Bogleheads® 2022 Conference –Nick Maggiulli on “Just Keep Buying”

00:00:00.000 | (audience applauding)

00:00:03.160 | - So it's my great pleasure to,

00:00:08.560 | I should start by saying what an honor it is

00:00:10.480 | to have an opportunity to participate in this conference.

00:00:13.080 | I've long admired the Bogleheads.

00:00:15.040 | I know you mainly from the discussion board.

00:00:18.040 | I'm a dilettante there.

00:00:19.320 | I've not earned my stripes on Bogleheads discussion boards

00:00:23.760 | to be a regular contributor, but all the same,

00:00:26.240 | I've learned so much from all of you

00:00:28.120 | and it's an honor to be a part of this morning's proceedings

00:00:32.400 | and congratulations on what sounds like

00:00:34.120 | has been a very, very successful conference.

00:00:37.520 | So I wanted to tell you a little bit about Nick.

00:00:39.160 | I think he probably doesn't need any introduction

00:00:41.880 | to many of you, very, very successful author, blogger,

00:00:46.880 | and operator in his own right.

00:00:50.080 | But all the same, it could be helpful to have a thumbnail.

00:00:51.840 | So I thought we would start with that and I'll bring Nick up

00:00:54.000 | and he and I'll have a chat for 30, 35 minutes

00:00:57.000 | and then we'll open things up to you all

00:00:59.560 | to make sure that you have an opportunity

00:01:01.640 | to ask questions of him, same way I do.

00:01:04.120 | But for those of you who aren't familiar with Nick,

00:01:06.400 | Nick is Chief Operating Officer

00:01:08.440 | for Ritholes Wealth Management,

00:01:09.840 | which Nick, as you know, is a registered investment advisor,

00:01:13.160 | which he joined in 2018.

00:01:15.120 | He's also the author of a best-selling book.

00:01:17.720 | I think, Nick, you said was it 35,000 copies and counting,

00:01:21.880 | which is a very, very significant accomplishment

00:01:24.440 | and deservedly so, it's a fantastic book.

00:01:27.120 | If you haven't read it, I should say,

00:01:29.800 | one that'll be a focus of our conversation in a moment.

00:01:32.760 | In addition to the book, Nick is the author

00:01:36.360 | of "Dollars and Data," which is a blog

00:01:39.400 | that explores the conversion of data in personal finance.

00:01:43.000 | He's a graduate of Stanford University

00:01:45.760 | with a degree in economics.

00:01:47.120 | I'm very pleased to welcome him to the stage today.

00:01:49.360 | So, Nick, welcome.

00:01:51.360 | (audience applauding)

00:01:54.520 | - Okay, thank you, everyone, for having me.

00:01:58.480 | Thanks for your time, and Christine,

00:02:00.080 | thanks for the invite, appreciate that.

00:02:02.040 | - So I think we'll start at an obvious place,

00:02:05.720 | which is the book.

00:02:07.040 | Maybe you can, the title is "Just Keep Buying."

00:02:10.040 | Maybe you can talk about the origin story for that,

00:02:12.040 | because it's interesting.

00:02:13.320 | - Yeah, so there's a YouTuber named Casey Neistat,

00:02:16.800 | and he used to vlog out of New York,

00:02:18.800 | and one day he uploaded this video called

00:02:21.720 | "Three Words That Got Me to Three Million Subscribers,"

00:02:24.760 | and the three words were "Just Keep Uploading,"

00:02:28.120 | and he had gotten this recommendation

00:02:30.320 | from another YouTuber and said just upload every day,

00:02:33.600 | vlog every day, and you'll be successful,

00:02:35.320 | and he is successful.

00:02:36.520 | He now has 12 million subscribers.

00:02:38.520 | He's been on the Academy Awards, all sorts of stuff.

00:02:41.040 | Anyways, I had seen that video,

00:02:43.000 | and at the same time, right around that time,

00:02:45.040 | I had started blogging in early 2017.

00:02:46.920 | I was very new to it.

00:02:48.640 | I was running all this analysis on US stock market returns,

00:02:52.000 | and this is something that I learned at the time.

00:02:54.280 | Many of you probably already know this,

00:02:55.520 | but it doesn't really matter when you buy,

00:02:57.920 | like regardless of valuations, starting valuation,

00:03:01.120 | P/E ratio, et cetera.

00:03:03.440 | All that matters is the holding period.

00:03:05.520 | Over a 30-year period, all the returns converge,

00:03:07.760 | regardless of the starting P/E, right?

00:03:09.960 | And so when I saw that, I said the real solution here

00:03:13.160 | to build wealth is just to keep buying over time,

00:03:15.360 | and that's kind of how it came about.

00:03:17.400 | Fun little side fact, when I was coming up

00:03:19.040 | with the name for the book, a little context.

00:03:21.280 | So every chapter in the book, I basically answer a question.

00:03:23.920 | How much should you save?

00:03:26.120 | How much of your raise do you need to save?

00:03:28.240 | Lifestyle creep, all sorts of stuff like that.

00:03:30.440 | But when I was coming up with the book title,

00:03:33.160 | my publisher was like, "Why don't we call it

00:03:35.440 | "A Data Scientist Answers the 15 Biggest Questions

00:03:38.600 | "in Finance?" (audience laughing)

00:03:41.120 | And I said, "That's the worst title I've ever heard,"

00:03:43.920 | so we went with Just Keep Buying instead.

00:03:45.920 | (audience laughing)

00:03:47.800 | - So we're gonna talk some more about the book,

00:03:49.080 | particularly on the topics of saving and spending,

00:03:51.680 | but before we did that, I think we'd be remiss

00:03:53.400 | if we didn't spend a little bit of time

00:03:54.760 | talking about the markets, inflation.

00:03:57.880 | And so at the time you published the book,

00:04:00.640 | inflation was relatively benign.

00:04:02.360 | Markets were flying high, risk was being rewarded.

00:04:05.140 | Different story this year, obviously.

00:04:07.240 | What would you say to those who might question

00:04:09.840 | whether they should just keep buying,

00:04:11.520 | given their recent experience in the market?

00:04:13.940 | - I mean, it's only been, what, 10 1/2 months

00:04:17.000 | into this from the highs, so if you're giving up hope

00:04:20.040 | at 10 1/2 months, then you're not truly

00:04:22.040 | a long-term investor.

00:04:22.940 | I think I'm preaching to the choir in here.

00:04:24.640 | I mean, we've had decades where markets go nowhere.

00:04:27.600 | You can think of 2000, 2009, you can think of the 1970s,

00:04:30.820 | most of the 1930s, right?

00:04:32.700 | So if you're giving up hope after 10 1/2 months,

00:04:36.000 | then maybe you need to reassess your risk profile

00:04:38.760 | amongst other things.

00:04:40.120 | But the joke I like to say, it's not my joke,

00:04:42.500 | I stole it from Rap Capital, but he says,

00:04:44.600 | yeah, the market's down, but the 100-year moving average

00:04:46.700 | is looking pretty good, and so that's what I,

00:04:49.400 | you actually look at the data,

00:04:50.440 | the 100-year real return in U.S. stocks,

00:04:53.040 | if you look at it through September, is 7.1% real.

00:04:56.300 | That's like with dividends, that's like insane.

00:04:58.240 | And I don't expect that going forward.

00:04:59.800 | If I had to assume a real rate of return

00:05:01.960 | across global markets, I would say 4%.

00:05:04.460 | I hope we get that.

00:05:05.760 | We obviously can't know,

00:05:06.800 | but that's how I plan going forward.

00:05:10.280 | - You wrote a piece in which you examine market performance

00:05:13.160 | following drawdowns of different severity.

00:05:15.600 | What did you find, and how does that apply to now?

00:05:18.240 | - Yeah, so when people like to talk about drawdowns,

00:05:22.720 | people like to say, okay, we're now in a dip of,

00:05:24.760 | let's say, right now the market's down 24%.

00:05:27.680 | The question is, are future returns higher

00:05:30.160 | over the next one year, the next three years,

00:05:32.560 | the next five years, given, conditional on being

00:05:35.200 | in a drawdown of some amount?

00:05:37.320 | And the answer is generally no.

00:05:39.640 | Once you're in a 20% drawdown or a 30% drawdown,

00:05:42.840 | you go back to 1926, it doesn't really,

00:05:45.840 | at least in US stocks, it doesn't really make a difference.

00:05:48.600 | You're saying, oh, I'm down 20%.

00:05:50.480 | The one-year returns don't really change.

00:05:52.200 | You're down 30% when your returns don't really change.

00:05:55.400 | However, once you're down 40% or more,

00:05:58.000 | so the very extreme drawdowns,

00:06:00.000 | then the returns start to shoot up.

00:06:02.320 | So what's the logic behind that?

00:06:03.600 | Why does it not make a difference?

00:06:04.980 | Because when you're down 20%,

00:06:07.200 | you could go down another 20%,

00:06:08.880 | and then another 20%, right?

00:06:10.280 | So you don't know what's to come.

00:06:11.640 | So when you're down like a little bit,

00:06:13.560 | there can be more pain ahead,

00:06:14.520 | but once you're down a lot, once you're down 40, 50%,

00:06:17.160 | most of the pain, most of the time has already happened,

00:06:19.400 | right, and so that's just what we have in US stocks.

00:06:22.440 | If we look in world stocks, it's a little bit different,

00:06:25.080 | so, and the world data only goes back to like 1970,

00:06:28.440 | MSCI World, ex-US, and so from 1970 through now,

00:06:33.400 | roughly there is a little bit of a benefit

00:06:35.320 | once there's a dip, so like buying the dip

00:06:36.880 | or having, putting more in once the market declines

00:06:39.320 | by 30% or more, generally there's some benefit there,

00:06:41.760 | but where we are now, I would say we're going down 24%,

00:06:45.400 | there's no evidence that necessarily the pain's over yet,

00:06:48.640 | so I wouldn't say, oh my gosh, back up the truck

00:06:50.840 | and buy everything, because we don't know that yet.

00:06:52.440 | Now if the market was down 50%,

00:06:53.920 | I would be making a very different argument,

00:06:55.600 | so I think that's the context to think about drawdowns,

00:06:59.160 | and so I don't really get excited about buying

00:07:01.080 | until there's a very large drawdown.

00:07:03.720 | So I think the last time I even got excited at all

00:07:05.960 | was March 23rd, 2020, 'cause we were down 33%,

00:07:08.560 | which was like the most I've seen in my investing career, so.

00:07:11.560 | - You also wrote a piece last year

00:07:14.040 | in which you tried to answer the question

00:07:15.960 | of how to invest when inflation is high.

00:07:19.520 | Can you talk about what you found

00:07:20.880 | and maybe also update us on your thinking on that topic,

00:07:24.440 | if it's changed any since?

00:07:26.560 | - Yeah, so if you look at, since the mid-1970s,

00:07:30.520 | the asset class, the best performing asset classes

00:07:32.800 | in terms of real return,

00:07:35.160 | the top three are U.S. stocks, U.S. REIT,

00:07:38.760 | international stocks.

00:07:39.720 | Like this is just broad asset classes

00:07:41.480 | that most of us can buy.

00:07:42.440 | We're not talking private equity and things

00:07:43.760 | where I can't really get into for retail investors.

00:07:46.280 | So those are the top three going back to like the mid-1970s.

00:07:49.520 | If you actually then subset to the periods

00:07:52.160 | when inflation exceeds 4%, so that's not high,

00:07:54.560 | but it's higher than most of history,

00:07:56.320 | so you subset to those, the top three asset classes

00:07:59.040 | are U.S. REITs, international stocks, U.S. stocks,

00:08:02.440 | the same set of assets.

00:08:04.080 | And so my takeaway from this

00:08:06.160 | is like owning income-producing risk assets

00:08:09.360 | like global stocks, real estate,

00:08:13.040 | other types of income-producing assets

00:08:15.040 | is the way to go regardless of the inflationary environment

00:08:18.320 | because yes, there's inflation that can happen,

00:08:20.640 | but it's really tough to know

00:08:22.560 | when to get in and out of those strategies.

00:08:24.520 | Like if we're thinking back like 1973,

00:08:27.480 | U.S. market was down I think 21% in real terms.

00:08:30.440 | The year after that, it was down 34%.

00:08:33.160 | So we basically got cut in half within two years.

00:08:35.800 | And right now, I think in real terms,

00:08:37.640 | well, we just had 8% print and we're down 24.

00:08:39.600 | So we're down about 32% real terms in the last year.

00:08:42.280 | So that's almost like our 1974 again, right?

00:08:44.760 | If you're thinking about the current environment.

00:08:46.080 | So that doesn't mean the pain's over or anything,

00:08:48.200 | but just thinking about that, like what happened in 1975,

00:08:53.040 | there was a 28% real return on the upside.

00:08:56.440 | So I'm not saying that's gonna happen now,

00:08:57.920 | but once we get through that,

00:08:59.520 | the real returns start to happen later.

00:09:01.760 | So.

00:09:02.600 | - So at this point, I was gonna turn

00:09:04.920 | and talk a little bit about saving and spending.

00:09:06.600 | In the book you state,

00:09:08.000 | saving is for the poor, investing is for the rich,

00:09:10.360 | and you provide a framework for determining

00:09:13.120 | where you sit on that saving investing spectrum.

00:09:16.120 | Can you walk through that for the audience?

00:09:18.920 | - Yeah, so I think the best way to do this is with the story

00:09:21.840 | 'cause it'll make more sense that way.

00:09:23.480 | So when I was 23 years old and I was living in San Francisco,

00:09:26.840 | I just graduated, got my first job.

00:09:29.360 | I'd saved about $1,000 within a few months.

00:09:31.800 | And I'm a true bogal head even from back in the day

00:09:34.080 | before I even knew what the bogal heads were.

00:09:35.400 | I had spreadsheets, I was projecting my net worth,

00:09:37.920 | I was over analyzing my asset allocation.

00:09:40.840 | I had $1,000 to my name, even with a 10% return,

00:09:44.560 | which I, you know, let's assume 10% to make the math easy.

00:09:47.160 | That's $100.

00:09:48.160 | At the same time, and I was making all these spreadsheets,

00:09:50.800 | I was going out with my friends, going to dinner,

00:09:53.240 | buying rounds of shots, getting my Uber home.

00:09:55.480 | Like I would blow my entire investment return in one night.

00:09:58.560 | And I did it multiple times throughout that year.

00:10:00.680 | So when I say savings for the poor,

00:10:02.840 | investing for the rich, what I'm saying is like,

00:10:05.480 | it didn't really matter what I did with my investments then.

00:10:08.000 | I'm not saying you shouldn't invest

00:10:09.360 | when you don't have a lot of assets.

00:10:10.520 | That's never my, I would never say that to anybody.

00:10:12.800 | I'm just saying it doesn't really matter.

00:10:14.240 | Tax loss harvesting doesn't matter when you have $1,000.

00:10:16.960 | You know, your asset allocation doesn't matter.

00:10:18.560 | Your rebalancing frequency doesn't matter.

00:10:20.480 | Now, most of the people in this room

00:10:22.000 | have been accumulating for some time, so it does matter.

00:10:24.200 | And so the question is, when does it start to matter more

00:10:26.360 | and how do you think about it?

00:10:27.800 | And so I have a framework I use

00:10:29.160 | called the Save-Invest Continuum.

00:10:30.760 | And basically, every person in this room

00:10:32.400 | is on this continuum and you can figure out where you are

00:10:34.280 | just from two numbers in your life.

00:10:35.840 | First number is, how much can you save in the next year?

00:10:39.040 | Whatever that is.

00:10:39.880 | Maybe you can save 10,000, maybe you can save 100,

00:10:41.200 | maybe you can save a million.

00:10:42.200 | Whatever, that's your number.

00:10:43.360 | This isn't a contest, by the way,

00:10:44.400 | so just privately keep these numbers.

00:10:46.080 | The second number is how much can your investment portfolio

00:10:50.240 | earn you in the next year?

00:10:51.240 | So assume maybe 5%, 10% return, whatever.

00:10:53.840 | Just take something, just an average return, right?

00:10:57.160 | So let's say you have $100,000, 10% return,

00:10:59.880 | that's 10 grand, right?

00:11:01.200 | So you have your first number, you have your second number.

00:11:02.640 | The question is, which number is bigger?

00:11:04.600 | And the bigger number is where you should

00:11:06.200 | spend more of your focus.

00:11:07.200 | Now obviously, if they're both similar,

00:11:08.720 | then you need to care about both.

00:11:09.800 | So let me give you the example.

00:11:11.240 | When I was 23, I probably could have saved

00:11:12.760 | five, 10 grand in a year.

00:11:14.080 | My investments would return me $100, right?

00:11:16.520 | So you see the difference.

00:11:17.720 | When I was 23, I should have been focusing on my income,

00:11:19.840 | raising my income, saving that money

00:11:21.240 | to get the other number higher over time.

00:11:23.520 | Now think of someone who's retired.

00:11:25.120 | They can't save anything.

00:11:26.440 | All of their focus is on their investments.

00:11:28.040 | It's about tax loss harvesting.

00:11:29.280 | It's about all the little, tiny details.

00:11:31.160 | And so when you think about that framework,

00:11:32.920 | you can use that throughout your life.

00:11:34.440 | And so for most young people,

00:11:35.400 | they're gonna be focusing on income.

00:11:36.480 | And I say, don't really worry about your investments.

00:11:38.600 | But as you get older and as you start

00:11:39.960 | to accumulate more wealth,

00:11:41.000 | you need to really focus on the investments.

00:11:42.640 | And that's what I think the bulkheads do

00:11:43.960 | because you guys have been accumulating

00:11:45.240 | for so long at this point.

00:11:46.520 | Which is also why it's funny we talk about this breakup,

00:11:49.560 | and this is exactly how the conference is broken up.

00:11:51.600 | Like we had the accumulator room,

00:11:52.800 | and then we had the retirement room,

00:11:53.720 | 'cause there are different focuses, right?

00:11:55.200 | And we talked about saving money in there.

00:11:57.160 | I think, was it Chris, is that your name?

00:11:59.440 | Yeah, Chris had a great panel in there

00:12:00.760 | where he's talking about FIRE,

00:12:01.640 | and he was talking about spending money

00:12:03.920 | and income and all that, and that's for accumulators.

00:12:06.160 | Whereas in here, we're talking about retirement

00:12:07.920 | and a lot of little tax strategies and things like that.

00:12:09.920 | So I think that's probably the defining idea of the book

00:12:12.840 | and how the whole book's even laid out.

00:12:15.360 | - In the book, you also talk about

00:12:16.640 | what you call the biggest lie in personal finance,

00:12:20.360 | which is the notion that people can be rich

00:12:23.160 | if they cut spending.

00:12:25.200 | Why do you think that's a big lie,

00:12:27.040 | and what should people focus on instead?

00:12:29.120 | - So I've just looked at the data

00:12:31.800 | pretty religiously on this,

00:12:33.080 | and there's a great paper called "Do the Rich Save More?"

00:12:36.140 | And they basically show that the highest correlation

00:12:38.840 | with savings rate is income,

00:12:40.200 | and it seems pretty obvious to me.

00:12:41.580 | Like, okay, obviously you have more income,

00:12:42.920 | you have more savings rate.

00:12:44.440 | Now, of course, it's very easy to say,

00:12:46.520 | well, I know this person that has a high income

00:12:48.680 | and they don't save a lot,

00:12:49.520 | and it's easy to find anecdotes.

00:12:50.880 | And anecdotes are fine,

00:12:52.160 | but over on average, that's not true, right?

00:12:55.040 | If you look at between that piece of that paper they put out

00:12:58.320 | and then there's a guy named Emmanuel Saez

00:13:00.640 | and Gabriel Zuckman,

00:13:01.480 | they do a lot of great stuff on inequality

00:13:03.320 | and wealth inequality.

00:13:04.320 | They find that the higher your wealth is,

00:13:05.840 | the higher your savings rate.

00:13:06.800 | And this has been true since 1910.

00:13:08.560 | They have data going all the way back to 1910.

00:13:10.280 | They find higher savings rate

00:13:11.720 | is correlated with higher wealth.

00:13:13.520 | Besides the 1930s, Great Depression,

00:13:15.280 | apparently it's really tough to save money,

00:13:16.880 | so besides then.

00:13:19.340 | But yeah, I just think the data's pretty clear on that.

00:13:21.020 | And I'm not saying you can't cut spending

00:13:22.880 | to save money and to build your wealth.

00:13:24.800 | It's just a short-term solution.

00:13:26.080 | I think we need to be honest about this

00:13:27.960 | and we need to talk about income

00:13:29.260 | and how do we get people's incomes higher

00:13:30.740 | and how can individuals increase their income.

00:13:33.400 | I think that's the main takeaway.

00:13:35.640 | - Can you talk about the 2X rule

00:13:37.680 | and also whether splurging,

00:13:39.820 | the 2X rule is one of the concepts,

00:13:42.120 | constructs that Nick writes about in the book,

00:13:45.400 | and also whether splurging should be thought of differently

00:13:49.000 | amid sharply rising prices

00:13:50.940 | or if the same basic framework applies

00:13:53.040 | irrespective of where inflation is.

00:13:55.480 | - Yeah, so I think there's a lot.

00:13:57.420 | I mean, a lot of people can't save money,

00:13:59.500 | but for those that can,

00:14:00.580 | I think there's a lot of spending guilt.

00:14:02.940 | I think most people in this room

00:14:03.940 | are probably very good at saving

00:14:05.180 | and maybe we're not.

00:14:06.260 | Because we're so good at one side

00:14:07.660 | to then flip in retirement

00:14:09.020 | and go to spend a lot of money, it's very difficult.

00:14:11.100 | So I'm trying to come up with ways

00:14:12.380 | to get people to spend their money

00:14:13.500 | without feeling guilty about it.

00:14:14.820 | And so if you're gonna splurge on something

00:14:16.980 | and for every person, a splurge is defined differently,

00:14:20.040 | I just said, if you're gonna spend $500 on a nice dinner,

00:14:22.960 | save another 500 and invest that

00:14:25.840 | in income producing assets, S&P 500, whatever,

00:14:28.480 | or donate that to a good cause.

00:14:30.880 | There's different ways.

00:14:31.720 | It's just tricks to try and get over the spending guilt.

00:14:34.080 | If you don't have spending guilt, don't worry about it.

00:14:36.320 | In terms of how do I feel differently now

00:14:39.880 | with rising prices?

00:14:40.720 | Well, if inflation's going up,

00:14:42.060 | that means an old splurge of $300,

00:14:45.160 | maybe now a splurge is even cheaper now

00:14:49.020 | than it used to be relatively, right?

00:14:50.400 | So now it's like, oh, I used to just go,

00:14:52.100 | I'd say we'd go to the opera and it was 300 bucks

00:14:54.700 | I'd spend now, it costs $500 or whatever.

00:14:56.700 | And so I think that's price levels change,

00:14:59.060 | your level of splurge is gonna change, so.

00:15:01.160 | - In the book, you also talk about the interplay

00:15:05.320 | between human capital and financial capital

00:15:08.260 | and the role each plays in amassing wealth

00:15:11.580 | and enjoying a secure retirement.

00:15:13.680 | Do you think the personal and professional disruption

00:15:16.380 | of the pandemic raises questions

00:15:18.420 | about how reliably we can estimate

00:15:21.060 | our future capacity to earn

00:15:22.660 | and how we'd estimate human capital?

00:15:26.180 | - Yeah, I think this is a really tough question

00:15:28.860 | because we're all planners.

00:15:30.980 | I mean, this is what you're all planning

00:15:32.620 | for our financial futures.

00:15:33.700 | We're planning based on certain assumptions

00:15:35.460 | about our income and all these things,

00:15:36.620 | but stuff happens where we can't predict.

00:15:39.900 | And unfortunately, the pandemic's one of those examples

00:15:42.560 | where if you were in a particular industry,

00:15:43.940 | you could have gotten hit very badly.

00:15:45.900 | I was actually talking to Jim here about,

00:15:49.020 | he had a conference, the White Coat Investor Conference,

00:15:51.540 | and that same week when they shut down

00:15:53.620 | the MBA and everything, he had a conference

00:15:55.780 | where a bunch of positions were coming

00:15:57.020 | and that he just got completely unlucky with that.

00:15:59.500 | And that's just, if he said he had it the week before,

00:16:01.460 | it would have been perfect.

00:16:02.420 | If it was a week later, he could have canceled everything.

00:16:04.340 | That's a great example of something you cannot control.

00:16:07.180 | And so unfortunately, it's really tough

00:16:09.500 | to predict future human capital, future market conditions.

00:16:12.500 | At the same time, though,

00:16:13.480 | I think there's always a market opportunity.

00:16:15.240 | There's always opportunities for people,

00:16:17.040 | even when things look bad,

00:16:18.240 | you just have to really kind of try

00:16:19.560 | and figure out what they are.

00:16:20.500 | And so it can be tough, but you know,

00:16:22.640 | I don't really have a great answer.

00:16:23.600 | That's my best take on it.

00:16:25.700 | - No, I think that's really helpful, actually.

00:16:27.960 | I do wanna touch on personal finance.

00:16:29.680 | We're gonna, I think, devote more of the morning

00:16:32.040 | to personal finance as a topic.

00:16:33.580 | You write about it in the book quite compellingly.

00:16:36.780 | Your book, it's not pro-debt,

00:16:40.200 | but it certainly isn't a polemic against borrowing

00:16:42.860 | to do things like reduce risk or attempt to amp up returns.

00:16:46.900 | Now that interest rates have jumped,

00:16:48.500 | would you caution more strongly against taking out debt,

00:16:52.420 | even in the circumstances that you walk through in the book

00:16:55.940 | where you think a little bit

00:16:56.960 | could be acceptable and manageable?

00:16:58.980 | - This is always a marginal decision.

00:17:01.740 | It's gonna be different for every person in this room.

00:17:04.020 | So like, whether it makes sense to take out debt or not,

00:17:06.740 | I think it's a very personal decision.

00:17:08.780 | So I don't really have a great answer for that either,

00:17:11.500 | but I think at the end of the day, yeah,

00:17:14.000 | you just have to figure out,

00:17:14.840 | it's always relative to something, right?

00:17:16.080 | 'Cause everyone's like, oh, should I buy or rent?

00:17:17.700 | Well, it's relative to what's the rental rate,

00:17:20.300 | what's the mortgage rate.

00:17:21.300 | All these things are relative to each other,

00:17:22.880 | and that system's always changing, right?

00:17:24.460 | So for us to say you should always buy

00:17:26.260 | or you should always rent,

00:17:27.580 | it's not really being intellectually honest

00:17:31.060 | how conditions are always changing.

00:17:32.580 | And so I just want us to be more open to that idea.

00:17:35.980 | - What's another piece of received personal finance wisdom

00:17:40.180 | that you think is off base?

00:17:41.720 | - Saving up cash to buy the dip.

00:17:44.260 | I think that is the worst thing you can do.

00:17:47.020 | I think there's a lot of people that,

00:17:48.140 | oh, I'm gonna hold a lot of cash

00:17:49.820 | and wait for the next big dip.

00:17:50.940 | And the issue with that is it only works

00:17:54.280 | if you know a big dip's coming,

00:17:56.640 | and it's gotta be a pretty big dip.

00:17:58.660 | A smaller dip's not gonna really be profitable,

00:18:00.460 | so it's really tough to know that in advance,

00:18:02.780 | and I know it's very popular in the culture.

00:18:04.700 | I don't think it's that popular with the vocal heads,

00:18:06.460 | so you guys are like, oh, I'm preaching to the choir here,

00:18:08.060 | but I just think it's very misguided

00:18:10.620 | and people shouldn't be holding a ton of cash

00:18:12.460 | in anticipation of a dip.

00:18:14.640 | Now, the converse to that is if by chance we're in a dip

00:18:17.880 | and you happen to have cash,

00:18:19.060 | let's say you sold your business,

00:18:20.340 | that's just how it turned out,

00:18:21.540 | and you happen to have a bunch of cash

00:18:22.860 | and we happen to be in a dip, then it's great.

00:18:25.140 | But you shouldn't be waiting on the sidelines

00:18:27.060 | for that type of stuff,

00:18:27.900 | 'cause generally the market does not reward that.

00:18:30.340 | - You also devote a section of the book to housing,

00:18:34.460 | and explore the buy versus rent question.

00:18:37.060 | How does the sharp rise in both home prices

00:18:40.460 | and mortgage rates change the equation

00:18:43.140 | for prospective home buyers?

00:18:45.100 | It seems like affordability, for instance,

00:18:47.140 | is a real problem now.

00:18:49.060 | - Yeah, so I think most people use very simple heuristics

00:18:52.140 | with a lot of their financial life,

00:18:53.300 | and so I think the housing heuristic is what's my payment,

00:18:55.860 | you know, what's my mortgage payment gonna be?

00:18:57.660 | So if rates go up and prices have not changed,

00:19:00.340 | obviously payments will go up, all else equal.

00:19:03.180 | So I think I read somewhere that for payments

00:19:06.220 | to equilibrate with what they were a year ago,

00:19:09.220 | prices would have to drop like 40% or something,

00:19:11.580 | which is a large amount,

00:19:12.860 | and so I don't think they will drop that much.

00:19:15.900 | Maybe they will drop.

00:19:17.020 | I don't know how much, obviously, is the question.

00:19:18.780 | So if you're really just anchoring on payments,

00:19:20.940 | which is what most people do,

00:19:22.020 | then yes, it is gonna be difficult right now for people.

00:19:25.460 | - Yeah, a couple of good follows.

00:19:27.300 | I don't know if you follow them too on housing right now.

00:19:30.940 | Bill McBride at Calculated Risk,

00:19:33.100 | and Colin Roach for What It's Worth.

00:19:35.620 | They're both in, I think, probably, I suspect,

00:19:37.980 | in both our Twitter feeds,

00:19:40.100 | but they do great work on housing,

00:19:41.560 | if that's an area that you're keenly interested in

00:19:43.460 | for what it's worth.

00:19:45.380 | Sticking with housing for a minute,

00:19:47.500 | first-time homebuyers, do you think it's wise

00:19:50.540 | for them to hold off now, and if so,

00:19:53.360 | what should they be monitoring, engaging,

00:19:55.900 | when the time's right to buy their first home?

00:19:59.380 | - I think this is more of a personal decision

00:20:01.700 | than a financial decision.

00:20:03.140 | Of course, it is a financial decision for most people.

00:20:05.900 | It's gonna be the biggest financial decision you ever make,

00:20:07.900 | but how long can you hold off?

00:20:10.220 | Could rates go higher?

00:20:11.100 | Yes.

00:20:11.940 | Could they come down?

00:20:12.760 | Yes.

00:20:13.600 | It's really tough to know what's gonna happen,

00:20:15.460 | and you're basically asking me to predict the future,

00:20:17.540 | which I obviously cannot do.

00:20:19.340 | So I think, for the most part, I would say,

00:20:21.100 | if it's the right time for you to buy,

00:20:22.460 | even though the market rates are high,

00:20:24.380 | so your payment's probably gonna be higher,

00:20:25.700 | you may have to downsize a little,

00:20:27.220 | but if you think it's the time for you to have a home,

00:20:30.140 | then go for it.

00:20:31.520 | - I wanted to shift and talk again

00:20:33.580 | about investing, if we can.

00:20:34.820 | One of the arguments you make for investing

00:20:36.940 | is that it promotes saving for your future self.

00:20:40.740 | I think that argument builds on research

00:20:42.660 | that folks like Hal Hirschfield have done in this area.

00:20:46.620 | Talk about what that research found

00:20:48.460 | and why empathizing with one's future self

00:20:51.420 | can induce one to invest.

00:20:54.460 | - Yeah, so they did these experiments

00:20:56.220 | where they basically, I don't know if you guys remember

00:20:57.740 | this FaceApp thing that was going around.

00:20:59.400 | This is kind of where you took a picture of yourself,

00:21:01.240 | and you can see yourself as an old person,

00:21:02.700 | or as a woman, or whatever, if you're a man,

00:21:04.460 | and vice versa, right?

00:21:05.300 | So it was very interesting to see that.

00:21:08.160 | But they did this before FaceApp was a thing,

00:21:10.780 | and they basically took yourself,

00:21:11.940 | and they aged you to be older, and they said,

00:21:15.820 | and after people that saw these photo-realistic,

00:21:18.700 | older versions of themselves,

00:21:19.860 | they were more likely to save more

00:21:21.060 | and increase their retirement contributions afterwards,

00:21:23.460 | which is kind of interesting.

00:21:24.500 | So just from that little thing.

00:21:26.500 | And they've done other studies where they ask people,

00:21:28.260 | what are you saving for?

00:21:29.140 | And they find that the only real saving motive,

00:21:31.100 | whether you're saving for an emergency,

00:21:32.220 | saving for your kid's education,

00:21:35.140 | vacation, marriage, whatever,

00:21:36.540 | the only one that really causes people to save

00:21:38.660 | and can save consistently is saving for yourself.

00:21:40.820 | So when it comes to saving money,

00:21:42.100 | be selfish is what I say.

00:21:43.660 | So, and I think between that research

00:21:46.460 | and the other surveys they've done,

00:21:48.100 | I don't know how great, perfect they are,

00:21:49.620 | but I feel like it's a pretty good way to go with it.

00:21:53.140 | - And if you're interested in that topic,

00:21:54.340 | I'll put in a little selfish plug for our podcast.

00:21:56.500 | We did have Hal Hirschfeld on "The Long View."

00:21:58.380 | We spoke to him, maybe it was earlier.

00:22:01.420 | Yeah, it was not too long ago.

00:22:02.700 | It's real interesting research that he's done

00:22:05.820 | and Nick does an outstanding job of walking through it

00:22:09.420 | in the context of the book.

00:22:11.660 | I maybe wanted to sort of couch this

00:22:13.740 | in the experience that you're having.

00:22:15.700 | You know, you're at an RIA, you're dealing with clients,

00:22:18.140 | they're being confronted, not only by a market downturn,

00:22:21.180 | but synchronous declines across asset classes,

00:22:24.140 | except for things like maybe commodities related.

00:22:26.820 | And so what are those conversations sound like right now

00:22:29.540 | when you have clients that are coming to you

00:22:31.140 | and questioning the virtues of diversification,

00:22:34.380 | questioning the benefits that diversification

00:22:37.020 | might confer to them in light of the experience

00:22:38.900 | that they've been having recently,

00:22:40.620 | beyond sort of the obvious, which is, well,

00:22:43.100 | like you said earlier, it's only a year, you know,

00:22:45.740 | your time horizon is much longer than that.

00:22:48.260 | What else, what else has been mentioned

00:22:49.980 | in talking to them about diversification

00:22:51.780 | and how to approach that?

00:22:53.660 | - So I don't talk to clients

00:22:55.300 | because I would say it's only been 10 months.

00:22:56.980 | Why are you like freaking out?

00:22:58.260 | So there's a reason I'm in the back office,

00:23:00.180 | if I'm being honest.

00:23:01.020 | So, but I think in more seriously though,

00:23:04.300 | like we are talking about these things.

00:23:05.820 | We're talking about, you know, we have certain strategies.

00:23:07.900 | I'm not trying to plug the firm,

00:23:08.940 | but we have certain strategies and things we use

00:23:10.820 | to kind of do risk off and trend following

00:23:12.820 | and stuff like that when necessary.

00:23:14.580 | And so I do think it's about focusing

00:23:16.740 | on like the long-term plan.

00:23:17.900 | I think Dan Egan said something very interesting yesterday,

00:23:20.020 | which is kind of also how we like to think long-term.

00:23:22.180 | If you think about, you know,

00:23:23.820 | every dollar that you have for retirement,

00:23:27.940 | that's eventually gonna be converted

00:23:29.060 | into some sort of income measure when you're retired, right?

00:23:31.460 | So let's just use a rough metric.

00:23:33.260 | For every $100, you basically need 30,000.

00:23:35.780 | You know, that's like rough 4% rule, right?

00:23:37.300 | $100 a month, you need 30,000 in capital.

00:23:40.100 | So if your retirement account right now is down,

00:23:42.340 | let's say 90,000, what that equilibrates to in retirement

00:23:45.820 | is you just lost $300 a month for the rest of your retirement

00:23:48.220 | all else equal, assuming, you know,

00:23:49.900 | the market would just stay like this forever.

00:23:52.260 | So when you're thinking about that, you're like, okay,

00:23:54.220 | I didn't lose 90,000, I lost $300 a month

00:23:56.860 | for the rest of my life.

00:23:57.700 | And I'm not saying that's trivial,

00:23:59.380 | but it's just when you think of it that way,

00:24:00.660 | it's a little bit different.

00:24:01.620 | You can kind of adjust that way.

00:24:03.260 | And most retirees, if you actually look

00:24:04.620 | at how they actually spend their money,

00:24:05.740 | they're not using the 4% rule.

00:24:07.060 | They just match to their income.

00:24:08.500 | They have five grand a month in income,

00:24:09.780 | they spend five grand a month at most, right?

00:24:11.460 | They don't say, oh, I have this much.

00:24:13.180 | And most of them don't do this and say,

00:24:14.340 | oh, I have a million dollars, I'm gonna pull 40,000.

00:24:16.100 | No, they don't do that.

00:24:16.940 | They say, I have a million dollars.

00:24:18.020 | How much income do I have plus all security?

00:24:20.260 | And then they adjust that way.

00:24:21.740 | - Why don't we shift and we'll talk

00:24:24.060 | about retirement and taxes.

00:24:25.380 | Recent retirees, as we all know,

00:24:27.260 | have been greeted by a painful market downturn

00:24:30.420 | and high inflation.

00:24:31.540 | What do you think they should be doing

00:24:33.060 | to ensure they don't outlive their assets?

00:24:35.500 | And conversely, what should they refrain from doing?

00:24:38.620 | - I mean, I think this is kind of a misnomer

00:24:41.400 | in the industry.

00:24:42.240 | I think there's all this fear about people outliving assets,

00:24:44.320 | but I think it doesn't happen that often,

00:24:46.320 | if I'm being honest.

00:24:47.160 | Especially, as I said, once you look at how retirees

00:24:49.760 | actually spend their money

00:24:50.960 | and how people think about retirement.

00:24:53.080 | Once I said, people use simple heuristics.

00:24:54.800 | They use the payment on a mortgage,

00:24:57.020 | and in retirement, they use income.

00:24:58.600 | So most people are not using the 4% rule.

00:25:00.960 | Of the people, so 40% of retirees don't have any savings,

00:25:04.280 | they're just using Social Security.

00:25:05.800 | But of the 60% that have savings,

00:25:07.480 | which is probably everybody in this room,

00:25:09.960 | they only, one in seven actually pulls down principal

00:25:13.360 | in a given year.

00:25:14.240 | Six out of seven do not pull down principal.

00:25:16.080 | They just live off the investment income

00:25:17.440 | or even less than the investment income.

00:25:19.640 | Most people who get RMDs,

00:25:21.560 | the Required Minimum Distributions,

00:25:23.080 | they reinvest most of that money.

00:25:24.660 | I think there was a,

00:25:25.640 | I can't remember which panel it was yesterday,

00:25:26.960 | they said there was a Vanguard Payout Fund,

00:25:28.880 | which is like, hey, you have to spend this money

00:25:30.840 | and it pays out to you.

00:25:32.140 | And most people would just take that money

00:25:33.440 | and reinvest it in the fund,

00:25:34.660 | and the fund manager was getting very frustrated.

00:25:37.320 | So I think the idea that people,

00:25:39.820 | I'm not saying people don't run out of assets,

00:25:41.440 | I think that would be very foolish,

00:25:42.560 | but I don't think it's as big of a problem

00:25:44.760 | as people think it is.

00:25:46.080 | People just adjust and they just cut back.

00:25:47.760 | They're gonna tighten the belt

00:25:48.600 | and they're gonna say, hey, my income's down

00:25:51.240 | because the market's down, I'm just gonna cut back.

00:25:53.440 | Or inflation's up, I'm gonna cut back in these areas.

00:25:55.820 | And so people make do.

00:25:56.880 | I mean, for most, retirees are just living

00:25:59.080 | off Social Security, which on average is $1,500 a month.

00:26:01.800 | So it's not a lot, but you have two people,

00:26:03.840 | maybe you have a spouse there,

00:26:04.680 | now you have three grand a month,

00:26:05.680 | assuming your mortgage is paid off,

00:26:06.720 | you can probably get by with that.

00:26:09.040 | - Yeah, some of the other retirement myth-busting

00:26:11.200 | that you do in the book, you mention,

00:26:13.320 | you think that probably people are overstating the risk

00:26:16.800 | that they'll outlive their retirement assets.

00:26:20.980 | A couple of others that you mentioned are,

00:26:23.880 | they'll be worse off,

00:26:25.440 | and also that Social Security won't be there for them.

00:26:27.600 | You wanna talk about those other two categories

00:26:29.760 | and why you think those are myths

00:26:32.500 | that probably need to be dispelled?

00:26:34.820 | - Yeah, so I think Social Security's gonna be there.

00:26:37.060 | Even if the fund runs out of money,

00:26:39.820 | just from people who are paying into the system,

00:26:42.100 | you know, younger accumulators,

00:26:43.820 | they'll be able to pay at least 70% of benefits

00:26:46.020 | to like, I don't know, 2070 or something.

00:26:47.500 | Of course, every year it changes.

00:26:48.720 | I think there's gonna probably be some sort

00:26:50.140 | of reduction in benefits,

00:26:51.600 | so they'll raise their retirement age or something.

00:26:53.120 | But to think that when I hit retirement,

00:26:55.180 | it's gonna be $0 a month,

00:26:56.520 | I would be absolutely shocked by that.

00:26:58.220 | I don't think there's any evidence that's gonna happen.

00:27:00.320 | I do think they'll have to reduce benefits

00:27:01.860 | or do something with retirement age

00:27:03.340 | to kind of make it work,

00:27:04.900 | but I don't think this whole idea

00:27:06.400 | that it's just gonna run dry

00:27:07.780 | and there's no one's paying in,

00:27:08.860 | I think just doesn't make sense.

00:27:10.280 | Now, in terms of some of the other things you said

00:27:12.140 | about people running out of money,

00:27:13.020 | I think one of my favorite studies that was done on this,

00:27:15.260 | Michael Kitsies, who many of you may know,

00:27:17.380 | wrote a post about,

00:27:18.780 | they were just using a 60/40 portfolio, 4% rule,

00:27:21.860 | and basically over 30 years,

00:27:23.820 | you're more likely to 4X your wealth

00:27:26.140 | than you are to go below your starting principle, right?

00:27:28.300 | So if you have a million dollars

00:27:29.260 | and you're pulling, doing the 4% rule on a 60/40,

00:27:32.300 | historically, you would have had 4 million after 30 years,

00:27:35.180 | more likely to have 4 million than below a million,

00:27:37.220 | which goes to show most retirees,

00:27:39.720 | your wealth just keeps going up in retirement.

00:27:41.420 | Of course, this year, that's not true,

00:27:43.280 | but generally, most of the time,

00:27:44.700 | if you retired in 2017,

00:27:46.120 | you've probably done pretty well for yourself, right?

00:27:48.300 | So I think that's the thing to kind of keep in mind here.

00:27:52.020 | And in terms of whether retired,

00:27:53.460 | future retirees are gonna be better off,

00:27:55.380 | this is a very interesting question.

00:27:56.660 | I do think millennials have had it a little bit tougher

00:27:58.960 | than prior generations.

00:27:59.980 | I know this is not me just saying this,

00:28:02.060 | 'cause it's given I'm a millennial,

00:28:03.300 | but I mean, there have been differences

00:28:05.140 | in the housing market amongst other things.

00:28:06.580 | Things are more expensive.

00:28:07.860 | At the same time though,

00:28:08.940 | I think future retirees will be better off

00:28:10.780 | 'cause all this wealth has to be passed down somehow.

00:28:13.500 | More importantly, I mean,

00:28:14.540 | I don't think wealth is the only metric to look at.

00:28:16.260 | I mean, the story I like to tell,

00:28:17.820 | so Cornelius Vanderbilt, right?

00:28:19.660 | Everyone knows who the Vanderbilts are.

00:28:21.540 | He was, in 1864, he was worth $40 million,

00:28:24.780 | which is a couple billion when you change

00:28:26.500 | for inflation and everything.

00:28:27.900 | His favorite son, who's gonna take over his empire

00:28:31.260 | and everything, died of tuberculosis.

00:28:34.540 | 25% of people in Europe died of tuberculosis

00:28:36.940 | in the 1800s, right?

00:28:38.220 | The richest man in the world couldn't stop a disease

00:28:40.540 | that today, basically, like 500 to 1,000 people

00:28:43.500 | in the US die of.

00:28:44.340 | So we wanna talk about being better off.

00:28:46.700 | I think stuff like that is completely,

00:28:49.460 | I think if you could, would anyone in here

00:28:51.100 | trade places with Cornelius Vanderbilt?

00:28:52.660 | I think almost no one would.

00:28:53.860 | Maybe someone would, but I think most people would not.

00:28:56.100 | And so I think that's something to keep in mind.

00:28:58.260 | I'm not saying that those advances will happen

00:28:59.820 | in the next 30 years in that way,

00:29:01.180 | but over the next, our grandchildren

00:29:03.060 | and great-grandchildren should have much better lives

00:29:04.980 | than we did, I think, on average.

00:29:06.640 | - I'm gonna ask you about 401(k)s,

00:29:08.980 | which you write about in the book.

00:29:10.500 | You do warn about contributing too much to a 401(k),

00:29:14.340 | which is a somewhat controversial take,

00:29:15.780 | and I actually think there was a thread

00:29:17.300 | on Vogelheads about this at one point.

00:29:20.420 | Can you walk through your thought process on that?

00:29:23.500 | - Sorry, I said get ready for this one.

00:29:25.740 | So I just wanted to start a discussion around this.

00:29:30.300 | I think saying you should never max out your 401(k)

00:29:32.660 | is a foolish thing to say, but I also think the opposite,

00:29:36.060 | you should always max out your 401(k)

00:29:37.420 | is also equally foolish.

00:29:38.580 | And the reason I say that is because no one actually looks

00:29:41.940 | at what is the actual after-tax benefit

00:29:44.820 | of everything above the match, right?

00:29:46.540 | I think you should always get to the match,

00:29:47.740 | there's no debate there, it's free money.

00:29:49.460 | Everything above the match, no one's actually analyzed

00:29:51.980 | how much that after-tax benefit is,

00:29:53.540 | and then adjusting for the fees

00:29:55.260 | you have to pay in your 401(k).

00:29:56.340 | So let's just walk through this very simply.

00:29:58.680 | I'm gonna use a Roth 401(k)

00:30:00.060 | because I only care about the avoiding capital gains.

00:30:03.060 | As you guys know, there's traditional 401(k)

00:30:05.520 | and there's Roth, and that difference

00:30:07.260 | is an income tax difference.

00:30:08.620 | I don't wanna look at that, so let's put that aside.

00:30:10.660 | Let's say you've already paid your income tax,

00:30:12.640 | so now you're in a Roth 401(k)

00:30:14.380 | and you're comparing that to a brokerage account,

00:30:17.420 | that you have some discipline,

00:30:18.980 | you're not trading in and out every year,

00:30:20.260 | you just have some discipline

00:30:21.140 | in a taxable brokerage account.

00:30:23.740 | Okay, how big is the benefit of having the Roth

00:30:26.660 | against all those capital gains?

00:30:27.820 | At a 15% capital gains rate over 30, 40 years,

00:30:31.260 | the average after-tax benefit is about 73 bps.

00:30:34.500 | Let's say 70 to 80 bps to make it easy, right?

00:30:37.260 | So if that's how much extra benefit

00:30:38.900 | you're getting in a 401(k),

00:30:40.940 | the question is, well, what about the fees?

00:30:42.300 | The average fee in a 401(k),

00:30:43.860 | and this is not even the fund fees,

00:30:45.020 | this is just the all-in fees, is about 40 bps.

00:30:47.700 | So half of that's already gone just from the 401(k).

00:30:50.460 | So now you're getting only about 20 to 30 bps a year

00:30:53.420 | in extra after-tax benefit by maxing.

00:30:55.980 | And my question is, is it worth it

00:30:58.100 | for that extra 20 to 30 bps?

00:30:59.540 | And I know over a very long period of time that can add up,

00:31:02.060 | but is that worth the flexibility?

00:31:03.560 | So I'm just running the numbers.

00:31:05.200 | I'm saying, hey, when you look at these numbers,

00:31:07.660 | it doesn't look like it's always worth it.

00:31:09.380 | And then that doesn't even include the people

00:31:11.100 | that have like a 401(k) fee that's like 1% or more.

00:31:13.860 | If your 401(k) fee's over a percent,

00:31:15.900 | all the after-tax benefit is gone, right?

00:31:18.380 | So if you have a good 401(k), you're young,

00:31:20.340 | you're saving a lot, it's probably fine.

00:31:22.100 | But I kind of regret maxing for a few years

00:31:25.140 | because that money I could have had outside

00:31:26.900 | in a taxable brokerage account that I could have been using

00:31:29.380 | to maybe buy a house or afford a wedding

00:31:31.220 | or whatever it is, right?

00:31:32.180 | And I think the flexibility and the optionality

00:31:34.460 | is more important than that 20 to 30 bps a year.

00:31:37.420 | And I just want us to kind of talk about that

00:31:39.300 | because every personal finance expert

00:31:41.160 | says max out your 401(k) and I'm one of the,

00:31:43.220 | I think there are others now,

00:31:44.740 | but I have not met many that don't say that.

00:31:48.180 | - Yeah, another piece of conventional wisdom

00:31:49.860 | that you challenge in the book very thoughtfully at that

00:31:52.580 | is on asset location.

00:31:54.580 | You argue for putting growth assets

00:31:56.940 | in tax advantage accounts and low growth assets

00:31:59.860 | like bond funds in taxable accounts.

00:32:02.700 | Can you talk about why you hold that view,

00:32:04.140 | how you came to that conclusion?

00:32:06.460 | - So historically, bond yields and obviously distributions

00:32:10.660 | were much higher than they are now,

00:32:12.820 | I mean, maybe not now now,

00:32:14.100 | but where they were when I was writing the book.

00:32:16.780 | And so as a result, most people would say,

00:32:18.820 | oh, you wanna shield that income from your bonds,

00:32:20.980 | you wanna put it in your qualified accounts

00:32:22.860 | and you wanna put your stocks,

00:32:24.500 | which don't have any payments, right,

00:32:25.740 | besides maybe a dividend once in a while,

00:32:27.520 | into your taxable accounts.

00:32:28.920 | But the truth is you wanna have your highest growth assets

00:32:32.660 | in your non-taxable and your qualified accounts, right?

00:32:36.140 | Now that's if you're just trying

00:32:36.980 | to maximize every dollar you can.

00:32:38.980 | I personally don't do that.

00:32:40.500 | I think the way to go is to have every kind of account

00:32:44.180 | be like a carbon copy of each other.

00:32:45.860 | So if I have a, I'm gonna make this very simple.

00:32:48.380 | I have a 60/40, I have a 60/40 in my taxable account,

00:32:51.740 | I have a 60/40 in my 401(k), I have a 60/40 everywhere else.

00:32:54.900 | It also makes it very easy to rebalance across accounts

00:32:57.900 | because I don't have to take,

00:32:59.060 | I can't get money out of my non-taxable

00:33:01.540 | and put it into my brokerage and vice versa.

00:33:03.100 | So because of that, I just kind of have them

00:33:05.140 | be cookie cutters of each other.

00:33:06.900 | But in theory, if you're trying to maximize every dollar,

00:33:09.260 | you should put as much of your high growth assets

00:33:11.340 | into non-taxable accounts.

00:33:12.940 | And I think the person that did this best

00:33:14.460 | was Peter Thiel when he put his PayPal shares

00:33:16.700 | into a Roth IRA and it's now worth $5 billion, so.

00:33:20.140 | But we all can't be so lucky.

00:33:21.800 | - We're gonna shift and talk about behavioral

00:33:25.460 | and maybe we'll get to trading.

00:33:27.420 | I think you've said that around 90%

00:33:29.860 | of your personal investments are in traditional asset classes

00:33:32.620 | like stocks and bonds and the remainder

00:33:35.380 | are in what you term non-income producing assets.

00:33:38.340 | So it could be stuff like art, crypto and the like.

00:33:41.180 | How'd you arrive at that mix and do you view the 10%

00:33:44.220 | as a way of scratching an itch to play

00:33:47.940 | in more speculative fare without putting

00:33:49.700 | your financial future at risk?

00:33:52.180 | - Yeah, that's exactly what I would say.

00:33:54.460 | Every person's gonna be different in terms

00:33:55.900 | of how much risk they wanna take in what I call

00:33:57.860 | non-income producing assets like gold, wine, art, et cetera.

00:34:01.440 | I just came up with, I say 85 to 90% of your assets

00:34:05.060 | should be in income producing, they have cash flows,

00:34:07.180 | there's something, I think there's some fundamental weight

00:34:09.780 | to cash flows and even though yes,

00:34:11.860 | people can bid up and down prices,

00:34:13.380 | there's still something there.

00:34:14.380 | It's like a suitcase with $100,000 in it.

00:34:16.820 | People may not know exactly how much money's

00:34:19.420 | in the suitcase but they have an idea

00:34:20.700 | and so they will bid up and down the suitcase

00:34:22.280 | but there's still some sort of fundamental value

00:34:24.580 | in the suitcase and I think that's what cash flows

00:34:26.380 | represent in theory.

00:34:27.860 | So that's why I'm a fan of income producing assets

00:34:30.600 | and why I recommend most people to,

00:34:32.140 | and I don't, I think most people in this audience

00:34:34.060 | would probably agree with that so I'm not worried about it.

00:34:36.860 | - In the book, you write that just keep buying

00:34:39.460 | is easier to follow today than at any point in history

00:34:42.660 | 'cause it's much easier to transact

00:34:45.180 | and you can diversify in a snap, to paraphrase.

00:34:48.120 | The flip side is it's never been easier to sell

00:34:51.500 | and transact in general.

00:34:52.900 | How confident are you that the benefits conferred

00:34:55.060 | by easier purchase of assets exceeds the cost some incur

00:34:59.380 | in opportunity buying and selling as we saw them do,

00:35:02.340 | unfortunately, during some stages of the last few years?

00:35:06.040 | - Yeah, so I think the benefits way outweigh the costs.

00:35:09.780 | I mean, I think Jason Zweig said something yesterday

00:35:12.700 | that because of technology, it's the best it's ever been

00:35:15.340 | for investors and I completely agree with that.

00:35:17.500 | Now, of course, does it make it easier to sell?

00:35:20.020 | Yes, but if you're disciplined,

00:35:21.700 | that shouldn't matter all that much.

00:35:23.420 | I don't think a $15 trade cost is stopping,

00:35:26.420 | when the market's down and you're panicking,

00:35:28.120 | I don't think it's like, well, I would sell

00:35:29.860 | but that $15, if you just lost 10 grand,

00:35:32.220 | oh, I don't wanna spend that 15 bucks.

00:35:34.100 | I don't think that's enough of a barrier

00:35:36.080 | to stop people from selling personally

00:35:39.420 | but that's kind of how I look at it, so.

00:35:42.000 | - I had a few more questions and then I think

00:35:45.420 | we'll throw it open to the audience for questions.

00:35:47.780 | Am I just gonna hand the mic to you and walk it around?

00:35:49.780 | Okay, sounds good, so if you do have sort of questions

00:35:53.440 | that you'd like to ask Nick, you'll have an opportunity

00:35:56.220 | in the next few minutes to do so.

00:35:59.220 | But Nick, I did wanna ask you about something

00:36:01.860 | you touch on in the book, which is the inadequacy

00:36:05.460 | of your education on financial matters

00:36:08.180 | during your upbringing.

00:36:10.020 | Reflecting on that, what do you think is the best way

00:36:12.160 | to educate young people about finances?

00:36:15.780 | - I think it's a really difficult question

00:36:17.460 | but I think just exposing people to these things

00:36:20.520 | and kind of getting them out there,

00:36:21.980 | I think the Bogleheads does a great job at that

00:36:23.880 | and talking to people.

00:36:24.720 | I know every one of you has networks,

00:36:26.860 | you can talk to younger people,

00:36:28.220 | people who don't know about this stuff

00:36:29.500 | and just knowing that, they'll say,

00:36:30.820 | "Hey, I know that person, maybe I should look into it

00:36:32.740 | "or maybe you recommend a book or whatever it is."

00:36:34.900 | It's stuff like that that kind of gets people interested

00:36:36.780 | and the only reason I even learned this stuff,

00:36:39.220 | I haven't been in the financial industry that long,

00:36:40.820 | I've been here for four years,

00:36:41.980 | but I've been writing for about six now

00:36:43.340 | and the only reason I know is 'cause I read

00:36:45.140 | William Bernstein and Jason Zweig

00:36:46.700 | and I wouldn't be here without them.

00:36:48.060 | That's period, end of statement.

00:36:50.020 | If I wasn't reading Jason in the journal

00:36:51.540 | or wasn't reading Intelligent Asset Allocator,

00:36:53.860 | I wouldn't care about the data and all this stuff.

00:36:55.500 | So I think it's stuff like that

00:36:57.280 | that really can make an impact on people.

00:36:58.780 | You can change people's lives, I think, in a very big way.

00:37:01.060 | I think last night we saw that with Taylor Latimore,

00:37:04.420 | he's like, "The house that Jack built,

00:37:05.780 | "there is something to that."

00:37:07.020 | And people, you don't realize the impact you have on people

00:37:09.260 | until it's already too late.

00:37:11.780 | - So one more before we turn it over

00:37:15.900 | to the audience for questions.

00:37:17.660 | Maybe we'll leave the audience with a parting gift.

00:37:21.340 | Who's an under-the-radar writer or podcaster

00:37:24.260 | on personal finance or investing matters

00:37:26.300 | that you'd recommend reading or listening to?

00:37:28.620 | - So there's a woman named Katie, K-A-T-I-E.

00:37:32.500 | Her brand is Money With Katie

00:37:34.020 | and I'm not just gonna tell you go read her,

00:37:36.780 | but I'm gonna tell you why.

00:37:37.620 | So this whole idea of thinking about

00:37:40.220 | every $100 a month in retirement,

00:37:42.060 | that's $30,000 you need in capital, that was her idea.

00:37:45.100 | And I took it from her and did not say that,

00:37:46.940 | but I would have told you guys.

00:37:48.340 | So it was her idea and it's really great.

00:37:50.100 | And it's a great way to think about,

00:37:51.280 | okay, so let's say you need four grand a month in retirement,

00:37:54.540 | you get 1,500 from Social Security,

00:37:55.940 | that's the average benefit.

00:37:57.060 | That means you need 2,500 a month extra.

00:37:59.500 | Well, how much does that mean?

00:38:00.740 | If you're using 4% rule very simply,

00:38:03.020 | you do 30,000 times those $100 units, and that's $750,000.

00:38:08.020 | So you can now back out very easily

00:38:10.220 | how much you would need for your income.

00:38:11.860 | So I think it's a cool rule, it's very easy to think about.

00:38:14.300 | And it's also, when you're thinking about your retirement,

00:38:15.660 | you're like, oh, I'm down, as I said,

00:38:17.020 | let's say you're down 30 grand,

00:38:17.980 | that means you're down $100 a month in retirement,

00:38:19.820 | although it's equal, right?

00:38:20.660 | If you're down 300 grand, that's $1,000 a month, right?

00:38:22.740 | So there's very easy ways to kind of think about that

00:38:25.220 | and how it easily translates into income.

00:38:26.940 | And I think heuristics like that can be helpful.

00:38:30.700 | - That's great.

00:38:31.860 | So with that, why don't we go ahead

00:38:33.020 | and we'll open it up to questions from the audience.

00:38:36.420 | - Hi there.

00:38:37.700 | Just a little bit of helpful basics of investing.

00:38:42.700 | I wanted to discuss your maxing out your 401(k).

00:38:48.020 | I think we have a difference of opinion here.

00:38:50.200 | But first thing is, you mentioned the word BIPs,

00:38:52.540 | BPS, to new investors.

00:38:54.300 | You're talking about the basis point, initialized BPS.

00:38:58.480 | That is 1/100 of 1%.

00:39:00.740 | So that's to investors,

00:39:01.820 | just to explain a little bit about that.

00:39:03.740 | But I didn't quite catch this,

00:39:06.620 | but you were, based on your assumptions, your comparison,

00:39:10.100 | you are comparing, you don't want to max out your 401(k)

00:39:14.260 | because you'd rather put it in taxable.

00:39:16.900 | To me, and you said you had like a 20 or 30 BIPs difference,

00:39:21.220 | and you were ignoring, you used the word 401(k)

00:39:23.780 | because you wanted to ignore income tax.

00:39:26.340 | To me, this is a behavioral change

00:39:29.580 | because the reason you put money into a 401(k)

00:39:33.740 | is because you can't take it out until you hit 59 1/2.

00:39:37.700 | If you do that trade now, while you're accumulating,

00:39:40.980 | there's that behavioral thing that says,

00:39:42.580 | oh, money's in taxable, I can use it to pay the bills.

00:39:45.300 | No, it's for saving for retirement.

00:39:47.820 | So I would disagree, or I'll make sure I,

00:39:52.220 | tell me if I'm misunderstanding anything.

00:39:54.060 | But I would absolutely max out the 401(k)

00:39:57.260 | because of the behavioral aspects.

00:40:00.020 | And besides, you don't know your tax rate.

00:40:02.260 | I don't think you can ignore taxes.

00:40:04.060 | You can't predict that.

00:40:05.260 | So take the safe approach, conservative approach,

00:40:08.180 | and max it out.

00:40:09.460 | And another promo for the wiki,

00:40:11.700 | prioritizing investments is a very key page

00:40:15.180 | on how you should save for retirement.

00:40:16.820 | So that's a little bit different

00:40:17.900 | from what you're discussing, but say,

00:40:19.180 | use the wiki as prioritizing investments,

00:40:21.660 | and that will tell you how to save.

00:40:23.500 | So that's what I wanted to say, just a difference, thanks.

00:40:27.140 | - Yeah, so I think the behavioral benefits

00:40:28.820 | are definitely there.

00:40:29.960 | I'm guessing, and I don't wanna,

00:40:32.860 | I don't actually have data on this,

00:40:34.420 | but I'm just guessing based on a lot of people

00:40:36.300 | I've talked to, so I will say this is anecdotal,

00:40:38.260 | but the people who are maxing their 401(k),

00:40:40.700 | I'm assuming most of those people are disciplined enough

00:40:43.620 | to, when they're saving in their brokerage account,

00:40:46.060 | they're not, it's like, I have a brokerage account,

00:40:48.660 | why haven't I drained all that?

00:40:49.860 | It's because I put the money in there,

00:40:51.460 | and I don't use it for bills or groceries and things like that.

00:40:53.740 | I'm not saying that people don't do that.

00:40:55.220 | That does happen.

00:40:56.060 | So for some people, that is a feature, that's a benefit.

00:40:59.020 | So I'm not saying for everybody that's not true.

00:41:01.160 | So if you're someone who thinks you might touch the money,

00:41:03.420 | then yes, max, I agree with that completely.

00:41:05.740 | But if you're someone who knows

00:41:06.700 | you're not gonna be touching that,

00:41:07.860 | then I would say, hey, you probably don't need to max.

00:41:10.700 | I think the optionality is worth more than that.

00:41:12.980 | But yeah, you have to be disciplined, I agree.

00:41:14.500 | That is a condition I should have specified.

00:41:16.700 | - Yeah, so when are, could you list some situations

00:41:23.340 | where you would recommend that an investor

00:41:25.620 | adopt trend following instead of a buy and hold portfolio?

00:41:29.460 | And then what are some advantages and risks,

00:41:32.180 | and you can compare that to a buy and hold portfolio?

00:41:35.740 | - I think trend's really tough.

00:41:37.100 | I think, I won't name names here,

00:41:39.380 | but one of the best trend followers in our industry's fund

00:41:43.300 | missed, sold in March 2020,

00:41:45.900 | and then bought back four months later

00:41:47.540 | after most of the rally happened.

00:41:49.140 | I think it's really tough to know this type of stuff.

00:41:51.740 | So I'm gonna be honest with you,

00:41:52.740 | it's difficult.

00:41:54.500 | If you're going to do it, I think behaviorally,

00:41:56.540 | you have to make it a smaller portion of your portfolio,

00:41:58.900 | so not all of your assets,

00:41:59.900 | 'cause I think the whip sawing can really get you,

00:42:01.860 | and behaviorally, it's not great.

00:42:03.860 | But I think having some of your money risk off

00:42:07.020 | while markets are crashing

00:42:09.060 | gives you enough of a behavioral hedge to say,

00:42:11.020 | hey, at least I got 10, 20% of it out

00:42:13.740 | before all this happened.

00:42:14.700 | So I don't recommend it for most of your portfolio.

00:42:17.100 | I think the swings are too violent,

00:42:18.460 | but I think having a smaller allocation to it

00:42:20.620 | can be helpful.

00:42:21.700 | How do you do it?

00:42:22.540 | There's a lot of ways,

00:42:23.380 | there's a lot of different arguments

00:42:24.660 | about which moving average you use and things like that,

00:42:26.700 | but most of the time it's just following price,

00:42:28.540 | and that tells you a lot.

00:42:30.580 | - Thank you.

00:42:31.420 | - I actually had a different follow-up

00:42:35.220 | from when Lady Geek had about the maxing out 401(k).

00:42:38.580 | I think one of the most important considerations

00:42:41.220 | is that for most people,

00:42:43.660 | you're not stuck with the 401(k) forever.

00:42:47.180 | When you leave your employer,

00:42:48.660 | you can roll your 401(k) into an IRA,

00:42:50.660 | and at that point there's no extra cost,

00:42:52.780 | or if you retire on a lower tax bracket

00:42:54.780 | and it was a traditional 401(k) there's an extra benefit.

00:42:57.900 | So I think that it is important to consider the cost,

00:42:59.860 | and it's something that sometimes does come up

00:43:01.780 | on the Bogleheads forum,

00:43:03.460 | but unless you really expect you're gonna be stuck

00:43:06.500 | with this employer for 20 years,

00:43:08.340 | which happens unfortunately to a lot of teachers

00:43:11.700 | in particular who have high-cost 403(b)s,

00:43:17.780 | you need to look at the cost of the 403(b)

00:43:22.780 | or 401(k) is only compounded according

00:43:25.300 | to how long you expect to stay in the job.

00:43:27.900 | And so I think that's a better number to look at.

00:43:30.940 | - I agree completely.

00:43:32.540 | I just wanted to open the discussion

00:43:34.420 | because a lot of people don't even look at their 401(k) fees

00:43:36.380 | and if you're paying over 1%, you're losing that benefit.

00:43:39.340 | So it's really just about opening the discussion

00:43:41.220 | because if 10 out of 10 personal finance experts

00:43:43.140 | say max out your 401(k),

00:43:44.540 | there's a lot of people who are getting screwed over,

00:43:46.460 | unfortunately.

00:43:47.300 | And that actually comes up on the forum.

00:43:48.820 | I have people who say I'm paying over 1% in this 401(k)

00:43:52.380 | and then I say, well, do you expect

00:43:54.100 | to leave this employer in five years?

00:43:56.140 | If so, you're losing 5%

00:43:57.740 | and it's probably worth losing 5%

00:44:00.380 | while if you're gonna be there for your whole career.

00:44:02.460 | - You'd have to run the numbers on that.

00:44:03.300 | - Yeah, if you're gonna be there for your whole career

00:44:05.060 | and you're losing 30%, - No, I agree.

00:44:06.500 | - Then no, you don't wanna lose 30% of your,

00:44:08.860 | to that.

00:44:11.020 | - Thank you.

00:44:14.180 | - And a great job with the presentation

00:44:15.580 | and I enjoy your blog. - Thank you.

00:44:17.140 | - One little thing that I wanna kinda just mention,

00:44:20.060 | you talked about like focusing on

00:44:22.100 | like the things that matter at the right time

00:44:23.820 | and I mostly agree with that,

00:44:25.260 | but there's like one little nuance

00:44:26.340 | that I think it's really worth pointing out

00:44:27.420 | 'cause I'm kind of an extreme example of that.

00:44:29.620 | So my wife and I, we figured out how to save

00:44:31.340 | half of our income from basically day one

00:44:33.220 | and we doubled our income within a couple of years.

00:44:35.580 | So if you do that, you're gonna end up

00:44:37.300 | with a big balance really quickly,

00:44:38.980 | which is the good part of the advice.

00:44:41.140 | We also were the extreme on the other side

00:44:42.900 | where we didn't know anything about investing.

00:44:45.140 | And so we ended up with this like six figure portfolio

00:44:47.580 | and actively managed funds with huge taxable gains.

00:44:50.340 | We had to figure out how to get rid of,

00:44:51.860 | and we had a, in a rollover account,

00:44:53.900 | we had a variable annuity,

00:44:54.900 | we had to figure out how to get rid of.

00:44:56.340 | And so that can be really expensive and painful.

00:44:58.380 | So I think the beauty of the Bogleheads philosophy

00:45:01.220 | is like just not that you can focus

00:45:04.340 | on these big things early,

00:45:06.260 | and if you get those right,

00:45:07.700 | it can save you a lot of pain later.

00:45:08.900 | So I agree with you, I think 98% of the way there,

00:45:11.380 | but I think that little bit of nuance

00:45:13.180 | of getting those things right early too,

00:45:14.900 | because if you don't,

00:45:16.300 | you can find yourself in a lot of pain

00:45:17.540 | and it costs us a lot in opportunity costs to get there

00:45:20.180 | and then going forward, tens of thousands of dollars.

00:45:22.340 | So it's really important to not totally ignore that either.

00:45:25.500 | And I think that's preaching to the choir here,

00:45:26.620 | but just as we try to educate people going forward,

00:45:28.700 | I think that's an important point

00:45:29.820 | and love to hear your thoughts.

00:45:31.620 | - No, I agree.

00:45:32.460 | I mean, of course I would say,

00:45:33.740 | buy low cost index funds or ETFs, right?

00:45:36.740 | I'm never gonna stray from that.

00:45:38.300 | I've been a Boglehead.

00:45:39.140 | I used to be a Boglehead in the Boston chapter.

00:45:41.740 | And so I don't disagree with that at all.

00:45:43.700 | I would buy, of course,

00:45:44.540 | but there's so many people out there

00:45:46.140 | who spend so many hours analyzing their trading,

00:45:48.780 | this and that.

00:45:49.620 | And it's like, okay, you made an extra $1,000,

00:45:52.540 | let's say you have a $10,000 portfolio

00:45:54.580 | and you had a 10% alpha.

00:45:56.180 | So you 10% more than what the market earned.

00:45:57.820 | You earned an extra $1,000,

00:45:59.180 | but you spend 10 hours a week doing that.

00:46:01.300 | So let's run the math on that.

00:46:02.380 | $1,000, 10 hours a week.

00:46:03.740 | Let's say you took two weeks off for vacation.

00:46:05.660 | That's 50 weeks, 500 hours, $1,000, 500 hours.

00:46:08.940 | You made $2 an hour.

00:46:10.020 | You better go into McDonald's and saving that extra money.

00:46:12.980 | So you start running these things very quickly

00:46:15.420 | and you're like, oh, wow, that doesn't make any sense.

00:46:17.140 | So I agree with you.

00:46:18.100 | Yes, you should have a low cost portfolio.

00:46:20.260 | I agree with all that stuff.

00:46:21.780 | Don't touch it.

00:46:22.620 | Just keep buying.

00:46:23.460 | That's the premise of the book.

00:46:24.700 | The same time though, it's like how much does that matter

00:46:26.860 | versus just that person raising their income,

00:46:29.340 | even working at McDonald's would have been better

00:46:31.060 | for that person than what they did.

00:46:32.980 | Now, of course, if that person was managing a billion

00:46:35.340 | dollars, this is a very different story, but they're not.

00:46:38.940 | - Hey, Nick.

00:46:39.940 | Wondering, any advice on being a smart consumer

00:46:43.180 | of long-term capital market expectations?

00:46:45.740 | I see different models around.

00:46:46.900 | Some of them have mean reverting valuations.

00:46:49.460 | Some of them are simpler.

00:46:51.100 | What works?

00:46:51.940 | - I think this is a tough question.

00:46:54.060 | Once again, it's like trying to predict the future

00:46:55.740 | and it's like, I just assume, and I think everyone

00:46:58.380 | should be conservative in their modeling.

00:46:59.860 | And so I try to assume a 4% real return going forward

00:47:02.900 | across a globally diversified income producing asset

00:47:06.940 | portfolio, that's what I assume.

00:47:08.300 | And if you look at like the equity risk premiums,

00:47:10.580 | DFA has released some data on this across like

00:47:12.380 | most developed countries, it's like four to 5%.

00:47:14.820 | Obviously the US, South Africa, Australia,

00:47:16.900 | there are exceptions to this rule that are on the high end.

00:47:19.580 | And then there's exceptions on the low end,

00:47:21.540 | which is like Russia this year, Greece, right?

00:47:23.300 | We can think about those, Japan a little bit, right?

00:47:25.660 | So I think for the most part, just try and find

00:47:28.140 | a good conservative estimate going forward.

00:47:30.500 | And I think 4% real is the way to use.

00:47:32.300 | Obviously everyone, we can differ on that and that's fine,

00:47:34.500 | but I just use that and I find it works well.

00:47:38.100 | - Sorry, this is about the 401k, but I have two questions.

00:47:43.100 | I think what you said is partially true,

00:47:46.580 | but specifically for the Roth, there are ways and tricks

00:47:50.060 | to get out the money before you reach 59 1/2,

00:47:52.700 | like rolling over the Roth IRA, that's the five year rule,

00:47:57.180 | two five year rules, and you meet that,

00:47:58.740 | you wouldn't have this problem.

00:47:59.980 | So it's partially correct.

00:48:03.340 | The traditional one I think is a bit tougher to pull out.

00:48:06.820 | There is one thing that you're missing though.

00:48:08.500 | The 401k has creditor protection

00:48:10.420 | and you don't have any creditor protection in taxable.

00:48:12.620 | And I think that is worth like the 20, 30 basis points.

00:48:15.380 | And I think we also have to assume

00:48:17.940 | that the person doing this is somewhat intelligent enough

00:48:20.540 | to have extra cash in taxable assets

00:48:24.140 | in cases of emergency.

00:48:25.220 | So like the wedding that you need the money for

00:48:28.460 | shouldn't be a thing.

00:48:29.340 | Like this is something that you should be planning for.

00:48:31.580 | So just my comments.

00:48:34.100 | My other more important question is that

00:48:36.540 | I've noticed you have a 10% non-traditional assets

00:48:40.260 | where you put your fund money in, scratch your itch.

00:48:42.660 | And I have something similar.

00:48:43.740 | And I've tried for over 15 years

00:48:46.100 | and I could never get any asset

00:48:48.020 | that would do well in practice.

00:48:50.620 | And I'm wondering if you have found anything

00:48:53.540 | that works well in practice.

00:48:55.100 | Or if not, maybe we can go through the list of stuff

00:48:57.300 | that has utterly failed in your experience.

00:49:01.780 | - I mean, I've gotten lucky, I will say that.

00:49:05.860 | My most famous tweet, I think,

00:49:07.340 | besides I did this tweet about Leonardo DiCaprio

00:49:09.420 | and the women he dates and how old they are,

00:49:11.300 | but let's not get into that right now.

00:49:12.940 | But my most famous, no, it was actually went

00:49:15.140 | like 30 million impressions.

00:49:17.180 | It was crazy.

00:49:18.020 | Anyways, I did not expect that.

00:49:19.060 | My most famous tweet before that was I said,

00:49:21.500 | I sold my Bitcoin, half my Bitcoin at $52,000.

00:49:24.660 | Ask me anything.

00:49:25.580 | And I was draped over the coals.

00:49:27.940 | Like how are you gonna tell your future grandchildren

00:49:30.700 | about this and like how disappointing they're gonna be

00:49:32.700 | and all this stuff.

00:49:33.540 | So there are ways you can do it.

00:49:35.260 | You have to obviously get lucky.

00:49:36.660 | Like obviously I bought Bitcoin much cheaper

00:49:38.540 | and I sold half of it at 52K.

00:49:40.780 | And so it's one of those examples where it can happen.

00:49:43.820 | I think on net, I'm up, but wait, I also lost a bunch of,

00:49:47.260 | I lost 70% in a little bit of money,

00:49:49.440 | but in altcoins this year, and that was stupid.

00:49:51.300 | But on net, I'm probably up a little, but I agree.

00:49:54.460 | It's probably not.

00:49:55.300 | I should have just bought the S&P 500.

00:49:56.500 | Every time I've regretted that, I should have just,

00:49:59.060 | like I should have just listened to myself.

00:50:00.460 | Why didn't I just, have I read my own book?

00:50:01.860 | I'm an idiot, right?

00:50:02.860 | (audience laughing)

00:50:05.860 | - Thank you for being here, Nick.

00:50:08.340 | I've learned a lot from your writing

00:50:09.860 | over the last few years.

00:50:11.900 | And I just, you've been very kind to us saying,

00:50:16.700 | this audience probably already knows this.

00:50:18.260 | This audience probably already knows that.

00:50:20.180 | What is a mistake that you would be afraid

00:50:22.300 | that we would make?

00:50:23.380 | The people in this room who are pretty knowledgeable,

00:50:25.940 | what's something you would be afraid of us overlooking?

00:50:28.940 | - Yeah, I think the, it's not an investment mistake.

00:50:31.860 | It's not a mistake with how much you're saving.

00:50:34.980 | It's probably your spending.

00:50:36.420 | I think a great book out there is "Die With Zero."

00:50:39.060 | I know that book has a lot of connotations

00:50:41.660 | and stuff out there with it.

00:50:42.620 | I'm not saying people should die with zero,

00:50:44.700 | but I think that's a closer approximation

00:50:47.420 | to about how people spend money.

00:50:48.660 | I think over-accumulation is more of the problem,

00:50:51.160 | I'm guessing, in this room than anything else.

00:50:53.460 | And so I think most people have nothing to worry about

00:50:55.540 | in terms of financial things.

00:50:57.220 | This is like the rock stars of the financial world,

00:50:59.660 | the people like, trust me, I'm a nerd.

00:51:00.900 | I've had spreadsheets, I do all this.

00:51:02.580 | I know people in here love spreadsheets, I just know it.

00:51:04.700 | I can feel the Excel energy in here.

00:51:07.820 | So I'm just saying, if I'm saying what's the thing in here,

00:51:11.100 | it's spending the money and figuring out

00:51:12.820 | how to feel comfortable spending the money

00:51:14.580 | and how you can live a life that you enjoy with doing that.

00:51:17.700 | And so a lot of different discussions we can have on that,

00:51:20.080 | but I think that's the big thing I would say.

00:51:22.340 | - Thank you.

00:51:23.180 | (audience applauding)

00:51:26.740 | - Thank you, everyone.

00:51:28.740 | (audience applauding)

00:51:31.900 | [BLANK_AUDIO]