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magical yes

1:05

the hike advocates because you dreams again

1:07

requests the as she got me into reading

1:10

saturn you say you're tuned in

1:12

to the investing for beginners on

1:14

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1:17

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1:18

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1:20

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1:23

financial freedom

1:36

hurry box welcome to investing

1:38

for beginners podcast today

1:40

we have a special guess we welcome david stein

1:43

he's the host of the terrific typecast money

1:45

for the rest of us an author

1:47

of the book of the same name he's here to educate

1:50

us more about money how it works and

1:52

how to invest and how to live without worrying

1:54

about money which is a great

1:56

topic to to our to know about

1:58

so i david there to talk to us

2:00

about cause then funds

2:03

as well as other fun stuff about the

2:05

investing in stock market so

2:07

david thank you very much for joining us today we

2:09

really appreciate you taking the time i do your

2:11

data come talk to us and we're

2:13

very excited to learn more about you and

2:16

all the great stuff you can share with us it's

2:18

great to be her thanks for having you're

2:22

welcome so i guess oh as

2:24

i mentioned it in all intro there was talk

2:26

about cause and fun say guess for those investors

2:29

out there that are not familiar with that term you

2:31

cannot help educate us educate little bit about what those

2:33

are sure are sure are a

2:35

close since i'm was the original mutual

2:37

fund so it it's a commingled

2:40

investment vehicle where you

2:42

have shareholders you have a professional

2:44

money , team that is

2:47

selecting the underlying

2:49

starts can be bonds to be equity

2:51

reads that what's unique about

2:53

closed and signs that differs

2:56

from an open and me to sign

2:58

or need to ask is an

3:00

open and be different for example is what where mr

3:02

my within a four one k plan the

3:04

trade at the end of the day sir the

3:06

the friend sponsor figure out who wants to

3:09

buy shares his who wants to sell shares

3:11

they netted out to figure out the price

3:13

of all the underlying assets and

3:15

then you exit or enter that signed

3:18

the market price equals the net asset

3:20

value which is the total assets

3:23

divided by the share prices christian

3:25

friends work differently they trade on an

3:27

exchange this like any tf

3:29

does there isn't a

3:31

mechanism to make sure that

3:34

the value of the assets the net

3:36

asset vapor share he calls the

3:39

the market price and so

3:41

do some advantages to that because then and

3:43

are different sponsor has to set

3:45

pool of capital they can invest since maybe

3:48

some more illiquid securities it

3:50

can use leverage that

3:52

that the challenger or the opportunity

3:54

for us as individuals masters is

3:57

that we can buy these

3:59

fines discounts

4:01

to their net asset value there

4:03

you could buy a bonsai and

4:06

that selling outta as fifteen percent

4:08

discount to net acevedo and

4:11

coast offense there are a you're

4:13

a smaller market so what i

4:15

like about them is they're

4:18

not a market that hedge funds can play and you

4:20

don't see a bunch of it's tissue investors buying

4:22

them because they just can't get the liquidity

4:25

so most the owners

4:29

find your individual investors which

4:31

means and in one of the things that i'm always

4:33

asking about and in my book i i

4:35

talk about this has to ask who's on the other

4:37

side of the train because

4:39

investing is it it's it's

4:41

a competitive game and we want

4:43

to know who's selling as

4:45

a particular investments just like only

4:47

buy a house who's selling us a house or who's

4:49

selling as a car what did they know

4:52

that we don't an with

4:54

most investments typically

4:57

if hedge funds are are bots

4:59

are institutions are involved dame wouldn't they know

5:01

more than us as individuals esters with

5:04

closed and fines it's other individual

5:06

festers and they they tend to panic

5:09

in a market environment like today and so

5:11

they they sell these fines and not

5:13

sure necessarily what their

5:15

owning and so then you see these discounts widen

5:19

and , it becomes more of an opportunity

5:21

for us that's ,

5:23

cool so i guess in

5:26

our mutual funds space a t

5:28

f space i think of like

5:31

the big names like peter lance and

5:33

his meat or fun from the nineties that

5:36

had crazy returns they

5:39

had like half the word and the arc

5:41

find are those clothes on sons

5:43

are those opened and funds whether the difference

5:46

are similarities between those

5:48

more popular funds on the ones you're talking about

5:52

the to the peter let's find that fidelity

5:54

those are open and me to fines park

5:57

is an exchange traded fine and

5:59

fine am i to we extend

6:01

my analogy to exchange try to find sedates

6:03

exchange or defines our like closed

6:06

and sciences in that they trade on an

6:08

exchange and you can

6:10

see the price disconnect

6:12

from the underlying net acevedo

6:15

but with closed and sign super and say

6:17

with each yes you have what are known as authorized

6:20

participants basically

6:22

institutional investors that are always

6:24

looking at the price the

6:26

each yeah imperative in acevedo

6:29

which gets published every fifteen minutes when the

6:31

markets open and then they can buy

6:33

and sell the underlying securities

6:35

er what's known as a reference basket well

6:38

as the underlying shares that can sort them

6:40

and so all that arbitrage

6:42

allows each yes basically

6:45

to stay in line the price

6:47

to stay in line with the net acevedo and

6:49

so cathy words arc

6:52

innovation it yes a adding

6:54

is a r k case that's and

6:56

a t s now it's it's distinct

6:58

because it's an actively managed a t

7:00

s whereas most a t s r r passively

7:03

manage are seeking to track a

7:05

specific benchmark but arc

7:07

is is heavily active very

7:09

technology focus certainly

7:11

down sixty percent year to date

7:14

by it price

7:16

will stay close to his net acevedo

7:18

with were with a closed and fun won't

7:21

and and i'm in the some of the big sponsors are closed in fines

7:23

are are black rock nuveen

7:25

i mean there are number the

7:28

a big time sponsors and one of the other

7:31

differentiator with a closed and fines as they

7:33

tend to be leveraged so they're borrowing money

7:35

to leverage up the

7:38

underlying assets to magnify the return

7:40

so they tend to often be more in some

7:42

oriented so you'll see distribution

7:44

yields is six seven eight

7:47

percent and that's where they can be attractive

7:49

as we can pick up a year that six percent

7:51

seven percent in

7:53

an asset class that you know it's selling

7:55

at at a discount to it's underlying

7:58

value of a fifteen percent

8:01

the as simple as

8:03

finding those clothes and fines

8:05

other trading other discounts and

8:07

buying them and selling them when

8:10

they are fully valued what kind of

8:12

i'm a strategy have you found

8:15

tends to work well when talking about

8:17

these kinds of investment

8:21

well we typically what

8:23

worked for trying to find is

8:25

a close to find his discount is greater

8:27

than average and thirty gorilla

8:30

a website like see as connect

8:32

you can screens for you can screen

8:35

based on the biggest discounts

8:38

they calculate what's known as a z

8:40

score and it's basically a statistical

8:42

measure and morningstar reporter

8:44

same thing if it is how big

8:47

is a discount relative to it's average and

8:49

so when i'm investing enclosed in science and

8:51

typically looking for a

8:54

z score as negative three last

8:57

you know another retorts negative for or

8:59

negative while , play don't get more

9:01

the negative for of a generally at

9:04

, more negative the negative three

9:06

and as typically shows that the discount

9:08

is greater than average so that's

9:10

an opportunity and any other thing to consider

9:13

is this is recognized his

9:15

his or dividends sustainable so after

9:17

we have a six or seven eight percent healed

9:20

that give it in has to be funded somewhere

9:22

either out of the income at

9:24

air as gains and services now

9:27

it just like if you're going to analyze a

9:29

start a company to lessen a stock

9:31

is there is some due diligence required

9:34

on on closed and sciences to understand

9:37

whether whether that income

9:40

the sustainable or that given a sustainable

9:44

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the kind of to help educate

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people and i give myself to that with

10:42

cause and funds and funds have the

10:44

same kinds of choices as of of

10:46

baskets that you could choose from or

10:49

is it is it a smaller asset

10:51

class and there's west choices

10:53

then you would have with with it yeah so

10:55

if you're looking to invest to

10:57

a artists technology versus commodities

11:00

vs maybe real estate's do you

11:02

have different closed and funds the focus

11:04

on those kinds of areas are

11:06

they bore are broad range of

11:09

like our distant the nasdaq

11:11

in the snp and the dow can of

11:13

idea no they they

11:15

they're all different types of asset classes

11:17

day sixty percent

11:20

or more sixteen com because

11:22

, the just because they're they're focused

11:24

on the distribution yeah but there's

11:27

there's equity i mean there's there's value

11:29

there's grocers technology there

11:31

are no debt finds there's

11:33

there's even one of the holding said i

11:35

own is the bearings

11:38

corporate investors find the tickers m c i

11:41

they basically basically do breath private

11:43

market lending so there there it's lenders

11:46

to private companies and

11:48

you know that's that's an

11:50

example of find that available within

11:53

close friends in that ned

11:55

this this debt and so it's not necessary

11:57

valued every day it's not

12:00

is now a liquid by this is a way

12:02

that individuals as we can get access

12:04

to a private investment and

12:07

that isn't necessarily available but the

12:09

within a public market categories when we don't want

12:11

it anymore then we can sell it so it's sort of

12:14

access to illit illiquid investments illiquid

12:16

investments and more liquid way

12:18

kind of along those lines as venture

12:21

to their venture capital and private equity

12:23

as well

12:27

i'm sure there are they they're say ten

12:29

the ones that are in sort of private

12:32

equity type companies because they do exist they tend

12:34

to have much wider

12:37

discounts because it's so difficult

12:40

to value those companies with

12:42

something like private def

12:44

make em this this particular prison

12:47

for the bearings court investors find

12:49

that day strike their net as of a

12:51

quarterly says are able to lose

12:53

value the debt quarterly were in

12:55

i feel a thing with ease these clothes

12:58

and find if they're holding private assets

13:00

he wanted began to the financial or that the

13:03

ten k or the just or that

13:06

not the tank habitat annual report the

13:08

semi and report to prospectus just

13:10

understand what understand what their valuation

13:12

policy like how are they valuing the

13:15

assets in order to come up with the net pacify

13:19

what is the best way to get started in

13:21

the market download andrews the

13:24

for free at the stock market

13:26

tds

13:26

okay

13:30

the i could see how that can be really helpful

13:33

so like as if i'm i was telling

13:35

somebody to go research on the t f

13:37

i know there's websites like he tf dot com

13:40

where people can go and there's almost like a

13:42

database of i

13:44

dunno know if it's ever but a seems like any

13:47

of the etfs that you would think seem to be

13:49

on that website? is there anything? i

13:51

know you mentioned the website earlier, but as there anything like

13:53

that for closed-end funds? is

13:56

it just matter of i'm going to

13:58

google this fine and kind of the do my

14:00

own independent research based

14:02

on what their disclosing like what's the research

14:04

process by not

14:07

so that the c e s connect dot

14:09

com is is the

14:12

the main one that i use that provide

14:14

some profile allows you to screen

14:17

morningstar covers close to and fun so

14:19

you i mean they you can get the returns and

14:21

some basic information know

14:23

, after if i look at morningstar

14:25

see a connect and and

14:27

i'll go to the the sponsors website

14:29

and get the faq sheet i look at the underlying documents

14:33

and and that sort of the process

14:35

there we do have on our website of free investment

14:37

guide on how to research close

14:40

to and funds research explain more about them than that

14:42

could potentially helpful resource to

14:44

listen to the cool what's the website as

14:48

well as money for the rest of us dot com the

14:51

last closed and fun so

14:54

close ties and and hype and funds

14:56

and i'll send you the link you can put it in the summers

15:00

the that that that's kind of a guide

15:02

we wrote a couple years ago that it's helpful so

15:07

i question that kind of springs to mind is

15:10

what kind of investment vehicle would

15:12

be best to invest

15:14

with these funds like okay versus the

15:17

a traditional eros or a brokerage

15:19

account where i where would

15:21

be the best place to put those or does it matter

15:27

well it is because they have higher

15:29

distributions you know sometimes

15:32

and in a tax deferred vehicle

15:34

and and iran iraq are a can

15:36

be helpful by the reality

15:39

is as as one's wealth grow this

15:41

the can't put also their assets in in

15:43

our tax deferred vehicle so vehicle have exposure

15:46

to close in fines that's my tax

15:48

four counts as well as my tax deferred accounts

15:51

yeah i think that's how for the kind of thing cause

15:53

it's like if there's

15:55

a focus on distributions kind of treated

15:58

like you were

15:59

the investment that generates

16:02

fire and com

16:05

that

16:07

definitely a fascinating option and

16:09

something i know doesn't get a lot of press

16:11

and the of us the world and so we appreciate

16:13

you breaking down that

16:17

kind of an investment options for people

16:20

the i know you had

16:22

the scanner like completely shift

16:24

gears hereby know you had a

16:27

interesting and podcast episode talking

16:29

about commodities

16:31

and how

16:33

the

16:34

forgive a like a little bit of background commodities

16:37

as you think of oil the

16:40

whole gold any

16:43

any of the basic building blocks of

16:45

the economy really the price

16:47

of us have been doing

16:50

very poorly in the last couple

16:52

decades and so i know there's been

16:54

a lot of hawk out

16:56

there about how maybe you know

16:58

the economy as move past commodities

17:01

and and you know it's all

17:03

it's all type company economy

17:05

now what are your thoughts

17:07

on commodities and our have you seen

17:11

bacchus give us like a breakdown of of

17:13

what you covered in that episode than and

17:15

kind of what what you've been observing in the world

17:17

lately around commodities

17:20

sure so we have been

17:23

in a commodities bear

17:25

market spam relief

17:27

from twenty eleven so coming out

17:30

ah the great recession we

17:32

had the he

17:34

can two thousand and eight and then commodity sawed

17:36

off and then he really piqued again and twenty

17:38

lamb and and then really from to eleventh

17:41

through hannah twenty

17:44

twenty that may twenty twenty

17:46

would really i think it caught the bottom cause if

17:48

you recall in may twenty twenty the price

17:51

of oil went negative there was a lot of press

17:54

regarding that

17:55

fan

17:56

you wouldn't forward south who was all shooters and will get to

17:58

that because it's and the recognize

18:00

that as investors we cannot go by it

18:03

bearable and so we

18:06

as individuals and even institutions you're

18:09

buying a sip of oil you're

18:12

investing a commodity futures which is

18:14

very different than investing directly

18:17

investing a commodity if you go out and buy gold you can buy

18:19

gold coins it promotes commodities

18:21

we can't access that so

18:25

when we think about commodities we had

18:27

a boom in commodities over

18:30

the past several years than

18:33

much of that is certainly the

18:36

russian russia invasion

18:38

of ukraine there has

18:41

that part of our because a big part

18:43

of the supply now has sanctions and

18:45

that's cause some issues but

18:47

another issue within commodities

18:50

the is when we when is is bear market

18:53

the oil companies this

18:56

didn't invest as much their

18:58

their shareholders demanded that

19:00

they they pay higher dividends and that's day

19:03

be more disciplined in

19:05

, investing in oil

19:07

and as a result we had really some

19:09

under investing and oil for about six

19:11

or seven year period as an

19:14

as we came out of the pandemic and

19:16

as era supply constraints and we

19:18

had to sender investing in a lot

19:21

of different commodities that shot the

19:23

price of commodities

19:25

up and and so then the big question is are we in

19:27

a new bull market for commodities

19:30

for this is just a temporary thing

19:33

then it it's incredibly difficult

19:36

question to answer because

19:38

the like

19:41

twenty years ago when you can look at is

19:43

very long cycles we now have this energy

19:45

transition going on the electrification

19:49

of autos and so at some

19:51

point you'll get more and more he

19:53

these online at obviously don't

19:55

use oil don't use other

19:58

ways to generate electricity

19:59

so

20:01

you know in a nap so we can always back and forth

20:03

and looked at both sides is there are new commodities

20:06

the

20:07

because of the under investment or is this

20:09

a temporary thing and because the energy transition

20:12

you'll see and because china's

20:14

economy is slowing and they were

20:16

a big consumer

20:19

of commodities in the prior bull market

20:22

and they're gonna miss transitioning sorry

20:24

of all these pieces going on

20:27

at the same time the hardest thing about commodities

20:30

when you think about commodity futures when

20:33

you buy any t assets is that deutsche

20:35

bank commodity tracking he to ask for some

20:38

other commodity each yes let's say you

20:40

are so descent oil they're

20:42

buying the commodity

20:44

futures commodity futures

20:46

a promise to take delivery of a specific

20:48

commodity in the future

20:51

the does prices of those suitors

20:53

are based on the consensus why

20:56

investors believe the price of that commodity

20:58

will be thirty days from now sixty

21:01

days from now so with a commodity

21:03

futures the only way to make money if

21:06

you're investing in each yes that's investing in commodity

21:08

futures are you doing it directly is

21:10

a commodity price has to do better than what

21:12

everybody out expect it has

21:14

to beat the consensus priced into those

21:16

contracts and that's why were

21:19

you can you can see somebody investing

21:21

somebody investing and as

21:23

a roll over that contract it loses money

21:25

every month because the

21:27

future price the

21:30

too optimistic and then it's called

21:32

what's known as negative role yield and

21:34

at were that act an essay

21:36

on on our website about how that works

21:38

but basically you can have investment

21:42

in a commodity and and lose money and less

21:44

we get appear like we just had a past two years were

21:47

the commodity prices spiked way more

21:49

than ever anybody saw that's

21:52

why commodities are up thirty five

21:54

percent here today though it isn't

21:56

just that they went off they went up more than what everybody

21:58

expected

21:59

priced in their futures contracts almost

22:02

like whoever selling these features are the only ones

22:04

who are making money off this it doesn't seem to help

22:06

the company's doesn't seem the health commodity

22:08

trainers are you just said

22:11

just to be like completely some

22:13

oversimplifies something that it seems like

22:15

resign his contacts as making a killing

22:19

we we we could sell a contract

22:22

i mean it is commodity markets a zero

22:24

sum game so if you're if

22:26

you're going long a commodity there

22:29

is not like a vanguard selling

22:31

it to you it it somebody

22:33

in the other side of the tray the police police

22:35

a commodity will fall in price are

22:38

there is a wanna take the opposite

22:41

and , just take the rockville the short

22:43

the commodity every month and then they'll

22:45

capture that negative role yield in it's

22:47

end up being a positive return and

22:50

so yeah it and

22:52

then you i mean you have oil producers that are

22:54

hedging on there are people are uses for commodities

22:57

to hedge your production costs

22:59

or something like that that much of

23:01

it i agree with you andrew it's speculative

23:04

but it's people speculating on both sides

23:06

of the trade and which is why commodities

23:09

is incredibly difficult way to invest

23:12

because it's a zero sum game

23:14

you have to

23:15

smarter than the consensus the

23:18

think things are gonna do and

23:20

if you view is were anna commodities bull

23:22

market and the consensus is

23:24

wrong we're going to continue to the

23:26

prices are gonna go up even more than people expect

23:29

then then you go along that

23:31

you mentioned earlier gas

23:35

prices then in gas

23:37

prices have fallen some so commodities are off

23:40

fifteen percent in the last month

23:42

so a semester decided i'm gonna go

23:44

long commodities invest

23:46

invest seats their down fifteen

23:48

percent already and it's only been a month

23:50

so they can be very volatile

23:52

though we you know who obviously we

23:55

can get into the

23:57

all the angles of we

23:59

know whether while what's gonna happen

24:01

the seats are we coming days but this was just like

24:03

side step that unless this assumes

24:06

that somebody believes that we do

24:08

have a commodity super cycle ahead

24:11

that , is happening now now

24:14

something that seems like you would persist

24:16

it sounds like you're not going to recommend buying

24:19

and holding these contracts were

24:21

when you think and investors

24:23

should start to look if they're wanting

24:25

to position their portfolio for

24:28

some sore those commodities bull

24:30

market

24:32

the way that to tie have

24:35

invested in the past that we did when

24:37

i was the last semester is

24:39

is that deutsche bank commodity tracking who

24:41

tf so dbc is

24:44

is the eat he asked

24:46

it

24:47

wait what's unique about it is have it a try

24:50

it as an associate by the front month contract

24:52

the one know at the one that started his

24:55

attic and very which contacted by

24:57

in order to try to minimize this

24:59

drag or this negative role yet it

25:02

i i don't own commodity futures

25:04

right now

25:05

and

25:06

i wish i had bought them back in may twenty

25:08

twenty bucks we're an image the pandemic

25:11

and again so unlucky enough to sutures

25:13

curves and i could see our

25:15

a different month contract is negative

25:18

that the were assume an honor i think there's

25:21

like twenty dollars a barrel for

25:23

oil the next month the

25:26

you say okay we'll org what twenty bucks in a month

25:29

for to i don't know and that's the challenge

25:31

with commodities is that i

25:34

don't typically like to and

25:36

to to invest in a way that i have

25:38

to do better than with the consensus already

25:40

six than with a zero

25:42

sum game that exactly what you're doing and that's

25:45

that's my commodities are commodities

25:47

are the thing i

25:49

discuss as discussion on

25:51

my show as well as the fuck you know what's the difference

25:54

between in investment the speculation

25:56

and a gamble the speculation

25:58

as commodities where the this agreement on

26:01

whether what the price to be the

26:03

people shooting the commodity people going long

26:06

somebody is gonna we're not everybody the

26:09

investment it is a positive

26:11

expect to return has cashflow it has

26:14

something an income so

26:17

he returns expected to be positive

26:20

then a gamble is something has a negative expect

26:22

a return and so as

26:25

an investor i prefer investments

26:27

vs speculations other will have some i

26:30

have some gold have some bitcoin

26:32

etc that most the workforce

26:34

of our profile is should be investments

26:36

the positive expected returns so

26:38

what kind of our allocation are you

26:40

talking about when you mention the the door

26:43

it's commodity ,

26:45

just ballpark announce

26:49

the towers adam how is it invested or how

26:51

like a typical like that from an investor priests

26:54

yeah like the lathers out wow

26:56

i'm in generally speculations should

26:59

be kept less than ten percent pro folio

27:02

the guy i had seen

27:06

that's com speculations people just get

27:08

so excited there's

27:10

so confident they're gonna be right without

27:12

really understanding it i

27:14

has a family friend

27:16

that basically lost their farm betting

27:19

on commodities

27:20

the

27:22

and i went it it it was so

27:25

frustrating because he showed

27:27

me this fund it was it was son investing

27:30

in commodities he was so it was very excited

27:32

about it and i notice oh

27:35

they close that one sign in and started

27:37

a new one said it was like a break and enter

27:39

trackers that a

27:41

pointed out to him and as i did my research

27:44

because they last saw the money the

27:46

here's a private commodity

27:48

fine the had a shutdown and and

27:50

started a new one

27:52

the guy still invested last

27:55

his shirt and masterful

27:57

and so

27:59

people

27:59

less than ten percent of

28:02

of your allocation like indication i own

28:04

have about three to four percent of

28:06

, network and gold gold coins a minute

28:08

that sit there hedges of protection but they're zero

28:10

some games though only go

28:12

up these people are willing to pay more

28:15

there's no kastler associated with so

28:19

how did how does how does

28:21

the commodity prices affect

28:23

investments that we could

28:25

make could make for example i

28:27

knows the other day that the price of copper has

28:29

dropped assists the l a like oil

28:32

or did and twenty twenty and

28:34

with he and his kind of gone the a at the other

28:36

way and so were you think about kind

28:38

of the t v coming

28:41

revolution was cars how

28:43

do ya it's ya it's to look at some of those

28:45

companies and try to figure

28:47

out whether you think a

28:49

company like albemarle is gonna be

28:51

a winner in the long run versus the

28:54

company that's mining copper and

28:56

both are important to electric vehicles but

28:58

it's gonna hearted is to figure

29:00

that out that's what i struggle with

29:04

well

29:05

it it's which is why

29:08

individual stocks because it's

29:11

, fifteen years researching

29:13

had fund managers and and longingly

29:15

stock managers and cable

29:17

came away disillusioned in the sense

29:19

that pierce the smartest investors in the world

29:22

must the time

29:24

iran or

29:26

they might be right about something then

29:29

suffering complete surprise happens and

29:31

so in a my approach to investing

29:34

there how do a invest

29:36

in a way that i don't have to know what's gonna happen

29:40

that even are and everybody else still thinks

29:42

they know what's gonna happen that's why

29:44

it gives you opportunities like with enclosed

29:46

and funds or movies to i

29:48

get into day we have to make an investment and so i'm

29:50

in the arteries and market that can become more attractive

29:53

they get cheaper and it but i've always

29:55

been

29:56

an asset allocator focused on

29:59

basket to see

29:59

the already

30:01

versus individual securities

30:04

you're sort of wanted to say much you

30:06

know it's getting pretty credible simple like

30:08

that and i series

30:10

i savings bonds or something like that

30:13

can you give us doesn't taste as a

30:15

high you make those allocation decisions

30:17

like what is a over let's say a five year period

30:20

that makes you say i'm an advocate

30:22

more here i'm allocate more there can

30:24

you give us an example

30:27

so in

30:29

i this is what we did as his two semesters

30:31

it's what i do on my website on

30:33

july press investing is come up with

30:36

expected returns for different

30:39

the tight so in in the building

30:41

blocks or that is what's

30:43

, cast so you can be given and

30:45

yield it's in upon

30:47

yield if it's preferred

30:50

stock it's dividend yield so i want to

30:52

look at what's that castle or is we want to

30:54

come up with an estimate of how

30:57

fast with that that kessler grover time

30:59

know if it a stock or ab it

31:02

with us stock market for example we can look

31:05

at the dividend yield it's one and a half percent right

31:07

now if we assume

31:09

that earnings grow over six percent

31:13

that's the second element of it and

31:15

then the third thing that drives returns

31:17

is what are investors willing to pay that

31:20

cashless stream today versus

31:23

five years ago so

31:25

a that we're looking at price to earnings ratio as

31:28

for a different markets

31:30

and so i that's that's the approach

31:32

i use for all different asset classes and then

31:35

look at and decide okay this

31:37

area's more attractive we want to add more

31:39

there the most are

31:41

cognizant of the risk and the risk that

31:44

that we use in our approach is maximum

31:46

drawdown there is an issue some

31:49

best to refocus on volatility but

31:51

the reality is enough volatility is not something

31:53

that is intuitive

31:56

to investors

31:57

we don't care about upside volatility yeah if

31:59

it that more than i ever expected great

32:02

so i focus more on maximum

32:04

drive and how much could we lose stocks

32:07

historically have lost worst

32:09

case scenarios sixty percent the

32:12

i want to scale my allocation to stocks

32:15

assuming they could lose sixty percent

32:18

and

32:20

that that sixty percent loss as bad

32:22

if you're young investor without much money

32:25

why is right through

32:27

if you're nearing retirement then it can

32:29

it impact your lifestyle

32:32

and so the idea is to scale your investments

32:34

based on not only the downside

32:36

risk but the impact of that

32:38

risk and your lifestyle then i'm just

32:40

diversified on in a dozen different

32:43

archer investments an asset classes both public

32:46

and private but i'm generally more

32:48

at risk averse conservative type investor

32:50

because i am in , older

32:52

than the many so i am not a

32:54

young pup anymore says reality is i

32:57

don't need to take rare

32:59

because financially

33:02

dependent so that case i am going

33:04

to be a more conservative investor but it's still going

33:06

to be diversified and and still take

33:08

advantage of opportunities as they arise yeah

33:10

i do like that really big picture person

33:13

per se sharing your wisdom with us

33:17

a lot of good stuff there david and we

33:19

really appreciate your time in

33:21

you joining us you have a great

33:23

podcast called money for the rest of us

33:27

sir , scrolling through the episode less

33:29

you can see a wide variety of topics

33:31

and i think that has

33:34

unattractiveness all on it's own just

33:36

based off based off so you have your

33:38

podcast where else can people go

33:40

to find out more about you and what you're doing

33:42

online

33:45

the their main websites that money for the rest of

33:47

us dot com so i'm there i i

33:49

know occasionally depend on twitter at jt

33:51

stein but a most of our free

33:54

investment guides such as enclosed

33:56

in fun so when i mentioned i negative role yield

33:59

we're investing you come on it is you can find

34:01

that at twenty for the rest of us dot

34:03

com and the menu item is guides

34:07

oh awesome work again david we really

34:09

really do appreciate you taking the time to

34:11

come join us today and helping educators and

34:13

i'll agree topics that we discuss today so

34:16

without further do i'm gonna go and sign a saucy

34:18

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34:20

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