Pragmatic Investing

<p>In this video, we go over some basic financial advice for families including budgeting strategies like envelope budgeting, tips on investing in a balanced portfolio across assets like stocks, real estate, crypto, and more. We discuss insurance, credit cards, buying in bulk, and investing in relationships and opportunities. This is practical financial hygiene advice, not get rich quick schemes.</p><p><strong>Malcolm:</strong> [00:00:00] This is boring, basic. Financial advice. But I feel like everyone out there is some sort of get what you couldn't do or</p><p><strong>Simone:</strong> like we'll look at financial advice. It's people looking at all these like charts and making it really complicated and they're way above my pay grade or like way below my pay grade, but pretending to be above, which is the worst.</p><p>Would you like to know more?</p><p><strong>Malcolm:</strong> Hello, Simone. It is exciting to be here with you</p><p><strong>Simone:</strong> today. I'm so excited. Yeah. We're going to talk today about the most important investment of all, your health.</p><p>No, just kidding. We're constantly sick because we have kids in school.</p><p><strong>Malcolm:</strong> So the most important investment of all is money. Yeah. The</p><p><strong>Simone:</strong> most important investment of all, money.</p><p><strong>Malcolm:</strong> Screw your health. That's a good, that's a good, for your</p><p><strong>Simone:</strong> health. Burn bright, die young,</p><p><strong>Malcolm:</strong> right? Yeah. So, it is true. The, the, the most important investment is money.</p><p>After maybe kids, I guess, like, you know, we are pernatalists, so we've got to say that matters as well, but I, you know, I don't know how much actual control you have over the outcome of that. I think that's why</p><p>you</p><p><strong>Simone:</strong> need to have a diversified portfolio. That means a lot of kids. [00:01:00]</p><p><strong>Malcolm:</strong> Yes. So this is actually a follow up episode to an episode that we did on how to get rich.</p><p>Where we just went over like, you know, the basics of like the actual financial world starting company and stuff like that. And I think we'll do more topics on this cause the video did really, really well and I did not expect it to do well because it's not our normal sort of a topic. But obviously something I know a lot about I should mention, you know, degree, I've got my MBA from Stanford.</p><p>Simone has her graduate degree from Cambridge. Both of us have worked in venture capital. Both of us have worked in private equity. And when it comes to investments, Simone, you had a really interesting way of framing it that you were going over with me earlier today about sort of.</p><p><strong>Simone:</strong> Yeah. We were talking about the issue of, of many people we know who've made a lot of money through investing doing it essentially by making bets, like all tact, tactically strategically.</p><p>Statistically weren't very ill [00:02:00] advised but then paid off and then they just assume I'm a great investor. And you actually saw a lot of this happen during the pandemic. The, and I think a lot of, of poker players and coaches who like teach Bayesian thinking now who have. Really summed up this kind of thinking really well.</p><p>They talk about when they're coaching poker players and they teach them to think in, in sort of a Bayesian way to make very well considered bets which are always calculated bets. And a thing that constantly frustrates them is the people they're coaching, like they'll lose a hand and they'll be like, yeah, well, I made, you know, I made the wrong choice.</p><p>I messed up cause I lost. And they're like, no, no, no. You didn't make the wrong choice because you lost, you made the right choice, but you still lost because in the end, there's some chance involved in these bets. And the same case happens with investing. You know, sometimes you make all the right choices and you lose money, but also sometimes you make all the wrong choices and you make a ton of money.</p><p>That doesn't mean you're a good investor. That doesn't mean you, you thought through things well, or [00:03:00] had a very robust strategy. And in the end, over the long run. You're probably going to lose money if you, if you don't think in a more calculated and statistically sound manner, which, you know, is, that was what we seen, right?</p><p>You were talking about all the people, you know, who used to make tons of money. Like, I mean, they put everything on Bitcoin and now, you know,</p><p><strong>Malcolm:</strong> Yeah, no. And I, I think that for a lot of people, and this is a great, like evoke set, look at your friends who are bragging about what great investors they were during the Bitcoin, the last Bitcoin bull run.</p><p>And, and we're believers in Bitcoin, but I think that a lot of people over invest in single assets because it's an asset that they have built a portion of their identity around, and this is something we increasingly see in investing, whether it's in the crypto space or whether it's in the you know, like, you</p><p><strong>Simone:</strong> know, it's just a stock, like a stock people really identify with, more like an industry people really identify with.</p><p>Yeah.</p><p><strong>Malcolm:</strong> And, and this is. It's something that in the short term, when I look at these people who are all bragging about [00:04:00] this in my like Facebook feed and stuff like that they are not bragging much anymore because. What ends up happening very frequently is somebody makes one of these ill advised bets.</p><p>It pays off. They now think, oh, I can make like an income investing. So then they start doing like really idiotic stuff like leveraged investing and stuff like that. And hold on, I'm gonna explain what I mean when I say leveraged investing is idiotic stuff. So, During bull cycles, this is something that always happens.</p><p>Somebody accidentally makes some money investing. They think, well, if I make that amount of money investing every month going forwards, then I don't need to work anymore. How can I make more money investing? And then of course, they find out about leveraged investing and they go, Oh, so this is just like a thing where like, if I'm really Smart about my polls and my puts and everything like that, right?</p><p>Like I can regularly on average make money through this investing thing. And that is true for some [00:05:00] people. We have some friends who just make astronomical amounts of money through this kind of investing. Yeah. Every single one of them. Is the type of person who did math for fun before getting into this.</p><p>Yes. They were all like theoretical math people from like MIT or like programmers who do a lot of programming or like AI stuff for fun. The people who do this well, who can actually make money with this sort of investing as an income stream. These are individuals who Just have an enormous love and talent for a specific kind of math.</p><p>If the reason you are going into leveraged investing is because you want to make money, you will fail. Maybe not the first time, but eventually you will fail. It is not a good, reliable stream of income, it is gambling. It is just gambling and you can make money [00:06:00] gambling. But most of the people who make money gambling are math nerds.</p><p>They're not like a gambling nerds. I mean, there's, there's a few, you know, obviously like, like people who are just like uniquely good at gambling, gambling, but when you talk about the people who the casinos are afraid of, they're the math nerds, right? And so if that's not your thing. Don't go into that field as a safe source of income for you and your family.</p><p>So we're starting with like some of the things you shouldn't do. And as Simone pointed out, and I actually you know, I was, I was talking with some of my friends after they, they made a bunch of money on Bitcoin. I was like, so you're going to balance your portfolio now, right? You made a big windfall.</p><p>You're going to balance your portfolio now. And they're like, no, my windfall has validated for me that I need to further consolidate my portfolio around. The area of my windfall, which is how they, they usually end up losing more money than they made during their lucky streak. So let's talk about a balanced portfolio and how you should be thinking about it in the world that we're going</p><p><strong>Simone:</strong> into.</p><p>Oh, and before [00:07:00] we go any further, we are not. Investment advisors. We're not giving you investment advice. We're talking s**t about other people. All right. And we were talking</p><p><strong>Malcolm:</strong> about how we hear the same investment</p><p><strong>Simone:</strong> advice. Yeah, we are not. Yes, this is, this is not, this is not advice. I just want to make that really, really clear.</p><p>So if, yeah, no, we're talking about how we do it and we're talking s**t about people. Okay. That's it.</p><p><strong>Malcolm:</strong> Yeah. So. This is the way I would suggest handling your investments. I strongly suggest that you with your spouse or your family or whoever, you know, is, is, is co related to your assets. And of course, once you intermingle your assets, it makes divorces much harder.</p><p>So like this is for people in like really aligned marriages. But it does really help to be able to bounce ideas off of another person is, is, is I guess what I'm saying here. So, You talk through, or I guess was yourself, like on a long walk or something like that, what you think is going to change about the world.</p><p>And I would generally develop three sort [00:08:00] of strategies, right? One is, I call them short term strategies, one is mid term strategies, and one is long term strategies. using what you predict to change about the world in the near future, make investments. But whenever you make an investment and you can do this for like a trade or something like that, that's a good general site for beginners.</p><p>I think whenever you make one of these investments Be aware that you need to set sort of a clock for yourself of when you're withdrawing that investment. Unless it's in the like ultra long term investment strategy. And when you withdraw, the investment is typically when an event resolves or when, so, for example, we had a high confidence that there was about to be an armed conflict leading up to the Ukrainian war, and so we invested in a lot of military companies during that time period. When the war started, I go to Simone and I go, withdraw all our military investments. And a lot of people would be like, wait, why aren't you investing when the [00:09:00] war?</p><p>Is going right? Like that's when the companies are doing well. No, that's when the market forces have said, Oh, they're, they're unlikely to get like additional cash flows going into them once the war is already going on, like unpredicted cash flows. It's once the unpredicted situation that you predicted resolves is when you withdraw your money from the market.</p><p>And this is, this is really critical. That you do this and then that you don't do the silly thing, which is double down because you made one right, right bet. So, for example, if you're like, oh, this covid thing, other people don't see coming. I am going to make bets that assume it's going to be here and then you make some money on that.</p><p>Don't didn't bet on the same thing that you already just bet on happening. further and more. You can make money on that. But most of the people I know who keep doing that end up getting burned more than, than resolved in their favor. Well, once you're, you're</p><p><strong>Simone:</strong> saying that basically once. mainstream society, or at least a [00:10:00] large segment of people have normalized to an idea, you're not going to make money off of it anymore.</p><p>You're going to make money off of something when you realize that there's a trend coming that other people have not yet really realized or acted upon. But once it's a mainstream idea, like during the pandemic, for example, we knew a lot of people who like, Well, into the pandemic, we're like, Oh, I'm going to do mask production.</p><p>No, they all lost money because that it was too late. It was too late already. So you, you have to think way, way ahead of the curve. Once everyone knows that something is needed, that's priced into the market.</p><p><strong>Malcolm:</strong> Yeah. Okay. So, the next thing we're going to talk about is like categories of investment, right?</p><p>So, you want. Your specific company plays, right? So this is just like I'm investing in this company or this company or this company. And then you want to invest in some either ETFs or mutual funds, um, these are honestly, from the perspective of your like lay investor, you can basically think of them as the same thing. They have different like tax implications and [00:11:00] different ways they distribute money and different ways that you reach them as investments, but they're basically collections of companies.</p><p>So suppose you have a thesis around like some country in South America, for example. Well, then what you do is you, oh, by the way, Simone, can you please withdraw all our South America investments? Because a lot of them are really reliant on China and I do not expect positive stuff from China in the near future.</p><p>Making a note. Ah, you see, this is how you, you handle investments, right? Because I had forgotten that we hadn't withdrawn all our South America plays. This</p><p><strong>Simone:</strong> is how we handle investments and we're not giving anyone advice.</p><p><strong>Malcolm:</strong> We're not giving anyone advice. Yeah, I was saying. So this is really useful if you're like, Oh, I think this country will do well.</p><p>Then you can look up like ETS or mutual funds that are tied to that resource or country or play. Right? Like, I think oil producers will do well. And then you can look up like oil producer ETS. A recent one for us has been. Uranium, right? We think [00:12:00] uranium will do well. It was really depressed in price after the, the Fukushima situation and it's been pretty depressed for a while now, but I think after, you know, what's happening in Germany right now, the world's waking up that nuclear reactors were actually pretty high utility and we're going to get some more online.</p><p>And once people see that, then we sell our uranium stocks. As soon as some country announces a plan to build a bunch of nuclear reactors, I don't wait till the nuclear reactors are there to in terms of real estate investment a lot of people will tell you, Oh, it's so easy. Do real estate investment and go into all this debt to do it.</p><p>And it's like, that makes sense for a portion of your portfolio. And when you do own real estate, you should have debt on that real estate. It's, it's kind of. Stupid not to in a growing economy. right</p><p><strong>Simone:</strong> now it's not going well, but</p><p><strong>Malcolm:</strong> it is the financially responsible thing to do in the way that the world economy has worked historically, which may [00:13:00] transform, but I think it'll be about 30 years before it transforms.</p><p>Yeah. With I. E. An economy that shrinking on average, which is one thing we talked a lot about in terms of the way that things are going to resolve in regards to demographic class. Right? Now, something to note with real estate is you know, with the world's population, not growing as much in developed countries anymore.</p><p>A lot of people can be like, why are real estate prices continuing to go up? I think this can be very confusing to a lot of people. And it's important to understand what's going on here. What's going on is that families where you used to have like five people to a household now everybody wants their own house because they're they're not finding partners anymore.</p><p>Which is why you see this increase in price in things like starter homes and stuff like that. Which is interesting. You know, it provides for some economic opportunities, but it is a short term sort of like market on equilibrium and not a long term solution. A good play that I would do if I had some cash aside in real estate is buying the types of assets that private equity firms, and this is something that's really important to note.</p><p>We mentioned [00:14:00] this was buying companies as well. There are assets that you can buy and make money off of. In ways that a private equity firm would make money off of something, but that are too small to be worth it for the effort of a private equity firm. So if you're buying some like historic building and you're transforming it and dealing with, you know, coding and stuff like that and, and turning it into like a five bedroom, like starter house thing, right?</p><p>Like a five. Separate bedrooms. What's the word I'm looking for? Five singles apartment unit, right? That can be really powerful because that's just like too small for most private equity firms to care about. And yet it can be, you know, an enormous opportunity to, to, to make money with a little bit of risk around zoning and stuff like that, depending on how you handle it.</p><p>So that's real estate. I would generally I mean, whether or not you own your house, it just depends on how quickly you plan to move. I guess I'd suggest anywhere you plan to stay for over six years, you should probably own.</p><p><strong>Simone:</strong> But it really depends, you know, on like rent versus buy. It depends on interest rates.</p><p>It depends on the market. It also [00:15:00] depends like on people's desired quality of life. But often it's a, it's a really bad idea to own a house. I think We</p><p><strong>Malcolm:</strong> need to do a whole video on buying houses because we have documents and documents on buying houses. It seems</p><p><strong>Simone:</strong> like in many cases, you know, you spend so much money maintaining a house that it can be really hard depending on the market to even make a profit.</p><p><strong>Malcolm:</strong> Anyway, so next crypto assets Bitcoin, I, I'd say you always got to eat your broccoli with crypto assets.</p><p>And by that, what I mean, Is we personally have a rule that any money we deploy in any crypto asset gets matched with a deployment in Bitcoin, uh, because it is the, the most, I think long term, the safest crypto asset as to why Bitcoin is like, we're not, I'm thinking about doing a full video on Bitcoin, but I don't really think I need to.</p><p>I can just sort of talk about it a bit here, which is interesting because there's a lot of smart people who don't seem to get why. Bitcoin is such a thing of value. Look at like Peter's eye hand. Like we agree with him on a lot of stuff and he thinks Bitcoin is just sort of pointless. And I'm like, how, what?</p><p>Okay. [00:16:00] So let's, let's go back a bit. Why do things like art have a lot of value, right? This is an important question that individuals should be asking themselves, right? They have a lot more value than like their actual value is because there is a limited quantity of them. And a wealthy society can use them as a very lightweight store of value.</p><p>If they ever need to move or leave or flee a country, they are very useful value stores. You can think of them almost like printing something on money. Now, of course, there's also a lot of market manipulation in art. I would not suggest art investment. Personally, unless you have an enormous knowledge of art.</p><p> If you're interested in something like art investment, instead invest in an area that you actually care about and have a passion for, like Magic the Gathering or something like that.</p><p><strong>Simone:</strong> We know people who've made a decent amount of money. Yeah. Like literal like card collectible markets.</p><p>So this is not crazy.</p><p><strong>Malcolm:</strong> Yeah. But again, that's a thing was a fixed value [00:17:00] that is easily movable, right? Yeah. Yeah. This is why you know, historically a lot of wealthy people, they had lots of jewels on them all the time and stuff like that. It was so that if they ever needed to run, they would have a large portion of their wealth on them in a way that could be easily sold.</p><p>Now, this matters a lot where this matters was Bitcoin is Bitcoin is literally the first time in human history there has been an asset class that was divisible, easily transferable and had a known quantity like if you're talking about gold or precious stones or something like that, they didn't have known quantities.</p><p>If you're talking about art, it wasn't divisible. So, I</p><p><strong>Simone:</strong> mean, geez, Now with that company that sells fractional pieces of like a Picasso, it's</p><p><strong>Malcolm:</strong> sort of visible. I guess it's kind of divisible. Yeah. That's a good point there. So, this matters a lot in a world in that is becoming increasingly hostile to wealthy individuals which it is, it is becoming increasingly hostile to wealthy individuals.</p><p>And [00:18:00] in which wealthy individuals, as we predict, like if we're predicting one of the trends we see in the distant Like long term future wealth is going to become increasingly concentrated among the top fraction of a percent of the population. And that population disproportionately gains value from Bitcoin as an asset.</p><p>If you're going to ask why, okay, like who's probably the wealthiest person in the world right now is probably Putin. Right? So think about it. You're Putin. If you store even a small fraction of your wealth in something like gold And and things go tits up as they almost did for him recently was that coup, right?</p><p>Well, what are you doing having a line of 500 trucks full of gold on like russian highways? That's not gonna go well No, and you try to take that into another country and you you're screwed It's it's insane like and this is true for the Of people all over the world, right? It's, it's just a very high utility [00:19:00] asset for corrupt individuals, for ultra wealthy individuals who don't trust their population for all sorts of things like that.</p><p>And we actually saw</p><p><strong>Simone:</strong> this a lot firsthand. I think what made us really excited about Bitcoin is the travel agency that we, that we run travel max has a significant client base in Venezuela. And when we discovered Venezuelans who were really thriving outside the country, like what were they getting into?</p><p>What were they using prolifically? Bitcoin. Like it is how they got their money out of the country. It is how they transferred wealth. So we also see like from a like future world instability perspective, how tactically useful Bitcoin is when. Nations go a</p><p><strong>Malcolm:</strong> little crazy thing I'd say about Bitcoin, which is useful for people to know is think about your successful friends, divide them into two categories, young, successful friends and old successful friends.</p><p>Your young successful friends, do they [00:20:00] differentially care about Bitcoin more than your old successful friends? And I'm talking about people who have made money in things other than Bitcoin. If the answer is yes, which it almost certainly is, that means that as they gain more money, more assets will be stored in Bitcoin so long as they maintain this interest over time.</p><p>Which just seems so obvious to me. Like when I look at my friend group who is like, Bitcoin is a scam, they're old people. When I look at my friend group who is like still really doubling down in Bitcoin, it's... young people young, successful people, mind you, who are like high, high producers in the economy.</p><p>And so what that tells me is the, that asset will increase in value over time. And this is another thing I'd look at. If you're looking at your long term investments, what's something that like all of the smart young people, you know, are investing in, but none of the old people, you know, are investing.</p><p>Right. That can tell you which assets are, are good sort of longterm bets. Now after all this, I still wouldn't suggest having more than 20 to 30 percent of your [00:21:00] personal portfolio in crypto. I mean, we've had more than that at times. We've had like 51%. Yeah.</p><p><strong>Simone:</strong> Because the price ballooned</p><p><strong>Malcolm:</strong> so much. Yeah. But this is what I suggest is like the good.</p><p>Amount. Right. What would you say real estate for a person's portfolio?</p><p><strong>Simone:</strong> I mean, we're, we're not giving advice. We're probably over deployed in real estate. Maybe it's like 40 percent of our assets and it's a mixture of investment in real estate businesses and actual real estate holdings.</p><p><strong>Malcolm:</strong> I'm generally really against bonds and debt.</p><p>I mean, now it's, it's a little bit right now. Everyone's like, Oh, it's a great market for bonds, blah, blah, blah, blah, blah. Look, I get it. Simone. I do not think it is good enough. I do not think in our lifetime, there will ever be a market where bonds make sense in the way that they did when the mathematical models were built, that people are using to suggest how much of your portfolio should be.</p><p>So I'll explain what I mean by this in the eighties the U S like [00:22:00] interest rate on bonds, like went up to like near 20 percent at points. Right. And this made bonds a great thing to get because not, not just for the interest that you were getting on But if the economy ever tanked, then what the Fed would do is they would lower the interest rate, right?</p><p>Because this would boost the economy. And in so doing, the new bonds would generate lower interest rates. So it might go down to like 15%, 10 percent or something like that. And then this increases the value of the old bonds that people have, these high Interest rate bonds, right? So not only are you getting the regular cash flow, but if the cash flows is counter cyclical with market trends because of what the Fed is doing now, the problem is, is that from the 80s till today, the Fed never really hiked the interest rate back up again in a significant way.</p><p>So now we're Basically hovering around a 0 percent interest rate, which means that if the Fed is going to do the thing now, it's gone up a bit since then, which is good, I suppose, but if the Fed is going to do the thing that it [00:23:00] needs to do to really increase the value of bonds, it needs to go to a negative interest rate, which it has done in some European countries.</p><p>This means it's basically. It's, it's, it's weird. Like you're, I'm not going to get into it. The point being is you can only go so far in a negative interest rate before things get really wonky. And what this means is that the mathematical models that people are using to show you that bonds are good are from a period at which there was like a high economic momentum behind bonds because of their starting high interest rates.</p><p>And then they went down over a period of time and that made bonds. Okay. sEem like a good asset in a lot of these economic models, but I just do not believe they are. Another thing that I would say I think is a terrible asset to own is precious metals. No, I don't consider something like uranium a precious metal.</p><p>I consider it more like gas or something, but let's talk about why precious metals are such a bad asset to hold going forwards. Cause a lot of people are like, well, I don't know precious metals. I don't know what they seem. Precious metals directly compete with crypto. That [00:24:00] is. Why people historically own things like gold and they can say, well, gold has these other values it's used in industry purposes and stuff like that.</p><p>And it's like, yeah, that's true, but that's not what gives it its assigned value in the marketplace right now. And, and, and you know that, and I know that people get it because it was a fungible divisible store of asset that historically was used by wealthy people to, to quickly move their money. The problem is there's a lot of these assets are just like stored in banks now, right?</p><p>And you're, and you're trading slips of paper, which defeats most of the purpose of that utility case for the asset, which were their primary utility case. And this really matters because when you're making an investment in something like gold these days, you are making a bet, not just that gold will do well, but that Bitcoin won't replace it as the core store of value outside of financial marketplaces.</p><p>Which is a stupid bet to make. Not, not [00:25:00] because Bitcoin definitely will, but because it's not a fully priced in bet. A lot of people who are investing in gold are old people who don't fully understand how much it has already been replaced by crypto assets for the younger generation. And therefore, and this is why gold and other precious metals have not reacted the way people expected them to react in market downturns.</p><p>During periods in which crypto was widely used because they are just not that kind of a counter cyclical asset anymore And therefore shouldn't be used as what? I'm sorry if I went a little too hard on precious metals because I know we've got some precious metal Fans probably in the show. They're like well if society collapse if society collapses, you should have semiconductors and bullets Okay, you do not need gold</p><p><strong>Simone:</strong> don't forget the guns, Malcolm,</p><p><strong>Malcolm:</strong> but yes, obviously guns, but who doesn't have a pile of guns in their house?</p><p>I guess normal people, normal people</p><p><strong>Simone:</strong> are fans inside though. I'm, I'm, I'm reading a, a biography of, of two women who were [00:26:00] like leaders in the early makeup industry called war paint. And interestingly, the early, you know, like twist lipstick cartridges were originally built in bullet casings from the war.</p><p>Oh, cool. Huh? Anyway, because it was after World War One and they were left over, there's a bunch of, you know, inventories. It was cheap inventory and it's a good delivery mechanism for lipstick. So there you go.</p><p><strong>Malcolm:</strong> That is</p><p><strong>Simone:</strong> awesome. Isn't that interesting? Yeah, more paint. Super interesting so far. Yeah.</p><p><strong>Malcolm:</strong> I'm trying to think of other asset classes which were deployed in.</p><p>Oh yes. Personal investments with friends and stuff like that. I think a lot of people undervalue these sorts of debt and equity investments that you can make in your local community, but I actually think it's an important part of being a engaged citizen. A lot of people are like, that can cause bad blood.</p><p>It can cause bad blood if you go into these investments, assuming that they're always going to pay out. Yeah. I would</p><p><strong>Simone:</strong> say like. We've, we've, we've invested in, in the [00:27:00] majority of friend investments we've made have completely gone bust. We've gotten nothing back.</p><p><strong>Malcolm:</strong> And we're okay with that. Yeah. Because a lot of them are two people I know probably couldn't raise money from other people.</p><p>Yeah. And we, I, I think to an extent with any investment, you also buy social capital. Yeah. And social</p><p><strong>Simone:</strong> capital. And you, you invest in people and you invest in</p><p><strong>Malcolm:</strong> relationships. Yeah, it's an important thing and being an active member of, I think, a community that has a skill set around investing or helping people start companies and that sort of thing.</p><p>I think</p><p><strong>Simone:</strong> our philosophy around investing in people is similar to our philosophy around any sort of risky investment, which is, We will never invest money that we have to have, like, we're like, if this is totally lost, that will not hurt us. Like our life is</p><p><strong>Malcolm:</strong> fine. Yeah. And that's very important when you're investing in friend stuff.</p><p>It should never be a major part of your portfolio, but it can make sense. Anything risky. And in addition to that one type of [00:28:00] investment that we often make that I think a lot of people don't think about is investments that can pay off with career opportunities. Sometimes when people are starting a company or something like that, that I think could do really well and become a good career opportunity for us.</p><p>I'll make an investment in it and I make it was the knowledge that that holds a, a door for me open. If the company does really well in terms of a recurring stream of revenue, even outside of my investment. And this is a weird thing that I think a lot of people don't think about, but it's actually an important partial payoff for an investment when you</p><p><strong>Simone:</strong> see something analogous to this with how people end up on nonprofit boards and then eventually paid boards is.</p><p>When people sort of decide to become professional board holders, what they often do to start, and this is sort of like, I don't know, like a rich trust fund person thing, but we've seen it happen. Is first they use like family foundation money to buy their way onto nonprofit boards and then they get a bunch of those positions sort of build up their board career and then eventually get their way through all the networking they have with us and [00:29:00] with their resume onto real paid corporate boards.</p><p>And it. That's sort of like a very low effort recurring revenue stream for them. But it's, it's similar in what you're saying here is that often you have to invest in someone or something or a company to get a position that ultimately builds up your career in a way that leads to different revenue sources.</p><p>Never in the form of ROI or rarely in the form of ROI but often in other ways through opportunities and investing in opportunities, I think is an underrated form</p><p><strong>Malcolm:</strong> of investment. Absolutely. Some other just financial health things that I'd suggest for our audience just some of these might be obvious to you.</p><p>You're not suggesting</p><p><strong>Simone:</strong> anything other, other financial health things we do for ourselves.</p><p><strong>Malcolm:</strong> Well, no, so I'd say one is insurance. Life insurance. If you have kids, you should have life insurance. Just an important thing to go out there and check. For credit cards you can make like, it can save you a lot of money in the long term if you have the right type of credit card.</p><p>Especially if you do a lot of traveling. You can get like priority pass. What, Simone?</p><p><strong>Simone:</strong> Never, never use a credit card for debt.</p><p><strong>Malcolm:</strong> Oh yeah. [00:30:00] Never use a credit card for debt. I'm just talking about like the, the privileges, a credit card can get you or the cash back and stuff like that. And I would suggest everyone have at least one credit card.</p><p>That's for like mainstream expenses, one Amazon credit card, which can get you 5 percent cash back on Amazon. You can do a lot of shopping</p><p><strong>Simone:</strong> on Amazon. Yeah.</p><p><strong>Malcolm:</strong> In America is doing that. And then one credit card associated with A what do you call it? A wholesale retailer. So we would call that like our BJ's card, but it could also be, you know, if you're a little fancier, a Costco card.</p><p>But no, I'm just talking about like the major expense sources in your life. If you have credit cards that are associated with them, you can often get better cash back deals</p><p><strong>Simone:</strong> through that. Yeah. BJ's card this year, and we, we don't spend that much on gross, like we're pretty. Careful about our food spending and we don't eat out except for when doing business meetings.</p><p>Our use of a credit card with a like bulk discount grocery store that's dedicated to the brand in this case BJ's has saved us or [00:31:00] led to cash back of over 3000 now almost 4, 000, which to us is a really big deal.</p><p><strong>Malcolm:</strong> Total or this year? This year. This year? This year. Wow, we spend a lot of money at BJ's.</p><p>And, and, and, and speaking of just like a, another financial health thing that people who have families should be doing if you do not have a what's the word again? Chest freezer? You should. You should have a chest freezer. Chest freezers. Combined with large box stores like BJ's and Costco will save you astronomical amounts of money if you have kids.</p><p>Yeah,</p><p><strong>Simone:</strong> so if people aren't familiar with these, these are like freezers into which you can fit probably three adult humans. So they only work if you have a fairly large house, but they enable you to buy a lot of frozen foods in bulk. You know, everything from vegetables to meats, which is a lot more affordable.</p><p><strong>Malcolm:</strong> And what else would you say? Any other types of insurance? I mean, there's the regular types of insurance, but I'm sure a lot of people are already thinking about [00:32:00] that. Any other advice you'd give?</p><p><strong>Simone:</strong> This is how we do investing. And I would say we're not sophisticated investors. There's a lot of like weird tax implications.</p><p>And, you know, like if you take a loss on something like, you know, and also how you reinvest money after. Getting, you know, a pig payout. Like we're not really not sophisticated investors. There's a lot of weird rules and, and like tax things around investments. All we're doing is sharing.</p><p><strong>Malcolm:</strong> Yeah. Yeah. This is practical.</p><p>This is a get rich investing advice. This is basic financial hygiene, investing advice. Yeah.</p><p><strong>Simone:</strong> I mean, so yeah, aside from that, we. Basically, we have a very strict budget. And we actually do a version of like envelope based budgeting, which I think people are really familiar with. And as I've alluded to in other podcasts, there's like an entire cottage industry of you on YouTube.</p><p>And we do, we do. So every time money comes in. Like per month, like we have a [00:33:00] sort of like, this is how much money we receive. Everything goes into actually like separate, literally separate bank accounts for our top expenses. So home bills, childcare, pet expenses, your discretionary income, my discretionary income.</p><p>We have a, like a, we have an internal VC fund, which is sort of like money that we allocate for risky bets or weird investments in like friends or just like stuff that might, so not stuff that's fun, but things that are an, are an investment that is risky. We have a fund for that. We have a fund for our children's.</p><p>We have</p><p><strong>Malcolm:</strong> a side note here for, for, for listeners. One of the things that we do put a lot of money into is investments that are meant to lower childcare costs for us. Eventually things like you know, we put a lot of money towards our nonprofit, which is developing this educational alternative, the Collins Institute.</p><p>And for us, that's an investment in that. If it can produce this alternate education system, and if it's the quality that we want it to be at, which we have confidence that will be like, I actually think it's. [00:34:00] It's taken so much longer than I wanted you to get it live, but I think it's going to be so much higher quality than when I initially expected that it is going to really dramatically cut childcare costs for our kids.</p><p>And it's the same with, you know, people who were helping get their businesses off the ground. They help us with childcare as a, an exchange for that. And so that's a long term investment in reducing childcare expenses.</p><p><strong>Simone:</strong> Yeah. But basically if we want to spend money on something and there's not enough money in the account.</p><p>That we have for that thing, like travel or gifts. We have, we have an account for gifts and for travel. And it's not happening. We're not taking our debt. We're not stealing from other accounts. And we also have an emergency fund that will cover our basic expenses as a family for six months. And that emergency fund is really helpful.</p><p>Like when we've lost our jobs or when we stopped paying ourselves during the pandemic while still working that was really, it was really necessary. So those are the other things that we do again. This is not advice, but this is this is how we do and we're not again sophisticated, but so far this has worked well for us, but I would say that we don't we're not.[00:35:00]</p><p>We don't make a ton of money. We have friends who make tons and tons of money from investments and they're super pros and it's all they do. And, but we would, we spend less than 2 percent of our mental bandwidth on investing. Yeah. So this is, this is what we get, but it's worked out for us. Yeah.</p><p><strong>Malcolm:</strong> All right.</p><p>Well, I love you to death, Simone. And who knows if this does well as well, we might be doing a lot more financial stuff for people. This is boring, basic. Financial advice. But I feel like everyone out there is some sort of get what you couldn't do or</p><p><strong>Simone:</strong> like we'll look at financial advice. It's people looking at all these like charts and making it really complicated and they're way above my pay grade or like way below my pay grade, but pretending to be above, which is the worst.</p><p><strong>Malcolm:</strong> All right. Love you to death Simone. And I appreciate that we have a. Sound financial strategy where I know that she manages our investments by the way, because I I'll tell her like what I'm thinking, but I am I, I take too much like emotional hit from looking at investments going up or down. She's, [00:36:00] she's the best kind of wife, the one who holds your crypto keys to make sure you don't sell during market crashes.</p><p>I love you to death,</p><p><strong>Simone:</strong> Simone. I love you too. Pizza night tonight. See you downstairs.</p> <br /><br />This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit <a href="https://basedcamppodcast.substack.com/subscribe?utm_medium=podcast&#38;utm_campaign=CTA_2">basedcamppodcast.substack.com/subscribe</a>