Financial Advisors’ Wishlist

Our 2 Cents – Episode #192

Financial Advisors’ Wishlist

We are back with another great episode of Our 2 Cents! On today’s episode, Steve and Gabriel share a quick update on the latest news and dive into the art of making the perfect scrambled eggs. Then, they explore some of the big wishes that are on our financial advisors’ minds. Listen in now using a link below!

1. Mastering the Best Scrambled Eggs:
   • Learn multiple chefs’ secrets to preparing the most fluffy scrambled eggs every time, so say goodbye to overcooked eggs and hello to breakfast perfection!
2. Financial Pros Wishes:
   • Discover our financial advisors’ wishlist for savers and investors, designed to pave the way towards financial peace of mind.

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Podcast Transcript

Announcer: You are listening to Our 2 Cents with the team from SGL Financial, building wealth for life. Steve Lewit is the President of SGL Financial, and Gabriel Lewit is the CEO. They’re here to discuss all the latest in financial news, trends, strategies, and more.

Gabriel Lewit: Welcome back to Our 2 Cents. We’ve got, obviously, a phenomenal show lined up for you today as always.

Steve Lewit: Better than ever.

Gabriel Lewit: The best one yet. Well, at least until our 200th episode that’s rapidly approaching.

Steve Lewit: Yeah. When is that?

Gabriel Lewit: I think it’s seven or eight more episodes to go. It’ll be right around the new year probably. Hey, that’ll be a good kickoff. We’re trying to think of something special for that one for you, all of our valued.

Steve Lewit: Definitely.

Gabriel Lewit: Have continued to receive some very kind feedback on our show, so thank you. Please send the link to your family, friends, people that you think might be interested in what we have to say about finances and planning and trying to keep things lighthearted and interesting, though, is our main objective here.

Steve Lewit: And thank you for your compliments. We do get a few every week, and it means a lot to us.

Gabriel Lewit: Puts a big smile on Mr. Lewit’s face.

Steve Lewit: It does. The fact that people are listening puts a smile on my face.

Gabriel Lewit: Yeah, it’s great. All right. Well, let’s see, obviously, today, by the time you’re listening to this, we know because we’re recording this on November 6th, there is a new president.

Steve Lewit: Amazing.

Gabriel Lewit: Donald Trump was elected.

Steve Lewit: Swept, swept badly, goodly for him, badly for Harris.

Gabriel Lewit: Well, yeah. He’s got, of course-

Steve Lewit: Unexpected.

Gabriel Lewit: … a month or, what, a couple months until he gets sworn in. That’s going to happen in the near future. And the question, of course, turns very quickly from a planning perspective to what can we expect next?

And, quite frankly, I think you’re going to see, as there is a little bit of a spike in the market here as of this morning, sometimes that can, very quickly, that sheen can wear off. And then we’re going to get back to what we were talking about the other day, which is really, regardless of who’s in power, presidents that are Democratic or Republican, the market eventually is going to go back to looking at fundamentals.

Steve Lewit: Yes, it does. Yeah.

Gabriel Lewit: Are we overvalued, price-to-earnings ratio, supply chain, all the things that make companies grow. Yes, they have some link to, of course, the president who’s in power. But I think, once that fades away about the new election here, you’re going to see people talking just more normally again about markets, interest rates, economic impacts of companies being overvalued, AI bubbles, all the things that we normally talk about here on the show.

Steve Lewit: Yeah. I think underneath that, Gabriel, there is an expectation with a Trump presidency that there’ll be more liberal abilities to build businesses, more profit making. The economy should excel. A lot of regulations will go away. There’s this very positive business outlook with a Trump administration, but as you say, there are other forces at work. We have wars. Does inflation come back? And so everything, sooner or later, gets back to the numbers and the data.

Gabriel Lewit: Yeah, I think the most likely scenario, too, with tax rates, obviously, we have tax cuts that were set to expire at the end of 2025, sunset at the end of 2025, those will likely probably be extended. We’ll see. That’s going to be-

Steve Lewit: I can’t imagine him not extending them, but …

Gabriel Lewit: Yeah, yeah, I would agree with that, so lots that we are going to obviously be tracking and following along and reporting back to you as far as updates. And then, as we understand more about the tax changes over time, our strategies for tax planning will evolve. We’ll come up with ways to optimize your taxes no matter what the tax environment looks like.

Steve Lewit: Yeah. We’ll get a sense as new administration takes over of what their policies are going to be in more detail and where they’re really headed, and then, of course, we can adjust plans and do planning according to that.

Gabriel Lewit: Yeah, yeah. But for those of you out there wondering, “Okay, now what do I do with my money?”, well, it’s the same answer from us as it was last week, before we knew, which is have a plan.

Steve Lewit: Which is the same answer that we’ve been giving you for a long time.

Gabriel Lewit: I still think markets are a little overvalued. I still think there’s a risk of an AI bubble. I think we’re in a decreasing interest rate environment. In fact, we’re going to talk about that just for two seconds here in just a minute. And, overall, your time horizons, your goals, your personal preferences, as well as some of these near and midterm market forecasts, all of that should shape together to help you determine what you do with your money as opposed to just who got elected.

Steve Lewit: Yeah, I like the way you put it sometimes, Gabriel, say our plans are all-weather plans. Whether it’s Harris weather or Trump weather or somebody other weather, those are just weather coming through, and the plans are built to handle all of that, whether it’s a storm or a sunny day or anything like that. A good plan has to be a flexible plan.

Gabriel Lewit: Yeah, it’s going to be one that will hopefully win in all weather conditions, all financial or economic conditions.

Steve Lewit: Our boat don’t sink.

Gabriel Lewit: No, sir.

Steve Lewit: No, sir.

Gabriel Lewit: Okay. Well, I mentioned I would talk just briefly about the interest rate environment. Article just came out recently, of course, back in September, the Fed reduced interest rates by half a percentage point. Essentially, many here predict that, coming up, there’s going to be another maybe quarter point rate decrease.

Steve Lewit: I’m surprised to read that. Well, we’ll find out Thursday, which is tomorrow.

Gabriel Lewit: It is.

Steve Lewit: My God, this week has gone so fast.

Gabriel Lewit: Yeah. And then, of course, either that or there’ll be a pause and just assess. But if there’s another interest rate decrease coming up soon, then maybe the one after that will be a pause, the next Fed meeting. We’ll see. We’re going to keep tabs on that. But it is still widely projected interest rates are going to continue to creep downwards regardless of the new administration.

Steve Lewit: That is true. That is true. Yes.

Gabriel Lewit: Okay. Well, let’s shift gears a little bit here. That was just our quick update for you.

Steve Lewit: You know what I want to talk about.

Gabriel Lewit: The quote of the month?

Steve Lewit: No.

Gabriel Lewit: Our health tip of the month?

Steve Lewit: Sort of.

Gabriel Lewit: Sort of?

Steve Lewit: Sort of.

Gabriel Lewit: Our healthy eating tip of the month?

Steve Lewit: Sort of.

Gabriel Lewit: How to cook eggs?

Steve Lewit: I love scrambled eggs.

Gabriel Lewit: Well, let me intro this. Yes, we’re not just your run-of-the-mill financial show. We like to include a little bit about health and well-being and the quality of your life. Our slogan here is, if you’ve heard this before, it’s not just about your money, it’s about your life. From time to time, we like to put in something into the show that’s not about your money, it’s just about the quality of your life. And what could be more important than making high-quality financial eggs-

Steve Lewit: Financial eggs.

Gabriel Lewit: … scrambled eggs every morning for breakfast.

Steve Lewit: Everybody loves scrambled eggs.

Gabriel Lewit: We do have a financial topic after this, by the way.

Steve Lewit: Yeah, we’ll get there. Well, we did some financial, but everybody loves scrambled eggs. And I’ve just learned that different chefs have different ways of preparing scrambled eggs that I didn’t even realize-

Gabriel Lewit: Well, what I’ve learned firsthand is I go to, say, a restaurant, hotel restaurant usually, for breakfast whenever I’m out traveling, and the eggs, I’m like, “Why are their eggs so much better than my eggs?” And I’ve always-

Steve Lewit: As long as they’re not the buffet eggs.

Gabriel Lewit: No, not buffet. Yeah, I’m talking about-

Steve Lewit: Buffet eggs are godawful.

Gabriel Lewit: Yeah. And so I came across this article, I always am browsing for stuff for the show, and I said, “This is great because I’ve got to try all these different techniques here.” Okay. And we’re going to share these with you so that you can become a better scrambled egg cooker and impress your kids, your spouses, your family members, your grandkids, with world-class scrambled eggs.

Steve Lewit: Start the day on the right foot with perfect scrambled eggs. All right, so lead the way.

Gabriel Lewit: Well, of course, eggs are a affordable, somewhat, but a healthy source of nutrition. Scrambled eggs are also good for you. And the key, though, is with scrambled eggs, it’s all about texture.

Steve Lewit: Texture, yes.

Gabriel Lewit: Okay, that was from a panel of chefs here, what makes perfect scrambled eggs perfect? And this one, Ann Quatrano, a James Beard Award-winner, said, “I like a soft scramble just barely set.” Okay. And the chef of Ritz-Carlton Dallas said, “I like light, fluffy, what I call pillow consistency. And executive chef of Hartley Kitchen and Cocktails says, “It comes down to a velvety texture with no hard-cooked pieces or edges.” All right.

Steve Lewit: We are talking about eggs here, folks.

Gabriel Lewit: Yes. These are-

Steve Lewit: This is eggs.

Gabriel Lewit: … chef descriptions of eggs.

Steve Lewit: Chef descriptions of eggs.

Gabriel Lewit: Okay. Velvety, fluffy, light pillow consistency-

Steve Lewit: Sounds like my couch.

Gabriel Lewit: … and a soft scramble. Okay.

Steve Lewit: Got it. Right.

Gabriel Lewit: Yeah. Then this one guy goes into curds and stuff, which I really wasn’t tracking with that.

Steve Lewit: Do you like soft, fluffy, just as they’re becoming hard? It’s soft in your mouth, I guess. Do you like those or do you like it firmer and fully packed?

Gabriel Lewit: I would say the overall egg consistency would be like Ann Quatrano said, soft scramble. I don’t speak chef, but I assume what they’re mentioning is, yeah, when they’re not overcooked and all hard and lumpy and not that tasty.

Steve Lewit: I have an admission to make.

Gabriel Lewit: What?

Steve Lewit: I always overcook my scrambled eggs. It’s just I’m stirring them in the pot, this is very important, I’m stirring them in the pot and they’re fine and they’re fine, and then, all of a sudden, they’re hard and tasteless.

Gabriel Lewit: Well, that’s why we’re going to teach you here how to cook eggs. The chef here, Alba, Mark Alba, says, “Eggs cooked quickly on high heat taste overcooked with an unpleasant mouthfeel-”

Steve Lewit: That sounds-

Gabriel Lewit: “… verging on rubbery or tough.”

Steve Lewit: So, I’m overheating.

Gabriel Lewit: You are cooking too quick and overheating. Now, that’s not all there is to it. If that was all there is to it, it seems like it’d be a lot simpler.

I’ve tried cooking eggs on medium heat and they still don’t come out the way they come out-

Steve Lewit: And it takes forever.

Gabriel Lewit: … and it takes longer, and they still don’t come out good. I’m like, “What the heck?” Okay.

Steve Lewit: Got to get to work.

Gabriel Lewit: The type of egg matters, yes, across the board, a unanimous yes. Well, this one you may not be able to do, but Quatrano, the chef here, serves only eggs from her own farm. Yeah, you got to get your own chickens apparently to really cook high quality eggs here. The other lady here says, “Source locally, if you can, for free-range eggs,” not just organic-

Steve Lewit: Definitely free-range.

Gabriel Lewit: … organic free-range range if you really want the highest quality egg.

Steve Lewit: We want eggs from a chicken that has good mental health

Gabriel Lewit: Yeah, running around on the farm, checking out the other chickens, hanging out-

Steve Lewit: Pecking along.

Gabriel Lewit: … living the good life, at least for a while.

Steve Lewit: Yeah, squawking here and there.

Gabriel Lewit: That’s all. Also, just in case you’re wondering, there is no difference between white and brown eggs. I was thinking of the orange yolk. But, yeah, you’ll typically find the better eggs have a really dense, orangy, darker yolk color as opposed to a really light one.

Steve Lewit: One chef in here chooses his eggs by breaking them open and finding the lot that has the right color in the yolk.

Gabriel Lewit: If you’re willing to break some eggs, you can do that.

Steve Lewit: In the supermarket.

Gabriel Lewit: There you go. Yeah, just crack them open there. They’ll love that.

Steve Lewit: I like this one, I like this one.

Gabriel Lewit: Okay. All right, let’s get to cooking techniques. This is important, folks. This is where the-

Steve Lewit: Very important.

Gabriel Lewit: … the rubber meets the road, okay, or where the rubber spatula meets the pan.

Steve Lewit: I’m not going to go down there with you. It could be the fork that is stirring.

Gabriel Lewit: Maybe. Yeah. Okay, a common mistake that leads to dense, less fluffy eggs is the raw yolk and the white are not mixed together enough before cooking.

Steve Lewit: Well, this I know. I think I told you all this, I was a short order cook all my way through college. When I had the breakfast shift … it was a place called King George Hamburgers, but we were open for breakfast, lunch and dinner. And breakfast, we had 30 people there, you had to have eggs over easy and eggs this way. But what I learned from the master chef short order cook there is, just before you pour your eggs into the pot, you scramble them up like crazy and then you pour it in.

Gabriel Lewit: Hey, there it goes.

Steve Lewit: People loved my eggs there.

Gabriel Lewit: There. Okay, well, you clearly lost your touch then-

Steve Lewit: I clearly-

Gabriel Lewit: … because you just said you’re making poor, low quality eggs.

Steve Lewit: But I do stir them, but I just overcook them.

Gabriel Lewit: Okay. Well, so here we go. Yeah. “Differently stirred eggs will have different cooking textures,” it says here, “and while a fork or a whisk is typically used …” apparently something about using chopsticks, they said here. I’ve never heard of this, they said, “Grandma said use chopsticks. I got to Google this or something. But what is it, you just stir them with chopsticks, or are you doing something special? No, just the gals here are looking at me saying, “Yeah, you just chopstick them.”

Steve Lewit: Why can’t you use a fork?

Gabriel Lewit: Well, apparently chopsticks is a thing I didn’t know about. Okay.

Steve Lewit: I got to go out and buy chopsticks now.

Gabriel Lewit: And then, after that, low heat, constant movement in a non-stick pan are your best friends for restaurant quality scrambled eggs. Now, folks, you’d think that was it, but it’s not. There’s more. The size of your pan-to-egg ratio, it’s very important here. The pan-to-egg ratio cannot be understated. Okay?

Steve Lewit: It is. If your pan is too big, then it’ll cook too fast.

Gabriel Lewit: Yeah, yeah. And if it’s too small, it’ll cook too slow. For two to four scrambled eggs, it’s best to use an eight-inch pan, versus a 10 to 12 inch pan for more eggs.

Steve Lewit: A smaller pan.

Gabriel Lewit: Yeah. And then, okay, butter versus oil, okay, yeah, butter.

Steve Lewit: Butter, definitely butter.

Gabriel Lewit: Somebody else said clarified butter or ghee.

Steve Lewit: Or ghee, yeah. Well, if you like ghee. But even in butter there are different qualities of butter. Some butter is more expensive, but it’s really delicious as compared to the typical butter that you get over at the food store. Katie? Katie’s saying yeah.

Gabriel Lewit: A couple last things here, then we’re going to move on. After that, put away the whisk, add eggs, and gently move with a spatula or wooden spoon from the outside of the pan inward until all just barely set. It’s important to keep the eggs in motion as the introduction of air will help them achieve that pillowy texture. And don’t forget to pull the egg off the sides of the side of the pan.

Steve Lewit: Going to have eggs for dinner, I think.

Gabriel Lewit: Okay. Two scrambled eggs in an eight-inch pan, done as we talked about here, according to Alba, should take between three to six minutes to reach a soft scramble.

Steve Lewit: Why don’t you come over for eggs tonight?

Gabriel Lewit: All right. And then it says use a little bit of freshly cracked pepper to release those natural oils. I don’t know what these chefs are talking about.

Steve Lewit: Do you guys want to have dinner tonight?

Gabriel Lewit: Do not add water or milk. Can you pay attention? Nobody’s coming to your house to cook eggs, man. You got to cook them on your own. All right.

Steve Lewit: It would be a fine dinner, right?

Gabriel Lewit: Yeah. Yeah. Most of these chefs say do not add water or milk into the eggs.

Steve Lewit: Definitely. Yeah, it waters them down.

Gabriel Lewit: Yeah. Don’t do that. And, yeah.

Steve Lewit: That’s it.

Gabriel Lewit: Also, one guy here says you can whip them up in your Vitamix blender to increase the cooking volume for even lighter, fluffier cooked eggs.

Steve Lewit: Yeah. Well, yes.

Gabriel Lewit: Yeah, you can blend them in your Vitamix, like a whisk on steroids.

Steve Lewit: Then you have to clean the Vitamix.

Gabriel Lewit: Well, then, yeah, okay.

Steve Lewit: I’m not doing that.

Gabriel Lewit: And then Mendenhall, one of the other chefs here, says, “For three eggs, use one tablespoon of butter, and just before the eggs are done cooking and removed from direct heat, stir in the butter.” That’s different than what I was expecting where you butter the pan.

Steve Lewit: Yeah, that’s called a finishing technique. Am I right?

Gabriel Lewit: I don’t know. It doesn’t say that here.

Steve Lewit: That’s finishing your eggs.

Originally, finishing my eggs used to be I’d eat them all.

Gabriel Lewit: All right. Well, that’s it.

Steve Lewit: That’s it.

Gabriel Lewit: Okay. Now you know. We would like some reports back on how well you have succeeded with cooking the finest scrambled eggs that money can buy.

Steve Lewit: And if you need a personalized egg planning plan-

Gabriel Lewit: No, that’s not connecting there, no.

Steve Lewit: Did not connect.

Gabriel Lewit: Yeah. Okay. All right. And if you’d like the whole article, of course, email us info@sglfinancial.com. We’ll give you the full scoop and you can track it, read it, circle it, highlight it to your heart’s content.

Steve Lewit: That took a little longer than I thought it would.

Gabriel Lewit: No, I thought it was good. It’s important. It’s important.

Steve Lewit: Very important.

Gabriel Lewit: Hopefully, you were egg-cited about that topic.

Steve Lewit: No, no, no. No, no, no.

Gabriel Lewit: I got to put in a good dad joke from time to time. We’re getting some thumbs down from the team here.

Steve Lewit: No, I didn’t hear that. Okay, let’s move on.

Gabriel Lewit: You guys are no fun. All right, let’s talk about money now, huh?

Steve Lewit: Yeah, good.

Gabriel Lewit: Yeah. That’ll be our non-money topic for today, but for money and finances and retirement planning, this month, November, is called Financial Literacy Month. It is a month devoted to teaching things about money and finance and making sure you are well-educated and in the know.

Steve Lewit: Which, unfortunately, in our schools today, very little, if any, is taught about finance. People graduate and grow up and get older, and they’ve got to learn on the fly and many don’t learn very well.

Gabriel Lewit: Yeah. That’s very true. Most people just figure this out and learn from mistakes, and hopefully, you don’t make too many of those. But, yeah, what we thought here would be an interesting topic is what are things that we, as financial advisors, know, or are experts in or experience a lot of, that we wish every investor or planner, retirement planner, out there would know about building their retirement investment plan. Okay?

Steve Lewit: These are our wishes for you all folks out there.

Gabriel Lewit: Things that we wish you would know for financial literacy month.

Yep. We brainstormed a long list here. We’re not going to get through all of these today. We might even do a two-part here. We might come back to these next week as well, depending on how much of these we get through.

Steve Lewit: This is a pretty good list.

Gabriel Lewit: Yeah, there’s probably lots more we could have put on here, okay, but one of the ones here I’d like to just start with here, I think is very important, is that we wish everyone knew the value of long-term planning over short-term gains or results.

Steve Lewit: Wow. That is a great one. Most people that we meet, Gabriel, I think you’ll agree with this, are really short-term oriented. We like short-term results. We like short-term gratification.

Gabriel Lewit: Yeah. No, people do. I will give a very simple example of this. It’s been a lot of this in the last year, people whose CDs were maturing. They were getting five and a quarter for a year and now they matured and they can get one more year now, we’ve been talking about this for a long time, at maybe a 4% CD for one year, and they’re renewing them, right? They’ve already seen the rates dropping, they’re not going to use this money, but they’re refusing to go into a longer-term rate that could get them a higher rate of return because they’re just so focused on that short-term rate and short-term thinking.

And sometimes long-term planning is very important to help you make better short-term decisions. It’s why we really emphasize the value of a plan so often, again, I’ll use this analogy, you know you’re going to go to California, you go west. If you’re going to go to New York from Chicago, you go east. Having a destination in mind really allows you to take that first step in a way that’s really going to work towards your goals.

Steve Lewit: Yeah. It’s interesting that, even waking up in the morning, the beginning of the day, is there a goal for the day? Is there a goal for the week? Is there a goal for my life? Is there a goal for my money? And a lot of people, this has to do with the second, the one I wanted to bring up here, is we wish everyone knew what their real risk potential was in their portfolio instead of just focusing on the growth. You have to know the goal of your portfolio. What are you aiming for? Are you aiming for 5%, 6%, and 7%? If you’re aiming for 8%, are you willing to take a 38 or 40% risk, like it was in 2008, to get that 8%? Having specific goals sets directions, and then you can, step by step, take that journey, but without a goal, you don’t know where you’re going to end up.

Gabriel Lewit: Yeah. I think the goal is important for all sorts of things when it comes to planning, but even just understanding … you might ask yourself, “Why am I saving this money this month?” And it can feel like you’re just putting this money into an account that’s not growing a whole lot. Well, sometimes I’ll show somebody a very simple calculation. As a thirty-year-old, for example, you put in seven grand a year into a Roth IRA at a 8% compounding rate of return, nothing out of the ordinary here, just conservative long-term rates of return, eight to 10%. I’m using eight on the low end of that. And people can have a million-plus dollars saved up by the time they retire if they do that.

Steve Lewit: That’s right.

Gabriel Lewit: And the importance of understanding short-term, a little bit of pain maybe on the savings front creates substantial long-term gain, as opposed to, “Wow, this seven grand this year, I could go on a real nice vacation,” but you’re going to put your entire retirement potentially at risk there, starting to really see that and weigh those benefits. But it’ll also impact things like you mentioned, what kind of investments should you have? What kind of rate of return do they have? What kind of risk should I be okay with? That could also impact other things.

Steve Lewit: Yeah, and to ask yourself, “Why am I doing this?” I had a visit with clients yesterday. It was very interesting. They were new clients, and I said, “Well, when do you plan to retire?” And they both said, “Well, in about five or six years.” I said, “Well, would you retire now if you could?” And they said, “Yeah, we would,” and we ran some numbers for them and they could. And then they came back and said, “Well, we really want to work.” And I asked them, “Why do you want to work? What is the goal of your working?” and they didn’t really know. It was just an old habit that they like working and they’ve always worked their entire life, so they felt they should continue working. And the way I put it, Gabriel, is as you often do, “Well, you understand you’re working for your kids, because you don’t need this money to retire. You could retire today. Understand that you’re going to work, and all that money’s going to your kids, it’s not to you.”

Gabriel Lewit: Yeah, yeah. That’s very true. That’s all part of having a game plan, right?

Steve Lewit: With a goal, understanding what I want the goal. Their long-term goal was to work, but their short-term goal was really, “I want to retire,” and they were ignoring that goal thinking that it was impossible.

Gabriel Lewit: Yeah. Yeah. Well, do you have another one on the list here that you like, Mr. Lew?

Steve Lewit: Yes, I do. Well, I had a couple of them. Okay. We wish everyone knew the significance of a diversified portfolio. Now, we talk about this a lot, and yet I still have people that’ll come in and say, “Well, I did great last year,” and then you look at their portfolio and it’s an all U.S., large, high-tech portfolio. And, of course, they did great last year, but what’s the problem with that, Gabriel?

Gabriel Lewit: Well, different asset classes do perform differently over different time periods. Just because something has done really, really well, it’s the old phrase, don’t put all your eggs in one basket. That’s a better one, right, than the excellent, excellent.

Steve Lewit: Yeah. Yeah. Don’t put it all ..

Gabriel Lewit: Yeah, yeah. I was waiting for that one. Okay. Yeah. Thanks for teeing that up, okay?

Steve Lewit: On purpose.

Gabriel Lewit: Yeah. Yeah. Don’t put all your eggs in one basket. Why? Because if that basket … aka you have all your money in U.S. large-cap stock, if that basket’s doing well, you’re like, “This is great. I’m glad I have all my eggs in this basket.” But if that basket has a really bad year and all the other baskets have good years or average years, you’re losing those years.

Steve Lewit: And that’s what happens.

Gabriel Lewit: Yeah. And then you could go through periods of time where U.S. stocks, like 2000 to 2012, have what are called lost decades. There have been multiple examples of this over history. And diversification, first and foremost, is a risk reduction technique. What is it reducing the risk of? It’s reducing the risk of getting the worst return in a given year, because if you’re diversifying across many asset classes or types of strategies, you’re not going to be having the worst performer because you’re blending in all the other better performing asset classes as well.

And then, also, you can diversify to improve return. For example, you can improve your return over a wider range of market conditions on average, and also have less what I call drought exposure. You’re going to have less of a risk of having poor performance over a long period where just, say, U.S. stocks are underperforming.

Steve Lewit: Well, it gets back to your short-term thinking or long-term thinking. All the independent research, starting back in 1965 with modern portfolio theory, which was Nobel Prize-winning research and been updated over the years, says that, if you’re in the market, there are two things you need. You need a diversified portfolio and you need to give it, guess what, time, 10, 15, 20 years. And if you do that, you’ll outperform the people that are chasing fund managers or chasing returns or are in particular sectors or own high concentrations of a particular security.

Gabriel Lewit: Yeah. Yeah. It’s so important, understanding diversification. I think a lot of people surface level understand diversification, but it can really be a deep subject. And people say, “Well, I’m in 500 stocks in an S&P 500 fund. I’m diversified.” Yes, you’re diversified in a single asset class, but that single asset class can go through really rough patches. And if you look at the research, the well-designed portfolio diversified in the right asset classes, the right factors, and the right percentages, with the right funds being purchased to represent those, will generally outperform over a longer term period than a more concentrated portfolio at a lower level of risk.

Steve Lewit: Or a portfolio that tries to time the market or algorithms that try to time the market.

Gabriel Lewit: Yeah. That brings me to my next thing that I wish, or we wish, that people knew, which may be our last one for today.

Steve Lewit: Okay. What’s that?

Gabriel Lewit: Well, we wish people knew that timing the market, stock market timing, does not work for many people. Okay.

Steve Lewit: Well, or it may work once.

Gabriel Lewit: Well, let me finish my-

Steve Lewit: Sorry. Interrupted you.

Gabriel Lewit: Let me ask you this. We were just talking about lottery tickets the other day. By the way, most people agree, the $5, we got a lot of comments on that.

Steve Lewit: We did. We really did.

Gabriel Lewit: Most people think the $5 ticket is much too high.

Steve Lewit: Ridiculous.

Gabriel Lewit: But why do you buy that $2 ticket right now? Why?

Steve Lewit: Should I give my cynical answer?

Gabriel Lewit: Just give a real answer.

Steve Lewit: You hope you win.

Gabriel Lewit: Right. And if nobody had ever won buying these tickets, nobody, would you ever buy the ticket?

Steve Lewit: Never buy a ticket.

Gabriel Lewit: You buy it because you know that somewhere out there-

Steve Lewit: Someone’s going to win.

Gabriel Lewit: … someone’s going to win. There’s a success story out there.

Steve Lewit: And I also know it won’t be me, but all those people thought it wouldn’t be them either.

Gabriel Lewit: But percentagewise, how many people that are playing the lottery are winning?

Steve Lewit: Percentagewise?

Gabriel Lewit: Mm-hmm.

Steve Lewit: Infinitesimal.

Gabriel Lewit: Very small.

Steve Lewit: Well, no, infinitesimal is smaller than very-

Gabriel Lewit: Okay, very, very small.

Steve Lewit: Very, very, very small

Gabriel Lewit: Market timings like that. People do it because there are success stories out there of some people that have successfully done it.

Steve Lewit: That’s right.

Gabriel Lewit: Okay. Everyone would agree that you’re buying the lottery ticket not as a good sound strategy. The percentage probability of you winning, very small. Market timing is interesting, though, because one guy out there says, “Oh, I managed to pick this and buy this and sell this, and I made $400,000.” And now that success story’s out there, other people are like, “Oh, I could do that.”

Steve Lewit: Or “I could copy him.”

Gabriel Lewit: “That sounds good.”

Steve Lewit: “I’ll let him teach me.”

Gabriel Lewit: Right. But the truth is, the vast majority of people lose when they’re doing market timing. And, yes, there are a handful of success stories, but that’s what I wish people knew, because if you were able to sit in our shoes, of the hundreds of clients that we’ve seen, of the ones that have done market timing, that data jives. Very few have been successful. A wide swath of them have all told me, “Yeah, we tried that. We lost our shirts. I’m not doing that again.”

Steve Lewit: Yeah. But when they talk to you, it’s like, “Hey, yeah, I sold right before 2008.” Maybe you did. That’s a one-time deal. Repeating that over and over again for a long period of time is impossible.

Gabriel Lewit: Well, yeah, again, you hear stories of this too. People that win the lottery play again. Why? Because there are people that actually win multiple times somehow, lucky people, but those are even more rare. Yes, repeating these types of market timing successes are even more difficult than getting lucky once. Okay.

Yeah. It’s not a great long-term strategy. Diversification’s a little less exciting, but you’re going to come out ahead, making sure you’ve got long-term planning versus thinking really short-term, and making sure you’re focusing on risk as opposed to just growth, especially if you’re entering or nearing retirement. Those are our we wish you knew these things today for Financial Literacy Month.

Steve Lewit: Yeah. And I think the reason that we wish you knew this is because part of our job is to try and impact your thinking about how to think about all of these kinds of things. And if your thinking has been, for years, one way, and then you meet us and it’s like, “Wait a second, that’s not necessarily the most efficient way,” it’s hard to change your thinking. Sometimes it’s impossible, in fact. That’s why we wish you knew it and we didn’t have to change your thinking.

Gabriel Lewit: Yeah, yeah, that too, and it would just make you lots more money.

Steve Lewit: Well, that too. That too.

Gabriel Lewit: But that’s what we’re here to help you with, right? We can make what seems complicated and difficult very easy for you. It’s why many of our clients align with us here for a lifetime, in most cases.

Steve Lewit: And we can make the simple complicated, like cooking scrambled eggs.

Gabriel Lewit: I don’t think it’s simple. I think it is complicated. People think it’s simple, but it’s actually complicated. Yeah.

Well, if we can help you out here, not so much with scrambled eggs, but, yes, to your financial planning, give us a call, 847-499-3330, or go to sglfinancial.com. And of course, email us your egg cooking stories. I’d love to hear how they turned out, info@sglfinancial.com. And we hope you have a wonderful day.

Steve Lewit: Enjoy. Wishing you all well.

Gabriel Lewit: Talk to you next time.

Steve Lewit: Bye.

Gabriel Lewit: Bye now.

Announcer: Thanks for listening to Our 2 Cents with Steve and Gabriel Lewit. For any questions about your finances, give SGL a call at 847-499-3330, or visit us on the web at sglfinancial.com, and be sure to subscribe to join us on next week’s episode.

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