Episode 161
A Guide to Buying Investments - EP. 161
Ever feel like the investment world is just one big emotional rollercoaster? Well, you’re not alone! We’re diving into the nitty-gritty of why the average investor is at a serious disadvantage and how to flip the script.
We kick things off by addressing the emotional rollercoaster that is the stock market, likening it to an emotional teenager throwing tantrums over price fluctuations. It’s all about understanding that while the market might be throwing a fit, we don’t have to join the chaos. We dive deep into the common pitfalls that trap everyday investors, highlighting the lack of knowledge about their own investments and the emotional decision-making that often leads to financial disaster.
Our conversation shifts to the practical side of investing, where we share Travis' top-ten actionable tips that folks can implement right away to regain control over their investment strategies. We’re talking about understanding what you own, looking past the price tag, and recognizing the real value of your investments
Takeaways:
- Investing is more than just buying stocks; it's about owning a piece of a company that should generate future profits, and knowing how to evaluate that is key.
- Understanding your investment statements is crucial; they should tell you not just the price, but the value of what you own and the story behind it.
- Don't let price fluctuations dictate your investment decisions; focus on the underlying value and long-term potential of the companies you invest in.
- If you're not confident in a company's future, or the leadership behind it, it might be time to reconsider your investment strategy altogether.
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About Your Co-Hosts:
Travis Maus has been in financial services for over fifteen years. He is a Senior Wealth Manager and Chief Executive Officer at S.E.E.D. Planning Group. Travis also hosts the Unleashing Leadership Podcast, where he dissects some of his favorite books on leadership and how you can apply it to your business or life.
Steve Campbell has over a decade of industry experience and is a Senior Marketing Director at S.E.E.D. Planning Group. Steve also hosts the One Big Thing Podcast, an interview-style show meant to inspire and encourage 30 and 40-year-olds going through difficult seasons of navigating marriage, raising kids, and growing personally.
Transcript
Foreign.
Speaker B:Welcome to Ditch the Suits podcast, where we share insights nobody in the financial services industry wants you to know about.
Speaker B:We're here to help you get the most from your money in life.
Speaker B:So buckle up and welcome to Ditch the Suits.
Speaker A:All right, so we're going to get back into this a guide to buying Investments.
Speaker A:And we're still talking about why the market acts like an emotional teenager or even a child younger than a teenager sometimes with its tantrums.
Speaker A:But in this episode, we're going to discuss what most people are getting wrong about their investments and why the average investor is at a huge disadvantage.
Speaker A:So I think.
Speaker A:I think we talked a lot about how people get things wrong in the last episode.
Speaker A:We're going to talk about why you're at a disadvantage right now and what you can actually do about it.
Speaker A:We're going to give you a list of about 10 things by the end of this episode that you can do top 10 with Travis to get control of your investments.
Speaker B:Love that.
Speaker A:So that's kind of cool.
Speaker A:I don't know if we want to make that a PDF that somebody can download or something.
Speaker B:Hey, we will.
Speaker B:We do things on the fly.
Speaker B:We are going to make that a PDF.
Speaker B:Go to ditch the suits.com, send us a.
Speaker B:Send us a comment, and we will get you Travis's Top 10 Things, a guide to buying Investments.
Speaker B:How about that?
Speaker A:Oh, sure.
Speaker A:And it'll be free.
Speaker A:We'll make it free.
Speaker B:What a time to be alive.
Speaker A:Yep.
Speaker B:Let's go.
Speaker A:Okay, so we talked about the YYY syndrome last time and going on this kind of picking on the kids.
Speaker A:We're gonna do na na na I'm not listening syndrome today.
Speaker A:And, and how you may, you know, again, how you may be sabotaging your investments in general.
Speaker B:Well, and we had briefly, briefly touched on it at the conclusion of the last episode, talking about individuals not really understanding what they're invested in.
Speaker B:And that go, like, how do you actually read these investment statements?
Speaker B:So when you have a Fidelity, a Charles Schwab, a 401k, an IRA, like, how should you actually look at an investment statement?
Speaker B:And I'm super excited because you do such a great job of not only helping clients understand statements, positions, what things mean, but also just training our newer planners on the importance of what to look at, you know, why do we receive these statements as investors, you know, and what's the important thing to look at?
Speaker B:So this is Ditch the Suits.
Speaker B:I'm Steve Campbell, your senior marketing director at Seed Planning Group.
Speaker B:This guy is Travis Moss, our CE co at Seed and co host to Ditch the Suits.
Speaker B:Seed, if you're new to Ditch the Suits is a fee only financial planning firm where we have a fiduciary obligation to work in all our clients best interests in this show is Travis and I just bringing the things we talk about every single day with clients, with staff members to empower you as a listener to get the most with your money in life.
Speaker B:So this is an exciting one because we're going to talk about in the first one kind of where mindsets come from fear and uncertainty.
Speaker B:But this is actually fun because it's a buying a guide to buying investment.
Speaker B:So let's get right into it today.
Speaker B:Travis, let's take a break to hear a word from our sponsor.
Speaker B:This episode is brought to you by the Unleashing Leadership Podcast.
Speaker B:Join Travis Moss, seasoned entrepreneur and business leader, on a transformational journey of leadership exploration.
Speaker B:In this thought provoking podcast, Travis shares his invaluable insights and experiences gained from two decades of managing diverse businesses which include small family enterprises, Fortune 500 companies and his own successful startups.
Speaker B:Through candid storytelling in real life examples, he unveils the profound truth that success or failure ultimately rests upon a leader's ability to recognize and unleash the potential in others.
Speaker B:Start listening to the Unleashing Leadership Podcast today, available on all major podcast platforms.
Speaker B:Do you want more of Ditch the Suits?
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Speaker B:If you're wanting more announcements, notifications, even access to prior seasons, you can head to patreon.com search ditch the suits and subscribe to our channel.
Speaker B:You'll get notifications of all episodes right in your inbox.
Speaker B:So visit patreon.com search ditch the suits or head to our show Notes where we got links to our channel.
Speaker A:Yeah, so this will be fun.
Speaker A:A little bit off script a little bit.
Speaker A:In the last episode I had mentioned you were we were kind of laughing about it afterwards.
Speaker A:Yes, I used to carry coal when I was a kid.
Speaker A:We had a cold so we lived out in the country.
Speaker A:Even back then the electric bill was ridiculous.
Speaker A:I don't know how the public utilities would calculate it, but I mean this is like 40 years ago.
Speaker A:The electric bill was still like 400 plus a month.
Speaker A:So we got a coal stove when I was a kid and one of my jobs when I started to get a little bit older so I was like a young teenager, was to carry the bags of coal into the house and we would get bags of coal delivered in 100 pound bags.
Speaker A:So my dad would order a ton of coal, it would get dropped off on a pallet and you'd have 100 pound bags of coal.
Speaker A:And for some reason, you know, and I weighed all of 120lbs soaking wet.
Speaker A:So I was about a senior in high school and then I weighed about 130 pounds soaking wet.
Speaker A:My job was to carry the 100 pound bags of coal from the garage to the coal stove and then pick them up and dump them in the coal stove.
Speaker A:And, but that, the reason why I'm saying this is if you bought 20, 20 bags of 100 pound coal and had them at a pallet at your house and they are to heat your house, you pay a price for them.
Speaker A:You now have inventory, you have 20 bags of coal, you don't care what the price does after that.
Speaker A:You've already got the coal.
Speaker A:So you're going to heat your house.
Speaker A:You use, let's say you use a bag every three days.
Speaker A:You know that you have 20 bags times three days.
Speaker A:You can get through 60 days.
Speaker A:So for the next 60 days you have what you need.
Speaker A:Now the only reason why you care about the price of coal and what the price of coal is doing is if you need to buy some coal or if you bought too much and you want to sell some of your coal to somebody else, that's the only reason you care.
Speaker A:Otherwise you're just moving along and using it.
Speaker A:So if you were to look at your inventory of coal, your 20 bags of coal, and look at how the price was changing every week depending on what's going on with the price of coal, you'd be freaking out because you'd be like, don't use that coal over there.
Speaker A:It's only worth X or it's worth Y today.
Speaker A:Let's not, let's not use so much coal.
Speaker A:But no, you heat your house and, and, and you kind of move along with your life and you don't worry about the price shocks, you know, the ups and downs until it's time to buy coal again.
Speaker A:Same thing with your investments.
Speaker A:You have an investment, the reason why you care about the price is if you want to sell it or buy more of it.
Speaker A:If you want to buy more of it, you want a good price.
Speaker A:If you want to sell it, you want a good price, right?
Speaker A:So if you want to sell it, you hope that it's up.
Speaker A:If you want to buy it, you hope that it's down.
Speaker A:If you go and you go and you say, I'm going to buy some Coal.
Speaker A:You never root for the price to be up.
Speaker A:You always root for the price to be down.
Speaker A:If you want to sell your coal to, let's say, your neighbor or back to the store, what do you want?
Speaker A:You want the price to be up.
Speaker A:However, what we tend to do is buy investments when the price is up and sell investments when the price is down.
Speaker A:Do exactly the opposite.
Speaker B:I'm just really blown away that a line about if you had Cole on your bingo card or you're doing a power hour.
Speaker B:Every time the word Cole was mentioned, you're doing a shot.
Speaker B:You are absolutely hammered at this point.
Speaker B:That was, who knew?
Speaker A:You're doing a shot for every time I say who knew.
Speaker B:Just a simple line from the previous episode about Cole would become such a powerful example about the power of.
Speaker A:Let's talk about the statement then.
Speaker A:Let's talk about the statement.
Speaker B:Yeah, we're not going to talk about churning butter.
Speaker B:That was.
Speaker A:We never turned butter.
Speaker A:We weren't like.
Speaker A:We weren't that.
Speaker B:Talk to us then about the power of.
Speaker A:I mean, that was a high school project.
Speaker A:We would do.
Speaker B:Oh, God.
Speaker B:We're ready to move on.
Speaker B:So you got an investment statement.
Speaker B:All of you, if you're in a 401k, if you have IRAs, if you have brokerage accounts, you've.
Speaker B:This has been what we've heard a lot from people calling in, I've inherited money from a grandparent or a parent.
Speaker B:So maybe you're seeing investment statements for the first time in your life.
Speaker B:Maybe these have been unopened envelopes that sit on your island kitchen because you just don't know what you're looking at.
Speaker B:Travis, help us understand the power of understanding the components of an investment statement.
Speaker B:And when we educate clients and our staff, what are the key components that we think investors should be looking at?
Speaker A:I want every.
Speaker A:Every person listening just to think for a hot second.
Speaker A:When you look at your statement, what do you actually look at?
Speaker A:What's the first thing that you look at, the second thing you look at?
Speaker A:Third thing you look at, like, what do you look at when you look at your statement?
Speaker A:Some people will say, well, I don't look at my statements at all.
Speaker A:Which is good and bad, right?
Speaker A:It's good because you're not getting stressed out about the ups and downs all the time.
Speaker A:And it's bad because you know what's actually going on in there.
Speaker A:And if somebody's ripping you off, right?
Speaker A:Like, so you.
Speaker A:You can't be, like, willfully blind.
Speaker A:But certainly, you know, you don't Want to overdo it.
Speaker A:But when you look at your statement, what do you look at like, Steve, what do you think that would be the most common things people would look at?
Speaker B:I would say probably the immediate balance fluctuation.
Speaker A:That's what they put in big bold letters.
Speaker B:Yeah, it's either green or red, which is terrifying or exciting.
Speaker A:Right.
Speaker B:And so maybe a great example too, if you're at your computer, pull up a statement, because I think it'd be cool if you had one of your statements in front of you as Travis talks through these things to actually in real time look at it.
Speaker B:But I would say probably the biggest thing most investors look at is just intraday moves and what the ending balance is each day.
Speaker A:So the balance, definitely the balance.
Speaker A:The second thing that you probably have is some kind of performance metric.
Speaker A:So a starting value and ending value, maybe a percentage returned over a time period, which is incredibly arbitrary because what does it mean?
Speaker A:Right.
Speaker A:You know, if you're a conservative investor and you made 5% and an aggressive investor made 10%, who won?
Speaker A:Right.
Speaker A:Which one was good?
Speaker A:If you're a conservative investor and you made 5%, but because of the dynamics in the bond markets and stuff, you probably should have made seven.
Speaker A:Did you do good or not?
Speaker A:That's not going to be on your statement.
Speaker A:What's going to be on your statement is normally you're, you're ending in your, your, your starting ending balance for a time period and maybe your average return over the time period or maybe even since, like our statements will put, since inception and stuff like that.
Speaker A:So you might get a little bit of a longer time period, but that's what you get.
Speaker A:Basically you have, you're tracking the balance over time.
Speaker A:So you have the current balance and then you're kind of tracking it over time.
Speaker A:Some statements might actually get into the underlying investments.
Speaker A:And so they'll list your inventory, kind of like your coal in my example, it'll list your inventory and what you've got.
Speaker A:And you know that for a lot of people can be overwhelming because it's an awful lot of numbers.
Speaker A:And you know, you have cost basis in there, you'll have where or purchase price and then current price and then, and then, you know, the, the gain or loss, whether or not it's long term or short term yield, number of shares.
Speaker A:I mean, there could be all kinds of things in there.
Speaker B:And that's so a great question because we get this a lot.
Speaker B:Is there a difference then by how mutual funds, ETF stocks and bonds are reported on statements?
Speaker A:Yes, so one of, one of the challenges that people have is a mutual fund is an actual portfolio, or an ETF is a portfolio all by itself.
Speaker A:So when you buy mutual fund XYZ, you're actually probably buying anywhere from 30 to 2,000 stocks.
Speaker A:Yep.
Speaker A:You just don't know it because you don't see them.
Speaker B:See the five letters?
Speaker A:Yeah.
Speaker A:So, so when you, when you buy one of them, you're getting a cut of every investment that would make that up, some of which are up today and some of which are down.
Speaker A:But when you look on your statement, all it shows you is the mutual fund.
Speaker A:Same thing with an etf.
Speaker A:An ETF is just kind of like a fancy mutual fund.
Speaker A:If you want to oversimplify it.
Speaker A:You can buy and sell the ETF within the day.
Speaker A:Mutual funds you buy or sell in the evening.
Speaker A:But when you look at, if you had stocks on your statement, you would see what each and every stock has done.
Speaker A:And so you might have a stock that's down 20% and a stock that's up 20%.
Speaker A:And you might say, well, I shouldn't own these things that are down.
Speaker A:Almost guaranteed that stock was also in your mutual fund.
Speaker A:So that mutual fund owns stocks that are up and down every day.
Speaker A:And this is one of the hardest things for investors to get to, especially if they transition into, like, retirement and they go From a generic 401k type of portfolio to a real portfolio that, you know, you buy the mutual fund because you're essentially buying a middleman.
Speaker A:You're saying, look, I don't know any investment managers, so I'm going to hire somebody or I'm going to pick myself.
Speaker A:Mutual funds, which are essentially investment managers, are going to manage my money for me.
Speaker A:They're going to build me a portfolio.
Speaker A:When you have more money, you need to just get your own portfolio manager.
Speaker A:You need to get somebody who manages a portfolio specifically for you.
Speaker A:Cut out the middleman because that mutual fund's taking a fee.
Speaker A:And the person who's selling you, the mutual fund's taking a fee, are telling you you should be in the mutual fund's taking a fee.
Speaker A:Right.
Speaker A:So you have two portfolio managers you're paying for.
Speaker A:You're paying for the portfolio manager who's managing your other portfolio managers, and then the portfolio managers who are actually buying and selling the stocks.
Speaker A:Even if you have indexes, there's a layering there.
Speaker A:So, you know, we need to understand what, what we actually own.
Speaker A:But on a statement, if you have mutual funds or ETFs, you're seeing what the portfolio did.
Speaker A:If you actually have a portfolio that's built for you with individual securities, you're going to see what every underlying investment is doing.
Speaker A:And people will say, well, I've never seen so many things that have made or lost me money on there.
Speaker A:But that's just because you didn't.
Speaker A:You never looked at the, at the underlying positions of the portfolio from the portfolio manager that you actually hired.
Speaker B:Let me throw in the Steve's self Help guide here.
Speaker B:So, so one we didn't mention, which is kind of confusing if you do have your statement out in front of you.
Speaker B:So you got the mutual fund, which is typically five letters large cap blank of whatever company where you don't see the underlying holdings, you just see the name of it.
Speaker B:You have an etf, which one we talked about, QQQ or vgi, three letters, you know, something like that.
Speaker B:Again, you don' see the underlying holdings.
Speaker B:You have individual stocks, Microsoft, Facebook, Tesla, Nvidia.
Speaker B:You're going to see those, the shares, individual bonds.
Speaker B:You're going to have, you know, where the bond was, the ultimate maturity.
Speaker B:All of those things.
Speaker A:Again, very different than what a mutual.
Speaker B:Fund'S going to, different than a bond fund.
Speaker B:And then the wild card would be an SMA or a separately managed account.
Speaker B:This is where if you hire a money manager, they might show you the stocks.
Speaker B:Yeah, but it doesn't mean that you as an investor can call that money manager and say, hey Steve Campbell, I do not want to own that stock.
Speaker B:Because you're just, it's like a larger.
Speaker A:Mutual fund that you're doing advanced statements right now or ditch the suits.
Speaker A:People are Advanced Payments 102.
Speaker B:Well, so when people see it, you might have five separately managed accounts by money managers show all of your stocks.
Speaker B:But that doesn't mean that you have full authority to just remove stocks you don't like versus owning actual time.
Speaker A:People in an SMA don't know they're in an sma, so they don't know they're in a separately managed account.
Speaker A:Because what happens is it's sold like this.
Speaker A:We pick the money managers that manage the money for you.
Speaker A:So what's really happening is the person that you're paying to manage the money is charging you a fee and then they're going out into the universe and they're hiring some larger money manager a lot of times like JP Morgan Chase or BlackRock or something like that to manage a portfolio for you where you see all the guts of the portfolio, but it's not the person you Hire, that's managing it.
Speaker A:It's some other company someplace else.
Speaker A:And there is a little bit of input you can sometimes have on those.
Speaker A:Sometimes you can't have any input on that, but it does.
Speaker A:Basically what it is, is it's like a personalized mutual fund, but it's not a personalized portfolio necessarily.
Speaker A:And it lets you see all the guts within it.
Speaker A:But one of the issues there is you still got two middlemen.
Speaker A:Mm.
Speaker A:Right.
Speaker A:You haven't eliminated any middlemen.
Speaker A:So your cost structure is still going to get hit twice.
Speaker A:You still, you got, you know, guy you've hired to.
Speaker A:Because you won't.
Speaker A:You can't buy an SMA by yourself.
Speaker A:As far as I know.
Speaker A:You're always going to go through, call them up and say, so there's going to be.
Speaker A:Because they're institutional.
Speaker A:So there's going to be an investment manager kind of as a conduit between you and the other investment manager.
Speaker A:Norm.
Speaker A:Or a company finance, some financial company is going to make money for brokering this to you.
Speaker B:Yeah.
Speaker B:So sometimes you'll see people, they pay 1% overall fee to their advisor and then they pay a half a percent to a money manager.
Speaker B:So they're all in rate as a one and a half percent.
Speaker A:So the fee structure is very similar to a mutual fund.
Speaker A:It's just, it's kind of hidden.
Speaker A:But let's talk about what's not on the invest on the statements.
Speaker A:Right.
Speaker A:Because, you know, we, we, we maybe talk very technically about some things here.
Speaker A:But what is not on your statement?
Speaker A:You, when you look at your statement, you see the balance.
Speaker A:So go ahead and look at your statements.
Speaker A:If you have them in front of you.
Speaker A:How much money do you have in your account?
Speaker A:Right.
Speaker A:That's your balance.
Speaker A:That's a representation of the price.
Speaker A:It has nothing to do with the value of your underlying investments.
Speaker A:Right.
Speaker A:If I can heat my house with the coal that I've purchased for the next 90 days, I have 90 days worth of value.
Speaker A:That is what it is.
Speaker A:Right.
Speaker A:It doesn't matter if the price goes down between now and the end of the 90 days.
Speaker A:All I care about is at the end of 90 days when I have to buy more, what the price is going to be.
Speaker A:So the value is, is so important.
Speaker A:But it's a number I have never, ever, ever seen on a statement.
Speaker A:In fact, every now and then I hear like on a tv, like a news show or something like that, them screw up and somebody will come in and argue that yes, the market's down, but the Value of companies has overall gone up and they'll actually, and normally you see it more in a white paper.
Speaker A:So the people out there who are peddling financial news or other financial companies that are talking, oh, the market lost $2 trillion of value today, they know darn well that that's not what happened.
Speaker A:They know that that's a price fluctuation and that no value is probably lost because value has to do with, go, go to back to your house example that we used in the last one.
Speaker A:If nobody wants to move onto your street this week.
Speaker A:So the price of your house goes down by $10,000.
Speaker A:It doesn't mean you have to sell it for $10,000 less.
Speaker A:It doesn't mean that it's going to appraise for $10,000 less.
Speaker A:It just means you don't have a buyer today that will pay you the full value of it and you have to wait for the next buyer to come along.
Speaker A:Right?
Speaker A:So price and value are two different concepts.
Speaker A:Value is not on your statement.
Speaker A:It's not going to be on your state.
Speaker A:Closest you're going to get.
Speaker A:The value on your statement is with bonds.
Speaker A:Bonds will actually, if you have individual bonds, not bond mutual funds, if you have individual bonds, they will kind of roundabout get you to value because they'll, they'll say you have $1,000 bond and they'll show you what the sale price is today.
Speaker A:So you have a thousand dollars bond, the sale price is, you know, 95, which means $950 and your yield to maturity is 3%.
Speaker A:So it gives you the equation that you need to figure out what the real value of the bond is.
Speaker A:It still doesn't normally show you that real value.
Speaker A:The real value would be exactly what will I, you know, with the bond?
Speaker A:Exactly what will I make with this contract?
Speaker A:What's the value of that contract?
Speaker A:So it does.
Speaker A:Your statement doesn't show you value, which if you're an investor, that is one of the most important tidbits of information is what the hell did what I buy?
Speaker A:What is it actually worth?
Speaker A:If I, if, if the stock market goes down and I buy Meta for $0.50 on the dollar, isn't it important that I know that I bought it for 50 cents on the dollar?
Speaker A:If it goes up a hundred percent because I bought it at 50 cents on the dollar, right.
Speaker A:If I make 100% on it, did I make 100% because Meta's making more money or did I make 100% because the price just reverted to where it should have been in the first place that represented its value.
Speaker A:I'm going to look at that investment very different than if I think, oh my gosh, Meta is going to double their revenues and therefore I could double my, my, the value of the investment because I bought it for fair market value.
Speaker A:It's, you know, like the mental equation is very different on how you would look at the investments.
Speaker A:There's no long term trend or projection relative to value.
Speaker A:There's no way to look at your statement and understand the value of Valero after Covid went up or did the price just go up when you look at your state, if you had Valero during COVID what you'd see is a very deep V where the price plummeted and the price after Covid shot way back up.
Speaker A:Right.
Speaker A:It'd be a very deep voice.
Speaker A:And so if you looked at that, you would.
Speaker A:There's no way to know that.
Speaker A:Well, geez, did Valero just not make any money and, and become less valuable of a company and then they started making a lot more money, become more valuable?
Speaker A:Or was it because everybody was panicking?
Speaker B:Right?
Speaker A:Nobody wanted to buy it, everybody wanted to sell it.
Speaker A:So the price plummeted and then everybody realized that that was childish and foolish and they were acting like teenagers.
Speaker A:So they decided, you know what, let's put all our money back into it.
Speaker A:So it went back up and it equalized the price to the value that's more realistic to what happened.
Speaker A:Well, that's a very different story than this thing isn't worth the paper that it was printed on.
Speaker A:And that's a huge challenge.
Speaker A:The moat of a company.
Speaker A:So the moat of a company is the economic advantage.
Speaker A:So when you look at a moat, this is a term I think popularized by Morningstar, but basically that's the economic advantage of the company versus its peers.
Speaker A:So does that company have a long term Runway and is likely going to be able to protect their profit margins because of their unique position in the economy, in the world.
Speaker A:And so when a company has a strong MO even though their prices fluctuating, you're like, but we know it's making a lot of money and we know the long term prospects are that it's going to continue to make that money.
Speaker A:So if the price is down, that's a buying opportunity.
Speaker A:That's coal being cheap.
Speaker A:I want to buy more coal when it's cheap.
Speaker A:Right.
Speaker A:Versus oh my gosh, the price is down.
Speaker A:This company must be failing.
Speaker A:And it's like, can you really take Visa or MasterCard out of the world economy?
Speaker A:Right?
Speaker A:Now, who's going to replace them?
Speaker A:How would that work?
Speaker A:You know, can you even create a competitor for them, a real competitor for them?
Speaker A:Take Apple, right?
Speaker A:Like, how easy would it be to take Apple out of the world?
Speaker A:Half the world uses Apple products and half their life is tied into Apple.
Speaker A:It doesn't just disappear overnight.
Speaker A:It would take a periodic decline for that to particularly happen.
Speaker A:So understanding how the company is making money and how it's kind of ingrained into society is a really important thing.
Speaker A:It doesn't say that at all.
Speaker A:And you're never going to open up your statement.
Speaker A:It's going to tell you the moat of your company that you own or the real value of the company versus the price.
Speaker A:You don't put that on statements.
Speaker A:Leadership team of the company.
Speaker A:Who's opened a statement and seen who's running their company or that they have a new CEO.
Speaker A:Yeah, most people, when they buy an investment, they don't know who the CEO is.
Speaker A:They don't know where they came from.
Speaker A:They don't know what their track record is.
Speaker A:Right.
Speaker A:They don't know anything about them.
Speaker A:They don't know anything about the leadership team of the company.
Speaker A:Think about how silly that is.
Speaker A:If you wanted your kid, if your kid was a great athlete and you wanted your kid to prepare to go to the, you know, some kind of professional sports team and you were shopping schools for the best possible coach, would you care who.
Speaker A:You know what I mean?
Speaker A:Like, for the best possible sports team, would you care who the coach is?
Speaker A:Yeah, you're going to move them to a district where they get primo coaching and development.
Speaker A:Why wouldn't you be concerned?
Speaker A:Who's running a company?
Speaker A:When somebody comes in and say, we should buy this company, Tell me about the company.
Speaker A:How's the mo.
Speaker A:You know, what's the value of the company?
Speaker A:Two questions.
Speaker A:Normally people can't answer that.
Speaker A:The third question is, who's running the company?
Speaker A:What do you know about who's running the company and the leadership of the company.
Speaker A:And like, people can't answer that.
Speaker A:They don't know.
Speaker A:And it's never going to be on your statement how much money the company made or reinvested into their business.
Speaker A:Does the company take every dollar out of the business?
Speaker A:So you could have a small company.
Speaker A:You have two small companies.
Speaker A:One company is really, really profitable.
Speaker A:They make a ton of money and they cash all that out in dividends and send it to all their, their, their little shareholders.
Speaker A:And we love it because we get a 5% dividend in this company.
Speaker A:The Second company, same exact size, not nearly as profitable, so they don't give the dividends and you go, well, that must be a worse company.
Speaker A:Except for the fact that they reinvest that 5% they were sending to their shareholders.
Speaker A:They reinvest it back into the company.
Speaker A:In fact, they do it in a way that they get a tax deduction for it.
Speaker A:So if they could send you 5%, they're reinvesting 7% actually.
Speaker A:And they are building for the future.
Speaker A:They are trying to become the next Amazon.
Speaker A:This is how Amazon did it.
Speaker A:They just reinvest, reinvest, reinvest, reinvest.
Speaker A:So one, you're getting instant gratification of the big dividend, but the second one, you're getting long term growth potential there.
Speaker A:And that's again where you go and look at the leadership team and you look at the moat, the long term economic advantage.
Speaker A:But you want to take into account that they're putting money back into the company to make this a long term investment, not a short term dividend play.
Speaker A:So instead of a short term gamble, we're looking at something that is trying to be around 20 years from now as a big time player.
Speaker A:That's where all the big money comes with investing is holding onto an investment long enough for it to pop right to actually like most of the time, it's like most things in your life, if you can just gut it out, you're gonna win.
Speaker A:Most of life is a war of attrition.
Speaker A:Everybody else is going to quit before you quit.
Speaker A:And if you can outlast everybody, you're going to win.
Speaker A:And then same thing.
Speaker A:Like people don't look at how did a company's competitors fare?
Speaker A:You know, did the company do well or bad?
Speaker A:Well, if company did well, but all of its competitors did well.
Speaker A:In fact, all of its competitors did better than that.
Speaker A:I don't know how good your investment really was.
Speaker A:And people say that all the time.
Speaker A:That was the best investment I ever made.
Speaker A:I made x percent per year.
Speaker A:And then you look at, then you compare it to other things and you're like, yeah, but other things doubled the return.
Speaker A:So that was the best investment you ever made.
Speaker A:But it wasn't a good investment, comparatively speaking.
Speaker A:So we got a lot of room that we can make some significant improvements.
Speaker B:That was really good.
Speaker B:I was, you know what I was actually thinking about because you had said the housing analogy, people will go out to find the best real estate agent so they can get the most out of the home that they sell.
Speaker B:An extra $10,000 means a lot to you as a seller.
Speaker B:People that we speak to from ditch the suits, have a million, 2 million, 5 million, $8 million.
Speaker B:And there isn't the same level of accountability.
Speaker B:Would you write a five million dollar check if I gave you five million dollars, Travis, and said, I want to make money, I want you to be accountable, Find companies with wide moats and.
Speaker B:But we don't do that when it comes to our investments.
Speaker B:We do it when we pick schools for our kids.
Speaker B:We do it when we want to sell our home to get an extra turn.
Speaker A:How many people?
Speaker A:How many people?
Speaker A:Well, I'm not gonna put my house on the market till, till the spring.
Speaker B:Yeah.
Speaker A:You know, I'm not going to put it on the market in November.
Speaker A:So we, we intuitively know not to hurt ourselves with our houses and with.
Speaker B:Our kids, but I think with investments because it's such a far off thing that we're not yet tapping into.
Speaker B:There isn't that same kind of level of accountability.
Speaker B:So I hope this guide so far.
Speaker A:Paper, you know, you no longer get anything in your hand when you buy stocks.
Speaker B:Yeah.
Speaker A:You know, you used to actually get something so it was tangible.
Speaker A:You'd get a certificate in the mail.
Speaker A:Now you don't get anything, Steve.
Speaker A:So one of the things that happens is it's not people's fault.
Speaker A:They're pushed into this gambling mindset.
Speaker A:They're pushed into, I need to have an answer for everything.
Speaker A:Why didn't it go up?
Speaker A:Why didn't it go down?
Speaker A:What's going to go up?
Speaker A:What's going to go down?
Speaker A:And everything's just a number on a computer screen or a piece of paper.
Speaker A:And so what's the connection between something being real and being just cyber?
Speaker B:So then before we get into your top 10 that we want to go through, why don't you hit us with this next part?
Speaker A:Because I.
Speaker A:Yeah.
Speaker A:So your investments have a story to tell you.
Speaker A:I think that we've talked about that.
Speaker A:I mean, it's when people want to know what's going, what's going to happen in the market.
Speaker A:You know, nobody knows for sure, but we can look at investments and give you a pretty darn good idea what the potential is.
Speaker A:And because you can look at price and value, you can look at a neighborhood and say, wow, the prices are down, you know, X percent compared to the value.
Speaker A:That means developers are going to come in and buy everything up.
Speaker A:Right.
Speaker A:Because once it gets so cheap, people can come in and make a lot of money flipping the houses or turning them into rentals.
Speaker A:So you can kind of see where things are going to be going by understanding some of these principles.
Speaker A:It doesn't mean that you know exactly when they're going to happen, but it means you can, you can pretty much guess what direction things are likely to go.
Speaker A:You know, and again, it's over more the long term.
Speaker A:You can't guess next month, but you can guess, you know, over the next year or two years or three years is probably the direction.
Speaker B:Well, and even just you've touched on this, and I'll let you run with this last part here.
Speaker B:We say things like the market is good, the market is bad, but within, within the market are companies, and some companies are doing extremely well.
Speaker B:So the market overall could be bad, but some companies are flourishing.
Speaker B:Wouldn't you want to know what those individual companies are?
Speaker B:So that if you're going to put your hard earned money to work, that's.
Speaker A:Like saying the grocery store is good or bad.
Speaker A:Yeah, you know, the grocery store isn't good or bad.
Speaker A:The grocery store has things that are good and things that are bad.
Speaker A:Right.
Speaker A:There's any store you go to are going to have good things and things that you like and things that you don't like, things that are good for you and things that aren't good for you.
Speaker A:That's a great point.
Speaker A:So basically the Nana nah, I'm not listening syndrome.
Speaker A:This is when people revert to just looking at balances and price movements as an indicator of financial health.
Speaker A:I mean, we talked to, we're blue in the face about this, this stuff.
Speaker B:Yep.
Speaker A:Right.
Speaker A:We talked.
Speaker A:Somebody asked me yesterday, well, you're probably getting a lot of calls from clients because of the market volatile.
Speaker A:I said no, honestly, we don't get a lot of calls because we work with clients to understand these principles.
Speaker A:But yet there, there are still some people that this doesn't kind of set in with because you're so conditioned to think different than this.
Speaker A:It's when people refuse to accept that each, every single investment that you have represents a real institution.
Speaker A:And we've talked about this in different episodes.
Speaker A:Do not buy an investment that you don't understand.
Speaker A:Do not buy an investment that does not have a purpose to your portfolio.
Speaker A:People buy a lot of stuff and a lot of products that they think are investments that I think they're products.
Speaker A:Right.
Speaker A:They're not, they're more contracts than they are investments.
Speaker A:You buy things you understand.
Speaker A:If you don't understand investing, you hire somebody who buys things that they, that you understand.
Speaker A:Right.
Speaker A:But every single investment is a Real institution that you're putting money into, make sure that that's an institution that you trust and believe is going someplace.
Speaker B:Great examples as Apple Tim Cook CEO, they sell phones.
Speaker B:You see phones, you see computers, like that's a real company.
Speaker B:But when you see Apple ticker on your statement, we sometimes think these are just things that go up and down when it's real companies, real leadership boards, people making decision decisions.
Speaker A:And the na na na syndrome is also when people allow so called financial advisors to just convince them that all investments are the same and that the price is all that matters and all investments are not.
Speaker A:I mean we've buried this now.
Speaker A:All investments are not the same and.
Speaker B:Not all advisors are all the same.
Speaker A:Yeah.
Speaker A:And, and, and the price is not all that matters.
Speaker A:If you overpay for a company, but they're a really great company and you can own them for 10 or 20 years because they're a solid business with good leadership, you'll recover from that.
Speaker B:Yeah.
Speaker A:If you overpay for a junkie company, you may not recover for that.
Speaker A:If you have an opportunity to buy a really good company at a low price, you're going to make even more money.
Speaker A:That's how you beat the average.
Speaker A:That's the way that you beat the average.
Speaker A:You buy a great company for a low price.
Speaker B:And if you're new to digital suits, when you hear Travis and I say so called financial advisors, we like to expose our industry.
Speaker B:Not saying that there's not good people out there, but because you are interested in getting the most from your money in life.
Speaker B:Just because someone has a business card or a shop down the street or a name on a title doesn't mean that they're necessarily the best professionals for you.
Speaker B:So, so what do we do about this?
Speaker B:You have an awesome quote and this is where we're going to get into your top 10 takeaways, buying guidelines.
Speaker B:Give us the quote and then let's.
Speaker B:I'm just going to let you walk through.
Speaker B:All right.
Speaker A:You know, okay, they're yours.
Speaker B:I'm not going to read.
Speaker A:All right, well whatever.
Speaker A:I'll do all the hard work today.
Speaker B:Thank you.
Speaker A:You keep me in line, I'll do the 10.
Speaker A:All right, so what do you do about this?
Speaker A:I saw this quote from mlk.
Speaker A:Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.
Speaker A:And I think that there's a lot of people out there who just want to pretend like they just don't want it.
Speaker A:They're not interested.
Speaker A:I want, I'm going To take what somebody else says.
Speaker A:I'm going to roll with that because it's easier just to roll with it.
Speaker A:Yep.
Speaker A:And we're challenging you to think a little bit for yourself and to kind of push back a little bit to get more for yourself.
Speaker A:Every time I see a financial advisor who's buying big houses and big cars and taking big vacations, the first thing in my head that I think of is, who paid for that?
Speaker A:You paid for that.
Speaker A:So if you're gonna pay for that, make sure you're getting something that you get as much as the advisor gets out of it.
Speaker A:That's my thought.
Speaker B:But, well, here's what I'm gonna do just in case.
Speaker B:We got people checking with us.
Speaker B:I'll give you the number, you give me the statement.
Speaker B:We got 10 of these.
Speaker B:That way people can check them.
Speaker A:We'll get them done.
Speaker B:All right, folks, Travis Moss's 10 buying guide investment statements.
Speaker B:Give us number one.
Speaker A:When you make an investment, you are buying property that is supposed to make money in the future.
Speaker A:You get a cut of that future profit based on how much of the company you own.
Speaker A:Number two, when you buy a company, you are hiring the management team.
Speaker A:Make sure you pay attention to the team's track record.
Speaker A:Three, make sure you understand the companies and how they make money that you invest your money into or hire somebody who does.
Speaker A:Four, don't buy and sell a company because of the price alone.
Speaker A:Five, don't sell a company because the price is down.
Speaker A:Six, don't buy a company because the price is up.
Speaker A:Seven, buy a company because the price is a good deal for the value you are getting.
Speaker A:Eight, don't think you know where the world is going or what is going to be the next great company or the next Amazon or Apple.
Speaker A:Number nine, price changes every moment.
Speaker A:Material changes in value tend to take time, with very rare exceptions.
Speaker A:Be patient and don't overreact.
Speaker A:And number 10, if you don't believe in where a company will be in 10 years, don't buy it.
Speaker B:As we said, you might be driving in your car.
Speaker B:Don't be trying to write these down on your phone while you're driving.
Speaker B:We will create a PDF and if you're interested, you can head to ditchthesuits.com.
Speaker B:there's a little contact us button up in the top corner.
Speaker B:Send us a note, Travis.
Speaker B:Steve, can you send me that PDF?
Speaker B:We'd love to get it in your hands for free again.
Speaker B:Put it on your fridge.
Speaker B:Put it wherever you make trades.
Speaker B:Just remember, this is a guideline line from Travis's years of experience of not only helping clients, but helping our other planners.
Speaker B:Understand that you have an unbelievable opportunity in the free capitalistic society.
Speaker B:We have to buy into companies.
Speaker B:You get to own a piece of companies.
Speaker B:How cool is that?
Speaker B:Understand the opportunity in front of you.
Speaker B:Don't throw your money to a wind.
Speaker B:Don't guess it.
Speaker B:Don't hire so called financial advisors that that.
Speaker B:Just say everything's all the same.
Speaker B:There's real opportunities.
Speaker B:People are making money every day.
Speaker B:Use this buyer's guide to help empower you.
Speaker B:So as always, thanks for stopping by Ditch the Suits thanks for checking out Ditch the Suits.
Speaker B:Be sure to write a review or drop a comment about this episode.
Speaker B:And if you want more like this, head over to ditchesuits.com you can send us a message and get in touch.
Speaker B:Let us know how we can help and be sure to share any topics you'd be interested in having us cover on the show.
Speaker B:We're here to help you get the most from your money in life.
Speaker B:Thanks for being our guest and checking out Ditch the Suits.
