Just Keep Buying by Nick Maggulli: Review, Thoughts and Key Takeaways

EPISODE SUMMARY

In our first book review on the podcast, Jordan and Evan provide their thoughts and key takeaways from Nick Maggulli's book, Just Keep Buying.

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TOPICS IN THIS EPISODE

What did we like about the book?

When is saving more important that the specifics of your investments?

How to spend without feeling guilty

How much to invest

How much of your raise should you be saving?

Why you shouldn't be fearful of volatility

Investing in bear markets and reframing the upside opportunity

Why you'll never feel rich and why money isn't everything

RESOURCES

Nick Maggulli's blog Of Dollars and Data

OTHER EPISODES

Guide to Recessions and Bear Markets

Dips, Corrections & Crashes

How can money make you happier? A conversation with Andrew Hallam

If you enjoy listening to the podcast, please leave a 5 star review on Apple Podcasts

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Become more confident with your money - Financial Foundations Course

Transcript

Evan Neufeld: Hello, and welcome back to the Canadian Money Roadmap podcast. I'm your host, Evan Neufeld.  Today is a new topic for us here on the Canadian Money roadmap. We're going do a book review of Nick Maggiulli’s latest book, Just Keep Buying.  Jordan we're readers now. 

Jordan Arndt: Yeah. We're readers, this is a good one though. I'm looking forward to this conversation. It's a good book. 

Evan Neufeld: Jordan and I both really enjoy reading, especially when it comes to personal finance books and things like that. I know lots of you as listeners do as well, especially those of you who filled out our survey. So this is our first episode in response to some of the answers that we got from the survey. If you haven't had a chance to fill it out yet, there's going to be a link in the show notes here until the end of June. So if you're listening to this afterwards, sorry, but if you fill out that survey, you'll have a chance to win a copy of one of our other favorite books.  Maybe we'll do a review of that one too. The Psychology of Money by Morgan Housel. But today we are going to talk about Just Keep Buying, a book by a guy named Nick Maggiulli. He is based out of New York And I think he's the chief operating officer for Ritholtz Wealth Management, I think that's his title.  So he's in a similar role to what we do, maybe not as client facing as much, but in the financial planning space anyways. So this book is for you as investors. So it's not necessarily for financial professionals. It is targeted to be accessible for anyone, to help them much along the lines of what we want do here on the podcast of helping people invest smarter, reduce taxes and retire with confidence.  So a lot of this, maybe call it confirmation bias, but a lot of the things that we talk about on the podcast were brought up in the book. Would you agree with that Jordan? 

Jordan Arndt: Yeah, for sure. The book was broken into a couple parts. The first half is kind of about saving, the second half is more about investing. I thought Nick does a good job of using anecdotal stories and some flavor in there along with a lot of research and backed up statistics and graphs and charts that isn't overwhelming by any means in terms of technicalities, but enough to prove his points and go beyond just stories and points. 

Evan Neufeld: Jordan, you haven't seen my list of favorites here, but I really liked the data side of things, but also the approachable tone that it's written in. There's lots of those historical stories and just lightheartedness, where he talks about his own life and things like that.

Sometimes it's nice to have a good idea. But until you have the data to back it up, it's just an idea. So this book was great for that. So it covers off a lot of the principles that we've often shared with people, but includes a lot more academic research to back it up. That being said, sometimes there might be a little bit too much esoteric data. I found myself skimming a few sections, which is just fine because he has really good summaries at the end of chapters. And at the end of the book too, if you kind of get lost in the weeds a little bit. One thing that I will mention off the top, of course is this is an American book and so it is targeted a little bit more to an American audience. There's a section or two for American specific retirement accounts that just won't be relevant to you as a Canadian listener.  Here on the podcast we wanted to provide a Canadian's standpoint or view on the financial system, because there is so much American content out there.  So, this is maybe counter to that a little bit, but there is enough in the book that's behavior focused and things that transcends geography in a way. So I think it's a really great book to recommend and I feel really comfortable doing that right off the top here.  Okay. So let's hop into maybe some of your key takeaways with this book. So let's start in that first section about saving perhaps.

Jordan Arndt: I guess the primary key takeaway that I took away from the saving section is that when you're starting out in your investment career or journey, saving is much more important than your investment choices. And we can think about that, I guess, from a numerical standpoint. So if you're saving, let's say a thousand dollars a year, a 10% return on that is a hundred dollars. You know, you think about it. You could probably spend a hundred dollars going out for supper these days, or there be ways that you might be able to filling up your car with gas, filling up your card gas there's ways that you could save that.

So the point is that your investment returns, whether it's 1% or 10%, isn't as important as your savings rate. Now that flips using an extreme example. If your portfolio is $10 million, a 10% return is a million dollars a year. That's tough to save right, a million dollars a year is big time for most people.  And so at that point, your investment rate of return is much more important than your savings rate. We can think of it, a bit of a continuum. And so someone who's starting out, try and think more about your savings rate and how much you can save, because that's going to have more of a meaningful impact than your investment returns, especially at the beginning.  And as that starts to cross over where your savings rate is maybe equalish to your investment rate of return. Those things might start to shift where you got to start thinking about more investments as opposed to savings. 

Evan Neufeld: Yeah. The minutia kind of creeps in a little bit later on. So at the beginning, when someone's first starting out are you going to pick the best fund or the cheapest ETF, or a hundred percent stocks or an 80/20, or maybe you're a 60/40 stocks and bonds. It doesn't really matter and he's kind of making that point, like at some level it, I guess it might. 

Jordan Arndt: And it always does matter to some extent, you want to make sure that you invested appropriately. But is it the best use of your time?

Evan Neufeld: Exactly. 

Jordan Arndt: And efforts in terms of stressing about earning 1% on your, you know, 1% better return on your investment portfolio. Again, using a thousand dollars example. Is such a small amount that thinking about your spending and savings rate is, is going to be more meaningful at that point.

Evan Neufeld: Can we talk about the phrasing here of savings? Sometimes people get it confused when we think of a savings account, that's just parking cash and sitting it on the sideline. When we talk about savings, we're referring to taking employment income or whatever income that you have and using that to put away for something else as opposed to spending it.

And so it was buying income producing assets. That's the language that Nick uses in the book here. Income producing assets. So stocks, bonds, real estate, things like that and these are investments.  So it is investing, but the savings rate is just how much you're transferring from cash in the bank to buying assets with.  Is that a fair explanation? That's a great point. One thing that I really liked from this section as well was the splurge rule. So talking about ways to spend without feeling guilty, because especially in the finance world you just see a lot of people or case studies on YouTube or the people that are retiring early.  They're 30 years old and they retired with 10 million dollars. Like what in the world? Like how is this kind of possible? And there's people out there that live off rice and beans forever, hoping to have a huge bank account and investment portfolio and so on and so forth. But at the end of the day, sometimes you’ve got to spend some money.  So if you see all these things out there of like, oh, you can't buy the Starbucks latte or you can't do anything like that. How do you ever actually feel good about spending money on nice things or high quality things or anything like that? He has a splurge rule that he puts in here. So I'm going to quote here from the book and Nick says, “if you've ever debated, whether you could afford something, even when you had sufficient funds. The problem isn't you, but the framework that you're using to think about your spending”.  So he says, “anytime I want to splurge on something, I have to take the same amount of money and invest it as well”.  So he calls this 2x splurge rule. Have you ever done something like this, Jordan?

Jordan Arndt: I haven't, to be honest, it's an interesting concept and one that says, okay, if I'm gonna spend a hundred dollars on going out, maybe going out is a splurge thing for me. I also need to save another a hundred dollars that I'm going to invest.  And I think it's an interesting way to maybe justify, you know, some of those splurges, but also still thinking about longer term investing and some of those longer-term goals that you have. 

Evan Neufeld: So it's taking care of your present self a little bit and also taking care of your future self.  I have a client who might be listening here and so if this sounds like you, it probably is. Their rule for splurging is the 24 hour rule. So anything over a certain threshold, if you wait 24 hours and you still want to buy it, then you go buy it. I like the, the two X rule here because it kind of kills two birds with the same stone.  So if you're saving twice as much, you have to assume it's going to take you twice as long to do it. So there is a little bit of the cooling off period between, “oh, this is awesome, I gotta get it” and also spending a little bit or saving a bit extra for yourself as well. So I kind of like the rule.

Jordan Arndt: Yeah, it was a good one. One of the other points that I liked about this saving section is Nick does a good job of acknowledging that saving everything, you know, living on rice and beans, maybe isn't necessarily the goal, but also the opposite maybe isn't the goal either. And so he talks about saving what you can, you know, people have probably heard save 10%, save 20%.  Well, what does that mean? Is that even possible? Life happens, you go through different phases with kids and house and income and all that. So he really talks about save what you can and understand it will fluctuate at different times. You know, he says, when we have the ability to save more, we should save more and when we don't, we should save less.  We shouldn't use static unchanging rules because our finances are rarely static and unchanging. And I know that's been certainly our experience in our household and I'm sure almost everyone can relate to that.

Evan Neufeld: For sure. This relates to another book that maybe will review in the future. It’s a Canadian specific one called The Rule of 30 and they try to quantify this concept in that book.  There's some pros and cons and some things that go along with this. My problem in my experience working with clients is that saving more when you can, is like pulling teeth a little bit, because that's where something like lifestyle creep comes in and we're going to talk about that.

Jordan Arndt: There needs to be a level of discipline for sure.  But maybe it's more on the other side, you know, give yourself some grace I guess, in those periods where you're not making as much or something has happened and you need to take a break from your contributions. You got three kids in diapers, it's a lot going on. You can't say it's going to be okay for sure but, you know, look at your plan, review your plan and give yourself some freedom maybe to pause once in a while. 

Evan Neufeld: And so maybe along with that, going back to the lifestyle creep thing, so that's, when you make more money, you just start spending more money. So he gives a little bit of a rule of thumb there as well. Backed up with some data. If you get a raise or if you get a bonus, spend half of it and put the other half into giving it to charity or investing for your future self or something like that, do something good with half of it.  But you can spend that, it's okay. Like it's okay to have some lifestyle creep over time. You know, you've worked hard for what you've earned and it's okay to spend that money on your family, on yourself and relaxing, whatever the case may be.

Okay, Jordan, let's jump ahead to the investing section here, which is the bulk of what most people are thinking about when it comes to “just keep buying” or that concept.  So some of the things that he really focuses on here is volatility and why we shouldn't necessarily fear market volatility. 

Jordan Arndt: Yeah go back to, I think it was just the last podcast we did actually, on bear markets. And we've talked about dips and crashes and how often that happens.  It happens more often than you think, volatility you know, you can't really fear it because we can't avoid it. Volatility in terms of seeing your portfolio decline is probably how we see volatility, maybe how it feels to us. We can't fear that risk or the risk of it going up and down is kind of the price of admission if you want to be invested in, certainly risk assets like equities or stocks. 

Evan Neufeld: Yeah. I'm gonna quote Nick here where he talks about risk is the price of admission. He says avoiding the bumps in the markets can be beneficial, of course, right?  Like if you can miss all the bad stuff, of course, it's beneficial though knowing when they will occur is impossible. Unfortunately, there is no magic genie, but what do we have instead, we have the ability to diversify. We can diversify what assets we own. We can diversify when we own them buying a diverse set of income producing assets over time is one of the best ways to combat volatility when it rears its ugly head.  This tracks with what we've been saying, Jordan.

Jordan Arndt: Yeah, for sure. Maybe we're sounding like a broken record a little bit. It comes back to the title, you know, just keep buying. This is really, I think his big advocate that he is really trying to get through in the book is that we can't time the market. We don't know when those bad days will happen. Something we like to quote all the time is, you missed the best 10 days and your returns got in half over a period of time. And anyways, the numbers don't really matter, but we just don't know when those days are going to happen.  So of course, like you said, if we avoid those bumps, if we avoid those bad days, that would be great. We just don't know when they're going to happen. And they often happen really close. The best days often have been close to the worst days. And so yeah, if someone can figure out how to get in and out and know when those are going to happen, of course that'd be great.  But we can't predict the future. 

Evan Neufeld: Right and as I always say, you got to be careful about the people that claim they can. If it sounds too good to be true, it probably is. Charlie Munger he might not be a name that all of you would recognize, but those who do probably really respect him, he is Warren Buffet's long-time investing partner.  And he's what, 98 or something like that. He has been investing for longer than most of you have been alive and probably twice as long in many cases. He is at the point where the filter is gone. He has a lot of really strong opinions on things and anyways, Nick takes one of his quotes here.  He says, if you're not willing to react with equanimity, I had to look that one up. I hope I even pronounced it right, but it's calmness and composure. So if you're not willing to react with calmness and composure to a market decline of 50%, two or three times a century, you are not fit to be a common shareholder and you deserve the mediocre results you're going to get. Ouch, says it like it is. Yeah. So, Nick says with much more grace and it's not long winded, but data to back it up and things like that. But it's you gotta participate and participation comes with a few knicks and scratches along the way. One thing that I liked from this investing section was making reference to how do we invest through a bumpy market?

So when things are down, kind of like they are right now, he does a little exercise called reframing the upside. Do you remember how this how this one played out?

Jordan Arndt: Yeah, it was interesting. So he talks about how if the market is down, let's use numbers here. So the market is down by 33%.  You know, he poses the question, how long do you think it will take the market to recover from its 33% loss? Now a 33% loss requires a 50% gain to get back to its high. 

Evan Neufeld: Lets stop there for a second. The percentage math is a little bit confusing sometimes. You think, if I'm down 33%, don't I need 33% again?. No, you don't. Let's go to the extremes here. Right? So if your investment gets cut in half, so you had a hundred dollars, now it's down to 50. For you to get back up to a hundred. your investment needs to double now, right? So if you drop by 50, you need a hundred percent on the way up to get back to where you were, right? So this is the pesky percentage math. We could probably do a whole podcast on percentage math here unfortunately. Yeah. So it looks better in spreadsheets. Yeah, exactly. We love spreadsheets. So let's hop back in here. So how long will it take to recover from a 33% loss when you need a 50% gain on the other side. 

Jordan Arndt: Yeah. So I guess that's where, you know, based on your thoughts of the market moving forward or, or whoever you're listening to for that, if you think it'll take a couple years to get back to all time highs, then your expected annual return for those two years would be 22% if you invested money at that point. Which is a fantastic return.

Evan Neufeld: That's awesome. It's about pretty close to four times what you would reasonably expect on a long-term average, right?

Jordan Arndt: So of course you're not going to time that bottom exactly right. But that doesn't really matter that the point kind of remains that if you are positive, I guess, on, on the long-term outlook on the market and typically long- historical returns have been in your favor in that regard. Understanding that buying low in that sense can reframe that upside to show maybe those returns that you're going to get over the next, shorter time on those dollars invested when things are down.

Evan Neufeld: For sure. So yes, if you invest, when things are down, it might go down again, but that's true every day, right? Absolutely. If the market's gone straight up for 10 years, it could still go down tomorrow. So that risk is never gone. But what you do have is the benefit of a discount today. So when things are down 33% and hopefully eventually they get up to a 30% or a 50% gain to get back to all time highs.  Even if it takes five years, then your expected annual return on that money invested at the bottom would be 8% a year. That's awesome. Still pretty good. Let's move on from this investing section here. Of course we could talk about this for hours and hours and hours. That's why it's a book.  Go buy the book and read it. Well, hopefully there's enough here that's kind of peaking your interest. If you're looking to buy the book before I forget. Yeah, you can get it on Kindle. We read it a digital copy here, but it'll be available in your local bookstore too. If you want to go support someone local, you can buy a physical copy there.  I don't have affiliate links. I don't have any way of charging you to sell you a book or anything like that. This is just a good book to have on your shelf. So let's go into this last section for your favorite takeaways here, Jordan. Is money everything? Well, time in a lot of ways is actually greater than money and it's a good thing to keep in mind.

Jordan Arndt: I really like this and his last two chapters acknowledged this point and I really appreciated this about the book. I thought he, back to what we talked about earlier, he really does a good job of walking that line between optimizing your wealth and making it efficient, but also understanding that maybe there's a point where, growing the pile bigger isn't necessarily always the goal.  And so I think he does a good job of that. And like you said, he talks about his time greater than money. And I think at certain times, Yes and at certain times, no, potentially. And maybe it's a bit of a privileged position to think about that. For a lot of people that's maybe not the case, but you can't get more time.  And I think as life goes on, you know, that's the one asset that just dwindles and there's a finite amount of it. So, yeah. Thinking about how you use your time and spend your energy is important. 

Evan Neufeld: So along with that too. He talks about the idea that even if you've done really well, you've optimized everything, you've saved, you've had a great income for your whole working life. You've had no financial calamities of any sorts. You're still never going to feel rich.

Jordan Arndt: This was awesome. Doesn't matter. And this was backed up by data. So he had a study that broke down individuals by their net worth and all across the board, except for the very lowest percentiles of net worth. People felt that relative to others, they were poor. So even at the, you know, the 100 percentiles or the 99 percentiles of net worth, felt like they were 80% or 75%. And that's true though all the way down, even the 50 percents felt like they're the 40th or 30th and basically all the way down until you get kind of in the, the one to 10% of net worth feel like they're richer than they are, which is an interesting conclusion. There's something else there. But you know, the point is whatever your net worth is today, or whatever you have invested today, you probably feel if you're like most people, I guess you probably feel like others are richer than you and it's backed up that doesn't change as that gets better and your net worth gets larger. You still feel that way. So, again, he's kind of making the point that is money everything, because you're always going to feel like you're behind the game or behind others in that regard. 

Evan Neufeld: And in some ways you are though, let's do a counterpoint here, maybe, right?

Unless we've got Elon Musk and Jeff Bezos on the other side of this podcast, which I doubt we do, there are people that are always going to be richer than you. So what's the point, what's the goal, you know. Is the goal to be the richest guy on the block. Right. You sure hope not, you know?

So reframing that focus for your money, because you'll never feel rich and you're never going to be the richest guy either. It's always easier to point at someone else doing better and feel bad about yourself and whatever but being rich is a relative concept. And being rich is something that kind of just makes you cringe a little bit, but just let's talk about absolute dollars here.  If you have a net worth, this is according to stats that we're pulling from the book here. If you have a net worth over $4,210, you are wealthier than half of the world. Yeah. How does that feel? 

Jordan Arndt: Yeah, it's really quite staggering when you think about it, taking it even further, the median net worth in the US is $93,000.  So if you have a net worth greater than $93,000, you're in the top 10% globally. It comes back to what, I guess, what do you value? 

Evan Neufeld: What do you value, what's worth spending your time on? How much is enough? Yeah, lots of things to think about here.

Jordan Arndt: Again, this is just food for thought, I have things that are important to me. Evan, you've got things that we are going to differ on some stuff and we'll be aligned on a lot. And you know, wherever you're listening from, you're going to have your own values and perception on that. I think he just does a good job of framing it, I guess, or tying together those pieces of money and life in some of the bigger picture things, 

Evan Neufeld: Which I really respect about the book because it's very easy to write money books and have it all being about optimize, optimize, grow, grow, grow. Yep. And so the last chapters here in particular would relate well to the interview I did with Andrew Hallam and his book called Balance, Money and happiness and greed and, and whatnot. If you want to go back and listen to that interview with that kind of topic interest, you  can go back and have a listen to that one.  It was pretty cool. That's another good book that we could maybe review here on the podcast, but any other key takeaways here before we wrap up Jordan? 

Jordan Arndt: I don't think so. I think this is a book that would be worth your time. You know, you might find yourself on one end of that saving investing continuum, but I think there's some good nuggets in there no matter where you are in your investing journey. 

Evan Neufeld: Okay. So how many stars out of five? 

Jordan Arndt: Oh, putting a me on the spot here. We didn't talk about this. I am going to go 4.2. 

Evan Neufeld: That's pretty good because I'll agree with your rating. This is Jordan's star rating. And I'll say I can't deviate from that too much because it was practical, it was approachable and it was short enough that we could kind of plow through it. Jordan, you read in two days here, you're a bit of a power reader. And a lot of things track with what we know to be good behavior.  There are no crazy ideas in there that I'd say steer clear from this chapter. Everything else is good, but steer clear. No, it's a great book and it's really practical. So yeah, I would recommend it as well. 

If you liked this episode, I'd love to hear from you. There's contact info in the show notes where you can reach out and just say, Hey, that was a cool podcast.  I'd like to hear more of these book reviews. We do a lot of reading, so hopefully we can dig out some of the ones that we've read in the past and do again.  There's more books all the time about investing and about personal finance and how to behave as it relates to your money. So we've got a few ideas for other books like this, reviews like this and going forward, but thanks so much for listening again to this podcast and we'll see in a couple weeks.

 Thanks for listening to this episode of the Canadian Money Roadmap podcast. Any rates of return or investments discussed are historical or hypothetical and are intended to be used for educational purposes only. You should always consult with your financial, legal and tax advisors before making changes to your financial plan.  Evan Neufeld is a Certified Financial Planner and registered investment fund advisor. Mutual funds and ETFs are provided by Sterling Mutuals Inc.