Welcome back to Portfolio Rescue, our show dictated by you, the viewers, where you send us in questions. We answer them. Our inbox is full all the time. Remember, if you have a question, email us, askthecompoundshow@gmail.com. Duncan, I think this week I actually pulled a question directly from the comments on YouTube.

Oh, nice. I was wondering where that one came from. I'm a psycho, so I read all the comments, but I will say, our viewers and listeners are usually pretty nice. We've got a lot to get to today, so let's do the first one. Okay. So, first up, we have a question from Tony, who writes, "Will demographics lead to reduced asset buying as boomers spend down their retirement and transfer wealth to kids upon death?" So, starting off with an upbeat one.

Yeah. This is a common one, and I think we answered something similar a couple months ago, but that was dealing more with the stock market. So, the idea there was, wealth is concentrated in the hands of the few. The top 10% own something like 89% of the stocks in the U.S.

So, my take there is, like, there's not going to be many forced sellers. A lot of it will just end up getting transferred because it's all rich people who won't need to sell. And even as the boomers do begin selling their assets, the millennials are going to come into their prime earnings years.

So, John, let's do the chart out of this most common ages in the United States. So, the Census Bureau publishes this, the most common ages, and they rank them. And you can see it starts in 2010, and in 2020, then they predict out to 2025, 2030, 2035. You can see in 2010, the young people are just starting to come up.

Now, almost all of the most common ages are 20s, 30s, 40s. It's going up to that because the millennials are getting older, right? So, I actually think that, and the millennials are now the biggest demographic in the country. I think that the millennials actually are going to have a bigger impact going forward than the boomers.

And I want to look at this beyond the stock market. So, let's show this ownership of financial assets. This is kind of what I was getting into. And this just shows stocks versus housing. You can see that the top 1%, the majority of their assets are in financial assets, stocks and bonds and real estate and that sort of stuff.

But their primary residence isn't that big of a deal. But for the bottom 50%, especially, and even the 50 to 90%, primary residence is a huge driver of their financial net worth. So, I want to talk about how this demographic stuff is going to impact the real estate market.

So, I never really bought into this idea following 2008 after the housing crisis that millennials were never going to buy homes and they were never going to drive cars and they were never going to move to the suburbs because that's what people do when they get older. I think millennials just kind of pushed it out a little bit because they went to school a little longer in a lot of cases.

This is the most highly educated demographic ever in terms of going to college. And they just pushed it back a little bit because of the crisis. And so, as people get older, they take on more responsibilities and they damn sure are going to buy a house in most cases, right?

And millennials are buying houses in force right now. Show this chart from the Wall Street Journal here, John. Millennials are buying, this is home purchase applications from the Wall Street Journal. You can see millennials in 2015 were about 35%. Now it's well over 50%. And at 40 years old, I technically am the oldest living millennial in the country, I think.

Either that or the youngest Gen X. I think I'm the oldest millennial. Yeah, I think you are. And I'm thinking about this, the demographic wave from my experience. So, we purchased our first home, I think I was 25, 26, had been married for maybe a year at that point.

And we kind of said, "Oh, this is going to be our forever home." Then our family got bigger and so we moved on. I think we were in that house for nine or ten years and life got in the way. My wife and I had twins and we realized we're not going to fit in this house anymore.

It's not going to work. We had to move. And I think so many people in finance look at this stuff from an investing perspective instead of life events, especially when it comes to housing, right? So people, like life events don't care about investments and mortgage rates and prices and ROI and all these things.

And so right now with all these millennials buying, and many of them in household formation years and buying their first home, it's impossible to find a starter home right now, right? And that's why those prices are rising so fast. I think in five to seven years, it's going to be impossible to find that next level home.

So we did this five years ago. We kind of traded up, went into a little bit of a bigger, nicer home. I think that's going to happen at the end of this decade. So you have all the millennials buying now, these starter homes, but in five to seven years, they're going to be ready to trade up.

And I think maybe that's when some boomer selling will happen. So we have 10,000 baby boomers returning every day from now until 2030. I would guess the next shortage of housing, millennials are just going to go through this housing market like a snake, like a snake eating a rabbit, right?

Going through. So in five to seven years, that next trade up level, which could be some of the boomers selling their houses, I think that is going to be the most crowded. And unfortunately, I think for millennials, like probably every huge purchase you're gonna have to make in your life is just going to be way more expensive than prior generations.

Think about college, the stock market, housing, cars, daycare, all this stuff. I think millennials have to get used to this. So I know this question was asking about boomers, but I actually think the millennial demographic is going to have a much greater impact on financial markets going forward. And boomers have plenty of time through retirement.

You know, they could have two, three, four decades to spend things down. It's going to happen on a slower basis. Millennials I think are going to have a way bigger impact. And if boomers do start selling their stocks, guess what? Millennials are now moving into their prime earnings years and they're going to be the buyers.

- Yeah, I mean, well, the thing I was going to say is where you hit the nail on the head. It turns out everyone does want a house, right? That's what we're seeing. - It seemed like, yeah, okay. Housing market crashed and I saw my parents lose their house.

I'm never going to buy one. That lasted only so long until you grow up and you realize this is what happens. Like you become an adult, right? If 20-year-old me could see 40-year-old me sitting at home on a Friday night, reading a book instead of going out and having fun, he'd put a gun to my head.

But this is what happens when you get older, right? You stop going out and you become boring. It happens to everyone. - Yeah, I guess. - All right, let's do the next one. - Okay. So up next we have, "You guys have been absolutely wonderful at teaching us some valuable lessons.

Hate to admit this, but I'm terrible at investing. My ability to withstand a drawdown is just awful. Don't want to save cash my entire life, but I also have such little risk tolerance. I'm 31 and my goals include getting married, buying a house." There we go. Et cetera. Any thoughts on my predicament?

- The good news is this person knows who they are as an investor. There's that old saying that the stock market is an expensive place to figure out who you are as an investor. This person already knows. And I always say a good strategy is vastly superior to a perfect strategy you can't stick with, right?

The good one you can stick with makes a lot more sense. So there's three main factors I've talked about before in terms of setting your risk profile as an investor. Your willingness, need, and ability to take risk. As a young person, your ability to take risk is nearly infinite because you have your human capital, which is your future earnings that you can use to save, and you have time on your hand.

You have many decades ahead of you. But if you're not willing to take risk, it doesn't matter what your ability is because you're bound to make a stake in your portfolio at the worst possible time. So the fact that this person knows this, that's good. I think the simplest answer is to fix your need to take risk.

That means cranking up your savings rate, right? If you're not willing to take a lot of risk, crank up your savings rate. That'll hopefully decrease your stress in other areas of your financial life as well, and I think offset some things. The next easy piece is thinking about asset allocation.

So this is your other risk dial. So John, let's do a chart on of the drawdowns. This is some various asset allocations I created going from 90/10 down to 40/60. And the S&P 500, this is in March of 2020, was down around 35%. You can see a portfolio that was 40% stocks and 60% bonds only lost 15%.

A 50/50 portfolio lost 18 and a 60/40 was down like 21%. So placing more conservative holdings in your portfolio like high quality bonds or cash is a great way to dampen volatility during a drawdown. Now let's look at the other side of this. Let's do the chart since the bottom in March of 2020.

You can see the S&P 500 is up almost 100%. A 40/60 portfolio has risen 33%. 50/50 is up 42. So that's the tradeoff. Investing is all about tradeoffs. Bonds or cash, I guess cash for that matter if you're looking at this kind of thing for conservative investments, might not give you great returns going forward, but it can provide something of an emotional volatility and help you not make poor decisions at the wrong time.

And since you're already saving for things like a house and wedding and more conservative, then that makes sense to keep money there. And I think the other thing you could do is potentially try to separate these by location and just keep all of your risk assets in a 401(k) that you're not gonna be able to touch for decades anyway because of tax penalties and all this kind of thing.

And I do think this is more of a behavioral question than anything. So let's bring in a guy who's been writing about and talking about behavioral finance probably since I was in college and I was 20 going out all the time. Our firm's namesake, Barry Rittholz, who's been talking about this stuff forever.

Hey, Barry. Hey, guys. How's it going? So I liked your answer to that question, Ben. And the behavioral side is really fascinating because stop and think about it for a second. When we look at professionals, when we look at mutual fund investors and how well they do when the question, the person who wrote the question said, "I'm terrible at investing." Well, so are most of the pros.

Over a decade-long period, 85% of professional mutual fund managers are underperforming their index. That's before we work in fees. And so all the bold-faced names that everybody knows—Warren Buffett and Peter Lynch and go down the list—they're the exceptions. We know who they are because, you know, they're the Hank Aarons.

They're the home run—they're the Michael Jordans. My frame of reference is a little older than you guys, so I go back to different sports figures. But essentially, you're terrible at investing, questioner, because we're all terrible at investing, most of us really bad. And if you're concerned about drawdowns and you're concerned about risk assets, put it in a broad index fund.

Go to Vanguard. Get a very simple fund. Check it once a year. And in 40 years, you'll thank us. You don't have to be—you know, the business of stocks, the day-to-day buying, selling, squaring up positions, syndicates, IPO loans, that's professional trading. You don't need to be involved in that.

What you need to say is, "I want to invest in America. I want to invest in the ingenuity and creativity of the entrepreneur class, and I'll check back in 20, 30, 40 years, and it's fine." I know it's easier said than done, but the day-to-day noise is what distracts us from thinking about the long term.

And, you know, shut your TV off. Don't read the—if you don't have to for work, why would you want to read the business section? Who cares what this fund manager or that CEO or that new IPO is doing if you're not in the business? Own the entire market, put it away for a few decades, and retire comfortably.

>> Right. I've heard Josh talk about this. Like, you could be like us and pay attention to stuff all the time, so you become essentially immunized to it, right? Or you can be someone else who just, like, completely ignores it, but getting stuck in the middle where you kind of pay attention and kind of don't, that's the hard part.

I think you need some sort of barriers, and that could be, "Okay, I'm not going to have a Robinhood account. I'm only going to invest my long-term risk assets in tax-deferred accounts, and it's going to be a target date fund or index funds or whatever like that, in a 401(k) or an IRA, and I'm just never going to look at it.

And the other stuff, I'm not going to even tempt myself with because I know that I'm going to make mistakes." >> You know-- >> That's why I was going to say it's hard to not pay attention these days with Robinhood sending you, like, push notifications, "Oh, this holding's down 5% today," you know?

>> You shouldn't have a Robinhood account if you're a long-term investor. And one last thing about, you know, the questioner saying, "I'm terrible about this," you know, evolution has trained us to, when we are threatened with actual danger, what happens is your stomach tightens up, your heart rate speeds up, your breathing becomes more deep, and you are prepared to either fight or flight.

The people who did not have that sort of reaction, well, you know, Darwin is really, you know, undefeated, and the people who were kind of chill, they didn't hang around to have progeny. So all of us who are around today are around because a couple hundred thousand years ago, our ancestors responded to threats very emotionally, very actively, and very aggressively.

And so the residue of that is, "Oh, no, the market's down 15%, you know, I have to fight or flight." And that's what leads to people in a panic dumping stocks at the exact worst time. Once you recognize that, once you figure out that this is my lizard brain trying to keep me alive to procreate and pass genes on to future generations, you have to put yourself in a circumstance where you're unable to do damage.

And whether that's all your investments in a 401(k) or just indexing and not looking at it, that's your best solution. Don't let your lizard brain affect your retirement. I think what Barry's trying to say is that I can blame my great, great, great grandfather for me buying Zillow last year and getting smoked, right?

I blame them. And if he didn't do that, you wouldn't be here. If he was kind of chill about it, if he had no reaction, you know, walking down, I love all the pattern recognition errors. If you're walking along a path and you jump because you see a stick rustling that you see is a snake, well, that's good.

You know, it scares you, but you're still around. The person who's blasé about that, eventually a snake bites them and they don't have kids. All right. Duncan, let's do both of these next questions since they're both about writing and blogging, and that's why I wanted to bring Barry on today.

So just read both of them so we can just give a general discussion on writing and what we think about that. >> Okay. Cool. So this one's a long one, but we do this show as a podcast now, too, so I'm reading the whole thing for those of you watching.

Sorry. I've considered starting my own blog over the years mostly for a place to put my thoughts rather than for any type of revenue stream. Each time I'm ready to start, I seem to fall into a paralysis by analysis on the form and style. I'm torn between doing pseudonymous writing to protect myself and to be able to speak more freely, read naively on topics, or a more formal connection to my professional life and getting my thoughts out there as a resume/career builder.

On certain topics, I can speak from a place of expertise, but others, I'm just hoping to get thoughts out there and potentially prompt a conversation with readers and maybe have them help educate me. I'm curious if you've faced these concerns earlier in your career and if you have any recommendations for someone like me.

>> That's a lot. >> That is a lot. >> All right. Do the next one real quick so we can just do both of these. >> Okay. So the next one is, "I work for a small family-run investment firm. We send our clients monthly market emails and quarterly emails regarding portfolios.

My issue is that while I'm the primary author of these emails, I don't really feel qualified to write them. I feel disconnected from my audience because I'm 36 years old and have plenty of time to invest while the audience members are mostly retired boomers or retired boomers. I feel that my time horizon is hindering my ability to connect with my audience.

Do you have any advice regarding what I should write about? I'm hoping to find a sweet spot that would allow me to explore other concepts in finance without totally losing the audience." >> So these are pretty similar questions. I'm sure, Barry, you've gotten these a lot over the years.

You've been doing this a lot longer than me. But it's kind of like, should I take this leap and just do this and start writing? And then what happens if people give me negative feedback? And what happens if I'm not any good and I say some wrong things? And the other thing is, okay, what do I write about?

Right? So these are the two main questions. You've been doing this since probably when I was in college, I guess. >> Late '90s, yeah. >> So what was the impetus for you for starting a blog? >> So, you know, we forget how the world has changed. I had three main motivations to write the blog.

The first was I wanted to always be able to access the things I was working on. Now, this is before Google Docs and G-Drive and Sheets and all that stuff, or even Dropbox. So if I wanted access to something on the Internet, I had to post it somewhere so I could circle back.

If I'm at home, if I'm in the office, if I'm out at the beach on the weekend, you know, you just take it for granted that all that stuff is accessible today. It wasn't. If you didn't print a copy and take it with you, or publish it on GeoCities, you didn't have access to it.

I guess you could theoretically email stuff back and forth all the time, but that just became tedious. So that was one thing. The other thing was, at the time I was working first as a trader and then as a strategist, and we had a couple hundred brokers and I got tired of answering the same questions.

In the morning meeting you mentioned a company. What was the name of that? So I started putting the whole morning meetings on GeoCities. And hey, you know where the site is. Go get it. You know, don't ask me what the stock symbol is for EMC. It used to be, like, make me crazy or get questions like that.

So that was one, two. And the third thing was, you just write to understand what your thoughts are when you're, you know, a little removed from it. We have terrible hindsight bias and narrative fallacy allows us to fool ourselves, sort of like a trading journal. Here's why I want to own this.

Here's what I'm thinking. Here's what I think the upside and the downside is. After the fact, we just are too good at rationalizing and lying to ourselves. So, gee, why did I write? I thought that this company, you know, I remember Apple had 15 with $13 cash and the, had an argument with the compliance people that 45 was my upside target.

This is like 15 splits ago. So it's the equivalent of like 4,000. So when you see it and go back and look at it, it's like, oh, I thought the stock could triple. What the hell did I know? It was selling it as a triple, worst trade ever. So that's the other reason to actually write stuff down.

And last, if you want to become a better writer, there's only two things that you have to do. Write a lot every day, preferably, and read good writing. And so putting stuff down on paper in public will make you a better writer. It forces you to recognize your audience and it forces you to accept feedback whether you want it or not.

Now, you have to develop a little bit of a thick skin and ignore, you know, the trolls and the haters, but you get a lot of great feedback from people who are genuinely interested in what you're talking about. - And I also think that, like, if you're first and foremost writing to build an audience, if that's your goal, that's not a great goal.

And I never did that. I don't know. I started at the same thing as you. I wanted to answer questions where people were constantly giving me and start some sort of library and almost a journal for myself. But sometimes I even forget that there are people on the other end reading the stuff that I write, right?

- Yeah. - And so I think you have to write about stuff that interests you personally, not like trying to put something out there that you think other people are gonna figure out. And like you said, this, becoming a writer, I never realized it. It forced me to become like a better learner, a better reader, become more curious, and become a better communicator.

Like, 'cause you're right, it's, I was never one who liked writing before, like in high school and college. I hated writing papers. But then you find a subject you like writing about and you wanna write about it more, and I feel like it is a muscle that you can get better at.

You can make it stronger, right? - Yeah, it's not homework when it's something you wanna do. And the old joke is if you wanna learn how to, really learn how to do something, teach it. So, you know, I used to use the blog because I kinda did a deep dive about 20 years ago into jazz.

I was always a classic rock sort of guy. But I found about 30 years ago the American Songbook and toured singers like Sinatra and Fitzgerald and Julie London and working with Sarah Vaughan, et cetera, et cetera, et cetera. So I started doing these Friday posts, Friday night posts, weekend jazz or Friday night jazz.

And it's, you learn so much when you have the ability to briefly explain it to someone and just say, "Hey, if you're interested in X, look at this and here's why this is important." Now, lately, I've been doing that with cars. I've been trying to learn more about the classic car market.

So every Friday, I throw up, "Here's an interesting car. Here's what makes it unique. Here's what's crazy about the pricing. This is either really cheap or this is really expensive." And it's revealing about a niche little market that you can leap off from. But it could be anything. You know, JC was doing this with wines for a while, talking about rinds.

Ed Giardini writes about movies and has been doing a movie review in his weekly market update for like 30 years. It's incredible. So you really develop an expertise by being able to explain it to third parties. And other people will give you feedback if you're wrong. Like the internet is full of people who are more knowledgeable than you in a lot of areas and they give you feedback.

I think your other point that was really good is about, I was sick of answering questions for people. So this very last question where the guy says, "What do I write about if I feel like I'm not connecting to my audience?" Like even if you, so this is a younger advisor and he's got older clients.

I think even if you have some sort of age gap, you know the general questions your clients are going to ask or have asked in the past. So build a library of questions that they're going to ask in the future about rising interest rates or higher inflation or lower inflation or bear markets or whatever.

And then when they ask it in the future, inevitably you go, "Oh, I wrote about that two years ago. Here's this piece." And then guess what? You're an expert. You've already thought about this and people say, "Oh, this person knows what they're doing." That's the whole thing. Build a library and just go straight to your clients and the stuff that they're going to ask you.

You know, writing, especially publicly, teaches you to develop better listening skills. I'll be the first to admit I have horrible listening skills. But when you're out in public saying something you really have to be aware when several people start saying, "Hey, you're talking about X, Y, Z and I work in that space and here's why you're not quite right and here's what you're missing." You have to learn how to A, recognize when you're making an error or a mistake and owning it and getting better from it, but B, respecting your audience and being empathetic.

You don't have to write for a specific audience, but if you're 30 and your clients are 66, well, you have to stop and say, "Hey, they don't have 40 years of work ahead of them and they don't have the ability to bounce back from a 30% drawdown. That's going to be really problematic, so I have to put myself in their shoes." So developing some listening skills and some empathy goes a long way.

Even if you're not custom writing to that audience, at least they need to know you understand who they are, you respect them and you're aware of their circumstances. I think that really makes a big difference. >> Yeah. Knowing your audience is huge. And so I, when I first started writing, my audience to me, the only people who were reading were my friends and family.

So I tried to simplify and dumb it down as much as I could and then I started getting people following me who were financial advisors saying, "Hey, this is perfect for my clients because they don't follow this stuff." I think people in finance take that for granted. We follow this stuff all the time.

We could use all this jargon and really complex terminology and stuff and it would be useful for 2% of our audience. But what's the point if you don't know your audience enough to be able to simplify it and explain it and use analogies? >> It's showing off at a certain point, right?

>> Yeah. So what's the point? And I always found that off-putting to the people I'd work with in finance when I first started out because I didn't understand a lot of it. And so I think being able to simplify the message too and make it useful to a broader audience is a huge skill that you can use in a lot of different areas in life.

>> And Ben, I'm going to give you a compliment. You talk about financial advisors. I just had a meeting with a very senior person at Vanguard and they were discussing an internal debate where they talked about tax loss harvesting and they talked about home prices and they talked about bonds.

And some of your posts are getting circulated within Vanguard for them to send to their clients who are advisors because you do such a good job explaining what can be pretty complex issues in a way that's understandable without talking down to people. Plus, you use numbers, data, charts in a way that most other financial writers you're clear of.

And it's the perfect balance. And hey, Vanguard is what? $8 trillion? It's nice to see your work getting circulated there. >> I think they just like it because it fits their price. It's free to pass around. >> Well, it's not just Vanguard. I've heard that at other shops also.

I've heard stuff. >> The first Barry Ritholtz stuff I ever read was at the street. What was it? Trading Diary? What was it where you were explaining that? >> The Apprentice Investor where it was, these are the lessons that you learn on a trading desk that when you move to becoming a long-term investor, you have to really bring over these skills and one of them was, hey, you got to expect to be wrong.

That was like one of the... And I got a ton of pushback. Well, who bats a thousand as an investor or a trader? The sooner you recognize... And then the math is even more interesting. If you talk to some of the professional investors who are on Twitter, they'll tell you, you don't even need to be 50/50.

As long as your losses are small and your winners are much bigger, you could have a 300 batting average and still outperform the market if you're a professional trader and doing all these things. For the average punter, for the average person who's just a dabbler, it's very, very hard.

It's just so counterintuitive. >> Did the street keep that for you? Is it still alive somewhere? >> I ended up moving all the posts over to the blog, over the big picture. And if you pick the category Apprentice Investor, you'll see that whole run. I think almost all of them are up there.

>> Okay. We'll find a link and put it in the comments, right, Duncan? >> Yeah. Well, I already have a link to that and here's what it looks like, the big picture. I was just going to say from an audience perspective, I'm a non-blogger, the only non-blogger on here.

The pseudonymous thing, I was just going to say quickly, to me, I like so much more reading you guys' stuff and reading people who you can kind of relate to and you know who's behind it. So the pseudonymous thing, I think, takes on a different kind of relationship with the reader when they have no idea who's behind it.

>> And Barry talking about posting on Jazz and Cars, if you don't show a little bit of a personality, I think it's going to be hard for the reader to connect with you. The stuff that Michael and I talk about on the podcast is that we get the most feedback about is our TV and movie recommendations.

Either they're great or awful, right? >> Well, because you hate it on Wes Anderson. >> I specifically added that as my first question during the lockdown on the podcast. That and the book question, you know, what are you streaming during lockdown? What are your favorite books? What are you reading right now?

People love those sorts of things because, hey, if I like this person and I trust their judgment and I'm simpatico with their kind of view of culture and entertainment or whatever, and they say, "Ah, I just finished Trillions to interview Robin Wigglesworth, and I was surprised how much I liked it," people will take that recommendation more seriously than just somebody out hawking whatever their latest book is.

>> All right. If you have a used car to sell, Barry is always in the market. Leave a link in the comments. Remember, if you have a question for us, askthecompoundshow@gmail.com. We finally hit our big round number this week. Duncan, everyone was very excited, 100,000 subscribers on the YouTube channel.

>> Congratulations. That's amazing. >> Which is very cool. Duncan is a huge part of that, so we appreciate that. Thanks to Barry for coming on again. You'll definitely be on again in the future. >> My pleasure. Duncan, next time you come out here, we'll take you over to McLaren.

There's a dealership 10 minutes from me. >> Awesome. Let's do it. >> See you all next week. >> Sounds good. See you, everyone. >> Bye.