2021 In Review

Almost as good as my podcast. It's like a podcast rivalry, Mike, how are you? 


Say, Hey man, we're losing our 


younger demographic as we speak, here's the thing everyone wants to do an end of year. Let's look back, the year that was, I feel like right. 


now, especially with this Omicron wave, people are saying, no, I don't want to do that. I don't want to think one more second about the year that was, and yet we're going to do it. 


We're gonna do it because I do think it's inherently interesting. And. Maybe we have too much of a, we're finishing out the year, it's dark, we're literally recording this by the way on the darkest day of the year. So it's it's dark, it's depressing. There's an Omicron wave, and I think people are a little downbeat. 


And I challenge everybody, just given a moment of thought, where were you? January and February. It was, it seems so long ago. And think of all the wonderful things that you have accomplished this 12 months. Undoubtedly, you have come a lot further, gotten a lot of things, done, learned a lot of things, and it's just amazing to be able to look back and say, wow, I can't believe where I was a year ago and how much have accomplished and move forward. 


And so that's why looking back and taking stock of that and then getting ready for the next year, using that, looking backwards and say, what did I accomplish? What was great. And using that as a springboard for understanding why I got another 12 months next year, what kind of thing? 


Really looking forward to getting done. 


The other thing I like about doing this kind of a show with you is that you have much more expertise, obviously. Business, personal investing, personal finance, that kind of whole sphere of life. My focus is a lot more on current events, politics, society, government. And so I, I feel like that's a nice intersection, a nice way to think about, one's own life, one's own picture, through the lens of big picture events and how those two intersect with one another. 


All right. Have we preambled. 


What's the crazy stuff that you're going to think back to. 


At the top level for me. Is the difference between what the economy is doing and people's personal lives versus the stock market. I always view the stock market kind of in isolation, just with the numbers, like whatever it's giving me whatever it's saying. Hey here's where it is today. Here's the makeup of the market, what it's doing in isolation with, from the economy and the news and everything else. 


And it's just continues to be amazing how the two. Our divergent in so many ways, the market's been on an absolute tear for the last couple of years. And our personal lives, of course, it had lots of ups and downs. 


So if you bring. So a negative baggage perspective to it. So I can tell you. A negative story that you'll find in there. It's we nearly had a coup, so that's not great. And then we had the highest inflation that we've had since the early eighties. That's not fantastic. Either. Those two pieces of data alone would be like, not such a good. 


On the other hand, we didn't have a COO and, we may have come dangerously close, but I think the reaction of wall street was interesting to that. It was that, we prevailed, we came through that. We came through this period of instability and it set off this amazing run-up in the market where the people who try and look ahead. 


So people built up savings for three months in the fall. People in consecutive months, we set new records for people leaving their jobs because people were so enthusiastic about the possibility they knew they could find another job. And so people were making a lot of personal choices about, I don't like the track that. 


I can find something better. And that speaks of optimism. Obviously wages are up 5% year over year. The GDP aggregate of the output of the economy is up very strongly. We had a slower growth in the third quarter, but very strong growth in the second quarter. It looks like we're going to have strong growth in the fourth quarter. 


You can tell yourself all of these data points as well and say, There are real struggles and no one likes where we're at with the pandemic right now, but there's an awful lot of good news embedded in that 


If you're an employer it's really hard to hire people right now. But at the same time, People have a lot of people have money, have saved money, continue to spend money. And that's the big news to me over the last couple of years is that people have money and continue to spend it. And that's why, when you talk about inflation, the supply and 


the demand for goods is really high and that's straining the supply side. And so that's one of the reasons you get a lot of inflation. So it is good news around those fronts. And that's why the stock. Has responded the way that it has businesses are still producing goods and services. 


There's still demand for those products and services. So they're making record profits and continue to grow. And so the stock market is rewarding them for that situation. And quite honestly, I see that. I don't see any reasons. Of course, I can't know the future or see the future. But on that front, yeah, things are continue to go well. 


So I would not be surprised at all if the stock market continues in that direction until we get that next real blip or change or something comes along that we can't foresee. 


And this is a little bit of a departure. I do this show with you. I do at other show with the host of Motley fool money, it takes a different perspective, an economy wide market wide perspective. You focus more on the personal view on the market, but one of the things that I've learned. 


Through that lens through the, both the personal investing in the stock market wide lens that comes back and informs the thinking I do about politics and government and policy is you constantly preach the wisdom of taking a long-term. Perspective and not responding to rapidly and in to knee jerk away to the ups and downs, the vicissitudes of the market. 


What's going on in the financial picture right now. It's the only way to avoid a performing worse because you miss time things inevitably. And you've pointed out that 80% of funds that try and time the market do worse than just index funds that let things ride and go with the market. Anyway, When we go through your, like this. With so many ups and downs with so much uncertainty, I've actually found it very helpful to have these conversations with you week after week, looking at a different slice of personal investing, because the metamessage overlying, all of it has been. Take a long-term view. 


So I find it very helpful. I'm happy to turn now to talk about stock markets and whatnot, but anyway that to me is the intersection of those two topics, your expertise, and what I tend to focus on. 


I was just looking at the numbers. It's up over 16% annually for the last 10 years running. So if you have been a buy and hold investor over 10 years, just continuing to put money in your 401k, doing that savings, just investing over time, you have done tremendously well over the last 10 years. 


So I said earlier, I kind of. put the stock market in one bucket, put the economy in news and another bucket. Let's just look at the stock market and your portfolio. Now's a great time for revisiting that, checking in with your portfolio balance, checking in with the stocks versus the bonds mix. 


Because as we mentioned before and rebalancing, since the stocks had done so well over the last two years and 10 years, you want to make sure you have the right risk allocation for your portfolio. Stay in it for the long haul. If you have 5, 10, 20 years still of. Keep chugging along and keep putting money in there, keep investing it. 


That happens all the time. Every five or eight years, we have a 20 to 30% decline. And so that wouldn't surprise me. I'm expecting that to happen. So let me say that again. I'm expecting the market to be they're up 20%. We're down 30%. Either of those are completely possible. And my portfolio is allocated in such a way. 


I'm ready. I have a plan if one of those happens or if the other happens. 


That's a pretty good litmus test for, are you well defended against that kind of volatility or the possibility that things could go up 


or down? 


So if we're sitting here at the end of next year and it's down 30%, trust me, we'll be having a different kind of conversation, but it would be the same outline, which will be, Hey, I'm still buying and holding. I'm still not spending these, this money for five, 10 plus years. And so on paper, it has gone down. 


But in terms of reaching my goals, I would still have an expectation. That the stock market will go up that six, 7% a year on average, over the next 10 years. Hey, it's down 30% right now, so I'm hoping it will continue to go back up and I will still reach my goals in 10 years. 


As we do, I know we're looking back, not forward so much in this conversation, but given how you've positioned in all the year-end housekeeping that we just talked through in our recent shows, here are the steps to make sure you're saving on your taxes, positioning yourself. There is a possibility that the market's overheated, is there anything that could happen that would really make you think, oh boy, I'm on the wrong long-term plan. 


I need to really readjust my longterm 


You're probably way more invested in the U S. Then in the international markets. And I really think you should revisit that it's rewarded you for the last 10 and 20 years. The U S market has gone up significantly more than the international market typically met that flip-flops every day. So like 10 years, the international market will do better. 


The next 10 years, the us market does better. So it's on these very long time horizons. If you want to think back 10 years what's happened in 10 years, there'll be a whole different conversation, but so every 10 years, but in the U S the last 20 years, the us has outperformed. So I still have an expectation that potentially the international outperform. 


In to answer your question. No, it would be something really. I left it. Look, we already had a pandemic. We almost had a coup these things and the market's still done well. So that gives you some confidence in what can happen. But I will say I would significant, I would look at your us versus international and continue to have a very good balance between those two 


And I guess the one scenario is look, NASA did send up the dark mission this year, which was meant to test whether we could deflect an asteroid that would come along and destroy all civilization and send us the way of the dinosaur. Maybe there are exotic scenarios there where you'd have to intergalactically diversify your portfolio to protect 


Before, before I go, all Christopher Nolan on this you wanted to talk about as part of this discussion, clean energy, clean tech ESG in general, it's everyone. 


What ESG stands for and why does this come into mind? As part of this year? Look back. 


So really it doesn't have the, past results are no indicator of future performance. So take that, understand that in terms of E S G and this past year. So this is environmental, social governance, right? That's the ESG so sustainable investing. This used to be called Sri, socially responsible investing all of these terms about this green investing in investing, you were putting your dollars towards investments that are better for the world, whether that's climate change, gender diversity. 


Women leadership, whatever it is that you think is going to make a pot, the world, a better place, all of that kind of falls under this umbrella. And it has really taken off this year. That's why I wanted to highlight it because of course all the listeners out there will have heard of these things. 


I've been reading articles about this. There are new products and funds being promoted all around these topics. Everybody's very interested in having the best company, towards these things. And. That's great. That's good. The problem is that when there's a lot of demand for something, then you have to recognize what you're reading, who it's coming from and what their motivations are. 


All right. So I always say the news outlets are there to write new stuff. Okay. So their motivation is for you to keep clicking, keep coming back every day, spending time on the website or reading the next article. That's what they're there for. So you know that, so that's cool, and you get good information from them and that's fine. 


Recognize that wall street creates funds, ETFs mutual funds, and wants to sell them. They get paid the more money they have in their fund, the more money they. So when you see marketing materials, Hey, this is a great ESG fond, or it's great at this or that recognize they would like your dollars because you're buying a product from them. 


You hope to make money. They hope that you make money, but they also are getting paid for that. So that's the problem with the overarching. This part of the industry is that we're seeing a lot of that because of the demand for these types of products, you're seeing the supply ramping up and the marketing ramping up and it's unclear. 


How much good your dollars are actually doing when you purchase one of these products? 


It's like when people say don't judge a book by its cover, actually the cover is a fantastic source of information about what the book is about, and maybe you'll learn about the author and Hey, this is an author. She's written some stuff I've read before. And I liked those things too. Maybe I like this book anyway. 


Past performance is no indicator of future performance. I get it It's just that seems wrong. What do you do? What do you do about this greenwashing factor? If you are interested in, I don't know which word has a higher bar factor for me? Sustainable. Or responsible. They both sound pretty like, all right. 


get off your high horse here, people. 


If you're interested in the kind of investing that also has a bit of a social mission that does something good in the world with your money, how do you cut through the greenwashing factor and the fact that so many companies want to market that, they're doing good things. How do you identify things that align with your interests and are doing something right. 


In terms of their internal policies and controls, how do you figure that out? You could spend all day and all year trying to just analyze individual companies with your perspective and that's the thing we're humans. So even if you believe, oh, this has got this kind of rating. 


That's some human, trying to look at the data and trying to say, oh, I believe this about them. And it's hard to tease these things out on an individual company level. Most, every company is in the middle of some kind of gray. Like they do some great things, maybe some not so great things. 


And and then to you personally, how much do you care about which of those things? All right, so I'm just highlighting. It's a very challenging field. Okay. That's one aspect to try to figure out where to put your dollars. Just because you invest dollars in that company, does that change the world? 


Okay. And this is really important. You have to think about what it is that you want to accomplish in the world. What are your goals? If your goals are, I'd like to do more for, to fight climate change. Okay. Good goal. Great goal. What can you do about that? Is investing in a company that makes clean energy, the best way is investing in a company that's been in the oil industry, but is trying to make more clean energy, a good way, or is spending your time and going out and doing activities is, a best way or it's putting solar panels on your own house the best way. 


So there's a number of ways of trying to accomplish that goal. And I'm not convinced that putting money into company. That are doing some good things in the world is the best way of impact, you know, reaching your goals and impacting that. Yeah, there's quite a few things there. Now we'll say this at the end. 


I don't want to say, this is the old sugar arguments Hey, just so a little bit of confusion and then people throw up their hands and be like, oh, whatever sugar is probably fine for you. So I don't want to, I don't want to go too far. I do think it's good. There's some great funds that maybe limit. 


Quote, unquote, bad guys, if you don't believe in tobacco or guns, things like that, you can get those out of your portfolio and then they're not getting your dollars. And that might be a great first step. And that's a pretty easy one. You can still use low cost index funds. 


But the rest gets pretty hairy for me. It really depends on your personal goals. And I would suggest that if you really wanted to invest your dollars, In something that you believe in that you have to look specifically for those investments and not just take a shotgun kind of bucket wide bucket approach. 


It's a signal between two parties in a transaction. And so if you're buying this company, how much of your message is getting through in aggregate? One could argue. Yeah. 


I mean over time, if you do good things, That should make a difference. On the other hand, the other part of what you're saying is that marketing can really muddy those waters so much that it's unclear what signal the market is receiving and what signal they're sending back. 


That does sound like a challenge. I wonder a little bit, but let me push you with a thought on, you have to get specific. It's unlikely that just throwing money at a broad index of, oh, this is generally good. We'll work. What do you think about the idea of hand selecting a portfolio of here are a few companies or a few projects, investments that I think are generally good. 


And I'll give you a specific example. I did this kind of approach recently with charitable giving. At the end of the year, I decided that I had. My kids to get a little bit of a lesson in responsibility in charity and kind of what the world of need was out there. So I set a budget and I told the kids here's a list of eight charities that I've selected for you. 


And I want you to research them and do a presentation and you decide here's the budget. And you can put all the money to one charity, or you can do it among several. And the function of it was. Lesson than anything else, because I don't think there were any bad choices on the list, but more to the point. 


What do you think about the upshot of in your own personal investing? If you're interested in socially responsible investing of saying. I'm going to, pre-select a group of potential investments that I think are pretty good, but I know there's an uncertainty factor with all of them. And some of them may be more marketing than reality. 


But if in aggregate, invest toward that bundle, not a broad index, but that bundle, then I'm mitigating some of those uncertainties and ups and downs. And in aggregate, I'll probably be doing more good. That's more aligned with my values. 


And again, how to best reach those goals. Now, investment could be part of that. So you've identified a few companies that are moving in the right direction, that you really liked their mission and you can invest in them directly. And it accomplishes a couple of things. One. You're supporting organizations that you really believe in. 


You're hoping to get some returns. So we're not talking about charitable giving, but I put this under the bucket of impact, investing, taking $10,000, put it into a specific investments, one company or one startup or whatever it is hoping they do really well hoping you get a return, but you're really aligned with how they're operating, what they're doing in the world. 


That's great. Recognize, even if you did that 5, 6, 10 times, that's not a diversified portfolio. So I would not take your retirement funds and put it into 10 or 15 of these different ideas and say, great, should get a pretty decent return. Now you have no idea. You need to get above 40, 50, 60 companies across different sectors, U S international, all kinds of stuff to get a nice diversified portfolio. 


So I would not do that. It does two things. One puts your dollars to work and things that you hope to do well in the world. And to, you mentioned this, it makes you feel really. About that you've done research. You're putting dollars in there. You get to watch it, whatever they're doing, because you're going to follow them and track them and see how that company is doing or that ideas moving forward. 


And that'll create a lot of a lot of positive energy and emotions. And I really believe in that aligning live in alignment. With your goals and there you're doing it. You're saying, look, I didn't take a hundred percent of my retirement portfolio, my investment portfolio, but I'm putting some dollars to work and things, I believe it makes me feel great and it makes me be involved in the progress of these things. 


And that's wonderful. 


It's look, there are people who are so into crypto, there are crypto evangelists out there, and then there are people like me, who I just, I don't want to deal with it. 


I don't want to think about it. I don't like it. It scares me. It's new. It's what's a, what's an NFT. Why do I want to buy your doodle of a thing that you that, oh, and it's only one of these on the internet, so it's worth something, but look, that's a whole other discussion. I do think we have to talk about crypto a little bit because when it comes to the markets and policy and government and everything that we focus on this show, it was a big deal this year. 


Invest in things, you know, if you only invest in companies that make products and services that people want to buy AKA the U S stock market, the international stock market, I think you're going to be fun. People are still going to want to buy those goods and services. And those companies will do well and they'll have profits and therefore shareholders will be rewarded. 


And I think your investment portfolio will do just fine without having any crypto. All right. So that's point number one. Now, in terms of looking backwards on crypto this year, of course, it's been around for a few years. We're talking about Bitcoin, Ethereum, those going, all these things and FTS they've been around for quite a few years. 


But this year in particular, I think it's really taken off the retail investors have gotten more involved and that retail investors. Everyday people. It's now easy, with Coinbase and other areas to go ahead and buy these. I it's coming out on all kinds of things like Venmo, I think now has like investing crypto. 


You can click the button. So it's going to become more and more mainstream that you can put dollars into these digital assets. And I have no idea what's going to happen next. Honestly, it's bizarre to me. For a number of reasons. I love the technology, my background's in technology using the blockchain and everything. 


I think this is going to solve a lot of problems. It's going to be amazing. We're gonna see some really cool products and apps come out using these types of features. So that's going to be incredible in terms of investing in it. It could go up and could go to zero. There's no intrinsic value to these, in my opinion, right now, there's, this is not a company making goods and services that people. 


All right. That has intrinsic value, own real estate. You own buildings, you own stuff. If you're a business, so there's value, gold has intrinsic value. It's used in electronics it's used in jewelry, so there is intrinsic value to gold , Bitcoin, there's no intrinsic value. 


You're just treating it to someone else. You bought it for some money and you're trained to someone else for some money because you both believe that it's worth that amount. That's cool. And maybe it will continue to be used in newer ways and continue for people to want to trade it and buy it. 


But that's kind of where I am in terms of investing, looking back on the crypto and all these things, but in terms of investing, just invest in what you know, and what you believe in. And if you do want to get involved in crypto, make sure you have the story for why it is you're getting involved. What's your plan. 


What's your thesis, what's the idea. When do you get in or out? If you're going to that's the planning process make sure that you're have thought about all of that ahead of time. 


You can touch money, but the value of money is something that we've all decided. We all agree. This has some value, but your point is. It used to be that all us money was backed by gold, which has some value. It's a metal. You could do things with it. It has some value or in the case of bonds, we have a long shared history that we've built up in our minds that they're backed by the enterprise of the United States of America and by our government, which represents us. 


And therefore it has credibility. It has a certain amount of inertia and heft and reality to it that you can literally bank on. You can put faith and stock in it. Again, I'm using a ton of puns. I don't mean to hear what I really don't like is with doge coin and a theory of all these and Bitcoin is that we really are blasted off into the realm of. 


Let's just all agree for now. We'll play, pretend that these are valuable things. And I know the poet, Emily Dickinson talked about creating imaginary gardens with real toads in them. All of these things that we talk about on this show in terms of investment are imaginary gardens, but some of them have real toads in them. 


If it goes down 30%, what am I doing with my clients? Are, do they have the right mix of cash bonds, stocks? So I would first look at that. We have no idea what's coming next. We've said that in 20, 22, but make sure you have a plan if the market's up 20% or down 30%. What are you going to do about that? Now you're playing could be nothing great. 


I'm just going to keep putting money in my four week maximum of my 401k into the target date fund. That was my plan last year. It's my plan next year. Fantastic. Perfect. You have a plan? That was great. That's all, so make sure whether you're at the start of your career, middle you're in retirement, that you know what you're going to do with your portfolio in the stock market pen. 


What happens next? The other thing that I think about going forward as in. Because definitely finally come around. We've wanted, to get to 2% inflation for the last decade. Hey, we finally got there. Oh, wait. We're at like 7% whoops. Too much. I think it's very interesting. I love. Trying to figure out why that is. 


I personally, I think it's a lot about supply and demand which is pretty interesting as well to read about and get to know, but in terms of how it's going to affect your personal life and what are you going to do about it? Just make sure again, that you have some planning around that goods are going up, goods and services are costing more. 


So I was on a recently talking to someone and she said, now's a great time to ask for. It's hard to hire people. This is your opportunity to, you know, if you're staying in the same job. Great. But go in, , ask for that raise. I thought that was really good advice. So things like that, knowing I think inflation will stick around for a little while. 


And so knowing that, just making sure that you're invested properly, I think stocks is a great place to be. When we're talking about inflation, I bonds, we've talked about those. That's a great opportunity to take advantage of if you want to use some tips, maybe in your portfolio for unexpected inflation they tend to do well in that kind of environment and wages. 


Just make sure, your job is going to be keeping up with where you're going and your goals. 


So a lot of where you stand depends on where you sit and the perspective that you bring to it. And I think one of the values of having a plan is that it adds the possibility in your mind. Hey, the stock market might be overheated. But it might not be, it might continue to go up. So what are you going to do in either scenario you're prepared for the possibility and you also have the perspective of where you just came from and look, nothing is necessarily inherently bad. 


Thanks for joining us on financial planning for entrepreneurs. If you like, what you heard, please subscribe to and rate the podcast on Apple iTunes, Google play Spotify, or wherever you get your podcasts. You can connect with me on linkedin or mortonfinancialadvice.com. I'd love to get your feedback. If you have a comment or question, please email me at . Until next time thanks for tuning in