Thoughts On Money [TOM]

In April of 1985, the world was introduced to New Coke. A corporate faux pas that would go down in history as one of the greatest marketing flops of all time; a what-not-to-do case study taught in business schools across the country.

As the tale is told, the Coca-Cola leadership team was nervous about losing market share to competitors. This anxiety was amplified by the PepsiCo marketing campaign – The Pepsi Challenge, a blind taste test that concluded consumers preferred Pepsi to Coke. The powers at be at Coca-Cola wanted to innovate, and they wanted to give the customer what Coca-Cola thought they wanted – New Coke, a sweeter flavor, a more Pepsi-like beverage.

It was no more than three months later that the company, Coca-Cola, reintroduced their classic flavor re-branding it with the “Coca-Cola Classic” moniker.

This soft drink story is the perfect example of the collateral damage caused by misleading benchmarks. Today we will talk about how benchmarking in investing can sometimes lead to similar woes.

Links mentioned in this episode:

• http://thoughtsonmoney.com

Trevor Cummings, the author and podcast host of Thoughts on Money, tackles the key topics investors care about the most.

Links mentioned in this episode:

• http://thoughtsonmoney.com

Risk Tolerance is one of the most obscure topics in finance. It’s extremely personal and difficult to measure.

Our industry invests a lot of time, money, and resources to determine your personal risk tolerance. Why? Because the optimal investment plan (portfolio) is the one that you can actually stick with, not the plan that pencils best in a textbook equation. If it does not suit your sensibilities, whatever they may be, you won’t possess the discipline to see it through to your desired goals.

Historically, times of calamity have led investors to abandon their plan, which is why the finance industry seeks this clarity around your investing tolerance levels.

Links mentioned in this episode:

• http://thoughtsonmoney.com

Trevor is joined by Sean Latimer, Drew Dill, and Nathan Straw

Links mentioned in this episode:

• http://thoughtsonmoney.com

2020 offered two key moments that are worthy of reflection.

Though 2020 feels like ages ago, right? Many of us are probably not inclined to reflect on a year that we’d prefer to forget.

Too often, we use the review mirror as a tool for regret rather than reflection. Here’s the difference – regret leads us to shame and embarrassment about a decision we wish we didn’t make. Reflection allows us to take a cerebral time machine and rethink our decision-making process. The benefits of hindsight allow us to see the impact of our process and our decisions clearly. The goal of reflection is not to cast judgment on your former self but rather to educate and inform your future self.

Now, let’s discuss those two key moments in 2020 that I am referring to…

Links mentioned in this episode:

• http://thoughtsonmoney.com

’ve been a sports fan most of my life. I‘ll watch any sort of sport, from the Tour de France to the Olympic Games to Baseball. The athleticism, the competition, the historical moments; what’s not to love?

If I had to pick my top two favorite sports, it would probably be basketball and football. I could describe to you many attributes that differentiate these two sports. One has pads and full contact, while the other is more a game of finesse; one has an 82-game season, while the other has a 16-game season; one has a roster of 15 players, while the other has a roster of 53 players.

Again, two totally different sports, but I’d like to draw your attention to one unique difference between basketball and football. In football, you play either offense or defense. In basketball, you play offense and defense. A slight difference that’s often overlooked.

So, why does this matter? Well, in football, you know your role and purpose. Your duties are clearly defined – you either tackle or avoid being tackled. In basketball, these lines are much more blurred. You may be a specialist at defending or ball-handling, or shooting, but your responsibility is still to show up on both defense and offense. The allure of offense, making baskets, and being the superstar on the court, can sometimes create quite a distraction.

Today I will discuss why you should view your portfolio like a football team as opposed to a basketball team and how a “basketball team” portfolio can get you in trouble. If I’ve piqued your curiosity, read on…

Links mentioned in this episode:

• http://thoughtsonmoney.com

What is the best hedge against inflation?

Links mentioned in this episode:

• http://thoughtsonmoney.com

Today, I want to talk about a word in finance that is often misunderstood and/or ignored – liquidity.   

There is a language of finance, and liquidity is one of those words that can be difficult to describe; it’s much like one of those words or phrases in Spanish or French that just doesn’t translate well into English.   

We hear things on the news about how the Federal Reserve is “injecting liquidity into the system,” or maybe we read an article about how “liquidity issues” led to the demise of a certain hedge fund or family office.   

You realize liquidity serves an important role, but maybe you don’t exactly know how it applies to your situation.  Even a quick dictionary search doesn’t give you much clarity.   

So, let’s discuss how this mysterious concept of liquidity applies to you personally and how crucial liquidity is to your personal financial plan. 

Links mentioned in this episode:

• http://thoughtsonmoney.com

Growing up, I didn’t know the difference between salad and lettuce. I’d always asked my dad to put salad on my sandwich. Luckily, dad knew what I meant.

All this to say, words have meaning, and they can often get lost in translation. There is a lot of vocabulary when it comes to finance, and there is a language of finance. You need to be careful not to misuse these financial terms in a fashion that would mislead your portfolio or financial plan.

It’s helpful to have an advisor. They can be your guide; they can be your translator. My dad was a great advisor; he didn’t pile a salad onto my sandwich. Our waiter just took our order and gave us what we asked for (nachos); he was not much of an advisor. You need an advisor, as these mistakes in the realm of personal finance can be costly.

Because maybe, just maybe, diversification doesn’t mean what you think it does.

Links mentioned in this episode:

• http://thoughtsonmoney.com

A surplus in cash flow can be problematic.   

Alternatively, when one has more income than expenses, it can be difficult to decide what exactly to do with the leftovers. 

Here at The Bahnsen Group, one of the core strategies we implement is a dividend growth strategy.  Many of our clients love this philosophy and its mechanics because it generates a predictable and sustainable income.  BUT, beyond these benefits, perhaps one of the greatest arguments for the validity of this strategy is that dividends are, in fact, a great use of “leftovers” (profits).   

Contact: [email protected]

Links mentioned in this episode:

• http://thoughtsonmoney.com