Ep 83How to Invest Wisely in 2025
Bored of 8%? Your friend from yeshiva promising 17% on a Texas deal will probably lose your money
Jonathan Shenkman
How to Invest Wisely in 2025
with Jonathan Shenkman
Investing should more closely resemble paint drying than a day at the racetrack. (crediting the economist Paul Samuelson)
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Quotes
“There's a good chance you're going to end up losing your money if somebody's promising you or insisting they're going to get you an extremely high rate of return.”
“If the listeners to this podcast have only one takeaway, it should be this. What is your time horizon with that money?”
“Shopping around for a few basis points in yield and going to some place that is shady, that you never heard of, that you know nothing about, is insane.”
“A big part of investing and personal finance in general is just being able to sleep at night.”
“If compounding is the eighth wonder of the world, I think automation is the ninth wonder.”
Takeaways
- 1 Time horizon drives everything. Money needed in 0-3 years stays in cash; 3-10 years goes into a mix of stocks and high-quality bonds; 10+ years goes mostly into stocks. Even clients in their 90s need growth to beat inflation.
- 2 Short-term cash options: money market funds (his first choice - stable, liquid, very low fees), CDs (penalty for leaving early), T-bills (treasurydirect.gov), and high-yield savings. Check expense ratios - about 0.05-0.1%, never 1-2%.
- 3 Pick reputable institutions you can reach by phone, and confirm FDIC insurance. Chasing a slightly higher rate leads to messes like one client's 21 accounts at 15 institutions.
- 4 Red flags: default sweep accounts paying a fraction of money market rates, hidden commissions, fees for buying another company's fund, and "low-risk" income funds holding junk bonds. Get a second opinion.
- 5 "Not losing principal" in municipal bonds or cash for 20 years is an illusion - inflation takes your buying power. For the nervous, a compromise like 60/40 plus two years of cash beats staying out.
- 6 Near retirement, keep a "bond tent" of 1-2 years of expenses in very safe bonds, so you never have to sell stocks in a crash.
- 7 Risk and return are linked. A yeshiva friend's leveraged real estate deal promising 15-20% is likely to lose your money. Every sector has its day - tech fell 80% in 2000 and took 15+ years to recover.
- 8 Don't react to headlines or elections. Investors who sold before Obama in 2008 or Trump in 2016 missed record highs, and energy and clean-energy stocks moved opposite to what each president's rhetoric suggested. The COVID crash was over before most people called.
- 9 Focus on what you control: savings rate, diversification, taxes (max workplace plans, Roth vs. traditional, 529, HSA, tax-loss harvesting), long-term focus and discipline.
- 10 Aim to be debt-free, including paying down the mortgage over time. Follow a few measured voices (Morgan Housel, Jason Zweig) and ignore anyone promising outrageous returns.