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2:06

this episode of the Personal

2:08

Finance Podcast, four ways to

2:10

accelerate stock market returns. What's

2:22

up,

2:28

wild builders and welcome

2:31

to the Personal Finance Podcast. I'm

2:33

your host, Andrew Founder of MasterMoney.co.

2:35

Today on the Personal Finance Podcast,

2:37

we're going to be talking about

2:39

four different ways to accelerate your

2:41

stock market returns. If you guys

2:43

have any questions, make sure to

2:45

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Podcasts, or whatever podcast player you

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If you want to help out

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the show, consider leaving a five

3:00

star rating and review. We cannot thank you

3:02

guys enough for leaving those five star ratings

3:04

and reviews. Now today, we're going to be

3:06

diving into the four different ways that you

3:08

can accelerate stock market returns. If you didn't

3:10

know, there really are only four ways to

3:12

accelerate your stock market returns. This is something

3:15

where I think a lot of people think,

3:17

well, I'm going to start day trading. When

3:19

I start day trading, I can really increase

3:21

my returns. Well, this is something that has

3:23

proven to be false for a very long

3:25

period of time. They'll say, well, I'm going

3:27

to start investing in individual stocks. Well,

3:29

90% of professional hedge fund

3:31

managers do not outperform the S&P 500. Of the

3:34

10% that do, they are not the same

3:37

year in and year out. Why do you think that

3:39

you can beat the S&P 500 by investing in

3:42

individual stocks? That's another one. This

3:44

is something where a lot of people try

3:46

to manipulate their returns in the market and

3:48

it's really not a very easy thing to

3:50

do. I think this is something

3:52

where I want to debunk that myth and show you the

3:55

four different things that really you can do. Some of these

3:57

are very simple. Some of these are

3:59

something Maybe you are making a mistake

4:01

right now on and you can make that adjustment

4:03

so that you can move forward and increase those

4:05

returns significantly. So I'm going to go through these.

4:07

The first one that we're going to be going

4:09

through today is one of the highest important things

4:12

of all. So I think a lot of people

4:14

need to hear this one. This is

4:16

going to be really, really important for a lot of

4:18

people. So really excited to jump into this episode. We

4:20

got a lot to cover. So without further ado, let's

4:23

get into it. All

4:25

right. The first thing that you can

4:27

do is you can minimize fees. Now

4:29

you may be saying to yourself, well,

4:32

I've never even thought about fees when

4:34

it comes to investing and understanding the

4:36

impact of fees is going to change

4:38

your trajectory for your wealth long term.

4:40

This is a million dollar decision for

4:42

a lot of people. I'm going to

4:44

show you exactly why. This is one

4:46

of the things that if you can

4:48

control your fees, you can save yourself

4:50

six figures to over a million dollars,

4:52

depending on how much you're investing and

4:54

how long your time horizon is. I

4:56

cannot stress enough how important it

4:58

is to minimize fees when it comes to investing. If

5:01

you have an advisor that is taking a 1% fee

5:03

or 1.5% fee or a 2% fee, you are destroying

5:09

your rate of return long term when it comes

5:11

to investing. Or if you have an expense ratio

5:14

on a mutual fund that is a 1% expense

5:16

ratio, they are taking away a massive amount of

5:18

money. You may be saying to yourself, well, it's

5:20

1%, it's 2%. It's

5:22

not a big deal. It is a massive deal. I'm

5:25

going to show you exactly why today

5:27

and why the high cost of

5:29

small fees can really destroy your

5:31

wealth over time. Here's

5:33

the first example. Let's take a scenario

5:35

where an investor is investing $1,000 a month into a portfolio

5:39

with an average rate of return of 9.7%. The

5:43

S&P 500 has returned a little more than that

5:45

historically, actually. 9.7% is not out of the ordinary.

5:48

We're just going to look at the historical context and the data

5:51

here and looking at this going

5:53

forward. Without fees, this would result in a

5:55

nest egg of approximately $5.8 million over

5:57

the course of 40 years. $9,000

6:00

a month, 9.7% rate of return, 40 years turns into $5.8 million. Boy,

6:05

oh boy, is compound interest

6:07

something special, isn't it? You're

6:09

getting that rate of return,

6:12

you're investing that $1,000, it

6:14

can really change your trajectory

6:16

over time and time paired

6:18

with compound interest is absolutely

6:20

amazing. However, typically, if you

6:22

have an advisor, the typical advisor fee

6:24

is right around 1%. So

6:27

this is something to note because they're going to come

6:29

to you and they're going to say, oh, it's 1%,

6:31

it's not that big of a deal. In

6:33

fact, we're going to be able to help

6:36

you increase your returns over time. Well, historically,

6:38

and the data shows that does not happen.

6:40

And so when we do this, we bring

6:42

it all the way down to 8.7% rate

6:44

of return. So instead of

6:46

9.7%, you got a 1% fee. Now

6:48

we're dropping that rate of return to 8.7%. What

6:51

this does is it lowers the

6:53

portfolio's value to $4.3 million.

6:57

So you went from $5.8 million to $4.3 million because

6:59

you had a 1% fee. How

7:06

staggering is this? This is a 25% reduction

7:09

in your total portfolio because you

7:11

had somebody with a 1% fee.

7:15

This can absolutely destroy your

7:17

wealth building ability if

7:19

you do not control fees. Let me say

7:21

it again. You need

7:23

to control fees when it comes

7:26

to investing. If you don't listen to anything

7:28

else ever on this podcast, I just saved

7:30

you a multi-million dollars if you're investing in

7:32

the long term. You need

7:34

to watch your fees. It will absolutely change

7:37

the way that your financial trajectory happens. Now

7:39

let's make this even worse because what a

7:41

lot of advisors do is they'll stick you

7:43

into something like a mutual fund, for example,

7:45

or they'll try to do direct indexing or

7:47

something else that adds additional fees on top

7:50

of that to your portfolio. Let's

7:52

say we added an additional 1% mutual

7:55

fund fees for expense ratios. This

7:58

further diminishes the portfolio. It's just how

8:00

much it brings the portfolio down for just an additional 1%

8:02

fee. So on top of that

8:04

first 1% fee, we have another 1% fee

8:07

with our mutual fund. It brings the portfolio

8:09

down to $3.2 million. Another

8:14

$1 million reduction because we added an

8:16

additional 1% fee. This is

8:18

just mind blowing to me. It is absolutely

8:20

mind blowing to me and people give their

8:22

money away with a 1% fee without thinking

8:26

twice about it. This is one of the most

8:28

important things that you can do. Now let's

8:30

look even deeper. Personal Finance

8:32

Club, if you don't know who that is, that's Jeremy

8:34

Schneider. He has a great Instagram page called Personal Finance

8:36

Club. He did this analysis

8:39

where he looked at how much money you

8:41

would lose to fees based

8:43

on how long you invest. For

8:46

long term investors, you lose even more money

8:49

to fees over that long term time horizon.

8:51

This is really, really important to understand. When

8:54

you go through this, I want you to understand your annual

8:56

fee here. When you go through this,

8:59

if you have an annual fee of 0.05%, that

9:01

is the standard annual fee

9:04

if you're just investing in an index fund

9:06

or an ETF, typically it's 0.05% or less.

9:10

A lot of them are free now. Things

9:12

like the Fidelity Zero Funds, for example. If you

9:14

invested for 10 years, it's a 0.5%

9:16

reduction. If

9:19

you invested for 15 years, your total portfolio

9:21

is a 1% reduction from what it

9:23

was. Over the course

9:25

of 50 years, your portfolio is reduced to 2%.

9:29

You lose 2% in your

9:31

portfolio over the course of 50 years. Now

9:33

let's look at a 0.2% and what Jeremy did here. He

9:38

has 2% reduction at 10 years, a 5% reduction at

9:40

25 years, and a 10% reduction at 50 years. It

9:45

is a big difference where really

9:47

even, I'm saying your minimum has got to

9:49

be 0.3% or

9:52

less, but you're taking a reduction over the course of

9:54

50 years of 10%, so it does make

9:56

an impact on your portfolio. Now let's get

9:58

into the meat and potatoes that we're talking about. talking about here though because I'm

10:00

going to show you the difference between a 1% and a

10:03

2%. This is a great illustration and if you're a

10:05

visual learner, go check out this post. It's called Lost

10:07

to Fees. The annual

10:09

fee at 1% if you invested

10:11

for 10 years, just a 1% fee at 10

10:14

years, it's going to be the same as if

10:16

you invested for 50 years at the 0.2%. So

10:18

you're going to have a 10% reduction in your

10:20

total portfolio over the course of 10 years because

10:23

you have a 1% fee. So say for

10:25

example that you went out there and you

10:27

invested a million dollars over the course of

10:29

10 years, you worked your butt off, you

10:31

handed away $100,000 just over the course of

10:33

10 years to an advisor. Let's

10:36

look at 25 years which a lot of you listening

10:38

to this podcast probably have 25 years if you're in your

10:41

30s and so 25 years is a 22% reduction

10:44

in your portfolio because you had a

10:46

1% fee. 22%

10:50

of your portfolio, poof, gone because you had

10:53

that 1% fee. Now let's look at the 50 years

10:55

and man oh man this is starting to

10:57

make me queasy. You lose 39% of your

10:59

portfolio based

11:02

on a 1% fee over the

11:04

course of 50 years. That is absolutely disgusting

11:06

to me and it is one

11:08

of the things that I really, really just

11:10

hate to see. Now we're going to make

11:12

it even worse. Let's look at 2%. A

11:15

2% fee, maybe your advisor charges you 1%

11:17

and the mutual funds charge you 1%, maybe

11:20

your advisor charges you 1.5%, the mutual fund charges you

11:23

1.5%. It doesn't matter where you land on this, maybe there's

11:25

extra fees added in the back end you don't even notice.

11:28

A 2% fee over the course of 10

11:30

years reduces your portfolio already 18%, just

11:34

10 years. So if you invested a million

11:36

dollars over the course of 10 years, you'd

11:38

lose $180,000. Does that feel good? I

11:40

don't think so. How about 25

11:42

years? Over the course of 25 years

11:45

with a 2% fee would be

11:47

a 40% reduction in your

11:50

portfolio. 40% over

11:54

25 years. 40% I don't even want to tell you the

11:56

50 years. If you had a 2% fee, just that

12:00

you're paying to an advisor or somebody else. Over

12:02

the course of 50 years invested, it would take

12:04

away 64% of your portfolio. It

12:06

would eat away at the majority of your portfolio

12:08

and all you would have left is 36%. To

12:11

be honest, that makes me mad. That is something that

12:13

should not be happening. You are doing all of this

12:16

work for your money. You give your money to someone

12:18

who usually will give you worse returns than you would

12:20

just buying an S&P 500 historically and

12:23

they're gonna take 64% of your portfolio away. That

12:26

is something you can absolutely not

12:28

do. So you

12:31

need to make sure that you

12:33

understand what you are paying to

12:35

advisors when it comes to these fees. Now, when

12:37

it comes to advisors, I love certified financial planners.

12:39

I think you can work with a CFP who

12:41

you pay an hourly rate. You do not pay

12:44

a percentage of your portfolio. You pay an hourly

12:46

rate to these people and they put together a

12:48

financial plan for you. They can help you with

12:50

investments. They can help you with so many different

12:52

things and there are some great ones out

12:54

there. We've had a number of them on

12:57

this show. But if you are paying a

12:59

percentage of your portfolio in fees, you need

13:01

to stop doing that now. You need to

13:03

stop doing that now. It is absolutely robbing

13:06

you of your retirement when you

13:08

pay a percentage to fees. You're always gonna have to pay

13:10

some sort of fee likely, especially if you're in an index

13:12

fund or an ETF. There's always like a 0.03% fee. We

13:15

see over the course of 50 years, your portfolio goes

13:17

down 2%. Over the course of 25 years, your

13:19

portfolio goes down 1%. The math

13:22

is something where the percentages look

13:24

small but the dollars you lose

13:26

are great. And so I want you to make

13:28

sure that you understand that as we go through

13:30

this. Now, there are a bunch of different types

13:32

of fees. I want you to know how to

13:34

identify those fees because it's really important to me

13:36

that you know what you're talking about when you

13:38

have these conversations with people. So number one is

13:40

the expense ratio. And expense ratios are what you

13:42

will see in a lot of mutual funds or

13:44

index funds. You can always look for these when

13:47

you're looking at a fund analysis. So if someone tells

13:49

you, hey, I want you to invest in this fund,

13:51

I want you to say, hey, what's the expense ratio

13:53

on this fund? And if this expense ratio is anything

13:55

above 0.3, 30

13:57

basis points, then you need to... reconsider

14:00

what that investment is because there's so

14:02

many low-cost investments out there. There's really

14:04

not a reason to do that. Number

14:06

two is advisory fees. These are charged

14:08

by financial advisors or robo advisors and

14:11

these are a percentage of the assets

14:13

under management. Assets under management

14:15

are a cuss word here on the

14:17

personal finance podcast. I don't want to

14:19

see you paying a percentage on assets

14:21

under management. AUM sometimes they'll call it.

14:23

And so you need to make sure

14:25

that you know what those advisory fees

14:27

are and ask that question. Transaction fees.

14:29

We live in a world where there should be

14:31

no more transaction fees. You can go to Fidelity, you

14:34

can go to Vanguard, you're not going to have any

14:36

transaction fees. But if you go somewhere else, you're going

14:38

to have some transaction fees. Every time you have a

14:40

transaction, they could charge you 1%. Those

14:43

are what can happen. And I know,

14:45

for example, just had a conversation with

14:47

someone very close to me who has

14:50

an advisor and their advisor charges a

14:52

1% transaction fee. Mm-mm-mm-mm-mm.

14:54

My blood is boiling just thinking about

14:56

it. All right, last one is load

14:58

fees. So these are sales charges applied

15:01

at the purchase or sale of a mutual fund

15:03

share. So load fees are just another way to

15:05

take your dollars out of your hand and put

15:07

them into someone's pocket who is in a giant

15:10

high rise in the middle of New York City

15:12

on Wall Street. And it is something that you

15:14

really need to avoid. You can fight back on

15:16

your own by just having a financial education. That's

15:18

all you got to do is have this financial

15:20

education. Now, one cool thing is that

15:22

there are a bunch of free tools out there that

15:24

can help you analyze fees. One of my favorite ones

15:26

is Empower, which used to be personal capital. They have

15:28

a fee analyzing tool. So you can run your

15:30

funds in there and you can say, hey, how much

15:33

am I paying actually in fees in here? So that's

15:35

a great free tool out there to analyze your investment

15:37

fees. But I want you to learn how to look

15:39

for this yourself. I want you to learn how to

15:41

identify where these fees are so that once you can

15:44

do this, then you can run them in these fee

15:46

tool analyzers and then make those adjustments based on that.

15:48

But I want you to learn how to do this

15:50

because it's really, really important stuff to

15:52

make sure that you know that. So here are some

15:54

strategies for minimizing fees because if you're saying to yourself,

15:57

well, I've always just given my money to an advisor.

15:59

I need some strategies. strategies to minimize these fees.

16:01

Well, number one is index funds

16:03

and ETFs. Investing in things

16:05

like low cost index funds and

16:07

ETFs will significantly lower the amount

16:09

that you're paying. You can also,

16:11

if you're paying an advisor 1%, you can consider

16:13

a robo advisor. They charge, I think, 0.25. 25

16:17

basis points is typically what they charge. They ask you

16:19

a bunch of questions and they build a portfolio based

16:21

on your risk tolerance. But really, if

16:23

you want to keep the advisor relationship going,

16:25

go to a certified financial planner who does

16:27

not take assets under management. Who does not

16:29

take a percentage of your investment. Instead, you

16:32

have conversations and you pay them an hourly

16:34

rate. That's all you got to do. And

16:36

so when you do this, you can find a bunch of

16:38

CFPs out there. I'm not affiliated with any

16:40

of them, but there's a bunch of great ones out there.

16:42

There's been a bunch of great ones on this show. And

16:45

so if you go back in some of those episodes, you'll see

16:47

a bunch of great ones. But this is the way that you

16:50

can do that. There's also services out there now where you can

16:52

pay an advisor like $100 an hour just to

16:54

get on a one hour call with him. There's

16:56

also services out there like that. So really

16:59

think through what you're doing here if you're giving

17:01

money to an advisor with assets under management. Really

17:03

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17:05

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17:08

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21:21

two, you're gonna say to yourself out loud in

21:23

the car, you're gonna shake your fist in the

21:25

sky and you're gonna say no duh, Andrew. But

21:28

number two is invest more. Now I'm not gonna

21:30

say wishy washy, invest more. We have a really

21:32

high rate of inflation. Everything costs way too much

21:34

money. Affordability is really low. Yeah, just go invest

21:36

more dollars. That's not what I'm saying here because

21:38

I know that's not the case for most people.

21:41

In reality, a lot of people are struggling right

21:43

now just to make ends meet. So how are

21:45

we gonna invest more? How are we gonna actually

21:47

go out out and do that? So what I'm

21:49

gonna do first is I'm gonna motivate you a

21:51

little bit here and give a little fire under your

21:53

butt. And secondly, then I'm gonna show you how to

21:55

do it because I think this is what a lot

21:57

of people need is that practicality of how they can.

22:00

actually go about doing this, instead of just

22:02

hearing people say, invest more dollars. That's all

22:04

you hear on social media. It's just invest

22:06

more. It's so easy. Just invest more. Hey,

22:08

I know it's not easy. I know how

22:10

difficult it can be in this world right

22:13

now to invest more. You have to pay

22:15

for student loans. Housing costs is through the

22:17

roof. If you have kids, daycare costs are

22:19

absolutely through the roof. You're just trying to

22:21

get by. You're just trying to

22:24

make ends meet. But let me tell you

22:26

what investing more can do if you really

22:28

can buckle down and figure this out. If

22:30

you can really buckle down and figure out how

22:32

can I invest more, are there ways that I

22:34

can invest more? Maybe you can. Maybe

22:37

you are doing every single thing you can.

22:39

And if that's you, then I understand. We're

22:41

going to work on some things that you

22:43

can actually increase your income and work on

22:45

ways that you can get more dollars, money

22:47

flowing through that checking account so you can

22:49

disperse and automate those dollars into different brokerage

22:51

accounts. But if it's not you, I want

22:53

you to think through how you can do this, okay?

22:56

First of all, if you invest more, you get

22:59

your time back. You get your freedom back.

23:01

Investing more allows you to put more fuel to

23:04

the fire so that over time, you will be

23:06

able to build up this snowball, this investing snowball

23:08

that's going to spit off cash for you every

23:10

single month and you don't have to work another

23:13

day in your life. If you're in

23:15

a cubicle you hate right now, you will not have

23:17

to work another day in your life if you figure

23:19

out a way to invest more. That's why this is

23:21

so important. This is going to change your life forever.

23:25

Number two is that you can give more dollars

23:27

to causes you believe in. How many times do

23:29

you watch the news and something happens and you

23:31

just get ticked off? You're just angry about it. But

23:34

guess what? Guess what? It can

23:36

actually propel something forward that can make an

23:38

active change in everyone's life. Money.

23:41

And so the rich people have known this forever. The

23:43

1% have known this forever. But what if everybody

23:45

learned this, that you can give your dollars and

23:48

actually make a massive change? This is something that

23:50

can absolutely change your life. Here's an example for

23:52

me. And this is where the light bulb moment

23:54

went off. One big example

23:56

was human trafficking specifically with children.

24:00

a cause that really just breaks my

24:02

heart. Once I had kids, I could

24:04

not imagine this scenario for another child.

24:07

And so this is something where

24:09

it really just lights a fire

24:11

in my gut and I changed

24:13

my entire financial plan based on

24:15

this cause bothering me so much.

24:18

It's something that I want to figure out a way

24:20

to help and the way that I want to do

24:22

it is with my dollars and then with my time.

24:24

So what I'm going to do is I'm going to

24:26

get my dollars, I'm going to get them going and

24:29

then I'm going to start spending my time once I

24:31

have more time from my dollars. And so I had

24:33

a lean fire goal, now I have a fat fire

24:35

goal only because of this specific thing. And

24:38

so I want to give back to causes I

24:40

believe in. This is a major thing as a

24:42

wealth builder, you're a wealth builder, anybody listening to

24:44

this podcast is a wealth builder who is actively

24:46

pursuing trying to build wealth and making a difference

24:48

in their dollars and making a difference in their

24:51

net worth and making a difference in the way

24:53

that they see money. You're a wealth builder. And

24:55

every wealth builder should have some sort of plan

24:57

to give the causes they believe in when they

24:59

get to a certain level. Because when

25:02

you start to do this, it'll absolutely change

25:04

your trajectory. Guess what? The next thing is

25:06

if you start to save more, I've never

25:08

heard anybody in my life say, hey, I really

25:10

regret investing more dollars. I really hate that I

25:12

actually did that. Now, if you do it later

25:15

on in life and you're investing so much money

25:17

that you're not taking family time, that's when you'll

25:19

regret it. You'll definitely regret that. But

25:21

outside of that, if you're investing more dollars instead of

25:23

going and buying the fancy car, or if you're investing

25:26

more dollars instead of going out to eat every single

25:28

night, or if you're investing more dollars instead of shopping

25:30

on Amazon all the time and getting 12 boxes to

25:32

your front door every single day, well, guess what? You're

25:34

not going to regret that whatsoever. Your

25:37

house is going to fill with junk. That car is

25:39

going to get old, but you're not going to regret

25:41

having that money in the bank for financial security safety.

25:43

Guess what? It reduces your

25:45

stress. It reduces your anxiety. It reduces everything that

25:47

you hate about money. And if you're listening to

25:49

this podcast and you hate money and you're just

25:51

trying to figure out what the heck do I

25:54

do with money? This is what you do. You

25:56

find a way to fuel the fire to be

25:58

able to invest more. And guess what?

26:00

The last thing it does is it

26:02

helps you outpace inflation because inflation, oh

26:05

boy, oh boy, inflation is the thorn in

26:07

our side right now. What if you could

26:09

rip that thorn out of your side and

26:11

be able to actually outpace inflation and your

26:13

dollars can go further? That's what investing does.

26:16

Investing allows your dollars to go further and

26:18

you can make that massive change over time.

26:20

So this is something where I

26:22

think most of you need to understand, you need to learn

26:24

how to invest more. Now, how do we do this? How

26:26

do we invest more of our dollars? It's really important to

26:28

understand how we can actually do this. And

26:30

really, it's just learning how to increase our contributions

26:32

by small percentages. You're not going to be able

26:35

to just do it all at once, especially if

26:37

you're just getting by. This is not something I

26:39

want you to just rip the entire band-aid off

26:41

all at once. Instead, I want you

26:43

to do this gradually. When you reduce expenses, I

26:45

want you to reduce your expenses gradually. When you

26:47

increase your investing, I want you to increase your

26:50

investing gradually. So let's do a give and take

26:52

here. Let's imagine that we have a scale. And

26:54

on one side of the scale is your expenses.

26:56

And on the other side of the scale is

26:58

the amount of dollars that you can invest. So

27:00

the thing that you can do today is slightly

27:02

reduce your expenses. And when you slightly reduce those

27:04

expenses, you're going to have a little bit of

27:06

extra money left over. What are we going to

27:08

do that a little extra money? We're going to

27:10

invest those dollars. And so the scale starts to

27:12

tilt a little bit. If you're watching on YouTube,

27:14

I'm doing this weird thing with my hands to

27:16

show you how a scale works. And so as

27:18

we do this, we're going to

27:20

reduce our expenses by 1%. And we're going

27:23

to increase our investments by 1%. Let's just

27:25

do that for the first couple of months. So

27:27

we're two months in, we're reducing our expenses

27:29

by 1% and increasing those

27:31

investments by 1%. Now,

27:34

a couple of months down the line, we say, hey, that's

27:36

not so bad. I think I think I

27:38

can do it again. And so we're reducing

27:40

our expenses by another percent and increasing our

27:42

investments by another percent. Do that for a

27:44

couple more months. Well, by golly, that's not

27:47

terrible. We reduce our expenses to another 1%.

27:49

And we increase our investing another 1%. And

27:52

so this is how you gradually over

27:54

time can increase the amount of dollars

27:56

that you were putting away towards retirement

27:58

and fuel the fire without feeling

28:00

the major pain that comes with ripping the

28:02

band-aid off when you have to invest just

28:04

a ton of money all at once. If

28:06

you have lifestyle inflation, for example, it is

28:09

a lot harder to go backwards than it

28:11

is just to increase your income. And so,

28:13

you really need to do this gradually over

28:15

time, otherwise you're going to quit. I know

28:17

how human psychology works. You are going to

28:19

quit if you do it any other way.

28:21

And so, this is how you

28:24

can make a difference when you go through

28:26

this. Now, let me just show you how powerful

28:28

increasing your investments by 1% can be. This

28:31

is just with a 5.5% rate of return. If

28:34

you just increased by 1.5% on your

28:37

salary and you started at the age of 35, you

28:40

would have $85,000 more in your portfolio just by that 1% increase. With

28:44

a 5.5% rate of return, that's what you can almost get

28:46

in a high-yield savings account right now. So, you're going to

28:48

have more than that on a rate of return if you

28:50

invest those dollars in a portfolio. If you started at age

28:52

45, you'd have an additional $42,900. And

28:56

if you started at age 55, you'd have an additional $17,000. And

29:01

that's contributing less than $16 per week. $16

29:04

a week. Small amounts of money over time can grow

29:06

to very large amounts of money. You hear me say

29:08

that all the time. Small amounts of money over time

29:10

can grow to very large amounts of money. Now, let's

29:12

look at this a little bit deeper. Because if you

29:15

wanted to do this with a 10% rate of

29:17

return, and your boy loves that

29:19

10% rate of return because your boy loves to

29:21

motivate you all. And so, what we're going to

29:23

do on that 10% rate of return is we're

29:25

going to look at this and say, hey, let's

29:27

increase our contributions every single year by 1%. We're

29:30

going to do it 1% every single year. And we're going to

29:32

start at $300 per month. So,

29:34

let's say we start investing $300 per month. And

29:37

every year, we increase it by 1% on a $70,000 salary. So,

29:41

we're looking at a $70,000 salary increased every

29:43

single year by 1%. After

29:46

10 years, you'd have approximately $103,000. So,

29:49

that's $300 a month, increasing it 1%

29:51

every single year, you'd have $103,000. After

29:55

20 years, this is cumulative, $488,000. Pretty

29:59

good stuff. there after 30 years, wow, $1.6 million just by

30:02

starting at $300 a month, increasing by 1%

30:08

a year, $300 a month, increasing by 1%

30:10

every year. And after 40 years, oh

30:12

boy, you ready for this number? $4.6 million

30:15

by making that 1% increase. My

30:18

friends, small percentages make a big, big

30:20

impact, as you can see. And this is why

30:22

we're talking about this on the fee side, and

30:24

this is why we're talking about this on increasing

30:27

your investments. If you need to learn

30:29

how small percentages will actually make a massive impact.

30:31

It's going to change your life if you can

30:33

start doing this now, especially if you have time.

30:35

Now, if you don't have a lot of time,

30:37

we're going to need to invest more in larger

30:39

chunks. We can't do this 1% anymore. And

30:42

so how can you actually do this? Well, A,

30:44

is making sure you're tracking your money flow, knowing

30:46

what's coming in, what's going out, and being really

30:48

meticulous about this if you really want to increase

30:50

this and you need to do it in a

30:52

short period of time. Number two is we want

30:54

to reduce all those unnecessary expenses that we do

30:57

not need. Sell the crap you don't use so

30:59

that you can take those extra dollars, fuel that

31:01

fire, put them towards the things you actually value.

31:03

Really important to do that. Number three, I want

31:05

you to automate your savings, meaning that your dollars,

31:07

every time they come in, I want you to

31:10

just automatically get it out of your account and

31:12

put them into your investment account. So sweep it

31:14

out. Sweep it out into your

31:16

investment account. That's the next thing we're going to

31:18

do. Then we're going to cut down on some

31:20

of these major expenses. You're going to look at

31:22

the big three, housing, food, transportation. Those three kill

31:25

most people. If you can control those three, you

31:27

can control most of your other expenses. The other

31:29

one is daycare costs for people who have kids.

31:31

That'd be a big four, really. But

31:33

the big three are those most people need housing,

31:35

food, or transportation so that those three can absolutely

31:37

kill you. Then lastly, you just want

31:40

to make sure that you reduce your debt, those

31:42

types of things as well. We've talked about that in a

31:44

number of different podcasts. We won't dive deeper here. Investing

31:46

more, that's a big one. Now, let's get

31:49

into number three. Number

31:51

three is invest longer. Investing longer

31:53

is something that can really, really

31:55

change your financial returns over time.

31:57

In fact, when you do this,

32:00

It could be something that absolutely it just

32:02

blows everything else out of the water It's just investing for

32:04

a longer period of time You saw that in our last

32:07

example for example that we did Is

32:09

over the course of 30 years on a 70,000

32:11

salary increasing it by 1% every single year and

32:13

with $300 a month It

32:15

went from 1.6 million dollars, but if you just add an

32:17

additional 10 years, it went to 4.6 million dollars So

32:21

as time progresses, it's usually between that

32:23

30 and 40 year mark where this

32:25

really just starts to accelerate because compound

32:27

Interest is at work. You have larger

32:29

numbers in those portfolios. And so it

32:31

just really starts to snowball This is why we

32:33

always talk about getting to that first 100k because

32:36

that first 100k Helps you

32:38

really just get those dollars working and it seems

32:40

like it gets a little bit easier after that

32:42

first 100k And so why start

32:44

investing earlier a Compounding returns

32:46

the dollars that you invest now during your 20s

32:48

listen to this podcast the dollars that you invest

32:51

now are gonna be The most valuable dollars you

32:53

ever invest in your entire life You're gonna have

32:55

to work to three four five times as hard

32:57

just to get the same result Instead

33:00

you could just invest right now. And so that

33:02

is one big thing I want you to understand

33:04

number two is you have more

33:06

time horizon for risk tolerance meaning that you

33:08

can actually invest into a higher percentage of

33:10

stocks which have historically returned more and You

33:12

can do that because you have a longer

33:14

time horizon for corrections and to make it

33:17

through some of these things number three is

33:19

It helps build the habit of investing. So

33:21

starting early helps build that habit for investing

33:23

We have a lot of high schoolers that

33:25

listen to this podcast So we've had messaging

33:27

before if you start investing in high school

33:29

boy Oh boy Those dollars are gonna turn

33:31

into massive amounts of money and then you

33:33

have recovery time if there is any recession

33:35

or anything like that That's going to help

33:37

you recover Over a very long

33:40

period of time now I want you to look at

33:42

this for a second because I want you to consider

33:44

two scenarios number one an investor starts at age 25

33:47

years old. Okay, this investor starts at age

33:49

25 number two an investor starts at age

33:51

35 So both of these

33:53

investors are going to contribute five thousand dollars annually

33:55

and we're going to assume an annual rate of

33:57

return of 10% this

34:00

amount by each investor to retire at the

34:02

age of 65. Okay? So

34:05

case one is the investor who started

34:07

at age 25 now has a future

34:09

value of $2,434,259 by

34:15

investing $5,000 per year at a rate

34:17

of return of 10%. Investor

34:19

number two starts at age 35 and the

34:21

value of their portfolio with the same amount

34:23

of investment every single month is $904,000. $2.5

34:29

million for starting 10 years earlier. And

34:33

if you start 10 years later, your portfolio

34:35

is $904,000. That

34:37

is almost a $1.4 million

34:40

difference just by starting 10 years earlier.

34:42

This is why I'm saying when you

34:44

start earlier, those dollars are

34:46

so incredibly powerful, I cannot explain

34:49

it enough. And so this is something

34:51

that I think you really really need to understand. And

34:53

so there are a bunch of reasoning why you want

34:56

to start early. And I gave you a bunch of

34:58

them here. Number one is compound interest. It is really

35:00

important to get compound interest working as early as you

35:02

possibly can. The earlier you do it, the more those

35:04

dollars, even if it's a small amount of money, I

35:06

don't care if it's a very small amount of money,

35:09

it is still really important. If you had a 10%

35:11

rate of return, you invested $10,000 per year, it is

35:13

really important to

35:15

understand how those numbers work. And if you want to learn

35:17

how to do this, just play with an investment calculator. There's a

35:19

bunch of them out there. If you like calculator.net, there's a bunch

35:21

of other ones out there. We actually have our own, I got

35:24

to release that one. But there's a bunch of great ones out

35:26

there that I think you need to play with. It

35:28

reduces your risk over time because of diversification. When

35:30

Brian Feraldi came on this podcast the first time,

35:32

he's been on here three times now, when he

35:34

came on here the first time, he talked through

35:37

the S&P 500 returns. Like

35:39

if you invested in the S&P 500 and

35:42

you did it over a certain amount

35:44

of time, the longer your time horizon,

35:46

the lower your risk is. And so

35:48

investors who invested in the S&P 500

35:50

for 20 years or longer, never lost

35:53

money. Historically have never lost money. And

35:55

that's the crazy power of just investing

35:57

over time into good quality stocks. And

35:59

then you have more. time to recover from downturns, you have volatility

36:01

smoothing, meaning that when the market goes up and down,

36:04

it's going to just smooth out over the long time

36:06

horizon. And you can see that when you pull up

36:08

a stock market chart, you can look at the stock

36:10

market chart and say, hey, in the short term, that

36:12

chart is going up and down and left and right

36:14

and backwards and forwards. When it

36:17

comes to the long term, that chart starts

36:19

to just smooth out. And so calm

36:21

and cool investors invest for the

36:23

long term and frantic investors invest

36:25

in the short term. Just

36:27

remember that. And that's number three. And

36:30

then number four is to reduce your taxes.

36:32

And I don't really want you to spend a

36:34

lot of time thinking about reducing your taxes unless

36:37

you're really into this stuff. This is kind of

36:39

like an advanced thing that you can do. But

36:41

there are some things that you can do. And

36:44

one is that we talk about

36:46

all the time is like using

36:48

your tax advantage account. So your

36:50

Roth IRA, your 401k, your HSA,

36:52

your SEP IRA, your solo 401k,

36:54

your TSP, all of these different

36:56

accounts, your 457B, all of these

36:58

different accounts are going to be ways that you can

37:00

reduce your taxes without really having to lift much of

37:02

a finger. If you're saving for your kids college, a

37:04

529 plan will help you reduce

37:06

your taxes. There are

37:08

so many different tax free growth and things that you

37:10

need to do. Guys, you need to take advantage of

37:13

these accounts. If you hear somebody on TikTok or Instagram

37:15

or Twitter or wherever else say that these are a

37:17

scam, they're probably trying to sell you a real estate

37:19

course. You need to take advantage of those tax advantage

37:21

accounts. Number two is holding

37:23

your investments long term, like we said, is

37:26

another way to reduce your taxes because

37:28

if you hold them for a year or

37:30

longer, you get long term capital

37:32

gains tax, which is taxed at a much

37:34

lower rate than short term capital gains tax

37:36

for folks who only hold stocks for less

37:38

than a year. And so long term

37:41

capital gains tax is really, really important. You

37:43

can also do things like tax lost harvesting, which is

37:45

a much more complicated system. We'll do an entire episode

37:47

on this where we can actually talk through how you

37:49

can do it in a way that makes a lot

37:51

more sense for people instead of having

37:53

to do it all the time and then making sure you

37:56

choose the right asset allocation. This is a big one. That's

37:58

a six figure decision because. Choosing the

38:00

right asset allocation is gonna ensure that you

38:02

have the right stocks and bonds in the

38:04

right accounts, and it's gonna make sure that

38:07

you are investing tax efficiently. And then looking

38:09

at tax efficient funds, so things like index

38:11

funds, ETFs, all are managed funds that have

38:13

lower turnover ratios, meaning they buy and sell

38:15

less securities than would like a traditional mutual

38:17

fund, and that's gonna lower your tax bill

38:20

as well as you go through this. So

38:22

these are the four ways that you can

38:24

really accelerate your stock market returns. One

38:27

more time, it's minimizing fees, and boy

38:29

oh boy, ya boy went on a rant

38:31

on that one. Number two is investing more,

38:33

and I showed you practically how to do

38:35

that. Number three is investing longer, and then

38:37

number four is reducing your

38:39

taxes. And so those four are gonna be

38:42

something that can really, really make a huge

38:44

impact on your portfolio, and I think most

38:46

people need to learn that this is one

38:48

of the biggest ways that you can accelerate

38:51

your stock market returns. You gotta focus on

38:53

the things that you can control. These

38:55

are the things that you can control. It's really,

38:57

really important to understand. Well

38:59

listen, thank you guys so much for listening to this episode.

39:01

I truly appreciate each and every single one of you listening.

39:04

If you guys have any questions, make sure to reach out

39:06

to us. You join the Master Monday newsletter, and then you

39:08

can reply to that newsletter and it'll come directly to me,

39:10

and I'll be able to see your questions there. And

39:13

thank you guys so much for listening to this podcast. Our

39:15

entire goal is to bring you as much value as we

39:17

possibly can, and we hope we are doing that every single

39:19

week. If there's a way that we can bring you more

39:21

value, please reach out to me and tell me. That's another

39:23

thing I want you guys to do, is constantly communicating with

39:25

me, telling me how I can bring you more value. I

39:27

want to know. I want to know how I can bring

39:29

you more value. What do you want me to dive

39:31

deep on? What do you want me to look into

39:33

more for you? How can I help you? How can

39:36

I serve you? That is what I want to know.

39:38

That's what this podcast is all about, is serving you

39:40

more. So thank you guys so much for listening to

39:42

this episode. We will see you on the next episode.

39:59

Everyone's heard this. saying, you have to spend

40:01

money to make money. But everything in life,

40:03

from travel to starting a business, is expensive.

40:06

Which is why I want to tell you

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about a new podcast I love that will

40:10

teach you all the tactics, tricks, and tips

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you need to upgrade your life, money, and

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even travel, all while spending less and saving

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more. It's called All the Hacks, and it's

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a top-ranked show hosted by my good friend,

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Chris Hutchins. A financial optimizer,

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an entrepreneur who's racked up millions of

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points, and he sold two companies. And

40:28

if you want to rethink the way

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40:35

Bill Perkins, and why you should be

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optimizing for net fulfillment and not net

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worth, and striving to die with zero.

40:41

All the Hacks has something for everyone,

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and I'm sure you'll find a new

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check out All the Hacks, that's all

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the hacks on Apple Podcasts, Spotify, or

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