Ep 18Investing: Smart Ways To Grow Your Money
There's a trick in the financial industry: why 'just 1%' can cost you 25% of your future returns
1% is of the whole pot... it's 10% of the whole growth. So, you're giving away 10% of profits.
Eli Fried
Investing: Smart Ways To Grow Your Money
with Eli Fried
Today, the barriers to be a solid investor is zero, zero. There's no reason why anybody is not investing in an automated simplified fashion.
More moments · 6
Try this · top 3
Quotes
“Human nature is when there's abundance, you think it's going to go on forever, and when there's a difficult time, you think it's going to go on forever. (on Yosef and recency bias)”
“You need to find good snow and a really long hill. (paraphrasing Warren Buffett on compounding)”
“1% is of the whole pot... it's 10% of the whole growth. So, you're giving away 10% of profits.”
“He confused a little bit of luck for skill. (on a friend who wanted to quit his job after a few good Robinhood trades)”
“If you have any credit card debt, which is burning through a hole in your pocket at 18, 20%, you got to get rid of that because that's like financial cancer.”
“That to me, that's like driving 90 miles an hour during the rain because you're in a rush. (on chasing high yields when rates are low)”
Takeaways
- 1 Buy low, sell high goes back to Yosef: store in the years of plenty for the famine. Recency bias, assuming today's conditions will last, is why that plan took a chacham.
- 2 The Gemara's advice to split your assets in three (land, business, cash) is cited in textbooks as the origin of diversification, though he says it is often misunderstood without the meforshim.
- 3 Compounding is a snowball: the early turns add little, the late turns add a lot. Start young for more turns. Doubling in 10 years is only about 7.2% a year, so 7.5% a year beats it.
- 4 Survivorship bias: you hear from the winners in shul, not the many who lost. Look at the whole picture of risk and reward, not only the success stories.
- 5 Good advisors raise minimums as they grow, but there are good advisors for smaller accounts who can't afford to market to them. He and Naftali Horowitz worked with Living Smarter Jewish on connecting people to them. For simple needs, all-in-one funds do the job for tiny fees.
- 6 Investing is about 80% behavior. The hard parts are saving, avoiding FOMO, and not reacting to other people's stories. The Vanguard growth fund he cites returned 11.1% a year over 10 years and 8.65% since 1995 (as of December 2021).
- 7 Fees compound too. A 1% fee on a 10% return is 10% of your growth and can cost about 25% of future returns over a career. An advisor earns it through planning and tax structuring, not by putting you in a fund you could buy yourself.
- 8 Gambler, trader or investor: know which one you are. Trading needs real market expertise. Someone with a full-time job should stick to simple long-term investing.
- 9 For frum families a house often comes before extra retirement saving, because prices in frum communities rise fast and moving is hard. A 30-year fixed mortgage on a solid home is, in his view, the best inflation hedge.
- 10 Real estate is something Jews tend to be good at (Charlie Munger said he didn't want to compete with Chassidim in it), but a deal isn't good just because a relative pitched it. REITs give you real estate with daily prices, which makes panic selling easier.
- 11 Aim for about 7-10% a year long term in a balanced portfolio, 10-15% for a hands-on "enterprising investor." Chasing more means taking risk you may not see.
- 12 The frum community has a real income side too: free emergency services, job networks and a safety net that would cost a lot to buy. His grandparents came with less and still saved, so we can too.