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bjbj Welcome to another episode of EricksonTV. Curtis here with Lauren. Last month I was
at a conference with our co advisor Matson Money and I met a speaker, Lee Zeidman, who
was the producer for 60 Minutes. He came up with how to be a more effective presenter
of speeches. He said that when talking about positive things in your speech, people forget
about 75% after 20 minutes. For negative things, people can remember those for up to 13 years.
So I thought that instead of talking about the positive reasons we invest, we could talk
about negative ways to invest and how they differ from what we do. How do we normally
tilt our portfolios that make them different from other portfolios? When it comes to stocks,
we tilt to small value. That means we place a great emphasis on including smaller companies
and distressed companies and the stocks of those companies in our portfolios. This is
opposed to simply investing in the largest U.S. companies or just investing with whatever
the latest fad is, which is what most people do. So I thought we would look at different
asset classes. This, by the way, is for the last 20 years; from 1991 2011. Let s compare
it to a T-bill. What is a T-bill? A treasury bill. This is what you would get if you had
a very, very low risk portfolio. Compared to the asset class that we tilt to, small
value treasury bills do not do so well. It has a -8.67% per year. Not total, but per
year. This is how you want to think about it: if you invested entirely conservatively,
you lost 8.67% per year for 20 years. For the people who actually do invest in the stock
market and maybe invest in active mutual funds, they tend to mirror the S&P 500, the U.S.
large Fortune 500 companies. What happened here? If you simply invested in the large
U.S. companies, you lost 3.82% per year versus what you would have done if you had invested
in small value. That s a pretty big chunk of money to lose. The next one is tech stocks.
Tech stocks are popular because of the names, for example the Apple computers of the world.
This is a diversified portfolio of tech stocks. Now people got excited about tech stocks.
That was the flavor of the month for a long time in the 1990s. You lost 4.39% per year
for the last 20 years if you invested in tech stocks instead of small value. Up to about
3 years ago, people always said that you never lose money in real estate. No one says that
now. Reit is basically a pool of different real estate investments that is diversified,
supposedly. What happened there? It lost 4.4% per year. And for a long time, Reits were
doing similar things to small value. But that ended eventually and now small value pulled
ahead. The one that has the most advertising per capita on the radio right now is gold.
What happened with gold? It lost 8.5% per year for 20 years. So to sum this up and bring
it home: keep these numbers in mind if you are the type of person that remembers negative
events. You are missing out on a potential independent lifestyle by focusing on the wrong
things. We ll see you next time on EricksonTV. Bye now. {s{k\ hBe( hBe( hi/` hi/` hhuZ hhuZ
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country-region Welcome to another episode of EricksonTV Curtis Erickson Normal Curtis
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