Many people blindly follow outdated advice when investing, believing things like:
- “Market timing NEVER works!”
- “Bonds are ALWAYS safe!”
- “Passive beats active investing EVERY time!”
In this enlightening conversation, Chris Casey, Founder and Managing Director of WindRock Wealth Management, exposes the biggest fallacies in investing and reveals how to protect your wealth in today’s volatile market.
Key Takeaways from This Interview:
- The hidden dangers in stocks AND bonds (it’s not what you think!)
- Why market timing isn’t always bad—and how to do it right
- The shocking truth about “safe” investments and risk management
- How fear, greed, and FOMO sabotage your portfolio
- What financial advisors DON’T tell you about investing
- Tax traps, investing biases, and psychological mistakes that cost you money
Investment Concerns? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/3XiBzBv
Chris Casey 0:00
Everyone has inherent biases, and it’s not necessarily that we need to overcome them, but I think it’s important for us to at least understand them. When we’re making investment decisions, it’s better to be in the market than out of the markets. However, it’s exceptional, major inflection points, and we think that you can see those inflection points coming in today’s day and age. We have to kind of redefine what we mean by safe, what we mean by conservative, what we mean by aggressive. These are terms that are all relative to a point in time.
Andrew Brill 0:31
Welcome to wealthion. I’m Andrew brill. Oftentimes we have a misconception of how our portfolio should work. We’ll tackle some statements we hear repeatedly but might not be right on. Please welcome back to wealthion, a founder and Managing Director of windrock Wealth Management who also happens to be one of wealthions partner, RIAs Chris, welcome back to wealthion and glad you’re feeling better from your tooth surgery.
Chris Casey 0:55
Hey, Andrew, thanks for having me on looking forward to the discussion.
Andrew Brill 0:58
So you know I have the first question, and to peel back the curtain a little bit, we talked beforehand about some of the things we’re going to talk about, but the stock market. My dad, may rest in peace, was not a big fan. He said, I always lose money in the stock market. A lot of people think that the stock market investing is like gambling, and I know that in today’s world, with all the information we have, not exactly right, but could be a little form of that, couldn’t it?
Chris Casey 1:27
Well, a lot of people have hang ups or misconceptions or just biases, you know, that on various aspects of investing, that particular comment about, you know, kind of being a gambling type atmosphere, or, you know, obviously that it depends what type of gambling you mean, if it’s if it’s where there’s set odds, you know, house eventually wins. That’s absolutely true. But investing is really not like that. And we all have these kind of misconceptions or perceptions just based on our The very fact that we’re humans, right? It’s how our brain processes reality. And then on top of that, so that that kind of general mentality is what you call just behavioral finance, right? That’s, it’s things that are pretty unique or not unique, but they’re, they’re all humans kind of possess them. There’s a lot of good psychological studies on this, not just on the fact that we have these biases, but also on the fact that it impacts investing, right? Some studies show that it could have a negative drag of, say, 2% on a portfolio. So we all have these by virtue of being humans. We all have them by virtue of our experiences in life, like your dad’s talking about, whether it’s, you know, you got burned on a particular type of stock or what have you. You know, everyone has inherent biases, and it’s not necessarily that we need to overcome them. I think it’s important for us to at least understand them when we’re making investment decisions.
Andrew Brill 2:48
So Chris, a lot of our viewers, and I’m sure a lot of your clients, are a little older in age, maybe before retirement or of retirement age, looking for a steady stream of income, and those people think, or there’s the misconception, I should say that you should be in dividend stocks and bonds. Is that where they should be? Or is that just another fallacy?
Chris Casey 3:17
I’d say a lot of people have that mentality that, you know, I’m on whether it’s a Fixed Income or Social Security or I have a finite amount of retirement funds. They’re very concerned about meeting household expenses. And I get it, it makes sense. But because of that, a lot of people, I’d say, are too fixated on generating income, like you’re talking about cash returns, whether it’s dividends or interest. And the reality is that it’s not a good way to look at your portfolio, because if you strip out taxes, and that’s really then returns, it doesn’t matter where the return comes. It could be from interest, it could be from dividends, it could be from capital gains. You strip out taxes, all things are being equal if you put taxes into the picture when reality capital gains, long term capital gains are better than interest and better than dividends in a lot of ways. So that’s one thing, is that people should realize when they’re older or maybe they have some income needs, it doesn’t have to be from cash generated from the portfolio. It should be from overall returns. And if there’s a downturn where we’re where stocks and bonds go down in value, maybe you take a little bit of the actual amount the portfolio out, you cash out of something and grow it later on. But I think too many people are fixated on the need for particular income, and what that happens is, when you’re fixated on that, it tends to drive what I would call misallocations. You’re not being properly allocated or diversified. It just creates a lot of issues with their portfolio. It’s what about
Andrew Brill 4:44
timing the market now, you know, everybody’s like, Oh, you know, I sold too early, or I bought in too late. You know, there’s a whole thing of timing about, look, I do it myself as I’ll sell a stock before it gets to its size. Like, ah, I could have made a lot more than what I made. Or I could have lost a lot more than I lost if I if I didn’t put my stop losses in place. What is the misconception conception about timing the market? You
Chris Casey 5:08
know, I think most wealth manager managers, we’re not one of them, but they would all tell you, you can’t time the market ever, and you should always be fully invested, right? That’s a that’s what I consider a very unhealthy and potentially dangerous type of position that a lot of wealth managers would have and a lot of investors. The reality is, if you look at studies, it is true. It’s all things being equal. It’s better to be in the market than out of the markets. However, it’s exceptional, major inflection points, and we think that you can see those inflection points coming. So whether it’s looking at year over year, monetary growth, whether it’s looking at the yield curve, whether it’s looking at expanding credit spreads, whether it’s just looking at the general situation of the economy, and perhaps the debt situation with the federal government, there are major inflection points where you can avoid market tops. And if you do that, it’s very beneficial. And to put that some numbers to it, or I should say, some time to it. If you look back at 1929 and some people hate using that as example, because it seems extreme, but it can’t, but not be. It can’t be, not be ignored, right? It’s 1929 happened while inflation adjusted terms, you could argue that the market didn’t recover until 1956 right? So that’s a long that’s almost a lifetime. That’s half a lifetime to be out of, you know, waiting to recover. Since you were in the market 1929 and we see this. That is an extreme example. We see it time and time again, most recently with the tech bubble in 2000 it took about six years for NASDAQ to recover. We see it time and time again with 1960s 1970s Nifty 50, whenever you have these downturns, it easily takes 12 to 24 months for the market to recover, and that could be a very long time. It’s a long time if you need the money, it’s it’s a long time to get back to even, let alone all the opportunity costs of missing out on gains. So I generally agree that people shouldn’t be market timers, but I think they should be very cognizant of market, tops and bottoms and position accordingly. So
Andrew Brill 7:03
is there a difference between timing the top of a stock versus timing the top of the market?
Chris Casey 7:10
Well, geez, I guess I probably haven’t thought about that recently, but I’d say there certainly is, for a couple reasons. One is that a stock can only do as long as you’re diversified to an extent you know it’s only going to do so much damage. So it’s not as important as a market timing event, right? So I’d say that’s the biggest situation. Also, stocks may not be impacted individually nearly as much as the market in general to macro economic factors. So for instance, if the Fed comes out with some data, or government comes out with some data, and we had a recession that started last quarter, does that really impact an AI stock that much? Maybe it helps it because now firms are looking for less labor intensive solutions. So in general, yes, I’d say it applies much more to the market to be cognizant of than any individual stock.
Andrew Brill 8:03
And there, I guess, when we’re talking about economic factors, there’s some stocks that do well with certain factors, and some stocks with the same exact factors won’t do as well or will be negatively affected,
Chris Casey 8:14
right? That’s extremely well documented. It’s actually an argument as to it’s evidence for what I would call the Austrian theory of the business cycle, right? So you always see the so called cyclical stocks perform far worse and then perform far better in recovery. And that’s that’s typical with just the theory behind what causes recessions. But yes, you’ll see that for a whole bunch of different industries, a lot of them have different or impacted differently from macroeconomic factors.
Andrew Brill 8:42
And you can go back and Chris and I actually did an episode on this factors, you know, which were affected by the new administration versus the old administration, and the economics that that the new administration brings versus what the old administration brings. So if you’re looking for those types of factors. You can go back and watch one of our old episodes. By
Chris Casey 9:03
the way, Andrew, we’re gonna have to do a follow up to that later this year, say, October, November. You know, what was right? What was wrong based on our predictions from that time. Happy
Andrew Brill 9:13
to do that. That would be a great idea. So Mario, if you can, Mario’s our producer. If mario, if you could write that down, we need to have Chris on later this year to to you know, go over our truths and negatives about the last episode, but Chris, let’s get into taxes a little bit. Now. I know that if you make money, you have to pay and that’s the bottom line, but is there a way to structure portfolios or or do people believe that you structure portfolios for the best
Chris Casey 9:42
tax incentives. Well, you always want
Chris Casey 9:45
to optimize your tax efficiency, right? And there’s just say, outside of investing, you can do that with retirement plans. If you own a business or you own real estate, there’s some really fantastic options available to you the but the problem or. The misconception exists that a lot of people are too focused on this, right? It’s kind of the tail wagging the dog. They’re they’re too obsessed with minimizing taxes. And I’ll just give you an example of how that can be detrimental. You could have a young professional up and coming that maybe socks away every single dollar they have in their company, 401, K plan. Well, the reality is 401, K plans tend to be fairly limited in your investing options, so it’s very easy to do that, and you think you’re doing well, I socked away, you know, $40,000 last year. But if you’re stuck into a handful of mutual funds that really wouldn’t be investing in, but for the fact that they’re your only options that can have very negative effects. So while taxes, everyone should be cognizant of them and structure things accordingly, whether it’s taking losses at the end of the year to cover some gains, what have you. That’s all prudent, that all makes sense. Way too many people are focused on purely tax management, with
Andrew Brill 10:57
the premise of you have if you make money, you have to pay taxes, something people should worry about if they’re investing in stocks, and I understand the vehicles that that can be used to minimize your your tax burden. But look, if you go into it, if shouldn’t, the mindset be, if you’re going to make money, you’re going to have to pay whether it be long term or short term capital gains, that’s something. Another way to minimize some of those taxes. We
Chris Casey 11:24
see that a lot of people are very adverse to paying anything, right? So that the negative impact is that could delay a sale, like, maybe you’re waiting, maybe you all things, being equal, you should sell stock in November, but you’re going to hold on to it because you want to hit the next calendar year for tax purposes, right? Take, take, to gain none. Well, the stock may be off 25% by then, right? So that’s just an example of putting taxes above just wise investment decisions. That happens all the time. So
Andrew Brill 11:50
stocks and bonds, we’ve heard all about the bond market. We’ve heard all about, you know, the what the Fed is doing to try and, you know, pay, pay the debt, stocks, bonds, always complimentary. Is that a misconception? I
Chris Casey 12:07
believe so. I mean, that is what most people assume. That’s why, you know, a classic 6040, or 7030, type portfolio. The idea is that it’s a counter cyclical balance to stocks going down. And we’ve seen that throughout history. That has happened. However, it’s also not happened 2022 you had both stocks and bonds off, let’s say 20% so in a way, that was worse than the oh eight crisis, because if you had a healthy amount of bonds, in a way, you actually did well in bonds, and so that kind of protected your losses on the equity side, but if both are going down, there’s no escape for a typical, mainstream type investor. So I think that that’s a fallacy people should be aware of, because it doesn’t always hold true. I think the misconception derives from the fact that typically, with a equity downturn, the Fed goes and they instantly cut rates because they’re they’re unannounced objective really is the prop up the stock market. It’s one of their mandates, so to speak. So I think that, yes, they’re not always counter cyclical. People shouldn’t assume that, because it could hurt you severely. So
Andrew Brill 13:12
let’s say I have a financial advisor and I’m into ETFs, mutual funds, private investments, am I getting whacked double on fees?
Chris Casey 13:24
Well, there’s fees in pretty much every fund out there, but compared to 30 years ago, they’re much more reasonable. You’re probably averaging. I haven’t looked at studies in a while, but I’m guessing they’re less than 1% in general, that’s active and passive combined. Some people are concerned because we’ve actually had prospects. Tell us, well, why? If I have to pay you, then I have to double up on fees, right? Then I’m also paying the mutual fund. And that’s a very, I’d say, short term kind of myopic way to look at it. Because reality is, is institutional investor, which you are typically with an RIA, you have much lower fees, and they could be dramatically lower for private investments, at least, or otherwise, we may have different minimums. Maybe you have access to something you didn’t have access to before. Just look at filling out sub docs, right subscription documents to a private investment. I mean, if you’re on your own, that’s, you know, 300 pages potentially you have to navigate. Whereas you have an advisor, they can, they can help you with that, or if not, fill it out and just have you sign. So, yes, I think that’s probably another misconception out there, that there’s too that there’s too many layers of fees. In reality, when you have an advisor at most, it’s probably more de minimis than anything. Talk to
Andrew Brill 14:37
me about those fees. A lot of people like, well, I don’t, pay an advisor because I don’t want to have to pay the fee. But the 1% is, I guess that’s around the average 1% depending on the investment. If you’re looking at private investments, maybe it’s a different structure. A lot of people are not happy about paying. That fee, but if your investment advisor is going to get you a substantial return on your investments compared to what you’re just going to do on your own with ETFs or mutual funds, putting the private investments aside, because as an individual, you don’t have access to a lot of that like you would if you went to Winrock and say, Hey, Chris, help me out with my portfolio. You would entertain some private investments with them. But how do you talk to people about that 1%
Chris Casey 15:29
Well, the 1% I was referring to before was really about underlying mutual funds or ETFs, what have you I was saying, they average less than that. But as far as an advisory fee, it’s highly dependent upon the client situation, as far as the overall amounts and the complexity of situation. The reality is, I don’t think a lot of advisors do add value a lot of times, and the reality is, I do think a lot of people are capable of doing this on their own, but it is a full time job. It is a lot of research, it is a lot of collaboration. So it’s kind of like being, I would compare it to, yeah, you could be a general contractor in your house, right? For having it built, what have you. Yeah, a lot of people can, it’s a nightmare, and put your normal job on hold for two years, right? So that there is a lot of aspect or a lot of reality to that. How
Andrew Brill 16:18
has, I guess the internet and AI helped you, because now it’s, you know, used to be called this, the information super highway. You used to have to get paper documents. You used to wait for the prospectus or wait for the the financials from a company to come in. You’d pour over them, you’d make notes, and you’d have to wait for the next quarter’s financials to come in to actually make a decision, but now the information is almost at your fingertips. How much has that helped you?
Chris Casey 16:46
Well, AI and the internet have helped us tremendously. And put in perspective, we started windrock. I should know it’s off top my head. Let’s call it 2011 right? So we’ve been around, let’s say 1314, years, something like that. Maybe it’s 2012 and you know, I’d say that’s first of all, it’s one of the things that we’ve been big proponents of. We’ve always sought technical cloud, technological efficiencies whenever possible. And then early example would be, I’m guessing we’re probably one of the first firms, first registered investment advisors, RIAs out there to really maximize and utilize as much as we can DocuSign or other type electronic signatures, because I remember when we first started the company, you literally, and this isn’t our requirement, but a lot of custodians require this. You were probably mailing in a thick stack of documents. FedEx sent it to a client, they’d sign it, inevitably, they’d miss a signature, and you have to send it back, and then you finally get it so that alone, just whether it’s reporting having software that’s reporting on a on a timely basis, meaning real time, whether it’s, you know, authorizations and signatures, whether it now as far as AI, which is obviously much, much newer compared to these other technologies. Yes, we’re trying to embrace that as much as possible. I think a couple areas where that could really assist in one would be just research, right? It’s much easier to have AI in trying to, you know, take that funnel and vet down investments, and it’s going to help. In another, other ways that clients probably don’t see or notice right away, but they’re powerful. So for instance, we do podcasts or webinars to our own clients. Well, there’s a lot of graphs, a lot information we’re conveying. I can’t wait till the day is when I tell AI exactly the type of graph I need, right? And then it’s created. Instead of me going to the Federal Reserve of St Louis, downloading data, you know, manipulating the data in Excel and creating a graph, you know, it’s all very complex. Very cumbersome, so any technology that’s AI or otherwise has had profound impact on the industry, and it’s everyone’s benefit
Andrew Brill 18:50
which is going to help my next question, because you can do your own research, look at charts and graphs, and I know that you’ve got some charts and graphs to share with us. But the Fed, they come out with their Beige Book, and they come out with their Okay, these are, these are, you know, everything you need to know. Is that really everything we need to know? Well,
Chris Casey 19:11
it’s true. A lot of firms assume the Fed is almost infallible, right? They just kind of repeat or parrot everything the Fed says. It’s not just the Fed. There’s a whole slew of other government agencies. My I have a lot of problems with the Fed. Obviously, we’ve talked about them. We’ve talked about their predictive or lack of predictive ability here on the past. But the CBO, this Congressional Budget Office, is maybe even worse, because they try to go out 1015, years, and they’re inevitably, horribly wrong. So I’ll give you an example in let’s say 2000 2000 2001 they basically looked at what they thought would be the budget deficit or surplus for federal government over the next 10 years. And they literally came out and said they were predicting a budget surplus for the next year of I know it’s called $150 billion Dollars, and by the end of the decade, so, oh, nine, they were forecasting maybe, like, a $450 billion surplus per per annum, right? And so that would translate into, you know, trillions of dollars knocked off the federal debt. Well, the reality is, we never came close to that. Reality is, despite what they say about Clinton, we actually never even had a budget surplus, if you do the accounting correctly. So, yeah, they’re horrible with with forecasts. I think everyone should take those with a grain of salt. And if your advisor is just parroting whatever they say, I think that’s a big red flag. So
Andrew Brill 20:33
it’s, it’s creative accounting, Chris, we know all about that. It’s, you know, you make the numbers look the way you want the numbers to look. That’s the bottom line.
Chris Casey 20:43
We know Clinton did do that, yeah, when it’s easy to balance your budget, when you take things off budget. And that’s exactly what they did when they had so called surplus. And if anyone doesn’t believe that, all you have to do is look at the change in debt levels, right? Because you can’t have a debt increasing if you’re running a surplus by definition. So the reality is, the last time we had a balanced budget, some people say Johnson, but I think that’s an error too. It’s really Calvin Coolidge, and he did it every year he was in office in the last year we actually, this is really scary. And maybe the only year the US government hasn’t had that, I think, was like 1835 or so under Jackson. So yeah, it’s, it’s when you take things off budget, it makes everything easier.
Andrew Brill 21:24
So Chris, we talk a lot about crypto, and I know you guys have been into crypto for well over 10 years, private investing. And there is a misconception that those things should not be in a portfolio, agree or disagree, or is that a misconception? I
Chris Casey 21:44
think it’s a misconception too. I mean, there are obviously extreme cases. If you have a 98 year old retiree, you’re not going to put them in a private equity fund for the next eight months. Now, that sounds absurd. It’s actually probably not as absurd as it sounds, because reality is the estate would settle and it would pay out eventually to heirs and descendants. You know, it’s not really a problem, but I think too many people are fixated on this whole concept of you have. Now, it is true you want to be safer when you’re older, because you need the money and you need more sooner that all things being equal, it’s true. But I think in general, people should remember that no investment is inherently necessarily safe or unsafe. It’s really time and place. And what’s going on
Andrew Brill 22:25
young investors now, I have somewhat young kids in their 20s, one of them in their late teens. I’ve told them to max out their Roth IRA. But also be aggressive. You can be aggressive with your investments. Because, look, we talked earlier about a 28 year gap between 1928 1956 and then a six year gap. So if things go a little south, they will come back. Should younger investors invest aggressively, or is there a medium that they should, you know, a medium investment, or, you know, not, I guess it depends on returns. But younger investors, should they invest aggressively?
Chris Casey 23:12
I mean, all things being equal, you could make an argument that, yes, compared to a 9098, year old retiree, they should be positioned with greater risk return profile, yeah, higher, higher levels of both. However, the way that translates into practice is that people interpret that is, I gotta be in all tech stocks, or I have to all do all this. And your kids, I’m sure you told me if I’m wrong, but if they lost 5060, 70% of their money, and they started at, you know, age 18, to get back to their age, 2526 that’s going to be an awkward thanksgiving for you. Be like Dad. Remember when it’s always to invest, you know, invest aggressively and put it on tech stocks. That can happen. So all things being equal, there’s there’s some truth to it. However, that’s also minimized at what I call major inflection points at the market. So if the market’s an all time high valuation wise, if we’re due for a recession, if debt levels are out of control and there’s a solvency crisis on crisis on horizon, I don’t know if I’d want my kids investing so called aggressively. They may, maybe not. Maybe that you want to do that turn that on a couple years from now. So
Andrew Brill 24:19
bonds, we talked a little bit about bonds versus stock. Are bonds considered a conservative investment compared to stocks? Well,
Chris Casey 24:30
they are with the kind of the general, mainstream type wealth management industry, absolutely all things being equal and and that’s because, you know, they’re higher up on the capital structure, right? If, theoretically, if theoretically, things went wrong with the company, they’re the ones to be paid back first. But I think in today’s day and age, we have to kind of redefine what we mean by safe, what we mean by conservative, what we mean by aggressive. These are terms that are all relative to a point in time. And I think, you know, it’s to bring that up right now is actually. Uh, timely, because we’re in arguably one of the worst bond markets us has ever had. You could argue it’s one of the top three worst bond markets. And sometimes these, I’m sorry, these bear markets and bonds, and sometimes they last a long time. So before I talk about equities, how long it takes to recover, well, bonds can be even worse. We’ve seen this in if you look at the 1970s when you had inflation running high for over a decade, where you had the price level literally double over a 10 year period, bonds were a horrible place to be, and you lost about two thirds your money, depending on you measure it. It was, it was a complete debacle for anyone invested in bonds. We’re seeing that right now. We’ve been in a bear market in bonds since the summer of 2020 longer duration or longer maturity type, bonds have really been pounded, if you look at like the 30 years since that time, the 30 year bond treasury. So yes, all things being equal, theoretically bonds are safer, but again, it’s time and place. And you know right now, I wouldn’t necessarily consider them safer, especially depending on who’s lending or who you’re lending the money to, because that’s ultimately what a bond is, right? You’re lending the money to somebody. Can they pay you back? So
Andrew Brill 26:11
I want to ask passive investing versus active investing now, is one better than the other, and is that something that is people say, Oh, passive is better, or active is better, another misconception, I
Chris Casey 26:31
think, largely so. I mean, all things being equal, there’s a lot of desirable attributes of passive investing. So for instance, it’s lower fees, obviously, right? There’s a lot of negatives too. If you’re in an index, like when that index goes down, you know, they’re forced to sell. Your index, your your ETF, or mutual fund is forced to sell. There’s a lot of detriments too. I think it’s more important. A lot of my answers are, it depends. And this is a same situation, it’s more important what you’re investing in. If you’re investing in the s, p5, 100, I’d say active management is probably all things being equal, less important than would be if you’re investing in a highly nuanced or or an industry where there’s you have to have a lot of skills or experience or knowledge about so for instance, years ago, I took a class at the Colorado School of Mines. That doesn’t mean I’m able to sit down and assess whether an exploratory mining company, their ore body is going to be viable and how they’re going to bring it to market. Like I know enough to know what I don’t know. But if you’re going to invest in, let’s say gold mining stocks, Junior gold mining stocks, I’d say that scenario, you probably do want an active manager because they know it, instead of just, you know, broadly, investing in a whole bunch of companies, a lot of which will fail. So active management, I think, has its place as does passive investing. So it’s hard to make a general generality about it where passing is out passive is always better. There
Andrew Brill 27:59
are a bunch of biases Chris, that we could talk about, and one of them is the loss aversion. And it’s like, okay, if a stop goes stock goes down, you don’t. A lot of people are like, Oh, I can’t lose. I can’t lose. Whereas, if it goes up, if they make money, okay, they’re happy. Maybe they don’t, maybe it goes up further, not as have as happy. But you know that loss aversion, where, if it goes down, cut your losses, invest in something that’ll bring your money back. Whereas a lot of people are like, no, no, I can’t sell now because I’m in the red, and then it just continues to
Chris Casey 28:31
sink. Yeah, there’s, there’s a couple, I think, biases right there you just mentioned. One is definitely loss aversion. A lot of people are for a given magnitude of gain or loss, they have a much stronger emotional reaction to the loss. That’s absolutely true. A lot of people have that. There’s a lot of studies on that, and I think that that can be very unhealthy, especially if you’re talking about any individual security or investment, because in that hand, you’re not looking at the portfolio as a whole. That should be your main purpose the entire time. How is portfolio as a whole doing? That’s, it’s pretty much modern portfolio theory, right? You You shouldn’t be, because it used to be from a fiduciary aspect, you couldn’t invest in anything that was going to lose money long time ago, right? And the reality is, you should be looking at portfolio as a whole and how the portfolio does so. A lot of people, the worst thing is, if they have loss aversion as relates to a particular security, it’s one thing to have it for the portfolio, but they should absolutely not have it for any given security. That’s absolutely true. The the other bias that was kind of embedded in that mentality you just mentioned, what was, what I call, like an anchoring bias. So it’s, it’s a fixation on either a particular price to sell or buy. It’s a fixation on particular gain or loss. I’ve seen this a lot. We had a prospect one time that he had an ungodly amount of money in one stock. It was a biotech company, and it was literally maybe 90% that was millions of dollars, probably like 90% of his net worth, and he wouldn’t sell his mentality. As I recall, he wouldn’t sell until it doubled in price and, well, it could also fall 50% you know, that’s just, that’s just a horrible but he was fixated on he wouldn’t get off of that. He’s like, Well, once it doubles, I’ll sell it, and then I’ll kind of diversify. So that’s another bias that’s out there that people should be aware of
Andrew Brill 30:15
human nature. Chris, how? I know it’s hard to fight human nature. But, you know, you look at a stock and say, okay, you know what I think this is going to be, you know, a good stock to invest in. And then we go and look for confirmation of that. We don’t read everything with an open mind. We look for a confirmation bias where, okay, yeah, this confirms what I’m thinking, whereas you read another argument. I’m not sure that’s that’s totally right. How detrimental is this?
Chris Casey 30:43
It can be fairly detrimental. It’s and it’s, it’s primarily a problem when you’re kind of monitoring your portfolio or your individual investments. I’ll just give you an example for me. Personally, I’m a big proponent. We’ve been on the show talking about Natural Gas Producers. I think, you know, given electricity demands from various sources. Given the disparity in prices, given the administration’s announced goals and personnel they put in place, I think there’s a pretty nice future in that that area. However, if I’m researching or just kind of monitoring it, I’m much more likely to click on an article about Trump’s latest you know, his, his recent Secretary of Energy pick, then I would be maybe, if it’s an analyst report, analyst report on natural gas companies saying how natural gas is terrible. It’s going the way the dodo, and we’ll never use it again. And we’re using, you know what, solar and wind, you know going forward. So confirmation bias exists. I think it’s a lot of it is just, you have to be aware. You have to force yourself to read some adverse opinions and news out there.
Andrew Brill 31:46
And what about, I know it’s not a biases, but FOMO, we’ve seen it a lot with mag seven, fear of missing out, that one has to be a big one.
Chris Casey 31:58
Oh, absolutely. You know, some people call it the cocktail party effect, or whether you’re at a cocktail the golf the country club or you had a bar. I mean, everyone’s been in a situation. You don’t want to hear about some guy. First of all, avoid all those guys that are talking about their last stock pick. You probably going to McDonald’s Sunday morning. There’s 10 old guys talking about their stock picks. So, yeah, no one likes to be in that position where they’re talking about Nvidia or what have you, and you just never bought it, right? So that’s it’s very easy to just want to be with the crowd, the kind of this herd mentality. However, knowing about that bias, being cognizant of that could be very beneficial. So, for instance, 2022 you remember the Super Bowl there were, it seemed like every commercial was about cryptocurrencies, right? And you had all these stars. You had Matt Damon, you had, you know, Tom Brady, I forget all the guys that were involved in in cryptocurrency pitches. There was a clear sign that maybe, maybe this has gone too far. Maybe, maybe cryptocurrencies need a breather, because everyone and their mom is investing it right now, right so being cognizant of that bias could be very powerful and beneficial knowledge that you could take action on. But
Andrew Brill 33:13
bottom line is that anyone at that cocktail party, they were only telling you about their big win, they are not telling you about their big loss, which inevitably probably happened also. Oh yeah. Well, Chris, thanks so much for going through this with me, and I know that there’s a lot of misconceptions that we probably didn’t even touch on with regard to the market and the information that’s out there, but I appreciate it. And if you’re looking for more information, hit up chris@winrockwealth.com they’re also on Twitter, Twitter at, I believe it’s at Winrock wealth, right? That’s right. And thanks again, Chris, I really appreciate it. We’ll talk again soon, and we’ll put it on the books for October, November, to talk about our predictions that we made with the new administration, looking forward to it. Thanks, Andrew, thanks so much for watching our discussion here on wealthion. If you would like help with your wealth efforts, please head over to wealthion.com/free for a free portfolio review. Before you go, please like and subscribe to the channel. Don’t forget to hit the notifications bell so you hear about all the new videos we post and follow wealthion on social media. All the links are below in the description. If you like this content, they’re looking for more ways to achi
