When should your asset allocation change?

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00:00:09.800 | - Welcome back to Portfolio Rescue,

00:00:19.540 | where we take questions straight from you, the viewers.

00:00:22.000 | Email us, askthecompoundshow@gmail.com.

00:00:24.040 | Thanks to the live viewers, as always, on YouTube.

00:00:27.400 | We had to change our time.

00:00:28.840 | We used to do it at, what, 11 in the morning?

00:00:31.680 | Eastern time, now we're doing it at 1.30.

00:00:33.520 | The only reason we changed is 'cause Duncan is such a diva

00:00:35.720 | and he made me change the time.

00:00:36.960 | I didn't want to.

00:00:38.160 | I'm just kidding.

00:00:39.000 | It just worked out easier for everyone's schedule.

00:00:40.880 | This was, it made things easier,

00:00:42.200 | so thanks for sticking with us.

00:00:44.960 | Duncan, one of the themes I've been writing about

00:00:46.720 | on my blog for years now,

00:00:48.140 | I think 2014 was the first post I did in this.

00:00:50.600 | I've been writing my blog since 2013.

00:00:52.680 | I think I'm coming up with my 10-year anniversary here.

00:00:55.640 | It's kind of crazy.

00:00:56.880 | Is the fact that market cycles are getting faster.

00:00:58.960 | There's a number of reasons for this.

00:01:00.240 | The markets are more mature, they're more global in nature.

00:01:02.560 | Technology makes things more efficient.

00:01:05.160 | The free flow of information

00:01:06.480 | just makes things travel faster and move faster.

00:01:09.140 | And we also have central banks

00:01:10.280 | that just have their tentacles just into the market now

00:01:13.120 | and it's hard to get them out of there.

00:01:15.000 | I think 2008 got this started

00:01:16.400 | and 2020 made this a permanent feature, potentially.

00:01:19.420 | I actually listened to Jay Powell's press conference

00:01:21.520 | yesterday, the Fed chairman.

00:01:23.520 | - Every bit of it?

00:01:25.180 | - I listened to all the questions.

00:01:26.660 | It's a little dry, but for people like me, I didn't mind.

00:01:29.700 | And he basically took a soft landing off the table

00:01:33.460 | and he said, "Listen, we're going to

00:01:35.700 | "tighten financial conditions to the point of

00:01:37.540 | "basically a recession, but if we go into a recession,

00:01:40.480 | "don't worry, we'll be there to save the day

00:01:42.320 | "on the other side."

00:01:43.160 | And I think this massaging of cycles at the extremes

00:01:47.980 | to we're gonna provide tons of ammo when things are bad

00:01:51.620 | and then we're gonna slam on the brakes

00:01:53.300 | and pull the parking brake when things get

00:01:55.620 | on the other side and things get really good,

00:01:57.680 | I think that's just gonna continue

00:01:58.820 | to potentially speed up cycles, right?

00:02:00.940 | So we're gonna go from a recession in 2020 to a boom,

00:02:04.380 | to a recession, to potentially another boom, who knows?

00:02:07.580 | And I mean, it feels like we've had 11 cycles

00:02:10.420 | in the last three years.

00:02:11.320 | We started out with like 1918 because of pandemic

00:02:13.740 | and then we had like 1929 'cause we felt like

00:02:15.860 | we were in a depression for two months

00:02:17.060 | and then we had the roaring 20s,

00:02:18.120 | which lasted for like a month.

00:02:19.660 | We had the 1999 cycle in 2020 and 2021.

00:02:23.420 | I guess the last year has been like the 70s kind of,

00:02:26.660 | and now it's gonna be like the early 80s,

00:02:28.060 | which is the last time the Fed threw us into recession.

00:02:30.740 | And I think the fact that these faster cycles,

00:02:35.620 | I think it makes it harder for investors

00:02:37.180 | to have a long-term mindset

00:02:39.100 | because you're constantly thinking like,

00:02:40.460 | "I should be doing something.

00:02:41.620 | "I should be hedging, I should be making changes.

00:02:43.680 | "I should be going all in, no wait,

00:02:44.880 | "I should be going all out."

00:02:45.740 | All these things where I think it makes it harder

00:02:47.460 | for investors to just stick to a long-term plan

00:02:49.180 | because these cycles feel like they're moving faster.

00:02:51.420 | In the past, you had these cycles that would take

00:02:54.180 | 24, 18, 36 months.

00:02:56.260 | It would be a long-term cycle.

00:02:57.460 | Now cycles last like three to six months

00:02:59.940 | and then they're over.

00:03:01.180 | And I think it's not gonna be easy,

00:03:03.320 | but I think the solution to faster cycles

00:03:05.020 | is like slower decision-making process.

00:03:07.460 | And I think people need to actually slow themselves down

00:03:09.300 | when they're making a decision

00:03:10.560 | and not try to make it so haphazardly.

00:03:12.540 | But I think everything with the market structure

00:03:15.180 | and the way things are moving,

00:03:16.000 | and I'm not trying to blame everything on the Fed here,

00:03:17.340 | but that's part of it,

00:03:18.420 | is just that I think it's harder for people to slow down

00:03:21.020 | and pump the brakes on their own decision-making process

00:03:23.700 | and be like, "Everything's moving faster.

00:03:25.880 | "I should probably be slowing down."

00:03:27.180 | And that's hard to do these days.

00:03:29.260 | - Do you think, would it have a meaningful impact

00:03:31.080 | if everyone just kind of unionized and said,

00:03:34.580 | "We're not gonna pay more than $12 for a Chipotle burrito"?

00:03:37.740 | Would that have an impact on inflation?

00:03:40.060 | - Is that before or after the guac?

00:03:41.420 | Because that's a big, maybe guac should just be free.

00:03:43.380 | - You know what, that's with guac.

00:03:44.940 | It's with guac. - Right.

00:03:46.300 | All right, we're blaming it all on Chipotle?

00:03:48.020 | All right, I don't know if that's gonna happen.

00:03:50.060 | All right, I still think it's a good deal.

00:03:52.420 | - No, it's ridiculous.

00:03:54.260 | It's ridiculously priced.

00:03:55.640 | But also, yeah, I mean, the serious part of that question

00:03:57.940 | is like, yeah, it seems like people just aren't willing to,

00:04:02.520 | and myself included, to adjust

00:04:04.660 | when we see the writing on the wall.

00:04:06.200 | It's kind of like it has to happen.

00:04:09.020 | It has to be like a big moment.

00:04:11.060 | - The other thing is, for your portfolio,

00:04:13.680 | you should be building in this stuff

00:04:15.140 | that things are gonna be cyclical,

00:04:16.540 | there's gonna be good times, there's gonna be bad times.

00:04:18.000 | I think that's the hard thing for people to do

00:04:19.780 | is just to realize that you shouldn't try

00:04:21.700 | to optimize your strategy for every single market cycle,

00:04:24.700 | and I'm gonna have this kind of portfolio for this cycle,

00:04:26.780 | and this portfolio for this cycle.

00:04:28.320 | You should think more of having a portfolio

00:04:29.740 | that's durable enough to handle all these cycles,

00:04:31.480 | as opposed to trying to make changes all the time,

00:04:33.120 | because half the time you make changes

00:04:35.360 | that leave you flat-footed,

00:04:36.420 | and then when you have the pivot and you miss it,

00:04:38.300 | then you think, oh, crap, my portfolio looks great

00:04:41.120 | for what would happen six months ago.

00:04:43.040 | And then you're kinda screwed.

00:04:44.760 | - Yeah. - All right.

00:04:45.600 | Let's do a question.

00:04:47.020 | - Okay, up first we have a question from Ben.

00:04:51.900 | How should your asset allocation strategy

00:04:53.640 | change with your net worth?

00:04:54.940 | For example, should someone of the same age

00:04:57.300 | with $10 million in net worth have the same allocation

00:04:59.840 | as someone with one million?

00:05:01.240 | - All right, is this a not to brag?

00:05:05.080 | Does this guy have $10 million?

00:05:06.200 | This is not me, by the way.

00:05:07.600 | - Yeah, I'm not sure.

00:05:09.040 | - So the bulk of my career before coming to Ritholtz

00:05:11.240 | was spent in the institutional space.

00:05:12.600 | That's like foundations, endowments, nonprofits,

00:05:15.220 | and these huge pools of capital

00:05:17.080 | like to call themselves sophisticated, right?

00:05:18.840 | Because they had a lot of money.

00:05:19.680 | They had hundreds of millions

00:05:21.180 | or maybe billions of dollars in some cases.

00:05:22.880 | And don't get me wrong,

00:05:23.720 | some of these funds are very sophisticated.

00:05:25.480 | They have these huge teams,

00:05:26.920 | and some of the teams would focus on hedge funds

00:05:28.600 | and private equity and venture capital,

00:05:29.840 | and they were very good at this.

00:05:31.400 | But far too many of these funds

00:05:33.220 | managed money with the assumption

00:05:34.640 | that the financial markets present a complex solution

00:05:37.680 | or complex problem,

00:05:38.520 | and we have to present a complex solution.

00:05:40.500 | And I think people with more money

00:05:42.600 | sometimes assume that just has to be the case, right?

00:05:44.860 | I have more money.

00:05:45.920 | And what I came to realize after a while was

00:05:48.760 | it's just a few more zeros.

00:05:50.360 | Like managing a pool of capital that's a billion dollars,

00:05:53.420 | sure, it's a lot of money,

00:05:54.380 | but I don't think just because you have more money

00:05:56.080 | means you have to all of a sudden complicate things.

00:05:58.120 | There's this old saying that you don't go to church

00:06:00.220 | to learn the 11th commandment, right?

00:06:02.120 | It's like you shouldn't try to reinvent the wheel

00:06:04.160 | just because things are bigger.

00:06:05.240 | So I think regardless of your net worth,

00:06:08.160 | the things that matter most when creating an investment plan

00:06:09.960 | are your risk profile.

00:06:10.900 | So that's your willingness, need, and ability to take risk.

00:06:13.120 | I've talked about this before.

00:06:13.960 | Your time horizon,

00:06:15.340 | when are you actually gonna have to spend the money,

00:06:17.380 | your current circumstances, where you are financially,

00:06:19.300 | and then your goals, where you're going to be.

00:06:20.900 | Those things are the only thing that's gonna matter.

00:06:22.660 | So for a big pool of capital

00:06:24.380 | that's hundreds of millions or billions of dollars,

00:06:26.660 | you still have to match up your portfolio

00:06:28.060 | with your risk profile and time horizon,

00:06:29.420 | understand how much are we spending?

00:06:31.060 | When are we gonna spend it?

00:06:31.940 | What kind of risk tolerance do we have?

00:06:33.180 | That's the kind of thing.

00:06:34.100 | And so I think that's the main building block,

00:06:35.580 | whether you're managing $10,000 for yourself

00:06:37.600 | or $10 million.

00:06:39.060 | Now, if you do have a high net worth

00:06:41.300 | and you are one of these not to brag people

00:06:42.660 | and you're in a good position,

00:06:44.160 | it can kind of change.

00:06:45.000 | The risk profile thing is kind of,

00:06:47.100 | it's kind of murky because let's say you're lucky enough

00:06:49.540 | to have a high net worth and then millions of dollars,

00:06:52.060 | right?

00:06:53.160 | Your ability to take risk is high

00:06:55.780 | 'cause you have a lot of money.

00:06:56.620 | And if your spending level is reasonable,

00:06:58.860 | then you have the ability to take more risk

00:07:00.700 | 'cause you have a higher net worth.

00:07:02.340 | But you don't have the need to take more risk

00:07:03.940 | 'cause you already have money, right?

00:07:05.260 | And so you're kind of balancing between

00:07:08.100 | I wanna continue to grow my wealth,

00:07:10.660 | but I don't wanna screw things up.

00:07:11.960 | So then it comes down to your willingness to take risk.

00:07:13.900 | Okay, I have a lot of money.

00:07:15.220 | Do I want to though?

00:07:16.540 | What's my risk appetite?

00:07:17.500 | What's my tolerance for risk?

00:07:19.380 | How comfortable am I with keeping things the way they are?

00:07:21.980 | How much do I wanna build

00:07:22.820 | for the next generation or whatever it is?

00:07:24.400 | So my favorite example of this

00:07:26.340 | is there's two wealthy billionaire families

00:07:28.780 | in the Grand Rapids area.

00:07:29.740 | One of them I used to work for.

00:07:31.260 | And there was two founders,

00:07:33.020 | two guys that founded the Amway Corporation.

00:07:34.940 | And the story goes that one of them

00:07:36.780 | took his billions of dollars

00:07:37.820 | and put it on private equity and venture capital

00:07:40.140 | and all these different kinds of high-risk,

00:07:43.200 | potentially high-reward funds and just invested it all

00:07:46.280 | because I have an infinite time horizon.

00:07:48.120 | I have billions of dollars.

00:07:48.960 | It doesn't matter.

00:07:49.780 | And the other guy took his billions of dollars

00:07:51.300 | and invested it all in US government treasury bonds

00:07:54.020 | and said, "I'm gonna keep it ultra safe.

00:07:55.480 | "I have this money.

00:07:56.320 | "What's the point?"

00:07:57.440 | And the thing is, neither of them are right

00:07:59.600 | and neither of them are wrong, right?

00:08:00.720 | If you have that much money,

00:08:02.680 | obviously that's an extreme example,

00:08:04.080 | but that's the idea here.

00:08:04.920 | If you get to a certain point.

00:08:06.480 | The other part of the question here is basically

00:08:09.440 | when should you actually change your asset allocation, right?

00:08:12.940 | So I think that kind of gets down to it.

00:08:14.660 | Like, is net worth a part of it?

00:08:16.700 | I think that's part of it is like

00:08:18.620 | when your circumstances change.

00:08:20.460 | So spending, this person in the question

00:08:23.220 | already also mentioned spending.

00:08:24.660 | I think spending is a big thing.

00:08:26.620 | If something in your life happens that makes you change,

00:08:28.420 | that's when you can kind of change your asset allocation.

00:08:30.740 | I think when the market opportunity set changes,

00:08:34.100 | that's time for it to potentially think about it.

00:08:35.620 | So in years past, I mentioned we've had all these cycles.

00:08:39.420 | When interest rates were on the floor

00:08:40.780 | at 50 basis points or whatever,

00:08:43.420 | I think a lot of people were thinking,

00:08:45.200 | why would I have a 60/40 portfolio

00:08:46.740 | if bonds aren't paying me anything?

00:08:47.860 | I'm gonna go to 70/30 or 80/20.

00:08:50.060 | And I think that made sense

00:08:50.880 | because the market was kind of dictating that.

00:08:52.300 | If you would be willing to take that risk,

00:08:55.140 | again, that gets into the willingness.

00:08:56.580 | Now that rates are higher,

00:08:58.100 | maybe people who were 70/30 or 80/20 could go,

00:09:01.300 | well, geez, interest rates are 5%.

00:09:03.100 | Maybe I'm more comfortable taking on 60/40

00:09:05.740 | or 50/50 portfolio because rates are so much higher.

00:09:08.460 | And so I think when market opportunity set changes,

00:09:10.780 | that can come to your thought process.

00:09:14.580 | And I think when you pick the wrong portfolio

00:09:16.140 | in the first place,

00:09:17.020 | I think when you set an asset allocation

00:09:19.100 | and you tell yourself, listen, I can do this.

00:09:20.660 | These are all the people who told us in 2020

00:09:22.220 | that I can invest in three times levered NASDAQ funds.

00:09:25.100 | Don't worry, I'm young.

00:09:26.460 | I have a tolerance for it.

00:09:27.440 | I can handle it.

00:09:28.280 | That's easy to tell yourself when markets are going up.

00:09:30.360 | Then when markets are going down

00:09:31.460 | and your portfolio is crashing,

00:09:32.620 | maybe you realize, okay,

00:09:34.700 | I did not understand what risk really was.

00:09:37.620 | I think I got out over my skis.

00:09:39.700 | Is that the right phrase?

00:09:41.140 | I never know if that's the right one or not.

00:09:42.420 | - Yeah, I think out over skis is right there.

00:09:44.500 | - Okay, I haven't skied since college.

00:09:46.900 | I skied back in the day, though.

00:09:48.020 | But I think if you pick that wrong portfolio

00:09:49.660 | in the first place and you realize,

00:09:50.940 | listen, I did a portfolio that's 90% stocks.

00:09:53.660 | I cannot handle this.

00:09:54.740 | I understand in a bear market, it's not me.

00:09:56.620 | I need to dial it down,

00:09:57.860 | even if that means lower my expected return.

00:09:59.340 | So that's kind of the idea

00:10:00.180 | when you should change your asset allocation.

00:10:01.980 | So should you automatically have a different portfolio

00:10:05.000 | just because you have a higher net worth?

00:10:06.260 | I don't think that's really the case.

00:10:07.500 | I still think that simple is always gonna beat complex

00:10:10.340 | for the majority of people.

00:10:11.900 | But obviously, if you're in that place,

00:10:13.520 | then it's a different line of decisions that you're making.

00:10:16.340 | And frankly, I think it makes more sense

00:10:18.380 | to simplify when you have that much money

00:10:19.740 | because the rest of your life is so much more complicated.

00:10:22.140 | Your financial planning stuff, your taxes,

00:10:23.620 | your estate planning, inheritance,

00:10:25.620 | all that stuff you're setting up,

00:10:26.580 | financial planning is way more complicated.

00:10:28.740 | That's when it makes sense

00:10:29.580 | to not go complicated on the investments

00:10:31.220 | and it makes sense to simplify.

00:10:32.780 | - Yeah, I think this bear market has taught me

00:10:35.940 | that my risk tolerance isn't as high as I thought it was.

00:10:39.500 | - And sometimes you have to experience it.

00:10:40.340 | - Now it's kind of too late.

00:10:41.860 | - Well, you're still a young guy though.

00:10:44.060 | I think that sometimes you have to learn that.

00:10:45.820 | You're paying your tuition, right?

00:10:47.140 | So you learn that now,

00:10:47.980 | and then the next time this happens,

00:10:49.300 | you right-size your portfolio to not take on as much risk

00:10:52.020 | or not take as many risky.

00:10:53.120 | Were you investing in oat milk?

00:10:54.140 | Maybe next time you invest in almond milk, right?

00:10:56.940 | - Exactly, yeah, yeah.

00:10:57.940 | Maybe not so much triple-levered stuff, you know?

00:11:01.540 | - That's the thing.

00:11:02.380 | But that's the thing, it hurts sometimes,

00:11:04.700 | but then now you know, right?

00:11:06.260 | That it's okay.

00:11:07.420 | And I think that your risk tolerance

00:11:09.180 | for this kind of stuff can change too.

00:11:10.700 | Like when you get more money,

00:11:12.700 | you could have a 20% downturn in your portfolio.

00:11:15.260 | If you have it at $10,000,

00:11:17.100 | it's gonna be a small amount of dollars.

00:11:19.960 | But if you know you have $100,000 or a million dollars

00:11:22.700 | and you have that same 20% loss,

00:11:24.140 | and you say, "Oh my gosh, that's $200,000 now."

00:11:27.120 | I think even seeing that,

00:11:28.180 | some people don't live their life in percentage,

00:11:30.020 | they live them in dollar terms.

00:11:31.240 | So even that could change the way that you view risk.

00:11:33.420 | So I think it's okay for your risk to change over time.

00:11:36.140 | You just have to understand

00:11:37.620 | that it's probably going to happen.

00:11:40.120 | - Yeah, I got way too comfortable

00:11:42.060 | with the buy the dip thing working every time, you know?

00:11:44.820 | It did for a while, and then it didn't.

00:11:48.000 | - Have a little more patience.

00:11:49.860 | All right, let's do another one.

00:11:51.500 | - All right, up next we have,

00:11:53.460 | "I get that nominal yields are significantly higher today

00:11:55.720 | "than a year or two ago on fixed income,

00:11:58.000 | "but why is nobody talking about the fact

00:11:59.540 | "that the real return of bonds is actually worse

00:12:01.400 | "than it was before all of these rate hikes started?"

00:12:04.580 | - This is true.

00:12:06.880 | Also, do you notice that, I think in the social media age,

00:12:10.020 | a lot of people love to talk about things

00:12:12.060 | that no one's talking about, right?

00:12:13.980 | - Right, yeah, yeah.

00:12:14.820 | - Why is no one talking about this thing

00:12:15.840 | that I'm talking about?

00:12:17.520 | Nominal yields are much higher,

00:12:19.020 | but they're still well below the level of inflation.

00:12:21.380 | So John, do a chart on my first one here.

00:12:23.100 | This is one of my favorite charts

00:12:24.060 | that just shows the US inflation rate

00:12:25.860 | with a 10-year treasury.

00:12:27.340 | It's like an alligator mouth at the end opening up.

00:12:29.420 | Inflation is still above 8%,

00:12:31.300 | bond rates are like 4%.

00:12:32.880 | We've never seen inflation this much higher

00:12:35.040 | over the bond yields, going back to 1960 at least.

00:12:37.100 | It's way higher.

00:12:38.220 | So yields have come up substantially,

00:12:40.140 | nowhere close to the inflation rate quite yet.

00:12:42.580 | So yes, on a real basis, you're still losing.

00:12:44.500 | John, throw the next chart up here.

00:12:46.340 | So this is from J.P. Morgan,

00:12:47.900 | and this shows real interest rates

00:12:49.820 | on the 10-year treasury.

00:12:50.660 | As you can see, this is just subtracting inflation.

00:12:52.420 | You can see, actually, in the '70s,

00:12:53.980 | even though nominal rates were 10, 12, 15%

00:12:57.660 | by the early 1980s,

00:12:59.100 | real rates were actually negative

00:13:01.460 | because inflation was higher than those.

00:13:02.980 | So back in the '70s, even though they had high nominal rates,

00:13:06.380 | inflation was above that,

00:13:07.540 | so real rates were negative.

00:13:09.340 | And this is the first time.

00:13:10.180 | We had negative rates a little bit in 2012,

00:13:13.020 | and they've been touching the negative.

00:13:15.620 | So I don't know.

00:13:16.460 | The thing is, I think people only really care

00:13:19.180 | about inflation-adjusted returns when inflation is high.

00:13:22.660 | No one talks about inflation-adjusted returns

00:13:25.220 | when it's low, right?

00:13:26.260 | No one was taking the 2% inflation rate

00:13:28.540 | for all the 2010s and going,

00:13:30.300 | "Look it, on an inflation-adjusted basis,

00:13:32.740 | "bond yields are actually negative."

00:13:33.940 | No one does.

00:13:34.780 | You only do that when inflation is high.

00:13:35.860 | That's one thing.

00:13:37.540 | The other thing I think you would hope for

00:13:39.100 | is that if you're locking in these 5% yields on bonds,

00:13:42.140 | that inflation is going to fall eventually.

00:13:44.260 | That's kind of the thing, right?

00:13:45.740 | We're gonna talk about IBONs in a minute here

00:13:47.220 | and how those rates have fallen,

00:13:48.780 | but I think that's part of it,

00:13:50.420 | is just these nominal yields you can lock in

00:13:52.860 | for one, three, five years or whatever into the future,

00:13:57.420 | and we're not sure that inflation is going

00:13:59.340 | to continue to be 8% per year going out that far.

00:14:02.140 | So if you're locking in the bond yields now,

00:14:04.140 | going out in time a little bit,

00:14:05.380 | then hopefully your real returns are gonna be better

00:14:07.700 | if and when inflation finally falls.

00:14:09.500 | And Jerome Powell, he said he's gonna throw us

00:14:12.260 | into a recession to bring inflation down,

00:14:13.540 | so I'm bound to believe him at this point.

00:14:16.380 | - Yeah, I feel like we should trust him.

00:14:19.460 | He seems to be making good on his words.

00:14:23.460 | Didn't you write something recently

00:14:24.500 | where you were saying he's basically telling us

00:14:26.500 | all of this stuff like he,

00:14:27.940 | it's not like we have to read the tea leaves,

00:14:29.900 | he's literally saying this is what I'm doing.

00:14:32.580 | - Yeah, back in the day, you kind of had to,

00:14:34.420 | the Fed was very mysterious in what they would say,

00:14:37.620 | and you'd try to, oh, they changed two words here.

00:14:40.220 | Jerome Powell's basically telling you,

00:14:41.340 | hey, idiots, I'm sending us into a recession.

00:14:43.420 | There's nothing you can do about it.

00:14:44.860 | It's happening, unfortunately.

00:14:46.940 | - Right, yeah.

00:14:47.940 | - Too bad, all right, next one.

00:14:49.820 | - Shout out J Powell.

00:14:51.700 | Okay, question three.

00:14:54.220 | I've heard you both mention the pitfalls

00:14:55.620 | of working with Treasury Direct for IBON purchases,

00:14:58.060 | and I think you might actually be underselling it.

00:15:00.980 | Treasury Direct is terrible in many respects

00:15:03.140 | when it comes to funding your purchases

00:15:04.940 | and customer service.

00:15:06.420 | I fear actually having to redeem my IBON someday.

00:15:11.020 | Yes, the current yield beats other options,

00:15:13.120 | but to what degree should listeners factor

00:15:14.900 | in the time and effort of having to deal

00:15:16.900 | with a terrible broker for these investments?

00:15:19.060 | You know what comes to mind here?

00:15:20.020 | If I was like a Wall Street person,

00:15:21.380 | I would say there's no such thing as a free lunch, right?

00:15:23.940 | - All right, that's true.

00:15:25.400 | Or a good government website, how about?

00:15:28.700 | This is true.

00:15:29.540 | We here at Portfolio Rescue,

00:15:30.500 | we're fans of the Sears iSavings bonds.

00:15:32.140 | We've been talking about them for a while.

00:15:33.900 | And I love this question because there's plenty of talk

00:15:36.320 | about risk tolerance.

00:15:37.160 | We talked about that already on this show,

00:15:38.440 | but there's little talk about your talents

00:15:40.940 | for complexity as an investor.

00:15:42.500 | So there's a lot that goes into the portfolio

00:15:43.860 | management process where you're talking

00:15:44.900 | about asset allocation today, which is a biggie,

00:15:47.260 | but how about like your time allocation?

00:15:49.220 | How much time and effort are you willing to dedicate

00:15:52.900 | to put into your portfolio

00:15:53.820 | in these disinvestment strategies?

00:15:54.980 | So one of the reasons that I wasn't a huge fan

00:15:57.500 | of the more complex approach in the institutional world

00:16:00.100 | is because it was so operational and efficient, right?

00:16:02.940 | So you had all these paperwork.

00:16:03.940 | Anytime we had a private equity or hedge fund come in,

00:16:06.320 | you'd get a 200 page deck

00:16:08.380 | of this private placement memorandum

00:16:10.220 | that was all just legalese speech from lawyers

00:16:12.340 | that they would just use to cover their ass

00:16:14.540 | and fine print, and it was 200 pages worth.

00:16:17.340 | And it was like, yeah, you just read it.

00:16:18.460 | Don't worry, it's fine.

00:16:19.740 | There was tons of due diligence in the process.

00:16:21.580 | There's all these different accounts you had to open.

00:16:23.020 | You had to track some of these investment strategies

00:16:24.740 | were hard to track, and the performance was hard to know.

00:16:27.140 | There's often like constrained liquidity.

00:16:29.460 | There's capital calls and distribution.

00:16:30.660 | It's a lot of work.

00:16:31.780 | And that was my biggest problem with it

00:16:33.060 | is that unless you have a huge team

00:16:34.260 | that's really well-versed in this, it's not that easy.

00:16:36.420 | And so, and then after you do all the heavy lifting,

00:16:38.940 | the majority of these funds still end up underperforming.

00:16:41.800 | So then you have to ask yourself,

00:16:42.740 | like all that hard work, was it really worth it

00:16:44.340 | if we're still doing worse

00:16:45.580 | than just putting it in the Vanguard fund?

00:16:47.520 | So yes, that stuff is intellectually stimulating,

00:16:49.840 | but is it worth for the high fees

00:16:51.780 | and high probability of underperforming

00:16:53.120 | if you're not able to get in like those top decile of funds?

00:16:55.760 | Now, buying Series I Savings Bond,

00:16:57.540 | not exactly the same thing,

00:16:59.020 | but we know it's not an easy process.

00:17:01.080 | They finally did update their website,

00:17:02.660 | it looks like from like 1997.

00:17:04.300 | I think they're probably more like 2006 now.

00:17:06.140 | So they're getting there, but they're still way behind.

00:17:09.380 | I opened up an account for my daughter when she was born,

00:17:11.920 | and I had an aunt who said,

00:17:12.940 | "I'm gonna give you $50 a year,

00:17:14.980 | "and I want you to open up a Savings Bond account for her

00:17:17.220 | "and put it in there."

00:17:18.060 | And so we did it for the first couple of years,

00:17:19.260 | and I think we forgot it.

00:17:20.100 | Maybe the aunt forgot to give us 50 bucks,

00:17:21.620 | and we did it like two or three times.

00:17:23.480 | And I wanted to go back and see like,

00:17:25.320 | "Oh, that's right, the rates are higher."

00:17:26.940 | So last year I tried to check,

00:17:28.180 | and I've done this a few times where I go in,

00:17:30.440 | and of course I don't know my account number

00:17:31.820 | 'cause she was born in 2014,

00:17:33.620 | and forgot my password.

00:17:35.340 | So I tried to enter it in a few times,

00:17:37.420 | and you lock out of your account.

00:17:38.420 | So what do you do?

00:17:40.100 | Call the 1-800 number.

00:17:40.940 | I called the 1-800 number, and it's like eight hour wait.

00:17:43.460 | - You never wanna do that.

00:17:44.300 | - So there's no customer service there.

00:17:46.720 | And so I do think you have to figure out also

00:17:50.000 | how much bang for your buck you're getting.

00:17:51.360 | So last week we told you here

00:17:53.120 | that the rates are gonna fall

00:17:54.120 | because they based the rates on six months of inflation.

00:17:57.480 | Right, so John, pull up the little CNBC article here.

00:17:59.920 | So the new rate is 6.89%.

00:18:03.200 | That was over 9%, you know,

00:18:04.800 | if you would've put it in a week ago.

00:18:06.160 | So that's still pretty good,

00:18:07.760 | but again, you have a $10,000 limit per individual.

00:18:10.360 | So that's like $690 a year you're making on these, right?

00:18:14.080 | You can get 30-day T-bills yielding almost 5% today,

00:18:17.000 | and they have no limit on them.

00:18:18.400 | You don't have to deal with this crappy Treasury Direct

00:18:20.640 | if you just buy a T-bill ETF, right?

00:18:22.760 | You can do it free.

00:18:24.240 | Is the extra $190 a year really worth it?

00:18:27.440 | For some people it is for the time and effort,

00:18:29.220 | but some people, you know,

00:18:31.280 | there's other people who do the constant switch

00:18:32.780 | from online savings account to online savings account, right?

00:18:34.800 | Because one of them yields 25 basis points more.

00:18:37.440 | You have to open all the accounts.

00:18:38.840 | You have to change your bank account.

00:18:40.460 | You have to change the accounts that are linked to it

00:18:42.200 | if you wanna send money out.

00:18:44.060 | It's like, is that really gonna matter in the long run?

00:18:46.960 | I don't know.

00:18:47.800 | Ramit at iWillTeachYouToBeRich

00:18:50.400 | talks about the difference between $3 questions

00:18:52.320 | and $30,000 questions.

00:18:53.840 | And the $3 question is like the latte thing,

00:18:55.660 | you know, the Susie Orman,

00:18:56.920 | is giving up on lattes really gonna have

00:18:58.800 | that material of difference to your finances?

00:19:02.040 | Of course not.

00:19:02.860 | But getting a raise or figuring out your housing situation

00:19:05.480 | and not overpaying or your transportation

00:19:07.080 | and making sure you're not overpaying on those things,

00:19:08.840 | those can lead to huge outcomes over the long term.

00:19:10.940 | I guess this one is more like a $300 question

00:19:13.340 | than a $3 or a $30,000.

00:19:15.760 | For some people, that $10,000 is a lot of money

00:19:18.040 | relative to the size of their net worth.

00:19:19.760 | And in that instance, maybe $200 a year extra

00:19:21.720 | is worth it for you.

00:19:23.120 | But for other people, it might be relatively

00:19:25.400 | a small piece of their portfolio.

00:19:26.480 | And is it really worth it?

00:19:27.300 | And I agree, if you have like a problem

00:19:29.080 | with drawing your money and you need to get it,

00:19:30.640 | 'cause I know a lot of people are using these

00:19:32.480 | as like a substitute for savings, like a savings account.

00:19:35.780 | And there's the penalty if you pull it early.

00:19:38.080 | And there's also like, what if you have a problem

00:19:39.840 | and can't get someone on the phone and you need this money?

00:19:41.660 | So, I'm still a big fan of the savings bonds,

00:19:44.320 | but I agree that maybe the complexity of it

00:19:47.840 | and the fact that it's kind of a pain in the butt,

00:19:50.200 | for some people, is just not worth the extra yield.

00:19:52.360 | And it's just easier to take an online savings account

00:19:55.520 | where you're getting 3% and call it a day.

00:19:58.140 | - Yeah, that's what I was actually thinking recently.

00:20:00.240 | I was talking to Sean about this,

00:20:01.400 | is why someone now would do short-term treasury ETF

00:20:05.320 | or whatever, you know, something,

00:20:06.760 | as opposed to maybe getting 30 or 40 basis points less,

00:20:10.280 | but it being a savings account, high yield savings account.

00:20:13.540 | That's what I was trying to figure out recently.

00:20:16.100 | - Right, which one is going to be easier for you?

00:20:17.940 | I have an online savings account.

00:20:19.100 | I could be earning 1% more if I moved it over

00:20:21.740 | to a brokerage account and put it in treasuries.

00:20:24.020 | I've had the savings account for like five years

00:20:25.700 | and I honestly just don't wanna do it.

00:20:27.340 | I know that seems dumb, but like, it's just, it's easier.

00:20:29.980 | I have automatic contributions going in.

00:20:32.200 | I can pull the money easy, it's there the next day.

00:20:34.900 | It's just a little easier.

00:20:36.420 | And if I'm missing out on a few basis points of yield,

00:20:39.940 | I'm okay with that.

00:20:41.460 | - Right, yeah, that makes sense.

00:20:43.180 | - I think Marcus is still below 3%.

00:20:45.960 | - Yeah. - They're gonna raise rates

00:20:47.500 | for me in like eight weeks

00:20:48.520 | after the Fed just raised yesterday.

00:20:50.020 | Can't wait.

00:20:50.860 | - I think they raised yesterday actually,

00:20:52.260 | but yeah, I can't remember exactly what they went to.

00:20:55.220 | - That's possible.

00:20:56.060 | All right, let's do another one.

00:20:57.420 | - Okay, up next we have,

00:21:00.300 | I'm trying to help my girlfriend

00:21:01.460 | with her retirement planning.

00:21:02.820 | She had a bunch of 401ks with small amounts in them,

00:21:05.340 | so she rolled them over to an IRA to consolidate.

00:21:08.860 | She's 39 years old,

00:21:10.100 | and only has about $40,000 saved for retirement.

00:21:13.300 | I had her start a Roth IRA

00:21:15.060 | as well as a regular brokerage account.

00:21:17.520 | She's a travel nurse, and while she makes good money,

00:21:19.620 | she doesn't currently have a 401k option,

00:21:21.920 | so is seemingly maxed out at contributing $6,000

00:21:24.620 | to an IRA each year,

00:21:26.360 | though she did max out her IBONs this year.

00:21:30.260 | What would be the best way for her

00:21:31.420 | to catch up on her retirement savings?

00:21:33.920 | - Okay, so Jeremy's girlfriend

00:21:35.760 | thought the complexity was worth it here.

00:21:36.960 | She maxed out her IBON.

00:21:38.780 | Kudos to him, first of all,

00:21:40.020 | for having this conversation with his girlfriend.

00:21:41.540 | I'm guessing that that's not always easy.

00:21:42.980 | It's not always a conversation people wanna have.

00:21:44.420 | This also gets to my point

00:21:45.420 | of why they should have 401k limits.

00:21:47.620 | Go to people with IRAs

00:21:48.700 | if they don't have access to a 401k.

00:21:50.260 | I don't think you should be penalized

00:21:51.540 | if your workplace employer doesn't have a 401k.

00:21:54.400 | You should get that limit on your IRA

00:21:55.740 | if you don't have the access to 401k.

00:21:58.220 | Let's make that one happen if someone's listening.

00:22:00.260 | - That makes sense.

00:22:01.100 | - So this is more of a financial planning question

00:22:03.140 | than an investment question,

00:22:03.980 | 'cause I think the savings piece is more important here.

00:22:06.460 | So let's bring on financial advisor extraordinaire,

00:22:09.100 | Blair Dukanay, to help out with this one.

00:22:11.740 | Blair, so we're trying to play catch up here.

00:22:16.540 | And the good thing is, I think even at 39,

00:22:18.860 | you still have a lot of time to catch up.

00:22:21.020 | There's still plenty of time to do it.

00:22:22.480 | You might just have to increase

00:22:24.260 | that savings yield a little bit.

00:22:25.820 | What do you think, taking away the 401k and stuff,

00:22:30.500 | how can you play catch up,

00:22:32.580 | if you're starting a little later here?

00:22:35.060 | - Yeah, well, my first takeaway here

00:22:36.860 | is that I've been married for 10 years,

00:22:38.580 | and it sounds like the dating process has changed a lot

00:22:42.700 | if we're having these kinds of conversations.

00:22:44.260 | But kudos to you for helping your girlfriend out here.

00:22:47.660 | - I'm not gonna lie, I had these conversations

00:22:49.620 | with my wife before we were married too, so.

00:22:52.240 | - Oh, okay.

00:22:54.120 | - How romantic. - Sorry about that.

00:22:55.180 | - What a catch, huh?

00:22:56.220 | - But I have a question here for Jeremy,

00:23:04.300 | which is, is she being paid

00:23:07.020 | as a 1099 employee traveling nurse,

00:23:09.900 | or is she getting a W-2?

00:23:11.180 | And that makes a big difference,

00:23:12.340 | because there may be an opportunity here

00:23:14.540 | to defer more income through either--

00:23:17.020 | - Oh, solo 401k?

00:23:18.420 | - Yeah, solo 401k or a SEP IRA is even easier.

00:23:22.560 | You can max out potentially up to $61,000 in 2022.

00:23:27.560 | You have to make four times that

00:23:30.220 | in order to get to that max,

00:23:31.500 | but it's essentially 25% of your net pay there

00:23:35.020 | if you're self-employed to a SEP or a solo 401k.

00:23:38.180 | So that would be the first question I have.

00:23:41.580 | You've already maxed out the savings bonds, which is great.

00:23:44.220 | I personally gave up on that website

00:23:45.820 | and never opened my account.

00:23:47.620 | I was one of those.

00:23:48.620 | If she's eligible or has an HSA healthcare option,

00:23:53.300 | that's another $36.50 a year that you can defer.

00:23:56.540 | And remember that health savings accounts,

00:23:58.140 | HSAs are triple tax free.

00:23:59.780 | They go in and you get a tax deduction.

00:24:01.980 | They grow tax deferred.

00:24:03.100 | And if you use them for medical expenses,

00:24:05.140 | they're never taxed.

00:24:05.980 | So that's another option.

00:24:07.940 | At the end of the day though,

00:24:09.920 | there's nothing wrong with saving

00:24:11.340 | in an after-tax brokerage account.

00:24:12.980 | So she can open an account in her name,

00:24:14.780 | set up a monthly savings amount to go in

00:24:17.420 | and automatically invest.

00:24:20.500 | You're not getting the tax deferral,

00:24:21.980 | but at the end of the day, when she retires,

00:24:24.820 | she won't be taxed to take money out of a brokerage account.

00:24:27.720 | So it's not a bad idea to start building that bucket as well.

00:24:31.660 | - Right.

00:24:32.500 | And there's easy ways to do that now

00:24:33.340 | where you can automate it, automate the contributions,

00:24:35.540 | get some tax loss harvesting if it's a robo-advisor.

00:24:38.100 | And I think my biggest thing was,

00:24:40.860 | if I'm explaining this to my girlfriend,

00:24:42.860 | saving is the most important thing

00:24:44.820 | you're playing catch up, right?

00:24:45.780 | The investment options are gonna matter eventually

00:24:47.980 | if you want to compound.

00:24:48.860 | But I think the biggest thing is just

00:24:50.420 | to increase that savings rate

00:24:51.620 | and make sure you're stocking money away,

00:24:53.380 | especially in like the first 10 years or so.

00:24:55.300 | The amount that you save is gonna dwarf

00:24:57.280 | any amount of investment returns you're gonna have.

00:24:59.040 | So I would think just figure out

00:25:00.820 | what the savings rate is gonna be.

00:25:02.120 | And again, make sure you're putting that on autopilot

00:25:04.440 | and making contributions automatic.

00:25:06.300 | - But don't make them cut out their lattes

00:25:09.160 | because then they'll just end up hating you.

00:25:11.120 | - It's true.

00:25:12.240 | - Only if you do it every single day

00:25:14.120 | and invest that money immediately for the next 45 years

00:25:18.280 | at 8.5%, then you might be saving a million dollars.

00:25:22.120 | I honestly don't think that kind of decision is worth it.

00:25:24.360 | No person ever does.

00:25:25.500 | If you cut back on something, no one ever does it.

00:25:27.820 | You know how I'm gonna retire?

00:25:28.660 | - Forever.

00:25:29.480 | - I'm not gonna pay for the Twitter blue check mark.

00:25:31.100 | That's how I'm gonna retire.

00:25:32.740 | $8 a month. - Every single month, $8.

00:25:34.740 | - All right, let's do another one.

00:25:38.300 | - Okay, last but not least.

00:25:40.000 | This is a long one, so hang in there.

00:25:42.940 | I have an account with Fidelity

00:25:44.420 | and use their retirement planning tool,

00:25:45.940 | which is Monte Carlo analysis-based

00:25:48.900 | to see how my portfolio might look moving forward

00:25:51.460 | using different asset mixes.

00:25:53.300 | What surprises me is that having a small bond position

00:25:55.820 | has always been the highest returning asset mix.

00:25:58.220 | I'm retired but live off of dividends and interest,

00:26:00.700 | no Social Security or pension,

00:26:02.620 | so I'm not spending down my portfolio.

00:26:05.020 | The only thing I can figure is that bonds protect

00:26:07.800 | on equity declines more than they hurt on equity rises,

00:26:10.740 | and that rebalancing during declines

00:26:12.360 | gives you a more positive bump

00:26:14.720 | than rebalancing hurts when equities are high.

00:26:17.260 | I will be taking Social Security at 70,

00:26:19.100 | and the tool does require me to take RMDs

00:26:21.340 | at the appropriate age.

00:26:22.820 | My best result, I define it as the portfolio

00:26:24.900 | that has the highest remaining value after 40 years.

00:26:27.340 | Can you explain why a small bond exposure

00:26:29.260 | results in higher return when using Monte Carlo analysis?

00:26:33.840 | - All right, Duncan's looking for an explanation

00:26:35.780 | of Monte Carlo here.

00:26:36.620 | I don't know the exact reason an all-stock one

00:26:38.100 | wouldn't perform.

00:26:38.940 | My guess is because if you're spending down

00:26:40.300 | that portfolio, the bonds help a little bit,

00:26:41.860 | and if you're an all-stock and you happen to spend

00:26:43.780 | on your portfolio and you get a bear market

00:26:45.420 | at the beginning, it could lead to lower outcomes.

00:26:48.380 | Blair, pretty much all financial advisors

00:26:50.140 | who use software to create financial plans,

00:26:52.540 | for their clients, utilize some sort

00:26:54.140 | of Monte Carlo simulation.

00:26:55.520 | How do you explain this type of scenario analysis

00:26:57.580 | to clients, and then how do you think people

00:27:00.140 | should view when thinking through the scenarios here?

00:27:02.800 | - Sure, so this is more of a complex planning tool,

00:27:06.600 | and we're not talking about a casino

00:27:08.140 | in the Mediterranean here with Monte Carlo analysis,

00:27:10.860 | but whenever you're building a financial planning

00:27:12.940 | projection, you have to make some assumptions.

00:27:14.780 | You make some assumptions on what asset class

00:27:17.460 | returns would be, what the volatility

00:27:19.200 | of those asset classes will be,

00:27:21.060 | and then you run what's called a straight line scenario,

00:27:23.220 | which is not realistic.

00:27:24.500 | So let's say, for example, you estimate

00:27:26.980 | that your portfolio is gonna earn 7% a year on average.

00:27:30.000 | The straight line scenario shows you earning

00:27:31.820 | literally 7% a year forever,

00:27:34.660 | which, of course, is not realistic.

00:27:36.100 | So then we throw in a calculator called the Monte Carlo.

00:27:39.180 | Some will run 250 different scenarios.

00:27:42.620 | 1,000, I think, is the minimum you would need

00:27:45.520 | to have a robust analysis, but essentially,

00:27:47.340 | they're taking those assumptions.

00:27:48.780 | So if you have an assumption for stocks

00:27:50.860 | with their return and their volatility,

00:27:52.820 | and with bonds for their return and their volatility,

00:27:55.440 | obviously, stocks are more volatile than bonds,

00:27:58.020 | and the math changes when you start taking money

00:28:00.500 | out of your portfolio versus when you're adding money

00:28:02.820 | to your portfolio.

00:28:03.660 | So if you think about the dispersion of returns,

00:28:06.360 | even though taking more risk in an all-stock portfolio

00:28:09.540 | can have a higher expected return,

00:28:11.700 | it also widens the dispersion of potential outcomes,

00:28:16.700 | and the other thing we don't know,

00:28:18.120 | and the whole reason we're running

00:28:19.300 | this complicated Monte Carlo scenario

00:28:21.620 | is because we're trying to figure out

00:28:23.860 | what is a range of possibilities.

00:28:26.540 | We don't know when the bear markets

00:28:28.060 | are gonna come in your lifetime.

00:28:29.540 | There's something called sequence of return risk,

00:28:31.420 | which is if the bear markets happen very early

00:28:33.660 | when you start to draw money out of your portfolio.

00:28:35.940 | Think about the market this year being down 20-plus percent

00:28:38.540 | and you're pulling out your 4%,

00:28:40.460 | which is the safe withdrawal rule.

00:28:41.720 | That's an unlucky time.

00:28:43.260 | So what we're trying to do with the Monte Carlo

00:28:44.960 | is create a scenario of probable outcomes.

00:28:49.480 | We don't know what the future will hold.

00:28:51.400 | I can guarantee you that whatever number

00:28:53.160 | you're coming up with in 40 years

00:28:54.640 | will not 100% be the number in 40 years.

00:28:58.200 | So it's a guidepost to show us

00:28:59.960 | what's potentially the outcome,

00:29:02.720 | and what is our probability of success,

00:29:06.600 | and I did put an example in the deck there, John,

00:29:10.040 | on a probability of success.

00:29:11.660 | Not to brag, this is my personal plan.

00:29:14.720 | I have a high savings rate,

00:29:16.040 | but essentially it's running 1,000 different trials

00:29:18.200 | of what could happen.

00:29:19.040 | - Jeez, 99% Blair.

00:29:21.200 | - I'm probably not properly accounting

00:29:23.720 | for what my expenses are gonna be in the future,

00:29:25.480 | if I'm being honest.

00:29:27.200 | But essentially, all those different squiggly lines

00:29:31.200 | are potential outcomes of what my portfolio

00:29:34.440 | could be worth now.

00:29:35.680 | - I like that top line, that looks nice.

00:29:38.040 | - Life is gonna get in the way.

00:29:39.360 | I'm gonna buy the big house, or the boat,

00:29:41.720 | or something's gonna happen.

00:29:43.620 | My kids are gonna get into some private college

00:29:45.520 | that costs a million dollars a year, who knows.

00:29:47.560 | But essentially, what we're looking for

00:29:50.080 | is a high probability of success,

00:29:52.320 | because we don't know what the next 40 years will hold.

00:29:55.280 | The best thing we can do is use history as a guide,

00:29:58.040 | and try to run a lot of different scenarios,

00:30:00.780 | and come up with this guidestick.

00:30:02.200 | So essentially, it's because bonds

00:30:04.120 | are less volatile than stocks.

00:30:05.360 | That's the difference in this question.

00:30:07.320 | - And my way of thinking about using Money Carlo

00:30:09.360 | is I would, what's the old quote?

00:30:10.960 | I don't know what you could attribute

00:30:11.800 | to 12 people online, Benjamin Flanklin,

00:30:13.700 | or Albert Einstein, or John Maynard Keynes.

00:30:15.700 | I would rather be roughly right than precisely wrong.

00:30:18.020 | And so I think, obviously, you'd rather have

00:30:19.700 | actual outcomes to use in probabilities,

00:30:21.360 | but we don't know what the outcomes are gonna be.

00:30:22.540 | So you have probabilities, and then you can use

00:30:24.760 | those probabilities to update your plan

00:30:26.940 | as the actual outcomes happen.

00:30:28.860 | And then you can also add stuff there,

00:30:30.780 | because like you said, your life is gonna change

00:30:32.220 | in the future, so in 10 years, you say,

00:30:33.940 | well, I'm gonna buy a vacation house.

00:30:35.220 | How does that impact our probabilities

00:30:36.700 | if we pull that lever?

00:30:37.580 | How does that change your potential

00:30:39.020 | for future spending and your future outcomes?

00:30:41.540 | And I think that it's just a good way

00:30:42.560 | to have conversations with people to show,

00:30:44.560 | this is how making this big change in your life

00:30:46.880 | or your financial plan can potentially impact

00:30:49.200 | your probability for good outcomes.

00:30:51.000 | And then when those actual outcomes happen,

00:30:53.200 | then you see, okay, how close were we?

00:30:55.420 | And then you kind of update and go from there.

00:30:58.640 | - Yeah, and I would add that the goal

00:31:00.160 | should never to be to end with the biggest pile of money

00:31:02.520 | like Scrooge McDuck, right?

00:31:03.880 | You can't take it with you.

00:31:05.680 | Really, what we're trying to do is save for the future

00:31:09.360 | when we won't be working and make sure

00:31:10.880 | that there's enough there that if we live a long life

00:31:13.160 | that we don't have to change our lifestyle,

00:31:15.800 | but at the end of the day, you should actually enjoy

00:31:18.240 | the fruits of your labor and the goal shouldn't actually be

00:31:20.400 | to end with the most amount of money.

00:31:22.760 | - Duncan, what do you have right now?

00:31:23.600 | 17% after your stock picks this year?

00:31:25.640 | - Probably not even, yeah, it's a rough looking one.

00:31:30.280 | Yeah, I was gonna say, do you think this is a use case

00:31:33.040 | for augmented reality, like one day we'll have a headset

00:31:36.100 | that just shows you the Monte Carlo simulation

00:31:38.160 | of everything you're about to do?

00:31:39.360 | That'd be kind of cool.

00:31:41.360 | - If visualization helps you achieve your goals,

00:31:44.120 | then it might be worth exploring.

00:31:46.520 | - Sorry, Duncan, I'm out of the metaverse already.

00:31:48.400 | It's never gonna happen.

00:31:49.400 | I'm not putting anything in my head.

00:31:51.880 | - Fast forward to a year from now,

00:31:53.680 | Ben wearing a VR headset while we're doing Portfolio Rescue.

00:31:57.360 | - I was just curious, Ben,

00:31:58.280 | are you doing No Shame November?

00:31:59.920 | - I guess so, is that what it is?

00:32:02.440 | - I don't know, I don't know how many days this is for you.

00:32:05.160 | - All right, if it happens, I gotta try to match Duncan.

00:32:09.120 | - Yeah, let's do it.

00:32:09.960 | - I do No Shame every month.

00:32:12.080 | - All right, I'm in.

00:32:14.600 | All right, thanks to Blair for joining us.

00:32:17.240 | As always, listen in to this in podcast form.

00:32:20.360 | Leave us a review if you're watching on YouTube.

00:32:22.320 | Leave us a comment, leave us a question if you want,

00:32:24.680 | or you can email us askthecompoundshow@gmail.com.

00:32:27.560 | Go to idontshop.com for some of our merch.

00:32:29.440 | Duncan, we still have the Fed shirt.

00:32:30.840 | I got mine in the mail, I gotta wear it at one of these.

00:32:32.600 | - This has been super popular.

00:32:33.880 | This has been super popular. - That's killer, yeah.

00:32:35.440 | - Okay, yeah, it's the Fed godfather one, very cool.

00:32:38.240 | Keep those questions and comments coming,

00:32:40.080 | and we will see you next time.

00:32:41.960 | - See you, everyone.

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When should your asset allocation change? | Portfolio Rescue 51

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