Podcast Summary: Ask The Compound

Episode Title: What’s the Biggest Risk Right Now?
Date: June 4, 2025
Hosts: Ben Carlson & Duncan Hill

Overview

In this episode of Ask The Compound, Ben Carlson and Duncan Hill field questions from listeners, delving into current investor anxieties and practical personal finance strategies. Major topics include the economic risks of AI—particularly whether deflation is a major concern, the future and safety of target date funds amid potential private equity additions, practical approaches to diversifying beyond major index funds, determining when a financial advisor is worth the cost, and clarifying what “buy the dip” truly means.

Key Discussion Points and Insights

1. Deflation, AI, and Economic Risk

([03:04])

• AI as a Deflationary Force:
  Ben highlights that AI has the potential to automate and replace a large swath of white-collar service jobs (e.g., customer service, analysts, programmers, bookkeepers). This could create “massively deflationary” effects and disrupt the labor market if realized at scale.
• Why It’s Complicated:
  The dynamic U.S. economy may eventually adjust and create new job categories, but the transition “is going to be painful for a lot of people.” The full impact, both positive and negative, remains uncertain.
• Stock Market Implications:
  If AI genuinely increases company productivity, profits and margins should rise, making stocks an attractive hedge. Conversely, if AI disappoints, current tech stock valuations could be unsustainable.
• Navigating AI Risk:
  Ben's advice: “Figure out how to work with AI to make people’s lives easier, your colleagues’ lives easier, your own job better...and stand out through creativity and originality.” ([07:54])
• Notable Quote:

  “We’re in the phase right now where people are still trying to figure out what is the impact going to be... expectations get way, way ahead of fundamentals and that causes prices to disconnect.” – Ben Carlson ([04:11])

2. Net Worth, Pools, and Experiential Spending

([09:12])

• Buying a Swimming Pool:
  Listener Ryan asks if a $125k pool makes sense at his (unspecified) net worth level.
• Perspective:
  Ben frames pools as “an experiential purchase,” suggesting to see it like buying a decade’s worth of vacations: “It’s time with the family, it’s time with kids...think about it through that lens.”
  Pool’s value rarely accrues in home resale value due to added insurance and maintenance costs.

3. Target Date Funds & Private Equity Infiltration

([10:56])

• Listener Worries:
  Concerns arise over private equity being added to retirement vehicles like target date funds. Are target date funds becoming “garbage” as a result?
• Current State:
  Ben reassures listeners that widespread inclusion of private equity isn’t happening yet and will take time, with fund choices likely to remain (standard vs. private equity exposure).
• On Fund Quality:
  “Target date funds are not garbage. That’s slander...for the most part, they’re a pretty decent option.” – Ben ([13:26])
• Fee Awareness:
  Ben highlights that basic total market index funds should have low fees (~20bps or lower), and anything higher signals a “red flag.” ([14:11])

4. After-Hours Stock Price Moves

([14:22])

• Why Do Stocks Swing After Hours?
  It’s largely due to illiquidity and major announcements (earnings, CEO statements) occurring outside regular trading hours, leading to sharp, expectation-fueled moves.

5. Diversification Beyond the S&P & Moving to ETFs

([15:24])

• Listener Zach’s Question:
  What ETFs (besides S&P 500 and Nasdaq 100) make sense for long-term investment? Is sector exposure (e.g., SMH—semiconductors) helpful?
• Ben’s Journey:
  Ben shares that his past dabbling in stock-picking caused “too much brain damage and mental bandwidth.” He stresses how even institutional investment teams rarely beat the index.
• Diversification Suggestions:
  Sector ETFs like SMH provide more concentration rather than diversification since they’re tech-heavy like the S&P/Nasdaq.
  Ben prefers holding small cap, mid cap, international, value, and momentum fund exposure as additional layers of diversification.
• Notable Quote:

  “I was spending 95% of my time worrying about the stuff that took up 5% of my portfolio...I never check my index funds obsessively during the day, but stock picks, I’ll check them multiple times.” – Ben Carlson ([17:07])

6. When is a Financial Advisor Worth It? “Cookie-Cutter” Worries

([20:46])

• Is $2-3 Million Middle Class?
  Ben points out that $2-3 million in investments puts one in the top 5-7% of the U.S.—not middle class, despite coastal perceptions.
• Advisor Value:
  Ben clarifies: “Philosophy is universal, but the strategy is always personal.” Good advisors provide tailored advice on asset allocation, tax strategies, insurance, generational transfer, and the emotional permission to enjoy wealth (e.g., “You’re going to be okay if you buy that vacation home.”)
• Testing Your Advisor:
  If your situation is complex and you aren’t getting value, “maybe your financial advisor isn’t very good.”
• Notable Quote:

  “If you’re getting cookie-cutter advice, you either don’t have a very complicated financial life or you don’t have a very good financial advisor.” – Ben ([22:15])

• On Pool Allocations:
  The hosts joke that with $2-3 million invested, “They could probably get a $400,000 pool, right?” ([25:26])

7. Book Recommendations for Investors

([25:37])

• Ben’s Picks:
  The Intelligent Investor (especially chapters 8 and 20),
  The Man Who Solved the Market (on Jim Simons),
  When Genius Failed (on LTCM),
  Your Money and Your Brain (Jason Zweig) as a top behavioral book.

8. Clarifying “Buy the Dip”

([26:39])

• Listener Patrick Asks:
  What does “buy the dip” really mean, and is it a sound strategy?
• Ben Explains:
  Buying stocks when prices fall can work well with broad index funds/ETFs over time, but “dips” can last—for example, after the 2000 dot-com bubble, the market took over two years to hit new highs ([28:15]). For individual stocks, buying more after sharp drops (e.g., Netflix in 2022) is riskier; some never recover. “The people who denounce buy the dip...are saying, don’t do it blindly—be patient. Sometimes, it’ll take a while for it to pay off.”
• Duncan Adds:
  The dangers of “averaging down” in individual stocks: “Several stocks go to zero.”
• Notable Quote:

  “There are a lot worse strategies than [buying the dip]…I think it’s still a good long-term strategy to lean into the pain.” – Ben ([30:58])

Memorable Moments & Quotes

• On AI & Creativity:
  “The stuff that is produced by these LLMs...it’s not creative. And I think there’s still the ability to have your own voice and be creative is going to stand out even more.” – Ben ([07:54])
• On Fee Red Flags:
  “20 basis points is pretty reasonable for just a basic total market fund, right?...That’s a red flag.” – Duncan & Ben ([14:11])
• On Financial Advisors:
  “The benefits of a good advisor...are you getting comprehensive planning, tax, insurance, estate, portfolio management? Are they giving you permission to spend?” – Ben ([22:58])

Timestamps of Key Segments

| Timestamp | Topic
|------------|-------------------------|
| 03:04 | AI, deflation & jobs risk
| 09:12 | Experiential spending: pools
| 10:56 | Target date funds, private equity worries
| 14:22 | After-hours stock price swings
| 15:24 | Diversifying beyond S&P/QQQ; ETF picks
| 20:46 | Value of financial advisors, net worth myth
| 25:37 | Investment book recommendations
| 26:39 | What is “buy the dip”? Does it work?

Tone and Delivery

• The hosts mix humor and substance (“Is that the Bentley of swimming pools?”), keeping it relatable while providing deep financial insights.
• Ben is analytical, cautious, and honest about uncertainty; Duncan injects the “everyperson” perspective and asks clarifying and grounding questions.

For New Listeners

This episode offers a comprehensive, practical look at several hot-button investor topics. Ben and Duncan address broad systemic risks (AI impact), retirement investing best practices, the psychology of financial decisions, and remain candid about the limits of expertise—making this a valuable listen (or read) for those interested in real-world financial advice beyond the headlines.