WEBVTT 00:00:00.000 --> 00:00:03.359 OK, let's unpack this. Welcome to the Deep Dive. 00:00:03.580 --> 00:00:06.219 Today, we're taking on a subject that, well, 00:00:06.360 --> 00:00:09.460 it underpins everything from our retirement plans 00:00:09.460 --> 00:00:12.500 to global economics. We're talking about the 00:00:12.500 --> 00:00:15.179 art and science of investment. We are. And we've 00:00:15.179 --> 00:00:16.839 gone through this incredible stack of sources. 00:00:16.859 --> 00:00:19.960 You provided a real map of the whole investment 00:00:19.960 --> 00:00:24.699 landscape. And our mission today is. Pretty ambitious. 00:00:24.839 --> 00:00:28.059 We want to go way beyond just the simple definitions. 00:00:28.160 --> 00:00:30.660 We're going to try and unpack the entire ecosystem. 00:00:30.899 --> 00:00:33.780 I mean, the history, the different types of assets, 00:00:33.899 --> 00:00:37.439 the strategies people use, and the key numbers 00:00:37.439 --> 00:00:39.259 that really define this world. The goal here 00:00:39.259 --> 00:00:42.140 is to give you those. Aha moments, right? Where 00:00:42.140 --> 00:00:43.780 it all clicks into place, but without feeling 00:00:43.780 --> 00:00:45.579 like you're drowning in information. Exactly. 00:00:45.719 --> 00:00:48.479 Real usable knowledge. Perfect. So let's jump 00:00:48.479 --> 00:00:50.179 in with the absolute core principle. I mean, 00:00:50.200 --> 00:00:53.000 if we strip away all the jargon, what does it 00:00:53.000 --> 00:00:55.619 really mean to commit your resources today in 00:00:55.619 --> 00:00:57.840 hopes of getting more back later? It's fundamentally 00:00:57.840 --> 00:01:00.219 about deferred consumption. That's the textbook 00:01:00.219 --> 00:01:02.159 way of putting it. Waiting for the bigger marshmallow. 00:01:02.600 --> 00:01:05.319 Pretty much, yeah. Broadly, it's the commitment 00:01:05.319 --> 00:01:07.920 of resources into something expected to gain 00:01:07.920 --> 00:01:10.700 value over time. But in finance, it's simpler. 00:01:11.040 --> 00:01:13.420 It's the commitment of money to receive more 00:01:13.420 --> 00:01:16.420 money later. It's just a calculated delay of 00:01:16.420 --> 00:01:19.700 gratification. And that more money later, that 00:01:19.700 --> 00:01:22.799 return, isn't just one thing called profit. The 00:01:22.799 --> 00:01:24.760 sources are really clear that it comes in a few 00:01:24.760 --> 00:01:26.180 different flavors, and you need to understand 00:01:26.180 --> 00:01:28.719 all of them. To see the whole picture. Absolutely. 00:01:28.920 --> 00:01:31.299 The main goal is generating a return, but it 00:01:31.299 --> 00:01:34.079 can show up in three primary ways. The first 00:01:34.079 --> 00:01:36.219 one, the most obvious one, is the capital gain 00:01:36.219 --> 00:01:39.799 or loss. So that's just the price going up. I 00:01:39.799 --> 00:01:42.200 buy a stock for $10. It goes to $15. I sell it. 00:01:42.239 --> 00:01:45.099 That $5 difference is my capital gain. Precisely. 00:01:45.099 --> 00:01:47.719 And the key word there is sell. We have to distinguish 00:01:47.719 --> 00:01:51.359 between a realized gain. the cash is now in your 00:01:51.359 --> 00:01:54.420 account, and an unrealized gain. Until you actually 00:01:54.420 --> 00:01:56.439 sell it, that gain is just a number on a screen. 00:01:56.540 --> 00:01:58.819 It's phantom wealth, really. It could disappear 00:01:58.819 --> 00:02:01.219 tomorrow. Same goes for a loss. Okay, so that's 00:02:01.219 --> 00:02:03.640 the lump sum part. Yeah. What about the steady 00:02:03.640 --> 00:02:06.000 flow of cash that a lot of investors, especially 00:02:06.000 --> 00:02:08.319 retirees, depend on? That's the second form, 00:02:08.439 --> 00:02:11.639 periodic income. This is the cash flow you get 00:02:11.639 --> 00:02:13.419 while you're still on the asset. So you're talking 00:02:13.419 --> 00:02:15.840 dividends from stocks, which is, you know, a 00:02:15.840 --> 00:02:18.060 slice of the company's profits. Or interest from 00:02:18.060 --> 00:02:19.960 bonds. Or interest from bonds, rental income 00:02:19.960 --> 00:02:21.939 from property. For a lot of people, this income 00:02:21.939 --> 00:02:23.800 stream is actually the main reason they're investing 00:02:23.800 --> 00:02:25.860 in the first place. And then there's this third 00:02:25.860 --> 00:02:30.400 one, this global wild card that throws a wrench 00:02:30.400 --> 00:02:32.740 in the works the second you invest outside your 00:02:32.740 --> 00:02:35.539 own country. That would be currency gains or 00:02:35.539 --> 00:02:38.750 losses. It's a huge factor. If you own an asset 00:02:38.750 --> 00:02:43.189 in, say, euros, your total return back in U .S. 00:02:43.210 --> 00:02:45.069 dollars is going to swing around based on the 00:02:45.069 --> 00:02:47.110 exchange rate. So you could pick a winning stock 00:02:47.110 --> 00:02:49.530 in Europe, but if the euro weakens against the 00:02:49.530 --> 00:02:51.830 dollar. Your gain could get wiped out or even 00:02:51.830 --> 00:02:55.129 turn into a loss. It's this extra layer of risk 00:02:55.129 --> 00:02:57.629 and potential reward that you just can't avoid 00:02:57.629 --> 00:03:00.430 in a global market. That sets the stage perfectly 00:03:00.430 --> 00:03:03.409 for the biggest, most fundamental rule of investing. 00:03:03.789 --> 00:03:06.849 Yeah. The trade -off. You're always, always balancing 00:03:06.849 --> 00:03:09.710 risk and reward. It's the iron law. You can't 00:03:09.710 --> 00:03:12.969 escape it. The calculus is simple. Investors 00:03:12.969 --> 00:03:15.689 demand higher potential returns from riskier 00:03:15.689 --> 00:03:18.569 investments. It's their compensation for taking 00:03:18.569 --> 00:03:21.689 on that extra danger. And the flip side is, if 00:03:21.689 --> 00:03:24.210 you want safety, you have to accept lower potential 00:03:24.210 --> 00:03:27.449 returns. Exactly. Low risk, low potential reward. 00:03:27.729 --> 00:03:29.909 And we have to be clear, the other side of high 00:03:29.909 --> 00:03:33.110 risk... isn't just high reward it's the chance 00:03:33.110 --> 00:03:36.629 of high or even total losses right so let's define 00:03:36.629 --> 00:03:39.530 risk because the risk of putting money in a savings 00:03:39.530 --> 00:03:41.710 account is just fundamentally different from 00:03:41.710 --> 00:03:43.949 i don't know buying a portfolio of emerging market 00:03:43.949 --> 00:03:46.210 stocks oh completely different worlds a savings 00:03:46.210 --> 00:03:48.150 account especially one that's federally insured 00:03:48.150 --> 00:03:50.710 has almost no risk the only danger is the bank 00:03:50.710 --> 00:03:53.330 itself defaulting and you know government insurance 00:03:53.330 --> 00:03:55.530 usually covers that it's a very remote possibility 00:03:55.530 --> 00:03:57.840 but wait you just mentioned currency so Even 00:03:57.840 --> 00:04:00.379 a super safe savings account can have risk if 00:04:00.379 --> 00:04:03.599 I open one overseas. You got it. If you decide 00:04:03.599 --> 00:04:05.539 to save your money in Swiss francs, you're now 00:04:05.539 --> 00:04:08.000 exposed to foreign exchange risk. If the franc 00:04:08.000 --> 00:04:10.539 takes a nosedive against the dollar, the value 00:04:10.539 --> 00:04:13.060 of your savings just went down, even if the bank 00:04:13.060 --> 00:04:15.199 is perfectly safe. And investments are just. 00:04:15.680 --> 00:04:18.040 They're in a whole other league of uncertainty. 00:04:18.480 --> 00:04:21.240 Orders of magnitude more risk. With investments, 00:04:21.399 --> 00:04:24.680 you have market risk, liquidity risk, industry 00:04:24.680 --> 00:04:28.079 -specific risk. It's a much wider, more complex 00:04:28.079 --> 00:04:30.220 set of variables. Even for something tangible 00:04:30.220 --> 00:04:32.839 like property. Even property. You have risks 00:04:32.839 --> 00:04:35.220 of a market crash, tenants who don't pay, unexpected 00:04:35.220 --> 00:04:38.519 repairs. The sources do note, though, that property 00:04:38.519 --> 00:04:41.360 investors have a tool others don't. A mortgage. 00:04:41.600 --> 00:04:44.319 Using leverage can mitigate some personal capital 00:04:44.319 --> 00:04:46.899 risk, or you can use a lower loan -to -value 00:04:46.899 --> 00:04:49.740 ratio to keep more equity in the asset. So if 00:04:49.740 --> 00:04:52.079 this tradeoff is baked in, what's the number 00:04:52.079 --> 00:04:54.959 one defense an investor has against getting wiped 00:04:54.959 --> 00:04:57.199 out by all this risk? Diversification. It's the 00:04:57.199 --> 00:04:59.500 one thing everyone agrees on. Don't put all your 00:04:59.500 --> 00:05:02.060 eggs in one basket? It's that simple. But it's 00:05:02.060 --> 00:05:05.480 based on a powerful statistical effect. Spreading 00:05:05.480 --> 00:05:07.160 your money across different assets, different 00:05:07.160 --> 00:05:09.579 industries, different countries, it's proven 00:05:09.579 --> 00:05:12.019 to lower the overall risk of your portfolio. 00:05:12.379 --> 00:05:14.819 It's especially crucial for anyone new to this. 00:05:15.079 --> 00:05:17.750 It's your safety net. To really hammer home this 00:05:17.750 --> 00:05:20.529 idea of high stakes, let's look at an industry 00:05:20.529 --> 00:05:23.410 that is the poster child for both massive wins 00:05:23.410 --> 00:05:28.170 and catastrophic failures. Biotechnology. Biotech 00:05:28.170 --> 00:05:30.730 is the perfect case study. Investors are chasing 00:05:30.730 --> 00:05:33.300 these. Just life -changing returns from tiny 00:05:33.300 --> 00:05:36.139 companies that might have the next blockbuster 00:05:36.139 --> 00:05:38.800 drug. But the risk. Yeah. The risk is almost 00:05:38.800 --> 00:05:41.459 hard to comprehend. It's staggering. The data 00:05:41.459 --> 00:05:44.319 is just sobering. About 90 % of all biotech products 00:05:44.319 --> 00:05:47.339 that are researched, 90 % fail to ever make it 00:05:47.339 --> 00:05:49.439 to market. 90. So you have a 1 in 10 chance of 00:05:49.439 --> 00:05:51.519 success from the outset. At best. And it's not 00:05:51.519 --> 00:05:53.360 a quick process. We're talking about a massive 00:05:53.360 --> 00:05:56.240 commitment of time and money. The average prescription 00:05:56.240 --> 00:06:00.350 drug takes 10 years. A full decade. And $2 .5 00:06:00.350 --> 00:06:03.589 billion in capital to develop. Wow. Let me just 00:06:03.589 --> 00:06:06.730 process that. As an investor, you're giving money 00:06:06.730 --> 00:06:10.810 to a company that needs a decade and $2 .5 billion 00:06:10.810 --> 00:06:14.889 for a project that has a 90 % chance of ending 00:06:14.889 --> 00:06:18.269 in complete failure. That's it. That is the absolute 00:06:18.269 --> 00:06:21.209 definition of high risk. And it's why that 10 00:06:21.209 --> 00:06:24.170 % that do succeed have to deliver such astronomical 00:06:24.170 --> 00:06:26.490 returns. You need that one winner to pay for 00:06:26.490 --> 00:06:28.889 all the losers and then some. It's a crucial 00:06:28.889 --> 00:06:31.310 point, especially when we contrast it with something 00:06:31.310 --> 00:06:34.449 that isn't really investing at all, because it 00:06:34.449 --> 00:06:38.029 has, in theory, no risk. I'm talking about arbitrage. 00:06:38.189 --> 00:06:39.670 Right. We should touch on that. Arbitrage is 00:06:39.670 --> 00:06:41.689 important because it proves the rule. It's the 00:06:41.689 --> 00:06:44.649 simultaneous buying and selling of the same asset 00:06:44.649 --> 00:06:47.569 in different markets to profit from a tiny price 00:06:47.569 --> 00:06:49.110 difference. But you're not holding it. There's 00:06:49.110 --> 00:06:51.310 no long term capital commitment. And no real 00:06:51.310 --> 00:06:54.189 risk. You lock in the profit instantly because 00:06:54.189 --> 00:06:57.009 it doesn't involve bearing risk over time. It's 00:06:57.009 --> 00:06:58.949 not investment. It's a different beast entirely. 00:06:59.350 --> 00:07:02.089 And it highlights why risk is so central to everything 00:07:02.089 --> 00:07:04.269 else we're discussing. OK, so now that we have 00:07:04.269 --> 00:07:08.089 the core calculus down risk versus reward, let's 00:07:08.089 --> 00:07:10.370 map out the universe of things you can actually 00:07:10.370 --> 00:07:13.389 invest in. We can split it into two big buckets, 00:07:13.589 --> 00:07:15.970 starting with the pillars of the modern economy. 00:07:16.639 --> 00:07:19.040 Traditional investments. Right. The traditional 00:07:19.040 --> 00:07:22.139 universe has four mainstays. First up, you have 00:07:22.139 --> 00:07:25.779 stocks. This is just ownership or equity in a 00:07:25.779 --> 00:07:28.480 publicly traded company. You buy a share, you 00:07:28.480 --> 00:07:31.040 become a tiny owner of that business. Second, 00:07:31.199 --> 00:07:34.500 bonds. If stocks are ownership, bonds are basically 00:07:34.500 --> 00:07:38.170 a loan. An IOU. Exactly. You're lending money 00:07:38.170 --> 00:07:40.610 to a government or a corporation. In return, 00:07:40.810 --> 00:07:42.750 they promise to pay you regular interest payments 00:07:42.750 --> 00:07:44.610 and then give you your original money back when 00:07:44.610 --> 00:07:47.230 the bond matures. Generally seen as safer than 00:07:47.230 --> 00:07:49.750 stocks, but with lower potential returns. Third, 00:07:50.009 --> 00:07:52.829 and people forget this one, is cash. Yes. Holding 00:07:52.829 --> 00:07:55.569 cash is absolutely a strategic decision. It's 00:07:55.569 --> 00:07:57.790 your ultimate safety asset. Professionals use 00:07:57.790 --> 00:08:00.430 it to lower portfolio risk, stay liquid so they 00:08:00.430 --> 00:08:02.850 can prance on opportunities, or even bet on currency 00:08:02.850 --> 00:08:05.029 movements. It has what's called option value. 00:08:05.160 --> 00:08:06.860 but a power to act. The power to act, exactly. 00:08:07.100 --> 00:08:09.639 And fourth, real estate, bricks and mortar. The 00:08:09.639 --> 00:08:13.519 tangible world. Real estate is powerful because 00:08:13.519 --> 00:08:15.959 it can do two things at once. It can generate 00:08:15.959 --> 00:08:17.899 that periodic income we talked about through 00:08:17.899 --> 00:08:21.100 rent, and it can also appreciate in value over 00:08:21.100 --> 00:08:23.680 time, giving you a capital gain when you sell. 00:08:23.980 --> 00:08:26.100 Okay, so those are the big four, the classics. 00:08:27.079 --> 00:08:30.519 But the financial world never sits still. Let's 00:08:30.519 --> 00:08:33.559 get into the new frontier, the alternative investments. 00:08:34.279 --> 00:08:36.299 The stuff that falls outside that traditional 00:08:36.299 --> 00:08:39.379 bucket. And this list has just exploded. We can 00:08:39.379 --> 00:08:41.480 start with private equity and loans. This is 00:08:41.480 --> 00:08:43.720 all about investing in businesses that aren't 00:08:43.720 --> 00:08:46.299 traded on a stock exchange. So things like venture 00:08:46.299 --> 00:08:48.200 capital, right? Investing in startups. Venture 00:08:48.200 --> 00:08:51.159 capital is a big one. Also angel investors, equity 00:08:51.159 --> 00:08:53.759 crowdfunding. It's a huge specialized world. 00:08:53.919 --> 00:08:56.620 It also includes other types of loans like private 00:08:56.620 --> 00:08:58.440 mortgages. The catch is that your money is usually 00:08:58.440 --> 00:09:01.320 tied up for a long, long time. Very illiquid. 00:09:01.399 --> 00:09:02.919 Then you have the things you can physically touch. 00:09:03.039 --> 00:09:04.960 Commodities. Tangibles and commodities, yeah. 00:09:05.279 --> 00:09:07.980 These are physical assets. Precious metals like 00:09:07.980 --> 00:09:10.440 gold and silver are the classic examples, often 00:09:10.440 --> 00:09:13.179 used as a hedge against inflation. But it also 00:09:13.179 --> 00:09:16.879 includes energy. like natural gas. And as the 00:09:16.879 --> 00:09:19.820 source wonderfully points out, Potatoes. I love 00:09:19.820 --> 00:09:22.179 that. It really grounds it, doesn't it? We're 00:09:22.179 --> 00:09:24.440 talking about these complex financial instruments 00:09:24.440 --> 00:09:27.179 and then potatoes. But it's a great example of 00:09:27.179 --> 00:09:29.659 a commodity driven by raw supply and demand, 00:09:29.860 --> 00:09:32.539 by weather, by harvests. Right. Then we have 00:09:32.539 --> 00:09:35.580 things valued purely for their rarity and cultural 00:09:35.580 --> 00:09:38.240 significance. Collectibles. High value items 00:09:38.240 --> 00:09:40.820 where the price is all about scarcity and demand. 00:09:41.120 --> 00:09:44.360 We're talking fine art, rare coins, vintage cars, 00:09:44.580 --> 00:09:47.519 even investment grade wine. They're very subjective. 00:09:47.820 --> 00:09:50.779 And again, very hard to sell quickly. We're also 00:09:50.779 --> 00:09:53.240 seeing new asset classes created by government 00:09:53.240 --> 00:09:55.559 policy. Yeah, the sources point to environmental 00:09:55.559 --> 00:09:58.539 assets, specifically carbon credits and offsets. 00:09:58.600 --> 00:10:01.080 This is basically turning pollution control into 00:10:01.080 --> 00:10:03.480 a tradable market. Companies can buy and sell 00:10:03.480 --> 00:10:06.679 the right to emit carbon. And finally, the category 00:10:06.679 --> 00:10:10.059 that's completely upended everything. The digital 00:10:10.059 --> 00:10:13.740 world. Digital entities. Cryptocurrency and NFTs. 00:10:14.100 --> 00:10:17.139 These are assets that live entirely outside the 00:10:17.139 --> 00:10:19.360 traditional financial system. They come with 00:10:19.360 --> 00:10:22.779 immense volatility and a whole new kind of technological 00:10:22.779 --> 00:10:25.639 risk. They're really pushing the boundaries of 00:10:25.639 --> 00:10:28.940 what we even consider an asset. So we've got 00:10:28.940 --> 00:10:31.220 the assets, but let's talk about the sophisticated 00:10:31.220 --> 00:10:33.659 techniques, the kind of stuff you see hedge funds 00:10:33.659 --> 00:10:35.820 using. This is where it gets really complex. 00:10:36.139 --> 00:10:38.960 It really does. These advanced strategies often 00:10:38.960 --> 00:10:41.899 boil down to two things. The first is using derivatives. 00:10:42.320 --> 00:10:46.659 Okay, so a derivative is a contract whose value 00:10:46.659 --> 00:10:49.200 is derived from something else, right? An underlying 00:10:49.200 --> 00:10:51.659 asset. That's the perfect way to put it. Its 00:10:51.659 --> 00:10:53.840 value is based on the performance of a stock 00:10:53.840 --> 00:10:56.500 index or an interest rate or a commodity price. 00:10:57.070 --> 00:10:59.990 Things like forwards, futures, options, swaps. 00:11:00.110 --> 00:11:02.129 They sound intimidating. What's the basic idea 00:11:02.129 --> 00:11:04.309 behind them? At their core, they're tools for 00:11:04.309 --> 00:11:07.009 managing or transferring risk. A futures contact, 00:11:07.250 --> 00:11:09.529 for example, lets you lock in a price today for 00:11:09.529 --> 00:11:12.070 something you'll buy or sell in the future. An 00:11:12.070 --> 00:11:14.350 option gives you the right, but not the obligation 00:11:14.350 --> 00:11:16.629 to do that. They're about controlling uncertainty. 00:11:17.360 --> 00:11:19.440 The list in the source material also includes 00:11:19.440 --> 00:11:22.679 some infamous ones like collateralized debt obligations, 00:11:23.059 --> 00:11:27.940 CDOs, and credit default swaps, CDSs. Yes, the 00:11:27.940 --> 00:11:31.820 stars of the 2008 financial crisis. A CDO is 00:11:31.820 --> 00:11:34.299 just a bundle of different debts packaged together 00:11:34.299 --> 00:11:37.639 and sold to investors. A CDS is basically an 00:11:37.639 --> 00:11:41.039 insurance policy against a bond defaulting. Incredibly 00:11:41.039 --> 00:11:44.259 powerful, but also incredibly complex and risky 00:11:44.259 --> 00:11:47.259 if not managed properly. Which brings us to the 00:11:47.259 --> 00:11:50.399 second major technique, using borrowed money. 00:11:50.799 --> 00:11:53.039 Leveraged investing. It's as simple as it sounds. 00:11:53.399 --> 00:11:55.759 You fund your investments with borrowed money. 00:11:56.200 --> 00:11:58.639 The goal is to make a higher return on the money 00:11:58.639 --> 00:12:00.700 than you're paying an interest on the loan. It 00:12:00.700 --> 00:12:03.259 magnifies your gains. Dramatically. But it also 00:12:03.259 --> 00:12:05.559 ruthlessly magnifies your losses. It's like pouring 00:12:05.559 --> 00:12:07.740 gasoline on the fire. It makes everything bigger, 00:12:07.779 --> 00:12:09.500 both good and bad. And that connects directly 00:12:09.500 --> 00:12:11.480 to one of the most controversial strategies out 00:12:11.480 --> 00:12:14.200 there. Short selling. The ultimate bet against 00:12:14.200 --> 00:12:16.470 a company. You borrow shares of a stock, you 00:12:16.470 --> 00:12:18.289 sell them immediately and you hope the price 00:12:18.289 --> 00:12:20.549 plummets. Then you buy them back cheap, return 00:12:20.549 --> 00:12:22.330 the borrowed shares and pocket the difference. 00:12:22.610 --> 00:12:26.070 It's a high risk bet on failure. This whole sophisticated 00:12:26.070 --> 00:12:28.830 market we've just described with its derivatives 00:12:28.830 --> 00:12:31.029 and its short sellers, it didn't just spring 00:12:31.029 --> 00:12:33.539 up out of nowhere. This has been evolving for 00:12:33.539 --> 00:12:37.200 a very, very long time. Millenia, actually. The 00:12:37.200 --> 00:12:39.340 roots of this go all the way back to ancient 00:12:39.340 --> 00:12:42.759 Mesopotamia. The first forms of credit and lending 00:12:42.759 --> 00:12:45.379 were essential for agriculture and trade in that 00:12:45.379 --> 00:12:47.379 region. And they figured out pretty quickly that 00:12:47.379 --> 00:12:49.039 they needed to write down the rules. Oh, yeah. 00:12:49.240 --> 00:12:53.399 The Code of Hammurabi from around 1754 BCE is 00:12:53.399 --> 00:12:56.419 incredible. It has formal rules for loans, for 00:12:56.419 --> 00:12:58.879 collateral. It sets maximum interest rates. It 00:12:58.879 --> 00:13:00.980 defines the rights of creditors and debtors. 00:13:01.549 --> 00:13:04.070 a legal framework for finance thousands of years 00:13:04.070 --> 00:13:06.350 ago. Fast forward to the Roman Empire. The sheer 00:13:06.350 --> 00:13:08.470 scale of it must have demanded a more complex 00:13:08.470 --> 00:13:11.529 system. It did. The Romans had these financial 00:13:11.529 --> 00:13:13.690 specialists, the Argentarii. They were like proto 00:13:13.690 --> 00:13:15.490 -bankers. They gave credit, they took deposits, 00:13:15.629 --> 00:13:18.370 they handled payments. And crucially for an empire 00:13:18.370 --> 00:13:21.570 with many currencies, they exchanged money. They 00:13:21.570 --> 00:13:23.730 were the intermediaries that made the whole economic 00:13:23.730 --> 00:13:27.750 engine run. But the real DNA of our modern system, 00:13:27.870 --> 00:13:30.230 the legal and commercial ideas, that comes a 00:13:30.230 --> 00:13:32.230 bit later from the Italian city -states, right? 00:13:32.350 --> 00:13:34.669 That's where you see the huge leap. Merchant 00:13:34.669 --> 00:13:37.090 banking families in places like Florence and 00:13:37.090 --> 00:13:39.769 Venice, they develop things like the bill of 00:13:39.769 --> 00:13:42.590 exchange. This was a piece of paper that allowed 00:13:42.590 --> 00:13:46.250 a merchant to pay for goods in another city without 00:13:46.250 --> 00:13:48.789 having to physically transport chests of gold. 00:13:48.970 --> 00:13:51.169 Which would have been incredibly dangerous. So 00:13:51.169 --> 00:13:53.350 this is the birth of financial instruments, of 00:13:53.350 --> 00:13:56.250 paper representing value. Exactly. It made trade 00:13:56.250 --> 00:13:59.509 safer, faster, and much more scalable. It laid 00:13:59.509 --> 00:14:01.710 the foundation for everything that came after. 00:14:01.909 --> 00:14:04.149 And that scalability was put to the test during 00:14:04.149 --> 00:14:06.230 the Age of Exploration, which really created 00:14:06.230 --> 00:14:08.289 the modern idea of public investment. Right. 00:14:08.700 --> 00:14:11.480 These long -distance shipping voyages were incredibly 00:14:11.480 --> 00:14:14.600 expensive and incredibly risky. If your one ship 00:14:14.600 --> 00:14:17.460 sank, you were ruined. So what did they do? They 00:14:17.460 --> 00:14:19.659 sold shares in the voyage. They sought outside 00:14:19.659 --> 00:14:22.360 investors to share the cost, and in return, they'd 00:14:22.360 --> 00:14:24.399 get a share of the profits if the ship came back. 00:14:24.639 --> 00:14:27.139 Shared risk, shared reward. That's modern investing 00:14:27.139 --> 00:14:30.019 in a nutshell. It is. And that need for capital 00:14:30.019 --> 00:14:32.360 led directly to the creation of the first modern 00:14:32.360 --> 00:14:35.720 stock exchange. In Amsterdam. In Amsterdam, 1602. 00:14:36.000 --> 00:14:38.679 It's considered the world's first. And it was 00:14:38.679 --> 00:14:40.960 set up to trade the shares of just one company, 00:14:41.139 --> 00:14:44.860 the Dutch East India Company, the VOC. They were 00:14:44.860 --> 00:14:47.379 the first to issue publicly traded stock. And 00:14:47.379 --> 00:14:49.720 the exchange meant those shares could be bought 00:14:49.720 --> 00:14:53.000 and sold continuously. That's the birth of market 00:14:53.000 --> 00:14:55.440 liquidity. The Dutch were clearly on a roll because 00:14:55.440 --> 00:14:57.220 they also came up with the idea of pooling money 00:14:57.220 --> 00:15:00.019 together, which is what most of us do today through 00:15:00.019 --> 00:15:02.480 mutual funds. They did. In the late 18th century, 00:15:02.639 --> 00:15:05.120 a Dutch businessman named Adrian van Ketwich 00:15:05.120 --> 00:15:08.200 created the first known investment trust. It 00:15:08.200 --> 00:15:10.279 let small investors pool their money to buy a 00:15:10.279 --> 00:15:13.080 diversified portfolio of assets. It's the same 00:15:13.080 --> 00:15:15.759 exact concept as a mutual fund today. OK, so 00:15:15.759 --> 00:15:18.190 by the time we get to America. The pieces are 00:15:18.190 --> 00:15:20.470 there, but it needed a catalyst to really get 00:15:20.470 --> 00:15:22.850 going. And that catalyst was Alexander Hamilton. 00:15:23.009 --> 00:15:25.929 His big move after the Revolutionary War was 00:15:25.929 --> 00:15:28.250 to take all the messy separate war debts from 00:15:28.250 --> 00:15:30.909 the states and bundle them into new federally 00:15:30.909 --> 00:15:34.049 issued bonds. He created a single reliable asset. 00:15:34.480 --> 00:15:37.759 He created the first big liquid securities market 00:15:37.759 --> 00:15:40.139 in America. And from there, it formalized very 00:15:40.139 --> 00:15:43.519 quickly. In 1792, you have the Buttonwood Agreement, 00:15:43.720 --> 00:15:47.399 where 24 brokers in New York agree on a set of 00:15:47.399 --> 00:15:49.500 rules for trading with each other. The beginning 00:15:49.500 --> 00:15:52.120 of the New York Stock Exchange. The very beginning. 00:15:52.299 --> 00:15:55.600 It was formally organized in 1817. And by the 00:15:55.600 --> 00:15:57.440 end of the Civil War, it was a mature market 00:15:57.440 --> 00:15:59.840 trading hundreds of securities. It was ready 00:15:59.840 --> 00:16:02.480 to finance the Industrial Age. We've covered 00:16:02.480 --> 00:16:05.740 the history. the assets now let's get to the 00:16:05.740 --> 00:16:09.539 how the strategic playbook the different philosophies 00:16:09.539 --> 00:16:12.019 investors use let's start with the classic the 00:16:12.019 --> 00:16:14.559 one everyone associates with warren buffett value 00:16:14.559 --> 00:16:17.000 investing value investing is all about finding 00:16:17.000 --> 00:16:19.139 bargains the core idea is that you're buying 00:16:19.139 --> 00:16:21.279 assets you believe the market is undervalued 00:16:21.279 --> 00:16:23.220 you're looking for a dollar's worth of a company 00:16:23.220 --> 00:16:25.820 that you can buy for 50 cents and this was all 00:16:25.820 --> 00:16:28.480 codified by buffett's mentor benjamin graham 00:16:28.809 --> 00:16:32.070 Right after the 1929 crash. That's right. He 00:16:32.070 --> 00:16:34.590 literally wrote the book on it. Security analysis. 00:16:34.929 --> 00:16:38.370 The method is all about digging deep into a company's 00:16:38.370 --> 00:16:41.049 financial reports to find its true intrinsic 00:16:41.049 --> 00:16:44.169 worth and then checking if the stock price is 00:16:44.169 --> 00:16:47.149 below that. To do that, they use specific financial 00:16:47.149 --> 00:16:50.350 ratios. Let's talk about the big one. The price 00:16:50.350 --> 00:16:53.909 to earnings ratio or PE. The P .E. is probably 00:16:53.909 --> 00:16:57.129 the most famous valuation metric. You just take 00:16:57.129 --> 00:16:59.129 the company's stock price and divide it by its 00:16:59.129 --> 00:17:01.529 annual earnings per share. What it tells you 00:17:01.529 --> 00:17:03.490 is how much investors are willing to pay for 00:17:03.490 --> 00:17:05.750 each dollar of that company's earnings. And as 00:17:05.750 --> 00:17:07.589 a value investor, you're looking for a low number. 00:17:07.849 --> 00:17:10.890 Generally, yes. A low P .E. suggests the stock 00:17:10.890 --> 00:17:12.890 might be cheap relative to its earning power. 00:17:13.130 --> 00:17:15.390 You're paying less for the same amount of profit 00:17:15.390 --> 00:17:17.930 compared to a company with a high P .E. But context 00:17:17.930 --> 00:17:20.069 is everything here, right? A P .E. of 15 can 00:17:20.069 --> 00:17:22.329 be cheap for one industry and expensive for another. 00:17:22.680 --> 00:17:25.119 Oh, absolutely. This is a crucial point. You 00:17:25.119 --> 00:17:27.940 can't compare the P .E. of a slow growing utility 00:17:27.940 --> 00:17:31.619 company to a fast growing tech company. The sources 00:17:31.619 --> 00:17:34.920 note a P .E. in the low teens is normal for telecom. 00:17:35.039 --> 00:17:37.740 But for a high tech firm, a P .E. in the 40s 00:17:37.740 --> 00:17:39.500 might be totally reasonable because investors 00:17:39.500 --> 00:17:42.299 are baking in massive future growth. You have 00:17:42.299 --> 00:17:45.039 to compare apples to apples. So if earnings can 00:17:45.039 --> 00:17:47.599 be a bit fuzzy with accounting tricks, what's 00:17:47.599 --> 00:17:49.799 the more conservative metric value investors 00:17:49.799 --> 00:17:52.390 use? That would be the price to book ratio, or 00:17:52.390 --> 00:17:55.009 PB. This compares the stock price to the company's 00:17:55.009 --> 00:17:57.549 net assets, but it excludes all the intangible 00:17:57.549 --> 00:18:00.529 stuff like brand value or goodwill. It's focused 00:18:00.529 --> 00:18:02.630 on the hard assets. The things you could sell 00:18:02.630 --> 00:18:04.930 off if the company went bust. That's the idea. 00:18:05.009 --> 00:18:06.609 It gives you a sense of the liquidation value. 00:18:06.809 --> 00:18:09.250 Value investors use it as a sort of safety check. 00:18:09.430 --> 00:18:11.829 If the PB is low, it suggests you're not paying 00:18:11.829 --> 00:18:13.809 much for the actual physical stuff the company 00:18:13.809 --> 00:18:16.490 owns. Okay, now let's flip the script. If the 00:18:16.490 --> 00:18:19.069 value investor is a detective looking for a hidden 00:18:19.069 --> 00:18:22.430 bargain, What is the growth investor? The growth 00:18:22.430 --> 00:18:25.289 investor is a futurist. They're not as concerned 00:18:25.289 --> 00:18:27.910 with what a company is worth today. They're obsessed 00:18:27.910 --> 00:18:30.849 with what it could be worth tomorrow. They are 00:18:30.849 --> 00:18:32.970 actively looking for companies with the potential 00:18:32.970 --> 00:18:36.049 for massive future earnings growth. So the goal 00:18:36.049 --> 00:18:38.609 here isn't a steady dividend check. It's all 00:18:38.609 --> 00:18:41.710 about the stock price soaring. Capital appreciation. 00:18:42.569 --> 00:18:45.829 100%. Growth companies rarely pay dividends because 00:18:45.829 --> 00:18:48.170 they're reinvesting every penny they make back 00:18:48.170 --> 00:18:50.829 into the business to fuel that growth. And as 00:18:50.829 --> 00:18:53.069 a result, these stocks almost always have a much 00:18:53.069 --> 00:18:55.990 higher P .E. ratio than their peers because that 00:18:55.990 --> 00:18:58.410 high price reflects all that future optimism. 00:18:58.670 --> 00:19:01.089 And this strategy was popularized by T. Rowe 00:19:01.089 --> 00:19:05.589 Price Jr. His insight was to invest in what was 00:19:05.589 --> 00:19:07.890 the phrase? Well -managed companies in fertile 00:19:07.890 --> 00:19:10.809 fields. The fertile fields part was key. He meant 00:19:10.809 --> 00:19:13.009 industries that were undergoing huge disruptive 00:19:13.009 --> 00:19:15.789 change and had years of expansion ahead of them. 00:19:15.910 --> 00:19:18.170 So who is this for? It sounds higher risk. It 00:19:18.170 --> 00:19:20.390 is. It's best for investors with a long time 00:19:20.390 --> 00:19:23.130 horizon who can stomach the volatility and don't 00:19:23.130 --> 00:19:25.269 need the immediate cash flow. And venture capital 00:19:25.269 --> 00:19:27.910 is basically this strategy on steroids. It is 00:19:27.910 --> 00:19:30.349 the purest form of growth investing. You're betting 00:19:30.349 --> 00:19:34.529 on very young private companies, hoping one of 00:19:34.529 --> 00:19:36.779 them becomes the next big thing. The ultimate 00:19:36.779 --> 00:19:40.140 high risk, high reward game. OK, strategy three 00:19:40.140 --> 00:19:42.960 is a totally different animal. It's not about 00:19:42.960 --> 00:19:45.359 the company's financials at all. It's about psychology. 00:19:46.480 --> 00:19:48.680 Momentum investing. Right. The core idea here 00:19:48.680 --> 00:19:51.579 is simple. Trends persist. A stock that's been 00:19:51.579 --> 00:19:53.779 going up will probably keep going up and a stock 00:19:53.779 --> 00:19:55.539 that's been going down will keep going down. 00:19:55.640 --> 00:19:58.200 It's about riding the wave. So what do they do? 00:19:58.259 --> 00:20:00.960 How do they find these trends? They look for 00:20:00.960 --> 00:20:03.480 stocks that have shown strong, consistent returns 00:20:03.480 --> 00:20:07.220 over the last, say, 3 to 12 months, and they 00:20:07.220 --> 00:20:09.359 buy them. They hold on as long as the upward 00:20:09.359 --> 00:20:12.059 momentum continues, and they sell as soon as 00:20:12.059 --> 00:20:14.480 it starts to fade. And in a down market, they 00:20:14.480 --> 00:20:15.940 just sit on the sidelines. No, they play that 00:20:15.940 --> 00:20:18.519 too. In a bear market, they'll short -sell stocks 00:20:18.519 --> 00:20:20.900 that are in a clear downward trend, betting that 00:20:20.900 --> 00:20:23.059 the negative momentum will continue. So if they're 00:20:23.059 --> 00:20:24.859 not looking at P -E ratios, what are they looking 00:20:24.859 --> 00:20:26.819 at? They use what's called technical analysis. 00:20:27.549 --> 00:20:29.690 They're looking at charts, at price patterns, 00:20:29.829 --> 00:20:32.690 at trading volume. They use tools like moving 00:20:32.690 --> 00:20:35.390 averages or the average directional index, the 00:20:35.390 --> 00:20:37.869 ADX, which measures the strength of a trend. 00:20:38.089 --> 00:20:41.230 It's all about market behavior, not company performance. 00:20:42.190 --> 00:20:43.970 But the sources say there's a lot of debate about 00:20:43.970 --> 00:20:46.089 whether this actually works long term. There 00:20:46.089 --> 00:20:48.670 is, because you're essentially trying to time 00:20:48.670 --> 00:20:51.769 the market, which is notoriously difficult. Many 00:20:51.769 --> 00:20:53.930 economists believe that over the long run, a 00:20:53.930 --> 00:20:56.490 company's fundamental value will always win out. 00:20:56.609 --> 00:20:59.269 So momentum can be powerful in the short term. 00:20:59.349 --> 00:21:02.170 But there's no real consensus that it's a reliable 00:21:02.170 --> 00:21:04.869 long term strategy. Let's move to our fourth 00:21:04.869 --> 00:21:07.109 strategy, which isn't about what you buy, but 00:21:07.109 --> 00:21:10.650 how you buy it. Dollar cost averaging. Or DCA. 00:21:11.009 --> 00:21:13.750 DCA is a behavioral superpower. It's just the 00:21:13.750 --> 00:21:16.250 discipline of investing a fixed amount of money 00:21:16.250 --> 00:21:18.750 at a regular interval, say $200 on the first 00:21:18.750 --> 00:21:20.529 of every month, no matter what the market is 00:21:20.529 --> 00:21:22.410 doing. And the example and the sources on the 00:21:22.410 --> 00:21:24.210 power of this is just incredible. It really shows 00:21:24.210 --> 00:21:26.829 how consistency is the key. It's astounding. 00:21:26.990 --> 00:21:29.829 It shows that if you just invested $500 a month 00:21:29.829 --> 00:21:32.569 for 40 years at a 10 % average annual return, 00:21:32.930 --> 00:21:37.380 you'd end up with over $2 .5 million. The driver 00:21:37.380 --> 00:21:39.720 isn't genius stock picking. It's just relentless 00:21:39.720 --> 00:21:42.480 consistency and the power of compounding. So 00:21:42.480 --> 00:21:45.099 what are the main benefits besides just building 00:21:45.099 --> 00:21:48.099 the habit? Two big things. First, it smooths 00:21:48.099 --> 00:21:50.359 out volatility. And second, it saves you from 00:21:50.359 --> 00:21:52.500 the temptation of trying to time the market. 00:21:52.680 --> 00:21:55.299 How does it smooth things out? It seems counterintuitive. 00:21:55.710 --> 00:21:58.789 Because your fixed dollar amount buys more shares 00:21:58.789 --> 00:22:00.829 when the price is low and fewer shares when the 00:22:00.829 --> 00:22:04.009 price is high. Over time, this actually lowers 00:22:04.009 --> 00:22:06.410 your average cost per share. You're automatically 00:22:06.410 --> 00:22:08.390 buying more aggressively during the dips without 00:22:08.390 --> 00:22:10.529 ever having to predict them. So what's the downside? 00:22:10.769 --> 00:22:13.430 There has to be one. The main one is just that 00:22:13.430 --> 00:22:16.170 you tend to pay more in brokerage fees because 00:22:16.170 --> 00:22:18.410 you're making lots of small transactions. With 00:22:18.410 --> 00:22:20.609 fees being so low today, it's less of an issue, 00:22:20.730 --> 00:22:23.289 but it's still a factor. And this idea, this 00:22:23.289 --> 00:22:26.069 very defensive strategy. also came from Benjamin 00:22:26.069 --> 00:22:29.250 Graham. It did. He coined the term in his book, 00:22:29.369 --> 00:22:33.769 The Intelligent Investor, in 1949. He said DCA 00:22:33.769 --> 00:22:36.150 users are likely to end up with a satisfactory 00:22:36.150 --> 00:22:39.470 overall price. It's another example of a strategy 00:22:39.470 --> 00:22:42.470 born from a desire for stability and risk management. 00:22:42.710 --> 00:22:45.190 And finally, we have the newest kid on the block, 00:22:45.470 --> 00:22:48.759 micro -investing. This is all about accessibility. 00:22:49.319 --> 00:22:52.059 It's designed to make investing easy and automatic 00:22:52.059 --> 00:22:54.039 for people who don't have a lot of money to start 00:22:54.039 --> 00:22:56.539 with. It's about turning investing from a big, 00:22:56.559 --> 00:23:00.759 scary decision into a small, regular habit. So 00:23:00.759 --> 00:23:02.420 we've talked a lot about individual investors, 00:23:02.500 --> 00:23:04.299 but the reality is most of the money in the market 00:23:04.299 --> 00:23:07.160 flows through these giant intermediaries. Let's 00:23:07.160 --> 00:23:09.490 talk about that ecosystem. That's right. Most 00:23:09.490 --> 00:23:11.950 people invest indirectly. Their money goes into 00:23:11.950 --> 00:23:14.809 pension funds, banks, insurance companies, these 00:23:14.809 --> 00:23:17.450 massive institutions that manage trillions of 00:23:17.450 --> 00:23:19.309 dollars. And their power comes from pooling all 00:23:19.309 --> 00:23:21.210 that money together. Exactly. They take money 00:23:21.210 --> 00:23:23.549 from millions of individuals and put it into 00:23:23.549 --> 00:23:25.710 these huge collective funds. You might know them 00:23:25.710 --> 00:23:28.390 as mutual funds, investment trusts, or in Europe, 00:23:28.410 --> 00:23:31.009 they're often called SACIVs. This scale allows 00:23:31.009 --> 00:23:33.049 them to make huge investments and keep costs 00:23:33.049 --> 00:23:35.769 down. So what's my relationship as an individual 00:23:35.769 --> 00:23:40.089 to that big pool of money? You hold a claim on 00:23:40.089 --> 00:23:42.769 the assets in the fund, but you're also paying 00:23:42.769 --> 00:23:44.950 that intermediary a fee for managing it all. 00:23:45.029 --> 00:23:46.910 So you get the diversification and professional 00:23:46.910 --> 00:23:49.650 management, but it comes at a cost. OK, let's 00:23:49.650 --> 00:23:52.190 go back to the core of this. How do you actually 00:23:52.190 --> 00:23:55.990 judge if a company is a good investment? Let's 00:23:55.990 --> 00:23:58.250 give the listener three essential tools to evaluate 00:23:58.250 --> 00:24:00.630 a company's financial health. Right. Three key 00:24:00.630 --> 00:24:02.910 metrics to look at. Let's start with what I think 00:24:02.910 --> 00:24:05.579 is the most important one. Free cash flow or 00:24:05.579 --> 00:24:08.819 FCF? Why is FCF a better measure of health than 00:24:08.819 --> 00:24:10.579 just, you know, the profit number they report? 00:24:10.900 --> 00:24:13.539 Because free cash flow is the actual cash a company 00:24:13.539 --> 00:24:15.839 has left over after it pays for its operations 00:24:15.839 --> 00:24:19.099 and reinvests in itself. It's the real spendable 00:24:19.099 --> 00:24:22.339 money. Net income or profit can be affected by 00:24:22.339 --> 00:24:25.480 all sorts of non -cash accounting items. FCF 00:24:25.480 --> 00:24:28.059 is much harder to fake. It tells you what's really 00:24:28.059 --> 00:24:29.900 in the bank. And for an investor, what's the 00:24:29.900 --> 00:24:32.470 appeal? A company with high and growing free 00:24:32.470 --> 00:24:35.089 cash flow is a beautiful thing. It means they 00:24:35.089 --> 00:24:37.769 have the money to pay down debt, buy back stock, 00:24:37.950 --> 00:24:40.190 or most importantly, pay you a healthy dividend. 00:24:40.450 --> 00:24:43.690 It's a sign of real financial strength. OK. Metric 00:24:43.690 --> 00:24:46.089 number two isn't about performance. It's about 00:24:46.089 --> 00:24:50.670 risk. The debt to equity ratio, or DE. The DE 00:24:50.670 --> 00:24:53.170 ratio tells you how a company is paying for its 00:24:53.170 --> 00:24:56.130 assets. Is it using shareholders money, which 00:24:56.130 --> 00:24:58.809 is equity, or is it using borrowed money, which 00:24:58.809 --> 00:25:00.970 is debt? It's like looking at someone's personal 00:25:00.970 --> 00:25:03.410 balance sheet. How big is their mortgage compared 00:25:03.410 --> 00:25:06.150 to their down payment? So a high DE ratio means 00:25:06.150 --> 00:25:08.869 the company's relying a lot on debt, which sounds 00:25:08.869 --> 00:25:11.609 risky. It is riskier. Because debt comes with 00:25:11.609 --> 00:25:14.210 mandatory interest payments. A company with a 00:25:14.210 --> 00:25:17.150 lot of debt is less flexible and its profits 00:25:17.150 --> 00:25:18.930 can be much more volatile, especially if the 00:25:18.930 --> 00:25:21.769 economy turns down. So a high DE is an automatic 00:25:21.769 --> 00:25:24.910 red flag. Not necessarily. Again, context is 00:25:24.910 --> 00:25:27.410 key. You have to compare a company's DE for other 00:25:27.410 --> 00:25:29.829 companies in the same industry. A big manufacturing 00:25:29.829 --> 00:25:31.789 company will naturally have more debt than a 00:25:31.789 --> 00:25:34.329 software company. The red flag is when a company's 00:25:34.329 --> 00:25:37.089 DE is way out of line with its peers. All right. 00:25:37.150 --> 00:25:39.809 And our third and final metric, the one that... 00:25:39.880 --> 00:25:42.200 Directly connects profit to an individual share, 00:25:42.400 --> 00:25:46.880 earnings per share, or EPS. EPS is simple but 00:25:46.880 --> 00:25:49.900 powerful. You take the company's total net income 00:25:49.900 --> 00:25:51.960 and divide it by the number of shares out there. 00:25:52.059 --> 00:25:54.480 It tells you how much profit the company is generating 00:25:54.480 --> 00:25:57.279 for each single share of its stock. And this 00:25:57.279 --> 00:25:59.779 is the E in the PE ratio we talked about earlier. 00:26:00.079 --> 00:26:02.680 Exactly. It's the foundation of that ratio. At 00:26:02.680 --> 00:26:05.079 the end of the day, as a shareholder, you want 00:26:05.079 --> 00:26:07.299 to see a company with a consistently high and 00:26:07.299 --> 00:26:10.279 growing EPS. It's the most direct sign that the 00:26:10.279 --> 00:26:12.819 business is becoming more profitable, which should 00:26:12.819 --> 00:26:15.339 eventually be reflected in the stock price. We 00:26:15.339 --> 00:26:17.539 have covered so much ground today. We started 00:26:17.539 --> 00:26:20.380 with that core idea committing money now for 00:26:20.380 --> 00:26:23.319 more money later. We mapped out the entire universe 00:26:23.319 --> 00:26:25.700 of assets from stocks and bonds all the way to 00:26:25.700 --> 00:26:29.480 golden potatoes and even NFTs. We did. We traced 00:26:29.480 --> 00:26:32.000 the history of it all from the legal codes. in 00:26:32.000 --> 00:26:34.380 ancient Babylon to the proto -bankers in Rome, 00:26:34.539 --> 00:26:37.259 and then to that first real stock exchange in 00:26:37.259 --> 00:26:39.660 17th century Amsterdam trading shares in the 00:26:39.660 --> 00:26:42.319 VOC. And most importantly, we went through the 00:26:42.319 --> 00:26:45.650 strategic playbook. The detective work of value 00:26:45.650 --> 00:26:49.390 investing with its PE and PB ratios, the futuristic 00:26:49.390 --> 00:26:52.609 optimism of growth, the trend surfing of momentum, 00:26:52.849 --> 00:26:55.630 and that powerful discipline habit of dollar 00:26:55.630 --> 00:26:57.509 cost averaging. And I think the core takeaway 00:26:57.509 --> 00:26:59.769 from all of this is pretty clear. Success here 00:26:59.769 --> 00:27:02.009 really boils down to two things. First, you have 00:27:02.009 --> 00:27:04.289 to understand the risk and reward profile, what 00:27:04.289 --> 00:27:06.529 you're buying. And second, you have to apply 00:27:06.529 --> 00:27:09.430 a defined strategy with discipline over and over 00:27:09.430 --> 00:27:12.089 again for a long time. We established early on. 00:27:12.410 --> 00:27:15.809 The universal truth. High risk comes with a chance 00:27:15.809 --> 00:27:18.569 of high losses. It's unavoidable. But here's 00:27:18.569 --> 00:27:20.009 the final thought I want to leave you with, and 00:27:20.009 --> 00:27:21.730 it's something we touched on. We talked about 00:27:21.730 --> 00:27:23.609 how Benjamin Graham created the framework for 00:27:23.609 --> 00:27:26.910 value investing after the 1929 crash. He formalized 00:27:26.910 --> 00:27:29.190 dollar cost averaging in 1949 to help investors 00:27:29.190 --> 00:27:32.230 be more stable. These core defensive ideas were 00:27:32.230 --> 00:27:34.490 born from periods of extreme financial pain. 00:27:34.890 --> 00:27:36.509 Which raises a really interesting question for 00:27:36.509 --> 00:27:38.730 you to think about. If these critical valuation 00:27:38.730 --> 00:27:41.750 metrics and defensive strategies weren't created 00:27:41.750 --> 00:27:44.349 in boom times to chase bigger gains, but were 00:27:44.349 --> 00:27:47.150 actually forged in the fire of historic market 00:27:47.150 --> 00:27:50.410 crashes, what does that tell us about their primary 00:27:50.410 --> 00:27:53.369 purpose? Are they offensive tools designed to 00:27:53.369 --> 00:27:56.210 maximize gain? Or are they fundamentally defensive 00:27:56.210 --> 00:27:58.609 shields born from a painful need to quantify 00:27:58.609 --> 00:28:01.609 risk and, above all, avoid catastrophic loss? 00:28:02.089 --> 00:28:03.849 Keep that tension between offense and defense 00:28:03.849 --> 00:28:06.430 in mind. Thank you for joining us for this deep 00:28:06.430 --> 00:28:08.650 dive. Until next time, stay well informed.