Paul Winkler: Welcome. This is “The Investor Coaching Show,” and I am Paul Winkler, talking about the world of money and investing with Anne Sawasky.
Anne Sawaksy: Hello.
Paul Winkler: So what do you have? What do you want to talk about?
The Rules of Investing
In the world of high finance, there’s always news. There’s always something to talk about. There is always interesting information out there for people to apply to their investment strategies.
The idea with this show is to help people understand more about investing, financial planning, so as to not blindly trust the investment industry.
I find that most people don’t understand or know that they know a lot of what they need to know to be successful investors. And that they have a lot of intuition and knowledge, that if you are doing what is in line with what you know to be true and what you believe, you’re much more likely to keep going and doing it.
Anne Sawaksy: Yeah. When I meet new clients, I always talk about the rules of investing. I always say, “Now, you know the rules of investing, right?”
Paul Winkler: “No, I don’t,” they reply.
Anne Sawaksy: Right. I know. Every time.
Paul Winkler: “I don’t know anything. That’s why I’m here,” people say.
Anne Sawaksy: That’s exactly what they say. And I say, “No, no, you really do.” Then we kind of walk through it a little bit.
Paul Winkler: Buy low.
Anne Sawaksy: … and they go, “Oh, yeah.”
Buy low, sell high. Diversify.
Paul Winkler: Don’t put all your eggs in one basket.
Anne Sawaksy: Right. But they invariably say they don’t know the fundamentals. So it’s just kind of funny, like you were saying, I think sometimes people know a lot more than they think they know.
Paul Winkler: Yeah. You can’t predict the future. I know you can’t predict the future. Then why is your investment manager trying to predict the future?
Anne Sawaksy: That’s true. I like that rule.
Paul Winkler: Actually, I probably ought to say that more often.
But it is the truth. I have found that people invariably, when you ask them, “Can you predict the future?” They go, “No.” And then what happens is, well, here’s a perfect example.
“Predicting” Unknowable Information
I had somebody actually text me this week and say, “This guy is saying this is going to happen.” He asked me what I thought about what the person was saying.
So I said, “Well, number one, the guy actually did get a really good prediction. That’s why he’s famous. And he nailed something 14 years ago really, really well.”
I said, “The last time, he predicted something, for the life of me, I can’t remember what it was,, but he was wrong.” I was actually hoping he’d be right..
Now he’s making another prediction. Well, lo and behold, some news that came out. There were news items that came out this week, and lo and behold, isn’t it interesting that every piece of news that came out during the week significantly moved the market.
It was the news that moved the market.
Anne Sawaksy: Oh, you mean new and unknowable information?
Don’t be fooled: No one can predict unknowable information.
Paul Winkler: Okay. So, what is on your mind today?
Anne Sawaksy: Well, I thought two things would be interesting. There was an article in ThinkAdvisor called, “Social Media and Younger Clients: A Toxic Brew.”
Paul Winkler: Social media and younger clients. I definitely have my thought processes regarding that. What are they saying are the toxic issues?
Anne Sawaksy: Well, basically, there’s a 2021 study that said that the Gen Z generation uses social media platforms or influencers as the second most popular resource for financial advice.
Well, I mean, it’s really just famous people or people that want to be famous that have figured out how to get clicks on social media, really is what they’re talking about.
Where Does Your Financial Advice Come From?
Paul Winkler: Some of these stock market commentators. You think, “Wow, this person is really, really sharp. They’re really, really on top of things.” And then you find out later that no, they’re not necessarily so great.
Especially when these business schools do studies on their stock picks and find that they’re really, really bad.
Anne Sawaksy: They’re not very good, yeah. But here’s the scary thing, too, millennials relied on social media about the same amount, about 24%. And Gen X relies 10%, and baby boomers rely about 4% on social media, for financial advice.
Paul Winkler: Anne, I wonder if that’s any different, though, than previous generations. Maybe not necessarily going to social media, but maybe talking to an insurance agent, or a banker, or a friend from high school that went and got their securities license.
Anne Sawaksy: So here’s the thing. The same Bankrate analyst, Sarah Foster, told CNBC, 46% of Gen Zers fess up to posting content that makes them look more affluent and successful than they really are.
I’m sure that’s not just Gen Zers. I think everybody does that on social media. It says here, which I got a kick out of, “This is akin to some of the ads and videos that popped up earlier this century with penny stock touting, showing them aboard private jets and their lavish waterfront homes, with an extensive collection of exotic cars.”
Paul Winkler: And then you go and do the same thing, and lose your shirt, and you go, “I’ll never…”, and then you become depressed, and despondent, and hopeless, and all of that.
Everybody Wants to Look Good
Anne Sawaksy: But they say, “Newsflash, all that stuff can be rented for a day.”
Influencers probably aren’t the best place to get your investment advice. Here’s another interesting thing about it. Although they do get their investment advice there quite often, the majority of those polls said they don’t believe it’s a good source of financial guidance.
Paul Winkler: Now, is that the people following the influencers? Who said that they don’t think it’s a good source?
Anne Sawaksy: The people surveyed. So even though they’re doing it.
Paul Winkler: Oh, even though they’re getting information there, they’re admitting that’s probably not a great place to get information about it.
Well, so often what happens is, people in general, look at what the wealthy are doing. You see articles all the time about what the wealthy are doing in the stock market.
They’re getting out, they’re getting in, they’re doing this, they’re buying that.
And of course, I talk about the studies of wealthy people. If you compare the growth of their wealth versus the stock market, it’s not a pretty picture.
Looking good, that’s what everybody always wants to do. Everybody wants to look good. Everybody wants to look like they’re successful.
You don’t want to get caught in the trap of buying your way to a “better” life, just because you see others around you who seem to be living an enviable lifestyle.
In reality, it’s what keeps people caught in the trap of trying to have nicer cars and nicer homes that they can’t afford. It keeps them looking for a “better” life, a lifestyle that they truly can’t afford. Then they end up being slaves to it.
They end up being slaves to debt, because they end up getting in debt to actually finance the lifestyle that they think is real, that somebody else has, but isn’t real. It’s fake.
Anne Sawaksy: Well, and even if it is real, the same day I did my research on people relying on influencers, I read that…
Paul Winkler: I think I know where you’re going, because I saw that article.
Crypto Touting
Anne Sawaksy: Kim Kardashian has to pay $1.3 million to the SEC for crypto touting.
Yeah. So she was pushing cryptocurrencies, and apparently she was paid to do it.
She was paid $250,000 a post on her Instagram about buying some crypto tokens. And the SEC seriously frowned on that and said basically that you have to be disclosing that you’re being paid to do this.
Paul Winkler: See, Anne, here’s the issue, though. I mean, you’re saying you have to disclose that you’re paid for doing it. I look at that and think, “Okay, she discloses it, and it’s still a bad idea.”
I think the worst part of it isn’t necessarily even the deal that she was not disclosing that she wasn’t paid, but that she was actually talking about something she knew nothing about and then touting it as a good investment.
Anne Sawaksy: Right. And the SEC chairman, Gary Gensler said, “This case is a reminder that when celebrities or influencers endorse investment opportunities, including crypto asset securities, it doesn’t mean that they’re right for all investors.”
Endorsed investments still aren’t necessarily right for all investors.
Paul Winkler: Somebody contacted me once and told me that a celebrity would do a commercial for the firm. I said, “No, but I’d love to talk to the guy so he understands what we really do.”
Because I feel like if anybody listens, quite frankly, to what we do, I feel that they’ll go, “Wow, this is really good what you guys do.”
This person didn’t want to talk to me though. He would speak on my behalf, but he wouldn’t talk to me.
There are people who can be bought. They’ll say whatever you want them to say about you.Unfortunately it happens a lot in advertising. It’s sad.
A Wealthy Status Doesn’t Equal Investing Know-How
Paul Winkler: I have found, even in the media, I’ve done a lot of things working in the media. And one of the things that I have found is that so often people are talking heads on TV, people that are in the news business, people that are on programs out there, and you think, “Wow, this person’s really, really sharp and they really know their stuff.”
Then I find when I get in interviews with them that they don’t have a clue. I’ll be talking over their head in two seconds. But the reality of it is, we often give these people who are in the spotlight way more credit for knowing more than they actually know.
Anne Sawaksy: Well, right. So in Kim Kardashian’s case, I guess, she’s very rich, so they think, “Oh, she must know what she’s doing with her money.”
Paul Winkler: Often, back to wealthy people in general, many of them have started businesses and become wealthy with businesses that they own, but they know nothing about investing.
People get wealthy owning businesses. Maybe they are the brand, so to speak, or they run a business.
People always talk about Bill Gates or Steve Jobs when he was around. Elon Musk, the list goes on and on. But they’re all business owners.
And the beauty is that we get to be, too. What I love about the stock market is that you get to be a business owner. Except not just one, but you own tens of thousands as an investor in the stock market. So it’s really critical to make sure that you are one who knows what they’re doing.
One of the best ways to grow, sustain, and protect wealth is the stock market.
I look at it as, when you’re building your wealth and you’re trying to preserve it, the stock market is one of the best ways to grow, sustain, and protect wealth. So I believe understanding how markets work is a critical thing as an investor. That’s what this show is about.
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