S4 E20 - Stock Myth Busting

Here is the last episode of Broke to Oak. In season five, I'm going to bust some myths about stocks. And then Brittany hits me with a banger question at the very end of the episode. Stay tuned. Find out what it is.

Brit.

Let's do it.

Here it is. It's the last one.

Last episode for season four.

We love you all so much.

Can't wait to see season five.

Thank you for being fans. Season five is going to be be the jam. We're gonna have babies run around and so many babies. All kinds of cool stuff's gonna be happening. I want to discuss some of the myths of stocks for a moment. Big, huge misconceptions out there about the stock market. And one of my favorite quotes recently goes like this. Mark Cuban said, diversification is for people who do not like to study. Mm.

Wow.

I like that quote because there's a really, really popular term. Don't put all of your eggs in one basket.

Right?

Right. And a lot of people relate that to the stock market. Well, one of my myths that I'm gonna bust in this episode is essentially what if the basket can't break or you have a bunch of chickens, meaning you could easily go back and get more eggs the next day. It's all right to break those eggs right then and there. Or maybe have some in the refrigerator. Right. You already got some stored up. It is okay to invest in extremely, extremely large companies and not have a massive diversification.

Right.

There are large groups of individuals right now that'll probably have a hundred thousand dollars or less in their IRAs, 401k stock accounts, but they have 1800 different stocks.

Right.

Way over, diversified. And that portfolio is definitely going to be safe, but it's also not going to have any explosive growth opportunities either if you're investing into baskets of something called mutual funds. Right, people. Some people love mutual funds out there. This is all again, my opinion and my advice. I'm not a financial advisor by any means, but I can tell you this. They're not exciting. Most mutual funds are gonna be growing somewhere between 2 and 6%.

Gosh. That's losing to inflation right now.

Correct.

Yikes.

Yeah. And we just had a conversation with a beautiful woman at what was that life changing summit that. Just the abundance of it.

Yes.

How I get conversation with a wonderful woman at dinner and she mentioned that her child received a lump sum of money when they were younger. They put it into a plan with a financial advisor. That particular financial advisor put it into a mutual fund. A very, very safe basket of Equity investments. And it has grown 23% in 15 years.

Total of 23%. Not 23% a year, a total of 23%. So what is that? Annually?

One and a half. Bad. Real bad. Now keep this in mind for those who are listening. And I might get some hate on this. And it's okay. I've never heard this phrase out loud. Not once. My financial advisor got me really rich. I've never heard it. A lot of people build wealth and then they will give that wealth to a money manager or a financial advisor, which is fine, that's all good. But that is because you have a belief. You have a limiting belief. You have a belief that it takes too much time to invest on my own. And I don't have any time to invest my own money, do my own research, learn my skills myself. No one will care more about your money than you do.

Right.

First and foremost. And when you're talking about trading, another common myth is you do not need to be a math wizard. Right? Most people feel like, oh, man, in order to be in socks, I got to be crazy good with numbers and math. Yes, you will need to master second grade math for sure.

Oh, that's tough.

It's going to be hard. There's going to be decimals, there's these percentages.

Oh, man.

Division, multiplication, addition, subtraction, that's it. Excel spreadsheet calculators, and you're good to go. There's nothing complex. There's no wild formulas. Don't let the word algorithm or artificial intelligence scare you.

Nice.

I do personally believe that long term investing is for everyone. Everyone should long term invest active trading, not for everyone. Everyone should try it out. Everyone should learn it, they should study it. They should spend 1, 2 years getting an idea of what it's like, how it moves, Knowing the buttons, knowing the math behind active investing, knowing the cash flow behind active investing. There's a really popular stat out there that 90% of millionaires are made through real estate. 100% of billionaires are made through equities. Now, when I say equities, I do mean equities of all kinds. But the billionaires, the extremely wealthy individuals, is because they have ownership of companies. And those companies issue shares and stocks, and those billionaires own those shares of those stocks. It can be private, right? It can be public, that's okay. But it's through equities. And equities, of course, is just another super cool fancy term for shares or for stocks. And I just think it's a strong flex that all the billionaires, the richest people in the world, they got their. The top 10 richest humans on this planet.

Yeah.

From stocks. Yeah. Simple as that.

Yeah.

Because they're scalable and they're very, very fast. They're extremely liquid in there. Everyone can have access to them and they can split. Right. So just like in real estate, it's harder to take one house and, oh, all of a sudden now that house is four houses, and then that four houses is now 16 houses. But stocks, you could have stock splits, which are an incredible wealth tool. And then you also have dividends in stocks. So a lot of people don't think that stocks is very passive. Dividends are an incredible passive wealth tool. Now, granted, they're not fantastic. So a myth to dispel is, oh, I could just buy stocks with dividends and I'm good to go.

Right.

With millions of dollars. Right. Because most dividends are paying somewhere between like one and a half to 3% a year.

Right.

Now, what is cool is you're going to get the dividend appreciation on the overall portfolio itself. Right. So if you're. You have $100,000 in Apple and Apple doubles now you have $200,000 of Apple, you're still going to be getting your dividends on the $200,000 worth of your value of your stocks. That being the case, most dividends are somewhere around that 3% range. And if you're going to be living off of that, let's say that's a $90,000 income per year, you're going to need at least $3 million into the markets.

Right?

Right. To get that $90,000, I mean, that's. That's okay. Not a big deal. But that's a decent chunk of money for a lot of individuals. So that being said, if you have the fear of investing in the market, you don't understand it. You don't know how it works. It's just because your parents probably didn't teach you right. The market's been around for 120 years.

It's not very long. No, it sounds like a long time, but people's last name is Smith. For what reason?

Blacksmiths. Yeah.

How long has that been around? People have these skills and trades that they pass along to their children and their generations for centuries. And this has been 120 years.

That's it.

Yeah. Only that's not very long.

Real estate's been around forever.

Forever.

People have always need a place to live. And yes, instruments have changed and things have grown, but for me personally, I've Never liked mutual funds. I don't like the returns. I don't want to put an aggressive amount of money into something that's going to not aggressively perform.

Right. My personal opinion, that's also where we are in life.

Yeah.

Too. You know, we are still young.

Sure.

Still look young at least.

Well, kind of for me.

You're getting gray, man. You're getting gray.

Gray.

Let's look at this before and after season one to four.

Look at it. It's a massive change.

Right.

And you still look amazing.

Great. You still look great. Hey, thanks.

Thanks for adding a tea.

You know.

In wealth, it's about understanding, it's about studying, it's about wisdom, it's about enlightenment, it's about insight. Understand your vehicle, understand your path. Know the ins and outs of whatever asset class that you're experiencing. Because when you're talking about stocks now, you're talking about a whole incredible game that's just as massive as real estate. Brittany made the amazing metaphor and example of doctors. Right. If you want to go be a doctor, you gotta pick. If you want to go in real estate, you gotta pick which asset class. And with stocks, granted, the deals are the easiest part.

Right.

They're everywhere, all the time, every day. But you still are and can focus on certain sectors.

Right?

Right. You can focus on certain strategies. So you could be someone that day trades. You could be someone that shorts the market, meaning you primarily look to make money as the market goes down. As I mentioned earlier, I believe everyone should learn the active trading mechanisms and you're going to find out if that's right for you or not. It might not be and that's perfectly okay. But long term investing is for everyone. Everyone should be a long term investor because there are instruments that make it so much easier for you. Insurance. You can buy insurance on your stocks, ladies and gentlemen. Right.

Did you not know you can get insurance that makes sure you can't lose?

You can. Yes. You could build these positions where it's just simple math. If you buy a stock at 100 and at the exact same time you buy the stock at 100, you buy insurance that starts protecting your position at 95, that insurance costs $5. So if the insurance costs 5, just like in real estate, and you buy a home or stock in this example at 100, it needs to go above 105 for you to start making money.

Right.

Just like in real estate, when you were sitting there and you're doing all of your numbers, you're factoring in. You mentioned that 30% right. That point seven, the 30%, your profits, but the agent fees, the closing cost, all those are baked in there. It's the exact same thing with stocks. These are simple, easy math. Most true wealth is all boiled down to extremely basic math. It gets repeated and compounded over time and over and over. One of the biggest questions I get when I'm talking about stocks and investing is when to sell.

One of my mentors, you might have heard of him, his name is Steve Baron. Steve Baron told me that he became a billionaire by selling too early too often.

Yeah, love that.

Yeah, it's a really cool quote. And by what too early too often for him means about 30%, because he will. And he realized that almost every single stock that you notice, look at, track or follow. Apple, Pfizer, Verizon, AT&T, Proctor and Gamble, Johnson Johnson, Costco, Walmart, Bristol Myers, Eli Lilly, Lulu, and Chipotle. Almost all these Companies will move 20 to 30% once or twice per year.

Wow.

Up. They'll move up 20 to 30%. So they go up, they go down, they go up, they go down, they go up, they go down. So he said, all right, well, what if I get into a stock that I'm extremely confident is going to go higher? I buy it and it goes up 20% and I sell it, and then I just repeat that process over and over and over with some really strong basket of stocks with some really powerful companies. That is a very, very powerful wealth game. Because as you mentioned two or three episodes ago, when you're playing the game cash flow, there's a certain portion in there where you're betting on stocks. The stocks make you more money. They make your cash reserves go up. You take that cash reserves, you start buying, well, in the game, assets, you're buying, houses, you're buying potentially bad things as well. If you get that card.

And yeah, the do, dad.

Yeah, you got to get some. The game needs to be revitalized a little bit with some of the new age, new pricing and all that kind of fun stuff. But you take stocks, you make money with stocks, then you take that cash, since that cash flow can be extremely fast, extremely easy, very simple. And then you go buy some assets. Those assets can be rental properties. We have already discussed in here wealth. We've already talked about what you can do to create your cash in real estate. We talked about how to build wealth in real estate trading. And the stock market is so similar to real estate. There are similarities that are so obvious. Yeah, it's not only me and you but so many other people. For those who are listening, check it.

Out, check it out.

Go learn, Go study. Books, courses. I got programs. They're free.

They're free.

Wait, just like this podcast.

Oh, man, you're giving it away?

Giving it away.

Giving it away. You must act in abundance or something. Like, there's more than enough to go around to teach all these people.

It's one of my favorite definitions. Right?

Amazing.

There's more than enough.

There's more than enough, guys.

It's okay. It's available. It's opportunistic. Abundance is the force that creates and provides all opportunities. And it's been an absolute honor and privilege to spend time with each and every one of you fantastic, beautiful listeners. I'm sure that you took tons of notes as you were driving, as you were listening. One of our bigger asks is, play this for your kids. Put on. Have them see you learn. Have them see you study. Learn with them, Ask questions with them. Get them to ask you questions. Pour into them. Because I think learning should be a group environment, should be a family environment, should be something that you all do together. And this podcast has been an absolute honor and privilege, Brit. So I want to say thank you. Thank you for not only allowing me to be here.

So good.

But just to experience your gift, your knowledge, your energy, your wisdom, your vitality.

Thank you. I've got a book full of notes on all my stuff that I've already learned from you. But I've got a question for you.

Okay, hit me.

If you have one thing you want to leave with our listeners until next season, what will that be?

One thing to leave our listeners with until season five is going to be God is love.

Ooh.

That's been my repetition over and over and over for me recently.

That's really good.

Yeah. For the past year. Just to remind myself of when you're stepping into fear, you're not stepping into God. You're not stepping into divinity. You're stepping into your own self, your own beliefs, your own thoughts. Because if you act in every aspect of love, love heals all, conquers all. It's all knowing and all seeing if you can be the best reflection of love in your life. It'll become easier, you'll become richer, you'll become happier. Every aspect of your life will become more fulfilled and more happy.

Love that.

What about you, Brit? What's one thing you're going to leave all of our listeners?

I could leave one thing with all of you. It would be the obstacle is for your expansion and everything that you are probably labeling a problem in your life today is probably actually a blessing and you just don't see it yet. So speak life over everything. Understand that God is love, the universe is kind.

Everything is working together for you. Never curse the past or the path because it's all coming together to answer that prayer that you prayed and those requests of your heart, those desires that were placed there from when you were just a child. He knows like it knows it's there for a reason. It's part of your destiny. So again.

I look back on my life. All the things I labeled as problems and obstacles were always the greatest blessing of my life. So when you view it that way, it helps you to not get lost in the pain, to not get upset, to not suffer quite as much. Because you recognize. I may not know now, but in the fullness of time, I will understand. That's what we got for you people.

That's it. That's all.

We love you. Make good choices.

May the force for good be with you all.

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