Nick Magiulli, author of the book "Just Keep Buying" and founder of the Of Dollars and Data blog, shares his insights on personal finance, investing, and the future of financial technology. You will hear Nick's advice on building wealth over the long-term, the importance of investing early and often, and his thoughts on the latest trends in personal finance.

Resources:

• Of Dollars and Data!
• Just Keep Buying 

Ren Makino: Hi, this is Ren from Next Gen Personal Finance and you're listening to NGPF podcast. Today on the show, Yanely is joined by Nick Magiulli, the creator Of Dollars in Data! and the Chief Operating Officer at Ritholtz Wealth Management. Nick joins us on the show to talk about his insightful book, Just Keep Buying, the elaborates on the proven ways to save money and build personal wealth. Listen to this podcast to hear Nick's valuable insights on personal finance and investing! Enjoy!

Yanely Espinal: All right. So a nice official. Welcome to you, Nick. Welcome to the NGPF speaker series. I'm so excited to jump in to talk about your book, your work, like everything that's been going on recently.

Nick Magiulli: Yes. I'm excited as well. Thanks for having me on. 

Yanely Espinal: Yes. All right. So let's get started with a little bit of your backstory.

One of the, my favorite parts that I read in your book was super early on and I'm going to just read like a couple of sentences from it because I just, I loved it. So it's super relatable. It says growing up, I had no concept of wealth or how to build it. I didn't know that the word summer could be used as a verb.

Like, I summer in the Hamptons. I didn't know what dividends were. Heck, most of my life, I thought Sizzler and Red Lobster were high end restaurants. So just reading that part, which is super early on in the book, that's like page two of your introduction. I immediately was like, okay, this is so relatable for so many people.

And just that description of thinking about earlier in your life and reflecting on how, you know, you recognize that people are living very different lives from the one that you were living. So tell us a little bit about that growing up, early experiences, money, lessons or memories. And, you know, this idea of really the disparities that exist in terms of wealth access in our country and globally.

[00:01:36] Nick's Background.

Nick Magiulli: Yeah. I think the quote here is you don't know what you don't know. And I think, you know, when I went to college I ended up going to a school with like a lot of, you know, upper middle class to upper class people. And so I was bombarded with very different lifestyle, very different backgrounds and from things that, you know, I grew up with, like I grew up eating off like the dollar menu at McDonald's, which it's, I still, and that's called the value menu and everything's like a dollar 50, but, you know, inflation.

So, just for me, like my background is like. I kind of grew up in that little bit of a scarcity mindset around money, cause we didn't have a ton, you know, my parents are lower middle class to middle class varied over time. Like their income was never just in one bracket at any given point in time.

But yeah, it was just like figuring out like the differences and understanding how money is is so unique to every person in their background. Right. And so what I think is like a high end restaurant I still like, going out to sizzler, like I love the bread, like I still remember all that stuff as a kid.

I was like, wow, this is like us going out versus us eating fast food. Right. But, you know, and then you realize, Oh, no, this is not a Michelin star, right? Like there's like just levels to this and even Michelin star restaurants, there's different levels of Michelin star restaurants. And so it's just one of these things where you can get caught up in that very quickly.

 I think I'm in a very privileged position in the sense that I got to see both sides of it now that I've kind of. Kind of college I've like grown up, you know, I'm like living in a big city. So I've kind of seen both sides of the spectrum. And so it gives you a little bit more perspective on like how other people live and stuff like that.

And I think it's, it's very useful when you're talking about personal finance and investing, et cetera. 

Yanely Espinal: Yeah, absolutely. I think one of the big things I've noticed too, is that. I don't know, like, people try to pit them against each other in terms of class and, like, the difference, right? Lower income and super wealthy or higher income folks, like, they try to make it seem like the problems that exist for higher income folks, like, they're not real problems, right?

Like, these are the real problems, folks that are really struggling. And, you know, having kind of pulled back from, like, my early experiences growing up really, struggling with finances, I feel like now I look back and I'm like, there's It's more in common than people think. Is that something that you've seen or now, you know, with your perspective, kind of having seen both sides that there's, I think more similarities or more commonalities than people might assume about folks that are on, you know, either extreme when it comes to money, whether that's a scarcity mindset or whether that's like abundance mindset or experiencing abundance, like the way that we operate when it comes to money on both extremes, that there's more in common there than we might think.

What do you think about that? 

[00:03:53] Nick's Thoughts On People Having More In Common Than Meets the Eye. 

Nick Magiulli: Yeah, I think it's the types of problems that change, right? When you don't have a lot of money, your problems are like, would literally be solved by money. Like, I don't have money to buy this thing I want or this, you know, this thing I'm going to do, right? Or whether that's, you know, in some extreme cases, like I can't afford the food I want.

Like that's the most extreme case I can think of. And then it's even like, okay, maybe I can afford the food, but like, I can't go do trips. Right. And then you, but as you keep going up, the problems start to change. Once you have money, then the problem isn't like, oh, I can't afford to do something. It's more like.

Okay, how do I do this equitably so that that this person doesn't feel slighted or that how do I support this person without like overly supporting them feel like they're abusing me? And so like, the problems change. And I think as you get more money, the problems become much more human oriented and less like, related to like your physical body and physiology and like survival oriented.

So I think it becomes more like relationships and managing conflict and managing family and ties and friends and all that. And that's how the problems change. So to think that, oh, Okay. Just because someone has a lot more money doesn't mean they don't have problems with money. They will have problems, just the problems are going to change.

There are different types of problems. And I'm not saying that one's easier than another. I generally think like obviously physiological problems, like the issues of like, I literally cannot eat. Like that is obviously worse, like basic survival. But once you get past that, it's not like you're in some dreamland where you never have issues with money again.

I think that just the types of problems change. And so just to keep that in mind. 

Yanely Espinal: Yeah, I love that. It reminds me of one of your blog posts. I come onto your blog all the time and try and catch up. There's so many amazing blog posts on there. So I want you to talk a little bit about like how you started with your blog before coming up with the book and how those kind of, you know, work a little bit in tandem.

But I you have a blog post that talks about climbing up the wealth ladder, if I'm remembering the language, right. But it talks about like how the problems are just different in terms of some are trivial, right. And as you start to get more money, the problems just look different.

It's not that problems just go away. And I think that's Honestly, one of the big misconceptions of folks that are like, you know, chasing money, chasing money in the rat race. Like I need more money because I need to solve my problems. And while money can, in a lot of ways, solve some small problems, it doesn't just erase all of your problems.

And so I really like that but tell us a little bit about of Dollars in Data, the idea to start a blog, you know how consistent you've been with it, it's grown an incredible following and your writing is just really freaking good.

That's why so many people like it. You tend to start with stories and then kind of fuse it in with data. So tell us about that, like unique style and approach that you've taken to the blog. And that's also reflected in your book, this combination of storytelling and data. 

[00:06:17] Nick's Blog.

Nick Magiulli: Yeah, so I started the blog about a little, about seven years ago, beginning of 2017, I started this thing, and I wrote once a week, I said, hey, I'm just gonna write once a week, and Honestly, when I started, it wasn't that good.

It was maybe better than some random person off the street blogging, but it wasn't that great, you know? And then, so I say, go read my early blog posts. You'll see. But then again, I say don't cause they're not that good, but they got better. I practice it. I got better over time and I was just writing about like, first I was writing about economic issues and then I kind of found a Like a little bit of a niche in like, you know, writing about personal finance and investing.

So I started saying, Hey, you know, I'm really good with computers and I can do data stuff. So maybe I can take all this data and make cool charts and stuff and make it relatable to, you know, the typical, investor, the typical person out there, right? Not talking about hedge funds and all these like advanced strategies, but just like, what's going to work for the average person, right?

That's where like a lot of people like, well, Nick, you can do managed futures or trend following. And it's like, Yeah. But the typical person is not going to want to spend the time and the money and all the reason all just for that. Right. So I'm like, what can the typical person do reasonably? And so it's like, what data can I show to support that?

And that's kind of what I've been trying to do. So I've been doing it, you know, as I said, once a week now I'm on post 363 now, so just doing one a week, but it's just like, it's one of these things where like, I didn't see much. Progress initially, like for the first, you know, my following is so small that even after three years, I still wasn't making money.

I was just doing it cause I loved it, you know, but over time I could actually build like a little bit of slight business. Obviously there's the books now and things like that, but it's one of these things where you just have to take a really long term view and you have to like really love the thing you're doing, right? And that's hard to find.

And so I've been very lucky. I've been able to write about stuff that I care about and has been able to help people in some ways. Right. And so that's the thing, that I really enjoy about blogging. And a lot of times like I'll be writing about personal stuff, not even related to personal finance.

Like I've talked about. You know, issues I've had with alcohol, where I go out with just with friends and maybe I drink a little bit too much or something, right. And just how I felt about that. And that's helped a lot of people. So it's not always just about money. I think just writing and connecting with people is something that can just be really helpful, whatever that is, you know, so that's something to keep in mind.

Yanely Espinal: Yeah. I love that. I think it's, it's obviously, you know, people just create that connection with other people, human connection, right? It's like such a big thing that drives us all. But your blog and your form of writing and your book too, one of the early things I noticed about it, it's just how good you are with data visualization.

And you talked a lot about how that's a skill that you recognize you're uniquely qualified to do stuff with data visualizations and combining that with money and investing. I think that teachers in particular, which is, you know, the audience that NGPF serves and a lot of listeners. They're facing this issue where we want to present a lot of this really cool stuff to students and get them thinking about this and expose them to these things, but a lot of times teenagers are lacking.

This data literacy, so how did you get good at that? And then if you were a teacher in a classroom, how would you help students with it? If you recognize that they're really lacking with data literacy 

[00:09:12] Nick's View on Getting Better at Data Literacy.

Nick Magiulli: skills. Yeah, so it kind of touches on the question you asked previously, which is like, how do you get people to, like, actually, think about data and start to care about it a little bit.

And I think the thing is, like, you do have to have a story, right? And I thought early on, I was very mistaken, like, Oh, if I just show a cool chart, like, people will love it. And then I realized, like, no, some people like me would love that if you're just really into data, like, yes, but that's not most people.

And so you have to kind of. Bring people in, get people hooked with like a story or something related to that. You can kind of relate to it. It doesn't have to be perfectly related, just related enough for you to be like, Hey, just like this, this is also true. And then you can show a visual or then you can show data.

Then you can kind of bring people into that. And if you actually look at like a lot of the best, you know, books out there, books that have sold far more than mine, they're really. All about great stories and so the stories is what people remember. I don't know why I can't explain why that's going on in our brain, but people are just wired to remember stories, remember narratives, things like that.

So if you can find like, hey, I'm having trouble with my students understanding this particular lesson. If there's a story or some catchy thing you can get to remember. Get them to remember start with that and see if that can be more applicable. Obviously, I'm not an expert. I've not spent a lot of time, teaching people in a classroom whatsoever.

So I'm not going to be the person to tell teachers how to do what they do. I've tried to like teach more broadly, which then just only through writing, which is very different, but that's what I found works at least within writing. So I bet there's something there you could do with stories. So that's what I'll say on that front.

Yanely Espinal: Yeah, I mean, I agree with that. And I think teachers tend to do that naturally. Like if you got 30, 40 kids in your class, and you're trying to keep their attention, you gotta be telling stories you have. I mean, that's the only way they're really going to kind of pay attention and really be hooked from the get.

But you know, I recognize how tough it is to do that in a space where a lot of times they're not practicing reading data and especially visualized data. Like if you're reading a bunch of stats, that's one thing, but if you're looking at a chart or like, you know, some type of graph or something like just reading that information and understanding the key points of the takeaway that is important from it, it's tricky, especially the, you know, younger generations that are much more digital native rather than like.

books that have a lot of graphs and data on it. So I do think , it's worth it to spend time teaching that. And I think that that requires direct instruction. Like I remember when I got to college, the reading, the level that I had to start reading was just so much harder than what it was in high school.

And nobody sat me down and said, okay, so when you see a chart, like the first thing you need to do is read the title. The second thing you need to do is look at the X and Y axis. And like no one ever did that. And I wish someone did because it might sound. obvious like, Oh, duh, you look at the title, but I cannot tell you how many times people just skip the title.

And there's so much important information in the title and the axes start there. Right. And just how to read data. I feel like it can be really helpful. Actually, NGPF has a bunch of. Activities called data crunches. 

And if you want other examples, I mean, you can literally pull from, from Nick's book, Just Keep Buying. There's so many really great visualizations in here either about investing or about inflation or about, I mean, just so many that we could use to pull and give examples to students to get them to practice.

 I want to talk about the structure of your book because it's so freaking simple that I was honestly, when you sent me the book, you sent it to me a little early, which I appreciate because I got to read it and loved it. And I was like, wow, this is so simple.

It's literally two parts saving and investing. And I was like, it can't be that simple. So what made you choose such a simple structure? And how did you know that that would be so effective? 

[00:12:46] Nick On His Book's Structure.

Nick Magiulli: I think when I was trying to, like, the first chapter it kind of lays out that structure for the book, and in that first chapter it talks about, like, where should you focus, based on where you are in your timeline.

So, for most people, young people, people who haven't really, they're just starting their journey, even if they're not young, maybe they're older, but they haven't really saved yet. They kind of have to focus on savings. So I front loaded all that material early, right? Front loaded all the personal finance stuff for those that have not really done much of that.

That's where we're going to get the most value early on talking about how to save money, ways to increase your savings, like understanding, how to buy a house, all these like basic personal finance things. I then use data and try to make arguments. Right. And so I said, let's put that stuff early.

And then , Over time, you should see if you start investing that money, et cetera, you'll see that the investing portion of your life takes over and that's why, you know, you hear that famous quote or that famous statistic that like, you know 95 percent of Warren Buffett's wealth came after his like 56th birthday or 60th birthday or something crazy.

I can't remember the number every time I like the number gets crazier, right? But like Warren Buffett's 93 right now and like 99 percent of his worth came after like his, his 70th birthday or something crazy. Right? And so. That's one of those things where like, that's the investing side taking off. It takes a very long time to do that.

But that's like, it's the investing stuff is all the tail end of your career, the tail end of your financial journey. So I think because naturally that's how, you know, our financial journeys go. We, most people, of course, there are exceptions. People that start with a lot of money because of parents, etc.

But most people don't start with much of any money and then they build it over time. And so that's where like savings important early and later. Times investing. And I just laid out the book to follow that path as well. 

Yanely Espinal: No, yeah, it makes a lot of sense. And it is a good analogy. I think at the end of the day, simple is best, especially with a topic like investing, which as you get to the investing part of the book, you obviously see, it can be a little more complex, there's bigger questions.

And even you talk about how you struggled with that yourself a lot on when you like were in college. And even though you only had like a thousand dollars in your investment account. You were like scrutinizing your investment decisions. Like to the point where you're just like should I have this allocation or that allocation 15 or 20%?

Like just these ridiculously detailed questions. And you make a really great point about how it honestly, it didn't even really matter because even if you got like 20 percent or 10 percent return, like if you did really well, that wouldn't really be that much money and changing your habits would have been more effective at that time.

Talk to us a little bit about that and like that continuum of like deciding at which point do you focus more to saving versus to investing? 

[00:15:17] Nick's View on Deciding When to Save Versus When to Invest.

Nick Magiulli: Yeah. So the, the example you gave, which is from, you know, I just graduated college. Like I'd been working for a few months. I'd finally, I had said, Oh, I'm going to be responsible, put money in my 401k.

But like, even after a few months of doing this, I only had like, you know, a thousand dollars in there. Right. Which is. Decent start, but it's like I was sitting there spending all this time. And even if I got a 10 percent return on that thousand dollars, that's a hundred bucks. Right. Which don't get me wrong.

That's not nothing, but like I was at the same time going out with friends. I was living in San Francisco at the time going out with friends. You know, I go out, we go to get a drink or two. We go to dinner, right? and by the time, you know, when you're in your early twenties, you're a party and stuff, and then with my Uber and everything, I would spend over a hundred dollars a night going out, right?

This is very normal thing to happen. So it's like, wow, I could go and spend my entire year's investment return in one night. So if I just, if I just forgone like one night of going out, I would basically make my investment return again. So it's like, I shouldn't have been focusing so much on the investment.

Not that I didn't want to care about it and ignore it. That's not what I'm saying. I'm just saying like, look, which lever is bigger. The lever of my spending is far bigger early. And it's only later like imagine if I now take the flip side, imagine I'm 75 years old and I have like 10 million bucks or something, you know, 10 percent returns a million dollars.

That's a lot of money, right? I could work as hard as I want in a year and probably not earn a million dollars, so it's like. That's the difference. It's like at some point , the investments grow so large that like, no matter what you do with your spending doesn't make a difference.

Right. And so that's kind of the dichotomy. I know 10 million is very extreme here, but like, I'm using that to illustrate the example, right. Where a 10 percent return doesn't matter when I'm 23, but it's like everything when I'm like 75, right. That's kind of the difference. 

Yanely Espinal: Yeah. And I think that that is so important to present to students because a lot of times when you're 15, 16, 17 years old, you're not.

thinking that way, especially because thinking about money logically is hard, period, point blank for me, for anybody. Like when we start thinking about money, all these cognitive biases come up, you know, the way our brain just plays tricks on us. We start to get emotional and feelings about money come up and then we lose our ability to access that logic for decision making when it comes to money.

and investing. So, you know, this is why so many people think they can beat the market. It is why so many people think that it makes sense to day trade and try to do all these profitable things in a really fast time when all of the data empirically shows it doesn't make sense.

It's not, in your best interest. And so I think that it's so important to put this in front of students really young at a young age and expose them to this repeatedly over and over again, because the more they hear it, the more likely they are to absorb that because it's just too easy to fall into the trap of thinking, you know, this feels like it makes sense, but it doesn't.

So, you know, it really doesn't make any sense at all. So talking about it early makes a lot of sense. And I think in a personal finance class, that's really important and showing a lot of examples of that. Like as you were talking, it made me think of like every time I post content on social media, I get a bunch of engagement when I talk about high yield savings accounts, which is so strange.

Cause I'm like, What's the difference of going from 2 percent at this bank to 4 percent at that bank? It's just a 2 percent change, right? But people obsess over those little things and they feel like it makes a big difference, but it really doesn't. What they should really be focusing on are things that matter more.

But honestly, if you're young, And you don't have a lot of money, you have to kind of think about what makes sense, right? A bank account that's charging you monthly fees, that might not be a big deal to somebody with lots of money, but for somebody with not a lot of money, those monthly fees are going to eat away a huge chunk of your little bit of money.

So those decisions matter so much more at that level. And then obviously later on, you know, they matter less. And so I think, obviously you make a great point about that in the book. And you talk about increasing income versus trying to cut down. And so, in college, you just mentioned like for you, it made a lot of sense at that point to really look at your spending and try to cut back and, save more versus trying to look at your investments and stuff.

Cause it just wasn't that much money at that time. This is a big thing in the personal finance space. You experts and gurus, yelling and shouting, you got to increase your income versus you have to cut back on spending. Now you talk about in the book, how you feel like there's a lot of stuff that's rooted in guilt and that you don't think it's, should be that way.

Talk a little bit about that idea. Cause I feel like it's starting to happen more now where people are starting to say like, you know, money advice written in guilt doesn't really. Makes sense. But for a long time, this is just what we were all kind of drawn to, or the only really options that were out there were very much guilt, guilt, guilt, shame, shame, shame.

And you say in your book flat out, that doesn't really work and it doesn't make sense. So tell us a little bit about that. 

[00:19:50] Nick's On Money Advice Written in Guilt.

Nick Magiulli: Yeah, so I think the big point you bring up is like the difference between increasing income versus cutting spending. And so obviously there's extreme cases where cutting spending is going to be the right move.

Like if you don't have a thousand dollars to your name and you're still like saving up to like get a Gucci bag, probably not the thing you should be doing. Right. And so it's like, There are definite times when like spending is the problem, but I think most of the time, you know, if you actually look at the data for people like lower income people, especially like they are not spending their money on stuff like the basic essentials are eating up their paycheck, right?

So those people for you to focus on like, Oh, don't have your daily coffee. Don't do this. I think that's very counterproductive. And even though, yes, you're not going to save money by like not cutting those things out. The thing you need to focus on is like, hey, like, even right now, this is okay that I'm not doing that.

But like, what can I do to make have a better future? And so that's where we start talking about, like, what are some long term ways we can talk about increasing income, I'm not talking about something you're going to do in the next month, it'll take a month, you would already would have done it, right?

If you're like, Oh, I could double my income in a month, you would have already done it, right? There's usually very unlikely that there's going to be things like that you can do. This is a long term process to, you know, Either find a skill you already have and monetize that or build a skill or get a better education and then work on that, work towards that.

So I think the thing I like to focus on is increasing income over the long term. And when I say long term, maybe I could even say medium term, like I say three to five years, right? Cause I would argue that like, I did something that took three years and I could have monetized much sooner if I had been better and smarter about it, but I'm not, which just took me a long time to learn, like all the mistakes I had to learn.

So I think it's one of these things where like, Yes, focusing on income is the long term goal, and I wouldn't guilt myself over that either. It's like, am I just doing the small things to kind of get on track? And so I try to tell people not to focus so much on decreasing spending unless you're like really flagrant with it.

Like that's what you talk about flagrant foul in the NBA. Like if you're really out there with your spending, then yeah, you probably could cut back a little bit. But if it's like, Oh no, I'm literally getting the basics. Maybe I go out to eat once in a while. That's not a big deal. Like that's not it.

If you're eating out every single day and you can't save money, then that is probably something where you could cut back. I think people know, people know when they're overspending, unnecessarily versus like, I'm just trying to get by. I think those are very different people.

And so that's why I tell people to focus on, you know, income because spending is not the way out. And simple fact, what's the most correlated with savings rate. Someone's level of income, you know, someone with higher income has a higher savings rate on average than someone with the lower income.

Right. And that's been true in every data set I've ever seen is the most proven point I've seen in personal finance. Right. And so I'm like, but Nick, I know this rich guy that spends all their money. Okay, you know, one person like I know every other rich person, right? Every other rich person that has a high income probably also has a high savings rate, right?

And so just because you can think of a celebrity, you can think of a few people like, I love when people use celebrities like, Oh, yeah. What about like Mike Tyson or, you know, Lindsay Lohan or whatever, you name like 10 celebrities, guess how many celebrities I can name that don't have that problem. Every other celebrity, right?

You know, 10, I know everyone minus 10. So all celebrities minus 10. So you think about that. In terms of like the amount of data I have on my corner versus that side. And you think like, wow, it's actually overwhelming. How much income is actually the true driver here. And so just to focus on that and keep that in mind and just like be cognizant of that, because a lot of people will tell you, oh, it's all your fault because you buy lattes when it's like, no, that's not really the issue here.

And we're kind of ignoring that core issue, which is income. Yeah. 

Yanely Espinal: I love that. I'm so tired. I think that younger generations now are starting to like rebuke that. financial commentary on social media, a lot of like cutting back on lattes or not drinking coffee every day. And your Starbucks habit is cost is why you can't buy real estate millennials, you know, stuff like that.

Like you think it's, it's starting to get ridiculous and people are calling it out. And you know, as. They should because you're right like at some point you have to again see that logical thinking and you know what makes sense is it really six dollars a day every day that's the reason why I can't afford a down payment on the house probably not right but they're trying to find where is the actual problem and how to solve that or address that in your book you talk about How to save more money, how to increase your income.

And you say, sell your time or expertise, sell a skill or service, teach people, sell a product, climb the corporate ladder. And you go into each one of these and give a little bit more of a summary for pros and cons of each of those approaches. Which I think is really helpful because at the end of the day, sometimes people just feel like.

You know, there's so much time and effort put into a nine to five, they don't really have the energy outside of that to think about, you know, other ways. I love how you lay this out with, this is for you. If you like this, this is probably something you should stay away from if you don't like this. So, which is really nice.

And we talk about this at NGPF a lot, but how teachers have so many transferable skills, teaching in and of itself is such a strong skill that you can, you know, take to online teaching that you can develop a course around you could, you know, do teach other teachers. I mean, there's just so much you could do with teaching.

obviously doing oral presentations every day, presenting and public speaking and communication and organizing and scheduling and logistics. I mean, there's just so many skills teachers develop that allow them to have these transferable skills and think of other ways to make money. So I love that part of the book, but obviously it's an investing book.

So let's shift and talk about investing. You have this very simple. Premise, like if I had to describe to somebody my one takeaway from your book, besides Just Keep Buying, I would say that it was just keep buying cash flowing, appreciating assets, right? And so talk to us about that idea, because there's a lot of things in the book that you mentioned that are not what you would consider to be like the investments people should focus on because they're not cash flowing, appreciating assets.

So tell us about that. 

[00:25:38] Nick's View on Investing.

Nick Magiulli: Yeah, so the idea behind buying like, you know, cash flowing or income producing assets is that you want to buy assets that are producing some sort of profit. And in that case, you know, it's cash flow of some sort that you can then reinvest or the business is reinvesting itself.

It doesn't necessarily mean that the asset has to pay you the cash. I mean, for example you know, Berkshire Hathaway, that's Warren Buffett's holding company. They've never paid a dividend. They've never paid cash to anyone, but they take that cash every year and they reinvest it in their businesses, right?

So That's an income producing asset, even if it's not literally sending you income. So that's just one quick thing to know. But why do I say focus on those? Because If you don't have income, like if there's no income with the asset, then there's no like necessarily fundamentals to like anchor the price of the asset, right?

Like for example, the price of gold, the price of Bitcoin, the price of a lot of things that are just kind of just intangibles. There's nothing that necessarily makes them worth something except the fact that someone else is willing to pay for them. I'm not saying you can't make money in those assets.

You can, but I say, like, keep that as a small portion of your portfolio. Like of my portfolio, 5 percent is non income producing. The other 95 percent is income producing. Right. And so that's the thing I say to focus on. I'm not saying, oh, you should never buy crypto. You should never buy gold. You should never buy like there's a wine or there's a bunch of things out there.

Art, for example, is one of those things where like, yes, well, don't the rich own art? Well, there's a host of reasons why they might do that, but. My main point is that most of the rich and everyone that has a lot of money, most of their wealth is in income producing assets of some sort, whether that's a private business, whether that's a royalties they have for some product, like there's a lot of different ways you can produce income.

And that's the thing I tell people to focus on. And I think the analogy I like to use is. Imagine a suitcase with, you know, 100, 000 in it. How much would you pay for that suitcase? Right? All I'm assuming you can get in and get the money. You'd pay a hundred thousand dollars. Right. But now imagine a suitcase where you don't know the amount of money in there.

And it's all just what everyone believes the amount of money is in there. Right now, that's a very different thing. And that's kind of what like a non income producing asset is, right? With income producing asset, you at least can see, Oh yeah. I look like it's producing this income. It has this. There's money in the suitcase, right?

There's something there I can anchor to. Of course, over time, people are going to bid up and down what they really believe the money in the suitcase is, but there's at least some fundamentals there. Versus, as I said, a non income producing asset, there's nothing in the suitcase, and we're all just trying to guess what we think is in the suitcase, right, which is very different.

So, that's the core tenet here behind Just Keep Buying, which is like an investment tenet. And that's what I tell people to focus on. And remember this is there's different tactics you can take for what type of level of wealth you're trying to get to. But I think for the typical person, as I said at the beginning of this, for the typical person trying to just have a decent life, not trying to be a multibillionaire or something, buying income producing assets over a long time is the key to building wealth.

So that's what I try and tell people to focus on. 

Yanely Espinal: Yeah. And that makes sense because there's so many vehicles for everyday people to be able to do that. You know, your 401k as a teacher, your 403b or a pension plan, your Roth IRAs, whatever types of brokerage account your investments allow you or investment accounts allow you to be able to buy.

Things like mutual funds, index funds, ETFs that tend to either pay dividends or, you know, kind of have capital appreciation. So I think that that makes a lot of sense. Even people with real estate who use it as investment, they will be collecting cash every month from their tenants. So, I mean, we can see a lot of examples of how to do that, that everyday people have access to it, you know, within reach which is great because obviously if it wasn't, it would be much more frustrating and difficult.

Now, because we're talking to a group of teachers or educators, a lot of times teachers will have a pension, which, you know, very Few employees tend to have any more because most employers have done away with it. They don't want to do that anymore. They rather allow you to do a deferred compensation rather than deferred benefit.

So as we're starting to see those pensions go away, but most teachers at least still have that. Do you feel like that should change the investment approach to a teacher who maybe, for example, has their pension 403B? A Roth IRA, a brokerage account, because there's a pension there, does that make you think that there should be a slightly different approach to what they are doing in their 403B in their IRA, in their brokerage?

Or do you feel like, eh, you know, the pension shouldn't really you know, change much of what you're doing in those accounts either way. 

[00:29:56] Nick On Investment Approach For Those With a Pension.

Nick Magiulli: Yeah, so I think every pension is a little different, and so if we assume all pensions are the same, and let's assume they're actually not that risky and they're actually going to pay out and everything, and let's just take that assumption out the gate, because obviously some pensions are more well funded than others, and there's a host of issues we can get into there, but let's ignore those for now, I think you can look at it.

A pension is sort of like a bond that's just going to pay you a payment like every single month until over some period of time, whenever you can start pulling it. And obviously it varies based on when you retire amongst other things. But in terms of that, you can think of that as like a safer cash flow, almost like a social security, right?

And so that's just money you're getting in. I think in terms of like, okay, well, what are your financial goals in retirement? And then based on that, that determines how you're. Invest the rest of your money. If you think you're going to be fine with just your social security, your pension, then you probably won't have to take as much risk as someone who's like, yeah, these aren't going to cut it for me.

I need more than you need to have like a higher, you probably need to take more risk. And you're like defined contribution or your brokerage account. You might need to have a higher allocation to stocks, like, you know, an S&P 500 or something like that than someone who wouldn't have that. And so I think the thing to keep in mind especially when you're looking at investments, think about your investments as a whole, like think about, okay, Hey, I have this pension.

I have this. Social security. I know that's going to pay me X amount over time. But like, what should I do with this other money that I have on the side to like, kind of get me to where I want to be. Right. And so that's the thing I tell people to keep in mind. And I know some people, if you have pensions, you don't even get social security.

I know it varies a lot. So I'm sorry. I'm not trying to sound ignorant. I know some people get both. Some don't, depending on the type of pension you have, but... 

Yanely Espinal: Depending on the state, most of the time depends on the state or the region, right where you are. 

Nick Magiulli: Yeah, exactly. So just something to keep in mind, like you have to think about it like holistically, like how is this Being invested, what's the high level of all these things I have in your life?

And it's very individualized, but once you know that, then you can kind of make better decisions, right? So like if I had a pension and social security, I'm obviously going to get social security. The question is like, I'm not expecting it to be that much. I don't expect it to be zero. I think that's silly.

I think politically we will come up with compromise. We'll probably move the retirement age out. Maybe we won't raise benefits as much. I think that's for sure going to be there when I'm, hit retirement age. The question is like, I just don't think it's going to be as much purchasing power as it is today.

I mean already now the average social security benefits like 1500 bucks a month I think we could expect that maybe to go down in real terms to like a thousand a month or something in the future So I mean the actual amount will be higher than a thousand But what it buys will probably be worth about a thousand if that makes sense So that's what i'm expecting.

That's what i'm planning for So I basically just have to make up everything else over the thousand for whatever lifestyle I want So that's what I would do if i'm trying to think about okay What do I expect? And you have to kind of be reasonable and be a little conservative, and then based on those assumptions invest the rest of your money accordingly.

Yanely Espinal: Yeah, that makes a lot of sense. I have some investing hot topics. So let's just go through these. And I'm just curious what you think about each of these. I mean, we're friends, Nick, so I know what you think about some of these, but I put them in here anyway, because I figure teachers are going to be curious.

So let's start with a hot one that I think, honestly, a lot of teachers use this as a hook to teach investing to students, because it's so hard to get students to care about it. Retirement when it's so far away or like a retirement account, right? Or mutual funds like teenagers don't care about that stuff.

So it's very difficult to get them to care. And the hook for it for a lot of teachers can be the fire movement. So what do you think about the fire movement in the space of investing? And for those of you who don't know, it's financially independent retire early, which is just folks kind of being really aggressive early on so that they can retire significantly sooner than they would otherwise.

[00:33:23] Nick on the FIRE Movement.

Nick Magiulli: Yeah, I don't have any issues with the financial independence side of the fire move in the F. I. I think is fine. I mean, I think there's a lot of reasons why people want financial independence and whether that's a personality trait. They don't like being told what to do. They like controlling their own time.

Some people are more open to that than others. Like I personally don't have a problem with like people asking me to do things. I don't have a problem with Having a nine to five job, right? I just want to make sure I like the people in my job. I enjoy my work environment. That's far more important. I'd rather take a job that I enjoy and have a job then like work completely alone and have less human interaction, right?

So I think that's, it's just trade offs. You have to figure out what you like, right? So the thing I would say is I'm okay with FI part, the retire early part. I think you have to think really hard about before you do it, because I think people imagine, you know, not everyone knows what they want to do if they retire early.

Like, okay, if I retire early, I would just be on a beach all day. It's like, okay, go try that for a month. Try that for two months. If you're still having fun, great. But I think a lot of people after some amount of time, and I've seen this anecdotally, I've seen a lot of stories about this. They can get depressed because they feel like they're not doing anything with their life.

And so I think people need a purpose bigger than themselves and it can't just be like, Oh, you know, hedonism and, you know, traveling the world and doing that. And some people can, and that's, I'm not putting down those people that like to do that. That's not what I'm saying. I'm just saying that's not going to work for everyone.

So for, if you are that person, that's great. And yeah. more power to you and go do that. But for, I think a lot of people, you need to be doing something outside of just, you know, consuming and not doing anything. I think you need to be building towards something. So instead of thinking about just, you know, financial dependence, think about like, what's the thing you can do to Obviously, have that control over your time if you want to, but also be doing something you love doing.

And so even that means you have a nine to five job, that's fine. I don't look down on that at all. I think there's people out there with nine to fives that are much happier than people who are financially independent, but they're trying to do something and they hate it. And they're just doing stuff for money.

And so it's really about the balance across your entire life. So that's the thing I would say when you're talking about money is like, think about the options that can provide you. To do what you actually want to do. And so that's, I think the main selling point for the fire movement. I think the retire early piece needs to be rethought a little bit because I don't think early retirement is right for a lot of people.

I think it can lead to a lot of negative things. And I talk about that a little bit in the book. So if you have more questions on that, I could be happy to expand. 

Yanely Espinal: Yeah. I mean, I think it's important to get people to recognize that if they haven't considered that at all, that this is a red flag. Like, how are you going to be pursuing fire when you haven't really thought about the fact that it's very easy to go into depression when you don't feel that you have purpose in your life or a reason, to kind of get up and go do and be active every day.

But there's plenty of people who have like a very specific and detailed plan about what they want to do and stuff like that, who have given it plenty of thought. But you know, I think that that's a great point. One of the other criticisms that I hear a lot is. It's often the fact that you can't spend more than what you're spending now.

So essentially you're kind of like locking yourself into this lifestyle or, you know, access to spending and the lifestyle that affords you pretty much through your every year for your retirement, because that's how it's going to work unless you're continuing to have income come in through your retirement, which I'm sure is possible with rental income, properties, you know, a lot of other things.

But. Ultimately, you know, this is the kind of stuff you have to consider. Okay, what about the next hot topic, which is ESG, Environmental Social Governance Investing. It's all the rage, especially for this next generation, which cares a lot about the environment and social causes that they're passionate about.

What do you think? Is it worth it? And you know, for teachers to kind of put it on the radar of students, you feel like it, it makes sense, or is it better to just kind of avoid it until we. So it kind of isn't so muddy. 

[00:36:57] Nick on the ESG.

Nick Magiulli: Yeah, I think the thing with ESG is it started with good intent. Like, okay, hey, let's be like, you know, socially responsible capitalists.

But I think what happened is it became like, oh, wow, if we can fake. Getting this profile on our company, then we'll get more money. And so it became like the incentives change and, you know, people who are capitalists are going to respond to incentives. Right. And so I think like one of the things I just, this is just like the example I used to say, they find it funny.

It's like. You know, Tesla, which is electric car manufacturer and obviously is a less carbon output by using natural gas. That's how a lot of electricity is made compared was not an ESG company, but ExxonMobil was an ESG company, right? And it's just like it's one of these things where it's like obviously like Tesla is trying to move us to a You know, lower usage of, carbon release, right.

You know, fossil fuels, all that, but like, they're not ESG, but like Exxon is because they have all these specific, you know, initiatives and stuff. And I don't know the particulars of Exxon or Tesla, and that's not the point here, but it's like, I think people can take something that's very good and then they're like, wow, we can actually benefit from this.

Let's just come up with these like initiatives and stuff. Even if like our core business is not actually. Helping the underlying narrative of SG. So I'm not completely against it, but I do think like it needs to be rebranded and it needs to kind of, you know, we need to think about a different way to do it.

Right. And if that's like, for example, let's say you don't support gun manufacturers. That's fine. And if I think in the future, we're going to be able to say, Hey, give me the S&P 500, but take out the gun manufacturers right now. You can't really do that. You just have to buy everyone at once.

And there's other arguments that have been made. Someone said, you know what? No, you should invest in every company. And even those companies that might earn a higher return, like let's say a gun manufacturer would. Do that and then take that money you earn and then invest that in causes you care about, like maybe anti gun violence or something like that.

And so there's different ways of kind of going about this and I don't know what the right one is, but I do think like ESG needs to be rethought a little bit. Right. I'm not against it. Obviously I think values based investing makes a ton of sense. I just think it's like how it was implemented and how it's being used today as like a marketing employee more than like the underlying, what the purpose was is where the issue can arise.

Yanely Espinal: Yeah. Now you mentioned like custom indexing, why is that not taken off? Like, why is it not possible yet for me to be able to say, I want, total stock market index. Without these 17 stocks, like that seems like it should be so easy to do what is taking so long. I don't understand. 

Nick Magiulli: So they, they do have it.

It's just it hasn't dropped to the retail investor level yet. And the reason why I think it's just it's a little costly to do that in terms of like, imagine what you'd have to do, right? You have to have a computer system do this for you. Okay. I'm going to buy you 500 stocks in these weights.

And so a lot of the times what they do have this, but you have to have an account minimum right now. I think one of the providers I think we work with at my firm, it's like, I think it's like 250, 000, maybe 125, 000 account minimum. So that's like a, that's a huge bar. We can't get someone in there with 10, 000,

 or 5, 000, I could see like an 1, 000 account minimum. Cause if you didn't have any of a thousand dollars, how are you gonna have all these fractional shares of 500 companies, right? You see, it just wouldn't make sense. So I could see like a 10, 000 account minimum, and that would really open it up for a lot of people.

But I just don't think we're there yet. And so I think fractional share ownership is a possibility that's going to allow for that. But I think over time the technology is going to get there where it's going to get so cheap that they can do this. I just don't think anyone's really hit it to mass market right now.

It's still like a premium service. And I think it makes more sense for their business model to charge a premium price or have like this premium service. And to be like, Hey, anyone can get this, right? What's the point? Why would I pay you, this extra little for these bells and whistles when I can just give it to anyone, right?

So I think right now. The business model is a, Hey, it's a premium service. And over time, as people come in and more people develop this technology, it's going to come down and everyone's going to be able to use it. I think, you know, 10, 20 years from now, custom indexing will be much more common than it is today.

Yanely Espinal: I mean, I hope so. It just seems to be a no brainer that, you know, cause I hear this so much, especially from younger investors. Like when I'm talking to students, they'll ask me all the time, like, what if I want to own the S&P 500, but I don't want to support this or that. And I'm like, yeah, 

I mean, if you really wanted, you could buy a bunch of sector funds and just not buy that sector, but it just seems like it's so cumbersome for the investor where it should be made easy. And then of course, there's like all these apps and trading platforms that kind of do a little bit of that.

Like you think about the wealth fronts or the betterments that kind of prepare these portfolios for you that are. You know, socially conscious or environmentally forward, or they kind of pre create these custom portfolios that you can then pick from. But of course, they'll charge you a little bit extra for that.

So like you said, it's constantly this premium thing when it should be, I believe, just as available and accessible price wise as your typical index fund or index ETF. But so speaking of that. A hot topic apps, trading platforms you know, your Robin hoods, your wealth fronts, your all of us, your M one finance, all of these teens love them.

But they often don't give the best products or services or price points versus your big discount brokerage. So what do you think about these you know, newfangled apps for investing? 

[00:41:50] Nick on the Newfangled Trading Platforms.

Nick Magiulli: I'm kind of torn on this issue because yes, some of the fees can be higher, like on a percentage basis, right?

Like I, there's even. I can't remember if it was acorns or some, and I'm not here to talk about any particular brand, but there's one that was like five bucks a month, which if you have a hundred bucks in there, that's a very large percentage, you know, fee you're paying, but like at, on an absolute basis, it's only 5 a month, right?

So it's someone who can probably easily pay that. And that's not the issue. So I don't like to focus too much on the fees there, especially if it's like the absolute dollars are small. If the fee percentage is high, but the absolute dollars are small. I try not to focus on that. And the other thing I'm torn about is like, Yes, they can kind of be gamey like Robinhood can be a little bit gamey at times in terms of trying to get people to do things and a lot of people may not know what they're doing and then they feel like, Oh, I lost all this money and it can be like, there was actually this story about this kid that he saw that the user interface wasn't that great.

And then he was looking at Robinhood account and he kind of got very depressed and he went and he actually committed suicide. It's actually a terrible story of something happened. This happened. It was this big in the Fintech community and we saw this happen. So, yeah. Obviously, there's a lot of things that need to be fixed on this front.

The only positive side to this is maybe it's going to get people interested in investing and personal finance earlier. And maybe they'll make mistakes on a small amount of money and it won't really matter, but that'll help them later in life. And so that's the only positive I can see from like the gamification of apps and things like that.

Is like, maybe it'll get them interested, even if they lose a little bit early, maybe that will save them, you know, thousands and thousands of dollars later. Right. So, cause the mistakes are small early on and they get much more costly as you get older. So that's the thing, like, I'm obviously torn on it.

Like, I don't like a lot of the stuff that they're doing, but at the same time, like they are getting people interested in investing. I'd rather have more people, at least somewhat interested or marginally interested that. Eventually find the path and do something that can be prudent investing versus someone who never finds out about it and they never have any clue and they never do anything with their investments.

Right. And so that's where my kind of conflict lies with that. 

Yanely Espinal: Yeah. I mean,, it's true. I kind of have similar feelings. A lot of people say, but it's getting young people into the door and I'm like, yeah, but then if they get burned, they're going to run away and say, Oh, investing is a scam.

It's like, no, it's just that you jumped into Robinhood, didn't know what you were doing and All of your money. So I'm also torn about it. All right, folks, thank you so much. This was a great session. All right. Awesome. Well, thank you all so much. The book is called just keep buying kind of like a Dory. Just keep swimming, but it's just, just keep buying again. Thank you so much, Nick, for joining us. This was so great. 

Nick Magiulli: Thank you. Thank you, everyone. Thank you for your time.

Truly appreciate your time. 

Yanely Espinal: Thanks, Nick. 

Ren Makino: I hope you enjoyed this episode with Yanely and Nick. I have a few final housekeeping items before we go. The show notes and a full transcript can be found on mgpf.org/podcast. You can also join these sessions live and ask the speaker questions by signing up for the NGPF Speaker Series Sessions that occur on Thursdays at 4:00 PM. Pacific time. You can sign up to attend on ngpf.org/virtual-pd. Please be sure to subscribe to the NGPF podcast on iTunes, Spotify, Stitcher. Or wherever you get your podcasts better yet. Leave us a review. We love hearing from you and it will help us reach a broader audience. On behalf of Yanely and Nick thank you so much for tuning into this NGPF podcast.

About the Author

Ren Makino

Ren started interning at NGPF in 2014, and worked part-time through high school and college. With his knowledge growing alongside NGPF, he joined the team to work full-time after graduating from college in 2020. He is also the producer of the NGPF podcast. During his free time, he likes to try out coffees from different roasters across the world.

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