Alex Shahidi: How to Build a ‘Truly Diversified Portfolio’

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Hello and welcome to Barron's The Way Forward Podcast. I'm Greg Bartolis, and my special guest is Alex Shahidi, co-CIO of Evoke Advisors and host of the Insightful Investor Podcast. Today, we're going to be discussing the markets, what he sees ahead, and where investors can find opportunity. Welcome to the podcast.

Thanks for having me. Excited to be here.

Excellent. Well, I'm genuinely excited to have you on for a number of reasons, but Tell us first a little about Evoque, what you guys do, and then I wanna talk a little about your podcast and then jump into untangling the markets.

Well, Evoque is a $28 billion RIA based in Los Angeles. I'm one of the co-CIOs. We started our firm in 2019, and it was 3 large advisory teams coming together to form the organization. We've added a lot of people and services since then. We finished a large merger late last year, so, We went from about 100 people to about 700 people now and almost $70 billion in assets. So we're very excited to take on the next chapter.

Excellent. And you're the host of the Insightful Investor podcast. And frankly, it wasn't on my radar until somewhat recently. And when I learned of it, it was a bit of an epiphany. I said, wow, this is really fantastic. So it runs weekly. You interview, um, investing, not all luminaries, but heavyweights, impressive people. And you go really deep on a variety of matters related to the markets. And I highly recommend it. So it's really great. So I'm definitely excited to untangle the markets right now. There's going to be a delay from when we're recording right now. It's today's March 25th. And that's just as a reference point. Hopefully this will be airing soon enough. So Let me— it goes without saying that with the war in the Middle East, oil prices elevated, uncertainty extremely high, stocks, most indexes down year to date. Let's, let's pick things apart. So let me hand it to you. I want to hear what you're seeing, hearing, and then I'll add some follow-up questions and take it from there.

Well, there's a lot to cover.

Yes.

In general, I'll start high level and work my way down.

Yeah.

In general, it seems that we're in an environment of great uncertainty. And I think in general, things are uncertain all the time, but it seems elevated today and it's the big forces at play. So geopolitics at a high level, inflation uncertainty for decades. Inflation was low and stable. We had COVID and then we had the spike. And even since then, inflation's been above target for 5 years almost. And there's a lot of uncertainty going forward. It's a hot topic today, but there are a lot of structural changes that may change the picture of inflation for a long time. So that is a, that's, and that's a big deal because it leads to what it means to be diversified when inflation is uncertain and potentially volatile. Growth is uncertain. People thought we were going to have a recession after '22. We didn't. We've had a very long expansion. Where's that going to go? Tough to know. The impact of AI, a transformative technology. What is the impact near-term? What is the impact long-term on growth, on inflation, unemployment? There's a lot of— and each of these individually is a massive factor and they're all happening at the same time. And You can have a guess as to how these things will transpire. It's an even tougher guess as to how it'll net out. And so my general sense is wide range of potential outcomes, greater risk of extreme outcomes as it relates to growth, inflation, interest rates, all the really important things. And so the, the, I think you can approach it one of two ways. You can try to guess what it's going to be. You could get it right, or you could be almost the opposite of what your guess is. Or what I think is more sensible is to recognize the uncertainty. You can try to have a view, but don't bet it all on that view coming to fruition and build a truly diversified portfolio. And I think there's a lot of misunderstanding as to what that really means. So that's generally how I think about it.

To that point of a truly diversified portfolio, I recommend investors look at episode 47, where you talk about 4 biggest mistakes that investors make. And, and, and One of them, which might seem self-evident, of don't put all your eggs in one basket, however, runs much more deep and much more profoundly. And you talk about on the podcast, a lunch that you had with a fund manager. He ran, he had a long career, I think 30 years. He did well and he thought it was properly balanced and et cetera. Politely beg to differ. Tell us a little about that.

Yeah, I think it is. It is. To me, it was very interesting. So there is a notion that a 60/40 portfolio is, quote unquote, balanced. 60% in stocks, 40% in bonds. They're not really correlated to one another. It seems like a relatively reasonable concept. And so I was having lunch with this portfolio manager. He had retired. He'd been managing money for 30 years, really successful. And I asked them a very simple question. I said, just out of curiosity, why do you call it a balanced fund if it's not balanced? And he said, what do you mean? Everybody knows that it's a balanced portfolio. This is 60/40, this is the common knowledge. And I said, but 60/40 is not that diversified and you can mathematically prove it. And I said, what do you think the correlation of a 60/40 portfolio is to 100% stock portfolio? And he said, oh, you know, I've never really looked at that, even though that's what he did for a living for 30 years. And he said, it's probably less than 60%. And I said, it's almost 100%. It's like 98%. And he said, that can't be true. And I explained, I said, well, conceptually, it's easily understandable. You have 60% of the portfolio in something very volatile, 40% in something that's not very volatile, and you're overweighting the more volatile asset. So directionally, it's gonna drive your success or failure. And he said, okay, that kind of makes sense. I never thought about it that way. And one thing that struck me is, I think it's very common in our industry, people put their heads down, they work hard, and they take as an assumption what everybody else believes to be true, rather than being an independent thinker, zooming out and saying, are these things actually true? And testing it yourself. And so I think it's easy to get caught up and start your argument in terms of where everybody else starts, rather than challenging those assumptions. And so this was a 5-minute conversation, And he said, you know, I hope what you're saying is not true because then I feel really bad about the 30-year career that I had. And I felt really good about it until you brought that up. And I said, well, I hate to break the news, but why don't you go home and check yourself? You can run an Excel spreadsheet and you can check. And he called me the next day and he said, you know, I checked the math. You're 100% right. I'm embarrassed. And I'm surprised that nobody thought of something so simple. You know, oftentimes what I find is the simplest things are the ones that are misunderstood because people look past that and they're focused on more of the details and execution rather than looking at the basic assumptions. And because investing can be so counterintuitive, there are so many things that are widely misunderstood, underappreciated, and oftentimes counterintuitive. And that's the podcast that I do. It's focused on those those topics. And so that's why one of the episodes focused on that. Yeah.

So for investors today and their portfolios, so what does this mean in terms of portfolio construction, perhaps adding uncorrelated assets, or just tell me more there?

Yeah, it is probably the most important thing and it's probably the thing that is the least well understood or appreciated. To think about diversification, you have to think about where do returns come from? Okay, it's not just correlation. Correlation is not a stable measure. It's just the byproduct of the environment and how two assets went up and down together or the opposite. So, for example, very simply, the bond market and the stock market on average are zero correlated. But in the 1970s, when inflation was a big problem, they have the same bias to inflation. They do better when inflation surprises to the downside. Those two assets were highly correlated. In the 2000s, inflation didn't move, but growth was all over the place. We had booms and busts. They have the opposite bias to growth, so they were negatively correlated. So it's, I think it's a mistake to have some assumption of what correlation is. You have to understand what drives the returns. So if you just follow that methodology and that framework, you essentially should end up with a portfolio that has assets to do well when growth is strong, assets to do well when growth is weak, because it's versus what is discounted. It's the surprises that really matter. When everybody thinks growth's going to be strong, and it's weak, that's when you get the big move. When people think the world is going to end and it doesn't, even if it's not good, that's an upside, right? Very counterintuitive.

Baking in all the conventional wisdom at the time. Yeah.

Yeah. Because if you think about the market is in some ways it's like the original AI, it's the input of all the players and their specific perception of what reality is. And that all finds its way into the price. So it's the surprises that move things. And by definition, they're surprises. It's not something that people talk about in advance. And in our hindsight, when we look back, we forget that they were actually surprises.

Yeah.

Right. So, so you have to have things that do well when growth surprises, when inflation surprises, which it hasn't for a long time, and then other things that are less correlated. And you put that all, all that together.

And I think that's particularly important when you consider, let's say, the timing of when someone wants to retire. I mean, we've had a, long-running bull market in equities, but the market has had long stretches of dead decades, if you will. And, you know, heaven forbid someone retires into one of those periods where it could be that or worse. I mean, it could happen, right? So yes, to your point, you want to have that seesaw. So some things are always going up when others are down. So you're never going to, let's say, land in a particularly disadvantageous time, bad time.

Yeah. Yes. Yeah. And that's particularly important today when equity valuations are relatively high and valuations are, are very mediocre, if maybe not even good predictors of short-term returns, but they're excellent predictors of long-term returns.

Yeah.

And we're investing for the long term. Right. And you don't know what the future returns are going to be, but it's— there's a probable probabilistic assessment based on valuation. Valuations are relatively high today. So if you're putting all your eggs in the stock market basket, like a 60/40 is, it's a really risky basket to put all your eggs in, and you can be more diversified. And I think one of the hurdles that people have to overcome, and part of it is mindset, is there's a general sense that you get returns from equities, particularly US equities. That's the mindset today. And everything else is diversifying but lowers returns. So there's a trade-off. If I want high returns, I just invest in US stocks. If I want to reduce risk, I have the diversifiers. This could be an environment where the diversifiers actually add returns because of where valuations are with stocks. So you could effectively diversify, own inflation hedge assets, things like gold or commodities or TIPS, inflation-linked bonds, other non-correlated assets like alternatives and so on, diversify the equity portfolio. And that may actually enhance returns and reduce your risk. So I think it's an opportune time to think about diversification in that way. Okay.

So just as a quick snapshot of where we are today, just for reference, S&P 500 is down about 3, 3.5% year to date. Dow is roughly the same. NASDAQ's roughly the same, maybe lagging a bit. Small Russell 2000 up actually, up, up, 1%. Gold, despite recent weakness, is still up about 5% on the year. Silver is also up about 4 or 5%. And oil is the big winner related to the war in the Middle East, obviously up over 55%. And the 10-year yield is really, you know, it's jumped in just in the past month since, you know, up to like roughly 4.4% from under 4%. Putting all this together, I mean, what do you— you're not going to necessarily predict, to your point, you're not constructing saying, I believe this, therefore— but having this as an input, and you talked about elevated elevations for US stocks, and you mentioned commodities, TIPS, other things. What if you're an advisor or even an investor, what do you make of all this, maybe short-term, longer-term?

Well, when you're building a portfolio, you want to in some ways check the boxes of the different environments that may transpire. And what I started with is wide range of potential outcomes. So outcome A, you want to own assets that benefit from that. Outcome B, assets that benefit from that. And you build and you put it all together. And what a lot of people think is all these things will negate one another and you end up with a zero return or low return. But each of these assets has some expected return, cash plus something, let's say 2 to 5 or 6%, depending on the risk level. So if you diversify across all those, you'll get to cash plus 2 to 6 more consistently than if you just bet on one of them. So conceptually, it's very simple. But the challenge is actually the implementation, because you have to own assets that maybe you're less familiar with, that you're less comfortable with. And those assets may be volatile. And there's a challenge when something goes down, we extrapolate that into the future.

That's the recency effect.

Yes. And we want to sell it. And what you should be doing and what the math supports is you should be buying more rebalancing. So, so I think, I think of it as a two-step problem. One is understanding what it means to be diversified, recognizing you're probably not properly diversified and the steps you can take to get there. So that's the math side. And then there's a whole psychology side of recognize that because that's different from the way most people do it and that— and the way most people do it becomes your reference point, which is basically you go up and down with the stock market. And if you don't zig and zag with the stock market, you'll feel uncomfortable and you want to make changes. That psychology you'd have to overcome, know it in advance, recognize what the issues are going to be so that when you face them, you're better prepared to overcome that.

Yeah, now tell me about this and how it manifests with advisors working with clients where a lot of them cling to the familiar assets they know, particularly stocks and bonds. It's kind of that security blanket. And they might hear that the other asset, other assets might make sense, but to your point, there's this, you know, this knee-jerk resistance. What are effective ways, to, to get buy-in?

Yeah, and that's important. You need buy-in to have staying power. So a couple of things. One is obviously education. So the more educated you are, the more, more likely you are to stick with it through time. I also find that there are moments in time where the lessons resonate more. So you could give the same message during an equity bull market and it doesn't resonate as much as when you give the same message during an equity bear market. So, so these are things that I've been talking about for 20 years. You know, during the good times, it falls on deaf ears. Today, people say, oh, now I see what you're talking about. Because, you know, when you stack rank all the different assets and when the S&P is near the bottom, it resonates more. And when it's near the top, it's— then the question is, well, why do I need all this stuff? I could just buy the S&P. Backward looking always.

Sure.

So I think of it as constant education, but really pump up the education when it's working because it's more likely to stick. And people learn through hearing but also from personal experience, and the personal experience cements it in their minds and changes their psyche and framework more so than just hearing it. So I would combine the two. Okay, okay.

Now, home country bias is something we know about well. It exists world over, basically. US stocks have done really outperformed international by a wide margin over the last 10, 15 years, thereabouts. However, last year, international stocks handily outperformed the US, and they've sold off a lot recently this year. I'm curious, to the extent you can tell, have clients, are they starting to abandon or open up more to international? Because it's one of those things where there's been well over a decade where that's people like, oh, that's all you need is the S&P 500, NASDAQ, forget international. But international outperformance can run many, many years. Like, we still theoretically might be in the early innings of a change in leadership. Maybe, maybe not. But is your understanding that clients are maybe more open to that, at least just within the equity space of looking more overseas, given that recent performance? Or to what extent are they, are they still perhaps resistant? Like, I don't know. It's hard to accurately assess that. I'm just curious.

Yeah. And I think it goes back to what I said earlier is less resistant now than a year ago.

Right.

Right.

Because it's the same message. But then they see they're getting some evidence of it. Yeah, exactly. Yeah. But so I think performance is part of it. But there's also a sense that the narrative is changing where there's, you know, more articles about concentration and within US stocks, portfolios being overly concentrated in the US. And even more concentrated in equities. Like, like if you just take a step back and you look at the world, I think most people would agree that it's probably a good time to be well diversified, yet their portfolio is probably less diversified today than it was 10 years ago. So I think that is starting to settle in. So that, that, that realization, international outperforming. And also there's a lot of people who are not happy with the way things are going on in the US and maybe they disfavor the international, but at least there's something else to consider. So, and then I guess higher level, it does feel like the world is shifting, right? We've gone from globalization to deglobalization. AI is a remarkable technology, but maybe it's going to hurt some companies and we thought it was going to help everybody. So it seems like a lot of the narrative is shifting. And that is coinciding with better performance. So that starts a new narrative. And now there's more talk about, well, you know, US has outperformed the last 15 years, but in the 2000s it was one of the worst countries to invest in. And that was the last tech bubble and, and bust. And now we're seeing some parallels to that being made. So, you know, these things move, they move slowly at first and then they move quickly. And it does seem like that is becoming a bigger concern today, for sure.

You mentioned that, yeah, stocks have become even more concentrated given the long bull market. A lot of people don't rebalance and the equity portion of their portfolios really swelled quite high. What are some of the diversifiers that retail investors can easily access that in your estimation, they, many, if not most, have no exposure to or are underweight? Exposed to?

Yeah, I divide up the world into 3 categories of investments. There's public markets that anybody can access. There's private markets that are more easily accessible today than they were 10 years ago, even to retail investors. And then there's a category in the middle I call hedge funds that hedge, and it's the ones that actually hedge the market and generate a return that's by and large uncorrelated to stocks and bonds. That market is not easy easily accessible, especially at reasonable fees. Public markets, I think of, there's stocks, but that you can go global as opposed to US-centric. Things like gold. Gold is in the news because it's done well recently, but the return of gold since we came off the gold standard in 1971, when it was free-floating, is almost the same as the stock market. Global equities.

Yeah, and I think it's beat the S&P 500 handily since 2000 as well. Yeah.

Yep. And so it's return. If you remove the name and you say asset class A, comparable return to equities, it's volatile, right? But it's not much. It's not very correlated to equities. Its best decades in the last 50 years were during the worst decades for stocks, and its worst decades were during the best decades for stocks. So from a high level, seems like an asset class to include, but it faces a significant challenge, which is, but it's a shiny yellow metal. It doesn't do anything. It is not a productive asset. But so I don't think of it as gold going up, I think of it as paper money going down.

Yes, yes, 100%. I mean, purchasing power has fallen sharply. I mean, gold is supposed to more at a minimum hold the purchasing power, and sometimes it'll have periods where it delivers startling gains.

Yes.

Yeah, but that's the right way to think about it because purchasing power—

that's right.

Clearly. Yeah.

And it's easy. You can— anybody can buy it. Yeah. And it could just be a part of your strategic allocation, not a speculative asset, but something that is diversifying.

Yes. Do you have any thoughts about the metal itself versus mining stocks, a preference, or what are your thoughts on that?

Yeah, I prefer the metal because I find it more diversifying than the mining stocks. And so I, if you think about all these assets, there's a return expectation and confidence in what that return is. And then there is a diversification expectation and what your confidence is in that. And in general, I'm more confident in the diversification benefits of some of these assets than what the return's gonna be. And so I prioritize that when I'm building a portfolio. And gold is actually one of those things where you hope it doesn't do well, because if it does, it's probably not the world that is gonna benefit a lot of other assets. So I just think of it as that part of that diversified mix.

Tell me about the national debt's around $39 trillion now, the debt to service, it's roughly the equivalent of what we spend on military budget annually. I know you don't wanna wear a hat and talk about targets or anything, but you're still, relatively positive on gold longer term? I mean—

Well, the data you just shared is getting worse by the minute.

Yeah.

And this is during good times. So normally during bad times, the deficit grows, right? The government revenues fall, they spend more to fill the hole, you know, taken back by the private side. So, and if you think about those massive debts and ballooning deficits, the least painful way to pay that back is to inflate your way out. So it seems like there's a great incentive to print more currency to do that. And at the very least, I'd want gold as a part of my portfolio as a hedge against the risk of that occurring. And so I think of it as, yes, it has upside, it's heavily under-owned. Most high net worth families own very little, if any. Institutions, it's not a strategic allocation. And the data we talked about earlier, long-term returns that are attractive, uncorrelated, and has an interesting upside potential. Seems like it should be part of a balanced portfolio. And if that actually happens because there's a finite supply, there's significant upside potential. So, so I think, yes, I think the data supports that. Okay.

And no counterparty risk as well.

Yes. Which is important post, you know, Russia, Ukraine and You know, that's the weaponization of the dollar was a big deal.

It's a very big deal. I think that's what's interesting is, I mean, China bought so, it's been buying so much and that was even with rates, you know, rising and historically lower rates would help, but the central banks around the world have definitely been big buyers. Yes. And what else? You mentioned TIPS earlier.

Yeah, TIPS are, I think, probably one of the most underappreciated and underutilized investments. It's like a Treasury, but it has an inflation hedge. And if you just think about it, if you're looking, let's say, 10 years and you're choosing between Treasuries or high-quality bonds and TIPS, the breakeven is whatever the breakeven inflation rate is. So right now it's like 2.3 or so. So if inflation ends up being more than that, TIPS beat Treasuries. If inflation is less than that, Treasuries beat TIPS. So you could argue that a neutral allocation, if you have no views on inflation, is half nominal bonds, half inflation-linked bonds. Now, if you have a view that inflation might be more than whatever the breakeven is, so let's say low 2s, which my guess is most people would think it will be more than that for the reason we described earlier, is there's an incentive to create inflation.

Sure.

You would want more TIPS. And, and so it's one of the, one of the purest inflation hedges. It's not a perfect inflation hedge. So that's why you add things like gold to protect against monetary inflation, commodities. And you add this basket of inflation hedge assets, it seems like that's, that's a no-brainer.

You know what's so interesting? I agree with you. And it's really interesting why they are not more popular, right? Given—

I have some ideas. One is they're relatively new. So 30 years relative compared to Treasuries. Number two, I think they're really misunderstood. So there is an expectation that when you have inflation spikes, TIPS should do well. So people look at 2022 and say it failed, experiment failed, inflation went up and TIPS lost money. Okay. And I don't view it that way. I view it as look at TIPS versus Treasuries. TIPS outperformed. In '21 was the real test case because in '21 is when inflation actually surprised. The TIPS market was up about 6% and the Barclays Agg was down 1.5% or so. That's a big difference when you talk about high-quality bonds. And in '22, it outperformed. I think the last 10 years it's outperformed. Last 5 years it's outperformed. So it's, it's done exactly what you would expect. But there is this expectation that, oh no, it should be up a lot because inflation happened. There's a real yield component that you have to think about. And one, one measure that I always go back to is the 1970s. So in that period, interest rates went up a lot. Inflation went up a lot. Treasuries underperformed cash. So did stocks. TIPS didn't exist, but they would have done well because real rates actually fell.

Interesting. So it was, they're a little bit of a victim, if you will, of history when they were introduced to the market.

Yes.

Fascinating.

Yes.

And for your average client, acknowledging there is no such thing, in terms of their fixed income exposure, I don't know, do you recommend TIPS often like for half of that or like how do you slice up the fixed income holdings?

So there's the math side and there's the psychology side, as we referenced earlier.

Yeah.

So the math side says probably about half, if not more. Psychology side says no way. Okay, that's too much because it just sounds too different. It doesn't, it may not zig and zag with a traditional bond market. So you probably end up with somewhere between 0 and 20% of the bond portfolio, but the math strongly supports it. And also TIPS are more diversifying to equities than traditional bonds are because they have the opposite bias to inflation. So you can make an argument of 60/40 shouldn't be 60% stocks, 40% nominal bonds like that Barclays Ag, should be 60/40 all TIPS. It's more diversified.

Yeah, the amount of money though in the ag index is staggering. So there's a lot of inertia and probably vested interests.

Yes, but that changes after, TIPS outperformed for a long time.

Right? Right.

So if we, if we repeat the '70s light, and TIPS are up materially, and the Barclays Agg isn't, then people look back and say, oh, we need more TIPS.

Exactly. I think it could be a case where fund flows will follow financial headlines. Like, so, so should you start seeing TIPS are doing great, TIPS this, TIPS that popping up, then yes, it might, nudge people.

And that's usually after the fact.

Exactly, exactly. So we talked about gold. You prefer the metal over the miners. Yeah, what about like oil companies, et cetera? What are your thoughts there?

Yeah, I take that world and I take all the commodities and split them into two groups. There's gold and there's everything else. And the reason I draw the line there is because gold doesn't have much use. It doesn't have much industrial use, which is a benefit because when the economy is weak, it tends to go up. So 2008, gold was up. When COVID hit and the economy collapsed, gold was up. All the other commodities got crushed because they have some industrial use. So, and remember, we go back to what drives returns and that's where you're diversifying is the drivers. So I separate gold from all the other commodities. So you take all the other commodities and there's basically two key ways to own that. One is you can buy commodity futures, so you get the price. But the challenge with that is it's relatively tax inefficient for taxable investors. The return tends to have historically been low. The expected return is low and is very volatile. The other way to own it is what you talked about earlier, which is commodity producer stocks. So the companies pulling the commodities out of the ground, you want to be as close to the commodity price as possible because the commodity price is highly diversifying, but the return and the taxes aren't great. So commodity producer stocks tends to be a good way to get that exposure. So the return of that index has actually been better than global equities for 50 years. It's more volatile, but it's differentiated. So in 2022, that index was up pretty significantly when almost everything else was down. This year it's up significantly when almost everything else is down. And there you can be diversified as well across energy, miners. I like to do it ex-gold because you already have gold. And then agriculture as well.

Let me back off for a second. You let me know what's an important aspect of this conversation that we haven't touched on yet that you think is worth addressing.

Well, we've covered a pretty broad range, which is a very good start. I think one of the key messages that I try to share when I have an opportunity is, and this is from personal experience, managing clients for 25+ years, institutional high net worth, a lot of them very large, sophisticated clients, and a lot of them not so sophisticated, is that psychology plays such a big part in managing money in practice. And so there's a science part to all this, which is what we've spent some time talking about, about how to build a diversified portfolio, why it's important. And then there's a whole psychological aspect of holding on. And if you just think about, if you take a big step back, investing is relatively straightforward. Rule number 1, invest, because then you benefit from compounding. Okay, and if you just play the game over the long run, you win. Okay, number 2 is diversify, because if you play the game and you happen to be in the wrong thing and you're putting all your eggs in that basket and doesn't work for 15 or 20 years—stocks can do that—then you don't benefit from compounding. And that's really it. Okay, invest and diversify. Okay, most people mess both of those up. Okay, and then I think of rule number 3 is don't screw up 1 and 2. Okay, and the screw-up occurs from behavioral aspect. People, you know, you're supposed to buy low, sell high. Most people buy high and they sell low. You have to have a long time horizon. And the way I think about that is in the real world, 5 years feels like a long time. You can graduate college in 4 years, but in the investing world, that could just be one environment and that doesn't tell you much. It's a short period of time. Yeah, yeah. So, so I think you have to have a long-term horizon. And, and I think of it as you have to zoom out. If you look at the picture zoomed out, it's much clearer than if you look at it zoomed in. And the challenge in the real world is every day there are headlines, there's news, there's emotions. You know, this person is doing this and it's working. That person is doing that, it's not working. And there's prognostications of what the future holds. That it forces us to zoom in and make short-term decisions. And I feel like a lot of my job is to help people zoom out.

Yes, no, that's 100% right. And we're, you know, the zeitgeist, whatever the common conventional wisdom is, it could be diametrically different from what it was 2, 3 months ago. And 2, 3 months ago, everyone was so certain about that conviction. And within a few months, everyone is preaching the opposite. You know, and it is really interesting. And to that point of keeping perspective, I think the— I'm not the first to say this, but if you look at like a long-term chart of the S&P 500 or Dow, what have you, crises, bear markets, they become blips the longer you pan out. So the other thing to keep in mind is just the nature of how compounding, how so many of the benefits require a lot of time. And you might see that parabolic rise, if you will, but only after a lot of time. That's another headwind where people might lose patience after 5 years in a flattish market and be like, it ain't happening, like, forget it. And it's like, no, you just have to, you know, be strong, be vigilant and resist all the temptation to trade, to succumb to fear and just to keep your eyes on the long, long term. So yeah. Yes.

And get rich quick is, that sells, it attracts attention. If you tell people, look, we're going to get rich slow, it just doesn't sound as exciting. True. And, you know, it's like the tortoise and the hare, right? And the hare can be ahead for, for a period, but then it crashes and the tortoise just steadily chugs along. And I think a lot of that is true in the markets and it's exacerbated by human psychology and emotions. And, you know, because we tend to, when times are good, we tend to want to pile in more. We lever, we take more risk, and then you get crushed. And then because the math is asymmetric and very cruel, right? Losses hurt more than benefits, than gains benefit you. So oftentimes what I found is the most aggressive investors do the worst because there's a psychological impact in how the math works.

Absolutely. And if you look at stock charts, you'll often see that at peaks in price, that the volume also is really heavy. And then likewise, near the lows, the selling pressure is often enormous. And smart investors, everyone can succumb to that. Yeah.

Yes, for sure. Yeah, because we're humans. If we were computers, there'd probably be less exposure to that. True. Very true.

I think we could maybe wrap it up there. We covered an awful lot of ground.

I think, I think we did. This was a fun conversation. Absolutely.

It's my delight. Thank you so much. My guest was Alex Shahidi. For more podcasts and the latest wealth management news, Visit barons.com/advisor. For The Way Forward, I'm Greg Bartellis.

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