Podcast Summary: The Stacking Benjamins Show – "Our Advice For Beginning Investors and Recent Graduates" (SB1679)

Episode Information:

• Title: Our Advice For Beginning Investors and Recent Graduates (SB1679)
• Release Date: May 7, 2025
• Hosts: Joe Saul-Sehy and OG
• Guest: Christine Benz, Director of Personal Finance at Morningstar

Introduction: Revisiting a Pandemic-Era Episode

In this episode, hosts Joe Saul-Sehy and OG delve into crucial financial advice tailored for beginning investors and recent graduates. Notably, they revisit content from an original episode aired on June 3, 2020, during the height of the COVID-19 pandemic. This retrospective approach offers listeners a broader perspective on financial anxiety and resilience in uncertain times.

Joe Saul-Sehy (00:00):

"It's a Greatest Hits episode... listen to this, especially now because of... worrying about tariffs and the economy."

Segment 1: The Target Date Fund Critique

A significant portion of the episode focuses on Target Date Funds (TDFs). Joe and OG share their skepticism towards these investment vehicles, highlighting common pitfalls that can hinder financial growth for investors.

Understanding Target Date Funds:

• Definition: TDFs are mutual funds designed to automatically adjust their asset allocation as the target retirement date approaches.
• Mechanism: They typically become more conservative over time, shifting from equities to bonds and other fixed-income securities.

Key Criticisms:

1. Over-Conservative Allocations:

   • OG (20:42):

     "The thing that I hate most about it is this. It assumes that at age retirement you need to be fully conservative... fixed income simply doesn't do it."

   • Joe (24:16):

     "I want to grab you by the shoulders and shake you around and go, are you kidding me?"

   Explanation: As investors near retirement, TDFs often reduce equity exposure too quickly, potentially limiting growth necessary to outpace inflation.

2. Inefficiency and Fees:

   • OG (22:08):

     "They're all at 2%. But that's the problem with them is..."

   • Joe (32:24):

     "They have costs on top of costs. Fund to fund."

   Explanation: Many TDFs carry higher fees compared to low-cost index funds, eroding returns over time.

3. Lack of True Diversification:

   • OG (22:00):

     "They're all at 2%."

   • Joe (22:14):

     "It's like you've got CDs in three different banks and you think you're diversified."

   Explanation: Holding multiple TDFs doesn’t equate to genuine diversification, as they often follow similar allocation strategies.

Alternative Recommendations:

• Customized Investment Strategies:

  • Joe (32:24):

    "Just because you stop at TDFs for an arbitrary reason because we can't spend another half an hour looking this stuff up."

  Advice: Investors should move beyond TDFs by actively managing their asset allocation based on personal goals and risk tolerance.

• Emphasis on Compound Interest:

  • Joe (29:29):

    "Compound interest... the biggest doubling of all."

  Explanation: Maintaining a higher equity allocation longer can harness the power of compound growth, essential for long-term wealth accumulation.

Segment 2: Financial Advice for Recent Graduates

The hosts, along with guest Christine Benz, offer tailored advice for recent graduates stepping into the financial world.

Key Recommendations:

1. Avoiding the Comparison Trap:

   • Christine Benz (36:10):

     "Don't spend too much time comparing yourself to your peers... it's you against your goals."

   • Joe (37:04):

     "It's you against your goals."

   Explanation: Focusing on personal financial goals rather than peer benchmarks enhances long-term financial well-being and reduces unnecessary stress.

2. Building an Emergency Fund:

   • Christine Benz (37:47):

     "Do you have some kind of a safety net... emergency funds."

   • Joe (38:50):

     "A safety net that we all have a better appreciation for a safety net that we did just a few months ago."

   Explanation: Establishing liquid reserves safeguards against unforeseen financial disruptions, providing stability during economic fluctuations.

3. Starting Early with Long-Term Investing:

   • Christine Benz (40:13):

     "You can start an account with as little as $100... get the dollars working as soon as possible."

   • Joe (30:34):

     "If you start earlier, your money will do a lot of the heavy lifting so you don't have to."

   Explanation: Early and consistent investing, even with modest amounts, leverages compound interest, significantly boosting retirement savings over time.

4. Invest Based on Goals:

   • Christine Benz (41:23):

     "Let your goals light the way... diversification if you have shorter term goals."

   • Joe (41:10):

     "You want to let your goals light the way."

   Explanation: Aligning investment strategies with personal financial objectives ensures that portfolios are tailored to meet specific needs, whether short-term or long-term.

5. Investing in Human Capital:

   • Christine Benz (42:23):

     "Investing in additional human capital... certifications that will add to your value."

   Explanation: Enhancing skills and education increases earning potential, providing a solid foundation for future financial growth.

Segment 3: Book Recommendations for New Graduates

Joe and OG share their favorite reads that offer valuable financial and personal development insights.

Recommended Books:

1. "Now What" by Brian Ursu:

   • Joe (46:35):

     "It's called 'Now What' that I really like... link to that also."

   Description: A practical guide for young adults navigating post-college financial landscapes, offering steps to accumulate and manage wealth effectively.

2. "Am I Doing This Right?" by Colleen Bordeaux:

   • OG (49:10):

     "It's just a great wisdom for people just out of college."

   Description: Provides essential financial wisdom and life advice tailored for recent graduates, focusing on building a strong financial foundation.

3. "Set for Life" by Scott Trench:

   • Joe (46:33):

     "It's your guide... how to accumulate your first $10,000."

   Description: Breaks down the process of saving and investing for long-term wealth, particularly useful for those starting their financial journeys.

4. "Broke Millennial" by Erin Lowry:

   • OG (49:18):

     "A guide to living a frugal life with money."

   Description: Focuses on budgeting, managing expenses, and financial independence for millennials navigating economic challenges.

5. "Richest Man in Babylon":

   • OG (49:18):

     "It's a storybook that teaches timeless financial principles."

   Description: A classic narrative offering foundational financial advice through engaging stories set in ancient Babylon.

6. "The Automatic Millionaire" by David Bach:

   • OG (49:30):

     "Set yourself up for systematic saving and investing."

   Description: Advocates for automation in financial planning, making saving and investing effortless and consistent.

7. "Never Eat Alone" by Keith Ferrazzi:

   • Joe (50:36):

     "A classic on networking and building professional relationships."

   Description: Emphasizes the importance of networking and effective relationship-building for career advancement and financial success.

8. "How to Work a Room" by Susan RoAne:

   • Joe (51:16):

     "Great advice on effective networking at events."

   Description: Offers practical strategies for mingling, networking, and making meaningful connections in professional settings.

Segment 4: Listener Questions and Expert Advice

Listeners send in questions seeking personalized financial guidance. The hosts address these inquiries with insights and recommendations.

Question 1: Target Date Funds for a 56-Year-Old Nurse (Tammy’s Question)

Context:

• Tammy, a 56-year-old nurse, recently divorced.
• Plans to retire at 62 with a pension and Social Security.
• Owns her home outright.
• Has significant funds in the Thrift Savings Plan (TSP), primarily in the G Fund (government bonds) and Lifestyle funds.
• Seeks advice on reallocating funds to potentially increase future earnings.

Discussion:

1. Current Allocation Concerns:

   • Joe (62:37):

     "She's got all her money... super conservative... it will run out because of inflation."

   Explanation: Over-conservative investments may fail to keep pace with inflation, jeopardizing long-term financial security.

2. Recommended Strategy:

   • OG (64:25):

     "Assuming your cash flow is fine... invest in equities just like you would have if you had a 10, 20, 30-year time horizon."

   Explanation: Diversifying into equities can enhance growth potential, aligning investments with long-term retirement goals.

3. Balancing Risk and Security:

   • Joe (70:46):

     "Not all of one’s reported hours count as work... concept sound great, but doesn't happen."

   Explanation: While shifting to more aggressive investments can yield higher returns, it also introduces more volatility, requiring careful consideration of risk tolerance.

Conclusion: Tammy should consider reallocating a portion of her G Fund holdings into equity-based Lifestyle funds to balance growth with security, ensuring her investments align with her retirement timeline and financial objectives.

Question 2: Refinancing a 30-Year Mortgage at 3.8% to a 15-Year Mortgage (Peter’s Question)

Context:

• Peter inquires about the viability of refinancing his current 30-year mortgage at a 3.8% interest rate to a 15-year mortgage at a lower rate.

Discussion:

1. Refinancing Benefits:

   • OG (66:36):

     "Borrow money at a low rate and invest money at a high rate to arbitrage the difference."

   Explanation: Refinancing to a shorter-term mortgage can reduce interest payments and accelerate home equity buildup.

2. Investment vs. Payoff:

   • Joe (66:43):

     "Decide where the balance is right for you... historically out ahead."

   Explanation: Allocating the difference between mortgage payments and investing can potentially yield higher returns over time compared to the saved interest from paying off the mortgage early.

3. Practical Considerations:

   • OG (70:47):

     "If it's important to pay your house off early, you can't do it any other way... just have higher payment."

   Explanation: Committing to a shorter-term mortgage requires disciplined financial planning to ensure that additional investments or payments are consistently made.

Conclusion: Refinancing to a 15-year mortgage can be advantageous if Peter is committed to higher monthly payments and disciplined investing. Balancing mortgage payoff with investment growth depends on his financial goals and risk tolerance.

Question 3: Impact of COVID-19 on Globalization (Mary’s Question)

Context:

• Mary references an article from The Economist discussing whether COVID-19 has killed globalization, highlighting disruptions in trade, capital flow, and international movement.

Discussion:

1. Globalization Dynamics:

   • Joe (75:12):

     "The stock market going up over time... companies' ability to make money over time."

   Explanation: Despite global disruptions, companies’ intrinsic ability to generate profits sustains long-term market growth.

2. Personal Impact Over Global Trends:

   • OG (75:12):

     "The real question isn't what does it... it's how does it impact you."

   Explanation: Individuals should focus on how macroeconomic trends affect their personal financial situations rather than being swayed by global uncertainties.

3. Investment Perspective:

   • Joe (73:28):

     "Stock market always, by always I mean over long periods of time has to go up."

   Explanation: Persisting in long-term investments is advisable, as historical trends show sustained market growth despite periodic downturns.

Conclusion: While COVID-19 has disrupted globalization, the long-term trajectory of the stock market remains positive. Individuals should prioritize personal financial strategies over macroeconomic concerns, maintaining focus on long-term investment goals.

Segment 5: Wrap-Up and Final Thoughts

The episode concludes with a blend of humor and reinforcement of key financial principles.

Key Takeaways:

1. Beyond Basic Investing:

   • Joe (77:36):

     "Diversifying your income streams... ensuring your income’s golden goose keeps going."

   Explanation: Diversification isn't limited to investments; diversifying income sources can further secure financial stability.

2. Staying Committed:

   • Joe (70:46):

     "If you're going to do this, follow through to the T."

   Explanation: Commitment to financial strategies, whether investing differently or refinancing, is crucial for success.

3. Practical Advice:

   • Joe and OG emphasize the importance of personalized financial planning, disciplined investing, and focusing on individual goals over external comparisons.

Humorous Interlude:

• Doug’s Trivia Segment: Engages listeners with light-hearted trivia, reinforcing the podcast’s friendly and approachable tone.

Notable Quotes with Timestamps

• Joe Saul-Sehy (00:00):

  "It's a Greatest Hits episode... listen to this, especially now because of... worrying about tariffs and the economy."

• OG (20:42):

  "The thing that I hate most about it is this. It assumes that at age retirement you need to be fully conservative... fixed income simply doesn't do it."

• Christine Benz (36:10):

  "Don't spend too much time comparing yourself to your peers... it's you against your goals."

• Joe Saul-Sehy (37:04):

  "It's you against your goals."

• OG (66:36):

  "Borrow money at a low rate and invest money at a high rate to arbitrage the difference."

• Joe Saul-Sehy (70:46):

  "Just diversifying your income streams... ensuring your income’s golden goose keeps going."

Conclusion

In episode SB1679 of The Stacking Benjamins Show, Joe and OG provide insightful critiques of traditional investment vehicles like Target Date Funds while offering actionable financial advice for new investors and recent graduates. Through engaging dialogue and expert input from Christine Benz, listeners gain a deeper understanding of personal finance strategies tailored to contemporary economic challenges. The episode underscores the importance of personalized financial planning, disciplined investing, and focusing on individual goals to achieve long-term financial security.

Additional Resources:

• Christine Benz's Work: Visit Morningstar.com for free articles and personal finance advice.
• Recommended Books:
  • Now What by Brian Ursu
  • Am I Doing This Right? by Colleen Bordeaux
  • Set for Life by Scott Trench
  • Broke Millennial by Erin Lowry
  • Richest Man in Babylon
  • The Automatic Millionaire by David Bach
  • Never Eat Alone by Keith Ferrazzi
  • How to Work a Room by Susan RoAne

Connect with The Stacking Benjamins Show:

• Website: StackingBenjamins.com
• Twitter: @benjaminscast
• Facebook: Stacking Benjamins Show

Disclaimer: The Stacking Benjamins Show is for entertainment purposes only. Before making any financial decisions, consult with a certified financial advisor.