Speaker 0 00:00:02 <inaudible>
Speaker 1 00:00:08 What's up, everyone. Welcome to the finance for physicians podcast. I'm your host, Daniel Raimi. Join me as we dig into what it looks like for physicians to begin using their finances as a tool to live better lives. You can learn more about our
[email protected] let's. Jump into today's episode, everyone. If you pay attention to the financial news, I'm sure you've seen all the craziness lately with stocks like GameStop and AMC and all the others that have been way up and have since gone way down. It seems like everybody now has a Robin hood account and is trading stocks on margin on top of it all. We're still in the middle of the pandemic, which has added all sorts of volatility to the stock market and everything was initially way down. And it's a quickly rebounded way back up with all this stuff going on. I think it's safe to say we're in the middle of a wild market given how wild it's been lately.
Speaker 1 00:01:01 I thought it would be good to talk about how to invest, especially when it's crazy. Like it is now to help me talk through this. I brought in a very special guest today. He's definitely a big name in the investment space and is currently working as the head of retirement research for Morningstar's investment management group and as an adjunct professor of wealth management at the American college, he's got his PhD in all sorts of other credentials and designation, but what I think he's most known for at least within the investment industry is his wide ranging research on investing. My guest today is David Blanchett. David, welcome to the podcast. Yes. So, uh, we are in the midst of a big ice storm in Lexington, Kentucky. It's, it's kinda crazy. So hopefully where you're at, it's much warmer and nicer as you're listening to this, but it's been, we've been kind of cooped up in our houses lately, right? I mean, we've had a big global pandemic and we were just talking, David, David has four kids. I have three kids. And so cooped up is kind of brings it to a different level, but we're talking investments. So like, do you think I'm curious, like being cooped up in our houses like this, like, do you think that it has an effect on people and even something like their investments or how they invest or what are your thoughts on that?
Speaker 2 00:02:12 I think it clearly does. I think if you look at downloads of Robin hood and Schwab, I think people want an outlet and they're using that outlet is day trading. I mean, I've never had so many conversations with friends of mine or random questions about stocks and the market before. So I think that people are looking to do something and for better, for worse, that could be, uh, you know, buying individual stocks in their portfolio.
Speaker 1 00:02:34 Yeah. So I was, we were talking about this as well. I actually, my first experience investing was in 1999 and I was, I guess, 14 or 15 years old. I'm surprised my parents let me do this, but I was day trading on an E-Trade account and buying tech stocks or.com stocks or whatever. And if you followed investments, uh, that was the.com bubble. You know, I don't know how everything shakes out this time, but in that situation was a ton of stocks that got big time hyped up and overvalued. And then, you know, I invested in them after they had grown. Uh, and then they all dropped. So I had an, I always joke about it. I invested my entire net worth at that time, which was only a few thousand dollars, but hard earned money and lost pretty much all of it. And so today it did, it kind of reminds me of it. Is it the same now? Or what's what's, how's this compared to the.com?
Speaker 2 00:03:25 Well, you know, it's funny that you say that show that story. We, I have a very similar first investment experience. So when I was in high school and I graduated, I think in 99, I got a friend of mine to open up an account for me at each rate. I wasn't yet 18. And so I, he opened an account under his name. I got some money from him and my parents and some other friends, parents, and I invested it and then I doubled the money. Then I got out. I didn't, I didn't stay. I know I've always been a, I'm a, you know, uh, you know, I'm, I'm weird like that. I, I didn't get too greedy. So I dealt with it raised money and that was enough of it. But, you know, we haven't been in an environment. I, I said, I think since then, where everyone wanted to trade as we are not in right now.
Speaker 2 00:04:02 So I think that that's the best example of where we are today, where, you know, everyone wants to trade. And I, you know, I've talked to people that have said, you know, I see people, you know, that are posting on Instagram or wherever else, and they're just making money and they're buying stuff like, how is that possible? And this is not right. I mean, you know, it's true today that, that the commissions are lower, but app spreads are lower. So the implicit cost and the explicit cost of trading is down, but you know, it just, it just scares me. Right. You know, you saw what happened in game stock, AMC, Bitcoin, who knows what's next. I think it, it creates this false confidence among people where, you know, the bubble burst eventually. It's really just only how long until it happens. Right?
Speaker 1 00:04:43 Yeah. So most people are like me, I'm kind of like average dude. So basically I gave my money to David, right.
Speaker 2 00:04:50 Effectively. Yes. You gave me your money. Thank you for that. Everyone that I invest with, he appreciated that,
Speaker 1 00:04:54 But that's where it went. And I think that that's
Speaker 2 00:04:57 The problem, you know, you know, people don't realize that for every one of those effectively a loser, right. I mean, as long as the markets are going up, I guess, you know, people can kind of win, but eventually they go back down. And I think that's where, you know, you're already hearing these, these incredible stories of people that lost tons of money on GameStop. I mean, sure people made money, but on average, people are gonna lose money because you know, those few folks that got an early saw these huge gains, but everyone else lost their shirts. And I think that's, that's part of the problem with, with people that day trade is that too often, we like to report our winners. We don't talk about our losers. Right.
Speaker 1 00:05:30 Yeah. So how does that differ from, so I'm sure everybody has heard the market goes up. It's historically always gone up and it goes up always every time. Uh, but long-term, you know, it should, should most time go up, but if maybe I'm just a little smarter than the market and I'm buying stocks and, um, and I can beat the market. So like D but can I beat the market? Is that I think a lot of people think they can beat the market that don't. And if you look at, you know, the research better than anybody, but I, you know, my understand is you look at the research and they don't beat the market. And, but even if they thought they did. And, and usually that's one of those things you've got to learn through failure, but like, how do you, uh, on the front end wrap your head around that and not be that guy that learns like me through failure and instead just kind of listens to someone like you.
Speaker 2 00:06:22 I don't even really time the market. I would say that my, I could count on one hand the times I've gone in and tried to buy or sell a security. So like, I'm not like a day trader because I I've met the enemy. I, I, when I went to business school, I met guys that run hedge funds, and these are like the smartest people in your entire life. So I don't want to trade against them. Okay. So the key is like, for everyone out there that trades, there's a winner and there's a loser. And you know, the winners out there, if they can even do that, are the ones that manage billions of dollars has infinite resources. You don't want to bet against them. Like, you're the sucker at the poker table. Right. And to your point, people that invest, don't always realize that they're actually losing money over time.
Speaker 2 00:07:00 And so I think that it's just really hard, right. And to think that I'm smarter than average, I can do this, but, you know, and so my one kind of thing is I'm okay with it. If it's like a tiny account, like you couldn't use to like buy slices of stocks, you know, it was a pretty big commitment to buy and sell securities back in the day, you had to like actual buy shares. Now you can buy these like tiny slivers. And so I think it's okay to do it if you want to learn more about investing, but I would take a long, hard look at yourself before you start trading, you know, most of your portfolio, your 401k, things like that,
Speaker 1 00:07:29 Right? Yeah. Yeah. That's, that's a good point, I think. And then you can learn through experience like, like I did, but not on your retirement account. And instead, just kind of on a sliver of your portfolio, the feeling I get, I don't know, uh, I've been to a casino or a horse race for in Lexington. So, you know, the horse track. And if you've ever made kind of like a little bit bigger than you probably should bet on a horse or at the casino, you get that like feeling in your stomach or whatever. I don't know. Some probably chemical gets released and makes you kind of get hyped up. Uh, when I traded stocks, the first time I got the same feeling, it was dead on the same feeling. And I think that's kind of interesting to look at is when I buy investments in my retirement account, I am so far from that feeling is not even close. It's a different sort of a thing, right? So like mixing the two together is I think where the danger occurs, right?
Speaker 2 00:08:24 Gambling. Like we have to be honest and call it what it is, right. If you, if you are not in it for the long haul, if you're, if you watch the news or follow someone's Twitter feed and buy a stock, you're not investing you're gambling and gambling can be fun. People really like to gamble. I think that it gives something to do, but I think it's important to distinguish between the two, you know, actively trading an account every day is not investing. And again, some folks make money and it could be a lot of fun. Like you can feel this high when you do it, but it can just be tragic. It's tragic average. I mean, there's no research I've ever seen that says that the average person who day trade beats a low cost professionally managed portfolio, that's just a fact,
Speaker 1 00:09:03 And it's not even close, right? It's like, like 1% or something like that.
Speaker 2 00:09:07 But every time you trade, even if you don't pay a commission, you, you, you get asked to read. So you're always losing a little bit of money every time you trade. And so I think that, that, you know, the role of advisors and other things is to protect them from themselves. I mean, it's really hard to, to not want to go out and buy Tesla when it's up a thousand percent, whenever and five years. And I think that that's when people need someone to remind them that you probably shouldn't be doing this. Like it's clerical, if it's like, you know, a thousand bucks in a Robin hood account, but it's not cool if it's all your hard earned savings that you're gonna use to live off.
Speaker 1 00:09:40 Right. Yeah. And so professional advice, I think part of the challenge, I kind of am not the, we have some issues in our industry as a, um, uh, I have a financial planning business in our industry, the financial advice industry, uh, there are some issues there. So I think some people kind of get burned by that industry and kind of just go the complete other direction. I was going to read an example of, of kind of this sort of thing. I, I got an email from a client the other day and it was just, it just, it just blew me away. And so this is from a financial advisor and I actually know, uh, of the person. And, um, they talked about all kinds of PR, uh, summarize it, but basically they're like, uh, in the, in March and April, we took all of our clients to cash March and April of last year.
Speaker 1 00:10:30 So that was the bottom of the pandemic. We took all of our clients to cash and significantly reduced our exposure to stocks and blah, blah, blah. And so, and then since then have reinvested in, basically we beat the market and, uh, beat the pandemic and our clients are loaded. And you need to give me your money now, because I know how to pick when the market is down. And when the market is up, do advisors know when the market is down? Let's clear that out. I think I cause that, that bothered me a lot here in that
Speaker 2 00:10:59 I, you know, I'm a pretty smart guy. I've I have, uh, every designation you've heard of a PhD, whatever else and still like, but no, like that's ridiculous, right? So like good investing is brewery. You know, you can make changes on the margin, but you know, to our earlier point about gambling advisers do not, cannot time the market with any level of consistency. So it makes sense to take risks on and off the table as your objectives change, you know, if all of a sudden you have a client and they can accomplish all their financial goals because their portfolio is up 30%, maybe you take risk off the table. But you know, someone that says I can time the market because I have some kind of a strategy like that to me is, is, is kind of ridiculous. I mean, I think that you can maybe make little adjustments here or there based upon valuations, but you know, I, I just, I'm not, you know, I'm a skeptical, I'm a, I'm a big fan of bull cost, passive investing, where you stay invested for long haul, you know, good investing is not, it's not sexy.
Speaker 2 00:11:56 It's not fun. It's boring. If someone's offering you a strategy, that's not boring. It's probably not the best strategy.
Speaker 1 00:12:02 Yeah. So let's go, there let's go that direction. What is the most boring, possible strategy we can, we can think of, well,
Speaker 2 00:12:08 The target date fund as a single balanced portfolio. And so like, you know, I, I like target date funds. I like balanced portfolios. They aren't necessarily efficient for each investor. Right? People are different. They often have different goals desires, but like, that's actually a good way to invest. If you put it in a 60, 40 portfolio, if you use a target date fund, those are all ways that you can accomplish financial goals. Now I think that there's a lot of other stuff that people need help with, but you know, there's nothing wrong with a target date fund. It's not necessarily optimal, but you have to weigh that against the costs of any kind of other stuff.
Speaker 1 00:12:39 Strategy. Yeah. I mean, if, if, if I'm a DIY investor and I don't spend a lot of time, uh, on it, and I kind of want the most simplistic, easy, boring, straightforward route possible, like there's a lot of appeal there to like a low cost target date fund. Now you got to watch target date funds because, and I don't even think it's as much the strategy it's the, sometimes the cost is, or the costs are hidden built into there. And I mean, that's, that's been, my experience is now if the costs are high, that's a different story. But in general target date funds are fantastic for kind of the autopilot sort of set up target date funds, by the way, they're automatically invest the funds based on your age and kind of rebalances over time as you get older, but it's, it's a one size fits all sort of a solution. But how does that compare to picking your funds? Do you think, I mean, have you done research on that specifically? Like if I'm the guy that's like smarter than the average, which everybody says, right,
Speaker 2 00:13:33 Right. The individuals don't tend to pick funds if they think that they're worse than the average investor. Right. You know, you don't, you don't pull the audience and say, Hey, we can't manage their own money and find that they're doing it. So I think that's part of the problem, right. Is that individuals think that they can beat the market. And, you know, I've looked at this, um, a lot within 401k investors. And what you find is that, is that they don't right. I mean, there's, I mean, this is, this is so important that no one realizes that there is not, there's no research whatsoever that suggests that the average person can outperform a low cost, you know, effectively Plaza, passive portfolio, where you just kind of stay invested for the long. That's a fact, um, it's, it's incredibly boring. It's not very fun, but that's good investing.
Speaker 2 00:14:14 And I think that it's hard people to kind of just say there or not do things. I think that, you know, to your point about, you know, the advisors that time, the market, well, you know, for just as many people that say that they timed it, right. They timed it wrong. Um, I know lots of advisors that did, that went to cash and stayed there. They missed the entire rally, um, back in 2020. So for some flips, some people can do it, but you know, no one talks about their losers, you know, advisors that say, I did this, I did that. I mean, they might've for some other clients, but you have to realize that just because they got it right before doesn't mean that they're gonna get right at again, like it's, it's, it's, it's effectively random, no one has like a secret sauce that they can use to outperform. That's just not how investing works.
Speaker 1 00:14:53 Yeah. And what's, what's interesting. I have seen lately as a lot of, um, passive investors have been kind of, uh, active on the side, uh, they kind of have slice and dice their stuff. So they have, you know, maybe a target date, funder or passive investments in their retirement plans at work. And then they have their trading individual stocks in their plans on the sidelines, like their IRAs are taxable in investments. Um, I think at least my opinion is it's kinda gotta be, I don't understand the concept of being half and half, like half active, half passive, but is there something there to, I mean, can you be a sliver active or like, is it kind of like, you either need to be all in on passive or, you know what I'm saying? You're not, you're no fun. You're no fun at all.
Speaker 2 00:15:44 I mean, I think in reality, if we were, you know, utility maximizing robots, we would all have very boring long-term portfolios. Right. No one would do that. I think that if you, I would only recommend you do it. If you feel like you have to do it, and then you do it with as little of your portfolio as possible. Right. And so someone would say, well, you know, that doesn't make any sense, David Raul, I don't want it. I don't want anyone effectively to be day trading there, any portfolio that they have, it just doesn't make any sense. Right. But if you're going to do it, you want to minimize the damage. You want to recognize that this is fun money that you're gambling with and that, you know, that if you lose it, you're not gonna, you're not gonna, you know, be out on the street destitute. So in theory, no one does it in reality, people are, you know, kind of crazy. You kind of, you, you do it in a way that minimizes the possible loss. But I don't want to start doing though is trading all their accounts, although, well, because again, that's going to end in a heartache for a lot of people.
Speaker 1 00:16:36 Is it, what is all their wealth? Like? Is there a percentage, like, is it safe to say I'll carve out like 1% of my,
Speaker 2 00:16:43 Well, I think it's 1% it didn't use to work. Right. You know, like back in the day, when you had to buy, you couldn't buy the slivers of stocks. You couldn't do 1%. But I think, I think, yeah, like I would not exceed 5% because you know, like, cause you, you can, you can buy dollars of individual stocks. Now it's crazy. You can buy these tiny slivers. And so I would say like, the goal is as little as possible. Now the problem is is that, you know, people that have different levels of worth, you know, for it to, to excite them requires different amounts. But like the goal is, is minimization. It's, it's recognizing that it's gambling. Like you can't call an investing, you're going to go gamble. You're not going to casino, but you're going to the stock market. And this is kind of like a casino in the grand scheme of things.
Speaker 2 00:17:22 But that's what I think that that's, that's what we have to reiterate over and over again, that you're not you're, you know, you, if you think that you're going to be the next Warren buffet, you are sadly mistaken. Right? Most people that buy individual securities in these accounts don't know who the CEO is. They don't know anything about the company whatsoever. And they're trading against these massive institutions that have billions of dollars of resources that they just don't want to trade against. And so do it, but, you know, minimize your, your portfolio as much as possible,
Speaker 1 00:17:50 Learn from your mirrors, mistakes like me, and, you know, come out brighter on the end.
Speaker 2 00:17:53 Right. But the thing is, I don't think people do, I think to your earlier point, like people too often don't realize that they haven't been making money or here's the thing, like the markets are going up for like a decade now. Right? So like any idiot it's like actively buying stocks for the most part would have made money. So if someone's like, wow, I'm really good at this. I should do more of this. We'll know like the right proxy is like an SB 500, you know, or whatever your, you know, if it's a small cap of next whatever you're trading against. And that becomes a really, really hard bogey to beat, like McGee is not, did I lose money? It's how did I do versus the market? And when you change your bogey to my account value is up to, I didn't beat the market. I think people are going to realize that, Hey, maybe I'm not as smart.
Speaker 1 00:18:31 Yeah. So if you're going to have, so take away from that. If you have a passive or like an index portfolio, like a target date fund, that's just kind of autopilot. That's great. Now, if you're active and trying to beat the market, I think what David's saying is just compare it to the S and P 500. That's a simple, like takeaway everybody should be doing that, especially if you're active, because otherwise you're just kind of who you're comparing it to, just whatever you're coming up with in your mind. I guess. So a lot of times in my experience, I have found that when you compare it to those legitimate benchmarks, you are surprised. And a lot of times people are underperforming. I remember a time I had a meeting with, uh, an ex client actually, uh, we, we parted ways after this conversation, unfortunately, but he had been doing his own investments.
Speaker 1 00:19:22 We have kind of a platform where we were still, we'll still work with people, even if they're doing their own investments, which is kind of interesting to see from my standpoint, because I see both sides, but he was, um, following the newsletter kind of a thing. And for years, and years and years, and using the strategy and I was like, we just got to compare it to the benchmark. And he had had a positive return, but he was something like 40% under. It was a very, and I finally just showed him, did the performance estimate on our end. And I was like, I showed it to him. But the problem was he got offended because it was like his thing. And I was like, poking holes in it. So he, we broke up at that point. And I, my guess is he's still using the same strategy, but like w uh, I think people, it becomes personal, I guess, you know,
Speaker 2 00:20:08 Off. Right. I mean, like, that's, that's the thing. I mean, you know, it's like, you're telling that someone's a bad driver. Like, you know, you shouldn't be driving. It's like, that's reality, but that's the reality. Right. And I think that's, that's part of the problem is that, is that everyone wants to be better than average. Right. You know, who wants to think that they can't trade the market and they can't watch the news. And, you know, I think that, you know, for people like you and me that have been done this for decades, we know how it works. Like, you know, we've, we've taken tests and we've read books and we've done all this stuff to understand the markets. Most people don't really know what a stock or bond actually is. They can't actually describe what a stock is and how it works and what it does, but they still want to trade. And I think that's the problem is how do you, you know, how do you explain to someone that this isn't in their best interests in a way that they understand and know feel heard? I, I'm not the right guy to ask,
Speaker 1 00:20:56 Especially when they don't exactly understand how it all works.
Speaker 2 00:20:59 Right. It's just often, so I think that's why, you know, you just reiterate, like, you just say gambling over and over and over again until they say, okay, it's gambling. And you know, to me, where it gets dangerous is when they think that they're, that they're investing in that they're actually, they know what they're doing. And then they kind of start to use more of their portfolio and put it into whatever.
Speaker 1 00:21:18 Yeah. And this particular instance, it was probably, Oh, it was over half of their entire, and they were several million. Like it was, they were later career and I was getting concerned about it and how high of a percentage he was not in the 1% or 5%.
Speaker 2 00:21:34 Um, so I'm, I'm, uh, I do like quantitative research. It's super boring, but like, there's one, there's one concept that you, that, you know, anyone that like studies people and economists uses idea called utility. And it's how you, it's how you quantify preferences. Like how much do you like something you assign these things called Udall's it's, it's pretty awesome. But like, here's the thing that people don't realize is that like, like you, people like to make more money and you like to have more stuff, but the moment you lose half your portfolio value, there's like, no coming back from, and all the little pings of satisfaction that you get when your portfolio goes up, you're going to be devastated. If things go poorly. Right. You know, like, like having a little bit more money cause you, cause you beat the market when you retire. Well, that's cool.
Speaker 2 00:22:13 But you know, you average that out with the possibility of like losing all your portfolio and having to work for an extra like eight years at age 65, that is, that is traumatic. And I think that we don't realize is that the downside of doing it yourself is much worse than the upside. The upside is. I, you know, like you actually beat the market by one or 2%. Congratulations. The downside is as the market crashes, you learn diversified portfolio you're ever going to retire. So I think, I think that as people go away, the outcomes correctly as well, and that creates, I think part of the,
Speaker 1 00:22:43 So, so it's, it's definitely a wild time right now, like in the market. And it's exciting. There's a lot of news stories
Speaker 2 00:22:50 Every day, every day, like socks are up a hundred percent.
Speaker 1 00:22:53 Some of that I've never had more people ask me what short selling was and I'm also like, I'm not sure I remember what, how they explain it. And I've explained it backwards several times and had to Google it and remember what, what it is. Cause we don't actually, we're like strongly against using that sort of strategy. But, um, it's kind of a lot of sexy media going on right now. Uh, so how do you, how do you, uh, vest in that time, if we're talking, you know, the ideal, do you just kind of put the blinders on and not pay attention to it? And
Speaker 2 00:23:24 Those are excellent and I think, but it's so hard to your point, right? Cause it's all over the news, you know, like what do you do? Like, like normally, you know, like GameStop was like everywhere. Like it was on every news article. Like, and so like I think it creates this, this false sense of, of what people should be doing. Right. I mean, in reality, like a publication focused on good investing be incredibly boring, right? The headline every day would just be staying invested. Right. But you know, like the activity and stuff, it sells ads, it sells news. And so it kind of, it almost teaches us the wrong behaviors when it comes to investing. And so if we're going to think about separating out, you know, what you do, I think the key is just so much to say, Hey, you know, to just to realize that that is probably not the best thing for me to do to go out and buy and sell and trade every day,
Speaker 1 00:24:12 Leave it alone. Right. Is boring. And unexciting is that is, so I think the number one takeaway, um, kinda feeling from this conversation is boring is King. I mean, it's not awesome. We're also too like geeks. So like we're, you know, that's just take it for what it's worth. But I mean, we both spend a lot of time in the industry and it's also interesting to me, uh, when, when I first kind of came around to that idea is that the people that I respect the most within our industry, you know, with all the designations and like David, David's got all kinds of designations or credentials and all this stuff, uh, and done all kinds of research and, and, but people like, like you and a lot of people I respect in the industry, they all kind of gravitate towards that mentality, which is very interesting to me when I finally saw that even Warren buffet was like, you know, it looks bad against the hedge fund guys and I'll get the passive portfolio just boring, plain Jane. And then you get to do your hedge fund with their butts. So it's interesting
Speaker 2 00:25:10 Professional investors that are really good that people that you know, that I think you and I both respect are going to say like good investments, like watching the grass grow. Right. But I think the problem is within our industry and just in general, there are some folks that say the opposite. It say they want to be active tactical traders and they have fancy charts with pretty pictures and our performance. And the thing is like that stuff sells. Okay. The problem is, is that the vast majority of that is isn't real. I think that advisors create stories. They generate performance, whatever else. And, and you know, unfortunately a lot of investors gravitate towards this idea that, that I want to be better than average. I'm not going to index, I'm going to beat the market. Well, you know, the funny thing is, is if you actually use index funds, you're going to beat the market on average and that's not intuitive. But if, if you, if you do this kind of tortoise versus Hare approach, the tortoise is actually going to beat the hair on average. So to the extent, to your earlier point, that you can put on those blinders, you actually do end up winning more often than,
Speaker 1 00:26:10 Yes, that's a very important point. So like basically what David is saying, you know, if you just buy all the stocks collectively in a low cost passive index fund and just hang onto it, you're going to on average beat your buddy's performance. And you're just buying a like Vanguard total stock market. That's like is plain Jane. You buy all the stocks and it's super inexpensive nowadays. So you just basically are buying all the stocks and owning them and setting on them. On average, you're going to beat your buddy, especially your buddy that's trading stocks during the day. But I'm talking, we're talking about buddies are probably not doing anything too crazy, playing around with their 401k mutual funds or something, which is, which is interesting.
Speaker 2 00:26:49 I know, right? Like you think, well, I think in every other, so like my wife and I were watching the last dance now that book Jordan documentary, which is, which is a bit of a stretch for her, but it's so far so good. You know, like people think about sports players, you think, Oh, you know, like Michael Jordan was awesome at basketball. Like, you know, he goes out there and he wins. Well, you know, like those same traits that don't carry over to investing, like just because you beat the market last year or the year after that doesn't mean we're gonna keep being the market. People like point to Warren buffet. Well, there's a recent, he's an anomaly like mutual funds just don't tend to win out that are active over the long haul. Sure. Over the short term, they do the promise. People tend to, they get in too late. I mean, we saw this in the nineties where, you know, most investors get to the party too late, you know, by the time you open up your account, you've already missed out on most of the gains. I think that's what that's the problem is that is that, you know, individuals that stay invested realize the full benefit of the market individuals that try to time it, you know, show up too late and then ended up getting burned.
Speaker 1 00:27:47 Yeah. I wish I could embed the image of games stop stock in here. I was looking at the chart of it. It's like the perfect example of what you just described. I mean, it's hyper extreme example. Like it happened very fast, but it's like way up and then short.
Speaker 2 00:28:03 So you're thinking about GameStop. So I, again, like I see, like I can count on them on my hand that, you know, I, I wanted to, to effectively short game stop. Okay. Because it had risen way beyond its fundamentals, but here's the thing it was incredibly expensive to do. So, so I'm not going to go into like all the ways that you can make money when stocks go down. But like, but put options were incredibly expensive. The cost over a hundred dollars for a seven day expiration. And the point is, is that it's really hard to make money. Also, things like that when they happen. And so, you know, I knew that it was overvalued, the entire market knew we couldn't do anything about it. You know? Like, like people that want to make money when it goes down, you just do it. And so like, part of this thing is, is that, is that, is that yes, it went up, but you only made money on that if you owned it, like before it went up and then when it went up, you couldn't make money if it went down.
Speaker 2 00:28:50 And so to me, I was, I was shocked. I mean, you know, I've seen that, that chart before of GameStop. And I know that a lot of people that, that, that see that, that are novice investors are thinking to themselves, I could have bought GameStop. It's 50. Why didn't I do that? I'm looking at that they can work more on about GameStop at 400. Right. So I don't look at, I don't look at the appreciation. I look at like the Rood would pay like 10 X for a stock two weeks later when nothing happened with it.
Speaker 1 00:29:18 Yeah. Well, our, our volume of it got to the point where we had a handful of clients asking us to help them by game stop. And, but it was, uh, directly correlated to the price. Like the price was low. Nobody even was unless you games, but got high, the higher it went. And when it was like, you know, in the hundreds and got all hyped up, that's when people were asking about it and that's what happened, happens. And then I'm hype. People want to buy it when it's really high, which is the reverse, right?
Speaker 2 00:29:44 Like, so like if I'm going to buy a car, you know, am I like, Oh my gosh, the car is up 4% a price. I'm going to go buy it right now. Like, it's, it's anything else? It's absurd to buy things when they are like doubled in price. But for some reason, for stocks, people just go nuts. And so I think like when it comes to investing, like we are our own worst enemy. Like, like it doesn't make any sense. Why would you buy GameStop when it's going up to 200%? I dislike it. I I'm, I'm probably like rash. Like I just don't get it, but people do like, they get excited about it. They're going to keep it up. Why? Like, like, why do you think game stock is going to keep up? It goes
Speaker 1 00:30:17 Up another 200%. I heard that they're ready to use it.
Speaker 2 00:30:19 I was actually very wrong on how fast it corrected. So like, my brother-in-law has a Robin hood account. We were, we were texting about it like every day. And I'm like, Oh, this won't last, you know, this won't last more than a few days. It lasted actually longer than I thought. But, you know, the, the ending was a foregone conclusion. Only question was how, how high it went in the interim and for how long.
Speaker 1 00:30:39 Yeah. And it, it was, it was fun to watch.
Speaker 2 00:30:42 Well, I saw this awesome. Like it's like scary, you know, because I think that's not what, you know, I don't want people to like, think they're going to find the next game stop. I don't people to get out there now and like actively trade. And so to me, it just sends the wrong message when that's so prominent, immediate. Cause it gets people thinking about doing this themselves and how you can double your money overnight. Well, you're gambling again.
Speaker 1 00:31:03 Right. Awesome. Well, as we wrap up, I'm curious, where can, uh, people find you, we talked a lot about investing and whatnot, but we didn't get to talk much about you. You're you have a very good website online that kind of breaks down your research and what are you up to now? Where can people find you?
Speaker 2 00:31:19 I have, I have a website it's, it's, it's pretty terrible. You're being, you're being way too generous there.
Speaker 1 00:31:23 What does have a, first of all, everybody that's listening to this needs to go look at it because the list of it, I was scanning through before we talked, I'm like, I think we can talk about all this stuff. This guy has researched everything. There is the research and investing. So it's a quite, quite a lengthy list. And you got to, got to check it out.
Speaker 2 00:31:39 Uh it's it's David and blanchett.com. Um, I'm on LinkedIn too. Or you can connect with me that way. But, um, I, I worked for an RAA, which is a registered investment advisor. So my options when it comes to redistribution of materials is limited. But I would say the website's the best approach, but I only update that like twice a years. Yeah. What are you up to now research? So I, you know, I, I try to write at least 10 to 12 papers a year. You know, I used to travel a lot with like conferences and clients and stuff, but you know, since COVID hit, I've been kind of shut down now for a running on 11 months. And so I've got, you know, investing like in a low yield world, I've got stuff on risk aversion on dividend stocks, on safe withdrawal rates. You know, there's no method to my madness. I just kind of think to myself what sounds cool and I kind of got it.
Speaker 1 00:32:23 Yeah. That's awesome. Yeah. So if any of y'all want to geek out on base, get all kinds of good stuff to peek out on. Thanks for joining me. David has been unchecked right here. Yeah. As always. Thank you so much for joining us today. If you found this valuable, please give us a review on iTunes and share with a friend. Also check out our
Speaker 3 00:32:40
[email protected] for all sorts of additional content. See you next time. Finance for physicians is not an investment tax legal or financial advisor. All content included in this podcast is for informational purposes only and should not be considered financial tax or legal advice. Material presented. It is believed to be from reliable sources and no representations are made by finance for physicians as to another party's informational accuracy or completeness, all information or ideas provided should be discussed in detail with an advisor accountant or legal counsel prior to implementation. You don't have an advisor or like a second opinion. Feel free to check out our website for recommended advisors.
