Looking to build wealth? Listen to this week’s episode to hear some tips from Josh and Austin that will get you on track! They discuss the value of a financial advisor, the difference between owning and loaning, risk, the importance of diversification, and fear. All of this and much more, on this week’s episode of The Invested Dads Podcast.
Main Talking Points
[0:56] – The Value of a Financial Advisor
[6:08] – Owning vs Loaning
[10:00] – Risk
[13:41] – Dad Joke of the Week
[15:27] – Wealth Over Time
[21:23] – Diversification
[25:18] – Fear
Links & Resources
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, hey, hey, welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. Today, Josh, we’re going to be talking about building wealth.
Josh Robb:
That’s right. So we will find out whose house has more money.
Austin Wilson:
Like building wealth?
Josh Robb:
Yeah. Building’s wealth.
Austin Wilson:
Yeah. So actually, let’s aim this conversation at discussing why building wealth is actually super simple.
Josh Robb:
Super simple.
Austin Wilson:
Super simple.
Josh Robb:
It seems complicated.
[0:56] – Value of a Financial Advisor
Austin Wilson:
Everyone wants to think it’s complicated, but we’re going to make it sound like the easiest thing in the world. So let’s start by saying that, we recommend, and we think it’s very valuable and worth the little cost associated with it, we think it’s worth it to work with a financial advisor.
Josh Robb:
Yes.
Austin Wilson:
So yeah, Josh, not really talking exactly about whose house is more wealthy because building wealth is, that’s funny. Good job. Good job on the pun. But no, we’re actually going to talk about how building wealth is really simple. It’s not a complicated thing, even though many of us have been led at some point in our lives to believe it’s a super complicated thing and it’s really hard. So that’s where we’re going with this, but first of all, Josh, where are we getting some of our inspiration from this?
Josh Robb:
Yeah. So here at our office, we did a book study together from an author, Nick Murray, and he has a book called Simple Wealth, Inevitable Wealth, and he’s had this out for quite a while and he just re-updated it a couple of years ago. And this is one where as a team, we went together and talked through the principles and concepts, but it’s a great book if you’re interested in checking out his thoughts on how to simply build wealth over the long run.
Austin Wilson:
Yeah, absolutely. So some of the points that we’ll be talking about are points from different sections of that book that we just found very valuable. So the beginning of the book talks about how it is valuable to work with a financial advisor. I mean, especially if you’re not a financial advisor. So Josh, that’s your neck of the woods, that’s where you call home. How would you describe the value of a financial advisor to someone who may not know?
Josh Robb:
Yeah, and I think one of the biggest misconceptions is you hire a financial advisor to beat the market.
Austin Wilson:
Right. Yeah.
Josh Robb:
And we get that conversation a lot, is, “Well, okay, are you consistently beating the market?” And that’s really not what a financial advisor’s there for. If we do end up beating the market, it’s because your goals and your objectives required you to invest in a way that through long-term consistent investing, you outperformed the average, which is the indexes. But really, a financial advisor is there to do a couple of things. The biggest one is help you avoid making mistakes. Now we’re not perfect, but we understand the big mistakes that usually happen in investing is due to emotions or trying to really outsmart yourself. Trying to time yourself in and out of things, trying to do things that really have a low probability of success.
So as an advisor, preventing you from making those big, big mistakes really is where most of our value comes from, because if we can keep you from selling when the markets are down, and locking in those losses and staying out of the market when it recovers, that alone covers our fees for years to come. And that’s, for a lot of our clients who have been with us for a long time, or anybody that’s been with a good financial advisor, that’s where the value is.
Austin Wilson:
Absolutely.
Josh Robb:
But on top of that, we’re there to increase your returns. Now, I just said, we don’t necessarily try to beat the market, but we’re there to increase your returns based on how strategically we’re investing you. So in other words, try to eliminate some of the things you may be prone to do, or encourage certain habits to get you a better result than you would have had on your own.
Austin Wilson:
Well, this is the classic example of the market versus the average investor, right?
Josh Robb:
Yes.
Austin Wilson:
So even being invested in the same vehicle, so just take a S&P 500 index fund versus the actual S&P, and someone doing it on their own has historically speaking, had a far, far, far, far less superior return in terms of percentage. And that’s because they’re not being told, “Whoa, whoa, whoa, things are down, this is not the time to just bail because you’re actually going to miss a nice return.”
Josh Robb:
Yeah. So we don’t try to, like I said, we don’t have a crystal ball, we don’t know what’s going to happen. But we do know historically what has done well and what will continue to work within our economy and within the world. And our goal is to just set you up on a plan and just be there to keep you on that plan. And that plan may change and adjust along the way as your goals go, but the overall concepts will not change. And that’s where we’re here to help our clients just to say, “Hey, remember why we did this? Now, that hasn’t changed? Even though you’re a little worried right now, that goal’s still out there, we need to keep doing what we’re doing.”
Austin Wilson:
And it’s probably also worth noting that most financial advisors are not portfolio managers.
Josh Robb:
Correct.
Austin Wilson:
So they’re picking investment vehicles that are being managed by people whom manage them.
Josh Robb:
Right.
Austin Wilson:
They’re not actually managing them, so the whole “beat the benchmark” thing, it’s irrelevant to them because that’s not their job. Their job is to help you meet your goals.
Josh Robb:
Yeah. And if you’re, depending on what your strategy is and what you’re trying to do, if you’re have a 30% waiting to fixed income, you’re not going to beat the market-
Austin Wilson:
No.
Josh Robb:
… there’s just no way. You don’t want your advisor trying to because you’re going to put you in stuff you do not want to be in.
Austin Wilson:
Exactly.
Josh Robb:
And so, yeah, just depending on what your objectives are, and what your asset allocation is, their goal is to just improve your returns by being smart and strategic about what you’re doing with your money.
[6:08] – Owning vs Loaning
Austin Wilson:
Exactly. Next up, let’s talk about, so you mentioned it a little bit, but fixed income is one sleeve, so that is one aspect of investing that people think about. The others is stocks, right?
Josh Robb:
Yes.
Austin Wilson:
Equities. And we’ve talked about this off and on throughout the podcast over the year or so that we’ve been doing this, but Nick Murray pointed out the philosophy that it is better to be an owner and not a loaner. So an owner, meaning essentially equities, you own stocks, you own portions of companies, versus a loaner, meaning-
Josh Robb:
Which is by yourself.
Austin Wilson:
Yeah. Versus a loaner, meaning-
Josh Robb:
Oh, no, not that type of loner?
Austin Wilson:
Yeah. That’s funny. A loaner meaning, you’re loaning your money to a bank, or to a company, or to a government with interest payments.
Josh Robb:
Yes.
Austin Wilson:
So two different ways to look at investing, people have very different philosophies on this, but the point of building wealth simply is to say that it’s better to be an owner of a company that’s growing and doing great things, and innovating, and taking market share, and doing all of these cool things, rather than just giving your money to someone for a small measly piece of interest in return.
Josh Robb:
Yeah. The big difference there is, when you’re an owner, you participate in the innovation, in the growth of that company. When you’re a loaner, it’s just borrowed money is the obligation, repay that borrowed money.
Austin Wilson:
Yep.
Josh Robb:
But when you have an ownership, you get to participate in the future, which is endless. The idea that if I find a company that is just innovating, and so creative, and solving problems that their future value or potential is just unlimited.
Austin Wilson:
Well that’s just, it’s-
Josh Robb:
And if I give them some money to get started, all they have to do is pay me back that money.
Austin Wilson:
Right.
Josh Robb:
But if I have an ownership in there, I’m on for the ride, I’m there to participate.
Austin Wilson:
And that’s exactly it, it’s about upside. So what’s your upside with a bond? Well, you’re going to pay for your bond and you’re going to get interest payments, but they still hold your initial principle amount. You’re going to get interest payments throughout, and at the end you’re going to get your money back for the bond. Okay? So your upside is, your interest payments essentially, unless interest rates go crazy and you sell before maturity, which we’re not going to get into that. But with a stock or any equity investment in general, you are like you said, you’re along for the ride, so as the company does well, you do well.
Josh Robb:
You do well.
Austin Wilson:
So if you’re invested in good companies, you’re going to do very well.
Josh Robb:
Yep. Or if you don’t know how to pick good companies, you’re invested in the index, you spread your risk out. And we’ll talk about that in a little bit.
Austin Wilson:
Yes. And that goes on risk, if we’re going to talk about risk in a little bit, actually, that’s one of the next things we’re going to talk about. But when your risk with the bond investment, you’re going to get your principle back with 99.99999% chance, unless the company defaults.
Josh Robb:
Yes.
Austin Wilson:
So you’re going to get your money back. So very, very, very, almost no risk. However, with stocks, the risk is that your principle, your initial investment amount, will go down. And of course, everyone, we’re understanding of that, but that is why that you’re being compensated for additional return as well.
Josh Robb:
Yeah. The day-to-day, the stock market, 50:50, you don’t know, it could be up or down. Month is about the same, right?
Austin Wilson:
Yeah.
Josh Robb:
You just really having a 50:50 chance.
Austin Wilson:
The longer you go out-
Josh Robb:
Yeah, the longer you have, the higher the chance of success. If you have 10 years, you have over 90% chance of earning money in any historically 10-year period. If you have 17 years, you’ve never lost money in the stock market, historically. So that gives you the opportunity to say, “If I can allow this company to do its thing, the longer I give it, the higher chance I have of earning money on this ownership.”
[10:00] – Risk
Austin Wilson:
Yeah. And this should be an especially encouraging, for those people with 10, 15, 20, 30 years of investing time horizon ahead of them, this should be a super encouraging to say that it’s not a guarantee, but historically speaking, those have been times where your wealth would have grown in the market. So we talked about risk a little bit, but I think that there’s a general misunderstanding of risk when it comes to investments.
Josh Robb:
My wife never understands that game. I always want to play with her, and she just, I don’t know if she doesn’t understand the concept of risk or what, but I love that conquer game. It’s awesome.
Austin Wilson:
Okay. So that game’s good, but I’ve really come to enjoy Settlers of Catan more.
Josh Robb:
That’s good, good game too.
Austin Wilson:
Do you play Catan?
Josh Robb:
Mm-hmm (affirmative). We should play.
Austin Wilson:
We should totally play Catan sometime because I will trade you some wheat for some sheep, and it’s just gone. It’s on.
Josh Robb:
You can get in arguments with your spouse pretty easy in that game. Yeah, so.
Austin Wilson:
So yes. Anyway, yes, risk. Now let’s talk about financial risk, and that’s really the risk of, so there’s two ways we’re going to talk about risk. So number one, let’s just get off the table that the risk really isn’t so much because of those longer-term returns that we had talked about, the risk isn’t as much about losing your money.
Josh Robb:
Right.
Austin Wilson:
The risk is actually need to be focused on outliving your money. And Josh, let’s talk about why the stock market has historically been the better way to grow and preserve your wealth, so that you don’t outlive your money.
Josh Robb:
Yeah. So what Austin is talking about is, the short-term risks, that volatility’s the better word for that, is not as important as the idea that, I may outlive and I may be broke before I’m out of time. And that is an inflation risk, or a purchasing power risk is another way of looking at it is, in other words, what I can buy today for $10, how many dollars do I need in the future to buy that same thing?
Austin Wilson:
Right.
Josh Robb:
And that’s inflation, that’s purchasing power, that’s okay, easiest way is to talk to one of your grandparents or someone in that generation and say … they’ll get on that whole, “When I was a kid-”
Austin Wilson:
Yeah. “What did a can of soup cost when you were a kid?”
Josh Robb:
Yeah, “It used to cost me X amount to do whatever.” But that’s the whole concept, inflation is here and it goes up over time. Everything, the price of everything goes up over the long run. And so that’s the bigger risk is, I may have a million dollars now and be like, “I’m set, I’m a millionaire.” Well, what a millionaire can buy today, in 30 years it’s not going to buy the same thing and that’s going to be the problem. And so that’s the big risk. And when you look at investing, historically speaking, stocks are the asset class that consistently outperforms inflation.
Austin Wilson:
Right.
Josh Robb:
Bonds, cash, they do not historically hold up to inflation.
Austin Wilson:
And this is why you can’t, I’m not saying you can’t, you have to put a lot of actual cash into a savings account, but most people wouldn’t be able to just shove money into an account and then get a million dollars, and then retire in cash.
Josh Robb:
Yes.
Austin Wilson:
Because that cash is getting less and less valuable for what it buys every single year, and historically speaking, that’s been 2, 2 1/2, even 3%, depending on what timeframe you’re looking at. A little lower as of late. But if you think about going forward, especially things like healthcare, those are things that are actually increasing faster than that, and becoming a huger portion of people’s budget as they get a little older. That is something that is going to eat away at your purchasing power in retirement, and historically speaking, stocks are the way to grow your money to be able to cover that.
Josh Robb:
Right.
Austin Wilson:
Yeah, let’s just take the misunderstanding of risk because like we said, the stock market can be a bit volatile and on any short-term period, exceptionally volatile. But the longer we go out, the less likelihood of down markets we have. So as long as we have a longer time horizon, volatility really is a non-starter.
[13:41] – Dad Joke of the Week
Josh Robb:
Yep. All right, let’s do a dad joke.
Austin Wilson:
Oh, yes.
Josh Robb:
I’ve got a dad joke for you, and this one’s for you. You like motorcycles?
Austin Wilson:
I do.
Josh Robb:
I know you do, you like motorcycles?
Austin Wilson:
I do.
Josh Robb:
And it’s wintertime. So-
Austin Wilson:
These two typically don’t go together.
Josh Robb:
Yeah.
Austin Wilson:
So I used to be really desperate when I was younger, to go riding as early as possible, because I was young and dumb. So I would like, March comes around and you’re like, “Let’s go. I’m going. I’m going.” So I remember one time I got on my motorcycle, it was March, the first motorcycle ride of the year, and got on my motorcycle and rode it over to my in-law’s house. And it’s only 10 minutes, and I got there, it was 30 something degrees outside-
Josh Robb:
Brutal.
Austin Wilson:
… and my hands were absolutely horrible rocks of cold frozen-ness. And I just was saying, “I’m an idiot. I’m an idiot. I’m an idiot.” So anyway-
Josh Robb:
Because you got to go home too.
Austin Wilson:
Well, no, I left it-
Josh Robb:
Oh, you left it there?
Austin Wilson:
… there and Jenna came and got me, or took me home, or however it ended up working.
Josh Robb:
She just shook her head the whole time.
Austin Wilson:
I was sitting on the couch under 10 blankets with a cup of tea, or something like that because it was that bad. So anyway, that was a little sidebar.
Josh Robb:
So, do you know what you call it when you have motorcycle stunts in the winter?
Austin Wilson:
Okay, so no, this isn’t your answer, but they do put snowmobile ski on the front and sled things on the back of dirt bikes-
Josh Robb:
Oh, yeah?
Austin Wilson:
… and you can ride them in the snow.
Josh Robb:
That’d be cool.
Austin Wilson:
Oh, I want to do it.
Josh Robb:
So, just the spin of the wheel gets you the traction?
Austin Wilson:
Yeah, it’s like a track on the back, but like a sled on the front, so I want to do it really bad.
Josh Robb:
Interesting. Well, what you call motorcycle stunts in the winter, well, it’s just wheelie cool.
Austin Wilson:
It’s wheelie cool?
Josh Robb:
Wheelie cool. Wheelie cool. That’s-
Austin Wilson:
That was like, why was Frosty the Snowman so popular?
Josh Robb:
Because he was-
Austin Wilson:
Because he was really cool.
Josh Robb:
… really cool? Yeah.
Austin Wilson:
Okay.
Josh Robb:
Always works.
[15:27] – Wealth Over Time
Austin Wilson:
So let’s talk about what it takes to make wealth happen over time. And what it really comes down to is behavior. You can make yourself wealthy given time and effort.
Josh Robb:
Yes. Yep.
Austin Wilson:
Right? So it’s really about making choices. So Josh, what are some choices that people can make that are going to set themselves up for success in the future?
Josh Robb:
Yep. And we’ve talked about these in some past episodes, but the first one is, set your goals. And we’ve had, again, a lot of topics along that route, but you need to know what are you trying to achieve? What is your end goal? What is the timeframe? What am I going to get to? Whether it’s retirement, how much do I need? When is it going to happen? Those types of things. Then if you know your goal, then you work backwards and say, “Okay, what do I need to do to get there?” So if I need, again, back to my example, a million dollars when I retire, how can I get that million dollars at that point? How much do I need to save? What is my assumption on returns, all that stuff. They need to know backing into it, what do I need to do?
And then dollar cost averaging, we’ve talked about that before, but consistently adding is key over the long when it smooths out returns, of adding when it’s up, adding when it’s down, smooth things out, but I need to be adding, I need to be consistently adding. And then the last one is, when I do retire, I need to track my spending because overall, what I take out of the portfolio has a big impact on my success.
Austin Wilson:
Right.
Josh Robb:
What percentages…
Austin Wilson:
Oh, yeah. If you leave more in there, of course it will last longer-
Josh Robb:
That’s right.
Austin Wilson:
… and continue to grow.
Josh Robb:
Yeah, but how the withdrawal matters. If I start out at a high rate and then have to adjust down, or start low, adjust, there’s all these factors that matter when it comes to those withdrawals.
Austin Wilson:
Yeah, absolutely. I think that another key, and you hit it on the head is, dollar cost averaging was something you mentioned, but I think that’s an example of essentially automated saving.
Josh Robb:
Yes.
Austin Wilson:
And automation is a beautiful thing, but really, it was a lot harder to do 20, 30, 40, 50 years ago. You’re mailing in checks manually, or doing X, Y, Z, it was really hard. And really, nowadays you just set it up to automatically once a month, or every two weeks, or whenever you get paid, either pay things off is one way to do it, but save. So automatically set that contribution to your Roth IRA, or have it set up through payroll deduction to your automatic 401k contribution every paycheck. Automate your savings based on the goals that you set, and how much you and your financial advisor calculated how much you’ve got to do, to retire at X age and be able to have a sustainable withdrawal through retirement. So, automation is key there.
Josh Robb:
Yeah. And along with that, Nick Murray in his book, he tries to boil things down to be very simple. And so this is what he said about, in a sense, averaging in or timing into it, you’re just consistently doing this no matter what. He says, “Buy when you have the money, sell when you need the money, everything else is market timing.”
Austin Wilson:
Yeah.
Josh Robb:
If you just simplify it all the way down is just, when I have money, I invest it, when I need money, I take it out. And that’s, again, from our standpoint, it’s not like, I’m a 20 year old, I need money, I’m going to go to my 401k. It’s, while I’m accumulating, I’m adding money in, when I’m in the de-cumulation stage, or the withdrawal stage, I’m taking money out.
Austin Wilson:
Exactly.
Josh Robb:
That’s the concept. Everything else, don’t worry about it, just do your job.
Austin Wilson:
And an interesting thing about dollar cost averaging specifically is that, so say you have, just for example, you’re in a large-cap US mutual fund, it starts the year at $50 net asset value. And if you want to know what an asset value is, we have a episode on mutual funds versus ETF, but it’s essentially a $50 a share, we’ll call it that. And at the end of the year, it’s also at $50 NAV. But in the middle, it dips to 20 and then it gets back up. So on paper, if you would’ve put no money in the entire year, and you had the same amount at the beginning of the year, you’d have the same amount at the end. Right?
Josh Robb:
Yep.
Austin Wilson:
But if you’re chipping away and putting it in every month, a couple hundred bucks, whatever it is, you actually made money because you bought it as it went down, and you were still buying it as it went up, you’re buying it the whole time. And even though throughout point A to point B the dollar price didn’t change, you had a positive return.
Josh Robb:
Yeah.
Austin Wilson:
And that’s how you smooth out your returns over time because you’re buying it when the market’s up, and you’re buying a little less, and you’re buying it when the market’s down, you’re buying a little more, but you’re buying all the time. And over time-
Josh Robb:
It removes the risk of trying to be perfect in getting the money in.
Austin Wilson:
You can’t.
Josh Robb:
You can’t, and that’s the key. And no advisors should claim to be able to perfectly time you in and out of the market.
Austin Wilson:
If they do, run.
Josh Robb:
Yeah. It’s the idea of, we will set a goal, we will set a plan, and we’re going to stick to it. So maybe the plan is, hey, I get this lump sum. Now I know historically, putting the money in right away gives you the highest chance because just three out of every four years is positive in the stock market. But for a lot of people it’s just that, again, that fear and that timing. It’s just, then we’ll put a plan, three months we’ll get the money in, six months we’ll get the money in. Whatever it is, we’ll add it in consistently, we’ll average it in for you and it’s the same concept.
Austin Wilson:
And I guess one more thing on the behavioral side of things is that it’s, let’s not forsake that little things add up. So if you can control some of your spending a little bit more, especially building good spending habits the younger you are, that are going to stay with you the older you get, that is going to actually probably have as big of an impact on your overall situation because your lifestyle is not going to creep up, and then you’re not going to require as much money to pull out of your investments when you retire. So the saving side of things is really important, but the actual conscious spending side of things, especially while you’re young to build those habits, is very important as well.
Josh Robb:
Yes. That is the bigger impact in a retirement plan is, what is your spending need in retirement, less … it’s a bigger impact than what savings is.
Austin Wilson:
Right.
Josh Robb:
You’re right, it is a big deal.
[21:23] – Diversification
Austin Wilson:
So diversification, that’s the next thing we want to talk about. I mean, it’s just probably common sense that it’s a good thing to have a diversified portfolio, but that can mean a lot of things to a lot of different people. And I want to talk about two ways to look at that, and two things to really avoid. And we’ll talk about things that you should have in your portfolio also, but let’s talk about over-diversification for one and-
Josh Robb:
Can you be over diversified-
Austin Wilson:
And-
Josh Robb:
… that’s a good question?
Austin Wilson:
That is. So I’m going to say, “Probably.” Because if you’re over diversified, you’re spread out into too many probable things that aren’t really helping your goals over time. So maybe you’re into things that you shouldn’t be in at your age or whatever, or the more different things you’re invested in, the more diluted the potential returns are going to be if you’re in good things to begin with that are going to go up over time. And so, that’s over-diversification. What are some other thoughts on over-diversification there?
Josh Robb:
Yeah. And again, Nick Murray, he says it this way, “Owning nothing by owning bits and pieces of everything, you become a collector instead of an investor.” So again, you’re just accumulating a bunch of different things. They may even be doing the exact same thing and you’re just then compounding fees, and costs, and stuff along the way. So yeah, you’re right, you could have too much and be spread so thin that you really can’t reap those rewards for all your effort in investing.
Austin Wilson:
Exactly. The flip side of that is under-diversification.
Josh Robb:
Yeah.
Austin Wilson:
Suppose you are all in on, okay, there’s a couple examples are coming to mind. Suppose you are all in on tech stocks in 1999 because you-
Josh Robb:
Yes.
Austin Wilson:
… and it made you a millionaire-
Josh Robb:
Yes.
Austin Wilson:
… and that’s all you had? But over a short period of time, it made you on paper-
Josh Robb:
A ton of money.
Austin Wilson:
… ton of money. You were under-diversified because all your money was in tech and then your portfolio exploded in a bad way. It just went to crap. So that’s one example of over-diversification is over diversifying into one part of the market, but another under-diversification would be if you’re only in large-cap US stocks. So historically speaking, large-cap US stocks have had a good risk reward relationship. They’ve been a little bit less volatile than international, or emerging markets, or small-cap stocks, but they also over time have had a little bit … because of that less risk, they’ve had a little bit less return over time.
So, one thing Nick Murray recommends and that I would recommend as well is, that there should be different buckets in your investment strategy. And when you’re looking specifically at that stock section we’re talking about, large-cap US stocks are very valuable and we think that should be a good core of that portfolio. But it is not to say that you should not have exposure to smaller-cap US stocks, or to international stocks, or to emerging market stocks. Because all of these different things in different times of the economic cycle, and in different market environments, are going to have their day, and all of these are going to underperform the others in other days. And if you build a portfolio that has the components of all of those, you’re going to have a portfolio that can sustain itself in different cycles.
Josh Robb:
Yep.
Austin Wilson:
Oh yeah, don’t be under diversified.
Josh Robb:
Yeah. You need to be spread out where one of your holdings cannot drastically impact your overall success if it goes bad. That’s how you know you’re diversified. And that’s the key is that if one of these decision doesn’t play out like you think, will that drastically alter my end result? And you don’t want that. You don’t say, “Okay, I have five stocks, I sure hope they all work because if one doesn’t, I’ve got a good chunk of money in that one.”
Austin Wilson:
Right.
Josh Robb:
That’s not diversified.
Austin Wilson:
Absolutely.
Josh Robb:
So, you want the point where you say, “Okay, this is spread out enough where if something struggles, I’m still okay.”
[25:18] – Fear in the Stock Market
Austin Wilson:
Let’s go the big picture here and so, obviously we’re focusing today on investing specifically in the stock market and how that is the best way to build wealth for the long-term.
Josh Robb:
Yes.
Austin Wilson:
What if you have the fear that stocks are not always going to be there for you?
Josh Robb:
Yeah. So there’s always this panic or fear that, what if? And there’s always a, what if, to anything going on. If you look back on the stock market, the S&P 500 and you just look at headlines that were going on during the whole S&P 500, there’s always something to be worried about. There’s always something going on, a war, an economic issue, just concerns all across the board. Historically speaking, if you look back at what stocks do, their ownership and companies, like we’ve said in the past, and that’s what you’ve got to remind yourself is, do I think these things that I own, that I’m an owner in, are going to zero? Are every company that I own. So if I own the S&P 500, are 500 of these S&P 500 companies, are they going to zero? Are they going bankrupt?
Austin Wilson:
It seems unlikely.
Josh Robb:
Yes. And so that’s, again, that worry, that fear is, could they go down in value? Yes. Could they be down for a while? Possibly. But in the long run, does the ownership of companies who are innovating, growing, and making things, have the best chance of getting me to my own end goals? Yes. I can’t think of anything else that would be a better job.
Austin Wilson:
Yeah. And I think it’s probably just worth pointing out that stocks and the US stock market specifically, is what we’ve got the best data on here anyway. US stocks have done well over long periods of time historically, and that is not a guarantee that they will going forward, but because they always have, we can only assume they always will. And that’s because underlying the actual stocks is an overall growing economy. And we have had, you know there have been periods where the economy has not grown, but it was always followed by periods where it has. And that is something that is just fundamentally how our capitalist system works. We have an economy that is set up to grow over time, and we can only assume that it’s going to continue to grow over time as well.
So that’s why we can remain bullish no matter what is happening on the long-term picture of, A, the economy, but B, how that flows through to equities, and that cannot always be said for debt. That can be said for equities.
Josh Robb:
Yes, definitely.
Austin Wilson:
So, that’s what we’re all about. And I think that that’s just something to keep in mind is that, keep the long-term picture in mind. Is the economy, and therefore the companies in the economy that are making things happen, is it going to be bigger and better in 30 years than it is today? Goodness gracious, I hope so.
Josh Robb:
Yeah. And you just got to assume human beings, we are always looking to improve our life. And so you would think that given time and energy, that that’s what we would do. You know, you go back 20 years, like you said, go back 30 years, the improvements that have happened, just being able to through this panic, COVID-19, everything that went on, shutting down the economy, the technology we’ve developed made it so much easier than it would of 20 years ago. You would not, I don’t think, have been able to get through this as well, without all this advancement that we’ve improved our lifestyles with.
Austin Wilson:
Right. Yeah. Yeah, it begs the question, this is not even related to this topic, but would we have been so quick to shut things down in a world where we can’t operate with things shut down?
Josh Robb:
Yeah, working from home, all that stuff.
Austin Wilson:
20, 30 years ago?
Josh Robb:
Yeah.
Austin Wilson:
It seems like it would have been a harder trigger to pull, but now you can Zoom anywhere and do anything you want, so it worked out. So anyway, that is why Josh and I, and a lot of other smart people, are really bullish on stocks over the long-term. We feel that that gives people the best way to win with their money over time. And yes, we are not claiming that it is going to be perfect all every single day, and every single month, and every single year, there are going to be tough years, and tough months, and tough days. But over time we are bullish on the US and our economy, and the stock market that’s going to follow that.
Josh Robb:
Yep, definitely.
Austin Wilson:
So as always, check out our free gift to you, it is a brief list of eight principles of timeless investing. These are overarching investment themes meant to keep you on track to meet your long-term goals. We talk about a lot of the stuff we talked about today in there. Check it out, it’s free on our website. Josh, how can people help us to grow this podcast and continue to help lots of people?
Josh Robb:
Yep. So first of all, subscribe, that way you get our episode every Thursday. Leave us a review on Apple Podcasts, helps other people find us. If you have any topics or questions about what we talked about today, email us at hello@theinvesteddads.com. And then also if you know someone that was talking about this, or working through some of these same questions, send them this episode and hopefully that’ll help them.
Austin Wilson:
All right. Well, until next Thursday, have a good week.
Josh Robb:
All right. Talk to you later.
Austin Wilson:
Bye.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review. Click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guest, are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only, and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index, would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
