Bullshit on Stilts: Tackling the bullshitology of financial decisions.
Join two financial brains turned podcast hosts unleash their wit and wisdom drawing on vast financial backgrounds. Using highly-tuned bullshit sniffers they call out the clichés, crap spackle and flapdoodle spewed by so-called experts across the landscape of financial advice. Identifying as doctors of bullshitology you can count on your hosts to bring you a lively if not deadly mix of serious analysis, hijinx, and tomfoolery. All within a 99.1% bullshit free safe space.
Bullshit on Stilts: Tackling the bullshitology of financial decisions.
Why Do You Own What You Own? Unraveling Your Investment Portfolio Choices
Ever wondered why you own the investments you do? On this episode of "Bullshit on Stilts," we unravel the mystery behind your portfolio choices, helping you maintain control and avoid decision regret. We'll discuss the importance of aligning your investments with your time horizon and objectives, ensuring your portfolio reflects your financial goals and risk appetite. By understanding the ‘why’ behind your investments, you can create a robust strategy that stands the test of time.
Is a US Treasury bond always the safest bet? Think again. We tackle the complexities of interest rate risks, comparing Walmart bonds with short-term maturities to long-term US Treasury bonds. You’ll discover how inflation can erode the perceived safety of long-term Treasuries over time. With practical advice on balancing risk tolerance and meeting financial goals, we’ll help you navigate the psychological challenges of staying disciplined in your investment journey.
Did you know that asset allocation is the key driver of long-term returns and risk? Inspired by the landmark Singer Bebauer Brinson study, we emphasize the importance of making strategic allocation decisions based on your time horizon, objectives, and risk tolerance. From saving consistently to choosing between similar index funds, we’ll explore how adjusting savings rates can mitigate risk for conservative investors. Join us for a blend of serious analysis and playful banter, aiming to optimize your portfolio and keep you on course towards your financial aspirations.
Developing your financial bullshit sniffer one episode at a time.
Welcome to Bullshit on Stilts, a podcast hosted by two guys with vast financial backgrounds and great bullshit sniffers who call out the cliche crap, spackle and flap doodle spewed by so-called experts across the landscape of financial advice Identifying as doctors of bullshitology. You can count on your esteemed hosts okay, maybe knuckleheads to bring you a lively, if not deadly, mix of bullshitology. You can count on your esteemed hosts okay, maybe knuckleheads to bring you a lively, if not deadly, mix of serious analysis, hijinks and tomfoolery, all within a 99.1% bullshit-free safe space. Let's get after it All right. So welcome to Bullshit on Stilts. Today we're going to focus on we're still in our course of focusing on the Fab Five for investing. This one is arguably the most important. Number two in the discussion is why do you own it so, mark? Why is this so important? Why does it make a difference if I know why I own it? I know what I own. I got all my percentages in place. I get it.
Speaker 2:Why do I need to know why I own it? Because we all need to be a little bit freaky when it comes to control. That's why so this is a control thing.
Speaker 1:You bet it is so if you don't know what you own.
Speaker 2:You can't explain why you own it, which means you don't have control. So this is about, not the rationalizations of why you have something in your portfolio Well, it was sold to me, or you know. I don't know which is probably the most honest answer out of all of it. Most frequent too? Yeah, most frequent, but you need to know why. And if you can't articulate why, then you're not in control. So the why is a very scary question that you need to answer to confirm that what is in your portfolio is what ought to be in your portfolio.
Speaker 1:So this is sort of like a validating question. You know what you own and now you got to validate why you own it. If you own all bonds but your investment objective is growth, we may have a disconnect and also, in articulating it, while it does validate, it also is reconfirming.
Speaker 2:Or have things changed for me? Yeah, and I need to rethink this. And if I'm rethinking the whys, I got to rethink the what I don't wanna. What do I own?
Speaker 1:Indeed, you do. Yeah, one of the things that I've seen in people is people want the cake and they want to eat it too, and they don't want any risk. And so sometimes what I encounter or have encountered has been people that want an all stock portfolio return, without the all stock portfolio volatility, and oftentimes, when you are able to go, I know what I own and I understand why I own it, and they validate each other, they confirm that they're working in concert so I can go on to the next step, so to speak. Within the social media area, right, there's all sorts of quote unquote experts espousing different returns and if you just do this, you can be a millionaire too at this age, and so forth and so on, but none of that is know why you own it. None of that has anything to do with know your why. It's simply saying 12%, this is how much you need to save. You'll be a millionaire. That's how simple they put these things.
Speaker 1:How does a person avoid decision regret In our world? We look at it and say there's a Fab Five. What do we own? Why do we own it? How's it doing compared to what the total expense is? So then, when we're talking about. Why do you own it. What's a good answer? Look like All right.
Speaker 2:So let's set a context for the why. The context should include your time horizon, your investment objective and then, within the investment objective, typically it includes an acknowledgement of the amount of risk and I call it volatility, not risk the volatility that you are willing to accept in the portfolio to either avoid or to bring it on. So in the investment objective that's intellectual we're talking about well, I want a long-term growth, or I want moderate growth. Well, that all sounds very benign until the markets don't make it look anything like that as to what you have experienced. So we need to often consider the amount of volatility that you're willing to take on. And that's more visceral. And, kelly, that's why volatility and visceral both start with Vs.
Speaker 1:So let's back up for a second. We talk risk, we talk volatility. When the investment world talks about risk to the consumer, they're really talking about volatility, right? The difference between the highs, the lows, the changing variation of the value of investments that you own. Is that correct, correct, okay, and so when we're thinking about you, you said time horizon. Give me some examples of time horizon, because to us it's important, but to Mr and Mrs Consumer out there, I don't know.
Speaker 2:Good question. Usually time horizon and this is general and give me some slack on the number of years but short term is usually one to three years. Ultra short could be just within a 12 month period. You have intermediate term that might be from five to 10 years and then we have longer term, which is typically 10 years and longer.
Speaker 2:Now what's interesting is the behavior of markets. Different types of markets or investment asset classes for example, cash, bonds and stocks have a level of predictability within particular time horizons. Very difficult to predict what individual stocks or an index is going to be doing over a 12-month period. What's the return going to be? I think it's measured on two hands the time over the last 100 years where stocks actually returned their average rate of return, yeah, it's like a 4%. So for predictability we need to know the time horizon so we can more adequately match up a mix of asset classes that might perform close to what our expectations were, also based on your objective within that time horizon. So time horizon is very important. Investment objective often there's no set definition of long-term growth for an investment objective. There's no set definition for moderate growth and income. It's really set by the investment house.
Speaker 1:What the?
Speaker 2:hell.
Speaker 1:Merrill Lynch has theirs, wells Fargo has theirs In terms of what they title, each type of account Of what they title those are and what it means.
Speaker 2:Yeah, so as part of this, when we talk about your investment objective, when you are filling out your new account form, to determine what is suitable or appropriate for you, you've got to read what the investment objective is and then repeat back to the advisor. Does this mean this, or frame it in your own words so that you're really matched up with what that investment objective is trying to convey? Your investing in or your objective is?
Speaker 1:I think that for people out there that are not professionals in financial services, I think it's very hard to understand that stuff. I think, ultimately, when it comes to a short-term objective let's say one to three years from an investment implementation standpoint, professionals out there are trained to reduce volatility in that goal, because you can't afford to wake up in two years and have your $100,000 worth $80,000 because the market corrected. So what you'll find is the professionals will recommend things like certificates of deposit, short-term bonds, things that have very little reaction to market environment.
Speaker 2:You mean short-term?
Speaker 1:individual bonds.
Speaker 1:Short-term individual bonds, absolutely yeah, they could be in a fixed annuity if they're working with an insurance agent, because that's an insurance company's form of a certificate of deposit, for instance a certificate of deposit, for instance.
Speaker 1:So the point is is that your short-term goal will normally draft a strong-handed advisor to recommend a very risk-averse investment plan for that money, because the biggest issue for a short-term goal is to lose the money that you set aside to take care of that goal. Conversely, when we have a long-term time horizon, you'll typically find people have more stocks involved in that plan. It might be a lot more depending on the time horizon we're talking about. But as an investor, why does Susan advise or recommend just putting money into some CDs for goal one, which is two years away, and then, on the flip side, susan's recommending that I put 80% of my money into stocks in my retirement account because I don't plan to retire for another 40 years? As an example, it really drives it and if you're in a medium term, don't be surprised if the advisor comes back and recommends something that's somewhat balanced, maybe roughly about 50% stocks and 50% bonds. As an example, you get some of the oomph, but not all the downside of 80, 90% stock portfolios when market's correct.
Speaker 2:Does that make sense? You bet it doesn't. That's what pension funds do, is they have what are called dedicated portfolios. They know what their liabilities are over the next year or two years and they allocate accordingly, and that is in short, instruments that come due at or before. They need that money For the long-term liabilities. It's pretty much in equities, and the reason is do you want the best performing asset class when measured over 20 and 30-year periods, or the second or third best?
Speaker 1:That's right, that's exactly it, and so time horizon is a critical component to how we develop the recipe, which is your investment plan right, correct With know what you own and why you own it. Here you were talking about how, let's say, your investment objective is growth. You're 20, 30 year old, you're just starting out, you're putting money into your 401k and you really want to grow that money. What would be an example of maybe a likely recommendation from an advisor, or even a 401k platform once you go through your questionnaire and you arrive at growth, is my. What would that look like for that person?
Speaker 2:Depending on certain preferences or idiosyncrasies that they have. It would be primarily a stock portfolio and that could be mixes of domestic or US large cap. It could be mid cap, depending on how complicated you want to make this or how specific you want to get. It could have small cap stocks in that with index funds and some mix therein. It could have small cap stocks in that with index funds and some mix therein. It could be international stocks, large cap, foreign emerging markets.
Speaker 2:This is where you can, as an artist kind of form the matter of your portfolio to your certain preferences or just what you think is kind of cool and you want in your portfolio. And that is helpful because the why you can say I kind of helped with this. So it's an expression of my view of the investment world over the short term or the long term, or a combination, and I can keep that very narrow or very broad. If I have a long-term investment objective and I'm still very conservative, though, I've got some thinking to do. What do I want to be afraid of? What are you talking about? What do I want to be afraid of? Interim volatility over the next 20 years or having insufficient funds to retire on? I got to choose one. I can't have them both.
Speaker 1:You do ultimately have to make choices right when you're planning on your investment objectives, and you used to have a discussion with folks around risk and how risk is defined by the individual, their needs, their goals, their ability to save.
Speaker 1:All these things come into the picture and I think, if I recall right, most of the investment world focuses people on volatility as risk how much it's up or down, how much you could lose in a bear market, those kinds of measurements. That's how they're taught to view things. But you make a great argument around risk. If you're averse to risk, you don't like risk, and you have 40 years to grow your money and you put your money in the savings account in your bank paying you 0.05% a year, what risk does that investor have when it comes to their 40-year goal of retiring someday with X dollars or whatever? Can you comment on the differences where the market always looks at risk from volatility, tipping the ups and downs, the roller coaster, whereas depends on, as you were talking about earlier, what is your unique circumstance? And in the example earlier, if you're conservative, trying to circumvent interim volatility and play it really safe, what kind of risk is that person facing?
Speaker 2:Let's put risk into context. Let's put it into interest rate risk. What's more risky from interest rate risk? A Walmart bond 5% coupon that matures in 18 months, or a US Treasury 30-year bond at a 4% coupon that matures in 30 years? From an interest rate risk, which one's more risky? A long-term bond, the US Treasury? Yeah, Not the Walmart A-rated, but the US Treasury is more risky. Tied to what? To the term right?
Speaker 1:Yes, that long term, because the longer a bond is, the more violent it reacts to changes in the interest rate.
Speaker 2:Sure. So the propaganda is that the US Treasury is the more secure investment over Walmart. That's what we're told. But in an interest rate environment and long term, which one has more risk from an inflation? It's the US Treasury, yes. So the other thing is with inflation, also in time horizon, what's more risky being in money markets and CDs If what you're trying to do is accumulate sufficient assets over a multiple year period to retire? What's more risky? A US Treasury, bond or the stock market? Yeah?
Speaker 1:What are treasury bonds? So I used to work with an organization and they started to focus on speaking to consumers the way consumers think about investing, not the way the financial service industry likes to talk, which is with their jargon and their definitions and so forth. So the organization identified three true risks to investing. It really is simple. The first risk is you don't accumulate enough or the amount you need for the future use.
Speaker 2:So there's a shortfall.
Speaker 1:There's a shortfall in the accumulated amount of monies that you were able to accumulate in your investment account. Retirement's a great example. Maybe funding college is another example of that. The next risk was not achieving a required return, and a required return is simply this Mathematically, we can figure out if you're going to save so much money and you have so much time horizon and you have a goal of, let's say, accumulating a million dollars in a retirement account. Based on how much you can save and how much time you have, we can figure out. Here's the required return you need to achieve in order to have a high probability of attaining that value of a million dollars or to meet liabilities.
Speaker 1:Yes. And then the last one is simply not having access to your money.
Speaker 2:Give it back.
Speaker 1:Liquidity. As an example, a number of things come to mind Limited partnerships, hedge funds, private equity funds, but also annuities, really, that have typically surrender penalties If you want to take your money out of the annuity before five years or seven years or nine years, and some have 15 years of surrender penalties.
Speaker 2:Oh my God.
Speaker 1:Meaning you can only take a little bit out before you start getting penalized. So these are things that are a natural part of investing, and I think that for people out there how do you come at know what you own, but why you own it? Part of that's going to be well, how much do you need? What rate of return do we have to get in order to achieve this? Putting a couple things together. If you're a person that naturally is risk averse, like my sister she doesn't trust the stock market, but she needs that's not what she said.
Speaker 2:She said she doesn't trust you with her money in the stock market. That was it.
Speaker 1:That's what it was. See, I need that insight. So in her case, she wants to accumulate so much money, but her money is in cash. It's earning less than 2% a year. She needs a 7% return. I can tell her, without being mean, you're not going to reach your goal, just not going to happen in your time horizon, based on 2%, when you really need a 7%. So for you to apply this in your own world, knowing why you own it is going to be, how much do you need? Is liquidity of issue and do you know your required rate of return which, by the way, your 401k platforms? All you have to do is enter a little bit of information and the calculator will tell you.
Speaker 2:It's pretty simple when we talk about risk and your sister again on getting 1% and 2%. You just like talking about her because she doesn't like me.
Speaker 1:Let me just say we have some things in common.
Speaker 2:Kelly. So she's willing to get one and two percent, knowing that really she needs six or seven percent. But you know what that's mindset? It's a mindset, a view of the world, almost a metaphysics. And I remember a counselor who was formerly a priest who said many of us, most of us, navigate with practice sails the shallow waters of our lives, never striking out for deep blue. And so we can leave so much on the table and experience and all of the opportunity therein by maybe moving out of that 1% and 2% rate of return so that life can open up for us and we may have a more spacious, more quality experience in our lives. You're not going to talk them out of it.
Speaker 1:People come to the table when it comes to saving money. First of all, you have to choose not to spend it. That's a tough decision, especially in today's economies that we've been living in, with inflation and so forth. There's two rules to being a great investor. First rule is save money. Second rule is invest and keep it invested. Pretty simple, well, that's easy.
Speaker 2:Yeah, it is, that's real easy. Problem is nobody does that. That's right and one of the hardest things, because the brain is not wired for long-term commitment and consistency in a thought and the application of that. It just isn't. So when we say we can get 10, 11, 12% in the stock market and you have to take the volatility that goes with it Roger got it. Okay, yeah, until the market goes down, that's right. And then you sell.
Speaker 1:Yeah, we've had conversations where, just as a practical matter and this is a little bit far field for a second, but one of the best things going out there is all the coupons that come to house right, and one of the biggest coupons outsized because it sticks out is always Kohl's. Kohl's always has a 20% gift card for someone, and so people count and look forward to their Kohl bucks, their Kohl coupons and all of the rewards so that they can go out and spend money. Why do people rush to Kohl's? Because they're going to get a 20% savings on today's purchase. Well, what's a bear market? It's defined as arbitrarily, as more than a 20% decline in the general price of the overall stock market or bond market, whatever market we're talking about. So if you're 20, if you're 30, if you're 40, if you're 50, and the stock market experiences a bear, that's Kohl's coupon Stocks are on sale.
Speaker 1:This year they're on sale for 30% off. In 20 years. Will the stock market be higher or lower? Well, historically, the answer is it'll be higher. I don't know by how much, but if you view it as everything's on sale, then you start institutionalizing in your brain. View it as everything's on sale, then you start institutionalizing in your brain. If the bear market's happening now and I'm 38 years old, I should be buying more of the market just systematically as a part of my contribution to my 401k or my savings account.
Speaker 2:So a bear market is a decline in the stock market. And what is the stock market composed of? Stocks from corporations, publicly traded corporations, so the very ones that you'll run out and buy when they go on sale. Yes, true, you're buying those very corporations and their products, but suddenly you're scared because those stocks of those corporations are down. That's right.
Speaker 1:So if you view it as the stock market's on sale, if the news media actually reported great news stock market's on sale. Today it's down 10% you know how many wives would be out there buying the stock market Because of sale. I don't know how many times I was told how much money I saved today with four bags of shopping goods in hand. But if media started reporting it's not a bear market, market's on sale, market's discounted this month all the way to 30%. If you're looking to build your portfolio, this is a great time to buy those stocks, yeah, but you know that's that doesn't sell.
Speaker 1:Screaming hysteria and fears. You got it right there. Yeah, that's what sells and that's part of the problem. But if you're listening to this and if you're willing to do anything and you're willing to say, hey, the bear market's happening like in 08, nobody in their right mind was putting money to work, the people with the right minds, like Warren Buffett. He waited 25 years to buy, strike the deal with Goldman Sachs, to get preferred stocks in Goldman Sachs, and he put, I think, $10 billion into that company, but he waited 25 years to do it. So there are great investors out there that think just like we're talking about Market's on sale time to buy.
Speaker 2:The problem is most investors. The problem is not in the market. It's in ourselves and our perceptions and reactions to the market. And that's always the bugger. We as humans, we're confounding messy little things. What's the deepest part?
Speaker 1:of our brain right, the amygdala right is the one that really triggers fight or flight and that's the base stem of our brain, and so it's really challenging to fight that emotional factory Cortisol flowing and my 401k is a 301k. Oh my God, what should I be doing? Are you 38? The answer is go to your HR and say, hey, I want to increase my contribution Because, if nothing else, you know, things are on sale for 20, 30, 40. Well geez, at the trough of 08, I think, the S&P was down 54% at its worst point, Finished the year down 30 something. But the point is, if you had contributed more to your 401k when the S&P was down 30%, 40%, 50%, you're contributing $500 a month. Maybe this year you should contribute $700 a month because it's getting decimated, which means you're buying a lot more for less. If you're 65 and you're going to retire in a year, still something to think about, frankly, because retirement's going to be 20, 30, maybe 40 years for you, that's a long-term time horizon.
Speaker 2:Which is one of the values of a mutual fund and periodic investing.
Speaker 1:Yeah, it is. It's a great value. You know what? Before we wrap this up, let's talk about what do you own and why you own it. There's seminal work out there around. What are the?
Speaker 2:contributors, I'm so glad we're finally going to get around to what do you own and why you own it. That's right, we haven't been talking about that. No, we haven't.
Speaker 1:But there's contributors to. How do you arrive at what percentage you put in stocks, bonds and cash? And we've talked about it the Singer Bebauer Brinson study back in the late 80s I think it was mid-80s and there's been studies since then. But in that study what was found is look like 88% of your long-term returns and risk are attributable to what percentage you have in stocks versus bonds. Is that?
Speaker 2:fair to say. And why is that?
Speaker 1:Because when you look at the market, it's not security selection, it's not. Everybody always focuses on investments and they think, well, I think I'm going to buy Apple, or I'm going to sell Apple, or I'm going to put a short on Apple, or what. That's trading, that's speculating. Investing is very different. It's like sailing a boat, right? So I think when you, when you're looking at this and you're saying, okay, as a non-professional person, and I need to accumulate money for retirement, let's make that as an example here.
Speaker 1:So you're going to put money away, that's first. Remember to be a good investor. You got to save money. The second thing is you got to invest and stay invested. So if you save the money, you don't have to worry whether you should buy Home Depot or Lowe's. You don't have to worry if you're going to buy Ford or Chrysler. All you got to worry about is what percentage do you want in stocks? And then make a choice as to what fund provides you that stock exposure. It's about the allocation between stocks, bonds, cash and alternatives, which is the 800-pound gorilla when it comes to how did you do as an investor?
Speaker 2:So it explains most of your return comes down to your allocation between cash, bonds and stocks. Why? Because bonds typically return over multiple year periods higher than cash and stocks over multiple year periods return higher than bonds. It's that simple. And then the security selection within there is where our industry likes to focus, and then the security selection within there is where our industry likes to focus and that attributes for what.
Speaker 1:Kelly.
Speaker 2:It's like 6%, 6% or 7% of that.
Speaker 1:4% to 6%, yeah, somewhere in there, I think security selection is actually subordinated in percentage weight to the manager themselves. I think the manager is around 6% and I think security is around 4%.
Speaker 2:So if how you want to express yourself is in security selection, please understand that most of it is at the asset allocation level.
Speaker 1:Yes, I mean let's ask this question Is there any difference between Fidelity Investments 500 versus Vanguard 500 index mutual funds?
Speaker 2:If there is Kelly, it is measured in expense ratios or in hundredths of a percentage of return.
Speaker 1:Effectively no difference, so that if the index has 4.3% weight to Apple, then the index funds of Vanguard Fidelity enter any other investment manufacturer name Invesco, t Rowe, price all of those funds are going to have 4.3% in Apple, plus or minus a thousandth of a percentage, right, so it makes it a little bit easier. You don't have to get wrapped around the axle that well. We have Fidelity funds in my 401k. I don't have the Vanguard 500. Peace, take the Spartan 500. Same thing, no difference. It doesn't matter who the coach is in Fidelity or Vanguard. What part of the market do you have exposure to? Roughly the same expenses, similar names, in fact, exact, similar.
Speaker 2:It's not a big deal. Let's go from why you own it all the way down to know what you own. So presumably you should be making decisions at the asset allocation level based on time horizon, investment objective and, at an emotional or visceral level, how much volatility you're willing to experience.
Speaker 1:Yes, so time horizon right Short-term, medium-term, long-term. Then it was investment objective, the investment objective being defensive, conservative, moderate growth, using words like growth and income and moderate or it could be income income and growth, growth and income growth and aggressive growth. It just depends on what houses you're working with. And then the last one was oh, that's right.
Speaker 2:A gut check more of the your tolerance, yeah, your tolerance. Your volatility and tolerance, yeah, yeah, yeah.
Speaker 1:So that brings up a great point on saving and how these all kind of intersect. If your risk tolerance is lower, then obviously the recommendation or the portfolio you choose will probably be a little bit lower on the volatility scale.
Speaker 2:Okay, but we do know if we're going to use risk as realized loss, which is the only way I know it or materially not hitting a marker, that's risk for me.
Speaker 1:Yeah, the point that I was going to make is this If you're risk averse, you need to grow your money, but you're in the step below a balanced strategy. Rather than 70, 80% stock, you're in 50-60% stock, just as an example. The way to compensate for that is simply, if you can, to increase the amount you save. So the amount you save is inversely related to the required return you get. If you're able to save a lot of money, your required return is going to be smaller than if you're a person that is scraping the barrel to save a few shekels a month. If you're a person that is scraping the barrel to save a few shekels a month and you have a goal of having a substantial accumulated wealth, you are going to be forced to take on greater risk because you need a higher return, everything else being equal. Well, that's no surprise at all. So that's what I was trying to make a point of.
Speaker 2:Let me rephrase that so if you have a lower risk tolerance yet based on your age and what you've been contributing to your 401k, let's say you're not comfortable with that terminal value, well, you can make up for that. Stay a little bit more moderate instead of aggressive by saving more Correct. Conversely, if you're a late saver and you're into your 40s and 50s and you got a hubba hubba here to get to some terminal value you're comfortable with, you need to take on more risk.
Speaker 1:Yes, the other thing I'll say is this our industry has gotten people to focus on the point and the age of retirement, forgetting about in retirement. In today's world, you're looking at 20, 30 years of doing nothing but taking money out of accounts, essentially investing it, growing it, taking money out of it. So, as a result, rather than getting so focused on, I want to retire at 67. And at that point, all my money should be in cash or I should be very defensive. Don't forget you've got another 20 or 30 years of investing in growth you need in order to withdraw the amount you need to live on every year so that you don't outlive your invested asset.
Speaker 1:One of the things that the insurance industry focuses on is the term guarantee. Why? Because they can use the term guarantee and investment professionals typically can't use the term guaranteed unless they're in guaranteed products like a US Treasury or a certificate of deposit, but there are no guarantees on stocks or other bonds. So the point is, if you're focused on not outliving your money, you may find that there's lots and lots of advisors out there all too willing to sell you an annuity because it guarantees that you won't outlive your money. The problem is almost all those guarantees associated with no cost of living adjustments on the money that you're getting sent by the annuity company. So it sounds good. I'm guaranteed not to run out of my money. And yet, at a 3% inflation rate over the next 30 years, I guarantee you your money will buy 10% of what it did originally, because inflation has robbed those dollars of its buying power. Does that make sense?
Speaker 2:Yeah, that makes perfect sense, and that falls into also know what you own, why you own it, how you're doing.
Speaker 1:You can figure out real quick whether that's working out for you, because you're falling behind inflation, that's right, that's right and that's going to be our next piece that we'll be talking about is how are you doing which is just such a critical thing for you to keep tabs on yourself.
Speaker 2:Okay, so, to wrap up where we are on, know what you own, why you own it. We're making decisions on time horizon investment objective whether it's moderate or aggressive or conservative, or growth or income. We're making decisions based on how much volatility and the scariness of the markets and our perception of these markets. That's an overlay to it and then from that it validates what our holdings are. Holdings are an expression of just what we talked about your time horizon, your investment objective and the amount of volatility that your gut can handle.
Speaker 1:No, that's exactly it, a hundred percent. I think we're good. Did we kill it? That was the best podcast we've ever done.
Speaker 2:Well, except when we were talking about. Oh, I think I interrupted you. Yeah, remember I interrupted you because I was talking about how we were defining risk Was that when I whipped my pen across the room. Yeah, that wasn't good either. That wasn't either.
Speaker 1:Yeah, you know what, kelly, you know what that actually wasn't that good of a podcast.
Speaker 2:This podcast kind of sucks. You're starting to convince me. All right, this is, we'll make it work. Let trash.