Uncovering Universal Retirement Truths

Our 2 Cents – Episode #150

Uncovering Universal Retirement Truths

We’ve all heard various retirement “myths” so let’s talk some retirement truths instead. On this new episode of Our 2 Cents, Steve and Gabriel will discuss some universal truths that can guide every retiree. But first, they’re sharing an idea to vacation in a new way to see some beautiful sights.

  1. Exciting Train Trips:
    • Amtrack Auto Train: Sit back, relax, and pack your car along with you!
    • Rocky Mountaineer Train: Explore the canyons and mountains at three great national parks!
    • Alaska Railroad’s Coastal Classic: Head off into the backcountry wilderness!
    • Grand Canyon Railway: Re-create the historic voyage to the Grand Canyon!
  2. Uncovering Universal Retirement Truths:
    • Everybody is going to age.
    • Everybody has some form of a plan.
    • Everybody has an advisor.
    • Emotions can be an investors worst enemy.
    • Nobody can consistently time the stock market successfully.
    • Diversification is essential for reducing risk.
    • Nobody knows how long they’re going to live.
    • Tax implications matter.

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Podcast Transcript

Announcer: You are 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, good afternoon, good morning, good evening. This is Gabriel Lewit, and Steven, we are welcoming you to our show here today.

Steve Lewit: Welcome everybody.

Gabriel Lewit: Welcome, welcome. Hope you’re having a wonderful day wherever you are, whatever you’re doing.

Steve Lewit: Did you know summer is ending in a week?

Gabriel Lewit: Yep. Pretty much, when it’s 50 degrees in the morning.

Steve Lewit: Yeah, it’s 52 or something like that.

Gabriel Lewit: I have come to the conclusion that summer is pretty much over.

Steve Lewit: Yep.

Gabriel Lewit: So I am, I guess, mentally not ready for it, but I guess I’m ready for it.

Steve Lewit: Yeah. There were brown leaves on the ground this morning, a chill in the air. Clouds flying through the blue skies in those trees.

Gabriel Lewit: And the Chicago Bears are getting beaten by the Green Bay Packers again, so that means fall is here.

Steve Lewit: Oh, wait a minute. How about my New York Giants getting beaten by the Dallas Cowboys 40 to nothing.

Gabriel Lewit: The only thing that made me feel better about the Bears losing was knowing that your Giants lost even worse.

Steve Lewit: Yeah, it’s amazing. Yeah, how about Aaron Rogers four plays in, he’s out for the season. I actually feel bad about that-

Gabriel Lewit: That’s too bad.

Steve Lewit: … because I like him as a quarterback, and I was excited to see him play, but it’s not going to happen.

Gabriel Lewit: Yep, injuries man. That’s what I was joking with producer Katie. I think I was joking with producer Katie and said, “Well, that’s what happens when you get old,” because he’s my age and I’m injured and all. I mean, he’s a little higher physical ability and the physicals, shape than me.

Steve Lewit: Comparing yourself to Aaron Rogers, I really do have a hard time with that.

Gabriel Lewit: Well, I didn’t say I’m as good of a football player as him. I just compared ourselves as your body ages, you get injured.

Steve Lewit: You do.

Gabriel Lewit: That’s all I’m saying. He got injured on turf. I got injured on turf, playing soccer.

Steve Lewit: Just like him.

Gabriel Lewit: We’re one and the same.

Steve Lewit: You guys are equals.

Gabriel Lewit: He has more money.

Steve Lewit: Oh, you bet he does.

Gabriel Lewit: He’s a very wealthy man.

Steve Lewit: Oh, extremely, yes.

Gabriel Lewit: All right.

Steve Lewit: What do you got today?

Gabriel Lewit: Well, you know what we got, we’re going to start off something a little less money focused. Our story here is all about, it’s not just about your money, it’s about your life, so we like to weave in financial topics of course. We also like to weave in non-financial things, things we think you might be interested in.

Steve Lewit: I’m excited about this one.

Gabriel Lewit: I know you are. In fact, this was your idea.

Steve Lewit: It was.

Gabriel Lewit: You said you were reading an article and you came across this. So we are going to talk about train trips.

Steve Lewit: Exactly.

Gabriel Lewit: Exciting train trips.

Steve Lewit: Yes. Something very few people actually think of. Of taking a train for a vacation.

Gabriel Lewit: Yes. Now, first thing that I thought of when, this is bad, when you brought this up is, well, the trains crash a lot.

Steve Lewit: No, they don’t. They do not crash a lot.

Gabriel Lewit: I’m laughing because I know it’s negative.

Steve Lewit: Mr. Negative.

Gabriel Lewit: But no, trains are, historically, they’re very, very, very, very safe, and so my point is there’s some very exciting destinations and I know I would love to go on a train. My son loves trains, Nathan. My daughters have not expressed as much interest in trains.

Steve Lewit: We should all go. I’ll venture forth with you and family on a train.

Gabriel Lewit: It would be fun. It’ll be very fun. So don’t let that discourage you from these very exciting destinations.

Steve Lewit: You mean don’t let you discourage them from these…

Gabriel Lewit: Well, maybe I’m trying to convince myself not to get discouraged, because these do sound a lot of fun.

Steve Lewit: Now I’m going to tell you something that you don’t know. When I was a kid, 14, 15, 16 years old-

Gabriel Lewit: The only mode of transportation was trains?

Steve Lewit: No, no, no. Listen to that.

Gabriel Lewit: I’m on a roll here this morning, I’m just kidding.

Steve Lewit: You are. So we lived in Queens at that time. We moved from the South Bronx to Queens and we lived in these row houses, but what the row houses had, they had a big basement. So I took the basement and I built an American flyer train thing, with four trains running around and mountains and trees and wires under. It was spectacular. And I’ve never told you I was a model railroad freak at that time.

Gabriel Lewit: I think that would be a lot of fun. The only problem I would have is where do you put that?

Steve Lewit: In the basement.

Gabriel Lewit: Well, we have no extra room in our basement to put a giant model train city,

Steve Lewit: It actually filled most of the basement and it was a permanent installation. In other words, you couldn’t take it down.

Gabriel Lewit: Did you, I guess, run the trains daily?

Steve Lewit: Yeah. I was always building or painting or building a mountain or adding a guy here or something there. You buy all of these accessories that have crossing gates and all kinds of things.

Gabriel Lewit: Well, we’re getting tiniest bit off-topic, but if you’ve ever been to the Botanical Gardens folks-

Steve Lewit: Fantastic.

Gabriel Lewit: … they have a little section in there. You got to pay extra for it.

Steve Lewit: Two bucks.

Gabriel Lewit: Well, I think it’s more than that now, but where they got a whole train thing.

Steve Lewit: It’s fantastic.

Gabriel Lewit: I mean, they put a lot of work into it. Kids love it.

Steve Lewit: You see, if I were retired, I’d take a job there as an engineer for their trains.

Gabriel Lewit: I’m sure you probably have to have actual train-

Steve Lewit: You probably do.

Gabriel Lewit: … engineering background for that or something.

Steve Lewit: Something.

Gabriel Lewit: Yeah. Okay. So without further ado-

Steve Lewit: So, what do we got here?

Gabriel Lewit: … let’s say you’re trying to plan your next exciting train trip, where would you want to go? We’re going to give you a couple options here based on the article we’ve got in front of us, dubbed, the 14 best train trips to take across America for breathtaking scenery. Okay, so it starts off saying, “Harry Potter isn’t the only one that gets to have fun on trains.”

Steve Lewit: Exactly.

Gabriel Lewit: You can too.

Steve Lewit: You can be a kid again.

Gabriel Lewit: Now, a couple of positive things. It’s more expensive. There’s sleeper trains, there’s passenger trains, there’s trains you can take your cars on, so let’s dive right in. So number one, is in fact the Amtrak Auto train. Okay, so basically if you’re taking your car along with you, you can pack your car on the Amtrak train.

Steve Lewit: Yes.

Gabriel Lewit: I didn’t even know this.

Steve Lewit: Yeah, there are actually a number of auto trains that I do know of, but I’ve never been on one and I’ve never taken an auto on one. But you can pick your destination, train there, and the trains are fairly luxurious. They have great meals, they have great cabins. They have different sleeping quarters that you can have, and they’re a lot of fun.

Gabriel Lewit: So, this one has pull down beds, lovely views of the East Coast. Delicious dinner and breakfast. I’m going to sell these to you folks, while we talk about them.

Steve Lewit: We’re getting a commission.

Gabriel Lewit: And it made this lady here that traveled it, said made her feel like she wasn’t losing a day of vacation due to travel.

Steve Lewit: Driving.

Gabriel Lewit: Driving, because when you’re driving, it’s a lot of work.

Steve Lewit: Yeah, if we were driving to Florida, it’s 24 hours, so it takes two days and you’re in the car just driving. Here, you can take a train to Florida, put your car on it. I guess it’s probably 12… Well, it’s probably, I don’t know how long.

Gabriel Lewit: I think most trains are longer than driving.

Steve Lewit: They’re longer than driving. Yeah, because they do make stops.

Gabriel Lewit: They make stops, yeah. If all you care about is speed-

Steve Lewit: Getting there.

Gabriel Lewit: Right, if all you care about is speed and the destination, not the journey, then this train may not be for you. But if you care about relaxing and bringing your car along with you, then the auto train might be your number one stop to wherever you’re going and you save money on the rental car.

Steve Lewit: Betcha. You bet.

Gabriel Lewit: Although it doesn’t say how much you have to pay to put your car on the train.

Steve Lewit: Not as much as a rental car.

Gabriel Lewit: Okay. Well, number two is America’s national parks with the Rocky Mountaineer train.

Steve Lewit: Yeah. Now I’ve heard of this train because I read articles about… There’s another thing you don’t know about me. I belong to this, what’s it called?

Gabriel Lewit: Do you have an engineer’s uniform at home that you just… With a little hat you wear around town?

Steve Lewit: I only wear it at home. No, I’m fascinated with trains. It’s something like I’m fascinated with airplanes too. I can fly around just to fly. But I’ve heard of this and in reading about it, you can see it’s an 11 day trip and you can see eight different destinations on this journey and your journey’s through the Rocky Mountains.

Gabriel Lewit: Make sure you sell this to me now.

Steve Lewit: Well, I don’t know how to do that.

Gabriel Lewit: Well, you got to put on your best announcer voice.

Steve Lewit: Okay. You’ll have a chance to explore Arches National Park, and there are tons of magnificent sandstone arches-

Gabriel Lewit: Okay, now we’re getting there.

Steve Lewit: … which are archaic in look and have history behind them. Canyonlands National Park, which has these rock columns that are very, very unusual and things you’ve never seen before. Native American paintings in there. Yellowstone National Park, of course, hot springs that you cannot go into, and geysers.

Gabriel Lewit: You don’t want to go into the hot springs or the geysers.

Steve Lewit: Or the geysers, either one. So that’s all included. If you want sightseeing tours, you can have it so you can park yourself in the train and let everybody else do the work. Get up, have meals, sleep, have fun, play cards, whatever you want to do. Look at the scenery and then take a view of each of these beautiful national parks, all for a price of…

Gabriel Lewit: We don’t know.

Steve Lewit: We don’t know.

Gabriel Lewit: Well folks you write in, let us know how you feel Steve did on that promo there. I’d say it was a good-

Steve Lewit: It was okay. It was okay.

Gabriel Lewit: I think we can try it again, okay.

Steve Lewit: I wasn’t ready for it.

Gabriel Lewit: All right, we’re going to do two more here. We won’t get through all 12, otherwise that’d be our whole show. So let me pick my next one here. Hold on folks. I’m just skipping one. I’m skipping one called the Grand Rail Experience, which takes you through Washington, Chicago, Seattle.

Steve Lewit: Yeah, you don’t want to do that.

Gabriel Lewit: No, not so much on that one.

Steve Lewit: It doesn’t sound so grand to me.

Gabriel Lewit: All right, let’s see here. Okay, I’m going to do the next one here.

Steve Lewit: Alaska.

Gabriel Lewit: Okay. Yes.

Steve Lewit: You’re going to do Alaska.

Gabriel Lewit: How do you know? So we’re going to talk here about the, Alaska, my accent there coming out, the Alaska Railroads Coastal Classic. Okay, now look at the views on this. My goodness.

Steve Lewit: I wish you could see this folks. It’s just magnificent.

Gabriel Lewit: The Alaska Railroad Coastal Classic departs from Anchorage and winds along the Turnagain arm. I didn’t know what that is. Before turning off into the back country wilderness and ending in Seward?

Steve Lewit: Seward.

Gabriel Lewit: Seward.

Steve Lewit: Seward.

Gabriel Lewit: It would help if I could pronounce these things. Look for the views of the steep Chugach range. I can’t pronounce it. I can’t speak to it eloquently, if I can’t pronounce it.

Steve Lewit: I’m not buying this trip.

Gabriel Lewit: The Chugach range, plummeting right into the ocean and the stunning shores of Resurrection Bay with wildlife sightings along the way, including beluga whales, sheep, bear and moose, and daily services available seasonally from mid-May through mid-September, and take a variety of tours in Seward-

Steve Lewit: Seward.

Gabriel Lewit: … like glacier treks or sled dog rides, before heading back to Anchorage.

Steve Lewit: Alaska is known as Seward’s Folly.

Gabriel Lewit: Oh yeah, Seward.

Steve Lewit: Seward-

Gabriel Lewit: I saw an extra A in there.

Steve Lewit: Was he President Seward? Because I believe he bought Alaska.

Gabriel Lewit: I don’t think there was a President Seward.

Steve Lewit: Can you look up who Seward was? Katie. Help us with our ignorance.

Gabriel Lewit: My goodness.

Steve Lewit: Everybody out there is saying, “You should know that.”

Gabriel Lewit: I don’t think anybody’s saying that.

Steve Lewit: But he bought Alaska, and it was called Seward’s Folly. I remember that from somewhere.

Gabriel Lewit: Okay. Well, William H. Seward was named in honor of… He was president… Okay.

Steve Lewit: Oh, he was secretary of-

Gabriel Lewit: Sorry. Seward was named after William H. Seward. He was the President Abraham Lincoln’s Secretary of State.

Steve Lewit: Right. And he bought Alaska-

Gabriel Lewit: Alaska from Russia.

Steve Lewit: … and everyone said, “Are you crazy?”

Gabriel Lewit: I bet you Russia would probably take it back.

Steve Lewit: In an instant. All those oil fields are useless.

Gabriel Lewit: Right. You pick the last one, because I totally botched that one, but it does look really cool. It looks really cool.

Steve Lewit: Okay, my last one is the Grand Canyon Railway.

Gabriel Lewit: This is why we’re not TV commercial hosts.

Steve Lewit: No, I don’t want to be a commercial host.

Gabriel Lewit: Oh, by the way, there’s a Napa Valley wine train. That sounds good.

Steve Lewit: Oh, that sounds good too.

Gabriel Lewit: Yeah, but we can’t talk about them all.

Steve Lewit: Which one do you want to do?

Gabriel Lewit: You go, it’s your

Steve Lewit: Pick. Okay. This trip recreates the historic voyage to the Grand Canyon by rail. It even has old engines in here. Do you see that? That blow smoke and everything. That’s really, really cool. Which opened to the first passengers in 1901. Passengers board the Grand Canyon Railway depart from Williams Depot and make their way to the Grand Canyon Depot, which is the last operating log depot in the country. The depot was located right in the middle of the National Park’s Historic District, near the storied El Tovar Hotel, and nearly 200 yards from the edge of the Canyon south rim. Have you ever been there?

Gabriel Lewit: I have not.

Steve Lewit: Oh gosh.

Gabriel Lewit: It’s on my list to go to.

Steve Lewit: It is just amazing. In all, the trip covers 65 miles of scenic terrain with unmatched views and photo opportunities.

Gabriel Lewit: See, you didn’t have anything hard to pronounce in that one. Lucky you. So folks, that’s all we’re going to cover here. If you want the full article, let us know. We’ll send it to you. There’s more. I think we only covered six or seven here, but the idea here is, as you think about things to do, how to enjoy your retirement, what to do on your next vacation, don’t ignore the backbone of our country, the railways.

Steve Lewit: There’s one that goes right along the Pacific Ocean. It’s right on the ocean.

Gabriel Lewit: You can stop and go surfing. You can do all sorts of different things, so lots of cool trips you can take via train if you feel so inclined. If you have interest in it, don’t call us. I’d probably go to Google.

Steve Lewit: Yeah, I think so.

Gabriel Lewit: Then we can help you figure out how to finance it.

Steve Lewit: We are not, obviously, aficionados on this.

Gabriel Lewit: Yes. Okay. Well, hopefully you found that interesting. We do have some financial topics to talk to you about today, now that we’ve gotten through our railroad track excursions.

Steve Lewit: Yes.

Gabriel Lewit: Okay.

Steve Lewit: That was fun.

Gabriel Lewit: Yeah. I think so too. Hopefully you thought so too, folks. So we are going to talk about some, and hopefully we’ll have time to get to them all, we may or may not, but universal retirement or financial truths. And these are things that, obviously there are things that are unique to every person that is out there, but there are some things that you can say or state that, generally speaking, apply to just about everybody. And we’re going to call those universal financial truths or retirement truths. Sometimes we think that not everybody knows about these, even though they seem like they should be really obvious.

Steve Lewit: Or they know about them and don’t think they’re truths. Like, it’s not true for me.

Gabriel Lewit: So, we thought it’d be good to talk about some of these and why we believe that they’re retirement truths that apply just about to everybody, because these are really foundational principles that can become very important and very helpful when it gets into your retirement and financial plan.

Steve Lewit: They organize your whole retirement.

Gabriel Lewit: So, I’m going to start with one, which is the foundation here, and I’m going to use it in two different spots, but everybody in this world, we’re all going to age. Would you agree with that statement?

Steve Lewit: Well, the alternative is… Yeah, I’d say if you’re breathing, you’re going to age. Yes.

Gabriel Lewit: Yeah, you’re not going to get younger. We’re going to age.

Steve Lewit: We’re going to age. That’s

Gabriel Lewit: True. And so here’s what that means to me. I’m going to use it in two parts. Number one, it means at some point you’re going to reach a retirement age.

Steve Lewit: Maybe.

Gabriel Lewit: At some point.

Steve Lewit: Yeah, at some point-

Gabriel Lewit: At some point.

Steve Lewit: … you’re going to not be able to work. And for some even by choice or you just can’t.

Gabriel Lewit: Yep. So whether or not you like it, at some point, you’re going to stop working and you’ve got to have a plan in place for those years eventually, because the universal truth is you’re going to reach that point at some point.

Steve Lewit: Especially if you’re not working because of health issues. So the truth is, as you get older, sooner or later, you’re going to have health issues unless you just-

Gabriel Lewit: Have well, and that’s the part two of that universal truth, which is yes, at some point, as you continue to age, age, especially higher ages, tends to bring with it health issues. Long-term care needs someone to look after you and help you when you get to a point where you need help taking care of yourself. These things tend to be, at some point, inevitable with time as you age and so it may not be helpful to pull the blinders down on these because whether you like it or not, you’re going to age more and more every year.

Steve Lewit: Yeah. It’s something that many people do not want to face aging. I know a couple of people who are aging so gracefully. It’s like, “Yeah, I’m getting older and I’ve got this wrong with me, and that’s what happens when you’re older,” and they’re pretty happy. It’s like, I don’t want to age at all. It’s like, wow. Yeah, so I’ll fight all the way until the end. But age’s age, and sometimes like Aaron Rogers, you get older and something happens, and the question is, who’s going to foot the bill? Will you become dependent on your kids or the family? And the truth is you’re going to age. Yep.

Gabriel Lewit: Yep. Yep. So with that in mind, that sets the foundation for the next universal truth which is, you might argue with me on this one, we’ll see, everybody has at this current moment, some form of a plan.

Steve Lewit: Yes. No, I won’t argue with you.

Gabriel Lewit: You know what I’m going to say about this though, right?

Steve Lewit: I do.

Gabriel Lewit: What do you think?

Steve Lewit: Everybody has a plan, and one of the plans might be not to have a plan.

Gabriel Lewit: One of the plans might be just to wing it.

Steve Lewit: To wing it. Yeah. See, people think they wing it, they say, “I don’t have a plan.” It’s like, “No, you got a plan. It’s a wing it plan.”

Gabriel Lewit: Your plan is, I’m going to worry about those details when I get there-

Steve Lewit: When I get there.

Gabriel Lewit: … and take the consequences of whatever that may be, good or bad, and that is my plan. Now, this is interesting because when I go on vacations, sometimes I like to plan ahead, and then other times, and in my head I’m like, “Eh, I don’t want to think about what I want to do. I don’t want to plan.”

Steve Lewit: I just want to get there.

Gabriel Lewit: I just want to get there and go and do and figure it out, and that actually is in fact my plan then.

Steve Lewit: Yes.

Gabriel Lewit: My plan is to get there and wing it.

Steve Lewit: Get there and wing it.

Gabriel Lewit: And sometimes that works out well, and sometimes it’s created problems, where I’m like, “Oh-”

Steve Lewit: I wish I had planned that.

Gabriel Lewit: “… I should have planned this out more. There’s so much stuff to do here, and I would’ve rather have done X, Y or Z, and I didn’t plan it out,” and then I look back with a little bit of regret, but that’s a vacation. You can redo vacations. Looking back with regret on your retirement or your finances is a little bit harder to undo.

Steve Lewit: Well, people say, “I’ll cross that bridge when I come to it,” and the problem with that is that there may not be a bridge there to cross when you come to it, so stuck. There are no redoes in retirement. You just don’t have the time on your side.

Gabriel Lewit: And that’s part of why we sometimes, we’ve said it before on some show, I don’t know… What episode are we up to now, Katie? 150? Wow.

Steve Lewit: We’ve done this 150 times.

Gabriel Lewit: So somewhere on one of the last 150 shows, I’m fairly certain we said that more people spend time planning for vacations than they do their retirement.

Steve Lewit: Oh, absolutely.

Gabriel Lewit: Which is true. But the ramifications of not planning for a vacation though are much smaller than not planning for retirement.

Steve Lewit: Sure. I think everybody gets that.

Gabriel Lewit: Okay.

Steve Lewit: And yet everybody gets that, and yet people are reticent often to plan about taking care of their health in the future.

Gabriel Lewit: Yeah. Well, and related to this is another universal truth, which is everybody has an advisor. I know you say this.

Steve Lewit: I say this all the time.

Gabriel Lewit: Yeah, you do.

Steve Lewit: I ask people at seminars. I say, “Okay, everybody here who has an advisor, please raise your hand,” and 5 or 6 out of 20, or 10 out of 20, will raise the hand. I say, “No, that’s the wrong answer.”

Gabriel Lewit: I’ve seen you do this.

Steve Lewit: Yeah. “Guys, that’s the wrong answer. Let me try that again, everybody…” And you find in the same 10, raise their hand.

Gabriel Lewit: They look stumped, yeah.

Steve Lewit: And they look stumped. “What is this guy talking about?” Well, he may not hire an advisor, if you don’t, then you are your own advisor. So everybody has an advisor and it might be you.

Gabriel Lewit: Yeah. Or your advisor might be Google.

Steve Lewit: Yes.

Gabriel Lewit: Your advisor might be a book, but at the end of the day, those go back into your head if you do things on your own and you’ve got to advise yourself on your own choices. So hence, everybody does have an advisor. It’s either somebody else or it is yourself.

Steve Lewit: Yes. That is absolutely true. And if it’s yourself especially, or even if you hire somebody, you have to ask yourself, “What is the quality of the advice that I’m getting?” So for example, we do a lot of tax planning folks, you know that, and many advisors don’t. So the question is, people will say, “Well, I have to talk to my advisor about that.” So I say, “Well, shouldn’t it be the other way? Shouldn’t your advisor be talking to you about that?” And then if you’re your own advisor and not doing tax plan, you have to ask yourself, “Why isn’t my self-advisor advising me on something that creates an enormous amount of wealth if you do it the right way?”

Gabriel Lewit: Well, it’s because sometimes you don’t know what you don’t know.

Steve Lewit: Not sometimes.

Gabriel Lewit: Many times.

Steve Lewit: I think well, a lot of times.

Gabriel Lewit: I think that’s the flaw sometimes with being your own advisor is, sure the things a lot about, you can advise yourself on, but it’s the things you don’t know about that you don’t even think to bring up to yourself because you don’t know about them. That is sometimes the biggest flaw here with that. But that is the universal truth that everyone has-

Steve Lewit: Everybody has an advisor. Yes.

Gabriel Lewit: Okay. Let’s see. There’s a bunch here on the list. Let me pick my next favorite. Do you have a favorite? You can-

Steve Lewit: No, I was waiting on you.

Gabriel Lewit: Yeah, I don’t want to steal all the fun. You can pick one if you’d like.

Steve Lewit: Emotions can be an investor’s worst enemy.

Gabriel Lewit: Yes. Do you want to talk about that?

Steve Lewit: Yes. So emotions drive action. Let’s start there. So you can act in two ways. You can be emotional and react, or you can act from reason and think things through and make decisions. But reactions through emotions, you never know what you’re going to get. So the market goes down and your reaction is, “Hey, I don’t like losing money. I’m going to sell.” Well, emotionally that might feel better, but intellectually it’s the worst decision you could make, because if you stay in the market, eventually it’s going to recover. It has the history of the market. So when emotions drive decisions, those are really reactions and reactions don’t have thought in it, or consistency or intelligence in it. They’re just reactions.

Gabriel Lewit: Well, that’s the idea. If you don’t have a really concrete philosophy that guides, you tend to be overwhelmed by your emotions and that can lead your plan sometimes, in many cases, very astray, right? Because you abandon the plan because of emotions, and that is sometimes not the right choice to do.

Steve Lewit: Yeah. Well, emotions are just energy. It doesn’t have thinking inside of them. They’re just energy so it can drive you to do things that you wouldn’t normally do if you were not emotional.

Gabriel Lewit: Yep. Yep. Now related to that, I think, is the next universal truth here, which is you cannot consistently time the stock market successfully.

Steve Lewit: Yeah. I don’t get why people don’t get that.

Gabriel Lewit: A lot of people get it, but a lot of people don’t.

Steve Lewit: People don’t get it. I just don’t get it.

Gabriel Lewit: Well, here’s what’s funny about this. Okay, so notice how we phrase that. Nobody can consistently time or beat the stock market. Consistently was the key word there, successfully. That’s because you hear stories all the time. “Well, I bought Apple and I bought it at just the right time, and I quadrupled my money and I think I can find the next one.”

Well, the problem is, you might find the needle in the haystack just right, but was that skill or was that luck? And I think there’s, it’s called, what’s the bias name? It’s something where you feel like you’re smarter than you are because you’ve made a good decision in the past or something like that. But the point is, just because you’ve done it once, your brain then thinks, “I can do this every time.” So what you do is you have this higher sense of confidence than you probably should, and then you’d go to try to find the next big stock and you lose big.

So ultimately what happens is you make maybe one or two good guesses and get lucky and then you have a lot of losses along the way because nobody can just find the one winner, sell at the right time, find the next winner, sell at the perfect time, find the next winner, sell at the perfect time. Obviously, just me saying that people will be like, “Yeah, that’s impossible.” And that’s what happens is eventually that loser, that loser pick or choice, or timing decision, catches up to you and you lose big, and it wipes out all the gains that you made.

Steve Lewit: I just got an email, this guy, again, a guy claiming, “Well, I caught the 2008, I was on top of 2001 and 2, I saw the 2022 coming.” It’s like, “Really? Then why are you selling a system? You’re so wealthy, if you did that, and you can time the market like that, why are you in this business selling a system?” Because it’s not true. They might’ve gotten something right, like you said, because every dog finds a bone sooner or later.

Gabriel Lewit: So, it’s very similar to saying, “Look, if every day you woke up and said, ‘I think it’s going to rain today,’ eventually you’re going to wake up and it’s going to be a rainy day.”

Steve Lewit: Yeah. Broken clock is right two times a day.

Gabriel Lewit: But that doesn’t mean you can predict the future. So again, that’s one of the truths. Everybody, I think, fundamentally gets that but what takes people the wrong way is greed, right? It’s this desire to do better, earn more with less work or less… Quicker, faster.

Steve Lewit: Or thinking, “I’m cleverer,” or “I’ve got a secret nobody else has seen.” Billions of people have tried to do this and they all have failed at some point.

Gabriel Lewit: Yep, exactly. So this brings us to the next item semi related to this, which I think, some people don’t like to hear, but is also, if you were to ask any financial advisor, CFP, anybody that knows their salt, any charter financial analyst that’s out there just about in the whole world, they’d say diversification is essential for reducing risk. And that is what diversification does. It’s such a fundamental point, and it’s interesting because I do reviews with clients and we talk about, “Hey, you have, as an example, 10 different asset classes, and let’s say each one was at 10% of your portfolio. One of those was the top performer in the last year, and one of them was the worst performer.” Inevitably, I always have a client or two that maybe is newer and says, “Well, why didn’t we put more in that one, and-

Steve Lewit: Sell the other one.

Gabriel Lewit: … the good one. Why didn’t we put…” It goes back to what we just said, you can’t pick just the good ones always. And diversification is that way that you diversify to reduce risk first and foremost, and it does win in the long run. Okay.

Steve Lewit: Yeah. So it’s a matter of math. It’s a mathematical truth. If you diversify, if you have more numbers, your averages, your volatility, your average is within a more consistent framework, than if you just have one stock or one asset class.

Gabriel Lewit: It may not be as exciting.

Steve Lewit: It’s not exciting at all.

Gabriel Lewit: But it works, and it wins in the long run, okay. Assuming you have the right mix of diversification.

Steve Lewit: And there’s plenty, plenty independent research that proves that and yet again, that’s one of the things I don’t understand that people turn their nose up. I hate to generalize people. Some people turn their nose up and say, “No, no. I can do a four asset classes or three asset classes.”

Gabriel Lewit: Yeah. So we’re running low on time here. Let’s pick one more for today. I’m going to end with, nobody knows how long they’re going to live. Okay.

Steve Lewit: Okay. I was looking at it another one but that’s fine.

Gabriel Lewit: Well, I’ll do this one quick and then you can end with yours. My point there is you should always plan your finances as if you might live to 90, 95, just in case, because it does happen to people. If you plan your finances to 80, and then you are a very spry and healthy 80 year old, you might be in trouble financially.

Steve Lewit: Oh my gosh. We’ve been doing this a long time. I’ve been doing this 30 years. You’ve been doing this almost 19 years. I have clients that came in 20 years ago, and I looked at them and I said, these people will never make it until the end of the year. And guess what? They’re still coming in. So you just don’t know. If you die young, finances don’t matter if you die, but if you live a long life, finances become really, really important.

Gabriel Lewit: So hence why we plan. Okay take this-

Steve Lewit: I used up our time.

Gabriel Lewit: You do your final one, then we’ll end there.

Steve Lewit: I’m going to give my tax implications matter pitch, because taxes are where-

Gabriel Lewit: Give the short version, not the long one.

Steve Lewit: The short version is very simple. The biggest wealth producer is not the market, it’s tax planning. If you don’t do tax planning, the government will take 30, 40, 50% of your hard-earned money. You got to do tax planning, especially if you think that taxes will go up in the future, which is what I think.

Gabriel Lewit: Yep. Yep, yep. Well, that’s our show for you folks. Get your train tickets ready, pack your bags.

Steve Lewit: Toot-toot.

Gabriel Lewit: Choo-choo. If you have questions on the money part of today, how to fund your train travels, call us, or if you have any questions on your retirement planning, we’re here to help. Give us a buzz. Hold on. Rewind. 847 499 3330. I almost gave my cell phone there for a second. Or go to sglfinancial.com or email us info@sglfinancial.com. Thanks for tuning in. We will see you on the next show.

Steve Lewit: Stay well everybody.

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.

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