June 4, 2021 • 47 mins
Correlation and Diversification are fancy words for fancy people. But you too could be fancy! Why do we care about it? What does it do for you? Is there such a thing as too much or too little of diversification? How can Correlation help you make better decisions for the long term?
Thanks for sticking around for Season 3! We still have more to come so make sure you keep checking back with us. Find us on Facebook and reach out with questions!
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Episode Transcript
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Chris Holling (00:00):
Checking 1
Sean Cooper (00:02):
2
Chris Holling (00:03):
3
Sean Cooper (00:05):
4
Chris Holling (00:07):
Why are you confused about four? Did you?
Did you think
Sean Cooper (00:09):
I just wasn't sure how far we were going?
Chris Holling (00:11):
Oh, you know, I really get the feeling that you
probably have more more awarewith all that I do if I just
kept counting. And I didn't tellyou I was just gonna keep
counting. Like you just, youjust count. You wouldn't even
think I'm trying to screw withyou. You're just like, oh, we're
just counting. Guess we're gonnacount for half an hour. That's
fine. Of all the inventions ofthe last 100 years. The dry
(00:37):
erase board has to be the mostremarkable.
Sean Cooper (00:42):
Okay, I'm very curious as to why.
Chris Holling (00:45):
Remarkable?
markable.
Sean Cooper (00:48):
Yes.
Re- Remarkable. That's the keythere. Yeah.
That'swell played out. I actually like
that one. That was good.
Chris Holling (01:00):
It brings me more joy that you're like, why?
There's by far better things.
How about sliced bread? Whatabout this? This computer? I
have in my hands? That's moreremarkable. No, no.
Like, like a marker. Remarkable.
Sean Cooper (01:13):
Yep. You're remarking?
Yes.
Chris Holling (01:16):
I just heard our child set the school on fire.
arson. Yes. Our son. That'sawesome. Okay, I'm done with
that. I'm sorry.
Sean Cooper (01:27):
I was gonna say that. That was quite a few.
We're laying it on thick today.
Chris Holling (01:31):
Well, I thought that I thought that we just
weren't counting. We weren'tkeeping track of counting was
gonna keep going until you know,counting.
Sean Cooper (01:38):
Oh, Okay.
Chris Holling (01:41):
Oh, geez.
Sean Cooper (01:42):
I was counting.
That was I think there were fiveof those.
Chris Holling (01:45):
Of course you were counting. How do I how do I
start? 11234567 floor.
Sean Cooper (01:57):
You are gonna count just count.
Chris Holling (02:01):
Welcome, ladies to
Sean Cooper (02:02):
Maybe we should introduce...there you go
Chris Holling (02:03):
I'm trying.
you're you're you're throwingoff my Juju. It's right here.
Sean Cooper (02:08):
I'm not sure you had it yet.
Chris Holling (02:11):
Well, that's just plain rude. But accurate.
Welcome, ladies.
Sean Cooper (02:16):
Just today, normally you've got it in
spades.
Chris Holling (02:18):
Hey, see that See that? There's
there's that rhythm again. It'sjust it's just like, it's right
there. It's happening. Okay.
Well, welcome
Sean Cooper (02:26):
No, I'm not sure it was.
Chris Holling (02:28):
Welcome,
Sean Cooper (02:29):
You just want to keep counting and throwing
things down I'm going to keep
Chris Holling (02:31):
Shut up, shut up, shut up Meg
Sean Cooper (02:35):
Did you just call me a nag?
Chris Holling (02:36):
No, I said Meg like in Family Guy
Sean Cooper (02:40):
Oh, gotcha. I thought you said nag like in A
League of Their Own.
Chris Holling (02:46):
You know, at this rate, I'm just gonna, I'll just,
I'll just mute you. I'll justI'm the all editing master, I'll
just cut you out.
I dodn't even care.
Sean Cooper (02:53):
But can you get through if I'm also talking even
if...
Chris Holling (02:56):
see, you can't even tell that he's speaking
right now as I have removed thefile. Welcome, ladies and
gentlemen, boys and girls, toanother episode of the truth
about investing back to basics.
(03:27):
My name is Chris Holling.
Sean Cooper (03:29):
And I'm Sean Cooper. And hopefully I'm not
muted anymore.
Chris Holling (03:32):
You're not muted, but you're at least consistent
at this point. Today, we we'reactually it's kind of crazy.
We're doing a season finaletoday we're we kept this one a
little shorter this season justto keep it a little bit more
compact. And I'm actually kindof shocked that we're here
(03:55):
already, to be completelyhonest. But we're doing
correlation and diversificationtoday. And well, those are two
things that I know nothingabout. So I in every other
episode, what we've done is Ihave said, This is what I
understand it to be. And well. Icorrelate that diversification
(04:24):
has something to do with money.
All right.
Sean Cooper (04:30):
At least the way we're talking about
diversification. Yes. I mean,you can have diversification in
lots of things. You can talkabout diversification in
correlation in terms of justgeneral their general
definitions I'm sure you...oh,really
Chris Holling (04:45):
see. That's why you get muted. That's why you
get
Sean Cooper (04:49):
Yeah. Yeah
Chris Holling (04:54):
Yeah, yes, diversification could go towards
a lot of things. Honestly, theonly thing I truly truly know
about diversification wouldwould be the general term of
it's good to diversify yourportfolio. And when you are
diversifying your portfolio, theunderstanding that I have is, it
(05:16):
is making sure that you have notall your eggs in one basket. So
you're not putting everythinginto a stock that you're pretty
sure it's gonna do pretty well.
But, you know, maybe several,and some that might offset some
that might do well when theothers aren't, and vice versa.
But that's, that's about as farreaching as I can get. Like,
I've just dumped my correlation,diversification knowledge, and
(05:39):
learn me, Sean.
Sean Cooper (05:47):
I mean, that was that was the basis of it that
covers diversification. That is,what we're shooting for, is it's
exactly that you don't want allyour eggs in one basket. Because
if you look at times, like 2008,a lot of things did really,
really poorly. So you didn'twant all of your investments in,
you know, one stock or even agroup of stocks, for the most
(06:09):
part because most stocks didreally poorly. Harry Markowitz
is famous for saying thatdiversification is the only free
lunch when it comes toinvesting. And that's mostly
true, I'd say there's still acost of trading for most people
that it's going to make it a lotless than free lunch, but you
(06:31):
get the gist of it.
Chris Holling (06:32):
Yeah.
Sean Cooper (06:34):
But yeah, that is the reason for diversification
is you, you don't wanteverything all in one investment
that could do get, you know,completely thrashed by a single
event correlation is just howthe diversification works. It's
the explanation for it, notnecessarily why you want it, but
(06:54):
why the diversification works.
So the Why is what we've beentalking about. And that's
avoiding losing everything allat once. So you've got different
levels of diversification.
Basically, yeah, the converse ofthat is concentration. So
(07:16):
concentration risk, you couldhave concentration risk, in the
form of being invested in asingle company, if that single
company goes bankrupt, you lose,you know, all our most of your
investment. Whereas if you're inlots of companies, the odds of
lots of companies going bankruptall at once is much slimmer,
you'd have geographicconcentration risk. So if you're
(07:37):
like a real estate investor, andall of your real estate is in
one little town, if that, youknow town, like the the town I
grew up in was mostly founded onlogging. So if the logging
industry tanks and 50% of thetown has to move away, then your
real estate investments aregoing to suffer. Or if you your
(08:00):
all your real estate is intornado alley and a big tornado
an F5 comes through and wipesout all your real estate, that's
you're gonna suffer there too.
So there's geographic risks,there's concentration risk.
Chris Holling (08:11):
That's interesting, I've never even
considered that but that thatmakes complete sense. So I
really feel like when I'velooked at real estate investing
stuff, when I when I've talkedwith real estate investors, a
lot of them tend to use a very,very common phrase where they're
saying I specialize in this areaof the of the Denver Metro area,
(08:34):
I specialize in homes in Aspen,I I have properties that I don't
come across almost any that arelike, oh, I've got some in Iowa
and I've got some in New York,and I've got some here and some
here, but but the way thatyou're talking about it is you
it might be a good considerationto kind of stretch out and, and
(08:56):
diversify even even that havingit so you don't have the
concentration, geographic riskand geographic risk.
Sean Cooper (09:06):
So there's both sides to the coin this coin.
Most coins really, but
Chris Holling (09:14):
that's all coins.
Sean Cooper (09:17):
All coins.
I mean, but
Chris Holling (09:18):
the heads the tale and the Ridge
Sean Cooper (09:19):
theoretical, I was referring to it in the
theoretical sense of mostconcepts have two sides to
anyway.
Chris Holling (09:28):
I know
Sean Cooper (09:29):
When you look we've talked before about and I don't
know if we've actually talkedabout this on the podcast or
just offline, but we've talkedbefore about you know, people
making outsized gains in asingle investment like they,
they bought into, you know,whatever it was, I mean, we're
going to talk aboutcryptocurrencies, eventually. So
Chris Holling (09:48):
eventually
Sean Cooper (09:49):
they bought into Bitcoin and it went from, you
know, a few 1000 and now whatit's trading it I don't even
know I don't follow it reallybut uh,
Chris Holling (10:00):
64,000
Sean Cooper (10:02):
All right, 64,000
Chris Holling (10:03):
As of last week plus, Yeah, something like that.
Sean Cooper (10:06):
Right, right.
So that investment made themtons and tons of money. But you
don't typically see that type ofoutsize gain happening. In a
diversified portfolio, one pieceof the pie might do that. So say
1% of your portfolio might doexceedingly well. But the entire
(10:29):
portfolio didn't do didn't gocrazy like that. So having that
concentration risk, having, youknow, dumping it all into one
potential thing, it has a riskand reward trade off. Yes, there
is, you know, you you buy into anew company, a brand new
company, there's a very highpotential reward, there's also a
(10:54):
very high risk. And so that'swhere diversification comes in.
And that's what I'm getting atwith those, those real estate
investors that you talked about.
They're relying on the fact thatthey are experts, or at least
view themselves as experts inone particular area. And so
they're, they're takingadvantage of that expertise. So
(11:15):
there is an advantage to thatconcentration. But my point is,
there's also a risk associatedwith it. And that's the idea
behind diversification isoffsetting some of that risk?
Chris Holling (11:29):
That makes sense?
I can see that. I mean, Iimagine there's some benefit
along the lines of kind ofkeeping your your taxes in
order, because then you're notdoing multiple state tax, just
just real estate specifically.
Sean Cooper (11:45):
Yes, Yes, that's true. Yeah, for real estate.
Yeah. If you're talking aboutstocks and stuff, it doesn't
matter until you start gettinginto foreign investments, and
then you have foreign taxes. Butthat's not it's not horrible. I
mean,
Chris Holling (11:58):
sure. That makes sense. Okay
Sean Cooper (12:01):
my taxes are complicated enough that a
foreign tax doesn't throw me forthat big of a loop. But
Chris Holling (12:09):
yeah, that that makes sense. Okay. Well, I mean,
that's a pretty, pretty simple,straightforward explanation on
the diversification side. Sowhat's what I mean, what is
correlation? I mean, I justapart from the term of
correlation, which I could pullup another dictionary definition
(12:29):
for you. But
Sean Cooper (12:31):
you could, was first I mean, taking that
diversification to anotherlevel, I mentioned, foreign
investments, even being investedall in one country potentially
has its own risk. Because, yeah,we've talked about inflation
before. If your country, thecountry, you're invested in the
the currency that underlies thatcountry suddenly goes haywire,
(12:56):
then you're still experiencingthe risk of that particular
region.
Chris Holling (13:01):
Right?
Sean Cooper (13:01):
If You will. So having potentially a foreign
currency, even or investmentsthat are denominated in a
foreign currency can offsetcertain types of risk as well.
It's just different levels ofdiversification and what you're
trying to achieve. But yeah, interms of correlation, we'll talk
(13:22):
more about diversification andwhat what that looks like in
terms of real life scenarios,obviously, the most recent that
people are going to think ofwould be 2008. Certainly talk a
little bit more about that. Butin terms of how you actually go
about diversifying, it stemsfrom correlation. And
correlation is just howdifferent investments in this
(13:44):
case because that's what we'retalking about, move in relation
to one another. So correlationin number terms ranges from
negative one to positive one. Sotwo two investments that have a
positive one, they're correlated100%. That means they're
(14:06):
literally going to move inlockstep with one another. Now,
they might not gain, the exactsame amount, but they always
have positive returns at thesame time, negative returns at
the same time and flat returnsat the same time. That would be
an example of 100% positivecorrelation or plus one,
(14:27):
negative one, negative one isgoing to be the exact opposite,
where one zigs the other Zags.
So anytime the one does, well,the other one does, poorly,
maybe not proportionately. Soyou know, it's not necessarily
one gains 10% the other oneloses 10% maybe it's one gains
10%, the other one loses 1%.
That's not necessarily criticalto the equation. It's just that
(14:50):
they always do the exactopposite to one another in terms
of whether one is going positiveor negative.
Chris Holling (14:57):
Okay, I guess I guess I'm I'm having a hard time
separating the two it sounds. Itsounds to me, and maybe you
explained it well, and I'm justnot understanding it. But it
sounds to me like they those twoexplanations are kind of the
same, like one one is going theopposite direction and, and
offsetting the other one aren'taren't both of what you just
(15:20):
described doing that or, or am Imisunderstanding?
Sean Cooper (15:23):
Are you talking about when I described positive
correlation versus negativecorrelation?
Chris Holling (15:27):
Yes.
Sean Cooper (15:28):
Okay. Positive is they're going the same
direction? Always the samedirection
Chris Holling (15:31):
Oh, okay. Okay, I totally missed that. So, so
you're saying a, it? How do Ithis probably isn't a good
example. But like at&t andVerizon, if at&t is going up,
then Verizon will likely also goup along the same for the same
reasons, whatever is going onand down to down, whereas the,
(15:52):
the negative correlation wouldbe. I don't know what the
opposite of at&t is. But, but,but something that does well,
when when at&t does not do well,is the offset is the negative
correlation.
Sean Cooper (16:07):
Yes.
Chris Holling (16:07):
Okay. Okay, sorry. I just I just
misunderstood when you'reexplaining it, that that's my
fault. All right.
Sean Cooper (16:12):
Yeah, no, I tried to throw in a kind of a caveat
there that the the percentagethat they they move does not
necessarily have to be inlockstep. And that probably
threw things off. But it's justthat positive correlation. They
both go up together, they bothgo down together,
Chris Holling (16:31):
okay,
Sean Cooper (16:31):
just not necessarily the exact same
percentage.
Chris Holling (16:35):
Sure, that makes sense
Sean Cooper (16:36):
negative correlation, they go opposite of
one another. Zero correlationmeans there's literally no
correlation, you cannot use oneto predict the other,
Chris Holling (16:45):
there's no rules
Sean Cooper (16:48):
Exactly.
And then you have everything inbetween those, those three
scenarios, those are yourperfect scenarios, or, I guess,
in the case of no correlation,you're inperfect scenario,
because you have no idea whatit's going to do,
Chris Holling (17:00):
right.
Sean Cooper (17:01):
But you have everything in between. So
basically, anything from zero topositive one means there's some
level of correlation betweenthem.
Chris Holling (17:12):
Okay,
Sean Cooper (17:12):
it might not be perfect, but there is some level
of correlation. And then zero tonegative one is negatively
correlated. Again, notnecessarily perfect, but it is
negatively correlated. So whenwe're talking about
diversification, anything lessthan positive one can
technically help a portfolio.
But it's not until you get tothe true, you know, you get to
true negative correlation, youcan actually really enhance a
(17:36):
portfolio in terms of reducingrisk or increasing return
without sacrificing or withouttaking on additional risk and
that sort of thing. So, you lookback historically, they had
modern portfolio theory,basically looked at
diversification from thestandpoint of Okay, well, we
(17:58):
will stocks and bonds, they'renot perfectly correlated. In
fact, you know, depending on thetimeframe, you're evaluating, it
can be a low in the, you know,.3 .4 range, but it can also get
up higher, depending on thebonds and the time period that
we're evaluating, you know, .8.9 in terms of the correlation.
And so the idea is, if you lookat the efficient, efficient
(18:26):
market, or the, what's the wordfor it?
Chris Holling (18:36):
I don't know,
Sean Cooper (18:37):
the efficient frontier, sorry, the efficient
frontier. So if you look at agraph of
Chris Holling (18:41):
the final frontier,
Sean Cooper (18:44):
not not really,
Chris Holling (18:45):
okay.
Sean Cooper (18:46):
Yeah, but so you take a graph of two. This is
much easier to do visually thanit is verbally, but we'll I'll
try
Chris Holling (18:57):
It's you got it.
You got to Bob Ross it you gotto paint a picture. So
Sean Cooper (19:02):
he actually got to paint a picture though.
Chris Holling (19:05):
Yeah. Well, you're the Bob Ross of of
verbalization. And
Sean Cooper (19:10):
I'm talking about the happy little clouds but not
actually getting to paint themand can
Chris Holling (19:14):
Paint the happy little clouds, Sean?
Okay. All right. So we take two,two asset classes, okay. stocks
Sean Cooper (19:16):
Okay.
Chris Holling (19:16):
Okay, and bonds are what a lot of
people talk about, but let's saythey were perfectly positively
correlated. One had a expectedreturn of, say, 10% with a
standard deviation, that's whatwe're using for risk of, you
know, 15%. And then the otherhas a expected average return of
(19:38):
5% and a standard deviation ofseven. So if you plot those on a
graph, you got your two dots,you know, one's up into the
right of the other. If you startmixing between those two asset
classes, if they're perfectlypositively correlated, Any
(19:58):
portfolio you build is going tofall on a straight line between
those two, two points. Okay, asyou get away from perfectly
positively correlated, so evenif they're positively
correlated, but they're less soso you get down to .8 .4, .6,
whatever, that graph, the of aportfolio mix between those two
(20:23):
asset classes is actually goingto move up and to the left now
up and to the left in this casewould be either higher returns,
or lower risk or a combinationof the two. So if you look at
stocks and bonds, for example,and where the idea of modern
portfolio stem theory stems stemfrom is you could actually
create a portfolio that hadbetween anywhere between 90%
(20:47):
bonds 10% stocks, up to about30% bonds, 70% stocks, that was
actually had higher returns andlower risk than any point along
that prior graph.
Sean Cooper (21:10):
in fact, anywhere along that line, even as you go
up to 90%, stocks, 10% bonds, isgoing to be superior from that
original line of perfectlypositively correlated asset
classes. And that's what we'retalking about is we're talking
about enhancing returns, orreducing risk or some
combination of the two, by usingthese asset classes that are not
(21:33):
perfectly correlated. Now if youget to a point where you have
two asset classes that havepositive average annuallized
returns, like we're talkingabout, but perfectly negatively
correlated, you end up with agraph that is basically creates
kind of a sideways v. And you'vegot a line that goes from, in
(21:57):
this case, our first asset classwith the lower, lower return
lower risk, straight to your yaxis, and then straight back to
your other asset class. And sothat point where it intersects
with the y axis, you literallyhave a positive return with zero
risk.
Chris Holling (22:19):
Interesting, okay
Sean Cooper (22:20):
that would be your perfect portfolio, you would
have a portfolio with positivereturn and zero risk. The
problem is those two assetclasses don't exist.
Chris Holling (22:31):
Sure. Right.
Sean Cooper (22:32):
I know, I just burst everybody's
bubble all there at once.
Chris Holling (22:35):
Yeah, yeah. Yeah, supposed to be a happy clouds
picture that you were painting.
Instead, you took it in you, youmade a great painting, and then
you lit it on fire.
Sean Cooper (22:45):
That's harsh. The clouds just raining a little
bit. The point is, your goal isto move up and to the left and
any reduction in correlation isgoing to improve that. So
that's, that's the target ofdiversification is to move
closer and closer to that thatpoint?
Chris Holling (23:05):
Sure. That makes sense. So as as a as a whole,
when people are, are coming toyou. Sean, you're so great. You
You helped me with all thisstuff. Do you? Do you discuss
with them? Aboutdiversification? Is that is that
kind of a blanket rule that youshoot for with with everyone? Or
(23:29):
is it is diversification?
Something that's, that's betterfor some than others? Or where,
where where does that all fit?
For
Sean Cooper (23:39):
Yeah, yes. For me, it's going to be a blanket rule.
And that stems from two things.
Number one, I think it's theright thing to do to avoid
unnecessary levels of risk. Andnumber two, if I didn't and had
a lot of concentration, I'deasily get sued and lose my
licenses.
Chris Holling (23:56):
Oh, yeah, that's bad. Yeah, yeah. Yeah.
They're bad
Sean Cooper (24:00):
Like I said, the the people who are making
outsized returns betting on oneinvestment or one gamble, if you
sorry. Hang on. We weren'ttalking about that before. We
will. That's That's not what I Ido on a investment basis through
my RIA. I, like I said, Iwouldn't last real long, because
(24:21):
there's outside outsized risassociated with that. That's
were talking about that beforewe even got started. And I think
that's what people if somebodis going to do that, you kind o
like what we were talking aboubefore. It needs to be mone
that you don't care about neveseen again.
(24:43):
it's a yes, sorry
Chris Holling (24:44):
I think it's a very good point that I wasn't
even sure if I was gonna mentionit either. So this is very fresh
Sean Cooper (24:51):
right today, guys. So just just kind
of follow along here. But wewere talking about this type of
stuff today because there werethere were a couple of of
different stocks and and somekryptos that I was paying
attention to, that I decided to
Chris Holling (25:04):
to take some of this money that I go Hey, I like
throw some money at this lastweek. And I was I was honestly
just getting Sean's opinion onthe matter and, and kind of his
his viewpoint. But while we weretalking about it, I was
explaining that something that'sreally important to me. And this
is kind of what Sean's alludingto, is that when, when we were
(25:25):
talking about our framework, andwe're talking about our
budgeting, especially in thesecond season, and we talk about
making sure that you're settingaside certain amounts to go
whatever direction that you feelis important, and and allocating
your funds the way that thathelps you the best part of
something that I do that I'mactually wondering if I even
(25:46):
addressed I think I did, butabout 10% of my income goes into
a wealth building category is iswhat I've defined it as and I do
do some separate that's justsome general investing from a
job that goes along withcorrelation diversification
that's not this 10% this 10% isthe stuff that we referenced a
(26:11):
couple episodes ago where it wasventure capitalism stuff where
where I bought that mike forsomebody to help get his
business off the ground andthis stock, or I think that
there's a bunch of potential inthis crypto or or something that
starts to veer more on the yourconcentration and your your eggs
(26:33):
in one basket type thing. I'mtreating this money as though
I'm never gonna see it again. Ihave a good I like to say
educated hunch on these theseactivities
Sean Cooper (26:46):
educated hunch I like that.
Chris Holling (26:48):
Yeah, it's it's an educated gamble. But that's
that's also what it is, youknow, and I know, we talked
about it when we discussed thethe brief venture capitalism
thing, but I've, I've reallycome to the conclusion that with
that, if I help my buddy get offthe ground and his his business
takes off, then great. That'sthat's what was important. And
(27:09):
even if I don't see any returnfrom it on my end, and if I put
this into a stock that I believein, but I don't know, if they're
going to be successful, or acrypto I have an educated hunch
on then then that's, that's alsowhat I put that into, but I'm
also well aware that if I neversee any of that cash ever again,
(27:31):
that that's just kind of cost ofdoing business and part of part
of the plan. And I'm okay withthat. Because that's my plan.
And people need to set upwhatever they find to be
important. Sorry, can you hearthat
Sean Cooper (27:45):
Well, yeah, and and you already have, I can hear a
little bit and sorry. But I wasjust gonna say that you already
have your other ducks in a row,like everything else is already
taken care of this isn't yourThis isn't your rent money that
you're
Chris Holling (28:03):
no
Sean Cooper (28:03):
saying, hey, let's let's give this a shot.
Chris Holling (28:06):
Right? What is that? Every everything on black?
Let's go. Let's go. Like, that'snot that's not what this is at
all? No, you're absolutelyright. It's, it's, it's money
that I have set aside because I,I feel pretty confident with it.
And ultimately, all all it's,it's going to become at that
(28:29):
point is that if I do see areturn on that, by chance,
because my educated hunch wassolid, then what I'll do is that
money is going to go back intothat same pot of kind of liquid
funds in a way of, you know, ifI see another stock that I go,
Oh, yeah, this this is my nextbig venture. Well, if I'm really
(28:50):
worried about wanting to besafer with it, then I can take
whatever profits I made out ofthat and just leave that in that
category and use that money. Andit's, it's sort of my free lunch
in a way if I get to that point.
But I I'm very much under theopinion philosophically because
I'm finding that that's kind ofmy job here anymore. But
philosophically, I I thinkpeople have a harder time being
(29:14):
comfortable with investing ifthey're not willing to take
their money and and let it go.
And so I really feel like if Iwasn't comfortable with putting
it into a stock that I believein, because all my other ducks
are in a row and I'm ready to gobut I'm willing to kind of let
(29:36):
that money go and do otherthings for me, makes me less
likely to be really concernedabout holding on to other
investments that might be asmarter long term move that's
fit in with correlationdiversification. Did that all
make sense? That felt like abunch of words that I wasn't
sure if it was just mush?
Sean Cooper (29:56):
No, I got the gist of it.
Chris Holling (29:58):
Okay.
Sean Cooper (29:59):
I wouldn't say everybody needs to be to that
same point in order to invest byany means,
Chris Holling (30:04):
right. That's just for me
Sean Cooper (30:06):
it's just, it's just a matter, right? It's a
matter of how you go aboutinvesting. I mean, like we're
talking about if you can buildout a diversified portfolio. For
example, if I take a anaggressive diversified
portfolio, versus a benchmarkthat I utilize, the average
annualized return is roughly thesame, but the standard
(30:27):
deviation, the risk of thatportfolio is roughly 30% less
that diversified portfolio, therisk is roughly 30% less, so
you're going to see roughly 30%less volatility. And the point
of that is, yes, you haven'tenhanced returns in that
scenario at all. But you'vereduced the volatility, you've
(30:50):
reduced the potential stress andsleepless nights. So it's purely
a psychological play it'sdesigned to eliminate the or at
least reduce the human aspect ofpanic, the the emotions involved
in a falling market. And what wehave talked about previously, of
(31:16):
the average equity fund investoronly realizing a three and a
half percent gain when the s&p500 is averaged closer to 9%.
And that stems from peoplemaking irrational decisions,
either in euphoria or panic. Soreducing risk can help also
reduce those irrationaldecisions.
Chris Holling (31:37):
Right. And I, again, like we've mentioned,
almost in every episode at thisrate, and I'm I'm okay with it
is that these, these are moretools for the toolbox type
thing. I'm, I think it'simportant to, for me, for me,
(31:57):
personally, this is me, me, me,me, me personally.
Sean Cooper (32:01):
There's lots of options. So yeah,
Chris Holling (32:02):
There's so many options. But with with that,
it's, it's a, I, I'm juststumbling over all my words, I
can't even figure out how I'mgonna how I'm going to speak
English here. Apparently, Ithink I'm in the camp of the,
you also miss every shot, younever take type of thing, which
(32:23):
is why this is the category of Ihave my other stuff organized, I
am comfortable with if thismoney disappears, that it's not
going to be an issue. But I'm,if if there is a large return to
be had, then it doesn't alwayshappen on the safer approach.
(32:46):
And I'm not saying by anystretch that the safer approach
is worse, or that one is better,because in fact, Sean just said,
Hey, on an average, the theriskier amount, your overall
return is going to be less thanthan sticking within an s&p over
time. And this really is, forme, psychologically, and, and
(33:09):
getting involved in taking thatshot. Because I'm, I'm
comfortable with it. And that'sme tools for the toolbox. I
think I just said the same thingfor like four minutes straight.
So
Sean Cooper (33:24):
that's okay, no, I've got nothing against taking
that shot, I just encourage youto have like, like Chris has,
and like I have because I havetaken the shot.
Chris Holling (33:33):
Because that's the only way you're going to
enter the danger zone.
Sean Cooper (33:40):
But you have everything else taken care of
first. So my retirementaccounts, they're diversified.
And they're taken care of. It'sjust the piece of the pie that,
hey, if I lose all of this, it'snot going to put me in a tight
spot. That's, that's where Chrisis getting at there.
Chris Holling (34:03):
Right.
Sean Cooper (34:04):
And along these lines, Chris has been is always
good about making things,putting things in kind of real
terms, whereas I deal in numbersand don't necessarily give real
world examples.
Chris Holling (34:20):
I'm the realist dude you'll ever meet.
Sean Cooper (34:23):
Yeah, Yeah. But but for me
Chris Holling (34:25):
For the streets
Sean Cooper (34:26):
in an effort to try to give you an idea of to make
this more real. For a lot ofpeople, they look at 2008 and
their assumption is thateverything lost money, the
market crashed everything lostmoney, and that is not true.
Yes.
Yeah. Yes,correlation went up for a lot of
Chris Holling (34:43):
That's a good point
things. So in in 2008, if youhad a stock and bond portfolio,
it you know, 2007, it wasprobably far more diversified,
lower correlation than it was in2008. Because the correlation
between stocks and bondsactually went up in 2008, which
(35:03):
is the exact time when you don'twant correlation to go up.
Ideally, you want things tobecome less correlated when the
market tanks. But the point isgetting this back to, you know,
your own situation and, youknow, real world, what can you
do with this diversificationcorrelation information. It's to
(35:26):
try to limit the impact ofperiods like 2008. And while
some people will tell you, andmay even believe that everything
lost money in 2008, anddepending on the investment that
they had access to, that mayhave been true for them. There
are lots of things that actuallydid well in 2008. So the purpose
(35:50):
is to find those non correlatedasset classes that can help you
diversify your portfolio. Justto give you a few examples, you
know, pretty much the vastmajority of your equities, most
of your bonds, a lot of realestate, even some of your
alternative asset classes didreally bad in 2008. However, you
(36:16):
look at the some things thatactually didn't do poorly, they
just kind of flatline in 2008.
You've got your Barclaysaggregate bond index. So the
bonds in that index did fairly,basically flatlined, foreign
corporate bonds were essentiallyflat merger arbitrage, which is
an alternative. strategy wasbasically flat things that
(36:37):
actually did well, for 2008.
Long term treasuries, USTreasuries actually did well,
hard assets like gold andsilver, gold, both did very
well, private equity did reallywell, volatility spiked. So
there are ways to invest involatility not directly but
(36:57):
using derivatives, which we'lltalk about another time. And
managed futures, managedfutures, depending on the
managed futures strategy.
portfolio manager you might havebeen following or likely weren't
following, you're talking aboutreturns anywhere from 20 to
150%, in 2008, so there arethings that did very well and
(37:18):
could have either enhanced thereturn, or at least softened the
blow of 2008, that potentiallycould do the same in into the
future. So it's a matter offinding those things that can
help make your portfolio moreresilient to market cycles.
(37:43):
Well if I. Oh, sorry, go ahead.
Sean Cooper (37:45):
And we'll talk more about alternative assets and
alternative strategies later.
But I mean, to give you an idea,the big endowments Yale,
Harvard, if you looked at theirallocations in 2008, I think
Yale had 60% of their assets inprivate equity. They made money
in 2008, they lost money in2009, when private equity caught
up to the market and crashed,but they actually made money in
(38:08):
2008. Whereas most investorsdon't have any in, in private
equity. In fact, most compliancedepartments and even errors and
omissions insurance won't allowtheir financial advisors to
invest more than about 10% inalternative assets and in
general, so these things, theyon a stand alone, they can be
(38:28):
very risky, but they can alsoenhance a portfolio in a variety
of ways, depending on howthey're utilized as a matter of
understanding them and utilizingthem effectively.
Chris Holling (38:45):
Yeah, that that totally makes sense. And also, I
wanted to mention something kindof bring everything back full
circle and, and psychologicallyand then that way, you know, I'm
not jumping all over the placeon these things. But there's
there's also several Iultimately, it's it's just, it's
(39:05):
different books that I've beenreading. That that a pretty
consistent phrase, when you'relooking at finances and and
economy books. And, and thesethese different books that I've
been involved reading one of theone of the most consistent
things that has come up istalking about that when there
(39:27):
are downtimes when there arerecessions, that's when new
millionaires are developed thethe the new opportunities come
out of those times when therewere several people that made a
bunch of money during thisstretch during COVID. Because it
(39:47):
It changed lots of differentaspects about the market and
paying attention to those thingsand placing your investments in
places where you think they willdo well can absolutely utilize
those situations because that's,that's a larger scale version of
diversification in a way and,and I mentioned that because
(40:10):
again, full circle, I personallyfeel like I wouldn't be able to
comfortably take advantage ofsome of those circumstances if
I'm a not paying attention. Andthe world is just happening to
me, which I just don't accept,honestly. And b that if those
(40:30):
occasions do come around, andI'm paying attention, then I can
be comfortable with saying, Hey,I think that there's a lot of
opportunity in this, becausewe're in this recession, or this
thing just happened and payingattention to where those rises
and dips happen. And me sayingI'm going to take X amount of
money and put it into thispossible opportunity that other
(40:53):
people don't tend to have theirducks in a row in their their
cash available to go towardssomething like that. And this,
this is kind of my own smallversions of that now, because if
I'm comfortable with gettinginvolved in those things,
psychologically now then I'm I'mpaying attention to the next
(41:13):
time that things are, are goingwell, the buy low sell high type
mentality. And
Sean Cooper (41:21):
wasn't it Warren Buffett, who said something
along the lines of when peopleare greedy, be fearful. And when
people are fearful, be greedy.
Chris Holling (41:30):
That sounds right.
Sean Cooper (41:31):
Yeah.
Chris Holling (41:32):
Yeah,
Sean Cooper (41:32):
It was something about that. Anyway, it gets at
the kind of what you weretalking about there.
Chris Holling (41:37):
That's exactly it. And so it's, that's, that's
the full circle I'm getting at,if you are paying attention to
those things, and you're willingto get involved in those things,
because that's of interest toyou, then that's, that's where
it's good to get involved in, inpracticing those things, or
looking into what, what ways toapproach it and how you do or
(41:59):
don't feel comfortable withthose things. Because there's
absolutely nothing wrong withgoing, Hey, I want a diversified
portfolio so that I don't haveto worry about anything, and I'm
taking care of me, I'm takingcare of my family and I'm gonna
go to bed and I'm gonna take anap. You know, like, get get
some get some good rest and, andhave that, that. I don't know
(42:21):
that comfort that shuteye that?
What am I trying to say thatsecurity? Just,
Sean Cooper (42:26):
I would just say that,
yeah, all of these decisionsreally come back to the point of
making them based on both yourfinancial ability to take on
risk, as well as yourwillingness or your risk
tolerance,
Chris Holling (42:43):
right
Sean Cooper (42:44):
Making sure those align, because there are lots of
varying degrees to which you cantake on risk and potential
returns. But they need to alignwith what your goals are and
what you're capable and willingto take on and understanding
(43:05):
what you are, what risks you areabsorbing.
Chris Holling (43:08):
Because not everybody is in the danger zone.
And that's okay. There's there'sno reason to feel like you need
to be it's it's just what'simportant to you and, and what
tools in your toolbox that youwant to use that that are
available to you. That's that'swhat we do. We we bring you the
(43:30):
tools you're a tool, Sean.
Sean Cooper (43:33):
Thanks
Chris Holling (43:37):
Man. Well, what else did we did we do it?
Did we?
Did we address correlationdiversification? Did we?
I think so. Yeah,I think so too. I like it. Cool.
Well, I'll just wrap it up.
Where we'll we'll almost soundprofessional. Thank you, ladies
(43:58):
and gentlemen, for listening andcoming out and catching us to
another episode about the truthabout investing. Back to Basics.
My name is Chris Holling.
Sean Cooper (44:09):
And I'm Sean Cooper.
Chris Holling (44:11):
And we will catch you next time. Ooh, in season
four, because season finale ofthree, three goes into four
remember the counting thingthat's so three goes into.
(44:36):
podcast disclaimer, disclaimer.
The disclaimer following thisdisclaimer is the disclaimer
that is required for thispodcast to be up and running and
fully functioning and movingforward. This is going to be the
same disclaimer that you willhear in each one of our
episodes. We hope you enjoy itjust as much as we enjoyed
making it all content On thispodcast and accompanying
(45:00):
transcript is for informationalpurposes only. opinions
expressed herein by Sean Cooperare solely those of fit
financial consulting LLC unlessotherwise specifically cited.
Chris Holling that's me is notaffiliated with Fit financial
consulting LLC nor do the viewsexpressed by Chris Holling Me
again, represent the views offit financial consulting, LLC.
(45:22):
This podcast is intended to beused in its entirety. Any other
use beyond the author's intent,distribution or copying of its
contents of this podcast isstrictly prohibited. Nothing in
this podcast is intended aslegal accounting or tax advice,
and is for informationalpurposes only. All information
or ideas provided should bediscussed in detail with an
(45:46):
advisor, accountant or legalcounsel prior to implementation.
This podcast may reference linksto websites for the convenience
of our users, our firm has nocontrol over the accuracy or
content of these other websites.
advisory services are offeredthrough fit financial
(46:08):
consulting, LLC, an investmentadvisor firm registered in the
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podcast on the internet shallnot be directly or indirectly
interpreted as a solicitation ofinvestment advisory services to
persons of another jurisdictionunless otherwise permitted by
statute. Follow up orindividualized responses to
(46:32):
consumers in a particular stateby our firm in the rendering of
a personalized investment advicefor compensation shall not be
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concerning the status ordisciplinary history of a
broker, dealer, investmentadvisor or other
(46:54):
representatives, a consumershould contact their state
securities administrator.
Amen.
My wife warned me that if I tookanother picture of her she'd be
furious. That's when I snapped
Sean Cooper (47:21):
you would to
Checking 1
Sean Cooper (00:02):
2
Chris Holling (00:03):
3
Sean Cooper (00:05):
4
Chris Holling (00:07):
Why are you confused about four? Did you?
Did you think
Sean Cooper (00:09):
I just wasn't sure how far we were going?
Chris Holling (00:11):
Oh, you know, I really get the feeling that you
probably have more more awarewith all that I do if I just
kept counting. And I didn't tellyou I was just gonna keep
counting. Like you just, youjust count. You wouldn't even
think I'm trying to screw withyou. You're just like, oh, we're
just counting. Guess we're gonnacount for half an hour. That's
fine. Of all the inventions ofthe last 100 years. The dry
(00:37):
erase board has to be the mostremarkable.
Sean Cooper (00:42):
Okay, I'm very curious as to why.
Chris Holling (00:45):
Remarkable?
markable.
Sean Cooper (00:48):
Yes.
Re- Remarkable. That's the keythere. Yeah.
That'swell played out. I actually like
that one. That was good.
Chris Holling (01:00):
It brings me more joy that you're like, why?
There's by far better things.
How about sliced bread? Whatabout this? This computer? I
have in my hands? That's moreremarkable. No, no.
Like, like a marker. Remarkable.
Sean Cooper (01:13):
Yep. You're remarking?
Yes.
Chris Holling (01:16):
I just heard our child set the school on fire.
arson. Yes. Our son. That'sawesome. Okay, I'm done with
that. I'm sorry.
Sean Cooper (01:27):
I was gonna say that. That was quite a few.
We're laying it on thick today.
Chris Holling (01:31):
Well, I thought that I thought that we just
weren't counting. We weren'tkeeping track of counting was
gonna keep going until you know,counting.
Sean Cooper (01:38):
Oh, Okay.
Chris Holling (01:41):
Oh, geez.
Sean Cooper (01:42):
I was counting.
That was I think there were fiveof those.
Chris Holling (01:45):
Of course you were counting. How do I how do I
start? 11234567 floor.
Sean Cooper (01:57):
You are gonna count just count.
Chris Holling (02:01):
Welcome, ladies to
Sean Cooper (02:02):
Maybe we should introduce...there you go
Chris Holling (02:03):
I'm trying.
you're you're you're throwingoff my Juju. It's right here.
Sean Cooper (02:08):
I'm not sure you had it yet.
Chris Holling (02:11):
Well, that's just plain rude. But accurate.
Welcome, ladies.
Sean Cooper (02:16):
Just today, normally you've got it in
spades.
Chris Holling (02:18):
Hey, see that See that? There's
there's that rhythm again. It'sjust it's just like, it's right
there. It's happening. Okay.
Well, welcome
Sean Cooper (02:26):
No, I'm not sure it was.
Chris Holling (02:28):
Welcome,
Sean Cooper (02:29):
You just want to keep counting and throwing
things down I'm going to keep
Chris Holling (02:31):
Shut up, shut up, shut up Meg
Sean Cooper (02:35):
Did you just call me a nag?
Chris Holling (02:36):
No, I said Meg like in Family Guy
Sean Cooper (02:40):
Oh, gotcha. I thought you said nag like in A
League of Their Own.
Chris Holling (02:46):
You know, at this rate, I'm just gonna, I'll just,
I'll just mute you. I'll justI'm the all editing master, I'll
just cut you out.
I dodn't even care.
Sean Cooper (02:53):
But can you get through if I'm also talking even
if...
Chris Holling (02:56):
see, you can't even tell that he's speaking
right now as I have removed thefile. Welcome, ladies and
gentlemen, boys and girls, toanother episode of the truth
about investing back to basics.
(03:27):
My name is Chris Holling.
Sean Cooper (03:29):
And I'm Sean Cooper. And hopefully I'm not
muted anymore.
Chris Holling (03:32):
You're not muted, but you're at least consistent
at this point. Today, we we'reactually it's kind of crazy.
We're doing a season finaletoday we're we kept this one a
little shorter this season justto keep it a little bit more
compact. And I'm actually kindof shocked that we're here
(03:55):
already, to be completelyhonest. But we're doing
correlation and diversificationtoday. And well, those are two
things that I know nothingabout. So I in every other
episode, what we've done is Ihave said, This is what I
understand it to be. And well. Icorrelate that diversification
(04:24):
has something to do with money.
All right.
Sean Cooper (04:30):
At least the way we're talking about
diversification. Yes. I mean,you can have diversification in
lots of things. You can talkabout diversification in
correlation in terms of justgeneral their general
definitions I'm sure you...oh,really
Chris Holling (04:45):
see. That's why you get muted. That's why you
get
Sean Cooper (04:49):
Yeah. Yeah
Chris Holling (04:54):
Yeah, yes, diversification could go towards
a lot of things. Honestly, theonly thing I truly truly know
about diversification wouldwould be the general term of
it's good to diversify yourportfolio. And when you are
diversifying your portfolio, theunderstanding that I have is, it
(05:16):
is making sure that you have notall your eggs in one basket. So
you're not putting everythinginto a stock that you're pretty
sure it's gonna do pretty well.
But, you know, maybe several,and some that might offset some
that might do well when theothers aren't, and vice versa.
But that's, that's about as farreaching as I can get. Like,
I've just dumped my correlation,diversification knowledge, and
(05:39):
learn me, Sean.
Sean Cooper (05:47):
I mean, that was that was the basis of it that
covers diversification. That is,what we're shooting for, is it's
exactly that you don't want allyour eggs in one basket. Because
if you look at times, like 2008,a lot of things did really,
really poorly. So you didn'twant all of your investments in,
you know, one stock or even agroup of stocks, for the most
(06:09):
part because most stocks didreally poorly. Harry Markowitz
is famous for saying thatdiversification is the only free
lunch when it comes toinvesting. And that's mostly
true, I'd say there's still acost of trading for most people
that it's going to make it a lotless than free lunch, but you
(06:31):
get the gist of it.
Chris Holling (06:32):
Yeah.
Sean Cooper (06:34):
But yeah, that is the reason for diversification
is you, you don't wanteverything all in one investment
that could do get, you know,completely thrashed by a single
event correlation is just howthe diversification works. It's
the explanation for it, notnecessarily why you want it, but
(06:54):
why the diversification works.
So the Why is what we've beentalking about. And that's
avoiding losing everything allat once. So you've got different
levels of diversification.
Basically, yeah, the converse ofthat is concentration. So
(07:16):
concentration risk, you couldhave concentration risk, in the
form of being invested in asingle company, if that single
company goes bankrupt, you lose,you know, all our most of your
investment. Whereas if you're inlots of companies, the odds of
lots of companies going bankruptall at once is much slimmer,
you'd have geographicconcentration risk. So if you're
(07:37):
like a real estate investor, andall of your real estate is in
one little town, if that, youknow town, like the the town I
grew up in was mostly founded onlogging. So if the logging
industry tanks and 50% of thetown has to move away, then your
real estate investments aregoing to suffer. Or if you your
(08:00):
all your real estate is intornado alley and a big tornado
an F5 comes through and wipesout all your real estate, that's
you're gonna suffer there too.
So there's geographic risks,there's concentration risk.
Chris Holling (08:11):
That's interesting, I've never even
considered that but that thatmakes complete sense. So I
really feel like when I'velooked at real estate investing
stuff, when I when I've talkedwith real estate investors, a
lot of them tend to use a very,very common phrase where they're
saying I specialize in this areaof the of the Denver Metro area,
(08:34):
I specialize in homes in Aspen,I I have properties that I don't
come across almost any that arelike, oh, I've got some in Iowa
and I've got some in New York,and I've got some here and some
here, but but the way thatyou're talking about it is you
it might be a good considerationto kind of stretch out and, and
(08:56):
diversify even even that havingit so you don't have the
concentration, geographic riskand geographic risk.
Sean Cooper (09:06):
So there's both sides to the coin this coin.
Most coins really, but
Chris Holling (09:14):
that's all coins.
Sean Cooper (09:17):
All coins.
I mean, but
Chris Holling (09:18):
the heads the tale and the Ridge
Sean Cooper (09:19):
theoretical, I was referring to it in the
theoretical sense of mostconcepts have two sides to
anyway.
Chris Holling (09:28):
I know
Sean Cooper (09:29):
When you look we've talked before about and I don't
know if we've actually talkedabout this on the podcast or
just offline, but we've talkedbefore about you know, people
making outsized gains in asingle investment like they,
they bought into, you know,whatever it was, I mean, we're
going to talk aboutcryptocurrencies, eventually. So
Chris Holling (09:48):
eventually
Sean Cooper (09:49):
they bought into Bitcoin and it went from, you
know, a few 1000 and now whatit's trading it I don't even
know I don't follow it reallybut uh,
Chris Holling (10:00):
64,000
Sean Cooper (10:02):
All right, 64,000
Chris Holling (10:03):
As of last week plus, Yeah, something like that.
Sean Cooper (10:06):
Right, right.
So that investment made themtons and tons of money. But you
don't typically see that type ofoutsize gain happening. In a
diversified portfolio, one pieceof the pie might do that. So say
1% of your portfolio might doexceedingly well. But the entire
(10:29):
portfolio didn't do didn't gocrazy like that. So having that
concentration risk, having, youknow, dumping it all into one
potential thing, it has a riskand reward trade off. Yes, there
is, you know, you you buy into anew company, a brand new
company, there's a very highpotential reward, there's also a
(10:54):
very high risk. And so that'swhere diversification comes in.
And that's what I'm getting atwith those, those real estate
investors that you talked about.
They're relying on the fact thatthey are experts, or at least
view themselves as experts inone particular area. And so
they're, they're takingadvantage of that expertise. So
(11:15):
there is an advantage to thatconcentration. But my point is,
there's also a risk associatedwith it. And that's the idea
behind diversification isoffsetting some of that risk?
Chris Holling (11:29):
That makes sense?
I can see that. I mean, Iimagine there's some benefit
along the lines of kind ofkeeping your your taxes in
order, because then you're notdoing multiple state tax, just
just real estate specifically.
Sean Cooper (11:45):
Yes, Yes, that's true. Yeah, for real estate.
Yeah. If you're talking aboutstocks and stuff, it doesn't
matter until you start gettinginto foreign investments, and
then you have foreign taxes. Butthat's not it's not horrible. I
mean,
Chris Holling (11:58):
sure. That makes sense. Okay
Sean Cooper (12:01):
my taxes are complicated enough that a
foreign tax doesn't throw me forthat big of a loop. But
Chris Holling (12:09):
yeah, that that makes sense. Okay. Well, I mean,
that's a pretty, pretty simple,straightforward explanation on
the diversification side. Sowhat's what I mean, what is
correlation? I mean, I justapart from the term of
correlation, which I could pullup another dictionary definition
(12:29):
for you. But
Sean Cooper (12:31):
you could, was first I mean, taking that
diversification to anotherlevel, I mentioned, foreign
investments, even being investedall in one country potentially
has its own risk. Because, yeah,we've talked about inflation
before. If your country, thecountry, you're invested in the
the currency that underlies thatcountry suddenly goes haywire,
(12:56):
then you're still experiencingthe risk of that particular
region.
Chris Holling (13:01):
Right?
Sean Cooper (13:01):
If You will. So having potentially a foreign
currency, even or investmentsthat are denominated in a
foreign currency can offsetcertain types of risk as well.
It's just different levels ofdiversification and what you're
trying to achieve. But yeah, interms of correlation, we'll talk
(13:22):
more about diversification andwhat what that looks like in
terms of real life scenarios,obviously, the most recent that
people are going to think ofwould be 2008. Certainly talk a
little bit more about that. Butin terms of how you actually go
about diversifying, it stemsfrom correlation. And
correlation is just howdifferent investments in this
(13:44):
case because that's what we'retalking about, move in relation
to one another. So correlationin number terms ranges from
negative one to positive one. Sotwo two investments that have a
positive one, they're correlated100%. That means they're
(14:06):
literally going to move inlockstep with one another. Now,
they might not gain, the exactsame amount, but they always
have positive returns at thesame time, negative returns at
the same time and flat returnsat the same time. That would be
an example of 100% positivecorrelation or plus one,
(14:27):
negative one, negative one isgoing to be the exact opposite,
where one zigs the other Zags.
So anytime the one does, well,the other one does, poorly,
maybe not proportionately. Soyou know, it's not necessarily
one gains 10% the other oneloses 10% maybe it's one gains
10%, the other one loses 1%.
That's not necessarily criticalto the equation. It's just that
(14:50):
they always do the exactopposite to one another in terms
of whether one is going positiveor negative.
Chris Holling (14:57):
Okay, I guess I guess I'm I'm having a hard time
separating the two it sounds. Itsounds to me, and maybe you
explained it well, and I'm justnot understanding it. But it
sounds to me like they those twoexplanations are kind of the
same, like one one is going theopposite direction and, and
offsetting the other one aren'taren't both of what you just
(15:20):
described doing that or, or am Imisunderstanding?
Sean Cooper (15:23):
Are you talking about when I described positive
correlation versus negativecorrelation?
Chris Holling (15:27):
Yes.
Sean Cooper (15:28):
Okay. Positive is they're going the same
direction? Always the samedirection
Chris Holling (15:31):
Oh, okay. Okay, I totally missed that. So, so
you're saying a, it? How do Ithis probably isn't a good
example. But like at&t andVerizon, if at&t is going up,
then Verizon will likely also goup along the same for the same
reasons, whatever is going onand down to down, whereas the,
(15:52):
the negative correlation wouldbe. I don't know what the
opposite of at&t is. But, but,but something that does well,
when when at&t does not do well,is the offset is the negative
correlation.
Sean Cooper (16:07):
Yes.
Chris Holling (16:07):
Okay. Okay, sorry. I just I just
misunderstood when you'reexplaining it, that that's my
fault. All right.
Sean Cooper (16:12):
Yeah, no, I tried to throw in a kind of a caveat
there that the the percentagethat they they move does not
necessarily have to be inlockstep. And that probably
threw things off. But it's justthat positive correlation. They
both go up together, they bothgo down together,
Chris Holling (16:31):
okay,
Sean Cooper (16:31):
just not necessarily the exact same
percentage.
Chris Holling (16:35):
Sure, that makes sense
Sean Cooper (16:36):
negative correlation, they go opposite of
one another. Zero correlationmeans there's literally no
correlation, you cannot use oneto predict the other,
Chris Holling (16:45):
there's no rules
Sean Cooper (16:48):
Exactly.
And then you have everything inbetween those, those three
scenarios, those are yourperfect scenarios, or, I guess,
in the case of no correlation,you're inperfect scenario,
because you have no idea whatit's going to do,
Chris Holling (17:00):
right.
Sean Cooper (17:01):
But you have everything in between. So
basically, anything from zero topositive one means there's some
level of correlation betweenthem.
Chris Holling (17:12):
Okay,
Sean Cooper (17:12):
it might not be perfect, but there is some level
of correlation. And then zero tonegative one is negatively
correlated. Again, notnecessarily perfect, but it is
negatively correlated. So whenwe're talking about
diversification, anything lessthan positive one can
technically help a portfolio.
But it's not until you get tothe true, you know, you get to
true negative correlation, youcan actually really enhance a
(17:36):
portfolio in terms of reducingrisk or increasing return
without sacrificing or withouttaking on additional risk and
that sort of thing. So, you lookback historically, they had
modern portfolio theory,basically looked at
diversification from thestandpoint of Okay, well, we
(17:58):
will stocks and bonds, they'renot perfectly correlated. In
fact, you know, depending on thetimeframe, you're evaluating, it
can be a low in the, you know,.3 .4 range, but it can also get
up higher, depending on thebonds and the time period that
we're evaluating, you know, .8.9 in terms of the correlation.
And so the idea is, if you lookat the efficient, efficient
(18:26):
market, or the, what's the wordfor it?
Chris Holling (18:36):
I don't know,
Sean Cooper (18:37):
the efficient frontier, sorry, the efficient
frontier. So if you look at agraph of
Chris Holling (18:41):
the final frontier,
Sean Cooper (18:44):
not not really,
Chris Holling (18:45):
okay.
Sean Cooper (18:46):
Yeah, but so you take a graph of two. This is
much easier to do visually thanit is verbally, but we'll I'll
try
Chris Holling (18:57):
It's you got it.
You got to Bob Ross it you gotto paint a picture. So
Sean Cooper (19:02):
he actually got to paint a picture though.
Chris Holling (19:05):
Yeah. Well, you're the Bob Ross of of
verbalization. And
Sean Cooper (19:10):
I'm talking about the happy little clouds but not
actually getting to paint themand can
Chris Holling (19:14):
Paint the happy little clouds, Sean?
Okay. All right. So we take two,two asset classes, okay. stocks
Sean Cooper (19:16):
Okay.
Chris Holling (19:16):
Okay, and bonds are what a lot of
people talk about, but let's saythey were perfectly positively
correlated. One had a expectedreturn of, say, 10% with a
standard deviation, that's whatwe're using for risk of, you
know, 15%. And then the otherhas a expected average return of
(19:38):
5% and a standard deviation ofseven. So if you plot those on a
graph, you got your two dots,you know, one's up into the
right of the other. If you startmixing between those two asset
classes, if they're perfectlypositively correlated, Any
(19:58):
portfolio you build is going tofall on a straight line between
those two, two points. Okay, asyou get away from perfectly
positively correlated, so evenif they're positively
correlated, but they're less soso you get down to .8 .4, .6,
whatever, that graph, the of aportfolio mix between those two
(20:23):
asset classes is actually goingto move up and to the left now
up and to the left in this casewould be either higher returns,
or lower risk or a combinationof the two. So if you look at
stocks and bonds, for example,and where the idea of modern
portfolio stem theory stems stemfrom is you could actually
create a portfolio that hadbetween anywhere between 90%
(20:47):
bonds 10% stocks, up to about30% bonds, 70% stocks, that was
actually had higher returns andlower risk than any point along
that prior graph.
Sean Cooper (21:10):
in fact, anywhere along that line, even as you go
up to 90%, stocks, 10% bonds, isgoing to be superior from that
original line of perfectlypositively correlated asset
classes. And that's what we'retalking about is we're talking
about enhancing returns, orreducing risk or some
combination of the two, by usingthese asset classes that are not
(21:33):
perfectly correlated. Now if youget to a point where you have
two asset classes that havepositive average annuallized
returns, like we're talkingabout, but perfectly negatively
correlated, you end up with agraph that is basically creates
kind of a sideways v. And you'vegot a line that goes from, in
(21:57):
this case, our first asset classwith the lower, lower return
lower risk, straight to your yaxis, and then straight back to
your other asset class. And sothat point where it intersects
with the y axis, you literallyhave a positive return with zero
risk.
Chris Holling (22:19):
Interesting, okay
Sean Cooper (22:20):
that would be your perfect portfolio, you would
have a portfolio with positivereturn and zero risk. The
problem is those two assetclasses don't exist.
Chris Holling (22:31):
Sure. Right.
Sean Cooper (22:32):
I know, I just burst everybody's
bubble all there at once.
Chris Holling (22:35):
Yeah, yeah. Yeah, supposed to be a happy clouds
picture that you were painting.
Instead, you took it in you, youmade a great painting, and then
you lit it on fire.
Sean Cooper (22:45):
That's harsh. The clouds just raining a little
bit. The point is, your goal isto move up and to the left and
any reduction in correlation isgoing to improve that. So
that's, that's the target ofdiversification is to move
closer and closer to that thatpoint?
Chris Holling (23:05):
Sure. That makes sense. So as as a as a whole,
when people are, are coming toyou. Sean, you're so great. You
You helped me with all thisstuff. Do you? Do you discuss
with them? Aboutdiversification? Is that is that
kind of a blanket rule that youshoot for with with everyone? Or
(23:29):
is it is diversification?
Something that's, that's betterfor some than others? Or where,
where where does that all fit?
For
Sean Cooper (23:39):
Yeah, yes. For me, it's going to be a blanket rule.
And that stems from two things.
Number one, I think it's theright thing to do to avoid
unnecessary levels of risk. Andnumber two, if I didn't and had
a lot of concentration, I'deasily get sued and lose my
licenses.
Chris Holling (23:56):
Oh, yeah, that's bad. Yeah, yeah. Yeah.
They're bad
Sean Cooper (24:00):
Like I said, the the people who are making
outsized returns betting on oneinvestment or one gamble, if you
sorry. Hang on. We weren'ttalking about that before. We
will. That's That's not what I Ido on a investment basis through
my RIA. I, like I said, Iwouldn't last real long, because
(24:21):
there's outside outsized risassociated with that. That's
were talking about that beforewe even got started. And I think
that's what people if somebodis going to do that, you kind o
like what we were talking aboubefore. It needs to be mone
that you don't care about neveseen again.
(24:43):
it's a yes, sorry
Chris Holling (24:44):
I think it's a very good point that I wasn't
even sure if I was gonna mentionit either. So this is very fresh
Sean Cooper (24:51):
right today, guys. So just just kind
of follow along here. But wewere talking about this type of
stuff today because there werethere were a couple of of
different stocks and and somekryptos that I was paying
attention to, that I decided to
Chris Holling (25:04):
to take some of this money that I go Hey, I like
throw some money at this lastweek. And I was I was honestly
just getting Sean's opinion onthe matter and, and kind of his
his viewpoint. But while we weretalking about it, I was
explaining that something that'sreally important to me. And this
is kind of what Sean's alludingto, is that when, when we were
(25:25):
talking about our framework, andwe're talking about our
budgeting, especially in thesecond season, and we talk about
making sure that you're settingaside certain amounts to go
whatever direction that you feelis important, and and allocating
your funds the way that thathelps you the best part of
something that I do that I'mactually wondering if I even
(25:46):
addressed I think I did, butabout 10% of my income goes into
a wealth building category is iswhat I've defined it as and I do
do some separate that's justsome general investing from a
job that goes along withcorrelation diversification
that's not this 10% this 10% isthe stuff that we referenced a
(26:11):
couple episodes ago where it wasventure capitalism stuff where
where I bought that mike forsomebody to help get his
business off the ground andthis stock, or I think that
there's a bunch of potential inthis crypto or or something that
starts to veer more on the yourconcentration and your your eggs
(26:33):
in one basket type thing. I'mtreating this money as though
I'm never gonna see it again. Ihave a good I like to say
educated hunch on these theseactivities
Sean Cooper (26:46):
educated hunch I like that.
Chris Holling (26:48):
Yeah, it's it's an educated gamble. But that's
that's also what it is, youknow, and I know, we talked
about it when we discussed thethe brief venture capitalism
thing, but I've, I've reallycome to the conclusion that with
that, if I help my buddy get offthe ground and his his business
takes off, then great. That'sthat's what was important. And
(27:09):
even if I don't see any returnfrom it on my end, and if I put
this into a stock that I believein, but I don't know, if they're
going to be successful, or acrypto I have an educated hunch
on then then that's, that's alsowhat I put that into, but I'm
also well aware that if I neversee any of that cash ever again,
(27:31):
that that's just kind of cost ofdoing business and part of part
of the plan. And I'm okay withthat. Because that's my plan.
And people need to set upwhatever they find to be
important. Sorry, can you hearthat
Sean Cooper (27:45):
Well, yeah, and and you already have, I can hear a
little bit and sorry. But I wasjust gonna say that you already
have your other ducks in a row,like everything else is already
taken care of this isn't yourThis isn't your rent money that
you're
Chris Holling (28:03):
no
Sean Cooper (28:03):
saying, hey, let's let's give this a shot.
Chris Holling (28:06):
Right? What is that? Every everything on black?
Let's go. Let's go. Like, that'snot that's not what this is at
all? No, you're absolutelyright. It's, it's, it's money
that I have set aside because I,I feel pretty confident with it.
And ultimately, all all it's,it's going to become at that
(28:29):
point is that if I do see areturn on that, by chance,
because my educated hunch wassolid, then what I'll do is that
money is going to go back intothat same pot of kind of liquid
funds in a way of, you know, ifI see another stock that I go,
Oh, yeah, this this is my nextbig venture. Well, if I'm really
(28:50):
worried about wanting to besafer with it, then I can take
whatever profits I made out ofthat and just leave that in that
category and use that money. Andit's, it's sort of my free lunch
in a way if I get to that point.
But I I'm very much under theopinion philosophically because
I'm finding that that's kind ofmy job here anymore. But
philosophically, I I thinkpeople have a harder time being
(29:14):
comfortable with investing ifthey're not willing to take
their money and and let it go.
And so I really feel like if Iwasn't comfortable with putting
it into a stock that I believein, because all my other ducks
are in a row and I'm ready to gobut I'm willing to kind of let
(29:36):
that money go and do otherthings for me, makes me less
likely to be really concernedabout holding on to other
investments that might be asmarter long term move that's
fit in with correlationdiversification. Did that all
make sense? That felt like abunch of words that I wasn't
sure if it was just mush?
Sean Cooper (29:56):
No, I got the gist of it.
Chris Holling (29:58):
Okay.
Sean Cooper (29:59):
I wouldn't say everybody needs to be to that
same point in order to invest byany means,
Chris Holling (30:04):
right. That's just for me
Sean Cooper (30:06):
it's just, it's just a matter, right? It's a
matter of how you go aboutinvesting. I mean, like we're
talking about if you can buildout a diversified portfolio. For
example, if I take a anaggressive diversified
portfolio, versus a benchmarkthat I utilize, the average
annualized return is roughly thesame, but the standard
(30:27):
deviation, the risk of thatportfolio is roughly 30% less
that diversified portfolio, therisk is roughly 30% less, so
you're going to see roughly 30%less volatility. And the point
of that is, yes, you haven'tenhanced returns in that
scenario at all. But you'vereduced the volatility, you've
(30:50):
reduced the potential stress andsleepless nights. So it's purely
a psychological play it'sdesigned to eliminate the or at
least reduce the human aspect ofpanic, the the emotions involved
in a falling market. And what wehave talked about previously, of
(31:16):
the average equity fund investoronly realizing a three and a
half percent gain when the s&p500 is averaged closer to 9%.
And that stems from peoplemaking irrational decisions,
either in euphoria or panic. Soreducing risk can help also
reduce those irrationaldecisions.
Chris Holling (31:37):
Right. And I, again, like we've mentioned,
almost in every episode at thisrate, and I'm I'm okay with it
is that these, these are moretools for the toolbox type
thing. I'm, I think it'simportant to, for me, for me,
(31:57):
personally, this is me, me, me,me, me personally.
Sean Cooper (32:01):
There's lots of options. So yeah,
Chris Holling (32:02):
There's so many options. But with with that,
it's, it's a, I, I'm juststumbling over all my words, I
can't even figure out how I'mgonna how I'm going to speak
English here. Apparently, Ithink I'm in the camp of the,
you also miss every shot, younever take type of thing, which
(32:23):
is why this is the category of Ihave my other stuff organized, I
am comfortable with if thismoney disappears, that it's not
going to be an issue. But I'm,if if there is a large return to
be had, then it doesn't alwayshappen on the safer approach.
(32:46):
And I'm not saying by anystretch that the safer approach
is worse, or that one is better,because in fact, Sean just said,
Hey, on an average, the theriskier amount, your overall
return is going to be less thanthan sticking within an s&p over
time. And this really is, forme, psychologically, and, and
(33:09):
getting involved in taking thatshot. Because I'm, I'm
comfortable with it. And that'sme tools for the toolbox. I
think I just said the same thingfor like four minutes straight.
So
Sean Cooper (33:24):
that's okay, no, I've got nothing against taking
that shot, I just encourage youto have like, like Chris has,
and like I have because I havetaken the shot.
Chris Holling (33:33):
Because that's the only way you're going to
enter the danger zone.
Sean Cooper (33:40):
But you have everything else taken care of
first. So my retirementaccounts, they're diversified.
And they're taken care of. It'sjust the piece of the pie that,
hey, if I lose all of this, it'snot going to put me in a tight
spot. That's, that's where Chrisis getting at there.
Chris Holling (34:03):
Right.
Sean Cooper (34:04):
And along these lines, Chris has been is always
good about making things,putting things in kind of real
terms, whereas I deal in numbersand don't necessarily give real
world examples.
Chris Holling (34:20):
I'm the realist dude you'll ever meet.
Sean Cooper (34:23):
Yeah, Yeah. But but for me
Chris Holling (34:25):
For the streets
Sean Cooper (34:26):
in an effort to try to give you an idea of to make
this more real. For a lot ofpeople, they look at 2008 and
their assumption is thateverything lost money, the
market crashed everything lostmoney, and that is not true.
Yes.
Yeah. Yes,correlation went up for a lot of
Chris Holling (34:43):
That's a good point
things. So in in 2008, if youhad a stock and bond portfolio,
it you know, 2007, it wasprobably far more diversified,
lower correlation than it was in2008. Because the correlation
between stocks and bondsactually went up in 2008, which
(35:03):
is the exact time when you don'twant correlation to go up.
Ideally, you want things tobecome less correlated when the
market tanks. But the point isgetting this back to, you know,
your own situation and, youknow, real world, what can you
do with this diversificationcorrelation information. It's to
(35:26):
try to limit the impact ofperiods like 2008. And while
some people will tell you, andmay even believe that everything
lost money in 2008, anddepending on the investment that
they had access to, that mayhave been true for them. There
are lots of things that actuallydid well in 2008. So the purpose
(35:50):
is to find those non correlatedasset classes that can help you
diversify your portfolio. Justto give you a few examples, you
know, pretty much the vastmajority of your equities, most
of your bonds, a lot of realestate, even some of your
alternative asset classes didreally bad in 2008. However, you
(36:16):
look at the some things thatactually didn't do poorly, they
just kind of flatline in 2008.
You've got your Barclaysaggregate bond index. So the
bonds in that index did fairly,basically flatlined, foreign
corporate bonds were essentiallyflat merger arbitrage, which is
an alternative. strategy wasbasically flat things that
(36:37):
actually did well, for 2008.
Long term treasuries, USTreasuries actually did well,
hard assets like gold andsilver, gold, both did very
well, private equity did reallywell, volatility spiked. So
there are ways to invest involatility not directly but
(36:57):
using derivatives, which we'lltalk about another time. And
managed futures, managedfutures, depending on the
managed futures strategy.
portfolio manager you might havebeen following or likely weren't
following, you're talking aboutreturns anywhere from 20 to
150%, in 2008, so there arethings that did very well and
(37:18):
could have either enhanced thereturn, or at least softened the
blow of 2008, that potentiallycould do the same in into the
future. So it's a matter offinding those things that can
help make your portfolio moreresilient to market cycles.
(37:43):
Well if I. Oh, sorry, go ahead.
Sean Cooper (37:45):
And we'll talk more about alternative assets and
alternative strategies later.
But I mean, to give you an idea,the big endowments Yale,
Harvard, if you looked at theirallocations in 2008, I think
Yale had 60% of their assets inprivate equity. They made money
in 2008, they lost money in2009, when private equity caught
up to the market and crashed,but they actually made money in
(38:08):
2008. Whereas most investorsdon't have any in, in private
equity. In fact, most compliancedepartments and even errors and
omissions insurance won't allowtheir financial advisors to
invest more than about 10% inalternative assets and in
general, so these things, theyon a stand alone, they can be
(38:28):
very risky, but they can alsoenhance a portfolio in a variety
of ways, depending on howthey're utilized as a matter of
understanding them and utilizingthem effectively.
Chris Holling (38:45):
Yeah, that that totally makes sense. And also, I
wanted to mention something kindof bring everything back full
circle and, and psychologicallyand then that way, you know, I'm
not jumping all over the placeon these things. But there's
there's also several Iultimately, it's it's just, it's
(39:05):
different books that I've beenreading. That that a pretty
consistent phrase, when you'relooking at finances and and
economy books. And, and thesethese different books that I've
been involved reading one of theone of the most consistent
things that has come up istalking about that when there
(39:27):
are downtimes when there arerecessions, that's when new
millionaires are developed thethe the new opportunities come
out of those times when therewere several people that made a
bunch of money during thisstretch during COVID. Because it
(39:47):
It changed lots of differentaspects about the market and
paying attention to those thingsand placing your investments in
places where you think they willdo well can absolutely utilize
those situations because that's,that's a larger scale version of
diversification in a way and,and I mentioned that because
(40:10):
again, full circle, I personallyfeel like I wouldn't be able to
comfortably take advantage ofsome of those circumstances if
I'm a not paying attention. Andthe world is just happening to
me, which I just don't accept,honestly. And b that if those
(40:30):
occasions do come around, andI'm paying attention, then I can
be comfortable with saying, Hey,I think that there's a lot of
opportunity in this, becausewe're in this recession, or this
thing just happened and payingattention to where those rises
and dips happen. And me sayingI'm going to take X amount of
money and put it into thispossible opportunity that other
(40:53):
people don't tend to have theirducks in a row in their their
cash available to go towardssomething like that. And this,
this is kind of my own smallversions of that now, because if
I'm comfortable with gettinginvolved in those things,
psychologically now then I'm I'mpaying attention to the next
(41:13):
time that things are, are goingwell, the buy low sell high type
mentality. And
Sean Cooper (41:21):
wasn't it Warren Buffett, who said something
along the lines of when peopleare greedy, be fearful. And when
people are fearful, be greedy.
Chris Holling (41:30):
That sounds right.
Sean Cooper (41:31):
Yeah.
Chris Holling (41:32):
Yeah,
Sean Cooper (41:32):
It was something about that. Anyway, it gets at
the kind of what you weretalking about there.
Chris Holling (41:37):
That's exactly it. And so it's, that's, that's
the full circle I'm getting at,if you are paying attention to
those things, and you're willingto get involved in those things,
because that's of interest toyou, then that's, that's where
it's good to get involved in, inpracticing those things, or
looking into what, what ways toapproach it and how you do or
(41:59):
don't feel comfortable withthose things. Because there's
absolutely nothing wrong withgoing, Hey, I want a diversified
portfolio so that I don't haveto worry about anything, and I'm
taking care of me, I'm takingcare of my family and I'm gonna
go to bed and I'm gonna take anap. You know, like, get get
some get some good rest and, andhave that, that. I don't know
(42:21):
that comfort that shuteye that?
What am I trying to say thatsecurity? Just,
Sean Cooper (42:26):
I would just say that,
yeah, all of these decisionsreally come back to the point of
making them based on both yourfinancial ability to take on
risk, as well as yourwillingness or your risk
tolerance,
Chris Holling (42:43):
right
Sean Cooper (42:44):
Making sure those align, because there are lots of
varying degrees to which you cantake on risk and potential
returns. But they need to alignwith what your goals are and
what you're capable and willingto take on and understanding
(43:05):
what you are, what risks you areabsorbing.
Chris Holling (43:08):
Because not everybody is in the danger zone.
And that's okay. There's there'sno reason to feel like you need
to be it's it's just what'simportant to you and, and what
tools in your toolbox that youwant to use that that are
available to you. That's that'swhat we do. We we bring you the
(43:30):
tools you're a tool, Sean.
Sean Cooper (43:33):
Thanks
Chris Holling (43:37):
Man. Well, what else did we did we do it?
Did we?
Did we address correlationdiversification? Did we?
I think so. Yeah,I think so too. I like it. Cool.
Well, I'll just wrap it up.
Where we'll we'll almost soundprofessional. Thank you, ladies
(43:58):
and gentlemen, for listening andcoming out and catching us to
another episode about the truthabout investing. Back to Basics.
My name is Chris Holling.
Sean Cooper (44:09):
And I'm Sean Cooper.
Chris Holling (44:11):
And we will catch you next time. Ooh, in season
four, because season finale ofthree, three goes into four
remember the counting thingthat's so three goes into.
(44:36):
podcast disclaimer, disclaimer.
The disclaimer following thisdisclaimer is the disclaimer
that is required for thispodcast to be up and running and
fully functioning and movingforward. This is going to be the
same disclaimer that you willhear in each one of our
episodes. We hope you enjoy itjust as much as we enjoyed
making it all content On thispodcast and accompanying
(45:00):
transcript is for informationalpurposes only. opinions
expressed herein by Sean Cooperare solely those of fit
financial consulting LLC unlessotherwise specifically cited.
Chris Holling that's me is notaffiliated with Fit financial
consulting LLC nor do the viewsexpressed by Chris Holling Me
again, represent the views offit financial consulting, LLC.
(45:22):
This podcast is intended to beused in its entirety. Any other
use beyond the author's intent,distribution or copying of its
contents of this podcast isstrictly prohibited. Nothing in
this podcast is intended aslegal accounting or tax advice,
and is for informationalpurposes only. All information
or ideas provided should bediscussed in detail with an
(45:46):
advisor, accountant or legalcounsel prior to implementation.
This podcast may reference linksto websites for the convenience
of our users, our firm has nocontrol over the accuracy or
content of these other websites.
advisory services are offeredthrough fit financial
(46:08):
consulting, LLC, an investmentadvisor firm registered in the
states of Washington andColorado. The presence of this
podcast on the internet shallnot be directly or indirectly
interpreted as a solicitation ofinvestment advisory services to
persons of another jurisdictionunless otherwise permitted by
statute. Follow up orindividualized responses to
(46:32):
consumers in a particular stateby our firm in the rendering of
a personalized investment advicefor compensation shall not be
made without our first complyingwith jurisdiction requirements,
or pursuant an applicable stateexemption. For information
concerning the status ordisciplinary history of a
broker, dealer, investmentadvisor or other
(46:54):
representatives, a consumershould contact their state
securities administrator.
Amen.
My wife warned me that if I tookanother picture of her she'd be
furious. That's when I snapped
Sean Cooper (47:21):
you would to
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