk away from the life you don't want and

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Speaker 1: start living the life you do want. Believe it or not,

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Speaker 1: I don't even think that amount of money has anything

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Speaker 1: to do with what you're going to spend. It's the

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Speaker 1: amount of money that gives you the courage. What we

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Speaker 1: tend to find is when people finally get the courage

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Speaker 1: to leave the life that they're living that they don't

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Speaker 1: like and then live the life they want to live,

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Speaker 1: it's just actually not that expensive. Like you can do

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Speaker 1: a lot of the things you love without spending much money.

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Speaker 1: And one thing which is not that expensive. The other

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Speaker 1: thing is we actually like having a safety net. People

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Speaker 1: like having a lot of money in the bank, even

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Speaker 1: to the extent that they will pass up on things

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Speaker 1: they say they want to do because that security and

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Speaker 1: that good feeling, that identity of having a lot of

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Speaker 1: money in the bank actually serves them. So a lot

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Speaker 1: of people see this as negative, and I agree in

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Speaker 1: a sense. This idea of working so hard and accumulating

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Speaker 1: this much money and that not spending it sounds bad

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Speaker 1: at the forefront, But I'll tell you, I know lots

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Speaker 1: of happy people who are underspending, and yet they're still happy.

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Speaker 1: They're still giving to charities, they're still going on great vacations.

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Speaker 1: They're just not spending everything down. And one thing I

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Speaker 1: think we need to come to peace with is maybe

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Speaker 1: that's okay. Maybe it's fine if you die and you

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Speaker 1: bequeath tons to either of your kids or charity, and

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Speaker 1: that's just is what it is.

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Speaker 3: So I have a family member I won't mention their name,

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Speaker 3: but they're in the fifties and I don't know. Maybe

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Speaker 3: the portfolio is ten million dollars and I can't get him.

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Speaker 3: He's constantly asking me about convertibles, and he sees the

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Speaker 3: cars I drive, which are not crazy expensive but a

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Speaker 3: lot of fun. I can't get them to spend twenty

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Speaker 3: five or fifty thousand dollars on a convertible that he's

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Speaker 3: jonesing for and will have no impact on his net worth.

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Speaker 3: How do you advise a person like that?

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Speaker 1: You know, I just had a conversation with Jane Chatsky,

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Speaker 1: who wrote a book that's forthcoming soon called The Forever Paycheck,

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Speaker 1: and she makes, you know, a brilliant point. With some

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Speaker 1: of these people. What you have to do is set

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Speaker 1: up a paycheck so they feel like they have money

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Speaker 1: that they either can spend or have to spend. See

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Speaker 1: you take someone with a networth a ten million or

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Speaker 1: eleven million. The idea is to structure their assets in

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Speaker 1: such a way that they feel like they're getting a

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Speaker 1: paycheck every year and they have the freedom to spend

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Speaker 1: that paycheck till it's at zero.

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Speaker 3: So you bond portfolio or something like that that just

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Speaker 3: kicks out regular yields.

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Speaker 1: So you can do it in so many different ways.

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Speaker 1: You can do it with annuities, You can do it

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Speaker 1: with a mix of annuities, their social Security muni bonds,

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Speaker 1: what have you. Or you can even go the other way.

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Speaker 1: We is, have your advisor say I'm just going to

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Speaker 1: liquidate this much equities every year, where regardless of where

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Speaker 1: the market is, and we're going to call that your paycheck.

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Speaker 1: It's funny. This is not a math problem. This is

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Speaker 1: a brain problem. And so the question is how can

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Speaker 1: you set these things up? A good friend of mine

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Speaker 1: I made the joke. He said, well, I have something

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Speaker 1: called the fun bucket, and I put as much money

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Speaker 1: as I think I can spend every year in the

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Speaker 1: fun bucket, and whatever is left, I either spend it

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Speaker 1: or I have to donate it to a political candidate

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Speaker 1: I hate. And that is the trick he plays on

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Speaker 1: himself to make sure he spends it.

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Speaker 3: The fun bucket. I love that idea. So you mentioned

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Speaker 3: the transition from accumulation to decumulation. What are the other

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Speaker 3: big transitions retirement, inheritance, selling a business, divorce where the

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Speaker 3: people who are doing it themselves might be most vulnerable.

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Speaker 1: So you know, I think they're really two situations. One

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Speaker 1: is where emotions play a big role, right, and so

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Speaker 1: for some people retirement, they just get very emotional. They

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Speaker 1: don't make great decisions. A family member dies and they

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Speaker 1: get an inheritance, and you tend to make emotional decisions,

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Speaker 1: especially at the beginning. So one is any place whether

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Speaker 1: it's a divorce or a death or even retirement where

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Speaker 1: you feel exceedingly emotional. This is going to be different

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Speaker 1: for each person. And the other time where I think

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Speaker 1: it's really important is when the room for error is

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Speaker 1: small and so for instance, and this is why I

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Speaker 1: always say, when we go from accumulation to decumulation, we

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Speaker 1: have to be really thoughtful because you might be depending

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Speaker 1: on healthcare subsidies right and if you decumulate incorrectly, you

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Speaker 1: may find that those subsidies are no longer there, or

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Speaker 1: you might be making complex roth conversions, and if you

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Speaker 1: do that wrong, it can really mess you up and

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Speaker 1: put you in different tax brackets. Or if you have

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Speaker 1: a disabled child and so you're starting to plan for

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Speaker 1: the fact that you're not going to have any income anymore,

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Speaker 1: the room for air can be very small in those situations.

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Speaker 1: And so that's an indicator that a financial advisor a professional,

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Speaker 1: even if all they do is look over your work,

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Speaker 1: is important. We tend to forget like hiring a financial

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Speaker 1: advisor doesn't mean you hire them and they do everything

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Speaker 1: for the rest of your life. It's a continuum. You

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Speaker 1: can hire a financial advisor to look over your work.

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Speaker 1: You could pay them hourly, they can give you some

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Speaker 1: recommendations and then you can carry it all out yourself.

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Speaker 1: So there's really a continuum of how we use financial

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Speaker 1: advisor in the first place.

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Speaker 3: Interesting, So you mentioned several behavioral mistakes. I'm curious what

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Speaker 3: do you see as the most common behavioral mistakes from

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Speaker 3: young DIY investors and what do you see amongst the

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Speaker 3: more financially sophisticated investors.

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Speaker 1: I think that in the young investors it's definitely an

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Speaker 1: overconfidence issue. And again we talked about this a little bit.

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Speaker 1: It's the seeking alpha when they should be concentrating on beta.

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Speaker 1: It's this idea that I know better than everyone else,

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Speaker 1: and maybe they haven't been around the block enough times

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Speaker 1: to see a stock go to zero. You know, you

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Speaker 1: see this all the time in alternative assets too. We're

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Speaker 1: experiencing this right now with multifamily syndications. For years, people

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Speaker 1: were telling me and everyone else, you know, multifamily syndications

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Speaker 1: are the way to go very little work, very little risk.

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Speaker 1: And what are we seeing now. We're seeing some of

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Speaker 1: these go to zero, literally, people losing everything. It's confidence

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Speaker 1: and a lot of times it's seeking alpha. Now, as

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Speaker 1: you get older, believe it or not. I think the

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Speaker 1: bigger problem and really mature DIY investors is you get

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Speaker 1: complacent like the world changes. And I, for instance, I

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Speaker 1: am a big believer in index funds, and I want

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Speaker 1: to believe that index funds will be able to ride

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Speaker 1: that wave for the next fifty or seventy five years.

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Speaker 1: But I'm also open to this idea that we can

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Speaker 1: become complacent and we have to keep our eyes open

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Speaker 1: and we have to look for how the world is changing.

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Speaker 1: Will index funds be the way to go in fifty years.

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Speaker 1: I don't know. I'm going to keep paying attention. That

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Speaker 1: doesn't mean I'm changing things. That doesn't mean I'm reacting

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Speaker 1: to little changes in the market. But I'm keeping my

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Speaker 1: eyes open, especially as I get older and I'm in decumulation.

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Speaker 1: We're really talking about risk modification. So I'm not as

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Speaker 1: worried about returns as I used to be. I'm worried

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Speaker 1: about losses. I want to modify my risk in such

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Speaker 1: a way that I don't have those really deep losses anymore.

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Speaker 1: Whereas you know, if my money returns four percent one year,

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Speaker 1: eight percent, one year six percent, but the market does

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Speaker 1: seven or seven point five I might be okay with that.

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Speaker 3: Really interesting last question. As a physician, you compare good

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Speaker 3: advice to a diagnosis. What should the diagnostic process look

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Speaker 3: like before someone either recommends a portfolio or recommends a

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Speaker 3: change in course of financial behavior, tell us what that

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Speaker 3: looks like.

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Speaker 1: So when a person comes into the office and has

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Speaker 1: a medical problem, I can assess that medical problem and

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Speaker 1: give them a quick treatment and send them off. And

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Speaker 1: that's very transactional, and it solves the problem for the moment,

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Speaker 1: but doesn't solve the greater problem. Remember I talked about

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Speaker 1: this idea, the biocyclesocial model. We need to put a

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Speaker 1: person in the context of who they are, who their

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Speaker 1: family is, what their stressors are, and what their goals are.

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Speaker 1: So when you walk into a financial advisor's office and

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Speaker 1: you're trying to assess is this the right financial for

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Speaker 1: you or not? You know, one of the first questions

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Speaker 1: they should be asking you is tell me about your goals.

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Speaker 1: What are your dreams. It shouldn't be what is your

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Speaker 1: goal net worth? It shouldn't be like, how many millions

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Speaker 1: do you want to have by the age of fifty

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Speaker 1: or fifty five, Because that's only one of many questions

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Speaker 1: The bigger question is you know, what do you want

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Speaker 1: to accomplish, what's important to you, Who are the important

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Speaker 1: people in your life, and what are the must haves.

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Speaker 1: And once you get past then that, that's when we

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Speaker 1: can start looking at your specific financial goals. What are

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Speaker 1: the trade offs? Is retirement important to you or maybe

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Speaker 1: you're willing to work longer to enjoy life more. Now,

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Speaker 1: all of those are bigger questions. It's equivalent to the

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Speaker 1: biopsychosocial model. We really have to put people in the context.

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Speaker 1: And any good advisor is going to put you in

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Speaker 1: the context of your life and try to stand on

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Speaker 1: that balcony with you, look across the fields of your

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Speaker 1: future and try to help you plot out that best life,

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Speaker 1: not just financially but generally.

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Speaker 3: Really really interesting stuff. So to wrap up, if you're

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Speaker 3: a do it yourself investor, there are a handful of

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Speaker 3: mistakes you need to avoid when you're younger. You have

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Speaker 3: to be aware of overconfidence and alpha chasing. When you're older, complexity,

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Speaker 3: changes in life, changes in the world might lead you

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Speaker 3: to seek additional help. You can do it yourself if

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Speaker 3: your disciplines, have a plan and manage your own behavior,

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Speaker 3: but there are times when you might need to various

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Speaker 3: types of help. Lots of it is available across all

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Speaker 3: sorts of different price points. If you need assistance, go

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Speaker 3: find it. I'm Barry Redults, you're listening to Bloomberg's At

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Speaker 3: the Money, Can I