10 Things Every Stock Market Investor Needs to Know

Summary

Ask The Compound – "10 Things Every Stock Market Investor Needs to Know"

Podcast Summary
Hosts: Ben Carlson & Duncan Hill
Date: December 17, 2025
Theme: Essential knowledge, mindsets, and frameworks for everyone entering the stock market or looking to improve their investment approach, with practical advice, entertaining banter, and a range of listener-submitted questions.

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Episode Overview

This episode is a comprehensive and accessible guide to the foundational truths of stock market investing. Ben and Duncan take audience questions on the most common mistakes new investors make, the 10 non-negotiable lessons for investing in stocks, understanding market cycles, the role of bonds in retirement, the 15 vs. 30-year mortgage debate, and more. The tone is informal yet highly informative, peppered with personal anecdotes, friendly debates, and a dash of pop culture.

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Key Discussion Points & Insights

1. Simple Portfolio Fixes and Mistakes Most Investors Make

(03:11–07:13)

• Automate & Simplify:
  Ben emphasizes automating contributions, asset allocation, and rebalancing.

  “The less you look, the less you do, the better your results are going to be.” — Ben Carlson [03:31]

• Portfolio Perspective:
  Rather than focusing on each investment individually, view your holdings as part of a whole.

  “Think about your investments in context of your entire portfolio, not in isolation.” — Ben [04:05]

• Aggregation of Accounts:
  Ben has consolidated accounts to Schwab & Fidelity for easier oversight.

• Track Performance (Benchmarking):
  Manually track how much you’ve contributed each year, what your returns are, and compare against benchmarks.

  “You should have some sort of benchmark…are you actually doing better than the market or could you just index the whole thing?” — Ben [05:32]

• Define Your Time Horizon:
  Know if your investment is a trade, a buy-and-hold, or something else before you invest.

• Save More Each Year:
  Ben’s data shows steadily increasing your savings rate trumps chasing higher returns.

  “Saving more money can improve your performance better than investment returns.” — Ben [06:28]

• Pay Off Credit Card Debt First:
  Duncan reminds listeners that carrying expensive debt undermines any market gains.

  “If you’re investing in Robinhood but carrying a balance on credit cards, that doesn’t make a lot of sense.” — Duncan [07:40]

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2. 10 Things Every Stock Market Investor Needs to Know

(08:28–15:58)

Ben delivers a rapid-fire, Letterman-style breakdown—complete with illustrative charts—of the core principles every equity investor must master:

1. Stocks Mostly Go Up, But Sometimes They Go Down
   Volatility is normal and expected.

2. Returns Are Lumpy
   Long stretches of stagnation (e.g., 2000–2009), followed by meteoric runs.

   "You don’t get these numbers just going up on a stair step approach..." — Ben [09:04]

3. No Such Thing as Average
   Annual returns rarely match the long-term averages.

4. Time Horizon Matters
   The longer you invest, the better your odds—market is a compounding machine.

5. Stock Market Can Be a Basket Case
   Periods of extreme daily swings, as in March 2020, are rare but happen.

6. Don’t Be Afraid of All-Time Highs
   New highs happen often during bull markets; not always a precursor to a crash.

7. Prepare for Crashes
   Three 50%+ drawdowns since 1950; expect two to three such crashes in a lifetime.

   “Charlie Munger says you should be prepared for two or three 50% crashes in your investing lifetime.” — Ben [12:38]

8. Bear Markets Are Normal
   Expect 20–35% drawdowns every five to six years.

9. Stock Market is a Compounding Machine
   $10,000 in 1980 would be worth $2 million+ today, compounding is powerful.

10. You Own Corporate Profits and Innovation
    Owning stocks = owning a share of real businesses, with their profits and growth.

    “It’s really magical that this system even exists that allows us to invest beside these corporations.” — Ben [15:44]

Notable Moment

Ben and Duncan discuss the difference between stock market drawdowns and individual stock collapses, reminding listeners that while markets as a whole recover, individual companies may not.

“There’s a difference between investing in a crash in the stock market versus a stock...Some stocks do come back. A lot of them don’t.” — Ben [17:22]

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3. Cyclical vs. Secular Bull/Bear Markets Explained

(17:54–21:31)

• Secular: Long-term trend (decades), e.g., 1982–1999 bull.
• Cyclical: Short/intermediate (months to a few years); can occur within secular moves.

“Cyclical is short term...Secular is long term...A short-term bear within a long-term bull, or vice versa.” — Ben [18:25]

• It's hard to identify these cycles until after the fact. Ben notes only about six major secular markets in the last century.

“We argue about it after the fact. You don’t know it in the moment.” — Ben [19:56]

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4. Are Bonds Now a Prudent Substitute for Cash in Retirement?

(23:37–25:54)

• With interest rates now higher, Ben agrees bonds (especially high-quality, short/intermediate-term) make sense as part of the “safe” bucket for retirees’ withdrawal strategies.
• No one-size-fits-all approach: “I don’t think that there is a perfect retirement withdrawal strategy...it’s so dependent on different assumptions and variables and flexibility and needs.” — Ben [25:17]

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5. Should Young Buyers Choose a 15- or 30-Year Mortgage in Today’s Higher-Rate Environment?

(27:02–31:17)

• Example: On a $500,000 mortgage at current rates (~6.3% for 30-year, ~5.75% for 15-year).

  • 15-year means much higher monthly payment but over $360k saved in interest vs. 30-year.

• Best Approach for Flexibility:
  Ben suggests opting for the 30-year mortgage and making extra principal payments whenever possible rather than being locked into higher payments.

  “Take out the 30-year fixed loan...But you can always make extra principal payments on the loan. This strategy gives you way more flexibility and doesn’t lock you into the higher payment.” — Ben [30:20]

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Notable Quotes & Memorable Moments

• On simplifying portfolios:
  “I'm trying to simplify as much as I can because it's so much easier to understand the entire picture of your investment plan when everything is under the same roof.” — Ben [04:33]

• On handling bear markets:
  “You either diversify, or you're just a psycho and you can sit through these things...” — Ben [14:22]

• On new investors’ attitudes:
  “To me, the main one is just...drawdowns are not something to be afraid of...if you have a decent time horizon, then it's actually something that can be a good thing for you.” — Duncan [16:37]

• Star Wars Pop Culture Beatdown:
  Lighthearted debate about the merits (or lack thereof) of Star Wars, with Ben provocatively declaring:

  “One of my hot takes is it's the most overrated movie of all time.” — Ben [22:21]

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Timestamps by Topic

| Segment | Start | End | |--------------------------------------------|-----------|-----------| | Automate and Portfolio Simplification | 03:11 | 07:13 | | Top 10 Things Investors Should Know | 08:28 | 15:58 | | Individual Stocks vs. Broad Market | 16:15 | 17:47 | | Secular vs. Cyclical Bull/Bear Markets | 17:54 | 21:31 | | The Bond/Cash Retirement Debate | 23:37 | 25:54 | | Mortgage: 15 vs. 30 Years | 27:02 | 31:17 |

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Overall Tone and Takeaways

Ben and Duncan manage to make fundamental investing principles feel fresh and relatable. The discussion is practical, sometimes counterintuitive, and deeply rooted in actual investor experience—as well as humility about market unpredictability. The hosts are approachable, funny (the Star Wars sidebar brings levity), and self-deprecating, but never lose sight of what matters: helping investors build better financial habits, resist behavioral pitfalls, and keep a long-term, holistic view.

Listener Value:
Ideal for both novice and intermediate investors, this episode is a handbook of "what everyone wishes they'd known sooner"—delivering actionable advice, context for why markets behave the way they do, and some much-needed humor for the rollercoaster that is investing.

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Key Actionable Advice:

• Automate everything possible (savings, investments, rebalancing).
• Focus on the portfolio, not individual bets.
• Benchmark your performance.
• Know and respect your time horizon.
• Save more, early and often—compound interest does the heavy lifting.
• Be mentally and strategically prepared for bear markets and crashes.
• Think of stocks as owning pieces of businesses.
• Embrace flexibility, whether in retirement withdrawals or mortgage strategies.

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Contact/Community:
Questions for future episodes? Email: askthecompoundshowmail.com
Live chatters on Twitter & YouTube contribute further education and community vibe.

Next Episode:
Ben promises a holiday sweater, more questions answered, and the same no-BS financial wisdom.

Transcript

[Ben Carlson]

Welcome to an all new episode of Ask the Compound, the show where you ask and we answer the questions. I am Ben Carlson. Let's say you're buying a new house mortgage rates are way higher than they were just a few years ago. So what makes more sense? 30 year fixed rate mortgage or a 15 year mortgage with a higher monthly payment but lower lifetime interest costs? I'm going to answer this question and more on today's show. Let's do it.

[Duncan Hill]

Alright.

[Ben Carlson]

Our email here is askthecompoundshowmail.com welcome back to our usuals the live stream watching on Twitter. On today's show we're going answer questions straight from our Compound audience about some simple portfolio fixes. What everyone needs to know before investing in stocks. What's the difference between a cyclical and secular bear market or bull market. How bonds can impact your retirement spending plan. And helping a young couple decide between a 15 or a 30 year mortgage. But first, our show today is sponsored by Rocket Money. Listen, we're closing in on New Year's resolution time, right? Duncan, can you have one?

[Duncan Hill]

I have some.

[Ben Carlson]

Wear some more hats. For many people, that means getting your finances in order. Rocket Money is a great way to do that. Rocket Money is a personal finance app that help find and cancel your unscriptions, monitors your spending and helps lower your bills so you can grow your savings. Rocket Money shows you all of your expenses in one place. You can check on their desktop, on the mobile app, including subscriptions you forgot about. If you see a subscription you no longer want, Rocket Money will help you cancel it. Rocket Money has saved users $2.5 billion, including over 880 million in canceled subscriptions alone. Their 10 million members save up to $740 a year when they use all the app's premium features. Cancel your unwanted subscriptions and reach your financial goals faster with Rocket Money. Go to RocketMoney.com ATC today. That's RocketMoney.com ATC or just download the app. All right.

[Duncan Hill]

You know, I see Dave talking about Christmas sweaters in the chat. I think giving us a hard time for not wearing them. I just want to point out I am wearing a Christmas shirt. It's got Stitch on it.

[Ben Carlson]

Okay. So Stitch was very big at Disney when I was there. That's a new thing. My daughter, that's all, my youngest daughter, that's all she wanted to buy was Stitch stuff.

[Duncan Hill]

That's a fun one.

[Ben Carlson]

Okay. I never saw the movie.

[Duncan Hill]

I'm a bigger fan of Wall E personally.

[Ben Carlson]

All right, next week, Dave, I Will be in. I will be in a holiday sweater. You got it. You. You mark it down next week.

[Duncan Hill]

I've got one I can pull out too. Speaking of, a lot of people are looking for stocking stuffers this time of year.

[Ben Carlson]

What do you got?

[Duncan Hill]

I think you still got time for this one. Anyone wanting to. Duncan to give your. To give your kids something useful for the holidays.

[Ben Carlson]

You can also buy the. You can buy the Kindle version too.

[Duncan Hill]

Look how thin it is. They can read it really quickly. It's a good book.

[Ben Carlson]

And our compound hats are back too.

[Duncan Hill]

It's true. I don't know if you can get bad in time. I'm not sure. But I bet you can get the book. And then also there's this one. This is another fun one from yours truly from Ben. This one is a little more adult. The first chapter has a lot about goat anatomy in it. So maybe not for little kids.

[Ben Carlson]

Fun story. They should make that into a movie. It's the guy who. Yeah. Said if you cut into goat testicle. Nevermind. All right, let's do a question.

[Duncan Hill]

I think you're probably the only person to write about, write about that in a finance book.

[Ben Carlson]

There they talked. There was talk that Matt Damon was going to play that guy in a movie and it never, never happened. But I would like to see it. Okay.

[Duncan Hill]

Yeah. Interesting story. Terrifying, but interesting. All right, up first today we got a question from Jeff. Here's a short one for Duncan to read and Ben to answer. What's something that's relatively simple that most investors don't do?

[Ben Carlson]

See, Jeff knows how to get on here because short questions. That was perfect.

[Duncan Hill]

Yeah, Love it.

[Ben Carlson]

All right, my kind of question. I think I've written plenty of blog posts about this over the years. Probably I think the biggest one for most investors is just to automate and then get out of their own way. You automate your contributions, what you invest in, your asset allocation, how often you rebalance, all that stuff. I just, I think the less you look, the less you do, the less you tinker, the better your results are going to be. I also think far too many investors, I think this is the big one, and this is especially for people who are just starting out, is that they focus on the individual investments in their portfolios, the performance of certain securities or funds or even asset classes, as opposed to looking at the investments as one big bucket in an overall portfolio perspective. So I think when adding any kind of investment, you should think about it in terms of how it fits within the context of your entire Portfolio, not the merits of itself on its own. Right. One of my bosses taught me this back in the day. We look at all these different fund providers and portfolio managers and funds, and it could have been a great fund on its own merits, but if it didn't really fit with what we were trying to do and make sense for the overall portfolio, it didn't matter. I think one of the ways that I've been personally trying to simplify my finances is by doing a better job of aggregating all my accounts in one place. Someone asked a question a couple weeks ago about why doesn't bend like HSAs. I have too many accounts. So I had a 403B from my wife's previous employer sitting there in the account. It was fine, but I finally rolled it over. We have all of our retirement accounts at Schwab and Fidelity, so I moved all of my crypto and brokerage accounts to those platforms as well. So I'm just, I'm trying to simplify as much as I can because it's so much easier to understand the entire picture of your investment plan when everything is under the same roof. So I've been doing that a lot. I think every investor should know how they performed in a given year or a given period of time, especially if you're actively managing your money. And I don't always trust the brokerage platforms explicitly on some of the different timeframes they're using. So I think if you have a nice back of the envelope, how much money you put in, how much money you have now, I think again, I think you should have some sort of.

[Duncan Hill]

Like, should you manually track this or something?

[Ben Carlson]

Well, I think you should have some sort of benchmark. Listen, I take here at the end of each year, here's my starting portfolio value, here's how much money I put in for contributions. Here's, here's my ending portfolio value, right? And there's, there's some time weighted stuff in there, but just back of the envelope, take away the contributions, what's the differences, your investment gains or losses, how did you do? Right. And if you're actively managing your portfolio over some benchmark, are you actually doing better than the market or could you just index the whole thing? Right. And then I think the other really simple one is just defining your time horizon before making an investment. And this is really hard because sometimes you make an investment and it falls out of bed. Sometimes you make an investment and it goes to the moon. So I think you have to know, is this a trade? Is this A buy and hold position. Is this something you plan on holding for a decade, maybe two to three years? And then finally, I think the, the easy one that most people don't pay enough attention to is just save a little more money each year. And I say, I always say that saving more money can improve your performance better than investment returns. So, Daniel, let's do a chart on here. I created this simple table using historical returns, and I said, what if we had a 100% stock portfolio or an 80, 20 or 6040 or a 40 60, and I looked over 25 years and I assumed you saved 10%, 15% or 20% of your salary. I used median wages, which is like $80,000, and I think on my table here, $80, but that'd be a little low. And if you look here, going to an 8020 portfolio, but saving 15% as opposed to 10% gives you more money than having 100% in stocks. So I think over especially long timeframes, just saving a little bit more each year can actually have you take a less. Take a little less risk in your portfolio, but get you further because you save more and it compounds. So that's my spiel. I'll get off my soapbox now. What do you think? What did I miss?

[Duncan Hill]

No, I mean, makes sense to me. I think just from a personal finance standpoint, the biggest thing that I feel like most investors probably do this, but a lot of young people don't pay off credit cards. And it's just something that we've talked about ad nauseam on the show. But yeah, like that.

[Ben Carlson]

That's the first thing that's going to.

[Duncan Hill]

Eat away any gains you're making in the market if you're carrying a big balance on credit cards.

[Ben Carlson]

Yes. And I get why people have to do it sometimes, right. If you don't have a backstop or whatever. But then that's your one financial goal.

[Duncan Hill]

I'm saying if you're investing money in like your Robinhood or public account and you're carrying a balance on credit cards, that doesn't make a lot of sense because you're probably not beating 30% interest on your credit card.

[Ben Carlson]

Compounded that I agree with. Yes. You do not carry a balance and then you divert all savings until you pay that credit card balance off. Right. What's the point of it? Yeah. Yep. All right, let's do another one.

[Duncan Hill]

Also, before we move on, it just occurred to me that half of our audience is audio only, and I just did the like pitch for your books by just showing Them, but. So if you're listening, Ben's books that I was promoting are Saving for Retirement and Don't Fall for It. A Short History of Financial Scams. So sorry.

[Ben Carlson]

Biggest fan, man. What a guy.

[Duncan Hill]

Yeah, but I just, I mean, we have a lot of listeners. They couldn't see what I was doing. All right, up next we have a question from Andy.

[Ben Carlson]

Another short one.

[Duncan Hill]

I know, I love it. What are the top 10 prudent indicators a retail investor needs to know before stepping into equities?

[Ben Carlson]

I looked at this. This was way, way down the list of our doc way back in the day. We still have, I'd say, hundreds of questions from people that we haven't answered yet. And we're sorry, we're trying to get to them all, but we have so many coming in, we can't get to them all. I am a night owl, so I used to watch a lot of late night shows in the pre streaming era. Right. You couldn't watch them on YouTube clips back then because YouTube didn't exist. So I was a huge Letterman guy growing up. So put my Dave Letterman up here. This is one of my favorite ones. He did the top ten numbers one to ten. I would have put seven. Number one. Sorry, Dave, that's just me. That was my football number. So I thought of this as like a top 10 list. That's what this reminded me of. So I feel like I could have gone at least 20, 25 deep on this. But I'm gonna. I'm 10 and I got some charts. I'm gonna fly through these. Luckily the production guys in the back end, Daniel, are Ken keeping up here. So number one, stocks mostly go up, but sometimes they go down. So try here. This is. I'm going to use some charts from exhibit A and Y charts in here. And remember, if you're an advisor, check out exhibit a for advice.com for some of these charts. This just shows even when stocks go up, a lot of times they go down during the year. So you just have to be okay with volatility. Number two, chart off, please. Nope, chart off. We're not going to have a chart for everyone. Returns are lumpy. So we went nowhere. For a decade from 2000 to 2009, the S&P was down 9% in total for a whole decade. Since 2010, the S&P is up almost 800%. So you don't get these numbers just going up on a stair step approach, right? It can drop, it can go up higher to the moon. It. It's not normal. It's lumpy. Okay, number three, there's no such thing as average. Now give me a chart on Daniel. I love this chart. Average up here, stocks are up 21%. Average down year, they're down 13. So there is a wide range from year to year. You don't get 8, 9, 10%. That rarely ever happens. Okay. There's no thing as average in the stock market. Chart off, please. Number four, your time horizon matters. Chart on. All right, Another one from exhibit A. The odds increase. I've used this one a million times. The longer you invest, the better your odds of seeing a gain. The stock market is the best casino there is because the longer you stay invested, stay in there, the better your chances of gains. This is a good thing. Chart off. All right, we're halfway there. Take a breather. Good. All right, number five. The stock market can be a basket case. Let's do chart on here. This is just the daily returns in 2020 at the end, from the end of February through early April when we had the pandemic. And you can see just these massive swings. There was a. In the middle of March, the stock market was down 9 and a half percent, up 9.3%, down 12%, up 6, down 5 in consecutive days. And when we were trying to figure out what's going on, is the world going to end? Is everyone going to die? So the stock market can be a basket case. This doesn't happen all the time, but sometimes it can happen. Chart off. Number six. Don't be afraid of all time highs. Chart on, please. Another one from exhibit A. This shows the number of all time highs over the years. And you can see it's marked out on the chart. And obviously these things cluster more in bull markets than bear markets. Duh. But there are a lot of them. And I think because the stock market went nowhere from 2000 to 2009, we didn't have a lot of all time highs. When we finally hit new all time highs again in 2013, a lot of people thought to themselves, oh, my gosh, this is it. And look what's happened since then. A ton of new highs. Just because that one all time high is going to be bad doesn't mean they all are. Most of them are fine.

[Duncan Hill]

This is something that I struggle so much with since I've been following the markets and been investing. Yeah. There's something that is ingrained in a lot of people, I guess don't study this professionally where you feel like, well, yeah, it hit a high, so now it's going to revert to the mean. And the mean is some like much lower line or something, right? When in reality the market just trends up over time over a long enough.

[Ben Carlson]

Most of the time it goes up. And listen, one of those highs again is going to be like the high before a crash, right? But guess what? Crashes are pretty rare. Which brings me to number seven. You have to be prepared for crashes. Let's do the, let's do the chart. This shows the drawdowns. This is from wide charts going back to 1950. There's been three 50% crashes in the early mid-1970s, in the early 2000s for the DOT com bubble and then the great financial crisis. Charlie Munger says you should be prepared for two or three 50% crashes in your investing lifetime. I think that's a pretty good, pretty good bet to happen. Now a lot of people thought they were going to happen all the time because we had two of them in a decade. But this is just something you have to be prepared for.

[Duncan Hill]

How quickly did that worst drawdown happen? Around 2009 or 10?

[Ben Carlson]

Well, that was a long one. That was from October 2007 through March of 2009. So we're talking 18 months.

[Duncan Hill]

It just looks very steep there. I couldn't tell if that was like a month.

[Ben Carlson]

That's just a compressed time frame. But that was living through that. It felt like it was never going to end. It felt like stocks just literally went down every day. We had a few countertrend rallies, but for the most part it felt like the stock market was just going to go down forever.

[Duncan Hill]

I was in college and not paying attention to the market, but yeah, so like every day the market just went down more bas for a long period of time.

[Ben Carlson]

Even after all the crazy stuff of the fall of 2008 when, you know, Lehman was falling and Bear Stearns went out, I guess that was in March, but all that stuff happened and even a few months later we were still falling. It was, it was pretty nuts. All right, now it's not just crashes. Bear markets are normal. Let's do the next chart. Number eight, another one from exhibit A. This shows like, you know, the average bear market is about 35%. You can see there are those huge crashes on there. But there's the run in the middle bear markets too, where you just fall 22%, 28%, 27%. Like you have to be prepared for those too. Just these run of the mill, call it every, I don't know, five to six years on average. That happens. All right, chart off. I Think I'm done with my charts here for this question.

[Duncan Hill]

So just to follow up on that, though, how. Talking about preparing for a bear marketer for a crash, I mean, how. How do you prepare with keeping, you know, good market exposure?

[Ben Carlson]

What do you mean, me personally?

[Duncan Hill]

I'm just saying, like, what, what would your, your advice be to someone who says, okay, so how do I prepare?

[Ben Carlson]

Okay, two things. One, you just have the intestinal fortitude to sit through it and sit on your hands and not do anything, not sell when they're down. Two would be you have some sort of dry powder that could be in the form of cash or bonds, right? So you're gonna rebalance into the pain or you have savings in the future. Right. That's how I made it through 2008. I was saving, I was putting more money in, so I didn't care as much because I knew more money was going in. So it's one of those things. So you either diversify if you have a more mature portfolio so you don't have all of your money exposed, or you're just a psycho and you can sit through these things. And some people are psychos about it, right? I can handle it. I've done it before. Right. So I think that's it. It's dry powder, or you're a psycho, or you have some sort of tactical strategy that sort of gets you out and is behaviorally. So we talked about that a few weeks ago. Now, the good thing is that I think, number nine, you mentioned the stock market almost goes up. I'd say that the stock market is a compounding machine. So $10,000 invested in the S&P in 1980, no taxes, no fees, all that stuff, caveats aside, would be worth more than $2 million today. Again, $10,000 in 1980, $2 million today. It's an insane compounding, right? And that leads me number 10. I just. I think sometimes people forget the stock market allows you to own a share of corporate profits and innovations, right? You're owning all of these companies. If you're invested in the stock market, you're part taking part in their cash flows, their sales growth, their dividends that they pay out, all the innovations and the things that they do. It's really magical that this system even exists that allows us to invest beside these corporations. Right? So that's my 10 things. I could have come up with way more, but yeah, yeah.

[Duncan Hill]

Do you feel like that's had a negative impact on the market that so many young people now just think of it as Kind of like trading, you know, just trading numbers on a screen instead of being an owner in a company or you know, like when they buy Apple stock, their shareholder in Apple and that means something. Do you think that's been lost?

[Ben Carlson]

Probably by some people? I do think that's, that's the right mentality though. Oh, this is interesting from Dave in the chat. He said, I want to ask RW employees who are not CFAs or CFPs their top two to three lessons working at RWM. Duncan has become really pretty sharp on this. So what have you learned about investing by coming in here? Being a non investing person, I mean, a lot.

[Duncan Hill]

The main one is just to. For someone who is relatively young, like myself, I'm 38. But that drawdowns are not something to be afraid of. That if you're going into retirement and the market crashes, I get why that's scary and bad. But yeah, if you're someone who has a decent time horizon, then it's actually something that can be a good thing for you to be loading up as prices are falling. That's probably one of the biggest things that you guys have.

[Ben Carlson]

Really the hardest counterintuitive thing to realize. Right? Right. That it's like the store, when something goes on sale, it's actually a good thing.

[Duncan Hill]

Also, this one dovetails nicely with what you were just saying about the market going up over time. Individual stocks, a lot of them end up not existing in like 30, 40 years. Right.

[Ben Carlson]

Some of them crash and don't come back. There's a difference between investing in a crash in the stock market versus a stock. Right. Like Citigroup and AIG. They didn't come back from the 2008 crisis. They crashed and never came back. And there's, there are a lot of stocks. Some stocks do come back. A lot of them don't.

[Duncan Hill]

That was one of my biggest mistakes when I first started investing was buying a bunch of stocks that had seen massive drawdowns and being like, they'll go up over time. Right. That's how it works. Wait, and then. Yeah, they never, they never did.

[Ben Carlson]

So. Yeah. Right. All right, we got another one.

[Duncan Hill]

Okay, up next, we got one that came from the comments on YouTube.

[Ben Carlson]

I think this was in the comments last week.

[Duncan Hill]

Yeah. So Frederick says, what does the word secular mean when used in front of bull or bear market?

[Ben Carlson]

All right. The show last week with Yurian Timmer, who was a great guest we've had on twice now, and people loved him. Everyone in the comments was really, he's, he's great. You mentioned he, he's not one of these people that comes in and sounds like a know it all. He knows a lot of stuff, but he doesn't sound like a know it all, which is I think a great, that's a great way to, to behave like the people who, who know a lot of stuff but then pretend like they're smarter than you. That is always kind of off putting me.

[Duncan Hill]

Right. He's also just, he's super nice and it comes across.

[Ben Carlson]

Very nice guy and a wonderful cook if you look at the pictures he shares on Twitter. So we were talking about cyclical versus secular bull markets. A lot of people in the comments were trying to ask us and I think, I don't think anyone kind of got to the answer. So I figured I would help people out. So cyclical is short term or medium term in nature. Secular is long term. But here's an example in stock market terms. Okay, chart on this is the 1982-1999 bull market. This was a secular bull market. It lasted a very long time, mostly up into the right. And if you look at the move starting in 95, how it just goes to another level that it's pretty crazy. I know this isn't a long term, but still, that's a secular bull market. It's something like 18% per year for nearly two decades. All right, chart off. But there were cyclical bear markets along the way. New chart on. Most notably in 1987 when stocks crashed 34%. You also had many bear markets in 1990, 91 and then one again in 1998. Okay, so that's a cyclical bear market within the context of a second broader secular bull market. So again, a short term bear within a long term bull. Now there are also cyclical bull markets within secular bear markets. I mentioned this already. Chart on this is 2000 to 2009. That's a secular bear market. We had a lost decade. You had two crashes. But from 2003, call it to 2007 at the peak, the S&P 500 doubled and it was up like 16% per year. So that's a cyclical bull market within the context of a longer term secular bear market. Trot off.

[Duncan Hill]

Wait, how do, how do we decide where they start and finish after the fact?

[Ben Carlson]

We argue about it.

[Duncan Hill]

Okay.

[Ben Carlson]

There's no good rhyme or reason to it. We argue about it after the fact. You don't know it in the, in the. That's my.

[Duncan Hill]

I thought you were about to give me an indicator or something.

[Ben Carlson]

Are you about it, listen, I, and this is, it's, it's splitting hairs and semantics, but I think the bear market, current bull market, started in 2009. Okay. We've had secular. We had cyclical bull markets in 2020 and 2022. But now we are right back on the long term trend. Some people will say, no, no, Ben, you know what you're talking about. We had reset button twice there because I think 2020 was like the 1987 crash. Right. So anyway, it's, it's hard. So you can, Dan, you can put up the, the chart here. This is the one since 2009. So you can see it's a, the trend is still up and to the right, but we've had setbacks along the way. But to your point, it's hard to know when exactly that happens. And the funny thing is, chart off. We've only had like five secular markets over the last hundred years. So 1929, start of the Great Depression through World War II, that was a secular bear market. End of World War II through, call it 1965, 1966 secular bull market, long one. Then from 1966, 1981, ish, secular bear market. The Dow went nowhere over that 15 year period. 1982, 1999, as we mentioned, secular bull 2000, 2009, secular bear 2009 to present secular bull. What's that, six? I guess so we haven't had that many of these longer term ones. That's why it's hard to know in the. You define it after the fact. All right, so that's secular, cyclical. There we go.

[Duncan Hill]

There we go. Yeah, it was an interesting comment. People were kind of going back and forth and arguing about it. So. Nice.

[Ben Carlson]

I looked at the comments and I think people were trying to figure it out. So I figured I'd come in from the top ropes and tell people what it is.

[Duncan Hill]

Yeah. And also on that note, I should just say it's pretty cool how, how good our comments are on the show. You know, people, you know, nice and helpful and, and trying to explain things to people. So yeah, pretty, pretty cool.

[Ben Carlson]

We have a very, very knowledgeable audience. Even the people asking questions, the way that they ask the questions is very knowledgeable, like they know what they're talking about, but they want some assurance or fill in the hole. So let's do another one.

[Duncan Hill]

Yeah. Oh, I'm just looking at the comments. Michael Skyros said Duncan is getting real market knowledge. Ben is a good Jedi stock market master and Duncan is his Padawan.

[Ben Carlson]

All right. Not a star wars guy. Sorry, folks. Wow.

[Duncan Hill]

Okay.

[Ben Carlson]

Well, one of my hot takes is it's the most overrated movie of all time. But we'll get into that later. Okay.

[Duncan Hill]

Wow. Wow.

[Ben Carlson]

Listen, it's a good pop. It's the biggest pop culture movie of all time. Like, in terms of what it did to future movies in pop culture. But the movie itself is not good. And if it didn't have Harrison Ford in it, it would be bad.

[Duncan Hill]

Which movie are you talking about?

[Ben Carlson]

The first Star Wars.

[Duncan Hill]

Okay. The very first.

[Ben Carlson]

Yeah, sorry. Come on, bring your booze. I know, I know. They're coming.

[Duncan Hill]

All right. Yeah. Now you're gonna get some attention in the.

[Ben Carlson]

Here's the thing. Mark Hamill is not good in the movie. He's a bad actor.

[Duncan Hill]

That is something that I feel like a lot of people. Yeah, a lot of people agree with you on that.

[Ben Carlson]

He's the main character of the movie and he's bad. Moving on.

[Duncan Hill]

In a fun kind of way, though, you know?

[Ben Carlson]

All right, it's the biggest pop culture movie of all time. I will give it that. But the movie itself, it's kind of hard to rewatch.

[Duncan Hill]

To me, it's like Harry Potter. They both do an amazing job at world building. These are really cool places to see played out in front of you and to immerse yourself in. They're fun.

[Ben Carlson]

Yes. Everyone's booing me in the comments. Yes.

[Duncan Hill]

I'm sure you're gonna. Yeah, you're gonna get ratioed on that one.

[Ben Carlson]

That's fine.

[Duncan Hill]

Okay.

[Ben Carlson]

Don't make that one a social club. All right, next question.

[Duncan Hill]

Okay, up next, we got one from Jeff. John's was a very solid and smart strategy, especially considering that interest rates were near 0% for much of his time horizon. But how about revisiting this for the current time period? With bond returns comfortably higher for the foreseeable future, wouldn't at least some bonds now be prudent versus cash? Would also be interesting to know how his strategy at the time might have worked if he owned bonds, since it sounds like he owned none.

[Ben Carlson]

Yes. So we got a lot of. This is for people who don't know what he's talking about here. A couple weeks ago, we outlined, from John, who was an old email pal of mine, he had this four year rule. We outlined the whole thing. I put the whole thing up on my blog, too. For people who wanted the longer term look at it. Some people loved it. Some people wanted to make their own tweaks to it, which I think is the point of any of these retirement Withdrawal strategies. But this is a topic a lot of people are really interested in these days. So on our Talking wealth channel tomorrow, I have a conversation with Stefan Sharkansky about his retirement withdrawal strategy and why he says it's better than the 4% rule. So I've interviewed now the guy who did the 4% rule. We've talked about the four year rule. Here's one that thinks it's better than the 4% rule. So there's no perfect way to do this. And listen, I agree with Jeff in the question here. I think bonds can be a piece of this if you have them high quality and in the right duration. We use high quality bonds for our Ritholts clients as this part of the safe bucket. And you're right with bonds yielding 4 to 5%, that makes way more sense. Now, I don't think it has to be all cash to be the safe part of your portfolio. I think bonds can be part of this shorter term and then intermediate term piece. So bonds can act as that safe part. So if you want to include high quality bonds that are relatively low in duration, not long duration, as part of your fallback or your dry powder or whatever it is, I think that makes a lot of sense. I think people who mix cash and bonds, that all makes sense to me. I don't think that there is a perfect retirement withdrawal strategy. It hasn't because it's so dependent on different assumptions and variables and flexibility and needs. And so, yeah, there isn't one right thing. That's why I like to share different ways to do it, because I think people can pull. Oh, that makes sense for me. And this makes sense for me, but that doesn't. I think that's the whole idea. I'm getting smoked in the comments.

[Duncan Hill]

Yeah, I'm sorry, I'm reading the chat.

[Ben Carlson]

Yeah, that's all right. Hey, listen, I used to have the Star wars figurines back in the day. It's just when all those new movies came out a few years ago, I tried. I rewatched all the first three Star wars and I thought, oh, wow, in my head, these were really good movies, but they're just pop culture relics. That's it.

[Duncan Hill]

I mean, you can't even appreciate the special effects, all the miniatures and models and things.

[Ben Carlson]

That's what I'm saying, that part of it, okay, the cinema quality that you would like, that was good.

[Duncan Hill]

You're saying that you just couldn't believe Jabba the Hutt as a character.

[Ben Carlson]

I'm just saying if Harrison Ford wasn't in it. And his charisma. It would have been an uphill battle as a movie. That's all I'm saying. All right, next question.

[Duncan Hill]

Now, we're never getting George Lucas on.

[Ben Carlson]

The show, but hey, listen, whenever anyone asks Harrison Ford a question about this, he, like, dunks on them and he's like, I don't care. So me and Harrison Ford, we're in the same boat here about Star Wars.

[Duncan Hill]

Oh, really?

[Ben Carlson]

You never heard that before? Someone asks him about some Star wars lore or something and he just. He'll be. I don't. He gets into cranky. I don't care what he. He totally doesn't care about any of that stuff. Really funny.

[Duncan Hill]

That's funny. I'll have to look that up. Okay, last but not least, we had a question from Chris. My fiance and I have been looking for a home in the Chicago suburbs recently. We're both 27, have stable incomes and no debt. We're leaning towards a 30 year mortgage, but would it ever make sense to go with a 15 year mortgage instead? We love the idea of paying less in interest, but the higher monthly payment is also brutal. We'd love to hear your thoughts.

[Ben Carlson]

All right, one more comment here. Jim in the comments says, I choose Spaceballs. Thank you. I probably like Spaceballs more than Star Wars. There, I said it.

[Duncan Hill]

You know what, I gotta come clean here. I've never seen Spaceballs, so I guess I'll have to go watch that. That's Mel Brooks, right?

[Ben Carlson]

Yes, we watched it a lot in college. All right, so great question from Chris here. I think people really like saying the word fiance and writing it because you put the little thing over the e. What's it called? The little hat. So a couple. I think last month we talked about 50 year mortgages versus 30 years. But now I think 30 versus 15 is a more meaningful conversation to most people. So remember in that example we used 30 year versus 50 year. We showed that there wasn't a huge difference in the monthly payments, but there was an enormous difference in the cumulative interest expense. So, Daniel, let's do a chart on this. This is one we used about a month ago, so you can see the difference. And we use the same. We use a $500,000 mortgage at a 6% rate. And it wasn't a huge difference in monthly payments, relatively speaking, but it was a huge difference in interest, like half a million dollars over the course of those loans. All right, chart off. Now let's look at the current rates today. This is for mortgage rates daily as of yesterday. So 30 years at 6.27, 15 years at 5.75%. So let's use the actual rates. Right? I want to use $500,000 again because I like round numbers. So let's do the comparison again. Daniel, next chart. Okay, so I did a $500,000 mortgage, again using the current rates. So about 6.3% for a 30 year, 5.75% for 15. You monthly payment is huge. And Chris mentioned it like it's a brutal difference. So in this example, that's more than $1,000 monthly difference in payments, but the total interest, you're saving over $360,000 by taking the 15 versus the 30 year. Okay, chart off. So here's the deal. Obviously because of the way amortization works, you're paying way more in principal upfront. For a 15 year, duh, you paid off faster. I refinanced my mortgage to a 15 year in the early days of the pandemic when rates fell to the floor. I think I did it at 3%. And then like 18 months later, rates fell further and then I refinanced back into a 30 year because I thought, wait, what am I doing? Why am I not borrowing more money for as long as I can? And I think again, I think it went from the same rate as a 15 year, 18 months prior to a 30 year, which is the same rate around 3%.

[Duncan Hill]

That sounds like a snip snap, snip snap situation.

[Ben Carlson]

Yeah, it thinking back now, the closing cost was stupid for me to pay that much, but in hindsight, I should have borrowed way more money. Like I should have taken out as much as possible because I locked in 3% for 30 years. Like that was, that was just obvious, like, duh, why didn't I do that? So I think with rates at 6% today, that does change the calculus where Maybe, maybe a 15 year does make more sense for some people, especially the debt averse among us, of which there are many of our audience. Right? We know that because of what we've heard from people. However, I think there's a better solution for Chris and his fiance here, especially since he's concerned about the higher monthly payment. Like, listen, I'm locking myself into a way higher payment. Even if I'm going to pay the mortgage off soon, take out the 30 year fixed loan, you lock yourself into a lower payment, but you can always make extra principal payments on the loans. There's no rules against that. Right? Some months, maybe you want to throw extra cash at the loan, maybe you get a year end bonus or something and pay it down that way. This strategy gives you way more flexibility and doesn't lock you into the higher payment. So if you realize, oh, shoot, after two years, this 15 year is way too much for us. We can't save. It's eating up all of our budget. Then you have to do what I did and snip, snap back into the 30 year, pay more closing costs. That's stupid. So that's what I would do is go in the 30 year. You can always pay down earlier, make principal payments only, and then you're good. Someone says, hey, Ben likes to pay mortgage insurance. Hey, I didn't say that. You could still put 20% down. That's where the mortgage insurance comes from, not putting enough down. So, yeah, I think it just gives you more flexibility. I don't think, I don't see the reason, especially at 27 or whatever, to lock yourself into a higher monthly payment like that. That doesn't make any sense.

[Duncan Hill]

All right, yeah, you've convinced me. Convince me. But yeah, I've always wondered about that because, yeah, they both exist, but 30 years, all anyone ever talks about.

[Ben Carlson]

All right, send any of your hate mail into Duncan's email. He'll give that to you shortly.

[Duncan Hill]

Well, now I'm getting it because I haven't seen Spaceballs. So we're even. We're even today.

[Ben Carlson]

Yes. I love satire like that. So to me, it's a great play on it. Remember, email here askthecompoundshowmail.com we will be here next week. I will be wearing a holiday sweater, so we'll dunk in and then we're taking off the last week of the year for the holiday. We'll be back here in the new year, but we'll be here next week. Send us your questions, send us your comments. Thanks to everyone in the live chat. As always. See you next time.

[Duncan Hill]

Thanks, everyone. See ya. Thanks for listening to Ask the Compound. All opinions expressed by Ben Carlson, Duncan Hill and any of their guests are solely their own opinions and do not reflect the opinion of Ritholtz Wealth Management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.