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The Thoughtful Investor: Building Portfolios Around Purpose, Time, and Risk · Money In Motion with Klaas Financial

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Speaker 1: three seven No charge for that initial gets to know
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Speaker 1: you appoyment tech Class Financial. It will be complementary to
0:51
Speaker 1: you and joining us this morning from Class Financial our
0:53
Speaker 1: CJ Closs and Eric Schwartz.
0:55
Speaker 2: CJ.
0:56
Speaker 1: How you doing this week?
0:57
Speaker 2: I'm doing great, Sean, how are you?
0:59
Speaker 1: I'm doing really well. Great to talk with you, Eric,
1:01
Speaker 1: how have you been?
1:03
Speaker 3: Not too bad? Sean excited for ash shout.
1:05
Speaker 1: It is an exciting conversation. We're going to be talking
1:07
Speaker 1: about the thoughtful investor and building portfolios around purpose, time
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Speaker 1: and risk and of course not the headlines which can
1:14
Speaker 1: be a big mistake. We'll talk a little bit about
1:16
Speaker 1: that with cjen Eric this morning. As mentioned, if you
1:19
Speaker 1: have any type of retirement related question, our retirement planning
1:22
Speaker 1: professionals are here. They are here to take your call
1:25
Speaker 1: at six eight three two one thirteen ten. That's six'
1:28
Speaker 1: eight three two one thirteen ten. Cool feature of the show.
1:30
Speaker 1: Not only opportunity to get in with your question, of course,
1:33
Speaker 1: the class Quiz question week is another great one chance
1:36
Speaker 1: for you to win a great prize and our friends
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Speaker 1: at Costs Financial provided a twenty five dollars gift card
1:40
Speaker 1: to Darden Restaurants this week. Tell you a little bit
1:42
Speaker 1: later on in the program how you can win that prize.
1:45
Speaker 1: Of course, a little tip if you listen closer to
1:47
Speaker 1: the show. Just about every program, the question and answer
1:50
Speaker 1: come up during the show, so you want to pay
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Speaker 1: close attention for your chance to win that twenty five
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Speaker 1: dollars gift card to Darden Restaurants. And before we get
1:57
Speaker 1: rolling on this week's topic and conversation, let's say actually
2:00
Speaker 1: look back at last week's show and get the question
2:02
Speaker 1: and answer there as well.
2:04
Speaker 3: Eric. Yeah, thank you everybody for listening as always, and
2:08
Speaker 3: congratulations to our winner from last week. Last week we
2:12
Speaker 3: were talking about disability and life insurance policies and where
2:15
Speaker 3: they fit into your financial plan. So our question was
2:19
Speaker 3: true or false? True or false? Most employer sponsored disability
2:23
Speaker 3: insurance policies are designed to replace fifty to sixty percent
2:28
Speaker 3: of a worker's working income, and the answer to that
2:31
Speaker 3: is true.
2:32
Speaker 1: It was a great program as always. Of course, you
2:33
Speaker 1: can listen back at Classfinancial dot com. That's coss Klaasfinancial
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Speaker 1: dot Com. Don't forget as well with clos quiz question week.
2:40
Speaker 1: We'll have another opportunity for you a little bit later
2:42
Speaker 1: on this program. So pay close attention. This week we're
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Speaker 1: going to be talking about what it means to be
2:47
Speaker 1: a thoughtful investor, and of course there's no shortage of
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Speaker 1: noise in the current market environment. Got headlines about interest rates, politics,
2:55
Speaker 1: of course, inflation's earned inflation, earning's global conflict, everything. What
3:00
Speaker 1: did the market do yesterday? And CJ. I hear this
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Speaker 1: phrase thoughtful investor, what exactly does that mean to you?
3:08
Speaker 2: Yeah, good question, Sean. So a thoughtful investor, from our perspective,
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Speaker 2: is someone who builds their portfolio around their life, not
3:16
Speaker 2: around news cycles. So at Class financial we believe planning
3:20
Speaker 2: must come first. So before we ever talk about which
3:24
Speaker 2: investments belong in an account, we want to understand three things. One,
3:28
Speaker 2: what is the purpose of the money well that will
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Speaker 2: be invested, which which can vary by account type By
3:35
Speaker 2: the way, Number two would be how long until the
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Speaker 2: money will be needed? So said another way, how much
3:40
Speaker 2: time do we have before you need all or a
3:43
Speaker 2: portion of that account? And then number three, how much
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Speaker 2: risk is appropriate appropriate for that specific goal and that
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Speaker 2: specific person. In our opinion, these three elements should drive
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Speaker 2: portfolio design much more than headlines ever should, because once
4:00
Speaker 2: you understand the purpose, the time horizon, and the risk
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Speaker 2: profile of an account, the portfolio can be built intentionally.
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Speaker 2: Then the day to day market noise becomes something to
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Speaker 2: be aware of, but not something that controls your decisions.
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Speaker 2: And that's a big distinction. Thoughtful investing is not passive
4:18
Speaker 2: in the sense of being careless. It's disciplined, it's deliberate,
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Speaker 2: it's rooted in evidence, structure and long term thinking. Well,
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Speaker 2: often here people try to simplify these terms like are
4:32
Speaker 2: you a passive are you an active investor? And what
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Speaker 2: does that mean? And if you're passive, it just means
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Speaker 2: you're lazy, And it's like you're trying to oversimplify this. Right,
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Speaker 2: you need to. If you can answer those three questions
4:43
Speaker 2: for each account that you have for each person exists,
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Speaker 2: then the market volatility is something you already plan for. Right,
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Speaker 2: you already knew that was coming. But where people get
4:54
Speaker 2: in trouble is where they think, well, no, I'm just
4:56
Speaker 2: I'm gonna invest while I feel good, and then I'm
4:58
Speaker 2: not gonna invest when I feel bad. I was going
5:00
Speaker 2: to bounce all over the place, and in our comment
5:02
Speaker 2: would be that is a recipe for disaster.
5:05
Speaker 1: Sorry, this morning with CJ. Closs and Eric Schwartz, our
5:07
Speaker 1: retirement planning professionals from Class Financial, it's a great day
5:10
Speaker 1: to start that conversation. All I got to just pick
5:12
Speaker 1: up the phone, give a call six oh eight four
5:13
Speaker 1: four two five six three seven, No charge for that
5:16
Speaker 1: initial get to know the appoyment at COSS Financial, it
5:18
Speaker 1: will be complimentary to you again their number six oh
5:21
Speaker 1: eight four four two five, six three seven online Cossfinancial
5:25
Speaker 1: dot Com. That's COSS k l aas Financial dot Com
5:28
Speaker 1: and as CJ excellently laid out the framework on of
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Speaker 1: that purpose, time and risk. Eric, let's then start with
5:35
Speaker 1: that first element purpose. Why is that such an important
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Speaker 1: place to begin.
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Speaker 3: Yeah, I think this is because not all dollars are
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Speaker 3: meant to do the same job, right, And I know
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Speaker 3: that sounds simple, but it's it's one of the most
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Speaker 3: important things that investors can can understand here and CJ
5:51
Speaker 3: was just referencing it. For example, money you'll need for
5:55
Speaker 3: a retirement income you know and maybe in the next
5:57
Speaker 3: few years should not be invested in the same way.
6:00
Speaker 3: Is money meant for growth ten or fifteen years from now.
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Speaker 3: Money you're marked for a future home purchase may need
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Speaker 3: a very different level of stability than money intended for
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Speaker 3: a legacy goal for the next generation. For example, when
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Speaker 3: investors lose sight of purpose, they start making decisions as
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Speaker 3: if every dollar has the same job. They see one
6:20
Speaker 3: scary headline, and I think we can all agree there's
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Speaker 3: plenty of headlines to distract us these days and you
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Speaker 3: suddenly feel like everything should be more conservative, or they
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Speaker 3: see a market rally and feel like everything should be
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Speaker 3: more aggressive. Right, it's that kind of bouncing around. CJ
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Speaker 3: is just referencing the thoughtful investing says, let's first define
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Speaker 3: what this account is supposed to accomplish, and once we
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Speaker 3: know that, we can align the portfolio to its job.
6:45
Speaker 3: That's one reason we often say planning should lead portfolio
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Speaker 3: management and not the other way around.
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Speaker 1: Talking this morning with Eric Schwartz and CJ Closs, they
6:53
Speaker 1: are our retirement planning professionals from Class Financial, talking about
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Speaker 1: the thoughtful investor building your portfolio around purpose, time, and risk.
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Speaker 1: Of course avoiding those headlines and not necessarily avoiding them,
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Speaker 1: but of course not building your your portfolio around them.
7:06
Speaker 1: And as we talk with CJ and Eric, don't forget
7:08
Speaker 1: about the phone number six So eight three two one
7:10
Speaker 1: thirteen ten. That's six eight three two one thirteen ten.
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Speaker 1: Eric talked about purpose, we'll talk about of course, time
7:17
Speaker 1: and risk. We will get to that in just a moment.
7:19
Speaker 1: I hope you've had a chance to stop by the
7:20
Speaker 1: website Coss financial dot com. That's coss k L a
7:23
Speaker 1: as Financial dot Com learn more about costs financial right online. Also,
7:27
Speaker 1: you can schedule a complementary chat right from the website
7:30
Speaker 1: Coss Financial dot Com. Of course, Coss Financial brings you
7:33
Speaker 1: Money in Motion here on thirteen ten. Wui b A.
7:35
Speaker 1: We'll talk more with Eric and CJ and you next
7:38
Speaker 1: as Money and Motion continues here on thirteen ten wuib
7:41
Speaker 1: A talking with our retirement planning professionals from Class Financial,
7:44
Speaker 1: CJ Closs and Eric Schwartz talking this week about building
7:47
Speaker 1: portfolios around purpose, time and risk, and we talked a
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Speaker 1: little bit about purpose just before the break.
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Speaker 2: CJ.
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Speaker 1: Of course, if purpose, then kind of answer that question
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Speaker 1: what the money is for. The second piece is time.
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Speaker 1: How should folks be listening about time horizon when when
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Speaker 1: you're evaluating event investments?
8:05
Speaker 2: Ce J. Yeah, So time horizon is critical because it
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Speaker 2: tells us how much volatility an account may be able
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Speaker 2: to withstand. If an investor needs to use the money soon,
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Speaker 2: they may not have enough time to recover from a
8:18
Speaker 2: market downturn. On the other hand, if the money won't
8:21
Speaker 2: be needed for many years, then short term declines may
8:24
Speaker 2: be uncomfortable, but they don't necessarily require a change in strategy.
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Speaker 2: This is one of the biggest mistakes we see people make,
8:31
Speaker 2: and it usually shows up at exactly the wrong time.
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Speaker 2: They invest long term money like its short term money
8:38
Speaker 2: after a scary market event, or they invest short term
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Speaker 2: money like its long term money when markets feel good.
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Speaker 2: Eric was kind of hinting at this earlier. The thoughtful
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Speaker 2: investor understands that time changes everything. It changes how much
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Speaker 2: liquidity you need, it changes how much growth you should pursue,
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Speaker 2: and it changes how much short term market volatility you
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Speaker 2: can resiliently tolerate. That's why at COSS Financial we build
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Speaker 2: our portfolio models through our internal centralized portfolio management group.
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Speaker 2: We're we're not starting with what do we think the
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Speaker 2: headlines of the week means, We're starting with what is
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Speaker 2: this account designed to do? And how much time does
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Speaker 2: it have to do it?
9:22
Speaker 1: Talking this morning with CJ. Closs and Eric schwartzev Class
9:25
Speaker 1: Financial great perspective As always from CJN Eric, don't fre
9:29
Speaker 1: You can always learn more online Class Financial dot com.
9:32
Speaker 1: That's COSS k l a as Financial dot com and
9:34
Speaker 1: they're telephone number six so eight four four two five
9:37
Speaker 1: six three seven. So we've talked, talked purpose time, and
9:40
Speaker 1: of course now brings us to risk. And of course, Eric,
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Speaker 1: that is the third piece here. When you talk with
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Speaker 1: clients about risk, what are you usually trying to try
9:48
Speaker 1: and to convey help them under to help them kind
9:51
Speaker 1: of understand there.
9:53
Speaker 3: Yeah, I think the big thing is that risk isn't
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Speaker 3: just about what you know an investor will say on
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Speaker 3: a questionnaire or or you know how they feel in
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Speaker 3: the market's doing well. It's really about what they can
10:04
Speaker 3: actually live with, what they can stick with through the
10:07
Speaker 3: tough times. And it's one thing to say in theory
10:10
Speaker 3: that you can tolerate market declines, it's quite another to
10:13
Speaker 3: experience them in real time and still stay committed to
10:16
Speaker 3: that plan. And what thoughtful investing means it is finding
10:20
Speaker 3: the right balance between the three things that we've between
10:24
Speaker 3: three things as it relates to risk here. So that's
10:27
Speaker 3: the return you want, the risk required to actually pursue it,
10:30
Speaker 3: and the amount of volatility you can actually live with.
10:34
Speaker 3: And because a portfolio is only appropriate if an investor
10:37
Speaker 3: can actually stay invested in it, we need to make
10:40
Speaker 3: sure all of these things are balanced. This is where
10:43
Speaker 3: planning and relationships really matter for us, especially risk tolerance.
10:47
Speaker 3: It's not just a mathematical exercise. It's much more personal
10:51
Speaker 3: than that. It involves behavior, comfort goals, income needs, and
10:55
Speaker 3: emotional response. The best portfolio on paper is not the
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Speaker 3: best portfolio if an investor is going to bail when
11:03
Speaker 3: when the market goes down, and you know, potentially at
11:06
Speaker 3: the worst possible time. So our job is to make
11:08
Speaker 3: sure that the clients are being very realistic about the
11:11
Speaker 3: level of risk they're comfortable with and.
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Speaker 1: Eric you really set up well. Of course, the role
11:15
Speaker 1: of headlines and CJ. We live in a world then
11:18
Speaker 1: we're investors, you know, we're constantly told that we need
11:21
Speaker 1: to react. Why do the headlines make it so hard
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Speaker 1: for people to invest thoughtfully?
11:27
Speaker 2: Yeah, because headlines create urgency, and urgency is often the
11:31
Speaker 2: enemy of good decision making. Goodness, isn't that wisdom? Slow
11:36
Speaker 2: down and think about that, everybody. Urgency is the enemy
11:39
Speaker 2: of good decision making. It's often the reason why if
11:42
Speaker 2: you ever go to buy a car, they don't want
11:43
Speaker 2: you to leave the lot right. And by the way,
11:47
Speaker 2: I know there's people who sell cars out there. I'm
11:49
Speaker 2: not saying car salesmen are bad or good people. I'm
11:52
Speaker 2: just rather saying they know how this works right. Once
11:56
Speaker 2: you leave the lot and have a chance to think
11:58
Speaker 2: about it, you know you'll make a more rational decision.
12:02
Speaker 2: So headlines are designed to grab attention. They make every
12:07
Speaker 2: event feel immediate and actionable. But the market has a
12:10
Speaker 2: way of pricing in information very quickly, and investors who
12:14
Speaker 2: react emotionally are often late on both on the way
12:18
Speaker 2: out and on the way back in. So you know, everybody,
12:22
Speaker 2: just pause and think about this. The market is a
12:24
Speaker 2: pricing mechanism. It's called a discount discounted future income pricing
12:29
Speaker 2: mechanism around of equities that trade on the market. But
12:33
Speaker 2: it is a forward pricing mechanism. So if we are
12:38
Speaker 2: trying to make decisions off of a forward pricing mechanism,
12:43
Speaker 2: and by the way, it's trying to look as far
12:45
Speaker 2: out on the horizon as possible, good luck, good luck,
12:48
Speaker 2: because it's taking an information in real time as it
12:52
Speaker 2: comes in. So by the time you've heard and you think,
12:54
Speaker 2: oh my goodness, I heard, the market is going down.
12:57
Speaker 2: Everything you've heard about has already been priced inn Now,
13:00
Speaker 2: some people out there who are listening to me, they disagree.
13:03
Speaker 2: They go no, no, no, no, no, I know more
13:05
Speaker 2: than the collective wisdom of the markets, and I am
13:08
Speaker 2: going to predict the next AI trend and then I,
13:11
Speaker 2: God bless you go right ahead and try that on
13:14
Speaker 2: for size. That has pretty much been debunked for the
13:17
Speaker 2: most part as it relates to investing. That you might
13:20
Speaker 2: get lucky here or there, but that's very hard to
13:23
Speaker 2: persist over long periods of time. So a thoughtful investor
13:27
Speaker 2: understands that markets will always have something to worry about.
13:31
Speaker 2: There will always be a reason to feel uncertain. The
13:34
Speaker 2: question is not whether uncertainty exists. It always does. The
13:38
Speaker 2: question is whether your portfolio was designed with that uncertainty
13:42
Speaker 2: in mind. And that's where evidence matters. So markets have
13:45
Speaker 2: always had disruptions, they've always had corrections, they've always had surprises.
13:50
Speaker 2: But long term invest built on the assumption that life
13:54
Speaker 2: will be smooth. They're built on the expectation that volatility
13:58
Speaker 2: is actually part of the journey. So when we talk
14:02
Speaker 2: about not investing based on headlines, we're not saying headlines
14:06
Speaker 2: are irrelevant. We're saying that they should not be the
14:09
Speaker 2: primary driver of your portfolio construction. So here's a bit
14:14
Speaker 2: of free advice for all of our listeners. The most
14:18
Speaker 2: dangerous thought an investor can have is, but this time
14:23
Speaker 2: is different. Let me repeat that, the most dangerous thought
14:27
Speaker 2: an investor can have is but this time is different.
14:32
Speaker 2: In my twenty one years tied to the financial planning
14:35
Speaker 2: and investment management industry, I've heard that phrase used at
14:39
Speaker 2: least a dozen times by novice investors to justify completely
14:44
Speaker 2: abandoning their financial plans and jumping out of the markets.
14:47
Speaker 2: And let me give you some examples. I heard that
14:49
Speaker 2: phrase used back in two thousand and one after terrorists
14:52
Speaker 2: slammed two jetliners into the World Trade Centers in New
14:55
Speaker 2: York City. I heard that phrase again during the subprime
14:58
Speaker 2: lending crisis ofAnd An eight and tarly two thousand and nine.
15:02
Speaker 2: I heard that phrase again around March of twenty twenty,
15:04
Speaker 2: when the first case of COVID nineteen was confirmed in
15:07
Speaker 2: the United States and the world began to shut down.
15:10
Speaker 2: And then I heard that phrase again, most recently in
15:12
Speaker 2: twenty twenty two, after Russia invaded Ukraine, and it was
15:15
Speaker 2: this is the beginning of World War III. And yet,
15:19
Speaker 2: with the benefit of hindsight, was were any of those
15:23
Speaker 2: a justifiable reason to abandon your plan? The answer is
15:28
Speaker 2: a resounding no. Now, of course, we have the benefit
15:32
Speaker 2: of hindsight, we can look back on all of those
15:33
Speaker 2: circumstances and say, huh, probably the best thing you could
15:36
Speaker 2: have done is just stay the course in terms of
15:38
Speaker 2: investing at least. And yet here's what I'll say to you.
15:42
Speaker 2: That is true of almost every single correction you will
15:46
Speaker 2: hear about our seet, including the Great depression in the
15:49
Speaker 2: late twenties and early thirties. From an investment perspective, if
15:53
Speaker 2: your money was long term, it probably was best to
15:56
Speaker 2: just stay the course. So remember that, everybody. The most
16:00
Speaker 2: dangerous thought an investor can have is but this time
16:05
Speaker 2: is different.
16:06
Speaker 1: And let's talk a little bit about bringing in some
16:07
Speaker 1: of that evidence in Eric. You know, there's a lot
16:10
Speaker 1: of talk you hear people talking in the investment world
16:12
Speaker 1: of investment world about market timing. What is the what
16:16
Speaker 1: does the research actually show, what does it actually say?
16:20
Speaker 3: Yeah, the research is pretty consistent on this. Trying to
16:23
Speaker 3: time the market is it's incredibly difficult and infrequent trading.
16:27
Speaker 3: To try to do that tends to hurt investors far
16:30
Speaker 3: more than it helps them. There's a well known study
16:32
Speaker 3: by Brad Barber and Terrence Odean look where they looked
16:36
Speaker 3: at tens of thousands of brokerage accounts okay, and they
16:39
Speaker 3: found that the households who actually traded most frequently had
16:43
Speaker 3: meaningfully worse returns than those who traded less. They have
16:47
Speaker 3: a pretty simple and blunt conclusion, which was trading is
16:50
Speaker 3: hazardous to your wealth. So that is frequent trading is
16:54
Speaker 3: hazardous to your wealth. More recently, morning Star, one of
16:58
Speaker 3: the players in the investment world, their mind the Gap
17:04
Speaker 3: research showed that investors often earn less than the funds
17:08
Speaker 3: that they invest in, not because the investments themselves actually failed,
17:12
Speaker 3: but because investor behavior got in the way. And if
17:16
Speaker 3: you if you look over the ten years ending at
17:19
Speaker 3: the end of twenty twenty three, they estimated that the
17:22
Speaker 3: average dollar invested earned about one point one percent less
17:27
Speaker 3: per year than the average fund's total return because of
17:30
Speaker 3: the timing of putting money in taking money out. So
17:34
Speaker 3: when people talk about I'm just going to get out
17:36
Speaker 3: of the market until things calm down, it sounds sensible, right,
17:40
Speaker 3: It seems reasonable in theory, but in practice that kind
17:43
Speaker 3: of decision making often causes investors to sell after bad
17:46
Speaker 3: news and then to reinvest our buyback in only after
17:50
Speaker 3: the markets have already recovered. So in order to get
17:54
Speaker 3: the best return you kind of have to ride the
17:56
Speaker 3: roller coaster sometimes.
17:58
Speaker 1: As we talk about that stuff very point there, Eric
18:01
Speaker 1: and CJ. One of the common ways I think advisors
18:05
Speaker 1: explain this is by taking and talking about missing the
18:08
Speaker 1: market's best days. Can you kind of dig into that
18:11
Speaker 1: and kind of expand on that a bit.
18:13
Speaker 2: Yeah, absolutely.
18:14
Speaker 3: So.
18:14
Speaker 2: One of the challenges with trying to time the market
18:17
Speaker 2: is that the best days often come very close to
18:20
Speaker 2: the worst days. So if you step out during a
18:23
Speaker 2: rough patch, there's a very real risk that you miss
18:26
Speaker 2: part of the rebound. So Vanguard published research showing just
18:29
Speaker 2: how costly that can be. Using a hypothetical one hundred
18:33
Speaker 2: thousand dollars investment in the S and P five hundred
18:35
Speaker 2: from nineteen eighty eight through twenty twenty four, they found
18:39
Speaker 2: that staying fully invested would have grown the portfolio to
18:43
Speaker 2: about four point nine million dollars. So again, one hundred
18:46
Speaker 2: thousand from nineteen eighty eight to twenty twenty four in
18:49
Speaker 2: the SMP, if you just bought it and left it alone,
18:51
Speaker 2: would have grown to four point nine million, but missing
18:54
Speaker 2: just the ten best days, So think about that, over
18:59
Speaker 2: all those years, we're just missing the ten best days
19:03
Speaker 2: reduced that ending value to about two point three million.
19:07
Speaker 2: It's literally more than cut it in half. Missing the
19:10
Speaker 2: twenty best days dropped it by about one point four
19:14
Speaker 2: or two, I should say two, about one point four million,
19:16
Speaker 2: that's where you would have ended up, and missing the
19:18
Speaker 2: thirty best days reduced it to roughly nine hundred thousand dollars.
19:22
Speaker 2: So listen, I haven't done the math on this. I
19:24
Speaker 2: actually wish I would have beforehand. But the question is,
19:26
Speaker 2: from nineteen eighty eight to twenty twenty four, how many
19:29
Speaker 2: days were involved there? Well, eighty eight, ninety eight, eight eighteen.
19:34
Speaker 2: You know, we're talking thirty five is years. I think
19:36
Speaker 2: if my math is right on that, so thirty five
19:39
Speaker 2: times three hundred and sixty five days, that's a lot
19:41
Speaker 2: of days, everybody. And if you just miss the thirty
19:45
Speaker 2: best out of all of those days, you go from
19:48
Speaker 2: four point nine million downe to nine hundred thousand dollars.
19:51
Speaker 2: And again, remember what I said earlier. The key here
19:54
Speaker 2: is that the best days typically come after the worst days.
19:59
Speaker 2: So think about what a or just said there. He
20:00
Speaker 2: said a lot of people have this kind of sensible commentary,
20:05
Speaker 2: which is like, I'm just going to get out until
20:06
Speaker 2: things settle down, right. That sounds sensible. Well, the problem
20:11
Speaker 2: is by the time you get back in those two best,
20:14
Speaker 2: two three four days have already occurred and you have
20:18
Speaker 2: missed them. So anyway, that doesn't mean that every investor
20:21
Speaker 2: should simply ignore everything and never review their plan. That's
20:25
Speaker 2: not what we're suggesting. It does mean, however, that market
20:28
Speaker 2: timing has a very high cost if you get it wrong,
20:32
Speaker 2: and most investors do not have a reliable way to
20:35
Speaker 2: get it right consistently. That's why we believe in preparing
20:39
Speaker 2: portfolios in advance for volatility, rather than trying to predict
20:44
Speaker 2: and trade around volatility after it begins.
20:47
Speaker 1: Really important information this morning, as we talk with our
20:49
Speaker 1: retirement planning professionals CJ. Closs and Eric Schwartz. Of course,
20:52
Speaker 1: they come to us from Class Financial online Classfinancial dot com.
20:56
Speaker 1: That's Coss k l aas Financial dot com and their
20:59
Speaker 1: telephone number six O eight four four two five six
21:02
Speaker 1: three seven. Will continue our conversation with CJ and Eric
21:05
Speaker 1: will also do the class quiz question a week. We'll
21:07
Speaker 1: do that next. As Money in Motion with COSS Financial
21:10
Speaker 1: continues right here on thirteen ten, WIB a talking with
21:13
Speaker 1: our retirement planning professionals A CJ. Closs and Eric Schwartz.
21:16
Speaker 1: Of course they come to us from Class Financial, the
21:18
Speaker 1: website cossfinancial dot com that's coss k l aa S
21:22
Speaker 1: Financial dot com and their telephone number six so eight
21:25
Speaker 1: four four two five six three seven, talking about being
21:28
Speaker 1: a thoughtful investor and of course building your portfolio around purpose,
21:31
Speaker 1: time and risk, not the headlines. And so Eric, what
21:35
Speaker 1: about the appeal of chasing some of those top performing
21:38
Speaker 1: managers or funds. I know a lot of folks probably
21:41
Speaker 1: see a fund that's had a great couple of years
21:43
Speaker 1: and wonder, why shouldn't I jump in.
21:47
Speaker 3: Oh that's a great question, Sean, And it's it is
21:49
Speaker 3: very tempting, very very tempting, right because if you think
21:52
Speaker 3: about it, it's like, well, yeah, I I as a
21:54
Speaker 3: as a novice investor, I can't time the market, but
21:57
Speaker 3: you know who certainly kind of these these managers have
22:00
Speaker 3: get paid to do it right, And unfortunately the evidence
22:04
Speaker 3: it says investors should be really cautious of this. The
22:08
Speaker 3: S and P did their most recent US Persistence scorecard
22:12
Speaker 3: actually highlights this fact and it shows how difficult it
22:14
Speaker 3: is for active outperformance to persist over time. So this
22:18
Speaker 3: is the idea that the investment manager is buying and
22:22
Speaker 3: selling to try to outperform the market. And as an example,
22:26
Speaker 3: among active domestic equity funds, so funds that invest here
22:30
Speaker 3: in the United States that were in the top quartile
22:33
Speaker 3: back in twenty twenty one, essentially none in most categories
22:37
Speaker 3: remained in the top coretile through twenty twenty five, and
22:40
Speaker 3: only four and a half percent of above media and
22:43
Speaker 3: large cap active equity funds stayed above median over that
22:47
Speaker 3: full period, which was actually worse than what random chance
22:51
Speaker 3: would actually suggest. So here's the idea. If an investment
22:55
Speaker 3: manager is outperforming the market, that means by definition, they
22:58
Speaker 3: are doing something different than the rest of the market
23:01
Speaker 3: and it is currently in favor. That that also means
23:04
Speaker 3: that inevitably, you know, their their strategy may not be
23:08
Speaker 3: in favor, and everyone else that was doing something different
23:11
Speaker 3: is suddenly doing better than them. So this doesn't mean
23:15
Speaker 3: that active management can't add value. It does mean, though,
23:18
Speaker 3: that identifying those managers in advance and actually sticking with
23:22
Speaker 3: them through the inevitable stretches of underperformance it's extremely extremely difficult.
23:28
Speaker 3: So rather than building portfolios around the hope that someone
23:31
Speaker 3: will consistently outguess the market. We prefer to build around
23:35
Speaker 3: the enduring principles of diversification, appropriate asset allocation, low costs,
23:40
Speaker 3: and disciplined rebalancing.
23:42
Speaker 1: Been a lot of great information this week's program. As always,
23:45
Speaker 1: don't forget. You can always listen back as well as
23:47
Speaker 1: subscribe to the podcast at cossfinancial dot com, That's cost
23:50
Speaker 1: k l a as Financial dot com and CJ Before
23:53
Speaker 1: we wrap up, any final takeaways for folks this week.
23:58
Speaker 2: Yeah, just a few. So First, before you make any
24:00
Speaker 2: investment decision, ask yourself three questions, what is this money for,
24:06
Speaker 2: when will I need it? And how much risk is
24:08
Speaker 2: appropriate for that purpose and for that timeline. If you
24:13
Speaker 2: can answer those questions clearly, you're already thinking more thoughtfully
24:17
Speaker 2: than most investors. And second, don't confuse activity with progress.
24:24
Speaker 2: Let me repeat that, don't confuse activity with progress. A
24:29
Speaker 2: lot of investing mistakes happen because doing something feels better
24:33
Speaker 2: than doing nothing, But often the most productive thing you
24:37
Speaker 2: can do is revisit your plan, confirm your allocation is
24:41
Speaker 2: still appropriate, and stay disciplined. And our opinion, thoughtful investing
24:46
Speaker 2: isn't about reacting faster. It's about preparing better.
24:50
Speaker 1: Really well said talking this morning with CJ. Class and
24:53
Speaker 1: Eric Schwartz, our retirement planning professionals from Class Financial I
24:56
Speaker 1: mentioned earlier. You can listen back to this in previous
24:58
Speaker 1: shows podcasts all at clown Financial dot com. That's coss
25:01
Speaker 1: klaas Financial dot com. You can also get to know
25:04
Speaker 1: Class Financial the team there. They're separate divisions as well
25:07
Speaker 1: how they can help you. Also, if you're an employer,
25:09
Speaker 1: that information all available to you at Cossfinancial dot com.
25:12
Speaker 1: Also from the website. You can schedule a complimentary chat
25:16
Speaker 1: right from class Financial dot com, or you can give
25:18
Speaker 1: a call at the office here in Madison six h
25:19
Speaker 1: eight four four two five six three seven. I want
25:22
Speaker 1: to hold on to that number now because it's time
25:24
Speaker 1: for the CLSs Quiz Question of the Week. It works
25:26
Speaker 1: like this. In just a moment, I'll ask you the
25:28
Speaker 1: Class Quiz question the week. You will then have thirty
25:30
Speaker 1: minutes from the interday's program to call the Class Financial
25:32
Speaker 1: office right here in Madison at six oh eight four
25:35
Speaker 1: four two five six three seven. If you are the
25:37
Speaker 1: first car with correct answer, you'll win this week's prize.
25:40
Speaker 1: Which day twenty five dollars gift card to Darden Restaurants.
25:43
Speaker 1: This week's COLSS Quiz question week Is this true or false?
25:47
Speaker 1: According to cost Financial, the most dangerous thought an investor
25:51
Speaker 1: can have is to quote, but the time this time
25:55
Speaker 1: is different. Let me read that one more time. True
25:57
Speaker 1: or false. According to Coss Financial, the most dangerous thought
26:00
Speaker 1: an investor can have is but this time is different.
26:03
Speaker 1: Is that true or is that false? Telephone number six
26:06
Speaker 1: oh eight four four two five six three seven, No
26:09
Speaker 1: charge for the initial gets to know you appointment at
26:10
Speaker 1: Costs Financial. It'll be complimentary to you again. That's number
26:12
Speaker 1: for Coss Financial office right here in Madison. CJ.
26:16
Speaker 2: Eric.
26:16
Speaker 1: It's always informative, it's always great you guys enjoyed the
26:19
Speaker 1: extended weekend and we'll talk real soon my friends. Thanks Sean,
26:22
Speaker 1: take care, guys. News comes your way next year at
26:24
Speaker 1: thirteen ten Wuiba. This is Money in Motion with Coss
26:27
Speaker 1: Financial Asset Advisors, LLC, a registered investment advisor registered with
26:33
Speaker 1: the SEC. The contents of this show are for informational
26:36
Speaker 1: purposes only and should not be considered individual investment advice.
26:40
Speaker 1: Class Financial does not offer tax or legal advice. Any
26:43
Speaker 1: opinion offered during the course of this show is the
26:46
Speaker 1: opinion of that particular investment advisor representative and not necessarily
26:51
Speaker 1: the opinion of cost Financial