What’s the Biggest Risk Right Now?

Summary

Podcast Summary: Ask The Compound

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

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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.

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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])

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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.

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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])

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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.

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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])

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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])

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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.

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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])

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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])

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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?

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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.

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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.

Transcript

[A]

Welcome back to Ask the Compound. We don't have any music because Duncan is in Chicago. We're working on the audio here. We good, Duncan? We're doing it live here. All right. Our email here is ask the compound showmail.com youm can always email us your questions. Ask a question in the live chat on YouTube or Twitter. On today's show, we are going to be talking about questions straight from the Compound audience. Should we be concerned about AI's impact on the economy? Should you be concerned about the makeup of your target date fund and the potential for private equity hitting there? How can you diversify outside of the S&P 500 and the NASDAQ 100? What level of wealth requires a financial advisor? And how does buy the dip actually work in practice? All right, today's show is sponsored by our friends at Rocket Money. Rocket Money is a personal finance app that helps you find and cancel your unwanted subscriptions, monitors your spending, and helps you lower your bills so you can grow your savings. I like the reminders that Rocket Money gives you. Here's how much you've spent this month. Here are your upcoming bills. This subscription price increase this month. Would you like us to negotiate a lower price on your behalf? You get to see the history of all your spending, which can be enlightening, too. You can easily create a personalized budget with your own customer categories. Keep track of specific goals or objectives. Plus, they have this new goals feature that automatically saves money for you, so you don't really have to even think about it. Cancel your unwanted subscriptions. Reach your financial goals faster with Rocket Money. Download the Rocket Money app and enter my show name. Ask the compound in the surveys to know that I sent you. Don't wait. Download that Rocket Money app today. Tell them you heard about it from the show. All right, Duncan, you hear?

[B]

Can. Can you hear me?

[A]

Yep. All right.

[B]

Well, that was a technical malfunction.

[A]

Hey, listen, this is what happens when you take the show on the road. Duncan, you are still in Chicago at our new office. I got home this morning. Last night, we recorded a live show at the chop shop in Chicago. That's why we're having some technical difficulties. Last night, the show. There was no difficulties, though. I think we had 300 people there watching live. It was a packed house.

[B]

It's funny. That went great. Everything was perfect. I've been trying to do the live stream today. The board died.

[A]

So, yeah, technology, how it goes. So it was a great energy in the room, thanks to everyone who came out. It was really a lot of fun. Duncan, you and the production team put a lot of time and effort into it too, and I think it's going to look great. Fabulous venue for that kind of show. I thought, you know, perfect size, great location, we had a really good crowd. And if you missed it, you can tune into the Compound and Friends on Friday. What is that trop? Friday morning? Yep. And so the first half of the show was Josh, Michael, Callie and I talking about the markets. And then we brought on the Morningstar CEO and Josh and Michael interviewed him. So great show. We'll see if Duncan can make it through this whole show and onto the questions.

[B]

We'll find out. If it's any consolation, I got an ear splitting humming sound in my ear when it went down, so it was painful for me.

[A]

All right, everyone. All right. This is your flu game. Let's do it.

[B]

Yeah. All right, up first today we got. I would love to hear your thoughts on deflation and if that could be a concern going forward.

[A]

All right. I do think that the AI discussions in the years ahead are going to be like some of the dominant economic conversations in the years ahead, assuming this is like as big as people say it's going to be. So two big long term macro worries right now. One is that government spending and deficits are going to cause inflation and it's going to cause all sorts of problems in the bond market. And who knows? The other one is that AI is going to make a lot of jobs disappear and cause deflation. So let's focus on the deflationary one. So first, Daniel, throw up my meme I created here. This is the big worry. Which one is more worrying, deflation or inflation? And I'm not. And maybe a solution to higher deficits, I don't know. So let me preface all of my statements here with a caveat that no one really knows how AI will impact the world if it's really going to be as big and powerful as people say. But if, if we're close to that. I think this is one of the. The scary sl. Fun and exciting things about technological innovations because we're in the phase right now where people are still trying to figure out what is the impact going to be. And this is one of the reasons that we almost always have a bubble from these advances because people get overly excited in thinking about the possibilities and how the world will change and the expectations get way, way ahead of fundamentals and that causes prices to disconnect from those fundamentals. Right. We had the dot com bubble, even though everything that we Wanted and more came from the Internet, right. All the stuff people were thinking about back then. It's probably better than people even expected. Maybe worse in some ways too. But we still had to go through the bubble to get there. And I think that these innovations often have counterintuitive and unintended consequences. So having said all that, here's the predictions, right? AI could replace many entry level or mid, mid level white collar service jobs. Think customer service, data analysts, programmers, administrative assistants, potentially bookkeepers, IT support copywriters, news reporters, maybe it could be a tutor going forward for your kid. And that's just off the top of my head. There's probably more. Podcasters like myself would probably be a place too, right?

[B]

Technical support is amazing. I use it all the time with photo and video gear. Now I go to ChatGPT and just say where do I find X in the menu? And it just tells you immediately. And you don't have to fumble around.

[A]

Looking for gives you a bullet point instructions. It's really, it is really helpful.

[B]

Yeah.

[A]

Then eventually the next level is okay, then we have the AI robots and they're going to automate even more of the work that we do. And that these developments could be massively deflationary. Right. Obviously that's not great for millions of people who are employed in these areas or looking for jobs. So AI has the potential to take a lot of jobs from people and assuming it's again able to do everything people think it would. In that sense, this deflation is a huge risk to the labor market. And I think the one thing people have been saying is that if and when we get another recession, some of those jobs that go away just might not come back because companies will be looking to cut costs and AI could be a way to make that happen in a real recession. So I think this is a very real concern and something governments are going to be forced to contend with. Ironically enough, this could actually lead to more government spending in the future because unemployment benefits and entitlements and people who are displaced. The good news is that the US economy is always in forever changing. It's very dynamic, the labor market is dynamic. So there's hopefully going to be some new jobs that are created out of this that we don't even know right now. I don't know, AI fact checkers or something like you can't, you know, there's a people on social media who ask grok every time you tweet something like hey, is this right? Obviously the AI system is not always right. It's it's garbage in and garbage out sometimes. So I think even if the economy is dynamic and new jobs are created, the transition to get from here to there is going to be painful for a lot of people. And it's also important to understand that inflation and deflation are not evenly distributed. Daniel, throw the next inflation chart from aei. And this one shows the inflation and things that we need and the deflation of things we want. So even if, I don't know AI is deflationary, it's not going to be evenly distributed. So I don't know. I guess the counter to all of this stuff is that just maybe the AI adoption is slower than many people think you can do. Chart off. Maybe companies will be hesitant to transition very important tasks to a computer generated model. Maybe the AI will be like Scarlett Johansson and her and just go off all the other AI systems and leave us alone because we're not worthy. I don't know. But it is a real risk to consider. And I think the best way to hedge these risks is, is one own stocks. Because if it really is this deflationary and cost saving, guess what? Profits and profit margins in an AI dominated world are going to go up and you're going to want to own those companies that benefit from it. On the other hand, if AI really isn't as big as people think it's going to be, then the US stock market is probably massively overvalued right now because all the money that these big tech companies are putting into AI. Second, I think you have to figure out how to work with AI to make people's lives easier, your colleagues lives easier, your own job better. We're having conversations all the time with how AI is going to help our financial advisors with notes and reminders and it's going to make their lives way easier. And we're talking like real time stuff. Hey, you're talking to this client. They haven't talked in a while. Maybe it's time for you to let them talk. Maybe you should ask them about this because they've said this before. And then finally I think you just have to stand out from the crowd through creativity and originality. Like the, the stuff that is produced by these LLMs. It's, it's like you said, instruction wise. It's very detailed, but 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 in a world dominated by AI that is pretty bland in a lot of ways and not Very exciting to read.

[B]

Yeah. What's kind of humorous is that forever all of us creatives were told learn to code and stuff like that. And now it's kind of funny that this is going to be a boon for art schools and creative disciplines, most likely. But not that you can't do creative stuff with it, but like you're saying the creative thought process behind things is what, you know, AI at the moment, I guess does.

[A]

Yes. But I think thinking through this stuff is a real risk to a lot of people, and I think you should think about how to be much more employable. Before we get to the second question, I'm going to pull one from Ryan. In the live chat, he said his wife wants him to put in a swimming pool. 125 grand. He says, at what net worth level should I be be at to not worry about spending that on a depreciating asset?

[B]

Well, wait, first is, is that a depreciating asset or doesn't your house have a higher value from here on out?

[A]

I don't know if swimming pool actually does add a ton of value because it's probably more insurance costs and more liability. Maybe you have to add a fence probably in some states. Remember, Larry didn't have a fence around his pool and curb. And that was a big. I remember that was a big issue. I don't. This is an experiential purchase, Ryan. If you're going to get a pool in, it's. It's time with the family, it's time with the kids in the backyard. I would think about it more through that lens and maybe you think about it like, hey, this is like going on 10 vacations or something. And, and that can be the back and forth with your wife that, hey, if we're going to put a pool in, maybe we're not going to go on some of these vacations. Maybe it can be back and forth, but I don't know.

[B]

Is that like the Bentley of swimming pools or something? I didn't know they were that expensive.

[A]

Pools are pretty expensive. My brother put one in over the pandemic and it was in the six figures. I think it's not cheap.

[B]

So wait, how long could you be a member at a country club or a nice swimming club or something for that.

[A]

That's true. Maybe not a bad idea to check. Good luck winning that one, though, ryan. He says 40% of the spend. I think the family's going to win on that one. Just pull a Clark Griswold and put the pool in.

[B]

Yeah.

[A]

Thank Me later. All right, next question.

[B]

Okay, up next we got Ben. You've got me all confused, paranoid and wiggy. I've never seen that word used like that. With the speculation of private equity intruding on people's 401ks. I currently work for a large corporation and my bi weekly contribution goes into a target date fund via Fidelity, the Blackrock Life Path Index 2045. I have a separate brokerage account elsewhere for messing around with stocks. Zero diversification. So I figured that having the basic target date fund would provide a ballast to that. But are target date funds garbage? Is the private equity thing potentially a leech on already modest returns? Should I choose something else for 401k allocation?

[A]

Okay, great question. So we talked about, remember a few weeks ago Michael Sidmore came out to talk about private investments and we said that the Target Date fund is probably going could be the vehicle of choice. We don't know for sure but they're the, the private equity managers themselves are talking about this. They want to get into the 12 to 15 trillion dollars that's in retirement assets. Like they, they, they're salivating over that. But much like AI, I am speaking theoretically as of right now that this stuff is coming, but it's not here yet. I also don't think it's going to happen overnight. I don't think every fund provider is going to go this route. Some, I'm sure some places, maybe a Vanguard, maybe Fidelity are going to say not for us quite yet. Are we going to be private free? I'm guessing there will probably still be standard target date funds and target date funds that have private equity exposure. If and when that happens, I would hope that'd be the case. But I think the private equity managers want to snap their fingers and get into all this money. But it's not going to be that easy. I think most retirement investors will see a lot more choice in the years ahead as these strategies gain prevalence. You'll have individual fund options for private investments and target A fund options with and without privates. So I hope there should be plenty of communication if and when this happens. So your target Date fund is safe for now from private investments. And I think for a while it'll probably be more of a niche option at first because a lot of retirement plan sponsors are going to have to wrap their heads around this. And I'm sure they'll have regulation changes and a lot of compliance based stuff. So we're still in the speculation stage. So you're fine from now and I think you'll know when it happens. They're not going to just sneak it in there on you.

[B]

I think we're going to see a lot more ETFs adding private holdings. Right? I've already seen one. It's, I think from Crane shares that has.

[A]

Yeah, there are, there are some of these. And yes, it'll be happening.

[B]

And they're limited to the, the allocation though, right? It has to be under like 5 or 10%, I think. I think there's something like that about it right now.

[A]

Yes. And also, target date phones are not garbage. That's slander.

[B]

I'm sure there are some loves a target date now.

[A]

There are, there are some garbage ones out there that charge really high fees and such. But for the most part, target date funds are a pretty decent option. And I always tell people it's a pretty good benchmark to see if your asset allocation, you know, makes sense or, or performing. Okay.

[B]

Oh, you know what, I have a question for you to get your, your read on. My wife was recently signing up for a new retirement, you know, account. Her company switched and I told her when she was like having her consultation, I just said, yeah, just ask for a total, you know, market fund and try to make sure it's under, you know, like 20 basis points or something. And the guy got mad at her for saying that. That I told her to say that.

[A]

Really?

[B]

Is that fair? Like 20 basis points is pretty reasonable for just a basic target. I mean, not Target, but a basic total market fund, right?

[A]

Yes, definitely. That's a red flag.

[B]

Trying to, he was trying to pitch something that was like 60 or 70 basis points, I think.

[A]

Yeah, red flag. All right, one more question from the chat here. Why are there such big after hours moves and how can they have such a range? So they're asking why stock prices move so much after hours. A lot of that has to do with the markets aren't quite as liquid, but that's when the companies announce their earnings and there's economic news. A lot of it happens outside of market hours. And obviously they do that on purpose. People are trying to parse what the CEO and the CFO are saying on a call with the financial statements and then the look ahead numbers and, and it's just all an expectations game. That's kind of why. But I think a lower volume is a big part of it. That's when Oatley has the big moves, right, Duncan?

[B]

Always. I mean, Oatley's looking good lately. You know, it's been the butt of a lot of jokes on this show over the years. So I feel like it's time to point out it's. Yeah, it's pretty good.

[A]

We don't want to jinx it though.

[B]

No, knock on wood.

[A]

Next question.

[B]

Okay, up next, we got one from Zach. In this week's episode, Ben mentioned he's slowly selling out of individual stocks and moving to ETFs to free up some stress and brain power in his brokerage account. Other than the obvious ETFs like Voo, QQQ and BTI, what other ETFs, if any, do you see as a good long term investment? Any better sector based such as SMH? Is that the chips one?

[A]

Shaking my head, yeah, no, that's a semiconductor one. Yes.

[B]

I'm in my mid-30s and started to have the same feelings towards moving away from individual stocks in my brokerage account. But I already have large positions in VQs in my Roth IRA and Roth 401K.

[A]

So I've always been more of a dabbler when it comes to stock picking. Like most people who started out, I read the Benjamin Graham and the Buffett books and I'll just wait for the fat pitch. I'll be greedy when those are fearful and I'll find, you know, then I actually I read the second book by Peter lynch called Beating the street and he talked about his process for researching stocks and it was talking about talking to company management and looking at supply chains. And I realized like, whoa, maybe this isn't for me. I don't know if I want to do all that work to really stick my teeth into it. Understand these. So this is, that was the first one that really gave me pause. And then I worked in the institutional investment manager field and I was working on manager selection. And so that is picking the managers that try to beat the market. I did this for the first 10 or 12 years of my career and these portfolio managers and all their team of analysts, they're all did an insane amount of work on these companies. These are all very highly educated people, right? Very smart, like forensic level accounting detail and financial statements. They're talking to competitors, they're looking into the supply chains, they're speaking with management on a regular basis. They knew these companies inside and out. And then we get to the performance and almost all of these managers underperformed. They still couldn't meet an index fund. At the institutional level, the fees are much lower because you're dealing with more money. So it's not like with actively managed mutual funds. Usually you can say like well, they did okay, but after fees, then they lost. But these ones had lower fees and they still underperformed. And there was a very small number of firms and funds that actually did outperform and it wasn't consistent and regardless of the amount of work they put in. So I just learned firsthand, stock picking is hard. And so it's always been a relatively small piece of my portfolio. And so one of the reasons I've been scaling back is just because it was causing too much brain damage and mental bandwidth. And I always say that investors spend 95% of their time worrying about things that happen like 5% of the time, right? A huge financial crash and a crisis and, you know, a recession that's going to end the, end the world or whatever. And I think the same was true of my stock picks in my portfolio. 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. And then like you said, if they report after hours, then you're watching and then you're just waiting for like, is this stock going to be up 20% or down 20% after this earnings report? Because that happens a lot of times, right? For the stock market itself, that's happened one time. For stocks, them, individual stocks, that happens all, all the time. So, and those moves are just, as someone asked earlier, the moves are just much bigger and more violent. And so I've been slowly but surely selling down those positions. I still think following the results of these companies is interesting from an economic trend perspective.

[B]

I was going to say, I think a lot is position sizing, right? Like, it's, to me, that's fun to follow certain stocks as long as it's not going to like, change your life if the stock gets cut in half.

[A]

Yes, exactly. And, but my point is just like I find it, I can still find it interesting and follow some of these companies to certain sectors and trends without actually owning the stocks, right? I can, I can still do that. So I'm just freeing up some mental bandwidth because it's not healthy for me personally. So the question is, like, how can you diversify if you're getting out of these? So this person has positions in the S&P 500, in the NASDAQ 100. Now that's much more diversified than individual holdings, right? But the smh, which is again, the semiconductor etf, that's not going to help you diversify more. That's just more concentration in the tech names, which you already get in the S and P and more so in the NASDAQ 100. Then the semiconductors is just even more so. It really depends. Some people think if I just own the total US stock market, I'm fine. For me, I personally, I also own small caps and I own mid caps and I own international stocks and I own some value and momentum strategies too. And that diversification hasn't really helped much the last seven to 10 years. But I think there's times, and this year is one of them, where the S and P itself isn't doing well and the other strategies are doing much better. So that's probably a decent place to start. But yeah, obviously going from just a handful of names to the S and P of the NASDAQ is much more diversified than you already were.

[B]

Makes sense.

[A]

Yeah. How many stocks, how many stocks do you hold? How many stocks do you hold right now?

[B]

Probably, probably 10 in my brokerage account and then another 15 in my Roth IRA. Oh, no, probably 20 in my Roth IRA. Something like that.

[A]

I just, if you Look, I got.

[B]

30 to 40 names.

[A]

If you looked at my Robinhood account, the number of times I check it, it's gone down drastically since I've just slowly but surely moved into index funds and I was already putting most of the time.

[B]

Mine's gone down a lot over the years. Mine's gone down, yeah.

[A]

All right, another question.

[B]

Okay, up next we got a question from Paul for middle class people like us who have 2 to 3 million dollars of investments, which I have a question about if that's middle class. Ben, is a financial advisor worth the cost? Most of us have one, but for different reasons. I have one to ensure my wife has someone to help guide her when I move on. But the general feeling among my friends is that unless you have at least $10 million, you just get a lot of cookie cutter feedback. Maybe at some point you could write an article pointing out when an advisor is needed and what benefits they offer. So maybe, I think, I think they're not seeing themselves maybe accurately two to.

[A]

Three, like, man, maybe this is tongue in cheek, but obviously that's not middle class. They must live in Manhattan or Silicon Valley or something. But if you have $2 million and this is just an investments, not like including other assets, I think 2 million puts you in the top 7% and 3 million puts you basically in the top 5%. So yeah, you're, you're squarely in the upper class. You're not middle Class, even if it doesn't feel like it because of who your friends are and where you live or something.

[B]

What about inflation adjusted? I'm just kidding.

[A]

But this just shows how, how money is always relative. They're looking at people. I have two to three, but my friends have 10. And it's funny how that works. But yeah, you're not middle class. There are many reasons why people hire a financial advisor. Sometimes it is as simple as more money, more problems if your finances start getting more complicated. But I wanted to hone in on the cookie cutter angle, saying that we're just getting cookie cutter advice cause of the amount of money we have. We always say with our wealth management clients that the philosophy is universal, meaning that we have a certain way in which we feel clients should be treated and how the process should work. But the strategy is always personal to those clients. Specific goals and their circumstances and their risk profile. So 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. The good news is that technology makes it easier than ever to have conversations with numerous advisors. Now, in the pre pandemic world, there were still a lot of people, and there still are some of those today that only wanted to work with someone who was the financial advisor down the street. Now I think people are a little more open to having a conversation with someone regardless of where they are. So you can talk to a bunch of advisors, see how they work with clients, understand their capabilities, their levels of expertise, get a better sense of what they actually can deliver to you. I think the benefits of a good advisor probably look something like this. Like, are you getting not only portfolio management planning and investment strategies and withdrawal strategies when you take your money out, but expertise in a comprehensive financial plan, Tax planning, insurance planning, estate planning, all that stuff. You know, they're helping you set your asset allocation to match with your risk profile and meet your needs, helping you make decisions and helping you define your goals. I think a big one that we've talked about here a lot is advisors can give you permission to spend money that, hey, you're going to be okay. Your financial plan is going to be fine if you buy that vacation home or take the cruise around the world or whatever.

[B]

Right. That's what I was about to say. I mean, not to brag, but I'm used to, you know, working here, hearing advisors talk about how excited they were that someone finally bought that car or went on that vacation and they actually know the goals and what people were working on.

[A]

I had some conversations in Chicago with prospects and clients who said that same thing. I've been putting money away for 40 years. It's tough to turn that around. And I need someone to help me, and that's part of it, which probably not a lot of people think they can offer advice on things that you might not understand, like certain specifics in the tax code or if you're selling a business or when to sell your socks and what's the right time and how it all kind of works together. Some investors have made big mistakes in the past, and they need that behavioral coaching. The example in this question, like making sure your family's gonna be okay. We get that a lot with a lot of DIY people who say, listen, I've managed the money myself. I can still do it, I think, but if I get hit by a bus tomorrow, my family gonna be okay. There's also the generational financial planning. Right. Working with the kids to ensure that they understand what's going on. And charitable giving is a big one, like how to give charitably but do so in a tax responsive way. And then the confidence piece, like, am I going to be okay? I always say that's the biggest question people want to know, and that comes with working with an advisor. And when you make this certain decision, am I still going to be okay or do I need to make some changes? So if you're not getting some or all of these things, I would maybe try somewhere else. And again, or maybe your financial situation isn't complex enough to have an advisor that that's full time. And the cost benefit analysis to you, I don't know.

[B]

With 2 to 3 million, what's Paul's responsible pool allocation?

[A]

2 to 3 million bucks. All right. And you want a $125,000 pool.

[B]

I mean, they could probably get a $400,000 pool, right?

[A]

Do it, man. I'd say do the pool. You're not going to regret it in the summer until it has a leak.

[B]

Depending on where you live, depending.

[A]

Yeah, yeah. All right. But yeah, I'd be, you know, it was worth it. Talk to some other advisors, I think. All right. Someone asked me, what's my favorite book behind me? I don't know. I mean, the Intelligent Investors right there, that's the one everyone reads right away, right? Or pretends to read. Just read chapters eight and 20. You're good.

[B]

You also have the Zuckerman one about Jim Simons. Find you.

[A]

Right. Pretty good.

[B]

I love that one. Yeah.

[A]

All right.

[B]

And Talking about what you were just talking about with the smartest people, you know, sometimes struggling to outperform when genius failed. Yeah, about ltcm. That's. That's a pretty fascinating one. That's one that kind of was a wake up call to me. When I read it, I was like, wait, all these brilliant people failed? That's. Yeah, that was a wake up call.

[A]

Oh, Adam asked about Jason's wag. Your money in your brain is probably my favorite behavioral psychology book there is. It's all about the neuroscience of, like, the neurons that fire in your brain when you're making decisions. That's a good one. All right, one more. One more question.

[B]

Okay. Up next, we got one from Patrick. I need clarification on the buying the dip strategy. Basically, what is buying the dip? Is this different from buying a stock at your desired price target? Is this different from dollar cost averaging into a stock you plan to hold long term that has dropped 50% due to market volatility? Some analysts say this is not a strategy. So when a stock drops significantly, like Netflix did to 190 in April 2022, am I not supposed to buy?

[A]

All right, someone asked about the Jim Simons book. It's the man who solved the markets. Someone also says here, a wealth of common sense has to be the best. I didn't say that. Maybe this is my mom. Maybe my mom's in the chat too today. That's. That's my book. Great question here, Patrick. It does seem counterintuitive that certain investment professionals and pundits are decrying a strategy that involves buying stocks and rent sale. Because old, old saying is the stock market is the only place that when the merchandise goes on sale, people run out of the building. Right. And that's not really happening anymore. Daniel, give me a chart on here. You can see in April there was a huge influx as the stock market fell. People bought more. Right. This hasn't happened. Investors put a ton of money to work in April when stocks were down. So the people who warn against buy the dip as a strategy. They're not necessarily talking individual securities per se. You can do chart off. I think it's the problem that people are blindly buying anytime stocks fall in the hopes that there'll be a quick V shaped recovery. Right. That's the thing people are saying, like, wait a minute, there's going to be a time when this doesn't work. And there are, of course, times when the market falls and you buy the dip and the market finds another leg low. Or Daniel, throw this Chart on this is like one of the greatest examples. This is the after the dot com bubble you can see there's all these countertrend rallies. Stocks fall, then they rise, and they fall, then they rise. And if you would have bought every dip here, you would have been in a lot of pain. This lasted a, it was a two and a half year long bear market from peak to trough. Now the thing is we did go two years in between all time highs from January 2022 to January 2024. Right. So we had a pretty extended period. That wasn't a V shaped recovery, that was a 2022. The entire year was challenging. 2023 was better. But it took a while to get those new highs again. So there will be a prolonged market bear market at some point. And the people who rush in to buy immediately, right, like we fall 10% and you buy, then it goes down 20% and you buy again and then it goes down 30% and you go oh man, I bought the dip and it didn't work. But the thing is like that can still work. I think it's still a good long term strategy to buy into the pain. You just have to have some patience sometimes. And I think that's the thing people are trying to say is that well, if people buy the dip and then it dips more then they're going to get scared and rush for the exits. And maybe that happens with some people. But and the other thing is like the Netflix example in the question, like there's going to be some stocks themselves that just won't recover from those big, you know, so it is weird to see people saying like oh, buy the dip. This is a stupid strategy. Like I don't know, I know a lot worse strategies than that.

[B]

Well, speaking as a non finance professional, something I think we should remind our young and people that are new to investing, people watching is that you're not talking about buying individual stocks, you know, dollar cost averaging or buying the dip in individual stocks so much. You're. When people talk about that they're usually talking about buying like the market, right. Which is. Has a much better chance of doing very well over a long period of time. But I was one of those people that I always heard about as like oh, when stocks drop, you just buy it. Like when I first started investing then you averaged down several stocks go to zero.

[A]

So.

[B]

So yeah, so it doesn't work with individual stocks as well as it works with, you know, ETFs or true.

[A]

But I think a lot of people think of the Warren Buffett stuff as like I'm, I'm being greedy when those are fearful and buying when this stock is down. That can work. And with a stock like Netflix, it has other stocks, it won't. But yes, I agree that the people who are sort of denounced by the dip as a strategy now you could say like, why don't you just buy all the time, like buy regularly instead of like ramping it up and down based on what the market's doing. But I do get the idea that some people try to over rebalance and buy more when stocks are down. And I don't have a problem with that. You just have to be aware that sometimes it's going to take longer for that, that purchase to pay off. But I still think it's a good long term strategy to lean into the pain.

[B]

Makes sense. Yeah, I like it.

[A]

All right, thanks everyone in the live chat as always. We got a lot of good questions today.

[B]

Over 2,000 people watching right now between Twitter and YouTube.

[A]

Very good. So yeah, leave a question in there. We always take them live if we can. Or email us. Ask the compoundshowmail.com remember to check out the Compound and friends this Friday. I will be on. Duncan was behind the camera. How many cameras did we have going in that place? Three?

[B]

Four?

[A]

Four cameras. All right. That was a very good setup. Subscribe to the compound YouTube channel, leave us a review and we'll see you next time. Thanks everyone.

[B]

Thanks everyone. Thanks for listening to Ask the Compound. All opinions expressed by Ben Carlson, Duncan.

[A]

Hill and any of their guests are.

[B]

Solely their own opinions and do not.

[A]

Reflect the opinion of Ritholtz Wealth Management.

[B]

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.