25 Financial Thought Leaders Define "What Does It Mean To Be A Long-Term Investor? (EP.126)

0:28We all need to make smart decisions with our money. Well, that's exactly what I did. Today, you'll hear what all of my past guests, from Ben Carlson and William Bernstein to Carl Richards and Hal Hirshfield, and what they think long-term investing is all about. My goal with this episode is to get you thinking about what it means to be a long-term investor, but also remind you to look back at some past guest interviews that you may have missed over the past year. And don't forget to stay until the end when I'll give you my personal take on what it means to be a long-term investor. Now let's get into it.

1:07I'm going to go in the order of publishing. So we'll start with Ben Carlson, episode 77. Ben is the co-host of one of my favorite investing podcasts, Animal Spirits, and also author of the book and blog, A Wealth of Common Sense. In this episode, we talked about instances when spreadsheets and financial theory don't necessarily align with human emotions and reality. If you go back and listen to that episode, you'll learn why investors fail to earn the market return, the importance of avoiding bad investments, and how personal finance best practices aren't always the optimal choice for you. Now, here's what Ben had to say.

1:44I think the biggest thing about being a long-term investor is just not reacting to what's going on in the short term. I personally can't look away from the stock market because that's part of our job, but I think it's okay to pay attention. It's okay to watch. I don't think it's always okay to just react to it. It's not that you're not going to feel anything in the short term. We're all humans. We all have emotion. But to me, being a long-term investor means having a plan in place and just not reacting to what's going on in the short term, unless somehow my circumstances have changed. And I think that's the biggest thing for me is My personal circumstances probably dictate what I do with my portfolio much more than what's happening in the market.

2:20That's a long-term investor. Up next is Taylor Schulte, host of the Stay Wealthy podcast. Taylor specializes in assisting people nearing or in retirement. So I had asked him to join me and talk a little bit about Irma charges. We completely nerded out on how Irma works, strategies for retirees to avoid Irma, and how to plan for Irma while you're still working. So you can check that out in episode 79. And in the meantime, here's what it means to Taylor to be a long-term investor. Being a long-term investor to me means recognizing and understanding and believing that it takes time for our investments to help us reach our stated goals, that investment success doesn't just happen overnight.

3:02And when you think about it, it's kind of strange that so many people get trapped into thinking that there are shortcuts to investing and that positive results should happen quickly because in just about every other area of our lives, and Peter, you've done a great job talking about this on your show, in just about every other area of our lives, we don't have those same expectations. You know, if we wanna lose weight or gain muscle, we all know it's not going to happen overnight. If we're diagnosed with a severe illness or we have chronic pain, we all know that the prescribed medicine or treatment plan will take time to help us feel better.

3:35So I think being a long-term investor to me means that we have reasonable and realistic expectations about our investments and that like everything else in our life, we understand that it takes time to achieve positive results. It takes time for a young investor who's just getting started, and it takes time for someone in retirement who needs to sustain income for the next few decades. In other words, I think being a long-term investor is less about your age or stage of life and more about your expectations, your goals, and your behavior. The next guest episode was none other than Dr. Burton Malkiel, author of A Random Walk Down Wall Street.

4:15Burt joined the show to talk about the 50th anniversary of this investing classic. And if you go back and listen to this investment legend, you'll hear him talk about the two biggest mistakes investors make, lessons from market bubbles of the past, and practical ideas for achieving investment success. Now, here's what Burt had to say about being a long-term investor? What it means is buy and hold. Don't think that you can time the market. Nobody can time the market. And in fact, one of the biggest mistakes that people make is that they think they can time the market and they get in and out and invariably they do the wrong thing.

5:01We have data that show conclusively that people tend to put more money into their mutual funds when the market is going up, and they tend to take the money out when the market is going down. Invariably, this happens. It's exactly the wrong thing to do. Your best investment opportunities occur when everyone is afraid, when the markets are going down. And so don't try to time the market, buy and hold and keep investing regularly over time. This is what it means to be a long-term investor. And this is the key to investment success. I love talking shop with colleagues from around the country and wanted to give you a sneak peek into those conversations.

5:58So these next two guests come from an episode where I featured two of my favorite chief investment officers, Phil Huber and Ruben Miller. If you go back and listen to our conversation, you'll hear us talking about some of the big storylines at that time, as well as how we develop return assumptions for financial planning models and things that people misunderstand about the role of a chief investment officer. We'll start with Phil Huber, author of the Allocators edge and bips and pieces. Here's what he had to say about being a long-term investor. To me, being a long-term investor means whether you are coming off a really strong year of performance or a really poor year, you're not going to dramatically change your portfolio in response to that.

6:38And now here's what Ruben Miller, author of Fortunes and Frictions, had to say. There's a significant portion of your portfolio that you don't give a shit about for many, many years. It's really hard. Next up, we have Desarte Yarnway, founder of Yarnway Wealth Management, head of community at Altruist, and co-founder of Onyx Advisor Network. In my episode with Desarte, he shares his personal story and the motivations for working towards changing the landscape of the financial services industry, one client and one advisor at a time. When you go back and listen to our conversation, you'll learn about changes in the financial services industry over the last decade, the importance of diversity in financial services and how to increase it.

7:21And lastly, we talk a little bit at the end about the most important things an advisor can do for business owners and entrepreneurs. Here are Desarte's thoughts on what it means to be a long-term investor. When I think about long-term investing, I think about discipline and commitment. Being a long-term investor to me means being extremely disciplined and committed to your goal and the journey. Robin Powell is an award-winning journalist and campaigner for positive change in global investing, advocating for better investor education and greater transparency. I invited Robin on the show to discuss what evidence-based investing is all about, the importance of developing a financial plan prior to choosing investments, and the differences in adoption of evidence-based investing outside the United States.

8:10Here's what Robin had to say about being a long-term investor? For me, being a long-term investor is essentially paying no attention whatsoever to the stock market. Jack Bogle, who's one of my heroes, famously said that the stock market is a giant distraction from the serious business of investing. And for me, that really hits the nail on the head. It's completely irrelevant which stocks or which sectors are going to do best or which countries are going to outperform over the next 12 months. It's almost impossible to say, and it is impossible to be consistently right all of the time. It's the same with market timing, will markets go up or down tomorrow, next week, next month, next year?

9:06It's extremely difficult, if not impossible, to say with any accuracy consistently. So being a long-term investor is saying in answer to those questions, frankly, I don't know and I don't care. The Secure 2.0 Act passed at the end of 2022 included over 100 changes to the rules governing retirement savings. That's why I invited PlanCorp's Chief Planning Officer, Brian King, to join me and talk through the most important opportunities resulting from the legislation. In Episode 90 with Brian, he talks about the impact of Secure 2.0 on people nearing or in retirement. He also goes into how new provisions make it easier for workers to balance current needs with future goals.

9:53And we also discuss some of the biggest planning opportunities from Secure 2.0 Act. Now, here's what Brian had to say about being a long-term investor. When I really think about that, it's like it always brings me back to like focusing on the basics and the basics really matter over a long period of time. that's having a strategy and sticking to it, whatever that strategy is. Over time, not flip-flopping between strategies, keeping costs low, diversification. Those are all the things that allow you to have a good experience over a long period of time. The only other thing is that I think also just starting and getting momentum towards becoming a long-term investor is really important versus, I think just like a lot of other changes you might make in your life, If people worry about what's the perfect way to start versus now, just get going, just start saving.

10:43Don't worry about the best place to save and what the best investment is. Like just start saving, right? Just start eating better. Just start running. Just start learning the new skill. Just start. Jeremy Schwartz, Global Chief Investment Officer at WisdomTree, joins me in episode 92 to talk about the sixth edition of Stocks for the Long Run, which he co-authored with Professor Jeremy Siegel. In our conversation, we talk about why you should want to own stocks right now, why fundamental indexing is better than indexing, and how to manage cash in the current yield environment. Here's what Jeremy had to say.

11:18When I think about being a long-term investor, I come back to the book I've been a co-author on stocks for the long run. You got to think about in the short run, stocks are going to be the most volatile asset. But over the long run, bonds have suffered from inflation. Stocks have been one of the best ways of accumulating wealth over the long run. When you extend your holding period from, call it one year, where you only have about two thirds odds of stocks beating things like treasury bills. When you get to 10 years, the odds go up to something like 85 % over the last 150 years. Go to 20 years, it gets closer to 99%.

11:55Did stocks beat something like treasury bills? That's what I think is a long-term investor. You got to zoom out. The long run to me is 10 to 20 years, what you're saving for retirement over those data, the case for stocks is pretty clear. And I think even today, a lot of uncertainty in the world and you get a lot higher income than you used to in fixed income, but stocks still have a nice after inflation, real return, equity premium priced in. I think that's what it means to be a long-term investor. Episode 94 with Jamie Catherwood was a history on investment vehicles from 1774 to 2023. But unfortunately, I forgot to ask Jamie about this question.

12:35But still, I wanted to take the opportunity to highlight what was an absolute masterclass on the history and investment vehicles. In episode 94 with Jamie Catherwood, he talks about the importance of understanding financial history, lessons from past bubbles, and how investment vehicles have evolved over time. Now, my next guest you'll hear from is Rick Ferry, host of the Bogleheads on Investing podcast. In episode 96, Rick talks about the importance of having a clearly defined investment philosophy, the four stages of an investor's philosophical journey, and the key ingredient to keeping a great investment plan intact.

13:13Now, here's Rick. Being a long-term investor means being able to match your assets to your liabilities. I know that's a fancy term, but we all have life's liabilities. We all have expenses, children to put through school, retirement, maybe passing on an estate. And being a long-term investor means setting up your investment portfolios to match all of those long-term liabilities. The prolific author of personal finance and retirement books, Mike Piper, joins me in Episode 98 to talk about his latest book titled Financial Steps to Take After the Death of a Spouse. In this episode, he explains what married couples can do to make it easier on the surviving spouse in the future, financial planning techniques a surviving spouse can use to maximize their wealth and minimize taxes, and when it makes sense to disclaim an inheritance.

14:03Here's what Mike had to say when I asked him about being a long-term investor. To me, it means not caring about what the stock market does from one day to the next. for most people, and that even includes retirees, short-term fluctuations simply are not that important. For episode 100 of The Long-Term Investor, I was super excited to be joined by Carl Richards, who is well known for his trademark sketches and the ability to make complex financial concepts easy to understand. In this episode, I asked Carl to talk about some of my favorite sketches and what real financial advice means. We also talk about how investors fall victim to the behavior gap, what it means to do real financial planning, and the best way to avoid the big mistake.

14:50Here's what it means to Carl to be a long-term investor. I mean, the simplest form of that to me is buying good things. I'm not thinking of these like long-term investor, I'm going to buy these seven mutual funds. I'm thinking like, where am I going to invest my time, my energy, my money and attention? And to me, the same answer, which is buying really good things that I value and keeping them for a long time. Michael Kitz's is one of the industry's leading experts on all things financial advice and financial planning. Episode 102 was a live recording at Wealth Management Edge, And I completely forgot to ask Michael for his thoughts about being a long-term investor, but I strongly encourage you to check out episode 102, where Michael explains the evolution of financial advice from the 1960s to present, ways that consumers benefit from financial advisors moving up the value chain, and how AI might impact the financial advice profession.

15:51Fortunately, I didn't miss the opportunity to ask my next guest this question. In episode 104, I'm joined by Ashby Daniels, author of Money Visuals, to discuss the problems with conventional wisdom and how that feeds into what investors get wrong. We also talk about a new way to think about risk and how to define investment success. Here's what Ashby Daniels had to say when I asked him what it means to be a long-term investor. I believe that a long-term investor is somebody who is quite literally a permanent owner of equities as I view it. Somebody who's not concerned about the headlines, somebody who can look at what's going on in the world today and still see a brighter future.

16:34You could encompass almost every big financial lesson into one phrase, which is that of being a permanent owner of equities. Polina Pompliano is the author of Hidden Genius, The Secret Way of Thinking That Powers the World's Most Successful People. She's also the founder of The Profile, a media organization that studies successful people and companies. And in episode 106, she joins me to talk about why mental models are more important than life hacks, how to problem solve in a crisis, and the difference between systems-based and outcomes-based thinking. Here's what Paulina had to say when I asked her, what does it mean to be a long-term investor?

17:13So to me, being a long-term investor requires having a goal and having the longevity and courage to see it through. Ultimately, the longest term investment that you can have is betting on yourself and figuring out what is your purpose in this life and how you're going to get there. To me, being a long-term investor is finding something meaningful that you can dedicate your time and resources to and just seeing it through and not being distracted by the daily volatility of emotion. The last guest that I had where I forgot to ask the question was Jill Schlesinger, host of Jill on Money, an award-winning business analyst for CBS News.

18:00She had come on the show to talk about her new book, The Great Money Reset. And we talk about things like what does it mean to do a great money reset, the differences between the money reset experiences by age, and timely financial steps to build the life you really want. So if you want to hear that conversation, go ahead and scroll back to episode 108 with Jill Schlesinger. My next guest was Matthew Pellerin, a senior researcher and vice president at Dimensional Fund Advisors. And he came on the show to talk about his recently published research on the impact of factor investing on retirement outcomes.

18:35So we discuss in this episode things like how a core portfolio differs from an index portfolio, the impact of investment strategy on the accumulation, decumulation, and bequest outcomes, and when the short-term, when you're looking at data, ends and the long-term begins. Here's what Matthew had to say when I asked him what it means to be a long-term investor. For me, the biggest thing about being a long-term investor is really your state of mind. Obviously, it's not about your investing horizon, and it's not even about staying in your seat because even if you stay in your seat, you stick to your plan, but you're just having a horrible time.

19:15You're anxious about your portfolio all the time. To me, that's a bit of a pyrrhic victory essentially. So to me, to be a full-blown long-term investor, it means that you have a mentality that you trust the markets and in the long run, markets do their job at allocating capital. Firms are gonna innovate, come up with new products and services. They're gonna grow in value and then the equity returns is gonna follow. basically. So I would say that's the most critical thing. It's really enjoying the ride, essentially, and just finding that right state of mind. John Jennings, author of The Uncertainty Solution, joined the show for episode 112, where he explains how to invest with confidence in inherently uncertain and unpredictable markets.

19:55We talk about how humans react to uncertainty, the difference between the economy and the stock market, and the role of skill and luck in investing outcomes. Here's what John had to say. It means not looking at your portfolio. It's really hard to be a long-term investor when you're getting short-term stimuli. And I think about a thought experiment. In fact, I think like maybe Charlie Munger came up with it, which is what would you invest in if you couldn't touch it for 20 years? It sounds scary. And we've dealt with this a bit. If an owner of a business sells their company to what's known as an ESOP, an employee stock ownership plan, and they elect something called Section 1042, they don't pay any gains until they sell the proceeds of what they reinvest in.

20:41But there's special rules for what they reinvest in. The main way they do that is you can buy U.S. stocks and U.S. bonds. Individual. You can't buy ETFs. You can't buy mutual funds. They have to be individual stocks. And if the stock is ever sold or gets merged away or goes out of business, then you have to recognize the gain on that portion. So when you do this, and we've done this before, you buy like, I don't know, 70 or 100 stocks, and you're like, we're not going to touch these for decades or longer. The stocks over time will get merged away and things will happen to them. There's sort of like a half-life or radioactive decay of them.

21:17But what would you invest in if you could pick, I don't know, 50 or 70 stocks and never sell them. And it's a different way of thinking about things than we're just going to buy a diversified portfolio that we're going to be able to tinker with. It's pretty fascinating. Kate Howerton was the first of two guests that I asked to come on the show to talk about student loans, a topic that had been requested quite a bit in the comment sections of the show. In this episode, Kate shares some challenges high-earning professionals with student loans face, strategies for managing student debt during the low and high-earning years, in how to manage lifestyle creep.

21:53But here's what Kate had to say about what it means to her to be a long-term investor. I think that being a long-term investor is focusing first on identifying your values and then using those values to shape your goals and then taking time and following a path of determination and grit to be able to use intentional decision-making to reach those goals along the way. So for me, whether that's investing in our health, it's investing in our financial plan, investing in our retirement. It is a long term journey to achieving the things that we want to accomplish within our lives. And that is what it means for me to be a long term investor.

22:33In a second episode about student loan debt, I'm joined by Tyler Olson, who provides financial advice in education for early and mid career physicians. In this episode, he talks about how to choose the right repayment plan, when financing or consolidating loans is an effective strategy, and differences in debt snowball and debt avalanche approaches to repayment. Here's what Tyler had to say about being a long-term investor. Being a long-term investor means that I'm putting my hard-earned money where it has a decent potential to grow, but doesn't involve my mental management. In episode 116, I talk with Jesse Kramer, author of the Best Interest blog.

23:18Our conversation is about the astounding math behind car ownership. We get into details like how to evaluate the impact of time owned versus miles driven, when a used car purchase is smarter than a new car, and how leasing compares to owning. Here's what Jesse had to say about being a long-term investor. Being a long-term investor means accepting the fact that you are going to be full of doubt, accepting the fact that you are going to be faced with lots of uncertainty, but when in doubt, zoom out. And so being a long-term investor means zooming out and seeing the world for what it is over the long run and having faith because it's not all scientific.

24:02Some of it really is just having some faith that in the long run, markets rise, economies grow, and staying with it for the long run is the best, most certain way to achieve your investment goals. Live from Future Proof, the world's largest wealth festival, I had the opportunity to interview Meyer Statman and talk about the evolution of behavioral finance and how the latest generation of behavioral finance focuses on holistic well-being. If you go back and check out that episode, we talk about the three generations of behavioral finance, the difference between errors and wants, and the trade-offs between a financially optimal and behaviorally optimal portfolio.

24:43Here's what Meyer had to say about being a long-term investor. Well, when I think about myself as an investor, and I rarely think of myself as an investor, I think about myself as a person. What I think about is what money is for. And so I'm at this fortunate position where I never imagined that I'm going to accumulate as much wealth as I did. I remember years ago, my CPA said, Mayor, you're paying a lot of taxes. And I said, I never imagined I'm going to earn as much as I'm paying in taxes. And I'm not going to spend my life complaining about taxes. And so we have, I have more than I need. And so my wife and I, who is a graduate of Santa Clara, where I teach, we have established an endowment of several million dollars that pays really grants to faculty members in my department to support their research.

25:48This makes their life easier, helps their research, in a way helps all of us. And it also gives me that sense of pride. Yes, I gave up some of my wealth. I gave up some of the utilitarian benefits, but I also gained a whole lot of expressive and emotional benefit. That to me is to remember that I cannot take it with me. I can really share it with people who matter to me and causes that matter to me. And if I've been fortunate, it is, yes, I worked really hard and continue to, but I've been very lucky and I surely can spend the luck portion of my money on other people. Susan Jones, a senior wealth manager and shareholder at PlanCorp, joined the show to talk about year-end tax and estate planning items.

26:48But not only did we talk about ways to reduce your tax liability in the current year, we also focused on the role that tax projections play in long-term financial planning. And as a result, Susan outlines a variety of multi-year planning opportunities that really impact retirees, working people with stock options, and business owners. Here's what Susan had to say about being a long-term investor. Peter, I really think of a long-term investor as someone who is willing and able to kind of rise above the noise and stay focused on the overriding investment philosophy. That's, of course, much easier to do when everything is going up and much harder to do in times of volatility.

27:32But I think that's really when it's the most important and so key to remember that reward only comes with risk. And again, being able to look away from some of those short-term and even daily volatility is really what it means to be a long-term investor. In episode 122, I'm joined by Hal Hirschfeld, professor of marketing, behavioral decision making, and psychology at UCLA's Anderson School of Management. We talk at length about his book, Your Future Self, How to Make Tomorrow Better Today, covering all sorts of topics like how our identities change over time, why our future self feels like a complete stranger, and ways to make good long-term decisions easier on your current self.

28:16Here's what Hal had to say about being a long-term investor. To me, to be a long-term investor means making choices that one, will benefit me, obviously in the long term, but also along the way. And two, that have some flexibility baked in where I can consider changing my plan at some point if life turns out to be going differently than I thought it was. In episode 124, I have the opportunity to chat with Bill Bernstein, author of The Four Pillars of Investing. We talk about all sorts of topics, including the history of risk, common traits of bubbles, how to project future returns, and even what might be some potentially attractive segments of the market.

29:02Now, here is what Bill had to say about being a long-term investor. It means two things. Number one, it means ignoring short-term volatility. That's the first thing that it means. And the second thing is it means not trading. It's that simple. And by not trading, I mean not trading excessively. It's all right to rebalance your portfolio between stocks and bonds and different asset classes, but it's not okay to be turning over your portfolio by much more than 10 or 15 % a year. If you want to understand the world around us that is constantly changing, you must first start by understanding what always stays the same.