Ekabo Home Financial Freedom Mastermind Podcast
A podcast for those who do not believe they were put on this earth to work 40 to 50 hours per week for 40 to 50 years, to hopefully retire at the age of 65.
Ekabo Home Financial Freedom Mastermind Podcast
144. The Investor's Blueprint: How This Immigrant Turned $100 into Financial Freedom!
🌟 Achieving Financial Freedom: Insights from Earl Yaokasin! 🌟
Welcome to the Ekabo Home Financial Freedom Podcast! I’m your host, Niyi Adewole, and tonight we have a special guest, Earl Yaokasin, a financial architect dedicated to helping individuals build financial freedom through smart investing.
🔥 The Quote of the Day:
"It's essential to do thorough research before making any investment. Just like you would carefully plan a vacation, you should only invest in things you truly understand."
This quote underscores the importance of thorough research and understanding in investing, highlighting that informed decisions lead to better financial outcomes. Earl emphasizes that understanding and managing your money is crucial for achieving lasting success.
🔍 Key Insights from Our Conversation:
🤑 Earl's Inspiring Journey:
Earl shares his incredible story, starting from his childhood in the Philippines, where he learned the value of hard work by selling various items to make ends meet. His journey to the U.S. was filled with challenges, including working multiple jobs while pursuing his CFA designation.
- From the Philippines to Financial Freedom:
➣ Earl discusses his early experiences hustling for extra money, from collecting soda bottles to selling concert tickets and cell phones. - The Importance of Hard Work:
➣ He reflects on the sacrifices he made while commuting long distances and working tirelessly to achieve his financial goals. - Mastering Your Emotions:
➣ Earl explains how emotional intelligence plays a critical role in investing, advising listeners to remain calm and focused during market fluctuations. - The Five Essentials for Smart Investing:
➣ Earl breaks down essential principles every investor should know, emphasizing the need for research and long-term thinking.
🎙️ Episode Highlights:
🏡 Navigating Financial Decisions:
Earl emphasizes that successful investors spend more time researching their investments than planning vacations. This mindset is crucial for making informed decisions.
📈 Understanding Market Cycles:
Earl discusses the current market conditions, including the impact of low interest rates and government spending, and shares his thoughts on potential future trends.
🌆 Creating a Margin of Safety:
Earl highlights the importance of having a buffer in investments to mitigate risks and ensure financial security.
💡 Key Insights You’ll Gain:
➣ Learn how to manage your emotions during market fluctuations.
➣ Discover the five essentials for smart investing that can transform your financial strategy.
➣ Understand the significance of conducting thorough research before investing.
➣ Explore the importance of maintaining a long-term investment horizon.
➣ Find out how to create a margin of safety to protect your investments.
🌍 Why This Matters:
In today's unpredictable financial landscape, this episode serves as a vital resource for anyone lo
🗓️ Tune in every Wednesday at 7 PM Eastern! Don’t miss out on our journey toward financial freedom through smart investments.
👉 Hit that subscribe button and turn on notifications so you never miss an update! Let’s unlock your potential together!
Our Links
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Niyi Adewole is a licensed realtor in Georgia, brokered by EXP Realty. Feel free to reach out at Niyi.Adewole@exprealty.com if you would like to work with an investor friendly real estate agent.
Welcome to the Financial Freedom Mastermind Group Podcast. Here we're all about breaking free from the 40 to 50 year work grind and accelerating our journey towards financial freedom. Join us every Wednesday at 7 pm Eastern as we explore different types of investments that can fast track your path to financial independence. We serve as a hub for connecting with fellow members during our sessions so you can share successes, ask questions and keep the momentum going so you can share successes, ask questions and keep the momentum going.
Speaker 2:Good evening everyone. This is Nii Adewale, host of the Acaba Home Financial Freedom Mastermind Group, and tonight I am joined by Earl Yalkason, who is one of the financial architects that's helping individuals build financial freedom through investing their money smartly. And, Earl, we're so happy to have you with our group today.
Speaker 3:Well, thank you for having me Nii, I appreciate it.
Speaker 2:Absolutely. And, earl, one of the things that really intrigued me about your background, which resembles a lot of the individuals that we have. We have a lot of people that come from all over in different walks of life that are now working toward financial freedom, but I know that you were born in the Philippines. You started from scratch in the US, working long hours and commuting a long distance to get your CFA. Can you take us back to some of those early days and what kept you going?
Speaker 3:Well, thank you for asking. Yes, I was definitely born and raised in the Philippines. Ever since I was a kid, I was always trying to make some extra money. So when I was in first grade I would go around the school, I would look for soda bottles, turn them in for the recycling credit and once I've had 10 of them I can buy myself a delicious Filipino barbecue pork skewer. Have you ever had one of those? I haven't, but it sounds good. Okay, yeah, it's super good. And then in second grade I started selling snappable bracelets all colors, all kinds of designs. And then, as I grew older, I sold concert tickets, cell phones, fireworks, you name it CDs I sold it. I went door to door just selling stuff, trying to make some extra bucks. But then one day I turned on the CNBC channel and then I saw things going up and down. And I've always been great at games and I've always been good at math as well. I won a silver medal in seventh grade in a national math competition and I said I can do this.
Speaker 3:And in the Philippines the stock market is more about who you know rather than what you know. It's all about connections. There's a lot of insider trading, so brains don't mean anything in the stock market in the Philippines. So I went to the US. I went to the US with very little money. I had to make ends meet, and in order to do that I needed to work two jobs at the same time. So my first job was are you familiar with Los Angeles at all?
Speaker 2:Yeah, I've been to LA a couple of times. I have some friends out that way.
Speaker 3:Okay, so there is a place in city in east of LA called Rancho Cucamonga. It's about maybe an hour away, something like that. So I lived in Rancho Cucamonga and then my first job was in Pomona at 7 am. I ended my second job my first job at 4 pm, and then I traveled to Pasadena at 5 pm to work my second job, and then I'd finish at 9 pm and then do the same thing over and over again for more thana year, just to make ends meet. And so it was definitely a very difficult time. I'm not proud of it. Sometimes I would fall asleep driving back home and I would have to turn the radio on like super loud and sing myself so that I won't fall asleep.
Speaker 3:So I did that, and then after a while, thankfully, I was able to get a job at American Express Financial Advisors as a financial advisor and to my surprise, coming from the Philippines, I didn't know anything about how things work here. So to my surprise that the average financial advisor here in the country is just actually just like a salesperson. They're not trained. All the company cares about is you making the sale, you making the commission, and that's not what I was looking for. So then I transferred to Bank of America Investments, which is now Merrill Lynch, I supported the top two financial advisors in the region and they were more focused on bonds. So after a while, after I've earned their trust, they were able to delegate all the stock picking to me, and my stock picking did significantly better than the in-house department.
Speaker 3:And so I started for the CFA, which you mentioned, the in-house department and so I started for the CFA, which you mentioned, which stands for the Chartered Financial Analyst designation. It's the most prestigious designation in the industry, and so this is from a former colleague of mine. She said that she has the CFA designation, the CPA designation and the CFP designation. So, according to her, she said that the CFA designation is 10 times harder to get than the CFP, four times harder to get than the CPA designation. So it was a long road that to get the CFA designation.
Speaker 3:It took three grueling years and I eventually worked for the Capital Group, which owns the American funds. I don't know if you've have you heard of the American funds? I have not. No, okay, so they are one of the largest mutual fund companies in the country and Capital Group it was at the time when I started with them in 2007, they were the third or fourth largest investment company behind Vanguard Fidelity, so they were really large and so, yeah, I stayed with them for seven years, but when my personal investment performance did better than almost everybody that I worked with, I started my own firm in 2014.
Speaker 2:Nice and that's pretty incredible. So you've been in business for over a decade now and they say most businesses fell within the first five years, but you clearly are not most businesses. And so I would say a couple of questions that come to mind. One when you think about that season of sacrifice right the year where you were literally working 24 seven or sleeping right and driving long, long distances and you think about some of the lessons that you learned along that time, even when you were going and pursuing the CFA and it took you three years to get it do some of those still influence how you invest and advise today and, if yes, which ones do?
Speaker 3:Yeah, so definitely it's the hard work is needed in order to become a good investor.
Speaker 3:So one of the things that I observe with most people when they plan a vacation, they research hotels, they research the flight, they research what they need to do, but when they make an investment decision oh, I heard it from my coworker that this stock is going to go up and then they'll just buy it without any research, without any thinking, and definitely you need to spend a lot more time researching your investments than planning your vacation.
Speaker 3:So that's one of the habits that I think people need to take away from this podcast, and that's one of the things that I continue to do to this day, which is I study the financial statements cover to cover. I listen for every quarterly earnings report. I'm on the call, listening to management talk about what happened during the quarter, and I talk to a lot of customers. Employees try to get a sense of different, varying opinions, to make sure that I've considered all different perspectives before making the investments and, as I continue to own the investments, whether I need to change my mind on anything. So that's, those are two key things that I would say that your audience can take away from.
Speaker 2:Absolutely, and I think you're spot on. That's. It's a funny story, but it's true. People will plan out a vacation for a year in advance, but when it comes to hey, what do you want your future to look like from an investing standpoint? It's like you just get the blank face, and so I think it's critical that we have individuals like you helping put the message out there that, hey, you can come to an advisor that's well-trusted and not just trying to sell you something that can help you plan for this. And I know one of the things that you talked about in the past is the five essentials for smart investing. Do you mind breaking down what those are for the listeners? Yeah, sure.
Speaker 3:The first one is mastering your emotions. So people are very emotional about their money. It's kind of like a religion or politics. People are very sensitive. People have very different philosophies of how they want their money handled.
Speaker 3:So one of the things that happens when people invest especially if you're not experienced enough and in fact, even professional mutual fund managers experience this they are swayed by how the market moves. When the market goes up, people get excited. When the market goes down, people panic. And when I was working for the Capital Group, there were three of us and all three of us are very experienced, very intelligent people, and intelligence has nothing to do with mastering your emotions. So before the financial crisis, we said that when the market drops, because we could already see the writing on the wall, people were buying real estate like crazy no money down, no underwriting by the banks. We could see the crash going to happen pretty soon and we promised ourselves, the three of us, that we will pounce and buy stuff on the cheap when the market panics. And out of the three of us and we talk, and we regularly talk about this almost every day and only two of us out of the three of us actually did that, so you can tell that even some people who know what they're supposed to do can't do it when the time comes.
Speaker 3:And what I would tell people is that think of the market as an emotional person, and I'm sure, nii, maybe you can think of someone who's an emotional person in your life. I'm betting right, absolutely Okay. So sometimes there are days when they're happy, super happy. Sometimes there are days where they're super sad, super excited, super fearful, and that's how the market works as well. The market works as a collection of people, and these collection of people can be super excited and super scared. And so what I would advise people is that always be mindful of what Warren Buffett says Be fearful when the market is greedy, and greedy when the market is fearful. So that's the first thing I think smart investors do they're able to go against the crowd.
Speaker 1:The second.
Speaker 3:Thing was what we talked about earlier. It's just doing the research. Just don't buy stuff because somebody else said it, without proper research. The third thing is being able to think long-term. So most people don't know these statistics that I'm about to tell you Before 2008,. And I say before 2008 because 2009 onwards there's a lot of manipulation in the markets, with a lot of stimulus and all that kind of stuff, which we can talk about later if you'd like, but before 2008,.
Speaker 3:For the last 100 plus years, if you had a one-year investment horizon, the chances of you making money would be 56%. If you had a three-year horizon, it'd be two-thirds. If you had a five-year horizon, it'd be 75%, and a 10-year horizon is 90%. And finally, 20-year horizon, you would make money no matter what, even if you invested at the top of any kind of bubble. So the longer your time horizon, the greater your odds of making money. So people who day trade, the odds are against them because it's just a 50-50 coin flip. It could go up, it could go down, nobody really knows.
Speaker 3:And then the fourth thing is to be mindful of risks and not just the rewards. So most people, before they invest, the only thing they care about is how much money can I make. The only thing they care about is how much money can I make. But as a business owner like yourself, many successful entrepreneurs they're all about risk mitigation. So the best investors in the world first ask how can I lose money on this investment? So we try to make sure that our downside is going to be very minimal, if it happens at all, and the probability of happening is very small.
Speaker 3:So that's what we want to make sure, because if, for example, you had $100,000 today, you just invested it, along with whatever's going up right now, it goes to $160,000, and the stock market drops 60% after five years. And the stock market drops 60% after five years, you're going to have approximately less than 700,000. And so that's a big deal. So if you had done nothing, you would be better off, in other words. So it's extremely important to be mindful of the risk, because easy come, easy go. And then the last thing is that people need to continuously educate themselves. What works at a certain time period may not work in a future time period, because the market change, the economy changes as well, companies change, a new product gets launched, ceo gets replaced, ceo retires. So there are many things that can happen, and people should always continuously keep up with the market and educate themselves 100% agree, and I definitely want to dive into a couple of pieces here because you got me excited.
Speaker 2:The first piece is when you talk about that time horizon. That's, even when it comes to real estate investing, the biggest thing. A lot of people say that they're long-term investors, but then they get into an investment and they all of a sudden start to show short-term investment behavior like seeing, hey, it's going down, let me get out before I lose everything. But, like you said, the longer the time horizon, the more of a percentage chance that's going to go up and to the right. And so I love what you said 20-year investment, long-term investment hat, that makes a heck of a lot of sense. And then when you talk about the risk piece, I read a book recently called the Dondo Investor have you read the book?
Speaker 3:Oh, yes, yes, I've read that book. It's been a while. I'm a big fan of Manish Pabrai, who is the author. He had a recent interview and that interview was actually really phenomenal, so I highly encourage people to watch that recent podcast interview. I forgot which podcast interview and then I went and got his book and it's similar to what you said.
Speaker 2:He has a phrase in there where he says he likes to invest where heads when he flips a coin heads, he wins. Or tells you don't lose much or you don't lose much at all and it's very mitigated risk. And so that's kind of stuck in my head now and it makes a lot of sense for your number four, right, like be mindful of the risk. Hey, if that stock has gone up X amount, maybe it's time to rebalance your portfolio and take a little bit off the table or move it to something a little less. And then when you talk about one other piece, right, like your track record, and we've glossed over it, but you've had many years of beating the S&P 500 as far as return volume, and that's hard to do.
Speaker 2:They say majority of the hedge fund managers and things of that nature are not going to consistently beat the S&P 500. So it's better to just put in an index fund. But the fact that you've been doing that is incredible and so I'm going to ask you to take out your crystal ball. Nobody's going to hold you to this, but when you look at where we are right now in the market, a lot of people would say that the pandemic and all the stimulus spending has driven us to a high and that the tariffs and other things are keeping us at a high and we should have crashed a while ago. But when you're looking at all the fundamentals underneath some of the businesses in the market and the AI excitement, all this other stuff, where do you feel we are in the market cycle? What do you think is going to happen in the next, we'll say, three years under the current presidency in the US?
Speaker 3:Yeah. So another person you should track is another great investor called Howard Marks. Howard Marks so he's fantastic. So one of the things that he says is that we can't predict the future, but we certainly can understand where we are today. So where we are today are today. So where we are today.
Speaker 3:From 2009 to 2000 till today, we've had three major things on why the market has gone up in a much smoother fashion compared to history, and the first thing is that interest rates were super low from 2009 to 2021. The second thing is that there was a lot of fiscal stimulus from checks being directly issued to people, especially during COVID. And then how much the government spends. So the government has been overspending like crazy. So last year and again, no matter if it's Republican or Democrat, they've been spending like crazy. So last year, the government spent about 6.5% more than what they made asa percentage of GDP, and that is a lot. The only times we have seen this was during the depths of the financial crisis and the depths of COVID. We've never seen this kind of spending before. So in other words, we're spending as if we are in a recession to prevent a recession. And then the final thing is that if we look at the money supply, in terms of the Federal Reserve, of how much they print money, the money supply is significantly above trend line. And so, because of all these three factors, we are at a 16-year bull market with stock prices extremely high.
Speaker 3:And you asked me for my crystal ball. So, looking forward, I would say that, if we look at how expensive things are, it's just a matter of time before the bubble bursts. I just don't know when, and nobody would know that. Howard Marks actually said that he feels it's like 1998. So, if it's true that it's 1998, we could have two more years, and in fact, I do think that, because Trump is a pro-business president, I think that we probably have three more years until you know we don't know what's going to happen on the next election, but probably three more years before we see the bubble burst. I mean, that's very possible.
Speaker 3:But, as I mentioned earlier, if your audience and I'm just going to make a round number, as I mentioned earlier is that if they have 100,000, for every 100,000 they have, or 10,000 or 1,000, for every 100,000, if it goes to 160,000 and then it drops 60%, you're going to have like 640,000. So you're better off sticking. I'm not saying all of your money, some of your money in cash in a money market account, in a high yield savings account, earning 4%, so that when the market panics then you have money to buy stocks on the cheap. And I always tell this to people the big money is not made when everybody's excited and the stocks are going up. The big money is made when everyone's panicking and you can buy things at a big discount.
Speaker 2:You're a hundred percent on and even though we have this conversation, it's almost like when you and those two other individuals were talking about the 08 crash and like, hey, we're going to buy everything, and then only two of you executed. That human emotion is a real thing. Like this is why you need help outside of yourself to make it happen. I can tell you from personal experience Bitcoin was a thing where definitely not putting all my stuff in there, but maybe like 2%, 3%, something like that. And so I bought when it was crashing or it was around like I don't know 30,000 at some point a couple of years ago, and then or no, no, 60,000. And when it crashed down to 30,000, I was like I'm getting this stuff out of here. I sold it and now you look at it and it's like, oh, for a hundred. I'm like, yeah, bitcoin's not for me because I don't understand it, but had I just held on? Now it's worth double where.
Speaker 2:If you can have somebody outside of you, ie somebody like Earl from WealthArc to be able to advise and help you keep a steady hand when times are shaky, this is the whole benefit of going to financial advisors to kind of get that help. But what are your thoughts on? Two things. One you mentioned that 20-year horizon right, and so my mind immediately goes to even if it does crash that 60%, as long as you have a long enough horizon right and you are a long-term investor and you're putting it to the side and almost forgetting about it in the long run, you should be okay.
Speaker 3:No, yeah, that is okay. I would say that, in terms of okay, you might make some money, but that may not be the most optimal approach. So most people don't understand that sometimes a group of stocks like the S&P 500 or some other group of stocks can be stagnant for a decade and not do anything. So if you invested in 1999, for example, approximately, you would not have made money for 10 years, and that's a very long time for you to not make money. Yes, you're okay and you didn't lose money, but your purchasing power was somewhat eroded during those 10 years. If you invested in the best and brightest of 1972, they call them the nifty 50 there the Procter and Gamble's, exxon Mobil, coca-cola at that time you would not have made money for 17 years approximately, and that's a very long time. That's if you don't care about the price. Yeah, you won't. You will eventually make money, but that's a long time for you to not make money. So inflation is eating out at you. So my advice is to make sure that when you see people getting super excited, then you should be careful in not being aggressive. Keep some money on the side so when the market eventually corrects, then you can buy stuff on the cheap.
Speaker 3:The one thing I wanted to also maybe just mention is one thing that you said With Bitcoin. It was something that you yourself were not so knowledgeable about. That's one of the. I should have added that to the five smart things and make it six, because I didn't have that on my list, and I'm going to do that. Going forward is that you need to be, you need to understand. It's kind of, I guess, related to number two, which is doing a lot more research than your vacation. So you really need to invest only in things that you really understand well, because if you don't understand it well, then the odds are against you. So investing in the stock market is like playing poker. Do you play poker?
Speaker 2:Not for money, but, yes, I know how to play poker.
Speaker 3:Well, maybe we should play for money. There you go, but anyway, yeah, if you're playing poker, somebody wins, somebody loses, whoever is the beginner, whoever doesn't understand the mathematics, the probabilities, they are the big disadvantage. And that's the same thing with investing, whether it's Bitcoin, real estate, like you said, or stocks. If you are informationally disadvantaged, the odds are against you and you are not going to make money, or, if you do, you're wasting a lot of money on the table.
Speaker 2:Agree, a hundred percent agree, and what you just mentioned is spot on, like you need to become an expert at this and enlist the help of experts to help you. I know personally. I'm a real estate guy. I've been doing it for a decade and I'm hyper-focused there, so I'm in the know on a lot of things, especially neighborhoods and just different products and what it costs to get stuff done, and so it does help and it helps mitigate that risk because you're looking at it daily and you're focused on it. And the same goes when you talk about investing in stocks and bonds and all the other types of investments. One of the things that you emphasize is investing and advising your clients to invest in things that you yourself also invest in, which is huge. That's like a stamp of approval, like hey, I'm putting my money here. Why is that so important?
Speaker 3:So earlier I mentioned that when I first came to the US, I was so surprised that the average financial advisor is just a salesperson, and when you have a financial advisor like that, they only care about making the commission and some products like insurance products or annuities. They pay a very large commission, pay a very large commission and it's extremely suboptimal for the average person to buy life insurance products that has an investing type of component to it. There are some life insurance products that are good, but we can talk about that later if you want to, but you want to have an advisor who is in the same boat as you. So for my practice, what I do is I have 100% of my net worth invested the same way as my clients, and what that does is that it incentivizes me on my free time to always be doing research as much as possible.
Speaker 3:I'm not trying to make 100 phone calls a day and hopefully I'll get five clients next month, something like that, and do the funnel thing. That's not what I'm trying to do. I am researching every day. In fact, before we just got on, I was just updating 30-plus stocks on my watch list, just updating my evaluations of them and trying to see which one could be a potential investment. So you want someone who is in the same boat as you, because if I make money, my clients make money. If I lose money, my clients lose money as well. And if hypothetically knock on wood and I don't think it's going to happen, but if God forbid that I do poorly, then I have to close shop, then I have to find a job and that's the last thing I want to do. So my clients understand and they know that as much as possible, I'm doing as much investment research as I can, because that's how we all make money.
Speaker 2:I love this. I love this and it's something that my team and I stand behind as well. And we're investor friendly, right, I'm an investor in real estate and other things, and so when we're helping some of our clients because we're realtors helping some of our clients go and buy houses, it's with that lens Like, hey, would I buy this property? Have I bought a property right next to it? Right, and things of that nature. And then also, when you talk about working with, like CPAs and all of the above, I'm always looking to work with investor friendly ones that own real estate personally, because I know if there's laws changing, they're going to be learning that for themselves and now they can carry it over to their clients, and so I think this is huge.
Speaker 2:Like what you just mentioned is huge. I don't want that to go over anybody's head. This is someone who's actually advising you to invest in the same way that they are investing, so they're putting their money where their mouth is and so that you can take to the bank and trust, because when they're hurting, you're going to hurt. And so when you look at how people can get started with you, normally I don't ask this question now, normally it's toward the end, but I think it's important to get people that contact. Now, what type of clients do you work with? Is there like a minimum number you have to have to be able to invest and work with you. How do you start out with people?
Speaker 3:So my primary service is investing in individual stocks. That is my expertise and for that service there's a lot to it. There's unlimited meetings. I write a lot of reports which they get, and that's where we own the same investments. So the minimum for that is $500,000. For people who don't have $500,000, I can help them invest with funds and I tell them which funds they can invest in with a lot less hand-holding. And also some other people they hire me by the hour and just do a review for them, give them advice that way. So there are many ways that I can help people, but the primary way is definitely for people that have $500,000 or more.
Speaker 2:Come on now. I love it, and this is the type of handhold and on-site experience that's going to help you take it to the next level and at least maintain and continue to grow your wealth, especially as we're moving into some of these volatile times. And so I'm going to ask you just for one if you had to pick one stock that you're watching right, or one company that you're watching as we head into Q4 and maybe early 2026 that you're excited about, what would that be?
Speaker 3:Yeah, so before I answer your question, I don't want to get myself in trouble- so I'm going to read a disclaimer.
Speaker 3:So the information provided is for educational purposes only and should not be considered personal financial advice. The views expressed are my own and do not constitute financial, legal or tax advice. All investing involves risk. Past performance is not indicative of the future and please consult a qualified advisor before acting on anything I'm about to share. So my best idea right now is a company called Elevance Health and that's a health insurance company. Health insurance companies have been hammered this year, whether it's United Health Group, centene or other. Basically it's 40 to 60% down, and United Health Group has a lot of problems with it on the legal front. They're being investigated by the DOJ for various different things, but Elevance Health, throughout history, has been you know, no company is like a saint, you know, but they are less.
Speaker 3:They're less legal cases against Elevance Health, so I would assume that they would have less fines on them compared to United Health Group if a fine does happen, health group if a fine does happen, and the reason they are struggling this year, the whole group is that, aside from all the optics and the hate for health insurance companies and I hate them too, by the way, because every November 1st I see my health insurance bill goes up how about you, nia Is?
Speaker 2:that happening for you too?
Speaker 3:It's crazy, right it's insane and they're able to reprice every year. But why they're down this year is that some of their costs on Medicare and Medicaid have been more than what they expected, but they're able to again reprice every year. So next year they'll be able to charge more from the government, from corporations, from individuals, and that's unfortunate for us, the ones who are paying the premiums. But no matter who is in office, whether it's Trump, republican or Democrat, throughout the years nobody has been able to displace them.
Speaker 3:Nobody has been able to curtail health insurance costs going down, and so my theory is that, if it has not happened for decades, they're very entrenched. Their tentacles are so deep into the system that it's going to be extremely hard to change, like it's going to be hard to imagine that the US becomes a universal healthcare system. So if next year they'd be able to reprice all their policies to be adequately covering all the higher expenses, then people will be surprised as to how much of an increase in profits they could have next year. One thing I would caution is that when I make investments, is that it is on a multi-year horizon. So, going back to the thinking long term, I don't invest in a company or a sector or stocks, thinking that, oh, what is the price going to be next year? I look at it from a five-year plus horizon and I do think that over the next five years, elevance Health, I think, could be something that could return north of 10% easily.
Speaker 2:Come on now, and that is just a teaser for the folks that are listening. You can see how Earl just eloquently went through the whole analysis on that and I love that stuff. Right, I think this is cool and, to your point, even when I'm investing in stocks Bitcoin is a whole other thing, we'll figure that out later but I'm investing in stocks. I'm typically trying to pick something that I'll hold for a minimum of three years. Right, a minimum of three years. If you don't feel comfortable holding it for that long, I think you should probably not do that. But you say that financial independence is not about chasing returns. What is it truly about in your eyes?
Speaker 3:Yeah. So financial independence is being able to sleep at night while you're retired or before you're about to retire. That allows you the freedom, the headspace to do whatever you want, because if you think that, oh, I'm worried about my portfolio going down, then that kind of cripples you from doing anything. So being able to sleep at night with your investments is the most important thing. And how do you do that? And the best way to do that is having what I call a margin of safety, and a margin of safety is a fancy way of saying a buffer. So I'm going to use real estate, because that's your realm, as an example. So, for example, we found in California it's crazy, you know, like how much properties cost over here. But let's just say we found a beaten up place in Los Angeles for a million dollars and you think it's going to be worth $1.5 million in a few years. Because of you fixing it up, the neighborhood gets better, some shopping malls are going to sprout out, things like that. So your purchase price is going to be $1 million, but you think it's worth $1.5 million. Now what if and I'm not a realtor, so you tell me. But let's just say, unexpected things happen. There are termites. You need to redo the whole AC. You need to redo the roofing, the infrastructure, all that kind of stuff. And let's just say again you are the expert, more than I am, but I'm just going to throw a round number to you. I'm just going to say it's going to cost $150,000 total for all of those. So your cost from $1 million is now to $1.15 million. Let's say you were incorrect and you were over-optimistic about the market and instead of selling it at, you think you can sell it for 1.5, it'd be 10% less. So the 1.5 is actually just 1.35. So now your profit has shrunk from instead of 500,000, it's just shrunk to 200,000. But because you had a buffer, you didn't lose money.
Speaker 3:So what I encourage people to do to try to get that financial independence is, before you invest, make sure that you have a margin of safety, a buffer, so that if bad things happen and you don't expect it you're still going to make money or at least break even. Most of the time. It's kind of like when I help clients do retirement projections and I think a lot of people try to Google retirement calculator or something like that. Don't assume, because the market has been up 20 something percent over the last two years per year. Don't put in 20% as your return expectations for the next 30 years and in fact I have a gripe with a lot of financial planners where they use 10% or some insurance agents they use 10% and try to project that for the far future.
Speaker 3:If the average stock market return is 10% and you're trying to contemplate becoming financial independent at age 65 or something, you want to be more conservative, create a buffer, assume only like 8% or 6%. Create multiple scenarios. If inflation has been running 3% to 4%, run it at four to 5%. If you think you're going to live until you're 80, but there are a lot of medical advances that could happen, project it as if you could live until you're 90, just to have a lot of different buffers so that to make sure you can sleep well at night and when you're retired you can truly feel like you're financially independent. And when you're retired you can truly feel like you're financially independent.
Speaker 2:Absolutely. I think that's sound advice and it's one of those things where building in that buffer can make it to where, if you don't need that buffer now, it's a huge win. Now you've got a home run. You're super excited. But if you do end up needing that buffer, you're not going to be mad that you had it right.
Speaker 2:Running too tight on a real estate deal or on even putting all of your money into one thing to where, like hey, this is going to control your financial future, can really hurt if it doesn't go your way. And also it can help you not sleep at night. If you're thinking about that constantly, at the end of the day, you're right. You should be able to sleep soundly, knowing that you've protected your present as well as your future, and that you're continuing to have your money work for you, which is the key to growing wealth and maintaining it. And so, earl, as we start to wrap up, what are some things that you're excited about as we head into next year, about your business, and what are some cool projects that you're working on?
Speaker 3:Yeah, so first, I'm just thankful for all my clients. Without my clients I wouldn't be here. They understand exactly how I invest and they're extremely supportive in whatever I've done so far, so I'm extremely grateful. In terms of next year, what I actually want to do is to devote even more time to more investment research. It's doubling down on what's made myself and my clients money. I want to make even more money than what I've ever had before, and the way to do that is just to do more investment research.
Speaker 2:Come on now. I love it and now with tools such as, you know, the chat GPTs of the world and things of that nature, it's only getting better. It's only going to make it a little bit easier to dig deep into some of these different companies and the numbers so excited about that. How can people reach out and get in contact with you if they want to enlist your services?
Speaker 3:services. Yes, thank you for that, nii. So we created a dedicated webpage for your listeners. It's mywealtharchcom slash FFM, and so let me just spell mywealtharch, so that's M-Y-W-E-A-L-T-H-A-R-C-H, so mywealtharchcom is our main website for your listeners. Mywealtharchcom slash FFM.
Speaker 2:Done and done and, for all the listeners out there, you should absolutely go check that out. We're going to put it into the show notes. We'll blast it out with the episode when we send it. And, earl, we cannot thank you enough for joining us this evening to connect with our audience. We truly appreciate you and we can't wait to see what you continue to do in the future and how you continue to help both our audience and many others get to financial freedom.
Speaker 3:Well, thank you so much, Nii, it's been a pleasure. I'm glad to find you know like kind of like a kindred soul in the real estate space. You know we're kind of like mirror image of each other and how we approach our clients we always think about their best interests first. So I really appreciate connecting with you and I look forward to more conversations in the future.
Speaker 2:Absolutely For the Acaba Home listeners. We appreciate you for tuning in. Go ahead and hit that like and subscribe button and leave a comment to let us know what you thought about this episode.
Speaker 1:We look forward to bringing on more guests like Earl, and we can't wait to see you in the future as well. Join us every Wednesday at 7 pm Eastern, as we explore different types of investments that can fast track your path to financial independence.
