Should I Pay Down Student Loans or Invest in the Market?

00:00:00.000 | - Welcome back to Portfolio Rescue. I'm sure we take questions straight from you. We've

00:00:21.280 | got a lot of questions, like I said, last week. We're going to try to do a lightning

00:00:24.320 | round today. Before we get to that, remember, askthecompoundshow@gmail.com. Duncan, last

00:00:29.800 | week's show, I mentioned the 50/30/20 rule, right, of budgeting. And I said, I don't know

00:00:33.400 | where it comes from. A lot of these things in finance, they just sound good and they

00:00:36.440 | stick like the 60/40 portfolio. No one actually knows who started that or where it came from.

00:00:41.000 | We all just kind of subscribe to it. But the 50/30/20 rule, last Thursday after we did

00:00:45.600 | the show, I was reading a book at night, kind of read before I go to bed. I was reading

00:00:49.400 | this book called "Die with Zero" by a guy named Bill Perkins. And the whole idea is

00:00:52.040 | if you have a lot of money, your hope should be to spend that money, either give it away

00:00:55.400 | to charity or spend it all on experiences before you die. Interesting concept.

00:00:58.880 | That's what you were talking about in "Animal Spirits."

00:01:00.960 | Yeah. One of the chapters of that same book, he said the 50/30/20 rule comes from a very

00:01:06.160 | well-known politician today. It's a woman. Do you have any guesses? A politician came

00:01:10.440 | up with this.

00:01:11.440 | Elizabeth Warren.

00:01:12.440 | Elizabeth Warren. Before she entered politics, Warren had been a law professor with special

00:01:17.440 | expertise in bankruptcy and co-wrote books about why middle-class Americans go broke

00:01:21.240 | and how to avoid that dismal fate. She suggested the 50/30/20 rule, which she called the balanced

00:01:26.920 | money formula, as a way to help people maintain financial stability. Had no idea. This is

00:01:30.960 | the Elizabeth Warren rule.

00:01:31.960 | Did not know that.

00:01:32.960 | Yeah. That's kind of crazy.

00:01:33.960 | Did not know that.

00:01:34.960 | All right. So, we're just going to get right into it because last week we mentioned we're

00:01:36.160 | overflowing with questions. So, we're going to do something of a lightning round today.

00:01:40.240 | Rapid fire. We still have an expert coming on at the end of the show, but I think we

00:01:43.120 | did seven or eight questions right away. We're just going to go rapid fire. We had a lot

00:01:46.320 | of them and I don't need to spend a ton of time. So, I think Duncan's got a timer for

00:01:49.960 | me even.

00:01:50.960 | Yeah.

00:01:51.960 | He's going to buzz me if I go too long.

00:01:52.960 | I'm going to time you on the Apple Watch, and I've actually got a sound effect timer

00:01:55.440 | and buzzer.

00:01:56.440 | All right.

00:01:57.440 | All right. Let's do it.

00:01:58.440 | We're ready to go.

00:01:59.440 | Question one.

00:02:00.440 | Okay.

00:02:01.440 | Okay. Can you please explain how the Fed raising interest rates fights off inflation? I understand

00:02:06.000 | it can slow down the housing and car market, but how does it impact other goods? Bikes,

00:02:10.360 | dishwashers, clothes, et cetera. Especially when there are supply side issues. Would the

00:02:14.560 | Fed be raising rates if demand and supply were at equilibrium?

00:02:18.520 | This is true. The Fed can't prove more semiconductors. It can't build more houses. It can't put more

00:02:22.640 | cars in the lots. Here's one of the things they can do. They can make money more expensive

00:02:27.120 | so maybe people don't buy a second home because instead of 3%, it's 5%. I'm not going to pay

00:02:32.960 | for another house here. I'm not going to buy a vacation home. Maybe some companies cut

00:02:36.360 | back on investments because the hurdle rate is now much higher. I think it's also a psychological

00:02:41.120 | component to this. People see asset prices fall and they might cut back on spending.

00:02:45.480 | Bill Dudley, who's a former New York Fed chair, wrote yesterday in Bloomberg, "In contrast

00:02:50.280 | to many other countries, the U.S. economy doesn't respond directly to the level of short-term

00:02:53.640 | interest rates. Most home borrowers aren't affected because they have long-term fixed-rate

00:02:57.240 | mortgages. And again, in contrast to many other countries, U.S. households do hold a

00:03:00.600 | significant amount of their wealth in equities. As a result, they're sensitive to financial

00:03:04.280 | conditions. Equity prices influence how wealthy people feel and how willing they are to spend

00:03:08.200 | rather than save." He's saying the Fed has to jack up rates to lower the stock market.

00:03:13.440 | That kind of makes sense. I don't know what the unintended consequences are going to be.

00:03:16.640 | Is a recession going to be better than high inflation? I think we might get a chance to

00:03:20.000 | find out if the Fed has their way. But yeah, the Fed can't make supply chain issues go

00:03:24.160 | better, get back without helping demand. A lot of pressure here. All right, let's do

00:03:29.280 | the next one. Shot clock. That was pretty close. All right, next one. The best thing

00:03:34.000 | about the Fed, too, is you can always blame the Fed if things don't go your way. Of course.

00:03:37.560 | That's what I like about it. Perfect scapegoat. What particular sectors or names come to mind

00:03:41.960 | for young investors with a 35 to 40-year time horizon? All right, easy. I don't know. I

00:03:46.400 | have no idea. You could say technology. That'd be an easy one. But who knows what the companies

00:03:50.640 | are going to be? There was this book I read. My brother got it for me for Christmas one

00:03:53.280 | year in 2007. The Forever Portfolio by James Altucher of all people. And he picked these

00:03:58.280 | stocks that you could hold forever for decades and decades. Most of the stocks you've never

00:04:02.700 | heard of today because things change. It was right before the Great Recession. And then

00:04:06.520 | you had all this other stuff happening afterwards. And so all the stocks that ended up doing

00:04:09.400 | well, you wouldn't have picked. So even picking out a decade and a half later is harder than

00:04:13.440 | three to four decades. John, throw up this chart of the biggest stocks in the S&P going

00:04:17.720 | back to 1980. You can see here in 1980, it was basically all energy stocks. These stocks

00:04:23.640 | have turned over so many times. It's so hard to pick. So maybe if you want to say like

00:04:27.940 | tech, technology is going to be a big part of our lives. Maybe the NASDAQ 100. But if

00:04:32.040 | you have three to four decades ahead of you, guess what? The easiest thing to do is you

00:04:35.400 | bet on the market. Corporations will continue to produce profits. They'll continue to innovate.

00:04:39.960 | That's what you want to do. Trying to pick certain stocks or sectors up for three to

00:04:43.600 | four decades in the future, when the future is so uncertain, is really difficult and basically

00:04:47.280 | impossible to do. Perfect timing. Look at that. Nailed it. I actually had a follow up

00:04:52.160 | on that one real fast. What percentage of companies do you think will no longer even

00:04:56.620 | be around in 40 years? A very high percentage. Yeah, it seems like a lot. Yes. Through bankruptcy

00:05:04.860 | or mergers and acquisitions or whatever, yes. Picking those companies is ridiculous. After

00:05:09.600 | that long, it's hard to do it for next year, next five years, 10 years, 30 or 40 years

00:05:13.560 | in the future is really difficult. Okay, so up next we have, what will bring more value

00:05:19.600 | in the long run for a child? Paying for a fancy private college that totals $250,000

00:05:24.480 | or sending them to a mid-tier public school on a full ride and putting that $250,000 into

00:05:28.920 | an index fund for their retirement? Listen, this is the type of question that is way easier

00:05:32.920 | to answer as an older person than a younger person. When you're older, you can easily

00:05:37.680 | say, "Don't spend a lot of money on a wedding because that's a waste of money," or, "Why

00:05:41.240 | would you spend all this money on college when you can just invest it and start a business

00:05:44.600 | and go bet on yourself?" That's way easier to say as a younger person. Hey, outside of

00:05:49.640 | the top 15 to 20 schools, it doesn't matter where your degree came from as long as you

00:05:52.640 | get one. I think you use this as a teaching moment. You can say option one, you go to

00:05:56.840 | a really expensive school but you forego this potential financially being set up as a young

00:06:02.000 | person and maybe buying your first house or paying for a wedding or whatever you want

00:06:04.760 | to do with the money, retiring early, or you go to a state school but here's what you're

00:06:09.040 | giving up. You're not going to go to a nice expensive school that you want to. You could

00:06:11.560 | be missing out on experiences and which one do you regret more? You put all the information

00:06:15.400 | out there for them. You use this as a teaching opportunity to maybe talk about compound interest

00:06:18.400 | a little bit before their eyes glaze over. But I say if you're going to do this, don't

00:06:22.060 | scold someone. Don't force them. Give them all the information and let them make the

00:06:26.460 | decision themselves, right? Because again, your decision at age 18, maybe they say, "You

00:06:30.440 | know what? I'll make my own money someday. I don't need your money. I want to go to this

00:06:34.000 | school because my friends are going there because that is this awesome program that

00:06:36.560 | I want to do," whatever. So I think that's what you do. You help them make an adult decision

00:06:40.240 | and let them figure out which path is better for them.

00:06:42.920 | Yeah, no, that sounds like good advice. Also, yeah, so much of college is about what you

00:06:47.040 | make it. Like, there are people, there are brilliant people who go to, you know, like

00:06:50.800 | less prestigious schools and end up, you know, being very successful.

00:06:54.560 | Well, my favorite one is...

00:06:55.560 | Going to a private school doesn't really mean that much. Oh, did we lose you, Ben? Oh, I

00:07:04.240 | think we might have lost Ben there for a second. All right, well, let's give Ben a second to

00:07:16.920 | see if he comes back. And if he doesn't, then maybe I'll bring Matt back in. All right,

00:07:32.520 | so we'll switch this up a little bit. So we'll go ahead and jump into Matt. So Matt, get

00:07:39.800 | ready. I'm going to get your opinion on this. What do you think about this question between

00:07:44.080 | the public mid-tier school and a private school? Also, I should introduce you. This is Matt

00:07:49.800 | Lurias, a young advisor extraordinaire at Red Horse Wealth. We were going to surprise

00:07:53.920 | you at question eight, but I'll go ahead and bring you in.

00:07:57.280 | Of course. Throw me a curveball right off the bat here. Love it. So I agree with Ben.

00:08:02.760 | It's much easier to answer this as an older person, just saying, having gone through the

00:08:06.780 | experience of paying for these types of big events and saying, well, you know, did I really

00:08:12.120 | need that? But the experiences are worth something. So, you know, in terms of like, where are

00:08:16.840 | you going to go to school? You know, as long as you get a good education, I think, and

00:08:20.320 | even if it's a mid-tier school, if you're not paying as much money, you know, you'll

00:08:24.080 | probably end up okay at the end of the day. You'll end up all right. So, I mean, you know,

00:08:29.880 | don't, don't, don't kill yourself over it. Don't feel like you have to spend godly amounts

00:08:33.120 | of money on, on school, but also at the same time, you want the experience, right? You

00:08:37.600 | want to be able to learn the things that, you know, don't necessarily happen in college,

00:08:41.680 | you know, you know, meeting people, networking, all that type of stuff is important. And,

00:08:46.140 | you know, when we're older, it's easy to say, did I really need that? But, right. Yeah.

00:08:50.840 | Hindsight, people, if people aren't happy with their careers, they're always going to

00:08:53.440 | look back and be like, oh, I spent too much on college. But, you know, I think, I think

00:08:56.680 | that some of that is, yeah, hindsight bias. Also, we both went to school, you know, very

00:09:01.640 | close to each other. You went to Coastal Carolina on the coast of South Carolina. I went to

00:09:05.720 | UNCW on the coast of North Carolina. So, and I had a great, great experience. Okay,

00:09:11.600 | so this is uncharted, uncharted territory. Ben is still not back. So he must be having

00:09:16.520 | some serious computer. Yeah, some computer difficulties. So yeah, we're taking over.

00:09:22.480 | And yeah, I guess we'll just continue on. So John, John hit it. Let's, let's go to the

00:09:27.080 | next question. Okay, so did we get Ben back? Hold on. Let's see. Ben, are you back? Ben,

00:09:37.280 | thank God. I'm on my phone. The power literally just went out of my business. You froze. I

00:09:44.640 | was like, how long do I give it before we just, like, completely, you know, regroup

00:09:49.360 | and continue on. So, but this is great. This is, it's not like we're alive or anything,

00:09:53.000 | you know? Yeah, we're only, this is the power of life. My, the power in my whole office

00:09:56.680 | just literally shut down. And I'm sitting here in darkness, but I'm on my phone. So

00:10:00.800 | I apologize for the video. But hey, it works. It works. So we were wrapping up the college

00:10:09.240 | question. So we're, we're on to the next one. Matt had some, some good contributions there.

00:10:13.000 | So I guess you can hop in and help out. Yeah, yeah. So we'll just have Matt, Matt on. The

00:10:18.760 | surprises is over. Okay, so up next, longtime viewer of the show, love all the content you

00:10:23.280 | put out. I'm 23 and just graduated from college. I landed my first job at a financial services

00:10:28.040 | firm and I'm wondering how I should allocate my earnings. Would you recommend focusing

00:10:31.760 | on paying off my student loans first around $30,000 or building up my retirement portfolio?

00:10:38.500 | My boring answer to this one is I like the idea of splitting it up because I think that's

00:10:44.400 | the simplest way to go about it. And I think building those financial habits early and

00:10:47.800 | saving important. Now it could be you're one of these people that just loves paying off

00:10:52.120 | debt because you hate it so much, right? Duncan, I can't remember. Are you a Duke or North

00:10:55.640 | Carolina fan? Because you're, you're from North Carolina. I'm a Duke fan. Okay. So some

00:10:59.760 | people hate debt as much as people outside of Durham, North Carolina hate coach K and

00:11:04.720 | Duke, right? Wow. Yeah. It's pretty vitriolic. It's pretty vitriolic. Come on. It was in

00:11:09.800 | the news a lot, but I'm just saying if you really, one of these people that just hate

00:11:12.760 | debt and cannot stand it, and it's going to keep you up at night, pay it off. And I like

00:11:15.600 | the idea of splitting it up and building those savings habits while you pay off the debt.

00:11:18.360 | And then when the debt's paid off, roll that those payments into your savings. For sure.

00:11:23.840 | I agree. I mean, you got to start contributing to the 401k at least, I think a little bit.

00:11:27.760 | You don't have to do a lot, but you can do both at the same time. There's no reason why

00:11:30.680 | not. Yes. At least get your match. All right. Buzz it. So right on time. There we go. Um,

00:11:35.280 | so one, one thing I had to add to that is just, yeah, the Dave Ramsey school of like

00:11:39.000 | no debt ever kind of thing that, that always to me is kind of annoying because it's like,

00:11:43.240 | well, you're basically telling a lot of people that they can't like go to college then if

00:11:46.280 | they can't take out student loan debt, because you should never take out, you know, I feel

00:11:49.320 | like, like you're saying some people are so, so extreme about it that it's kind of off.

00:11:53.360 | Yeah. That's a debt that's going to pay off for you. There's good and bad debt for sure.

00:11:56.960 | Okay. So up next we have my friend who's 38 years old, has a 2.8% 30 year fixed mortgage,

00:12:04.800 | roughly 24 years left and pays an extra $400 each month towards her principal. If she continues

00:12:10.560 | to prepay $400 towards her principal, she has about 16 years remaining. Her house has

00:12:16.140 | enjoyed strong appreciation in the past six years, about 85% according to Zillow. I told

00:12:21.360 | her I would show, I told her that I would slow pay the mortgage due to the phenomenal

00:12:25.880 | rate plus significant appreciation and invest the $400 a month in the stock market. What

00:12:30.400 | are your thoughts on this? I do think the rates matter in these things. Like my first

00:12:35.080 | interest rate I paid at my house, like 6.5% and we ended up refinancing a few times to

00:12:39.520 | the point where we kept making the same payment and it was like double by the end. But then

00:12:43.480 | when we sold our house after 10 years, I realized like, wait, what was that money doing for

00:12:47.560 | me? It was illiquid. It was just sitting there. It wasn't that great. I think if you have

00:12:50.800 | that low of a payment and it's taxed advantage, I think you have to think about that in terms

00:12:54.160 | of like, how are the rest of your finances? Are you on track with your retirement savings?

00:12:57.760 | Could you be using this money for something better than a 2.8% repayment on your house?

00:13:06.960 | Some people just don't like debt. So I mean, if that's how you are, you know, and if that's

00:13:10.840 | keeping you up at night, then pay it off. But yeah, otherwise it's probably other things

00:13:13.800 | you could be doing with it. And that's just, you know, it takes a little bit more deeper

00:13:16.820 | dive into your, your full picture. It's a really, really low hurdle rate. Yeah. Cool.

00:13:23.060 | We didn't even get to the buzzer on that one. So let's let's keep trucking along. Okay.

00:13:26.580 | So another Fed one. What happens when the Fed raises rates? Moreover, if the bond market

00:13:31.180 | has priced in several rate hikes, why raise rates 25 basis points per month? If 6.25 basis

00:13:36.920 | point hikes are priced in this year, what would happen if the Fed raised to 1% in March?

00:13:41.800 | I don't really understand this one. I have to be honest.

00:13:43.840 | Okay. So they're basically saying the Fed has this target that they want interest rates

00:13:47.000 | to get to, but they're taking their time and it's going to take them a while to get there.

00:13:51.520 | And if they're going to get to 2% or 3% anyway, why not just rip the bandit off and do it

00:13:55.440 | now? So they're taking a stair-step function where they're doing like little increments

00:13:58.720 | at a time. This is the hardest price, hardest part of investing is like what's priced into

00:14:02.480 | the market. No one really knows because there are no counterfactuals. And I think the idea

00:14:06.240 | is like, if they ripped the bandit off and did this, what would they be signaling? Like

00:14:09.120 | things are worse than people think. Would there be like a meltdown, some counterintuitive

00:14:12.360 | reaction? Like maybe the bond market would be worse than the stock market in this case.

00:14:17.560 | I think it's mostly psychological because people can't handle big, huge changes right

00:14:22.560 | away and throwing the kitchen stick. I think people would just freak out because so much

00:14:25.280 | of it is psychological. Yeah. I can't believe I'm doing this from my phone.

00:14:32.080 | It's surreal. 45 seconds left on the timer, Matt. You have anything to add?

00:14:36.720 | Let's just do the next one and then we can spend some time on the next question.

00:14:40.680 | Okay. So up next, I'm 44 and single with no kids. I have a net worth of around $425,000.

00:14:47.120 | College educated and a financial controller at a commercial real estate firm in Chicago.

00:14:51.560 | I would have more if Twitter had performed better, though I didn't sell any or I haven't

00:14:55.920 | sold any. I own 5,550 shares at $29.83 cost basis. What do you think about where I am?

00:15:04.480 | Okay. So this one was obviously sent to us before Elon Musk decided to hop in and buy

00:15:08.240 | 9% of Twitter and the shares shot up 30% this year. So now this guy's up like 65% on his

00:15:14.480 | shares. John, throw the chart up on Twitter. This is Twitter since the IPO. Has not done

00:15:19.880 | great. So the S&P is up like 200% since Twitter went public. Twitter is up like 15%. That

00:15:23.720 | includes this week's run-up in prices from Elon Musk taking over. I think it's funny

00:15:29.720 | this guy included Twitter in his asking how he's doing. Because I think if your whole

00:15:35.720 | financial ecosystem is based around how one stock is doing and it has to make or break

00:15:40.440 | you, that's kind of tough. The other thing is you have an amount of money. The idea of

00:15:43.840 | answering where am I, I think that's hard to do because you have to answer where do

00:15:48.720 | I want to be, how much do I want to spend, when do I want to retire, what are my goals.

00:15:52.680 | So Matt, someone comes to you and says, here's how much money I have, here's my age, here's

00:15:55.920 | where I want to be. How do you help them understand whether you're on the right track or not?

00:16:00.120 | Yeah. I mean, every situation is different. So we really have to take a look at everything

00:16:04.920 | that's going on and kind of see like, all right, where do you want to be? How do you

00:16:09.480 | envision the rest of your life playing out and what resources do you currently have to

00:16:13.880 | get there? And what capabilities do you have to continue to add to these goals and what's

00:16:21.040 | prioritized then? So I did a back of the envelope for this one. If this guy did nothing else

00:16:25.000 | at $425,000 or whatever he has, he earns 6% of his money, he retires at 65, he's got like

00:16:30.160 | $1.3 or $1.4 million. If, since he's a listener on the show, he's maxing out his 401k, he's

00:16:35.600 | maxing out his Roth IRA, so that's $26,000 a year, call it. If he did that in addition

00:16:40.360 | to what he already has, he'd have like $2.3 million. So I think you take that and you

00:16:44.280 | say, I don't know what the market's actually going to do, but if I need more than that,

00:16:48.560 | I'm going to work longer, I'm going to save more. If I need less than that, maybe I can

00:16:51.760 | save less now or retire a little earlier. So I think that's how you look at those goal

00:16:54.880 | posts along the way. I cheated. I just did that one when you finished. I think that was

00:17:02.840 | all our lightning round. We did pretty good. I think we got through seven of them and we

00:17:06.120 | held two questions for Matt. We were going to bring Matt in now before I had my technical

00:17:10.400 | difficulties. Back to schedule programming. There's a storm here today, so yeah, my power

00:17:14.680 | went out. But let's do a couple more. We've got one floor that we've got for Matt here.

00:17:19.120 | By the way, a lot of these questions I think are from younger viewers, which I think is

00:17:23.800 | great. So we wanted to bring Matt in, since he specializes in working with some younger

00:17:27.960 | investors. So let's ask the question here.

00:17:30.200 | Okay. So what are some good questions to ask when selecting a financial advisor, especially

00:17:34.600 | as a young person?

00:17:36.000 | All right. Really great question, because I think this is one of the hardest things

00:17:40.160 | for people to understand. I don't know, because you go to the hospital and they give you a

00:17:43.720 | checker. You don't select them. A lot of things, you don't really know what you're

00:17:47.520 | looking for. So Matt, why don't you talk about when you're talking to prospective clients,

00:17:51.360 | what are the things they should be looking for and what are some of the red flags that

00:17:54.400 | maybe they shouldn't be asking questions about?

00:17:56.080 | Yeah, definitely. It's a great question. I think anyone looking for an advisor, you

00:18:00.920 | have to be seeking out a long-term relationship. You want something that's going to last.

00:18:04.960 | You don't want to hop around a bunch, go from advisor to advisor. So you really want

00:18:08.680 | to take it seriously. You want to do your due diligence and you want to ask the right

00:18:11.880 | questions. So there are wrong questions to ask as well. So right questions being obviously

00:18:19.080 | the obvious ones, are you a fiduciary? Are you going to serve my best interests at all

00:18:23.200 | times? If you're a younger investor, I think a key question is how do I fit into your firm's

00:18:30.360 | philosophy given where I am in life right now? And how is that path going to evolve

00:18:36.360 | for me as a client of the firm?

00:18:39.520 | Yeah, you're right. As a young person, you could have certain things that are going on

00:18:43.880 | in your life and you have life events that change. So it's like, how can you help me

00:18:46.240 | along the way as I have these changes happen?

00:18:48.240 | Right. So what are the services that I should be seeking out right now that you can provide

00:18:52.360 | to me? How will that change? And then what are the fees around those services? Do the

00:18:56.560 | fees change? Obviously, you don't want to be paying a ton of money for stuff you don't

00:19:00.080 | need. So you want to be cognizant of that as well, I think. And then we can get into

00:19:05.600 | like investment philosophy. If you're someone who is a little bit more experienced when

00:19:08.880 | it comes to investing, you've done some on your own, right? Obviously, you want to make

00:19:13.880 | the relationship as easy as possible to be able to stick with it for a long time. So

00:19:18.760 | you want to make sure philosophies align, I think.

00:19:20.840 | Yeah. I also think one of the most important things is like, what does the relationship

00:19:23.880 | look like going forward? Like, how are you going to work with me? How often are we going

00:19:26.920 | to talk and communicate? Because I know that can vary for our clients. Some people want

00:19:31.440 | to have their hand held and talk all the time. Some people want check-ins, you know, irregularly.

00:19:35.520 | So it kind of depends, like, how are you going to work with me and how are you going to fit

00:19:38.560 | with my schedule and personality?

00:19:40.640 | Yeah. I think the key is expectations have to be aligned in the beginning. So spend time

00:19:46.800 | with whoever you're talking to. Talk to more than one firm and really make sure that you're

00:19:52.200 | getting, you're setting out on the right foot in terms of what the expectations are for

00:19:56.080 | both the advisor and the client. And both should desire the same thing in terms of having

00:20:00.560 | a long-term relationship that's beneficial to most importantly the client.

00:20:05.240 | Yeah. A lot of it comes down to, here's what I want out of you. Can you actually fulfill

00:20:09.480 | what I want? Or are you just telling me what I want to hear?

00:20:12.240 | I agree.

00:20:13.240 | Yeah, definitely.

00:20:14.240 | Do you ever get any, like, personal questions, like your favorite music or sports or stuff

00:20:18.960 | like that? I mean, because it seems like people would naturally want to know that stuff if

00:20:23.200 | they're going to have a long-term relationship.

00:20:25.200 | Definitely. You know, that's the fun part is getting to know people and really getting

00:20:29.600 | to mesh with certain people and see like, hey, do we even get along? You know, sometimes

00:20:33.400 | you don't get along with somebody. It has nothing to do with finance or numbers or financial

00:20:38.440 | plans and it's like, all right, you know, we just get along and I trust this person.

00:20:42.680 | I think trust is a huge thing. Obviously, it seems obvious, but you want to trust whoever

00:20:46.680 | you're seeking out as an advisor.

00:20:49.920 | So a lot of times you want to work with someone that you like and respect. And yeah, trust

00:20:54.280 | I think is the big one for sure.

00:20:55.520 | Yeah. Yeah. I would need to ask favorite Beatles album. So I just put it in the chat. No, I'm

00:20:59.760 | just kidding.

00:21:00.760 | I mean, worst, Duncan, worst podcast question ever. Beatles or Stones, right?

00:21:05.760 | Oh, because, well, because of the obviousness of it, you know, it's like, it's not even

00:21:09.960 | a contest.

00:21:10.960 | Yes. Yes. Okay. Let's do the next one.

00:21:13.120 | I probably just made a bunch of people mad. Okay. So last but not least, I'm in my thirties

00:21:19.280 | and can now afford to buy a house full cash without taking any debt. However, with interest

00:21:23.760 | rates so low and they were at this one a while back, but should I take a, take a loan anyway

00:21:28.240 | and finance the house and invest my capital in the stock market?

00:21:31.800 | I think this is interesting that like rates could change the story going from a 3% mortgage

00:21:36.980 | rate to a 5% that hurdle changes. So nine months ago, I would have said you'd be nuts

00:21:41.360 | to pay in full cash. Now, maybe it kind of makes sense. But first of all, kudos to this

00:21:45.920 | person for having that amount of money. I don't know where they live to be able to buy

00:21:48.080 | in cash, but that's great. But so Matt, you're thinking through this type of decision with

00:21:51.520 | a client and this is the kind of thing where there really is no right or wrong answer,

00:21:55.400 | right? A lot of this is personality driven and depending on what the person wants to

00:21:58.800 | get out of it. So how do you help someone work through a big decision like this? Because

00:22:02.040 | this is, this is a huge decision. We're talking about a huge lump sum of money, you know,

00:22:06.400 | six or seven figures here, potentially depending on how much home they're buying.

00:22:09.720 | Yeah. Like a lot of these questions, there are a lot of qualitative elements that need

00:22:13.520 | to be addressed, right? As opposed to just where can I make the most money? You know,

00:22:17.480 | what should I, what should I do in that sense? It's really about, you know, what's the opportunity

00:22:22.240 | cost, right? What other goals do you have that this money you could be throwing into

00:22:27.520 | equity in your home could be used for, right? Do you have kids? Do you want to help them

00:22:33.020 | get to college and go to college? You know, if they're young, you might want to front

00:22:36.440 | load a five to nine plan and use some of this money for that. So that's just one example,

00:22:40.340 | but there's a lot of things that, you know, play into this as opposed to just, Hey, I've

00:22:43.800 | saved up the money. Should I just throw it all into my house?

00:22:45.760 | I also think, especially when you're young, uh, borrowing money makes more sense to me

00:22:51.480 | because especially with a house that offers more liquidity, flexibility, you can't really

00:22:55.080 | spend your house in a pinch. You could obviously borrow against it, but having some flexibility

00:22:59.720 | to do something with that cash and then still having that cash to, if, if, if you realize

00:23:03.880 | a few years down the road, like I made a mistake here, you can still pay it off eventually,

00:23:06.680 | right? You still have that cash somewhere. So, so I think that that is the kind of thing

00:23:11.320 | where it's, it's hard to take that one back. If you buy the house in all cash, obviously

00:23:14.640 | maybe one of the things now is, well, if you're getting into a bidding war, having all cash

00:23:17.920 | could, could make more sense and help. But I think especially when you're young, you'll,

00:23:21.800 | you lose some of that flexibility by just having it paid off.

00:23:24.400 | Definitely. I mean, the interest rate part of it is, is pretty big. I think, I mean,

00:23:28.640 | a couple of months ago, you know, it's, it's like you said, it's more obvious, but still,

00:23:33.120 | even with where we're at today, you want the flexibility. You want to be able to fund other

00:23:36.920 | parts of your life. Having everything tied up in equity, you know, is, you know, it's,

00:23:41.680 | it could be restraining a little bit, but again, you've got these people, they just

00:23:44.600 | hate that. So, you know, if that's the type of client that I'm dealing with, you know,

00:23:48.100 | the conversation is going to lean that way and there's nothing wrong with that. There's

00:23:51.480 | nothing, you know, we can, you know, we can, we can gear towards that type of conversation

00:23:55.800 | if it's required for the person that we're dealing with.

00:23:57.840 | Duncan, I'm not going to make a Coach K, Duke reference here, because I know it's a, it's

00:24:00.840 | a touchy subject right now. I didn't, I didn't realize.

00:24:03.040 | It's rough. Yeah.

00:24:04.040 | Sorry. Tough weekend.

00:24:05.040 | It's been rough. A tough way for them to go out, but literally the worst team they could

00:24:08.200 | have lost to, you know, everyone knows that, I guess, but yeah.

00:24:10.480 | Yeah, that had, that had to be tough.

00:24:12.040 | It's rough.

00:24:13.040 | Thanks to Matt for stepping in here. I've been in this office for six years, seven years

00:24:17.440 | now almost, and I've never lost power before. So yeah.

00:24:21.040 | Glad I could be the one on here today to experience the time, and thanks Matt for stepping in.

00:24:24.960 | We got to mention no Portfolio Rescue next week because Duncan and I will be in Miami

00:24:30.960 | recording a live edition of Animal Spirits that if we figured out, can hopefully go up

00:24:34.680 | on this channel at some point. Keep those questions and comments coming. Remember, askthecompoundshow@gmail.com.

00:24:42.960 | Thanks guys. Thanks everyone for watching, and we'll be back in two weeks.

00:24:45.640 | One other thing. Don't forget we're also available as a podcast wherever you listen to podcasts.

00:24:49.520 | So make sure you've subscribed and give us a rating, all that kind of stuff. It helps

00:24:53.040 | a lot.

00:24:54.040 | Yeah.

00:24:55.040 | Thanks everyone.

00:24:56.040 | We have a fancy new cover with Duncan and I on it. Our pictures. It looks amazing.

00:24:59.440 | Sure. Feel famous.

00:25:00.440 | All right. Thanks everyone for watching.

00:25:01.440 | See ya.

00:25:02.440 | See ya.

00:25:02.920 | See ya.

00:25:03.920 | [Music]

Should I Pay Down Student Loans or Invest in the Market?

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