10 Ways to Stop Blowing Up Your Investment Portfolio (SB1660)

Summary

Podcast Summary: The Stacking Benjamins Show – Episode SB1660: 10 Ways to Stop Blowing Up Your Investment Portfolio

Release Date: March 24, 2025

Hosts: Joe Saul-Sehy and OG

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I. Introduction

In this episode of The Stacking Benjamins Show, hosts Joe Saul-Sehy and OG delve into practical strategies to safeguard your investment portfolio. Drawing insights from financial expert Barry Ritholtz, the duo outlines 10 critical ways investors can avoid common pitfalls that can derail their financial growth. Additionally, they address listener questions and engage in their characteristic blend of humor and financial wisdom.

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II. Main Content: Barry Ritholtz’s 10 Investment Maxims

1. Every Bull Market is Followed by a Bear Market (14:09)

Barry emphasizes the cyclical nature of markets, reminding listeners that periods of growth (bull markets) are invariably followed by downturns (bear markets). Joe reflects, “Once you realize that every bull market's followed by a bear market, you become a more resilient investor.”

2. Buy and Hold is Easy During Secular Bull Markets (17:28)

While maintaining a buy-and-hold strategy works well in sustained growth phases, it becomes challenging during prolonged downturns. OG notes, “If all you hold is tech stocks and tech is leading the downward trend, you'll go from wanting to hold 100% of tech stocks to, to all of a sudden, you know, these are the people wondering what the hell should I be doing.”

3. Greater Return Requires Greater Risk (22:35)

Ritholtz asserts that higher returns come with increased risk. OG adds, “If you're getting 25% a year for three years in a row, that's fantastic. However, winter might be coming.”

4. Valuation Matters a Great Deal (26:18)

Understanding the valuation of your investments is crucial. Broad-based index funds naturally adjust away from overvalued sectors, reducing the need for constant monitoring. Joe highlights, “Valuation matters because when you load up on a sector, it's so hard to hold during a bear market.”

5. Risk Means Sometimes Getting Less Than Expected (32:57)

Investors must acknowledge that returns are not guaranteed. OG explains, “Sometimes you get less than your expected return. You have an expected return... it needs to be aligned with your goals.”

6. The Business Cycle and Recessions Occur Regularly (49:05)

Barry underscores the inevitability of business cycles and recessions. Joe relates it to personal experiences, reinforcing the importance of preparedness.

7. Markets Experience Emotional Extremes (43:05)

Crowd psychology often leads to market extremes where emotions override logic. OG reflects, “Markets are subject to bouts of extremes. They are, after all, just crowds of people where emotions sometimes prevail over logic.”

8. Behavior is Key to Performance (48:11)

Investor behavior during market fluctuations can determine long-term success. Joe asserts, “Temporary drawdowns become permanent losses if you behave foolishly during inevitable downturns.”

9. Extrapolating Current Trends is Foolhardy (45:39)

Predicting that a current trend will continue indefinitely or reverse completely is unreliable. OG cautions against making investment decisions based solely on ongoing market movements.

10. Politics and Investing Don’t Mix (51:29)

Political changes can adversely affect investments. Joe humorously concludes, “Politics and investing make for terrible bedfellows.”

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III. Trivia Segment: Tulip Mania (37:41)

Doug presents a historical trivia question: “What country was the home of tulip-fueled mania from 1634 to 1637?”

Answer: The Netherlands.

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IV. Listener Question: Investing on Behalf of an Elderly Parent (57:27)

Cliff asks for advice on managing his 84-year-old mother's investment portfolio, which includes approximately $3 million in a Vanguard standard brokerage account with a significant portion in tax-exempt bonds.

Responses:

• Joe: Highlights the importance of understanding the rationale behind asset allocation, especially in relation to the investor’s goals.

• OG: Suggests evaluating the portfolio's alignment with the mother's financial needs and time horizons, emphasizing that a conservative mix like 70/30 can be appropriate but also explores scenarios where a more aggressive approach might be warranted based on specific circumstances.

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V. Conclusion: Key Takeaways

At the episode's end, Joe and Doug summarize the main points:

1. Adopt a Resilient Investment Strategy: Understand and anticipate market cycles to maintain composure during fluctuations.

2. Avoid Trend-Based Investing: Base your investment decisions on long-term goals rather than short-term market movements.

3. Align Investments with Goals and Timeframes: Ensure that your portfolio's risk and return expectations match your financial objectives and the time horizon for your investments.

Joe encourages listeners to take actionable steps based on the insights discussed rather than merely absorbing the information.

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Notable Quotes

• Joe Saul-Sehy (14:09): “Once you realize that every bull market's followed by a bear market, you become a more resilient investor.”

• OG (27:06): “If you're getting 25% a year for three years in a row, that's fantastic. However, winter might be coming.”

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Final Thoughts

This episode provides valuable guidance for both novice and seasoned investors aiming to protect and grow their portfolios. By incorporating Barry Ritholtz’s principles and the hosts’ engaging discussions, listeners gain actionable strategies to navigate the complex world of investing effectively.

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Disclaimer: This summary is intended for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making any investment decisions.

Transcript

[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

I went to a wedding this weekend. I've been. How long has it been since you guys have been to a wedding?

[Doug]

I have no idea. That's how long it's been. Yeah, a long time.

[Joe Saul-Sehy]

The bands, they had a phenomenal band. They don't play slow songs anymore. There's no such thing as a ballad. Like bands either have forgotten what a ballad is.

[OG]

No. November Rain.

[Joe Saul-Sehy]

I mean, if I can't have a song by Poison, Dance with my lady.

[Doug]

What is it?

[Joe Saul-Sehy]

What am I doing?

[Doug]

Do the two step shuffle like eighth grade again.

[OG]

How many Swedish meatballs did you eat?

[Joe Saul-Sehy]

They didn't have any of those. They had a wonderful steak medallions. That was great. But I got to tell you, this place was at a winery that had the best name. It was called Divine Winery.

[Doug]

Oh, geez.

[Joe Saul-Sehy]

D apostrophe vine. Get it? Who could have.

[Doug]

Who could have seen that coming?

[OG]

It was.

[Joe Saul-Sehy]

It was. So.

[Doug]

That's a classy place.

[Joe Saul-Sehy]

It actually was very pretty. It was a nice place. But speaking of classy, let's class it up on a Monday morning and salute our troops. Seltzer water, gentlemen. So raise your glass on behalf of the men and women making podcast in Mom's basement and the men and women serving our military at Navy Federal Credit Union. Here's the people who kept us safe all weekend. Let's get her done.

[OG]

Let's go get her done.

[Doug]

Thanks, folks.

[Joe Saul-Sehy]

Go stack some Benjamins together. Hello, Honey, I'm at the mall now. And I found this beautiful leather coat. It's Only a thousand.

[OG]

Can I get it? Well, sure, if you like it that much. Okay.

[Joe Saul-Sehy]

I also stopped by the Mercedes dealership and saw the new model. You know, the one I really like.

[Doug]

How much?

[Joe Saul-Sehy]

120. Well, at that price, I want it.

[OG]

With all the options.

[Joe Saul-Sehy]

Great. Oh, and.

[OG]

And one more thing.

[Joe Saul-Sehy]

The house we wanted last year is.

[OG]

Back on the market.

[Joe Saul-Sehy]

They're. They're asking 1.5.

[OG]

We'll make them an offer, but come in at 1.4. Okay. I love you, baby. I love you, too. Okay, bye.

[Joe Saul-Sehy]

Does anybody know whose phone this?

[Doug]

Live from Joe's mom's basement, it's the Stacking Benjamin Show. I'm Joe's mom's neighbor, Doug, and we're so obsessed with learning how to invest. What if we ask the question, how should we not invest? Today, we walk you through 10 doozies that'll help you clean up your portfolio. Plus we'll answer a question from stacker Cliff, who thought, you know, I'd better call Saul. See? Hi. And Og, he has a great question about investing on behalf of his mom. Oh, how nice.

[Joe Saul-Sehy]

Cliff.

[Doug]

Realist. I don't know why I sounded annoyed at Cliff when I said that.

[Joe Saul-Sehy]

Because Cliff is making us all look bad.

[Doug]

Yeah, that's it. Goody two shoes Cliff. Joe's mom had never, ever let us near her portfolio.

[Joe Saul-Sehy]

Nope.

[Doug]

So, yeah, you must be a gem of a son, Cliff. Show off. And then you guessed it, I'll also share some homegrown trivia. And now, two guys who wanted to buy a Lamborghini, but opted for the more frugal Hot Wheels version instead. It's Joe and O. Juju Juju G.

[Joe Saul-Sehy]

You know, inflation's going up when the cost of the hot Hot Wheels version. Doug, you have to make six easy payments.

[Doug]

Klarna is involved in your Hot Wheels?

[Joe Saul-Sehy]

You're asking, Could I just lease it? What's the lease option on this deal? I won't even own the Hot Wheels. I'll just play around with it for a while and give it back five years later for the new version. Yes, and a guy who's so awesome he doesn't need a new version. He's with us here today across the microphone, kicking off another great week. Mr. OG's here. How are you, my friend?

[OG]

My existing version is already upgraded. Is that what you're saying?

[Joe Saul-Sehy]

It's the. The new and improved who needs it. You are retro and stylish, right? I mean, come on.

[OG]

Fiori. Hoodies. Gotta love it.

[Joe Saul-Sehy]

Cheryl swears by those. And by the way, the reason she does great. I will.

[OG]

Doug loves them.

[Joe Saul-Sehy]

We'll give credit where credit's due. We were at your house, and Mrs. OG kept going on and on with Cheryl about how awesome Biori was. And so we. We went immediately down. We went immediately down to North Park Mall after leaving your house. And speaking of refinance, your house refinanced our. Our house to buy some vori clothing, which, by the way, Cheryl wears nonstop.

[OG]

Yeah, yeah, it's gumpy.

[Joe Saul-Sehy]

It's so. It's a thing. Speaking of the thing, we got the guy who is the drip.

[OG]

Sorry. It took me a while to get it, but that's what my kids say. The drip.

[Joe Saul-Sehy]

The drip. Is that the new thing now? The drip?

[OG]

Check my drip, Doug.

[Joe Saul-Sehy]

Doug's like, who?

[OG]

How's my drip? Doug, your drip is not cool.

[Joe Saul-Sehy]

Doug just got here from the doctor. He found out his drip needs some medication.

[OG]

His drip is infected.

[Doug]

Means different things to different generations.

[Joe Saul-Sehy]

He totally has a get off my lawn look. Totally.

[Doug]

So annoyed.

[Joe Saul-Sehy]

So annoyed by this get off my lawn.

[Doug]

Just let's move on.

[Joe Saul-Sehy]

It's so good. Speaking of the guy, who is the thing, who's the drip? When it comes to personal finance in the world, Barry R. Holtz is going to be here on Wednesday. OG Barry is a guy that if you don't know financial planning, you don't know how special it is that we actually got Barry here. But if you remember our guest, Josh Brown, who is on CNBC at noon, Josh began his career in financial planning working for Barry. Now he's Barry's partner. And Nick Magi, who's been on the show, has a phenomenal. One of the best personal finance blogs of dollars and data and a great book called Just Keep Buying. We reference Nick a lot. Nick works for Barry and Josh. And now we got the head honcho, OG Coming on to join us on Wednesday.

[Doug]

Was Barry the guy that played Greg on Brady Bunch. Oh, no, that's Barry Williams Does.

[Joe Saul-Sehy]

Very familiar. Barry holds Barry Williams close. Yeah. Great. And OG they have one of the top conferences. Barry has one of the top conferences for financial planners in the nation as well.

[OG]

Yeah, they co host Future Proof, right?

[Joe Saul-Sehy]

Yeah. Fantastic. If you want to give good advice, you have to make sure that you're future proof. So we're excited that Barry is going to teach us how not to invest on Wednesday. So in preparation of that, I grabbed 10 of Barry's points, 10 of Berry's maxims about investing, and we're going to dive into those with OG Today. And I think this is going to help you avoid some bad investments a ton. So sit back and relax. So happy that you found us. You know what? We've got a couple of sponsors who made sure that this show is free and you don't got to pay for any of this. Goodness. We're going to hear from them first and then we're going to go through 10 of Barry R. Hold's big points when it comes to remembering how to invest. Well, wait, wait, wait.

[Doug]

Don't do it. I just saw you about to hit the skip forward button. Don't do it. Listen to these or do it. Don't do it.

[Joe Saul-Sehy]

Or you know, do it a little.

[Doug]

You're not paying for a thing. Just listen to the ads.

[Joe Saul-Sehy]

You'll go blind. If you skip the ads, you'll go blind.

[Doug]

That's it.

[Joe Saul-Sehy]

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[OG]

Weird. You mean, like, financial planning and good financial management is just a bunch of, like, little things to do, right? Is that what you're saying?

[Joe Saul-Sehy]

It's crazy.

[OG]

Find that hard to believe. It's got to be one. One major thing, though, right?

[Joe Saul-Sehy]

It is funny because I don't golf, as you guys know. And when I do, OG Takes a video of me golfing, and it's like, watch. Watch how to golf. Really, really, really bad and ugly at the same time. But one great lesson I learned about great golf is it's not OG about the great shot. It's not about doing things perfectly. It's about staying out of the. It's. It's about if you just keep away from all the nasty.

[OG]

Don't hit it in the water. Basically, just always hit it in the fairway and always hit it on the green. Keep out of the sand, the water, the rough, just straight down the fairway every time, and you'll be a good golfer.

[Joe Saul-Sehy]

I remember that.

[OG]

All there is to it. Oh, my God.

[Doug]

Why do they even put those things out there?

[Joe Saul-Sehy]

No, the point is, I remember a great old radio commercial for Golf Digest where a golf pro is saying, you will never hear an expert at golf go, I'm just going to thread this ball through these two trees and everything will be okay. You never hear a pro say that. What do they do? They go for safety first.

[OG]

Yeah.

[Joe Saul-Sehy]

And then stay out of trouble.

[Doug]

A good analogy is what my brother always says. When I'm in the trees and trying to make that shot. And he says, dude, if you were good enough to make this shot, you wouldn't be in the trees right now in the first place.

[OG]

That cuts to the quick, doesn't it?

[Doug]

It kind of does. That's your older brother for you.

[Joe Saul-Sehy]

So these 10 things that Barry talks about are things that you're going to say your to yourself. Stackers. I've heard those before. And this isn't about have you heard it? This is about what are you doing about it. What are you actually doing? Number one, Barry's list of 10 here. OG every bull market is followed by a bear market. And that sounds incredibly elementary, doesn't? And then you're like, wait a minute. And to me, that sounds a little like some of those old Chinese proverbs where you're like, duh. And then you're like, wait a minute. Why has this been passed down through the ages for so long? And it's because people forget that every bull market is followed by a bear market.

[OG]

Sounds pretty pessimistic, right? I mean, like, is that. I feel like there's got to be some more explanation there and not so much like waiting for the next shoe to drop. Is that. Is that the message? Like, get out now while you still can?

[Joe Saul-Sehy]

I think it's that you learn that over time, bear markets happen. Bear markets are going to happen. People ask us all the time, what if there's a bear market? And your answer always is, yes, it's coming. It's like Game of Thrones. Winter is coming, bear market is coming. And I think, oh, gee, once you realize that every bull market's followed by bear market, you become a more resilient investor. And last week with Molly Fletcher, we talked about the value of resilience. And it's hard to be resilient when you think that your chart is always going to go up and to the right. Consistently up and to the right. That's when you start to run into trouble.

[OG]

It's interesting that he kind of leads off with this one, because it sounds like it would be better suited to say it the other way. Every bear market is followed by a bull market so as to say, if things aren't going your way right now, just give it some time. It'll be okay. It's a weird twist that he puts on the other side of it. Of every bull markets followed by a bear market. It's almost very Chicken Little. Yeah, but I don't think that's where he's. What he's going for no.

[Joe Saul-Sehy]

But I do think, you know, you talk about the fire drill, right? And about, hey, if the market goes down, we got to know what we're doing. We want to prepare for that. I mean, look at, look at how many people with the market doing all this fluctuating the last few weeks. I, I know OG you're not online that much anymore, but the consternation and the foolhardiness that you will see people engaging in. I've seen people talk about pulling all their money out in the last weeks.

[OG]

Please do it.

[Joe Saul-Sehy]

I've seen people asking about should I invest in Tesla now so that when it comes back, things are going to be great. I've also seen people talk about going to gold. I've seen the word gold more in the past two weeks than I've seen the word gold mentioned. Like all of a sudden people talking about should I hedge? Should I, should I, should I, should I? And if I know that every bull market's followed by a bear market, I'm leading off with an investment policy statement so that I know ahead of time what my fire drill or my tornado drill is so that I'm not caught in the middle of the tornado wondering if I should go to gold or thinking, is the stock going to go lower than I'm thinking is the stock of the week number two on his list? Buy and hold is easy during secular bull markets. Meaning you take one part of the the world. Let's say it's technology, which is what we've had lately. Buy and hold is easy during a secular bull market, but buy and hold is much more challenging during a secular bear market. And I think this is really important because people really want to get into tech stocks when tech is going big, right? Why would I have international? We did that show just a month ago. Look at our International's been saving lately, right? The don't want to say we told.

[OG]

You so, but we told you so.

[Joe Saul-Sehy]

And by the way, how many times have we done that over our 14.

[OG]

Years where we're small companies International. Why don't I just put it all in the S P?

[Joe Saul-Sehy]

It just seems like we're omniscient, you know, because the thing happens. But you don't have to be Nostradamus to call this stuff. But the thing is, is that when you load up on a sector, it's so hard to hold during a bear market. If all you hold is tech stocks and tech is leading the downward trend, you'll go from wanting to hold 100% of tech stocks to, to all of a sudden, you know, these are the people wondering what the hell should I be doing.

[OG]

I don't even think about it like an individual sector component. I mean, just straight up investing during a bear market, which for the record, we're nowhere near right now. You know, we, the S and P officially a week ago, ticked into correction territory, which is, which is minus 10, and then promptly was up. I don't know what it was last, you know, two Fridays ago, it was a banger day. All of a sudden a good day. Yeah, but that doesn't mean anything. It doesn't mean like, oh well, that was all there was. It could mean that's the beginning of, you know, another 10% decline. None of this actually matters in the grand scheme of your of your money because the reason that holding positions during a market decline is challenging or would be challenging, would be if the timeframes for your goal are not aligned to the timeframes of your money. When you see your portfolio go down or you see a sector or a section of your portfolio go down and that causes concern, it's probably because the money that you think you need is misaligned with the timeframe in which you need it. If you need the money in the next five years, this is your kid's college money and it's down 12% in the last two weeks. And your kid's a sophomore in high school. Yeah, I'd be concerned too. You know why you're concerned is because you need the money in three years and you have it in a 10 year investment. You gambled with that. You said, I'm going to put this money here. Either you did this consciously or unconsciously, I'm going to put this money here in hopes that it continues to do the thing that it's been doing for the last five or eight years. And I'll get a little kicker at the end versus going, nope. My goal is in three years. My money needs to be in three year money. And three year money is cash or treasuries. That's all there is to it.

[Joe Saul-Sehy]

One of the things that may be saddest that I saw online, out of all the crazy stuff I saw online, was a woman who said, what horrible timing for this to happen. We're only four years away from retirement. And to your point, my initial thought was four years from retirement should not matter specifically because of what you're talking about. Now don't get me wrong, if it's a prolonged downturn and one like we've Never ever seen before could still be a problem. However, I know I don't know because I don't know the person, but I'm 99 sure. This person's consternation is all around the fact that they've got money they want to spend in four years sitting in the wrong spot. OG.

[OG]

Well, that or they have 90% of their money in five year plus, which is what they probably should have and are focusing on the fact that that's, you know, five year, ten year money and it's going down and really shouldn't care about that.

[Joe Saul-Sehy]

Oh, gotcha.

[OG]

That should give you lots of comfort going, oh, that's my 10 year money. That's down 10%. Whatever, I'm good. I don't care. That's the money I need in 2035. It can do whatever the hell it wants to do. That's 2035 money by that stackers.

[Joe Saul-Sehy]

If you're wondering what OG's talking about, that money's going to Arnold Schwarzenegger. It's going to totally Arnold Schwarzenegger.

[OG]

You know what that is?

[Joe Saul-Sehy]

Well, he's walking out and he goes, I'll be back. Oh, that money's going, I'll be back.

[OG]

Probably, yeah.

[Doug]

Joe thought that up over the weekend. It was just looking for a place.

[OG]

He's been hanging out of that. I feel like that's been written on the cue card.

[Joe Saul-Sehy]

Okay, I'm now using Arnold Schwarzenegger analogy. I'm now using that over and over and over and over based on that reaction.

[OG]

Like a desk calendar thing that you tear off and it says, you know, challenge. Use Arnold Schwarzenegger idioms as much as possible today.

[Joe Saul-Sehy]

No, but you know what is funny?

[OG]

Piss off your friends. That would be a funny desk calendar.

[Joe Saul-Sehy]

I do have. I got a game. I haven't been able to play it yet, but it is a game where when you're having a dinner party, you give somebody a couple of of slips and the goal is to do the thing without anybody calling you out on it. And everybody at the party has one. And so you got to make some ridiculous phrase. You got to say some wild thing or do something very.

[OG]

What was the phrase we did with Doug that we kept on saying he got so pissed off about?

[Joe Saul-Sehy]

Given your history.

[OG]

Given your history. There you go. Golly. That only took like two laps around the, around the track before he's like, given my history. What are you guys talking about?

[Joe Saul-Sehy]

So angry.

[OG]

That's right.

[Doug]

Given yours getting re angry right now.

[OG]

Ask an answer, Doug.

[Joe Saul-Sehy]

Number three.

[OG]

Ty goes to the runner. I got all three of them. You just do those three. This goes right to tilt.

[Joe Saul-Sehy]

Number three on our list. Now that we got Arnold Schwarzenegger in at number two, I still got eight to go, and I already used the Schwarzenegger.

[OG]

Oh, boy.

[Joe Saul-Sehy]

Number three. Returns are a function of risk. The greater return you seek, the more risk you must be willing to accept. Oh, gee, things that go up come down. Tell me that's not so Newtonian.

[OG]

Oh, boy, that is 5,000 do not.

[Joe Saul-Sehy]

Apply to the stock market, do they?

[OG]

I think this is, you know, and I, I hear this. And what I think about this is in the context of asynchronous investing advertisements. And what I mean by that is when you hear about a friend or you hear about a product or you hear about some sort of thing that only. Only the. Only. The insiders want you to know this, you know, or the insiders don't want you to know this, you know What?

[Joe Saul-Sehy]

Don't want you to know.

[OG]

Yeah. Oh, how cool would it be to be an insider, you know, like, oh, you get 20% return to no risk. It's like, okay, that has to. Something has to flip in your brain to understand that there's no chance that a tool invests, an investment tool exists that provides a return that's not commensurate with the amount of volatility. He used the word risk. I like the word volatility a little bit better. But, you know, he's talking. We're talking about the same thing. It just doesn't exist in real life. And it has to be that way. That's the important thing out of this is like, I'm not saying that 20% return investments don't exist. Of course they exist. But they exist within the context of. And then sometimes it goes down 80% or all. You lose all your money. It doesn't exist in the context of you get 20 every year guaranteed, right? The Bernie Madoff thing. I always get 12, and I never get less than 12, and there's no risk to me getting 12. It's like bull crap. The freaking biggest companies in the world average 10, but go down 30 every so often. How do you have the lock on 12 but no volatility? No, you don't. This is BS to the nth degree. If you're looking at an investment. And this is. I mean, this really just has to just trigger the Spidey sense of, like, if I'm hearing something that's like, oh, you can get this. It's risk free. Well, there's a definition of risk free in your finance book from accounting school. Risk free is US Treasuries. That's what we call risk free. We've long used that as risk free. So if you're getting something greater than treasury rates, greater than treasury returns and somebody's calling it risk free, something isn't right. There's a trade off.

[Joe Saul-Sehy]

You don't know enough about it. You got to dig in further.

[OG]

And if the person selling you this idea believes it, they're also in a heap of trouble. It just, it just has to make sense. You would not. And I've used this example a million times, if you have a million dollars and you have a choice, I can invest in the s and P500, which is the 500 biggest companies in the world. And I know that over time it averages 10% every so often it goes down a third, but I get 10. Historically, since the beginning of recorded financial history in the 1920s and some people have gone back to the 1800s and it's still the same. Or I can invest in my brother in law's ice cream shop and he says, great deal, you know, I got a great opportunity for you. I think we can grow this thing at 8% a year. You're going to go, this is ridiculous. I'm never going to give you money to grow at 8%. When the biggest companies give me 10, the most well capitalized, the most professionally run organizations in the universe versus I need something more. I'm going to need 20, I'm going to need 15, I'm going to need 18. To take the risk of a single operation somewhere, you know, like an ice cream shop. If you hear numbers that are greater than the public markets, it's got to come with greater than public market risks. That's all. Just all there is.

[Doug]

Come on, man, something for the team. I married your sister. That's what you're going to get.

[OG]

Sucks to be you.

[Doug]

On both fronts.

[OG]

Yes, on everything.

[Joe Saul-Sehy]

For everybody.

[Doug]

I know my sister.

[Joe Saul-Sehy]

You know what's interesting is, and I was trying to pull this up, I would have had this had I known you were going there. Oh, gee. But we had the two researchers on that were talking about how contracts are made and how people are able to pull things over on other people, how scams are developed. These were the same researchers that brought to our attention the Van Halen contract. Remember this maybe from a year and a half ago, where Van Halen would always put that they wanted Brown M M's in the contract, they wanted Brown M M'S in their, their, their dressing room. In their dressing room. And the reason wasn't they got a lot of notoriety for being special and that wasn't it at all. The reason they put the brown M M's in the contract was to see if the local people that were setting up all the stage equipment, the lights that could kill them if it was done incorrectly, it could all fall down or create a fire or whatever that they did it right. So they wanted this munition in the contract. And what these two fine professors talked about was the fact that it isn't often og what they say, what we miss is what they don't say. And that's the number one thing you have to ask yourself when an annuity provider says to you, hey, you'll get participation in the stock market. None of the downside. We shouldn't evaluate what they said, we should evaluate what's not being said. And of course in that case what's not being said is you will get a percentage.

[OG]

What percent of the participation do I get?

[Joe Saul-Sehy]

And that percentage is so small that you'd be better off not participating at that level. You'd be better off with some fixed, fixed product on the downside. And by the way, what I find interesting about these, we have now gone through three of these OG all three from one of the top financial advisors in the country. They're all about risk. All he's talking about here is risk. And you think about it. The average do it yourself investor thinks about opportunity, opportunity, opportunity, top financial advisor. What's the risk? How do you manage the risk? How do you mitigate the risk? Because I think the important thing here is you got to stick with your plan. And if you understand the risk in your plan, I think you're going to do a better job of, of sticking with it. Number four on here. And I think this is really important. Valuation matters a great deal. And I thought about this because I thought, okay, for a long term investor, do we worry about valuation? And I think the answer is yes. And the reason isn't what's the valuation of the stock market overall? I don't think we can play that game because then you're getting in and out, in and out and everybody knows you can't play that. But this is the reason why. Because he's right off of talking about sectors, right? You don't sector bet because it's hard to stay with a sector only when things go down. The cool thing about being in broad based index funds is that when one sector has valuations that are off of the charts. Your widely diversified fund is naturally going to pull away from these highly overvalued areas and the water's going to flow downhill to areas of the market. And guess what you get to do? OG you don't have to do anything because your sector will naturally rotate to the area that is now in vogue.

[OG]

Yeah, I mean ETFs or mutual funds are self rebalancing products. Right. Like it's self clearing or self cleaning I think is the word you use sometimes it's like, yeah, I don't have to worry about that company going out of business. I don't have to worry about that sector being over or undervalued because it's. The waiting is going to go where it's supposed to go automatically through the normal function of the investment. It's a great thing. Now the downside to that is that at the end of the day, you're never going to be able to be the leader in the clubhouse. You're never going to be number one. You're never going to say, I was all in tech the last 10 years because that's not the game you're playing. And I think, I think once people recognize that over performance is not a financial goal, it takes all the stress away from how your money is doing. It's like, how are we doing? I mean, I don't know. Look at what's going on in the market just broadly. What do you think is happening? Oh, there's political consternations. Okay, what do you think that does to your money? Well, it's probably not good. That's right. We don't have to like that takes so much stress out of managing all that stuff because you have all of the companies all the time.

[Joe Saul-Sehy]

Well, go back to sectors. Right. I mean, let's take this down a few notches. Nvidia, how many times the last several years have we heard, I need to get it on video, I got to get in on video, I got to get on video. And then a company shows up out of the blue from China and then we see Nvidia go down. And then what do you have now? What's, what's going to happen next with Nvidia? What's going to happen next? Elon Musk, what's going to happen now with Tesla? What's going to happen there playing all that game. And this is I think also part of the reason OG that he starts with every bull market followed by a bear market. There is no such thing as a stock that goes up and doesn't come down. There is no such thing as a sector that goes up and doesn't come down. It's really his second one, his third one. Greater return, the more risk valuations matter. Let's do number five before the break here. Number five. He says risk in quotes means that sometimes you get less than your expected returns. What I love about what Barry's doing here with number five, you get less than your expected returns. This is a key point, I think, for you and me to impress upon all of our stacker community the idea that you have an expected return. I think it's a really important thing because what do we see people do online OG they compare their results to the S&P 500. Why am I comparing my results to the S&P 500? Why don't I begin with the goal, know what return I need for the goal, and then I'm creating a portfolio that's based on that expected return. I think there's a fair amount of the investment community that goes expected. I don't have expected return.

[OG]

Yeah, we call it required rate of return. But it's basically that same sort of concept, right? It's looking at what your financial goals are and what your resources are and then going, how does my money have to behave for me to reach those financial goals, given the financial resources that I have. And sometimes, sometimes people need to have a high expected or high required rate of return to make their financial goals happen. And what happens, you do that calculation. So you're at home and you're figuring all this stuff out and you go, my required rate of return is 14%. That doesn't exist in real life. There is no investment that you can build a plan on. That's 14%. That doesn't mean you can't get 14%. Last year the S&P did whatever, 20 some odd, right? But you can't build a plan on 14. You can build a plan on 7, you can build a plan on 9. You might even be able to build a plan on 10. Although it's going to be a wild roller coaster ride, you know, and, and, and to your point, when you do that calculation to figure out what you have to do, what does your money have to do every single year? Then you fill it in with the investments that make up that expected return. I need to get 7. Here are the investments that generally get 7. And off we go. I'm fascinated by the fact that again, he's looking at it from the negative side of it as opposed to Saying sometimes you get a higher than expected return. And he's saying, often you get worse than your expected return, or sometimes you get worse than your expected return. I don't know. Just overall demeanor, I guess. Maybe. Maybe he's a lot like me. This is a way that I would write a book. Hey, look, sometimes life sucks, bro.

[Joe Saul-Sehy]

I think, oh, geez. It more excited about Wednesday Doug than when we started as a writer. After my own heart, I thought this guy was cool. Now I think he's.

[OG]

Now I think he's great.

[Joe Saul-Sehy]

Is he my brother by another mother?

[OG]

I'll just flip it around. Just as often as you're going to have lower than required or expected returns, you're going to have some higher ones, too. That doesn't make you a genius, by the way, just because you guessed right. And this is the funniest thing you know, and I know you remember this from, from your days, Joe. It's. It's a little different now than it was 20 years ago when individual stock picking was really still a big thing. And people come in to the office, right? And they'd say, oh, I did. And you're like, you, good job. You guessed right. You put all your chips on black. And the. And the dice roll or in the spinner thing, roulette wheel landed on black. Like, that doesn't make you a genius. It makes you an insane risk taker who hit. Congratulations. Bravo, sir. How about you take some off the table and get back to normal?

[Joe Saul-Sehy]

Now, the other thing I found out too, though, was that people would always lead with a big winner.

[OG]

Oh, 100%. I bought Ford at A$5. You're like, damn, you must be a millionaire then. How much? Well, I mean, I. I didn't buy it all at A$5. I bought 100 shares. A$5. The rest of it I bought at 27 and down 40.

[Joe Saul-Sehy]

But they would lead with that, and then they'd hire you, and then you get to dig into their whole financial situation. You found out that pathway is littered with dead stocks that didn't make it.

[OG]

What do I do with this cup? Yeah, exactly.

[Joe Saul-Sehy]

Coming up after Doug's trivia, Barry has five more, which are also.

[OG]

I thought you said there's eight total.

[Joe Saul-Sehy]

There's 10 total.

[OG]

Oh, my God.

[Joe Saul-Sehy]

Which are also, to OG's delight, equally pessimistic as the top five. So buckle up as OG gets giddy in the second half of today's show. But, Doug, what's on tap for our trivia today, my friend?

[Doug]

Hey there, stackers. I'M Joe's mom's neighbor, Doug, and I love talking about horrible investments. One that should have worked out was the time Joe's mom convinced me that this Beanie Baby bonanza was going to make us all bajillionaires. So because I'm so afraid respect her so much, I went all in. Everyone else was all pets.com and AltaVista, but I was 100% certain that Princess the Bear alone was going to pay off my mortgage. Sure, OG kept babbling on that stuffed animals don't generate cash flow, but you know how it is. That's a tale as old as time, not nearly as old as another craze where everyone was buying tulips and making a fortune until they weren't maybe slightly more popular in business schools than my story. Here's today's trivia question. What country was the home of tulip fueled mania from 1634 to 1637 when Joe was just a lad? Oh my God. I had to. I'll be right back after I figure out if Beanie Babies can make me any money on ebay these days or Facebook Marketplace. Is that where all the kids are? Garage sale? Seriously, the back end of my El Camino is full of these things.

[OG]

This.

[Doug]

Episode brought to you by Progressive Insurance.

[Joe Saul-Sehy]

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[Doug]

Shifting a little money here, a little.

[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[Doug]

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[Joe Saul-Sehy]

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[OG]

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[Joe Saul-Sehy]

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[OG]

Edu.

[Doug]

Hey there, Stackers. I'm Plush Animal Lover. Oh, I don't like the way that sounds. And guy who thinks you shouldn't believe Beanie Baby fever is over. You know, until you buy about 40 of mine. Joe's mom's neighbor Doug. Tulip Mania was all the craze in the 1600s, but didn't become the object of business school lessons until 1841 with the publication of the book Extraordinary Popular Delusions and the Madness of Crowds, written by Scottish journalist Charles McKay. McKay wrote that some bulbs were worth more than the daily wages of 10 skilled artisans. And other bulbs went at one point for the same price as 12 acres of land.

[Joe Saul-Sehy]

Oh, my God.

[Doug]

I know the good news. Some Beanie Babies are still selling for a bunch of money on ebay. One Princess Diana Baby is today. Hold on. One Princess Diana Beanie Baby is today listed at $15,000. You can't buy Harry for 15 grand. Unfortunately, I traded mine way back for a couple of deep dish pizzas from Gusano's up the street. My bad. Today's question, what country experienced Tulip Mania way back in the 1600s? Of course, it was during the Dutch golden age, which means it was the Netherlands. And now back to the two wallflowers who operate this podcast, Joe and Og. More like hot house flowers.

[Joe Saul-Sehy]

Doug, you reminded us of speaking of ancient, of this old show called Friends for people that are too young to remember Friends. Chandler is teaching Joey a little lesson when they meet a Dutch person. So the first voice you're going to hear is the woman. The second voice is Chandler. And then the third guy, who, who is wondering what's what, is Joey, who tends to get things wrong.

[OG]

It's over. We eat now.

[Doug]

No, no, no.

[OG]

The game's not over. We're just switching teams. Yeah, Chandler finds me so intimidating that it's better if we're on the same team, right?

[Joe Saul-Sehy]

Okay, let's play. Let's go.

[OG]

Oh, hold on a second, Joe.

[Joe Saul-Sehy]

Where did Dutch people come from?

[OG]

Well, the Pennsylvania Dutch come from Pennsylvania.

[Joe Saul-Sehy]

And the other Dutch people, they come.

[OG]

From somewhere near the Netherlands, right?

[Joe Saul-Sehy]

Nice try.

[OG]

See, the Netherlands is this make believe place where Peter Pan and Tinkerbell come from. Oh my.

[Joe Saul-Sehy]

Oh my is all she can say. That's not true. Apparently that's not true. Netherlands is a different place. Thanks for that one, Doug. Let's get back into it. The bottom 10 on Barry's list when it comes to his investment maxims. Number six, OG the business cycle exists and recessions occur regularly. I love how he starts out with. The business cycle is a thing. It's not a fad. Every business will have a cycle and we're all going to be on it and it is a thing. We've talked about that one much mucco over the years. Number seven. Markets are subject to bouts of extremes. They are, after all, just crowds of people where emotions sometimes prevail over logic. And I love this one, OG because I think that people tend to. Especially what I saw the last couple weeks is everybody suffers from. What if the crowd is right and I'm wrong? I mean, truly, that's what you gotta be thinking the last couple weeks when you see all of this volatility in the market.

[OG]

I mean, how can you not have thought it for the previous few years with technology, specifically the big seven mag. Seven, whatever they want to call it. And if you were diversified, right. Well, maybe, maybe there, maybe the old companies aren't working anymore.

[Joe Saul-Sehy]

This is why I don't need international.

[OG]

I should have all my money and technology. Maybe, you know, I don't know. I heard this example and I hate to use it because I think it draws. It draws us into a different discussion.

[Joe Saul-Sehy]

This is always the lead into, Doug. This is the lead into. But I'm going to use it anyway.

[OG]

But I'm going to use it anyway. Yeah, I hesitate to bring this up, but I think it's a reference from a book that probably the author didn't have too much reason to write it, but it was a Tony Robbins book about money and he got kind of popular for a quick minute on the money front by writing this book. But he always talked about seasons in business. And I always thought that that made a lot of sense. Like there's different, you know, there's winter and spring and summer and fall in business, just like there is in real life. And sometimes the growing season is really long and maybe the harvest season's really long. And then there's a dead period. You know, whether that dead period is economically or it's just a, a change of direction in the business. We've done it with stacking. Benjamin's right. Famously change the whole tenor of the show. It, you know, and it was like winter for a while. It's like, well, this is the dead period. Where we just change everything up and tomorrow we'll stop planting again, you know, so. So to think foolishly that either a, this will always continue to be summer and will never be fall or winter again is silly, or to think it's winter and it will never be spring again is also foolish. I mean, there's definitely times in the Great White north that you think, well, this might be it. It might never be spring again. But it always shows up eventually, sometimes a little later than you expect at some point. But it's seasons of life and seasons of business. Makes a ton of sense. And just do yourself a favor and just remember, if you're getting 25% a year for three years in a row, that's fantastic. However. However, winter might be coming. And if you're in winter and you go, this is minus 20s and it sucks and it's never going to get out, it'll be okay. Little Annie said the sun will come up tomorrow. You can bet your bottom dollar that tomorrow. I thought Doug would just launch right.

[Joe Saul-Sehy]

Into it, start just crooning for us, but nope. Your point that you made, OG is also Barry's number nine. Extrapolating the current trend to infinity or to zero is foolhardy. You shouldn't do it. Don't take the thing and think it's always going to be the thing. Speaking of that, it's funny, Tina on our team sent me something that at the time, there was a lot of consternation about. This is how people reacted in 1993, three, when at Burger King, they decided to try something new, and everybody was sure this was the end of the world. All right, let me see. What will it be? We're here to go. Would you like ketchup on that?

[OG]

Well, large or small fry?

[Joe Saul-Sehy]

Cash or credit? What?

[Doug]

The home of the Whopper is offering cash or credit.

[Joe Saul-Sehy]

I think it's pretty bad if you have to use a credit card when you go to a fast food restaurant for something as little as $3.10.

[OG]

If I use my GM card and I get a 5% rebate by here long enough, I'll be able to buy a pickup truck.

[Joe Saul-Sehy]

Burger King bosses say workers won't have.

[Doug]

To figure out how much change the customer gets back.

[Joe Saul-Sehy]

I just hope it doesn't slow things down at the Cash and carry that people are going to be having to.

[OG]

Call New York and get.

[Joe Saul-Sehy]

Get the confirmation or, you know, whatever it is. Because when I want a Whopper, I want it now. Just another way to spend money.

[OG]

I'm sure it'll Work for people on vacation when they don't have to do something. But I can't imagine it working on a day to day basis here.

[Joe Saul-Sehy]

So far, the smallest credit has been for $2.50.

[Doug]

The largest just over 10.

[Joe Saul-Sehy]

Jamie Costello, News Channel 2. News Channel 2. At the time, the shock of shocks Burger King accepting credit cards and you know how much consternation people had about, oh, this is going to be the end of the world. This is going to be absolutely horrible.

[OG]

It's funny that it's gone the other way now.

[Doug]

I was going to say, I can't remember a time I didn't use a credit card.

[OG]

Places that switch from credit card to cash only. I walked into a diner for breakfast and the sign was on the front door, we accept only cash. And as I'm opening the door, my brain is processing that information as I like what I'm like, wait, what did.

[Doug]

I just immediately you turn and walked right back to your car.

[OG]

I walked up to the, I said, is it cash only or the credit card machines down? She goes, yeah, we just don't take cash. We don't do that credit thing. I'm like, we don't do that credit.

[Joe Saul-Sehy]

Thing, that credit thing.

[OG]

Is there an ATM nearby? She's like, well, I think there's one in town at points like, you know, 30 miles yonder, as it were. And I'm like, ah, just be hungry. Thank you.

[Joe Saul-Sehy]

Welcome to Burger King 1993. Yeah, wow.

[OG]

It's a lot easier to money launder when it's only cash though.

[Joe Saul-Sehy]

It totally is. But think about the resale value of that business when they're, when the owner's trying to sell it. How much money you make? Oh, we've been losing money non stop for 35 years.

[OG]

Do you want the tax return or the books?

[Doug]

The books I show my wife or the books I show my accountant.

[Joe Saul-Sehy]

Which set do you want? Extrapolating the current trend to infinity or zero. Is foolhardy. Is foolhardy. Just like that Burger King video. I want to go back to number eight because, oh gee, this might be my favorite of all. And this entire discussion is based on number eight. Behavior is an important part of performance. Temporary drawdowns become permanent losses if you behave foolishly during inevitable downturns.

[OG]

I mean, ultimately this is the whole beginning, middle and end of financial planning. It's behavior management. Because who, who doesn't want to spend all of their money and then some all the time, you know, like. But you have to have the right behavior to save a little bit and think about the future and live within your means. And, and then the next piece of that is, what do you do with it when you invest it? You have to invest it in a manner that is commensurate with your goals. And once you have the commitment around your goals, then you know what sort of investment portfolio you have to have to reach your goals. You're more likely to be okay with the inevitable ups and downs if you know that those are coming. Behavior issues manifest themselves largely when people are misaligned on timeframes and expectations. Those are the two broad brushstrokes of when things don't go your way, why they're not going your way. You had incorrect expectations or you have incorrect time frames with your money. And, and if you can make sure that your expectations are, are where they should be, you're more likely to stay the course either in good times or not so good times. There's just as much risk on the good times not staying the course. I think especially when there's something going on that's not, you know, you're, you're getting your 8% a year and your buddies air quotes are getting 26 and you're going, what the heck? How come I'm not getting 26? It's because you don't have a 26% portfolio. We've talked about that. You know, you don't get to have 26 and not take the risk of 26. Then your buddies go from plus 26 to minus 40 in a weekend and you go from plus 8 to minus 4. It takes just as much courage in the minus 40s to stay the course as it does in the plus 26s.

[Joe Saul-Sehy]

That's so true. The plus 8 is hard to hang on to when everybody's skying over you.

[OG]

It's big time.

[Joe Saul-Sehy]

Number 10. How many times did you hear this? Man, I used to hear this all the time. Let's wait and see what the government does on this. Let's wait and see. There's this bill, there's this thing, the government's going to Change it. Number 10. And man, we had to have some experts on a year before the election because we knew this was going to happen last year and still happening today. Number 10 on Barry's list. Politics and investing make for terrible bedfellows. I think we just dropped the mic on that one.

[OG]

I just believe so strongly that everybody is so interested in their self preservation and it sounds really like a bad attitude to have, but I actually think it works really well. And this is the One brilliant piece of capitalism is that everybody's in it for themselves. And it sounds really negative to say that, but, but I use this example all the time. If, if all of a sudden they just banned sugar, right? There's no more sugar in drinks, period. Full stop. We can't do it. The fine folks at Coca Cola just don't pack up. They're not like, oh, well, it's been a good run, everybody. You know, does anybody need a box? Anybody need help carrying their stuff out to the car? We'll see at the company picnic, you know, the reunion. Cause the company should know the executives at Cocoa. Holy crap. All my money's in Coke stock. We have. Everything we do is in sugar. Pivot time. We have to figure out a way to keep this company afloat and by God, make money, because my freaking livelihood is tied to the outcome of this organization.

[Joe Saul-Sehy]

Within weeks, Coca Cola researchers come up with a sugar substitute.

[OG]

Yes, Weird. Or you're in, you know, natural gas and government says we can have tons of it, or they say we can't have any of it, or they say we have to get rid of it all or we are going to double down. Like, like all of that is externalities that these really smart people who have their entire livelihoods tied up in that single organization are elbow deep in every day. That's all they know. BP executives know all there is to know about gas and oil in every country in the world because their life depends on it. The fact that they have a $10 million house and a mortgage payment that goes with it, that depends on freaking BP making money in all manner of market conditions across the world. So by being an investor in those organizations, by being an investor in Coke and Tesla and Nvidia and Apple and every company in the world, you're getting the collection of all of that self interest benefiting you at the same time. Because whatever the government, and it's not to, you know, we're in the U.S. so we have the U.S. government, but guess what? These companies do business all over and the Brazilian government has a different attitude about different things. And, and how many times have we.

[Joe Saul-Sehy]

Heard about the eu, Right?

[OG]

I mean, there was a. There was a bunch of stuff about Facebook and data sharing and Google and antitrust lawsuits in the EU and all that sort of. Google's not like, well, I guess we just don't do Google in Europe anymore. Pack it up, fellas. All right.

[Joe Saul-Sehy]

Apple changing everything to USB C. That's.

[OG]

Another great example, right? It's like we're just going to try to figure out a way to make everybody happy and make as much freaking money as we can, because I'm in it for me. And that's the one team of people at that one company, and then multiply that by every company in the entire world all at the same time.

[Doug]

So you're saying corporate greed isn't all that bad.

[OG]

I believe Gordon Gekko.

[Joe Saul-Sehy]

We're back at greed is good.

[OG]

Gordon Gekko had a line. Greed is good. But my point is, I'm all in. This is. This sounds really bad to say, but that's what gives me a lot of comfort when. When the government says, hey, we're going to go this different direction, I go, huh? You know, well, how. Oh, my God, what's that going to do to gold prices? What's that going to do with, you know, with, like. I don't know. I don't care. You know why I don't care? Because there's a bunch of people who have way more money in that company than I do that really care. And that's all they're doing is caring right now and figuring out a solution to make money because they got to make it, because they got a freaking mortgage, just like I do. And so by being a little investor in each one of those pieces, you get to benefit all of that aggregate intellectual capital that's all working in the same direction, which is, how do I get it for me, you know?

[Joe Saul-Sehy]

Ochi and Gordon Gekko separated at birth. Let's listen. The new law of evolution in corporate America seems to be survival of the unfittest.

[Doug]

Well, in my book, you either do.

[OG]

It right or you get eliminated. In the last seven deals that I've.

[Joe Saul-Sehy]

Been involved with, there were 2.5 million stockholders who have made a pre tax.

[OG]

Profit of $12 billion.

[Joe Saul-Sehy]

Thank you.

[OG]

I am not a destroyer of companies.

[Joe Saul-Sehy]

I am a liberator of them. The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works.

[OG]

Greed clarifies, cuts through, and captures the.

[Joe Saul-Sehy]

Essence of the evolutionary spirit.

[OG]

Greed in all of its forms, greed.

[Joe Saul-Sehy]

For life, for money, for love, knowledge, has marked the upward surge of mankind. And greed, you mark my words, will not only save Tel dar paper, but that other malfunctioning corporation called the usa. Thank you very much.

[OG]

I mean, I don't know how to go so far as, say, greed, but you get the idea.

[Joe Saul-Sehy]

And greed at the end of the movie lands you in jail.

[OG]

Land somebody in jail.

[Doug]

Never get more emails from our fans than after this episode.

[OG]

I Don't know that I would go so far as to agree completely with Gordon Gekko.

[Joe Saul-Sehy]

We probably, probably, probably don't.

[Doug]

I mean, how is it going to fix a paper company?

[Joe Saul-Sehy]

Seriously, Tell darn paper.

[OG]

Oh, Blue Horseshoe loves Anacott Steel.

[Joe Saul-Sehy]

We've got time for one more segment. Let's play the game called one stacker said I better call Saul.

[OG]

See?

[Joe Saul-Sehy]

Hi. And Og. This is where we shine a light on a stacker who's hoping, hoping against hope that OG can swoop down and come to his rescue. And right now we're going to shine that light on Cliff because Cliff just wants to help out Mom. Hey, Cliff.

[OG]

Joe, Og and Doug. I have a question. I could Google it, but I want a free shirt. My mom, 84 year old mom has around 3 mil in a Vanguard standard brokerage account. Mostly index funds, but over a third of it is in bonds. On the advice of Vanguard, mostly tax exempt bonds. My question is why would they suggest this? My mom is saying she thinks it's because of the tax exempt advantage. I'm not so sure that makes a whole lot of sense. I'd appreciate any feedback. See you.

[Joe Saul-Sehy]

Thanks for that, Cliff. A lot of tax exempt bonds in the portfolio from the pros. What are they thinking? Og?

[OG]

I don't have the foggiest idea. I mean there's so much here that is unknown specifically around the goals that mom has said that she wants for the money. You know, clearly I would imagine that, that somebody along the way said do you want this to bounce around plus or minus 20% a year or do you want it to be pretty stable? And she went, well, I'm 80, so I want it to be pretty stable. And then off they go and, and ends up with a pretty conservative portfolio. Although he say a third of it. So that could be, you know, like, that could be like a 7030 mix of, of equities versus fixed income, which honestly is not awful. I'm much more of a 1000 fan. Equities to, to fixed income personally, but.

[Joe Saul-Sehy]

But still, she's 80 years old and it's just common rule of thumb type advice. 70, 30.

[OG]

Yeah. I mean honestly, it's probably more aggressive than you'd find for most people at 80, honestly. But there comes a point in time, and I think this is really important. There comes a point in time where you're out of the risk of running out of money. I don't know how much money Mom's drawn from the portfolio. That could be another thing. Maybe that's solving all of her Withdrawal needs by having this income kicked off that's tax free for her state and or federal and all of her income needs are met by this tax free income. Or there could be other reasons. But yeah, I mean there gets to be a point where you have enough money that now you don't have to worry about running out and you can almost become more aggressive then when you get to retirement and you're like, okay, I'm pretty sure I got enough, I'm good. And then the market does well or whatever and you keep your lips above water and you get to the point now where you're like way out in past the surf zone and like life is good. You don't have to be as conservative anymore because you can stand the ups and downs. So now you can start thinking about investing for that 20, 30 year time period again because she needs money when she's 85 and 86 and 87. She also needs money when she's 95, 96 and 97. But that's a small portion of her portfolio relative to how much is left or at least what I would assume. And now she could be Investing for my 50 year old or investing for my 20 year old grandchild that has an 80 year time horizon or a 50 year time horizon.

[Joe Saul-Sehy]

Think about that. When grandma's picking sectors and she's like, how much risk can we take because I've got an 80 year time horizon.

[OG]

Yeah. I mean ultimately this just boils down to what goals mom has with her money. And it sounds like she probably answered a 5 questionnaire thing or the broker on the other end of the phone from Vanguard said, now do you want this money to be aggressive or conservative? And she was like, well, I guess pretty conservative I suppose.

[Joe Saul-Sehy]

And how do you feel about taxes? I don't want to pay extra taxes.

[OG]

Yeah, yeah. Which would you do you like? Yeah, that's such a great line. How do you feel about it? Such a. That's what I would call a doofus question. If you answered any, any way other than the obvious, you're a doofus.

[Joe Saul-Sehy]

Like, well, but how would you feel.

[OG]

If you ran out of money when you retired? Oh, I'd feel great. Why? Like doofus question.

[Joe Saul-Sehy]

Those are the old days when I started in cold calling, you'd ask question, how do you feel about taxes?

[OG]

Well, I feel great. Love giving back to the government. Give to Caesar. With Caesar, it's in the Bible anyways. I mean if she's 70, 30, it's probably not the end of the world, honestly.

[Joe Saul-Sehy]

Thanks, Cliff. For the question. You know what comes with that answer? Gertrude, Mom's friend Gertrude, who operates the machinery, is clearly the puppet master, is going to send you a code so you can go to the Stacking Benjamin store and pick out your swag. So thanks for the call, Cliff. Glad to hear from you. And if you've got a question you want to be as cool as Cliff, head to stacking benjamin.com voicemail and OG will step up and knock another one out of the park on your behalf. I did that because I just had my major league baseball fantasy baseball draft, Doug. Fantasy baseball draft. Juan Soto was my number one pick.

[Doug]

You got number one overall pick?

[Joe Saul-Sehy]

No, I was the number seven pick and I got Juan Soto.

[Doug]

Wow.

[Joe Saul-Sehy]

Yeah. Aaron Judge went first.

[Doug]

Well, everybody knows what happens to a baseball player the season after he signs a contract. So it goes well. You screwed yourself.

[Joe Saul-Sehy]

It goes. It goes very, very, very well. That's that. That's the end. Tail as old as time. They always win. They start off winning, they always win. Isn't that what Barry would say? Yeah. Yeah. Jazz Chisholm was my second pick.

[Doug]

Beg your pardon?

[Joe Saul-Sehy]

Chaz Chisholm.

[Doug]

Okay, that's what I thought. I heard.

[Joe Saul-Sehy]

He plays two positions, third base and outfield. Yeah. Makes it all the way to third base. I also got Emmanuel Class A, by the way.

[Doug]

This is boring.

[Joe Saul-Sehy]

How about that? What? You're a baseball fan.

[Doug]

I know, but not everybody. They don't care that you got a third baseman.

[Joe Saul-Sehy]

Okay.

[Doug]

Anyway, he's probably going to be injured by June.

[Joe Saul-Sehy]

Guess who's coming up on Wednesday. We talked to the Barry Ritholtz on Wednesday, diving deep into philosophies around how not to invest. And as you can see from today, Barry thinks a little bit about the risks of picking the wrong investments. So he's going to dive in even, even more as we talk to the man himself. But we end this podcast by asking you the question, what should be on your to do list after you listen to this? It isn't about what you know. It's about what you do. And, Doug, what are the big three things we should take away from today?

[Doug]

Well, first, Joe, take some advice from Barry Ritholtz's top 10 emotions rule the game. We all get caught up in bad investment decisions when we don't begin with our goal and work backwards. It's far better to avoid big losses than to turn investing into gambling. Second, at one point, the world thought it was weird to use credit to buy a hamburger. So that thing that you think is the end of the world. That too shall pass. But the big lesson next time, forget Beanie Babies. I'm going all in on Funko Pops. Those bad boys are never going out of style. Plus, there's so much fun to say. Funko Pops. This show is the property of SB Podcasts, LLC, Copyright 2020 and is created by Joe Saul Sehive. Joe gets help from a few of our neighborhood friends. You'll find out about our awesome [e-mail] along with the show notes and how you can find us on YouTube and all the usual social media spots. Come say hello.

[Joe Saul-Sehy]

Oh yeah.

[Doug]

And before I go, not only should you not take advice from these nerds, don't take advice from people you don't know. This show is for entertainment purposes only. Only before making any financial decisions, speak with a real financial advisor. I'm Joe's mom's neighbor, Doug. And we'll see you next time back here at the Stacking Benjamin Show.