Building Your Investment Philosophy

Our 2 Cents – Episode #261

Building Your Investment Philosophy

New episode alert! Steve and Gabriel are talking FIFA, coffee, and investment philosophies on this week’s episode of Our 2 Cents. Whether you’re a sports fan, coffee lover, or curious investor, there’s something for you. Tune in now!

1. Gabriel’s Quick Hits:
   • The World Cup is over, but the numbers are still scoring big. Discover how much money the tournament generated.
   • Could coffee support heart health? Discover what the latest research suggests.
2. Investment Philosophies:
   • Learn how your investment philosophy can influence your strategy, risk management, and long-term financial success.

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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: Hello, everybody. Welcome back to Our 2 Cents. You’ve got Gabriel Lewit and the esteemed Stephen Richard Lewit here on the microphone here today. Maybe every now and then I call you you know fancy names. I know your full name.

Steve Lewit: I never call you Gabriel David.

Gabriel Lewit: You could. I could. Yeah, that is my middle name. Yeah. GDL. Most of us all have one. GDL, right.

Steve Lewit: That’s right.

Gabriel Lewit: My son’s initials, and I did kind of do this on purpose, are NFL. And I just thought it was really cool, Nathan Francis Lewit. Yeah. So I was, you know, I thought it was just a good initial to put on a backpack.

Steve Lewit: Well, as long as you did water or ocean or cloud or something.

Gabriel Lewit: Like something where it’s like C A T, so their their initials are cat. It had to be a manly NFL.

Steve Lewit: People are crazy with names. Here’s my son’s cement.

Gabriel Lewit: Northwest, yeah, Kanye’s kid.

Steve Lewit: My daughter Pothole over here. I don’t know.

Gabriel Lewit: There’s some funky names going around in this. Nathan, I think, is pretty straightforward. So, I like it.

Steve Lewit: And you have a niece named Ocean.

Gabriel Lewit: I do have a niece named Ocean.

Steve Lewit: And you know what? She’s the cutest thing in the world.

Gabriel Lewit: It’s a cute name. Yeah. Agreed. It is. All right.

Steve Lewit: You have a niece named Sky as well.

Gabriel Lewit: Yes. Very earthy.

Steve Lewit: That part of our family is very interesting.

Gabriel Lewit: Indeed. Well, any who’s back to the show. We’ve got some good topics here for today. We’re going to talk about a couple of just quick, you know, quick hits here, as I like to call them. A couple things here related to not necessarily directly money, but little interesting, engaging topics for you. We’re going to talk about the World Cup here and how much money they generated.

Steve Lewit: Yep.

Gabriel Lewit: And we don’t collect any of that, so unfortunately, it doesn’t benefit us. But the World Cup, in particular, FIFA that oversees the World Cup generated a whopping $15 billion this last World Cup that just recently concluded. Well above the $11 billion they thought they were going to generate, and double or more what they generated the last World Cup cycle, which was around seven to seven and a half billion dollars. So, someone’s pockets are getting lined here.

Steve Lewit: You bet. You bet they are.

Gabriel Lewit: Who actually keeps that money is what I want to know, right? Does the head guy get a big chunk?

Steve Lewit: Does who knows? Yeah. I don’t know. It’s soccer, you know.

Gabriel Lewit: Well, of course, everyone was thinking that the hydration breaks were really advertisement revenue breaks, which they probably were.

Steve Lewit: Yeah, aren’t they?

Gabriel Lewit: Well, they technically they were for the players. Nobody really believed that.

Steve Lewit: Well, it’s the same on basketball. They have TV breaks.

Gabriel Lewit: Sure. Well, the basketball, of course, has yeah, lots of timeouts and TV breaks, but soccer is a pure sport where you’re supposed to play for 45 minutes.

Steve Lewit: Wait a minute. Basketball is not a pure sport.

Gabriel Lewit: Not as not as they need they need timeouts and they need breaks, you know.

Steve Lewit: But folks, I just want you to know that. My son is like a soccer maniac.

Gabriel Lewit: Not quite a maniac. I just a fan. Yeah.

Steve Lewit: Yeah, but to say well, now you’re going to tell me soccer is probably the best sport in the world.

Gabriel Lewit: I mean, it is the most popular sport in the world.

Steve Lewit: Well, that doesn’t make it good. You know, Coca-Cola’s popular. It’s not good for you.

Gabriel Lewit: Yeah anywhos. Well, the other interesting things here is Spain, the winning team, by the way, kind of a dud of a final if you watched it.

Steve Lewit: I did watch you know, and I watched it because of you. I said, my son is going to ask me questions about this this match, and I sat there for the full 18 hours watching them kick the ball back and forth, and nothing happening.

Gabriel Lewit: Well, Argentina had a whopping zero shots on goal pretty much the entire I think it was the entire game. I mean, that’s very unusual for a top top team.

Steve Lewit: I mean, I think they wound up with one or two.

Gabriel Lewit: And it kind of speaks to how really how good Spain was. But um Spain, the winners, of course, pulled home $51 million, is what Producer Gabby was saying here. So, if there’s if there’s 25 players on the team, I don’t know exactly how many, they’re each getting two million bucks just for playing in the World Cup, not too bad.

Steve Lewit: Not too shabby.

Gabriel Lewit: Even the bench players, I think most of the teams split them pretty even.

Steve Lewit: Yep.

Gabriel Lewit: So, you can just sit on the bench and collect two million bucks.

Steve Lewit: Yep, yep, yep.

Gabriel Lewit: Chew your team on front row seats.

Steve Lewit: I applied for a bench seat and they didn’t respond.

Gabriel Lewit: Yeah, yeah. Well, and Argentina got 34 million for coming in second. And I believe the USA, who again lost in the round of 16, I think they they pulled a total of like two million or something like that. I don’t have it in front of me.

Steve Lewit: But it’s an incredible number. Uh what do you recall the audience? 50 million people, more than the uh more than the uh Super Bowl and the NBA together.

Gabriel Lewit: And it had a terrible halftime show.

Steve Lewit: Oh my gosh. And it was too long.

Gabriel Lewit: Anyways, uh well, hopefully you enjoyed it. If you did watch it, if if you didn’t, uh you have no idea what we’re talking about. But, anyways, all right, so let’s talk a little bit about coffee for just one second. Then we’re gonna get into some real financial topics for the main part of our show. Just as just a quick tip here, folks. Well, because I like this art. I drink coffee.

Steve Lewit: We needed coffee to keep us awake.

Gabriel Lewit: And now I need another I need another cup because it says up to five cups of coffee per day may potentially lower your heart disease risk.

Steve Lewit: I love articles like this that say may potentially. What I mean, what does it mean?

Gabriel Lewit: Well, everything may potentially mean you might potentially wake up, and it could be raining. I don’t know. You know, everything’s potential. I can’t guarantee anything in this world.

Steve Lewit: No, no, you can’t.

Gabriel Lewit: So, yeah, it says so it says it’s safe for most adults here, and regular coffee consumption may be linked to lower risk of stroke, diabetes, and heart failure, according to a new scientific statement from the American Heart Association. But, but, folks, how you brew it is very important. Okay, so it’s from uh let’s see, strictly paper filtered or instant coffee.

Steve Lewit: No, instant coffee is just horrible.

Gabriel Lewit: It says paper filtered or instant coffee. Unfiltered options, including a French press espresso or Turkish coffee, contain compounds called cathetrol, which could raise your bad LDL. And the problem is I don’t know what like a does a does an espresso or a Keurig or even our coffee machine in the office, is it considered filtered or not? I don’t know. I don’t think so. So maybe I’m drinking bad coffee. Now I’m concerned.

Steve Lewit: Yeah, and and it’s also what do you put in it?

Gabriel Lewit: Well, the yes, this doesn’t talk about it.

Steve Lewit: If you put five sugars in each of those five cups of coffee, then it’s 25 packs of sugar, and that’ll kill you.

Gabriel Lewit: Yeah, maybe. And it also says here that um, well, actually, I was gonna say something. What did it say? Hold on. I forgot what I was gonna say. My goodness, I was thinking too many things. Oh, yeah, if if you otherwise can’t handle five cups of caffeine, be cautious how much you know caffeine you in you intake, because it could it could have other effects on you.

Steve Lewit: Yeah, like uh make you crazy, nervous.

Gabriel Lewit: So well, now you know it’s not you know, it’s kind of these things where you-

Steve Lewit: Who did this?

Gabriel Lewit: No, this was this was a this was a big study. Who did this? The journal circulation.

Steve Lewit: Who is that?

Gabriel Lewit: By the American Heart Association is a statement, okay? Dr. Jennifer Miao.

Steve Lewit: Miao?

Gabriel Lewit: Miao, M-I-A-O, Miao. A board certified cardiologist.

Steve Lewit: Yeah, yeah. Well, you know, everybody has their opinion.

Gabriel Lewit: I don’t think this was just an opinion piece, but okay. All right. Well, let’s go. Let’s talk about our main things.

Steve Lewit: Let’s talk about something really, really serious.

Gabriel Lewit: Yes, I want to talk about your investment philosophy, Steve.

Steve Lewit: Mine.

Gabriel Lewit: Well, no, our listeners.

Steve Lewit: Oh, okay.

Gabriel Lewit: Not just yours.

Steve Lewit: No, yeah. Do you think most people have an investment philosophy, Gabriel?

Gabriel Lewit: Well, an investment philosophy is a really defined purpose, if you will, of how you choose to invest your money. And I would to answer your question, uh, after defining what it is, I’d say no, I’d say the vast majority of people that I encounter or talk to or work with absolutely do not have their own investment philosophy that guides their investment decision making. But it is perhaps one of the most important things that they all should have that they currently do not have.

Steve Lewit: All right. Say put a little meat on that bone.

Gabriel Lewit: Well, that’s the we’re going to.

Steve Lewit: Okay.

Gabriel Lewit: Yes, but to put a summary on it, right? What we’re going to talk about here is most people do not have an investment philosophy. Most of you are listeners out there, you probably do not. We’re going to find out today. And having an investment philosophy is an incredibly important part of an investment and retirement plan.

Steve Lewit: Okay. So, convince me that it is an important part of a retirement plan. Convince me. Because there are people that do well. There are people that do well in the market.

Gabriel Lewit: Let me ask you this differently.

Steve Lewit: Okay.

Gabriel Lewit: Without an investment philosophy, what would be the other side if we swung that pendulum the other way? You’d say, okay, if if an investment philosophy is a defined and very purposeful driven way of selecting your investments, then the lack of an investment philosophy by reversing this would be an ad hoc, scatter shot, random selection of various investment vehicles.

Steve Lewit: Throw darts at the wall.

Gabriel Lewit: Throwing darts at the wall. And the question, quite frankly, would be which of those just on the surface sounds like it would probably be a better selection for a secure and reliable long-term retirement plan.

Steve Lewit: Well, uh uh, let me see, throw darts or have a plan. I could have a plan in throwing darts.

Gabriel Lewit: You sure could.

Steve Lewit: But that doesn’t work. Yeah, it makes sense.

Gabriel Lewit: But did I just convince you why you should have one?

Steve Lewit: Not yet.

Gabriel Lewit: Not yet.

Steve Lewit: Okay. But you’re getting we’re getting warmer. But here’s what I’m thinking, Gabriel. The market goes up, and even if you throw darts, you still make money, and people convince themselves that that’s they they’re good at what they do. They convince themselves that they have a philosophy. I guess you could call it a philosophy, but it’s not really a philosophy.

Gabriel Lewit: If your philosoph yeah, if your philosophy was literally, I’m just gonna randomly pick stocks and if they go up, I’m happy. That is itself a philosophy. You just you just put a label on it.

Steve Lewit: Yes. Okay.

Gabriel Lewit: You’ve defined it.

Steve Lewit: Okay, gotcha.

Gabriel Lewit: Okay, and so if someone’s came to you at a at a house party or if your financial advisor is interviewing you for the first time and they ask you, Mr. Mrs. Smith, what’s your investment philosophy? Your answer would be, well, I like to pick random stocks and watch them to see if they go up, and if they don’t go up, I pick other ones, and that’s what I do because I believe in it.

Steve Lewit: So, I’m going to say, in that case, based on your definition and explanation, this is based on your stuff, that everybody has an investment philosophy.

Gabriel Lewit: No, I’m saying they they aren’t purposely saying that that’s what they’re doing. They’re just doing it.

Steve Lewit: They don’t yeah, but they they have it, but yes, you’re right. They’re not aware they have it, but they have it.

Gabriel Lewit: Well, I don’t think they’re even aware of what they’re doing, and if they were aware of it, it may not actually be their philosophy. Because I think most people, when you talk to them, if you ask them these questions, which I do all the time, right, Mr. and Mrs. Smith. So, you’ve got your 401k. Great. Let’s just use that easy example. Why did you pick what you’re what you’re in? Why you’re in it? Do you know what you’re in? I ask these questions. Do you know what you’re in? And then the follow-up is why did you buy it?

Steve Lewit: So here are the answers. Go ask me the question.

Gabriel Lewit: Uh Steve.

Steve Lewit: Yes.

Gabriel Lewit: Uh so the 401k that you invested in at work, you said you’ve got uh a million bucks in there?

Steve Lewit: Uh about a million, yeah.

Gabriel Lewit: Yes. Uh first question I’ve got for you, Steve, is what are you currently invested in inside of that 401k? Do you happen to know off the top of your head?

Steve Lewit: Uh uh Yeah, I pick some mutual funds.

Gabriel Lewit: Some funds?

Steve Lewit: Yeah.

Steve Lewit: Okay. Do you know which ones?

Gabriel Lewit: Uh I’m I I’m uh I’m I’m uh I’m moderately aggressive.

Gabriel Lewit: Moderate aggressive?

Gabriel Lewit: Yes.

Gabriel Lewit: Uh is it a target date fund?

Steve Lewit: Uh so uh target date means it has like a date on it.

Gabriel Lewit: Yeah, like a retirement 2035 fund?

Steve Lewit: Yeah, yeah, it has a date on it.

Gabriel Lewit: Oh, okay. So, you picked a target date fund.

Steve Lewit: Yes, I guess.

Gabriel Lewit: Why did you pick that one? I’m just curious.

Steve Lewit: Well, my my my buddy at work said that at my age uh that would be a good one to have.

Gabriel Lewit: Ah, okay.

Steve Lewit: Because it’s more aggressive?

Gabriel Lewit: Yeah. That’s helpful.

Steve Lewit: Yeah.

Gabriel Lewit: Yeah. Uh yeah. Yeah. Uh yeah. Uh yeah. That’s these are how these conversations often go.

Steve Lewit: That is how they that is how they go.

Gabriel Lewit: Or I hear often um, I’m not I don’t really know what I’m in.

Steve Lewit: Yeah, I can be another I can be another person.

Gabriel Lewit: You want to do you want to be a person too?

Steve Lewit: Yeah, I’ll be person too.

Gabriel Lewit: All right, Steve. So, you’ve got a million dollars in your 401k.

Steve Lewit: I I do scroll.

Gabriel Lewit: That’s great. Good scroll. Good job.

Steve Lewit: Yeah, thank you.

Gabriel Lewit: Um, I was just curious as we start to outline your plan. The goal is to figure out what you have and where it fits in. So, uh tell me a little bit, what did you pick inside your 401k for investment options? Do you know off the top of your head what you know what funds you’re in by chance?

Steve Lewit: Um You know, I I’ve I probably haven’t looked at that thing in two years.

Gabriel Lewit: Okay, so but it’s doing well.

Steve Lewit: I’m a genius.

Gabriel Lewit: Okay, good, good.

Steve Lewit: Keeps going up.

Gabriel Lewit: Great, great. Well, I’m glad to hear that.

Steve Lewit: Yes.

Gabriel Lewit: Well, at some point we might want to get a statement so I can I can at least show you what you’re in and we can decide if that’s a good fit for for what your plan looks like.

Steve Lewit: Yeah.

Gabriel Lewit: Would that be okay with you?

Steve Lewit: If it’s going up, what’s the problem?

Gabriel Lewit: Maybe it could go up more.

Steve Lewit: Uh or maybe it might go down, right?

Gabriel Lewit: Maybe it’s riskier than you want it to be.

Steve Lewit: Yeah, these are the kind of conversations we have.

Gabriel Lewit: They are similar to these.

Steve Lewit: Yeah, I mean it’s kind of wild. I I’ve never really role-played this in that person’s position. Mm-hmm. But they they have a million dollars, they never look at it.

Gabriel Lewit: A lot of people Well, to some extent, not looking at your portfolio is arguably good advice once you know it’s doing what you want it to do. Right. But until you’re sure it’s doing exactly what you want it to do, blind aversion to what you have might actually be doing more harm than it might be helpful.

Steve Lewit: Yeah, I never saw I know you know, it’s interesting. I never saw it right through uh their eye. It’s like, what’s the problem? It’s going up.

Gabriel Lewit: Yeah.

Steve Lewit: The first thought that came to me is like, you know, it’s going up. What’s the big deal?

Gabriel Lewit: Well, this is what I call, if I were to give it a name, very purposeful, purpose-driven investments.

Steve Lewit: Right.

Gabriel Lewit: Okay, where you pick something because you have a defined investment philosophy that drives you to pick it because of how you feel, where it fits into your plan, what purpose it serves in that plan, uh, your risk preferences, your time horizons. There’s a very defined reason that you’re picking what you’re picking that you’ve solidified.

Steve Lewit: Yep.

Gabriel Lewit: Okay. Like some people, this is a simple analogy, right? Some people have decided that they they like electric cars.

Steve Lewit: Yes.

Gabriel Lewit: Others have decided, no, I do not like electric, I prefer gas.

Steve Lewit: Yes.

Gabriel Lewit: They have come up with an automobile driving philosophy or purchase philosophy that determines which type of car they shall purchase.

Steve Lewit: Yeah, but here’s where you know if your philosophy is truly a philosophy. Mm-hmm. Okay. Now, interview me, the market’s down 30%.

Gabriel Lewit: Well, Steve, so the market uh recently was down 30%.

Steve Lewit: You just asked me about my million dollars in the 401k. Same same question. So, where’s your money, the million dollars in the 401k?

Gabriel Lewit: Yes, yes. So, Steve, you’ve got a million dollars in your 401k.

Steve Lewit: Yeah, yeah. I’m losing my shirt.

Gabriel Lewit: Yeah, the market’s been down lately.

Steve Lewit: Yeah, so you know what? Um why didn’t someone someone should really t tell me what to do about that and get out. I can’t get any advice from the the from anybody. I’m just watching my money go down.

Gabriel Lewit: Well, it’s I know it’s right now in the middle of a market decline isn’t the best time to say we might have wanted to take a look at that earlier and see what kind of risk exposure you had, make sure you were comfortable with it.

Steve Lewit: What do you mean by risk exposure?

Gabriel Lewit: Well, every portfolio that goes up can also go down.

Steve Lewit: Nobody’s talked to me about going down, they only talk to me about going up.

Gabriel Lewit: Well, yes, it’s it’s uh a two-sided coin for investing. You’ve got how much upside you can earn in a given year, but any given portfolio also has a level of risk exposure that goes along with its upside growth potential, the two go hand in hand, and we we want to always look at both sides of that coin to make sure it’s a good fit for you.

Steve Lewit: So, what’s your investment philosophy?

Gabriel Lewit: Are we switching gears here?

Steve Lewit: Yeah.

Gabriel Lewit: To me, yeah.

Steve Lewit: Because that’s a uh if I were the client, that’s what I’d be asking you now.

Gabriel Lewit: Well, that’s a great transition.

Steve Lewit: Yes. What would you do different?

Gabriel Lewit: Have I convinced you pause here?

Steve Lewit: Yes.

Gabriel Lewit: And listeners out there, have we I’m hoping we’ve gotten to a point where we’ve can agree having an investment philosophy sounds important.

Steve Lewit: Yes, right.

Gabriel Lewit: Something that determines how you invest your money very purposefully.

Steve Lewit: And but then there’s a quality of your investment philosophy. But that’s the different things.

Gabriel Lewit: We’ve got to get into what is it then? What is it? Right, what are the options?

Steve Lewit: But having one is important.

Gabriel Lewit: But having one is important. If we can all agree upon that, then the question you should be asking yourself here as you listen to this is what is your investment philosophy? What is my investment philosophy?

Steve Lewit: Yeah, do I really have one, or do I kind of wing it, or I listen to somebody on the radio? What is your philosophy?

Gabriel Lewit: Now, if you’re a client of SGL Financial, and this is I think what you were going to ask me a second ago, we as a firm and as advisors do indeed have an investment philosophy, or in some cases a couple of them, right, available to our clients that we provide guidance on, that we believe in, that we adhere to, and that we have done a lot of research in and have a lot of confidence in.

Steve Lewit: Yeah, an investment philosophy, Gabriel, isn’t it like a roadmap? You know, it’s like I’m gonna drive from here to-

Gabriel Lewit: The blueprint if you’re-

Steve Lewit: A blueprint or a roadmap. It’s something to know, it tells you when you’re off course. That’s what I think why having a philosophy is important is that if it’s a good philosophy and it’s working, it will tell you when you’re off course somehow.

Gabriel Lewit: Uh I would say maybe. No, maybe on that one. We can circle back to that. I’ll I’ll I can explain why.

Steve Lewit: I thought that was a brilliant point.

Gabriel Lewit: A plan will tell you if you’re on track or not, but that’s still a little different than an investment philosophy. An investment philosophy must fit into your plan.

Steve Lewit: Right. Okay. Okay.

Gabriel Lewit: But let’s you asked what was ours here, or what is ours here at SGL Financial. Yep. Well, by default, let’s say you came to me and said, Gabe, gosh, Steve, I I have no idea what I want to do. If we let’s because I would start by saying, Hey, do you have any preferences on how you’d like to invest your dollars, Mr. and Mrs. Smith? Right? I do want to get your feedback here. Many people say, I Gabe, I have no idea that’s why I’m not sure.

Steve Lewit: Well, they’ll say I’m very conservative or something.

Gabriel Lewit: Sometimes let’s just use this blanket example of someone saying, I have no idea, Gabe, it’s not my thing.

Steve Lewit: Yeah.

Gabriel Lewit: Well, what do you recommend that I do? Okay. Okay, if I had to have a default like that, what would it be? Well, it would be a couple of things. Number one, to your point, I’m gonna ask you that very first question. I’m gonna say, Mr. Smith, are you aggressive or conservative by nature? And we’re gonna get some clarity on just how you feel about investing, very simplistic terms, aggressive, conservative, or somewhere in between.

Steve Lewit: Yes.

Gabriel Lewit: Okay, I because I really need to know the answer to that. My philosophy is gonna be custom tailored a little bit to you based on whether or not you’re aggressive or conservative. Okay. The other thing is we believe in number one, securing your income as a retiree.

Steve Lewit: First and foremost.

Gabriel Lewit: So, you have dependable, reliable, secure income over your retirement as a top priority in our investment philosophy. So, what does that mean? It means if you need a lot of income out of your portfolio, let’s say you have a million dollars in your 401k like we were talking about before, and you need sixty thousand dollars per year, well, taking that out of highly aggressive, concentrated individual stocks-

Steve Lewit: Not a great idea.

Gabriel Lewit: Is not in alignment with our investment philosophy of securing your reliable, dependable, predictable peace of mind income plan. Okay, so that wouldn’t be our recommendation. Now there are people out there that would love to roll the dice and have a hundred percent stocks and have a million dollars invested in stocks and and they pull out their sixty grand. Yep. And that may or may not work.

Steve Lewit: Right, but that’s their philosophy.

Gabriel Lewit: But that is what they feel comfortable with, but that would not be ours here at SGL Financial. Right. Okay. Another thing would be we often create buckets. Buckets have to do partially with creating reliable, dependable, of course, income streams in retirement, but a bucket is where you identify a certain amount of money and where and how it’s going to be used in your plan. So, let’s say we have a certain chunk of money that we know we’re gonna need for income, and we have another chunk of money that we know is gonna sit there for 30 years and never be spent on income as we’ve built out your plan. That bucket has a 30-year time horizon, that long-term one. We might invest that very, very differently than a bucket that may be used tomorrow for income, because it has a substantially longer time horizon. So, a part of our investment philosophy is customizing your allocations based on time horizons.

Steve Lewit: Very important. So, what you just did, Gabriel, which is brilliant, is because my son is brilliant.

Gabriel Lewit: My goodness, thank you so much.

Steve Lewit: My son is brilliant. Uh what you just did is expanded what investment means. Investment just doesn’t mean how am I doing in the stock market.

Gabriel Lewit: No.

Steve Lewit: Investment means like you said, purpose driven. I’m I’m going to invest this money, but for what purpose is this money being invested? And that has to do with risk and time horizon.

Gabriel Lewit: Yes, exactly. And I’m going to give an example here because this concept for this show today came from an article from someone I read a lot of her stuff. Her name is Christine Benz. She’s a Morningstar writer. And I get her newsletter and I read a lot. And this hers was titled Here’s My Investment Philosophy, What’s Yours? Nice. Okay. And you know, we, of course, have been talking investment philosophies for a very long time here at SGL, but let me read you hers because I thought it was really interesting. So, this is another person, uh, an advanced person who knows about this world. This is her investment philosophy. Her first principle was keep it simple. She actually said K-I-S-S-Keep it simple. Bad word, I won’t say. Okay.

Steve Lewit: Silly person. Silly. Silly person.

Gabriel Lewit: Keep it simple, silly, okay? Uh she said that was her core belief. There are people out there that will just buy a single fund. That’s it. They’ll just they’ll open up their investment account, and they’ll put it in a one fund model. Yep. Because their philosophy is-

Steve Lewit: Vanguard Oil World.

Gabriel Lewit: Keeping it simple.

Steve Lewit: Vanguard oil world. And I’m happy.

Gabriel Lewit: I’m not going to say that that’s bad because it’s it’s a it’s a way of investing. But it also may not be the most optimal either, as we get into some of this. But this again is her investment philosophy for a frame of reference. Her second principle was maintain ample liquidity. Okay, so for her, keeping money in cash, while it may not create the highest risk-adjusted return, it is a part of her philosophy to have ample liquidity, right? So, everybody has a different level of cash that they feel comfortable with. This is part of your personal investment philosophy. Okay. Principle number three, which I I applaud you on this one, Christine. I agree. Principle three, let time horizon guide you.

Steve Lewit: Absolutely.

Gabriel Lewit: Huge, huge foundational principle. I believe everybody should have this principle, I think, is part of their investment philosophy. Not everybody does, but it’s certainly one that guides almost all I think educated financial planners out there, right?

Steve Lewit: And notice what she’s talking about. She’s talking about investment philosophy, not investment strategy. Which are two different things. The strategy is how you accomplish your philosophy, but you have to have the philosophy first. You have to have that big picture of what you’re trying to accomplish and how.

Gabriel Lewit: Yeah, her next principle is be mindful of costs. Okay. So lower costs, you know, is often better.

Steve Lewit: Big deal.

Gabriel Lewit: Although costs, some people take that to the extreme, and that’s the only thing they look at, but you know, it’s it’s not necessarily that simple either. And principle five, which I like as well, Christine, get the big things right.

Steve Lewit: What are the big things, Gabriel?

Gabriel Lewit: Um well, like she says she’s observed investors obsessing over topics like whether to carve out a separate allocation to real estate stocks or if it makes sense to hold foreign stocks in an IRA or a taxable account.

unknown: Right.

Gabriel Lewit: Like these this is you know, analysis paralysis over little decisions. I’ve seen people say, oh, I should have a 5.1% allocation to small value instead of a 4.9% allocation to small value.

Steve Lewit: Yeah, I that’s pretty interesting when people do that, isn’t it?

Gabriel Lewit: You know, and it’s like you really think. First of all, you have no idea if that 0.2% allocation will do better or worse for you over the next 10 years.

Steve Lewit: How about the next 20 years?

Gabriel Lewit: Or 20 years, right? So, you know, these are these are little things versus the big things right, which is your broad asset allocations. Just getting these core principles and these investment philosophy refined is a big thing, right? Get that right. Right? You have a phrase you use a lot in seminars, which is which we’ve there’s research on this, that the vast majority of all investment results are determined by your broad asset allocation, not even individual fund selection or stock selection. And that means how much you have just in stocks versus bonds. You know, I’ve seen 45-year-olds that have 50% of their money in bonds when they still have 20-year-long time horizons before they’re gonna need this money.

Steve Lewit: A lot of fear.

Gabriel Lewit: You know, we gotta get these big things right. Yep.

Steve Lewit: Okay. Yep.

Gabriel Lewit: So, let’s let’s pause here.

Steve Lewit: So, what so what’s the upshot of the do you think, Gabriel, when people hear this, that are do-it-yourselfers that are doing well in the market, do you think this is really registering? Do you think it’s going in and they’re saying to themselves, you know what, I know I’m doing well, but I really need to rethink this.

Gabriel Lewit: Maybe. I don’t know. You know, there are so many different types of investment philosophies out there. You could Google them and research them. There are people that believe in value investing only.

Steve Lewit: Yep.

Gabriel Lewit: There are people that believe in single fund models. There are people, and this is another one speaking of ours.

Steve Lewit: We have all tech we have people that have all tech portfolio.

Gabriel Lewit: We have people that believe US only is the only way to go.

Steve Lewit: Yep.

Gabriel Lewit: Right? Why would I ever put anything in international? One of our philosophies is diversification. SGL’s philosophy here that we believe in is diversification and not just asset class diversification, but in fact, strategy diversification as well.

Steve Lewit: Yeah, but you have to I uh Gabriel, you have to point out this isn’t a belief based on belief. This is a belief based on evidence, which is very different. We believe in what we believe because we have the statistical data that tells us that what we’re believing in is what is the optimal way to go. And if you have a belief but it’s not tested by data, then you’re just making stuff up.

Gabriel Lewit: Well, there, you know, hope-ism isn’t really a belief.

Steve Lewit: That’s right.

Gabriel Lewit: I get an ad on my I go, I sometimes read stuff on Yahoo, and I swipe through the the article headers. And every time, like every fifth ad, it’s like there’s an ad from Motley Fool or something. This is like buying NVIDIA at 16 cents, is the ad that’s been popping up lately on my Yahoo feed. And you know what? It’s only there because people are clicking on it. A lot of people are clicking that ad thinking, oh, I can figure out the next stock to purchase that was like buying NVIDIA at 16 cents, and they read this long squeeze advertising page that’s pitching them this next hot stock, and you just have to buy their research report and for two thousand dollars. Whatever, right? And they’re gonna make all this, you know. And some people think that that’s that’s their philosophy. You can pick and choose stocks, and you can in time markets, right?

Steve Lewit: Yep.

Gabriel Lewit: So, are there rights and wrongs? Maybe not so much rights and wrongs, but there are rights and wrongs for what stage of life you’re at at any given time, and how much risk you’re taking with various strategies.

Steve Lewit: I’m gonna say this again. There are rights and wrongs. There are no rights and wrongs, let’s put it that way. But there are rights and wrongs based on evidence and statistics that point you in one direction rather than another.

Gabriel Lewit: Yeah. Like I’ll give you, I’ll give you one just quick example as we wrap closer towards our time. It’s very rare. You would if you just research this, you’re not gonna find really any retirement planner, researcher, you know, financial advisor that suggests going into retirement other than the guy we talked about on the show the other day. Ramsey that says you should have a hundred percent of your stocks of money in stocks as you approach retirement.

Steve Lewit: Yeah, he had a moment.

Gabriel Lewit: It’s just not traditional advice you would find.

Steve Lewit: But give him a pass.

Gabriel Lewit: If that’s the the approach you want to take in retirement, uh is the is it bad per se?

Steve Lewit: Yeah, but we’re but we talked about that. Here’s the deal. Dave, show me the statistics behind that.

Gabriel Lewit: What’s the data? Yeah.

Steve Lewit: Yes. How risky is that. Show me the data. Guys, this isn’t about investing in philosophy. It’s show me the data and then investigate the data.

Gabriel Lewit: You know, what’s the risk if that data happens to be wrong, right?

Steve Lewit: Exactly. Exactly. So, philosophy based on imagination is one kind of philosophy. You know, I think I can pick winners in the market, while the data says picking winners in the market over extended period of time is impossible.

Gabriel Lewit: Well, this isn’t the best analogy, but I think hopefully you’ll see the parallels here. If you go to a casino, right, because all cause all casino money is gambling. But different casino goers have different gambling uh call them philosophies.

Steve Lewit: Definitely.

Gabriel Lewit: Some think they can, you know, sit at the roulette table, others think they’re gonna get an edge through poker.

Steve Lewit: Uh sit next to the hot guy or something.

Gabriel Lewit: Others think that, you know, you wait for a hot streak and then you jump in. Other, you know, everyone tries to come up with some like foolproof gambling system. The truth is it’s all just pure luck.

Steve Lewit: It’s a ma well.

Gabriel Lewit: I mean there’s a tiny bit of skill in gambling in some gambling.

Steve Lewit: But that’s the belief made from imagination.

Gabriel Lewit: There’s no data.

Steve Lewit: If I stand next to this guy, his luck is gonna rub off on me.

Gabriel Lewit: About the only data there is in gambling is that if you’re really good at poker, you might have a slight edge versus just sitting at the roulette table.

Steve Lewit: Blackjack.

Gabriel Lewit: Or blackjack, right, or whatever it is, right?

Steve Lewit: I have a buddy in oh, you know this guy in California.

Gabriel Lewit: Yeah.

Steve Lewit: Always wins in blackjack. I don’t know how he does it. He’s made a fortune.

Gabriel Lewit: Yeah.

Steve Lewit: I mean, but I sat next to him, and guess what? What? It didn’t rub off on me at all.

Gabriel Lewit: Yeah, that happens.

Steve Lewit: Yeah. It does.

Gabriel Lewit: Well, hopefully that was engaging topic.

Steve Lewit: He’s making money, I’m losing money. How do you do that? He says, well, I’m I’m just smarter than you are.

Gabriel Lewit: Well, we hope that was an engaging topic for you here today.

Steve Lewit: Which I didn’t like hearing that.

Gabriel Lewit: All right, focus, sir.

Steve Lewit: Okay, focus. I’ll focus. Okay.

Gabriel Lewit: Uh we talked, of course, about the goals of creating an investment philosophy, what it is, why you should have one, some examples of them, a little bit of what SGL Financials investment philosophy is. If this is something that resonates with you, in particular, if you feel you don’t have one, right, or you want to figure out where my philosophy really fit into what I’m doing here, and can I build what I’m doing better into my plan? Give us a call. That’s what we’re here for.

Steve Lewit: Or you’d like to see the data behind your philosophy. We have data on lots of different philosophies.

Gabriel Lewit: We have lots of data, Steve. Well, I’m pushing the data. I am very kicking the data horse here. Okay. We have data. I’m trying to wrap up here.

Steve Lewit: I know you’re wrapping. That was a wrap-up stuff.

Gabriel Lewit: Okay, well, we’ve got the opportunity here. We’d love to talk with you. You could set up a no obligation consultation. There’s never a cost for that. Give us a call anytime here, 847-499-3330. Or you can go to SGLfinancial.com, click contact us, or email us info at info@sglfinancial.com. We’d be overjoyed to meet with you at any point in time.

Steve Lewit: And we have the data.

Gabriel Lewit: All right. Have a wonderful rest of your day. Talk to you soon.

Steve Lewit: See you soon. Bye-bye.

Gabriel Lewit: Bye.

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. And be sure to subscribe to join us on next week’s episode.

Disclosure: Investment Advisory Services are offered through SGL Financial, LLC, an SEC Registered Investment Adviser. Insurance and other financial products are offered separately through individually licensed and appointed agents.