Latest / The Personal Finance Club Show / Investing During War, Day Trading and, the No Bond Crew | Ep 26

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Investing During War, Day Trading and, the No Bond Crew | Ep 26 · The Personal Finance Club Show

0:00
War is breaking out. How should you change your
0:02
investments? Are bonds dumb?
0:04
And can you get rich by day trading Australian currency?
0:07
Let's find out. Welcome back to the personal
0:15
Finance clip show. Hey, Jen.
0:16
Jeremy, where are you? Is my voice echoing?
0:20
Does it sound more echoey to you or is this microphone solving
0:23
that? It doesn't sound more echoey.
0:26
OK, good. It's sounds echoey to me, but
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hopefully my old, I'm in a new studio here at my home because I
0:33
got rid of my old Home Office and I had like all this like
0:37
foam padding, like soundproofing stuff up and now I don't.
0:42
And you got a white wall. Boring.
0:44
I got a white wall but it's going to be painted in
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background. Set made one of these days you.
0:50
Get you're going to do like a stop motion and not stop motion
0:54
like a time lapse video of you painting.
0:56
Are you painting? Are you going to hire someone?
1:00
I'm painting Jen. I don't know.
1:02
Not that big. No, I actually would.
1:04
I was like, I really wanted like lighted shelving back there.
1:06
And I've been like hand wringing about like, do I know how to do
1:10
it? And I think I'm just going to do
1:12
it myself. Listen, painting is no joke.
1:15
Like I my friend and I painted these couple walls and it's like
1:18
the the edges are real crunchy. So yeah, I know it's true.
1:23
Yeah, there's definitely an amateur.
1:25
I hired someone when I look at these corners.
1:27
Yeah, that's even when you tape it, the tape, the paint can go
1:30
on the tape. But but that's not what's
1:33
important because, Jen, I have bigger news that I actually
1:35
haven't even announced yet. It's not really news, but I went
1:40
on a trip. It was about a week and a half
1:43
ago now. Yeah.
1:45
And the day we're leaving to come home for the trip, it was
1:49
like 10 AM and we're check out of the the resort we're at was
1:53
at 11 and the phone rings and the front desk is like, you
1:58
can't go to the airport because the road's blocked or something.
2:04
Done. I know and and like actually my
2:07
wife Andrea answered that call and she's like, well, can can
2:10
you drive us? Is there like alternate, like
2:11
transportation? And they're like, you don't
2:13
understand, No one's leaving. And we're like, what?
2:16
Because we were in Puerto Vallarta and you may have heard
2:23
that there was some cartel warfare happening.
2:28
And we literally booked this trip like 6 days in advance
2:32
because we're, I think we've mentioned, I think I might have
2:34
mentioned a podcast where we're like going to go check out a
2:37
venue for, for a, a wedding. And there's like a very nice
2:41
resort that's down there. So we went, we booked like 6
2:43
days in advance, just a 2 day trip.
2:46
You know, we went down on a Thursday night.
2:47
We're going to come back Sunday morning, I guess.
2:50
Yeah, like 2 full days and three nights.
2:54
And then the day we come, the day we're literally like packing
2:57
to go to the airport. That is when the craziness
3:02
happened. And if you haven't heard,
3:03
basically the US or I guess the Mexican government, with some
3:07
help from U.S. intelligence, did this like raid on El Mencho, I
3:12
think his name is. He's like the big cartel boss.
3:14
And he, he ended up dying in this raid.
3:17
And so then there's like this huge corded cartel attack where
3:20
they were, you know, lighting cars and, and trucks and buses
3:25
and stores on fire and basically bringing these like cities into
3:30
a, a gridlock. And that was happening.
3:32
And it usually doesn't happen in resort towns like Puerto
3:36
Vallarta. They kind of consider it to be
3:37
off, you know, it's called off limits because it's a resort and
3:42
they don't want to mess with the tourists.
3:43
But this time there's like an escalation.
3:45
So it was, it was very weird because we were like looking
3:50
out, you know, we weren't right in the main part of the city
3:53
where it was happening. We were about 20 minutes away.
3:56
But we saw, you know, we'd look out towards the city and we'd
3:58
like we'd watch the city burn like all day.
4:00
That's. So crazy.
4:02
On that Sunday. And then if we turn the other
4:05
way, there's fires the other way, too.
4:06
And, and in this part of Puerto Vallarta, in this part of
4:09
Mexico, there's only really one Rd. because there's like the
4:13
ocean and then the road and then like the jungle.
4:15
So there's not like, alternate roads you can take.
4:17
And so I'm like, Dang, that one Rd. is being blocked on both
4:21
sides. And yeah, we were fine.
4:25
You know, we never were especially close to the
4:28
violence. They never came to the resort.
4:30
The fires weren't especially near us.
4:32
You know, we saw them when we eventually left the resort.
4:36
You know, I, I, we had our, you know, just recently turned 1
4:40
year old baby with us. And I was, you know, a little
4:44
bit worried about the violence coming into a resort, but not
4:47
really because there's a lot of resource down there.
4:50
And it seemed like they were doing this cars on fire in the
4:53
middle of the road thing to block traffic.
4:55
Not like murder and tourist thing, thankfully.
5:00
But I was worried about, you know, running out of diapers and
5:02
formula because the resort doesn't have that stuff.
5:06
And if the roads are blocked, you know, we're just supposed to
5:10
be there for two days. It's like we packed for a long
5:12
time. Yeah.
5:14
It's also. Very.
5:15
Yeah, it's like an interesting lesson in in news because the
5:19
day is happening. You know, I realized how slow
5:23
mainstream media is, you know, because we were literally
5:27
watching the city burn for like 12 hours.
5:30
And I would like go to CNN and New York Times and even go to
5:33
Google, Google News and search Puerto Vallarta.
5:36
And it took like 6 hours before anything show up.
5:39
And it's like the Hindustan Times or something.
5:41
Some like international newspaper picked picked up.
5:45
And then like the next day Monday, it was like it was like
5:47
front page New York Times, front page CNN.
5:49
So it was literally like a 12 hour delay from what I thought
5:52
was like breaking news to what was actually going on.
5:57
And the other interesting thing I saw was, you know, so we were
6:00
then going to Twitter and Reddit, which is like, you know,
6:02
real time. You could see like people's
6:04
first hand accounts, but then there's like, like lies, there's
6:08
like misinformation. And so, and I was believing it
6:12
too. You know, I, I, I consider
6:13
myself pretty Internet savvy, but you know, I, I was under the
6:17
impression that the airport was closed, that the airport was the
6:20
airports because this happened not only in Puerto Vallarta,
6:22
like the other main city was happening was Guadalajara was
6:25
happening even other places too. But I was, I was under the
6:29
impression that they were under attack.
6:30
So I saw like planes burning and gunmen in the airport and yada,
6:33
yada, yada. And, you know, come, that was
6:37
not true according to like, you know, first hand accounts of
6:39
people who were at the airport and the airport, like they're,
6:44
you know, announcements themselves.
6:45
They're like, we have not been breached.
6:47
There's been no attacks in the airport.
6:48
We were protected by a National Guard.
6:51
We're open. They never closed.
6:53
They're like, well, lots of flights are getting cancelled.
6:55
So you might want to check your flights and, you know, make sure
6:57
you have safe transportation at the airport.
7:00
So it was really weird to kind of see this.
7:02
It's a scary time because, you know, we were, we were able to
7:07
see the smoke, you know, we're that close.
7:10
But we still were relying on, you know, Twitter's
7:12
misinformation to figure out like, what's going on.
7:15
It's pretty wild. So nuts.
7:17
Yeah, I definitely saw, I'm assuming, what is a fake airport
7:20
video like a couple hours before you texted me.
7:23
And I was like, Oh my gosh. Like I was so nervous for you.
7:29
But I'm glad you're back safe. Yeah, I know.
7:32
I feel like it may have been worse for our friends where like
7:34
they're seeing these like terrifying images and we're
7:36
like, we're there, but from our perspective, we're like, we're
7:40
generally feel pretty safe. The resort was operating
7:43
normally. Like people were like sitting by
7:44
the pool and there's still food and stuff, but that's definitely
7:50
a little nerve wracking. Oh well, you're back safe kept.
7:56
Both kids safe, all like flights got cancelled.
7:59
We ended up, we ended up having like 3 different flights at the
8:01
same time, you know, on different days based on they've
8:03
been cancelled And and then like time in the 11th hour.
8:06
We were able to get a Southwest flight on Wednesday.
8:08
So we only had a we booked like three extra nights at the hotel.
8:12
Southwest, that would have been like pass.
8:14
Actually, I mean, I know better than our alternate.
8:17
We, we came down, we flew down in Alaska.
8:19
We don't want to hear about my whole.
8:20
I would have been like, no thanks, I'll take the next.
8:22
You're like, no, I'm going to go see you.
8:24
The see what the cartels doing. Yeah, they have assigned seats
8:28
now. Actually, the first time ever I
8:29
flew Southwest. I actually prefer the no
8:31
science. I can't do no science really.
8:34
I don't, I'm not. I don't like that false sense of
8:38
urgency when you're trying to get on the plane.
8:39
It's already people are already so messed up when it comes to
8:43
that, that like they're waiting in line even though they're
8:45
they're zone Z. It's like I don't want to be
8:49
running to just try and not get a middle seat.
8:52
But I guess they have assigned seats now.
8:53
Sure. They do have sciences now
8:55
actually, once you like know the Southwest system, you know how
8:58
to not get stuck with the middle seat.
8:59
You can get an earlier spot, but you know.
9:01
Delta all day, baby. OK, well yeah, if you live in LA
9:05
and you live in a hub, that's fine, but like us, San Diegans
9:08
are roughing it with second tier air airlines.
9:13
San Diegans. OK, great, let's get into the
9:15
episode. I know it's all about finance.
9:17
Jeremy survived the cartel warfare, and now let's talk
9:20
about index funds more. OK, let's get into our first
9:23
segment, Hot Topics. Hot Topics I.
9:30
Actually don't know how far away we're going to get from I Know
9:34
the darkness of the World in this hot topic.
9:37
Though I know I feel like if with the speed of these news
9:40
cycles lately. Is this the hot topic of the
9:44
moment or is it a new one? So what is the hot topic?
9:48
The hot topic is World War three question mark I.
9:52
Feel like there was, you know, the World War One and two.
9:55
It had such good branding. I was like waiting for World War
9:57
Three. But I just don't.
9:58
Are they going to name? Do you remember like when you
10:01
were younger and you're and you'd be like, it's not going to
10:03
be World War Three. Like it was a joke and now it's
10:06
like, oh, are we in World War three?
10:08
Like actually. I mean, that's The thing is like
10:11
who? Who's going to call it that?
10:12
Who's going to say how many countries did it get involved
10:15
before? It's not just some other name.
10:17
No, you're totally right. I'm like we we the branding is
10:19
not strong. Not to make light of it of it,
10:22
but like, is it world world three?
10:24
But yeah, I just remember that being like a little trope that
10:27
you would say like, oh, calm down, It's not going to be World
10:29
War three or like, I don't want to get into a fight with him.
10:31
It's going to be World War three.
10:32
And now it's like, wait an. Oh, really?
10:34
That was like a saying. Oh, I don't think I ever.
10:35
Feel like I mean chime in chat chat if you're listening.
10:40
This thing is not live. It's not live at all.
10:43
Chat, chime in, comment, let us know.
10:45
Did you guys ever say that? Like, you know, like, you know,
10:48
it's more like don't hold your breath.
10:49
Remember when we used to always say that I was like, it's not
10:51
going to be World War three. It's like that.
10:52
OK, so anyway, you made a post on Instagram about this current
10:59
war in Iran and you had your chart, your infamous chart.
11:04
Do you want to explain the Instagram post and what, what?
11:07
What should we be thinking about our stock market?
11:10
Like what should we be thinking about our finances?
11:12
What should we be thinking? Should we sell it all?
11:14
Should we buy more? Tell us.
11:16
I mean, first, before we talk about the finances, I would
11:18
like, you know, I just need to say that war is horrific.
11:22
And I don't support war. And I don't wish, you know, war
11:27
on anyone. And I feel deeply for everyone
11:30
who's impacted by it. And I don't revel in, you know,
11:34
innocent people dying. You know, I understand a school
11:37
was already bombed in Iran, not to mention, you know, the
11:42
hundreds of military deaths already and several on the US
11:45
side as well. You know, So it's, it's going to
11:50
be a little bit of a harsh segue into how's your 4-O1K doing?
11:55
Because like, you know, that's not the most important thing.
11:58
And but, you know, it's also not something that, you know, I can
12:04
control. I'm not the president.
12:06
I'm not in the military. I don't support war.
12:08
I don't believe I voted for this.
12:10
In fact, I think, you know, people on any side of the aisle,
12:14
I don't think they think they voted for this.
12:16
I thought that, you know, our current administration was the
12:20
weren't they called the Board of Peace or something like that?
12:23
I mean, they've used all these by themselves.
12:26
They always give themselves the nicknames.
12:30
I had that one funny thread that was like, not the the board of
12:35
peace is Board of peace with the alternate spelling of board.
12:40
Clever. And so, yeah, why are we bombing
12:43
Iran? I don't know.
12:43
This is all so far above my pay grade.
12:45
And, you know, obviously the political pundits will be like,
12:48
yeah, of course we're bombing Iran because their leader is a
12:52
Dick like he has been for 37 years.
12:54
And now we're going to do Middle East regime change, because that
13:00
always goes super well. Right, right, right.
13:05
No, it doesn't. So I don't know.
13:08
Sarcasm Canon. Yeah, the sarcasm Canon.
13:13
We don't need the nuance. Can we need the sarcasm Canon
13:15
for that one? I'm surprised how rare Rare.
13:18
I'm sarcastic on this podcast. Anyway, so the the atrocities of
13:24
war aside, what do you care about?
13:26
How's your 41K going to do? The answer is I don't know.
13:30
And so you know what I did is I went back and made a chart
13:33
looking at the 10 years of the S&P 500 total stock market
13:37
return following the beginning of any US involved major war
13:41
over the last 100 years or so. And so you can look at, you
13:44
know, World War 2, the Bay of Pigs invasion, the Iraq War, the
13:48
Vietnam War, the Korean War, the Gulf War, and the range of the
13:53
total return on those. What did I just mention?
13:55
123456 wars over 10 years is between 108% and 461%.
14:03
And if you average them all, it comes out to around 10% per
14:06
year. And you know, sadly the stock
14:10
market just does what the stock market does.
14:12
I, I, I don't know if that's sad, but you know, it's not like
14:15
the US is getting involved in a war.
14:16
We're going to have a bad 10 years of the stock market.
14:18
That's not true. I also think there's sometimes
14:21
sentiment in the market or in pop culture that says war is
14:25
good for the economy because there's going to be more
14:28
spending and it's going to drive up manufacturing.
14:30
And, you know, I don't think that's really bared out by the
14:34
facts either. I think it's just the global
14:38
economic machine turns on and there's all these very short
14:43
term ebbs and flows based on the speculation of is this going to
14:48
be good or is this going to be bad in the short term.
14:50
And that's all those little bumps we see in the stock
14:52
market. But when you zoom out, the stock
14:54
market goes up because the economy continues to turn on as
14:57
long as the world continues to to exist.
15:00
If there's some sort of, like, widespread nuclear Holocaust
15:03
where, you know, computers don't work anymore and there's no
15:07
transportation and, you know, the economies just crumble,
15:10
banks don't exist anymore, that would be bad for the market.
15:13
You know, that would mean your 41K is probably not going to be
15:15
worth much. But that also means maybe the
15:17
cash in your checking account might not be worth much either
15:21
because commerce doesn't exist anymore.
15:24
And, you know, is that going to happen?
15:25
I have no idea. You know, you should go listen
15:27
to a proper podcast if that's where your mind is.
15:30
And, you know, it's not necessarily wrong either.
15:32
You know, I think that sometimes do after having just gone
15:35
through that in Mexico. I was like, yeah, maybe we
15:36
should have some like bottled water on hand or whatever it is
15:39
to make sure. That you guys have an earthquake
15:40
kit? No, we have flashlights some.
15:44
Stuff there. Yeah, there's a while where I
15:47
was keeping like a 7 gallon jug of water, you know, just around
15:52
in case, but you know. All right, story for another day
15:58
I guess. So anyway, war is atrocious.
16:02
Is is an atrocity. But you know, and, and we're
16:06
already seeing and, and I think it does maybe add to the
16:09
volatility, the volatility of the market because now there's
16:12
these short term guesses about what's this going to mean for
16:14
the short term. Yesterday the market opened down
16:17
2%, which is a kind of a big day down, but it finished down 1%.
16:21
Today it opened up 1%. You know, and so and year to
16:24
date, the market is basically flat.
16:26
You know, we're in March now and the markets basically right
16:29
where it started in the beginning of the year.
16:31
And you know, I know it's really tempting to say, OK, what should
16:37
I do about this? What move should I make to, you
16:40
know, for my finances to react to this?
16:45
And the answer you're going to get on this show is nothing.
16:48
You know, you should keep staying the course.
16:50
You you should do the things that you can control.
16:53
You can limit your expenses. You can get those raises at
16:55
work. You can earn more, spend less,
16:58
invest the difference, keep doing it early and often
17:00
minimize cost of your investments.
17:02
Those are the things that you can control and that are going
17:04
to help you result in the better long term outcome.
17:07
But selling, predicting when the market's going to go up and down
17:11
is not going to not going to help.
17:14
I mean, anybody who knows you knew what she was going to say.
17:17
I know, I know. But you know what, even people
17:20
who know me 99.8% of their life, they hear other people talking
17:26
crazy things into their ear. And so our job, Jen, is we need
17:29
to talk rational things into the ear.
17:30
And the .2% of your life that you can listen to the Pfc
17:34
podcast, we're just going to keep chirping the same little
17:37
rational things. And, and because you might say,
17:41
hey, I've been hearing a lot of crazy things.
17:43
What would Jeremy say about this?
17:45
And then I say the same same, not crazy thing.
17:48
I'm like OK because the one time I say dude sell everything like
17:53
just burn left, light your house on fire, run for the hills.
17:57
Then you know videos AII. Then you know, shit's real.
18:00
Yeah, that's that's mad. It's either fake or, you know,
18:05
it's bad. Knock scenario.
18:07
Go. Get some.
18:08
Jugs of diesel. OK, All right, let's move on.
18:13
Let's move on our. Next segment is money Money.
18:18
Can I ask a dumb one? This is where you get to ask
18:20
smart questions to dumb people. What do we have today?
18:24
OK, we've got Dylan who asks. I'm 27 with 1.2 million in a
18:29
Vanguard target date fund. According to past results,
18:33
Vanguard TDF has 4.1 average percent average real return.
18:38
Vt has 4.87% average real return.
18:41
Adopting Bill Perkins die with a 0 philosophy.
18:44
Isn't it best to just invest in Vt and have three years of
18:47
living expenses? All right, Dylan, do we know
18:54
where Dylan's from? We don't know where Dylan's
18:56
from, so yeah, go ahead and let. Us know it was a very smart sign
19:05
question he talks about let's break down the question first of
19:09
all, so we're talking about he's got he's 27 and he's $1.2
19:14
million in a target date fund. First of all, Dylan, like I
19:18
don't know where you got $1.2 million that's incredible.
19:20
I, you know, either you're hugely successful in some tech
19:24
field or something like that, or you had some sort of windfall or
19:27
inheritance, I don't know. But that's like absolutely
19:30
crushing at 27. And he's gotten a target date
19:33
fund. As a reminder, target date fund
19:35
is just a combo of AUS stock market index fund and Vanguard's
19:39
case, an international stock market index fund and a bond
19:42
index fund. Basically a nice basket, like a
19:45
combo menu of these different funds that are perfect for your
19:48
age. And he says according to past
19:50
results, the target date fund has a 4.1% average real return.
19:55
Real means after you account for inflation, how much actual
20:00
additional spending power do you really get?
20:02
How much actual real growth is there?
20:04
Not just. The opposite of real is what's
20:06
called nominal, where the number goes up more, but if inflation,
20:09
if everything costs more, you don't really get any benefit
20:12
from that. So he says it's a 4.1% average
20:14
real return and Vt has a 4.87% average real return.
20:18
So actually and Vt by the way is the Vanguard Total Stock Market
20:23
ETF globally, the Vanguard Total Globally ETF.
20:27
So it's basically almost exactly like a target date fund, but no
20:31
bonds. So to compare those two things,
20:33
a target date fund has U.S. stocks, international stocks and
20:37
bonds. Or to put it more simply, a
20:39
target date fund has global stocks and bonds, and Vt has
20:44
just global stocks. The target date fund increases
20:48
the amount of bonds as you age. So when you're in your 20s like
20:51
Dylan is, it's 90% stocks. But when he's my age, 45, is
20:56
going to start introducing more bonds.
20:58
And then when he's like retirement age, like 65, it'll
21:01
be like a 5050 portfolio, half stocks, half bonds.
21:04
And he's saying, hey, since the stocks go up more, why don't you
21:08
just have 100% stocks and then a big pile of cash to basically
21:14
wait out any of the dips in the stock market.
21:17
So if the stock market is down for three years, you can live
21:19
off of your cash for three years, giving it time to recover
21:22
and then you can go back to your higher performing stocks.
21:26
So let me break down some things.
21:29
First of all, looking at this past performance is a relatively
21:32
short history. Vt, it was incepted, it was
21:36
introduced to the market in 2008, which is kind of a bad
21:38
time to introduce a fund to the market because the market was in
21:41
free fall around the time this was created.
21:44
And so I want to put a huge amount of faith in what the
21:48
markets done between 2008 and 2026.
21:51
It's like an 18 year time frame. Second of all, your numbers are
21:56
not right. Dylan, you seem like you're a
21:59
smart dude. You got, you've got got it going
22:02
on, but you made a big mistake. You were looking at the return.
22:06
I don't know what you're doing, but based on the numbers, this
22:07
is my guess. You're looking at the return of
22:09
the price, the share price only, meaning the dividends.
22:14
Both of these funds kick off. You are taking and flushing on
22:17
the toilet. If you look at the actual what's
22:20
called total return, that means the increase in share price plus
22:25
the dividends you get reinvested.
22:27
The total return you get is not around 4% over the last since
22:32
the inception, which is what I see what you're doing.
22:34
Since 2008, the nominal return, that's the numerical return for
22:38
Vt is 8.5% and the real return is 6.1%.
22:42
And so basically you were 2% off because you weren't kind of
22:45
dividends. And that actually unfairly hurts
22:50
bonds because bonds generally don't go up in price at all.
22:53
So their share price return is always going to be 0 and their
22:57
real share price return is going to be negative.
22:59
You know, if you, for example, if you buy $1000 bond, give
23:03
someone 1000 bucks, they promise to give you 1000 bucks back in
23:05
30 years, your real return of that share price, that $1000
23:09
will be negative. The $1000 they give you back in
23:12
30 years will be worth much less after inflation than the $1000
23:16
you gave them. The whole point of bonds is to
23:19
get those dividends, those coupon payments, those bond
23:22
interest payments along the way. That's the entire point.
23:25
And in your analysis, you were deleting those coupon payments
23:29
which made the target date fund look terrible because in fact I
23:33
went with VFIFXI, don't know which target date fund you're
23:36
using, but I was using that one which is a 2050 fund, which is I
23:39
think even up until now is almost entirely is still about
23:42
90% stocks. But the nominal return over that
23:46
same time period going back to 2008 is 9.75% and the real
23:50
return is 7.29%. So to compare the stocks which
23:56
you claim are higher performing 6.1%, the target date fund 7.3%.
24:03
Crazy, right? And so, you know, first your
24:07
analysis is wrong. You're actually wrong about
24:08
those numbers. The target date fund actually
24:10
outperformed the 100% stock portfolio over this period.
24:13
But I'll say that might be unusual because the reason I
24:18
think this looks so bad is because of this 2008 time frame
24:20
where stocks did really, really bad.
24:22
You could absolutely find a time frame and most time frames to be
24:25
fair, where 100% stock portfolio will do better.
24:29
So here's my real answer to you. And, and by the way, you might
24:34
be right. I think what you're saying isn't
24:36
crazy saying, hey, there's like a no bond crowd out there that
24:40
says bonds are dumb. Why would you invest in
24:42
something that we all kind of agree as a lower performing
24:45
asset class when you could just perform, you know, you could
24:48
just gut it out, gut out the, you know, and the trade off is
24:52
you would only really do bonds because the risk of drops is a
24:56
lot lower. And so you get a more consistent
24:59
but smaller return rather than the more volatile but higher
25:02
return. And he's saying, hey, why don't
25:04
we just use a big cash buffer to balance out these the volatility
25:09
or wait out the volatility and then take advantage of the high
25:12
return. You might absolutely, totally be
25:14
right. And I'll say there's lots of
25:16
reasons you might want fewer or no bonds in your portfolio. 1 is
25:21
you might have a pension, like let's say you're a teacher, you
25:24
retire and the pension kicks off $50,000 a year of income.
25:27
That pension, that recurring income kind of replaces the
25:31
purpose of bonds, which is to provide income and then you
25:34
might as well put more of your portfolio into the high
25:37
performing but more volatile stocks.
25:39
You might have Social Security. You know, I think a lot of us
25:43
will have Social Security. Maybe we don't know the future,
25:45
if it still exists by then, but that totally you'd count that as
25:48
part of your bond portion. You you kind of get your bond
25:51
portion. You might have real estate
25:53
income. A lot of investors, you know,
25:55
have a, you know, rental home or two that's providing cash that
25:59
kind of is could take place of the bond portion or you might
26:03
have a big cash buffer like you suggested, say, hey, I'm just
26:05
going to keep a three-year emergency fund instead of a six
26:07
month emergency fund. All these things are totally
26:11
rational. And if you want to do it like
26:13
you have my my blessing, Dylan. But here's the argument against
26:19
when I talk to real human beings in their 60s and 70s, they don't
26:25
feel the way you feel. Dylan, you're 27.
26:28
I'm 45. I'm like maybe halfway between.
26:30
I still, frankly, I'm kind of feel more like a 27 year old.
26:34
And I even financially I'm like, yeah, I can weather the storms.
26:37
That's just how I feel about my own investing.
26:40
But when I talk to people in their 60s and 70s, they don't
26:43
feel that way. They don't want World War 3 the
26:47
next time. Whatever clown's in the Oval
26:49
Office, I'm sure whoever's listening, I'm sure you don't
26:51
like this guy. The last guy can virtually
26:53
guarantee it these days. So you probably think someone,
26:56
some clown's been in the Oval Office in the last few years.
26:59
They don't want him doing something stupid or her.
27:03
Hopefully one of these years, right, Jen?
27:06
Don't hold your breath. I'll be 47 presidents deep and
27:11
I'm still not able to breathe. But they don't want the
27:16
president doing something stupid, see their $2,000,000
27:19
portfolio become $1 million. And now they're worried about
27:22
like my inheritance or my, I'm not going to be able to pay for
27:25
food or whatever they say. I just want to lock it in.
27:28
I've done it. I got here, I'm retired.
27:29
I want to lock in how much I have and then just get a
27:31
paycheck every month. That's kind of what bonds are
27:34
for. And so when you're making the
27:37
decision, am I going to score 100% stocks with a bigger cash
27:40
buffer or go with the target date fund, I think you should at
27:43
least have a real honest, you know, look in the mirror and
27:48
say, OK, will I feel the same when I'm 67 as I do when I'm 27?
27:54
Or is it possible I'm going to like that income, I'm going to
27:58
like those paychecks coming in monthly, and I'm going to be OK
28:02
without a, you know, I think even in Dylan's estimate here,
28:06
he said I would end up with 45% more money.
28:09
You know, that logic might be true when you're 27.
28:12
When you're 67, you don't really care about 45% more money in 30
28:16
years. You care about am I able, able
28:18
to pay for my, you know, travel and cruises and living expenses
28:22
or whatever now and this year and next year because, and he
28:26
even mentions diode 0, which is great because you know, diode 0.
28:30
The whole point of that book is, hey, when you're 67, if you want
28:34
to do something, do it. Because when you're 87, you're
28:37
probably not going to feel like jumping on a plane.
28:38
You're probably not going to, you know, even if you survive
28:40
that long, your physical fitness and health won't be able to
28:45
support the same lifestyle that you have now.
28:47
And so spend your money now. And so that kind of speaks more
28:50
to the idea of, hey, put yourself in a portfolio that
28:53
optimizes for a living now, not for 30 year growth.
28:57
So the no bond crowd, you know, everyone, I feel like the no
29:01
bound, the no bond crowd comes from me.
29:04
Like Jeremy, bonds are stupid. They have low returns.
29:06
And you know, I'm like, that's fine.
29:09
You don't have to do bonds. I will say, I think there's a
29:11
little bit of chasing past performance in there because
29:13
bonds have done really bad lately because rates have gone
29:16
way up. When rates come back down, bonds
29:19
are going to shoot back up. And so just like even even
29:22
Dylan's own analysis was wrong. The bond portfolio actually did
29:26
better since 2008, just because, you know, randomness or whatever
29:32
of the over that time frame that might happen again in the
29:34
future, right? So I, I guess here's the other
29:36
thing is you might be saying, OK, well, I will just stick with
29:40
my 100% stock portfolio and then I'll wait until I'm 67 to see if
29:43
I feel the same way and change then.
29:45
The problem with that logic is what might happen is when you're
29:49
63, World War 5 will be the World War we're on by that
29:54
point. And yeah, I know.
29:56
And at that point, you might say, you might still market drop
30:02
in half and be like, I can't do this.
30:04
Jeremy was right. I don't, don't like, I don't
30:06
want to risk it going down by 90% like it did during the Great
30:09
Depression. I'm going to lock it in at
30:11
losing half. And then you sell everything and
30:13
convert to bonds, whatever. And then the market goes back
30:15
up. That sort of time in the market
30:17
is, is much worse than getting the right portfolio, you know,
30:23
And so I that's why I love target date funds because
30:26
they're kind of protect you from yourself a little bit.
30:29
So, you know, Dylan, I don't, I don't think what you're saying
30:33
is crazy, but I still, you know, you're 27 with 1.2 million and a
30:38
target date fund. Clearly something's been working
30:40
for you. I don't keep doing it.
30:42
If you want to tilt a little bit, say, OK, I'm going to do a
30:45
target date fund and a small cap value funder and you know, Vt
30:50
like do both. That's cool too.
30:52
I'd give both of those portfolios an A+.
30:55
But just yeah, be be real with yourself about what you might
30:58
want when you're 67 and don't wait until then to make the
31:01
decision because it might be too late.
31:03
If World War 5 happens then. Mm Hmm.
31:06
Wow. Thank you for your question,
31:08
Dylan. I hope that was helpful and I
31:11
hope they don't feel too discouraged about the World War
31:13
Five that's going to be happening when you're 67.
31:15
Let's get into our next segment, Scroll Patrol.
31:22
Scroll Patrol. OK, so I'm going to have this is
31:26
a video that I got from the Internet and I'm going to make
31:29
Jeremy watch it and react, but I'm going to give you some
31:31
context after you watch it. So click on that, watch it with
31:35
me and then we'll, we'll, I want to give you a little bit of
31:38
context afterwards. OK, I have never seen this video
31:42
before. What do you day trade?
31:43
The Australian dollar? the US dollar?
31:45
How? Many trades you make a week.
31:47
Five good ones a day, you. Use a broker or do you do it
31:50
yourself? You do it myself.
31:51
Do you have any licenses right now?
31:52
So they've expired in my end because I wasn't sure I was
31:55
going to go back into finance. I want to get into crypto as
31:57
well. What's the price of Bitcoin
31:58
today? About 100 grand, I don't know at
32:00
the moment. You trade no other currency.
32:02
Not at the moment, no. Did.
32:04
You vote for Trump. I didn't vote, but I would have
32:07
voted for Trump as. A cop out I.
32:09
Well, I wasn't here. I know it's a cop out.
32:11
I'm absolutely conservative though, without a doubt, without
32:14
a doubt. And I'm happy that he won.
32:15
I'm actually really sorry about him.
32:17
I'm sorry, No. No, no, it's, it's so the way
32:22
this works is like once a quarter, Jerome Powell, the head
32:27
of the Fed, he speaks on things and those things cause ripples
32:31
in the market that I trade in. How do you know like the
32:33
meetings going on? Oh, I check like all the time.
32:37
There's like, do you get like a Facebook invite?
32:39
This is like my job at this point, so I'm like half
32:41
listening to that because I kind of understand where it's had to.
32:44
There was like. 2 videos there, I clipped them.
32:48
Together. I clipped them together because
32:49
I needed you to have more context because it was like
32:52
this, this person, this is from a reality show called Love is
32:54
Blind, and it's a. Danger, this is love is blind.
32:58
This is love is blind, and there's a danger.
33:00
Quick aside, Quick aside, did you watch the first season with
33:03
the the vet guy? The vet guy.
33:08
That everyone hated. He was like the heel of that
33:10
season, the Indian guy that's. Not the first season.
33:16
Oh, it's not. If it's the Indian guy that I'm
33:18
thinking of. He said he didn't like Indian
33:20
women, but then he matched with an Indian woman and then he
33:22
dumped her because she wasn't hot enough or.
33:23
Something definitely not the first season, but yes, I watched
33:25
that. I've watched.
33:25
Them all. Oh anyway, I was on his podcast.
33:28
That's my claim of fame. Wait, we have to talk about
33:33
that? We have to talk about that.
33:35
That's crazy. Why?
33:35
What does he do? Like he was just trying to like
33:39
become an influencer post like Love is Blind fame and his like
33:44
team reached out to me and was like, do you want to be on the
33:46
podcast? I was like.
33:47
How was the conversation? I don't know.
33:50
It's fine. Like, you know, I mean, we
33:53
didn't, I didn't be like you were a Dick for dumping that
33:55
girl. I know.
33:56
We just stopped. Him saying, I literally just saw
33:58
a clip of him today as I was like looking at this stuff and
34:00
he was like, all these women, like attractiveness is is
34:04
subjective. And like I don't even like any
34:06
women except for Vanessa, who's the host.
34:08
And then Nick Lachey's there. He's like you're talking.
34:10
About my wife. Oh yeah, he's crazy.
34:13
I had some very bad, very bad PR moves in that.
34:17
Show great TV, fantastic TV anyway, so this is from love is
34:20
blind this current season there these are two people that
34:23
matched and he has this like very interesting timeline of
34:26
what his actual career is. And I knew like as soon as I saw
34:30
that he was claiming he's a day trader, I was like, OK, I got to
34:33
get I got to get some clips here.
34:34
So the first clip was on TikTok. The second one, I was like, I
34:36
need that context of like him watching the Fed meeting to like
34:40
figure out. And I was like, bro.
34:42
So anyway, I don't want to inform too much, but you can
34:48
tell us what you think about Alex here.
34:50
So, you know, he's this youngish finance bro, he's got some tats,
34:59
he fancies himself a trader. He says all he trades is, was it
35:04
US and Australian currency? I was.
35:07
So confused. Yeah.
35:08
And so like, so that's called foreign exchange currency or
35:11
forex or foreign exchange trading or forex.
35:14
And, you know, it just has this following of people who think
35:19
that they can, you know, buy the Australian dollar for $0.88 and
35:23
sell for $0.90 based on what's going on in the world.
35:26
And, you know, in, in my opinion, I think that this type
35:32
of trading, especially by, you know, amateurs, which, you know,
35:36
I think he is, because he's not working for some huge bank that
35:39
has the ability to like, you know, get advanced notice of
35:42
things. You know, it's just, it's fake.
35:46
You know, I don't think he would have ever allowed any sort of
35:49
audit of his finances to prove what kind of income he's making.
35:54
But everyone I've ever seen who does this isn't actually making
35:57
money doing it. They might make money sometimes,
36:01
you know, And what happens is they convince themselves they
36:06
they have a system. They read the books they like,
36:08
look at the charts, they read the news like this guy's
36:10
clicking refresh of Jerome's pile talk.
36:12
And that gives them some sort of edge over the.
36:14
Call that we all have access to. By the way, he's actually gets
36:17
like a work call. Exactly, and he's like 4 minutes
36:20
later he's going to make one of his trades, you know like.
36:24
The call that everyone saw. So like.
36:27
And the bots have already traded on information you know before
36:30
you even process the words he's saying.
36:32
So good luck. But he, he thinks he's got the
36:36
system and so he buys at one point and then he sells and he's
36:40
like, I made $1000 today and he's like, it's working.
36:44
But the problem is that was just random.
36:46
You know, it's as though you went to Vegas and you're looking
36:50
at a roulette wheel. And in Vegas roulettes where it,
36:53
you know, you spin a little ball and it lands on red or black and
36:56
even shows like a history of where the ball has landed under
37:00
like next to a lot of roulette wheel.
37:01
So it can be it's like black, black, red, red, red, black,
37:03
black. And so sometimes you'll say, oh,
37:05
it's red six times in row. It's got to be black now.
37:08
So here's my system. I'll wait till it's red five
37:10
times in a row and then I'll start betting on black because,
37:13
you know, it's sure to flip the other way.
37:15
And the problem is I just ran them.
37:17
Every single role is independent.
37:19
The 6th role is no more likely to be black than the 5th role
37:21
was. Just regardless of what
37:23
happened. And the, and the markets are the
37:25
same way because all the information he thinks he has,
37:28
whether it's, you know, Jerome Powell calls or past performance
37:32
or charts or, you know, there's all this sort of analysis these
37:36
traders do, they convince themselves it's a skill when
37:40
it's purely luck. But then three years later, they
37:43
all quit this job because they haven't been making any money
37:47
and they've been doing something else right.
37:48
And so, yeah, I just, if I was on mission and I could go look
37:54
and do an audit of this guy's trading, I could virtually
37:56
guarantee you he's very close to making zero money.
37:59
Maybe he's even lost money. And so.
38:03
Yeah. That's what folks are saying.
38:05
I love when we can have crossover between our two
38:07
worlds, Jeremy. Bad, bad job.
38:11
I know I did. I actually did watch one episode
38:13
of Love was Blind. I was the one with that.
38:15
The the guy's podcast that's on people even like it's not at the
38:19
time, you know, he's kind of like dated now, but people have
38:21
like, hell, you know, that guy's a Dick.
38:23
I was like, I don't know, like not like endorsing his view of
38:25
women. I'm just.
38:26
Trying to. Spread the good word about
38:28
Index. You know, podcast even still
38:30
exists. That's so funny.
38:32
I'll have to go check out that episode.
38:34
Amazing. OK.
38:35
So are you rating this? Oh yeah, I I give I give it AI
38:41
give it an F. You know, I think this is
38:43
made-up nonsense and I think that, you know, his mansplaining
38:47
at the end to this is that his match, that he matched with his
38:51
girlfriend or whatever. Oh, sorry, sounds like I'm.
38:54
Sorry, wait, sorry. I missed, I missed, I missed, I
38:59
missed the the headline. Alex 30, soccer coach, of course
39:04
he's a soccer coach. Everyone who's everyone who's
39:06
doing forex trading making $1000 a day also has to go coach
39:10
soccer for 9 bucks an hour. I.
39:12
Want to tell you about Alex. But we don't have time.
39:14
We just don't. And it would be not finance
39:16
related at all. So I had to like find the little
39:18
bits. All right, I'm saying this is a
39:20
volleyball coach by the way, I like love coaching.
39:23
I would never describe myself like I mean, I would be pretty.
39:27
I wouldn't be offended, but I would say it's not very accurate
39:29
to say that that's my career as a volleyball coach.
39:31
I'm like the the scroll beneath my name.
39:33
I volunteer as a volleyball coach because I'm exceedingly
39:36
wealthy. I don't have to be a soccer
39:38
coach because I'm day trading foreign currency and
39:40
mansplaining about Jerome Powell calls to this, you know, very.
39:43
Jeremy, you don't even know. He had several injuries.
39:45
He was going to be a soccer star until those surgeries, don't you
39:48
know? He probably should have done
39:51
that because that's better than trading.
39:54
That dude is not going to make money.
39:56
Alex gets an F makes me happy because he is trash.
40:00
OK, let's I. Didn't even know he's trash.
40:01
I'm just going based on the 62nd clip you put together.
40:04
I know This is why we do this because you need to blind react,
40:07
but I will give you additional context once you've reacted.
40:10
OK, fantastic. Let's move on to our next
40:13
segment, Money, Money. Jeremy had time today.
40:18
By the time we're in the comments, what are we doing?
40:21
OK, let's stick with war. You had the Instagram post,
40:25
their most recent Instagram posts at the top of this episode
40:28
and we had some comments in there.
40:29
Most people were happy that you spoke up on it or just like
40:33
we're happy to have you weigh in on what you think they should be
40:36
doing. But we did have one comment or
40:38
say you should buy between two to four years after and sell
40:42
between 5:00 to 6:00 after the war because there's always a dip
40:46
correction. It's always the people that have
40:48
like an interesting comment that like their grammar is messed up.
40:51
I'm like, you know what? I'm like buy BY, not BY.
40:53
Like I'm just like bro. And what's this guy's username,
40:57
Alex? Soccer coach love.
40:58
Is blind. I hate you.
41:02
I've got the username. We do not ask.
41:04
Anybody on the personal finance club show?
41:07
Hey, they're posting it publicly.
41:08
I think we could totally post it publicly, but yeah, we don't
41:10
need to because I'm not sure that's not.
41:12
Going to be my cross to bear. This comment is essentially the
41:15
culmination of the first segment, the war chart and
41:18
Alex's perspective, which is I can look at the charts and
41:21
decide what to do, but even this comment is so ridiculous you
41:24
should buy between two and four years.
41:27
OK, so this is your zero. You know, war broke out a week
41:32
or two ago. So somewhere between 2008 or
41:36
2028 and 2030 we should buy then we should sell somewhere between
41:41
you know and I'm having told you the math 2031 and 2000 32 which
41:47
where in there, I don't know somewhere in there and.
41:49
When the wars end, like there, this is like, you know what I
41:53
mean? Like what are you talking about?
41:54
But he's like squinting, looking at this chart, he's like, he's
41:57
like, no, see, there's a dip there and then it goes up there.
42:01
But even in these, you know, 6 wars, I included, they all dip
42:05
at different times. It's just chaos.
42:07
And so this, you know, he's basically doing a what's called
42:10
technical analysis of saying, OK, a technical analysis is
42:14
essentially that red black roulette thing.
42:16
It's like, OK, if it's five time 5 red in in a row, then it's
42:19
going to go black. Or if it they have these things
42:22
called like ceilings and floors and, and, and if it hits the
42:26
floor, it's going to go back to the ceiling, whatever.
42:28
I'm, you know, technical analysis, people can make that
42:30
guy's, he doesn't know what he's talking about.
42:31
And you're right, except for I know everything that you do is
42:34
nonsense because it's just not backed up by actual like data or
42:39
results. It's backed by, you know,
42:42
guessing. So he's trying to do a technical
42:44
analysis of these charts and saying, hey, if you sell in this
42:46
time frame and buy in that time frame, you'll have missed the
42:51
dip that always comes along with wars, which would be great if it
42:53
was true. But even by his own assessment,
42:56
he can't narrow down to more than a two year time frame.
42:59
And the market can go crazy in not only two years, but in a day
43:02
or two. If you, you know, they always
43:04
say if you miss like the few best days of a year, you'll have
43:07
like no gain instead of 10% gain because the few best days are
43:10
the, are the whole gain each year.
43:12
And so when he's giving you a 2 year window, it's like just
43:15
ridiculous. So you know, no LX soccer coach,
43:19
you should not be day trading. That's the war.
43:21
And also by the way, like, you know, it's not like in two years
43:24
it's gonna be 20-30. And like, remember two years ago
43:27
when we bombed Iran? And I said two years later,
43:29
sorry, two to four years later, there's going to be a dip in the
43:31
market. Now I'm going to go, I'm going
43:34
to go by because two years, you know, two years ago, there's
43:37
going to be different headlines, right?
43:38
And I'm not trying to minimize this war, but like, you know,
43:41
two years for this war. There was the, you know, Israel
43:44
Gaza war, but two years for that war, there's the Ukraine Russia
43:47
war. But two years before that war,
43:48
there's, you know. Yeah, there's.
43:52
So many wars. I don't even remember all the
43:53
wars, but so you're not going to the.
43:54
Two year window is hilarious. I'm like what?
43:58
Yeah. And so, you know, I think I
44:02
respond to that comment in Instagram like the grimace emoji
44:05
like this, just because no, you don't do that.
44:12
It even you're by your own admission, it's not you don't
44:15
know what you're doing. And, and, and the good news is,
44:19
if you don't know what you're doing, you're in great shape
44:22
because all you got to do is buy, buy, buy, buy, buy low,
44:24
buy, buy high. Never sell until you retire and
44:27
then sell a little bit of time just what you need.
44:29
That's how you do it. That's how you get rich when you
44:32
you think you're smart and you're not smart.
44:34
I'm looking at you, Alex, I'm coming for you.
44:36
I don't even know you, sorry, dude.
44:38
But like, you know, you're kind of given think you're smart, not
44:41
smart. That's what I'm seeing from that
44:44
very short clip I saw. That's when you're going to
44:47
learn the expensive way three years from now when you figured
44:50
out that, you know, forex trading Australian currency and,
44:55
you know, listening to Trump Paul's call because it's going
44:57
to give you some insight, is not going to do what you think is
45:02
going to do. So yeah, don't do that.
45:04
Got it. Okay, we made it to the end of
45:08
another episode. It was a good one.
45:11
Sorry about the war, but keep holding all of your investments.
45:15
Yes, Jeremy, break us off with those rules.
45:19
If you want to build the wealth, you got to follow the 2 rules of
45:21
Personal Finance Club. Rule #1 live below your means
45:24
and rule #2 invest early and often.
45:27
See you next week. The Personal Finance Club show
45:29
is produced by Jeremy Schneider and Jen Mundia, music by Essa
45:32
Balu and Homie. Send your questions to podcasts
45:35
at personalfinanceclub.com The Personal Finance Club show is Co
45:39
hosted by Jeremy Schneider who is a co-owner of Nectarine and
45:42
SEC Registered Investment Advisor.
45:45
The views expressed on this show are those of the hosts and
45:47
guests and do not necessarily really reflect the views of
45:50
Nectarine. Please refer to
45:52
hellonectarine.com for all relevant disclosures.
45:55
This podcast is for informational and educational
45:57
purposes only and should not be construed as personalized
46:00
investment advice or a solicitation to buy or sell any
46:03
security. Listeners should consult their
46:05
own financial, legal or tax professionals for advice
46:08
specific to their situation.