In this episode, we discussed concentration and risk in both investing and financial planning.  Nathaniel started the conversation by asking: why would anyone invest in your 20 fair ideas if you can invest in your best 5 ideas?  The key is to understand your circle of competence.  Like Nathaniel always says, I know what I know, and I know what I don't know.  Dan added, the most dangerous investment is when people think they know something, but they truly don't.  Using Coca-Cola as an example, Nathaniel explained how PRICE and VALUE, RISK and VOLATILITY, are not the same things.  Understanding their differences, doing deep research, studying the company, plus having a margin of safety, are the tools to minimize risk while concentrating an investment's weighting.  Dan explained why over-diversification in investing can harm you. Tim added that the reason why we are comfortable with concentration, other than Nathaniel's ability, is that we have done financial planning to a T and thus understand our situation and goals.  Like in life, you have to concentrate on your primary job/investment, so that everything else is achievable later in life.  Don't get caught up and get sidetracked by "but my friends are doing XYZ" - just focus on what you are good at.

Today we talked about the bandwagon bias. It is a tendency to want to conform, be part of the crowd, to do things because others are doing them or believe in them.  It’s also known as herd mentality and is similar to groupthink. This is a bias we see daily in investing and in financial planning.  It happens so often because it's natural.  Nathaniel gave a couple of examples in investment history of how that bias has caused some investors' losses.  Tim discussed how that impacts clients' financial planning: they want us to tell them how are they doing compared to our other clients.  The answer is always: it doesn't matter because everyone has different goals and lifestyle preferences.  You may fancy your neighbor's new BMW, but do you know if they took on heavy debt to buy it?  Do you still want to follow in their footsteps?  As to how to fight back against bandwagon bias, Dan suggested that we should take time to think and think critically.  Tim added that you should not be afraid of asking questions, and to be the dumbest person in the room.  Nathaniel reminded us to try to be rational and be honest with yourself as to what YOU want in your life.  Tim's conclusion is simple but straight to the point: understand who you are and what you value.

In this episode, we invited Mike Steadman, a fellow Bunker Labs veteran entrepreneur, to speak on topics ranging from race to entrepreneurship.  Mike is the Founder of IRONBOUND Boxing, a veteran-owned company whose core purpose is to “change lives through boxing.”  We started the conversation with his experience in the Marines as an African-American infantry officer, and how he grew from there to become an entrepreneur.  He talked about his non-profit part of the business and how the boxing coaching experience transforms and benefit youth.  Tim asked Mike where he got his drive to start all of this, and Mike spoke about his mother's influence and his family's tradition of "giving back."  In Mike's opinion, when we discuss race, we focus a lot on social injustice, but not enough conversation on economic drive.  It's important to build an economic environment that every race can thrive within and to achieve that, education and consistency are key.  We hope you enjoy this episode.  Talk soon!

It's part 2 of the Price vs Value fight!  We discussed how a different narrative can shape the price of the same company so differently, and thus the importance of understanding the fundamentals of the company rather than the stories that you’ve been told.  Dan asked a very interesting question: with more and more non-professional “do-it-yourselfers” entering the market, will that enlarge the disconnect between price and value?  Now, remember we recorded this podcast before COVID-19 hit us and, at the time, we were in one of the longest bull markets.  It’s incredible to hear Nathaniel’s answer because when he predicted what people will do when the market turns 20% down tomorrow, he was dead on!  As Dan quoted, price is what you pay, and value is what you get.

In this episode, we talked about stocks' Price vs Value.  Price is simply what the market is willing to pay today, at the moment; price is arbitrary and value is fundamental.  Nathaniel explained why they are often different, and the disconnect between these two is what a good investor looks for: a cheaper price for a higher value.  It doesn’t matter what kind of investor you are: growth-focused, value-focused, international-focused...in the end, the goal is the same, just with different applications.  Nathaniel gave great examples of how irrational markets could be, and Tim added that you shouldn’t replicate other investors’ portfolios without understanding their reasons for buying and selling.

In today's episode, we talked about loss aversion. In cognitive psychology and behavioral economics, loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains.  Tim asked Nathaniel two questions: 1. what would you choose: guarantee to get $900, or a 90% chance of getting $1000, but a 10% chance of getting nothing? 2. what would you choose: guarantee to lose $900, or a 90% chance of losing $1000, but a 10% chance of losing nothing?  Nathaniel gave his short and simple answers to both questions and explained how that affects his behavior in investing.  Dan's suggestion to break this loss aversion bias in the daily financial decisions is to stop viewing only what's in front of you, but looking at it from a more long-term, and holistic view.  Tim stressed the importance of having a process and structure, not to let your instincts jump to a conclusion, but think it through, and let the numbers guide you.

In today's episode, we talked about the restaurant industry during COVID-19 with one of our local restaurant owners Lance Ratze.  Lance is the owner and creative force behind Yola’s Café.  He reaches into the heart of the community with community events, local non-profit support, and strong business networking.  He briefly talked about what kind of difficulties restaurants are facing during this time, and what they are doing to cope with it.  He discussed the PPP loan, where it helped, and where it was lacking.  Nathaniel asked an interesting question about "ghost kitchens", and Lance talked more about that and the importance of collaboration within the industry.  Dan and Tim asked as a consumer, what can we do to help our beloved local restaurants and cafes.  Lance's suggestions are short and simple: be patient and kind to the staff and owners for they are trying to figure out what's the best and safest way to serve you.  Dan urged all local restaurant owners to reach out for help: it's time for us to lend a hand to each other.

For Part 2 of “What is a Financial Planner”, we talked about our view on some industry credentials and what they provide.  Tim, who has both CPA and CPWA credentials, shared his experience on both courses.  While they were helpful, he said, nothing trumps self-teaching and life-long continuing education.  He added, the most difficult, and yet most fascinating part of financial planning, is the qualitative side.  It’s not just about money and numbers, it’s also about your goals and lifestyle that you are willing to pay for.  We believe that the key in financial planning is a forever changing, agile process.  Like Dan brilliantly pointed out, as life changes, so should your plan.  A financial plan is just a snapshot of a period of time - it should always evolve with your life.

In this episode, we are going to talk about what a financial planner is.  Tim briefly explained the history of how the financial planning industry evolved from passive planning to actively giving out advice.  Dan mentioned that here in LBW, we believe a proper financial planner's role should be both a financial consultant and a family office manager.  With that in mind, we actively choose not to sell products but sell services.  Nathaniel later pointed out that it's crucial to understand your Advisor's incentives.  How they get paid can make all the difference in what they would do for you.  In addition, we discussed the disconnect between the public's view of our industry as a financial planner versus what we truly can provide.

In this mini-series, we are going to talk about five cognitive biases and how they affect us in our financial decisions.  Anchoring Bias refers to when a person latches onto the first piece of information they see or hear and end up being an "anchor" for new information that follows.  Nathaniel mentioned how that effects him then it comes to investing in the stock market.  To combat this bias: analyze historical data, but don't hold onto those historical conclusions.  As one of our favorite quotes goes: "history doesn't repeat itself but it often rhymes."  A cousin of the Anchoring Bias is Recency (Availability) Bias.  This is a tendency to overvalue the latest information available.  Dan pointed out how people are overly optimistic, and assume the market will always go up when times are good, and then go to the opposite extreme when times are bad.  The key to avoid both biases is to gather information from different sides so that you can have a more comprehensive understanding.  Tim explained how we can actually utilize these biases to our benefit when negotiating salary, buying a house, etc.  We ended the podcast by recommending some of our favorite authors' books on these cognitive biases.