The Investing for Beginners Podcast - Your Path to Financial Freedom

The Investing for Beginners Podcast - Your Path to Financial Freedom

By Andrew Sather, Stephen Morris, and Evan RaidtBusinessInvesting
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The Investing for Beginners Podcast - Your Path to Financial Freedom episodes

  • IFB74: Potential Investor Problems When Examining the History of the Market

    Welcome to Investing for Beginners podcast this episode 74. Tonight we’re going to talk about potential investor problems when examining the history of the market. Andrew has been on a bit of a history bent lately and I’m a big fan of history and I love learning more stuff about what has happened in the past. Because that can always help us in the future when we make decisions those who fail to learn from the past are bound to fail in the future.
    So go ahead and starting off Andrew why don’t you go ahead and talk up to us a little bit about short time periods are valueless.
    Andrew: yeah so I think this is a nice kind of follow-up to last week’s because we kind of examines the same type of thing right. a lot of studies academic studies about the stock market are looking at what happened in the past and let’s see if we can find a trend a correlation and maybe use that to have better success in the future.
    And so we kind of focus in on like the acted the academic part of the particular problems that can arise when you’re looking at particular studies and then how they’re doing that.
    Now we can kind of look also how people like you and I the average investor might do kind of similar things and this is particularly common with beginners if you’re not putting thought into this and how it can affect what kind of decisions you’re making then  you might not even realize you’re making these kinds of mistakes.
    I mentioned last week I’m reading this book called bull it’s talking about the history of some of the bull markets right now I’m focused on the bull market of the 90s. And it’s cool to like see the book puts yourself in the shoes of some of these people as they were living it in real time.
    You had and I’m blanking on the name of this I believe she was a she was an analyst. basically she this was you have to put yourself again in the 90s you had the internet really kind of coming into the mainstream and it was really changing the whole business world and so she really kind of tied herself to technology she was an analyst who really covered technology stocks.
    And as adds a lot of these IPOs a lot of investment bankers are making huge sums I think there was one guy it said something where he made like 300 million dollars a year and he was kind of like a leader of one of the companies like a Morgan Stanley or Goldman Sachs or their these investment banks they’re helping these small companies go public obviously getting the Commission’s off of that.
    And so a lot of money was being made and a lot of people like this analysts were good at picking out the winners and really kind of bringing the stocks that were going from IPO to into the market and then having like relative success in the business world which would translate to massive success on Wall Street particularly in this time period because there’s just so much money going around.
    And you had the Fed cutting interest rates just flooding the market with liquidity so a lot of different factors that were leading up to everything that you saw in the 90s and that finally bubbled up and crashed in 2000-2001.
    But this analyst became like a great expert and she became so bullish with technology stocks she produced this like three hundred page report and the book said that a six or eight page report at  on Wall Street was considered very extensive. So she went crazy with this and I think it said something about the future of the Internet or she was essentially covering like the Internet and new tech so she became very bullish. And became somewhat of a darling to the rest of the investment community and the rest of the mainstream.
    And so when she was bullish a lot of people trusted her and she was very good at what she did a lot of people trusted her and went bullish on a lot of these stocks and made money for ...
    36 min
  • IFB73: Wall Street Studies Pitfalls

    Welcome to Investing for Beginners podcast, this is episode 73. Tonight Andrew and I are going to talk about Wall Street study pitfalls, this is based on a book that Andrew is a big fan of by James O’Shaughnessy and we’re going to talk a little bit about some of the potential pitfalls that you may run into.
    We’re going to start off by talking about data mining and I think the easiest way that I could explain this was a metaphor that James used in the book and he talked about if you’re in Grand Central Station which is obviously a very large place with lots and lots of people around.
    If you find a specific area that has let’s say you go into one too but where one of the trains is running and you see 75 percent of the people there are blonde then you would be potentially thinking that hey everybody in Grand Central Station is 75 percent blonde and that’s not actually the case.
    It just happens to be at that particular time at that particular place that you find that and so the data mining is something that if you’re doing Studies on different Wall Street things you different factors of looking for let’s say you want to buy stocks on a Wednesday every 16th month well that’s not necessarily that’s data mining because you feel like you have to only buy stocks on a Wednesday on the 16th of the month.
    And that’s it could lead to a lot of pitfalls and okay that means dude but I mean.
    Andrew: that’s now uh that’s part of I think having tests that look at history you have to be very careful I think when it comes to studies in general and I’m sure you can extrapolate this to things outside of Wall Street and it’s very easy to take facts and weaponize them and make them sound like basically a way to advance your own agenda and you can manipulate statistics to do that.
    And so as investors who are looking at studies we like to talk about all the time on this podcast about how let’s learn from history.  History might not repeat it might look different every single time but we know that there are some core things are true history mostly rhymes.
    We have bear markets who have bull markets we have prosperity we have times where things tighten up credit expands creditor contracts these are things that we’ve observed over time and it’s recorded in written history. and so we can kind of see that this is how markets tend to work this is how human behavior tends to work and we can come up with a lot of different lessons from how this stuff all kind of works and we can use it in our investing.
    Something like data mining though is definitely a huge pitfall to be aware of. like you know I love that Grand Central Station metaphor if I were going let’s say I was a tourist to America and the first tourist thing I did was I went to an NBA game right and then if I just thought that the players on the court were a representative of the entire United States I would think everybody’s above six five.
    And you can do that and see that through a lot of different studies when it comes to Wall Street and you have to be really careful and look with a watchful eye. That hey there’s going to be things that you’re going to find out and this is true whether it’s a Wall Street study whether it’s something you’re kind of embarking on your own. And it’s very easy we talked to him a previous episode about biases and how it’s very easy for certain things to kind of skew your understanding of how the market really works based on your own skewed perception.
    We all view the world through our own unique lens and so it’s our own experiences and our own things and lessons we’ve learned that is tainting whatever conclusions were coming up with. It’s very important to have a skeptical eye with that and so on the one hand how we always talk about ...
    43 min
  • IFB73:Wall Street Studies Pitfalls

    Welcome to episode 73 of the Investing for Beginners podcast. In today's show, we will discuss some of the pitfalls of investing in data from Wall Street studies.

    Learn more about your ad choices. Visit megaphone.fm/adchoices

    48 min
  • IFB72: Shareholder Yield Metric: Cheap Stocks with Good Capital Allocation

    Welcome to Investing for Beginners podcast, this is episode 72. Tonight Andrew and I are going to talk about shareholder yield, this is a term that I came across when I read a book by Meb Faber. One of my favorite podcasters, he’s a quant investor that runs a ETF that he’s a fantastic guy really interesting super smart and sometimes he can be a little technical.
    But he’s very interesting and he wrote some great books that are on Amazon and quite a few of them were actually free. So the book that we’re going to talk about tonight that we’re going to reference let me rephrase that is actually free and I will put the link to that in the show notes. If you guys want to check out a little more deep dive into what Andrew and I are going to be talking about tonight that’ll give you an opportunity to check that out so well then further ado Andrew once you go ahead and start us off and talk a little bit about shareholder yield and capital allocation.
    Andrew: yeah so shareholders yield a metric it’s a good kind of description for a metric where you’re essentially looking at a CEO management of a company and seeing how are they allocating capital. You have earnings that you get right profits up that these companies have and as we’ve mentioned in previous episodes two to three episodes ago these companies have various decisions that they can they have various purposes that they can use this cash that they have for.
    And so shareholders yield is a measure to evaluate that and it can identify companies if there’s a high shareholders yield can identify companies that are really rewarding shareholders giving a lot of that cash and giving it back to shareholders and it doesn’t have to be in the form of a dividend that’s why it’s different than like the dividend yield.
    You have essentially the five ways that they can pay back shareholders and so they can reinvest back in the company and that’s good if the business if the core business is growing they can do a an acquisition a merger and acquisition. Where you’re they’re buying another company hopefully saving money by combining operations and obviously growing earnings and revenues in that way.
    They can pay down debt they can repurchase shares we talked about that extensively with the share buybacks episode and they can pay dividends.
    What we’re going to talk about today I think really gives a nice little measure and a way that you can take it one step further right. So we took the time to really introduce these kind of things and talk about them from a theoretic level. Hopefully you were able to learn that if you haven’t listened to those two episodes I definitely recommend doing that.
    But understanding the how it works and what these things are and then now this is a good idea of how you can apply it and use it practically to find good businesses good stocks to buy.
    I really liked the book that Meb Faber wrote shareholder yield he had like really cool kind of metaphor about the way some investors will look at stocks so he talks about this concept some I don’t know it feels like a legend or just a story.
    but there’s six blind men right and they’re all told to touch this elephant and they’re told to describe what this elephant is what it feels like and then kind of make some conclusions based off of that. One blind man might touch the tusk one might touch the tail one might touch the side or the bottom of his belly and they all describe different things but neither of them not one of them if they’re all just touching this one place they’re not able to accurately describe the whole picture and so when it comes to investing and buying stocks a lot of investors can fall into that trap as w...
    34 min
  • IFB71: Combining Entrepreneurship with Investing Through Website Flipping
     

    Welcome to the Investing for Beginners podcast episode 71. Today Dave is taking a break and I am taking over the reins. We have an interview for you today with somebody who has a really unique take on investing and it’s a cool little mix between investing and entrepreneurship.
    We have Greg Elfrink from Empire Flippers and what his company does is provide an outlet and a unique investing possibility and approach where like I said it kind of mends these two ideas of investing and entrepreneurship. And it quite literally is something that wasn’t available before the internet.
    This is something very new a new type of investment opportunity and for somebody who is particularly like me because I’m super passionate about entrepreneurship. I’m type A going to go out and spend way too many hours of my day kind of hustling and trying to make a secondary income and some of the who’s familiar with the online space is definitely this is a resource that you might be able to find useful for being creative and finding other investment opportunities.
    Greg welcome to the show thanks for coming on and thanks for joining us and giving us a couple ideas today.
    Greg: yeah thanks for having me Andrew I know this is probably going to be a bit different than your typical podcasts and like you said a relatively unique way of investing in creating a bigger thicker wealth machine for you in a kind of a different way not affected by the stock market and all that good stuff.
    Andrew: so yeah so I actually remember hearing about you guys I’ve mentioned Pat Flynn’s podcast on our podcast before.
    we’ve talked about passive income here and there so I heard about you guys on his podcast and I can’t remember if it was from him if it was for my guests but there’s something really cool you guys do and it’s essentially and you can correct me if I’m wrong or you’ll probably have a much more elegant way to put it than I do.
    But buying websites online or basically as businesses and then either working in them or kind of letting them run on their own and then collecting the income. Essentially buying a small business but you’re buying these websites online.
    Greg: yeah I mean that’s exactly it so what we do is we help people connect between the buyer and the seller and is it’s not always necessarily a website because it’s always a non-business but there’s a few business models on the internet that don’t really require a website which I know some weed sounds kind of weird.
    But like businesses we call them Amazon FBA so that’s like fulfilled by Amazon so that’s like an e-commerce business that’s using Amazon’s platform. So they don’t necessarily have a website but we’ve sold a ton of those businesses over the over the last two three years and obviously a bunch of websites as well.
    Andrew: okay yeah makes sense even that idea Amazon FBA is really new I don’t I don’t memory hearing about it like five years ago and then two or three years ago kind of everybody’s talking about it so that’s really good.
    Greg: for sure one of the interesting things too like even the concept of buying and selling on like businesses like you mentioned at the top it’s a pretty new concept I mean making money online is not even really 20 years old yet.
    There was some people doing it like in the 95 1995 and stuff but very few and far between and now we kind of reach this level where a lot of these businesses or are starting to mature as assets.
    So there’s an it’s a very interesting time so the buy and sell space still pretty young comparatively even two making money online.
    Andrew: all right so I know this might be unfair to you based on your experience or backgroun...
    31 min
  • IFB70: The 3 Major Types of Investment Risk and How to Combat Them

     
    Welcome to Investing for Beginners podcast this is episode 70. Tonight Andrew and I are going to discuss risk, we’re going to talk about all the different types of risks there are with investing and we have a very interesting show coming up for you.
    So without any further ado I’m going to turn over to Andrew and he’s going to start us off.
    Andrew: yeah so when I think about risk and when many people define risk and whether you talk to investment advisor you talk to maybe an individual investor who is more experienced and kind of understand what the risks are when it comes to investing your money.
    Well there’s kind of like three major ones so we’ll discuss each of those and it’s very important to talk about risk and think about risk. If you go back to the very basic definition of an investment which I always love to refer to when I’m talking about dividends.
    But if you say investment 101 what is that it’s essentially money that you put it you put money at risk and in order to be compensated for that risk you have a reward you have gains you have an income stream and that’s essentially what an investment is.
    And that’s no matter how what kind of investment you’re making that’s going to be how it works even if you do something like as simple as lending money to somebody and charging them an interest rate there’s going to be risk there. There’s risks that you lose all your money because some of the skips town and then they don’t pay you those payments right.
    And so obviously our shows focus a lot on the stock market we’ll talk about the stock market risks and some of the various factors that maybe somebody who’s a little bit more green or if that’s the right term somebody more new to the market some of these not as educated they might not have thought about these different things.
    It’s important to think about them important to learn them but also important to have a solution right to be able to understand that there is risk but historically and moving forward there are different ways to mitigate that risk and it can help it can help your overall returns it can help the type of results that you will see from your investing.
    And so make sure that’s something that you’re thinking about and you are forming your strategy in order in order to fight those risks.
    The first one this is very common commonly talked about in finance it’s a market risk and so just the fact that you’re in the stock market in general you’re going to have market risk. Another way it’s kind of referred to as it’s called systemic risk and basically it’s the risk that you get for putting yourself into the system.
    This is something that you are not able to really have an easy solution to go against. So if you think about the other two risks so a big one is business risk and that’s the risk of a stock you’re owning of the company going bankrupt that’s called unsystematic risk and then you also have like interest rate risk.
    With market risk you can’t diversify your way out of it so for unsystematic risk this is business risk a business of any one stock losing a lot of value or even going bankrupt and you lose your whole investment.
    You can the way you counter that is by reinvesting I’m sorry not reinvesting uh the way you counter that is by diversifying if you have enough eggs in the basket and one goes bad one cracks at least you have those nine other eggs those 19 other eggs and so you still have a big part of your investment capital intact.
    With market risk you cannot diversify that away unless you spread out unless you put less money into the market so because it’s stock market risk away.
    You can essentially combat that is by holding different types of assets and so that...
    46 min

About The Investing for Beginners Podcast - Your Path to Financial Freedom

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The Investing for Beginners Podcast teaches you how to buy your first stocks and build long-term wealth in the stock market— without the hype or confusing jargon.

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