More Knowledge, More Wealth EP. 205 – The Magnificent Seven Stocks

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[00:00:37] Good day. This is Gabriel Shaheen certified financial planner and your host of more knowledge, more wealth here on every weekend talking about onboard topics and personal finance. My goal is to go over the knowledge you need to increase your wealth. Now to the listener, you can always reach out to myself or any one of my colleagues here at Falcon Wealth Planning.

[00:00:53] Our phone number is 855 963 2526. That's 855 96 Falcon. Like the bird or visit our website at falconwealthplanning. com. That's falcon, WP. com for short. Now I'm the president of Falcon Wealth Planning. We are fee only non commissioned true fiduciary 100 percent of the time. We have to do it in your best interest, which is why we chose to be an independent registered investment advising firm, independent RIA.

[00:01:22] And folks, we are offering one to two meetings, one to two hours of our time at no. Our phone number is 855 963 2526. That's 855 96 Falcon. Like the bird. Where we can help relate this show to your specific situation. Now folks, there is a lot to go over today. I mean, just in general, there's just a few talking points that I wanted to discuss.

[00:01:49] And really, it starts off with just the stock market. I know it goes up and down and there's more good days than bad days. It's as simple as that. But how are you capturing that is the main point. Purpose of this. And by the way, I have a lot of videos on YouTube that you can see, whether it's stocks, one on one or tax strategy or investment strategies, or just talking about global markets in general, I heavily recommend you take it, take a look at our YouTube channel.

[00:02:12] Folks, we have almost a million views in just under nine months. So we'd love for you to take advantage of that and take a look and you can get this episode or any one of our previous episodes as well, but focusing on you for just a moment. I mean, a lot of people, are investing in what we're calling that magnificent seven stocks.

[00:02:32] So this is just the biggest seven stocks that are out there. This could be the Apple, the Microsoft, the Amazon, the Facebook, the Google, the Nvidia. And so on and maybe microsoft if I haven't said that already my point is Is that a lot of people are investing in these stocks and let me just kind of put things in perspective I thought i would just go over some stats and facts with you guys and something as simple as just I apple in general so many people Have been investing in apple for so Long and I'm actually more bearish on apple, but let me go over some of this the air pods revenue alone Uh, this is as of 2022 Is almost 18 billion dollars, by the way, that's more revenue than all of adobe Excuse me.

[00:03:20] It's almost 15 billion. Adobe has about 17 billion. So it has almost as much as Adobe. Has more than Intuit. More than Spotify. More than eBay. eBay only has 10 billion. More than Airbnb. Not even 8. 4. DoorDash. Under 7 billion. Shopify. 5 billion. And Twitter. At 4. 4 billion last year, so it's crazy to think when you look at the magnitude of just apple in general and you compare, this is example of market cap weighted portfolio and this is the thing when you take a look at these big five or in this case, magnificent seven companies, they represent almost 30 percent of the overall markets and it's crazy to think, but that's what you're investing in.

[00:04:10] Even when you buy an index. Keep that into account Because when you look at how poorly or well a company is doing you have to compare to its benchmark Now I'll give you an example like Apple you should compare it to how other tech companies are doing Apple is doing poorly Well, you know what? A lot of companies are probably doing are roughly doing poorly right now including in the tech industry Now keep in mind Nasdaq's up roughly 30 percent year to date And when you compare it to how it did last year, if they're all going down, like last year in the tech world or this year, they're all going up.

[00:04:45] You have to see if there is it really the company's that great or the industry is that great. You have to be a bit leery of that because these cycles are. Cycles. They're cyclical. And so, you have to, versus a NVIDIA, by the way, that skyrocketed compared to the market. So there's something going on with NVIDIA.

[00:05:04] And people are excited. I'm not telling you to buy NVIDIA or Apple or sell either one. I'm just trying to say it's extremely difficult to outperform and understand what the next winner or loser is going to be. Because you can't just be right once, but you've got to be right twice. When to buy and when to sell or when to sell and when to buy.

[00:05:23] That's why timing markets are impossible. And it's just crazy because you can look at all these just data points of all these subscription models. Let me list these subscription models. Right now the average cost for a cable package right now is 83. Okay, I'm getting this information from StatPanda by the way.

[00:05:42] This is as of 2023. When you add Discovery Apple TV, Prime Video, Peacock, Paramount Netflix, HBO Max, and Disney When you add all of this together, it comes out to almost 89, almost the same amount as cable. It's actually more. It's cheaper to go with cable. So where am I going with this? This is why some people think it's good investments to buy Disney, despite what's there internally going on.

[00:06:11] Or Warner Brothers, or Netflix, or whatever the case is. So my point is is, everything sometimes seems logical to move in that direction. By the way, Netflix just came out with something with commercials. Is that good or bad? They're getting additional revenue now through commercials. Now their users are getting a little annoyed.

[00:06:29] And they up their costs. And they're cracking down on logins. You might want to watch it on your laptop, on your cell phone, on your TV. You might want to watch it at work. I wouldn't recommend to do that, but some people do. But how does this affect you and the stock market is what I'm saying. You have to be forward thinking on this.

[00:06:49] And instead of trying to guess what the next best fad is. And that's the thing, some of these things could be fads. I don't know. Is people thought Netflix was a fad? That's what Blockbuster thought. They're out of business. Did you forecast that or did you buy Blockbuster on its way down? These are the things that you have to factor in.

[00:07:09] You have to decide. But man, is it tough to do that? By the way, folks, if you're just joining me, you're listening to Gabriel Shaheen, Certified Financial Planner, your host of More Knowledge, More Wealth, here on every weekend, talking about all important topics of personal finance. And I'm just here saying how difficult is everything that I'm talking about?

[00:07:28] Is it easy to calculate all this stuff? Is it easy to figure all this out? I mean, are you aware that disney parks that does 28 billion in? In revenue in total revenue. Okay, and the sum of universal resorts six flags SeaWorlds, Knott's Berry Farm, and Busch Gardens. Busch Gardens, revenue for Disney parks is 28 billion.

[00:07:56] All of those combined is 11 billion. Does that mean those are bad investments? Does that mean those are going to underperform Disney? Does it mean they maybe have more market share, capture share? Heck, Disney's saying they're having lower people go to their parks, because the information I gave you is 2022.

[00:08:10] So the information that you get to make an educated investment decision is based on last year. I'm not here saying Disney is a bad investment. I'm not here to even comment on Disney. They got enough drama on their plate. My point is, when you look at the 73 million people that go to Disney parks and they combine the 79 million people that go to all the other parks combined and still Disney does over twice the revenue.

[00:08:36] Heck, we go to our local grocery store sometime and there's a little SeaWorld or Knotberry Farms tickets or uh, discounts to go in. I don't remember the last time Disneyland did a discount. Heck, they do do a discount for Southern California residents, they do. But you know what? You have to buy a ticket, instead of paying 150 or 160, you buy it for 100, but they force you to buy three days.

[00:08:58] And you have to use those three days over four months. That's a lot of time to go to Disney, at least for me. I'm busy. I got things going on on weekends during the summer. Yet again, you're making your investment future decision based on what? How are you supposed to decipher all this? It's crazy. There's just always information going on.

[00:09:22] And what I mean by that is there's always a reason to do something or not to do something in investments. They call that analysis paralysis. I mean, sometimes I wish you were just not smart. Because then you would just listen and invest in globally diversified index portfolios. Not trying to think you're smart to outperform the market.

[00:09:42] Not thinking you're smart or you could make a decision today where you think it's going to get reward infinite times over. The worst thing that could have happened to you is make a lot of money during COVID. Right? When the market dropped, a lot of people put their money, they took their stimulus money and put it in.

[00:09:57] And then everything went up, everything, real estate, stock market. Cryptocurrency. Everything went up. Now keep in mind it came down and dropped. But my point is, at the time, some people made money, they're like, this is easy. I've had somebody said, I'm not happy with 20 percent returns. I mean, can you think about a statement like that?

[00:10:18] Like, I know you're thinking, oh, these young bucks, this is just how they are. Like, no, no. Let's focus on... a 20 percent return. Let's just say you put 10, 000. Remember, this is a 25 year old that's saying they're not happy with, I'll say it again, 20 percent returns. If you put in 10, 000 and not added one more dollar since that, your money would grow to over 60, 000 in just 10 years.

[00:10:47] You do 20 years, it's now 400, 000, For 20 years, it's now 400, 000. Let's say over 30 years, so a 25 year old who's not happy with 20 percent returns, over 30 years now has 2. 4 million with just a 10, 000 investment. That's it. Let's do 40 years. They now have 15, 000, 000. So a 25 year old is now 65 and they can retire and they're not happy with 20 percent returns.

[00:11:15] Like it's just crazy to me where people are these days. It just makes little to no sense at all. I mean, you know, I look at yet again, focusing on Apple and people are trying to make decisions on what to invest in. And some people are saying Apple is not a good investment. I'm not here saying it is. I'm just saying it's the largest company in the world right now.

[00:11:36] Yes, it's harder for her to double. I get that point. But you start comparing it to other investments out there, and you look at the revenue of Apple at almost 400 billion in 2022, and it's almost the same as Adobe, Nvidia, Netflix, Oracle, Lenovo, Sony, and Facebook combined. It's kind of crazy when you think about that.

[00:11:57] You know, the revenue per employee with all those 1, 2, companies I just listed, Is 830, 000 per employee. You know what it is for Apple revenue per employee? Two point over 2. 4 million seems pretty efficient to me. Yet again, I'm not telling you to buy Apple. I'm just saying this is why some people do buy Apple This is why sometimes the big get bigger, the rich get richer.

[00:12:26] More people are buying into it because, not just because it's a great company It's because it's a market cap weighted portfolio. When you're buying into the S& P 500, you're buying almost, what, 5 percent in Apple And they just keep getting bigger and bigger and bigger. So this is why sometimes buying just S& P 500 doesn't make sense It could make sense to Separate it out into growth and value companies.

[00:12:53] By doing that, it makes it a little bit more diversified, and you know they go in different directions. For example, large cap growth carries. Large cap value doesn't. Squeeze them together, it's virtually the S& P 500. I'm just here to say, think open mindedly. Folks, we're going to go on a quick break. And by the way, if you need help with this, please give us a call.

[00:13:14] We would love to help our phone number is 855 963 2526. That's 855 96 Falcon, like the bird folks. I'll be right back after a few words.

[00:13:26] This is Gabriel Shaheen, certified financial Planner, your host of More Knowledge, more Wealth. That's on every weekend. We're going over all important topics of personal finance. We're going over retirement planning, making sure you're prepared for retirement, social security and strategies, real estate taxes, avoiding them now and in the future, investments reducing.

[00:13:45] Fees, commissions, and so on. Insurance and estate planning. Folks, we are offering a free financial assessment that you could take advantage of. We have offices all across Southern California, including the Inland Empire. Give us a call to take advantage. Our phone number is (855) 963-2526. That's 8 5 5 9 6.

[00:14:03] Falcon like the bird, or visit our website, falcon wealth planning.com. That's falcon wp.com for short. Enjoy the show. We look forward to serving you.

[00:14:13] Welcome back folks. This is Gabriel Che, certified financial planner and your host of More Knowledge, more Wealth here on every weekend, talking about all important topics of personal finance. Today, we're just talking big picture and how investors are trying to make decisions on investing individual stock and trying to decipher what's going on in the market right now.

[00:14:29] They're trying to decipher if it's what's going on with the interest rates they're trying to decipher when the next, uh, uh, recession gonna hit. They're trying to figure out. What's happening next? And I'm here just saying that is complicated for the top economists in the world. And you're going to try to do it yourself.

[00:14:45] That's hard to do for a fed chair. That's hard to do for some of the top money managers in the world. I mean, listen, you got how many people on TV saying recessions coming, recessions coming, recession coming. You know what they're putting on there? The person who has the paints the worst picture of doom day, just like that hurricane in California last month.

[00:15:06] Remember that it was just rain. Yeah. No wins. I'm, this is crazy. There was worse rains and wins in December. But yet people just want, media wants somebody that could get attention of people and freak people out. Nothing is better than a good old classic freakout. And so just keep that in mind when you're looking to invest.

[00:15:30] I'm just here saying, getting into a globally diversified portfolio could make a lot of sense. Not just U. S., but international as well. Not just large companies, but medium and small sized companies. Small sized companies outperform large companies over long periods of time. Academic research has proven that.

[00:15:49] There's been Nobel Prizes, Nobel Laureates have presented that. My comment to you is, don't go chasing the next shiny thing. I've said that before. Some people say, no, America's where it's at. America's the future. I get that. Hell, California's GDP is almost 3. 4 billion as of 2021. You know what that's more than?

[00:16:12] That's more than Czech, Romania, Finland, Colombia, Chile, Pakistan, Iran, Vietnam, Hong Kong, and Malaysia. All combined. And you know, what's funny about that? Their population of all those countries is over 650 million population in California, about 40 million. So some people are saying, well, we need to invest in the U S because that's just one example.

[00:16:45] Well, you know, here's the thing. You're analyzing just one side of it. We're also spending more. What does that mean? Well, you know, our military budget. In 2023 is over 760, uh, billion dollars. Almost a trillion. Oh, well, China does more really? China. China dis spends 230 billion Russia, 82 India, 54 Germany, 52.

[00:17:11] The way I look at it, you add 'em all together. America spends more than all of them combined. You've heard that before, right? So I'm not here to say we shouldn't spend our money on that. I'm here to say, look at everything. It's not how much you make, it's how much you net. What are other countries doing?

[00:17:29] Are you investing in countries? No, you're investing in companies in those countries. So you have to think, what are those companies going to do with taxes? What are they going to do with inflation? How is their... debt look? What does their books look like? Yet again, I'm just causing you to think because my whole point of this is you don't know and you don't think there's a secret.

[00:17:49] It's not just you who doesn't know. It's the professionals who don't know. I'm not here to say I know. I'm not, I'm here to tell you that it's proven that nobody knows what's going to happen out there. Everything out is efficiently priced. Everything that I have, I may have access to it easier because I'm in the industry, but everybody has access to it.

[00:18:12] Well, when everybody has access to it, that means they can go ahead and implement in their investment recommendations sooner before anybody, right? When it comes out, what am I trying to say? The market. Instantly adapts when information comes out. That's how smart the market is. It instantly moves. So if you think you're going to outsmart the market, you are absolutely wrong.

[00:18:34] You can't outsmart it. It instantly changes. That's what you call efficient pricing. Everything is efficiently priced. Everything based on what's going on today in that company, in our country, and in our world. Everything is efficiently priced. Hey, Samsung has this new phone that's coming out, that's going to affect Apple sales.

[00:18:59] It instantly affects the price of Apple. You think you're the only person who thinks that? You get what I'm saying? Everything is efficiently priced. This is why I recommend staying. Globally diversified, because it's not just U. S., but international as well. International is actually harder, because it's not as efficient as the U.

[00:19:21] S. in regards to something as simple as government risk, currency risk. I mean, the fact is, is that there are certain, every country has different tariff rules and laws with other countries. Everybody wants to be the U. S. We can go from one state to another, no problem. NAFTA as well, that you can go from North American all over and you can have simple trade now.

[00:19:49] Common to you is, how much and how active are you participating in the updates of these trades? Did you know Trump made, uh, President Trump ended up making some changes to that when he was in office? Is it good or bad? It depends on the view that you have. I'm saying, when you take a look at all this information, And I'm going to share with you some DALBAR studies as well, because the thing is, is that we have to look at how you are doing and the proof is you're not doing well from investments.

[00:20:25] And I'll have proof of that through the DALBAR study. By the way, folks, if you're just joining me, you're listening to Gabriel Shaheen, certified financial planner, and your host of more knowledge, more wealth here on every weekend, talking about all important topics of personal finance. My comment to you is just take a look.

[00:20:40] At your current portfolio, are they more individual stocks are the indices and are they mutual funds and if they are mutual funds or indices or ETFs or whatever the case is, how diversified is it? Do you just have the same fund many times over? So people are like, I have the S and P 500. I also have the Vanguard total stock market fund.

[00:20:57] Do you know that's almost 80 percent redundant? I mean, majority of the funds are large caps. If you need help with this, you want to analyze your portfolio. If you want to put it through an in depth, just an X ray of how you're invested, where it's invested, give us a call. We're happy to offer free financial assessment folks.

[00:21:21] We can help relate this show to your specific situation. Folks, our phone numbers. That's 855 963 2526. That's 855 96 Falcon. Like the bird. We got offices all over, folks. We can help. Doesn't matter where you are. We'll give you one to two meetings, one to two hours of our time, folks, at no cost. Give us a buzz and feel free to visit our website as well.

[00:21:47] FalconWealthPlanning. com. That's Falcon, WP. com for short. I'm going to go over with you a 30 year study. It started in 92, ended in late 21, right? December 31st of 21. And this is just... Uh, interesting when you look at inflation numbers, okay? And, uh, dalbar, this is all from DALBAR inflation during that period was about 2.36%.

[00:22:14] Uh, when you look at, uh, if you invested a hundred thousand dollars over that 30 year period, you would've had over 200,000 . So I'll take it a step further. Uh, the s m p 500 had a return of 10.65% during that same period. A hundred thousand dollars investment is 2.1 million. But do you know what the average equity investor did during that period?

[00:22:36] You think it's over 200, 000? You think it's under 2 million or over 2 million? It was actually right in the middle. At 790, 000 at a 7. 13 percent over 3 percent under what the index did. Why is that the case? Well, it could be analysis paralysis. It could be, they just don't know how to choose an investment.

[00:22:56] It looks like they could have maybe gotten their rear handed to them during the com tech wreck and maybe even the great recession, it could be the fact they sold and never bought into the market. It could be that they're just buying what's on the news, which, oh, by the way, what people do, they bandwagon it, right?

[00:23:12] It's human nature. We do it in sports all the time. And people do it in investments as well. Something does well, so well, they want to jump on that coattail. There is proof here that you, people, underperform the index. And we're just talking about the equity side of it. Here is a famous study. This is a study from 2017.

[00:23:37] Okay, and it talks about one year returns average for a normal investor, an average investor, seven and a half percent. Okay, well, the markets did 12%. Well, let's focus on a three year returns. Markets did almost 9%. Regular investor did 3. 8. Oh my gosh. That's well under half. Let's continue. For over 5 years, regular investor did 10%, markets did 14.

[00:24:07] 5%. Let's look at, uh, 10 year numbers. 3. 8 percent normal investor versus 7%. Keep in mind, this was during the Great Recession, right? Because 2017, 2007 to 2017. 7 percent versus 3. 8%. Almost half. Let's look at 20 year numbers. 7. 8 percent return versus 4. 8%. Remember, this included the tech rack, 30 year numbers is 4 percent compared to 10.

[00:24:39] I mean, this is crazy how consistent underperformance is for individual investors. And it's funny, it's, it's, it's sad actually. But let me tell you the funny part. Um, some people be like, Oh no, I doubled my money. I'm doing great. Yeah, but you doubled it over 20 years. You know, doubling it over 10 years is 7 percent doubling over 20 years.

[00:25:00] It's three and a half percent. You're happy. Yeah. Yeah. You doubled your money. Over 20 years. Think about it. You bought that thing in the 2000s. We're here in almost 2024 now, and you're excited, you're happy, you're proud that you bought Qualcomm when you did? Are you serious? I'm just saying stop trying to outsmart this stuff.

[00:25:24] I gave you contradictory reasons of what's going on with Apple. Something as simple as their sales of their products are slowing. Well, their service is going up, yeah, but if they don't sell as much product, then the service side follows that. What about no innovation? What about this AR headset that I think is going to blow up in a negative way?

[00:25:47] Who's going to drop 3, 000 to 4, 000 on a headset? People are trying to experience life. They're tired of being in front of a computer. Now they're going to go sell you on this headset? I could take any stock that you're excited about and spin it and tell you why it's a risky investment and why I wouldn't invest in it.

[00:26:04] I'm not saying. I wouldn't. I'm saying why I wouldn't. It's just like having a negative person. It's a beautiful day out. Eh, it's a little warm for me. Eh, it's a little on the humid side. You know that bright sun that you're bragging about? It's a little too bright. It's hurting my eyes. I need to wear my sunglasses.

[00:26:22] And now I'm going to have a tan on my face because I'm going to have a sun tan ring around my eye or a sunglass ring around my eyes. I'm going to look like a fool. Do you want me looking like a fool? Is that why you're telling me it's nice out? You get where I'm going with this? I'm not trying to say negative people.

[00:26:41] We want to be positive. The easiest way to do this, to remove all the noise, all the nonsense is to stay globally diversified. I promise folks you'll thank me in 10 to 20 years from now. I know, I know you're probably saying, well, I'm not having 10 to 20 years from now. Why not? Even if you're retired, even if you're 70, that money still needs to last you 10 to 20 years.

[00:27:05] And if you're 20 and you want to retire at 50, I'm telling you, stay, compound growth is magnificent. Stay in the markets, stay disciplined. It's the most common, best way to do it. Folks, if you need help, give us a call. We'd be happy to help. Our phone number is 855 963 2526. That's 855 96 Falcon. Like the bird.

[00:27:33] Or visit our website at falconwealthplanning. com. That's Falcon, WP. com for short. We can help relate the show to your specific situation and answer the questions. You may have folks that was a fast pass show. I want to thank you for tuning in with me this weekend. You can always reach myself or any one of our colleagues here at Falcon Mount planning.

[00:27:50] Our phone number is 8 5 5 9 That's 8 5 5 96 Falcon. Like the bird. We'll be happy to put a personal assessment for you to help relate this show to your specific situation. Give us a call or check us on Spotify or on podcast where you can get this show or any one of our previous episodes and don't forget to subscribe and like to it as well.

[00:28:13] And go on our YouTube channel. We got a video version of this. In addition to that, you can get some really good fantastic strategies on our library. Folks, we want you to have a fantastic weekend. Have a great week and God bless.