Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:05] Speaker B: Welcome to another episode of the Worst Advice I Ever Got. I'm your host Sean Taylor along with my producer jb and today our guest is Jeremy Schneider. Jeremy is a personal finance educator, entrepreneur and founder of Personal Finance Club. After selling his tech company and retiring at age 36, he's devoted his time to helping people build wealth through simple long term investing principles. Jeremy breaks down complicated financial ideas into clear, actionable insights and he's got a big Instagram following to prove it. Hey Jeremy, thanks so much for joining us today.
[00:00:38] Speaker A: Hi Sean, thanks for having me.
[00:00:39] Speaker B: Jeremy, we don't beat around the bush, let's jump right into it. What's the worst advice she ever got?
[00:00:45] Speaker A: The worst advice I ever got was investment is speculation.
[00:00:50] Speaker B: Okay, investment is speculation. Let's talk a little bit more about, you know, where the advice came from.
[00:00:57] Speaker A: It wasn't like one day where one person said, jeremy, investment is speculation. It's just, it's many examples through my life and I think it's almost in pop culture what we think of when we think of investment. You are guessing about what's going to happen in the future. You're speculating, you're making bets. It's akin to sports gambling or going to Vegas. There are ways to gamble on the stock market using very speculative things like options and calls and to some degree, stock picking and day trading. These are all ways to basically use this volatile stock market as a gambling machine. But investing is something very different, which is acquiring shares over time and letting the compound growth of time and the growth of the companies and dividends and growing economies do the work. And there's really like two pieces of the stock market.
What we hear about the news is this volatility piece, it's the speculative piece. It's like, ooh, what's going to happen with these tariffs? What's going to happen with interest rates? What's going to happen with whatever the news of for the day? And that's where you see the volatility. But below that, the, there is this, the real part below is the companies of the world. And when you buy, for example, an index fund that's buying all the companies of the world and those companies, as long as society exists, you'll see bumpiness in the purported value over time. But over long times, you're going to build wealth. And that's what investing is. It's that accumulation of shares and growth, not the day to day speculative guessing. Right.
[00:02:22] Speaker C: Well, compound interest, right? I mean, Einstein called compound interest the eighth wonder of the world. And so I think the idea is, obviously that's there, but why do you think people are so into this speculative investing in the day, trading all these things now? Why is it such a hot button topic?
[00:02:39] Speaker A: I think it's like the old ad, which is dog bites man isn't news. Man bites dog is news. And if the market goes up half a percent because companies reported normal profits, that's not news. That happens all the time. And it's not interesting, it's not exciting.
And it also doesn't result in some sort of dramatic overnight win. Right?
But if you make some speculative Options trade on GameStop right before the GameStop news breaks, you can literally make a million dollars overnight. And so those are the stories that capture people's attention and get like undue press in, in the media. And so someone hears, oh, this guy bought GameStop options the day before this really unexpected thing happened with this tiny stock. That's what investing is, it's gambling. And that's what I should be doing. And that's not true. That's like akin to buying a lotto ticket and saying, oh, that's what I should be doing because one guy won the lotto. But that's not repeatable and it's not expected.
[00:03:36] Speaker C: That's the danger. Right? And that's why I think this, this, this advice and why I think it's such an important topic for their audience is like that, this idea that investing is speculative is this kind of idea that some people have. And then, and it absolutely can be, like you said, it can be news forward. When that happens for our audience, what is the difference between investing and speculating?
[00:03:57] Speaker A: Speculating is making a bet on an unknown future. I guess speculating is saying, hey, I'm going to buy a call option. This is an example. Call option is like a bet that the market's going to go up, but it can also be lesser things. Like it can be, hey, I'm going to pull my money out of the market today. Because I know, I'm guessing I'm speculating that the future of the market is going to be bad because of what the government is doing or what the banks are doing, what interest rates are doing. That's all speculating because it's, it's making a guess about the unknown future. Investing is simply acquiring shares systematically. It's buying things that pay you while you own them. Real estate or stocks. Real estate pays you rental income, stocks pays you dividend income. So just just being an owner pays you money.
And these things are likely to go up in value. That's what investing is speculating often gets mixed up in this world because people are then gambling on top of these things, making guesses about what's going to happen.
[00:04:58] Speaker B: Yeah, I mean, it's not really sexy to talk about index funds, right. I mean like, crypto is a lot more fun to talk about, right?
[00:05:06] Speaker A: Yeah, it's not sexy at all. But you know what is sexy is becoming a millionaire.
[00:05:10] Speaker B: Yeah, that doesn't suck. Yeah.
[00:05:12] Speaker A: And you know, I'm 44 and so like, you know, friends might, many of them are millionaires and many are not. And the millionaires got there by opening up their 401k, putting a lot of money every single year, you know, having a Roth ira, setting up the automatic investment and then just not doing much for 20 years. And you know, one is like boring because like for the first few years it looks like nothing's going to happen. I always talk to new investors who are like, I've been investing for nine months and I put in $1,000 a month and I'm only at 9,200. I'm like, that's pretty good. Like that's about, that's about right.
Not most of the money at the beginning is what you put in, but that 200 is like the seed of a mighty oak tree that's going to grow and grow and grow. But then they hear stories about someone who's like, oh, I like did a reverse crypto trade on dogecoin and I made 20 grand in six hours. You're, should I be doing that? I'm like, no, that guy's gonna be broke in 20 years and you're gonna be a millionaire.
[00:06:05] Speaker C: Stay the course that all the time with like gam, you see, you'll see a gambling ticket of some guy put a five dollar parlay on for 15 things to happen. He went $300,000. He's probably just paying himself back at that point with the money that he won. Because you're doing so many speculative things and you know, borrowing from Peter to pay Paul kind of stuff. What, what do you think you would say to somebody who's like, all right, I'm gonna do this, I'm getting into investing. What's your message for them?
[00:06:30] Speaker A: My investing is a few things. One, think long term investing is a game of decades, not days.
You focus on acquiring more shares, you focus on minimizing fees and basically being diversified in index funds.
It's not a sexy message because there's always people squawking, the talking heads and the opinion People who are like, this is going to happen, this is going to happen. There's 10,000 reasons that the stock market's about to crash. And I sound dumb for saying, ignore that, all that scary stuff, just keep buying it sounds really dumb. But optimal investing is really, really simple.
I have two rules of investing. Rule number one is live below your means. That means spend less money than you make. And rule number two is invest early and often. If you do those two things, even if you're not doing it perfectly, even if you pick the wrong index fund, or even if you have a little tax mistake, yada, yada, yada, you're going to build a ton of wealth. If you're spending more than you make and you're not investing, you're going to be broke for your whole life.
[00:07:29] Speaker B: But okay. My son started his first job in January. You know, he was faced with a decision, you know, do I max out my contribution to the, you know, company for a 1k plan? Right. He looked at it that it was like a little bit of speculation. So how, how do we cure this mindset poison that I think I'm hearing here? Investment is speculation, right? Because he looks at, he looked at it as.
But you're saying it's not.
[00:07:55] Speaker A: Yeah, it's not. And I think, you know, the short answer is education. You know, if you look back at 100 years of stock market history, you can point to almost every single year and point to like economic catastrophes like currently trade war, tariffs like two years ago, hyperinflation two years before that, Covid before that.
You know, the financial crisis, banks failing. There's always reasons not to invest. There's always reasons. It sounds scary, but then you zoom out and you look at that chart. It's almost like 10% on the money over that period of time. And over any given day or week or month, it could be whatever, who knows? But if you zoom out to 10 years, 15 years, 20 years, there's never been a losing 20 year period in the market or even a 15 year period in the market. And so as long as you understand what you're doing saying, hey, I'm acquiring shares, I'm buying a piece of the companies of the world and I know that company's going to profit and I know that they're going to be profiting more in 20 years than they are now. As long as I keep acquiring more shares over those 20 years, I'm going to be a millionaire in 20 years. All that noise, all that volatility along the way, you can Just safely ignore Jack Bogle, the founder of Vanguard. One of his quotes was don't do something, just stand there. Like the opposite of don't just stand there, do something. He said don't do something, just stand there. Which is the perfect advice for investor behavior.
[00:09:17] Speaker B: Well, and you talked about education. I would tune into CNBC or you know, Bloomberg or what, whatever to get my investment advice. But they're not really talking about true education like you're referring to.
[00:09:31] Speaker A: Right. 100. It's, it's, it's kind of shocking. Like if you go read three classic books on investing, pretty much any three books on investing are going to triangulate what I've just been talking about. Whereas you almost never hear that on Bloomberg or cnbc because you're exactly right. They're not in the business of like thoughtful long term investing. They're in the business of eyeballs and clicks and breaking news crayons and things like that. And one of my favorite financial articles of all time comes from the Onion, the satiric newspaper. And it says all Jim CRAMER viewers from 2000 are now billionaires.
Because of course this guy who goes on TV every single day and tells you what are the good and bad stocks like, we all know the dirty little secret that if you've been doing it the whole time, you're probably no better off than just randomly investing. But, but the implication of him having that show is that if you do this really like clever stuff, you will be wealthy over that time. And that's like, that's not true.
[00:10:29] Speaker C: No, it's the, it's all like, why, why aren't all economists rich? You know what I mean? If you have such an understanding of what this thing is, why are you making $44,000 a year teaching in some juco econ 101? Like, what do you mean?
[00:10:41] Speaker A: Here's a fun stat. Since the foundation of the federal res, US dollar has lost 96% of its value. That means a dollar today can buy 96% less than it could back then. But if you had invested in the broad stock market as measured by the s and P500 and held until today, adjusting for inflation, it's up 151,000%. It's really mindboggling numbers that it sounds made up, but you don't want to be holding the dollar. That's like, you know, on the down 96% train. You want to be on the up 151,000% train. It's pretty, pretty wild what compound growth does over time.
[00:11:19] Speaker B: Yeah, it sounds like what my 3 year old, you know, said back in the day, said $1,000 billion dollars, Daddy. You know, it's like that's a made up number, right? But those returns are not made up. It's insane. It's insane.
Talk a little bit about this whole concept of balance first timing.
[00:11:38] Speaker A: One of the core good practices of investing is don't time the market. And timing the market, in my opinion is any sort of decision or action you make based on what is happening in the world, not your life. The classic timing the market is I'm going to sell my entire portfolio, avoid a crash, and then buy my entire portfolio. At the bottom. It sounds like buy low, sell high. It sounds like classic advice. The problem is you don't know when that's going to happen. And so, for example, in 2013, the stock market hit an all time record high.
And back then people were saying, oh, we're at an all time high, crash is coming.
Better, better sell. But here's the problem. In 2014, it had an all time record high, 15, 16, 17, 18, 19. In 2020, the big crash came 30% down in March of 2020. But guess what? March, the year 2020, ended up 18%. And so when we look backwards, we can see where those crashes are. And it seems obvious to us. Of course the market crashed during COVID of course it crashed during the bank crisis. But looking forwards, we don't know what's going to happen. And it's not always obvious and it's virtually impossible. And so the wise investing strategy isn't jump in and out of the market, change what you're doing, switch from stocks to bonds, stop contributing, start contributing more. I don't even like the phrase buy the dip. A lot of people say, oh, it's down, buy the dip. Because that implies that you've been saving cash on the sideline waiting for a dip. And historically the math is bad on that. You would have been better off just putting the cash in the moment you got it, whether or not the stock market was at an all time high. In fact, if you look back over the 100 plus years of the stock market and look at only the months where the stock market broke the all time record high. The average following year is over 11%. And so even though you're at a record high, the expectation on average is that it's going to, it's just the.
[00:13:38] Speaker C: Record high for now until the new record high.
[00:13:41] Speaker A: Record highs are very ephemeral. They're going to be the new record high next year. And so I think the most valuable button in the entire world of investing is the recurring investment button.
You click that button, you choose once a month. I'm going to choose take this amount of money out of my checking account, put it into either 401k, IRA, regular brokerage account, whatever it is, into some index funds, and then just leave it there. That's the optimal behavior, not the guessing about what's going to, you know, what's going to happen next.
[00:14:09] Speaker B: That's the old Ronco oven or whatever. What was his famous phrase?
[00:14:13] Speaker A: Set it and forget. I know. Yeah, infomercials. I would have stolen that phrase because it's perfect for investment.
[00:14:20] Speaker B: Well, so. So are you holding any cash? Speaking of balance, what's the balance of, you know, you know, cash versus investing in the marketplace. Because, you know, a lot of times when you invest, you can't uninvest without.
[00:14:31] Speaker C: Yeah.
[00:14:32] Speaker B: Gotta have tax liabilities or penalties. You know, just talk about that a little bit.
[00:14:36] Speaker A: Yeah, so we kind of only talk about investing if you take a little step back and look at a more holistic personal finance view of your life. I'd say one, you, you want to have about a month's worth of cash in your checking account, a month's worth of expenses, because living a life of not knowing if your rent's going to clear is not nice. And I'd say you probably want three to six months of cash in an emergency fund. This is a, maybe a separate account, high yield savings account or a money market fund, something like that. That's, you know, these days you can get probably about 4% interest on that money just sitting there. That's kind of more of like a defense in a sports analogy. Investing is your offense. That's like your money, it's going to grow. But part of, you know, winning is having a defense. If you lose your job, medical emergency, car unexpectedly breaks down, you know, life happens. You don't, like you said, you don't want to have to go to your investments and do something bad like, oh, I have to pull out the money when the market's down. And the way that life usually works is things generally go bad all at the same time. Like, you want to have that cash. If you have six months of cash plus your checking account sitting there at all times, and then you start investing. And, you know, things like real estate and mortgages are a little bit of a different type of debt because those, you can sell those assets to pay off the debt, and they're generally appreciating assets not things like cars and credit card debt.
[00:15:50] Speaker B: Where does spending come into all this? Okay, great, so I have a great investment strategy and I return 100 billion trillion percent or whatever we said it was since 1913.
What do I do with all this freaking money now?
[00:16:02] Speaker A: Yeah, that's a really important question. Because when I go on one of my little tirades about index funds, there's like this underlying assumption that the goal is, you know, roll into your grave at 85 with the most millions and you've won at life. And like, that's definitely not true. You know, money is a tool to maximize your life's happiness. And in addition to this compound growth that investments provide, there's this like exponential decay of our own health. You know, no one's ever lived to 150 years where the time is, the clock is ticking for all of us. And not only that, it's, it's kind of like a gradient over the years too. Like, what you can do in your 40s is probably going to be very different than what you can or want to do in your 70s.
It is, it is, you know, balance and like, you know, sometimes I hate that word because it's kind of like almost like a cop out. You're like, oh, just have a balance. But, you know, you want to make strategic decisions about when to spend your money and make sure that you're getting the most value out of your life. And, and some, sometimes that balance can be out of whack. Like there are stories of people who do roll into the grave at 85 with $10 million and they didn't use, make the best use of that tool. They should have been more generous in their life giving it away. They should have been, you know, going on more fancy vacations and experiences.
But I think there's a lot more people who, the pendulum has swung too far the other way. You know, they're in their 20s, 30s, 40s, they have credit card debt, they have car loans. You know, they're terrified every day about losing their job, about tax changes, about, you know, every little, every little financial thing. And that's not a very joyful way to live life. It's not a very secure feeling. It's not a very good plan for the future. And so while you want to be saving, you also want to be spending. You want to be spending while you can on the things you love, but with the knowledge about what the implication is. So maybe that means taking an extra trip with the kids and taking them out of school for two weeks and doing A once a lifetime thing because it's not going to change your retirement date that much. Well, maybe it doesn't mean buying a new $100,000 car every two years and working another 10 years just so you're driving some other stupid car.
[00:18:04] Speaker B: Yeah, Jeremy, I, I think talking about, you know, you know, not hoarding a bunch of income, but, you know, spending and, and, and having a quality of life is important. But you touched on a little bit in there about a lot of people are, are probably not truly in that position of having assets that they're hoarding, but really being in trouble.
Didn't I read somewhere one time that the, a very, very small percentage of people control the marketplace? You know what I'm referring to there?
[00:18:30] Speaker A: Yes, you guys did just help me a little behind the scenes. You guys helped me look up the stat. But, but yeah, as we just looked up, 1% of Americans control 50% of all the stocks in the stock market and the top 10% as of, of income. Americans control 93% of the stock market and the bottom 50%, like half of people control 1%. And so, you know, and this is like half of people, like if you go to a football stadium and there's 100,000 people in there and you look at like after, like everyone from the 50 yard line north, they own 1%. And then like you know, the little VIP box in the top, they own, you know, 50%. And so, you know, when I talk about this balance and say, okay, most people have skewed, you know, towards this 50% where they probably have more debt, they are living paycheck to paycheck, they don't have a cash buffer, they don't have investments. And the world is a diverse place. Everyone has their own experience and there's lots of reasons. But on an individual basis you can look at, hey, what can I do to decrease my spending, increase my income?
Like avoid the reckless wasteful spending, avoid debt, put less money towards debt, more money towards those assets. And you want to get out of that 50% and climb your way up into the asset holding portion.
[00:19:47] Speaker B: Yeah. So investing is really not about trying to get lucky, right?
[00:19:55] Speaker A: Totally. In fact, I don't think there's luck at all. I think when I look at the stock market on a daily basis, if I do just because it's what I kind of do for a living, it's just out of curiosity. It's not about checking my lotto numbers.
A recent post I did showed two charts. The first chart was it said how to be stressed and if you look at the vault of the stock market, it's very stressful. It goes up, it goes down. It feels like this bumpy ride.
But how to get rich is looking at how many shares you own. That's like a step up chart. And that's a very calm chart because I just own more and more and more shares. What someone's willing to pay me for those shares on a given day, you can look up in the market what, you know, what the market price is, but if you're not selling, it doesn't matter. And so that share step chart that I described, where you're stepping up the more shares you own, that's not luck, it's just a simple systematic plan.
[00:20:46] Speaker B: Well, I, I do have to say I feel there was some luck involved in getting you to join the podcast today. I really do appreciate you, Jeremy, and appreciate all that you brought today. It's really going to matter a lot to our listening audience. So thank you so much for joining us today, Jerry.
[00:21:02] Speaker A: Yeah, thank you guys so much for having me.
[00:21:04] Speaker B: You know, jb, who's probably nodding along the most with this episode, Brad Swinesberg and the whole team at Smith and Howard Wealth Management.
Brad. Brad might have a few thoughts about some of Jeremy's takes, but I think he'd absolutely is going to agree with the heart of it. Real investing is simple, boring, and incredibly effective when you actually do it, right.
[00:21:30] Speaker C: I mean, that's the hard part, actually doing it, you know, not understanding it, just actually getting it done. And obviously his advice isn't really flashy, just is what it is.
[00:21:40] Speaker B: Exactly. It sounds so obvious. But resisting the hype takes real discipline. So if you're listening to this, thinking, this can't be it, there's got to be more to it. That's the whole trap, right? It's the speculation mindset Jeremy warns about.
[00:21:55] Speaker A: Right.
[00:21:55] Speaker C: You see so many people, you know, making a hundred thousand dollars in two days and it's like, oh, it's, it's like scambling, you know, it's why so many people end up missing out. You know, they treat the market like a slot machine instead of what it actually is, which is, you know, ownership and a real business. And it grows time.
[00:22:11] Speaker B: Yeah, yeah, let's be clear. You don't need hot stock tips. You need time. You need patience and maybe a recurring transfer button.
[00:22:21] Speaker C: Yeah, you know that old set it and forget it we brought up.
[00:22:25] Speaker B: Exactly. Yep. And, and hey, if someone tries to pitch you a once in a lifetime opportunity, just tell them you're already invested in not being dumb with your money.
[00:22:37] Speaker C: Yeah, solid return on that one.
[00:22:39] Speaker B: Well, we hope you got a solid return on investment with your time during this episode. And if this or any of the episodes helped you rethink how you're approaching your life, share it with us.
We love to hear what our listeners are enjoying to make sure we bring you as much value as we can. I know I ask you every week, but once again, hit that follow button, share the show and join us next week for more bad advice turned good stories on the worst advice I ever got.
