AAR30 - How When You Start Investing Matters

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2:34Andrew Sather:The way I kind of frame it is there are three types of time periods in the market that you could land in. So you could have an uptime where the market is just going up, up and up for that time period, down, of course, down, down, down, or also where it's flat. I definitely think that having a flat market where not that much is happening, not that much growth, not that much loss, can also have an impact on you and your investing mindset. So for me, if you say you end up, you start in an uptime like I did, there's definitely the pros of seeing, okay, I can make money on this platform. This is something that can...

3:21Andrew Sather:Morning, morning, morning, everyone. Welcome back to At Any Rate. My name is Evan Rate, and we are here to help you make sustainable financial changes without breaking a sweat. I'm pleased again to welcome back my friend and one of the hosts of the other segment on this podcast, Andrew Sather. How are you doing?

3:36Evan Raidt:I'm good. I'm excited for this. Thank you for having me on again.

3:39Andrew Sather:You guys continue to tolerate me and so I'll keep coming. I'm a very, very patient person. I feel like I bring this up at the beginning of too many podcasts, but it is still an important point of view nonetheless. To put it nicely, you have had a different investing timeline than me. We're at a different point in the timeline from each other. Not that different, but still different. What was it like when you first started investing? Just when you first hopped on the scene of investing in stocks, what did the stock market look like? What did the economy look like? All that.

4:13Evan Raidt:I've probably said this story multiple times on the show, so be patient with me, long-term listeners. But for the newer folks, I first started around this time, actually, around Thanksgiving was when I bought my first stock. And I remember it vividly because it was on like an iPhone 3 or something and like the fact that they put the stocks app as one of the default apps was I think that's what got me interested because I was like clicking on that app and like well what's in here kind of thing. I never

4:49Andrew Sather:even thought about that. It's a pretty interesting choice to have been a default app but you're right it was. That's a very impactful choice by them.

4:57Evan Raidt:It was because otherwise I would not have known. You just never think of things like this when you're coming up. I had people also at work helping me out, but when you hear something as vague as the stock market, it's so ethereal. It's hard to visualize, but having an app to help you visualize it, that was just really helpful, other than what you saw on CNBC. So anyway, this was like 2012, I guess it was. Yeah. 2012 in San Francisco. I remember this. So I bought my first share and it was Microsoft. And then once I bought my first share, then I started diving in. And around that time, I had just graduated college maybe four or five years ago.

5:50Evan Raidt:A lot of the people, a lot of my peers, we had trouble finding jobs and it was coming out of the great financial crisis. So that was something that had really jarred a lot of people. The great financial crisis was something we hadn't seen since the Great Depression. And I heard Jeff Bezos talk about this recently when he's talking about this AI bubble concept. He says the AI bubble, even if it's a bubble and even if it bursts, it's a good bubble in the sense that humanity is advancing technology. whereas in 2008, 2009, it was just a bunch of people who were, it was a financial bubble. So a bunch of people who were just taking on all this risk.

6:35Evan Raidt:There was no benefit to society and it impacted a lot of people in a negative way. A lot of bankruptcies, a lot of bad debts, all of these things. So the public at that time was very, very risk. They were scarred. I mean, Enron was a stock that those guys were looked at like an Elon today or a Sam Altman today. These guys who are superheroes who had made a bunch of people rich and they were one of the best business people. And that was Enron. And then one day later, it's gone. And it was just a very negative, very bearish time period is what I came up in. And so a lot of the, when you would go and listen to podcasts or you would go, and there were still a few podcasts back then that would talk about stocks, but everything was about kind of like keeping your, avoiding the excesses of the previous decade and keeping your money safe while also still growing it.

7:39Evan Raidt:And then energy was a big thing back then. So it was like if you were a stock market investor and you didn't know anything about what was happening with oil and Exxon and Chevron, it was kind of like you didn't know what you were talking about. So yeah, it was a very different time from today. And technology was not nearly... It feels like today, if you don't talk about AI, if you don't know about NVIDIA, you're kind of out of touch. that's how it was in 2012 but it was all oil chevrons chevron exxon the permian basin i remember hearing that a lot um so it was yeah just a different time okay but that's that's

8:21Andrew Sather:really interesting and you know with with all that negativity surrounding all that uh the economy as a whole uh investing whether it's it being a bubble and then feeling a ton of short-term fear or long-term as well but mainly short-term fear about what the heck just happened is going to happen again? When will this happen again? How do we protect ourselves? All that sort of stuff. I'm sure that that would have a massive impact on your overall financial mindset. And I know you've said before that you're a very frugal person financially as a whole, but why do you feel that even after seeing all of that horrible volatility in the financial sector as a whole, that you ended up being financially frugal as a whole, but still being very willing to invest and continue investing and put more and more money into investing over time, even though when you started investing, it was so volatile and the whole mindset was just protect yourself at all costs.

9:17Evan Raidt:I think it was definitely for me a transition. It didn't happen overnight for sure. And a lot of it was having confidence and just being really prepared for whatever would happen. So once I kind of internalized that, okay, investing is a game you can figure out. like you you can there's always uncertainty but if you can manage it if you can have a system to take account for the uncertainties then you can still get ahead and so the more confidence i built in myself as an investor the the way i was able to get over the the fear of investing in the stock

9:55Andrew Sather:market okay that's really interesting so yeah seeing framing investing as as a tool that you can learn to use even if you do seen how careful you need to be with it but it's still something you can learn to use and it can it can help you that's that's that's really interesting and i think it it contrasts pretty well to when i started investing which i started in like late 21 late 2021 uh so at that point it was it was mostly just up like crazy post-covid like once things recovered after covid which was only like three months or something so it was quick after covid it began and then by mid late 2021 overall things were just going up to like crazy for the most part you know crypto was absolutely crazy meme stocks were again running wild as they always do periodically um there was definitely a lot of wild speculation just assuming that things were going to go up up up and up and i it was it was incredibly easy to succeed and i even remember there was a time when it was soon after i started investing i i think by that point i had already kind of decided, okay, I'm probably going to do, I think I was investing in some blue chip stocks at the time.

11:01Andrew Sather:So Coca-Cola, Apple, just big stocks at that point. And I was investing a few of them and they just kept going up. And I was like, okay, I need to start learning about some ratios and some statistics about stocks. Did some research on that, picked more stocks. After a few months, they're still just going up. And I was like, oh, okay, this is easy. That's why people do this. That's why there are investors out there. That's how people get rich off of this is you just kind of, as long as you put any thought into it, then things are just going to go up. And I remember I was, I was in the office I was working at at the time talking to, um, the, the mentor that I had that helped teach me about investing and finances in general at that time.

11:45Andrew Sather:and I was telling him that I felt that way and he was like trust me it's not always going to be like that and I was just like but it is right now it's crazy how much your like recency bias essentially completely overrides all logic and online research and what somebody is telling you to your face you still just feel like this this experience is happening right now is the truth and this must have been the truth and so I just thought that that investing was so easy and again And as long as I put any thought into it and picked even a halfway decent stock, then I was going to be okay. And obviously, that's a very scary mindset to be in.

12:24Andrew Sather:But that's where it put me in initially. And so it kind of felt also more like what interested me mattered more than what stocks will succeed. Because it felt like practically everything is succeeding at this moment. and so okay i'm more interested in like renewable energy or something so i am going to invest in a couple renewable energy stocks that seem to look good according to a couple ratios online and they're going to do well and that was my whole assumption and it was it was just so such a backwards way of looking at things but but again whatever you whatever you start in is so easy to get caught up in.

13:07Evan Raidt:Yeah, so it sounds almost like the flipped opposite of my experience. So how did you come to the realization that, because it sounds like you don't have that mindset now, so how did you, as I kind of had to build confidence to become more risk-taking, how did you find yourself to become more risk-averse?

13:35Andrew Sather:I don't remember a specific example, but I do know that after this period of everything just going up, up, up, and up, after there was probably only a few to several months, like three or six months or something time range of investing in this, there was a very short-term downturn, not a real notable downturn by any means, not a significant downturn of the market as a whole. But some of these stocks I was invested in started trending downwards, and there started being concerns about longevity. longevity of the company as a whole. Again, maybe not the blue chip stocks I was invested in, but a couple of these smaller renewable energy stocks that I might have picked or something along those lines.

14:13Andrew Sather:And I remember feeling like, okay, I can see that there's something here because there are still stocks that are going upwards. There are still stocks that are recovering. There are stocks and companies out there that people don't have long-term concerns about. But some of these stocks that I went out and picked or thought about picking or whatever are now going downwards and there are serious concerns about it surviving in the long run and what this downturn indicates about the company and blah, blah, blah. And it suddenly started to feel, really the best word is just overwhelming. And it made me realize that, okay, I can't just go pick something willy-nilly out of the clearance bin and assume that it's going to be okay.

14:52Andrew Sather:There needs to be a lot of thought, a lot of analysis, a lot of in-depth understanding behind this decision-making for this to be successful in the long run at all. and that sort of sort of mentally for me flipped me to the side of okay that's at least at this point i don't think that's the effort that i want to put in because this it feels overwhelming it feels like something i know nothing about and so at least for the time being i'm going to lean away from putting that time in whatnot is quickly becoming the next big thing for you to pay attention to and its success isn't even slowing down over time but it's compounding faster and faster.

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17:44Evan Raidt:I just made a new stock the third largest position in my portfolio. And I actually just finished the deep dive report on it called the Newtonian Compounder, How 60 % Returns Power on Unstoppable Machine. It's available for our Value Spotlight members. If you want to see the thesis, we're doing a 60 % discount for now, but I'm pulling the deal once the stock hits$45. Check it out at einvestingforbeginners.com. slash 60. I know I still definitely spent a lot of time on things like podcasts, things like

18:14Andrew Sather:YouTube videos and blog posts online and other educational material, just trying to learn about the market as a whole. But I really flipped over more to that learning and understanding mode, similar to the place that you landed, again, coming from the opposite end of things. But you landed in that place of, okay, this is a tool, I need to learn how to use it. and I felt very similarly that like okay this tool got really really crazy and lucky and good lately but it's not always going to be like this and if I want to have any real six long-term successful access to this I need to start learning the inner workings of everything and so it led me down that path path of a ton of education meanwhile not really taking many risks and you know of course in the long run, landing into investing pretty much or primarily in index funds, still very passive investing.

19:03Andrew Sather:But that was after a ton of learning about the market and its workings as a whole.

19:10Evan Raidt:It's cool that you started in late 2021 instead of late maybe 2020 or early 2020 because your tuition to learn that lesson might have been a lot more expensive if you had a lot more money in it because it sounded like it was right before things started to turn and we saw the market come down a bit in 22. Yeah, there was a lot of different kinds of time periods

19:34Andrew Sather:happening within only the span of a couple of years. But I definitely am not sad about the one that I ended up in. But the way I kind of frame it is there are three types of time periods in the market that you could land in. So you could have an uptime where the market is just going up, up, and up for that time period, down, of course, down, down, down, or also where it's flat. I definitely think that having a flat market where not that much is happening, not that much growth, not that much loss can also have an impact on you and your investing mindset. So for me, if you say you end up, you start in an uptime like I did, there's definitely the pros of seeing, okay, I can make money on this platform.

20:15Andrew Sather:This is something that can genuinely make me a ton of money depending on how much money I have to work with. And it can help me more and more over time through compounding. And you're just seeing dollar signs. But at least seeing dollar signs makes you see it as useful and makes you want to invest in it as opposed to just being too afraid to even touch it. But, of course, there are also cons to it being an uptime where I just assume that everything is going to be okay. Or anybody that starts in that time period is going to assume that everything is going to be okay in the long run and is completely averse to worrying about risk.

20:50Andrew Sather:So when I'm analyzing a stock, at that period, at that time, I'm looking at, okay, what stock is going to shoot up the most and earn the most money in the long run? And that's it. That's the end of the conversation. There is no, and what kind of moat does it have to protect it in the long run from failing, protect it from competitors? What kind of competitive advantage does it have that's going to keep it up on that echelon and not just get it knocked over overnight? you're only looking at one side of the coin, which is just the good side, but completely ignoring the bad side of the coin. But what kind of pros and cons do you see if you start in a downtime like you did?

21:29Evan Raidt:Yeah, there's several cons. We talked about some of the good side because it keeps you humble and you tend to learn a lot. But the cons are, going back to what you said about recency bias to kind of beat that horse a little more, I remember just every year people expected it to be a repeat of 2008, 2009. And with the benefit of hindsight, obviously we've seen, sure, we had the COVID crash, which was very quick, but we haven't had another financial crisis. But people were saying it over and over and over again. And I heard it every year, 2012, 2013, 2014. People were like, oh, you know, this bull market's getting long in the tooth.

22:14Evan Raidt:The kind of stuff you still hear today. But it's just that recency bias where people think, okay, there was disaster, another one's coming, so I better not take too many risks. And again, with hindsight, ironically, that was the best time to be taking some risk. Buying some of those tech companies that didn't fit the mold of blue chips. Companies like Facebook or Google, even Apple, was not loved because people thought it was a computer their company. That would have been the time. So that's a con is you're blinding yourself to the opportunities. The other one was bonds used to be a lot more popular.

22:56Evan Raidt:And even if you were younger, it was considered prudent to have a bond allocation, which is silly now. Nobody would ever recommend that for a young person. But back then people said it was a good thing because when the market inevitably turns, you can take some of your bonds, sell them, and then buy stocks at cheaper prices. And that was something that a lot more people did and thought about. And I was guilty of it in the sense that I was saving for my daughter's college in a 529, and I had a bond allocation. And that bond allocation, I think I even did like, I can't remember if it was 50-50 or 25-75, but that bond allocation has greatly underperformed.

23:41Evan Raidt:That was a disservice I did to her that I didn't have enough in stocks because I was influenced by this whole mentality that you need to have bonds, you need to have bonds.