It’s that time of the year again here at Apriem! Our annual Summer Internship Program has started, and every year I am reminded of how deep of a topic finance is.

At this point in my career, I have been in thousands of financial reviews and planning sessions.  I still learn subtle nuances around topics constantly. New tax laws, constantly shifting macroeconomics, the lives of our clients, and many more things are always changing.

This weekly letter goes out to 5 different generations, so for some of you this will be like practicing free throws. They will feel obvious because you’ve already experienced them.  You’ll hopefully nod to yourself as you read and think of stories from your own life that fit each principle. For some of you this will be the first time you think about a given topic, and I encourage you to dig deep and look for opportunities to apply it. In the arena of money, it is better to learn from others’ mistakes than make them yourself!

With all of that in mind here are 10 finance related things that I wish I had either understood or taken the time to truly understand right away when I first started.

  1. The landscape our financial lives play out on is not paved with cement, it’s more like the Saharan desert that moves with the wind. 

When I first started learning about finance, I wanted to know the fastest path from point A to Z. What is more efficient is to learn the skills and tools to navigate the ever-changing sands.

  1. A fit body, a calm mind, and a house full of love…things that must be earned and cannot be bought.  

I think it’s very common to think of wealth as mansions, Lamborghinis, and yachts. I certainly thought that way when I was younger. What’s not obvious at first, but becomes frighteningly obvious as life unfolds, is true wealth is having priceless things money can’t buy.

  1. The biggest risk to most people’s financial plan is often not volatility.  

Most textbooks hyperfocus on volatility because it is obvious, and most people intuitively understand volatility. It certainly feels risky and painful. The more lethal long-term risks are more esoteric in nature. Loss of purchasing power over time, permanent loss of capital, and debasement of underlying currencies are the true financial assassins.

  1.  Many things in life are simple. Do not confuse that with easy.  

The roller coaster of investing is no exception to this. Selling greed and buying fear is much easier said than done. It’s easy to say you’ll think of a 30% drop in markets as a buying opportunity when things are good. Hardly anyone pictures during calmer times what terrible things are going on in the world to produce that drop in the future.

  1. There are a lot of “experts” that have predicted 15 of the last 3 recessions.  

Be aware that pessimism sounds smarter. It also sounds like you’re trying to help someone when you’re pessimistically predicting a massive crash. Optimism sounds like a sales pitch. But optimism is what you need to stick with your plan and experience the wonderful magic of compound interest.

  1. The real answer is “it depends”.  

There are very few blanket answers in finance. Someone answering a financial question without understanding the subtle nuances of their life is being reckless in my opinion. Small details can dramatically change the optimal action to take, and most of the biggest questions people will face do not have formulaic answers.

  1. Understand the time horizon of the person you’re listening to.  

To a day trader the short-term noise of life is incredibly important. To a long-term investor short term noise is meaningless and only fundamental problems that lead to permanent impairment are important. A statement can be true for one investor, but categorically false to the other.

  1. Roughly 99% of Warren Buffett’s wealth came after his 50th Birthday.  

The real secret to Buffett’s wealth is the amount of compounding time he has had. He started investing at 11 and has never retired at age 92! Over 80 years of compounding without having to spend any principal or much of the interest at all. Most people really focus and invest for 10-20 years of their working life and then turn around and live off it. If Buffett had the same amount of compounded time, he would have a much more normal net worth despite high returns.

  1. Look for asymmetric upside.  

Heads I win big, tails I don’t lose much. These types of opportunities are all around us in life. Not just with money. You must be constantly looking though; they are not obvious to find. Much like when you want a certain car, and then suddenly your subconscious mind now sees that same car constantly on the road. Our human brain is amazing at filtering for things we seek out. Train to look for these opportunities.

  1. Equity. Equity. Equity. 

It is almost impossible to earn financial independence by renting out your time. You must disconnect your inputs from the outputs! Ownership in a private business, owning a piece of a business through stocks, renting out property or land you own, and many other forms of equity is the path to freedom. Building wealth while you sleep is a very powerful thing.

I hope this either helps you on your financial journey or can be a helpful forward to someone you care about. I wish you all a blessed life where you become as numerically wealthy as you want to be, but that you realize early on that being rich isn’t what you were really seeking in the first place.

Market Update

After the recent meeting of the Federal Reserve, the market is taking a breather as Federal Chairman Jerome Powell testified before the Senate Banking Committee as part of his semi-annual presentation of monetary policy to Congress. In his testimony, he emphasized the Federal Reserve’s intentions to increase the Fed Funds rate and maintain it at an elevated level throughout the year. This announcement had a slight negative impact on the market, leading to a sell-off, primarily in the technology sector. Alongside this news, Wall Street is also processing a range of housing data and the weekly jobs report. For the week, the S&P 500, Dow Jones Industrial Average, and Nasdaq are all down 0.61%, 1.03%, and 0.42%, respectively, as of today’s close.

– Chris Whitaker
Sr. Financial Planner & Sr. Financial Advisor

Disclosures:
Advisory services offered by Apriem Advisors (“Apriem”), a registered investment adviser with the United States Securities and Exchange Commission in accordance with the Investment Advisers Act of 1940. Any reference to or use of the terms “registered investment adviser” or “registered,” does not imply that Apriem Advisors or any person associated with Apriem Advisors has achieved a certain level of skill or training. Apriem Advisors may only transact business or render personalized investment advice in those states and international jurisdictions where we are registered, notice filed, or where we qualify for an exemption or exclusion from registration requirements. For complete information about our firm, please refer to our Form ADV Part 2A, 2B and CRS at any time.
The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. Past performance is no guarantee of future results. The reader should not assume that investments in the securities identified were or will be profitable.”
The S&P 500 Index is a free-float market capitalization weighted index of 500 of the largest U.S. companies. The Dow Jones Industrial Average, or DJIA, is a price-weighted index that measures the performance of 30 large publicly-owned companies in the U.S. The NASDAQ Composite Index covers more than 2,500 stocks in The Nasdaq Stock Market. All index data is reported on a total return basis, which includes dividends. One cannot invest directly in an index, and index returns do not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses a client would have paid, and that these expenses would negatively impact performance.