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Investing is hard. You have to sacrifice your money now, so you can enjoy life later. Many people don’t start investing because it’s easier not to.

But you know what’s harder than investing? 

Trying to retire in your 50s or waiting until you’re older to start investing. Waiting has a massive opportunity cost that nukes your wealth. Easy has a cost — and it’s expensive. 

But don’t worry. In this episode, I walk you through the 6 sins of money and investing so you can retire sooner and wealthier than most people. 

Listen to the episode now and secure your future.  

Show Highlights Include:

  • The “easy has a cost” mindset tweak that helps you invest more in 2022 than you ever have (1:33) 
  • Business magnate John Jacob Astor IV’s secret for acquiring $87 million in wealth in 1912 before dying on the Titanic (2:16) 
  • The dirt-simple way to make investing a habit in the next 5 minutes (2:22) 
  • Why trading individual stocks is a surefire way to tank your returns (even if one generates 200% returns) (5:13) 
  • The weird way going to the gym a few times a week can make you rich (6:25) 
  • The unsexy investment advice you don't’ want to hear but makes you wealthier beyond belief (14:17) 
  • How Kobe Bryant’s family received $80 million more than he made in the NBA even after his death (15:08) 

To schedule your complimentary retirement track review, head to https://onecapitalmanagement.com. You can also call us at 805-410-5454 or text the word ‘TRACK’ and we’ll reach out to you.

Read Full Transcript

Welcome to Make Your Money Matter, the show that aims to change the way we think about financial advice so you can make better financial decisions. Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1,500 clients nationwide, with over $2.5 billion in assets. They are a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now, here's your host, Brad Barrett.

Welcome to Make Your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett. And it's my goal to help distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple, to help our clients and you listeners take control of your finances and build the life you deserve.

And in starting this week's episode, I started thinking, have you noticed that strangely life gets harder when you try to make it easy? Exercising might be hard, but never moving makes life harder. Uncomfortable conversations maybe are hard, but avoiding every conflict is harder. Mastering your craft is hard but having no skills at all is harder. Easy has a cost. It's interesting, right. In thinking about this in January, the new year, new you month of new year's resolutions and what have you. We all have these goals in mind to do the right thing, to get things in order to do this or that, whether it's workout or eat better, all those normal things. And as I mentioned last week and the week before that, in fact, as well around one of the most important things you can do to start off your new year, right, is to get your investing an order.

And I know that it's easier to not, it's easier to avoid it. It's easier to just not bring it up or not make that call or, or just not do anything that you didn't do last year. John Jacob Astor once wrote wealth is largely the result of habit. Creating the, that first initial action is what starts it. Alexander Graham Bell actually once said, the only difference between success and failure is taking action, think about that for a second. Taking action, that's it. That's the one thing that's needed and to acquire money actually requires some valor. To keep money, requires prudence and to spend money well is actually an art. So, understanding your planning heading into 2022 is probably more important than ever before. Look, what's in front of us. Look, what's behind us actually in the past few years. We've had nothing but volatility and uncertainty, all of which is a part of life, we know that.

And as we get into today's conversation, I wanted to talk about some of the sins as it relates to your money or the sins as it relates to investing. In particular, the six sins to avoid when it comes to investing, see what I did there. Six kind of a demonic number, the devil's number. Yeah. Don't fall into that trap. Let's make sure we avoid these. Number one is holding cash in a retirement. Now let me be clear about this holding cash as an allocation, as a percentage of your overall diversified portfolio is fine, but investment accounts are really for investing. Wouldn't you agree? After you contribute cash, we wanna make sure to invest that money, get it working for you. Make sure it's going in the right direction that you want it to go. Everyone wants to focus on the rate of return. Don't get me wrong, hugely important, all right. But when you talk about rate of return in concert with how much you actually need to earn. If you don't know that question, if you haven't asked that of yourself, or if your advisor and helped you walk through that, like with our clients here at one capital management, we focus on the distribution rate ultimately when they choose to retire.

Now again, retirement may be true retirement in their sixties or seventies, or it just could be when someone wants to be financially free, therefore not working for a specific company or doing their own thing and want to build up their savings enough to which their distribution rate can then make them afford their life. That is also retirement. So, understanding your distribution rate relative to your rate of return is important. And you’re investing accounts, the accounts you dedicate towards investing that could also be an IRA, a Roth IRA, your retirement plan. It could also be a trust account, an individual brokerage account, but anything that's domiciled towards investing, it's basically anything other than your cash checking or savings account. We don't wanna hold that largely in cash.

Sin number two would be individually picking individual stocks. Trading individual stocks, as opposed to maybe by index funds for certain asset classes or sectors introduces additional risk and human error. And usually based on performance numbers is likely to underperform. This is where you hire a money manager. We here at One Capital Management have a team of portfolio managers that works for us advisors directly to help allocate your investment accounts using individual stocks, individual bonds, also using ETFs and exchange traded funds. But we're the experts knowing what we're doing. All of our team myself included had designations like a CFP or a CFA chartered financial analyst or a certified financial planner. This is what we do. You don't wanna leave your investment accounts to chance picking some stocks that you may have heard about just because it's a pocket investment, like something you use or where, right? You wanna be careful of those scenarios just because, that doesn't mean they're bad investments don't get me wrong, is just make sure to put it all in context with the entire investment portfolio.

And with that, I think it's important to remember investing once doesn't necessarily make you rich investing consistently will. Now that's the same as exercising. Exercising once won't make you fit. So, all of us in our new year's resolutions back to that exercising once not gonna make us fit, exercising consistently will. Reading as an example, not necessarily gonna make you smart if you just read once but reading consistently will. Consistency of action is the key to getting everything that you want, especially when it comes to investing. The two D’s, I always talk about when it comes to investing are discipline and discernment. Discipline being the first pillar there on a consistent and disciplined approach will get you to where you want to go, which helps you get that investment account on sin number one, investing for you, not just sitting I and in cash, especially now with inflation where it's at, and also making sure that you have the right person managing the assets. So as not to get caught underperforming by picking individual stocks that you think have done well, which by the way, gets us into send number three, which is chasing past performance.

So, sin number two is be careful of picking individual stocks by yourself, or just because you've heard it from somebody. And then right on the heels of that is the next sin that we see that we wanna avoid, which is chasing past performance. Investing more in what has recently done well, could be a recipe for missing out on what is about to do well. There's a difference. And usually if you really thought about it, think to yourself right now in how you look backwards in your rear-view mirror versus your windshield as an example of a car. What you choose to see behind you is interesting what your brain tells you. Because if you look at the past year too, we've had really good market years, but we've also had a pandemic, which is wild, if you think about it, which is where a bunch of the questions are coming around, fundamentals and value, which we'll get into in a second. But it's important to think about it.

Now, let's go back even further. 2011, Europe debt crisis. 2012, we had a fiscal cliff. 2013, we had a go and shut down in October, along with Syria. If you remember that 2014, we had Ebola. 2015 was Brexit, remember that whole thing. 2016 was a U.S election, quite a tumultuous one. 2017 was the Harvey Irma Maria storm year. 2018, two government shutdowns. 2019, there was an impeachment inquiry. 2020, obviously COVID-19. 2021, U.S capital attack. 2022's got a question mark on it. But the 10-year S&P 500 total return is around 375%. Stay invested, stay disciplined. Don't look too far or too little behind or too little or too far in the future. Create your disciplined approach and stick with it. And find that manager to help you avoid some of those potholes you can't see. It's really important when it comes to sin number three, which is chasing past performance.

But sin number four is timing the market. Jumping in and out of the market to avoid a crash or changing strategies or thinking too far ahead sometimes gets us in trouble. I mean, changing strategies based on what the market is doing is actually very likely if you look at studies to cost you money. And if you really look at this sin, a lot of it has to do with time, specifically timeframe and context. What we choose to see right in front of us, it matters. Let me give you an example of why time is one of the most important things when it comes to investing in really our entire life. If an 80-year-old person right now worth 10 million, offered a trade places with you permanently, would you, do it? Of course, you wouldn't why because time is more valuable than money. This is why becoming financially free and financially literate, which is one of the reasons why we do this show because not only for our clients that we get to pour into and create relationships with, we also want all of our listeners and our community to know that you have the ability to control your outcome.

And it's important to make sure that we don't get caught into some of these traps, which is why I'm bringing up these six sins of investing and money, because those are what can hurt us. And when it comes to this fourth sin of not timing the market, remember this. It's not about timing the market, it's about time in the market. That's what the discipline comes in and that consistency.

All right, sin number five is thinking short term, like, let me give you an example. Hmm. How do I double my money by next weekend? Investing is a long-term game. Trying to get rich quick is a really good way to actually stay broke. We don't want to get rich quick. We want the long game. We want consistency because we've heard this before. We all know this in life in general. If it sounds too good to be true, it probably is. So be careful of getting into the trap of thinking short term. One of the questions I get from clients and from perspective clients that we do our discovery meetings with is what is considered short term. What's the time frame on that. Now you've heard me talk about bucket planning before where we have a cash bucket, a midterm bucket for midrange planning, and then long-term bucket for retirement planning. That short term bucket I've defined as somewhere between less than two years and really no more than five years.

So, let's call it two to five years is considerably short term. Now you have some goal-based investing in that maybe it's saving for a house or paying down some debt like a student loan or something like that. So, we definitely attach some goal-based planning when it comes to investing and shorter-term accounts. By the way, this also ties in, to the sin number one, when it comes to the investing accounts being in cash, this is why we wanna differentiate the buckets between short term cash that we just have in cash for rainy day funds for our overhead, for any volatility that might happen in our job or whatever else, right? And then investment accounts, that's when you get into bucket number two. And thinking too short term on bucket, number two can be problematic. So just to be clear, when I talk about sin number five, around thinking short term, it's thinking short term, and you're investing in buckets, number two and three, which are midterm and long term investing strategies.

Investing in the long-term game is what's important. And when it comes to investing in general, back to sin, number four, around timing the market, or chasing past performance, looking at someone else's rate returns and kind of thinking, oh, well, they had that stock and I've used that before. So, it seems like a good idea. There's two traps you wanna avoid with all of these sins. Caring what people think and thinking that they care. They don't care if they gave you the recommendation for some stock necessarily, or anything else. I'm not saying it's bad or good. I'm just saying, think about it in your planning. Make sure to bring it back to the foundation that is your overall financial picture. That's how you avoid some of these sins to make sure. It's not the most fun I'll admit. Trust me, it's not the sexiest thing in the world to talk about discipline and discernment and long-term goal planning and long-term investing, but it does matter. It does amount to success.

All right, the sixth sin I want to bring up is not investing early and often. Now I wanna talk about this. For anyone listening right now, who thinks, oh, you know, I, I should have gotten this earlier. I'm I'm too far in the game. Or when you talk about early and often look, Bruce Wayne didn't become Batman until he was 30. It doesn't matter how old you are. There's still time to invest. There's still time to grow your financial future. It's not about time in terms of age. Early and often means now, means getting that action in place. Remember the only difference between success and failure is taking action. The power of investing is brilliant. You know, Kobe Bryant made $320 million plus in the NBA, he invested $6 million in body armor in 2014. The Bryant family now receives about $400 million from that one investment that is roughly $80 million more than he made in his entire NBA career.

Now what's not talked about in that news report that came out around that investment is that that was one of many different investments he had. Diversification matters. Don't try to get rich quick on some scheme like that. You might have one area of investing that will produce and others that might not, but having the right mix of different asset classes, different sectors, different industries makes the difference when you try to add up your overall investing. And that's where you get into this seventh sin, you wanna avoid is not investing early often. All of the sins of investing this one is probably the deadliest. You won't end up with anything if you don't invest early and often. And early doesn't mean you need to start this when you were 16 or 18 or 20 years old or something like that, it means starting now and do it going forward on a consistent and disciplined basis.

Right now, if you're contributing to your retirement plan, you're doing it every two weeks, right? So, you are contributing every two weeks on a consistent and discipline basis. One of the things that gets talked about often, and one of these big news reports that comes out on all these white papers is why retirement plans is the number one asset class for all retirees. What they don't talk about, what I know being an advisor for nearly 20 years is that's mainly the only area that a person will invest on a consistent basis because it's automatic. It comes from their pay stub. They like set it and they almost forget it, right? You can do that in your investing life as well. Set that time to make sure you view your retirement plan out the next 20, 30 years. Don't look at it myopically just what's right in front of you. Remember how you view things has a lot to do with how your brain tells you what to do and what not to do when it comes to money and really anything in life in that matter. It's also one of the best ways to form habits to make sure these six sins don't happen.

You don't wanna hold cash in a retirement account above a certain amount. You do not wanna be out there to picking individual stocks based on what you feel is right, which also has to do with the next one being chasing past performance. Oh, that one did great last year. I'm probably gonna continue. I'll I'll do that. Be careful of that. You don't wanna time the market. I'll wait for the next crash and then I'll, I'll invest in there. That's never worked for anybody. You don't want to think short term either, and you definitely wanna start and don't avoid investing early and investing often.

I wanna thank you all for listening to Make Your Money Matter. Remember before acting on anything discussed today, speak with a financial advisor and near you. And if you're not sure where to turn, you'd like our help visit us at onecapitalmanagement.com or give us a call (805) 409-8150. And until next week, remember Make Your Money Matter.

The information in this podcast is educational and general in nature and does not take into consideration the listeners' personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a final decision.

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