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00:01:34.640 | Hello, and welcome to another episode of All The Hacks, a show about upgrading

00:01:41.200 | your life, money, and travel.

00:01:42.840 | I'm Chris Hutchins, and I'm excited you're here today.

00:01:45.400 | With all that's happening in the markets right now, it had me thinking a bit about

00:01:49.360 | my guest from episode six, Morgan Housel, who talks about how volatility in the

00:01:53.760 | stock market should be viewed more as a fee for admission than necessarily a

00:01:57.880 | fine.

00:01:58.400 | I think that's a really helpful perspective, especially given what's going

00:02:01.800 | on.

00:02:02.120 | It's currently mid-May 2022.

00:02:04.240 | We're getting awfully close to bear market.

00:02:06.520 | So today I want to bring on Nick Maggiuli, who shares a similar sentiment to Morgan

00:02:11.680 | and has written about it on multiple occasions.

00:02:13.920 | He's the COO at Ritholtz Wealth Management, but he's also a writer, investor, and

00:02:18.520 | data scientist who regularly uses data to produce insights and great content about

00:02:23.560 | investing and personal finance on his blog of Dollars and Data, and he recently

00:02:28.480 | released his first book, Just Keep Buying, Proven Ways to Save Money and Build Your

00:02:33.200 | Wealth.

00:02:33.600 | He's covered a lot on his blog and in his book, but I'm really excited to dig into

00:02:38.120 | his focus on income producing assets, why you might not want to max out your 401(k),

00:02:43.200 | investing during a downturn, getting comfortable with spending more, and why

00:02:47.240 | you'll probably never feel rich.

00:02:48.960 | Chris Hutchins works at Wealthfront.

00:02:51.440 | All opinions expressed by Chris and his guests are solely their own opinions and

00:02:55.160 | do not reflect the opinion of Wealthfront.

00:02:56.920 | This podcast is for informational purposes only and should not be relied upon for

00:03:01.200 | investment decisions.

00:03:02.200 | Nick, thank you for being here.

00:03:03.800 | Thanks for having me on, Chris.

00:03:05.280 | Appreciate it.

00:03:05.800 | So you talk about volatility in the market being kind of the price for admission for

00:03:09.520 | people interested in buying stocks.

00:03:11.400 | How do you think people should be thinking about this?

00:03:13.760 | I agree completely.

00:03:16.160 | It is like a fee for admission, except the fee isn't paid.

00:03:19.280 | You don't actually have to necessarily pay it.

00:03:20.920 | If you hold for a long enough time in a diverse set of income producing assets,

00:03:24.440 | you never have to physically pay it.

00:03:26.160 | You pay it with your emotional costs of holding through all that stuff.

00:03:29.440 | And so it's more of a, I'd say it's more of a mental fee than it is a actual

00:03:33.120 | financial transaction fee, right?

00:03:34.840 | So keeping that in mind is what's important.

00:03:37.200 | I think the thing for me that just like allows me to stay calm when markets are

00:03:40.840 | crashing.

00:03:41.400 | I've just seen this happen so often.

00:03:43.120 | Actually, tomorrow I'm writing a blog post about this.

00:03:44.920 | It's just like, I've been investing for 10 years and on average, the market

00:03:48.320 | declines by a little bit, a little over 10% every other year, 30% every four to

00:03:52.720 | five years and 50% like once a generation.

00:03:55.720 | So let's say every 20 to 25 years, right?

00:03:57.680 | We did have two 50% declines in the two thousands.

00:04:00.680 | There was the.com followed by the great recession, but the last 50%

00:04:04.680 | decline before that was 74.

00:04:06.240 | So this is all on average, but if it's happening every other year, then like

00:04:09.720 | you shouldn't be panicking over this.

00:04:11.000 | Cause these types of things just happen.

00:04:12.320 | There's going to be different catalysts, different reasons that cause them.

00:04:15.240 | That's why I can be like, Hey, this just stuff happens.

00:04:17.560 | It's just like the nature of markets.

00:04:19.680 | And it's going to keep happening that way.

00:04:21.000 | And what do you say to someone who's like, gosh, it feels like it could get even

00:04:24.840 | worse.

00:04:25.120 | Maybe I should get out before it bottoms.

00:04:26.920 | Oh, let's say you do get out before bottoms, right?

00:04:29.400 | Like, wow.

00:04:29.920 | Okay.

00:04:30.240 | I got out.

00:04:30.880 | Maybe it goes down another 10%, right?

00:04:32.840 | But how do you know when the bottom's in?

00:04:34.480 | How do you know when to get back in?

00:04:35.880 | That's the problem.

00:04:36.720 | It's like you have psychological like hell on the exit and then you have

00:04:40.040 | psychological hell on the reentry.

00:04:41.480 | So it's not even about trying to time it.

00:04:43.720 | Like that's why it's very difficult to do.

00:04:45.640 | But even if you got lucky on one side of the trade, you may get unlucky on the

00:04:49.280 | other side of the trade and you end up not making anything in the long run.

00:04:52.080 | Like imagine you sold in like early March, 2020, right?

00:04:54.800 | Like looking back now, that looks like a good idea.

00:04:56.920 | But when did you get back in?

00:04:58.480 | Within six months, we were at all time highs.

00:05:00.120 | Did you get back in before you passed your old price?

00:05:02.720 | Like probably not.

00:05:04.400 | Right.

00:05:04.640 | And that's the thing, because it would happen so quickly.

00:05:07.000 | Like it's really hard to predict that stuff.

00:05:09.040 | So I don't recommend those types of all or nothing type of moves.

00:05:12.360 | If you are getting worried, I say make minor, very, very minor tweaks.

00:05:16.160 | Just enough to get you to sleep at night, but not so much that you

00:05:18.680 | jeopardize your financial future.

00:05:20.040 | So that's my hack there.

00:05:21.560 | If you're going to sin, sin a little.

00:05:23.120 | Don't sin a lot.

00:05:23.840 | Don't.

00:05:24.080 | It's that's where people make big mistakes when they start moving everything too

00:05:27.000 | much based on short-term changes in information.

00:05:29.600 | And what would be a minor tweak?

00:05:31.400 | Let's say I do like a 60/40 every month in my 401k and putting 60% into stocks,

00:05:36.720 | 40% into bonds, a minor tweak would be like, okay, I'm going to flip that.

00:05:40.040 | I'm going to put 60% into bonds, 40% into stocks, right?

00:05:43.160 | Obviously it's a small change in money.

00:05:44.560 | You're still investing in stocks, but you're doing it at a slower rate.

00:05:47.240 | And you're putting more into bonds on the productive front.

00:05:49.400 | Even having a rebalance, rebalancing back.

00:05:51.680 | If stocks have fallen a lot and bonds haven't rebalancing back,

00:05:54.480 | that can also do things.

00:05:55.480 | There's a lot of different ways of doing this and there's no right answer, right?

00:05:58.640 | Every person's going to feel differently.

00:06:00.000 | Someone's like, I'm not going to feel safe if I lose another dollar in the market.

00:06:03.280 | Well, it's like, the truth is now, you know, your actual risk tolerance and you

00:06:06.280 | shouldn't have had that money invested in the first place, but Hey, you're here now.

00:06:09.360 | And if that's true, then yeah, you probably do need to get out completely

00:06:12.320 | because you didn't realize your risk tolerance and you should have had a very

00:06:15.080 | different portfolio before this happened.

00:06:16.680 | I think a lot of people think, okay, well, the stock market goes up always.

00:06:20.120 | So there's not really that much risk, but you kind of say sometimes the

00:06:24.080 | biggest risk you can take is not taking risk.

00:06:26.240 | Can you talk a little bit more?

00:06:27.440 | I guess you can look at it as two types of risk.

00:06:30.320 | There's slow risk and fast risk.

00:06:32.120 | Now I would define as fast risk is something like stock market

00:06:35.520 | crashes happens very quickly.

00:06:36.880 | You know, COVID-19 the world shutting down, all that stuff.

00:06:39.600 | Those are all types of fast risks.

00:06:40.880 | They happen very quickly, right?

00:06:42.120 | Slow risk is something that accumulates over a long time.

00:06:45.040 | So I think the analogy I like to use is with drugs, right?

00:06:48.680 | So someone doing heroin that they're taking on fast risk, they're probably

00:06:52.080 | going to overdose relatively quickly.

00:06:53.480 | They're not going to be doing heroin for 20 years and then they get, I

00:06:56.400 | don't know, heroin cancer.

00:06:57.720 | I'm not, it's not an equivalent, right?

00:06:59.000 | For there's no cancer or you can get from heroin, but they're going to

00:07:01.280 | get some sort of cancer and then die.

00:07:02.440 | But smoking is slow risk, right?

00:07:04.320 | That's someone who you smoke a cigarette and nothing's going to happen from that.

00:07:07.120 | You do it over 20, 30 years though.

00:07:08.760 | And you can see the incidence of lung cancer is highly correlated with

00:07:11.960 | smoking, especially after a 20 year period.

00:07:13.640 | So that's slow risk versus fast risk.

00:07:15.800 | So holding cash is slow risk.

00:07:18.040 | You're sitting there and just holding that cash.

00:07:19.600 | And that's just going to be dwindled away by inflation.

00:07:21.880 | And so the question is, which one's better?

00:07:24.200 | And there's no right answer, but you have to figure out

00:07:26.480 | whichever risks you want to take.

00:07:27.520 | So I'm going to sit this one out and sit through cash.

00:07:29.560 | Not only is your cash being inflated away, but if the

00:07:32.120 | market does happen to move up.

00:07:33.600 | Like, for example, I had had people in 2017 telling me that,

00:07:36.840 | Oh, markets are overvalued.

00:07:38.200 | If you've been sitting in cash since then, you're, you lost

00:07:41.080 | out on a hundred percent gain, basically, even with the current

00:07:43.520 | decline, maybe 80, 90% gain.

00:07:45.040 | So it's like, what risks do you want to take?

00:07:47.520 | And where do you want to take it?

00:07:48.800 | That's the things you need to think about.

00:07:50.280 | So there's nothing wrong with sitting in cash, but as long as you know,

00:07:52.880 | Hey, like I'm going to lose purchasing power over time by doing this.

00:07:56.160 | As long as you've accepted that, let's say two to 4%, this last

00:07:58.880 | year inflation has been 8%, but that's generally not what happens

00:08:01.720 | over long periods of time.

00:08:02.600 | Let's just say 4% a year.

00:08:03.800 | You're willing to accept that haircut on your money, then that's fine.

00:08:07.000 | But in the short term, very little fluctuation, but that's

00:08:09.240 | what you have to deal with.

00:08:09.960 | One thing you mentioned in there, which I just want you to drill down a

00:08:13.480 | little bit more is about kind of trying to use that cash to time the market.

00:08:17.480 | I always thought, okay, let's leave some cash on the sidelines so that

00:08:21.360 | when the market's down, which of course is very hard to predict, but we're

00:08:24.960 | in a situation like that now you can put it to work, but given how long

00:08:29.440 | it might take for that to happen, it sounds like not actually from

00:08:32.920 | the data, the best decision.

00:08:34.520 | No, it's definitely not.

00:08:36.640 | I mean, 80% of the time you're going to underperform if you

00:08:39.840 | follow a strategy like this.

00:08:41.120 | There are cases where it does outperform.

00:08:43.040 | So the time when it's best to hold cash is right before a big dip.

00:08:46.080 | And then you have to time it pretty well to like buy into that dip.

00:08:49.240 | But the problem is dips are rare and big dips are especially rare.

00:08:53.240 | Like if I had to go back and said how many 50% drawdowns if we had, or even

00:08:56.400 | let's just say 33% drawdowns, like what we had in COVID, it was 2020.

00:09:00.080 | The one before that was 08, the one before that was 2000.

00:09:02.760 | I think the only one before that, maybe 87.

00:09:05.680 | We got to down 33 with everything.

00:09:07.360 | I don't know if we did the time before that was 74.

00:09:09.920 | So they're very rare.

00:09:10.760 | And we keep going back through time is not a history lesson, but you get my point

00:09:13.920 | because they're so rare, the strategy doesn't work because you're sitting

00:09:16.960 | there in cash, hoping for this dip that never usually comes.

00:09:19.800 | And so then you've just lost out on market gains that you could have had.

00:09:22.880 | Basically, that's the whole issue with trying to time.

00:09:25.760 | And I think what you said was if you were sitting around in 2017, thinking

00:09:29.520 | things are overvalued and you waited, even if you time the dip, you wouldn't

00:09:34.040 | come out ahead, is that right?

00:09:35.200 | Yeah.

00:09:35.560 | So if you started at the beginning of 2017 and let's say you held cash

00:09:38.560 | the whole time and you bought at the exact bottom on March 23rd, 2020, right?

00:09:43.000 | That was the most recent bottom, at least, right?

00:09:44.720 | Even if you perfectly time that, you still would have bought at prices

00:09:47.720 | 7% higher than what you could have gotten early 2017.

00:09:51.120 | Of course, that's still an incredible trade.

00:09:53.160 | Like it's insane that you could do that.

00:09:54.480 | Like it just, it doesn't really work that way.

00:09:56.400 | So yeah, I don't recommend trying to time the market.

00:09:59.280 | It's tough.

00:09:59.920 | It's just too tough.

00:10:00.800 | I've shown some evidence that if you can do it even somewhat, okay, you

00:10:04.120 | might be able to make some money on it, but it's really tough and most

00:10:07.080 | people can't do it over the long run.

00:10:08.400 | You just end up losing out.

00:10:09.680 | What do you say about now?

00:10:12.080 | Now we're not trying to time the market, but we are in a down market, right?

00:10:16.400 | Depending on what day this airs, maybe we hit bear market.

00:10:18.560 | Maybe we recover.

00:10:19.440 | And a lot of this is not relevant, which I guess we are all hoping for.

00:10:22.520 | But when you're already in the down market, is there

00:10:24.960 | something to do differently?

00:10:26.080 | If you have a way of getting more cash, of course, I'm

00:10:29.800 | not against buying the dip.

00:10:30.960 | I'm against holding cash and waiting to buy the dip.

00:10:33.680 | They're very different things because conditional on you being in a dip, let's

00:10:36.400 | say you just sold a business or you got an inheritance and by chance you happen

00:10:39.920 | to get a big cash infusion when the market's down, that is one of the best

00:10:43.720 | times to buy because if the market does recover as we expect it to over some

00:10:47.240 | period of time, you're looking at higher expected return.

00:10:49.800 | I cover this in chapter 17 of the book.

00:10:52.400 | The math on this is very simple.

00:10:53.720 | So let's just use the COVID example.

00:10:55.720 | So for every percentage decline, you need a larger percentage

00:10:58.960 | gain to get back to even.

00:10:59.960 | This is just a mathematics, right?

00:11:01.600 | So let's say we're at a hundred and the price goes down 33%.

00:11:05.000 | So something's at a hundred goes to 66 to get from 66 back to a hundred.

00:11:09.320 | You have to go up 50%, right?

00:11:10.840 | 66 has to go up by 33 more roughly, right?

00:11:13.720 | Which is 50% gain.

00:11:14.960 | So X percent drop requires a larger gain to get back to even.

00:11:17.640 | So if you had bought on March 23rd, 2020, all we need to do is figure out, okay,

00:11:22.640 | how long do you think it's going to take for the market to recover?

00:11:25.160 | You have some estimates, some time estimate, and then based on that, we

00:11:28.520 | can back out your expected return.

00:11:30.040 | So even if you thought it was going to take five years for the market to recover,

00:11:33.160 | right, you're looking at a 50% upside over five years, that's roughly 10%.

00:11:37.920 | I should do the compounding math.

00:11:39.040 | It's less, it's like 8.5% a year, but let's just make it linear to

00:11:42.080 | make it easy for us, right?

00:11:42.960 | Mentally, you're looking at 10% a year.

00:11:44.720 | That's a pretty good return.

00:11:45.840 | If it took five years, right?

00:11:47.200 | Even if it took two years, you're looking at what?

00:11:49.120 | 50 divided by two, that's 25% a year returns.

00:11:51.920 | You're like, who wouldn't want that?

00:11:53.280 | So if you think the COVID is going to recover in two to three years, you're

00:11:55.800 | looking at some pretty good returns if you buy, right?

00:11:57.800 | What actually happened?

00:11:59.000 | The market was back at all time highs within six months.

00:12:01.200 | And you had something like a 106% annualized return, which is like

00:12:04.160 | one of the greatest of all time.

00:12:05.400 | Now, I'm not saying that that's going to happen here.

00:12:07.480 | I don't know, but that's just, that's the thinking you need to get into.

00:12:10.880 | So, oh, we're 20% off the high, right?

00:12:13.640 | To get back to even let's say it's whatever, like 25%, right?

00:12:17.000 | You know, if a hundred went to 80, you'd have to go up by 20, which is 25% of 80.

00:12:20.640 | So you need a 25% gain.

00:12:22.240 | Okay.

00:12:22.760 | If you think it's going to take two years to get back to our old high,

00:12:25.400 | let's say it takes two years.

00:12:26.320 | That's 12 and a half percent, roughly doing the linear math there.

00:12:29.440 | Do you not want 12 and a half percent right now?

00:12:31.000 | That's a pretty good return, right?

00:12:32.280 | All else equal, but maybe it doesn't take two years.

00:12:34.120 | Maybe it takes five years to get back to high.

00:12:35.720 | Then you can see why it's not as good of a deal.

00:12:38.200 | You know, if you were to divide 25 by five, now it's only a 5%

00:12:41.240 | return, which isn't as great.

00:12:42.800 | In the book, you said there are two good reasons to take on debt.

00:12:45.400 | One of them was when your expected return is higher than the cost.

00:12:48.280 | Does that mean that it could be a good idea right now to borrow,

00:12:53.160 | to invest when the market's down?

00:12:54.960 | Is there risk there that's beyond the expected return

00:12:58.520 | that people should be thinking about?

00:13:00.240 | So I would not recommend that under most of almost all circumstances.

00:13:04.720 | I think like technically, yes, the expected return could be higher.

00:13:08.560 | The problem is we don't know the future.

00:13:10.000 | Like we could be at the beginning of a five-year bear market.

00:13:12.720 | And so borrowing money to then invest is a very risky proposition,

00:13:17.320 | unless like you could easily pay off that debt, unless you're like,

00:13:19.720 | you know what, I'm going to take this risk.

00:13:21.520 | I'm going to lever.

00:13:22.200 | And even if it goes south, I can easily pay it off.

00:13:24.560 | You borrow like 2% of your net worth.

00:13:26.320 | There's not some really small amount.

00:13:27.600 | You could try that.

00:13:28.720 | I don't think it's worth the hassle and effort and stress of

00:13:31.680 | that to do something like that.

00:13:33.000 | But you're right.

00:13:34.080 | If the drawdown was bigger, yes.

00:13:35.520 | I think, I don't think we're there yet.

00:13:36.560 | We were down 20, but now the market's rallied today.

00:13:38.560 | And I don't know where it's going to be by the time this gets released,

00:13:40.240 | as you know.

00:13:40.640 | So I don't know.

00:13:42.360 | I think it's too, it's a risky proposition.

00:13:44.200 | I don't recommend that type of stuff because you can get really

00:13:46.720 | wrecked by trying to lever up.

00:13:48.320 | I'm not here recommending it or proposing that you recommend it.

00:13:51.960 | The way I thought about it was, gosh, maybe if I had a certain

00:13:55.000 | amount of money, I wanted to invest over the next three months.

00:13:57.800 | Maybe I could invest those three months today and to just

00:14:01.080 | pay it back in two months.

00:14:02.120 | Like I always say, when you borrow money, you need a plan to pay it

00:14:06.080 | back and you need to be comfortable with rates and a lot of borrowing

00:14:10.800 | against your portfolio, against your home, sometimes those rates aren't fixed.

00:14:14.760 | I will throw to anyone out there listening, thinking buying the dip,

00:14:17.440 | maybe I should borrow for the expected return.

00:14:19.520 | One, take all the advice you just gave.

00:14:21.440 | And two, there are some expectations of interest rates going up, which

00:14:25.080 | could mean that that equation of how much it costs to borrow is going up also.

00:14:29.440 | So from my perspective, I don't think it's a timely or wise thing to do,

00:14:34.040 | but I thought I'd touch on it a little.

00:14:36.600 | Yeah, I generally don't recommend that.

00:14:38.560 | If you have extra cash, that's investable cash.

00:14:40.640 | I don't think for an emergency or anything, you have to have extra

00:14:42.640 | cash by chance, go ahead and buy.

00:14:45.120 | Right.

00:14:45.320 | But if not, I'd say, wait, don't do anything like that.

00:14:47.520 | Don't go beyond your means, basically.

00:14:49.200 | But another way to buy the dip in a sense could be to just rebalance.

00:14:53.400 | If your stock portfolio is down significantly and you want it to be at

00:14:56.440 | 80/20 and you're at 70/30, you could sell some of those bonds when

00:15:00.040 | they're down and buy more stocks.

00:15:02.280 | That's another way of doing this.

00:15:03.640 | And obviously it happens in the reverse too, when people think they're

00:15:05.960 | overheated and you reverse back, you sell some of the stocks to buy bonds.

00:15:09.480 | You can do the same thing there.

00:15:10.520 | So it works both ways, right?

00:15:12.080 | It's a natural rebalancing process.

00:15:13.760 | And over time, there will be drift.

00:15:15.320 | The higher return asset will eat most of the portfolio over time.

00:15:18.840 | And so, or become most of the portfolio over time.

00:15:21.280 | So you'll have to just rebalance periodically.

00:15:23.880 | Maybe we're out of this whole thing by the time this comes out.

00:15:27.160 | So I don't want to spend too much time digging on how to

00:15:29.640 | invest when the market's down.

00:15:31.000 | But let's talk a little bit about what to invest in.

00:15:33.600 | You focus a lot in the book on income producing assets.

00:15:36.880 | And when I heard that, I was like, "Hmm, I feel like I know what that is.

00:15:40.000 | But I feel like maybe it would be better to get your definition."

00:15:43.160 | Yeah, these are assets that actually produce some sort of cashflow.

00:15:46.560 | They have some sort of fundamentals around how they're priced.

00:15:49.520 | So what that means is they're not just priced based on what people feel.

00:15:52.840 | Of course, how people feel about assets is going to change how they're priced.

00:15:55.720 | That's true of stocks, bonds, crypto, anything out there.

00:15:58.560 | That's going to be true, right?

00:15:59.600 | But income producing assets have some sort of fundamental...

00:16:02.640 | Like there's some weight there, which is the actual cash flows for that asset.

00:16:07.440 | Assuming they have cash flows.

00:16:08.600 | Like imagine a suitcase with $50,000 in it.

00:16:12.000 | We all could be sitting here debating the value of the suitcase.

00:16:14.840 | But if we know there's $50,000 in that cash, like that is a hard fact that we

00:16:19.600 | can use and be like, "Okay, the value of this suitcase should never

00:16:22.240 | go below $50,000," right?

00:16:24.000 | Historically, that actually is not true because Warren Buffett used to buy

00:16:27.840 | something called Nets back in the day, which was like buying that $50,000

00:16:30.800 | suitcase for $25,000 because he would buy a company where the liquidation

00:16:35.160 | value of the company was worth more than what you could buy it for in the open market.

00:16:38.840 | That's like an arbitrage.

00:16:39.720 | Those should never happen.

00:16:40.680 | And today, they basically never happen because people are smarter now and

00:16:44.200 | then people have more data and they're not allowing these types of things to happen.

00:16:47.000 | But that's just an example of like income producing assets are just a

00:16:49.920 | fundamental weight that keeps prices in line.

00:16:52.560 | And in the book, you outline a list of income producing assets.

00:16:56.120 | And some of them, I think most people will be familiar with.

00:16:58.120 | Things like real estate and stocks.

00:17:00.080 | But one that I think most people aren't is royalties.

00:17:02.520 | Are some of these more alternative income producing assets, things that

00:17:06.680 | you talk about because they exist or you talk about because the average

00:17:10.040 | person might want to look into them?

00:17:11.560 | Well, I think it's something that people could consider looking into.

00:17:15.400 | I don't think any single asset class is necessary to build wealth.

00:17:18.800 | I think I've seen people do it with just real estate.

00:17:21.080 | I've seen people do it with stocks.

00:17:22.600 | I've seen people do it with farmland, etc.

00:17:24.840 | Like there's no one that's required.

00:17:27.120 | You don't need to have all these.

00:17:28.280 | I'm just trying to expose people to different asset classes and different options.

00:17:31.760 | I think, for example, in the case of farmland, that's something that during

00:17:35.120 | most good times, it's not really correlated as much with U.S. stocks.

00:17:38.400 | Of course, most risk assets will decline together.

00:17:40.600 | That's going to probably be farmland as well.

00:17:42.480 | But the thing about farmland is it's just a different return stream.

00:17:45.760 | And so because of that, it's going to behave differently than stocks.

00:17:48.200 | Right.

00:17:48.360 | So it's something to kind of keep in mind is like, hey, how am I

00:17:51.200 | diversified and what do I own?

00:17:52.560 | So I don't think there's any reason why you need to use those.

00:17:55.160 | You don't have to.

00:17:55.800 | I just want to expose people to different ideas out there.

00:17:58.080 | And just because they're like, oh, that's kind of cool.

00:17:59.320 | Like if you're a big music fan, I could understand why you might want to own royalties.

00:18:02.560 | I think there's a personal reason for that.

00:18:04.040 | I'm a big music fan.

00:18:05.280 | I think that's something I'll get into eventually.

00:18:06.800 | There's a lot of accredited investor rules and things around some of those things.

00:18:09.320 | So you have to just kind of wait until you can do that unless the rules change.

00:18:13.720 | But that's just something to keep in mind.

00:18:15.600 | And for anyone who doesn't know, royalties, you essentially can just buy

00:18:20.040 | the income from an asset like an album or an entire collection of albums.

00:18:24.520 | And people sell these in private investor groups.

00:18:27.040 | Is that right?

00:18:27.600 | Yeah, basically.

00:18:28.360 | So you can say, hey, I want 10 years of royalties for this particular song.

00:18:31.640 | And let's say they're selling those royalties for, I don't know, let's say 20 grand.

00:18:36.440 | That's what they sell.

00:18:37.000 | And you get 10 years of it, right?

00:18:38.440 | But last year, the song made five grand in income, right?

00:18:41.680 | So they would have paid you five grand.

00:18:42.880 | You're like, well, Nick, that's a great thing.

00:18:44.200 | If I got five grand for the next 10 years, you know, that's 50 grand.

00:18:47.120 | I only paid 20 grand for it.

00:18:48.120 | That's a great return.

00:18:49.040 | The problem is you don't know if the listens and streams and all those royalties

00:18:52.080 | are going to be five grand a year.

00:18:52.960 | They might be declining over time.

00:18:54.320 | You need to see the history.

00:18:55.320 | You need to guess about the future.

00:18:57.120 | Obviously, if one of those artists were to die or something, you would see a huge spike

00:19:00.360 | in the royalties in that one year.

00:19:01.840 | Maybe the royalties would permanently be elevated.

00:19:03.760 | You don't know.

00:19:04.280 | And so you're guessing around the future.

00:19:05.680 | But it's also like a cultural investment.

00:19:08.200 | I think it's more like social than it is necessarily just the cash flows.

00:19:11.480 | But they both definitely matter.

00:19:12.880 | So you said, "Don't buy individual stocks."

00:19:15.920 | But I'm curious if the message is more, "Don't trade stocks."

00:19:20.120 | And that if you want to buy 20 companies that you're excited about

00:19:23.440 | and build that kind of basket of long-term investments,

00:19:26.400 | how do you feel about that approach?

00:19:28.520 | - It's relative to the percentage of your wealth.

00:19:30.240 | So if you're doing that with 5% of your net worth, go ahead.

00:19:32.800 | If you're doing it for fun, go ahead.

00:19:34.640 | I don't care.

00:19:35.520 | But if you're going to put the bulk of your wealth in 20 companies that you're crazy

00:19:39.280 | about, I think that is a less prudent strategy than owning like an index fund

00:19:44.560 | because the probability that those 20 companies are going to grow at the market

00:19:48.200 | rate over a long period of time is unlikely.

00:19:51.000 | I mean, most companies die.

00:19:52.240 | And the reason why you look at that chart of like, "Oh, here's the U.S.

00:19:54.880 | economy," or $1 invested in stocks for the last 100 years or the S&P 500 for the last

00:19:58.320 | 50 years, that line isn't realistic because the companies in that line are

00:20:02.920 | always changing over time.

00:20:04.240 | The companies that are falling behind fall out, and the companies that are rising up

00:20:07.560 | get added in.

00:20:08.120 | It's like a momentum strategy.

00:20:09.320 | People don't realize that.

00:20:10.240 | So if you just do a buy and hold of 20 random companies, say, "I'm going to hold

00:20:13.360 | these for the next 40 years," like half of those companies probably won't exist.

00:20:16.920 | A couple of them will probably do really well.

00:20:18.600 | But the question is, will those ones that do well offset all the ones that don't do

00:20:22.200 | well?

00:20:22.440 | And I don't know the answer to that.

00:20:24.240 | And so, I don't recommend doing that for performance reasons.

00:20:26.800 | But most importantly, I don't recommend doing it because what I call the existential

00:20:30.200 | reasons, which is you don't know if you're a good stock picker.

00:20:32.080 | And I can get into that whole argument if you want.

00:20:34.080 | But unlike most endeavors where you can identify your skill, your talent pretty

00:20:38.080 | quickly, with stock picking, we don't know.

00:20:40.200 | Like you and I, Chris, can go pick a basket of stocks, come back a year.

00:20:42.920 | And if yours outperforms mine, does that mean you're a better stock picker?

00:20:46.440 | I don't know.

00:20:47.080 | I don't think we can say that with certainty after one year.

00:20:49.240 | I don't think we can say it even after five years.

00:20:50.840 | Maybe 10, we'd have enough.

00:20:52.400 | Looking at our track records, we could probably say something.

00:20:54.400 | But after one to two years, no one knows.

00:20:56.760 | So, I just imagine someone who bought GameStop in July 2020, before the Wall

00:21:00.880 | Street Bets thing happened in early 2021, they had a huge return but had nothing to

00:21:05.520 | do with why they picked the stock.

00:21:06.800 | Had zero to do with their intuition about that.

00:21:09.280 | So, I think there's a lot of luck here, and that's what makes it tough.

00:21:12.080 | You mentioned if we picked a basket of stocks, some won't be gone, which I think

00:21:15.240 | means it's maybe even more important to figure out when to sell.

00:21:18.920 | So, I want to talk about that a little.

00:21:20.120 | For me personally, it's tough, right?

00:21:21.960 | You pick a stock or you invest it in crypto early on or something where you have a little

00:21:27.000 | bit more of an attachment to it.

00:21:28.280 | I don't have a particular attachment to VTI, right?

00:21:30.600 | Like the total stock market.

00:21:31.960 | Nor do I want to stop holding it at any point.

00:21:33.960 | But for all these other things that people might have invested in there, 10%, 15%, how

00:21:38.680 | do you think people should think about selling them?

00:21:40.360 | Or even if you work at a company and you just have the stock in that company and you have

00:21:43.720 | beliefs about it, how do you make it easier to sell either in advance when I know you

00:21:48.280 | could say this is my criteria, but maybe when you're not that prepared in advance to have

00:21:53.160 | created criteria, how do you think about selling?

00:21:56.280 | I think there's 3 reasons to sell.

00:21:57.880 | First reason, rebalancing.

00:21:59.320 | Sometimes that's just a natural thing.

00:22:00.600 | I don't think that's what you're asking in this question.

00:22:02.120 | So we're going to put that aside.

00:22:03.400 | The second reason is the point of investing is so you can live the life you want.

00:22:06.120 | So sometimes you need to sell stuff just because, "Hey, I'm going on a vacation.

00:22:09.160 | Maybe I want to do this or I want to do something nice for somebody."

00:22:11.560 | You sell.

00:22:12.280 | I also assume that's not what you're asking either.

00:22:13.960 | So we're going to put that aside.

00:22:14.840 | So rebalancing and funding your lifestyle, let's put those aside reasons to sell.

00:22:19.160 | The third reason I think you should sell is to get out of a concentrated or losing position.

00:22:24.040 | Those are very different things because it's amplifying your risk.

00:22:27.160 | It depends.

00:22:27.720 | Let's say you work at a company, right?

00:22:29.080 | You can think of that company paying you stuff as like a bond income.

00:22:31.880 | That's like the income you're getting from the company is like a bond.

00:22:34.760 | It's just a payment, right?

00:22:35.480 | You get every 2 weeks, you get your payment, right?

00:22:36.920 | Your coupon payment.

00:22:38.120 | Now, why would you also want to hold the equity?

00:22:39.720 | You're like, "But Nick, this would be the next big thing."

00:22:41.800 | Okay, that's fine.

00:22:42.680 | I recommend finding what is called the regret minimization framework.

00:22:46.280 | That's not something I came up with.

00:22:47.400 | But basically, sell enough of it so that you can lock up some level of lifestyle.

00:22:52.840 | And then anything above that, if you want to let it ride, go ahead.

00:22:55.880 | I want you to imagine the future.

00:22:57.640 | If it goes to zero, how do you feel?

00:22:59.640 | If it triples, how do you feel?

00:23:01.000 | So sell the amount, the right amount such that no matter how the future unfolds,

00:23:05.080 | you're kind of happy with your decision.

00:23:06.760 | I think that's the best way to do it.

00:23:08.120 | I think it's the only prudent way to do it because someone close to me, they went public.

00:23:12.200 | He saw his net worth shoot up a lot of money, talking high six figures.

00:23:15.720 | And he was in a high growth tech stock.

00:23:17.240 | And now that company has collapsed by like 80%.

00:23:19.880 | So he's now seen his wealth drop.

00:23:22.120 | And now that six-figure position is still six figures, but now it's very low six figures.

00:23:26.120 | So he's seen this happen because he didn't want to sell any of it

00:23:28.360 | because he thought it was gonna be the next big thing.

00:23:30.120 | And I think he's having some regret

00:23:31.400 | because he should have sold probably some of it to lock up some lifestyle stuff.

00:23:34.680 | And I just said, "Hey, here's what I would do, but you can do whatever you want."

00:23:37.240 | And then they did what they wanted.

00:23:38.280 | And that's it now.

00:23:39.000 | So that's what to just think about is like regret minimization.

00:23:41.800 | That's the framework I would use.

00:23:42.920 | So let's say you're holding one of those stocks.

00:23:45.160 | And right now, it's down more than the market is on average, right?

00:23:48.600 | There are a handful of tickers that are down, like you said, 80%.

00:23:51.720 | Is there an argument to stay in them?

00:23:55.240 | Because if the whole market recovers,

00:23:57.160 | they're gonna recover at a rate that is maybe greater than the average market.

00:24:02.840 | If you just trade out of, I don't know, Peloton or Robinhood or something into the S&P,

00:24:07.720 | everything comes back to normal.

00:24:10.440 | Well, you went down 70% and now you're just up 20%.

00:24:13.640 | Is the argument stay in them?

00:24:16.120 | Is it stay to something diversified but closer to that profile?

00:24:19.960 | Nasdaq tech index fund or something like that?

00:24:22.040 | How do you think about when you lost a large percent diversifying

00:24:25.480 | into something that probably won't recover at the same rate if it recovers?

00:24:29.080 | Yeah. So that's the thing.

00:24:29.960 | You don't know if it's going to recover.

00:24:31.160 | So the only thing you can use is historical data.

00:24:33.640 | If you look at the one-year median return across any individual stock,

00:24:36.680 | I was using the Compustat database going to 1976.

00:24:39.560 | The one-year return is like 6%.

00:24:41.000 | And the one-year return on an index is 9%.

00:24:43.960 | The probability that you're going to have one of these stocks,

00:24:46.200 | it's going to have one of these returns, it's going to do better is low.

00:24:48.440 | So it's more likely you're going to underperform.

00:24:50.360 | If we're picking stocks out of a hat, you're probably going to underperform.

00:24:53.000 | I hear your argument, but look, these ones are like high beta.

00:24:55.320 | So like when the stock market dips and they dip more,

00:24:57.400 | but when the stock market comes back, they come back more.

00:24:59.320 | Well, maybe that was true in this last run because tech was really high

00:25:03.400 | and everything was going well, but now maybe things have changed.

00:25:06.120 | I can't give you an answer that's going to satisfy you because I'd be like,

00:25:08.840 | "Oh yeah, of course they're going to come back."

00:25:10.200 | The thing I like to think about is all the prices in the past

00:25:12.920 | could have just been imaginary.

00:25:13.960 | We were all very bullish on tech and like, "Oh, COVID is taking over the world

00:25:17.960 | and we're never going to come out of our houses and this is everything."

00:25:20.120 | Like Zoom and Peloton, all these companies are now the future, right?

00:25:23.320 | And now that the world's kind of coming back to reality, like maybe that's not true.

00:25:26.840 | And so maybe all those prices were like kind of imaginary in some respect.

00:25:30.200 | So I don't know if we're going to see something like that.

00:25:32.600 | Then again, like I know it's crazy to say that we go to another pandemic

00:25:35.800 | and then those companies start to thrive again.

00:25:37.480 | I just don't know, like the future is so uncertain.

00:25:39.560 | I mean, it's really tough to be in that space when you're down 80%.

00:25:42.200 | You have to just evaluate it going forward.

00:25:43.720 | I would say evaluate on risk parameters and not necessarily trying to get all your money back

00:25:47.640 | because you should just assume you're not going to.

00:25:49.640 | So what I'm doing, for example, I own two tech stocks.

00:25:51.960 | I won't say what they are.

00:25:52.760 | I'm not trying to pump them or anything.

00:25:54.120 | But at the end of the year, if they're still down bad,

00:25:55.720 | I'm going to sell them and just have them as a tax loss.

00:25:57.400 | I'm holding through the end of this year.

00:25:58.840 | And if like, if they come back, they do.

00:26:00.840 | If they don't at all, I'm selling at the end of this year regardless.

00:26:03.160 | And I'm just going to lock in the tax loss

00:26:04.600 | because I can write that off against other gains.

00:26:06.600 | So that's kind of how I look at it.

00:26:08.200 | That's a good strategy.

00:26:09.320 | Maybe I'm going to adopt that strategy for a handful of these small positions.

00:26:12.840 | You mentioned income producing assets.

00:26:14.280 | What about the other side of that equation?

00:26:16.200 | Crypto or art or anything like that?

00:26:18.520 | Where do those things fit into investing?

00:26:20.440 | I hold roughly 10% of my investable assets in those different types of

00:26:25.640 | what I call non-income producing assets.

00:26:27.160 | So that actually does include mostly art and crypto.

00:26:29.480 | And I actually also put private companies,

00:26:31.160 | even though companies could be income producing.

00:26:33.080 | I don't consider them income producing.

00:26:34.680 | I have a couple of very small private investments,

00:26:36.520 | like 1% of my net worth or something.

00:26:38.360 | And those aren't income producing, right?

00:26:39.720 | I always look at it like that.

00:26:41.240 | And when the price is based completely on what people are willing to pay for it,

00:26:46.120 | and then there's no income, you kind of have to look at it that way.

00:26:48.760 | So I'm not saying you can't make money in them,

00:26:50.040 | and they're not good for risk reasons or a host of other things.

00:26:53.400 | But I just think you need to keep it a smaller portion of your portfolio,

00:26:55.800 | because it's really hard to show how those are going to keep

00:26:59.000 | going up in value in the same way that income producing assets go up in value.

00:27:03.080 | There's a much more fundamental reasoning for why those should go up

00:27:06.360 | in value versus why art or crypto or anything else should go up in value.

00:27:10.200 | That makes sense.

00:27:10.840 | Getting the crew together isn't as easy as it used to be.

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00:28:25.000 | So let's jump a little bit to where we put the money.

00:28:28.760 | I think one of your contrarian takes in the book

00:28:31.560 | is that maybe you shouldn't max out your 401k.

00:28:34.840 | Yes, that's one of my most contrarian takes.

00:28:37.240 | I think it's a very disliked take, but some people see the value in it.

00:28:41.160 | For someone listening, it's like, "Wait a second. Wait a second. I've got my 401k."

00:28:44.120 | Let's set aside the match because I think we'll all agree that

00:28:46.680 | if your company is going to match your contributions, that's worth it.

00:28:49.480 | But if they're not, why would someone listening who's not getting matched

00:28:53.640 | want to stop and say, "Maybe I shouldn't do this"?

00:28:56.440 | Well, I think the point of this is to actually just open the conversation up.

00:29:00.280 | Because if I looked and I was like, "9 out of 9 personal finance experts all said max your 401k."

00:29:05.400 | I was like, "Maybe I should just look into the numbers and find out."

00:29:07.480 | And you actually look at the after-tax savings you get from above the match, as you said.

00:29:12.120 | So anything above the employer match was something like 0.7% a year.

00:29:15.480 | That's assuming a 15% capital gains rate and a bunch of other assumptions.

00:29:19.080 | You're looking at 0.7% a year and some 401k plans have all-in fees of over 1%.

00:29:24.840 | Those people are paying 1% to be in their 401k.

00:29:27.800 | They're getting -0.3% a year tax.

00:29:30.520 | They're paying a negative tax alpha, I guess you'd call it.

00:29:32.760 | You're losing money just to be in their 401k.

00:29:35.000 | They would be better off if they didn't put any money in there and just held that

00:29:37.640 | on the outside and put it in a brokerage account and got lower fee options.

00:29:41.400 | So they could just manage it themselves.

00:29:43.080 | And so I just wanted to open this up so that people would actually look at their

00:29:46.040 | 401ks and say, "How much am I actually paying?"

00:29:48.040 | The all-in fees, everything.

00:29:49.240 | If it's anywhere near, let's say, 0.7%, you need to definitely get out of there.

00:29:53.320 | If it's like 0.5%, then the question is like, "Is it worth the extra 0.2% a year

00:29:57.960 | to lock up your money to 59 and a half?"

00:30:00.600 | And I don't know for all the excess money.

00:30:02.200 | And I don't know what the answer is.

00:30:03.240 | So I wrote about all this in the book.

00:30:04.920 | I was just comparing a 401k to a brokerage account where it's post-tax money and all this.

00:30:09.240 | What I didn't even consider and I've since thought about since,

00:30:12.200 | in a brokerage account, if your only income is capital gains,

00:30:15.000 | like dividends, capital gains, whatever, and that's your only income for the year,

00:30:18.360 | you can have $40,000 a year tax-free as a single individual.

00:30:21.720 | If you include the standard deduction right now, it's like 50 grand.

00:30:24.280 | So if you're a couple, now multiply that by two, a couple, a retired couple right now,

00:30:28.760 | let's say they have, I don't know, a $2 million portfolio,

00:30:31.240 | and it's paying them $100,000 a year in income, like capital gains, dividends, etc.

00:30:35.800 | And that's the only income they have there.

00:30:37.080 | No social security, nothing else.

00:30:38.680 | They can have 0% tax on all that money.

00:30:41.640 | No taxes.

00:30:42.680 | So now if you use that, if you just have a well-managed brokerage account,

00:30:46.520 | that completely destroys maxing out a 401k because you're not putting money,

00:30:51.000 | locking it up to 59 and a half.

00:30:52.760 | It just makes absolutely no sense to do that when you can have a 0% tax-free

00:30:57.960 | pulling money out of your brokerage account, which is kind of wild to think about.

00:31:01.240 | But that's like a real thing.

00:31:02.040 | You can look it up, like, yes, a couple can pull out about $100,000 a year tax-free,

00:31:05.960 | as long as their only income is capital gains.

00:31:08.920 | And most people don't talk about that.

00:31:10.760 | And that's something that now going back,

00:31:12.920 | I would have added that into the book as another counter argument.

00:31:15.240 | But just think about that.

00:31:16.760 | That completely changes the retirement landscape.

00:31:18.840 | I'm like, "Do you need to max 401k?"

00:31:20.440 | Well, not necessarily.

00:31:21.480 | Because if you can build a big enough portfolio outside of your 401k,

00:31:24.920 | you can even do it and have a much better tax treatment as well.

00:31:27.560 | I had Andy Ratcliffe, who started Wealthfront, where I work on the show.

00:31:32.760 | He has a similar take to you, but he added on.

00:31:35.320 | And so go back and listen to that episode if you want to go deeper on this.

00:31:38.520 | The cost of the liquidity, the fact that if you need the money,

00:31:41.800 | you have to pay fees.

00:31:42.920 | And there isn't an easy way to get the money out.

00:31:45.480 | And his argument was that young people, you don't know what you're going to need money for,

00:31:50.360 | whether it's starting a company, whether it's buying a home, whether something happens.

00:31:53.480 | And so his point was like, "If the fees don't make sense,

00:31:57.000 | then it's a no-brainer that you shouldn't do it."

00:31:58.680 | And there are sites out there right now where I think you could just search 401k fee analysis.

00:32:03.160 | And they'll tell you, sometimes it's the account fee,

00:32:05.800 | sometimes it's these mutual funds that just get marked up.

00:32:08.360 | It's like you could get the same fund somewhere else, but we just charge you

00:32:11.400 | an extra half a percent.

00:32:12.920 | But there's also a cost to liquidity and not having access to your money if you need it.

00:32:17.800 | If you're not a good saver, maybe that's actually a benefit.

00:32:20.440 | Maybe if you can't access your money, it's probably better for you.

00:32:23.000 | But if you are a good saver, I think that's another factor that plays into it.

00:32:27.160 | Yeah, I agree.

00:32:27.800 | And I think so some people say locking up your money is a feature, not a bug.

00:32:30.760 | And I agree for some people that don't have discipline.

00:32:32.600 | This is not going to be a great idea because you're going to pull that money out and then

00:32:35.080 | probably spend it or something.

00:32:36.200 | So I completely understand that take.

00:32:38.200 | There's some benefits that go beyond a spreadsheet.

00:32:39.960 | But yeah, that's why I even thought about looking into the numbers on this,

00:32:43.240 | because I was like, I had the same issue where like,

00:32:45.720 | "Oh, wow, I couldn't buy real estate right now because like I locked up way too much

00:32:49.320 | money into my 401k that I probably should have just done the 4%, got my match,

00:32:53.000 | and then had everything else on the outside."

00:32:54.600 | And I kind of regret that now.

00:32:56.440 | That's why I'm just trying to get this idea to people, especially young people who like,

00:32:59.960 | "You're right. You don't know what you're going to use the money for."

00:33:01.560 | And so just having that kind of in mind is kind of helpful, I think.

00:33:04.760 | If you want to have a diverse portfolio, maybe there's some assets you put in your

00:33:07.720 | retirement account, some you put in your Roth IRA, some you put in your taxable account.

00:33:12.440 | And for someone versed in asset location, is that really a big deal?

00:33:17.000 | I think I saw somewhere that you either don't do it or it's not an

00:33:20.120 | important part of your investing strategy, which made me question whether it's worth it.

00:33:23.960 | There's 2 different ways of looking at it.

00:33:25.880 | If you're trying to maximize every dollar, there's an optimal way to do it.

00:33:29.640 | And I can tell you, you want to put your highest growth assets,

00:33:32.040 | the things you think are going to grow the fastest, let's say stocks.

00:33:35.160 | Let's say there's only 2 assets. There's stocks, which are high growth.

00:33:37.720 | And let's say they're bond, which are low growth.

00:33:39.640 | In that scenario, you would put all your high growth assets into your non-taxable accounts.

00:33:43.960 | Your 401(k) would be all stocks. Your IRAs would be all stocks.

00:33:47.640 | And then your bonds would sit in your taxable accounts where you have to pay

00:33:51.000 | whatever on the income that you're saying.

00:33:52.360 | But Nick, they pay the income, but if you actually look at the math, the high growth,

00:33:55.720 | all the taxes on the capital gains are going to be much bigger than any sort of income you're

00:33:58.840 | going to have to pay on a bond, especially with yields as low as they are today.

00:34:01.560 | The income is very small.

00:34:02.920 | So if you're trying to just go like maximize every dollar,

00:34:05.880 | there is an asset location argument to be made.

00:34:07.800 | But if you want to do a convenience argument, which is what I care about,

00:34:10.360 | I just make all my accounts look basically the same, right?

00:34:12.680 | Like they're like carbon copies of each other in terms of the asset allocation.

00:34:16.200 | I don't put the same funds in all of them.

00:34:18.040 | The reason I don't is because I do tax-loss harvesting once in a while.

00:34:21.160 | This is where you kind of need a professional sometimes.

00:34:23.240 | If you don't do that correctly, you can do something called a wash sale.

00:34:25.400 | And basically you try to tax-loss harvest, like lock in a loss.

00:34:28.200 | But then if you buy something like one of your IRAs, you buy the same thing.

00:34:31.400 | It's all washed.

00:34:32.360 | It's a very complex topic.

00:34:34.360 | I don't want to get into here.

00:34:35.400 | I just recommend talking to a professional and getting that type of advice.

00:34:37.960 | Because if you're trying to do certain types of tax games in there,

00:34:40.840 | you're going to have to just be careful what you do.

00:34:42.360 | But just for ease of use, I like having the same allocation across all my accounts.

00:34:46.280 | Because then rebalancing is much easier.

00:34:47.960 | Because I can rebalance within an account, right?

00:34:49.800 | If I have all my stocks in one account and all the bonds in another account,

00:34:53.000 | how do I get the money out of the 401(k) and into my brokerage?

00:34:55.560 | You can't do that, right?

00:34:56.600 | So for a host of reasons, I recommend the carbon copy model,

00:34:59.560 | cookie-cutter model of asset allocation.

00:35:01.480 | When it comes to tax-loss harvesting, one of the saddest emails I've ever gotten was

00:35:07.160 | from people while I was working at Wealthfront.

00:35:09.000 | They're like, "Gosh, I've been running three RoboAdvisor portfolios and tax-loss

00:35:14.040 | harvesting on all of them."

00:35:15.640 | Which effectively meant they're buying and selling the same index funds to optimize their taxes.

00:35:19.960 | But three people completely uncoordinated are doing it.

00:35:23.080 | And the end result is just not going to be fun.

00:35:25.800 | I always say, "If you are doing any kind of tax-loss harvesting,

00:35:28.920 | make sure that whoever's doing it knows all the rules across all the accounts.

00:35:33.160 | Otherwise, it can be messy."

00:35:34.600 | Even just the investing of it, right?

00:35:36.120 | If you are investing regularly in your IRA, like you said,

00:35:39.720 | if you're buying the same thing, your tax-loss harvesting somewhere else can be a problem.

00:35:43.160 | The single feature that I thought was the coolest is in Wealthfront,

00:35:45.800 | you can go in and put an email address and they have to confirm, I think.

00:35:48.760 | But so my wife and I each have an account.

00:35:50.600 | If we put our email addresses in Wealthfront, we'll link them up

00:35:53.800 | and tax-loss harvest accordingly across all the accounts.

00:35:57.000 | So there's software that can do it.

00:35:58.680 | There are advisors that can do it.

00:36:00.040 | You could do it once a year where you know everything's happening.

00:36:02.680 | But if you're trying to play the tax games, I'm with you.

00:36:05.240 | You just got to be careful because the tax games all go away if you mess it up.

00:36:09.640 | Yeah. Especially if you're tax-loss harvesting, I'd recommend

00:36:12.360 | do not automatically reinvest your dividends.

00:36:14.760 | That's also another nightmare because you could sell out of a position and then

00:36:18.520 | it automatically reinvests and starts to wash.

00:36:20.680 | That's another wash sale thing where you now don't get the tax loss at all.

00:36:23.640 | You got to be really careful.

00:36:24.680 | We could do a whole episode just on that because I've made all the mistakes now.

00:36:27.480 | And I know all the things to look out for.

00:36:29.240 | But it's so complex that I agree.

00:36:30.920 | You need like one person in the so-called driver's seat,

00:36:34.280 | trying to figure out all the accounts and everything.

00:36:36.200 | Otherwise, you're going to wash sale yourself.

00:36:38.280 | It's not a matter of if, but when.

00:36:39.640 | You got to be really careful.

00:36:40.600 | Or like you said, a hack there would be just have a different set of funds.

00:36:45.320 | If you are investing in 2 different accounts and you don't want to have to deal with that,

00:36:49.640 | just pick a different set of index funds in each account so you're not at risk.

00:36:53.400 | Yeah, exactly. Also, all my non-taxables are identical because I can

00:36:57.400 | do whatever and I'm not going to get any sort of wash sale because they're all non-tax.

00:37:00.760 | My IRAs, 401ks, etc.

00:37:02.520 | But then all my brokerage stuff is a completely separate set of funds.

00:37:06.200 | There's no overlap there because I don't want any sort of accidents to happen, so to speak.

00:37:10.280 | Now, we talked a lot about investing and a lot of the book is about saving.

00:37:15.880 | And I did want to touch on one thing where

00:37:18.920 | you talk a little bit about how some people early on might be focusing too much on investing

00:37:23.960 | when they should be focused on saving.

00:37:25.320 | Why is that?

00:37:25.880 | Let's just do some simple math here.

00:37:28.600 | It'll illustrate it instantly, right?

00:37:30.120 | Imagine you have $1,000 to your name, right?

00:37:32.520 | You're 22 years old like I was or 23.

00:37:34.520 | I'm like, "Hey, I'm starting investing.

00:37:36.200 | I spent all this time analyzing my investments and all this."

00:37:38.520 | Let's say you get a 10% return.

00:37:40.280 | That's $100, right?

00:37:41.880 | At the same time, when I was 23, I was out in San Francisco with friends.

00:37:45.560 | We'd go to dinner, have drinks, Uber home, all that.

00:37:48.360 | I easily was spending $100 in a single night.

00:37:51.560 | Me foregoing one night going out with my friends was the same as my investment return for a year.

00:37:55.880 | So you can see when you don't have a lot of capital to invest, especially younger people,

00:37:59.640 | people who are just starting, it's not going to matter what your investments do.

00:38:03.000 | That's the sad truth.

00:38:03.640 | No one wants to talk about it, but it's not really going to matter what happens.

00:38:06.360 | And once you start building that nest egg, then it does.

00:38:09.000 | And so you can see generally over someone's life.

00:38:11.160 | The phrase I like to use in the chapter one in the book is called "savings for the poor

00:38:15.080 | and investments for the rich."

00:38:16.520 | I don't mean poor in an absolute way.

00:38:18.680 | It could be true in an absolute way, but I really mean in a relative way.

00:38:21.320 | If you're young, you're probably poor relative to your future self, right?

00:38:24.280 | You're assuming you're going to have a career, save money, etc.

00:38:26.680 | You need to focus more on your income, your savings, things like that.

00:38:29.720 | And as you get older, you can spend a lot more time on investments.

00:38:32.280 | That doesn't mean you shouldn't read books on investing.

00:38:33.960 | I'm not anti-knowledge.

00:38:35.000 | Of course not.

00:38:35.640 | Of course, I want people to learn more about this stuff.

00:38:37.720 | But you don't need to spend a ton of time on it, at least initially.

00:38:40.360 | Just set something up.

00:38:41.560 | If you, "Oh, should I be in a target date?

00:38:43.000 | Should I do this?"

00:38:43.800 | It's not going to matter that much if you're 22 or 23.

00:38:46.040 | It's really not.

00:38:46.840 | But as you start to learn more about stuff, start saving up more money,

00:38:49.160 | then your investment decisions matter.

00:38:50.520 | Because now let's do the flip side.

00:38:51.960 | Let's say you have a $10 million portfolio and it declines by 10%.

00:38:55.080 | That's $1 million.

00:38:56.360 | Someone that could save $1 million after tax, you have to have a very high-paying job.

00:39:00.520 | There's very few people that can do something like that.

00:39:02.520 | So you can see, once you have a big portfolio, investing is kind of the whole game.

00:39:06.360 | Your income is not going to be able to do much to budge that.

00:39:08.840 | But your investment knowledge and what you do and what you own really matters a lot more.

00:39:12.840 | So just think about, where do you have the most leverage?

00:39:14.760 | The best hack I know is take what your time and attention

00:39:17.240 | and focus on the area where you have the most leverage.

00:39:19.000 | When you're 22, when you're young, it's your career.

00:39:21.400 | And as you get older, and assuming you have more wealth, it's your investments.

00:39:24.760 | And so figuring out where you are on that spectrum is what's important.

00:39:27.880 | So the little rule I like to use is just figure out how much you could save in the next year.

00:39:31.560 | That's some number.

00:39:32.440 | Let's say $10,000.

00:39:33.320 | Figure out how much your investments can return you in the next year.

00:39:36.680 | Let's say in a good year, you can get a 10% return.

00:39:39.480 | Let's just use that number for fun.

00:39:41.080 | 10% return.

00:39:42.520 | Unless you have $50,000 invested, that's $5,000.

00:39:44.840 | So if you could save $10,000, but your investments can only earn you $5,000,

00:39:47.560 | you probably need to work a little bit more on either raising your income

00:39:50.600 | or saving more money to get that other number higher.

00:39:53.240 | You want that $50,000 to be $100,000 and then $200,000, etc.

00:39:56.440 | So that if it gets a 10% return, the amount of income you're going to get is larger.

00:40:00.040 | So whatever number is bigger is where you need to focus on.

00:40:01.960 | Because over time, you're going to see that your investments

00:40:04.120 | are going to be able to return you more than you can save in a year,

00:40:06.360 | in theory, if everything goes well.

00:40:08.120 | So that's what they're focused on.

00:40:09.080 | And so let's go down that journey.

00:40:11.080 | Now you're at the point your investments are earning you more, that second half of the journey.

00:40:15.560 | And you're in a situation where I know a lot of people are...

00:40:19.960 | Which is they're struggling to spend money.

00:40:22.120 | They've gone through this disciplined cycle of saving.

00:40:24.840 | And now... And maybe they're not all the way there.

00:40:26.920 | Maybe they're still saving more than they would earn in their investments.

00:40:29.400 | But they're struggling because they don't want to spend money.

00:40:32.680 | I know so many people that have that guilt and anxiety.

00:40:35.320 | Myself, my wife included, where we're trying to feel comfortable spending money.

00:40:39.880 | Because after all, what is all the money for,

00:40:42.760 | if we're not able to actually use it on the things we want?

00:40:45.720 | But people who adopt a diligent savings habits sometimes struggle here.

00:40:51.000 | Yeah. So this is a problem that a lot of people have,

00:40:53.080 | especially people who are affluent, who have done well.

00:40:55.240 | Because by definition, the people that have a lot of money have probably...

00:40:59.240 | Besides the people who got lucky, let's put them aside,

00:41:01.400 | have probably had pretty good savings habits.

00:41:03.400 | So it's like you're actually really good at acquiring money,

00:41:05.960 | and you're not really good at spending.

00:41:07.320 | So by definition, it's going to be difficult.

00:41:09.240 | That's the first thing to realize.

00:41:10.600 | It's not going to be easy for you.

00:41:11.960 | I think the second thing to recognize is a lot of this comes from guilt.

00:41:15.400 | Whether you're guilting yourself, or you're seeing the media guilt people,

00:41:18.840 | or maybe your social circles would be guilting you.

00:41:20.840 | I don't know what it is.

00:41:21.800 | And every person is going to be different.

00:41:23.640 | It's figuring out how to get past that guilt.

00:41:25.880 | I'm not saying that, "Oh, if you have a lot of money,

00:41:27.480 | you should be spending a lot of money."

00:41:28.520 | That's not my argument here.

00:41:29.480 | But I'm saying you should be comfortable spending money when you need to, right?

00:41:33.160 | I don't want you to spend money frivolously.

00:41:34.600 | I don't think that's good for anybody.

00:41:36.040 | But if you're like, "Oh my gosh,

00:41:37.240 | I don't know if I should buy these nice dress shoes,

00:41:39.480 | because my other ones, they're fine, but they're getting old."

00:41:42.120 | And if you're worried about $200 purchase,

00:41:43.720 | and you're worth $2 million or $5 million in net worth,

00:41:47.000 | you need to get something psychologically figured out.

00:41:49.640 | Why are you feeling that way about spending money?

00:41:51.560 | And sometimes it is from stuff you can't change.

00:41:53.960 | For example, I go out and spend a lot of money at restaurants.

00:41:56.440 | That's the thing I like to do.

00:41:57.960 | But at the same time, every time I go to McDonald's,

00:42:00.360 | I still order off the dollar menu,

00:42:01.800 | because that's what my mom and dad always had me order off as a kid.

00:42:04.760 | And there's this weird thing where I can't get over it.

00:42:07.160 | I can go drop $60 on a dry aged rib eye steak,

00:42:10.040 | but there's something about me spending $5 on a McDonald's sandwich

00:42:13.080 | that's going to mess with me mentally.

00:42:15.080 | And so I don't know why that is.

00:42:16.520 | And so you got to figure out what in my psychology is making me do that,

00:42:19.720 | and what in your psychology is making you behave the way that you are.

00:42:22.520 | Tips to do it.

00:42:23.240 | I would say, if you want to spend, I have a rule I use.

00:42:25.640 | It's called the 2X rule.

00:42:26.600 | If you're going to splurge on something,

00:42:28.360 | let's say you're going to spend $500 on some fancy watch or handbag or whatever.

00:42:31.960 | It doesn't matter what it is.

00:42:33.400 | Take another $500 and either invest it or donate to a good cause.

00:42:37.000 | Now you can get rid of your guilt saying,

00:42:38.200 | "Every time I spend on myself, I'm also donating."

00:42:40.200 | So now, yes, you're going to be spending more money,

00:42:42.120 | but at least you can get rid of that guilt

00:42:43.720 | and spend it towards something that you care about in some other way.

00:42:46.440 | So that's another way of doing it.

00:42:48.040 | You can try and do that.

00:42:48.920 | It doesn't work for everyone, but I've heard some good results from it so far.

00:42:51.320 | And you said you could also invest it.

00:42:54.360 | So if you're investing it, you're not giving it away.

00:42:56.440 | You're just setting it aside for the future.

00:42:58.200 | For your future self, yeah.

00:43:00.440 | I just want to thank you, Quik, for listening to and supporting the show.

00:43:04.120 | Your support is what keeps this show going.

00:43:06.920 | To get all of the URLs, codes, deals, and discounts from our partners,

00:43:11.400 | you can go to allthehacks.com/deals.

00:43:15.000 | So please consider supporting those who support us.

00:43:18.360 | Can you talk a little bit about what you call the biggest lie in personal finance?

00:43:22.040 | Yeah, so what I think is the biggest lie in personal finance

00:43:24.840 | is that cutting spending is a reliable path to building wealth.

00:43:28.200 | And I just don't think the data suggests that at all.

00:43:31.240 | Yes, you can cut spending.

00:43:32.360 | It's like a short-term workaround, but it doesn't build wealth of the long run.

00:43:36.360 | Just consider this.

00:43:37.240 | Very simple.

00:43:37.880 | If you look at the data, one of the most positively correlated things with savings rate

00:43:41.720 | is your income, your absolute level of income.

00:43:43.640 | And you're going to say, "Well, Nick, this is so obvious."

00:43:45.320 | Well, it's so obvious, but yet people are still pushing this cutting spending argument, right?

00:43:50.040 | It's like people with higher incomes generally save more money.

00:43:53.000 | That is just across the board.

00:43:54.200 | The higher rate, they're even saving a higher percentage of their income.

00:43:57.160 | And the reason is simple.

00:43:58.200 | Incomes go up, but your spending doesn't move with it, right?

00:44:00.760 | It's like law of the stomach.

00:44:01.800 | If I increase your income 10x, are you going to spend 10 times more on food?

00:44:04.840 | Probably not.

00:44:05.560 | Are you going to spend 10 times more on housing?

00:44:07.480 | Maybe, but probably not.

00:44:08.520 | Maybe you'll spend 8 times more on housing.

00:44:09.960 | I don't know.

00:44:10.280 | But you see people generally earn more and more money.

00:44:12.840 | They don't spend more and more.

00:44:14.280 | And you're like, "But Nick, I know this person has high income.

00:44:15.880 | They spend a lot."

00:44:16.440 | Yes, you know these people.

00:44:17.560 | You know a handful.

00:44:18.280 | You can think of anecdotes.

00:44:19.240 | I know people like that too.

00:44:20.680 | But the data suggests, if you're looking across aggregated data sets across most people,

00:44:24.600 | that that is just not true.

00:44:26.360 | And I'm sorry to burst the bubble.

00:44:27.720 | But it's just not in there.

00:44:29.160 | And if you want to bring other data sets that show this, I'd be happy to look at them.

00:44:33.000 | But I have not seen any data sets that show that people of higher income are spending

00:44:37.960 | money at a higher rate than people of lower income.

00:44:40.280 | So I think it really shows that really the way to get rich in the long run, the most

00:44:43.640 | reliable path, it does take longer, is to raise your income and find other income opportunities.

00:44:47.880 | Work on your career, whatever.

00:44:49.080 | Work on a side hustle that becomes a main hustle, whatever.

00:44:51.160 | There's a lot of ways to do this.

00:44:52.760 | But it's what I recommend.

00:44:54.280 | And you like break down each one of those.

00:44:56.200 | Yeah. Chapter 3, I talk about different ways you can raise your income.

00:44:59.000 | If you really need that type of stuff, there's different ways of doing it.

00:45:01.160 | Whether it's like selling a product, whether it's like selling a skill or service, teaching

00:45:04.920 | people.

00:45:05.160 | There's a lot of different ways you can do this.

00:45:06.920 | And what mine is just like a limited set just to kind of get your ideas flowing if you need

00:45:10.280 | that help.

00:45:10.600 | But that's really the only way out as I see it.

00:45:13.800 | Cool.

00:45:14.360 | I think another big thing, and you talked about this, is that as you build more wealth,

00:45:19.240 | it doesn't matter.

00:45:19.960 | You're never going to feel rich.

00:45:21.720 | I don't want to get into that paradigm because I know we've talked about it a lot.

00:45:24.760 | But I am curious if you have any stories, anecdotes, or tips for people who are in that

00:45:29.960 | boat where they're like, "Gosh, I feel like I'm at a place where I thought when I got

00:45:34.920 | here, I'd be great.

00:45:35.960 | And now I just feel exactly like I did 1 year, 5 years, 10 years ago."

00:45:39.880 | I think the easiest way to do it is to remember where you came from.

00:45:43.640 | Have an absolute measure of wealth.

00:45:46.280 | For example, if you have over $100,000 in Liquid Net Worth, that puts you in the top

00:45:50.920 | 10% of people on the planet in terms of how rich you are.

00:45:53.880 | I would say that's considered rich.

00:45:55.000 | And you're saying, "Nick, that's ridiculous.

00:45:57.000 | You can't compare me to some random personnel out there in the world.

00:46:00.360 | That's not fair."

00:46:01.000 | But in the book, I talk about this.

00:46:03.160 | Lloyd Blankfein, the ex-CEO of Goldman Sachs, was interviewed about this.

00:46:06.520 | They asked him just about his life.

00:46:07.800 | And he's like, "I don't feel rich.

00:46:08.840 | I'm well-to-do."

00:46:09.480 | Even though he's a billionaire.

00:46:10.200 | This person's a billionaire.

00:46:11.080 | He says, "I'm not rich.

00:46:11.720 | I'm well-to-do."

00:46:12.200 | And you're saying like, "That's a ridiculous argument.

00:46:14.120 | How can you say, Lloyd Blankfein, that you're not rich?"

00:46:16.600 | Well, because he's hanging out with people like David Geffen and Jeff Bezos,

00:46:19.880 | and people who have 10, 100x his wealth.

00:46:21.640 | So he doesn't feel rich relative to them.

00:46:23.400 | Well, I can make the same argument that like, "Hey."

00:46:27.480 | I know what he's saying is outlandish.

00:46:28.920 | But what you're saying about how like, "Oh, well, you can't compare me to those

00:46:32.200 | other people around the world."

00:46:33.320 | It's the same thing.

00:46:33.960 | Lloyd Blankfein doesn't think that you can compare him to people like you and me, right?

00:46:37.480 | Because he's like, "That's not my social circle, right?

00:46:39.640 | Those aren't my people."

00:46:40.520 | So you're making the same argument he's making.

00:46:42.760 | Obviously, it's less objectively outrageous, but it's the same argument.

00:46:46.280 | So I think you have to look at global wealth.

00:46:48.040 | You have to look at like, absolute thing relative to your history,

00:46:50.920 | what you could expect to earn or expect to have in your life.

00:46:53.720 | I think that's the only way to stay grateful and to kind of break out of that cycle of

00:46:57.080 | not feeling rich.

00:46:57.800 | Like, for example, I consider myself rich.

00:47:00.280 | I'm not a millionaire.

00:47:01.080 | Like, objectively, in the United States, I'm not rich.

00:47:03.080 | But like, relative to the world, I consider myself rich.

00:47:05.720 | And so I have to think like that.

00:47:07.400 | Otherwise, I will always be chasing that type of stuff.

00:47:09.960 | And so I think you have to remember that.

00:47:11.640 | That's how you ground yourself.

00:47:12.600 | So I would consider myself a rich person, despite the fact that I'm not even a

00:47:16.040 | millionaire.

00:47:16.760 | I'm not someone who can go around and fly private or any of that type of stuff,

00:47:19.720 | which we would consider rich behavior.

00:47:21.400 | I think it's just a way of like looking at the world so that I don't kind of lose

00:47:25.080 | myself, that type of stuff.

00:47:26.600 | Taking out of your mind that flying private is rich behavior is probably going to help

00:47:31.400 | because I feel like most of us will probably never get to that point.

00:47:34.440 | We did have an episode where we talked about how you might be able to do it for a little

00:47:37.160 | bit less.

00:47:37.640 | But no matter how you slice it, it's just really expensive.

00:47:40.120 | So don't put that as a target or a goal.

00:47:42.840 | You can always use points and fly business class for way less.

00:47:45.320 | So I think most people here know that.

00:47:47.240 | Yeah.

00:47:47.740 | So you ended the book talking about this experiment where you said, "If I were able

00:47:54.840 | to create some principles that I would give to myself, if I were randomly dropped somewhere

00:47:59.880 | in the last 100 years, what would I create if those principles weren't like avoid the

00:48:04.280 | stock market during a certain time period or something?"

00:48:06.680 | And you said that was the book.

00:48:07.960 | The idea was you wanted to write this book, I assume, for anyone at any point in time

00:48:12.520 | to read.

00:48:13.640 | But there were 21 principles.

00:48:15.240 | So I'm curious if you had to pick only a couple, what would they be?

00:48:18.520 | We just discussed one of them.

00:48:19.640 | You'll never feel rich and that's okay.

00:48:21.560 | I think that's a huge principle because throughout history, like status is always going to be

00:48:26.040 | something that affects humans.

00:48:27.160 | It's going to be something true today, 100 years from now, 1000 years from now.

00:48:30.840 | I know that's going to be true, right?

00:48:32.040 | I don't know what the investment environment is going to look like, whether we're going

00:48:34.520 | to have investments.

00:48:35.320 | You go back a couple hundred years, investing wasn't a thing that people did, especially

00:48:39.080 | like regular people did.

00:48:40.120 | It was something that maybe the rich did or governments did, but regular people wouldn't

00:48:43.480 | do that.

00:48:43.960 | You're never going to feel rich.

00:48:44.920 | That's one thing.

00:48:45.720 | If I had to guess, I would assume markets on average will keep going up into the right

00:48:50.360 | over the very long term, like there's going to be human growth.

00:48:52.840 | I think capitalism will survive despite all the critiques against it, which means if that's

00:48:57.320 | true, then buy quickly, sell slowly.

00:48:59.320 | That is a kind of an idea I had for thinking about how to invest in markets.

00:49:03.400 | Don't wait.

00:49:03.960 | Don't sit in cash forever trying to wait and trying to find the right time, those market

00:49:07.480 | timing things.

00:49:07.960 | So that's like an overarching point of my work.

00:49:10.680 | That's another big one I'd put out there.

00:49:12.280 | I know there's a lot of money things we can talk about, but I think a lot of the things

00:49:15.160 | that affect people is more about their life.

00:49:16.600 | So that's why I talk about not feeling rich.

00:49:18.440 | But in addition, figure out not where you're going to retire from, but where you're going

00:49:21.400 | to retire to.

00:49:22.440 | That's what's really important in retirement.

00:49:24.280 | A lot of people think retirement is about money and all this, and don't get me wrong,

00:49:27.160 | money is a piece of it.

00:49:28.360 | But I think the existential crisis of retirement is a far bigger thing that people do not talk

00:49:33.160 | about.

00:49:33.400 | And it's literally a big life change.

00:49:34.760 | You go from going into an office every day or talking with people, whatever you're doing

00:49:38.440 | to now you don't do that anymore.

00:49:39.640 | You have to fill that entire 40 hour week with other things.

00:49:43.160 | And I think a lot of people aren't ready for that.

00:49:44.680 | And it really hits them in a bad way.

00:49:46.600 | So before you figure out what you're going to retire from, figure out what you're going

00:49:49.880 | to retire to.

00:49:50.600 | Really imagine your retirement.

00:49:52.040 | Figure out what type of activities you're going to do with who, how often, et cetera.

00:49:56.440 | Like, is that going to be with family, with friends, whatever?

00:49:58.680 | I think we should put a lot more emphasis on that because I think that's going to have

00:50:01.640 | a bigger impact on people's well-being than whether they can use the 4% rule or the 3%

00:50:07.000 | rule.

00:50:07.240 | I don't think money is the primary concern for most people in retirement.

00:50:11.000 | And I think my book has illustrated that.

00:50:12.920 | If you read chapter 2, it talks about that at length.

00:50:15.400 | So if I had to give a couple principles, the market timing one, because it's kind of my

00:50:18.600 | bread and butter what I talk about.

00:50:20.040 | I say the feeling rich thing because I think a lot of people don't focus on that.

00:50:23.320 | And then same with the retirement thing.

00:50:25.320 | Thinking about much...

00:50:26.600 | Think beyond money when it comes to retirement.

00:50:28.280 | Those are the 3 big ones I give out.

00:50:30.200 | I know that from our conversation outside of this interview, you have some life hacks,

00:50:34.200 | some tricks, some tactics, some routines that are worth sharing that have nothing to do

00:50:38.360 | with personal finance or investing.

00:50:39.880 | So I'm curious, while we have you, what some of your top ones are.

00:50:43.320 | If you live in a city where they have laundry services, I recommend getting your laundry

00:50:49.160 | done.

00:50:49.400 | Just taking it in there, have them pick up, deliver.

00:50:52.200 | I actually have a friend who lives in Long Island, so he gets to drive it in and stuff.

00:50:55.640 | And he's like, "It's the greatest thing I've ever done."

00:50:57.960 | It's because it saves you time and it's so low cost relative to your time.

00:51:01.080 | I hate folding clothes.

00:51:02.280 | It's one of the best things I've ever done.

00:51:03.720 | I feel like every time I spend my money there, I'm getting a bargain relative to doing my

00:51:07.400 | laundry by hand.

00:51:08.120 | Especially if you have a wife and kids or husband and children, whatever it is.

00:51:11.480 | That's a ton of clothing.

00:51:13.240 | You have to physically wash it, dry it, sort it out, fold it.

00:51:17.000 | It's just so much time and mental energy, especially if you're really busy.

00:51:19.880 | Having someone else just do that and getting it delivered all full and you just got to

00:51:22.760 | put it in a drawer is so much easier.

00:51:24.760 | So that's my first hack.

00:51:25.720 | Have someone else do your laundry if you can.

00:51:27.480 | If there's an area where you have laundry services, I think it's probably one of the

00:51:30.440 | most undervalued things out there.

00:51:31.640 | That's one.

00:51:32.440 | Another thing, this is a travel hack I use.

00:51:34.680 | I have duplicates of almost like, "Oh, I have to pack a toothbrush.

00:51:37.960 | I have to pack this.

00:51:38.520 | I have to pack..."

00:51:39.240 | Nope.

00:51:39.640 | I have everything already sitting in my suitcase ready to go.

00:51:42.360 | The only thing I have to still pack is clothing because weather does change.

00:51:46.200 | If I'm in Seattle, it's very different than I'm in Phoenix, especially if I'm different

00:51:49.160 | in Boston and when I'm going.

00:51:50.360 | So I do have to pack clothing, but everything else I have and I need on a trip is already

00:51:54.920 | in my suitcases.

00:51:55.720 | I never say, "Oh, did I forget my toothbrush?"

00:51:57.720 | Zero percent chance because it's already in there.

00:51:59.400 | On top of that, if you do, something happens.

00:52:01.720 | Let's say your razor runs out of...

00:52:03.160 | The blades go bad or something.

00:52:04.360 | I don't have a backup razor.

00:52:05.320 | Yeah, you do.

00:52:05.720 | It's in your travel bag, right?

00:52:06.920 | So you already have it.

00:52:07.720 | Thinking more about redundancy is really important because it just reduces your risk.

00:52:11.800 | I used to forget, "Oh, God, I forgot my razor.

00:52:13.720 | Oh, I forgot my deodorant.

00:52:15.080 | I forgot this or that."

00:52:16.120 | Never.

00:52:16.360 | I've never forgotten a thing since.

00:52:17.720 | So double pack.

00:52:18.440 | You're saying, "I have to buy everything twice."

00:52:19.640 | I'm telling you it's worth the cost to do it once and you'll never have to think about

00:52:23.320 | it again.

00:52:23.640 | So if I could, I would actually have a whole wardrobe ready to pack, but that's really

00:52:27.000 | hard to do and you're not going to know where you're going to go.

00:52:28.760 | So you can't do that.

00:52:29.640 | But I would say just have backups and travel.

00:52:32.040 | Awesome.

00:52:32.520 | Okay, I have one more hack.

00:52:33.720 | The biggest hack I've ever done in my life, maybe the greatest decision of my life.

00:52:37.160 | So I applied to a very selective school.

00:52:39.240 | I got into Stanford.

00:52:40.440 | So I'd apply early where if I got in early, I basically had to go.

00:52:43.240 | And so I couldn't apply anywhere else early.

00:52:45.480 | But I was looking at the statistics and the acceptance rate my year to get into Stanford

00:52:50.200 | was 10%.

00:52:50.840 | Very difficult, right?

00:52:52.040 | But early acceptance was 18%.

00:52:54.040 | It was double.

00:52:55.640 | So don't get me wrong.

00:52:56.600 | 10% is very hard.

00:52:57.640 | 18% is still hard, but it's not as hard.

00:53:00.040 | Today, those rates are half of that.

00:53:02.120 | If you want to get your kid into a selective school and there's some sort of early program,

00:53:05.560 | I guarantee you the acceptance rate is higher.

00:53:07.880 | And there's no single thing you can do to double your kid's chances of getting into

00:53:12.360 | a selective university than by having them apply early.

00:53:14.680 | I don't care if they got a 2400.

00:53:16.200 | I don't care if they're valedictorian.

00:53:17.400 | I don't care.

00:53:17.960 | You can go across the board.

00:53:18.920 | There's not one single thing that's going to double their chances.

00:53:21.400 | But that's a hack that probably will.

00:53:23.640 | I bet if you look at the data now, it's still double.

00:53:25.640 | I think the last time I checked, like now the standard acceptance rate is like 5%.

00:53:29.160 | But if you apply early, it's 10.

00:53:30.600 | It's like the easiest ARB out there.

00:53:31.800 | Of course, you can probably only do this to one school.

00:53:33.640 | But if you have one of these schools, you're like, "Hey, I want to go."

00:53:35.880 | Parents are spending all this money and all this stuff.

00:53:37.720 | It's like, have them apply early.

00:53:39.000 | That literally doubles their chance.

00:53:40.120 | It makes no sense to me why this isn't being talked about more.

00:53:42.680 | I should have seen a bunch of articles on this.

00:53:44.120 | I have not seen it yet.

00:53:45.080 | So that's my biggest life hack for trying to get your kids into a selective school.

00:53:48.840 | So I hope that helps.

00:53:50.120 | I hope it holds true a decade or two from now when my kids are actually going to school.

00:53:55.000 | Everyone's short in college now.

00:53:56.200 | So who knows, right?

00:53:57.560 | Well, one more thing I always like to end on is to pick a city you love

00:54:01.320 | and just give some people some suggestions who are visiting from out of town.

00:54:04.760 | Places to eat, something to drink, something to do, anything in there.

00:54:08.280 | Yeah.

00:54:09.160 | So I'll give you some New York City stuff.

00:54:10.680 | I'm a big foodie.

00:54:11.400 | So I'm going to focus on that.

00:54:12.440 | You can look up what's in New York City museums, etc.

00:54:14.760 | I say find your interest and go after that.

00:54:16.520 | So big thing, food places, it really depends what you want exactly.

00:54:20.520 | But I recommend one of the biggest brands in New York City is called Quality.

00:54:24.120 | So Quality Eats, Quality Meats, Quality Bistro, Quality Italian.

00:54:27.400 | There's a bunch of different restaurants here.

00:54:29.080 | It's not like a chain like that, but it's like a restaurant group.

00:54:31.480 | I think they have really good food.

00:54:32.920 | It's more high-end, really fun.

00:54:34.840 | If you like sushi, Sushi Seki is good.

00:54:37.400 | If you want to do a Michelin star restaurant, my favorite is probably Momofuku Co.

00:54:40.520 | That's really awesome.

00:54:41.560 | Honestly, if you just have restaurant recommendations, just DM me on Twitter.

00:54:44.120 | I'll just give them to you.

00:54:44.840 | Just tell me what you're looking for, price range.

00:54:46.440 | I'll just help you.

00:54:47.000 | I love doing this for people.

00:54:47.960 | It's just so awesome because I've been in the city a while.

00:54:49.800 | In terms of bars, if you want just my favorite cocktail bar, it's a place called Olly.

00:54:54.920 | Just for the taste of the drinks, O-L-L-I-E, they are just so good.

00:54:58.920 | It's in West Village in Manhattan.

00:55:00.840 | Not the flashiest place here, but the drinks are just incredible.

00:55:03.880 | If you want something that's more visually appealing and kind of fun,

00:55:06.600 | there's a place called Time Bar.

00:55:07.960 | It's like a seated tasting type of thing, T-H-Y-M-E.

00:55:10.520 | That's a really cool place.

00:55:11.320 | And you'll be drinking out of what looks like an oyster shell.

00:55:13.480 | It's just like a copper's porcelain,

00:55:15.000 | but it looks like an oyster shell and all these different things.

00:55:17.240 | You'll have smoke coming out of things and drinks hanging from the roof.

00:55:19.880 | It's really weird stuff.

00:55:21.400 | So, if you want to experience, that's probably a place I'd recommend.

00:55:24.040 | Outside of that, trust me, just DM me if you want.

00:55:26.040 | I'm on Twitter @DollarsAndData.

00:55:27.800 | So, free food recs in NYC.

00:55:29.720 | That's awesome.

00:55:31.000 | Where else can people find you and the book?

00:55:33.240 | My website's of DollarsAndData.com.

00:55:35.240 | I said Twitter @DollarsAndData.

00:55:37.240 | Book's going to be at Amazon, Barnes & Noble.

00:55:39.240 | Just search, just keep buying.

00:55:40.440 | You can find it there.

00:55:41.320 | So, hope you guys enjoy it if you read it.

00:55:43.240 | The book's fantastic.

00:55:44.360 | I read it.

00:55:45.000 | I love that half of the subtitles for every chapter is something contrarian to pull you

00:55:48.840 | in because I'm like, "Whoa, whoa, whoa.

00:55:49.880 | I don't know if I buy that."

00:55:51.000 | And then I kept reading.

00:55:51.960 | So, thank you for writing that.

00:55:53.640 | And thank you for being here.

00:55:54.680 | Yeah, appreciate it, Chris.

00:55:55.400 | Thanks for having me on.

00:55:56.120 | I really hope you enjoyed this episode.

00:55:59.640 | Thank you so much for listening.

00:56:01.400 | If you haven't already left a rating and a review for the show in Apple Podcasts or Spotify,

00:56:06.360 | I would really appreciate it.

00:56:07.960 | And if you have any feedback on the show, questions for me, or just want to say hi,

00:56:11.880 | I'm chris@allthehacks.com or @hutchins on Twitter.

00:56:16.120 | That's it for this week.

00:56:17.160 | I'll see you next week.

00:56:27.640 | [BLANK_AUDIO]