Can we count on AVUV high performance in the future?
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Well, welcome back. It's great to have you back with us and I am always honor when the the dark and Chris h join me for the podcast and typically when we do the podcast and these guys join me, we also do uh a youtube peace. So it's it's it's wonderful to reach out to people who enjoy getting their information uh, through the videos.

Are, by the way, if this is your first time here, uh, i'm paul mary man and I started this foundation in two thousand and twelve with a commitment to educating investors to teach them how to take Better care of their investments, primarily on to do IT yourself. This is that the goal. On the other hand, if we could use some information and you have an adviser and because of this information, you are able to maybe ask a few questions that might lead to a slightly different portfolio. We're happy for that as well. And with me, if you don't know Chris Peterson, he's our director of research uh and the retired engineer, uh, marketing development, how many titles do you have? How many how many lifetimes have .

you had this? I i've been a professional photographer, but mostly I was a product manager. So that's that's a IT was a great fun career.

And then when I got ready to retire, I realized I needed to live off my investment and that I need needed to learn how to do that Better. And so I called you and volunteered to to try and help. And it's LED to a much more comfortable, much more knowledgeable retirement.

And and I should point out you, you're too humble. You mentioned that you fan this, that that you created this foundation. You did this all with your own money.

There is no conflict of interest. You don't, I earn money for anybody, or ask anybody for money, or work for money. You do this out of the goodness of your heart, and just with a desire to help people. And that was part of what attracted me to join .

you and in for thank you. That is very kind, just for full disclosure. Uh, we actually do have people who donate money to us and we're thankful for that. But, but, but most, yes, most the money is come out of my wife in my pocket and uh but what we do have A A lot of a very kind contributors. Uh and and there you you an engineer manager, a most severe career.

I I was an engineer for all of my working life career, essentially um started out as a system engineer. I started out as an astrobotic amaist that's one who works with our mechanics um became a system engineer later on and then retired and. Thought to you about come on and trying to help pick up some slack when when one of the people had who had been supporting had believed the the foundation for other reasons. And so I was years ago, yeah.

amazing. But you guys you guys have done an amazing job of helping uh our folks and uh IT takes a lot more than money to make to make this work. And you guys i've made IT work and I really uh I do appreciate now today is kind of A Q N A day um and and i've i've got A A A A bunch of topic。 The first one that i'd like to cover has to do with an amazing day.

Uh, i'm not gna get into politics, but we had a political event that LED to the stock market deciding uh to go up um three, four, five, six, seven percent the ending on what investments that you had. And I just opened the door for me to look inside some of the investments that we recommend and of course were big and small cat value as a waited to to add some juice to your portfolio. And I am to share a few numbers, and then I at turn to Chris and find out how meaningful these numbers are.

Now if we just talk about that one day, that would be november six, A V, U, V about a smoke up value was up seven point two percent. Now another fund that is managed a very similar fashion, managed by dimensional, was up seven percent. And that's interesting because if you look at these two funds, when they've both been in existence, their returns have been very close.

Because the people who started advances, who started the advantage funds used to be at dimension al funds. So it's not shocking that these two funds have produced very similar returns on that one day. But if you wanted to be in the hot dog of all amongst the funds that we attract in that arena, A V B R, that's a one guard.

Uh, small cap, by the way, this is a small cap value fund. D, that has larger companies. On average, IT was up over nine percent in one day, and then V, I O, V, up five point eight and V, T, W, V and that's another language.

Small cap and uh, up six point three. So uh, I am sure that are the owners of all of those funds were happy to own them on that on that single day. They probably haven't been all that happy every day over the last years because value has lagged growth generally.

But here's what I want to dig in to. I wanted dig into the fact that for the last five years, A V U V has compounded at fourteen point five percent V I O V at nine point nine, V B R at eleven point nine, V T W V at nine point eight. So, uh, A V U V has way, uh, outperformed over this particular vibor period.

If you actually put that money to work and you look at the morning star graphs, IT would show that you be up about ninety three percent in A V, U, V, and as little as forty two percent at A V T, W, V. And then the other two are in between. So here's what i'm when I say i'm worried about IT or that i'm concerned about IT, I just want to know is IT legitimate that A V U V could in fact continue to outperform? Maybe, but not this much that, that would be unlikely because that's a huge difference. But but by enough that I could be life changing for some people. So Chris, you have turned these kinds of investments inside out between morning star and and what's the other source that you use so.

so much visualize?

Yes, of course, what do you know what can you tell us about these funds that would lead us to believe that this is either just of a fluke, uh, or there's some meat here that the we, we, we, we want to have on the bones of our portfolio?

Well, is you as investors in these smaller out of favour companies, what we're looking for is their future earnings growth. We we're looking for them to thrive and grow. And and when we buy a fund that includes them, we're looking for stable exposure to companies of smaller size, companies of A A greater discount.

And we want that to be stable over time. And if IT is stable over time, we would expect that there will be periods of time when those attributes are worth something more than just exposure to the market at large, and i'll be times when they're not. And hopefully, IT averages out of the the long hall to look like the past.

And the past says that those smaller companies and those value companies delivered higher returns with a little bit more volatility. And so it's interesting you started all of this with a discussion of one day of return because we'd all agree one day returns is important. But what that one day returns probably says is that people believe that, that the future, based on the information that we've gained in the last few days, is more favorable to companies that are small companies that are out of favor.

And you know, we're not pundits, but pundits on the news would tell you why. They would say, oh, it's because there's gonna less regulation and then a deregulated environment that favors these startups that are trying to do innovative things or the tax regime will be Better or what whatever. And and the truth is they don't know either, they're just guessing.

But the consensus of the market yesterday was obviously that these companies are going to do Better, that these the companies with these attributes are going to have Better earnings growth and that, that earnings growth may be less discounted because of interest rates and inflation than IT than IT was the day before. So so that's that's the belief of the market. Now you asked, is IT reasonable to expect that A V, U, V advantage is going to continue into the future? And that depends on two things.

That depends on whether the fund is managed in a systematic way so that it's exposure to these attributes that give us higher expected returns to stable. And the answer to that question is generally yes. You can go in to portfolio of visualizer and you can run a regression analysis on the and you can look at the residuals. Um it's basically a chart that shows you how close the model is to modeling the returns and how much exposure you get to each of these attributes over time and it's very stable.

You can also just do a shortcut and go look at the r square number, which says how good is the model? Yeah did the model predict returns pretty accurately for when they came in based on what the market was doing in the small part of the market, in the value part of the market? And I think the last time I looked IT was ninety eight percent, which is pretty high.

So I think it's reasonable to expect that A V U V will continue to give you exposure to these attributes in the way that it's done in the past. And that has been advantaged exposure over V B R, over vt, wv, IT. It's why it's my best in class recommendation is that IT gives you more of the the sauce, the flavor under the hood that's going to spice your portfolio.

Um now whether that means next year it's gna perform al or not though, depends on whether those attributes are being rewarded at that point in time. And and we hoped that over the long term, over five years, ten years, fifteen years, that those attributes will look like they did in the past. And that means that they do come in and out of favor, but that on average, there to our advantage.

So i'm optimistic. I'm optimistic about A V, A V, V. I think it's gonna continue to be a good best in class choice for us. The d fa funds you mentioned are not far back. They're actually neck neck.

So I am in terms of uh, the best in class choices is one of the things I aspire to do next year to show not just which one's best but how far apart. There some kind of a relative rankings s so the people can see because um the two are much of a much as they're actually very close to one another. And if somebody he's already in one and has to realize profit and gains to switch to another one, IT probably doesn't make sense. If they're close, if there's a big difference, then IT may make sense. That's that's what I hope to be able to reflect in the update.

You know talk a little bit, Chris, about about this for quality. You had A A slightly different way of of turn the turn about quality, but the difference in quality of the avoid companies that they hold and for example, the banker W T W V uh and I think V I O V are both basically rustle two thousand based indexes. What were those differences between the Russell two thousand and advantage that gave a vas theoretically an upper hand?

Well regarding quality that the um the specific attribute that shows up in the regressions the this is the former french fires factor regressions is rich minus week so so these are companies with advantage financials and the the rich minus weak advantage or the quality advantage of you will was ten or twenty basis points ten or twenty percent of that attribute or that that factor um when you compared these funds.

And so that that means that you have an engine that's firing on more cylinders. You know it's it's just the the more broadly, you are exposed to a wider range of these attributes, these factors, as the academics call them in your portfolio, the more consistently those that portfolio will perform because each of these attributes tends to come in and out of favorite different points in time. And and the more you get also the higher you are expected return. So so there's a number of reasons why vv should do Better. But again, in any given year, me you don't know, right?

So I know looking at warning in the star that, uh, A V U V has a lower P E racial average P E racial. I notice the morning star that the Price to book racial is lower uh for advantage uh the size is not too different actually uh with A V U V V I O V and V T W V. So um it's not a size factor difference that has has driven this is a this difference in return.

So um so appreciate all that you just said. I I will add something that might be a an an advantage in terms of knowledge. Uh I don't know that i've read this before on one of our podcast but um um fell that works out of all this.

So i've known for at twenty plus years I knew and when he worked at D F, A, A, and his father was actually responsible for helping our firm uh become A D F A adviser in one thousand nine ninety four. so. Uh, I know this Young man well, and I have great regard for his commitment to doing the right thing, but he provided this.

He says, our strategies, this is from somebody works at A V, U, V. Our strategies are daily managed, daily managed, by the way, a to maintain exposure to the target universe. The we are designed to provide exposure to the top one five percent of the small cap universe that are highest in the joint ranking of profitability and modified book to Price.

Essentially, we are looking to own the most profitable business that are is also trading at the that are also trading at the low valuation. We are less concerned about what industry the companies are in. We just want businesses with great profitability at a good Price.

With that said, we have some constraint to prevent significant sector concentration. We have top one cup of thirty percent uh in a sector. We also have a relative cap of ten percent uh of anything that would bigger than ten percent of the small cap universe.

We don't buy rates because we view reads as a distinct asset class and we want clients to be able to choose rates if they if they want real state and how much they want. We he mentions that they have a global reach strategy. We also don't buy utilities in the average value strategies because they tend to be highly regulated, which has a negative effect on long term expected return.

These exclusions will also impact relative sector waitings. So um you mentioned Grace looking for a system and what is what what confuses some people is they think that a votis is looking for the best companies well and where you measure the management and you measure the the financials and all of those things。 And basically what they're looking for is the company with good financials that's under prised. Would you make IT any more complex than that?

Well, under IT, looking in a small the small part of the market where that there are a lot of companies, it's you know it's not like the S M P five hundred where you got five hundred companies that everybody on the plane is looking at them. When you get down into the small part of the market, you have thousands of companies that are less well examined.

And you know in the fact that they they do this so systematically, they do IT very systematically, means that in many respects, they are liking index. Because in and people do sometimes trip over this and say, well vantis active, they're not passive while the esn people five hundred is decided by a committee that's active as well, right? So the fact that they don't show to the world the trades that they're gonna do before they trade them should be an advantage to the investors in the fund.

The that the fact they do this systematically is why when you look at the exposure to the factors over time, it's stable. There's nobody behind the curtain second guessing and saying, you know, I think small is out of favorite this month. We're gonna a little bigger and you know, value is it's the wrong time.

We're going to sit in cash for a while. And you know quality, maybe that i'll be next month. There's nobody doing that. If there were, IT would show up in the numbers.

And the fact that IT doesn't show up in the numbers tells me that this is essentially an index fund that's private index. It's run behind the scene s and that's why it's twenty five basis points. If there were somebody even doing a whole bunch of sophistic ted black magic behind the scenes, there would be a lot more than twenty five basis points of expense. So yeah well .

and and the the the fact that they look at the all of their companies daily, they run this improve daily.

And so if you compare IT to the russia two thousand, where once a year they going and correct to make things right, uh, and I von is, why would we want to way the year if something is is fAiling, by whatever definitely I were you defined fAiling, why let IT go for a year or nine months or six months? Do IT now? And that is a part of of what they do.

And because they are an etf, they are turn over over appears to be very, very low at seven percent. Uh, and I I think that is just because of the nature of how how uh etf work. Uh, if they were a traditional mutual fund, I think they would they would be considered to have a lot more um turn over there. You certainly welcome the way in here if you got anything on your mind a question .

that pops up to you yeah I think this this might be a uh a time to mention the fact that that um a lot of the a lot of these moke APP value or small funds or or etf or indexes, uh they have they have their own rules for what determines membership or determines eligibility for membership in the class that they are attempting to represent. And those rules are different from one fun to another. And one set of rules is what you just mention.

There are others that other funds and embassies use that make their component different. So a small cap value fund a is different that a small cap value on b or c or d or anything else. And so um this is where Chris work has such value sort speak. Instead he he goes in and he looks at what the performance is for different funds, not just what the name of the fund is down. And so I think that's that's maybe an important point that people should realize is that just because something is named small or large or bend or value or growth IT doesn't mean that it's the same as everything else that might or might not have that name in a.

And by the way, I I looked at D F A uh etf song value and advances and I looked at the twenty five largest hole means now they're not gonna have a whole bunch of anything because they've got between seven hundred and almost I take a thousand companies and so they're gona have small percentages of a whole bunch companies.

But uh, the fact that that I looked IT up at the biggest twenty five companies in each and there wasn't I don't think there was any duplication um IT makes me think because D F A is so academic, drive academically driven and avoid ces academically driven. A uh, I think only in both of those funds is is is okay. Uh, because what is going to give you is two funds that are trying to do very similar things, but but you're going to have more diversification by owning both of those.

And in looking at the returns of these two funds since the D F A, so we have we've had the the D F A mutual fund for small cap value around since ninety three. So there's there's plenty of history A D F A managing small cap value. Uh, I was so when we look at their fund that spent around during the same period of time that of on dust has been around, the returns are very similar.

Now I can speak to all of those things that Christal look at. And maybe at some point when we after the first of the year when Christmas though is analysis, maybe he'll even take the time to share with us the subtle differences between the D, F, A product and the advantage product. I think that would be A A good lesson uh, for for us all. And I think it's probably something he does anyway. Is that fair to say that you're going to do that analysis when you decide which one you're gna pick?

yes. Just a question of how how much work we share and you know how much how much we can do without confusing people you have there .

is a problem around here is that that I am response. I'm a charge of confused in her, our students act .

of exclusion.

Am I doing, by the way? yeah. Okay, let's let's take a really easy question here.

So uh, J, L, columns recommends we put all our equity investments in the vanguard total market index. And warm buffer says the same thing about the S P. Five hundred.

If you had to choose one, which one would you recommend? end. What do you say, guys?

Well, i'll go first and then risk can correct me. Um I would I put IT in V T. I because it's more diversified than the S P.

Five hundred. right. If you want to make a bet that maybe the additional volatility, would I off then do the S P five one.

But why do you think that the S M. P five hundred will have more voluntier ity?

It's more concentrated, right? It's got your stocks probably it's in it's in a specific asset class, large pack blend more less um as opposed to V T I, which has more made more stocks in and um in more asset classes. Although the waiting in the other other classes is probably not that great, but that's .

my two sense yeah no.

that's it's .

probably what .

it'll make you is too sense.

Grace.

Well, historically, the difference in the returns between the S, P, five hundred and V, T, I are very small because the V, T, I is dominated by the large caps being accepted fun. The rest of the rest of the other three, four thousand stocks that are in there just don't move things very much because are not very big in comparison. So with a return standpoint, there's not much of a difference between the two. And um I think at a behavioral al standpoint, there is an advantage or owning V T I and that you own a little bit of almost all the companies there are public that you do business with.

And that may be from an educational and a psychological standpoint useful because as Benjamin gram used to say, you if you own the total I think of was Benjamin n gram if you the total stock market and somebody comes up to you and says, what about company X, Y, Z, you can you can just kind of confidently nod and say, yeah, I have some of that, right? Um and so there's there's a little bit of psychological advantage there. But in terms of meaningful diversification, they both give you basically exposure to the market risk factor and nothing else.

So if you really want additional diversification, i'd take a little of your portal lume and threat in small cap value and put the rest in the S M P. Five hundred. Because when you own V, T, I, if you're thinking you're getting diversification, you're not.

And the reason is that the small stocks that you own are offset by the large stocks and the value stocks are offset by the growth stocks. So if you if you think that in owning V T. I, you're getting meaningful diversification, and I would do IT differently, i'd take the S M. P. Five hundred and add a little bit of small cat value because now you have exposure to more attributes that are gone to give that are going to move at different times and thrive in different economic conditions and have earnings growth that the varies from one another and you're going to get .

a higher return for unity of rescue. And if you look at V T I, the the part that is not large cap blend is about fifteen percent of the portfolios. So basically if you, if you bought the S M P five hundred for eighty five percent and smoke value, you you d have something cooking that could maybe maybe add extra three quarters to one percent. You think, Chris.

from the study? Yes, you know you talking about fifteen percent, three percent. So what is that? Half a per? I'd be confident in saying half a percent in expected return. Not, not you get IT every year. But yeah yeah and if you leave IT, if you do IT as a true by and holding investment, you just let IT sit there and you don't rebaLance every year, it'll probably do even Better and one run yeah yeah .

a good point. Um and they also the other possibility is not to use the S M P or V T I, V O O or V T I, but to use A V U S because A V U S has doubled up and its exposure to small and its exposure to value is still a total market index.

Um but it's a smart total market index. Who are vt? I is a dumb total market index. And and by them I just mean it's making no choices at all about what parts of the market historically have delivered higher returns or not where A V U S kind of IT IT takes advantage of the that we know that small cap growth historically drags things down. And so IT filters that out and IT shifts you in a direction away from this historically troubled part of the market. Yes.

that's great. You know that leads right into another question I had here from h, somebody who was asking about, uh, a something other than the the international total market index, the advance guard, is there something, uh, something Better people could use? And this comes up again with with the if you look at the a target date fund at bangor, IT is made up, uh, the equity portion of the total U.

S. Market and the total international market. And so if we wanted to help people, IT seems like if we could replace the total market U. S. And the total market international with something Better in both cases, we will have help them make a difference in their financial future that could be meaningful. So so what do you say about something Better than the vanguard total market index?

Well, there isn't an exact replacement for, you're talking about V T， right, which is the world .

the global no no, it's it's the um well, the fund the fund is IT is the total market international index .

and .

the IT is only IT is X U S okay?

V X U S, which I think does include emerging markets. So .

yes, he does.

Yeah so with this footnote that that i'm going to ask you to go get emerging markets on your own, then what we do in our best in class recommendations as we recommend the advantages find A V D E um in delta echo. So AV delta echo. And the reason we do is that is very similar to A V U S.

But for international developed markets, IT doesn't include the emerging markets um but emerging markets are a small part of the international X U S. Markets anyway. So you could add that in with a separate fund and the same principle applies internationally that does in the U.

S. If you looked at a total market fund for international developed markets outside the us, IT would perform very similarly to a top five hundred or a large cap blend fund because of the cap waiting. So I I would say a vd is a good choice there.

Yeah, but they're not gonna have to do the emerging .

markets on theyll have to add the .

emerging markets separately, ten percent, fifteen percent of that.

Well, we I mean, your recommendation in the ultimate by and hold portfolio has always seemed prudent, which is yet ten percent of the total portfolio.

okay. And the and the emerging market fund you would recommend.

I think we're using another advantage. Fun these days. A V E M.

yes. Yeah, kay, just double checking that. Yeah, advance. So we have a volunteers, emerging markets, A V E M, that's our recommended best in class in paul in your in your implementation of best in class in your own portfolio.

And dare I think in some of your back testing of the ultimate by and hold you actually divide the emerging markets into three parts, right? And we have recommendations for emerging markets value and emerging markets small cat blend where somebody could do that if they wanted to, they could they could bring in um they could divide up their emerging markets into those smaller slices and try and extend the exposure they have a small and value into the international market. IT is more expensive to get your tilts to smell in value internationally. But if you want to preserve that kind of a till, you could do .

that very good. Uh so we had another um a project here today. I I am such a fan of ben carlson H I don't know if either do you guys read and Carol daily everybody I sten .

to bank week you do and and I .

do occasionally .

I do occasionally yeah I I just I I don't .

listen the podcast generally um but I do read his articles every day and the and he is this recent one I thought was very good about some things I don't believe about investing, some things I don't believe and i'd like the list and what I thought would be interesting. I I I will read quickly his his his one liners that that make up his list without all the explanation. Guess it's pretty obvious.

But I would be curious whether there are some things you you don't believe about investing that I suspect a lot of people do. He says, I don't believe there is a soul way to invest. He says, I don't believe anyone has the ability to predict what's going to happen next with regularity. I don't believe politics should ever play a role in your investment decisions.

By the way, I didn't know this, but in the article, he shows the total returns from the past four presidential election dates uh and in two thousand and eight the the uh the return was fourteen percent analyzed, two thousand twelve fourteen percent annualized, two thousand sixteen fifteen percent annualize and in two thousand and twenty sixteen percent annualized um so the people who have shed away from A A from being involved in one or rather president in terms of the market historically made a mistake. I don't believe investing is ever easy. I don't believe there is a perfect portfolio.

Um I don't believe you should make investment decisions based on what warm buffet is doing. By the way, one buffer t is acting very buried uh and I don't believe you need to outperform uh, the market to achieve financial success. I don't believe bian hold ever truly dies.

There are there are announcements that IT has died many times of in my sixty, almost sixty years. Every time we go into big bear market, somebody is protecting that buying hole is dead. Uh, I don't that's like .

that's like when I say that smoker value is dead or remember, equity died back and what was IT, they were dead. They were gone.

The front U. S. News and world report. I think I don't believe following the news makes you a Better investor. Uh, I don't believe risk ever goes away, uh, is the matter of choices and that that's that's what a he came up now I just wondered whether whether you too have something that you don't you don't believe in uh in investing that that's meaningful.

I wanna to and they maybe just derivatives of of something he said but but um and maybe this goes along with the well so I I don't believe you have to do everything right as long as you don't do too many things wrong and that is not original by the way I can't remember .

IT warm buffet .

you yeah well okay, there you go. So um but I think it's true because i've done a few things wrong and and i'm i'm i'm happy with all I am. Um the other one is that I don't believe you have to to be perfect when you're executing your investment strategy.

Uh, you know close enough is good enough most of the time. So you don't need to go for the last little. Ten thousands of a percent of return or make sure that your asset allocation is perfect to the nearest hundred percent close enough is good enough.

So so don't .

believe.

Let me ask a question about that daro. Uh, there is an amount I don't know, but IT IT could be any number of numbers, but there isn't a month that is actually gets my attention. Certainly a half a percent of I can add a half a percent over a lifetime, even as short as my expected life. I would take steps to make an extra half a percent for the people and the causes I leave behind. Um but sure .

but but you don't have to and you probably will be fine.

No that's right. But how I but I still begs the question, uh at what point should an investor A J L column, smart guy, wonderful person, help in millions or at least hundreds of thousands of people and saying, basically all you really need is a the total market index. And just the U.

S. They don't need that international. Stu s, that's all you need. And so somebody comes long and says, but J, L, if they would just put in twenty percent small cap value, IT could add one percent compounded over their lifetime.

And it's pretty simple to do that in the whole scheme of things. The hourly reward in your lifetime for adding small cap, how you too total market index is, is the hour wage is probably maybe two hundred thousand dollars an hour or something because IT doesn't much that not take much time. So what I have to .

comments about that all. yeah. So who's that? Someone who said, hi, J. L.

What you mean I say say who .

would that be? Yeah that would be you, right? So so the other thing though, this goes back to one of the things advanced there is IT to perfect portfolio.

He does believe there is a perfect portfolio. You're trying to well and and you're right, you can you can you can add commenting to your return, but the first step is to invest. And if you do that, right, I D person on .

the way there.

And so now we're just talking about what happens at the margin. And this goes along along the lines of what I was talking about is you don't have to have a perfectly executed investment strategy in order to be got that good enough well.

And just look at at how much time you mean there will spend trying to teach people how to become effective by involving investors of small cap. Tell you, I think jail looks that goes a but I know I don't want to put, I don't want to put all that time into IT and beauty. You know, I have other things I want to teach my audience. You know, i've got so so it's it's kind of it's a question of who you're speaking to and and what they need are in the the the matter is for very large part of the population, in a target date fund may be just fine.

Exactly.

you may get them enough and enough is all we really need right? And and where they are, try and get fancy beyond IT IT might actually cost them if IT exceeds their risk tolerance and ability to to stay the course. So I you know just answering answering your question, paul.

The the truth I would add is the a new and I talked about the city of the day. We may do a whole podcast unit at some point, but I don't think anybody invest in any of these model portfolios for our lifetime. And that would be true for, you know, two funds for a life, the ultimate bian, all the the boglin buffett recommendations.

I think everybody's investing journey in life just has too many twists in terms and too much history and IT. And even the teachers have complexity behind the scene that are a product of how they got to where they are and where they're going. That mean that, no, it's it's fun to have these teaching examples. But life is messy and and even the teachers tend to follow something different than what they teach.

M, I hope is that the students at western washington university will come closer to doing what we would think they should do, then people who don't get that extra little kick in behind educationally to get them headed in the right direction. But you're right now just make one point that IT happens all the time.

Somebody will say, paul, you guys and they do mention you guys, they mention the work that you guys are doing and I say, you guys are are helping me out so much, I really like ah what what what you're doing. And then i'll just ask couple of questions to get a sense what they're doing, what they the portfolio and IT has sometimes almost nothing to do with what we teach. And I and I just I have to laugh because yeah, we spend a lot of time trying to get them to see the light.

So okay anymore, you guys come up with anything else, i'll get one. I don't believe people when they tell me how they've done in the market. I have spent a lifetime listening to people.

In fact, one of the one of the joys of being an investment adviser is that you do get to see like A C P A gets to see how people have really done and and um uh um very often what they do remember so vividly, there are two things they remember with couples. One and is typically the mill remembers the stock that they made the most money on that you remember IT so well. And the spouse who wasn't a one, the female Normally who wasn't a one, pulling the trigger and making the trades would say, i've I remind her husband that SHE tolled.

And by microsoft. And in the sea dollar, typically microsoft was the what is the story and he didn't and SHE has never left him for yet. So uh the memories people have about their investments um in in in, in in fact, we we we we know and and this is not a political statement, but we know that people do not remember what their life was like four years ago and what was going on that made any difference to them because because we are so good at at making up stories about about where we are, where we were and that this human nature.

which is yeah the stories of financial loss, I I find more believable. Yes, people will tell you about the mistake they made selling out at the wrong time or you losing on a bad investment. And I think those are more believable because they are they're usually hard one.

Yeah yeah. But I will say most people do not actually understand the lifetime IT cost of a mistake and even that little bit that they pay for a load fun and what that really costs them their their minds don't think like calculators compound everything. Um I I would say this one about I don't believe following the news makes you a Better investor. And the studies also say or being very smart IT turns out that being very smart does not help you make more money that this sounds so counter intuitive. But the reality is is indexes are going to probably make more money than most smart people will.

I I did have a thought though, as you were talking about, the people who you talk to that follow our work and then have a portfolio that's different. And that's that I think the most important thing we teach is by and holding investments. So it's by right, hold tight, don't peak.

And I think the fact that they find value in our messages is probably that and sometimes people's port are a mess, partly because of that. I know for myself, I really hesitate to try to add of things even if it's to rebaLance or get my portfolio in the right shape because I don't want to pay the taxes, I don't want to pay the fees, I don't want I don't want to make behavior mistakes. And so um you know IT maybe that their portfolio doesn't look like ours, but that their behavior is helping them out, and that's probably more important.

Good point. Can you leave that in, please? I like that. That's good gentleman. Thank you is always and and and certainly a really hard felt. Thank you to all of you who keep coming back.

Uh when I read that somebody has a been to our site and they're gone through almost all of our articles in podcast uh I have of my first my first thought oh my god i'm sorry but the other thought is in in its real we are so happy to be able to help people do Better with their investments uh, where the first to admit we don't know what tomorrow will bring. We don't know what the next decade will bring, but we do look at a lot of numbers from the past and and I honestly don't know anybody who is well there. I mean, there are academic super digging deeper than we are.

But I can tell you for people out doing that kind of thing that we're doing, uh, I think we're doing a good job of looking on the past and finding information that can help you. And I hope you keep come back and I hope we keep helping you. Thank you, and good luck.

How can I be wrong and never make any predictions?