The Personal Finance Podcast - The FIRST Steps You Should Take as a New Investor With Andrew Sather and Dave Ahern

Episode Date: January 3, 2024

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on this episode of the personal finance podcast, how to start investing for beginners. What's up everybody and welcome to the personal finance podcast. I'm your host, Andrew, founder of mastermoney.com. And today on the personal finance podcast, we're going to be talking to Andrew and Dave from the Investing for Beginners podcast. And if you guys have any questions, make sure I'm going to hit us up on Instagram, TikTok, Twitter, at MasterMoney Co. And follow us on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast on right now. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast players.

Now today, we're going to be talking to Andrew and Dave from the Investing for Beginners podcast. And we're going to think through, since it is the new year, how should beginner investors actually think about what stocks to buy or how should they think about what funds to buy? and we're going to talk through investing for beginners as a whole. Because I think this is a really important subject for people who have not started investing. And Andrew and Dave are the perfect people to kind of talk through this with. So today we dive into how to start a portfolio from $0,000, how to get started investing, somewhat of mastering investing psychology, which is very, very important when it comes to your investments.

We talk about choosing investments. We talk about risk assessment and how to figure out, you know, what your risk tolerance is or how much volatility can you handle, meaning how much of the stock. stock market going up and down, can you handle on how do you choose your investments based on that? We're going to talk about types of investment accounts. And we're also going to talk about holding period, the importance of investing, and resources for beginner. So this is an action-packed episode. And if you are a beginner investor, this is a can't miss episode. So without further ado, let's welcome Andrew and Dave to the Personal Finance podcast. So Andrew, Dave, welcome to the Personal

Finance podcast. Thank you. Yeah, thanks for having us. We are really excited to have you because you guys have a great show called Investing for Beginners. And this show is going to air in the new year. And so I want to kind of go through what beginners should kind of consider and think through as they start investing. But before we dive in, what kind of got you guys interested in teaching people about investing? Well, I mean, for me, I was just trying to teach myself. So I started the blog where I was just like, it was almost like a journal. It's like, oh, this is what I learned today and then row that down. And that's kind of the way it's been for pretty long. while just trying to learn stuff and then regurgitate it and that helps me remember and other people can follow along. So I'm always just kind of one step ahead of the audience. Yeah, I'll echo the same.

It was I wanted to learn more about finance. I worked in the banking industry and that was one of the things I wanted to do. And because they wouldn't let me, I found another outlet to do it. And that was writing and working with Andrew. I love that. And I think that's kind of where where my journey began too was just kind of, you know, I wanted to learn more about investing. And so kind of going through this process and learning some of the things that work and then kind of teaching that along those ways are some of the most powerful things that you can do. So I want to kind of go through for beginner investors. If they want to get started investing, some of the things that they actually need to consider and how to think through this. So for someone who is completely brand new to investing,

where should they begin? What should they be thinking about and how should they actually, you know, even think about, you know, this process. Well, I think there's probably the best place to start is really try to decide, well, first of all, you have to have your ducks in a row. You have to have your financial base set up. You need to have an emergency savings plan. You need to be out of debt or very close to being out of debt. You basically have to have your foundation set. And then once you kind of have that organized, then you need to think about what kind of investor do you want to be. Do you want to be somebody that spends hours and hours and hours reading financial reports like And I do. And if that leaves you cold, then there's another option, and that's index funding or

using ETFs because those are great ways to invest. And you don't have to spend as much time. You can spend as little or as much time as you want. And then there's the other option, if you have some money, is having somebody help you do it for you. So there's really three buckets. And once you kind of figure where you really want to fit in those, and you can mix and match those. So you don't have to start out being a stock picker and then go to ETF, like more passive. passive investing if you want. You can start out in passive investing and go to stock picking or vice versa. So it really depends on where you want to go and how you want to do it. How much time you really want to spend and how interested in this you really are. Absolutely. I think for overall,

you know, I was a person who kind of started on that line where I was like you guys where I was reading all these financial reports and I'm like, man, as time would progress, I had little kids. And I was like, man, this is a lot of work. And so I kind of transitioned from being, you know, just an individual stock investor all the way over to, you know, more so like an index fund investor or real estate, some businesses, those types of things. So I think you're spot on with that is kind of figuring out what type of investor you want to be and then kind of moving on from there. Now, one big thing for us is figuring out our financial goals and also figuring out some investing goals as well, because we have to have these goals so that we can take action on these goals

and create some of these action plans on how we want to invest. So why is it so important for people to have financial goals specifically when it comes to investing? I guess it gives you a way you can check boxes and feel like you're making progress because the game, of investing is it's really a marathon and not even a marathon. It's more like a lifelong journey. So it can become very disappointing if you spend, you know, all day for seven days feeling like you're striving, striving, striving to learn as much as you can. And then your investment accounts go up a smidge or they go down. And it's just a very long-term game. So if you can set the right type of goals in place, that helps shift your mindset and put things in person.

So you don't get discouraged too much when you don't feel like you're making progress because it takes a very long time. It does. And that time is something where you really got to learn how to kind of wait through this process. So when it comes to some of the key principles or what should be some things that investors should understand before they actually go out and they make their first investment? I'll take a stab. To me, it's really understanding that investing, at least if we're talking about the stock market, investing is all about just being involved with the economy. Mankind has this extraordinary ability to work really hard, be innovative, and strive forward. And so all we're doing when we're investing in the stock market is trying to participate in that. And what's important about participating in that and doing it through the stock market is we have to realize in the short term, the stock market's a crazy bipolar person.

But in the long term, it follows the progression of the economy. So what you have to do when you invest in the stock market is hang on through that roller coaster long enough so that you can participate in the economy without getting whipsawed by the market. And that's not something that comes intuitively. As a beginner, you might look at the stock market in a completely different light and have different perceptions about it. And that's not your fault because it is a crazy place. But you have to realize that over the long term, the market does follow the businesses. and how those businesses grow. So Apple, Microsoft, Visa, these companies that create real products and services that people enjoy.

And as those companies continue to grow, so do their stock prices. It's just a mangled mess in the short term. I completely agree. And one of the things that I always tell investors to do, especially beginner investors, is if you are in some sort of stock or you're in some sort of investment and it's going down and you have your investment plan in place, one of my favorite things to tell them is, you know, take out your phone and turn it sideways. So the longest time horizon you can see for that investment in what direction does that go. If you look at the S&P 500 or something like that, for example, you can see it goes in one

direction. So short term, you're going to see it up and down, but long term, you're going to see that time horizon going out in one direction. So here's a huge factor for a lot of people as we go into this, because we're talking about volatility and some of these things that come into play is mastering your psychology. And when it comes to investing, that is one of the most important things that you have to do is kind of try to remove your emotions from the equation as much as possible. So obviously investing involves, you know, managing a ton of emotions.

We're all going to feel those natural emotions as our stocks go up and down. We're losing money. But how can beginners overcome that fear or greed in their investments when they start to invest? How can they kind of overcome some of those emotions? Well, unfortunately, there's no easy button for that. And there is, there's several ways that I think Andrew and I have found and talked about on the show that they can help you reduce some of these, you know, self-induced errors, if you will. Number one is try not to watch the movement of your stocks.

I know it's hard and I'm guilty of it. When I first started investing, I was on my brokerage account six or seven times a day, you know, just watching the fluctuations of Microsoft, the first company that I bought. And I noticed after over time that I started kind of losing interest in it. Now, I'm built a little different in that to me I associated with like baseball. So looking at the box scores every day to see how your favorite player did the night before. So for me, that was the way I kind of approached it. But one of our business partners, Andy Schuller, came up with this great idea of removing the apps from your phone.

So like your brokerage apps, taking them off your phone because it creates a speed bump. And it makes it harder for you to sit down to your computer, log into your account, you know, make a decision to do, buy or sell something. And if you can put like these little frictions in your way to basically give yourself a speed bump or a hard stop to say, hey, I can't do this kind of thing. And that's one of the easiest ways that I've found that you can help try to control your emotions. I think also understanding what it is that you're trying to do and what it is that you're buying. If you gamify it and you think about these tickers as just like electronic symbols going across the screen, then it becomes, comes a game and it kind of is a game but it's not and if you think about you know andrew mentioned these three great businesses and Microsoft Apple and Visa those when you buy a stock that's what you buy is

you're buying a piece of the business and so you're participating in that business's profitability and its growth and all those things and so you know saty and adela the CEO for Microsoft he's doing all the heavy lifting all we got to do is just sit back and watch and so I think if you kind of take that mindset, it takes a lot of the stress and like watching, watching, watching all the time. And also to your point earlier, Andrew, was that the long game is really where you're going to win. And if you really focus on the short term, you can really drive yourself crazy. But if you can, if you can withstand the first early buying of a stock and watching it a lot as you build your portfolio, I personally haven't looked at my portfolio in almost two weeks. I just, I haven't looked.

I don't even know where they are. And I'm okay with that because I understand. that it's the long game. And that's, once you understand that it's the long game and that's our biggest advantage that we have is the long term, once you understand that, I think that mindset helps alleviate some of the risks. And, you know, we're all going to do dumb things. I mean, I'm still going to do dumb things. I'm going to make bad mistakes. I mean, you know, Charlie Munger just passed away. And he said in his last interview that he made lots of dumb mistakes, especially towards the end of his life. And like he said, we don't all get it right every time. And I think you have to understand that, too, that you're not going to,

to win with every single pick that you, you know, even Warren Buffett misses. And so you give your, cut yourself a little slack. Absolutely. And especially early on, it is one of those things where you really have to learn to forgive yourself. I mean, the first, one of the first stocks I ever bought was, was I didn't understand what I was doing and I was a teenager, but I bought a penny stock. And I put all of my net worth, which is only like $700 at the time into this one penny stock. And in 24 hours, I lost the entire amount. Now, I could have stopped and, you know, quit investing right there. But instead just kind of decided, hey, I'm going to learn what to do here. And I'm going to figure out how this works. And that's kind of where the journey started.

And so for so many people who are brand new investors, they need to understand that. You may go out and you may make these mistakes, but it's so important to forgive yourself and move on to the next step and learn from that mistake. And then you can learn from other people's mistakes as well, like Charlie and Warren always say, they don't have to be your mistakes. You can learn from other people's mistakes, which I think is really, really important for people to understand. Now, as we get into this, you know, and people need to understand how to kind of choose their

investments and choose their investment strategy. So how can beginners determine their investment strategy? such as, do they want to be a long-term investor? Do they want to be a short-term investor? Do they want invest in stocks or bonds? Or how can they kind of think through this process? It's hard. I mean, it's really hard because how can you make a decision if you don't have all the information? So, you know, I think one of the things, in addition to cutting yourself some slack is kind of be patient about where you're going to be and what you're eventually going to be and just try to soak up as much information as you can. Just to give another tool to the tool belt, one of my favorite tools is

dollar cost averaging. And what that's done for me is really help me have progress all along the way, even when my investing skill was zero or very minimal. And so what dollar cost averaging is is simply taking a set dollar amount and putting that into the market every single month. And what that can do for you is it takes away the element of market timing because again, the market's going to be crazy. One month, it's going to be down and one month they'll be up. So you're eliminating that by always putting money in whether the market's down or up. And so you're not trying to guess. The second thing is, is it's building a habit.

And that habit is really what your key to success is going to be. Because investing is a never-ending cobweb of options, information, and things you can do, types of traders you could be. I mean, even inside of value investors, which is if I had to label myself, I'd probably put myself there. You have like 40 different factions of value investors and what they believe and what they want to argue about and all these things. And I've been in different factions at different times in my life. So if that part is endlessly fascinating and endlessly confusing, what we need to remember instead about investing is at the end of the day, it's how much money can you save and invest and put in. And so that means spending less than you make and setting habits like dollar cost averaging to put money to work for you.

And the rest will take care of itself. And like I said, it's a long-term game. This is a lifetime game. We're going to be investors until we pass away. So don't try to figure that all at once, but put basic strategies in place so that you give yourself the space to figure it out over time. As you learn more about yourself, you learn more about the market, you learn more about investing. And Andrew hit the nail on the head there where you really have to build out these habits.

It's so important to have the habit first that you're actually investing your dollars first. and then making sure obviously you live below your means so that you have those extra dollars in order to invest. And it's so important to be able to do that. That's up front. That is probably the most important thing overall for most people. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy. Clothes don't fit anymore and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in.

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and I want to give back to the community. Ooh, then it's the vacation of a lifetime. I wonder if my out of office has a forever setting. An IG Private Wealth Advisor creates the clarity you need with plans that harmonize your business, your family, and your dreams. Get financial advice that puts you at the center. Find your advisor at IGPrivatewealth.com. So I want to kind of get into assessing risk tolerance.

And can you kind of explain what risk tolerance is and how somebody who is brand new can kind of assess what their risk tolerance is and why it's so important to know what that is? Yeah, that's an interesting can of worms to open. So risk tolerance really comes down to how much volatility can you stand. So I think a lot of people when they think about the stock market, they think it looks like a casino to them. And so it can be overwhelming. And you think that when you're going in that the house is always going to win. and the house doesn't always win. The house wills win sometimes a lot, but it doesn't always win. And so I think you have to go into it first of all with the mindset that I'm putting the money in for a long period of time.

And this is money that I can afford to have, not to lose, but to see it lose value for a period of time. Because you will not find a company that you will invest in. If you invest in a company for 20 years, you will not find one that will not see a lot. at some point, it'll drop. It's just the nature of the beast. And Warren Buffett and Charlie Munger, who owned Berkshire Hathaway, they have talked about, they've seen in their 50, 60 years of investing with that company, they've seen drawdowns, which means drops in price of 50% or more three or four times. And they've held on through that whole period. So a lot of times, Peter Lynch is famous for saying he's a famous investor from the 70s and 80s and 80s, or 80s and 90s,

I'm sorry. And he was famous for saying that your stomach is more important than your IQ. And so having a strong stomach and being able to withstand the ups and down. So when you go into investing, understand what it is you're trying to do. Understand that there is a chance that you will lose some money. I mean, Andrew, you were talking about your experience with a penny stock. I mean, that unfortunately is a very common reaction or experience for people that get into the stock market. And one of the things that Andrew and I, really try to talk a lot about and preach is experience and learning from your mistakes. And we're all going to make mistakes. We're all going to make poor choices. And the stock market is a great place to really humble you and teach you, you know, what is going to work and what isn't going to work. And

over time, if you continually chip away at the iceberg or, you know, as I like to say, water dripping on a stone, it will make an impression. And if you stay consistent dollar cost average and do the things that you need to do, you will be successful in the end. And you don't have to pick the next Google or the next Amazon to be successful in the stock market. And so there is a lot of opportunity, but I think you just need to really understand that it's not going to be a fast game. If you're looking to get rich quick, the stock market is not the place to do it. And I think if you understand that when you go into it, you'll and have a strong stomach and can withstand some of that, then I think the risk starts to kind of fade a little bit.

Now, when it comes to risk, what we're going to hear a lot of people say is thinking about diversification. What are your opinions on diversification in terms of should new investors be well diversified and or do you think that, you know, less stocks or less investments is kind of the way to go? What are your opinions on that? I say diversification is 100% in necessity. We just don't know what's going to happen in the future. Even the best businesses in the world have gone through things. Enron took a lot of people by surprise, and they were considered one of the greatest businesses of their time. So we have to understand that the world's an uncertain place, things happen, and we want to prepare our portfolios for those things that happen.

Now, I think an important distinction, and it's hard because when we talk to beginners, people can be on all sorts of spectrums of where they are personally with their life. And so it becomes very hard to say that everybody should do that. this, everybody should do that. But I think an important distinction that we've learned to talk about over time is some people are in their accumulation phase and some people are in their harvesting phase. And so in general, where you are in that life cycle should help direct how much money you want in stocks, for example, or how much money you want in something more conservative, like bonds, which is not going to be as crazy or as uncertain as a stock investment. Or even if you feel like you need some

cash because you're going to use that soon. So, I mean, for the accumulation phase, I feel like that's me and Dave's sweet spot. We're really about helping beginners in that accumulation phase. But as you start to get to the harvesting phase or you're in the harvesting phase and you're, you got this pile of money and you're trying to figure out what to do with it, we really push people towards financial advisors because there's not only things in there with your age and kind of how you feel about money, but also with taxes and just a lot of things. that it can become really hard to answer that question. It does.

It does get more complex as you get, like you said, to that harvesting phase. I think it's one of those things where it gets tough for people to navigate and you definitely don't want to mess that up. So really, really important to think through that for sure. So most investors, they're listening to us and they say, okay, I want to get started investing, but I don't know which account to open. And this is one of the biggest questions we always get with brand new investors is thinking through, hey, what accounts should I open?

Should I open multiple accounts? How should I, you know, contribute to those accounts? So how do you guys think through that? Is there an order of operations that you guys have when it comes to the investment accounts that beginners should think through and start with? Well, sometimes the biggest hurdle for people is just getting started, putting that toe in the water. And so our biggest thing is just open a simple brokerage account. And all that is, and I'm preaching to the choir here probably, but if you're a beginner, all that is, it's like a checking account for your stocks. So if you do that, open a brokerage account, buy at least you could put as little as $5, but buy some amount of shares in any stock. And that shows you, it really breaks down that barrier to show you, look, this isn't a super complex thing, even though sometimes the media can make it look this way. It's as simple as logging in and hitting by and getting yourself in the game in that way. And so from there, there's a lot of different ways you can go. But sometimes people just get this analysis paralysis. And I don't blame them because there's so many options. If you're in that place and you're stuck, get started, get your toe in the water, start building momentum. And then, then you'll figure out the rest of it.

Exactly. I agree as we go through that. David, you have another point. I want to throw out another log on that fire is if you're really, you just got your first job and you want to start investing and you want to maybe take a moment to figure out what it is you want to do. If you have a 401k available, start.

Do it. Do it. It's free money. If the company has any sort of match, whether it's 1% or 6% or whatever it is, that's free money. And who wouldn't want free money? and it's a great way to get started, to build the habit.

And the other thing is it can really help you start building that mountain of money and start compounding because you don't see it. The company takes it out of your paycheck. It doesn't go into your checking account and then leave. And so it can automatically start building that habit. And then once you have that base established, then you can, you know, you can open a brokerage account like Andrew was saying. And, you know, if you want to buy individual companies, then you can start doing it.

But I think getting over the inertia is the hardest part and taking that first step, whether it's with a 401k or whether it's a brokerage account, is the, you know, if you take away nothing else from what you listen to today, go do it now. It's 9.30 on a Thursday. Go do it by 10 o'clock. You know, that's your goal. Exactly. I completely agree on that as well because I think overall, you can look at that employer match. And if you don't know what employer matches, is, you can go to your HR department and see if they have it available for you. And it's one of those things where, you know, it is a 100% rate of retirement. like Dave is saying here. Free is my favorite number, so I definitely want to make sure that I'm making that 100% rate of return overall. So that's a really easy first step is just starting there. And then going into that taxable brokerage and buying your first stock, showing you that this isn't scary. You can do it with smaller amounts. We have fractional shares now where you don't even have to

buy an entire share if you don't want to. But just kind of seeing how it moves around, how the market ebbs and flows, is really, really important. So I love that. So are there any tax implications that people should be aware of as they kind of progress through this. So maybe they bought their first couple of stocks. They started to invest their money. Are there any tax implications when they are choosing their investment accounts? Can you kind of talk through that and how they should think through that? There's two very special accounts that are available for people, for most people in most income brackets. And that's the traditional IRA and the Roth IRA. And basically what those do is they give you a tax shield on one side of your money. So that traditional IRA gives you a tax shield on the

front and the Roth IRA gives you a tax shield on the back. And what that does is help you to save money. So, for example, the Roth, if you're putting money from your checking account, that money's been taxed because the taxes came out of your paycheck. But now that that money is in your checking account, if you go and contribute to a Roth IRA, then when you sell any stocks in that account, you don't have to pay taxes on those. And I think that's such a cool idea to be able to have that freedom of money in account that you know it's not going to be taxed. Now, the problem is you're going to have to keep it in there until you retire. So a lot of people don't like hearing that part of the equation, but really as a wealth-building tool, it's a fantastic way to put some tax-free money in, which can

really snowball over time and give you a good amount of wealth. And it's a great way for people to get in the game and really feel involved and see the progress that you can check on at any time. I'm a big, big fan of the Roth IRA. as well. It is one of my favorite accounts overall, and I think it's one of the, that tax-free growth is just so incredibly powerful. Even if you max that thing out and you got an 8 to 10% rate of return, say you had a million bucks in there, we've done the math a number of times in this show. Over the course of 30 years, you'd have like $800,000 of tax-free money in that account. So it's just so incredibly powerful what you could do with that Roth IRA. Now, you mentioned with the Roth IRA that you have to kind of keep the

money invested for a long period of time. So when we go into holding periods for a lot of people or they're trying to figure out, hey, how long should I actually own this stock or when I buy this stock? How long should I actually hold on to it? What do you guys think about that? And how long do you think through owning a stock when you buy it? Well, the ultimate goal is to hold it forever. But the reality is that's not always going to happen. And there's lots of different schools of thought. And our favorite Warren Buffett has talked many times, you know, if you won't consider owning a stock for five minutes, then why would you own it for five years, you know, kind of thing. And the basic gist is the best way to think about it is hold it until something fundamentally changes about the business that's the way that we

try to look about look at it and for example if you look at a company like Microsoft they have gone through some pretty amazing evolution since they were founded by bill gates back in the 70s and they reached you know incredible highs during the dot com boom and then they kind of fell on some harder times and it struggled for a long time and now they have a new CEO and they've really kind of turned their fortunes around. And so you could have held that company from 1999 to today. And you would have had a great return, but you would have had to endure some pretty lean years for a while. And so I think one of the things that you have to really, that's where coming in knowing what you own, understanding the business, understanding what it is that they do. And if you own a company like Domino's, for example,

you know, a company that makes pizza and all of a sudden they shift to, you know, they're going to be a gold miner, you know, then, okay, maybe it's time to get out kind of thing. So the way that I try to look at it and, you know, Andrew can speak to his viewpoint is I try to look at it and hold it for as long as I think that the company is going to remain viable and has a product that people are going to continue to want to use and pay for. And if at some point that changes, then it's time to start looking for the exit door or find something else. I live in a bunch of numbers prisons. And so one of the numbers prisons I like to put myself in is this idea. Our friend Brian Ferraldi did some research, and I don't know if it was his or if he saw it from somebody else.

But basically, the time horizon you have gives you your probabilities of making money in the stock market. So looking back at all the years, we have over 100 years of stock market history that we can look at. If you would have held for a day, your chances are close to 50-50. You hold it for five years, your chances get better. Hold it for 10 years. You have something like a 90% chance of making money. And if you put that out to 20 years, you have 100% chance that you made money. But that's buying an S&P 500, which represents a big portion of the stock market.

So we're just talking about the market in aggregate. When you go out to the individual stock level, that's where it gets really complex. And to Dave's point, you really have to know what you own at that point. But if you have this framework that, okay, most of my stocks will make money the longer I hold them, I think it really helps to keep that mindset that, you know what, I might not feel great about where the stock is now, but I know that these numbers have told me that over history, stocks will do well if I continue to hold longer and longer. And so for me, that helps stay optimistic. For sure. And I think those numbers that Brian puts out all the time, that's one of the most reassuring things is that if you hold this stock for a long period of time,

historically, if you hold the S&P 500 for 20 years or longer, you know, you've made money 100% of the time, which is just one of the most powerful things. I think that are out there. So how can a beginner, because I remember when I was a beginner, you know, I was always tempted to kind of buy and sell stocks all the time. How can they avoid that temptation? If they want to be long-term investors overall, and maybe your strategy is short-term, but if you want to be a long-term investor, how can they kind of avoid that temptation of just

buying and selling stocks all the time? Well, to a man with a hammer, everything is a nail. So for me, it goes back again to the dollar cost averaging. When I force myself to only make a portfolio decision once a month, that really helps me not panic and not sell things when I shouldn't. And then to Dave's point again, if you're a stock picker, then there are only a few reasons you should sell a stock, and that's if they start selling cupcakes when they should be a technology company, or something else in the business has fundamentally changed.

Other than that, trying to, and I struggle with this too sometimes, but trying to to over-optimize your portfolio where it's like, okay, I want to shift to this stock or this sector or this industry because I think over the next six months, this is really going to be on fire, that'll drive you crazy. And so by really limiting the reasons why you'll sell something, that helps you to stay and not sell and panic all the time. And then by limiting yourself to only buying at a set time every month on the buy side, that helps you to accumulate and be able to have a lot of different ideas and a lot of opportunities to build your wealth without putting too much in and burning now or making a big mistake that cripples you for a couple of years.

Those are just some ideas I have. And for a lot of investors out there, if you know you're not super disciplined with your money, if you're just starting out, one of the best ways to do this is to automate your money, like Andrew's saying, and just dollar cost average it every single month, but make it automated so you don't have to utilize your willpower in order to actually get into this equation. You can just automate that money right into those accounts. And that's another great way to go through that process. Now, as we go through this, do you guys have any stories of people either you've interviewed

or maybe your own stories where people have grown their portfolios over time? Because sometimes it's just helpful for people to kind of see examples. So maybe somebody started from $0 and they've just grown their portfolio over time. Have you ever seen any really cool examples of that? And can you share some of those? Oh, if you don't mind, I'll take another stab at this. So to put this in context, I first bought my first stock in 2012. And then I started a blog in 2013.

So I've really only been doing this nine or ten years as far as sharing information about this. If you look at the context of how long it takes to build wealth, I don't have any of those great stories that you're probably hoping for. But I'll give you a couple that are kind of fun to me. So one is like my little brother who follows the stock picks I do. And I was on the phone with him the other day and he was like talking about, oh, I just got a new job. How should I allocate? you know, should I put 401k, Roth, blah, blah, blah. And then he logs into his brokerage account. He goes, whoa, I got $4,000 in here. He's like, I haven't logged in in like three months.

What's going on? This is awesome. And so, like, stories like that really inspire me to think that, like, you know what? You don't need a ton of money to find satisfaction and to start building wealth. And I know for him, he's 24 now. So he's got just so much potential to compound and build massive amounts of wealth that now that he has that, habit. He has the bug. He's putting money in. He's not blowing it all at the club or at bars, you know, or at restaurants. He's doing it prudently and being smart with his money decisions. I think those are the kinds of things that over time he's going to look back and be really glad he made decisions like that. I love that. He's making it rain on the market instead of in the club. So that's perfect. Dave, do you have any? He might be doing both.

Exactly. Dave, do you have any great stories like that? You know, I think probably, the best story that I could think of is my friend that's sitting next to us. You know, Andrew has, you know, he started, as he said, in 2012, and he's done a fantastic job. You know, he started his own investment newsletter service in 2014, I believe. And the goal was to get to a million dollars by the time he retired, investing $150 a month. And his portfolio has now reached the point where, based on compounding and dividends that he gets, that it's starting to self-fund itself. And he's earning more money that he's putting in, you know, in just a short amount of time. And I think that is to me one of the greatest examples of the impact that compounding can have and just starting off,

you know, he's a regular person. He's not a rocket scientist, so he's not that I'm aware of. And he's been able to do this by consistently every month putting at least $150 into the market and, you know, investing in individual stocks, having the dividends reinvest. And it's not flashy. And, you know, And it's certainly not sexy, but just by grinding away, he's been able to build the portfolio now. The word itself funds itself. And I think that's an amazing accomplishment. And it's something that shows that everybody, anybody can do this if they're just consistent. You know, I've said this before.

It's water dripping on a stone. It just eventually that just makes impression over time. And, you know, I think a lot of people in the market think that you have to hit it big with Bitcoin or Amazon or Google. You don't. You can just be an average. person. There are stories out there all the time of, you know, people that had regular average, if you want to quote, average jobs that were contributing to a 401k or some, you know, and then they pass away and the relatives discover that they had $8 million in their, you know, brokerage account

or something, you know, something crazy like that. And so I think it just shows that, you know, doing what we're talking about, doing what you're talking about, Andrew can really lead to success for people if they just stay consistent. And I think that's the biggest takeaway. It's just trying to be consistent. Absolutely. That is exactly what I was looking for between both those stories, because I think for a lot of people, they're like, oh, I don't know what to do. How am I going to get to this big, huge, massive goal? And it's just really that consistency over time and just continuing to build those habits and do the same exact thing over time is really what's going to help you kind of grow your portfolio. So do you guys have any resources that you utilize to kind of help you research investments or

are any books for beginners that you would recommend? Or how would you actually think through resources for beginners so they can kind of learn more about investing? Oh yeah, we got lots. On the book front, there are so many. We have gone through a lot of them. I think some of the ones that I like a lot are a couple books from Peter Lynch, beating the street and one up on Wall Street in particular are both fantastic, easy to read books that are great for beginners.

There's a book that was written by a gentleman named Monish Prabri, and it's called The Dondo Investor. And to me, that was one of the greatest books ever. The other book that I really, really like that I think is great is the richest man in Babylon. Doesn't get as much attention as an older book, but I think it's a fantastic book to really help you set your money mind and really understand what it is you're trying to do. That's a fantastic book. If you really want to get into like the nitty gritty of investing, you have to read The Intelligent Investor. I know it gets a little bit of bad press and it's

air quote dated, but it's still got tons and tons and tons of fantastic wisdom. And it inspired Charlie Munger and Warren Buffett to do what they do. So I think if nothing else, that's certainly worth a gamble. Andrew, do you want to throw any other logs on the fire? One I really liked for stock pickers was a guy we had on our show a couple times. His name's William Green. He has a book called Richer, Wiser, Happier. And that one's great because you get to see investors. And they talk not just about investing, but also about their lives holistically. And you see how health in one area can help with health and the other. And I think that's really cool, too. Just to kind of go back in the time machine, one that I really loved, when I

first started was rich dad, poor dad. And kind of like Dave's recommendation, Richest Man in Babylon, really helps to really get you down back to the basics, if you will, of saving more, you know, spending less than you earn, saving that money and putting it to work. And that's really the magic of investing. And I second all of those books. Those are all amazing books. And actually the Dondo investor, I haven't met many people that I've read that. So I love that you guys have that on your list, too, because I think that is one, one amazing one. The second book I read. It's amazing. It's one of the best out there. He's one of the best investors alive right now. So it's pretty cool to go through that for sure. So I want to talk about, before we dive into maybe a rapid fire of questions, I want to talk about your portfolios specifically. And if somebody was looking at like a pie chart of your portfolios, how would that be made up? I guess for me, 95% of my liquid net worth is in the stocks I recommend for my newsletter that Dave mentioned. And so within that, I have close to 30 stocks. And they all have different positions. sizes from, you know, 0.5% of the portfolio all the way to my biggest position right now is like

15%. But in general, most of my stocks are about 5% position size. And so if it was a, I guess if it was a pie chart, it would be a lot of little slices. Yeah. Awesome. For me, I have, I have 16 companies in my portfolio. And like Andrew, all my net worth is tied up in the portfolio. And I have three companies that make up over 45% of my portfolio. And that's Berkshire Hathaway. a visa and a Dutch payments company called Agen. Those are the three biggies for me. And the rest of it is much smaller positions. A lot of it matching what Andrew recommends in his newsletter because he comes up with great

picks. And I'm like, well, why am I doing all the heavy lifting? He's doing all the heavy lifting. I could just use his work. And yeah, it works out great. And I am the example of you need to diversify. So if I could divest for a second, I went down a payments rabbit hole a few years ago. And I went kind of crazy and bought a whole bunch of payments companies.

And some of them have, a couple of them have done really well. And a couple of them have been dogs. And so it's just an example of you can get too enthusiastic and you need to learn from your mistakes. And so that's what I have been working on is trying to move away from having such a big exposure to one industry because it can really impact your returns and your portfolio. And so that's really helped me. But yeah, that's kind of my story. I agree.

And I think I've had tunnel vision before in an industry. as well, and then you just pick a bunch of them and you go through across the board, and sometimes it just doesn't always work out. So I agree as well. I think that's a really important thing to add in there. So, okay, I want to shift gears to some of our rapid fire questions that we ask a lot of people that come on. So we just talked about books. So I'm going to skip this one. But what part of your worker life makes you come alive? I like reading. I like reading about businesses. That really is fun for me. I'm weird. Yeah, me too. I'm weird. I love reading about companies. I love that. That's kind of how I am, too. So what is your biggest fear?

when it comes to money. I guess I don't really have any, which is more of a spiritual thing than anything else. I have fears obviously in other areas, but for money, I'm pretty set there. Awesome. How do you plan to level up your finances this year? That's a good one. Dave, you got any good ideas? How do I, how do I plan to level up? I think one way that I plan to level up is work on building out a better emergency fund. I don't feel like I have a one that's adequate. it. And so that has been something that I've been trying to focus on for the last six months or so. And so that's my goal. And then just get better at picking companies. Love it. And if you could tell your younger stuff, one thing about money, what would that be? Start investing. Start investing. When I was 18 to 20

years old, if I had started then and still, I waited until I was older. I was in my mid to wait 40s before I started. So I was much, much later to the game. That's the one thing I would say. And the last one is my favor one. You don't have to answer this in a rapid fireway whatsoever, but what does wealth mean to you? Well, you know, it's interesting. I think wealth could be attainable no matter where you are. And to me, wealth is more of a mindset. And so if you can put your head on your pillow at night and understand that, you know, I did what I could today. Even if I put five bucks in the market, that's five bucks more than I had yesterday. To be able to do that and do it every day, I think, is a It's a new opportunity. I'm like a morning person, so I probably turned off half the audience by saying that. But there's something about in the morning being able to be like, you know what, today's a clean slate. I might have screwed up yesterday. I might have really put myself like 10 steps back. But every day you have the opportunity to work towards a brighter future. And if you can put your mindset on that versus on looking too far ahead of what don't I have and instead, what do I have and what can I control? I think that's

a very good way to have financial freedom in your life. It is in your control for a lot of people to be able to, you know, whether it's make sacrifices so you can put a couple extra bucks in the market, whatever that looks like for you. There's a lot of satisfaction in the morning and at night sometimes when you can do that. And I guess for me, wealth doesn't equate to money. To me, it equates to kind of to Andrew's point. It equates to the ability to do what I want to do when I want to do it and have the ability to spend time with the people that are important to me. Because I think at the end of the day, none of us are going to look back on our deathbed and go, I wish I had worked harder or I wish I had done this.

It's more about the time you spent with people that you love, whether it's my friends like Andrew, whether it's my fiance, whether it's my daughter, my family. I think those are what is important. And wealth to me is having the ability to spend time with them and to enjoy them. and not worry about the money part of it because there's always going to be somebody smarter and somebody better than investing. And I just need to worry about what I can control. And I think if I worry about those kinds of things, then it takes a lot of stress out of your life.

And if you can find something that makes you happy, whether it's your job or whether it's some sort of, you know, family, friends, you know, hobbies, whatever it is, your life becomes immeasurably better. And I think that's to me what it, you know, chasing the dollar is not important to me. Could not agree more. I think those are fantastic answers. So Andrew Dave, this has been absolutely amazing. Where can people find out more about you guys, what you have going on, your podcast, newsletters, everything else? Well, we're pretty simple. You can just search for investing for beginners and you'll find us. Our podcast is called The Investing for Beginners podcast, your path to financial freedom. We do two episodes a week right now. And a lot of times

is just me and Dave answering listener questions or we'll have really insightful, great guests on our podcast like you, Andrew. So people can check that out if they're interested. We also have a blog, einvestingforbeginers.com. And Dave has an awesome Twitter too. What's that Twitter handle? IFB underscore investing.

I'm sorry, at IFB underscore podcast. Yeah. And Dave's just dropping, he's just dropping gold on that all the time. So check that out too if you're a Twitter person. amazing we're going to link all of those up down below so that you guys can check that out that are listening thank you guys again so much for coming on this is amazing welcome it was our pleasure this is awesome this is a ton of fun