Cullen Roche (00:02:55):
And so I start from a very general framework, where when I’m typically working with somebody, or trying to explain to them how they might allocate their assets, I always tell people that you should really start from a first-principles perspective. I start from the idea that the term investing is actually somewhat misleading. From an economics perspective, the term investing means spending for future production.

Cullen Roche (00:03:19):
And what we technically do when we buy stocks and bonds, we’re not technically investing. A firm invests when they spend money for future production. When Tesla’s building their cars, they’re spending for future production. But when we buy Tesla’s stock, we are literally allocating our savings to an instrument that will derive its returns based on how well the firm invests.

Cullen Roche (00:03:43):
And so when you work from that methodology or that perspective, you arrive at a different conclusion where investing is oftentimes viewed as this very sexy get-rich endeavor, whereas the idea of saving is much more prudent. That’s the foundation I typically try to get people to work from.

Cullen Roche (00:04:02):
And the reason that I focus so much on ETFs and index funds and just indexing, in general, is that when you’re saving, you generally need to diversify across lots of different asset classes. And the goal really is to diversify your assets in such a way that you’re meeting certain liability needs over time.

Cullen Roche (00:04:23):
For instance, everybody needs to hold some cash. Holding cash, I always tell people, cash is the worst investment in the long run. But in the short term, in terms of principle needs and being able to meet your liabilities, cash is the best investment. Because it’s the one that provides you with the liquidity and the ability to be able to meet those daily, weekly, or monthly cash flow needs. So to me, a lot of this is about matching your personal assets and liability needs across time.

Cullen Roche (00:04:51):
And so the reason that I like to focus so much on diversified low-cost indexing is that if you view your savings in a big bucket of your asset allocation as this portfolio that needs to meet these certain needs, well, diversifying across ETFs is just a very good way to be able to achieve a lot of diversification in a very low cost and diversified way. A lot of this is about setting very clear goals upfront, knowing are you someone who is trying to beat the market, or are you someone who’s trying to save for retirement and meet certain liquidity needs?

Cullen Roche (00:05:28):
And then filtering through what I would say is more of an evidence-based approach to investing, and working from the approach of really trying to more-so control what you can control, rather than… A lot of people try to, you can’t control what Tesla is going to earn next year, but you can control what the, for instance, the taxes and fees you might pay on that instrument are. So you can control things like taxes, fees, your asset allocation, and the biggie that I’m focused on is behavior. So those are the four big ones that you can really control.

Cullen Roche (00:06:03):
And so when you’re picking ETFs, and you’re looking at what asset classes you want to own to diversify across those ETFs, you need to figure out really what your personal needs are and what goals you’re trying to achieve. So that then you can apply the right components. Because by this point, there are thousands and thousands of ETFs available, there’s going to be thousands and thousands more, it’s one of the fastest-growing segments in the financial services industry. Mutual funds are going to continue to convert at a blistering rate in the coming 10 years because the ETFs are just superior products in so many ways.

Cullen Roche (00:06:39):
So there’s a lot of different options out there. I’m not giving a very customized answer because this is such a customized approach to the way we have to actually pick and choose these things.

Stig Brodersen (00:06:49):
Cullen, I can’t help but ask this question, because as much as this episode is about ETF investing, as an individual stock picker and we have so many in the audience we do pick individual stocks, I always think about whenever for instance you see ETF investing, passive tracking really be on the rise, this, that, here we have the S&P 500 that’s held in passive indexes and ETFs or mutual funds, it has risen by 0.5 percentage points in 2021. It’s now at 18.3%, the highest it’s ever been.

Stig Brodersen (00:07:20):
So keeping in mind that a lot of our audience are individual stock pickers, should we see this as a good thing or a bad thing that more money is pouring into passive investing?

Cullen Roche (00:07:32):
This is a really hot debate in the last five to 10 years, especially as the market seems to be on this just perpetual upward trend. And a lot of people will say that that’s due to trends like passive investing.

Cullen Roche (00:07:43):
The most interesting aspect of going through all the regulatory processes of actually building an ETF is that you get into the weeds on these debates and these definitions with SEC examiners and the people who are advising you on the legal on everything. So one of the big definitions that you come across is this active versus passive.

Cullen Roche (00:08:04):
And it’s interesting because I would argue that working from a really strict technical definition, there is no such thing as passive investing. So to me, there is the one truly passive portfolio in the world. And that portfolio is, it’s the portfolio of all the world’s financial assets.

Cullen Roche (00:08:22):
And the truth is that nobody holds that portfolio. But if you were buying into a purely efficient market hypothesis perspective, that’s the portfolio that you would buy. And you would never deviate from it, you would just let the market cap weighting drift as it would. Nobody can buy that portfolio. And so one of the main reasons is because literally, that portfolio is not investible. I built a global stock allocation within the ETF.

Cullen Roche (00:08:47):
The interesting thing is that when you look at the global market cap, I went back and forth with various attorneys on the definitions of this, global market cap weighting does not have a consistent definition. And everybody, literally everybody calculates it wrong. So even FTSE All-World, which is what Vanguard Total World is based on, it literally buys 70% of global equities. So it’s missing 30% of the global slice because so much of this is not investible.

Cullen Roche (00:09:14):
And so when people talk about passive, I think there’s a little bit of salesmanship in the way that the industry has framed this. The term passive implies that this is some sort of market-cap-weighted, pure market portfolio when the reality is that Vanguard has actively chosen to deviate from what the true global market cap weighting is.

Cullen Roche (00:09:38):
If you buy something like a 60/40 stock/bond index, that’s not truly a passive index. The people that built that 60/40 index, they constructed that index in a very active way, in that they’re deviating from usually to a domestic all stock, all bond allocation. And they’re choosing, they’re actively choosing not to hold literally tens of thousands of global instruments within that portfolio. They’re deviating from what the actual global market cap of stocks to bonds is in a relative sense.

Cullen Roche (00:10:11):
So right now it’s about 45/55. So 60/40 is actually an active deviation in a much more aggressive way, which I would argue is not that passive. So it’s a weird thing to think about. Because when you get into the really fine details of it, you realize that everyone’s active and everyone is choosing to be active for some specific reason. There’s nothing wrong with that necessarily.

Cullen Roche (00:10:37):
There are bad ways to be active. I would argue day trading is a bad way to be active. But if you’re building a portfolio that is in line with your risk profile, and is just really well balanced and diversified across the 60/40, and you’re rebalancing that thing once a year, I would argue you’re technically being active. But it’s a pretty smart way to be active.

Cullen Roche (00:10:58):
Stock picking falls into the same sort of bucket. There’s nothing inherently wrong with stock picking. In fact, indexers need stock pickers to be able to make the markets that they operate in. They provide the liquidity that makes indexing possible.

Cullen Roche (00:11:13):
And that’s a whole other aspect of this discussion, where when we break this thing down into this binary argument, we’re ignoring the fact that active needs passive to even be able to exist. I look at it as two sides of the same coin, in that when I’m constructing a passive index, or what we call a passive index, underneath the surface, that passive index fund is incredibly active.

Cullen Roche (00:11:37):
You should see the Vanguard trading desk. This thing’s humongous. These guys are sitting around trading stocks and bonds all day. And yet, this firm is known as the passive indexing firm, when they’re one of the biggest market-making and trading firms in the entire world. And so that’s the underbelly of this discussion that I think a lot of the salesmanship and the narratives ignore.

Cullen Roche (00:11:59):
And so long story short, I don’t think you can break this thing down into this neat little argument where one is necessarily bad or is active good and passive evil? Because in a lot of ways, they’re just two sides of the same coin, and they’re co-dependent on one another.

Stig Brodersen (00:12:17):
Cullen, one thing we can see here in the market is that ETF investing has just continuously been growing for decades, very much at the expense of mutual funds. Could you please take us through some of the tactical things about ETF investing?

Stig Brodersen (00:12:32):
I think that as investors, we see a lot of the front end, we don’t really see what’s really going on. We have the creation redemption process, there are different tax benefits to consider and a lot of that is not well understood. Could you please go through that process with us?

Cullen Roche (00:12:47):
One of the neat things about building these things and actually going through the whole process of working with everybody along the whole process of how these funds actually work is that you see the underbelly of everything. And so one of the most interesting things about ETFs is, so for anyone who doesn’t know, an ETF is just, it’s basically a mutual fund that trades like a stock.

Cullen Roche (00:13:09):
So the neat thing and the big advantage of ETFs over mutual funds is that they have this creation redemption process, where a market maker and the ETF issuer can literally create new shares of the ETF from thin air. So for instance, with a new fund, there is no market for that fund when it’s issued. There are no sellers of the ETF because nobody holds the ETF yet.

Cullen Roche (00:13:36):
So the way that these funds become liquid, and the reason why a fund that is not even widely traded, or doesn’t have a lot of volume on any given day, the reason that that thing could actually be incredibly liquid is that the market makers can create shares from nothing. And as long as they’re incentivized to be able to arbitrage the underlying basket, well, they’ll make a tight market for that thing, if they know the underlying value.

Cullen Roche (00:14:01):
And so to get into the nuts and bolts of how these things work basically is that the way to think of an ETF is that there is a basket of underlying assets. That underlying set of instruments has what’s called, basically, they call it the iNAV. It’s essentially the intraday NAV. So it’s the intraday net asset value of the underlying assets.

Cullen Roche (00:14:23):
And the way that a market maker calculates that is by looking at all of the underlying assets, and then they’re able to quantify in real-time exactly what the underlying basket is worth. So they’re looking at the true value of the underlying basket. And then what they’re doing is, with the ETF, they’re trading the ETF and basically creating or redeeming it for people, based on supply and demand. And so they’re able to look at the value of the underlying assets.

Cullen Roche (00:14:52):
And then if they’re incentivized to do so, let’s say that you put in an order for $25 to buy SPY, for instance. A market maker will look at that, and he’ll look at what the S&P 500 is actually worth. And let’s say it’s worth $24.98. Well, he’ll create shares of the ETF at $25 and make a market at $25.

Cullen Roche (00:15:13):
And what he’s able to do is they’re able to then go into the market, the issuer will create shares of the ETF. The market maker will essentially sell short the ETF to the buyer. That creates a market for the buyer, and then the market maker goes in and they buy the actual underlying at $24.98. They’ll then close out the position. And because they’ve sold the ETF to you, they’ll close out their underlying and they’ve booked a two-cent profit essentially.

Cullen Roche (00:15:45):
And so they’re able to not only keep the spreads very tight on that instrument, but they’re able to make a market in something that literally does not exist, because they’re able to essentially instantly arbitrage what the value of those things are in a relative sense. So in a sense, you’re paying for the liquidity in a sense of these things. Even though they don’t technically trade that much or they might not even exist in this instance. But that creation redemption process is really, it’s the distinctive element of ETFs that makes them not only function very efficiently, but more importantly, this process makes them super tax-efficient.

Cullen Roche (00:16:27):
So when compared to a mutual fund, the problem with a mutual fund is that when you send money to a mutual fund, you literally kick their cash. And the mutual fund manager has to go in and buy all of the underlying assets. I don’t do that. Somebody invests money in an ETF. I don’t go out and reallocate the fund. I don’t actually distribute cash to anything. So there are no purchases underlying all of this that goes on.

Cullen Roche (00:16:51):
Whereas with a mutual fund, the mutual fund has to actually go out, distribute cash, buy all of the underlying assets. And if they are selling stuff along the way, they’re in current capital gains. And this is the big problem with mutual funds is that mutual funds are unfairly punitive with the way that they distribute their capital gains. Because you could buy a mutual fund at the end of the year, and if that fund has large capital gains, you can get kicked a tax bill, even though you don’t actually have a capital gain.

Cullen Roche (00:17:20):
And so this process of creation and redemption inside of a mutual fund is very inefficient because it’s basically a cash-based reallocation process. Whereas in the ETF, underlying the market maker and the issuer, they’re actually exchanging the underlying in what’s called an in-kind transaction. So they’re not actually making a cash sale of the underlying assets, which allows the ETF to operate in frankly a much fairer way, because it gives them control of the tax liability to the shareholder.

Cullen Roche (00:17:56):
So rather than being forced into a capital gain, in the way that a mutual fund often does, the ETF puts the power of the tax liability in the shareholder, where I control the tax liability based on when I want to sell it, rather than the actions of thousands of other people buying and selling the fund within itself.

Stig Brodersen (00:18:18):
Let’s continue talking about costs. ETFs are very often promoted for the low cost associated with them, costs that are typically lower than comparable mutual funds. Whenever I look at an ETF, I very often look at the expense ratio. To me, that sounds like that’s the expense I’m going to have by holding this asset. Do I have other expenses if a buy an ETF? And let’s just disregard any commission that my broker might impose on me.

Cullen Roche (00:18:46):
Commissions, obviously they’re going away, as you mentioned, but ETF expense ratios can be a little bit confusing. Because you actually have a gross expense ratio and a net expense ratio. The gross expense ratio is typically the total cost of running the ETF for the actual issuer. So typically, they will discount that to some degree. And that arrives at a net expense ratio. The net expense ratio is the fee that the shareholder actually will pay.

Cullen Roche (00:19:13):
Typically, this is waived for a period of 12 to 24 months. I tend to find this way too confusing. I typically think they should be the same, but that’s just my philosophical belief. Those are two things to pay attention to is that the net expense ratio, that’s the fee that you’re going to pay. And you have to pay attention to whether or not that fee is waived for 12 months or 24 months. Or maybe it’s waived in perpetuity, who knows? Every fund is different.

Cullen Roche (00:19:38):
But the other big one with ETFs is the bid/ask spread. Like I was saying before, one of the reasons why ETFs operate so efficiently is because the market makers are incentivized to make markets in this thing. And the reason they’re incentivized to make markets in this thing is because they’re getting paid to make the market in that thing. And you’re paying the spread basically on the way that fund works.

Cullen Roche (00:20:00):
Like I said, with the previous example, when SPY is actually worth $24.98, and the market maker is selling it to you for $25, well, you have the benefit of being able to buy SPY at a very liquid and relatively close price to what its underlying intraday NAV is actually at. But of course, you’re paying the two cents to the market maker. So that’s one of the underlying costs. You see very, very wide spreads on an ETF, you have to consider that that’s actually part of the upfront… It’s essentially a form of a commission is really the way to think of it, that the market maker is earning a commission basically for making that trade and making that market for you.

Cullen Roche (00:20:41):
The other big cost is that ETFs can trade at a premium or a discount. And that’s usually a function of how liquid the underlying is worth. So how tight can the market maker keep the current market price of the actual instrument relative to its iNAV? And that’s not always easy to do.

Cullen Roche (00:21:02):
So for instance, if you have very illiquid underlying instruments in the underlying, well, the market maker is probably going to keep much wider spreads on the ETF, because he has to cover his butt in the case that he discovers that the underlying is not worth nearly what they’re actually selling the ETF for. So you have to pay attention to the premium versus the discount.

Cullen Roche (00:21:23):
This can be tricky for retail investors because retail investors really rarely know what the iNAV actually is. So typically, on a very, very liquid fund, the iNAV will be very, very close to whatever the bid/ask is. But on a less liquid fund, you could have a situation where an ETF is really worth, the underlying is worth $25 and the spread could be 25 to 25.10. And because the underlying is very illiquid, you might think it’s a good idea to buy that thing at 25.10. And you might be paying, you’re paying a 10 cent premium basically and that’s where the fund will trade.

Cullen Roche (00:22:01):
But in the long run, it’s an important element to be mindful of, because like closed-end funds, ETFs even though they tend to be much closer to the net asset value, they can trade at these premiums and discounts.

Stig Brodersen (00:22:16):
One thing that’s been popular for many years is to look at backtesting. I’m very torn whenever it comes to backtesting. It’s definitely something we see a lot of in the ETF space here. Because you have ETFs out there that really show an impressive backtesting record. It might be that they’re buying companies at the lowest P/Es or highest dividend yield, the highest share repurchase yield, whatever it might be.

Stig Brodersen (00:22:42):
And whenever you look at the track record for those back-tested results, it’s like outperforming with three, five, whatever. It looks really, really good. And so whenever I look at ETF investing, I feel really good about investing in something that has historically proven that it’s a good strategy.

Stig Brodersen (00:23:01):
But on the other hand, I’m always constantly concerned, well, history repeats itself. It’s a cyclical trend, is it a cyclical trend, whatnot? How do you think about investors think about back-testing results, whenever they’re constructing their portfolios?

Cullen Roche (00:23:17):
Like you, I think you have to be really skeptical of backtests because it’s very easy to backpedal into a backtest that looks really good. Everybody, if you’re constructing a fund and trying to pick out what would be potentially the best performing future assets, of course, you’re going to, typically, you’re going to look at what worked the best in the past. And the assumption is that this is an extrapolated expectations process, where people are extrapolating from the past and expecting everything to be the same in the future. Obviously, it just doesn’t work out that way.

Cullen Roche (00:23:54):
And so you have to be really skeptical of backtesting. Get into all of these finer discussions about the necessity of forecasting and making predictions about the future. I just think that people need to embrace that.

Cullen Roche (00:24:09):
I typically fall into more of a market-cap-weighted approach to indexing and allocating assets, just because to me, I don’t pretend to know where in the stock market we typically should be at any given time. And so to me, it’s almost generally at least as a big portion of your portfolio, to me, it’s better to just own it all, rather than trying to pick and choose which components.

Cullen Roche (00:24:36):
Obviously, there are lots of ways to skin the cat here. But for me, when you’re thinking about your savings portfolio and the core of your asset allocation, and the piece that is just going to be your more of your sleep well portfolio, to me, it’s really about building in diversification and owning lots and lots of things. Knowing that, well, there’s going to be a lot of times when certain parts of that portfolio are going to do really badly, and other parts are going to do really well.

Cullen Roche (00:25:07):
In essence, that’s why diversification works are because you have these uncorrelated assets, that they aren’t always doing the same stuff. So you almost want some portion of your portfolio to be underperforming at times in a weird way. And backtesting, oftentimes what ends up happening is people will put together backtests and discover that, well, they found a whole bunch of assets that all performed really well in the past. And then you find out that, well, in the future, when things go badly, well, all those assets perform really badly. And you don’t have a lot of diversification in that portfolio.

Cullen Roche (00:25:40):
So to me, again, going back to the first principles, I like thinking of things for what they are, rather than trying to backtest and then extrapolate what they might be. And so looking at, you could go back and for instance, look at a 30-year treasury bond and say, “Holy cow, this thing… I’m going to start a treasury bond ETF because treasury bonds have performed so well in the past.”

Cullen Roche (00:26:01):
And you have to look at what that thing is today for what it is. And that instrument today is nothing like it was 30 years ago. That instrument 30 years ago was a 10% yielding 30-year instrument that had government backing. And today, that instrument is a 2% yielding instrument that has the same credit quality instruments, but going forward in almost any reasonable expectation of the future, that instrument is a significantly worse risk-adjusted position than it was, for instance, back in 1980 or 1990.

Cullen Roche (00:26:35):
So that’s a really simple example. But you have to be really skeptical of backtesting, because the future is always different, the environment. I think after COVID, I think we all know, nobody knows what the future holds for all this stuff. But you can formulate reasonable guesstimates about what these instruments will do. And to me, that’s a much more sound way to look at the future, rather than the past is a nice guide, but it shouldn’t be your only guide by any measure.

Stig Brodersen (00:27:05):
One of the reasons why I’m so excited to speak with you here today Cullen is that we have a lot of our listeners who really want to manage money. And you’ve done that for a long time. But here very recently, as of last month, you started your very own ETF. Could you please walk us through step by step, if possible?

Stig Brodersen (00:27:24):
You have this idea of, “Hey, I want to start an ETF,” and then until the day it launches. I know it’s a very big question. There are probably many steps. But could you break that down for us?

Cullen Roche (00:27:34):
It’s basically hundreds of phone calls and emails with lawyers back and forth is really the majority of the processes. But no, in essence, they’ve made this a fairly smooth process today, relative to what it used to be. 10 years ago, starting an ETF was a monstrously difficult process, because you needed what was basically called SEC exemptive relief to even be able to form the trust that’s able to hold the assets that actually is really the underbelly of the ETF that you want to start.

Cullen Roche (00:28:05):
But today, it’s become much easier to do this with the new SEC or the new ETF act. And really, there’s a number of ETF white label issuers now. So in my case, I worked with Wes Gray and Alpha Architect, a lot of your listeners I’m sure to know who they are because you’ve interviewed them in the past.

Cullen Roche (00:28:25):
But they offer a white-label process where they’re able to basically utilize the Alpha Architect ETF trust, to help people like me, who… I have a big asset management business. I have clients that are already using my strategy. And the ETF is basically a really clean, distilled version of the strategy that I’m already operating.

Cullen Roche (00:28:48):
The kicker with an ETF is that because you’re able to put all of these… I run a fund of funds. I’m able to basically put my client portfolios into one ETF, which creates a huge amount of not just systematic efficiency, but also tax efficiency like we referred to earlier.

Cullen Roche (00:29:04):
But the process of starting this basically involves, well, first of all, this is a hugely competitive area. A lot of people were laughing because I started a fund of funds that basically is a global stock bond allocation. And it’s very similar to, although I’m technically referred to as an active fund, for all practical purposes, it’s pretty passive. It’s a fund of index funds. I hold basically a bunch of Vanguard funds inside of the ETF.

Cullen Roche (00:29:30):
So it’s a weird thing because I’m referred to as active when technically it’s relatively passive in nature in the way that the fund actually operates. But in terms of the way that the actual structure works when starting is, well, you need to have a good idea. You need to have an idea that is going to be viable because it’s expensive to start an ETF.

Cullen Roche (00:29:55):
And so the kicker is that you need a relationship with a white label issuer, and you need to convince this white label issuer that you’re going to be able to make it worthwhile to them to be able to actually go through the process of… We spent nine to 12 months actually going through all the regulatory hurdles, and getting all the legal details and regulatory stuff ironed out. So there are all these upfront costs.

Cullen Roche (00:30:25):
And the really, really strange thing about an ETF is that the way that the SEC views an ETF is that, the way to think of it is that it’s technically a rolling IPO. Like I mentioned earlier, when a market maker will go to the issuer, the issuer will be able to create new shares. Well, each one of those instances is, in essence, it’s an initial public offering. And so the SEC views this stuff as a rolling IPO.

Cullen Roche (00:30:53):
And so with new securities, they’re very strict about the marketing. That’s the thing that makes ETFs somewhat difficult if you’re a new entrant into the field, for instance. It’s very easy for Vanguard to go out and market a new ETF because they have this big base of existing customers.

Cullen Roche (00:31:09):
Whereas if you’re someone who’s trying to start an ETF, well, you’re stepping into this arena with a bunch of established competitors. You can’t talk about this thing until the day it’s issued. So you’re in a blackout period until the day this thing is issued. I was not even allowed to talk to friends and family technically about the ETF until September 21st, on the day that it actually went live, and it became a publicly available instrument.

Cullen Roche (00:31:36):
And then going forward, the regulatory agencies, they’re relatively strict about communications with the public, because this is technically a rolling IPO is the way to think of it. So getting the word out and getting people to even know that you have this thing available, might be the best ETF in the world, and you might not be able to get it out to the public, because it’s just very difficult to educate people and get the word out. So that’s the probably biggest hurdle along the way is just getting people to even know that this thing exists in the first place.

Stig Brodersen (00:32:12):
One thing that’s definitely known to a lot of people, if we can continue on that is whenever you have a stock that’s IPOing and you hear in the news that, this top 10% or 30%, and what an amazing entry into New York Stock Exchange or whatnot. So there’s a lot of buzz around that specific stock.

Stig Brodersen (00:32:32):
But I also think it’s important for retail investors to understand what this process is all about. So for example, you have an underwriter often IPO. It could be Morgan Stanley, could be JP Morgan. They will typically get around 7% of the money raised, and they’re typically freshly minted shares. That’s how it goes.

Stig Brodersen (00:32:50):
So the current shareholders will either get their stake diluted. It might be something along the lines of 10% that’s getting issued there. And so this would, everything else equal, incentivize the investment bank to charge a somewhat high stock price.

Stig Brodersen (00:33:05):
However, the investment bank that is promoting the stock, that’s truly what it is, it is a promotion, they have to sell that to institutional clients and they don’t do that to retail investors. So that’s also why you have this pop in the stock price. And if we just look over the past decade, it’s averaging 21% of the very first day. Snowflake, there was a lot of buzz about it, it was at 112%. So this is a premium that we as retail investors are paying.

Stig Brodersen (00:33:35):
Let’s talk about ETFs. So a retail investor is at a similar structural disadvantage compared to institutional investors, whenever ETFs are being launched.

Cullen Roche (00:33:47):
It was funny when I was going through this process, so we had to pick which exchange we were going to work with. I talked to NASDAQ and CBOE and NYSE. And it was interesting, because the NYSE came back, and one of their big marketing pitches to us was the bell ring. Everybody knows about the bell ringing at the New York Stock Exchange. I was thinking to myself, I’m going to get to ring the bell at the New York Stock Exchange.

Cullen Roche (00:34:10):
The NYSE came back and they were like, “You shouldn’t care about ringing the bell for an ETF.” I was like, “Why? This is awesome. I’m IPOing a fund on the New York Stock Exchange. That’s amazing, isn’t it?” They were like, “Well, to put this in perspective, this is totally different from a corporate IPO.” Because thinking of a corporation, a corporation, they raise funds and they build this company for a decade, for more, before anybody even knows what it is when they IPO on the New York Stock Exchange.

Cullen Roche (00:34:41):
And in a lot of ways, when that thing issues on the New York Stock Exchange, in a lot of ways the original investors are, they’re getting out or they’re diversifying. They’re selling their shares to the public, and allowing the public to reap the benefits going forward of whatever that stock is going to do.

Cullen Roche (00:35:00):
And an ETF is just totally different because an ETF is issued. But again, it has this underlying net asset value, where you know what the underlying net assets are actually worth. Whereas with a stock, nobody necessarily knows what the net asset value of Tesla is today.

Cullen Roche (00:35:21):
In a lot of ways, people are doing some guesswork about what the actual underlying assets are worth. That’s what the IPO process is part of, it’s allowing the public to value this thing hopefully in a manner that is more efficient than the way that the private market was valuing this thing.

Cullen Roche (00:35:39):
Whereas with an ETF, you issue an ETF and the underlying assets have that net asset value. And the supply and demand for the fund, it can create a premium or a discount for the way that the instrument trades. But the market makers know, they know exactly what that iNAV is. So they know exactly what those underlying assets are worth.

Cullen Roche (00:36:03):
So if I hold a fund that is 50% SPY and 50% TLT, long-term treasuries, well, the market makers know exactly what those things are worth in their underlying value. So if I issue a new fund that holds those two ETFs, and the market maker goes out and starts making a market for those things, and let’s say again, that it IPOs at $25. And let’s say that some knucklehead goes in and puts in a market order for $26. Well, the market makers know they have an instant $1 arbitrage there.

Cullen Roche (00:36:38):
So what they’re going to do is they’re going to make a market for you at $26, because that’s the price you want to buy it. They’re going to instantly, they’re going to sell those, they’re going to buy the underlying, they’re going to sell the underlying and they’re going to sell you the ETF for $26. They will book their $1 per share profit on that instrument, and the price of the ETF will then collapse back down to 25. Because in the long run, there aren’t a lot of people who are willing to buy at a 4% or 5% premium to NAV.

Cullen Roche (00:37:09):
And so that’s one of the reasons why ETFs work as efficiently as they do is because they’re totally different in terms of the way they’re structured because we actually know what the underlying NAV is. Whereas with an individual stock, nobody really knows in real-time what those things are actually worth.

Stig Brodersen (00:37:29):
Perhaps someone out there is thinking, well, it seems like it’s a lot more approachable now to run an ETF. You can white-label stuff. And it seems like it’s a lot easier today than perhaps it’s been in the past. So perhaps someone’s thinking, “Well, how much does it cost?” If someone’s like, “I want to do this, I have a great idea for an ETF,” could you talk to us about the different costs you would have associated with running an ETF?

Cullen Roche (00:37:56):
So there are fixed underlying costs of just being able to partner with, for instance, the white label. You’re basically paying for very streamlined compliance and legal structure in doing so. So rather than, I didn’t want to have to pay for the trust on my own and hire attorneys to work with and new compliance firm. So, a firm like Alpha Architect makes it very clean to be able to just go in and essentially outsource all of that.

Cullen Roche (00:38:24):
You’re going to end up paying, it depends on the complexity of your fund. And my fund was very simple, very clean. And this thing, I would estimate that the base cost of most ETFs is probably, you should expect to pay at least $200,000 a year for just the fixed fees that you’re going to incur along the way. But the more complex you get, you could build an ETF that is futures-based or options-based. It’s a lot more complex to run. Or a Bitcoin ETF or something like that, and you can get really, really infinitely more complex than I did, in which case, your costs are going to be a lot higher.

Cullen Roche (00:39:04):
And that doesn’t even get to the biggest cost, which is in the long run, the biggest cost of running an ETF is going to be all your marketing. Because again, it’s difficult to get the word out if you’re a small shop, or you don’t have the Vanguard marketing megaphone that a lot of these big firms have. And so in the long run, it depends on how much money you’re willing to spend on advertising.

Cullen Roche (00:39:30):
That’s the thing, that’s the big challenge with an ETF is that you spend all this time and money upfront building the ETF and getting it ready to come to market, and you’re not even allowed to talk about it. So nobody knows about this thing. Then when it IPOs, that’s the first day anybody even knows about this thing. And so it’s not like you got to do a roadshow and go and pitch this to the whole world and let everybody know about it. You just have to vomit this out to the world on day one.

Cullen Roche (00:39:58):
And then that’s when the real work starts. So unlike a corporate IPO, in a lot of ways starting a new ETF is, the IPO day, or the initial IPO day is really, its take-off. It’s the very beginning of the journey in a lot of ways. And so it depends on how much you’re willing to spend, not just upfront, but really how much marketing you can be willing to spend and how well you can get this idea out to the public. So that even if it’s an incredibly great idea, you still need to be able to tell people and sell them on the idea that, “Hey, this is something that I think can be helpful for you.”

Stig Brodersen (00:40:35):
As you know, our listeners are avid followers of Warren Buffett. That was the very core of how we got found in the first place. And Warren Buffett placed this famous a $1 million dollar bet where he bet on a passive S&P 500 index to outperform a fund of funds in hedge funds. And at the time whenever he made that bet, and I should say all the proceeds were going to charity, but it was a very publicized bet. At the time, he warned about the two layers of expenses whenever you have a fund of funds.

Stig Brodersen (00:41:07):
I can’t help but ask, what are your general thoughts on fund of funds ETFs?

Cullen Roche (00:41:12):
It’s interesting because there’s actually a great quote from Buffett that says, “We don’t have to be smarter than the rest, we have to be more disciplined than the rest.” I would argue that one of the big successes of Warren Buffett over time is not only is he smarter than most of the other investors, but he is much more disciplined to his actual methodology than most other people have the ability to be.

Cullen Roche (00:41:37):
I literally named the fund company Discipline Funds, because the whole ethos for me is that the older I get and the more experience I have, the more I come to the belief that investors’ biggest problem is usually themselves. And it’s their ability not just to find a strategy, but to remain disciplined to a strategy.

Cullen Roche (00:41:57):
And so there was this study that came out in dieting circles about five years ago, where these academics they studied all these different fad diets. Atkins diet and keto and all these popular diets that everybody loves and claims work so great. And what they found was that the diet that worked the best was the one that you stuck with. It didn’t even matter which diet you actually picked. The diet that worked for people was the one that people could remain disciplined too.

Cullen Roche (00:42:28):
And to me, investing is so similar, in that we spend so much time trying to pick and choose the absolute best strategies that are out there. We look at backtests and we look at manager performance and things like that when for the most part, I think a lot of people should spend more time picking a strategy that is aligned with their financial goals and then making sure that it’s something that you can stick with.

Cullen Roche (00:42:52):
Because that’s one of the biggest hurdles that people have to overcome is this constant lure of the grass is always greener somewhere else. And you’re going to always see strategies that look better than yours. You’re going to constantly question, well, I’m underperforming now, I could be doing be better. Why don’t I just switch everything into Cathie Wood’s fund or whatever it is? Whatever the hotshot fund is of the day.

Cullen Roche (00:43:16):
And what we often find is that the money-weighted returns of these strategies over time, there’s old academic research, going back ages and ages, showing that money tends to chase returns. It’s because we’re undisciplined about the way that we approach all of this. And so to me, I don’t have any problem with people trying to generate actual alpha or picking stocks or doing anything that’s really customized to them and what they prefer.

Cullen Roche (00:43:43):
But to me, it has to be aligned with the goal of being able to generate what I call behavioral alpha, which is the ability to perform better than you otherwise would because you remained disciplined through essentially the most traumatic time. So can you implement a strategy that not only does well from 2015 to 2020 but also during March of 2020, when it’s scaring the daylights out of you? Can you stick with that strategy and reap the benefits of the big upturn?

Cullen Roche (00:44:19):
And that’s the kicker is that a lot of people aren’t able to actually stick with a strategy when the going gets tough. And that behavioral bias, that behavioral risk creates a huge amount of financial risk. And so to me, it’s not that generating excess return or generating alpha is a bad goal. It’s that you have to be, I think, somewhat careful of whether or not when you’re reaching for a return and reaching for an alpha, are you potentially creating behavioral risks where you create essentially a conflict of interest?

Cullen Roche (00:44:53):
That, to me, if you can meld the two, where you’re implementing a strategy that is to some degree, achieving some degree of excess return relative to a counterfactual, but more importantly helping you remain comfortable and sleep well at night. Well, that’s the best of all worlds.

Stig Brodersen (00:45:12):
I also should say here that Warren Buffett won that bet. That was why I was curious. It’s not to demonize everyone who is doing fund of funds. I think it’s important to understand what fund of funds are really doing and why people are doing it.

Stig Brodersen (00:45:27):
Let’s specifically talk about your new ETF. In your ETF, Cullen, you have six ETFs. Right now you have a 45% weighting to stocks and 55% in bonds. And here on the show, we often talk and wonder why investors who are not required by regulation to buy say long-term bonds would invest in them. And this is due to the low yield and inflation prospects. I’m putting you in the hot seat here. You can probably tell here, Cullen.

Stig Brodersen (00:45:54):
In your ETF, you have a 13.75% exposure to Vanguard’s long-term bond fund. Why do you have that?

Cullen Roche (00:46:02):
Again, going back to, I’ll give people the framework for how I structured the fund in essence. I’m starting from what is essentially a global market cap weighting. And so at present, the global market cap weighting of stocks versus bonds is about 45/55 stocks versus bonds. And so our allocation, technically, we have about a 50/50 benchmark is the goal that we structured. And so the current 45/55 weighting for us is a little bit below our benchmark.

Cullen Roche (00:46:34):
The fund itself, actually, the goal of it is again to create something that is really well-diversified, that is helping people keep a bucket of their savings that they can remain disciplined with, to a large degree. And so one of the problems that I have with index funds and your typical, for instance, just cherry-picking a 60/40 index fund, is that the problem that I run into with people is that that 60% weighting is, it exposes you to a lot more risk than people realize.

Cullen Roche (00:47:05):
And so you think you’re building this nice little savings bucket here, where you’ve got your retirement in the 60/40. And the reality is that that neat little savings instrument can be a lot riskier than a lot of people realize. And so for instance, in 2008, 60/40 falls 35%, in large part because something that people don’t realize is that even though Vanguard calls their 60/40 a balanced index fund, that fund is not balanced at all, in terms of where its risk actually comes from. That fund actually derives about 85% of its volatility from the 60% stock slice.

Cullen Roche (00:47:41):
So the stocks are so much more volatile inside of that aggregate portfolio, that what happens over time is that there are certain periods where the principal risk, the negative volatility of that portfolio is extremely exacerbated. I would argue that the way that most index funds rebalance is not necessarily aligned with the way that people actually perceive risk.

Cullen Roche (00:48:03):
So, for instance, 60/40, it grows into 70/30. Vanguard just systematically says, “Well, we’re going to rebalance back to 60/40,” because I don’t know because that’s the weighting that they like for whatever quantitative reason or subjective reason that they decided that 60 was the right number. I actually go in and I look at the equity piece relative to the bond piece and I say… I actually constructed an algorithm that tries to essentially quantify, well, how risky is that stock piece relative to the bond piece at certain times?

Cullen Roche (00:48:35):
And so typically, what this thing is doing is it’s trying to quantify essentially where we are in a market cycle and whether or not we’re riskier in the stock sleeve than we are on average. And so right now, with the weighting being slightly underweight stocks, I would argue that the algorithm is basically consistent with an environment where the stock market is being quantified as relatively above risk, in terms of its historical weight.

Cullen Roche (00:49:01):
And so rather than just rebalancing back to this fixed weighting, we actually rebalance somewhat more dynamically. So this thing actually right now it’s 45/55. But it can move within a band of 70/30 to 30/70. It never gets all in or all out. It’s designed to help people stay the course through thick and thin. So you’re always invested in stocks and bonds through thick and thin, but you’re dynamically rebalancing across time and again doing so pretty passively.

Cullen Roche (00:49:28):
But in a way that I hope is creating a more stable, a little smoother ride for people, so that they can remain essentially more disciplined to the strategy over time. And a big kicker with that is that one of the hedges, one of the most important hedges during negative periods in long-term bonds. And so typically what will happen is that as you actually see the equity slice shrink inside of our portfolio, you see that long-term bond allocation will actually grow.

Cullen Roche (00:49:58):
So for instance, two years ago, we didn’t even own a long-term bond position inside of the portfolios. And so even though I’ve been running the strategy for 10 years outside of client portfolios, even though we just issued the ETF, but I didn’t own any long-term bonds in this thing two years ago.

Cullen Roche (00:50:16):
Whereas as the equities shrink, and the equity market is perceived as riskier, it actually grows a little longer duration in the bond piece. Because the kicker is that we know that during periods of the really traumatic market downturn, long-term treasury bonds tend to be the instrument that is always the safe haven. So you see it in March of 2020. You see it during the great financial crisis. During these periods of really traumatic financial market downturns, people tend to run to the safe haven that is long-term treasury bonds.

Cullen Roche (00:50:52):
And so it’s a little bit counterintuitive to own something like long-term treasury bonds in an environment where I just went on a rant saying that long-term treasury bonds are totally different animals than they were 30 years ago. And while that’s true, it’s also true that they could be the most important sleep well aspect of your portfolio, at the time when you most need them to be. And that’s the kicker is that in a weird way, right now, cash and treasury bills, they can’t provide you with an uncorrelated return that long-term treasury bonds will.

Cullen Roche (00:51:26):
So, well, it might be a little bit uncomfortable to own these things during periods where the risk-reward doesn’t look great, it could turn out that during the periods when the stock market is scaring you, that this is the component of the portfolio that’s actually providing you with the most important hedge. And then helping you stay the course and remain more disciplined, because that component is helping reduce the underlying instability of the equity positions.

Stig Brodersen (00:51:52):
It’s an interesting approach, and it also makes me think of Ray Dalio’s All-Weather Portfolio where he always wants to have long-term bonds, even though it doesn’t seem like it’s appealing. But that portfolio is constructed with the mindset of, we just don’t know. This might look appealing or this looks to happen, but we don’t know. That’s why it’s constructed the way that it is.

Stig Brodersen (00:52:14):
I guess that’s also a nice segue to talk a bit about the Fed. Seldom an episode here on We Study Billionaires without talking about the Fed. And one of the latest signals that we have from Fed Chair Jerome Powell is that it looks like we will most likely be facing interest rate hikes, perhaps in 2022 already. And so, on one hand, the value of our current bonds goes down. But it also implies that bonds purchased in the future will have a more attractive yield.

Stig Brodersen (00:52:42):
I’m saying this because bond ETFs are typically replacing bonds that have matured with newly issued bonds continuously. It’s being ignorant of what’s happening right now. How should we as investors in the bond ETF look whenever Jerome Powell is saying, “Oh, we’re going to hike rates?”

Cullen Roche (00:53:01):
So as great as ETFs are, this is one of the difficulties with ETFs that, in some ways, ETFs create behavioral risks that wouldn’t otherwise exist. For instance, I used to sell bonds at Merrill Lynch back in the early 2000s. One of the nice things about selling literal paper bonds to people is that they just have a piece of paper that says, “XYZ certificate is worth $100.” You receive a coupon in the mail every month or quarter, whatever and you don’t actually see the value of that piece of paper changes, because you just have a piece of paper that says $100 or whatever.

Cullen Roche (00:53:42):
And one of the behavioral problems with bond ETFs is that you could literally login to your Vanguard account or your Schwab account or you’re whatever and you could see that the value of that thing changes every day. It can be harder for people to actually behave well with bond ETFs because they’re able to see what the actual price changes are. And that creates a behavioral risk that it just didn’t exist because people literally just didn’t know what the value of their underlying bonds was before.

Cullen Roche (00:54:08):
So you are more likely to hold things to maturity inside of just holding a paper bond because, in large part, you knew that that thing was going to mature at par, and you didn’t care whether or not the current value of it was $90 because you knew it was going to be worth $100 in the long run. So ETFs are different and they create that behavioral risk.

Cullen Roche (00:54:29):
But I think it’s really important to compartmentalize. I love this, when you’re looking at things from this savings portfolio perspective that I was referring to earlier, I really like bucketing things across specific time horizons. And so if you’re going to own a bond ETF or a short-term key bill-like instrument or anything like that, it’s very useful, I think, to be able to match these things to certain time horizons across your portfolio.

Cullen Roche (00:54:58):
So for instance, if you needed cash in the next three years, you wouldn’t want to go out and buy a 10-year treasury bond ETF for that money, because that fund will expose you to principle volatility that it could persist through most of that 10 year period. On average, in a bond ETF, the likelihood of that thing losing principal value is low, because the underlying bonds are consistently maturing at par. But in the short term, that bond fund could be incredibly volatile and could expose you to periods where inside of a three-year period, you actually have a principal loss.

Cullen Roche (00:55:31):
And so it would be much more sensible to look at something like a three-year CD, or maybe even a five-year treasury bond at most, where you’re better aligning the time horizons with the specific instruments. So regarding Fed policy and Fed interest rate hikes specifically, again, this is one of those things that you have to make a prediction about the future. But it’s also virtually impossible to predict what future interest rates are going to be.

Cullen Roche (00:55:59):
Greenspan spent five years raising interest rates before the housing boom, trying to grapple with what was perceived as a potential housing bust or a housing boom and housing bubble. And he couldn’t make long-term rates go up. Greenspan called this the great conundrum back in the 2000s.

Cullen Roche (00:56:16):
And so it’s one of those things where I don’t know what’s going to happen. My guess has been that interest rates will be lower for longer and that the likelihood of returning to a 1970s style outcome is not very high, because I just think there are so many different demographic trends and technological trends, and globalization trends, that the likelihood of moving back into a very high-interest rate environment is low.

Cullen Roche (00:56:41):
At the same time, we’re diversifying across bonds in large part because we don’t know. So, again, it’s following this philosophy of owning everything and managing it to your behavior, but owning everything because we don’t really know what’s going to happen. We don’t know if… The yield curve could completely flatten from here and invert. The Fed could raise rates a bunch and get scared of inflation and cause the whole economy to drive into a recession, which would be deflationary, which would cause long-term bonds to outperform.

Cullen Roche (00:57:11):
So there are all these scenarios where, yes, maybe long-term interest rates go up. But there are also plausible scenarios where maybe the Fed raises rates a lot, drives the economy into a recession, and actually in a weird way causes a repeat of this conundrum. And interest rates end up going lower, and you start seeing deflation across the whole economy. And then we’re looking at another period where long-term treasury bonds are, again, the best performing asset class across time.

Cullen Roche (00:57:40):
I’ve heard that narrative my whole career. Literally, since the day I stepped foot on Wall Street, people have been telling me, “You cannot own long-term bonds,” because interest rates are low and the risks are too high. And so I’ve just arrived at this conclusion that everyone’s been wrong about this for 20 to 30 years or more. And Bogle said, “Nobody knows nothing, we can make good guesses and you need to construct a portfolio that is behaviorally consistent and well-diversified.”

Cullen Roche (00:58:09):
But I don’t pretend to know where interest rates are going to go. We want to be diversified, knowing that if the equity piece falls apart, then we’re diversified in a way that is really going to protect us in that scenario. So that’s why we own some long-term bonds. And it’s why I think most people should construct a diversified portfolio that applies this sort of asset-liability matching perspective, where they’re really not just controlling for their short-term liquidity needs, but also maintaining a fairly long time horizon, where they have assets that can potentially reap the benefits of incurring the structural underlying components of what these instruments are designed to do over the long term.

Stig Brodersen (00:58:52):
I think that’s a good segue into talking about that. No one knows. Like you mentioned, you were quoting Bogle there. No one really knows. We have a lot of indicators suggesting one thing or the other, but no one knows for sure where different the markets are heading.

Stig Brodersen (00:59:07):
And so whenever I think about the last time you were here on the show back in episode 370, your master class on inflation, first of all, it was absolutely amazing. Everyone should go back and listen to that. I can’t help but think now that we’re talking about ETF investing, you talked about your own ETF also. And how should we as ETF investors think about inflation and protect us against that?

Stig Brodersen (00:59:30):
Because one thing that I did notice in your ETF and I can’t help but calling you out, traditional vehicles to protect against inflation, that’s very often gold and commodities. That’s what we learned from Ray Dalio and his All Weather Portfolio. Whenever I look at your ETF stocks and bonds, so how should we think about it, and not just specifically related to your ETF, just in general for us investors?

Cullen Roche (00:59:53):
I love Ray Dalio’s all-weather approach, risk parity. I am essentially trying to build a very simple version of risk parity. I’m trying to literally keep parity between the risk exposures of the stock and bond components in the portfolio and the way that we rebalance counter-cyclically. Harry Browne’s Permanent Portfolio I think is a fantastic portfolio. Working from a first-principles perspective, it’s a very sound approach to asset allocation.

Cullen Roche (01:00:20):
What I did with this ETF was, this thing is just a very simple, very diversified allocation that keeps things simple, and no more complex than I really think they should be. And so my only problem with owning commodities and gold inside of your financial asset portfolio is that they can be expensive ways to get exposure to these instruments.

Cullen Roche (01:00:47):
So in my opinion, investors can protect themselves from inflation in less expensive ways, or ways that they don’t have the taxes and fees necessarily that a lot of these publicly available instruments expose you to. So inside of the discipline fund, to me, the stock market is a very good inflation hedge in the long run. Because you’re basically buying what is a stream of future corporate profits, you have, in essence, a certain sense of embedded purchasing power protection inside of that portfolio.

Cullen Roche (01:01:22):
I like using the stock markets specifically as a growth and purchasing power protection component of your portfolio. And the bond component in there is specifically a principal hedge. It’s not designed to generate real returns. In fact, you should expect it to lose to inflation in the long run, and that’s fine. They’re serving totally different needs.

Cullen Roche (01:01:43):
If you really wanted to own other asset classes, I have no problem with people owning gold or commodities or other types of inflation hedges. In fact, I’ve been a proponent of that pretty vocally for the last, especially since COVID hit, because I said that the fiscal stimulus would be at least somewhat inflationary.

Cullen Roche (01:02:02):
But I think that most people, the average American at least has one of the best inflation hedges in owning a home, for instance. So owning real assets is a very, very sensible way to obtain an inflation hedge. And to me, your financial assets, sure, owning gold inside of your financial assets or owning commodities can be a fine way to get inflation protection.

Cullen Roche (01:02:27):
In my opinion, most people already have a lot of inflation protection outside of their financial asset portfolio. So the way that I generally just default to building a financial asset portfolio is to simplify, simplify, simplify. And that’s really my methodology. And so to keep costs low and to keep things very diversified, we only use stocks and bonds because I think that a commodity component and a gold component, unnecessarily complicate things in a way that my fund is just not necessarily trying to protect you from.

Stig Brodersen (01:02:59):
Cullen, what can I say? This has been absolutely amazing once again to have you on our show. I’m always looking forward to having these discussions and hopefully, we can already say that we’re going to invite you back next quarter. But in the meantime, where can the audience learn more about you, pragmatic capitalism, and your new fund, Discipline Funds?

Cullen Roche (01:03:18):
I write the blog, Pragmatic Capitalism. I’m on Twitter @CullenRoach, just one word. Discipline Funds is disciplinefunds.com. The ETF is the Discipline Fund, the ticker is DSCF, it’s on the New York Stock Exchange, Monday through Friday. That’s where you can find me and like I always say, I love to try to spread the knowledge and help people as best I can. And if you’re looking for help to try to navigate all of this, what seems to be an increasingly complex and confusing financial world, obviously, like I’ve said a lot of times, I don’t know everything, but I’ve spent more time than was healthy obsessing over all of this and thinking about it and trying to build a nice clean, simple approach to navigating it all.

Cullen Roche (01:04:07):
I love answering questions though. So feel free to email me, cullenroche@gmail or cullenroche@disciplinefunds. I can field questions or help people in any way that I can.

Stig Brodersen (01:04:18):
Absolutely amazing. And thank you for spending so much time on it, so you can come here on our show and educate our audience. Cullen, really, really appreciate it. As we’re letting you go here, I just want to say to the audience, make sure to follow The Investor’s Podcast on your favorite podcast app. If you’re watching this on YouTube, make sure to like and subscribe to get more content like this. Cullen, I hope we can see you soon again.

Cullen Roche (01:04:41):
I’m sure we will. Thanks, Stig. Take care, everybody.

Outro (01:04:44):
Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network, and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.