I was on Yahoo Finance yesterday with Michael Santoli discussing the release of my new book and in the interview he asked me about some of the key points I make:
- Most importantly, the macro picture matters more than it ever has. The world is more interconnected and intertwined than it’s ever been. Understanding what happens at the local level doesn’t guarantee success. You have to understand the big picture. You have to understand the global macro picture, central banking, how the monetary system works. Succeeding in what I call “the new macro world” relies on an in-depth understanding of the macro picture. While the financial crisis has faded, this fact is likely to become increasingly prevalent in the coming years as the world only becomes smaller.
- I kind of bumbled through this one in the video (ah, the fun of not knowing precisely what you’re going to discuss on TV!), but my basic point was simple – “Stocks for the long run” doesn’t apply in the way we’re often told. Our portfolios aren’t just made up of money that can afford to sit in accounts for 50 years. Much of it is made up of savings that could need to be tapped for life’s big events – buying the new home, going to school, paying for children, getting married, retirement, emergencies, etc. Our financial lives don’t stop when we retire. They are a series of events that require planning, stability and “stocks for the long run” often implies that we can simply afford to “ride out” all of the ups and downs of the stock market. I don’t think it’s quite so simple.
- Why a home isn’t actually a great investment. When thinking about financial assets you have to calculate your real real return. That is the after tax, after tax fees and after inflation return. And homes are an extremely expensive financial asset. When we calculate the real, real return of housing over the long-term the returns are essentially in-line with inflation. Housing isn’t year as good of an investment as many think.
Watch the full interview here:
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.