Callie Cox (03:25):

We’ve seen a nice little rebound from a few weeks ago, but there’s still a lot of risk in change to consider. One thing I’m thinking a lot about is the fact that this market may struggle to get back to the highs anytime soon, especially because the fed is so into fighting inflation right now at all costs. And the stock market with so many households owning stocks at the moment, it’s a great dynamic, but it gives the fed more incentive to talk the market down if it gets too high. Clay, there are a lot of things we’re thinking about today, but that’s a good little summary of a bunch of different tentacles we’re trying to tie together.

Clay Finck (04:00):

One of the things I almost find interesting with these corrections or recessions, you look at say what happened in 2018, 2019. That was just like a few months, the market got spooked and investors come back around and the market comes right back. But then you look at say times like the 2000 tech bubble or the 2008 financial crisis, it’s like many months of that downward trends and we’re at that sweet spot where it’s like, okay, what’s going to happen here? The market hit highs a few months ago, and now we’re just waiting and seeing what’s actually going to happen with all these kind of headwinds that the markets are facing.

Callie Cox (04:37):

Yeah. Well, the one thing I’ll say there is that the difference between the 2000s tech bubble, the 2008 financial crisis and what we’re seeing right now is we’re still not sure if we’re about to hit an economic recession. I mean, surprisingly with all the fear that’s out there, economic data still looks pretty decent and I’m a typical analyst and that I look at economic data and earnings. I consider those the fundamentals of the market. It’s really hard if you just look at the economy to say that we’re in a recession at the moment.

Callie Cox (05:08):

When markets fall outside of recessions, the rebound based on history tends to be pretty quick, but this is a little different, of course, you’ve probably heard the word unprecedented so many times over the past two years, but we really are an unprecedented times and we’re dealing with economy that’s fine right now, but a lot of changes underfoot, especially related to monetary policy and fiscal policy. I mean, the government’s pulling back spending compared to the past few years. There are a lot of changes and people are just having a really, including me, people are having a really hard time digesting all these changes and what they can mean about the future. I almost characterize it as, is a crisis happening right now? No, but could a crisis happen down the road? Maybe, and that seems to be what we’re focusing on.

Clay Finck (05:55):

eToro is also involved in the crypto markets and crypto and Bitcoin in particular has been, almost talked about as this uncorrelated asset. It doesn’t move in the same direction as stocks, but that’s not what we’ve really seen recently. Crypto’s also come down along with the stock market. I’m curious what your general thoughts are on that market as well.

Callie Cox (06:18):

Yeah, you’re right. At eToro, we dabble a lot in crypto. We see a lot of customers investing in crypto these days, but we have that general younger customer base as well. It skews toward millennials and gen Z. If you think about it, younger investors tend to have those higher risk appetites because they have more leeway in front of them to invest. The crypto market’s very front of mind of me. We are in a bit of a crypto winter it seems. I actually found out that was a phrase a few days ago, so now, I’m using it constantly. But yeah, we seem to be in a bit of a crypto winter and there seems to be a lot of factors behind it. We saw what happened, Terra and the stablecoin collapse and there’s a lot of nervousness in that sector right now, or that part of the crypto market, but it all boils down to the feds policy and the fed eyeing higher rates.

Callie Cox (07:10):

If you step back, it is a bit hard to connect that to the crypto market. But when you think of crypto as a growth investment, as something we’re investing in right now, because we see the future potential of blockchain technology and the future potential of decentralized finance, it makes sense why people are feeling a little bit nervous and stepping out a bit. Because if you want to boil down the current environment as rates go higher, it’s basically like, okay, the future is getting discounted here because higher rates discount the value of future cash flows.

Callie Cox (07:40):

Investors are really thinking more now versus later. They’re saying, I don’t know what I can value that future potential at, I’ll just take what I can get now and not a day later. That unfortunately, hits young markets, young markets with hopefully a lot of potential like crypto, Bitcoin all the way down to the old coins. We’re looking at it and we’re constantly reminding our customers that if you have time on your side, there are a lot of really good reasons to feel bullish on crypto at the moment. There’s just a lot of innovation going on, but you just have to be patient and you have to wait out these crypto winters. They happen every once in a while and that’s just the nature of investing in a young market.

Clay Finck (08:22):

I’m really curious, have you seen any interesting data behind how these individual retail investors look at crypto relative to stocks? Have you seen any data how much they’re actually invested in crypto or just what their overall sentiment and how they view the asset class? I’m curious because a lot of younger investors are very new to the markets and they’re going to view the investing landscape a lot different than say, your boomers in those nearing retirement.

Callie Cox (08:50):

Yeah. We do a lot of really cool work around this. There’s one survey that we run. It’s a quarterly survey. We call it the retail investor beat and it’s basically where we talk to 1,000 investors, all age groups, all investing platforms, all walks of life, and we ask them a series of pretty basic questions about how they’re investing and how their strategies have changed over the past three months. In that survey, I pointed out because we ask like crypto focused questions in every single one of those surveys. One of them is, well, this is an asset specific question, but one of them is just, what are you investing in? And what do you plan to invest in over the next 12 months? If you look at the age groups that we survey, we look at 18 to 34 year olds, we look at 35 to 44 year olds, 45 to 54 and then 55 plus.

Callie Cox (09:37):

If you look at the 18 to 34 age group, they’re investing and have plans to invest in crypto more than even domestic stocks, US stocks, which is just so surprising to me, especially coming from a traditional finance background. And the fact that we don’t see that same trend in the 45 to 54 age group or the 55 plus age group really tells me that there is this kind of yearning for this decentralized system. One thing that we really like to talk about at eToro is the fact that investing hasn’t been approachable for so long. I mean, I’ve worked in finance my whole career, and I just started investing outside of my retirement fund five years ago because even I thought it was intimidating. But the really good story about crypto is that there is education needed and parts of it are a bit more unapproachable, but on the whole, the conversation about around crypto has been very welcoming.

Callie Cox (10:31):

I think that’s been a main reason why we’ve seen these younger investors feel a little more comfortable getting into crypto. It’s almost like it started from an approachable state and that really helped it to catch on with current generations who are more risk friendly and technology friendly. I think it’s a really good kind of underlying foundation for the space as well. I mean, I tweeted this morning, I said, this is the one chart that makes me very bullish on crypto. And it was that question that I just told you about what assets are you planning on investing in over the next 12 months? 53% of investors, 18 to 34 said that they’re planning on investing in crypto versus about 30 to 35% for domestic stocks. It’s just such a cool movement. I don’t think people give enough credit to the fact that crypto is really this kind of statement on where the financial system is now and where the younger generation see it going.

Clay Finck (11:25):

There are a lot of thoughts that come to mind as you answer that question. This week, I listened to one of Preston pitches episodes on our network and he brought on these guys where they created this course, it was called looking glass education and it kind of outlines our whole financial system and it talks about how Bitcoin could essentially play into that. The way you’re talking about this data, where these younger investors are more apt or more open to investing in cryptocurrencies makes me a little bit excited. These younger investors have just seen so much volatility.

Clay Finck (11:59):

It’s almost like they see the cards they’ve been dealt and they’re like, the traditional way of saving might not work for me because things are getting so much more expensive. You got housing and just the cost of retirement and just the cost of goods in general makes me pretty optimistic going forward that these younger investors are trying to adapt in some way, at least, and seeing the potential of something like Bitcoin and planning for retirement. Speaking of just like the higher cost of things, inflation is definitely top of mind today. I believe grocery bills where I’m at are up over 20%. The average gas price in the US is up over 50%. It’s no doubt that the American consumer is feeling these inflationary pressures. Do you have any tips for how people can work through these pressures?

Callie Cox (12:44):

Cost pressure is so real. Yeah, I’ve noticed it in my grocery bill. In fact, I went to the beach with my in-laws last weekend and there’s this deli we go to and there’s a ribbon sandwich that I get that was 8.50 last year. Like I live in North Carolina, by the way, we’re thinking North Carolina prices, but it was 8.50 last year and this year it was $15. I don’t know if we can describe all of that to inflation, but that’s the thing with inflation too. Like if you look at the consumer price index, prices according to CPI are up about 8% year over year, which is a pretty quick pace of inflation, but it’s also very situation specific. It all depends on if you own a home versus if you rent a home, what you buy at the grocery store or what you buy with your discretionary income. Your experience of inflation can differ so much depending on your lifestyle, basically.

Callie Cox (13:35):

I think that there is some truth to inflation hurting different classes of people more, different groups of people more depending on what their budget is and what they’re spending habits are. But I think the biggest tip I can give with inflation is to really assess your income. Your income is your biggest tool against inflation and the job market is slowing a bit right now, but it’s still very hot. One of the easiest weight on inflation is to make sure your income kind of grows with it, get a new job, start that side hustle, drive for a car sharing service.

Callie Cox (14:08):

It’s hard to also give tips on inflation because it’s such an uncontrollable dynamic of the economy. You’re probably going to deal with it in some form or fashion. But the other thing I’d advise is that in the periods of high inflation, it is so important to put your money to work. Inflation is eating into the value of your cash and it makes it even more important to reach out and accept some of that uncertainty and risk to hope that your money can take on a return. I wrote this piece actually, when I was at Ally about when inflation sticks around, which it’s funny, I wrote it about a year ago and in the back of my mind, I was like, oh, inflation will just be a transitory thing.

Callie Cox (14:45):

I’m writing this just in case inflation sticks around, it turns out it did, but it’s all about the S&P’s historical returns, the S&P’s historical returns with dividends as well, getting that quick income on your money from historically more stable companies and the S&P in stocks in general, depending on how diversified you are, have proven to be a really effective way of fighting inflation by investing. Certainly, you can look at other risk assets as well. It’s not working super well at the moment, but it also makes sense to think a little bit more long term, start early, invest now and watch your money hopefully grow over time. I’m a sucker, I’m an investing nerd, right? I’m always going to tell you to invest, but it’s just so important to think about what your money is doing for you in high inflation environments.

Clay Finck (15:35):

Yeah, I definitely agree with what you said there with keeping an eye out for a potential new job if you’re ready to make that jump and then obviously being invested in the markets. In the inflationary system we’re in, investors are always going to benefit over the long term. Those that have the right mindset and buy and hold the right assets over the long time horizon. This just came to mind related to the inflation, a big piece of personal finance and saving and investing is need to limit your expenses to some degree. When I think about this, I always think about the big three categories, what they call them like the big three expenses and that’s food, housing, and transportation.

Clay Finck (16:13):

You don’t have to be like totally frugal in a total skimp on all three of these categories. But if you just focus on what area do I maybe not care all that much about like, do I have to have the fanciest car, like the huge pickup truck consumes all this gas, that’s now very, very expensive? Maybe you could have a paid off car, that’s more reasonable and allow you to absorb that inflationary pressure, say in the grocery bill where you really don’t want to cut back on some of the things that you’ve really enjoyed and you’ve really liked. So kind of prioritizing that I think is really important too.

Callie Cox (16:43):

Yeah. I love that you said that, Clay, that’s the splurge areas theory, right? It’s like, you want to go treat yourself and I feel this way too. In my life, I want to treat myself, but if you really focus on one or two areas and you try to prioritize where you’re spending your money, you can still get that feeling of, no, I have this nice thing, or I am able to feel the benefits of saving my money, making that income, but you’re able to contain it. I think that’s really important.

Callie Cox (17:11):

Like Matt, my husband and I, we talk about our splurge areas all the time and ours right now are food and experiences. I mean, we have older cars, we drive those. We don’t spend a ton on housing, but we ball out on food and experiences because those are kind of what we’re putting as a priority in our lives right now and that can shift too. You can pick a splurge area and then like in a month, in a year or whatever, change it. But defining those splurge areas is a really cool personal finance trick, if you will.

Clay Finck (17:40):

Yeah, I love that. Totally, agree with what you’re saying there too. Should we be adjusting our investment portfolios with inflation or what are some things we should be considering regarding our investments during this time?

Callie Cox (17:53):

Yeah. I’ll start off with saying none of this is investment advice, because I don’t know you, listener your situation. It all depends on your goals, your needs, your risk tolerances, your cash balances, all of that. None of this is investing advice, but if we’re thinking theoretically, there are some ways you can optimize your portfolio in times of high inflation. What I mentioned a few minutes ago, thinking now versus later, it all boils down to that. Thinking about how to get those quick returns on your money without having to wait to realize those returns and those cash flows. Working now versus later, we’re thinking about companies with cash flows now, companies with profits now, value stocks, stocks that are trading closer to their earnings, to their current earnings. But yeah, just try to think about what’s working now versus later, value stocks tend to have current cash flows and they trade closer to the cash flows they’re making now so there’s less room for guesstimating and uncertainty there.

Callie Cox (18:53):

I also like to talk about dividends. Dividends, I mentioned a little bit earlier, but there are quarterly annual payments that you get back from a company and those make a big difference because first of all, higher rates discount and kind of lower the value of future cash flows. If you bring those cash flows in, they tend to be less affected by higher rates and they add up over time. Dividends, they tend to add up a little bit here, a little bit there. They tend to add up over time if you’re responsible enough to reinvest them. Again, think now versus later. In a period of low growth but high rates, it is important to search for what’s working now as well, what tends to work well with the economy and the place that it is. I mean, at eToro, if you want to get technical, we really like achieve cyclical sectors, like financials, energy, stuff that people need now.

Callie Cox (19:47):

I said it in an earlier note, but it’s almost like, think about what investors need regardless of the [inaudible 00:19:53]. They need food on their tables. They need gas in their cars. They need power to turn the lights on. That kind of stuff is stuff that works regardless of where inflation is. Especially now with uncertainty, with those fears around a recession, those stocks could be almost like comfort food for investors. Honestly, we’ve seen that this year, we’ve seen a lot of those steady Eddie companies perform well relative to the index. Think now versus later and think about what performs well, regardless of what economic environment we’re in.

Clay Finck (20:25):

Yeah. I think many investors learn some tough lessons over the past couple of years when the interest rates are near zero and you see interest rates rise, like you mentioned, those high growth, high flyers are going to be hit really hard and some might be confused why that is, and you hit on it how the market discounts, the future earnings. Many investors are calculating the value of those companies based on those earnings discounted back to today. When the interest rates rise, that hurts the growth stocks and doesn’t affect the value stocks near as much. Even some of those sectors, like energy, energy’s up a lot over the last few months that might surprise some people how any stocks could be up given the environment we’re in.

Callie Cox (21:07):

Energy is super chaotic right now. I make all these sector charts and energy is just like off the axis and I’m like, and I love it, and I hated all at the same time, aesthetically, this is not great.

Clay Finck (21:20):

Yeah. I keep hearing how energy in hindsight, we can say that energy was very underinvested and now, we aren’t producing near enough oil and all these other sources of energy. Do you have any other general rules of thumb people can use to ensure they aren’t taking this excessive risk that many might have seen, the risk they might have taken over the past year or two?

Callie Cox (21:42):

Yeah. First of all, if you’re thinking about risk, you’re doing better than 90% of investors. A lot of people think about return, but they don’t think about risks. If you’re talking about risk, pat yourself on the back, you’re doing great. But when you start to think about risk, risk is a tough thing to define and it’s very personal as well. If you want to sit down and have an honesty hour with yourself about the risk you can take, think about when you need the money you’re investing, because that’s the number one question you should answer. Because as you go out in time, as you give your money time to season, and as you give your investments time to play out, you typically can take on a little bit more risk.

Callie Cox (22:21):

The other thing is its helpful and cash isn’t the sexiest thing to talk about these days in a high inflation environment, but having some cash on hand, having a stable balance that you can dip from if you need for expenses and other investments, having that stable cash balance could help you also take risk, take a little bit more risk as well, because you always have that kind of mode of cash and that emergency fund to tap back into if you needed it. And think about your emotions as well, even if you’re in the best financial position, you have high cash balances, you’re investing for the long term, you can get spooked off by swings.

Callie Cox (22:58):

It’s not easy to invest in a heavily volatile market. You also have to ask yourself, what can I handle emotionally here? Can I turn my brain off and not look at my brokerage account when markets are falling in Bitcoin is 60% from the highs and this tech stock I really like is 50% from it ties? There are a lot of things you can consider there. Another thing you can do too, is kind of stress test your portfolio. Think of all the different securities and assets you’re invested in and almost simulate what would happen if one of them fell 20%, like go through the motions in your head about how you would rebalance and where you would find your cash and if you would cash out.

Callie Cox (23:40):

Sometimes that can give you a little bit of comfort so you know that you have a plan when things go south or arrive on you, but there are a bunch of different things you can do to define the risks you want to take. Once you start investing and you define that risk, set your targets, really understand where you want to buy in, where you want to sell, how long you want to be invested so you’re really relying on the numbers instead of your emotions. I hate using this word, but diversify your investments.

Callie Cox (24:09):

Diversification is such a weird word. I almost can’t find a good synonym for it, even though it’s a word that everybody seems to hate. It’s like medicine. Really, spread that risk out among your portfolio so you’re not focusing on just one asset class at a time. You can certainly do that. But as we saw over the past year, if you focus too much on growth stocks, you probably have had a really rough 2022. I don’t know if some people have been able to handle it emotionally, think about it, quantify the risk, define the risk that you can take, set your targets before you invest and stick to them and then spread that risk out.

Clay Finck (24:45):

Looking back over the past couple of years, it’s honestly been a lot of fun. I’ve been talking about investing in investments with so many different people. I’m texting people what feels like every day about what’s going on, what investments we’re looking at? A lot of my friends and I own many of the same say individual stocks, or say Bitcoin, or we just enjoy and just love talking about the markets and it gives people this sort of comradery or this like community feel. COVID has kind of like separated us. Many people are working from home, working remote, and it’s like investing has brought so many of us together, which is kind of funny and just super interesting.

Clay Finck (25:23):

You can just look at the WallStreetBets forum, there are so many people I would’ve never thought would ever care about investing. For some reason, they’re drawn into this WallStreetBets forum, this comradery, and just this community that like people feel drawn in, they’re not just trying to make money. They’re in it with other people and I think that’s really cool. I think I saw on the website that eToro is like a social investing platform. Could you talk a bit about the role that you’ve seen community play in the investment field?

Callie Cox (25:54):

Yeah, definitely. eToro is all about community, you’re right. We’re basically this, if you combine social media with an investing platform, that’s eToro. You can invest with other communities, you can invest in what other investors are investing in. It’s very Meta when I say it. You can invest in other crypto portfolios that investors have put together for you. We really encourage the open dialogue among our customers, what’s going on in the markets today? What do you think about this stock? Just because community, when everybody comes together, the almost matching together of thoughts and experiences and perspectives really can bring about a good result for everybody. COVID and community, man, that’s such an interesting behavioral use case, like almost case study, right?

Callie Cox (26:41):

I was talking to this psychologist friend of mine about six months ago, all about like COVID and community and he brought out this really interesting point about what isolation kind of did to our brains and how we just craved communities so much when everything was shut down during COVID, that it really made us search in strange and unusual places for that community. At the same time, we were really stressed about money. I started my job at Ally in February of 2020, and my first thought when market started falling was, oh man, am I going to keep this job? I don’t know. I work for a bank and I have no idea what’s going to happen to this bank because of this weird pandemic that seems to be shutting down the economy and hurting all these small businesses.

Callie Cox (27:25):

You take the fact that we were all isolated, we were all craving community, and we were really stressed about money too, and it turned into this almost really cool situation where we started talking about it with friends over our Zoom happy hours, over the internet, just really talking about our money stresses and about investing and how we can really get by in such an unstable environment, honestly. There are pros and cons to it too. Of course, we’ve seen a lot of pros in that the money conversation has become even more prevalent. It’s no longer taboo to talk about money. Honestly, in that situation, everybody wins. Like we’re all being transparent with each other, but at the same time, we have seen a little bit of group thinking markets and there are those risks with community too, getting swept up in the crowd and investing with everybody else while ignoring your own goals and needs.

Callie Cox (28:15):

But I love the fact that people are talking about investing. I’ve had a bunch of friends approach me about investing their money and what’s going on in the markets. I watch fed press conferences every time there have been, those press conferences after the fed announcements and it’s been crazy to even see the amount of people watching those on YouTube. I think in the last press conference I saw 20,000 people at some point, watching Fed Chair J Powell talk about monetary policy. It’s cool to see finance go mainstream because it really helps. The fact that it is going mainstream really helps people understand what’s going on and how these vague headlines and how these kind of obscure market events really impact their money. That’s kind of a lot there, but I could talk about this for hours, just kind of what COVID did to our brains and what isolation did to our brains and how that’s really turned into a market that’s turning more and more toward retail investors favor.

Clay Finck (29:12):

You mentioned group thinking, this is related to something I was chatting with Trey Lockerbie about yesterday, we host a podcast and we bring all these different types of thinkers, investors and just viewpoints onto the show and that’s one of the best things about being a host is like, I hear one opinion and it sounds very convincing, but what I haven’t heard yet is the other side of the argument. Many people are biased in their views and opinions and being able to either listen to a podcast or just tune into those different viewpoints, I think is super important because it helps balance out your biases. Because if you only listen to a growth stock investor in 2021, you might think, oh, I have to put all my money in growth stocks because this is the future. These are the huge trends.

Clay Finck (29:53):

Then you can just get almost totally wiped out in one year’s time and that can be a tough lesson to learn and very expensive lesson. Related to this community aspect, I was thinking about how many people in finance are male and I personally have a hard time getting female guests on the show. I’ve seen some podcasts pop up that are in the finance space that are more geared towards females and that’s really good to see because they’ve been really popular. I’m curious if you have any tips for women or just people that are new to the investing space in general, what tips you would give them to get started investing and get off on the right footing?

Callie Cox (30:33):

Gosh, don’t I know it, the finance industry is very heavily male and that’s just how it’s shaken out. But unfortunately, it’s the reality that we’re all kind of dealing with right now. It always struck me as funny too, because money is just so personal. I remember reading Morgan Housel’s Psychology of Money, which by the way, is a wonderful book. Definitely, read it, it’ll blow your mind. But he brought up a point in there about how money is personal and your view of money really depends on your past experiences. But at the same time, we look at the financial advisor community and it’s overwhelmingly like white men. You deal with this thing, this such an emotionally… Money being so emotionally charged. You take this to a financial advisor and you really put some trust in them to sort out your situation and ultimately help devise a plan to meet your goals.

Callie Cox (31:22):

But then for this highly personalized thing, you don’t have somebody in front of you that fits your situation and understands your situation. I always thought that was really strange and I think we’ve learned a lot about how money is just so personal and emotional, especially over these past two years. But anyway, yes, finance is a heavily skewed industry toward men and it’s a bit of a self-fulfilling prophecy too. I mean, honestly, you can’t be what you can’t see. If we can’t make any progress there, it’s just going to snowball. But luckily, we have seen a lot of progress. We’ve seen in a lot of different data that women have felt more empowered to invest, especially over the past two years. The industry has really focused on education, which benefits anybody coming into the industry because there’s a bridge kind of across that moat, that was just so big for so long.

Callie Cox (32:10):

Like the industry was just so gate kept because of all this jargon and all these weird systemic quirks that nobody really understood. Then there’s crypto too, I mean, new products like crypto, we talked a little bit earlier about how crypto has been a little more accessible and the conversation has been a little more inclusive and open. That’s really helped open up the finance industry as well. Even if you’re not a crypto believer, even if you’re skeptical of crypto, wouldn’t invest in it yourself, at least you see what this environment is doing in terms of bringing people in.

Callie Cox (32:41):

I think that there are a lot of things we could fix in the industry, but I don’t want to lose sight of the progress we’ve made so far. I guess in terms of tips for women investing, I mean the biggest tip I would give them is to do it, dip your toes in and stay engaged. For me, the best way to learn about investing was to just try it myself. I mentioned this earlier, but I was really intimidated for so long to invest and then one day I just took a couple $100, threw it in an S&P mutual fund, and I was like, all right, let’s do this. I don’t need this. This is extra money. Just toss it in there.

Callie Cox (33:16):

There are a lot of behavioral reasons for why starting small and being consistent can help you start to feel more comfortable with a process, but biggest tip is just do it, start really small, even if it’s $20, really test your hand out, don’t be afraid to try different things, see what investments work for you, especially, for what you want to do with your money and ask questions, try to find a community that works for you. I’ve been lucky that Twitter has been such an awesome community for me, I’ve met so many smart people, including you, Clay, I’ve met so many smart people over Twitter and the dialogue has really been great. Try to find that friend group or that community that really supports you. Luckily, it’s easier than ever to do that.

Clay Finck (34:03):

Very good points. Thank you for sharing that. I’d like to transition to talk a bit about real estate. You mentioned earlier that you’ve bought a home recently and you’ve been studying the real estate market a little bit too, and this is a challenge for millennials. The real estate market seems to just keep going up, oftentimes outpaces inflation even, outpaces incomes as well, which makes it very difficult to go out and buy a home, especially when there’s a lot more buyers than sellers. You’re getting into things like bidding wars and the things I hear is just crazy. Luckily, I’m in the Midwest and home prices for the most part are reasonable compared to many areas here in the states. What are some of the trends you’ve seen for millennials in general getting into the housing market?

Callie Cox (34:49):

Yeah, gosh, it’s a cold world out there for a lot of buyers right now. But like I mentioned earlier, I live in the south. I live in Charlotte, so I’m not dealing with the vicious housing markets that we see in Southern California and major metropolitan areas, but it’s not exactly easy here either. Charlotte’s a rapidly growing city. I’d like to say I’ve seen a little bit of a hot housing market here, but I think the housing market is so interesting because it’s partially an economic story and then it’s partially a demographic story. Economically, rates have been low for so long that’s really pushed housing prices up. We’ve seen a lot of people benefit from the wealth effect. Stocks rising mostly over the past decade, the S&P being in its almost one of its longest bull markets in history and the housing market kind of participating along with that.

Callie Cox (35:37):

But we’re also seeing a lot of millennials and millennials by the way, biggest generation out there right now, we’re seeing a lot of millennials getting to that home buy engaged, their early 30s where they want to start that family, they want to put roots down and we’ve seen a lot of millennial home buyers emerge from that. In fact, millennials were actually the biggest generational buyers of homes last year according to some national association of realtors data I saw. It’s definitely a trend. If you believe that demographics are driving the housing market more than economic factors, then you’d have to think that housing prices will continue to go up just because this huge cohort of millennials that are coming of age are looking to buy houses, and houses too, it’s a tough environment to buy a house in, but people are also so emotional about their houses.

Callie Cox (36:27):

I mean, it’s the roof over their heads. It’s where you have to live. You have to kind of care about the house you end up purchasing. On one hand, it’s a really tough housing market. But on the other hand, we’ve seen a lot of consumers stretch themselves to fit this housing market, waive inspections, search out of their budget, put down smaller down payments. Those are not necessarily bad trends, but it just goes to show how much of a poll there is, especially in the millennial cohort to buy that perfect house. It’s a really tough housing market. Personally, very happy that we bought a year ago.

Clay Finck (37:04):

I bet you are. I’m in Nebraska and not too many people, it’s almost like there’s a saying that either stay in Nebraska or people are leaving, no one’s really moving to Nebraska. The weather’s terrible in the winter, but seeing how expensive areas like California are getting, I talked to some people that are in the real estate space and they’re like, many of the buyers that are coming to us have moved from these very expensive areas and came to the Midwest and the housing difference is just like crazy to think about the price differences.

Clay Finck (37:34):

Since I’m in the investing space, I have many people come to me like what’s going to happen to the housing market in the next year or two. It’s like, it’s the impossible question of pull out a crystal ball and like, tell me, is housing going to go up or down over the next year or two? Is the housing bubble going to crash? Let me throw the impossible question over to you. What are your thoughts on how millennials can approach the real estate market with interest rates are higher, which means the monthly payments are higher, but we could see rates eventually come back down? What’s your advice for someone that’s looking to buy a house in today’s market?

Callie Cox (38:06):

Yeah. Gosh. Well, my first piece of advice would be don’t try to time the housing market. I think we all learned our lesson with COVID there. The economy went to a recession, but housing prices didn’t dip at all. In fact, we kept going higher. The housing market, like all markets is incredibly tough to time. Buying a house is a personal decision. It’s tough to view it in an investment lens, especially if it’s your primary house. Because like I said earlier, it’s the roof over your head. You have to like it and to kind of monetize the roof over your head can make for a very miserable experience. So don’t time the housing market, buy when you’re ready, because ultimately it is a personal decision and there’s a lot of time and money that can get caught up in buying a house. Understand if that lifestyle is good enough for you.

Callie Cox (38:53):

Don’t view rent as throwing money away. I hate when people come to me and say, oh, why do you rent? Like rent is throwing money away. Because any cost that you pay to have a roof over your head is not throwing money away and rent can give you optionality. It can give you a capped cost every month where you’re not always worried about being on the hook for an AC system that broke and that’s a $10,000 expense right there. Don’t hate on renting. You can certainly build wealth while renting, but try to find something that works for you. Think about what kind of house you want. When Matt and I were searching for a house, we first knew that we didn’t want to fixer upper because A, maybe you pay a little less for it, but that’s cash you eventually have to pay overtime to renovate it.

Callie Cox (39:38):

And B, we’re not handy people, we’re not good at house chores, taking care of the lawn, renovating the kitchen. We don’t find enjoying that. We’re not good at that. We had to find a house that worked for us there, but financially I’d also mentioned too, that throw the old rules out of the book for buying a house. If you’re like me, your parents had probably told you to put that 20% down payment down, look for the shortest mortgage term possible, and that may have worked back when they were buying houses in the late ’80s and early ’90s. But right now, rates are still historically low, even at 5%, and it is really hard to save up that 20% down payment.

Callie Cox (40:20):

Having a big down payment definitely makes you a stronger buyer can make you more competitive, but at the same time, you don’t need to put down 20% to buy a house. There are plenty of different options you can get out there that don’t require you to put down that 20%, including taking on PMI or possibly looking at an FHA loan. Think about all that old advice to stuff that your parents tell you, and really try to adapt it to what the environment looks like today. Just because you don’t check all those boxes doesn’t mean you can’t buy a house, but again, think of it as a personal decision and don’t rush it.

Clay Finck (40:55):

One of the big issues with entering the real estate market, especially with high inflation is like, what do you do with all the cash you put on the side? Just say, for example, a house is, we’ll just say $300,000 and you’re putting three and a half percent down. So that means you’re going to have to save, say close to 15 grand for the down payment and then you have closing costs on top of that. Do you have any tips for what people do with this money, while they’re saving up to buy a house and maybe touch on some of the tips and tricks you did, as you saved up for your own house over this past year?

Callie Cox (41:27):

I get this question a lot from friends because surprise, I’m a millennial, all my friends are trying to buy houses right now. But when you’re thinking about a short term goal, like saving up for a house down payment, you really need to consider capital protection over growth, and different things work for different people. But markets have shown us that especially this year, year to date, that selloffs can happen, ups and downs are normal, and sometimes they take a few years to recover. You can certainly prioritize growth over kind of protecting your money and try and invest it in stocks and crypto to see if it can grow, but not always a guarantee that you’re going to get that money back before you need it to buy that house or put down that down payment. I always tell people, and this is not investing advice, never investing advice, but I always tell people that with a short term goal, there’s just a lot of uncertainty about the future.

Callie Cox (42:18):

Even though inflation is high, you might just have to stash it away in a savings account, a money market account or in bonds, just to make sure you have that cash available for when you need it. That’s what Matt and I did. We stuck it in a savings account and we said, okay, this is our house fund and we’re not going to touch it. We’re not going to invest it. We’re going to get it to a point where we’re comfortable with how much we have saved up so we can buy that house and put down that down payment. But I don’t want to discourage people either. You really don’t have to save up too much money to buy a house.

Callie Cox (42:51):

It is prudent to do so, because again, it can make you a competitive buyer and it can put you in a good position where you have a good solid base of equity, when you buy that house. But I mean, there are a bunch of different options these days. You can look into first time home buyer grants, you can look into FHA loans where you don’t need to put as much down. Don’t think that you need to be stashing your cash into a savings account forever before you can buy a house because it all boils down to the fact that it’s a lifestyle decision and there are many different ways to get to that point in your life where you can end up buying that house.

Clay Finck (43:24):

You keep mentioning that it’s not investment or not financial advice. I kind of want to expand on that piece because you mentioned earlier, Morgan Housel’s book, how personal finance is personal. Each person’s situation is different than each other person. Like you have to assess what makes most sense for you and what’s going to work for you? There is no perfect, there is no one size fits all answer. You just have to think about the trade offs with each financial decision you have and try and make the best one for yourself and don’t like beat yourself up, if you don’t make the perfect decision, like say, you didn’t buy a house last year while rates are low. Now, rates are much higher now. Well, don’t beat yourself up over that because you’re not going to get every personal finance decision perfect. We can all just try and follow these general rules of thumb.

Callie Cox (44:12):

Yeah, I think you’re totally right. There’s just so much gray area in personal finance too. I love when people and I’m guilty of this view, but I love when people step out on social media and they say, don’t take on any debt or they make it a zero sum game because it’s just so easy to do that. It’s so easy to do that for attention, for the likes and the retweets, but that really isn’t how personal finance works. It really comes down to what your goals are, what your needs are, what exactly you’re going for and what you can handle, what kind of risk you could tolerate? You really have to play your own game and kind of going back to the whole, this is not investing advice thing. It really like every piece of financial content out there, you can read it and you can learn a lot, but you ultimately have to adapt it to your own situation, and everybody’s situation is different.

Clay Finck (45:01):

You’ve also done some interesting research related to retirement and millennials. It seems like the narrative is almost that millennials haven’t been dealt to really bad hand relative to the older generations, which I would definitely agree with from a financials perspective. Despite the better hand being dealt to baby boomers, it seems like there’s still this crisis of many of them not having enough money saved for retirement, are millennials positioned to suffer that same fate eventually? Or are they potentially better positioned actually?

Callie Cox (45:36):

Yeah. It’s really hard to say because, and this isn’t like a millennials versus boomers comment, but it’s more that it’s really tough to prioritize investing, especially retirement investing. It’s tough to prioritize that and conceptualize it. It’s a bit of a learning curve to get started. When we’ve talked about many times in this conversation about how there’s a bit of a learning curve and a moat between learning about investing than actually doing it. But at the same time, it’s really hard to know how much you’re going to need for retirement. But I think back to a decade ago or so, we had that show, Who Wants to Be a Millionaire? And everybody was like, wow, a $1,000,000, that’s so much money. Well, now, we’re figuring out after a few years of inflation and also a few years of asset price is growing that $1 million isn’t actually a lot of money.

Callie Cox (46:28):

If you think about it, if you do the math, you’re probably going to need more than a $1,000,000 when you head into retirement. That fact in itself is really daunting and I think those two factors put together. The fact that it’s really hard to prioritize investing and it’s really hard to conceptualize how much you need, it scares a lot of people off and it makes them think, I’ll deal with this tomorrow. Then they say it over and over again until they’re 50 and they realize they’re going to retire in 15 years, but hopefully millennials are in a better spot. I will say millennials, I think have the upper hand when it comes to education. There’s just so many more ways to learn about investing these days and to learn about the power of investing early.

Callie Cox (47:05):

But, on the other hand, many of us were lucky enough to get pensions, right? But when our parents were working, pensions were a lot more popular than they are now. But at the same time, I mean, we have 401ks. 401ks actually aren’t a terribly old concept, they were introduced in 1978, and both IRAs, or other tax friendly or tax advantaged accounts weren’t introduced until the late 1990s. It’s a bit of a different situation, but I would attribute, if anybody struggles with retiring, I’d probably attribute it to those first two factors. The fact that it’s really hard to start, and it’s very hard to conceptualize what you need.

Clay Finck (47:44):

In a way, I’m like really optimistic about mini millennials and gen Z types and planning for retirement and one of the reasons is they have access to social media and just the internet in general, it’s access at their fingertips. And many, I think older generations just haven’t come around to being able to have that at their fingertips and like do that research and try and find sources that they can actually trust. I think many younger generations are finding that they have these tools that they can use to empower themselves and learn about things like investing or the stock market, or just like how to actually plan for retirement because you can’t count on your employer and the government to just do it for you.

Callie Cox (48:24):

Yeah, I completely agree with you. I think that’s a huge advantage that we haven’t fully realized the power of yet. The fact that investors, retail investors have so much power in general, because they have education and information behind them. I think we’re seeing a lot of, this is beside retirement, but I think we’re also seeing a lot of companies and publicly traded companies that are starting to realize that power and they’re starting to curate what they’re offering and how they market their offerings and their financial information to the retail investor. That’s not just SEC filings anymore. We’re seeing a lot of companies, a lot of company executives and a lot of brands step out on social media and say, hey, this is what’s happening, this is what we’re thinking. It’s really introduced this interesting dynamic of keeping individual investors like you and me loop in on everything that’s happening.

Clay Finck (49:15):

Some of what we discussed today might make the future look somewhat bleak for some younger investors. Let’s close out the episode with a bit of a positive spin. What’s the best thing a young investor can do to maybe set themselves up for financial success?

Callie Cox (49:33):

The economy might look bleak right now, but you have the power. You have more power than you think. The best thing that you can do is start early and stay engaged. Start early meaning even if you feel like you’re not at the point where you can invest, just toss a few dollars into a brokerage account and see if you can build from there. Because once you get involved, once you get in the habit of putting money into a brokerage account or investing money towards your future self, then it’s a lot easier from then on out from a behavioral perspective and from a financial perspective because you have that allotment in your budget to do it. And compounding is just so powerful, having time on your side and allowing your investments to compound over years and decades can make such a huge difference.

Callie Cox (50:19):

I clearly work in the finance industry, I think, and talk about compounding all the time and I myself will run compounding calculations and I’ll be amazed by the results too. It’s just so hard to comprehend what compounding can do to your portfolio. We were just talking about retirement investing too. I mean, that’s the perfect example of when starting early can be such a massive benefit because you’re investing over multiple decades and letting all of the games snowball on top of games. That would be my best piece of advice for a millennial investor. Really, just start early and know the power that you have and talk about it, too. Talk about your investment journey with your friends. I know it’s still a little tough to talk about money, but we’re in a tough position right now. We’re all worn out for the past two years. I promise you, if you’re the first person to speak up, everybody else will appreciate it. If you can’t talk about money with your friends, come to me, I’ll talk money all day.

Clay Finck (51:18):

I love that you mentioned the compounding piece. I think that, and I was like 18 or 19 when I read Buffet’s biography to figure out how he built his wealth. Just reading about the compounding piece how he built his fortune, like 99% of it passed his 65th birthday. When you start to run the numbers and understand how compounding actually works, I think that it just like so powerful and so incredible and just a message, you and I just want to spread as far and wide as we can. Callie, thank you so much for joining me today. I really, really appreciate it. I really enjoyed this conversation. Before we close out the episode, I want to give you a chance to give a hand off to what you’re working on.

Callie Cox (51:55):

Yeah, sure. Well, I’m an investment analyst at eToro. I write a weekly note called the Bottom Line. We posted on eToro’s blog every Friday so check that out, and you can also follow me on Twitter at Callieabost. I post quite a bit of market analysis there and it’s a bit of my personal Twitter as well, so you might see some tweets about the Tar Heels and my plug and North Carolina, but it’s all fun and I love, love, love talking markets, so please reach out and please follow whenever ready.

Clay Finck (52:24):

Awesome. Thank you so much, Callie.

Callie Cox (52:26):

Yeah, thank you for having me.

Clay Finck (52:28):

All right. I hope you enjoyed today’s episode. Please go ahead and follow us on your favorite podcast app so you can get these episodes delivered automatically. If you’ve been enjoying the podcast, we would really appreciate it if you left us a rating or review on the podcast app you’re on. This will really help us in the search algorithm so others can discover the show as well. If you haven’t already done so, be sure to check out our website, theinvestorspodcast.com. There, you’ll find all of our episodes, some educational resources as well as our TIP finance tool that Robert and I used to manage our own stock portfolios. With that, we’ll see you again next time.

Outro (53:05):

Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. 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.