Raising Your Investment Mindset - Series Recap | 7.10 - Enjoy More 30s: Family Finance

Episode 10

Raising Your Investment Mindset - Series Recap | 7.10

Published on: 9th May, 2022

Recapping the 9 episodes that reframe our investment mindset to ease financial anxiety!

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

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

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcript
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Welcome to the Enjoy More 30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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

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from simply enjoying life.

Joseph Okaly:

Hello there and welcome once again to the Enjoy

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

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

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

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

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

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wherever you are listening to clicking those stars leaving a

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review, it really really does help us reach literally

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

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that are young families sitting here just like you.

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

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

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

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favorite thing to talk about because quite frankly, they are

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

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

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

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

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cover these main things about investments because investments

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are what people have the most questions about. Investments or

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

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rounded, comprehensive financial planning movie, there should be

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

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

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

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

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

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

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

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

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a more constructive way, hence, raising your investment mindset

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title.

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

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

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

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

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

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have to believe very high on that list is enjoying more

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

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

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

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

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

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

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

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

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

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

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spouse. And let's review.

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

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

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

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

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

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

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compare the investments to their peers, doing good is completely

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

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

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

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

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estate fund, it would have actually trailed its index by

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

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

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path to get you to your goals and leave the investment

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performance comparisons up to an advisor or an allocation fund or

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something to make sure those individual pieces are performing

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

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

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

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alternatives to the same kind of investment box to see whether

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

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

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

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they are actually doing that."

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

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

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

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

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

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

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

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

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

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

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

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

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

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exact index, different time period, very different result.

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

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

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

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

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

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

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to not emotionally sell low when that happens."

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

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Parties. Here we discuss how what political party happens to

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

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stock market performs, as well as the certainty versus

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

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

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them all together in all different ways. And what the

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

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investment returns just by what political party happens to be in

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

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does historically show a high correlation with volatility:

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

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

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

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recovery. So hopefully everyone after this episode was able to

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

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

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laid out.

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

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

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

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to only put out very negative perceptions, which can increase

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our uneasiness, decrease our likelihood of maybe taking the

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steps we need to through investments or advice. Wall

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

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the most popular movies involve crooks, criminals, and otherwise

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very unscrupulous individuals. So what are your views about

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

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

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

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

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

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

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

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were too fearful of using investments, or too fearful of

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

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

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

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

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recognize what can greatly affect many people's perceptions

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

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for that episode.

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

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

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

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

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what happened recently is just going to keep happening right?

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

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

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systematically taking gains in certain well performing areas

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and reinvesting them into an area that has been

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underperforming is something an advisor or an allocation fund

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

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

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

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

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

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

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

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

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

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we laid out for the episode.

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

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

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bit more is almost always possible. And just how hugely

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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better understand how impactful it can be to consistently push

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my savings just a little bit further."

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

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

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likelihood your portfolio extends way beyond what they're

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

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

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

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

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

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

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

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

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

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

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

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

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hopefully for you that's not true.

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Number 8, Emotionally Abnormal, Statistically Normal and Healthy

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

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abnormal from an emotional standpoint can actually be very,

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very normal from a statistical standpoint. By knowing what

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normal is we can better protect against acting emotionally when

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it comes to our investments. When you use a mathematical

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statistically diversified portfolio, the goal is like that

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

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

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

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

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

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

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

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

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

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when we combine that standard deviation with the expected

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

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That would be statistically normal. Now, the shorter the

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

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

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

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

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

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

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

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

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succeeded here.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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company matches, using Roth retirement account, identifying

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

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

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fees for that advice can separately affect my situation",

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

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And this is really the culmination of everything from

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

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

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

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

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

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

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

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

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

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

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

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potential.

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

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confident, push that chest out a little bit more about

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

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

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

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advice. Because this is really the most important takeaway that

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

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

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part of what a good comprehensive plan should

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actually include.

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

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

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centuries! Droning on and on about expected returns and

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standard deviations and statistical norms. I know I like

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

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

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

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

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

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

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

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

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in your mind and on the right track financially.

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

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

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

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

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

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

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

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

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

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

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

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

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EnjoyMore30s.com EnjoyMore30s.com Click Ask Joe

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or you can connect with me directly by visiting my wealth

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management firm New Horizons Wealth Management at

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

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

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soon.

Voiceover Audio:

The conversations on this show are

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Joe's opinions and provided for general information purposes

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

Voiceover Audio:

professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

Voiceover Audio:

accountant, lawyer, or other professional before acting upon

Voiceover Audio:

any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

Voiceover Audio:

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

Voiceover Audio:

Registered Investment Advisor, Member FINRA/SIPC.

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About the Podcast

Enjoy More 30s: Family Finance
Family Finance for Young Professionals.
Young families receive little to no personal finance help. We all grow up to have jobs and money, yet our education system focuses on Shakespeare and Algebra. Even professional advice can be hard to come by, with the majority of the industry chasing retirees and existing wealth.

Joe Okaly's podcast is aiming to change this, providing personal financial advice geared specifically to professionals with young families. This podcast is dedicated to making life more enjoyable for young families, by hitting on the financial topics that tend to weigh on us, stress us out, and distract our focus from simply enjoying life.

Joseph P Okaly is a CFP Certified Financial Advisor who fits directly in with who this podcast is focused on - a young professional with a family. With over a decade of experience as an advisor, there is passion and knowledge to make a difference.

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC. TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.