george grombacher 0:00
Come on lead this is George G. And the time is right welcome today’s guest strong and powerful Louis Louis Yanis Lewis. Are you ready to do this?

Louis Llanes 0:20
I’m ready to rock. All right, let’s do it.

george grombacher 0:23
Let’s go. Lewis is a CFA he is a CMT. He’s an investment strategist and advocate for investors. He is the author of the financial freedom blueprint. And he’s the CEO of wealth net investments excited to have you on. Lewis, tell us a little about your personal life more about your work and why you do what you do.

Louis Llanes 0:45
Okay, well, first and foremost, I have a dad, I’ve got lovely twins, one boy and one girl and been married to the st. My wife for a long time well over two decades. And secondly, I’m an investment guy. I’ve been in the investment business and all different elements of investing and planning for over two decades as well. And I’m also a guitar player, I love to play guitar have played in performed in many different capacities. Kind of a little bit of a hiatus right now. But making plans right now to start playing again and performing. So that’s just a general overview of me.

george grombacher 1:20
Nice. How old are the kids?

Louis Llanes 1:24
They are 15. They just turned 15. Okay. freshmen in high school.

george grombacher 1:29
All right, perfect. Married for two decades working in investment management for two decades. Similarly challenging and rewarding, Louis?

Louis Llanes 1:41
Absolutely. I would say parenting is definitely more UFC more adaptive with parenting than the stock market. So it’s, I think they’re pretty close to each other. Like, yeah, bull markets, bear markets, sideway charges, you know, volatility, you know, good times, bad times. It’s all good, though. And it’s all good.

george grombacher 2:00
And it is all good. All right. So you and I were talking, before we hit the record button about just the world of investment management and money, and, and all that. And you’ve, you’ve worn a lot of different hats, and I think come at it from a really great perspective, being a chartered financial analyst. And, anyway, so in, in your 20 years, 20 plus years, two decades?

Unknown Speaker 2:30
How How, how have you thought about? Or how is your perspective

george grombacher 2:35
on helping people with money changed? If it has?

Louis Llanes 2:41
Well, it’s changed me mainly because the environment is so different now than it’s ever been in my career. It’s really more an environment that, that we haven’t seen in a long, long, long time. And my I think the biggest thing is that this is not your parents economy anymore. We’ve got tech innovation that is rapidly changing the speed of things, we’ve got huge budget deficits that we didn’t have before as a percentage of the overall economy. Very large money supply increases, I mean, excessively large money supply, supply increases that are affecting things. So we have some that leads to a lot of different issues that people need to plan and invest for, you know, you need to change your strategy. So if you want me to tell, I can tell you why that’s important. Yeah, please, what does that mean? So I mean, really, what that means is that inflation and taxes, which have always been a problem for investors, I think that could be a bigger problem. You know, that going forward for most retirees. So that changes the dynamics, people who are trying to retire ready. And so it also means that you need to kind of be aware of the established rules, because what did work in the past will not necessarily work as it did in the future. So you have to have a different strategy. And that strategy is really a combination of a couple things. First, you need to differentiate between what is part of the future and what is part of the past, because of this rapid innovation and change. And because of the government policies that are being put in place, that’s going to change the you know, what is working in the future, and then you need to eliminate the past or reduce the past so so indexing, which is a traditional way that a lot of people invest can be a problem, because what is the largest market cap or what is the largest portion of the economy may not be so in the future, so So we’re more of an advocate of being more selective. And ultimately, it means that you need to have smart planning and investing good habits, things like that.

george grombacher 4:48
Fascinating, right? There’s the speed at which things are changing. And I think you definitely hit on something that I’ve been thinking a lot about the fact that all old rules or mores, standards, whatever, don’t necessarily apply anymore. And if I look at just over the broader range of society, we are questioning everything. And the need for critical thinking and independent thinking and analysis has never been more important. But that’s hard, right? Especially with money, because it’s so complicated and complex. So how do you coach people to sort of look at all of that, with all the taking everything we just talked about into consideration?

Louis Llanes 5:33
Well, I have a variety of different models that kind of we use internally, but it really starts off with the basics. It’s all mostly, it’s almost boring, how basic it is. But there are a few things that just consistently work no matter what’s going on. And that really starts off with, you know, you need to start make sure depending on where you are in your situation, you need just to make sure that you have good habits, right. And that you’re doing, I have seven steps that I always talk about that that everybody should go through, if you haven’t gone through the seven steps of planning, smart planning, then you probably are going to have something missing. So with if you don’t do that, then you’re going to have some problems. And then it’s also it also means that you need to invest in a way where you’re not afraid to sell things, and you’re not afraid to to be a little more focused in where you’re investing and not just go broad, because if you took the average portfolio today, we see different portfolios coming in, they all look the same, and they all perform the same. They’re, they’re basically 6040 stock and bond diversified huge numbers of stocks and huge numbers of bonds. And they’re tracking the indexes. And they’re not really looking to be rational for steady type growth. So I really try to coach people to think don’t think s&p 500. You know, that’s what a lot of people think about because you’re not going to want to invest in the s&p 500. Most people can’t handle that level of volatility. You know, the s&p 500 goes down 50% Every now and then, and most people don’t want to hold investments that go down 50% And then you make up make bad choices. So we really try to coach people to think long term beat taxes and inflation try to get a steady ride, and have good money habits if you’re building towards, you know, being retire ready.

george grombacher 7:17
And that that is different than, than what a lot of currently held wisdom is it which is just by the index. And correct.

Louis Llanes 7:33
And, you know, we say some about that, because this has happened before, I think people forget, you know, I remember in during the.com bubble, a lot of people were buying indexes, they were buying the NASDAQ and the s&p 500. And, and everybody was saying look, and even all the literature that was coming out of the CFA organization was like, you know, buy indexes by indexes. This has happened before, when you have a rip roaring bull market in stocks, it’s very difficult to beat an index mathematically because it owns everything. And the money, you know, by naturally what is working, you own more of it, and then what’s not working, you know, unless it but when the markets actually crack those, you have most of your money in the largest stocks that are in the most expensive overvalued, and it gets pretty ugly. And then people stop indexing, even even, there’s even studies that show that people that invest in these index funds don’t perform as good as the indexes because they because of behavioral problems.

george grombacher 8:34
Tell me more about that.

Louis Llanes 8:36
Well, people will tend to chase chase the market, when it’s doing well buy a lot when it’s going up. And then when it crashes sell out, and then they don’t get back in as soon enough when the markets down. So they wind up losing money on the way in and then they wind up being late getting back in. And so their results are significantly lower 200 to 300 basis points or two to three percentage points. Less than than just buying and holding. But the root of that problem is is that the risk profile, people change their risk profile at the wrong time. And you know, I heard a professor one time tell me that, that risk tolerance is time varying. I do some lecturing at the University of Denver and other places to teach, you know, master students about investing and and and you know, that’s one of the things I think is the hardest thing for most people is that we want to take more risks. Our natural instinct is to take more risk at the wrong time.

george grombacher 9:36
Our brains have kept us alive though us but they’re not helping us be good investors.

Unknown Speaker 9:43
That’s for sure. All right. So

george grombacher 9:46
do you think that that we that most investors have a good understanding of risk or bad or that’s maybe the wrong term, but how How should people think about risk, is it valuable to figure out what your risk tolerance is? How do we even go about that?

Louis Llanes 10:07
Yeah, definitely, you definitely want to think about risk. We look at it from three different dimensions, you know, the first would be kind of your temperament and how much volatility or really negative returns can you tolerate, and still kind of sleep at night? You know, and then the other way we look at risk is how much risk capacity Do you have? How much can your financial plan, withstand, you know, some people, if you have a lot of money, then you can afford to take some more risks. If you don’t have you know, as much money then you can’t, but then there’s this opposite effect, which has to do with your, the amount of risk that you require, how much you need. So, you know, sometimes you could be in a position where you need to take more risk to get a higher rate of return. But your temperament doesn’t match that. That is the worst position to be in. Actually, that’s the position you want to really avoid if you can. That’s why you need to save early and invest early for the younger people in the audience. And you want to save and invest early and often for sure.

george grombacher 11:07
Yeah, that’s definitely a bad spot. If I’m 55 years old, and I have very little saved Well, if I intend to retire in 1510 or 15 years, then I probably do need to take on more risk. But if I’m going to develop an ulcer, because I’m taking all that risk, and I’m worrying about it all the time, that is, that is kind of like jail.

Louis Llanes 11:28
It is. And that’s, that’s why I really like talking to young people, I’m going to be doing some even talking to high school students, you know, kind of pro bono work, because I really feel like if people just get some basics, it really what can avoid a lot of problems in life, financially, anyway.

george grombacher 11:47
And what what in I mean, the trick there, I’m not sure that I know what the trick there is talking to young people in getting people to take positive, proactive action, right, when they think I don’t want to miss out on things. That’s, you know, I’ll I’ll get around to that in a couple of years kind of a thing. Do you have a sense of, of, of what your messaging will be, to kids or what it is?

Louis Llanes 12:18
Well, I’m kind of modeling after the the the course that I built for my kids actually built a little course, I wrote an outline out for a little course, for my kids, because, you know, I have given them some money, and for them to invest in their investing purely in individual companies. I’ve taught them about exchange traded funds and mutual funds, but, but I’m flying them to understand that the root of this of most investment is based on companies. And you know, that’s what’s underneath the hood. And you really need to understand those basics because it ultimately is going to boil down to that. And being in the right places, and understanding just how business works. So I think today, and this is a little bit controversial. But there’s there’s a lot of people today that believe that capitalism is bad, but they love their 401k. And they don’t realize that their 401k is by definition capital. So all stocks all bonds is capital. And my hope is that people don’t kill the goose that lays the golden eggs that go which is capitalism.

george grombacher 13:29
They like their iPhones to Louis, WhatsApp, they like their iPhones too. And I’m pretty sure it was capitalism that created the iPhone. So

Louis Llanes 13:40
exactly. Yeah, exactly. Love those iPhones. And we want them to have bigger and better and greater things in the future. So let’s not kill capitalism. That’s right.

george grombacher 13:50
I mean, what are we at iPhone 10 or 11? Or 12? You want iPhone 25 to young people, let’s let’s write let’s not throw the baby out the bathwater here. All right, so I’m just gonna bounce around and ask you 1000 Different crazy questions that are not necessarily germane to one another? How are you thinking about crypto assets?

Louis Llanes 14:12
Well, well, I’ll tell you what we’re doing. And then I’ll tell you how I’m thinking about it. So maybe they’ll it’ll make some sense. So what we’ve been doing is we do own Bitcoin, but we also own precious metals. And we also own agricultural commodities. They’re all kind of interrelated but non correlated. So it’s really has to do with money, the price of money, which is inflation, and it has to do with money flows. So when when the way we’re dealing with this is when Bitcoin takes a big rally, we’ve been tearing back on Bitcoin and then buying say gold, which is not rallied as much and we’re basically rebalancing that way. That’s called volatile volatility scaling. So we have we have less money in Bitcoin have the allocation that we have to those assets, those money related assets like the likes You know, that I just listed out, we have less money in Bitcoin because it’s more volatile, we have more money in gold, and more money in commodities. So we all those prices, I would expect to go higher. But I could just So what basically what I’m telling you, we’re hedging that bet with Bitcoin, because there’s some serious risks involved with with any crypto asset, because it’s really unknown what the how the government is going to deal with them. And ultimately, the government has the guns, and they decide what’s going to be in existence. So, so I think that there, it’s going to get more and more regulated as it already is beginning to, and that, you know, once the Fed comes out with their own kind of cryptocurrency, if you will, or using that technology, like blockchain, Blockchain type technology, they have every incentive for that to be the protocol not to be the standard, because they’re going to be able to track more flows in the economy, you know, and they really want to track more flows in the economy, because they want to be able to capture more taxes. You know, what, if everybody is on a blockchain type scenario that is issued by the Fed, then, you know, then it’s going to be tougher to evade taxes. And since we have such huge budget deficits, believe me, we need to collect a ton of taxes. Yeah, so there’s, there’s, there’s only one or two things that can happen here, that either we’re going to inflate our way and cause more inflation, and that’s how we’re gonna pay for this big problem that we have with deficit spending, or we’re going to tax increase taxes, and probably be a combination of those two. And I think in the short term, Bitcoin will rally and continue to move higher. You know, obviously, we had a little bit of a dip recently, that that could be a buy the dip scenario for for, you know, in terms of an overall portfolio strategy, obviously, you know, concentrated that, just to give you some context, our average position size in Bitcoin is less than 2%. So it’s not a huge part of our portfolio.

george grombacher 17:03
Nice. And how, how do you how do you play? Or how do you invest in in in commodities? Do you actually buy the stocks of milk? How, how do you like to do it?

Louis Llanes 17:17
Well, we’re doing it in two ways. One is we do own kind of more basic materials type companies. And then we also own actual commodities, through exchange traded funds, you have to be real careful with those exchange traded funds, because they’re structured in different ways. So when you want to buy, the way we’re doing it is we’re buying the exchange traded funds that are that don’t have as many tax problems, and that are more pure in their exposure, how they get exposure to the the commodities, and they’re generally getting that exposure through the futures market, which is the purest way to do it. without actually owning the physical commodity. It’s also the most regulated, you could, you could get it done with notes, too. But there’s some tax problems with that. And depending, if you have a retirement plan, oftentimes you can’t get exposure to that in retirement plan. Because many 401k and other retirement plans won’t allow those types of assets to be in there. You could also buy mutual funds, which they will allow more, not a big fan of those in general, just because of the layers of fees and the way they’re structured. But But yeah, and you have to keep in mind that that is more of a diversifier is I don’t see it as something where you would want a huge position in it.

george grombacher 18:32
How much time during the day do you spend thinking about this stuff, Louis?

Louis Llanes 18:41
Way too much, probably no, actually, I have a routine, you know, I have a routine of the combination of thinking, reading, writing, and talking to smart people. That’s pike Harbor, that kind of timeout you know, pretty much every day. But it’s more so on my buffer days. I don’t know if you’ve heard of Strategic Coach, but I’m a big strategic coach. Now. Remember, Strategic Coach. So on my buffer days, those are the days kind of backstage days, that’s when I do more of this type of thinking and work and talking with people. And then the the focus days are more doing like things like I’m doing right now talking to people, trying to educate and motivate people to make smart financial choices and retire ready. I love

george grombacher 19:29
it. Thinking, reading, writing and talking. I think that getting back to that whole idea about critical thinking and actually using our brains super valuable. So I appreciate you sharing all that. Louis, thank you so much for coming on. Where can people learn more about you? How can they engage with you? Where can they get a copy of the financial freedom blueprint?

Louis Llanes 19:54
Yeah, yeah. Financial freedom blueprint Seven Steps to accelerate your path to prosperity. just came out, actually, I have a special way that people, your audience can get a signed hardcover copy of it, you can go to Path to Real wealth.com. And you can order a copy there, and we can get you a signed hard copy as to real wealth.com.

george grombacher 20:19
Excellent. And if folks want to engage with you for investment management, how does that work?

Louis Llanes 20:29
Basically, we just we just like to schedule a call and chat. And you can go to wealth net, invest calm, and click the button on top, so schedule a call. And then you can have a call with me or one of our advisors and just kind of go over your situation to see if we can help you achieve your objectives. Excellent.

george grombacher 20:50
Well, if you enjoyed this as much as I did, show Lewis your appreciation and share today’s show with a friend who also appreciate good ideas, pick up a copy of the financial freedom blueprint at Path to Real wealth. com get a copy of a signed copy of the hard cover, and then go to wealth net, invest calm, and book some time to chat with Louis or somebody from his team. Thanks good, Louis.

Louis Llanes 21:16
Thanks a lot appreciate you having me on.

george grombacher 21:18
And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai