120: Meb Faber – A Crash Course in Long-Term Investing—For Short-Term Traders

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Tasty Trade Inc. is a registered broker dealer and member of FINRA, NFA, and SIPC. Podcast. What's going on, traders? Welcome to episode 120. Thank you very much for being here. I'm glad you could join me. Uh first up, I must give a quick reminder. I'm hosting a small chat with traders event in New York on the 2nd of May. There will be bears, there will be pizza, and I'll be doing a live interview with a trader, essentially like a live podcast.

There will also be a number of past guests of Chatwith Traders attending, so it'll be a cool opportunity to meet with some of them and more importantly, meet up with other traders who are doing similar things and who have similar goals. to yourself. It's only twelve bucks for a ticket and that includes absolutely everything. You can grab a ticket at chatwithraders dot com slash NY.

Just so you know, since I first announced this last week, more than 80 people have reserved their spot already, and I have a hard stop at 120 people. So please be quick if you'd like to come. And a special thanks to Trading Technologies and Sangluchi, who are both sponsoring this event and essentially making the whole thing possible. Avoid the FOMO, reserve your spot at chatwithraders.com/slash ny.

Now, on to my guest for this episode. My guest is Meb Faber. Meb is the founder and CIO at Cambria Investment Management, where he manages Cambria's ETF. separate accounts and private investment funds. He's also authored numerous white papers and five books now. Meb's a budding podcaster too. His podcast is called The Meb Fabor Show.

The main reason why I asked Mab to come on the podcast was to talk to us about some simple ways that active traders can capitalize on the opportunity and compounding effects. that somewhat passive longer term investing has to offer. So I asked Meb about where to start out, how to set expectations, various types of portfolios.

when to enter the market, what to do during drawdown, what things new investors struggle with most, and so on and so forth. Throughout the interview, Meb does mention a fair few links and resources. I've curated all of these at chatwithraders.com slash one twenty. So you can find everything there. I don't think I've missed any.

And one last thing, in case we have some new listeners here, please keep in mind you're 100% responsible for your own trading and investing decisions. Now please welcome Meb Faber joining us from California. When you first got into markets, Meb, where did you start out?

So my background is a little different. I was a biotech and engineering student at university, but this was during the late two t uh late nineties, so pretty exciting time in markets, both for internet as well as biotech. If you remember back uh back uh sequencing the genome and all the fun stuff going on with genetics and so, you know, I spent a fair amount of my spare time uh investing and studying markets and so it actually started out

as a biotech equity analyst, taking a year off before going back to get my PhD, but that that one year off certainly became two, three, four and started gravitating more and more towards

um the quant side of the business before eventually starting Cambria in two thousand seven here in Los Angeles with my partner Eric Richardson. Um but but if you wanted to go ri back really far, you know it's certainly um with my father chatting stocks and investments in business, uh, you know, for many years growing up and and I w I even found a a postcard the other day that I had written from camp that was talking about how

Uh, I thought it was a good idea for us to pick up some chairs at Disney. So kind of a kind of a fun reminder at a early age. But yeah, it was uh it was instilled pretty early on.

And so what other roles have you had? Obviously you uh I think it's CIO and also co founder of Cambria now, but what other roles have you had sort of leading up to that point? And I I think you worked as a trader at some point also. Yeah, I mean so that it was started out as as biotech analyst while I was going to grad school. And so that was focused on pure fundamental research picking biotech stock.

And then it became a little more quantitative. I I went to go work for a CTA, so commodity trading advisor that um I spent more of my time on on trading systems, quantitative ideas. everything from very short term to very long term, but with a particular interest in what a lot of CTAs do, of course, which is which is a lot of what we do at Cambria, which is um trend following concepts, long term trend following ideas that have been around for

But uh and then had simply moved to to LA in oh six and started Cambria in oh seven. And so um but it's a full spectrum from fundamental, technical And then multi assets from everything around the world, stocks, bonds.

real estate commodities, everything in between. Well tell us a little bit more about that. Like how do you spend your time these days? What sort of things are you doing? What do you do now? What is Cambria essentially? You know, I think a lot of professional investors on uh they're listening to this will sympathize or or this will con next comment will resonate a little bit and is that you learn pretty quickly the difference between

Managing money and the business of money management. And what I mean by that is, you know, simply coming up with trading ideas and systems and theory and research. It's totally different than running a a investment business. And so there's a lot of people that are in trust um attracted to our world by, you know, the m of course the money and the compensation, but also the really exciting, complex puzzles that exist in in the world economy and investing. But

you know, also on the flip side of, you know, spending all day on uh chatting with lawyers and the SEC and managing public funds and talking to reporters and all that good stuff that goes in with running a company and making sure people get paid on time. So

Uh what do I spend most of my time? I I enjoy doing is is certainly the research. Uh and and something that's a bit of a surprise had you told me ten years ago when we started the firm is is of course writing. Uh you know, the the first academic paper I ever wrote was an accident and and published and then looking back on it it's kinda crazy now'cause we've published about a dozen white papers, five books

And I think the blog has gone on two thousand articles, uh, which is a little crazy. So but the writing has become part of the process and so like you, you know, we started a podcast last summer, which has been a lot of fun. So the day to day is kinda coming up with ideas or concepts to refine our process or to help implement or improve what we're doing. And in some cases, you know, we have eight public funds out there to actually launch new products.

or or things that we look around and say, Hey, I I think this is a better mouse trap or uh a more interesting thing that doesn't exist that should. But the day to day that I would spend most of the time what I like doing is reading and writing and uh skiing if if I get the chance to, but uh this year's been a little light on the ladder front. Nice. Well I mean it sounds as though you've got a lot of things going on I'm just interested to know, is there like a

How would you categorize your style or or styles of investing and trading? I mean, is it possible to categorize what you do because you do so many different things or is there like like is there an overarching theme to what you do? Th there's a couple. So when we think of launching funds or any sort of money management that we offer to the public, is that

There's a couple criteria. And we say, look, number one, does this concept or fund exist already? Because there's plenty of fund companies out there like Vanguard, you know, multi-trillion in assets that uh provide a lot of products and they do it very, very well. Two, is it something that we think we can improve upon or that doesn't exist or that we can do cheaper?

And we think there's still a lot of ideas out there that that don't exist in the format that we think that they should. And lastly for me is that Is it something that I want to put my own money into? And so unlike the vast majority of mutual fund managers, I think the number is something like ranges from fifty to eighty percent of mutual fund ma mutual fund managers in the US have

zero dollars invested in their own funds and and and on the higher percentages is less than a hundred thousand. So, you know, I have a hundred percent of of my m net worth in our funds and strategies and and most of the people here do. So Is it something that you believe in and you want to invest in? And so once you've said that The funds are very different. Each one or each strategy ranges from funds that are very niche

you know, that may say be a sovereign high yield bond fund. You know, that's a very neat strategy to something very broad like an asset allocation fund that owns thirty thousand securities around the world and is a super low fee. Now that having been said,

There are and everything we do is rules based and quantitative, which we think is important to remove the emotions out of the whole process. That having been said, there are two themes that kind of have their tentacles in almost every fund or thought process. And it's two concepts that have been around for over a hundred years, ever since Charles Dow was talking about it with Dow theory and trend following. So that's one is easy and they're close cousins, but momentum and trend.

And then two is uh again, over a hundred years old is Ben Graham talking about it, and that that of course is value investing. And so some funds are pure value funds, some funds are pure trend falling funds. Some funds do actually the combination of the two, which is if you had to pick one investment strategy or concept in the world that is is the perfect synergy of uh everything I look for. It's it's value and trend or momentum. So basically something that's really cheap that's going up.

Uh, but depending on the fun or strategy You know, those are the two main themes and and then of course we could talk about this at some point, but uh also the question of how does an investor holistically put together all these ideas into a portfolio and not go totally crazy with with holding these two different ideas in their head.

Yeah, I mean we're certainly gonna get into that. I think that's gonna sort of be the the main focus of of our conversation here. I just wanna go back to that that stat you threw out, something like fifty to eighty percent of asset managers don't actually have any money in their own funds. I mean that seems really Crazy. I'm kind of shocked by that.

Here's the funny part about it, and I I know Nassim Taleb's got a new book coming out on this topic, which I look forward to, but it's either really strange and surprising or it's incredibly unsurprising. And So let's say the average mutual fund manager charges one point two five percent. average ETF is like point five five percent in many funds you can now get ETFs in in mutual funds publicly for

Even like 10, 20 basis points. So, in many cases, a lot of these mutual fund managers say, look, I know this fund is tax inefficient, I know that it's expensive. Why would I invest my own money in that? And that's a totally rational decision. Um now from the in fund investor. It's the last thing I wanna see. You know, I want to see that fund manager investing in their own fund. And and this is one of the reasons the hedge fund space traditionally

at least has that going for it. You know, the the traditional hedge fund fee structure is much higher, but at least most of these managers have a lot more skin in the game, for better or for worse. But you know, and it depends on the fund too and the different strategies. But Morningstar puts out a lot of uh research on this topic, which is where we sourced it. And I'm I can't remember the exact name of the blog post, but I can certainly send it to you that has the charts on this topic.

Uh but yeah, it it ranges depending on the type of fund. But in some cases, yeah, it's as high as eighty uh I think eighty percent have either nothing or less than a hundred thousand in the fund. Right. Very interesting. Yeah, we might try and dig up that link and I'll I'll put it in the show notes if anyone's interested to read up more about that.

Uh but as we hinted, Meb, obviously I've reached out to you and I've you're aware of this. Um, you know, one of the reasons why I was really keen to bring you on the podcast is because I kinda wanna speak to you about how active traders, traders who trade very short time frames, either intraday or or swing trading, you know, holding positions for a couple of days, how short term active traders can Sort of tap into the opportunity of a longer term, bigger picture investing as well.

something that requires less input than it does to be an active day trader, for example. Um, but something that can it is reasonably simple, reasonably robust, you know, just some actionable tips and ideas for how we can sort of take advantage of that the the compounding effect. So

I I guess, you know, on this point of conversation, what is a good starting point? I mean, let's just start right there. I mean, most of my questions, uh, just so you know, are gonna be fairly basic, but because I think this is This is quite new to a lot of people. People who are even advanced traders, I think, some of them tend to neglect the investing side. Obviously that's why I brought you on here. So what's a good starting point?

Hopefully that made sense. No, it's it it does. And I and I think it's one of the most important things an investor can do. And so people and it doesn't just matter if it's with investing or relationships or work. One of the most important things people can do in life is understand expectations. And so I saw a recent survey recently asked a bunch of investors around the world, what do you expect?

stocks to return and same thing in the US and and of course ask some millennials too. And I think the the average response is they expect stocks to return ten point five percent or something going forward. And there's a couple of comments on that. And so one is say, all right The first thing we need to do is set our base case and understand what does history look like? What are the worst case scenarios? What are the best case scenarios? So my favorite investing book.

Which I highly recommend. It's expensive, so go get it at the library if you're listening. It's called Triumph of the Optimist. It's written by a couple of British professors. And it takes a look at the history of markets going back to nineteen hundred. And there's some been other some other variants of this. Ibotson's done it, but this one in particular looks at about twenty global markets. So it looks at say for example, here's what the world looked like in nineteen hundred.

and the sector composition and the global composition of markets. And then here's how these markets did since nineteen two hundred. And here's an exam I mean by the way, there um if you Google global investment returns yearbook Credit Suisse does an annual update to this book that's free. So you can c probably get about ten years of this for free. That uh is probably the best investment. uh writing that you can read. Highly recommend it. Anyway, so

What what's the historical results look like? So US has done about ten percent a year in stocks going back to nineteen hundred. And then um if you look at bonds have done about seven percent and I think bills had done about six percent. So going back to nineteen hundred. Um now Uh sorry, that might be a little bit too high. But the the real return, so net of inflation, is that stocks did six and a half percent.

uh bonds did around two and bills did around one. So um you lop off that four percent inflation and you get down to those numbers. Now The US was one of the best performing stock markets in the world over that period. It went from kind of this emerging market to now the global superpower. The best performing stock market in the world, uh I think was tiny South Africa.

And then the worst performing is Austria basically had zero returns over the entire period real. So after inflation. And that's not really the worst case scenario. The really the worst case scenario is China and Russia shutting down their capital markets completely. So essentially your mo your investment there went to zero when when the government said, Thank you very much, we're gonna take your investments away.

So that's the base case scenario. And so we like to call it the five two one rule, meaning after inflation Stocks globally have done about five percent a year, bonds, and I'm rounding up about two percent a year, and bills around one. And so every deviation from that, you gotta start with that as the as the starting point. And you say, okay, US stock. They've also declined

by fifty percent multiple times. So most people are familiar with that global financial crisis, dot com bus, but they also declined over eighty percent in the Great Depression. And Charlie Munger and Warren Buffett often say this as at many others, they say, look, if you're not willing to invest in stocks and experience quoted securities having a fifty percent decline, you shouldn't be in stocks in the first place. So that's a lot of just kind of here's the base case scenario.

So you should never be surprised if you buy a stock market, for example, and it goes down eighty percent or fifty percent. Now you can come up with probabilities and projected outcomes based on a lot of other things we'll talk about, I'm sure at some point, like valuation. But in general, you have to assume that potential outcome. And then so people say, Okay, well stocks sound pretty risky even though they have higher returns. What about bonds? Well bonds

suffer from a much different risk, which is usually not the price crash risk, but it's really the long eroding effects of inflation. So while bonds on a nominal level have only declined by about twenty percent. Bonds after inflation in the US in particular, but other places around the world have declined by half. So in many ways, bonds are equally as risky as stocks.

But the uh it's a different risk, which is inflation, whereas stocks typically it's more of a manic depressive Mr. Market risk and and the price change. So the solution for many people, first thing they do is they say, Okay Well, I'm gonna diversify across US stocks and bonds. We'll do a traditional sixty forty portfolio.

And you get a little bit lower return than stocks, but you get lower volatility and drawdowns. Well the problem with that portfolio is it's the volatility of stocks still dominates the portfolio. And so you have a portfolio that still ends up with very high drawdowns, we're talking two thirds at some point. You you can't really find a global market that hasn't had two thirds draw down at some point in a in a sixty forty traditional institutional allocation.

And most investors, if you were to tell them, man, you know, here's your basic moderate portfolio, sixty forty, and you're gonna lose sixty percent at some point, that's way too much risk for them. And it's really hard, and that's why you see so much bad behavior b by investors when uh markets do poorly. And there's a lot of research that comes out that shows this that people over and over again, based on their emotions,

We'll sell at market bottoms, buy at market tops, rinse repeat. And part of that's just'cause we're human. You know, we're not really built to trade shares of IBM and and wheat futures.

But but really the flight response and the the greed takeover and it's uh it's just part of knowing the history at least of what's capable and what's happened in the past can at least help you to take a step back and say, okay, let me implement some sort of rules based policy portfolio or process to avoid me acting like an idiot going forward.

Okay. Now when you talk about just for example, stocks have returned X amount over, you know, the last hundred years or or whatever. When you say stocks have returned, are you talking about, you know, the stock market index?

Yeah, so we're talking about like a a mar what we call a market cap weighted index, which means in the US the good example is S P five hundred. And th this is actually a good talking point where The the market cap weighted index, which weights so the S P five hundred means you put the most in Apple and the next in whatever it is, Walmart, Exxon, et cetera, you put the most in the biggest stocks all the way down.

And that reflects the market. That is literally the market. If you were to go out and just buy, quote, the market, that is the sum average of what everyone's gonna have. Well There's a couple comments on this. So one, a lot of people don't know this, particularly in the US, and and this is a point of of bad behavior also, is that so if you look globally, the US is about half of world market cap. And so that means the rest of the world makes up the other half.

And the problem in the US, for example, is that most investors in the US invest around seventy percent of their equity allocation in the US. And that's called home country bias, meaning they put way more in their own market than other other markets. And it's a

normal thing for for people to do. You know, it's the same reason I cheer for the Denver Broncos and I like skiing, is it, you know, all these other things is that it's comfortable, it's what I'm used to, it makes sense. But the irony is that it happens in every country around the world. So Aussie's just as bad, Brits just as bad, Japan and China even worse, where these markets

People in the local country place way too much in their own market relative to the world percentage. And that gives you a massive uncompensated risk, which is this concentration risk. And you could ask anybody in Greece or Brazil or Russia the last few years in these countries that have declined sixty to ninety percent. I'd say that was probably a really dumb thing to do, but it also applies to stocks. You know, a lot of people say for example, may work at a company and invest

uh in the stock of the company in their retirement plan. And so they're really like triple leveraged the company, one with their job, one with the uh money going into their retirement plan and and three to the broad market as well. So th that sort of risk and that sort of concentration

Um, while market cap investing is the market, it's also a very suboptimal way to invest. And we can get into that if you want, but you know, a lot of people To further clarify what market cap investing means, is a lot of people all say, Hey, look, the S P five hundred.

You know, what's that? And I'll talk to friends and they'll say, Well, it's the five hundred largest companies in the US. I say, Right. Largest by what measure? And usually my friends will say, Well, you know, probably like earnings and revenue. I say, No, no, no, no. The only measure that matters is simply the price of the stock times the shares outstanding. And that's what we call that's market cap. That's how big the company is.

But it actually has nothing to do with whether the company makes any money, whether they ever sold one widget ever, whether they have any revenue, anything. Whether it's a good value, whether the stock's super cheap or inexpensive. All it is is how much are people willing to pay for the price of that stock? And so if you were an alien and came down and said, is this a reasonable way to invest? I don't think anyone would think it is, but that's

Um but that's the market cap investing. Now the pro of that is that By owning the index, and this is one reason why it works historically is you're guaranteed to own the winners. So you're guaranteed to own Apple, Amazon, McDonald's, all these stocks that have had incredible performance.

And the historical results show that it's actually a subset of all of the stocks out there, maybe twenty percent, that deliver all the gains. So market cap investing is a good first step, but it's not an ideal way to invest. Are you ready to get serious about trading? Then join Tasty Trade, Investopedia's best platform for options trading in 2026.

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Now just before we go any further, obviously I kind of outlined my reasons for wanting to bring you onto the podcast here. And I just want to go back to that a little bit. Is it slightly naive to think that you can do well in investing with what's the right word? With limited input. You know what I mean? Because like I I said, one of the reasons was obviously active trading is very time intensive. I kinda see

longer term investing is something that does require less input. I'm just curious to get your opinion on that. Like is that me being naive? Because if someone said they wanted to be a trader with very little time input, You know, good luck. Is it the same with bigger picture investing? Obviously it takes up a large part of your day, but you're doing, you know, many things. Is someone who wants to take more of a passive approach, is that reasonable?

So here's the beauty, is we we we wrote an article a couple years ago, I think, called It's a Wonderful Time to be Investor. It's probably the best time to be an investor in the history of investing as far as access to low cost uh portfolios. And what I mean by that is any investor could go out and buy a handful of Vanguard funds. They could buy our asset allocation ETF.

And boom, in one shot, and there's even brokerages that don't charge commissions at this point. There's the advent of all of these digital advisors that now do it for you. So it's very simple and you could just go sign up for any of these digital visors. We have one. Vanguard has one. Schwab has one.

But you could also go just go buy all in one fund and meaning you get all of these things for a super low cost and a very, very tax efficient vehicle. And that's awesome. You know, you go back twenty, thirty years when these brokerages would charge three percent. Or even ten years ago. And and the and the scary thing is that

a lot of this still exists in the world. So the flip side of this is that you've never had more access to dynamite to blow yourself up as well. You know, the ability to have an app on your phone and you can trade all day long and and uh not pay commissions and you know check your balance every ten seconds if you wanted to. are all things that probably don't help the long term approach. You know, probably helps your world a lot, but but doesn't help the uh long term investment approach.

And so there is a lot of awesome solutions out there. And, you know, we try to be o honest and agnostic and say, look. Obviously we think we have some great solutions, but there's plenty of other great shops, Schwab, Vanguard, et cetera, uh BlackRock that you can invest in a couple of these funds, not look at'em again for ten, twenty, thirty years.

and be just fine. Uh the beauty of these what people call these digital advisors or robo advisors now and Um there's a handful of them in the US to where they'll give you a you take a questionnaire, they give you a portfolio of say a dozen funds. they rebalance them for you, they tax manage them for you. You do literally nothing. And so to the to the person that wants a good solution and needs to spend, I don't know, ten minutes a year

if at all, uh, it's never been a better time. And we can get into some specifics on how some of these are better than others and how some are are, you know, still terrible. I mean the the bad news is the most of the investment world for even this long term holdings still charge huge fees and can be very predatory. So if someone doesn't know what they're doing, you can still go down the route that our parents and grandparents do. But the good news is that most of all the news flow

and fun flows demonstrate that it's kind of a one way street. You know, most people don't go from uh a high fee, tax inefficient product where someone isn't a fiduciary to someone who by law has to be in your best interest, low cost funds that are tax efficient and perform well, usually that's a one way street and usually it's a generational process that people people

um, you know, they'll sell off their funds when they die uh or get divorced or inherit the money. I mean, th there's a stat in the US that the average financial advisor that's been in business for I forget it's either ten or twenty years. owns two hundred mutual funds for his client.

And that harkens back to the days of, you know, these salespeople showing up and selling a fund and getting a three percent commission and the fund costing two percent a year plus twelve B one fees plus a front end load.

Well, that world doesn't really exist. I mean it still exists, but it's dying a very, very quick death. So the good news is it's a wonderful time to be an investor and you have never had better access to low uh cost products. And I'll even give you one more stat that a lot of people don't know. So for example, let's say you have an ETF, Exchange Trade of Fund, that charges thirty basis points per year.

So a third of a percent. So it's super low already. Many of these funds actually will go and lend out some of the securities uh to short sellers. on margin and then they will return the short lending revenue to the fund shareholders. So there are a handful of funds out there

that actually have a negative expense ratio, meaning they're paying you to own the fund. And that's a pretty cool thing, right? If you think about it, uh what a time we live in to be able to own an investment portfolio where the management fee is actually negative.

So you're talking about some of these robo advisors which are becoming increasingly popular. If someone was willing to put in a little more effort, you know, you said if you go down that path, you could spend ten minutes a year to manage your longer-term investments. If someone was to put in a little more effort than that, What's their chances of achieving better performance over the long term?

So this is a interesting question because To me that the beauty of a lot of the funds and strategies now is that if you go back to the seventies when John Vogel invented the mutual uh the index fund.

You know, that used to have a certain meaning. That meant market cap weighting, low turnover, low cost. And that's what an index fund was. So something like the S P five hundred, right? Well It's ch that that definition has been totally polluted over the years because What it active management used to mean is hey, here's a manager who's trying to beat the S P five hundred and he charges two percent a year.

And there's very little chance of him doing and it's tax inefficient. So that's why index funds have now grown so much. They're about, I think, a quarter or a third of the overall market. Well, however, all index funds have become at this point is rules based process. So for example, we were talking about how market cap, index weighting, SP five hundred is a good first step.

But if you weight the stocks in the S B five hundred by almost any other methodology, you could equal weight them. You could weight them on based on like a value metric, something like price to earnings ratio. You know, people used to talk about dividend yield and the dogs of the Dow. So any of these waiting methodologies will beat the SP five hundred by a percent or two per year, going back as long as we have data to the twenties. The reason being

is that market cap waiting has no tether to pri uh to value. And so once you break this market cap link and you start to tilt towards value, so buying a stock that has lower PE ratio or a higher dividend yield. you end up outperforming the S P five hundred. Well the good news is you can now get those rules based objective portfolios for also very low cost. So you have indexes

Um that are what people would have used to have called active management, but that are low-cost tax efficient for super low cost. So That doesn't necessarily require you to put any ex any additional effort, really only up front. So we talk about this in a white paper we publish called the Trinity Portfolio. It's free online. We'll give you a link in the show notes.

Um, and we kind of go through this whole less holistic process of how to build a portfolio. So we start out with the US sixty forty. And then we expand to f uh global sixty forty. And by the way, adding global assets doesn't really increase your returns or reduce your risk that much. What it does do is it reduces the possible extreme scenarios. So if you put all your money in Greek bonds and stocks, for example.

That would have shown to have had a very negative outcome over the past decade. Um, on the flip side, if you put all your money in US stock. you know, in bonds, you would have done much better. But a global gives you kind of the average. So you'll never be the best or the worst, which is good. The second thing you can add to the portfolio is some traditional real assets.

So think about that as real estate investment trusts, commodities, uh things like uh energy related or gold, things like treasury, inflation protected securities, so tips. Uh, because a lot of those help protect against inflation. And in the nineteen seventies, that is an example, very poor period for traditional assets.

So once you have that portfolio, and by the way, we kinda call that the global market portfolio, then that looks like as you just went out and bought the entire world. So if you just said I'm gonna buy with one ETF and we actually have one that does this. I'm gonna buy with one transaction the entire world, I get thirty thousand securities around the world, I don't have to do anything. Okay, that's a good stop, okay?

Now, next step, if you said, all right, I want to improve upon that, because I think Meb said market cap investing is isn't ideal, what can I do? Well, the next step is you start to tilt towards things that have historically worked. And the two things we talk a lot about that academics have written thousands of papers on and thousands of books is value and momentum. So if you tilt these stock indices away from market cap to value and these indices towards momentum.

Those are both things that will increase the risk adjusted return as well as the absolute return of that portfolio. So that doesn't really require any effort. Once you select the funds, you don't have to do anything because they rebalance themselves once a quarter. So all you have to do is simply monitor and rebalance it, maybe once a year, even every couple of years. Now.

The biggest departure I have from almost every other investment manager in the country. So if you look at all these robo advisors, and we've done posts on this. Um sound like a a broken clock, but we'll give you give you show notes. Um where we compare Vanguard and Schwab and Goldman Sachs and uh Wealthfront and Betterment.

And they basically all do the same thing, which is give you that portfolio I just mentioned. The global market portfolio, stocks, bonds, little bit of real asset. And that's a great thing. That's better than probably what ninety percent of the people have out there.

Now, the departure that I have is that it doesn't include an investing approach called trend following, which you've probably talked about on this podcast before, which I think for me personally is an investment strategy that I believe can give a more stable and consistent uh investment returns, as well as having the potential.

benefit of not sitting through long bear markets. So um so but I think either approach is actually great. And the conclusion of this paper was If you had to put a gun to my head, Desert Island, which portfolio would I pick? I would certainly pick the trend following portfolio.

But it has its own challenges. So buy and hold, the biggest problem with buy and hold, global portfolio is the long bear markets and drawdowns. Two thousand eight, right? So when everything's hitting the fan, people panic and sell.

a problem with a active trend following portfolio is not necessarily an oh eight because you usually those do well in that sort of environment, but actually it's in the years that follow where people where you look different, where you do poorly in a year when everyone else is doing well, when your neighbors are getting rich. by buying Snapchat and everything else and you're n you may not be doing uh, you know, as well. So I th uh we we said in this paper the conclusion was kinda

to put the two ideas together, fifty percent each, to diversify not only your portfolio but also your psychology. So there's a lot of ideas in there, but my my point being is that And we wrote a recent article about this called the Zero Budget Portfolio. The vast majority of listeners don't have a written investment plan.

So if you're listening to this right now, raise your hand. Be honest with yourself. Do you have a written investment plan? I'm guessing one percent do. And then second, have you shared it with your wife, daughter, father, neighbor? to keep you accountable? And unlikely the answer is yes, because and this is why this is so important is because people

the emotional component with the long term investing is is usually by far the biggest problem. So uh it doesn't really matter what the investment portfolio is so much, but once you set it, you don't have to monitor that much. All you have to do is Keep yourself away from yourself. Okay. Well we'll speak to us a little bit about that. So what sort of things would you want to include in an investment plan? Like what would one look like? And just to take it one step further, I think

This is also quite important, is actually talking about your investment goals. So how would you suggest? Thinking about investment goals. Because obviously, for most people listening to this, a trader is trying to hit much larger returns than what you're going to achieve from. you know, a a slightly passive uh with a little bit of active inv investing. So

Yeah, what do what are your thoughts around that? Let me uh I'll I'll get to that, but let me give one quick point to explain why this is so important to write it down. So there's an investment survey that goes back to the eighties called the American Association of Individual Investors, and they asked their investors Are you bullish? Are you neutral? Are you bearish on the stock market?

So no surprise you've had a very wide spectrum of responses going back to the eighties. But if you look at the historical results. And you find that the highest bullish rating ever in the entire survey was in January of two thousand. So the literal worst month to ever be investing in US stocks and the entire history of the survey was when people wanted to buy the most. And say on a flip side, when were people when was the highest bearish reading?

It was in March of two thousand and nine. And you couldn't have made up a more awful response to that survey than what the reality was. But again, going back to the point of that's why people are human, you wanted to do the exact opposite of what all those people did. And so if you don't have a written investment approach then you're simply flying b blind. And when January two thousand comes along You're gonna be excited about buying pets dot com and CMGI because you're

uh neighbor and and broker are and they're making tons of money. And the same thing happens in March two thousand nine. You're gonna be panicking, you're not gonna know what to do. And so there's a lot of elements that it can be included. And so there's a lot of different

um people out there with different goals. My mom, for example, perfectly happy to sit in C Ds. She sleeps at night, and that's what we say is the most important. Do you have a sleep at night portfolio? So a lot of people, you know, first step, do you have fifty grand in the bank or, you know, one or two years of expenses that you can cover your investment, um, you know, your your lifestyle. And if you don't, you don't really need to be putting the rest at risk because

These as we mentioned, these markets can have large drawdowns. And so two would be to write down, hey, look. The robo advisors do a good job of this. Traditional financial advisors do a good job of this. Um, you know, traditionally th they charge about one percent a year. And so if you don't have an advisor

Uh, we think they can be worth their weight in gold if if you don't feel like you can trust yourself and a lot of people can't. Um but at the same time that one percent uh ret uh that one percent cost is a very real cost. So if you don't need one, you shouldn't be paying it. And and I can we forgot to comment I forgot to comment on this. We can talk about this al asset allocation costs in a minute.

Um but writing it all down and coming up with all of the inputs that you may have and and financial advisors are great because they'll provide you with a plan if you've never crafted one. But it could also be as simple as, hey, look.

I'm gonna buy this diversified portfolio of ETFs and rebalance it every five years. And that's a like that's a policy statement. But in your head you have to have The ability to say, is this gonna stay consistent if gold goes to five thousand or if gold goes to two hundred?

if stocks go up eighty percent or down fifty percent, you know, are these scenarios that or am I just gonna watch CNBC and, you know, react emotionally? Because usually that that's the the kind of worst kind of way to go about it.

As we're talking about, you know, the these major drawdowns that obviously happen from time to time when you're a buy and hold investor, what do you suggest actually doing in those periods? Like I obviously I know I know you mentioned before you said it's a good idea to one option is to have be fifty percent invested in trend following strategies and fifty percent in in buy and hold. So they kinda uh balance each other out.

When you're in, you know, let's just go back to the prime example of two thousand eight, the GFC, what's the What would you suggest for buy and hold investors to do in in periods like that? And maybe periods that aren't even as severe as that, but you know, when you're in major drawdowns or downtrends. What can you do as a buy and hold investor? Is it best to just ride that out or, you know, like how do you deal with that? So there's a couple of comments. So if you are a buy and hold investor

And that that's your policy portfolio. You know, I'm gonna buy and hold, I'm just gonna go about it, and then you do nothing. And you accept that drawdowns are a natural part of life. If um because here's the problem with drawdowns, is that markets spend the vast majority of time in drawdowns. You know, they only spend about

I think it's like twenty percent of the time at new highs. And there's only two states. It's either all time high or drawdown. There's nothing in the middle. And the problem with drawdowns is it gets exponentially worse the more they go down. Right. So People often talk about compounding being the eighth wonder of the world. Well, unfortunately the opposite is true to the downside. So it gets asymmetrical and the kink really happens around ten, fifteen percent. So

You lose ten percent, you only need twelve to get back to even. You lose twenty, you gotta get what, twenty five to get back to even. You lose fifty, requires a hundred percent to get to get back to even. And if you lose seventy five percent, requires three hundred percent.

Right. So it's much harder to come out of these drawdowns. Um and and the problem is you never know how bad it's gonna be. So yes, theoretically if you knew that stocks were only going down fifty percent in the global financial crisis. You should have loaded the boat and stocks, right? But the challenge is that 50 could have become 80. Here's where valuation helps.

And so we've written a book on this topic called Global Value. And the way that valuation helps is that acts as a fundamental anchor from which you can use common sense. So here's an example. Um we use a valuation indicator called the ten year PE ratio. Schiller Robert Schiller popularized it in a late nineties paper and book called Irrational Exuberance. uh then Alan Grantspane uh Alan Greenspan used the phrase in in court testimony which made it popular. But it goes back to something that

Ben Graham was talking about a hundred years ago, where you look at a P ratio, you average it out over a number of years to help average out the business cycle. And so for the S P, going back to nineteen hundred or US stocks, for example. That value has been around seventeen over over time. Now it's been as low as five and it's been as high as forty five in the dot com bubble.

And not surprisingly, if you group stocks into buckets of valuation, so zero to ten, ten to fifteen, fifteen, twenty, above twenty. In each bucket it goes a stair step. So when the market's the cheapest, so below P ratio of ten, future returns are very high, ten year returns. And this isn't a market timing indicator for the next month or quarter, but this plays out over years. And then when markets are are normal, you know, you're gonna get ten percent returns and then when markets are expensive

You're gonna have very low returns. And this has worked very well over the past 120 years. And so where we are right now, so here's what's interesting. So you went back to 2000, trading at a value of forty-five. No rational person would say it makes sense. to be paying forty five times earnings for the S P five hundred. And it gives you that kind of common sense takeaway. Now

In March of two thousand nine, it got the that what we call the cape ratio got down to a value I think of around thirteen. So really cheap. Not extremely cheap, but but really cheap. And then where do we sit today? US stocks have been the number one performing stock market in the world since two thousand nine, which is very rare. Usually US versus foreign stocks is a coin flip. It's literally fifty fifty as long back as we have data, which outperforms.

Um and so you've had this massive outperformance in US stocks. So US stocks now traded a CAPE ratio of thirty. Which is one of the highest values we've ever seen. It doesn't mean it's a bubble. You know, I don't think the bubble really until you get into the high thirties or forties.

Um and it doesn't mean they have to crash. It just means future expected returns are gonna be lower. So going back to the expectations and ideas we were talking about earlier, you know, historically people have been expecting ten percent for stocks. We think that value going forward for the next ten years is probably around four.

And then you add on US bonds at say two point two or two and a half, and there's no way that sixty forty portfolio is gonna have the expected returns historically of what most pension funds and endowments expect of eight percent. And so so one of the things that people need to realize if you're looking into those assets is expectations need to be a lot lower. Now, the good news is

the rest of the world ranges from reasonably cheap. So we were the first people to do this, but a a lot of others do it now where we built cape ratios for every country in the world. And so foreign develop sits around that 16 range, which is totally normal. Foreign emerging is down around that 13 or 14 range, which is quite cheap.

And the cheapest quartile of stocks, so the twelve of the forty-five cheapest countries in the world, is at a P ratio of around ten. And that's one of the biggest things. um discrepancies between US stocks and the foreign markets, particularly uh the really cheap stuff and the entire history of the database that we have, certainly going back to the eighties and seventies. in thinking about stock opportunities, you know, a long term investor, you could either A

allocate to a fund that does this. So you can allocate to a fund that naturally rebalances into the cheapest countries and we have funds that do that. Or B, when you're reviewing your portfolio on a yearly basis, take a step back and say, okay.

You know, and remarking about in the US, we were talking about earlier where US investors put seventy percent in the US. We say, you know what, maybe it doesn't make sense to be putting the most in we calculate the second most expensive country in the world currently, maybe we should be paring down U.S. stocks and allocating to foreign stocks and particularly the really cheap stuff.

And the interesting part about this is it's not always the US. The US is used to be one of the cheapest countries in the world when it hit a value of five and it could certainly go higher. It could hit a value of forty five. And even higher than that, you know, Japan hit the highest value we've ever seen.

in the eighties when it hit a P ratio of almost a hundred. But then Japan had terrible market returns for the next twenty years in what people call the lost decades. Um and it's not like Japan was some uh backwater economy, Japan's market got to be the largest by market cap as a percent of the world back in the eighties when it got to almost half. So if you're a global market cap investor, you had a minus two percent per year

drag on returns because of investing in Japan during that period. So um thinking about value and starting to tilt away from what uh you know common sense would dictate and particularly in the US right now. uh also applies to traders and short term traders and traders working at banks because many of them have additional exposure through their retirement plans or through their job, et cetera. Um but that's a easy indication we think that that helps uh improve upon just the base case portfolios.

Now, just so we don't lose anyone, when you're talking about the CAPE ratio, what exactly is that referring to and how's that different to a PE ratio? So the cape ratio is a PE ratio. P E ratio is simply price to earnings ratio. And the cape ratio is say let's take a ten year average of the PE ratio. So, you know, um and it also adjusts for inflation. So trying to compare apples to oranges uh over time doesn't make sense. So adjusting for inflation makes a lot of sense.

Um, and historically we've done a lot of simulations with various P ratios and and the worst one to use is the one year P ratio, usually'cause it's so volatile. Uh, but the longer term metrics, whether it's five years, seven years or ten years, work a lot better because they reduce um turnover as well as have uh a longer term focus.

Okay. Um now I think this this next question probably leads on from your last comments there. Let's talk about timing, like timing when to begin investing. Like

You know, there's a lot of talk going around at the moment as there always is, you know, there's many people think the stock market's about to fall out of bed and all the rest of it. I'm not saying that it is or isn't, I really have no opinion on it. But There are people who do have the opinion that, you know, we're gonna see some severe downside. How do you time getting into investing? Because, you know, if you'd bought any time in 2007, obviously 2008 would be very tragic.

You've had to wait many, many years to get your money back and to even start making some returns. So How do you time getting into investing? I know that wasn't very well worded, but I think you know what I'm getting at. Yeah, we deal with this question a lot with individual investors that are Uh asking the same question, Meb, when when do I get in? And should I jump all in or should I spread it out? Should I wait?

And my first response is always look, you know, a global portfolio, you're not just investing in one asset class, you're investing in s US stocks, foreign stocks, US bonds, foreign bonds, real estate commodities, everything in between. So There's a huge portfolio of different assets. However, even if you were investing in just one asset class and say US stock. uh the correct mathematical choice is to invest all of it now.

Now, that may not be the correct emotional choice. A lot of people have a big problem with regret and hindsight and bias. So if you were to invest at all in two thousand seven and the market crapped out in two thousand eight, A lot of people emotionally and psychologically would have s really struggled with that decision. They would have pulled their hair out and said, Man, that was really dumb. I wish I hadn't done that. I should have waited a year. That was stupid.

So we say even if it's irrational, we're totally fine with people's spreading out dollar cost averaging into their investments into as long of a time frame as they feel comfortable. They can invest every month for the next five, ten years if they wanted to. And that traditional dollar cost averaging is a great way to go about it.

Um, but in general the correct math is everything now. However, if you were to ask that question as a specific market, like we were just talking about US stocks and valuation, and say, look. the way that we liken it is it's like playing blackjack. And so You you have a stock market that's trading at a P U cape ratio of thirty, so very high historically. It's kinda like sitting down at a blackjack table.

in watching someone have a sixteen versus the dealer's ten up card. And historically that's a hand you're very likely to lose. It's not guaranteed, but you're likely to lose. And on the flip side, let's say you have a uh nineteen and the dealer's showing a six, chances are you may win that chances are you should win that hand. Okay, so um it's the same thing with valuation where we're trading at a P ratio of thirty Chances are returns are going to be low.

Could they go higher? Absolutely. Um, but is the more likely scenario that they go down or sideways? Probably. And and so um in a scenario where you take this common sense approach and if if you were only investing in one asset class, You could say, look, like like an expensive US stock market. You could say, Okay, I'm gonna invest, but here's the rules. You know, I'm gonna dollar cost and b average until this gets back to average valuation, etcetera.

Granted, I think the better way to do it is invest in a global portfolio, start all now, because one of the things we learn from compounding is the earlier you start, the better and uh make make time work for you.

Sure. Yeah. Fair comment. I also want to go back to a comment you made a little earlier. Uh you brought up rebalancing and that's something we haven't really talked about too much, I don't think, unless it's sort of slipped past me. But How do you think about rebalancing and just to bring it right back to basics, what's the point of rebalancing your portfolio?

So let's say you have a portfolio that's sixty percent stocks, forty percent bonds, and stocks have a monster year and they start to drift to where now your portfolio is eighty percent stocks and twenty percent bonds. Well, that may give you an exposure that has drifted from your original intended portfolio. And if given a long enough time horizon, those two assets

because stocks historically have had a much longer uh uh a much higher return. You know, that portfolio is gonna eventually end up being ninety percent stocks or ninety five percent stocks and five percent bonds. That having been said, there's been periods of twenty, forty, sixty years. where stocks don't outperform bonds. But in general, the the evidence has been stocks

Uh Jeremy Siegel's famous phrase, stocks for the long run, uh stocks have outperformed bonds. Now the more assets you have, the less it matters. So what we often say is rebalancing is good to do as long as you do it sometime. So even on a yearly basis you rebalance the target, it gives you the nice discipline of selling the winners.

adding more to the losers, um, and rebalancing back to target. However, in a multi asset class portfolio, you could do that every even three to five years and it's not gonna make a difference. Um it only matters that you do it sometime. So if you left it for twenty years, then it gets kinda out of whack. So really rebalancing I think is in and the biggest consideration is to do it make sure you do it tax efficiently.

Uh you know, so so you're doing it to where you're not paying a lot of taxes and doing it smart. But it's it doesn't matter that much as long as you so the true lazy man, these global asset alpha asset allocation portfolios can be very lazy. You could buy into one and not do anything for five years if you wanted to. Um, but we often say yearly'cause it's just a nice habit to say, hey, I'm going to look at my investment portfolio once a year, make some tweaks, and that's about it.

Okay. Now you brought up tax considerations, um, and and doing it in a tax efficient way. I mean, I know everyone's tax situation's different and I mean we've got people listening to this podcast in however many different countries. Just broadly speaking, is there anything you can add around um the idea of doing things tax efficiently?

Oh boy, there's a lot. And let me sort of um I'm gonna talk about taxes and then I wanna talk about fees too, because if if everyone listening hasn't fallen asleep yet They're probably gonna nod off now. But the the irony is they're probably the most important determinants of your future performance.

Uh of your portfolio vastly more important than your asset allocation for long term investors. And let me explain why. So taxes, um If you look at traditional investment options, so let's compare an index fund to a actively managed mutual fund to a hedge fund, right? And so let's say that that we're targeting a return net of all expenses of around eight percent. Well, the index fund You only need to have about a ten percent return.

to to have a net of eight percent return after all taxes and fees because Likely the transaction costs are low cause the fund doesn't have much turnover, the management fee is only point one percent, and you're not paying a whole lot on on on taxes and dividends'cause it's a a fairly tax efficient portfolio. Still pay it on dividends but not on on tax.

So you really only need a ten percent return to get to that eight percent. Um, an actively managed mutual fund because it probably has a hundred percent turnover and because the management fee is that traditional one point two five percent that we talked about earlier for mutual funds. You all of a sudden need to have thirteen over thirteen percent gross returns.

to get that eight eight percent after tax. So that mutual fund manager, and this is why s the high percent of mutual funds fail to beat the indices, is because of the high turnover and the high uh uh annual fees and costs. And then lastly you have our hedge fund friends, which charge two and twenty and have probably even higher turnover.

You need to generate a nineteen percent gross return to get to an eight percent net return. And that's one of the biggest problems with a lot of hedge funds. People see them as being very sexy, the high returns potential. Here's the great stuff they're buying, very swashbuckling. But the problem is particularly in taxable accounts, um

you really want to avoid them many cases because they have to generate a massive amount of alpha just to break even with an index fund. So that that's just kind of illustrate the importance of taxes. And there's a lot of other things you can do as a Um try to optimize where you hold the assets, whether in taxable or tax efficient accounts. We actually did a uh blog post which we're not gonna go down that rabbit hole because it's um probably a whole nother hour long topic is

talking about avoiding dividend yielding and and yielding stocks in general and taxable accounts because they underperform what you include uh tax on dividends. But the the one segue that I wanted to make that I think I sh I should have mentioned earlier that I think is profoundly interesting. is in our book Global Asset Allocation, we look at when we're talking about these asset allocation portfolios. We went around and said, Huh, this is interesting there's been about a dozen

Super famous guru investors. So we're talking Dave Swinson of Yale, uh Warren Buffett, Mohammed El Arian of Pimco and Harvard. Ray Dalio runs the largest hedge fund in the world, these guys that manage trillions that at one point have stated here's a recommended asset allocation portfolio for an individual investor. And so in the book we said, Okay, well let's examine how all these portfolios have performed all the way back to nineteen seventy two. And they are vastly different portfolios.

Some put twenty five percent in gold, some put zero, some put fifty percent in stocks, some much lower amount. And so these portfolios look very, very different. With the exception of the permit of portfolio, which isn't really fair because it has half the portfolio in cash and bonds, these portfolios all dozen of them since nineteen seventy two performed within one percentage point of each other. And to me that is an astounding statistic. And so here's the fun experiment.

If you went back to nineteen seventy two And I said, Aaron, I'm gonna give you a crystal ball. I'm gonna let you pick the single best asset allocation portfolio out of my book for the next whatever, thirty five years. You know, how much would somebody pay for that? How much would Pimco pay for that? Billions? Absolutely. I said, however, here's the catch. You have to implement that portfolio, the average mutual fund fee today, one point two five percent.

Let's not even talk about the average mutual fund fee thirty years ago, two, three percent, but one point two five percent today. Would you take that deal? You know, everyone would probably say, Absolutely. I got the best performing portfolio. So that would have been the L area portfolio, which is endowment like, so very heavy exposure to growth and equities.

Had you implemented that portfolio with the average mutual fund fee, you would have transformed the best performing portfolio in my book to almost as bad as the worst. So the takeaway being that most people, what do they spend their time thinking about as long term investors? Their asset alcation, are stocks expensive? What about gold? How much should I put in bonds?

What should I be buying Greek debt right now? Is the real estate market? Um, how's that gonna do in a in a Fed rising environment? And and what should I do about Bitcoin? All these questions that people spend all their time s sweating and thinking about.

How little do they think about fees? If you had to go a step further and said, you know what, I don't trust myself. So I'm gonna hire an advisor, pay him one percent, he's gonna allocate to a great portfolio of mutual funds at one point two five percent. That would have taken the best performing portfolio and made it far worse than the worst performing portfolio in the entire book.

And that for a lot of people is um a tough kind of pill to swallow. You know, they they wanna think about the exciting parts about investing, which are you know, the stock market and everything else, but really the boring blocking and tackling of taxes and fees is likely gonna have a much bigger impact on your portfolio than everything else we talked about over the past hour.

Right. Well that really puts things in perspective. Or puts people asleep, one or the other. All right, Meb, well let's summarise some of the things we've been talking about over the past sixty minutes or so. So from what you've seen, where do most people struggle the most? It's unquestionably with with their emotions, you know, and and we see this over and over again and and it has different flavors of course.

Bye. our Canadian friends who are flipping h real estate houses right now are probably getting to see it and they're having conferences where pit bull is the you know, uh, hyping people up about investing in real estate to you know, you you see these sort of bubble we've written papers on Yeah, one was called Learning to Love Investment Bubbles and it goes back to the South Sea bubble in the eighteenth century and talks about all these famous bubbles across history.

And you see them rinse and repeat over and over again. And and the ch I think the biggest challenge for people, one is They don't teach at least in the US They don't teach personal finance or investing in high school. You know, it's not a core curriculum and and for most people they don't teach in college unless you're in economics or

investment major. And so a lot of these concepts, what is probably the one skill set that every human being on the planet uses the most, and it's personal finance or investing. um and how to just deal with money. And so the biggest challenge I think is

coming up with an investment plan that's logical, that you can implement, um, that's based on history and sticking to it. The big the biggest key being sticking to it and uh, you know, not getting caught up in in whatever the macro environment is because the biggest

Challenge is that the times that you want to be investing the most is the times that it feels the hardest, and vice versa. And just uh take a step off that, you know, investing can be as simple as you want to make it or it can be as complex as you want to make it.

Where do you see many people overly complicating things? Like, is there anything which stands out to you? Yeah, we see a lot of people that come to us with portfolios and we call this mutual fund salad, right? Where they show up and they say, Here's my portfolio. I have thirty mutual funds. And you can't even ask them, say, you what percent do you have in stocks? What are your exposures? They have no idea because they've just been accumulating these and

You know, the the psychological bias of become wetting to something you own. You know, you care more about it once you own it. So whether that's your car or your house or your your stock portfolio. So we often tell people, say, look, it's okay to start from zero. You can sell everything and d ignoring taxes. So if you've owned GE since the nineteen forties, ignore that last comment. But in general, you can sell everything and start over.

And the biggest problem people have is I I think often they pay way too much in fees. And this is even more onerous um to your listeners in say Europe and in some countries around the world, uh, to where indexing and and low cost pressure of like a Vanguard hasn't really

cause the entire space to go down. But, you know, I I think that that paying a lot in fees and become emotionally attached to your portfolio is a big one. And that's the beauty of a digital advisor. And I think you're gonna see a lot more of this And w and w this is one of the reasons we're in the early innings of this sort of disruption. Which is great for investors. And a an example is this. So there's

four ETFs that are asset allocation, global asset allocation ETFs, we're we have one of them that charge less than point three percent per year. And they manage around two billion. So pretty good, right? But there's something like six hundred mutual funds that charge over that amount. In some cases it's one, two, three percent per year, they manage almost a trillion. And so you can see a lot of this money is still in very high fee structures that and look, I'll be the first to admit.

All that matters is total returns after all fees and taxes. So if you got a killer hedge fund doing something crazy that's making great returns, hey man, thumbs up. But the vast majority of managers that aren't doing anything, by definition, are meant to be lazy and buy and hold.

You should be paying as little as possible. So simple takeaways, you know, are um the good news is a lot of the stuff to put into practice is very simple. So uh a long term portfolio, have a plan, pay as little as you can in taxes and fees and stick to it. That's good advice that most people can handle. And the digital advisor, the beauty of it Whether you use ours, whether you use Vanguard's, doesn't matter, is that they do it all for you.

And it kind of whirrs in the background. And I think particularly the younger crowd listening um can certainly identify more with that a little more than the older crowd, although the average age of our investors on the digital side is in the late forties. So um perhaps uh maybe maybe it's not as true as we think. But anyway, it's it's it's a wonderful time to be investor and I would say just be mindful of what you pay and how you implement it.

Yeah. Well, Meb, this has been really interesting. If anyone listening to this podcast maybe has some questions or they want to find out more. Where would you point them? Where's the best place to go um to find out more about you? Uh we got about four places. So you can watch me pick fights on Twitter at Meb Fabor. We have my blog which has thousands of posts on it. Um and that's just Mebfavor.com. We have my two three work sites. So there's

The digital advisor is Cambria Investments.com. The fun website is CambriaFunds.com. Our research portal is the ideafarm.com. And I think I mentioned it before, but uh if you want to download a free book. Freebook dot mebfavor.com Uh you get a download our last book off Amazon. But lastly, just shoot me an email more than having to connect anytime. And if you're in Los Angeles, come look me up. We'll grab a beer or a coffee.

Cool, man. Well I'll make sure to include all those links in one place in the show notes at chatwithraders.com as well. So um one thing you didn't mention is you've got a podcast. yourself. Where can people go to find out more about that? Is that on your blog, I presume? Yeah, blog, iTunes, Meb Favor Show, Creative Name. Uh but uh but yeah, it's been a lot of fun and uh we try

If I can get around to it, put out one per week. But as you know, Aaron, it's uh it's a it's a labor of love and it's a lot of work. So you guys make sure to go give Aaron lots of good reviews'cause it's uh it's it's it's a lot more work than I thought it would be. But it's been a lot of fun. Yeah, yeah. Admittedly I was a little bit naive going into it as well. It turned out to be a bit more work than I expected, but um no, I thoroughly enjoyed it.

Um, Meb, thank you very much for coming on the podcast, man. I truly appreciate it. Yeah. Thank you once again. Being great. Let's do it again. You've reached the end of this episode of Chat with Traders, but rest assured there are more episodes. if you leave a rating. At with traders.