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Raising Your Investment Mindset - Series Recap | 7.10
Episode 109th May 2022 • Enjoy More 30s: Family Finance • Joseph P. Okaly
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Recapping the 9 episodes that reframe our investment mindset to ease financial anxiety!

  • The worst 15 year period in the market over that same period of time going back to 1970, positive 3.7%, same exact index, different time period, very different result. (06:04)
  • Uncertainty on the other hand, we talked about how it does historically show a high correlation with volatility: financial crisis of 2008, COVID in 2020, the uncertainty period was the drop. Once there was more perceived certainty, a plan of action, what are we going to do? The market started its recovery. (07:29)
  • When you use a mathematical statistically diversified portfolio, the goal is like that of a healthy cookie, we want the most delicious flavor that we can get for the least amount of unhealthy ingredients. (13:46)

Quote for the episode: "The fear should not be paying for advice, it should be not getting something for that advice, not getting the value that you're paying for." (15:35)

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Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s Family Finance

Voiceover Audio:

podcast. The only podcast dedicated to making life more

Voiceover Audio:

enjoyable for young families by hitting on the financial topics

Voiceover Audio:

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

Voiceover Audio:

from simply enjoying life.

Joseph Okaly:

Hello there and welcome once again to the Enjoy

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More 30s Family Finance podcast. And today I have for you our

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Series Recap of the Raising Your Investment Mindset series. So as

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always, if you're liking what you're hearing, which I hope you

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do, please make sure to subscribe, please make sure to

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follow us on Apple podcasts, please make sure to follow us

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wherever you are listening to clicking those stars leaving a

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review, it really really does help us reach literally

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millions, not just a few 1000, but millions of people out there

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that are young families sitting here just like you.

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Today, as I said, we have the recap for you of the Raising

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Your Investment Mindset series. As I opened with at the very,

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very start of this series, investments really aren't my

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favorite thing to talk about because quite frankly, they are

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not nearly as important, in my opinion as so many of the other

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planning elements when it comes to finances. But you know, as

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sometimes I can be a little bit of the minority here, I wanted

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to make sure that I did provide you with these main points to

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cover these main things about investments because investments

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are what people have the most questions about. Investments or

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what people make movies about. There's no you know, well

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rounded, comprehensive financial planning movie, there should be

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but there's not. So you know, the mentalities that go with it

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the make it big mindset that they teach you in Hollywood and

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what a lot of people talk about, you know, from what I have seen

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myself personally in almost 15 years, it hinders the way more

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people operate, the decisions that they make than it helps. So

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why I did this series was for you to help reframe how you view

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and when we reframe how we view something, it can allow us to

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now utilize that in a different way. So utilize investments and

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a more constructive way, hence, raising your investment mindset

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title.

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The goal of this series, though, was very similar to the goal of

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all the other series that I've done. And that's to make sure

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that we are removing anxiety, we are removing financial worry. We

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don't want to forget that goal. So we can focus then all of our

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energy on what matters most, what matters most to you. And I

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have to believe very high on that list is enjoying more

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living with your family and with your friends. So you don't need

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to have anxiety when it comes to money. That's crazy, right? And

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with the right mindset, with a few steps in the right

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direction, you can make huge, monumentally huge strides. So be

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proud of every step as you take it, you're making a contribution

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to yourself, you're making life more enjoyable for you. And the

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natural consequence of that is now your family's life is better

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as well, that's great. So lastly, at the end, today, I'm

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going to talk about the next series for the podcast to come.

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Always super excited. So without any further ado, let's grab your

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spouse. And let's review.

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Number 1, Investment Don't "Do Good". So here I got a little

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bit up on the soapbox. We discussed how we don't want to

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ask if our investments "do good". We want to ask if our

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investments are on a path to get us to a specific goal. Are they

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getting us to where we want them to be? And if they're doing so

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effectively, when we compare them to their peers, when we

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compare the investments to their peers, doing good is completely

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arbitrary, and likely emotional with how it is generally used.

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It needs to be compared to something. If you had a fun last

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year and 2021 that went up 30%, you are probably like wow, this

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is fantastic. Best fund ever right? However, if it was a real

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estate fund, it would have actually trailed its index by

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15% still, as the real estate index was up over 45% in 2021.

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So we need to focus on making sure your investments are on a

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path to get you to your goals and leave the investment

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performance comparisons up to an advisor or an allocation fund or

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something to make sure those individual pieces are performing

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how they should would be my advice. Point of the investments

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are to get us to our goals. Comparison wise we need to make

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sure we're comparing them to the right thing, the right

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alternatives to the same kind of investment box to see whether

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they're doing well or not. So hopefully at the end of this

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episode, everybody was able to say "I now understand what I I

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want my investments to do and how I should be evaluating if

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they are actually doing that."

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Number 2, Buy Low, Sell High? Here we discussed how too many

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people wind up buying high and selling low, because of the role

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of emotions and the lack of education that's provided, the

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lack of perspective on what normal actually is. So as an

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example, we talked about how a 10% drop in the market, market

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being the S&P 500, every 18 months on average, is normal. If

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you see a 10% drop every 18 months in the market, that is

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actually normal when we look back in history normal. So you

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should actually expect 20 of those to occur over the next 30

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years. That would be normal. The worst one month since 1970 in

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the market, again, the S&P 500, the worst one month performance,

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negative 21%. The worst 15 year period in the market over that

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same period of time going back to 1970, positive 3.7%, same

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exact index, different time period, very different result.

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So time period greatly affects what normal is. Shorter term,

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again, you should expect more ups and downs. Longer term, you

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have a smaller range of returns and again, the worst 15 year

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period was positive 3.7%. So hopefully now at the end of this

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episode, everyone is able to say "I now better understand what

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normal is for how often downs do occur and I am better equipped

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to not emotionally sell low when that happens."

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Number 3, The Stock Market Doesn't Care About Political

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Parties. Here we discuss how what political party happens to

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be in power tends to have very little correlation to how the

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stock market performs, as well as the certainty versus

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uncertainty elements that most certainly do. They've looked at

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the President, they've looked at the Congress, they've combined

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them all together in all different ways. And what the

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past says is that you can't dictate better or worse

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investment returns just by what political party happens to be in

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office. Uncertainty on the other hand, we talked about how it

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does historically show a high correlation with volatility:

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financial crisis of 2008, COVID in 2020, the uncertainty period

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was the drop. Once there was more perceived certainty, a plan

Joseph Okaly:

of action, what are we going to do? The market started its

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recovery. So hopefully everyone after this episode was able to

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say now, "I now know better what generally affects the stock

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market and what generally doesn't" goal statement that we

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laid out.

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Number 4, Hollywood's Stock Market. Here we addressed how

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our perceptions are based on what we hear and what we see,

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those inputs. And when it comes to investments, Hollywood tends

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to only put out very negative perceptions, which can increase

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our uneasiness, decrease our likelihood of maybe taking the

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steps we need to through investments or advice. Wall

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Street, The Big Short, Boiler Room, Wolf of Wall Street, all

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the most popular movies involve crooks, criminals, and otherwise

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very unscrupulous individuals. So what are your views about

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investment? Do you have positive views? Are they negative? Are

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they opportunistic? Are they fearful? You know, think about

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how you may have gotten to the mindset you have today. You

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weren't born with it. It's something that's developed over

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time. And think about what mindset you might want your kids

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to have about it. Because I've seen too many clients who are in

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bad, you know, situations and make bad decisions, because they

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were too fearful of using investments, or too fearful of

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reaching out for advice. And were in, you know, a poor

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financial situation because of it. In my experience, there are

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way more good people than not out there that can help you be

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making decisions. So hopefully everyone is now able to say "I

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recognize what can greatly affect many people's perceptions

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of investments", which was the goal statement that we laid out

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for that episode.

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Number 5, Winners and Losers are Temporary. This episode we

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focused on how just like every dog has its day, every area of

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the market tends to have it's time to lead and how emotionally

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to make the most of that fact. Human tendency is to assume that

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what happened recently is just going to keep happening right?

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Stock is going up, it's gonna go up forever, right? Nothing goes

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up forever though. So we talked about how rebalancing, which is

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systematically taking gains in certain well performing areas

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and reinvesting them into an area that has been

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underperforming is something an advisor or an allocation fund

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does, because of how different areas tend to do best each year.

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Again, we use the real estate example. In 2020, it went down

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around 12%. Get out right? Down 12%! In 2021 it went up 45%.

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It's fantastic! Get in! Through the end of January of 2022, it

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was down over 6.5%. Get out again, right? So rebalancing can

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help us avoid the emotional toll of selling things that have done

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well, and buying things that maybe haven't. So hopefully,

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everyone is now able to better say "I understand how to better

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view my winners and my losers." Again, that goal statement that

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we laid out for the episode.

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Number 6, We Can All Save Another $100. This one is pretty

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self explanatory. And we talked about how saving just a little

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bit more is almost always possible. And just how hugely

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significant that little extra bit can be for you and how much

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farther it can take you down the road. So our credit card bills

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are very easy. As an example here. They vary every month. If

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we have an emergency vet visit, we figure out how to pay for it.

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So use that same urgency on yourself. We spoke on how an

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extra $100 a month for 30 years equates to an extra $150,000 at

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8%. $100 a month that you probably not even going to

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notice. And it's all linear. So $200 a month over those same

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assumptions, 30 years, 8%, 300,000. So if you have a credit

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card bill that varies by $200 a month, you could probably afford

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to save $200 a month towards yourself over these next 30

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years and walk away with another $300,000 if those assumptions

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are true. So save more towards yourself. You're worth it! So

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hopefully everyone is now able to say the goal statement of "I

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better understand how impactful it can be to consistently push

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my savings just a little bit further."

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Number 7, Bingo! You Probably Own More Than the Market. Here

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we clarify what exactly "the market" is, and how in all

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likelihood your portfolio extends way beyond what they're

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even talking about on TV. "The market" is simply an index, a

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grouping of the largest 500 US companies. Just like the numbers

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that they pull for bingo, it doesn't mean that what they

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share on TV every night is actually what you have on your

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card. If you have a portfolio 50% the S&P then only 50% of

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what they talk about directly relates to you. And with US

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bonds, foreign bonds, small companies, real estate funds, so

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on and so on and so on that make up a true diversified portfolio,

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you likely have a lot more than just "the market" that they're

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discussing. So the goal statement here was, "I now

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better understand what they mean when they say 'the market', and

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how that may actually relate to my personal investments." And

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hopefully for you that's not true.

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Number 8, Emotionally Abnormal, Statistically Normal and Healthy

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Cookies. In this episode, we discussed how what may feel

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abnormal from an emotional standpoint can actually be very,

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very normal from a statistical standpoint. By knowing what

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normal is we can better protect against acting emotionally when

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it comes to our investments. When you use a mathematical

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statistically diversified portfolio, the goal is like that

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of a healthy cookie, we want the most delicious flavor that we

Joseph Okaly:

can get for the least amount of unhealthy ingredients. The most

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return for the amount of risk we are willing to take. That's the

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goal. So normal for our 10% expected return portfolio, for

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example, was positive 22 to negative 2%. When we consider

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the risk number of the standard deviation, that thing that we

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all tend to just ignore standard deviation, that sounds a little

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too technical. I'll just ignore it and look at the return. So

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this is what should occur the majority of the time though,

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when we combine that standard deviation with the expected

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return. So 2 out of every 3 years that should hold true.

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That would be statistically normal. Now, the shorter the

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time period, the greater the chance for variation. Again,

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going back to that S&P 500 example since 1970, the worst

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single month for the market negative 21%. Very short period

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of time. The worst 15 year period, however, for that same

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period of time, positive 3.7%. So if you're able to say that

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goal statement of a "I now better understand how much up

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and down is normal for investments, so I'm better

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prepared to not freak out when it does", then you have

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succeeded here.

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Number 9, last episode here, Advice Should Trump Fees - The

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3% Study. We live in an increasingly fee focused society

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but in this episode, we reviewed in my opinion, how advice should

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be viewed in context compared to fees for that advice, and what

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studies have supported being true, namely Vanguard's 3%

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Study. The fear is not paying for advice, or it should not be

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paying for advice, it should be not getting something for that

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advice, not getting the value that you're paying for. If you

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go buy a Snickers bar, the Snickers bar is good. We just

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don't want to pay $13 for the Snickers bar, when we could buy

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it for $1. We want to get good value for what we are spending

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our money on. Vanguard, if you remember, is an incredibly fee

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conscious firm. Low fees are one of their bedrock principles of

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where they got to now. When they looked at where you put your

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money, where you take it out of and retirement, rebalancing,

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behavioral elements, they came up with over 3% per year in

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value provided by a proper advisor. 3% per year in inputs

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provided by a proper advisor. So we did our own example even. And

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we got to $1 million dollars in value over 30 years, really

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without too much difficulty. By saving a little bit more, having

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someone to push you to save a little bit more, increasing that

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a little bit more every year, taking advantage of things like

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company matches, using Roth retirement account, identifying

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where to take the money out of it really, really can add up. So

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if you can now say "I better understand how advice versus

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fees for that advice can separately affect my situation",

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then you've hit on the goal that we have for you here.

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And this is really the culmination of everything from

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this season. If you there is somebody out there who is

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wanting advice or who would benefit from advice, I don't

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want you to either be A) afraid of asking for that advice,

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because what you see on TV, or B) think that there's nobody out

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there that could help you. Are there bad advisors out there?

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Absolutely, just like every other industry. But if you look

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for one that does planning, look for one that does comprehensive

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work, look for one that's trying to really make your life more

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enjoyable. That's the goal of working with you not a big

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number on a piece of paper. It is out there, you can find it.

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So don't let fear or fee stop you from reaching your full

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potential.

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So that is it for this recap. Hopefully now you feel more

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confident, push that chest out a little bit more about

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investments, what to expect, maybe how to better utilize that

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now towards your goals. But more than anything, I hope you're not

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now afraid of investments, not afraid, again, to seek out

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advice. Because this is really the most important takeaway that

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I had. Investments I know is what everyone tends to focus on.

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But it's really just one piece of the puzzle. It's just one

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part of what a good comprehensive plan should

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actually include.

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Now for our next series to come. We all like stories, right?

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They're such a powerful tool. Stories have been around for

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centuries! Droning on and on about expected returns and

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standard deviations and statistical norms. I know I like

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that. But I also recognize that for most of the normal people

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out there, it's super boring. Stories are how we connect with

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our grandparents, our friends, our families, it's how as a

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race, we've passed morals and histories down for generations

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upon generations. It's how we put our children to bed every

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night. So let's see what it can do for our finances in our next

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series to come, The Financial Parables of Your Life. I'll be

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picking out the most memorable, unique, powerful stories to keep

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in your mind and on the right track financially.

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So that takes us to the end of this Raising Your Investment

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Mindset series. Take some time, review these important areas,

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and remember, if you can make one positive change, not 20, not

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5, not even 2, just 1. Then you're one further step along

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the path of having life be more enjoyable for you and your

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family. If you can absorb and implement all of them even

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better. That's fantastic. You know, having an idea that I

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could be helping people out there that I never meet. That's

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a really cool, amazing world that we live in. If you do

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happen to have questions that you want help in answering, if

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it's overwhelming, you just want somebody out there to help and

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do it for you reach out to me either through my website

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EnjoyMore30s.com EnjoyMore30s.com Click Ask Joe

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or you can connect with me directly by visiting my wealth

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management firm New Horizons Wealth Management at

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nhwmllc.com. I'd be happy to help. So thanks so much for

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joining me today and I can't wait to connect with you again

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soon.

Voiceover Audio:

The conversations on this show are

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Joe's opinions and provided for general information purposes

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

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer, or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor, Member FINRA/SIPC.

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