(projector whirring) - Welcome back to Ask the Compound, where we take a week off, but the questions never do. We got a bunch more good ones today. Today's show sponsored by our friends at Bird Dogs. Duncan, today we're talking about diversification, one of my favorite topics. I like the diversification that Bird Dogs can apply.

- I was waiting to see what you were gonna do with that. - Yeah, I've been out on the lake a lot lately, like riding bikes with the kids, and these are the kind of shorts that you can take anywhere. I wear 'em at the beach, I wear 'em to the pool, I wear 'em on the boat.

They also have different kinds, so I like to have diversification among my Bird Dogs. So some of them are plain, some of them have nice patterns when I wanna feel like going crazy a little bit and rockin' out a little bit. So, really like the Bird Dogs. They're very comfy, they're very stylish.

BirdDogs.com and BirdDogs/ATC. BirdDogs.com/ATC, you get a free tumbler, right? Yeti-style tumbler, pretty cool. - Right, yeah. I gotta get me some of those really cool design ones. I've just got some navy blue ones, and I've got some camo ones. - Listen, I don't mind wearing a floral print here, but I have some floral print Bird Dogs that are very nice.

People like them, I get a lot of compliments on those. All right, let's do a question. - Nice. Okay, so up first today we have a question from Connor. I'm a 34-year-old with a high risk tolerance. All of my investment accounts are 100% stocks. The one thing I have a hard time finding a tried and true answer on is how to best allocate my investments among large-cap, mid-cap, international, emerging markets, et cetera.

I'm not looking to get the highest return possible, per se, although that would be nice. Rather, I'm looking to have a well-diversified portfolio that gives me long-term returns of 7% to 10%. I've always utilized the following allocation, and I'm guessing they mean annualized, obviously. 33% U.S. large-cap, 17% U.S.

mid-cap, 16% U.S. small-cap, 20% developed international, and 14% emerging markets. Does this seem about right to you? I'd love to know what you think about, how you think about your stock allocation and what you utilize as a good benchmark. - Well, if they want a total return of 10%, then we'll just put them in hedge funds.

(laughs) I can't promise anything when it comes to future returns, but a global benchmark for the stock market is actually pretty straightforward. The world stock market is a good starting point. So I broke down the Vanguard World Total Stock Market Index Fund, VT. So John, pull up the first one.

This is just the breakdown between geographies. So United States is roughly 60%. International developed markets is like a third. Emerging markets is a little less than 10%. So Conor here is actually pretty close to this. Do the next one, John. This is small, mid, large-cap of the same World Stock Market Index Fund, large caps, a little over 70%.

Mid caps, like 20. Small caps, again, a little less than 10. One more, do the next one for VTI. This is the US version of this. It's basically the same thing as the world. A little over 70% large, 20% small, or 20% mid, 8% small. So it's pretty close.

And so if you look at Conor's portfolio here, it's, I mean, he's plus or minus 5% for all of these. So actually pretty darn close. Now, I'm not saying that, like you have to have the global weightings when it comes to diversified portfolio. I think the global market cap is a good starting point just to see where you're different from the actual market.

'Cause the market is what everyone collectively holds. So if nothing else, you can use that as the jumping off point and then use it for performance attribution or just to see where your bets are being made. Like I'm going way above and beyond here, way below here. Am I comfortable with that?

Now, many investors, especially US-centric investors would assume the S&P 500 or maybe a total US stock market index fund would be the benchmark of choice. The US makes up 60% of the pie, but probably gets 99% of the financial media coverage. And I guess that's probably makes sense. So I looked the top 25 holdings in the Vanguard World Stock Market Index Fund.

How many do you think are foreign companies, Duncan? If you had to guess. Outside the US, listed somewhere else. - Out of how many? - 25. - Four. - That's a pretty good, yeah, it is four. Four total out of 25. The first one is Taiwan Semiconductor at like 13.

So the top 10 holdings in the World Global Stock Market Fund are the same as the S&P 500, basically. So America just dominates the stock market. I do, however, think there's still room for diversification if you're gonna invest your entire portfolio in stocks. I know it seems like the S&P 500 always outperforms everything, but you really don't have to go back that far to find a time when the S&P 500 got just shellacked and underperformed.

So John, let's do a chart on. This is the total returns for the first decade of this century. This is large cap, mid cap, small cap US, and then international developed and emerging markets. And this is 2000 to 2009. Total return for the S&P 500 was down 9%. You lost a little bit more than 1% per year and you had 250% corrections to show for it.

Mid caps and small caps were both up almost 90%. International developed outperformed the US by a healthy margin. And then emerging markets just knocked it out of the park. And this was a horrible time to be a US investor. It was a great time to diversify. Now, if we look at the next decade, 2010 to 2019, obviously the S&P 500 came back.

Emerging markets went from first to worst. Mid cap and small cap actually did pretty well again. International developed lagged again. But it's kind of interesting. So if you put it all together and do these first two decades in this last chart, John, the S&P 500 from 2000 to 2019 was actually fourth place out of these five asset classes.

Small and mid caps did the best. Emerging markets actually outperformed from 2000 to 2019, which might surprise some people. Now, some of this has to do with the start and end dates. My favorite saying here is that if you want to win any argument about performance in the markets, just change your start and end dates.

You can take this one off, John. So I could change the start and end date and show that the S&P did better in these different periods. But maybe that's my point, is that you just never know when certain asset classes or markets or geographies or market caps are going to outperform or when they're gonna knock the cover off the ball or a shirk out or whatever.

So that's why I think diversification is important, even if you're gonna be all in the stocks. I think, you know, could you, I mean, if you get to the point where you're thinking, should I do 2% more here or 3% less here? I think you've probably already won the game in terms of asset allocation.

As long as you can stick with it, you're fine. But it seems like this, Conor, is on the right track here. - Yeah, yeah, it sounds like it. With EM, that last chart, you would think that if you're taking that much risk, you would expect a little more outperformance over the S&P.

- Well, it's just gotten crushed these past 12, pretty much since 2008, it has been the S&P. But I used the S&P 600 and 400 here for the small and mid caps. And they've done better than most people would have assumed. So yeah, the diversification, it seems like it hasn't worked, but if you zoom out a little bit, which I like to do, it's done pretty darn good.

All right, next question. - Okay, up next, we have a question from Amy. Like Ben, I'm one of the oldest millennials, just turned 40 this year. - Backhanded compliment of the day. - Yeah, my husband and I make good money, six figures. I'm a lawyer and he's in finance.

But I also have $100,000 in student loans from law school. We have a high income, but not enough financial assets just yet. So I don't think we qualify for a financial advisor. But I have a lot of financial questions as we transition into middle age. Sorry, Michael. How do we, they're really in the, yeah.

I mean, they know our shows. So good job, Amy. Thanks for watching. How do we know if we're on the right track with retirement savings is question one. Second question, how much do we set aside for our two kids 529 plans? Third question, should I pay off my student loans or keep investing in my 401k plan?

That's a popular question as of late. And they say, I feel like we're doing well for people our age, but I have no idea how to gauge our progress. Any thoughts? - All right, so this is the middle age question where you go from, okay, we've started saving, we're getting our life together.

Now we have financial planning questions. So let's bring in a financial advisor who focuses on millennials. Doug Bonaparte from Bonafide Wealth. - Hey, Doug. - Hey, guys. - One of the best advisors in the country. - That's what they say. - That's the rankings, you can't argue with those.

Doug, you focus explicitly on millennials and you've been going through this transition with them as well, where when you're just starting off, it's setting up the right accounts and getting saving. And some people are overwhelmed with that, but that seems like the easy part. The hard part is when you get to these financial planning questions.

And I do think it's kind of a misnomer that people think, well, I don't have a million dollars or $2 million or $5 million. So a financial advisor is not for me. And maybe in the old days, that was the case where you had to have a certain minimum, but there are many different business models these days and many people that can work with someone who has a high income and is going to have assets one day and has questions, but you can still find an advisor.

So you've dealt with these kinds of clients. So I'm curious to hear your thoughts on dealing with a situation like this. - Yeah, man, you nailed it. There are so many, not just myself, but so many amazing colleagues that work with not just older millennials here, I like to call it us geriatric millennials, but you have advisors catering to Gen Z.

I mean, you have babies offering... Fine, no, just kidding. You don't have infantile financial advisors yet. But you reach this point where it's kind of a good problem to have, right? You've reached a certain amount of success and you're like, "Look, my free time." I always describe the best time to figure out whether you need a financial advisor is when your free time has gone down so much because your responsibilities have gone up so much.

You have a couple of kids, you're balancing your career, you're knocking 40, you're entering peak earning year. So you're super, super busy, stretched thin in almost every part of your life. And it does suck to think that you don't have access to a qualified professional simply because you don't have enough money for them to manage.

Let's throw that out the window right now. As I just said, there are lots of qualified professionals to help you here. - So I think your point that you make is good about being stretched. We both have young kids. We know how life can get busy, but it's outsourcing the decisions and also outsourcing the worries in some ways.

Because a lot of these questions that they ask in here, they're not really black or white. They're kind of exist in a shade of gray. And so I think some people at a certain point just want someone to help them. Like help me make a decision and come up with a plan.

Even if I know that there's probably three or four good answers here. And there's not one answer that's gonna be perfect, but help someone understand my situation and then help me execute this actual plan. - 100%. A great financial advisor or planner is going to help you make the best financial decision possible for you.

Where sometimes there's only one way to do it, right? You gotta go get your will, you gotta do your basic estate planning documents. Like go get it done. Versus, hey, let's talk about what your investment style is. And in this particular question, they're asking about goal priority. And that is where should I put the first and last dollar of available savings?

I have multiple goals, right? It could be saving for a home, retirement, the kids going to college, and other stuff we haven't even brought into the equation here. And that's where things start to get a little bit complex and only emphasizes the need to actually go through formal financial planning.

That is the system that helps you figure out how to allocate your free cash. You have to also have some sense of ownership over what's most important to you. It's not my financial life I'm solving for. It's the client's. If they had told me, making sure that we achieve what we, the parents here or the husband and wife or whatever the structure is, that we achieve financial independence above sending our kids to college, the advisor's gotta show them how to go about doing that.

Answering that question's critical towards the allocation of that money. So financial planning is hands down the tool that's gonna bring you through retirement planning, college education planning. The last one about student loans versus 401k, I think actually is a little bit more technical of how to go about allocating than really goal priority, although you still need to understand which is most important to you.

But I think about that question probably like you do, Ben, what do we expect in terms of a consistent or long-term rate of return on investing in a 401k or any other type of account versus what's the interest rate on that loan, on that debt? And are we gonna be better off paying down an eight, nine, 10% loan?

Well, can we get eight, nine, 10% consistently in the market? At eight, yeah, we're in an interest rate environment now where it's not so clear cut or becoming more clear that paying down expensive debt is the way to go, right? - Yeah, it was easier when rates were a little lower, that question, I agree.

I love your idea on goal priority because that is one of the biggest jobs of financial advisors, that it's kind of, you can't really define it very well, it's not quantifiable, but that this goal priority thinking in terms of like what actually matters to you. And those are the hardest questions for some people to answer sometimes.

And then, yeah, you're right, it's figuring out a plan to hit those. David in the chat, I just want you to know, said the rule number one for picking a financial advisor is finding someone with a great shirt. And before we got on here, Doug informed us that these are called camper shirts, which I didn't know.

So now you learned something. I thought I was the GQ expert here, but Doug is schooling us on fashion. - We are rocking camper T-shirts apparently, yeah. - You're the real fashion expert, but yeah, I guess maybe. - You'll receive my consulting invoice in the mail shortly. - Yeah, all right, let's do another question.

- Okay, up next we have a question from Adam. How do you factor in RSUs for budgeting? And RSU stands for restricted stock unit. - You're getting them Duncan. - Yeah, we don't count them all in our budget and it works much tighter than reality. Should we? Either way, what is a good budget scheme for someone in a very high income bracket?

A 50, 30, 20 needs, wants savings isn't working for us, particularly on things that are automated or fixed, like mortgages. What's a reasonable clothing budget or vacation budget? That's what makes this too difficult. - So this is interesting because, so they're in there, on paper, they're probably more wealthy than they feel in the income that they're receiving.

'Cause they know that those stock units are coming at some point. And so they're probably living a little bit above their current level of income, but they're looking at their level of wealth and what it could be someday and thinking, well, I should be up here because I have these stock units.

And unfortunately, in the past couple of years, some people have probably had that knocked down a peg or two if they've been in a tech company and they've seen the stock options not worth nearly as much as they thought they would be. They probably were counting that money before it even showed up.

But how do you think about this? You think it's coming someday and you maybe have a timeframe or you don't. It's kind of like an inheritance maybe. Like I know I'm gonna get some money someday. And so should I just spend more now with the understanding that this money's coming, but you don't know, this is a tricky one.

So how do you plan for something like this? - Ideally, the most like clean way to do it is I'd like to think of RSUs and equity or incentive compensation as icing on the cake, a windfall, as you suggested with an inheritance. Now, some asterisks or caveats to that, depending on what company we're talking about, the vesting schedule really having a lot to do with it.

I'll pick on Amazon for an example. It's a really great example for what you're mentioning with not only the stock being worth less than it was just a couple of years ago, but the way they engineer the vesting schedule and the way they go about doing the grant. So when you receive RSUs in this case, has a lot to do with how you're going to view that.

And a lot to do with your overall compensation package. I'll give you a quick example. If your base salary can't cover, your monthly not, you're going to be looking at those RSUs as the way to cover that. And if you're vesting every month, you're going to be very tempted to view that as truly income, that's supplementing your base salary.

Flip it around. If your base salary or your household stable income through salaries is enough to cover the monthly not, you can more easily view stock incentives as icing on the cake, as long-term investment assets, whether you sell it and diversify it or keep it because you're long on your company is a separate question.

So a lot of companies, look, they go into this knowing this, right? And for the company, it's really about what kind of incentive are they trying to create? And what really handcuffs are they trying to put around your wrists? It's a little bit, I don't know if insidious is the right word, but it's a little bit more gaming you, the employee, when they're pushing you more towards, you got to eat these RSUs versus, hey, this is an award for doing a great job and we just want you to stick around.

- To your point, you really have to understand how these work and every one maybe works a little different depending on the company and the timing and then the tax treatment of them and all these things. Another potential financial advisor savior here, but you better know what you're doing with these before you start counting the money and planning on it just being there.

I'm sure there were a lot of people in Silicon Valley the last couple of years who were ready to buy a huge house or something because they know these stock options are coming and then they fall 80% or whatever it is and then now what do you do? - Exactly.

Our good friend Morgan Housel wrote a piece the other week called "Expectation Debt" specifically around this topic where you see the price of that stock in the form of RSUs or performance based options go up, you're wealthy on paper, but you now got to repay that debt, there's a debt there.

And that's the reversion to the mean, the fact that you need to plan for the fact that you are not going to be as wealthy as you are at that moment. And if you build your life around that, you buy a house that's large and now commands that you pay a larger mortgage than you thought 'cause you felt rich at the moment, these are classic personal finance traps.

And it's not helpful and I'm not trying to vilify companies that do this, that's how they chose to incentivize and motivate their employees. More times than not, your employer is not looking out for your financial wellbeing. It's great if they are, so don't be naive. You have to take that into your own hands.

And if you fell into that trap, you're gonna pay for that if the stock goes down. And they don't always say, hey, the price of the stock went down, let's make sure you get more of those shares granted to you at the refresher. They're like, no, things are pretty crappy here, you're getting less.

So you then find yourself in a bind. So I would recommend to anyone, back to financial planning concepts, how are you viewing cashflow from the forms of compensation you receive? It's not necessarily a bad thing that you're eating performance-based or restricted stock to live, but you need to have a really good context around that in the short, intermediate, and long term so you don't fall into one of those holes later on.

- Right, and yeah, maybe treat it more like a bonus than part of the actual budget, depending on when you're gonna get it. - Ideally, that would be the case. But again, if you need X a month and you're not gonna get that from your base salary, because that's just not how your comp structure is, your kind of hand is forced to either do uncomfortable austerity, either lower the cost of your lifestyle, and that's gonna be very hard for a lot of people who've grown accustomed to something, or I now need to dive in.

Yes, in a perfect world, we'd love not to touch this other form of stock, treat it as a bonus, but it doesn't always break like that. Careful planning will get you there. - That's why I require part of my salary to be paid in physical oat milk delivery. So that's all.

- I thought we were just paying you in hats every week, Duncan. - Yeah, true. Speaking of which, more on that. Remind me. - All right, next question. - Okay, up next, we have a question from James. I'm struggling with financial planning in a dual income house. It seems like the typical advice in terms of savings rate and income needed at retirement should differ between single and dual income households.

I live in a high cost of living area, have two kids in Catholic school, and we both work. Dual income means we spend a lot more on children, camps, et cetera. Our income is pretty high, so having X percent saved of our income by age 40 is tough. It just doesn't seem like the commonly provided targets really match up.

Any thoughts on this? - So a dual income household is actually in a much better position. A dual income household with kids, that's tougher, right? So we're talking single versus dual income, that's different. I think this is just more like managing a family, even when you have a dual income, can be difficult for people, especially depending on where you live.

And I'm sure these people have seen these charts from a financial place that shows by 35 you should have this much saved, by 40 you should have this much saved, by 45, and people look at those numbers and they say I'm not even close to that, or you should have this X amount, X times your salary saved, or whatever it is, because they've run these numbers through the spreadsheet, and people look at these and they go this is crazy, I'm never gonna get there, I'm way behind already, I'm stuck, what do I do?

And I think this is a tough place for people to be when they're trying to measure against these goalposts that are unrealistic to them. - Well, it seems like everyone used to say just have a million dollars to retire, you know? Like I remember just hearing that all the time, people talking about a million, a million, a million.

It's kind of funny that's changed. - Obviously a lot of it depends on how much you're actually spending and what your lifestyle is, but I think for some people they have to figure out, I mean, Doug, as parents, you want to give your kids the world and you never want to hold back on experiences with them or letting them do what they want to do, so I think maybe for some people they have to figure out like, can I supercharge savings later in life if I'm slowing down right now or having some sort of fallback plan in the future to juice things when they need to.

- Awesome lead for me on that one. Yeah, it's a little, that's correct, but let's get into the nuance of that. You know, this question is posed by what I would argue are, you know, highly performing or, you know, two professionals that are striving to, you know, continue to grow in their careers, and when you think about career growth, and by the way, career growth and expanding the top line is just one of those conversations in personal finance that doesn't get talked about enough, because you talk about those rules of thumbs, you start to treat this as a linear system, right?

Nothing, nothing in personal finance, the markets, the economy is linear. It just doesn't work like that, and that's when things start to become oversimplified. So to your point, it is tough. It is very tough in planning to say, "Okay, we're doing great, we're making all this money." You know, you can't go back on certain, you send your kids to camp, you're then next year, and they love it, you're not not sending them to camp the next year, like you're locked into that.

Like, there's just things you can't walk back in this type of environment. - I just got sent pictures from my wife today. The kids are at some outdoor camp, and they're both riding a horse, ear to ear smile, and there's no way they're, they're gonna have to go there every year now.

- Yeah, there you go, and you're committed to X thousands of dollars every year for the next eight years. And we just took our daughter to, you know, a rookie day at a camp, just like, "Great." You know, and oh, this is gonna be the greatest gift that we could give her.

Truly, it is a magnificent, life-defining gift that equates to an economic function of our household. And this type of stuff is what is in this question. So let's talk about the thing that's not said is, how are they thinking about the trajectory of their careers? I would hope that most people hustling in careers that first provide for upward mobility and income are doing that.

And that could be a dangerous or tricky game to play, saying like, look, I'm gonna give them this now, or I'm going to choose. This is the active choice to remain this comfortable, and it comes at this cost, but I'm gonna bet on myself and my career in order to get there.

And the thing you gotta be mindful of, the lifestyle creep, right? That when you do elevate your income, and you now are back in the position of being able to super save, how quickly will that go away based on the decisions that you are going to make? And then factor in that life's fickle, not linear.

You could lose a job, there's great, or you could find yourself moving across the country for a great opportunity and making even more money. People don't just sit in one spot. I, in my own career, have gone from cool, look, we're maxing out 401ks and savings and all this stuff.

The 529 plans, well, the firm's got to grow again. We have to make investment in the business. And this is coming from the entrepreneurial side, not just the, well, I want to send my kids to campsite, or we really do need this vacation because if we don't take it, we are gonna burn out and become unproductive at our jobs, and that's a risk we're not willing.

Whoever thought taking a nice vacation would actually equate to ensuring that you're able to consider, or continue growing your income. They're not-- - The other thing is, you're probably gonna have to, there's always trade-offs with this, and if your kids are going to be, and family is going to be your number one priority, or one of them, then somewhere else is gonna have to be cut back, right?

It's gonna have to be fancy restaurants, or your trips aren't gonna have to be as nice, or something, so unfortunately, something has to give. If you're living in a high-cost of living area, maybe you don't have as much transportation, you don't have cars, or some way, you have to give up something, unfortunately.

I think that's part of it is prioritizing and giving up on something, and that's your point of lifestyle creep. If you wanna have it all, and you look around, and you say, "I'm getting nowhere," then something has to give there. - Absolutely, for folks that can't increase their top line, this is extraordinarily relevant.

You definitely then need to focus on the bottom line. Not everyone has even the ability to go out. It's so cliche, at this point, to be like, "Go get a side hustle." It's like, "Yo, I'm working 70 hours a week. "This is what I'm gonna make." There's no opportunity for that.

So Ben, to your point, yeah, maybe you didn't need that extra roll when you went out with Innards. Does that add up? Do the smaller things add up? Yeah, everything adds up, but when you don't have that ability to increase your top line, you have to get super critical about the expenses and all of those.

- But I agree with you that the personal finance blind spot has always been making more money, and for a lot of people, that's the key. You just have to figure out a way to then continue saving a percentage of it and not just spending the whole thing. If and when you do get to the point, you do make more money.

- I like doing a ratio here. I tell my clients, "Hey, cool, you got that bonus "or you got that raise. "I'm okay with you increasing lifestyle. "Just make it one to five of lifestyle to savings "or one to 10 or whatever it is." If you keep up that kind of mentality, you're gonna save more and you're gonna enjoy life a little bit more too when you spend every dollar that you made more on a vacation.

Yeah, you're definitely not getting anywhere. - Right, all right, we got one more question. - Okay, up next, we have a question from Zach. "I work in investment banking "and have a comfortable comp package "given my current lifestyle. "However, I struggle with what I should do "as it relates to my savings, excluding 401k.

"I'm looking to purchase my first home "within the next two years, "but I'm looking for guidance on the split "between a high yield savings account "and my brokerage account. "I currently have about $30,000 in the savings account "and the same in brokerage. "Should I just take 20% from each paycheck "and put it directly into the brokerage "since I have a cushion in the savings account "or continue to split between the savings and brokerage?" - So this is like a bucketing thing where if you think about it, all your money is in one bucket.

You have all this money, but you have different strategies depending on the time horizon for it. So obviously, this person's saying, "I know the 401k, I can't touch that for decades, "or I won't, but I have this other money "where I have a goal that's coming up "in a fairly short period of time "and I wanna buy a house.

"How do I allocate my cash savings?" I think this one's probably easier than it was a few years ago because we actually finally have some short-term yield. You can put it in. This is one of the questions we got more than any other from people for years is like, "I'm saving for a house or I'm saving for a wedding.

"Where do I put it 'cause interest rates are zero?" Now that they're not zero anymore, it's a little easier. And so I don't know if they're asking if they should have some money in the stock market because they're gonna be spending it two years. - Yeah, that's what I used to.

- But I think with a goal that short-term, the stock market is always very risky in the short-term, and especially for something as important as a house, risking it in the stock market, I think is almost just too big of a risk. I don't know what your rule of thumb is for something like this, if it's two years, three years, five years, something like that.

But I think you have to have some sort of rule of thumb where you say the stock market in a short period of time, even though it goes up most of the time, is too risky for a goal that's this important. - Yeah, it'd be quite the hot take to go against that wisdom right there.

And I would argue even, not only do I agree, but I would go back to the comment about when interest rates were low and you got nothing. I would still favor that. - The safety of it, right? - Yeah, the bottom line is there is no reward attractive enough in that short period of time to justify the risk that you would need to take in order, when it comes to needing that money.

So whether interest rates were at 1% or you could get 5% in your money market fund, the goal is cash here. In some cases, you really do need to know yourself and your own risk tolerance. So let's use like real terms on that. Okay, you're saving for a home and you make an extra five grand because you decided to invest a good portion of that.

You're gonna do what Warren Buffett says, put it in the S&P 500, bet on America. You got an extra five grand to your name here. That's not going to do much other than maybe defray closing costs or a nice sofa in the house. Yeah, fantastic. But what if you lost five or 10?

You're gonna kick yourself, right? What if that's the difference of you closing or not? Well, first of all, if that's the difference of you closing, you probably did poor planning from the jump. - To your point, if you gaining the closing costs, that's great. But if you lose the closing costs, that's gonna hurt way more.

The downside is way bigger than the upside, even for the same amount of money. - Exactly. It's disproportionate, the downside than it is to the upside. So my rule of thumb is zero to four years, you can go with cash risk-free. I think it's great that for the first time since 2007, you and I remember when you could get some yield on some stuff.

Folks younger than us, this is their first rodeo and actually being outside of a zero interest rate environment. So it looks cool. And there's a whole lot of stuff we could talk about on that. But yeah, it's cash. Forgo the brokerage. We could talk about a small allocation to fixed income and whether there's an opportunity there.

But the bottom line is they could lose value too. - Right. So if you really wanna go crazy and speculate, take like 5% of the money maybe and an amount you're willing to lose and not be there, something like that if you really want to. Otherwise, I don't know why you'd take the risk, especially if it means not buying a house.

Especially since it's so difficult to buy a house these days, you want your finances as shored up as possible 'cause there's just not a lot of houses out there. - Yeah, you gotta be pretty aggressive on the savings and just getting the money in that bucket for the home personal.

It is extraordinarily difficult depending on what market we're talking about. It's just not a fun thing to do. So take the safety of it. And life is a little bit more simple when you look short-term. It's cash, it's risk-free. And when you're thinking retirement long-term, go risk on. I mean, you have time on your side versus time not on your side.

And it's as clear cut as that. One of the few things we can just be like, it is what it is. - Right. Okay, Doug, we're gonna plug here. Newsletter, "This is the Top," right? It's a sub stack. - Yeah, yeah, I get to plug something here. Cool, I write a sub stack called thisisthetop.substack.com.

You can get to that following me on any social media. We gotta pump threads, right? That's what everyone's trying to get followers on now. But it says @DougBonaparte on all your favorite- - Can you believe we have to completely start over on social media again? - Not if you're like a massive influencer and celebrity that gave you that.

I felt like Meta should have given them a delayed start and we get the head start. That would have been more fair, but that's not apparently how ad dollars work here. Yeah, we gotta start all over here. Yay. - I'm not loving threads, I gotta be honest. Everyone, I know it's uncool to say you don't like threads, but I'm not getting into it so far.

Maybe I'm just too used to threads. - Yeah, I have no choice. My general counsel and head of business development, AKA my wife, is, "Get on there, go do it." It is another avenue. You take the Gary V approach of it's not Twitter or threads. It's Twitter and threads.

It's like, "Great, I have this other-" - Diversification, Duncan. - Yeah. - Back to that. - It's true, diversify your social media. - The compound is on threads. - Isn't that the threat though? But isn't that the threat? You know, like, "Oh, your platform's going away, "so you need to get it." I don't think any of them, you know, with serious dollars behind them from a company like Meta or Elon is going anywhere.

This is too much money going towards them. - I did sign up for a post account in Mastodon, I think, and at Josh's recommendation, like you were talking about on Animal Spirits, then I haven't used it. - See, that's too much diversification. All right, if you wanna send us a question, email us askthecompoundshow@gmail.com.

Thanks again to Doug for joining. We appreciate it. All the young people, millennials, asking our questions. If you're listening to a podcast, leave us a review. You're on YouTube, leave us a comment or a question. New hat, Duncan? - New hat, dropping in the shop, idontshop.com tomorrow at noon, this hat.

I was supposed to be wearing it on the show. I forgot. - That's great. - Okay, so thanks again to Bird Dogs, and we will see you next time. - See you, everyone. (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) you