Investing: How to Build an All Season Portfolio | Greg Vanderford | Skillshare

Investing: How to Build an All Season Portfolio

Greg Vanderford, Knowledge is Power!

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11 Lessons (2h 19m)
    • 1. Promo Video

      2:10
    • 2. Lesson 1 Creating an All Season Portfolio

      10:12
    • 3. Lesson 2 The Nature of Markets

      21:15
    • 4. Lesson 3 Price to Book

      11:54
    • 5. Lesson 4 Investing for Your Situation

      27:51
    • 6. Lesson 5 Diversification by Asset Class

      17:15
    • 7. Lesson 6 Investing in What You Know

      16:33
    • 8. Lesson 7 Ignoring the Noise

      9:23
    • 9. Lesson 8 Staying True to Long Term Goals

      6:26
    • 10. Lesson 9 Investing and Your Health

      9:09
    • 11. Lesson 10 Conclusion

      6:33

About This Class

Financial Markets are Famously and Dangerously VOLATILE.

This makes most people believe that investing is RISKY.

BUT NOTHING COULD BE FURTHER FROM THE TRUTH.

The truth is, not investing for the long term puts you at risk of never achieving financial independence or a secure retirement.

In this course you will learn:

1. How to think about financial markets

2. How to manage market volatility

3. How to invest safely during ALL types of economic conditions

4. How to spread your capital across asset classes intelligently

5. How to build an All Season Portfolio so you can sleep well at night while your money works for you!

Transcripts

1. Promo Video: this course is called investing Building an all season portfolio. What that means is I'm gonna teach you guys how to think about allocating your hard earned resource is in such a way as to make you basically recession proof. If you put your assets into certain asset classes in certain ratios, according to lots of research And according to everything I'm gonna teach you in this course, you can basically make your portfolio recession proof and make it so that even if the markets crash, because the way that you have invested your money and part of your portfolio will go up enough to offset on you losses that you would have had. So the all season portfolio not only is a way to build wealth safely over time is a way to sleep well at night as your investments fluctuate as they they will, no matter what. If you're invested in the stock market or real estate or in gold or any asset class, the prices we'll go up and down, values will go up and down. Most of all, fine is very stressful, especially as the number of assets that you have grows and so the all season portfolio. It's smooth out the ride for you so that you get really good long term results and you suffer a lot less during the big boom and bust cycles that we never we have in a capitalist system. So that's what this course is all about. I'm gonna go through all aspects of you, building your own all season portfolio based on your situation, your age, your risk profile, whether not you have a family and different things like that help you guys get on the road to financial independence or if you're already on that road, hopefully you learn something new or get a new idea. It will help you get there faster and with less stress. So thank you for joining the course, and I hope you guys really enjoy it. 2. Lesson 1 Creating an All Season Portfolio: investing is a really confusing subject, and in this course I want to make everything a lot simpler for the average person to understand. So I'm gonna focus on creating what we call on all weather portfolio. This means you could build wealth through investing in any economic environment, whether it's a recession or boom or maybe a mixed environment where you're not sure what's going on. We, uh, can learn how to allocate our capital in such a way so that we do well in any environment sense of this course is all about. So we're gonna look at it. Diversification. We're going to look at not only diversification, diversification by you know which stocks you invest in, but by asset class. How much capital should you allocate to, Let's say, stocks or bonds or real estate or cash or whatever we'll look it the optimal allocation in terms of the fractional amount that you put of your wealth into each asset class, so that if the market's going down, it will minimize your losses or make it so you actually make money during a recession without even having to do anything or when the market is booming. How to course, catch most of that boom without, you know, being unprepared for if things change rapidly in the market. So basically, we look at diversification. This is a word that is used all the time that pundits and talking heads and reading articles else you should be diversified. But what does that really mean? It's not so simple to say that well, you shouldn't have all your eggs in one basket. I mean diversification of simple idea, but how you choose to diversify, depending on not only what I just said about asset allocation based on asset class, but also depending on your situation, your age, your risk, tolerance, your situation in terms of whether or not you're single or have a family, your goals, all different aspects of your situation, will determine what you should be doing with your money. So diversification is a way to invest in a more passive style and minimize your risk, and is also all about being a sequel of night and not worry all the time about losing money . If you invest in the stock market or things, you know, going up and down having a lot of volatility was a guy who, some of you may have heard, was very famous being great. Dalio use the originator of what he called the all weather portfolio, and he had a very specific asset allocation that, um basically guaranteed over the last few decades about a 10% return, no matter what the environ, whether it was a recession or ah, expansion, his poor, his all weather portfolio gotten about 10% and it was very, very smooth. 10% to 1 of things about markets is that there's a lot of volatility, no matter what, whether talk about real estate or stocks or bonds, whatever, there's always a lot of ups and downs in the market. This is what stresses people out at least people to hire managers and have some money managers that you know, charge a lot of fees. And that's actually one of the things that, ironically, hurts. People's returns over time is paying a lot of fees, Teoh advisors. I mean, all weather portfolio is all about how do I passively allocate capital in such a way, so as a sleep well night? That's not that you stressed out and know that no matter what happens with the exception of maybe rebalancing your portfolio like once a year, which will talk about you will do well So I'm gonna go over Ray Dalio specific asset allocation mix he prescribed. But of course, no one formula is gonna work for everybody. So the way that he tells you, allocate your capital His I can tell you right now, in brief, basically says that 75% of your money in gold 75% in cash, about 30% in stocks, which is a lot lower than you here for most people. Most professionals will advise you put a lot more than that stocks, because stocks do really well over a long period of time. But 30% stocks about 40% in, uh, bonds, and then is a few percentage points left over that he tells you to put somewhere else in alternative investments or whatever, but basically he goes really heavy on on Bonds. But some gold in there. And, of course, about 1/3 stocks. That's that's Ray Dalio is all weather portfolio. In a nutshell. We're gonna dive into that this course and look it. All the different aspects of that, and just generally the best way that you should be allocating capital for good economic results in all economic environments, no matter what your situation. So there's different kinds of diversification, right? You can diversify by company. That just means like picking stocks, having on lots of different stocks every time the stock market, um, portfolio allocation, which is really what this course is about, mostly, which is about with percentage of your assets. Did you put into each stock right? Each company, because stock is just a fractional ownership of the company or in each asset class. You want to have explosion of stocks, but its stock market crashes. You won't have explosion of things like golden real estate. You know, there's usually, um, an inverse relationship between gold and stops. So if you had a lot of gold or chunk of, um, your assets in gold during all of the different stock market crashes have happened in the past. Your gold we've gone way up as a stock market went down. So say, for example, you had your overweight goatee on 20% of your assets in gold because you were concerned about a market crash in 2000 say six and seven as things were booming. Then when the market crashed and stocks and and real estate loss, you know, about half of their value wherever it waas gold more than doubled during that time. So you have done very well, despite the fact that it was the worst economic recession since the Great Depression. Right, So that's what it's all about, knowing how to allocate your assets so that if things go bad in one area, you're gonna do all right, you're gonna make up for it another part of your portfolio. And this is not to say that this is the best way to get rich or make money fast in the stock market. Actually, the opposite is true. If you want to make the most amount of money possible, the stock market or in any market you want to concentrate have focused support fully with only like a few stocks. But that's how we're talking about here. That that's gonna lead to more risk, more volatility, which is more stressful for most people. But we're talking about it happened. You smooth out the ride and make it so that you're gonna do well, no matter what happens in the economy after the all season portfolio is all about. And that's what we're gonna be learning about, um, throughout records. So the whole idea is, what percentage of assets should you put into each individual stock or into each asset class? This is a big question that we want to diet into. And if you if you make some good decisions early on, when you set up your portfolio, you don't have to touch it. I mean, you really don't have to do anything for decades except for re balance now and again if one of your asset classes, you know, balloons. But state of the bubble is that you had a lot of explosion real estate during the big bubble during 45 2006 and then it got so that you were way too overweight, way to expose the real estate. Well, in that case, you know, you might want selloffs. Um, was assets take off some of those profits and re allocated Teoh a different area that is cheaper. So maybe during that period, time gold didn't do very well. Over there was certain sectors and in the stock market that we're not doing as Well, you want to reallocate some of your assets to those other heirs. We're gonna talk about that as well. But other than re balancing which you didn't do every year or two, you don't really have to do much at all In Rebel sees is really simple. You can basically just decide what percentage of the assets you wanna have it each asset class you allocated accordingly. And then as one of Aziz, the balance changes because one sector will be doing well growing. You want tea, you're the balance of your portfolio, about the same building it was. Sell some of it and just moving around. So we're gonna talk about that too. So basically investing is really simple. We've got a long time arising, but there's so much psychology investing something that they're calling Behavioral finance is a huge, huge part of, um, understanding, business and markets now. And, of course, the great investors like Warren Buffett and mentoring Ground Charlie Munger. They've understood this stuff for decades, but it wasn't being studied and finance financial schools that when u N b A, they're not teaching us about even now, it's not something that's a major part of learning about finance. Finance is mostly about math, and looking at returns happen. You understand market. It's not taking psychology, do account. But investing in losing money, even on paper, is very stressful and not knowing what to do, whether to buy or sell, whether to hold, you know, which stopped Jews out of thousands and 1000 of choices. There's a lot of psychology in this, and there's a lot of stress when it comes to our money, right. We worked really hard to earn it, and we don't want to lose it, obviously. And so I would say, at least half money management and investing is psychology, or what they now call behavioral finance is so that's kind of with his course is all about . I mean, you have an all season portfolio. It makes the process not only more effective in terms of increasing the probability that you're going to do really well over time, build wealth by in a way that it's smooth and allows you to not be so stressed out about it . Sleep well and I have good health and relax knowing that even during a recession, you know your money is safe, everything's gonna be okay, and that's what it's all about. 3. Lesson 2 The Nature of Markets: So the first thing you want to look at here we're talking about the all season portfolio and understanding how to allocate our capital is the nature of markets. And why are so many people bad at investing in? This is true. Most people are not good at even 90% of professional money managers underperform the S and P 500 market apathy index. And that's a really hard statistic to believe. 90% of professionals underperformed the average. That means that Onley 10% all of people you're paying your money to to manage your money actually do better than when you could do if you just but the S and P 500 index or any other average e t f that tracks the Dow or the NASDAQ or that's impede any of those If, yes, tracking indexes with outperform 90% of money managers. I mean, it's a really crazy thing to think about. So especially with rich people, when they give, you know, millions of dollars or hundreds of millions of dollars hedge funds to manage them. Those hedge funds take fees like 1 to 2% off the top, and then they have only a 10% chance of performing better than that rich person could have done on their own by just buying and eating at the tracks. The market index. It's really unbelievable, Um, but there's a lot of psychology that goes into white people are bad investing. Even the professionals already mentioned behavioral finance this term. In the introduction, there is something these things called evolutionary mismatches, where, you know, we evolved in a certain environment that is way different than our complex, modern capitalist society. And so we have all of these psychological misjudgments trying. Mother calls it these, uh, human misjudgments, the theory of human misjudgment and why we have such bad judgment in general when it comes to a lot of decision making in life. But especially when it comes to money because we're emotional about money, we don't want to lose it. There's something you know called loss aversion, where we actually feel more pain from losing money, then the joy we feel from gaining the same amount of money. So we lost $100. It hurts a lot more than the happiness that we feel when we gain $100. A whole bunch of studies that have been done around this is very interesting. It's like if you lose $50 gambling, you want to get it back. Hurts it, are lost. If you don't that threw away, you put more money into, uh, you throw good money after bad. You try to chase those losses. And, of course, you dig yourself into a deeper hole. So the the gambling psychology that, of course, casino owners understand very, very well. It applies to investing. People speculate they want to make money fast. We don't want to have to wait, you know, for money to grow. Someone once asked Warren Buffett why people are so bad at investing. And he said, Because people don't like to get rich slowly, everyone wants it fast. Unfortunately, the very nature, uh, markets, the nature of investing successfully is a slow one, because what is a stock stock is a partial ownership in a real business and that business. It takes time for a business to sell a product or service to get profits, reinvested profits and to grow. That takes time really good. And now into the Warren. Buffett always always says as an example. When he's explained this that? He says. Some things just take time. You can't produce nine babies or studio. You can't produce a baby one month by getting nine women pregnant. Some things just take time, right? Something They have to follow their natural course. It takes nine months to produce a baby. It takes years to produce problems. Now you know some of you listening as they say, Well, sometimes you know, certain stocks explode, certain companies go super fast, and that's true. And you have to have invested one of those. And you caught that huge explosive wave. Well, good for you. But that was That was lucky. I mean, that's just speculative. It's like winning the lottery. The odds were against you, so that may happen sometimes. But don't be fooled. The statistics are way, way, way against you. And so when we think about investing successfully, you wanna have the probabilities in your favor and how the probably in your favor you have to look long term and you want to diversify a portfolio not only across stocks, but across asset classes. I already mentioned it as well. In the intro, gold tends to go up with stocks. Go down. Well, there are lots of other relationships like that that if we know them, um will help your before moral over time, but also help you to, um, sleep all night and not be stressed out about your money. Fluctuating old time. You've got hundreds of thousands of dollars in the stock market and you know, you have a bad couple of days. Excuse me? You know, you could watch the value of that portfolio go down 10 or $20,000 in a day or two. That's stressful. Right now, you can also watch it go up 10 or $20,000 in a day or two, and then you might feel great like, Oh, I'm making all this money, but they'll be fooled because the nature of markets is that they fluctuate. But if you have a long time horizon and you have a very diversified portfolio, not only are the odds of really high that over time, you're going to compound your wealth very well and you're not gonna lose money due to the nature of human psychology. Due to our natural loss aversion, it just is more comfortable. And it feels better to know that all with full certainty. You're going to be slowly getting richer over time and does not have to worry. And a big part of that is being able to block out the noise We live in. The Information Age denounced the hyper information age, 24 hour news cycle. Any article you read about a stock, you could be notable, say, and by it's a great opportunity. The next. Start up and say this company is going down the stocks over Price. Just conflicting information coming at you left and right, and it's very confusing. It's paralyzing. It's like you don't know what to do and then you know you're encouraged. Trade actively to be trading and buying and selling a lot. You've got people on TV like Jim Cramer just throwing out recommendations willingly buy this stock, sell the stock. You know that's not investing. I mean, that's that's gambling and speculating it's not investing. Benjamin Graham defined investing a long time ago as safety of principal, an adequate return, and so we want to minimize as much as possible the chance of loss. That sounds like an obvious thing that would want to do. But uh huh, the reason is when you lose money in an investment, you can take a long time for that money to compound back to where you were, and then you're starting over. And that could take years just to get back to where you were. So the nature of a successful investing program is conservative and defensive. That's why Warren Buffett says Rule number one in investing is don't lose money. Well, number two is Don't forget Rule number one. A lot of the stuff sounds really simple. A lot of stuff, something obvious. And it it seems like it should be. But the fact remains that most investors do not outperform the indexes, and these are the reasons why. So we're going over all this stuff in the course, and I'm gonna be a little bit repetitive because I really want to get this into your guys minds so that tomorrow we turn the news where you start reading next article about some Wall Street analysts, you know, on some stock, you don't start listening to it. Okay, I'm gonna buy that stock aeronautical out of it by that stock. That's not the way that we want to be thinking about managing or running or allocating our cap. And they said markets by major their volatile your money is going fluctuate. Now that stresses you out. You wanna have a lot less money in the stock market because the stock market is the most volatile. Bonds or less volatile gold is usually less volatile, and real estate is also usually generalised, bald and stock market. And the thing is, even if sometimes those markets aren't less volatile, you know where we saw the huge realistic crash in 8 2009 the thing is, you're not getting daily quote flashing on a screen, but you're stuck. So oh, my God, my investments down. What was said today, 2% and every single day it seems like you're either making or losing money. That's not actually what's happening. What's actually happening is the market is offering you certain prices for your shares every single day and different prices. And when the economic the economy is pessimistic, then you know if you want to stop and the overall economy is looking gloomy and people are worried that stock might go down has nothing to do with that particular business right? But all stocks might go down for that day or that week or that month, given that year. Excuse me, that doesn't mean that value your investments actually going down your long term investment . That's when you should be buying Maura that stock. Actually, all that means is the market is telling you this is how much the public will say is willing to pay now for this asset, whether we're talking about stocks for goal or now, Cryptocurrency, which I'll mention a little bit, talk about a little bit in this course or real estate. It's an important thing to understand. So for some people, the stock market is stressful. And that's why Raed Al, EOS all season portfolio called for only a 30% allocation of stocks. Most money managers will put you at 50% or more allocution in the stocks, and there's a famous sort of rule. Thumb. 60 40 stocks and bonds, 60% in stocks Port visit involved. There's a lot of rules of thumb like that. Now, the whole point of this course that I'm teaching you guys is to give you some of the rule of government help. You understand that you know it really depends on your situation. Those rules of thumb. You know, those and other formulas of investing their only useful in so far as they apply to you. And they don't always apply to you. I mean, you don't want to be invested, you know, seven year, 80% of your money and stocks. You're about to retire. What if the market crashes 30 or 40% which it could do, and then all of a sudden there goes your retirement, right? So you wanna be way more conservative as you get closer to retirement and you can be you want way more aggressive if you're gonna. If you're in your twenties and you've got a 30 or 40 year time to rise in the stock market , you can afford to make some mistakes and get it back. Because if you don't make mistakes and if you're aggressive portfolio, let's say that's 100% stocks does really well. You could end up maybe really, really rich, right? But if you're in your sixties looking to retire, you know it's just too risky to do that because you don't have the time for your investments to recover. So there's a lot of stuff like that that we'll talk about as well. But just know that you know, you have to make peace with the nature of markets. They will fluctuate. Your money will go down. You might even have a year where your money goes down 20%. Overall, however, that being said, um, all season portfolio, the whole point of having a really blended asset mix is so that you will minimize those those losses. So even in a recession or even a market crash, since your assets will be split across different classes if one crashes another one white go up Unversity example already gave with the relationship of the stock market and gold goal is a classic hedge that people flocked to, usually during a recession. And so a really good all season portfolio, which has to have some either some gold or some precious metals. Some people are now saying that Bitcoin is a replacement for gold or is also a hedge because it's totally disconnected, um, sexualized baking systems on that people point. It's on a Blockchain certain type of technology that decentralized awaiting governments and stuff like that. But, um, it's still really new still really risky and in my opinion, far, far, far too volatile to use as a hedge. Bitcoin and cryptocurrencies are extremely speculative. I'm really hard to value. There's really no way to actually value it. And gold is actually kind of state. William Gold is a non producing asset. It is only worth as much as the market said this work based on how many people are buying it. But the fact remains, gold is a physical asset that has been used for thousands of years that people believe in as a store of value. It's also used, of course, for jewelry and even in semiconductors and difficulty technology. So, uh, if you're gonna look for a hedge, if you're gonna look for something that's gonna go up during market volatility on recessions, then gold is still way better than a Cryptocurrency. Because cryptocurrencies we just don't know what they're gonna do. They could go to zero goals, not gonna go to zero, right? And if you look at charts that show you the relationship of gold, you look a the price fluctuations over the last 100 years, every single time that stocks have gone down significantly, gold has gone way, way, way up and you just look at the chart and it just means, basically that the stock market crashes. Gold goes through the roof. It's happened every time. Gold would have been a great place to have your assets during the Great Depression. Gold reaches peaked during the great recession in 2000 and nine and 10. He was around $2000 outs, you know, and so it's good to have some gold in your portfolio if you're trying to develop in all season portfolio and you want to smooth out the ride now, if your goal in investing is to actually make the absolute maximum amount of money in a short of period time possible, then I already mentioned you may not. You may not necessarily want to have any gold at all. You may wanna have 100% stocks and focused on, like just a few high growth companies, and now is a way that you might get very wealthy. But you also may lose all your money, so just know that when you do that you're speculating or gambling. You're not really investing. Okay, so that you've got to separate what when gambling or speculating is and then what investing is investing is actually not a risky activity. If you do was called dollar cost averaging, which is putting the same amount of money every single month or every single year into, um, Anita tracks an index, for example, you. If you look at the history of stock market, you have gotten roughly a 10% compound return for year. That return will make you financially independent over time, even if you're only investing a few $100 a month now. Most people know stuff like that now. And the funny thing is, excuse me is that even though the vast majority of of of late people, right, that's us, the normal average Joes in the world we know stuff like that. Why do we not follow that advice? I don't so many people that know about dollar cost averaging that no, the average market return over the years has been around 10%. They still want to pick stocks themselves, and this just statistic is also shocking. It shows that the average individual investor that's not a professional, um, according to some studies, has only gotten about a 2.6% return in the stock market over over time 2.6%. That's after you take out fees before taxes, so that's not very good at that far, Far underperforming the index is. So in other words, the odds of you dear listener outperforming a stock market index are almost zero. They're very, very, very low professionals. About 10% of professionals can do it, and it even fewer percentage of individual investors can do it. You can find out liars you confined cases where people got Rex quickly. If you were lucky enough to buy Bitcoin during its early days and became a millionaire, well, good for you. I mean, you won the lottery, but that's not investing. That's just called luck, Okay? We want to put ourselves in position so that no matter what happens in the economy that we're going to be slowly building well and eventually achieving financial independence. That's what it's all about. Warren Buffett, Charlie Munger and many others. I mean, they become so rich, mostly do discipline rather than intelligence, intellectual brilliance. You don't have to have a super high I Q. Where you need to have his patients. Discipline is stick to the plan equanimity to be calm when markets were going up and down. As you know, there's saber rattling between superpowers and all kinds of stuff going on in the world. You need understanding, even throughout World War Two and the Great Depression. I mean, over all those periods. Vietnam War, huge recessions in the seventies and eighties that happened stops slowly, slowly, slides marked upwards ever, ever, ever upward because stocks are based on profits and an expansion of profits by companies that innovate and reinvest the money. I mean, it's a very, very tangible thing you're buying. You buy ownership in a business that produces money. You know, that's not gambling is something. I talk to a lot of my friends and is the on the stock market. First year old. It's just like gambling. You know, you're risking your money if you look and the history of the stock market. And if you understand what a business is and you are conservative and you're careful, it's not gambling at all. I'm not too right. The reason why I have forced people like Warren Buffett and Charlie Munger and many other great investors have become not only millionaires and billionaires doing nothing but investment. I mean, it's just like poker, you know, pulled for the game of skill, even though there's some luck involved in poker. If you're a professional poker player, you know how toe put the odds of your favorite so that you consistently make money. You could be professional and you can make money and actually is really interesting. The number or the percentage of poker players that are profitable over time is also about 10%. So it's really, really similar to the percentage of professional investors that outperformed the market. So that's kind of just see. So about 90% of all poker players will lose money, and all that money goes to about 10% of the winners. And also, as it happens, tennis Tamir capitalism. It is totally unregulated as well. As right now, we have a lot of inequality but says that happen totally unregulated. Capitalist society is that wealth has to go to the smaller, smaller percentage of, um, people or companies just cause the nature of the way markets work, which is why we have over the last 100 years, but, you know, safety nets and a little bit of redistribution. Or some people would say to little the redistribution of, say, too much redistribution. Well, whatever your own personal views, maybe without any regulation at all, it tends to a sort of winner. Take all, um, result. And there's lots of reasons for that that that are beyond the scope of this course. But the point that I'm making now is that building well, it's not something We have to be a genius. It's something where you have to have the discipline innovations basically. And if you have that, you're gonna be financially independent If you're going to wait, you know, again, we're in love that money after that and the question, why don't most people, you know, investment, stock market or get get rich or follow your advice? And he says, because people don't want to get rich slowly. And if you could really internalize, that's OK. To slowly build wealth and become financially independent, you're almost guaranteed to do it, actually, but if you're not one toe wait, you know, a few years or maybe a few decades in, uh, in whatever you know, case, uh, whatever situation you're in, well, then the odds of you doing at a very low, because when you try to hit a home, run in finance and you try toe get rich quick, it's very, very difficult. And another. Another quote from Warren Buffett is, he says, Um, becoming Wells do slowly is pretty easy, but it's really hard to get rich quick. It's just, uh, another nice quote could keep in your mind and thinking about the nature of investing. Okay, so why are you mentioned that I've been talking throughout the course of the psychology in investing? I'm gonna I'm gonna get Teoh the all season portfolio and the actual specific, um, allegations capital that you want to have in your portfolio. But I want to explain everything else first and understand why the all season portfolio will work so well and why it's basically the best thing for the vast majority of people to do. And so we're gonna continue on this a theme of the psychology of investing in the next lesson. 4. Lesson 3 Price to Book: so the price of book tells us how it spent to the stock is relative to the value of its assets minus liabilities. Sometimes the stock trades at less than its net asset value. This is kind of amazing that some some people who haven't studied business, they think, How is that even possible? But it could be three number of reasons on the popular pessimism around the business, only thinking maybe the business is facing an existential threat from editor. Maybe it's just got so much debt that even though it actually has, um, a net asset value that is still higher than the outstanding stock price, people just don't see a bright future for it. And they're worried and somebody's. That worry is correctly placed, and you should stay away from the stock even though it's training lesson book value. Other times, however, the worry is misplaced, and the company is in a much stronger position than people think. And this is what makes investing so interesting. Right, if you can find a stock is undervalued, are trading at less than its book value, but it shouldn't be. Then it makes it. It's a big investment opportunity and This is what comes in. This is when the, uh, the theories of investment and finance come into play. There's something called the efficient market hypothesis, which basically says that nobody can outperform the market because the market is 100% efficient. As information about companies and businesses come into the public sphere, there are so many agents that's you and me investors that are acting on the information that the market is totally efficient. But obviously this this is wrong. It's not totally true, because if that were the case, no one can outperform the market. People like Warren Buffett, Peter Lynch. Others have proven that you can outperform the market over long periods of time. It's not just luck, and the reason is because the market actually is quite efficient, but it's not 100% efficient. It takes time for data to be correctly allocated in the market over time or, in other words, as put by Warren Buffett and and his mentor, Benjamin Grant. In the short term, the market is a voting machine, but in the long term is a weighing machine. So in other words, in the long term, the market is very efficient, but a short term, the market can be very inefficient, which is why it fluctuates so wildly and which is why it's so all. And a lot of people have to miss perception that the market is risky and stocks are just gambling. Because, you know, you put your money in there, what a crash comes, you lose your money. Oh, no, that was a stupid thing to do. But that's a misunderstanding of what investing is. Investing is studying a business, making a calculation after his value, buying it when the value is good and then only using money that you're willing Teoh lead in the market for long periods of time. Investing is, by nature, a long term activity. If you are buying and selling stocks within, like one year timeframe, that's not investing. You are trading. You're trying to time the market, buy and sell and make money off of the arbitrage of prices going up and down. And that is very, very risky. Day trading or just trading in general is inherently risky, speculated. It's gambling and maybe you're really good at it. People think that they can read the charts and guess what's gonna happen and they make money that way. But that's not investing, Okay, so we need to find those terms. Investing is being willing to have your money invested for at least a year. Even that in the investing world is a short time frame or above. It measures investing results in five year minimum time frames, right? The amount of time that it takes for the world to go around the sun, right? One year, um, is a very arbitrary amount of time to measure business performance. That's a warm above it says that, he explains. That's why do we measure business performance in annual terms? Well, we're used to measuring things that way, so that's what we do. We want to see, you know, earnings reports and want to see how well businesses are doing. And, you know, three month time periods, which are called fiscal quarters or in nearly time periods, but the amount of time it takes for investment. Teoh give you results or for a business to grow, you know, it doesn't necessarily need to be specific time like a year or two if a business is not growing and the stock is not going up after a few years, then you have a problem. You probably made a mistake. You want to sell those shares and reinvest your buddy. Call this rebalancing your portfolio, but you have to wait a few years to see what results you're going to get. A really good example I've seen recently of this in action is Disney Disney Stock. For three or four years in a row, it was basically flat. People worried that, um, profits from ESPN, which does he owns and which was a cash cow. They were going down because of cord cutting. People were leading cable on foot solution over toe online. Um, options. Netflix. Things like that, and Disney stock prices stagnated, but they were investing in the future. They were investing in their own online platform, do the plus, and they were making huge investments into their new attractions, like the new Star Wars Land Galaxy's edge, um, new, um, avatar land and lots of other big investments they were making. They opened a huge Disneyland resort in Shanghai and China, but anyway, the point is that stock of it just was flat, like three or four years. So if you're sitting there holding Disney shares Your thinking, man, I've got no results in all these years, I should sell this. But all of a sudden there is a lot of optimism about the company, and results were starting to show from all of these investments. And the stock went up 40% in just a few months. And so if you average out that 40% gain over three or four years, you're getting a really good result, and that highlights and nature of the stock market, it may be flat or go down, but then you may have a year. Work goes up 30 40 or 50% and you want average out those results. And so if you get an average of nine or 10% compounded per year, you're going to be building a lot of wealth. You're gonna be getting very, very good results. See, people misunderstand the nature of the stock market. You have to look a long time frames. And this is why, if you look at, like 100 year timeframe, the S and P 500 index the average stock market total index, it averages around 8 to 9%. I was lying and people like Warren Buffett advocate. Most people should just buy stock market index fund and by the average index of the S and P 500 companies, and they're gonna probably get around eight or 9% returns over long period of time. It's not guaranteed, but that's what's happened in the past, and you don't to make any decisions at all. You just take money that you say and you buy the index, and you should get an adequate return. By doing that, you want to do a little bit better than the market, which will make you 100 of thousands or millions of dollars more over investing lifetime. You can outperform the market by you one or 2% points. Then we need to learn how to invest on your own. And this course about financial ratios is one way to help you guys learn how to do that. Okay, so, um, as already mentioned in the intro press, the book of one means that the market cap of the company is equal to its total value of net assets. All assets minus all liabilities and that's considered to be very, very safe doesn't mean that in a market cap is equal, do the company's assets and stunning and counting any of the company's sales or profits. So I mean price, the book of a company of one, and it's very probable that makes it look really cheap on I would wonder, why is it trading at such a cheap valuation? And then you got to investigate a little bit to figure out why people are pessimistic about the business. It might be due to the competition, like I already said or other factors, but oppressed a book of one in a profitable business. This may mean that there's an opportunity to buy that stock, and it's probably gonna go up. It might mean that the market is pessimistic. I mean, we see a rising tide raises all boats or is it a stinking tide lowers all boats much, sure, but the point is, when the stock market goes up in general, almost all stocks will benefit. The same is true. When the stock market goes down, almost all stocks will be punished. But obviously the strength of all businesses is not state. So a lot of times in the stock market goes down, you will have opportunities to pick up really great value in companies that are good, but their stock price is training at a much lower evaluation that it should be. Just because you're a bear market or the economy in general is not doing very well. That's when the best investors are most active. In 20,009 Warren Buffett, Charlie Munger They were most active buying businesses when everyone else was selling in. The market was depressed because they understood this, that you could buy great businesses at huge discounts because of pessimism or because of the economy being in a bad way. And then as things improved, stock will go up and it will go up a lot. They've got to buy a whole railroad for pennies on the dollar. They bought Burlington Northern Santa Fe Railroad for way less than it was worth, and they made a huge amount of money on that. They invested in all the banks. When it was clear they were going to be saved, they were trading at two or three times earnings right at a P E ratio by two or three times . And of course, there were almost the only people who could do this because they're very smart and they always keep a lot of cash. So with stock market was going up, things getting more expensive, they were hoarding cash and then the stock market crash. They were almost the only ones around that had all this liquidity. And so then they were just saving companies looking right, getting believe in terms, on deals, buying stocks at super low valuations. You and I don't have to be geniuses to mimic that. Behavior of the general rule is if you're gonna be investing on your own and not following the dollar cost averaging into an index strategy hoard cash markets are going up because it means that they're getting more and more expensive. And when markets go down buying more stocks because it means they're cheap, which, of course, is the opposite of what most people do. And it's the opposite of what the financial of professors and textbooks tell you to dio. But it is actually turns out to be the way you make the most money in the stock market, but we're getting into another realm. That room was called behavioral finance, and it has to do with psychology of investing and making, like buying and selling decisions. I want to try and stick as much as possible that can do the financial ratios, which is what this course all about. If you want to learn more about, there's other aspects of investing. I've got other courses about the psychology of investing, behavioral finance and other aspects of investing in none of the stock market but real estate as well. So companies that sell services they usually have a much higher price to book value because they don't have as many assets. Their assets are intellectual property. So you've got a software company or a service company. Their price. The book might be 10 or 20 or something like that because they don't have very much real estate, and they don't have very many assets that air tangible assets. So that shouldn't scare you away. Used to understand the nature of different businesses. So, you know a company that sells a lot of a heavy equipment like caterpillar or something, they're gonna have a lower price to book or a bank. Thanks have much lower prices to book because banks are holding all of these deposits from all of their customers right and so on. Banks also, usually you're highly leveraged. That means they have a lot of debts, which is the nature of the way that banks are. Structures eventually usually trade at P PB ratios between one and five. That might be typical, whereas a software company might be trading at a PB ratio between 10 and 20 and that's okay . So you just gotta understand. The nature of the price of book ratio is based on the company's assets, and some companies don't need to have a lot of tangible assets. Software companies are, for example, other companies need and by definition, have a lot of assets. Banks are a good example of that. We have more property to have a real assets cash, etcetera. So it's important. Understand the industry that you're investing in support, understand a company that you're investigates. So, um, that sort of a crash course in the price to book ratio and at least you guys have an idea about what is used for and what it is next, we're going to look at the efficiency ratio. We are away another very, very important 5. Lesson 4 Investing for Your Situation: So obviously everyone has a unique situation, and that should determine to a large degree your optimal asset allocation. There are a lot of standardised rules. Rules of thumb. Um, I already mentioned 60 41. They say it should be about 60% in stocks, 40% in bonds. That's a good mix, or there's the famous 4% rule. Basically, that says that you want to have enough money so that you can withdraw 4% of your assets every year in retirement, and they see little in that the rest of your life. Another way of looking at a 4% rule is that you should have about 25 times your annual salary. Vaginal income saved, and that's about enough for you to withdraw 4% for the rest of your life. There are some pundits and state election. The 4% rule is antiquated. It's actually too much. It should be lower, other people say. Actually, it's too conservative on there saying that based on different assumptions that they're making about people's ages of the market or whatever, So it just shows that these these rules of them are useful there, good to know and they can be applied to you. But also just know that obviously you can't standardize on this stuff into one formula where it's gonna be good. So I talked about this all season portfolio. You know, Ray Dalio actually had, as I said, a very, very specific, exact percentage of your assets that should be allocated to each asset class and everything but course is gonna have to bury, depending on your risk. Tolerance is your Asia goals. There's so many things that are gonna go into it. But that being said, having all of this knowledge about how to make your own all season portfolio and all of these different rules of thumb that air used will make the process much, much simpler for you. And by the end of this video course, hopefully you will know exactly what you want to do with your money and have a plan to do so that you can put in the action right away. And that's why I make these forces. I want you guys to be ableto have something actionable to able to immediately use this in your life. And you may be what, listening to this course right now looking at this single wealth, doubling about having money, right? Like not all of us have thousands of dollars or $100,000 sitting around. Well, hopefully this will motivate you to try to get yourself in a situation where you can start saving at least a little bit because even, you know, a few $100 here and there over time. Once you get up into the thousands, have a couple of good years in the market. You know, it starts, it starts to amount to something. You know, you you see yourself hitting milestones. $10,000.20,000 dollars. Now you have a down payment for a house. Whatever. It's very rewarding and you start to get kind of addicted to sitting money started kind of ah, positive addiction and you gain some momentum and really quite fun. But the hardest part, of course, is getting started. But it just seems like it takes a lot to be so difficult to save money at first. So if you are in that situation, looked into this, just know that all of us have been there. Um, and you, too, can get to the point where financially independent almost anybody can. If you're willing, Teoh make some sacrifices. You know, you patient and follow these These rules follows that advice. Um, I mean, the portfolio of a single young adult. It's obviously gonna be way different than the portfolio of a middle aged family, uh, or of someone about the reach retirement. And so it's definitely something that you want to keep in mind. If you're listening to, like some pundit on TV telling you all that you should have 60 40 stocks, bones, that location. I mean, that totally depends on the situation. So single young adults be a little repetitive here because important this stuff's important , um, generally be a lot more aggressive with their portfolio, and the opposite is shoe. The older that you are so 60 40 rule might be pretty good. A good average for some of you may be, you know, middle age, or maybe in their thirties or forties and save annually younger, um, have still would be good to have about 60 40 his stocks bob. But if you're in your twenties and you're already starting to invest, there's no reason why you can't have a year. 90% of your money in stocks if you're willing to take on the higher risk because you have a lot more time for the compound. However, that being said you wanna have all season portfolio, you're gonna want it, have it split across stocks, bonds, cash and things like gold. And again, we're gonna get Teoh the details a little bit later in the course. So you know, the more financially responsible, the more financial responsibility you have. Like if you have Children, for example, of the more cash you should keep available. But sometimes we call this an emergency fund. People make different recommendations. Should you have three months of living expenses saved up in emergency funds, you have six months to a year. I mean, that's up to you. You only you know your situation. I personally have a family. I have kids, so I like to have several months worth of living expenses in cash. And then they also like to have several months of living expenses saved up and fixed incomes that would that includes things like bonds or certificate of deposits that pay interest right CDs. I actually live abroad other than four country where interest rates are a lot higher. I live in Vietnam, Larson for financial reasons, so that I can save money and make money, go a lot further and do the things that are talking about in this course. But over here, in straight your way higher because, um, the inflation expectations are also a bit higher, but you get 78% on deposits, so you can simply Parker cash in. The bank gets 7% annually on it, and that's a three reasonable thing to do with certain portion of your assets. Then, of course, they have some assets in American stock market, and I also have some gold, and I personally don't own bonds. I'll get into the reasons why later. The interest rates right now are so low that coming only balls kind of like only cash. I just keep my money in cash and in these banks over here that have good yields. It's kind of like a proxy for owning a bomb. Basically, fixed income, they're all these similar just depends on what the interest rates are. It's his interest rates so low and asset prices so high moment, um, kinds of real estate and stocks and everything. Bonds just make very little sense. So you might want to park your money, their short term in bonds to get a little bit of yield, Mostly yours doing it to not have poll exposure, Teoh real estate or stocks. So you know you can have cash. You can have bonds. Or maybe you could have just some interest paying savings account or something like that, the way you have to decide how, how much money you want to have an emergency fund. If you're single and you don't have a lot of expenses, you really do not need to have much of an emergency. But there's really no reason for it. If you have an income and you're living off that income, I mean, an emergency fund is supposed to be for emergencies, and the odds of a real emergency happening are actually very, very low, Right? That's something. That's what insurance products are all based on the actual odds of you dying or getting sick or whatever. Getting in a car crash. You actually look, we worry about that stuff a lot, and it could happen and read stories in the news every single day about how those things happened to somebody. You gotta remember that there's billions of people in the world the actual odds that you getting into a car crash or getting a disease or anything. They're actually really low. So if you think about it statistically, it's actually your rational. If you want to maximize your asset allocation to have a lot of cash around, you just don't need it. But course, if you have a family, you have more expenses. You worried about your kids? Then, of course, you want to have as much cash as you need to have around feel comfortable so that you could sleep well at night and everything. But if you're single, you don't have that much cash. You can basically invest like almost all of your money into the market. Just know that, um, you be ready to leave it in there for a long time, Okay, so some of the virtually no financial responsibility side yourself really doesn't need much of numbers to find out all you can be very aggressive and free with your investments, and the opposite is true. More financial responsibility that you have. However, I will make one caveat to that statement, and that is that some people just simply are not very risk tolerant, right? You not like losing money, you're even more lost averse than the average person. And if you know that about yourself, then simply and best accordingly, keep more cash on hand than you need. Invest more in things like a gold and bonds than you. Then you need Teoh. You can't handle the fluctuations in the stock market, and you can't help looking at the prices every day. Um, then maybe you just don't have that many stocks just because it's just you have to make that decision. But you should know. And I would be a dereliction of duty if I didn't tell you that the stock market is by far the best asset class over the long term. If you want to compound your money, it is outperformed. Real estate is up from gold is outperformed every asset class that there is on average over long periods of time. 10% compound returns over a long period of time will make you rich charming. It's that it's a really good your turn. Um, a passive return. Just leaving your money in something and not having to do anything. I'm kind of biased against real estate, just with the reason that it's not really passive. If you live in a house and you own your house, that's one thing. But this loss fences that go into that in terms of you gotta pay for taxes and insurance and maintenance and repairs. And it's often a lot more spending bill in the House of People Think, um, even if you actually own one, you're gonna actually add of all your, uh, expenses that carefully. And then if you have a investment rental property, then you also have a lot of stress. Is even if you hire a management company to manage it for you, you it's still not pass it. You still have expenses. You got problems with tenants. You have, ah, vacancies. Sometimes that it's not running out. So you're losing money. You're it is. It is a huge expense if you don't have a tenant in there. And there's all kinds of other things that people don't think about when you're just looking at on the asset on paper, like the fact that you can use leverage. This is dead, you know, to buy real estate and the fact that the bank will loan you money. It makes it seem sometimes, like it's better than stocks. But the thing is stopped truly a passive investment. You buy and hold, and you don't do anything else all Anatoly liquid. You know, if you have a property, you need the money out of it. You can't just sell it today you have the list it you've got to find a buyer. If the market is at its a recession, that's. Do you have a house and you wanted it. You wanted to sell it in 20,009. There were a lot of buyers were there. And what can you do in a situation you might have to sell at a loss? Or it's not, You know, not get your money out or whatever, but that's why the stock market and it's so liquid tends to trade. You know, high evaluations most of the time, especially looking individual stocks that are really well known. Companies penetrated high P e ratios part that is because of a liquid you can sell in an instant and get that money out. So there's a lot of benefits to that. So again, just knowing your situation is really reports. I was gonna give you guys a few scenarios here and stopped looking at what all season portfolio might look like for you. I'm not gonna give one formula because there is no one formula. If you're looking for a former to say, okay, this is what you should do with your money. I mean, it's impossible because you can't You can't do that and have it apply to everybody. And if you have a listen to the pundits or read books saying this is the way and is only one way, then I mean, I just urge you to think more about that because it's not gonna be safer for all of you. However, there are examples that will apply to large groups of people. And so that's what we're gonna look at now. So single young person might have a little 5% of your money cash a za much as 85% of your money in stocks. And when I say stocks, I don't talk about picking stocks picking company that that's a whole another. Um, course. Basically, we're talking about stock picking and I do have courses about having a concentrated portfolio and only 5 to 10 stocks, and that's the way to get really, really wealthy. That's what the Warren buffets of the world have done. But the whole another skills, the whole of the thing that you're trying to do there, then we're not going into that. And this course it also, when I say 85% smart, I mostly just mean on ET f or two or three that tracked the of the average of the market. The index's US to be 500 the Dow Jones industrial average. The NASDAQ etcetera. Um, and then you may have, you know, 10% in some fixed incomes. That could be as a remission for bonds, CDs, even lows, and those you might wanna get a personal loan out to. Somebody does. There's APS now was I think it's wonderful. It's on the LendingTree, Um, maybe just a little LendingTree lendingclub because we're lending club and a whole bunch of others now where basically you put up your profile is an investor of what interest rate you're looking during your money, and then a person who wants to borrow money. But can't get a loan from a bank for whatever reason or the interest rates from the bank of are to hire. They want so much collateral, whatever they will say, what amount of money they want to borrow and their credit score will be in there and basic . It'll match you, and then you could, like, loan your money out at 7% or 8% or whatever, maybe even 15% if it's a person with maybe, like a lower credit score and silver riskier. There's all these APs now, um, that allow you to make lows, and that's kind of interesting, But all that stuff call it fixed income, and it's sort of like capture any, you know, if you own bonds or CDs, you can. You can sell those any time you can pull your money out of the bank of the CDU just won't get your interest. So all the fixed income, um, products are a little bit different, but that you can group them together. Basically, it's not cash. It's not 100% liquid, but usually it's less volatile. You're gonna be earning some sort of interest on it, not as much as stocks over the long term, but something and depending on which one you have, it's still pretty liquid. You can get your money out of it. It's not like real estate where you have to sell whole house to get your money. If you have all of you to sell your bombs, Theo CDs, you can just pull money out in the bank will give you your interest with CD, right? You say that my money and for a year and I'm gonna get, you know, 4% of whatever over the year. But you're not allowed to take the money out. And if you do, evil can pay the interest, right, So the money is actually still liquid. But you pay by not getting the interest. And then, of course, of you along the money, Well, that would be a little less money. Where is? Well, it depends on the person of you loaned it to. And if you call alone, if they can pay you or not, things like that anyway. So a single other person might have something like that. Lots of exposure to stocks, a little bit of exposure to bonds or other fixed income products, and then a little bit of cash. And so, you know, if you have $100,000 you had a, you know, a good start to your career, you keep a few 1000 bucks $5000 in cash. This is not This is obviously, like an aggressive. This is a very aggressive asset allocation and your $85,000 stocks. You're looking to really grow fast. And you can do it because you got lots of time, just in case stocks take a take a bad turn, Not your more middle age. Maybe your family man or woman. You've got kids. You wanna have more cash. So maybe you want to have at least, um, you know, let's say you you have $500,000 because you been standing consistently or a couple of decades or something, so you won't have about 10% cash that about $50,000 in cash. So maybe that's about one years worth of expenses for an average family or so it's pretty conservative, right? And maybe you have 60% and stop, so it's a lot less than that. The 85 is that that we allocated to the the young person you've made in the twenties, so that would be $500,000.60 percent with the $3000 stocks. That's still a lot of exposure to stocks. When you look at it in terms of the money, it feels a lot different than me. Just look at it, as is a percentage right. You think 60% stocks. It gets a lot less than 85% but on 500 grand, that's still $300,000. A lot of money to have fluctuating, Um, and so that could still be kind of, like stressful for a lot of people to have that money out there in the market. So it's it's reduced, and then you have 30% left that you can put in fixed income that with 150,000 that you could have in bonds or whatever. Now again, these are just examples. You wanna have even more cash than this, just in case stuff go down, you might want to strategically find more. I told you, you don't want to time the market, but when you have a lot of cash and things were uncertain, um, then it allows you to do things like that. If opportunities pop up, if the market goes down, you've got a lot of cash you can put Mawr in because you're getting cheaper prices. You're getting better price. This is like my people like Warren Buffett during the great recession in over 809 he had lost in love month cash on here and because of it, stocks and real estate really expensive. And to go to six of the seven and he stopped buying his cash build up. I mean, I always could do this. He wasn't actually timing the market. He just saw that things were expensive and he was gonna hold off his keep more cash and see what what happened. And then, uh, indeed, huge opportunity of everything crashed and he was picking up whole businesses for pennies on the dollar. I mean, he bought Burlington Northern Santa Fe a huge, you know, railroad company for, like, half price what it was worth. And now it's one of the biggest companies that Berkshire Hathaway owns. And that was only because he had who's overweight cash during the boom. Um uh 04 or five of six. And so weaken kind of mimic that as well. And it just kind of feels good to have more cash on. And in general, if you're stressed out about having a lot of money in the markets having more cash, I always I always encourage that I don't think you should never be too worried about what we could have made Mawr if we were more fully invested and the market went out. Oh, no. The market went out 40% this year. I would have made an extra $10,000 if I would have invested mawr that slippery slope. When you do that, you're starting to get a look again gamblers mentality You should never have that fear of missing out we shouldn't have is is a way of thinking that makes it so. No matter what happens in the market, you're gonna feel OK. You know, if the market goes down, well, he's not able to capture you have golden that went up. Oh, are you? You're the market goes up a lot and you weren't fully invested. But you still got Richard. I'm you still build well and you know that's still good. She never worry that you know someone else is getting Richard faster than you because it's always gonna be somebody getting richer faster than you, And you're never gonna be able to time the market perfectly. So just you think about that being with the psychology of it, it just makes sense to have an all season portfolio and arranged things in such a way. That just doesn't matter what happens in the economy. Either way, you're gonna be slowly building well and aiming at your individual financial goals. That's the rational way and the easier way you have to think about this in the final example for this particular slide that say that you're a couple, you really close to retirement. You really don't want to take a lot of risks. So you've got a lot more money cash, because you're gonna be starting spending. You want to have it in the markets at all. So let's say you got a $1,000,000 to say that your whole entire career and you've got 20% calf, so that would be, you know, $100,000 every $200,000 in cash. I can't change it. So you $200,000 in cash, which seems like a lot, but, you know, you're about to retire. You wanna have that money, they're ready to use 40% in stocks rights. We've lowered our exposure, although down from 85 60 just 40%. And these these stocks with the conservative stocks I mean, you're about to retire. You wanna have dividend paying stocks, stocks that maybe they have a yield of, like two or 3% or maybe 4%. It will be a stock like, uh, give you just a few examples of Coca Cola pays, like a three plus percent dividend tobacco stuff, which you may be against because of the nature of, you know, the product being bad for your health. But some people are against that of a really high yields 45 percents. Um, a lot of old companies like Johnson and Johnson, three m it was big industrial companies. They pay around like, you know, 3% dividends and stuff like that. So those are the kinds of stocks that you wanna have, so you could have also the index's pay a dividend. So the, uh s and P 500 on E. T. F. Like most pocket was the tick of symbols SP Why, if the oldest and most popular E t. At the tracks SB 500 it pays at the moment, it's like just under 2% dividend yields. So you get an E. T F. That pays you a dividend, and so you have about 40% exploded to that, and you're getting this cash payment. So I mean, if you have $5400 in stocks and you were getting a 3% depending on that $400,000 that's $12,000 a year. And this is going into your account on those dividends, not counting any appreciation. And even if the stocks depreciate because maybe they had a bad year, you're still gonna get be getting pay that same dividend, no matter. Uh, what? So it's recommended that if you're close to retirement to buy dividend paying stocks but still have less exposure than just because they fluctuate so much. So if you have a 20% cash, Forbes and stocks and then another 40% in fixed income now, I didn't include gold in any of these scenarios. I think you kind of love gold into fixed income, even though it's not fixed income. Basically, gold is a hedge, and I already explains with its relationship, it usually has an inverse relationship to their other asset classes. And so ray down, he recommends 7.5% every assets being in gold. That really is just up to you. If stock market to do really well, gold will not be doing that well, usually. So they will kind of be sitting there maybe fluctuating a little bit, maybe even going down while the markets are rallying. But you hold it just because markets crashed. Gold goes through the roof on me pretty much every single time. So if you wanna have more of an all season portfolio, you might wanna have more gold. So in this, let's say 40% fixed income. Maybe you have between five and 10% of that is is cold. And then if everything goes to hell and markets are crashing, um, that you have 20% of your money is in cash, and you've got tens of thousands of dollars on Golden in that gold doubles. Well, everything else is crashing. Your overall portfolio may still go down some, but you're not gonna be feeling that bad if instead of going down like 40% like the whole market did over the over a year to doing a really bad, nasty crash, your portfolio only goes down like five or 10%. Because you're a lot of cash, you have a lot of gold. Then you feel pretty good. And you're not gonna be too worried about that. You know, you know, if you have a $1,000,000 you're near retirement, if your portfolio only goes from a $1,000,000 down to 950,000 that's a pretty good result when you could have lost three or $400,000 in one or two year time period. Seeing this that type of scenarios is why we want to think about having all season polio. And if the markets boom and they and they go up 50% in one year, which happens from time to time, well, you're not gonna catch all that 30% but you're still maybe you'll catch 15% or 20% of it, and I'm playing or polio. Maybe you're really heavy cash and you make 100,000 or $200,000 a year instead of 300,000. Well, there are worse problems to have in the world than, um, getting rich, you know, slower than other people or slower than you could. And so, you know, psychology is very, very interesting people. We invariably tend towards a fear of missing out. We see other people around us better than us, or we perceive to be better than us. Maybe they're not actually doing better, right? It's kind of like, Oh, the all hat, no cattle quote from from Texas, Like people up people that on the outside look rich, but really, they're in debt or it'll have much real assets. A big hat, milk, cattle. But we really don't know how much money people have. So we should never, ever, ever worry about, um, someone else to be better than us. We're gonna, um in the words of Warren Buffett inner scorecard and just kind of focus on our own individual goals. You know, something will be doing better than you. Some people will be doing worse than you financially. But, um, you know, the important thing is to know yourself your risk, tolerance, what are your realistic goals that are achievable. And then using all of this information that you're learning from this plaice and other stuff that you'll read to develop all season portfolio. That is right for you. And, you know, I've been doing this for many years, and I have tested out the asset allocations. You know, that that make me feel comfortable or uncomfortable or do do well, it was environments. Now I'm doing this for months, almost 20 years, managing well, portfolio and I know it works for me. I know what I feel comfortable. I know that I'll be comfortable if a really bad recession hits because of the way that my assets were diversified. And I know that I'll be comfortable if the economy booms hard for several years and I don't necessarily may the maximum out that I could have if I was less conservative. I'm totally OK with that. And you know, I sleep really well at night knowing that the odds of me crippling my capital and be going pro are like zero. Basically, you know it's going back to Benjamin Graham's definition of investigators. Be safety of principal, add. It would return you know we don't need to be greedy in fact, wishing or hoping for, really. I retire in trying to use your capital too hard decreases the probability that you're gonna achieve your goals. And the opposite is also true. Charlie Munger says. You know, being conservative and not expecting miracles is the way to go. And you obviously I totally agree with that. And on that note, we're going out turn to looking more at diversification by asset class. 6. Lesson 5 Diversification by Asset Class: so I kind of covered a lot of the stuff that I was planning on talking about in this lecture in the last one that was a long one Attendee get carried away, sometimes making certain points. I want to be thorough and make sure that you know I'm making the point well. And also, sometimes it's good to be a little bit repetitive just to make sure that it's really, you know, sinking in these things. You know, they're not just something advice. This is what the greatest investors in the history of capitalism have pretty much all taught us, and it is the fundamentals of finance. It's like a regular, a sport or something. You learn the fundamentals. First you learn the basics right, and these are the basics that timeless. They don't change their not gonna change. During the 19 nineties, during the dot com boom, there were old. Is this new technology? The Internet is changing everything. Well, it didn't change the fundamentals of economics, and that's why it led to a huge bubble bursting right, A big bust in 2 2000 because no companies that were not making any money but had you know huge revenue growth or in just a potential for huge revenue growth. They were trading the stock market for billions of dollars. Of course you know a zwart, Buffett says. Every every everything turned Teoh pumpkins and mice at midnight. And that always happens during bubbles. In any asset class, these fundamental economic truths will never, ever change so long as capitalism is capitals, so long as we have free markets. And it doesn't look like that's going to change anytime soon, even highly regulated, you know, Europe still has free markets that may have a higher taxes and more redistribution of the wealth. But these these principles still apply on. Investing still applies, especially when you're looking at, you know, at all season portfolio and diversifying your assets based on asset classes. So really, there are only four asset classes we're gonna talk about. You've already got stocks, got bonds, you've got real estate, you got gold. Yes, there are other. There are commodities that you contract. Basically, when you buy into commodity, it's just like buying E t f board. A stock market indexes your you're speculating on the price of that commodity commodities being things like coffee orange juice and gold, gold and precious metals. So over there, all commodities, the reason we could use gold is it's the most, the most popular. It's one of the oldest. It's one of those valuable. I mean, you could invest in silver, where Silver and it. It behaves in a really similar way to gold, but gold is just kind of like the standard. It's kind of like the U. S. Dollar is the reserve currency for the world. So it's kind of like the standard currency amongst which everything else sort of based, you know, it's based in the biggest economy. We have the Federal Reserve Bank, So the U. S dollar was kind of a standard. You have the British pound is worth more per unit and the euro is over. Also, stable currency. The U. S dollar is like the reserve currency. Well, gold was kind of like, you know, the reserve precious metal basically, And so we think about like a commodity. We just think about gold. Let me know that gold is a hedge and we'll and we'll go up, you know, 100% of time. Virtually if you look at history as I've already mentioned when all the other asset classes are going down. So user really the only asset classes you want me thinking about. Some people will argue with me on this and say Cryptocurrencies are a new asset class Onda problem with differences. They cannot be valued in any objective way. Who knows what one Bitcoin is worth? Nobody knows, but it's me. You would have to 20,000 few years ago and it crashed in within one year crash. All we done like 3000 you know, that's the way to what's volatility And the whole idea of a Cryptocurrency is that I was supposed to be a currency, something that you can spend. But that means everyone has to accept it. And not only that, but issued Bitcoin. Now there's like thousands of thousands of all these other cryptocurrencies, so it's not really an asset class. It's a new technology. The technology is very, very interesting. The, uh so called Blockchain decentralized technology disconnected from a central bank of central government. Very, very interesting. They even call, you know, using using the Blockchain to build a new layer of Internet called Web 2.0, it's all kinds of legal stuff of technology. Okay, but we're talking about investing, investing, safety of principal and an adequate return. Real estate is always going to have value because it has so much utility people need a place to live. If you buy an apartment building or a house and you rent it out, you can bank as long as I didn't buy a terrible, terrible, terrible property and then plays right that you're gonna get a yield in, that someone's gonna someone's gonna get a place to stay there, gonna rent it from you. You still have some expenses. You have to have some upkeep. But that Israel property that's gonna have real value over time is going to go up. And at the very least, you can be rented out or you can live in it. So real estate is like the most tangible thing. There is already talked about how I prefer stocks when it comes to just investing because thoughts are liquid and they outperform real estate. Real estate appreciates that about of 4% year averaged out for a long time. Um, and by the way, goals is loose. Similar. If you're looking at long time periods like a few decades out, real estate and gold have appreciated a really similar rate, which I find it very interesting. But depending on how many decades we're looking at, whether it's 50 years or 100 years or whatever it averages out to run 4%. That's a pretty good return on your money, especially if you're using leverage to buy real estate. And so you put 20% down, you know, and so you financing 80% of a property and then you're getting a yield from having attendance in there. That could be a great great investment for you. As one emphasize that real estate is not passive, it doesn't appreciate as much as stocks. And there are lots of lots of hidden expenses and things you may not anticipate when it comes Teoh real estate. On paper, real estate can look amazing, but in reality, and if you are listening to this, having experienced the feeling to know that it's true that there are a lot of unexpected expenses and headaches when it comes Teoh real estate and also depending on what state you're living, you know, a lot of taxes due of taxes on real estate, very estate. And sometimes you have. You know, you have a city tax and estate tax on property and they can be pretty high. So anyway, but realistic obviously has. It has tangible value. Bonds have value because bonds are basically debt. Whether it's a Treasury bond from a government or its bond from a business, you are basically loaning that entity money at a guaranteed interest rate. And so, if you believe in the U. S. Government, you buy Treasury bills and paying 3%. And then you know that you know, you could take out to the bank literally that you're gonna get, um, 3% on that bond and bonds bonds. As you confuse a lot of people are not gonna get into it too much because not with discourses about the bonds do fluctuate in value, like if you buy upon or $100 that bond can go up or down in value is not gonna be exactly $100. If the bond market, due to what's happening in other asset classes, becomes unattractive at that bond, it will go below the par value it and it won't go down to like $9 on you could sound that bond at a loss if you want to, your bonds can go up and you could sell bonds at a profit on People want to buy a bond because if you could say but in general Bonds, because in the warrant puppet it is not a good long term investment, all because yields on that is very low. And in the short term, that could be a good place to park your money because at least they pay something and they're considered to be, like, very safe in this talking about junk bonds of the name says it all there, um, stocks just outperform all the other asset classes over any long beautify. By far the sent stocks have been about 10% and other asset classes of the No. 4%. So, you know, if you look at the stats, it's just obvious what you should do. But the volatility of stocks turns people off. And the fact that I'm using the weights along sometimes to get the return that I keep mentioning it makes it hard for people if they don't discipline, not patient. Um, you know, So, um, again I want to emphasize that stocks are a tangible ownership, partial ownership in a riel business. Um, and even though the most volatile, they will give you the most growth on average, because companies make real money selling real products and services, and they re invest that capital. Either I pay you a dividend by buying back stock, which increases earnings per share, Um, or by reinvesting in the business for grow, it's riel profits. You don't get profits from a Cryptocurrency. You get speculation. And by the way, you don't get profits from gold. Either. Gold is purely speculative. It pays no, you know, and it doesn't produce anything. But there's just so much faith and gold, especially in times of turmoil, that it's a really good store of value, at least as a hedge. And that's why you'll lose that many that you have 100% of the assets and gold, except for you know, crackpots that you know, I believe you know, that really read too much Ayn Rand something up that I distribute everything, Ayn Rand said. But you know, gold is not a productive assets, so it doesn't make sense to be overweight like half of your assets and something like ghoul . It's very, very, very intelligent or can be very intelligent. Have some of your assets. Our it is goal as a hedge. Private Maryland. Okay, um Bond, that is, explained ownership of either corporate or government, debt based fixed interest and, of course, far less volatile stocks. Which is why they're they're still really popular. People like the idea that their money is safe, even though you know, to make your money safe and stocks all, you have the views of a long time horizon. That's a really good way out to think about it as another Warren Buffett Benjamin Graham quote throughout you that says that in the short term, stock market is a voting machine, but in the long term, it's a weighing machine. Over the long term, the stock market will be very, very accurate at pricing of business. And so if you own a really good probable business, um, never remains probable than that stock is gonna continue to rise, you know, in perpetuity as long as it is, business succeeds. But in the short term, due to economic factors due to political factors due to maybe scandals or whatever the case may be, that stock may be very volatile, even though the underlying business hasn't changed up is really, really good and very, very probable stock and still go down. And that makes it seem like it's risky. Volatility seems like there's risk there, but it's not really risky. If you hold not asset through the turmoil, risk is defined as the probability of losing money. So Warren Buffett, trying hunger, often talk about how, like, you know, they would take a lumpy 12% return over a smooth 8% return every time. Right? You're making a lot more money if you get 4% points. MAWR over the years that's gonna turn into a huge, huge, huge compounded, um, difference. But people, people want less volatility. And that's the reason why we wanna haven't all season for Folio. It actually smoothed everything out and reduces volatility, but still has a heavy waiting into stocks with one of the best asset class. So we want to have a heavy stock wait, but in such a way that are volatilities lowered. That's kind of another way to define on all season portfolio. And that's why having a little bit of gold is really important because not only does it reduce your exposure to the stock market during the recession, but gold will go up through into recession residue, just like heavy, heavy weight, overweight bonds and cash that's going to mitigate the damages, you know, lower being not that you're gonna lose during a stock market crash. Um, none of your assets are gonna be going up. And that's why you wanna have the gold, because it will have an inverse relationship to stocks. Um, and the next one was to keep going over, I guess, is that this is the last. It is the last slide of this lesson. So I kind of already went over this, um, real estate. Usually primary residents, high use of leverage. I eat debt. It's the most familiar to us, but ironically, it's the most complicated. From an analytical point of view, it seems really simple. Most of us think that we understand real estate. It's not that complicated. We know what a mortgage is. You know that we have some interested in taxes and some insurance that we may pay. Um, and we think it's better by an old house that the throwing money away on rent right? That's sort of the typical view, but and also it has this savings feature, right? You're building equity in the home as you make your mortgage payments. And if all things in the world were equal and you held your realistic for a really long time, then I would totally agree that owning property it would almost always be better than renting. But that's not reality. In reality, you may need to move for a job or some other reason. You may need to sell your house because you need cash. There may be expenses that were totally unexpected, like you put you pay for a new roof. Maybe you didn't have enough flooding insurance in your in your house. Plus, maybe you're medically insured for fire in your house burns down. I mean, use things that we don't want to think about, but there's a lot of stuff that can happen of it caused you to have a lot more costs in a in a house. Also, usually realist, it's pretty tax efficient. Historically, you can deduct, um, the interest that you pay on your mortgage, right, and you can still do so announced, been limited because in 2017 there was a new tax law passed, and it limited how much mortgage interest deduction you could take. And so, um, you know, things like that can happen with real estate now, the only thing that can really happen stocks, I guess they could increase taxes on corporate profits, and they can also increase that the long term capital gains tax. But if you really still, even if they did that, if you leave your money compounding uh over long periods of time, you won't have to pay the tax until you sound. Um, that's why Warren Buffett says his favorite holding period is forever. He left that money from pound, pound, pound and has his giant, enormous unrealized capital gains that he never, ever, ever has to pay taxes on until he sells them. And by the time you know we sell them, maybe a retirement time. The the asset has been compounding this along tax free, that it it's end of being a really good deal. So even if that, um, capital gains tax, which at the moment is 20% has been his lowest 15% It's also Venice High as actually a little bit higher than 3% or not. But the capital gains tax right now with long term. That means more than a year capital gains tax is 20%. So in the future, do you know the national debt building up and stuff they may need? Raise the capital gains tax even if it's a 30% or 35%. I mean, if you have compounded your money to the millions of dollars and you sell, you know, certain percent every year, let's say you sell $200,000 worth of stock and you given year. You're still only gonna pay that capital gains tax of 30 or 35% on it. Um, and you can leave the rest of your body still compounding. So anyway, that's kind of like a long way of explaining the fact that stocks air really tax efficient as a reason why a lot of people complain that the wealthy pure less in taxes because, you know they have all these assets and they make their money from businesses and real estate and from stocks, and we can do the exact same thing as the ultrawealthy. We just have to learn about the stuff, which is what you're doing right now, and then apply it in your life. Even the numbers may be much smaller. We can still become much more efficient, much more tax efficient and much more efficient in terms of allocating our capital, We could behave like wealthy people before were wealthy, and the result is that will become wealthier. Okay, putting it. Okay, that's probably enough on that. The next one is toe staying within your circle of competence and Onley investing in what you know. 7. Lesson 6 Investing in What You Know: warm up. It talks a lot about staying within your circle competence, because it's not so much about you having toe be brilliant and no so much what every company or know someone even about finance. But it's not staying within your wheelhouse and knowing what you don't know. Another thing he says another way explains it is, he says, that when the dumb money ceases to be done Oh, no excusing when the dumb money and recognizes its real limitations, it ceases to be dumped and uses that, um, quote when he's describing like the fact that the average person, by just investing in an index, is gonna outperform 90% of professional investors. Just realizing that you don't really know what you're doing on not trying to beat the market. You end up doing better than the vast majority of professionals by accepting the average in this result, now average it almost makes us. It sounds bad, right? You're only getting average returns, average returns. We want to get a better than average, but in a weird sort of paradox. By getting the average of the overall stock market, we're getting above average results because most people try to beat the market failed. If 90% of professionals try to be the market and fail, getting the stock market average gives you an above average return above the average with other people get I hope that I hope that doesn't confuse you, so don't feel bad if you're only buying and e t. F. That tracks the market index. What you're doing is very intelligent. You're minimizing your risk. You're minimizing the probability of losing money, and you're maximizing the probability of becoming financially independent over time. Never worry that you're not getting rich faster than other people or that you're not even getting rich fast enough. Unless, of course, you know you hate your job. Your miserable we don't have money. Okay, then he might worry that, you know, getting rich fast enough. But in that case, the advice wouldn't be take more risk in the stock market. The advice would be to find a job that pays more, or that you like to do you know, all of a sudden, now we're talking about a different topic. But when it comes to you asset allocation I e. Investing, this is the way to think conservative long term and keeping it simple. Okay, that being said, some people are this more comfortable holding certain kinds of assets for some people. You know, if you feel comfortable with having most of your assets in real estate, and you should probably hold realistic, you like real estate. You want toe own your own house. You don't mind fixing after paying for repairs or whatever you like. Being a landlord, you like having tenants. You don't mind managing rental properties when that's what you should do. You shouldn't put all your money in the stock market if it stresses you out to see it fluctuating every day. And it was real estate. You don't get daily prices. You may know that the market's going up generally of as it's a slow year for real estate or whatever. But you don't have the constant ticker symbols and prices flashing on the screen at you, especially now in the world of smartphones. You know, we're all we have to do is look at it at the screen, in our hand and we get notifications and everything. It's always impossible toe not look at your stock prices. I mean, I teach all these classes about it, and I still look at my stock prices. Something almost everyday, just so simple. I only have to do is look at your phone. I try to ignore it. I'm trying to let it bother me and take advantage. Prices seem to be too low, but it's still really hard to more above. It only looks at it every two weeks, and I guess that's crazy. That's also because it doesn't use computers easy to have a computer in his office, so I guess that makes it a lot easier. But, you know, you should invest in whatever makes you feel comfortable. And so your all season portfolio, it may look something like the examples I gave earlier. Um, it just depends on what you want. You can have most of your money and in goal or in real estate or in stocks. If that's what makes you feel comfortable as long as you're not, you know, taking too much risk. Like if you put half your money in like two or three individual companies in the stock market, Well, that's not very smart because those companies crash. You're losing a lot of money, right? But you put most of your money in the stock market and an index that tracks it all you have to do then basically is just wait. Now, if your timing is really bad and you put it all in at once, you know, average in by putting like 10 20% of your money and waiting some time putting it in, You know, if you just buy it all once and it happens to be that the top okay, you might be waiting a long time. Like, for example, if you took all of your wealth and you bought stocks at the top of the bubble in 1999 or 2007. Um, you know, all of a sudden you could've watched most of your wealth evaporate within the next year. That would be the worst possible case scenario of it. Even then, you only had to do was wait a few years and you would have ended up making a profit. So even the worst possible case scenario for a stock market index if you put the entirety of your wealth into it the very peak of a bubble. If you look at the history of stock market Eventually you still would make your money back . And that's I mean, that's the worst thing that could possibly happen was most likely to happen. Is that every buying during, you know, through sick and sin when when the markets up in the markets down the market sort of average prices. And, um, you're bunking in just you're gonna get average prices, and that means that you're gonna get about 10% if history is any guide. Now, a lot of people are working that future of stock market returns or getting lower because interest rates have been low for so long. And that the national Dan it has gotten so high and other factors related to the economy are going to make it so that the old world returns my foot down because the last 30 or 40 years in America have been really exceptional. Been really, really good time. Um, the stock market. Either way, that stock market is still going to get you better returns almost for certain. Any other asked us. So maybe you won't get 10% Sure. Maybe you'll only get seven. Nobody knows, But if the stock market returns are lower and it also means that all the other asset classes insurance will also have to be low because you only have a certain number of choices. You can look at your capital right. It's supplying the man right now. Realistic stocks asked Asset prices. We're all really high because interest rates are low and so makes no sense to buy bonds or to put your money in the bank because you can't get it and you return on it. The only choices you have are the stock market, real estate and maybe, you know, gold. So asset prices are really, really high, and they're not gonna go down. Yes, there's some catalysts, um, reason for them to do so. And so, with just this little bit of fundamentals of economics that influence these things, and a lot of people are predicting that the future of the stock market in general, we'll have lower returns in the past. But you know, nobody knows, so there's no reason to worry about it. The thing to do is to build yourself a nice all season portfolio that holds enough cash to keep uncomfortable. That exposes you to enough stocks to give you that that long term financial growth that you need that you want. And then a mix of bonds. Uh, this income were gold As a hedge that still still earns you money still helps you build well, but lowers your exposure. That's all season portfolio. So, um, to build true wealth in your full portfolio, you need to have both asset allocation, an asset class diversification hope that that makes it how much you, by each asset, how you spread that around. So if you're comfortable in stocks, you don't know any real estate that Oh, I don't own any real estate or oh, I mean only like, yes, I'm exposed a little bit too realistic because I do, Oh, the S and P 500 e t f. So there's obviously some real estate investment trusts and other real estate firms that are listed on stock exchange so indirectly, I do have exposure to real estate through the stock market. But I don't own the real estate myself, and that's just a personal choice. I don't want the hassle. And in the future I made by made by real estate, I would like to pay cash for middle states. I would want to buy a house and have a mortgage and have interest and the taxes, insurance and and all the other expenses. Um, I think that the price is right now all over the world, not just in America. Told you earlier that I live with, you know, the price of real estate are super super high because of a lack of choices like I mentioned because of low interest rates like I mentioned. And that is not sustainable. Let me markets always go in cycles. There's things that causing the open down so eventually prices will move down. It's happened 100% of the time in the past, and I would be open toe only real estate or any asset class that made sense. But, like personally, I favor favor stocks and right now in cash build up as well, because I, um, my ankle, because I little bit served about past evaluations being too high. And while I always have some exposure to stocks, I'm starting toe let my cash and gold reserves. Bill Mawr just doesn't make me feel comfortable that the stock market does. Asher have a of a couple of years. I'll feel OK about it, and it goes by more stuff during that times is going down. That's my personal preference. That's what feel comfortable doing. That's my all season portfolio. I'm heavily reads thoughts of 70% stocks, 10% beauty, actually, about 50% cash, and the rest is golden fixed income. I have a couple of loans that loaned out some personal loans, but by far the vast Victoria of my assets are stocks. And I mentioned earlier that stocks outperform all their asset classes by huge margins Here . Is that the example again? Historically, it's been about 10% of stocks. This is about 4% for gold and real estate. And gold's really interesting because, I mean, you look at the chart from gold over the course of 100 years. I mean, during during the 19 thirties, gold with selling overseas $100. That's I mean, that's not that much lower. That's something for house like. I mean, that's like half about what it's selling for right now. And, um, you know, that's the 19 thirties. I remember talking about 90 years ago or whatever, so that's pretty crazy. But it also is is recently, as the 19 nineties, when the stock market was having its epic run, gold was trading around eternal. That's so that was pretty half of what it was trading at way. That really great question and what that shows you very clearly is it just shows you the inverse relationship between Golden Stop. So the Great Depression, Armitt bargain based basement prices for stops and goals that old time high. Back then, that night, imagine stocks are at all time highs. Gold was trading it. You just count it. Very, very, very little. People were not wanting to be in gold, soft doing so well. Some of the greatest do things to see if you look at the charts and the same thing happened in 2000 and nine, holding up to record record highs around $2000 an ounce. Well, the stock market was trading at record lows, but you don't find out about 40% of whatever than a year zoo and s so interesting to see what you see. That goal. It's kind of his kind of in between export prices. This amazed to hire little it stocks also have seen the way. Probably what you're seeing is that everything is more or less a fairly priced. Its intrinsic value is about right, and that might be what we're seeing right now. So they will say this officer way too high. By the way, this is on late mento late two dozen 19 2nd half of 2019 in this sport. So when making all these references do now that that's what now is interest rates are very low and stock prices and houses are very high, Warren Buffett has said. You know, if it just breaks stable for a long time and stocks are really cheap, you know they appear to be your store. Klay expensive. It's all based on interest rates as interest rates go up. That makes other assets, like bonds and other fixed income investment vehicles, see much more attractive. And money will go into that and out of stocks and stocks will go down real estate down. And so everything has to do with, uh, interest rate. And so right now, interestingly, gold is doing pretty well. Um, while stocks and real estate are also doing really well, So it's a really interesting time for for economics. A lot of people are scratching their heads. We're not seeing a lot of inflation, even though we're seemingly low unemployment, and we're seeing a lot of weird things happening in the economy because of the Federal Reserve has never been quite so active with this monetary policy, lowering interest rates and printing money and stuff like that. So this is why you never know what's gonna happen. Um, and it's just yet another argument for why a, um all season portfolio makes so much sense. So then, if you like no state, invest in real estate, just know that it's not liquid incurs expenses, and it's not passive. Maybe you wanna have 10% cash, 30% in real estate, 30% in stocks, 20% fixed income, 10% gold. That would be like about as diverse as you possibly get your exposed to, like all the main asset classes, that you're really good all season. For Full Hill, I'm actually 30% real estate. That is music. That would be the equity rights. Let's say, for example, your house is worth $200,000. That means you have $60,000 in equity in your your home, right? Usually, you know, the vast majority of people in their own home. It'll have a mortgage, and you have a certain amount of equity in a certain amount of of debt. Obviously, if you have 30% in real estate and you and you pay cash for a house or your mortgage is paid off, have you much larger figure. So that's why you wanna think without you think about asset allocation in real estate, you're thinking about the equity that you have in that property. Um, maybe you wanna have, you know, 80% in real estate, 10 10% in your residence, the equity and residents in 18 80% and real estate properties and then only 10% in gold or stocks, right? I mean, a lot of people that they just don't like having their money supposed to stock market, even though it's the best performing asset class. So people like to leverage up and, um, you know, borrow money from banks and have mortgages have rental properties. They're good at it. They know about the real estate market. You don't mind being a landlord. I mean, I've got a friend who had those very things got like, 10 rental properties, and I think there's very little money in the stock market and he just loved real estate, and he's done very, very well. I think I was very, very, very well to do. And he focuses like almost 100% on real estate. So it just goes to show what works for one person. I was going to give her something else, and you need to learn what you feel comfortable with based on what you know. And for most people that aren't really into business or investing or financing all the simple solution is to just buy an E T F the tracks, the S and P 500 index. That's a Warren Buffett recommends. I totally agree and makes so much sense. It's passive. It's easy, it's simple. And you're gonna end up doing well by doing that. So, But if you like a list eight, where you like gold whenever, by all means, invest in what you know, and it's gonna help you stay the course psychologically, be easier. And it's just gonna be better for you in the long run on with that, we're gonna look at it. Morning, No lease. This is actually a really, really poor thing. Now, in our, uh, uh, 24 7 news cycle, information world 8. Lesson 7 Ignoring the Noise: So they already talked about this a little bit, and I was talking about how easy it is to see the price of a stock these days. It's not just that it's that each other TV, you've got the financial news people talking about buying, selling the stock of that was gonna happen in the economy. Oh, no recessions coming. Sell all your stocks. Oh, no, There's a new tax law being passed Oil, real estate, yada, yada, yada, yada. I mean, it's very, very confusing, and it is not helpful. It is not helpful at all because, you know, how are you supposed to know what to do? One pundit contradicts the other. One book contradicts the other, and it's just information overload. So one of the biggest challenges for the modern investor is just having too much information. We used to not have enough information about businesses, Andi, you know statistics and how well they're doing nor to make an informed decision about investment. Now we have way too much information, most of it in the form of so called expert opinions or even just late lay person opinions. Eso You know, all this contradictory information is paralyzing It's too much data, and it's also just too many choices. You have thousands and thousands of stops. The trade on the stock exchange is so again, this is why the simplicity of buying the indexes is so beautiful. I mean, it decreases your stress. It's better for your your sleep and your health on these are big things, not little details. Like a little sleep better at night. I mean, this is your health we're talking about. This is like it's to be how long you live. This is not just about how much money that you're gonna make when you're gonna be able to retire. We're talking about your well being right now. Stress levels are a huge cause of disease and early death and all kinds of health problems . So, you know, this is not like some abstract thing here doing what simple. And his lower risk is better for you in multiple ways. But it is also better for you. Financial. Um, you know, I'm listening toe all these news, all these planets on the news and reading up too many articles falling things too closely actually increases the chances that you're gonna be making mistakes I mean, I know I've done it in the past where I read some articles, been very convincing, and then it made me, you know, buy a stock. I I should have bought her of investing in a emerging economy that, um, I shouldn't have done or whatever, you know. And then later on, I look back on that. It's like it was one article. Well, that one comment, maybe even by someone on TV that I was like, Oh, you have a sense. Like, it's logical that I get that I should do that. Um, we gotta think big picture when investing and the all season portfolio and investing in index funds. It's a very big picture thing to do, because the the economy is always to be shifting and changing the markets always gonna be fluctuating. And so the whole name of the game is simply spending less minding your turn so that you have savings taking those savings as much as you can and then buying them in assets that are almost certain to appreciate over time. Are we getting a 5% return over time or you give 10% Richard. Over time, maybe we'll get a 15% return over time. There's no way to know. And so it seems like all of the financial news and reading all these, um uh, financial statements and picking companies seems like a fun thing to do. Especially like finance something. I know that I like it, so I tend to do more of it that I should, um, it's actually not the most probably use part time. Most probably use of our time would be to ignore most of the noise and consume far less. Like, for example, I have, like three or four financed books that is read over and over again because they're written by the best investors in history. And they're teaching, you know, similar lessons that are a little bit different with the overlap. And that's the intelligent investor my Benjamin Graham, the father so called value investing more buff, it learn from. And then there is Charlie Munger is biography, which is really good, called damn straight. I think it's called about Charlie Munger. He's Warren Buffett's right hand man in Berkshire Hathaway, and there's ah syriza investing books by Robert Hagstrom, who has studied the careers of Buffet and Munger and he wrote one called Investing the Last Liberal Arts You call people Who You Wrote one called the Warren Buffett Portfolio, analyzing how Warren Buffett invests. And then there's another really famous investor who influenced Warren Buffett, trying longer named Phil Fisher. And he wrote a book called Come Stocks and Uncommon Profits. And that's either really, really good one, where he emphasizes buying and holding growth fastly growing companies hold them for long time famously held Motorola stock from like the 19 fifties all the way until he died, like 60 years later, or something never sold. It kept growing through all best institutes you put those stocks might go down during recessions. It doesn't mean that you should sell them. You don't really have to do anything as long as you own good companies or in the case that I'm making is long as you just only index. You don't have to worry about stocks going down. All you have to do is wait, so it's gonna keep repeating that Don't worry, you haven't lost money just because your asset value has gone down. If the value of real estates down down the own a house, you haven't lost money. If you own stocks and the stock market is down, you haven't lost money unless yourself. So you should just learn the whole. Unless, of course, you made a really bad decision to begin with or you need the money or whatever. Obviously, there will be those types of scenarios as well. But ignoring the information and sticking through the fundamentals and keeping things simple? Um, it's more and more important, and it's increasingly tickles deuce simply for the over abundance and the access to information that we have now. So you want to build on all season portfolio. You basically want to ignore financial forecasts and news as much as possible. Just don't listen to it. Don't even read it. Um, rebounds your portfolio less than once a year. Once years. That is the most often that you want to do it. If one of your asset classes booms way out of proportion to what you want in one year, let's say stocks go up 30% a year, and all of a sudden it make up 80% of your portfolio and you'll want him to be such a large proportion. Okay, so maybe you sell 10 or 20% of your stocks off, and then you put that into a different bucket, um, bonds or real estate or whatever. Um, but so you know, you should do some re balancing here and there, but you don't have to do it very often. Once a year is not that often, maybe, of beginning of every year. You have a look at your portfolio and decide whether or not you need to do that. But the whole point is to always keep a long term in my your financial independence is a long term thing. Maybe it's just thinking five years down the road, maybe 10 years. You should be thinking 20 or 30 years. I mean, our life expectancies now, um, are as long as they've ever been in history. Medical technology is continuing to grow exponentially, and we've been working on cancer vaccines. They're working on all kinds of ways. Teoh be able to replace our organs with stem cells and other new methods. I mean, we may live in a world where the 10 or 20 years longer than we expected on DSO, you should be thinking very, very long term. But it comes to your money. Yes, It's also true that you want to enjoy the now another good dynamo in a car crash. But actually, the probabilities are in your favor, living a really long time. And so the rational thing to do is to you behave as if you will live a long time and you don't want to run out of money. If you do so, investing is a long term activity. No matter what someone is saying on the news, or someone is trying to sell you some financial products, you know, invest in my my new crypto currency or whatever. I don't believe it because, um, the truth investing principles are timeless. The same things that worked 2000 years ago, even though they may not have been a stock market like then there was real estate. There was money that was, you know, there was wealth being built. There were there were things that resembled companies, mostly governments. But, you know, the same principles apply. Modest stock markets may only be one or 200 years old, couple 100 years old. The first major one is in London. There was force where they started to trade and a very similar way towards stock market. But these ever since modern markets emerged, nothing has changed. The Internet has has made businesses. We were profitable. That has changed certain things. But it hasn't changed fundamentals of investing. And neither have Ah, you have cryptocurrencies. Okay, so you want to stay true to your long term goals, and that's a quick lesson. Let's look at some questions that you want to be asking yourself. 9. Lesson 8 Staying True to Long Term Goals: So this question it's a really good one. Um, it's a good example of how we should be thinking about our resident results. So, um, an investor who had been retired for a long time was asked by somebody, What investment return did you get over your investment Lifetime? You can find your money at a 10%. And did you beat the market and the injustice that you know? I don't know. All I know is I ended up in Boca. Boca Raton is a famous community in Florida. It's very, very, uh, plush, expensive, nice area, Let's say, and this guy, you didn't matter if you got five secretaries 10% through time Searchers it didn't at all that matters is that he reaches financial goals. You know all that all the only knows is yet another focus. And that's what you that's what he needed. So don't agonize over your year, the results over your hurt your returns, whether people market, who cares? Maybe maybe you don't be the market. Maybe you pick stocks for you or you avoid the stock market and you invest in real estate because you like it. And maybe you don't see the market. You don't even know who cares. All that matters is that you state you your long term goals and never have a fear of missing out. You should have a fear of losing money. You should have a fear of of permanent, um, crippling of your capital, permanent terrible capital. In the words of grand. This is why we want to be conservative and offensive. But you should never worry about not making money fast enough unless you you know you're the result. You think getting us totally horrible, but they shouldn't be. You're doing what I'm telling you have to do with this course. If you have a long time arising, you want you to be either even more conservative or maybe even more aggressive with your investments. But you know that will depend on your personality. And you're your goals. You want filthy rich and be more aggressive. But just know that you are taking more risk and you you're more likely to probably lose money by doing that. Um, but maybe that's your personality. Then maybe you should do if you're happy with slowly building. Well, and I recommend this because this is the way that you're probably gonna actually succeed in building well, you know, knowing that you'll eventually have financial independence. Well, you are. You are in a rush. You be conservative, you know, Slow, steady wins. The race is a good choice. You know, uh, if you love your work and don't crave time, that's that will make all of this easier. Because what's the rush to get rich if you do something that you like every day, you don't really need to retire. You don't really need to get out of what you're doing. You can earn your daily bread and not fuss too much over your investments. Also, you know the really big recommendation. Warren Buffet talks about this a lot, too. It's you the job that you like, even if the pay isn't very good because, you know, having defeated to do something like everything, actually, the ultimate freedom is really better than any financial future. You can have it that financial freedoms gained today, something that you hated for 20 or 30 years. Right, So this sport is all about investing, but your investment results are gonna matter a lot less, and therefore it'll be a much easier process. If you have ah, career job that you really enjoy, it won't matter that you make a little bit less maybe even a lot less than other people long you don't have the fear of missing out that I've been talking about course. Um, all this is gonna be much simpler. All you gotta do is buy the index funds, you know, save some money, and you're gonna be building. Well, I mean, that sounds like an over simplification, but it's really not if you look at the big picture and if you're willing to look long term , But obviously, I recommend to you and some people have spent I mean, almost no time considering these questions. I mean, if you're one of these people, now is the time to start thinking seriously about your long term goals, are it? I mean, if you hate your job career woman, Yeah, you're gonna wanna retire earlier. Or maybe you just need to get into a job here that you like more and and then you don't have to worry about retirement. You know, you just think about that, and that will make investing simpler because you won't have as much pressure on you, you need to get, you know, great results. If you're not in any rush, stop working. So, having clarity about your financial and overall life goals, it will really help you create your own unique all season portfolio based on a lot of the rules of thumb and guidelines that I've given you guys throughout these lectures. No, none of that is all that useful if you don't know yourself. And no, you are what your risk tolerance is, which type of assets that you may like to own, what Johnny like to do and what your overall financial goals are. I mean, some people they want the last check bounced, but you may not even want to let us well, but you just want to have some form of financial independence. Then they not need accumulating hundreds of thousands of dollars in assets on do you should know that about yourself. Maybe you need a lot less than other people because you're single or because you love your job. And maybe you do a job that you know you can do into your other years. On the warm up in 88 years old, a slower full time because, you know, investing is a mental game that he just reads and thinks all day long. And then everyone's well, he isa company. We're not all in that situation, obviously. But if you love the job that you do, especially if it's not a very physically rigorous job, um may not need to make that much money. And you may not even be into best all that successfully you to achieve our goals. I heard you'll spend some time thinking about stuff because I thought a lot of people in my career I do a lot of consulting and coaching and stuff. And I'm always surprised by how little people really given this serious thought and what most people don't know. This sort of listen to what people told them. We're listening to the pundits or read a few books or articles and have always sort of general ideas. But you really need to know what you want and that will inform all the rest of your decisions. Um, and that's lesson with a little more deeply at the convention to your physical health, which may seem tenuous when it comes to investing. But I've already touched on this golf course of It's a really important thing 10. Lesson 9 Investing and Your Health: it cannot be stressed enough. How important? Understanding your risk tolerance as to your investing decisions and therefore to your mental health. I mean, what's the point of building rapid wealth if you're a nervous wreck for years while you do it? Chronic stress, at least you all kinds of physical illness and disease as of our attention, as you already know. But people still do not let this guide their decisions. I mean, at least in cancer and lead the heart attacks, high blood pressure and even indirectly can lead to things like diabetes and stuff because it could meteo, overeating and being overweight stuff. So even laid all different kinds of health illness. And, um, you know, again, this is something that it kind of seems like. It's not even related to investing, but it issue. No, we're talking about behavioral finance. Everything is connected or what job? You choose this kind into your health, where you choose to live, who you choose to spend your time with, how you invest your money. It's all connected to your help, but specially with money, it's very, very emotional. We have a strong emotional connection to it because you live in a the market economy live in a society where you know the amount of freedom we have in many ways is connected to the amount of money we have. Now. It may be to you, as studies have shown, that beyond a certain point, more money does. It doesn't equate to more happiness. But, you know, a certain amount is absolutely necessary. I think we would all agree on that and the way that we approach saving and investing it. I was very, very, very strongly linked to our our happiness, our equanimity and how how stressed out we are on a day today basis. So choosing an all weather portfolio and a general investment style that allows you to sleep well at night even if it might lead toe lower returns than you would have otherwise gotten if you would have spent you know, another 1000 hours on your investments. I mean, what's more important, living five or 10 years longer and having more well being better relationships, more time, um, and less money, or having a bit of extra money, or maybe even a lot more money? But at what cost? At what cost was it to get a lot more money. So this stuff and have a huge, huge, huge effect on your health and I just want to emphasize that nothing is more important than your help. This sounds like an obvious, stupid statement. But if you look at the way we live in the West, the way that we eat the way that we we think about our money, how much we work our relationship to our jobs, how we feel about all of these things, then way don't really believe this. I don't think way really believe that nothing is more for their health. We would change the way we do a lot of things and a lot of people say Well, Aziz, to say it's hard to do. I want to change. But the reality is it's all psychological. We overspend on things that are unnecessary. And I have been said that we spend money on things. We don't need to impress people that we don't like, and that's definitely true to some degree. And a lot of people say, Why don't I don't make enough money to stay. I can't invest, I can't invest in stocks. You will take too long I'll be dead before it amounts anything. Well, um, the statistics disagree with, I mean, even a relatively poor person. United States. If you were just a little bit Frankel, you could stay in a couple 100 bucks a month. I mean, that just means, like not eating out and spending less. I mean, there's there's ways you could do it in new ways. You could do it on the government, even helps you have. You have kids you get, you get the early contests. But if you don't make very much money, you get a tax better for kids. You know there are ways that you could save money by inexpensive, used cars living in places inexpensive. Um, you know, I don't have a long commute to your job. I mean, there's so many things. There are so many, so many things that you could do so you can at least save some money. Whole idea, though, is to arrange your life in such a way. And by the way, it's easier now than ever 21st century, with the Internet and with ease of travel and and everything is easier now than ever. Toe have flexibility, you know What's the point in getting rich if you don't live long enough to enjoy it anyway ? You know, I know some people that are really wealthy, very happy, so and something for everyone. But it's definitely work we're thinking about is you invest your hard earned money and a said, if you're not comfortable being overweight stocks, even though I recommend the heavy exposure to the stock market over a long period of time on, you can't stand seeing your investments fluctuate by $1000 every day. Just don't invest in stocks, you know? I mean, just because I recommend them and just let me know that they're gonna give you the best results over a long time still doesn't mean that you should invest in that if they feel uncomfortable. If if you're really, really risk averse that it's fine invested other stuff. If you want to always be kind of heavyweight overweight in cash, but you got to put your money somewhere. Otherwise inflation will eat your money, right? Inflation is usually 23% over the long term. That's how much money you lose by holding cash and not investing it on an annual basis. So we gotta put your money somewhere. So if if you don't like stocks, you don't like meals. Daytime. You gotta You gotta think something that you like. And right now, that's why it's so hard right now because you just being as low. They are people that are risk averse and don't want to pay a lot for a real estate. Stocks don't have very many choices. That's why you know, Golden Commodities might be a good choice right now. If you don't like stocks, but in general, just diversify as much as possible. If you don't know which asset class you feel comfortable owning, just diversify as much as possible. Put like 20% into each 1% cash time, since stocks 20% bars time sent gold you know, 20% some of the commodity. Just do something like that and you'll probably be fine. Um, and, uh, you know, holding what's the catch is always get if you really discover it because you just feel comfortable there. So the important thing is that building all with a portfolio that's right for you and including investing in the asset class or classes that make you feel more comfortable. That's that That's the point that I'm making, and it can have a huge impact on your health. I mean, just think about the people that lose money, gambling or something, and you go into a downward spiral, you know, in the alcoholism or into more and more debt. And it just never come out of it. And I've seen that happen, people. And it's a really slippery slope. You know, money is so emotional, so many people. We work hard to get it, and it hurts to lose it. This is this is not a small thing. This is not a small consideration. So I encourage you to think very seriously about your risk, tolerance and how you personally feel with your money in different buckets and then, you know, allocated according to to those buckets. This is why behavioral finance is becoming so big. It's really people are realizing the strong psychological link Teoh Investment Success and Money Management and the Link, the physical health, many group of the greatest investors they figured out long ago. Benjamin Graham Health, Fischer warned. Buff it. They understood this, which is why they have outperformed their peers so much. This also why you know, finance professors or not billionaires, which I think is pretty funny. All these people, they're teaching finance off times, they don't have anybody. That's I mean, would you take, Would you would you want to have someone that doesn't know how to invest in reality? You know, teaching you finance, It doesn't it doesn't make any sense. But, you know, so the people that understand this stuff, they've understood it for a long time because it's pretty commonsensical. But it goes against what we what we read in the news and sometimes what we're told. Of course, in school we don't know much about money else, since there's somehow seems like to be like a vulgar or unimportant subject. Our public education system is based on a classical education, heavy emphasis on what we call a liberal education in the arts and literature. There's nothing wrong with those things, but I mean, you know, the United States. We grow up and think maybe one economy class in high school. We may or may not have learned much from it, and that might get and then we grow up. We go to college and we don't major business and All of a sudden we live in a free market economy and we know nothing about money. You know, that doesn't make any sense to me at all. So but the psychological aspect is a big, big part of it that a lot of us just have learned the hard way. This stuff should be taught in school, and I'm trying to do my small part to remedy that by teaching classes like this one. So the rate in our fast in our fast paced world, it just turns out that, you know, a conservative, slow and steady investing approach is usually the best approach for most people. And that's the one that I recommend to you all things remaining equal. It'll get the job done for you and you'll avoid a lot of falls along the way the other people fall victim to and, uh, who needs that? Right. So the next lesson we're gonna wrap up and kind of go over the maid points over the last time 11. Lesson 10 Conclusion: so that we truly diversified and having all season portfolio. You need to invest across multiple asset classes, stocks, bones, ballistic gold, etcetera. You would have a portfolio that's gonna do well. No matter what happens in the economy, you need to be truly diversified in order to do that. And again, it does mean trading some profits, probably during economic expansions. But it means protecting yourself mawr during contractions, so when it booms, you make less. When it busts, you lose less. But it's much easier and mostly and increases your probability from over the long run. If getting results that you needed a good holding a hedge asset like gold is a key to this because, as I already mentioned during the course, it has an inverse relationship to stocks. It will go up as stocks took down so you can get it, make it so other people are losing money, even a break even or make money during recessions. By doing that now, there is one thing I didn't mention older in the course, which is beyond the scope of the course, which is shorting stocks, and you can predict an economic recession coming or a stock market crash. You can short spox and make a huge profit as they go down, but it's extraordinarily risky. I don't recommend it as not that this course is about this course is about passive all season portfolio that could be left alone. Shoring is not something that you're doing. It is past time the market to do that. And I do not recommend timing the market as discussed in the court. So I left that out of this course. So you gotta know. Head of ignore the noise knows being inundated with financial information with data and with opinions. You gotta block most of that stuff house and you you invest successfully over the long run . You know, you you will usually do that by investing in asset classes that you're comfortable with, whether it be stocks were listed or gold or whatever you need. Teoh. Think about that for yourself. To achieve your financial goals, you have to focus more on character traits rather than intelligence. People get very confused by this. They think that you need to be a genius or very, very, very smart to be good at finance or to be a good investor. It's not true. You need patients, you need equanimity. You need courage. I mean, it takes it takes courage to have all of your hard earned money out there. You with the vice institutes of the market, Just making you go up and down. That thinks courage is tough. You gotta be tough, you know, antics, independent thinking. All those things are more important than complicated analysis and trying to be brilliant trying to compound your money a 20% per year even though some people have done that. Um, I'm not. I know about the smartest Warren Buffett. So why should I try to pretend like am I'm not trying to play the lottery here? I want to get certain financial rewards I want. I want to get high probability of financial independence. And I've already achieved a very high degree of financial independence by doing exactly when teaching you guys in this course because it's not rocket science. It's very, very simple. But it's not easy either. It's simple. It is difficult because it takes these traits. It takes character, you know, time under says, all we're trying to do is not the idiotic, but it's harder than you think. I mean, it's like he always talks about inverting the problem. Sometimes Just buy it by avoiding the things that would cause you, uh, to be unsuccessful, you will automatically be successful by avoiding big mistakes. You automatically get good results as sort of another way of thinking about you know, the defense of nature or the conservative nature of investing this way by not losing money over time, you're gonna end up making a lot of money. Um, so just kind of keep that in your mind as you invest and you listen to people giving you advice. Your financial advisor especially. You know, the person that you pay to manage your money has a conflict of interest with you, and that makes be a totally new concept to you. If you grew up in a world where you used to the old world of, you know, hang your financial advisor Senator too managing money for you. They are not incentivized for you or investments to do well. There actually incentivise just to keep your money under management because they feel off these based on how much you have invested with them. So by the very nature of The agreement you made with your financial advisor is basically two commissions. Or imagine city as a percentage of assets, with the vast majority of Do you have a conflict of interest with views. It makes no sense. Do you let someone manage your money and your fee? Unless the fee is like a one time fee or unless they're gonna be? You want them to actively manage your your stocks and try to beat the market and then, if it not be in the market. But what you paying it for? You're paying them to do worse than you could do by yourself free by buying a industry. Yes, right I have been talking about throughout the course, so it's just another thing I get. What we're doing here is not rocket science. It's just mostly about not being stupid, really, and continue to not be stupid over time. Can you get good results? It sounds like an oversimplification, but it's really not. It's just it's just it's still hard. It's a hard thing to do. It's hard to be patient, and that's what's it all about. So Benjamin Graham, I mentioned him, is being warned about his teacher he again defined successful investing, receiving safety of principal and Adam favorites here. This means don't be greedy means think long term means be conservative so you can sleep well at night and diversify your holdings. If you do these things, the odds of you failing at building wealth are almost zero. That's nice to make a big statement, but if you actually do all these things over long periods of time, the odds of you failing are almost zero. So I want you to think about that. That's final thought of the course. I wish you the best of luck and thank you for spending some time with me.