← So Money with Farnoosh Torabi
So Money with Farnoosh Torabi
1915: Investing in the Age of the AI Bubble with Amanda Holden, Author of How to Be a Rich Old Lady
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- [00:00]
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- [02:26]
So money episode 1915 investing in the age of the AI bubble with Amanda.
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Holden, author of the new book how to Be a Rich Old lady.
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Farnoosh Torabi (Intro)
You're listening to so Money with award winning money guru Farnoosh Torabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers, and from Farnoosh yourself, looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to SO money.
- [03:02]
Amanda Holden (Guest)
What have we seen this year is that the stock market has really performed fine. International stocks have been done better than US Stocks, but across the board, asset prices are doing just fine. The economy, that's another story. But we're talking about specifically the stock market here. And so yeah, anybody that tells you to behave in a way that is reactive to fears that have yet to materialize are. They're probably providing really dangerous advice. And even though it is so unsatisfying to hear somebody say, who knows what's gonna happen, but over the long term it usually goes up. That's like the only honest way to describe the market.
- [03:39]
Farnoosh Torabi (Host)
Welcome to so Money everybody. I'm Farnoosh Tarabi. What if the real threat to your financial future isn't the next market crash, but the AI fueled bubble that we may already be living through? Today's so Money episode is part liberation, part investing. Reality check. Heart clap back at the financial pressures we face to get it perfect when the system itself is unpredictable. My guest is Amanda Holden, author of how to Be a Rich Old lady who breaks down how to Build Real Long Term Wealth. Even as tech stocks dominate headlines, valuations drift from reality and everyone seems to be bracing for a correction. Together we'll unpack the psychology of risk, what true diversification looks like in an AI obsessed market, and why slow intentional investing still works, especially right now.
- [04:31]
Take a listen.
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Amanda Holden, welcome back to SEW Money.
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Amanda Holden (Guest)
Thank you for having me, Farnooch.
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Farnoosh Torabi (Host)
And this time as a newly minted author of how to be a Rich Old Lady.
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Amanda Holden (Guest)
That's right.
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Farnoosh Torabi (Host)
I love it. Perfect title. And I only you can write this book. This is the perfect title.
- [04:53]
Amanda Holden (Guest)
Thank you. Landing on the title was extremely difficult and it was a fight with the poem publisher. But I'm so happy with where we landed.
- [05:02]
Farnoosh Torabi (Host)
Tell me about that fight.
- [05:04]
Amanda Holden (Guest)
To be clear, my publisher is amazing and they only want what is best for the book and what is best for the reader. And they want the book to find itself in the hands of the women who are looking for this information and a bit about the the book is primarily about investing. I come from the world of investment management and so I've been teaching investing alongside more general financial literacy for a decade now. This is really a book about going from surviving to thriving and building wealth. And so the publisher was really attached to the word invest being in the title. And this makes perfect sense, right?
- [05:45]
Darina
Like the.
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Amanda Holden (Guest)
You want the reader or your potential reader to know within moments what a book is going to be. And so for me, but then like, for me, I'm coming from it from like a. I'm coming to it from a much more maybe creative angle. And so I wanted to name the book how to buy nipple tassels when you're 80. That's what I wanted to name the book. I wanted to name it Naked rollerblading when you're 80. That's what I brought to the table. To which Simon and Schuster was like, absolutely not.
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Farnoosh Torabi (Host)
I would have loved to see those men at that mahogany boardroom table. What do we think about this, Charles?
- [06:23]
Amanda Holden (Guest)
Exactly. And so I couldn't get them convinced on Naked rollerblading when we're 80. But I think we found a really happy confidence.
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Farnoosh Torabi (Host)
Did you throw it at that though?
- [06:31]
Amanda Holden (Guest)
Because if you did, that was a.
- [06:32]
Farnoosh Torabi (Host)
Brilliant move because then how to be a rich Old lady was like an absolute.
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Amanda Holden (Guest)
Yes, totally. They were like fun, just.
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Farnoosh Torabi (Host)
You used anchoring psychology, didn't you?
- [06:40]
Amanda Holden (Guest)
Exactly.
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Farnoosh Torabi (Host)
You're so smart, you're so brilliant. For me, how to be a rich old lady, there is so much truth to this too, because there is also that famous story, I think it was in the New York Times, where there was a rich old lady, quite literally, who was written about. She was, I believe, an assistant to a financial advisor. And this was maybe in the 50s or the 60s, and she would quietly buy stocks that her boss was recommending to his clients. She was just slowly investing quietly. And when she passed away, she had millions of dollars to her name. Nobody knew that she was worth all of this money. And I think she had in her will passed it to a charity or a foundation she didn't have heirs to. Passage to. And it just became this incredible story for so many reasons. But I think for me the biggest takeaway was investing slowly over the many years is so important. And power to her, right? For having that understanding and that self love, right? To be like, I'm going to do this for myself. And so how to be a rich old lady, you can too. So you mentioned, like from surviving to thriving. And someone said to me recently that so much of financial personal finance advice is about how to get rich, but so many Americans just want to get to zero. We have an enormous debt problem in this country, as we all know. And so just this idea of I can wake up one day and not have debt for so many Americans feels like the finish line. That's winning. So tell us how to that person, tell us why it's important to want for more.
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Amanda Holden (Guest)
Sure. So to that person, to that woman, what I would say is building what I call a strong financial foundation is an investment in yourself. And so for many folks, the first step to investing, it actually doesn't even involve stocks or bonds or Faberge eggs or whatever it is that you think about when you think about investing or buying assets. And so when you are establishing a strong financial foundation, really what this consists of is saving up an emergency fund, paying down high interest or I would say spiritually damaging debt. Right. Any debt that is making you lose sleep at night.
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Farnoosh Torabi (Host)
Right.
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Amanda Holden (Guest)
Focus on getting that debt down and then also working to have an income that is greater than your expenses. And it's so easy to list them out in this simplified list format. But these are actually very big jobs. And so if this is where you're at, it is all good. All you need to do is take the one next step forward. Nobody ever is going to have their entire financial life figured out in one day or even one year. This is a lifelong practice. And so the first section of my book is on building this strong financial foundation, which is not only necessary for your short term security, but it's also going to make you a much better investor down the line. What you should never do is listen to anybody on the Internet, especially if you're a woman who tells you that you should invest every last dollar or that you don't need an emergency fund. Anybody who has ever been without cash understands the value of cash and having some cash and working down your debt. These actions have an almost indescribable value, especially for women, because it then allows you to act from a position of power. You're not on your back foot and so if that's where you are, that's all good. That's where you start.
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Farnoosh Torabi (Host)
Do you see that happening too often where women are targeted as. Because that sounds like almost fear mongering, like you gotta put all your money in the market. I actually met a woman who was coming out of a divorce and she was in a program where she was talking about how she and other midlife women were taking this investing class. It was like thousands and thousands of dollars and it was very not how to invest for long term growth retirement stuff. It was like derivatives and performance stocks. And I was like, wait, do you even have savings?
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Do you ha.
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And she was an entrepreneur. So for her everything was going into the business. And then now, okay, I'm gonna learn about how to invest, but I want to be savvy, quote unquote. And I just couldn't help but feel as though she was. And it was a program run by women. Do you see this as being, you know, a thing, a cautionary tale for people?
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Amanda Holden (Guest)
That is absolutely a cautionary tale. And a big part of the work that I do in this book is teaching people how to understand the finance industry and the ways in which both the finance industry and the economy writ large. Right. Capitalism, the way capitalism is structured, the ways in which these systems are designed to scam us, to exploit us, to entrap us. And if you think about it, make money fast, make money the easy way. It's like the, it's the original scam. All scams were born from this original scam. And so yet when I hear something like this, all of the alarm bells are going off because anybody that's going to promise you that, that, that you can get something out of the market that the market wasn't already planning on giving us is real cause for concern. And gosh, it's even, it even alarms me a little bit to hear, to hear about any woman who is before they're investing, cycling all of their earnings back into their own businesses. Because it's this same idea of investing in only one company. It's the same idea as investing in only one stock. And I'm thinking about this because I've done like a self employment guide for one of my pre order bonuses for the book. And something I say in this self employment guide is please don't recycle all of the money you earn from your self employment efforts back into your own business. I know it's your baby, but would you do that with Amazon stock? Do you do that with Apple stock, which these are arguably the most powerful companies, corporations in the world. And if the answer is no, that is far too risky. Then it's also too risky for you in your business. Whether we're self employed or we're traditionally employed, but really just anybody who's just a regular person. It is unfortunately on some level now, now up to us to learn the rules of the game, especially as we are seeing this erosion of the social safety net in this country. That's the other thing I would say, especially to this first woman who is asking, okay, like I'm, I can't get ahead of this thing. What is it that I can do? One thing we can all do right now is learn how this system works, learn how is it is designed to. It's not designed for everybody to get ahead. And at least that way, if you really believe that and if you see the system for what it is, then maybe, just maybe you learn not to define yourself by the setbacks you experience within this broken system. And that's such a big piece of what this book is too. So it is also, it is, it's fun, it's about how to use the tools that are available to us. But it is also systems critique. And that's important to me too.
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Farnoosh Torabi (Host)
Yes. Which is why I do really love your voice and I appreciate your work and your perspectives because I think it's for too long has been a piece of financial wisdom and advice giving that we have neglected to really bring to the forefront. Forefront this idea of the systemic failures. And we really do blame ourselves so much for our shortcomings when so much is out of our control. So let's say you have a system in place for your debt, your savings, your earning. You're ready to dip your toes in the investing waters. Let's do a mini course, a mini kind of breakdown on how to begin investing. I want your advice on robo advisors diversification. And you know where to start? Maybe outside of the employer sponsored accounts because we know 401ks are great, but let's just say you are looking at the Roth ira, traditional IRA brokerage account. What are, what should we be looking at? What's the menu?
- [15:13]
Amanda Holden (Guest)
Sure, let's do the quick and dirty lesson. I love it. So the place that I always start, especially with my students, and this is because this is the first and I would say most significant stumbling block for anybody learning to invest is really separating these two ideas. There are accounts like 401ks and Roth IRAs and then there are the investments inside of them. And so oftentimes what I hear some again, for example, let's say I asked somebody what are you invested in? And they say oh my 401k. And I'm like okay, so your 401k is a bank account. Now granted it is a, a fancy bank account that has special tax treatment, but at the end of the day it's still a bank account. What that 401k or your Roth IRA or your regular brokerage account holds are investments. And so really spending some time popping these two ideas apart in our minds. Now why is it so easy to conflate the two? I think automation is at least partially to blame, right? Especially if You've already got a workplace plan that money is, is taken from your paycheck, it is deposited into the account, and then that money is automatically used to purchase investments. And so it obfuscates what that, what is actually happening here and that is that there are multiple different steps to the process and getting you automatically invest generally in, and these are the investments in funds that hold stocks and bonds, and we'll get there in a second. But those are the investments that are actually powering your returns. The fact that is all happening automatically, it makes it feel as if the 401k is itself the investment. And so what I always encourage my students to do and what my, what I encourage my readers to do is we're going to, okay, we're going to have to learn about 401ks and Roth IRAs. We're going to have to learn about the tax differences between all of these different retirement accounts. But we must move swiftly to the investing piece, actually picking the investments that go inside of these accounts, because that is the most important part and that is what generates our returns over time. And so that's the, that's my first request is understand that the bank accounts are the bank accounts and there are some nasty, crusty tax rules that go along with them. But all retirements are, all retirement accounts are good and fine. They all act as tax shelters for long term investment growth, which I know that may sound like just a bunch of nothing, but I assure you they're all fine so long as you qualify. And so then we can move to the more interesting side of the conversation, which is talking about the investments inside. When we are talking about investing, like the type of investing that happens inside of a bank account, we're generally talking about stocks and bonds. You can think of these as the two cellular units that make up all investment life. And it's not that there's only stocks and bonds, obviously, we also have crypto, we also have real estate, there's all sorts of alternative investments, but for the most part it's stocks and bonds. And so we really can't be having any conversations about how to actually invest if we don't first understand what are stocks and bonds. And we can certainly go through what each are. But let me just finish this up by saying that even though stocks and bonds are the individual units of investment that are going to be powering our returns, most of us are going to be buying them in big old baskets. These are funds. And so a fund, no matter what type of fund it is, I know there's lots of different type of funds. But even just think of the word fund, big old basket of investments. And so what that means then is most of our strategies are going to be these funds of baskets of stocks and bonds. And really I would, I would hone it down even further to say that really it's three different categories that we're generally building a strategy with. US Stocks, international stocks and bonds. That's really how we break it down. And something simple you can do is buy what is specifically called an index fund, which is a fund that invests across an entire market. So for example, the entire US Stock market, the entire international stock market, the entire bond market, and just buy one of each to represent each of your three categories. Now you'll adjust the mix. So we call the mix so the breakdown between stocks and bonds, we call this your asset allocation. And again, don't get bogged down by the jargon like even think of the words, pull the words apart. Like how are you allocating your money to the different asset types? Those are stocks and bonds. And so you'll probably do more stocks if you're younger, more bonds if you're older and closer, closer to retirement. And so something like this, like a really simple three fund, three index fund strategy is a great starting place. This is something you can implement any bank account, a Roth IRA. You can do something like this in your 401k through work. You can do it in a brokerage account. And so this would be a more DIY approach. This is also what robo advisors do for you. And so the question of should I robo advise or not? Robo advise is really a question of should I pay this service to buy me index funds or should I buy the index funds myself? A robo advisor is not giving you access to anything you could not access on your own. And so it is going to charge you a small fee for the service of purchasing those index funds. And so for somebody like me, I would personally never use a Robo advisor because I can buy the index funds myself and I feel confident doing so. And even though the fee on a Robo advisor is small, it does add up over time, especially with larger dollar amounts invested. But that being said, if you're listening to this and you're like, I don't really want to do any of that, I would say then, yeah, move expeditiously to the Robo Advisor. And I think in the book I say get your thumbs out of your butt and over to your phone. Download the Robo app and get Invested asap.
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Farnoosh Torabi (Host)
That was an excellent summary. I do have a question about the Robo Advisor. In addition to purchasing these assets for you and opening up the portfolio for you, they also and I again, you could do this on your own too if you're comfortable. But my understanding is that the Robo Advisor also automatically rebalances the portfolio, meaning that if the market has like a stretch of positive runs upswings that the original kind of asset allocation that you want could get flipped or recalibrated and at some point during the year and the rebalancing would bring it back to where you want it to be. So whether that's 60% stocks or 40% bonds, again you can do this on your own. The Robo Advisor would do that on its own for you. And then I think the Robo Advisor gives you maybe access to a human for one or two calls a year or even more. So there are some like additional services that's wrapped into that fee. Just want to understand if that's what you also understand too.
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Amanda Holden (Guest)
Most of the Robo Advisors don't necessarily offer a free call, but you can access somebody to speak with if you would like like to. And I think that's great for anybody that I would really make this decision based on one factor and one factor only. If using a Robo Advisor is going to get you to invest more, it's going to make you feel more comfortable, then it's worth it. It's worth paying the fee to use a Robo Advisor service. So you're exactly correct in that it's not just getting you invested that the Robo Advisor does. It gets you invested, it automates the investing process and that it also maintains the balance of your portfolio over time. It does is rebalancing and it does. So I most of them, they're all a little bit different, but most of them do it frequently quarterly or even more often sometimes. Whereas if you were investing on your own, this is something that you would need to do yourself. I say once a year, every couple of years is probably fine as well. And so in my book what I do is I do provide very specific examples of how to calculate how to rebalance because I know that it's something that can be hard to wrap your head around without a concrete example. You can also use a rebalancing calculator online and that will help you know exactly what you need to sell and where you need to move the money to. What's something that's a little bit interesting is there are starting to be newer. I call them like an in between option or a third way option. Whereas a robo advisor service is going to automate everything for you and doing it on your own requires that you do each of those steps for yourself and including picking your investments and then rebalancing your strategy over time. Also setting up automations something like an M1 Finance, which by the way I receive no money from any banks or financial institutions to share, but something like an M1 Finance. You pick your investments, you pick your allocations and what you can do on their platform is click a button to have them then rebalance it. I believe if you have more than $10,000 invested there is no fee and so it's this like interesting in between option that is available as well. I also think my prediction is that hopefully within the next five or ten years all of the brokerage banks will offer this type of service like an automated rebalancing service for free.
- [25:01]
Farnoosh Torabi (Host)
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A quiet little corner with a desk.
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And a shelf filled with novels by Boston authors.
- [26:54]
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- [29:27]
Farnoosh Torabi (Host)
A lot of us are worried about a crash. The data suggests that women are less risk tolerant, which I actually think works to our advantage. I think I also saw data that says women outperform men in the stock market because we are more sensitive to risk and which means we're not like trading all the time. We're maybe more likely to ride the market. We're not like trade crazy. And so first my question is, what is your understanding of maybe female behavior as trade, as investors? Maybe some good data that you have found and then advice for navigating the twists and turns. I know you have a whole chapter in your book about market crashes and how to protect yourself against the inevitable. The market is unpredictable. And yeah, there, there is gonna be. And someone said to me, a financial advisor said to me, I am long term bullish. That is my, that's how I feel about where the market is going.
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I'm like, that's not helpful.
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But okay, fair.
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Amanda Holden (Guest)
But it's actually the most honest thing.
- [30:26]
Farnoosh Torabi (Host)
Somebody true.
- [30:28]
Amanda Holden (Guest)
Because if anybody tells you they know what's going to happen in the next year, they just don't. We can't know. This is a bit of a side story, but one of my best friends has a cpa. So a tax person who at the beginning of the year after the election sent out an email to all of his clients, his tax clients, recommending that they move to cash at the beginning.
- [30:48]
Farnoosh Torabi (Host)
Of year of the year. And a cpa.
- [30:51]
Amanda Holden (Guest)
A cpa.
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Farnoosh Torabi (Host)
Okay.
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Amanda Holden (Guest)
That's not really his territory. No, it's not. And a lot. And it's so funny because the fears at the beginning of the year, the tariffs trump. It was, it was all anybody was sued. I, I don't know. I don't know this person personally. I just remember when my friend told me that I was like, that is insane and maybe not legal. Yeah, I mean, it's just, it's pandering to the fear of a moment, which was a very scary moment for a lot of people. It was an interesting moment. Obviously for some people it was their Garden of Eden. And some people it's an absolute apocalypse. And so it's it was a very interesting moment, but we could not know what was to come in the stock market. And what do we, what have we seen this year is that the stock market has really performed. International stocks have been done better than US Stocks, but across the board, asset prices are doing just fine. The economy, that's another story. But we're talking about specifically the stock market here. And so, yeah, anybody that tells you to behave in a way that is reactive to fears that have yet to materialize are. They're probably providing really dangerous advice. And even though it is so unsatisfying to hear somebody say, who knows what's going to happen, but over the long term it usually goes, goes up. That's like the only honest way to describe the market. Oh my gosh, I totally lost track.
- [32:08]
Farnoosh Torabi (Host)
So then, have you found any data to suggest that women, although maybe on the one hand were not as risk tolerant when it comes to investing, that we can actually be better investors as a gender and then just in general for everybody who's spooked about volatility, how to weather the storms.
- [32:31]
Amanda Holden (Guest)
Yes. So something interesting that we find about women and risk tolerance is that risk tolerance is actually largely a function of income and not gender. And so this makes some intuitive sense, right? Folks who have more money to invest are able to invest more. And so this old story that women just don't invest because I think what I say in the book is because like, like our little girl brains are filled with glitter or whatever, it's just, we're just out here thinking about ponies and horse. No, the mom who with three kids who is struggling to get by just does not have as much money to invest, therefore has a lower investing risk tolerance. As she should, right? Investing really only becomes possible. Taking the risk that is required by investing. There is no investing without risk taking. It only becomes possible if you have that type of breathing room in your life. And so we know who gets to take the big swings in this world. And it's not that mom, right? And yes, it is true that women may take less investing risk, but it's generally because they don't have as much money. Now when women do invest, interestingly, at least a few studies show that they are better investors than men, that they earn more than men. And it's not because they are better at stock picking. It is not because they know something men don't. It is because they are able to stay calm, cool and collected when the market starts to overreact. When the market gets really scary, men on average panic, sell Much more than women.
- [34:14]
Farnoosh Torabi (Host)
And then. So for anyone who is worried about the short term sort of highs and lows of the market, people are like, this might be my year 2026, I'm going to invest. And then Q1 might just be like a negative. Who knows, right? And then they're going to be like, far nough and Amanda told me to start investing in 2026. We're going to tell them to hold on. We are, right. We're going to say stick with it.
- [34:38]
Amanda Holden (Guest)
We're going to stay stick with it. And I'm so worried about the timing. But what.
- [34:44]
Farnoosh Torabi (Host)
And you're worried why?
- [34:45]
Why?
- [34:45]
I'm worried because I'm like, we're overdue for a correction a little, right?
- [34:50]
Amanda Holden (Guest)
Yeah. And there is. For anybody that's not keeping their finger on the pulse of investment news and chatter, here's what's happening right now. So right now there is talk of an AI asset bubble. And so specifically companies, AI companies for which you can own stock are seeing these huge influxes of cash that is being invested in these companies. And that's what a stock is, right? A stock is a share of ownership in a company. Now, what's interesting is it is not as if when a company profits, the profit fairy comes and waves a wand over the stock and the stock goes up. Instead, the mechanism that drives stock prices up or down is our buying and selling. So when we all, en masse buy into a stock, that is what drives a stock price. And so what we are seeing right now is a moment where a lot of people are very excited about these AI companies and their future potential profitability. Now, that's all fine and good, except for most of these AI companies do not have a clear path to profit. They might not even have a viable product right now. And so it is feeling right now very reminiscent of the dot com bubble that we saw in 1999 and 2000. It was almost the same exact thing. People were so excited about just even the very prospect of these companies being able to make money on God's green Internet. And so all of this money flowed into these Internet stocks. But eventually investors need to see profit or they're going to be uninterested. Profit is really the engine that drives prices over longer periods, over short periods. It's human emotion, baby. It's drama that drives markets up and down. But the stocks that we're still talking about 10 years from now are going to be the stocks of the companies that figured it out and figured out how to be profitable. And so the concern is that at some point investors are going to be questioning their initial calculus, especially the big time investors, and they're going to wonder if maybe their money would be better elsewhere. They start to sell, that drops prices lower, that causes more selling, and then we have an out and out panic. And so that's the anatomy of a bubble and then a bubble bursting. So right, a rise and then a crash. And so there's just concern that if these AI companies don't figure it out, then we will see the bubble burst. And so that's what people are talking about right now. I do think that there is some legitimate concern around what is happening with the AI bubble. The problem is there's not really that much we can do about it in terms of timing the market. Now I want to talk a little bit about what we can do to protect ourselves. One of those things that something that is not available to us is knowing when this is going to happen. Is it going to happen next month? Is it going to happen three years from now? Is it never really going to happen? Because maybe there are other companies that do end up being profitable and those cancel out the companies that aren't profitable. And so anything could really happen moving forward with this AI bubble. We just don't know. For me, a moment like this is a great time to take a look at our strategies and make sure that we understand exactly what we're invested in and make a decision as to whether we are appropriately diversified now. Something that, you know, if you ever get any investing education from social media, what you've been told to do in the last 10 years is buy an S&P 500 index fund. Buy an S&P 500 index fund. That's all you have to do to be a diversified investor. Which I can appreciate that this advice. It's like the idea is to just get people started and get people invested. But having come from investment management, there is no universe in which any investment manager worth their salt would ever tell you only to invest in the US in US Stocks as a total diversified strategy. Now, of course, it's very popular to do because for the last 15, almost 20 years, US stocks have outperformed all other categories by a lot. And so anybody that's only bought The S&P 500 index fund is feeling pretty great about their choice of strategy. And if that's you, honestly, good for you. You did amazing. But it also tricks us into believing that this is how it's always going to be, which history also tells us that is not the Case. Instead, what we see is these big sea changes in the markets where one decade it's US that does best, then European stocks do best, then maybe it's bonds, right? Bonds do go through pure. They outperform branches. And so the idea behind diversification is of course, don't load yourself all up in one area of the market. But I would think about it like this. You don't get to have both. You don't get to have both the performance of only the best performing asset class. So let's say U.S. stocks, right? You don't get to have the performance of only that asset class and protection if the worst happens within that asset class. And so you get to take your pick. Do you want to put all your eggs in that basket or do you want to spread it out across multiple different asset classes in order to diversify? Now, something that is also happening right now, so sorry if this is like getting a little bit too into the weeds, but something that is also happening right now with these tech companies and AI companies getting so big, they are now dominating something like an S&P 500 index. So something you should know about an index which is just a way to measure a market, but now we can buy funds that mirror the index. So something like an S&P 500 index fund that mirrors this measuring stick that measures the 500 biggest stocks in the US is that they are what we call market cap weighted. You can just think size weighted, which means that Microsoft is just a much bigger company than Chipotle, and so it has much more weight or power to move the index index. Microsoft probably makes up 7% of the S&P 500. Chipotle probably makes up 0.2% of the S&P 500. So a 10% move in Microsoft is going to have a lot more power over not only the index, but also the fund that you own that mirrors the index. And so right now we are in a moment where US tech companies make up, specifically the seven biggest tech companies make up about 40% of the S&P 500. And so there is also a really interesting question that is being risen is should we be considering strategies outside of what traditionally qualifies as passive investment strategies in order to protect ourselves from single stock risk? Because if you only own AN S&P 500 index fund, then you 7% of your strategy is in Microsoft off, probably more than that is in Nvidia, like more than that is in Apple, right? And so that's a lot for the average American to be having in especially for their retirement invested in just one company. And so we're definitely having conversations about whether it might also make sense to overweight or to integrate something like a small or mid cap US stock index fund. Those are just smaller or mid sized companies. And even though if you were overweighting them, let's say 10 or 20% percent of your strategy was weighted to a small cap index fund, you would technically no longer be utilizing a strictly passive strategy. You would be overweight small stocks. But that might be something that is worth considering in this moment where we are all taking a lot of single stock risk and single industry risk.
- [42:59]
Farnoosh Torabi (Host)
And for all of this, I think if you are getting that granular, maybe worth working with a professional or at minimum like a robo advisor just to. If you're new to all of this, because this sounds like a little.
- [43:12]
Amanda Holden (Guest)
This. You should buy my book.
- [43:14]
Farnoosh Torabi (Host)
You should definitely buy your book. But pairing it with a human also.
- [43:17]
Amanda Holden (Guest)
To walk you through.
- [43:18]
Farnoosh Torabi (Host)
Because this feels very like little 200 level finance for. Because I'm like taking notes even. I'm like, okay, single small stocks. Russell 3000. Okay, let's know.
- [43:28]
Amanda Holden (Guest)
But it's really.
- [43:29]
Farnoosh Torabi (Host)
This was great. Like we. You really, really went there and I really appreciate that because a lot of guests are not. They're not comfortable going there. They like don't want to really get too granular because it's taking really a firm stand on this. It's very appreciated. I really appreciate everything. You really mapped it out for us because some would say the S P 500, you get international exposure. These are US companies, they. McDonald's has a plant in Japan. But not the same.
- [43:57]
Amanda Holden (Guest)
Same. No, it's not the same. It is very unique in this moment that we are seeing this big tech dominance in a way that it does feel like we are seeing the mark detach from reality. And that is the time to be a little bit concerned. Now I want to reiterate, not concerned in the sense that you should be bailing out. You gotta. If you're gonna play the game, you gotta play the whole game. You gotta be along for the ride.
- [44:24]
Darina
Right?
- [44:25]
Amanda Holden (Guest)
Because we can't time the market. We can't know when it will start to go down. We can't also know when it'll start to come back up. Right. Often what happens when people bail out in a moment that makes them feel scared is they don't get back in until the market is already recovered and moved higher than it was previously. And so what we know, remember, right. The US stock market is up on average at least historically it's been 10% per year. Year International markets, there's a lot of ways to slice and dice the international markets. But it's 8% per year. Bonds, it's 5% per year. And this include these averages include all the bad years, all the stinker stocks, all the bummer years. And so we still have this like very generous, beautiful average. It just takes time. And to achieve that average, we all everybody's thinking about what do I do to not miss the crash crash. But what is actually way more important is that you participate in all upside. Yeah. You cannot achieve the average if you are consistently performing worse than the average.
- [45:29]
Farnoosh Torabi (Host)
Very good reminder. Yeah. First thing I'll be doing if and when that crash happens is scooping up some more of those stocks. Amanda Holden, thank you so much. How to Be a Rich Old lady is out January 13, 2026. I'll still be writing 2025 though on January 13. It usually takes me like a month, month to adjust to the new year.
- [45:51]
Darina
My gosh.
- [45:52]
Farnoosh Torabi (Host)
Happy New Year to you, my friend. Great to see you.
- [45:54]
Amanda Holden (Guest)
You too.
- [45:58]
Farnoosh Torabi (Host)
Thanks so much to Amanda Holden for joining us. Her book is called how to be a Rich Old Lady. Amanda is also an investing expert. You can go to amanda-holden.com to take her course. It's called Invested Development. It's a great course. I'll see you back here on Wednesday. And I hope your day is so money.
- [46:31]
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Amanda Holden (Guest)
Warning.
- [47:33]
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