The Growth Booth

#23: Wealth Building Part 3: The Stock Market Investment That Has Never Failed

June 15, 2022 Season 1 Episode 23
The Growth Booth
#23: Wealth Building Part 3: The Stock Market Investment That Has Never Failed
Show Notes Transcript

85% of millionaires have one thing in common: stock market investments. But what, where, and how exactly does one dip their toe in the deep waters of stocks, bonds, and other related investments? 

Welcome to the 23rd episode of The Growth Booth Podcast, a show focused on supporting budding entrepreneurs and established business owners alike, towards achieving lifestyle freedom through building successful online businesses.

On the last leg of our 3-part series on Wealth Building, Aidan is joined by Beth Sharpe-Verdugo, a private wealth manager from Creative Planning, to discuss how one could get started with the stock market, common newbie mistakes, what to look for in a financial planner, and to demystify many more questions about stock investments.

Whether you're looking for step-by-step strategies to start building an online business, simple game plans to grow your business, or proven lifestyle freedom frameworks, you’re in the right place.

Stay tuned and be sure to join the thousands of listeners already in growth mode!

DISCLAIMER:This commentary is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Opinions expressed are those of the speakers and do not necessarily represent those of Creative Planning. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

Access the episode timestamps and other resources on: https://thegrowthbooth.com/podcast/episode-23-wealth-building-part-3-the-stock-market-investment-that-has-never-failed/

About Our Host:

Aidan Booth is passionate about lifestyle freedom and has focused on building online businesses to achieve this since 2005. From affiliate marketing to eCommerce, small business marketing to SAAS (software as a service), online education to speaking at seminars, the journey has been a rollercoaster ride with plenty of thrills along the way. Aidan is proud to have helped thousands of entrepreneurs earn their first dollar online, and coached many people to build million-dollar businesses. Aidan and his business partner (Steven Clayton) are the #1 ranked vendors on Clickbank.com, and sell their products in over 100 countries globally, as well as in 20,000+ stores across the USA, to generate 8-figures annually.

Away from the online world, Aidan is a proud Dad of two young kids, an avid investor, a swimming enthusiast, and a nomadic traveler.

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Thanks for tuning in! Please don’t forget to like, share, and subscribe!

DISCLAIMER: This commentary is provided for general information purposes only and should not be construed as investment, tax, or legal advice. Opinions expressed are those of the speakers and do not necessarily represent those of Creative Planning. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

 

Welcome to episode 23 of The Growth Booth, where today we are doing the third in a three-part series where we've been talking about wealth building.

In Episode Number 21, a couple of weeks ago, we gave a 10,000 ft. overview of my ideas around wealth building and the kind of blueprint that I've been using. In the last episode, episode number 22, we focused more heavily on property. And in the third episode of this trilogy, this episode right here that we're going through today, we're talking more about stock investment.

Now, I believe that success leaves clues and something that you may find interesting is somewhere in the vicinity of 85% to 90% of millionaires are invested in the stock market, and there's a reason for that.

It's been a solid performer for many, many years. However, there are lots of different ways that you can get involved with the stock market. There are people that go out there and actively buy individual shares of a company, and there are other people that just buy the entire market.

Now, you might not know what any of this means, and that's absolutely fine because we're going to get into some good elementary questions here. I am joined here today by Beth Sharpe-Verdugo, and she's over at Creative Planning.  

 

AIDAN

So, Beth, so grateful to have you with me here on the call today.

 

BETH

Hi, Aidan, likewise. Thank you so much for having me. I'm flattered and honored you wanted to have me on.

 

AIDAN

For sure. Beth is over at Creative Planning. I basically knew nothing about investing. I went down this rabbit hole of reading dozens and dozens and dozens of books about stock market investing, but up until then, I had been very much involved in property investment.

It's been quite a journey, and I hope I can take you on a little bit of that journey with Beth here today. I do want to say right from the outset, though, that I'm not qualified to give you financial advice. As we always say on this show, you should seek your own counsel. This whole idea around The Growth Booth is a place where we can discuss things. I can share my personal experience. That's a little bit of framing for what we're going to talk about here today.

Maybe we can just dive in right at the starting point, Beth, and you could share a little bit for people about what actually are stocks and what are equities, because we hear these words being thrown around like, “Oh, I'm investing in equities.” What is equity? What is a stock? What is a share? Maybe you could share a little bit about that with our audience here.

 

BETH

Sure. Yeah. At the simplest level, stocks are simply just owning a fractional share of a company, and they're just called shares. It gives you or the owner of that stock a portion of the company's profits, and that's equal to how much you have in the shares that you own.

 

AIDAN

Okay. Let's say that someone has got incredibly deep pockets. They've got a few billion dollars on their hands, and they want to spend $4 billion to buy a good chunk of Twitter. That would essentially give them maybe using very rough numbers here that might give them 10% of Twitter.  Would that mean that they actually own 10% of that company? Is that how it works?

 

BETH

Right. You become a fractional owner of that company, entitled to vote on things like who will run the board, how much of a dividend will be paid out, if any, kind of the governance of the company.

 

AIDAN

Okay. When you're buying a share, even if you're just buying one share in a company, you are buying a little fraction, a little percentage of that company. That's the first thing. The other thing that I want us to get our heads around here is what exactly are bonds.

 

BETH

Yeah. A lot of times I think some people seem to get kind of tied up on bonds being so different from stocks. And really, if you think about bonds just being instead of a company going out and asking a bank to borrow money, they're going to go out to an individual investor and ask to be a borrower of their money. You're essentially lending your money to a corporation or to a municipality or to a government entity in order for them to take your funds and go build out new jobs or build out new projects or come up with roads and infrastructure that they want to fix.

In return for that, and in return for borrowing your money, they're going to pay you an interest coupon on a regular basis. For some bonds, that's an annual basis. For other bonds, it's quarterly or semi-annually. It depends on the kind of bonds.

 

AIDAN

Okay, good. I feel like we're making progress here around some of the terminologies. A couple more things, then we can start getting into some other bits and pieces here, one thing that I'm a big fan of is indexing. Could you explain to people very briefly what is an index fund and also what is a mutual fund? Because that's another term that's thrown around a lot in investment circles.

 

BETH

Yeah.  I'll kind of start with the end in mind only because an index fund is essentially a type of mutual fund. They're handled a little bit differently. A mutual fund essentially just is a collection or a basket of different kinds of stocks. Typically, it's managed by a professional money manager or portfolio manager.

The idea that this group of stocks could share different kinds of characteristics, like whether or not those companies that are going to be in that mutual fund are small or large, whether they're diversified overseas or just US companies, whether they're in different sectors of the market, so in other words, are they just consumer discretionary? Are they just consumer staples?

There are different kinds of mutual funds that try to adhere to those specific characteristics. Typically, but not always, mutual funds don't necessarily follow a particular index, a benchmark like the S&P 500. I think most investors or people understand the S&P 500 are the largest 500 companies in the US market by market capitalization or the size of the capitalization of that company, whereas being a little bit different, an index fund is typically and kind of characteristically benchmarked to an index. You can't actually buy an index outright. You have to buy it in the form of either a mutual fund or an index fund.

The idea that index funds over time have become more and more popular is because the mutual fund companies have been able to become very efficient using a lot of technology infrastructure in place to rebalance those indices or index funds against the index and do so in a way that becomes very cost-efficient, very low-cost way to buy the entire index, and you can buy things on different kinds of benchmarks.

You could buy the Dow Jones index, you could buy an S&P 500 index, you could buy a Russell 2000 index. You could buy the NASDAQ 100 index, which is the largest 100 technology companies. There are index funds on just about every index now. But the key is that index funds are really geared toward buying the whole index, and you're benchmarking against keeping up with that market performance. The intention really isn't to outperform the market. It's very difficult to do that with an index fund. That's not really the goal. The goal is to buy the broad index and match that performance, whereas a mutual fund is a little bit different to compare the two, typically, mutual funds are to try and outperform a given index or a given benchmark. You're trying to find characteristics within that particular fund that would outperform the market. That doesn't always happen, but that's kind of the goal of a lot of investors and what they're trying to achieve.

 

AIDAN

Okay, that's great. 

Now, interestingly enough, I did a lot of research, and I had quite a few interviews with different wealth management firms.

The thing that I was trying to get my head around is should someone in my position, and it's different for everyone, but should someone in my position look to be stock-picking, selectively choosing a stock, like saying “I'm going to put a certain amount of money in Apple and I'm going to buy Apple and I'm going to put a certain amount of money in something else, and I'm going to buy that,” or should I be investing in index funds?

The more that I dived into it, the more that I read, it became a complete no-brainer for me that what I wanted to be doing, again for my personal situation, was index funds because I felt that they were going to give me the best coverage and allow me to sleep a little bit easier at night.

One interesting stat that I read recently was that if you took all of the stocks on the stock market, I think something like 30% of them, or maybe it's even less than that 25% of them are going to go up in a year or a certain period of time, and 75% of them are going to go down. If you're just sort of selecting a stock at random, there's at least a 50% chance that that's going to go down. However, if you buy the entire market because some of the ones that go up tend to skyrocket, then you can have a more, I guess, balanced or reliable way to predict what might happen. And again, you can't really predict anything, but I think it's a more conservative approach.

Anyway, a little bit of a backstory there. Now another question for you. If someone owns equity or stocks or shares or a bond, how do people actually make money? How do they build wealth from them? Obviously, one of the ways that it happens is you could buy something from an index fund at a value of $100 and it increases to $120. It's appreciated a little bit. But how can you actually make money from buying these assets?

 

BETH

Yeah, I think it's important to come back to the basics of what is the whole purpose of investing in the first place. I think we start there. At least at Creative Planning, that's where we start. We're really big on trying to understand what is the whole purpose of the money that you're going to put at risk. Right.

You're going to put capital at risk in a couple of different buckets with the expectation that each one of those buckets has an expected historical return. Now we've all kind of said from the very beginning of our conversation here, there are no guarantees that historical returns are going to give you the same returns going forward, and this is not really construed as financial advice.

Each person's situation is different. But I would say to your question of how do you make money in each of these buckets? It really comes down to A) what do you want the money to do for you, and B) what are you trying to achieve in a timeline that you've set out?

Each of these buckets could be invested in things like in bonds, in stocks, in commercial or residential real estate, in orange juice futures. It could be in a lot of different kinds of investments. Each one of those areas carries its own average expected return, and its own average volatility, meaning how much can you expect the price of that type of asset to fluctuate over time?

Some people's stomach to manage that kind of up and down is a lot less than others, and I think it's important to know what you want the funds to do for you and at what time you expect to use those funds to achieve that goal. Some people are looking at “I want to plan for College, I want to plan for retirement. I want to plan to buy a house in five years.” All of those have a very different timeline of when you need that bucket of money to be ready for you.

It is possible to have different portfolios for each of those different goals.

Again, back to the question of how do you make money in stocks and bonds? It's all dependent upon how much risk are you willing to take? What's your willingness and need to take that risk? How long do you need the money to work for you, or when do you need it back to buy whatever it is that you're wanting to go buy, in which case, that is when you can start to put together a portfolio to try and achieve each of those different benchmarks. On average, bonds over time, again, in just a well-diversified group of bonds, have a tendency to return somewhere around 5%, 5.5%. Now that's all dependent upon are they all treasuries? It's going to be lower than that. Are they all muni bonds? It's going to be a little bit higher than that. If it's going to be corporate bonds, it's even a little bit higher than that. It all kind of depends…

 

AIDAN

I could share an interesting story about buying bonds in Argentina, which didn't end up too well. I guess you would call that an emerging market bond, but this one didn't pan out all that well for me. It was a very small amount of money, thankfully. But Argentina does have a very interesting history with things like that.

Anyway, that's a conversation for another day.

 

 

 

BETH

You bring up a really good point though, about the risk in that story, and that is I would advise people not to put any more money into the stock market or into any kind of investment that you can't afford to lose. There are no guarantees. You have to have the stomach and the timeline to allow for those assets to grow or to do what you expect them to do. You also have to have the expectation that if you're going to invest in something that has a high amount of risk, the chances of you losing all of your investment are also there.

 

AIDAN

In my case, with the Argentine bonds, it was over a very short time window. I think traditionally if you look back at the history of the stock market, there are plenty of graphs that people could search on Google to find a graph of this, you'll see that it's always increased, now, not necessarily on one day to the next, not necessarily one year to the next, but over a period of decades.

I'll have to fact-check this one, but I don't think there's been a decade where the value has gone down at the end of the decade to where it was at the start of the decade. I think your timeline is really important there.

Another thing that you mentioned or also alluded to was that everyone is going to have a slightly different plan. Are you planning on needing some money for your kid’s college education in ten years’ time or your own retirement? And then if it is for your retirement, how much money do you actually need? Because there are so many different ways that you can kind of mold or shape a stock portfolio, no two people should ever have the exact same plan.

With that in mind, where does someone start? If someone is listening to this, how do they figure out where the best place to start is?

 

 

 

BETH

Yeah. This is such a great question and I could probably go on for hours. If I go on for too long, just cut me off.

You're right. Everyone's situation is different. I think the best place to start is to figure out, like we said, what is it that you're trying to accomplish, and what is your relationship with money? If your idea is that this is going to be a super short-term window, very likely you're better off owning things that can be highly liquid, aren't going to have a lot of volatility, and you're able to get the money back with a nominal rate of return because you need it in such a short amount of time, things like treasuries, high-yield money markets, although right now in the last couple of years we haven't had a whole lot of interest being paid on those, there probably will come a time again where we do get interest on treasuries and short-term bond yields again.

And then, of course, as we talked about, there are usually short-, mid-, and long-term goals, and those have a time horizon attached to each one of them. We're also looking at things like how much do you have in income? How much do you need to take out of the portfolio as an income?  Are you still working and contributing to the portfolio or are you literally setting it up so that you can start taking an income stream out of it? 

In our case, at Creative Planning, we build out an individualized customized plan for every client so that we can see exactly those things. We can ask all of those questions around the short-, mid-term, and long-term goals. How much income are we contributing, if any? Are we adding to the portfolio to aggregate or accumulate, rather into the portfolio, or are we taking it out as a source for a new income, like a paycheck when we retire?

I kind of look at all of this as money is simply just an exchange of energy. If you kind of think about different people have values attached to what they want that money to do for them, and they also have kind of an interest in seeing that money get exchanged for a risk-return profile, I think if we come at it with that way of what do we want to exchange the money to do for us, it becomes a lot easier to, I think, sometimes separate yourself emotionally from what is the end goal and how do you achieve it.

I find a lot of times working with families where there's a lot of emotion tied to what's happening in the day-to-day market, and there are a lot of ways to kind of mitigate some of that emotion by having a very solid plan in place and also a discipline with either yourself, if you can do it, or an advisor who's coaching you through the ups and downs in the market.

I think one of the easiest ways to get started is to buy low-cost, really well-diversified index funds. You can go out, let's say, if you have less than $50,000, one of the best ways to do that is simply to just buy the broad-based market. You're going to get exposure to the US. You're going to get exposure to emerging markets like Argentina, Brazil, and Mexico. You're going to get exposed to things in China, and India. Those are all emerging markets. You're also going to get exposed to really well-developed markets like Australia, the EU, and the well-established Middle East. There are all those kinds of elements to the portfolio.

You're also getting exposed to small-cap, mid-cap, and large-cap stocks, and you're getting exposed to growth and value. By just having that broad-brush approach, once you kind of hit the $50,000 US dollar level, I would say that's when you can start to hone in and focus a little bit more on what is it exactly you want to accomplish with those funds and you can start to focus in on are you willing to take a little bit more risk in certain areas of the market? Are you willing to take a little bit more timeline to achieve that return? And so again, someone studies this all day, every day, they can help you start to figure out how to achieve those things.

 

AIDAN

Yeah. I think one of the best things that I did was to seek help and to seek advice. I think if someone is listening to this and thinking, “Oh, my God, it sounds interesting, but I still feel like I'm out of my league here,“ you can seek local advice about these kinds of things.

Most banks these days are set up to be able to help you with your investing. You can also look at creativeplanning.com. Creative Planning works with different types of people and banks work with different types of people. I think just do your due diligence and look for experts in the space that can help guide you along because even if there are fees associated with that, it almost always pays off.

A simple way to explain this is one of the things that any expert who's really worth anything in this space should do is walk you through building out a plan. This is one of the things that I did with Creative Planning, and it wasn't just about building out a plan for my investment. It was about gathering together an understanding of the assets that I've got at the moment, and potential risk factors. Do I have insurance over all of my most important assets? Do I have a will set up, and so on and so forth. Working with experts in this space can be really valuable and definitely worth every penny in my experience.

Then hopefully, if you're working with those experts, or even if you're not, developing some kind of scaffolding or some sort of framework that you can hold onto, especially I think, in times of turmoil when the market is going up or down, one of the things that I've loved, and John Bogle has done a lot of writing on this, a lot of people have, but simple things like dollar-cost averaging, which is where you commit to investing a certain amount of money on a regular basis, regardless of what the market is doing. For example, if the market is skyrocketing, you might put in $1,000 a month, and if it's plummeting, you keep on putting $1,000 a month in.

Just by doing that, you can kind of remove yourself from the emotion and say, “Okay, well, my plan is to put in $1,000 a month or $500 a month or whatever it might be,” and you've really removed yourself from the emotion. I also find in my own personal experience that investing in the likes of index funds helps me remove some of the emotion as well because if I see that a stock like Apple or something is plummeting, I'm not personally thinking, “Oh, my God, my wealth is diminishing before my eyes” because it is spread out across the entire market.

Just a couple of thoughts there. Have you seen some of these automated apps that are out there, Beth? There are a couple that come to mind. One is called Acorns, another one is Stash, I think. You can set these up too if you buy something at the supermarket and it cost you $13.10, you can set it so that it will round up to the nearest dollar and that rounding up will automatically go into a fund of some kind. I thought that's a really cool thing for people who want to just dip their toes in the water to have a look at that kind of a thing because it's not a huge amount of money.

 

 

BETH

Yeah, definitely. And I think you bring up a really good point, which is that sometimes I think people are really intimidated to try and figure out all the ins and outs and nuances and feel like they need to have a huge body of knowledge before they get started. I would encourage you to kind of flip that model on its head and say, just get started first. Just commit to $20 a week or whatever. You can afford to get your portfolio and get that couple of contributions in there. You'll learn over time by listening to podcasts like this, going out, and reading a whole bunch of good books. We can put a couple of really good books in the show notes that I would recommend. People that are trying to get started in investing would think about and just get started, get off that starting block and try not to be too intimidated by the process.

Just doing that, you will be ahead of 80% of others who kind of sit on the sidelines and wait to figure it all out before they get started.

 

AIDAN

You know, one thing that I really regret, and the more I think about it, the more it annoys me. But I remember when I was about 14 or 15 years old, I had this idea that I wanted to learn about the stock market. I want to see what this is all about. I walked into my local bank and sat down with a banker and I said, “I'm interested in some money in the stock market.” She almost looked at me and laughed, and maybe it was because she didn't have any money in the stock market or she was like, “What's this 14-year-old care about this kind of a thing?”

I ended up not doing it. As a young teenager, I wasn't guided along, “You could do this or you could put a little bit of money into this.” I already had a part-time job while I was working at school and stuff, and I just think, wow, that was quite a long time ago. Imagine if I had been dollar-cost averaging and even like $100 a month as a teenager or something, or just the learning that you could have got by dipping my toes in the water. You really can't replicate that with any amount of reading or studying or listening to podcasts. When you actually go and open up a brokerage account or start talking to someone and actually get money in the game, that's where you can really learn a lot.

In fact, a completely speculative example here, but recently I got tied up in all the hype and hoopla around crypto and put some money into crypto. I'd never done that before, and thankfully, it wasn't a huge amount of money for me. But by just putting some money into that, I was able to learn so much more in a couple of weeks than I had learned in the last five or ten years hearing other people talk about it.

Anyway, consequently, I basically lost all of that money. I've lost money with Argentine bonds, and I've lost money with crypto, but I'm doing really well with property and stock market shares as well. I'm talking about mistakes. I think that's a good way to segue into this. One of the things that comes to mind, and I think about great investors, is that they always try to make a special effort not to lose or to really mitigate their loss.

An example that comes to mind here is if you've got $1,000 in an investment and the investment drops by half, you've got $500 left. You've had a 50% drop, but to get back to where you started, you need the investment to double, so you need a 100% gain. When I understood that, I was like, wow, to be able to claw my way back from a big loss is going to take a lot more work. I may as well try to mitigate loss, which is one of the reasons why I love these index funds.

But talking about mistakes, what are some of the mistakes that you see people committing, either novices, newbies coming into this, or even more experienced people?

 

BETH

Yeah, and that's a great question. Reiterating, don't invest any more than you can afford to lose. Be very clear about the amount of time that you're willing to invest those funds before you expect to use all or a portion of those funds.  That timeline is really important because that will give you the discipline to keep it invested, knowing that the expectation could be ten years before you should be able to achieve that kind of expected return.

Try not to time the market or stock-pick your way into the return. Performance on picking the right stock is a loser's game. It's very well researched, and there are tons of…

AIDAN

I just found my notes on that. By the way, I've got some notes here, and the statistic I found was 2/3 of the stocks underperform the market and only one-third outperformed the market. If you're rolling a dice, picking a stock, and you've got no other information, you've probably got a 66% chance that you're not going to do as well as if you just purchased the whole market.

What did you mean by market timing? Just so that everyone understands that.

 

BETH

Yeah. Essentially what you're trying to predict is that you can time when the market's at a high and when the market's at a low. In order to make that work out for you, it's two decisions you have to make. You have to hit it right at the high and get out, and you have to hit it right at the low and buy-in.

Obviously, I'm sure everyone's heard to buy low,[and] sell high. That's the idea. But the challenge is to be able to do that time and time and time again throughout your lifetime because, for most of us, we're not investing for a two-year window. We're investing from the time we start making money to the time we retire and then pass away and hopefully pass on what we've made toward the next generation and the next generation.

If we've done it right, we're able to do this over and over again. Very well-researched that market timing, trying to choose the buy in time and the sell time, very challenging to do accurately and overtime. A better way again to do this is to, as you talked about before, choose the plan, choose the timeline, and then start to invest toward a continuous contribution until you have to get to a point where one of the goals is to try and use it as a replacement for income, then how do you start distributing that in a really tax-efficient way?

 

 

 

AIDAN

One of the other things that I have read a lot about and have even noticed in myself on many occasions is getting in my own way, getting overconfident, and too bullish about something. I experienced this to some degree with crypto, for sure, where I had some quick early wins and I was like, “Okay, I'm going to put some more money in this. I'm going to put some more money in this,” or also getting experience loss aversion, so being too afraid that something is going to go wrong and I'm going to lose money. Warren Buffett once said that it's wise for investors to be fearful when others are greedy and greedy when others are fearful. That's something that's really stuck with me. But I think a lot of people are sometimes their own worst enemies, and I've seen that one play out quite a few times.

The other thing that I've heard a lot about is just getting the wrong kind of advice. If someone is looking to work with a financial advisor or a wealth manager, what are the types of things that they should be looking for?

 

BETH

Yeah, this is an important one Because a lot of the language around this industry can be somewhat misleading. If you say financial adviser or wealth manager or broker or financial planner, I mean, all of those things sound like a good person that has all the different knowledge to be able to help you with investing a portfolio. The key is, at least here in the United States, not all financial advisors are created equal.

Not all of them have the same level of education or credentials or certifications or your best interests at heart. I'll just kind of distill it to one of the first questions I would ask if you're thinking about working with an advisor: what credentials, what schooling do you have? What kind of certifications do you have?

Here in the United States, again, Chartered Financial Analyst, CFA, a certificate holder for a certified financial planning designation. That's a CFP, CPA. Typically, they're very well versed in tax and accounting. All of those folks are a good baseline. They also follow a fiduciary standard, meaning they are by law obligated to do what is in the best interest of the investor, the client. They're not allowed to put their own priorities ahead of the investor or the client.

And then I would also say, what are the fees involved? How much are you going to make if you advise me? Is it on a fee basis? Is it on a commission basis? Is it just a flat fee to do a plan and then manage the assets on my own? Those are all really good questions to ask.

 

AIDAN

I think the one around fees is really important because if we're looking at maybe getting a 7%, 8%, 9%, who knows? 6%, whatever we're looking at getting as a return there, if we didn't have to subtract a couple of percentage points off for fees or sometimes more depending on how it's done, there are oftentimes hidden little fees that you might not be aware of that occur at different points of trading and so on and so forth. You really need to be careful because you might have a portfolio return of 8%, but you might only get 5%. I think that's a big one.

Making sure that you are working with people that are aligned is really important as well. Completely unrelated to the stock market here, but we're working with some architects here in Argentina at the moment. The fee structure that they've got is based on a percentage of how much we spend. They are incentivized to recommend that I buy the most expensive lighting and the most expensive flooring and the most expensive everything instead of just going out of the way and being incentivized to make sure that I get the best of everything and that I'm happy.

That's happening in office remodeling that I'm doing here and some remodeling that we're doing in my home as well. That's not the kind of thing that you want to happen to you when you are investing. You want to make sure that your money is protected. I think the comment about a fiduciary is just so important. There are so many cowboys out there and you want to get advice from people who are qualified to give advice. You don't want to be grilling some steak with your brother-in-law and finding out that you should be putting thousands of dollars into something which is based on absolutely nothing.

We've covered some good ground here. I would love to ask just a couple of final questions here. I'm really conscious of the time here. Educating people around this, do you do anything with your kids? I know you've got a few kids. Do you talk to them about investing, or have you got any thoughts about how people who are parents could start to talk to their kids about investing? And if you've got really little ones, something that I do, and I'm still learning in this, so I'm sure there's a lot more that I could do, but I try to talk about money with them. Today, I was explaining to my five-year-old the concept of renting versus owning and where that money goes and what you can do with the money and so on and so forth. But even older kids, teenage kids, things like that, have you got any ideas around teaching and helping kids learn about this stuff?

 

BETH

Yeah, I feel very strongly and passionately about this because I think it's important to demystify how money works from very early. I think the earlier you can start to create this very healthy relationship with money, that money is not a bad thing. It doesn't make people bad because I think in some families, it's almost taboo to talk about it. You can't fault yourself if you get to the point in your life where maybe you're 30, 40, or 50 years old and nobody really taught you about money, they don't really teach it in public schools so much. Maybe one personal finance class, which in my opinion is just nearly not enough.

But I think yes. I mean, I have four teenagers, three in college, one in high school, and all along we talk pretty openly with them very similar to how you're talking about it at different stages of their growth and development, which is the idea that every time you get a paycheck, any time you go out and mow the lawn or do chores or anything like that, a portion of that is for saving. You pay yourself first, at least a portion. I say 20%. Some people would say 10%, but I like to teach them to really pay themselves first and save. So, 20%, pay yourself. Then you got to look at one of your fixed expenses, your rent and your food and your gas and your insurance and all those things, right? To kind of walk them through, almost a mimicked, watered-down version of our bills, and so they kind of understand, “Okay, if I get $1,000 a month, I got to portion that out so that I can manage my budget.” Then finally, for us, giving back is a really important component of that energy. You're exchanging energy out there. I think by giving back to your community, you're showing them a really important part of what money can do for the community, which is build people up who are in need.

That comes back to you full circle at a later point. Usually, when you're helping out people in need, their response to that gift is to say, “Okay, I'm going to go try and make myself better, learn more, and I'm going to give back to my community when I can afford to do so.” Those are kind of I'd say the basics with kids. What I find is the more time we spend learning about that healthy, positive relationship with money, the more they ask questions and seek knowledge and they want to find mentors to help them do different things that they're interested in. All of that, I think, is a positive approach to this next generation being very fiscally responsible with what they're going to be tasked to do when they become our age.

 

AIDAN

I remember I would have been seven or eight years old, and I don't know how I remember this, but we used to have these little bank books. This was before the age of online banking. It was a little bank book that I would fill out and at school, at primary school, elementary school as you call it, I would put, in my case, like $0.50 would be the deposit each week, and I would get the bank book back and I'd get some kind of a little statement once a month or something. I remember sitting down and seeing that there was some interest that had occurred there, and I'd made some extra money. How did I make those couple of cents, kind of a thing? I think that kind of a thing is really invaluable, and hopefully, I would hope that in the future the schools do put a lot more emphasis on this because as you say, there's so much taboo around it.

Thinking back to my high school education and even university education, virtually none of this stuff was taught to me. It was all self-taught. If you're not someone who is a self-starter or don't naturally sort of drift towards learning about this, then I feel like society sort of could do a lot more to help. I really love your thoughts there.

The last question I've got for you here today, Beth, is any books that you would recommend? I can see one on the bookshelf behind you. People are watching the video version of this.

One of my favorite books is on the bookshelf, Five Mistakes. That's from Peter Mallouk, Five Mistakes Every Investor Makes and How To Avoid Them. That's by Peter Mallouk, who is the founder and I think president of Creative Planning. I love all of his books, by the way. I will let you get a mention in here in just a second, I just want to make sure I don't forget. In fact, one of the only podcasts that I listen to is called Down the Middle by Peter Mallouk, The Creative Planning podcast, essentially. That's another good one to listen to if you just want some pragmatic advice that's quite timely because it's always related to what's going on in the world. You showed us one book there. Any other books that you would recommend there, Beth?

 

BETH

Yeah, I think just productivity, all of us are always trying to seek ways to maximize our time and productivity, it’s by Brian Moran, The 12-Week Year. I absolutely love this. I adopted this about two years ago, and for pretty much all projects that I'm a part of, I ask our groups to consider operating this way. It's essentially just breaking down your year into four 12-week years. I just find that the groups I'm a part of now, if they do adhere to that kind of strategy and planning, we execute far more than what I'm used to in doing it another way.

 

AIDAN

One thing I learned, because we had Brian P. Moran, the co-author of the book on the show a few episodes ago, and he's actually got a 12-week year system which is for teams. I've always used it on a personal level, but he told me that they do have a system that is designed for teams. That's something I'm going to look at. That's an absolute favorite of mine.

Any other books or resources?

 

BETH

The Dip by Seth Godin.

 

AIDAN

Oh, I love that one.

 

BETH

This is all about teaching you when to quit and when to stick. It's just kind of a really great, very quick read, maybe, I don't know, 140 pages or something like that. All of us, again, when you're trying to think through what ideas are worth continuing on in projects and what things you got to just say, “Look, this isn't working. I got to ditch it,” and having the courage to say it's okay to try a whole bunch of stuff, but A) we don't want to get distracted, and B) we want to decide on things that are going to pull away from or run us down a rabbit hole that isn't going to give us anything we're looking for. You've got to just ditch it and move on. Sometimes I find that's really difficult to do.

 

AIDAN

Absolutely. I agree with that. The Dip is a book that I read a few years ago, but the concept of the message there has really stuck with me. It's one of those things that I read at once and the penny dropped and I was like “Oh wow. Yeah. I can totally relate to that.”

Thanks for that. A couple of recommendations from my end. I think anything that you can find from John Bogle who is the founder of the Vanguard Group and he's got a book called The Little Book of Investing. Money: Master the Game which is by Tony Robbins. A video recommendation, he's also got books as well, but How the Economic Machine Works by Ray Dalio. He's got a couple of good books as well. They are quite dense, I will say, but he does have a sort of a cartoon-style book. It's called Principles…

 

BETH

… actually came out with a new updated data and it's excellent. The Principles, yeah.

 

AIDAN

That guy is incredible. Anything from Ray Dalio, but quite dense, and I do like the video that he put out on how the economic machine works and his cartoon style book on principles. I think that really gets to the point without getting stuck too much in the weeds.

 

That's a wrap. Thank you for tuning into episode 23 of The Growth Booth. Sincerely hope that you've taken a few nuggets out of this and if nothing else just find a way to dip your toes in the water. If you only want to do it with a few bucks and get an app like Acorns, which will do it automatically for you, or something like Stash, which will also do it automatically for you, or just go and speak with someone locally and get some advice about how you can start getting some money in the game because you need to be in the game if you want to be able to win the game.

So Beth, thank you once again for being here with us today. Real pleasure to have you on the show and this is an episode that I've been looking forward to doing for quite some time so I'll make sure that we include in the show notes the links back over to creativeplanning.com a couple of Peter's books there and the other resources that we've mentioned.

 

We will see you in the next episode of The Growth Booth.