Investing 101

The Childfree Wealth Podcast, hosted by Bri Conn and Dr. Jay Zigmont, CFP®, is a financial and lifestyle podcast that explores the unique perspectives and concerns of childfree individuals and couples. In this episode, Bri & Dr. Jay discuss all things investing.

Throughout the episode, you’ll learn the number one rule of investing and some things to watch out for. When it comes to investing there are three things you need to understand: where you’re investing, what you’re investing in, & how it impacts your finances. Be on the lookout as we dig more into each of these topics over the next couple of months.

Resources:

• Podcast: Silicon Valley Bank & Protecting Your Money
• Book: The Simple Path to Wealth by JL Collins
• Book: The Little Book of Common Sense Investing by John C. Bogle
• Book: A Random Walk Down Wall Street by Burton G. Malkiel
• Course: Saving & Investing Course
• Website: Advice-Only Network

The Childfree Wealth Podcast, hosted by Bri Conn and Dr. Jay Zigmont, CFP®, is a financial and lifestyle podcast that explores the unique perspectives and concerns of childfree individuals and couples.

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Disclaimer: This podcast is for educational & entertainment purposes. Please consult your advisor before implementing any ideas heard on this podcast.

Transcript

Bri

All right, Dr. Jay, today we're going to be talking all about investing. And if somebody has never invested before, but they want to start, what can you tell us about investing and the basics?

Dr. Jay

So when we're looking for investing advice, is the first place you go is online and go what do whatever the finance bro is selling this week and that's what you should invest in? Is that kind of your plan?

Bri

I did that. I'm not saying it was a good idea, but I did that.

Dr. Jay

Yeah, that's not a good idea. Okay. So it may frustrate people a little. I am not going to tell you what to invest in. Why? Because I can't. I'm a Certified Financial Planner. Childfree Wealth is a registered investment advisory firm with the S.E.C.. That doesn't mean anything special, but just means we have to follow the rules. So if there's somebody online saying you should buy blank, they're either an educator, an entertainer or not an investment adviser. I know that sounds weird, but just go with it. So if they're selling you that, oh, IUL or crypto or stock or they like, it's cause they're making money off of it. Is that fair, Bri?

Bri

Yes, I would say that's fair.

Dr. Jay

Now that make me make you a little frustrated because you're like, well, but how do I learn this stuff? So here's the first thing. We're going to set one rule for investing overall, and that one rule is only invest in things you understand. So understanding an investment means a lot of things, but it means you've got to understand what you're investing in, like stocks or ETFs or bonds or real estate or crypto or whatever.

You have to understand where to keep it, you know, which accounts, taxes, retirement, all that. And then the third one's a little harder, which is how does it impact your financial plan, which is like risk and reward and that balancing act. So everybody probably at some point in their life has invested in a savings account. A savings account is where. That is just like the bucket it is in.

What is real simple. You put money in, you get interest. Hopefully, in a high-yield savings, you get a little bit more. How it impacts your financial plan? Well, the job of a savings account is just to have money there for when I need it. It is not going to beat inflation. It is not going to grow like an investment. It's just a nice, safe place.

We also had a separate episode talking about some of the banking, SVB and FDIC and all the insurance. That's a separate thing that you need. Understand a savings account, but a savings account is rather simple to understand. The people go well, but do I have to like understand everything about the stock market, everything that goes on and I have to pick stocks.

No, you don't. But you only invest in things you understand? So, Bri, do you understand crypto?

Bri

Not really.

Dr. Jay

Cool. I go to a webinar almost every week on crypto and, you know, read stuff nonstop. I understand the technology behind it. I understand some of the theories behind it. There's not a lot of history. Of course, that's part of the problem. I don't invest in crypto now. Somebody in the comments is going to, you know, “blah blah you should invest in crypto and blah blah blah blah blah.” And they might be right, but I don't understand it well enough to know which crypto should go, where and how it impacts my financial plan. Now that might be a blind spot. That's okay. It's okay to not understand every investment that's out there and use the ones you understand.

What do you think?

Bri

I think that is very true. It's important to know what you're investing in and understanding it because it can have real impacts on your financial plan and to me, the scariest thing is when people say, Oh yeah, I do this, but I don't know what it is. I’m like, “Well, if you're working with somebody, they should be able to explain to you what you're doing in a way that you can understand it. If not, you probably shouldn't be doing it.”

Dr. Jay

Yeah. The scarier one to me is my answer. Blank friend. Family member said I should buy x.

Bri

Yup. I have heard that recently.

Dr. Jay

And I'm like, cool. That might work for them because that might impact how their financial plan works. They might understand what it is. And then I have a place for it. It doesn't mean it's right for you, but I am not hating on crypto. You want to mess with crypto and you understand it. Good. Do it. I don't, you know. And it's one of those things where like people go, well, I could you could do a lot of things. So let me ask you a quiz question here, Bri, and I'm asked about your personal finances, and I apologize. We'll make this about all about Bri. Bri do you want your investments to be sexy or do you want them to work?

Bri

I just want them to work.

Dr. Jay

Why?

Bri

Because one, I'm not going to people are never really going to see what my investments are to begin with because that's not something I share. And so I don't need to impress anybody with what they are and I just want them to work. So that way I can have financial independence.

Dr. Jay

Yeah. I mean, most people are with you. Like, I don't need to be sexy, I don't need to be fancy, and I don't need my investments to make me rich overnight. I need to be slow and steady and boring. Like my goal is for your finance to be boring. So your life can be amazing. And boring like bothers some people.

So if you haven't caught it yet on Netflix, Ramit is doing a documentary on How to Get Rich, love what he's doing. And I got some, you know, I don't love everything he says, but I like what he's presenting. And there's somebody in there. He's talking about doing calls and options and which is by the way gambling. I mean, that really is gambling in the stock market.

He hit hard, did well, then put it back in another stock and then lost most of it. Now, the the interesting part of that to me is not the investing. Two things he didn't really understand. He didn’t, but his friend... And it worked. That's always bad when somebody gets lucky. It's always a bad deal because then I have to reprogram. But what was more interesting is he shared with his wife when the stock went up, but not when it went down.

Bri

Yeah, he kept that from her until the show and that… I think he mentioned in there. For me it was like, well, yeah, people want to talk about when they're doing good, but they don't want to talk about what they're doing bad.

Dr. Jay

Yeah.

Bri

And I can't remember the guy's name who got the money, but he did say at one point, you know, maybe I'm not as smart as I thought I was. Maybe I was just lucky. I was like, yep.

Dr. Jay

 And here's what happens with the stock market. Luck is your enemy. Now we're going to talk about kind of what you invest in next time, and we'll talk about passive versus active investing, all that. But the fun one is every time they do a competition, well almost every time, okay, I've got a little where the chicken or the monkey is picking the stocks.

They do better than the professionals just randomly picking stocks. They're like, that's why we don't pick individual stocks. But like, I do this for a living and my investing is very boring. I do keep a little bit of money, about 10% of my stuff for what I call gambling. I invest in individual stocks, because like, I do this for a living and I'm just trying to like have some fun.

But the other 90% is just simple passive investing. I invest in three things. The whole U.S. stock market, the whole international stock market, and some bonds. That's it. Like and I do this for a living and I'm not trying to get fancy now. People go well, but as you get higher income, you need to get fancier.

No. As you get a higher net worth you need to get these… No. And by the way, for childfree folks who are dying with zero fancy isn’t going to help you because you can add more money at the end, maybe, but you might lose your life in the middle, you know, if your investments are keeping you up at night.

That tells me one of two things. Either you don't understand what you invested in or you took on too much risk. I don't want you to think about investing. Is that investment at all. My goal and I'm not 100% there. I’ll freely admit this. My goal is to check my portfolio twice a year. Kind of like, are we still on the same path?

Cool. Unless something major change in my life or them or the world set it and forget it for you as my clients, I want the same thing twice a year. If you're looking at your portfolio every day and up and down, write it, throw it, forget it. You are investing the wrong things. You know, understand what it is or you're taking on too much risk.

Bri

I fully agree with that. If you're constantly looking at it, it's not going to help you. It's just going to make you anxious because it goes up and down so much and I know I mentioned in a previous episode that I had turned on daily account balance alerts. I got it turned off now, thank God because it was just a roller coaster.

And you know, even me who is on this podcast and working in finance and all this, it can be frustrating to see that constantly. And this is my job. So you don't want to be looking at it every day. Two times a year. I like that goal. I also I'm not there yet.

Dr. Jay

I didn't say I got it yet. Like I will admit now I'm kind of at monthly now and then the other one I have to watch out for myself is like because I do this for a living, I’ll be in somebody else's work. And I'll be like, oh, that was a bad day. How’d that hurt me? Or, wow, that was an awesome day. How do I do? I know I need to get past that, but now that's just I live in finance.

Bri

Yep. Is very true. It's kind of hard to shut that off at the end of the day. We like, stop looking at things, just go look at something else that is not related to finance. So I get that.

 So if I'm so, if I'm wanting to learn more about finance, how do I learn about it? Where do I go?

Dr. Jay

Okay, the first thing is you got to know who's giving you the advice, all right? It's just the nature of the beast. I tend to start people off with three books. The first book is The Simple Path to Wealth. JL Collins. You know, he's right about the basics of financial planning, and it would do most of your financial plan if all you did was read The Simple Path to Wealth and stop listening, I'm good. Now, Childfree folks have some weird quirks and some changes, but start with The Simple Path to Wealth. So the second book is John Bogle, The Little Book of Common Sense Investing. And by the way, this was like breathtaking when it came out of like, yup, I just invest in the whole stock market, let it sit and go. And Bogle invented Vanguard and ETFs and a few other funds, things that now are part of every day.

It's a good one for you. It's getting into a little more complicated than The Simple Path to Wealth. We can call that kind of intermediate level. Now if you decide I want to like dive in a little deeper and I want to like think about like technicals and all this other stuff and what should I do? And picking stocks.

The last book I recommend is A Random Walk Down Wall Street. Now the Random Walk Down Wall Street, real simple. They pull apart and go, yep, none of that stuff works. They're like, The bottom line is, over time, stocks go up and it looks more like a random walk. Like some days this goes up, some days that goes down.

Now I have colleagues, you know, especially those that are CFA and others that will swear they can outthink the market and do what they might. But for us, that's it. Because here's the thing. If you want to outsmart the market, you have to outsmart hedge funds with technology and teams of people and like, you’re not, it's just not going to happen.

Instead, you want to protect your investors, make them boring, and make them go up over time. Those three books, if you read those three, I'm good. If you want to dove in a little deeper, especially on the childfree folks, we actually have a course on investing. Saving & Investing. We'll include a link on that. Yeah, you pay for it, but it gets you there, but it also helps you through assessments and different things.

Dr. Jay

Now, before I go further on this, I got to talk about getting your advice on the TikTok. So breathe. Who's your favorite TikTok influencer?

Bri

Oh, man. You know, I deleted TikTok, but I'm on Instagram now. I like Money with Katie. I really like her. I think she brings up a lot of good points, a lot of the books she recommends. I read those actually. I think maybe like five of the last three books I've read have been recommendations from her. Quite a few.

Dr. Jay

And by the way, there are some good financial influencers out there, but there's also a lot of garbage. And I pick on TikTok in particular one because I don't understand TikTok. Like I just don't get it. I'm too old for TikTok. But the other part of it is any random person can start giving financial advice on there.

Now they're going to say it's not financial advice, so they don't get regulated. But like literally anyone can be doing it and it gets caught on. So I mentioned earlier this IUL thing which is which indexed universal life and IULs are kind of like, hey, well, you know, we can use infinite banking and they're like, get the sales pitch that sounds really good.

You're buying a combination of insurance product and investing, which I call a spork. It does neither job well, but it's being sold by these influencers. Also, we recently had some rather large names get sued by the SEC for talking about crypto without talking about the issues behind it. It's tough. So here's my general rule. If they're helping you on like general finances, understanding how finance works, I'm okay with that.

If they're saying, buy this, sell that, forget it. Like by the way that's not a perfect rule, but just kind of like if you live in the in the Internet world, if they're saying you buy or sell something. Now, the other one that happens here a lot is like a people that have gone down the, in particular real estate path, which is I need to buy a real estate and leverage things.

This is the grant conditions of the world of taxing and I need cool by the way real estate is an investment. Understand what it is, where and how it impacts. But what they're doing is they’re selling debt. So when they sell debt, they're saying leverage. Those are the same things. Now we're talking about combining debt and investing. And my analogy on that one is, well, would you take a loan out on your house to put it in the stock market?

People go, no! Well, then why would you take a loan out to buy a property that is a three door apartment? Now, a lot of you make my money in real estate. I'm not. I don’t have a problem with real estate. I just want you to buy it with cash or with your money, not with debt. But what happens is that like those all are popular because people feel like they understand real estate.

But the thing is, the house you buy as an investment and the house you buy to live in are two different things.

Bri

Oh, my God. If I heard, if I had a dollar for every single time somebody told me I need to buy a house to live in because it's an investment, I'd be retired already.

Dr. Jay

Yep. And remember, for childfree people buying a house, a choice, not a requirement. So where I'm going with this is each of these influencers, myself included, I guess. I don't know if I call myself an influencer. I do something childfree, something I guess I can hate on them because I'm talking on the internet, but each of them has their own recipe.

You have to pick which recipe you want to follow. If you want to follow the Dave Ramsey's of the world, the no debt, fine. Don't mix it with the Grant Cardone’s, the all debt people. That's not going to work. And when you're doomscrolling on the Internet because you're trying to figure out how to get out of your finances or get your retirement, you're mixing ten different recipes.

The end result is some mush. You're making a brisket and brownies at the same time. Who knows what's going to come out of this? And I think the hard part is it's very easy to learn investing, but you just have to take the time to do it. You're like, yeah, but I need to invest now. Well, you can wait.

It's not going to kill you to wait. You know, you can read the books, you can take some courses. The other thing you can do, you can hire someone to help you. So just kind of a caution on this. I am completely jaded because I do this for a living. So my own opinion is my own opinion on this one.

But you can hire a Certified Financial Planner to help you invest. There's two different ways to do this. One is they call it the delegation approach, where you're like, here, you do it for me. I don't love that because cause you're not understand what you're investing in. I have people that come to me all the time, like I've been with this so-and-so for years and I'm like, okay, why do you have these investments?

Like, I don't know, because they said I had to. No, no, no, no. We don't trust anyone. Like you need to understand it. The other model is what we call an advice-only financial planner who's there to teach you. You pay either hourly or on a retainer basis, and they teach you and you do it. That's better because you're learning how to do it for life, because the reality is whatever you do for investing now, you probably going to be doing for next 50 years.

You need to take the time to learn that whether or not it's worth to pay it well, you can learn them on the books of courses and just be good. You want more help pay for somebody or you want to faster pay for somebody. You know, it's it also has to do with your learning style. So my background is a PhD in Adult Learning, I know some people will learn by books and some people don't.

Some people, you know, I meet with clients, I deal regular on a monthly basis and we make one or two improvements. And I look over the shoulder and I'll be like, okay, buy this sell that do this, and I'm teaching them how to do that and it works for them. Others pick up The Simple Path to Wealth and good for life.

You know, you need to decide what this for you. You don't need to spend the money. But I'd encourage especially childfree folks to look for what they call advice-only financial planners. Yes, we do that Childfree Wealth, but also if you don't want to work with us, there's a website called AdviceOnlyNetwork.com, which a whole bunch of advice on the planners.

Just be sure to ask them how your financial plan is different because you're childfree. If they say, well, you'll change your mind, you just get up and walk out of the room. But I said, walk around with Zoom now, but you know, you shut off the zoom. If they say, I don't know how it's different, I'm actually okay with that answer.

And if they say here are the differences, I mean, that's even better. But you need to ask them that question because if they say, well, you know, it's not different. Mm. I'm going to strongly disagree with that. But the bottom line is you learn, you get help, you take the time. It's, it's not something you’re going to pick up overnight.

And by the way, pick it up an app that like throws confetti when you buy a stock because it encourages you buy stock does not teach you about the stock. All it does is gamify it and hoping you do that. You're smiling Bri. You know what I'm talking about?

Bri

I did that because of a finfluencer.

Dr. Jay

And what did you buy? Some random stock.

Bri

I have no idea honestly.

Dr. Jay

That’s my whole point. But yeah, to give you an idea of how dangerous that can be, I've had this more than once now where somebody reached out to me and did a whole bunch of day trading because they read something on the internet and ended up with millions of dollars of taxes owed. It is actually possible to owe more taxes than you made on the stock because you made a whole lot of mistakes around day trading, a wash, sales, and some funky things.

Bottom line this you don't day trade. You don't try to get rich overnight on investing. Slow and steady. Learn and only invest in things you understand.