Financial Detox® Show

Is It Time To Impeach Your Investment Philosophy?

January 25, 2020 Jason Labrum
Financial Detox® Show
Is It Time To Impeach Your Investment Philosophy?
Show Notes Transcript

Show Description: Politics and investing intersect in this show where Jason and Alex pose a tough but important question to investors. Is your investment philosophy impeachable? Impeachment is defined as the act of calling into question the integrity or validity of something. Markets have been extremely kind to investors in recent history which may be causing many to have a false sense of confidence. A rising tide lifts all boats. One of the more common investment philosophies is to have an extreme home bias towards a US only portfolio. We buy what we know. While US Large cap and FAANG investors have been rewarded by recent market performance, Jason shares evidence over both 10 and 48 year time frames where a globally diversified portfolio performed significantly better than an all US Large Cap one. The lost decade was a clear example of how important it is to think bigger than just the US when it comes to your portfolio. It could mean the difference between a -9% ten year total return compared to a +50% one during that same time frame. There are other investment philosophies that also warrant a closer look. If you had a 17% chance of success vs an 85% one, which would you choose? Jason and Alex take it one step further and ask investors to look closer at whether their adviser is impeachable. If your adviser is operating within suitability guidelines and isn’t serving you as a full time fiduciary adviser, you might benefit from spending some time considering the alternatives. Would you rather have a preferable adviser or one that is just suitable? Another critical and potentially impeachable situation might be present if your adviser tells you what you want to hear rather than follow a disciplined philosophy rooted in confidence, conviction and a solid foundation to weather all seasons. Listeners should come away with actionable questions to bring to their investment philosophy and their adviser with the purpose of knowing whether they are impeachable or well positioned for what’s to come. 

In this show you will learn about: 

- Why a home bias in your portfolio may not be the best long term strategy 

- How to look at history and craft an investment philosophy that has a higher likelihood of success 

- How to evaluate if your adviser is working in your best interest above their own 

- Why it’s important to have an adviser to sticks to their philosophy in good times and in times of volatility 

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this'd is financial detox, helping you Retire with Confidence featuring Jason Labor, certified financial planner and founder of I D. A well, intelligence driven advisers. For over 20 years, Jason has shown people had to steer clear of toxic advice, achieve financial peace of mind and manage their wealth. A maximum impact joined Jason and co host Alex Clinton Smith as they simplify the complex share industry secrets and provide proven strategies designed to take you from financial insecurity to financial independence. This is financial detox. Hello

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and welcome to financial detox. It's Jason Labrum in Studio with Alex Culling in Smith here, and we are the financial detox team and intelligence driven advisors. And welcome to our show this week. Alex, how we doing? But I'm doing good. I mean to I'm doing fantastic. Yeah, I'm doing well. January is almost over already. This is nuts, right? I mean, last year I don't know where it went. I don't know what I did, but here we are now already through January of 2020 and you have to write 2020. You can't write 20 because somebody could put 18 after its 17 after it. 19 after A. There's all kinds of issues that are just happening, and it's just going by like crazy, right This time last year we were we were neck deep in ah, culture merger, acquisition all that. I think it's really relevant for the topic we're gonna talk about today because we I think more than more than we had been, at least in several years, been tested on our own investment philosophy, right by having to kind of dismantle it and show it off. Yeah, and put it back together, right? We did that for the first quarter of last year. I would say, at least that was awesome. And we, uh, I think came out with renewed confidence in it. But we're gonna talk about some cool stuff today because it is the impeach your investment portfolio or your investment philosophy show at financial details. Yes, impeachment is hot right now. It is the topic of the day in the week, maybe the month and even the year is impeachment. So here we go. We're talking about whether or not you should be impeaching your investment philosophy. Wonder if anybody's ever thought of it that way behind. I know, but you got it, and you might even need to think about if your financial advisor should be impeached. Can you define impeach form? I don't know exactly what you're talking about. Can I can and thank you for asking since I wrote it down that help theat action of calling into question the integrity or validity of something, the action of calling into question the integrity or validity of something. So we ask you, as the financial detox team here, intelligence driven advisers. Should you be calling into question the integrity or validity of your advisor or your investment philosophy? If you want to give us a call, give us call it 877707 88 89 That's 877707 88 89. You can always check us out of financial detox dot com and last but not least, send an email to Jason financial detox dot com so I gotta immediately challenge this good fun how we're gonna cover cattle. I like it. I want I would if it was somebody if I'm an investor. Last year, Um, yesterday I met with a client. He manages his own for one k. Finally, he's giving. He's asking for and taking some advice because we don't know, You know, we don't always manage for one K right, Do provide. That is part of the advice, right? Right. Anyways, he did some random stuff last year on his own in his 41 K, um, chose some different funds. Like what we What we know is not typically the most prudent way to do that. He was up 26% last year because almost everything was up 20 or 30% last year. Right? So he bought us large cap growth, have 1/3 of its portfolios, and us large got some international, and then you had some target data the other third. But I guess the point is, is why would right now be a time or if I'm an investor? I probably did pretty well last year. Why would I think about impeaching my investment philosophy? I'm imagining ah, black curtain in front of my face where I can't vulnerable the times when I most vulnerable times when I'm most blinded are the times when I'm being shown success that is not founded on anything other than quite possibly good fortune or luck. Kind of like the worst thing a gambler a brand new gambler can do is when the first time. Because if you have good luck the first time, even other there was no discipline behind that. That's the worst thing. Because then you might have a false positive you might have, right? Yeah. And I mean, people who have these experiences, unfortunately, they can last the thought processes in the psychological impact of that can last for years and years and years and can ultimately destroy lots of wealth. And by this, what we mean is as an example when we're seeing now with perspective clients, which we are bringing on new clients at Intelligence Driven Advisors, which is R. R. I, a registered investment advisory firm. So financial detox is our consumer education brand and helping you make the most of your wealth. But when we were 29 by the way, we just finished our court are your end stuff. Last year, 99 new clients last year, 99 new clients and we're looking for more than 100 this year when we have the capacity to serve those clients and we will continue to add great talent, a great adviser, so we can always serve more people because we refuse to sacrifice the service to our existing clients for growth. It doesn't work that way. It's number one, our current clients. But anyhow, so what happens is the psychological impact. So we we we see so many new clients that come into our firm. We get to see their portfolios. We get to see what their current advisers air doing and what their current investment philosophy is. Hundreds of those literally a year, um, hundreds and hundreds. And so the problem is, when we look at these, they are deeply flawed, almost always. And when I say almost always, I'm going to say confidently, 85% to 90% of the time, eight and 1/2 to 9 times out of 10. When we see a perspective, clients put foil. It is deeply flawed, However, because of the current environment, trump a nomics or whatever you want to call it. The port foils are actually often doing really well. This can be super confusing to somebody who doesn't understand and isn't a student of capital markets and how markets work so it could be very confusing. And you think, Well, this is the right way to do it. Um, whatever they're doing and most of those times to be specific, those portfolios air are are way, way, way overweight to the United States, meaning that United States makes up about 52% of all capitalization around the world. So if you take all equities in the world, United States is responsible for about 52% of productions of good and service's capitalization values of companies. And yet most of these portfolios we see are 95% U. S stocks. So they have 95 us. What investment philosophy do you think that falls under? I think it falls under just, uh, by what you was easy and what you know. And everybody thinks the market and they think S and p 500 Dow Jones, maybe NASDAQ. Maybe they're thinking all three, which is a total of 630 stocks of about 44,000 traded stocks. So they think the market is those three, but it's not, and we're becoming so much more of a global economy. And yes, some U S companies do business in other places. So you get some international exposures even by US domicile companies. But there are also phenomenal companies that are doing phenomenal things that are domiciled outside of the US, their international companies and even emerging market companies and things like that. So what if what evidence would you be able to provide the support? Why, that's an impeachable investment philosophy to be so focused on on Lee U. S. Companies. Yeah, I think that's a great question. Is should you? And the topic of our show today is, should you consider impeaching your advisor? You like to say that I'm teaching your investment philosophy, changing it, call it into question, doubt its validity, and that's what we're gonna talk about in the next segment is whether or not you should doubt me. Hang little. I'm gonna leave me hanging. It's a nail biter here on financial detox today. Thanks for listening catches on K c b que the answer at San Diego The answer. Am 11 70 or FM 96.1. You can always check us out anywhere. Podcasts are played stitcher podcast player Ah Spotify, you name it. Financial detox is out there making the most of your well, stay with us. We'll be right back. It's financial detox. Welcome back. We're talking about impeachment. It is time to consider whether you should be impeaching your financial advisor or should you even be peach ing your entire investment philosophy and thought process. It is the impeachment show at financial detox, and impeachment is hot. As we know, Trump is going through impeachment, and there is some Cem sensationalism flying on both sides of the media. Isn't it sad? And isn't it a shame how our media and our world has become so stark a stark comparison between Democrats and Republicans as if nobody is in the middle when, in fact, probably 80% of our population, maybe 70% of our population, resides in the land of independence in the middle? If they weren't being totally bombarded with messaging and sells tack six and sensationalism by the left and the right, it's sad we should eliminate all political parties. But that's not what we're talking today. We're talking about your portfolio and is your investment philosophy. Do you have one? And if you do, should it be impeached? Is it wrong? So we were talking about how a lot of people have fallen into us only portfolios because it's a very comfortable place to just buy what you know. Um and then we had worked so well the past 10 years has been phenomenal, right? It has worked so well that it's become just obvious that you should own Facebook and Apple and Amazon and Google cause thes companies are obviously going to change the world forever and be the only big companies forever going for it. So why is that? Maybe not the right approach. And why is that MP even impeachable to not think that way long term? It is impeachable. And here's the problem, right? So we have lots of great studies and we'd love to share these with you. If you're looking for data and you want proof of what we talk about on financial detox, the show making the most of your wealth. We have proof. We have evidence. We will not say things that we don't believe can be evidenced proven, backed up. And so we would invite you to reach out. If you are maybe thinking G's, I should call my investment philosophy or my advisor into question and possibly impeach them. We will give you data as to why or why not? Ray are doing the right thing and you can simply get ahold of us by sending an email to Jason at financial detox dot com. That's it. Shooting e mails say I want to consider impeaching my investment philosophy. Tell me why Show me evidence. What the evidence. The evidence number one is this. We would look at Ah, timeframes rolling 10 year periods, Let's say And we confined by going clear back to 1972 through 2000 and 19 that if you owned a portfolio that was diversified globally, meaning that you had roughly 55% of your portfolio in us, you had international emerging market with the other 45% of your portfolio. You had performance of roughly four acts four times better than if you owned a portfolio. That was all U. S. Stocks, A k a, the S and P five. How many years? How many years of the time frame was that? That's from 1972 2000 and 19. So you can basically call it 40 40 years. And so the that's basically that globally diversified four x one is basically the idea. 10. That's our are all equity postal aggressive strategy we have versus and versus an S and P S and P 500. That was frank for times return. Now here's an even more stark comparison in some data to back up. What we're talking about is you look a 2 4009 which was a period known as we we affectionately refer to as the Lost Decade, where if you were invested in the S and P 500 the Facebooks, the Googles, the Amazons, those types of companies and those air NASDAQ, obviously, But you would have had a total return of a negative 9% over 10 years to tell years later, I'm down 9%. Imagine you're 55 years old. You have your 401 k you by the U. S. Large cap growth. Because it's the best performing fund over the last 10 years. It's the best one. So you put him almost all your money in that US large cap growth fund and fast forward. 10 years from now, there's a there's a possibility that you're down 9%. 10 years later, the Roman and I would be every time loss of pay for should impeach that your investment philosophy would have ruined your retirement. We can look back, though, to be fair. And there are a few periods the most recent 10 year period starting in 2010. They don't jump ahead yet. What happened to the 10? What happened? So sorry that the better the loss are different for law. So because compliance is right, we can say that with a different right. So we like better. So 2000 to 2009. If you're invested in all U. S stocks, you have a negative 9% return. That's not good, right? Negative. Nine over 10 years. 10 years. You have no, not only no positive return. But you've lost 10% of your brought money or 9% If you were in a globally diversified portfolio that we promote here, which has US stocks in our aggressive strategy. Yeah, if you're in the i d. A strategy, your return would have been somewhere around a positive 60% over that 10 year period is a big difference. Negative. Nine versus plus 60. So So you're $1 turns into a $1.60 or you're $1 turns into 90 cents. Yeah, so why we're talking about this on impeach your your philosophy is because if you don't have an adviser or if you yourself cannot describe why you invest the way you d'oh and have academic or historic proof, and evidence is to why that's going to work and it can't be because it's been kicking. But that's not the answer to why it's it's It's a good investment philosophy because it's done so great the last five or 10 years, you could be sitting on the precipice of something very dangerous, right, because right now in the markets are at all time highs. Right now, when something has done really, really well is the time when you get blindsided. This is when you step onto the railroad tracks and wham, you get smoked because you're not paying attention to the things that are not, um, right in front of your face, right that aren't prevalent and right there available for you to see you see great returns. You feel like, Hey, this must be working. It must be the right thing to do? Yeah, um, that made me think about something to be as we've been talking so much about the impeachable investment philosophies, and I think that's a very good example of one. And there's some really good evidence there. Its financial detox, the impeachment show. You just laugh at that every day because your face is like lights up when you say that. Why, I don't know. I think it's so. It's so good because impeachment is hot right now. It is the theme it is that so hard it is on trend impeachment. Hi. Unfortunately, it's hot right now, but I think I get what a waste of our public taxpayer money, our taxpayer money. And instead of feeding poor people instead of helping solve global ah ah problems, we are just letting our Congress and Senate people just burn cash, burn money that otherwise be benefiting and Andy motivate. And the more I mean, it's just not. It's just not a good thing when you have about the culture like that in society in our country. Like what? What a waste of energy and how about the hatred in just the lies and deceit in the misrepresentation in the change. So this is why we're calling a possible impeachment on your investment portfolio and even your financial advisor. Yeah, we've been talking for a while, holding even for people who are just tuning in right now. I'm talking about why update your financial, your investment philosophy? Um, especially this past five or even 10 years. You're probably have had a lot of good luck last year, and so it's more important than ever when you have good luck to appreciate what that how that happened, what it was. You know, I think advice in General Alex has been redefined, right? I mean, there is a new era of financial advice that is breaking through the chains and the walls of Wall Street. And that is advice that instead of being salesmen and sells people advisors, there is a new breed of financial advisors who are true consultants who are legally bound. Act in your best interest, who must put you first, who don't get paid them, nor their firms very important, nor their firms do not get paid to sell particular products. They don't get extra compensation when they sell one product over another. Their firm isn't receiving $17 million in Spits Toe have a preferred fund family that they take all their top producers on trips around the world every year to sell their crappy, underperforming funds. There is a new era of redefined financial advice. It is coming. So I think it is appropriate for all investors who are trusting an adviser to take into question whether or not that advisor is is operating with their best interest in mind. And you have to be very careful because most advisers, if asked the question, Are you a fiduciary? They will say yes, because sometimes they can be, But they also could switch in and out of that role. So you're really making a decision. If you operate with an advisor who's not a full time fiduciary, you're making a decision to work with somebody who's providing you with suitable advice that is okay versus somebody who is preferable in providing you with advice. It's in your best interest. It's a major difference. What you said is really important, and I think just to recap, summarize real briefly for listeners. What he's saying, What we're saying is that one alarm bell as to why you would impeach your advisors That they are, if they're not a full time all the time. Preferable Sze Fiduciary Advisor If you don't know what that means, go all the way to white papers You know the second thing and then we'll have some stats to share The second thing that would make me really scared if I was, you know, in about an investor that was hired and trusting an adviser is if if I think back on all the conversations over the past 235 10 years even, um, my review meetings with my advisor, right? And the advisers basically telling me what I want to hear. So because you can do that as an advisor, I could just tell people what they want to hear. They come in and they're like, scared about this or they're excited about that. And I'm like, Yeah, totally. We'll just buy an S and P find only we'll just chase real estate because it did really well last. So basically, that's an adviser that doesn't have an investment philosophy. Their philosophy is just to make you happy, even if it's not the best thing for you. Yeah, there's there's so many advisors like that Well, and I think you have to advise. Ask your advisor real quick. Can you define our investment? Philosophy? Is your team with your advisor? He's your coach. He or she is your coach. They're helping you. Can you define what it is? And if they cannot articulate very clearly with evidence, consequential evidences to why they're doing what they're doing for you in their portfolio on how it all works together. Then you gotta consider impeaching him. We have a great piece that we'd like to send out to you today. It's called delivering Value. It's how advisor should deliver value and it is intricate and detailed about how we deliver value to our clients. If you take a look at this, I think you will have information that you can now become a very informed person as an investor, a very informed individual as to whether or not your advisor is impeachable on whether or not they are doing the right job for you. So give us a call at 877707 88 89 That's 877707 88 89 Or send an email to Jason Financial detox dot com. Okay, here's a couple stats, so we use a fund family called Dimensional. It's one of the investment products that ultimately ends up in our clients, and it doesn't have to. We're not obliged to them. We don't owe them anything. We're not loyal to them. We're loyal to our clients. If they happen to have the best product we put it in as part of our portfolio structure, it's a different type of firm. It's a different type of mutual fund company, very low cost, like a vanguard, very market based, very academically supported evidence. You know all this kind of stuff as opposed to general mutual funds, which are much more expensive and suggests that they might be able to outperform the market. If you give them your money and you pay them extra that they're so smart. And so why is there gonna beat their benchmarks or the index? The interesting statistic that we have to share is if you have the right investment philosophy, it works, and it works over long periods of time, over and over again. 85% of dimensional funds beat their benchmark ER index from 1999 to 18 2085% of funds beat their benchmark index dimensional of dimensional funds. When you look at mutual funds in general, the industry, excluding those 17% of the funds, beat their benchmark or index. Could you imagine if you had a 17% chance of success? This is not good. You will lose unless you get in front of my floss. It might teach my investment philosophy if it is not similar to an investment philosophy like Dimensional. Here's another statistic for you. From 2008 to 2012 when the market was nasty when it was down, when it was not doing great, $535 billion flowed out of the general industry. Mutual funds, meaning advisers who should be impeached did not have the right investment philosophy and did not keep their clients invested at the right time. They let them sell equity mutual funds. At a time when equity mutual funds were at the bottom half, a chose advisers collapsed in their investment philosophies. They succumb to the pressure of their clients to their client's emotional emotional whims, and they did not serve their clients with integrity, with discipline, with structure and rigor. And if you look at advisers to use dimensional funds, $34 billion went into equity funds during that period from 2008 to 2012 versus 535 billion flowing out amazing statistics. That proves that if you have the right advisor and the right investment philosophy, you are going to do substantially better for creating and preserving wealth for your family. It's time to consider whether you should be impeaching your investment philosophy and or your financial advisor, And if you want help on making that decision, we can help you. Where the financial detox team at Intelligence Driven Advisors I'm Jason. This is Alex, and you can get us Get ahold of us at 877707 88 89. That's 877707 88 89 or check this out of financial detox dot com. Thank you for listening to the show, as always, will be back next week with some fresh content for you. Thanks for the

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to learn more about financial detox and to get access to today's show. Notes. transcript and Resource is. Visit financial detox dot com. Call Jason and the team at intelligence driven advisers. If you're ready for financial detox and a better tomorrow, call 877707 88 89. Get answers to your questions. That's 877707 88 89 that's financial detox dot com for podcasts and information. And if you like what you've heard, be sure to hit the subscribe button. That way you'll be notified about upcoming podcasts. You'll take one more step toward financial peace of mind. This content is provided for informational purposes only, and should not be considered investment advice or recommendations to buy or sell any types of securities. Mr. Labrum and intelligence driven advisers are not responsible for the consequences of any decisions or actions taken as a result of information provided in this program, and do not warrant or guarantee the sacristy or completeness of information provided information discussed today reflects the views of Mr Labor and his guests as of the date of the show and are subject to change without notice. Past performance is no guarantee of future results. Any forward looking statements or forecasts are based on assumptions, and actual results may vary from any such statements or forecast. No reliance should be placed on any statements or forecasts when making an investment decisions accordingly. Listeners should not rely solely on information provided today and making any investment decisions. There's a risk of loss of investing in securities, including the risk of loss of principal. Different types of investments involved, varying degrees of risk. And there can be no assurance that any specific investment will be profitable or suitable for particular investors by natural situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses.