Pilot Money Guys

Flight #19: Investment Newsletters – Investment Advice or Entertainment?

Pilot Money Guys:

What's Up With Investment Newsletters?

Flight #19: Investment Newsletters – Investment Advice or Entertainment?

“There’s a lot of money to be made from financial newsletters that give investment advice. But the money comes from selling the newsletters, not from taking the advice.” ~Paul Merriman 

Investment newsletters are getting more popular every year and the returns they promote are extremely tempting. So, should you ditch your financial plan and subscribe?  

We’re diving into newsletters to give you our honest opinion and concerns.  

Unfortunately, anyone can create an investing newsletter, and because they are not actually managing your investment accounts, they have no regulatory agency monitoring their recommendations or investment performance accuracy.   

Investment newsletters only fall under the 1st amendment right of free speech, so they can claim any returns over any time period regardless of actual performance.  

From the article “The Truth About Financial Newletters” by Paul Merriman. 

“In a 35th anniversary edition of The Hulbert Financial Digest, publisher Mark Hulbert noted that when he began tracking newsletters in 1980, there were 28 of them. Of those 28, only nine have survived. The rest are gone. 

Of the nine newsletters for which he has continuous data back to mid-1980, only two have beaten the market (measured by the Wilshire 5000 Index) on a risk-adjusted basis. One newsletter has matched the market for 30 years, and the other six have lagged behind.” 

Podcast Transcription:

voice actorr: ladies and gentlemen, welcome aboard the pilot money guys podcast, where our mission is to help clients build and protect wealth to achieve their dreams and goals. This podcast is brought to you by leading edge financial. Without further ado here is your host. Robert Eklund.

rob: Here we go. Investment newsletters, flight 19 folks, a tip of the cap to you.

Thank you for joining us here at flight 19, the pilot money guys podcast, where we cover some airline news and of course, a financial topic we aim to educate and bring some light hearted, financial fun to your day. I'm your host wealth manager, Rob Eckland, AK rubber mallet, the flight crew today. Is the godfather certified financial planner and former F 16 fighter pilot, Charlie Mattingly godfather.

charlie: Thank you, Mellon. Great introduction.

rob: You're welcome. Flying in the number three tail and Charlie position is Mr. Kyle Bell, the Ben Dickinson. Welcome Cabo. Oh, I can barely hear it.

Ben: Clear that up

rob: in editing

Ben: post production.

rob: I didn't bring that biz as an a biz in the best. That's super dope. This is a good one. Guys. We got investment newsletters. This is going to be fun. A lot of fun. That's

charlie: right. Robin, you sound like you're feeling better, which I'm really excited

rob: about. I'm not a hundred percent, but I'm getting a 99.9.

In fact,

charlie: you just need to calm down just a little bit. You're getting way too excited.

rob: You shut your mouth when you're talking to me, Cal belt. Kalba all right. Still nothing been. Aviation news. We're going to do a little obstacles the way on this one as I messed up and I'm going to apologize.

I can't believe it happened, but I know first time ever don't tell my wife quick correction. On the previous podcast, I called the T 38 and F four. I don't know what I was thinking. It was a slip of the tongue. Forgive me the F five. Of course, which was the Russian MIG and top gun. Yeah. Yeah, many apologies.

So we're going to use as our aviation news because we're going to tie it into what's replacing the . Which show a picture. Ben, can you

charlie: me pull that up? I got it pulled up. Oh, there it is.

Ben: There you go. Wow. That

charlie: was your music.

rob: All of you listeners out there. We've got the bowing SOP slash sob. It's an American Swedish speeding.

Eklund is Swedish T seven red Hawk. That's going to be set to be delivered or it's set to be delivered in 2023 to replace the teeth RDA. That's a good looking trainer and

charlie: is nice. Look at this one right here. Why do you need, oh yeah, that's nice. Wow.

rob: Yeah, that's beautiful. I want to go back. Northrup.

Talon was a two seater. It was the world's first supersonic. And is also the most produced it's pretty cool, but it's going to be retired in 2023 or there abouts it began production, or at least it started the development. The development started in 1952. So it's about time to be replaced. I think Charlie, when he got through that, I

charlie: did, I flew that airplane.

It was a fun. Pretty cool airplane. First airplane to go supersonic. And you went on a designated ride for your supersonic rod. That was so cool. Boom. Yeah, it was pretty cool. I'll never forget. One of my best memories was your first formation night flights as a student. You're on the wing. It's at night, you're sitting on the runway, they push the power up and all of a sudden you see a big.

To your left or right. Whatever now. And you're just, I was so stunned. Like I got left behind on the takeoff.

rob: I forgot.

charlie: I forgot to pull them and push my throttles forward. I was like, this is so awesome. What are you doing?

I was singing and I would like, look at, look in the mirror and do this little look here, like in the.

rob: What was your call sign? I should have asked you that. What was your calls? I,

charlie: it was Woody,

rob: Woody. Oh from the animated. Yeah. Probably

charlie: something like that. Something, yeah. Toy story.

rob: Yeah.

charlie: Nice. I think that was what I got when I was in the F 16, before that it was like, we have a couple different ones as you go through training. One of them was a. Which I think means dumb cow in Spanish. If I'm not, if I'm not mistaken, dumb cat,

I don't know. My Spanish is not very good, but that's what they said. It's not my dumb cow. That was me. And then

rob: smart cow would have been way better.

charlie: I don't think I fit that role. Ever though that was appropriate. Where'd

Ben: you fly or did you fly over. So you get on that flight. Where were you flying over on that flight?

Which one?

charlie: The supersonic training, the training somewhere over Mississippi, those lakes to the north of Mississippi. What do they call the point set? I can't remember. Welcome up.

rob: Hey, Ben used flashed right before you put the up there. You flash something about the. It was hell yeah.

Ben: Oh yeah. So this is the new doge coin. It's the, basically this is also a joke crypto coin that was making fun of doge coin, which those coin is a joke coin made up of making fun of Bitcoin. But Sheba, let me tell you. Just pass doge coin and it's doing great. I think it's because Elon Musk got a Shiba Inu, I guess it's a breed of dog.

And let me tell you this thing is doing great. It's got a market cap of 40.7 billion value, which is with a B, which is just wild. I don't even know this is a little scary. I don't even know if I should share the year to date returns, but I'll put it on here on YouTube. Check that one out.

rob: It's a little scary.

I dare say, Dr. Evil's the person who came up with Sheba. I

charlie: think he

Ben: might be right. It's doing great. I bought some today just so I can talk about it on this podcast. And let me tell you, let me see, let's see how we're doing here. Got about a hundred dollars worth I'm down.

charlie: Dang here's the kicker, Ben like you and I talked and I said, okay, I'm in, I'm going in 96000000% return.

Yeah, I'm in and I'll put a dollar or two and become a gazillionaire, but how do I get my money back? That's what I want to know. Yeah. Yeah. I don't think there's a trick. That's the trickery, huh? Yeah.

Ben: Yeah. Just selling $96 million worth of your Sheba. I don't think it's, first of all, it can crash the market, I would imagine.

And then, so this

charlie: is real, it's not real yet. To me, in other words, I can't get my money back. Like you said somebody, and this is I'm being a little bit serious right now because everybody's Hey, I'm going to put 10 bucks a piece in all these. And I read, I think I read today, there's 10,000 different cryptocurrencies now is that we'll look at that in a minute.

I've gotten to see the seam Taylor the mask pronouncing that, it seemed to leave tele whatever. We'll re reference him in a minute, but really smart dude. That's the point? And so if I want to put my money in these things, I want to put 10 bucks a piece in each one and it goes up 96000000% in a year.

I can't really get that back. I got to go to some kind of, nah, that's the catch?

Ben: Here, I'll share this. This is this is. Some people are saying here, there was this NFT that was sold for $532 million. I think they realized it was actually dished up. They says it's a flash loan. I'm not exactly sure how that works, but, or people I was reading about this and what people were saying was the guy couldn't get his money out of.

He put money into cryptocurrency is obviously a very rich person. They, he wasn't able to get it out. So he's converting it to all these different crypto based assets to just try and get his money out. And I don't know. We'll see. I don't think you can get your money out if you put it in.

charlie: Oh yeah.

So that's the catch right there. So this is a fake world of something weird going on that I can't explain yet. And not many people can either, but back to the article NASEM to leap tailoring. I keep, no, that's not him. That's the writer of this article.

Ben: Okay. Okay. Got

charlie: you. Got you. So this guy has written books And Ben, would you Google which books he's written?

I cannot escape my mind right now. He's a prolific writer. In fact, reading his books is a challenge because it is dense Swan, black Swan, all the ones he's


rob: about

the same, not very

charlie: different. So here you go. You got to pull it up on, on the article that we read today. And it's pretty interesting. And Bitcoin, I'll just read a couple of the highlights here. Bitcoin has failed to become a currency because Bitcoin transactions are too expensive and too slow. I didn't know that this article says that if you go to buy a cup of coffee with Bitcoin, it can take 10 minutes.

If it were a currency, it's not a currency now. But I didn't know. I didn't know. It was like that. I thought the whole point was that it was a fast or instantaneous or whatever, is it inflation, hedge? What happened in 2020? Did it protect anybody during the market downturn of 2020?

This article says no. Yeah. And here's the interesting thing. And it's towards the number seven, eight or nine, one of the goals with these cryptocurrencies is to get rid of the intermediary and that's number nine. Bitcoin does not solve the agency problem of reliance on intermittent inter intermediaries.

Sorry. So that's one of the solutions that people say, Hey, we need this decentralized. Money. Yeah. The problem is he says is every time you have in history or whatever, when you have an effort to get rid of intermediaries, the disruptors become the new intermediaries. In this case, it would be the people mining the coin.

So the miners themselves, if they knew that all of a sudden this became the one, the thing now they're the new intermediate. So I'm going to get it from the miners. Yeah. So that was an interesting thing that I didn't think about. And I'm not sure either, and this is me, not in the same, not sure either that the decentralization is really what we want in our money, even though we, a lot of times we don't one entity, either government in our case doing things it's one of the more trusted.

I know that's I know that's laughable. Sometimes I expected you all to laugh when I said trusted, but thank you. All the PR is the fed or the government, whoever we do need some entity that somewhat trustworthy besides. Bitcoin miners in their basement,

rob: Yeah.

Some sketchy folks

charlie: at the top. I call the top a couple of weeks ago. I don't know if I'm still right or not, but yeah.

Ben: Oh no. I think you're doing great. I think you're doing great. And just a, something on Coinbase and all of these different marketplaces where you can go and buy the Bitcoin. We were mean the professor, we're just talking to somebody who was involved in the Mt.

Gox got money, all his money stolen back in the Mount gospel gosh, crisis that we've talked about in the last podcast. We think Coinbase is going to survive. We think that they're doing the right things, but we don't know. We don't know what, like Jim and I that's another big one.

We don't know if they're going to actually end up being able to allow. Not to mention the problems with going on with the stable coins that are, it's just awful. I think tether is big issue right now, but

rob: anyway, I'd like the scroll up just a tad bit there where it says he aims a mini gun, where's it say?

Oh, scatter

Ben: gun that Bitcoin

rob: has underlying database technology, blockchain. Yeah, he's a smart guy, again, not the guy picture, but

Ben: again, and black SWAT is a great movie to

rob: check it out. Let us know what you think. All right. Charlie, what do you got on any other aviation? I know that wasn't aviation, but

charlie: we couldn't resist that one.

The other aviation stuff we talked about was just the interest in, the new pilot hiring. It's just been insane to see. Get rid of, airlines get rid of pilots. I E me and then, and and lots of others. And now they're just desperate for POTUS again which is totally crazy, but it's, that's the reality that we live in.

So what are these programs? A lot of our clients, kids, a lot of people are saying, my kid wants to fly. What, how do we do this? What's the best way to do it. And almost every airline. I know I looked into United. I looked into Southwest, maybe a no, I think Delta has one too. Southwest is called destination 2 25 pathways.

So what what are these things? Basically, you go to some training out in Arizona for Southwest, and it's part of a, they have a partnership with CAE and you do a flights and simulators. Then you go work for four years somewhere. But if you do all that, go through the programs, then you have a chance to become a Southwest pilot or United or a Delta pilot, depending on which program you go through.

So there's some that are like college, where you go to school, you get a degree, you then become a pilot or you skip the college stuff all together and then just go straight into the flying program. If you get accepted, there's no flying experience required, but I think the program for a year or so, it could be, I'm not mistaken, 80 to a hundred thousand.

So the other thing that we looked up for one of our clients was can I use my five to nine, we checked into that, tried to dig a little bit. I don't have a definitive answer. My guests at this point would be know that you cannot use five to nines for some of these destination 2 25 programs.

And it basically has to be an eligible education institution in the eyes of the IRS. And and in fact, on the website there, especially for Southwest or specifically for Southwest, I should say it says you must demonstrate the ability to pay out of pocket. Or secure financing for the total amount of the program.

So in fact, then they start to advertise Southwest federal credit union, blah, blah, blah. So let's say IRS website, here's the IRS website language, an eligible educational institution is a school offering higher education beyond high school. It is any college university trade school or other post-secondary education institution eligible to participate in a student aid program.

Run by the U S department of education. So according to this program can w can, you can use your five to nines for that program, if it's an eligible educational institution, which means they accept students. So that's from the website there. So check the interesting.

rob: Wow, very interesting.

So I just

charlie: want to share that real quick, because we have a lot of people thinking and talking about, Hey, my kid's interested in flying. They're hiring again. There's a pilot shortage. So hopefully

rob: that's. Yeah, it is. I think that's a useful to a lot of listeners out there. There's a lot of good stuff we're covering on this podcast has that moved newsletters, but let's get into it before that though.

Why is money important to you? Do you need help with retirement planning, college savings, tax loss, harvesting state planning. Let us know as fiduciaries we stand ready to help. We can manage your investments and provide comprehensive planning continuously or on an hourly basis. Give us a jingle at 8 6 5 2 4 0 2 2 9 2.

Or check us

charlie: All right. Nice work. Hey, you know what, Rob, the best part of that, you got the voice, you got the phone number, right? This time.

rob: Nailed it. I've

charlie: had to edit out the phone number, every other timing now.

rob: So if you ever called us,

charlie: if you notice a previous podcast where Rob says and give us a call. Thank you very much. And I don't know how to insert the right number into our oh,

rob: nice job. My bad somebody to your actions. Two times I've been wrong.

Hopefully that

charlie: does not listen to know

Ben: your rights.

rob: Okay. Investment newsletters. We're going to cover newsletters, intent, the legal standard they owe to you and their performance. First things first newsletter the intent. Are they for entertainment purposes? Are they fiduciaries? Charlie? What do you got on the man's letters?

charlie: I'm going to start talking now and I'll be done in about 25 minutes.

So just want to clarify newsletters. We're talking specifically about investing newsletters. There's a lot out there. In fact, we say we have a newsletter, our newsletter, not our newsletter. Our newsletter is truly the best. Yeah, but the newsletters we're talking about today are the ones that say, buy this, sell that, buy this, sell that you're going to do.

Awesome. And there's a bunch of them out there. So

rob: Like stock picking or mutual fund.

charlie: Exactly. Yeah. There's tons of them out there and I've used some paid for some before and some of them are very interesting, but that's what we're talking about today. The intent is to help you to invest your money.

Is that a good answer? Everything.

rob: Well, is it their intent? Sometimes? I think you're right. I think other times they're, they're not a financial, they're not associated with any kind of the, of controlling entities, such as the sec or a state or anything like that. They're only governing. And we'll get, I guess we'll get into this into the legal standard, but I might as well cover it.

Now. They're only governed by the first amendment. They don't have to report that what they actually did to anyone. And matter of fact, if it weren't for some, just a nice folks out there tracking them, no one would know what they actually do. So I think their intent is mainly for entertainment purposes.

A lot of times. And you have to be really careful what you're getting into. There's a lot of money they're making off of you. So you say, oh, they're just a hundred bucks a year. No big deal. Multiply that by a thousand, 10,000 people, obviously that's the money. So I think it's mainly entertainment for frugal people thinking, and this is going to be harsh, but I'm going there anyways, entertainment for frugal people.

They think they can beat the system by paying a hundred or even a thousand bucks. To a newsletter that they think is out there trying to do the best they can. And so they intent is there really a publishing company for entertainment purposes, and I'll even read one of their disclosure. I'm not going to say the name of it, but Blanc is a publishing company.

Period. Blank is not a financial advisor, nor is it a financial. So that's kinda my 2 cents on the intent, the they've done studies. We're going to get into mark Holbert. Who's the godfather not to steal your name, but the godfather, the king of a newsletter analysis. Who started it, he's been examined him since 1980.

And they've from his research. They've distilled that even though the newsletters are written and produced by really smart folks that went to Harvard or whatever, and have all these different degrees behind their name or letters behind their name. They actually didn't do any better than newsletters produced by Joe Schmoe down the street.

So anyways, that's what I got. Ben, what do you got?

Ben: Yeah.

 There are many different types out there I've even seen some for the crypto have been out there now they'll even give you the what to buy, what when to sell. There's some, I know there's a really popular one about options trading.

There's some about that. And it's just kind of these groups of people that think they know when to time, how to time the market. And as we all know, there's you gotta be right when you're trying to time the market on two things. The buy and sell. So you may be right on the first side, but when are you going to sell when am I going to sell my Sheba?

I don't know. I'm waiting for a newsletter to come out to tell me, but but yeah, the intent behind it is I guess it's just a, it's just to make themselves seem really smart and get some clicks

rob: and pulled us. We have a conflict of interest, obviously, because if you're about a newsletter, you probably not.

Part of a leading edge financial planning. So that we're going to say that up front, we have a conflict of interest. Doesn't mean we're wrong

charlie: right, I'm gonna, I'm gonna disagree and I'm gonna get angry. And the reason is because yesterday I was in Nashville taking my daughter to we just went to the concert.

We visited Vanderbilt and in the hotel, I met this guy and this girl, and they were there to be on the Maury Povich. What? And so they were Maury Povich stars. And he was offering to buy my daughter some snacks, and he's Hey, we're here on NBC's card. So his job was to be on Maury Povich and and be the drama guy.

And he was a coach. He said he wanted to be a coach to teach people how to be more dramatic and angry on their show. So I'm trying to take the tips that he taught me.

All of that's a hundred percent true, except I'm not very good at being emotional and getting angry. But let me just, I'll just tell you this. Did you have a question about the more he puppet show

Ben: Ben? Yeah, I was just going to say, was it about like you are not the father is that

charlie: He said we do a really good job of showing our emotions.

So we come back on the show multiple times. Oh,

Ben: wow. Wow. What a career? I

charlie: love that. He said he makes 50. If he was to be a coach, to coach other people to be on the show. 1500 a week. So that's not bad, not a bad coaching gig. Just tell somebody to get angry and start shouting about that. Baby's not my daddy, the baby daddy.

Anyway, sorry. We really got an off track, but the point of all that is I will tell you this, there are some newsletters that have done really well over a long period of time. Okay. However, so have some mutual friends. So have stocks, so have some bonds, no, not bonds disregard that part mutual fund, any other holdings.

So here's the challenge. And this is what mark Holbert does. Like you mentioned, Rob, he, he ranks all these newsletters over time one year, three year, five years, 15 years. So you can go look at some of these newsletter. And go, how well have they done over 15 years time period. W what time period is appropriate?

I don't know. What's a good sampling size point is there's some pretty good performers out there, but how do we pick the ones? And if I did pick the right one, would it be a good performer in three years and five years in 10 years? Would it be the same one? It's the same process with investing there's mutual funds out there. You can go Google the top 15, 20 mutual funds of all time. And they do just as well, if not better than the best mutual, excuse me, newsletters of all time. So it's interesting that they can produce documentation. Some of them that say we've done this performance for 15 years, but Rob, back to what you alluded to, they are absolutely not advisors.

They're not regulated. Like we are a registered investment advisor. Regular regulated by the securities and exchange commission. So when we tell our client, this is your performance, that number has gone through some rigor, Moreau. That's a scientific word for there's a lot to that. You can't just tell somebody, here's your performance, which is what the newsletters do.

And they compare it. For example, there's one newsletter that caters to our pilots they'll compare their performance to the S and P without. Dividends make up 20, 30, sometimes 40% of the actual return, depending on the dividends that year. So I could tell you, in essence, that I'm beating the S and P 500 without dividends and not tell you I'm comparing to something that's.

And that's not something you can actually invest in. Does that make sense? Yeah, absolutely. That's where newsletters get tricky is because sometimes they're good, but how do you pick the ones that are going to be good in the future? Just like picking an investment. That's going to be good in the future.

You don't, you can't.

Ben: Yep at Charlie Holbert. He was doing, we were in this article where he's got since 1980, he's been tracking these newsletters and 28 of them, I think, is in the article. He's been able to attract since 1980 of those only nine are still around today and out of all of 28, just in general, only two have actually beaten them.

Only two. So just like you said, yeah. W what are the, are you going to be able to pick those two newsletters out of the 28 that were then, and then stick with the program, then not missing email. What if you missed a newsletter? Oh, There it goes, you're tracking. Yeah, you're right.

You're not gonna be sticking to it. That's

rob: exactly what happens. This kind of, this is a great segue into the legal standard owed. When we talk about anything, when it comes to money, I think it's important to peel back the layers and peel back the onion a little bit here. The layers of the onion. Is that a proper term?

The onions of the layer? Yeah, the London. I'm eating an onion anyways. There's a lot of layers in an onion. Okay.

When we peel it back and we start looking at who can start a newsletter, like who can be in a financial advisor, you have to pass a test in a series 65. And not that makes you the end all be all by any means. But I think it's important to look at some of those basics and some of the background there.

So who can start a newsletter and investment newsletter. Anyone?

charlie: Anyone? Yes. So I'm going to start a new, oh, sorry. Ben.

Ben: No, I was just gonna say it reminds me of this gambling show that I watched a few times about sports gambling and they have their track, their picks. Who's doing the best, who's doing the worst.

They also have a goldfish that whichever side it swims to that picks the winner. And it almost, it's just as good as anybody else. It's just like that in the, in these newsletters, just get a goldfish or

charlie: pick it for. Yeah, no that's been done in the world of investing to where there's a, I can't remember.

I wish I could remember the story, but same thing. So I'm going to start a newsletter, you all, and here's how I'm going to do it. You ready? I'm going to design a strategy that has beaten everything in the last year. I'm going to, I'm going to do something. I'm going to do it right now and go, Hey, what would have beaten that in the last.

I'm going to put that out on my newsletter and then I'm going to put four or five other newsletters out that are maybe a little different just in case things are different, going forward. And then one of those five is going to do really well. And that's the one that's going to survive for the next five years.

And then I'll design. So go on mark. Holbert I think I'm pronouncing his name correctly. Yeah, you are. Look at the newsletters for each newsletter. He pulls up there's about five or six of them that are very similar in name and come from the same company. So it's not difficult to design a newsletter that is going to be successful.

And then you can tout those returns going forward. The other thing I'm going to do is I'm going to design something that did great in one year and that year of 2000. So that actually happened. In fact, this is a mark Halbert's article in the Barron's newsletter, September 9th, 2009. He says, how should you pick a newsletter?

And remember, this is September 9th, 2009. I went through a pretty helacious one of the worst besides the great depression recessions we've ever had. So you look back, he said, what if I look back at the last 12 months and I get the best performing newsletter of the last 12 months and pick that one, that's a pretty good, right?

That'll build you some credibility. If you can kick butt during the worst recession we've ever had. But the catch is those newsletters, underperform. Every other time in the. So they were only successful during one year.

rob: And I think that's so important. And the point you made there, Charlie, we hammer this a lot, but it's worth it.

A foot stomping again, past performance does not guarantee future results. When we talk about money managers, there's been tons of studies out there. Here's one that comes to that we've got in the show notes. We'll put it in the show notes. The study that was done on this one shows the top money managers in the top core tile, the top 25%, the NICU of the last three years, they fell out.

70% of that top. Cortel fell out of the top core tile at the top 25 over the next three years. So if you're picking somebody because they did well the last three years, there's a 70% chance they're going to fall out of that top 25%. So even if you found. There you're going to, the chances of picking someone like that's going to continue to be a top performer is very slim.

So I think when you're talking money managers, newsletters, it's all in the same vein there, right? Yeah.

charlie: So people say, Hey, you're bagging on these newsletters. They're terrible. You guys are awesome. Of course, so what is the answer? The answer is. Is that no one, no investor should only focus on investing.

Now that sounds weird. Investing is very important, but there are many other things that, that I think an investor needs to focus on that I believe the newsletter distracts you from. In other words, if I sign up for a newsletter. Then I get some sense of control, some sense of I'm doing the right things.

When in reality, you're really not doing anything differently than owning, maybe aggressive mutual funds. For example, these airline newsletters, they give you a recommendation and they require you to say or pick, are you aggressive? Are you conservative? Are you monitor? So pick one of those. Okay. You pick aggressive and then boom.

And I used to I used to, I signed up for this newsletter. I evaluated it, looked at it or whatever, because I wanted to know what people were doing and how they did it. So you just pick the mutual funds that are equity, the stock mutual funds. If you're aggressive, that's what you get. If you're conservative, guess what?

You don't pick the equity mutual funds. You pick the, you pick like maybe 30% equity mutual funds and the rest bond. So you're conservative. So what if I just picked the aggressive mutual funds. You just did just as well as any newsletter.

Does that make sense? In other words, I'm having to choose, am I aggressive? Am I conservative? Am I moderate? That's the most important thing to try to understand and know, and the newsletter can not do that for you. You have to make that selection. If you're all following there, I'm probably not explaining that wherever

rob: I'm going to use a, their own verbiage again here, while we're talking about this and it's the publisher does not analyze the suitability of any particular fund or investment approach for individual investors nor makes specific recommendations tailored for individual investors.

There you go. Yeah. These portfolios have significant risk and are for sophisticated investors willing and able to assume a high degree of. And then the next part's nice to any and all communications from blank incorporated. The employees should not be construed as personal advice on investment. So any communication from employees should not be construed as personal advice on investments.

Although our employees may answer your general customer service questions, they are not licensed under security laws to address your particular investment situation. So I think that's very important that they are not governed by. The sec and they do not have a fiduciary standard or best interest standard.

They don't even have a suitable standard. They are just protected by the first minutes, meaning they can claim almost anything. So some of the best pitches are fantastic. I like this lock in 400% returns. Lock-in 400% returns or this one's actually my favorite to turn $10,000 into more than 40.


charlie: Wow. She's

rob: 847% annualized returns over the past three years. And then wow. Blank newsletter delivers information. You can't get anywhere else. Nowhere, that almost sounds like insider trading, which is. But I like how they

charlie: say, I like how they say this is for sophisticated investors. It's what's sophisticated about that.

You know what I mean? That's

rob: That's not do exactly what you tell

charlie: me. Yeah. So the, I'm trying to, you did a great job, Rob, of trying to articulate or help me articulate what I'm trying to say, but I'm trying to say that what. What if I say, I want to be conservative in a time, and then I miss out on the next 10 years worth of returns because I decided I should be conservative.

That's just, that's my point is what does that mean? And how do I pick that? And that's the most important thing. Here's another disclosure from one of the newsletters that, that caters to the airline pilots. He says, we're not gurus. There's no crystal ball. We don't know where the market is going, but we can tell you what are the best performing funds,

 a money magazine article done in 2014 about. About these newsletters, because the newsletters were directing people to sell mutual funds. Our airline people to sell mutual funds in their 401k is in Vanguard T Rowe price.

There may have been another one. They put restrictions on it because they said, we, we do not want this mass Exodus of funds of money from our mutual funds because we. Execute our mutual fund strategy within that mutual fund. There's two, you gotta have too much liquidity for a mutual fund to execute.

So they said no more of that. They cut them off. And it was, they were basically doing these massive trades because of the newsletter. So the newsletter, why is the newsletter so appealing? And it was this article did a really good job of interviewing some people. I was one of them. They didn't quote me in it, but anyway,

so one of the persons they interviewed, I thought nailed it. She said all I had before this newsletter was a single index fund, but I always felt like I could do better. I was missing out. I feel like I have more control. And after the say the same is talking about American airlines bankruptcy the 25 year vet said she needed that sense of stability more than ever. So it's fascinating how, again, we've, and I can understand that you feel like you want to have some sense of control. And, that's a behavioral finance thing and here's the, here is the man, the legend William Bernstein.

He's awesome. He's a doctor and he's a private pilot, by the way. He says investing as with flying, our instincts can be wrong. Warren's William Bernstein, the neurologist turned investment guru, who also has a. When a pilot comes in for a landing while flying slowly and descending rapidly, the instinct is to pull the nose up, but you actually need to point it to the ground to get enough airspeed to fly.

Again, investing is the same way. We instinctively react to danger with fight or flight, which is useful, which is a useful instinct in nature, but all the wrong and finance, you should not sell. When the fund goes down, you should hold on. And I'll add, buy more of that. I want to buy more when it's down but nonetheless.

It's really a fascinating how it becomes a behavioral issue. You want to get some kind of control and I can do that for 90, 95, 99 a year in the newsletter when there really is. It's just a facade. Sorry to interrupt. I'm

rob: done. It ties right in to mark Colbert's analysis. And one of the most distinct patterns, I guess they notice.

From his analysis and the newsletter monitoring was the inverse correlation between markets and the consensus and the opinions of the newsletters. They were monitored. So they tended to be bullish at, or near the top of the market and bearish at, or near the bottom of the market, which is just super fun, like opposite of what you want.

And these guys that said, I don't think we. Say this enough or we can't do it justice, but these guys are so good. These newsletters, and a lot of them are so good at a copyright and convincing you, they know what they're talking about. And some of them are great, absolutely phenomenal speakers. And they go, they're asked to speak at all these financial conferences and at the end of the conference, everyone's going up and asking them, oh, how do you do this?

And I'm going to get in and meaning. I won't name names, but I guess when he's been down here, he does an option newsletter and he's been down 20% a year for the last 15 years, at least when that study was done. And I don't think it's up to date 20, 21, but down 20% a year, you start off with a million dollars.

You're not going to have very much after a 20% loss every year. And when you talk about, I think it's important to talk about option newsletters, which I guess there's quite a few out there. They have a terrible track record and they sell you on the this notion of, Hey, we're going to we're you're not going to participate in the downside of the market.

And unfortunately, that's exactly what you end up doing is losing a lot of money. A lot of downside.

Ben: And maybe we talk just really quick about some of the alternatives to this newsletter, a tactic of investing, because we're really comparing this to the markets and what you could get in the market.

And, not only is there the stress involved in the likelihood that you're going to probably lose money by following these newsletter based on a lot of the studies you could just get a very healthy return if you're just invested diversely across different asset classes in the markets and you get what you get the returns of the market you invest through time and and it's much, much less stressful than trying to keep up with the next the next big hit investment and, hoping you buy and sell it at the right time.

rob: Yeah, I think that's important to BIM because a lot of these newsletters, you have to do it when they're saying, if you're to capture the gains they're talking about, and if you miss that, say you're flying that day and you don't get to it, you can miss out on whatever theory they're trying to implement.

charlie: Perfect. Rather you nailed out what I was getting ready to add on to Ben's comment is, those things are really, you got to make this trade now because it's based off of this moment. Momentum in there, these moving averages and whatever, of course it's proprietary the technique that they use very proprietary that they can tell you, but it is momentum. Based on the prices, most recent prices, that's what that person was alluding to. And we know the prices today and that there's some information in that. However,, here's a couple alternatives bend to the question that you raised, which is excellent.

What else should I do? , I would rather personally do a target date fund if I was going to do, if I was looking for something, , I think planning is the way to go.

I think there's ton of value in planning and knowing should I be risky? Should I. Aggressive, should I be conservative? You know that, that's the key question. That's the most important question like we've talked about before, even with the target dates, maybe I've got a military pension maybe maybe I can handle more, be more aggressive, maybe.

But the point is there are other alternatives been that in, that's a great

rob: question. And I just, I have to throw in because there's a lot of scholarly debate on you made it sound. Charlie will throw you under the bus. The momentum is something you can count. And there's a lot of scholarly debate that you can not do that efficiently.

But I just wanted to foot stomp that there's a lot of people say you can't do that in momentum. And also that's if your newsletter is actually, prescribing to that theory and trying to do that some newsletters, or I guess there was one back in the day that literally said they were.

Their investment advice from God and that's who they were getting thing. Yeah. I know. Turned out not to be true, but yeah, I'll say they can claim anything. Yeah,

charlie: just you're right though, just to be more specific about the momentum factor sometimes that's what it's called is dimensional fund advisors will say that we cannot capture.

That re that that factor, we can't get that premium because it costs too much to just wrap up in a mutual fund. In other words, dedicated an entire fund to that because of the expenses, it negates the benefit of the momentum factor BlackRock, or I shares does have an ETF. They tend to put stuff out there where if somebody wants it, they put it out there.

That's just, how they're different than dimensional. So you're right. It is definitely very debatable on how to capture that, that

Ben: And it just, and the other thing about these new letter, I know we've said it, but these people are not registered in any way, shape or form. They don't actually manage people's money.

They're not allowed to, or I'll say they wouldn't be able to do these newsletters and say these Garren teas, when you could invest in an active ETF, actively traded mutual fund, that's held, that's run by manager, a fund manager that has all the certifications that is regularly. And, they probably have a lot more knowledge than the the newsletter people, but just

rob: another alternative.

That's a good point. But, and I think we've thrown a lot of numbers out, but one that I think is easy for people to, to realize is you have a one in seven chance of picking the newsletter that will outperform the. So you do the math on that one, you got a one in seven chance of outperforming the market, or there's the opinion.

You just try to be the market as best you can or factor investing or whatever. But yeah. Mr. Jaffe from the Wharton school of business and James Mahoney from the federal reserve bank of New York, they came out with a study a while back that concluded, taken as a whole, the securities that newsletters recommend do not outperform.

Appropriate benchmarks, period. That's and that was the quote directly from it.

charlie: I

Ben: know. Might drop right there. Yeah.

rob: I love it. I know we got more on this, Charlie, what else you got?

charlie: I think it's a behavioral thing.

I really do. I think it's like that quote earlier, we feel a little bit out of control. We want to have some control. We want to do something. We want to feel like we've earned that passive income. There's some science behind that. In fact, Dan O'Reilly one of our favorite behavioral finance economic professor out of duke says sometimes when feeling out of control, we reach for a narrative that will help us we don't like randomness. He adds, we try to force order on life around us. So we tell ourselves a story. And that story is that I subscribed to this newsletter. I'm going to do better when in fact, you can do okay.

It's just that like you can do okay. With a lot of other things too, such as a target date fund or buying the most aggressive funds in your 401k. But anyway,

rob: I'm done. You can't. Yeah, you can do. Okay. But I think it's so interesting that those, the publishers of these newsletters, they only, again, you only hear about their wins and they are geniuses at hiding their losses and only, research like Holbert is able to point out their losses.

Yeah. All right. I think that's it. You guys got any fun, man that went

charlie: by fast. I think our training from the Maury Povich show paid off,

rob: can we get an emotional adviser?

charlie: That was intense drama.

rob: I was hoping we were going to come up with our own news. During that whole thing, actually

charlie: talk about it.

That's a good point. Ours is boring.

rob: Yeah, but we can name it something good. One of the kind first in class retire next year.

charlie: Best ever guaranteed.

Ben: Lots of guarantees in our newsletters.

rob: Lots just done. All right. That's it a couple of quotes to leave you with from Charlie. Here you go. You don't make money when you buy and you don't make money. When you sell you make money. When you wait.

charlie: Boom, Charlotte.

Ben: He always knows what to

rob: say. Second one, those who keep learning will keep rising in life.

All right. That's it. We've arrived at our final destination. Let us be the first to welcome you to the end of flight 19. Thank you for joining us here at the PA money guys podcast. If you have any questions or would like us to answer any, anything you have about the show, shoot me an email. Sign up for our newsletter. You go to leading edge We're going to have a link on there. And let me know if we don't think we did good. If you liked what you heard, you hit that subscribe button so we can reach more people. And remember, as Emerson said, the world makes way for those who know where they're going.

So plan according. From all of us to here at leading edge, this is October 29th. So we're going to say happy Halloween. You're not going to hear this until afterwards, but happy Halloween

charlie: at the hut


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Pilot Money Guys

Can I Get Rich With Options Trading?

Stitcher Button

You are on a trip and your fellow pilot says they have a new investment strategy that’s getting amazing returns. You are skeptical at first, but after talking about it for the next five hours on the way to LaGuardia you become convinced you must be missing out.

We hear these stories often; we even experience it ourselves! That’s why we are starting a new podcast segment where we discuss some hot topics circulating the pilot lounges, crew vans, and cockpits. We are calling these episodes the Pilot’s Crew Lounge!

In this episode, we are taking on the hot topic of Options Trading. We’ve had a few pilots come to us with questions about Option Trading after hearing about them on trips. We are here to address these questions and give our thoughts!

Are you missing out by not using options? In this podcast we discuss our Top Five Considerations Before Trading Options.

If you have questions, comments, or topics that you would like us to cover, send them to us at

Get your peace of mind back this summer with a comprehensive financial plan! Give us a call at 865-240-2292!

Flight #9: Can I Get Rich Options Trading?

[00:00:30] Rob: [00:00:30] A tip of the cap to you.

Thank you for joining us here at the pilot money guys, podcast. Welcome to the
special edition that we're calling the pilot lounge during these flights or episodes. If you will,
we will talk about the questions we've heard around the system in the pilot lounges. And of
course, I'm your host, Rob Eklund.

[00:00:48] We've got the flight crew today. We've got the godfather certified financial
planner. Charlie Mattingly. Sir.

[00:00:55] Charlie: [00:00:55] Yes, sir. Here, president of for

[00:00:58] Rob: [00:00:58] perfect and [00:01:00] advisor, Mr. Cal bell V Ben Dickinson.
Welcome Ben.

[00:01:04] Ben: [00:01:04] I wish you still have that cowboy cowbell. Oh, the ringtone.

[00:01:07] Rob: [00:01:07] Yeah, but that's

[00:01:09] Ben: [00:01:09] all right. That's

[00:01:09] Rob: [00:01:09] all right.
[00:01:10] Without that certain special occasions, although it is the pilot lounge, so we will
have to get to it.

[00:01:16]Ben: [00:01:16] We might add it in post

[00:01:17] Rob: [00:01:17] production. Do you hear that? If you didn't bend was lazy. Okay.
Exactly. All right. Let's jump into some aviation news. Charlie, we're talking a little history.
What do you got?

[00:01:29] Charlie: [00:01:29] Yeah, so we decided to take the aviation news segment. And
and go historical we were talking before we came on you all about Pardo's push. I said, have
you all heard of Pardo's push? I remember talking about this. We used to do aviation or
excuse me, military history, every Friday night at the squatters, it was cool to go on or some
of our some of our warriors that went before us.

[00:01:48] So Pardo's push is very fascinating. It was I'll just tell the story real quick. Captain

Bob Pardot and wingman captain Earl Amman, I think is how you say that. Eighth tactical fighter wing [00:02:00] out of Thai air force base back in Vietnam, March, 1967, trying to tack a steel mill north Vietnam, just north of Hanoi.

[00:02:08]Both fr Phantoms were hit by anti-aircraft fire. Amman's plane took the worst
damage. His fuel tank had been hit and he quickly lost most of the fuel. So Amman
determined that they did not have enough fuel to make it to the tanker, the KC 1 35 tanker
over Laos. So the options are basically little bailout over hostile territory.

[00:02:28] So Pardot said, Hey, I'm going to push you. I'm going to push you to friendly
territory. So Pardot tried pushing the airplane. Now he's pushing his F for another F four
with his F four 80. So he tried using the drag shoot. Couldn't do that. Basically a mom put his tail hook down and then Pardot put the tail hook on his windscreen.

[00:02:49] And he pushed him that way. So basically then Amman shut down both engines and Pardot began pushing him now, in [00:03:00] reality, he's just minimizing the descent so he can push him far enough into friendly territory. It kinda did the trick basically then. So it gets more interesting.

[00:03:08] First of all, the tail hook would not stay in position for longer than about 15 to 20
seconds. So we had to reposition. Do it again, put the tail, look on his windscreen and push
some more just to reduce that descent, which is pretty incredible. And if you know the
physics of the it's, they call it the rhino or the flying tank, because it is a huge fuselage, huge
body of the airplane.

[00:03:29] And then these tanks, excuse me, the wings that go out are very thin they're not
big for the airplane. So the. So the glide ratio is not good, right? So they're doing some work
there. So he's repositioning every 15, 30 seconds to push the tail hook, to get them to
friendly territory. But Pardot was also struggling with fire and one of his own engines and eventually had to shut it down.

[00:03:50] So in the remaining 10 minutes part, I'll use the last engine to slow the descent of both airplanes. So it was pretty incredible. So they're flying [00:04:00] two airplanes are descending slowly on one engine

[00:04:02] Rob: [00:04:02] in between both of them. Most of the time they have four
between them. Yeah, exactly. So

[00:04:07] Charlie: [00:04:07] Pardot is playing running out of fuel after pushing a Mons plane almost 88 miles.

[00:04:11] Again that's really incredible considering where he would have been, had he not had somebody pushing him, he would have who glided a little bit, but not that much.

So the planes reached a friendly airspace at an altitude of 6,000 feet and left them about two
minutes of flying time where they ejected evaded capture and were picked up by rescue

[00:04:31] So incredible story.

[00:04:32]Rob: [00:04:32] It, we talked about a little bit Charlie, but yeah, it was funny. It was part, it was reprimanded for not saying his own aircraft, but then yeah. Military re-examined and said, oh, actually you deserve the silver star for saving both your butts on.

Absolutely. Yeah.

[00:04:47] As a credible. And they both retired at the prestigious rank of Lieutenant Colonel.
Yeah. That's a big rank. I'm a. That's the team in 20 days. Nice.

[00:04:58] Charlie: [00:04:58] Congratulations,

[00:05:00] [00:04:59] Rob: [00:04:59] man. Thank you. Thank you. July 4th is my retirement date. Oh, nice. So you're going to expect presence from Uben for sure. July

[00:05:09] Charlie: [00:05:09] 4th, you'll be retiring as a Lieutenant, as a reserve, as a
Lieutenant Colonel reservist, correct?

[00:05:16] Yeah.

[00:05:17] Ben: [00:05:17] Robbie better sill better. She'll be on your game. You're still notthere yet. Can tell him those chickens.

[00:05:24] Rob: [00:05:24] Yeah, good point.

[00:05:27] Ben: [00:05:27] Good point. They're watching. I'm watching you like a Hawk.
Anything. I see.

[00:05:33] Rob: [00:05:33] Good call. All right. Thanks Charlotte. That's good. Any other aviation news you guys want to talk about?

[00:05:42] Ben: [00:05:42] Man. There's not much. It's been boring out there. I want some
more elevation. Come on. I'll just lines.

[00:05:47] Rob: [00:05:47] Give it to us. The Southwest boring is good. Boring is good.
Southwest is buying 30 plus max seven aircraft. So it's 7 37, 700. They're buying more of

[00:06:00] those. I think it would have over 60 next year.

[00:06:02] So that's good news, but a little bit other news, we got the electronic vertical
takeoff and landing system, apparently American and Virgin at least are buying some of these IE Vittol electronic, vertical takeoff and landing aircraft that will be coming out at some point. So that'll be interesting to see how that develops.

[00:06:23] So we talked supersonic last week and now we've got V. Wow. Heck yeah. Apple
is crazy world. Crazy world. Yeah. Yeah. All right. Any any

[00:06:32] Charlie: [00:06:32] talk at Southwest about different non Boeing airplanes?

[00:06:37] Rob: [00:06:37] Not that I've heard. Cause

[00:06:39]Charlie: [00:06:39] That was a big, hot topic about a year ago. Yeah. Have you
talked to Gary about that?

[00:06:43] Gary talks about it. Yeah. Because that's, this time last year I was like, holy cow,
you have one type of airplane. We know it. Wasn't this time last year. It was two years ago
when we had the max issues. So yeah, one type of airplane and they're having trouble.

[00:07:00] So that was difficult.

[00:07:02] Rob: [00:07:02] Yeah. Yeah. I don't know.

[00:07:04] I think right now we're they're focused on that, that max seven and what that's
going to do, there is rumors who knows what they're true or not of maybe some eat tops
out of Denver. I don't know. Woo. Nice. That'd be interesting.

[00:07:17] Charlie: [00:07:17] Don't forget about the Dreamliner rumors there at Southwest.

[00:07:20] I'm starting through dream liners coming to Southwest fall 20, 22.

[00:07:26] Rob: [00:07:26] Your words not mine.

[00:07:30] Excellent. All right. That's all we have for aviation news. Quick commercial here,
summers here, planes are full. Things are hopping while you enjoy the sun and fun. Or
overtime flying, whatever. Nice. Let us make sure your retirement plan is on track. Give us a
call or shoot us an email to discuss your financial needs.

[00:07:48] We are fiduciary fee only advisors, and you can reach us at 8 6 5 2 4 0 2 2 9 2 or
good old electronic mail. Do you know what that is? [00:08:00] Even electronic mail.

[00:08:03] Charlie: [00:08:03] You have to go to the post

[00:08:04] Rob: [00:08:04] office for that. Anyways. That's
And if you want to reach Ben Dickinson directly, call them at (865) 290-7523.

[00:08:18] Again, that's 8 6 5 2 9 0 7 5 2 3. That's enough of

[00:08:22] Charlie: [00:08:22] that, please call.

[00:08:24] Ben: [00:08:24] I need some more. I need some friends.

[00:08:29] Rob: [00:08:29] I know who I'm calling late Friday. Excellent. Let's jump in. We've
got options. I know we talked a little bit about. The pilot lounge would cover options,
covered calls and how to buy an airplane and the tax implications of these a little bit too
much to cover on one podcast. And we're just going to cover the options and covered calls.

[00:08:45] And we're going to get to the airplane and tax implications next week. Charlie,what do you got?

[00:08:50] Charlie: [00:08:50] Absolutely. We've got some top five considerations before
considering wait a second. That's redundant considerations before I said a lot of things here.

[00:09:00] Top five considerations before. Trading options. So yeah.
[00:09:04] Number one, what is your goal? Are you trying to make money? You're trying to
minimize risk. What are you trying to achieve here? Just like our now famous Bitcoin
discussion, it's like we don't just buy an investment to be buying it. We have to know why
we want it. Secondly, is it something, I think this is this has to be true.
[00:09:22] It has to interest you because you need to spend some time. Studying this stuff,
understanding it. Options can be boring and confusing. So you better enjoy it before you
jump in there. There's other ways to achieve the same results. So that's number two,
number three. Are there more profitable alternatives for you?
[00:09:37] In other words, how do you spend your time? Is there an, is there a better way to
spend your time maybe so profitable and maybe monetarily, maybe in quality of life, that's
number three, number four. Do you have the time. Maybe we just talked to that. I don't
know. Maybe that's a, maybe that's a sub-bullet of number three, nonetheless.
[00:09:54] It is. It does take a lot of time, and you've got to take that into consideration. If
you're taking time away from your normal [00:10:00] job, then there's a cost to that.
Number five. What other options do you have for your free time? Other hobbies, you might
enjoy spending time with your family instead of investing in options.
[00:10:10] But we'll talk about today. Investing in options, pros and cons, nuts and bolts. Yes,
that's true.
[00:10:15] Ben: [00:10:15] It's exciting. It's this has been a hot topic on on tip
[00:10:20] Rob: [00:10:20] tic-tac.
[00:10:22] Ben: [00:10:22] Yeah, absolutely. People are making millions from what I've seen some of these videos. According to these anonymous
[00:10:29] Charlie: [00:10:29] videos
[00:10:30] Rob: [00:10:30] and they've only lost 10 millions, so yeah,
[00:10:32] Ben: [00:10:32] exactly.
[00:10:33]They don't put this on important, it's not really that, that math doesn't really need
to work. Yeah.
[00:10:37] Yeah.
[00:10:39] Rob: [00:10:39] That's funny. We've got Obviously, we're going to explain a little
bit about options. We're not going to get too in the weeds. What are we not going to get
into? Oh my gosh. I wouldn't even some of those fancy
[00:10:48] Charlie: [00:10:48] terms.
[00:10:49] I want that straddles long call butterfly spreads are my favorite. Yeah. Not to be
confused with peanut butter spread.
[00:10:58]Rob: [00:10:58] No. That's different
[00:10:58] Charlie: [00:10:58] long [00:11:00] strangle, married put, but. But call spread. No,
that's not the butt call spread. It's the bull call spread. Sorry, I misread my notes there. I was
pretty close, protective collar rights and unwinds.
[00:11:13] So we're not going to, luckily we're not going to talk about any of those that,
especially the buck calls. Those are not fun to talk about.
[00:11:20] Rob: [00:11:20] Optimism.
[00:11:21] Ben: [00:11:21] Call me all the time, Charlie. We should talk about
[00:11:23] Rob: [00:11:23] this. That's a good point.
[00:11:26] Charlie: [00:11:26] We've got to
[00:11:26] Rob: [00:11:26] keep it professional today. Call you at eight six five two nine zero
[00:11:33] Yeah. All right. Excellent. We're not going to cover that. We're just going to keep
it high level, if you will, or low level or whatever, we're not gonna get into the details. Okay. I
love that. Yeah. So what is an option? It's a derivative means derived from something else
for our purposes today.
[00:11:48] We're just going to talk about stock options, where the options derive their value
from stock. Typically one option is worth. 100 shares. So that's the first part I [00:12:00]
want you to know. We get a little bit of the history here. Options are very old. They're not
brand new. They've been around quite awhile.
[00:12:05] They were even, yeah. During the stock market crash of 1720, and yes, you heard
me right. 1720, not 1929. Whoa. So back then too, people would go into a contract and
that's all an option is a contract between two parties. And they would enter it in the contract
or one person would write the contract, given the buyer the option to buy or sell the stock if
it hit the exercise or strike price on or before the exercise date.
[00:12:35] So it was just a contract between two people. That's it? That was back then.
Obviously if one person didn't have the shares or couldn't buy the shares, when the exercise
price was hit on the exercise date or before. Then that would be a problem. So in 1973,
Chicago board options exchange came about and they were able to solve some of these
[00:12:54] And now it's called CBO for you traders out there. , CBO came about helped solve
some of those problems. And if someone [00:13:00] wanted to write an option, Now they
needed to show that they had the shares and this exchange would make sure of this so that
someone would just, wasn't saying, oh, I've got the chairs when they didn't and take off to
London or something.
[00:13:11] And they, or they have money in a margin account. So they say, okay, you've got
money in a margin account. If the stock goes, whatever way we can put more in. And that's
what the margin call is, where you'd have to put more money in. I don't ever want to be a
part of those. I don't think there are any fun for.
[00:13:28]Some of the folks I've talked to who have been a part of those, you have to put
more money in and it can get ugly. But in any case, you get to a point where you're writing
options and they're called naked options or naked calls and naked puts. And all this means is
you don't know the shares.
[00:13:44]With the exchange you're on that margin account where you have that money
away so that they can go in there and trade on your behalf. If the stock goes the wrong way.
Opposite of being naked as being covered, which leads us to cover calls. Charlie, what do
you [00:14:00] got on to cover calls?
[00:14:02] Charlie: [00:14:02] They're not naked, so that's the good part.
[00:14:04] That's good. So options are like we say, can get very complicated as you've
already learned. Very difficult to follow along some of these, but the most basic. When I
was studying and learning about options they said is , you could do covered calls with your
[00:14:21] In other words, it's conservative enough to be able to do that. So that's the one
that people maybe are most familiar with and are able to do if they wanted to not a
recommendation if they want to do that in their 401k they can, in most 401k is like in an, in
a in a brokerage window of some sort.
[00:14:39] Of course in a taxable brokerage account at Schwab or E-Trade or fidelity, you can
do any of these things if you want to, or there's other brokerages out there that facilitate
options specifically. They specialize in that. However, again, we're going to focus on what is
a covered call.
[00:14:53] So let's pretend for a minute that, that I own a stock now. Now most people buy
covered calls [00:15:00] or write covered calls, the lingo there, like Robin said, okay. In a
market where they believe it may be flat, the stock market, the stock may go up in price a
little bit.
[00:15:09] It may go down a little bit, but flat that's when they might do a covered call, but
basically it can add income to your investment. So it's essentially like an income producing
strategy, maybe like a dividend, you could compare it to. So just real quick explanation, let's
say I own a stock ABC stock it's at $20 a share.
[00:15:29] So I own that stock and I say, Hey, I'm going to produce a little extra income. And
I'm going to sell a call option. I'm going to sell that contract. Someone's going to pay me to
do that. So I take that premium that I get paid by selling that a call option. I still own the
stock. Let's pretend then that the stock goes down.
[00:15:48]If the stock goes down, I still own the stock and I've got money for that call option
that I wrote to someone or sold to someone. So that's one scenario. Now let's say that I did
the same thing. I sold the call [00:16:00] option. And the stock goes up well, I've got the
premium from the call option that I sold stock goes up to the exercise price or strike price,
someone else exercises that option I am required to now sell my stock.
[00:16:14] And so it's gone. So in other words, let's say I own that stock at $20, ABC stock at
$20, I wrote a call. I received a premium, it went up to $25. It was called away because I had
to sell. So I made 20 excuse me, $5 on the increase in the stock. And I made a little bit of
premium on the selling of the covered call.
[00:16:35] So that is the strategy in a nutshell. And there's a lot of services out there that
offer that as in, I'll be honest with it, they offer it as some magic solutions and magic potion
to increase your 401k and make your life wonderful.
[00:16:50] Rob: [00:16:50] Yeah. And it's interesting why they might do that.
[00:16:54] You start talking about a lot of, Robin hood and, almost all the brokerages
nowadays are doing zero [00:17:00] commission trades for you. And a lot of people get
confused and they think, oh I'm not getting charged anything. Everything's great. And yes,
that is true. However, the brokers are still making a lot of money, especially when it comes
to option trading.
[00:17:13] So on a normal equity trade, a broker might make 17 cents portrayed off of
what's called. Payment for order flow. So that's where they get a kickback from the market
maker, the person actually doing the trade there, they get paid to channel the trade to that
person. And you'll never guess who actually pioneered profit for excuse me, payment for
order flow.
[00:17:39]Any guesses there? Bernie made off burning. Whoa. He planned here or helped
pioneer payment for order flow. So the broker gets a kickback. Yeah. You're not paying
anything, but they are getting paid off that bid ask spread is pretty big compared to a regular
[00:18:00] trade when you're talking about option trading and that market maker is able to
offer those guys as much as 58 cents.
[00:18:05] So 17 cents. Compared to 58 cents, those are just rough numbers there, but
they're making a lot of money off of option trading, which is why you'll see some companies
Robinhood, even TD Ameritrade, other companies wanting and pushing option trading
because they are getting a heck of a lot of money.
[00:18:22] I think one of the quarters, Robinhood and TD Ameritrade, there were upwards of
400 million during the quarter. So it's a wow, it's a lot of money out there and it makes sense
why they're pushing it because they get. Again, they get more money off of it. Off of those
zero commission trades there.
[00:18:39] They're getting quite a bit of money. Now, quick note here, fidelity doesn't accept
payment for order flow. And why do you care about that? You're like I don't care except that
if someone's getting paid to channel your trade to a certain market maker, that means you
may not get the most favorable [00:19:00] terms.
[00:19:00]If they're getting. If they're getting paid to send it to, Maydoff, then they're going
to send it to him to get paid. So anyways enough about that what'd you have,
[00:19:10] Ben: [00:19:10] yeah, that's a shame. I was just going to say. Yeah. Like you said,
with these. Different brokers out there that are now pushing options more.
[00:19:17]Options trading has exploded in popularity in the last 10, 15 years. And it keeps
increasing. I think I saw recently it was like 20 million options are traded a day now, and so
talk about a moneymaker, but then also talk about the popularity increase. Like it is a
serious thing and now.
[00:19:35] Again. I actually see it on social media, people talking about this as if it's, instant
way to, to make a bunch of cash. And so yeah, if you want to know these, the ins and outs,
but gut.
[00:19:47] Rob: [00:19:47] Yeah, absolutely. If you want to get into any of option trading,
just try to search for any podcast on opposite trading.
[00:19:53] You'll get a bazillion different ones out there because people are pushing it like
crazy. [00:20:00] Not to say you can't make money. You just better know the risks. And to
that point, some of the things, some of the things we talk about here at leading edge, if
you're going to do it, and you really, like Charlie said, you want to get into it.
[00:20:12] You're really interested in it. You have the time you have the, it's a hobby for you
or whatever, then you're going to want to put no more than at least what we advocate here
is no more than 5% of your portfolio in that you don't want to put too much because you
might lose it for one. If you're going to do it, make sure you define your risk and know your
[00:20:34] It can take years to get comfortable with it. That's something you're going to have
to make sure you have the time to get. Get good at it. It's not something you're just going to
pick up one day and say, oh, I'm going to, I'm going to be a great option straighter and make
a ton of money tomorrow.
[00:20:46] The one thing I will read here, which is pretty interesting is one of the quotes, the,
one of the quotes from TD Ameritrade that they make you read before you can even start
trading options.
[00:20:55] As opposites are not suitable for all investors. As the special risks inherent to
option [00:21:00] trading may expose investors to potentially rapid and substantial losses.
And it goes on to say a whole bunch of other things. Option trading privilege privileges in
your account are subject to TJ, TD Ameritrade review and approval.
[00:21:13] Not all accounts owners will qualify. So lots of different things out there. Charlie.
What else? What else do you got on options? Yeah.
[00:21:22] Charlie: [00:21:22] Yeah. It's just it's just, I don't know the way you think about
some of these things, a lot of times as investors, we're sold stuff, we're sold strategies.
[00:21:29] We're sold annuity, sometimes nothing wrong with annuities. If they fit your
situation, nothing wrong with options. If they fit your situations, don't get sold something
though. In other words, let's say someone's trying to sell me on call options. Call options are
great, cover calls, fine, income producing the stock gets called away, fine, whatever it can be
beneficial, but as a, as an accumulator right now in my life or any, let's say one of our pilots
still flying, do I really need to [00:22:00] produce some income?
[00:22:01] And my 401k, people are like of course I do. Maybe not because I really want to
keep those investments and I want them to grow. For the long-term, so what is it that I
really need because sometimes executing this fancy complex call strategy sounds really cool,
but is it really what I want?
[00:22:19] And I probably could do better if I, go, just go long on equities, period. And so
that's, I'm not trying to produce income until I'm in retirement. I really want capital
appreciation. So that's one of the things and the other thing is that, we talk about the risk of
options and there are some risks, but most options strategies they're designed to reduce
your risk, buying a put option, it's designed to provide a floor to a stock that you might own.
[00:22:47]To minimize losses, or like I said, covered calls, designed to produce a little bit of
extra income. So most of the time, these things, are risky mitigation strategies that large
insurance companies are using. Large [00:23:00] institutions are using hedge fund managers
are using an individual investor.
[00:23:04] I'm not so sure that we often understand exactly what options are for when we're
investing in them. In other words, most of our most investors will say, I just want to make
more money. Options probably aren't your best bet. Then you don't just go along the stock,
or as many oxygen you can.
[00:23:19] So anyway it's interesting how sometimes things are sold to us when we don't
really know exactly the purpose of the particular investment, we're just attracted to it
because of the complexity.
[00:23:29] Rob: [00:23:29] Yeah, that's a good point and note on that. If you're buying call
options or you're a call option holder, and you're not entitled to the quarterly dividends,
every other person is, that, that has, that just regularly buys that stock regardless of when
they purchase, when you purchase that option.
[00:23:47] So something to keep in mind, sometimes you don't capture those dividends,
which dividends aren't the end all be all, but they are, they do help in certain cases. So
something to keep in mind. Yeah.
[00:23:57] Ben: [00:23:57] Yeah. So I heard something that, . [00:24:00] And again, this is
the pilot lounge topic, cause this is something that we hear.
[00:24:04]That people are talking about and whether it be in the cockpit or in the pilot
lounge, but there's a lot of different people out there actually trying to sell what they call
like the, basically the signals of, Hey here's what options I'm looking at. Here's what options
you should go and buy.
[00:24:20] And then, you pay a subscription fee. They give you a, Hey here's three options a
week that you go and buy and here's the returns I'm making. It's crazy. That's just something
to look out for because I've seen that a lot going around. I've heard a few of our pilots tell us
this and that people are doing it and people are asked telling them about it.
[00:24:38]I would definitely do a lot of more research before you go ahead and subscribed
to something like that, because a lot of scams happen that way. And it seems to be
increasing in popularity. I don't know if you all have seen any of that advertised or anything,
but it's definitely something that you should be .
[00:24:53] Cautious of, if you see
[00:24:55] Rob: [00:24:55] it. Yeah. It's been floating around for sure. One of the pilots I flew
with [00:25:00] not too long ago, he's doing it and, I think he's trying to make sure he's doing
it the right way and protecting himself. But just a side note here, if you're riding or selling a
naked option, You get paid for writing that contract, but your losses can be all the way, you
could lose it all.
[00:25:15] So knowing your risk again, foot stomp in that know your risk, know your
downside as you're getting into this. And if you don't know that, then you probably shouldn't
be doing it.
[00:25:25] Charlie: [00:25:25] Yeah, exactly. And like we talked about before, there's a
couple other alternatives too. Like individual options contracts. So there's a lot of mutual
funds out there that, that take these strategies and wrap them into a mutual fund.
[00:25:39] In fact, there's an ETF. So we'll talk about it in a minute too. But so what I did is I
just Googled, the top 10 mutual funds that, that execute option strategies. So I've got the
top 10 . I put them in our software. And Rob, I was showing you this before we got on the
call here.
[00:25:55] And I was like, we'll look at the risk return profile of these investments in
[00:26:00] the expenses. We're all averaging. They probably average about 1.5. In fact, I
might be able to take a look right now, but it is significant, so here's an example for you on a
portfolio. You typically average a 0.16%.
[00:26:15]It's what our portfolios, average expense ratio. So for every a hundred thousand
dollars, that's $161. So the expense ratio of these option based mutual funds is an average
of almost 1.5%, which is $1,400 annually versus 161. So you've got huge expenses and oh, by
the way, let's take a look, is it worth it to have those expenses?

[00:26:37]No, it's not worth it because up until last fall, The intermediate term treasury was outperforming these top 10 together. So I took the top 10 option based mutual funds. I
equally split them, about 8.3%. And their performance was was just about on par with a
government [00:27:00] treasury. Wow. And so not only are you taking more risks, you're
paying more expenses, but I could have been the same thing with immediate term.

[00:27:06] Yeah. So I'll be honest with you. I don't get it. I don't get, because one, an investor doesn't usually a mutual fund like this for a timing strategy. If I'm going to buy a mutual fund like this, I'm going to let those managers execute their strategy. That's the whole point. And that's why you pay more expenses.
[00:27:23] But they've not really done what they said they were going to do. So anyway, I'm just very fascinated at why and what place. Cause that's what we think about Rob and Ben is like as investment advisors. Where, what role does this play in my portfolio? Does it provide diversification? Does it add value? When times are tough, does it help me?

[00:27:44]Let me tell you about in 2020, the options based mutual fund portfolio that I
created returned 3.6, 2%. Intermediate term government treasury 7.5%. Okay. If you'd just
done a 70, 30 portfolio, you probably [00:28:00] would've gotten mid-teens. So what role, a lot of people say you gotta have alternatives in your portfolio.

[00:28:05] Wow. I don't get it. So I'm not sure, you know what I'm missing here. But I don't think I want them in my portfolio.
[00:28:12] Ben: [00:28:12] It's like people it, there's something about the complexity of it
and, Hey, we're doing all these options training. It may sound great. Hey, we're doing all this look, look at all this complex stuff we're doing it sounds maybe good on the surface, but really, yeah, like you look at the numbers, you look at the fees involved, you look at the risk profile, you look at what are their returns been, and you start to realize that just because things are really complex and these portfolio managers are really active. Doesn't necessarily mean that's what's best for you.

[00:28:40] Charlie: [00:28:40] Yeah. And that's a behavioral thing as investors. We just can't believe sometimes that it can really be that simple to own a diversified portfolio.

[00:28:49]Government treasuries provide the best diversification and in difficult times, at
least they've shown to do that in, in, in history anyway. So we, it's just our natural tendency
to look for something [00:29:00] really complex. Somebody has got to have the secret potion out there and listen to these names, equity call a premium, a tactical core fund, enhanced equity, income, strategic program, risk emergent.

[00:29:11]It's that sounds pretty good but it looks when you look, dig a little deeper, it
doesn't look so, so good. So anyway, so sometimes simple wins out in these types of

[00:29:20] Ben: [00:29:20] It's boring just to own a fund with a bunch of companies in there, but then you look deeper and you realize, these companies that like it and are just a regular portfolio, that's not doing these complex options.

[00:29:31]These are companies and businesses that are doing complex things behind the scenes, trying to make more money for their company and grow. So really it's not boring. It just, it may sound more boring than that. I want that tactical, a whatever you called it. That sounds pretty cool, but really it's just a S a smoke and mirrors from what it seems like,
obviously on the, in those tendencies.

[00:29:52]But is there a place for options?
[00:29:56] Rob: [00:29:56] Yeah. Sure. Sure. I think if you're going to be [00:30:00] trading stocks, individual stocks, and you're scratching that itch again with a very small portion of your portfolio and you're trading stocks, I can see where you're going to head some of those positions. Yeah. To protect yourself from the downside.

[00:30:12] And that's where I see if you're going to be doing that. Then, that's one thing. Or again, if you're really adamant and you're really You really want to get into this, riding those covered calls and doing some of those things with a small portion of your portfolio. I think it could be interesting too.

[00:30:26] And it's got an appeal to it, to some

[00:30:27] Charlie: [00:30:27] people. Yeah., and the way we make decisions is interesting. If

I just had my speculative money out, and I'm ready to go do some different things and just
learn about investing. I'd have no problem doing covered calls.

[00:30:39] I have no problem. With put options buying put options, they create that floor for you, and they're better than doing like a limit order. limit order on a single stock or a put option is better than that because it gives you more flexibility. We won't go into too many details, but think about it this way.

[00:30:53]If the choices of my hobbies and my off time are like to do put call, put options
and cover calls

[00:31:00] versus say, buying a horse. I think you're way way better, better off doing covered calls. Okay. Let me just put that out there because you don't have to feed
them. You don't have to call the vet. You just have to spend some time and if you enjoy it,
great do it. But like you said, Rob, just understand that it's speculative unless you've unless you're doing something little more conservative, again, cover calls, fairly conservative, just to understand which kind of options strategy you're doing.

[00:31:25] Rob: [00:31:25] Yeah. Good stuff. Yeah.

[00:31:28]Charlie: [00:31:28] Hey, do we have time to talk about the the last ETF?
[00:31:32] Rob: [00:31:32] I, yeah, absolutely. I think so.

[00:31:34] Charlie: [00:31:34] I think so. Like you said, Ben, the options are used by our
clients, if they buy and, in fact to fixed indexed annuities and that's, that sounds like a dirty word to some of us, but there are some times when fixed index annuities are appropriate, just depends.

[00:31:50]But those types of annuities use option strategies. They use out of the money calls in the money calls and they create. This floor for [00:32:00] investors and they create a cap.

Now all of that is very confusing. We won't go into detail on how those constructed, but
sometimes they're appropriate.

[00:32:07] Sometimes they can serve a purpose and that's why insurance companies use them. So that's one example. There's another example, and this is a relatively new thing in there called buffer ETFs. You can look these up online. They're called innovator ETFs and they came out a few years ago. And basically what they do is they're that fender fixed indexed annuity that I just described where there's a floor created, and then there's a ceiling created.

[00:32:30]. So a couple of years ago, these buffer ETFs came out and they've since multiplied like crazy, they have all kinds of them right now.

[00:32:37]. They don't talk about how exactly how they construct them. But nonetheless, I
could buy one of these buffer ETFs it's in an ETF wrapper, which makes it much more

[00:32:46] I know what to expect. I say because there still are some things to think about. I know the expenses they're less than an insurance product. The fact they're about 0.8% is the expense ratio, which is expensive for an ETF. There's no doubt about it, but there's a lot of moving parts going on here.

[00:33:00] [00:33:00] So I will tell you that last year during the COVID downturn this was an alternative to getting out of the market completely. It's not a panacea. If I, when I describe it to you right now, it will sound like a panacea. Okay. So in other words, I can buy an ETF. That's called a buffer ETF S and P 500 is what I'm tracking.

[00:33:19] It protects me for the first 9%. Decline. In other words, the stock, the market goes down S and P goes down 8%. I don't go down at all. So that sounds pretty good. Now, if I go to, if it goes down 20, then I'm going to go down 10 ish. The difference. Okay. So there is not complete protection, but they have other ones that can protect you almost 30% on the downside.

[00:33:39] That sounds great. But the upside is also kept much, much lower. Ah, so see how
these get complicated really quickly. There's the rub. So now is it an alternative? And again, going back to, how does this fit in my port polio last year, we thought, Hey, should we use these or not? And in fact, we tried [00:34:00] to talk to, if a client was having difficulty maintaining their plan in the market, they wanted to go to all cash, which we thought was a bad move.

[00:34:09] Then buffer ETS, we thought were a good solution. Because it provided
somewhat of a predictable outcome. In other words, at the end of this one-year period,
they're all based off of one year, because that's when the options expire, you know what
you're going to be limited to on the downside and the upside.

[00:34:27] So that provided some people, some certainty in a time where uncertainty was rampant. I talked to one person last year and they said, Hey, I think we're headed for the great depression. And I couldn't disagree with him. I had nothing to come back to cause
anything could have happened. That sounds silly.

[00:34:40] Maybe looking back now, but at the time it was pretty scary, a lot of uncertainty.

Now they're not a stock replacement. And maybe they're not a bond replacement, maybe
they're a hybrid, so you gotta think about how you're using them in your portfolio.

[00:34:52] There's pros and cons to everything. I'll go over the couple of negatives real quick.

They're very expensive. Like I said, 0.8% is a very high expense ratio for [00:35:00] ETFs, but you can understand why, because they have options, et cetera, going on inside these ETFs, they're likely to underperform during strong bull markets.

[00:35:09] Now last year, there was such a quick recovery hindsight being what it is.
Probably would have been better off not going into buffer ETFs. However, remember what I
said, it was a stretch, it was an option to go in into cash. We stayed in the market. We've got
some return, not as much as the S and P gives it recovered quickly and strongly stronger
than we ever thought it would.

[00:35:29]So there, there are these ETFs that have these options strategies, quite frankly,
they're going to underperform in the longterm. That's just what you're gonna have to, put up with they're complicated. They have a lot of moving parts. So again, anytime you use an
options, strategies, you need to know what you're doing and know what to expect, because there's nothing worse as an investor investing in something thinking I'm going to have this
result in the exact opposite happens.
[00:35:53] So I think that's one of the big things to consider.

[00:35:57] Rob: [00:35:57] Yeah, absolutely. That is a great [00:36:00] example. Charlie and to piggyback on that, that's one of the reasons why we are so adamant that we're getting your risk analysis, right? Because we want to know when COVID hits, when you know, the 2008 financial crisis hits, we want to know what your risk tolerance is.

[00:36:16] Sometimes you can't know until it happens. And I get that. But if you can, and if
you can simulate it and share flat or whatever you're going to do to see when COVID hits, I'm okay with it going down, 30 to 40%, and I'll, I'm going to be just fine because I'm a long-term investor or I've got my risk.

[00:36:32] I know I've got bonds. , and I'll be able to get through this rebalancing and those
kinds of things. So I don't need to get into to these options that we're talking about right
now, even the ETFs. If you've got your risk analysis nailed, you don't need to get into that.

[00:36:46] If you don't or if you start getting cold feet, that's where an advisor can really
help you out and get you through those hard times. All right. Anything else?
[00:36:58] Charlie: [00:36:58] I think that's about it. Like I said, if you're going to [00:37:00] do horses, the options are better.
[00:37:06] That's it? In a nutshell, I just got my little girl four chickens, because like I said, last time our chickens got eaten by someone besides me or something besides me. I don't like it.

We've got some new chickens. We're going to do some goats. But we're not going to do
horses. As long as I can stiff arm that as long as I have a say in my own family, Which may
not [00:37:26] Rob: [00:37:26] be very long.
[00:37:28] Yeah. Good luck. We're all counting on you. I'll

[00:37:32] Charlie: [00:37:32] talk a bit. Let's talk a big talk. Yeah, my daughter, this
weekend, we got chickens. Soon as we got chicken. So daddy, did you say I could get horses when I'm 12? No. 15. I said 15 and before it was 20 she's already talked me down. She's already anchored me down five years.

[00:37:47] It was 20 before
[00:37:50] Rob: [00:37:50] hires you hire her now. That's awesome. Good stuff. We've
arrived at our final destination. This I [00:38:00] believe is flight nine, episode nine. Thanks for joining this year. Pilot money guys podcast. If you have any questions. You would like us to answer anything on the show.
[00:38:09] Shoot me or Charlie and email Robert leading edge or Any of us throw us an email. We'll try to cover it. Leave you with a couple of Charlie Munger quotes. The big
money is not in buying or selling, but in the waiting a second one, here is a lot of people with high IQs, terrible investors, because they've got terrible temperaments.

[00:38:35] That's it, if you like, what you heard, please hit that subscribe button so we can reach more people. And remember, as Emerson said, the world makes way for those who know where they're going. So plan accordingly from all of us here at leading edge. Thanks for
stopping [00:38:52] Charlie: [00:38:52] we're out.

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Charlie Education

“The Envious Investor”



“My neighbor invested all of his portfolio in TESLA and now I’m envious!  It feels like I’ve FOREVER missed out.  And I might have less money in retirement because I missed the hot stock, ETF, Mutual Fund, etc.? 


“As an investor, you get something out of all the deadly sins—except for envy. Being envious of someone else is pretty stupid. Wishing them badly or wishing you did as well as they did—all it does is ruin your day. Doesn’t hurt them at all, and there’s zero upside to it.”


“If you’re going to pick a sin, go with something like lust or gluttony. That way at least you’ll have something to remember the weekend for.”


Warren Buffett

We understand these concerns and feelings because we’re investing for retirement too!  Furthermore, as investment advisors we hear these concerns almost every year.  If you’re a diversified investor, there will always be an asset class, a high-flying stock or mutual fund that has higher returns than your diversified portfolio.   

Does this mean we’ll have less money for retirement than our neighbor who’s ONLY investment last year was TESLA?  Historical evidence says you’ll likely do just as good or better over the long-term.  The “over the long term” part of the sentence presents the challenges.  In other words, it’s really hard to be a long-term investor when it feels like the world is falling apart around you AND your drinkin buddies are killing it with their daily newsletter stock picks!   

We all feel the pressure (envy) of missing out on great investmentthat we should have known were going to do better than all the others.  The good news is that diversification still works.  It’s never really “cool” nor does it ever feel great.  However, we believe, and the evidence supports the fact that your chances of success are better in the long run.  Check out the numbers from the chart below from BlackRock.   


Take a look at our short video where Charlie discusses what it was like in 2020 as investor.  How challenging it can be to stay the course and not chase recent returns.  Furthermore, the difficulties of feeling like you’ve forever missed out if your returns weren’t as high as your neighbor who invested in TESLA, Bitcoin, etc.   

Thank you! 

Charlie & the Team at Leading Edge Financial Planning 


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 03/12/2021 and are subject to change at any time due to the changes in market or economic conditions.

Retirement Rob

What Does Fiduciary Mean and Why is it Important?

Leading Edge Financial Planning is growing!  Thanks to you for spreading the word about Leading Edge, we’re adding new advisors to increase our capacity and continue to improve the quality of our service for current and future clients.   

We’ve been tremendously fortunate to have added three new advisors over the last few months.  Many of you already know Ben Dickinson as he’s been with us for almost two years now.  However, he’s moving into more of an advisory role as he’s increased his knowledge base, experience and met the SEC’s requirements to become an Investment Advisor Representative (IAR).   

We’ve also added Mark Covell as an IAR.  Mark is a soon-to-be-retired Marine fighter pilot as well aan American Airlines pilot And yeshe’s brilliant and talented in addition to being a Marine warrior for our country!   

For many of you, this article may be your first introduction to Rob Eklund.  He’s one of our latest additions to the team.  We’re very excited to add Rob to our team of advisors because of his passion and excitement for helping people with their personal finances.  Mguess is his enthusiasm will come through in this article. He tells his story of searching for a trusted, fiduciary financial advisor to help him and his family with their personal financebefore becoming an IAR himself.  Click here tlearn more about Rob’s background and experience, and please check out his article below... 


What Does Fiduciary Mean and Why is it Important

The first time I heard the term fiduciary, I said to myself, fidu…what? Sounds fancy. Then I fell asleep. Admittedly, this topic appears boring and could put my 16-year-old boy all hopped up on Mountain Dew to sleep! But here is a wake-up callknowing who is and who is not a fiduciary is the first step in finding someone to help you with your retirement and investment planning.   

I have been interested in investing ever since I was knee-high to a grasshopper. However, I acquired this fiduciary knowledge several years ago when I was a newly minted first officer for a major airline, before becoming an investment advisor myself.  At that time, I began a journey to find a trustworthy financial advisor for myself and my family. As a military officer, money had not been a primary concern, and to be honest, I didn’t have enough of it to matter. But as I began my major airline career in 2013, I realized I would soon have enough money that I had better start thinking about how to manage it. I knew I needed help. Furthermore, my focus was on learning how to be a first officer while still juggling my Air Force Reserve career.  

Many questions ran through my head. The biggest and most important was, How can I protect my money? The money I had worked so hard to accumulate. What I found surprised me.  Many financial advisors wanting my business were not fiduciaries. Some of these advisors were very intelligent and could sell with the best. One problem, they only had a suitable duty of care to me versus a fiduciary standard.   

The Suitability Standard 

The suitability standard means an advisor or broker only had to put my money into investments they deemed adequate. They did not need to give me advice that put my interests ahead of their own.    

The Fiduciary Standard 

A fiduciary is someone who acts on behalf of another person and has a legal and ethical obligation to put their clients’ interests ahead of their own.  SEC Chairman Jay Clayton defined the fiduciary responsibility this way, This duty  comprised of both a duty of care and a duty of loyalty  is principlesbased and applies to the entire relationship between the investment adviser and the client. When someone is a fiduciary, it applies to the entire relationship, not parts of it. It is the highest standard in the financial world.  

You may be saying, Okay. Great! Aren’t all financial advisors’ fiduciaries? Unfortunately, the term financial advisor is very nebulous and can apply talmost anyone.  In fact, most financial advisors are not fiduciaries.  Furthermore, more than half of respondents (53 percent) to a 2017 Financial Engines survey mistakenly believe that all financial advisorare already legally required to put their clients’ best interests first.    

Regulation Best Interest, aka “Reg BI”? 

Reg BI, effective January 1st, 2020, attempted to improve upon the suitability standard and move the ethical bar higher for anyone who calls themselves a financial advisor.  Instead of only having a suitable duty, they are now supposed to have a best interest duty. The regulation takes several steps to raise the bar (like having to disclose conflicts of interest); however, it does not change the dynamics of how a non-fiduciary advisor operates or receives compensation  

It is difficult to get a man to understand something when his salary depends upon his not understanding it.” ~Upton Sinclair  

I believe this is what Reg BI attempts to do. It tries to get brokers to act in the client’s best interest, but their salary often depends on him not doing so. I fear that many advisors will continue finding ways to put clients in funds that pay them a commission. Even in the regulation itself, the term best interest is ill-defined and very open to interpretation.  

Fee-Only versus Fee-Based 

The critical distinction is that an advisor operating under Reg BI castilbe paid by a 3rd party tpuclient’s money in certain investments or insurance products.  In other words, if an advisor gets paid by a third party (mutual fund company or insurance/annuity company) to put your money in certain investments or insurance products, then there is a conflict of interest.  And athat moment, the advisor needto disclose that they arNOT acting in a fiduciary capacity.      

Most fiduciaries operate in a fee-only manner.  This means the client’s fees are the onlsource of income for the advisor, and they are not paid commissions from third parties or outside sources that could bring into question the objectivity of the advice given.  Be sure to understand thdistinction between a fee-based financial advisor who may earn a commission and a fee versus a fee-only advisor.  The languagis very nebulous and confusing for a reason.   

Back to my personal journey in search of a trustworthy financial advisor; During one conversation, I asked, Do you have a fiduciary duty to me? What should have been a simple yes or no, was instead a bunch of hemming and hawing, but no real answer. Not to be deterred, I asked again. This time I received another vague response, so I asked once more. Finally, thiadvisor told me he only had a suitable responsibility (today, he would have told me he had a best interest responsibility).  Case closed! He may have been a great advisor, but he had no legal obligation to dwhat was best for my family and me 

 I wanted my financial advisor to do what was in my highest interest. Furthermore, I wanted someone whose advice was objective and had no incentive to put me in a particular mutual fund. For me, the fiduciary advisor is the answer.  

“How do you find out if someone has a fiduciary responsibility to you? This one is easy, ask.  

Ask the following question, If I hire you as my advisordo you always have a fiduciary duty to me?” If the answer is not a fairly quick, “Yes” I advise looking elsewhere. If it is, follow it uwith this question“To be clear, you never put on a broker hat and always have a fiduciary responsibility tme? The answer should again be, yes. 

Beyond asking, you should also be able to find out by looking at the disclosures on their website or looking at their Form ADV Part 2A/Firm Brochure or the new Client Relationship Statement (CRS) mandated by Reg BI. 

When I became an advisor, I knew I wanted to do it the right way and act as a fiduciary for my clients.  Thankfully, Leading Edge Financial Planning (LEFP) shares this belief. Our Form ADV Part 2A says this: 

Item 10: Other Financial Industry Activities and AffiliationsNo LEFP employee is registered or has an application pendinto register as a broker-dealer or a registered representative of a broker-dealer. LEFP only receives compensation directly from our clients. We do not receive compensation from any outside source, nor do we pay referral fees to outside sources for client referrals.” 

 If you have gotten this far and not fallen asleep, I thank you. As you now know, I am a fiduciary and vow to protect my clients’ hard-earned money with the highest devotion to their goals. Until next time, I hope you have only tailwinds and blue skies! 

Robert E. Eklund, CRD # 7317768 
Investment Advisor Representative 

Robert Eklund

Financial Planner

Rob is a Southwest Pilot and soon to be retired Air Force Lieutenant Colonel. He grew up working on his family’s ranch in Colorado and went to high school in Alaska.  In 2000, he graduated from the United States Air Force Academy, earning a Bachelor of Science degree in Legal Studies.  Rob has served over twenty years in the Air Force, ten years on active duty, and over ten in the Reserves. During his military career he flew the C-130 while stationed in Germany and the KC-10 in California. Rob has accumulated over 700 hours of combat flying hours and participated in multiple Operations.  He was hired by Southwest Airlines in 2013 and became a staff officer at USNORTHCOM’s Domestic Operations Division in 2016. While holding this position as an Air Planner, Rob helped areas recover from Hurricane disasters; specifically, he was called to active duty to aid in recovery efforts following Hurricane Maria.

While studying at the Academy, Rob discovered his enthusiasm for the study of personal finance and investing.  As his military service comes to a close, he is excited to combine his passion for helping and protecting others with his enthusiasm for personal finance.  This culminated in 2020 with Rob passing the Series 65 Uniform Investment Advisor Law Exam and joining the Leading Edge team as a fiduciary advisor.  A fiduciary’s role comes naturally to him as he enjoys helping people whether that benefits him or not.  Rob knows the tremendous trust clients place in their financial advisors, and it is his goal to grow that trust through the highest level of transparency and integrity.  In his personal life, Rob married up to the love of his life and has been married for 18 years. He is overwhelmingly proud of his son, whom he recently donated a kidney.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this post will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 02/10/2021 and are subject to change at any time due to the changes in market or economic conditions.

Charlie Education

What Lies Ahead? The Top Ten Investing Principles for Getting Through the Next Market Downturn, Pandemic, Recession, etc.

Not even Hollywood writers could have created a story like we lived out in 2020. In this video, Charlie Mattingly and one of Leading Edge’s newest advisors, Rob Eklund, discuss what this year has taught us, how to better prepare in the future, and thoughts about the markets and economy going forward.   

Leading Edge financial advisor Rob Eklund, a First Officer for a major airline and a retired Air Force Pilot, review what investors can learn from mission planning in the Air Force anairlines.  Foexample, how can we be proactive instead of reactiveMany times, people may remark how pilots need quick reactions to be successful.  As Rob and I know, if you are frequently reacting as a pilot, it’s a good indication you did not plan sufficiently.  We believe it’s the samwith investing and retirement planning.   

Although, it is to prepare prior to a recession or market downturn, there are many things we can do during the event itselfVanguard posted the following graphic listing just a few of the value-added strategies that are critical to consider during any market decline.  


In addition to the checklist above from Vanguard, we believe there are ten essential principles to help all of us remained focused and less stressed during the next market downturn or recession.  


Embrace the efficiency of the markets in the long term.   


In the short term, the stock market reflects investor phycology (and many other unpredictable factors).  However, over time, equity prices tend to represent the future cash flows of a business.  We can all share in those future profits if we have the discipline to remain invested.

Don’t try to outguess the market. 

Although there is some debate within the finance community on the exact level of impact on investment returns, most will agree that strategic asset allocation and the amount of time in the market (not market timing) havthe most considerable influence on investor returns.    

Resist chasing performance.  

Do not select investments based on past returns.  Funds that have outperformed in the past do not always persist as winners in the future.  Past performance alone provides little insight into a mutual fund or ETFs ability to outperform in the future.  

Let markets work for you.  

The financial markets have historically rewarded long-term investors.  We have the opportunity to earn an investment return that outpaces inflation by supplying capital to the companies we invest in. (I.e., stocks, mutual funds, exchange-traded funds) 

Consider the drivers of returns.  

Evidence shows that buying investments at a fair price (value factor), buying companies that demonstrate a consistent trend of profitability (profitability factor), and companies that tend to be smaller (small-cap premium) point to differences in expected future returns.   

Practice smart diversification.  

Diversification helps reduce risks that have no expected return.  Global diversification can prove beneficial over the long term while reducing the short-term volatility of a portfolio.   

Avoid market timing.  

You never know which market segments will outperform from year to year. Time in the market is much more profitable than attempting to time the market.   

Manage your emotions. 

It’s challenging to differentiatthe short-term ups and downs of the market from the long-term returnneeded to outpace inflationIn reality, the most significant risk we face is losing purchasing power over the long-term, during retirement, versus the risk of short-term losses in the market  

Look beyond the headlines.  

There will ALWAYS be a news headline that could prevent you from investing in the stock market.  The news headlines will either attempt to scare you out of the markets or lure you into the latest investing trend.  Either strategy increases viewership, which in turn sells more commercials.   

Focus on what you can control.  

As we mentioned at the beginning of the article, just like pilots plan for their missions in great detail, we believe thorough planning is the best way to ensure a successful investing experience plus a fulfilling and prosperous retirement.   

Please don’t hesitate to call or email us anytime.  We’d love to hear from you! 

Charlie Mattingly 


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/18/2020 and are subject to change at any time due to the changes in market or economic conditions.

Charlie High Income Pilots Retirement Mistakes

Trust Your Instruments, Not Your Gut, When it Comes to Flying AND Investing!

​As a brand-new pilot, one of the first things you learn is how to mitigate the risk of the potentially deadly physiological phenomenon known as spatial disorientation or spatial-D. In pilot speak, spatial-D is when your body is telling you one thing and your flight instruments (and airplane) are telling you something completely different. Sadly, spatial-D has claimed the lives of many pilots.

In this video, one of our newest Leading Edge team members and previous Marine F/A-18 fighter pilot, Mark Covell discusses just one example of spatial-D.  Mark shares how carrier pilots tend to feel like they are pitching up as they are launched off the carrier at night due to the massive acceleration from the catapult. During daytime, VFR conditions this is probably a non-issue. However, in weather, or at night, this type of spatial-D is potentially deadly.

What does spatial-D have to do with investing and retirement planning? Personally, I feel like all of 2020 could be compared to being catapulted off a carrier at night and not knowing what is up or what is down.

During the heat of the battle from February until the markets settled a bit in early April, investor emotions were all over the place. Years of stock market gains evaporated in days, even hours. Furthermore, many people thought, and the news media quickly suggested we were headed for the second Great Depression. And don’t get me wrong, anything was (and is) possible. Sometimes, the unknown can be truly scary.

One slightly humorous example of investor spatial-D was early in the pandemic when the shares of ticker symbol ZOOM shot up due to investors buying up shares as quickly as possible. Zoom Technologies, a so-called penny stock had risen more than 240% in the span of a month before the SEC suspended trading. Unfortunately, the traders failed to realize the ticker symbol ZOOM did not represent the Cloud Video Conferencing company Zoom they thought they were purchasing – Ticker symbol ZM.

Here is the headline from dated February 27, 2020.

In the airplane, pilots must fight spatial-D by cross-checking and TRUSTING their instruments. If, as an investor, you did not trust your instruments during 2020, it may have been very costly.

So, it’s a dark night and the weather is terrible.  What are the instruments you trust?  What is your primary and backup instrument? Here are four instruments that I think can save your investments as well as your financial sanity during uncertain times…

1. Cash reserves – Emergency Funds.

    • Having extra cash can prevent withdrawals from retirement accounts or excessive credit card debt in emergencies.  Studies also show having cash in a bank account makes people happy. In an article posted on,  “Can Cash Really Make You Happier”, Joe Gladstone, research associate at the University of Cambridge in the U.K. and co-author of two recent studies about money and happiness said,

“We find a very interesting effect: that the amount of money you have in your bank account right now is a better predictor of happiness than your aggregate wealth,” Gladstone explained. “Having more money in their bank account makes people feel more financially secure, which leads to an increase in happiness.”

2. Have a working knowledge of financial history.

    • You don’t have to be an expert or financial historian, but I believe being familiar with financial history is akin to training before you go on a flying mission.  Pilots call this chair flying.  Athletes and musicians use a technique called visualization that helps them prepare for uncertainty and reduce anxiety for a sporting event or concert.

3. Admit that times are scary, and you do not know what’s going to happen.

    • This may sound silly, but I’ve seen many people get themselves into a “square corner” because they assumed that something was going to happen when in fact there was no indication or possible way of knowing what the future may hold.  We have heard investors say “my gut tells me…” many times.
      • Some of the best investors in the world invest with the mindset of preparing to be wrong. That’s why diversification is not popular or “sexy” because it’s like admitting you don’t know what’s going to happen in the future, so you must prepare for multiple scenarios.  However, diversification can feel disappointing but prove to be a profitable strategy over the long term.

BlackRock Investment Management Company posted the graphic below on their investor education website about diversification and “S&P Envy” over the last 20 years.

4. Prepare and Plan by having a clear vision of your goals and priorities.

    • If you don’t understand the “why” behind your investments as well as why you’re investing and saving in the first place, you will most likely bail-out of your plan during difficult and uncertain times.  Changing your investment plan mid-crisis creates a very high likelihood that your investment returns will be significantly lower.
    • Simon Sinek started a movement by encouraging businesses to “Start with Why.” It’s a powerful mindset that leads to trust, inspiration and success.  I believe the same applies to your financial and investment game plan.

5. Remember that you are invested in companies – not politics.

    • Sometimes our politics clouds the investment and retirement planning picture.  This rule falls under the axiom; “control the controllable.”  If you’re allowing your politics to affect your investment game plan than you may want to see rule number 2 above.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this video will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Moreover, you should not assume that any information or any corresponding discussions serves as the receipt of, or as a substitute for, personalized investment advice from Leading Edge Financial Planning personnel. The opinions expressed are those of Leading Edge Financial Planning as of 12/09/2020 and are subject to change at any time due to the changes in market or economic conditions.