Announcer: 00:00 You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern, to decode industry jargon, sirens, crippling confusion and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.
Dave: 00:34 All right folks, we’ll welcome to the Investing for Beginners podcast. This is episode 116 tonight. Andrew and I are going to answer some listener questions. You’ve been getting some great ones lately, and you guys keep sending us great stuff, so we want to keep talking about it, see if we can help you guys. We’re in a thing or two and answer any questions that you guys might have. So I’m going to go ahead and read the first question and then we’ll go from there.
Dave: 00:58 So it says, Hello Andrew. I started listening to your podcast, and it is inspired me to start investing. I found a list of dividend aristocrats that ran each one through Finviz with filters. I did the research, looked into the balance sheet, and warned about what the companies I was interested in did. The one I finally decided on was WBA Walgreens Boots Alliance. I didn’t see anything to wrong, and a balance sheet is slower growing its profits at debt as well, and I saw nothing to my beginner’s eye that says it’s bad, so I bought three shares. That being said, now I think I miss something and I don’t know what the price immediately dropped in price hang it. They released an announcement saying they’re going to close down 3% of their stores. Now I know most people freak out about that, but they’re trying to do it to help more profitable because everyone says they should be doing better than they are. I guess my question is, as a new investor, I’m kind of terrified that I bought the wrong stock. Even after reading the 10 Q and 10 k I’m still not sure I miss if I miss something. Someone with more experience would have seen. I guess my question is, as a new investor, how do I figure out if I’m right or wrong? Andrew, what do you think?
Andrew: 02:09 Yeah, first off, Samantha, that’s, that’s a good question. And it’s something that I think crosses a lot of people’s minds on when they buy a stock for the first time. So I would say having these fears are, are valid, but they are fears you should have, I guess I’ll try to break it down with a, a sort of metaphor. Let’s say you bought a house somewhere and let’s say, let’s say you were buying as like an investment property or something like that. So if you bought and as a booming area, like, I don’t know, Austin, Texas or something. And so this is one that’s historically done well. The prices of homes in that area have been rising for quite some time and as you can s as most people can see, I know I visited there before. It seems like a lot of people are moving in, and it looks like a good place to live, not only just from a livability standpoint. But if you were to live there long term, um, you generally want to see property values growing to get property values to grow, you’d want more growth and more people moving in and, and you know, the city generally improving, you would want a situation like that rather than like something like Detroit.
Andrew: 03:27 Right. So as I think people know with mortgages and then property values, these can fluctuate through the years. Um, so why do they fluctuate? Generally, it comes down to supply and demand. How many people are moving into an area? How many of them are looking to buy a home versus looking to sell at any certain time? So if you were to buy a home and like Austin, Texas, and let’s say the property value of, of your home dropped by 25,000 in the first year, you know, but as far as you could see with everything else. There’s nothing catastrophic that’s happened that doesn’t seem like the towns taking a turn for the worst things seem to be kind of moving as they are. Um, just for whatever reason, property values went down for a year. So would that cause you the second-guessed yourself with that caused you the one, the sell your, your property and move somewhere else where you think property values will rise?
Andrew: 04:26 Like; I don’t think so. I think it’s obvious when you look at it from that perspective that well, you know, we, we kind of know supply and demand for homes fluctuates from the year over the long term. These property values tend to rise. So I’m fine, and I don’t feel like I should move because buying a home was a bad investment choice for this, just based on that small fluctuation. And so I know with this Walgreen’s situation, you know, they did announce that they’re closing three of their stores. You admitted yourself that people are freaking out, but it should help them be more profitable in the longterm. So just as with home values, um, things can happen that develop in the short term that might not necessarily have impacts on the longterm. So on the same token, I wouldn’t want to put yourself in the mentality with the stock that hey, I think I made the wrong choice just because in the short term the price went down and you know, they had some development within the company that may be caused this stock to go down.
Andrew: 05:30 If you feel over the long term, which it sounds like you did, you looked at the balance sheet and all of those important things that you know, the price should grow over time, the business should grow over time and be healthy over time. Well, then you should do your best not to feel concerned that the stock drops in the same way that you wouldn’t feel that stressed out if property values tended to dip over the short term with, with let’s say a home purchase. Now on the flip side, if something catastrophic happens, if all of a sudden all this crime flooded the area, right, or, um, jobs just vanished in the city for one reason or the other, um, maybe now you start to get nervous about the house he just bought. They’re in the same token, if something catastrophic happened within the business, then yeah, maybe now you need to be worried and, and start to consider if this was a good stock price.
Andrew: 06:25 But if, again, if it’s just something that’s either temporary or not that big of a deal to the big picture, then I think you shouldn’t worry too much. And I wouldn’t worry if you got that right or wrong. Um, in this case, based on what you said, I’ve, I’ve researched Walgreens. I know, uh, recently it was a value trap indicators, strong bias. So that’s a good sign there. Um, I don’t see anything, I don’t like to make guarantees when it comes to stocks, but I haven’t seen anything with Walgreens or the economy or that, that, um, healthcare industry that that’s in. I haven’t seen anything that caused too much concern when it comes to that. So I think, you know, as much as I don’t like to get personalized advice, I think the conclusions you’ve made a sound very reasonable and I think you’re more on the track of maybe you’re nervous because this is your first time versus this is something you should really be concerned with.
Dave: 07:27 Those are all great points. And I, I would agree with everything that Andrew said. Uh, some things that I have experienced, uh, when I first bought my first doc, I bought Microsoft quite a few years ago, and I think Andrew and I both bought the same stocks as our first stock pick. So that’s comical.
Dave: 07:46 When I bought the stock, I kind of went through the same emotions because when I bought it, it, it immediately dropped. And I didn’t know why. I didn’t understand why I started getting nervous that I had made the wrong pick and I decided to just kind of stick with it and see what happened. Uh, decided I would give it three months and see what happened. And after three months it started to climb back to where it was when I bought it. And then after that, it took off. And so now I think it’s like at $134 a share or something crazy like that. But, um, anyway, when you buy a stock, I guess one of the things that, a couple of things that come to mind when I think about when I’m buying stocks. So the first thing that I always try to do is I always try to write down why I’m buying the company.
Dave: 08:31 What is it about the company that I’m buying is making me want to buy this company? And if all those things have stayed true over the last, you know, year, three months, three days, whatever it is, then I’m comfortable knowing that, you know, yes, the stock has gone down because of the recent announcement about them closing 3% of their stores. Yes. In the short term that’s going to make people freak out. And, but in the long term it’s going to like Andrew said, it’s going to help make the company more profitable than it’s a good thing. It’s, it’s sad that people are losing their jobs and that’s unfortunate. But for the company overall, then it will potentially help them. So one of the things that I would do when I would see something like this is I would make a note of that. And so when the next 10 Q comes around, or the next 10 k comes around, if that’s next up in the rotation then I would look for something like that too indicates that hey, they close 3% of their stores.
Dave: 09:26 This is how it’s affected the business. What has happened? Have they as the increase their profitability, has this affected them negatively? You know, all the things that Andrew was talking about are things to take into consideration. But because we don’t always remember, you know, three years, three months, three days ago, what we have for lunch, sometimes it’s a good idea to write some of these things down cause it can help our sanity when we’re looking at things. A couple of other things that I want to keep in mind too is when we first get into the stock markets, it’s, it’s uh, it’s natural to want to watch what’s going on with your company that you just put your harder and money into. And it’s natural to do that, but it’s better for your sanity if you don’t. It’s okay maybe to look at it once a day, but if you’re at work and you’re checking it every half an hour, that’s going to drive you nuts real quick.
Dave: 10:18 And so one of the things that I try to do is when I buy a company as I don’t look at it every single day. Uh, I’m a big baseball fan. I love stats, and I love looking at the up and downs of you know, specific players and you know when I play fantasy baseball I’m constantly checking all that kind of stuff. But I try to, and I try not to do that with my stock picks. Sometimes they do, sometimes they don’t. It just depends. But it all depends on what you are, you know, you will, you can handle what your risk tolerance is. Go back to that. And the other thing that I always like to keep in mind when I’m buying a new stock as something that Warren Buffet said, he said, don’t buy a stock for three days if you won’t hold it for three years.
Dave: 10:57 If you won’t hold this company for three or five years, then why are you buying it for three days? And if your investment thesis is still solid after something like this news comes out wrong, or the overall stock market is taking a hit because of the potential bad news with the trade war that’s going on right now, temporary, that doesn’t really, it’s not really a reflection on what’s happening with Walgreens. It’s more of a reflection of what’s going on in the overall stark market. And if Walgreens is still doing their business and they’re still selling all the things that they sell at, people are still coming to their stores to buy all the stuff that they need. Then all that stuff’s going to wash away, and the company is still going to be standing there when the tide goes out, and it’s going to be doing well.
Dave: 11:41 And those are the things that I think you have to try to keep in mind when you’re buying a company when you’re investing your hard-earned money into a company, why did I buy it? And is it all those things still true after you that the stock has gone down for whatever reason. Now, if you see things like that debt going up or there’s a huge change in the balance sheet and all of a sudden their liabilities have skyrocketed, and their stock shareholder equity has drastically dropped, those are all things like, ah, what’s going on? You know, that’s, those are times where you need to be nervous. But the day to day fluctuations, that’s when, when Warren Buffett and Charlie and Margaret talk about not losing money in Nero, in the stock market, that’s not what they’re talking about. What they’re talking about is losing your capital permanently when things are going south in a big, bad, big, bad way when the company is not doing well, not necessarily where the overall fluctuations of the stock market.
Dave: 12:35 So those are things that you can, you can keep in mind. And Andrew has a great product that can help you with that. The VTI is something that you can run all these things through, and it helps in ease knowing that hey, this company is not at risk of going bankrupt because you know, they have done all the right things and maybe the stock market is just punishing them for the temporary moment. But it doesn’t mean that that’s something that’s going to last for a long time. So I guess the Samantha, I guess you try to rest easy a little bit. I think you’re doing the right thing. You’re on the right path for sure. And you made a good, good choice for our first investment and I think the company will do well, but you gotta be patient and Kinda try to keep all the things that Andrew and I have talked about in mind. And try to set your mind at ease a little bit and kinda relax and, and enjoy the ride, if you will.
Andrew: 13:23 Yeah, and I love what you said, Dave, about writing down reasons that you’re buying it. This is something I didn’t do. So I guess I’ve, I’ve done it with every stock pick I’ve made ever since I opened the eLetter because since the eLetter there is tracking and real-money portfolio, I’m writing these issues. This news, other issues and I never really realized how fundamentally helpful that’s been to my investment process and my investing skillset if you want to say because I have had times where I feel a certain way about stock, and it’s different than how I used to feel about it. And so I don’t always remember why I bought stock. And so I will go back to the archives on these issues that I wrote and see why exactly did I buy this and is it, is it something where the pictures changed that much from it or not?
Andrew: 14:16 And I found that very, very helpful and feeling more confident about uh, whatever investment decision I was about to make. And even now I think I’m doing that more and more. So I have a spreadsheet where I track all of my um, stocks on them, watching all of the stocks I’ve already bought. And so on top of writing about these stocks as I buy them, I also have this spreadsheet, and I have little notes now on some of the qualitative reasons why I’m buying stocks and what my feelings are at the time. And I’m just adding to that spreadsheet over time and having these references to go back to what I’ve started doing now with the spreadsheet is all have these. These times and in running this portfolio where I’m not sure whether I want to sell a stock and take profits or whether if I want to sell this stock because it hasn’t been doing well.
Andrew: 15:10 So I’m tracking like with dates that hey, you know, stock a, B and C, should I sell it, question mark. And then I kind of chew on it for a couple of days or however long. And then once I came either to a conclusion, yeah, I did sell it, then I write about it in the, in the leather or you know, maybe I didn’t sell it. And then I write it down in my spreadsheet, and that reminds me. And then so when I go back to it again, and I think about, cause these, these thoughts will reoccur, and they’ll pop up with these stocks over and over again, and I go back, and I’m like, Oh yeah, that’s why I didn’t sell it before. Oh yeah, that still makes sense today. Okay, cool, easy. And then boom, I’m onto the next decision. So I liked that idea that, that Dave mentioned about writing it down.
Andrew: 15:55 I think there was another book I read where they also mentioned having like an investment diary. I can’t remember which book that was. I think that’s a huge, huge, um, potential game-changer as you run the portfolio. And really to Dave’s point, like you made a good decision. You bought your first stock; you got your feet wet. Maybe it’s like that initial shock when you first jump into a swimming pool. Um, it was, it was very cold at first, you know, but the longer you kind of stay in, you’ll get used to it. And so maybe the answer now is not just to jump out because the pool was so cold and then, you know, I’m Kinda losing all the gains, you know, all the benefits of, of jumping in and surviving that shock versus just kind of sitting through and then letting that rest.
Andrew: 16:42 And I don’t know, like, I don’t know. Um, I don’t, I don’t deal with this when maybe other investors do where it’s like every time you buy a new stock, you feel this kind of emotion where, um, immediately you feel conflicted on whether it was the right choice or not. I don’t feel that, but if that’s something that you notice that that tends to happen, maybe give yourself a period of, you know, I know that this is a characteristic or an emotion that I always feel with these stocks when I buy them. So I’m always going to give myself, I don’t know, two weeks buffer, three weeks buffer, one month buffer where I promise I will not make a, a reactionary sell on the stock just because I’m getting this buyer’s regret. Um, and, and if that’s inherent in, in the way that you behave in the stock market, then that can be a good, um, kind of anti measure against that. There are so many different things and so many different ways you can kind of structure your behavior. I think asking these questions is a great thing. And, and having the awareness that’s, that’s huge. Um, but I think there are lots of different ways that you can maybe make this feel better for yourself. And I think some of those examples are fantastic things to consider.
Dave: 18:01 Absolutely. Yup. That’s a great point. I guess the last thing I’ll throw out there to Samantha is I can pretty much guarantee any stock that I buy is going to go down immediately. It just seems to me that as it does, it’s just kind of the nature of the beast. And at first you’re, you’re a little bit taken back. Like what did I do? But as you grow in your confidence and you start to get better at all this and feel more confident about your decisions, you’ll realize that that’s just kind of the nature of the beast. And do you know initially ignore it? So, um, yeah, I can pretty much guarantee anything that I buy is immediately going to go down. So it’s like the stock market goes, oh, Dave’s buying something. Let’s go, let’s, uh, let’s, let’s knock it down a percent or two. Alright. There we go. All right. We’re good now.
Andrew: 18:53 So yeah, that leads great into our next question. So, um, this one’s from Nikki in Scotland. That’s pretty cool. Um, she says, hi Andrew. I subscribed to your newsletter and listened to your podcast. I was wondering what your thoughts were on the market’s taking a beating recently due to the trade war between the US and China. It would be good to get your perspective on it. I’ve recently bought some of your stock picks; however, they’re all in the red, and it does make me wonder if this is the right time to invest.
I look forward to hearing from you. So based on the context of what we just said, Dave, and how Nikki’s kind of, what her place is, where her head’s at, w what do you, what would you say to her?
Dave: 19:32 Uh, I would say to her that this is all short, shorter-term things to think about. And again, going back to what we were talking about with Samantha, if the thesis and the idea of why you bought the stocks, to begin with, where are still valid. Then the news that you hear about the trade war, the not trade war, the up and down with all that, those are things that are going to be more temporary, and it’s, it’s stuff that you try not to react to. And I’ll give you an example. When I worked at Wells Fargo, I had a financial advisor that I talked to quite a bit, and it set me down to the path of, of, you know, doing this kind of thing. And one of, I remember asking him one time, why does this kind of stuff happen?
Dave: 20:23 It’s, it wasn’t logical to me. And he said it’s because they, they sell the news. And I said, what? And he said, whether it’s good or bad news, people sell the news. And I, Huh, I didn’t quite get that. And he sat down and explained it to him. You said when there’s good stuff going on, they’re going to sell the news because they’re going to try to short the stock or they’re going to try to get some quick profits. And kind of the same thing happens when there’s bad news. They’re going to try to get out of it, so they’re not going to lose money on it in the short term. And that’s not the way that I think. And that’s not the right way to think. And so when you’re looking at stock picks right now, let’s say that they’re all in the red, but that also means that as a value investor, they’re possibly on sale too.
Dave: 21:11 And you could be buying some other thing. You could be buying some more of those particular companies. If you think that they’re great companies, well this is throw out a company, you know, that Andrew would never invest in. Let’s say, JP Morgan. Um, I’ll pick a bank. If JP Morgan is doing well, but the, and you look at all the metrics, you look at the balance sheet, you look at the evaluations of the company, the dividends, the stock buybacks. Everything is going great, and they’re doing well as far as, you know, their little entity in their little world and they’re doing all the right things and are growing their business. They’re growing their profits, their revenues going up. Uh, they’re doing making great decisions on the loans. You know, they’re not, you know, doing a lot of subprime lending and putting themselves a lot of risks.
Dave: 21:58 All these things are great for a bank to be doing. The return on equity is awesome. You know, all these great things, but the stock price keeps going down and down or down. Why is that? It’s because the overall market is being shrunken or the people are selling out of the market because they think that the stock market is going in the wrong direction. And there’s a lot of different reasons why that would be occurring. But the news is a big part of it. And again, it’s all short term things. You know you know the trade war could be resolved in two weeks. They’re having a meeting, the president, our, you know, u s president and the president, the premier of China. We’re all getting together and are going to chat about this, and it may be resolved in two weeks.
Dave: 22:39 You don’t know. And so all of this stuff that’s negative right now could be temporary. And it could be longer-term too. It could be another six months to a year. But it doesn’t mean that JP Morgan is doing badly. It doesn’t mean the company is doing badly. And if you can teach you to invest in a company when things do start to take a turn for the better, which they will, they always do and it will again, then you’ve bought the company at a discount to the price that it was a year ago. You’re going to make more money, and it’s still paying a dividend. You’re still going to be collecting all those dividends. So the result, those are all things that are going to work in your favor and think about when you get in an elevator, you don’t always go to the top. Sometimes you have to go down to get off the elevator. Right. So it’s kind of the same thing with the stock market. When the stock goes down, you can still buy-in and get at the bottom floor and go back up and it’s the same. It’s the same thing. So I guess I go back to what we were talking about with Samantha. You got to think about what it is that caused you to buy the stock in the first place. And if those, if that thesis and that idea are all still the same, then it’s still a good investment. It regardless of what’s happening in the market for the short term that elevates their thing. That pop in or is that something you’ve not on for a while?
Andrew: 23:59 That was good and no, it just popped in. Nice. Yeah. Yeah, I love that.
Andrew: 24:16 I have moments. Oh, you have moments. Yeah. I guess I sometimes had I have those two or fortunate when we do, and I want just to echo what Dave said to give context. And I think it’s, it’s funny to me, uh, ironically we record this on August 13th. And so there was news that just came out that the trade kind of war slashes the tariffs, the tariffs thing, um, just got delayed. And so a lot of the retail and apparel stocks shot through the roof. One of my Eli, their picks one up to six or 7%, I’m off this news. So, uh, everything Dave says about, you know, selling on investors, sell on the news and, and stocks jump on the, on the news. It’s, it’s something that not only are we seeing now, like, like this environment the past several months, but it’s; also, it’s been a huge, a big example of that.
Andrew: 25:16 But it’s something that’s, that’s going to happen, that’s, that’s just a characteristic of the stock market. And so that’s as an investor, you’re going to have to deal with that always. Um, the other thing I’ll say is the context of, uh, the environment that we have today with the stock market is recent, um, maybe last month or so, the stock market hit a peak of 3000, and then, um, it kind of coins coincided with some other macro themes. But if, if you were first buying in at that time when the market was literally at the highest it’s ever been, um, and it doesn’t continue going that way, then obviously your stock picks are going to be lower. So going back to this idea that, hey, too, to sound like a broken record, but we try to, we try to do it as much as we can on this podcast because it’s so, so critical.
Andrew: 26:05 You need to remember that time in the market beats timing the market. Try not to feel bad about having bought in at the top. That’s why we always recommend dollar-cost averaging. So if you’re always buying in, then there’s never a wrong time to invest. And the studies and the numbers and the results. I’ve always shown that out to that as long as you’re in the market for the long term, um, doesn’t matter too much when you get in. We talked about this episode too, um, one of the contributors to my blog, Andy Schuler. He recently did a fantastic blog post, uh, with numbers and data and there might’ve been the charter two in there that showed a great example, um, of taking some real real world data and. And doing a couple of hypotheticals and showing how, um, really having bad timing versus having just regular, um, you know, versus being able to time the market.
Andrew: 27:03 And the good way really wouldn’t have made that much of a difference if at all. So this is something to always kind of keep in the back of your mind, but always really focused on what’s, what’s important, what’s important. You’re buying these businesses, and you know why you’re buying them. You’re buying them for the longterm, for the longterm health, for the longterm growth. All your investments should be for the long term. You’re not trying to get rich tomorrow; you’re not trying to double your money in three days. You’re trying to build sustainable wealth over time. You’re trying to not necessarily always buy just because you want your stock picks to go up, but you’re also trying to buy because you want income streams and those income streams are going to give you a chance at compound interest. And so if you reinvest these, these, uh, income streams, now you have greater and greater ownership of these stocks that you own.
Andrew: 27:49 And so as they do eventually go up over the longterm, now the total value of your portfolio is ballooning up because you’re getting compounding interest from all of these dividends and all this income that you’re reinvesting. So all of these big-picture things we always try to speak on over and over and over again. These are the reasons why. And so you want to keep those big principles and reasons in mind and apply those to the day to day as you’re in the trenches watching your portfolio go up and down. That’s why that’s when is the best time to remind yourself. Pop in an episode of the Vander and Dave talking about some of the same things we always talk about and remind yourself that I’m only going to get burned here if I sell early because I got scared. A quote I think by Dave Ramsey was, if you think about investing as riding a roller coaster, you only get her if you jump off in the middle of it.
Andrew: 28:46 So keeping your goals in mind, keeping the right expectations with these investments, understanding how investments generally work, how Wall Street generally works, and how you can expect your results to work overtime. How the compound interest will, will, um, kind of move your portfolio up in, up or down over time. And keeping all of these principles in mind, staying grounded and staying kind of inflow with, with these principles, whether that’s reading books like we like to recommend, whether that’s listening to podcasts that cover the big picture and the important investing principles like ours and others. Those are things to keep in mind. And it’s good to wonder. It’s good to question, and it’s good to evaluate the decisions you’ve made. Try not to make knee jerk reactional decisions. Try not to feel too negatively and be too hard on yourself if whether you’re just buying stocks for the first time and maybe you don’t have that skill set or that knowledge base that somebody who’s been doing it for three, four, five years has, you know, don’t be hard on yourself because of that. Try the, really remove yourself from that day to day chaos of the news and Wall Street and the how prices move and just do your best to, to stay. Keep that focus on the long term. And I think that we’ll do so much more for your results rather than any single stock pick.
Dave: 30:15 Yeah, that’s all excellent. That’s, those are, those are all great points, and I think, uh, you nailed it on the head. Just be patient and stick with it and don’t jump off the roller coaster. That’s where you’re going to get hurt for sure. I love that quote. That was great. All right. So let’s move on to the next question. What is your standpoint on Motley fool? I have mixed feelings about them. I, unfortunately, signed up for two years of their stock adviser at the price of $98. I’m starting to regret it for a few reasons. Their ads are extremely pushy and make them look unprofessional in a sense. Their forum is complete garbage, in my opinion. And the authors write negatively about them in the edition. I bought an intelligent investor on the flip side. They do have some good reading content that I do enjoy. Did I make a mistake just subscribing to them? I wish I had brought your book and spreadsheet instead of subscribing to Motley Fool, something that we’ll have to wait until my next paycheck.
Andrew: 31:13 And what are your thoughts? That’s pretty harsh. Um, yeah, a little bit. Yeah, I think a little, a little too harsh. Um, so I’m familiar with the motley fool. I used to listen to them quite a bit when I first started. I’ve. It’s good timing on the, on the question cause I had just recently started listening to them again. I liked their podcast. Um, they, they cover a lot of the, um, the news of the day and they, they do a good job of not over, overexciting and over sensationalizing a lot of the news that comes out, uh, with a lot of them, the various stocks, you know, a lot of the stocks you’ll hear about in the media. Um, the social media stocks, the Uber’s, the lifts, the, uh, the Pinterest, the tech stocks, the Facebooks, the Amazons, all of these that you always hear about in all the mainstream media. They do cover them and they, I think they do a good job of, of really sticking to the fundamentals and, and talking more so about, uh, what’s, what’s, what are the going on in this business rather than, how was Wall Street reacting? And, and, um, I don’t think they get too caught up in like guidance and, and earnings projections and things of that nature. I think they do a good job of sticking the fundamentals. Um, they, they tend to talk about when they talk about news, they tend to talk about stocks that aren’t even on my radar. Um, just as a general rule, I think stocks I get the most media coverage tend to have the highest valuations cause everybody’s talking about them, and all the attention’s on them. So those are stocks that I’m not looking at because as we talked about in the show, I like to buy with a margin of safety, emphasis on the safety. So that means buying stocks, so they’re less favored than the market.
Andrew: 33:01 That means they’re less popular in the market. And so they’re going to have lower valuations. Um, when it comes to, uh, like one episode that I recently listened to, they talked about the retirement crisis. I thought that was a fantastic episode. Um, and, and in general, they tend to do a good job of telling their listeners, you know, I’m kind of like what we do on our show, how we, we talk about the big-picture principles, um, staying invested for the long term, diversifying those types of things. I think they do a good job of, of doing that now. Uh, as far as lately as, as some of the episodes I’ve listened to, I don’t want to comment on, on their business model or their forum. I don’t; I’m not familiar at all with their forum. I’m huge, I’m a huge fan of the intelligent investors, so anybody who says something negative about that stuff going to get a good reaction from me.
Andrew: 33:56 But other than that, you know, I don’t know if he made a mistake subscribing to them or not. I think it’s good to have a variety of different, um, forms of information and, and investor resources that you use. Uh, David and I talk all the time about different books that we recommend. So I don’t try to be like this one and be-all solution for investors. Um, I think it’s important to kind of branch out, but that’s a decision you have to make on your own, you know. Uh, we also talk about how investing is Kinda the personal and everybody’s going to have different risk tolerance. And so the type of stocks everybody’s going to buy are going to be a little bit different. How you, how you, um, how you apply the principles that Dave and I talk about is probably going to look different for everybody as well. So, you know, trying to make that decision for yourself, but I think their podcast is great. I’m not sure about some of their other aspects and um, I think that’s all I have to say about that.
Dave: 34:53 All right, well I’ll throw my 2 cents and then, so I did subscribe to Motley fool when I first got in to investing, and I did I think of the same thing that you did a, I think I only did it for a year as opposed to two years. But um, one of the things that, uh, so several things, some, some good things. So the good things are for somebody new and just getting into investing, it can be a little overwhelming. It can also be, I don’t know, I guess the easiest way is that touch dry to, to read about some of this stuff. And I felt like that they had a, a really good way of presenting material and talking about kind of the basics of the stock market and how stocks work. And how, you know, how they’re investing in companies and not just a ticker and some of the metrics and you know, how to read, you know, the financial statements and things of that nature I thought was good and was very helpful for me.
Dave: 35:53 And I noticed as I was starting to read their newsletters, that they gave me a really good overview of a company. But the thing I guess, I guess it’s something that I didn’t care for was that it didn’t go deep enough into the companies. And that was what I guess I was expecting from them. And it wasn’t there. And so that was a disappointment for me. And I did buy it on some of the recommendations, and one of them did well, and a few of the other ones were major duds. But, uh, I learned from that mistake that not just to buy based on four sentences about a company and that that was a mistake on my part. And though, so that’s something that I learned from being involved with the motley fool. And you know, like Andrew, I used to listen to their podcast a long time ago, and I got away from it, but, uh, Andrew says it, it’s, you know, it’s improved a lot recently, so I probably will go back to listening to it again. Uh, it’s a great source of, like Andrew said, of the news and kind of an overview of that news. And, uh, I’m going to let Andrew Talk a little bit about this, but something that he and I were talking about off air, about Warren Buffet and about his reading and things like that. I thought it was illuminating. So, Andrew, do you want to relate a little bit of that? Were we talking about?
Andrew: 37:14 Yeah, I mean, I had an epiphany the other day. Um, so this isn’t something we’ve talked about too, too much. So, you know, I think it’s always good to know this what guys like buffet have done. And one of the things that are very kind of well known and the popular part of the buffet for the buffet fanatics are out there is they always talk about how Buffet’s spends, well I think they mentioned like a couple of hours a day napping but also like for the six to eight hours reading every day. And so, you know, we always echo that kind of idea too. If you want to be a good investor, you’re going to want to be a good reader and read about a lot of different ideas. Well, I never really thought about with that before was this idea that, well a lot of his reading to is not only is he reading 10 ks, which is something we talk about a lot.
Andrew: 38:08 Not only is he reading like big-picture business books, like he’s, uh, and I don’t know if it was a snowball or one of the other audio autobiographies of his life that talked about how he read Buffett read every book in the library, uh, on business by the time he was like 10 or 12 years old. So I’m not only up to date on some of the best business books, some of the 10 k’s and, and the, the big picture financials, longterm financials of these businesses. But he’s also a big reader of the, of the newspapers. I think he reads like he has a select few newspapers that he reads like the front to back every day. So like the Wall Street Journal, I know, it is one of those and maybe a couple of other ones. So I guess I never put two and two together that, you know, not only is it important to read the 10 k’s and the, um, and, and, and these books that we recommend, but it’s also important to stay in tune with what’s going on on Wall Street and in the economy.
Andrew: 39:10 I don’t know like I think it’s good. I don’t think it’s necessarily a requirement. I think if you’re a value investor, you’re buying low, and you’re selling high, and uh, I think there’s a lot of value in just shutting yourself off to really what’s going on with the noise. Cause a lot of it is noise. But I think if you’re somebody who has a lot more time to kind of stay plugged in, and you’re aspiring to be a buffet type investor that looks for huge returns over the market. Then I think there’s a lot of value in and stay in the tuned to what’s going on in the day to day on Wall Street. So I don’t know, like is that applicable to the average investor who probably has a full time job and, and probably doesn’t have the time to be keeping up with all the, all the readings and all the current events of business, news, economy, Pol politics, blah, blah, blah, blah, blah. I don’t know, probably not. But for somebody maybe with that, that capacity, somebody who’s closer to investing kind of full time or are having more time to, to make these investment decisions. I think maybe we’re a little bit too harsh on like the whole blocking out the noise versus like staying in forms. So that was kind of an epiphany I had that hey, uh, um, maybe as investors as to something we can model as well.
Dave: 40:34 I thought it was a great epiphany personally. So that’s why I will. Okay. Share with listeners. It’s something I think I’m a [inaudible]
Andrew: 40:43 The more, the more and more time I spend on Wall Street, the more experience I get and the more skills I build with Wall Street, I think, I think more and more knowledge is better. And I think it’s something I’m going to aspire to more than maybe something like I would have to aspire to two years ago. Maybe that’s part of evolving as an investor too.
Dave: 41:03 Yeah, I think so. I think so. I would, I would agree with that 100% all right. Let’s move on to the last question. So we got Pi. Andrew, thanks for the most recent podcast. I too am in the older range of doing investors 60. So it was interesting and insightful to listen to you both chats about it is never to wait for a value in investing. Pardon me for the probably stupid question. There are no stupid questions, but it is net cash on your VTI spreadsheet. Current assets minus current liabilities. Cheers Ian.
Andrew: 41:34 It’s not such a good question. Um, if you think about assets minus liabilities and we, I like to use this metaphor a lot or you, you relate it to the real world. Uh, people’s finances. If you have a home and you say it’s worth like 300,000, you owe 200,000 of it in for the mortgage. So your, your equity on it’s a hundred thousand. That’s the same as assets minus liabilities is equity. So, uh, when it comes to the balance sheet, cash is part of that current assets formula. So like if I was an investor, I’m looking to, to, to calculate my entire net worth. Not only would I include my home, which has the equity plus the mortgage equals and the home value, right? I include that in my kind of net worth calculation. I also include maybe like a car, and I’m what the net worth differences for that, what, how valuable it is, how much I owe on the car.
Andrew: 42:37 And then maybe I include some other things like maybe I have $20,000 saved up and then the emergency fund. So I would include that as an asset, right? And then that would add $20,000 to my net worth — so same story with stocks. Um, with balance sheets, the, you will see if you look on a 10 k that the assets are all listed out and then the current assets are listed out. And inside of current assets, you have cash and cash equivalents. So that’s going to be part of the tr, the total current assets. And so it’s not assets minus liabilities. That would be shareholders equity or current assets minus current liabilities. Um, it’s just part of assets. It’s one asset. All right, perfect. All right. I think that’s all I got for today. Great questions.
Dave: 43:26 Okay. Yeah, so absolutely. Those are, that was fun. All right, well, without any further ado, folks, I’m going to go ahead and sign this off, so you guys go out there and best with a margin of safety, emphasis on the safety. Have a great week, and we’ll talk to you all next week.
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