The Financial Huddle | Real Money Conversations for Financial Literacy

Basic Investing For Dummies

• Brian Minier, Ed Beemiller & Ryan Fleming | Keystone Financial Group • Episode 16

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We lay out a clear path for new and seasoned investors to avoid costly behavior, understand basic strategies, and keep more of their returns. Data from Dalbar and simple math on “best days” show why time in the market, low fees, and an emergency fund matter most.

• why average investors underperform broad indexes
• the risk of missing the market’s best days
• the role of an emergency fund in avoiding forced sales
• active vs indexing vs passive vs evidence-based approaches
• mutual funds vs ETFs key differences
• fee types and calculating the all-in cost
• choosing based on strategy, fees, and time horizon

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Disclosure: Information contained in this podcast is for entertainment and informational purposes only, and should not be considered as financial advice. Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Keystone Financial Group and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice.

Announcer:

The financial huddle does not provide tax, legal, financial, or other professional advice. Listeners are encouraged to consult with their own advisors in these areas.

Brian Minier:

Alright, everybody, huddle up. Play calls in. This is the Financial Huddle. Ready? Welcome back to the Financial Huddle, everybody. Thank you, huddlers, for taking time out of your busy day to be with us. I am Brian Manier, and I am here with my partners and compadres, Ed B. Miller.

Ed Beemiller:

Hello, hello.

Brian Minier:

Ryan Fleming. Hello, Brian and Ed. And hello to everybody out there. Thanks for joining us. Thank you. And how are you both doing today?

Ed Beemiller:

As I said, every every day's a good day. Every day you wake up and put the shoes on and come into work.

Brian Minier:

Every day above ground is a good day. It's a good day. That's right.

Ed Beemiller:

I can't. I'm a little sore.

Brian Minier:

A little sore?

Ryan Fleming:

I've been trying to get back in the weight room a little bit. Yeah. Really?

Ed Beemiller:

You can't tell.

Ryan Fleming:

Oh, I'm sorry. Oh no. Oh, he's going up. I'm hurt. I'm trying to I'm trying to fight off father time. I gotcha. You know? So I'm trying to.

Brian Minier:

I always say he's going to win, but I'm going down swinging. Yeah. There you go. Yeah. That's right. But the chicken wing is a little bit bruised up, huh? Yeah. Yeah.

Ryan Fleming:

Ed's motivated me here. I'm going to do a couple more reps.

Brian Minier:

You look good.

Ed Beemiller:

He may he may sit down and do 20 push-ups right now.

Brian Minier:

That's another podcast.

Ed Beemiller:

We might do that.

Brian Minier:

Push-ups. Who can do the most push-ups? Make sure you're working out out there, Huddlers. That's right. Well, I I'm so glad you guys are here. And as we reflect on why we do not only this podcast, but but why we do what we do, it's really to put people in a better situation than when they started. So when you think about it, that that's why we we do. We want to try to help people, yeah, make them better, put them in a better situation than when they first met us. Be better, be be good stewards of money and their health, their mental health. And one of the things that we do as a firm is we we wealth manage because we want to try to help grow their money. We we try to help them grow so that they have more than when they started. And and that is the whole principle of investing. Now, there's a lot of things that you can look at and and you can take different positions. And and when I think about investing, is it a little bit like gambling? Because there is some unpredictability, there's some uncertainty of how market works. And I was thinking about that, and I was thinking about it at a time I was actually at a casino, and I was with a really good friend that you may or may not know this person, and and we were at a casino, and this person liked to play three-card poker. Now I like to play a little bit of blackjack, it's a great game. It is, but I'm not one of these people that always says I win every single time. I probably have lost more than I have won, but I do enjoy playing especially blackjack. I like to play roulette a little bit, but but I like to play blackjack. Well, this person is like, I have to play three-card poker. And I told this person, do not play three-card poker because you're gonna get raked. And the person looked at me and said, No, I got this. I win every time. He's Raid Man, right? He knows what they're doing. I got it. I'm like, all right. So I went to the blackjack table. This person played three-card poker, came back, checked on this person, and this person may or may not had a look on his or her face of I'm in trouble. Oh boy. So I said, How did you do? And this person said, I'm down 7.50. And I need to go make a trip to the ATM because I need to try to recover. And then, as they were walking to the ATM, person said, Please do not tell my wife. Oh no. This is between you and I.

Ryan Fleming:

So wait, he was down seven dollars and fifty cents? Yeah, 750.

Ed Beemiller:

Yeah.

Ryan Fleming:

Oh boy. Move that decimal.

Ed Beemiller:

$750,000. Hopefully not that much.

Brian Minier:

Hopefully not. $750, right?

Ed Beemiller:

Yeah, to ourselves.

Brian Minier:

So that boy was caught up in the vortex. A little bit. Oh man. So even when we think about, hey, I know what I'm doing from a gambling perspective, it doesn't always work out that way. So, anyways, what we thought we would do today is talk a little bit about investing because that can mean a lot of different things to a lot of different people. But what we thought we would do is just simplify it. We want to, if you're a basic investor or you're trying to, you're young and you're trying to start a retirement account, what does that look like? What are some of the basics of investing?

Ed Beemiller:

So, what did we title this episode?

Ryan Fleming:

Basic investing for dummies? There we go.

Brian Minier:

I may have a couple books that say blank for dummies on my bookshelf somewhere.

Ed Beemiller:

It's really just meant to be dummies equals an introduction to this topic. That's all it is. That's right. By the way, we're not doubting your intelligence.

Brian Minier:

That's right, because a lot of people, just like anything, you may want to start something, but you don't get into it because you're overwhelmed and you're not sure what to do with it. Or fair. The reality of it is the market is a great wealth tool. Take advantage of it, use it properly.

Ed Beemiller:

We talked about that in our last uh episode, I believe.

Ryan Fleming:

We have the greatest wealth generating tool maybe available, maybe in the history of mankind. Yeah. That's right. Arguably.

Brian Minier:

And so what we would say is don't be afraid of it. And I think I said in our last episode, sometimes boring is better. So let's talk a little bit about investing. And I think Ed, we got to start out with uh stat time.

Ryan Fleming:

Oh it's that time. It's that time. It's stat time.

Ed Beemiller:

So we're we're gonna focus kind of our stats here on um investor behavior because ultimately that's kind of what you know controls, and just like that gambler, his behavior basically made him go to the ATM, take more money out, and probably lose more money, right? So that's possible. We could call that bad investment. That is true. So there is a report that is published each year. It is called the Dalbar Report. And this is something that if you're in the industry, is is kind of like the you know the the Bible, you know, where you know the the facts and figures and it really kind of tells you where things are in in the you know financial marketplace, the behavior of investors, this types of things. So, you know, a lot of people look forward to the report, to reading that report and going through it. So this is you know, obviously we're you know uh we're in 2026, but 2025 won't be released for a while. So I'm gonna go back to 2024. And this is the first stat is the average equity fund investor earned 16.54% in 2024, while if you would have invested in the S P 500 fund, you would have earned 25.02%. So an 8.48% difference. That's a little bit of a gap. That's a gap, and that that gap is is is a result of of timing. It's a result of you know selling or or buying, and as opposed to kind of more holding, uh it's a it's allowing those emotions to get involved and it's a pretty big difference. Making you make uh you know potentially poor decisions. But you know, this isn't just mean one person did this. Is this you know this analysis goes across the board and looks at all those investors, yeah. Correct. And you know, you may find it surprising or not, but this has actually happened in the same report 15 consecutive years.

Ryan Fleming:

That the average equity investor has underperformed just the SP.

Ed Beemiller:

And the last time the average equity investor actually achieved a higher rate of return was 2009.

Ryan Fleming:

Oh, right after the housing market crash. Yeah. Well, you'll never necessarily keep up with the index because you might have like a fee or so, but that egregious of a difference alludes to a bigger issue going on.

Ed Beemiller:

That's more I like to say that's more than fees. Yeah. You know, we're not we're not just talking fees there. And then kind of in the same, you know, statistical behavioral analysis with investors and things, and and a lot of us have have have probably heard about this, but when you actually put some numbers to it, uh there was another report um that that came out and based upon a $1,000 investment in the the stocks that make up the S P 500. So and this goes back, it it's it's a little bit dated, but if you put $1,000 in and it it's it's a one-decade period from 1970 to 1980, if you basically just let it sit and it was a buy and hold strategy.

Ryan Fleming:

How to cook in the oven?

Ed Beemiller:

Yeah, that 1,000 would be worth would have been worth $121,353. Now here's the problem. Most individual investors, as Dalbar has has repeatedly shown through through data and factual evidence, don't do that. They they think they know, all right, I can time the market or I can do this. So they rather than set it and forget it per se, they they make changes, they buy, they sell, they do different things with that. And the the cost of emotional investing. So what if that same investor instead of, you know, they they basically instead of just the the buy and hold with that thousand dollars, letting it cook or letting it bake for that 10-year period, what happened if they missed during that period of time the single highest return date of the market? Of the market, you know, of the one day, the highest one-day return over that decade, their account value would have gone from one hundred and twenty-one thousand three fifty-three down to one hundred and eight thousand seven hundred-eight.

Brian Minier:

Just by trying to move it around.

Ed Beemiller:

Just one day. They got out of it one day. Well, the the numbers get worse. The next thing we look at, well, what if they would have missed the five largest return days over that decade? That 121,353 goes down to $77,056. So think that five days. Do you think over a period of 10 years, how many, how many, how many days are in a year? 365?

Ryan Fleming:

Last time I checked.

Ed Beemiller:

Yeah. Yeah. 10 years. 10 years? You know, that's that's crazy. Simple math.

Ryan Fleming:

Yeah.

Ed Beemiller:

Five days you missed.

Ryan Fleming:

Yeah.

Ed Beemiller:

And a lot of times people will pull out of the market. Oftentimes it's after a uh a lot of volatility, or they think volatility is coming up, or after a correction. Well, that's the worst time. And we've talked about that.

Ryan Fleming:

Or I may add, sometimes they pull out of the market when they don't really want to because they don't have an emergency fund. Right. And something happens.

Ed Beemiller:

And they have to sell.

Ryan Fleming:

And they have to sell because they don't have any other liquidity.

Ed Beemiller:

Right. They don't have any of those buffer assets.

Ryan Fleming:

We got to get that emergency fund.

Ed Beemiller:

Yep.

Ryan Fleming:

Six months.

Ed Beemiller:

The last stat on that, if you missed the highest 15 days in that decade, your account value would be $43,472 as opposed to $121,000. So just approximate math. $33, 34% of the value you could have achieved if you just would have said it and forgot about it for 10 years. So just the when you when you see those numbers, and this is factual data. I mean, it's not like my opinion or anything with it, it it really brings home the that idea of you you really have to have time in the market. Time in the market and watch. Don't let the emotions control the decisions you're making. Oh, it is. It is. And you know, often, you know, a lot of people nowadays do everything themselves, right? I mean, we're a we're a DIY, and and a lot of people, I mean, I'll talk to clients that, you know, like, yeah, I I I kind of day try day trade on the side. I'm like, all right, do you work full-time? Oh, yeah, but then I you know, I'm up 35% every year. Oh, okay. Yeah.

Brian Minier:

Well, you know, the validity of that is everybody's always up, but yeah, when you read that Dow Bar report, we're saying that not everybody's up. Oh yeah.

Ryan Fleming:

Yeah. Going going to the casino is uh it's emotional, it's exciting. It is exciting. Yeah, there's the risk and reward with that. And you know, given the fact that just there's so many trillions of dollars that are floating around in the market or in these investment vehicles or you know, whatever it is, I thought we would just, you know, in in in typical fashion here with investing for dummies, is just talk about just high-level different types of investment strategies that people can be thinking about. Um of course, with inside these strategies, you have things like stocks, bonds, uh, mutual funds, ETFs, cash, CDs, money markets, real estate, like those things are uh you know opportunities to invest and get a return. But there's a couple strategies that people have access to that they may or may not know about. One is called an active strategy, right? An active strategy is um it's kind of like timing the market, kind of antithetical to what we talked about here. It's it's very difficult to do. Even the professionals that profess to be active managers, you know, don't do a great job with that because you have to be perfect. You have to get out at the right time and get right back in at the right time. And you could hit a home run if you did that, but it's very hard to replicate. And the reality is, is that's probably one of the most expensive ways uh to invest, right?

Ed Beemiller:

Yeah, a lot of peas.

Ryan Fleming:

There's a lot of peas for an active management. But but there there could be a place for that for somebody out there. But but active management is is is that at a high level. So you may choose to do a little bit of active management or hire somebody that professes to be good at that.

Brian Minier:

Logically, people will say, Well, why don't I just get out now when I think the market is going down, and then I'll just get right back in. Yeah, well, like Ed just illuminated that. How do you know that are people tying the market? Yeah, it sounds very easy, but in reality, it's very difficult to do.

Ryan Fleming:

So that's one way, of management, and that's out there, um, or maybe like a hybrid of that or something. But another uh one is just a straight-up indexed approach, right? Warren Buffett's been on record saying that you if you are an investor uh uh dummy, all right, and you don't really know a lot, uh, you might be better off just putting your money into an SP index, SP 500 index, or a Russell's index, or just pick an index and let it cook in the oven. Let's let it marinate, and that you would do better than the average investor, average uh fund manager that's out there. And that kind of goes along with the Dow Bar.

Ed Beemiller:

Well, the DAL bar basically stated that.

Ryan Fleming:

Kind of confirms and affirms that confirms that. Which is that's very interesting. Right. Um, you know, so you got the indexing approach, but the the problem with the indexing approach, somebody could argue, is that it just lacks diversity, right? So if you're just if you're in the S P 500, you know, those are the 500 strongest domicile US stocks, but you you lack international funds or you lack emerging markets. So, you know, if you want a little bit more diversity, you might want to look at a different way, okay? Um, the other one is just exactly what we said passive, right? So you have active, you have indexing, and you have passive is literally just buy and hold, right? Um, and you could throw in a lot of other types of strategies. Those are three just kind of generalities, one there, you know, there's there's another type of strategy called an evidence-based, and we don't have to get into that today, but it's just a certain way certain funds are tilted, maybe to uh tilt their funds a certain way relative to a benchmark. So maybe they might carry a little bit more small cap versus the benchmark or diversify. Yeah, it's it's a different approach. But you know, if you want to learn more about that or any of these strategies, we just invite anybody to come in, set up a meeting with us. But it's just important to know that there's different types of ways to invest and to strategize to try to grow your money. Okay. And um, you know, so in that, you know, one of the one of the more important ones that are out there as far as investing, I pulled these up for you guys, is I just wanted to give a quick side-by-side comparison to some popular things out there called mutual funds versus ETFs. Um, these are kind of big in our culture right now. And um, you know, a mutual fund versus an ETF, many, many, many people have these within their retirement accounts, their brokerage accounts, so on and so forth. Um, but to give you an example, inside the strategies, um, mutual funds are bought and sold directly with the fund company. ETFs are traded on stock exchanges like a stock. Um, the ETF pricing changes throughout the day, whereas the mutual fund pricing is just priced one day, uh what one time per day after the market close. Right? So there's some some nuances there. Um, expense ratios are typically lower in ETFs versus uh mutual funds, and and I could go on and on, but these are just little nuances inside the strategies that people need to understand about investing. Another thing that people need to understand about investing is how fees work. And and I also pulled up an exhaustive list over here about fees, and we certainly don't have time to go over all these fees, but there's a lot of fees out there, guys, um, in different ways. You know, so you might have an advisor fee or a management fee, is what we call it. You know, an advisor might charge 1% to help manage your portfolio. Um, there might be a retainer fee, there might be an hourly fee that an advisor might charge you. But moreover, inside certain funds like a mutual fund, there's every fund out there has an expense ratio. And every fund has a different price for how expensive that expense ratio is. You may have a fee because there's a compliance arm through like a registered investment advisor, like we work through. And they may charge a fee to monitor all the emails, all the presentations to make sure the advisor's on the up and up. A lot of compliance. A lot of compliance. So my point about that is whether it's a retirement account fee, like a 40 uh like a 401 fee, like a 12B1 fee, an advisor fee. You have to understand as the investor, what is my all-in cost for this strategy?

Ed Beemiller:

And a lot of those fees are what we call hidden, right? And what I mean by hidden, there's compliance where they have to basically um provide that information upon request. But if you look at statements and things, there's a little small print where you know we got to get our reading glasses on nowadays to actually see that. It's not the easiest thing to determine.

Ryan Fleming:

Well, a lot of pot of people say I'm only getting charged one percent. But when you take a deeper look, it's the one percent from the advisor, it's the point five basis points on your expense ratios, and you've got uh another fee over here, and next thing you know, you're all in at two.

Ed Beemiller:

Right.

Ryan Fleming:

You're all in at two. Right, right.

Ed Beemiller:

Most people do not have have a clear definition of what their fees are.

Ryan Fleming:

So if you're gonna be an investor, yeah, if you're gonna be an investor, you need to make sure you ask what is the all-in fee that I'm gonna be paying. And if an advisor can't lay that out clearly and transparently, then you might want to walk away.

Brian Minier:

Yep.

Ryan Fleming:

Right?

Brian Minier:

Yep. So when you're thinking about investing and you're trying to get into uh how do I invest in a certain type of account, all the things that we've talked about before when when you look at taxes, but when you just look at the breakdown of what kind of strategy, what kind of fees, and what is my time horizon, when you break it down into those three things, it will help you determine what type of approach to the case. Yeah, what the best what are the best options together? So look at the look at those three things. So so with that, we want to thank you guys for taking time. We always enjoy being here to to serve you. Make sure that you subscribe to our pages, like, make sure you follow and follow. And and also make sure you tell people that we're here to help as well.

Ed Beemiller:

Don't be afraid to make sure you're listening to all our podcasts because They're all great, right? I mean they're all amazing. Don't just listen to one or two. Get get them all in there. Keep up to date with us. Appreciate you, Huddlers.

Brian Minier:

Yeah, Huddlers. Have a great day. We'll see you next time. Thank you.

Ed Beemiller:

Until next time. Bye guys.

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