The Ultimate Investment Strategy

Transcript

Mike:

Hey, it’s Michael Reese again, certified financial planner, founder of the prosperity planning system. A system designed to help you enjoy a prosperous financial life, no matter what the world throws your way. Hey, you see it behind me. It’s a whiteboard. You know, I love the whiteboard right there. Exciting. Anyway, today we are going to talk about the secret behind successful investing. This is a kind of thing nobody talks about, but I promise you after we’re done with this video, you are going to sit back. You’re going to know more about investing than even 90% of financial advisors out there. This is going to be awesome.

Mike:

All right, gang. Here we go. Talking about the secret behind successful investors. You’re going to know more at the end of this video than 90% of financial advisors. This is going to be great. Now, before I jump into this, remember like us, you know, little thumbs up icon below, click that, leave a comment. A nice comment. Be nice, please. And of course subscribed. If you want to share this video with your friends and family members by all means do so. And if you want to talk to me in the team, all you got to do click the link below that says talk to mike.com. That’ll take you to our online calendar. Quick 15 minute introductory phone call gets you started. Alrighty. Let’s dive in. I know you’re looking at this. Like what’s going on, Mike? This looks pretty cool. Right? What? What’s what’s what’s happening here? Well, here we go. Here we go. You ready? Let’s imagine we’re going to imagine.

Mike:

I’m going to show up on your doorstep. I wish I could draw this out. It’d be cool, but I’m going to show up on your doorstep. Maybe tomorrow afternoon, around one o’clock in the afternoon. I’m going to pull into your driveway in the DeLorean from back to the future. You know the car that can go travel time. So that’s what we do. We, I pull up in the car. I say, come on, happened the car I’ve got this pile of cash happened, the car I’m going to give this cash to you. In fact, here we go. Ready. It’s ah, let’s get that on there. It’s $1 million of cash. I’m going to give you this million dollars. We’re going to go back to the past. We’re going to go back to January 1st, 2000, January one, 2000. I’m going to give you this million dollars, right? Come on.

Mike:

Let’s go. And you’re thinking, Hey, I’ll take an easy million, right? Who wouldn’t. So you hop in the car with me. We set the little timer to January one, 2000 and boom. There we are. And I say, here you go. Here’s your, here’s your sack of money. Oh, oh, wait a minute. Wait. Darn it. I forgot. I forgot to tell you something. You can’t take the money back with you yet. You have got to, you’ve got to invest that money. You’ve got to deposit that money at either Vanguard or this company called ABC financial. You never heard of guys like nobody’s ever heard of these guys. We all know who Vanguard is, but we haven’t heard of these guys right. To somebody, somebody else, you got to put it in one of the two places. And the way it works is you’re going to invest it on January one, 2000.

Mike:

Right? And then on December 30, first, 2020. So like 20 years later, they’re going to cash it out. They’re gonna send you a check. Okay. That’s when you’re going to get your money. So who wants to bring a million dollars back with you anyway? Why not invest it for 20 years? And when we go back to today, right? You get a check with all the growth on that thing. Right. That sounds cool. Right? Okay, cool. So we’re from the future. We do know a couple of things. First of all, we know, Hey, it turns out in 20, 20, 20 years later, Vanguard’s still going to be around shocker. Right? Of course they’re going to be around. And then, but in a surprising development, so is ABC financial. They both make it 20 years. Fantastic. So good news. They’re both going to be around second, 8%.

Mike:

They will both after expenses deliver 8% a year on average, they’re going to get the same return. So here we go. Now how about that? You’re going to get a million dollars. You got to put it at one of the two places you’re going to, they’re both going to be around for 20 years. They’re both going to get the same rate of return. And so as of December 30, one, 2020, they’re going to cash out the accounts and send you the track. Right? So let’s ignore taxes and anything else, let’s say that. That’s what we know. Who, where are you going to put your money? You’re going to put the million with Vanguard or ABC. Well, here’s the deal. This is not a trick question. By the way. I mean, everybody, I asked this, I say, well, I put the money with Vanguard and I asked, well, why?

Mike:

Well, because I know who they are. I don’t know these ABC guys. I mean, they, who knows maybe that the next Bernie Madoff. I mean, I don’t know who those guys are, but I know who Vanguard is. So, you know, when I’m given a choice of someone I know and someone, I don’t know, I’m probably going to take someone I know all else being equal and you know what I say to that? Yeah, me too. I do the same darn thing. So of course we’re using Vanguard. So that’s where the money goes. Right? Put a little star there. And here’s what happens. Here’s what happens December 30, one, 2020 rolls around. So the money has been there like 20. I think it’s actually 21 years technically, but it’s been there 20 plus years. You get your check in the mail. You get a check, you open up the mail.

Mike:

You’re all excited rights come from Vanguard. Like, oh, it must be my check. You get it. And you open it up. And here’s what you find that check is worth 3.7, $5 million, 3.7, 5 million. You’re like, yes. Right. That’s a great thing. That’s a good day. Isn’t it? That’s a good day. And you’re all excited. So if it were me, I’d get that check. I’d be like, yeah, this is awesome. And I would go to my wife, Becky and I take, check it out. Our count’s 3.7, 5 million. You know what she’d say to me? She’d be like, that’s great, Mike. Now go take out the trash. Right? I mean, cause that’s what she would do to me. And I don’t know, maybe the same would happen to you. So there I am taking the trash down, like muttering to myself. Oh my gosh. I got like almost $4 million.

Mike:

I’m still taking out the trash. I mean, you’d think my life would have changed it hadn’t but there you go. That’s a good thing. But then while let’s imagine you’re down there doing the same thing, taking down the trash and as you get to the end of your driveway, you meet your neighbor, Bob, right? You’re Nate, your next door neighbor, Bob. And here’s what happened when I took you to the past and we deposit that million dollars. You put it at Vanguard. I brought you back home. I just rolled over to his house and I did the same thing with him. And in his case, here’s what happened with your neighbor, Bob? He had just gotten off the phone with Vanguard and he had like the one person at Vanguard that just, I mean, it was one of those phone calls where you just hang up.

Mike:

You’re like just frustrated as all can be. It’s like the worst call in the world. And you’re like, man, I hate those guys. And so that was, he had that one person at Vanguard that morning. So when I picked him up and I gave him the same option, he was just like, I’ll take anybody other than Meg. Are you? You’re telling me these ABC guys are going to be around. Yes. You’re telling me I’m going to get the exact same return net of fees. Yes. He goes, all right, I’m going with ABC. Cause I’m mad at Vanguard. It happens. Right? So you see him at the end of the driveway and you’re down there. You’ve just gotten your check for 3.7, 5 million. You’re all excited. And when you see them, you’re like, Hey Bob, Bob, get your check. He looks he’s like, I know. Right. It was awesome. I got my it’s like I get 4.7, $7 million. How cool is that right now? By the way you got your check. It said, wait a minute, it’s a 3.75 Bob got 4.7, seven.

Mike:

What the heck is going on? What the heck is going on here? And you don’t want to sound stupid. Right? So you’re like, yeah, Bob was awesome. Yeah. Cool. But then you go back in to your house, you look at your check again and yeah, it says 3.7. It does say 3.75. So you’re like, what’s going on? So, so you pick up the phone, you call me and you say, Hey Mike, like, what’s going on? I said, Hey Mike, I got my check today at 3.7, 5 million. Awesome. Right. It’s like, yeah, yeah. But I talked to my next door neighbor, Bobby. He said his check was 4.77. Is that right? Like, yeah. Yeah. That’s right. But what’s going On here? How I thought we’re getting the same rate of return.

Mike:

Yeah, you did. You did get the same rate of return.

Mike:

Well, what’s going on,

Mike:

Right? That’s how you’d react to how I would react. Well, here’s the answer I tell you. I say, well, here’s the thing. Yes. You both got an 8% rate of return. But what I didn’t tell you was the amount of risk you would have to take to get that 8% rate of return. You see, when you invested your money at Vanguard, you invested your money essentially in the stock market, the S and P 500 index fund. And over the 20 years, a good year in a good year, you might’ve been up 32% when you were winning. When you were up, you’re up a lot. But guess what? In bad years, like 2008, for example, you’re down 37%. By the way we call this symmetrical investing. It’s like when your ups and your downs are kind of close to the same number, symmetrical neighbor, Bob, on the other hand, ABC, they followed what’s called an a symmetrical path when times were good.

Mike:

They weren’t making 32%, like maybe 21% might be the best that your neighbor Bob ever did. But guess what a bad year for him was maybe 12%. Now that’s asymmetrical. It means that your losses are not as, they’re not as big of a number as your ups are. In fact, we’d like to even make it better than that, if we can. But what’s my point. My point is, look at the risk here. Risk is measured. Like how wide what’s the volatility? How wide are your expected or your a potential returns while you start to hear you’re going to innate, I could be up 32 down 37. That’s almost 70% of ranger. That’s a big range. What about here? I get the same return, but I’m up 20 down 12. That’s about half the level of risk or even, I mean, the range is about half the size.

Mike:

Think about it this way in a baseball analogy over here, we’re hitting home runs and striking out. What are we doing over here? Singles and doubles. And here’s the dirty little secret nobody talks about when you’re getting the same average return, same average return. The portfolio that has a tighter range of hits, singles and doubles, outperforms the home run and strikeout portfolio all day long, every day, mathematically every single time. Now here’s the question. What’s your portfolio look like? Are you symmetrical or are you asymmetrical? I’ll bet you a lot of money that you’re probably symmetrical. I see that every single day. And if you want to talk to us about how do you get a portfolio that’s asymmetrical. All you got to do is click the link below. Talk to mike.com. Take your online calendar. 15 minute introductory call. We’d love to help you with your retirement accounts and your investment accounts. Be a symmetrical. All right, gang. I know my message went a little long today. I hope that’s okay. I gotta wrap this up like us subscribe and let’s make sure you live that prosperous life. We’ll catch you on the next video.

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