Money Rehab with Nicole Lapin - Index Funds and Chill (2022 Vision)

Episode Date: December 31, 2021

Happy freakin’ New Year's Eve everyone! 2021 was another rollercoaster of a year, but let’s embrace this day as the start of something new. Today, we revisit an episode on investing in your future. For the sake of your future self, listen up! Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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So much in your pocket, your face would turn blue. But where should you put it? What are you to do? Saving your money? It's hardly a thrill. But you can grow your small fortune. If you index fund. And chill.

Happy frickin' New Year's Eve, everyone. I know 2021 was another roller coaster of a year, but let's embrace this day as the start of something new. I, for one, am really excited for 2022 and feeling re-energized to tackle my financial goals. How about you? Whether you're ready to hit the ground running or need a little motivation, I'll be here on Money Rehab every day so that together we can make 2022 the year we get it together and get it all. This week, we pulled the five most crucial Money Rehab episodes that you should focus on for success financially in 2022. So far, we've talked about some financial hygiene with credit scores and debt and budgeting. But in the spirit of the day, I wanted to highlight an episode about investing in your future. So without further ado, here's episode 16, Index Funds and Chill.

Hey guys, are you ready for some money rehab? Wall Street has been completely upended by an unlikely player, GameStop. And should I have a 401k? You don't do it? No, I never do it. You think the whole world revolves around you and your money. Well, it doesn't. Charge for wasting our time. I will take a check.

You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Today, money rehabber Daisy called in with a question that I am particularly stoked about. Hi, Nicole. I listened to your episode on unclaimed money, and I went to unclaimed.org and actually found some unclaimed money on my own. I've been saving up for a while to get this Louis Vuitton bag that I've had my eye on for forever. So I think I'm willing to use this money to get that. But before I do anything, I just wanted to know how you would spend unclaimed money. This question is near and dear to my heart because I had a personal experience with it. I'll tell you the story at the end teaser. So you keep

listening. But for now, I want to get down to business. At the start of the pandemic, every person on Twitter was DMing me, slipping into those DMs about hot stocks. They were like, Nicole, should I buy Zoom? What are your thoughts on Peloton? Netflix is killing it right now with everyone stuck at home watching it. Should I buy their stock? To all of those folks who said it was their first time getting into investing, I said hell to the no. No investing in individual stocks. And I repeated the title of this episode to them. Index funds and chill. Warren Buffett, he is a very smart investor, perhaps the best of all time, said the greatest investment Americans can make is putting their money in low-cost S&P 500 index funds. And when the greatest investor of all time speaks,

we should seriously listen. So let's unpack what he said. An index is a collection of different stocks by a certain set of parameters. So what does that mean? When you hear the stock market report saying the Dow is up, blah, blah, blah, the S&P 500 is down, blah, blah, blah, the NASDAQ is blah, blah, blah level. They are talking about the three main indexes, the Dow, the S&P 500, and the NASDAQ. Now, the Dow Jones Industrial Average, or just the Dow, for example, tracks the 30 biggest stocks in the United States, including ones like Apple and Microsoft and Disney. The S&P 500 is made up of recently 505 stocks, which is annoying to my organizational put-it-in-a-bento-box brain, but I digress. It's made up of different large-cap companies or companies with a value of more than

$10 billion. All of the Dow companies are in the S&P 500, plus 475 more, making up 80% of the U.S. stock market by capitalization, which is a fancy word for value. The NASDAQ is another index that tracks mostly technology and internet-related companies. There are 3,300 companies in the NASDAQ, including Facebook, Alphabet, which is the parent company of Google, Amazon, and iHeartMedia. While all three of those indexes, or indices, tomato, tomato, whatever you want to say, I'm going to stick with indexes, they track large U.S. companies. There are still a lot of other indexes that track smaller companies, including the Russell 2000, the Wilshire 5000, and the S&P Small Cap 600. When you buy an index fund, you're basically buying a little

bit of all these companies without buying the actual company. Mr. Buffett and I both like index funds because they're 80% less expensive than actively managed mutual funds, which you've probably heard about with your retirement accounts. And you also get all this diversification built in since they include small slices of different companies from different industries. So they're less risky because if one company fails within that index, you still have all the others to prop it up. There are also some tax advantages, and I often say don't do anything because of tax advantages. But if you're going to do it anyway and it makes most sense

for you as a newbie investor, then you should know that there isn't a lot of active trading, which can trigger capital gains, which we will talk about in another episode. Not that you should follow my particular investment strategy, because my goals and investment strategy, therefore, are different than yours. But I personally like to use a discount brokerage without having to put a ton of research into stocks all the time. There are so many different ticker symbols you can invest in. If you're looking for the S&P 500 ones, take a look at GSPC. There are also VOO, IVV, SPY, Alphabet Soup, USA. I own a lot of index funds because I can automatically invest month after month and ignore the ups and downs of the stock market and all the finance news with

confidence that over time, my investment will grow in step with the overall market, which has only gone up. If you look at the levels over long periods of time. Generally speaking, few investors, even the most renowned fund managers, beat the market. Seriously. Those are the folks who put an awful lot of time into their investments, way more than I do. I mean, if I looked at stock charts all day, I would not be able to record this show for you. So that is also why they're so appealing to me because they're really low maintenance. So after my own cost-benefit analysis, the cost being the time I spend managing my investments compared to the benefit of the money I get from them,

index funds are my go-to investments. So Daisy, I told you that I was going to tell you a story. I know you want to hold me to that. So here goes. When I was growing up, my family didn't have a lot of money. And if you're like me and didn't have a lot of money growing up, I'm sure you had some moments burned into your mind when you felt shame. I definitely have one. For me, it was when two bitchy girls in middle school called me out for wearing knockoff Doc Martens that I got at Payless Shoe Source. They called my shoes, wait for it, Nurse Martens and teased me for it. I went to school with a bunch of rich kids who gave each other Tiffany jewelry for their birthdays or bat mitzvahs. I had just started living with my mother after my father died, and there was

no way I was going to see anything that resembled $100 combat boots or a sterling silver bracelet with a dangling heart like the popular girls at school wore. About 15 years later, I had just moved to New York and started appearing more on the Today Show and MSNBC in addition to my anchor role at CNBC. One day, I got an email that made my heart sink. Now, mind you, I was interviewing CEOs and politicians and world leaders and all the people who never made me nervous. But this email was from her. Bitchy girl numero uno. My childhood bully. The same one who teased me for those Nurse Martins all those years before. She wrote to me asking for some advice on how to get on TV. Getting a note like that should have made me feel so proud, right, for how far I'd come, like I'm laughing last, bitches. But seeing her name pop up in my inbox

actually, honestly, made me feel like I was 12 years old again. The truth is, no matter how much we accomplish or how much money we make, we all have that vulnerable little girl or boy buried deep within us who comes back to life when triggered just so. And in that moment, my 12-year-old self wanted those Doc Martens, the real ones, and that Tiffany bracelet. And at that point, I could afford them. So I jumped into a cab and I went straight to the Tiffany's store with every intention of buying that damn chunky bracelet once and for all. When I got there, I headed straight for that heart bracelet. I looked at it. It was smaller than I remembered. It was about 300 bucks. But instead of putting my card down, I ran out of the store. I didn't run

out of the store because my card wouldn't work. I ran out of the store. I didn't run out of the store because my card wouldn't work. I ran out of the store because I had a better idea. I jumped on the phone with my broker, and I asked him to buy me TIF stock. Tiffany & Company is a public traded company, and they trade under the ticker symbol TIF. At first, I was thinking I would take that 300 bucks and I would just buy as many shares as that would get me. Then I decided, listen, bitchy girl number one and two, I'm going to double that. It felt like a better investment and something that I would actually still care about in a few years for my portfolio, for myself myself and that scared 12-year-old girl who actually wasn't scared anymore.

And now, starting from that $600 investment, I can buy more Tiffany bracelets than I have space for on my arm. So Daisy, how important is that bag to you? If that bag honestly will bring you happiness, bag to you? If that bag honestly will bring you happiness, amazing, get the bag. If it truly doesn't, I would suggest to look at Louis Vuitton's parent company, LVMH. They are a publicly traded company. They own all sorts of brands beyond Louis Vuitton. They own Celine and Givenchy. I hope I said that right. And you can buy a piece of that that will grow in value, I think, way more than that bag ever will. So take that money and invest it in yourself for the long run. Today's tip you can take straight to the bank is super simple. Index funds and chill, y'all. super simple. Index funds and chill, y'all. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are

Mangesh Hatikadur and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all. money money money money money money money money money money money money money money money