Afford Anything - 10 Questions to Master Successful Investing, with David Stein

Episode Date: February 7, 2020

#240: Are you investing, speculating, or gambling? What are the three drivers of asset performance? Are you aware of who’s getting a cut from your investments? Do you even know who’s on the other side of the trade? David Stein is the author of Money for the Rest of Us, a book that answers these questions. He’s the former Chief Investment Strategist & Chief Portfolio Strategist at Fund Evaluation Group, a $70 billion investment firm. If you’re thinking of adding a new investment to your portfolio, David’s investment philosophy and framework can help you avoid expensive mistakes. For more information, visit the show notes at https://affordanything.com/episode240 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a tradeoff against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention. It applies to anything in your life that's a scarce or limited resource. That leads to two questions. Number one, what matters most to you? And number two, how do you align your day-to-day decisions to reflect that?

Answering these two questions is a lifetime practice, and that is what this podcast is here to explore. My name is Paula Pan. I'm the host of the Afford Anything podcast, and today, David Stein joins us to talk about 10 questions that you should ask yourself before buying an investment. David Stein was the chief investment strategist and chief portfolio strategist at Fund Evaluation Group, which was a $70 billion investment advisory firm. During his time there, he co-led a 21-person research group.

He now hosts a podcast about investing called Money for the Rest of Us. This is his second time on the Afford Anything podcast. He was also our guest on episode 95. And he has recently published a book called Money for the Rest of Us, in which he outlines 10 questions that a person should ask themselves before they buy a new type of investment. So if you're thinking about going into dividend investing or starting international investing or picking up shares of individual stocks like Tesla or Nike or Apple, here are 10 questions that you should ask yourself before making that decision.

In this upcoming interview, we're going to talk about the difference between investing, speculating, and gambling. We're going to talk about how to figure out the upside and the downside. We're going to talk about three factors that drive an asset class performance and much more. So all of that is coming up right now. Hey, David. How are you? I'm wonderful. Thanks for having me on your show.

Thank you for coming on. David, could you please introduce yourself? Tell us about your investing background and at a high level your investing framework and approach. Sure. I spent 17 years as an institutional money manager working mostly with not-for-profits, a lot of university endowments. From that experience, my approach to investing has always been an asset allocation approach in terms of diversifying among a number of different asset categories. And the philosophy is very much to have multiple return drivers in your investment portfolio and to be able to understand what has to happen for an investment to be successful. I find investors,

they'll often find whatever is getting the most hype, be it Bitcoin, be it weed stocks, be it real estate. And the purpose in my approach is really to take a step back and have a framework for deciding how we invest. Here are some specific questions to ask to help us decide whether this is an appropriate investment for our portfolio or not.

I find that in my, In my investment career, we spent a lot of time researching hedge funds, money managers, private capital managers, and you find the most successful investors, they have a framework. In fact, it was one of the criteria that we used in deciding whether we wanted to recommend a manager is what is their investment culture, what is their investment discipline, and do they stick through it, even as things might change? Because sometimes all investors go through what we'll call bad times, where you're tempted to react, perhaps rashly, and a discipline allows us to stick to our approach to investing,

and that's what I tried to accomplish with this book, to really give the individual investor a decision criteria, really a checklist to go through before they invest. You mentioned that you have what you call an asset allocation approach. Now, most of us, when we start learning about how to invest, one of the first things that we learn is that asset allocation is cornered. stone to your investment success. So when you say that you have an asset allocation approach, in contrast to what? Are there other approaches that are not asset allocation forward? Well, sure. I mean, there are plenty of people that start investing, thinking, although

we'll just do one asset class. They might just decide, I'm going to, and I've seen it, I'm going to put all of it in Bitcoin. I'm going to just buy individual stocks and not ETS, not mutual funds, but try to select individual stocks. And some, investors just have one asset class, which is just stocks in general. Maybe it's just Vanguard one Vanguard fund. My approach is to have public investments, to have private investments, and put them together in an overall portfolio. And it's not sort of a quantitative modern portfolio theory approach. We're trying to optimize a portfolio. We can't optimize as investors. It's just too difficult. In many asset types, you can't really get the data to do it.

As investors, we really cope and we try to do our best in putting together a portfolio. And that actually takes off a lot of the stress. If we feel like there's a right portfolio that's just one absolute optimal portfolio, then we're always afraid to make changes. We're afraid to add something. We should be much more relaxed than our investing, and I'm sure we'll get to it later, but really approach investing like you plant a garden. You don't optimize a flower garden.

You plant a variety of flowers and plants. and that's how we can approach investing. So with that approach established, let's talk through the 10 questions that you outline that any individual investor should ask themselves before onboarding a new investment into their portfolio. Well, what I find, and this really came from one of my clients. I had a liberal arts college in Indiana that I was advising. They had about $200 million. And the chair of the Investment Committee said to me once,

I will ever recommend or will never invest as a college in an investment that I can't explain to somebody that's not on our investment committee. So I have to be able to explain it to another board member. Here's what it is. And that seems pretty straightforward. But academic research shows that the act of explaining an investment or anything, let's say something as simple as a zipper, try to explain how a zipper works. or as you go through and try to explain that, we often realize we don't know as much as we thought, and it humbles us.

So going through the process of explaining what an investment is, what its characteristics is, how it's going to make money, and the other nine questions help us to answer what is it. But we ought to be able to explain to a family member or a friend if there's something that we're interested in, how does it work? And Bitcoin's a great example of that. I mean, there were many people that went into Bitcoin in 2017. having no idea how it even worked or what it was or anything related to it.

Just they thought, and I've done it. We all do it, right? I have bought investments simply because I thought they would go up in price without really thinking about it. I bought it, Novell, because I thought it would go up in price and it did something with computers. And that was my investment thesis. It will go up because it does something with computers. That's not being able to explain what investment is. I need a little more detail than that.

In this chapter, you make the point that financial markets are nonlinear, complex, adaptive systems. Can you go into what that means? We'll start with non-linearity. Can you define that? Something is non-linear if the output that you get isn't always the same as the input. In other words, something that's linear is you know, you put in A and you get B every single time. sometimes if it's nonlinear, you might put in A, you might get B plus, you might get C minus. And so it's another way of saying is investment markets, financial markets are not predictable.

They're nonlinear. I'll give you an example. Generally speaking, when there's a big crisis or some tragic event, there's a bombing or terrorist act or something big, usually the market falls 4 to 5% the next day. But not every time when the recent situation where Iran bombed some bases in Iraq, the market went up. And so that's what nonlinear is. It's not the same input or output based on the inputs. Something is a complex adaptive system. Something is nonlinear, but things change over time.

The people that input it or in terms of, like markets are made up of humans, and humans learn and they react. So going back to something that's nonlinear, a sand pile. If you drop the sand in a pile, at some point there'll be an avalanche, but you don't know which sand, which kernel sand will cause the avalanche. Something of the complex adaptive system is if those sand could think and interact and react and react and as they interact. And that's really what financial market is. You have all these players, including quantitative algorithms and AI that's learning. and that's what we're investing in, that environment. And so, you know, I spent a great time trying to help people realize what it takes

and how difficult it is to try to predict the future, particularly when it comes to investing in an individual stock, which can be very fun and enticing to do, but also very challenging because of the environment that we invest in. You raise the point that financial markets are nonlinear complex adaptive systems in order to underscore how unpredictable the outputs ultimately are? Exactly. A very important part of investing is coming up with a reasonable return for an investment,

understand what some drivers are that would lead to that. But there's no guarantee that that will happen. And so you often hear people that, particularly young investors, like, I just put it all in stocks. I'm 100% stocks. And they'll retire 100% stocks in their 30s. let's say the fire movement. And great for having saved that amount.

But there are places around the world, Japan, that markets crashed in the 80s and have never recovered. They've never gotten back up to the high. And there are lengthy periods of time where the bond market has outperformed the stock market. And so I'm a big proponent is understanding where we are today. So yes, we can't necessarily predict what's going to happen,

but we can understand what the market's temperature is. Where are things today? Understand what the drivers of stock returns are, for example, and where those are today. And that helps us come up with some reasonable expectations so that we don't get overconfident in our investment thesis. And I think that's really, markets are humbling and we need to approach it as humbling. And nothing is guaranteed, including the fact that stocks will generate eight to nine. 9% a year for infinity. So with that established as that first question, the question of what is it, what is this

investment that I'm looking at? We then moved a question to where we take a look at this potential investment and we ask the question, is it investing, speculating, or gambling? What is the distinction between the three? An investment is something with a positive expect of return. Typically because it has some form of cash flow. It has, it pays interest. It has profits that lead to dividends in the case of stocks.

It could be rents in regards to real estate. And so there's a reasonable expectation that the return will be positive because there's cash flow. Now, we can contrast that with speculation. Speculation is something where there's some disagreement whether the return will be positive or negative. Because the outcome is completely dependent on the price going up. For example, gold is a speculation. Cryptocurrencies are speculation. Antiques, art.

There is no cash flow associated with them. I mean, you can still make money with stocks, even if the price doesn't go up because if you're getting the dividend. But with speculations, it's very dependent on somebody paying more in the future. And the speculations aren't bad. I mean, I have speculations. I suspect you have some speculations in your portfolio. But they shouldn't be the main driver of our performance because it's not dependable.

Cash flow is way more dependable, and so that's why it's an investment. Gambling then is something with a negative expect of return. It's something that we do strictly for entertainment, because there's a reasonable probability that will lose money, and that's why it's gambling. You go to Vegas and you're betting against the house, you can't have a positive expect of return, otherwise the casino would go bankrupt. And so we do gambles if we choose to, just strictly to be entertained. lottery, for an example, but most of our investing should be assets that have cash flow that can

generate a positive return. And so whether or not an asset produces cash flow, for example, in the form of dividends or rent, would be the distinction between an investment versus a speculative purchase. A speculative purchase you're relying on appreciation. Exactly. That would be the difference. Because if it's just the price appreciation, then what often with speculations, or because there is no cash flow, you can't value it. There's no good way to say, here is the correct price for gold. Because with stocks, you can look at, all right, here's the earnings or the dividends, and what is the price of stocks relative to that earnings, P.E. ratio.

And how does that compare to the historical P.E. ratio? So we can say stocks are overvalued relative to their history. With speculations, we can't say gold is overvalued. or Bitcoin is overvalued because there's nothing to value it against to come to that conclusion. Let's move to question three that you recommend that investors ask themselves, which is, as you're evaluating a potential investment, question three is, what is the upside of this investment? This is probably the most difficult chapter in the book because I go into a great amount of detail to figure out

what's a reasonable expectation for returns? And we go through bonds and we use rule of thumbs. As investors, we don't have to be experts. There are 1,500-page books on bond investing. For an individual investor, we don't need to read that. We need to know that the primary driver of bonds are fixed income returns. Bonds are debt instruments. So you're lending money to an entity.

The primary driver is the starting yield. What is the interest rate yield, which is sometimes, called the yield to maturity. If it's a bond mutual fund or a bond ETF, every fund is required in the U.S. to publish what's known as the SEC yield, which is basically the yield to maturity, less fees. And if you hold that ETF or individual bond over for seven to ten years, your return will be very close to that starting yield. And because that is the math of bond investing. And I go through that. And so when we enter an investment, we need to understand, well, again, what is a reasonable expectation based on the inputs? Now, all investments have return drivers. The first, as I mentioned,

is the cash flow. So for that bond, it's that yield to maturity. The second driver is, is the cash flow growing over the time? So if it's stock, it's the dividend yield. And to what extent are earnings growing over time? And then the third component are what are investors paying for that cash flow and how has that changed over time? And you can you can go and look back at the stock market example, go back to 1900, 1870. The overall returns been about 9.5% annualized and four percentage points has come from the dividend. Another four has come from that dividend growing over time. And then one percentage point came from stocks getting more expensive over time. Why that's important, so we can do the same analysis today. We can look at the U.S. stock market and see, well,

dividend yields only 2%. If that's the starting point, then what's a reasonable assumption for earnings growth? And that's typically been 5%, 4 to 5%. So that gets us a return of 7%. So if stocks are going to return 10% like they've done historically, then they're going to have to get more expensive than the art today. Investors are going to have to want to pay more for that earnings and that earnings growth, which is probably not a solid assumption given that PE ratios are already very high and much higher than it have been historically. And so this analysis lets us just be reasonable in our assumption. So a 6% to 7% return is a reasonable expectation for stocks right now. And for bonds, a reasonable expectation because interest rates are so low is about 2, 2.5%. And that means as investors, if we're saving for

retirement, we can't assume very high returns. And so we're going to have to save more. And that's the point of figuring out the upside. What is the potential expect to return based on these return drivers? So you mentioned that the three return drivers of any asset are cash flow, cash flow growth, and change in valuation. And when you talked about what type of returns we can expect from equities right now, you mentioned that 2% is the current dividend yield right now, and that 4 to 5% has been historically the rate of growth through appreciation or change in valuation. However, in your book, you make the point that factors that affected the market historically are not necessarily the same as factors that impact the market today, and therefore we should be cautious about over extrapolating from historical averages.

So my question is, to what extent should we rely on historical data when we're making these types of predictions? Well, I think it's a good starting point, and let's take earnings growth. Historically, earnings growth does not grow any faster than the economy in terms of a gross domestic product, GDP. That's the measure of output, the value of the output in goods and services produced. So over time, earnings have actually tracked the growth in GDP, but they haven't grown as fast. And the reason why is because there's always new companies issuing. stock. And, you know, as you get more companies, so generally, and you can look at the 50s, the 60s, 70s, 80s, 2000s, earnings growth always trailed the nominal growth in GDP or the growth of the economy.

The one exception was the decade that we just had, where earnings did grow faster than the economy. And the reason why is because there was so much stock buybacks. And so the number of shares were shrinking. And there weren't as many. initial public offerings. And so that's something to recognize. And so then we can step back and say, all right, maybe we should assume higher earnings growth going forward for U.S. stocks. But we have to recognize that how did those companies buy back all that stock? Well, one, they got a one-time big tax cut and a lot of companies were able to bring back cash from overseas. And two, they took out a lot more debt. So companies are much more indebted than they've ever been. And so,

So then we have to decide, okay, is that a reasonable assumption? Will they continue to increase their debt balances so that earnings growth grows faster than the economy? I would say, then that's probably not a great assumption. It's an upside potential, but I wouldn't bet my retirement on earnings growth continuing to grow faster than the economy. And so that brings us back to a for U.S. stock market, five and a half, six percent, perhaps seven percent return going forward. What was it about this past decade that made it different from previous decades? You mentioned that many companies bought back their stock due to the increased availability of cheap debt, coupled with tax cuts. Were those the two primary factors, or were there other factors at play as well that caused this past decade to be so different?

Well, I think company management, they're realizing it's way easier to be able to exercise your stock options and make money by buying back. your stock. I mean, it's very, very difficult to run a publicly traded company and to make investments for the future. It's way easier just, well, we're just going to reduce the number of shares, so our earnings per share goes up much faster than overall earnings. And so it's an easy way to manage a company because your shareholders are happy because your earnings are going up, because earnings per share is going up, only because there's less shares outstanding. Obviously, the company's earnings have to at least grow at some level, but it's much easier to do that than to try out a new product.

Right. But why now? I mean, that was also true in the 90s. You know, that's a good question. I'm not sure other than maybe management's more humble than used to be, right? I mean, back in the 90s, you had sort of these superstar managers that felt like they could walk on water. And I think overall, especially as tenure for CEOs has been shorter and markets are less patient with managers that are underperforming, that they go, they're more inclined to go to that. And the other big change is interest rates are much lower than they were in the 90s. And so by using leverage, you get more bang for the buck. You're able to borrow the money. Banks are willing to lend.

The interest rates are super low. and so you get more of an impact of buying back stock and reducing the shares. If interest rates are much higher, then it's not as a compelling argument to do that. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for, businesses of any size. But they also have the fintech hustle that got them named one of

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Terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-A-I-O. dot com. Sale ends December 7th. For an individual investor who's trying to evaluate the upside potential for some type of investment that they're considering getting into, what should they do? Like, what steps should they take to start evaluating that upside potential?

You start with looking at, you know, what's the cash flow being generated? So with bonds, look at the SEC yield on the particular bond fund. Maybe it's funds within your 401k or other defined contribution plan if you're not in the U.S. And you look at what are the options? They'll list out. You'll be able to get information, be it Morningstar or the sponsor's website and be able to say here. Here's the yield on the cash option or let's say it's a guaranteed investment contract or some type of stable value fund. Here's the yield on the other bond fund in there.

And one of the things that you'll quickly see if you have those two options within your plan is that the cash, often a stable value fund, is yielding more than the bond fund. That's a reasonable expectation for what bonds are going to do. Then you would tend to allocate more to the stable value fund than you would to the bond fund. So that would be a good starting point. You would look at what's the dividend yield. And you'll see that the dividend yields for the non-U.S. options are higher than the U.S. options. So then, well, okay, so maybe they're going to do better. You could look at the valuations.

What's the price to earnings ratio of U.S. stocks versus non-U.S. You'll see that the P.E of U.S. stocks is over 20. Non-U.S. stocks, it's over 17. And so based on the valuations and based on the dividend yields, you would come to conclusions that, well, maybe non-U.S. is going to do better than U.S. stocks over the next decade. The wildcard is going to be the earnings growth. Will the U.S. continue to grow with earnings faster than the rest of the world? and that's debatable and we don't know.

But my conclusion is the U.S. stock market only makes up 55% of the world's stock market. Even if I'm a completely passive investor, do I want to be overweight U.S. stock market given that it has a lower dividend yield and much higher valuations? Or do I want to have more in non-U.S. stocks? So that's some of the things we'd want to look at to start out. Now, you also, moving to question four, you also encourage investors to ask themselves the question, what is the downside? Tell us about how to evaluate the downside. So the downside of investment, it's its maximum potential loss. So that's one thing. But more importantly,

the personal financial harm caused by that loss. So typically for asset classes, and I include them in the book, I show stocks, for example. Historically, its worst loss was 60%. That's what happened during the great financial crisis. And the recovery period was about four years. So when we're investing in stocks, we want to be recognized that I could lose 60% of the market value. Now, that's not necessarily a reason not to invest, but then we have to decide, okay, how would that impact me personally? If I'm a few years from retirement, unless two or three years from retirement, maybe I don't want 90% in the stock market right now, because if stocks fell 60%, I'd have to delay my retirement because I don't have a pension plan. And so for all investments, when you look at the

downside, we want to see, how bad has it gotten? What's the worst thing that has happened? And how would that impact me? And that can help us figure out risk. So traditionally in finance, risk was volatility. To what extent did the asset class move up or down relative to its average? was investors, we don't care about upside volatility. We'd love when stocks do better than their average. We care about downside volatility. What happens when we lose money? And how often does that happen and how big has it been?

And then that can help us evaluate. So I don't spend a whole lot of time figuring out volatility of stocks. I worry more about how much could I lose in stocks and how would that impact me. How can you objectively evaluate the way in which a major loss would impact you? It strikes me that there would be logistical ramifications, such as your ability to pay bills, and that's fairly straightforward to calculate or to model. But there would also be an emotional impact which could trigger behavioral changes, and that's much harder to predict.

Is there a way for investors to be able to make that assessment, particularly young investors who have not yet dealt with a lot of downside volatility? Well, I believe it should focus primarily on the logical aspects. Like physically, in terms of my ability to meet my financial goals, how would that downside impact me? Oftentimes, financial planners will do risk tolerance and they'll say, well, how would you feel if this happened? And the problem with these type of risk tolerance questionnaires is our risk tolerance is variable. Prior to the financial crisis, people thought that stocks were a high return. earning low-risk asset class. And then they lost 60%. I suspect people still do that because we

haven't had those type of losses. And so the people that use robo advisors, which is perfectly fine, it's wonderful we can automatically invest. But if it's primarily in stocks, it's not a cash investment. It's stocks. And so I don't think we can, we won't know how we will react when the stock market falls like that until you go through it. But what we can know is will I still be able to pay my bills if that happens? And if you're younger investors, yeah, because they don't have as much. Their portfolios tend to be smaller. They have many, many years to continue to invest.

They have a large amount once in what is known as human capital, the ability to continue to earn money. And so they can have more in stocks. And that's why we, I focus more on fiscally. how will it impact us if the worst thing happened? The fifth question that you recommend investors ask themselves is who is on the other side of the trade. Can you elaborate on that? Sure. Whenever we buy anything, we should consider who's selling it to us. And real estate, we generally do that.

If you're buying a property, a house, a rental property, you want to know who's selling it to us. Why are they selling it? because if you get if you have that information sometimes that can help you in negotiation if they're highly motivated seller you might offer less we tend not to do that with public markets we don't think about who is selling it to us and this becomes particularly important when you're buying an individual stock we might be excited about Netflix or some Tesla and we don't think about who are the primary investors that participate in the stock market market because the stock market, it's an auction market. There's an exchange in the middle,

but when we're selling or buying a stock, somebody sold it to us. And so it's important to recognize that this has changed over time. When Benjamin Graham wrote his classic tome on investing back in the early 50s, most stocks were held by individual investors. And as a result, he, Warren Buffett, they could do a huge amount of research, understand the drivers of that stock, what's going to happen, how it's valued. And when they bought it, it was probably an individual selling it to us, or they had some type of informational edge to determine that the stock is mispriced. And then they earned outsized returns. Now, most trading is institutions and algorithms. And the research teams are huge. And so it's very, very difficult to purchase a stock and say that it's too cheap, that the

price is wrong because somebody is out there, have done way, way more research. Most investors have done way, more research to understand that. And so that's really the point is to understand, who am I trading with? And there's other aspects to it to, we want more trading or buying something.

We want to feel confident the transaction will go through. If you're selling a used car, you take cash. Now, most financial markets, you have confidence that the trade will go through because there's insurance. But here's an example. A lot of investors, and I've done this, they've invested in these crowd platforms where they're lending to people that are flipping houses. Right, real estate crowdfunding. Right, but particularly the housing.

And what you've seen with these real estate crowdfunding sites is, particularly let's focus on one housing. You would think, okay, I've made a loan to somebody and they bought the house, and so we have security in the house. If they go bankrupt, we're fine. But no, if you actually look at the document, it's a mortgage contendent payable note. So you only get paid if that person gets paid.

but you as a participant on the platform, you don't have a security interest in that property. The platform does. You have an unsecured liability with the platform. And we saw this with realty shares. I mean, I had investments with realty shares or really shares closed down. They didn't file bankruptcy, but for a while there,

I was concerned of it. Would I get my money back because of the platform? And with so many of these crowdfunding platforms, they're funded with venture capital. You don't get transparency to understand. their financials. Now, where else is somebody, I mean, it's risky. It's a low risk, but it's risky to essentially tie a large amount of money to a platform

where you have no transparency in terms of their financial situation. Even though you're thinking you're just lending on somebody's house, there's a middle person and there's risk to that. And that's why it's important to understand who is on the other side of the trade. Right. That was a major thing that I learned from reading this chapter. I was previously under the impression, as I think many people are, that if you go to a crowdfunding platform and you loan on a specific property, like an apartment complex in Fort Myers, Florida, then that loan is secured by the apartment complex. But in fact, as you point out, that's not the case.

You're giving a loan to the platform, and that is an unsecured note. The platform then lends that money to the property, but you yourself have no security for the loan that you've given. Well, right. And the note says that they'll pass the payment, you know, so if the property owner makes the payment, they'll pass it through you. But it's what happens to that middle person. And I mean, Realty Shares was a real wake-up call because they were one of the leading platforms. And they shut down with very little notice. Right. And so that underscores the importance of understanding who's on the other side of the trade and understanding the platform on which you are trading. Exactly. So understand who you're dealing with. Understand the platform. And these are just aspects to make sure we're confident that the deal will go through and that we really understand the investment. And if we're getting to where it gets really, in some extent, gets to question seven will get to is what does it take to be successful? And that's part of it understanding what the return drivers are. And is it dependent on outsmarting some other investor who's selling you the asset? Right. Is it dependent on an informational? edge. Right. How do people take action on this step? Let's say that there's an individual investor who's listening to this interview who wants to get more information about who is on the other side of the

trade. They want more information about the mechanics of the platform that's facilitating the trade. How do they get started in unearthing this information? Well, let's say it's a particular platform and there's a security. I mean, you can read the documents that come with the investment that you're making. to see what am I actually investing in? It gets back to what is it. So if I make a trade on a platform that I'm going to land on a place down in Florida, look at the note and read and see, okay, do I have a security interest in the property or am I unsecured?

So that's a good place to start. If it's just something as simple as buying a Vanguard stock mutual fund VT, you don't have to worry about it because you're buying the broad market, your success is not dependent on successfully outsmarting other investors. And there's insurance guarantees if Case Vanguard gets into trouble or something along that line. And so it kind of depends on the particular investment. For plain vanilla investments, typically you don't have to spend a lot of time worrying about it. It's when you get more specific, buying an individual stock, for example, buying a commodity futures. I mean, sometimes people will invest in oil futures thinking,

oil will go up in price and not realizing that most oil trading is by algorithms and that even within the oil business, the hedge funds, they're not trading anymore, those that try to base that on hitting some type of informational edge. And so you realize that, well, if the hedge funds aren't doing it anymore, then how am I as an individual investor supposed to do that? And so it really gets back to just being humble to recognize because one of the things, the financial markets are enticing. But where else? other than let's perhaps poker, can you basically pick up a racket and start playing with professionals? And that's what people do with investing all the time.

I've seen it specifically with a lot of the trading academies because there's the promises, we will teach you to trade. And I had a furniture salesman that paid $25,000 to learn how to trade. And I went to his trading academy, and they were very upfront. the way that we make money trading is exploiting naive investors. And I mean, it's in their patent. And so we need to be very humble and recognize, all right, if I'm going to trade, who am I trading with?

And I'm trading against institutions, then there's a phrase in the investment business for hedge funds called getting your face ripped off. That means that whoever you're trading with took advantage of you because they knew more. And that's why we need to be careful. But for Plain-Vinnell investments, typically it's not a concern. But at least it's something we should ask ourselves. We'll return to the show in just a moment. Let's talk about question number six, which is, what is the investment vehicle?

Yeah, so this is fairly straightforward. An investment vehicle is the instrument, the product, or the container that houses the particular investments. And it's really understanding the criteria, such as, well, what's his expect of return, which we've talked about, what's the risk in terms of potential maximum drawdown. But it also gets into other characteristics. What are the fees? How liquid is it? Am I able to get my investment out quickly or is it a longer term investing? And what is the structure of it in terms of, what's the difference between a mutual fund and an exchange trade of funds? So it's surely understanding now all investments have some type of vehicle. And so it gets back to reading, as we mentioned with crowdfunding, reading the documents to understand like this is the investment vehicle. This is

what the fees are. This is the structure of it, the liquidity, and that's what that question's about. So it's sort of the nuts and bolts of investing, understanding that investment vehicle. That leads us to question seven. What does it take to become successful? And that seems like a very broad question. It is. It's an important question because we're looking again at what are the return drivers and what has to happen for this to be a successful investment. And so, I mean, there is some overlap with these questions, but it's important to recognize that successful portfolios, they'll have a diversified mix of return drivers. And a return driver is something like the income or the cash flow that we talked about, the growth of the cash flow. But one we've not talked about is leverage.

So oftentimes, let's take real estate, for example, it'll look like an attractive opportunity, but, well, let's say a traditional crowdfunding platform where they've gone out and they bought an apartment. it looks like it's going to have a higher expect of return than public real estate markets, reeds, real estate investment trust. But what you need to recognize is these private platforms tend to have higher leverage. They've borrowed more money. So they might have 60 cents of debt for every dollar of property they bought, whereas a real estate investment trust, typically that debt level is about 30%.

So it's not that the crowdfunding platform is essentially smart. than publicly traded reits. It's just there's more leverage involved, which means that the downside potentially is greater if they're not able to meet those debt obligations. And so that's important just to recognize, what has to happen? When we buy an individual stock,

in order to be successful buying an individual stock, we have to outsmart other investors. We have to be assured that the price is incorrect. When we buy a basket of stocks or an ETFs, we don't have to worry about whether the stocks are priced correctly, because some will be, some won't be, but on average, if we're buying an area of the market that is cheap or undervalued, it has more embedded potential positive surprises than negative surprises. When we buy an asset that's very expensive, well, things have to go more swimmingly in order to make money. What does it take for that investment to be successful?

And I give a lot of examples in the book where the success depends on outsource. smarting other investors. And I think as individual investors, we should tend to avoid that. There's going to be fun to do, but it's better to buy broader asset classes through ETFs, mutual funds, and other structures as opposed to things that are dependent on being precisely right. And this gets back to speculation. Speculations require us to be precisely right that the price is going to go up in the future. Where in investment, we don't have to be precisely right because we get the cash flow. You mentioned that assets have multiple return drivers, including income or cash flow, the growth of that cash flow, the change in valuation over time, and also leverage is a return driver, one that comes with a specific set of risks.

How can an individual investor evaluate what type of return driver is most compatible with their style and their needs? say, for example, that you have $5,000 to invest, and you're trying to decide whether to put it into a REIT or into a small cap value index fund. After you have gone through the process of understanding how those two investments are different with regard to their return drivers and their risk characteristics, how do you then evaluate and come to a conclusion around which one is better for you? Cash flow is always more dependable than change in prices and cash flow growth. So depending on one stage in life, I would argue that having both in the case of small cap value or REITs, but if you're trying to choose if you were going to reallocate, perhaps the dividend yield on REITs is about 4%. The dividend yield on small cap value is probably closer to 2%. And so all things being equal, then we would say, all right, you got a 2% advantage with REITS,

Can the small cap value stock grow its cash flow faster than REITs? Maybe. But right now, small cap value is less expensive on a price to earnings ratio than REITs are generally. And so that's another advantage. But part of this framework is just sort of to think about it. In other words, don't do like I do with my first stock. Just buy it because you think it's going to go up. Step back and say, all right, what are the redrivers?

You know, what is the cash flow right now? how dependable is that? And that can help us to decide. And oftentimes what this framework does, it steers us away from things have to just go perfectly in order to make money. And that's what it's such as a speculation. Let's move to question number eight. Who's getting a cut? This gets back to understanding what entities are taking a portion of the return. This is fees, expenses, and taxes. I often see investors get upset because they have to pay taxes. They might have held a stock for a long time or an ETF. And we have to recognize that taxes are just part of investing.

We know we try to do everything we can to defer taxes, but the reality is successful investors pay taxes. Successful investors also make sure that they're getting sufficient benefit for the fees they pay. You know, often get asked, should you hire a financial advisor? Well, it's fine to hire a financial advisor. if the reason you're hiring them is to get some assistance and structuring your retirement portfolio and figuring out, are you saving enough or handling an estate issue or just planning for the future? That's a reasonable thing to do for a financial advisor. We don't hire a financial advisor and pay them 1%, 1.5% because we believe they're going to outperform the stock market

and do better than passive indexing because they probably won't. Most have not, and if they were really that good, they would be managing a hedge fund and wouldn't be putting together financial plans. We all pay fees, keep them as low as possible, and make sure we're getting benefits for the fees that we pay. For the people who are listening to this who currently have a financial advisor, and they're not sure whether or not they're getting sufficient value from that relationship with that financial advisor, what question should they ask themselves? Ask what fees am I paying? Like, what is the advisor paying me? Then they should look at, all right, how has this advisor invested the assets? Is it primarily in passive funds or is it in active funds where there's perhaps what's known as a 12B1 fee in the U.S.

where there's a portion of the fund that's being paid as a commission to the broker over time? Sometimes I'll get individuals say, well, I don't pay anything to my advisor. And then you look at what's in the portfolio and realize that most of the funds, are actually paying a portion of the expense ratio to the advisor as compensation. And so look at what you're paying, look at what's in the portfolio, and then look at performance and see, you know, how has it done? An advisor can be helpful for peace of mind. I mean, some people just don't want anything to do with investing, but just recognize

that that cut, those fees are coming out of your return because the advisor is not going to outperform the market. and so you could buy an index fund and do better, is the additional fee worth it? I find oftentimes it's helpful to hire advisor on a project basis, perhaps to do a financial plan, then implement it yourself. And it's not that advisors are out trying to rip people off.

I mean, the problem is return expectations are low, and in order to give appropriate client service to a couple hundred clients, you need a fee structure of 1% of assets. and it's just are you getting enough benefit for that 1% in terms of what the advisor is delivering? Question number nine. How does it impact your portfolio? This gets to whenever we invest in something, we don't do it in a vacuum. It is an investment that becomes part of our portfolio, which is made up of multiple investments.

And the traditional approach to asset allocation was modern portfolio theory, where you're trying to find the right mix of assets. where you can maximize your expect of return for a given level of volatility. I used to do this as an advisor. You'd have all these assumptions. And advisors do that because they have hundreds of clients and it helps them manage them. But as an individual investor, we don't have to do that. There isn't a way to optimize a portfolio.

We just, it can be very simply done. It could only, it can be two asset classes. We can go back to our stock and bond example. And stocks, let's assume. assume it has we're going to assume a 7% return for stocks potential loss of 60% worst case scenario and then we have the stable value fund or alter short term bonds or cash where it's yielding one and a half to 2% and the potential loss is zero well on a spreadsheet you can do that you we could do a look well what if we put 50% in stocks and put 50% in bonds in that case the potential

drawdown would be half the 60%. So potentially could lose 30% and the expected return would be roughly a 4.5% expected return. That didn't require a fancy optimization model that required some simple math deciding how much should I put in stocks. Maybe I'm comfortable with the 50% drawdown in stocks. And then maybe I put 90%. And again, when we're looking at the drawdown, we're saying, okay, what's the personal harm if that maximum return happened? And so this gets back to the garden approach to investing, right? We're not trying to optimize. We're getting variety.

So once we decide on our overall stock bond mix, then we can add additional drivers. Maybe we do add real estate investment trust that are more stock-like, have a little higher dividend yield. Maybe we decide to buy a rental property, which would be a little more bond. unlike because it doesn't vary so much day to day, but we know what the cash flow is. But I find that if we don't feel like it's an optimization problem, we're more willing to make changes and add things. I have added things to my portfolio, small positions, just to simply to understand them and to see how they work and then decide whether I want to add more or not.

So we're allowed to, we can do experiments with a portfolio. We can try things out. again, we're just looking at it on a portfolio basis as opposed to just focusing on one particular investment. And that's really the idea is to just get a variety of return drivers and recognizing it's never going to be perfect. We just do our best and treat it more like a flower garden as opposed to a portfolio that has to be absolutely perfect. And then finally, we come to question number 10, which is should you invest? Once we've looked at an investment opportunity and we've gone through the questions, we have to decide when and how much to invest. And figuring out how much is really, it's a function of how confident we are that it will be successful. Do you understand the return drivers?

How dependable is the cash flow? What's the personal financial harm if the investment falls short of our expectations? And that's an important component when we're trying to scale it, right? If it's a speculation, I suggest most people should have less than 10 percent. other portfolio in speculations, and that can help us. And we have smaller positions if something majorly can go wrong. But if we're investing, let's say, in the stock market, the global stock market, we could own the Vanguard total stock market ETF, VT, and we're comfortable having a very large percent of our portfolio, and just that one holding, because it owns thousands and

thousands of underlying companies. So that's one of the things to consider should we invest. And then timing is the other aspect. When should we put the money to work? And this often gets to the idea of sometimes investors or individuals will get a lump sum. They might get a bonus or an inheritance. And they're trying to decide, should we invest it all at once? Or should we average in over time? And the numbers, I used to do this exercise with clients because they would get big gifts and we'd go through the exercise. And the numbers say invested all at once because over time, the stock market goes up over time. So on average, investing in a lot of once

we'll make more money than dollar cost averaging. Most with dollar cost average. Because there, what we find as humans is we want to minimize our maximum regret. So we don't want to, we feel bad if the stock market plummeted 20% after we invested that very large lump sum. And so investing a little bit over time allows us to sort of feel more peaceful about the decision irrespective of what happened. So oftentimes investing is a

function of regret management, making sure that we're following approach where we won't feel absolutely awful if something happens. That was unexpected. If there are investments that you have made in the past that you regret, to what extent are they informative about investments in the future, particularly if the choices that you made in the past were made in a different context, both historical market context as well as personal context, and with a different level of knowledge. How do you apply that knowledge into the future without over-extrapolating from it? Well, we all make investment mistakes,

and we visually feel the mistakes we made. And so we take the lessons that we learned, and I go through an example in the book at the same college in Indiana, where I recommended junk bonds or high-yield bonds to the client. I didn't know much about them. I tried to learn as much as I could, and we made the recommendation. And my recommendation was based on the historical returns.

So I didn't look at the current conditions and what had to happen for the investment to be successful. And it was not successful. The high-yield bonds sold off. They didn't lose money, but they didn't do as well as the rest of the bond portfolio. So my takeaway from that, is for bonds don't rely on historical returns because bond returns are driven by math.

I can see what the yield to maturity is or the SEC yield and feel very quite confident. And so with all our investment mistakes, we learn from them and try to extract principles from them. Now, maybe it didn't do so well. And in Annie Duke, who's in a decision strategist, she wrote the book, Thinking in Betts, And she talks about how we needed to separate the outcome of a decision from the process. What was the decision-making process? Because the outcome, and she saw this in playing poker, that you can't necessarily always control the outcome.

But you have to go back and say, did we have a good decision-making process? And oftentimes our what we call investment mistakes because our decision-making process was not good. We made a mistake. Sometimes we, I had investment, you know, I made an investment last year in a particular fund. I knew what had to happen for it to be successful. Well, the fund sold off. And I'm fine with that because I understood why it did. And I don't consider that a mistake, even though it was down for the year.

And so we need to be able to separate out the outcome from our process. And that's why I think having a framework like this can help us have a discipline to make the decision. So then if things don't go well for particular investment, we can feel confident that, well, eventually they might, or what do we learn? Where can we improve our process the next time? Well, thank you so much, David. Where can people find you if they'd like to know more about you? You can find me at my podcast is Money for the Rest of Us.com. And that's where you can find it. The book is also at wherever you can find books. Money for the rest of us, 10 questions to master successful investing.

Thank you, David. What are the key takes? that we got from this conversation. Let's review the 10 questions that a person should ask themselves before they take on a new investment. So if you're thinking about investing in something, whether it's adding an emerging markets index fund into your portfolio, or venturing out with a small piece of your portfolio into the world of individual stock picking, or adding Ginny Mays or tips into your portfolio, any time that you are thinking about adding some new asset class to your portfolio, here are 10 questions that can help guide that decision. Question number one, what is it? Can you explain what that investment is and what it does in extremely simple terms?

Let's take the emerging markets index fund as an example. If you're thinking about adding a component of that into your portfolio, can you explain how is that index fund constructed? What countries are considered emerging markets and how do they differ from frontier markets or developed markets? What's the historical risk and return of that fund over time? Can you explain the basics of that investment? If you can't, that's a sign that you might want to learn a little bit more about it before you start pushing into that new area. David gives an example of a mistake that he made when he was in grad school. He bought an individual stock simply because it had something to do with computers, and he figured that computers was generally a thing that might go up.

And in hindsight, that's a really bad way to make an investment. And the fact that he couldn't explain what that company did was a sign that he shouldn't be investing in it. I bought it, Novell, because I thought it would go up in price and it did something with computers. And that was my investment thesis. It will go up because it does something with computers. That's not being able to explain what an investment is. Need a little more detail than that.

So that is the first question. What is it? Question number two, is it investing, speculating, or gambling? An investment is an asset that over time has a positive expected return. It has over a long enough time frame, a reasonable likelihood of being profitable. And largely that's because investments have some type of cash flow that they generate, whether that's dividend income, interest income, or rental income. The investment creates cash flow and therefore is intrinsically worth something.

An investment is something with a positive expect of return. Typically because it has some form of cash flow, it pays interest, it has profits that lead to dividends in the case of stocks. It could be rents in regards to real estate. And so there's a reasonable expectation that the return will be positive because there's cash flow. Now, by contrast, speculation is an asset with an uncertain outcome. It'll only go up in value if the overall general market agrees that it should. For example, when it comes to real estate investing, I often say that appreciation is speculation, meaning that if you buy a property with the hopes that it might appreciate over time,

due to broad market forces that are outside of your control? Well, that's speculation. So buying real estate for the sake of market appreciation is speculation, whereas buying it for its cash flow or its cap rate is making an investment. And so that's the distinction between investing versus speculating. And then finally, gambling has a negative expected return over time. You're more likely to lose money than not. And so that's question number two.

Is it investing, speculating, or gambling? Question number three. What's the upside? As David outlines, there are three drivers of asset class performance. One is cash flow, which is the income that you receive from dividends, interest, rent. And this cash flow is expressed as a percentage, like a dividend yield. So that's one driver of performance. And then another driver of performance is the growth of that cash flow.

What's the growth rate of dividends or earnings per share? So cash flow and cash flow growth are two very intrinsic ways that assets create value. And then finally, that third way is that change in valuation. So what are other investors willing to pay for that asset based on the fact that it has this cash flow and this cash flow growth? And that's where a lot of appreciation comes in. And so when you take all of those together, cash flow, cash flow growth and the change in valuation, those combined drive the performance of an asset class. All investments have return drivers. The first, as I mentioned, is the cash flow. So for that bond, it's that yield to maturity. The second driver is, is the cash flow growing over the time? So if it's stock, it's the dividend yield. And to what extent are earnings growing over time? And then the third component are what are investors paying for that cash flow? And how has that changed over time? And so when you're looking at a potential investment, ask yourself what?

type of return you expect as it relates to each of those three performance drivers. So going back to rental properties again as an example, first, you'd look at the cash flow or the dividend yield as it stands today. So if I were to buy this property today at this price and it were to rent for this much at this percent occupancy and it had this much in operating expenses, then this would be ultimately the cap rate, which is analogous to the dividend yield, that this property would generate, So that's how you take a snapshot of cash flow today. And if that's satisfying to you, then you can take a step back and say, hey, do I think that this is going to grow over time or not? Are there ways that I can create value?

Can I create greater efficiencies in the operating expenses? Or can I renovate the property to a level in which it then rents at the top of the reasonable rent range in the neighborhood? Or is there a lot of population growth coming into this area, which indicates potentially higher rents, or at a minimum lower vacancies. And by asking yourself those questions that contextualize this investment, then you can get an idea of not just the cash flow, but also the cash flow growth over time. And then finally for that third driver,

which is the change in valuation, how much are other investors willing to pay in order to acquire this? I mean, that gets pretty speculative. Particularly in the context of a rental property, I don't know if I'd go there. But for other types of investments like broad market index funds, that might be a completely appropriate question to ask. And so that is an example of question number three.

What's the upside? Question number four. What's the downside? As David mentions, there are two major big picture questions that you want to ask yourself with regard to risk. One is, what's the volatility? How much could this go down? What is the potential downside? And then the other question is, what are the personal consequences to me

if I were to suffer that volatility. Am I relying on this money in order to live? If the markets were to go down and this investment were to lose money, would I have to convert paper losses into real losses? How strong am I financially to withstand that downside? How would that impact me personally? If I'm a few years from retirement

to two or three years from retirement, maybe I don't want 90% in the stock market right now because if stocks fell 60%, I'd have to delay my retirement because I don't have a pension plan. And so that is question number four. What's the downside? And how equipped am I to handle it?

Question number five, who's on the other side of the trade? So if you're buying a major index fund, if you're buying the Vanguard Total Stock Market Index fund, you know that there is a big publicly traded marketplace where buys and sales are getting executed all of the time. But particularly if you're interested in buying an investment from an alternative platform, be careful about who you do business with. I have never been a fan of real estate crowdfunding platforms when people have called in for the Ask Paula episodes and have asked about real estate crowdfunding platforms.

I've often told them, hey, it's not a get out of due diligence free card. you can't just throw money at an apartment building in Brooklyn or an apartment building in Fort Myers, Florida, or a commercial establishment in Topeka, Kansas, and then hope that it'll make money because you feel emotional reassurance from this concept of safety in numbers. If that's your motivation for wanting to go to a real estate crowdfunding platform, then that's the wrong motivation. And so for that reason, I've cautioned people against real estate crowdfunding platforms and often told people, hey, either buy your own property if you want to own real estate directly or go into a reet. David, in his book, illuminated even more evidence as to why real estate crowdfunding platforms are scary. And this goes to that question number five of knowing who is on the other side of the trade. The way that real estate crowdfunding platforms are structured is that you yourself do not hold a lean on that apartment building in Brooklyn or that shopping center in Topeka, Kansas. You yourself loan money to the platform and the platform then loans money on the project.

So you have an unsecured debt, which means the defendant. the underlying platform collapses, get in line with the rest of the creditors. That's scary. You don't have a lien on the property. You have a mortgage-dependent promissory note. And so knowing that changes the context of the type of returns that you would want to demand if you were to go into something like this. Because given the fact that you have such a high level of risk, well, then the returns, the potential returns better be commensurate with it. And the money that you put into the project should be an amount that you are prepared to lose in the event that you do have to wait in line with other unsecured creditors.

So that background about real estate crowdfunding platforms is a perfect illustration of the importance of understanding who's on the other side of that trade. What you've seen with these real estate crowdfunding sites is, particularly focus on one housing. You would think, okay, I've made a loan to somebody, And they bought the house, and so we have security in the house. If they go bankrupt, we're fine. But no, if you actually look at the document, it's a mortgage contendent payable note. So you only get paid if that person gets paid. But you, as a participant on the platform, you don't have a security interest in that property.

The platform does. You have an unsecured liability with the platform. And so that is question number five. know who's on the other side of that trade. Question six, what's the investment vehicle? Are you buying an actively managed mutual fund? Are you buying a passively managed index fund? Are you buying an ETF?

Are you buying bonds directly or are you buying bond funds? And what does that mean? What does that mean with regard to the costs, the liquidity, the structure? Make sure that you understand what you're holding. It's really understanding the criteria. such as, well, what's his expect of return, which we've talked about? What's the risk in terms of potential maximum drawdown? But it also gets into other characteristics.

What are the fees? How liquid is it? Am I able to get my investment out quickly or is it a longer term investing? And so that's question six. What's the investment vehicle? And question seven, what does it take to be successful? As David outlines, all investments have return drivers like income, cash flow, growth and leverage. So what are the characteristics or the attributes that will drive a particular

investment to succeed? The success depends on outsmarting other investors. And I think as individual investors, we should tend to avoid that. There's going to be fun to do, but it's better to buy broader asset classes through ETFs, mutual funds, and other structures, as opposed to things that are dependent on being precisely right. Question number eight, who's getting a cut? What are the trading costs? What are the fees? Make sure that you understand what you're paying for and why. We all pay fees, keep them as low as possible, and make sure we're getting benefit for the fees that we pay.

And so that's question number eight. Who's getting a cut? Question number nine. How does this impact your portfolio? How does this particular investment that you're thinking about, fit in the overall context of your portfolio. And as David outlines, you can experiment with different types of assets that have different return drivers and different risk-reward characteristics. There is no one single, quote-unquote, correct portfolio.

The mix of assets that you want should reflect your goals, your age, your timeline to withdrawal, your risk tolerance, your understanding of the assets that are inside of that portfolio. And so all of that combined plays into this question of how does this given investment that you're thinking about, how does it impact your overall portfolio? I find that if we don't feel like it's an optimization problem, we're more willing to make changes and add things. I have added things to my portfolio, small positions, just to simply to understand them and to see how they work and then decide whether I want to add more or not. So we're allowed to, we can do experiments with portfolio. We can try things out. Again, we're just looking at it on a portfolio basis as opposed to

just focusing on one particular investment. And that's really the idea is to just get a variety of return drivers and recognizing it's never going to be perfect. We just do our best. So that is question nine. And then finally, question number 10, should you invest? You spent all this time thinking about a particular type of investment, a rental property, a reet, a bond. an individual stock. Now that you've asked yourself these previous nine questions, what's your conclusion? Should you move forward? Should you invest? Now, as you ask yourself this question, remember that ultimately what matters is the decision-making process, not the temporary or momentary result? You can't necessarily always control the outcome, but you have to go back

I say, did we have a good decision-making process? And oftentimes our, what we call investment mistakes, because our decision-making process was not good. We made a mistake. So judge your decisions based on the process that you used in order to arrive at the decision, not on the outcome or result that it generated. Because remember, financial markets, as we talked about in the beginning of this interview, are non-linear complex adaptive systems. You will not always have output B, as a result of input A. And so judging your decisions based on the results that they generated is an imperfect evaluation strategy.

It's better to judge the process that you use to arrive at those decisions so that you can refine and improve upon the skill of being a better decision maker. That's our show for today. If you'd like a written copy of these 10 questions plus a brief description of each of them, head to afford anything.com slash episode 240. afford anything.com slash episode 240. And while you're there, sign up for our email list so that once a week we can send you a detailed copy of our show notes, which have a synopsis of all of our interviews and all of our episodes. That way, if you ever need a reference back to it, you've got a written record. So again, head to Afford Anything.com slash episode 240 to get a written synopsis of today's episode. plus while you're there, sign up for our email list so that you can continue to get that for all of our interviews as they unfold.

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Thank you so much for being part of this community. My name is Paula Pant. This is the Afford Anything podcast. You can find me on Instagram at Paula Pant. That's P-A-U-L-A, P-A-N-T. I'm so happy you tuned in, and I will catch you next week.