The Investing for Beginners Podcast - Your Path to Financial Freedom

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts. Now. Dave:                                    00:33                     All folks, we’ll work up for beginners podcast. This is episode seven tonight. Andrew and I are going to answer a few. Yes, we got a couple of great ones and we thought there would be really interesting to talk about and they’re kind of relevant to what’s going on in the market as of today. So I’m going to go ahead and read the first question and then Andrew and I will talk a little bit about it. And then Andrew, read the second question and then we’ll talk a little bit about it so that you go ahead and start. Dave:                                    01:05                     So the first question, hello Andrew and Dave, thank you for doing the podcast and helping beginners were in the basic principles of investing and value investing. You guys have fueled my interest to learn more and they’ve given me more confidence when it comes to investing. I have a question for you too. I know Andrew has mentioned a past experience with fl. Hitting is trailing stop and he was forced to sell. He said that he underestimated how far fl would bottom out. I’ve experienced this with a few stocks that have been affected by the current trade war slash terrorists with China, so my question for you too is whether you have any strategy buying stocks that you feel are on a temporary downtrend. How long do you wait before you buy and how can you make the call when you think the stock’s won’t get anymore? Thanks, Josh. Andrew, why don’t you go ahead and answer that first and then I’ll throw in my two cents. Andrew:                              01:56           &nb...

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:36                     Welcome to podcast episode tonight. We’re going to have an interesting discussion. We’re going talk about several things tonight. So first off we’re going to talk a little about the market and the conditions that it’s in today, and so what we’re doing tonight is we’re recording on. We’re going to discuss the market on December 20th, 2018. Talk a little bit about the market conditions. Then we’re going to segue and talk about my buddy Warren Buffet and one of probably the best speeches you’re ever going to learn about in regards to investing. And then we have a listener question that Andrew wanted to discuss towards the end, and then we also have a special announcement that we’ll talk about at the end as well. So why don’t we go ahead and start off by talking about the market conditions. Andrew, why don’t you go ahead and tell us how good or how bad things are right now. Andrew:                              01:31                     Yeah, it’s really bad right now. Everybody’s freaking out and so I think it’s something we need to address and when I mean everybody, I mean the media, obviously there’s all these reasons for why, why it is basically, I don’t know how the rest of the year is going to end up what I’ve seen historically in December, even if there’s been a strong area you will generally see some selling off in December because people have this crazy idea that you should lock in losses in order to save on taxes. I’ll get like two to a deep into a tangent. That’s one of those stupid things that people use as this conventional wisdom, this idea that you should take a loss to save money on taxes, but so, so you’ll have some of this December selling off. You’ll see as a result of that and we have had so many other factors in play, but essentially where we closed at the end of 2017 last year with the S&P 500, we’re about 200 points under that this year as we record this December 20th.

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:34                     All right folks. Welcome to the Investing for Beginners podcast. This is episode 85. So tonight Andrew and I are going to talk about dividends, our favorite subject. Andrew over the weekend had some revelations on some thoughts on dividends and some metrics and he’s got some great blog posts that are going to be coming out here shortly that we’ll talk a lot about what we’re going to talk a little touching on tonight. So some of the metrics that we’re going to talk a little bit about. We’re going to be current yield, recent dividend growth, consecutive years of dividend growth and yield on cost. And I’m going to have Andrew go ahead and start us off and he’s going to be kind of the lead guy tonight and I’ll throw in my two cents on occasion when I feel it’s relevant. So Andrew, why don’t you go ahead and take us away. Andrew:                              01:21                     Alright, I’ll take the wheel. So by the way, by the time this goes live, those posts will be on the blog. So if you go on, they’re going to be a four post series and uh, you can go in depth and really get deep into the weeds so it’s actually useful and you can actually use it when you’re trying to look at dividend stocks. I figure we would talk about some of the ways that people currently trying to find good dividend then stocks. It’s a great primer for beginners and, and there’s some good metrics that we really haven’t touched on much and any of the episodes that we’ve recorded a and stuff you’ll see in financial websites when you’re sifting through dividend stocks, trying to find, you know, the ones that will really drip and do really well give you outsize returns for your portfolio. But you know, some of these metrics also have some things missing with them. And so that’s what all kind of get deeper into. Andrew:                 &nbs...

Return on Equity is a quick and easy way to discover how well a company turns its assets into equity. The Dupont analysis goes even further into discovering how the company grows its return on equity. Be it through leveraging debt or growing revenue. Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:35                     All right, folks, we’ll walk up to testing for beginning podcast. This is episode eighty-four tonight. Andrew and I are going to do a two-parter here. So what we’re gonna do is we’re going to talk about the Dupont analysis and the reason why we’re going to talk about this is we got a great question from Facebook that Andrew and I wanted to answer on air, but we wanted to talk you guys through what the Dupont analysis was so that when we answered the question and it kind of makes sense to you guys. So for those of you who are not familiar with Dupont analysis, all raise your hand. Okay? That’s everybody. All right, so this is something that is not talked about a lot and it’s a very interesting analysis and what it is in a nutshell is the breakdown of the return on equity. And Andrew, I’m going to have you talk a little bit about return on equity and then we can kind of talk a little bit about how this analysis kind of that. Andrew:                              01:31                     Yeah, sure. If you’re the asked me that question yesterday, I would’ve had my hand up to. So definitely not aware of it. I’m definitely aware of the return on equity. So that obviously helps a lot. We’ve turned. Oh, we’ve talked about return on equity before we had an episode in the archives or we talked about some of the efficiency ratios, return on assets, return on equity, so that episode might be a good supplement to this one and maybe if you listen to those back to back get a better understanding. I know it’s not that easy to learn these kinds of advanced topics through a podcast, but I think the more exposure you get to it, whether that’s through a podcast or through reading or just writing out some exercises, is trying to do them with some companies and stocks are out there. Then the more and more you can learn and kind of digest it. Andrew:                              02:20                     Like you said, Dave, Dupont analysis is a breakdown of the return on the equity and it essentially breaks it down into three parts. So why it’s called Dupont is because, um, there’s a, there’s a meeting, it’s not, it’s still public, it’s called Dupont, now it merged with Dow Chemicals and now it’s called Dow Dupont. But there were three gentlemen there and they came up, basically, they wanted to figure out how, how they kind of take the return on equity and take it to the...

  Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence, crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:36                     Welcome to Investing for Beginners podcast. This is episode eighty-three tonight. Andrew and I are going to take a few moments to answer some listener questions. We got some great questions recently and Andrew and I wanted to take a few moments to go over those with those with you guys. So without any further ado, I’m going to go ahead and read some questions in an Andrew’s gonna answer for us. So in Andrew’s going to be the area, answer man. Dave:                                    01:00                     So first question. Hi Andrew. My name is Luke. I am 24-year-old college student and I’m a new subscriber and an ebook purchaser. First off, I would like to thank you for all that you’ve taken the time to put it out there. I’ve learned so much from your podcast alone that I’m feeling so much more confidently already about what am doing with my money. The first stock that I purchased was Comcast maybe a month and a half ago. I’ve been contemplating selling to buy into positions, still listed as buys and your ego letter that made the purchase of this month to Comcast has been pretty steady since that held it, but I figured I’d ask for input. I don’t want to miss out on any opportunities. Thanks in advance for any advice. Luke. Andrew, what are your thoughts? Andrew:                              01:46                     So obviously like we like to say we can’t give personalized information or advice. I’m legally, but I can talk about kind of what I would do if I was in the shoes based on like the context a lot of investing in has to do with context. You have to understand that as you go along with your journey, the stock selections that you make, the investment decisions you make, the portfolio decisions that you make. Oftentimes those can be more important than actually the stocks you pick themselves up, but those are going to vary based on what your situation is, what your goals are, where your portfolio is. So some of the WHO’s just building a portfolio, you combine that with not combined, you can contrast that with somebody who already has a diversified portfolio and then you can contrast that with somebody who maybe is five years or less close to retirement. Andrew:                              02:44                     And that would be those with all three be situations where they will all have a different portfolio, uh, decision making ideas and that reflects itself in the stocks that you buy or sell. So for me, when I first started out, when I was first building my portfolio, and Luke,

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:33                     All right. Welcome to this podcast. This is episode 82 tonight. Andrew and I are going to do a case study into a GE. Been in the news recently for some not so great stuff and we’re going to talk a little bit about why investing principles are critical and GE is going to be a great illustration of that. Andrew came across a great article on Wall Street Journal recently and we will put a link to that in the show notes for you guys, but it talks a little bit about a gentleman that worked for GE for a long time and Andrew will give us a little more details on that. So Andrew, why don’t you tell us a little bit about the article. Andrew:                              01:14                     Sure, yeah. It was actually about several gentlemen, an article was written back earlier this year. There’s this one. He’s like 61 years old. He had basically was able to retire after working at GE for a thing. It was over for the years. He had a pension, 85,000 and you had company stock up more than $280,000, to give some backstory on GE, a huge, huge blue-chip company. I believe the evaluation used to be over $200,000,000,000 back in a, like the.com kind of boom-bust. They kinda had the type of evaluations that you saw just like with every other stock. And same with the financial crisis. However, recently things have been really bad there they went from 2016, they had share price hovering around 25, $30 a share through 2017. It was dropping and I believe by the end of 2017 was around a, it’s around seven a $7 and eighty cents per share. Andrew:                              02:28                     So the company has just really been struggling and the amount of loss in market value from this stock has just been horrendous. In this Wall Street Journal or the coal, they compare from a dollar standpoint, right? An of market value. Obviously when you compare the accompany like Enron or Lehman that went completely bankrupt, the percentage is not as much because obviously, GE is still alive today, but the actual market value loss was greater than a lot of some of the big name bankruptcy’s or just huge stock crashes that we’ve heard of in the past. Companies like Valiant and Ron DM, Lehman and Bear Sterns. GE has lost more market valued under all of those since 2015, so obviously it had to be a big stock with a lot of the market value at that happen. Really, really a sad, sad story and I think we can shed some light into it and really try to examine it and let’s try to learn lessons from it and hopefully that helps us understand that some things that we like to preach over and over again on the podcast are not just things that we say because they sound nice. Andrew:                             

[00:00] You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome the emotions by looking at the numbers. Your path to financial freedom starts now. [00:36] All right, folks, welcome to investing for beginners podcast. This is episode 81 tonight. We’re going to do something different for us tonight. We’re going to play you an audio clip and then we’re going to talk a little bit about it. So Andrew and I have talked a lot about how we choose companies, where we find her ideas and things of that nature. And tonight I thought we would go back and show you the original source where we’ve gotten our ideas from and so I’m going to have you listened to an audio clip from Charlie Munger and he’s going to talk about is four filters for choosing an investment. [01:09] We have to deal with things that we’re capable of understanding and then once we’re over that filter we have to have a business with some intrinsic characteristics that give it a durable competitive advantage and then of course we would vastly prefer a management in place with a lot of integrity and talent and finally, no matter how wonderful it is, it’s not worth an infinite price. So we have to have a price that makes sense and gives a margin of safety considering the natural vicissitudes of life. It’s a very simple set of ideas and the reason that our ideas have not spread faster is there to sample the professional classes, can’t justify their existence if that’s all I have to say. I mean it’s also obvious and so simple. What would they have to do with the rest of the semester? [02:14] Alright. So that was fascinating. Very interesting guy to listen to. Super smart and a little cranky. So it’s kind of fun at the end. They enter an hour chuckling about that earlier. It’s kind of comical, but. So Charlie being Charlie, so I thought we would break it down and talk a little bit about the different filters there and we can talk a little bit about those ideas and give you guys a little bit better idea of how to find companies to invest in. So filter number one, filter number one, it’s going to be develop an understanding of the business. Andrew, why don’t you chat a little bit about that and I’ll throw my two cents in on that. [02:55] Yeah, sure. So when I think about business, I think it should always be very, very simple. Business in general, uh, has a purpose. I think it gets lost a lot, especially in the stock market. People think I want to own this business, I want to buy it, I want to buy a piece of it and I want to sell it. Lay there for a higher price. And I think that’s so backwards. I think you buy a business because you want the profits from it. You want this business to make profits and you want to keep some of those profits and that...

  Announcer:                           00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers. Your path to financial freedom starts now. Dave:                  00:34                                    All right folks, Welcome to the Investing for  Beginners podcast. This is episode 80 tonight. We’re going to do something kind of different. A lot of fun. I think this is good. That’d be really interesting. So Andrew took a deep dive into where the 10 percent of returns of the s and p over the last 80 years comes from. And tonight we’re going to talk about the individual components that make up that 10 percent and kind of where it comes from. Dave:                                  01:00                     I thought this was really kind of fascinating and Andrew, a lot of great work getting this together. So I’m going to go ahead and turn it over to him and we’re going to chat a little bit about it. Andrew:                              01:10                     Yeah, thanks Dave. I guess that’s a good disclaimer, right? That A. I did a lot of work and be speculation on my part. Right. Fair enough. Idea and running with it. Yeah. Fair enough. So there’s no academic sources for this other than Google, so don’t come at me with their pitch forks, but I was always, you know, I’m curious. Andrew:                              01:34                     It’s something you hear all the time, right? People talk about what’s the average return I can expect from the stock market and it’s been around 10 percent a year for over 80 years, like they’ve mentioned. And you know, you hear a 10 percent, you hear seven percent and seven percent is just the return with inflation taken out because inflation is also been pretty constant, pretty consistent around three percent a year. So it makes for a good kind of estimation, right? If you’re thinking about where are my finances going to go in the future, how am I going to plan and what’s like a reasonable, what are reasonable expectations? You know, I think to think that you could be an average person and become more rich than Jeff Bezos just because you’re going to be a stock market genius. I think that’s obviously absurd, but at the same time it’s not absurd to think that over a long enough time period with consistent deposits and even decent or just average returns from the stock market that you can make a quite a bit of a fortune where it can change your life over the very long term. Andrew:                              02:47                     And so if we can kind of ...

  Announcer:                        00:00                     You’re tuned in to the investing for beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom begins now. Dave:                                    00:36                     Welcome to Investing for Beginners podcast. This is episode 79 tonight. Andrew and I back by popular demand are going to talk about dollar cost averaging. Talked a lot about this before, but we have gotten a lot of questions about it recently and we thought maybe we would dedicate an episode to it so we could help you guys a little learn bit more about this wonderful strategy that you could use to help with your investing. So Andrew, why don’t you talk a little bit about this and we’ll just kind of go back and forth. Dave:                                    01:06                     Yeah, sure. So most basic definition of dollar cost averaging as you set aside a certain amount each month and you’re going to put that into the stock market. So why you want to do that? A, it builds a habit B. It’s something that happens kind of in the background and so you’re structuring not only your investing but your personal finances to, to work in the background without any sort of input needed from you, especially if you can do like an auto auto draft or an auto transfer from, from a checking account or something and you can just be making progress with your investing no matter what happens with the market and no mother, no matter what you’re doing with your personal situation. The rich dad poor. That mantra was always pay yourself first. And so by having a dollar cost averaging strategy in place, that’s a way you can do it. Dave:                                    02:05                     And a way that, again, you can make progress and start to really make your money compound over time. Everybody wishes that they can get into the market and time it perfectly and it looks so easy in hindsight. Um, and as we’re definitely seeing now as we’re recording this, at the end of October 2018, and that’s been a really rough month for the stock market. A lot of people kind of yelling at each other. If you go on twitter, the presidency that people and people are yelling at the president, uh, and there’s just a lot going on and if this, so this is like one of the best times to have a strategy, adopt something like a dollar cost averaging plan in place because it’s when things are, is when you want it the most is because it’s fine. It can also be the most beneficial to you over the long term. Dave:                                    03:08                     Yeah, I totally agree. And the thing that I love about what we’re talking about tonight is with the market being so volatile over the last month or so,

Announcer:                           00:00                     You’re tuned in to the investing for beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew and Dave, to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now. Dave:                                    00:35                     All right, folks, welcome to investing for beginners episode 79 tonight. Andrew and I are going to talk about moats, competitive, both business advantages, all the things you look for in a great business, and we’re going to talk a little bit about some of the ins and outs of those as well as some things to look out for and how you can find great companies with moats. So Andrew, why don’t you go ahead and start us off and talk a little bit about moats. Andrew:                              01:00                     Yeah, let’s do it. Shout out to Warren Buffett, right? He kind of came up with this idea. What’s a moat, other than the margin of safety. I don’t know if they use that for the margin of safety metaphor also, but you know, uh, I’m assuming most of you don’t have castles and don’t have a moat. So we’ll explain that real quick. Uh, if you had a castle, your try the defendant against attackers who might be pounding at your walls. So if you build a moat and you fill it with water, they’re going to have to, although I guess swim across and you can pick them off. Andrew:                              01:35                     And so that helps you stay competitive, right? It will help a business stay in business. And so it only makes sense if you can find the businesses that are the most competitive, those will tend to have the best results. And so they all tend to take up more market share, be able to get more profits, and that in turn leads to more returns for the investors. So buffets talked about different types of Moats, uh, some of the ones he looks for. There are a couple of other ones I think we can kind of throw in the mix there, and I’m sure he looks at that stuff to a first on the list. Let’s talk about pricing power. So the kind of logic behind this one is when you have a business that you’re able to increase the price without the, without losing sales, then you have pricing power. And that’s a very, very strong moat. Andrew:                              02:36                     Easy example, simple example of this, was one of Buffett’s first and most successful investments that the city ever had. It was, I don’t know if it was called the Washington Post or fills a different, it was, it was a publishing company and because they had distribution to whatever cities they were servicing, they, they essentially had to, had a monopoly on the, on those select areas. And so because they were the only newspaper in town, they were able to raise their prices, and people will continue buying them.

  Dave:                                    00:35                     Welcome to episode 77 tonight. Andrew and I are going to talk about a stock selling theory. Three strikes. You’re out. Andrew has some thoughts on selling a stock and you wanted to share them with you, so we’re going to go ahead and start us off. Andrew, why don’t you tell us your ideas. Andrew:                              00:53                     Should I really? Does anybody want to hear them? I think they do. Okay. I will. I’m God this cold email today. I want us to share it because it’s inspiring. A email from Renee says, Dave:                                    01:08                     I just got into investing maybe 10 days ago and they’re already listened to around 10 podcast. Keep up the good work. Dave:                                    01:14                     Those are the kinds of things I love to hear. It fires me up a 10 day brand new investor. That might be. That might break our record as far as recorded record of being public. I don’t know if some of these beaten that. That’s pretty cool. It is. So keep those coming. Uh, that fires me up to get me a recording on an episode like today. Andrew:                              01:40                     But you know, we want to talk about selling a. We talked previously in episode 65 a. If you go back and listen to the archives, I talked about how my approach evolved a bit. When I went back, I looked back at the history of some of the buys and sells I made through the Eli, their portfolio and Ivy. I used to break up the portfolio into two portions. I had the regular portion and the dividend fortress portion. I still have those two sections kinda a segregated off, but I had trailing stops on the regular portion. And in episode 65 I talked about why I no longer use trailing stops. Andrew:                              02:33                     Kind of a cliff notes on that was I found that because the way I picked stocks is very, very conservative, very, very much so. Margin of safety, emphasis on the safety. A lot of these companies with strong balance sheets, maybe not explosive growth that leads the market, but Kinda just plugs along slowly but surely and quietly creating profits and with them is that grow over time and trading at prices that make them not popular. Right? So already by that, by that kind of definition, they’re not going to have momentum at least a start. And so what I found, looking back at some of the stock picks I had, I had several where if I would have not, you know, if I would have not applied the trailing stop if I were the let the stock run, than I would have actually had much higher performance. And that was a pretty consistent trend I noticed through several years of data. So, uh, coming up on, oh,

Welcome to Investing for Beginners pocket and this is episode 76. Tonight Andrew and I are going to do something a little different for us, we’re going to talk about some fun predictions. We’re going to go off the radar and off the range a little bit and talk about some upcoming predictions we think might happen and so we can give you an idea of what kind of great prognosticators we are now. Well let’s talk a little bit about some stock market stuff maybe a baseball thing or two and just kind of have a little fun so Andrew why don’t you go ahead and start us off a little chat a little bit. Andrew: all right you mentioned baseball obviously we’re recording this and there’s a game on so before we get into the stock market stuff I want to know who do you think is going to win the World Series this year? We have to give a context if you’re listening this in the future right now there’s the Dodgers the Braves the Rockies and Milwaukee yes that that’s kind of crazy that’s./ I don’t remember the last time they were in the playoffs with I don’t know where that is just kidding killing and then I’m al there’s Boston New York that’s turned out to be really cool series they were always big rivals. And you’ll have to help me on the other two al teams us the Astros and the Indians that’s right of course the Astros yeah so he’s going to take it it’s going to be Astros again I’m sorry to say I know that funds will in a year but yeah I think it’s I think it might come down to the Astros and the Dodgers and World Series again and I think the Astros will take it again. Andrew: I mean the team didn’t change it all right. Dave: so not a lot but they did pick up a couple new pitchers that helped them huge Gerrit Cole has been monstrous and Verlander has been amazing all season and yeah they got some they got their bullpens much improved and they’re good team they’re really good team. Andrew: well I want I wonder what kind of pitcher Cole is because if he doesn’t pitch well when the balls are juiced knock knocking clean. they did this thing where I don’t know last year those record for most home runs hit in the World Series ever saw their speculation and in the conspiracy theorists area that the balls are juiced and it just so happened that certain pitches don’t do well when the balls are made different with different characteristics. And surprise some of the pictures that the Dodger and on the Dodgers I didn’t do well have pitches that would be affected by it so I don’t know what kind of picture pitcher he is I’m sure you probably know that’s something random I I’m sure like a baseball expert when now. I don’t know obviously I’m big on Dodgers I think this is our year I think our righty power is really good and we have a couple key pieces we didn’t have last year it’s. Dave: very true yeah it’s I didn’t say it to be easy but I think it’ll be fun to watch for sure Dodgers are playing great  at the end of the season so it’s could be a lot of fun. Although I will say that the Yankees I think are going to be tough if they get by Boston which I think they probably can that will be a that will be a very fun series between the Astros new Yankees because they he’s got a lot of power it’s just crazy this was juggling Sanchez and Stanton oh man. Andrew: it’s good for baseball when the Yankees are on top it is it is for yep America I guess yeah I get flashbacks of George Bush yes good for baseball good for America yep. Speaking of America and the bull market we are in do you what do you think about the bull market moving forward that’s kind of the thing that whenever you turn on CNBC or any sort of media outlet they always ki...

Welcome to Investing for Beginners podcast this is episode 75. Tonight Andrew and I are going to answer some listener questions. We got some great questions in the last few weeks and we wanted to take a few minutes to go ahead and answer those on the air for you guys. So Andrew why don’t you go ahead and start us off there big guy. Andrew: all right sounds good. I’m going to start us off with wasn’t the question but it was a cool comment and it’s great to hear and hopefully some of you guys can relate to where she was where she is now give you some inspiration so this is from Shannon she says: Hi Andrew, just wanted to say thank you so much for the podcast I was left feeling pretty powerless following my most recent meeting with my financial adviser who handles my retirement account. So I vowed to learn more about investments and that is when I came across your podcast I’ve learned so much and started my own account in addition to my retirement account and I’m having so much fun. I love that it is a constant and endless learning process I am surprised at how many of my female friends are in the same position I am and really know nothing about where their money is going. Anyways I just wanted to say thanks for giving me some power back over my money thanks Shannon That’s really cool to hear and hopefully other people who might be struggling or feeling hopeless can find the inspiration to try to learn something and get yourself from feeling powerless to feeling excited.  This next question here is from Jake he says Hi I’ve been listening to your podcast for a few weeks and I’m about halfway through the episodes I’ve heard you talk about buying US companies only but I’m a little unclear if you mean US companies only our companies are they’re traded the US markets. Gives a good example here he says I’ve been looking at ticker symbol SHI traded on the NYSE the company seems to be a great value based on most of the parameters I have checked but I’m a little hesitant given that it is a Chinese company. My question is should I keep my scope to US companies only or companies other traded in the US markets any input would be great I really enjoy the content and I’m excited about getting into the market and building some wealth for the future take care Jake. So when I talk about buying US stocks only I definitely am talking about those which are not in the situation as such I is so a lot of international stocks will trade on the New York Stock Exchange and that can be an option for you. I personally only invest in US stocks and I’ve talked about that before you can definitely look that up in the archives. Taxes being a big reason and the other big reason is the SEC will not audit any of the financials for companies if they’re from a different country. Even though they do trade on the NYSE they won’t report the same as US companies will and so those tend to be more stringent and restrictive and better chance that oversight that there’s going to be less errors for the financials. and then and so you’re hopefully getting more accurate picture so for example if you go on SEC.gov which is where you look up annual reports 10k is 10 Q’s quarterly reports. You’ll see that SHI doesn’t have any 10 KS all they have are these 6 KS and 20 FS which I’m not too sure about those I don’t have any expertise in kind of investing with those. The other big thing is when you have the reason why I’m so confident and it’s not just because I’m like extremely patriotic right. It’s also because of the fact that the US makes up the majority of the market cap of the world so the US stock market is very huge even though you hear stories about other stock markets and a lot of growth obviously in China and stuff but when you ...

Welcome to Investing for Beginners podcast this episode 74. Tonight we’re going to talk about potential investor problems when examining the history of the market. Andrew has been on a bit of a history bent lately and I’m a big fan of history and I love learning more stuff about what has happened in the past. Because that can always help us in the future when we make decisions those who fail to learn from the past are bound to fail in the future. So go ahead and starting off Andrew why don’t you go ahead and talk up to us a little bit about short time periods are valueless. Andrew: yeah so I think this is a nice kind of follow-up to last week’s because we kind of examines the same type of thing right. a lot of studies academic studies about the stock market are looking at what happened in the past and let’s see if we can find a trend a correlation and maybe use that to have better success in the future. And so we kind of focus in on like the acted the academic part of the particular problems that can arise when you’re looking at particular studies and then how they’re doing that. Now we can kind of look also how people like you and I the average investor might do kind of similar things and this is particularly common with beginners if you’re not putting thought into this and how it can affect what kind of decisions you’re making then  you might not even realize you’re making these kinds of mistakes. I mentioned last week I’m reading this book called bull it’s talking about the history of some of the bull markets right now I’m focused on the bull market of the 90s. And it’s cool to like see the book puts yourself in the shoes of some of these people as they were living it in real time. You had and I’m blanking on the name of this I believe she was a she was an analyst. basically she this was you have to put yourself again in the 90s you had the internet really kind of coming into the mainstream and it was really changing the whole business world and so she really kind of tied herself to technology she was an analyst who really covered technology stocks. And as adds a lot of these IPOs a lot of investment bankers are making huge sums I think there was one guy it said something where he made like 300 million dollars a year and he was kind of like a leader of one of the companies like a Morgan Stanley or Goldman Sachs or their these investment banks they’re helping these small companies go public obviously getting the Commission’s off of that. And so a lot of money was being made and a lot of people like this analysts were good at picking out the winners and really kind of bringing the stocks that were going from IPO to into the market and then having like relative success in the business world which would translate to massive success on Wall Street particularly in this time period because there’s just so much money going around. And you had the Fed cutting interest rates just flooding the market with liquidity so a lot of different factors that were leading up to everything that you saw in the 90s and that finally bubbled up and crashed in 2000-2001. But this analyst became like a great expert and she became so bullish with technology stocks she produced this like three hundred page report and the book said that a six or eight page report at  on Wall Street was considered very extensive. So she went crazy with this and I think it said something about the future of the Internet or she was essentially covering like the Internet and new tech so she became very bullish. And became somewhat of a darling to the rest of the investment community and the rest of the mainstream. And so when she was bullish a lot of people trusted her and she was very good at what she did a lot of people trusted her and went bullish on a lot of these stocks and made money for ...

Welcome to Investing for Beginners podcast, this is episode 73. Tonight Andrew and I are going to talk about Wall Street study pitfalls, this is based on a book that Andrew is a big fan of by James O’Shaughnessy and we’re going to talk a little bit about some of the potential pitfalls that you may run into. We’re going to start off by talking about data mining and I think the easiest way that I could explain this was a metaphor that James used in the book and he talked about if you’re in Grand Central Station which is obviously a very large place with lots and lots of people around. If you find a specific area that has let’s say you go into one too but where one of the trains is running and you see 75 percent of the people there are blonde then you would be potentially thinking that hey everybody in Grand Central Station is 75 percent blonde and that’s not actually the case. It just happens to be at that particular time at that particular place that you find that and so the data mining is something that if you’re doing Studies on different Wall Street things you different factors of looking for let’s say you want to buy stocks on a Wednesday every 16th month well that’s not necessarily that’s data mining because you feel like you have to only buy stocks on a Wednesday on the 16th of the month. And that’s it could lead to a lot of pitfalls and okay that means dude but I mean. Andrew: that’s now uh that’s part of I think having tests that look at history you have to be very careful I think when it comes to studies in general and I’m sure you can extrapolate this to things outside of Wall Street and it’s very easy to take facts and weaponize them and make them sound like basically a way to advance your own agenda and you can manipulate statistics to do that. And so as investors who are looking at studies we like to talk about all the time on this podcast about how let’s learn from history.  History might not repeat it might look different every single time but we know that there are some core things are true history mostly rhymes. We have bear markets who have bull markets we have prosperity we have times where things tighten up credit expands creditor contracts these are things that we’ve observed over time and it’s recorded in written history. and so we can kind of see that this is how markets tend to work this is how human behavior tends to work and we can come up with a lot of different lessons from how this stuff all kind of works and we can use it in our investing. Something like data mining though is definitely a huge pitfall to be aware of. like you know I love that Grand Central Station metaphor if I were going let’s say I was a tourist to America and the first tourist thing I did was I went to an NBA game right and then if I just thought that the players on the court were a representative of the entire United States I would think everybody’s above six five. And you can do that and see that through a lot of different studies when it comes to Wall Street and you have to be really careful and look with a watchful eye. That hey there’s going to be things that you’re going to find out and this is true whether it’s a Wall Street study whether it’s something you’re kind of embarking on your own. And it’s very easy we talked to him a previous episode about biases and how it’s very easy for certain things to kind of skew your understanding of how the market really works based on your own skewed perception. We all view the world through our own unique lens and so it’s our own experiences and our own things and lessons we’ve learned that is tainting whatever conclusions were coming up with. It’s very important to have a skeptical eye with that and so on the one hand how we always talk about ...