The Compound and Friends - Investment Nostalgia (Tadas with Justin Mallory)

Episode Date: May 3, 2019

“Many of us look back nostalgically on our childhood memories when life was simpler and allow the feeling of familiarity to warm our souls. That’s ok. But, save your memory of investment traditions for small loses where lessons were learned, stay educated about the changing landscape, and participate in the positive evolution of the industry.” Justin Mallory has a deep interest and background in financial planning and blogs at The Real Wealth Farmer. Tadas got Justin on Skype to talk about a recent post of his entitled “Investing Stranger Things” where he talks about how time, luck and nostalgia affects how we invest. You can read more about Justin’s take on how nostalgia affects our investments at his blog The Real Wealth Farmer: https://therealwealthfarmer.com/2019/04/29/investing-stranger-things/ Enable our Alexa skill here - "Alexa, play the Compound show!" https://www.amazon.com/Ritholtz-Wealth-Management-LLC-Compound/dp/B07P777QBZ Talk to us about your portfolio or financial plan here: https://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer if you seriously need this spelled out for you. https://thereformedbroker.com/terms-and-conditions/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, Justin. It's Taddis. How are you? Hey, I'm doing well. How are you? I'm great. Hey, I'm on the line with Justin Mallory, who has a deep interest and background in financial planning and blogs at The Real Wealth Farmer. I asked Justin on today to talk about a recent post of his entitled Investing Stranger Things. The post caught my attention not only for the classic 1980s nostalgia, but it also raised a number of good points about how time, events, and our memories affect how we approach investing. A classic example of this are people who have lived through the Great Depression, and in many cases, their ability to take on risk was dramatically affected throughout their lives by their experiences. So that seems like a good place to start. Justin, you covered a lot of ground in this post. What gave you the impetus to write it?

You covered a lot of ground in this post. What gave you the impetus to write it? Well, when I did my tweet sort of introducing or advising that this post had come out, I said that I'd been feeling pretty nostalgic lately. And I think I just kind of had that general feeling over the last year or two. And I used the Stranger Things moniker because I think that kind of captured some of what I've been feeling. But I don't know. I've been consuming a lot of financial media. And I think just kind of having that thought and then the consumption of financial media sort of spit out this kind of combination that related to the two things, sort of the inputting information. And you're really surprised about kind of the things that your brain puts out. So that was kind of how

I looked at it. And I've been noticing sort of like you said, with generations and particularly the Great Depression, I've looked at some family members' portfolios and things. I see drastic differences regardless of sort of how their risk tolerance might be, but just drastic differences based upon sort of the experiences in their lives. Yeah, no, I think that's absolutely correct. I mean, I think, you know, it's hard to discount the effect of time, as it were. You know, I know that oftentimes when portfolios come into Ritholtz Wealth Management, they're almost like a geologic survey of this person's life and how it is that

these certain things came into the portfolio and never really left. And so, yeah, I think that's a really underrated idea. And I think, you know, you kind of, uh, you approached it in a really interesting way. Great. Well, yeah, I, um, that's something I always try to do. Um, I like, um, um, for anyone that hasn't checked out my blog, um, I sort of like the metaphorical way of relaying some of these, um, pieces of information. I think I, you know, can kind of draw people's attention. And I hope that people kind of enjoy reading it as well with mixing it with sort of getting some concrete financial information in there. Yeah, no, I think the best blogs and the ones that kind of stand out are the ones that have, you know, that sort of a very personal sort of approach to things.

And I think, you know, you obviously have that. Well, thank you. Well, you know, that sort of a very personal sort of approach to things. And I think, you know, you obviously have that. So. Well, thank you. Well, you know, I think what, you know, it's interesting because this week also there was a post by Ryan Kurland, who's at Alpha Architect, and he had a post up talking about, you know, the ETF industry. And, you know, for those of us who are in the financial blogosphere, it seems like all we talk about are ETFs, you know, 24-7. And he had an interesting post up. And one of the things that jumped out at me was this idea that, you know, as much as we talk about ETFs, mutual funds as a whole still have four times the amount of assets under management than ETFs in the United States. And it's like, you know, that's a real head scratcher. We spend all our time talking about ETFs, but, you know, this kind of legacy industry, the open-end mutual fund industry still has not only more assets, but, you know, if you think about it, the impact on

people's portfolio is still very large. Yeah, I saw Ryan's post and I did glance through and I felt like it sort of related to some of the things that I had written. We do spend a lot of time on ETFs, I think, because they're capturing't, or maybe there's some philosophical things about whether someone calls passive truly passive, but just indexing and ETFs have captured a lot of the flows. But to your point, there are a lot of assets still in mutual funds. A broker that I know had pointed out to me that he had a lot of old A-share business. And it sort of said to me, there's been kind of a set it and forget it mentality, which for investors could be good or bad depending upon the vehicle that they're in and the expenses and so forth.

But I think it behooves everyone to sort of check on those things every now and then. Yeah, no, it's very much a trade-off. We talk about the set it and forget it mentality oftentimes works very well for people. But if you are in a vehicle that is high fee fee, you know, that is a, you know, that's a significant sort of trade-off. So yeah, that, that makes a whole lot of sense. Right. There's that, um, there's that supposed fidelity study that no one can find about whether there's, there's, um, what was it? The situation where people, uh, are like people that forgot their accounts or lost their logins. And those were the ones that had sort of the best returns. I think, you know, that's kind

of interesting information out there. Yeah, no, that study is the financial blogosphere's great white whale. Everybody's looking for it and nobody has yet to find it. So, you know, one of the things that I thought about, you had a couple of charts in that post kind of chart in the way people approach investing? I think that technology has definitely impacted the way people approach investing. One of the points that I made in the blog was just, and I used my insight about what rappers I liked in the late 80s and early 90s. And I was saying that it was kind of related to the information that I had as far as a top 40 countdown versus not having a true hip hop radio station. And maybe my exposure was a little limited. And I feel that the internet has just you

know it's really flattened the information that's available out there i think you know you know a generation ago people didn't have the ability to go and you know pull up you know you know a website i don't necessarily name any any places but you know just a website in general or just doing Google searches about whatever they might want to do and where they can pull that information, I think, versus having to call up a broker a couple of decades ago to get that information. It's much more unfiltered and people get to make judgments with the information that they're able to pull down themselves. Yeah, no, that is a huge change. I mean, the library used to be the place you had to go for, you know, for information about companies

and about mutual funds. But you made, you know, you made a great point kind of towards the end of your post. And you kind of said that one of the things that hasn't changed, you know, all of, you know, all of these things are changing in the industry. One of the things that hasn't changed is our need to keep an eye on conflicts of interest when we're dealing with sort of third parties, and I thought that was kind of a good way to cap off the post. Sure. Well, the example I used was kind of related, you know, businesses are in business to make money. And you just have to step back a little bit and look at what are, you know, what are the things that are sort of driving my ability to obtain X? What are the things that are sort of driving my ability to obtain X? Am I paying somewhere else at Y that I don't necessarily realize?

And I think one of the things I had said is that financial services or Wall Street in general just has a bad history of, like you said, sort of the conflicts of interest, but also a lack of transparency. And I think that the Internet and a lot of people just being honest about what their conflicts of interest are have really given investors sort of a breath of fresh air that maybe they didn't have so much in decades past. Well, you know, that is a great point, and it's kind of an optimistic one. So I'm going to wrap things up on that optimistic note. And I want to thank Justin for coming on, and we'll talk to you again soon. Thanks a lot, Titus. It was great to talk to you.