Bucket Your Way to Simpler Investment Decisions

Our 2 Cents – Episode #174

Bucket Your Way to Simpler Investment Decisions

We are back this week with another episode of Our 2 Cents with Steve and Gabriel Lewit. They are excited to share how to work through the challenge of making financial decisions and the benefits of simplicity when planning for retirement. Listen in now using a link below!

  1. The Difficulty in Financial Decision-Making:
    • Discover that people who view themselves as emotional thinkers have a more difficult time processing and making financial decisions.
    • Learn how reframing and using more practical thinking can better your approach to making decisions with your finances.
  2. Gabriel’s Quotes of the Month:
    • “It’s not who you are that holds back, it’s who you think you’re not.” – Denis Waitley
    • “Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
  3. The Benefits of Simplicity in Investing:
    • Understand how diversification, patience, and time are keys to a simpler approach to investing.
    • How the concept of Bucket Planning can help you view your investments in a simpler to understand way.
    • While there are more complexities behind the scenes with Bucket Planning, the idea that you know the purpose and goals for each bucket can help simplify your investment decisions.

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Podcast Transcript

Announcer: You’re listening to Our 2 Cents, with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies and more.

Gabriel Lewit: Well, welcome to Our 2 Cents. You’ve got Gabriel here, and Steven. Can you say hello?

Steve Lewit: Hello, hello.

Gabriel Lewit: I don’t know why your name made you laugh.

Steve Lewit: Well, the way you said it, “Steven.”

Gabriel Lewit: You’ve got Steven here. It was very blue sky and a sunny day to start the day, and then it looks like some storm clouds came rolling in here, it’s almost pitch black outside our window. Kind of weird. Steve is sneezing, so he can’t comment.

Steve Lewit: We got on the show, and I started sneezing. It’s like what happened there?

Gabriel Lewit: Yeah.

Steve Lewit: Yeah. Well, I drove in, it looked like a beautiful day. Yeah, all of a sudden, it’s darkness outside.

Gabriel Lewit: Yeah, it’s darker than the eclipse.

Steve Lewit: Well, the eclipse was a lot brighter.

Gabriel Lewit: This is how dark I thought it would be with the eclipse actually, is when it noticeably gets very dark. But anywho.

All right, well we’ve got a good show for you today. First and foremost, in case you have forgotten and you listen to this on the day of, you’ll have some last minute reminders here. This Sunday is Mother’s Day.

Steve Lewit: It is. Thank you, mothers.

Gabriel Lewit: Okay. We greatly appreciate all you moms, grandmas, mothers-to-be soon, everyone that’s out there-

Steve Lewit: Partner mothers, every kind.

Gabriel Lewit: Yeah, you’re doing a great job keeping us men in line.

Steve Lewit: They do. The truth is, they do do that.

Gabriel Lewit: Yes, and keeping the kids in line, and the family typically being taken care of most of the time by mothers, sometimes by fathers and all family members of course.

Steve Lewit: Yes.

Gabriel Lewit: But in particular, shout out to you mothers, all you mothers out there. Hopefully you go out there, and do something nice to relax and celebrate being you.

Steve Lewit: Definitely.

Gabriel Lewit: Okay. I just wanted to put that out there. Also, we like to share financial topics on the show, sometimes just random non-financial topics. I’ve got a random one for you today. It says here that “scientists have discovered a gigantic,” well they’re calling it a structure, but I don’t think it’s an alien structure, “under the surface of the Moon.”

Steve Lewit: Yeah, I read that. When I saw the word structure, my first reaction was, “Uh-oh.”

Gabriel Lewit: This is what they do with the headlines.

Steve Lewit: Right.

Gabriel Lewit: I clicked on it because I thought it would be some ancient alien building.

Steve Lewit: Yeah.

Gabriel Lewit: Apparently, it’s admittedly a very large, gigantic metal mass underneath the surface of the Moon. Here’s how big this supposedly is, “a pile of metal five times larger than the Big Island of Hawaii.”

Steve Lewit: Wow. Wow.

Gabriel Lewit: Yeah. Then, burying it underground.

Steve Lewit: I wonder who put it there?

Gabriel Lewit: Apparently, there’s a-

Steve Lewit: Somebody.

Gabriel Lewit: I always find this stuff interesting, hopefully you do, too. We’ll just spend a minute on it. NASA has a gravity recovery in interior laboratory Grail Mission, which measures the changes in the Moon’s gravitational field. Did you know that they had that?

Steve Lewit: Well, I was reading about it last night before going to sleep, yeah.

Gabriel Lewit: The Grail Mission?

Steve Lewit: The Grail Mission, yes.

Gabriel Lewit: Apparently, it’s I guess designed to help somehow study the internal composition of the Moon.

Steve Lewit: Yeah.

Gabriel Lewit: For what purposes, I do not know.

Steve Lewit: Well, we don’t know until we know what’s there. It might be something there that we can use in the future, when we start contaminating the Moon with people.

Gabriel Lewit: Well, that might be-

Steve Lewit: Sorry I said it that way.

Gabriel Lewit: That might be a ways away.

Steve Lewit: Well, I’m not so sure.

Gabriel Lewit: I don’t know.

Steve Lewit: I’m not so sure.

Gabriel Lewit: Well, a question for you. Would you want to live on the Moon? If you had to choose between the Moon or the Earth?

Steve Lewit: If I had to choose permanently, I’d live on the Earth.

Gabriel Lewit: Yeah.

Steve Lewit: But I wouldn’t mind living on the Moon. One of my bucket list dreams is going off on a spaceship into the great unknown, ala Star Trek.

Gabriel Lewit: A bucket list item is usually, I would say it’s usually something you can do.

Steve Lewit: Well, I have two bucket lists. One is the reality list and the other is wouldn’t that be great to travel the Universe?

Gabriel Lewit: Steve wants to go on a Star Trek ship to faraway galaxies.

Steve Lewit: Fight with the Klingons.

Gabriel Lewit: Okay.

Steve Lewit: Yeah.

Gabriel Lewit: All right.

Steve Lewit: It would be fantastic.

Gabriel Lewit: Now, Producer Katie, let’s see if she’ll nod yes or no. Would you want to live on the Moon or the Earth? Let’s see what she says here. Okay, she’s says Earth, too. That’s two for two.

Steve Lewit: Well, I said the Moon for a little while.

Gabriel Lewit: Well, that’s not living. That would be a little vacation.

Steve Lewit: That would be a vacation, yeah. Yeah.

Gabriel Lewit: Could you imagine if they had found an ancient building buried under the Moon’s surface?

Steve Lewit: Well, that’s what I thought.

Gabriel Lewit: Yeah.

Steve Lewit: I got really excited.

Gabriel Lewit: I did, too. Oh, well.

Steve Lewit: What about you, Moon or Earth?

Gabriel Lewit: Me? I would definitely choose the Earth.

Steve Lewit: Yeah.

Gabriel Lewit: Yeah, Moon would be very boring because you’d have to live inside or go outside with a spacesuit on. That would be boring.

Steve Lewit: You’d never see the Moon.

Gabriel Lewit: The Earth would be your Moon.

Steve Lewit: Yeah, you’d have Earthrise instead of moonrise.

Gabriel Lewit: Well, I think it’s sunrise.

Steve Lewit: Right. It would be totally different, like putting your arms around your girlfriend or your wife, and looking up and not seeing the Moon. You’d see the Earth, so it wouldn’t carry the same emotional … We’re going to talk about emotions today, aren’t we?

Gabriel Lewit: I don’t know where you’re going.

Steve Lewit: I’m giving you a lead in. Well, it’s romantic to look at the Moon.

Gabriel Lewit: Well, I guess it would be romantic to look at the Earth then, if you lived on the Moon.

Steve Lewit: Not the same.

Gabriel Lewit: One would argue it’s prettier. Yes.

Well actually, we were going to talk a little bit about emotions here-

Steve Lewit: I don’t think you get a crescent Earth.

Gabriel Lewit: Let’s move on.

Steve Lewit: Yeah, we better.

Gabriel Lewit: All right. We were going to talk about why financial decisions are hard to make for some people and how to fix it.

Steve Lewit: They are hard. They are.

Gabriel Lewit: Here’s the question. Have you ever encountered, Mr. Lewit-

Steve Lewit: Yes.

Gabriel Lewit: Anybody that’s had a challenge or trouble making financial decisions?

Steve Lewit: Yeah, that would be about everybody.

Gabriel Lewit: Can you give some examples?

Steve Lewit: Yeah, everybody.

Gabriel Lewit: More specific examples.

Steve Lewit: Including me. Oh, can I give examples? Okay. Do you spend money or leave it to your kids? Do you buy the car for 30 grand or 50 grand? Do you invest aggressively or conservatively in the market? Do you shop at Whole Foods or do you shop at Jewel? Do you buy the sweater that you love, it’s beautiful but it’s expensive, or do you pass it on? All of these kinds of financial decisions, people really do not find easy to make.

Gabriel Lewit: Yeah. Yeah, definitely I’ve had clients that really struggled to decide if they, yeah should save money or should spend it on a vacation, or something for their family, kids, how much to spend towards their college. There’s all sorts of examples of financial decisions that we aren’t sure necessarily how to make the right choice, so some people can procrastinate is a very common result of all this.

But the question here that was posed by this article that we’re referencing was what caused it? What causes people to have trouble making financial decisions?

Steve Lewit: Well, you think about it. Think about it. You have lots, and lots, and lots of money. You could fly first class and it wouldn’t put a dent in your pocketbook, but you don’t. What holds you back?

Gabriel Lewit: Well, ultimately what the author here was saying is that they were trying to figure out … For many people, the surface level answer is financial decisions are confusing. Now, I don’t know about in your case, about buying first class versus regular. That’s not so confusing.

Steve Lewit: Not very.

Gabriel Lewit: I’m not sure that’s what the author was studying here.

Steve Lewit: Well, I’ll teach him how to write the article the next time.

Gabriel Lewit: I’m sure you will.

Steve Lewit: What I’m getting to-

Gabriel Lewit: More so, investment decisions. Buying first class versus coach is a spending decision, not so much an investment decision. Well, let me finish here before you jut in.

Steve Lewit: Okay.

Gabriel Lewit: All right. The author was saying that, on the surface, most people boil it down to, “Hey, it’s really complicated, it’s outside of my scope of expertise,” and that was the commonly accepted reason why people struggled with making more challenging financial decisions.

Steve Lewit: Yes.

Gabriel Lewit: But that’s not what they found to be the root cause.

Steve Lewit: Yes.

Gabriel Lewit: Okay. What they did find is that, ultimately, it’s whether or not, and this was your lead in earlier, are you a more highly emotional person.

Steve Lewit: Yeah.

Gabriel Lewit: Because the study found that the more emotional, so to speak, that you are, the less likely you were to be able to process and make decisions when it comes to financial matters. Very interesting conclusion.

Steve Lewit: Some people are very analytical, it’s one step at a time, “If I do this, this is going to happen. If I spend this money, then I can’t spend that money.” They map it out, one step at a time, like a process.

Gabriel Lewit: Yeah.

Steve Lewit: Emotional people don’t do that. They react. It’s like, “Well, if I do this, I’m going to be upset, or I’m scared, or I’m fear,” so they can’t make a decision. Even sometimes analytical people get caught in the weeds. You know that, Gabriel. They become, what is it, analysis paralysis.

Gabriel Lewit: Well, yeah. That’s another risk there. But ultimately … The example here that the author gave is, apparently they’re an MBA with a concentration in finance and a doctorate in business, yet he’s giving the example that any time they get a statement from their bank, they just shove it in their desk drawer.

Steve Lewit: Emotional people.

Gabriel Lewit: The author, yeah.

Steve Lewit: Yeah.

Gabriel Lewit: That’s the point is that he’s good at finance, but he’s still more of an emotional person, and as a result has this innate tendency to push that stuff away. What they found out, it’s because emotional people view financial stuff as cold, numerical, calculating, what you would generally perceive to be the opposite of emotional, warm, fuzzy.

Steve Lewit: We have clients, Gabriel, that will come in for a quarterly review, and they’ll take out their papers and they say, “Hey, this mutual fund did not do very well over the last two years. Why is it in my portfolio? This is doing great, can we buy more of that? How can I get my income up a little bit? I noticed that there was an extra $20 taken out in taxes.” They’ll know every little thing about what’s going on with their money. Other people come in and they’ll say, “Hey, am I all right?”

Gabriel Lewit: Yeah.

Steve Lewit: Yeah, you’re okay. “Okay, thank you.”

Gabriel Lewit: Well, obviously anything with humans, and our brains and emotions are complex. I’ll give you a little bit of an example of this.

They were saying the relationship here, about being an emotional thinker and avoiding more investment related decisions, doesn’t necessarily extend to decisions in other areas, such as buying clothes or making healthcare decisions. What they ultimately concluded is if people can take the money decision and try to skew it away from the actual, “Should I save $200 this month? Well, I’m an emotional person, I’m more thinking about emotional things.” So, start thinking about the benefit of saving that money. You’re going to have a secure retirement, you’re going to have a happy kid who you pay for college for.

Steve Lewit: You can buy the necklace that you’ve been looking at, or the watch you wanted.

Gabriel Lewit: The more you can translate this into something that’s going to be an emotional outcome, as opposed to a, “I’m going to have $1000 in the bank,” the more emotional thinkers are able to translate this into actionable steps.

Steve Lewit: Yeah. In the world of psychology, that’s called reframing. You take the same thing but reframe it in a different way and it has a totally different impact on our emotional system and our logical system. When we’re just talking about money, it’s like, “I don’t want to talk, this is so boring, or it’s so cold,” like you said. But if you say, “It’s the quality of my life, or it’s a gift for my child, how do I save for it?” It’s a whole totally different decision part of the brain that gets involved.

Gabriel Lewit: Yeah. Here’s the final example here. In their survey study, they did a test where they asked people to make decisions about their life in retirement versus a decision about financial investments for retirement. The former got substantially more emotional thinkers engaged than the one that was just about the investments.

Steve Lewit: Well, it’s more interesting.

Gabriel Lewit: Yeah, it’s kind of interesting.

Steve Lewit: It’s like getting an extra 5%, for some people, in their investments is interesting. But for a lot of people, it’s like, “So what, I’ve got a lot more money?” But if that money means something, it’s going to give you some pleasure, it’s going to move your life forward, it’s going to make a kid happy or send feed a child, then the money has meaning. When it has meaning, things clear up.

Gabriel Lewit: Yeah. Now, did you find that as interesting as a giant, six times the Big Island size crater, or whatever it was on the Moon? I don’t know, but I thought it was interesting.

Steve Lewit: Well, the logical part of me is still stuck on the structure, but the emotional part of me loves talking about money and how it impacts people.

Gabriel Lewit: There you go. By the way, it is now substantially darker than it was even a few minutes ago, and it now looks like it’s pitch black so it feels like nappy time.

Steve Lewit: Is this the-

Gabriel Lewit: But 8:30 in the morning.

Steve Lewit: Welcome to the SGL Weather Forecast.

Gabriel Lewit: Oh my gosh. You’re not looking at it.

Steve Lewit: No.

Gabriel Lewit: I can’t help but notice it in the side of the-

Steve Lewit: I can’t see it. But I can feel the room getting darker.

Gabriel Lewit: Yeah, it’s kind of weird. Turn around, just turn around and look. You’ll see. Yeah.

Steve Lewit: Oh my, darkness has come.

Gabriel Lewit: I’m not joking.

Steve Lewit: Is it 6:00 or 7:00?

Gabriel Lewit: Okay, anyways, we digress.

Steve Lewit: Yes.

Gabriel Lewit: Now how do you practically apply this? Well, I think if you start to get to know yourself over time, hopefully, and you can assess, self-assess if you will, if you’re an emotional thinker, and then try to even reframe any decisions you’re making about the outcomes and what you’re going to benefit from them. Obviously, if you know you’re an analytical thinker, then you’re probably focused more on the nuts and bolts, and what kind investment am I going to hold, what kind of rate of return is it going to give me, and that’s of course totally fine when it comes to your money.

Steve Lewit: Yeah. There’s a great exercise you can do, it’s called the Why Exercise. Let’s say you’re debating whether to put money in the market and you say, “Why do I want money in the market?” And you say, “Well, I want it to grow.” Then you say, “Why do I want it to grow? Well, I want to have more to spend. Why do I have more to spend?” Ultimately, you get, after six or seven whys, you get to the thing that’s really motivating you. That’s how you find out what your motivation is and find out what you should do. Then things get clear. Once you know your purpose and what you really, really want, everything gets clear.

Gabriel Lewit: Very zen. Very zen.

Steve Lewit: No, no, no.

Gabriel Lewit: Very deep.

Steve Lewit: No, no, that’s not zen. That’s practical, how-to why thinking.

Gabriel Lewit: Okay.

Steve Lewit: Yes. No zen.

Gabriel Lewit: Which I call zen.

Steve Lewit: You could frame it as-

Gabriel Lewit: Philosophical.

Steve Lewit: How about woo-woo?

Gabriel Lewit: There it is, very woo-woo. Yeah.

Steve Lewit: Very woo-woo.

Gabriel Lewit: Well, now as a quick interlude, I’m going to do for us a couple quotes of the month.

Steve Lewit: I thought you were going to sing to us, I got so excited.

Gabriel Lewit: They don’t want to hear me sing. I think everybody wants to hear you sing, Opera Man.

Steve Lewit: (singing) Yes, they do.

Gabriel Lewit: Yes.

Steve Lewit: (singing) Yes, they do.

Gabriel Lewit: Yes, they do. Okay. Well of course, by the way, if you have questions on that, you can call us any time, 847-499-3330 or email us info@sglfinancial.com.

Let’s talk about some quotes of the month here. You’ll like this one. “It’s not who you are that holds you back, it’s who you think you’re not.”

Steve Lewit: I was thinking about this, this morning.

Gabriel Lewit: (laughing)

Steve Lewit: I think about this stuff. Read that again. I think that’s very profound.

Gabriel Lewit: Okay. “It’s not who you are that holds you back, it’s who you think you’re not.”

Steve Lewit: Yeah. Would you like me to comment?

Gabriel Lewit: You sure could, sir.

Steve Lewit: I’m on my way. Look, we all have the real us that we are and we have the imaginary us that we think we are or that we think we’d like to be. Here’s the problem. If you don’t know who you are, you can’t move forward with any sense of purpose or responsibility because you don’t know the starting point. It’s like, “Hey, I’m going to take a trip to California, but I have no starting point so I don’t know how to get there.” That’s called self-knowledge, self-observation.

Gabriel Lewit: Well, me being the host that I am, I was going to tie this into our prior topic.

Steve Lewit: Oh my gosh. That’s so clever.

Gabriel Lewit: If you think you’re not a financial person, that might hold you back from making financial decisions.

Steve Lewit: Yeah.

Gabriel Lewit: As opposed to who you are. I would say who you are is a strong, capable, smart person that can make choices about the future, even for things that they’re not familiar with, you can learn them and figure them out. Focus more on who you are and who you can be, versus who you think you’re not.

Steve Lewit: Well, that’s so interesting. Gabriel, I totally forgot this. It reminds me of a business mentor I had many years ago. He was telling me how to be in business. He said, “Hey look, here’s the deal, man. If you find yourself running away from something, like you don’t want to micromanage or you want to stay in the big picture, whatever you’re running away from, that’s the thing you really got to get involved in because that’s going to tell you who you really are.”

Lots of times, people run away from things that they’re afraid of it, but they’re really good at it and they never discover that because they’re always running away from it.

Gabriel Lewit: Interesting.

Steve Lewit: To your point, if you’re running away from money, my mentor would say to you, “Yeah, dive into it because you’re running away from it. That’s something you really need to dive into.”

Gabriel Lewit: Again, very zen. Very 180-ish.

Steve Lewit: It also reminds me … I’ll keep going.

Gabriel Lewit: Well, no, no. I’m going to cut you off.

Steve Lewit: I can’t give my Robert Lewis Stevenson quote?

Gabriel Lewit: No.

Steve Lewit: Okay.

Gabriel Lewit: All right. I’ll give you the second quote we got here, planned quote.

Steve Lewit: I might say it anyway.

Gabriel Lewit: Okay. This one is from a fellow named Paul Samuelson, an economist. He says-

Steve Lewit: Who I studied a lot.

Gabriel Lewit: “Investing should be like watching paint dry or watching grass grow. If you want to …” Uh-oh.

Steve Lewit: Hello?

Gabriel Lewit: I think we lost electricity for a second.

Steve Lewit: We did.

Gabriel Lewit: It cut us out there.

Steve Lewit: Yeah, the lights flickered.

Gabriel Lewit: Yeah.

Steve Lewit: Now there’s thunder.

Gabriel Lewit: I wonder, is it still recording there, Producer Katie? Maybe we’ll be okay.

Steve Lewit: Yeah.

Gabriel Lewit: Hopefully, we don’t lose our whole show.

Steve Lewit: Wow. I see a giant spaceship appearing in the clouds.

Gabriel Lewit: It says, “Investing should be like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas,” says Paul Samuelson, economist.

Steve Lewit: Very, very famous economist, Paul Samuelson. Well, everything’s going back to the emotional side. Some people get bored just watching their money grow safely. They want the ride of ups and downs.

I was listening, on my way here … And folks, I was a little late this morning and my staff was waiting for me, so I have to apologize. But I was listening to this basketball coach. He said something really, really interesting. He said, “Hey, I’m the kind of guy, if I’m not worried, I’m not happy.” That’s what coaching is all about, you always got a problem.

Gabriel Lewit: Well, yeah. Of course.

Steve Lewit: Some people need that invigoration, that electricity going there them and they like the thrill of the ups and downs of the market. It makes them feel alive.

Gabriel Lewit: Well, the reason I liked this quote is because it’s going to tie nicely into the second topic we’ve got for today.

Steve Lewit: You are tying so well together.

Gabriel Lewit: Which is about the benefits of keeping things simple when it comes to investing.

Steve Lewit: What’s going on behind me?

Gabriel Lewit: There are lightning strikes and thunderclouds, and wind, and dark skies right behind you.

Steve Lewit: I can’t see anything behind me, folks, because I wasn’t built that way.

Gabriel Lewit: He’s facing the inside and I’m facing the outside.

Steve Lewit: Yeah.

Gabriel Lewit: Yeah, it’s quite the show.

Steve Lewit: Okay.

Gabriel Lewit: All right. Well yeah, we’re going to talk about keeping things simple. Part of keeping things simple is not watching your investment statement every day because … I like what Mr. Samuelson said here, is quite frankly, investing does get boring after a while because part of it, the biggest … We talk about what are the key ingredients for investment success.

Steve Lewit: Yeah, it’s diversification and …

Gabriel Lewit: Time.

Steve Lewit: Time.

Gabriel Lewit: Time. The time part can … The diversification, we’ll talk about more of that, how to do that simply. But there’s definitely this time component. We have to be patient. We look on a graph on a spreadsheet of a plan that says, “In 30 years, you’re going to have $10 gazillion,” but you’ve got to be patient.

Steve Lewit: Because it’s over 30 years.

Gabriel Lewit: Yes, 30 years is a long time.

Steve Lewit: It’s not tomorrow or the month after. Yeah.

Gabriel Lewit: Yeah. Let’s talk a little bit about keeping things simple here. I have this feeling that-

Steve Lewit: I got a question, Gabriel. Do you feel people have gotten more impatient?

Gabriel Lewit: Yes.

Steve Lewit: Say more about that.

Gabriel Lewit: People have gotten impatient.

Steve Lewit: No, when I say, “Say more,” you have to add at least an extra word or two, like some people.

Gabriel Lewit: Well, they’ve become less patient than they used to be.

Steve Lewit: Very good. That was so helpful. That really-

Gabriel Lewit: I’m just teasing.

Steve Lewit: I love to dive in with you.

Gabriel Lewit: Well, yeah. As an example, there’s been only one bear market since … Well, we had the short blip during the Coronavirus, and then we had 2022, we had a bear market. The last one before that was 2008.

Steve Lewit: Yeah.

Gabriel Lewit: People, in the middle of this admittedly relatively short bear market, about one year of 2022-

Steve Lewit: It’s like a sneeze.

Gabriel Lewit: One year in, they’re like, “Okay, come on. What’s going on here? Why is the market not up yet?” It’s like, “Hello?”

Steve Lewit: Or they say, “You mean I didn’t make any money this year?”

Gabriel Lewit: “Why did I make no money this year? The market’s down. Why is my portfolio not up?”

Steve Lewit: “Why didn’t you pull the money out?”

Gabriel Lewit: I feel like there’s a lot of this impatience these days about results, results, results. A big part of investing has always been patience. Obviously, having the right philosophy, the right investments.

Steve Lewit: I have a theory about that. It’s that because the world is so tentative right now, we’ve got wars, we’ve got debt, we’ve got political contentiousness, we have presidents being grilled, we’ve got everything going on, national debt. That people have become more short term thinkers.

Gabriel Lewit: Yeah.

Steve Lewit: It’s like, “I’m not worried about 10 years from now, I’m worried about what’s going to happen in November. Are we going to have a safe passage of the election, whoever wins? I’m worried that the war will expand in the Middle East,” and they’ve become very short term thinkers.

Gabriel Lewit: Well, I think that’s really at the core of this concept of simplicity is if you are impatient and you don’t want to sit and watch grass grow or the paint dry on the wall, which investing, per Mr. Samuelson, should feel more like, then it causes you to make things more complicated than it needs to be. In other words, you think you have to do something, so then you have to decide what to do. What do you buy? What do you sell? What do you change? What do you tweak? Because if there’s always this feeling like you’ve got to do something big and different, you’re going to always complicate things, quite frankly.

Steve Lewit: I got an email yesterday and I get them more often than I would like, that the sky is falling, that the US dollar will crumble, that cryptocurrency is going to take over everything and the dollar won’t be worth anything, that China and Russia are going to take over the world, with a whole list of all kinds of things that could happen but they’re remote. The way I’d put it is can there be an earthquake in Chicago? Could there? Well yeah, there could be. Do you go to sleep and worry about it? No. Well, that’s how I feel about all of these sky is falling things. It’s not to worry about. But that gets into people’s system, and then all of a sudden, it’s like, “Hey, should I buy gold? Where should I put my money? What am I going to do?”

Gabriel Lewit: Your fears can cause you to over-complicate things, your boredom can cause you to over-complicate things, your impatience. How do we simplify things here? That’s really where I wanted to get to. I think there’s a beauty in simplicity in planning for retirement, and it really comes down to this philosophical concept of investing we call a Bucket Plan.

I’m just going to lay this out for you, quite frankly, as simply as I can for you today.

Steve Lewit: Yeah, step by step and simple.

Gabriel Lewit: It is a little bit more behind the scenes than I’m going to make it sound here, but this is how simple it can be.

Steve Lewit: Yeah.

Gabriel Lewit: You just need a few different buckets.

Steve Lewit: You’re confusing me.

Gabriel Lewit: Bucket number one would be a short-term cash bucket. You have short term emergency funds, reserves, something to cover you in case something happens.

Steve Lewit: Yeah.

Gabriel Lewit: Bucket number one. Bucket number two would be a safe income bucket. If you are looking to retire … Some people don’t want this bucket, that’s okay, but it’s still the simple concept which is if you want more of your income in retirement coming from a safe source, we call that a safe income bucket. Let’s put some of your dollars in that bucket that will generate you safe income.

Steve Lewit: Now, safe income means safe income. I go to sleep at night and I still have my income, even if the stock market goes down 30%.

Gabriel Lewit: Correct, yeah. Safe means you can’t outlive it, you can’t lose it.

Steve Lewit: I love how quick you did that.

Gabriel Lewit: What?

Steve Lewit: Blew your nose and got back to the microphone.

Gabriel Lewit: You saw me blowing my nose, you were supposed to keep talking. Instead, you pause, waiting for me to-

Steve Lewit: I put the pressure on you to finish blowing your nose.

Gabriel Lewit: Yes, thank you for that.

Steve Lewit: Yeah, I’m sorry. I’m sorry.

Gabriel Lewit: The third bucket is what we call a safe growth bucket, meaning some of your money can be earmarked just to grow for the future but to do so in a safer way.

Steve Lewit: What would you say safe means?

Gabriel Lewit: Safe means it’s not going to have huge spikes of volatility and huge loss potential.

Steve Lewit: Yeah.

Gabriel Lewit: Safe or safer. Then we have, we call it a buffered growth bucket. This is a mid-range but less risk, preferable some or no risk depending on the year, what we call using buffers, for medium term time horizons.

Steve Lewit: Yeah.

Gabriel Lewit: Then in our world, we have something called diversified aggressive growth. We can have diversified but aggressive growth, so we reduce risk by being diversified but the goal is still longterm aggressive growth.

Then the last bucket is what we would call speculative or concentrated growth.

Steve Lewit: Yes.

Gabriel Lewit: In our world of planning, we obviously customize this a lot for everybody, but that’s all you need. You just decide how much you want to put in those different buckets.

Steve Lewit: Yeah.

Gabriel Lewit: There’s one or two best in class or ideal investment choices for each of those buckets. Then you just let the grass grow.

Steve Lewit: I think what’s important there is you’ve got buckets, different buckets that do different things, but the stock market isn’t the answer to all those buckets.

Gabriel Lewit: It does not. It does not.

Steve Lewit: You have to employ a multiplicity of products. You can’t just use the stock market.

Gabriel Lewit: Well, yeah. For some people, if that’s all you’re going to use, then all your money is in, well it depends on how you invest in the market, but either in diversified aggressive or concentrated speculative aggressive. You don’t have those other buckets, necessarily.

Now people, we typically employ a non-market timing based approach, meaning we’re not buying and selling every month, or every day, or every week, or every year even just to try to take advantage of opportunities in the market. Why? Well, the data we read, all the data we read says over time, that’s a losing approach.

Steve Lewit: What time period-

Gabriel Lewit: Can people be successful with it here and there? Yes. Over time being the key words that we’re referencing here.

Steve Lewit: Yeah, time could be 10 years, it could be 25 years.

Gabriel Lewit: Yeah. This goes back to people being impatient. If people just understood that with time comes success if you’re doing things the right way, it would be less exciting, it’d be a little more like watching grass grow. You assign money to this simple bucket system and then you let time doing its thing.

Steve Lewit: I would add on one more piece to that, Gabriel, is that a lot of people … Let’s say your goal for investing in the stock market is 7%, and you know that that portfolio in a really bad year could go down 30% and you’re willing to take that risk. But your goal is 7%. The market bulls along and you’re in a diversified portfolio to get the 7%, but the S&P goes up 18%. People come in and say, “Well, why didn’t I get 18%?” Well, your goal is seven, so the portfolio was designed to give you seven not 18, because if you go for 18% instead of, in a bad year, losing 30%, you could lost 47% and you didn’t want to do that.

But I think what happens, and it’s very easy, we lose focus of what our goal is and get enamored by what we could have had, instead of what we actually made.

Gabriel Lewit: Yeah. I think that would circle back to simplicity, is focusing on your long-term goals, which the Bucket Plan helps to identify. Giving your purpose to each bucket allows you to help choose the right investments for it. All of this can bring a sense of simplicity, and dare I say calm, to your investment portfolio because some people really think investment needs to be complicated. “What am I buying today? What did you sell last week? What did you do here? What about this? The election’s this fall, what are we buying and selling now?” The economy, the dollar, the sector, the war.

If you have the right diversified Bucket Plan that’s simple, well-developed, well-designed, implemented as part of your cashflow, sometimes investments in retirement planning can be simple.

Steve Lewit: You’ve made full circle back to short-term thinking and long-term thinking and what drives the two of them.

Gabriel Lewit: That’s a stretch, but I wasn’t full circling in my mind.

Steve Lewit: No, you weren’t?

Gabriel Lewit: But yeah, sure.

Steve Lewit: Oh.

Gabriel Lewit: It sounds great.

Steve Lewit: I got it in my head, I see the circle completed. I’m saying to myself, “God, this guy is brilliant.” You just tied the whole thing together.

Gabriel Lewit: I’m not going to say no to that.

Steve Lewit: Well, yeah.

Gabriel Lewit: Of course.

Steve Lewit: And of course, you’re my son so you have to be brilliant.

Gabriel Lewit: Yes, yes. All right, my friends, thank you for listening to our show today. We hope you enjoyed spending some time with us. If you have any questions, of course call us, 847-499-3330 or go to sglfinancial.com. We hope you have a wonderful Mother’s Day weekend. Get out there, enjoy, relax.

Steve Lewit: Celebrate.

Gabriel Lewit: Celebrate. We will talk to you on the next show.

Steve Lewit: Stay well, everybody.

Gabriel Lewit: Bye, now.

Steve Lewit: Bye, now.

Announcer: Thanks for listening to Our 2 Cents, with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330 or visit us on the web at sglfinancial.com. Be sure to subscribe to join us on next week’s episode.

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