The Beginner’s Guide to Investing: Tips, Tricks, and What to Avoid

Cody Niedermeier: [00:00:00] Hello everyone. And welcome back. My name is Cody Niedermeier and I’m the host of our BFG webinars series. Um, I am a CFP candidate and an associate in our office who works directly with our lead advisors and developing plans and implementing those plans for our clients. Um, today we are lucky enough to have our favorite guest back who’s been on the most times, Eric Brotman, uh, before we dive into anything, Eric, I just want everyone to know that we will have a Q and a at the end of this, for those who’ve done it before, or who have tuned in before, uh, at the end of our webinars series, we’d like to take 10 to 15 minutes and try to answer any questions that come about from any of our listeners.

Cody Niedermeier: Uh, so if you can please send in those questions, we’ll have our director of marketing, Sara pop on, and she’ll pick a few of those. So, uh, so we can pick Eric’s brain a little bit more than we’re going to do during our, uh, webcasts, but Eric, welcome to the show. [00:01:00] Uh, we’re so excited to have you back.

Eric Brotman: Thanks. It’s good to be here and I worry that you’re going to pick my brain. It’s slim pickings right now. I’m on summer time.

Cody Niedermeier: Yeah, you’re enjoying the beach out there. I’m a, I’m definitely jealous, but like I said, we’re lucky enough to have you tuned in then even from the beach because, uh, you know, you really do enjoy these.

Cody Niedermeier: And I know our listeners from the feedback that we’ve gotten really appreciated every time that you’re on. So thank you for doing that for us.

Eric Brotman: Let’s do it.

Cody Niedermeier: All right. Well, based on this top screen, and what everybody’s been seeing is today, we’re going to talk about the beginner’s guide to investing and the best place to start with that.

Cody Niedermeier: Obviously the disclosure, but what is investing?

Eric Brotman: Um, sometimes it’s important when you describe what investing is to first understand what it isn’t. Um, what it isn’t is it isn’t necessarily speculating it. Isn’t designed to be gambling. It’s designed to be, um, deploying capital in a place where you expect a reasonable return on [00:02:00] that cash.

Eric Brotman: So there are lots of different kinds of investments in lots of ways to do that. And the difference between investing and just saving, for example, because in saving, you’re deploying capital and looking for return on that capital, um, is that you’re anticipating by taking on some additional risk of your principal at times, you’re anticipating a more substantial return.

Eric Brotman: Um, which you don’t get typically in a savings or money market or certificate or other type of cash vehicle. So investing is really a way to try to grow money over time. Um, and it’s, it’s not a game despite the fact that lots of websites have gamified this, it’s not a game it’s real money and it needs to be taken seriously.

Cody Niedermeier: So you would say it’s not a way of getting rich quick or anything of that nature.

Eric Brotman: Uh, no. In fact, um, any time there feels like a, a herd that is running towards something to get rich quick, so to speak, uh, it’s a good time to [00:03:00] put yourself in reverse and get away from that because typically that ends very, very poorly for the vast majority of people in the stampede.

Cody Niedermeier: Yeah. You would think that once everybody knows about it, you’ve, you’ve kinda missed the hump on it and, uh, you’re going to be catching it on the backend.

Eric Brotman: Uh, at the very least it could be worse than that. So, yeah, no, this is, this is not designed to create wealth quickly. It’s designed to create wealth strategically, sometimes tactically, uh, but definitely over time, the greatest variable.

Eric Brotman: When you look at the formula for investment success, the variable that plays the biggest role, isn’t your rate of return? It’s the number of years involved. Time is the single most valuable piece of that pie. And so when we start talking about how to create and how to build wealth, the most powerful piece of that equation is time. Now, investment return matters.

Eric Brotman: So do deposits and the frequency of those deposits, I, you know, are you making a one-time investment? Are you making an [00:04:00] investment with every paycheck? And I know you want to talk about the different ways to do that, but the reality is that this is designed to be a marathon, not a sprint. Um, and folks should not be, you know, day-trading and jumping in and out of securities.

Eric Brotman: That is a recipe for disaster.

Cody Niedermeier: Yeah, absolutely. So you would say, or would you say that investing is more focused on, you know, just reaching long-term goals or, you know, if used properly, it could also be used to reach those short-term goals as well.

Eric Brotman: Well, investing for short term is usually investing for income as opposed to investing for appreciation, appreciation requires time. It requires securities to grow in value over a period of years or decades even. Um, and you know, that is a totally different type of investing than investing for. Let’s say, you know, buying a home or, or paying for college or doing some of the things that are shorter term.

Eric Brotman: Um, sometimes those require only saving. Sometimes they can, [00:05:00] uh, they can involve investing, but it needs to be handled very differently than something you’re hoping will essentially be your own personal endowment and grow into something you can take income from for the rest of your life. Yeah.

Cody Niedermeier: So it really does depend on, you know, what goals you have, but, um, no, I think that’s a great broad overview and we’re definitely going to be diving into a few of the things that you’ve already touched on a bit.

Cody Niedermeier: So one of the best ways I think to start this is, you know, what can you invest in, uh, there’s been terms thrown around such as traditional investments versus non traditional, um, stocks versus bonds. Um, where would you start with. A client coming to you and saying, you know, what do I even have the ability of investing in?

Eric Brotman: Um, well, let’s start with what people invest in. You can invest in almost anything. Um, you know, traditional investments are stocks, bonds, and cash. Um, stock is when you’re buying, um, a piece of the equity in a company, whether it’s a private company or a public one. Bonds are a fixed income instrument. They are a way to [00:06:00] lend money for a return in the form of a coupon or an interest payment, and then cash speaks for itself generally. Um, but there are dozens of if not hundreds of other types of investments and they can range from commercial or residential real estate to private debt, to commodities or natural resources or agriculture or precious metals.

Eric Brotman: Um, they can be startup companies and angel investing. It can be venture capital. Um, there’s lots of different ways to deploy funds. Um, certainly to suggest that all of them are appropriate for everyone would be fool’s errand. Um, a lot of this depends on where you are and where you’re starting and so the second part of your question, which was how do we start with clients?

Eric Brotman: We always start in the same spot, which is analysis and inventory. Where are you right now? What resources do you have? How soon might you need them? You know, you don’t invest your emergency fund, the fund that you need in case your washer and dryer blow up tomorrow is not the same as the fund you plan to use in [00:07:00] some form of financial independence in your seventies.

Eric Brotman: It’s it’s just a totally different animal. So you have to invest very differently, but you can invest in anything. People invest in artwork. They invest in collectibles. They invest in baseball cards. I mean, it could be any number of things. Traditionally, when people talk about an investment portfolio, they’re talking about stocks, bonds, cash, and other either marketable or potentially illiquid securities.

Eric Brotman: Okay. So

Cody Niedermeier: it, like you said, it’s, it really is understanding where you’re currently at and what you’re trying to achieve in order to kind of back into what’s the right investments for you, because there’s a multitude of options when you really break it down and look at everything.

Eric Brotman: We always have to start where you are.

Eric Brotman: I mean, there’s, there’s no sense in, there’s no sense in beating yourself up for where you’ve been. Or what you have, or haven’t done, whether you’ve had investment success in the past or not, whether you’ve had investment experience in the past or not. Um, I think you, you have certain variables that, that change only based on your life.

Eric Brotman: So [00:08:00] your, your age, your net worth, your income, your family status, your health. Um, some of these things are quantitative, um, and some of them are qualitative. Um, and then of course your objectives, what’s important. For some people, the idea of investment success, um, is having enough money to work one job instead of two someday.

Eric Brotman: And for some having investment success is buying a house on the Riviera. So I think it’s impossible to define that for the same, you know, it’s impossible to define that exactly the same for, for lots of different kinds of people,

Cody Niedermeier: which is the whole idea of avoiding any type of blanket statement because everybody’s an individual and everybody is unique.

Eric Brotman: It’s very rare that someone shows up at our office and there’s something in their questionnaire or in their documents I’ve never seen before, but that said, we’ve never seen that exact combination before. And that’s part of what makes it, what’s fun is that every single situation is unique. [00:09:00] And that is the enjoyable part of this is, is not only being able to, to help solve problems or prevent them.

Eric Brotman: Um, but to be able to look at each one, not just as a math problem, because quite frankly, that gets boring. Um, it’s looking at the math problem in the context of, of a life that needs to be well lived.

Cody Niedermeier: Yeah, no definitely keeps us on our toes and definitely keeps us busy. But, um, so let’s say I’m a listener right now and I’m trying to figure out, you know, where I’m at.

Cody Niedermeier: So I understand I’m an individual and I’m unique. What are the different types of investors? Um, I know a term or terms that we like to throw in. Throw around, excuse me, are there’s buyers, they’re sellers, and there’s also holders. And how do you understand what each one of those are? And then how do you understand which one you are?

Eric Brotman: First of all, thanks for not throwing it down. It’s not that kind of webinar. Um, I, I would say that there are only, ultimately there’s only three ways to treat, uh, various [00:10:00] investment or security. You’re either buying shares of something or you’re selling shares or something, or you’ve owned it and you’re just buying and holding it.

Eric Brotman: And what’s important is to understand not just where you are as an investor, but where your accounts are and making sure that they’re aligned. So for example, you don’t have to be only one of those three things. So here’s what I mean. Um, I’m at a point where my personal retirement goal is to continue to save and invest and grow my retirement portfolio.

Eric Brotman: So there. I’m buying with every paycheck or every month or both. Um, but in other places, you know, I’ve, I’ve got a kid to educate and I’m actually using college savings plans in ways where I’m actually making withdrawals to help pay tuition. So they’re, I’m a seller. So it’s not that you’re one or the other.

Eric Brotman: I might have one account where I’m a seller and one account where I’m a buyer, or I may have a accounts, like, for example, for people who’ve worked at prior, uh, with prior employers, and let’s say they had a prior 401k, and now it’s in an [00:11:00] IRA. But they’re working again for another employer and they have a new 401k.

Eric Brotman: It’s perfectly possible to be a buyer in that 401k with your new employer, but to be a holder of that IRA because it’s parked. And so treating those differently matters, generally, it’s more palatable for someone trying to grow wealth. It’s more palatable to take on some additional market risk where you’re above.

Eric Brotman: That’s not to suggest that everyone should know blanket statements here, but it’s to suggest that in a, in a case of somebody who’s in their twenties or thirties or forties or even fifties, and who’s trying to accumulate wealth, you can handle more volatility in an account where you’re buying regularly because of dollar cost averaging.

Eric Brotman: You’re taking advantage of some of that volatility as, instead of being a bit of a sitting duck as a whole. And the best example of this was in the, the, the great recession, the financial crisis of 08-09, where people who were [00:12:00] buyers look back on that as one of the greatest opportunities of all time, because they had a 40% to 65% reset in various asset classes.

Eric Brotman: And as buyers, they made a lot of money over time .Holders lost five years of their lives. People who planned to retire five years later now had to work an extra couple of years because they were holders and they had to wait for recovery of the market sellers, arguably will never recover to this day because it’s like, it’s like chopping, uh, branches off of the money tree instead of just picking fruit.

Eric Brotman: At some point there’ll be less fruit. And so, uh, you know, being a seller during a market like that is incredibly dangerous. And so it’s real important that if you are using your investments for income, that they are segregated from the assets you’re trying to use to grow because they are completely different and it’s okay for one investor to have two or even three of these different kinds of strategies employed at the same time.

Cody Niedermeier: Wow. So you [00:13:00] really don’t have to just be one it’s really looking at your entire portfolio as one versus each asset or as in each asset. But that actually raises two questions for me that I think some of the listeners might be asking first off the term that you used of dollar cost averaging. I think a lot of people are doing that and kind of not even realizing it and employer plans.

Cody Niedermeier: Could you give a brief definition of that for, for the listeners?

Eric Brotman: Dollar cost averaging means that you’re, you’re investing a specific dollar amount into some security on a regular basis, regardless of the cost of the security. So if you’re putting a hundred dollars a check into the XYZ security in your 401k, you’re doing that a hundred dollars a check, whether that security goes up or down in value.

Eric Brotman: So some months you buy more shares than others, that is dollar cost averaging. And the objective there is without thinking about it to be buying the dips when market prices drop [00:14:00] a little bit and to be gaining appreciation through the years. Now, dollar cost averaging isn’t magic. It’s not a, there’s no magic bullet.

Eric Brotman: It’s not a guarantee of anything, but it’s a reasonable and logical approach to investing that does two things. One, it allows you to keep on track and make sure you’re doing what you’re doing. And two, it relieves us of the psychological torture that comes with making an investment of, is this a good time?

Eric Brotman: If you’re investing every two weeks through your paycheck, you’re not thinking about, is this a good time to do this? What was the news du jour? And so it, it, it allows us all as human beings to demystify and be dispassionate about that decision, because there’s no decision to make. It’s just happening.

Eric Brotman: We know what we’re putting in per year. We know what’s going to happen every check or every month. And that’s okay. No matter what markets are doing, that’s dollar cost averaging and yeah.

Cody Niedermeier: Okay. Yeah. Thank you for definitely diving into that. I think a lot of people do it and have no idea what the term is or anything like that.

Cody Niedermeier: So thank you for [00:15:00] breaking that down.

Eric Brotman: Sure.

Cody Niedermeier: Second thing is, what about those, you know, viewers and listeners that are saying, oh, like I could time the market and figure out when’s the best time to sell when the best time to buy is and what are some reasons why, you know, they’re probably not as capable as they think they might be.

Eric Brotman: Lots of us have a bias referred to as overconfidence. Yeah. And that’s true in all aspects of life. If you had a room of a hundred people in it, and you asked everyone who thought they were an above average driver to raise their hands, you’d probably get 95 out of a hundred hands up. And that’s either because five people are being realistic or they weren’t listening to you.

Eric Brotman: Um, we all think we’re better than average and that’s naturally impossible by its very nature of what is the average. Um, when it comes to investment accumen being educated and understanding how these things work is not the same as being able to manage your own [00:16:00] psychology and your own behavior to make good decisions and to make them in a dispassionate way.

Eric Brotman: It’s one of the reasons why great athletes have personal trainers and star tennis players have coaches. You’d think why do you need a coach? You’re one of the best. Well, how do you think I got there? And why do you think I’m still there? So there’s a, a, a natural tendency for us to be over-confident in our abilities.

Eric Brotman: And, um, it, it is over time, not just difficult, but impossible to beat or time anything. There there’s, there’s no manager in history has been able to do that. Even if they have 10 or 13 year positive runs, there’s always a point where that doesn’t work. And sometimes when it doesn’t work, it doesn’t work spectacularly.

Eric Brotman: So I don’t try to time anything ever. Now, are there exceptions to that? Are there reasons why you might make an adjustment? Well, sure. One of them might be related to your age. One of them might be related to your employment. Did you get a big raise or did you or your spouse lose your job? Well, that’ll change your investment horizon or [00:17:00] the way you treat your money.

Eric Brotman: Um, that’s not a timing issue based on what you think is coming in the markets there. If, if it was possible to time the top money managers in the world would all hire those people. And it would, we wouldn’t need 20,000 different funds to invest in because there’d be seven that were right all the time.

Eric Brotman: Well, clearly that’s not a, that’s not true for a reason where it’d be the only one. The other timing, things are around tax policy or, um, or other types of legislative, uh, issues where you can say, well, it makes sense to time this transaction because capital gains rates are changing or because I’m in an abnormally high or abnormally low tax bracket this year.

Eric Brotman: So there are tactical decisions to be made in investing timing. The market is not one of them in mind.

Cody Niedermeier: Well, yeah, no, thank you for diving into that one as well. And it was actually a pretty good transition to new what’s next, because you were actually just talking a little bit about political risk and what are along with political [00:18:00] risk.

Cody Niedermeier: What are some of the other main types of risks that, you know, people can face, uh, when they’re thinking about investing or are investors?

Eric Brotman: Well, the biggest, most obvious risks that people think of when they invest is market risk. Could the price go up or down and if the price could go down, what is the likelihood of that?

Eric Brotman: The frequency that, or the potential bandwidth of that? How big of correction could you have in a specific sector or security or what have you. Um, market risk matters. It absolutely matters, but it doesn’t matter in a vacuum. It doesn’t matter by itself. There are also, um, things like purchasing power, inflation risk.

Eric Brotman: So, for example, if, if you said I want the lowest risk portfolio possible, you might not have a portfolio. You might have your money in a shoe box under the swing set, but the fact is then you’re taking on a different kind of risk, which is purchasing power risk, because your money is not growing by inflation and therefore it’s getting less and less valuable every year. So it’s not just can the market go up or [00:19:00] down. If the market can’t go down, it doesn’t mean it’s risk-free. It means it might be market risk-free, but there are other things. So inflation risk, political and legislative risk, tax risk, um, behavioral risk.

Eric Brotman: I think one of the very biggest risks that most of us face are ourselves.

Cody Niedermeier: Absolutely.

Eric Brotman: It’s not just the overconfidence. There’s there’s anchoring biases. There’s there’s um, there’s hindsight biases. There’s familiarities. Some people invest in predominantly what they know. I’ve heard of that company therefore I want to invest in it. Well, maybe that’s okay. Maybe it’s not the most sophisticated approach. So it’s, it’s important to, I think, try to look at this as objectively as possible and to try not to look at just market risk as the only component.

Cody Niedermeier: So you could be hurting yourself by not being in the market when you’re trying to be safe versus, you know, being in the market and putting everything into a fund that you think is going to make you a [00:20:00] million dollars in two weeks.

Cody Niedermeier: Uh, it’s finding the balance.

Eric Brotman: It’s true, but, but you also have things like liquidity risk or access to your capital. If, if you’re 28 years old and you’re putting all of your money in a 401k and don’t have any other savings or investments. And you run into a situation where you’re unemployed or you need capital.

Eric Brotman: The only place you have to go other than a credit card or some kind of debt is to go to your 401k, which either means a 401k loan, which is by and large, always a bad idea, um, or it means making an early withdrawal from an IRA or paying fees or penalties or taxes. So there’s there’s risk in that. I don’t care how well the portfolio done.

Eric Brotman: If you take a 10% penalty on an ordinary income tax at a point in time where you also have earned income. The rate of return is irrelevant. You just got your teeth knocked down your throat.

Cody Niedermeier: Yeah. I couldn’t agree more with you. And then previously you were also talking about behavioral finance, which has been one of the biggest topics over the last few years, [00:21:00] just in the finance or investment industry and understanding you can, you can often be your worst own enemy, which is a scary thought in itself as well.

Cody Niedermeier: There’s so many different things out there that deter people away from wanting to invest. And I don’t want this all to seem negative, but I think you have to have a real understanding of what are the risks when you’re getting into investing, um, in order to do it the right way.

Eric Brotman: And if you, if you’re doing this in a thoughtful way, and some of your assets are positioned for the long-term with some risk, but other assets that you might need to get to sooner are positioned in a way where there’s dramatically less risk you can typically survive, endure, and maybe even plow through an adverse market condition or an adverse life event. So it’s, it’s not that we’re trying to be negative. I’m certainly not trying to be. Um, what I am trying to do is I am trying to say that it is easier to, to walk a high, tight rope if you have a good [00:22:00] net under you.

Eric Brotman: And so sometimes just from that standpoint, um, you know, I wouldn’t walk a tight rope that was six feet high without a net, but I’d walk one 60 feet high with a good net. Not successfully, of course, but I would,

Cody Niedermeier: I’d love to see it. And I think we could definitely get that on one of the future webinars, just so everybody else could see it as well.

Cody Niedermeier: Um, yeah. Sorry. Um, so once we have an idea of understanding, you know, different types of risks in investing. How do I determine what my personal risk tolerance is based on, you know, my age or, you know, what are my goals? Do I want to buy a house? Am I putting more towards liquid assets? Or am I focused on my retirement right now?

Cody Niedermeier: How do you understand what your risk tolerance is?

Eric Brotman: And there’s a couple ways to answer that question, Cody and I actually, the first thing is that every firm, every investment company, every fund company has one it’s called a risk tolerance questionnaire. These [00:23:00] are sophomoric, right. And not helpful and completely useless in my opinion. Every firm uses them. In fact, in some cases they’re required. But so much of the answers, so much of the, the way in which people answer those questions is based on, uh, on, on recency. The way, the way a person would answer a risk tolerance questionnaire after a really great year would be totally different than after a really lousy year.

Cody Niedermeier: That’s a good point.

Eric Brotman: It’s the same person. So I believe so much of that is layered with the behavioral and the emotional and the psychological, that risk tolerance questionnaires don’t do the job by itself. I think it’s much more important to have dialogue and to talk about some what-ifs. To figure out what all of us have finite resources. Bill gates has finite reasons. I could live on what he’s worth comfortably, but they’re still finite. So if you know, you can afford to do just about anything you want to do, but you can’t afford to do everything [00:24:00] you might dream up. Then it comes down to prioritizing. What’s more important.

Eric Brotman: Okay. Is it more important, you know, as families grow, is it more important to have a bigger home or to have a second place at the shore? Is it more important to have, um, a neighborhood where, where you might pay more for a house, but you can send your kids to public school? Or is it more important to maybe have a more modest home because you want to use the private school system?

Eric Brotman: I mean, some of these things have nothing to do with portfolio risk, but they have everything to do with, with some of the risks involved in choosing how to manage them. So I think it starts with that. And then figuring out on an account by account basis, your risk tolerance could be different. And the example I just used, the risk tolerance I take on in the college plan for my daughter is totally different than the risk profile that I have for my IRA that I don’t plan to touch for 25 years.

Eric Brotman: Yeah. So I think it’s okay to understand the risk tolerance is going to be different, not only based on the person or the family or the couple, but [00:25:00] also based on the purpose for the funds.

Cody Niedermeier: Okay. Yeah. No, I think that’s a great point that it just keeps leading back to, you know, understanding where you’re at and what you’re trying to accomplish is the root of figuring out, you know, the rest of these answers that we’ve been discussing.

Cody Niedermeier: But building off of that, when is the right time to start investing? I know you talked about an emergency fund and you know, your HVAC goes up and you need those, you need funds in order to pay for that damage. And maybe they’re all locked up in an IRA. So is a good starting point starting with that emergency fund. And then from there, prioritizing and figuring out where this is the best place to put your money.

Eric Brotman: Like everything else. It depends on the individual situation. The short answer is when is the right time to start investing? The answer is always five years ago. Um, because time is so important so starting soon is usually better than starting later, [00:26:00] just because of the time element. Now that said not everyone should be investing. Um, for young people who are, um, getting clobbered with student loan interest, for example. It may be more important to make extra payments toward a student loan to try and get that albatross from around your neck, as opposed to investing. Um, having an emergency fund matters.

Eric Brotman: You know, whether it’s three months or six months depends on lots of factors, but, uh, having enough money to cover the bills, if you’re suddenly unemployed or you’re disabled or something goes wrong. Um, it is very, very helpful and important. And you want to know that you have access to capital. Um, it’s also important to make sure you have access to collateral.

Eric Brotman: So if you own a home, it means having a line of credit. If you own life insurance or securities portfolio its having lines of credit available to you for emergencies. That’s what it’s for. Um, beyond that, I get asked a lot, like, should I pay down my student loan or should I prepare to buy my first home? Or should I invest in my company for a while?

Eric Brotman: Um, and [00:27:00] the short answer is to the extent possible if you are working for a company that has a plan that offers a matching contribution, it is often best to, to participate in that plan at least to make the maximum, get the maximum possible match. So if you’re with a company and they pay 50 cents on the dollar for the first 6%, if you put 6% in, they’re going to give you 3% into the plan.

Eric Brotman: That is a better return than you can get on anything so long as you stay long enough to vest in the money. So, um, unless you’re at risk of bankruptcy or you have horrendous personal or, um, uh, uh, consumer debt, it’s usually best to at least participate to the extent that you’re getting matches from your employer, then debt reduction, uh, is, is almost always the next step.

Eric Brotman: And it’s aligned with, if there was a 2A and a 2B, it would be aligned with building an emergency fund. The emergency fund is the moat around your castle. Cody, [00:28:00] once you have that, once you have a safety net down, um, and you’re either debt-free or at least adverse debt free, and we’ve talked about that on other shows, yeah. Then it’s time to really get serious about growing some wealth.

Cody Niedermeier: Yeah, no, uh, I think just a definition that you, uh, you briefly spoke about that I think we should dive into, is that the idea of the line of credit and you know, what is that when, when you have a home, a home equity line of credit or anything along those terms, for those that are listening.

Eric Brotman: Lines of credit are ways to leverage assets that you own and to borrow against them. Um, and there are some good ways to do that. And some rather poor ways to do that. Yeah. Um, you know, doing a 401k loan is technically using your 401k as collateral. That is disastrous for lots of reasons and should be avoided by everyone as much as possible.

Eric Brotman: On the other hand, some property allows you to have collateral with very favorable terms, often [00:29:00] interest only, um, and often relatively low rate so that you can get access to capital without having to make a big decision, like selling something or taking on a capital gain or moving, or, you know, making large life decisions.

Eric Brotman: And so having that in addition to the emergency fund, having those lines of credit, I think becomes incredibly important. It allows you to have access to capital quickly and inexpensively if you need it, and then you pay it back when you’re ready. Um, it’s not designed to be long-term, it’s designed to be an emergency. It’s a, it’s a, a switch you can flip and then hopefully flip back shortly. You don’t want to have a line of credit balance outstanding for 10 years. That’s not the point of them. The point of them is to have access to capital when you need it.

Cody Niedermeier: And you can open those lines of credit and not take anything from it and just have that access. It’s that liquid resource without, let’s say you’re trying to buy a second home or something along those lines, you don’t have to go to a bank and get approved or anything like that. If you already have that line of credit open.

Eric Brotman: Once you have the [00:30:00] line open and in most cases you can apply for and have a line open with little or no cost, often none.

Eric Brotman: Um, and it means that when you’re ready and you need to deploy capital, you might have a five or 10 year window to use it so that if you are looking for that second home and you, or, or not even a second home, you’re just looking to move. Sometimes it’s difficult. If you sell your home before you buy your new one, then you’re homeless for awhile and you have to put stuff in storage and you have to figure out where you’re going to be.

Eric Brotman: And you have to move twice on the other hand, if you buy a home, but then can’t sell yours. Now you’re carrying two mortgages, you’re carrying two home expenses and that’s not real pretty. So it, it, it is sort of a midpoint between those two scenarios where you can leverage that to make a down payment on a new home while preparing to sell your home. And then you can pay it off with some of the proceeds from the house you sell. So in that case, it winds up being a useful strategy.

Cody Niedermeier: No, that was [00:31:00] a little bit more in depth. I just, I know you touched on it and I know there, there were a couple of listeners that are scratching their head a little bit, and I just wanted to make sure they had a better understanding of that. So thank you. Uh, as we go into the next slide, you actually already touched on the idea of, you know, getting the employer match, but what are some other ways to start investing? And a term that’s come up on a couple of webinars is like an HSA or a traditional IRA versus an IRA or versus a Roth IRA, excuse me. Uh, what are some different vehicles that can be used, um, in order to start investing? Because people are realizing they should have started five years ago and they’re ready to take that next step..

Eric Brotman: Some of that’s going to depend on your tax situation. If you’re a, you know, if you’re a young family and right now you’re not in your peak earning years yet, but you’re trying to start building wealth, using a 401k and using a health savings account, um, can create some nice tax benefits for sure.

Eric Brotman: [00:32:00] Now, for, for folks who aren’t super high income, the Roth IRA is a great tool, um, because it’s a way to put money away where it’s never taxed again as long as it’s used under the certain rules and regs. And the HSA is even more powerful than that. I think they’re terrific. Um, but I also think it’s important to have some assets that are not in qualified plans, especially if you’re young people.

Eric Brotman: You know, if you’re, if you’re 30 years old, you it’s important to have some investments that aren’t tied to waiting until you’re 59 and a half to use them because a lot can happen in 30 years, a lot can happen in 30 days. So I believe the way to start investing is to start both gradually and regularly.

Eric Brotman: Okay. That means start with your 401k or Roth 401k at just the amount that gets the match. Do the 6% and get the three if that’s the way it works at your company. Um, do it every check. You can put in an automatic increase function and a lot of the 401k plans that allow you on, on January 1st, the [00:33:00] next year now you go from 6%, you go to seven or you go to eight and it’s automatic so you don’t have to remember that. That can be helpful. Um, you can put escalations in there. Um, you can do monthly investments in anything you’d like a hundred dollars a month, $200 a month. It may seem like a small thing and it may not be buying buildings down the road, but it starts the right habits because the only difference between doing a hundred dollars a month and doing a thousand dollars a month, other than the comma, the only difference is that that you have to have higher income to be ready for that.

Eric Brotman: Well, if that comes over time, And you’re already in the habit it’s much easier to change the amount you’re investing than it is to start. So get it established, do something, even if it’s modest and then you’ll increase it over time as your wherewithal and your comfort grows.

Cody Niedermeier: So it really is. It’s just building the correct habits now and by doing that, it’ll carry forward and help you reach your goals. As you know, you continue to get those incoming increases that you [00:34:00] should be, and you know, your assets start to really grow.

Eric Brotman: That’s absolutely right. I mean, starting good habits as early as possible and, and instilling them in your, in your kids or grandkids also matters. I mean, help relatively young people who are maybe not really experienced in this get started and it will empower them over time. Yeah.

Cody Niedermeier: It’s just the, just the tip of the iceberg of, you know, things that we wish we would have learned in high school. Right.

Eric Brotman: Well, financial literacy matters. And it’s something that we’ve been trying to, to push not only at the, at the state level and legislatively, but also at the school by school level.

Eric Brotman: Um, yeah, young people need to know how to do this. You can graduate from college without ever having a personal finance course and that leaves you completely unprepared for the decisions you’re making. And by the way, you’ve already made a huge decision on a student loan that you now are going to have to repay that you had no idea what that meant. Yeah, I know I’m not picking on you personally, Cody, I’m just saying that’s [00:35:00] what people do.

Cody Niedermeier: I’m the one person you get back on during these webinars are, so bring it on.

Eric Brotman: I appreciate that. All right. Fair enough.

Cody Niedermeier: Multiple, you know, friends, clients just, oh, I wish I would have known this as I was growing up or anything along those lines. It’s yeah, it’s crazy. Just how much that, you know, we wish we would have been taught that we weren’t. And I know here, we’ll touch on a little bit later, just, you know, trying to get those resources out into the world. So people really can get this knowledge and start building those habits to find the success that they’re looking for.

Eric Brotman: Absolutely.

Cody Niedermeier: Yeah. Jumping a little bit ahead with that. Just, uh, just some things we’re looking at here at BFG, but uh, what should people be avoiding? And I know there’s a lot of topics going on in the world right now of the get rich quick, like we talked about that you want to avoid. What are some things that people should keep an eye out for or red flags when they’re looking at it?

Eric Brotman: Um, one, I think you should avoid being the last on the train. [00:36:00] Um, you know, I used to refer to it as my, my cab driver theory back in the days before Uber, when I used to travel a lot. And I was in the back of cabs all over the place. Um, I, in, in the 1990s, I would have cab drivers tell me which tech stocks they were buying so help me honest truth. Okay. And that’s usually when you know it’s time to be out of tech stocks. Because it’s now reached the point where everyone believes they’re tech stock experts. And of course, in 2000 that bubble burst. The same cabs. The same drivers were flipping houses in 2007 and in 08-09 we know how that worked out for a lot of people.

Eric Brotman: Suddenly rehabbing a house was a ticket to instant wealth until it wasn’t today, you have different third rails there you have crypto as a third rail, you have. Um, you have, uh, securities that are no longer backed necessarily, um, in the same way that, uh, that particularly currencies that [00:37:00] are backed by the full faith of, of, uh, government entity.

Eric Brotman: Hmm. Um, so at the end of the day, I would say it’s important to avoid number one, trying to time anything, number two, piling into something, um, where you think you’re going to get a quick buck. It just, it’s just not the way to do it. Um, and lastly, I would say the things to avoid often are psychological, avoid inertia, avoid analysis paralysis, where you’re, you’re looking at so many things, you’re looking for something perfect so you don’t do anything until you find it. Well, you’ll never do anything. I’m sure. It means it means getting started in a meaningful way. I would avoid inertia. Um, I would also avoid micro-managing. I’d avoid looking at it every day and thinking, oh, should I buy it or sell it or what? I would time nothing. I would park it and forget it.

Eric Brotman: Make sure your statements are reconciled. And beyond that, I don’t spend a ton of time looking at the, at the details, um, whether you’re doing it yourself or whether you’ve outsourced this, um, to a [00:38:00] professional. Looking at it every day is not good for you. I mean, all you need to do. All you need to do is see a lousy day on wall street, and then you look at your accountant and it’s down $10,000 that day.

Eric Brotman: And you’re, you’re ready to panic over something, you forgot it was up 10,000 three days ago. Like it’s just one of those things that is a, a, um, it’s an ongoing way to train your brain, not to, uh, react emotionally.

Cody Niedermeier: And it’s just another case in point of how automation can be super helpful in building that habit of having everything go in and then you’re checking on it, you know, a few times throughout the year. And you know, when tax season comes to make sure everything’s in order, but set it and forget it, I think is, is one of the big takeaways that you can, uh, you can grab from this.

Eric Brotman: Generally. I think that’s the best way to go. Set it, forget it, but also feed it, you know, it’s not enough to park it and ignore it. Um, but I think it’s okay to park it and then feed it regularly.

Cody Niedermeier: I liked that. I liked that a lot. Um, building off [00:39:00] that, you know, we figured out what type of investor we are, you know, we’ve started investing. We have an idea of what to avoid. This can be a lot, this can be overwhelming for a lot of people because they’re going to have questions of, should I put into my employer plan? Should I put it into my health savings account? Which one is right for me and figuring out how am I unique? And what is the best decision? When is the right time to ask for help?

Eric Brotman: That’s a great question because people don’t like to ask for help with anything. You, and I know, thank goodness for GPS. You don’t have the embarrassment that, that we had as younger people where we had to stop and ask somebody for directions, which men didn’t do by the way.

Eric Brotman: None of us like to ask for help, because asking for help feels like somehow there’s something deficient or weak about this. So what I would say is when is the right time to ask, maybe not for help, but for some guidance, um, for some oversight, even for a second opinion. Um, and I think as soon as [00:40:00] your, your in your life has gotten complicated enough that maybe you don’t have time to spend on all of these things where maybe you choose to spend your time some other way, whether it’s working on your occupation or playing with your kids or doing something you love to do.

Eric Brotman: I think there’s a great benefit to outsourcing those things that you don’t really enjoy and have a great talent for. So, uh, I tend to think that the reason why financial advisors can be valuable isn’t necessarily because we’re the smartest people in the room. Um, it’s because we are going to look at things in a dispassionate way and it’s because we can look at everything with, um, with a set of eyes that is really new.

Eric Brotman: Uh, and, and I think that’s a really helpful, especially with a married couple or with partners. If you’re, if you have two, two adult people in the household, they’re going to have different understandings and feelings and impressions on not just money in general, but on goals on housing, on [00:41:00] education, on retirement, on vacations, on you name it on groceries, Cody, they’re going to think about what they spend on groceries. And the things couples fight about the most are kids. And while I can be of no help to them on the kids’ front, um, on the money front, having those dialogues does matter, and it does make things more comfortable for people. And, um, I, I think that if I didn’t do this for a living, I would absolutely hire a professional to do this for me because it’s a lot to know.

Eric Brotman: Um, I don’t do my own tax returns, not because I don’t understand taxes, but because I despise that. And I don’t want to do that. I want to pay somebody to do a great job with my tax returns. I’m not a lawyer so I have a lawyer. I have an insurance agent. I have a real estate agent and a mortgage broker.

Eric Brotman: And, you know, I have resources and I think it’s okay to have subcontractors out there. And, you know, I even have a financial advisor, my wife and I sit down with one of the other advisors at BFG. And it’s great because I can take off my planner hat, put on my husband hat and be relatable. So, I don’t know that anyone [00:42:00] should do this themselves.

Eric Brotman: Um, and I don’t mean just the investment piece. Investing is not difficult. There are algorithms, there are computer programs. You can do that on your own. You can get the, the solutions from a computer. What you can’t get is you can’t get the, the interaction and the psychology, the computer doesn’t know what it’s like to lose a parent or to have a child with special needs, that’s true. Or to have, um, or to be worried about a job loss, you know. Computer’s not going to help you when you’re losing sleep at night over something like that. And so the human aspect of this becomes so valuable. Just because it is, um, it gives you some guide rails.

Eric Brotman: It helps you maybe avoid the big mistake. It doesn’t mean you’re going to get rich quicker or anything like that. It might just help you avoid some of the third rails. And, um, so I think as soon as you’re in a position where you’re, you’re, you’re busy and your life is complicated enough, and this [00:43:00] isn’t something you want to become an expert on then that absolutely gets some guidance. And that guidance could be one time. It could be ongoing. It could be an like, it could take a lot of different forms. But I don’t know anyone who wouldn’t benefit from some oversight here, unless, unless you were really dealing with a, a true bankruptcy situation and someone who truly had no resources and needed more of a, uh, an attorney or a social worker or both, and, and, you know, in, in those situations, financial advisors not going to be particularly helpful, but, um, if you have income and if you have assets and if you’re looking to grow one or both of them, uh, and trying to position yourself to have work be option well someday. I think it, I think it’s worth, um, having a second opinion on that that’s a professional one and that’s objective.

Cody Niedermeier: No, I could not agree more with you. I think you put that really well. Um, do you have any last thoughts on investing in general before? Uh, I think we’ve got time for a question or two before uh, our time runs out.

Eric Brotman: I’d love to know if there’s [00:44:00] questions from the, from the audience. I would say in terms of, in terms of last statements, um, it’s don’t wait, start, start now. Um, take inventory, begin looking at your finances and look at them honestly. Whether it’s just you or whether it’s you and a partner, look at them, honestly, look at your debt, look at your spending, look at your savings, look at your investments.

Eric Brotman: Um, and start to, to really judge where you are now, now, and to think about where you want to be. And let’s build a path. I mean, it’s not going to be linear. It’s not a straight line. And a lot of times it’s exponential. So that’s why time is so. But it is, this is, this is really, it’s a journey that is best started five years ago, no matter how old you are.

Eric Brotman: Um, and so with that being said, start immediately. Inertia is very, very dangerous here. You, you don’t want to just sit and do nothing because it will not make the problem better. It will not make solutions more ample and it [00:45:00] will make, it will not make outcomes more fun.

Cody Niedermeier: Yeah, and I think that’s, that’s a great way to lead into the Q and a.

Eric Brotman: So, uh, let’s hear what we have to say here.

Cody Niedermeier: I think we got Sara who can chime in who’s our director of marketing who has been, uh, taking in all the questions that everyone has written in. So if, uh, Sara are you there?

Eric Brotman: Yeah, if you haven’t written one and you can go to the chat box and do that as well.

Cody Niedermeier: Yup. I think we got her

Sara Lohse: All right. I’ll let, let’s get to that first question. Do you have a particular sector that you think would be a good idea to look into?

Eric Brotman: Um, that’s that’s a funny question considering we just talked about trying to avoid tactical timing, but, but since someone asked it, I would say there are certainly things that appear to be poised for some growth in a post pandemic world.

Eric Brotman: Um, I think one of them is financial companies. I think the, the unbelievable transfer of wealth between one generation and another is [00:46:00] going to create enormous opportunities in the financial world. Um, so that’s one, I would say healthcare. Because people are living longer, but not necessarily living better.

Eric Brotman: And, and, uh, healthcare is a spot that needs to be thought and rethought and rethought on a regular basis. Um, but it’s also one that’s not going anywhere. It will be here. Uh, and so I think that matters. Uh, and lastly it sounds a little silly, but, um, but I would say technology is so pervasive that it’s difficult to say what a technology company is anymore, because every company is a technology company. It just part of what you do. Um, but that said, um, the real innovators in the tech space who are creating, um, real material change and efficiencies and systems and processes and so forth. Um, and let’s face it in new gadgets. Everybody wants the latest greatest. Um, I think that’s still a really viable spot.[00:47:00]

Sara Lohse: Awesome. Thank you. That was Kayla’s question. We have one question from Stephanie. I think it’s a really important one to get to. Um, what’s the first step for finding a good fit financial advisor for us. How do we know they’re a good fit and not someone will take advantage of especially knowing our financial situation.

Sara Lohse: That is a fantastic question.

Eric Brotman: It is a good question. And I, and I think it’s, um, I think it’s, there’s a couple of different answers for that. I, I wrote don’t retire, graduate and publish the book recently. And one of the chapters is dedicated entirely to interviewing a financial advisor. And what are the types of questions um, that should be, uh, that should be asked. And what do the answers mean? Um, so that you can really understand that, um, there are some resources that we’ve put out that are, uh, available and that are free as well. Um, to talk about what the financial planning process is. Um, and if you go, I see it now on the screen. If you go to Brotman media.com, you’ll find some of those resources. Um, you’re also [00:48:00] welcome to use the QR code on the screen. Uh, Cody, I’m stealing your thunder, sir. I’m sorry for that. But you know, that, that QR code it’s, it’s a money bag, I think. But part of it reminds me of the volleyball in Castaway actually.

Eric Brotman: Well, so do you see that at all? Is that look at all like, like, uh, Wilson? Anyway, um, if you use that QR code, you can schedule a call with one of our, uh, eight financial advisors. Um, it will cost you nothing. It’s an opportunity to get to know us and to see if we could be helpful to you. Uh, and you can schedule it right on your, on your mobile device, just by scanning that now.

Cody Niedermeier: Yeah. And actually to build off that, Eric, just based on these webinars that we have that free consultation with you, and let’s say you want to move forward and work with us in building a relationship. There’s actually a 10% off discount that I, uh, I just wanted to make sure everybody was aware of off of, you know, the initial fee, just to start the relationship.

Eric Brotman: That’s coming out of your pocket, right Cody? [00:49:00]

Cody Niedermeier: Pockets are small over here, so sure. But, um, no, I think, I think we’ve got time for one more. If, uh, if Sara, you got another question. Cause eric was saying,

Eric Brotman: I don’t see the chat box on my screen, but if there’s a few we’ll we’ll certainly take them.

Cody Niedermeier: Yeah. We’ve got another one or two.

Sara Lohse: All right. Um, I know you’re going to enjoy this question from, what do you think about crypto mining?

Eric Brotman: Uh, I, I, you know, this is a family show. I can’t, I can’t tell you what I think. Um, I think it is, um, yeah. I think it’s a very dangerous thing. Um, I think it’s grounded in and based on nothing tangible. And you’re talking about investing in something that has no, um, proven use, no intrinsic value.

Eric Brotman: It doesn’t create anything or produce anything. Right. Um, people have made some of them, a lot of money doing this [00:50:00] only because other people were willing to pay more for it than they were. Um, and I, I suspect it’s going to end very badly. And I, and I, of course I want this webinar to age well, and, uh, three years from now, dollar bill has been replaced by a Bitcoin or something uh, um, um, I guess I’ll look pretty dumb, but I just don’t feel like there’s a, I don’t feel like there’s an intrinsic value to it. And so I’m avoiding it, like, like, uh, like it was contagious.

Sara Lohse: So, what you’re saying is I shouldn’t move my 401k into doge coin?

Eric Brotman: I wouldn’t. I would, uh, I would tell you not to do that. I know there, there are some, there’s some very big name folks out there who are starting to talk about the, um, the legitimacy of crypto. And at the end of the day, I’m concerned. I’m not convinced, but I’m concerned that they may be doing that because they own some, and they know that they have enough influence that they can create a buying frenzy, make some money, and then leave others holding them.[00:51:00]

Eric Brotman: And, uh, you know, that’s not to suggest that everyone is sinister. Um, but certainly I think that that is a real possibility and it’s still a largely unregulated, um, uh, you know, wild west. And so, um, um, if it becomes a mainstream thing and it becomes regulated in a, in a meaningful way, then I may feel differently. But for right now, I, I, I think, yes, you should avoid it.

Cody Niedermeier: I think that’s well put Eric, but, uh, Sara, you got time for one more.

Sara Lohse: All right. I’m going to go with the question that I like the most, because as the two of you know, there’s something that I’m extra passionate about.

Cody Niedermeier: Yep.

Eric Brotman: It’s about dogs.

Sara Lohse: Yes, should I invest all my money in puppies.

Sara Lohse: Um, no, how am I, can I start teaching this to my kids?

Eric Brotman: How can you start teaching it to your kids? Um, financial literacy is hard to come by in school. Um, in [00:52:00] fact, you know, our team Cody included put out a, a course, a financial literacy course, um, which, uh, which is free, which is available at bfguniversity.com.

Eric Brotman: And you can get there through the website on the screen. Um, but it’s, it’s, it’s a starter course and it’s great for middle or high school kids or college kids, young adults, or even just anybody who wants a refresher.. And I think it’s a, it’s a neat way to, um, it’s a neat way to, to take things like cash and debt and some of the real basics and make them relatable in a, in an interactive way.

Eric Brotman: So, um, I would do that. I would also say there are non-profits that do a lot of work in this space, junior achievement being, I think the best of them where you can find resources for your school or for your kids or community and, um, it’s international. So you can find them anywhere.

Cody Niedermeier: And Eric, I think building on that, going into summer vacation, it could be something, you know, keep your kids engaged and ready to go and tuned up for, you know, [00:53:00] going into the new school year something to keep them busy and make sure that they continue learning throughout the summer as well.

Eric Brotman: Well, the kids can enjoy that, that online course, the adults summer reading at the beach should be don’t retire, graduate. Um, that, that, that is, uh, that is the best summer reading assignment. I can give everybody just, just because the, the feedback, the feedback we’ve had on it has been so positive. Um, it just real exciting.

Cody Niedermeier: Yeah. I think it’s a book that needs to be on everybody’s shelves and I think it will be, but, um, now Sara, thank you for all of those questions. Uh, I’m going to pull up a pretty screen with all of Eric’s co uh, information just. Thank you again, Eric, you know, I know you got a big or busy schedule and every time you make time for these webinars in order to put a little bit more information into the world, into the world and you know, really help people reach their goals and everything they’re trying to achieve.

Cody Niedermeier: So a huge thank you. It’s not going to be the last time I’m going to keep pulling you back for [00:54:00] more. So thank you. It’s a little bit of both, but, uh, just a huge thank you. And, uh, enjoy the beach a little bit, I think for everybody. And, uh, we’ll definitely be talking to you again.

Eric Brotman: Sounds perfect. Thanks for having me. It’s been fun.

Cody Niedermeier: Yeah, no problem. Uh, for everybody that’s tuned in today, I also just want to say thank you. Uh, we wouldn’t be doing these webinars without you, and I hope you are able to take some valuable information from today and hopefully you’ve set up a consultation just to speak with one of our advisors, um, to help answer any of the questions. Maybe we didn’t get to today. Uh, or just, you know, more specific questions to you and see if there’s any way we can provide you with a little bit of value to, to help you reach your goals. But our next webinar’s going to be July 21st. Uh, I’m pulling Lena back in. So if you tuned into our, uh, marriage webinar, which was a fun one, she’ll be back and the focus of this webinar’s going to be on buying house.

Cody Niedermeier: So for those of you have come for the first time, thanks for joining for those [00:55:00] of you that come back. Thank you for joining and hopefully I’ll, uh, I’ll see you all again on July 21st, but, uh, thanks for everything. And I’ll talk to you guys soon.