[00:00:00] Speaker A: Hello.
[00:00:00] Speaker B: Welcome to the podcast. This is Brenton Harrison of, uh, New Money, New Problems and your host for the New Money, New Problems podcast. If you joined us, last week, we did the money story of Kevin Matthews, the second owner, uh, and founder of Building Bread. And if you're looking at the screen and saying, this guy looks familiar, it's because he's back for part two. And last week we covered his Money story and some of the unique, um, instances in his childhood that developed him as a person who can educate that led him to the founding of Building Bread. In this episode, the reason I asked him to join is because he is an educator of investors. And I come across people all of the time who are in situations where they have the time, they have the knowledge to build a portfolio, or they have an investment philosophy that tells them that if I have the time and I have the resources, then I might be losing a whole lot of money by paying an investment advisor to do those things for me. So, to me, I like to be balanced and fair. If you have that time, if you have that knowledge and those resources, then you would lose a lot of money by paying an investment advisor. It's not always right in every situation. So I do want to make sure that we are measured in balance and bringing on resources of people who can teach you how to get started with picking your own investments. And I think that Kevin is an excellent person to do that. So, Kevin, welcome back.
[00:01:23] Speaker A: Yes, thank you.
[00:01:24] Speaker B: In our last episode, I would encourage you to go check it out. We're not going to do, ah, a 30 minutes recap of a 30 minutes episode last week. So we're going to jump into this. I do want you to at least give a brief rundown of what Building Bread is and then I will get started with our first question.
[00:01:39] Speaker A: Right. So Building Bread is my investing education company, started in 2010. My chief goal is to make investing simple. I do it through videos, articles, and everything in between.
[00:01:51] Speaker B: All right. So for compliance reasons, we have to let you know that this is not investment advice. We're giving his experiences some of the lessons that he shares. We encourage you to make sure that you find, uh, your own place in between what we recommend on this episode. So we got to make sure we get that out of the way for compliance so you understand that. That being said, Kevin, we have investor John or Jane Doe, and they are saying, I don't know anything about the stock market. I am trying to figure out where is step one? What do you recommend?
[00:02:25] Speaker A: I usually recommend well, first, I always ask questions before I recommend anything. But my first question would be, do you have access to a 401K? Or if you are someone who works in school or the government, do you have like a 403? B? Uh, always start there. And in my experience, for some reason, some people think like, oh, I have it, I put money into it, but I'm not an investor. That counts. That counts. That is, for many people, their biggest asset outside of your home, depending if you want to call your home an asset conversation for a different day. But that is the absolute first starting point that can really set you up for success.
[00:03:02] Speaker B: I completely agree with you that people, they don't think of themselves, of investors, and they might have been in a 401K for 20 years. To me, it's almost like that idea that since it's automatically coming out of their check, that they don't really have any involvement in it. But from an education standpoint, I would say that that might be accurate. They might have been auto enrolled into that 401K. They might have just had a target date picked for them based on their age. So let's say that they are enrolled in it, but they truly don't have any day to day, week to week, month to month, year to year insight, uh, into what's going on with it. What about in that scenario?
[00:03:38] Speaker A: Yeah, well, I would say, one, I think there is a misconception in that you have to be active and that you have to know every single month or every single day what's going on to be an investor. I would argue that anywhere between four times a year, maybe even once a year, depending on how active you want to be, is actually fine. And that's something I even do with my own portfolio. I have a date where I'll say in the middle of June, I'll check in on my, uh, portfolio and make some adjustments. Catch me in December. And there have been a lot of studies that show that when you are checking your account every day, you're prone to making more mistakes and you are incentivized in some cases to move in ways that you probably normally wouldn't. I like to compare it to being in traffic. You'll sit in one lane, you look to the right, that lane is moving faster, you move over, and then you only stuck. Right? It's not always beneficial to move so frequently, so that's the first thing is, hey, you don't have to be out there doing all these things. You can sit calm, be boring. That is actually one of the best, uh, effective ways to invest, in my view. And also know that you can take it one step at a time, too. I think some people also feel like I got to do it all tomorrow, and I have to go from zero to Warren Buffett in two days. So I think take it step by step, but also know that you don't have to be incredibly active and know every single thing and really check your account every minute that you get.
[00:05:06] Speaker B: So they put those two to four dates on their calendar a year. And I've heard you say that, and I, uh, think it is wise counsel, because many people, they look at their account ten to twelve times a year, and they have no clue what they're looking at. They just know whether it's going up or going down. And if it's going down, they think, Should I sell? But it's not like they're applying any real lessons to it in terms of, okay, it went down, here's what I glean from that information. Or, It went up, here's what I gleaned from that information. When you check your account those two to four times per year, whatever it is on your calendar, what are you looking for?
[00:05:44] Speaker A: Great point. So what I'm looking for is, um, I usually do kind of a watermark and say, I have a spreadsheet. Well, say, here's what the account balance was, here's why I was investing in and here's why I invested in it. Because after a quarter, after six months, you might not remember, you may feel a lot differently. Right. And I need that reminder to say I invested in X company because I thought X, Y and Z. Was I right or was I wrong? Because I always want to come back and reevaluate myself and reevaluate my investments. Because what was true two years ago may not be true anymore. Right. And you have to be able to adjust to those when necessary. So I'm always looking for how well did that investment do compared to the S and P 500, the largest 500 companies in the US. And why did I invest in that thing? Right. And has that thing changed? You can think about AI like that, uh, was not a thing two years ago. Right. No one was really talking about that. But now it is. So when I go back and check my portfolio, I need to see how that phenomenon has changed any of my investments, for better or for worse, and then make some decisions based on that.
[00:06:56] Speaker B: I've seen people recommend that, especially with single stocks, you should invest in the stocks of the things that you buy. So if you buy this brand of yogurt for your kids and that company is public, then invest in that yogurt company. What do you think in terms of do you invest in your passions? Do you invest in the things that you buy? What's your philosophy on that?
[00:07:18] Speaker A: So my philosophy is that's probably not the best idea. I would say most of the time that's not the best idea, because knowing the product doesn't mean you know the business. And there are some companies that you may shop at that aren't doing well. Uh, an example for me is I love shopping at Target. Target is down, at least last time I checked, more than 20%. And that's been true for the last few years. And just because I shop there doesn't mean that that stock is going to make me money. I can get lucky and pull out my phone, oh, great, Apple is good, but I can go and check, uh, my pantry and look at Campbell's Soup or Hershey's chocolate and it might not be doing well. Right. And that's the just because I eat it has nothing to do with whether or not the stock is good. So you want to be careful. And that's one of the things where I get the spirit of the idea. I know it's simple to really get and understand, but there are at least another two layers of research that you want to do before jumping into it. Uh, one really selling example is peloton. During the Pandemic, everybody was talking about peloton. It was great at that point in time, and now it's down 90%. I could use it. It may help me lose a few pounds, but it's not necessarily going to make me make any money, at least at this point in time. And things can change. But you got to be very careful around that type of or leaning, because it's not something that can be relied upon. In my view, that gives you a repeated result.
[00:08:50] Speaker B: So what do you think would be an alternative in the absence of, uh, investing in an exercise bike because you bought it during the Pandemic? If someone's saying, I want to pick my first stock, what do you think, in the absence of that they could use to identify a company in which they might invest?
[00:09:10] Speaker A: What I would say is you can start your research process based on the things that you use every day. And it's a difference between the research process and just buying it. Right. And, uh, what I also coach people to do, too, is start the research process, but also always look at the competitors around that specific company. So if you like Target, but Target's not doing well. Well, what about costco? What about Walmart? What about dollar, General? What about Dollar Tree? Because when you start to look up that stock, those are its main competitors. And that's how you can really branch out and see what might actually work for you and what has a higher likelihood of success, as opposed to just blindly picking up items around the house. So I think that is a more efficient way to look at it and a way to help educate yourself, too, because you have to think about competition when you're investing. You have to think about what other things are out there in the area. And the most popular brands out there don't always equal the most profitable things for your portfolio.
[00:10:12] Speaker B: You are a veteran in this, so I know, you know, um, to educate without giving away your secret sauce. Uh, we found a competitor. It seems like it might be a better opportunity in which we can invest what's some publicly available data, let's say that we've chosen it, right? We decided to invest in Costco, what's some publicly available data in our two to four times a year that we're checking that we can use to evaluate its performance moving forward.
[00:10:39] Speaker A: Yeah. So one of the easiest things to do is check the performance of the company, like how well it has done over the last six months and over the last twelve months, and compare that to how the stock market has done as a whole. So, for example, I can go to Yahoo finance. If you have an iPhone, you can use the stocks app. There are a bunch of places you can do this. I can go and click six, it'll say at the bottom six M for six months. And let's say Costco is up 20%. I compare that to SP 500 and says, uh, SP 500 is up five. From there I can determine, hey, perhaps Costco is going to continue to beat the S and P 500 or not, and then decide what you want to do from there. The reason why I choose those two time frames is because there's a study from UCLA Anderson School of Business that talks about how recent performance can help. Keyword is help predict how the stock will move in the future. And that is something that you can use to guide you on what your next decision and your next move can be. I also think, and perhaps more importantly, it might help you to avoid some bad investing decisions because I see too many people just jump into it and just do nothing, right? If I see something that's down for a year by 60% might not be the best place, right. So you might want to at least take something off the board. So this is at least one good piece that might help.
[00:11:59] Speaker C: This is the New Money, New Problems podcast, a show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen. We'll be right back.
[00:12:18] Speaker D: Are you wondering what new money problems you might be overlooking in your financial life? If so, we've got great news. We've crafted the New Money New Problems Gap finder to identify potential weaknesses in your finances in areas ranging from budgeting investments, insurance, and even the threat your extended family's finances could pose to your household. Please head to Newmoneynewproblems.com Gapfinder to complete it today. Again, that's Newmoneynewproblems.com Gapfinder to take the assessment.
[00:12:57] Speaker C: You're listening to the New Money New Problems podcast. Subscribe
[email protected]. Welcome back.
[00:13:07] Speaker B: I gave you a compliment in calling you balanced, which in our industry, it seems like that wouldn't be much of a compliment. It seems like it would be basic, but in our industry, it's not. It's almost like saying common sense ain't that common. Right to be balanced is actually a thing. So you talked about comparing it to the S and P 500. Do you think that indices like the S and P are appropriate, or do you believe that people should build out their portfolios entirely themselves?
[00:13:34] Speaker A: So, for me, I think that index funds so invest in the S and P 500 should be the bulk, or at least that's what I do. So I've been very open. More than 80% of my money is in an index. And what I try to do is find a few stocks that can just push me up just a bit more. So if the S and P 500 makes 7% a year or so, can I get ten maybe, right? That's the goal is just to do just a tiny bit more, because you take on more risk. And I think that's something that not enough people realize when you decide, I don't want to invest in the index, I want to choose one stock or ten stocks or what have you, it's harder to manage, you're taking on more risk, and there are a lot of factors there that you cannot control. So I try to limit the amount of companies that I own and be very careful because you don't want to over index or put too much in a specific area and be wrong. And sometimes that's not even your fault, right? It could be a CEO changed and then the company drops. You can even predict that, right? So I try to make sure that, uh, what I say is to afford to be wrong. So I'm putting this very specific amount. I don't want to put more than that amount in, and I've got the index in case I'm wrong. History has shown us that the index is going to be one of the best places for long term investment. So I want to make sure to have a bunch of money there and then take small risk that I feel like I can afford.
[00:15:02] Speaker B: You mentioned the investor who puts money in company XYZ and it goes down 60% and they don't do anything. There's two parts to this question. The first part is when you look at a, uh, DIY investor and you've seen some good ones, you've seen some horrible ones, what are some of the worst mistakes that you see from investors building out their portfolios for the first time?
[00:15:26] Speaker A: One of the worst mistakes that I see is only having one or two stocks. And they'll say, hey, I've got 100% of my money where it was 100 or 1000 or 10,000. I just put it in this one thing and that was it. And that's not always the safest thing. You can get lucky and get something that's great, but you try and do it again, and then it's not so great. So that's definitely one that I see people run into. I Also See People and I, um, think this Is A Lot More Common since 2020, where People will really Kind Of Hope on The Next Meme Stop, the Next GameStop, the next AMC or Something Like that, where I Will Look up the company and The First Headline I see is Kodak Going Bankrupt or Mullen Automotive near Bankruptcy. And people are like, we're really by those companies. I'm like, oh, uh, that's very risky.
That's not something I would put 90% of my money into. So, um, those are usually the big ones. It's people investing in companies that don't have a great track record and then putting way too much money on one or two positions.
[00:16:32] Speaker B: It is akin to the, uh, studies they've done on people who purchase lottery tickets, as this person may be just in the throes of poverty, but they buy two, three lottery tickets or scratches every week. In some cases. It's almost like, I would rather just take my chances on my life changing forever. Because it's not as if I got 10% returns. My life would change that substantially. It's like, if I get a 300% return, I'll be okay. If I get a 10% return, I'm still broke. So it's like, you see these people who are just like, uh, oh, whatever. I'm just going to put it all on red, but I definitely know what you mean. Now, let me ask you this, the second part of this conversation, because I gave you another compliment. I said that there are people out there, especially in the content creation world, who build their brand off of attacking other brands. Sometimes those brands are just blatantly wrong in saying, like, things that could get people imprisoned. But I think that you do one of the better jobs of finding information that is inaccurate, educating your audience as to why it's inaccurate without coming off like an attack. But I will ask you this. When you see things in the, uh, social media space, the content creation space, what are some of the most blatant lies or mistruths or inaccuracies that you see from content creators as it pertains to investing?
[00:17:53] Speaker A: How much time we got? So the fact that you brought it down to investing helps, because the first one, I'm always thinking about the weird tax rules that people just make.
[00:18:02] Speaker B: Ah, LLC, Twitter.
[00:18:04] Speaker A: Yeah. LLC twitter. Uh, get a G wagon for free.
That's one of them. Um, but that's not investing. That's taxes. So there are two that come up. One doesn't happen as much anymore now that people realize that the stock market can fall. And there's one that still pops up, that's pretty relevant. So the one I saw this a lot from, um, a lot of newer content creators just haven't been around long enough where they were like, hey, the S and P 500 is, uh, a savings account. It guarantees you 7% per year. Put all your money there. Which is not true. The stock market can drop. And that is an average, not a guarantee. So that was one where let's educate people and tell them exactly what it is. Show them the numbers and then really, after that point, the case makes itself. So that's one where people are a little overly optimistic, a little too eager to talk about what they just learned and not really show that balance side. You want to show the good and show in a negative situation, this is what can happen. So that's one but again, I don't see that one as much as I did maybe two or three years ago. The one I'm seeing a lot now is a lot of these fancy insurance investing products. And the Blatant lie is or the lie that I would see is one that it is perfect and that there's nothing wrong and no downsides. They don't always discuss the fees and how much it cost and what that return is after fees. And then in some cases where people will make up like, hey, X, billionaire got rich from investing in, uh, these specific insurance policies. You can do the same. It's like, OOH, that's not how they got there, right? When you look at a lot of these billionaires, they got there from building a Tesla or an Apple or an Amazon. That's how they got there. And then they used all these fancy products to keep that wealth. A lot of people kind of misconstrue that and say, because bank of America has life insurance for X amount of people, that's how you got to get rich, you got to get one too. And don't say nothing about the fees or the fact that they're even selling insurance policies. So that's the one that's very murky, that a lot of people don't always understand. And people just jump to it because it sounds so good. And it sounds so good for so many people because again, they're not talking about how much it costs. Anything sounds good when it sounds free. And the second part is they don't always talk about the downsides or the other risk of it, and they preach about it as if it is risk averse. And that's not always the case.
[00:20:41] Speaker B: Well, Kevin, this was great stuff. I encourage our audience and when I speak, I try to let people know it's not 1990 or 1995 when there were two people out there talking about finance of any grandstanding. You don't have to just accept those two different ways to build your finances. You can find a, uh, financial literacy voice that you connect with. So I think you have great content. I thank you for being willing to share it with us. If you could tell our audience where.
[00:21:09] Speaker A: To find you, yes, you can find me on all things social media, at BuildingBread YouTube, TikTok, Instagram, primarily on YouTube most of the time. And you can find
[email protected].
[00:21:20] Speaker B: All right, if you were with us last week, you said they do over 250 YouTube videos a year. So there is no excuse to say that you can't find content, because if you like his, there's plenty of it. So. Kevin. Thanks for coming.
[00:21:32] Speaker A: Yes, thank you for having me.
[00:21:35] Speaker D: From new money, new problems. This was the New Money, New Problems podcast show for successful professionals searching for the tools they need to navigate financial opportunities and obstacles they've never seen.
