The Big Picture | Brandon Averill, Justin Dyer | AWM Insights #93
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Episode Summary
Money is such an important part of our lives, impacting mental and physical health. With so much information available immediately and through so many sources, sticking to the data of what works for a good investing experience can be difficult.
Zoom out and look at your big picture first. This will always help focus on what’s actually important and to ignore or block the things that don’t actually matter with a wider perspective.
Episode Highlights
(1:45) Why is money even important? Why do people jump to invest before looking at the big picture?
(3:20) With so much information out there, why is it so hard to filter out the bad?
(4:05) The data and evidence for a good investing experience is out there.
(5:23) Why do we invest? This is the first step to understand your big picture.
(5:55) Everyone’s personal experience with money is different and defines how they behave in the future with their investments.
(7:05) To help our clients, we reframe and guide to the long-term, to multigenerational growth of wealth.
(7:45) NFT boom and Opensea. Is this a “sure thing” to invest in?
(8:45) Nothing is certain in investing. No one can predict the future. If there is no risk there would be no return for the investor taking that risk.
(9:30) Theranos and Elizabeth Holmes were seen as a great investment at the time. It ended with investors losing everything and Holmes convicted of fraud.
(10:30) OpenSea’s valuation is very high. If you were to invest, keeping the allocation small and part of a bigger private investment portfolio is how you would do it.
(12:00) Statements like “crypto is going to change the world” should trigger you caution reflex.
(12:45) Be careful getting caught up in the flashy returns. Return back to what will give you the best chance of achieving long term wealth.
(13:30) Not investing in private markets isn’t the right answer either. Proper allocation to private markets is where you can seek big returns, when done the right way.
(14:17) At the end of the day, what are you trying to achieve. Determine your priorities and the investment decisions become simple.
(15:20) Investing is to make money but many investments will do that. Next week will cover how to do it most effectively.
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Justin Dyer: LinkedIn
Brandon Averill: LinkedIn
+ Read the Transcript
Brandon Averill (00:05):
Hi everyone. I'm Brandon Averill, one of the partners at AWM, where we advise people in creating multi-generational flourishing families so that we can solve that shirt sleeves to shirt sleeves financial epidemic. This is a front row seat with AWM's chief investment officer, Justin Dyer and myself, as we discuss some of our clients' most pressing financial questions. This is AWM Insights and let's dive right in. Justin, happy New Year. Welcome back.
Justin Dyer (00:35):
It's been a while. We missed a couple weeks there. Someone got sick here.
Brandon Averill (00:40):
I know. Along with the rest of the world, we got bit by the old COVID with everybody else.
Justin Dyer (00:47):
Well, we're happy everyone is doing well now and got through it relatively mild.
Brandon Averill (00:53):
Unscathed. Well, new year, Justin, we certainly wanted to kick things off with a beat and thinking about this, you and I have spent a lot of time in conversation and just thought, what better place than to start at the very beginning. I think hopefully we can guide some people this year through common questions we're getting from clients and really start to just tackle this whole money thing. We all know that we're impacted by money, whether we're interested in it or not. Our health and money are things you can't really avoid. They matter to everybody, different degrees and certainly different for everyone.
Brandon Averill (01:30):
But I thought it would be a really good place. We thought it would be a really good place. Let's start off and just lay the groundwork, why is money even important? Why does it impact everybody? Hopefully throughout the year we can help guide some people in the way that we do our clients to make really smart financial decisions that help them to create their own multi-generational flourishing families, the things that we focus on with our clients.
Brandon Averill (01:57):
I'd love to start there with you and let you kind of rift a little bit on big picture. Why do people make such bad decisions with money? Why do we jump immediately to wanting to invest when the first step is actually thinking bigger picture about what we want and using money as a tool? Big meaty topic for the day, but love to hear your thoughts as we open up.
Justin Dyer (02:20):
Man, that is a huge meaty topic. I mean, I don't think anyone truly knows the answer to that question. Well, maybe we know somewhat. You can say, "Hey, it's human psychology and behavioral, our behavioral nature that it's really difficult." It's not impossible to overcome, but it's really difficult to make good decisions when it comes to money. You mention health as well. They're very interrelated. When you have kind of the immediacy or the bright flashy influences, whether it be food on the health side or financial media or silly anecdotal comments from your buddy about whatever it may be. Last year was certainly crypto currency. Other years it's the hot stock of the year.
Justin Dyer (03:08):
It's incredibly difficult to tune out that noise. I don't even necessarily want to say tune out that noise to take in that information and properly quantify it or properly digest it, given all the information that is actually out there at our fingertips.
Justin Dyer (03:26):
I mean, the amazing thing in the time that we live, there is so much information, good and bad, but you can go find very good, very sound, very robust data around money in general. Obviously we're going to get into great detail around that. Maybe today we'll touch on some today. Maybe we'll continue to dig into this. But we know what works. The answer is out there. We know what will provide you a good investing experience, a good money experience over the long term and a high probability way. It's just, it's getting that data in front of you. It's understanding what that means. Then it's also acknowledging, hey, there are going to be times where it's hard to focus or, or believe that that data is still kind of true. There certainly over the last year, year and a half, two years even, there's been plenty of examples where it's the bright shining thing that distracts us from what we know, what the high probability outcomes that we're trying to accomplish.
Justin Dyer (04:28):
I mean, again, I don't know if there's a super simple answer to that question. I think a lot of it has to do with our behavioral nature around, again, whether it's health or money. Death and taxes is another way of putting this. Those two things are always something everyone has to deal with. But I think it is in really what we're seeking to accomplish here. It is taking that step back. It's looking at the data from a really objective point of view to say, "Okay, what ..." Well, first let's ask the question. What does money do, which we're going to get into, and then why do we invest? Then let's look at the data as to how we should invest. Let's not just turn on CNBC and watch Jim Kramer and throw it in the three stocks that he's talking about today. That certainly is not a robust way of managing long term wealth. Hopefully that at least scratched the surface as an answer.
Brandon Averill (05:21):
No, I think it's a great answer and great foundation. I mean, I think you hit on it and it resonates with me as the behavioral side. We're all impacted by our personal situations. I mean, Morgan Housel and his fantastic book, Psychology of Money, he has a quote that goes something like your personal experiences with money actually make up, I think it's one 1000th of a percent what's actually happened in the world, but maybe 80% of how we think about it.
Brandon Averill (05:48):
I think a good example is what happened this last year, the S&P 500, for instance, what it was, it hit 70 closing highs over the course of the year.
Justin Dyer (05:58):
Unbelievable.
Brandon Averill (05:59):
The most since 1995. You have some people that look at that and go, "Shoot, let's ride this wave. Let's pump more money in." Then you have on the flip side, somebody that looks at that, like a client that texted me yesterday and said, "Hey, do you think it'd be smart to pull everything out and wait until this thing corrects?"
Brandon Averill (06:18):
I think you get both sides of the coin, but neither are unvalidated. I mean, it's just, they're based on their past experiences. I think what you talked about is coming back and looking at it and going, "I got to first identify what we're trying to do here." For our clients, again, it's going back to, we're not trying to maximize some sort of return in a really short term period of time. We also know that's difficult to near impossible to do, but we're actually thinking multi-generationally. We're reframing the question, reframing the problem and saying, "Hey, actually, okay, let's look at that. That happened this last year. Us moving in and out, is it going to impact your next generation?" The answer is, I mean, potentially negatively, but we're just trying to make decisions in a different way.
Brandon Averill (07:09):
I mean, conversely we've seen this NFT kind of boom. You see places like OpenSea, which is an NFT, and then taking the money and turning around and buying it, or at least allegedly, or in talks to acquire Dharma Labs, a digital wallet for currencies, you start to see these things happen and people all of a sudden jump to, wow, this is a huge certainty. I got to get in. This is the hot flying thing, when they might not be in a position to feed their priority and then you'll get the flip story. It's like, okay. It was such a sure thing, but so was Theranos. I know you've got some thoughts on Theranos, but it's just not that easy. I think going back to that original question, what are we trying to achieve here is the key point.
Justin Dyer (07:59):
What are you trying to achieve? Then let's implement a plan. I used the term earlier, let's implement a plan that has a high probability, high likelihood of getting there. Nothing is certain in life. We can't predict the future. We can't predict the returns this year. Anyone who says differently is full of crap. But we know over the long term, we have a high conviction, high expectation that a well structured investment plan or well structured financial plan, even let's go beyond just the investing, will likely get you to your priorities.
Justin Dyer (08:32):
Going back to your comment on Theranos, I mean, so Theranos for those who don't know, it was a darling Silicon Valley art up and raised money from all sorts of high profile individuals, I mean, people who were secretaries of state, national security advisors, et cetera, et cetera, it's an incredible list. A lot of these individuals served on the board, young woman, Stanford graduate had a supposedly revolutionary blood testing technology, and a whistleblower came out. I think the Wall Street Journal actually published the article a couple years ago that basically exposed the fraud or accused her of fraud.
Justin Dyer (09:13):
Anyway, fast forward to when was it last week, I believe, or this week, she had been taken to court for fraud and was found guilty on a number of counts held against her. Even the court case aside, these investors and I think the last time it actually raised money, it raised money on a $9 billion valuation, all the investors, I mean, they have nothing as a result of that. Risk is there.
Justin Dyer (09:39):
Going back to your OpenSea valuation, $13 billion valuation, I don't know if it's worth $13 billion. I know if we were participating in that, it would be a small fraction of one's portfolio. The whole NFT, again, a crypto world, we've talked a lot about that. Blockchain is interesting. There's so much money in the space and so much innovation going on that it's so hard to pick the true winners, but does it make sense to have a small allocation there through some private market vehicles? Yeah, potentially, and that's more of the picks and shovels approach that we talk about where it's not necessarily the cryptocurrency. It's the structural, the foundational building blocks that companies are building in that space that are really interesting.
Justin Dyer (10:27):
But the valuations can be eye popping. It almost harks back to the dot com bubble of '99, 2000, 2001, where valuations were insanely high. Companies were going public left and right and a big portion of those ended up going belly up, investors losing all their money. It's not like we're going too deep into the data side of things, but these anecdotal experiences are always important to refer back to.
Justin Dyer (10:58):
History doesn't repeat itself. It certainly rhymes in many cases. Anyone who's saying this time is different and crypto is going to change the world and whatnot, it's statements like that, that I think you should be very cautious with. Yes, is it an interesting technology? By all means. Do we know what it's going to look like in 5, 10, 15, 20 years? I don't think anyone truly knows what that looks like and which companies are going to come out, whether Bitcoin is still around or some other crypto's taken over anyway.
Justin Dyer (11:26):
Kind of a long-winded rant there, but I think it is important, especially with the psychology side of things. Over the last year and a half, two years, there's been a lot of interesting market dynamics because of the pandemic, because of crypto really kind of making its appearance on the main stage, so to speak, even though it's been around for quite some time, to just take a step back and not get too caught up in the flashy returns that you're seeing and then ask yourself, okay, and we're going to address this in coming episodes. What are we trying to accomplish? Then we can say, "Okay, this is how you should invest. This is why you should invest to potentially accomplish what you're trying to address here."
Brandon Averill (12:06):
That's a great point. I think what everybody will learn in the coming weeks ahead, and we should state here is we're not against the private markets, and quite the opposite. We're in great favor of them. We think they produce the best returns over time. What we're advocating for is doing it in a way that evidence supports is successful. There'll be a lot of people that are scared off. Theranos is a great example. People walk away from that experience, shoot, I'm never touching the private markets again, and now they've just cut themselves off from one of the potentially greatest wealth generators.
Brandon Averill (12:41):
Now we'll get into this. It's a difficult place to exist. I mean, cautionary tale there. If you actually look at the people who backed Theranos, it was some of the, like you had mentioned, the wealthiest families in the country, people that thought they had some special access and all this stuff, but maybe didn't have the skillset to do the due diligence, a lot of the institutional side actually stayed away from it.
Brandon Averill (13:03):
I think it's just kind of, I guess, a cautionary tale there. But kind of circling back as we wrap up, I think what we're trying to get across to everybody is this is a difficult process. At the end of the day, though, you can simplify a lot of it by just identifying what you're trying to achieve. Is it multi-generational wealth? Is it getting to retirement? Whatever it might be, providing for just your family, you got to figure out those priorities and allow them to drive your decisions, because that's going to take a lot of the emotion and set it aside.
Brandon Averill (13:38):
If I look at it, I get jazzed all the time. I see these companies I get really excited about, and then I sit there and I look at my three kids and I'm like, "Well, if I go do this and the money goes away, they might not be going to college." That informs my decision making. We do have special access to really exciting, neat stuff, yet I'm making decisions not to put money there because I know that my priorities are somewhere else.
Brandon Averill (14:05):
I think that's what we're going to try to get across with everybody here in the weeks ahead. Hopefully this was a really good foundation for us to work off of. We'll probably start to dive in next time around next week, come back, because we're going to start to talk about the actual meat that everybody loves, and that's the how do we invest or why do we invest in the first place? What do we actually want to accomplish when we put our money at risk? Teaser, the answer, to make money is the simple answer. But it's much more complex than that as you all could imagine.
Brandon Averill (14:35):
Anyways, we look forward to sticking with you this year. We'd love to hear your thoughts, stuff you want to hear about. If you have any input, if you're interested in additional information, head over to AWMinsights.com, we got some resources you can download there and until next time, own your wealth, make an impact and always be a pro.
Brandon Averill (15:02):
The information in this podcast is educational and general in nature and does not take into consideration the listener's 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.