Young and Profiting with Hala Taha - Peter Mallouk: Post-Covid Predictions and Investing Tips | E72

Episode Date: July 5, 2020

Covid-19 has changed everything, including the ways you should invest. Will you merely survive or will you thrive in this new world? Today we’re chatting with Peter Mallouk, the President & Chief Investment Officer of Creative Planning, a Registered Investment Advisory firm with over 27 offices throughout the US. Creative Planning manages over $45 billion in assets and is routinely named by Barron’s as the #1 Independent Wealth Management Firm in America. Mallouk’s leadership in the industry has not gone unnoticed, either. He is the only person to have ever ranked No. 1 on Barron’s “Top 100 Independent Financial Advisors in America” list for three consecutive years. For more info about Peter’s accomplishments, head over to creativeplanning.com. Tune into this episode to hear Peter’s predictions on how the economy will shake out in a post-covid world, get his guidance on how you should be investing during the coronavirus and hear his perspective on speculative investments like cryptocurrency. Follow YAP on IG: www.instagram.com/youngandprofiting Reach out to Hala directly at [e-mail] Follow Hala on Linkedin: www.linkedin.com/in/htaha/ Follow Hala on Instagram: www.instagram.com/yapwithhala Check out our website to meet the team, view show notes and transcripts: www.youngandprofiting.com Learn more about your ad choices. Visit megaphone.fm/adchoices

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$0 delivery fee and percentage off discounts subject to older minimums and participating scores. Taxes and other fee sell apply. Hey everyone, it's your host, Halitaha. Before we kick off this week's episode, I want to say thank you to everyone who has left us a review on Apple podcasts or a comment on your favorite platform. Reviews are the best way to thank us and mean the world to our team. This week I'd like to share a review from David Munford. Found this by accident. I found this podcast by accident,

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everyone out there listening right now, I hope that if you enjoy YAP, you'll also take the time to leave us a review or a comment on your favorite platform. I'd love to hear what you think about the show. You're listening to YAP, Young and Profiting Podcast, a place where you can listen, learn, and profit. Welcome to the show.

I'm your host, Halataha, and on Young and Profiting Podcast, we investigate a new topic each week and interview some of the brightest minds in the world. My goal is to turn their wisdom into actionable advice that you can use in your everyday life, no matter your age, profession or industry. There's no fluff on this podcast and that's on purpose. I'm here to uncover value from my guess by doing a proper research and asking the right questions. If you're new to the show, we've chatted with the likes of XFBI

agents, real estate moguls, self-made billionaires, CEOs, and best-selling authors. Our subject matter ranges from enhancing productivity, had again influenced the art of entrepreneurship, and more. If you're smart and like to continually improve yourself, hit the subscribe button, because you'll love it here at Young & Profiting Podcast. Today on the show we're chatting with Peter Malook, the President and Chief Investment Officer at Creative Planning, a registered investment advisory firm with over 27 offices throughout America. Creative Planning manages over $45 billion in assets

and is routinely named by Barans as the number one independent wealth management firm in America. Malooke's leadership in the industry has not gone unnoticed either. He's the only person to have ever ranked number one on Barans top 100 independent financial advisors in America's list for three consecutive years. For more info on Peter's accomplishments, head over to CreativePlanning.com. Tune into this episode to hear Peter's predictions on how the economy will shake out in a post-COVID world, get his guidance on how you should be investing during the coronavirus, and hear his perspective on speculative investments like cryptocurrency. Hey Peter, welcome to Young and Profiting Podcast. I'm so excited to talk to you today.

It's great to talk with you. So I want to kick it off giving my listener some background about your career journey and how you got to being such a successful financial advisor. So to give everybody some background, you are the president and chief investment officer of the wealth management firm called Creative Planning and you manage over 45 billion dollars in assets and you hold accomplishments like being the number one independent financial advisor in America's on barons top 100 list. You can head over to creative planning.com if you guys are interested to learn more about

that. So you have so many different accomplishments. I could rattle them all off, but I'll do that in your formal intro. There's no small feat there. You've accomplished so much in your life, but based on my research, I found out that you actually started your career as a lawyer, and you got your JDMBA, and you started off as a lawyer, but now you're in finance, obviously,

you're one of the biggest and most successful independent financial advisors in the world, so how did you go from like lawyer to who you are today? I would start by just saying, it wasn't intentional, so I think a lot of people that you find that have success in a job or career or starting a business, it wasn't necessarily the first thing they wanted to do or that they thought about. You always hear about the teenager and the garage and invest some software program, but

that's really not the norm. And I think my journey was much more typical. While I was in college, I was just having a good time. And I didn't know, I didn't want to go home. And so I went off and got an MBA in a lot of degree. And then from there, I had a job for a couple of years. And then I wound up being in a state attorney. And as in a state attorney, that just

means you're doing wills and trusts for people. So if you're over 18, you should have some basic documents like a health care power attorney that says, who will make health care decisions for you if you can, or a financial power of attorney that says says who will make healthcare decisions for you if you can, or a financial power attorney that says who will make financial decisions for you if you can't. I did stuff like that. And financial advisors would hire me to do that for their clients, because financial advisors

would be managing money, doing financial planning, and this is related to the kind of your financial house in order being an adult, right? So they would bring me in, and I got to see the whole industry for the first time. I never had any relatives that worked in it, didn't have any friends that worked in it, wasn't familiar with it at all, did not even know what a certified financial planner was, or the financial planning wasn't profession. And this isn't like me at 18, this is me at 29, right? So at that point, I got to see the profession.

And I did that for about eight years before I said, you know what, I think there might be a better way to do this and started to look at how I could build a firm that would be able to do it in a different way. Very cool. So for everybody just to understand, like, what is creative planning exactly? Like, what are the types of things that you do on a day to day as a creative planner? So if somebody has 50,000 or more creative planning works with them to build a financial plan. So what that means is looking at your assets and liabilities.

If you have a job, you have a 401k. Some people own part or all of a house. Some people have a rental property. Some people have an IRA or Roth IRA. It's creating a list of those assets and a list of liabilities like student loans and a mortgage or a car loan and coming up with the net worth, that's what we would call the starting line and financial planning and then building out path to your goals.

So some people, they have young kids and they want to pay for their college or part of it. So running projections to figure out, well, how much do you need to save and what's the best place to save it and what's the best place to save it, and what are the best investments to buy. And the best time to start planning for retirement is when you just start your career. And so we're running projections on well, how much do you have to put away to accomplish your goals?

If you're young, you don't have to put away a lot. And so it's building out those goals. Like what are you dream to do in the future and creating a deliberate way to get there? That's basically what financial planning is. Interesting. I think it's very important for everybody to do some sort of financial planning,

whether it's on their own or worth a professional, especially as you get to like your 30s and you're really starting to establish yourself and make some real money, I think that's super important. So I want to get straight to business. You have a wealth of knowledge that I want to uncover. Right now, people are really concerned with the economy. We have the coronavirus pandemic, everybody's really worried about

job security. If they still have a job, people are unemployed, and more than ever, people are really concerned with their financial features. So I want to know if you have any predictions of the economy. So what would a post-COVID world look like to you? What a post-COVID world looks like in terms of how business works and then predicting the market, I would put those, those are two different things. So I think that one part would be the post-COVID world is just everything that was going to happen anyway, happening faster. So everyone's just moving to more virtual work faster. More people are using video conferencing faster. All of this stuff was happening anyway. It's just happening faster. People had never

got around using Amazon or now using it. People that were never doing video conferencing are now doing it. And it's also forced adaptation of an older generation, you know, 65 plus that was just never going to bother. Well, now they're all in. And so what you see in all these recessions, and recessions happen for all kinds of reasons as your generations, I think first recessions as some of your generation might have experienced a little bit of a way to a nine. But what all recessions do is they're basically cleansings

like all these businesses that we're gonna go away anyway, they go away faster. And then all these businesses that we're gonna emerge, emerge faster. And we're seeing that happen right now. So you'll see more people working remotely, more people doing video conferencing, more people using things online, doing business online. All of that's just moving at a more rapid rate that would have otherwise. So then what's going to take 10 years is going to be done in 18 months. That makes sense. And so from an investing standpoint, betting on those is a different deal.

So if you look at say the market, the market's just, it's going to go up over time. If you buy your listeners, buy say the S&P 500, which is 500 of the biggest companies in America and the world, they represent all kinds of different industries, whether it's technology or consumer goods and things like that. If you buy the S&P 500 over time, it's almost certainly, there's never a guarantee, but almost certainly gonna go up over the long run. And there will be winners and losers that rotate

in that space. And so today, losers are everyone in the travel industry and winner is Big Tech. As people use, watch more Netflix and use Zoom and use Google More and Facebook more because they're all stuck at home. You're going to see some of the winners, but the winners and losers, they're constantly rotating for different reasons all the time.

If you own that big basket of diverse fight assets over the long run, it goes up into the right. It just generally works out. So there's something I specifically wanted you to cover. You talk about the V-shape, U-shape, and L-shape recovery. And I thought that maybe you could kind of break that down for our listeners, because I think people are really curious to know how experts think that our economy will shape out in the near future.

So, whenever the market tanks, eventually it recovers, right? So, we've had probably a hundred corrections since the beginning of the market. The corrections just a drop of 10% or more happens on average every year. And we have bear markets about every five years. Those are drops of 20% or more happens all the time. Like your listeners are going to have probably 10 to 12 more of these in their lives. Right. So you're getting scared now. I mean, then you just got to find a way to get used to it or you're never going to win with investing.

But whenever there's those huge drops, those bear markets, we eventually have a recovery. And the question is, what does it look like? Well, if you go down and then it just immediately goes up, just as fast as it went down, we call that a V-shaped recovery. If it goes down, stays down for a while, and the problem gets solved, and everything goes back up, we call that a U-shape recovery. Sometimes things go down and they stay down for 10 years, like the Great Depression, which is before most people, all of your listeners time, before my time, things tanked.

They stayed down for years and years and years before they recovered. This was starting to look like a V-shape recovery. Everything went down very sharply. Then the federal government kind of came in and gave everybody free money and printed money and did all this stuff to protect the markets. And then on top of that, it looked like we might have the coronavirus and our control

and that really, you know, five and a hundred people weren't gonna die, maybe one in a hundred and that they were older people or people pre-existing conditions. And so young people like your listeners felt safe to go do their business. The market felt pretty good about that. And started to become like a V-shape recovery.

But now that we're seeing the spread again, now that we're seeing the spread again, the markets are paying a lot more attention. And we might wind up, and then I swear I'll stop with the letters with a double unit, because when we go back down again and then come back up later. So if you know what's gonna happen know, if you know what's gonna happen

with coronavirus, you know, it's gonna happen with the markets. No one knows what's gonna happen with coronavirus. That's very unpredictable. Okay, so I think best case scenario is either a W or a U shape, and we're no longer seeing a V shape. Is that correct?

Well, I think, you know, this has been pretty close to a V. So I think that like, if people wear masks, right, and we get this thing under control again, I think you'll see a pretty healthy recovery. If this mutates into something more dangerous or it becomes significantly worse than the fall, they don't have any treatments development, like develop like we expect, then it's going to be very, very painful. Well, fingers crossed that we get a nice recovery and the economy kicks back.

You mentioned that we're in a bear market, just a medication for my listeners. A bull market is when things are going good and the stock prices are going up. A bear market is when things are receding and going down. A bear market is specifically a drop of 20% or more. We've been through multiple downturns like this in the past. We had the tech bubble, 9-11, 0809. drop of 20% or more. So we've been through multiple downturns like this in the past.

We had the tech bubble 9-11, 0809. How does coronavirus compare to the previous economic downturns that our country has taken? So in some ways, this shock people, it's not as bad. Like 9-11, the market went down about 48%. And with the tech bubble, it was down in the 40s. And with 0.8 and I in crisis, it was down 53%. This one, I think we were down about 34% and it's recovered a lot of those losses. I think part of it is things were so strong coming in. So there was no fundamental breakdown.

It was kind of like snowstorm and everyone has to go inside. I mean, so people feel like one of the snowstorm passes and everyone goes back outside, things will go back to normal. That's not how we felt in 0.809 or in previous bear markets. In other ways, it's worse. I think psychologically, it's much worse because there's no distractions, right? So there's no sports to watch. There's no concerts to go to. Plus everybody's home, so trapped at home. Plus it's the first bear market we had when widespread social media and technology.

So you can get all the negative news around the clock on TV, around the clock on your phone, social media is amplifying disinformation, misinformation, stress, anxiety, you don't have to go very far to find it. So here we are with nothing to do. And bad information coming to us as much as possible. And to add to all of it, it's life and death, right? It's not as serious health issue.

And so I think from a psychological perspective, it's much more traumatizing, but from an actual financial perspective, it's not as bad. That's so interesting. It's so true. It's like we're in an echo chamber. Everybody's kind of obsessed with the coronavirus.

It's everything that everybody's talking about. And it might not actually be as bad as previous economic downturns that we've taken. So I think that's really great insight. So in terms of investing advice, that's why we have you on the show. I know you can't give anything super specific because there's regulations around that, but I know that age is a really big factor when it comes to the type of investments and how you should plan for your financial feature. So for our younger listeners,

everybody at Younger Profiting, who listens to Younger Profiting, we have listeners of all ages, we're young at heart, but we do have younger listeners for sure. So if you're, let's say, in your 20s, how should you think about investing during the coronavirus, what would your advice be?

So I think what somebody in their 20s has is the number one thing that any investor wants, and that's time. Nothing drives future wealth as much as time. So somebody's even saving 100 a month now. It's better than at 65, saving a thousand a month. I mean, it is so powerful to have money on your side. If you can earn about 7% on your money, your money doubles every 10 years.

So let's just take a 20 year old and they somehow piece together $5,000, right? At 30, it's 10, at 40, it's 20, at 50, it's 40, at 60, it's 80, it's 70, it's 160,000. Just that saving that five grand because they had time for it to grow. He takes somebody who's, say, 60 and they say 50 grand, well, it's 70, it's 100. It's much, much harder to make it work without time on your side. So young investors have such a huge, huge opportunity.

My biggest advice to them is to find some amount, whether it's $5 or $100, and invest it every single month, and also start rooting for the market to do bad, because you don't want it to go up today. You want it to be higher when you need the money, when you're in your 60s or 70s, or if you want to retire in your 40s or 50s. So you want the market prices to stay low.

You want to be buying every month at low prices, and then you want it to go up later. I mean, the best case scenario for somebody in their 20s is the market stays horrible for 10 years, and you're saving it for those 10 years, and then it goes up, because you're accumulating all these shares at the lower prices.

So invest really early, invest in a diversified way, and don't root for the market to go up. You want to go up later. We're going to dig into all of that. Don't you guys worry. So how about older listeners? So let's say you're in your 50s, 60s, how should you invest during the coronavirus? Well, so certain principles still apply. Anytime you can invest, the best time to invest was yesterday, we don't have yesterday anymore.

So the next best is today, so it gets started. I mean, you have to get started and you have to have a plan. You have to know where you are and what you're trying to do. And then by diversified, very good investments that are gonna make it through any bear market. And do it deliberately, intentionally, every single month keep adding towards that goal. You have to take some action to make this happen.

So a lot of people think it's the trading that's the action. The action is having a plan in place and investing deliberately. The trading is actually not helpful at all, right? You just want to invest and hold in high quality things. You don't have to pay attention to it. We have to do is pay attention to getting off your ass and getting this thing going today instead of waiting a year from now or two years from now because you really need all the time you can possibly get right away.

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Now they're financially free and they're sharing their hard-earned lessons with all of us. That's right, millionaire university will teach you everything you need to know about starting and growing a successful business. No degrees required. In each episode you'll gain invaluable insights from seasoned entrepreneurs and mentors who truly understand what it takes to succeed. From topics like how to start a software business without creating your own software, to more broad discussions such as eight businesses you can start tomorrow to make 10K plus a month, this podcast has it all. So don't wait, now is the time to turn your business idea into a reality by listening to the Millionaire University podcast. New episodes drop Mondays and Thursdays. Find the Millionaire University podcast on Apple Spotify or wherever you get your podcasts. Yeah, I think that's excellent advice. I want to go into

a use case. It's a personal one. So at the beginning of the coronavirus, I was heavily invested in stocks. So I probably had like 70% of my money in stocks. I took like a lot of risk and I did really well. I had like over 50% returns on my portfolio and I did it all by myself. And right when the coronavirus started and things started to tank, my portfolio went to like 30% profits

and I was like, I'm gonna sell everything and I sold everything. And so now I'm like sitting on a whole bunch of cash, which you and your own words have said is a disaster. And so I wanted to know your thoughts about holding onto cash during the coronavirus, because I know there's some very smart people like Warren Buffett, who's reportedly holding onto $137 billion worth of cash right now.

And so there are smart people who are holding on to cash. So I wanted your perspective. Why do you think that cash is such a disaster? Could you explain that to our listeners? So cash is not doing anything for you, right? It's just sitting there and it's earning nothing. So let's start with the idea that the market will probably hire later, right?

So if we go back to 0809, which was typically horrible, right? It was the worst market drops as the great depression. The market went down about 53% from top to bottom. I think it had been around 14,000 or something and then it went down to 6,700 or so. Now let's just assume you were sitting in cash and you're trying to decide, wow, do I get in when it's at the Dow is just an index of stocks in the US. Do I get in

when it's at 14,000? Do I get in when it's 11,000? I get in when it's 12,000 seems like a big deal at the time But it's really not the way to think about things today. The Dow is at 24,000 right it doesn't matter if you bought when the Dow is at 14 Which was the high at the time or if you got super lucky and bought when it was at 10,000 who cares today? It's a 24,000. The people that got burned or the people that waited and it got away from them. I went to 15, 16, 17, 18, it's too late now. You want to get your money in the market, go buy the S&P 500, that's one fund you buy that owns the 500 biggest stocks, and just leave it alone. Don't ever go to cash, don't ever trade it.

Just wait 10 years, it will probably work out very well. I mean, and that's really what the key to long-term success is, is just buy as soon as possible, and don't make the mistake of going to cash and waiting. That doesn't mean that you're listening. You could take all that money, you did a great job with. You can go invest in the S&P 500 today. The odds next year, you will have lost money or one in a four. You can lose money for a year, but you're not touching it next year, right? We're putting it in a time machine, and we're gonna go take it out for you,

probably 30 or 40 years later, right? So I am very confident if you go put all your money in the market today, and you open up the time machine for your 50 years later, the Dow is gonna be in the hundreds of thousands, and it won't matter if you bought a Dow 24, 22, or 18, or whatever is going to be in the hundreds of thousands and it won't matter if you bought a Dow 24 or 22 or 18 or whatever price it may be. It's just going to get time on your side, get invested, leave it alone.

Yeah, so the idea here is that when you're investing in stocks, it's really a long-term play. You're not trying to just like time the market perfectly where you're kind of entering at the perfect time and exiting at the perfect time. Could you explain to us why that's kind of an unrealistic strategy? Well, I mean, like it's fun, you know, to have a Robinhood account and trade in it and whatever. That's totally fine. And I'm not against people having fun and speculating and trading, but figure out what you need to scratch that itch and set that aside that money and say, okay, this is the money I'm going to have fun with. And just know, sometimes you're

going to do a ton better than this to be 500 and sometimes you're going to do a ton worse. But over 30 years, the odds are very, very high. You will do worse. So take your serious money and get it invested because the way you lose is by accidentally being out of the market at the wrong time. So get your money invested, let it do its thing, and then take your play account, whatever that is, whether it's 5% of your money or 20% of your money,

put it in your Robinhood account and have fun with it. The serious money that should be invested in a diversified portfolio for the long run and just don't play with it. Got it, that makes sense. And so you're basically saying the risk of being out of the market is greater than the risk of being in it. No matter what.

That's right, let's say you go in it. No matter what. That's right. Let's say you go in today and the markets, whatever it's at, 24,000, 25,000, you think I would know that. That just shows you that, you know, I'm managing $50 billion and I can't tell you exactly where it's at today. But there are a lot of people that probably know exactly where their heart stock is today that are playing with it on Robinhood. You shouldn't be really paying attention to it day to day.

So let's say you invested in the $1,000 over $25,000. So let's say that you invest today, and it was just the worst advice ever. Tomorrow some horrible thing happens, let's say in North Korea, and the market goes down 10,000 points. It doesn't matter to you, because when we open the time machine 30 years from now,

it will have gone from 24 to 15 up to hundreds of thousands. Let it just do its thing. Now, let's say in reverse, you decide after this podcast to stay in cash and they come out with a vaccine for coronavirus. They announced it's going to be ready in December. The market's going to go up thousands of points. It may never come back down again. So the problem with being out of the market is the market can go up and never give you the opportunity again. If you're in it and it goes down, that's temporary, not a big deal. Right? So that's the difference.

So everybody paying attention right now, if you're holding on to extra cash, stocks are like half price right now, right? And I heard you say this before, Peter, that like everybody likes a sale, but when stocks aren't sale, nobody wants to buy them. Why is that? Why don't people like the evidence is there? Everybody knows that you should buy low, sell high. So, why do you think that people don't actually go ahead and do what they've heard so often in terms of buying stocks when they're low? I think it's this human behavior. We're just wired, wired in a way where bad feelings hurt a lot worse than good feelings. Like, so we know that it takes seven compliments to offset an insult.

And we know that the average person who looks at Instagram for every extra hour they look at it, they become more depressed, right? We just have this human behavior where we know we do things that we know aren't in our best interests because we're driven a lot by investing fear in greed. We want all upside but we get really scared when it's down, when it's down we go, I got to wait for things to calm down when it comes down, it's too late, it's back up against. We can read every book in the world that after the Great Depression, after 9-11, after the 70s, after 8-09, after the tech bubble, the market recovered, recovered, recovered,

but every time we go watch this Will Ferrell movie that has the same plot, you know, one time he's a basketball player and one time he's a stepbrother and now he's a hero of his. It's always the same plot. We know how it's going to start, we know it's going to happen in the middle, we know it's going to happen in the end. But the story is just a little bit different and we get all freaked out about how the story is going to end.

So I think in every crisis, there's a whole huge group of people in the panic. And it doesn't matter how long they've been doing it, fidelity released something saying that their average adult, the older investor took part or all of their portfolio to cash in March. So think about you saving your whole life. March was the bottom.

It was the worst time you could possibly sell. It's just it's the same thing over and over and over again. So you got to find a way to get your emotions in check to really be able to succeed at this. Yeah, so talking about emotions, let's say that I didn't get rid of my stocks and let's say I didn't overly invest in stocks in a risky way and I didn't need that money in the future. What kind of mental dialogue should I have had with myself to kind of talk me out of selling my stocks? Well, I think one would be, hey, I bought things that are high quality. I knew this was going to happen, right? So I knew there are going to be corrections. I knew there were going to be my markets and here we are in one. I

knew this was going to happen. And that's why I owned this diversified group of high quality stocks. And then next, I would say, we're mind yourself, this money is for when I'm retiring. This is not money I've saved for something for next month. It's not money I've saved for three years from now. This is money I've saved for the long run. And in the long run, I know what happens here.

So remind yourself that you had a plan, that you had a goal, that you knew this was gonna happen, you know where you're going, and that'll help a little bit and get it you to stay where you're at. I love that. So anybody who is holding onto stocks, still you heard Peter's advice,

I would definitely take heed. So you mentioned diversification a bunch of times. I think my listeners are, you know, have a financial literacy that's across the board here. So what is diversification? Diversification means owning a bunch of different things. So for example, when you buy one company, you have what's called company risk.

So if you bought Hertz stock, well it went bankrupt. So you lost all your money because Hertz didn't do well. Other car rental companies are doing better, but Hertz went bankrupt. That's company risk. Also with investing, you have industry risk. Like so, for example, you could have diversified your airline stocks, but they're all in the same industry.

So, all of them are in trouble now, because no one wants to get on a plane. All of them could probably won't, but all of them could go bankrupt. That's industry risk. And then there's market risk, which is you could own a bunch of different stocks and a bunch of different industries. But if you're in the stock market, the stock market, all of it can go down together. So when you invest in the market, you always get market risk, but you don't have to take industry risk and company risk. If you buy something like this and P500, you now own companies and technology

and energy and financials and consumer cyclicals and travel. So sometimes like in a crisis like this, technology does well because everyone has to use it, travel this poorly because of the circumstances, and it kind of works out for you in the long run. And so being diversified, you don't have to worry about going under, losing all your money because one company goes away or one industry goes away. Yeah. Okay. I understand that. So a lot of people are interested in what's called speculative investments like Bitcoin, Ethereum, other cryptocurrencies, gold, silver. These are all examples. Could you define what a speculative investment is for us and give your opinion in terms of if it's a smart idea to think about during this economic climate.

So what I would call a traditional investment is one that pays you something, right? So like if you and some friends team up and you go buy a duplex and you rent it out, you're collecting rent checks, right? And so you take that rent check, you pay your mortgage, you pay the maintenance, you pay the insurance, you have money left, you have money to put in your pocket

like actual money to go do stuff with. If you buy a stock, the stock usually pays you dividends. So the company that when you buy McDonald's stock, McDonald's actually selling real stuff to real people making real money and they pay some of that out to you and you can go do stuff with that money. Specular investments, that's not the case. Specular investments, we are just 100% counting on somebody paying more for that later. And that doesn't mean it won't work, it just means it's speculative. So examples of that would be art, right? You could buy a painting and we're just counting on somebody else paying more for the

painting later. The painting's not going to pay you, well, it's on your wall, it's not going to pay you all its its in storage. We just really, really need people to like that painting down the road. And sometimes that works out awesome. Sometimes it doesn't. You know, maybe one day just everyone stops buying that stuff. Who knows?

Bitcoin falls in that. Cryptocurrencies fall in that because there's no income coming. It doesn't mean it's not going to work out. Right now, I think there's over 3000 cryptocurrencies. I think it's pretty safe to say 99 points. Something percent of those are going to zero. Not down, not going to suffer a little bit, but to zero. Will there be one or two or seven that work out?

Maybe. Will one of those be Bitcoin? Maybe. So if you buy Bitcoin, you're speculating. It doesn't mean that it's wrong. It just means do it knowing. It's probably not going to work out.

It doesn't mean it's not going to work out, but speculative investing is just much more dangerous than investing in things that actually bring money to you. Yeah. I think that makes a lot of sense. I think that when you get into cryptocurrencies, like you said, it's really risky. So I did like my episodes number two and three. If you guys are really interested, I went really deep into cryptocurrencies. So you can go check that out.

But it's really interesting. It's really cool technology. I think you really need to understand it before you get into it. And I think like you said, it's very risky. So you might want to use like money that you're not really worried about that you just want to kind of see

like if you can get high risk for high reward. And I can just tell you because 100% of the time when I talk about this, I get blasted by a ton of people on LinkedIn. There are a lot of people that disagree with me on that. There's a lot of people that think it's not speculative at all. It's the new standard. It's going to work out awesome. I'm not in that camp, but I understand the reasoning of that very pash that's group of people. Yeah, totally. So I know that you can't give very specific investment advice like what exact stocks, we should put our chips on. But would you mind giving us some insight into the asset types or the sectors that you think

are underrated right now that we should take advantage of? Well, I think it's really easy for your crowd. Your crowd should be until they get to $50,000, a hundred percent of their money should go in the S&P 500. You now own 500 of the world's best companies. That's about 80% of the market capitalization. So there's thousands of thousands of companies, but those companies are bigger than all the other ones.

You know, right? So like, Apple in the S&P 500 is bigger than probably the bottom 100 companies in the S&P 500 is bigger than probably the bottom hundred companies in the S&P 500 is so big. To be on the S&P 500, you get company diversified, industry diversified, you're tied to the market. That tends to work out very, very well over the long run. That's really what anybody would less than 50,000 that doesn't need their money for 10 years or more. I think she'll be putting their money in something like that. Once you get over 50,000, probably makes sense to talk to somebody and say,

okay, what else should I be doing to compliment this? But until then, that's really it. Take that whatever amount of money you need to trade cannabis stocks or herds stock on Robinhood or Bitcoin or whatever it is or if you just want to trade stocks, Apple Amazon, all that. Take whatever that money is on the side,

but the rest should go in the S&P 500 until you get to that benchmark. And can you talk about how the S&P 500, like, what's the typical rate that it goes up every year, and how does that compare to what you would make putting your money in a savings account or something like that? The savings account is like zero. So, yeah, if you're super lucky, it's barely more than zero.

That's the P500. It depends on how far back in history we look, but traditionally it's been around eight to a little, eight percent to a little over 10% a year. There's a lot of people who think it's gonna be a lot better because we're innovating and the demographics are better and all of those things. There's a lot of people who think it'll be worse

for a variety of reasons, interest rates are low and so on. But that's just historically what the range has been. You compare that to bonds, which is two, three percent, you compare it to cash, which is close to zero percent. It's a lot of upside, but the trade-off is, in a savings account, never goes down, right? The bonds rarely go down, but stocks, if you own them this year,

bonds are one and four, they'll be down. You really need time to take away that risk. Over three years, most of the time, it's up, over 10 years, it's up, 98, 99% of the time. So you need to be in the, it's time in the market, not timing the market that makes it work. So why would somebody ever invest in a bond? And if you could explain what that is to our listeners,

versus if they could just always invest in the S&P 500 and make more money on their money. So with a stock you own part of a business. So let's just take Nike. If I want to own part of Nike, I can go buy part of it. And I literally own part of Nike. It's not hypothetical or theoretical. I'm an owner of Nike. So like I own creative planning, I could sell stocks to you and you would be

an owner in creative planning. We're a private company, but still, it's stock, right? So, instead, you could loan money to Nike, and Nike has to pay you back. Well, unless Nike goes bankrupt, you're going to get your money back. So if you loan money to Nike at 3%, every year, you're going to get your 3%, you kind of know what's going to happen and the only thing you have to worry about for the most part is that they go bankrupt. If you own 90 stock you've got to worry about a lot of other things. How's it? Deed is doing, how's underarmor doing? Are they going to do something that makes people boycott their brand? Is there something that could make them go out of business? Right? Because if they go out of business you're not going to get anything but on top of, it can go down and just stay down for a long time. And that's the key difference with the bond is a publicly traded company. You can just not do well. It can stay in business,

but not do well for decades. It's a very competitive world out there. So you can put your money in a company and have it just suffer for a long time and not go up. So that's why you want to own a group of companies because in general as a group, some of them will do amazing. Like Amazon and Apple have done. Some of them will do very, very poorly. Like, Hertz switch went under, a lot of companies go bankrupt or maybe some movie theaters are going to go bankrupt, too. No, so, but oh, as a group over time, built an average seven to 10% and earn you triple what you would earn in the bond But the bond there's no drama. There's very little suspense with the stock you've got all the stuff that comes with being an owner and

How long do you keep a bond for isn't there like a certain like expiration date on them? So every bond comes with yeah an expiration date So you can loan money to a company or or even the government. You can loan money to New York City or California. That's called a municipal bond. And if you loan money for one year, let's say you loan money to the federal government. That's called a treasury. If you loan the money for one year, it's called a short term bond. If you loan it for 30 years to somebody, it's called a long term bond. If you loan it for 30 years to somebody, it's called a long-term bond. And so every single bond, it has a date when it's over. So if you loan a thousand dollars a 3% every year you get your 3% and when it's over, you get your thousand back too. So that's how

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where you still going on e-trade, Robinhood, where do you buy a bond from? Like how does that work? Well, if I was advising somebody your age, I would say don't buy bonds. Just buy stocks, diversified for the long run. It's gonna work out most likely, much, much, much better for your listeners.

So, stocks, stocks, stocks. I would not be buying bonds. Bonds are for thing, if you need to take money from your portfolio in the next 10 years, we need to have bonds, right? Because stock market can go down and stay down for a long time. But if you want to take money from your portfolio in the next 10 years, we need to have bonds, right? Because stock market can go down and stay down for a long time. But if you want to buy bonds, the best way for a listener to do it is through a bond fund.

So there are what are called exchange-traded funds or mutual fund companies like Vanguard and Fidelity, where you can go buy one thing that owns a whole bunch of bonds. So now you have a portfolio of loans rather than loaning money to one company. Just like, you might, let's say you have five brothers and sisters. One of them is probably really, really likely to pay you back. And one of them probably you would never expect to get paid back. So if you loan to all of them together, it's not going to kill you if one of them doesn't work out. That's kind of how a bond fund works out. It allows you to get diversified in a really simple way. But by recommendation to anybody that's far away from retirement, especially your listeners would be to own stocks.

Got it. I think that makes sense. And then another stupid question, S&P 500, it's like kind of like buying shares in a stock, right? So how do you purchase an S&P 500 index stock share? I don't even know what to call it. I don't think, so first of all, I don't think any of your questions are stupid. And this is probably, I do a podcast. This is one of the best ones I've ever done.

You're doing a great job. And I actually think you're thinking about sharing this with a lot of people. Thank you. That I think would really benefit from it. So you've, you want to buy Nike, Google, and so on. Those are stocks that you can just, it's very easy, right? You're buying one company, you get it. If you want to buy this in P500, there are companies that put together that group of stocks for you. So for example, I'll just give one example. There's a ticker symbol, SPY, S is in Sam, P is a Peter, Y is in Yes.

You can go buy that the way you would buy a stock and all of a sudden you own the 500 biggest companies in the country all put together in a basket for you. So they have those that are very broadly diversified, like that's the 500 which I'm recommending that somebody young getting started. If you wanted to gamble, you could go buy one that specializes in just airlines, for example. There are also exchange-treated funds that just take little tiny, tiny spaces as well. Very cool. I think that's great advice. When I was investing in stocks, I really just picked my own.

I made really good choices. I kind of went with the companies that I really like, like Amazon, Apple, Facebook. Those kind of companies that I already was a customer and thought, there's no way that these people are going to go down or go out of business. So I just put my chips on them and I did really well. But the S&P 500 is really smart. Because like you said, it basically averages out the 500 biggest companies in America. And unless you're betting that America's economy is going to completely tank in the future, you'll be in good shape, right? Yeah, and if it does completely tank in the S&P 100 Ghost of Zero, we've got some bigger problems. Yeah, everyone's going to be worried. Yeah,, everyone's going to be worried about their account.

That'll be, they're going to be worried about other things. Cool. So let's talk about overrated asset types. Everybody's really into real estate. People really like hedge funds. Could you talk to us about some of the asset types that you think might be a little bit overrated that we might want to stay away from? Well, I think real estate's a good investment because it's, you're just like a company, you're buying a building or a duplex or a department come, whatever, and you're collecting actual rent. So it's a real asset that pays real income. Historically, it doesn't do as well as the stock market does, but it's pretty close.

And you can buy it publicly traded so you can buy an exchange should fund that owns a bunch of real estate. And that's a way to get exposure to real estate. So I like real estate as an asset class. Good diversifier. I'm just not a fan of things that don't pay income. I'm not a fan of things like cryptocurrencies. I think if you're doing them, you've got to be doing them for fun. Or like cannabis startup companies, where there's just a ton of risk on laws and regulations changing, and is there gonna be a Walmart of cannabis that comes in and just destroys everybody?

Try not to get dragged into the most sexy, hot, new thing, and instead just focus on quality companies. We're pretty sure that these huge American companies like McDonald's and Chipotle and Walmart and Google, they're probably going to be here down the road. Those are the types of things I'm interested in investing in. Thank you for your advice. So I know that there's a lot of talk in terms of financial advisors and the fact that we got to be careful when we work with these people because they're actually a lot of the times not working in our best interest. I did find out today that a new regulation came out. It is called the regulation of best interest. Do you know anything about this new regulation and how it impacts brokers versus

financial advisors? Yeah, so I mean the space is an absolute mess in terms of trying to figure out what advisor has to act in your best interest and which doesn't. And I just to simplify it as best as I can, there's hundreds of thousands of advisors in America. So all of your listeners know somebody who's doing this, right? And so there's 330,000, 380,000 advisors. About 90% are brokers, and about 10% are independent advisors. By law, an independent advisor has to act in the best interest to their clients. A broker

does not need to do that all the time. So the broker can get paid what's called revenue sharing. They can recommend an investment, then collect money back from the company. They can maybe sell something on a commission. They can maybe sell something that their company owns where they maybe charge you a fee, but then they also get a fee in the fund because their company owns the fund. Those are all the conflicts that come

potentially with working with a broker. When you're with an independent advisor, the advisor by law has acted the client's best interest so it makes it a little bit easier to get at least advice that's in your best interest. So a lot of people look at the brokerage world and go well, they manage so much money. I feel safer there.

The independent advisors, they tend to manage smaller amounts of money, maybe 500 million or something like that. We're creating a planning as a firm that we manage a lot of money and we're in the independent space. So I think we check both boxes, but there are other firms that do too. I'd encourage your listeners that when they get serious about things, they want to have an advisor to look for somebody as an independent advisor, because just like a doctor, doctors

by law, accountants by law, lawyers by law have to act in their patients and client's best interest. It's not the case with all financial advisors. Try to get that box checked. That's really interesting. I feel like that's something that people like really have no idea about. So definitely pay attention to that. Make sure that the person who is advising you and your money is actually an independent financial advisor and not a broker. I think that's really important. And no offense to any brokers out there. I'm sure you're okay. Believe me, we just offended a lot of them.

I'm sure you're going to be. Oh, believe me, we just offended a lot of them. I'm sure we'll get some messages about that. So tell us about your personal investing style. How would you describe that? So I'm invested at the exact same custodians our clients are. So my money sits at places like Charles Schwab and TD Ameritrade. And then I buy the exact same investments our clients do. So that S&P 500 fund, I recommend it to your listeners.

That's a top holding of creative planning and it's my personal top holding. That's where most of my money is invested. And then I invest globally just like our clients do. So we own baskets of stocks all over the world. And I think that that's a big part of it. We also for people that are more affluent, we have what are called alternative investments

where you can own things like private equity, private lending, private real estate. Those are kind of the private version of public things. So there's publicly traded stocks, but you could also buy private companies. There's publicly traded bonds that you and I have talked about, but you could also do private lending where you're loading money to businesses. You could buy publicly traded real estate or you can go buy actual properties on your own. So for people that have five million or more, a lot of our clients are invested in things like those. And I'm invested in a lot of those things too,

alongside of them. Those are some big ball-in moves right there. So let's talk about private equity, just so people understand what that is. I know that public would be buying stocks and things like that. But how would you go about like private equity? I know this is, most of us aren't in this wheelhouse yet, but hopefully in the future.

And your listeners should not be in that wheelhouse and they should not be even thinking about buying it. I mean, I didn't own any alternative investments like that until being in this profession for 10 or 20 years. I mean, you have to. First of all, most people, you can't do it unless you have a net worth of 5 million or more, you can't do it unless you have a net worth of five million or more, you can't get into most of these things.

So the government has a law called the Qualified Purchaser Rule that you have to be worth a certain amount before they think you can go into these types of things. Because your money tends to be trapped for a long period of time. Some of them are available to people that have a million or more. But really, the building block is S&B 500 to 50,000

than other public investments, even in the millions. And then if you wanna get even a little bit further where you're buying things for your money's trap for a long time, they have some potential to make your portfolio perform better. Interesting. Okay, so that's way longer term. We'll concentrate on the S&P 500,

like you mentioned, and also playing around with our stocks if we try to learn more and have fun there. So great advice. Let's talk about saving money. I heard you on Tim Ferriss' podcast. He's one of my idols. I hope one day to be the female version of Tim Ferriss.

Thank you, Ron, your way. Thank you. So I heard you talking about how you have some clients that they save and save and save. They don't spend their money and then you told the story about how a guy passed away the day that he retired. And it was a big lesson in terms of like, you know, you kind of have to, you only live once. You also need to spend your money in addition

to investing it and saving it. Could you talk to us about your perspective on saving money and what's too little and too much when it comes to saving your money? Yeah, I'm actually not one of those people. You know, I see a lot of people say, oh, you have forego the coffee and save that money and you should save, save, save. I'm not a believer in that at all. We don't know how long God's given us, right? We don't know how

long we're going to be here. You know, some of us are going to die at 20. Some of us going to be 100 and the most of us in between, but we don't know. We don't come with a very clear expiration date. And so you see all these people save, save, safe, safe, safe, safe, and really deprive themselves a lot. And then they get to a certain age and they're gone. Or their spouse is gone, or one of them becomes disabled in a way where they can't continue to travel or do the things they wanted to do. You can't really go, I'm going to save, save, save, save, save, and then when I'm 65

I'm going to start having fun. You have to have fun on the journey. So you have to budget in enjoying yourself along the way. And so I think it's important to save early, because if you save early, you can save a smaller amount and accomplish your goals and then spend the difference. If you save later, you have to go, you know what? I'm not going to do anything else, because I've got to save

so much to catch up. One thing, your generation, your listeners have to go, you know what, I'm not gonna do anything else because I've got to save so much to catch up. One thing your generation, your listeners have figured out, I think better than any other generation is that experiences bring more happiness than things. Yeah. I think that if you look at the Boomer generation above me, not all of them, but as a group, they were consumers, right?

They bought a lot of things, more than any generation in history. And I'm kind of in between these generations, and you get down to your generation, your generation more than any in history is really value experiences. Now part of it is you have the luxury to enjoy experiences because the greatest generation a long time ago started this whole revolution that made it possible to enjoy experiences. But today your generation can choose between things and experiences, and they choose experiences and experiences. We know now from research,

results in a lot more happiness than owning things, which actually create more anxiety because you become responsible for them and all the stuff that goes with it. So I would encourage your listeners to not save every dollar either. Just budget a little bit to save every month to accomplish your goals.

If you have to scratch an itch, set aside a little bit to you know, you do Robin Hood or whatever, trade your stocks, but also budget fun, enjoy in the form of experiences and sometimes things that will make you happy too. So you can enjoy your life because there's no sense in not enjoying yourself from your 20s to your 60s because you might not get there, your spouse might not get there, or you might not get there in a

position to really enjoy yourself. So really take the time along the way to enjoy the journey. If you're thinking you're not going to be happy, you're going to just have to be happy, that is not how it works. You have to enjoy the hike, you have to enjoy the path. I love that. I think that's excellent advice. Everybody should take key to what Peter just said. Make sure that, you know, I know that so many of my listeners out there were all such hard workers. We worked so hard. Many of us have multiple jobs, side hustles,

spend some of your money, have some fun. I just bought a new BMW and I'm happy about it. Yeah. All right. Well, that's probably, that's pretty impressive. And I'm sure a lot of your listeners can't go out and do that today. But it's a great example of making sure you have fun

along the way. Yeah. OK, so the last question I ask, oh my guess, is what is your secret to profiting in life? Well, I would say it's not a money thing. I think that one of the things I've just learned from my family and friends, but also from my clients is really trying to be very intentional about what makes me happy. And then how can I do more of those things and less of everything else?

So most of us tend to do what's presented to us. You know, we get up and the world tells us what to do all day long. And I think that part of how I think I profit from life is I really try to say, no, I'm going to control my day. There's sort of things I have to do, but I really, really pay attention to, I want to spend as much time with my family as possible. I want to spend time with my best friends, not everybody I know, but my best friends as much as possible. And I want to have as many wonderful experiences as I possibly can. And so I tend to think a lot about that. And you think about things, then you start to make those things happen. And so I

think being very intentional about that, you extract more joy out of life. And I think that's, I think where I profit the most. Now, I would tell your listeners, it helps to have a job that gives you flexibility. Yeah. And where you can make a good living so that you can start to do some of those things. And I think that, you know, I've been fortunate enough to be in a career that allows for that too. That's amazing.

It's so true. You really need to prioritize your values. And like you said, you like to be in control of your life. I think that's great. So where can our listeners go to learn more about you and everything that you do? So you can follow me on Twitter at Peter Malook. I'm on LinkedIn. I don't think any of your listeners are on Facebook, but I'm there too.

But mainly Twitter and LinkedIn, I've got a new book coming out that you can preorder on Amazon called The Path. If you're a list there's more to check that out. There'll be an audio version too. And you can find out more about creative at CreativePlanning.com. And when does that book come out? October 13th.

OK, we'll have to have you come on again. So I can talk to you just about that book. I'd love to do that. All right, thank you, Peter. Thanks so much. It was such a pleasure to have you. That was a good time. Thank you.

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