Welcome to how to retire on time, a show that answers your retirement questions. Say goodbye to that oversimplified advice you've heard hundreds of times. This show's all about the nitty gritty. Now that said, remember, it's just a show, not financial advice. It's educational.

So do your research. As always, text your questions to (913) 363-1234. Again, (913) 363-1234. Let's dive in. David, what do we got?

Hey, Mike. Enjoyed reading the book, but I'm having a hard time changing my portfolio. What I'm doing seems to be working. Why should I switch now?

This is a classic conundrum that what has worked will continue to work. So let's just have some fun playing out a couple of scenarios. Okay? Farming, you hired a bunch of people way back in the day, and everything was done. So you had a stable job because you had to pick the crops.

Right? That's how farming was done until the tractor came about. Replaced a lot of jobs. Right? Creative destruction.

Yep. Right? Things evolve over time. Another way to look at this is real estate investing was great until when? 2008, and then it didn't do so well.

Another way to look at this is right now, I think I saw the path to college has had a little bit of interruption. So according to the research, quote unquote, whatever that means

Uh-huh.

Forty one percent of college graduates for 2024 actually got a job.

Oh, that seems low. Yeah. Because when growing up, we were told like, hey, you go to school, and then you graduate and you get a job.

Yeah. It it works. Right? Yeah. Until it doesn't.

Right. 30% of college graduates in 2025 have a job.

Oh, it's going down.

So the idea that what has worked in the past and going to college did work in the past. Yeah. Having a stable job with manual labor was very dependable in the past. Things have evolved over time. Farming has evolved over time.

I think Tesla now makes cars without any human actually doing anything other than just overseeing in case something happens. Yeah. So I wanted to paint that picture in different lights because too often we have this assumption that in investing, if you're just investing and it's working, that it will keep working. All investments are predicated on the companies that you've invested in. So if they experience creative destruction, that sucks for you.

Yeah. I don't know any other way to put it. Uh-huh. Look at what happened to ATT when the cell phone came out. It didn't do so well.

Look at Cisco when Cisco was on top of the world in 2000, and then we realized maybe we spent a little bit too much money in infrastructure, and they fell off. So the hardest thing one of the hardest things a human has to do is to question its success. That's kind of counterintuitive. Right? Yeah.

Questioning your success. Okay. What has worked? Why would you wanna expend any energy into figuring out why what's working may not work moving forward?

I mean, you look at an NFL team, they have to change their playbook every single week. Right? What worked last week will not work next week.

I mean, that's different. I guess that's a great analogy because different teams are gonna play different ways, different economies, different environments. You're going to have to adjust along the way. Mhmm. If you wanna be good, or you can be like some teams that always lose.

I say that with, you know, a bit of my heart being torn because growing up in Seattle, the Mariners are still the only team that have never been to the World Series. They almost made it this year.

Yeah. Nope. Yeah. My heart was with them as well.

So now let's completely shift to another part of this, because this is behavioral investing is really what's going on here. It's not about being rational. It's about greed. Well, I really really wanna keep making more money. I really want this thing to keep going.

So how do you such a a hard transition, a hard turn here, but how do you catch a monkey? You ever ever googled that?

I've never googled it. I've never been in a position to have to catch a monkey.

Have you ever seen a monkey outside of the zoo?

No. I guess it's prevalent in like Southeast Asia though. Right? Yeah. I haven't been there yet.

So Funny. But I've heard about they're just all over, rampant. Yeah.

So monkeys are a funny breed Uh-huh. Creature. One of the ways you can catch a monkey, and I'm not a zoologist, but you read about these things, is you'll take a coconut, you'll carve it out, and you've got a little hole, and you put something curious in the coconut. Uh-huh. And the coconut's tied to something so that you can't run away with the coconut.

And the monkey will reach in there and grab the object that it wants. Yeah. But because the monkey's hand turns into a fist with an object inside, it now can't pull out of the hole. It's stuck. Uh-huh.

So a rational monkey would just let go and leave because it's exposed to predators or humans doing scientific studies on it or whatever. Yeah. But no, because they don't wanna let go, they hold on to their detriment. Now think about all of the stocks that you're emotionally attached to or the idea that you just buy and hold the S and P five hundred or the Nasdaq one hundred or the Russell two thousand or the Dow Jones Industrial or whatever favorite ETF or stock or investment of your choosing is.

Mhmm.

Are you holding on because of an emotional reason? Is it rational? Can you argue it? When does it not work? Are you prepared for that?

Are you looking for when it doesn't work? These are things that are not natural for human behavior. We don't naturally wanna do this.

Yeah. So that's a big hurdle to overcome.

Huge hurdle. So many people will say, well, it keeps working. I wanna hold on a little bit longer. Uh-huh. Okay.

If the markets were to tank 20%, would it have been worth it? Some will say yes. Some will say no. And that's okay. You wanna have the conversations because no one can actually time the market.

You're probably gonna be either way too early or way too late. Very few people get it right. And the ones that do, the self proclaimed philosophers, if you look back at their record, it's probably pretty horrible, but they're gonna focus on the one or two times that they got it right and brag about that. Mhmm. That's like me bragging about my hole in one, which is true.

I got a hole in one on a PGA golf course. I think it's PGA. Yeah. The PGA was there once. Uh-huh.

So that counts. A hole in one. I'm not that good of a golfer. So am I gonna brag to people saying, got a hole in one. I'm a better golfer than you.

No. It was a horrible shot that just happened to roll in.

And so if we equate that to, success in in predicting the market, quote unquote, It's Yeah. Really just a shot in the dark that you get lucky occasionally.

Yeah. We all get lucky occasionally. But the thing I really wanna drive home more than anything else is just because you've had something that has been successful, there's no guarantee that it will continue to be successful. As they say, past performance is no indicator of future returns. That goes for your portfolio that you're managing on your own or not.

Now it's okay to hold on to some positions and continue to ride out the mania. It's okay to wanna take some risk because risk really is when do you need the money? And if you don't need the money for a couple of years, then maybe you wanna hold on to some of it. But if you're retired, the dynamic, the environment, the needs change. And so that's what part of the book is really focused on how to retire on time.

Do you have enough assets from a protected source that if the markets were to go down, you could pull income from it while your other accounts have sufficient time to recover.

And is that the need that changes there? Like needing income?

Yeah. You've got to give up some of your gains, lock in those gains, and then put it into something that admittedly will probably make less money overall. Mhmm. That's a tough pill to swallow, And emotionally, many people struggle with it. But when you understand risk mitigation, portfolio management, and the fact that over a longer term period of time, the higher average annual returns don't actually advance your money as much as maybe a more steady average annual returns where the volatility or the ups and downs maybe aren't as wide of a range, but they're more concentrated and more consistent.

That's what selling some of your gains on the more volatile or risky stock positions are, putting it into something that can't lose money, but still has upside growth. I mean, the reality is, and this is very harsh reality. These are hard to swallow pills, the buffered ETFs Mhmm. The fixed index annuities, CDs, treasuries, these things are not gonna make more money than the market on the good years, but they're not gonna lose as much during the down years.

So you can't have your cake and eat it too. Is that what you're Yeah.

Yeah. But the last part I wanna talk about here in this question is people that believe in buy and hold are half right in thinking that it is a strategy. Warren Buffett doesn't really buy and hold if you think about it. He buys and holds until it makes sense to move on. He's sold when the time is right, and that's gonna be dependent on you and your situation.

So he has, in the past, purchased things like Wells Fargo or other banks, and he has sold them from certain times. He's bought Apple, and I I mean, he changes his portfolio. Bill Ackman changes his portfolio. Ray Dalio change these these are some of the great investment minds of our time. So buy and hold and close your eyes and just ignore whatever happens for the next thirty years.

That's not really a strategy because you're closing your eyes. That's more of a product pitch. Hey. Buy our stock. Buy our ETF, and close your eyes.

That's product sales. A strategy is I'm gonna buy it and hold it until whatever you define as the strategy. And it could be until the price crosses negatively the two hundred day moving average, and maybe that's an indicator that you consider, not a trigger, but a consideration of reevaluating the stock. Maybe you're looking at the price earnings, whether it gets too hot or it's just right. There are different metrics you could look at that say, based on a system that you've put together, hey.

Maybe I wanna reconsider these positions. Maybe I can lock in the gains and look for other opportunities.

And will a DIY investor know to look for some of those things you mentioned, or should they be working with somebody? How will they know when one of those

I think it is impossible for someone to really know if they're qualified for that or not. Because I know licensed financial advisors, some of them are brilliant, and some of them not so much. I know many DIY investors who are brilliant, and some of them who are ignorant with their brilliance. And so the self evaluation is very difficult to really look into. I mean, we we don't wanna be our own greatest critics.

Sometimes we are, sometimes we're not. Sometimes we ignore the blind spots. That's just part of being human. There's the psychological framework called the Dunning Kruger effect, where a lack of experience would suggest that maybe you overestimate your abilities because you don't know the right questions to ask. Generally speaking, if you've been managing assets in the market for over ten years, you've probably got hit on the cheek a couple of times, and you've learned a few lessons, and maybe you're more informed.

Maybe you just bought and hold and really weren't paying attention to it, and you got lucky. It's hard to say. But the point being is just because it has worked, it doesn't mean it will continue to work. Buying and holding and closing your eyes is more buying a product and hoping it works out as opposed to a strategy that can guide you along the way. And just remember that the S and P goes flat like most equity markets do for a ten year period of time.

So even though the markets have gone up for the last fifteen, twenty years, which is great Mhmm. It still can go flat like it did from 2000 to 2010 or 1966 for over ten years, 1929 for over ten years, nineteen o six for over ten years. Yeah. How would that feel if if you held on your positions and then you made no money for the next ten years? This is why I go I go back to that statement over and over again.

You don't win by buying products. You win by strategies. Understanding how to make moves along the way. That's my opinion based on my experience. That's all the time we've got for the show today.

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