Animal Spirits Podcast - Blog Post: How Ben Invests His Money

Episode Date: December 7, 2020

Inspired by the new book, How I Invest My Money, Ben shares how he manages his own money. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey guys, this is Ben, and this is How I Invest My Own Money. I was inspired by the new book How I Invest My Money by Josh Brown and Brian Portnoy, so I wanted to share how I invest my own money. First of all, the best investment decision I ever made was just developing good savings habits at a young age. I don't know why. For some reason, I guess I've always been a saver. Part of it is probably personality-based. Part of it is I think I was passed down good traits for my parents. My parents were always relatively frugal, never got into a lot of bad debt. They were always good of their money. And I think I just learned from watching my mom and dad. Things like spending wisely, staying out of credit card debt, and saving for the things. future. I entered the working world in the mid-2000s, but didn't really have enough money to truly invest until the onset of the financial crisis. Some of the best investments I've ever made came during that time, and it was as simple as just continuing to plow money into my 401k and IRA during 2008, when everyone else was running for the hills and putting their money in cash. It felt like every time I put money in the market, I got punched in the gut because the market just fell further, but those are some of the best stock market purchases I will ever make in my life.

being thrown into the fire like that early on was actually a blessing because it helped give me the right mindset to view down markets as an opportunity and not at risk. Before getting into specifics about my investments, I just want to issue a full disclaimer. My investments are relatively boring, but boring works for me because I think boring wins over the long run. Exciting is often the enemy for most investors. I also have a high tolerance for risk. I've had the majority of my money in stocks for as long as I've been invested, and most of that money is in tax-deprient retirement. accounts. So that starts with, I have a 401k right now with Redhill's wealth management. I have an old 401k that I rolled over into an IRA from a previous employer, and then my wife has a

403B account. All of the money in these accounts is invested in low-cost index funds or other rules-based strategies. So this money is in the same strategies and funds that our clients use. I am an aggressive investor because basically all of that money is in the stock market in some sort of diversified fashion. I also have a SEP IRA with Vanguard. That money is invested in a simple four-fund index fund portfolio. Again, all in the stock market, all of these investments are set on autopilot. The contributions happen automatically. The dividends are reinvested automatically. The rebalancing happens automatically. I want all these decisions just out of my hand so I don't have to worry about them. And I find that the convenience of doing this just makes my life easier.

And honestly, it probably improves my performance because it keeps me from tinkering with these accounts. I also recently opened a Lyftoff account. Liftoff is our automated investing platform in partnership with Betterment. I have a sleeve for my wife and myself, along with one for each of my three children. I plan on using this account, not only as a way to build some wealth, but also as a teaching tool to show my kids how you can grow money over time by saving, and then use it as a way to jumpstart their lives when they're done with school and starting into the working world. This account also fully automated, so the only thing I have to worry about is really increasing the amount we save in it over time. When all my kids were born, I opened up a 529 account in their name.

The Michigan plan is pretty good run by TIA-Cref. They have all sorts of low-cost funds. They have these low-cost target date funds. And just so, you know, Michael, if you're listening, listening to this. This is the only target date fund I actually own. I use the most aggressive allocations, which will slowly get more conservative as my kid's age. My fund portfolio with Robin Hood makes up probably 5 to 7 percent of our investments. This account helps me scratch an inch by picking some stocks and ETFs I wouldn't normally hold in my rules-based accounts. I probably have eight or nine holdings in this account. I'm basically following the Peter Lynch methodology of investing in companies that I know are used. So right now that's companies

like Disney, Spotify, Slack, which is soon to be Salesforce, and Stitch Fix. I look at my overall strategy as a barbell approach. So there's risky investments on one end, mostly in the stock market, and then ultra-safe investments on the other. And those safe assets are held in an online savings account right now with Marcus. That money is used to get us through any big purchases or unexpected outlays in the short-chain or intermediate term. I view cash as a way to allow us to stay invested on the other end of the barbell, since we know

most of those stock market assets won't be used for many years or even decades. And I think being a saver, while also holding a portfolio, gives you the best of both worlds. if the market goes up, I'm buying at higher prices, but the value of my current holdings goes up. And if the market goes down, the value of my holdings goes down, but now I have the ability with my new savings to buy at lower prices, higher yields, and lower valuations. I think this is a wonderful way to not worry about the stock market very much. I have put some money in recent years into some alternative investments. There are a few reasons for this. Number one, interest rates are insanely low. The world would be a lot easier

for investors if interest rates were higher, but we have to invest in the markets as they are, not as we wish them to be. Number two, I'm looking for some diversification benefits since most of my investments are in the stock market and my livelihood is also tied to the stock market. Number three, these are experimental investments. If our clients eventually ever invest in this stuff, and I'm not saying they're going to invest in alternatives, but if they do, I want to test drive it first. I don't want to put client assets into something that I wouldn't invest in myself. I want to understand these investments from an operational perspective, a liquidity perspective, a reporting perspective. So far, those alternatives for me include

crypto, art, and real estate. I've talked about Bitcoin plenty in recent weeks, but this is basically a play on human nature and the potential for a new technology to just carve out some space in the financial markets. MasterWorks is a new company that allows you to invest in art, an asset class, which has historically just been reserved for the Uber wealthy. And part of my thesis actually rests on this Uber wealthy class because I think rich people right now have too much money and not enough places to put it. And art actually has a pretty decent historical track record when you look at it, which

probably would surprise some people. funderize is another new company that allows you to invest directly in private real estate in a diversified fashion and i like the idea of investing in direct real estate without having to become a landlord myself and all the commensurate headaches that come along with it we've had founders for both companies and animal spirits in the past and came away impressed with their stories i also have a small stake of ownership in my firm my equity stake in writ holds wealth is one of the assets i'm actually most proud of because it's a firm i love to work for i love the people i work with i love our clients i love the way we've built the business And if that equity someday becomes a financial windfall, that's only icing on the cake because I derive a lot of psychic income from this asset because it's, again, part of my livelihood. We do carry a mortgage on our house. We recently refinance into a 15-year mortgage.

I don't mind holding debt right now with rates so ridiculously low, so I'm not going to pay it off early. But I also love the idea of having our house paid off and the optionality that provides when our youngest, my two twins, will be turning 18 and leaving the house. Another point of emphasis for my family is investing in experiences. A few years ago, one of our friends mentioned to us, you know, we probably have 15, maybe 16 summers left of them before they start going off to college and then become adults, and it's going to go really fast. And this always kind of snuck out in my mind and it really hit me kind of hard. So a few years ago, my family found a place on the water, about an hour from our home. Side note, it helps that real estate is still relatively inexpensive in Michigan. It's a place where we're outside all the time.

We're on the water. We're creating memories. And I view this as an investment in experiences of my family. and I don't think you can calculate the opportunity cost on that. So I don't even care if we get a financial return on this because the return we've gotten from the memory as we've created there make it easily one of the best investments we've ever made. That's pretty much it.

That's how I invest my money. Listen, I'm sure this can and will change over time as my risk profile on time horizon changes. But the things that likely won't change very much in the years ahead is, A, I will continue to be a saver. And B, I will continue to bet most of my money on the stock market, which I think remains the best way to invest in human ingenuity and innovation.

Obviously, the stock market is still risky, so the way I hedge this out is by investing like the glass is half full, but saving like the glass is half empty.