Episode 324: History, Risk, and the Long Game: Investing Lessons That Never Go Out of Style with Ben Carlson

The financial news cycle moves fast, but the fundamentals of investing have not changed. Melissa Joy, CFP® sits down with Ben Carlson, Director of Institutional Asset Management at Ritholtz Wealth Management and author of five books including his latest, Risk and Reward, to explore what history actually teaches us about markets, human nature, and the psychology behind smart long-term investing. Ben brings equal parts data and storytelling to make the case that understanding the past is one of the most underrated tools an investor can have.

From the inflationary spiral of the 1970s to lost decades and the dot-com aftermath, Ben and Melissa walk through the market cycles that shaped today's investing environment and what those periods reveal about our own tendencies as investors. They also dig into the coming wave of wealth transfer, why women will increasingly control the bulk of financial assets, and why the financial advice industry is not yet ready for it.

What You'll Learn

• Why studying financial history matters and what it reveals about the range of possible outcomes
• How inflation in the 1970s shaped investor psychology in ways that still resonate today
• What the lost decade of 2000 to 2010 teaches about diversification and why that lesson keeps getting forgotten
• Why simplicity in a financial plan beats complexity almost every time
• How to build a portfolio durable enough to survive a wide range of outcomes without requiring you to predict the future
• Why preparation is more valuable than prediction when it comes to investing
• What the great wealth transfer means for women and why the financial advice industry needs to catch up
• How human nature is the one investing variable that never changes across market cycles
• What Ben's list of 20 investing beliefs reveals about discipline, self-awareness, and behavioral finance
• Why the best financial plan is the one you can actually stick with through difficult markets

About Ben Carlson

Ben Carlson is the Director of Institutional Asset Management at Ritholtz Wealth Management and the author of five books on investing and personal finance, including his latest, Risk and Reward. He is the creator of the blog Wealth of Common Sense and co-host of the Animal Spirits podcast.

Book: Risk and Reward

Blog: awealthofcommonsense.com 

Podcast: Animal Spirits

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Transcript

Welcome And Guest Introduction

SPEAKER_01 0:00

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Girl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. Welcome back to the Women's Money Wisdom Podcast. Today we always love having authors of new personal finance books join us, and today is going to be a great one. We are thrilled to have as our guest Ben Carlson. He is the director of institutional asset management at Rittholtz Wealth Management. He is the author of five books, including his latest, Risk and Reward, and the creator of a blog called A Wealth of Common Sense, as well as a podcast that I'm a fan of, the Popular Animal Spirits Podcast. Ben, welcome to the podcast.

SPEAKER_02 1:04

Thanks for having me.

SPEAKER_01 1:05

Well, and I should mention too, um, even though we have a national presence, a lot of our listeners are from Michigan, and I think you are as well, right?

SPEAKER_02 1:13

Yes, I'm a member of the flyover states, just like you.

SPEAKER_01 1:16

Perfect. Well, welcome, um fellow Michigander, but national presence when it comes to talking about personal finance. Um, congratulations on the new book.

SPEAKER_02 1:25

Thank

Why Risk And Reward Matters

SPEAKER_02 1:26

you.

SPEAKER_01 1:26

Tell me a little bit about why you decided to write what I think is a great um like a popular literature textbook, or not literature, but you know, like something you could pick up in the bookstore to teach you about history lessons when it comes to money in the framework of risk and reward.

SPEAKER_02 1:44

I feel like I've been trying to explain the markets for the past 12 years or so since I started my blog and figure out different ways of using data and stories and analogies and ways to do that in in like plain English. And when you write for as long as I have you, you're bound to get feedback. And I I love getting feedback from people, questions, and there's also pushback and and exceptions and devil's advocate, and hey, what about this? And did you think about this? And I I think it's good to sort of stress test all of your own strongly held beliefs. And and I and I wanted to show that even though I believe in the power of long-term investing, that if you look at the history of the market sort of last hundred years or so, there's just a laundry list of bad things that have happened. And I wanted to kind of show both sides of that. So that's why it's called risk and reward, it's like a yin and yang type of thing. And I wanted to show people that uh yes, the long-term results can be magnificent in the stock market, but it's not easy. It's never easy and it's never been easy to sort of stick it out through the all the bad times.

SPEAKER_01 2:46

So true. And I think we are sitting in a moment in time where there's been a lot of um reasons to be scared, but there's also been so much to believe in when it comes to investing results. You know, if you just wait a month or two or three, then um, for most of the last 15 years, almost 20 years, you have been rewarded. And so one of the things I love about having had a chance to read the book is that it takes us over periods of time that newer invest investors haven't been exposed

Market History As A Reality Check

SPEAKER_01 3:21

to. Um, and so why do you think those history lessons matter? And what are a few of your favorites?

SPEAKER_02 3:28

So William Bernstein is one of my favorite authors, and I try to kind of look at the similar things he does. And he always he says something along the lines of the only black swans are the history I've never read before. And and I was really attracted to history when I first got into this business because I realized there's a lot of stuff about the markets I just didn't know. And I was never going, it's some of the things you have to experience, but I think also you can learn from history to understand like the range of outcomes. And it's funny when I talked to my publisher about this book, he told me like whenever this book comes out, it's going to be a good time because there's always something going on in the markets that is surprising or shocking or catches people off guard to the upside and the downside. And and yes, I wanted to go through things like the Great Depression in the 1970s and the lost decades and all these things that have happened. You mentioned how things keep snapping back really quickly in this cycle, and they don't seem to last as long, but there's plenty of plenty of periods throughout history where there have been these long, drawn-out crises, right? And I think it's good to provide a reminder to that to people too, that uh this stuff doesn't always come back so quickly. And sometimes there are these really nasty recessionary periods and these bear markets that can last for a few years instead of a few months. And I I think the one interesting one to me that was kind of seemed to match up with today is just the inflationary period of the 70s. And it's kind of one that not a lot of people talk about very often. And it wasn't something we really had to consider until we had inflation this decade because it had been so long. It had been 40 years since we had inflation as high as we did. And I just think I was even a little surprised at like the psychological reaction to higher prices, how people reacted to that and how uh how badly it made people feel, how poor the sentiment got.

SPEAKER_01 5:08

Everybody's still pissed, right? Like it's oh yeah, it's because you're waiting for the prices to go back down, and it's like that's not the way inflation works. In fact, if that happens, we're gonna have an even bigger, you know, kind of problem on our hands because deflation is maybe the only thing worse than inflation.

SPEAKER_02 5:26

Yeah, it's like the lesser inflation is the lesser of two evils. Obviously, you don't want inflation so high, but I just I the the psychology behind that, and I think understanding people at a time back then were pissed too, right? Of course. Uh, and thinking through how these things, like the human nature side of it, is one thing that repeats over time. Like the the market environments are always different, they're always completely different. People have, you know, updated knowledge and updated research and analysis

Inflation Psychology And The 1970s

SPEAKER_02 5:50

and of what's going on in the market, but the human nature piece, that's the one that doesn't change.

SPEAKER_01 5:54

Well, I'm glad you mentioned that updated research and analysis. I got into the business um completely by accident in the late 90s and really learned um about investing first of all on the job. I I feel fortunate to have lived through a professional um working for investment firms, financial planning firms in between the lost decade between 2000 and 2010 and seeing like the the last vestiges of the dot com the first dot-com boom. Um, but I feel like there were it was easier to access this risk and reward um framework. It feels like almost your book is a throwback because we have access to so much more information nowadays, and it almost obscures some of the most fundamental investing lessons about risk, about re uh returns and rewards. Um, because there is just so much coming at you. You can go on, you know, you can get more information on a like um very idiosyncratic, tiny part of the market, and you almost lose out on some of those investing lessons that feel felt a lot more accessible when there was less data in the world. Um, so I for that, I think for listeners, this is a great way to access some of the fundamentals of learning about be becoming an investor.

SPEAKER_02 7:18

Well,

Filtering Noise With Simple Frameworks

SPEAKER_02 7:19

it's funny, the the thing that you always taught as a financial advisor is to tell your clients to ignore the noise. But that to me, that's impossible these days. The noise is everywhere. And we have these little supercomputers in our pockets that give us alerts and 24-7 news and social media. And so the noise is just constantly on. And so you're right, it's more important than ever to have a filter in place to figure out what really is important. I don't know who I stole this one from, but uh someone told me to quote that no one goes to church on Sundays looking for the 11th commandment, right? You you go because you want to reinforce these things that people should, and that's kind of what I try to do with with my writing. You're right, it's harder than ever these days to not focus on like the minuscule details. And I think that's what leads a lot of people astray is that they hold on to these things that don't really matter all that much to like their long-term plan. Even in that maybe it matters right now in this moment, but in 10 years they're gonna look back and go, why did I ever spend so much time worrying about this little thing or paying attention to that data point? Yeah, it's hard to do.

SPEAKER_01 8:14

There's so many distractions nowadays. And so I think one of your enduring lessons is to have frameworks, to have uh process, to be patient, um, reduce your reactivity when it comes to investing, but all that needs context and narrative. So I I appreciate the storytelling and um the back to basics that the book brings. And uh basics is good in this this case, actually. I think basics is is advanced nowadays.

SPEAKER_02 8:44

Yeah, you're right. I I I like to think that like I always say that simplicity trumps complexity uh because I think it's it's easier to fool yourself with complexity, but it's also easier to like stray from the path when you have too complex of a of a financial plan or an investment plan. And I think it's easier to like rebalance into the pain when you have something that you understand, like what you invest in and why you invest in it, as opposed to something that you don't really understand. If you don't understand what you're investing in and you have like the newest, new latest thing, even though it might be a good investment for someone else, if you can't personally, emotionally stand it, uh you're gonna give up on it the first chance. And guess what? There's a million other things to invest in these days. So that's the hard part is that there are so many things that you can invest in that the temptation to change your portfolio and to change your plan has never been greater. And there's no barriers to entry anymore, right? There's no cost, the trading costs are at zero. Technology makes it easier than ever to just move things around. So it's it's much easier to just flip-flop if you want.

SPEAKER_01 9:41

Yeah, and based on history lessons, I mean, um, the future isn't predicted by the past, but based on history lessons, if you have a process that is built for both good days and bad days, good markets and bad markets, good decades and lost decades, then you can't deviate at the moment that's the most difficult. Um, I know you talk about some really difficult times in history. You mentioned the lost decades, not the lost decade. The one that comes to mind first and foremost for me is um, you know, between 2000 and 2010, where if you just take the returns of the SP, then you see no, you know, no returns. Um, but there's others, right? So you use Japan as a lesson. I know bonds in the 50s and 60s are also um pretty much lost.

Lost Decades And Diversification

SPEAKER_01 10:29

Um, what do you what do you take from these lessons?

SPEAKER_02 10:32

It's that first lost the first lost decade of this century is really seared into my memory because that's when I first came up in the industry. And I I lived through it and I saw that happen. And I it really I think so much of investing is really about like your personality and some of your experiences as well, like the things that you've lived through. And so living through that period and living through the great financial crisis and seeing how bad things can get really changed opened my eyes to the benefits of diversification. And it's funny because that basic premise of risk management is something that everyone has wanted to throw out the window for the past 10 years. We had this 10-year period that showed people diversification can save you from this type of period. The S P 500 went nowhere, it had two huge crashes, but all these other asset classes could have saved you, and you actually would have done okay if you had had some bonds and some emerging markets and some small caps or these other strategies. And now we've had this period where people just go, well, why wouldn't I just put all my money into large cap growth stocks or the NASDAQ 100 and call it a day because that's the only thing that works. And so people have have to kind of learn these lessons. And a lot of them obviously weren't invested back then, didn't didn't know that. So that's the kind of thing that um you're right, diversification doesn't protect you against like bad days or bad months or even bad years sometimes, right? It's it's about like the the longer-term cycles that you have to be protected against.

SPEAKER_01 11:52

Absolutely. And I would mention um there's something that you can read hundreds of chapters, hundreds of um recaps. I I love the book that came out last year in 1929, um, that gives you perspective on the Great Depression. Um, but living through those difficult moments yourself, whether you're a personal investor and you're opening your 401k statement, or you're an investment professional who's responsible for um millions of dollars of your clients' portfolios, it it is completely different to read about losses in a textbook or a personal narrative versus experiencing those losses firsthand. Um, I don't know if you could, you know, you're talking about formative years that were the same as mine in that lost decade. But if you can if you can compare and contrast um what it's like to read about, like, for example, Japan um just have going nowhere for multi-decades, um, versus which we've read about but never experienced versus um, you know, the March of 2020 or something like that.

SPEAKER_02 13:05

Yeah, I so there's this book uh called The Great Depression, a diary. And this this guy, Benjamin Roth, found his grandfather's diary from the Great Depression, and he wrote these little passages every couple months about what was going on and what it was like to live that period. And it's funny because most history books do a look back, and it's with the benefit of hindsight, it's it's often easy to say, oh, of course you would have bought back then when stocks got killed. Like I would have, I would have bought it's it was obvious, but at the time it's never obvious. And him giving notes to himself about how, hey, I think the worst is over, and then of course the worst wasn't over and things got worse. And and so, yes, I I think it is you want to like stand on the shoulders of giants sometimes and and learn the mistakes of people in the past, but sometimes you have to just pay your own tuition, unfortunately, and learn those lessons and mistakes yourself. Uh and I think that's that's like with every young investor. And I think uh coming out of the great financial crisis, a lot of young people wanted nothing to do with stocks. Remember, that was the story that millennials are giving up at the stock market, and that was a mistake. It seems like now we've gone to the other side of the boat, and a lot of young people are just taking so much risk,

Living Through Crashes Versus Reading

SPEAKER_02 14:06

right? They're they're day trading, they're speculating and doing all those other things. And I think the pendulum does just kind of swing back and forth depending on the market cycle. And and I guess the hope is you do learn those lessons when you're young and you don't have as much at stake, right? You have a smaller financial nest egg. And then when you're older, you've learned some lessons and you've gone through things and you realize uh one big mistake in your older middle-aged retiree life can can ruin your financial plan. And you don't want to make the worst possible error at the worst possible time.

SPEAKER_01 14:35

Yeah, it's one thing if you open a statement and you had a hundred thousand and then it's down to sixty, it feels entirely different, at least for some people, when you had a million and it went down to six hundred thousand. It's just, you know, those numbers are kind of spoken for in terms of um a game plan for sometime sooner. And that's where the role of financial planning comes in, I think. Um and it's so interesting too when you think about what we've seen as prof investing professionals, where um, yes, it the you know, kind of populace has their trends, but also our financial industry um caters to those trends and in some cases creates a feedback loop of self-affirmation. I remember, you know, after 2009, it was like this is the new normal. There's so much debt, we're going to um never be able to trust equities again. Um, everything's overpriced way early after, you know, kind of the recovery starting in 2009. And um, those that kind of deviated from their process and game plan and believed that um really stunted the recovery and the, you know, kind of um bounce back that you could have participated in when it comes to portfolios.

Prepare Not Predict And Accept Uncertainty

SPEAKER_02 15:48

Yeah, that that's why the the big thing I talked about in my book, I think I stole this quote from Howard Marks, but he talks about like, you don't try to predict, you try to prepare. And I think I've the that's what the last 20 years has taught me that so many people have tried to predict what happens next. And even the people who said they saw the financial crisis coming, most of them couldn't turn that side of their brain off and turn around the other way when it did snap back. And and they stayed in that mindset and they couldn't get out of it. And I I've just seen so many very intelligent people who have a very high IQ, who have a very good education, try to predict what's gonna come next in the economy and the markets and be wrong time after time. And that's why again, well, I think, yeah, you have a durable enough portfolio and durable enough plan to help you ex help you survive a wide range of outcomes without trying to predict what the outcome is gonna be in advance. I never would have expected 10 years ago that the bull market would still be going on today and that things would keep snapping back. Who could have possibly predicted that, you know, we'd have 9% inflation immediately turn into this AI revolution and that the earnings growth would still be kicking as strong as it is now in the stock market? I never could have possibly planned for that. And I think that's that's one of the things you have to do as an investor is have have an open mind. And and part of diversification is is managing against the bad risks, but part of diversification is also opening yourself up and casting a wide enough net to take part in the winners when the winners are are not known to you in advance. Um I think that's that's part of it too, is opening yourself up to both of those possibilities.

Women And The Coming Wealth Transfer

SPEAKER_01 17:12

Well, I'm a collector of quotes by women about investing, not quotes about women investors, because if you ask AI, like, hey, give me some great quotes that women said, um, our voices are are often masked, and it's like, oh, I'll tell you about women investing. Um, so anyway, you had a quote from Maggie. Um, tell me if this is correct pronunciation, Mayor. Um, uh in the book, men resist randomness, markets resist prophecy. Um, and you know, it's so difficult to explain to someone that you're an investment professional who doesn't believe in forecasting. Um, but forecasting has cost um cost portfolios more than anything I can think of when it comes to history in a way to, you know, think this time is different. And it may be different, every time is different, but it's probably not the way that you're predicting, even if you're really good.

SPEAKER_02 18:06

And she we talk about history. She wrote one of my one of my favorite books that I think it's one of the more underestimated uh books on financial market history. It's called uh just called Bull. And it's a history of the bull market in the 1980s and 90s, but she also extended it to talk about what happened in the aftermath of the dot-com bubble blowing up and how people reacted to that situation ending. And of course, we know the current cycle right now is not going to last forever. I don't know how much longer it can go for. No one does, obviously, but I think you have to think about the other side of it. Um, and getting back to your women investor thing, I I was just doing some some research for someone on our team. Um, and we're looking at the life expectancy things and and like the life expectancy for a man and a woman at 65, the woman's life expectancy is three to four years longer. And I don't think enough people in the financial advice industry are prepared for the fact that women are going to control the bulk of the money in the years ahead because the baby boomer generation is, you know, we've never had a demographic this large that's gonna live this long that has this much money. Right?

SPEAKER_01 19:06

It's true, so true.

SPEAKER_02 19:07

And the bulk of that money is going to go to women investors, and it's funny because all the data shows that women have more patience and they they they aren't as tempted to make changes to their portfolio as much, and they will stick with something. They won't just they they don't speculate as much. Um and I think it's fascinating to how that will play out in the financial advice space. And I don't think a lot enough people are ready for it yet.

SPEAKER_01 19:29

It's so true. And it just if we can go off on a tangent for a moment, I just there's another study that's kind of floating around on um my women-focused Instagram reels, which is that um women receive like dumbed-down financial advice. When you study what the financial plans or the investment strategies are, advise to women, and I'm not including from women advisors to women, but all advisors give make an assumption that they are not as sophisticated, um, which I think like any person can be less sophisticated when it comes to investing. And I've seen women and men who are less sophisticated, but there's an um there's an industry-wide or professional um default that goes to um, in some ways, you and I are both bans of simplicity. So, you know, perhaps that's good, but it probably will also result in um de-risked portfolios, which may result in different returns and outcomes and and maybe limitations

Discipline Rules And The 20 Beliefs

SPEAKER_01 20:32

on financial resources. So there is so much um room for these types of discussions. And I think like oxygen for um women and men investing professionals to be having um some looks in the mirror and talking about how we can um be more prepared for that. Um, because I think the easy uh route that happens now is like, oh, look, you're, you know, if there's a few of us who are women financial planners, like you're for the women, but we're actually for people and we need all of financial planners to kind of tune up for that coming wave of um continuing wave of increasing financial control um by females in the population.

SPEAKER_02 21:10

Yeah, it is funny. Like there's all these stories about the great wealth transfer that's coming, right? And how much money is gonna go down to the next generation. But before that happens, most of the money is gonna go down to the spouse, right? And and you're right, it's women that are gonna control it first, and no one's really planning for that wealth transfer.

SPEAKER_01 21:26

Absolutely not. So it's um so much more interesting. The waves of this is a completely different asset transfer than their parents' generation because you have defined contribution plans, 401ks, IRAs, that have um supersized wealth. You did not pass on your pension in the form of an inheritance when that pension, when that person passed away, the pension terminated. And um, that's kind of how it worked back in the day. So um, there's a method to the madness when it comes to a new era. Of wealth for many Americans. And it's it's not your great-grandfather's generational wealth transfer.

SPEAKER_02 22:09

Yeah. It's also why the whole idea of transparency is so important and including everyone in the conversation when you're talking about money.

SPEAKER_01 22:15

Absolutely.

SPEAKER_02 22:16

Both generations, both spouses, but you know, the whole household essentially, instead of just having one person be the point person. Because that, you know, like I said, it's it's it's kind of morbid to talk about, but there's going to be a lot of death and dying in the years ahead because the baby woman, there's such a large cohort of people that dealing with that is just something that we're gonna, as a society, have to kind of grapple with. That's 70 million people that are reaching this age where they're not, you know, they're they're riding it out in the sunset, essentially. Um and and those are conversations you have to have beforehand instead of after the fact.

SPEAKER_01 22:46

Absolutely. And I find like we cater to um working with people that are Gen X and older millennials. And they're whether it's dealing with an estate, but so many of them that I'm working with just anecdotally are getting, you know, like firsthand checking on mom and dad, finding out they haven't filed taxes in a couple of years, you know, they're kind of masking um the diminishing capacity. And then, you know, you wake up and you're trying to figure out like how is this working? And, you know, grandpa was good with stocks, so he was self-managing all the way through, which was great. You know, um, the wealth was created, but now it needs to be tended to and managed. And it sure is helpful to have that conversation before the capacity issues um present themselves.

SPEAKER_02 23:31

Yeah, definitely.

SPEAKER_01 23:32

Well, one of the other things I wanted

Humility Psychology And Playing The Long Game

SPEAKER_01 23:34

to just ask you about. So um the the book is fantastic. You could poke it, pick it up if it had been written 10 years ago and if it was written 20 years in the future and it would be relevant. Um, so kudos on that, Ben. Um, but I wondered how do you take the lessons from risk and reward and apply them to the world today? I had I know so many people that um are like appreciative of the uh positive returns in the market, but also pessimistic about the future, concerned, fearful, etc. Um, what do you what what lessons do you take to uh to apply to today's world?

SPEAKER_02 24:13

Yeah, I sometimes people ask me, like, how do you come up with stuff to write for your blog? And what I say is that I try to have like this 10,000 foot worldview of this philosophy and then apply it to today, right? Like what's going on to today. Um and that's that's why it's like a more the like you said, a basic building block type of thing. And I think that it's it still rings true to no matter what is going on. And and there are I think there's certain investors that, and this was especially true come out of the great financial crisis, that latched onto the bad stuff and could they couldn't get out of like they were investing from the fetal position and way too conservative. And now you've probably got some people who are on the other side of the boat who go, Oh my gosh, it's it's gotten things are going so good, they're never gonna get bad again. It is funny though, I I do think anecdotally from the people that we talk to, a lot of clients have, I think a lot of people have learned their lesson because we have clients coming to us who have huge gains in these stocks that they put in 10 years ago, right? Hey, I put money in NVIDIA, I put money in Tesla or Apple or one of these stocks, and it made me a ton of money, and I know I need to diversify. So I I don't think it's like there's all these maniacs running around just assuming the good times are gonna last forever. I think a lot of people do recognize the fact that like diversification is a form of risk management and that it it makes sense, especially in times like this when you don't know what the future holds, especially when the future is always uncertain, but in times of technological change, and we're we're dealing with you know geopolitical situations plus this huge innovation boom in AI, and what is it gonna mean about the future? And there's a it seems like uncertainty is heightened now. I I guess the point is that you know there's always this irreducible level of uncertainty about the future, and you're never gonna get rid of that. And that's the whole point of like having to step off into the void a little bit and and accept risk. And it's really about knowing yourself and like how much you can really take. I'd say in the book, like the the good plan you can stick with is way superior to the perfect plan you can't stick with.

SPEAKER_01 26:01

Yeah, I the chapter on the perfect portfolio, unfortunately, the answer is it's up to you, your emotions, your approach to risk, what you can take. I always say that the um success of a financial planner or an investment manager is the batting average of their clients when you go through difficulties. So, what is the batting average for you staying in the allocation that you've chosen um, you know, in March of 2020 or in 2022 when when it was a very difficult investing market, it was just brief. Um, and so if the if you review your investment portfolio and you navigated through and you're on the same in the same place on the other side, you're not bouncing around from year to year. That is a good batting average. And I guess if you never change it and you never look, then the question could be could you take more risk? But otherwise, if you're always changing, then you probably take it on too much.

SPEAKER_02 26:56

Yeah, no, yeah, I think that's that you're right. The batting average is a great analogy. And I think you have to figure out whether you're the kind of person who wants to swing for home runs, but you could strike out, or you're the kind of investor who's okay taking singles and doubles and and just getting on base.

SPEAKER_01 27:11

Well, speaking of batting averages, I'm gonna um bounce to a different sports analogy. I'm a huge Michigan basketball fan. I don't know if you where your allegiances lie um when it comes to uh I'm also a Michigan fan.

SPEAKER_02 27:25

I took my kids to Chicago for one of the regional final games. So we're big uh Go Blue fans in our household too.

SPEAKER_01 27:31

The times are good for the men's and women's basketball team. Uh, but when I read your last chapter, the epilogue, 20 things I believe about investing, I was reminded of something that I learned about the way Dusty May coaches um for men's basketball at University of Michigan. He has a preference for how you shoot um if you're his player. Number one preference, get to the free throw line, get those free shots, um, uncontested shots. Number two is layups or close to the basket dunks. They're uh super high percentage. And number three is um three pointers. So when you look at the visual statistics of his team shooting, nobody, there's such discipline from the team. Nobody is shooting mid-range jumpers. They're lower probability you get a 50% bump if you um make a shot from the three versus if you make that to mid-range, which has lower probability. And the discipline of, you know, do not take that shot if you're open in the middle, um, really was part of their success. And it was it it he taught that to a team that a lot of the the um roster was new to him um just in that, you know, nine-month period. Um, when I read your chapter, which I think is golden on 20 things I believe about investing, I'm reminded of that discipline. Um, I think like every great investor, personal or professional, needs that list of things that you're going to commit to and endure. And I just wonder um how you develop the list and maybe we could talk about a couple of the points.

SPEAKER_02 29:06

Yeah, I I think it's kind of everything that I've been trying to figure out about myself and about investing in in the markets. And I just think that the um the markets are like this huge laboratory for understanding human emotions, and that's that's the biggest part of it, obviously. Everyone could look at the data now, and the data's pretty easier, much easier to come by. But I think understanding yourself and figuring out what your actual beliefs are allows you to, like you said, swat away those mid-range jumpers if that's not in your plan. That's the hardest part. Josh Brown, who I work with, always says that a good financial advisor is like a bouncer at a club standing behind the velvet rope and like not letting in stuff for your portfolio most of the time, turning it away. Yeah, turning it away and only letting in the things that like meet your criteria. But you have to have a criteria in the first place, otherwise you're totally lost.

SPEAKER_01 29:49

Absolutely. I think like your number one on the list is I believe simple beats complex. And um, I think simplicity, whether it's in your financial plan, simplicity definitely in your investment process. We have a decision rule in our investment process that you have to you have to have a reasonable case that you could beat, you know, the market capped index in order to make it into the portfolio. Otherwise, the index is just fine and a heck of a lot cheaper in most cases. Um, and simplifying wherever possible is a great way to get started when it comes to kind of um dictums that can really help you to be successful as an investor.

SPEAKER_02 30:27

Yeah, and easier to understand. You know what you own and why you own it. Uh, yes, you're right. That that index should be your anchor for, and it's kind of like a benchmark comparison too for the rest of the stuff in your portfolio. If you're gonna pick stocks, if you're gonna pick an actively managed fund, you compare it to that index, and that's kind of your benchmark. Like, was it was all the time and effort and higher fees and higher costs and more transactions, was it actually worth it in the end?

SPEAKER_01 30:49

Absolutely. And I think a lot of the rest of your, you know, kind of 20 beliefs are uh behavioral and psychological. Um, can you just I know you emphasize this throughout the book, but just tell us in your own words how important that psychology is to be successful over time as an investor?

SPEAKER_02 31:09

Yeah, I when I first got into the business, I was working on the institutional side of things and I I was in the room with a lot of very smart people, very high IQ, very well educated. Uh, they had a lot of, you know, letters after their names, MBAs and CFAs and PhDs and all these things. Uh, but I found a lot of those people tried too hard to outsmart the market. And I realized that they didn't have like they didn't have any, they were so smart they didn't have enough self-awareness or self-control. And I realized Or maybe humility. Yeah, humility, yeah. Yeah, and the ability to admit like I don't know sometimes. Like I never heard any of these people say, you know, I don't know, or we're underperforming right now because this is just not the right time for our strategy. It was always excuses, and um, you know, the market just doesn't isn't aware of our strategy yet or whatever uh it's gonna happen. And so so I think like I I learned that self-control and self-awareness, and that that matters a lot more. And yeah, the ability to tell the say I don't know, and and sometimes say I'm not smarter than the market. The market, the market is smarter than me. All these millions and millions of opinions that make up the prices, maybe I'm not, maybe I can't outsmart it. Uh that's not to say the market is is always right, but I think, yeah, that having some humility and self-awareness is is huge when it c as an investor, because uh I had a boss who told me, like, don't like you're going to be surprised in the market. Just don't be surprised that you are surprised by what happens.

SPEAKER_01 32:30

So true. And, you know, speaking of batting averages, nobody bats a thousand. In fact, you if you can just, you know, um get up and participate and you know, kind of get the market's numbers um day to day, is it's kind of gonna look like a coin toss um from one day to the next. But over time, that's where, you know, if you're patient, if you avoid being reactive, if you avoid those shiny objects, that's where you start to, you know, kind of feel the weight of the building of wealth and and the results. Um and you can never get there if you're just looking for the next hot stock.

SPEAKER_02 33:06

Yeah, and the hard part is it it takes time. You have to do have to be patient. And that's hard for a lot of people these days because everything in our society is on demand now, right? Yeah, it's millis. Movies and TV shows. Yeah. Everything is right there.

SPEAKER_01 33:17

So true.

Where To Find The Book And Closing

SPEAKER_01 33:18

Well, Ben, um, where can people find the book? I'm sure everywhere.

SPEAKER_02 33:22

Yeah, Harriman House uh published it for me. They did, they did a great job. I actually uh read the audiobook myself. I figured I'd try it, did that for the first time since I do the podcast. Uh so it's in Kindle and Paperback and Audio and uh Amazon and Barnes and Nobles and all the places.

SPEAKER_01 33:37

Well, congratulations on your audio debut as well. And thank you so much for joining us.

SPEAKER_02 33:43

Yeah, thanks for having me.

SPEAKER_00 33:55

Thank you for listening to the Women's Money Wisdom podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to ProPlan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as the receipt of or substitute for personal investment advice from Pro Planning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and form CRS discussing our advisory services and fees are available upon request or on our website platform at Perlplan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.