Stop Guessing Stocks | Brian Feroldi | Growing Money with Sean Trace

In this episode of Growing Money, I sit down with Brian Feroldi to break down investing in a way that actually makes sense. 

We talk about why so many people feel overwhelmed by the stock market, how to stop seeing stocks as random letters on a screen, and why the real key is understanding the business behind the ticker. Brian shares how he teaches people to read financial statements, spot red flags, think long term, and avoid getting trapped by emotion, hype, and constant market noise. We also get into why index funds make sense for most people, how different investing styles fit different personalities, and why building wealth often comes down to patience, consistency, and learning the fundamentals before putting your money to work. 

If you’ve ever wanted investing explained in plain English without the jargon, this conversation is for you.

Transcript

SPEAKER_00 0:00

Time is the exponential here. And to really maximize your long-term wealth creation, you really want to maximize the time component because that's what does the heavy lifting for compounding over time. So while I teach people about the stock market, the funny thing is, whenever people ask me, how did the market do today, I'm like, I don't know. I never look at what the stock market did. It is rare if I actually see what the stock market did in real time because that what the stock market does today has no um no ability to change what I do or my my core my core uh philosophies. So I go in with a mindset of buying and holding great businesses for multiple years. And because I take that mindset, the price of the stock market today has no impact on what I do. It's similar to like owning a home. It would be like somebody coming to you and say, Do you see what happened to your house price yesterday? It would be like, well, that has no impact on my ability, desire to live in my house. I don't care what my house is worth or how that number is jiving up and down on an everyday basis. It's the same thing for me and the stock market. I don't care what the up-to-date minute to minute, second to second price of the stock is. That's not investing. That's worried about, that's worried about trading. I'm trying to build a portfolio that grows sustainably for a long period of time at an acceptable uh rate. So what happens in the day-to-day world, minute-to-minute world, has little to no impact on what I do. And that's the kind of thing I try and teach people is the only way to get great returns from the stock market is to give it the time that it needs to for the market to deliver those returns. And the more you look at it, the more likely you are to want to trade or be tempted uh to tempted to trade. So I teach people one simple thing to do if you're an investor, delete all the apps on your phone that show stock prices. That alone will make you a better investor.

SPEAKER_01 1:59

All right, welcome everybody back to the Growing Money with Sean Trace Podcast. I've got an awesome guest with me today. Would you like to tell people who you are and a little bit about what you do?

SPEAKER_00 2:08

Sure. I'm Brian Feraldi. I consider myself a financial educator. I teach investors how to analyze businesses so they can invest with confidence.

SPEAKER_01 2:17

How did you start that path, man?

SPEAKER_00 2:20

Uh I kind of made it up for my myself. So I have a, you know, like many people today, a winding career. Um, but I discovered 20 years ago that I was super interested in the stock market. And I've always kind of been a teacher at heart. So 10 years ago, I landed a writing gig at the Motley Fool and I wrote thousands of articles uh for them. And I've just been analyzing and understanding stocks um ever since then. But it's always bothered me that there's never been an easy way to understand kind of the complexities and the nuance of the stock market. And one thing about my personality is whenever I learn something, I always in my mind try and figure out how to I how I could explain this concept that I learn to my former self in the easiest way possible. So I create content that kind of does that thing. How would I teach my old self how to read an income statement or a balance sheet or a cash flow statement or an SEC filing, um, et cetera? But um it turns out that uh when you share content online, if you share good content, people will follow you and you can build a business out of that.

SPEAKER_01 3:18

I love that, man. Well, you know, taking those concepts and making them easy is always interesting. And that's one of the like the frameworks and the foundational points of this podcast is people go, why did you start this podcast? And I I'm not a financial professional at all. I I just had a 10-year-old daughter who was asking me, Dad, what's money and what is this? What's compounding interest? What's this? And she like asked me some crazy questions because she's watching these videos, and one of our like this podcaster was mentioning our YouTuber was mentioning something about I don't know what she's watching on investing. I I monitor her her her content intake pretty well. But the day she came up to me, she's like, Dad, what's this concept? And I was like, I do not know. And so I had to go look it up. And when I looked it up, the language confused me. So, you know, it was something that when I tried to figure out how to break it down, suddenly when I broke it down, it was a lot easier. Yeah, I love doing that in all of my podcasts. I have a wine podcast, and because I just like a lot of different things, and I both made podcasts for the stuff I like to talk about. And one of the things for wine is I was always overwhelmed by the types of wine until my friend and I, we broke down like different wines as if we were sorting them into houses of Harry Potter. And then suddenly wine made sense to me because it was something I could conceptualize, you know?

SPEAKER_00 4:38

Love that. Yep. Uh that's so so good on your daughter for being interested in money concepts at age 10. I would put money on her being quite financially well off later in life.

SPEAKER_01 4:47

I hope so. But what made you realize most people don't fail at investing because of intelligence, but because information seems inaccessible?

SPEAKER_00 4:55

I would say that information was accessible 20 years ago, even 30 years ago. That used to be the barrier. The barrier to making good investments used to be accessing the information. When Warren Buffett started investing in the 1950s, his edge was that he would go down, uh, he would buy this book that had all data on all the companies, and he would read through it kind of page by page. So he he formed his own um library of content. And the data that he was getting was like multiple quarters old. So he was making decisions on information that was like six months old. Compare that to today, where anybody with an internet connection, which is like six billion people, can look up SEC filings of companies in real time. They can get transcripts of conference calls, they can get access to stock prices, valuation metrics, uh, any numbers in in real time. They can get access to AI that can explain all that information to them instantaneously. So, in terms of an information uh access, it's never been a better time or an easier time to be an investor.

SPEAKER_01 5:58

It's interesting because, yeah, you know, it's like there used to be more barriers. And I mean, maybe again, like you said, like I had one guy that came onto my podcast a long time ago, and he was a makeup artist, but like not like makeup. He did like prosthetic makeups for movies and like you know, the type of stuff that you would see in The Lord of the Rings or things like that. And I asked him, like, how did you learn? And he was like, dude, it was really hard. Like, there were classes, but I had to take a bus to this other city and like go into this like college that was across town. And then I there was one shop that you had to like had a mail order catalog to buy your stuff. And he's like, now, dude, YouTube. If someone wanted to start now, it's so much easier because you just turn on YouTube and you can get whatever like makeup you need and the prosthetical, like prosthetic pieces off of Amazon. He's like, you can do this so easy now. But he doesn't he said the challenge is now is finding people that are like like sorting through which information's good or not. Like there's so much of it. And he says, now it's almost like people have to figure out how to make their way, but you know, they take time and they they learn and they try things, and that trial and error gets them ahead of where he said where he was at at the same stage.

SPEAKER_00 7:13

Yep. Naval Ravakant has this great quote on on this phenomenon. He says, uh, education is abundant, free, and all over the internet. It's the desire to learn that's scarce. So I'm a firm believer that if you have the desire to learn, you can learn absolutely anything today for for for free. And you can really help yourself stand out because so many people will just look at the information once and then they won't act on it. So if you have the personality type to dive deep into something and then take action on it, you can actually you're no longer limited by information.

SPEAKER_01 7:46

Yeah. You know, and I was reading up some of what you you post and things, and like you you teach people about investing to invest in a business. What does that mean? Like you're investing in the business versus something else.

SPEAKER_00 7:58

So uh I I my category is investing in the stock market. When most people hear about the stock market, all they know is a ticker on a screen with the price tag that wiggles throughout the day. And they uh associate that, rightfully so, with gambling, because it looks like the stock market is a random number generator where Metastok goes up or down, Microsoft stock goes up or down. And it's hard to form a concept in your mind to relate the ticker symbol to the business behind the company. Um, everybody here knows how to look up Apple's stock price. How many people here know how to look up Apple's financial statements and to equate why do the financial statements of the company have any relationship at all to the stock price? That's not a natural thing because they can often move in wildly different directions from uh from each other. But I'm a disciple of Warren Buffett, and I'm a firm believer that the stock price eventually follows the fundamentals of the business. So I focus my effort on studying the fundamentals of the of the business and use that as a rough proxy for where I think the stock price could go in the future.

SPEAKER_01 9:10

That's interesting because it's like I think one of the things that I've when I've talked to people about investing, the idea of the company is very abstract. They're like, they're buying these letters, they're buying, I'm investing in these numbers and letters right here. And, you know, instead, like you're investing in the people, in the leadership, in the decisions like that that are behind everything. You know what I mean? It's like there's something much more concrete that you're buying into, if that makes any sense.

SPEAKER_00 9:42

Well, sure, but uh it depends it depends on the company. Some some companies that are publicly traded, you and I will never interact with, right? Maybe they sell like uh plumbing supplies or they operate in a part of the world that we have no um association with. But we've I'm assuming you've been a Chipotle customer at some point in your life. So you can have a direct relationship to be like, what's the food quality? What happens when I'm in line? What is it like to use the app? Do my friends also use and and buy this product? And you've probably seen Chipotle's popping up in different locations from where you are. So you as the consumer can have a direct eyeballs with like this is good food and it's popular, and there are more of them. So you can take that, and if you go a little bit deeper, look into the financial statements, see how much the company is growing. Oh, look, it's a publicly traded stock. Wow, this company has done phenomenally well over the last 20 years if you just bought uh and held it. So there are some companies out there that you can take your real world experience as a consumer and translate that into um understanding the business, uh the fundamentals behind the company, but you do need to have the skills to kind of look at the report cards of companies, which are financial statements, to determine is this an actually good business or is this just a garbage company?

SPEAKER_01 10:58

That's interesting because that's something that, you know, looking into the financials, like if you don't know what you're looking at, like it's like reading something in another language, you know? And so, and like I know that that for some people leads uh investing to feel either complicated or too risky because they're not, you know, if I if you told me to go and navigate the uh the Tokyo subway system, and like I'll tell you one thing that I do know is that there are not many signs in English. It is definitely complicated. Not that it's risky, but you know, you're probably gonna end up in the wrong place. And just because you don't know how to read the information that's there, you know. So how important is it to start trying to figure out how to interpret these things?

SPEAKER_00 11:44

Well, I guess that depends on what type of investor you are. If you're in that 99% of the population that has no interest in analyzing individual companies, no interest in learning how to read financial statements, no interest in researching businesses, figuring out SEC files, if that just sounds terribly boring to you, no problem. Just invest in uh broad-based index funds and call it a day. That's all the investing knowledge that you you need to know the basics of what stocks are, how they work, what bonds are, how they work. That's how 99% of the general populations invest. And there's plenty of things that you could, there are plenty of ways to do that without ever having to read a financial uh statement. But if you're in that weird 1% of people like me that enjoys researching company, enjoys the process of investing, then you need to go to the next level and make sure that you understand the fundamentals of accounting, the fundamentals of reporting, the fundamentals of competitive advantage. So some people are weird like me that they enjoy that process, and those are the people that should learn those skills.

SPEAKER_01 12:48

Is there are there any like simple truths that you live by uh that can everyone can apply to investing?

SPEAKER_00 12:56

Sure. Um if you look back at the history of the United States stock market, the stock market has returned a nominal return of about 10% annually uh per year for the last 200 years. In real returns, meaning after the effects of inflation, that's about six and a half to seven uh per percent. Um it's it's it's always been a good idea to bet on the stock market of America, or at least it has been, for the last 200 plus years. And today, millions of people around the world are betting their financial future on the stock market continuing to produce good returns for them uh over time. That to me, again, is the default thing that most people should do, and many people are doing, whether they realize it or not, if they have a 401k or a Roth IRA or traditional um IRA. They're betting their financial future on the continued performance of the stock market. I think that's a really good bet uh to make, but I'm the type of person that needs to know the details about why that's a good bet uh to make. So I'm a huge advocate for educating yourself at the at least at the bare minimum fundamentals of what the stock market is, how it works, why it produces good returns um over time. So to me, those those are the those are the core fundamentals I think everyone should understand, whether you're interested in the stock market or not.

SPEAKER_01 14:15

I love that. Well, and it's like it's interesting too because your like your whole brand, a lot of your brand, it is around explaining complex ideas in a simple way. What is your process though for taking a look at this information that's like super dense, something like accounting and changing it into something that anyone can understand? Because, man, I I I took like an accounting class in my NBA program and I felt overwhelmed. Like, how can we start looking at these things and make it more easy to understand?

SPEAKER_00 14:49

Yep. So that's a matter of um making things as visual as possible. I'm a huge believer in the concept of uh a picture is worth a thousand words. Uh, the second concept is to simplify the language as much as you possibly can. I aim for a fifth grade reading level or below in all of the content I create. Sometimes that's not possible, but at least it's a good goal uh to have in mind. And then pictures and arrows and bullet points. There's a huge benefit to the way that content is formatted. If you can imagine opening up an accounting textbooks, you just instantly become overwhelmed because there's so many words and it's just written and there's all these terms. Uh, I try and strip away all that complexity, focus on the 80%, the 20% of content that really carries 80% of the weight, and then using pictures, arrows, and diagrams whenever possible, which gets the information cross uh easy. And then you also want to do it in bite-sized chunks rather than studying quote unquote accounting. You say, how about we focus on the income statement or revenue, the top line number, and relate that to things in everyday day-to-day lives. To me, that is the way that I learn best. So that's the kind of content that I like to create.

SPEAKER_01 15:58

I love that because to me, like there are some very complicated things. But, you know, I remember my first photography class. I I work in media and content. That's my background. And I remember when I was in college, I my dad got me my first camera. And I was having a heck of a time trying to figure out how to set the different, you know, the settings that, you know, so you can balance the aperture versus the shutter speed versus the ISO. And I was just like endlessly confused. And then my dad pulled me aside. He's like, All right, you see this knob here, you turn it till the arrow goes in the middle, you point your camera, you focus it, you press the button. I was like, that's way too simple. How's my photo gonna be good? He's like, no, that is it, that's it. Like, there's other fancy things to do, but he's like, get them in focus, point the camera at them, and make that little arrow for the light meter go in the middle. And if you can do that, you're gonna get a good photo. And I said, every time, he's like, not really every time, but you just do it enough and you you'll start figuring out. And I started practicing, but like when he was able to break it down for me, um, you know, things got a lot easier because it was those simple concepts. It didn't need to be complicated. Certainly, as I became more experienced, I went deeper and I wanted to learn more. But at the end of the day, those fundamentals were there. And he, I got to my professor had a really good chart that says, if you change this, then this is what happens here. And it was again, it was super visual, and those visuals make all the difference, you know?

SPEAKER_00 17:33

Absolutely. Um, you have me chuckle a little bit. My son just took a digital photography class in his high school, and I was thrilled with it. I was like, if you can just learn a few concepts for how to take a good picture, that is a skill that will pay you off for the rest of your life. I'm sure everyone listening has had the experience of handing someone a phone to take a photo of them, and then you get it back, and it's just awful. And you're like, I guess you've never been taught the rule of thirds or how to frame a photo, like some super basic things. So you are absolutely correct. Once you understand just a few fundamentals of photography, lighting and the rule of thirds, you'll take better photos than 90% of people.

SPEAKER_01 18:13

I I do part of my business is we edit content for people. And I love the people we do content for, but you don't understand how many times I get a video and the person's like this, framed like this. And I'm just like, what can I do with this, man? Their chin is like right at the edge of the screen. They're like, I'm here to tell you about this. And I'm just like, and they're like, why didn't you zoom in and out? I was like, because we're just gonna be like zooming in and out on your forehead, man. It's like, and I and I'm just like garbage in, garbage out. Yeah, yeah. Please try to keep your head at about the uh, you know, a third of the you know, way down and like your eyes, two-thirds of the way up, simple photography rule, right? Right here, right? Simple those simple rules, but like, but that's the thing, especially with all things personal finance, a lot of people aren't learning the simple rules, you know, and like, and so I think that's one of the things that, you know, in my in my my MBA program, the one concept that was mind-blowing for me, and I was like, how did I just not learn this until in my 40s was like ROI, you know, and I was just like, no one had ever talked to me about ROI, and I was just like, dude, if this was something someone had taught me earlier, it would have been really helpful, you know. But I I wanted to ask you this, you know, um, with investing um and our our our our modern world, everything happens so fast. And people, you know, with things getting really fast, you know, you get a lot of emotion. And like there's all types of things that are going on, and people can react really quickly. But how do you teach more long-term thinking in such a short-term world where like what we're existing in right now?

SPEAKER_00 19:55

Uh the way that I do that is by uh drawing on my own experience, showing my own portfolio, showing the stocks that I have held for long periods of time. Uh, I've held Google stock for this, I'm on year 17 of holding Google stock. And if you look back at the history of great companies, the correct thing to do on all of them was buy and then wait a long period of time. And the longer you waited, as long as you bought great companies, the better you did. And you don't have to do that with individual companies. You can just you can do that with the stock market in general. You can use, you can buy SP 500 or the NASDAQ composite or the total stock market index. It's incredibly easy. It's incredibly easy uh to do that. But the thing to really hammer hammer home to people is that the returns that you you get are the the the interest rate or the return that you get per year to the power of time. Time is the exponential uh here. And to really maximize your long-term wealth creation, you really want to maximize the time component because that's what does the heavy lifting for compounding over over time. So while I teach people about the stock market, the funny thing is, whenever people ask me, how did the market do today, I'm like, I don't know. I never look at what the stock market did. It is rare if I actually see what the stock market did in real time because that what the stock market does today has no um no ability to change what I do or my my core my core uh philosophies. So I go in with a mindset of buying and holding great businesses for multiple years. And because I take that mindset, the price of the stock market today has no impact on what I do. It's similar to like owning a home. It would be like somebody coming to you and say, Do you see what happened to your house price yesterday? It would be like, well, that has no impact on my ability, desire to live in my house. I don't care what my house is worth or how that number is jiving up and down on an everyday basis. It's the same thing for me and the stock market. I don't care what the up to date minute to minute, second to second price of stock is. That's not investing. That's worried about, that's worried about trading. I'm trying to build a portfolio that grows sustainably for a long period of time at an acceptable rate. So what happens in the day-to-day world, minute to minute world, has little to no impact on what I do. And that's the kind of thing I try and teach people is the only way to get great returns from the stock market is to give it the time that it needs to for the market to deliver those returns. And the more you look at it, the more likely you are to want to trade or be tempted uh to tempted to trade. So I teach people one simple thing to do if you're an investor, delete all the apps on your phone that show stock prices. That alone will make you a better investor.

SPEAKER_01 22:44

Right? I love that that you reference a house there too. Cause it's like if you're buying a house, you're you know you're going to do the due diligence to learn about the house. What's the neighborhood? Where is it at? You know, who, you know, what does the construction look like? Does it look like it has a strong foundation? You know, is it does is there stuff you're going to do some, you know, checking on things. And like as you start talking about like doing the due diligence on the companies and looking into their numbers and things like that, it reminds me of just like that. But then once you buy it, don't go crazy. Checking out the value on that house makes a lot of sense because I mean what was it that that my daughter just got a plant that her teacher gave her. And um it wasn't a plant. The teacher sent her home with a science project. It was her dance teacher, but it's one of the best educators she's had across the board. Her dance teacher is just a wonderful educator and gives these kids all these activities and tasks. And she sent them home with these little like like little pots of dirt and a seed. And she said put the seed in and add some water because she wanted the girls to see the idea of progress and things take time and just to stick with it. And I was just like blown away by how awesome she is. But my daughter was like every 10 minutes like is it has it sprouted yet? Has it sprouted yet? Has it sprouted yet? And I'm like nope. And it's not going to be there in 10 more minutes. But like I said just keep watering it. And then a couple days later she came back and she's like oh it sprouted and she did that whole 10 minute thing again but she kept coming back for 10 minutes and I was like it's it's not going to change in the next 10 minutes. But we keep watering it and it was like a week later it was like this tall. And she's like oh my goodness but she started to realize that it it just took time and consistency, you know?

SPEAKER_00 24:32

And you know we all are guilty of that wanting to hyper hyper check things and hyper focus on them but it doesn't change the outcome you know yeah gardening is a phenomenal analogy for um for for thinking about in investing I I often um equate investing to like um to planting an orchard like an apple orchard if you know anything about apple orchards it takes like three to five years before you see any fruit at all from the trees. And it's really after like 10 years that they're finally mature and can start producing fruit. But if you own an orchard for 20 years, it is just raining apples on you like nonstop. Like so it's a similar timeframe to to investing. The only difference is with the stock market offers you instantaneous feedback on whether you're making money or or losing money or not. This is why Warren Buffett has stressed for years don't make any investment you wouldn't be perfectly happy to hold for 10 years. If you're not happy to hold it for 10 years don't even bother holding it for for 10 minutes. If the stock market turned off for the next five years I would be perfectly comfortable with that because I because the holdings that I have are I believe are accruing value in in in the background. And I think that they're all going to be bigger more profitable and my wealth is going to increase in the next in the next five plus years as these companies continue to to grow. But if I looked at the minute to minute moment to moment prices of these stocks it would dramatically increase the temptation that I have to to trade them. So I try and remove all distractions and just focus on the fundamentals of the companies.

SPEAKER_01 26:09

I love that and there's but that but that leads to my next question. When you look at a company what are the first things that you look for that tell you that this company's worth investing in I mean the financials are one thing but are there anything in those financials that are really important?

SPEAKER_00 26:23

Yeah I mean that's a semi complicated question as you can uh imagine but um uh it I I believe you can learn a whole lot about the company by starting with its income statement. Um if you're familiar with an income statement it starts at revenue at the top all the company's expenditures are broken down by category and then at the bottom line is the company's profit or loss, whether it made money or lost money or not. And if you can look at a couple of income statements in a row you can determine is revenue growing? Is revenue shrinking? Is the company making money? Is the company losing money? Are the margins which are the percentage of the company's profits compared to revenue are the margins increasing over time or are they decreasing over time? How rapidly are those numbers changing but you have to think about financial statements as kind of like a company's report card. It can tell you where the company was and how it's doing but it won't tell you where the company is going. So that's when you have to get into the SEC filings you have to read about what kind of products or services does this company have? What are the markets for those products and services? What are the competitive advantages of the company or services? Does it control pricing? Who's the management team? How much stock do they own et cetera et cetera so I have a pretty detailed checklist that I go through when I'm checking out any business and I I look for about 40 different uh items and I uh I would say how the company does compared to my to my checklist. But by the end of going through the checklist I have a really good idea for what the company does, its growth rate and whether or not I'd be interested to own it or not.

SPEAKER_01 27:52

That leads me then to the other side though, because it's like those are clear things to look for but had what are some of the red flags that people should look for for a company that they should not go anywhere near?

SPEAKER_00 28:04

Oh I mean again there that's a very long and exhaustive list that you you could you could uh go through. No revenue to me is a pretty big uh red flag or um a company that has accounting uh procedures or has been um uh has changed auditors or the auditors had has said uh mixed opinions about the company's financial statements that to me is a massive red flag if the management team is out there speaking highly about the company but they are also selling off their position at the same time that to me is a red flag if the company's revenue is erratic or going down that's a red flag if the company's margins are decreasing over time uh that that's a red flag if the company's profits say one thing but their cash flow says another thing that to me is a is a red flag so there are numerous ways that you can analyze see uh if a company is a red flag or not and the funny thing about investing is just because a company trips some red flags doesn't mean it's going to be a bad company. To me a red flag just means you need to get to the bottom of this and understand why this is before you would before you would move on. But most publicly traded companies the majority of publicly traded companies lose to the market over time. So if you just like randomly picked stocks, you have a six in 10 chance of underperforming the market and you have a four in 10 chance of losing money in absolute terms, having a 70% loss or or worse. So I think you should do everything in your power to make sure if you're going to be putting money behind a specific company to make sure you know the company inside and out and also it's important to understand the odds that you're facing right from the get-go.

SPEAKER_01 29:45

You you were you've written a lot especially at the Motley Fool for you know the long for to run into the long-term mindset. What did you learn about how most investors think and behave there? You know, are a lot of people following these things or you know is there a wide degree of variations in how investors approach investing or is there kind of like a you know I know everyone references Warren Buffett um but do a lot of people have Warren Buffett's mentality or is there just like a a a broad diversity of ways that people go at this you know or is there a right way, a wrong way? I it's just something that I'm absolutely curious about because I would like to emulate it like should I only study Warren Buffett or are there other ways to do this? You know what I mean?

SPEAKER_00 30:32

There's lots of ways to to in investors being on a spectrum and that spectrum has the a risk and and reward on it. On one side of the spectrum let's go to the extreme side is venture capitalists. These are people that are putting money behind startup businesses. These companies are often just an idea and a CEO. That's it. They don't have any customers they don't have a website they they are just an idea being born so that is extraordinarily high risk right the failure rate of those kind of investments are like 95% 95% of the time or something around that you're gonna lose 100% of your capital. But your whole goal over your career is to be the first investor on the next Uber or the next Airbnb or the next Tesla or the next Google because if you can, you can make so much money you can make a million times your money as a return if you get in early to those companies. So they're playing a wide distribution game where they're making hundreds of bets and they only expect one or two of them to literally return the entire to pay for all of their losers and more. That's one style of investing very high risk and you want to really diversify. On the other end of the spectrum are the Warren Buffettes of the world he only invests in big, well known diversified balanced seat strong wide moted highly profitable um often entrenched businesses. So he buys companies like Coca-Cola, American Express, Costco, Apple so these companies are all highly profitable, have long track records behind them of being excellent businesses, are often paying dividends or returning capital to the shareholders. So that is Warren Buffett's style of investing. He tries to minimize the risk that he takes in the market by only investing in very high quality companies. Now the trade-off with that style of investing you have a much higher hit rate he's far more accurate with his investments and making money but the returns that he gets are far more muted. If he's doing exceptionally well, he can expect to earn 12% annualized per year. Better than the market but he's not going to earn he's not gonna get a thousand bagger or a a million bagger like the the venture capitalists are so the most important question for every investor to kind of answer is where on that risk reward spectrum are you? What what sings to your personality? I'm the type of investor that likes to be slightly more aggressive than Warren Buffett, but not much more. So I like to invest in quality businesses but I focused on valuation. I'm happy to trade upside for for for for accuracy. People like David Gardner or Kathy Wood or again Mark Andreessen, they're all the way on the other side they just want the next Airbnb and they're willing to get up to the plate and strike out 99 times out of a hundred um and that and that fits their personality. So there's no right or wrong way to invest there's only the right or wrong way for you.

SPEAKER_01 33:40

That that's actually really interesting because um you know it is very personal and and again like you said I I like to exercise and I love Muay Thai. I love going and hitting the punching bag and I feel relaxed and peaceful when I do that. If you put me into a spinning class or an hour and a half long yoga class I'd probably want to murder people. I I like yoga when I'm doing it for 10, 12, 15 minutes, but an hour and a half yoga class is not my jam, you know and I think that like for each of us there is a different way to do things. And if you are understanding of what's right for you, you're gonna be able to manage not just like the ability to make money but also the stress that's going to come from the process that you're going through as you make money, you know, because the last thing any of us need is extra stress in our lives you know and I mean certainly there is always risk in everything, but you know how much can you tolerate you know and what is it that you're looking for in the long run, you know? But I I have another question for you. You know you've been in this for a while what's a belief about investing that you held early in your career that you've completely changed your mind on now?

SPEAKER_00 34:57

Oh so many things. When I first started investing I had no I I'll put investing in air quotes when I first started buying and selling stocks I had no idea what I was doing. I thought that the way that you made money in the market was by buying at one price and then selling that same thing at a higher price a day or a couple weeks later. I had no concept that there was companies behind the businesses or how those businesses related to the stock price and I was a hundred percent in trader mindset. So that that was the that was what I thought kind of investing was. So that was the first that was my first introduction to investing if if I started investing two or three years ago I guarantee you I would have been on Reddit I would have been buying GameStop when that craziness I would have bought AMC that that's what so many people think investing is because that was their first exposure to it. Now I was lucky in that I lost I got my teeth kicked in with a few hundred dollars behind my name. So it was extremely painful to me at the time to lose that amount of money but looking back it was like the best tuition I could have possibly paid. So I think that many people when they first get started with investing they they they don't have any concept of investing and they're just naturally attracted towards towards day trading or they're naturally attracted towards very high risk investing. It's much better to do that when you're young and have lots of time ahead of you to make up the losses than when you're than when you're later in life and you're putting serious money behind your name. So I used to believe that day trading was the way to make money in the markets. That's something I no longer believe I used to believe that high yield investing so buying companies with very high dividend yields was the best way to make money in the market that I no longer believe. Then I learned about value investing and value investing the goal is to buy assets below their intrinsic value. So you look at things like price to book ratio, price to earnings ratio and try and pay low numbers I have since completely changed my mind on that where I no longer emphasize valuation. So I I've changed my mind about many things uh about uh about investing uh over the last uh uh 20 years and I've since found a style that works best for me and that style is buy and hold quality companies for long periods of time and I just accept that some investors will be better than me and some will do some some will do worse. But I'm very comfortable with the style that I have.

SPEAKER_01 37:25

I love that man it it's like you don't have to make everyone happy but you do have to find what works for you you know and like not there's people that like I I train the Muay Thai gym and I I do 12 minutes in the treadmill I wrap up I do 15 to 20 minutes hitting the heavy bags and then I do some some weights afterwards. And the guys at the gym are like why don't you come spar with us why don't you do this and I was like man I've had injuries in the past I don't need to go up against you get do 23, 24 year old guys like I know you're gonna work me over and I I'm not feeling that right now. And you know I've got to go and run my business. I've got to take care of my daughter which are higher priorities right now my priority is just staying healthy. And my point being that's where I'm at and I get pressure to match someone else's style but the reality is is you just got to know know what's what works for you you know and uh and honor that. But for someone listening who wants to start investing but feels behind or doesn't know where to begin what's the first small step they should take this week so the very first step to anything and this is especially true of investing is to educate yourself.

SPEAKER_00 38:35

Don't do anything with your money until you understand what you're doing and and why you're doing it. Now people today are extremely spoiled because no matter what kind of content you like to consume I guarantee you on every platform there are high quality content creators that can educate you before you make your first investment. So do you like videos? There are lots of great content creators on YouTube that can explain the fundamentals of investing easily. Do you like short-term video? There's good creators on TikTok, believe it or not or Instagram that can explain investing do you like to read there are hundreds of great Substacks out there or people on X that post grace content or if you're in that rare group these days that likes books there are wonderful wonderful books out there that can really help to break down the fundamentals of investing into into bite-sized uh chunks you can get on my audio you can listen to them on short and short bursts on your on your on your work break it is so easy so easy today to get the fundamental information you need to know to to invest why so if you've never explored this concept uh before the first thing to do this week is whatever content you like consuming content on search for creators on that platform that talk about investing or the stock market and start to educate yourself.

SPEAKER_01 39:53

If you could go back in time and and give your younger self some advice what what advice would you give yourself about investing?

SPEAKER_00 40:02

Buy Bitcoin. No, I'm that that's that's too simple, right? I would try and um I I it's hard for me to even think think things through about things I would change about my journey because I made so many mistakes early on but if I didn't make those mistakes early on I wouldn't have learned the lessons that I've learned and I wouldn't have internalized them as well. So while it's always so easy to look back and say oh buy Apple stock buy Amazon stock buy Netflix stock like that to me is like is is is cheating. I'm very happy with the journey that I had and I think that the scars that I picked up along the way especially the the mental scars that I learned have really made me the investors that I that I am today. But um so so I I was obsessed with learning everything I could about investing I was putting money on the line I was making mistakes and I was learning in in real time. So I would tell my former self don't worry about it. You're doing everything right just keep doing it.

SPEAKER_01 40:58

And it's it's easy to look back and see that but I remember when Netflix for those people who are young and don't know Netflix used to send you DVDs in the mail and these little red envelopes and then you'd have to throw it back on the envelope and send it back. And I remember when Netflix was trying to step into streaming and everyone was pissed off because they were raising the price a tiny bit. And I remember all these people like all my friends like what is this streaming crap? I just want to get my DVDs you know little did we know like if you could go back and tell someone yeah that that's probably the dumbest thing you've ever done this this this company's going to become an absolute beast. People might not believe you you know and you might not believe you. And that's the wild thing. It's like hindsight's 2020 but I think that it is you're right like you you navigate the best you can you figure out you you do what you can and get the best information you can but then you go from there. You know I I know that some of the best things in my life I um were educated risks. You know I I had challenges but then you find out as much information as you can and then you take those chances and hopefully the research you've done has been good enough to get the a good choice. You know I remember when before I moved back to Southeast Asia I had done a lot of research and things were just you know going in different directions in my life but I knew certain things I did a bunch of research and I was concerned that if I moved back to Southeast Asia with my skill set I'd be able to make a go at stuff and and and and make a shift and it was right but that was still like you know it was still an educated guess you know so I I think sometimes you just have to figure out your path and do your best you can but if someone wants to learn more about what you're teaching and what you do where can they look so whatever platform you're you're you're on um you can find my my content.

SPEAKER_00 42:56

I put the most time and energy into YouTube so that's just my name which is Brian Feraldi but I'm active on X. I'm active on Instagram um I'm active on nearly every platform out there. So whatever platform you like to consume content on search for my name and you'll probably find something