View Transcript of This Weeks Show Here
Speaker 1 (00:00):
This is financial detox, helping you retire with confidence. Featuring Jason labrum, certified financial planner and founder of Ida wealth intelligence driven advisors. For over 20 years, Jason has shown people how to steer clear of toxic advice, achieve financial peace of mind and manage their wealth for maximum impact. Join Jason and co-host Alex Klingensmith. As they simplify the complex share industry secrets and provide proven strategies designed to take you from financial insecurity to financial independence. This is financial detox.
Speaker 2 (00:39):
Hello, and welcome to financial detox. I’m Jason labrum, your host with my co-host Alex clinging Smith and studio Alex. How good, how good is it to be back in studio? <laugh> that’s good. This is cool. I told you before the show, I’m almost nervous. I feel like it’s my first time again. Alex is nervous everybody. So please be patient with us. <laugh> yeah, that’s fun. It’s been a couple months. It’s been too long. We’ve just been too busy. Yeah. And, um, unfortunately there was something that happened in market volatility as of late trigger this again, but there was one specific instance that I’m like, we’re recording a show and I freaked out, but there was a specific thing that just triggered me and also something that triggered you that I think when you add those two together, like we just it’s time to do a show.
Speaker 2 (01:21):
Yeah. For our clients, we’ve done a couple presentations or at least one here recently on mark of volatility and how to respond and how to act we’re day after Russia and beta. And you did that, right? That was that’s why we skeptic the last one because you’re like, no, no, I got this. We gotta do a live one. Yeah. Q and a live. It was really good. Yeah. This is real. This is real volatility, right? I mean, we’ve had these really short stints of volatility. It seems like this is gonna be more extended. And so rightfully people are concerned, but isn’t it funny how the clock just continues to go around and around? I mean, every year the average volatility will talk about some stats in a minute, is the market moves from peak to trough of 14% on average. That means a lot of years, it’s way more than 14%.
Speaker 2 (02:04):
But yet every time there’s volatility the market, everybody acts as if, oh my gosh, this volatility’s crazy. It’s different this time. Yeah. It’s always different, right? There’s always a different headline to it. Well, I mean this year does feel different and it is different. And so you had to validate people’s fears and their emotions when it happens. We do right. That’s what this show’s about. I think we should. I think you should re-explain to those new listeners that have never heard the show, or maybe the listeners that haven’t heard us them or months, or however many months it’s been, cuz our shows are all on the, on the website and on the, uh, podcast, you can go back and jump around in time and, and hear us kind of say similar things years ago sounds the same today, but with new events, right? New events, new headlines, why did you start this show?
Speaker 2 (02:44):
Why did you write the book? Well, financial detox was born out of, kind of my frustration with just generally the information that is constantly disseminated to investors. And by that, I mean you, I mean me, I mean people who have money invested in the markets and even when we say markets, what do you mean by markets? Most people are referring to the Dow Jones or the S and P 500, but yet that’s a very small segment of the overall markets, right? So we decided that we needed to help people become more financially detox, just like most of us need a health detox and we need to eat better and we need to work out and cleanse ourselves. You know, we really need to cleanse our perspectives around money and investing in how it works. And unfortunately the tide is going against you and I, Alex, most people generally think about investing incorrectly.
Speaker 2 (03:41):
Most people consistently make behavioral blunders over and over again, which destroys their long term returns. Yeah. And yet they still continue to do it because they justify it based upon the fear and or the greed or the emotion that they’re feeling at that time. And unfortunately it trips people of real potentially multi-generational wealth because of the decisions they’re, they’re making and the behaviors they’re exhibiting when it comes to money psychology, this is psychology. This behavior, this isn’t even invest investing. This is just, we’re our own worst enemy, totally behavioral finance, which is a new study. Oh, I did that. Um, I went down to San Diego state and I got to speak in a class with a professor who I love the guy’s great. And don’t know if I’m allowed to say his name. So I won’t, but a professor of San Diego state, he has a behavioral finance class at San Diego state.
Speaker 2 (04:33):
I wanna take that. Kids are so smart. Yeah. They were great. These people are learning real things. We interviewed one. Yes. Actually he just did a second interview yesterday and, and Jordy loved him. Oh wow. Probably gonna. I mean, we might hire him just because of what your, your time there, your, your, your event. It’s so fun to see these, you know, to see that happening. And hopefully there’s more of that in the future. And hopefully there’s more educations for kids and about, you know, checking checkbooks about stocks, about bonds, about managing money, about volatility, about things like this, because it truly making the wrong decisions strips you of depending on your net worth, maybe tens of thousands, maybe hundreds of thousands, maybe millions of dollars. So, so you said something that I think a lot of people say a lot of advisors and, and smart people say, and then if I was listening and I was like, well, prove it.
Speaker 2 (05:20):
And then we’d say, well, Hey, actually, we have this amazing study that’s been done year over year by a third party research firm. Right? The, the qu, oh yeah. The qu the quantitative analysis behavior report, investor behavior, you go, I missed AI or whatever, but, but what a powerful study to be able to actually show real data of investors, because what you said has real tangible impact and you can measure it. Yes. So even the engineer, clients of ours are like, well, I don’t make bad decisions. I’m not that emotional. And I’m like, well, but let me show you what, what happens if, if you just succumb to narrow framing or, you know, the market timing stuff or the other, there’s like all these different behavioral tendencies that we all all drive 16 or 20 commonly referred to named behavioral, mental accounting mistakes. That that will cause you problems.
Speaker 2 (06:06):
And they are easy to do. It’s you’re not stupid because you make those mistakes. You’re just a human <laugh>. We all do those things. Right. Even us included. Yes. Yes. At least we have each other to check each other and say, Hey, whoa, you’re doing that thing where you’re remembering only part of the story. Remember? Yes. Like maybe we should, uh, step back for a second and, and think, yeah. Before we make act, take action. Right. True. So anyways, that’s what the story, the book was about. That’s why we started the show. Why are we doing the show today? All right. So let’s get to it. Financial detox, right? We’re trying to help you make better investment decisions. We are an RIA. We that’s a registered investment advisory firm. We operate in a fiduciary capacity for our clients serving their time, best interests all the time.
Speaker 2 (06:45):
Not some of the time, not flip our hat. Not sometimes we do broker dealer business. Sometimes we do RIA business. So we’re coming at this from a, a viewpoint of really even advisors who have broker dealers. It’s not that they’re trying to give bad advice by any means, but you know, we’re coming at this from a, I think a pure behavioral finance. What are we dealing with? How are we doing things? So, first of all, before I dive into that, Alex, I don’t even remember our direct phone number eight, eight, eight, seven oh seven eight eight eight eight nine. What was it? That was too many. Eight that’s 2 98, 8, 8. Is it 8 88? I just 7 0 7 88. 89. Yeah. Is that right? Yeah. That’s right. Or financial detox.com, which is didn’t even faster way to, uh, hit an email in. Yeah. Who knows? We have a, the phones ring a lot. Now we have a tax team.
Speaker 2 (07:30):
So, ah, geez, man. That’s amazing. But there’s now there’s five or 600 more people calling us every day. <laugh> right. That’s great. Email’s probably gonna work faster. Financial check us out financial detox.com. Cause we wanna help you. Right. And if you, if you hear something in the show that you’re like, I wanna talk to these guys. I want to, we’ve been doing this for a long time. Don’t email while driving, sorry. Don’t eat while driving. <laugh> um, people make fun of me and, and I’ve had several people say that’s really stupid. When I say the combined experience, like 350 years combined experience. I don’t know why everybody doesn’t like that saying. So how about we reengineer that and say the average 10 year of our industry experience, financial advice, helping clients, the average of our advisory team is something like 19 or 20 years experience.
Speaker 2 (08:13):
So even I have like 15. Yeah. And you’re just a kid I’m yeah. I guess man, <laugh> doesn’t feel like that’s so much anymore, but yeah. Still on the younger end of the spectrum in terms of average advisory age, right? Yeah. Average advisory are pretty old, but, and that doesn’t mean they’re good. A lot of times it actually means they’re probably bad, but there we go. Whoa. So, whoa. Maybe it just means that perhaps they aren’t, uh, pushing themselves to personally improve and be a student of the industry anymore student of the business, you get comfortable. I think a lot of people that’s how everything think every industry down. Okay. Okay. So here’s the deal, right? And I mean, no personal attack on this particular person, but I, I gotta call him out. Right. I’m gonna call him out. And, and I listened to some CNBC and I listened to some Fox business and I was listening to, you know, tuning in cuz and I don’t tune in a lot because it drives me nuts and it’s bad information.
Speaker 2 (09:01):
Usually, usually I don’t love the information that I get from them, but I did tune in the other day and it was Varney and company and Varney is the, you know, the CNBC, the market update, here’s what’s going on. And Mr. Varney, you know, I gotta call you out. You literally are destroying investors’ returns by giving the advice you’re giving historically speaking in data base. But you know, I’m sitting there listening to radio and he says, this is a, a host of a show, a financial show. Who’s supposed to be delivering value to people or giving them news. And, uh, he was giving news. Here’s what the market’s doing today, which you can get anywhere. But the other thing he would go on to say is, well, I’m in, I moved into cash and I’m holding off in cash. And what do you think we ought to do is he had all of his guests on, I’m gonna holding cash.
Speaker 2 (09:49):
And what do you think we oughta do? Should we just keep holding in cash and wait for that time? I’m waiting for the time to bounce. I’m in cash now. And I, and, and as if he’s presenting that there was that he made the perfect timing and he went to cash right at the top of the market, which I dared. I challenge you, Varney, show me your portfolio. And when you went to cash, show me your portfolio. And when you went to cash and how much of it’s actually in cash, what you’re doing and saying to the public, when they’re listening to you is a radio show host like that, that you somehow went to cash and you’re gonna get back in right at the B it’s a, it’s absolutely horrible advice. And a horrible thing to say, because the fact is most people, the large majority, and probably all over some period of time who try to time the market and get in and out, make huge mistakes.
Speaker 2 (10:41):
And they miss gigantic moves upwards. Most of the best days in the market come. A lot of the best days in the market, come during it down during the bear market. And if you miss like 15 of the best days, you know, your returns just get, get hammered. So the fact that people like Varney and I challenge you to have me on your show and debate this Varney, I’d love to be on your show because I think you need to pivot how you’re portraying your show to people because you’re hurting people. You are truly hurting people by giving them the idea that they should be sitting in cash because the market’s volatile waiting to get back in because the only time it’s gonna feel good. And the only time they’re gonna want to get back in is when it’s already recovered. So you’re telling them to go to cash.
Speaker 2 (11:25):
They’re gonna sell at the bottom. They’re gonna wait till things get better until they have more clarity, which is when it’s already recovered. And then they’re gonna buy back in at the top. You’re destroying people’s investments and you’re destroying their potential for returns. So that was what triggered. Yeah, no, that’s awesome. That story’s funny. Cause I hate watching the news of any kind, because it never makes me feel informed or better about life. Um, I can read the news and I do cause it removes some of the emotion, right? Maybe, maybe I ha maybe I realized a long time ago that I get too emotional about it. And I’m like, I can’t handle it. I don’t wanna, but I think back to like our approach, like our client experience designed to first understand the person. Yes. Not just the personality and the emotions, but like their personal circumstances and situations.
Speaker 2 (12:06):
So if this guy, you, I don’t even know who that is. But if he was a, he was a potential client looking to hire one of our advisors or our firm, we would build him a customized, comprehensive financial plan, interactive with him there with, with a lot of data inputs, a little bit of back and forth, not, not painful at all by any means. And then we would show him what it would be like to be a client. Like here’s the first wave of things we would do. Right. And, and, and that, that obviously leads us to an investment strategy. That’s tailored to his specific or his family specific goals and objectives. And even his personality type. You mean, we would build a plan around how we’re gonna invest and have it a philosophy and a strategy to investing. Yep. And it would never include market timing.
Speaker 2 (12:43):
Right. And it would never include even stock picking, but what it, what it could do for this guy, cuz maybe he’s really successful this guy, maybe cuz he is, he’s hosting a, a show on what, what channel, whatever Fox business. Yeah. Probably makes a good amount of money guy. Sure. He makes tons of money. Maybe he’s got 10 or 20 million like in his liquid net worth. And he is, and he also has 10 or 20 million in, in his personal real estate or whatever holdings he doesn’t need to be invested really actually. Right. Because he could just be in cash his whole life and probably never amount of money. Right. So his personal advice is meaningless to most of the people listening. Right. Maybe he’s not, by the way. I don’t know this guy. So yeah, we, we, we don’t know Varney’s personal financial situation. Don’t pretend to, I can assume he’s doing fairly well.
Speaker 2 (13:21):
He’s had a show for a long time and I like a lot of things about him by the way I, I do. But when you give it, but when you sit on your show on your quote unquote high horse and you act like you’re so smart and you’re sitting in cash because the market happens to go down. I dare bet. You’ve been in cash for four years and you’ve missed all the market. I would bet that you you’ve missed. I you’re, you’re giving off the impression to listeners that you should be timing the market and maybe that’s how you sell ratings. And maybe that’s how you keep people interested because you’re selling panic and fear or fear and you’re selling greed, but it’s wrong. It’s wrong. And that’s why I started financial detox. Yeah. And that’s why we wrote the book. And that’s why we do this podcast is to help people understand that that information, that Varney is giving you is bad information and it is gonna detract from your overall performance over time.
Speaker 2 (14:14):
If you listen to him, so Varney bring me on the show. Let’s go, let’s debate it out, man. You’re ruining people’s investment experience in their returns by pretending that you know, when to get in and out of the market, I, I would watch, let’s go. You know, why I’d watch that show though, which is the kind of the point of it anyways, I’d watch it because it would be entertaining to me. Sure. And that’s, I think that’s probably what this guy’s objective is. Anyways is it’s entertainment. It’s not meant to be advice like the news, not supposed to give advice. The news is supposed to inform and honestly entertain my opinion. Otherwise people wouldn’t watch it. It’s not, it’s not interesting. Right, right. It’s gotta be interesting. Mm-hmm <affirmative> our story. We kind of joke sometimes like our story, the client experience is amazing. It’s five star, but it’s not like a, I mean sometimes I, you know, we have a lot of clients and friends that do really interesting, exciting things for it’s a little boring.
Speaker 2 (15:02):
I mean, compared to someone who runs like a parasailing company, for example, or dives with great wide sharks or, or who’s like developing the cure for cancer and yeah. You know what I mean? Like yeah. All that stuff, right? Like, so our, our story is not gonna sound like Barney’s cuz it’s not as, you know, we’re like, Hey, stay the course and be, and come back to your financial plan. But you’re being too nice. I, I mean this, guy’s talking to investors about investing and what to do with the Mar what to do with your money. He’s literally talking about what to do with your money and he’s portraying that you should be in cash and then get back in when things are better, which means buy back in when things are higher. It’s just horrible advice. It’s a horrible way to, well, especially since most major stock market indexes are markets across the globe are down what 10, 15% is of today year to date some.
Speaker 2 (15:49):
So it’s like, you’ve already, you’re already down 15% lock that in. Right. Like lose that, go to cash. Inflation’s really high. So go backwards even further because of inflation. Yeah. That sounds if he were to, I mean, he can’t really be saying that he’s saying that he’s literally saying I’m in cash. Yeah. I’m in cash. And just that’s what I’m doing is I’m when, I’m sorry, trying to use his voice. And I don’t mean it in a mean what kind of accent he have? What is that? He’s kinda got like an English act accent. Maybe he’s, he’s got an accent British, maybe he’s British or English. I don’t know. And forgive my naive BT for not knowing, but you know, he’s successful guy, but this happens all the time. Right? This is happening on CNBC every day. It’s Jim Kramer. It’s all of ’em I’ll call ’em all out because they’re, they’re pretending to their listeners that they know something that the rest of the broad market doesn’t know that they’re so smart.
Speaker 2 (16:37):
They’re gonna get in and get back. It doesn’t work. So there should be a disclaimer on the bottom of their show that says what I’m saying and pretending like I’m the Jedi master of when to get in and out of the market is not true. Is this is all a show. You should have a long term discipline and investment strategy and you should put it to work and you should stick to it. Yeah. And pivot, if you, if your philosophy morphs and advances and change and becomes more developed. That’s great. Yeah. But the fact that you’re sitting there telling people I’m in cash and I’m just, uh, yeah, that’s what I’m doing is I’m just waiting for the entry point, right? Uh, sure you are. And how long have you been in cash? Barney? Why don’t you tell us that? Why don’t you disclose your actual portfolio holding?
Speaker 2 (17:17):
Tell us how long you’ve been in cash. Tell us when you got in, tell us what you did on the last bear market. Did you go to cash in March of, of 20 when COVID hit and the market was down, I bet you went to cash then too. And then it rebounded so fast. Did you miss all that? Tell the truth. Like if you’re going to tell people what position you’re in, why don’t you tell us really and disclose what your true portfolio holdings are? And I bet your returns are worse than, than most people think. Yeah, my trigger. So my trigger story, I, which I will not go into detail on, but I will just, I would just say that, that I don’t watch the media for any reason. I watch a lot of, we watch a lot of movies as a family, you know?
Speaker 2 (17:54):
That’s great. Cause it’s pure entertainment. Yeah. It’s super entertaining. It doesn’t mean I’m gonna try and live my life according to the movie, except for Ted lasso. That’s a show. Yeah. I want to be Ted lasso when I grow up. There’s the real lessons there that I’m trying to uses. So amazing. So funny. But anyway, so like then the rest of us that don’t watch the financial news, those of us, that there are out there out our, we are out there, but then you go and you like, you hang out with your friends or your family. And everyone’s talking about this stuff right now because, because the market’s down, it is a time, by the way, we don’t sell fear on this show. But if you don’t know what you own or why you own it, or don’t have a financial plan or don’t know what all that stuff I’m saying even means, or you’re kind of a little confused about that.
Speaker 2 (18:28):
You should get help because the markets are down. Doesn’t mean you should go to cash, but it means you should know why you’re invested and how you’re invested. And it means that when you’re at, when you’re at a social event over the weekend or whatever, you shouldn’t take advice from somebody that doesn’t know your situation, because they’re just gonna portray whatever. And they’re probably not gonna tell you truth, the real bad stuff, the whole story they’ve made or whatever. They’re just gonna say, oh yeah, I went to, well, even Bitcoin, isn’t a good example. Whatever’s done really well. I’ve only bought real estate the past three years. It’s like, wow, it’s amazing. You’re the only one like, yeah, you have nothing else. Like, so just be real careful where you’re getting advice and what causes you to take action. Cuz that was where I had one of those last weekend.
Speaker 2 (19:06):
I was like, man, this is a personal setting. I don’t wanna go there. I’m not gonna go there. I didn’t go there cuz you know how it is like we’re in this business and people know what we do for a living. And then like I just wanna go and hang out and talk about kids and travel and family and fun stuff. You know? Not, not debate the markets, but suck in inflation and war. And whatever’s going on in the real world out there, which is real. It’s real stuff. It is. Well, I had a client meeting yesterday and they in the meeting like eight times, this client referred to what their friends have said and what their friends are doing. I mean, people were obviously all very influenced by our friends, but consider the source of advice. Right? This particular client was talking about owning more gold and I need certain types of gold so I can carry it around and buy things with it.
Speaker 2 (19:49):
Oh yeah. When Armageddon strikes and I’m like, so let’s talk about that. Right? So you’re gonna you’re you’ve got a friend telling you to go buy small denominations of not only gold, but silver so that those small denominations of silver can be used to go buy bread and stuff. Do you really like, let’s really paint the Armageddon picture. There’s no banking. There’s no financial system. You can’t access cash. You can’t your credit cards. Aren’t working debit cards. Aren’t working. You need water more than anything. There’s no. Yeah. These days in California, you really think your silver coins, you’re gonna just cruise to the store with your small denomination, silver coins and just buy some bread and cruise ride on home in your car. That, by the way, you don’t have any gas cuz there’s no gas stations cause they’re not working. And then there’s people with guns and ammunition.
Speaker 2 (20:32):
Yeah. And who water you’re gonna need water. Right? You’re gonna need food and water. Yeah. It’s so ridiculous. But that’s like the advice that this client was getting from their friends is go by small denomination. So I showed what the price you actually pay for silver. If you break it into really small denominations and whatever the spot price is at that time, you’re gonna pay several percentage points above the spot price because you’re paying for it to be shipped and handled and broken down into these small, cute little coins. So you pay ridiculous amount for the silver. And so you’re buying silver for more than Silver’s actually worth. Yeah. In a time when a bunch of people it’s just like bad advice, right. That’s not the common conversation for us though. Right. Tho those kind of clients need us more than anybody because we are the rock in their storm and we’re gonna keep ’em from making those really bad decisions.
Speaker 2 (21:21):
Mm-hmm <affirmative> I think that people, if I was listening to this show and I was like, okay, I never heard these guys talk before the markets down 10 to 20%, depending on what you own. Yep. Bonds are terrible. Inflation’s real. Yep. Russia’s scary. You know, what do I do? <laugh> yeah. What, what is the actual advice or what can you at least tell me to comfort me? If I have a well diversified portfolio that has a smart way to rebalance through this and I have a financial plan. I have a great advisor. How can I check that against what I’m currently doing? And like what, you know, what would you do differently? I guess? Well, I think you made a really good point Alex, a second ago about when you’re investing, you do need to know what you own and why you own it. Yeah.
Speaker 2 (22:00):
Like if you have no idea what your advisor’s investment philosophy is, and I’m not here to dig on advisors cause lo love our industry. And there’s a lot of great smart people in the industry. There’s a lot of advisors who don’t even have their own investment philosophy. They’re just kind of buying whatever seems good that day, that week, that month, that year, that it changes all the time. So if you don’t know your advisor’s investment philosophy or if you’re doing yourself or, and you don’t have a defined, written like defined, here’s how I invest. I buy individual stocks of great companies that I know. Then I hold them for a long period of time go Motley, fool style. Or I access factors that, you know, characteristics of securities that tend to perform better than the broad markets over long periods of time, whether that’s value, whether that’s momentum or low volatility or quality companies, whatever it is, you gotta have a philosophy.
Speaker 2 (22:50):
You gotta know what you’re doing. Or even when the I time markets, at least you you’re owning it. <laugh> right. I right. And good luck, but then have a financial plan. Right? Meaning why am I investing this money for what, like a financial plan is not just like a bunch of numbers written down in a three ring binder, cuz that’s not what it’s really about. It’s it’s about what’s the purpose. Yeah. Like why am I investing? Why do I have money? What is the purpose to create wealth, to pass on errors, to create a retirement income? Is it to, you know, you can go on a list and how much income for how long, what assumptions and that’s, that’s a big project. Actually. It’s not a small thing you do. It’s not, it takes time. And that’s why we get paid. Right? Most of the time is professional.
Speaker 2 (23:34):
Some of our favorite, some of our favorite clients have already done most of this work on their own. And they, they come to us with their versions of financial plans and I’m like, you’re gonna be a great client because you’re basically saying that I could do this myself. And I kind of have a decent philosophy. Even some of ’em mm-hmm <affirmative> like, I, I kind of agree with what you guys are doing. Yeah. I’m ready to now say this. Isn’t what I want do with my, my life. And I don’t wanna stress over like knowing what’s going on all the time. What’s cause I don’t wanna watch this guy on whatever show Barney telling me crazy stuff. And it gets to me sometimes cuz then I go hear that guy. And then I go to have a barbecue with somebody. And one of my friends tells me the same thing and I’m like, oh my gosh, they’re both saying the same thing.
Speaker 2 (24:08):
Like I do that. You flip the channel to CNBC and that guy’s telling you to get all in or get all out or do this or that. And there’s different sets of opinions on every, they, they, they purposely do that. They bring guests onto the financial shows that have totally contradictory so they can create that baby and a baby crib laying there on their back with the wheels spinning around. They can’t stop looking to the wheel. Right. They’re trying to mesmerize you by conflicting information. So if I was Varney and I had you on my show, what would you say? You’d say, okay. I’m like, here’s what I said, market time, go to cash. And you’re like, no, here’s what you should do instead. Yeah. Have a financial plan. I would understand what I own. And I would understand what a volatility my portfolio is exposed to like right now, if you’re surprised how your portfolio is behaving, that’s not good.
Speaker 2 (24:53):
You should have known and expected it to behave like this. At some point in the future, cuz we know volatility exists in our past. We know it exists in our future. You should build the portfolio that you understand the risks, AKA the volatility associated with that portfolio so that you are expecting it to happen. At some point you just don’t know when you don’t know if it’s gonna last 18 months or 30 days. So I’m Varney still. Okay. So let’s say that we get a pretty, pretty good size of the population is in a 60 40. Yeah. Or like in a moderate investment strategy, not aggressive, not conservative kind of middle of the road. Ish. What kind of volatility would you say? I should expect assuming I don’t do any market timing. Probably 20%, 20 to 25% in a worst case scenario, potential downturn from peak to trough.
Speaker 2 (25:39):
And what about best case? Well, the upside potential upside, you may have a 20% positive year. You may have a 20% downside year. So up 20 down 20 that’s a big range for me. Okay. I’m okay with all that. What’s the point? Like what is then the, I’m willing to accept that in exchange for what an average annual return, you know, this is where it gets very interesting because you’ve got historic average annual returns. Do we assume that the markets are gonna continue? Like they have historically or are they, or the capital market assumptions which we use at our firm? Ida, we look at what we think generally speaking from where we are today, how are equities gonna perform going forward and bonds? We don’t think that they’ll probably have the same returns they had the last 20 years that they’ll have the next 20 years.
Speaker 2 (26:23):
Why not though? I think we’re in a place where you’ve gone to very low interest rates. Valuations are relatively high there’s headwinds, uh, demographically, baby boomers, getting older, maybe spending a little less money on everything, but healthcare there’s a lot of demographic reasons. Uh, we also listen to BlackRock, JP Morgan first trust a bunch of different companies that put out capital market assumptions and they have really all that mean basically lower your expectations a little bit for 20 years, 24. Yeah. I would probably lower my equity expectations. So in a 60 40 portfolio, you know, we’d love to see a, probably a, a six to 7% average annual return. Why is that even a five to 7% average annual return, but that’s the key is like average annual return, right? Yeah. And there’s no guarantee of even that, but that’s why also we believe that you should start incorporating.
Speaker 2 (27:15):
If you haven’t already, you, you do need to diversify your portfolio beyond a traditional 60, 40, it’s a whole nother show. We’ll talk about alternative investments, private, real estate, private debt, private equity, different investments that can, can shift the efficient frontier of your portfolio and potentially get you more returns for similar risk because you have non correlated non-efficient market. Mm-hmm <affirmative> type of asset classes. You know, when we say efficient market, the stock and bond market is pretty efficient because it’s publicly traded all the information about those companies is public. When you go into the private universe and you think about multi-family apartments or you think about industrial, it’s not an efficient market. The information is not readily exchanged across the internet about a private piece of real estate or about a private business. That information is private, right? So the people who do the due diligence in the research can arbitrage can find some opportunities there.
Speaker 2 (28:07):
And so private markets versus public markets is a very interesting topic, but that goes feels like a bit further. So back to your question is you have a financial plan, you understand investment philosophy that makes sense and is deeply rooted in historic evidence and data and proof. Yeah. Why is this work? How do I know it’s gonna work? How do I have a high degree of confidence it’s gonna work? And then I understand the volatility that’s associated with that. Make sure it matches my financial plan. I’m comfortable with it. And I chill. I rebalanced periodically task loss, harvesting, rebalancing, tax sensitive, asset location, those types of things. I think the part about volatility is actually the part that most people could really benefit from right now. I’m not earning anymore, by the way. I’m uh, out of that mode for a second boot change, no more roleplay.
Speaker 2 (28:48):
I think expectations are super important because you, you, so this is what we do, right? Mm-hmm <affirmative> jumping to like the, how we, we talk about this with, with new clients, especially we have to remind existing clients of this all the time. I hear all of our advisors kind of like, oh my gosh, the mark is down. What are you saying? I’m like, well, I’m saying the same thing that when they first interviewed us, I’m saying in a six, for example, in our, in our version of a six, which isn’t even a 60 40, actually it it’s ish around that depending, but close enough, worst case you’re down, like you said, 25 best case, you’re up 30, but that doesn’t even that matters because right now, if you’re, if a six and ID a six is down 12, let’s say right, ish. That’s not even like half is bad as could be bad as it has been going back 25 years.
Speaker 2 (29:28):
So it’s kind of like I told you, so to the, to those clients that forgot cuz they, maybe they weren’t paying attention or they didn’t think I was being serious. Right. And I’m like, no, no, no. I was totally serious. Like it’s gonna happen. Don’t worry. It’s part of your plan. We’re expecting it. Not that we knew that interest rates, not that we knew Russia, not that we knew any of that stuff. Right. But we knew something, eventually something was gonna happen and we were gonna have volatil like we weren’t just done with volatility. No, volatility’s never gonna go away. There’s always gonna be a new face. There’s gonna be a new war. I’m looking at a slide here, Alex. I hope that people like psychologically. I hope that people appreciate that. If your advisor’s like, Hey, we already talked about this and it’s already part of the experience and the journey.
Speaker 2 (30:04):
Cuz then as an investor you’re you can at least then go, if you still wanna watch these shows that you guys watch, I don’t know how you guys do it, but you guys meaning like you, it’s not just you, there’s a couple other advisors are from to watch financial news. I’m like why? At least then you can watch it and be entertained again and be like, ah, I’m not worried about what he’s saying. Well, but I am worried about the general public and the effects it has on people’s portfolios. Cuz we work so hard to pursue better, to help our clients build portfolios, to protect families, to protect the families wealth, to help people create legacies. And they, you work your whole life. You save all this money and then to make behavioral blunders and have it be, you know, buy at the highs and sell at the lows and what a lot of people do.
Speaker 2 (30:44):
I mean the average return for investors in, in equity funds over the last 35 years is dismal. It’s terrible. It’s less than half. Right. Versus just the markets. Yeah. But so then what people say, okay, I’ll just go buy some indexes at Schwab and be really cheap. But the problem is then when the market goes down, you sell those indexes. So it’s not just about owning the markets. It’s not about indexing versus active or that it’s about having investment philosophy and sticking to it. So here’s an interesting data point too, looking at a history of bull and bear markets, right? Bull markets when we’re on, we’re going up and things are looking good. Bear markets is when the markets retraced basically 20% we’re we’re touching bear markets and we’re already in some bear markets. If you look back to 1942, so no small timeframe, right?
Speaker 2 (31:26):
80 we’re going 80 years or so. There’s the average bull market has lasted 4.5 years. So good times now they come with some blips in the middle. But generally speaking, the average bear market has lasted 4.4 years. And the cumulative return during that four years is 154%. Woo I’m in. Right? I’m in phenomenal. I’ll take it. Um, the average bear market has lasted 11.3 months, less than 12 months, less than a year, less than a year and a cumulative loss of 32%. Ooh, I don’t want that cumulative. I only want the other one. Right? <laugh> the bowls. No bear time. It, can you time that for me please? <laugh> the problem is even when you look at it on a chart here, you can see it. You don’t know when they’re gonna come. You don’t know when they’re gonna start. You don’t know how long they’re gonna last.
Speaker 2 (32:17):
Some of the bear markets lasted, you know, seven months, some lasted, you know, four years, some, I mean just it’s varies. So what about all these people that say that they timed it right last time? And sometimes that’s real. Sometimes people did guess relatively close to a little accurate last time. Well guess I would argue that if they say they timed it. Right. Which God bless him. Awesome. Right. I’ve made some really great trades in my life too. Right. And I can talk about those and act like I’ve never made bad trades, but that wouldn’t, wouldn’t be fully disclosed. You don’t only have to get it right on one side. Right. So here’s what happens. A lot of people say, well, I got out of the market in about 2000 and uh, 2007. Cause I saw this was coming. Right. Okay. Sure. Okay. You did.
Speaker 2 (32:59):
That’s great. Awesome. When did you get back in 2013? After it was already back up to where it was. Right? So if you, if you get it right going out, yeah. You also now have to get it right. Coming back in or the market may rebound higher than where you got out and you missed the whole thing up anyway. More stressful to be out of the market than in it. Right. As long as you’re diversified properly and whatnot. I think it goes back to purpose. I think I’m guessing my purpose as a company. Yeah. Like what’s our purpose as like we’ve defined this and redefined it every year, right? Yeah. Help people create true financial peace of mind. So that same story that triggered me has like, is an easy response for me. I’m like, remember my purpose. Our purpose is a company that we work all day, every day with all 25 of us, you know, to steward true financial peace of mind.
Speaker 2 (33:42):
Imagine if I was talking like market timing, like going to cash, like buying individual stocks, Bitcoin, whatever else. That’s not financial peace of mind. It might be really fun, but Ooh, that’s, that’s really emotional, like really stressful to do it that way. I think playing blackjack at Mandalay bay outside in the summer, getting cocktails while you’re playing now that’s fun gambling to do this with your hard earned life savings or to do this with your true wealth and your legacy have a mad money account if you want go to Vegas. But, but it is not fun. It it’s not peace of mind. Yeah. There there’s the way to do this. And when I say this, I mean invest. Yeah. The way to invest successfully is actually the way that creates the most peace of mind. The opposite of that is that you feel like you have to time it or you have to be smarter than, or you have to get in or you have to get out.
Speaker 2 (34:33):
That process takes away all the financial peace of mind and it actually hurts your returns. Yeah. You don’t have to guess that. And you don’t have to know what’s going on today versus tomorrow when the market’s gonna go up, when you don’t have to know that to have a good outcome. And one other thing I wanted to hit on that you talked about, cause we talked about volatility or we talked about risk, risk, risk, risk, you know, how much is my risk I’m down to. And I think it’s really actually a bad way to verbalize it because if you have a properly diversified portfolio, I don’t think risk is the right word. I think the right word is volatility, right? Because risk is when I invest in there’s a chance of me losing all of my money or risk is I don’t have enough money to live.
Speaker 2 (35:16):
Right. You can define risk so many different ways, but I think it’s improperly attached to what should be called market volatility, temporary when our, like your, your bare and bold market. Yeah. It doesn’t, it, it changes doesn’t last. And when our six portfolio goes down 20%, if it ever does, we’re not worried about risk. It’s not gonna go away. Why will it always come back? It’ll come back. Well, that’s, that’s, it’s an interesting, I love when I am able to draw this out, but a, because it always has, you draw a picture, I’ve gotta see this. I draw great. But it’s fun. Pretty good. Right. It’s the fun on whiteboard on zoom or what are we talking about here? What are you yeah, a whiteboard. Yeah, sure. So I drew yesterday actually. So, you know, look, it always has the reason why it has is because the market’s like a funnel.
Speaker 2 (36:01):
And when I say the market, I mean stocks and bonds and all that, and in the top of the funnel is a big area and innovation and technology and leaders and new companies and ideas and progression and, and growth is coming into the top of that funnel. And what’s coming out of the bottom is dead stuff. The dead, the code acts the world coms, the Enrons blockbuster fitting, um, you know, financial fraud that eventually gets uncovered. That idea is blockbuster. Like, come on, let’s let’s reinvent ourselves, whatever it was, the, the junk falls out the bottom. So all this new human, we have population growth on the earth and human ingenuity and creativity and advancement and technology is going into the top of this funnel. And the public markets have been a phenomenal place for companies to access capital, to continue their growth strategies. I would argue now, and this is back to our alternative conversation.
Speaker 2 (36:54):
A lot of those opportunities have shifted out of the public markets, into the private markets, through private equity because now there’s so much money in private equity and there’s very intelligent people in the private equity universe, the companies are tending to stay private longer, not tending. They are staying private longer because they can access capital for growth privately now. And they don’t have to go through all the public filings and all the administration and legal stuff of being a publicly traded company. So some of the returns, that’s another reason why capital market expectations I believe are lower going forward is because returns are actually being taken out of the public markets and put into the private markets because companies can access money as the private companies now and continue to grow. And then they go public way later in the cycle, which is not great for public market investors, which is why you should consider alternatives in your portfolio too.
Speaker 2 (37:43):
But that’s another call. Maybe we’ll do that next show. Yeah. We should probably start to wrap it at this point. Huh? I think we do gotta wrap it up. So number one, Varney, bring me on your show. I challenge you to stop telling people you’re in cash and pretending you got into cash at just the right time and pretending that you’re gonna get out of cash at the right time because it’s nonsense. And you’re hurting people by doing that on your show. You’re really hurting people by leading them to believe that market timing is the right investment philosophy. It’s wrong. It’s not right. And it won’t work. Don’t do it. Don’t listen to Varney, Varney. Let’s get it on. Uh, we’ll have an debate. I gotta watch that show. And we’ll, we’ll talk through it. Other than that, you are an entertaining guy and, and I like you, but bad advice, really bad advice.
Speaker 2 (38:25):
I think in general, write financial detoxing and watch out for toxicity. Toxic financial advice is everywhere. It’s in the media every single day. It’s at your cocktail parties. It’s at your dinner events. It’s coming from your friends. It’s coming from bad financial advisors. It’s coming from so many different places. You gotta get a plan. You gotta stick to it. And that’s what financial detox can help you do. So we invite you to give us a call at (888) 707-8889. If you want help or check us email@example.com, we’ll guide you through this. We’ll help you create true financial peace of mind. And your email address still works. firstname.lastname@example.org. It sure does. That’s it. Jason financial detox.com. I hope this was helpful. I think the crux of the show was be careful to what you hear out there right now. Things are volatile. It’s obviously nervewracking for people and you really need to dive into your financial plan and make sure that your investment philosophy is right.
Speaker 2 (39:23):
Cause this will end. We will have great markets. Again, volatility is a natural, normal part of investing. You should structure portfolio that you’re comfortable with the volatility, cuz it doesn’t have to be risk. Right. It doesn’t have to necessarily be risk. It can literally just be volatility and that’s okay. So yeah, I hope that’s helpful. I think that’s it Alex. I mean, let’s wrap it up and uh, if for now more to come, we’re gonna have some events coming up the rest, you know, later this year and we’ll, we’ll let you know about ’em. Okay. Perfect. Thanks for checking in it’s financial detox. I’m Jason labor. I’m your host with Alex Klingensmith and we’ll catch on the next show
Speaker 1 (39:56):
To learn more about financial detox and to get access to today’s show notes, transcript and resources, visit financial detox.com. Call Jason and the team at intelligence driven advisors. If you are ready for financial detox and a better tomorrow, call 8 7 7 7 0 7 88 89. Get answers to your questions. That’s 8 7 7 7 0 7 88 89. That’s financial detox.com for podcast and information. And if you like what you’ve heard, be sure to hit the subscribe button that way you’ll be notified about upcoming podcasts. You’ll take one more step toward financial peace of mind. Mommy.
Speaker 3 (40:37):
This content is provided for informational purposes only and should not be considered investment advice or recommendations to buy or sell any types of securities. Mr. Labrum and intelligence driven advisors are not responsible for the consequences of any decisions or actions taken as a result of information provided in this program and do not warrant or guarantee the accuracy or completeness of the information provided the information discussed today, reflects the views of Mr. Labrum and his guests. As of the date of the show and are subject to change without notice past performance is no guarantee of future results. Any forward looking statements or forecasts are based on assumptions and actual results may vary from any such statements or forecast. No reliance should be placed on any statements or forecast when making an investment decision. Forwardly listeners should not rely solely on information provided today and making any investment decisions. There’s a risk of loss of investing insecurities, including the risk of loss of principle. Different types of investments involve varying degrees of risk. And there can be no assurance that any specific investment will be profitable or suitable for particular investors, financial situation or risk tolerance, asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses.