7 Principles for Successful Long Term Investing – Episode 180

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome back to the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we have bestselling financial author Kim Butler with us today. When I was out on the internet and I found, as a matter of fact, this is just the 2017 edition. It’s at the JPMorgan Chase website. They have issued the seven principles for effective long-term investing. And our goal today is to let Kim Butler, who has, I believe you have something with it and a seven in it too, don’t you Kim?

[00:57] I do. One is a biblical concept for completeness. All right. So principles for success, the seven principles for successful long-term investing, using insights to achieve better client outcomes. And again, everybody can get more details on this, but we are going to start principle number one, plan on living a long time. Oh, well, I totally like the living a long time. I just don’t like the plan word. So yes, yes, yes. We learned earlier that the oldest living person passed on. Tell us those facts about our 117 year old. We are in, we’re in April, 2017 and she was 200 and our 200, gosh, 117 years old. She was the last living person born in the 1800s. So I just, I would love to have made a movie with what her eyes have seen.

[02:03] Oh, gosh. Yeah. So incredible. But yeah, absolutely. We need to be focusing on strategizing around living a long time. So in complete agreement with their particular first principle and the insurance companies have moved from age 100 to age 120 or 121 or 122 to pay on the company. And so that is definitely something that we need to be thinking about and strategizing around. And the best way to do that is to continue working as long as you can, which means you better find work that you love to do. All right. You ready for number two? Yep. Cash isn’t always king. Interesting. Now, I was all prepared to disagree with these, but some of them you got to go along with now. I’m, I’m good with this one because I believe that cash flow is king and cash can be queen.

[03:01] So yeah, I’m in, okay. So far you’re, I kind of think you’re in for two for two so far, right? I am. Yes. All right. Ah, interesting. Harness the power of dividends and compounding. So yes, dividends are good, especially when they’re from a life insurance company. I guarantee you they were not talking about those kinds of dividends though. Compounding is an interesting one. So one of the principles of prosperity is to, one of our seven principles of prosperity is to measure opportunity cost. And when you compound in a taxable account, so it’s really important to know that this is not for IRAs and SEP IRAs and those kinds of things. But in just a regular taxable account, when you compound, which Albert Einstein,

[03:54] I think supposedly said, it’s like the eighth wonder of the world or something that could have my quotes wrong, but you absolutely can grow your account, but you also end up having a compounding impact on your taxes. In other words, interest on interest on interest causes more and more tax to be paid, which can absolutely be a detriment. So I like growth, but I do think we need to be really careful about what’s going on in the taxation around our growth. And if we’re all in after-tax monies, that’s something that has to be looked at really carefully. So I’m going to go like half and half on this one. That’s where I’m thinking. You’re at 2.5. That’s how I figured it. Okay. All right. Number four, avoid emotional biases by sticking to a, I’m going to have to say it, plan.

[04:46] Yuck. Avoid emotional biases. All right. That’s not bad. I know you just don’t like the N-word, but. I don’t like the four-letter plan word. This is correct. And so why not? Because planning is what Russia tried to do and it didn’t work. It’s what Cuba tried to do and that didn’t work either. So why as human beings are we trying to do it? You know, it’s one thing to plan dinner tonight, but it’s an entirely another thing to try to figure out what’s going to happen in your life 20, 30, 40, 50, 60 years from now. Now, keeping the emotion out of it. Oh yeah. I definitely agree that that’s important. Can I have another half? Yeah. If you read the details of this, it is very much about sticking to stocks and bonds,

[05:36] which I know you wouldn’t agree with, but I would say the idea of maintaining a consistent savings program, good times and bad is very important. Absolutely. And it’s so much easier to do that when that savings program consists of paying your life insurance premiums and that automatically, it forces you to save, it automatically builds cash value, it creates higher death benefit. There’s so much good there. I’m so truly grateful to have discovered whole life in my early 20s and bought policies and been forced to pay premiums because we have value that our family would never ever have had in any other type of savings instrument. So I’m good with that part of it. Let’s tackle the next. All right.

[06:29] Number five. Here, we’re going to get some fun. Volatility is normal. Don’t let it derail you. Oh my gosh, no, no, no. I absolutely totally disagree. Volatility is normal because the stock brokers and the stock jockeys have made it normal. A roller coaster ride is not okay with your money. Now if you want to have a little bit of fun and play in a small account, have at it. But when you’re talking your serious money that needs to be grown and saved and invested for the future, it should not be roller coaster riding. Your cash value of life insurance never goes down. The value of a life settlement never goes down. Insurance loans, I admit that could be slightly more problematic only because it is real

[07:23] estate. However, we’re not focused on the value of the real estate, which clearly can go up and down. We’re focused on the cash flow off the real estate. And so I adamantly am opposed to accepting this supposed fact, quote unquote, that volatility is normal. It does not need to be normal. And I, for one, refuse to put up with it. My risk tolerance is zero. I’ve publicly stated that numerous times. I want nothing to do with a roller coaster ride when it comes to my money. Number six is very similar. It’s staying invested matters. Staying invested matters. Now that’s interesting. Yeah. The point is, the next quote is, it’s always darkest just before the dawn. So in other words, the market’s just on sale.

[08:15] Well, you’re totally right about it’s linked to the last one because they couldn’t come up with a better number six. Sorry. Now, now I’m feeling, feeling my own emotion. But yeah, this, this is not an issue. If you have investments that are not rollercoasting, you’re not trying to get out of them. And so the only reason they want you to stay invested is so that you’ll continue to pay their assets and our management fees every year, year upon year upon year. No, that’s not okay. That is not a good reason to stay invested. You want to have your money invested because it continues to grow every year. And I’ll just stop here and get off my soapbox. Well, we’re at the last one. And I know within a hundred percent that you’ll agree with this one.

[09:00] Diversification works. Yeah, whatever. Diversification and who said it? Robert Kiyosaki or Warren Buffett is often de-worsification and while I will totally agree that you shouldn’t have all your money in one particular thing, the only reason that they’re proposing diversification is because they know that some of their assets don’t work all the time. So let’s play this one out a little bit. So here you have your classic stocks and bonds, right? You’re supposed to diversify by your age or whatever the color of the moon is or, you know, the 18 other reasons and ways that they diversify money between stocks and bonds. Let me ask you a question. So Todd, you can play devil’s advocate or the client side or whatever you want

[09:56] to do today. If you are putting some money in bonds, doesn’t that basically tell us that you don’t believe the stocks are going to do all that you think they’re going to do? I would say absolutely. This one. Boy, I mean, I can’t think of any of us who are in the financial business that have not been taught to say this. I mean, would you say it’s been going on since time began? If you’re in the financial business, you tell everybody to diversify. I think it’s just because that way you can always explain when, you know, I can remember, you know, when I worked at the bank, I mean, you know, there were some days where when a client would come in, I’d hide under my desk because I didn’t want him to see me.

[10:49] And then, you know, other days when everything was good, I took full credit for it like I was controlling the market. Well, it is a really amazing statement. And I’ll share the credit with Todd Langford, my husband, who brought this to my attention, and it kind of dawned on him fairly recently, or at least again, in doing some work with, interestingly enough, a diversification calculator that’s available inside truthconcepts.com, which, by the way, any of our listeners can grab for free for 10 days if they want at truthconcepts.com in the support section. But the diversification calculator is designed to help you look at this whole stocks and bonds thing and see if we can make it better. And as Todd’s doing some analysis work on this, he points out that

[11:38] investing in bonds is admittedly showing that you don’t trust stocks to do what you think they’re going to do. And so why is that? And why is the solution bonds, which of course can also be affected by interest rates and valuation changes, et cetera, that does not make any sense. And it’s just, our whole society has turned to focus on this because the stock market companies have such big advertising bonuses and such big advertising dollar figures available to help us all think that the stock and bonds are the only thing for investing and that you have to have this diversification between the two of them. And then you get some people out there talking about diversifying actually means out of paper assets.

[12:29] And that’s good. That’s an improvement. But then you have this other side of, well, diversification is really de-worsification because we’re picking up some bonds in hopes that they offset our money in the stock market. If it goes down, why not just have all of our money be going up all the time? I mean, I’m not saying that life settlements are perfect. And I’m not saying that everything that we do is absolutely for sure up all the time, but there are definitely some real solutions out there to this quandary of what am I trying to diversify for? Like, why am I doing this? And I think the answer is usually so that I don’t lose money. And there are a lot better ways to, quote, not lose money. So I am like adamantly opposed to this number seven.

[13:16] And I would like now my final score, please. I think you’re at about three and a half. Interesting. So three and a half of the seven principles we agreed with. That’s actually higher than I thought it was going to be. Cool. Awesome. Well, listen, I have one quick question for you. And yes, I’m going to put you on the spot here. We talk about investing in markets a lot of times, and we think about probably more mutual fund markets as I sit here talking today. They just announced the delivery dates for the thirty five thousand dollar test list. Wouldn’t you want to support that company by investing in it if you could? Yes, I absolutely would in a heartbeat. So what’s the question behind the question?

[14:06] Isn’t that investing in the market? Yes, it is. So is that OK? That’s up to you. And and I so appreciate the question. Only each person for themself can answer that. And here’s how I personally would do it. Now, I’ll openly admit I do not have a Scott trade or any trader and any other trade account to pop out there and grab some shares, nor am I going to. However, if I had a little extra time, I might. But I wouldn’t do it with my serious money. I would love to support Tesla. I’d rather just buy a Tesla car, frankly. But it’s something that we really can choose only for ourselves and each individual person, not only just each individual family, but each individual person can say, yes, I’m comfortable

[14:51] essentially taking a bet or a gamble on this particular company or that particular company. And that’s there’s no judgment to that at all. But for your serious money, put it where it should seriously be invested and cannot roller coaster ride. Only use play money if you want to support a company. Hope that it does well. Then when it does, take the cream off the crop, take the profits from that growing stock and go put them somewhere where you will never lose them again and then let your principal keep on growing again and again and again. If you want, there’s nothing wrong with that at all. Have at it or just go buy a Tesla. Super. Well, I would like you to. You also have a book, e-book and audio book that you like to make available.

[15:46] And I think this would be perfect for the people who are listening to this, especially maybe even a JPMorgan Chase customer to get that. Absolutely. It’s available at no cost for the availability of learning about these alternative investments, our alternative for cash, as well as our alternative for growth and income. And a little bit more about the seven principles of prosperity that we espouse on which my score is seven and zero, I will say. So it’s partners number four prosperity dot com slash e-book. There’s an audio version available. It’s not on Amazon. You cannot get either the physical or the audio in any other place. But at partners number four prosperity dot com slash e-book. Well, super.

[16:33] This is No BS Money Guy Todd Strobel like to thank Kim Butler. And also just to thank our listeners, continue sending in your questions. If you have any websites that you’d like us to review, books you’d like us to review, we are always glad to have a good time with it. Take care, everybody. Thank you for listening to the Prosperity podcast. To take control of your money and have it work for you. Visit us at partners for prosperity dot com. If you liked this episode, make sure you subscribe and leave a review.