Big Brain Investing
@BigBrainInvestt • 2,234 subscribers
Learn to not suck at investing
Videos
"Low IQ, high energy." Robert Downey Jr.'s verdict on Wall Street after visiting in 1993:
Big Brain Investing1,623,349 views • 1 month ago
Dave Ramsey on investing $150,000 outside retirement accounts without getting crushed by taxes: A caller named Steve asked Dave how to invest $150,000 outside of retirement accounts. Dave's answer revealed a tax strategy most investors overlook. Dave starts with his two foundational rules: "Rule number one is you don't want to do it unless you understand it. Rule number two is you put somebody in your life that has the heart of a teacher." Then he gets into the real problem with investing outside retirement accounts: "I personally invest, Steve, inside my retirement accounts in four types of mutual funds: Growth, growth in income, aggressive growth and international. Outside of retirement accounts, those funds all create taxes each year as they grow. That's a problem." His solution? Low turnover ratio mutual funds. Dave explains the concept using a rental property analogy: "If you buy a rental house for $200,000 and it goes up in value to $300,000 and you still own it, you do not owe taxes on that 100,000 in growth because you've not sold the house… So, you've got capital gains growth, but you don't have any taxes because you've not sold it." The same principle applies to stocks: "If a share of stock goes from $50 to $70, you don't pay taxes on that $20 gain until you sell it. Same is true inside a mutual fund." Here's where the turnover ratio comes in: "The turnover ratio is when they sell the stock inside the mutual fund. If it has a 90% turnover ratio, that means almost all the stocks get sold every year. And so all those gains are going to be taxable every year. If they have a 5% turnover ratio, which is a low turnover ratio, that means you're not going to pay taxes on the increase in value until you sell the mutual fund cuz they aren't selling the stocks inside the mutual funds hardly at all." The target number Dave gives: "You want an under 10% turnover ratio. Because anything that turns over the gain is they're going to send you a tax bill on the gain every year." Here's a shortened version: The takeaway: Outside of retirement accounts, how often a fund trades matters more than what it holds. High-turnover funds create a tax bill every year. Low-turnover funds let your money compound quietly until you sell.
Big Brain Investing189,361 views • 1 month ago
Dave Ramsey explains why paying off your mortgage early is the fastest path to millionaire status: A caller who's debt-free except for his house and has $90,000 in savings asks Dave what to do next. Dave walks him through his framework before getting to the real insight. "What we teach is a thing called the baby steps where you're debt-free everything but the house and have an emergency fund. That's one, two, and three." After that comes saving for kids' college (the caller has $75,000 across 529 plans for his two kids). Then comes the step where it gets interesting: "Pay off the house early. We would say throw everything at the house, which is the $90,000 that's in discussion here unless you don't have an emergency fund." But why? Dave points to the data: "We just completed the largest study of millionaires ever done, over 10,000 of them. 79% inherited nothing and somewhere in the neighborhood of 90% inherited not enough to make them millionaires." So 90% of millionaires aren't wealthy because of inheritance. It's because of their habits. And the two habits Dave sees at the first million or two of net worth are simple: a maxed-out 401k and a paid-for house. Here's what millionaires are NOT doing: "We do not find them saying, 'I'm going to borrow as much 3.5% money as I can borrow because I can invest it and make a better rate of return.' We do not find them doing that." Instead, they kill the mortgage and redirect that cash flow into investing. Dave projects the caller's future: "If we fast forward 5 to 7 years... you'd have about a million and a half net worth of which 700,000 is your house. You would be a typical case study of the representative statistically of the typical millionaire." Skip the payoff, and you become an outlier: "If however you didn't pay off the house you might still reach millionaire status, but you would be very unusual among that group." Then Dave gets to the deeper reason, the one that isn't on a spreadsheet: "100% of the foreclosures occur on a house with a mortgage. And when you have zero mortgage and you walk in the backyard and the grass feels different under your feet, 'it's mine by God,' kind of thing, it changes the way you operate the rest of your money because you're standing on such a more solid foundation to live your life."
Big Brain Investing151,673 views • 1 month ago
Howard Marks offers a contrarian view on investing: "The investors who never finish in the top quartile are better than the ones who do." He tells the story of a Midwest pension fund manager named Dave Van Bencotton who, for 14 years straight, finished every single year between the 27th and 47th percentile. Howard contrasts Dave with a New York fund manager who had a catastrophic year — a value firm that bet heavily on banks, collapsed in performance, and then justified it publicly with this logic: "If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5%." Howard's reaction was immediate: "I like the first guy better." That juxtaposition became the title of his very first investment memo, written October 12th, 1990: The Route to Performance. Most investors visualise the normal distribution and think the same way: shoot for the upper tail, swing for the fences, find the massive winners. Oaktree's approach is the opposite. "Cut off the bottom tail." Remove terrible from the equation. If your range of outcomes consists of fabulous, excellent, very good, good, not so good, and so-so — but never terrible — you'll be one of the best performers over time. "Not after one year. Somebody else will swing for the fences and hit it exactly right and will be lionized for her performance that one year." "Who can do it for 30 years?" The lesson is to understand that in compounding systems, avoiding catastrophe is more powerful than hitting a home run.
Big Brain Investing97,275 views • 1 month ago
Ray Dalio warns of "something worse than recession" and points to 5 forces converging right now: The billionaire investor isn't worried about a typical downturn. He's mapping something bigger. "There's a financial problem. There's an imbalance problem," Dalio explains. "There are basically five big forces through history that drive everything." Force #1: The debt cycle "First, there's the money, credit, debt, economic cycle in which there's a building up of debt in a cyclical way that becomes too large and we're going to have problems. We're going to have a government debt problem." In Dalio's framing, this is what's changing our monetary order. Force #2: Internal conflict "The second big force through time is the internal conflict force. The left and the right. Differences in wealth and values causing a conflict that we're seeing it changing our political order." This is what's changing our political order internally. Force #3: The great world order "How countries deal with each other. When there's a rising power challenging existing power." Dalio sees a major shift underway: "Now we are going from multilateralism which is largely an American world order type of thing to a unilateral world order in which there's great conflict." Force #4: Acts of nature "Droughts, floods, and pandemics." The historical wildcard that compounds every other pressure. Force #5: Technology "Technology changing and how they are coming together are the main forces behind this." Dalio's core warning is about convergence. No single force is the whole story: "There can't be imbalances anymore in that environment."
Big Brain Investing29,051 views • 1 month ago
Warren Buffett on deciding whether to hold a declining stock:
Big Brain Investing20,511 views • 1 month ago
Brian Preston and Bo Hanson on when financial advisors actually make sense: Asked whether anyone should hire a financial advisor if investing is "really as simple as just buying an index fund consistently," they push back on the framing itself. "Buying an index fund is just one part of the financial planning process. It's the investment part." They're quick to admit that most people don't need to pay a professional: "We don't think that everyone needs a financial advisor with all the information out there on podcasts and YouTube channels and books and blogs. There's so much great free information out there that a lot of people can self-manage for a long time." So when does hiring an advisor actually make sense? They break it down into three specific scenarios: 1. The gravity of your decisions becomes uncomfortable. "If I make a 10% mistake on $10,000, it's not going to change my life. If I make a 10% mistake on a million dollars, well, now I'm starting to impact my livelihood. Now, that might be more than I save in a year, more than I make in a year." 2. Your life becomes financially complicated. "You used to have a two-page tax return and now you have a 100-page tax return or you might have options and RSUs and ESP or you are wondering about what your estate documents should look like… You're an expert in your field in your vocation but you don't know all the financial planning stuff." 3. You have the smarts but not the time. "Maybe you're super super smart and you can do it on your own. And the complexity doesn't even really frighten you, but what you found is you just don't have time to put the energy and effort and attention into it that you would like to. And so naturally, because you have all these other things going on, personal finances falls on the back burner." The common thread? Clients reach out wanting a second set of eyes from someone who has navigated their next stage many times before: "I want someone who's done it a hundred times so they can tell me, 'Hey, what are the things to look out for? What are the pitfalls I should have?'" But if you're early in your career, the advice is refreshingly direct: "It's not super complicated to figure out, hey, I need to make a good income, live on less than I make, follow the financial order of operations, put my money to work, and every dollar that I can save is going to be way more valuable going into my portfolio or funding my financial goals than paying a financial advisory fee."
Big Brain Investing15,169 views • 1 month ago
Warren Buffett just reminded everyone why trying to time the market is a losing game: He bought his first stock in April 1942. He was 11 years old. Pearl Harbor had just happened, America was losing badly in the Pacific, and the Dow sat at 100. By every measure, the outlook was terrible. It turned out to be a great time to buy. He did the same thing after the 1987 crash. And again after 9/11. His logic hasn't changed in 80+ years: "The country is not going to go away. The plants aren't going to go away. The people aren't going to go away. The talents aren't going to go away." And his warning is just as direct: "It's a terrible mistake to buy or sell stocks based on what you think business is going to do next month or even next year." When someone asked him why the economy weakened, his answer was disarmingly simple: "People were just more optimistic then." That's it. Not a structural collapse. Not a policy failure. Just a shift in mood. And moods change constantly. The factories, the workforce, the ingenuity behind a productive economy — those don't disappear because sentiment dips. Stop trying to predict the next quarter. Trust the long arc.
Big Brain Investing10,948 views • 1 month ago
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