Financial Mentor – Hedge Funds, Happiness, & Over 15 Years of Early Retirement

Financial Mentor

Todd Tresidder from Financial Mentor joined me for an episode of the Financial Independence Podcast to talk about active investing, finding happiness, and other important lessons learned during 15+ years of early retirement!

Listen Now

Highlights

  • Building wealth with paper assets, real estate, and entrepreneurship
  • Protecting your money during turbulent times
  • Pursuing good goals vs. bad goals
  • Finding happiness both before and after achieving financial independence

Show Links

Full Transcript

Mad Fientist: Hey, What’s up everybody? Welcome to the Financial Independence Podcast, the podcast where I interview people who have already achieved financial independence to find out how they did it.

I’m really excited about my guest today. It’s Todd Tresidder from FinancialMentor.com. Todd has been in the investing game for quite a while. He started his career in the hedge fund industry and learned a ton about investing and ended up retiring at the age of 35 back in the 90s. He’s been retired ever since.

After a few years of retirement, he decided to give back and start a financial coaching/mentoring site called FinancialMentor.com. He’s built up a huge library of just incredible resources over there. He’s got calculators, lots of articles, books that he has written. It’s really just a ton of information over there.

I’m really excited to chat with him about what he’s learn over the years about investing and about 20 years of financial independence almost. It’s going to be a really good discussion so I’m looking forward to it.

Before we dive in though, I hope you can tell that my voice sounds a little bit clear. After doing all of these previous episodes on a free headset that my colleague gave me, I figured it was about time to actually fork out some money and buy a proper microphone. So hopefully, you’re enjoying the smooth sounds of the new podcast. Hopefully you like it.

Also, I wanted to quickly thank everyone who’s left a review for the show on iTunes. It’s great to get feedback. So I really appreciate you taking the time to leave your thoughts on the show. If anyone else is interested and wants to do that for me, that will be great. I will leave a link in the show notes so it will be great to get your feedback.

Without further delay, I’ll just introduce Todd. Todd, thanks a lot for being here.

Todd Tresidder: Right on! Thanks for having me in the show, Brandon.

Mad Fientist: You’ve been in this game for a while obviously, FinancialMentor.com. You must’ve snapped that up pretty early on because it’s an amazing domain. For my listeners who haven’t come to your side, could you just tell a little bit about yourself and how Financial Mentor came about?

Todd: Yes, you’re right. It did happen a while ago to get the Financial Mentor domain. I, quote unquote, if you could see me holding up air quotes, quote and quote, “retired at age 35,” which if you could see me, you’ll know it was a long time ago (basically, 20 years ago). I’m 54 right now as we record this.

What happened was once I had “retired”, I had made several mistakes. I went out and I did the classic thing. You go do more of what you’re good at or whatever.

I took a year off. We travelled. My wife and I did a six month trip around the world. That was our honeymoon. We got married right after I sold the company. We did a bunch of stuff.

I fumbled. I made a few mistakes business wise. And then, my wife kind of got tired hearing me avoid conversations around finance and financial independence.

You’re probably familiar with this Brandon. People, they don’t really get what it’s about. You have to fast-forward and go back to – this is like ’97, ‘98 (1997, 1998) and the stock boom was on and everybody thought it was about hot stock tips. It’s just the flavor of the day. You can go to 2007. Everybody thought it was about real estate investment, right?

Mad Fientist: Right.

Todd: Whatever the flavor day is, that’s what everybody thinks what financial independence is about. And of course it’s not.

And so, I was just trying to avoid the conversations. People didn’t even have the right questions to ask and I was just trying to stay clear of the whole thing. My wife finally got tired of it and she put me to test. She said “Why don’t you do something with this knowledge you learned? It worked for you. It’s totally not how people see stuff. Why don’t you do something with it?” That was kind of the birth of the Financial Mentor.

Again, dating myself, Corey Rudl was the leading internet marketer in his day. He’s the one that most of the big name internet marketers learn from that you know today. The only reason you don’t know his name is he put his Porsche into a wall at about 200 miles an hour.

I saw him at one of his first public speaking experiences or his first public speaking things. That’s where I got the idea of building out a website and becoming a teacher and educator. I saw him speaking. He just really hooked me on what the internet was about and how to do it. And that’s why I grabbed the domain, Financial Mentor.

Mad Fientist: Nice! Man, you’ve created an amazing resource. I’ll put a link in the show notes obviously. You have everything over there. You’ve got a huge collection of calculators. You’ve got a podcast. You’ve got tons of great articles you’ve written, many books that you sell on Amazon. It’s an impressive amount of information and it’s all really great information. Well done!

Todd: Well, thanks.

Mad Fientist: Well done for doing that. So let’s get back…

Todd: And that’s my warmup act. I’ve got plans for years ahead.

Mad Fientist: You got us lead on. You’re retired. What’s going on?

Let’s go back actually before you’ve reached financial independence. You said 1997, you retired at the age of 35. How did you get there and what was that path like?

Todd: Just classic formula like if you’ve heard everybody else talk about. I made more than I spent. I’ve invested the difference wisely because I went in the hedge fund business.

Back date to college, when I came out of college, my point of committing to becoming financial independence – I can still remember the day I was attending UCLA and there’s an area called Santa Monica Park. It’s right down by the Sta. Monica pier. It’s a set of bluffs over the ocean. It’s absolutely gorgeous. Probably most people have seen it because it gets featured in a lot of films. They shoot films there a lot.

Anyway, there are a lot of bums that more or less lived there. I remember, I had got a bunch of friends graduate ahead of me and had gone off to cubicle nation and were wearing their suits and they were out running buying their Porsches and being excited about that whole lifestyle thing. I remember riding my bike through the park, it was a gorgeous day. I was heading down the beach and I thought “Wow! These guys on the park, these bums living on the park benches, playing guitars and the food trucks will come by and serve them.” They have food trucks that just feed the poor. They are people living homeless. I thought, “Wow! They have more freedom than my buddies who graduated from UCLA and went off to cubicle nation.”

Mad Fientist: Right.

Todd: Granted, they have fancy apartments and they have their Porches and they have their night life and their fancy suits, but I had a high value on freedom. I valued my experiences over stuff. I valued what I did with my day and what I thought about and what I created. I didn’t have a big value on Porsche.

I just committed at that point. I said “Well, as long as I have to lead an economic life, I may as well design it to result in financial independence.”

That was kind of my commitment point. I couldn’t make sense of any other alternative. I just said, “Well, let me just design my life to be financially independent.”

And so, I started reading all about how you become financially independent. I started studying the subject and getting biographies of people who built wealth and just trying to figure it out. I never changed from that.

Mad Fientist: Wow! If I researched correctly, I think this was about when you were like 23 and you’re still in some debt from studying. Is that correct?

Todd: Oh, yeah! Twenty-two actually because I got out in four years. I would have been 22. Yes, I was in debt from school. I had student loan debt. I did not come out with a silver spoon. I started out with debt and problems like everyone else.

Mad Fientist: And then, 12 years later, you’re completely free. So yeah, if you could talk about how did you structure your life and what changes did you make to do that quickly.

Todd: As part of studying financial independence, I realized that if you’re going to be financially independent only, you have to become a master investor. There’s no way around it because the return on your assets ultimately determines your freedom and the growth of your wealth. I just said, “Well, I might as well get paid to learn that,” and doubled down on the whole thing. And so I went into the investments field.

It’s kind of an interesting play. I’ve never told the story on a podcast before because I was getting job offers for the blue shoe investment firms, all the ones where you’d wear a suit and you’d go to cubicles and all that. I was getting very lucrative job offers because I had a pretty good resume coming out of college which is a whole new story.

But I took a really bizarre offer. I took a $500 draw on commission with a start-up hedge fund because I was clear that my goal was to learn how to invest. I was never going to learn how to invest being a cog in the wheel in a very large scale investment firm.

That was my goal. I wanted to become a master investor. And so, instead, I got in to an upstart hedge fund. And I’ve already been developing statistical risk management system on the side and researching it. That was what I was interested in doing. That’s how I got the offer.

I made nothing for the first year, two years. I made nothing. But what happen was I became so valuable that I was immediately moved to partner status. And then, when the firm took off, it was incredibly lucrative and I made a whole lot of money and I never raised my lifestyle above college kid.

Mad Fientist: Wow!

Todd: So, I just kept my lifestyle where I was comfortable. I didn’t need anything more and I just banked it. It’s really easy to become financially independent when you make a whole lot of money and you just bank it.

Mad Fientist: Right! So what are some of the big lessons you learned throughout those years working for a hedge fund and focusing solely on investing. Was it more on the risk management side of things or did you…?

Todd: Yeah. This going to fly in the face of how most people teach investing, but the game is risk management. Risk is not equal to reward like people commonly teach. Risk equals reward in the world of product. Most people understand investing from a product perspective. “Should I own value? Should I own grow? Should I own small cap, large cap? International vs. domestic?” Right?

Mad Fientist: Mm-hmmm…

Todd: All these different styles. It’s all about product. That’s how investing is almost always taught because people have an assumption that it’s all about what’s a good investment.

When you really understand investing done right, investing is about process, not product. And when you understand process vs. product, you realize that risk equals to reward in the world of product, but risk and reward are inversely related. In other words, the less risk you take, the more you make once you understand the investment process.

And so, there’s different dimensions to the puzzle. It’s probably way beyond what we can get to on this podcast. But there’s a much deeper level of investment understanding that most people teach.

The way I teach is that there’s nothing wrong on how it’s conventionally taught, right? I don’t want to make people wrong here. The conventional teaching of low cost passive index asset allocation, that’s conventional wisdom. Nothing wrong with it. It absolutely works.

By the way, I’m judging it is as, “Does it have a positive expectancy that’s provable based on historical research,” right?

Mad Fientist: Right.

Todd: That’s the criteria of what’s valid and what isn’t. Does it have a positive expectancy?

The answer is yes. And there’s a very good reason why. We can go into that if you want, but the answer is yes. So, it does meet the criteria. It’s a valid strategy.

The question is not whether it’s valued or not. The question is whether or not it’s the most efficient path, whether or not it has the better risk reward ratio.

The other thing too, because this podcast is about financial independence, there’s a much bigger question here that almost no one discusses and that is, “Is volatility something that should managed or accepted?”

In the traditional asset allocation, the answer is always that volatility must be accepted. There is no way to manage it because that’s the big, bad T word, timing because the only way you can manage volatility is to have self-discipline because you have to manage market risk.

And so, it goes into the world of voodoo according to a lot of people.

But what happens when you’re financially independent when you’re living off your assets is you cannot endure prolonged, what I call flat spots.

Let’s use the recent market history as an example. You got the period in 2000 to 2012 or 13 before the SMP or before market started showing any sense of profit over like a 12 or 13 year period, right?

Mad Fientist: Right.

Todd: That’s what I’ll label, just for a simple term, as a flat spot. If you’re using conventional 4% rule (and I’m not saying that I agree with that or disagree with that. That’s a whole another conversation we can get into. But just for benchmarking because it’s not that far off. Let’s just use it as a benchmarking and use the conventional 4% rule), in a 12-year flat spot, you’re going to have to draw down volatility just greater than 15% your portfolio.

So, the idea here is yes, the markets will always comeback, but your portfolio won’t.

Mad Fientist: Right, you’ve got to survive this, so that your portfolio is meaningful enough to have gains that can compensate. So yeah, you just have…

Todd: Yeah. You have to have regular new highs and conventional asset allocation can’t assure that if you’re going to spend from your portfolio and live off it.

The key distinction here is that investment research is typically done on the assumption of a buy-and-hold portfolio, conventional asset allocation like a 60/40 split, right? That’s how you do conventional investment research.

Retirement planning – I’m sorry, investment research always – I’m sorry I got it backwards. Investment research always assumes that there’s no an additions or withdrawals from a portfolio, that you start with a certain dollar amount and your gains and losses are at the end. They vary investment strategy.

Retirement planning research always assumes a conventional 60/40 or asset allocation portfolio or buy-and-hold portfolio. But then they vary the inflows and outflows from the fund. You have to combine both to get a whole picture and nobody is…

Mad Fientist: Yeah, absolutely. I actually just listened to your podcast with Wade Fowl. I believe he’s your first one.

Todd: Yeah.

Mad Fientist: And that was really good to listen to you guys chat back and forth about what withdrawal strategies and things like that. I’ll link to that as well on the show notes.

So, from what you learned during those hedge fund years, do you still use most of that in your personal investing?

Todd: Yes.

Mad Fientist: Yeah, okay. So you’re not very passive even these days when you…

Todd: Let’s get clear. This is being recorded and beginning of November of 2015, I would be anything but passive with interest rates approaching zero and valuations in the US stock market in the top 6% or 7% percent in recorded history.

Mad Fientist: Alright, so what are you doing to…

Todd: This is a tough one, Brandon because people always want the sound bite like, “What do you do with your money?” I can’t do it justice in a quick interview and I’m not trying to be cagey.

Mad Fientist: No, no, no.

Todd: It’s like, “So how do you do brain surgery?”, right?

Mad Fientist: Right.

Todd: “So do you just cut across the cranium? Is that the quick answer?” It’s not quite that simple. You have to get a deeper understanding and know how to put the puzzle pieces together. And if I try to sound bite it for an interview, it’s not going to come out right. It’s going to mislead people.

Mad Fientist: Sure, sure. In the past, I know you’ve seen higher risk, riskier scenarios leading up to the housing bubble bursting and you’ve known enough to get out.

Todd: Quick!

Mad Fientist: You don’t necessarily know when the bubble is going to pop, but you know that the environment in such that…

Todd: Bingo.

Mad Fientist: …it’s not a good thing to have your money in. Is that sort of a similar situation you find yourself in now? If not, then we can move on.

Todd: No, it’s cool. The way you approached it is really a good one. What you’re addressing here is you can look at – valuation will tell you the risk reward environment, but it’s a very blunt edge tool. It is not a timing tool per se, but it tells you the environment you’re in. So it tells you what tool box to pull out.

Mad Fientist: Right, okay.

Todd: For example, it’s well documented that I exited all my real estate in 2005-2006. It took me about two years to unwind it all, the large apartment complexes and stuff. I literally sold everything and paid the taxes near the top of the bubble. And I was openly ridiculed. The brokers, they couldn’t believe that I was just going to pay the taxes and not 1031 exchange the money and keep investing.

Mad Fientist: Right.

Todd: I was like, “There’s no deal that makes sense.” People were buying this stuff from me two to two and a half times what I would be willing to pay for it. There was absolutely no way to make sense of a deal. It’s such a bubble, right?

Mad Fientist: Right.

Todd: So, I just said “Well, I’m just going to pay the taxes”. As you said, at the time, I had no idea it was the absolute top. I did not know, right? All I knew was the risk reward made no sense and if somebody wants to pay me two and a half times what I’m willing to buy for it –

I had a lot of other ancillary indicators that just come from me having the experience across broad markets. My tenants that were moving out of my apartment building, these guys didn’t even really qualify to get a $500 or $600 a month apartment from me because I know their credit history because they apply for the apartments, right?

Mad Fientist: Sure.

Todd: They were going out, they were leaving me – because every tenant leaves gets an exit interview, right? They were leaving because they were getting $300,000 three year fixed rate mortgages on houses.

Mad Fientist: Wow!

Todd: They didn’t even qualify to rent a $500 a month apartment from me. One reason they were in there is because I was scraping the dregs in order to fill my units because credit was so permissive at the time that pretty much anybody who could fog a mirror could get a loan.

Mad Fientist: Yeah, I remember. We had just moved from Scotland and I was working remotely for a Scottish company under – I had no sort of contracts, like a long–term contract. I was just pretty much working from month to month for them. I’m making not a great wage because Scottish wages are quite low compared to American wages. And my wife was going back to school, so she wasn’t working at all. I got approved for something like a $470,000 mortgages. I was like, “What? That is absolutely insane!”

Todd: Yeah.

Mad Fientist: No wonder the whole thing came collapsing down. But…

Todd: I know enough about supply and demand to know that the demand for housing and the demand for property is fueled by permissive credit.

Mad Fientist: Right.

Todd: That’s why you see the Fed trying to pump up the housing market by pumping up the credit market, right?

That’s what drives the demand and then when the interest rates are low, it increases the valuation levels too because interest is your highest cost of owning, right?

And so, I knew enough about supply and demand and pricing to know that the numbers didn’t make any economic sense whatsoever. I knew that somewhere, I would be able to re-enter below what I was getting out at. I just didn’t know how or what it would transpire with.

Mad Fientist: Sure.

Todd: It was so far away from reality that it made no sense. I had clients coming to me. Like I said at that point, everybody wanted to get rich in real estate. So I had clients come to me trying to do deals down the state of California. These were the lowest interest rates in history at that time. They went lower after that. But anyway, the lowest rates in history up to that point, they couldn’t even pay the mortgage. If they had zero vacancy, zero expenses, zero overhead, zero anything that went wrong and all they do is collect rent, they still couldn’t pay the mortgage.

Mad Fientist: That’s insane.

Todd: Yeah. The only possible way to make money in a deal like that is if a greater fool comes a long and pays even more for it.

Mad Fientist: Right.

Todd: There’s no possible way to make money in a situation like that.

Mad Fientist: …which went on for quite a while as well.

Todd: Well, around that time, that was just about the top.

Mad Fientist: Oh, that was about the top?

Todd: Yeah. So I had ancillary evidence and I just said, “You know what, I don’t want to carry any leveraged risk here. I want no financial leverage when this comes unwound.” And so, I sold everything except my house. I even had a property taxing company where we got property on bad taxes. I sold that company and sold all real estate. I sold everything except the house I live in.

Mad Fientist: Wow! You mentioned a lot of broad economic things. I know you studied economics in college. Is that correct?

Todd: Yeah, yeah.

Mad Fientist: I’m sorry. That was your undergrad or…?

Todd: Yeah, that was my undergrad degree.

Mad Fientist: Okay. Is that something you’d recommend to other people who maybe want to be more clued up to things like this or recognize these patterns? Obviously, the housing example was a pretty blatant example. But still, most people in society still missed it. Is that what you recommend just as a general economic principle?

Todd: No. Most of my knowledge comes subsequent to college, just studying the market extensively. I’m a nut head for this stuff. I had walls of books. It was so bad that I had to box them up in order to make room for new books. Then the box just started stacking up in the garage. And so then, literally, I had a sale on eBay and I sold off hundreds and hundreds of books on eBay. I mean, I had a collection, so it was back into early or late 1800s. I had some books back in the late 1800s and stuff, really old texts. I’ve been pretty feverish about learning this stuff.

Mad Fientist: Any stand outs that I should add to the show notes that people need to check out, any favorites that you would gift to somebody if they’re interested in investing?

Todd: Not really, because it’s always been tidbits. I get a tidbit here. I get a tidbit there. I get a good idea here, a good idea there. The thing that’s weird about me is I assemble the stuff. If you’re in my office, you’d see my file cabinets behind me and I have file drawers all for different topics. They have some files in them and I just constantly assemble information.

Mad Fientist: That’s a good way to do it.

Todd: Yeah, that’s how I work. I’ve just been able to assimilate it and put it all together into different things that are meaningful. There’s no stand out books because there are so many different topics. If you want to understand valuation, I’m looking over on my shelf right now and there’s a really cool book that’s out of print, but Valuing Wall Street. Again, I’m just pointing this one because I can see it in the sidebar print.

Mad Fientist: Right.

Todd: It’s not like it’s a stand out, but I remember it. That was really cool to understand about Tobin’s Q Ratio and how Q Ratio relates as far as a valid valuation timing system for the market and what the limitations are. That was an interesting learning for me to add that little tidbit to my – another tool to my toolbox.

Mad Fientist: Right.

Todd: And then I’m looking, I’ve got Charles Ellis’ Winning a Loser’s Games which is a classic text right next to it. I’m just pulling the ones that are sitting on the shelf that I can see. That book was interesting because it showed me so many of flawed reasoning and the contradictions in the traditional buy–and-hold approach. Yet it’s a bestseller and really popular with that group.

I actually did a book study group with followers just to see what they thought of it. And they were so blown away. That’s what prompted me to start developing my investment courses. When I went through to analyze that book and showed what the latest research showed and all the contradictions, people were just blown away.

Mad Fientist: What was the name of that one again? I would be interested in checking that one out.

Todd: The book itself is not a great book. I’m not trying to criticize Charles Ellis. I used it as a teaching tool to show the common misconceptions and how it’s put together. He’s got some interesting data in there. But again, it’s tidbits, right?

Mad Fientist: Right.

Todd: The book next to that is by Nassim Taleb. I’m probably mispronouncing his name, but it’s Fooled by Randomness. Now that’s an interesting book because what that teaches is the tremendous, tremendous importance of long tail distributions, fat tail distributions and understanding investment strategy. The way Taleb worked was – he was an options trader, right?

Mad Fientist: Right.

Todd: So he would lose the bulk of the time, but boy, when those fat tail distributions come in, he would rake it in.

Mad Fientist: Right. I had read the Antifragile. In there, he had talked about rather than having all invested in a medium risk index fund that covers the whole market, he mostly invested in something that’s very safe and then have 10%, 20% than something that’s much more risky, but the potential for that outsize the gains. I was wondering if you could talk on that at all.

Todd: I’m not an advocate of that. I teach expectancy investing. Everything is based on mathematical expectancy.

Mad Fientist: Right.

Todd: And so, why would I mix the low expectancy product with the high expectancy but high risk product? I’m not getting the logic of that. I have great respect for Taleb, but that’s not how I approach it.

Mad Fientist: Cool! Yeah, I know. That’s great to hear. I haven’t read Fooled by Randomness, but he talks a lot about that and Antifragile, which I highly recommend as well. It’s a great book.

Todd: Yeah. And the book next to it (just to stay with this), the book next to it is The Crowd by Gustave Le Bon which is a classic text in crowd psychology and how crowds get it wrong and how they go nuts.

Mad Fientist: Nice.

Todd: And so, that part of learning is part of what grounds me in understanding when I’m in bubbles and manias that make no sense economically and that gives me the strength to go against them.

It’s not like any one of these stand out. I’m literally looking. That was four books in a row sitting on my shelf that I kept after I sold hundreds and hundreds of books. I happened to have kept those.

Mad Fientist: See, it’s great advice too. Just read as much as you can. That’s something that I’ve been doing over the last six months, just reading a wide range of books in all different topics. And yeah, you’re right. You pick up a few things here and there. But then, they’ll stick with you and can help you see things that maybe others can if they’re just hyper focused on one particular thing.

Todd: Yeah. Each one is like a cog in my total understanding of how the markets work. They’re each sharing little pieces of how the game is played properly and how the puzzle pieces fit together.

Mad Fientist: Nice, yeah. I completely agree. That’s a great advice.

So you talked a lot about wealth building, paper assets being one way. You also discussed real estate and businesses. You mentioned you had some real estate you’ve since sold. Maybe you can talk about if that still plays a part, if you’ve since rebought any real estate or if you just instead focusing on the business side of things?

Todd: No, I missed the whole move up after the 2009 bottom in real estate. I frankly didn’t believe that the problems were over and I still don’t believe the problems are over. That’s a great illustrator. I’m more than happy to miss opportunity. I have a little saying in my head which is, “The deal of the century comes along every year.” So I don’t mind missing opportunity. I’ll step away from opportunity everyday of the week if I’m not totally clear.

Mad Fientist: Right.

Todd: I only want to do a deal when I’m highly confident, I really feel I’ve got the puzzle pieces together and I can manage the risk. And to me, taking on financial leverage and acquiring real estate in 2009 turned up being incredibly smart decision in hindsight. But literally, you’re stepping up to the plate and grabbing a falling knife in a complete credit crunch and you had to believe that all the bailout policies were actually going to turn the tide.

Fortunately, for the public at large, it did at least temporarily kick the can down the road. But I couldn’t make that bet. I wasn’t willing to bet my economic future on that. So, I missed the rise back up.

Mad Fientist: At least you got out in time. Wealth preservation plays more importance.

Todd: Yeah. Risk management is the key to – nobody’s ever played the game perfectly, right?

Mad Fientist: Right.

Todd: What you want to do is you want to play the game where you consistently make higher highs and higher lows. Everyone is going to have setbacks. Everyone is going to make mistakes, me included. And so as long as you are managing your risks where you make higher highs and higher lows, you’re doing about as well as you can.

If you look at the research on how actual railroad investor accounts perform, it’s pretty dismal. They radically underperform the indexes. That’s the claim wide passive indexing is the strategy du jour and all that. But there are other reasons why average investors radically underperform.

Again, just take it easy on yourself because we all hear stories of these amazing scholars and these amazing moves. Everybody makes mistakes. Just manage your risks and consistently make higher highs and higher lows and you’re doing quite well.

Mad Fientist: Nice. Okay. Then the third pillar of your wealth building focus is businesses.

Todd: Yeah.

Mad Fientist: Especially for people wanting to pursue early financial independence, there’s no way to get there a bit quicker than just relying on paper assets or dealing with leverage and the real estate game.

Todd: Let’s look at it as a quick puzzle piece. Let’s put it together for your listeners.

Mad Fientist: Sure.

Todd: The key to the whole wealth building is one sentence, right? Make more than you spend and invest thedifference wisely, right?

Mad Fientist: Yup.

Todd: Or spend less than you make and invest the difference wisely, depending on how you want to phrase it.

And so, there are three dimensions. You’ve got make more, spend less, invest more. So it’s three dimensions to a puzzle. And so you can take each one of those and subdivide it.

There’s the conventional frugality path. That’s where you get your spending way down. The reason that’s powerful from the financial independence standpoint is because the assets require to support financial independence are a multiple of your spending, right?

Mad Fientist: Sure.

Todd: The more you drop your spending, the dramatically lower the assets are required to support it. So that’s one path. It has a downside limitation, plus, then it puts you on a path of permit frugality. For some people, that’s fine. For some people, that’s not. It just depends on your values.

Then you’ve to make more where you can maximize your income. Again, none of these are right or wrong. They’re all valid in they’re all different approaches to it.

Mad Fientist: Sure.

Todd: And none of them are mutually exclusive. They could be grouped together. You can spend less and make more as I did. I kept my spending at a college kid level and then I made a whole bunch more.

And so making more is done primarily through business. As it turns out, the two fastest paths to building wealth are entrepreneurship and real estate. That’s not just me saying it. That’s documented. And there’s a logical reason why which is you’ve got tax advantages and leverage possibilities that allow you to ramp up both a business and a real estate portfolio.

Paper assets are typically best used as wealth preservation, wealth growth vehicle. Just try to grow your wealth in excess of inflation and you’re doing well in the paper asset game.

Mad Fientist: Sure.

Todd: If you can grow it in excess of inflation and support spending, then you’re doing very well.

Mad Fientist: Alright! That’s a great rundown.

I’m going to take a little bit of a detour. You write a bit about happiness which is obviously the main name of the whole game. I’m going to actually read a quote from I think it’s your Secret to Your Happiness post.

“When I achieved financial freedom and quit working, the biggest realization I had was that I was the same guy. I had the same hang ups, personal issues, facing the same life I had before.

The only difference was now I had a lot more time to wallow in it and no distractions or excuses from the presumed work a day life script to distract me from seeing the truth about my life.”

Now, even though I haven’t stepped away from work, once I hit my number, I realized nothing really had changed. The happiness that I thought would come from hitting that number really didn’t appear because why would it? In hindsight, it didn’t make any sense. But when you’re working towards that, it’s like, “I’ll be happy when I get there.”

So I want to just have you talk a little bit about that, transition from working in the hedge fund to not working and how you were able to find the path to happiness after realizing that freedom alone wasn’t going to give it to you.

Todd: Talk about highs and lows. Selling the business, I had some stacked away money up until I sold the business. And suddenly, I’m financially independent. I was going to be marrying my long time girlfriend (who became my wife and still my wife). We were planning on travelling which I told you about earlier. We did a six month trip to Europe and Middle East. I’d always want to just backpack around for a while, just to have nothing but what’s on my bag. So we did that. That was good beginning of the unwinding.

The high I explained was both figuratively and euphemistically. So we’d sold the company. I was taking my computers down to my assistant who lived in the valley. I was living at Lake Tahoe and my assistant lived down at Carson Valley. I’m literally driving over the summit of the mountains looking down over the valley and that was figuratively the end, actually the high point. I dropped off the computers. I’m high as a kite, “I’m free. I’m free.” Suddenly, everything was going to be solved.

And then we took off. We got married and then took off on that trip. And the trip was everything you would dream it would be for about a month and a half. About a month and a half into the trip, I started waking up and the trip started becoming the new job. This is before the Euro, right?

Mad Fientist: Right.

Todd: So you’d hit a new and you go exchange your currency. And then, you go and do the sites. And of course, the church is the highest point in the town. And you go climb the steeple. And then, war seems to dominate most histories, so then you see the museums and the collections of world artifacts in history. It started taking this pattern. You got to pick out what restaurants you’re going to. You hit the town and you got to pick where you’re staying.

I don’t want to sound sarcastic. I’m so blessed to have taken the trip. I’ll always treasure that trip. But it was that gradual wake-up from vacation to reality that this is my new reality. I can do this permanently. I can travel permanently. And then you start questioning, “Is that what I want?”

Mad Fientist: Right.

Todd: Right? Do I really want to live this life forever?

Then we came back to Tahoe and tried to recreate our lives. I did some failed businesses, trying to re-ground myself. I made the usual mistake. I did hedge funds find-a-friend due diligence. I went back to my old pattern which is what most people do because there’s immediate demand for their services and they have expertise and it feels comfortable and familiar.

The idea of starting a website and becoming a financial educator is way out of left field for the running hedge fund. But ultimately, that was my path, but I didn’t know it at the time.

So, all these highs and lows. And then, as the lows set in and I started questioning, “What the heck is wrong with me? What’s up? Dude, you’ve got your financial independence. You can do anything you want with your life.”

What I started realizing is happiness is an interesting thing. It’s like a cat, right? You can’t call the cat to you. It will never come. You can’t demand that cat to present itself because the cat will never show. You have to make your lap a really comfortable, warm place. The cat has to feel invited in.

And that’s how happiness is. You have to run your life in a way that it invites happiness in.

Mad Fientist: That’s a great analogy. How did you start doing that?

Todd: Well, one of the things I learned about myself – it’s true for most people, but I don’t want to over generalize. Everyone’s different. Some people could probably find happiness through their own narcissistic self-indulgence of “what’s going to make me happy today?” That didn’t work for me. I found that I needed things that are bigger than me and I need to be driven by something, a cause that’s bigger than me.

There’s a lot that comes from work that we don’t realize – a sense of contribution, something we’re committed to, a sense of purpose. We have friends and relationships in the workplace. There’s a lot of stuff that goes on that leads to our happiness that we don’t really give full credit to until it’s gone.

I started getting grounded much more once I started financial mentor in ’98, ’97. I started finding that contribution, that sense of giving back, that sense of having a purpose, that sense of building something that mattered.

I’ll read you something really quick. It’s up on my wall above my computer. Hopefully, I can see it. I’ve got a horrible reflection. Let me move the mic.

It’s a quote by Ralph Waldo Emerson. And this is probably what drives me.

It says:

“To laugh often and much, to win the respect of intelligent people and the affection of children, to earn the appreciation of honest critics.”

Boy, don’t we know that one Brandon, right?

Mad Fientist: Right.

Todd: “And to endure the betrayal of close friends, to appreciate beauty to find the best in others.”

Now this is where it gets really on.

“To live the world a bit better whether by a healthy child, a garden patch or redeemed social condition, to know even one life has breathe easier because you have lived, this is to have succeeded.

Mad Fientist: Nice!

Todd: Yeah. So that’s right above my computer. The only piece on the wall above my computer I see every day. The only other thing that stands there is a genuine million mark note from the German Weimar Republic to always remind me about what money really is.

Mad Fientist: Right. Nice! That’s really good. You’re talking about having a purpose bigger than you and having goals. There’s another article you wrote that I’ll link to in the show notes, Are You Making This Early Retirement Mistake. You talk about…

Todd: Wow, dude! You did your research, man.

Mad Fientist: Oh, man. That’s what I do.

Todd: You did good.

Mad Fientist: Good. Yeah. You talked about going away goals lead to momentary satisfaction like the honeymoon period that you literally had on your honeymoon, I guess. And then this discontent set in.

Whereas going toward goals are actually what lead to happiness and fulfillment presumably because you’re making progress toward those goals. You can see the progress and yet you still have something to work towards.

I think that’s probably a big mistake that a lot of future early retirees make. They’re just concerned with ditching the job. They really don’t have anything lined up for afterwards.

Todd: Bingo!

Mad Fientist: And yes, I’ve been lucky in the sense that I feel, for me, personally, I think this is like a transitory phase of, “I’m now working remotely. So, it’s sort of like I have a job, but I don’t.” I’m just trying to get a lot of habit in place now working towards goals that I’m going to want to work towards once I finally quit in hopes that I’ll have the momentum which will then keep me from coming out of the gate really lazy and having the big struggle of not doing anything.

Is there any other tips you think would be good to keep people from that trap or anything that you found or is it just really start picturing those goals that you’re going to start working towards?

Todd: I think you said it really well. People who are very motivated by financial independence typically away-goalers. They’re trying to get away from the man. They’re trying to get away from the job, whatever restrictions they perceive money doing.

Here’s the challenge. It’s a recipe for disappointment. And the reason for that, when you want financial freedom, what you’re really trying to do is you’re trying to honor an internal value which is freedom, personal freedom. What happens is you project that lack of freedom that you experience personally on to money because it’s obvious in all around you how money is limiting you when you don’t have financial freedom. It’s a logical reasonable thing, right?

But what happens is any time you project an internal value onto an external thing, it sets you up for disappointment. That’s why when you achieve financial freedom, if you’re not clear on what’s going on and why you’re doing the things you’re doing, you’re going to end up disappointed like I did and it sounds like you did also.

Mad Fientist: Right, yeah.

Todd: And that’s because we both made that mistake, right? We were both going away from something and what we were doing is we were projecting our internal value of freedom onto an external thing called money. You can’t do that. You can only experience an internal value through an internal experience. It’s not an external thing. That’s why it results in disappointments.

So when I’m coaching clients, what I do is I work with them around next steps of visions and dreams of where they really want to go. It’s not about what they want to leave behind, but what do they really want to do.

The neat thing about that and how it plays in financial independence is it opens up a lot of myths.

The way we structure financial independence traditionally is you have to amass this wad of cash and you got to get your expenses down to a certain level to where you’re spending a certain percent of your portfolio, blah-blah-blah. We all heard the song and dance. That’s how it’s traditionally perceived.

But when you start really getting clear on what you really want, where you’re really going with it, then what happens is you start realizing, “Gosh! I’m not really looking to never work again. I’m just looking to create this over here and it’s going to take me a few years to do it.” You then start realizing that maybe a bridge fund is good enough and you can start living a truly free life much earlier than you had thought otherwise was possible.

It opens up a lot of possibilities when you start getting clear in getting rid of the myths in your mind about why you’re doing these things.

Mad Fientist: Yeah. That’s an amazing advice and that’s something that really made a big impact on me and my wife in particular. She didn’t see the point. She liked her job. She liked her life. She’s like, “Why am I going to just save everything I can for no reason when I’m just going to keep doing the same thing?”

It was only once we really started talking about how we can make our lives better by spending more time abroad and seeing family since both of our families lived in opposite continents. It wasn’t until we put into that frame of mind that she’s like, “Oh! Now I see why that’s a good thing to work towards.” Not at the expense of limiting our current life, but it is something to work towards that we could actually make our lives better.

Todd: Yeah. I don’t want to take anything away from financial independence. I’m agreeing with you a hundred percent. It’s a great lubricant to life, but it’s not a substitute for life and it’s not that kind of a goal. It’s just a lubricant to life when you have financial independence. You still got to go lead your life. You still got to create happiness. You still got to do stuff. All it does is it lubricate things. It allows you to pick and choose. It allows you to make your choices as oppose to being restricted. That’s the beauty of it.

Mad Fientist: Yeah, absolutely. So we’re getting near to the end of the interview here. I usually ask all my guests, if someone is just starting out on the path to financial independence, is there any one particular piece of advice you’d offer them? It could be investment related, it could be just happiness related or just on the path itself, something about the path to this end goal. Is there anything that you would offer them?

Todd: Well, it’s something that you and I share. It’s a scientific process. It’s not luck. It’s not random. It doesn’t take amazing intelligence. There’s a science to it.

You teach the same stuff I do. It’s not like there’s some big secret out there. Read your site, read my site. Go read Pete’s site. Mr. Money Moustache is what I’m referring to as Pete’s site. Go read this stuff. It’s free. You don’t have to pay us a dime and go learn. It’s pretty straightforward.

Yes, there are some more advanced topics. I’m going to have paid courses for some more advanced stuff, but it’s pretty straightforward. Most of what you need to know is free.

Mad Fientist: Absolutely! That’s a great advice.

Todd: Just take action.

Mad Fientist: Yeah, absolutely. Don’t read forever. That’s another trap I think people get into.

Todd: Get ready, get ready, get ready.

Mad Fientist: Yeah. They just keep getting ready and never actually do something.

Todd: I will throw something else in.

Mad Fientist: Yeah, please.

Todd: You have to be clear about your commitment. I talked about that day in the park. Did you ever commit to a process where you got really clear and committed?

Mad Fientist: Oh, yeah, just when I stumbled on early retirement extreme back in 2011 or something. I’d always been a good saver-up until that point, but I really had no goal. I just like the idea of having the money, security.

But once I realized that early retirement was possible, that’s when I was just like, “Woah! That’s what my goal is and that’s what I’m going to work towards.”

Todd: What carried you through the difficulties? For me, I had a lot of setbacks. It wasn’t just a straight line path for me.

Mad Fientist: Yeah. I think it carried through very well. There was a definite period of a couple of years where I wasn’t happy. I was so focused on the goal that I made myself really unhappy and I made my wife really unhappy. It was only once we emerged on the other side that I realized I did it really wrong.

So, my path was definitely not something to emulate. I was just so focused that nothing else mattered. Obviously, I wasn’t focusing on my happiness or my wife’s happiness or anything like that. That was a big mistake.

Todd: The key, I think, is you have to be clear on your commitments. What are you really committed to, what you do it for, what does it look like to you, how are you putting it together, what are the next steps? Clarity of mind causes clarity of actions and produces results.

Mad Fientist: Yeah, absolutely. That’s an excellent advice as well. If anyone wants to get in touch with you or read more, obviously they can go to FinancialMentor.com. Is your email there or…?

Todd: Yeah, that’s it. That is my hub. You can find anything else from there. It’s FinancialMentor.com. I give away subscriber bonuses. There’s a free course 52 Weeks to Financial Freedom. And no, it’s not get rich quick. I probably should change the title, but what I’m trying to communicate is it’s a 52-week course that explains how financial freedom works. It goes in structures.

And then I give away a free book, 18 Essential Lessons from a Self-Made Millionaire. It just goes through some of my life’s lessons, a lot of what we talked about here, but other stuff too as I was on my journey and how I learned my lessons.

Mad Fientist: Excellent!

Todd: Those are all freebies.

Mad Fientist: Perfect! I’ll link to both of those if they have landing pages. If not, I’ll just link to the main site and people can sign up for that. That’s sounds excellent.

Todd, I really appreciate it. It’s been a really fun talk. I really appreciate taking the time to chat with me.

Todd: Thanks for having me on the show. It’s good talking with you.

Mad Fientist: Alright! Take care.

Related Post

FI Laboratory
Chart Your Progress to Financial Independence!

Calculate your FI date and graph your progress to FIRE for free in the Mad Fientist's FI Laboratory!

27 comments for “Financial Mentor – Hedge Funds, Happiness, & Over 15 Years of Early Retirement

  1. Elephant Eater
    November 24, 2015 at 10:41 am

    Brandon,

    Great job getting Todd on the podcast. He along with MMM really transformed the way I thought about finance, life and the whole concept of retirement. They made me realize it is not some black or white situation and is all about using your finances to develop the lifestyle you want and you can define it however you want. Great stuff!

    Cheers!
    EE

    • The Mad Fientist
      November 24, 2015 at 3:02 pm

      Exactly. Money is a tool you can use to develop the lifestyle that makes YOU happiest and you should ignore other people who try to define that lifestyle for you because most other people are crazy :)

      Glad you enjoyed it, EE!

  2. rosewatereliot5
    November 24, 2015 at 10:58 am

    Excellent one, Brandon. It’s been impressive to listen about how candid you and Todd are re: what makes happiness once the game has been won. I get the feeling that some folks just want to play video games, eat exotic food, and travel the world. But seems like you and Todd are both seeking something more, and are doing the hard, uncomfortable work of figuring it out.

    • The Mad Fientist
      November 24, 2015 at 3:09 pm

      Still trying to figure it all out but nothing good has ever come easily so I don’t mind doing the work because it will hopefully pay off :)

      Glad you enjoyed the interview and thanks for the comment!

  3. financiallydependent
    November 24, 2015 at 5:16 pm

    Would you comment (or perhaps write a separate post) on your thoughts about Todd’s approach to managing his investment? What I mean is, he stated that he’s not exactly “timing” the market, but he is using his vast knowledge of how the market works along with current events to influence where his investments are to minimize risk. He may not want to call it timing, but that’s what it sounds like. It may be very sophisticated, and thus different from an amateur who goes by his gut or some random piece of news, but it’s still pretty different from the passive investing philosophy we see on your site, which is excellent, and so many other sites. Curious as to your thoughts on tension between these strategies. Thanks, and keep up the great work!

    • The Mad Fientist
      December 1, 2015 at 5:58 am

      Hey, sorry for the delayed reply; my wife and I took a trip and I decided to leave my laptop at home so that it was a proper vacation!

      I used to record a little outro to each of my podcast episodes to give my thoughts about the interview but I haven’t done that for the last few episodes but maybe I should start doing it again? Anyway, here are my thoughts and answers to your questions…

      I would agree with you that it is timing and as you heard, the problem with timing is that even if you get it right on the one end (i.e. in Todd’s case, taking his money out of the housing market), you also have to get it right on the other end (i.e. putting your money back in) to really reap the benefits. That’s hard to do and it could cause you to miss opportunities.

      My approach is different…I’d rather just invest in something I’d happily own for the rest of my life (e.g. a low-cost, total stock market index fund) and not try to time anything. Sure, there will be scary times when it would have been nice to be out of the market but since I probably wouldn’t have picked those times correctly anyway, I’m happy taking the bad with the good (since the good will dramatically outweigh the bad over a 50+ year time horizon).

  4. Dorf
    November 24, 2015 at 5:29 pm

    You sound almost a bit homesick, Mad FIentist. If you were going to be just a bit east of Cologne, well, on the other side of Germany, I’d invite you to our T-Day dinner– on Saturday!
    Xx

    • The Mad Fientist
      December 1, 2015 at 5:59 am

      Oh man, that would have been good! Although I was missing my turkey dinner, I did have some delicious German food and beer so I wasn’t too homesick :)

  5. Eric B
    November 24, 2015 at 8:13 pm

    Great podcast! I really liked how this one went far beyond personal finance and into happiness itself.

    Did anyone else pick up on Todd’s comment that his wife sort of nudged him in the direction of starting his site and sharing his knowledge? If I recall correctly, Mr. Money Mustache said he was similarly nudged to start MMM by Mrs. MM. Starting to see a pattern…

    • The Mad Fientist
      December 1, 2015 at 6:00 am

      Glad you enjoyed it, Eric!

  6. ANonymous Follower
    November 24, 2015 at 9:15 pm

    Sorry to say, but this comes across as a total sales pitch for this guys website. What do the returns on his investment portfolio look like?

    • The Mad Fientist
      December 1, 2015 at 6:06 am

      Hey, sorry it sounded like a sales pitch. I’m always happy to promote my guests’ sites/projects/etc., since I wouldn’t ask them on my show if I didn’t like what they produce and it’s my way of giving back to them to thank them for taking the time to be interviewed, but I definitely don’t want it to sound like a sales pitch or anything so hopefully that’s not usually the case!

  7. SnakeOil
    November 25, 2015 at 3:51 am

    Todd’s podcast has been great if for no other reason for introducing me to the work of Wade Pfau. But I can’t help but have all my “SNAKE OIL SALESMAN” alarms go off hearing him in this interview. He uses pretty much every greasy marketing technique in the book, it seems. A vast knowledge that we mere mortals cannot possibly grasp. An understanding of how the market really secretly works, which allows him to time the market. The 4% rule that we’ve all been sold is a lie in the case of a down market. You can go down the road of frugality, but it is locking yourself into constant suffering.

    Some of his message about making your life count is good, but it is overwhelmed by a feeling of sliminess somehow.

    • The Mad Fientist
      December 1, 2015 at 6:54 am

      That’s probably my fault as an interviewer, since I should have pressed him a bit more to find out exactly what he does. Here’s what I was able to pick up from the discussion though:

      He is an expectancy investor so uses probabilities to determine if he should make an investment or get out of an existing investment. How these probabilities are calculated wasn’t discussed but I imagine he uses various charts/indicators/etc. that are common to technical investment analysis (it’s obvious that some fundamental analysis also plays a part in his decision-making but I imagine it’s the math and numbers that really matter at the end of the day).

      I also think he focuses a lot on limiting risk so he probably uses options to limit his downside (which would help with his expectancy calculations).

      The nitty-gritty details and the theory behind what he does probably was beyond the scope of this short interview but I apologize for not pressing a bit harder. I don’t advocate an active investing strategy though so even if Todd was able to achieve outsized gains over the years, it still wouldn’t have changed my approach or what I recommend to others, because it’s much harder to be a successful active investor than passive investor, so that’s why I didn’t feel the need to dive too deep.

      I think there was a lot of other great advice to come out of the episode though so I’m glad you at least enjoyed some of his other messages!

      • Rick Mayor
        January 19, 2016 at 5:40 pm

        I really don’t see where these folks saw this “sales pitch” “snake oil salesman” stuff from??? I’m a little late getting to this podcast as I thought you’d gone offline or something as I use the check your site religiously but didn’t see any updates for quite some time late last year. Anyway I thought this was a very informative podcast and will definitely check out Todd’s website. Maybe he is just trying to sell something, but I sure didn’t get that as the take-away from this podcast! Nice to have you back in action and will again start checking your site regularly!

  8. Stockbeard
    November 25, 2015 at 2:44 pm

    As always, thanks for the transcript

    • The Mad Fientist
      December 1, 2015 at 6:55 am

      My pleasure! Thanks for reading :)

  9. Tim
    December 3, 2015 at 12:18 pm

    On a purely superficial level – your voice sounds great! I noticed it right away before you even mentioned the change. What microphone / equipment did you end up going with?

    • The Mad Fientist
      December 4, 2015 at 6:55 am

      Haha, nice! I’m really so happy with the new microphone so I should have bought it a long time ago!

      After seeing so many podcasters recommend it, I ended up going for this one.

      I can see why everyone recommends it – the quality is incredible and it only cost $55!

  10. Nancy
    December 5, 2015 at 6:10 pm

    Is there a link to Todd’s conversation with Wade Pfau? Thanks.

  11. Donta
    March 7, 2017 at 2:51 am

    Mad Fientist…just found your podcast and site a few weeks ago. I have been consuming everything at a rapid pace. Thank you so much for offering up your knowledge and support to help us reach our financial goals. I think a few follks from the comments are mentioning the “sales pitchiness” of the interview because Todd seem to evade simple questions because he thought his answer would be too complex. I am totally noob in this space so I am sure he has a great deal of knowledge and his is probably crushing it but he just didn’t seem to want to connect to the common listener on a tactical level like other “down to earth” FI heros (Justin from RoG, JLCollins, MMM, 1500s etc…). With that being said, I still have a profound sense of gratitude for him being on the show and trying to share some of his knowledge.

  12. fred boucher
    June 6, 2018 at 12:21 pm

    I know this is old, but I just listened to it and, although I enjoyed it, I don’t understand one pretty major thing: How can you call from 2000 to 2012 a “flat spot” in the stock market when a globally diversified portfolio of 100% stocks distributed across value, growth and emerging markets grew 7.52% annualized over the period? I crunched some numbers starting with a portfolio of $2,000,000 and a withdrawal rate of 4% per year, and ended with a portfolio over $3.02M at the end of 2012. This takes into account all the 4% withdrawals AND a 40.55% decline in 2008! I’m really curious what Todd is invested in if this was a flat spot for him. Thanks for the podcast!

    • Todd Tresidder
      June 7, 2018 at 6:00 pm

      @fredboucher and I exchanged some friendly emails on his comment above to where we could agree that there are different ways to look at this issue. In a nutshell, there are many ways to crunch the data that will result in different conclusions. To make the discussion easy, I just ran across a tweet the other day addressing this very issue of lengthy flat spots and their implications https://www.seeitmarket.com/debunking-myth-investing-for-long-haul-part-i-17062/ I think it does a reasonable job of looking at both sides of the argument. My point in sharing this is to show how this no more makes Fred wrong than his analysis makes my conclusions wrong. It’s unquestionable that certain buy and hold strategies deliver prolonged flat spots (that are magnified by SWR analysis), but in any given time period other asset allocations may not face the same problem. Stated another way, different asset allocations perform differently at different times, but they’re all prone to experiencing a long term flat spot when bought and held, regardless of any specific past performance. For example, it’s entirely possible and logical for bonds and stocks, both domestically and internationally, to correlate to the downside even though specific data analysis may not support that conclusion. As stated in my other comment on this same date, what I’m most concerned about is the right/wrong polarization and judgment within the FI community around these issues (particularly low cost passive index asset allocation). Fred can be right based on his data, and Todd’s position in the podcast can still be valid and fully supportable. My intention is to move the conversation toward understanding the nuance and what can be learned rather than just attack/defend closely held beliefs. Hope this helps.

  13. Todd Tresidder
    June 7, 2018 at 4:00 pm

    Brandon, I was reading through the comments above because a listener told me there was some aggression and confusion in this thread. I’m impressed with your analysis of my investment methods. Given that we never discussed it that’s pretty darn good inferential analysis. You’re actually darn close to reality, but there were two parts that were not accurate that should be corrected – I don’t use options to protect the downside, and I don’t use charts or chart patterns since they’re subject to variable interpretation (not repeatable science). With that said, your emphasis on risk management and concern for the difficulties of both exiting a high risk market and getting back in is spot on. For example, I correctly exited real estate before the big decline (because of my emphasis on risk management), but I never did get back in for the rise (because of my emphasis on risk management). To this date, I’ve never bought back in. Totally missed it. And because my focus is risk management (not market timing), I would likely miss it again should a similar situation present itself. It’s one of the prices you pay and is part of that particular investment process. Regarding the “snake oil” and “sales pitch” comments, I tend to generate that feedback on other FIRE blogs, but nowhere else. For example, my interview on ChooseFI years after this one was published is the most controversial in their history. People were absolutely polarized generating the most comments of any thread in their Facebook community. They either claimed it the best interview ever, or that I was a scum bag, snake oil salesman. There were almost no balanced comments discussing the information or educational value. It was remarkably emotional, not too different from some of the later comments in this thread. This is all the more interesting when you realize I’ve been on over 200 interviews and this response only occurs in the FIRE community. What I’ve come to realize is my disagreement with certain closely held tenets of the conventional FI community like buy-and-hold-vanguard-total-stock-market, or extreme frugality, as the ONLY acceptable solutions seem to fire up emotions in listeners. I further motivate the reaction because my methods are beyond the scope of a podcast interview to explain (unlike buy and hold, which is very simplistic and can be explained fully in a few sentences) so people interpret that as “evasive” or not being transparent. The truth is it requires a wholly different framework to understand and presents nuanced truths different from conventional wisdom. Additionally, the fact that I sell courses and books when few (if any) of the oher FI sites have a business model outside of advertising further violates expectations and invites “snake oil” criticism. However, last time I looked, Vanguard had a pretty clear business model and nobody is calling Jack Bogle a snake oil salesman for it. In my mind, as long as the business delivers more value than it charges and is overt about it’s model then there’s nothing slimy about it. Clearly, others disagree. Anyway, my intention with this and other FI community interviews is to introduce nuance and alternatives to the FI conversation. My concern is the FI message has gotten polarized, and that’s not healthy for the community in the long term. I hope sharing these thoughts brings some context to the conversation.

  14. Charles
    September 23, 2018 at 8:04 pm

    Thanks for posting the podcast. I agree that entrepreneurship and real estate are the 2 largest ways to leverage our money. In the past, I used to time the market and then I eventually got slammed during the last few recessions. Nowadays, I time the market less and I don’t feel as stressed! Thanks again for the financial tips!

  15. James wilson
    January 11, 2019 at 2:31 pm

    Todd my name is James Wilson. I’m 48 is it too late of an age to get a finance degree and work in the field

Leave a Reply

Your email address will not be published. Required fields are marked *