August 1, 2025 • 48 mins
Have you ever renovated a home? If so, then you remember all of the decisions that you had to make that initially were a lot of fun. Paint colors, light fixtures, tile, even the kind of toilet you wanted… but eventually it gets old and you just want it done. If you can’t relate, even picking up a loaf of bread at the grocery store can be overwhelming- “Should I get honey wheat, 100% whole wheat, 13 grain, the stuff with flax?!” While it can be nice to have options, complicating things doesn’t always make them better. And when it comes to investing, the opposite is actually true. Decision fatigue is what we’re talking about and there can be so many distractions that keep us from reaching our financial goals. Lump sum vs dollar cost averaging, international stocks, ESG investing, real estate, hiring a financial advisor- these are just a few of the potential distractions that we discuss in today’s episode.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Had of Money. I'm Joel and I am Matt,
and today we're asking the question how complicated should investing be? Yeah, So,
(00:28):
speaking of investing, did you realize I didn't realize this
until recently, until a couple of weeks ago, but we
just exited the longest bear market since nineteen forty eight?
Oh wow, isn't that crazy? That is crazy to think
about it. So here's fail that long Agough ultimately it
really did.
Speaker 2 (00:43):
And this is so the reason I'll bring this up
is because I love the fact that we didn't even
really notice that, and hopefully listeners didn't notice that either,
because they were just continuing to invest like clockwork, continuing
to plug money into the market. But oftentimes folks aren't
doing that because they are over complicating things. They're making
it a little too complex, is keeping them from their
financial goals. And so we're going to try to make
(01:06):
sure that does not happen from here on out if
you're listening to this podcast. Yeah, and there's a couple
things I think that might make sense to complicate a
little bit on the investing front. But how complex you
get and what you you know, what you choose to investor.
We're going to talk about a bunch of different ways
you can complicate things and maybe it's good, and then
other ways in which you can overdo it. So that's
the that you should completely avoid. That's the theme of
(01:28):
this of this combo in this episode. What's this You
wanted to talk about getting beers last night or something? Okay,
So we got beers with a friend last night, Uh huh.
And there's free parking all around where we hang but
there's also a paid parking lot when all the free
parking's taken really close to this particular establishment. Yes, And
I was driving from across town and they were I
(01:49):
couldn't find a free parking spot, and I did want
to be a jerk and be late when when we'd
had this hang plan for a little while. So I
paid five bucks for parking.
Speaker 1 (01:58):
And I hate that. There's like not much I hate
more than that. And so, but then we were walking
to the car after hanging out, and he pointed out
a couple of free spots. I didn't know about it.
He's like, these are the this is the low hanging fruit.
No one's ever spots. So hopefully I'll never have to
do it again.
Speaker 2 (02:12):
Okay, So I got a couple of follow ups and okay,
so when you were meeting up, yeah, like with a
friend for beers, how late is too late because there's
like a certain amount of window unless like you're it's
a business meeting and like you're meeting a client. Obviously,
if you're if you're on time, you're late, Like basically
you need to get there early. But when it comes
to like friend hangs, what's your window of time.
Speaker 1 (02:29):
I'd be in past ten minutes late, feels just oh yeah, rude, Okay,
I totally if you're like three to five minutes late,
it's it's probably not.
Speaker 2 (02:36):
A three to five which is why because I saw
you walking into the place last night and I was like,
oh crap, do I need to go ahead and pay
for parking as well? And it was it was like
four or five minutes after and so I was like,
all right, I'm gonna circlecle the blog more time. And okay,
so so you found a free spot five spot I
paid like an idiot. So okay, what are your thoughts
on how do you feel about questionable parking spots like
(02:58):
spots that obviously if something is marked and it says
no parking. I don't. You're not gonna park there. There's
a good chance you might get towed whatever. Make somebody upset.
But I guess I mentioned this because I feel like
for years I have parked in spots that are like, oh,
I'm not totally sure this is a legit spot. It
doesn't say no parking, it's not right in front of
a fire hydrant, there's no red curb that kind of thing.
(03:19):
And I can't remember the last time I got a
parking ticket.
Speaker 1 (03:22):
Yeah, it's a you gotta know what you're risking, right,
and exactly I think I talk a risk I'm willing
to take. A couple of years ago, when I was
meeting a friend down by the airport, he was in
town for a second. We grab beers and I parked
in I think where like they the valet would park cars.
But it was raining super hard, there was nobody out there,
and there were plenty of spots, and so I risked
it and I didn't get a ticket, which is great,
but I also knew I might get a ticket or
(03:43):
somebody might say something to me.
Speaker 2 (03:44):
Did you had you said something to the valet was there?
When they're like a valet there and you're like.
Speaker 1 (03:47):
Hey, or is this an So I don't think there
was anybody there, which is why I was like, all,
I'm just gonna give it a shot. But yeah, well,
paying for parking is a pet piat of mine. Every
once in a you gotta know what you're willing to risk. Yeah,
all right, let's mention the beer we're having on this episode.
This one's called Symptom of Progeny. It's a golden sour
ale that you picked up Matt at burial.
Speaker 2 (04:06):
So and not only did I pick one up for us,
I actually picked up three additional bottles for Kate and
I because we held this at the brewery and we
liked it that much. At the time, I was thinking,
this is a perfect barrel aged golden ale. So I'm
looking forward to sharing it with you today.
Speaker 1 (04:19):
Same here. All right, Well, let's get to the subject
of hand. Matt. We're talking about how complicated investing should be,
and it just made me think back when we were
renovating our home before we made the move to the Burbs,
and I'd never really done that massive of a renovation
and it was kind of fun to pick out specific
finishes for all the stuff we were doing like the tile.
Speaker 2 (04:40):
Yeah, the tile in particular was top yea, and.
Speaker 1 (04:45):
It was just it was a fun endeavor up until
a point, and then it started started to kind of
get old after a while. Right, there were endless options
of everything, and even picking out that tile, it took
a lot of searching and looking to find the exact
kind that we wanted. Then, so at a certain point
in the process I kind of got decision fatigue, right,
discussing paint colors and toilets even which who knew that
(05:08):
you could really go down a rabbit hole of toilets,
but yes you can, especially these days online. There's so many,
so many different toilets you could get, and at some
point you just stop caring which toilet suit your vibe
the best right and investment choices I think can be
similar to that kind of process of when you're renovating
and all the choices you have, the choice overload. There's
so many directions you can go in on the investing front,
(05:30):
all sorts of options that you can consider, and I
do think it for some things in life, more can
be merrier, right, but it can also backfire, and things
that could be fun or could be energizing ways in
which more choice can be beneficial well as possible for
it to go too far, especially especially when we're talking
about building wealth. And so we would say, and something
(05:52):
we talk about on the show regularly is that complicating
things doesn't always make them better, and in fact, the
opposite is typically true, and especially on the investing front.
That's right.
Speaker 2 (06:01):
Yeah, So you even said the term decision fatigue, and
that's when basically you are spending an inordinate amount of
time trying to decide which of the many, many options
you have available to you is going to suit you best.
And when it comes to investing specifically, there are so
many options, so many distractions that can keep us from
investing the way that we should with the vast majority
(06:23):
of our money. And you know, when there is that
much noise, which is often coming from the talking heads
in financial media, it is no wonder that we start thinking,
Like we start asking ourselves, well, maybe I should be
investing internationally, right, Like I should probably diversify more value
stocks in my portfolio, invest in wine and art as well.
I've heard that the returns on ESG funds they're pretty solid,
(06:46):
So maybe that's the direction I should be going. But
many of those questions and considerations, they don't actually help
all that much, and in fact, they end up distracting
us from from doing what it is that we should
be doing. But that doesn't necessarily mean that we should
barrier bury our heads in the sand. We think it
is important to know what the other options out there
are and then why it is that we should either
(07:08):
consider them or ignore them all together.
Speaker 1 (07:10):
That's part of the reason we like Aldi Matt is
because there's just fewer things, fewer choices right at your disposal.
There's like one ketchup and so you just get the
ketchup as you're walking by, and the simplicity, even though
is it Berman's right, I think it's right lines yeah,
And it's just nice to know, okay, cool, I need
ketchup and I don't have to look at the price
pronounce and different brand names and which one's on sale
(07:32):
right now. You just grab the ketchup and it's so easy.
So I think, yeah, we could stand to have a
little more like al They in the way we think
about investing. And part of the reason we're talking about
this today is because when market conditions are good, there's
even more of an inclination to shake things up, to
start overthinking things. And you mentioned, hey, guess what, now,
we've we've ended that longest bear run and we're in
(07:52):
a bowld market right now. When we are in that
bear market, though, when things are going badly, when the
stock market is performing poorly, nobody wants to discuss smart
investing methods. Everyone's just kind of like covering their head.
They're grinning and bearing it. The assumption is that the
market is going to continue to drop, and so why
would you start investing if things are going to continue
along the same path. Yeah, but then again, when things
(08:12):
are going gangbusters, everybody's got an opinion, right. And so
now that we are officially in this bowl market, we're
up twenty percent from from those lows. We're seeing certain
stocks popping in a big way, and I think more
people are more inclined to start fiddling with their portfolio.
It holds a greater allure right now when things are
going up up into the right and the boring index
(08:33):
fund route, it seems more intelligent, I think when the
market is going down, but on the way up, it
just it feels kind of like you should be making
moves to amplify those gains, right, Why settle for average
when certain things are popping off to greater degrees. But
just because it's more exciting or just because it's more enticing,
that doesn't mean it's the direction you should be heading in.
Speaker 2 (08:53):
That's right. Yeah. And also we're not just talking about
the you know, that part of your portfolio that you
want to speculate with that five percent or less that
you'll hear us mention here on the show as a
pressure relief valve. Now, we still think that this is
a good rule of thumb, good thing to maintain. And
for a lot of folks who do like to tinker,
I think having a negligible amount of money that you
(09:14):
can trade just for funzis helps them to stay the
course and to keep doing the boring, old standard, bland
thing with the bulk of their investment dollars. So eat
your heart out with that small percentage of play investment dollars, go.
Speaker 1 (09:28):
To town, do the funkiest things you can.
Speaker 2 (09:30):
Think of the money though, that you're willing to completely lose. Right,
But what we're talking about today is the other ninety
five percent of your portfolio. A few specific temptations and
then why it is that most of them should probably
be avoided.
Speaker 1 (09:43):
Yeah, it's not that we have a problem with folks
getting a little wild and a little speculative. It's just
like five percent wild exactly. You just can't let it
infect all the other areas that you're trying to do
the boring, proven method of building wealth, right, and so
totally if you leg it out of hand, I feel
like it can kind of tank the majority of what
(10:05):
of your assets that are going to be doing just
the standard normal thing, which is investing in a total
overall stock market kind of thing. Right, And we're also
we're not going to focus too much on timing today, right,
whether now is a good time to start investing if
you haven't already, because for most people, dollar cost averaging
is the best approach, right sticking your money into your
(10:25):
four one K, your IRA, or your HSA your Health
Save mus account, which we always talk about as being
an awesome investment vehicle. Most people don't think of it
that way.
Speaker 2 (10:35):
Talked about it on Monday. Yeah, we've been hitting it
more lately. Yeah, Yeah, it's a good thing. It is
because people need to know that. And if you're investing
in each of those vehicles like clockwork. Every time you
get paid without giving in a second thought. This is
the best way to go, right. And so when it
comes to timing, it's not something that we're fans of,
and in fact, it's really easy to screw that up
and actually shoot yourself in the foot as you're trying
(10:56):
to time your entrance into the market in a given
through year. But this strategy, the dollar cost averaging strategy,
it works because you're able to remove your emotions from
the equation, and our emotions can get the best of us.
But that being said, if you really want to optimize
for the highest returns, the data show that lump some
investing at the beginning of the year or as soon
(11:18):
as you're able to fund a retirement account is the
way to go. And I guess the reason we talk
about dollar cost averaging is and not lump some, it's
just because that's how most people get paid. That's the
way it makes most sense. But most folks aren't sitting
on like a massive.
Speaker 1 (11:30):
Pile, you know. But if you are, if you do
have the money in January to fully fund your roth
IRA or something like that, go for it. Go to town.
That's a better thing. To do than do the doing
the dollar cost averaging approach. It's just that specifically, with
something like a four toh one K, it makes sense
to deploy it every single paycheck. So really the timing
(11:51):
that we're talking about is the sooner the better, and
the more regular the better too.
Speaker 2 (11:55):
Yeah, and I mean, I do think it's worth maybe
trying to work towards that lump some kind of mindset
if you're able to slowly over time over the years,
kind of get ahead of it, right, So as opposed
to you get paid, do you invest a portion of
that but stockpiling that ahead type, So if you're able
to max that out, make that payment that year, but
then slowly over time you build up essentially like a
little war chest, so that when the new year does
(12:18):
hit and you are able to invest in those retirement
accounts for the next year. The ability to make that
happen sooner rather than later, it does over the long
haul return you higher returns. But then when it comes
to the actual securities or the actual investments that we're making,
there's also a lot of nuance involved. Some things are
going to be more negotiable than others, and some of
(12:38):
the things we're going to mention today might actually be
worth considering. So we'll talk about some of those alongside
some ways that folks are attempted to invest their money
right now that we think are going to be a
distraction at best, but it actually could be damaging your
future returns at worst.
Speaker 1 (12:52):
Yeah, and it feels like we have more investment options
at our disposal than ever before. So it's like the
opposite of all the like I was talking about, Matt. Now,
it's just like plethora of this range, and not just
inside of our four oh one K, but then even
all of these exterior alternative investment possibilities that we could
partake in that we're getting pitched right and left in
(13:13):
different places, whether it's a newsletter that you read, or
whether it's commercials that you see or social media advertisements.
Speaker 2 (13:20):
Just talking with friends. I feel like it's a conversation
I have more often as I've gotten older. Folks, and
rightly so, are more interested in investing. But just because
folks are talking about it doesn't mean that it's something
that you that you should be considering, because but it's.
Speaker 1 (13:32):
All enticing and it's like, yeah, your eyes can get
as wide as saucers. You're like, wait, I can't invest
in that or this or that. That's amazing, But then
you I think a lot of people lose the plot
if they start to go down that rabbit hole, and
maybe they miss out on the main course. So yeah,
let's talk about some of those added investing complications, when
to say yes, when to say no. We'll get to
more on that right after this.
Speaker 2 (14:02):
All right, we are back and we're talking about the
many different forms that investing can take. And we're gonna
kick this off with international stocks, because this is one
I feel like it's kind of gained some steam lately. Joel.
Neither you nor I have much exposure to international stocks ourselves,
and we actually feel pretty good about our decision. But
(14:23):
there are a lot of smart folks out there who
have a different take. And again, yeah, it's a topic
worth discussing because we get the question from listeners sometimes
as well. But Jack Bogel, he's the founder.
Speaker 1 (14:35):
Of Van Guard.
Speaker 2 (14:36):
He's a pretty brilliant dude.
Speaker 1 (14:38):
Passed away what a year or two ago, Yeah.
Speaker 2 (14:39):
Went all that long ago. But he was famously not
a big fan of international diversification for a number of reasons,
and the truth is, so many of the companies that
you own in either a total stock Market index fund
or an SMP five hundred index fund, they do business overseas.
And that was, honestly, that was Bogel's main argument. Something
like forty percent of s and P five hundred revenues
(15:03):
come from other countries come from overseas, and so folks
who have diversified to more international holdings they haven't done
as well.
Speaker 1 (15:10):
But of course past results.
Speaker 2 (15:12):
Are not indicative of future returns, and so we're not
saying that like, oh, yeah, things, you should only be
investing in US companies. This isn't like a Even though
we love America for many reasons, we think that our
country is a very fertile ground that comes to starting
new industries and the ability for companies to get ahead,
that doesn't necessarily mean that over the long haul that
(15:33):
international stocks may not do better than the total US
stock market. Yeah.
Speaker 1 (15:37):
Well, and the truth is our country is really only
four percent of the world's population, but we have our
stock market. The global wealth is something close to a
quarter of it. So it turns out then when you
look at the numbers, international stocks are relatively inexpensive these days.
Which is part of the reason we're probably seeing more
headlines about them in front of the show. Ben Carlson
Matt who's just a brilliant mind of love reading his blog,
(15:57):
he recently articulated his use on why folk should have
more international stock exposure, and he said, global diversification is
about accepting good enough returns to avoid the potential for
terrible returns at an inopportune time. And I think it's
a really good way of thinking about it. You're not
necessarily if you do choose to invest internationally, doing it
because you're looking for outsized mega returns or anything like that,
(16:19):
and you might see better returns over the next decade,
who knows, But yeah, I think investing internationally it's not
a necessity. But given the outperformance that the US stock
market has seen recently in the past decade plus, international
stocks do look cheaper and more attractive right now. This
is one of those things where I think you can
complicate your life a little bit and add international stocks
(16:41):
to your portfolio. But it's also not a have to.
Speaker 2 (16:44):
Yeah. I think Ben's argument it's more from like a
wealth preservation standpoint, as opposed to him saying that like
oh things are going to be gangbusters overseas in the
coming decade.
Speaker 1 (16:52):
And some folks would point to Japan, whose stock market
was rocket and rolling in the nineteen eighties, and I
think finally just got to nineteen eighty levels like in
recent weeks. So multiple decades, yeah, so like last decades really,
which you know could happen if you're too heavy into
one country.
Speaker 2 (17:08):
Yeah. But so even if you do want some international exposure,
don't go overboard and don't make massive changes quickly, like
all at once. I would consider keeping your portfolio as
it is, keep it intact, but then start investing any
new dollars into either target date funds or into another
international fund like Vanguard's Total World Market Fund. That ticker
symbol for that one is VT. And what's great about
(17:30):
those two, well, especially Vanguards, the costs are so incredibly low.
That's one of the things you get with Vanguard.
Speaker 1 (17:36):
You get that international international exposure, but you're barely paying
more than what you pay for just an S and
P five hundred andX fund.
Speaker 2 (17:41):
It is a little bit more on the target date funds,
but they're I think it's fair because you are getting
an added benefit with those target date funds as it's
changing its allocation over the years.
Speaker 1 (17:50):
And this is and it truly is the most set
it and briget it approach.
Speaker 2 (17:53):
Yeah, well exactly, because I mean, I don't know if
we were planning even to talk about bonds, but a
big part of that too is it changes how much
of its holdings are in bonds, because when you're looking
really really far out, like bonds are more conservative and
so they're there oftentimes is a hedge two stocks. But
then especially with the target date funds that are that
we're quickly approaching, say like at twenty thirty fund, you're
going to see a much higher percentage of the allotment
(18:15):
of the portfolio towards bonds. But that doesn't necessarily mean
though that you should be going out and also buying
a bond index fund, because, especially if you are earlier
on in the wealth building stage of your investing life,
you can afford you can handle to weather out those
the volatility, those storms of ups and downs, and in fact,
you can't afford to not be investing in actual stocks
(18:38):
over the long haul. The closer you get to retirement, yeah,
maybe you do want to de risk a little bit
and see more consistent returns, but you just need to
know that those returns are going to be slightly less
than if it was fully in stocks, but.
Speaker 1 (18:51):
It's going to smooth out the bumps, which, yeah, especially
as you're getting closer to withdrawing those funds, you want
those moms to be smoothed out, because it's going to
be really disheartening and potentially destroying to your lifestyle if
you're let's say your portfolio declined twenty percent or something
in a year you had a twenty twenty two style
year as you are leaving employment. That's a tough pill
(19:12):
to swallow. But let's talk about another thing mat that
can complicate people's portfolios, and that's investing in a socially
responsible way, opting for ESG funds, which is becoming more
and more popular. We're seeing a lot of people kind
of start to sock more of their money into these
kinds of funds. And there's ESG.
Speaker 2 (19:29):
Stands for Environmental, social and governance, so the way a
company is run.
Speaker 1 (19:33):
Yeah, and there's just a lot more interest now in
these funds, and there's kind of a push to get
people to stick their money into these funds which claim
to be investing in ways that are better for the
environment and for other social reasons. But our take really
is that ESG is largely in the eye of the beholder,
and you can't make this up, Matt. But something I
saw last week Philip Morris, which is a company that
(19:56):
makes cigarettes that have killed so many people, millions of people,
They're scoring higher in the ESG ratings than TESLA, like
significantly higher ESG, I know. And so it's just like,
what in the world is ESG trying to accomplish? And
a similar thing, right, companies who are hijacking our attention,
they're making products with slave labor overseas, Like many of
(20:17):
those companies are also ESG darlings. They score well on
these ESG fronts. So I think the lack of defineability
is a massive problem on the ESTREE front. And it's
been sold is this way to do good with your
investment dollars, But that's not necessarily the way it shakes
out in reality.
Speaker 2 (20:31):
Yeah, And ESG funds they actually so they not only
perform more poorly in a financial sense, offering worse returns
to investors, which is the main goal of investing, but
they're also actually worse on these ESG metrics than what
it does these funds say that they're trying to achieve.
This is according to research out of Columbia University. We'll
linked to that in the show notes, but there are
other studies as well that have come to similar conclusions.
(20:54):
Opting for these ESG funds, it's not doing anything much
for the environment or to change corporate governance. And these
these funds, again, you know, they perform more poorly because
they come with higher fees oftentimes not to mention worse results.
So for a while there it seemed like ESG funds
were actually performing better and it's just like, all right,
if that's the direction you want to go based on
(21:15):
past performance. But we're actually seeing that shift recently. But
all of those things are eating into your returns significantly
over time, and we think that most most folks should
actually avoid some of these newer ESG funds and instead
stick to traditional index funds. It's so difficult to define
what it is that these different ESG funds are trying
to achieve. So much of it it's not objective, it's subjective.
(21:37):
And so again for you as an individual, you might
hold different values than what it is that Meta is
trying to accomplish, or Microsoft or or any company regardless
of where they are on the ESG scale. And it's
my subjective view that electric cars are better than cigarettes
for people over time. So I'm just it's I'm curious.
I don't really know how. It feels like there's like
(21:58):
the Wizard of Oz making these decisions about behind some
sort of curtain about which of these companies qualify for
their funds and which ones don't. And until we get
more clarity on that, and until I don't know, it
seems like the funds that actually at the companies that
actually get included in some of those funds are companies.
Speaker 1 (22:14):
That are doing more good. And even then it might
not be in people's best interest as from.
Speaker 2 (22:21):
Financially, like they might be checking all the boxes from
from an ESG standpoint, like maybe Philip Morris doesn't get
to did they not change their name to Atria or whatever.
Speaker 1 (22:30):
That might be Peru.
Speaker 2 (22:30):
I don't know, But regardless, I would say good for
them because somehow they were able to kind of greenwash
their way onto one of these funds. And unfortunately, that's
what it seems like a lot of these companies are
trying to do.
Speaker 1 (22:42):
Yeah, so when we're talking about complicating your investments, there's
some things that might be worth it. Maybe you're saying, oh,
the international stocks thing, that makes sense, and over time,
I do think I want a little more exposure there,
But on the ESG front, I don't think there's really
any reason to complicate things further and basically sign yourself
up for higher fees by stocking more of your money
into these ESG style index funds. Let's talk about something
(23:04):
else that people might do to complicate their investing strategy,
and that would be to incorporate more real estate into
their investing plan. And that's certainly a more complicated form
of investing that you know, we get asked about fairly regularly,
especially because you and I we are real estate investors.
We're mom and popular estate investors. We each own a
handful of properties in the Atlanta area. And the thing
(23:27):
is we're kind of mostly talking about the passive style
investing on this episode, and you and I we think
of real estate investing is more like taking on a
part time job, because it kind of is right not
only in the identifying and purchasing of that property, but
in the managing of that property too. And so if
you're not up for that, if you're not up for
all of the extra work that it's going to take
(23:47):
to own and manage that rental property, that fixes the
calls that you're going to have to get from the tenant,
the things you're gonna have to do to keep up
with that property, you should avoid becoming a landlord. And
you know, like I said this, so we're mostly talking
about the simple forms of investing that most people are
doing with every paycheck. So buying real estate is just
this other ball of wax altogether. It's not a bad one.
(24:09):
It's not something we would necessarily steer people away from.
And in fact, we've done episodes in the past. We'll
link to one or two in the show notes if
you want about investing in real estate and how it
can be a powerful wealth builder. We're happy real estate
investors ourselves. But the truth is there are other more
passive ways to invest in real estate besides buying a
duplex down the street in the town where you live
or whatever. And so if you do want to add
(24:29):
real estate exposure to your investments and you don't want
to go with the part time job route, Matt, you
want to talk about maybe kind of some other ways
to do that.
Speaker 2 (24:37):
You can do that by investing in reates.
Speaker 1 (24:40):
So that's how you say it.
Speaker 2 (24:41):
But it stands for real estate investment trusts, and so
there are the public rates, there are private rates, and
so we're not completely against the private ones, but they
do come with higher fees unless liquidity. Oftentimes your money
is locked up for years at a time. So because
of that we avoid them ourselves. But even publicly traded
reads they're kind of cool. They can give you some
(25:01):
diverse exposure to real estate that you can easily dollar
cost average into. You don't have to plunk down a
large amount of cash, like twenty five thousand dollars is
oftentimes sort of like the minimum amount required to go
into some of.
Speaker 1 (25:13):
These private routs. During like a cocktail hang or something,
you can tell people, oh, I own an apartment building in
New York City, or I own this with that because
you have like this small small sliver, but you do
I've investment in that project, Like yeah, I own some
of Tesla because I own right Boo. But some of
the other reut funds, like Vanguard's V and Q, they
are attractive because they're incredibly low cost. But still even
(25:36):
still most folks they don't need real estate exposure because
the average American homeowner, they have most of their net
worth tied up in their home, in their primary residence.
And guess what last I checked, that's real estate. Yeah,
and so we would.
Speaker 2 (25:49):
Rather see that kind of person more focused on investing
within stocks via index funds. And even if you don't
own your own home, and you're like, well, maybe I
should be investing within a read, I don't own my
my own property. Reads, they actually make up about five
percent of the total stock market. And so guess what,
if you own a total stock market index fund, you're
probably invested in a red but boom, you just didn't
(26:10):
even even realize it.
Speaker 1 (26:11):
Yeah, you have you own real estate.
Speaker 2 (26:13):
You didn't know it.
Speaker 1 (26:14):
Yeah, that's right. Even even if you're a renter, you
own some real estate via your other investments. And we
hung out with somebody recently and he was asking about
investing in real estate or passive income, and of course
we try to dispel the myth that passive income it
is super easy to come by, but we even told yeah, hey,
investing in real estate might make sense for you and
(26:35):
we try to go through all the nitty gritty and
all the details, but it's a harder thing for most
people to accomplish. You have to save up a ton
of money, and then numbers don't always make sense, and
they make sense a lot less in today's environment than
they have than they did years ago. So it's it's
harder for people to get into the real estate game.
But that brings up like one other I guess way
that you can invest in real estate, and that is
(26:55):
syndication funds and indication deals. Yeah, so those are interesting too,
they're sexy, well they're yeah, I think they get some press,
especially on Instagram. I follow some real estate investors and
they're talking about syndication deals all the time. But there
are good syndication deals, a bad syndication deals, and all
the final realick. They're basically like, just imagine someone buying
(27:15):
an apartment complex. Well, it's truly hard to do on
your own. So you get a group of investors to
pool their money together to buy this apartment complex and
then you start, you know, paying all the investors out
as you profit from that apartment complex doing well. And
so the thing is typically you have to have big
money to get in the game, and you have to
be an accredited investor, which means a net worth of
(27:36):
a million dollars or I think an annual income of
like two hundred and fifty k or something like that.
So it's hard to even qualify for that much less
save up the fifty k that it would take to
get in on that one syndication deal. And most people
over complicating their lives and they're probably getting to real
estate heavy in with their investments by partaking a syndication deal.
(27:56):
That's unless they have been like maxing out those retirement
accounts for years and years and years and still they've
got extra money and they just really want to go
down this hole. There's also a lot of pitfalls investing
in the syndication route. We're already seeing some of these
syndications go bust, a lot of investors losing all their money.
That doesn't happen in the stock market nearly to the
(28:17):
same degree.
Speaker 2 (28:17):
That's right, Yeah, I think a lot of folks just
they just want to be able to refer to themselves
as syndicates because that has a nice ring to it
as well. But that is one way that folks could
potentially overcomplicate their investing lies. But how do you untie that? Knot?
What is the simplest and easiest way for you to
invest for your future? We will get to that right
after this.
Speaker 1 (28:47):
All right, Matt, let's keep talking about simple investing in
some of the ways, maybe we try to complicate those investments,
some of which might make sense, in others which don't
make any sense at all.
Speaker 2 (28:58):
And I don't know.
Speaker 1 (28:59):
It makes me think about the game of life. You
remember that game back in the day, you spin the wheel.
You'd like it, never owned it, but I remember playing it, okay,
And like you got a different job which had a
different salary. You maybe had a family, or maybe you
stayed a bachelor. I mean, there's all these different choices
you make along the way.
Speaker 2 (29:13):
It's like the American rat race. Yeah, exactly, it's the
negative way to see it.
Speaker 1 (29:18):
Yeah, well, but there were so many different options. And
the same thing is true in the world investing, like
you can go down a bunch of different paths. Which
one makes sense for you might depend on and largely
does depend on individual circumstances. But I think even still,
there's a lot of broad based advice that we can
give simplicity is typically in the investing world, a better
way to go. And it just makes me think of
like all these super niche platforms that exist now, like
(29:41):
you can invest in farmland, you can invest in wine,
you can invest in whiskey, you can invest in crypto NFTs,
and I mean think about how the n FT's done
over the past eight to twelve months. I mean, I
think that first tweet of Jack Dorsey's went for mega
dollars and now the guy I can't even resell it, right,
and so I think he did resell it, but for
a whole lot less. Yeah, for like pennies on the dollar. Yeah,
(30:02):
unfortunately lost a lot or fortunately because like if what
we would not have wanted was for things to continue
to spiral out of control and continue to but for
that person, for them, yes exactly. But like conveniently we're
hearing nothing nothing about some of those categories these days.
But we actually did a deep dive of some of
those different online investing platforms back in episode four forty six,
(30:23):
if you want to go back and listen, and we
kind of covered the fees but also the returns that
you're likely to get on some of those things. And
and uh yeah, for most folks, all of these more vibrant,
i'll say ways of investing your money, they're just a
massive distraction from the tried and true investing methods, that's right.
Speaker 2 (30:40):
Yeah, If you're not maxing out your roth IRA, if
you're not maxing your four ohine k socking away basically
thirty thousand dollars annually into index funds within those tax
advantage accounts, then you shouldn't even be considering any of
these alternative platforms where you can invest in whiskey or wine.
Speaker 1 (30:57):
Like we were just talking about real estate, and I
think that that's the first thing I would push back
on somebody who's looking to do that. I would say,
have you done all the border the low hanging fruit
of those two accounts. Are you crushing it there? If so,
we can talk about next steps. But if not, like
real estate probably shouldn't be a consideration.
Speaker 2 (31:12):
Sure, yeah, I mean, if you've got money left over
and you just love the novelty of it, then like
it's not the worst thing in the world that you
could dip your toes into. But most people who are
investing in some of these random ways that have popped
up in the past few years, they're just reducing their
meat and potatoes style investing, and that's what we are
trying to make sure that folks aren't taking care of
first in order to funnel dollars into this direction. That's
(31:34):
what we don't want folks to do. They're getting distracted
from the like the bigger prize, and honestly, like this
is to point out that most of the things that
we've talked about aren't necessarily inherently bad investments, except for
like crypto and NFTs, But like some of these other platforms,
there's still investments. It's not like their MLMs or anything
like that where you're totally going to get scammed.
Speaker 1 (31:55):
It's just that there are other.
Speaker 2 (31:57):
Priorities that you we want you to focus on first.
If the alternative is to mindlessly blow that money, is
to mindlessly consume, then I might even say, okay, well
make sure, yeah, maybe you should invest in this platform
if that's if that keeps you from blowing money that
you otherwise would have invested, I think maybe in that
scenario it could actually make sense. But we just want
to make sure that you are eating your veggies, your
(32:19):
mean potatoes first before you start focusing on the exotic.
Speaker 1 (32:23):
Desserts off to the side. I think that's a good
way of putting It's not that these things are inherently bad,
although maybe NFTs are.
Speaker 2 (32:29):
But yeah, but like and crypto Yeah, yet to be determined.
Speaker 1 (32:32):
Some of these sites like I don't mind that their existence, yeah, exactly,
It's just that they are for investors who are doing
the right thing with a ton of their income before
even thinking about crossing the threshold into investing in some
of the random things you can invest in now online.
And let's talk about hiring an advisor for a second, man.
I think that's something that the people might think that
is either going to help them uncomplicate their finances or
(32:55):
they think it might bring more complication. But they think
it might bring some necessary complication their life life. And
it's not that we think that hiring a human is
a bad idea, right, that that a financial advisor can't
stiry in the right direction, can't give you good advice.
Speaker 2 (33:07):
We like humans. We like people. Mostly, it's not all
about we're not doubling down.
Speaker 1 (33:12):
Right. If human advisors were less expensive, I think it
can make sense for more people, but for everyday folks. Again,
I think the hiring an advisor question that pursuit can
be a deviation from what they should really be focused
on and focusing on. If you're barely snagging the match
in your four to one K, you just don't need
(33:32):
to spend hundreds or thousands of dollars to get advice
from a professional. That's something that you can do before
you talk to a profession right, right, It would be
so much better to funnel that money into those accounts,
more money into those accounts to grow for your future.
I think an advisor makes sense for some folks whose
situation is getting more complicated, but even then, we want
folks to only consider fee only financial planners. X Y
(33:55):
Planning Network is probably the best side out there to
find one of those. But I think people like they
start to learn about money and they're like, oh, it
must be time to hire the advisor.
Speaker 2 (34:04):
I need a guy.
Speaker 1 (34:05):
Yeah, girl. The truth is you probably don't unless you're
crushing it. You've been crushing it for years on end. Yeah.
Speaker 2 (34:12):
And I would say based on the fact that you
if you are hearing a say this, that means you're
listening to the podcast, which means like that tells me
that I think you are the kind of person who's
going to proactively take charge of your finances. And I
think that that's a good thing, because what we don't
want are folks to just by default thinking like, basically,
I don't want you to be like me when I
got my first real job and started earning money. I
(34:33):
don't know if I've ever actually talked about this, sure
new podcast logan don't be like that. But I went down.
I was like, oh, man, I'm earning real money now
I'm gonna go talk to this Edward Jones guy. And
so I walked down to walked out, you know, and
drove down the street and went in there and started
talking to him. But even at that point, I realized,
this seems pretty expensive, and I think I can do
(34:54):
what you're talking about with without paying you.
Speaker 1 (34:57):
And I actually just looked this up because I was
curious what it is that they.
Speaker 2 (35:00):
Charge on the first two hundred and fifty thousand dollars.
They charge one point.
Speaker 1 (35:04):
Three five percent.
Speaker 2 (35:05):
Wow, that is expensive, man, And especially for somebody who
is just getting started with their investing, that is not
a fee that they need to be and they need
to be paying. But so one of the ways around
hiring an actual person are is ai it is the
all the robo advisors out there, and some folks were
saying that, you know, this is a happy medium for
(35:27):
a lot of folks, but are those a good choice
and what would make someone opt to go in that direction.
And this is the second time we've referenced Monday's episode,
but we talked about the tax lost harvesting abilities of
a robo advisor like Betterment, which we would say it's
it's probably one of the best ones out there. It
might be the best of the bunch within the robo
advising category. And this is largely because of the like
(35:50):
the behavioral finance elements that they've built into the service.
Speaker 1 (35:54):
Where they're able to help folks to stay the course.
It's not like they offer superior fun choices or anything
like that. There's no there's no secret sauce, right, It's
it's those kind of advisory elements that they will they
help you stay the course, which is really important. That's
one of the best things an advisor can do.
Speaker 2 (36:09):
Right, Yeah, And well then they actually do have advisors
and so like their fees range from like zero point
twenty five percent for kind of like their standard digital plan,
but if you pay a little bit more point four percent,
which I don't like seeing. But with that premium service,
you get access to professional financial planners actual cfps, which
can go a long way when it comes to, you know,
planning out your finals.
Speaker 1 (36:29):
When you think about when you compare it to something
like Edward Jones that you just mentioned.
Speaker 2 (36:32):
That's a third of the price shoving an entire point. Yeah,
for one hundred points a full percentage point, it seems
like it seems like a pretty good deal. What do
you think about on those terms? Yeah, you're paying a
little more, certainly for a robo advisor than if you
were to be doing it yourself, but it's still pretty
inexpensive compared to hiring a traditional human advisor. And no
(36:52):
hate to all those Edward Jones folks.
Speaker 1 (36:54):
Out there, Yeah no, I mean, I'm some people want that.
I guess, like that's not our jam, and that's not
we recommend people. It's a different Yeah, it's a different service,
and some folks kind of want that assistance. They want
to sit down in person, you know, going through that
whole thing. I think if you're going to go the
robo advisor direction, like I don't know. I think Betterments, Yeah,
is one of the best. And that combo of human
(37:16):
advice with the kind of robo platform helping you on
the tax front and on the advice front, I think
it's pretty cool, and you know, for some people it's
worth paying the extra money. But let's talk about Matt
just kind of some guideline, some basics. When we talk
about simplification of investing and how over complicating things, and
(37:37):
of course there are a million ways that you can
complicate your investing strategy, but we really believe that it
doesn't need to be. It shouldn't have to be, and
it shouldn't be terribly complicated. And I think the more
complicated you make it, the less likely people are to
partake in that action. Right when you say there's ten
hoops to jump through, people are going to just walk
away before they start. When the belief is that investing
(38:00):
is hard, a lot of folks decide to skip out altogether.
And so that does so much more harm than maybe
not having quite enough international exposure or missing out on
some years where real estate had super good returns something
like that. Doing the thing, even doing it imperfectly and
doing it regularly is the key it comes down to
the crux of the matter is don't let perfect be
(38:21):
the enemy of good if you're trying to you're just
starting out, and you're like, I want to invest the
exact right way, the perfect way for future returns, and
the perfect way so that I stay the course. I mean,
I think my advice would be get started and then
continue learning and you can iterate over time if you want.
But simplicity is better than perfection.
Speaker 2 (38:40):
So this kind of makes me think of why I
don't necessarily like talking about my budget in the fact
that we've made it available, which I guess I'm doing
that by even sharing this example. But the reason I
don't necessarily like pushing it out there for folks is
because it's too complicated for most folks. It's not something that,
especially if you've never budgeted before, this shouldn't be your
first step towards tracking your expenses and budgeting for the months.
(39:03):
And so, in a similar way, we want folks to
be successful rather than you know, having all the i's dotted,
all the t's crossed, and have anything's perfect, where you
end up kind of, you know, falling off the wagon.
And so we want folks to opt for what we
would call a minimalist portfolio. We've always said that a
total stock market or at S and P five hundred
fund it gets folks who are in the wealth building
(39:24):
phase of their lives basically what it is that they
need without overthinking it. And target date funds they are
another great set it and forget it approach for money
that you're stalking away inside of your retirement accounts. And
so it's not that you can't diversify further. You know,
if you wanted to say, add some a little more
real estate exposure via a rate, If you want to
(39:46):
do that, that's great, you do you. It's just that
the minimalist route, investing within a single fund or maybe
two that are already well diversified, this is an effective
strategy that will get you where it is that you
want to be. Yeah, man, I love that. A like
the idea of just keeping it as simple as possible,
keeping it minimalist, and then doing the right thing over
and over right. So the next thing would we mentioned
(40:08):
is to have that plan and then stick to it,
because the best plan is something that you can stick to,
and it's it's easy to make complicated plans and then it.
But it's easier to break those plans too, right, because
you're like, wait a second, I got to step three.
There's thirty more steps. I'm just gonna bow out right now.
And that's what makes like, it makes me think of
(40:28):
the app Couch to five K. Heard someone talking about
that recently and how it changed their life. They were
nervous to start running. But with that app, it's specifically
it like slowly changes the amount of time where you're
running and walking so that you don't feel overwhelmed. After
two days of You're like, if you try to go
run a five k and you've been like, haveing run
(40:49):
at all in years, good luck? Right, you're probably gonna
get demoralized. But if you take this couch to five
k route and you try to build up over I
don't know, the course of something like three months, you
are in all likelihood gonna running awesome five k a
recipe for success. Yeah you might even keep going go
ten k pretty soon, right, But yeah, So the same
is true with your investments. The most important thing is
(41:09):
shoveling money into those retirement accounts, consistently getting those dollars
invested in a diversified manner. So come up with the plan,
and hopefully that plan is minimalist in nature, and then
stick to it, do it regularly, do it religiously. That's
where dollar cost averaging comes in, right. If you just
kind of keep doing it with every paycheck, then without overthinking,
without overthinking it, you're going to be ahead, vastly ahead
(41:31):
of the majority of your peers on the investing front. Yeah,
and so you said kind of shoveling money into those accounts,
Which makes me think of the fact that especially early on,
when you are just getting started with your investing, when
you see fluctuations in the market, and especially like we've
seen over the past several weeks we've seen a booming market,
if you are just getting started with your investments, you're
(41:52):
not going to see much change when it comes to
the size of your portfolio because you're just getting started. Truly,
what has the biggest impact, what moves the needle of
the most is your savings rate and how much money
you are able to sock away versus you like we've
been investing for like ten fifteen, like coming up on
twenty years, and we've got bigger nest eggs. That's bottom
line than when we started investing fifteen twenty years ago,
(42:15):
and now when the market goes up, it's a little
more fun, right Like, it's a little more fun to
see the balances increase a little bit when you check
it at the end of the month. But that would
not have happened if we weren't sacrificing, cutting back on expenses,
finding ways to invest more while we were younger. Basically,
you kind of have to like pay your dues a
little bit. And once that nest egg gets to be
(42:36):
a certain size, well market fluctuations and a growing market,
that's when you get to see the beauty of the
compound of compounding returns, because compounding returns and interest doesn't
make a huge dent in those early years. On the
back end is when you start to see that.
Speaker 1 (42:51):
You can totally split hairs about how much money you've
got allocated international, how much exposure you have to real estate,
whether or not you're investing in vintage lines, whatever. I mean,
you can split hairs over all that stuff, and what
the exact right percentage is for every single thing. Do
I need more small cap value in my portfolio? Bloody
bloody blah. And it's not that those conversations are completely worthless.
(43:14):
But you're right, Like, the biggest change that we can
make most easily that comes with the less stress and
the most likelihood of follow through is to keep it
simple and to just ramp up the percentage that we're
that we're dedicating each and every month, each every paycheck
to those accounts, Like that is the spigot that we
can turn on the most that's going to lead to
the largest growth in nest egg. You can try to
(43:36):
get that perfect allocation, create the most diverse investment account possible,
but the reality is then you're probably not quite as
focused on that more important lever and ultimately, yeah, you
might have the most diverse portfolio on earth, but you're
the perfectly diverse. Yeah, but you're missing out than on
the most important thing. It's kind of like, well we
(43:56):
talked about back not too long ago with frugality, how
it has to men wishing returns.
Speaker 2 (44:01):
Same thing. People.
Speaker 1 (44:02):
If you're so focused on frugal, you're probably not going
to be as thoughtful about ramping up your income. And
this is true too. I think the more you think
about how your portfolio is allocated, boom, you've lost the
plot and you're focused too much on the little things.
You're majoring on the miners, that's right.
Speaker 2 (44:16):
Yeah, And then and finally too, I mean, so one
of the reasons we're talking about this today is because
of the timeliness of it.
Speaker 1 (44:23):
Right, So, as the.
Speaker 2 (44:23):
Market is booming and we've seen some you know, fluctuation recently,
but folks, it becomes something that folks want to talk
about more. And what we want to encourage you to
do is like, once you do have this plan you've
heard us talk through, Hey, maybe you should just be
looking at a total stock market index fund or an
SMP five hundred index fund, or maybe a target date fund.
Once you have that plan, ignore everything else. We want
you to put the blinders on. We want you to
(44:46):
limit the noise, especially when it comes to the different
headlines that you read. But when the market is tanking,
folks are like you batten down the hatches, right, Like
you are not interested in taking some of these risks.
But like you were saying earlier, when things are booming,
everybody feels brilliant, everybody feels rich, and they're thinking, ah, well,
what else can I do in order to make this
(45:08):
ride last even longer? Basically, and we that is the
opposite of what you actually should be doing. And so
while everyone else is out there figuring out different ways
that they can invest in the latest sexy thing like
and who knows what the next iteration of distracting investment
opportunities are going to come down.
Speaker 1 (45:26):
The pike, right like, they'll come they oh, they.
Speaker 2 (45:28):
Absolutely will, but they are not things that you need
to be paying attention to. And so, yeah, we wanted
to talk about the different ways that you can simplify
how it is that you invest in. Truly, it does
not need to be all that complicated.
Speaker 1 (45:40):
Agreed and simple doesn't mean unsophisticated, right, Simple can still
be diverse, and it can it can give you exactly
what you need without ever thinking if.
Speaker 2 (45:48):
You think the S and P five hundred NIX fund
or the total stock market in NIX fund is unsophisticated.
Speaker 1 (45:53):
Log into all of.
Speaker 2 (45:54):
The different companies that make up sure that that fund
consists of.
Speaker 1 (45:59):
Back to see and go back and listen maybe to
our episode with Robin Wigglesworth about his book Trillions and
how Jack Bobol kind of really started the index fund
movement and it's been a powerful one. So yeah, it's
investing is the one thing where the more effort you
put in, the worst your returns get. Typically, simplicity makes
(46:20):
a whole lot of sense. We'll link to that interview
as well. Yeah, all right, Matt let's mention as come
back to the beer we had. This one is called
Symptom of Progeny. It's a golden sour ale fermented with
spontaneous culture. What were your thoughts on this one? I
really like it.
Speaker 2 (46:33):
What do you think about it?
Speaker 1 (46:34):
I really, I guess I say it's like brightly tart.
It's got chris. I know there's no fruit in this.
It's got peach fuzzy elements. Oh yeah, big time dude.
So truly.
Speaker 2 (46:45):
I was curious because we've been drinking some really big,
really sweet stouts from Burial recently, and because of that,
this one almost seems like a touch to tart. But
I think it's because of all the sweet beers that
we've been drinking like this. It's still such a bright, crisp, refreshing,
perfectly aged, perfectly oky golden ale. It's exactly what I
want out of a golden golden ail. And it's I mean,
(47:07):
there's a good reason why Kate and I mean we
picked up several bottles of us to bring back home
to enjoy, because we certainly enjoyed this one.
Speaker 1 (47:12):
It just makes me think Burial does some of the
best beers in every genre.
Speaker 2 (47:16):
Oh yeah, before we were talking about just how they're
crushing it. They crush it with their their New England
hazes and obviously there are stouts that we've been enjoying recently.
But yes, this is a barely age sour.
Speaker 1 (47:25):
Do they make bad beers? I don't think so. Not
completely knock out of the park. Yeah for sure. All right,
that's gonna do it for this episode. You can find
links to some of the stuff we mentioned up on
the show notes at our website howtomoney dot com, and
of course you can sign up for our how to
Money newsletter. One came out just yesterday. You missed it,
but you'll make that next one if you go sign
up at hoddam money dot com slash newsletter or.
Speaker 2 (47:46):
You didn't miss it because you're one of the select few.
You're one of the chosen.
Speaker 1 (47:50):
No, it's growing. It's a growing list.
Speaker 2 (47:51):
There's a lot of people in there, but we just
want we're not selective everybody to get anybody and everybody
the free glory that is the Hadding Money newsletter. But
that's right man, all right. So that's gonna be it
for this one until next time. Best friends Out, Best
Friends Out,
Welcome to Had of Money. I'm Joel and I am Matt,
and today we're asking the question how complicated should investing be? Yeah, So,
(00:28):
speaking of investing, did you realize I didn't realize this
until recently, until a couple of weeks ago, but we
just exited the longest bear market since nineteen forty eight?
Oh wow, isn't that crazy? That is crazy to think
about it. So here's fail that long Agough ultimately it
really did.
Speaker 2 (00:43):
And this is so the reason I'll bring this up
is because I love the fact that we didn't even
really notice that, and hopefully listeners didn't notice that either,
because they were just continuing to invest like clockwork, continuing
to plug money into the market. But oftentimes folks aren't
doing that because they are over complicating things. They're making
it a little too complex, is keeping them from their
financial goals. And so we're going to try to make
(01:06):
sure that does not happen from here on out if
you're listening to this podcast. Yeah, and there's a couple
things I think that might make sense to complicate a
little bit on the investing front. But how complex you
get and what you you know, what you choose to investor.
We're going to talk about a bunch of different ways
you can complicate things and maybe it's good, and then
other ways in which you can overdo it. So that's
the that you should completely avoid. That's the theme of
(01:28):
this of this combo in this episode. What's this You
wanted to talk about getting beers last night or something? Okay,
So we got beers with a friend last night, Uh huh.
And there's free parking all around where we hang but
there's also a paid parking lot when all the free
parking's taken really close to this particular establishment. Yes, And
I was driving from across town and they were I
(01:49):
couldn't find a free parking spot, and I did want
to be a jerk and be late when when we'd
had this hang plan for a little while. So I
paid five bucks for parking.
Speaker 1 (01:58):
And I hate that. There's like not much I hate
more than that. And so, but then we were walking
to the car after hanging out, and he pointed out
a couple of free spots. I didn't know about it.
He's like, these are the this is the low hanging fruit.
No one's ever spots. So hopefully I'll never have to
do it again.
Speaker 2 (02:12):
Okay, So I got a couple of follow ups and okay,
so when you were meeting up, yeah, like with a
friend for beers, how late is too late because there's
like a certain amount of window unless like you're it's
a business meeting and like you're meeting a client. Obviously,
if you're if you're on time, you're late, Like basically
you need to get there early. But when it comes
to like friend hangs, what's your window of time.
Speaker 1 (02:29):
I'd be in past ten minutes late, feels just oh yeah, rude, Okay,
I totally if you're like three to five minutes late,
it's it's probably not.
Speaker 2 (02:36):
A three to five which is why because I saw
you walking into the place last night and I was like,
oh crap, do I need to go ahead and pay
for parking as well? And it was it was like
four or five minutes after and so I was like,
all right, I'm gonna circlecle the blog more time. And okay,
so so you found a free spot five spot I
paid like an idiot. So okay, what are your thoughts
on how do you feel about questionable parking spots like
(02:58):
spots that obviously if something is marked and it says
no parking. I don't. You're not gonna park there. There's
a good chance you might get towed whatever. Make somebody upset.
But I guess I mentioned this because I feel like
for years I have parked in spots that are like, oh,
I'm not totally sure this is a legit spot. It
doesn't say no parking, it's not right in front of
a fire hydrant, there's no red curb that kind of thing.
(03:19):
And I can't remember the last time I got a
parking ticket.
Speaker 1 (03:22):
Yeah, it's a you gotta know what you're risking, right,
and exactly I think I talk a risk I'm willing
to take. A couple of years ago, when I was
meeting a friend down by the airport, he was in
town for a second. We grab beers and I parked
in I think where like they the valet would park cars.
But it was raining super hard, there was nobody out there,
and there were plenty of spots, and so I risked
it and I didn't get a ticket, which is great,
but I also knew I might get a ticket or
(03:43):
somebody might say something to me.
Speaker 2 (03:44):
Did you had you said something to the valet was there?
When they're like a valet there and you're like.
Speaker 1 (03:47):
Hey, or is this an So I don't think there
was anybody there, which is why I was like, all,
I'm just gonna give it a shot. But yeah, well,
paying for parking is a pet piat of mine. Every
once in a you gotta know what you're willing to risk. Yeah,
all right, let's mention the beer we're having on this episode.
This one's called Symptom of Progeny. It's a golden sour
ale that you picked up Matt at burial.
Speaker 2 (04:06):
So and not only did I pick one up for us,
I actually picked up three additional bottles for Kate and
I because we held this at the brewery and we
liked it that much. At the time, I was thinking,
this is a perfect barrel aged golden ale. So I'm
looking forward to sharing it with you today.
Speaker 1 (04:19):
Same here. All right, Well, let's get to the subject
of hand. Matt. We're talking about how complicated investing should be,
and it just made me think back when we were
renovating our home before we made the move to the Burbs,
and I'd never really done that massive of a renovation
and it was kind of fun to pick out specific
finishes for all the stuff we were doing like the tile.
Speaker 2 (04:40):
Yeah, the tile in particular was top yea, and.
Speaker 1 (04:45):
It was just it was a fun endeavor up until
a point, and then it started started to kind of
get old after a while. Right, there were endless options
of everything, and even picking out that tile, it took
a lot of searching and looking to find the exact
kind that we wanted. Then, so at a certain point
in the process I kind of got decision fatigue, right,
discussing paint colors and toilets even which who knew that
(05:08):
you could really go down a rabbit hole of toilets,
but yes you can, especially these days online. There's so many,
so many different toilets you could get, and at some
point you just stop caring which toilet suit your vibe
the best right and investment choices I think can be
similar to that kind of process of when you're renovating
and all the choices you have, the choice overload. There's
so many directions you can go in on the investing front,
(05:30):
all sorts of options that you can consider, and I
do think it for some things in life, more can
be merrier, right, but it can also backfire, and things
that could be fun or could be energizing ways in
which more choice can be beneficial well as possible for
it to go too far, especially especially when we're talking
about building wealth. And so we would say, and something
(05:52):
we talk about on the show regularly is that complicating
things doesn't always make them better, and in fact, the
opposite is typically true, and especially on the investing front.
That's right.
Speaker 2 (06:01):
Yeah, So you even said the term decision fatigue, and
that's when basically you are spending an inordinate amount of
time trying to decide which of the many, many options
you have available to you is going to suit you best.
And when it comes to investing specifically, there are so
many options, so many distractions that can keep us from
investing the way that we should with the vast majority
(06:23):
of our money. And you know, when there is that
much noise, which is often coming from the talking heads
in financial media, it is no wonder that we start thinking,
Like we start asking ourselves, well, maybe I should be
investing internationally, right, Like I should probably diversify more value
stocks in my portfolio, invest in wine and art as well.
I've heard that the returns on ESG funds they're pretty solid,
(06:46):
So maybe that's the direction I should be going. But
many of those questions and considerations, they don't actually help
all that much, and in fact, they end up distracting
us from from doing what it is that we should
be doing. But that doesn't necessarily mean that we should
barrier bury our heads in the sand. We think it
is important to know what the other options out there
are and then why it is that we should either
(07:08):
consider them or ignore them all together.
Speaker 1 (07:10):
That's part of the reason we like Aldi Matt is
because there's just fewer things, fewer choices right at your disposal.
There's like one ketchup and so you just get the
ketchup as you're walking by, and the simplicity, even though
is it Berman's right, I think it's right lines yeah,
And it's just nice to know, okay, cool, I need
ketchup and I don't have to look at the price
pronounce and different brand names and which one's on sale
(07:32):
right now. You just grab the ketchup and it's so easy.
So I think, yeah, we could stand to have a
little more like al They in the way we think
about investing. And part of the reason we're talking about
this today is because when market conditions are good, there's
even more of an inclination to shake things up, to
start overthinking things. And you mentioned, hey, guess what, now,
we've we've ended that longest bear run and we're in
(07:52):
a bowld market right now. When we are in that
bear market, though, when things are going badly, when the
stock market is performing poorly, nobody wants to discuss smart
investing methods. Everyone's just kind of like covering their head.
They're grinning and bearing it. The assumption is that the
market is going to continue to drop, and so why
would you start investing if things are going to continue
along the same path. Yeah, but then again, when things
(08:12):
are going gangbusters, everybody's got an opinion, right. And so
now that we are officially in this bowl market, we're
up twenty percent from from those lows. We're seeing certain
stocks popping in a big way, and I think more
people are more inclined to start fiddling with their portfolio.
It holds a greater allure right now when things are
going up up into the right and the boring index
(08:33):
fund route, it seems more intelligent, I think when the
market is going down, but on the way up, it
just it feels kind of like you should be making
moves to amplify those gains, right, Why settle for average
when certain things are popping off to greater degrees. But
just because it's more exciting or just because it's more enticing,
that doesn't mean it's the direction you should be heading in.
Speaker 2 (08:53):
That's right. Yeah. And also we're not just talking about
the you know, that part of your portfolio that you
want to speculate with that five percent or less that
you'll hear us mention here on the show as a
pressure relief valve. Now, we still think that this is
a good rule of thumb, good thing to maintain. And
for a lot of folks who do like to tinker,
I think having a negligible amount of money that you
(09:14):
can trade just for funzis helps them to stay the
course and to keep doing the boring, old standard, bland
thing with the bulk of their investment dollars. So eat
your heart out with that small percentage of play investment dollars, go.
Speaker 1 (09:28):
To town, do the funkiest things you can.
Speaker 2 (09:30):
Think of the money though, that you're willing to completely lose. Right,
But what we're talking about today is the other ninety
five percent of your portfolio. A few specific temptations and
then why it is that most of them should probably
be avoided.
Speaker 1 (09:43):
Yeah, it's not that we have a problem with folks
getting a little wild and a little speculative. It's just
like five percent wild exactly. You just can't let it
infect all the other areas that you're trying to do
the boring, proven method of building wealth, right, and so
totally if you leg it out of hand, I feel
like it can kind of tank the majority of what
(10:05):
of your assets that are going to be doing just
the standard normal thing, which is investing in a total
overall stock market kind of thing. Right, And we're also
we're not going to focus too much on timing today, right,
whether now is a good time to start investing if
you haven't already, because for most people, dollar cost averaging
is the best approach, right sticking your money into your
(10:25):
four one K, your IRA, or your HSA your Health
Save mus account, which we always talk about as being
an awesome investment vehicle. Most people don't think of it
that way.
Speaker 2 (10:35):
Talked about it on Monday. Yeah, we've been hitting it
more lately. Yeah, Yeah, it's a good thing. It is
because people need to know that. And if you're investing
in each of those vehicles like clockwork. Every time you
get paid without giving in a second thought. This is
the best way to go, right. And so when it
comes to timing, it's not something that we're fans of,
and in fact, it's really easy to screw that up
and actually shoot yourself in the foot as you're trying
(10:56):
to time your entrance into the market in a given
through year. But this strategy, the dollar cost averaging strategy,
it works because you're able to remove your emotions from
the equation, and our emotions can get the best of us.
But that being said, if you really want to optimize
for the highest returns, the data show that lump some
investing at the beginning of the year or as soon
(11:18):
as you're able to fund a retirement account is the
way to go. And I guess the reason we talk
about dollar cost averaging is and not lump some, it's
just because that's how most people get paid. That's the
way it makes most sense. But most folks aren't sitting
on like a massive.
Speaker 1 (11:30):
Pile, you know. But if you are, if you do
have the money in January to fully fund your roth
IRA or something like that, go for it. Go to town.
That's a better thing. To do than do the doing
the dollar cost averaging approach. It's just that specifically, with
something like a four toh one K, it makes sense
to deploy it every single paycheck. So really the timing
(11:51):
that we're talking about is the sooner the better, and
the more regular the better too.
Speaker 2 (11:55):
Yeah, and I mean, I do think it's worth maybe
trying to work towards that lump some kind of mindset
if you're able to slowly over time over the years,
kind of get ahead of it, right, So as opposed
to you get paid, do you invest a portion of
that but stockpiling that ahead type, So if you're able
to max that out, make that payment that year, but
then slowly over time you build up essentially like a
little war chest, so that when the new year does
(12:18):
hit and you are able to invest in those retirement
accounts for the next year. The ability to make that
happen sooner rather than later, it does over the long
haul return you higher returns. But then when it comes
to the actual securities or the actual investments that we're making,
there's also a lot of nuance involved. Some things are
going to be more negotiable than others, and some of
(12:38):
the things we're going to mention today might actually be
worth considering. So we'll talk about some of those alongside
some ways that folks are attempted to invest their money
right now that we think are going to be a
distraction at best, but it actually could be damaging your
future returns at worst.
Speaker 1 (12:52):
Yeah, and it feels like we have more investment options
at our disposal than ever before. So it's like the
opposite of all the like I was talking about, Matt. Now,
it's just like plethora of this range, and not just
inside of our four oh one K, but then even
all of these exterior alternative investment possibilities that we could
partake in that we're getting pitched right and left in
(13:13):
different places, whether it's a newsletter that you read, or
whether it's commercials that you see or social media advertisements.
Speaker 2 (13:20):
Just talking with friends. I feel like it's a conversation
I have more often as I've gotten older. Folks, and
rightly so, are more interested in investing. But just because
folks are talking about it doesn't mean that it's something
that you that you should be considering, because but it's.
Speaker 1 (13:32):
All enticing and it's like, yeah, your eyes can get
as wide as saucers. You're like, wait, I can't invest
in that or this or that. That's amazing, But then
you I think a lot of people lose the plot
if they start to go down that rabbit hole, and
maybe they miss out on the main course. So yeah,
let's talk about some of those added investing complications, when
to say yes, when to say no. We'll get to
more on that right after this.
Speaker 2 (14:02):
All right, we are back and we're talking about the
many different forms that investing can take. And we're gonna
kick this off with international stocks, because this is one
I feel like it's kind of gained some steam lately. Joel.
Neither you nor I have much exposure to international stocks ourselves,
and we actually feel pretty good about our decision. But
(14:23):
there are a lot of smart folks out there who
have a different take. And again, yeah, it's a topic
worth discussing because we get the question from listeners sometimes
as well. But Jack Bogel, he's the founder.
Speaker 1 (14:35):
Of Van Guard.
Speaker 2 (14:36):
He's a pretty brilliant dude.
Speaker 1 (14:38):
Passed away what a year or two ago, Yeah.
Speaker 2 (14:39):
Went all that long ago. But he was famously not
a big fan of international diversification for a number of reasons,
and the truth is, so many of the companies that
you own in either a total stock Market index fund
or an SMP five hundred index fund, they do business overseas.
And that was, honestly, that was Bogel's main argument. Something
like forty percent of s and P five hundred revenues
(15:03):
come from other countries come from overseas, and so folks
who have diversified to more international holdings they haven't done
as well.
Speaker 1 (15:10):
But of course past results.
Speaker 2 (15:12):
Are not indicative of future returns, and so we're not
saying that like, oh, yeah, things, you should only be
investing in US companies. This isn't like a Even though
we love America for many reasons, we think that our
country is a very fertile ground that comes to starting
new industries and the ability for companies to get ahead,
that doesn't necessarily mean that over the long haul that
(15:33):
international stocks may not do better than the total US
stock market. Yeah.
Speaker 1 (15:37):
Well, and the truth is our country is really only
four percent of the world's population, but we have our
stock market. The global wealth is something close to a
quarter of it. So it turns out then when you
look at the numbers, international stocks are relatively inexpensive these days.
Which is part of the reason we're probably seeing more
headlines about them in front of the show. Ben Carlson
Matt who's just a brilliant mind of love reading his blog,
(15:57):
he recently articulated his use on why folk should have
more international stock exposure, and he said, global diversification is
about accepting good enough returns to avoid the potential for
terrible returns at an inopportune time. And I think it's
a really good way of thinking about it. You're not
necessarily if you do choose to invest internationally, doing it
because you're looking for outsized mega returns or anything like that,
(16:19):
and you might see better returns over the next decade,
who knows, But yeah, I think investing internationally it's not
a necessity. But given the outperformance that the US stock
market has seen recently in the past decade plus, international
stocks do look cheaper and more attractive right now. This
is one of those things where I think you can
complicate your life a little bit and add international stocks
(16:41):
to your portfolio. But it's also not a have to.
Speaker 2 (16:44):
Yeah. I think Ben's argument it's more from like a
wealth preservation standpoint, as opposed to him saying that like
oh things are going to be gangbusters overseas in the
coming decade.
Speaker 1 (16:52):
And some folks would point to Japan, whose stock market
was rocket and rolling in the nineteen eighties, and I
think finally just got to nineteen eighty levels like in
recent weeks. So multiple decades, yeah, so like last decades really,
which you know could happen if you're too heavy into
one country.
Speaker 2 (17:08):
Yeah. But so even if you do want some international exposure,
don't go overboard and don't make massive changes quickly, like
all at once. I would consider keeping your portfolio as
it is, keep it intact, but then start investing any
new dollars into either target date funds or into another
international fund like Vanguard's Total World Market Fund. That ticker
symbol for that one is VT. And what's great about
(17:30):
those two, well, especially Vanguards, the costs are so incredibly low.
That's one of the things you get with Vanguard.
Speaker 1 (17:36):
You get that international international exposure, but you're barely paying
more than what you pay for just an S and
P five hundred andX fund.
Speaker 2 (17:41):
It is a little bit more on the target date funds,
but they're I think it's fair because you are getting
an added benefit with those target date funds as it's
changing its allocation over the years.
Speaker 1 (17:50):
And this is and it truly is the most set
it and briget it approach.
Speaker 2 (17:53):
Yeah, well exactly, because I mean, I don't know if
we were planning even to talk about bonds, but a
big part of that too is it changes how much
of its holdings are in bonds, because when you're looking
really really far out, like bonds are more conservative and
so they're there oftentimes is a hedge two stocks. But
then especially with the target date funds that are that
we're quickly approaching, say like at twenty thirty fund, you're
going to see a much higher percentage of the allotment
(18:15):
of the portfolio towards bonds. But that doesn't necessarily mean
though that you should be going out and also buying
a bond index fund, because, especially if you are earlier
on in the wealth building stage of your investing life,
you can afford you can handle to weather out those
the volatility, those storms of ups and downs, and in fact,
you can't afford to not be investing in actual stocks
(18:38):
over the long haul. The closer you get to retirement, yeah,
maybe you do want to de risk a little bit
and see more consistent returns, but you just need to
know that those returns are going to be slightly less
than if it was fully in stocks, but.
Speaker 1 (18:51):
It's going to smooth out the bumps, which, yeah, especially
as you're getting closer to withdrawing those funds, you want
those moms to be smoothed out, because it's going to
be really disheartening and potentially destroying to your lifestyle if
you're let's say your portfolio declined twenty percent or something
in a year you had a twenty twenty two style
year as you are leaving employment. That's a tough pill
(19:12):
to swallow. But let's talk about another thing mat that
can complicate people's portfolios, and that's investing in a socially
responsible way, opting for ESG funds, which is becoming more
and more popular. We're seeing a lot of people kind
of start to sock more of their money into these
kinds of funds. And there's ESG.
Speaker 2 (19:29):
Stands for Environmental, social and governance, so the way a
company is run.
Speaker 1 (19:33):
Yeah, and there's just a lot more interest now in
these funds, and there's kind of a push to get
people to stick their money into these funds which claim
to be investing in ways that are better for the
environment and for other social reasons. But our take really
is that ESG is largely in the eye of the beholder,
and you can't make this up, Matt. But something I
saw last week Philip Morris, which is a company that
(19:56):
makes cigarettes that have killed so many people, millions of people,
They're scoring higher in the ESG ratings than TESLA, like
significantly higher ESG, I know. And so it's just like,
what in the world is ESG trying to accomplish? And
a similar thing, right, companies who are hijacking our attention,
they're making products with slave labor overseas, Like many of
(20:17):
those companies are also ESG darlings. They score well on
these ESG fronts. So I think the lack of defineability
is a massive problem on the ESTREE front. And it's
been sold is this way to do good with your
investment dollars, But that's not necessarily the way it shakes
out in reality.
Speaker 2 (20:31):
Yeah, And ESG funds they actually so they not only
perform more poorly in a financial sense, offering worse returns
to investors, which is the main goal of investing, but
they're also actually worse on these ESG metrics than what
it does these funds say that they're trying to achieve.
This is according to research out of Columbia University. We'll
linked to that in the show notes, but there are
other studies as well that have come to similar conclusions.
(20:54):
Opting for these ESG funds, it's not doing anything much
for the environment or to change corporate governance. And these
these funds, again, you know, they perform more poorly because
they come with higher fees oftentimes not to mention worse results.
So for a while there it seemed like ESG funds
were actually performing better and it's just like, all right,
if that's the direction you want to go based on
(21:15):
past performance. But we're actually seeing that shift recently. But
all of those things are eating into your returns significantly
over time, and we think that most most folks should
actually avoid some of these newer ESG funds and instead
stick to traditional index funds. It's so difficult to define
what it is that these different ESG funds are trying
to achieve. So much of it it's not objective, it's subjective.
(21:37):
And so again for you as an individual, you might
hold different values than what it is that Meta is
trying to accomplish, or Microsoft or or any company regardless
of where they are on the ESG scale. And it's
my subjective view that electric cars are better than cigarettes
for people over time. So I'm just it's I'm curious.
I don't really know how. It feels like there's like
(21:58):
the Wizard of Oz making these decisions about behind some
sort of curtain about which of these companies qualify for
their funds and which ones don't. And until we get
more clarity on that, and until I don't know, it
seems like the funds that actually at the companies that
actually get included in some of those funds are companies.
Speaker 1 (22:14):
That are doing more good. And even then it might
not be in people's best interest as from.
Speaker 2 (22:21):
Financially, like they might be checking all the boxes from
from an ESG standpoint, like maybe Philip Morris doesn't get
to did they not change their name to Atria or whatever.
Speaker 1 (22:30):
That might be Peru.
Speaker 2 (22:30):
I don't know, But regardless, I would say good for
them because somehow they were able to kind of greenwash
their way onto one of these funds. And unfortunately, that's
what it seems like a lot of these companies are
trying to do.
Speaker 1 (22:42):
Yeah, so when we're talking about complicating your investments, there's
some things that might be worth it. Maybe you're saying, oh,
the international stocks thing, that makes sense, and over time,
I do think I want a little more exposure there,
But on the ESG front, I don't think there's really
any reason to complicate things further and basically sign yourself
up for higher fees by stocking more of your money
into these ESG style index funds. Let's talk about something
(23:04):
else that people might do to complicate their investing strategy,
and that would be to incorporate more real estate into
their investing plan. And that's certainly a more complicated form
of investing that you know, we get asked about fairly regularly,
especially because you and I we are real estate investors.
We're mom and popular estate investors. We each own a
handful of properties in the Atlanta area. And the thing
(23:27):
is we're kind of mostly talking about the passive style
investing on this episode, and you and I we think
of real estate investing is more like taking on a
part time job, because it kind of is right not
only in the identifying and purchasing of that property, but
in the managing of that property too. And so if
you're not up for that, if you're not up for
all of the extra work that it's going to take
(23:47):
to own and manage that rental property, that fixes the
calls that you're going to have to get from the tenant,
the things you're gonna have to do to keep up
with that property, you should avoid becoming a landlord. And
you know, like I said this, so we're mostly talking
about the simple forms of investing that most people are
doing with every paycheck. So buying real estate is just
this other ball of wax altogether. It's not a bad one.
(24:09):
It's not something we would necessarily steer people away from.
And in fact, we've done episodes in the past. We'll
link to one or two in the show notes if
you want about investing in real estate and how it
can be a powerful wealth builder. We're happy real estate
investors ourselves. But the truth is there are other more
passive ways to invest in real estate besides buying a
duplex down the street in the town where you live
or whatever. And so if you do want to add
(24:29):
real estate exposure to your investments and you don't want
to go with the part time job route, Matt, you
want to talk about maybe kind of some other ways
to do that.
Speaker 2 (24:37):
You can do that by investing in reates.
Speaker 1 (24:40):
So that's how you say it.
Speaker 2 (24:41):
But it stands for real estate investment trusts, and so
there are the public rates, there are private rates, and
so we're not completely against the private ones, but they
do come with higher fees unless liquidity. Oftentimes your money
is locked up for years at a time. So because
of that we avoid them ourselves. But even publicly traded
reads they're kind of cool. They can give you some
(25:01):
diverse exposure to real estate that you can easily dollar
cost average into. You don't have to plunk down a
large amount of cash, like twenty five thousand dollars is
oftentimes sort of like the minimum amount required to go
into some of.
Speaker 1 (25:13):
These private routs. During like a cocktail hang or something,
you can tell people, oh, I own an apartment building in
New York City, or I own this with that because
you have like this small small sliver, but you do
I've investment in that project, Like yeah, I own some
of Tesla because I own right Boo. But some of
the other reut funds, like Vanguard's V and Q, they
are attractive because they're incredibly low cost. But still even
(25:36):
still most folks they don't need real estate exposure because
the average American homeowner, they have most of their net
worth tied up in their home, in their primary residence.
And guess what last I checked, that's real estate. Yeah,
and so we would.
Speaker 2 (25:49):
Rather see that kind of person more focused on investing
within stocks via index funds. And even if you don't
own your own home, and you're like, well, maybe I
should be investing within a read, I don't own my
my own property. Reads, they actually make up about five
percent of the total stock market. And so guess what,
if you own a total stock market index fund, you're
probably invested in a red but boom, you just didn't
(26:10):
even even realize it.
Speaker 1 (26:11):
Yeah, you have you own real estate.
Speaker 2 (26:13):
You didn't know it.
Speaker 1 (26:14):
Yeah, that's right. Even even if you're a renter, you
own some real estate via your other investments. And we
hung out with somebody recently and he was asking about
investing in real estate or passive income, and of course
we try to dispel the myth that passive income it
is super easy to come by, but we even told yeah, hey,
investing in real estate might make sense for you and
(26:35):
we try to go through all the nitty gritty and
all the details, but it's a harder thing for most
people to accomplish. You have to save up a ton
of money, and then numbers don't always make sense, and
they make sense a lot less in today's environment than
they have than they did years ago. So it's it's
harder for people to get into the real estate game.
But that brings up like one other I guess way
that you can invest in real estate, and that is
(26:55):
syndication funds and indication deals. Yeah, so those are interesting too,
they're sexy, well they're yeah, I think they get some press,
especially on Instagram. I follow some real estate investors and
they're talking about syndication deals all the time. But there
are good syndication deals, a bad syndication deals, and all
the final realick. They're basically like, just imagine someone buying
(27:15):
an apartment complex. Well, it's truly hard to do on
your own. So you get a group of investors to
pool their money together to buy this apartment complex and
then you start, you know, paying all the investors out
as you profit from that apartment complex doing well. And
so the thing is typically you have to have big
money to get in the game, and you have to
be an accredited investor, which means a net worth of
(27:36):
a million dollars or I think an annual income of
like two hundred and fifty k or something like that.
So it's hard to even qualify for that much less
save up the fifty k that it would take to
get in on that one syndication deal. And most people
over complicating their lives and they're probably getting to real
estate heavy in with their investments by partaking a syndication deal.
(27:56):
That's unless they have been like maxing out those retirement
accounts for years and years and years and still they've
got extra money and they just really want to go
down this hole. There's also a lot of pitfalls investing
in the syndication route. We're already seeing some of these
syndications go bust, a lot of investors losing all their money.
That doesn't happen in the stock market nearly to the
(28:17):
same degree.
Speaker 2 (28:17):
That's right, Yeah, I think a lot of folks just
they just want to be able to refer to themselves
as syndicates because that has a nice ring to it
as well. But that is one way that folks could
potentially overcomplicate their investing lies. But how do you untie that? Knot?
What is the simplest and easiest way for you to
invest for your future? We will get to that right
after this.
Speaker 1 (28:47):
All right, Matt, let's keep talking about simple investing in
some of the ways, maybe we try to complicate those investments,
some of which might make sense, in others which don't
make any sense at all.
Speaker 2 (28:58):
And I don't know.
Speaker 1 (28:59):
It makes me think about the game of life. You
remember that game back in the day, you spin the wheel.
You'd like it, never owned it, but I remember playing it, okay,
And like you got a different job which had a
different salary. You maybe had a family, or maybe you
stayed a bachelor. I mean, there's all these different choices
you make along the way.
Speaker 2 (29:13):
It's like the American rat race. Yeah, exactly, it's the
negative way to see it.
Speaker 1 (29:18):
Yeah, well, but there were so many different options. And
the same thing is true in the world investing, like
you can go down a bunch of different paths. Which
one makes sense for you might depend on and largely
does depend on individual circumstances. But I think even still,
there's a lot of broad based advice that we can
give simplicity is typically in the investing world, a better
way to go. And it just makes me think of
like all these super niche platforms that exist now, like
(29:41):
you can invest in farmland, you can invest in wine,
you can invest in whiskey, you can invest in crypto NFTs,
and I mean think about how the n FT's done
over the past eight to twelve months. I mean, I
think that first tweet of Jack Dorsey's went for mega
dollars and now the guy I can't even resell it, right,
and so I think he did resell it, but for
a whole lot less. Yeah, for like pennies on the dollar. Yeah,
(30:02):
unfortunately lost a lot or fortunately because like if what
we would not have wanted was for things to continue
to spiral out of control and continue to but for
that person, for them, yes exactly. But like conveniently we're
hearing nothing nothing about some of those categories these days.
But we actually did a deep dive of some of
those different online investing platforms back in episode four forty six,
(30:23):
if you want to go back and listen, and we
kind of covered the fees but also the returns that
you're likely to get on some of those things. And
and uh yeah, for most folks, all of these more vibrant,
i'll say ways of investing your money, they're just a
massive distraction from the tried and true investing methods, that's right.
Speaker 2 (30:40):
Yeah, If you're not maxing out your roth IRA, if
you're not maxing your four ohine k socking away basically
thirty thousand dollars annually into index funds within those tax
advantage accounts, then you shouldn't even be considering any of
these alternative platforms where you can invest in whiskey or wine.
Speaker 1 (30:57):
Like we were just talking about real estate, and I
think that that's the first thing I would push back
on somebody who's looking to do that. I would say,
have you done all the border the low hanging fruit
of those two accounts. Are you crushing it there? If so,
we can talk about next steps. But if not, like
real estate probably shouldn't be a consideration.
Speaker 2 (31:12):
Sure, yeah, I mean, if you've got money left over
and you just love the novelty of it, then like
it's not the worst thing in the world that you
could dip your toes into. But most people who are
investing in some of these random ways that have popped
up in the past few years, they're just reducing their
meat and potatoes style investing, and that's what we are
trying to make sure that folks aren't taking care of
first in order to funnel dollars into this direction. That's
(31:34):
what we don't want folks to do. They're getting distracted
from the like the bigger prize, and honestly, like this
is to point out that most of the things that
we've talked about aren't necessarily inherently bad investments, except for
like crypto and NFTs, But like some of these other platforms,
there's still investments. It's not like their MLMs or anything
like that where you're totally going to get scammed.
Speaker 1 (31:55):
It's just that there are other.
Speaker 2 (31:57):
Priorities that you we want you to focus on first.
If the alternative is to mindlessly blow that money, is
to mindlessly consume, then I might even say, okay, well
make sure, yeah, maybe you should invest in this platform
if that's if that keeps you from blowing money that
you otherwise would have invested, I think maybe in that
scenario it could actually make sense. But we just want
to make sure that you are eating your veggies, your
(32:19):
mean potatoes first before you start focusing on the exotic.
Speaker 1 (32:23):
Desserts off to the side. I think that's a good
way of putting It's not that these things are inherently bad,
although maybe NFTs are.
Speaker 2 (32:29):
But yeah, but like and crypto Yeah, yet to be determined.
Speaker 1 (32:32):
Some of these sites like I don't mind that their existence, yeah, exactly,
It's just that they are for investors who are doing
the right thing with a ton of their income before
even thinking about crossing the threshold into investing in some
of the random things you can invest in now online.
And let's talk about hiring an advisor for a second, man.
I think that's something that the people might think that
is either going to help them uncomplicate their finances or
(32:55):
they think it might bring more complication. But they think
it might bring some necessary complication their life life. And
it's not that we think that hiring a human is
a bad idea, right, that that a financial advisor can't
stiry in the right direction, can't give you good advice.
Speaker 2 (33:07):
We like humans. We like people. Mostly, it's not all
about we're not doubling down.
Speaker 1 (33:12):
Right. If human advisors were less expensive, I think it
can make sense for more people, but for everyday folks. Again,
I think the hiring an advisor question that pursuit can
be a deviation from what they should really be focused
on and focusing on. If you're barely snagging the match
in your four to one K, you just don't need
(33:32):
to spend hundreds or thousands of dollars to get advice
from a professional. That's something that you can do before
you talk to a profession right, right, It would be
so much better to funnel that money into those accounts,
more money into those accounts to grow for your future.
I think an advisor makes sense for some folks whose
situation is getting more complicated, but even then, we want
folks to only consider fee only financial planners. X Y
(33:55):
Planning Network is probably the best side out there to
find one of those. But I think people like they
start to learn about money and they're like, oh, it
must be time to hire the advisor.
Speaker 2 (34:04):
I need a guy.
Speaker 1 (34:05):
Yeah, girl. The truth is you probably don't unless you're
crushing it. You've been crushing it for years on end. Yeah.
Speaker 2 (34:12):
And I would say based on the fact that you
if you are hearing a say this, that means you're
listening to the podcast, which means like that tells me
that I think you are the kind of person who's
going to proactively take charge of your finances. And I
think that that's a good thing, because what we don't
want are folks to just by default thinking like, basically,
I don't want you to be like me when I
got my first real job and started earning money. I
(34:33):
don't know if I've ever actually talked about this, sure
new podcast logan don't be like that. But I went down.
I was like, oh, man, I'm earning real money now
I'm gonna go talk to this Edward Jones guy. And
so I walked down to walked out, you know, and
drove down the street and went in there and started
talking to him. But even at that point, I realized,
this seems pretty expensive, and I think I can do
(34:54):
what you're talking about with without paying you.
Speaker 1 (34:57):
And I actually just looked this up because I was
curious what it is that they.
Speaker 2 (35:00):
Charge on the first two hundred and fifty thousand dollars.
They charge one point.
Speaker 1 (35:04):
Three five percent.
Speaker 2 (35:05):
Wow, that is expensive, man, And especially for somebody who
is just getting started with their investing, that is not
a fee that they need to be and they need
to be paying. But so one of the ways around
hiring an actual person are is ai it is the
all the robo advisors out there, and some folks were
saying that, you know, this is a happy medium for
(35:27):
a lot of folks, but are those a good choice
and what would make someone opt to go in that direction.
And this is the second time we've referenced Monday's episode,
but we talked about the tax lost harvesting abilities of
a robo advisor like Betterment, which we would say it's
it's probably one of the best ones out there. It
might be the best of the bunch within the robo
advising category. And this is largely because of the like
(35:50):
the behavioral finance elements that they've built into the service.
Speaker 1 (35:54):
Where they're able to help folks to stay the course.
It's not like they offer superior fun choices or anything
like that. There's no there's no secret sauce, right, It's
it's those kind of advisory elements that they will they
help you stay the course, which is really important. That's
one of the best things an advisor can do.
Speaker 2 (36:09):
Right, Yeah, And well then they actually do have advisors
and so like their fees range from like zero point
twenty five percent for kind of like their standard digital plan,
but if you pay a little bit more point four percent,
which I don't like seeing. But with that premium service,
you get access to professional financial planners actual cfps, which
can go a long way when it comes to, you know,
planning out your finals.
Speaker 1 (36:29):
When you think about when you compare it to something
like Edward Jones that you just mentioned.
Speaker 2 (36:32):
That's a third of the price shoving an entire point. Yeah,
for one hundred points a full percentage point, it seems
like it seems like a pretty good deal. What do
you think about on those terms? Yeah, you're paying a
little more, certainly for a robo advisor than if you
were to be doing it yourself, but it's still pretty
inexpensive compared to hiring a traditional human advisor. And no
(36:52):
hate to all those Edward Jones folks.
Speaker 1 (36:54):
Out there, Yeah no, I mean, I'm some people want that.
I guess, like that's not our jam, and that's not
we recommend people. It's a different Yeah, it's a different service,
and some folks kind of want that assistance. They want
to sit down in person, you know, going through that
whole thing. I think if you're going to go the
robo advisor direction, like I don't know. I think Betterments, Yeah,
is one of the best. And that combo of human
(37:16):
advice with the kind of robo platform helping you on
the tax front and on the advice front, I think
it's pretty cool, and you know, for some people it's
worth paying the extra money. But let's talk about Matt
just kind of some guideline, some basics. When we talk
about simplification of investing and how over complicating things, and
(37:37):
of course there are a million ways that you can
complicate your investing strategy, but we really believe that it
doesn't need to be. It shouldn't have to be, and
it shouldn't be terribly complicated. And I think the more
complicated you make it, the less likely people are to
partake in that action. Right when you say there's ten
hoops to jump through, people are going to just walk
away before they start. When the belief is that investing
(38:00):
is hard, a lot of folks decide to skip out altogether.
And so that does so much more harm than maybe
not having quite enough international exposure or missing out on
some years where real estate had super good returns something
like that. Doing the thing, even doing it imperfectly and
doing it regularly is the key it comes down to
the crux of the matter is don't let perfect be
(38:21):
the enemy of good if you're trying to you're just
starting out, and you're like, I want to invest the
exact right way, the perfect way for future returns, and
the perfect way so that I stay the course. I mean,
I think my advice would be get started and then
continue learning and you can iterate over time if you want.
But simplicity is better than perfection.
Speaker 2 (38:40):
So this kind of makes me think of why I
don't necessarily like talking about my budget in the fact
that we've made it available, which I guess I'm doing
that by even sharing this example. But the reason I
don't necessarily like pushing it out there for folks is
because it's too complicated for most folks. It's not something that,
especially if you've never budgeted before, this shouldn't be your
first step towards tracking your expenses and budgeting for the months.
(39:03):
And so, in a similar way, we want folks to
be successful rather than you know, having all the i's dotted,
all the t's crossed, and have anything's perfect, where you
end up kind of, you know, falling off the wagon.
And so we want folks to opt for what we
would call a minimalist portfolio. We've always said that a
total stock market or at S and P five hundred
fund it gets folks who are in the wealth building
(39:24):
phase of their lives basically what it is that they
need without overthinking it. And target date funds they are
another great set it and forget it approach for money
that you're stalking away inside of your retirement accounts. And
so it's not that you can't diversify further. You know,
if you wanted to say, add some a little more
real estate exposure via a rate, If you want to
(39:46):
do that, that's great, you do you. It's just that
the minimalist route, investing within a single fund or maybe
two that are already well diversified, this is an effective
strategy that will get you where it is that you
want to be. Yeah, man, I love that. A like
the idea of just keeping it as simple as possible,
keeping it minimalist, and then doing the right thing over
and over right. So the next thing would we mentioned
(40:08):
is to have that plan and then stick to it,
because the best plan is something that you can stick to,
and it's it's easy to make complicated plans and then it.
But it's easier to break those plans too, right, because
you're like, wait a second, I got to step three.
There's thirty more steps. I'm just gonna bow out right now.
And that's what makes like, it makes me think of
(40:28):
the app Couch to five K. Heard someone talking about
that recently and how it changed their life. They were
nervous to start running. But with that app, it's specifically
it like slowly changes the amount of time where you're
running and walking so that you don't feel overwhelmed. After
two days of You're like, if you try to go
run a five k and you've been like, haveing run
(40:49):
at all in years, good luck? Right, you're probably gonna
get demoralized. But if you take this couch to five
k route and you try to build up over I
don't know, the course of something like three months, you
are in all likelihood gonna running awesome five k a
recipe for success. Yeah you might even keep going go
ten k pretty soon, right, But yeah, So the same
is true with your investments. The most important thing is
(41:09):
shoveling money into those retirement accounts, consistently getting those dollars
invested in a diversified manner. So come up with the plan,
and hopefully that plan is minimalist in nature, and then
stick to it, do it regularly, do it religiously. That's
where dollar cost averaging comes in, right. If you just
kind of keep doing it with every paycheck, then without overthinking,
without overthinking it, you're going to be ahead, vastly ahead
(41:31):
of the majority of your peers on the investing front. Yeah,
and so you said kind of shoveling money into those accounts,
Which makes me think of the fact that especially early on,
when you are just getting started with your investing, when
you see fluctuations in the market, and especially like we've
seen over the past several weeks we've seen a booming market,
if you are just getting started with your investments, you're
(41:52):
not going to see much change when it comes to
the size of your portfolio because you're just getting started. Truly,
what has the biggest impact, what moves the needle of
the most is your savings rate and how much money
you are able to sock away versus you like we've
been investing for like ten fifteen, like coming up on
twenty years, and we've got bigger nest eggs. That's bottom
line than when we started investing fifteen twenty years ago,
(42:15):
and now when the market goes up, it's a little
more fun, right Like, it's a little more fun to
see the balances increase a little bit when you check
it at the end of the month. But that would
not have happened if we weren't sacrificing, cutting back on expenses,
finding ways to invest more while we were younger. Basically,
you kind of have to like pay your dues a
little bit. And once that nest egg gets to be
(42:36):
a certain size, well market fluctuations and a growing market,
that's when you get to see the beauty of the
compound of compounding returns, because compounding returns and interest doesn't
make a huge dent in those early years. On the
back end is when you start to see that.
Speaker 1 (42:51):
You can totally split hairs about how much money you've
got allocated international, how much exposure you have to real estate,
whether or not you're investing in vintage lines, whatever. I mean,
you can split hairs over all that stuff, and what
the exact right percentage is for every single thing. Do
I need more small cap value in my portfolio? Bloody
bloody blah. And it's not that those conversations are completely worthless.
(43:14):
But you're right, Like, the biggest change that we can
make most easily that comes with the less stress and
the most likelihood of follow through is to keep it
simple and to just ramp up the percentage that we're
that we're dedicating each and every month, each every paycheck
to those accounts, Like that is the spigot that we
can turn on the most that's going to lead to
the largest growth in nest egg. You can try to
(43:36):
get that perfect allocation, create the most diverse investment account possible,
but the reality is then you're probably not quite as
focused on that more important lever and ultimately, yeah, you
might have the most diverse portfolio on earth, but you're
the perfectly diverse. Yeah, but you're missing out than on
the most important thing. It's kind of like, well we
(43:56):
talked about back not too long ago with frugality, how
it has to men wishing returns.
Speaker 2 (44:01):
Same thing. People.
Speaker 1 (44:02):
If you're so focused on frugal, you're probably not going
to be as thoughtful about ramping up your income. And
this is true too. I think the more you think
about how your portfolio is allocated, boom, you've lost the
plot and you're focused too much on the little things.
You're majoring on the miners, that's right.
Speaker 2 (44:16):
Yeah, And then and finally too, I mean, so one
of the reasons we're talking about this today is because
of the timeliness of it.
Speaker 1 (44:23):
Right, So, as the.
Speaker 2 (44:23):
Market is booming and we've seen some you know, fluctuation recently,
but folks, it becomes something that folks want to talk
about more. And what we want to encourage you to
do is like, once you do have this plan you've
heard us talk through, Hey, maybe you should just be
looking at a total stock market index fund or an
SMP five hundred index fund, or maybe a target date fund.
Once you have that plan, ignore everything else. We want
you to put the blinders on. We want you to
(44:46):
limit the noise, especially when it comes to the different
headlines that you read. But when the market is tanking,
folks are like you batten down the hatches, right, Like
you are not interested in taking some of these risks.
But like you were saying earlier, when things are booming,
everybody feels brilliant, everybody feels rich, and they're thinking, ah, well,
what else can I do in order to make this
(45:08):
ride last even longer? Basically, and we that is the
opposite of what you actually should be doing. And so
while everyone else is out there figuring out different ways
that they can invest in the latest sexy thing like
and who knows what the next iteration of distracting investment
opportunities are going to come down.
Speaker 1 (45:26):
The pike, right like, they'll come they oh, they.
Speaker 2 (45:28):
Absolutely will, but they are not things that you need
to be paying attention to. And so, yeah, we wanted
to talk about the different ways that you can simplify
how it is that you invest in. Truly, it does
not need to be all that complicated.
Speaker 1 (45:40):
Agreed and simple doesn't mean unsophisticated, right, Simple can still
be diverse, and it can it can give you exactly
what you need without ever thinking if.
Speaker 2 (45:48):
You think the S and P five hundred NIX fund
or the total stock market in NIX fund is unsophisticated.
Speaker 1 (45:53):
Log into all of.
Speaker 2 (45:54):
The different companies that make up sure that that fund
consists of.
Speaker 1 (45:59):
Back to see and go back and listen maybe to
our episode with Robin Wigglesworth about his book Trillions and
how Jack Bobol kind of really started the index fund
movement and it's been a powerful one. So yeah, it's
investing is the one thing where the more effort you
put in, the worst your returns get. Typically, simplicity makes
(46:20):
a whole lot of sense. We'll link to that interview
as well. Yeah, all right, Matt let's mention as come
back to the beer we had. This one is called
Symptom of Progeny. It's a golden sour ale fermented with
spontaneous culture. What were your thoughts on this one? I
really like it.
Speaker 2 (46:33):
What do you think about it?
Speaker 1 (46:34):
I really, I guess I say it's like brightly tart.
It's got chris. I know there's no fruit in this.
It's got peach fuzzy elements. Oh yeah, big time dude.
So truly.
Speaker 2 (46:45):
I was curious because we've been drinking some really big,
really sweet stouts from Burial recently, and because of that,
this one almost seems like a touch to tart. But
I think it's because of all the sweet beers that
we've been drinking like this. It's still such a bright, crisp, refreshing,
perfectly aged, perfectly oky golden ale. It's exactly what I
want out of a golden golden ail. And it's I mean,
(47:07):
there's a good reason why Kate and I mean we
picked up several bottles of us to bring back home
to enjoy, because we certainly enjoyed this one.
Speaker 1 (47:12):
It just makes me think Burial does some of the
best beers in every genre.
Speaker 2 (47:16):
Oh yeah, before we were talking about just how they're
crushing it. They crush it with their their New England
hazes and obviously there are stouts that we've been enjoying recently.
But yes, this is a barely age sour.
Speaker 1 (47:25):
Do they make bad beers? I don't think so. Not
completely knock out of the park. Yeah for sure. All right,
that's gonna do it for this episode. You can find
links to some of the stuff we mentioned up on
the show notes at our website howtomoney dot com, and
of course you can sign up for our how to
Money newsletter. One came out just yesterday. You missed it,
but you'll make that next one if you go sign
up at hoddam money dot com slash newsletter or.
Speaker 2 (47:46):
You didn't miss it because you're one of the select few.
You're one of the chosen.
Speaker 1 (47:50):
No, it's growing. It's a growing list.
Speaker 2 (47:51):
There's a lot of people in there, but we just
want we're not selective everybody to get anybody and everybody
the free glory that is the Hadding Money newsletter. But
that's right man, all right. So that's gonna be it
for this one until next time. Best friends Out, Best
Friends Out,
Hosts And Creators
Joel Larsgaard
Matthew Altmix
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