The Iced Coffee Hour - Financial Expert: The MOST CONTROVERSIAL Investing Myths That Cost You Money! | Ben Felix

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Starting point is 00:00:34 Picking stocks, and I think that's probably on average detrimental. Who should buy individual stocks? I honestly don't think anybody. Leopold made the same mistake investors in South Korea made. Too much leverage. I would probably stop checking my portfolio five times a day. I would stop dabbling in individual stocks and covered calls. the costs of trading options are exorbitant.

Starting point is 00:01:02 Is it possible, though, that we can continue to see these 10 to 15% returns every single year? We are very close to a recession, and I'm worried about something worse than a recession. So what's the downside of saving too much money? I, well. Ben Felix, thank you so much for coming on the iced coffee hour. Thanks so much for the invitation. So you're the chief investment officer and portfolio manager at PWL Capital, with over $8 billion in assets.

Starting point is 00:01:34 I have to say, I've been watching you for the last nine years on YouTube. I think you're probably one of the most sensible people when it comes to investing, early retirement, saving money. What's the best investment you've ever made? Two, two things. One is myself. I went to university, got a degree in mechanical engineering, did an MBA with a finance concentration,

Starting point is 00:01:57 did a whole bunch of financial certifications, and doing all that stuff allowed me to get the, job that I have and progress with PWL, with the company that I'm that I'm with and create content and all that stuff. So that's, I mean, in terms of return on money, that has been by far the best investment. If I had not done all of that education and put in the time doing content, all that kind of stuff, I would have had a very different outcome. I know there's an outcome bias here.

Starting point is 00:02:21 Like I have been successful in a lot of ways. So it's easy for me to say, well, if you work hard, you can do the same thing, which is not necessarily true. But I do think that I put myself in a situation where I was able to, you know, get to an extent lucky. And if I had not done those things, the luck would have not played out the same way. I'm very careful to say that, you know, if you go make content and you're going to have the same outcome as I did, because that's not, that's not true. And I don't think that's the right message for people to hear. Anyway, the second best investment that I've ever made is in

Starting point is 00:02:49 equity of my company, of PWO Capital. I got options early on that I pushed for and then I bought equity later on and we were actually acquired last year. Congratulations. Thanks. So that was cool. And then I also got equity in our acquirer, which is an American company called One Digital. So I still have a big chunk of my net worth. I know I say don't buy individual stocks.

Starting point is 00:03:12 They're a private company. I think it's different. But I do still have a big chunk of my net worth in One Digital Equity. So what percentage of your net worth then do you have in a private company? It's a lot, man. 99%. It's not that much, but it's, uh, It's a little under 50%.

Starting point is 00:03:29 I know. Wow. I know. It's a lot. But I'm, you know what? I put so much of myself into the work that I do. I would not want to do that if I didn't have a meaningful equity stake in the company that I'm helping to build.

Starting point is 00:03:44 How does that feel? Does that make you nervous at all? Do you think that you could improve your peace of mind if you just didn't have that? One Deges is a big company. They're a diversified business. They're a large company. like it's probably not going to zero. It could reduce in value,

Starting point is 00:04:01 but I'm not super worried about a total loss. Even if that happened, though, I'd still be in a way better financial position than I ever thought that I would be, like when I was growing up or whatever. So I'm from that perspective pretty comfortable. But again, it's, the risk is there. And I'm not blind to that at all.

Starting point is 00:04:19 But the amount of myself that I put into the work that I do, I just, I wouldn't do it if I didn't have a meaningful portion of my, net worth in there. What's the worst investment you've ever made? We were very careful with crypto. But when Bitcoin hit 60K for the first time, we had an academic, like a distinguished academic in traditional finance,

Starting point is 00:04:40 who had written a book on crypto and defy. We had them on our podcast. And we spent an hour talking about his normal finance research, which is like, you know, he's one of the top in his field. And then we spent an hour talking about crypto and defy. And I was like, man, I had kind of ignored Crypt, not ignored, but I've been very skeptical of crypto. But then when this guy's like, man, he's super credible.

Starting point is 00:05:03 He knows normal finance. I was going to say real, but that might piss people off. Oh, well, I said. He knows that stuff better than anybody, including me. So I was like, okay, if he's taking this stuff serious, I've got to take it seriously. And so this is the first time Bitcoin's at 60K. And I bought equal amounts of Bitcoin Ethereum. And then it went back to whatever, it crashed to 30K or something like that after that.

Starting point is 00:05:31 And I'm pretty sure I sold at the bottom. But you ignored your own advice. So just buy and don't look at it. I bought it for the way that I justified it to myself at the time is after that podcast episode where this guy who I respect was talking about how much crypto is going to change the future of finance. I was like, okay, I need to take this more seriously and treat it the same way that I treat my research in other areas. And so we actually did, I think it was 13 episodes of a sort of sub-subs series of our podcast where we did an extra release every week for 13 weeks or whatever it was purely on

Starting point is 00:06:05 on crypto. So we had a bunch of experts with just different areas of expertise that touched crypto. And the way that I justified the purchase to myself was that if I'm going to get my head into this and research it, I feel like I need to own some and get experience with using a wallet and using an exchange and all that kind of stuff. So that was my justification. But yeah, I bought at the worst time and sold at the worst time. No, no regrets.

Starting point is 00:06:30 Paper hands. You could have just held. I could have had the same amount today as I did then. Yeah, but you would have sold, though, at the peak. You could easily have bought at 60 and then sold at 122. Held down to 30 and then back up to 122. Well, no, no, no, no. When it drops is 30, you double down.

Starting point is 00:06:47 You write it to 125. You sell. It's not difficult. I'll do that. I'll do that. The next cycle, I'll do that. I'm curious. What is a widely acceptable piece of financial advice that sounds sensible, but actually makes people poorer?

Starting point is 00:07:01 I mean, I take a little bit of a different angle to the question. I just talked about some of the biggest myths in personal finance in a recent video. And one of the things that I talked about is that you should save as much as possible as early as possible to live a good life. So now we're not talking about financial wealth because that certainly will benefit your financial wealth. but I think that young people really squeezing themselves to save as much as they possibly can and making sacrifices early on in life, I don't know if that's always the best thing to do for their long-term outcome when you consider the whole picture, not just the size of their portfolio or the amount of money in their bank account. I think you might have just triggered Graham.

Starting point is 00:07:37 Yeah, I was about to say, because that was my entire philosophy was save as much money as possible, as early as possible, because I did this compound interest calculator. And when I was 18 years old, I'll never forget this, I put a dollar in a money chimp calculator. And then I saw that by the age of 65, that would be worth like $40 or $50. And I thought, oh my gosh, every dollar I spend is actually worth $50. And so every single thing, it was like a $10 shirt times 50. A coffee times 50. Shoes times 50.

Starting point is 00:08:11 And when I saw that, I thought there's no I'm spending any money. And so I got my expenses as low as possible. I remember even I wouldn't go out to restaurants. I would eat at home and then go to like show up and drink the water and eat the bread because I could save the $20 times 50. Everything was times 50. And I look back at that and I think I probably could have spent more money, but I have zero regrets. That's, I mean, and that's fine.

Starting point is 00:08:34 If you have zero regrets, that's good. And it's not just about eating out at restaurants. There's other things like investing in education. You've obviously had a great outcome professionally. Investing in education, investing in experiences. Like there are lots of other things that you can spend money. that are not saving or investing in stocks. So you're not wrong, and I don't disagree with you.

Starting point is 00:08:50 Young people should save. I just think that there's often a perception that leads people to do things like go to restaurants and only drink water that's not always healthy. So what's the downside of saving too much money? Well, giving up on life experiences, giving up on things that you might have enjoyed doing. You can look back and say, I didn't regret that, and that's fine. But there are things that are nice to spend money on that can save time, they can give you enjoyable experiences.

Starting point is 00:09:14 And I think that perception that spending anything is bad, I think that can be unhealthy. To a point. We'll get more onto the psychology behind spending and saving and investing, all the psychology of money later in the episode. But I am curious because you do manage around $8 billion worth of assets. So financially then, in terms of financial wealth, what would you say is a widely accepted belief that people think is responsible? And it's generally accepted by financially literate people that's actually going to

Starting point is 00:09:43 make you poor. I think picking stocks, and I know you guys dabble in that, but I also know it's a tiny part of your portfolio, so I don't think you'll disagree with me on that. I think there's a, there's a point in financial literacy where people believe that they can pick, that they should be picking stocks, and that's how you invest. And I think that's probably on average detrimental to most people. You know what's funny? It reminds me of that like bell curve graph, where it's like the low IQ, the average IQ and IQ, and on both ends of the bell curve, it's like index funds. In the middle, it's picking stocks. It's like people that know nothing, like I know nothing, so I'm just going to buy an X funds. And the people that like know everything, like the senseys, the masters are like,

Starting point is 00:10:19 I'm buying it. That is a perfect meme for the point. I agree. Do you think people can pick stocks successfully long term? And a good example of this is Chris Camillo. I don't know what it is. He seems to have his finger on the pulse where his batting average is just insane. Even in this market, it's just how on earth did you know that? So there's a reason. that you guys talk about Chris Camillo a lot. Yes. Because he's very unique. There are not a lot of people that are doing that.

Starting point is 00:10:47 Now, I'm sure he's brilliant. Has he been lucky? There's probably some luck involved. Is he skilled? I have no doubt. Should other people try and replicate what he is doing? Probably not. So if investing is at the end of the day really simple,

Starting point is 00:11:00 is buying index funds. Why do so many people screw it up? Yeah, that's a very good question. I think people want to believe that there's something more. I think that's part of it. I think a lot of people don't even know about index funds still. I think for a lot of people just learning about that is a huge leap forward in terms of their financial literacy. I think people learn that in the long run in many cases where they'll be picking stocks.

Starting point is 00:11:21 It'll have a portfolio with whatever, five or 15 or 20 stocks. And then at some point, they evaluate how they would have done if they had just bought the index and realize that they did have positive returns with their relatively concentrated stock portfolio. But they would have actually done better with less of their own time invested if they just bought the index. And so then they'll be, oh, you know what, I'm just going to buy the index. So I think it's a learning process and sometimes people need to learn through experience, but sometimes people just aren't aware that index funds are an option. That was exactly me because I started off with index funds. I believe in 2013 with a Roth IRA.

Starting point is 00:11:55 Vanguard index fund, super simple. In 2020, everything crashed and I started buying individual stocks. And I diverted away from the index funds. I still had my index funds, but I plowed into individual stocks. And 2020, they did insane. I think in one year I was up like 30 something percent on these individual stocks, but I realized I'm really bad at selling because I'm the type when I buy something, I never want to sell it.

Starting point is 00:12:22 And so I held. And they kept going up. And then in 2022, they went down. And when I looked at the price when they went down from all the ones I held, I had made more just in the index fund that did nothing. And so I sold all of them at the low? No, I staggered. So I tax loss harvested. Some of them actually did insanely well. I think it was like Tesla that did really well. Google did really well. There were a few companies that just exceeded

Starting point is 00:12:52 my expectations and then others I lost like Robin Hood, unfortunately. So overall, I still made money, but I just sold all of them and then index funds. I stuck with index funds ever since. And that's kind of what you would expect statistically. Most people are going to have that type of experience. A very small number of people are going to have the Chris Camillo type experience where they just compound like crazy. But that's the exception. That's like finding someone that won the lottery twice and being like, look, let's find replicate what he did. I don't think it's realistic. How common is it that you see really, really bad financial advice being spread online on TikTok or Instagram or YouTube by people of authority that people listen to? Like, is this a very

Starting point is 00:13:29 common thing or what are the biggest myths that people spread that are actually very harmful? I think it's extremely common. The idea that you can pick individual, stocks, the idea that you can pick stocks based on their dividend yield covered calls is another one that comes up a lot. We'll talk about that. That's in the outline. I do not worry. We have that in the outline.

Starting point is 00:13:49 You guys got to keep watching because that's in there. And I would love to get your take on this because we've talked about it a lot. Yeah, I know you guys have. Imagine on your $8 billion that you have invested, you make 1% a week. That's not how it works. Selling a call. So I've been thinking about how to explain this to you. Should we go there now?

Starting point is 00:14:04 No, no, no. We'll go save it. We'll save it. Okay, okay. I think the product that gets sold a lot by influencers and by people who are trying to create content is hope. And that's sold many different ways. It's sold by saying, well, if you pick this, man, the scam comments on my YouTube channel about whatever insert name of the new token, like the ICO scams. Those are all based on hope. It's like if you invest in this thing, you're going to have a great financial outcome. And I think that gets sold a lot. You're going to build passive income with covered calls. You're going to build passive income with dividend stocks. You're going to pick the next big token before. more it blows up. And the product that they're selling people is hoped,

Starting point is 00:14:41 but it's not, it's not real. It's usually designed for clicks or the people selling it just don't understand what they're talking about. I'm not talking about you with covered calls, maybe a little bit. But yeah, so I think there's lots of advice like that out there.

Starting point is 00:14:56 People listen to and it sounds sensible when you hear it. You hear, well, you can make 1% weekly with covered calls. That sounds really good. And people are like, well, yeah, I want that. I want to, I want to be financially independent without having to save a huge portion of my income. So stuff like that is easy for people to consume because it gives them the hope.

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Starting point is 00:16:35 that's for the money that they're not going to touch for a very long time. I think it's very difficult for that to end up being advice that you would later say is bad. Now, with the market, though, at all-time highs, and valuations are pretty stretched, should people be more careful about where they put their money? All-time highs are normal for first things to understand. Very, very normal. They happen all the time, which you should expect in a stock market that is increasing over time. Earnings are going up. Recently, valuations have gone up. All-time highs are just part of the the stock market, they're always going to happen. They're not typically followed by crashes.

Starting point is 00:17:08 They're actually more typically followed by more all-time highs rather than declines. So that's all-time highs. Valuations are a little bit different. I think U.S. market valuations are high. They're as close to as high as they've been throughout U.S. market history. When you sort future U.S. stock returns by their starting valuation, when valuations are as high as they are now, future returns are almost always low or negative in the U.S. market. And I think people hear that statistic where they see those data and

Starting point is 00:17:39 they get scared. They start wondering the type of questions that you just asked me. When you look outside of the U.S., which is something that I have done for 10 other developed markets, it's a much wider range of outcomes. So if you sort future returns by starting valuations across all 10 developed markets that I looked at, you do still see a relationship where lower starting valuations have higher average returns, but when you include other countries, there's a much wider range of outcomes. So you can have valuations where they are now in the U.S. market. And in Canada, for example, there are 10-year periods following starting valuations this high where returns are very positive. And the same is true in other countries. So I think there's some

Starting point is 00:18:18 information. There's some signal in valuations, but there's a lot of noise. So I would not use it to time the market. I wouldn't be worried about it. What I would do, and then I heard you guys talked with us in a recent podcast about Vanguard's expected returns always being too low. Oh, yeah, lower. So, but I think that's the reasonable interpretation. Valuations are high. We should expect lower returns going forward, but that does not mean the market's going to crash. It doesn't mean you should get out of stocks. I think if anything, it's a very good argument to be diversified outside of the U.S. market. Not completely. I think global market capitalization weights are a very good starting point for any portfolio. I think that's going to go

Starting point is 00:18:53 over a lot of the viewers' heads. That's very academic. And I know obviously you have a background in academia, but I do question, should you base your actual behavior and your investing decisions on your knowledge? Because people now hear this and they think, oh, I need to acquire this knowledge in order to know what to do. But even still, like, you would probably say that you should just dollar cost average into index funds. And so how much does this knowledge actually even help you? How you talk about valuations? You talk about all-time highs. Oh, well, at all-time highs, it typically actually continues climbing at valuations as high as they are, then this will happen. When in actuality, all of this knowledge, does it actually, like, it doesn't sound like

Starting point is 00:19:29 it translates into behavioral changes or decisions. I think that's the benefit of the knowledge. I think when you acquire knowledge and when you understand things about what is the relationship between stock market valuations and future returns, it's very comforting to know that when you do that research, it typically suggests to do nothing. And sometimes people need to go down that path of hearing that, of seeing the data, hearing me or anybody else talk about it, for them to feel comfortable investing when they see people saying, well, markets are at all time high is that's a bad thing. It's not. But you have to be comfortable with the data to be comfortable with the fact that it's not a bad thing. Maybe some people can just say that they have

Starting point is 00:20:08 so much belief in financial markets and in index investing and in stocks that they're going to completely ignore the news and they're going to completely ignore people talking about valuations. But I think a lot of people do need that reassurance. I try and do that in a lot of my videos where it's like a lot of people are saying that this is a problem that you should be worried about that. Here's why you probably shouldn't. It seems like the problem if you distill it down is people taking too much action, trying to do too much research, trying to buy too many individual stocks, trying to predict things when in actuality, what they should be doing is simplifying. What do you think about a one fund portfolio? Do you think that

Starting point is 00:20:39 that is a viable method for people to do? It is the most simplest hands-off approach to investing. Yeah, as you guys mentioned, my firm manages around $8 billion. A huge portion of those assets, believe it or not, are in single fund portfolios. The rebalancing is done inside of the fund in Canada at least it's very tax efficient. It's very operationally efficient. Behaviorally, it's fantastic because you don't see all the individual components. Oh, you know, international stocks went down and you start to worry about that. So I'm a big fan.

Starting point is 00:21:08 My personal portfolio is 100% in a single fund portfolio. Your personal portfolio is in 100% one. Yeah. It's a Canadian listed mutual fund so the ticker doesn't really matter to most of your audience. But yeah, it's all in a single fund. How often do you check your portfolio? Almost never. I couldn't even tell you what it's worth.

Starting point is 00:21:25 right now. And do you have then someone that's managing your portfolio? Yeah. Yeah. So I have an advisor through my firm. Now, it's in one fund. So most of their advising is on, you know, how much should I be contributing to my registered accounts this year or right now or whatever? Or should I do this for tax purposes or whatever? And so in practice, then what you do is you get paid out from YouTube from your job and then your advisor will just take that money and throw it in this account and you don't even check it. Yeah. What's the strongest argument against a one fund portfolio? You could make some tax arguments that maybe there are fewer tax loss harvesting opportunities with a single fund.

Starting point is 00:22:06 I don't love that argument. ETFs are so tax-efficient, like you mentioned VT, the funds that I'm talking about in Canada are extremely tax-efficient. So the idea that maybe you're missing some tax-loss harvesting opportunities, I think you're probably making up for that by how tax-efficient the single fund is in the first place. People love complexity. As you said, people have a bias for wanting to do stuff. having components in their portfolio, maybe that makes some people feel more engaged. But I don't know, man, not having to rebalance, not having worry about anything. It's really nice.

Starting point is 00:22:34 What would you consider to be the perfect portfolio? No. Does that include real estate, cash, treasuries, gold? There is no universally perfect portfolio. So let's start there. There's a really interesting book, actually, where a whole bunch of Nobel laureates were interviewed by another professor at MIT about what their definition of the perfect portfolio is. I think this would make a great video. I just haven't made it yet.

Starting point is 00:22:59 And everybody has a different definition. And I think that's really telling it just about investing and portfolio management in general that you can take all these brilliant people who have literally shaped the field of finance and they don't agree on what the perfect portfolio looks like. And so how should, you know, what does my opinion matter on what the perfect portfolio? So I don't have a universal answer. My portfolio is global equities with a Canadian home country bias. So that's relevant for Canadians.

Starting point is 00:23:27 For Americans, it's a little bit different. You could still argue for a bit of a home country bias, but U.S. is such a big part of the market anyway. Anyway, so Canadian home country bias, the rest global market capitalization weighted. My portfolio is very similar to an index fund, but it does tilt a little bit more towards small cap and value stocks, which is like, I don't know, it's a small optimization that I like, but for all intents and purposes, it's very similar to an index fund. I own a house.

Starting point is 00:23:54 I don't own gold. I don't own any other real estate assets. I have some cash, probably more cash than I would tell most people to have. But it's kind of nice having cash. What percent do you have in cash? In percentage terms, it's not a huge amount. In dollar terms, it feels kind of big, but it's... Is it like 5% cash?

Starting point is 00:24:14 Below below 5%. Oh, that's not. Like 2%, 1%, it's probably close to 4... You know what? There's probably, if I can include everything, it's below, below 3%. Why is that? It feels like a big dollar amount.

Starting point is 00:24:30 I don't know. I look at it. I'm like, we got money back to McGee over here. Okay. Mr. Deep pockets. I mean, three percent has got millions of dollars, Jeff. I mean, he is managing $8 billion. That's not my $8 billion.

Starting point is 00:24:42 Are you not a billionaire yet? Okay. Got it. To me, that sounds really reasonable. Yeah. Why do you feel like it's too much? It's basically like global index fund portfolio, how is some cash? Why do I feel like the cash is too much?

Starting point is 00:24:53 I don't know, man. because I know that cash has a low expected return. I know that in real terms, it's probably losing money over the long term. And I don't have any concrete reason to have it right now. But it's like, I don't know, we have to do something in the house. It's just nice to have cash there. So speaking of savings, do you think the S&P 500 is a reasonable savings account? It depends how big your spending liabilities are relative to your portfolio.

Starting point is 00:25:20 If you might need $1,000 next year or sometime in the next six, six months and you have $10 million invested in stocks, I'm not worried about it. But if you need a million dollars next year and you have $2 million invested in the market, I'd maybe think about taking some of that out of the market. So it really depends on the proportion that you need liquidity on. So how much should people be saving? It's another tough one. It really depends on each individual situation and the person's goals and all that kind of stuff. But there's been some research on this somewhere between 10% at the low end and maybe a little bit higher than that if you want to be more aggressive is reasonable if you start saving at a normal point in your life. It can be higher

Starting point is 00:26:00 than that if you want to have a really aggressive retirement goal. But I don't like any, everyone's got to save 10% everyone's got to save 20% of their income. I don't like that. I think everybody needs to sit down, look at what their specific goals are and map out how much they should be saving. It sounds like you put a strong emphasis on making goals coming up with a plan, what you want and then making sure all of your decisions, beliefs, behaviors, all serve that one goal. Where do people go wrong when they set goals? Because if everything hinges on your ability to set good goals for yourself, how does someone know if they're setting good goals? And what would be a failure of setting goals? Failure setting goals would be looking back and realizing that you

Starting point is 00:26:39 set the wrong goals after you've spent 20 years trying to achieve whatever the thing you set out to achieve was. There is pretty interesting research suggesting that people are quite bad at identifying the goals that are actually important to them. But there's also some pretty interesting research showing how you can overcome that to an extent. A big one is using what's called categorical prompts. So it's really just giving people the categories that important goals might fall into. And that helps them ideate goals that are actually meaningful to them. So that's a big one.

Starting point is 00:27:09 And then another one, and we have this research up on our website, is presenting people with a master list of goals, which is a pretty cool idea. It's basically take a whole bunch of goals that other people, people have generated and put them all into one big list that's like it's not actually all goals you could possibly have, but it's an approximation of all goals you could possibly have. And then people can go through that list and pick off goals that might be important to them. So those two exercises produce goals that people will later reflect on as being more meaningful to them. Let's say we're providing the average viewer for direction for advice on setting correct goals. What would, if you were to distill it down to like one decision or thing that they should do

Starting point is 00:27:47 actionable thing, what would you say that is? Yeah, so the process that we use, and we have an app on our website that people can use if they want to do this, we ask people to write down their goals. We then ask them to double the list of goals. It just gets you to think a little bit harder. Then we present them with the categories. So for categories, we use the items in the perma model, which is a model of well-being that comes from positive psychology. But it basically suggests that the ingredients to a good life are positive emotion, which is feeling good right now. Like we're having a good time talking.

Starting point is 00:28:19 That's positive emotion. I'm enjoying a coffee later, whatever. That's a positive emotion. Engagement. So being engaged in tasks that are, that meet your skill level. I would say like this now recording a podcast is engaging. Relationships is having meaningful relationships. Meaning is doing things that are larger than yourself and accomplishment,

Starting point is 00:28:40 which is accomplishing hard things. Like getting to a million subscribers on a YouTube channel, for example. So you give people those prompts. these are the categories that important goals might fall into, and then they fill out a few more goals, and then the final step is they review the master list of goals to other people have prevented. And you get, in the end, you get a list of goals that have gone through this iterative process, and people tend to find the exercise really helpful. What are the best goals that people should be writing down that you've noticed lead to the highest amount of happiness?

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Starting point is 00:30:39 slash invite slash iced coffee hour or you could just click the link down below in the description. I absolutely love. running the podcast like filming with guests, YouTube strategy, traveling, it's all so fun. But there is one thing that I genuinely despise and that is a back-end paperwork. No joke, if I have to do anything with payroll, taxes, or benefits, it be the . And that's exactly why we've partnered with today's sponsor Gusto. For those are aware, Gusto is an online payments and benefits software built for small businesses. It's all in one, remote-friendly,

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Starting point is 00:32:11 Once again, that is GUSTO.com slash ICED. with the link down below in the description. What are the best goals that people should be writing down that you've noticed lead to the highest amount of happiness? Yeah, it's an interesting question. The most common goal when we did our goals survey, which is what we used to generate our master list, was financial independence. It wasn't early financial independence.

Starting point is 00:32:35 It was just financial independence at some point. So that is definitely a goal. I mean, it's a goal that everybody should have because at some point we're, as humans who age, not going to be able to earn income. So I think that is a very good goal. good goal. I think you have to be careful with how aggressively you pursue it. We can talk more about that if you guys want. And then there are lots of other interesting ones about relationships and

Starting point is 00:32:54 time with family. Time comes up a lot, just freedom of time, which is related to financial independence, but not necessarily the same thing. But if you just think through the perma model, positive motion engagement relationships, meaning an accomplishment, there are tons of good goals that stem from that that will contribute to people living lives that they enjoy more. Now, in terms of maximizing returns, going back to investing, what are you, your thoughts on margin for people who are young? Because I have a note here that your argument is that young people should potentially borrow to invest. And I would love for you to explain the rationale behind this. The economic models on lifetime saving and asset allocation suggest is that you want to

Starting point is 00:33:34 reach your lifetime exposure to stocks as early as possible. Now, if you have $10,000 in your investment account, but you have $3 million of future earnings that you will eventually save, but you don't don't yet have access to. And your lifetime allocation to stock should be whatever, 70% or something. Then the amount you should have in stocks today, based on economic models, is much higher than your available savings. And therefore, you should borrow to invest, to get closer to your optimal lifetime exposure to stocks. Now, should people use margin? The downside of margin is that you can lose everything. You can have a total blow up. I think that's very unpleasant. pleasant and can deter people from investing afterwards. So I don't tell people to use margin. I think

Starting point is 00:34:22 conceptually leverage for young people does make sense. There are lots of other ways that people can get leverage. People use leverage to an extent when they when they take out a mortgage to buy a house. Some people use leveraged ETFs. I don't have a super strong opinion on those. But yeah, so it was a good idea in theory. But should people actually go out and borrow on margin to invest when they're 22 years old, I'd be pretty hesitant to. It was interesting. Chris Camilla was making the argument that people who are young should be buying a 2 to 3x leveraged S&P 500 index and said that even at 2x leverage, if you're just going to be dollar cost averaging, you might see an 80% decline if the market collapses like 2008. But if you keep buying in long term, it should

Starting point is 00:35:05 outperform. What are your thoughts on something like that, which is really aggressive, but as long as you could stay the path, assuming you're not going to panic sell, or go to zero. Honestly, I don't hate it. I'm a little hesitant to say yes, S&P 500 only because that's not really a diversified portfolio. The U.S. market has gone through very long periods where it delivered no returns. The general idea of using leverage for young people and using leverage ETFs to get it is not terrible. I'd be very careful about who should actually go and implement that. I think behavioral could be very, very difficult for a lot of people, but I don't hate it. I don't hate his comment. So who should? I'm curious, because I think about it logically, and it does sort of make sense. Obviously, there's going to be a little bit of decay because you are paying that margin fee or you're paying the expense ratio on a leveraged ETF that's usually going to be a little bit higher than the base form of the ETF. But you know what? So we had a professor on from Arizona who's done a study on his was looking at single stock leverage products. He's actually less concerned about this stuff. We had another

Starting point is 00:36:11 Yale professor, too, that talked about the same thing. I brought up the leveraged decay. It's the volatility decay that people worry about. And both of those guys said, that's not really the right way to think about it. Like, that's just part of the cost of leverage. But you look at going, go and take out a margin loan or go and take out a whatever, a bank loan. And leverage ETFs overall, the total cost of implementing leverage through that medium is going to be pretty competitive. I don't worry about that stuff. I think the behavioral issues are much larger. So if you are to do leveraged ETFs, then what would make the most sense is something similar to what you practice, which is you kind of just buy it.

Starting point is 00:36:44 and then let it sit. And you don't even check your portfolio probably. Oh, yeah. I wouldn't be trying to go in and out of the market using leverage ETFs to trip. But it is, if you're holding 10, 15, 20 years, you don't really see a problem in buying, you know, VT leveraged. So again, I would be like recommending, recommending leverage in my profession is like super, super dangerous.

Starting point is 00:37:06 So I'm not saying everybody should use leverage. I don't want listeners to think that that's what I'm saying. I think for people who can psychologically handle it, who really understand the implications of what they're doing, the ups and downs that can come, the costs of doing it, all that kind of stuff. Here's where I'm getting at this. You are talking about this from a very academic standpoint

Starting point is 00:37:25 of research and history. And then I think there's also a behavior component to this. For sure. Probably, I'd say behavior is more important than what's academically correct. Would you agree with this? Yeah. In the paper that I mentioned that argues for this,

Starting point is 00:37:42 approach. They do kind of acknowledge that the behavior is a big issue. The argument that they make in the paper is that if people understood the long-term benefits, they would, the behavioral aspects would be a lot more palatable. Like, people don't realize how big the potential benefits are and that's why it's so behaviorally difficult. So they do talk about that. But talking to actual investors, as I do, I would be really worried about most people successfully implementing this type of strategy over a long period of time. How important is behavior when it comes to investing like this? Not just like this. I would say investing, period.

Starting point is 00:38:18 Behavior is kind of everything. Investing is simple but not easy. I didn't come up with that. Lots of people said that before, but it's, you know, you buy index funds. Very simple. But how many people actually do that and hold on them for the long run? Not a ton. So should people be more afraid about losing money in the markets or more afraid about

Starting point is 00:38:39 losing purchasing power of cash? without question cash, without question. Over a 30 year horizon, cash is much riskier than the stock market. And from your perspective, if someone wants to save more money to invest, is it better for them to cut back or try to make more money? Make more money is my opinion. People get pretty upset when I say that. Like when I make the point that I made earlier that maybe not everybody should be

Starting point is 00:39:07 trying to save as much as they possibly can as early as possible, people get really upset when I say that when I say people should maybe just earn more money they get really upset about that too but I think there are lots of ways people can earn more money I don't think you guys would disagree like you guys are both doing stuff you're using your time in ways that allow you to earn more money than you could have I don't know working at I'm not going to call anything out but a job makes less money like there's there are things that you can do not not everything is in your control and I and I completely acknowledge that but there are things that people can do to improve their situation.

Starting point is 00:39:40 But that being said, it still does make sense for a lot of people to probably save more than their spending, because I do think that the U.S. and probably just North America in general has a spending issue. I agree. And so if someone is dissatisfied with where they're at financially, for 99% of the people within that population, it's probably they're spending too much. What sort of spending strategies or expenses do you think people waste their money on or strategies they should implement in order to improve their financial performance.

Starting point is 00:40:09 I'm not a fan of budgeting personally. Never clicked with me. But I think that what you can do is define the amount that you need to save in order to reach whatever your goal is and work backwards from there. And sometimes you might realize that the amount of saving you have to do to achieve the goal is way too aggressive. You want to retire at 35, so you have to save 60% of your income, which means you're living on whatever, $1,200 a month or something. That probably doesn't sound palatable to a lot of people. so you adjust your goals.

Starting point is 00:40:36 But I much prefer, and this is what I do personally. I know how much I need to save each year. I save that. And I don't really worry too much about the rest of the spending. But I'm also, you know, I'm not going to restaurants and just ordering water. But I think I'm naturally pretty, pretty frugal. So I think if someone has a spending problem, that probably requires deeper, deeper reflection. I'm curious for you, Graham, because like you said, back in the day, you would do a lot of these,

Starting point is 00:41:05 frugal life hacks and stuff like that. Realistically, those actual decisions did not probably amount to a very large change in your overall net worth now. If we fully remove that from the behavioral stacking that you probably did, like the habits that you formed, the habits are valuable. But the decisions themselves were probably not very productive to your current financial portfolio. Maybe. Maybe they were. And the reason I say that is because back then I was dump in everything into real estate. And I would basically be at $0 in my bank account at the end of the year because my goal was to have 100% invested. And so by December 31st, I'd be spending money on renovations. It would go to a down payment. I would be zero. And then I'd have commissions

Starting point is 00:41:52 coming in like January and basically bump me back up. And so I invested everything. So I don't know. I think in the big picture, no. But if that prevented me from buying one property back in 20, 12, let's just say, then that would be pretty significant today. I think you're in a unique situation because if you weren't that guy, it would have changed your content and the appeal of your content. But also, I want to push back because I got the same experience. We're talking about going to a restaurant and ordering water. My experience at the restaurant was not the food that I got and ate.

Starting point is 00:42:26 My experience was going to the restaurant with friends. I got the same experience as everyone else minus a $30 entree, because I I ate at home. Same with going to the bar. Like, I would go to the bar with friends, would never get a drink. But we can go to a liquor store down the street and all buy one bottle. Yeah, one bottle. Pour it in a thing like this.

Starting point is 00:42:50 Drink it outside of the bar. Have fun. And then we walk in the bar. Now you already got your drinks, but for a fraction of the price. And then we just get waters. No one knows. You get, like, you know, just a water and a glass. Oh, you know what I used to do.

Starting point is 00:43:03 Bad day to be a restaurant owner. You know, bad day. This unlocked a memory, by the way. I'd ask for water with ice in it. And they'd say, oh, by the way, could I get a lime? Throw the lime in there. No one has any idea. It's just water.

Starting point is 00:43:18 I just remembered that. I don't know how small businesses would survive if people, if everyone did that. I am curious, if you could go back and give yourself now, let's just say you gave yourself $10,000 from what you own right now. and you had to spend it and you couldn't invest it to your 18-year-old self. And so you had $10,000 to spend over the next, you know, 10 years, an extra $1,000 a year just on dinners or whatever it is. Would you do that? Yes.

Starting point is 00:43:47 You would do that. Yeah. Yeah. Even though you could not invest the $10,000. You had to say. Yeah, $10,000 today. If I could give it to myself back then, I had 100% would. It's probably not $10,000 today, though. It's $10,000.

Starting point is 00:43:58 If it's a $1,000, giving it back then, it would be like, you know, losing $10,000 today, but receiving $2,000 back then. Let's just say, let's just say, let's just say, Let's just say that $10,000 back then is just now through real estate and this and that worth $60,000. What I take $60,000 today to get? Probably not, but if it's 10K, I would. What's the number? I mean, I have no idea. I would have no clue how to compound what went to which property and then to what index fund. No, wait, wait, wait. What number would you do it? Not 60, but you would do it at 10.

Starting point is 00:44:29 Ah, maybe like 30. 30 to 10? 30 to 10, yeah. Yeah, pretty giggles. But at the same time, I got 3X over, I mean, it's 18 to 35, so 17 years. So 3X over 17 years. That's, yeah, that sounds about on track with the S&P. It's probably. Enough. But like I said, I didn't miss out on experiences at all.

Starting point is 00:44:51 I got the same experience. I just found a way to do it cheaper. I think a lot of people could put into practice the things that you did when you were younger, for sure. Because I 100% admit, for most people, it is a spending issue. Yeah, I agree with that. I think spending is a huge problem. A lot of people don't know what they spend. They don't realize the impulses that they have to spend and then all of a sudden they have no money. And the problem with the problem with this whole issue is that because of compounding, 20, 30 years down the road, when you realize you had a spending problem, there's not a whole lot you can do about it. You can't undo the saving that you didn't do because you can't catch up with the compounding that you missed. So those that do end up saving money, you argue, of course, ETFs all the way. But I am curious within ETFs, I know that it is the objective of these ETFs to get as much money into the ETF as possible so then they can collect their expense ratio fee. It's easier to sell a product, the product being the ETF, if it's not as volatile, if it appeals to the investor's emotion, because it's easier to digest as an investor, less volatility.

Starting point is 00:46:00 but because of that, do you think that they could be compromising returns over time, risk-adjusted returns because they're trying to sell something a little bit more conservative? I don't know about the conservative angle, but I think that this issue of ETFs being created to be marketable is a massive issue. I did a video earlier this year that I called the rise of ETF slop, where I basically said that we're in this age now where there are hundreds of ETFs, maybe even more now, being created every year for all kinds of wacky, key investment strategies that appeal to the biases that investors have. So I talk in that video, I think it was about a covered call ETFs. I talked about thematic ETFs, like you got your

Starting point is 00:46:40 semiconductors, you got your whatever, AI ETFs, all that kind of stuff. There were a couple of other ones to single stock ETFs. You can buy a covered call leveraged single stock ETF, which is like, it's wild, but they're attracting a ton of assets. And the crazy thing about them is that they have high fees. And so an issuer can come out and create whatever, 15 new ETFs. that cover individual stocks. If one of them attracts a bunch of assets because it does well over the short term because that stock gets a bunch of media coverage or whatever, it makes it worthwhile for them to have issued all of those,

Starting point is 00:47:10 all of those ETFs. And so we're in an environment now where there are all of these financial products that are behaviorally very appealing because whatever, they pay a 10% yield or a buffer ETFs. That was the other one that I had in that video. So they're capped on the upside and the downside. And again, to your point, that's very behaviorally attractive. If you listen to the story, oh, I don't have to lose money and I can invest in

Starting point is 00:47:30 stocks, that sounds amazing. People don't realize how much upside they're giving up in the long run. And all those products tend to have higher fees. And so you get into this situation where the ETF issuers want to be profitable as they should be. And so they create products that are appealing to people that are very marketable that have higher fees. And those are the ones that get advertised to investors and people buy them. What do you think about covered call ETFs? I mean, I've done, I did, I think, three videos on this topic last year. And I don't know who should actually invest in them. I think a lot of people, do because they pay high income yields and that feels really good. But who should actually invest in

Starting point is 00:48:06 that strategy? I'm at a loss. Like I really don't know. I agree. I would, well, I would argue that the people who should invest in that are the people who mentally want to see that income coming in. And they, they like to see that, I think it's like 8% a year that's a consistent dividend without a ton of volatility. And just psychologically just makes them feel better to know, hey, if the market goes up or down and make my 8%. But you're not, right? Because you're making, if the portfolio crashes 30%, you don't get 8% on your initial investment.

Starting point is 00:48:38 Like, there's volatility in that too. But I think the people don't understand, the thing people don't understand with covered call funds. Covered calls in general, just as a strategy, is that it introduces asymmetry into the distribution of outcomes. It's basically like, it reduces volatility. So if you look at a covered call ETF or whatever, you look at its sharp ratio, it's like,

Starting point is 00:48:56 that looks really good. It's a good sharp ratio. It's got less volatility. than the market, but most of that volatility reduction is coming on the upside. You're keeping most of the downside. You get a little bit of premium buffer, but you're keeping most of the downside risk and you're completely capped in your upside. What does that mean for Jack's option strategy? Okay. So I want to just think through. Like you talk about getting whatever, three percent a week or one percent a week, whatever that is. Well, a lot of that, every, I hope every time I've said that it's more

Starting point is 00:49:26 of like tongue and cheek. It's kind of like, yeah, you know, I get three percent a week. Obviously, you do not average 3% a week. That makes zero sense as an investor. You can't do that. That being said... I'm glad to hear you say that. Yeah, that being said... But I do think that it's not a bad strategy to play around with with a little bit of money on the side.

Starting point is 00:49:47 And I've been doing it, and so far it's tended to work pretty well. Have you benchmarked your covered call of returns relative to the underlying stock? Well, as of late, yes. And relative to the underlying stock, I have underlined. performed. Which is kind of what you'd expect. I mean, listen, I've heard you guys talk about this stuff. I know it's a small part of your portfolio and I know you enjoy doing it. And it's like, that's, that's fine. But as a strategy, what people have to understand about covered calls is that the expectation is that you're going to underperform the underlying structurally. That is what is going to

Starting point is 00:50:18 happen. And if you want that and you understand that you're giving up upside volatility, but not downside volatility, which basically means if it goes down, you still capture most of that. But if it bounces back, you don't capture that. That's just, that's mechanically the way a covered call works. If people get that and they have fun doing it, like, who am I to say they shouldn't do it? I just think people have to understand what the expectation is when they go into that type of strategy. What do you think about the opposite strategy of buying call options or buying put options then? Well, two very different strategies, obviously, buying call options is a way to get leverage. So I don't think people should, I'm not going to say everybody should be buying calls, but we talked earlier,

Starting point is 00:50:56 but there can be some benefits to leverage in a long-term portfolio. When we had Robert Merton on our podcast, who's a Nobel laureate, and he's done a ton of the original research on life cycle asset allocation, how should people invest over the lifetimes, he's an advocate for using a bit of leverage as well. And he talked about it on a podcast that he would actually rather people use call options than margin because you can't completely blow yourself up with a call option, or with margin you can.

Starting point is 00:51:23 But the other comment that he made that was really interesting is that, He would not advocate for people buying call options themselves. He would like to see it embedded in a financial product. So you buy an ETF that gives you exposure to the S&P 500 plus calls to give you some leverage. And then you just buy the ETF. And it's very simple. But Merton's point was people shouldn't be trying to buy calls themselves because people are error prone. And there's a lot of rest that you screw something up.

Starting point is 00:51:49 So given all these strategies, who should buy individual stocks? And when is that the right move to make? I think you guys are great examples where I think you have a lot of fun doing it. It gives you something to talk about. It's entertaining to listen to you, talk about it. But those are all reasons that people do buy individual stocks. It's pretty boring to show up to a dinner party, especially if you're not ordering food, and say that you know, you just buy index funds.

Starting point is 00:52:14 But you guys have great stories to tell. So you can not order food and talk about, I can't remember the name of the stock that you guys are talking about recently. But you have stocks to talk about. You have stories a time. And that's true because my Robin Hood loss ended up becoming one of our most viewed clips. There you go. It's been reposted so many times. I think cumulatively, we probably get 50 million views in that rob.

Starting point is 00:52:36 Just me losing money on Robin Hood. So I made some of the money. I've lost so much more than that clip generated. But it helps offset some of the losses on that. There are other niche scenarios too. Like some people who are directors of companies are required to hold stock. some people who are insiders at companies that have gone public and hold a huge amount of stock with a low cost basis. In many cases, they want to continue holding the stock, not just for tax reasons or because there's a huge sentimental value.

Starting point is 00:53:02 And it's like, if that person has diversified enough for them to be set for the rest of the life and they want to continue holding the stock of the company, they help to start, I'm not going to tell them that's a bad thing to do. So there are reasons like that. But who should like commit to picking individual stock as part of the long term investment strategy for reasons, like for objectively, objectively. of reasons like it's going to improve the long-term outcome, I honestly don't think anybody. Is it possible, though, that we can continue to see these 10 to 15% returns every single year? Because my concern is that we've all gotten very spoiled that for the last 15 plus years, we're seeing 12% annualized returns. What do you think are the returns that we're probably going to see over the next 10 years? We, as a firm, produce capital market expectations,

Starting point is 00:53:45 similar to what Vanguard does, I guess. I think ours are a bit higher, though. But I think we're just below 7% a year as our long-term expected return for, that's a globally diversified portfolio with a Canadian home country bias. Whatever. It's probably roughly similar for a just a global market portfolio, maybe a little bit lower because the U.S. is a bigger weight. But whatever, call it between 6 and 7%, I think is a reasonable long-term expectation. That's a nominal return.

Starting point is 00:54:09 So before inflation. I don't think the returns we've seen in the U.S. market in recent history are normal. I did a video on that. I felt like it was a bit of a throwaway video. maybe a couple years ago, we're just talked about what have the actual returns been of global stock markets throughout history of the U.S. market throughout periods other than this one that we're in right now. And it's pretty clear that this current period is an anomaly. It's not a period that we should expect to repeat forever. And I think there is a, there's a danger there where people look at

Starting point is 00:54:38 10% to such a common number. I think that was the title of my video, do stock return 10% a year? And the thumbnail says, no, they do not. But I think that 10% number is dangerous because it leads people to think through long-term financial decisions on the assumption of 10% returns, and that can lead to mistakes. How much international equities should people own? The easiest starting point. I love that there's a quote from Eugene Fama, who is a Nobel Prize winning economist. He's the guy that kind of created the idea of market efficiency, which is the idea that

Starting point is 00:55:08 the market prices contain all available information. In an efficient market, you shouldn't try and pig stock. So, like, this whole concept of index investing really sits on top of Fama's research, his comment about answering your question is you've got to talk yourself out of the market portfolio. So you look at market capitalization weights. The market has priced in the optimal asset allocation allocation approximately. So look at that as a starting point and you've got to talk yourself out of it. Now, you can talk yourself out of it to an extent if you're an American, maybe you do have a bit of a home country bias. If you're Canadian as I am and as we reflect on

Starting point is 00:55:46 our portfolios, again, maybe you have a bit of a home country bias. But, market capitalization weight should be the starting point. So that's whatever, 60 to 65% U.S. and the rest international. How do you know when you're being too conservative with your investments? Every business owner hits a point where they need a real specialist, a developer, a designer, or someone who actually knows AI. But a full-time hire with a salary and benefits is a huge commitment for a three-month project. That's exactly why we've partnered with Upwork. Upwork is where businesses find highly skilled freelance professionals for specialized work from software development and AI implementation, to marketing, design, and business operations.

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Starting point is 00:57:14 to connect with top talent ready to help your business grow. How do you know when you're being too conservative with your investments? I don't know if you can know that. We have a tool on our website that, in my opinion, is the best. It's called a psychometric risk tolerance assessment tool. It's basically like it's a bunch of survey questions that you go through and it spits out a range of asset allocations that makes sense for you. I think doing something like that so you have an idea of what you're comfortable with makes a lot of sense. and if you're more conservative than that,

Starting point is 00:57:47 then that'll help to tell you. I think a lot of people probably are more conservative than they should be. I think tools like target date funds, there is research on this out of Boston College, I believe showing that target date funds do help people increase their equity exposure when they're younger relative to what they would do

Starting point is 00:58:05 if they were on their own. I think financial advisors can have the same effect. But people have, the reason in that research is that people tend to have pessimistic expectations, more pessimistic than they probably should be, which leads them to have more conservative portfolio. So it's a tough question to answer, but it's definitely something worth interrogating for each person. When does it make sense to have a financial advisor? If what your firm mostly invests in is just a single ETF, one fund portfolio, then why would it make

Starting point is 00:58:34 sense for your clients to be putting their money with you paying fees when they could basically be doing the same thing? We're huge advocates of DIY investing. I mean, my YouTube channel and our content in general is, like, at least in Canada, one of the top resources for do it yourself investors to figure out how to do it themselves. So I'm a big advocate for doing that for people who can. There are a couple of reasons I think that people do hand it off. One is implementation. So we can say you just buy a fund, but you still have to figure out which accounts you're buying it and you still have to figure out when you should sell it if you should, how to fund your spending, where to put new savings, which fund it should be, what asset allocation it should be. So there's lots of decisions. leading up to that final step of just buying a fund. Just buying the fund is the easy part. And there's a lot of complexity. So people could spend hours and hours doing research and listening to podcasts like this to arrive with those decisions. Or if they want to hand it off, they can contact a financial advisor and be told basically based on your situation.

Starting point is 00:59:31 This is what we would recommend. So reducing complexity is one and implementation. And the other one is comfort. We have a ton of people who find us through our podcasts. And they'll be like dedicated listeners for years. and then they'll become clients at some point, and they'll tell us that they stop listening to the podcast because they didn't have to worry about this stuff anymore,

Starting point is 00:59:51 and it's a huge weight off their shoulders. And there's a really interesting phenomenon, but I think it speaks to one of the reasons that people outsource this stuff, which is mental overhead. It just goes away. It's one less thing to think about it. So you're at $8 billion in assets under management right now.

Starting point is 01:00:05 Canadian dollars, yeah. Canadian dollars. Oh, that's like $2 million. It's not that low going on. I know. Did you notice a stark increase in the amount of clients that you had before and after you went on dire of a CEO? No, not a stark increase.

Starting point is 01:00:19 There was definitely a period of heightened interest where we filled it a whole bunch of calls. But no, not a huge difference. Would you say, would you be able to distill it down to a number? Like going on a podcast that gets 2 million views like die of a CEO, how much money in deposits did you get? Honestly, it would be a rounding error. Like it's... Really? It was not a huge deal.

Starting point is 01:00:40 A lot of interest, a lot of phone calls, a lot of. a lot of new subscribers to my channel and our podcast and stuff like that. But, I mean, we're already a big enough firm that I don't think something like that it's going to move the needle that much. I have a feeling for something like that it's going to take repeated.

Starting point is 01:00:55 Yeah, exposure. They subscribe, they become a follower. It's going to start with that and then they're going to go down the rabbit hole and then like three years later. Right. Then it'll be like, all right. See some dude on a podcast

Starting point is 01:01:05 gives him my life savings. It's probably not. Yo, I saw you on Dyer of the CEO. Yeah. All my money. Yeah. Now, if you're feeling, a lot of these calls. I'm curious, what's the worst call and financial situation that you've seen?

Starting point is 01:01:17 I don't take the calls, so it's tough for me to say. But I think probably the most common situation where I look at it and it's like, yeah, like this person really needed our help is people who are just sitting in cash. They've got a successful business or they've got a high income job or whatever and they've just been shoveling money into a savings account. And it's literally sitting in cash because they don't know what to do. What's the most amount of cash you've seen? I don't know. Millions of dollars. I don't know. So it was a small business owner. or something that just saved up everything through millions of dollars of cash.

Starting point is 01:01:45 Or someone who sold a business and they stuck in a savings account because they didn't know what to do and it's just sits there. So that's one of those, it's a situation where you look at it and it's like, yeah, okay. So our fee, relative to the opportunity cost of sitting in cash,

Starting point is 01:01:59 is negligible for that person. And what about the strangest story? Weird ones would probably be people who have started businesses in legal gray areas and come to us. We've had to be like, uh, we can't touch this. there's been some interesting ones there

Starting point is 01:02:14 other ones with crypto where people just made it huge on some random token and it's like it becomes real money and it's life changing and it's just you look at it and it's like wow that's what's the biggest amount you've seen

Starting point is 01:02:25 from that type of scenarios tens of millions tens of millions of dollars wait we're talking after tax they sold it went to cash and they were like hey I need help yeah so I mean those are crazy stories

Starting point is 01:02:39 but it's like that's we can say wow And it's like, wow, it's a crazy outcome. But we've also- Wait, guys, you're saying if you put $10,000 into crypto, you can turn it in tens of millions? Yeah, which point to invest in? I saw on your channel, there were some comments about an ICO that we should be buying. Those comments are the worst.

Starting point is 01:02:54 Yeah. But seriously, though, we also get people who have actually literally won the lottery by buying lottery tickets. And so, like, people get windfalls from all sorts of different weird. Lottery is not as weird. I think crypto ones are stranger. But yeah, people end up with piles of money for all kinds of weird reasons. The one thing I found very interesting is that you recently said that the more you look at your portfolio, the worst you're likely to do. And then I thought of myself, where I look at my portfolio, probably five times a day.

Starting point is 01:03:24 It's actually strange for me not to have checked it before we filmed. I check it constantly. Are you okay? After not checking it, do you feel okay? I'm curious what it's doing because there's 10 minutes up to the market and I like to throw in some buys at the end of the day if it's down. Yeah, that's a real problem. What does it say about me that I check so often? Honestly, it's probably leading you to take less risk than you otherwise would if you were like me and just didn't look at it.

Starting point is 01:03:51 That's what that research suggests. It suggests that people who check their portfolios more frequently are more worried about risk because they see the volatility day to day or minute and minute throughout the trading day and it makes them more averse to risk. So what we're going to do for the channel members is it at the very end, I'm going to show you my portfolio. And you'll be able to rate it. And you'll be able to be brutally honest with what you think of my allocation because I have a feeling I know what you're going to call out. And there's something in my portfolio that the channel members will see that you're probably not going to like. Okay. But moving beyond that, in terms of the general economy, do you think it's easier or more difficult for people to get wealthy in 2026, 2027?

Starting point is 01:04:34 I'm not an economist. I don't study the macro economy. I can tell you what we see with our very biased sample with people who are becoming wealthy. There's still a lot of people starting businesses. There's still a lot of people raising capital. There are still a lot of people participating in the equity of companies like some of these AI companies that are still private or maybe going public soon. Like there's still a lot of wealth being created. Now, again, I'm not an economist.

Starting point is 01:05:02 I don't study the lives of everyday Canadians or Americans. is it easier or harder for them to get wealthy? I don't know. But I can tell you from our, our, again, acknowledged as a very biased perspective, as a firm that deals with people who are getting wealthy or who are wealthy, it does not seem like that has decreased. Do you see any risks to our economy that you think people are overlooking? Tons of risks.

Starting point is 01:05:25 I think it's very easy to get bogged down worrying about questions like that. And I think a lot of people do. Like when I posted my video recently on the biggest myths in personal finance, I mentioned that savings method, you should save as much as possible, a ton of the replies were that, well, in this economy, it's different. You need to save as much as you can because the future is going to be awful. It's like, maybe, maybe it is. I think being an investor inherently requires optimism. I think if you're not optimistic, you're not going to be a good investor. It ties back to the checking your portfolio too much. Like if you just invest in stocks, don't look at your portfolio,

Starting point is 01:05:59 save what you need to save, and don't worry about it. You're going to be a better long-term investor than if you worry about whatever thing. I mean, the funny thing is, right, you could have, you could have 10 brilliant economists on your podcast who would all give you some crazy niche reason about why everything's about to collapse. And maybe they're right to an extent. Maybe they're not. Maybe it's already priced in.

Starting point is 01:06:21 I don't know. And those things are interesting to hear about it. But are they actionable or useful for investors? I don't really think so. I don't worry about that stuff too much. What do you think about Pokemon cards as an investment? I saw that episode, but I have not listened to it. I don't know, man.

Starting point is 01:06:37 Lego is another one that apparently has had great returns. I did listen to your episode with Ben. That was cool. That was a cool one. But yeah, there's all kinds of weird stuff that you can show. Look how well this person did investing in this weird thing. I think collectibles as a general asset class. Wine is another one that comes up.

Starting point is 01:06:57 Cars, another one. There's all kinds of weird stuff. It's whatever. I think a lot of those asset classes are pretty, thinly traded. I really like advice that works in equilibrium. Like, you can kind of tell everyone to invest in index funds, and that that works. They're participating in the market portfolio. You can't tell everyone that they should have a 10% allocation to Pokemon cards. The market will explode. Speaking of being well diversified, I think a lot of people also look at their house

Starting point is 01:07:25 as an investment. What are your thoughts on the current conditions of the housing market? I do know the Canadian market better than the U.S. market. I know housing costs are high everywhere and they've been going up and that's a challenge. That's true for both renters and owners. But beyond that, I mean, I think that the housing decision, how much housing you should buy and whether you should rent or own it, I think the assessment of that is still the same as it would be under any market conditions. Even though now the monthly payments are so much higher, the prices are so much higher,

Starting point is 01:07:57 what's surprising to me is that when you look at the income ratio needed to buy a house, it's the highest it's ever been in history. And so I tend to argue that maybe conditions today are not as they were five years ago, 10 years ago. Because housing costs have gone up or because the rent versus own tradeoff has changed? Purely because prices and the carrying costs are so high relative to what the average income is. Yeah. I mean, I agree that is a challenge, but I mean, people still have to pay for housing.

Starting point is 01:08:25 So I don't know how it changes the decision other than maybe you have to live in a smaller place than you would have 10 years. ago. Do you consider a house to be an investment? Not an investment. I would say it's a consumption good. It's a mix, I guess. When you buy a house, you're buying, you're consuming part of it, but you're also investing some of your money in a real estate asset. So it's a, it's a combination. I think the big benefit of buying a home is that it provides a hedge to the cost of living in that specific home. It's saved to live in that specific home. Say you to live in a very specific area that you want to stay in. If the cost of living in that area go up, rents are going to go up a whole bunch. But the other thing that's

Starting point is 01:09:09 going to happen is that real estate prices are probably going to go up. And so if you own a house, you're hedged. Housing costs went up in that area, but so did the price of your assets, so you're protected, whereas a renter might get priced out of their home. That, to me, is the best argument for owning. It's like insurance, almost. Yeah, it's kind of like insurance. It's, It's like there's a really cool paper that asked that question, why do people invest so much of their net worth in their home? And they come to the answer that it's because it behaves like a long-term bond that's perfectly indexed to the costs of living in that specific home, which is a pretty cool way to frame it. Now, I think that the other side of that argument is that just like a long-term bond, well, it might produce coupon payments that meet your cash flow needs or whatever. in the in term, in the short term, it's going to be very volatile in price. Long-term bonds are super

Starting point is 01:09:58 volatile. Individual home prices are also super volatile. And I think that leads into how long you want to stay in a place. If you want to stay in a place hypothetically forever and you want to make sure that you're not going to get priced out of that house, the only option is to buy. But if you might leave in three years between transaction costs and price risk, I think renting starts to become pretty appealing. You have a very interesting equation. I've never heard this before that determines if you should rent or buy. Explain what this is and who should be using it. I called it the 5% rule.

Starting point is 01:10:28 That's what you're talking about. And it's not always 5%. Some people got mad about me about that. It's like, well, it should have been 6% or 4% or whatever. But I'll explain the premise and people can figure out what number makes sense for them. It's basically the idea that there are unrecoverable costs of owning a home. Just like rent is an unrecoverable cost. You rent a place for $3,000 a month.

Starting point is 01:10:50 You pay the rent. You get a place to live. You have nothing left over. There's no residual value. When you own a home, people imagine that you buy this asset and it goes up in price and they don't, they don't account for all the costs that you incur to live there. And so I think you have to account for those to make the rent versus zone comparison. And so I just thought about, okay, if we take the property taxes, which are an unrecoverable cost, you pay taxes to the municipality or whatever, and you get whatever, a nice city or whatever, but there's nothing, there's no residual value. You pay maintenance costs, which are just the costs of keeping the place running.

Starting point is 01:11:21 your video on your real estate returns and your kind of misadventures, if we can complement that in real estate, maintenance cost was a huge part of that. It was. Where people just, they don't account for it. And it's all little things. I thought you did such a good job in that video, because all those little things that add up to like, holy crap, I paid X number of dollars and spent X number of hours maintaining my house. So maintenance costs. And then the other big one that I think really gets ignored. And you talked about this implicitly in your videogram is the opportunity cost of capital. If you have $100,000 of equity in a home, that's $100,000 that you could have had invested in the stock market.

Starting point is 01:11:55 And that difference in expected returns between home equity and stock market appreciation is an opportunity cost. And then if you're using leverage, you also have the cost of interest. So you end up with a weighted average cost of capital, but whatever. And so you add all that up. And based on the numbers that I used in that video back then, I came up with 5% as a number. And all you do is you take that and you look at the amount of rent that you would be paying and you compare that 5% of the value of a home that you would otherwise buy to the amount of rent.

Starting point is 01:12:26 And if they're equal, you're financially indifferent, roughly, approximately. But it also shows you if owning is much more expensive. Maybe 5% of the property is whatever, 5 grand a month, but you could rent a similar place for $4,000 a month. And that's okay, renting is actually pretty cheap relative to buying this house. And it can tell you the other thing, too, that maybe renting is more expensive. So it's rough. It's not perfect. But I mean, in analysis that I've done since then, it's actually pretty good. So again, I think we're going back to the math versus behavior. And I think there are also intangible benefits of owning a house that even for myself, I try to account for. Because I put myself in the position where mathematically, I think it's better to rent right now.

Starting point is 01:13:14 But then I think, realistically, could I be happy renting a house? And I think for a home that you intend on keeping or staying in 10, 15 years, I don't know if you would be happy, or at least for myself, renting a home for that long and not being in control of that house and like what you do with it and the fixes and the, you know, moving a, you know, changing a bathroom. So where do you build in the intangible benefits? I think a lot of what you just described is actually a trap that people don't account for. The perception that you have control and can do whatever you want, it seems really compelling. Listen, I've lived like I'm in the middle of living this right now where we bought a house six years ago. And ever since we moved in, we've been doing stuff like a bathroom. Like a, I mean, we had one wall in the house that was never finished when the house was built.

Starting point is 01:14:03 It's in a room with a really, really high ceiling. And so we finished the wall. And on that wall, I put a full glass backboard basketball hoop because I was like, that'd be super cool. Like we're doing this anyway. It's an extra whatever, a few thousand dollars to put that. I'm going to do it. And stuff like that's very fun. I would never be able to do that in a rental.

Starting point is 01:14:20 And I love, I can, I can literally make myself breakfast and then go shoot hoops, like right the side of the kitchen, which is, which is awesome. But every one of those little things is thousands of dollars of costs that I would not have incurred as a renter. So that's, you can view that as awesome. Or you can think about our renters, are people who rent their homes any less happy than owners when you look at the broad data? Like, again, I've, I rented with my family, with a wife and kids for six years.

Starting point is 01:14:47 we've now owned a home for six years. I don't think we're any happier as homeowners. Honestly, I think the added stress of home maintenance and managing all the renovation stuff we've been doing is probably a net negative relative to when we were renting. And landscaping, you know, I mean, you know, real estate better than I do. It's brutal. And then when you look at the data on this,

Starting point is 01:15:07 and there have been studies in Canada and a few other countries that ask whether homeowners are happier than renters. There is one American study, too. It was a sample of 600 women, I believe, specifically. But asking that question, are homeowners, happier as and renters? And the answer is generally no when you look at a broad sample of data. I mean, that lines up with my experience. So I believe it.

Starting point is 01:15:31 It's good confirmation bias for me. So it's like that should be an intangible. It seems like that's a great argument. You can do whatever you want with your house. But I really think it's a license to spend just ungodly amounts of money doing stuff that's not actually going to improve your life. And I say that as someone who's doing it right now. Another thing that I'm curious about is I posted on Twitter and it got a lot of attention.

Starting point is 01:15:53 I got 4 million views. I said for those that have paid off their mortgage and own a home free and clear, do you have any regrets? Almost no one posted that they had regrets. There's a few people who had regrets that were very specific to paying off a mortgage that was sub 3%. But every single other person said that the freedom and the feeling they got, by owning a home free and clear, superseded anything else. And they said it was the best feeling in the world. What are your thoughts on that?

Starting point is 01:16:24 I've got a full great anecdotes that speak to this. So in Canada, we have to get Canadian for a second here for me to explain this. In Canada, when you take out a mortgage to buy a home, the interest is not tax deductible. But when you borrow money to invest in an asset that's expected to produce income, like stocks that paid dividends, the interest becomes deductible. And so sometimes we'll see a client who comes to us. us and they have whatever, a million dollars in their portfolio and they have a, whatever, a $500,000 mortgage.

Starting point is 01:16:52 This is just borrowed to purchase the house non-tax deductible. And we'll say, hey, you know, we could use some of your portfolio to pay off your mortgage. And then if you want to keep the mortgage, you can re-borrow, reinvest back in the portfolio. You end up in the exact same place, but your interest is now tax deductible. It's just smart financial planning if someone's in that situation. And I would say 95% of the time, there's one case. where the person really did go through with it. But 95% of the time, they do step one.

Starting point is 01:17:20 We sell some of the portfolio. We pay off the mortgage. And then we're like, okay, now we're going to go back to lender. We're going to we're going to re-borrow and invest back in the stock market. And 95% of the time the person is like, you know what? I actually feel really good having the house paid off. We're just not going to, we're not going to reinvest in the market, which is fine. That's like, that's great.

Starting point is 01:17:40 That was the right decision for them. But going through the actual process, at first, just, oh, this is a great idea. we're going to do it. And then they have a paid off house. And they have to make the decision to re-borrow to invest. And they don't do it. So I think that speaks volumes to your, to your question. I wrestle with the exact same thing. Because I know at some point, I want a house with more space. We have family to visit, you know, with a bigger yard, things like this. And then I wonder, for that exact same purpose is that the primary home deduction really is capped at 750. 50 grand, everything else after that. There are ways of borrowing, but it seems like the best thing to do is if you have something relatively liquid, use that to buy the house and then pull a margin and then buy back the position that you had sold to buy the house. And I wrestle with the exact same thing is would I do that regardless? Like, why am I not doing that now? Why didn't I do that five years ago? I think that lends itself to just the peace of mind that I've never really controlled for peace of mind until recently.

Starting point is 01:18:45 just something clicked after dealing with all those rental properties, where now I place a premium for just easy. Yeah, I think there's a lot of psychological benefit to having a paid off house. I also don't think people, on the other side of the argument, I don't think people fully understand the costs of having a paid for a house. Almost every video that I make on renting versus owning, people will say, well, the math changes dramatically in favor of owning once your house is paid for, as if it's better to have a paid off house.

Starting point is 01:19:14 it's actually way worse. Yes. When you look at the total cost of owning, including the opportunity cost of equity with a house that's been bought in cash or is fully owned otherwise, and you compare that to a renter, the fully paid for home is almost always going to look worse than renting and investing in the stock market.

Starting point is 01:19:30 Mortgages bring owners onto the same level as renters. But if you haven't paid for a house, it's costing you far more, which is the cost of peace of mind. And there's nothing wrong with that. At what point does Optimus, just become not worth it. And I'll give you an example, a personal example.

Starting point is 01:19:49 I was looking to doing a box spread, but I had some tax-free muni bonds too. And so I was thinking, if I do the box spread, I can get a capital loss, and then I look at my after-tax return compared to what I'm earning from, tax-free munis, and I'm doing all these, like, mental calculations, and then I determined through Claude,

Starting point is 01:20:07 analyzing every single aspect, that I would be saving 0.02% by doing all of these things. And I think like the net amount was like, it was a negligible amount. I mean, it's the difference of, you know, a few hours in the market up or, that's really what it was.

Starting point is 01:20:30 When could people take it too far? So I think it's subjective. I think in that case, you've got to look at the amount of time that you spent doing it. We've also looked at how much you enjoyed spending that time. I think it's an interesting example because you might have really loved saying that you did a box spread.

Starting point is 01:20:45 Maybe that's something you could talk about in content or whatever. And maybe that's a reason that it doesn't matter so much. But if you account for the cost of your time in that scenario, you're maybe a net negative even. So I think people have to account for time. But it's also highly subjective just based on an individual's preferences. We've brought really good tax planning to some folks that work with us and show on, you know, you could save over your lifetime, whatever. hundreds of thousands of dollars in net present value of tax by doing this thing. And some people

Starting point is 01:21:16 say that's great. I want to implement it. And some people say, you know what, for a few hundred thousand dollars, it's just not worth the complexity in my life. So I think it's highly subjective. But I think in general, people do get bogged down in the details and try to optimize things when they should just be, as we talked about earlier, buying index funds and not worrying too much about it. I have to say, though, for the few people who this applies to, this will save five people could be hundreds of thousands of dollars. If you're buying a primary residence and you have a few million dollars, minimum, in a brokerage that supports options,

Starting point is 01:21:53 you buy a house, primary residence with a box spread and take a capital loss on it. It's not financial advice, but look into it. The few people this applies to, it is mind-blowing. No one knows about it. It's very complicated to explain. It took me days to wrap my mind,

Starting point is 01:22:09 around how this thing works. It is incredible. It's like, it's a superpower to be able to do that. You get borrowing right now, net after tax, high three percent. It's crazy, fixed, interest only. It's incredible. But it applies to like five people watching, so I'll end it there. What does money mean to you? Money is a tool that lets you buy time, I think, is really its fundamental purpose in our lives. that's that's really it it's a it's a tool you you work or or or start a business or or create an asset or whatever to create money but what's the money actually for is to give you ownership of your time and so how do you use money to produce more time in your life like what are

Starting point is 01:22:56 the main things that you spend money on that you've noticed improve your happiness the most there's a whole bunch of things really I mean we we uh we had one vehicle for years we have I have four kids. We had one vehicle up until two years ago. We finally got a second vehicle because there would be cases where, whatever, you had to wait, wait for the other person to be done with the car. So that was, that's a big expense, but it's been, it's been really useful just for time use and not having to wait for, wait for the vehicle.

Starting point is 01:23:27 Another big one is meal prep, meal delivery. We get a prepared meals delivered to our house every week so that we don't have to worry about cooking. and that's something that we did that years ago and then we moved to a more rural area we couldn't get it delivered out there anymore and just a few weeks ago I found a service that does deliver to our address and so we've been doing that again.

Starting point is 01:23:48 Personally, I don't know if you guys do that, but I find that to be... Cook unity, I love it. I just got it, I actually brought it to the warehouse today. I find it so it just takes such a mental load off, not even to plan your grocery shop, not having to actually cook and clean up and all that stuff. So that for me is a big one.

Starting point is 01:24:04 But then also, so there's time saving And then there's also how you use your time. And money is a tool for that as well. We went on a family trip to the West Coast of Canada this summer. It was the first big trip we've taken with all four of our kids on an airplane and all that stuff. And that was incredible. Trips are cool because the anticipation leading up to them brings a lot of joy. The actual trip, hopefully it goes, well, ours did, brings a lot of joy.

Starting point is 01:24:29 And then the memories give you lasting joy. So stuff like that is great. and then I spend money on equipment, like I've got a kayak and a mountain bike and all that kind of stuff. So those are really the big ones. You have a really interesting video that I've probably watched at this point three or four times, which is how money relates to happiness. What were the findings of this? Because a lot of it was backed in science, and so it's nearly, you know, undisputable.

Starting point is 01:24:58 I mean, there's evidence of data that suggests that certain things actually do produce happiness and certain things negatively affect your happiness. What did you find out in the making of that video? Yeah, I think a big one that people often don't know until they see the research is that the relationship between money and happiness. If you just look at income levels and happiness, there's a very weak relationship.

Starting point is 01:25:22 Some older research suggests that there was a plateau where above certain levels of income you don't get any happier. More recent research has found that it does continue to increase, but the relationship is very weak. I think that's the part that gets missed, even with more updated research, the new research shows, okay, if your income goes up, whatever, from 100,000 to 500,000, there is a bit of a happiness increase, but it's not meaningful. For a big jump in income, it was like five points on a hundred point scale of happiness. Like, we're talking about nothing crazy. There's another stat from one of those papers that talked about

Starting point is 01:25:54 how a big income increase was about equivalent to a headache in terms of effect on happiness. So I think that that really messy relationship with between happiness and money is really important. The other stuff I talked about in that video that I think is meaningful is time versus money preference. People who prefer money over time tend to be less happy. So if you're given the choice between having a little bit more money or a little bit more time, people who choose time will tend to be happier people. They also tend to have better relationships with their spouses. And there's a few other data points in there like that.

Starting point is 01:26:29 The data on social comparison, I think is so important. If you have people around you who are wealthier, who have a nicer house or a nicer car, that tends to really decrease your happiness. So interesting implications of that, like who you spend time with. I think this happens as people get wealthier. They start hanging out with other wealthy people and there's always someone wealthier. And so you end up feeling bad about your level of wealth and your position in life. I think that's really important.

Starting point is 01:26:58 It has implications for where you live too. like buying a not so nice house in a really nice neighborhood might not be the best idea. I think those are the, those are some of the biggest takeaways. I'm curious what, you've watched three times now. What are your biggest takeaways? I mean,

Starting point is 01:27:11 I always heard about the commute, you know, and that was kind of interesting to hear about. And then I thought the time and the money thing was the most interesting out of everything that you covered in the video. What in the research of finding the happiness and money relationship, what have you practiced in your own life that? has made the most meaningful impact.

Starting point is 01:27:31 Definitely having a preference for time over money. So what does that mean in application? If there was something that I was offered that would give me money or save me money, or I could choose to have more time with my kids and my wife. As a rule, usually I'll take more time with my kids. Being here with you guys is a bit of an exception. Not that I appreciate it. Not that I'm getting paid to be here, but it's, you know, it's,

Starting point is 01:27:59 a business trip. So that was, but that's a case where you look, look at the, the perma model that I mentioned earlier, positive emotion, um, engagement relationships, meaning an accomplishment. Relationships my family are super important, but so is, so is accomplishment, so is engagement and trying to continue to build my,

Starting point is 01:28:17 my, my, my, my ability to create content is important to me. So anyway, I had to make that trade off. Am I going to take a few days away from my family to come out here, which I did? But generally speaking, uh, if an opportunity, up or like, hey, do you want to come do this? Do you want to come to this speaking engagement? Do you want to come to this conference? Usually I'm going to turn that down. One of your top comments on that video I thought was really interesting. It's always remember

Starting point is 01:28:41 that money is just a means to an end. It's not an end in and of itself. So what does this mean to you? It's like I said earlier. Money is a tool. It's a tool that lets you do stuff. But I think you have to understand what it can do. And you've got to understand what the research says about the best ways to use money for it to be a useful tool. I think a lot of people end up amassing huge amounts of wealth, but are unhappy. I think it's a very common, very common story for lots of different reasons. But yeah, there's an old paper that I based portions of that video on called if money doesn't make you happier, you're not spending it right. And the premise is just that, you know, you can have a ton of money and engage in activities that don't make you happier. But that's not

Starting point is 01:29:23 because money doesn't improve happiness. It's because you just don't know how to use money to make yourself happier. So I think being in tune with what you want out of life, what your priorities are, and what the evidence says about the type of spending that is most beneficial is really important. At what point does increased wealth start to see diminishing returns? I've heard you guys talk about this, this question with other guests. I'm always curious. I've thought about it a lot. I've seen a lot. I, you know, I've worked with and know a lot of very wealthy people, and I really think it depends on the person. Like, there are people who have and I'm not just talking about the people that I know,

Starting point is 01:29:58 but there are people who have tremendous amounts of wealth and are still wondering if they can spend a little bit more and still be okay. And then there are people who have, whatever, $5 million, $10 million who are just perfectly content. So I really think it does depend on the person and what their objectives are and what their perspectives are. But I don't know if there's a single rule on that.

Starting point is 01:30:20 Was there a moment for you? I don't think I'm there yet, really. Like, I don't think if I stopped working, right now, I'd probably have to make some changes to my lifestyle that I wouldn't want to make to be okay for the rest of my life. And I, yeah, so I'm not there yet. What's interesting to me in doing the research on you for this podcast is that while finance may be the thing that you're a professional in, it seems like the thing that you're really passionate about is philosophy and like the psychology of money, at least based off the content that I've watched of you. What has been like

Starting point is 01:30:54 your single greatest finding in that whole. adventure you've gone on researching that. Oh, man. I don't know if there is a single greatest funding. Maybe the single greatest funding is how important that side of finance is to people's actual decisions. We can do find all the research on why index funds are good and covered calls are bad or whatever. But none of that matters if it isn't, if it isn't connected to the psychology of the person making a decision. So that's, I mean, that's a good question. And I think really, think about it. The answer is that those two things are, are connected. They're, they're intimately connected. I set up my video that the, the, the, uh, using your money to be happier video by saying,

Starting point is 01:31:37 like, hey, this might be, this might seem like a weird topic for a chief investment officer and like a quantitative finance person to be talking about. But all of these important financial decisions that I'm always talking about are there, like you said earlier, there means, a means to an end to achieve the life that you want to live. And so for all of the, Quanty finance research stuff to be useful, it has to be anchored in in people knowing what they're trying to achieve. It is a means to an end to achieve the life that you want to live, but then you also talk about the life cycle model, which is trying to even the curve of happiness and then using money to kind of flatten that. Can you explain a little bit more on that? Yeah. So the life cycle,

Starting point is 01:32:17 the life cycle model is just the idea that people want to smooth their consumption through their lifetimes. And if you think about your lifetime earnings, typically people are going to going to have lower incomes when they're younger and their incomes are going to increase as they get older and get into the peak of their careers and then it's going to decrease a little bit as they stop working and then it's going to stop. And so the idea of the life cycle model is that people want to smooth their consumption throughout their lives, which means saving less and maybe even borrowing early on in life, which is super common. Like people take mortgages, they take student loans and all that kind of stuff. Like I think it describes reality fairly well. And then as you

Starting point is 01:32:52 start earning more throughout your career, that's when you start saving. And then as you get into retirement, that's when you start dis-saving or spending your savings. The real-world implications are one of the things that we talked about earlier, which is that maybe young people shouldn't save them much and should be comfortable borrowing, which, again, I think people do that. They take student loans. They take business loans. I think that's a pretty, I don't think it's controversial to say. But then the tricky part is you do have to start saving eventually throughout your peak earning years and you've got to save enough to be able to retire. That's the concept. What do you think is an appropriate it safe withdrawal rate given today's valuations.

Starting point is 01:33:28 I've made so many videos videos bashing the 4% role. So people are probably going to be like pulling their hair when I say this. 4% is probably fine. But it really depends how you're using it. However, I don't think it's safe to actually literally spend 4% of your starting portfolio value adjusted for inflation for whatever, 40 or 50 year. But I also don't think that's what people will actually do. I think people who are actually retired and living off of their

Starting point is 01:33:54 portfolios, and I see this, we see this with our clients. If the financial markets are not doing well, people will scale back. They'll go on a less nice cruise. Maybe they'll skip the cruise all together that year. They'll give their kids a smaller down payment, whatever. People will make sacrifices. They'll cut back. The whole premise of the 4% rule and the way that Bill Bengin did that analysis and the way that all of the analysis replicating it since then has done is spending the exact same amount adjusted for inflation every year. And there's all kinds of other stuff in there too. even if people don't cut back spending when markets are bad, I don't know if it's true that people are always going to perfectly index their spending to inflation.

Starting point is 01:34:30 So anyway, but I think as a guideline, if you're trying to figure out how much can I actually spend for my portfolio, or how much roughly can I, do I need to have saved to fund my retirement safely? 4% is probably fine. But I only say that on the basis that people are not actually going to follow the 4% rule, that they're going to follow some more flexible spending path. If it has to be fixed, if someone says I want a number that I can spend that dollar amount adjusted for inflation for the rest of my life, I'm probably closer to 3%.

Starting point is 01:35:02 That's how I've modeled it to. It seems like the 4% rule, he actually came out and said it was actually more like 5.5%. Well, he changed stuff, right? He went out of it in small cap stocks. He's done, he's modeled different scenarios like in this, in this inflation environment, in this valuation environment. He's done tons of stuff since then. I think that the most useful research that followed Benkins was the research that looked at international stocks. The U.S. market, like, we know looking backward that it is the best performing stock market in history. And so to look at the history of the U.S. market, even, yes, they had the Great Depression, which interestingly, that's not the year that breaks the 4% rule.

Starting point is 01:35:41 Do you guys know that? It was the 1970s, correct? 1968. Yeah. That's the worst period of retire. Anyway, that's because inflation was super high, not because returns were low. I love that point. Anyway, even with the Great Depression, you look around the world, returns have just been lower than they have in the U.S.

Starting point is 01:35:58 And when you run the exact same analysis that Bill Dengen did on other markets, you get a lower number universally. I think Canada is the closest. Maybe New Zealand was up there too. I don't remember. But most countries and the world index, which includes the U.S. market and its market capitalization weight, do not support the 4% rule. So that to me is like, yes, Bill Bungan did research that. is practically so useful because it gives people quick napkin math to figure out how much they just save for retirement. But it was based on U.S. history, which we know after the fact

Starting point is 01:36:31 to be exceptional. So I was modeling at 70% U.S. equities, 30% international for someone retiring in their 30s. And it seems like, by the way, what's interesting is that after about 40 years, there's no downside of modeling longer. Like, if you, live to 150. After about 40 something years, it doesn't matter if you lived to 80, 100, 200 years, because your expected return over time is going to be so positive that it doesn't matter beyond that. But when I was modeling that scenario through also world markets, it came out to 2.75% would have a 99.9% success ratio. Success ratio, I can't say that. Yeah, that sounds reasonable. There's a paper that came out recently that uses a simulation technique called block bootstrap.

Starting point is 01:37:27 But basically they take actual historical returns for a whole bunch of stock markets around the world. I think they have 39 stock markets in there and bond markets. And they use that to create a million simulated possible outcomes. So anyway, it's a good, without getting into the details, it's a good simulation technique that gives you a realistic distribution of outcomes based on actual history. And they found that the 4% rule, I've been. believe for a normal American retiree, the 4% rule had a failure rate around 7%. So it's probably similar-ish to your numbers if you did the same type of analysis. But you think broad-based, average person, spend fixed amount, 3% for a long retirement,

Starting point is 01:38:08 for someone who wants to retire early. I think that's reasonable. I did one video where a paper by those same authors, but a different paper, they looked at just domestic stocks. They didn't include international stocks. Now domestic stocks in their setup is not American stocks. It's the stocks of any domestic country from the, from the perspective of any investor in one of the countries in their sample.

Starting point is 01:38:31 So the way they do their sampling method is they'll pull an on average, a 10-year block from maybe it's the U.S., and then they pull another block from another country. So maybe it's 10 years of the U.S. and then maybe 12 years of Canada and then maybe four years of Italy, and they keep running this until they have a run of returns. and using only domestic data. So that means returns of the stocks of a country measured in their own currency.

Starting point is 01:38:56 They found a 2.7%, I believe, save withdrawal rate. But when you introduce international stocks, at least in their historical data, it's had a big benefit. I feel like a lot of what's discussed in this podcast is still not necessarily actionable and applies to so few people. So if someone's made it this far and they still haven't walked away with one single decision or, habit or behavior that they should have, a decision they need to make about their own finances, what would you say is the safest overall advice or thing that you would do if you were them? If I'm a random person listening to this podcast, I would probably stop checking my portfolio five times a day. I would probably invest in a globally diversified portfolio of index funds and not

Starting point is 01:39:44 worry about it. So I would stop dabbling in individual stocks and covered calls and use that time to invest in my human capital. Yeah, Jack. Honestly, those are probably the big ones. For most people, that's such a huge portion of it. Pay off high interest debt. We haven't talked about that at all. But if people are overspending and ending up in credit card debt or unsecured consumer

Starting point is 01:40:04 financing that's cost to them whatever, six or seven percent a year, paying stuff like that off is an easy win. But for what we've talked about, I think, not checking your portfolio too often, being optimistic, maybe that's the easiest takeaway, being optimistic and not working. about a lot of the stuff because, and I know we can't predict the future, and maybe it's possible that the apocalypse is coming. I don't know. But I think investing is predicated on optimism. Which is more true, that happy people make more money or that money makes people happy? Oh, yeah, that's a great question. I don't know, I don't know if we have research that, that

Starting point is 01:40:41 untangles that question. I don't know. I think there's probably a relationship. I think happier people probably do make more money, that that later paper that I mentioned that found that there is no plateau on income did find that there is no plateau for happy people. So for happy people, people who are generally happy, their happiness set point is higher. Their happiness tends to increase log linearly with more income, with no end. Unhappy people do have a plateau, whether happiness increases up to a point and then it stops increasing. So maybe that, maybe that does answer your question. Is there anything that you wish we asked you that we didn't?

Starting point is 01:41:22 And do you have any questions for us? No, I think your questions were, I think your questions were great. Covered a lot of the stuff that I've talked about on, on my channel. A question for you guys would be, is there anything that I have not covered in any of my content that you'd like to see me cover? I always find, so these are the videos that are doing really well right now is, these videos is two to three million dollars enough. They're blowing up. I'm seeing everyone making these videos,

Starting point is 01:41:50 and they all do well. I'd like to get your perspective on the ideal amount of money to have and aim for, and what that means in terms of spending. The other concepts are levels of wealth. They always do well right now, and it seems to be a trend of like, hey, what is a million dollars buy?

Starting point is 01:42:08 What does $5 million by? What's $10 million in retirement look like? And you cap it at like 10 to $20 million. Like what does a $20 million retirement actually look like in practice? And what does that get you? And how does that differ from five? I think that would be interesting. I would love for you to poll some of the people that have their wealth with you.

Starting point is 01:42:28 And you could then have your own data about happiness as it relates to different amounts of wealth. That would be really interesting because I know that Dave Ramsey pulls a lot of the people that listen to him and he says, oh, we've made this amount of millionaires. you could do something similar with happiness and wealth. I'd also like to see you do investment breakdowns. Like Humphrey Yang has recently been doing subscriber portfolio reviews. I think the money guys have also done portfolio reviews. I'd like to see you take someone's portfolio and break it down and say this is what you're doing right. This is what you're doing wrong.

Starting point is 01:43:03 Here's the age. Here's what I'd be improving on. I think that could do quite well. I'd like to see those videos from you. Those are good ideas. And then more flames in the thumbnail, preferably. And more hay videos about Graham's David. All of those things.

Starting point is 01:43:17 Yeah, that makes... Yet to see flames in your thumbnail. And they do... That does increase CTR substantially. You know, it's funny. Back in the day... Yeah. This is back like Santa Monica time period

Starting point is 01:43:28 when I was living in Graham's guest house and we would meet up every single day and discuss titles, thumbnails, strategy, what's working on YouTube, what's not working. And the term that we used for thumbnails was Armageddon is what we would call. And if you look back in like 2020, 2020, 2021 at Graham's thumbnails,

Starting point is 01:43:46 like there was a very popular image we would use, and we would use it as a background, and it'd be like red flames and blue flames, like, hitting. Colliding, colliding. And it was just like the battle of good versus evil, and it's like why I'm cutting up my credit card. It's like, you know, why I'm canceling my Chase Sapphire Reserve. And then in the background, it's just like some...

Starting point is 01:44:04 But you know what? At the time, no one was doing that at the time. And I remember we did this and we're like, holy crap. We found it. We found it. We're on to some. We found the unlock, the cheat code of YouTube. And I remember what we would do is we'd post it.

Starting point is 01:44:21 And then I'd sit there and I'd scroll on YouTube until my video comes up. And it would just, you would see it. It was like this nuclear radioactive, bright blue and red in your eyes. It was blinding. But I'm like, oh yeah, people are going to click on that. And they would. I love that. I think we guys joke about that.

Starting point is 01:44:36 So something you guys didn't ask me, about. I don't know if you guys want to talk about this or not. You can obviously edit out if you don't. But my hesitation to come on this podcast, yeah, we said we might talk about that, but we haven't. So I don't know. I would love to talk about it. Yeah, because we're open. You know, I had commented on a podcast before that I watched your video about money and happiness and that I loved it. And then I don't know if that was you or a member of your team that had commented back. Oh, this is great. Sort of got into contact from there, got into a group chat. And then everything was good. But then you had message. to us. Hey, I think my team has some reservations about me coming on the podcast. We'd love to know why. Hey, by the way, really quick, if you want extra content just like this, as well as early access, and a bonus post show posted every single week, feel free to join as a channel member to get immediate access to all of that, as well as early access to everything else that we post, along with priority responses to all of your comments. So if that sounds cool, feel free to join. Would love to have you on board. Thanks so much. We'll get back to the podcast now.

Starting point is 01:45:36 everything was good, but then you had messaged us, hey, I think my team has some reservations about me coming on the podcast. We'd love to know why. Yeah. So I've, like you, like I've known your videos at least for as long as I've been making content. Because like we talked earlier, we started around the same time.

Starting point is 01:45:51 And I always thought you were fine, like the clickbait title, the flame titles for sure. That was a thing. thrilled about that either. But my team at PWL, when I said, hey, I think I ended go on this podcast, there was a lot of like, whoa, like, way, wait a second and a lot of it was the click baby stuff is a little bit of the issue i agree with you

Starting point is 01:46:12 all 100% you think i like i hate it i absolutely hate it and i've been upfront about this i do not like my titles and thumbnails at all but i look at it also from a perspective of what are people watching what are they clicking on what's getting reach and i have to do it i have tested at this point probably across three channels, maybe four channels, three to four, five thousand videos over nine years. And I constantly A-B test. And if I see something perform better, I go with that. Like by default, I just want the video

Starting point is 01:46:49 that has the highest CTR possible. And so I've consistently found, unfortunately, the flames in the thumbnail, sensational title gets the highest CTR. And I hope I balance that out in the video content itself where I'm really balanced. Like, if you actually watch the video to the end, it's never, okay, guys, we're going to sell here and we're going to buy here. It's always, here's the pros, here's the cons. And my thought is just, and people joke about it, to dollar cost average into an S&P 500 index fund with international diversification, save as much money as possible, do a number, like every video ends with that. But the packaging is so much to be able to get people to watch the video to get to that point. That's how I justify it. So I, I, my experience is the same. I don't.

Starting point is 01:47:35 maybe go as far as you do, but I do get comments from my audience as well. They're like, I can't believe you're doing this clickbait stuff. And I'm just like, listen, I, B tested two thumbnails. Yes. And this one, I hated two, but this is the one that got clicks. Like I'm sorry. Like don't hate the player, hate the game, basically. Dad is what it is. So with a lot of that, you know, I, I, I see certain comments and I take some into consideration, but I constantly AP test.

Starting point is 01:47:55 I test three thumbnails and then usually I'll test like five different titles and I find the package that works. That all makes sense. And obviously I came. So like I, I'm comfortable with with all that even before hearing you guys explain it. What I ended up doing was going to my, we have a community. It's free. I mean, we're not very good monetizing. We don't monetize it all, really.

Starting point is 01:48:16 It's, it's all. The financial benefit of our content channels is that it raises awareness about our business. We occasionally get clients from it. We've never taken sponsorship money. Anyway, so we have a community around our podcast. It's got maybe 20,000 people in there, super active. It's, uh, it's on a discourse. the forum platform.

Starting point is 01:48:34 But it's a very, like, tight-knit community of people who are, like, you mentioned, long-time viewers, like a lot of those. So I posted in there, like, hey, guys, I'm thinking about going on this podcast, what do you guys think? And there's a whole debate and everyone had their opinion. But I think the consensus was like, listen, regardless of what you think about the podcast, even if we say, even if we agreed, unless they didn't, but even if we agreed that it's a bad podcast, if you go on and spread good information, it's a net, good thing.

Starting point is 01:49:00 And I was like, you know what, man, that's, and I don't think this is a bad podcast. I've listened to him. Yeah, that's fair. But I was like, that's enough. Like, I'm, so I went back to the team and I was like, all right, guys, we're doing it. I appreciate it. We try to be as balance as possible. And I worry even that some of the guests we have on paints us in a certain light because just like you coming on here as a representation of you. The guest that we have on our representation of us. So like, we'll bring you on and then we'll bring togi on. The way I see it is it's the same thing as like a journalist having a conversation with someone. I. I'm I like to think that the people that we bring on the show, it doesn't mean that we endorse what they have to say. It just means that we're curious. And we think that it could be entertaining some. And some we think it could be beneficial. I think this one is a nice hybrid of both entertaining and beneficial. But a lot of the ones that we bring on are just straight up entertaining.

Starting point is 01:49:51 And we have clavicular on. Do I think that people should be following clavicular's? No. You know what I mean? And we're upfront about that. Like, we'll respectfully challenge our guests when we think it makes sense. And sometimes we don't when we kind of agree. but, you know, no one here is proclaiming to be some sort of a guru.

Starting point is 01:50:08 Like, I, you know, just a random 27-year-old guy, you know, random 45-year-old guy. So, yeah. 70-year-old guy. Yeah. So I wouldn't take anything that we say for the gospel, but if you can tune in every Sunday and be entertained or sometimes educated when someone says something smart, then I think that that's good. I'll tell you guys, I had not heard of your podcast. Someone sent it to me.

Starting point is 01:50:27 It was an email exchange, not a comment that I ended up here from. someone sends it to me a friend of mine like, hey, you're on iced coffee hour. I was like, cool, I knew who you were, but I'd never heard of the podcast. And since starting that conversation, I've listened to, I don't know, maybe 12 episodes, which is a serious time commitment

Starting point is 01:50:45 because they're long episodes. And I think you guys do a great job. Some of your guests are like, I'm like, man, the stuff this person is saying is crazy. Yeah. But like you said, I think you guys do a pretty good job of being balanced and asking good questions. We try to go in so neutral,

Starting point is 01:50:59 but there's also only so much that we could also account for too. Like we've had a lot of people on politically that are on the right, but we've really tried to balance it out with the left. It's just the ratio of the type of person tends to lean right. And so like we try to balance it out. But at a certain point it's like, are we not going to have this guest on because we can't get the equivalent on the other side? No. Would we like the other side? Absolutely.

Starting point is 01:51:25 So for me, it's not about, it's not about I don't want to be on a right leaning podcast or left leaning podcast. For me, it's more like, I don't know if I want to be associated at all with people who are that divisive on either, on either side. I see your perspective, but the difference is that, like, how are you to learn if you don't put yourself up against adversity? Which is why we bring on people that have different opinions. If we had every single Sunday, we rotated between you and the money guys and Jordan Hamill, then it's like, what do we really learn? Like, I'm not learning anything at that point, and neither is the viewer. And so I think what's great is for this podcast, not just trying to pat ourselves on the back, but like, a viewer can tune in. be enjoy the very few of them enjoy graham and my our presence meanwhile we introduce them to a

Starting point is 01:52:07 wide range of opinions and this is great because a lot of the people if you tune into a conservative podcast or a liberal podcast or you tune tune into just grant cardone who tells you to leverage everything and spend everything on you know you're increasing your education or you tune into george camel who says you shouldn't you know borrow money to buy an investment or whatever it is like if you pigeonhole yourself with a certain ideology, then you never actually grow. You need to challenge your beliefs. And that's what I think is great about this podcast, is that we don't proclaim to have like any super, super strong beliefs. I mean, I do, but I generally don't show it because I think it's more about the guest and understanding a diverse range of opinion. And so that's why I think

Starting point is 01:52:46 it's really interesting to have, to be kind of like at the core of letting people hear out a bunch of different opinions to decide which ones they align with and which ones they don't. Yeah, it's an interesting perspective. I think I view my role in running our podcast as being more of a curator of what people should listen to, which is a different perspective. But I respect everything you said. Yeah. And we all, like I said, we always try to balance it for a while. We had fun because we were so far ahead. We would post Grant Cardone and then Dave Ramsey right now. Back to back. We did we did Peter Schiff and Michael Saylor. Back to back. So we got opposites. And then I remember. So we got opposites. And then I remember we also had someone from the Daily Wire.

Starting point is 01:53:28 I think it was like Ben Shapiro. And then Destiny. Right after it was Destiny. And so it's like back to back. But what happens, we find it funny. We pissed off everyone. Like the people who didn't like Ben would comment on that one. And then the people that didn't like destiny would comment on that one.

Starting point is 01:53:45 And so you'd always like every. But you know what? At that point, it's like come on. Like we just try to show everything. And we're not there to like debate or push anything. We just want to talk to the. people who we think would be an interesting conversation. And I think you guys do a good job.

Starting point is 01:54:00 I guess I'm like, I view myself as so far away from all of those people that you just nand. I'm like, do I even want to be? Anyway, I'm here. I appreciate it, man. And also, thanks for like expressing the concerns with coming on the show. Like, I wish at the end of the day, if anything, that people would just be more honest with the ways that they felt.

Starting point is 01:54:18 So then we can learn from it and we could try to to grow. Yeah. And we're always open to feedback is the other thing. There's nothing I'll take. personally and all of these things are concerns that we should be made aware of because it impacts guests in the future and our ability to really deliver the best show possible. Except if the feedback is to tell me to stop doing comfort calls. In that case, cut.

Starting point is 01:54:40 I do not. But I think now is the time, by the way, you'd review our portfolios. Okay. And I'd like your honest thoughts. And this is for the channel members. I really hope you appreciate it for everyone else. Thank you so much for coming. I'll link to all of your information down below in the description.

Starting point is 01:54:55 This has been such a joy because, like I said, I've watched you now for probably. It'll almost be 10 years. At the end of this year, I think it'll be almost 10 years. Crazy. So that's nuts. I really appreciate everything that you do. I highly recommend for everyone to subscribe as well. Thanks so much.

Starting point is 01:55:09 Thank you to all of Ben's fans that are tuning into this episode. We hope that you enjoyed. Thank you to everyone that watches us every Sunday and sometimes on a Wednesday. Really appreciate it. Would not be here without you. Until next time. The bulk of my wealth is Robin. Do you keep your Robin Hood shares in Robin Hood?

Starting point is 01:55:25 Uh, no. We're building a financial super app. Are you setting them up in a situation where the odds are stacked against them to actually make money? A lot of people criticize us because they think we incentivize active trading and prediction markets. That's when you can kind of get into trouble. Get this, the richest 1% controls more wealth now than at any time in more than a half century. Alarm bells have started ringing. There's a small circle of wealthy insiders that's benefiting from all the growth.

Starting point is 01:55:56 How much has AI changed the game? Humans overseeing agents, seeing how many agents you can actually employ, including when you're sleeping. So do you think, though, with Robin, eventually you could have just a few people running the entire company? Um, it's... That's just dangling to care at home.

The Iced Coffee Hour - Financial Expert: The MOST CONTROVERSIAL Investing Myths That Cost You Money! | Ben Felix

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