I want to read some investments to you, and I want you to tell me what is not like the other, okay? We're playing a game - what is not like the other?
- Fidelity Zero Large Cap Index Fund: So that's a mutual fund. You know what that invests in? The large cap.
- Fidelity Z Large Cap Index: You know what that invests in? Just the overall large companies in the United States.
- Fidelity Total Market Index Fund: What does that primarily invest in? Like the S&P 500?
- Fidelity 500 Index Funds: What does that invest in? I have no idea. It sounds a lot like a large-cap American company.
- Fidelity Zero Total Market Index: The biggest holding is the SPDR S&P 500 ETF (SPY). You realize you own like eight different flavors of the same hot dog. Four, five, six, seven, eight. I could say nine things that are doing pretty much the same. All those mutual funds, before I... I don't think I really have much in them.
So, when I was first learning and opened Fidelity, I was just playing around with the different things that they offered. Different mutual funds with the best rate of return historically on their platform, and a lot of them have like probably like $2 in them sometimes. Some of them I exited, left like a share, some might have a little more than that. Not 100% sure at this time, but I think the vast, vast, vast, vast majority is SPY and Q. By the way, I love all those funds, it's just I've never seen anybody buy none of them. I mean, just choose one and then stick with that one. This was a long time ago, but they're fine, but that's just not what I'm going with. Well, I think what's so interesting is, right, what we do in our day job, right? We're financial advisors. We help people make good decisions. We've already established you're sort of new to being wealthy, new to being a rich guy. I'm going to use that term loosely, but you're new to being someone who has success. One of the things that we tell people, especially early on in their financial journey, specifically when it comes to investing, is it's so easy for us to make it hard. What stock do I buy? What ETF? What sector? What this? What that? You know, one of the things we love telling people who are early on their journey to do is go look at a Target Retirement Index Fund. You think about the year that you want the money and how much you can save, because I would argue no matter how you invest, no matter what you put it in, your savings percentage of your income is going to vastly outperform this. If you can save an extra 5% of what you're making income-wise, it's going to do way more than figuring out how to make this make 5%. So, don't waste the calories on this part yet. Pick something super easy, something super low cost, something that's automatic so that you can focus your efforts on the places that have the biggest return, which is your savings rate. How do I have an understanding of what my business expenses are, my personal expenses, and then how much I'm saving? Because all this is kind of minutia. At least until the portfolio reaches critical mass because what you're going to find out is that different types of investments are taxed in different ways. So, when you do start a 401K plan, different types of things you're going to put in there, what you hold in your IRA, what you hold in your taxable account, especially if you're going to use your taxable account to potentially fund future real estate purchases. One of the things you're going to want to do once you reach that critical mass is tax-manage it well so that you can get to that capital. Because it does you no value to put a bunch of money in a taxable account, put $500,000 in there and have it turn into a million. Then, to get to it, it's going to be incredibly cumbersome from a tax perspective if you've not tax-managed it all along the way. The more account types that you have and the better your allocation is, the more that you're able to do that. But in time, you're just not quite at that place just yet on your wealth-building journey.
I would love to see you race to get to $3 million in liquid assets as fast as possible. I mean, I really would. Come up for air at $3 million, and then you can play with real estate. No, well, I mean it's just you know what I mean. I just, I think that you could focus all of your energy on the content game because you're good at it. People love hearing you, they feel connected to you. You have something. But you have. And that's why it does break my heart. That's why if you race to $3 million, you give yourself options to get out because exactly. Have you ever had a $3 million portfolio make 10% before? Uh, no. No. Do you know how much a $3 million portfolio making 10% will make? Yeah, $300,000, right? That's just while you're sleeping, right? Think about how hard it is for a bunch of different real estate properties to go out there and appreciate $300,000. I mean, certainly in 2021 and 2022, you saw it. But if, on average, it's 4% per year, S&P 500 capital appreciation is a little bit better than 4% per year. So, it gives you the flexibility to decide how much in the public eye you want to be.
I think, faster than exclusively real estate would do that. Do you think in these types of income situations that more target-based funds, where it gets more conservative over time, makes sense? Because I personally don't care about it adjusting to a more conservative portfolio near retirement. I think realistically, if you're racing to that $3 million number we threw up, you're probably going to get to that critical mass before the glide path even starts adjusting. Because if you pick something that's 2060 or 2065, it's going to be majority equity-based right now. If you hit that number in the next 2, 3, 4 years, the allocation will not have changed that much. And you likely will have altered your strategy before then. It's more of a placeholder for the next step. It's more of... I would like to see you index-focused and consolidate because you just... there's too much of a good thing with the name soup that you've got going on. And I want to... I want to suggest something because I've been in the game for a while, and I know... you know, Joe S., Joe does a lot. He's the founder or the seed planter for a lot of podcasts out there. That being your future, too, Caleb. You don't always have to be in front of the camera, or you could be. You have a platform you've built that you can figure out what makes you comfortable. But I'd like to tell you this: I feel like one of my superpowers is EQ and getting a sense for people pretty quick. People like and care for you, and I hate that there are negative people, because there are always trolls. For a while, I thought I was a troll whisperer, and I could convert trolls into fans. But I realized that you can't change those people because you're educating and changing people. You know, we talked about the whole budgeting, we talked about debt. America needs that stuff. So, don't let somebody who's jealous or just doesn't know your heart or just because they feel smart behind a keyboard... Because there's a lot of those out there as well. You keep doing what you're doing. But I think there is an avenue where if it's just personally too much for all the attention, you can always go behind the camera and be essentially the kingmaker, or the person who kind of chooses the next. Because I think you have a big enough platform. You're going to be able to do great things. It's so exciting. The text has been corrected and punctuated for better clarity. For more information, check out our free resources