BiggerPockets Money Podcast - 86: Choosing the Right Investment Type for Your Goals with David Stein

Episode Date: August 19, 2019

David Stein reached out to us after Erin Lowry’s Episode 81, where we talked about the basics of investing. He really liked that episode, and wanted to dive a little further into the different TYPES of investments you can choose from. In this episode, we explore asset classes we haven’t really discussed before: Closed End Mutual Funds, REITs, Mortgage REITs, and the different types of stock you can buy. (Yes, there is more than one!) We even touch on Gold and Cryptocurrency!  Investing isn’t limited to stocks, bonds and real estate, and David introduces these ideas so you can start investigating the asset classes that appeal to you and works best for your financial goals. David also shares his Investing Principles and his top tip is so simple, yet such an EXCELLENT piece of advice: Be able to describe in detail what you are investing in. If you can’t, you’re not ready to invest in that just yet. If you’re looking for different asset classes, better returns or even just to diversify your portfolio, this episode is a must-listen! In This Episode We Cover: David's money journey Launched businesses at the very young age Studied and liked the aspect of finance His approached to money throughout his career What prompts him the decision to retire On the "Money For The Rest of Us" The investment principles that he teach On the trading Disadvantages of buying individual stocks The difference between investment, speculation and gambling Individual stocks versus index funds Any circumstances that would make people buy an individual stock The reason why he start the podcast Closed-End Mutual Funds Bonds On real estate investment trust How he select reits Private reits versus public reits On preferred stock Buying preferred stock versus common stock What a mortgage reit is On bitcoin What makes bitcoin speculation rather than a gamble And SO much more! Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the Bigger Pockets Money Podcast show number 86 with David Stein from Money for the rest of us. I spent years trying to identify money managers that could outperform the market. I mean, that's what we do. We had 20-person research group. And there just aren't that many. And so how are we going to do it as an individual? It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years, barely scraping by. Whether you're looking to get your financial house in order, invest the money you are already have or discover new paths for wealth creation, you're in the right place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money podcast.

How's it going, everybody? I'm Scott Trench. I'm here with my co-host, Miss Mindy Jensen. How you doing today, Mindy? Scott, I am having a lovely day today. How are you doing today? I'm doing great. We just had a wonderful discussion with David, who is clearly an incredibly sophisticated, smart investor who really has a good, solid, intellectual basis for what he's doing and why? Yes, David reached out to me a few weeks after Aaron Lowry's episode where she was explaining the basics of investing. And he said, you know, that's great. I love her book. I recommend her book. But how do you know how to choose what kind of investment to even start with? You know, I think that would make a great show. I'm like, hey, I agree with you. I think that

and make an awesome show. So we connected, and now he's here today to talk about different ways to invest and let you make decisions, informed decisions, once you have all the facts. Yeah, and shout out to that episode with Erin Lowry. Virginia, my girlfriend, said that was one of her favorites. So she really got a lot out of that. And so if you or someone you know is still learning about investing and kind of use an intro, that might be a great one to come to dive into and then follow up right away with this episode, which is going to, kind of, I think, maybe more higher level, more advanced, maybe the discussion today than the one with Aaron.

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David Stein, welcome to the Bigger Pockets Money podcast. How's it going today? Wonderful, thanks. Can you walk us through where your journey with money begins? For sure. grew up in Ohio and I was a single family household to my parents got divorced when I was young. And my first experience with money was not having very much at all. And knowing, you know, probably the first time I realized we didn't have anything was, you know, we'd get food deliveries.

We had food stamps and welfare. But it was just kind of the fear that my mother had because she was always trying to figure out how to make money. I mean, she did all kinds of stuff. She sold real estate back when interest rates, mortgage rates were 15%, right? So that didn't go too well. She made dolls. She cleaned houses. And so growing up, I wanted to have money.

And, you know, we had a house. So it sounded like we were on the streets. And my mother always said, you know, if we didn't have that house, we would be on the streets, but we had that. And there was, I was probably about 10 or 11. I was reading the newspaper, Cincinnati Enquirer. I was a big Reds fan.

and there was a full page ad for this guy had a motorhome. And he's like, you can make $100,000 a year. You can have a motor home and travel all around the country. This was sort of the late 70s. And I'll show you how. And I convinced my mother to buy this thing. I didn't know what it was. Like just the secret.

Now, I think she was interested and I was interested. and it ended up being basically books on how to do advertising. And so from there I started trying to launch businesses from really a young age. And so that's kind of where the story of money began, realizing we didn't have enough. And the way to solve that was to figure out how to run businesses. What sort of powers of persuasion do you have that allowed you to convince your mom to buy a motorhome when you were 10? I mean, that's really impressive. I don't think it was my persuasion.

I think it was the copywriter of that full-paid Cincinnati Inquirer at. I showed it to her. She read it. I read it. And, you know, maybe, I don't know. It might have been over $100. And then you sent me these books, most of which I didn't really understand. But it was sort of like, oh, I could solve this problem in my life and not wait for

somebody else to solve it. And that resulted in a series of mostly failed businesses. I mean, back then there was no internet. So, you know, I'm running ads in the classified of doing handwriting analysis. I'm trying to do, I'm washing windows. I mean, it was a combination. But surprising, most of it was information products. Like, I offered to do research services. And generally speaking, nobody bought anything, which means I wasn't a very good copywriter. But that desire to kind of control my own money destiny never really left. did anything of this work out? Or what was the kind of position that you kind of maybe left high school

or entered the next phase of your life in? I mean, I got experience. So, I mean, that worked out. But no, I mean, I mean, I cut law. I mean, the things that worked out best were the ones where I was trading time for money. I was washing windows. But things that leverage sort of information products, you know, that didn't really work out in high school.

But again, I'm in high school. So after high school, I actually worked for your washing dishes. at a hotel, which was also very eye-opening, because that was sort of, again, time for money. But eventually went to college, and I studied finance. I mean, what I found interesting, I remember going to college and, like, introduction, business, I didn't give a whole lot of thought to college.

So I thought, I want a job. I'll study business because businesses give jobs. And they had introductory speakers, and a stockbroker stood up and said he made $100,000 a year. So he kind of had that six-figure number. again, I'll study finance. And unfortunately, I realized that I actually liked aspects of finance. And that's kind of eventually ended up in investing business and learned to actually manage money professionally that way. What was your financial position upon graduating college? Did you take on

student loan debt? Did you were able to get a job that immediately paid you pretty well? What did that kind of look like? Well, I worked all through college. So I went to University of Cincinnati undergrad. I went to Miami University graduate school. But yeah, I guess fortunate enough, we were poor enough, and they were still grants. So much of it was grants. There were scholarships. But I left school with about 10 grand in loans after graduate school, which wasn't bad. You know, my in-laws helped.

My father-in-law said, here's 10 grand, go to graduate school now. I went to graduate school with six kids, and you don't want to do that. So just go now. And so that helped. But at the end of the, yeah. So, I mean, and then I got a job. I mean, I didn't know anything. I graduated from, with an MBA,

and I went to the placement office, and I got a job in basically the credit analyst. And so it's very different. Like my kids now want to get jobs. It's very, very different. And my jobs, I had two jobs, adult life. One I got from the placement office. The second investment firm I joined.

I answered a classified ad. and stayed there 17 years, and then my third job is what I do now. So I'm not the person to go to for etiquette job advice. I did it the traditional way. No, absolutely. So what was your kind of approach to money with these, at this first job and at that second job over the, like what are the kind of the milestones in terms of changing your thinking

around money over this part of your career? Were you consistently saving? Was there a-ha moment where you really stepped on the gas? Did you take on any more debt? What was kind of your approach to money throughout this portion of your career? Well, in the early years, we made mistakes like a lot of people do, you know, and got in the debt, cars with health, like health club type thing. And, you know, so we had consumer debt.

And it wasn't until, so I, you know, I spent three years in corporate. And then I went to this kind of this small 25-person investment advisory firm. And there, you know, I spent a lot of time, you know, I took a pretty big pay cut. wanted to go investing so badly that I took about a 50% pay cut to join this investment firm. But they promised double-digit wages or raises over time. And so really, you know, I learned more about money spending a lot of time with investment managers, looking at how they research stocks, I look about hedge funds, and just observing. You know, a lot of it was just observing how I work with a lot of not-for-profit boards and

observed how, how the wealthy react to money and how they act around money and what do they do in terms of money and that, you know, they're not these stuffy rich people. They're actually very giving people that is giving their time and their money to causes. And so, you know, ultimately, we got out of the whole because we increased our income. You know, I became a partner at our firm. And so it was not, you know, with the fire movement where they're saving 40 to 50%. But we didn't do that. I mean, we, you know, ultimately, I'd been with my firm. maybe five years, and I was a partner and we sold it. And then three years later, we bought it back at half the price

and took on a bunch of debt, a bunch of leverage, and that worked out. And then I got to the point, you know, it was in my mid-40s. Like, I hit my number that I could retire and so I quit. And that's been seven years ago. That's awesome. So it sounds, I mean, what it sounds to me like is you took a big risk in joining this firm and then got out of the ground floor and then helped grow it

and really intrinsically understood the value of the business as well along with the other partners. And that was perhaps a primary driver in the creation of a lot of maybe your net worth over that period of time. Is that right? That's true.

It was, I mean, it might not seem like a big risk now, but at the time, you know, I was working for AT&T capital, so I was a big corporation and you'd climb the career ladder. And the idea of joining a 25-person firm, at least to me that come from kind of a traditional mindset,

like, why would you do that? And I remember reading an article by the management guru, Peter Drucker, and he talked about gazelles versus, I think, was elephants, right? And that a gazelle is going to run fast. You're going to get way more opportunities. And so that convinced me, okay, I'd be willing to take this cut and try this. And I quickly found that. You realize in business that many people, they don't want to share their ideas, they don't have ideas, and that people that share ideas and that want to create value, they get rewarded. And so, and especially with a small company where people can see, I mean, there's not that many people, they can see when you're adding value. And ultimately, that

helped. And then we took another big risk when we, you know, we signed personal guarantees to borrow a bunch of money in millions of dollars to buy back our company. And there's always some luck involved, too. I mean, in terms of what I did there, I launched and, and, an asset management product that did very well, that became close to a third of our firm's revenue. So there were things that worked out along the way. It was being aware and taking advantage of opportunities that did show up. Absolutely.

All right. So, I mean, it sounds like a wonderful career here. What prompts the decision to retire and go to the... What was kind of your thought process in moving away from traditional employment and your career with this firm? Well, I remember this was probably 2011, and we were having an annual client conference, and I was speaking. I was one of our keynote speakers. And I remember giving my speech, and why you give a speech, sometimes you kind of have basically your voice in your head,

this talk chattering to you, I should give your speech. And it basically said, like you've topped out of this firm. Like, all right, you're already the keynote speaker at your client conference. There's hundreds of people there. you're giving a speech. And like, what are you going to do now? Because, you know, I could just keep doing what I was doing and kind of wait out the clock and do a traditional retirement. But my biggest fear is that, you know,

what if somebody sued us or something bad happened? And I kind of knew what my value was because, you know, we had an operating agreement. And I, you know, it was stressful to manage money. And to be compared, you know, against a benchmark. every week and try to outperform. And I just got to the point where I remember I was just giving a speech in California.

And I saw our numbers for that particular week. And the performance, it wasn't good. You know, that mother, we're having a tough year. And I thought, you know, I'm done. Like, I know what it's worth. And I talked to my wife, LaPra. And she was always very supportive of quitting. Like, yeah, go do it.

I mean, you've talked about this for years. Just go do it. So I booked a red eye flight. and I showed up at our weekly executive committee meeting and I told him I was done. And I mean, I didn't know what I was going to do. I just knew that in my mid-40s, like I didn't want to do what I was doing for another 20 years. Got it. So how long were you retired before you jumped back into the workforce?

Well, we told them our clients I was retired. I mean, that was, but the reality is I launched the website on a plane coming back from my retirement. party. But the problem was I launched an investment newsletter, an investment site, and I hated it. Basically, I had recreated my same job, but I wasn't getting paid. And I found that I was afraid somebody would hire me or, you know, I wasn't even invest to advise. I just, I just sort of didn't know what else to do.

And so I, yeah, I literally launched that. And that went on for two years, starting stuff. shutting it down. I think I probably started to shut down five different websites over a two-year period, just because I never got comfortable. I knew I wanted to, I got tired of saying we as an investment advisor, right? We think this, we think that. And I wanted to say me, but still saying me, I think this was still a little terrifying. And it took me a while to get used to that. and did figure out a way how I wanted to do it. And finally, it was probably early 2014.

I started writing a regular investment column for a personal finance column for a local newspaper. And I became a guest on a podcast, Matt Andrews podcast, List of Money Matters. And they had me on, and I didn't know who they were. And I just, I was a guest. We talked. I thought, that was kind of fun. And I kind of missed the teaching aspect of investing. And so it was probably a few weeks after that.

launched my podcast money for the rest of us. Just try it out. I didn't know what it would be like. And I found I enjoyed it. And from there, I'd learn, I like the teaching. And that's what I do. That's what I do now. I teach through video, audio, and writing.

Okay. So money for the rest of us. Who are the rest of us? Who are we excluding? You know, it's not defined. Bernadette G. She's a branding expert that came up with the name back in 2014. She's like, you should write a book.

Here's what you should call it. And that was kind of my question to her, who's the rest of us? And she said, it's how people interpret it. And in my mind, it's us. It's individual investors, right? It's not Wall Street. It's people that are trying to learn how to invest to be better investors. It could be better at personal finance.

That's the rest of us. And so I guess you could say we're excluding, you know, the hedge funds out there, the Wall Street firms that, you know, not that they're necessarily bad people, but they're not us. You know, they have much better resources. They have quantitative algorithms. They have bots. I mean, they invests very differently than how an individual should invest. Got it. So would you say that your advice is mostly tailored to folks that have something to invest? Maybe let's call it like 10,000-ish or more to begin investing, or is it even with the first dollar that you really kind of... Oh, no, I think it's for the first dollar. I mean, I've done an

episode on how to invest $100 because, I mean, now, you know, fortunately, I mean, you can buy an ETF without paying any commission. Our commissions are very low. I mean, there's apps out there that you can use to start investing. And it's very much the same principle, whether you're investing a dollar or whether you're investing a million dollars. It's the same investment principles. And that's what I teach. I try to teach in principles. Awesome. So what are some of those principles? What are things I should be thinking about if I'm thinking about taking control and investing my own money with total control? Well, the first thing you should ask yourself, whenever you invest in anything, you should be able to answer the question, what is it? You should be able to describe in detail if you were talking to a friend. I had a college client, one of my first endowment clients.

He told me, he says, I'm not comfortable investing in anything that I cannot explain. to somebody that's not on our investment committee. So if I can't explain it, then we shouldn't invest. And that process of explaining an investment, it keeps us humble. And they've done academic studies on that. When they ask people to explain something as simple as a zipper, how does a zipper work?

They find it's very difficult to do. So we think we know more than we do. And so I find that the beginning investors get in trouble because they go into an area and have no idea how it works. I mean, trading. And I was talking to that a conference this past weekend, and I was talking to one of these online learning platforms.

They said the number one course of selling on their platform is on trading securities, right? It was dumbfounded me, because if, you know, where else, other than I said poker, because I asked this before, can you pick up a tennis racket and start playing with professionals? And that's what trading is. you're trading against professionals. So the first thing you should ask is what is I be able to explain it.

And from there, another question should be, like, who am I competing against? Who's on the other side of the trade? If you're buying a car, you know who's selling you the car, typically, and you know what their motivation is. But with many invests or real estate, right? Typically, you have some idea who's selling the real estate or why are they highly motivated. If they're highly motivated, you can get a better price. but many investments, people go in, they buy a stock, they buy a cryptocurrency, they have no idea.

They don't really think, why is that person selling that to me? Who is selling it to me? And when it comes to individual stocks, it's typically an institutional investor that's running an algorithm, which means they're going to know so much more about this company in its correct price than we wouldn't buying it. So, yeah, I think those are two great questions. I think a natural problem that is kind of coming in my mind from that, is suppose I'm new to investing, you know, those seem like huge rabbit holes to go down, even to kind of just understand what one company in all the companies in the stock market does

and how they make money and all that kind of stuff. And then to figure out who on the other side of the equation is that, is there kind of an introduction or guide that you can kind of give us that how to very simply go about those if I'm just trying to get started with my first couple hundred. Yeah. First, don't buy individual stocks, right? Go to your 401. and look at what the options available if you have a 401K. What is this fund? And you read the material because I don't buy individual stocks. As individuals, we should focus on asset classes,

which are basically baskets of securities that create a return. Because one of the things that we want to step back and ask is, is this opportunity, is this an investment? is this speculation or is this gambling? And the difference is the expected return. And real estate's an investment. Why? Because it has income.

Right? And as a beginner, we know we can look at something and say, is this going to, this is of a dividend? Am I going to get some income out of that? That's an investment. The speculation is where you have to be precisely right. And there's some disagreement whether the return is going to be positive or negative. Bitcoin's a speculation.

There's no income to Bitcoin. It's just, it's going to go up or it's going to go down based on whether people will buy it. And then you have gambles, which has a negative expected return because we know so little about it, let's say, and we get taken advantage of. And so we lose. And a lot of trading is like that. And so we can start simply by focusing on, you know, what are the opportunities in your 401K? You know, what is that basket of security?

What is that asset class? I mean, you can invest with two ETS. You can buy a VT, you can buy the Vanguard total global stock market ETF. You can buy a bond version, and that's how you start. So one of the things I also invest almost exclusively in index funds and stocks and real estate as my two major asset classes for a lot of these reasons. I wouldn't have articulated them like this before talking to you, but I love these concepts. When I invest in an index fund, I am investing in a broad set of companies.

I'm investing in a huge portion of the public marketplace. So I don't have to know what each of those companies does and what they're doing to answer, I think, satisfactory the question, what is it? What is the ETF? What is the thing I'm investing in? And because I'm, you know, who is on the other side of that? Well, it's the entire market of buyers and sellers of securities in the overall broad U.S. stock market, if I'm buying a broad U.S. stock market, ETF or index fund.

right so i'm really avoiding having to do some of the really hard stuff that the professionals are doing on the trading or gambling or speculation sides of the piece when i have had would you agree with that as an analysis of kind of why absolutely yeah because you are buying the broad market because and so you don't for example you don't care whether the stocks are priced correctly or not when you're buying an individual stock right that there's some pride there because you're saying that the market is wrong, that they have priced this stock wrong, because the value of a stock is basically the value today of all its future earnings. And that's what the market is.

The people are transacting and they're saying this company is worth this amount based on our expectations of how it's going to grow in the future. And so when you buy an individual stock, you're saying they're wrong. I think it's going to do better than everybody things because otherwise, if it doesn't do better, then it's not going to outperform. And so by buying an index fund, you don't have to read the paper anymore. You don't care about what individual companies are because some are going to do better than what people think. And that's what's going to, they're going to want to appreciate a bunch. Some are going to do worse than what people

have priced in and they're going to do worse. But overall, that cancels each other out. And then you benefit by buying an index fund, what drives the return of an index fund. Let's say a U.S. Index fund. It's driven by the dividends. the cash flow, and it's driven by how that dividend grows over time. That's the second thing. And then it's driven by, you know, what the value individuals are putting on that. Are they paying more in terms of the price-dorneous ratio or less? That's what drives the stock market. And that's what it comes down to be able to explain what an investment is. One of the things you should be able to explain is what drives the return. Well, it's income, the growth in

income and what people are paying for that income. Are there any circumstances that would make you buy an individual stock or recommend that people, you know, oh, if this happens, if you see, you know, something that would make you recommend buying an individual stock versus an index fund? Just for fun. Sometimes it's fun. But other than that, I mean, I drew, I test drove a Model 3 Tesla last weekend. That's just so cool. And I've driven them before, but the Model 3, it was just amazing. You could see, this is going to change how people drive. And I thought, maybe I should just buy Tesla stock. Now, a year ago, I did an episode on electric cars, and I made the case for why not to buy Tesla stock.

And then I, you know, as I went through it again, I stopped myself. I said, you know, I have no idea. Tesla's not making any money. You know, there's risks. And but sometimes, you know, if you bought the Tesla stock and it did well, it's like, yeah, you could tell me, you know, I did well on it. And it kind of participated it. But Tesla doesn't even see the money, right? This is all trading in the secondary market. That's not money going to damn. But for most of us, no. I mean, you do it maybe for fun.

Sometimes you have to learn by doing and realize how hard it is to invest in individual securities. But I spent years trying to identify money managers that could outperform the market. I mean, that's what we do. We have 20-person research group. And there just aren't that many. And so how are we going to do it as an individual? Yeah, I find that the stock picking and this kind of like exercise and analyzing a company and seeing if they'll do well is a really good way to motivate, for example, a teenager

or a student or a very young person who just starting a career, a college student or something like that, to get them interested in investing in the first place. But I really don't think it's a good way to, it's not how I manage my money for the long term in terms of returns. Because I just don't think that I can outperform these professionals, these traders who are looking for these undervalues and really kind of honing in on these these price points for exactly the reasons that you're talking about. But it is, it can be fun every once in a while, like you said, to buy an individual. Well, right. And I mean, there's so many other asset classes one can learn, right? That's why if you focus on individual stock, I mean, you can learn about real estate.

You can learn about closed-end funds, which we don't necessarily talk about today, but they're a type of mutual fund that's extremely inefficient because it's driven by individual. Who's on the other side of a trade with a closed-end fund is like a mutual fund, but it trades on an exchange and typically sells for a discount to the value of the assets. And it's individuals that are on the other side of the trade there, and they panic, and they dump their assets. And then suddenly you can pick up a real estate closed-end fund for, you know, the value of the property is worth 80 cents on the dollar in terms of the values there.

And so, I mean, there's all these other asset classes that people that like to invest, and learn about. Now, if you don't like to invest, stick with stocks, stick with passive real estate, and go on with your life. I asked that question because I wanted to hear it from you, what I consider to be a money expert, saying, no, you shouldn't buy individual stocks unless, you know, it's just for fun. I will give you one caveat. You should buy one share of Berkshire Hathaway B-stock so you can go to the Berkshire Hathaway annual meeting. You could. And you can learn, I mean, you can learn from investing from Warren Buffett. I did an episode recently.

Should you hire Warren Buffett to manage your money? And I evaluated. I'd love to. I evaluated Berkshire Hathaway as a money manager. So if they were a money manager, what would you look at? And at the end, I concluded you would not hire them as a money manager

because they don't have a succession plan, right? They're very talented, but they're also very senior. they have a ton of cash that they can't put the work because they don't have enough good ideas and they can't put their money to work in terms of opportunities. So, you know, if you were hiring,

if you were an endowment hiring a money manager, you wouldn't hire somebody that didn't have a clear succession plan and that had too much capacity. In other words, they had too much assets under management that they can't get it to work. But you can still learn a lot from Warren Buffett

in terms of how he goes about it. Yeah, I think that's very interesting. Let's go into some of these other asset classes that you mentioned around that you can get involved in. What is your opinion of considering real estate, for example? Or, you know, you mentioned closed and mutual funds. I've never heard of that before. Can you kind of give us a list of other areas to maybe kind of consider if you're interested in more than just index fund investings in a stock? Well, I, I, you know, we've not talked about bonds. I mean, people should own bonds, right? You can buy, I mean, sometimes you want to save for their house,

You don't want to put your down payment money in stocks or tie it up in real estate. And so people need to understand what bonds are. They're dead instruments. And for all asset classes, there's rules of thumb that you can use to figure out what the potential return is going to be. So bonds, every bond fund or ETF in the U.S. has an SEC yield. Basically, it's a percentage basis. So right now, the Vanguard Total Bond Market Index Fund has an SEC. yield of about two and a half percent. And that is a very good estimate of what that bond fund

return over the next seven years, right? I mean, that's just the way the math works, because bonds is driven by math. Well, you can buy a cash and earn two and a half percent right now. You can buy a very short-term bond fund. You can get a CD. So why would anyone buy the total Vanguard bond market index fund when you can get the same return just by owning cash? I mean, And the only reason you would do it is because you believe interest rates are fall, because the way bonds work is the value does fluctuate as interest rates rise and fall. And a Vanguard fund, that one is just more sensitive to those changes. So if you believe rates are going to fall, then you buy that fund. But rates going up or down, that's a speculation again, right?

Because you have to be exactly right. And you primarily own bonds because I want the income. So I care about how much income I'm going to get. And I want the safety of principal. because if I'm saving it. Or I like the optionality of bonds. I like the own bonds because someday the stock market is going to fall, and it can fall 50 to 60%.

And I would like to have some assets so that I can rebalance into stocks for. The bond is an asset class. Real estate, most people aren't going to buy rental real estate. So you learn about real estate investment trust, which is basically you can buy a REIT exchange rate of fund or a REIT index fund that owns hundreds and hundreds of real estate projects around the world, office, buildings, apartments, et cetera. That's another one. Do you invest in REITs or real estate? I do. I do. So most of my real estate exposure is through REITs. I've owned rental real estate in the

past, but I found it's a lot of work. I didn't like it. I couldn't find a property manager. And so I actually, most of my real estate, private real estate, it's actually debt financing. So I've lent on a 12plex, for example, to where I, you know, they're paying me. I'm basically the bank. And I prefer that way versus actually owning that. But yeah, I own REITs. I mean, I, if you look in my portfolio from my membership community, I share everything that I own so they can see, here's my asset mix, here's the securities I own. And, you know, I have well over a dozen different asset classes. You know, I own gold as a speculation. I, you know, I distinguish, here's an investment, it has income and positive expected return. Here's a speculation where there's some

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investing in real estate, deals get harder to find. How do you select a REIT? What are you looking for? And where do you buy them or invest in them or whatever? Well, when I'm talking reeds, I'm talking public, there's private REITs and there's public REITs. So public real estate investment trust. And I don't select A READ. So A READ is one company that trades on the stock exchange and they're buying, they might have a dozen properties that they own. I'm buying a REIT index fund. So it owns hundreds of REITs, in which case they own hundreds of properties. So you don't, I mean, you can, Vanguard, I believe has a REIT index fund. You know, Schwab has some, has a very inexpensive REIT, ETF, the Schwab real estate. So I mean, just buy it.

at iShares has REIT, exchange trade of funds. And so you don't have to be analyzing specific REITs because you're buying the overall market. So what drives the returns of REITs? Because we want to know what's the upside? Well, public REITs right now have a dividend yield of 4%. So that returns locked in. And then the overall return over, let's say, a 10-year holding period will be driven by that dividend yield and how fast that dividends grow over time. So if REITs grow their dividends at 3%, let's say, then you know,

you have a 7% return baked in. And then the third variable would be, are people 10 years from now paying more for REITs in terms of how much they want for that cash rate or they're paying less? So that will influence it. So that's what I do there. Now, private REITs, a lot of the crowdfunding platform offer private REITs.

And I haven't invested in them because you mentioned that the real estate's expensive. And they tend to have a little higher return because they're using more leverage. right your average public reet has about 25 to 30 percent of leverage a public read as a private reed uses 50 to 60 percent leverage so they're going to have a higher return because they're taking on more risk and the problem with private reeds is they're not liquid right you can't get out you basically you can get a little bit out every quarter but you have to make it's like a three-year commitment or longer but i think reeds a great way to invest in real estate if you don't want to go out and buy individual properties because you're right right now

Now, the capitalization rate, so basically the yield on private properties is as low as it's ever been historically. So, I mean, it's not that they're going to fall in price, but if the yield is that low, that means your expect a return is going to be much lower. Yeah, and I would say, look, I'm CEO and president of Bigger Pockets here, and I would say that you really shouldn't invest in real estate privately in rental properties unless you expect a return that is significantly greater than what you can get in these other asset classes, such as a REIT, which is totally passive for you as an investor, or the stock market, or bonds,

or whatever other asset classes. You only invest in real estate if you think you can get substantially higher returns, at least real estate that you can control as a rental property, especially if you're going to self-manage and owner operate. I must get a 15, 17% expected return in average market conditions to invest in real estate personally. Otherwise, it's just not worth worth all that extra effort, in my opinion. Well, exactly. And in fact, my view is that they're hard to find. I mean, back 10, 15 years ago, you could buy a rental property

where the cap rate was 10 to 12%. Now the average apartment cap rate is 5. Here at a college town, they're selling for 4. And if my yield is 4%, and I got all the expenses and all that stuff, I mean, a lot of times I think people talk to themselves into real estate deals because they factor in the leverage. Well, no, the deal should stand on its own and be competitive without leverage at all. And then you decide whether you're going to lever it up or not. I mean, most people do.

But if just straight paying 100% equity for the deal and its yield is 4 or 5%, I wouldn't touch it. And so that you should be looking at my view. You should look for 9, 10%, and they're hard to find. No, I would agree. I think that, you know, there's an interesting risk in the commercial real estate market right now where cap rates are extremely low and interest rates are extremely low. So what happens if both of those things begin ticking up, right? Which, you know, that is speculation, as we mentioned earlier.

But that's going to really put a lot of, you know, it seems like that risk is increasing. It can't go down much further, it seems. No, I agree. I guess I could. No, I had a couple years ago. there was a friend, guy I knew, and I got to know him, and he was doing a student housing project. So I bought a share in his deal, and he died, like, within a year. And there wasn't really, there wasn't a real good, there was no succession plan, which is why I didn't put that much money into it.

But so another project team came over, and they started doing sort of these worst case scenarios. And I'm looking at their worst case scenario, was that cap rates would go to 7%. And I said, well, what if they go to eight? And it's like, well, they'll never go to eight. Well, you know, they've been eight six years ago. And they've realized that no, well, they'll lose money. Because as the cap rate goes up, the value the property is going to go down and they would have a hard time selling it.

So, yeah, I think you're right to be very aware of cap rates and interest rates because it does impact. Well, let's, you know, this we can go all day about commercial real estate markets. I think that there's a lot of risks there. And you got to know what you're doing, which is. is why you should listen to the Bigger Pockets real estate podcast for the commercial real estate side of things especially. Could you just kind of maybe walk through quickly that list of 12 asset classes that you're in so that we can get an idea for that? You've got bonds, real estate,

stocks, reits. I don't have all 12 in front of me, but I can name some other one. So, you know, something I've invested in this year is preferred stock. So preferred stock differs from common stock because preferred stock has a promised dividend payment. And, you know, typically they're yielding 5 to 6%, so they yield more than reeds. And a preferred stock doesn't ever expire. So they're like a very long-term bond. And so they're much more sensitive to interest rates. So in this environment, when the Federal Reserve's suggesting they're going to start cutting rates,

you know, I didn't want to buy, we talk about speculation, right? I don't want to buy long-term bonds because I think rates are going to fall because maybe they will, because you only get, like I said, a two and a half percent. yield. But I'll buy an asset class if I'm getting a 6% yield. I'm collecting that income and if rates fall, the value of that's going to go up. So that's an example of an asset class. So before we move on to the next one, how do you buy preferred stock versus common stock? They trade on an exchange. So there's preferred stock exchange trade of funds. So you can buy a preferred stock index fund. Now, I made an exception this time because I bought, the challenge with

preferred stock is most of the issuers are banks. And I didn't, so if you're buying an ETF for an index fund, it's going to be mostly banks. So I actually bought the preferred stock of, I mentioned these closed end funds. So these closed end funds, they also are leveraged up. So they've issued some preferred stock. So, but I knew the company and I, you know, I was felt I was comfortable Well, they are, because again, with this preferred stock, I'm not having to predict the future. I'm not saying this company's priced wrong. I'm saying they've issued a security that pays a 6% dividend. I know my risk is if the actual closed-end fund falls 50%, they might suspend the dividend for a while.

But then they have to catch it up. So you always have to look at what's the downside to an investment. So the preferred stocks and asset class I've bought recently. I've bought mortgage reits. So we've talked about equity reits where they actually own the real estate property where there's something called mortgage reeds where they're actually buying mortgage-backed security bonds

and then leveraging them up. And we want to go in a lot of detail. But there's all these little niche asset classes that most people don't have to necessarily invest in. You're fine. You want to do stocks, some cash, and maybe you want to do real estate, some reeds. you don't, you know, bonds. That's all you need. But I like investing. So instead of learning how to

do individual, to buy individual stocks, I'd rather focus on different asset classes. And that's what I teach anyway. So that's what I spend time doing. Do you do any investing in private assets? I do. So, you know, my old firm, we launched a number of private funds. So they're called Fund to Fund. So I'm in venture capital. I'm in leverage buyout funds. They have some farm loans, they have energy and things like that. But I don't, I'm not picking individual private deals per se other than, you know, occasional real estate type thing. But I do think, you know, once you have sufficient assets, it's helpful to have things that aren't tied to the financial markets. So own some land, right? Or own some eaves. If you don't want to manage real estate,

we own some land. I mean, if you own some farm land, even though they don't lease it out, right? Tax is really low. You just have something as kind of a store of value. one of the things I think is interesting is your first thing is what is it can you explain what you're investing in to a friend or to someone you know whatever and I think that way to get around that is again to go into these index fund investments these very broad asset classes that kind of get the average return of a given asset class into your portfolio but the exception you made this exception yourself when the preferred stock fund that you're investing in seems to be in those very few areas where each of us seems to have an individual competitive advantage in

understanding things or company preferred stock if you know that there's a reasonable risk behind that and you can explain what's going on there or you know i know some folks that are our high net worth individuals here in denver who are able to source deals that they can invest in basically as private equity partners or angel investors and those can be i think they're not excluded by your philosophy here But again, it's like that very bit selection with a portion of your investment portfolio in and perhaps these private things that you can really understand and articulate very well. Is that what you agree with that? No, I agree with that.

Yeah. So, I mean, in my stage, I have about 40% of my assets in private stuff. So, you know, maybe 10% is in kind of the private equity venture capital. But a lot of it's sort of these direct deals where I've lent, you know, asset-based lending is what I call it, where there's an asset. I've done lending on it. But I think you need to understand whether, you know, do you have an expertise, right? And start small and always look at what's the worst case scenario.

You know, how much could I lose? And with speculations, Bitcoin, for example, the assumption is baseline assumption, you could lose it all. So you want to keep those speculations very, very small. So I'm not a huge Bitcoin fan or Bitcoin fan at all, but I also cannot explain it, which is why I don't invest in it at all. what makes Bitcoin a speculation rather than a gamble in your mind? Well, a gamble is something that has a negative expect of return.

So you know over time you're going to lose money on it. Whereas it's not completely clear whether with Bitcoin, if people trust it, then it will probably do fine over time. It's volatile as heck, but there's not an embedded loss. An example of an asset, for example, that has a negative, expect a return is binary options. You know, they're an option contract where you pay a premium and if things, it works out, you make $100. If you don't, you lose a, basically you lose your premium. Well, you know, a lot of binary options trade on exchange. So there's somebody,

there's another individual on the other side. But many trade on, you're just trading with another firm, right? So if you're trading, it's like going to a casino, right? The casino has a negative expect of return because if it was a positive expect of return, the casino would go out of business. So if you're trading binary options with a private exchange and that's who you're trading with that exchange, you know it has a negative expect of return because otherwise they'd be out of business if it was positive because they have to have a positive expect to return. And that's why it's always important to look at what am I trading it? What's their motivation? And what informational insight do I have to suggest that I can earn more

than they did or more than the market. Man, you're just going to crush so many folks' egos who invest in these little bitch things like, hey, I'm investing in gold or I'm investing in binary options or whatever. Oh, this is going to, you know, I... But I own gold. I mean, but it's classifying it, right?

I own gold coins and gold ETS, but I know that it's a speculation, that I had to be precisely right that 10 years from now people are going to want gold more than they do today. But there's people that take their entire retirement and have put it in gold or Bitcoin. And that's crazy because the workhorse of your portfolio should be the income being generated from an asset class or that cash flows growing over time. I could not agree more with that statement. I have a little bit of a reputation for trashing gold a little bit. I think it will

rise with inflation over time, more or less. It could even be better than a currency. I just feel like long-term, and this is a bias perhaps to my personal investing in life situation, the long-term return of holding gold for me, I think, would result in less wealth than putting that equivalent amount in a stock index fund, even though I know I might have more volatility or whatever over the long long long. It probably will, right? So you own gold because it's an option against uncertainty is how Jim Grant puts it, right? That everything's going to fall apart, right? So I own gold because I keep it in a safety deposit box somewhere. And just in case, I don't know.

But over time, you probably will not beat the stock market because there's no income to it. So if it beats it, I don't want it to beat the stock market because if it does, that means life is not going to be good for us because something is very, very wrong. Got it. I agree with Scott, except I don't own any gold. gold hasn't really risen in price over the last.

I mean, it's like stayed the same with little ups and downs, right? Yeah, I mean, it's had a six year high this year. Is it? Yeah, gold does well when there's unexpected inflation or when there's huge geopolitical risk or, you know, we won't get into how the monetary system works. But, you know, money is essentially worthless, right? I mean, it's not backed by anything. And so there's the idea that here's an ass, here's a chunk of rock that people have valued for millennia.

And if suddenly people lose trust in central banks in all currency, where they're going to go to? They're going to gravitate toward things that are real. That could be land, it could be real estate, but it could also, but it's kind of hard to carry around land, but you can carry around gold. And maybe it'll be Bitcoin. Maybe people will trust these digits of Bitcoin. I mean, they definitely use it in Venezuela right now. I mean, people, you have super high inflation. People store their wealth in Bitcoin

because they can quickly switch it over to Venezuelan currency and buy something because prices are rising to stratic, you know, very, very high. I recently had a debate of the Bigger Pockets Forum with a user who was claiming to have discovered a new way to cash flow gold, which I disagreed with. It was basically like sell calls. at a certain point, buy gold, sell calls, and you'll get the income from the calls. I was like, well, the goal goes down, based on the way this is working, it's not going to work.

Anyways, I won't go into... Well, I wouldn't. No, I wouldn't do that. I was not pleased. I was not happy with the strategy. But basically, I kind of looked at it. It was like, gold is actually remarkably volatile asset. It's gone up and down over the last 100 years by, you know, four, five, six times, a couple of times at various points since, you know, early 19. Oh, it has.

It has. Or there's times where you weren't allowed to own gold, right, where they froze the price and they confiscated gold. It's a controversial asset. And I have about 4% in gold, another 2% cryptocurrency. And I just, you know, put it away and ignore it. Because if it does well and you don't own any, you'll feel bad. Now that, okay, that is a good point. I don't own Bitcoin because I don't understand it at all. But I remember when Greece and was it Greece in Italy? Greece was having its horrible currency issues and that was when Bitcoin had gone up to the previous high. It was like $6,000 or something for a Bitcoin, I think. And that was people from Greece would put their money in Bitcoin and then like you said with the Venezuela, pull it out to buy something and put it back because it was a more or less volatile currency than their own currency. You know, but as it's going up, you're like, oh man, remember when it was a thousand three weeks ago, I wish I would have gotten in then.

And I was just telling myself, yeah, but it could easily be, you buy it at $1,000, and then it goes down to $20. Well, right, and that's why it's a speculation. So it's sort of minimizing your maximum regret and the idea that, okay, I'm going to feel bad if, like my wife LaPrell was like, well, why didn't you sell Bitcoin when, you know, it got up to $19,000? Well, one, I didn't know it was going to fall. I knew it was probably a bubble,

but I would have felt bad had it kept going up. It went down and cut by half. I didn't feel bad because I already had set my allocation. I knew, you know, I bought this. I'm going to hold it for 20 years to see how it works. And so I don't want to, if you have something that's not a big part of your portfolio, there's no reason to sell it.

But it's been to how your mind's made out. I feel bad missing out on something than I would taking my profit. She would say just take the profits and go buy a piece of land, whereas I would feel bad selling and then know it doubled or tripled. That's interesting because I feel bad, at least I'm trying to train myself this way. It doesn't always work out this way in practice. But I feel bad when I feel that my decision wasn't based on the best mathematical case

for the long run for my investing portfolio. But I think that in reality, I'm more like you where I'd be upset if I missed out on a good bet, even if it wasn't, it didn't fit fully in with my like, oh, long term, I think stocks will beat gold or Bitcoin or whatever. So maybe there is, I think there's actually some really good, there's some really great stuff here for this discussion. I've got to go home and think about and figure out if I'm going to change any of my. But no, I think I think you're right, right? In fact, Danny Duke, I talk about this in my book. She talks about a good decision is not the result of a good outcome. You know, whether the outcome is positive or negative. That, that isn't

what makes a good investment decision. It's whether you had a good decision. It's whether you had a good process for making that. So you have a good process. I mean, you're looking at this the right way. You know, what is the driver of the stock market? Okay, if I see what drives return in the stock market, the dividend, the income growth, et cetera, that's a better foundation than buying gold where the return driver is people paying more in the future. I mean, between the two of you buy stocks. You buy gold case the world falls apart, but not too much. We'll have to go look it up, but we actually interviewed Annie Duke on the Bigger Pockets real estate podcast. She's one of my favorite authors, so I'll plug her book, Thinking in Betts, right here on the show.

Go check that out. That's one of my favorite reads I've read in the last couple of years, non-Baker Pockets Reads, of course. And then I'm also dabbling a little bit in poker as a result of what she's been talking about, which I classify, according to your schema here, as gambling appropriately. Oh, no, she's delightful. She actually endorsed my book. So she's on the front cover endorsing my book as a very good investment decision process. Fantastic.

That's a stellar recommendation right there. And the Andy Duke episode is episode 297 of the Bigger Pockets Real Estate Investing Podcast, which can be found at biggerpockets.com slash show 297. Okay, David, it appears that we have come to that time, the famous four. These are the same five questions that we ask all of our guests. Are you ready? I am ready. I don't remember the fifth question.

It's four questions and a command. Okay. Sort of. So what is your favorite finance book? My favorite book is Anti-Fragile from Nassim Nicholas Talib. And he's a difficult read, but I like him because he's really changed the way I think about investing ever since his first book comes out. And the biggest takeaway from that book is ruin matters. says he says he's effectively organized his life, that sequence matters and the fact that

when we do things, why we do things, and if there's a chance of being ruined in a particular deal, such as putting all your money in Bitcoin or gold, you don't do it. So we need to always avoid ruin to make sure that we live another day. That sounds awesome. I've not heard of that book. I'm going to have to go check it out. What is your biggest money mistake? Well, my most recent money mistake is one of my biggest. We've bought a lot of used cars in the past, and three years ago I bought a BMW 650I. I talked about it on my podcast. It was a fast car.

It would be fun. I thought, you know what, it's already taken a 50% depreciation hit. It'll be great. I just traded in for Prius because one, I got sold a lemon. Two, the price dropped like a rock. and I ended up spending, I throw 20,000 miles. It's been $1.25 a mile on that, which is about twice what I've ever spent on a car on a per mile basis.

So that's the biggest money mistake I've made recently. Here's why I love this mistake so much. That is you have articulated out exactly how much money you've lost on a per mile basis in great detail, right? Who categorizes that level of detail around the mistake? I mean, that's got to be a contributor to the reason why you've been so successful with money. for a long period of time. Well, yes, because I like to know what am I paying. We've done this with all our cars. Our typical car in our Honda Odyssey is probably, you know, we drove it 160,000 miles.

We ended up, you know, it was like 28 cents a mile. So when I have a car that suddenly costs me $1.25 a mile, and it, yeah, it stings. So yeah, I calculated it. And I mean, I felt bad trading it in on the Prius because, you know, my daughter, will drive that in college and people say it's my car. It's like, you know, no, that's not really my car. I don't have a car because, you know, I messed up on my car. I don't get a car for a while.

Not even the Tesla. Testura, we won't get that one. But I even factored that one in. You know, leasing a Tesla, a Model 3 will run about 83 cents a mile. The cheaper than this used BMW that I lost money. Wow. So

Scott, you are asking him, wow, who does this? Who calculates it out by the mile? I did. Did you not? Because you're just as much of a money nerd as... I have not done that. But I do think that my car is probably one of my bigger financial mistakes,

but it was a little bit lower scale. I bought a new Toyota Corolla, and I probably should have bought a five or seven-year-old model when I first started out, and that would have been up 10, 12 grand. Yeah, but still, as far as money mistakes go, I mean, there's some whoppers out there. Because I now drive a five-year-old Toyota Corolla 2014,

I feel like if I were to compute my cost per mile, it's got to be in the lower end of the spectrum. So maybe that's why I haven't done that. Oh, I'm sure it is. How many miles do you have on it? Like $30,000? You're probably still up there. You've got to hold it longer.

Yes. But you'll get down under 30 cents a mile. That includes gas and insurance, too. Yeah, if you're interested in kind of diving, deeper into this, listeners, on the discussion around the nuts and bolts in this, I'm sure, David, you have a lot on your website and podcasts. But Mr. Money Mustache has also done an interesting study that kind of resonated with me around how if you buy a new car, you're basically purchasing 20 years of car inventory, which is a really inefficient way to build a business,

for example. And there's a lot of mathematical concepts that kind of derive from that that make it kind of that helped make the case very strong for used vehicles and those types of things when you're making a decision around this. Is this the new cars and auto financing article? I don't know. I'll find it, then I'll link it to it. Yeah, we'll put those in the show notes, which can be found at biggerpockets.com slash money show 86.

Okay, David, back to the actual show. What is your best piece of advice for people who are just starting out? Well, always what we talked about in this episode, be able to, whenever you're starting out, ask what is it, be able to explain what the investment is and how it's going to make money. You know, even if it's the option within your 401K, I understand what it is before you invest. All right. What is your favorite joke to tell at parties? And this is the hardest question of the famous four. Yeah, it actually is. I'll tell you, let's see. I'm going to see, I hear this as a popular joke. So let me know as people have told it before. So there are two muffins in the oven.

You know the punchline yet? No. All right, two muffins in an oven. The one says the other, it's getting hot in here. And the other says, hey, a talking muffin. Oh, nice. You're definitely going to get a rise out of the audience with that one.

Oh, God, Scott. Okay. David, here's the command. Tell me where people can find out more about you, please. Oh, yeah. My website's Money for the Rest of Us.com. So that's where you can find out there. And in my book that's coming out is basically it goes through 10 questions you should ask

anytime you want to invest. It's money for the rest of us. Ten questions to master successful investing. You can find information on that at Money for the Rest of Usbook.com. When does that book come out? October, October 25th, 2019. October. Awesome. Awesome.

And you can pre-order the book, Money for the Rest of Us, Book.com. And we'll link to those in the show notes as well. And again, the show notes for this show can be found at biggerpockets.com slash money show 86. And that book comes out October 25th. David, thank you so much for being on the show today. I really appreciate your time. And this was really informative. All these different ideas.

And like principle number one, be able to describe what you're investing in. You know, I hear a lot of people on Facebook. I see people saying, you know, oh, I just bought X. I'm like, why did you buy that? That seems like something you heard. And, you know, I'm going to start asking people, actually, can you explain what this is and see what they say? Because that's a really good indicator of do you even have the knowledge to be putting money into this?

You can lose everything if you don't know what you're doing. I really like that idea. The challenge is that that idea, we don't think about losing everything, right? When we buy something, all you can think about is that feeling, what's going to feel like when it goes up? Oh, yeah. I've gotten the process. Just thinking it's going to go up makes us feel like we know more than we do.

I've won the lottery about a thousand times in my head. Every time it goes up really high, I buy one ticket, and then I don't win, and I'm always surprised. But you do it for the entertainment values, right? And that's lotteries or gambles. And the only reason you gamble is for entertainment. But you don't want to be entertained by losing money on your investing. You want to do that. You do that for gambling or you go to Las Vegas.

Yeah, and I don't really gamble that much. My in-laws live in Las Vegas. I'm there a lot. I'm there a real lot for somebody who doesn't gamble. But yeah, I never buy a stock, buy an index fund, invest in real estate thinking, I hope I lose everything. No, but the entertainment just is the lottery, right? You get more satisfaction out of the thought of winning that is worth,

what you get at is worth more than the price of the ticket. otherwise you wouldn't do it, right? The thought of that I could win is worth more to you than the amount that you know you can lose buying the ticket. Yeah, oh, I couldn't buy like five lottery tickets. Are they $2 now? That's like $10. I can't put $10 in there. I don't want to lose $10, but I'll lose $2.

Okay, this is David Stein from Money for the Rest of us. And we're out of here. Thank you, David, for your time today. Thanks for having me. All right, that was David Stein from Money for the Rest of Us. Wow, what a great discussion. What an insightful commentary. What's some great rules for investing and a whole bunch of new asset classes to think about an explorer if you're like me and we're kind of new to some of those things, but thought you were getting a pretty good grip on maybe real estate, stock investing

and bond investing. Yeah, you know, his number one principle, be able to describe in detail what you're investing in is like it's so simple, but it's so mind-blowing. If you can't explain it, then you should not be investing in it, not until you can explain it. Bitcoin, I have no idea what it is. I mean, I know what it is, but I don't know how it works. I don't understand it. Frankly, I don't care. I don't want to invest in Bitcoin. It's very volatile. It's too volatile for me. So I don't invest in it. But there's a lot of other people that I know who are investing in it. And I know they don't know what they're talking about. And that just makes me a little scared for their experience coming up. But that right there is like the number one tip we can take from this is

be able to describe what you're investing. And like you said, he gave us a lot of different new to, maybe new to you ideas and new investment classes that you can go and research and, you know, figure out, hey, is this something I want to do? Is this not something I want to do? But I love this episode because it just introduces some new things that we haven't talked about before. Yep. And I'll say that. I've, feel like I have a reasonable understanding of Bitcoin and what it is and how it's used. And I feel like that is why I do not invest in Bitcoin. So I think, you know, I think to go out by once every, you know, six month tirade against Bitcoin, right? Bitcoin is one of hundreds of cryptocurrencies, right,

which are used leveraging a technology called the blockchain. The blockchain is a very valuable technology that has a lot of applications and a lot of business things. Bitcoin itself is one of hundreds of fabricated theoretical currencies that you could apply value to. For example, Target, Kodak created a Kodak coin a few years back to, or maybe last year, that was a new cryptocurrency that could have been just exactly like Bitcoin, right? For, you know, they were more specifically for photography-related purposes. But the currencies themselves have no intrinsic value except in how individuals trust them as currencies.

So there could well be a cryptocurrency like Bitcoin or Ethereum or one of these other currencies that's a leader. One day that takes over a large portion of international trade. But who's to say it will be Bitcoin or Ethereum or no one that doesn't exist yet? right? It's going to be one of those that's going to attract, in my opinion, most of the market share. And I have no reason to suspect that Bitcoin would be it if that ever exists in the first place. As the United States citizen, if you try to pay me in Bitcoin, I'm going to refuse you. And I'm going to ask you for dollars. So for now, practical application for Bitcoin,

and I see really long shot odds of any one specific currency actually becoming a de facto world currency that's used to a great extent. could be wrong on that, but that's my understanding of Bitcoin, and that's why I do not invest in Bitcoin. And you do make a good point. I use Bitcoin interchangeably with cryptocurrency. It's just easier to say Bitcoin than cryptocurrency. So I think most people, when they're talking about Bitcoin, they actually mean cryptocurrency in general. Either way, I don't invest in any of it, because I don't understand it. So I was going to invest in cryptocurrency or speculate. as we should say, I would try to do it in an index fund of cryptocurrencies to de-risk that concept that has talked about of Bitcoin maybe not being the one that wins out in the end. Maybe it's Ethereum,

or maybe it's one that we haven't even been invented yet, or one of the hundreds or thousands of small ones that have value currently at close to zero in aggregate. But you just don't know. And I think that there's a lot of challenges around that. So tirade against Bitcoin over, Tyrate Against Gold happened today. There you have it. Yeah, I'm not a big fan of gold either. And I thought that I had read somewhere that gold has like hovered around like $1,200 or $1,500 an ounce. And I remember in the 80s, it was also like $12 or $1,500 an ounce.

I am just going on memory, though. So please, if I'm wrong, don't send me 3,000 emails telling me how wrong I am. You can send them to Scott instead. M-I-N-D-Y at biggerpockets.com. All right. Well, should we get out of here, Mindy? We should. From episode 86 of the Bigger Pockets Money podcast, I am Mindy Jensen.

He is Scott Trench, and I don't have a snappy comeback today, so goodbye.