Rick Ferri: Core-4 Portfolios for Simplistic Success

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welcome to fun with annuities with your

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host me stan the annuity man america's

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annuity agent can annuities be fun can

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contractual guarantees be fun

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absolutely they can find out the brutal

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facts about annuities with no sales

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pitches or high pressure nonsense just

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the brutal and factual annuity truth

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which is all you need to hear

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let's have some fun with annuities and

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let's have that fun start right now

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[Music]

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welcome to fun with annuities i'm your

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host stan

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the annuity man america's annuity agent

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as you well know

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boy do we have a good guess for you

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today

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um

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his name is rick ferry let me tell you a

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little bit about him and that is the

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spelling is

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f-e-r-r-i i'll have all his information

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as you know on my site at the

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annuityman.com he'll have a permanent

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page there um and i want to just welcome

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all the people on the major podcast

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platforms and on on the fun with

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annuities youtube channel where you can

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see rick and i looking at each other

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he is a i tell you what

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this is a person that is unique and and

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i can say that with confidence

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um

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this is a retired fighter pilot former

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stock broker ag

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adjunct college professor

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founded a firm for low advisory fees and

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now has a hourly consultant advisory

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firm which he's backed up and booked

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forever

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but i mean he is he's who we're looking

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for from the standpoint of a podcast but

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yes he started his investment career in

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1989

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as a stock broker at a large large wall

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street firm kind of like i do with uh

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dean witter payne weber morgan stanley

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ubs

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and then he um

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he just said hey i can do it better and

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he has core beliefs and and some things

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that are going to align exactly with my

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listeners and viewers hey rick thank you

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for joining fun with annuities i

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appreciate it thank you thank you stan

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for inviting me i appreciate it very

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much

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so we're not going to talk initially

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about investments we're going to talk

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about fighter piloting

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okay so can you give us the story there

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because um i went to the air force

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academy briefly in my career

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so i know what you did and what it takes

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to be who you are so can you give us the

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elevator speech on the fighter pilot

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background

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well i graduated from college the

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university of rhode island in 1980 and

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back then there was a i want to say a 13

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unemployment rate

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and

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it was not a very friendly job market

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but one of my buddies from high school

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had gone in the military had a had a

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good experience with that after high

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school and i was an eagle scout and i

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was always into you know camping and

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doing things outdoors so i decided i was

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going to go into the military and i

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looked around at the various services

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and the marine corps aligned with what i

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wanted to do the few the proud the kind

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of the

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do more with less

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do everything with nothing mentality

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that they had and so i

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joined the marines i went to quantico

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virginia officer school and they said to

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me would you like to fly a fighter

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aircraft and i said sure yeah

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right i've never flown before in my life

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but yeah we'll try that so i took the

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exams my eyes were good luckily and my

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you know they went through the medical

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thing and it was accepted into flight

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school uh went down to pensacola florida

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which is navy flight school

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which is all the marines go to navy

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flight school and there um

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is the first primary training and they

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throw you through a bunch of

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drills this is all the things you see on

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tv about you know

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uh turning off all the lights and and

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putting you in a what looks like a tin

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can and throwing you underwater upside

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down and say okay get out all of that

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stuff so did all of that and they got

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through it all took the battery of exams

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and

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somehow passed and they did a

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psychological exam and i somehow passed

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that as well and

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they uh sent me to uh to start flying

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airplanes and i did i did well enough so

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that they sent me to advanced fighter

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aircraft later on

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when they were selecting and i went down

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to kingsville texas where i met my

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my wife of 40 years and still married

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and uh

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got my wings about a year and a half

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later you know i do a lot of carry

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landings and a lot of air-to-air combat

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and shooting things and you know just

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all the kind of fighter pilot stuff that

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you you know you watch on tv and so

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forth did all that in flight school and

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then uh went off to fly initially a4s

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and then a6s

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and uh

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that was what i what i did for about

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eight years until i left active duty and

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and then i went in the reserves and

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actually retired from the reserves after

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20 years but when i left active duty i

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went to

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and went into the investment industry so

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i think that the the thing that i

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learned though

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most

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was when i was landing on aircraft

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carriers because it was both day and

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night aircraft carrier operations and

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that has to be so

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precise so accurate i mean

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any screw up at all and and you know you

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hit the deck you hit the water you hit

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something and so it's very very accurate

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no margin for error and and

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when i left that environment and i went

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to wall street it was the exact opposite

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correct

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yeah that's good enough you know we

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don't worry about these things and

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accuracy was never something that we

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were concerned about and you know you do

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what you do to

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to make your money and i that was

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completely foreign to me i mean i really

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didn't understand that so that

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that was one of my initial

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reactions to uh to wall street when i

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when i went there from that fighter

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pilot and

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you know environment

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what makes you go there i mean what made

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you go into the financial services

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business what was the drive there i

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actually had my undergraduate degree in

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business administration with a minor in

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entrepreneurial studies so i was very

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much an entrepreneur i had

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put myself through college by doing uh

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basically a flea market antique business

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i would go and buy

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antiques and various things from

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yard sales and auctions and uh you know

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clocks i mean you name it and i would

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turn around and resell them

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uh to dealers and recent and resell them

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at a booth that i would set up so i was

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very much into you know you could val

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what is the value of things and and what

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can you sell them for and it it

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interests me enough to

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get a business degree and also um when i

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was getting out i still had a very big

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interest in taxes and

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investing and and so forth i decided i

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wasn't going to be an airline pilot like

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all my friends became an airline pilot

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uh i decided i was going to go to wall

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street and uh that's what i that's what

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i did

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and you're one of the pioneers in lofi

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investment advice and portfolio

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management using etfs and index funds i

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mean you were the i mean pioneers take

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all the arrows and i'm sure you took a

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bunch early but uh and you and you've

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written seven over i think seven books

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um hundreds of articles people probably

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read them in wall street journal and

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forbes and places like that he's even

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won

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um

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even won an award on a research paper he

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did on index investing so i mean what

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the reason i was so happy for you to

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come on is i wanted you to talk about

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you know how your core beliefs then

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leads into

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the core what you call the core four

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number four portfolios i think that my

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listeners would be fascinated

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to hear about those six simple

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portfolio models

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that pretty much any investor can adopt

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and they can customize

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um as a foundation using that and even

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have put together a free website for

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public use on that which we'll have on

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our site you have to write anything down

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but can you cover i'm assuming core4

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comes from your core

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views and your core beliefs am i right

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well the word core

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i'm not sure yeah i think that

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it came from the idea that

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investing is a whole lot simpler than

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what

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people make it out to be especially

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people in the industry who are trying to

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make a living from this

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that uh you know it it's not that

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difficult and uh

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and the more you study it and the more

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you're in it

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you realize the simpler you can make

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things the better off you're gonna be in

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the long term if you can keep things

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very low cost if you can keep your taxes

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low

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if you could

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just

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buy it

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and put it away and forget it

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or maybe do some rebalancing once a year

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and you just don't do much i mean the

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less you do the better off you are the

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less moving parts the better but you

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would need to be broadly diversified as

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well so in the core fork idea which i

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developed probably 15 years ago

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initially

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was all what if we were just to develop

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a simple portfolio that might hold four

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funds say two stock funds and two bond

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funds

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that don't even really have to be bar

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bond funds i mean they could be uh cds

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they could be

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uh

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annuities fixed annuities and they could

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be anything as long as a fixed income

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type allocation but on the stock side

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you do

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a total stock market index fund which is

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a u.s fund that holds all of the stocks

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on on the market and a total

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international fund which holds all the

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stocks

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on the international market and these

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are your two core holdings

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along with your two bond holdings let's

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say

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and that's all you did how would you do

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and the answer is you'd actually

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outperform over 90 percent of everyone

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else with your investment portfolio just

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doing that well if you're not measuring

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yourself against the markets because

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you're not going to outperform the

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markets you're just going to get the

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return

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of the markets but you'll outperform

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over 90 percent of all other investors

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because they're all trying to do other

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things and that's probably a

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conservative number 90 is probably

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higher than that so that was the idea of

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the core four

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initially and i talked about it for a

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while and i wrote about it in

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forbes and then i

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actually created a website a few years

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ago and what i did with that website was

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i

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took a couple of variations of the core

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four i said well if you want

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a high dividend yielding portfolio then

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you could buy these four funds and if

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you wanted a

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esg socially

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conscious

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portfolio you could buy these four funds

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so it still was just four funds that was

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the idea and you could just this is the

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portfolio 100 in whole done finished or

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you could use it as the core of

10:51
something else where you might

10:53
put a little icing on the cake if you

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will this is the cake and if you wanted

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to put a little icing on the cake you

10:58
could add some other things to it so

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that was the idea make it simple so that

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anybody can do it you don't need to be

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paying

11:04
one percent to a financial advisor or

11:06
two percent

11:07
high fees

11:09
didn't need that just just follow this

11:11
recipe

11:12
bake your cake the way you want it and

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then you could add a little icing to it

11:15
and that was the whole idea and that's

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what i put out there

11:19
if anyone out there is like screaming

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into the uh at their car if they're

11:23
driving or they're on a whoever you're

11:25
at and you're saying wait a minute that

11:27
sounds eerily familiar to john bogle and

11:30
the bogle heads a spoiler alert

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um

11:34
rick co-edited the book called the

11:36
boglehead's guide to retirement planning

11:38
and he even is a host

11:41
of a podcast called boggleheads on

11:43
investing

11:44
so

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he's he's a disciple as they say of that

11:48
simplistic

11:50
type of approach in fact he he actually

11:52
will say that simple investing is

11:55
actually a virtue

11:56
and is really the ultimate in portfolio

11:59
sophistication which kind of leads the

12:00
whole steve jobs thing is simple is

12:03
complex correct

12:05
that's correct uh simplicity is a virtue

12:09
complexity is a cost

12:11
the more complex you make your portfolio

12:13
the costlier it's going to be it's not

12:15
going to perform as well

12:17
the fees will be higher you'll make more

12:19
mistakes

12:20
so complexity is a cost simplicity is a

12:23
virtue

12:24
and if you can follow this with your

12:26
investment portfolio and

12:28
you're going to be better off in in the

12:30
long term i mean it's it's a marathon i

12:32
mean we invest our whole lives all the

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way up until the end and actually we

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invest for our

12:37
kids and grandkids as well so this is

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multi-generational and if you can make

12:41
it simple and make it low-cost and

12:43
tax-efficient

12:44
you're going to be better off and that's

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that's the belief that the bogle heads

12:48
have the belief that i have correct

12:50
well and and what i like about all of

12:53
this is is you i mean

12:55
the funds and the etfs that rick is

12:57
talking about they're widely available

12:59
everywhere whether you want to do it

13:01
yourself or with a your brother-in-law

13:03
that's managing your whatever whatever

13:05
it work you know whatever works for you

13:07
that's what i like about it it's simple

13:09
it's tax efficient it's broadly

13:12
diversified it's low cost

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um and it works you know it works it

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works

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and i was thinking about as you were

13:20
explaining that to a person that's flown

13:23
a uh a fighter jet a jet and landed it

13:25
on a um

13:27
on an aircraft carrier market volatility

13:29
probably doesn't affect you that much am

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i correct

13:32
well

13:33
you know it was funny when uh i came

13:35
into the investment industry people

13:36
would talk about risk and i didn't

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really understand what they were talking

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about i said i don't really understand

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what risk is uh i get to go home every

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single night to see my family i mean

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this is not a risky business i just

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don't understand what you mean

13:48
by risk

13:50
but by the way i know people are yelling

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at at the uh at the screen and that

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they're at whatever they're listening to

13:56
and say sam please give this site okay

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i'm gonna have it on my site but it's

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the site that we're talking about

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is core c-o-r-e dash four dot com core

14:05
dash not the word dash but the actual

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dash four dot com and on there you can

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view free for

14:12
portfolios you can look at custom

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portfolios um it's all free keyword free

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i mean rick's not playing around now he

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is

14:20
i think

14:22
am i right about this but when you

14:23
started you came from the wall street

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firms you know we me and you both could

14:26
talk about that for a whole show but we

14:28
don't want to be negative um but when

14:31
you left there you're saying wait a

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minute this this can be so simple and

14:35
effective that

14:36
this is really an hourly fee type

14:38
arrangement is that what brought you

14:40
there how did you get to being one of

14:42
the pioneers of hourly fee advising

14:47
well a couple of things i mean cheryl

14:48
garrett from garrett planning network is

14:50
the pioneer of hourly advising i've been

14:52
a fan of sheryl's for 20 years so i give

14:54
her all the credit for that i just

14:56
adopted the model recently

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but when i left wall street the

15:01
brokerage industry back in 1999 because

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i was

15:04
well first of all i wanted to do this

15:06
type of investing for clients and i

15:08
couldn't do it as you know from being in

15:10
that industry back then you couldn't do

15:11
it there were no etfs well there were a

15:13
couple of etfs but but it wasn't like it

15:15
is now they've really shunned anything

15:17
having to do with index and it was all

15:18
about active management and high fees

15:21
and return on assets meaning how much

15:23
money you're going to get from your

15:24
client portfolio for you and for us and

15:26
for the firm and it wasn't about you

15:28
know client-centric at all really so

15:31
when i had the epiphany of indexing back

15:34
in around 1996

15:36
i decided i needed to leave that

15:37
industry but it took me three years to

15:39
do it because i had a contract and i had

15:40
to hang around for another three years

15:42
or i would have would have lost a lot of

15:44
money i had redone my kitchen we bought

15:46
a pop-up camper and you know i spent all

15:48
the money that i got and and so

15:50
therefore uh you know i needed to hang

15:51
out but i did but i just planned my

15:53
escape

15:54
and i left in 1999 and started a low fee

15:57
advisory business which was

15:58
revolutionary at the time i charged a

16:00
quarter of a percent 0.25 percent to put

16:03
put people in basically portfolios of

16:05
vanguard index funds and some etfs and

16:08
some

16:08
dimensional funded advisors which were

16:10
kind of like index funds and i custody

16:12
at schwab in custody at fidelity custody

16:15
at td ameritrade the client's accounts

16:17
but i'd only charged a quarter of a

16:18
percent

16:19
and that really took off i mean it it

16:21
was uh

16:23
it was

16:24
it went up to went up to a billion and a

16:26
half dollars and i ended up getting

16:27
bought out by a private equity investor

16:29
and a rather the ugliest transaction you

16:31
ever want to talk about and we really

16:32
want to want to talk about it there but

16:33
it was terrible it was a terrible thing

16:35
that

16:36
happened anyway uh

16:38
but uh when when i got bought out

16:40
eventually by uh this fellow uh he um he

16:44
went and took the company a different

16:45
direction unfortunately but

16:47
uh i was left you know without a job and

16:50
uh short not compete and i said okay now

16:52
i'm going to do really what i

16:54
have been thinking about doing for a

16:55
long time i'm going to

16:57
follow cheryl's lead and i'm just going

16:59
to do

17:00
advice for the sake of advice people pay

17:03
me now

17:04
by the hour

17:06
for advice and

17:08
that's it

17:10
i have no skin in the game

17:12
and i

17:13
i just do what i believe is in their

17:15
best interest and i say to them if i

17:17
were you this is what i would do and i

17:19
i'm really the truth that is exactly

17:21
what i would do i'm not trying to sell a

17:23
portfolio management service i'm not

17:25
trying to sell any products i'm just

17:26
trying to

17:27
help people with their financial life

17:30
and uh

17:31
i get that that's what my business is

17:33
now i work with one or two clients a day

17:35
for an hour or two a day and and that's

17:37
it per client

17:38
you just succinctly

17:40
define fiduciary

17:42
i hope so that's that's what if people

17:44
say it wasn't fiduciary rick just rick

17:46
just did it he's doing what he would do

17:49
for himself he's putting your best

17:51
interest ahead of everything

17:53
i find it funny that we have to somewhat

17:55
try to legislate people having morals

17:57
and efforts

18:00
if you're in the financial business you

18:01
should by default be a fiduciary because

18:03
that's why you're in it i want to go

18:05
back to the core 4 real quick and i was

18:07
digging in

18:08
last night and was really fascinated

18:10
because when you go to that site again

18:12
it's going to be on my website you'll

18:14
just link to it it's free there's a

18:16
classic portfolio there's a total

18:19
economy portfolio there's a global

18:20
markets portfolio there's an inflation

18:23
portfolio there's an income seeker

18:24
portfolio and even for you socially

18:26
conscious people out there

18:28
there's an esg socially conscious

18:30
portfolio

18:32
you pretty much covered the full

18:34
spectrum on that which was the first one

18:37
to

18:38
come which was the first one you

18:39
introduced and which one was the last

18:41
that you well actually the first one

18:44
isn't even on there the original

18:46
original classic portfolio was the total

18:48
stock market index on the total

18:50
international index fund

18:52
the u.s total bond market or aggregate

18:54
bond market index fund and a us tips

18:58
index fund sure now

19:00
for some reason i didn't put that one on

19:02
there but if there was a pre-classic

19:04
that was it and then i expanded it a

19:06
little bit and said okay let's just do

19:08
the total stock total bond market and

19:10
drop the tips

19:13
and go with uh three stock funds which

19:16
are the total stock the total

19:17
international and a little bit in the

19:19
real estate fund

19:20
but again you can make to match these

19:23
however you you need to it's all

19:26
as i wrote on the website you either

19:28
take them as they are or you modify them

19:31
to your needs

19:33
but the idea is simplicity be simple be

19:36
low cost

19:38
be consistent

19:40
uh stay the course be tax efficient all

19:43
the good bugle head type philosophy sure

19:45
that goes behind

19:47
these

19:48
these portfolios

19:50
and there's also

19:52
funds that do it all and you could you

19:53
could just buy a balanced index fund or

19:56
life strategy fund from vanguard and

19:58
it's

19:59
pretty close to the same thing only you

20:00
don't have to manage the portfolio

20:02
yourself they

20:03
they'll do it for you right there

20:04
through the life strategy fund so

20:06
there's other ways of doing it as well

20:07
to be very simple but this is the idea

20:10
be simple be low-cost

20:12
with that being said with over 5 000

20:14
mutual funds and over 2000 etfs you know

20:17
and counting

20:18
you know choosing amongst those can be

20:21
really hard to do

20:23
um on your site you list kind of a like

20:26
a four step five it's actually a five

20:28
step process

20:30
can you kind of go through that knowing

20:32
that and everyone knows that everyone's

20:34
situation is customizable but can you go

20:36
through the steps the five steps that

20:38
you laid out and once again that's on

20:40
the site but i think the the viewers and

20:42
listeners would be interested for you to

20:44
explain it since you came up with it

20:46
well great could you tell me first what

20:48
the steps are and absolutely

20:52
i'm six number one i don't remember

20:53
everything i wrote select a portfolio

20:55
strategy

20:59
so this would be the asset allocation

21:01
between stocks and bonds so you have to

21:04
make a determination

21:06
whether or not you're going to be

21:07
aggressive or whether you're going to be

21:09
conservative because you want to be

21:10
consistent with this so your strategy

21:13
is going to be

21:14
am i should be should i be aggressive

21:16
should i be 80 in stocks should i be

21:18
conservative should i be 50 or 40 in

21:21
stocks so you first have to decide

21:23
what the cake is going to look like

21:26
and and how aggressive you're going to

21:28
be or how conservative you're going to

21:29
be and that's based on two factors

21:31
number one what kind of a rate of return

21:32
do you need do you need a higher rate of

21:34
return do you need a higher rate of

21:35
return i mean

21:37
are you required to get a higher rate of

21:38
return because you're really not able to

21:40
save that much and you really need to

21:42
get more

21:43
and that you would need to have a

21:45
higher allocation to stocks

21:48
but then also

21:49
your ability

21:50
to handle

21:52
risk because if even if you need to get

21:54
a higher rate of return if you can't

21:56
handle

21:57
the volatility that that implies then

21:59
you're going to

22:00
not get a higher rate of return because

22:02
at the worst time of the market you're

22:03
going to pull the plug and capitulate

22:06
and jump out and that's going to going

22:07
to hurt you so it's a combination of two

22:09
sides of the coin it's your emotional do

22:11
you understand yourself emotionally and

22:13
they technically do you understand how

22:16
you know what kind of rate of return

22:17
you're looking for to to come up with

22:19
the strategy that you need the uh

22:22
you know the asset allocation step

22:24
number two is choose a stock and bond

22:27
mix now you do have a link to the

22:28
vanguard questionnaire on there which i

22:30
think is is

22:31
is you is good okay so let me let me let

22:34
me reverse let's go

22:36
a little bit back up that i apologize so

22:38
the strategy would simply be getting to

22:40
be active or passive

22:41
so i apologize for that so this is

22:43
actually i already answered step two so

22:45
this is step one so step one is are you

22:47
gonna be active or passive and that's

22:48
simply are you gonna use low cost index

22:50
funds or you're gonna try to outperform

22:52
the market and clearly i say the benefit

22:53
to you is to use low-cost index funds

22:55
which leads us into number two which is

22:57
the asset allocation question of how

22:59
much you should have between stocks and

23:01
bonds sure

23:03
and then number three was just select

23:04
your funds i think that's the one that

23:06
people can go wait a minute didn't you

23:08
just say stan there's five thousand

23:09
funds and two thousand etfs and the

23:10
answer is yes i did

23:12
select your funds that's where you can

23:15
help correct with this with this side

23:17
sure sure so

23:20
99 of those funds are not needed

23:23
unnecessary redundant

23:25
you know they're there for some other

23:27
purpose other than to make you money

23:28
there to make somebody else money

23:30
the funds you want to concentrate on are

23:32
the total

23:33
market index funds us total market the

23:37
international total market and you could

23:39
go and screen

23:41
total stock market

23:42
index fund list total international

23:45
index fund list and you'll come up with

23:46
these databases that'll you'll be able

23:48
to screen for this there's not that many

23:50
of them out there you know fidelity has

23:53
them schwab has it vanguard of course

23:54
has it

23:55
some etfs like uh

23:57
state street has it uh ishers has it and

24:00
they're all very very similar

24:02
you look at the underlying index that

24:04
they follow that they follow and they're

24:06
all very similar they all have at least

24:08
2500 stocks all the way up to 4 000

24:10
stocks they're all low cost so really

24:13
any of those would work well

24:15
uh same thing on the international stock

24:17
fund you do total international be the

24:20
same thing you'll get a laundry list of

24:23
funds and etfs that

24:26
track the entire international market

24:27
which is maybe

24:29
six thousand other companies not in the

24:31
u.s

24:32
fidelity has one vanguard has one there

24:35
there's there's a number of them out

24:36
there some of them include

24:38
emerging markets those are ones i like

24:40
so it's both developed markets and

24:41
emerging markets and one fund

24:43
so there's

24:45
probably five or six

24:47
really good very low cost funds that are

24:49
available by different vendors that

24:52
different fund companies that are better

24:54
available to you and on the bond side

24:56
there's

24:57
total bond market is offered by vanguard

24:59
by fidelity by schwab

25:02
i shares state street

25:05
there's

25:06
black rock has there's a lot of

25:08
different

25:09
total bond market funds and again on the

25:12
fixed income side it could be different

25:13
it doesn't have to be bond fund it could

25:14
be a cd ladder it could be annuities

25:16
fixed it could be any could be a lot of

25:18
different things on the on the bond side

25:20
but um

25:21
there's

25:23
these are the core funds that you're

25:24
looking for

25:25
and

25:27
the the differences between them are not

25:29
much the fees are all very very low like

25:32
in the stock funds they might be .03 to

25:35
maybe 0.05 percent they're all very low

25:39
international might be a tad higher than

25:41
that bond funds are going to be very low

25:44
and so you can tell when you're looking

25:45
at the fund the expense ratio really

25:47
whether you've got what you're looking

25:48
for because

25:50
if the expense ratio is very low around

25:52
less than 0.1 percent you're probably

25:55
fishing in the right lake this is what

25:56
you should be

25:57
looking for

25:59
you've partnered with a firm that offers

26:01
something called the portfolio

26:03
visualizer which is step number four

26:05
analyzing your selection or ongoing

26:07
analysis of those selections yeah

26:10
without

26:11
thinking that people are going to go

26:12
down the rabbit hole here because we

26:13
don't want them to do that obviously

26:16
tell us how that works and and how

26:18
you've simplified that

26:21
well the portfolio visualizer again is a

26:23
free website and you can just type in

26:25
these exchange traded fund symbols in

26:27
there and if you

26:30
wanted to know

26:31
what the performance was which some

26:33
people do

26:34
personally me i i don't care what the

26:37
performance was it makes no difference

26:39
to me i

26:40
that's in the past i i have a good idea

26:42
why i'm investing in these funds for the

26:44
future but i mean if you really wanted

26:45
to know you could type them all into

26:47
this free website portfolio visualizer

26:49
and you could see this portfolio

26:51
achieved x return with x amount of risk

26:54
and had so much downside and so much

26:56
upside during you know various market

26:58
cycles and you could look at it now i

27:00
don't really believe that that

27:03
i mean i i can't even recall the last

27:06
time i actually

27:07
calculated people people do calculate

27:09
that i have people who

27:11
who i get i get on

27:13
the internet and i can find people who

27:15
calculate what what the rates of return

27:17
are of those portfolios but i don't and

27:20
nor do i care because i'm not

27:22
i i guess i'm work after 35 years in the

27:25
industry and seven books and cfa and mba

27:28
and all this other stuff that i've done

27:29
a masters of science and finance and

27:30
blah blah blah and all the research i

27:32
realized that

27:35
that's not that doesn't really give me

27:36
any information at all

27:39
you know what that happened if i'm doing

27:40
low cost and i'm doing diversification

27:43
and i'm doing low taxes and i'm going to

27:45
stay the course i know what i'm expected

27:47
to get out of that going forward it

27:50
doesn't really matter what happened over

27:51
the last five years or ten years and

27:53
quite frankly it's really a distraction

27:56
to go down that road but since some

27:58
people want to see then it's there and i

28:01
did link up with them again it's all

28:03
free it's not like there's

28:05
any kind of a

28:07
cost in doing any of this

28:09
that's what i love it's no gotchas once

28:11
again let's before we get to step five

28:13
because i'll let you knock that one out

28:14
of the park step one is select a

28:16
portfolio strategy step two is choose a

28:18
stock

28:19
and bond mix step number three is select

28:22
your funds

28:23
step number four is analyze your

28:25
selections and step number five

28:28
rick

28:29
invest your core for portfolio yes

28:33
that's it now no i know you're investing

28:37
pull the trigger so in other words don't

28:38
just

28:39
pull the trigger right right

28:40
procrastination it's the last phase so

28:42
uh let me kind of talk about the three

28:44
phases of this or the three steps to

28:46
getting this done the first step is the

28:48
philosophy which is the you know what

28:50
you had talked about

28:52
whether you're going to be passive or

28:54
whether you're going to be active if

28:55
you're going to do index funds you're

28:56
going to be passive low cost so that's

28:57
the philosophy that you're using you're

28:59
not going to try to outperform and then

29:01
there's the strategy and the strategy is

29:02
what we had talked about how to select

29:04
the funds how to select your asset

29:05
allocation and then how to select the

29:06
funds

29:08
and all of uh everything you need to do

29:10
if you want to test it or look at it

29:11
whatever but come up with what it is

29:13
you're going to do

29:15
now's the hard part

29:17
now the hard part and the hard part is

29:20
do it

29:21
get actually do it get it implemented

29:24
and maintain it this is excruciatingly

29:28
difficult the other stuff is interesting

29:30
i mean there's an epiphany of the active

29:33
versus passive side step one where you

29:35
say oh wow i get this this is great this

29:37
is wonderful i'm i i get the whole idea

29:40
the clouds lift i i get the whole thing

29:42
and then you start digging into the

29:43
details of okay how do i do this how

29:45
should i do it what should my portfolio

29:47
look like what funds should i use how do

29:49
i mix all this stuff together and you

29:50
get to that point this is what i should

29:52
do

29:53
that's kind of uh you know stimulating

29:55
brain stimulating if you will but now

29:58
comes the hard work and that is do it

30:01
do it

30:02
well

30:03
and that's what that's that's in life i

30:05
mean it's hard it's hard to pull the

30:07
trigger

30:08
um

30:09
of the seven books that you've you've

30:10
written and i'll read them all to the

30:12
to the listeners and viewers and once

30:14
again we'll have the link straight to

30:15
his uh

30:16
his amazon site so you can buy them

30:19
um and the books are titled all about

30:22
asset allocation

30:23
um another one's called all about index

30:25
funds another the etf book

30:29
fourth one is the power of passive

30:31
investing fifth is protecting your

30:33
wealth in good times and bad

30:35
fifth is serious money straight talk

30:37
about investing for retirement

30:39
and then the the final one the

30:42
bogglehead's guide to retirement

30:43
planning two of those jumped out at me

30:45
rick which is

30:46
protecting your wealth in good times and

30:48
bad and then the serious money straight

30:50
talk about investing for retirement most

30:52
of the people that are listening to this

30:53
either

30:54
thinking about retirement in retirement

30:56
can trying to spell retirement but at

30:58
least going in that direction

31:00
and then the other one so we need to

31:01
talk a little bit about that but the

31:03
good times and bad which seems to always

31:05
be around

31:06
can you discuss the current environment

31:09
and what people

31:10
you know the fears people have you talk

31:12
to them just like i do and sure what's

31:14
your advice mr fighter pilot

31:17
well

31:18
this too shall pass

31:20
uh

31:22
look uh investing it doesn't come

31:24
without risk if you don't want any risk

31:26
well you can't you can't invest

31:29
without risk because even if you left

31:31
your money in a money market fund

31:33
inflation is eating it away right now so

31:36
you have inflation

31:38
risk it's just living has risks

31:41
so

31:42
money has risks burying your money in a

31:44
mason jar is risky

31:46
so it's it's not uh

31:52
this environment is not different than

31:54
any other environment it's always

31:56
unknown

31:57
there's always something you could point

31:59
to that's bad you can always point to

32:01
something that's good

32:02
that's what makes a market

32:05
we have uh you know interest rates right

32:08
now are ha

32:09
i i

32:10
never say are going anywhere so i can't

32:13
say

32:15
little tongue-in-cheek i cannot say

32:16
interest rates are going up because we

32:19
don't know that now we think interest

32:21
rates are going up but we don't know

32:23
interest rates are going up and so many

32:24
people have been hurt

32:26
because for 15 years they thought

32:29
interest rates were going up and

32:31
interest rates went down

32:33
uh so

32:34
now interest rates have gone up they've

32:37
gone up a lot in the first quarter in

32:39
fact more so than in the last 40 years

32:41
they've really people who have my had

32:43
money in bonds

32:45
bond funds have lost more of their

32:48
temporarily because things are

32:49
self-correcting in the bond market

32:51
remember those bonds come due they get

32:53
reinvested

32:54
money coming in now the dividends and

32:56
interest coming in from uh

32:58
cash paying securities get reinvested at

33:01
higher rates so it becomes

33:02
self-correcting self-writing doesn't

33:04
happen right away but it does happen

33:06
so

33:08
this is uh but this is a shock to a lot

33:09
of people uh who

33:11
had not seen bonds lose money i saw it

33:14
back in 1994 pretty substantial losses

33:17
in the extent i was there yeah but not

33:19
as bad as actually it is now it's a

33:20
little bit worse now

33:22
uh at least

33:24
up until today and again i don't know

33:26
what's going to happen from this moment

33:27
forward but that's what has happened

33:30
and stocks

33:32
have

33:33
come down some

33:35
and

33:36
there is a relationship between higher

33:39
interest rates

33:40
and lower stock prices so the fact that

33:42
interest rates have gone up and the

33:44
rights of stocks have come down some

33:47
there's no surprise

33:49
if interest rates continue to go higher

33:51
it could be stocks will will continue to

33:54
go lower however if it doesn't that that

33:56
doesn't happen

33:57
on the plus side you've got a tremendous

34:00
amount of cash sitting on the sideline

34:02
from

34:04
that needs to be invested even my

34:05
clients portfolios

34:07
just

34:08
overly stuffed with cash

34:11
and

34:12
waiting to invest in bonds and stocks

34:16
trillions of dollars out there in the

34:17
banking industry waiting to be invested

34:19
in stocks and bonds so there's this

34:23
avalanche of money out there that could

34:24
come tumbling into the market

34:26
if say

34:28
there was a ceasefire or whatever

34:29
whatever the catalyst is you know

34:31
in the uk it doesn't matter

34:33
what it is they'll this could everything

34:35
could reverse um we just don't know we

34:38
don't know the things so

34:39
how do you invest

34:41
with all of these

34:43
uh known

34:45
unknowns and unknown unknowns and all

34:47
all of that how do you invest well you

34:49
have to have

34:50
an allocation that you can stick with

34:52
between stocks and bonds

34:54
through all market conditions you have

34:55
to be very low cost

34:57
be tax efficient

34:58
do some tax loss harvesting in your

35:00
taxable account if you've lost some

35:02
money

35:03
take the lemons and turn them into

35:05
lemonade go from one

35:08
vanguard total stock market index fund

35:09
to a i share total stock market index

35:12
fund go from a

35:13
vanguard total bond market index fund to

35:16
an i share total bond market index fund

35:18
it's not a wash sale

35:19
because there are two different fund

35:20
companies there so you can take the tax

35:22
loss and you can use those tax losses to

35:24
offset gains or ordinary income up to

35:27
three thousand dollars a year so you

35:28
just be smart about how to use these

35:30
taxi make make the tax loss an asset if

35:33
you will take advantage of doing that so

35:35
there are things you can do to take

35:36
advantage of uh the this

35:39
downturn that has occurred in the market

35:43
as far as changing your investment

35:44
strategy

35:46
that you don't want to do particularly

35:48
when things are either red-hot or

35:51
have taken a beating that's not when you

35:53
want to change your investment strategy

35:55
you don't want to become brave in a bull

35:56
market and you don't want to get scared

35:59
in a down market you just have to

36:00
maintain stay the course

36:03
and

36:04
things eventually self-right after a

36:06
while but it does

36:08
sometimes take a while

36:10
if you have money that you need to buy a

36:12
house with or you're going to be

36:14
doing something else with that money it

36:16
probably shouldn't be in the stock or

36:17
the bond market anyway it should

36:18
probably be sitting in a bank somewhere

36:20
earning

36:22
very low interest but and probably it's

36:24
below inflation interest but that money

36:26
is for your spending needs and i don't

36:29
really even count that as far as your

36:31
investment so you got to differentiate

36:33
monies as well long-term money you need

36:36
to be

36:37
very patient with in the short term

36:39
money just need to be very safe with

36:42
one of the things i was reading

36:44
i was reading a bunch of your stuff um

36:46
over the weekend actually

36:49
and one of the things that jumped out to

36:50
me is something you said about the

36:52
there's some

36:53
three attributes that successful

36:55
investors

36:56
have

36:57
and and you have cultivated this

37:00
over your you know 35 years of talking

37:02
to people and helping people and

37:04
listening to people

37:06
um

37:07
there are three and i want you to cover

37:09
each of them but it's number one is is

37:11
embrace a passive philosophy number two

37:14
is create

37:15
a portfolio strategy

37:17
and then the hardest one maintain

37:20
discipline

37:21
yes green like you that's that's an easy

37:23
one for for the rest of sure sure it is

37:26
that's an easy one well a lot of my

37:29
marine corps friends unfortunately uh

37:31
were flying jets unfortunately are not

37:33
around today because they didn't

37:34
maintain flight discipline

37:36
but um

37:38
okay

37:39
uh sadly but

37:41
let's cover pat you know we kind of

37:43
talked about passive philosophy and we

37:45
and portfolio strategy

37:47
can we talk a little bit about the

37:49
discipline and and the die hard

37:51
discipline that you

37:53
talk about sticking with the plan that's

37:55
easy to say because we've all started

37:57
and stopped and started diets and

38:00
written down you know first the year

38:02
goals but investing this is legit this

38:04
is real this is game time how do how do

38:06
you tell people to do that

38:08
yeah so you know the three things the

38:10
philosophy the strategy and the

38:11
discipline are really taking what you

38:13
initially started with about the five

38:14
things that i sort of boiled them down

38:16
to three so

38:17
you know took the asset allocation side

38:19
and the fun selection side and i

38:20
packaged it together into strategy so i

38:22
took that and made it five and then made

38:25
it three here so you can see the

38:26
evolution of this as i try to get even

38:28
simpler and simpler

38:30
uh when describing the approach but

38:32
again discipline is

38:34
two sides the first first side is

38:37
getting it invested you have to actually

38:40
implement it so the first part of

38:41
discipline is now that i've got the

38:43
strategy i've got my plan i know what i

38:45
want to do

38:46
getting it implemented

38:48
is difficult how do you tell people to

38:51
get over that hump

38:52
i i mean what do you tell them you have

38:54
a person on the phone and they just keep

38:56
him in and on and this is

38:58
you know you've had a couple of

38:59
conversations with them i can't i can't

39:01
get them to do it i i can't it's it's

39:03
good answers it's like it's like a uh

39:06
a physical trainer who says you've got

39:08
to come in and work out if you want to

39:09
get in shape

39:11
and they say yes i'm coming i'm coming i

39:12
promise i am i'm coming i'm going to do

39:14
what i'm doing to do it and they never

39:15
do it right i it you can you know lead a

39:17
horse to water but you can't make them

39:19
drink kind of thing i can show you what

39:20
you need to do i can help you create the

39:22
plan

39:23
i can't do it for you now here's where

39:26
advisors come in where they say they can

39:28
do it but they can only really do a

39:30
small portion of it because it might be

39:31
401k plan that needs to be implemented

39:34
you may have to buy some cds or do some

39:36
other things some paperwork has to be

39:37
done if they even as an advisor if the

39:40
if the client doesn't do the paperwork

39:42
doesn't follow through there's nothing

39:43
you could actually do about it so

39:45
the the first phase of this is actually

39:47
get it done get it done now i've got

39:49
some clients who are very very good at

39:51
it they've taken this plan that i helped

39:53
them create and they they went and they

39:55
got it done

39:56
and then there's the other half and the

39:58
other half

40:00
called me up a year later and saying

40:01
well haven't you been really upset with

40:03
me i really haven't been very good i

40:04
kind of got some of it done but not all

40:06
of it and then we go through it all

40:07
again and say okay and i write out this

40:09
is what you need to do you need to do

40:10
this this this this and i send it to

40:12
them and then a year later they call

40:13
back and they send me their portfolio

40:15
and it hasn't really changed very much

40:18
right so it's like thing

40:20
i can't do anything about that i i

40:22
honestly can't even want

40:24
the you you you at some point it gets

40:27
done maybe and if it gets done

40:30
that's the biggest hurdle i mean

40:33
by far once you get

40:35
it done

40:37
maintaining it is easy you know once you

40:40
go to the gym a few times and you start

40:41
working out it's easier to get in the

40:44
car

40:44
or and go to the gym because you're you

40:46
get into a routine and it makes it so

40:48
much easier but

40:49
this is the

40:51
implementation

40:52
phase of discipline is absolutely

40:56
the hardest phase of investing it's not

41:00
the philosophy it's not coming up with

41:02
the strategy that's all fun and

41:03
interesting it's the excruciating pain

41:07
that it seems like people sometimes have

41:08
to go through to actually get it

41:09
implemented but once it's implemented

41:11
once it's done

41:13
then they're

41:14
pretty much

41:15
it's easy to maintain it's really not

41:17
difficult at all do you think that

41:19
market timing or interest rate timing is

41:22
the

41:22
the killer of discipline

41:25
a lot of times

41:28
yeah let's talk about

41:30
this and let me frame it in a uh either

41:34
when you're going to implement the

41:36
strategy and you've got a bunch of cash

41:38
are you going to do a lump sum

41:41
you're going to do it all at once and

41:42
one day you're going to go in and you're

41:43
going to do all the trades and you're

41:45
going to get it done in one lump sum

41:47
or you're gonna dollar cost average

41:49
where it might put some in now three

41:51
months later you put some more in six

41:53
months later you put some more in and so

41:55
forth until it's all actually done now

41:58
it sounds a whole lot

42:00
more palatable to people who

42:02
oh you know who are looking at the

42:04
market and saying oh the market's high

42:07
or maybe the market has come down and i

42:09
think it's going to come down further

42:10
you know what if interest rates go up

42:12
and this and that because it's really

42:13
palatable to them to do dollar cost

42:16
averaging well let me tell you it's

42:18
usually not the best

42:20
way of doing it and here's why

42:22
it doesn't get done

42:24
it doesn't get done

42:26
what they'll do

42:28
is

42:29
look if you're going to do the lump sum

42:31
let's cover that for if you're going to

42:32
do the lump sum it's painful

42:34
excruciatingly painful and you might as

42:36
well get it into your mind that if you

42:38
do the lump sum and you take it all and

42:40
you implement it in one day you make the

42:43
change and you do it all in one day you

42:45
might as well just get it into your head

42:47
the next day the market's going to crash

42:50
you might as well get it into your head

42:52
because

42:52
it's going to you just expect it to now

42:56
we don't know whether or not it will or

42:57
not but you're sitting here saying when

42:59
should i do this when should i do it

43:00
okay i'm going to do it

43:02
now

43:03
you might as well have in your head that

43:05
your timing is the worst it could

43:06
possibly be and the market's going to

43:08
crash

43:08
because if it does then it meets your

43:11
expectation

43:14
and if it doesn't it's like wow

43:17
i actually went up you know this is

43:18
incredible i didn't screw myself okay

43:21
so you do it one time it's one pain

43:23
point that you have to get over and it's

43:25
a big pain point to get it invested and

43:27
no by the way statistically that's what

43:28
you should do mathematically you should

43:30
get it all invested at once and don't

43:31
worry about it but people want to be

43:33
able to do the dollar cost average

43:34
because it just sounds more sounds

43:36
better now let's go to the dollar cost

43:37
average person okay now

43:39
i gotta invest a million dollars i'm

43:41
gonna put 250 thousand dollars a quarter

43:43
for the next

43:44
uh

43:45
four quarters i'm going to start today

43:47
i put it in today i got my i got a

43:49
quarter of it invested three months from

43:51
now i have to go through the same

43:54
excruciary

43:55
pain

43:56
yep

43:57
in three months

43:59
maybe that money will get invested or

44:01
maybe i don't like what i see

44:04
going on in the world maybe i don't like

44:06
this election that's coming up maybe i'm

44:09
going to wait and another way it doesn't

44:11
get done

44:12
so dollar cost everything is a great

44:14
idea and if you could do it automated

44:16
where somebody else does it for you or

44:17
computer does it great well you have no

44:19
say in the matter that's great like a

44:21
401k

44:23
yeah the money comes out of your

44:24
checking your your check or your

44:27
paycheck and it goes directly to the

44:28
401k and it gets invested okay you don't

44:30
touch the money that's great somebody

44:32
else does it it works but when you have

44:34
to do it it doesn't work it's hard to do

44:37
but once you rip the band-aid and

44:38
implement it all all at once

44:41
it's done you're not going back you're

44:43
not going to change anything you're

44:45
you should expect

44:47
bad things to happen after you rip the

44:48
band-aid off there's going to be some

44:50
bleeding

44:51
you know potentially

44:53
and uh and

44:55
you should expect that just expect

44:56
you're going to be wrong in your market

44:57
timing expect that the market's going to

44:59
work against you as soon as you rip the

45:00
band-aid off

45:02
but but here's the thing about ripping

45:04
the bandit once you rip the band-aid off

45:05
it's off it's it's done the account's

45:07
invested yes there may be some bleeding

45:09
but you're not going to change it it's

45:11
finished you you've allocated you're

45:13
you're invested you're in the program

45:15
now

45:16
and now you can go forward um

45:20
dollar cost averaging you have to rip

45:21
the band-aid off like four times or

45:23
eight times

45:24
because you're putting this money in

45:25
over a period of staging it over a

45:27
period of a year or two and just ripping

45:30
the band-aid off once is hard enough but

45:32
having to do it four times or eight

45:33
times is just way too hard for most

45:35
people couple couple final questions

45:38
because this has been fascinating i

45:39
could talk to you forever but i am

45:41
interested with someone of your

45:43
background and knowledge and just

45:45
outlook on things

45:47
what's your take on bitcoin right here

45:48
not the blockchain technology is

45:51
obviously i think that's legitimate

45:52
technology but

45:54
the the bitcoin tulip bulb whatever you

45:56
want to call it i'm fascinated to know

45:58
what someone like you thinks about that

46:01
well i don't know what the value of a

46:03
bitcoin is uh to me

46:05
there is a cost to mining a bitcoin

46:08
and that is a really

46:09
fixed cost based on the amount of power

46:11
that you have to

46:12
use to mine a bitcoin and also the

46:15
amount of capital you have to put in

46:17
sure a hard hardware to to to get this

46:20
thing going so there is a cost to mining

46:23
a bitcoin and to me

46:25
at least the value of bitcoin should at

46:26
least equal the cost to mine it much

46:29
like if you were going to be mining

46:30
copper or gold or anything else i mean

46:32
at some point if

46:34
it's not

46:35
economical to mine bitcoin anymore then

46:38
people would stop mining bitcoin until

46:40
it did become economical so there must

46:42
be some

46:43
value to it because it is the currency

46:45
in which these miners are paid

46:48
for figuring out the algorithms and

46:50
confirming the trades and so forth in

46:51
the blockchain so there must be some

46:53
value to it uh and to me it's

46:57
it's it's the it's the

46:59
the the cost to mine it so be there's so

47:01
many miners out there and you can get

47:03
into the business pretty easily sure uh

47:05
by just downloading some basically free

47:07
software and you know buying some

47:08
computers and then hooking it up to the

47:10
to the grid but the bottom line is it's

47:12
hard to

47:14
uh

47:14
you know what is that cost is it 35 000

47:17
36 000 i mean there's a hash rate that

47:18
that tells us what the cost is so then

47:20
maybe that is the value the true value

47:21
of bitcoin and

47:23
things kind of fluctuate from around

47:24
that but i i don't know now as far as

47:27
using this in a portfolio

47:29
if you're going to treat bitcoin as a

47:31
currency some sort of a global currency

47:33
that um

47:35
you know it is it's important for some

47:37
countries you know third world countries

47:39
or emerging markets if you want to be

47:41
politically correct uh you know this is

47:44
a really uh

47:45
important uh technology that helps them

47:47
transact business

47:49
but um

47:50
yeah it's got a long way to go in this

47:52
country and develop markets

47:55
and i say to people if you're treating

47:57
this as a currency then are you going to

48:00
put it alongside of your portfolio of

48:03
yen

48:04
and uh sterling

48:08
and euro and deutsche mark are you going

48:10
to add it to that currency portfolio and

48:12
they look at me go well what are you

48:14
talking about i said well you're telling

48:16
me this is a currency

48:18
so that means you must have a currency

48:20
portfolio correct

48:23
and they it's like they never thought

48:24
about that i'm like well how can you

48:27
not have a currency portfolio

48:30
if you're talking about buying currency

48:32
this currency and so they said well i i

48:34
don't really want a currency portfolio

48:35
and i really thought about having should

48:37
i have a currency portfolio i said no

48:38
you don't need a currency portfolio the

48:40
fact is if the world starts transacting

48:42
in bitcoin if big companies start

48:44
transacting in bitcoin

48:46
it'll be part of the balance sheets of

48:48
corporations it'll already be in your

48:49
portfolio there'll be companies like

48:51
coinbase and so forth that'll be in the

48:53
total stock market index fund you're

48:54
going to have exposure to it sure you

48:56
don't really have to go out and buy

48:57
bitcoin to do that in fact if you want a

49:00
total total stock market fund you

49:02
already own a little bit of this already

49:03
so that's that is a a very good point

49:07
definitely one more question but before

49:09
i do that i was writing down just kind

49:11
of who you are i'm just fascinated with

49:13
the character that you are and the

49:14
personality that you are

49:16
which is i know my viewers and listeners

49:18
are just loving this but one last

49:20
question but before that i wrote down

49:22
fighter pilot entrepreneur visionary

49:25
40-year husband

49:27
bogle head leader rhode island ram i see

49:29
i know the mass

49:31
former marine investment advisor expert

49:34
cfa mba fiduciary

49:38
and all-around good guy and with that

49:39
being said i left out a bunch

49:42
yeah i used to be the rhode island table

49:43
tennis champion too at one time see

49:45
there you go ping pong

49:48
table tennis ping pong in the south you

49:49
know but um i do this with all my

49:52
celebrity guests at the very end and i

49:53
never tell anybody

49:55
beforehand

49:57
but i think you can handle it mr fighter

49:59
pilot you've seen something you can do

50:01
it so we're you know i'm we're going to

50:02
come in and we're going to land this

50:04
thing

50:05
on the uh

50:06
on the deck of the moving boat

50:08
mic drop moment

50:11
what would you tell people if you had

50:12
the mic for 30 seconds to a minute

50:15
words of wisdom from rick ferry

50:17
yeah all this money stuff is not

50:18
important uh your family is the most

50:20
important thing and if you take care of

50:22
your family everything else will will

50:24
work out uh happy wife happy life i

50:26
firmly believe that

50:28
and that's where you should be

50:29
concentrating your efforts all this

50:30
investment stuff i mean i wish i learned

50:32
about indexing a long time ago so that i

50:33
could have just done it with my

50:34
portfolio forgot it and got on to those

50:36
more important things

50:38
tell you what if you didn't write that

50:40
one down then re rewind the tape

50:43
so uh rick really appreciate you being

50:45
on and

50:46
fascinating conversation hopeful

50:48
hopefully you'll join us again

50:50
in the future

50:51
um i do want to thank everyone who's

50:53
watching on the fun with annuities

50:55
youtube channel listening on all major

50:56
platforms to fun with annuities which is

50:58
surprisingly one of the fastest growing

51:01
business podcast in the country and the

51:03
reason is because i have people on like

51:04
rick ferry so thank you my name is stan

51:07
the annuity man and i'll see you next

51:10
week

51:15
thanks for listening to fun with

51:17
annuities please hit the subscribe

51:19
button and make sure to go to my site at

51:21
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51:22
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51:24
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51:39
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51:42
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51:44
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51:47
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51:49
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51:52
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51:55
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52:05
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52:09
[Music]

52:20
you