Just Keep Buying

and this one is always there. And it's somebody I know from um Riddholtz and it's Nick Julie and his book is called just Keep Buying, which is somehow I feel linked to the book I wrote, which was I mean, there's no way Jack Bogel would disagree with this premise. And what I liked about it is it's very practical. It's a really good book. It explains why you want to invest, how to invest in. It splits between savings

and investing, and savings actually is important as well. It's half the battle, and I just it's really laid out very well. I like some of the anecdotes, and I also think I've come My theory is that we're an in an investor Enlightenment era and the first phase was just to get the friction out of the way. Low costs, index funds. The second phase of this era is behavior, and there's a lot of behavior in here. You know, once you understand why you're investing, how it works, what

to use, it's very easy to behave. If you don't know any of that, your emotions take get the best of you. So I think that's a big part of this book as well. And um, but this year is a crazy year for the market, So I think it's a good it's an interesting title just keep buying for this year. Maybe it's even more important title this year. So yeah, I thought we'd be cool to dig into

this um and get kind of practical. So joining us on trillions this time we've got Nick Mjuli, who's the chief operating officer and data scientists that Ridholt's wealth management this time on trillions. Just keep buying, Nick, Welcome to Trillians. Thanks guys harving me on. Okay, So three word tie I said a few times already, just keep buying. Uh, what else do I need to know? Because that's what I'm doing, man, I'm just I just keep buying. What what?

What could you possibly feel in a book other than those three words? I mean, that's it's saying if I can only give you three words, there's are the three words I can give you, right, there's the three words I would give you, but um to expand on that. It's the you know, continual purchase of a diverse set of income producing assets, if I could give you a sentence. But then beyond that, the books not just about dollar cost averaging. Obvious. Some people just like, oh, that's obviously,

I'm not gonna read it. Like, no, there's a lot more to it. There's a lot pieces of savings about personal finance, things like how do I save for a house? You know, am I saving enough for retirement? How much should I say for retirement? You know, why should I invest? You know? What should I think about market volatility? Et cetera? All those types of things. Okay, so I said your

job title chief operating officer and data scientists. What did Barry, who's a frequent guest, What did Barry say when you were like, Hey, I'm gonna write this book. Uh he was. I kind of just told him after I was already writing it actually, Like it's like I said, get a proval. I was like, hey, I was like, yeah, I'm writing

a book. Barry's like, Okay, great. Yeah, He's like, you put out enough stuff now, I think you can probably come up with something like Okay, cool, thanks appreciate that Berry. So yeah, and I did, basically, But no, he's he's always been supportive. I mean, I love Barry. I'm obviously, you know, not just because he's like one of my bosses, but because you know, Barry is just a great guy to be around. And you know, I believe in the vision that we're building there. So yeah, um, just how

did you get the title? I love there's a little anecdote in here, and I love that you were able to find this title through something you saw. Can you go through that story how the title came to you? Yeah, So there's this so Casey and I said, it's like a YouTuber And you guys may have heard of him used to. I think I don't know if he YouTube as much now as he used to be used to

like a daily vlog. And he was in New York City and he had a he had a video called three words to get to three million subs right, And there's another YouTuber named Roman Atwood and gave him this advice. He said, if you want to get to you want to really grow your audience. You know, I'm just gonna give you three three words of advice. Just keep uploading. And so his that was his mantra every day and need upload a video every day, and need to upload a video. He kept doing it, and Casey and I

sitting now was like one of the biggest YouTube wars ever. UM. And actually I used that. UM. I remember hearing that right around the same time. I was doing some analysis on the stock market and I realized, like, wait, just keep up, just keep buying. It kind of fits. It's a it's a catchier way of saying dollar cost average becahen you say dollar cost averaging, people's eyes glaze over. I think this is a catchier way and actually is

a more aggressive investment allocation approach. And really this actually that intro chapter kind of came from a blog post I wrote literally, you know, uh, five years to the day before the book came out. It was just by chance that happened. As origin the book supposed to go on earlier, but due to supply chain stuff, we had to push it a couple two months. In the paper Short had the great paper Short once that was sorted out,

though I realize, like, oh my gosh, that's weird. Like literally five years to the day before the book came out, like that was when I wrote the blog post just keep Buying, which is arguably my first post that really kind of like went did well for me as a blogger, right when I didn't really have an audience and kind of kind of blew up a little bit relative to to my audience at the time. People, Yeah, went from twelve people like fifty people. I was like, wow, this

is got here. You've dropped a phrase their dollar cost averaging. Break that down because that's not something that we've really ever talked about on the on the podcast. But so the issue I have an issue with this word because there's two different definitions out there, and if you're not careful, you'll use both of them without realizing it. So the traditional definition, which Benjamin Graham I think came up with,

was just buying over time. Right, So, if you have a four wing K, you're making contributions every two weeks every month whatever that's considered dollar cost averaging. You're investing as soon as you get the money. That's what it's about. There's another definition, this is a definition I do not like, and I try not to use this definition, which is, let's say you just got an inheritance of a hundred thousand dollars and you slowly kind of average that into

the market, so you don't put it on. You don't buy not worth of stocks. Now, now you don't lump some you you Dollar cost averaging is what they would say. I do not like that definition. I do not use that term. I don't use dollar cost averaging for that term because I think it's so confusing. You can see, those are very different things. Buying as soon as you have the money, even in small increments is very different than taking a large amount of money and slowly averaging in.

And they're very different strategies. And that second strategy, the averaging in UM, is subpar across the board. I've tested it every way to Sunday and it just does not outperform relates to lottery winnings. Also that that term is just for most normal people. It's it sounds financial and it's boring. Yeah, for some reason, dollar cost averaging, but it's it is powerful UM. Let's you broke this book down into two parts. The first half is on savings.

And I like the way at the beginning he's like, look, if if you have enough money saved, just go to the second part. I won't be offended. Um. Yeah, I which the second part is investing, which is investing. Yeah, but here's a line in here that sounds it stuck out to me. It almost sounds harsh, but it's true, which is saving is for the poor and investing is for the rich. Um. And you go to explain that,

but I guess, just talk about what that means. You know, if you're have if you're young, or don't make a lot of money, investing might not be as uh the ticket you think it is early on, And I guess just explain that that dynamic there. I just think that, I mean, we can just do this with a simple example. The issue was just like investing is on that impactful when you don't have that much money invested, for example, And I the story I tell in the first chapter.

I was twenty three years old, I had a thousand dollars to my name. I was analyzing my investments every way possible. I was like, you know, oh, what should I have five percent bonds? Ten percent bonds? I was neurotic basically. But the end of the day, I only had a thousand dollars invested, even if I got a ten percent return on my portfolio, which is like a good year. You know, what is that a hundred bucks?

Like I was at the same time, I was going out with my friends in San Francisco and blowing that hundred dollars on dinner, drinks, you know, uber home whatever. Like it was very easy to blow that hundred dollars. So you can see that my investment returns didn't really matter, but my spending in a given day mattered a lot more, right, And I'm not not saying that tell you not to go out with your friends, And that's not the point

of that. The point of that story is to say, when you don't have a lot of money to invest, it doesn't really matter. We should be focusing on is your career and how much you can save. And then once you have some money saved up and ready to invest or you've invested already. That's where let that lever matters more so. It's about it's about just like where you focus your attention and where you kind of get

the biggest return for your use of time. And so I think for when I say savings for the poor investings for the rich, I mean that on a absolute and a relative sense, Like I wouldn't consider myself a poor person. As a twenty two year old living in San Francisco, I was not poor, but I was poor relative to my future self. And that's kind of how I want you to think about it, Not like I

was an abject poverty. I'm not trying to say that at all, um, but just think about that, like whether you're poor on absolute level or on a relative level to your future self. That's how I want you to

think about that problem and how you make decisions. First of all, I just love that simplicity of that breakdown, right, Like you can't invest until you save, you can't save until you actually figure out how to make more money, and and actually you know, be diligent in your savings, and there is sort of that that transition between your younger self and an older self that might be able to to get there, but you still have to figure

out a way to start investing. Right. And so I'm curious in the book, like how do you write about turning that corner and going from somebody who might not be able to save to actually being able to like invest, because I think that that's there's a huge financial literacy component there where people are just intimidated not in the market, not in the market, and speaking very broad terms, because the last year has been insane and a lot of people did get in and bought high and have witnessed

the carnage. But how do you talk to how do you talk talk to people in general about that switch to becoming investors. I mean, I think the main thing is obviously you're right once you have some money to invest, Like I think actually, if I had written this book in tween, I think that question would have been a lot more it had been a lot more difficult to answer because they're you know, investing wasn't as forefront as it is now due to Robin Hood. It just became like, yeah,

everybody's armchair. Everyone kind of knows. I think not everyone. I mean, of course there's still people that don't. There are people unbanked, all that stuff, but I think most people have heard of Robin would have heard of things. So the issue isn't with robin Hood. It's what you're buying on robin Hood, right, It's like you can buy e t s, you can buy all the stuff that a lot of you know, people would say is prudent investment management. So it's not the tools necessarily, it's just

how you're using them. So I would say it's like, oh, most you will probably hurt of robin Hood, like, oh, have your robin Hood account and instead of buying things like GameStop, maybe you buy something like I don't want to give a ticker out, but just a index fund of something. Okay, I did not say that. I can say I can't recommend tickers, but I don't. I don't think that's a great ticker. Let's I'll say I can't.

I can't recommend it or deny it. But that's all I'm gonna say is like tickers out there for broad based index funds that you can buy that are very good and very cheap. Right, And so that's an example. Eric just gave an example of one of them that you can choose from. So yeah, I agree, I mean robin Hood does they are motivated to get you to trade more with the confetti dropping and that it's like a casino mindset there. But you're right, you can get

that stuff there. People just tend to go to Robin to do other things. But I like the idea of the focusing on saving and your income ability when you're young, because it's also a motivating factor. There was a sort of get rich quick easy way with the Robin hood game stop thing that was a big thing. And by saying well, look, you should really focus on your earning you can control that early on, is a good message.

Now when it comes to retirement savings, you have this really interesting UM case stud or experiment they did which I love this. Listen to this um Individuals who saw the older versions of themselves right through an age progressed rendering like you know when you digitally aid yourself on that app, they allocated about two percent more of their pay on average to retirement versus people who didn't see such photos. I explain that, and I might use that. I might put a picture of my seven year old

self up on my mirror. You know how Rocky had that picture of club laying up there. I might. I might put my seven year old self up there, just to give myself a little extra motivation. Do you have an old picture of yourself around? No? No, I do not. I do not use that because I mean, there's actually other research in that in that chapter where I talked about they asked that asked a bunch of people. You know what motivates people to say? They found like, is

it like a vacation? Is your children? All this stuff besides emergencies, which people do want to say for once that's out of the way, once your emergency funds done, the only thing that motivates people to save is themselves. Actually, so really like, if you want to say for your future, you have to be selfish. And so I think that the idea of using that face app or would have to see an old version of yourself is you realize you're going to be an old person. You want to

take care of that old person. So that's what investing is supposed to do. Right, You're supposed to be replacing your income when you can no longer or don't want to work anymore, and you replace that income with your investment income. Right, it's the kind of the whole idea there. And so be selfish. It's okay to be selfish in that case, isn't that so true? Like you know, there was I've read a book. I think it might have been um think and grow rich. Forget it was. You

put something up where you see it every day. Like when I wrote my book, had a whiteboard where I just clock time that I've spent writing, and that thing in my face every day. I'm telling you it really just putting something up there to motivate you. I think it really it's interesting. I'm not surprised that works, um, but I would. I'm kind of curious to see an old version of Joel. I mean he already looks seven. Yeah. Remember remember my brother sees me. He's like, hey, you're

coldest sex in your forehead? Are looking really strong? Power alleys? Uh So, So Nick, let's talk a little bit more about the dusting aside. Because once you're in the market and you you have that exposure, it's common sense just to keep buying. So what what added value do have for us? For those of us who are active participants and are already doing what the title of your book suggests. I mean, I think you know, if it for some people that it's easy to do, yeah, just keep doing

what you're doing. I think the the issue is like that's not easy for everyone, Like, especially in a year like this where we have high inflation, there's geopolitical risk. You know, even bonds are declining by a large amount, so even things that were considered safe or not as safe as they were. Um, so there's a lot of things like that going on, where like we have acid declines, high inflation, and people are worried. So in those cases, like just keep buying. It's it's much harder to do it.

And so, like I know, people a lot of people joked like, of course this book will come out at the end of a bolt marker. I just keep buying at the top. But actually by the time it came out, you know, in April of this year, like the market was down, like pretty good timing. Yeah, yeah, so it's like I actually wrote it more for a bear market

than the bowl market. And so that's my favorite chapter in the books, chapter seventeen, which is about like how to think about buying during a market crash, which is a much much different. I have a different framework for looking at that because I think it's the only way to really kind of get through these dark times. We'll walk us through that because like we are we are there or so it feels like, yeah, well I would say this is a more minor of mark. I mean

that happened much more regularly. I think what I'm talking about is a much worse crash. But either way, like is the same. Yeah. Yeah, So for example, I'll give you the math and what happened in COVID nineteen in March. So at the time, I think at the bottom, we were down thirty three percent going into that Monday, which is March, and so being down roughly thirty you know, this is just simple math. To get back to even you have to go up fifty percent. And I'll just

run the numbers for you. Let's say you know Indexes at hundred goes down to sixty six. To from sixty six back to a hundred, you have to go up roughly thirty three, which is half of six six fifty percent gain, right, And so you just do that math. The larger the decline, the bigger they gain to get back to even. So now once you know that, right, that's just simple math. Once you know that, you can actually kind of back out. You can say, okay, how long do I think the markets don't take to recover?

You come up with a fair estimate. You know, you can ask other people as well, and then you can back out the markets expected return from this point back to the high. Right, And so at the time I think, I asked Twitter, and you know the media answers two to three years. So if we're down fifty percent, Remember this is not exact math. You have to do compounding, and I'm just gonna make this linear. So let's say you know, you know, divided by two, that would be

about tent a year. Divided by three, you're looking at seventeen eighteen percent a year, like annualized returns to get back to the Like, those are great returns, Like who wouldn't want to buy it? Then? Like, when you look at it from that perspective, you're like, wait, this is a huge deal, right, Like if I buy right now, I'm gonna be You're gonna give me seventeen percent returns to get back to even, like just to get back to even, Like that's amazing. And so of course there's

always the case where it takes longer. But my point is, let's say you're getting those seventent anialize returns to get back to even. That's a huge return. And that's why when you reframe it, you're like, wow, Like why wouldn't I be buying right now? It's clearly a bargain. And what actually happened within six months here at all time highs and it was like a hundred and six percent

annualized return or something so absolutely absurd what happened? No one, I think expected that, not even even as optimistic as I was. I thought I was gonna take like maybe two years to recover. But that's kind of how I look at it. So right now, if we're down what our fourteen percent, and that's not a big enough amount for me to like, you know, think about all we can do the math. Okay, what is it to get

back to even maybe fifteen percent? Let's say it takes two years, you're still looking at like what seven percent returns roughly, So like that's like an average year, right if you were by right now, you're basically gonna expect average returns if it takes two years to get back to a high. So that's not bad, right considering all else.

So as you're talking and you talked about people, Oh, of course this book comes out after a little market, like there's this this the Bears on Twitter there, I can see this title kind of just pissing them off a little like, oh, you're just easy. The FED was there, YadA YadA, or the be the best one. Now do Japan. That's when everybody puts out charts of like how great stocks are overtime, like, well, now do Japan, because Japan

has done nothing right. In your book, you pointed out since the market has been basically flat, what would you say to somebody who's like, what if we are Japan for the next thirty years. I mean, that's, of course it's plausible. No one knows if that's going to happen or not. But I I addressed this in that chapter.

In chapter seventeen, I address this. I say, let's say you'd put a dollar to the Japanese stock market every day starting and yes, there are times when you're underwater, But if you look because your dollar cost average and you're buying over time, it's very different. You're saying this, the market has done nothing for thirty years. That's true if you put in a lump sum right at the peak,

But how many people are investing like that? Maybe there's a Japanese businessman that sold his business and eight said, oh, I'm not worried, and then someone commits okay, you just put it all on the market, and then he puts a hundred percent of Japanese equities and eight nine. Okay, think about how crazy it is does that and then is yeah, that person underwater. But how many investors put all of their wealth into one asset, one purchase, one time.

It's very rare. So I'm saying if you had been owning other asset classes you've been if if you're a Japanese mister, you're diversified all those things, that would have completely changed the conclusion. So I the saying that Japanese market has done nothing for thirty years. That's using snap you know, snapshot judgments, and really you're really kind of cherry I think I agree it's correct, but also at the same time, it's cherry picked. If you're buying over time.

The Japanese market has not done nothing for thirty years. That hasn't been great, don't get me wrong, but it's not zero. And I think that's the takeaway here. And I will say, you know, um, this kind of reminds me. Obviously, I just spent two years in plan at Bogel and he was not a fan of international investing. Or he just said you don't need it because US has enough overseas um connection that you're going to get some of

that anyway. And in addition, a lot of American companies seem to be really the drivers across the world, the Apples, the Microsoft, etcetera. So I guess, do you even need international and is this just keep buying? Actually, obviously now do Japan wouldn't it will now do. Europe isn't going to be as applicable because the companies in America tend to be really massive leaders relative to other companies in

the world. I mean, that's that looks true now. But I mean, like, so from two thousand ten to twenty nine, you want to look at it, like the US clearly outperformed international, emerging whatever. But look at the decade before, look at two thousands thousand nine. I mean it's a very different story. Emerging crushed the US. So I'm not

saying that's going to happen again. We don't know the future, but to only bet on American companies, I don't necessarily agree with that because I think things can mean revert, things can change, and so while the US is on top, now, who knows what's going to happen. And I think the best example of this is imagine a Russian investor, you know, at the beginning of two right, they're like, oh, look, I most of my stuff in Russia. Russia's great, all this the market drops a month. Now, I don't think

that's going to happen in the United States. We would have much bigger problems than our investment portfolios. But my point is someone who's not diversified out of their domestic market is probably going to see some sort of pain at some point. And so I'm willing to take a little bit of under performance now by owning international stocks, if that means in periods where the US is struggling, I have a little bit more of you know, outperformance

relative to the US market. So I'm curious just to bring it back to sort of the here and now, what do you think changed in how you wrote the book or what you put in the book if it was before time, before times book like before the pandemic, versus what actually wrote? What what changed during COVID that you brought into the book. I don't actually think the best thing that helped the book for COVID was that we had the COVID crash. That was something I could

just use. Hey, it's in everyone's memory. It's otherwise to talk about, Like like myself, I was, you know, eighteen years old. I was, you know, entering college at the time. Like I didn't have a job, I didn't have to worry about income. I literally started school in oh eight, so I remember like starting, you know, going my first week of class right before classes started, and I remember

like seeing the market drop and everything. In economics one on one was really popular at the time because of that. But I think like because it was so old, it wasn't in recent memory, but because we had that crash, it really helped the book. I could talk about something that's really recent. Everyone everyone investing now remembers that, right, It's unless you're like sixteen and you kind of just started investing like today, like everyone remembers COVID and kind

of the effects that had. So I think that's what helped the book. Other outside of that, I haven't changed much. The only thing if I could have re you know, re written the book or done something differently, I think I would have emphasized inflation a little bit more because you have to realize at the time. Remember all my data is to the end of inflation was lower and was going lower in twenty I'm like, I talked about inflation.

I do discussed in the book, but I didn't realize I had no clue that, Okay, by the time this thing comes out, which is going to be you know, a year and a half later after writing and everything, that the inflation data was going to come in termines, We're going to be all over the house. Yeah, I didn't.

I had no idea that was going to happen. And so a lot of people like, he doesn't even discuss inflation, like, look at the data I had coming into this, like inflation was going lower when I had the data, I'm like finishing this up, like inflation was not. You read the comments so well, of course you got read comment. What would you what would you be saying or how do you respond to that? That's that's a that's a

double edged sword. Yeah, we can get into that. But how would you how would you respond and what would you have put in? How would you have expanded your your inflation wisdom. I just would have included more inflation stuff like I've done analyzes since I've just been a lot more folks on inflation. It's just because like you know, at the time, like you know, we haven't had it really, I mean since the really seventies eighties last time we had and so we haven't had such a long time.

I could talk about it, but it's like people like, why did you spend so much time talking about something that doesn't really happen anymore. And it's not that I never expect inflation to happen ever again, but I address it. I just would have put more emphasis on because people would have cared more, they would have thinken, they would have thought that, um, you know, I had, you know,

thought through it more. And so that was the only thing I just didn't know that was gonna happen because people are I mean, everything is recently by, so inflation is crushing everything. And I'm not talking on inflation learning to think I'm an idiot and I'm gonna and I'll admit, like, yeah, I didn't try to write a ton about it. So that was kind of the only thing I think I could have. It's just hard to anticipate the future. I

had no idea We're gonna see a percent inflation. I was completely shocked by that, you know, so, yeah, I mean I think everybody was. Um. You know, you have a section here where you talk about in the investing part about income producing assets, and this is clearly in the Bogel buffet mindset. You want to invest in things that produce income. Right, makes sense, money that works for you.

The crypto crowd, obviously you don't have cryptosn't here. You have stocks, bonds, investment, property, reads, farmland, and small businesses. No crypto. Um, this was this is a big debate. Right, Crypto doesn't produce anything. You are basically hoping somebody buys it from you from more than you pay. That's pretty much the deal. The crypto crowd. Sometimes they'll go after the SMP five index fund, and I don't understand that.

I mean, that is an interesting gap. I wonder how many young people actually understand the difference between an income producing asset and and one that doesn't like crypto, because it does seem the young crowd the message in the narrative of crypto it seems even more seductive and interesting to them than the message of a boring SMP five index fund. Yeah, I mean, what's the question is, do you know do you want to do something fun or do you want to get rich? I mean that's kind

another question. And like I have like one of the most boring asset allocations out there, but it's working right, and it's like that's the key. Now. I'm not saying not to own any crypto. I actually own some crypto. But like I say, incomptucing acts your portfolio, the other ten percent is safe for things like crypto, gold, art wine. I go through the you know, uh, through the gamut of those type of assets. I'm not saying they don't hold any place in a portfolio. I just keep them

as a smaller proportion of my portfolio. That was my point. I was in a debate with somebody from that world and I was like, you guys should just pitch yourself as a compliment to the boring vanilla. Let us be some exciting hot sauce to your boring meal rather than your meal sucks. Yeah. Yeah, I agree, but that's not that's not going to gain you followers to think like, oh, we're in bed with the traditional finance. Yeah we're you know, we were in with the old world. Like, no, you

want to sound like you're against that old world. There's a new world World World. It just has it more. It's more appeal to do that. But I mean the rational approach is like, no, there is a place for crypto. Like I believe that, you know, people should generally get off zero. I don't think everyone should be at zero on crypto. But at the same time, I don't think you should have anything more than five percent. Even then

that's a lot because how volatile it is. That's so I have two percent and I even then, like, you know, some people wouldn't be comfortable with that, so I'd say, like just put a very very small percentage and kind of just wait and let's wait and see what happens with this thing. So so just keep buying. Related question, what should you not buy? And that's a very personal question. That's like whatever you can't sleep at night with. That's it,

Like I can't. There's certain assets I won't buy, Like I don't generally buy gold, But don't think that I should say that no one should buy gold. I think for certain people there's definitely cases to be made for gold. I think gold is more of a trade than a long term hold. There's just I mean, there's a period of you know, twenties something years of negative real return on gold, and it's really tough to kind of hold

that for me, So you know, I can't. It's hard for me to hold an Aska for twenty years and see it go absolutely nowhere. You know, there are exceptions to that. Maybe I could do that with you know, equities and an emerging market or something, but for like something like gold, where there's no intrinsic cash flows, no income, it's really tough for me to believe like, oh, the story is gonna flip and everything's gonna be okay. You know. I think that's why it's tough for This is an

ETF podcast. We've got a long time and we have not talked about et F specifically. What are you gonna what are you gonna ask? Sure, Yeah, I'll go there. So yeah, this is definitely sort of I think a lot of in your book, you say I like index funds and ETF. You basically are flat out he you know, just Um says what he does and you don't have

to do that. You know, you can go active. I'm not I'm not trying to be overly rigid with this, but Um, in the book I wrote I write a little section about behavior, and I think the index fund that the idea of a cheap index fund or on ETF that traps tracks the broad market for three or four basis points is one of the most underrated UM contributors to good behavior because you read this book and you're like, I wonder how this would all play out if there was no such thing as a cheap index

fund and all you had was like a eight basis point blend manager versus a small cap growth manager. UM, it's a little harder to behave sometimes, especially if that manager starts under performing. And I think that mess people up in the eighties and nineties a little bit because their fun all of a sudden was underperforming. They panic and just keep buying. Is a lot easier when you know you're locking into that market beta and there's a

nice resignation to that. So I guess i'd like to get your thoughts on the impact that just having a near free beta exposure product has done for this concept.

I think the main takeaway here is like that, you know, passive vehicles have benefited investors because as they're cheap and because it's easy to stick with them, and more importantly, it's like the default choice now, right, Like if you if you talk to anyone says, yeah, the default is like you buy a passive index from like the Spire or something, and so every deviation from that and this this kind of goes back to what we're discussing with the crypto people and why don't why don't they just

okay with like saying, hey, you know, we can be a compliment to you guys, because no, it's an identity argument, and so a lot of active investors it's an identity I'm not a passive person. I'm I'm not. I don't want to be average, even though it puts through the eighth percentil we can put that aside from it. But I don't want to be average. I'm gonna pick my own stocks and I'm gonna set my own destiny, and

there's all that kind of piece to it. I think what passive has done is saying, like, here's the default option. And so when the market declines, it's not your fault. You didn't make a bad decision, that's just the market rights outside of your control. Right. It's like a hurricane came financial hurricane. There's nothing you can do but once you start deviating from you know, market cap passive way

to portfolios. That's when you're making active choices, and that's when you start to get in your head of like, oh man, maybe I shouldn't have only went in on tech stocks, or maybe I shouldn't have, you know, went in on these biotechs or whatever it is, or energy

stocks or so that's the whole point. I think. Another big so this is identity, and so what passive has done it has removed the identity piece from investing, which allows you to kind of not worry about That's why I went markets down twenty Even when the market was down, I wasn't panicking. I really wasn't like, oh my gosh, my my portfolio is like I'm not going to be using that money for a long time. This is going

to happen. It will recover eventually. It might take a couple of years, but that's the nature of the world and we've gotta we'll roll with the punches. And it recovered way more quickly than I expected, right, But that's kind of the idea, is that you're going to see this stuff happen. You're going to see more crashes, We're gonna see I almost guarantee my lifetime we'll see a ten year period of sp is you know, has not performed as you know, flat or below where it was

ten years prior. Yeah, I don't know, but I do think there it is nice to have that resignation that I've got, I've got a great deal. There's no reason to shift to switch it around because if let's say that market cap it wasn't it was an active fund and it's underperforming that I think that's that makes you think should I be in something else? And then you jump ship go there, and I think there's a resignation.

What am I gonna do? I'm I gonna just I'm gonna switch all these investments every two years, screw it um. And that is I think when we talk with Gino Martin Adams last two weeks ago, that she talked about capitulation, and I'm like, I don't think those investors are ever going to compitulate. The passive people are really strong. They're the strong hands. They are not the weekends that people say.

And I think once that you haven't here, which is fascinating is the best performing four percent of companies explained the net gain for the entire U S stock market. Since so if you pick those four percent, I mean your love and life, But which four I mean which four percent? So I think that's another one is you get your your hands on everything and you get those at least you know you lock in those four percent.

You don't get all of it though. Um, this this is why I embarrassed E. S G a little bit because the on the four percent includes x on Mobile, Apple, Microsoft, General Electric, IBM, etcetera. E. S G. What do you think of this? Like this is you wouldn't get x on you probably you know, so there are an tesla is now not in the SMP S G. Um, Is that, in your eyes just another active active management in disguise or do you really think this is a better way

to invest in your just keep buying premise? I mean I think so. I think what the industry is gonna eventually move towards something like, you know, a direct indexing or someone we'd call custom indexing where you get to pick and choose kind of based on your personal beliefs. And so I understand why people would do that. At the end of the day. The counter argument is, okay, well, if you're doing these E s G type moves. What if all the companies you don't buy end up outperforming

because no one else is buying them. So in theory, you're under allocating capital for some reason relatives of the market portfolio. So someone else is gonna overallocate and they're gonna outperform you. And so the question is do you want to take that money and grow it to as much as possible and then donate to cause you care about, you know, or do you want to just not invest in the underlying companies? And those are the two ways you can do it, and I think they're both valid.

And it's a question of some people like, oh, I don't want to give my money to a gun manufacturer. It's like it's not technically going to them. But in theory they could buy backstock, they can sell stock, and so the equity could be used for that purpose. So yeah, I don't I don't have a great answer there, but I think we're gonna see this area evolved as like kind of custom indexing comes in, where people are gonna be able to allow their choices to be dictated in

their pols. So I will say customer indexing embarrassed on it. I'll just get on the record. I think anything you trying to dislodge the three basis point in X fund has it to it's a very tall hill to climb. I think for very wealthy individuals it might work, or hardcore hippie s G types, But that's not E s G investing because a lot of these companies that you would think in your perception are not good, like Xon, they actually score pretty well on E s G scores.

Um It, perception of people. People's perception is not really the same as an E s G scoring system. Um but I agree with you. At least it's customed to your liking. I just think in ten years, if that custom portfolio and it performs, you're gonna have a seller's buyer's remorse. Um Plus. I just think dislodging three basis point beta is just people love that stuff, man. I mean,

it's it's like such a good deal. So but anyway, I debated this with Josh and Michael vat Nick on an episode of The Compounding Friends Van Wants to Listen to. We had a nice, long, lengthy debate on direct index thing We've gotta get, Uh, we have to do an episode on that soon, Joel, that's gonna be a good one out of two lists. Okay, so earlier he said you can't recommend a ticker, but that doesn't mean that we can't ask you for your favorite et F ticker um,

which is a question that we always ask. I guess, okay, if I have to, my favorite is v O of the Woo. Of course. My dad, my dad is this funny thing. He says, I'm hedging my my video exposure with s p y And I'm like, I was like, I couldn't hand. I was like, what is Like, I didn't know that was possible. I know, it's just wait a second, my head hurts. He says, I'm hedging my vieoo exposure with sp y. Right, it's like that that's basically like issue we're hedging. Yeah, it's it was a

joke more than anything. Yeah, he's like, oh, I just hedged my viewo with us. Yeah, like you're all in, Yeah, I would say to yeah, of course. Yeah. He's just he's on the just did he do? Does he do? That? Is a year ord you get that from him? No, he does it because you know I obviously wrote about and stuff, but he like edits my blogs every week

he reads, Yeah, you didn't edit the book. We actually got a professional, but he's edited a lot of the posts on the material that went in there, roughly half of its old material. Halfs knew I would say. So I gotta say I felt like when I read this, I was sitting with rid holes advisors and almost like getting some of the secret sauce on how you talk to clients. Is that is that fair? I mean a lot of the ideas that you know I have and they have are very s already aligned already. That's why

it works so well. I didn't have to come in and like rethink everything. Oh I don't agree with this, And I'm saying we're not a hund percent line on everything, but a lot of the core ideas are there, and like that's we would agree on on a lot of

the stuff there, doesn't Does that mean we agree on everything? No, there are certain things where we may not agree perfectly on um and I and I've I've gone back and forth on some of these things, you know, whether that means stuff like trend following, whether it's how we allocate the crypto all sorts of stuff like that where I can. I don't think our firms do anything incorrect or bad or anything like that. But where we may not be

in a hundred percent agreement, that's fine. Like not everyone agrees. Like for example, I have a whole chapter on don't buy individual stocks, right, and I know they're people in my UM at my firm that own individual stocks, not the it's not the bulk of their money. It's a small percentage, but still it's like something that I generally don't do. And once again, you know, that's kind of

how I think about. It's like, let's think about the overall picture and are we do we agree on the core tenants and we do, and then so that's where if you feel like that, that's because we generally agree on a lot of Like if someone goes to red Holtz and they're sitting down, you kind of go over like, well, let's say, first let's look at that. You know, you've got to go over that. What depends where they are, right, if you're if you're if you're seventy five years old

and retired, saving he's not gonna out. It's oh, you have a huge nestake. Let's figure out how to protect that. So it's once again the ideas here can be applied generally. But yes, I kind of agree with what you're saying. So Nick Majuli, thanks for joining us and Trillians. Appreciate, appreciate, thank thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcast, Spotify, and wherever else you'd like to listen.

We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show. He's at Eric Faltunas. This episode of Trillions is produced by Magnus Hendrickson. Francesca Levie is the head of Bloomberg podcast Fibers. M m m m hm hm