Cash is King - the Importance of Having an Emergency Fund in a Market Downturn Like This

If you are planning to have a child, or you just had one, there are some financial preparations that you may find extremely beneficial in the long run:

1. Cash Flow: Create a realistic budget and increase your emergency fund;
2. Estate Planning: Pick your guardians, create a trust, or at least complete the free estate planning templates your state provides;
3. Life Insurance: Now that you have (or are about to have) another person who depends on you, please review your insurance needs.  It's a risk management tool, not an investment!
4. Education Planning: Utilize 529 plans and other useful investment vehicles for your child;
5. Tax Breaks: Talk to your advisor and CPA about child and dependent care credits, FSAs, and other tax benefits.

In this episode, Nathaniel and Tim discussed what the S&P 500 index is, its performance, and does it truly represent the overall stock market.  From January 1 to June 20, 2023, the S&P 500 increased 14.3%.  That's well above the 10-year and 20-year averages through that same time period of 3.6% and 3%, respectively.  "The markets must be doing really well this year then!", you may think.  But why are your 401(k)/retirement accounts not doing as well?  Did you know that the top 9 companies of this index (Apple, Microsoft, Amazon.com, Nvidia, Tesla, Alphabet, Meta Platforms, Berkshire Hathaway, and UnitedHealth Group) accounted for almost 31% of the market capitalization?  And if you exclude these top 9 stocks, the index would be up about 3% in the same time frame, making it a very mediocre year.  Nathaniel talked about what drives the 2023 jump, and the volatility of the short-term market.

In this episode, Tim and Nathaniel discussed estate planning for digital assets.  This is a relatively new concept for older generations.  Most of us are familiar with wills and trusts for cash, real estate, and other investments.  But what about digital assets like Bitcoin, online bank accounts, etc.?  If you are an influencer or work in the media industry, what about your social media accounts, movie/music rights?  Nathaniel and Tim also discussed password management.  We understand that estate planning is always difficult because we don’t want to face our mortality.  But please give it a try, and do the hard work on estate planning, so that your loved ones can focus on mourning your passing and building a meaningful life afterward, instead of stressing out about where everything is.

In this episode, Tim and Nathaniel discussed private investments: what're their qualifications, why they have income/assets restrictions, and how should one view them.  A couple of research filters to go through: define your goals, understand the vehicles, consider the risk, know the management/leadership, and pay the right price.  Nathaniel made a great point: if you have a small business or part-time side business, the best private investment could actually be your own company.  You know the industry well, you understand the product/service, and you are in control of the execution.  When it comes to investments, new and shiny may not be the best option.  Why not put your money into things you know best?!

Threads is Meta’s latest social media app.  It’s a Twitter-like product with short missives you can share with followers.  It lets you post text, photos, links, and videos.  It reached 100 million subscribers in a record time: within 2 days.  In comparison: it took ChatGPT 2 months, TikTok 9 months, Instagram 30 months, cell phones 15 years, and telephones 75 years.  Tim and Nathaniel discussed from an investor’s perspective, what Twitter’s and Thread’s (really Twitter and Meta’s) pros and cons are and what the future may hold for them.

For this episode, Nathaniel and Tim discussed investments within the music industry.  The earning method has changed in the past decade with streaming services.  Nathaniel used Taylor Swift as a perfect example of how top artists can change the power dynamic with corporate giants.  There are many different types of organizations in the music industry (artists, music production, recording companies, publishing companies, agencies, etc.); which ones will Nathaniel choose to invest with?  He gave his answer and reasoning.

In the last episode, we discussed some frequent spending habits we’ve seen, and how we should interpret them.  For this episode, we are going to discuss budgeting.  Before we start, understand that this is going to be an emotional and hard exercise.  Ask yourself, are you really ready to make a lifestyle change if needed?  Be realistic about your expectations and numbers: if not, you are going to fail again and again, and create a negative emotion feedback.  Dan and Tim discussed delayed gratification, outliers, and the importance of understanding the value of your dollar: both quantitatively and qualitatively.  How you feel matters a lot when it comes to budgeting.

This is part one of our spending habits discussion.  Dan and Tim listed what people call “spending red flags”: frequent small expenses like coffee and restaurants; unused subscriptions and memberships; impulse purchases; and trying to keep up with your friends.  We are not disagreeing with these points, but it’s also important to understand this: our spending is not about the objects/services that we pay for, but more about the emotions behind the purchase.  You have to ask yourself: why did I buy it, and does it bring me the maximum happiness?  

The crypto ETFs are not doing too well for the past year.  The fall of some leading players like Tierra/Luna and FTX hurt investors greatly, and the potential criminal fraud investigation is even more alarming.  And now, with the rise of ChatGPT, you can clearly see that crypto is no longer ETFs’ favorite new baby; the money is moving to the AI world.  Investors are piling into shares of graphics chip maker Nvidia, Microsoft, Google, and other stocks that they think stand to benefit from AI technology. What can we learn from the crypto fallout, and should we jump on the new AI investing wagon?  Nathaniel and Tim discuss the four main reasons why investors lost millions over crypto and their thoughts on how to approach the new AI investment trend.

In this episode, Nathaniel discussed 4 hot industries that he won’t invest in, and what his exceptions are:

1.     No commodities like oil, gold, and silver, etc., but yes to commodity royalties.

2.     No Bitcoin, but yes to blockchain technology or other related industries.

3.     No real estate as a landlord, but yes to professional real estate investment groups.

4.     No cash-heavy and cyclical industries like shipping, but yes to utilities and railroads in the US.

Overall, you can find a pattern: Nathaniel doesn’t like asset-heavy and high-risk industries, and he doesn’t like investments that require a lot of upfront capital-intensive work either.  But overall, that’s not what ultimately stops him.  What Nathaniel truly cares about when he invests, is his circle of competence.  Kobe Bryant, LeBron James, Warren Buffett, Dr. Dre, what makes them successful?  They all stick with what they are good at: their own business, their strength, their core values.  When it comes to investing, most of the time “safe and boring” is good!  It’s not worth it to chase the next “sexy new thing”.