Think you need a fancy investment strategy? You may be surprised at the answer.

• Evaluate your investment mindset (01:30)
• Diversification (02:51)
• Not touching it (05:55)

Quote for the episode: "Long term, if we have a little bit in different pieces, it should take us in the correct upward direction."

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Welcome to the Enjoy More 30s: Family Finance

podcast, the only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out and distract our focus

from simply enjoying life.

Hello, and welcome to the Enjoy More 30s: Family

Finance podcast. This is episode number six in the initial

series, "Your Money Mindset", and it's titled "Investments

Should Be Boring". So we're going to cover what you need to

know about why your investment approach should be boring, and

what you can do to make sure that it stays that way. Now,

when I was a kid, like many boys, I wanted a really cool

fast car. I'd watch movies with these fast cars and all sorts of

things, and I obviously wanted to do that too. I probably

watched "Gone in 60 Seconds" a million times and said you know,

"I want one of these old fast cars that I could do tricks in

and, you know, be generally very unsafe in." I kept the Motor

Trend magazine's, I looked at all the new models and

everything else. And then you fast forward to me today, and

well, I drive a Subaru. It's not particularly fast. I bought it

because it's known for being safe, and it has a good

reputation for being reliable. And essentially, I feel like I

can put my family into the car, and we can go to, you know,

wherever we're wanting to go to safely. And that's what turned

out to be the most important to me when it comes to my car for

where I am today.

So what you need to know is people can kind of be the same

with investments. We watch movies of people trying to time

the stock market and hit it big- and we may think of the stock

market then as a fancy shiny car. And because everybody kind

of has investments, it can sometimes make it feel not quite

so reckless to take this approach. We're just kind of

emulating what we may see on TV with buy low, and sell high and,

you know, all this kind of stuff. And it's, in my opinion,

a reckless approach to be taking when it's the most important

tool you probably have when you're trying to determine what

your future is going to turn into.

So when you hear me say boring, 'what does that mean exactly?'

is probably the question that you're asking. So I'll first

start off by saying what it doesn't mean. It does not mean

leaving all your money in the bank, with no real upward

potential long term. If you leave all your money and save in

the bank, you're probably not going to reach the goals that

you're setting out for yourself. If you do, it's certainly going

to take you much, much longer than it necessarily has to by

trying to do it that way. What it really comes down to is two

main points. The first is staying diversified, and two is

not touching it.

staying diversified. My industry likes

using a lot of jargon terms that confuse people, but diversified

is really just a fancy way of saying 'don't have all your eggs

in one basket'. If you think about your 401(k) statement,

that's probably the easiest place to relate to, and you look

at all the investment options- what you probably see are 20 to

30 different individual options. In those titles, you'll see

words such as large cap growth this, or small cap value that,

or foreign this, or emerging markets that. These are all

different areas of the market, the global market. And some of

these are stock funds, where you're buying equity or

ownership in companies. Others can be bond funds, and that

would be kind of like if you- the easiest way, again, is whe

you received government sav ngs bonds from the U.S. gov

rnment when your gra dparents probably gave those to

ou. That's basically the gov rnment having money loaned to

hem, you're loaning them you money, and they're paying you

an interest rate off of tha . That's how a CD works. Tha

's how any bond debt kind of ins rument works. Corporations lik

Apple, Coca Cola, etc. they do hat too to raise money for th

mselves.

So there's all these different areas that you can invest in.

The thing about it is despite what you may see on TV or what

anybody proclaims, nobody has a crystal ball to know which areas

are going to do really, really well in any one year, and a

crystal ball to know which areas are going to do really, really

poorly in any one year. And so we don't want to really be

trying to time, or guess, what areas are really fantastic and

are really going to do well, and what areas aren't. Because

that's when people tend to get into trouble. If you think about

all these finance experts, or self proclaimed experts out

there, if any of them was really able to do that, everybody's

money would probably be with them by now, right? If they

could consistently say which area is always going to do the

best, they probably would draw a lot of attention. They certainly

would be drawing attention from people in the industry like me.

When we're staying diversified, that means that we're keeping

pieces in all of these different areas. We're kind of, you know,

we're acknowledging the fact that we don't know which area is

going to do really well, or really poorly in any one year,

but long term, all of these different areas should go up in

value. Long term, if we have a little bit in different pieces,

it should take us in the correct upward direction- again, long

term. Any one year things can go down, they can go up. But long

term, if we spread out everything all the time, we're

giving ourselves a much better chance of going in the right

upward direction as time goes on.

For number two, not touching it, this is much more

straightforward. Unfortunately, 2020 is probably a really good

example. If you're watching the news, or maybe even watching

your accounts, in March or so most things went down 20-30%.

And then they proceeded to rebound in the next few months,

and we ended 2020 with most categories, or most areas of the

market that we just kind of touched on briefly, positive.

Some were very positive, double digit positive. Now the people

that panicked, and moved their money out when it was low, were

the ones that completely now lost their ability to recover-

that recovery already happened. So they can invest now, but

they're investing after everything has already gone up.

And that's the thing that most people run into, and it's not

something that I can blame them for at all. Emotionally, when

you see those numbers decreasing, it fills you with

fear, it fills you with anxiety- that's perfectly natural, you're

watching something go down. However, if you're reacting on

those emotions, that's where you can get yourself in some

trouble. When they do studies on how much value an advisor

actually adds for the people that they work with, the biggest

contributing factor to that, oftentimes, is helping people

with the behavioral element. Avoiding rash, emotional

decisions when it comes to investments is generally a sound

approach to be taken.

So what can you do? The first is to kind of treat your

investments more like a Subaru. We're trying to use them to get

your family to its destination- that's our mindset. We're not

trying to jump in a sports car and get them to their goals, you

know, potentially at 200 miles per hour, but also with a very

high likelihood of crashing. We're trying to go in the right

direction and get there safely. If you're a do-it-yourselfer, we

never recommend creating your own allocations. So for your

401(k), again, if you look, "oh, they have all these different

funds, I could pick some of this, I can pick some of that."

If you're not a professional that's trained and can do this

on a regular basis and has knowledge and experience, then

we do not at all recommend doing that. Most 401(k) plans offer

you what they call target date funds. So if you're looking at

your list of investment options, you may see a phone that says

the Retired 2045 Fund or the Retired 2050 Fund. What these

funds are, are an easy way to get broader diversification, a

broader spreading your money out, all in one fund. So what

the fund does, is it says 'this person says they're going to

retire in 2045'. That means I can be more aggressive today,

because we're still 20 plus years away, and when we get

closer to 2045, we're going to make it naturally more

conservative because they're getting closer to the

retirement. So this is a very basic way to get a larger level

of diversification without having to make those decisions

on your own, when if this is not your profession, you're probably

not qualified to be doing that. Outside of a 401(k), they have

something called allocation funds. So it may be the Vanguard

Moderate Growth Allocation Fund, or the Franklin Templeton

Conservative Allocation Fund, or whatever it might be. And you

can match the level of risk that you're wanting to take, or

that's appropriate to be taking, for each of your individual

accounts. If you are using an advisor, they, in my opinion,

should be giving you very similar advice to this. While

they may have an expertise in designing their own allocations,

in my opinion, it should be very much an invested everywhere all

the time kind of a mindset. If your advisor speaks about

tactical, or moving to cash, or forward looking projections, or

anything like that, that's generally code for trying to

guess what's going to do well, which I definitely am not a

proponent of.

In closing let's take a quick look at some of these main

points that we covered today. The first is take a step back

and look at how your mindset currently is when it comes to

dealing with your investments. Are you looking at them as a

tool? Are you looking at them as kind of the Subaru- I want this

tool to be able to take me and my family to reach my goals. Or

are you looking at it as more of a Hollywood fast car, and maybe

that's not the approach that you really want to be taking. The

second point is being diversified is a way to spread

your money out everywhere all the time, because we aren't ever

sure which area is going to do really well or really poorly,

but long term, they should be taking us in the right, general

upward direction. The last is when it comes to the emotional

part of it and not touching it. 2020 may seem unique, 2008

seemed unique. There is going to almost certainly be multiple

more stressful situations, emotional situations where

you're going to see your account go down in value. Lastly,

remember there are tools such as target date funds, and

allocation funds, that can help if you're not using an advisor

who can assist with these allocations, that can give you a

level of diversification that most likely is better than you

trying to do something like this on your own.

As always, thanks for tuning in. If you enjoyed this episode,

please make sure to review us on Apple podcast or wherever you

listen. There are literally millions of young American

families out there that I'm trying to reach and help just

like you. The final episode in this initial series is going to

be coming up shortly, and its title is "Aren't Advisors for

Old People?" So there are some things that we may be taught

subconsciously through what we see on TV, and what we think of

when it comes to an advisor, that may not necessarily be

true. It's been great talking with you today and I look

forward to connecting with you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal tax or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS securities Inc and TFS advisory services an SEC

registered investment advisor member FINRA/SIPC.