Financial Expert: The MOST CONTROVERSIAL Investing Myths That Cost You Money! | Ben Felix

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Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  There is a lot more to a good life than a higher income and more wealth. A good life is subjective, but there is lots of research on what does and does not tend to contribute to good lives for most people.

• 0:10Jack Selby?

  You do manage around $8 billion worth of assets. What would you say is a widely accepted belief that's actually going to make you poorer?

• 0:19Speaker 00

  Picking stocks, and I think that's probably on average detrimental.

• 0:25Graham Stephan?

  Who should buy individual stocks?

• 0:28Speaker 00

  I honestly don't think anybody.

• 0:31Speaker 03

  Leopold made the same mistake investors in South Korea made. Too much leverage.

• 0:36Speaker 00

  I would probably stop checking my portfolio five times a day. So I would stop dabbling in individual stocks and covered calls. The costs of trading options are exorbitant.

• 0:47Graham Stephan?

  Is it possible, though, that we can continue to see these 10% to 15% returns every single year?

• 0:53Speaker 04

  We are very close to recession, and I'm worried about something worse than a recession.

• 1:00Graham Stephan?

  So what's the downside of saving too much money?

• 1:03Speaker 00

  Uh, well.

• 1:08Graham Stephan?

  Ben Felix, thank you so much for coming on the Ice Coffee Hour.

• 1:10Speaker 00

  Thanks so much for the invitation.

• 1:12Graham Stephan?

  So you're the Chief Investment Officer and Portfolio Manager at PWL Capital with over $8 billion in assets. I have to say, I've been watching you for the last nine years on YouTube. I think you're probably one of the most sensible people when it comes to investing, early retirement, saving money. What's the best investment you've ever made?

• 1:32Speaker 00

  Two, two things. One is myself. I, I went to university, got a degree in mechanical engineering, did an MBA with a finance concentration, did a whole bunch of financial certifications, and doing all that stuff allowed me to get the job that I have and, and progress with PWL, with the company that I'm, that I'm with, and create content and all that stuff. So that's, I mean, in terms of return on money, that has been by far the best investment. If I had not done all of that education and put in the time doing content, all that kind of stuff, I would have, would have had a very different outcome. I know there's an outcome bias here, like I have been successful in a lot of ways, so it's easy for me to say, well, if you work hard, you can do the same thing, which is not necessarily true.

• 2:13Speaker 00

  But I do think that I put myself in a situation where I was able to get, to an extent, lucky. And if I had not done those things, the luck would have not played out the same way. I'm very careful to say that, you know, if you go make content, then you're going to have the same outcome as I did, because that's not, that's not true. And I don't think that's the right message for people to hear. Anyway, the second best investment that I've ever made is in equity of my company, of PWL Capital.

• 2:38Speaker 00

  I got options early on that I, that I pushed for, and then I bought equity later on, and we were actually acquired last year.

• 2:46Graham Stephan?

  Congratulations.

• 2:47Speaker 00

  Thanks. So that was cool. And then I also got equity in our acquirer, which is an American company called One Digital. So I still have a big chunk of my net worth. I know I say don't buy individual stocks. They're a private company. I think it's different, but I do still have a big chunk of my net worth in One Digital equity.

• 3:03Jack Selby?

  So what percentage of your net worth then do you have in a private company?

• 3:07Speaker 00

  It's a lot, man.

• 3:08Graham Stephan?

  99%.

• 3:10Speaker 00

  It's not that much, but it's, it's a little under 50%. I know.

• 3:16Graham Stephan?

  Wow.

• 3:16Speaker 00

  I know, it's a lot. But I'm, you know what? I, I put so much of myself into the work that I do. I, I would not want to do that if I didn't have a meaningful equity stake in the company that I'm helping to build.

• 3:29Jack Selby?

  How does that feel? Does that make you nervous at all? Do you think that you could improve your peace of mind if you just didn't have that?

• 3:36Speaker 00

  One Digital is a big company. They're, they're diversified business, that they're a large company, like, it's probably not going to zero. It could reduce in, in value, but, but I'm not super worried about a total loss. Even if that happened, though, I'd still be in a way better financial position than I ever thought that I would be, like when I was growing up or whatever. So I'm, from that perspective, pretty comfortable. But again, it's, it's, the risk is there, and I'm, I'm not blind to that at all. But the amount of myself that I put into the work that I do, I, I just, I wouldn't do it if I didn't have a meaningful portion of my net worth in, in there.

• 4:12Graham Stephan?

  What's the worst investment you've ever made?

• 4:15Speaker 00

  Well, we were very careful with crypto. But when Bitcoin hit 60K for the first time, we had an academic, like a distinguished academic in traditional finance, who had written a book on crypto and DeFi. We had him on our podcast, and we spent an hour talking about his normal finance research, which is like, you know, he's one of the top in his field. And then we spent an hour talking about crypto and DeFi. And I was like, man, I, I had kind of ignored cri- not ignored, but I'd, I'd been very skeptical of crypto. But then when this, this guy's like, man, he's super credible. He, he knows normal finance. I was going to say real, but that might piss people off. Oh, well, I said, uh, that, he, he knows that stuff better, better than, than anybody, including me.

• 4:59Speaker 00

  So I was like, okay, if he's, if he's taking this stuff seriously, I've got to take it seriously. And so this is the first time Bitcoin's at 50K, I said 60K. And I bought equal amounts of Bitcoin Ethereum. And then it went back to whatever it crashed to, to 30, 30K or something like that after that, and I'm pretty sure I sold at the, at the bottom.

• 5:19Graham Stephan?

  But you ignored your own advice, so just buy and don't look at it.

• 5:23Speaker 00

  I bought it for, the way that I justified it to myself at the time is after that podcast episode where, where this guy who I respect was, was talking about how much crypto is going to change the future of finance. I was like, okay, I need, I need to, I need to take this more seriously and treat it the same way that I treat my research in other areas. And so we actually did, I think it was 13 episodes of a sort of sub, sub-series of our podcast, where we did an extra release every week for 13 weeks, whatever it was, purely on, on crypto. So we had a bunch of experts with just different areas of expertise that touched crypto. And the way that I justified the purchase to myself was that if I'm going to get my head into this and research it, I feel like I need to own, own some and, and get experience with using a, using a wallet and using an exchange and all that kind of stuff.

• 6:09Speaker 00

  So that was my justification. But yeah, I bought at the worst time and sold at the worst time. No, no regrets.

• 6:15Graham Stephan?

  Paper hands. You could have just held.

• 6:18Speaker 00

  I could have had the same amount today as I did then.

• 6:21Graham Stephan?

  Yeah, but you would have sold, though, at the peak. You could easily have bought at 60 and then sold at 122.

• 6:27Speaker 00

  Held down, held down to 30 and then back up to 122.

• 6:30Graham Stephan?

  Well, yeah, no, no, no. When it drops to 30, you double down. You write it to 125, you sell. It's not difficult.

• 6:35Speaker 00

  I'll do, I'll do that next time. The next cycle, I'll, I'll do that.

• 6:38Graham Stephan?

  I'm curious, what is a widely acceptable piece of financial advice that sounds sensible, but actually makes people poorer?

• 6:46Speaker 00

  I'm going to take a little bit of a different angle to the question. I, I just talked about some of the biggest myths in personal finance in a, in a recent video. And one of the things that I talked about is that you should save as much as possible as early as possible to live, to live a good life. So that, now we're not talking about financial wealth, because that certainly will benefit your financial wealth. But I think that young people really squeezing themselves to save as much as they possibly can and making sacrifices early on in life, I don't know if that's always the best thing to do for their long-term outcome, when you consider the whole picture, not just the size of their portfolio or the amount of money in their bank account.

• 7:20Jack Selby?

  I think you might have just triggered Graham.

• 7:22Graham Stephan?

  Yeah, I was about to say, because that was my entire philosophy, was save as much money as possible as early as possible. Because I did this compound interest calculator. And when I was 18 years old, I'll never forget this, I put a dollar in the Money Chimp calculator, and then I saw that by the age of 65, that would be worth like $40 or $50. And I thought, oh my gosh, every dollar I spend is actually worth 50 bucks. And so every single thing, it was like a $10 shirt times 50, a coffee times 50, shoes times 50. And when I saw that, I thought, there's no way I'm spending any money. And so I got my expenses as low as possible. I remember even, I wouldn't go out to restaurants, I would eat at home and then go to like show

• 8:05Graham Stephan?

  up and drink the water and eat the bread, because I could save the $20 times 50. Everything was times 50. And I look back at that and I think, I probably could have spent more money, but I have zero regrets.

• 8:18Speaker 00

  That's, I mean, and that's, and that's fine. If you have zero regrets, that's good. And it's not just about eating, eating out at restaurants, there's other things like investing in education. You've obviously had a great outcome professionally. Investing in education, investing in experiences, like there are lots of other things that you can spend money on that are not saving or investing in stocks. So you're, you're not wrong, and I don't disagree with you. Young people should save. I just think that there's often a perception that leads people to do things like go to restaurants and only drink water. That's not always healthy.

• 8:43Graham Stephan?

  So what's the downside of saving too much money?

• 8:46Speaker 00

  Well, giving up on life experiences, giving up on things that you might have enjoyed doing. You can look back and say, I didn't regret that, and that's fine. But there are things that are nice to spend money on, that can save time, that can give you enjoyable experiences. And I think that, that perception that spending anything is bad, I, I think that can be unhealthy to, to, to a point.

• 9:05Jack Selby?

  We'll get more onto the psychology behind spending and saving and investing, all the psychology of money later in the episode, but I am curious, because you do manage around $8 billion worth of assets. So financially then, in terms of financial wealth, what would you say is a widely accepted belief that people think is responsible and it's generally accepted by financially literate people that's actually going to make you poorer?

• 9:30Speaker 00

  I, I think picking stocks. And I know you guys dabble in that, but it's, I also know it's a tiny part of your portfolio, so I don't think you'll disagree with me on that. I, I think there's a, there's a point in financial literacy where people believe that they can pick, that they should be picking stocks, and that's how you invest. And I think that's probably on average detrimental to most people.

• 9:47Jack Selby?

  You know what's funny? It reminds me of that like bell curve graph, where it's like the low IQ, the average IQ, and the high IQ. And on both ends of the bell curve, it's like. Index funds. And in the middle, it's picking stocks. It's like people that know nothing, like I know nothing, so I'm just gonna buy index funds. And the people that like know everything, like the senseis, the masters are like, I'm buying index.

• 10:04Speaker 00

  That is a perfect meme for the point. I agree.

• 10:07Graham Stephan?

  Do you think people can pick stocks successfully long term? And a good example of this is Chris Camillo. I don't know what it is. He seems to have his finger on the pulse where his batting average is just insane. Even in this market, it's just, how on earth did you know that?

• 10:26Speaker 00

  So there's a reason that you guys talk about Chris Camillo a lot.

• 10:29Graham Stephan?

  Yes.

• 10:29Speaker 00

  Because he's very unique. There are not a lot of people that are doing that. Now, I'm sure he's brilliant. Has he been lucky? There's probably some luck involved. Is he skilled? I have no doubt. Should other people try and replicate what he is doing? Probably not.

• 10:42Graham Stephan?

  So if investing is, at the end of the day, really simple, just buying index funds, why do so many people screw it up?

• 10:47Speaker 00

  Uh, yeah, that's a, that's a very good question. I think people want to believe that there's something more. I think that's part of it. I think a lot of people don't even know about index funds still. I think for a lot of people, just learning about that is a huge leap forward in terms of their financial literacy. I think people learn that in the long run, in many cases, where they'll, they'll be picking stocks. It'll have a portfolio with whatever, five or 15 or 20 stocks. And then at some point, they evaluate how they would have done if they had just bought the index and realize that they did have positive returns with their relatively concentrated stock portfolio, but they would have actually done better with less of their own time invested if they just bought the index. And so then, then they'll be like, oh, you know what? I'm just gonna buy the index. Um, so I think it's a, it's a learning process. And sometimes people need to learn through experience.

• 11:31Speaker 00

  But sometimes people just aren't aware that index funds are an option.

• 11:33Graham Stephan?

  That was exactly me, because I started off with index funds, I believe in 2013, with a Roth IRA. Vanguard index fund, super simple. In 2020, everything crashed and I started buying individual stocks. And I diverted away from the index funds. I still had my index funds, but I plowed into individual stocks. And 2020, they did insane. I think in one year, I was up like 30 something percent on these individual stocks. But I realized, I'm really bad at selling, because I'm the type, when I buy something, I never want to sell it. And so I held. And it kept going up. And then in 2022, they went down. And when I looked at the price, when they went down, from all the ones I held,

• 12:18Graham Stephan?

  I had made more just in the index fund that did nothing. And so I sold all of them.

• 12:24Jack Selby?

  At the low?

• 12:25Graham Stephan?

  Uh, no, I staggered. So I tax loss harvested. Some of them actually did insanely well. I think it was like Tesla that did really well. Google did really well. There were a few companies that just exceeded my expectations. And then others I lost, like Robinhood, unfortunately. So overall, I still made money, but I just sold all of them. And then index funds, I stuck with index funds ever since.

• 12:47Speaker 00

  And that's kind of what you'd, what you would expect statistically. Most people are gonna have that type of experience. A very small number of people are gonna have the, the Chris Camillo type experience, where they just compound like crazy. But that's the exception. That's like finding someone that won the lottery twice and being like, look, let's find, replicate what he did. I don't think it's realistic.

• 13:05Jack Selby?

  How common is it that you see really, really bad financial advice being spread online on TikTok or Instagram or YouTube by people of authority that people listen to? Like, is this a very common thing? Or what are the biggest myths that people spread that are actually very harmful?

• 13:19Speaker 00

  I think it's extremely common. The idea that you can pick individual stocks, the idea that you can pick stocks based on their dividend yield, covered calls is another one that comes up a lot.

• 13:29Jack Selby?

  We'll talk about that. That's in the outline. Do not worry. We have that in the outline.

• 13:33Graham Stephan?

  You guys gotta keep watching, because that's in there. And I would love to get your take on this, because we've talked about it a lot.

• 13:40Speaker 00

  Yeah, I know you guys have.

• 13:41Jack Selby?

  Imagine on your $8 billion that you have invested, you make 1% a week.

• 13:45Speaker 00

  That's not how it works.

• 13:46Jack Selby?

  Selling a call.

• 13:47Speaker 00

  So I've been thinking about how to explain this to you. Do we, should we go there now?

• 13:49Jack Selby?

  No, no, no, we'll go. Yeah, yeah, yeah, we'll save it.

• 13:51Speaker 00

  Okay, okay. I, I think the product that gets sold a lot by influencers and by people who are trying to create content is hope. And that's sold many different ways. It's sold by saying, well, if you pick this, and the scam comments on my YouTube channel about whatever insert name of the new token, like the ICO scams.

• 14:09Graham Stephan?

  Correct.

• 14:09Speaker 00

  Those are all based on hope. It's like, if you invest in this thing, you're gonna have a great financial outcome. And I think that gets sold a lot. You're gonna build passive income with covered calls. You're gonna build passive income with dividend stocks. You're gonna pick the next big token before it blows up. And the product that they're selling people is, is hope, but it's, it's not, it's not real. It's, it's usually designed for, for clicks. Or, or the people selling it just don't understand what they're talking about. I'm not talking about you with covered calls. Maybe a little bit. Um, but yeah, so I, I think there's lots of advice like that out there that people listen to. And it sounds sensible when you hear it. You hear, well, you can make 1% weekly with covered calls. That sounds really good. And people are like, well, yeah, I want that. I wanna, I wanna be financially independent without having to save a huge portion of my income.

• 14:54Speaker 00

  Uh, so yeah, I, stuff like that is, is easy for people to consume, because it gives them the hope.

• 14:59Graham Stephan?

  Can you give bad advice if you recommend index funds?

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• 16:12Graham Stephan?

  Can you give bad advice if you recommend index funds?

• 16:16Speaker 00

  I think if you tell people to build a diversified portfolio of index funds, and that that's for the money that they're not going to touch for a very long time, I think it's very difficult for that to end up being advice that you would later say is bad.

• 16:28Graham Stephan?

  Now, with the market, though, at all-time highs, and valuations are pretty stretched, should people be more careful about where they put their money?

• 16:35Speaker 00

  All-time highs are normal, for, for things to understand. Very, very normal. They happen all the time, which you should expect in a stock market that is increasing over time. Earnings are going up. Recently, valuations have gone up. All-time highs are just part of the, the stock market. They're always gonna happen. They're not typically followed by crashes. They're actually typically, more typically followed by more all-time highs rather than declines. So that's all-time highs. Valuations are a little bit different. I think US market valuations are high. They're, they're as close to as high as they've been throughout US market history. When you sort future US stock returns by their starting valuation, when valuations are as high as they are now, future returns are almost always low or negative

• 17:20Speaker 00

  in the US market. And I think people hear that statistic, or they see those data, and they, they get scared. They, they start wondering the type of questions that you just asked me. When you look outside of the US, which is something that I have done for 10, 10 other developed markets, it's a much wider range of outcomes. So if you sort future returns by starting valuations across all 10 developed markets that I looked at, uh, you do still see a relationship where lower starting valuations have higher average returns. But when you include other countries, there's a much wider range of outcomes. So you can have valuations where they are now in the US market. And in Canada, for example, there are 10-year periods following starting valuations this high, where returns are very positive. And the same is true in other countries. So I think it's, there's some information.

• 18:04Speaker 00

  There's, there's some signal in valuations, but there's a lot of noise. So I would not use it to time the market. I wouldn't be worried about it. What I would do, and then I heard you guys talked about this in a recent podcast, about, uh, about Vanguard's expected returns always being too low. So, but, but I think that's the reasonable interpretation. Valuations are high. We should expect lower returns going forward, but that does not mean the market's gonna crash. It doesn't mean you should get out of stocks. I think if anything, it's a very good argument to be diversified outside of the US market. Not completely. I think global market capitalization weights are a very good starting point for any portfolio.

• 18:37Jack Selby?

  I think that's gonna go over a lot of the viewers' heads. That's very academic, and I know, obviously, you have a background in academia. But I, I do question, should you base your actual behavior and your investing decisions on your knowledge? Because people now hear this and they think, oh, I need to acquire this knowledge in order to know what to do. But even, even still, like, you would probably say that you should just dollar-cost average into index funds. And so how much does this knowledge actually even help you? How you talk about valuations, you talk about all-time highs. Oh, well, at all-time highs, it typically actually continues climbing. At valuations as high as they are, then this will happen. When in actuality, all of this knowledge, does it actually, like, it, it doesn't sound like it translates into behavioral changes or decisions.

• 19:17Speaker 00

  I think that's the benefit of the knowledge. I think when, when you acquire knowledge and when you understand things about, what is the relationship between stock market valuations and future returns? It's very comforting to know that when you do that research, it typically suggests to do nothing. And I, sometimes people need to go down that path of hear, of learning that, of seeing the data, uh, hearing me or anybody else talk about it, for them to feel comfortable investing when they see people saying, well, markets are at all-time highs, that's a bad thing. It's not, but you have to be comfortable with the data to be comfortable with the fact that it's not a bad thing. Maybe some people can just say that they have so much belief in financial markets and in index investing and in stocks, that they're gonna completely ignore the news, and they're gonna completely ignore people talking about valuations.

• 20:00Speaker 00

  But I think a lot of people do need that reassurance. I, I try and do that in a lot of my videos, where it's like, a lot of people are saying that this is a problem, that you should be worried about that. Here's why you probably shouldn't.

• 20:09Jack Selby?

  It seems like the problem, if you distill it down, is people taking too much action, trying to do too much research, trying to buy too many individual stocks, trying to predict things, when in actuality, what they should be doing is simplifying. What do you think about a one-fund portfolio? Do you think that that is a viable method for people to do? It is the most simplest, hands-off approach to investing?

• 20:29Speaker 00

  Yeah, as you guys mentioned, my, my firm manages around $8 billion. A huge portion of those assets, believe it or not, are in single-fund portfolios. The rebalancing is done inside of the fund. Uh, in, in Canada, at least, it's very tax-efficient. Uh, it's very operationally efficient. Uh, behaviorally, it's fantastic, because you don't see all the individual components. Oh, you know, international stocks went down, and you, and you start to worry about that. So I'm a big fan. My, my personal portfolio is 100% in a single-fund portfolio.

• 20:57Jack Selby?

  Your personal portfolio is in 100% one?

• 21:00Speaker 00

  Yeah, it's a Canadian-listed mutual fund, so that the ticker doesn't really matter to most of your audience. Um, but yeah, it's all in a single fund.

• 21:06Jack Selby?

  How often do you check your portfolio?

• 21:08Speaker 00

  Almost never. I couldn't even tell you what it's worth right now.

• 21:11Jack Selby?

  And do you have, then, someone that's managing your portfolio?

• 21:15Speaker 00

  Yeah, yeah. So I, I have an advisor through my firm. Now, more than ever, we need someone on our side.

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• 21:49Speaker 00

  Now, it's in one fund, so most of their advising is on, you know, how much should I be contributing to my registered accounts this year or right now or whatever? Or should I do this for tax purposes or whatever?

• 22:00Jack Selby?

  And so in practice, then what you do is you get paid out from YouTube from your job and then your advisor will just take that money and throw it in this account and you don't even check it.

• 22:08Speaker 00

  Yeah.

• 22:09Graham Stephan?

  What's the strongest argument against a one fund portfolio?

• 22:14Speaker 00

  You could make some tax arguments that maybe there are fewer tax loss harvesting opportunities with with a single fund. I don't love that argument. ETFs are so tax efficient, like you mentioned VT, that the funds that I'm talking about in Canada are extremely tax efficient. So the idea that maybe you're missing some tax loss harvesting opportunities. I think you're probably making up for that by how tax efficient the single fund is in the first place. People love complexity. As you said, people have a bias for wanting to do stuff, having components in their portfolio. Maybe that makes some people feel more engaged. But I don't know, man. Not having to rebalance, not having to worry about anything. It's, it's really nice.

• 22:49Graham Stephan?

  What would you consider to be the perfect portfolio?

• 22:52Speaker 00

  No.

• 22:52Graham Stephan?

  Does that include real estate, cash, treasuries, gold?

• 22:58Speaker 00

  There is no universally perfect portfolio. So let's, let's start there. There's a really interesting book, actually, where a whole bunch of Nobel laureates were interviewed by, by another professor at MIT about what their definition of the perfect portfolio is. I think this would make a great video. I just haven't made it yet. And everybody has a different definition. And I think that's really telling just about investing and portfolio management in general. That you can take all these brilliant people who have literally shaped the field of finance, and they don't agree on what the perfect portfolio looks like. And so how should, you know, what does my opinion matter on what the perfect portfolio is? So I don't have a universal answer. My portfolio is global equities with a Canadian home country bias. So that's relevant for Canadians. For Americans, it's a little bit different.

• 23:43Speaker 00

  You could still argue for a bit of a home country bias, but US is such a big part of the market anyway. Anyway, so Canadian home country bias, the rest, global market capitalization weighted. It's, my portfolio is very similar to an index fund, but it does tilt a little bit more towards small cap and value stocks, which is like, I don't know, it's a small optimization that I, that I like. But for all intents and purposes, it's very similar to an index fund. I own a house. I don't own gold. I don't own any other real estate assets. I have, I have some cash, probably more cash than I would tell most people to have, but it's kind of nice to have.

• 24:21Jack Selby?

  What percent do you have in cash?

• 24:23Speaker 00

  In percentage terms, it's not a huge amount. In dollar terms, it feels kind of big, but it's.

• 24:27Jack Selby?

  Is it like 5% cash?

• 24:29Speaker 00

  Below, below 5%.

• 24:30Jack Selby?

  Oh, that's not like 2%, 1%?

• 24:34Speaker 00

  Uh, it's probably close to four.

• 24:38Speaker 00

  You know what, it's probably, if I can include everything, it's below, below 3%.

• 24:42Graham Stephan?

  Why is that?

• 24:43Speaker 00

  It feels like a big dollar amount. I don't know. I look at it, I'm like, I should really.

• 24:46Jack Selby?

  So we got Money Bag McGee over here. Okay, Mr. Deep Pockets.

• 24:49Graham Stephan?

  I mean, 3% has got millions of dollars, Jeff.

• 24:51Jack Selby?

  I mean, he is managing up $8 billion.

• 24:54Speaker 00

  That's not, that's not my $8 billion.

• 24:56Jack Selby?

  Are you not a billionaire yet? Okay, got it.

• 24:58Graham Stephan?

  To me, that sounds really reasonable.

• 25:00Speaker 00

  Yeah.

• 25:01Graham Stephan?

  Like, why do you feel like it's too much?

• 25:02Speaker 00

  It's basically like global index fund portfolio, a house, some cash. Why do I feel like the cash is too much? I don't know, man, because I, I know that cash has a low expected return. I know that in real terms, it's probably losing money over the long term. And I don't have any concrete reason to have it right now. But it's like, I don't know, we have to do something in the house. It's just nice to have cash there.

• 25:24Graham Stephan?

  So speaking of savings, do you think the S and P 500 is a reasonable savings account?

• 25:30Speaker 00

  It depends how big your spending liabilities are relative to your portfolio. If you might need $1,000 next year or sometime in the next six months, and you have $10 million invested in stocks, I'm not worried about it. But if you need $1 million next year and you have $2 million invested in the market, I'd, I'd maybe think about taking some of that out of the market. So it really depends on the proportion that you need liquidity on.

• 25:55Graham Stephan?

  So how much should people be saving?

• 25:57Speaker 00

  It's another tough one. It really depends on each individual situation and the person's goals and all that kind of stuff. But I, there, there's been some research on this, somewhere between 10% at the low end and maybe a little bit higher than that. If you want to be more aggressive is reasonable. If you start saving at a, at a normal point in your life. It can be higher than that if you want to have a really aggressive retirement goal. But I, I don't like any, everyone's got to save 10%. Everyone's got to save 20% of their income. I don't like that. I think everybody needs to sit down, look at what their specific goals are and map up how much, map out how much they should be saving.

• 26:30Jack Selby?

  It sounds like you put a strong emphasis on making goals, coming up with a plan, knowing what you want, and then making sure all of your decisions, beliefs, behaviors, all serve that one goal. Where do people go wrong when they set goals? Cause if everything hinges on your ability to set good goals for yourself, how does someone know if they're setting good goals? And what would be a failure of setting goals?

• 26:51Speaker 00

  Failure of setting goals would be looking back and realizing that you set the wrong goals after you've spent 20 years trying to achieve whatever the thing you set out to achieve was. There is pretty interesting research suggesting that people are quite bad at identifying the goals that are actually important to them. But there's also some pretty interesting research showing how you can overcome that to an extent. A big one is using what's called categorical prompts. So it's really just giving people the categories that important goals might fall into. And that helps them ideate goals that are actually meaningful to them. So that's a big one. And then another one, and we did, we have this research up on our website, is presenting people with a master list of goals, which is a pretty cool idea.

• 27:31Speaker 00

  It's basically take a whole bunch of goals that other people have generated and put them all into one big list. That's like, it's not actually all goals you could possibly have, but it's an approximation of all goals you could possibly have. And then people can go through that list and pick off goals that might be important to them. So those two exercises produce goals that people will later reflect on as being more meaningful to them.

• 27:52Jack Selby?

  Let's say we're providing the average viewer for direction, for advice on setting correct goals. What would, if you were to distill it down to like one decision or thing that they should do, actionable thing? What would you, what would you say that is?

• 28:04Speaker 00

  Yeah, so the, the process that we use, and we have an app on our website that people can use if they want to do this. We ask people to write down their goals. We then ask them to double the list of goals. Just gets you to think a little bit harder. Then we present them with the categories. So we, for categories, we use the items in the PERMA model, which is a model of, of wellbeing that comes from positive psychology. But it basically suggests that the, the ingredients to a good life are positive emotion, which is feeling good right now, like we're having a good time talking. That's positive emotion. I'm enjoying a coffee later, whatever. That's a positive, positive emotion. Engagement, so being engaged in tasks that are, that meet your skill level. I would say like this, now recording a podcast is, is engaging.

• 28:48Speaker 00

  Relationships is having meaningful relationships. Meaning is doing things that are larger than yourself. And accomplishment, which is accomplishing hard things, like getting to a million subscribers on a YouTube channel, for, for example. So you give people those prompts. These are the categories that important goals might fall into. And then they fill out a few more goals. And then the final step is they, they review the master list of goals that other people have prevented. And you get, in the end, you get a list of goals that have gone through this iterative process. And people tend to find the exercise really helpful.

• 29:17Graham Stephan?

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• 29:39Jack Selby?

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• 30:31Graham Stephan?

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• 30:46Jack Selby?

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• 31:20Graham Stephan?

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• 31:49Graham Stephan?

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• 31:56Jack Selby?

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• 32:08Graham Stephan?

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• 32:16Jack Selby?

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• 32:26Graham Stephan?

  Once again, that is G U S T O dot com slash I C E D with the link down below in the description. What are the best goals that people should be writing down that you've noticed lead to the highest amount of happiness?

• 32:39Speaker 00

  Yeah, it's a, it's an interesting question. The most common goal when we did our goals survey, which is what we use to generate our, our master list, was financial independence. It wasn't early financial independence, it was just financial independence at some point. So that is definitely a goal. And I mean, it's a goal that everybody should have because at some point we're, as humans who age, not going to be able to earn income. So I think that is a very good goal. I think you have to be careful with how aggressively you pursue it. We can talk more about that if you guys want. And then there are lots of other interesting ones about relationships and time with family. Time comes up a lot, just freedom of time, which is related to financial independence, but not necessarily the same thing. But if you just think through the perma-model, positive motion engagement relationships, meaning and accomplishment.

• 33:20Speaker 00

  There are tons of good goals that stem from that that will contribute to people living lives that they enjoy more.

• 33:26Graham Stephan?

  Now, in terms of maximizing returns, going back to investing, what are your thoughts on margin for people who are young? Because I have a note here that your argument is that young people should potentially borrow to invest. And I would love for you to explain the rationale behind this.

• 33:43Speaker 00

  The economic models on lifetime saving and asset allocation suggest is that you want to reach your lifetime exposure to stocks as early as possible. Now, if you have $10,000 in your investment account, but you have $3 million of future earnings that you will eventually save, but you don't, don't yet have access to, and your lifetime allocation to stocks should be whatever, 70% or something. Then the amount you should have in stocks today, based on economic models, is much higher than your available savings. And therefore you should borrow to invest to get closer to your optimal lifetime exposure to stocks. Now, should people use margin?

• 34:24Speaker 00

  The downside of margin is that you can lose everything. You can, you can have a total blow up. I think that's very unpleasant and can deter people from investing afterwards. So I don't tell people to use margin. I think conceptually leverage for young people does make sense. There are lots of other ways that people can get, get leverage. People use leverage to an extent when they, when they take out a mortgage to buy a house. Some people use leveraged ETFs. I don't have a super strong opinion on those. But yeah, so it's a good idea in theory, but should people actually go out and borrow on margin to invest when they're 22 years old? I'd be pretty hesitant to.

• 34:57Graham Stephan?

  It was interesting, Chris Camillo was making the argument that people who are young should be buying a two to three X leveraged S and P 500 index. And said that even at two X leverage, if you're just going to be dollar cost averaging, you might see an 80% decline if the market collapses like 2008. But if you keep buying in long-term, it should outperform.

• 35:21Speaker 00

  Yeah.

• 35:21Graham Stephan?

  What are your thoughts on something like that, which is really aggressive, but as long as you could stay the path, assuming you're not going to panic sell or go to zero?

• 35:29Speaker 00

  Honestly, I don't hate it. I'm a little hesitant to say yes, S and P 500 only, because that's not really a diversified portfolio. The US market has gone through very long periods where it delivered no returns. The, the, the general idea of using leverage for young people and using leveraged ETFs to get it is not terrible. I'd, I'd be very careful about who should actually go and implement that. I think it behavioral could be very, very difficult for a lot of people, but I don't hate it. I don't, I don't hate his comment.

• 35:57Jack Selby?

  So who should? I'm curious because I think about it logically and it does sort of make sense. Obviously there's going to be a little bit of decay because you are paying that margin fee or you're paying the expense ratio on a leveraged ETF. That's usually going to be a little bit higher than the base form of the ETF.

• 36:14Speaker 00

  But you know what? So we, we had a professor on from, from, from Arizona who's done a study on, his was looking at single stock leveraged products. He's actually less concerned about this stuff. We, we had another Yale professor too, that talked about the same thing. I brought up the leverage decay. It's the volatility decay that people worry about. And both those guys said, that's not really the right way to think about it. Like, that's just part of the cost of leverage. But you look at going, go and take out a margin loan or go and take out a whatever, a bank loan. And leveraged ETFs overall, with the total cost of implementing leverage through that, that medium is going to be pretty competitive. I don't worry about that stuff. I think the behavioral issues are, are much larger.

• 36:52Jack Selby?

  So if you are to do leveraged ETFs, then what would make the most sense is something similar to what you practice, which is you kind of just buy it and then let it sit. And you don't even check your portfolio, probably.

• 37:03Speaker 00

  Oh, yeah, I wouldn't be trying to go in and out of the market using leveraged ETFs to.

• 37:07Jack Selby?

  But it is, if you're holding 10, 15, 20 years, you don't really see a problem in buying, you know, VT leveraged.

• 37:13Speaker 00

  So again, I would be like recommending, recommending leverage in my profession is like super, super dangerous. So I'm not saying everybody should use leverage. I don't want listeners to think that that's what I'm, what I'm saying. I think for people who can psychologically handle it, who really understand the implications of what they're doing, the ups and downs that can come, the costs of doing it, all that kind of stuff.

• 37:35Graham Stephan?

  Here's where I'm getting at this. You are talking about this from a very academic standpoint of research and history. And then I think there's also a behavior component to this.

• 37:45Speaker 00

  For sure.

• 37:46Graham Stephan?

  Probably I'd say behavior is more important than what's academically correct. Would you agree with this?

• 37:53Speaker 00

  Yeah. In the paper that I mentioned, that argues for this approach, they, they do kind of acknowledge that the behavior is a big issue. The argument that they make in the paper is that if people understood the long-term benefits, they would, the behavior, behavioral aspects would be a lot more palatable. Like people don't realize how big the potential benefits are and that's why it's so behaviorally difficult. So they do talk about that, but you know, talking to actual investors as, as I do, I would be really worried about most people successfully implementing this type of strategy over a long period of time.

• 38:25Graham Stephan?

  How important is behavior when it comes to investing like this?

• 38:29Speaker 00

  Not just like this, I would say investing, period. Behavior is, is kind of everything. Investing is, is simple, but not easy. I didn't come up with that. Lots of people said that before, but it's, you know, you buy index funds. Very simple. But how many people actually do that and hold on for the, for the long run? Not a ton.

• 38:49Graham Stephan?

  So should people be more afraid about losing money in the markets or more afraid about losing purchasing power of cash?

• 38:56Speaker 00

  Without question, cash. Without question. Over a 30-year horizon, cash is much riskier than the stock market.

• 39:06Graham Stephan?

  And from your perspective, if someone wants to save more money to invest, is it better for them to cut back or try to make more money?

• 39:12Speaker 00

  Make more money is, is my opinion. People get pretty upset when I say that, like when I, when I make the point that I made earlier, that maybe not everybody should be trying to save as much as they possibly can as early as possible. People get really upset when I say that, when I say people should maybe just earn more money. They get really upset about that too. But I, I think there are lots of ways people can earn more money. I don't think you guys would disagree. Like you guys are both doing stuff, you're using your time in ways that allow you to earn more money than you could have. I don't know, working at a, I'm not going to call anything out, but a job that makes less money. Like there's, there are things that you can do. Not, not everything is in your control and I, and I completely acknowledge that. But there are things that people can do to improve their situation.

• 39:54Jack Selby?

  But that being said, it still does make sense for a lot of people to probably save more than they're spending. Cause I do think that the US and probably just North America in general has a spending issue.

• 40:05Speaker 00

  I agree.

• 40:05Jack Selby?

  And so if someone is dissatisfied with where they're at financially, for 99% of the people within that, within that population, it's probably they're spending too much. What sort of spending strategies or expenses do you think people waste their money on? Or strategies they should implement in order to improve their financial performance?

• 40:23Speaker 00

  I'm not a fan of budgeting personally. Never, never clicked with me, but I think that what you can do is define the amount that you need to save in order to reach whatever your goal is and work backwards from there. And sometimes you might realize that the amount of saving you have to do to achieve the goal is way too aggressive. You want to retire at 35, so you have to save 60% of your income, which means you're living on whatever, $1,200 a month or something. That probably doesn't sound palatable to a lot of people, so you adjust your goals. But I much prefer, and this is what I do personally, I know how much I need to save each year. I save that and I don't really worry too much about the rest of the spending.

• 41:00Speaker 00

  But I'm also, you know, I'm not going to restaurants and just ordering water. But I think I'm naturally pretty, pretty frugal. So I think if someone has a spending problem, that that probably requires deeper, deeper reflection.

• 41:14Jack Selby?

  I'm curious for you, Graham, because like you said, back in the day, you would do a lot of these like frugal life hacks and stuff like that. Realistically, those actual decisions did not probably amount to a very large change in your overall net worth now. If we fully remove that from the behavioral stacking that you probably did, like the habits that you formed, the habits are valuable, but the decisions themselves were probably not very productive to your current financial portfolio.

• 41:45Graham Stephan?

  Maybe, maybe they were. And the reason I say that is because back then I was dumping everything into real estate. And I would basically be at zero dollars in my bank account at the end of the year because my goal is to have a hundred percent invested. And so by December 31st, I'd be spending money on renovations. It would go to a down payment. I would be zero. And then I'd have commissions coming in like January to basically bump me back up. And so I invested everything. So I don't know. I think in the big picture, no, but if that prevented me from buying one property back in 2012, let's just say, then that would be pretty significant today.

• 42:22Speaker 00

  I think you're in a unique situation because if you weren't that guy, it would have changed your content and the appeal of your content.

• 42:29Graham Stephan?

  But also I want to push back because I got the same experience. Like we're talking about going to a restaurant and ordering water. My experience at the restaurant was not the food that I got and ate. My experience was going to the restaurant with friends. I got the same experience as everyone else, minus a $30 entree, because I ate at home. Same with going to the bar. Like I would go to the bar with friends, would never get a drink. But we can go to a liquor store down the street and all buy one bottle. Yeah, one bottle, pour it in a, in a thing like this, drink it outside of the bar, have fun, and then we walk in the bar. Now you already got your drinks, but for a fraction of the price, and then we just get waters.

• 43:14Graham Stephan?

  No one knows. You get like, you know, just a water and a glass and, oh, you know what I used to do?

• 43:17Jack Selby?

  Bad day to be a restaurant owner, you know? Bad day.

• 43:20Graham Stephan?

  This unlocked a memory. This unlocked a memory, by the way. I'd ask for water with ice in it and they said, oh, by the way, could I get a lime? Throw the lime in there. No one has any idea. It's just water. I just remembered that.

• 43:34Jack Selby?

  I don't know how small businesses would survive. If people, if everyone did that, I am curious if you could go back and give yourself now, let's just say you gave yourself $10,000 from what you own right now. And you had to spend it and you couldn't invest it to your 18 year old self. And so you had $10,000 to spend over the next, you know, 10 years, an extra thousand dollars a year, just on dinners or whatever it is. Would you do that?

• 44:01Graham Stephan?

  Yes.

• 44:02Jack Selby?

  You would do that?

• 44:03Graham Stephan?

  Yeah.

• 44:04Jack Selby?

  Yeah. Even though you could not invest the 10,000, you had to.

• 44:06Graham Stephan?

  Yeah, $10,000 today, if I could give it to myself back then, I hundred percent would.

• 44:10Speaker 00

  It's probably not $10,000 today, though. It's $10,000 if it's a thousand.

• 44:13Jack Selby?

  Exactly. Giving it back to them back then, it would be like, you know, losing 10 grand today, but receiving 2,000 back then.

• 44:18Graham Stephan?

  Let's just say, let's just say that $10,000 back then is just now through real estate and this and that worth 60,000. Would I take $60,000 today to get, probably not, but if it's 10K, I would.

• 44:30Speaker 00

  What's the number?

• 44:31Graham Stephan?

  I mean, I have no idea. I would have, I would have no clue how to, how to compound what went to which property and then to what index fund.

• 44:39Speaker 00

  No, what number would you do it? Not 60, but you would do it at 10?

• 44:44Graham Stephan?

  Uh, maybe like 30.

• 44:45Jack Selby?

  30 to 10?

• 44:46Graham Stephan?

  30 to 10, yeah. And giggles, but at the same time, I got.

• 44:50Jack Selby?

  3X over, I mean, it's 18 to 35, so 17 years, so 3X over 17 years. That's, yeah, that sounds about on track with the S and P.

• 44:59Graham Stephan?

  It's, it's, it's probably.

• 45:01Jack Selby?

  Enough, close enough.

• 45:02Graham Stephan?

  Like I said, I didn't miss out on experiences at all. I got the same experience. I just found a way to do it cheaper.

• 45:08Jack Selby?

  I think a lot of people could put into practice the things that you did when you were younger, for sure. Because I hundred percent admit, for most people, it is a spending issue.

• 45:17Speaker 00

  Yeah, I, I agree with that. I think spending is a huge problem. A lot of people don't know what they spend. They don't, they don't realize the impulses that they have to spend. And then all of a sudden they have no, no money. And the, the problem with, the problem with this whole issue is that because of compounding, 20, 30 years down the road, when you realize you had a spending problem, there's not a whole lot you can do about it. You can't undo the saving that you didn't do because you can't catch up with the compounding that you missed.

• 45:45Jack Selby?

  So those that do end up saving money, you argue, of course, ETFs all the way, but I am curious, within ETFs, I know that it is the objective of these ETFs to get as much money into the ETF as possible. So then they can collect their expense ratio fee. It's easier to sell a product, the product being the ETF. If it's not as volatile, if it appeals to the investor's emotion, because it's easier to digest as an investor, less volatility. But because of that, do you think that they could be compromising returns over time, risk adjusted returns, because they're trying to sell something a little bit more conservative?

• 46:24Speaker 00

  I don't know about the conservative angle, but I think that this, this issue of ETFs being created to be marketable is a massive issue. I, I did a video earlier this year that I called the rise of ETF slop, where I basically said that we're in this age now where there are hundreds of ETFs, maybe, maybe even more now, being created every year for all kinds of wacky investment strategies that appeal to the biases that investors have. So I talk in that video, I think it was about a covered call ETFs. I talked about thematic ETFs, like you got your semiconductors, you got your whatever, AI ETFs, all that kind of stuff. There were a couple of other ones too, single stock ETFs. You can buy a covered call leveraged single stock ETF, which is like, it's wild, but they're attracting a ton of assets.

• 47:08Speaker 00

  And the crazy thing about them is that they, they have, they have high fees. And so an issuer can come out and create whatever, 15 new ETFs that cover individual stocks. If one of them attracts a bunch of assets because it does well over the short term, because that stock gets a bunch of media coverage or whatever, it makes it worthwhile for them to have issued all of those, all of those ETFs. And so we're in an environment now where there are all of these financial products that are behaviorally very appealing. Because whatever, they pay a 10% yield or the buffer ETFs, that was the other one that I had in that video. So they're capped on the upside and the downside. And again, like to your, to your point, that's very behaviorally attractive. If you listen to the story, oh, I don't have to lose money and I can invest in stocks. That sounds amazing. People don't realize how much upside they're giving up in the long run. And all those products tend to have higher fees.

• 47:50Speaker 00

  And so you get in the situation where the ETF issuers want to be profitable, as they should be. And so they create products that are appealing to people that are very marketable, that have higher fees. And those are the ones that get advertised to investors and people buy them.

• 48:03Graham Stephan?

  What do you think about covered call ETFs?

• 48:06Speaker 00

  I mean, I've done, I did, I think, three videos on this topic last year and I, I don't know who should actually invest in them. I think a lot of people do because they pay high income yields and that feels really good. But who should actually invest in that strategy? I, I'm at a loss. Like I really don't know.

• 48:23Jack Selby?

  I agree.

• 48:23Graham Stephan?

  I would, well, I would argue that the people who should invest in that are the people who mentally want to see that income coming in. And they, they like to see that, I think it's like 8% a year. That's a consistent dividend without a ton of volatility. And just psychologically just makes them feel better to know, hey, if the market goes up or down, I'm making my 8%.

• 48:45Speaker 00

  But you, you're not, right? Because you're making, if, if the portfolio crashes 30%, you don't get 8% on your initial investment. Like that's, there's volatility in that too. But I think that people don't understand, the, the thing people don't understand with covered call funds, covered calls in general, just as a strategy, is that it introduces asymmetry into the distribution of outcomes. Which is basically like, it reduces volatility. So if you, you look at a covered call ETF or whatever, you look at its sharp ratio, it's like, that looks, that looks really good. It's a good sharp ratio. It's got less volatility than the market. But all of that, most of that volatility reduction is coming on the upside. You're keeping most of the downside. You get a little bit of premium buffer, but you're keeping most of the downside risk and you're completely capped on your upside.

• 49:25Graham Stephan?

  What does that mean for Jack's option strategy?

• 49:30Speaker 00

  Okay, so I want to just think through like you you talk about getting whatever 3% a week or 1% a week, whatever.

• 49:37Graham Stephan?

  Well, a lot of that, every, I I hope every time I've said that it's more of like tongue in cheek. It's kind of like, yeah, you know, I get 3% a week. Obviously, you do not average 3% a week. That makes zero sense as an investor. You can't do that. That being said.

• 49:51Speaker 00

  I'm glad to hear you say that.

• 49:51Graham Stephan?

  Yeah, that being said, but I I do think that it's not a bad strategy to play around with, with a little bit of money on the side. And I've been doing it and so far it's it's tended to work pretty well.

• 50:05Speaker 00

  Have you benchmarked your covered call returns relative to the underlying stock?

• 50:09Graham Stephan?

  Well, as of late, yes. And relative to the underlying stock, I have underperformed.

• 50:15Speaker 00

  Which is kind of what you'd expect. So I mean, listen, I've heard you guys talk about this stuff. I know it's a small part of your portfolio and I know you enjoy doing it. And it's like, that's, that's fine. But as a strategy, what people have to understand about covered calls is that the expectation is that you're going to underperform the underlying structurally. Like that is what is going to happen. And if you want that and you understand that you're giving up upside volatility, but not downside volatility, which basically means if it goes down, you still capture most of that. But if it bounces back, you don't capture that. That's just, that's mechanically the way a covered call works. If people get that and they have fun doing it, like who am I to say they shouldn't do it? I just think people have to understand what the expectation is when they go into that type of strategy.

• 50:55Graham Stephan?

  What do you think about the opposite strategy of buying call options or buying put options then?

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• 51:29Speaker 00

  Well, two very different strategies. Obviously, buying call options is a way to get leverage. So I don't think people should, I'm not going to say everybody should be buying calls, but we talked earlier, but there, there can be some benefits to leverage in a long-term portfolio. When we had Robert Merton on our podcast, who's a Nobel laureate, and he's done a ton of the, the original research on life cycle asset allocation, how should people invest over their lifetimes? He's an advocate for using a bit of leverage as well. And he talked about on our podcast that he would actually rather people use call options than margin. Because you can't completely blow yourself up with a call option, whereas with margin you can. But the other comment that he made is really interesting is that he, he would not advocate for people buying call options themselves.

• 52:14Speaker 00

  He would like to see it embedded in a financial product. So you buy an ETF that gives you exposure to the S and P 500 plus, plus calls to give you some leverage. And then you just buy the ETF and it's very simple. But Merton's point was people shouldn't be trying to buy calls themselves because people are error prone and there's a lot of risk that you screw something up.

• 52:33Graham Stephan?

  So given all these strategies, who should buy individual stocks? And when is that the right move to make?

• 52:39Speaker 00

  I think you guys are great examples where I, I think you have a lot of fun doing it. It gives you something to talk about. It's entertaining to listen to you talk about it. But those are all reasons that people do buy individual stocks. It's pretty boring to show up to a dinner party, especially if you're not ordering food and, and say that, you know, you just buy index funds. But you guys, you guys have great stories to tell. So you can not order food and talk about, I can't remember the name of the stock that you guys were talking about recently, but the, you have stocks to talk about, you have stories to tell. And that's.

• 53:09Graham Stephan?

  That's true, because my Robinhood loss ended up becoming one of our most viewed clips. It's been reposted so many times. I think cumulatively, we probably get 50 million views in that Robin, just me losing money on Robinhood. So I made some of the money, I'd lost so much more than that clip generated, but it helps, helps offset some of the losses on that.

• 53:29Speaker 00

  There are other niche scenarios too, like some people who are directors of companies are required to hold stock. Some people who are insiders at companies that have gone public and hold a huge amount of stock with a low cost basis. In many cases, they want to continue holding the stock, not just for tax reasons, but because there's a huge sentimental value. And it's like, if that person has diversified enough for them to be set for the rest of their life and they want to continue holding the stock of the company they helped to start, I'm not going to tell them that's, that's a bad thing to do. So there, there are reasons like that. But who should like, commit to picking individual stock as part of their long-term investment strategy for reasons like for objectively, uh, objective reasons, like it's going to improve their long-term outcome? I honestly don't think anybody.

• 54:09Graham Stephan?

  Is it possible though, that we can continue to see these 10 to 15% returns every single year? Cause my concern is that we've all gotten very spoiled, that for the last 15 plus years, we're seeing 12% annualized returns. What do you think are the returns that we're probably going to see over the next 10 years?

• 54:26Speaker 00

  We, as a firm, produce capital market expectations, similar to what Vanguard does, I guess. I think ours are a bit higher though. But I think we're just below 7% a year as our long-term expected return for, that's a globally diversified portfolio with a Canadian home country bias. Whatever, it's probably roughly similar for a, just a global market portfolio, maybe a little bit lower because the US is a bigger weight. But whatever, call it between 6 and 7%, I think is a reasonable long-term expectation. That's a nominal return. So before, before inflation, I don't think the returns that we've seen in the US market in recent history are, are normal. I did a video on that. I felt like it was a bit of a throwaway video, maybe a couple of years ago, where I just talked about like, what have the actual returns been of global stock markets throughout history?

• 55:09Speaker 00

  Of the US market throughout periods other than this one that we're in right now? And it's, it's pretty clear that this current period is an anomaly. It's not a period that we should expect to repeat forever. And I think there is a, there's a danger there where people look at 10% is such a common number. I think that was the title of my video, do, do stocks return 10% a year? And the thumbnail says, no, they do not. But I, I think that 10% number is dangerous because it, it leads people to think through long-term financial decisions on the assumption of 10% returns. And that can lead to, it can lead to mistakes.

• 55:40Graham Stephan?

  How much international equity should people own?

• 55:43Speaker 00

  The easiest starting point, I love, there's, there's a quote from Eugene Fama, who is a Nobel Prize winning economist. He's the guy that kind of created the idea of market efficiency, which is the idea that the market prices contain all available information. In an efficient market, you shouldn't try and pick stocks. So like this, this whole concept of index investing really sits on top of Fama's research. His comment about, about answering your question is, you've got to talk yourself out of the market portfolio. So you look at market capitalization weights. The market has priced in the optimal asset allocation, allocation approximately.

• 56:18Graham Stephan?

  Yeah.

• 56:19Speaker 00

  So look at that as a starting point and you've got to talk yourself out of it. Now, you can talk yourself out of it to an extent, if you're an American, maybe you do have a bit of a home country bias. If you're Canadian, as I am, and, and as we reflect on our portfolios, again, maybe you have a bit of a home country bias. But market capitalization weight should be the starting point. So that's whatever, 60 to 65% US and the rest international.

• 56:41Graham Stephan?

  How do you know when you're being too conservative with your investments?

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• 58:01Graham Stephan?

  How do you know when you're being too conservative with your investments?

• 58:05Speaker 00

  I don't know if you can know that. We, we, we have a, a tool on our website that, in, in my opinion, is the best, it's called a psychometric risk tolerance assessment tool. So it's basically like, it's a bunch of survey questions that you go through and it spits out a range of asset allocations that make sense for you. I think doing something like that, so you have an idea of what you're comfortable with makes a lot of sense. And if you're more conservative than that, then that, that'll help to, to tell you. I think a lot of people probably are more conservative than they should be. I think tools like target date funds, there, there is research on this out of Boston College, I believe, showing that target date funds do help people increase their equity exposure when they're younger relative to what they would do if they were on their own.

• 58:50Speaker 00

  I think financial advisors can have the same effect. But people, people have, the, the reason in that research is that people tend to have Pessimistic expectations, more pessimistic than they probably should be, which leads them to have more conservative portfolios. So it's, it's, it's a tough question to answer, but it's definitely something worth interrogating for each person.

• 59:08Jack Selby?

  When does it make sense to have a financial advisor? If what your firm mostly invests in is just a single ETF, one fund portfolio, then why would it make sense for your clients to be putting their money with you, paying fees when they could basically be doing the same thing?

• 59:25Speaker 00

  We're huge advocates of DIY investing. I mean, my, my YouTube channel and our content in general is like, at least in Canada, one of the top resources for do it yourself investors to figure out how to do it themselves. So I'm a big advocate for doing that for people who can. There are a couple of reasons, I think, that, that people do hand it off. One is implementation. So we can say you just buy a fund, but you still have to figure out which accounts you're buying it in. You still have to figure out when you should sell it, if you should, how to fund your spending, where to put new savings, which fund it should be, what, what asset allocation it should be. So there's lots of decisions leading up to that final step of just buying a fund. Just buying the fund is the easy part. And there's a lot of complexity. So people could spend hours and hours doing research and listening to podcasts like this to arrive at those decisions.

• 1:00:09Speaker 00

  Or if they want to hand it off, they can contact a financial advisor and be told basically, based on your situation, this is what we would recommend. So reducing complexity is, is one and implementation. And then the other one is comfort. We have a ton of people who find us through our podcasts. And they'll be like dedicated listeners for years. And then they'll become clients at some point. And they'll tell us that they stopped listening to the podcast because they didn't have to worry about this stuff anymore. And it's a huge weight off their shoulders. It's a really interesting phenomenon, but I think it speaks to one of the reasons that people outsource this stuff, which is mental overhead. It just, it just goes away. It's one less thing to think about.

• 1:00:46Jack Selby?

  So you're at $8 billion in assets under management right now.

• 1:00:49Speaker 00

  Canadian dollars, yeah.

• 1:00:49Jack Selby?

  Canadian dollars.

• 1:00:50Graham Stephan?

  Oh, that's like 2 million American.

• 1:00:53Speaker 00

  It's not that low.

• 1:00:55Jack Selby?

  Did you notice a stark increase in the amount of clients that you had before and after you went on Diary of a CEO?

• 1:01:01Speaker 00

  No, not a stark increase. Like, there was definitely a period of heightened interest where we fielded a whole bunch of calls. But no, not a huge difference.

• 1:01:10Jack Selby?

  Would you say, would you be able to distill it down to a number? Like going on a podcast that gets 2 million views like Diary of a CEO, how much money and deposits did you get?

• 1:01:18Speaker 00

  Honestly, it would be a rounding error. Like it's,

• 1:01:22Jack Selby?

  Really?

• 1:01:22Speaker 00

  It was not a huge deal. A lot of interest, a lot of phone calls, a lot of new subscribers to my channel and our podcasts and stuff like that. But I mean, we're already a big enough firm that I don't think something like that is going to move the needle that much.

• 1:01:35Graham Stephan?

  I have a feeling for something like that, it's going to take repeated.

• 1:01:39Jack Selby?

  Yeah, exposure. They subscribe, they become a follower.

• 1:01:42Graham Stephan?

  It's going to be, it's going to start with that and then they're going to go down the rabbit hole. And then like three years later,

• 1:01:46Speaker 00

  Right.

• 1:01:47Graham Stephan?

  Then it'll be like,

• 1:01:47Jack Selby?

  That's true. See some dude on a podcast, gives him my life savings. It's like, that's probably not very.

• 1:01:51Graham Stephan?

  I saw you on Diary of a CEO, here's all my money.

• 1:01:54Jack Selby?

  Yeah, yeah.

• 1:01:55Graham Stephan?

  Now, if you're fielding a lot of these calls, I'm curious, what's the worst call and financial situation that you've seen?

• 1:02:01Speaker 00

  I don't take the calls, so it's tough for me to say. But I, I think probably the most common situation where I look at it and it's like, yeah, like this, this person really needed our help is people who are just sitting in cash. They've got a successful business or they've got a high income job or whatever. And they've just been shoveling money into a savings account and it's literally sitting in cash because they don't know what to do.

• 1:02:21Jack Selby?

  What's the most amount of cash you've seen?

• 1:02:23Speaker 00

  I don't know, millions of dollars. I don't know.

• 1:02:25Jack Selby?

  So it was a small business owner or something that just saved up everything through millions of dollars of cash?

• 1:02:29Speaker 00

  Or, or someone who sold a business and they stuck it in a savings account because they didn't know what to do. And it's just, it's, sits there. So that, that's one of those, it's a situation where you look at it and it's like, yeah, okay. So the, our fee relative to the opportunity cost of sitting in cash is negligible for that person.

• 1:02:45Jack Selby?

  And what about the strangest story?

• 1:02:47Speaker 00

  Weird ones would probably be people who have started businesses in legal gray areas and, and come to us and we've had to be like, uh, we, we can't touch this. There's been some interesting ones. There are other ones with, with crypto where people just made it huge on some random token. And it's like, it becomes real money and it's life changing. And it's, you look at it and it's like, wow, that's.

• 1:03:08Jack Selby?

  What's the biggest amount you've seen?

• 1:03:10Speaker 00

  From that type of scenario, tens of millions.

• 1:03:12Jack Selby?

  Tens of millions of dollars. Wait, we're talking after tax?

• 1:03:17Speaker 00

  They, they, they sold it, went to cash and they were like, hey, I need help. Yeah. So I mean, those are, those are crazy stories, but it's like, that's, we can say, wow, and it's like, wow, that's a crazy outcome, but we've also.

• 1:03:26Jack Selby?

  Wait, guys, you're saying if you put $10,000 into crypto, you could turn it into tens of millions?

• 1:03:31Graham Stephan?

  Yeah, which coin to invest in? I saw on your channel, there were some comments about an ICO that we should be buying.

• 1:03:36Speaker 00

  Those comments are the worst.

• 1:03:37Jack Selby?

  Yeah.

• 1:03:38Speaker 00

  But seriously though, we, we also get people who have actually literally won the lottery by buying lottery tickets. And so it's like, people get windfalls from all sorts of different weird. Lottery's not as weird. I think crypto ones are stranger. But yeah, the people end up with piles of money for all kinds of weird reasons.

• 1:03:54Graham Stephan?

  The one thing I found very interesting is that you recently said that the more you look at your portfolio, the worse you're likely to do. And then I thought of myself where I look at my portfolio probably five times a day. It's, it's actually strange for me not to have checked it before we filmed. I, I, I check constantly.

• 1:04:13Speaker 00

  Are you okay? After not checking it, do you feel okay?

• 1:04:16Graham Stephan?

  I'm curious what it's doing because there's 10 minutes left of the market and I like to throw in some buys at the end of the day if it's down.

• 1:04:23Speaker 00

  Yeah, that's a real phenomenon.

• 1:04:24Graham Stephan?

  So what is it, what does it say about me that I check so often?

• 1:04:27Speaker 00

  Uh, it's honestly, it's probably leading you to take less risk than you otherwise would if you were like me and just didn't look at it. That's what that research suggests. It suggests that people who check their portfolios more frequently are more worried about risk because they see the volatility day to day or minute to minute throughout the trading day. And it makes them more averse to risk.

• 1:04:48Graham Stephan?

  So what we're going to do for the channel members is that at the very end, I'm going to show you my portfolio and you'll be able to rate it. And you'll be able to be brutally honest with what you think of my allocation. Because I have a feeling I know what you're going to call out. And there's, there's something in my portfolio that the channel members will see that you're probably not going to like.

• 1:05:08Speaker 00

  Okay.

• 1:05:09Graham Stephan?

  But moving beyond that, in terms of the general economy, do you think it's easier or more difficult for people to get wealthy in 2026, 2027?

• 1:05:18Speaker 00

  I'm not an economist. I don't study the, the macro economy. I can tell you what, what we see with our very biased sample of people who are becoming wealthy. There are still a lot of people starting businesses. There's still a lot of people raising capital. There are still a lot of people participating in the equity of companies, like, like some of these AI companies that are still private or, or maybe going public soon. Like there's still a lot of wealth being created. Now, again, I'm not a, an economist. I don't study the, the lives of everyday Canadians or Americans. Is it easier or harder for them to, to get wealthy? I don't know. But I can tell you from our, our, again, acknowledged as a very biased perspective, as a firm that deals with people who are getting wealthy or, or who are wealthy.

• 1:06:01Speaker 00

  It does not seem like that has, that has decreased.

• 1:06:04Graham Stephan?

  Do you see any risks to our economy that you think people are overlooking?

• 1:06:08Speaker 00

  Tons of risks. I, I think it's very easy to get bogged down worrying about questions like that. And I think a lot of people do, like when I, when I posted my video recently on the biggest myths in personal finance, I mentioned that savings method, you should save as much as possible. A ton of the replies were that, well, in this economy, it's different. You need to save as much as you can because the future is going to be awful. It's like, maybe, maybe it is. I think being an investor inherently requires optimism. I think if you're not optimistic, you're not going to be a good investor. It ties back to the checking your portfolio too much. Like if you, if you just invest in stocks, don't look at your portfolio, save what you need to save and don't worry about it. You're going to be a better long-term investor than if you worry about whatever thing.

• 1:06:50Speaker 00

  I mean, the, the funny thing is, right, you could have, you could probably, you could have 10 brilliant economists on your podcast who would all give you some crazy niche reason about why everything's about to collapse. And maybe they're, maybe they're right to an extent. Maybe they're not. Maybe it's already priced in. I don't know. And those things are interesting to, to hear about, but are they actionable or useful for investors? I don't, I don't really think so. I don't worry about, I don't worry about that stuff too much.

• 1:07:15Graham Stephan?

  What do you think about Pokemon cards as an investment?

• 1:07:18Speaker 00

  I saw that episode, but I have not listened to it. I don't know, man. Lego, Lego is another one that apparently has had great returns. I did listen to your episode with Ben. That was cool. That was a cool one. But yeah, there's all kinds of weird stuff that you can show, like, look how well this person did investing in this weird thing. I think collectibles as a general, as a general asset class, wine is another one that comes up. Cars is another one. There's all kinds of weird stuff. It's whatever. I think a lot of those asset classes are pretty thinly traded. I really like advice that works in equilibrium. Like you can kind of tell everyone to invest in index funds and that, that works. They're participating in the market portfolio. You can't tell everyone that they should have a 10% allocation to Pokemon cards.

• 1:08:03Speaker 00

  The market will explode.

• 1:08:05Jack Selby?

  Now, speaking of being well diversified, I think a lot of people also look at their house as an investment. What are your thoughts on the current conditions of the housing market?

• 1:08:14Speaker 00

  I, I do know the Canadian market better than the US market. I know housing costs are high everywhere and they've been going up. And that's, that's a challenge. That's true for both renters and owners. But beyond that, I mean, I, I think that the, the housing decision, how much housing you should buy and whether you should rent or, or own it. I think the assessment of that is still the same as it would be under any market conditions.

• 1:08:37Graham Stephan?

  Even though now the monthly payments are so much higher, the prices are so much higher. What's surprising to me is that when you look at the income ratio needed to buy a house, it's the highest it's ever been in history. And so I tend to argue that maybe conditions today are not as they were five years ago, 10 years ago.

• 1:08:55Speaker 00

  Because housing costs have gone up or because the rent versus own trade off has changed?

• 1:08:58Graham Stephan?

  Purely because prices and the carrying costs are so high relative to what the average income is.

• 1:09:04Speaker 00

  Yeah. I mean, I, I agree that is a challenge, but I mean, people still have to pay for housing. So I, I don't know how, I don't know how it changes the decision other than maybe you have to live in a smaller, a smaller place than you would have 10 years ago.

• 1:09:16Graham Stephan?

  Do you consider a house to be an investment?

• 1:09:18Speaker 00

  Uh, not an investment, an investment. I would say it's a consumption good. It's a mix, I guess. When, when you buy a house, you're buying, you're, you're consuming part of it, but you're also investing some of your money in a real estate asset. So it's a, it's a, it's a combination.

• 1:09:36Speaker 00

  I think the big benefit of buying a home is that it provides a hedge to the cost of living in that specific home. It's easy to live in a very specific area that you want to stay in. If the costs of living in that area go up, rents are going to go up a whole bunch. But the other thing that's going to happen is that real estate prices are probably going to go up. And so if you own a house, you're hedged. Housing costs went up in that area, but so did the price of your asset. So you're protected, whereas a renter might get priced out of their home. That, that to me is the best argument for owning.

• 1:10:07Graham Stephan?

  It's like insurance almost.

• 1:10:09Speaker 00

  Yeah, it's kind of like insurance. It's, it's like, there's a really cool paper that asked that question. Why do people invest so much of their net worth in their home? And they come to the answer that it's because it behaves like a long-term bond that's perfectly indexed to the costs of living in that specific home, which is a pretty cool way to frame it. Now, I think that the other side of that argument is that just like a long-term bond, well, it might produce coupon payments that, that meet your cash flow needs or whatever. In the interim, in the short term, it's going to be very volatile in price. Long-term bonds are super volatile. Individual home prices are also super volatile. And I think that leads into how long you want to stay in a place. If you want to stay in a place hypothetically forever, and you want to make sure that you're

• 1:10:52Speaker 00

  not going to get priced out of that house, the only option is to buy. But if you might leave in three years between transaction costs and price risk, I think renting starts to become pretty appealing.

• 1:11:03Graham Stephan?

  You have a very interesting equation. I've never heard this before, that determines if you should rent or buy. Explain what this is and who should be using it.

• 1:11:11Speaker 00

  I called it the 5% rule. That's what you're talking about. And it's not always 5%. Some people got mad about me, about that. It's like, well, it should have been 5%, 6% or 4% or whatever. But I'll explain the premise and people can figure out what number makes sense for them. It's basically the idea that there are unrecoverable costs of owning a home, just like rent is an unrecoverable cost. You, you rent a place for $3,000 a month, you pay the rent, you get a place to live, you have nothing left over. There's no residual value. When you own a home, people imagine that you buy this asset and it goes up in price and they don't, they don't account for all the costs that you, that you incurred to live there. And so I think you have to account for those to make the rent versus loan comparison. And so I just thought about, okay, if we take the property taxes, which are an unrecoverable

• 1:11:54Speaker 00

  cost, you pay taxes to the municipality, whatever, and you get whatever, a nice city or whatever, but there's nothing, there's no residual value. You pay maintenance costs, which are just the costs of keeping the place running, your video on your real estate returns and your kind of misadventures, if we can call them that in real estate. Maintenance cost was a huge part of that.

• 1:12:13Graham Stephan?

  It was.

• 1:12:13Speaker 00

  Where people just, they don't account for it. And it's all little things. I thought you did such a good job in that video. Because all those little things that add up to like, holy crap, I paid X number of dollars and spent X number of hours maintaining my house. So maintenance costs, and then the other big one that I think really gets ignored, and you talked about this implicitly in your video, Graham, is, is the opportunity cost of, of capital. If you have $100,000 of equity in a home, that's $100,000 that you could have had invested in the stock market. And that difference in expected returns between home equity and stock market appreciation is an opportunity cost. And then if you're using leverage, you also have the, the cost of, of interest. So you end up with a weighted average cost of capital, but whatever. And so you add all that up and based on the numbers that I used in that video back then,

• 1:12:57Speaker 00

  I came up with 5% as a number. And all you do is you take that and you look at the amount of rent that you would be paying, and you compare the 5% of the value of a home that you would otherwise buy to the amount of rent. And if they're equal, you're financially indifferent, roughly, approximately. If, but, but it also shows you if owning is much more expensive, maybe 5% of the property is whatever, five grand a month, but you could rent a similar place for $4,000 a month. And that's okay, renting's actually pretty cheap relative to buying this house. And I can tell you the other thing too, that maybe renting is more expensive. So it's, it's rough, it's not perfect, but I mean, in analysis that I've done since then, it's, it's actually pretty good.

• 1:13:40Graham Stephan?

  So again, I think we're going back to the math versus behavior.

• 1:13:44Speaker 00

  Yep.

• 1:13:44Graham Stephan?

  And I think there are also intangible benefits of owning a house that even for myself, I try to account for. Because I put myself in the position where mathematically, I think it's better to rent right now. But then I think realistically, could I be happy renting a house? And I think for a home that you intend on keeping or staying in 10, 15 years, I don't know if you would be happy, or at least for myself, renting a home for that long and not being in control of that house and like what you do with it and the fixes and the, you know, move in a, you know, changing a bathroom. So where do you build in the intangible benefits?

• 1:14:24Speaker 00

  I think a lot of what you just described is actually a trap that people don't account for. The perception that you have control and can do whatever you want, it seems really compelling. Listen, I've lived, like I'm, I'm in the middle of living this right now, where we bought a house six years ago. And ever since we moved in, we've been doing stuff like a bathroom, like, uh, I mean, we, we had one wall in the house that was never finished when the house was built. It's in a room with a really, really high ceiling. And so we finished the wall and on that wall, I put a full glass backboard basketball hoop. Cause I was like, that'd be super cool. Like we're doing this anyway. It's an extra whatever, a few thousand dollars to put that, I'm going to do it. And stuff like that's very fun. I would never be able to do that in a rental. And I love, I can, I can literally make myself breakfast and then go shoot hoops like

• 1:15:08Speaker 00

  right beside the kitchen, which is, which is awesome. But every one of those little things is thousands of dollars of costs that I would not have incurred as a renter. So that's, you can view that as awesome, or you can think about, are renters, are people who rent their homes any less happy than owners? When you look at the broad data, like I, again, I've, I rented with my family, with a wife and kids for six years. We've now owned a home for six years. I don't think we're any happier as homeowners. Honestly, I think the added stress of home maintenance and managing all the renovation stuff we've been doing is probably a net negative relative to when we were renting. And landscaping, man, like, you know, I mean, you know, real estate better than I do. It's, it's brutal.

• 1:15:50Speaker 00

  Uh, and then when you look at the data on this, and there have been studies in Canada and a few other countries that ask whether homeowners are happier than renters. There, there is one American study too, that it was a sample of 600 women, I believe specifically. But asking that question, are homeowners happier than renters? And the answer is generally no, when you look at a broad sample of data. And I mean, that, that lines up with, with my experience, so I, I believe it. It's good, good confirmation bias for me. So it's like, I, that should be an intangible. It seems like that's a great argument. You can do whatever you want, whatever you want with your house, but I really think it's a license to spend just ungodly amounts of money doing stuff that's not actually going to improve your life. And I say that as someone who's doing it right now.

• 1:16:33Graham Stephan?

  Another thing that I'm curious about is I posted on Twitter and it got a lot of attention. It got four million views. I said, for those that have paid off their mortgage and own a home free and clear, do you have any regrets? Almost no one posted that they had regrets. There's a few people who had regrets that were very specific to paying off a mortgage that was sub 3%. But every single other person said that the freedom and the feeling they got by owning a home free and clear superseded anything else. And they said it was the best feeling in the world. What, what are your thoughts on that?

• 1:17:08Speaker 00

  I've got a couple of great anecdotes that speak to this. So in, in Canada, we have to get Canadian for a second here for me to explain this. In Canada, when you take out a mortgage to buy a home, the interest is not tax deductible. But when you borrow money to invest in an asset that's expected to produce income, like stocks that, that pay dividends, the interest becomes deductible. And so sometimes we'll see a client who comes to us and they have whatever, a million dollars in their portfolio, and they have a whatever, a $500,000 mortgage. This is borrowed to purchase the house, non-tax deductible. And we'll, we'll say, hey, you know, we could use some of your portfolio to pay off your mortgage. And then if you want to keep the mortgage, you can re-borrow, reinvest back in the portfolio. You end up in the exact same place, but your interest is now tax deductible.

• 1:17:51Speaker 00

  It's just smart financial planning if someone's in that situation. And I would say 95% of the time, there's one case where the, where the person really did go through with it, but 95% of the time, they do step one, we sell some of the portfolio, we pay off the mortgage. And then we're like, okay, now, now we're going to go back to lender, we're going to, we're going to re-borrow and invest back in the stock market. And 95% of the time, the person is like, no, you know what? I actually feel really good having the house paid off. We're, we're just not going to, we're not going to reinvest in the market, which is fine. I think that's great. That was the right decision for them. But it, going through the actual process, at first it's, oh, this is a great idea. We're going to do it. And then they have a paid off house and they have to make the decision to re-borrow to invest. And they don't do it.

• 1:18:36Speaker 00

  So I, I think that speaks volumes to your, to your question.

• 1:18:39Graham Stephan?

  I wrestle with the exact same thing, because I know at some point I want a house with more space, we have family to visit, uh, you know, with a bigger yard, things like this. And then I wonder.

• 1:18:53Graham Stephan?

  For that exact same purpose is that the the primary home deduction really is capped at 750 grand. Everything else after that, there are ways of borrowing, but it seems like the best thing to do is if you have something relatively liquid, use that to buy the house and then pull a margin and then buy back the position that you had sold to buy the house. And I wrestle with the exact same thing is would I, would I do that regardless? Like, why am I not doing that now? Why didn't I do that five years ago? I think that lends itself to just the peace of mind that I, I've never really controlled for peace of mind until recently. It's just something clicked after dealing with all those rental properties, where now I place a premium for just easy.

• 1:19:36Speaker 00

  Yeah, I think there's a, there's a lot of psychological benefit to having a, having a paid off house. I also don't think people, on the other side of the argument, I don't think people fully understand the costs of having a paid for house. Almost every video that I make on renting versus owning, people will say, well, the math changes dramatically in favor of owning once your house is paid for, as if it's better to have a paid off house. It's actually way worse.

• 1:20:00Graham Stephan?

  Yes.

• 1:20:00Speaker 00

  When you look at the total cost of owning, including the opportunity cost of equity with a house that's been bought in cash or is fully owned otherwise.

• 1:20:08Speaker 00

  And you compare that to a renter, the fully paid for home is almost always going to look worse than renting and investing in the stock market. Mortgages bring owners onto the same level as renters. But if you have a paid for house, it's, it's costing you far more, which is the cost of, of peace of mind. And there's nothing wrong with that.

• 1:20:26Graham Stephan?

  At what point does optimization just become not worth it? And I'll give you an example, a personal example. I was looking at doing a box spread, but I had some tax free muni bonds too. And so I was thinking, if I do the box spread, I can get a capital loss. And then I look at my after tax return compared to what I'm earning from tax free munis. And I'm doing all these like mental calculations. And then I determined through Claude analyzing every single aspect that I would be saving.

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• 1:21:40Graham Stephan?

  0.02% by doing all of these like things. And I think like the net amount was like, it was a negligible amount. I mean, it's the difference of, you know, a few hours in the market up. That's really what it was. When can people take it too far?

• 1:22:00Speaker 00

  So I think it's subjective. I think in that case, you've got to look at the amount of time that you spent doing it. You've also look at how much you enjoyed spending that time. I think it's an interesting example because you might have really loved saying that you did a box spread. And maybe that's something you could talk about in content or whatever. And maybe that's a reason that it doesn't matter so much. But if you account for the cost of your time in, in that scenario, you're maybe a net negative even. So I think people have to account for time. But it's also highly subjective, just based on an individual's preferences. We've brought really good tax planning to, to some folks that, that work with us.

• 1:22:35Speaker 00

  And shown, you know, you could save over your lifetime, whatever, hundreds of thousands of dollars in net present value of tax by doing this thing. And some people say that's great. I want to, I want to implement it. And some people say, you know what? For a few hundred thousand dollars, it's just not worth the complexity in my life. So I think it's highly subjective. But I think in general, people do get bogged down in the details and try to optimize things when they should just be, as we talked about earlier, buying index funds and not worrying too much about it.

• 1:23:03Graham Stephan?

  I have to say though, for the few people who this applies to, this will save five people, could be hundreds of thousands of dollars. If you're buying a primary residence and you have a few million dollars minimum in a brokerage that supports options, you buy a house, primary residence with a box spread and take a capital loss on it. It's not financial advice, but look into it. For the few people this applies to, it is mind blowing. No one knows about it. It's very complicated to explain. It took me days to wrap my mind around how this thing works. It is incredible. It's like, it's, it's a superpower to be able to do that. You get borrowing right now, net after tax, high 3%.

• 1:23:48Graham Stephan?

  It's crazy. Fixed, interest only. It's incredible, but it applies to like five people watching. So I'll end it there.

• 1:23:55Jack Selby?

  What does money mean to you?

• 1:23:58Speaker 00

  Money is a tool that lets you buy time. I think is really its fundamental purpose in our lives. That's, that's really it. It's a, it's a tool. You, you, you work or, or start a business or, or create an asset or whatever to, to create money. But what's the money actually for? It's to give you ownership of your time.

• 1:24:20Jack Selby?

  And so how do you use money to produce more time in your life? Like, what are the main things that you spend money on that you've noticed improve your happiness the most?

• 1:24:28Speaker 00

  There's a whole bunch of things, really. I mean, we, we, we had one vehicle for years. We have, I have four kids. We had one vehicle up until two years ago. We finally got a second vehicle because there'd be cases where whatever, you had to wait, wait for the other person to be done with the car. So that was, that's a big expense, but it's been, it's been really useful just for time use and not having to wait for, wait for the vehicle. Another big one is meal prep, meal delivery. We, we get a prepared meals delivered to our house every week so that we don't have to worry about cooking. And that's something that, we did that years ago. And then we moved to a more rural area. Couldn't get it delivered out there anymore.

• 1:25:11Speaker 00

  And just a few weeks ago, I found a service that does deliver to our, our address. And so we've been doing that again. Personally, I don't know if you guys do that, but I find that to be.

• 1:25:18Graham Stephan?

  Cook Unity, I love it. I just got it. I actually brought it to the warehouse today.

• 1:25:22Speaker 00

  I find it so, it just takes such a mental load off. Not even to plan your grocery shop, not even to actually cook and clean up and all that stuff. So that, that for me is a, is a big one. But then also, so there's time saving. And then there's also how you use your time. And money is a tool for that as well. We, we went on a family trip to the west coast of Canada this summer. It was the first big trip we've, we've taken with all four of our kids on an, on an airplane and all that stuff. And that was incredible. Trips are cool because the anticipation leading up to them brings a lot of joy. The actual trip, hopefully it goes well. Ours did, brings a lot of joy. And then the memories give you lasting joy. So I think stuff like that is, is great. And then I spend money on, on equipment, like I've got a kayak

• 1:26:07Speaker 00

  and a mountain bike and all that kind of stuff. So those are the, really the big ones.

• 1:26:11Jack Selby?

  You have a really interesting video that I've probably watched at this point, three or four times, which is how money relates to happiness. What were the, the, the findings of this? Cause a lot of it was backed in science. And so it's nearly, you know, undisputable. I mean, there's evidence and data that suggests that certain things actually do produce happiness and certain things negatively affect your happiness. What did you find out in the making of that video?

• 1:26:36Speaker 00

  Yeah, I think a big one that people often don't know until they see the research is that the relationship between money and happiness. If you just look at income levels and happiness, there's a very weak relationship. Some older research suggested there was a plateau where above certain levels of income, you don't get any happier. More recent research has found that it does continue to increase, but the relationship is very weak. And I think that's the part that gets missed, even in with more, more updated research. The, the research, the new research shows, okay, if your income goes up, whatever, from a hundred thousand to 500,000, there is, there is a bit of a happiness increase, but it's not meaningful. For a big jump in income, it was like five points on a hundred point scale of happiness. Like, we're talking about nothing crazy.

• 1:27:20Speaker 00

  There's, there's another stat from one of those papers that talked about how a, a big income increase was about equivalent to a headache in terms of effect on happiness. So I think that, that really messy relationship with, between happiness and money is, is really important. The other stuff I talked about in that video that I think is meaningful is time versus money preference. People who prefer money over time tend to be less happy. So if, if you're given the choice between having a little bit more money or a little bit more time, people who choose time will tend to be happier people. And they also tend to have better relationships with their spouses. And there's a few other data points in there like that.

• 1:27:59Speaker 00

  The data on social comparison, I think is so important. If you have people around you who are wealthier, who have a nicer house or a nicer car, that tends to really decrease your happiness. So interesting implications of that, like who you spend time with. I think this happens as people get wealthier. They start hanging out with other wealthy people and there's always someone wealthier. And so you end up feeling bad about your level of wealth and your position in life. I think that's really important. It has implications for where you live too. Like buying a, a not so nice house in a really nice neighborhood might not be the best idea.

• 1:28:34Speaker 00

  I think those are the, those are some of the biggest takeaways. I'm curious, what you've watched three times now, what are your biggest takeaways?

• 1:28:39Jack Selby?

  I mean, I always heard about the commute, you know, and that was kind of interesting to hear about. And then I thought the time and the money thing was the most interesting out of everything that you covered in the video. What in the research of finding the happiness and money relationship, what have you practiced in your own life that has made the most meaningful impact?

• 1:29:00Speaker 00

  Definitely having a preference for time over money.

• 1:29:03Jack Selby?

  So what does that mean in application?

• 1:29:04Speaker 00

  If there was something that I was offered that would give me money or save me money, or I could choose to have more time with my kids and my wife, as a rule, usually I'll take more time with my kids. Being here with you guys is a bit of an exception.

• 1:29:23Jack Selby?

  We're honored, yeah. We appreciate it.

• 1:29:24Speaker 00

  Not that I'm getting paid to be here, but it's, you know, it's a business trip. So that's a case where you look at the, the perma model that I mentioned earlier, positive emotion, engagement, relationships, meaning and accomplishment. Relationships in my family are super important, but so is, so is accomplishment, so is engagement and trying to continue to build my, my YouTube channel and my ability to create content is important to me. So anyway, I had to make that trade off. Am I going to take a few days away from my family to come out here, which I did. But generally speaking, if an opportunity comes up, we're like, hey, you, do you want to come do this? Do you want to come do this speaking engagement? Do you want to come to this conference? Usually I'm going to turn that down.

• 1:30:04Jack Selby?

  One of your top comments on that video I thought was really interesting. It's always remember that money is just a means to an end. It's not an end in and of itself. So what does this mean to you?

• 1:30:15Speaker 00

  It's like I said earlier, money is a tool. It's a tool that lets you do stuff, but I think you have to understand what it can do. And you've got to understand what the research says about the best ways to use money for it to be a useful tool. I think a lot of people end up amassing huge amounts of wealth, but are unhappy. I think it's a very common, very common story for, for lots of different reasons. But yeah, there's a, there's an old paper that I based portions of that video on called, if money doesn't make you happier, you're not spending it right. And the premise is just that, you know, you can have a ton of money and engage in activities that don't make you happier. But that's not because money doesn't improve happiness. It's because you just don't know how to use money to make yourself happier. So I think being in tune with what you

• 1:30:57Speaker 00

  want out of life, what your priorities are, and what the evidence says about the type of spending that is, is most beneficial is really important.

• 1:31:06Jack Selby?

  At what point does increased wealth start to see diminishing returns?

• 1:31:10Speaker 00

  I've, I've heard you guys talk about this, this question with other guests.

• 1:31:13Jack Selby?

  I'm always curious.

• 1:31:13Speaker 00

  I've thought about it a lot. I've seen a lot, I, I, you know, I've worked with and know a lot of very wealthy people, and I really think it depends on the person. Like there, there are people who have, and I'm not just talking about the people that I know, but there are people who have tremendous amounts of wealth and are still wondering if they can spend a little bit more and still be okay. And then there are people who have whatever, five million, 10 million, who are just perfectly content. So I really think it does depend on, on the person and what their objectives are and what their perspectives are. But I don't know if there's a single, a single rule on that.

• 1:31:48Jack Selby?

  Was there a moment for you?

• 1:31:50Speaker 00

  I don't think I'm there yet, really. Like, I don't think, if I stopped working right now, I'd probably have to make some changes to my lifestyle that I wouldn't want to make to, to be okay for the rest of my life. And I, yeah, so I'm, I'm not there yet.

• 1:32:04Jack Selby?

  What's interesting to me in, in doing the research on you for this podcast is that while finance may be the thing that you're a professional in, it seems like the thing that you're really passionate about is philosophy and like the psychology of money, at least based off the content that I've watched of you. What has been like your single greatest finding in that whole adventure you've gone on researching that?

• 1:32:28Speaker 00

  Oh, man. I don't know if there is a single greatest finding. Maybe the single greatest finding is how important that side of finance is to people's actual decisions. We can do, find all the research on why index funds are good and covered calls are bad, or whatever. But none of that matters if it isn't, if it isn't connected to the psychology of the person making a, making a decision. So that's, I mean, that's a good question. And I think really, when I think about it, the answer is that those two things are, are connected. They're intimately connected. I, I set up my video, the, the, using your money to be happier video by saying like, hey, this might be, this might seem like a weird topic for a chief investment officer and like a, of

• 1:33:10Speaker 00

  quantitative finance person to be talking about. But all of these important financial decisions that I'm always talking about are, they're, like you said earlier, they're means, a means to an end to achieve the life that you want to live. And so for all of the quanti finance research stuff to be useful, it has to be anchored in, in people knowing what they're trying to achieve.

• 1:33:32Jack Selby?

  It is a means to an end to achieve the life that you want to live, but then you also talk about the life cycle model, which is trying to even the curve of happiness and then using money to kind of flatten that. Can you explain a little bit more on that?

• 1:33:43Speaker 00

  Yeah. So the life cycle, the life cycle model is just the idea that people want to smooth their consumption through their lifetimes. And if you think about your lifetime earnings, typically people are going to have lower incomes when they're younger and their income's going to increase as they get older and get into the peak of their careers. And then it's going to decrease a little bit as they stop working and then it's going to stop. And so the idea of the life cycle model is that people want to smooth their consumption throughout their lives, which means saving less and maybe even borrowing early on in life, which is super common. Like people take mortgages, they take student loans, all that kind of stuff. Like I think it describes reality fairly well. And then as you start earning more throughout your career, that's when you start saving. And then as you get into retirement, that's when you start diss saving

• 1:34:26Speaker 00

  or spending your, your savings. The real world implications are one of the things that we talked about earlier, which is that maybe young people shouldn't save that much and should be comfortable borrowing, which I think, like, again, like, I think people do that. They take student loans, they take business loans. I think that's a, that's a pretty, I don't, I don't think it's controversial to say. But then the tricky part is you do have to start saving eventually throughout your peak earning years, and you've got to save enough to be able to retire. But that's, that's the concept.

• 1:34:51Jack Selby?

  What do you think is an appropriate safe withdrawal rate, given today's valuations?

• 1:34:56Speaker 00

  I've, I've made so many videos, videos bashing the 4% rule. So people are probably going to be like pulling their hair when I say this. 4% is probably fine, but it really depends how you're using it. However, I, I don't think it's safe to actually literally spend 4% of your starting portfolio value adjusted for inflation for whatever, 40 or 50 years. But I also don't think that's what people will actually do. I think people who, who are actually retired and living off of their portfolios, and I see this, we see this with our clients, if the financial markets are not doing well, people will scale back. They'll go on a less nice cruise. Maybe they'll skip the cruise altogether that year. They'll, they'll give their kids a smaller down payment, whatever. People will make sacrifices, they'll cut back. The whole premise of the 4% rule and

• 1:35:40Speaker 00

  the way that Bill Bengen did that analysis and the way that all of the analysis replicating it since then has, has done is, is spending the exact same amount adjusted for inflation every year. And there's all kinds of other stuff in there too. Like even if people don't cut back spending when markets are bad, I don't know if it's true that people are always going to perfectly index their spending to inflation. So anyway, but I, I think as a guideline, if you're trying to figure out how much can I actually spend for my portfolio, or how much roughly can I, do I need to have saved to fund my retirement safely? 4% is probably fine, but I only say that on the, on the basis that people are not actually going to follow the 4% rule, that they're going to follow some more flexible spending, spending path. If it has to be fixed, if someone says,

• 1:36:23Speaker 00

  I want, I want a number that I can spend that dollar amount adjusted for inflation for the rest of my life, I'm probably closer to 3%.

• 1:36:30Jack Selby?

  That's how I've modeled the two. It seems like the 4% rule, he actually came out and said it was actually more like five and a half percent.

• 1:36:37Speaker 00

  Well, he's, he changed stuff, right? He went, added in small cap stocks. He's done, he's modeled different scenarios, like in this, in this inflation environment, in this valuation environment. He's done tons of, tons of stuff since then. I think that the most useful research that followed Bengen's was the research that looked at international stocks. The US market, like, we know, looking backward, that it is the best performing stock market in, in history. And so to look at the history of the US market, even, yes, they had to create the Great Depression, which interestingly, that's not the year that breaks the 4% rule. Do you guys know that?

• 1:37:10Jack Selby?

  It was the 1970s, correct?

• 1:37:12Speaker 00

  1968.

• 1:37:13Jack Selby?

  Yeah.

• 1:37:13Speaker 00

  That's the worst period to retire. Anyway, that's because inflation was super high, not because returns were low. I love that, that point. Anyway, even with the Great Depression, you look around the world, returns have just been lower than they have in the US. And when you run the exact same analysis that Bill Bengen did on other markets, you get a lower number universally. I think Canada is the closest. Maybe New Zealand was up there too. I don't, I don't remember, but most countries and the world index, which includes the US market and its market capitalization weight, do not support the 4% rule. So that, that to me is like, yes, Bill Bengen, Bill Bengen did research that is practically so useful because it gives people quick napkin math to figure out how much they need to save for retirement.

• 1:37:55Speaker 00

  But it was based on US history, which we know after the fact to be exceptional.

• 1:38:01Graham Stephan?

  So I was modeling at 70% US equities, 30% international for someone retiring in their 30s. And it seems like, by the way, what's interesting is that after about 40 years, there's no downside of modeling longer. Like if you'd lived to 150, after about 40 something years, it doesn't matter if you live to 80, 100, 200 years, because your expected return over time is going to be so positive that it, that it doesn't matter beyond that. But when I was modeling that scenario through also world markets, it came out to 2.75%. Would have a 99.9% success ratio.

• 1:38:45Graham Stephan?

  Success ratio, I can't say that.

• 1:38:47Speaker 00

  Yeah, that sounds reasonable. There's a paper that came out recently that uses a simulation technique called block bootstrap. But basically they, they take actual historical returns for a whole bunch of stock markets around the world, and they have 39 stock markets in there and, and bond markets. And they use that to create a million simulated possible outcomes. So anyway, it's a, it's a good, without getting into the details, it's a good simulation technique that gives you a realistic distribution of outcomes based on actual history. And they found that the 4% rule, I believe for, for a normal American retiree, the 4% rule had a failure rate around 7%. So it's, I mean, it's probably similar-ish to your numbers if you, if you did the same type of analysis.

• 1:39:29Graham Stephan?

  But you think broad-based, average person, spend fix amount, 3% for a long retirement for someone who wants to retire early?

• 1:39:38Speaker 00

  I think that's, I think that's reasonable. I did one video where, where a paper by those same authors, but a different paper, they looked at just domestic stocks, they didn't include international stocks. Now, domestic stocks in their setup is not American stocks. It's the stocks of any domestic country from the, from the perspective of any investor in one of the countries in their sample. So the way they do their sampling method is they'll pull a, on average, a 10-year block from, maybe it's the US, and then they pull another block from another country. So maybe it's 10 years of the US and then maybe 12 years of Canada, and then maybe four years of Italy, and they keep running this until they have a run of returns and using only domestic data. So that means returns of the stocks of a country measured in their own currency.

• 1:40:24Speaker 00

  They found a 2.7%, I believe, save or draw rate. But when you introduce international stocks, at least in their historical data, it's had a big, a big benefit.

• 1:40:33Jack Selby?

  I feel like a lot of what's discussed in this podcast is still not necessarily actionable and applies to so few people. So if someone's made it this far and they still haven't walked away with one single decision or habit or behavior that they should have, a decision they need to make about their own finances, what would you say is the safest overall advice or thing that you would do if you were them?

• 1:40:56Speaker 00

  If I'm a random person listening to this podcast, I would probably stop checking my portfolio five times a day.

• 1:41:06Speaker 00

  I would probably invest in a globally diversified portfolio of, of index funds and not worry about it. So I would stop dabbling in individual stocks and covered calls and use that time to invest in my human capital.

• 1:41:19Graham Stephan?

  Yeah, Jack.

• 1:41:21Speaker 00

  But honestly, those are probably the big ones. That for, for most people, that's such a huge portion of it. Pay off high interest debt. We haven't talked about that at all, but if people are overspending and ending up in credit card debt or, or unsecured consumer financing that's costing them whatever, 6% or 7% a year, paying stuff like that off is an easy win. But for what we've talked about, I think not checking your portfolio too often, being optimistic, maybe that's the easiest takeaway, being optimistic and not worrying about a lot of the stuff because, and I know we can't predict the future and maybe it's possible that the apocalypse is coming, I don't know. But I think investing is predicated on optimism.

• 1:41:59Graham Stephan?

  Which is more true, that happy people make more money or that money makes people happy?

• 1:42:03Speaker 00

  Oh yeah, that's a great question. I don't know, I don't know if we have research that, that untangles that, that question. I don't know. I think there's probably a relationship. I think happier people probably do make more money. That, that later paper that I mentioned that found that there is no plateau on income did find that there is no plateau for happy people. So for happy people, people who are generally happy, their, their happiness set point is higher. Their happiness tends to increase log linearly with more income with no end.

• 1:42:39Speaker 00

  Unhappy people do have a plateau where their happiness increases up to a point and then it stops increasing. So maybe that, maybe that does answer your question.

• 1:42:47Jack Selby?

  Is there anything that you wish we asked you that we didn't? And do you have any questions for us?

• 1:42:52Speaker 00

  No, I, I think your questions were, I think your questions were great. Covered a lot of the stuff that I've talked about on, on my channel. A question for you guys would be, is there anything that I have not covered on, in any of my content that you'd like to see me cover?

• 1:43:07Graham Stephan?

  I always find, so these are the videos that are doing really well right now is, these videos, is $2 to $3 million enough? They're blowing up. I'm seeing everyone making these videos and they all do well. I'd like to get your perspective on the ideal amount of money to have and aim for and what that means in terms of spending. The other concepts are levels of wealth. They always do well right now, and it seems to be a trend of like, hey, what does a million dollars buy? What does $5 million buy? What's $10 million in retirement look like? And you cap it at like 10 to 20 million. Like what does a $20 million retirement actually look like in practice? And what does that get you? And how does that differ from five?

• 1:43:50Jack Selby?

  That would be good content. I would love for you to poll some of the people that have their wealth with you and you could then have your own data.

• 1:43:58Graham Stephan?

  Oh, yeah.

• 1:43:58Jack Selby?

  About happiness as it relates to different amounts of wealth. That would be really interesting because I know that Dave Ramsey polls a lot of the people that listen to him and he says, oh, we've made this amount of millionaires. You could do something similar with happiness and wealth.

• 1:44:12Graham Stephan?

  I'd also like to see you do investment breakdowns. Like Humphrey Yang has recently been doing subscriber portfolio reviews. I think the money guys have also done portfolio reviews. I'd like to see you take someone's portfolio and break it down and say, this is what you're doing right, this is what you're doing wrong, here's the age, here's what I'd be improving on. I think that could do quite well. I'd like to see those videos from you.

• 1:44:37Speaker 00

  Those are good ideas.

• 1:44:38Graham Stephan?

  And then more flames in the thumbnail, preferably.

• 1:44:41Jack Selby?

  And more hate videos about Graham Stanton. All of those things. That is, that makes.

• 1:44:46Graham Stephan?

  Yet to see flames in your thumbnail and they do, that does increase CTR substantially.

• 1:44:51Jack Selby?

  You know, it's funny, back in the day, this is back like Santa Monica time period when I was living in Graham's guest house and we would meet up every single day and discuss titles, thumbnails, strategy, what's, what's working on YouTube, what's not working. And the term that we used for thumbnails was Armageddon, is what we would call. And if you look back in like 2020, 2021 at Graham's thumbnails, like there was a, a very popular image we would use and we would use it as a background and it'd be like red flames and blue flames, like hitting you.

• 1:45:21Graham Stephan?

  Colliding, colliding.

• 1:45:23Jack Selby?

  And it was just like the battle of good versus evil. And it's like, why I'm cutting up my credit card. It's like, you know, why I'm canceling my Chase Sapphire Reserve. And then in the background is just like some.

• 1:45:32Graham Stephan?

  But you know what? At the time, no one was doing that at the time. And I remember we did this and we're like, holy crap.

• 1:45:40Jack Selby?

  We found it.

• 1:45:41Graham Stephan?

  We found it.

• 1:45:41Jack Selby?

  We're on to something.

• 1:45:42Graham Stephan?

  We found the unlock, the cheat code of YouTube. And I remember what we would do is we'd post it and then I'd sit there and I'd scroll on YouTube until my video comes up and it would just, you would see it. It was like this nuclear radioactive, bright blue and red in your eyes is blinding. But I'm like, oh yeah, people are going to click on that and they would.

• 1:46:03Speaker 00

  I love hearing you guys joke about that. So something you guys didn't ask me about, I don't know if you guys want to talk about this or not, you can obviously edit out if you don't, but my hesitation to come on this podcast, yeah, we, we said we might talk about that, but we haven't. So I don't know.

• 1:46:18Jack Selby?

  I would love to talk about it. Yeah, because you know, I, I had commented on a podcast before that I watched your video about money and happiness and that I loved it. And then I don't know if that was you or a member of your team that had commented back, oh, this is great. Sort of got into contact from there, got into a group chat and then everything was good, but then you had messaged us, hey, I, I think my team has some reservations about me coming on the podcast. We'd love to know why.

• 1:46:41Graham Stephan?

  Hey, by the way, really quick, if you want extra content just like this, as well as early access and a bonus post show posted every single week, feel free to join as a channel member to get immediate access to all of that, as well as early access to everything else that we post, along with priority responses to all of your comments. So if that sounds cool, feel free to join, would love to have you on board. Thanks so much. We'll get back to the podcast now.

• 1:47:04Jack Selby?

  Everything was good, but then you had messaged us, hey, I, I think my team has some reservations about me coming on the podcast. We'd love to know why.

• 1:47:11Speaker 00

  Yeah. So I, like you, like I've known you, your, your videos at least for as long as I've been making content. Cause like we talked earlier, we started around the same time.

• 1:47:20Speaker 05

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• 1:48:19Speaker 00

  And I, I always thought you were fine, like the clickbait titled, the flame titles, for sure. That was, that was a thing.

• 1:48:25Graham Stephan?

  I'm not thrilled about that either.

• 1:48:27Speaker 00

  But my, my, my team at, at PWL, when I said, hey, I think I'm gonna go on this podcast, there was, there was a lot of like, whoa, like, wait, wait a second. And a lot of it was that the clickbaity stuff is a little bit of the issue.

• 1:48:39Graham Stephan?

  I agree with you 100%. You think I like, I hate it. I absolutely hate it. And I've been upfront about this. I do not like my titles and thumbnails at all. But I look at it also from a perspective of what are people watching? What are they clicking on? What's getting reach? And I have to do it. I have tested at this point, probably across three channels, maybe four channels, three to four, 5,000 videos over nine years. And I constantly A/B test. And if I see something perform better, I go with that. Like by default, I just want the video that has the highest CTR possible. And so I've consistently found, unfortunately,

• 1:49:23Graham Stephan?

  the flames in the thumbnail, sensational title gets the highest CTR. And I hope I balance that out in the video content itself, where I'm really balanced. Like if you actually watch the video to the end, it's never, okay, guys, we're gonna sell here and we're gonna buy here. It's always, here's the pros, here's the cons. And my thought is just, and people joke about it, just dollar cost average into an S and P 500 index fund with international diversification, save as much money as possible, do number, like every video ends with that. But the packaging is so much to be able to get people to watch the video to get to that point. That's how I justify it. So.

• 1:49:59Speaker 00

  So I, I, my experience is the same. I don't maybe go as far as you do, but I do get comments from my audience as well. They're like, I can't believe you're doing this clickbait stuff. And I'm just like, listen, I A/B tested two thumbnails.

• 1:50:11Graham Stephan?

  Yes.

• 1:50:11Speaker 00

  And this one, I hate it too, but this is the one that got clicks. Like, I'm sorry. Like, don't hate the player, hate the game, basically.

• 1:50:16Graham Stephan?

  That is what it is. So with a lot of that, you know, I, I see certain comments and I take some into consideration, but I constantly A/B test. I test three thumbnails. And then usually I'll test like five different titles. And I find the package that works.

• 1:50:29Speaker 00

  That all makes sense. Man, obviously I, I came. So like, I, I'm comfortable with, with all that, even before hearing you guys explain it. What, what I ended up doing was going to my, we, we have a community. It's free. I mean, we're not very good at monetizing. We don't monetize at all, really. It's, it's all, the, the financial benefit of our content channels is that it raises awareness about our business. We occasionally get clients from it. We've, we've never taken sponsorship money. Anyway, so we have a community around our podcast. It's got maybe 20,000 people in there, super active. It's a, it's on a discourse, like the forum platform. But it's a very like tight knit community of people who are like you mentioned, longtime viewers, like a lot of those. So I posted in there like, hey, guys, I'm thinking about going on this podcast. What do you guys think? And

• 1:51:12Speaker 00

  there's a whole debate and everyone had their opinion. But I think the consensus was like, listen, regardless of what you think about the podcast, even if we say, even if we agreed, and that's they didn't, but even if we agreed that it's a bad podcast, if you go on and spread good information, it's a net good thing. And I was, you know what, man, that's, and I don't think this is a bad podcast. I've listened to it.

• 1:51:30Graham Stephan?

  Yeah, that's fair.

• 1:51:32Speaker 00

  But I was like, that's, that's enough. Like I'm, so I went back to the team and I was like, all right, guys, we're doing it.

• 1:51:35Graham Stephan?

  I appreciate it. We try to be as balanced as possible. And I worry even that some of the guests we have on paints us in a certain light, because just like you coming on here is a representation of you, the guests that we have on are representation.

• 1:51:49Jack Selby?

  Yeah, Togi. So like, like we'll bring you on and then we'll bring Togi on. The way I see it, the way I see it is it's the same thing as like a journalist having a conversation with someone. I like to think that the people that we bring on the show, it doesn't mean that we endorse what they have to say. It just means that we're curious and we think that it could be entertaining some, and some we think it could be beneficial. I think this one is a nice hybrid of both entertaining and beneficial. But a lot of the ones that we bring on are just straight up entertaining. And we have Clavicular on, do I think that people should be following Clavicular's? No. You know what I mean? And we're upfront about that. Like, we'll respectfully challenge our guests when we think it makes sense. And sometimes we, we don't when we kind of agree. But, you know, no one, neither, no one here

• 1:52:33Jack Selby?

  is proclaiming to be some sort of a guru. Like I, you know, just a random 27 year old guy, you know, random 45 year old guy. So yeah.

• 1:52:42Graham Stephan?

  70 year old guy.

• 1:52:42Jack Selby?

  Yeah. So I, I wouldn't take anything that we say for the gospel, but if you can tune in every Sunday and be entertained or sometimes educated when someone says something smart, then I think that that's good.

• 1:52:51Speaker 00

  I'll, I'll tell you guys, I, I had not heard of your podcast. Someone sent it to me. It was an email exchange, not a comment that, that I ended up here from. Someone sent it to me, a friend of mine, like, hey, you're on Iced Coffee Hour. I was like, cool. I know, I knew who you were, but I'd never heard of the podcast. And since starting that conversation, I've listened to, I don't know, maybe 12 episodes, which is a

• 1:53:12Graham Stephan?

  Cool.

• 1:53:12Speaker 00

  serious time commitment because they're long episodes. And I think you guys do a great job. Some of your guests are like, I'm like, man, this, the stuff this person is saying is crazy.

• 1:53:21Graham Stephan?

  Yeah.

• 1:53:21Speaker 00

  But like you said, I think you guys do a pretty good job of being balanced and asking good questions.

• 1:53:26Graham Stephan?

  We try to go on so neutral, but there's also only so, you know, so much that we could also account for too. Like, we've had a lot of people on politically that are on the right, but we've really tried to balance it out with the left. It's just the ratio

• 1:53:39Jack Selby?

  Have people willing to go on a podcast?

• 1:53:41Graham Stephan?

  Tens of lean right. And so like, we try to balance it out. But at a certain point it's like, are we not gonna have this guest on because we can't get the equivalent on the other side? No. Would we like the other side? Absolutely.

• 1:53:52Speaker 00

  So for me, it's not about, it's not about, I don't want to be on a, on a right leaning podcast or left leaning podcast. For me, it's more like, I don't know if I want to be associated at all with people who are that divisive on either, on either side.

• 1:54:03Jack Selby?

  I see your perspective, but the difference is that like, how are you to learn if you don't put yourself up against adversity? Which is why we bring on people that have different opinions. If we had every single Sunday, we, we rotated between you and the money guys and Jordan Hamel, then it's like, what do we really learn? Like, I'm not learning anything at that point, and neither is the viewer. And so I think what's great is for this podcast, not just trying to pat ourselves on the back, but like, a viewer can tune, tune in and be, enjoy, very few of them, enjoy Graham and my, our presence. Meanwhile, we introduce them to a wide range of opinions. And this is great because a lot of the people, if you tune into a conservative podcast or a liberal podcast, or you tune, tune into just Grant Cardone, who tells you to leverage everything and spend everything on, you know,

• 1:54:46Jack Selby?

  you're, you're increasing your education, or you tune into George Camel, who says you shouldn't, you know, borrow money to buy an investment or whatever it is. Like, if you pigeonhole yourself with a certain ideology, then you, you never actually grow. You need to challenge your beliefs. And that's what I think is great about this podcast is that we don't proclaim to have like any super, super strong beliefs. I mean, I do, but I generally don't show it because I think it's more about the guest and understanding

• 1:55:11Graham Stephan?

  Same.

• 1:55:11Jack Selby?

  a diverse range of opinion. And so that's why I think it's, it's really interesting to have, to be kind of like at the core of letting people hear out a bunch of different opinions to decide which ones they align with and which ones they don't.

• 1:55:23Speaker 00

  Yeah, it's an interesting perspective. I think I, I view, I view my role in running our podcast as being more of a curator of what people should listen to, which is a different perspective. But I, I respect everything you said.

• 1:55:35Graham Stephan?

  Yeah. And we, like I said, we always try to balance it. For a while, we had fun because we were so far ahead. We would post Grant Cardone and then Dave Ramsey. Right.

• 1:55:45Jack Selby?

  Back to backs. We did, we did Peter Schiff and Michael Saylor.

• 1:55:50Graham Stephan?

  Back to back. So, so we got opposites. And then I remember we also had someone from the Daily Wire, I think it was like Ben Shapiro. And then

• 1:55:58Jack Selby?

  And Destiny.

• 1:55:58Graham Stephan?

  Right after was Destiny. And so it's like back to back. But what, what happens, we find it funny. We pissed off everyone. Like the people who didn't like Ben, would comment on that one. And then the people that didn't like Destiny would comment on that one. And so you'd always like every, but you know what? At that point, it's like, come on. Like, we just try to show everything and we're not there to like debate or push anything. We just want to talk to the people who we think would be interesting conversation.

• 1:56:26Speaker 00

  And I think you guys do a good job. I guess I'm, I'm like, I view myself as so far away from all of those people.

• 1:56:31Graham Stephan?

  Yes.

• 1:56:32Speaker 00

  That you just nanned. I'm like, do I, do I even want to be, anyway, I'm here.

• 1:56:36Graham Stephan?

  I appreciate it, man.

• 1:56:37Jack Selby?

  We appreciate you coming. And also thanks for like expressing the concerns with coming on the show. Like, I wish at the end of the day, if anything, that people would just be more honest with the ways that they, they felt. So then we can learn from it and we could try to, to grow.

• 1:56:49Graham Stephan?

  Yeah. And we're always open to feedback is the other thing. There's, there's nothing I'll take personally. And all of these things are concerns that we should be made aware of because it impacts guests in the future and, and our ability to really deliver the best show possible.

• 1:57:03Jack Selby?

  Except if the feedback is to tell me to stop doing comfort calls. In that case, cut. I do not agree.

• 1:57:09Graham Stephan?

  But I think now is the time, by the way, you'd review our portfolios.

• 1:57:12Speaker 00

  Okay.

• 1:57:13Graham Stephan?

  And I'd like your honest thoughts. And this is for the channel members. So I really hope you appreciate it. For everyone else, thank you so much for coming. I'll link to all of your information down below in the description. This has been such a joy because like I said, I've, I've watched you now for probably, it'll almost be 10 years. At the end of this year, I think it'll be almost 10 years.

• 1:57:30Speaker 00

  Crazy.

• 1:57:31Graham Stephan?

  So that's nuts. I really appreciate everything that you do. I highly recommend for everyone to subscribe as well.

• 1:57:36Speaker 00

  Thanks so much.

• 1:57:37Jack Selby?

  Thank you to all of Ben's fans that are tuning into this episode. We hope that you enjoyed. Thank you to everyone that watches us every Sunday and sometimes on a Wednesday. Really appreciate it. Would not be here without you. Till next time.

• 1:57:48Speaker 04

  The bulk of my wealth is Robinhood shares.

• 1:57:51Graham Stephan?

  Do you keep your Robinhood shares in Robinhood?

• 1:57:54Speaker 04

  Uh, no. Um, we're building a financial super app.

• 1:57:57Speaker 07

  Are you setting them up in a situation where the odds are stacked against them to actually make money?

• 1:58:04Speaker 04

  A lot of people criticize us because they think we incentivize active trading and prediction markets. That's when you can kind of get into trouble.

• 1:58:11Speaker 05

  Get this, the richest 1% controls more wealth now than at any time in more than a half century.

• 1:58:17Speaker 04

  Alarm bells have started ringing. There's a small circle of wealthy insiders that's benefiting from all the growth.

• 1:58:24Graham Stephan?

  How much has AI changed the game?

• 1:58:25Speaker 04

  Humans overseeing agents, seeing how many agents you can actually employ, including when you're sleeping.

• 1:58:32Graham Stephan?

  So do you think though, with Robinhood, eventually you could have just a few people running the entire company?

• 1:58:36Speaker 04

  Um, it's.

• 1:58:39Jack Selby?

  That's just dangling the carrot, huh?