Investing Unscripted Podcast 102: April 2024 Mailbag Plus a Big Announcement

Note: All transcripts are edited for clarity. We may earn commissions from some (not all) links. Thanks for the scratch.

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​Jeff Santoro: Hey, everybody. Welcome to another episode of Investing Unscripted, where we ask and answer the hard questions about investing. I am Jeff Santoro, and I am joined as always by my good friend, the voice of the aristocracy, Jason Hall.

How are you, friend? 

Jason Hall: Hey, Jeff, voice of the people, my good friend. I'm good, pal. How about you? 

Jeff Santoro: I'm great. So it, you're a little scratchy in the voice today. So, we decided just for fun, I would do the, the intro and I only messed it up one time before we had to. Yeah, this is 

Jason Hall: only our second take. I'm impressed.

Jeff Santoro: I heard, well, I have heard you do it over a hundred times. So I am a slow learner, but perhaps not that slow. And 

Jason Hall: that was just one episode. 

Jeff Santoro: That's right. That's right. It's true. So, uh, anyway. 

Jason Hall: Let's make a podcast. Let's make a podcast. 

Jeff Santoro: And let's not have me do the intro anymore. It felt very [00:02:00] unnatural. 

Jason Hall: Yeah.

Yeah. Do I have to do the notes now? Do I do the homework? 

Jeff Santoro: Yeah. 

Jason Hall: Okay. So we have a podcast. We do. We have a Twitter. 

Jeff Santoro: We have a Twitter. 

Jason Hall: We have a YouTube. 

Jeff Santoro: Yep. 

Jason Hall: We have a newsletter. 

Jeff Santoro: We have a newsletter. 

Jason Hall: You can find all that stuff in the show notes right there. Go to InvestingUnscripted.com, find links for all that stuff there. You sign up for the newsletter, every Wednesday when we drop a new episode of the podcast, you're going to get the transcript in your email as well, plus links for lots of stuff that we talk about. So that can be really useful and helpful. And on Sundays, You're going to get random words from either myself or Jeff, occasionally from both of us and write some fun stuff.

It might have something to do with the latest episode of the show. Might be completely unrelated, but it will be fun and there's a good chance that whoever is writing is going to be making fun of the other one. And maybe that's the most value that you'll get out of our newsletter, Jeff. 

Jeff Santoro: Agreed. Yes. That, value, is a word, one word for it.

Entertainment is another.

Jason Hall: Well, entertainment can be value.

Jeff Santoro: That's true. Good point.

Jason Hall: Do we, uh, do we need to shill for, [00:03:00] ratings? 

Jeff Santoro: We should always shill for ratings. So, I, actually, I do want to shill for ratings, and I want to do it very specifically, because it's been a, I gotta be honest, audience, it's been a while since someone has given us a review on Apple Podcasts.

Jason Hall: And just in case it wasn't clear, audience, that's you we're talking to, Apple podcast audience. 

Jeff Santoro: Now, I will say, we've been getting a You're in the 

Jason Hall: back, you're not listening, listen. 

Jeff Santoro: We have been getting regular edition star ratings on Spotify, so our Spotify listeners are doing well at giving us nice ratings, so thank you Spotify listeners, but you Apple podcast people…

Jason Hall: Step it up. 

Jeff Santoro: Step it up. All right. So Jason, before we dive into the mailbag, which is this, this week's episode, we have a little announcement to make. We did a thing and it, it, it requires a little bit of conversation and explanation. 

Jason Hall: So we're doing our, we're doing our B side first here. 

Jeff Santoro: Yeah. We're going to, we're doing this right up front.

I want people to know this now. All right. So there is a website that we found and checked out called [00:04:00] SavvyTrader.com and it allows you to create a portfolio that you can then put out into the public for people to subscribe to in order to see real time buy and sell decisions. So what Jason and I decided to do was put together what we think are our 10 best ideas right now as a starter for this portfolio.

They're all equally weighted. They're all. Purchased in this portfolio, and we are committing to making at least one stock by each month taking turns making the pitch to each other. And the cool thing about this is there is a community aspect built into the platform where we will add our commentary next to each buy or sell what we were thinking.

What our investing thesis is, all that kind of stuff. And anyone who chooses to subscribe to the portfolio can join in on that conversation, ask us questions. And we're hoping it builds into a nice little community for our listeners to interact with each other and with [00:05:00] us and ask questions and stuff like that.

It is absolutely not recommendations or anything like that.  

Jason Hall: It's not a stock picking service or anything like that. Yeah. 

Jeff Santoro: It's just, we talk so much about the process. And what we think about and how hard it is to make decisions sometimes that we wanted to do. This was like 

Jason Hall: our, and we, Jeff, you and I've been talking about doing something like this for a long time. 

Jeff Santoro: Yeah, we have. 

Jason Hall: And this is like kind of our chance to kind of put our combined process through the, through a test. Right. Yeah. Find out how it works when we work together, be methodical, kind of hold one another accountable to ideas as well.

I'm really excited about, I think it's going to be a lot of, a lot of fun. Hopefully we do well. And then we're going to learn some stuff. 

Jeff Santoro: Yeah. And when we actually recorded ourselves talking through the first 10 10 picks, and that's going to be the genesis of what we put into the platform in terms of commentary. And because it's behind a paywall and it's a subscription thing, we might try to leverage it for some, you know, exclusive [00:06:00] content down the road, but that's, that's to be determined.

I do want to point out one more important thing, Jason, that we decided to do with this. Neither of us are trying to launch a stock picking service. Like we just said, these are not recommendations. We also feel like if people are going to spend their hard earned money to see what we decide to do in this portfolio-

Jason Hall: Easy-earned, we don't know how people make money.

Jeff Santoro: Okay. That's true. It could be easier money. That's a good point. 

Jason Hall: Yeah. 

Jeff Santoro: We do want to monetize the podcast. We want to monetize the fact that we've been working hard and trying to put out good content, but we also want to always be thinking about other people. So we have decided to build some charity into this endeavor.

So here's what we're going to do at the end of each year.

So we bought this portfolio on April 26th, 2024. That's when all the stocks were purchased. And every April 26th from now until we stop doing this, we will give 10 percent of all subscription revenues to charity. So if you do give your hard or easy earned money to this endeavor, [00:07:00] know that 10 percent of it will be going to a charity. And we'll do that once a year.

After three years, we are gonna up the ante. If we are not beating the market after three years with our picks, we're gonna donate half of all the subscription money we've received up until that point. Which, after three years, could be a substantial chunk of money to charity.

And if we are losing money, if we are in the red at the end of three years, we will donate 90 percent of the subscription revenue to charity. Because if we can't at least not lose money, we don't deserve people's subscription money. So, I hope that that entices people who might be on the fence about this to, to consider subscribing.

Jason Hall: If you think we're terrible stock pickers, well, you're not really giving money to us, you're giving it to a charity, right? 

Jeff Santoro: So that's sort of the side of this that makes us feel a little bit better about about what we're doing and makes it a little bit more fun. So there will be learning, there will be conversations, there will be roasting of each other.

[00:08:00] 

Jason Hall: You have the first roasting evidence right now. Let's go ahead. Let's put one out there. Let's put one out there. The first stock, the first 10 buys, one of mine is already down by double digits. 

Jeff Santoro: Yes. Go ahead. It's your, it's your pick. So you can, you can talk about it. 

Jason Hall: No, no, no, no. I'm not going to share the name of the stock. It's a bank. It reported earnings this morning. That’s all I’ll say. 

Jeff Santoro: See if you can figure it out. So anyway, we hope people- 

Jason Hall: I want to say this before we move on to the podcast. We've already spent a lot of time about this. One of the nice things too, about having it part of SavvyTrader. We'll mention it on the podcast here and there a little bit. Of course, it'll come up, but it kind of segregates it too.

I don't want this to be like anything that takes away from what we do on the podcast at all whatsoever. It's a separate thing, but it creates a space we can interact with people and engage with people and talk about what's going on with this fun little portfolio we're trying to build without taking space away from the other things that we do that you're not paying us directly for.

So I want to say that as well.

So, we have, speaking of that, this is, this is the mailbag. It's the April mailbag on May 1st.

Jeff Santoro: Yeah, we had a little vacation turned in there. Jason was a little under the weather. So the mailbag is a little bit later in the month than it normally is, but this was one of our better mailbags in terms of responses, Jason, we got a lot of really good questions from a variety of people.

So, I'll just say it again is before we dive in. If at any point anyone ever has a question that they'd like to hear answered on the mailbag just send it to us doesn't matter when it is we have a nice little folder in our email or and on our social media accounts that we file everything away and until we're ready to do a mailbag question.

Jason Hall: It's not a call in show. Asynchronous communication.  

Jeff Santoro: That's right. Asynchronous. So anytime you have a question, shoot it our way any way you can, and we'll get it on the mailbag the next time we record one. All right, Jason, here we go. First question. Short and sweet from our good friend Colin.

ETF fees, what's too much and why?

And before we answer it, before we answer it, though, yeah, let's, let's give the definition so everyone knows what an ETF is and why there are fees. 

Jason Hall: So [00:10:00] whether it's an ETF or a mutual fund, and first, here's the difference between an ETF and a mutual fund, a mutual fund is closed.

You just, you give your money to the fund. Almost always directly or through a broker. And then they get the money to the fund. And then the mutual fund manager buy stocks or sell stocks to raise cash. If you're selling your funds.

And the price happens at the end of the day, right? It takes some time to get your money. And it's a little bit less liquid with mutual funds.

With ETFs. It stands for exchange traded fund. It kind of happens in real time. You're trading it on the market, right? On that secondary market that you'd be buying and trading stocks on.

So the prices are in real time. It's a lot faster to move your money in and out of. I'm not going to get into the nuts and bolts of like some of the tax differences, because there are Like tax differences. If you're holding it in a taxable account that they can affect, which might be better. But generally for most investors, most of the time ETFs make more sense.

They're more [00:11:00] liquid. They're cheaper to buy. They're easier to buy in and out of, you don't have minimum amounts, all that kind of stuff. So the fees. And the way you can see them as you look at the prospectus or maybe the fact sheet or whatever they have in the summary prospectus, look for expense ratio.

What the expense ratio is a percentage on an annualized basis of assets under management. The fund manager is going to liquidate out of that fund to cover their fund operations and their, whatever their slice of the pie is. So if it's a 1%. Expense ratio, and they have a billion dollars in assets under management, they're going to take a 10 million, right?

Because that's 1 percent of a billion dollars. Is that right? Did I do that math right? 

Jeff Santoro: I don't know. Yeah. But that's 

Jason Hall: right. 

Jeff Santoro: So yeah. And, and what that means, and what that means to the individual investor is that you can expect that 1 percent of any gains you would have gotten. It's a lag on returns.

Correct. Right. It's coming from you. 

Jason Hall: It's a lag on returns. They don't send you an invoice and you write them a check and pay it. They take the money out of assets, [00:12:00] right? Right. It's completely opaque. You never see it happen. 

Jeff Santoro: And that's, I just want to pause there because that's, that's the thing I don't, that's important.

Like I, this is a thing I had to figure out way much later in life as it related to my, my retirement account, my four Oh three B that I used to have. And it was more than just expense ratio. There was other fees tied into, but you never see that it's not broken out on a statement. It's not like it says.

You made this percent minus the expense ratio equals this percent. You never see it. You just have to know it's there. So that, that's an important point to, to pause on. 

Jason Hall: Yeah. And the reason, and the reason why it matters is that you don't see it. It's easy to miss it and not think about it. The implications for these really small numbers.

In a percentage basis over decades as your wealth compounds are enormous. We're talking thousands to tens of thousands of dollars in difference in wealth. You can create based on. The expense ratio, right? 

Jeff Santoro: Yeah. And there always will be an expense [00:13:00] ratio. I don't believe there are any ETFs that have zero percent.

Jason Hall: Fidelity does. Fidelity does have some, but it's a loss leader. They do it to get you to do all the other Fidelity stuff. But generally these things cost money to operate, right? If even if it's an index fund, somebody built the index, they own that intellectual property. They're going to charge the investment manager to have access to that intellectual property.

You have to make the buys. You have to have an accounting department. You have to have tax people. 

Jeff Santoro: Yeah, there's no such thing as a free lunch. These, these, these companies that make the ETFs need to make money too. So let's, let's get to the heart of Collins question then. What, what is too much and why? So here's, here's something that I, here are some things that I, I know that I've learned over the last couple of years.

So one is that you can find this information usually fairly easily by just Googling the ticker of the ETF. And then you can click on the website from. You can probably find a multiple places, but it's actually easy enough just to go to the company that makes the ETF. So whether it's Vanguard or BlackRock or, [00:14:00] or Schwab or any of those, and you can see what the expense ratio is Vanguard is typically pretty low on most of their thing.

They they're known as like a low, low cost ETF provider, but that's not going to 

Jason Hall: investor owned. So they're incentivized to drive. those costs out, 

Jeff Santoro: but they're still going to have ones that are higher than others. And I, and like anything else, it's probably based on popularity and supply and demand and things like that.

So here's just an example that I looked up really quick. Cause the one, one of the only ETFs I, I own personally, my wife has a bunch is a Vanguard ETF called VOO. And that is the ETF that tracks the S and P 500. So it's an S and P 500 index fund. Sorry, ETF, the expense ratio on that is it is 

Jason Hall: both.

It is an index fund and an ETF. 

Jeff Santoro: Yes. Yes. It tracks an index, but you could, you could buy it and trade it as, as an ETF and it's as easy as tick, you know, typing in the ticker VOO and buying it like you would Apple or IBM or anything like that. It's expense ratio is 0. [00:15:00] 03%. So you can do the math on how much that would be in your portfolio if you were to buy X amount of shares of that.

Now there are other. ETFs out there that track the s and p 500? I don't know the typical, so 

Jason Hall: like the SPDR S&P 500 ETF. 

Jeff Santoro: SPY, right? 

Jason Hall: Yeah. SPY, which is I think the largest, so I think its expense ratio is 0.09%.

Jeff Santoro: You sound like you're guessing.

Jason Hall: I don't have it right in front of me. 

Jeff Santoro: Regardless, while you're confirming. So like, I guess step one to answer Colin's question is, if you know what kind of ETF you're interested in, you could shop around for the lowest expense ratio. That's one way to, to kind of see what's, what's out there in terms of how much you're going to pay.

So if I were trying to buy, Any TF that tracked the S and P 500, I would compare V O O to S P Y and to any others that exist that do the same thing. That's a pretty apples to apples comparison, I would imagine. Because It is supposed to be [00:16:00] tracking the S& P 500. It's not as easy if you're going to be comparing other types of ETFs because there's no law that says the cybersecurity ETF has to have these specific companies at these specific weights.

So if you. 

Jason Hall: Right. 

Jeff Santoro: are looking for that specific kind of an ETF, you're going to see differences in what's in it, in it. If you look at Vanguard versus Schwab versus BlackRock or any other provider. So I would just shop around. I mean, I think that's, I don't know what is too much necessarily, like there will always be a fee.

It's just a matter of, I think, comparing the best you can products against each other and seeing. You know, I, I would imagine you don't want to get much above 1 percent if that's just like a, you know, this is not financial advice, but that's where my 

Jason Hall: head goes. I'll build on that a little bit. So I think first of all, if you're looking at these very large, large cap ETFs or funds that are the same thing.

So like the S and P 500 index fund, there's a lot of them. And they're [00:17:00] basically the same thing. Now, of course, they're going to say that there's differences, their methodologies and all this stuff that make them superior, but that's mostly bullshit marketing. When they say that by and large, they're going to be the same thing.

And it is a commodity. It is why pay a penny more for a gallon of oil or a gallon of gas from one place versus another. You know, you're going to get the same return, you know, before fees, it doesn't make sense to pay a higher fee. Right. So the exception is if all of your assets are at fidelity. Right. Or for there's some reason why owning that asset from that particular provider makes sense, then that's, that's a reason, but generally it does come down to absolute cost on those where prices do move higher.

You mentioned like some of like the cybersecurity ETF, as an example, when you start moving into those niche products, Your expense ratios do get, get higher, right? Because they are, but there 

Jeff Santoro: is some differentiation [00:18:00] there you're, you are, you, you are theoretically paying for a specific, you know, allocation of different companies in different orders and things like that.

Jason Hall: Well, that's the key you have to, you have to know why you're buying it. So like, for example, if you're buying one of those niche ETFs, you're trying to accomplish something. So like cybersecurity, you're probably trying to get better alpha than the SMP 500 because super high growth, you can concentrate on just the companies that are in this area.

So the, the, guess what? The investment managers know they can charge a premium for investors that are looking for that. But if you're looking at something. It may, maybe you're looking for dividend growers, right? And same thing, you might pay a higher premium because the NOBL, which is the S and P, the, the dividend aristocrats ETF, S and P Dow Jones indices, they short, they want their piece of the pie because they own that intellectual property.

So you have to be mindful of that. Now the fees do get bigger and bigger when you start moving into like actively managed funds because those costs more to operate. And Occasionally there are some of those [00:19:00] that have really, really good track records of outperformance against like the S& P 500 or other indices, but generally.

There's an inverse correlation between higher fees with those actively managed products and outperformance of the index. You pay more to get a worse return, right? So as a general rule of thumb, like we could have just answered this by saying lower is better. And, and that would have been the answer, but the more nuances that generally lower is better because it's less fees.

And also particularly if you're looking like in your 401k from your employer and you have limited selection, almost always those ones with lower fees, they're probably also going to give you better returns to not just net of fees returns too. So you're going to get more money and you're going to pay less in fees.

So, yeah. 

Jeff Santoro: I think the last thing I would say is, take the time, like, to answer Colin's question, like, how much is too much and why. I think the better question is, yes, lower is always better if, if you're comparing apples to apples. [00:20:00] But you can find a lot out about these funds when you go click on the website.

from the provider that has them. So fidelity or whatever. And you can see like, how did it do over the last 1, 5, 10 since inception against, against a benchmark that they provide. You can also Morningstar is a very good website for getting like their ratings of ETFs and index funds. And they do the same thing.

They compare against, you know, benchmarks. So you can start to, you know, it's like anything else you get what you pay for to some degree. So let's use the cybersecurity example, just to kind of close this out. If you have in mind, a handful of cybersecurity companies that you actually really like, or that you don't, and you're comparing multiple different types of cybersecurity ETFs, you can see at least top 10 holdings, and maybe even more if you dig a little deeper, and you might see some of your favorite companies, At higher weighting and you might say to yourself, I feel so strongly about having these companies at a higher weight.

I'll pay 0. [00:21:00] 09 versus 0. 07 percent to have this one versus that one. Or you can look at the benchmark and say, well, this one has a higher expense ratio, but it's also had a better return over the past 10 years or 20 years or whatever. So I think that's, that's about as much as you can do. And then just kind of, you have to make the best decision you can, I guess, but I wouldn't go into it blindly.

I would look because you might even look at one ETF. That has a ridiculously high fee and say, absolutely not. That's not worth it. I'm going to go do something else with that money. 

Jason Hall: Yeah. And then when you start getting into these, these more specialized ones too, you need to look at what they actually hold, what the holdings are, because just because one's cheaper doesn't mean that the holdings are going to be the same holdings in the two.

If they're not following an index, it's really important that you think about that too, to make sure, like if you're buying a solar ETF that you don't end up with one, that's just a bunch of, you know, commodity focused, Chinese solar panel manufacturers. And you're not getting any of the innovators, right?

So that's, that's 

Jeff Santoro: important. And the last thing I'll say too, [00:22:00] just, you just reminded me of something else. Not all ETFs that say they are one thing are only that thing. Right. So you might, you might have like a cybersecurity ETF and like the eighth biggest holding is like. a company that's not a cybersecurity company or has like a very tiny part of their business that is.

So 

Jason Hall: it's a big, it's a big conglomerate software company and they do a little 

Jeff Santoro: bit of cybersecurity. 

Jason Hall: Right.

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Let's move on. This one's from Craig. He says, hi, Jason and Jeff. I was hoping that you might share your method of ranking your different investment ideas. I have a somewhat really portfolio around 115 stocks and lack an objective approach to ranking my individual investments.

When it comes to When it comes to add additional capital, I tend to focus on valuation, but I feel like sometimes I might be overlooking the opportunity to do more watering of the flowers. Would love to hear your approach to deciding which positions to increase your stake in.

Jason Hall: Hi Craig. We're the same. No, not exactly. Is this a 

Jeff Santoro: question actually from you, Jason? 

Jason Hall: It is. No, Craig, Craig sent us this question a while ago. Yeah. And we. [00:24:00] We DM a little bit, and I think maybe on Twitter, we talked a little bit about it because I know it was going to be a while before we got around to this one.

And this is a challenging one because I think when it comes to objectively ranking stocks, there's really almost no such thing. Because it's always going to be subjective because it needs to be subjective because you need to factor in a lot of things about what you already own, uh, what your goals are.

And when you go to objective, you end up overweighting your overweighting yourself really quickly. I think because you do get caught up in maybe too much in valuation. If you're only buying the stocks that the valuations are the best right then and they're laggards and they're underperforming, you just keep buying more of those to his point about not watering the weeds.

So what I do, Jeff, and I think you do something that's kind of similar. Is I think a lot about conviction of ideas of businesses and opportunity. I don't want to, and we always do this, right? We fall into this kind of a little bit of a, a feedback loop [00:25:00] about recent stocks. We've talked about for one reason or another, I moved away from banks and now I'm just doing it with Kinsell capital.

But this is one that I have very, very high conviction in what their business is doing And that helps me not get too caught up in things like valuation when I'm thinking about my long term financial goals, right? And where a Kinsale Capital fits into it. So if I'm thinking about the, the barbell approach that I take where one end is a little bit more like the steady dividend growers and the one end is focused really on finding those disruptive growth businesses that can just become multiples larger, focusing so much on, on the great businesses.

And less that have those really big addressable markets and less getting caught up in like getting the perfect valuation helps me avoid falling into that trap of just buying realty income every single month when it, you know, comes up or EPR properties or whatever. And, and I end up with more diversification.

I'm still appropriately thinking about risk and volatility. And when I'm managing myself, [00:26:00] right, because that's, I think it's less about managing the actual risk and more about managing how I might get in the way and start messing with the portfolio. So I don't think so much about it as objectively doing it is finding the balance between the objective measures of things like valuation and growth rates.

And but also trying to be more subjective about how it's going to fit within my portfolio and the framework around controlling myself as an investor and reaching my long term goals. What about you? 

Jeff Santoro: Yeah, I, I think look, 30,000 foot view of what I do is similar. I don't, I'm not sitting here. You're far more analytical than I am.

In a way I'm direction. Here's the way I would put it. I'm directionally analytical. 

Jason Hall: Yeah. 

Jeff Santoro: Right. So here's what I do. And this is maybe too much for some people, but on my spreadsheet where I have all my investments, like all my stocks that I track. I have columns where I list very basic, valuation metrics for every stock and I have like a weighted average of where I bought it.

And [00:27:00] then I have today's average. So I'll give you a quick example. Let's say I bought a stock, stock X, whatever, and I paid, I bought it twice, both equal weighting. And I paid five times earnings the first time and I paid 10 times earnings the second time. So we would average out to 0. 75 as a price to earnings ratio, right?

And then the column next to it, I have today's price to earnings ratio. And I update that whenever I'm about to buy. And I do the same thing. I do it for multiple valuation metrics though. So. If you have, if someone wanted to do this, you could start with the really basic things. You could do price to sales, price to earnings, price to free cash flow.

Just as a directional, you know, that doesn't work for all businesses, right? You might want to do price to book if it's a bank or something like that. Directionally, that's what I do. And then I can see, it doesn't tell me if something's cheap or expensive. Helps you 

Jason Hall: visualize the trends, right? 

Jeff Santoro: It tells me where it is now in relation to, All my previous buys, and that at least informs me if I see it sort of rising up my portfolio in [00:28:00] terms of like returns, like surface, you know, heading north because I sorting by sorting by like, you know, total gain.

And it's also one that is cheaper now than the average of all the times I bought it. That might be, that might tell me, Even though this has gone up in price, right? Cause it's the game, you know, the total gains have increased. It may actually be a better valuation point than all the other times I bought it.

So that's just to give me like to narrow down out of my portfolio of 45, 50 stocks, like where I might want to start thinking. Then I do what you talked about, which is like, what's my level of conviction in this company right now? And. That's sort of what I do. It helps a little bit. Now the downside of this is I end up ignoring a lot of the stuff that's way at the bottom of my portfolio.

The stuff that has not done well in terms of like an investment for me, which could be fine. That will help me avoid the risk. Those tiny socks that will just sort of go away to oblivion because they were bad [00:29:00] investments. 

Jason Hall: Yeah, but bottom feeding, right? It's, it's, it's, yeah, except 

Jeff Santoro: weeds, right? Yeah, that's the better way to say it.

It prevents me from watering my weeds. But what it also prevents me sometimes from doing and I have to sort of force myself to look down there every once in a while is what if I'm just really missing a great opportunity for a company that has just had a rough go of it. So the example I use is in 2022 by this method.

Okay. Amazon was pretty low on my, on my spreadsheet because it had done so poorly as a stock and, and it was always available for a better valuation than what I paid for it. Now, I, I had pretty high conviction that it was going to turn things around. And I keep bragging about it because it's like the one thing I've done right in four years.

And it's only because I kind of forced myself to look down in that part of my portfolio that I forced myself to think about if I was just focusing on the stuff up top that had gone up in price, I might've missed that. So, but I'm aware of that. So I try to hedge against it. I don't know. That's what I do.

It, it, it's not, it's, [00:30:00] I think, like I said, I think it's directionally helpful. It's, it's not precise. It is not a formula that I follow all the time. It just, It helps me narrow some things down and gives me some sort of process. 

Jason Hall: One thing I try to do too is, and this has come more over time, is really thinking more about cost basis and not getting too caught up just in the portfolio, the size of my, it is in my portfolio.

And a big part of that is because of age and where I am in terms of like building that portfolio over time is, I'm in my late forties now, but that's still, I'm going to be, should be still contributing money for probably a couple of decades. Um, I anticipate I'll still be earning income and buying, you know, putting that money to work.

So, I think it can be really easy if you see a stock that's five or 6 percent of your portfolio and say, well, that's already pretty big. I really don't want to buy anymore. And then you look at it and you're like, well, I've only contributed, you know, one and a half percent of my cost basis to [00:31:00] it. And I feel really confident this business is going to get a lot bigger and I'm also going to contribute a ton more money over the next 20 years.

So that 5 percent or 6 percent today. Maybe. Is it really a good reflection of like the end goal with that stock? So that's another thing I've really thought a lot more about to, to avoid kind of falling like almost into like a fallacy trap of position sizing versus like real position sizing in the real world in real time. 

Jeff Santoro: Alright, so let's, uh, let's jump into the next question here. This one is from Jeff. It's not from me. But it's ironic that it's from someone named Jeff and it's about outset medical. So, this is a good one though. So 

Jason Hall: this is not from, from Jay Santoro.

This is from Jeff S. Yes, 

Jeff Santoro: exactly. Right. This is from another Jeff. I swear. I did not write this question. All right. Not me. Jeff says on April 8th outset medical stock jumped 25 percent ish to around 2. 58 when BTIG opened coverage with a buy rating and a 6 price target. [00:32:00] How do analysts have such an influential effect on the stock's price?

It would be lovely to see another 25 percent increase on the price of outset. Would you gentlemen be willing to announce coverage with an argument for an optimistic price target? Yes, absolutely. I am initiating coverage today. In the, uh, Investing Unscripted fund or, uh, investment shop that, uh, outset will reach 200 a share.

So, uh, let's see how that works. 

Jason Hall: Yeah, we're, we're initiating coverage here. That's awesome. So I love it. I, 

Jeff Santoro: I think I know the answer to this, but so let me go first and then you can tell me if I'm wrong. I think, I mean, I could tell you wrong and then you could go. Good. 

Jason Hall: You're wrong. 

Jeff Santoro: Thank you. My understanding is that it's, it's actually pretty logical.

People think that analysts know the business best. And if an analyst thinks the stock's going to go up, the stock will go up and 

Jason Hall: self fulfilling prophecy. Yeah. 

Jeff Santoro: And honestly, I mean, if, if, if it's going [00:33:00] from less than 2 and 58 cents and the price target is 6, that is more than a double. So, uh, that's a pretty big.

You know, analyst estimate there. So I could see why the stock jumped and it is a small company. It is volatile. It will jump around on almost any news and 20 or 25 percent drops or pops are common with outset. Even when there's not news like it just moves around a lot. So I think that's part of it too.

But the important thing to remember about these analyst estimates is they are relatively short term. You know, sometimes they're just a couple quarters or a year and sometimes they're a little longer than that, but I ignore them 

Jason Hall: all the time. 

Jeff Santoro: I ignore them entirely. Because I, I, I'd much rather know what the company thinks it's going to do than what an analyst thinks it's going to do.

Um, yeah. But I don't know, what am I missing? What else? What other reasons do you think that 

Jason Hall: they're market moving because they get a lot of attention from analysts. There's no doubt about that. So, but the other thing I think if let's really contextualize this, this, [00:34:00] this created approximately 30 million of value for, for outset medical investors.

They moved it from a hundred million dollar stock to 133 million stock. So I think that's important. But there, there's They move the market like 

Jeff Santoro: this. Isn't like Google going up by 25%, 

Jason Hall: right? Right. It's not, it's not billions of dollars. Um, but so, so all the things you were talking about, about small, small market cap, small float, all that stuff is true, but we will see them move very large companies by very large amounts, right?

So it happens. But for exactly the reasons you said, because it's, it's the, the appearance of, of expertise and knowledge which is true. These analysts know these businesses incredibly well, right? They follow them. That's their full time job. But their job is not making price targets, right?

That's, that's not what they get paid to do. That's part of how they create awareness for, for their, for their fund. And they're more about creating access for the funds. [00:35:00] Clients and helping them find great ideas. So that's important to remember. The more important thing to think about when it comes to these price targets.

You're, you're going to get about the same accuracy if you flipped a stock, a coin. If you flip a coin a thousand times, it's going to be about as consistently accurate as those price targets are, which is to say 50 percent of the time. Yeah. If 

Jeff Santoro: these, if these. Analysts and the companies they work for could predict stock prices with accuracy.

That's what they'd be doing quietly, privately by themselves, and they wouldn't be announcing it. 

Jason Hall: So, so I think the price targets part and the upgrades and the downgrades is largely useless for, for retail investors in terms of, because it's already out, right? The stock's already moved, but they're, they're reasoning like whatever their note is.

Can be useful and informative. Like, why did they raise the price? What are they saying is the catalyst that's going to move the price higher or lower? What are the things that are going to affect the [00:36:00] business? Because you just learn a little more about the business. I think that's useful, but the price targets are just, just noise.

Jeff Santoro: I agree. And when the, when the price target is, Heading in the other direction. When, when the company gets downgraded, it's important to remember that again, if you're a long term holder, I think there's probably stocks in both of our portfolios that you and I would say right now, there's a chance. a year from now, it could be lower because we just expect that company to face some short term challenges because maybe it's cyclical or maybe whatever, whatever the reason is, I'm not going to sell it necessarily because I think in five or 10 or 15 or 20 years, it's going to be fine.

So I think that's. Important to remember. I mean, I would take 

Jason Hall: that a step further, Jeff, and I would just say I don't expect it for any particular stock, but I accept that it's going to happen because that's what stocks do. I wrote it in this, this weekend's , Random Words. There's not a stock that I buy ever that I'm not prepared for the possibility that at some point it's going to fall by 30%.

Jeff Santoro: [00:37:00] Yeah. Let me, let me rephrase what I said, cause I, you're right, I just thought what I meant. I'm thinking more about like, let's just, oh, whatever this, this BTIG from the, from the email, like let's say that company, an analyst from, from that firm lowered a price target for a company from like 10 to nine, right?

Like maybe it'll still go up to nine. But nine is lower than 10. And, you know, that's what I meant about not necessarily it's going to the stock's going to go down. I know that's what I said, but I was just thinking like the downgrade of the expected number could just be a short term headwind. And every company has short term headwinds.

Every stock goes up, every stock goes down. Agree completely. All right. Got a question coming up next from Mike McCann a, a well known character around The Motley Fool for those who are listening, who are subscribers. 

Jason Hall: Thanks for the question, Mike. It's been a while since you got to send a question to us.

Yeah, 

Jeff Santoro: yeah, yeah. Good to hear from him. So he says, okay, he's, he's giving us a scenario here. You are listening to an obscure podcast or reading a niche newsletter when there is an investing nugget about a [00:38:00] company that, you know, no one else will know, you are excited that you found an edge and you're ready to go all in on the company, what framework or process do you have to deal with Do you have to deal with this find?

Jason Hall: I go to my savings account and I move all of my cash into my account, my brokerage, and I open a market order as large as I possibly can. And then I pray. No, I do the opposite of all of those things. I love this because there are so many like psychological investing, challenging things here because you find this immediately greed, greed grabs the wheel, right?

So again, thinking about fear and greed is those two base emotions that are going to drive every financial decision you ever make, right? Those are going to be the emotions that are pushing you one direction or another. Every time you're facing a financial decision in this case, man, greed has got you.

Right. Has absolutely got you. And FOMO has got you too, because like, you see this thing that eventually the [00:39:00] market's going to figure it out. And like, you, you gotta be in there first. You gotta be the first in line. So for me, it gets back to like some of the, just the core things about, about my process.

Is it like, I know those things about me. Jeff, you're like the opposite because you're like the guy, you know, you were telling a story. We've told it before about like your 403b or 401k for teachers. Like if having one of your colleagues say you need to set this up and you're like, okay, and then you just wouldn't do it because you're a stubborn ass.

Like you, you don't, maybe you don't deal with that the same way that I do, but like, so I have to build a process in where number one, If I fall in love with an idea, like I can't buy right then, like it's one of my like hard and fast rules about like, I have to take a day at least sometimes two days before I can act on that information and when it comes to something like this where it's a fresh idea that I've never been exposed to, I know I fall in love with stories.

So now I have to go, does the math even [00:40:00] remotely line up with the story and then. I'm going to start thinking about taking small steps and open a starter position and not go big because even if it is a really big thing, but again, you're talking about something obscure and small. You don't need a lot if it works out really, really well.

And if it was a terrible idea, you don't want to lose a lot. 

Jeff Santoro: Yeah, that's, that's exactly how I think about it too. The most obscure tiny ideas will give you plenty of time to get in if they really are going to be the next. Big, big thing. So I, that's something that I've said to myself to sort of slow myself down.

So there was a period of time, not that far into when I got into investing that I was very big into running screeners. And trying to like be the guy who finds that stock. Like I was fascinated by screeners. I thought they were really cool. And I, cause I was changing all the things and, and defining 

Jason Hall: screeners for anybody that doesn't know your brokerage account has a [00:41:00] tool to find stocks or ETFs or whatever.

It's called a screener where you could screen by different things, market cap, industry, whatever, right? All of those things, so many different things, valuations, stuff like whatever you want to possibly filter a stock by, you can screen by those different things. 

Jeff Santoro: And sometimes I would find one that like, and I, my, my criteria was probably very basic at the time, but I would find, I'd narrow it down to like six, I would say naive, six or eight, yeah, naive, whatever, six or eight companies and like things I've never heard of.

And I'd start, and then I'd get all, I wouldn't really, and then I would, but for me, I got paralyzed by like, It's the opposite feeling almost like I, I was thinking of it as like, there's no way this company is huge and like the next Amazon, just to use that cliche or someone else would have found it already.

And then I would just like self doubt myself. It's fear. It's again, 

Jason Hall: it's, it's, it's that, it's the other emotion. 

Jeff Santoro: But I think if I were to go back and try that method again now, like with a few more years of experience, there's a couple of things I would do differently. And I think this is [00:42:00] my answer to Mike's question.

So number one, I think. So I'm a member, even though I work for the Motley Fool as a contractor, I was a member before and I, you know, so I have that as a resource. And I view that, for me, even back when I was a member, not working as a contractor, as like a vetting service for me. Where I It's the 

Jason Hall: starting point, right?

Yeah. It's not the end point of the research. 

Jeff Santoro: Because I know what I don't know. Like, I don't know how to identify in the, SEC filings, every single type of red flag that might tell me that there's something funny going on. I know some of them, but not all of them. So I feel like it 

Jason Hall: reminds you of that. All the time, by the way, 

Jeff Santoro: I know, but if you subscribe to any sort of like newsletter service or stock picking service, you know, I, I feel like that's a nice level one vetting of ideas, right?

So like, if an idea comes to me through that, I feel a lot better about not missing something huge, because that's what you're paying the service for. But I think what I would do now, if I found something on my own, is just like, put it out on social media and be [00:43:00] like, anyone ever heard of this? Like, what am I missing?

Like, anyone see any red flags? I just as a starting point, and then you may or may not get any response. But then I think Jason, you said it. Is the perfect thing by a tiny bit and learn about it like, 

Jason Hall: well, at some point you're going to have to make the idea your own. If you're going to really see it to fruition.

We've talked about this a lot. You know, as much as losing money is a mistake, right? Making a bad investment is a mistake. It's missing out on all of the upside. That's usually the bigger mistakes, right? And that happens when you don't have conviction because the idea was never fully your own. You found it in a newsletter.

You read about it on Twitter. You heard about it from a friend or whatever. You bought it. It kept going up and that was great, but you never actually bothered to do anything to learn what you actually owned. So you never were able to make objective decisions. And guess what? Fear and greed. We're right back to that.

Jeff Santoro: Yep. And then it goes down and you second guess yourself or you sell and it turns out it only went down for a silly reason, not a substantial [00:44:00] reason. You know, it's, it's all that. 

Jason Hall: Or it became 5 percent of your portfolio and you couldn't imagine it getting any bigger. And they only had 3 percent of the market share and 10 years later they had 10 percent or whatever.

Yeah, you did, you did make the idea your own. I think that's so, so important to inoculating against fear and greed and also having that conviction to act more objectively. 

Jeff Santoro: Hey everybody, we'll be right back, but first, a word from our sponsors. Earlier in the show, you heard us talk about investing platform Public.com. That's where you can trade options with no commissions or per contract fees, and you get a rebate of up to 18 cents per contract traded. NerdWallet recently gave public five out of five stars for options trading.

If you want to see why, go to Public.com and start getting a rebate of up to 18 cents per contract traded. Paid for by public investing, options not suitable for all investors and carry significant risk. Full disclosures and podcast description, US members only.

Yeah, I agree. All right. Got another one here from Austin. Austin says, thanks for putting on a great podcast. [00:45:00] Well, thank you, Austin, for listening.

April mailbag question with the stock down almost 95 percent is now the time to consider investing in Redfin or should investors stick to accumulating safer real estate assets like Vanguard's real estate fund VNQ. So that's another ETF everyone. Since we were talking about that earlier and realty income ticker.

Oh, what are the major risks associated with Redfin? So there's a lot of different questions here. It's a lot to unpack. Yeah. Yeah. So I want to hit on a couple of things. First, I want to push back on the idea that accumulating safer asset assets, as he put it, like, The VNQ ETF and realty income, you know, the VNQ is an ETF.

It is made up of stocks. So you could argue that that's less risky, a little more diversified because you're buying a basket of stocks, not just one individual company. I don't know that. I guess realty income is probably a little bit safer than Redfin, but it's still just another stock. So like, I don't know that I would equate, I don't know, safer.

Maybe that's not the right word for [00:46:00] it. So I, I think if, if you're worried about Redfin specifically, we can talk about Redfin. What it does and, and that company. But to me, the ETF is the way to go if you're interested in the real estate space, but don't want to put all your eggs on any one or two companies baskets.

And I don't know anything about that ticker specifically, but I had imagined it's a pretty diversified list of companies within it, but maybe you can dive in a little bit to, to Redfin itself, what it does, what the risks are, and then maybe how it compares to reality. 

Jason Hall: Yeah. I'll say this. My favorite thing about this question from Austin is you're really looking at making very different investments in very, very different things.

Right. So if you're talking about Redfin, you're buying a real estate brokerage, right? So these are people, it's a website, everybody knows the website, right? But the way they make money is listing houses, selling houses. So they get a commission and they have some other ancillary stuff and advertising revenue and that kind of thing.

But really their core business is just that, being a real estate [00:47:00] broker, right? Listing houses and helping people buy and sell houses.

 So if you're looking at VNQ and realty income, you're looking almost entirely at businesses that own real estate and make money leasing them out, right? Because if you look at VNQ, REITs make up probably half of it is my guess.

Jeff Santoro: I'm looking at it right now. Prologis, which is a REIT. American Tower, which is a REIT. Equinix, which is a REIT, Simon Property Group, which is a REIT. That's the, the top handful of, of stocks. 

Jason Hall: Well, I'm looking, they've got a, on their, on their website, they've got a really good breakup by sector right here.

So data center REITs is 9% industrial REITs is 12. 6%, right? So, but then you also getting like retail and office REITs and other stuff that are part of it too. So you're getting the diversification that can reduce your exposure to things that, uh, that can increase your exposure to like the good stuff.

But you get offices too, right? So you get some things that are going to kind of hang [00:48:00] on and maybe lacks. It's a good way to get exposure to real estate. And I'll make the case here that real estate from the perspective of owning the asset and making money by owning the real estate, it's an attractive way to get diversified exposure.

But why, why would you buy V and Q versus realty income, which is like the best in class in the area they focus in, right? So they focus in like net lease. So they get. Their, their tenant pays them, they own the property, their tenant pays them rent, and then the tenant pays like literally everything else on the property too.

They insure it, they maintain it, property taxes, like all that stuff, right? So it's, you're, you're investing in very different kinds of businesses when you're looking at doing that. So the way, what, what I would say, Is instead of thinking about this Austin and anybody else is thinking about it is less about where is the better place to invest in real estate.

You're not investing in the same things in [00:49:00] Redfin. You're saying I'm making a bet that they're going to be able to build a bigger platform that leverages lower costs and everything that's happening in the world of the realtor business. now that's kind of getting blown up with these lawsuits. Redfin is going to win in the race to the bottom on fees and scale is going to be how they're going to be the big winner there.

Right? And that's a very different calculus than. Realty income is going to, you know, there are 29 years of straight dividend growth and it's a 6 percent yield today. And they're going to keep being a really good buyer and operator of real estate with good tenant relationships versus VNQ is just a good diversified way to get exposure, mostly to REITs, but also like some real estate development, that kind of thing.

So 

Jeff Santoro: yeah, it's three very different. Very different. Even though it's all quote unquote real estate, it's all very different. 

Jason Hall: And for, so Redfin, I want to answer the question though that he asked, what are the major risks associated with Redfin? Because I [00:50:00] will say this, I'm going to push back Jeff a little bit and I'm going to say that Redfin in terms of defining risk as the probability of a permanent loss of capital, Redfin is far riskier individual business to invest in than realty income.

Your chances of buying and owning for five years plus. And losing money with realty income, I think is very, very, very low, especially compared in comparison to Redfin compared to Redfin, right? With Redfin, because everything that's happening with residential real estate, there's no inventory. Your business is selling used houses, right?

Guess what? There's not a lot of them out there that are being listed. Corporate investors have bought up a massive amount of the supply. Baby boomers are retiring in place. It's harder for them to sell and find something that they want to buy because of everything that's happened with pricing. So it's a tougher business model right now.

It's a risk reward investment, right? So your probability of losses are much, much higher than with realty income. But. [00:51:00] If they do nail this, and I think that they're going to figure it out, you're talking about many multiples of returns, potentially higher. So with these dollars that you're investing, it comes down to the decision of how much risk, how much of a chance of losing this money am I willing to take just to capture that upside that I may not need?

And the answer may be, well, it's position sizing, right? That's how you figure out. Maybe I take a little bit of that risk of red fin. Or, I don't need to take it because that's not the sort of risks that I'm built to take. Or I'm risking capital that I shouldn't be risking, and realty income makes more sense, right?

Or the ETF. 

Jeff Santoro: Yeah, the way I think about it is, you have, if it were me making the decision between Redfin and realty, I'd have to say to myself, there's a higher chance of losing money with Redfin versus realty. But there's also a higher chance that I will see a 10 bagger out of Redfin than I will out of.

Realty like that much, 

Jason Hall: a much, a much higher chance, but again, on a [00:52:00] probability basis, it's still not a very high probability, but I think it's a false comparison to compare these three. I wouldn't really want to stress that. 

Jeff Santoro: Yeah. 

Jason Hall: I agree. If you're thinking about realty income or Redfin, you're, you're not really approaching this and thinking about upside versus downside versus risk appropriately.

If you're thinking about Redfin, you need to also be thinking about, Enphase, right? That might be a better comparison is like companies that are down in their luck. The cycle is negative for their business. Financials are getting squeezed. But if the, when the market return turns for their business, the potential upside is really big.

You know, Redfin versus Enphase is a better comparison in terms of thinking about like material capital risk. 

Jeff Santoro: Yeah. Agreed. And just to close it out, because it ties back to our first question about ETFs, the VNQ Vanguard real estate ETF has an expense ratio of 0.12%. So just as an example, that's four times higher fee.

Then the VOO ETF that tracks the S&P 500. So just so you can see a quick [00:53:00] comparison of how they can vary depending on what's in them and what kind of ETFs they are. 

Jason Hall: So that's point one two percent, right? So not one point two percent, but point one two percent.

So basically one twelfth of one percent. 

Jeff Santoro: But VOO was point, but VOO was point oh three. 

Jason Hall: Right. Right. So it was, it was three cents for every hundred dollars versus 12 cents for every hundred dollars. 

Jeff Santoro: All right. That brings us to the last question in our mailbag and it comes from John. John says, Hey Jeff and Jason.

And then in parentheses, the people's rep always goes first, right? Which I agree with. I agree. The correct way to address us is me first. You two have both talked about adding small starter positions to your portfolio. Jason seems to have at least a dozen or so like this at any given time. I tend to do this a lot and I'm trying to craft a strategy to keep it a little more organized.

Can you discuss your strategy and or process around this? Do you limit these or the amount of capital used for them? Do you give yourself a deadline to increase or get out? Does it [00:54:00] change how you research it? Does it, does price movement impact this decision? Why don't you go first? 

Jason Hall: I thought you were going first.

Jeff Santoro: Well, I actually have a little bit of a process and you don't. So I think it'd be more fun if you went first. No, 

Jason Hall: I do. I do have a process. That's a total lie. No, I do. And it's, but, but as the way that, and it's evolved because at one point, this is something we've talked about before, about thinking about percentages versus dollar amounts in terms to like building out positions in your portfolio.

When my portfolio was smaller and I was still just trying to get started and I hadn't yet rolled over a 401k or, you know, when, back when I was working for another company and it was less money to buy individual stocks. So now, you know, everything's in, you know, in, in individual stocks and I'm contributing directly to my 401k that I manage and buy stocks in.

It was small dollar amount positions, you know, at one point it was a couple hundred dollars. Like that was a starting, uh, starting position. But as my portfolio has gotten larger and like the [00:55:00] contributions that I'm making is bigger dollars that I'm, because it's the retirement money now too. I've shifted more to like a percentage basis thinking about it.

And generally, I like to start with about a half a percent, sometimes maybe a third of a percent. And this is a, my cost basis. That's where I try to start with that amount because it number one, it's, you know, we've talked about it a couple of times on the show. It's, it needs to be small enough that it's not debilitating, particularly as John was talking about.

I use this strategy a lot. Right. So if you may, if you have lots of starter positions, you can create some pretty big material risk to your portfolio if they're dumb bets. Right. So they do need to be relatively small on an individual basis, but they do need to be big enough so that they're both useful and also can be just a little bit painful.

Right. If they don't go well, [00:56:00] you know, I'm lucky enough now that, uh, you know, a half percent of my portfolio is, it's, You know, it would be meaningless 20 years from now if that, if one goes bankrupt or falls 80 percent or whatever, and I sell, but I still see that dollar amount go down. It's like, yeah, that sucks.

That hurts. Right. And you learn from that pain. So it's both meaningful enough that I pay attention to it, but also small enough that it's not going to be debilitating. Right. And, and then from there, this is where it gets squishy, Jeff. Because generally what's going to happen is the stock's going to tell me enough to get me to pay attention when I need to.

If the stock does really, really well, it's like, okay, I need to find out why. So start pulling the filings, reading the research that's out there, talking to colleagues that might follow the industry or the business to find out what the story is. And if it's a business story, they're doing really, really well.

The, it's a winning business to kind of crib David Gardner, you know, adding to your winners, averaging up. I may make the decision, okay, it's time to start adding [00:57:00] more. If the stock's not going up or if it's fallen. Especially if it's fallen, it's telling you something else. And then you go back and start, looks like, okay, usually it's because the business sucks, or I opened a starter position and the multiple was way too high.

Right. And it's come down. And then again, you start figuring out, well, is the business doing bad? Or is the business doing well? And is there any signal here about that? It's time to actually add more capital. Jeff, most of the time, the answer for me in the short term, a few quarters, Even a year. A lot of times it's nothing.

I'm not going to do anything. Unless, unless there's obvious reasons that it's time to start building it out into like a real position, into a big boy, grownup position and start adding to it. A lot of times I don't really do anything. So that, that means that I will have laggards in my portfolio that I've had for five or 10 years that are meaningless in terms of what they've generated in value, but I haven't chased them.

Right. I haven't put more money to work and it failed. And every once in a while you get A Mercado Libre, where it didn't do [00:58:00] much for a long time. And then it went crazy. And I, and then I added more to it as it continued to get more established. And now it's become a massive part of my portfolio and a big winner.

And you get two or three of those over an investing career and you have 15 or 20 that never do well. And those two or three that do really well are orders of magnitude bigger. Then your losses on the other. So they more than make up for that and they create meaningful wealth and it pays off. So that's, that's more of my strategy.

Like I said, it gets kind of organic there in the middle, but you, but it lets me be more patient, right? I'm not so married to a process tells me that I have to do stuff that's arbitrary just because it's a process when usually the best thing to do is nothing. 

Jeff Santoro: Yeah, I agree with all that. I think for me, so I, I said a couple episodes ago, I'm actually going to probably after spending so much time trying to get my stock portfolio is smaller. I'm actually adding again because I want more starter positions. And I don't think the two things [00:59:00] for me are contrary because what I was cutting out over the past year or so were things that I had no real conviction in. They were things I bought on borrowed conviction or just because I was brand new and the things I'm adding, even though maybe my total number of stocks is now higher are things I have conviction in because I've learned that I've made my own process.

So for me, what you said about Thinking of it less in terms of dollar amounts and more in terms of percentages I think makes a lot of sense to prevent a starter position from becoming a problem in terms of if it goes to zero. 

But for me, it doesn't really matter. Like for my process, I could put $1 into the stock because what that means is it'll be in my portfolio, which means it'll be on my nerdy spreadsheets, which means every quarter I will make myself read the press release, the 10K or the 10Q, the earnings transcript.

Every quarter, like the companies I've owned since I started, like the few that I still have in my portfolio that I bought in [01:00:00] 2020, I've now read 16 quarters worth of earnings reports, 10 Ks, 10 Qs, all that kind of stuff. So I've learned a ton about those companies. I know them pretty well. And so if you ask me, do I want to add to Apple, I'll just pick a company I know I've owned since 2020.

I can tell you yes or no, but give you reasons. And it's not going to be just always 

Jason Hall: be no, because most of your wealth is in ETFs, 

Jeff Santoro: right? Separate from that. I'm just using an example of a stock. I know I go, I'm always going to say 

Jason Hall: that when you mentioned Apple, Jeff, 

Jeff Santoro: I know it's like part of the policy of the podcast.

But here's what I would, here's. So, for me, to answer John's question, it's, it's really just about the dollar amount and even the percentage doesn't matter, it, I just need to get it in my process. So that's where the value is for me. I'm also in maybe a unique position compared to some people where my entire stock portfolio is still only, I don't know, 12 percent of, of my and my wife's combined invested wealth.

So like my entire stock [01:01:00] portfolio could go to zero and that would suck, but I wouldn't go, I wouldn't like not be able to retire. So. I think in percentages a lot. But what I'm trying to do is by. in thirds. So like I'm trying to get some of my stocks up to a third of a percent of my cost basis of my entire portfolio just because stocks are such a small.

Let me ask you 

Jason Hall: this question. Um, I know the answer, but you're talking when you say your portfolio, you're not talking about that, that just stocks, that 12 percent of your, you're talking about everything. You're, you're invested wealth. 

Jeff Santoro: Yes. Everything. Yep. Yeah. That's how I think. That's really important.

That's really 

Jason Hall: important. 

Jeff Santoro: And I, I, that's something I used to wonder about when I was younger. And I, I asked a lot of people and I, that's the way I have to think about it. So to be honest, Jason, like I only have one, I don't have any stocks in my portfolio that on a cost basis of my entire portfolio or my entire invested wealth, I have no stocks that are 1 percent even.

So Cool. I probably could take much bigger bets on a starter position than [01:02:00] I do if I look at it from the standpoint of my entire portfolio, right? Cause like, I, I, I don't, I just can't get my head around that yet. But I think for like most people. Thinking of it as a percentage of your total invested wealth and deciding what the right amount is for that not to hurt you and feel too too bad if it goes to zero.

And then just keep learning and adding as you build conviction is the way I would think about it. 

Jason Hall: I like that.

Jeff Santoro: All right, Jason, that's the last of our mailbag. We got to the end. I know I started the show. 

Jason Hall: Yeah. 

Jeff Santoro: And I think I did okay. But I didn't like it. I want to go back to, uh, not being the person who starts the show.

And I would like you. 

Jason Hall: You're not even going to, you're not even going to get a full episode in the big chair.. 

Jeff Santoro: No. No, I, listen, I dipped my toe in the water. And decided it was too cold and I would like you to wrap the show. 

Jason Hall: Okay. I can do it. I can do that. Jeff, we did it. 

Jeff Santoro: We did it. 

Jason Hall: We did. We gave our answers.

We gave our answers to a lot of great questions. We love giving our [01:03:00] answers to these hard questions about investing and finance. But they are our answers. As we always say, and stress, and that's important to remember because our answers might not be your answers. You can borrow them and try them on, but you have to come up with your own answers.

Okay. You can do it. I believe in you.

All right, Jeff. We'll see you next time. 

Jeff Santoro: See you next time.