Episode 162
Are the Markets Rigged? - EP. 162
Have you ever felt like the stock market is rigged against you? Well, you’re not alone in that sentiment, but we’re here to pull back the curtain and show you that it’s all about understanding the rules of the game.
Throughout the episode, we argue that many investors are distracted by the flashy allure of 'instant wealth' while ignoring the real strategies that could lead to sustainable success. We illustrate how knowledge and strategy can turn the tables.
The conversation weaves through the emotional rollercoaster of investing, debunking the idea that markets are inherently unfair. Instead, they emphasize the importance of discipline and a solid investment thesis. By the end of this episode, you’ll be equipped with insights that make you question every investment decision you’ve ever made, and maybe even inspire you to approach your portfolio like a chess game—strategically and with purpose!
Takeaways:
- In this episode, we dive into the misconception that diversification always leads to better investment outcomes, highlighting that understanding the rules of investing is key.
- We explore how many people perceive the stock market as rigged, and how this perception often stems from a lack of knowledge about investment strategies and market dynamics.
- Understanding the importance of having an investment thesis can dramatically improve your investment outcomes, as it helps guide your decisions in a strategic manner.
- The discussion emphasizes the necessity of being disciplined and structured in investing, reinforcing that successful investors are those who play to win rather than play not to lose.
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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:Steve, do you think the markets are rigged?
Speaker B:I think a lot of people feel that way.
Speaker A:Might be weird for some people.
Speaker A:I don't know.
Speaker A:Let's talk about it.
Speaker A:Let's dig into that.
Speaker B:Okay.
Speaker A:In this episode, we're going to discuss how most people have been misled by a term called diversification and why their investments, even when they're managed by an investment manager or a financial advisor, may actually be at a huge disadvantage.
Speaker A:So.
Speaker A:So I'm not certain if we would call that rigged.
Speaker A:It's.
Speaker A:We'll foreshadow a little bit.
Speaker A:If you don't know the rules of a game, a game is always going to feel like it's rigged against.
Speaker A:You say that right?
Speaker A:If you understand the rules.
Speaker A:I like to play strategy games.
Speaker A:We have game night at my house, like, almost every week, very competitive, and I win all the time because I really understand the rules.
Speaker A:And then people are like, oh, this is like rigged.
Speaker A:You just.
Speaker A:It's not fair.
Speaker A:So if you understand the rules, the game's not rigged to you.
Speaker A:If somebody else doesn't understand the rules as well as you do, it's going to be rigged to them.
Speaker B:You're like the Bill Belichick of card games.
Speaker B:Like, you understand the rules in a way that's annoying playing against you because you know the rule book so well that it's frustrating trying to compete against somebody who knows, if you do this, I can do this.
Speaker B:And if you don't know that, it can be like, hey, you're cheating.
Speaker B:No, I just.
Speaker B:I understand how to play.
Speaker B:So I think with investing, there's people that feel the sudden discomfort of the stock market's rigged.
Speaker B:It's all these big CEOs, all the ultra wealthy people.
Speaker B:When there are rules to how you play and presets that you can follow that can help you.
Speaker A:The Tushbush is a play that the Philadelphia Eagles use, and it's one of the reasons why they won the super bowl this year.
Speaker A:And it's basically an unstoppable play where they can get one or two yards every time.
Speaker A:And part of the NFL is flipping out, and they're trying to get a rule passed to outlaw the tush push because it's not.
Speaker A:They don't think it's fair.
Speaker A:And there's nothing illegal about it.
Speaker A:It's part of the rules.
Speaker A:It's a basically a glorified quarterback sneak, but the Eagles are just the team that has kind of mastered it, so everybody else thinks it's unfair.
Speaker A:So that's a great example.
Speaker A:If you understand the rules and what you're allowed to do and other people don't understand the rules as good, you could take advantage of it.
Speaker A:And frankly, that's what most of investing is, is taking advantage of how the rules work where other people don't have a clue.
Speaker A:If other people are being emotional, you don't be emotional.
Speaker A:You will win.
Speaker A:So this is the third episode in our little miniseries.
Speaker A:We did yyy, we did Na Na Na.
Speaker A:I'm now listening.
Speaker A:And now we're going to do the Violet from Willy Wonka I Want it all now syndrome.
Speaker A:And the ramifications for how that kind of leads into these kind of misunderstanding about diversification.
Speaker B:Yeah.
Speaker B:And, and we know that from podcasting.
Speaker B:If you put Are the markets Rigged?
Speaker B:As your title, there are listeners that will go out and search that topic and you may be brand new to Ditch the Suits.
Speaker B:So if you are welcome, my name is Steve Campbell.
Speaker B:I serve as the senior marketing director at Seed Planning Group.
Speaker B:Travis, who you just heard at the beginning, is our CEO of Seed and also the co host of Ditch the Suits.
Speaker B:And Seed is a fee planning firm where we have a fiduciary obligation to work in clients best interests.
Speaker B:And this show is a platform for us to come on and talk about the things we talk about every day with clients and employees to help empower them and you get the most from your money in life.
Speaker B:And so when you say is the stock market rig, know that this has been part of a three part series.
Speaker B:There was two prior episodes that if you're brand new today, might want to go back and listen to first one talking about just how sometimes investing can feel like an emotional teenager.
Speaker B:And then in the last episode Travis kind of gave you strategies for a buying guide and how to choose investments.
Speaker B:But let's talk about this big question because I think it's top of mind.
Speaker B:People are asking it are the markets rigged and where would be a good starting point for us to start to address that question.
Speaker B:Let's take a quick break to hear a word from your sponsor.
Speaker B:This episode is brought to you by Seed Planning Group.
Speaker B:If you're looking for a life giving experience working with a financial planner, then Seed is here for you.
Speaker B:Seed is a fee only financial planning firm with a fiduciary obligation to put your best interests first if your goal is financial freedom and independence without sales products or really glorified salespeople, then check out Seed Planning Group.
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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:And I think we talked a lot about what investing actually means.
Speaker A:In the last episode.
Speaker A:We really talked about, you know, with the 10 steps of what an investment is or how an investor would look at investing.
Speaker A:So I think that that's a really good guide and that was probably new for a lot of people.
Speaker A:And most people don't have that experience.
Speaker A:They don't have the experience of when the market goes down, understanding exactly what to do and not being afraid of it and how that impacts their portfolio and why they don't need to blow up their investments because their investments are broken.
Speaker A:So one of the things that we try to do when we work with people is to reshape their, their understanding of things and how it actually works.
Speaker A:We want to actually teach you the rules of the game so that you're playing, you know, with an advantage against everybody else.
Speaker A:And that's hard.
Speaker A:It's hard work winning because when you win, everybody who's losing actually is cheering against you.
Speaker A:Most people do not go, oh, you're beating me.
Speaker A:I'm so glad for you.
Speaker A:Most people say, oh, you're beating me.
Speaker A:You know, you must be cheating or, you know, it's rigged against me.
Speaker A:So that's kind of where this comes from.
Speaker A:Investing is basically, you know, as we talked about two episodes ago, I think been turned into gambling because everybody wants these quick results based on timing.
Speaker A:You know, you could do it yourself, you could do it your.
Speaker A:Listen, if everybody can make these quick decisions and make 10% a week on their investments, everybody be a billionaire.
Speaker A:Like, like there when somebody goes on YouTube or Instagram or Facebook and they've got an ad on there about their, how they're a guru with investing and you should buy Passive investments and make all this money or just buy gold and all that kind of stuff.
Speaker A:If they were that good, they wouldn't be wasting their time selling you ads because they'd be so freaking wealthy that they wouldn't be talking to anybody about how they get wealthy.
Speaker A:The reason why they're out there talking to people about how other people can get wealthy is because they're trying to make money off the other people because they don't have the money yet.
Speaker A:People with money don't do that.
Speaker A:You don't see people with money.
Speaker A:You don't see Elon Musk out there trying to sell you on a passive investment.
Speaker A:He doesn't give a care in the world what you invest in.
Speaker B:You did a good job right there.
Speaker B:I felt like you wanted to let loose and you filtered yourself.
Speaker A:Oh, I did good.
Speaker B:But.
Speaker B:But there's probably a couple camps.
Speaker B:And I know because some of you have called in over the years with questions.
Speaker B:We have a lot of do it yourselfers that listen to Ditch the suits.
Speaker B:And so when you talk about investing, they're in it every day.
Speaker B:They're working the Excel spreadsheet, so they love this topic.
Speaker B:But then you probably have a lot of people that have went out and hired a financial adviser.
Speaker B:Financial professional.
Speaker B:One of the thoughts that I have, just think about your experience dealing with a professional.
Speaker B:When things are good, you probably meet far less with that individual.
Speaker B:When things are rocky, when it looks like the market's going down, when you feel like you're losing money, you're probably making more phone calls, sending more emails, and wanting to meet more frequently.
Speaker B:And I think that's because when you deal with somebody who's managing money or choosing managers, if the stock market is acting appropriately, your teenagers doing what they're supposed to, you're not paying as much of attention because the pain isn't as real.
Speaker B:Right.
Speaker B:When you come in and you deal with somebody, it's, how's the kids?
Speaker B:How's the family?
Speaker B:Oh, we made 8%.
Speaker B:And you move on.
Speaker B:Are we really doing deep dives into the intricacies of what we're actually invested in?
Speaker B:Because is there also an opportunity loss that we're not taking advantage of?
Speaker B:Like you said a few episodes ago, if you made 5%, is that good in context to what you could have done without reaching?
Speaker B:But just understanding, like we said at the beginning of this episode, if you understand the rules of the game, are there different strategies you could have implemented to possibly yield a greater return without necessarily ratcheting up the risk?
Speaker B:So Couple of camps coming into it today.
Speaker B:I think you can take this conversation to doing it yourself or back to a professional to hold yourself accountable or hold somebody else.
Speaker A:Well, let's, let's, let's, let's start with the do it yourselfers.
Speaker A:Let's give them some respect because there are some people that put the discipline in, put the time in, do a great job and do a great job and get some really wonderful results.
Speaker A:I've known people like that and I've worked with people where they're doing their own thing and I'm like, you're doing it good enough, man.
Speaker A:You don't need to hire somebody.
Speaker A:You've got to figure it out.
Speaker A:Yep.
Speaker A:But it's a minority.
Speaker A:And the problem is, is then other people, you know, that they come in, they're like, you could do it yourself too.
Speaker A:And it's like, no, there's something unique about you that's allowing you to do it by yourself.
Speaker A:There's a certain interest in a certain way that you see the world normally.
Speaker A:The people who really do it well by themselves are people who really understand business.
Speaker A:Because again, investing is about businesses.
Speaker A:People don't understand that investing is all about choosing businesses that are going to be around long term that make a lot of money.
Speaker A:That's what it's about.
Speaker A:And so if you don't understand business, you have no business investing.
Speaker A:That's where you should go and buy that index fund.
Speaker A:Right.
Speaker A:Because then you don't have to know anything about business.
Speaker A:You just buy one of everything and it makes it easier for you.
Speaker A:But there are do it yourselfers out there who do a very good job because they're very structured, they're very disciplined, they understand business and they're buying companies that they think run good businesses and have good long term prospects and they're trying to buy them at good prices.
Speaker A:Wonderful.
Speaker A:And they do a great job.
Speaker A:So.
Speaker A:And I think for them this will be reinforcing and maybe give them some tidbits.
Speaker A:And our last episode I think definitely would be supportive of that.
Speaker A:But the vast majority of people out there don't have the time or the interest or the perspective to do that.
Speaker A:They have different ideas of what investing might be about.
Speaker A:And that's where it gets into more of that organized gambling or trying to find formulas.
Speaker A:A lot of people, you see the advertisements for AI and AIs crack the code and you could turn 30,000 into a hundred thousand in 30 days and all that kind of stuff.
Speaker A:There is no preordained pattern for investing what happens in the market on a day to day basis is based on what happens tomorrow.
Speaker A:And you don't know what's going to happen tomorrow.
Speaker A:And there's so many things that are happening tomorrow that could influence how the market moves or how a particular company moves.
Speaker A:And there's no way that you or any computer system is privy to all that information.
Speaker A:So what is going to happen tomorrow will not meet expectations consistently.
Speaker A:So you have to keep that in mind.
Speaker A:And there is no silver bullet.
Speaker A:There's no special spreadsheet, there's no special price targets, there's nothing like that.
Speaker A:That is surefire way to make money.
Speaker A:And so a lot of times do it yourselfers believe that they found the surefire way to do it.
Speaker A:What you have found if you are being successful over time is discipline and structure.
Speaker A:The same way that you would have been successful as a professional athlete or as a professional in your field of choice.
Speaker A:Structure, discipline, rinse and repeat.
Speaker A:That's how they're getting ahead.
Speaker A:But we're here today to talk about the I want it all now syndrome.
Speaker A:Anybody?
Speaker A:You coach a lot of sports, right?
Speaker A:Any spoiled kids on any of the teams that you coach?
Speaker A:Oh yeah.
Speaker A:Okay, so.
Speaker B:And you can spot them easily.
Speaker A:Okay, so how do you spot a spoiled child?
Speaker A:Not to get you into any trouble with some parents that might be interesting.
Speaker B:A lot of it's attitude, entitlement, feeling.
Speaker B:They deserve more than other players even if they're not putting in the work.
Speaker B:There's a, there's an air about them that's very not team centric.
Speaker B:It's very me centric.
Speaker A:How about the parents with spoiled children?
Speaker A:Because a lot of times my experience in coaching as parents are worse than the kids.
Speaker B:Well, they're either one of two things.
Speaker B:They're either empowering or they're silent.
Speaker A:Gotcha.
Speaker B:Right.
Speaker B:You, you typically don't find a spoiled athlete that has a very committed parent that's willing to course correct when they need to.
Speaker B:You either have a parent that feeds that and fuels that or a parent who just feels like, I don't want to deal with that.
Speaker B:You're the coach.
Speaker B:I'm gonna cross my arms and let the kid run amok on the field.
Speaker A:Right, Right.
Speaker B:And so that's not helpful.
Speaker A:I talk to people all the time and it's, and it's interesting to me because almost everybody I talk to when they talk about their kids or their grandkids, I don't know how many kids and grandkids I have of people that I've worked with that are all the greatest musician, athlete, ballerina, you name it, right?
Speaker A:They're all the best at whatever they do.
Speaker A:And I'm sure that they're wonderful and you should be proud of your children, right?
Speaker A:But you know, let's slow it down a little bit.
Speaker A:First of all, let the kids be kids.
Speaker A:And second of all, not everybody's kid has to be the best at everything and be, be the superstar at everything and stuff like that.
Speaker A:It's just, that's not how it works.
Speaker A:And so the, like the I want it all now syndrome and this is maybe a bad analogy, but it's the, you know, I want to be the best right now.
Speaker A:I want everything right now.
Speaker A:And it's like no good things come over time.
Speaker A:It's the same thing with that do it yourself investor structure and discipline over and over and over again.
Speaker A:The people who really make it big and make it long term structure and discipline are at the heart of it.
Speaker A:So that gets me to, when you're a real investor and you look at your portfolio and you look at investing, what do you actually see that's different than what other people see?
Speaker A:You know, there's no entitlement or anything like that.
Speaker A:There's no, you know, short term.
Speaker A:I need this right now.
Speaker A:What it really comes down to is watch my strategy or my game plan.
Speaker A:That's where your structure comes in.
Speaker A:What's, what's the path that I'm going to follow?
Speaker A:How am I going to approach this game and what happens when, when I'm against a player who's playing with a different strategy.
Speaker A:If you're a chess player, right, like the master chess players, they adjust to how the other chess players play.
Speaker A:They're not just going out there and playing a game plan.
Speaker A:And it doesn't matter what the other player does.
Speaker A:They take a move, the other player takes a move, and they've all memorized all these different ways that you can go within the rules, within, you know, X amount of moves regarding, depending on what the other player's doing.
Speaker A:But they don't just disregard what the other player is doing and do their own thing because then they could easily lose.
Speaker A:If they have a strategy that's going to win in four terms and the other player has a strategy that's going to win in three terms, they better pay attention to what the other player is doing.
Speaker A:They just have to.
Speaker A:And so a good investor has a strategy or a game plan.
Speaker A:They understand the rules and they've got to figure it out.
Speaker A:Okay, if I play against somebody who goes for this, this is what I'm going to do.
Speaker A:If I play against somebody who does this, this is what I'm going to do.
Speaker A:It's the same thing with the market.
Speaker A:If the market does this, this is what I'm going to do.
Speaker A:If the investment that I think is a great long term investment has great leadership, great economic mount, all of a sudden there's a scandal and leadership gets replaced, this is what I'm going to do.
Speaker A:Yep.
Speaker B:One of the, the we just.
Speaker B:You and I talked about spoiled kids.
Speaker B:When you coach sports, sometimes you go into drafts and I think it's easy to find a kid who's super talented, but there's no character.
Speaker A:Right.
Speaker B:And as a coach you have to make a decision.
Speaker B:Tons of upside, but could destroy a team.
Speaker B:Same thing with investing.
Speaker B:We can pick the one that from an eye standpoint looks like it has upside, but there's no substance to it.
Speaker B:As a coach, you'd rather have 10 consistent, well groomed players that can win you games that play as a team versus all in.
Speaker B:And when in the last episode you talked about leadership structure when you coach a team, a lot of player evaluation is do we know anything about the parents?
Speaker B:You talked about leadership of companies.
Speaker B:Sometimes you'll draft 10 kids because the parents are good parents.
Speaker A:Yeah.
Speaker B:You know what I mean?
Speaker B:And so sometimes we take these approaches, moms and dads to sports or to raising our own kids.
Speaker B:When you talk about consistency and strategy, is it better to own 10 companies that have consistency or what we hear a lot.
Speaker B:Crypto's the way of the future.
Speaker B:Pot stocks are the way of the future.
Speaker B:I'm going all in on this and that.
Speaker B:So there's a lot of investors that are trying to have it all now by finding lightning in a bottle.
Speaker B:They want all the talented player and they're not looking at the potential flaws that exist that could go terribly wrong.
Speaker A:Think about the NFL.
Speaker A:So even if you're not a football fan, a lot of times what happens is there's different rules.
Speaker A:For once the game is within two minutes, Right.
Speaker A:And there's a lot of rules.
Speaker A:There's rules on replay, there's rules on how the clock moves.
Speaker A:If you go out of bounce and stuff depending on what time it, what, what, what time of the game it's in that type of thing.
Speaker A:And you consistently see a team win or lose.
Speaker A:And then there's clock mismanagement as one of the issues.
Speaker A:And it always baffles me when coaches don't know the rules of the game in which they are coaching.
Speaker A:It's just, to me, it's just this where players on the team don't know the rules of the game that they're playing.
Speaker A:Like you're a professional.
Speaker A:Your job is to know the rules.
Speaker A:And I don't expect to lose because you don't understand the rules.
Speaker A:I expect to lose because somebody outplays us.
Speaker A:I expect to lose because possibly there's an error because errors happen.
Speaker A:But I do not expect to lose because you don't understand the rules of the game.
Speaker A:And ultimately, what you're seeing a lot of times with investing is people lose because they don't understand the rules of the game, not because you know what, they misunderstood something.
Speaker A:Like they read an investment research report and, and had the wrong impression on who the leader was or what the future was for that industry or something like, okay, fine, you make a mistake, you learn from it, or for some reason like that it's because they didn't understand how price and value relate to each other or that there are things like moats and that individual leadership is important within a company.
Speaker A:Knowledge that you're going to win some and lose some.
Speaker A:No investor wins 100% of the time.
Speaker A:Warren Buffett doesn't win 100% of the time.
Speaker A:Engineers have this problem the most.
Speaker A:They hate seeing things that are read on their spreadsheet.
Speaker A:They cannot stand it.
Speaker A:It just.
Speaker A:And, and this tends to be more of a male problem, I think, because of the competitive kind of the testosterone, you know, like, like alpha type of, you know, like, I can't stand to lose.
Speaker A:That's not how investing works.
Speaker A:Your price fluctuations are gonna happen on investments depending on the timing of when you've bought them, you are going to see red on your statement periodically.
Speaker A:If you take that as a personal affront in the fact that you can't stand losing and that investment has to go away.
Speaker A:You have no business looking at your statements or managing your investments.
Speaker A:It's just nuts that you would even think you do.
Speaker A:You have to understand you are gonna lose sometimes.
Speaker A:This is why you don't invest in just one investment.
Speaker A:You invest in multiple investments.
Speaker A:You have diversification because if you take 10 big bets, at least one of them is going to fail.
Speaker A:And that's okay.
Speaker A:In fact, four of them can fail.
Speaker A:Five of them can fail.
Speaker A:Eight of them can fail depending on how good the other two do.
Speaker A:You have to be comfortable with the fact that you are going to lose sometimes.
Speaker A:Football teams, you know, any, any sports teams very rarely go undefeated.
Speaker A:Baseball, they never go undefeated.
Speaker A:Do they play 160 some odd games.
Speaker A:When was the last baseball team that was the greatest team I've ever actually went undefeated.
Speaker A:Doesn't happen.
Speaker A:You are gonna lose.
Speaker A:You're gonna have some losers, you're gonna learn things after the fact.
Speaker A:Or companies, you know, you buy a company because it looks great, you buy this amazing investment and something happens.
Speaker A:You know, a regulation changes and they lose some of their funding.
Speaker A:And now all of a sudden the business dynamics look horrible or they lose, you know, they're not allowed to do business in a certain place or something.
Speaker A:Or you know, utility companies, the regulate, the state regulators change the rules in which they play and now it no longer looks like a good investment.
Speaker A:You didn't do a bad job, you didn't do anything wrong.
Speaker A:You didn't make a bad decision.
Speaker A:What happened is, is the world happened, things changed, and now you have to pivot from that or oh, the, you know, like we were talking about an episode or two ago with Valero during COVID The price is way down.
Speaker A:You didn't make a bad investment.
Speaker A:You got Covid happening.
Speaker A:You know, it's like the, it's the economy, silly, right?
Speaker A:Like, like you can't change the fact that Covid is happening, right?
Speaker A:So what you cannot do is make, is make a reaction to a company for something that actually has nothing to do to represent the company.
Speaker A:But you're making a decision on an outside issue, on what's happening inside of something.
Speaker A:And so that just becomes a very big issue because people are just chasing their losses.
Speaker A:They're looking at things and saying, if I'm making money on it, I should put more money in it.
Speaker A:No.
Speaker A:Back to coal.
Speaker A:If coal is really expensive, should you really try to buy more?
Speaker A:Probably not.
Speaker A:If coal is really cheap, should you buy more?
Speaker A:Probably so again, it could be that coal is a great commodity and great thing to have, but the prices isn't good right now, so you should wait till the price goes down and buy more.
Speaker A:And when the price is up, have your reserves so that you don't have to, you don't have to buy it, right?
Speaker A:Well, in investing, you want to buy it when the price is really good.
Speaker A:And when the price is really high, consider maybe trimming the top and reaping some of that reward type of thing.
Speaker A:You have to pick your battles and your hills to die on.
Speaker A:I see this all the time.
Speaker A:People worry about the wrong things.
Speaker A:I can't buy that company because I went into their store and I had bad customer service.
Speaker A:Really?
Speaker A:That's how you're gonna Decide on a multinational company is because you had one bad experience with a store.
Speaker A:You know, like, that's.
Speaker A:That's, you know, that's really where you want to dig in and say, I can't buy this company, this investment, or, I have to sell this investment.
Speaker A:But we see it all the time.
Speaker A:People will have the wrong things that, you know, social issues.
Speaker A:What about, you know, all the federal layoffs because of Doge and what's happening with the federal government right now?
Speaker A:Yeah, what about it?
Speaker A:What's that got to do with whether or not you should buy Visa today or whether or not you should buy Apple or Microsoft?
Speaker A:What's it got to do with any of that?
Speaker B:Right.
Speaker A:You know, like, because these are big, emotional things that are happening to you or happening in life and you're observing them, doesn't mean that that's got to trickle into your portfolio, and it doesn't mean that it has anything to do with why your portfolio is down.
Speaker A:But these things kind of get convoluted.
Speaker A:And so now we're saying, the world is bad and investing is bad.
Speaker A:I need to take my money out.
Speaker A:And you might be right at the precipice of the market just exploding because of a tax overhaul deal, right?
Speaker A:And you got to look past your nose, you know, like, you don't bite off your nose to spite your face.
Speaker A:But that happens a lot of times where we're conflating issues and we're sticking our flag in the sand saying, I'm going to die for this issue, which is essentially what you're saying.
Speaker A:You're not thinking that when you're saying it, but that's what you're actually doing.
Speaker A:And then the last one that I had is play to win instead of not to lose.
Speaker A:My dad taught me this when I was a kid, and I had some challenges in my upbringing.
Speaker A:But one of the things that I remember him saying that I didn't understand until I got older because I was always afraid to lose.
Speaker A:If you play afraid to lose, you are going to lose often.
Speaker A:So if you have to be convinced that you.
Speaker A:That you can win before you play, you know what I mean?
Speaker A:Like.
Speaker A:Like you're.
Speaker A:You're just gonna.
Speaker A:You're gonna lose more than you win.
Speaker A:If you just play to win, you go out there and say, I'm gonna do the best as I can.
Speaker A:I'm gonna make the best decisions that I can, and I'm gonna let it hang out.
Speaker A:I'm gonna do everything I can to be successful.
Speaker A:And you know what?
Speaker A:Sometimes I'M gonna lose and that's okay.
Speaker A:You're gonna win a lot.
Speaker A:But the guy who goes out there and says, if I lose, look at what people are gonna think about me.
Speaker A:You know, maybe my, my self worth will be down.
Speaker A:I'll have less money.
Speaker A:Like in investing, I'll have less money.
Speaker A:If you're playing with that attitude, you've already lost.
Speaker A:You should not be managing your money if you're playing with the.
Speaker A:The idea is I'm afraid to lose money.
Speaker A:If you're afraid to lose money, do not manage your own investments and do not have any say in how your investments other than the investment thesis that's followed.
Speaker A:But put somebody in charge of it that's not afraid to lose because you're gonna have losers.
Speaker A:Right.
Speaker A:Not even when you have a Super bowl winning football team.
Speaker A:Not everybody on that team was the greatest player in the world.
Speaker A:Some of the players, some of the guys didn't do good.
Speaker A:Right.
Speaker A:They didn't.
Speaker A:The Chiefs, I think the Chiefs.
Speaker A:No, it was a 49ers.
Speaker A:They kicked a player off their team who didn't want to play.
Speaker A:Right.
Speaker A:You're going to have pieces of your program that just fail and it's okay, you move on.
Speaker A:That's why you have to understand business and business.
Speaker A:My big advice to people, you know, a third of what you do is not going to work out.
Speaker A:It's just not going to work for whatever reason.
Speaker A:Not because it's always a bad idea, but because you try, it doesn't work out.
Speaker A:You didn't have enough information.
Speaker A:People don't care about it.
Speaker A:But you don't stop trying.
Speaker A:You keep going.
Speaker A:Your portfolio is going to be the same way.
Speaker A:There's going to be parts in it that lose and you're going to be able to stomach it.
Speaker B:Well, and you had talked about to the do it yourselfers that have done a great job and just walked through that.
Speaker B:But I'm even thinking about the people that have hired a financial advisor.
Speaker B:Like how are you keeping the people that are managing your money accountable?
Speaker B:So.
Speaker B:So that you are making good business decisions with your money.
Speaker B:Right.
Speaker B:And just because somebody makes you feel good.
Speaker A:Yeah.
Speaker B:Doesn't mean that that also equals performance.
Speaker B:And here's this why I would say if you're paying somebody a fee, they're going to want you to feel good because they don't want to.
Speaker B:Well.
Speaker A:And they're salespeople.
Speaker B:They're salespeople.
Speaker B:So.
Speaker B:So just because when you come in, the, the cat pageantry of the industry that gets you coffee and asks about your family.
Speaker B:And they speak very little about your investments.
Speaker B:But you leave away feeling good.
Speaker B:What if you were actually missing out on understanding all the things you've been walking us through and owning great companies and really making good decisions and opportunity cost.
Speaker B:Don't wait for the world to go to hell in a handbasket and say what?
Speaker B:What have you been doing all this time?
Speaker B:Hold the people that you're paying fees to accountable to make sure that they're really looking at this with your best interests.
Speaker A:But that's the Na na na, I don't want to hear it.
Speaker B:Yeah.
Speaker A:Episode.
Speaker B:Yep.
Speaker A:Because here's the thing.
Speaker A:If you're working with somebody or you're going to hire somebody, you need them to explain their investment thesis to you.
Speaker A:And if they say we invest according to modern portfolio theory, some bullshit that they got off the Internet, if they don't sound like what we're talking about, the fact that you're buying pieces of something that's real and you need to get those things for a good price, and that's what matters.
Speaker A:And we're looking to build value for you over time.
Speaker A:If they're not talking about those things, they're selling you somebody else's investment strategy.
Speaker A:There should be an investment thesis.
Speaker A:You should be sitting down with your investment person and explain to me the investment thesis and how you're going to handle my investments.
Speaker A:And they should be talking about price and value.
Speaker A:They should be talking about economic advantages.
Speaker A:They should be talking about what we're going to do in the market's down, when it's up.
Speaker A:They should be talking about why this stuff that you're reading on the news, you know, does or doesn't impact you.
Speaker A:But this should sound a lot like some of the stuff that we've talking about.
Speaker A:And I truly believe that.
Speaker A:And I talk to investors all the time, people who are managing endowments and things like that too.
Speaker A:And they come in and they say, we want you to do XYZ for us.
Speaker A:And the first thing I say is, what's your investment thesis?
Speaker A:Well, we don't have one.
Speaker A:I'm like, well, how could we possibly build you an investment program for your organization if you don't have an investment thesis?
Speaker A:Let's help you start.
Speaker A:There's.
Speaker A:Let's start with your investment thesis.
Speaker A:And that's for people who are managing other people or giving advice to other people.
Speaker A:Now, if you are the type of person who is saying, well, I'm coming to you for advice, I'm buying your investment thesis, you need to have those spider like the BS indicator up.
Speaker A:And if you're getting generic stuff when you Google investing and it's the top line of Wikipedia, or if you talk to three different investment people and you say, what's your investment thesis?
Speaker A:And they all give you the same spiel that means not a single one of them actually has a real thesis.
Speaker A:They're just selling you investments.
Speaker A:They're selling you like you talked about two episodes ago.
Speaker A:I think SMAs or mutual funds or stuff like that, they're just putting you in whatever they put you in because that's how they get paid.
Speaker A:It needs to be an intellectual conversation, not one that is using words that you can.
Speaker A:I don't think I've used a single term here in the last three episodes that people can't understand or that we didn't explain, that goes.
Speaker A:When you hear, you go, okay, that makes sense to me, right?
Speaker A:It's down to earth.
Speaker A:Talk to you like a human being, Explain how it is.
Speaker A:Here's the rules of the game.
Speaker A:Here's how we play within the rules.
Speaker A:Not well, you know, if you really want more return, you could buy this structure product over there or that product over there that creates these K1s and all these other issues.
Speaker A:And you know, but it's great because you get more income and blah, blah, blah.
Speaker A:It's like, no, what's the actual investment thesis for how you're going to manage my portfolio for me.
Speaker A:And, and I would go a step further.
Speaker A:Do your financial planning before you do your investment management.
Speaker A:The financial plan gives you a guideline for what you need the investment program to do for you.
Speaker A:If you don't know what you need out of the investment program to meet your financial goals, then how do you have a properly developed financial plan or investment plan?
Speaker A:So you start with the financial plan, understand where you want to go, and then you look at your resources and say, can they help me get there?
Speaker A:Or what do I need to do to help me get there?
Speaker A:And that will cut out a lot of the garbage that gets sold to people.
Speaker A:I've seen people who, you should have a retirement annuity.
Speaker A:You should have an index new, that type of thing.
Speaker A:Why do I need that?
Speaker A:Well, because you need guarantees.
Speaker A:It's like, no, you have so much money that even if you made 5% for the rest of your life and spent 6% a year, you'd still have money left over.
Speaker A:Why would you buy a guarantee?
Speaker A:When you buy a guarantee, you give up your money, you give up your principal, you buy a contract with A third party company.
Speaker A:Why would you do that if you don't need to do that?
Speaker A:You need to understand the rules of the game first.
Speaker A:Before you do that and what's actually happening, you need to understand your situation.
Speaker A:What's going on with your situation.
Speaker A:When you talk to investment people, I think it should sound like us.
Speaker A:You know, I think you should look for somebody who's saying, look, there's value in every investment that you buy.
Speaker A:There's a reason why you need to, you should be buying that investment.
Speaker A:So if you say why do I own this?
Speaker A:We could actually give you an explanation of why you own that and how that relates to your financial situation.
Speaker B:Well, and this is one of those moments that if you've been presented with new information you've never heard of invest investment thesis.
Speaker B:What, what do you do with that?
Speaker B:As a listener, you go back to your professional money managers or whoever it is and say, talk to me about your investment thesis.
Speaker B:And if they stare at you like deer in a headlights or say we.
Speaker A:Pick money managers for you.
Speaker B:Right.
Speaker B:There's your spider sense, number one.
Speaker B:So when we have people reach out to us for consulting and Travis poses a question on what's your investment thesis?
Speaker B:It's never to trap the individual or to shame them.
Speaker B:It's because we need to have a guideline.
Speaker B:Going to be hired as a fiduciary to say what are we being held accountable to and what's the thesis?
Speaker B:So that we know that we're staying within.
Speaker B:So that's.
Speaker B:If there's one takeaway from this episode.
Speaker B:What is the investment thesis that either you're following on your own or that somebody that you're paying a fee, what are they following?
Speaker B:So I'm going to let you finish here on these last parts and just.
Speaker A:Let me make a point on that too.
Speaker A:I don't mean that in any way negative.
Speaker A:I.
Speaker A:To me, it's a wonderful thing to have a conversation with somebody about what your investment thesis.
Speaker A:And if you don't have one, are you going to use ours?
Speaker A:Or, or do you need us to help you design one that works for you and your situation?
Speaker A:Because what that does is that creates the guidelines for how the management happens.
Speaker A:Right.
Speaker A:If you don't have it, if you don't have a thesis, how do you create the structure and the discipline?
Speaker A:Yep.
Speaker A:Right.
Speaker A:You have to have that guiding principle.
Speaker A:And that's what your thesis is.
Speaker A:It's my guiding principle.
Speaker A:I believe in index investing.
Speaker A:I believe in individual equities.
Speaker A:That's your thesis.
Speaker A:Now how do we create structure around that.
Speaker A:So that's why that's so important.
Speaker A:Some people might call it investment policy statement.
Speaker A:That's more of a rule book.
Speaker A:The thesis is kind of what that investment policy statement is designed to actually drive.
Speaker B:Right?
Speaker A:Here's, here's what I would say, because I think that this has been a great discussion today.
Speaker A:If you look at every very, very successful investment manager and hedge fund guy, pick anyone you want.
Speaker A:Ackerman, Buffett, not a single one of them got rich investing in the index.
Speaker A:None of them did.
Speaker A:Dalio, he didn't.
Speaker A:He didn't buy the.
Speaker A:That's not how he made his money.
Speaker A:They made money by buying individual companies, understanding the companies and their economic advantages and their leadership teams, and that's how they made their money.
Speaker A:All the really, really wealthy people got rich investing.
Speaker A:Jeff Bezos invested in his own company.
Speaker A:Elon Musk invested in his own companies.
Speaker A:Right.
Speaker A:That's how they got rich in individual companies, not in the average of how everything does.
Speaker A:And so if you're thinking, well, nobody can do it, but that's how all the really wealthy people did it.
Speaker A:And if you say, well, I heard Warren Buffett talking or I heard Kramer talking or any of these other, you know, talking heads talk, and they said that, you know, I should buy the index, the reason why they're saying that is because they don't believe that you have the structure and the discipline to do what they do.
Speaker A:And they're a hundred percent right in most cases, because you not only have to have structure and discipline, but you have to understand business.
Speaker A:And if you don't understand business, if you don't have structure and you don't have discipline, you're not going to be able to do what they've done.
Speaker A:It'll be a pipe dream.
Speaker A:So you're just not going to get there.
Speaker A:So their answer to you then is buy the s and P500 so that you don't have to worry about it.
Speaker A:Because it's dangerous to buy things you don't understand.
Speaker A:It's dangerous not to be disciplined.
Speaker A:It's dangerous not to understand the rules of the game.
Speaker A:That's where you can get wiped out.
Speaker A:When somebody says, yeah, I know a guy, he went to financial advisor.
Speaker A:He lost all his money because he was investing with somebody who didn't have a good thesis.
Speaker A:He was investing with somebody that was taking bad bets.
Speaker A:He didn't understand the rules of the game.
Speaker A:Right.
Speaker A:He didn't understand how the, the financial.
Speaker A:Not every financial advisor is the same.
Speaker A:Yep, you can go out and get a broker.
Speaker A:When you get a broker, a registered representative with a company, you give them permission to buy or sell something.
Speaker A:In fact, a lot of investment advisor representatives, so called fiduciaries, if they don't have discretionary authority, what happens is they come to you and say, we think we should do this.
Speaker A:They sell you an idea and you say, go ahead and do it.
Speaker A:They have shifted 100% of the liability to you.
Speaker A:And when it doesn't work out and you lose your money because you buy a stock or some kind of investment and blows up on you, they say, but you gave us permission to buy it.
Speaker A:You're the final decision maker, not us.
Speaker A:All we do is present the idea to you and it happens over and over and over.
Speaker A:And then you hear about, well, you know, so and so was investing with somebody that lost all their money.
Speaker A:You didn't understand what the rules were even with the people you were working with.
Speaker A:So you gotta understand the rules of the game.
Speaker A:But just think about that like that every billionaire you've ever heard of, not a single one got, became a billionaire.
Speaker A:LeBron James not a billionaire because, or Michael Jordan not a billionaire because of index funds or mutual funds in general.
Speaker A:None of them are.
Speaker A:They buy companies, they go out and they get a good price on things.
Speaker A:They buy it, they make sure they have good leadership in place and they make a ton of money on it.
Speaker A:And they still buy losers, they still fail.
Speaker A:There's still things in their portfolios that don't work out you can talk to.
Speaker A:I'm sure that you can look at Buffett's history and you'll find things that lost money.
Speaker B:Well, and I think that's part of the exciting part is how you've tried to bring to reality the fact that if you're an investor, you have an opportunity in a free market to go buy a cut of a company and own it.
Speaker B:You're, you're not buying the physical company from Tim Cook, but you can own a part of Apple.
Speaker B:If you believe in their mission and what they're doing.
Speaker A:You are buying a part of the physical company from whoever owns it.
Speaker A:I mean you like a share of a company.
Speaker A:If there's a million shares of a company, that means there's a million equal pieces of the company.
Speaker A:When you buy one, you are buying an equal piece of the company.
Speaker A:Which means, you know, you, you can't necessarily go and like, because you own one millionth of the company, like just walk into its building.
Speaker A:Like you own the place.
Speaker A:You got to own a Lot more.
Speaker B:That's more what I was alluding to.
Speaker B:But you have an investor have an opportunity to do that, and you can make money.
Speaker B:You can make money by putting your money behind companies that have strong visions for where they're going, and you can reap the benefits of that.
Speaker B:And so investing.
Speaker B:You can say, the stock market's rigged, which is being the parent on the sideline that says, my kid's out of control, you fix him.
Speaker B:Or you can be the parent who says, this might be a little rough for a little bit, but I want to course correct so that the character's there.
Speaker A:Yeah.
Speaker B:Because over the long run, I want to have the best darn kid I can.
Speaker A:If you're going to play a strategy game against me.
Speaker B:Yeah, I've done that.
Speaker A:Right.
Speaker A:Do not complain if I beat you because I do something that you didn't know you could do.
Speaker A:Read the instructions.
Speaker A:Right.
Speaker A:Like the market.
Speaker A:The answer to this is the market's not actually rigged.
Speaker A:The real answer is that you need to be a student of the game.
Speaker A:That's the only way that that that's how you win is you have to be a dedicated student on the game.
Speaker A:You have to understand all the rules.
Speaker A:You have to have structure, you have to have discipline.
Speaker A:You have to play to win.
Speaker A:You have to understand business.
Speaker A:You have to be a student of the actual game you're playing.
Speaker A:You can't.
Speaker A:If you lose the game over and over and over again and you don't relook at your strategy and your discipline, that's not a market problem.
Speaker A:That's a you problem.
Speaker A:I love when I play games with people and they every single game is the same exact strategy.
Speaker A:They do the same thing over and over and over again.
Speaker A:No matter how I beat them, because all I have to do is adjust and I can beat them.
Speaker A:That's a them problem.
Speaker A:If they want to win, they got to do something.
Speaker A:They got to take a chance, try something, not be afraid to lose.
Speaker A:Oh, if I don't play like this, I can't win.
Speaker A:Well, you can't win like that either.
Speaker A:So either play to win, you know, or sit there and get upset when you lose over and over again.
Speaker B:Yeah, well, hey, if this was your first interaction because you looked up, is the stock market rigged?
Speaker B:And you happen to stumble upon ditch the suits.
Speaker B:Travis and I always present series, usually two or three episodes around topics.
Speaker B:This was our investment series, investing.
Speaker B:So go back, listen to the previous two episodes.
Speaker B:But as a reminder, you can also visit our Patreon channel.
Speaker B:Subscribe to Ditch the Suit so that you can get live inbox updates about new episodes.
Speaker B:We just appreciate you being our guest.
Speaker B:And until next time, thanks for checking out Ditch the Suits.
Speaker B: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 Ditch suits dot com.
Speaker B: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.
