032 - Being Unaware Of Your Investor Profile Leads To Costly Mistakes

Most people don't operate with their personal investment style in mind, and when you invest in a way that's out of alignment with yourself, you have a higher chance of making costly mistakes. 

Those losses deplete your funds with limits your ability to grow your money. And failures also trash your confidence and hope for retirement. So do yourself a favor and put some extra effort in at the beginning so you get off on the right foot by avoiding unnecessary problems. 

Many brokerages have resources to help you clarify your investing style. Here are links to 3 companies that provide a questionnaire to get you started. We walked through Schwab's in this episode. 

• Charles Schwab
• Fidelity
• Vanguard 

If you want to do a deeper personal assessment, it might be more helpful to ask yourself the following questions. 

What are your investment goals?

• Preserve the money you invest at the start
• To grow your money over time
• Do you want your investments to provide regular income

What is your time horizon?

• Do you need your money soon to buy a house, pay for college, etc
• Do you need your money to maintain your standard of living in retirement years much further down the road
• Or are you somewhere in the middle

Immerse yourself in the differences between the investor profiles.

Conservatives

• Prioritize security more than growth
• Have little to no risk tolerance
• Focus on shorter term investments ranging from 0-5 years
• Portfolio consists of 80-100% in fixed income investments

Moderates

• Fall between conservative and aggressive
• Are willing to give up some liquidity & security to make higher returns
• Are comfortable with medium range investments from 5-10 years
• Portfolio consists of 60-65% in fixed income with the rest in dividend or growth stocks

Aggressives

• Prioritize profitability above all else
• Have the greatest tolerance for risk/losses because they know higher profits come in long run
• Focus on long term investments 
• Are savvy investors who have more money so they can give up immediate liquidity
• Are all about returns

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Ticker metrics change as markets and companies change, so always do your own research. The content in this podcast is based on personal experience and is for educational purposes, not financial advice. See full disclaimer here.

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Transcript

Welcome to roaming returns, a podcast about generating a passive income through investing so that you don't have to wait till retirement to live your passions. Did you know that when you invest in a way that's out of alignment with who you really are, that it increases the chances of you losing money? In today's episode, we're going to discuss the three different types of investor profiles, conservative, moderate, and aggressive, and how to determine which one you fit in and align your investing strategy so that you actually have a greater chance of success. This is the one thing that most investors fail to do before they start.All right, so we decided to record the investor profile episode before we do the three best utility stocks, because we want to give you a break from the humdrum of boringness that is the stock realm. We thought this would be fun, or maybe I'm just delusional. That could be a thing, too.Yes, so I sent this out in an email on the 15th? A couple of weeks ago, yeah. 15th, there was an email that came out with this information on it. Basically, the email was know yourself.We touched on the last podcast episode that if you know who you are, you know what your investment style will be. Your investment style will pretty much dictate, or it should dictate your portfolio, because if it doesn't, then you have that conflict. Then you're more apt to lose money because you're either in risky stuff because you're too aggressive for your personality, or you're in stuff that's not too conservative for your personality.You get impatient, and you generally will lose money, too. Yeah, it's interesting how that works. That is absolutely a thing, where you get impatience can be just as much of a problem as being too risk-seeking.The reason that I thought about it was I've been reading so much stuff about how we're going into a recession, we're going into recession, blah, blah, blah, all that nonsense that we've been talking about the last few months. When the shit hits the fan, and the shit always hits the fan in the investing world, what will you do? How will you react? That's generally where the whole thought process of this episode and the email came from. Because I know there's a lot of people when the shit hits the fan, they panic sell.They're like, oh, my God, my principal, and they just sell, sell. They sell knee-jerk sell, which is not the right way to do things, but there's a lot of people that do that. Hence the reason when the markets go down, they go down a lot because a lot of people panic sell.Obviously, there's institutional investors that have their limits and all that stuff in there, but I'm talking about average investors. From a knee-jerk reaction is what we're talking about. If that is the case for you, if you know that you do that, you more than likely fall into the first category, which is the conservative category.Basically, like I said, if you Google investor profile questionnaire, the Schwab has one, Fidelity has one, blah, blah. Pretty much every investing exchange will have one. The reason that you want it is because it helps you find a suitable investment strategy for your time horizon and for your risk tolerance.Risk tolerance is where majority of my focus has been on. But time horizon, I actually think, impacts that whole thing. That came to mind in the last episode or the crypto episode when I was talking about how I kind of just yellowed with my retirement.The fact that I had that 30-year time horizon with that, I really don't care that it lost 50% or 60% when it did because I actually have full faith in where crypto is headed and crypto being adopted. I did enough research to have absolute faith in that whole thing that these short-term massive movements really don't bother me so much because I know I cannot touch that for 30 years. The time horizon is a really big component of your risk assessment.It also, in my opinion, can vacillate because I'm not actually that risk-seeking in a non-retirement account because it's a completely different mindset because you know you can't touch that for 30 years, whereas our regular brokerage account is more of a short-term, we need that money. My risk tolerance, I think I actually end up exactly where Tim's at in the moderate, the middle category. Do they have questions? Can we actually walk through a couple questions? Yeah, they have questions.I pulled up the one on Charles Schwab. Question number one is, I plan to begin withdrawing my money from my investments in less than three years, three to five years, six to 10 years, 11 years or more. Generally, when you're invested in income stocks, that's going to be the six to 10 or 11 years or more when you're going to start withdrawing your money.Unless, obviously, if you're older on in years, then that number is not going to be that high. I think that question, too, maybe needs a second part or we need to expand on that a little bit because we're not normal investors who have to liquidate your actual assets to then take profits to be able to take that money out and live on. We're actually setting up investments that generate income.To me, I think that one isn't quite as straightforward as it could be because if you think about it, you could need the money sooner. But that's like your dividends. That's not I know.I know. I know. But I'm saying I, well, maybe this is me being a spaz, but I'm just saying here's like I'm walking through.And question number two is, once I begin withdrawing funds from my investments, I plan to spend all of the funds in less than two years, two to five years, six to 10 years or 11 years or more. Again, the objective would be to not actually spend any of your investments. You're just going to live on dividends.So that's like, again, six to 10 or 11 years or more would be my guess. I think what they're getting at here, though, from what I've read with Time Horizons is that a lot of people will stick money into investments to hold a large amount of money aside while still growing for something like a wedding, a destination wedding, because that's a big expense, college funds to buy a new house, that kind of thing. That is more of a short term.You're sticking money away. I think that's what that question one and two potentially are getting at. And then if your answer is more the retirement aspect, that in theory should be even if you're liquidating it, you're going to be using it over at least 11 years, because what's the amount of years that you typically use when you're in retirement when you actually tap it? Isn't it like 20 to 30 years is what they assume you have to make that spread over? So like 20 years? I think that's what that question is getting at.So for us, on both questions, it's six to 10 or 11 years or more. So it's one of the two bottom two. We might be taking dividends, but we're not actually tapping the principal, tapping the investment.So then blah, blah, blah, blah, blah. Basically, they want to make sure that your score is three or more. Each answer has a number next to it.You add it up. It tells you your time horizon score. Then here's the one that I think is more important.It's the risk tolerance section. Oh, so they were exactly talking about time horizon. I can't read that small print because I'm blind as a bat.So the risk tolerance question number one would be, I would describe my knowledge of investments as none, limited, good, or extensive. That's an individual question. For me, it's good.So it'd be number three. Question number two, what amount of financial risk are you willing to take when you invest? Take lower than average risk expecting to earn lower than average returns. Take average risks expecting to earn average returns or take above average risk expecting to earn above average returns.Again, I can just see that that's conservative, that's moderate, and that's aggressive. So for me, it's the middle one. Take average risk expecting to earn average returns because what we do, we invest in dividend stocks.So I don't really care about the risk because we're getting dividends. But I'm not going to take obscene amounts of risk and stuff that's like the risk reward equation comes into play. Well, and I think, again, we haven't done an episode on risk, but I think risk is very perspective-based because some of the stuff we get into sounds like it's risky, but we kind of have a strategy that makes us aware of risk and makes us navigate the risk in a way that becomes less risky.Like for a big example would be the ETFs, the fact that we actually take our initial principal out as soon as we possibly can so that we take all of our money off the table, therefore mitigating the risk of losing the seed money. Yes, that's what I mean. Even though the ETFs technically are high risk.I've tried to expound that through the months that that's what we almost always we start pulling profits as soon as we can to lower our total money invested. And that is a risk moderating strategy. Another one would actually be the fact that some of the stuff we'll get in has less of a track record or it's a higher yielder, but we're actually balancing our total portfolio with a lot more secure and the aristocrat dividend stocks.So even though that one stock is risky, it's such a small percentage of the portfolio that it's really overall not that big of a risk. Well, that's the risk reward equation. So where this question would trip me up, I actually want higher rewards, but I don't want a lot of risk.And like, I think that's where I have trouble answering these questions because it's like you got to find the unicorns to get that. And that's what I think makes people like do stupid stuff. Generally, like.Hence my track record. That's why you. I know.That's why I don't do this. That's why you don't do this. Question number three, select the investments you currently own or have owned bonds and or bond funds, stocks and or stock funds, international securities and or international funds.We own all of those. How would you answer that question? So would you do the average of it? No, you just select what you currently own. And so we do all of them.So we all three. So we would have 17 total points right there. I don't think that's how that works, but OK, I think it's want you to pick one.It says, you know, you currently own you now own stock funds. In the past, you purchased international securities. Your point score would be eight.So I guess eight. I mean, it would be the highest one. But we own all of them.Yeah, I know. That's why I said I think I would just average that generally in any portfolio. You want to actually be exposed to all three of those.So I don't even know why the question is worded that way, because when you own bonds or bond funds, you actually that helps you mitigate the risk of your stocks and or stock funds and your international securities and or international funds. You obviously would have to navigate that with like, OK, India is doing well and China's in a are almost in a like a recession slash depression. So you don't want to have more Indian exposure than China exposure.But you're still going to be in international stocks and bonds and funds. So I feel like this questionnaire is just more geared for new people versus people who have like the second tier thinking, I guess. Then consider this scenario.This is one that we've discussed ad nauseum, actually. Imagine that in the past that in the past three months, the overall stock market lost 25 percent of its value. An individual stock investment you own also lost 25 percent of its value.What would you do? Sell all of my shares, sell some of my shares, do nothing or buy more shares? Again, it's to me that's dependent on the stock dependent on lots of variables. But generally, it's going to be do nothing or buy more shares. Yeah, yeah.And then it gives you a box for your totaling of points. So that's, again, that's a somewhat aggressive approach because generally people that are conservative would be like, I'm selling all my shares, just getting out of that. I'll just keep it in cash, which I don't do because it doesn't make sense.We're in dividend stocks. So the more dividend stocks you can get, you get a better return. And the more it goes down, you actually get more compound shares from the dividend.And then here's the one that like I really have no idea even how to answer this one. So review the chart below. We've outlined the most likely best case and worst case annual returns of five hypothetical investment plans.Which range of possible outcomes is most acceptable to you? Plan A, 2.6% average return, 10.8% best case, negative 5.1% worst case. Plan B, 4.1% average annual return, 19.2% best case, negative 10.6% worst case. Plan C, 5.6% annual average return, 27.6% best case, negative 16.4% worst case.Plan D, 6.1% annual average return, 36% best case, negative 21.7% worst case. And Plan E, 7.2% annual average return, 42.5% best case, and negative 25.8% worst case. So you're supposed to pick one of those.So what this question is basically saying is your average yearly return is what a lot of people use to focus on. But it's showing you that that doesn't happen from year to year. It's showing you that they have some really good years and some really bad years.And if you can stomach the losses of the bad years for that average return, like you go up to that threshold. I think that's what it's saying. I don't know.But again, that kind of doesn't even really apply. It doesn't pertain to what we do. Exactly.Because our dividends typically mitigate a lot of those risks. And our average returns are, I think, above that. Our average return right now in Schwab is D. And in Vanguard, it's E. Have we been down 25%? I mean, there was that big thing in August and September.We've been down and we've been up. But it doesn't matter in income investing because- We're not looking at portfolio value. We're looking at dividend growth and share quantity increase.They basically want you to, like, again, that's conservative, moderate, conservative, moderate, moderate, aggressive, aggressive. So like, I don't think. But that's the questionnaire.Are there any more questions? No, like I said, it only takes a couple minutes. Yeah, OK. So we were just giving that as an example.And then what you add up, all your numbers, and it tells you right here where you would be. Look at those block breakouts. You'd think it would be diagonal straight across.It's like stepping stairs. What is that? So because we- Oh, so they break this into five categories. So we'd be 16.We'd probably be moderate, moderate to moderate aggressive on this Schwab one. Yeah, probably. But I actually don't like this as much as I liked what Tim had in the email when he just had the three different categories and the actual descriptions of the categories, I thought was an- Well, we're going to get to that.An easier way to identify or self-identify. So basically, like, there was two questions in the email. What are your investment goals and what is your investment time horizon? Investment goals, do you want a lot of money? Do I just want to preserve the amount of money I invest at the start? Or do I want to make my money grow over time? Should my investments provide me with regular income? That's investment goals.I would assume generally people would want their money to grow over time and they would want regular income. So it would be both those second questions. I mean, I don't know anyone that just wants to preserve the money they have at the start.Yeah, like the bank would be the best option. Question two is what is my time, my investment time horizon? When do you need the money? Do you need it to build a house in three years time? Do you need to pay for your children's college in 15 years? Or do you need to maintain your standard of living when you retire in 30 years or more? This helps you if you answer it honestly, it will help you. You can figure this out on your own rather than actually- Because if you go to, like, say you hired a investment manager or whatever the hell they're called, they're going to ask you the same question.So they can tailor a portfolio to your particular risks, liking or risk aversion or whatever. So that is fun. Okay, then we get down here.An investor profile basically is a summary of all those, like, they lump it into three categories, conservative, moderate, and aggressive. I mean, some will have five or they'll have moderate conservative and moderate aggressive. It's the same thing.I think breaking it into these three and showing the differences, knowing you can potentially fall between two is good. But I like the fact that these three categories have very specific definitions that I think are easier to identify with. So you're either going to be a conservative, which a conservative investor prioritizes security and liquidity more than profitability.They have zero tolerance for losses and risk, which naturally leads these type of investors to forego larger returns because they don't want to be in higher risk investments. They just can't handle that valuation swing, which means that they also have an awareness that they would prefer more fixed income type investments. Yes.And these generally, generally, this again, generalization, investors that are conservative usually are in short to medium term investments ranging from zero to five years. And basically, every person I've talked to, myself included, when you first start out, this is ultimately how you end up starting out. It's just, I guess, you dip your toe in.It's the training wheels. Yep. Training wheels.You're conservative. You're testing things out. You're seeing how things work.You should have more risk aversion in the beginning. And the middle one's moderate. A moderate investor has one foot in the conservative and another in the aggressive profile, making it safe to say that they have a more balanced investing approach.You have a greater tolerance for risks, but not as much as an aggressive type. Not quite. You're not quite there yet. You're willing to give up a little bit more on liquidity and security to achieve higher returns. You're generally in search of or more comfortable with medium to long term investments ranging from five to 10 years. And your portfolio, like if we started conservative, conservative is going to be at least 80% in fixed income stuff. Moderate is 60 to 65% in fixed income and the rest in stocks and dividends and growth and all that fun stuff. Then you have the aggressive investor prioritizes profitability above all factors and has the greatest tolerance for risk. This says that you're usually a savvy investor with one or more.They're usually a savvy investor or one with more money, so they're willing to give up on immediate liquidity. What that means is if you have more money, it doesn't matter if your portfolio balance goes down. All you're worried about is return.They're literally all about returns. You're more flexible and have a greater tolerance for losses because you understand that higher profits will come in the long run. This is like mentality where Carmel says from time to time that the stock market always goes up.If you're an aggressive investor, you know the stock market always trends upwards over the long term. So you don't mind taking like in 2022 when everything's all hell broke loose. You don't mind staying in your investments and probably buying more of the same investments, even though they're going down because, you know, in 10 years or so, everything's going to be up.Yeah, you have more of a view on the horizon than you do in the short term moment because the short term moment fluctuations. The reason most people that have the shorter term like horizons will not be aggressive investors is because you cannot guarantee the stock market is going to do what you need it to do in the short term. So if you have money specifically set aside for a college fund or a house purchase or that wedding you're saving for, you cannot afford for that value to go down past a certain point.And you cannot guarantee that in the short term, whereas the long term investor doesn't have to worry about that. It can make 25% corrections throughout that time period. And they just know eventually or like the trajectory of it is heading up in the long run.And I always talk about if you really, really pull back from the stock market as a whole and you go to the 30 year window, you can see those massive pullbacks. But you also see that it's completely trending upward because inflation valuations over time have to go up because that's just how the economy system is set up with inflation increasing that 3% every year, which means everything has to go up in price over time. Now, obviously, this bears like shitty companies like going to zero and bankruptcies and all that other stuff.We're just talking generalities here. Well, if you just dump your money in S&P fund, you generally get 10% per year. But that's why they say it's average.It doesn't mean 10% every year, but it averages out to 10%. So what you're going to have is like in 2022, it was down 20 some percent or I think 16%. And then in 2023, it was up 26%. So you average those together, that would be 26 minus 6 a year. That's 5%. So you're just only halfway to what they call the average.So that's why you got to be careful with those average numbers, because they don't really dictate the year to year, but as an average over time. So yes, the S&P fund, when you go in those, that's a really good example of that, that if you set it, forget it, stick it in one of those funds, you will essentially mimic the market. And if that's the I'm not even I'm not negatively connotating like laziness, but it is the lazy way of investing that if you're good with that, by all means, go ahead and do that.You're not going to get the dividend component of it. But you're definitely going to get that valuation thing, which if that's all you're focused on, that's a really easy way to mimic that. Well, I mean, if you want to be a lazy, you could actually there's S&P index funds that are tied in with dividend paying stocks.So you can actually get they don't average 10.2 per year, but they average like 7.8 per year. But we talked about those, didn't we? Yeah, but you get the dividends, you get like a 4% dividend per year. So like if you you can actually do the best of both worlds.That's what's so nice about being alive in this time. Like there are so many different options out there that if you do have a specific thing you're trying to, there is usually a hybridized version of something where you can you have options. I like that to get to.But to the first step into getting to determining if you want to be a set and forget it. You need to take this. You got to actually take the questionnaire to determine what type of investment strategy you're more you're most comfortable with.And I can probably say with 95% accuracy, at least 90% of people never do this. Yeah. Because it seems like, no, I never heard of it until recently.But it makes a lot of sense. Like even in like other areas of life that people aren't as intentional or in alignment with like who they are. So for example, I'm really into the personality thing.I know I've mentioned it multiple times in here and that's why this really intrigues me. But when I stumbled upon that, there are, I'm going to generalize it to two different kinds of people. You have the people that are very conservative based and then you have the people that are very like live in the moment and more like stimulated oriented.When I realized I was in the more stimulated oriented category and I needed more frequent change to keep things fresh and stop getting bored and making stupid decisions. And it actually causes stress when I'm too bored and whatever. When I was working at the government, we had the option of going to 10 hour days and taking one day off a week.When I realized that the change thing was part of like my programming essentially, I moved my day off from a Monday to a Wednesday. So I was working two days on, one day off, two days on. Switching just that one little thing and alignment with my personality was a game changer for being able to like hang on to the government as long as I did.Not that that job was really suited to me in general. I realized that and made my way out. Obviously that's where I'm at now.But that was a massive, massive shift that was so influential for me. So that in itself, again, finances is the same way because I'm so scattered and I'm always up with stuff in the moment. That's why investing and being up in the portfolio as much as Tim is, isn't my bag.So I'm fortunate enough to have Tim to do that. I bring interesting insight to the board. But you would do it if I wasn't around.Yeah, it just would be different. Yeah, the necessity because you'd want to keep doing what you're doing. It would be really different.I think we are going to pivot at some point to letting me manage once I have more time when the condo is gone. But I would actually be curious to see what I would fall into because I was even self assessing when I was reading this. And I thought it was interesting that Tim said he fell into the moderate category. And I think I'd lean more risk. But there are certain areas I'd probably actually be more moderate. So I probably would be a weird hybrid between those two.Well, that's what I was saying in the last podcast is that I know myself outside of this. And it's aggressive. It's risk.It's like YOLO all the time. But that's why the questionnaires, it's thought provoking beyond just the seven questions. When you actually take the questionnaire, the financial part is a tool so I can do my risky stuff.So it's completely like I need this to do what I want to do in my life. And if you look at the questionnaire through that scope, you're going to be more moderate, more conservative because you want to make sure that you're getting that monthly income every month so you can do whatever you want to do. I was looking at this and I was actually really starting to think in introspect.And it's like, OK, so if I was doing normal growth stock oriented, I actually think I would fall more into the conservative, excuse me, moderate realm. But when you factor in the approach of dividends that we've actually created, I actually think I would be more aggressive risk moderate because to me, you're navigating that risk in a lot of the strategy component. I'm actually really, really excited that that's what Tim is essentially falling into because that is like the perfect hybridization for who I am.So I think in general, I'd be conservative, aggressive, but I would not be full aggressive. Excuse me, not conservative. I keep saying conservative, moderate, aggressive.The interesting part, actually, when I look back and think like would I have been able to come up with the contrarian value investing for income had I just used the questionnaire? And I don't think it actually would have transpired like that. And that's the unfortunate part. And I think I'm the same way that I learn better from failed experience and pain.So that's a human trait. It is. But I have noticed through my own experience in general and being stuck in an office so long that I also learn really well from learning from other people's pain.So if I can actually immerse myself in books in like their story and like follow what they went through, I can actually learn almost as well and then be a little more cautioned when I go in with my own experience and navigate some of those pitfalls. I mean, I'll still make some of my own mistakes, but it'll be less so that prevents me from going forward because the problem with investing, if you fuck up in the beginning, you potentially take away the ability to invest because you lose your your seed money. Well, you think like if if say you lose 20 percent right away, it takes what, 30 percent to get back to 30 or 40 percent? Back to even.So like making a mistake in the beginning, like we like I did multiple times, like it set us back a few years because I was trying to do so. I was trying to basically, as I said, fit a freaking square block and square back into a round hole. And that's not like it wasn't working.And to piggyback on what she was just saying, I actually am better when I don't have any other avenues to get away from it. Like I don't like, for example, like this has to work or we can't live in the van. And I actually thrive better whenever I have to figure out how to make it work or else that won't happen.So when the stakes are high. Yeah. So I guess that's part of my.I actually am the opposite. When the stakes are high, I get overly aggressive and I make mistakes. So knowing that about myself, and I've done that countless times in the crypto realm, like I actually lost quite a bit of money using leverage and other certain things.And I was trying to do those micro things. And I was trying to do it more manual. And when the when the herds and stuff came in, like it just poof, gone.That was really hard to stomach. And I've done that quite a few times. And I think I finally learned my lesson on the last one.So well, if you look back, though, like you were working at the government. So like I was so desperate to get out, but like me messing up when you were working for the government, it wasn't it wasn't that stressful or like because I had that ninety six thousand dollars coming in. So like it wasn't until you stop working the government.I was like, OK, this has to work now or work. And I figured it out at that point. Yeah, I did.I've always been like that, though, like if there's stakes involved, I'm five thousand times better than if there's just now. Yeah. So when it comes to financial thing, I'm actually better if I do more of the taking time to actually consume a lot of material.And that's why when Tim and I started doing this, I really didn't know a lot about this topic. And I just did what I do best. I hyper binged and read like twenty five different financial and investing books.And honestly, I should have done that initially. Like to me, that's something that works really, really well. I feel like an idiot, honestly, realizing that a lot of those books are as old as they are.I read a couple, but apparently I never did research enough to read enough books to realize there were patterns and I could have approached it from a much different perspective. And I think I actually would have stumbled onto the dividend approach before Tim had I read those beforehand. Oddly, yeah, I just yellow.I don't read. I know. I know.Like we just have absolutely different approaches. So it's like it's so interesting to see how we get to the same conclusion through completely different means, through completely different experience. As I always say, learn by doing.Sometimes it's painful. Other times it's not. I do prefer to mitigate some of the pitfalls and the landmines by reading.And I need to put that one of our T-shirts. It's learned by doing because that seems to be one of your quotes. Yeah, we have merch I didn't know if we told you guys that I'm wearing one right now. Yeah, our merch is pretty sick It's a mountain problem is though because I told you I got into that a little Etsy thing where I realized you can do certain stuff so I was like, yeah, let's make t-shirts and The one place was on vacation through Christmas So we were actually gonna send some stuff out to F&A van life to support our pimp our stuff for us But um, I offered I we ordered a sweatshirt that was supposed to be for Tim But I guess because it's made by Chinese people The Chinese large is not the same size as an American large It has the broadest shoulders for his structure and he's big boned in general.
He does actually have big bones he's not fat by any means and like he likes taller like longer shirts and I'm more like chody and my like Whatever just in general. So I'm very compact. So I'm actually rocking a sweatshirt.
It's a little looser than I'd like like as a normal one But it's sick. Yo, it is so sick If anyone's listening you want merch you have to email us because the merch is sick Like it's really cool. Like ah, does the website have the logo on it? Um, I can put a link in the in the show nuts to our if you go to the website You see what the logo is a logo is a big mountain with the dude with the riding a bike up a mountain pass You're on the email.
It's in every email. It's it's sick. So we got merch.
So yay for us Tim just wanted to wear stuff for the gym. I do want to wear stuff the gym people like whoa, that's cool Where'd you get that like it's mine bitch But he can't wear it cuz his shoulders are too big and he feels like his butt cracks hanging out It's like a those but I don't know why you can't just tuck one of your longer shirts in shirt You crop top. Yeah, it's like a sports bra You were so talking smack But that like it's like all I got like I said It's a very important part of any any person that's just started out or if you've been investing for a few years But you've actually never taken the questionnaire It'd be something that you should take just to make sure your portfolio meshes up to what you are as an investor It'll help you in the long run And like I said, if you've started out or if you ever ever used a financial planner, they've they did they've done the same thing They might not ask you the questionnaire verbatim.
Like here's question one To you and then they'll fill out they'll fill this out so they can come up with an investment plan That's tailored to what you said in the in the interview and I think in general I did make that comment But I think all new investors Generally are not in the aggressive category and the aggressive category is the growth stock you had that down in the email You closed it already But you had that like generally the aggressive profile is more geared for people chasing growth stocks And that's I think the biggest problem that like these new investors and that might be why 95 to 99 percent of investors lose money. It's because they're not actually aggressive investors, but they're Investing in growth stocks or they're chasing well, they're chasing growth stocks, but if you actually combine their Not knowing who they are as an investor with the biases. We talked about They're chasing growth stocks, but they figure Everybody else knows what the growth stocks are.
So they have the herd mentality. So they actually never actually identify their own individual Stock trading method or their preferred method. So they just kind of follow the herd and the herds like almost always wrong.
So Well, they're right for a time period but it's the fact that you have to know when to get out I think the hardest part about the growth aspect is knowing when to get out and We even fell prey to that with that whole class crypto run Like we were we made over a hundred percent in crypto when we first got in We got a little like oh, this is really cool. And like weren't aware of the whole having and that we We were naive, right? It was not. I think there was a naive.
I was definitely Naivety naivety, but it was also like when you're in a bull market It's super easy to make money if whether it's a crypto bull whether it's a stock But you don't know when it's gonna end and that's that's the bad I know when we first started her mom's account like no matter what I threw money into it went up and I was like Well, dude investing is easy So you can get that false confidence and that's exactly what happened with crypto and then when it hit the freaking crypto winner We were like damn her mom's portfolio has changed probably 90% from when I first started to when I first took it over I was just throwing money into like a different Income investing type stuff and it was all going up. I was like, well, this is income investing is easy as hell and then when sideways and Was that 20 20 21 and 20 22 was really bad and like I had to like like, okay, so I did something wrong Well what I did wrong is when when you're in a bull market Like I said, you can invest in anything and everything goes up, but you might be getting into it like it's overvalued So I was buying over Value I was my purchase price was like 20% higher than it should have been because I wasn't paying attention to the valuation That's where the that's where the actual value part of the contrarian value income investing came from because I noticed okay When I started putting the PE into the thing and said well, this is actually undervalued compared to its peers it made it made all the difference in the world like her mom is up so much money and like this is like second half of 2022 and shit was still bad and I started doing the value value investing with income stocks and like dude She's up so much like she's up. I think She's I 20 or 30 percent since I started doing that.
It's insane so there's two different ways to approach that you have different climates in investing and you either have a different strategy for each climate or you do what Tim kind of has created with a strategy that essentially Weeds out stock specifically no matter what climate we're in because it just rules out the stocks That are like there's like there's investments. I'd like to get her into but they're overvalued like they're either Par valued or overvalued so I can't get into I think Tim's approach is actually better because it's something you apply Consistently, so when you create that habit and that discipline, you don't really have to worry about the environment as much I mean You'll consider it in here and there or even just listen to us to keep up with the future like Projection of where we think climates or environments are going like like you obviously have to have some knowledge of current Events because like some but I'm saying all office rates are undervalued right now So if you bought an office rates, but they're gonna go to bed because like no one's going to the office You got a key kind of have to know the macro trends Yes, you do, but that's I think maybe only 20% of it 20% of it Whereas the metrics are more 80% metrics or everything. Yeah, so I would consider that like an 80-20 a Pareto principle I would think if you if you stick to the metrics That's probably 90% of it.
You just have to you just have to know in passing like, okay We're in a bad environment for office REITs. So no matter what the metrics say, you know, it's a bad environment for well and then I think you could just pivot to basically the consumer perspective where it's like would I buy something when I know that this Is something that other people are not? Doing or like you can even turn that sideways like right now Like last year tech was just phenomenal like most tech stocks went up and then you have like the AI stocks are all up Well, you know that okay So, you know, the macro trend is that technology and AI is booming? So then you actually have to use that macro trend combined with the metrics. Okay.
So is this overvalued? Oh, it's overvalued So it doesn't matter that tech is booming if it's overvalued you're gonna lose money I mean that can get a little harder because sometimes you don't know how long those runs are gonna go and that's where we get into the like that's where we're usually wrong or like we're less confident because It's uncharted territory basically, so we really don't know how high some of this stuff is gonna run and but if we're too We have an idea, but if we're too hopeful, that's where you get caught with your pants down and you act like for a prime Example would be the stock in the video the video it seemed because it's like $400 It went up like 70 some percent or 80 some percent. I forget that maybe even 100% last year But if you look at the metrics of the video compared to its peers, it's actually still undervalued So it should in theory go up this year Even though everything everything if you just looked at it and said there's no way in hell I'm gonna buy a stock that doubled last year. Mm-hmm I'm not gonna buy but if you look at the metric you live in the metric say oh Well, it's still undervalued by like 10% so you could still make 10 or 12 percent buying the video I see I said, I love I love Tim's like the way he's taking everything and broken it down like that Just totally tickles my fancy for sure.
I would never own a video. I'll just do in a video me yield max Just that's why I said when you have that other option you see what in a video is doing and then that actually to me solidifies that the yield max is is a really good way to generate the income while still kind of having that price buffer because The yield max sort of follows the trajectory of the Nvidia So if Nvidia is still got that price valuation to go or another ones Tesla Tesla like went up 70% last year But it's had a lull and it's like undervalued right now So I would imagine if you're one to invest in Tesla, you could make probably 20% Yeah, the metric saved by be about 20% but I just do the Tesla yield max because I actually want income I don't care the growth aspect doesn't tickle my fancy because like to get the money you actually have to sell the stock Yeah, and I don't like that It's like I want to meet you once you once you sell the stock then you have to pay taxes on it Like and that's actually that actually might be my problem with gold the fact that gold isn't really worth anything Yeah, like it's not really like you can't well, that's everything's not worth anything till you sell it That's why I love the dividend stuff so much and I was actually gonna say We were just talking about Tesla and Nvidia like those are growth stocks. So to me again aggressive aggressive profile that's probably not what you're gonna be in as a new investor even like Here's what happened with me is I noticed that I was like, okay, those are growth stocks I don't want I don't want to be in they don't pay anything and they're like that you never know if they're overvalued or Undervalued so I was looking for alternative ways to make money off of them and I read that's how I came across the yield max I was like, oh I can actually invest in Tesla by me.
I'll granted its options. It's not actually the Tesla stock, but it's options on Tesla So you're still investing in Tesla, but you're making 70% per year. I'll sign me up.
Yeah And that's where we took that risk on because we were like that makes a lot of sense It's not it's a risky move like if you looked at like if you look at that spectrum that we were just talking about like the Tesla yield max is more on the aggressive side because it's Yeah, the volatilities, but to mitigate that risk to mitigate some of that aggressiveness We only put a small percent of the portfolio I put 4% of the portfolio into Tesla and then I'm not doing anything until I like I get my dividend every every month and Then I just put that in other stuff and I document okay I got two hundred and eighty six dollars from Tesla and we learned that strategy through crypto failures So there was some positive the whole crypto what the hell happened? I mean even when we first started with crypto is kind of doing that same thing Like I wasn't my aggressive stupidity hopefulness came in and hijacked some of that but what I was gonna say was the nice part about Tim's strategy is even if you're in the conservative area you can Ease faster step into the moderate because the dividends Give you more of a safety Margin of safety and a cushion that if you if you mess up a little bit on getting in at the right time or the right Price those dividends actually like booster. It's like the bumper cars in bowling It keeps you out of the gutter basically like if you were looking at say Hercules We just discussed Hercules in the BDC Hercules yields ten point nine percent So to me you have the the dividends coming in it's gonna be ten point nine percent So if you like say you overpay by still like say five percent or so like you're still gonna make money throughout the year It's not gonna be the ten point nine, but it'll be the five point nine But so you do have leeway because it pays your your your yield actually gives you leeway on your entry price Well, I think a really good example too of what we were just saying is we saw somebody on Twitter Being hesitant about getting into ECC and Tim's like I don't even understand that because every single time I've gotten into ECC I've made money because of the dividends ECC if you're not familiar, it's a it's a Eagle something another credit credit They're basically they're kind of like a BDC they yield like 16% like so you have that 16% leeway like okay So if I overpay by 12% you're still gonna make 4% throughout the year So I don't know how they lost money. I really don't because they were looking at the chart and they're like well This is going down It's like yeah But if you factor in how much it went down versus how much dividend you're getting paid Like the higher percent of dividend more than makes up for the loss of another good another one That's a prime example like that would be like OX LC and OXSQ like they're both smaller Lenders type places that you both yield like 16% and like one of them's a $3 stock Oh, that's OXSQ is like 289 a share Penny sucks.
So like and it yields like 16 or 18 percent like I've never lost money in that one either It sounds like we're aggressive. But once you start applying like I Hate to say it but basic math to it. It's not really that aggressive Well, and that's where we are gonna do a risk episode at some point that really breaks down all the different pieces Cuz that's the thing when you look at stocks from a dividend perspective.
You're looking at multiple different aspects and not just the growth Valuation that everybody else focuses on and maybe a couple metrics like PE and stuff when they focus in that area This takes so many different things in and yes, it's a little more complicated But it has a lot more actual safety margin. It has a lot more growth potential But I'm saying you just look at have to look at more facets and do like an apples-to-apples type thing like you have to do a little more work from calculating math, which When we do that episode I will explain to you exactly how I Created a apples-to-apples Even if it's crossed different sectors basically Simplify it is you just take the dividend like say and you just take the purchase price into 10,000 so you just make 10,000 your anchor point back to biases $10,000 your anchor points you get as many shares you can for 10,000 multiply times a dividend to give you how much you're gonna make per month or per quarter and You do that for every investment you're thinking of then you can like kind of then you can kind of line them up like okay I'm gonna make the most on that one And then you have to go back and look at the PE and make sure it's undervalued But it's actually quite simple once you establish a map yeah, so it's a system process and the more you practice it the easier it gets because it becomes ingrained and trenches a habit and Then it's easier to be a discipline So like I mean, we're not wealthy by any means but like I'm pretty sure if I had like a million dollars We would be beyond we'd be running the country because if we yeah if we had another hundred thousand dollars knowing what we know now Dude, we'd be set because like what we got going on Like I don't like I've said before I don't see anyone else doing it. There's either contrarian investing or the value investing I've never seen a contrarian value income investing I haven't and I've been looking for this tech so I can like compare notes and maybe make this better and I haven't seen it I don't think anyone does it they either buy when everyone else is selling or they just look for like the best deals They don't actually combine the two.
I don't understand why well, that's I really truly and I've never seen anybody Actually even talk about this type of stuff with dividend stocks. I'm so excited about this because I love taking Random stuff and creating blended strategies like this if anybody's gonna do it I'm actually gonna figure it out and then Tim and I will probably end up comparing notes after I get through all these books I have on my to-do read list dude Like it combines like four different show and I love stuff like that because that's exactly what I do with Everything so I love that. I love that I'm hoping that more people more and more people listen and more and more people sign for the email if you haven't you need to The emails are just awesome.
They like like every week you get ten stocks that I think are rocking that Ex-div so Tim They're essentially like an entire blog post in the beginning But if you're not interested in that they have very you can scroll down and you learn a little bit about me I tell little stories here and there. Yeah, but you can scroll down right to the stuff That's like time-sensitive for every week So it's like if you're not into the whole reading thing and you prefer to consume it through The podcast because we always do the episodes like weeks down the run But if you want to have that information first before everybody else like get on the email subscriptions We can't I can't like stress and we promise not to spam you like I we actually send out one email Maybe if I like something shit the bed. I'll be like, oh this shit the bed Emergency Before I get some word on special dividends there they're going on that week like two days from now Like well, this one's actually going special dividend Like I think one was a Main Street Capital had a special dividend I was like, well, that's a really good stock and you haven't got into it yet It actually has a special dividend, which is like a hundred percent what you'd make Like that's important you might want to get into Main Street if you haven't thought about that's worth that extra email but I'm glad we're both on the same page with not like in spamming because I like I can't and I don't try to sell Anything.
I mean, I haven't tried to sell anything yet Even the merch I haven't even tried to sell that yet Actually, I think ultimately that's how I'm gonna want it like to make money from all this is just people buying t-shirts And I'll just take that money and apply it to all this stuff. I have some plans We'll see because dude the merch is sick. I'm not gonna I just it's sick.
You're so out of control My next episode I plan to do the utility one but I just like it's that that one's gonna take some time because there's like hundreds of utility stocks and I actually have the Reads were only you said it was only a few stars like 70 some reads and there's only like 43 BDC So those were easy to easy enough to get through hundreds because utilities encompasses Obviously utilities, but then you have renewable energy and then you got oil and gas and you got Telecom and I mean there's like so many different sectors that fall into the utility area that it takes a while So that's why we did this one first So I hope to have that done so we can get the this up before the end of the month end of the month But we'll see so we will see you in the utility episode. Yeah, have a good one. Take it easy You're interested in the merch keep it on you're interested in the merch Send us an email and we'll get the links out there because I'm not completely done with all that for now Yo.