Liquidity: Throwing Money Over the Wall

[0:00] Ryan Warwick: Some of the smartest people in the world got caught up in the very thing we're talking about. These institutions of, of higher education with

[0:10] Ryan Warwick: multi-billion dollar, I mean, 10,

[0:14] Ryan Warwick: fif- you know, 20, $50 billion portfolios.

[0:18] Ryan Warwick: All of a sudden,

[0:21] Ryan Warwick: all of those things, so the 70% of their portfolio that was tied up in things that weren't liquid or weren't easily sold,

[0:33] Ryan Warwick: all of a sudden couldn't be sold. Picking up nickels in front of a steamroller. Okay, it's great. It- I- I'm just picking up free nickels all day long. Yeah I'm getting all this extra return, until the moment I trip or I reach for one- Yeah... that, and I just catch my finger in the steamroller just, and I can't get out from under it, right?

[0:55] Shannon Warwick: Out from under it.

[0:55] Ryan Warwick: So they were good until the moment that they weren't.

[1:00] Ryan Warwick: Welcome to the Worth Beyond Wealth podcast.

[1:02] Shannon Warwick: Where net worth meets personal worth. I'm Shannon.

[1:05] Ryan Warwick: I'm Ryan. We help families navigate the emotional, relational, and personal realities that money alone can't solve.

[1:12] Shannon Warwick: If you've built wealth but still wonder what it all means, or how to keep your family grounded while protecting your legacy, you're in the right place.

[1:20] Ryan Warwick: We sit down with experts, and with you, to talk identity, purpose, and connection beyond the balance sheet.

[1:27] Shannon Warwick: Because true wealth isn't measured in dollars. It's measured in the impact we make and the relationships we nurture.

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[1:38] Shannon Warwick: To be truly wealthy together.

[1:40] Ryan Warwick: This is the Worth- Worth Beyond Wealth... Beyond Wealth podcast.

[1:43] Shannon Warwick: Uh, but let's dive into the topic for today. So it's liquidity,

[1:47] Shannon Warwick: and, um,

[1:49] Shannon Warwick: you said, "Well, why, let's, let's open up the podcast with why did you even wanna talk about liquidity today?" And I s- I said, "Well, 'cause that's what came up in my search when I was trying to decide what to talk about today." But, but, but really,

[2:04] Shannon Warwick: if I pause, why did that come up? Because liquidity is so critical to

[2:12] Shannon Warwick: creating financial peace, not just for yourself, but for your home, for your family.

[2:18] Ryan Warwick: Yeah.

[2:19] Shannon Warwick: Liquidity is crucial.

[2:19] Ryan Warwick: And it's been a

[2:22] Ryan Warwick: ancillary topic to- Mm-hmm... some of the other things we've talked about. Absolutely. So.

[2:26] Shannon Warwick: Yeah. And, and it-

[2:27] Ryan Warwick: Dollar cost averaging.

[2:29] Shannon Warwick: Right.

[2:29] Ryan Warwick: Years of safe money. So some of these conversations have absolutely touched on this.

[2:33] Shannon Warwick: And, and we will continue to- Yeah... keep looping back around to liquidity as we continue on the podcast. It, it, it won't, it will never go away. Yeah. It's just crucial to, it's, it's foundational to financial health, wealth- Yeah... peace, all the things. So-

[2:51] Ryan Warwick: We even have a chapter dedicated to it in our forthcoming book.

[2:55] Shannon Warwick: Oh, yeah. Yeah. So- Yeah, um-

[2:56] Ryan Warwick: I mean, it's, it's just an important topic.

[2:58] Shannon Warwick: Well, and, and, and as, as we dive in f- to today, you know, we'll even discuss the fact, um, that we talk about it heavily in the Life Raft book- Yeah... that's coming out. Um, you know, and so give you the floor on, on that, um,

[3:14] Shannon Warwick: that topic for today. But liquidity and the need for liquidity, um, so just opening up, we always wanna offer a learning moment- Yeah... for anyone who is new to finance. Um, and, and we always wanna give space for that because that is so critical to what we're doing.

[3:31] Ryan Warwick: Yeah, I mean, it's important that you just mentioned this is, uh, liquidity related to finance and not, uh, liquidity or-

[3:39] Shannon Warwick: Mm-hmm

[3:39] Ryan Warwick: ... um, you know, talking about water and rivers and-... lots of liquidity in this world. But we're, we're specifically talking about it as, as it relates to the world of, of finance, investing money. Yep. And so liquidity has this very, um, specific definition. Yeah. And I think that's important to, to put out there. So, um, um, so liquidity is the ease, so how easy is it, and the speed, how quickly can we do it- Mm-hmm... with which we can sell an asset or turn it, turn something into cash

[4:22] Ryan Warwick: without impacting its price.

[4:24] Shannon Warwick: I really liked that. I liked-

[4:25] Ryan Warwick: Or with w- with a, without a big impact on its price.

[4:29] Shannon Warwick: The ease and the speed. That was really good. I liked that.

[4:31] Ryan Warwick: The ease and the speed- Yes... that you can sell something- Mm-hmm... without impacting its price.

[4:37] Shannon Warwick: I love that. Yeah, so I, you know, simply referring to liquid assets or easily available cash, um, that someone needs access to in order to meet an immediate need. Yep. An unexpected expense, uh, even having capital for an investment opportunity that may arise, and you need access to cash.

[4:54] Ryan Warwick: Yeah, and, yep, and, and that's all absolutely liquidity. And then there are, we'll, we'll go into today other things that might be considered liquid that, that maybe don't meet all of those f- I would say three conditions- Mm-hmm... to meet the definition of liquidity. Okay. So how easy is it to sell? How quickly can you sell it? Ease and speed. And can you sell it quickly and easily without impacting the price? So those are three-

[5:21] Shannon Warwick: Right

[5:22] Ryan Warwick: ... you know, really big conditions that, that are going to define, uh, liquidity in, in the conversation.

[5:28] Shannon Warwick: So that actually gives rise to my next question here. Yeah. And it's can you, or my first question, can you give a broad overview of different types of liquidity, uh, liquidity risks, uh, key liquid assets? Just, just sort of a, a general transfer of knowledge moment.

[5:45] Ryan Warwick: Yeah. I mean, it's, it's big, so I'll try to-

[5:48] Shannon Warwick: Do you need markers?

[5:49] Ryan Warwick: May- probably not yet. Okay. Um-

[5:51] Shannon Warwick: I have them at the ready. You just give me the word.

[5:55] Ryan Warwick: So more than, let me see how you, how you worded this. Oh, it- Um-

[6:00] Shannon Warwick: It was a big, sorry, it was really a lot there that I just threw at you. But a broad overview of first different types of liquidity

[6:08] Ryan Warwick: So let's just stop there Risks Let's just-

[6:10] Shannon Warwick: Let's just stop there. Yeah Okay

[6:12] Ryan Warwick: So I wouldn't say there are different types of liquidity. I would say there are

[6:17] Ryan Warwick: different assets that have liquidity that have different characteristics.

[6:21] Shannon Warwick: Okay

[6:22] Ryan Warwick: And, and push back on if you've seen something where you say, "No, there's like, this seemed like a different type of liquidity," so, so please. Um, but you have i- in the world of investing,

[6:35] Ryan Warwick: all types of things that you can put your money into.

[6:40] Ryan Warwick: Um, stocks or companies, we, we like to say because, um,

[6:47] Ryan Warwick: stocks may not make sense to everybody, but, hey, ownership of companies. Uh, companies are, are liquid if they're, if they're public, um, meaning we can... There's a stock market, and we can, we get a price on those every day, and we can easily sell those. Um, we'll come back to each one of these. Bonds or fixed income instruments- Mm-hmm... um, uh, have liquidity because we could sell them relatively easily. Um, cash, of course, is, is liquid. You've already- Right... touched on that. So cash comes in many forms. Um- Yes... there's physical cash, cash in a savings account at your bank, cash in money market- Mm-hmm... cash equivalents. Those are- Mm... going to be things, um, like very short-term debt instruments that are very high quality, like US Treasury bills. Um,

[7:37] Ryan Warwick: widely considered to be the safest asset in the world. Um, gold is an asset. You know, is it, is it liquid, right? So I'm, I'm more talking about, um, the assets and then the characteristics of liquidity. Um, so is real estate. It, it's an asset. Is it liquid? Um, private investments. And so, um, you know, as I think about liquidity,

[8:06] Ryan Warwick: it's, you know, cash is one thing, but often we, we think about stocks and bonds or other investments as being liquid. Right And, and they are,

[8:18] Ryan Warwick: um, because I can get a price. So if you think about the stock market, I can get a price on that each and every day. So it's liquid, but here's the challenge. I don't know what the price will be tomorrow. Mm-hmm. So I think it's

[8:34] Ryan Warwick: liquid,

[8:36] Ryan Warwick: meaning I can sell it

[8:39] Ryan Warwick: easily, quickly, but this-

[8:42] Shannon Warwick: So ease and speed are there

[8:43] Ryan Warwick: ... third, but this third thing- That's the third... is really catching, uh... So it catches a lot of these things-

[8:49] Shannon Warwick: Okay

[8:49] Ryan Warwick: ... uh, because

[8:51] Ryan Warwick: this, any given company, for sure, could be down a lot tomorrow, and it could be up. But the point is, I don't know if I can sell it quickly without taking a price that I don't like.

[9:04] Shannon Warwick: Mm-hmm.

[9:05] Ryan Warwick: So it doesn't... Companies or, or things that are, um, designed to grow, investments that, that we hold in order to have growth over time, um, don't really meet all three conditions. Right. And so then it jumps us back. So especially real estate, let's think about that.

[9:24] Shannon Warwick: Mm.

[9:24] Ryan Warwick: Um-

[9:25] Shannon Warwick: Oh, great, great point

[9:26] Ryan Warwick: ... people, people love their real estate. Mm-hmm. I can see it, I can touch it, I can use it.

[9:30] Shannon Warwick: So it feels safe. It feels safe. Or an illusion of safety- Um, I-... often

[9:33] Ryan Warwick: ... you know, the thing that I often say, it's, it's kind of a side point, but the, the double-edged sword of, of real estate

[9:42] Ryan Warwick: is, uh, and the double-edged sword of, of stocks or companies, is that, um, i- in real estate, I don't get a price every day, and in companies o- on the stock market, I do get a price every day, okay?

[9:56] Shannon Warwick: Sure.

[9:57] Ryan Warwick: Getting a price every day is great. I know what I can sell it for. It's, it's liquid in the sense of I can get to it,

[10:05] Ryan Warwick: but it creates a lot of emotion-

[10:09] Shannon Warwick: Yeah. Yeah

[10:10] Ryan Warwick: ... because I can see the price every day. And that- In real estate, it, it, you, you don't see the same kind of emotion because I don't see the price every day. So I kind of feel-

[10:20] Shannon Warwick: I think this is such a great point

[10:20] Ryan Warwick: ... like real estate just smoothly goes up- Yeah... when it really doesn't. No. Especially if I needed real estate to be liquid all of the sudden. What if I had to sell a, a piece of land tomorrow because I had some other obligation? Guess what? I'm not gonna like the price that I get for it. So I may be able to sell it quickly, maybe even easily if I find the right buyer, but boy, that third condition, um, I'm not sure I could sell it quickly and easily and get the price I want.

[10:50] Shannon Warwick: Sure, and I think, uh, that's, this is such a great... I, I love where you're going with this because we talk about the psychology of money- Yep... all the time. Yeah. And here it is- Yeah... again- Yep... rearing its head. So, um, yeah, that's, that is fascinating. How does this tie into-

[11:06] Ryan Warwick: It, it's why... I, I'm just gonna say why

[11:10] Ryan Warwick: I think knowledge is so important around public markets.

[11:15] Shannon Warwick: Mm.

[11:16] Ryan Warwick: I- and

[11:19] Ryan Warwick: public, public markets being, you know, if you think about the US stock market, S&P 500, Dow, um,

[11:25] Ryan Warwick: is how a lot of people think about it,

[11:29] Ryan Warwick: is

[11:31] Ryan Warwick: one of the greatest, I'll, I'll call it an invention-

[11:35] Shannon Warwick: Mm

[11:35] Ryan Warwick: ... in, in history because it is, it allows for the free flow of capital in ways that never existed before you had, had companies that could go and raise capital in public markets. So it's, it's a phenomenal, um... It, it moved us forward as a world i- in terms of development and, and I, I would say wealth generation-

[12:04] Shannon Warwick: Absolutely

[12:04] Ryan Warwick: ... tremendously.

[12:06] Shannon Warwick: Mm-hmm.

[12:07] Ryan Warwick: So I think it's just this phenomenal thing that we get to participate in, but if you don't understand what it is, you can- Y- y- your mindset around it could devolve into, "It's just a casino. It's scary. It's, it's just risk." And so you really need to understand what it is, right? And so this, this conversation around, um, liquidity and different types of growth assets is, is really critical. So

[12:40] Ryan Warwick: when I invest to grow,

[12:44] Ryan Warwick: I have to understand that it's not generally liquid m- in, in terms of all these, these three definitions. That make sense?

[12:55] Shannon Warwick: Uh, yeah, and I'm thinking you, you got ahead of me a little bit- Yeah... and we'll, we'll get there, but yes, absolutely. And, and actually I, I was wondering, is this, just in listening to you, is this a space where people can also enmesh or get caught up in, um, market hanging?

[13:14] Ryan Warwick: Yeah.

[13:14] Shannon Warwick: Yeah.

[13:15] Ryan Warwick: I mean, i- m- that's, that's always, that's always a risk, again, if, if you don't understand the long-term nature of, of, uh, owning, of ownership of companies, and you see it more as short-term navigation in order to turn a profit- Mm-hmm... um, then it's, it's going to be problematic in, in particular, um, emotionally.

[13:38] Shannon Warwick: Yeah. So is it common to get caught up in investing in illiquid assets while forgetting the importance of liquidity?

[13:46] Ryan Warwick: Yeah, it's, um, it's huge because

[13:51] Ryan Warwick: we get,

[13:53] Ryan Warwick: we get excited. Mm. These opportunities, we, I mean-

[13:57] Shannon Warwick: Yeah

[13:57] Ryan Warwick: ... we can, again, this is such a huge topic, but, um, everyone's heard of this-

[14:01] Shannon Warwick: And I, and I know it is. I appreciate that it is, and I, I, I recognize, you know, we're having to really draw everything in to c- to, to a small conversation- Mm-hmm... really for the p- sake of the podcast. Yeah. But touching on it-

[14:14] Ryan Warwick: So-

[14:14] Shannon Warwick: What would you say?

[14:15] Ryan Warwick: FOMO?

[14:16] Shannon Warwick: Yes.

[14:17] Ryan Warwick: I mean, so in these moments when, um,

[14:22] Ryan Warwick: w- when, uh,

[14:24] Ryan Warwick: things are good-

[14:25] Shannon Warwick: Yeah

[14:25] Ryan Warwick: ... we, we have this fear of missing out, and that's just this, like, if I'm, if I'm out or if, you know, if, if Joe is out talking to friends at a party and, and they're- Right... talking about making money and XYZ company-

[14:40] Shannon Warwick: Gotta get in on this- Boy, that's-... next big thing

[14:41] Ryan Warwick: ... that's an exciting. I'm, I'm out at the golf course, and this idea's coming across, and I don't wanna miss out on this. Yeah. So it's, it-

[14:49] Shannon Warwick: Well, and peer, and peer pressure too

[14:50] Ryan Warwick: ... peer pressure, it, you know- Imitation... there's- Don't wanna disappoint. Yeah, there's, there's ego involved. I wanna be part of that. Absolutely. Um-

[14:58] Shannon Warwick: That's a great point

[14:58] Ryan Warwick: ... I mean, that honestly is, is what,

[15:03] Ryan Warwick: we don't wanna go into it too much, but you know, those kind of things is what, uh, has accelerated or, or allowed some of the problems, a lot of people have heard of this, um, the, the Bernie Madoff scandal years ago. And, and it was, boy, you were in, you were part of the in crowd- Mm... if you were part of Bernie's, uh, investment. Yeah. And, and so y- you know, that, that plays a big role. Um-

[15:30] Shannon Warwick: Don't go, don't go to that weekend at Bernie's.

[15:33] Ryan Warwick: No.

[15:34] Shannon Warwick: No. Different Bernie, though. Different Bernie. Um- But still.

[15:38] Ryan Warwick: So

[15:40] Ryan Warwick: I think it's, we, we see this often in, in our... The book Life Raft is

[15:48] Ryan Warwick: directed at this, this entrepreneurial family,

[15:53] Ryan Warwick: and one of the things that

[15:57] Ryan Warwick: I have often seen in those situations is

[16:02] Ryan Warwick: you have, um, a business that's successful, that's generating good returns. In other words, the, the value of that business is, is increasing.

[16:15] Ryan Warwick: Um, as you have cash, now sometimes it's for because of necessity, and other times it's because of desire. Sometimes the money just gets plowed back into that business and, and there are lots of good reasons for doing that, but-

[16:29] Shannon Warwick: Which w- we, we've experienced- Sure... through the years in, in building, um, a business, and y- there are times when we've had those conversations where the need arises where we do need to reinvest capital into- Sure... we need to tie it up for, for a time, but, but I wanna say something that- It's an investment. Yeah.

[16:46] Ryan Warwick: But it's, but it's not liquid, and so-

[16:47] Shannon Warwick: Correct. But I wanted to say something here where I ha- that I have appreciated about you. Mm-hmm. Uh, again, you're my husband, but you're my financial advisor. And we've had those conversations, uh, and it's something I was, I was actually thinking about as I was, um,

[17:04] Shannon Warwick: preparing mentally for this episode. Gosh, there's been seasons where we've had to put the money back in, and it has been illiquid for a time or a season. But we've had conversations about your awareness of that and then plans for how can we quickly, um, th- th- tip the scales back to where we, we, we do have liquidity again. Sure. So I have really appreciated that, that awareness- Yeah... that you have brought into our, our family. Sure. So thanks. Yeah. There's a call-out. Well, we've- And maybe encouragement to others-

[17:37] Ryan Warwick: Yeah, I mean, we-

[17:37] Shannon Warwick: ... to create this if possible

[17:38] Ryan Warwick: ... we want to obviously live and, and

[17:42] Ryan Warwick: practice the same advice that we, that we give, right?

[17:45] Shannon Warwick: Well, it creates wisdom.

[17:47] Ryan Warwick: Yeah. Yeah, i- um, going through, you know, it's knowledge until you earn the scar tissue by living through it, right? Yeah. Lived experience- Uh, and then it becomes wisdom

[17:56] Shannon Warwick: ... is so, is so- Yeah... critical. But I think you can also have an appreciation for times when you have, you have to- Yeah... tie the money up. But be aware that you shouldn't leave it tied up for-

[18:07] Ryan Warwick: S- so then there's, there's another thing that happens and, and that is successful people often have

[18:16] Ryan Warwick: interesting deals- Investment opportunities coming across- All the time... their desk all the time. And so it's easy, what we've seen in, in some situations is this opportunity comes across. Yep, I, I have some liquidity. I have some cash right at the moment to invest. Yep, let's go do that.

[18:34] Shannon Warwick: Mm.

[18:34] Ryan Warwick: And, and often it can be done without a holistic perspective, uh, or a financial plan, or just a sounding board to say, "Is this, is this..." So yes, it's a good opportunity, let's just assume that, but does it impact other things? And so-

[18:54] Shannon Warwick: In the whole picture of the wealth health- Yeah... I like to say wealth health, holistic wealth health. In the whole picture, does it make sense?

[19:04] Ryan Warwick: Right.

[19:05] Ryan Warwick: Um,

[19:08] Ryan Warwick: so we talk to them about this, this idea we call throwing money over the wall. Right. So here's-

[19:15] Shannon Warwick: Hit my head again. Here- Goodness. Um- It's okay

[19:17] Ryan Warwick: ... here's the business, here's the family. Shall we at least consider regularly in throwing cash and liquidity over the wall so that the family has safety and protection? Because it can be very easy, back to this, uh, question that, that got us down, down this road, to, um, invest when we see opportunities, and all of a sudden we look up and we're... and, and we say, "Oh, there's no cash to pay- Sure... a tax bill." There's no... Like, we, we miss some of those things, because that's not fun to think about. Right. That, that investment opportunity was, and that is not that uncommon.

[19:54] Shannon Warwick: Sure.

[19:55] Ryan Warwick: Um, so we'll talk about that, um, perhaps more. I wanna make sure we, we hit on years of safe money- Yeah, absolutely... um, as, as a concept here.

[20:04] Shannon Warwick: I'm making a note of that. Um- But

[20:07] Shannon Warwick: we- Okay.

[20:09] Ryan Warwick: So there's this tension between, um, growing and having liquidity. And, and we often will use the term safety, uh, when we're talking about liquidity. Mm. Because if, if I can... If it meets these conditions, I can sell it easily, I can sell it quickly, and it doesn't impact the price, that largely equals safe.

[20:37] Shannon Warwick: Mm.

[20:38] Ryan Warwick: Right?

[20:39] Shannon Warwick: I, I, I love that. Yeah. That's really good. So a lack of liquidity then, would you agree that a lack of liquid- liquidity can have devastating blows in certain situations?

[20:49] Ryan Warwick: Sure.

[20:50] Shannon Warwick: Okay.

[20:51] Ryan Warwick: So,

[20:52] Ryan Warwick: uh,

[20:55] Ryan Warwick: I will, will give a, uh, an interesting example to show that...

[21:04] Ryan Warwick: You know, in, in The Psychology of Money, which is a, a book by Morgan Housel that we talk about quite a bit together,

[21:14] Ryan Warwick: he makes the point that investing, wealth management, growing, growing wealth is actually less about knowledge and more about, uh, about behavior, and, and psychology, and, and managing emotions. And so the example that I'm going to use I think shows that. Mm-hmm. And it's because, uh, we're gonna go all the way back to the early 2000s. Okay. Markets were good. Yeah. They were really good.

[21:44] Ryan Warwick: Interest rates were low. Um,

[21:47] Ryan Warwick: they, they had started to really accelerate, especially in, um, some areas, uh, some markets that weren't, that aren't liquid. Mm-hmm. Okay? So real estate was doing well. Um, commodities were doing well. Things like oil, timber.

[22:05] Shannon Warwick: Mm.

[22:06] Ryan Warwick: Um,

[22:08] Ryan Warwick: the, uh,

[22:10] Ryan Warwick: areas like private equity and, and private investments, um, were, were doing well. And guess what? None of those are liquid, okay? But they were showing really tremendous returns. And so some of the... Now I'm gonna move away from families, and just to show this idea that some of the smartest people in the world got caught up in the very thing we're talking about.

[22:40] Shannon Warwick: Mm.

[22:40] Ryan Warwick: And

[22:42] Ryan Warwick: if we go back in time, so some major universities with

[22:48] Ryan Warwick: tens of billions of dollars in in- endowment funds- Mm-hmm... were running strategies with that money. And, and so if you think about these major institutions,

[23:02] Ryan Warwick: if you think about

[23:04] Ryan Warwick: we have, we have $40 billion to manage, the people managing that are, are very highly educated. There, there are teams around that of, of PhDs,

[23:18] Ryan Warwick: h- uh, finance experts. These are, these are top of the industry, uh, in the world people.

[23:27] Ryan Warwick: And

[23:29] Ryan Warwick: they

[23:31] Ryan Warwick: started to believe, because the returns had been so good for so long- Mm-hmm...

[23:38] Ryan Warwick: that they should have something like

[23:43] Ryan Warwick: 20% of their portfolio in public markets. Interesting. So public liquid markets. Mm-hmm. Maybe 30%. Hmm. Maybe a little bit in, in bonds and cash, but not a lot, and then a lot in these things that I mentioned, timber, commodities, private equity, you know, other things that were generating high returns that would be good for the stakeholders of these endowments at these in- institutions. Mm-hmm. And

[24:14] Ryan Warwick: then

[24:16] Ryan Warwick: something happened. Okay, so it went, it went fine, and it, and it always goes this way. It, it, it goes on in- And as returns are good, then it-

[24:28] Shannon Warwick: It goes on long enough to feel comfortable

[24:29] Ryan Warwick: ... it, to feel comfortable and to maybe suck a few more people in.

[24:33] Shannon Warwick: Yeah.

[24:34] Ryan Warwick: And I like this quote, the, the market always does what the most, uh, fewest people expect it to do. Um, so in... We all know what happened. I mean, basically, uh, everyone knows what happened about 2006 through 2009. I'm going all the way back to 2006, maybe even earlier, because cracks in real estate started to show up.

[25:00] Shannon Warwick: Mm-hmm.

[25:02] Ryan Warwick: And, and then that caused this domino effect downstream of, of what we now affectionately call the, the great financial crisis, right? Or the Great Recession. So

[25:16] Ryan Warwick: in that, i- in that moment, so come about

[25:21] Ryan Warwick: October of 2008,

[25:24] Ryan Warwick: market was at a peak. And, and there was a, largely an emperor had no clothes moment. And, and so the markets started to fall.

[25:33] Shannon Warwick: Yeah.

[25:33] Ryan Warwick: And it really was the, the catalyst, if I go back and try to remember, was, was probably two major financial institutions that, um,

[25:48] Ryan Warwick: went, went under. So, and, and I will say those, 'cause just a factual statement. Lehm- Lehman Brothers and Bear Stearns failed.

[25:56] Shannon Warwick: Mm-hmm.

[25:56] Ryan Warwick: The reason they failed is because they had done just what we're talking about. They, they had, um, invested in things that could go up and didn't have enough liquidity in the, in the event of crisis. But that started this domino effect, and these public, excuse me, these, these institutions of, of higher education with

[26:19] Ryan Warwick: m- multi-billion dollar, I mean, 10,

[26:23] Ryan Warwick: fi- you know, 20, $50 billion portfolios,

[26:27] Ryan Warwick: all of a sudden,

[26:30] Ryan Warwick: all of those things, so the 70% of their portfolio that was tied up in things that- Yeah... weren't liquid or weren't easily sold,

[26:42] Ryan Warwick: all of a sudden couldn't be sold.

[26:44] Ryan Warwick: Okay? So, so they were good until the moment that they weren't. In, in a paper I have here, he, he actually calls it, and, and so put this analogy in your mind, picking up nickels in front of a steamroller. Mm-hmm. Okay, it's great. It, I, I'm just picking up free nickels all day long. Yeah. I'm getting all this extra return, until the moment I trip or I reach for one- Yeah... that, and I just catch my finger- Uh-huh... in the steamroller just, and I can't get out from under it, right?

[27:15] Shannon Warwick: Can't get out from under it. And so- It's good

[27:17] Ryan Warwick: ... what happened then, and I'll just read a,

[27:20] Ryan Warwick: a, a quote from this. Um, "In times of great stress," which we could call the, the financial crisis of, of '07, "liquidity disappears." Yeah. So that's where I say this, these three conditions are really important. Absolutely. So we can feel like something's liquid, but are they really? Have we really thought through this, this three-pronged definition of liquidity?

[27:44] Shannon Warwick: So this three, this three-pronged definition- Yeah... as you will, b- uh, really I think of it as a litmus test.

[27:50] Ryan Warwick: Yeah, that's great. Yeah. Um, so liquidity disappears. I can't sell these private assets. I can't sell my timber futures or- Mm-hmm... you know, whatever they, they were. And so it became so onerous that, um,

[28:06] Ryan Warwick: these institutions- Mm-hmm... to fund their current operations had to issue billions upon billions of dollars of new debt to, to create the liquidity they needed. So they had- Mm-hmm... to go borrow money.

[28:20] Shannon Warwick: Right.

[28:21] Ryan Warwick: And, um, it goes on to say, "Liquid instruments, like public companies, had to be sold at rock-bottom prices to meet other obligations." Okay.

[28:34] Ryan Warwick: What did we say about public companies? I can sell them easily. I can sell them quickly, but I can't- Right... necessarily sell them without impacting the price, right? So here's an example.

[28:46] Shannon Warwick: Exactly. This, the, and this, this goes back to the qu- uh, do you agree a lack of liquidity can have devastating blows- Oh, yep... leading to significant loss- Yep... is the other part of that question.

[28:55] Ryan Warwick: So with the rest of the portfolio frozen- Yeah... they could not... So, so yes, they, they had to sell those, uh- At rock-bottom... those things at rock-bottom prices.

[29:06] Shannon Warwick: Right.

[29:06] Ryan Warwick: And so that's devastating impact one.

[29:11] Shannon Warwick: Yeah.

[29:11] Ryan Warwick: Devastating impact two is they could not rebalance. Mm-hmm. So they couldn't even take something that had done well, and often that's what we wanna do in a rebalance, right? Let's- Exactly. Trim... trim what's done well and put it over into maybe what's lagged- Right... because often we get-

[29:27] Shannon Warwick: We don't have the ability to do that.

[29:29] Ryan Warwick: We, we don't, and so they couldn't rebalance, and they generally missed the stunning rebound of the capital markets in 2009. It's devastating. So it was, um,

[29:40] Ryan Warwick: it was really, um-

[29:42] Shannon Warwick: It's insult to injury

[29:43] Ryan Warwick: ... damning on that- Yeah... uh, that strategy- Mm-hmm... of reaching for yield. Mm-hmm. And I like to sometimes use this as an analogy when talking about specifically fixed income insurance, but they were reaching for return, got their heads chomped off.

[29:59] Shannon Warwick: Ugh.

[30:00] Ryan Warwick: Right? They put it into the guillotine reaching for yield, they- Yeah... and then the, the-

[30:03] Shannon Warwick: Reaching for the nickel in the steamroller

[30:05] Ryan Warwick: ... the thing is it, it feels-

[30:06] Shannon Warwick: Hmm

[30:06] Ryan Warwick: ... it always feels safe. We feel smart because the returns are good- Mm-hmm... until the moment that something changes. And so, like, I think the moral of that story and, and just what we wanna say here is we have to be pragmatic. We have to have a plan. We have to think about all sides. Mm-hmm. And it brings me back to this question that-

[30:28] Ryan Warwick: We've talked about a little bit.

[30:30] Shannon Warwick: Mm-hmm.

[30:30] Ryan Warwick: Um, and that is, should all of our money, should, should we always be trying to get the highest return?

[30:38] Shannon Warwick: Mm-hmm.

[30:40] Ryan Warwick: And, and many people would just intuitively say, "Of course." Of course. Right? Yeah. Yeah. But I think the answer's no.

[30:46] Shannon Warwick: Mm.

[30:46] Ryan Warwick: And I think the answer also ties to this other question of are we holding today and tomorrow in the right tension- Mm... and in the right balance? Because if, if I'm holding only tomorrow

[31:02] Ryan Warwick: in, in sight, in view- Mm-hmm, mm-hmm... then, then I'm okay loading up with growth assets that can't be sold without impacting their price. Because I'm not,

[31:14] Ryan Warwick: I'm not even thinking about anything today. Mm. Right. But

[31:19] Ryan Warwick: if I'm i- so whoops, sorry, if I'm only thinking about today- Mm-hmm... I don't hold any growth assets. So- Mm-hmm... this is what...

[31:27] Ryan Warwick: And I love being able to describe this to new people when, when they come in,

[31:32] Ryan Warwick: because there is a perception that there is, in the world of investing, that it's pretty binary. It's safe or not risky- Mm-hmm... and then it's risky. Mm-hmm. And often the, the thought is company stocks are risky, bonds and cash are not risky. Mm-hmm. And so, like, right now we're just talking about one form of risk which is when liquidity dries up- Mm-hmm... boy, that is, uh, devastating if you don't have current assets or safe liquid assets that meet the three conditions of liquidity- Mm-hmm... uh, to fund your short-term obligations. And that can be,

[32:17] Ryan Warwick: that can be really devastating. And so these are all, we have to hold them all in tension because in imbalance.

[32:25] Ryan Warwick: So it, it requires long conversations for us to hear and understand and what are the goals and objectives and emotions around money- Yeah... so that we can give good advice. Because

[32:38] Ryan Warwick: while safe in one perspective-

[32:41] Shannon Warwick: Mm-hmm

[32:41] Ryan Warwick: ... it has risks in other perspectives. Like- Absolutely... in 30 years will it have kept up with purchasing power- Mm-hmm... y- or, or with, with inflation? And, and while short-term risky, does it have the long-term benefit of actually producing the best returns? And so we have to, we have to actually recognize that there is no perfectly safe investment and no completely risky investment. And so we blend these things together, and this is the art. We, we blend them together so that we can meet the logistical demands of the family we're talking about, or institution or whatever, and meet the emotional capabilities or capacity of, of what they can handle. Because the worst thing we can do is, um,

[33:30] Ryan Warwick: do invest in such a way that it creates an emotional response when, not if, you've heard me say this enough, when the markets-... have, uh- I actually-... go crazy on us

[33:42] Shannon Warwick: ... I love that you said that because I think, I think there can often be this perception that, um,

[33:48] Shannon Warwick: finance is, is, is science.

[33:52] Ryan Warwick: Mm-hmm.

[33:52] Shannon Warwick: And it's primarily science. Yeah. It's heavily science. But you said art, and I think that, that we can tend to forget that they absolutely have to work in tandem. Yeah. In order to make the science- Well-... work, the art- Finance is-... has to come in

[34:09] Ryan Warwick: ... you may have said this, but finance is taught as a science.

[34:11] Shannon Warwick: It is taught as a science.

[34:13] Ryan Warwick: But it's practiced as an art.

[34:14] Shannon Warwick: But it's practiced as an art, yes, absolutely. I-

[34:17] Ryan Warwick: I think, I think it's best practiced as an art. There is no doubt, uh, there are

[34:23] Ryan Warwick: vast teams of people out there working on, in spreadsheets- Yeah... and, and running models. Yeah. But- Yeah... it is so emotional. And-

[34:32] Shannon Warwick: No, and I can really appreciate this. You know, I just think about, um, we actually have classes called the art and science of nursing, right? Yeah. So much science, but all of that has to go through this lens of are we practicing with the art? So I can appreciate it.

[34:46] Ryan Warwick: Yeah.

[34:46] Shannon Warwick: Um, but this has been a great segue into the next, um, talking point. So we want and need the ability to quickly access funds, and yet we still want and need to benefit from our money working for us in the market. How can we have our cake and eat it too?

[35:04] Ryan Warwick: Yeah.

[35:06] Ryan Warwick: Um, I think this,

[35:09] Ryan Warwick: this is a good place to, to go back to something we've talked about in, uh, a prior episode, um, this, this thing we call years of safe money.

[35:20] Shannon Warwick: Do you need your markers?

[35:21] Ryan Warwick: I will. Yep.

[35:24] Ryan Warwick: So

[35:26] Ryan Warwick: years of safe money presumes for these, for these families, uh, entrepreneurial families that are running businesses, that have, um, opportunities that maybe, you know, we're constantly, we're building the next building. We're-

[35:40] Shannon Warwick: Mm

[35:40] Ryan Warwick: ... we're reinvesting the business, buying the next, acquiring the next company. Um, it assumes that we're also throwing some money over the wall.

[35:49] Shannon Warwick: I think we should back up and, and give a quick recap on throwing money over the wall, because you've referenced it- Yep, it-... more than once now.

[35:55] Ryan Warwick: It is just our

[35:58] Ryan Warwick: branded way of saying, "Let's make sure that we don't leave all of our liquidity. When we make money in our business- Mm-hmm... don't just leave it there and reinvest it trying to get the highest return. Let's- Mm-hmm... let's throw some money over, there's a wall between business and family."

[36:22] Shannon Warwick: And if there's not-

[36:22] Ryan Warwick: And if it's all-

[36:23] Shannon Warwick: ... then please build one

[36:23] Ryan Warwick: ... sitting over here, so-... so let's just talk about ourselves. Yeah. If, if it was all sitting on this side- How would that make you feel? Right. No. And I want to know.

[36:33] Shannon Warwick: Well, we've, we've been through these conversations, as I said. Yeah. And I was thanking you because y- there, there have been moments where

[36:42] Shannon Warwick: we've had to reinvest money, and so there's a season where that's kind of uncomfortable. What if we need to have access to liquidity? Yeah. And maybe we're balanced a little bit too heavily this direction. It, it makes me uncomfortable. I don't like it.

[36:58] Ryan Warwick: There's a life cycle in every business where you- Right... you don't always have choice. I'm, we're largely s- talking about the moments when you have choice. We- exactly. Yeah.

[37:06] Shannon Warwick: And when you have choice, that's my answer. Yeah. Uncomfortable. No, thank you. Yeah. Um, I wouldn't- And, and- I don't choose that

[37:11] Ryan Warwick: ... so if you were sitting here and, yeah, we're making money, but we leave it in the business, and it, you don't have anything to see to hold the tax. So I will- How do I run my... You know, we've heard things like, "We had a big tax bill- Yeah... and, uh, and I could only see a few thousand dollars in my bank account" And then- Right... you know, it was described to us, we had to go call notes and sell things- Exactly... and, and-

[37:36] Shannon Warwick: So here's what I'll say

[37:36] Ryan Warwick: ... so that's stress, right?

[37:37] Shannon Warwick: So here's what I'll say. Yeah. In those moments where it's necessary and we're having open, honest communication, and we have had to weather a season- Yep...

[37:45] Shannon Warwick: although uncomfortable, necessary, and you know that will end, and everybody has a good awareness, there's health around that. But if it were not a choice- Yeah... and it were, um, it was a situation that was thrust upon me, you're asking how would you feel? Angry, frustrated, frightened, unprepared. None of those responses are positive. So you can really create, um... I think y- I think the risk here, creating tension within your home that is unnecessary.

[38:17] Ryan Warwick: Yeah.

[38:19] Shannon Warwick: So that's not healthy ground.

[38:21] Ryan Warwick: And, and I'm glad I know this about you, so I don't do that. Don't do it. So. Well- Yeah

[38:25] Shannon Warwick: ... here's the thing.

[38:27] Shannon Warwick: I'll call you out. I will call my financial advisor- And now you-... and we will have a meeting.

[38:32] Ryan Warwick: Yeah. And, and, um, anyway-

[38:34] Shannon Warwick: I know, I know the, the main, main one

[38:35] Ryan Warwick: ... but, but it happens. You're right. The, it creates unnecessary tension. There's unnecessary tension- And the-

[38:40] Shannon Warwick: ... and you're putting your, your, you're putting your family in a place of vulnerability that isn't healthy vulnerability. We talk about vulnerability all the time, and it can be beautiful, and it's absolutely necessary. This is not a time where vulnerability is necessary or healthy.

[38:54] Ryan Warwick: Or think about these institutions we talked about. They created unnecessary tension.

[38:58] Shannon Warwick: They did.

[38:59] Ryan Warwick: How,

[39:03] Ryan Warwick: how good could their returns have been had they gotten

[39:08] Ryan Warwick: good returns in the, in the great- Because I-... in the great times with, with some more l- safety and liquidity- Mm-hmm... knowing that

[39:19] Ryan Warwick: crises can come.

[39:21] Shannon Warwick: Has anyone ever run the numbers on the what if scenarios?

[39:25] Shannon Warwick: I'm curious.

[39:25] Ryan Warwick: No. I mean, it'd be hard to go back and- It would be... but-

[39:28] Shannon Warwick: But you could do something- Um... that was-

[39:30] Ryan Warwick: So-

[39:31] Shannon Warwick: I've run numbers before on what could have been

[39:32] Ryan Warwick: ... I, I think the what's... There's this, there's this term out there, a, a lot of people have probably heard of it, but it's, it's black swans. Um, you could call it a, a curve ball, um, you know, or, or a lightning bolt out of the blue. But- Mm-hmm... we, we can run all the

[39:53] Ryan Warwick: risk analysis that we want. We can, we can look at the headlines, we can make projections, and we can say, "Look, I think this is going to happen." But the reality is none of us know what the future holds. And it's interesting because in, back to the science of finance, the models would predict certain things like decreases. H- How, how often, for instance, how often would we have a decrease of 30% in markets, okay? And the models would say that should happen every so often.

[40:30] Shannon Warwick: Mm-hmm.

[40:32] Ryan Warwick: But in reality,

[40:35] Ryan Warwick: for some reason, it happens more frequently, and I think it's because we live in an emotional world where- Let me just-... sometimes these things get, they get piled on- But can you-... as snowball effect

[40:42] Shannon Warwick: ... have, have we thrown in the variable of human behavior?

[40:45] Ryan Warwick: Yeah. And, and the answer is no. Most of the financial models are, are run what I would call in a, in a vacuum.

[40:56] Shannon Warwick: Right.

[40:56] Ryan Warwick: So they as- they also assume, this is funny,

[41:01] Ryan Warwick: uh, they assume a rational investor. That's a mistake. And that's a mistake. But how do you, like, b- think about trying to create a mathematical formula and say, "Okay, now let's interject this crazy person." Human behavior- Uh, human behavior... this emotion- Yeah... this feeling- Yep

[41:17] Shannon Warwick: ... that I can't control without somebody helping me as a sounding board. Yep. So- As the emotional barrier between me and my money. That's what we say a good, a good financial advisor does. Yeah. That's how you operate. Yeah.

[41:27] Ryan Warwick: And so I like this quote where, you know, now we've, we've thought about, I'm, I am getting to your question. I'm, I'm just-

[41:33] Shannon Warwick: Yeah, I was gonna say we-... patiently- I'm bringing you back to my question

[41:36] Ryan Warwick: ... I'm patiently not using the, uh, the markers. So we've thought about-

[41:41] Shannon Warwick: You're teasing us-

[41:42] Ryan Warwick: ... all these things

[41:42] Shannon Warwick: ... with those markers.

[41:43] Ryan Warwick: Um, but I like the quote.

[41:46] Ryan Warwick: It says, "Risk is what's left over when you think you've thought of everything."

[41:51] Shannon Warwick: Ooh, that's good.

[41:53] Ryan Warwick: So they had thought of everything. They had run models. I mean, there was another one, a, a book is written about it, so I, I can say, uh, the book name. It's called When Genius Failed, and it's about how Nobel laureates and PhDs, some of the best minds in finance, almost took down the global financial system- Hm... because they did the very thing that we're talking about. They had, they were picking up nickels in front of a steamroller, and the steamroller got them. And it happens all the time because you can think about all the things that you can think about, and what's gonna get you is the thing you don't think about.

[42:29] Shannon Warwick: We're really creating some of that

[42:30] Ryan Warwick: I mean, that, that kind of sounds like a Mark Twain quote, right?

[42:32] Shannon Warwick: Parano- It, it does- Oh, yeah... but you're creating a little paranoia here. No, but I m- I'm gonna, I'm gonna go back to the talking point and just repeat.

[42:38] Ryan Warwick: Well, but it, perhaps it should if your goal is, "I'm always reaching for the highest and best return and not worried about those things that can come out of the blue that- Mm-hmm... that will require some liquidity."

[42:54] Shannon Warwick: Okay.

[42:56] Ryan Warwick: And so-

[42:56] Shannon Warwick: I'm going to bring us back to this point.

[42:57] Ryan Warwick: Yeah. And, and, and so we sit down and, and, um, just restate your question because, yeah- So we want- I rambled, but it was-

[43:04] Shannon Warwick: It was so good

[43:05] Ryan Warwick: ... it was good. Okay.

[43:06] Shannon Warwick: That wa- that ramble, priceless. We want and need the ability to quickly access funds. But we still want and need to benefit from having our money working for us in the market. We've talked about that a lot. So how can we have our cake and eat it too? And then Morgan Housel, I do have a, I have a quote. Would you like to hear my quote?

[43:29] Ryan Warwick: I would.

[43:30] Shannon Warwick: Okay. Uh, so he says, "More than I want," but you paused a really long time there.

[43:37] Shannon Warwick: Do you notice that?

[43:38] Ryan Warwick: Hmm.

[43:39] Shannon Warwick: Hmm.

[43:39] Ryan Warwick: Thinking about whether I want to hear it. I- No, I do.

[43:42] Shannon Warwick: Okay. "More than I want big returns, I want to be financially unbreakable. And if I'm unbreakable, I actually think I'll get the biggest returns, because I'll be able to stick around long enough for compounding to work wonders."

[43:55] Ryan Warwick: Yeah. He, he puts it in,

[43:59] Ryan Warwick: i- in great terms, tells a story with it. Um,

[44:03] Ryan Warwick: I want to be unbreakable. M- and yeah, the problem is

[44:09] Ryan Warwick: the examples that I've been giving, not to create paranoia, but to show that if we don't have a balanced perspective of investing and have assets that have growth capacity-

[44:22] Shannon Warwick: Mm-hmm

[44:23] Ryan Warwick: ... that may be presumed liquid at the moment you buy them. That's, that's why we're talking about this, is we're, this topic today is liquidity. Mm-hmm. And so all these things were presumed to be liquid, because for years they were.

[44:37] Shannon Warwick: Right.

[44:38] Ryan Warwick: But the reality is they're not when crisis happens.

[44:42] Shannon Warwick: So then, Ryan, can we be, as he would say, as Morgan Housel would say, can we be unbreakable while having liquidity and having our money working for us in the market? Yeah. So you would say yes?

[44:53] Ryan Warwick: I would say yes. Um,

[44:57] Ryan Warwick: as I thought about this, um,

[45:00] Ryan Warwick: I, I don't know that I've ever said it this way, but I think that the difference between,

[45:09] Ryan Warwick: uh, assets that are intended for growth

[45:14] Ryan Warwick: and assets that are liquid,

[45:18] Ryan Warwick: um, is kind of the first and most basic level of diversification.

[45:23] Shannon Warwick: Hmm. Hmm.

[45:25] Ryan Warwick: So that's, so, so the answer is yes, we have to. If we don't, we, we actually run into, um,

[45:33] Ryan Warwick: being broken, uh unless now i- this is where I think, um, people often succumb to timing and selection because they're trying to take advantage of all these risk-based opportunities and, and don't have the liquidity. So-

[45:48] Shannon Warwick: So timing, selection, FOMO-

[45:49] Ryan Warwick: So how do we-

[45:49] Shannon Warwick: ... emotion, that's how we can fall prey.

[45:50] Ryan Warwick: Yeah. So how do we

[45:53] Ryan Warwick: do what you just asked? How do we grow and meet our goals long term? So look at, look at tomorrow, and then how do we hold today i- in, in importance and, and the possibility of, of emergencies that we can't foresee, expenses that we can't foresee- Mm-hmm... um, just regular spending that we can foresee. How do we do all of that? Mm-hmm. And I think for a lot of people that's overwhelming, so it's a really big- No, absolutely... big, uh, topic. So with this e- example, I just used a, a million dollar, uh, investment so that the math is, is easy.

[46:27] Shannon Warwick: Okay.

[46:28] Ryan Warwick: And so when we, when we think about a family who's in retirement asking this question, "Can we grow? We're 62 years old.

[46:38] Ryan Warwick: Mortality tables would say probability, 50% probability is that one of us is sitting here in 30 years. So we have this three-decade retirement, we're done working, and, you know, we have a million dollars and, and we want to, um,

[46:58] Ryan Warwick: spend 4% from this portfolio." Okay, so I'm just gonna kind of tee up how we would think about this. We, we have to know, uh, information about the, the family that we're talking to. Sure. So we can't just answer it out of that kind of... So we would say, "Hey, a, a 4%, uh, distribution from this," you know, this would assume they have other income sources like- Mm-hmm... Social Security, maybe a pension, but they just need from this a 4% distribution. Mm-hmm. Um, so $40,000.

[47:30] Ryan Warwick: Now, if, if we were all in stock, so let's just kind of go through this. What does, what- or companies, what do companies do?

[47:42] Ryan Warwick: Go up and down, right?

[47:43] Shannon Warwick: Mm-hmm.

[47:43] Ryan Warwick: So we kind of see at the outset that we don't want to just be invested in, in companies because in, in these moments, I don't want to have to sell companies- Right... when, when they're down in order to generate that $40,000 of spending for the year, okay? So we have to find some balance between stocks or companies that can grow and, and give us, um, purchasing power protection and actually grow on a real basis or after inflation basis. And then also, we need to meet this, this spending goal. So

[48:19] Ryan Warwick: we might

[48:22] Ryan Warwick: come in here and, and say, "You know what? For today's," again, ease of math, I'm going to make it 40%- Sure... here for the moment. Um, so sorry about that. 40% in equ-

[48:38] Ryan Warwick: Cash,

[48:40] Ryan Warwick: fixed income,

[48:42] Ryan Warwick: um, you know, safe liquid assets, right? And then 60% here in stocks or companies.

[48:53] Ryan Warwick: Now, we just drew this out. That's, that's what companies do. This side stays relatively stable. Mm-hmm. Now, I'm not saying it can't ever go down at all, but when it does, it usually isn't, uh, very much at all. So we're just gonna, gonna say this is, is, uh, cash and, and liquidity.

[49:13] Ryan Warwick: Um, so if I have 40% invested in, in bonds, that's $400,000. Okay? So let's, let's have a, a fun crisis. We, we invest this million dollars and

[49:34] Ryan Warwick: we, we do that, we do that right here. In the very, you know, next month or next day, market starts to drop-

[49:43] Shannon Warwick: Yeah

[49:43] Ryan Warwick: ... and all of a sudden, we might even be below, well, we're well below- Oh... where we started.

[49:48] Shannon Warwick: Okay. Well, we need a red one. You want red? I do. We don't- Alarm

[49:51] Ryan Warwick: ... we don't wanna do green.

[49:51] Shannon Warwick: We're in crisis. Ah. There we go. Okay.

[49:55] Ryan Warwick: Okay.

[49:55] Shannon Warwick: We need like a bomb.

[49:56] Ryan Warwick: So

[49:59] Ryan Warwick: I don't want to take anything

[50:04] Ryan Warwick: from this side of the portfolio. I don't wanna sell companies- Mm-hmm... when we're in a bear market. No. Okay? So I have to live on now- Mm-hmm... this side of the portfolio, our safe money. So how long if w- market goes down and it stays down for a while, so this is the years of safe money concept.

[50:26] Shannon Warwick: I think this is a good time to say I have to live in this section of the pie chart for a season. Right. This is not indefinite. No. The market will recover.

[50:35] Ryan Warwick: But how long can I?

[50:36] Shannon Warwick: But how long can I do that? Yep. I'm just weathering a season.

[50:41] Ryan Warwick: Of safe money. Mm-hmm. This, this is conceptually very comforting for people. Oh, absolutely. So- Yeah... oh, my gosh, I could... You mean, I'm 62 today, and I wouldn't have to think about selling stocks until I'm 72?

[50:56] Shannon Warwick: Mm.

[50:56] Ryan Warwick: Oh, that's great. A- and- Yes, I really-... what we know from market history- Yeah. Uh-huh... is that the longest we would've ever needed to wait, so, uh, from some point, a peak in the market, through a bear market, and back to a recovery where we kinda came back to level, has been about seven years.

[51:18] Shannon Warwick: So this is interesting, just an insertion here. So I teach something called the fa- the fear, sorry, pain, tension, fear cycle. Yep. Okay. So what we're doing here, just from a psychology of money standpoint, is we're saying, "I'm afraid," right? That's a normal response when we see this red and this moment. Yep. Everything blew up. So it creates tension, but because I have educated you and I know that I can weather 10 years without touching this side, I just removed the tension, so I've removed the pain. Yeah. Isn't that interesting?

[51:58] Ryan Warwick: Yeah.

[51:58] Shannon Warwick: Yeah. I, I just find that fascinating.

[52:01] Ryan Warwick: Yeah, I mean, with- without this,

[52:06] Ryan Warwick: saw plenty of people walk through this, through, through various market moments, but

[52:10] Ryan Warwick: 2000, crisis of 2007, um,

[52:17] Ryan Warwick: with- without a framework for thinking about it, it becomes very scary, and, and now we're in fight or flight. Absolutely. With this-

[52:24] Shannon Warwick: Yeah

[52:24] Ryan Warwick: ... okay, we... It's kinda like, um,

[52:30] Ryan Warwick: we actually have a presentation that, um, was put together by a, a consultant, um, or for part of it was. It's called This Is a Football. And in the opening picture is Vince Lombardi, who was the Green Bay Packers coach. Yeah. Uh-

[52:45] Shannon Warwick: I ha- I haven't seen this presentation.

[52:48] Ryan Warwick: So Vince Lombardi coached the Green Bay Packers when they won the first Super Bowl. Mm-hmm. Uh, so Super Bowl One. Mm-hmm. And he comes back to the world championship team, the, the best football players in the world.

[53:01] Shannon Warwick: Mm-hmm.

[53:01] Ryan Warwick: They know what they're doing.

[53:03] Shannon Warwick: Yeah.

[53:03] Ryan Warwick: And he, and he says, "Gentlemen, this is a football."

[53:07] Ryan Warwick: And he's, and his point was, we are getting back to the basics. Y- you're no, you know, don't have an ego. Everyone's out to get you. If we focus on the basics, we can do-

[53:19] Shannon Warwick: Wow

[53:20] Ryan Warwick: ... well. And they won Super Bowl II, and- That's just incredible... so it's, it's about, in these moments of crisis, it's going back to the basics. Simplify. How do we, how do we process the information without going into fight or flight? Absolutely. So I really like that analogy. So at, at the first cut, we have a decade if we've done it this way. Now, we can run this other ways, right? If, if we were in a 80% company portfolio, 20% fixed income portfolio- Mm-hmm... then how many years of safe money would we have? Mm-hmm. We would have half or five years. Right. For many people, that would also be acceptable. Right. Right? And, and so this is where, I'm just giving one example, we actually walk through different scenarios with people and, and we're weighing the logistics, which is this piece- Mm-hmm... with the emotion. Some people-

[54:11] Shannon Warwick: Right

[54:11] Ryan Warwick: ... this is great. Other people might say, "Oh, I'm really comfortable with five years. I would sleep, I would sleep-" Sure... "pretty well." So then- And then we can have, just real quick, then we could actually have more dedicated to growth assets- Yeah... because we have somebody who is, you know, has a different perspective emotionally.

[54:28] Shannon Warwick: So and I love your excitement around this, but I, I'm sorry. Just- Yeah... boiling back down to just where we're going. So this is just a quick overview of years of safe money. Yeah. But that was taking us into that next point, and I believe we're, was it, was it money over the wall?

[54:43] Ryan Warwick: Well, no, we already talked about that. Okay. You, you're asking how can we be financially unbreakable-

[54:49] Shannon Warwick: Okay. So we had to go back to years of safe money, and now- Yeah... let's go back to how do we do both- Well-... and live in both spaces of- Yeah... liquidity and-

[54:56] Ryan Warwick: Because we, in this model, we have assets or investments- Yeah... that are directed at growing,

[55:07] Ryan Warwick: and assets or investments that are directed at providing safety- Mm-hmm... and liquidity- Mm-hmm... in the event, and again, I love to say when markets go down. Sure. Not, not yet. Sure. So the beauty of this is that

[55:27] Ryan Warwick: the first, the first cut of this doesn't tell the whole story.

[55:31] Ryan Warwick: So

[55:33] Ryan Warwick: when s-

[55:35] Ryan Warwick: when you own companies, they pay a dividend. So in this case, that dividend, let's just, again, making up some numbers, 2%. We have 600,000 in companies. Mm-hmm. So we're gonna get $12,000 in dividend cash flow.

[55:51] Shannon Warwick: So my question was, our money working for us? It is.

[55:54] Ryan Warwick: Yep. We also, on this side, get interest.

[55:57] Shannon Warwick: Yeah.

[55:58] Ryan Warwick: So if it's-

[55:58] Shannon Warwick: So my money is working for me

[55:59] Ryan Warwick: ... if we get 3% interest on- Yep... $400,000, that's also $12,000. Yep. Okay. Now, we're not gonna go into all the, like, nuance- No, no, no... every little piece. But if I can... Let, let's take, let's say this is 10,000 and this is 10,000, just again, ease of math. Sure. That's $20,000 of cash that's coming off- Yeah... that I actually could spend if I want to. Correct. Okay? Correct. Okay. So if I wanted to do that, then I don't need to take $40,000- Mm-hmm... from my $400,000 in- Mm... bonds and cash. I only need to take $20,000. Right. And guess what?

[56:35] Shannon Warwick: So now this number goes up.

[56:36] Ryan Warwick: It doesn't last 10 years. It lasts 20 years. Right. Okay. Right. So now I'm sitting with this 62-year-old couple who I've just shown that through

[56:46] Ryan Warwick: this portfolio, this blend or mix of growth and, and, uh, safe liquid assets-

[56:54] Shannon Warwick: Mm-hmm

[56:54] Ryan Warwick: ... we can, first and foremost, what we're talking about is if the market collapsed and stayed down, which has never happened like that-

[57:03] Shannon Warwick: Right

[57:04] Ryan Warwick: ... um, we could live without touching a company for about 20 years. Yeah. Let's say 10 to 20 years. That's a long time. And people are, "Okay, that's great." Okay. Okay. Now-

[57:15] Shannon Warwick: That's good to know

[57:15] Ryan Warwick: ... now we can step into, and, and what I like to say is,

[57:19] Ryan Warwick: you know, when we think about owning companies-

[57:23] Shannon Warwick: Mm-hmm

[57:24] Ryan Warwick: ... I, I love companies because I, we want growth. And we want... I think inflation is a far bigger risk than the

[57:34] Ryan Warwick: volatility, the short-term volatility of the markets. Mm-hmm, mm-hmm. But we have to have safe money. We have to have liquid assets that we can get turned into cash to spend-

[57:44] Shannon Warwick: Right

[57:44] Ryan Warwick: ... easily, quickly, without impacting their price, right? Mm-hmm. So if we have that balance. Mm-hmm. So now the question becomes what's the right mix up here? So we understand, okay, that would work. Mm-hmm. Can we go, maybe we can go 70/30? Mm-hmm. Maybe we can go 80/20, right? So you see we start then playing with numbers- Mm-hmm... both logistically, which is to say we're looking at their financial plan. Mm-hmm. And I wanna touch, maybe you can write a note down on how many people have plans. Yeah, that's- And then-

[58:16] Shannon Warwick: ... for another podcast. But yes, I think I've already-

[58:18] Ryan Warwick: And, and then, uh, emotionally. So, um, we look at both sides, which is really critical because- Mm-hmm...

[58:26] Ryan Warwick: these, um, these strategies- Mm-hmm...

[58:31] Ryan Warwick: are contingent upon somebody being able to weather storms. Absolutely. That's what-

[58:36] Shannon Warwick: So, and this is your-

[58:37] Ryan Warwick: That's what liquidity is all about

[58:37] Shannon Warwick: ... and this is your argument that, yes, you can be unbreakable. Yep. Yes, you can live in a space of liquidity- Yep... and having your money working for you. Yep. This is your argument.

[58:47] Ryan Warwick: Yeah. And, and over time, um,

[58:51] Ryan Warwick: the growth side should be growing. You can actually, uh, and we can show people this, um, but you can actually increase spending.

[58:58] Shannon Warwick: Well, you, well you-

[58:58] Ryan Warwick: Which you will need to do.

[58:59] Shannon Warwick: You have your calculator out. Yeah. Do we need it?

[59:02] Ryan Warwick: I don't think so. Oh. No.

[59:04] Shannon Warwick: Well, you were really- Um... excited about it a minute ago. I didn't know.

[59:06] Ryan Warwick: I just made the math simple for myself.

[59:08] Shannon Warwick: Okay.

[59:09] Ryan Warwick: Yeah.

[59:09] Shannon Warwick: So then liquidity, we know it's important to overall, um, h- uh, wealth health, financial wealth health. But is there such a thing as too much liquidity?

[59:20] Ryan Warwick: Yeah.

[59:20] Shannon Warwick: We... Yes. So let's talk about, and you did, so you kinda, you know, got into my next point here, a balanced portfo- portfolio specifically regarding liquidity. So- Too much of it.

[59:31] Ryan Warwick: Yeah. Uh,

[59:34] Ryan Warwick: and, and that's

[59:37] Ryan Warwick: good. Um, I wanna say something else about-

[59:39] Shannon Warwick: Do it

[59:40] Ryan Warwick: ... that I, that I, um, just missed.

[59:42] Shannon Warwick: Okay.

[59:44] Ryan Warwick: One thing, um... So this is, this is step one. Let's just assume that we arrive at the answer that this is an, uh, an, an acceptable portfolio.

[59:54] Shannon Warwick: Mm-hmm.

[59:56] Ryan Warwick: So we've got 60% companies, 40% safe bonds and cash. We know that there will be moments that come along where

[1:00:07] Ryan Warwick: the companies are down.

[1:00:10] Ryan Warwick: What this does, part of being financially unbreakable to me

[1:00:17] Ryan Warwick: is having the opportunity

[1:00:21] Ryan Warwick: to take advantage

[1:00:24] Ryan Warwick: when the market goes on sale.

[1:00:27] Shannon Warwick: Mm. I love that.

[1:00:30] Ryan Warwick: So- Yeah... and sometimes they are generational opportunities, meaning when the, when the S&P 500 went down 58% between October '08 and, and March of '09-

[1:00:44] Shannon Warwick: Mm-hmm

[1:00:45] Ryan Warwick: That was a generational opportunity, uh, meaning perhaps once in a lifetime to see that- Sure... kind of a decline. Mm-hmm. And if you were too exposed to risk-based assets- Mm-hmm, mm-hmm... i.e., things that became illiquid, like we talked about with those institutions-

[1:01:05] Shannon Warwick: Right

[1:01:05] Ryan Warwick: ... then you couldn't take advantage of that generational opportunity. Mm. So part of being unbreakable is being able to take advantage of opportunities.

[1:01:12] Shannon Warwick: Well, and that's how we open the podcast, um, having, having capital for an investment opportunity- Yep... that arises, yeah.

[1:01:17] Ryan Warwick: So in that moment, I'm gonna s- I'm gonna go sell some of the investment or some of the side of the portfolio- Mm-hmm...

[1:01:28] Ryan Warwick: that didn't drop 20, 30, 40%. Mm-hmm. And I'm going to go buy

[1:01:35] Ryan Warwick: the stuff that has. So I'm using volatility- Mm-hmm... to my advantage. Exactly. So liquidity allows us to make really good decisions, to be- Mm... to proactively lean into markets-

[1:01:51] Shannon Warwick: Mm-hmm

[1:01:51] Ryan Warwick: ...

[1:01:53] Ryan Warwick: to be a contrarian.

[1:01:54] Shannon Warwick: Yeah.

[1:01:55] Ryan Warwick: And guess, guess what? Um,

[1:01:58] Ryan Warwick: not everybody is out there buying stocks when they're down.

[1:02:03] Shannon Warwick: No.

[1:02:03] Ryan Warwick: In fact, they're going down because people are selling them.

[1:02:07] Shannon Warwick: Mm. And so- Mm

[1:02:08] Ryan Warwick: ... you know, I, and I love, uh, w- Buffett is, um, has been a master of words over the years, but-

[1:02:13] Shannon Warwick: Mm

[1:02:14] Ryan Warwick: ... um, this quote actually relates to liquidity because if you think about, let's go back to those, um, those in, uh, those institutions, um-

[1:02:25] Shannon Warwick: That shall remain unnamed

[1:02:26] Ryan Warwick: ... unnamed, but they, um... The way Buffett worded it is, "When the tide goes out, you see who's swimming with no shorts on." So

[1:02:40] Ryan Warwick: right? And, and so you get caught with your pants down. And, and because the point is that you haven't prepared for the possibility of

[1:02:53] Ryan Warwick: risk, right? You've thought about risk in this f- very sophisticated framework that you thought about.

[1:02:59] Shannon Warwick: In your think tank.

[1:03:00] Ryan Warwick: But you haven't thought about the things

[1:03:02] Ryan Warwick: that you didn't think about, right? So like- That's good... let's prepare for possibility-

[1:03:07] Shannon Warwick: You gotta prepare for losing your shorts in the riptide. Absolutely. Okay.

[1:03:11] Ryan Warwick: Gives us the opportunity-

[1:03:12] Shannon Warwick: Is it a riptide?

[1:03:13] Ryan Warwick: ... to take advantage. I don't know.

[1:03:15] Shannon Warwick: Is it a riptide? I don't know.

[1:03:17] Ryan Warwick: So that, does that help? Because, because now we have a framework for saying, "Yeah, I can own risk-based assets and actually just let them grow for the rest of my life." Mm-hmm. And, and use them. We'll rebalance, we'll sell them, we'll trim those when they rise. So when 60 becomes 65 or 70, maybe I trim that and re- Mm-hmm... rebalance. So, so what we're doing is we're not, this framework

[1:03:44] Ryan Warwick: allows us to not be scared and react to the markets. It allows us to proactively take advantage- With the fear-... of markets

[1:03:51] Shannon Warwick: ... ten- tension pains like- Yeah... what we talked about.

[1:03:53] Ryan Warwick: I'm no longer fearful. I get to take advantage. Yep. Here's what we find. Our clients call us in those moments- Mm-hmm... and they say-... "This is what we talked about, right?" It's so fun. It's time to buy. It's so fun. And- Yeah... and yes, it, it's- Yes. Um-

[1:04:09] Shannon Warwick: And sometimes you're holding them off a little bit. Sometimes, yeah. "Not really."

[1:04:13] Ryan Warwick: Because, y- you know, markets can go down for a while- Yeah... and so we don't wanna use all our bullets at once, right? Um, so that's kind of fun. And-

[1:04:22] Shannon Warwick: No, it's very fun. Yeah. But I'm gonna, I'm gonna scoot us on. You get so- So-... excited about this

[1:04:26] Ryan Warwick: ... uh, I'm such a nerd. You are. Um-

[1:04:29] Shannon Warwick: And I love it

[1:04:29] Ryan Warwick: ... so how do you, uh, you asked the question then, is there too much- I did... liquidity? Okay. So this goes back to, I can use the same framework,

[1:04:41] Ryan Warwick: um,

[1:04:44] Ryan Warwick: because

[1:04:46] Ryan Warwick: it, it goes back to what I said earlier. Somebody comes in and they say, "Okay, s- company's risky.

[1:04:53] Ryan Warwick: Bonds, cash, safe. So

[1:04:56] Ryan Warwick: we need to own bonds and cash because I can't take risk."

[1:05:00] Shannon Warwick: Yeah.

[1:05:00] Ryan Warwick: That is focusing on one type of risk.

[1:05:03] Shannon Warwick: Mm-hmm.

[1:05:05] Ryan Warwick: And so the person who says, "I'm only going to put my money into, um, cash because it doesn't go down, it's safe," or Treasury bills. You know, I, I can- Mm-hmm... um, I can be assured that tomorrow when I wake up it'll be there, and the price won't have gone down. That is, that is focusing on one type of risk. So this person who needs $40,000 in today's spending, okay? The same, we're gonna talk about this same, uh,

[1:05:40] Ryan Warwick: uh, hypothetical person that we, that we've developed here. If inflation, so the g- a general rise in the price, uh, of things, goods and services over time, is 3%,

[1:05:56] Ryan Warwick: $40,000 in 30 years, so when one of them is still around at age 92-

[1:06:02] Shannon Warwick: Mm-hmm

[1:06:02] Ryan Warwick: ... um,

[1:06:04] Ryan Warwick: is

[1:06:07] Ryan Warwick: going... Hold on.

[1:06:16] Ryan Warwick: Okay. So $40,000 today is how much we need from our portfolio. Mm. And now we're saying, this person says, "I don't want

[1:06:26] Ryan Warwick: scr-" Let's just start with, "I don't want companies, I don't want stocks at all 'cause they're risky."

[1:06:31] Shannon Warwick: Mm-hmm.

[1:06:32] Ryan Warwick: Okay. In 30 years,

[1:06:37] Ryan Warwick: the equivalent of $40,000 in spending at 3% inflation is $97,000.

[1:06:43] Shannon Warwick: Right. Okay. Mm. So- Yep

[1:06:45] Ryan Warwick: ... when we protect for one type of risk, we're ignoring another.

[1:06:48] Shannon Warwick: We're opening ourselves up for another. Yeah. In- Yeah

[1:06:53] Ryan Warwick: In some cases, you know, the things that people in retirement are, are spending money on is, are, are going up faster than the general rate of inflation. Travel, experiences, those things because there's a big generation retiring right now. Mm-hmm. And, and, uh- Mm-hmm... inflation hits the things that have, uh, demand around them. Mm-hmm. So that stands to reason. So

[1:07:18] Ryan Warwick: to, to answer your question, yeah, you can absolutely have... And we talk to people about this, um, all the time. Sometimes,

[1:07:26] Ryan Warwick: um, it's really easy, uh, to, to overcome this using this framework when, when somebody, um, just comes in with that perspective because it's just offering a little bit of education, saying, "Look, the bigger risk that you have to, uh, really account for over the rest of your life is the risk that your investments, if kept too safe- Mm-hmm... don't keep up- Quoth my quotes... with inflation." Absolutely. So- The risk of, uh, just real- the risk of that volatility that you think of as, as risk is just short-term, so we just have to balance that short-term reality of volatility with having enough liquidity that we can weather whatever storm the market throws at us. Mm-hmm. So that's the beauty of this model, is we can use it to answer such a variety of, of questions, and give peace of mind, and overcome fear- Mm-hmm... so that when, O- one, we can get invested in, in the right way for the right, um, goals and, and a, a great financial plan is, is- Mm-hmm... a very critical component around this. Um, but then when, uh, once invested, when the markets go haywire, cause all sorts of fear and anxiety in most people- Mm-hmm... the people who have followed this advice are actually

[1:08:52] Ryan Warwick: very, um, usually very comfortable. I'm not saying you never have any, "Oh, boy, I, I hope, hope the world turns out okay." Mm-hmm. You know, there's that, 'cause there's, there's uncertainty as we've talked about in other-

[1:09:04] Shannon Warwick: Yeah... episodes. No, absolutely.

[1:09:06] Ryan Warwick: So yeah, you can have, um,

[1:09:10] Ryan Warwick: too much, um, in safe money.

[1:09:13] Shannon Warwick: Yeah. And you know, we, we've talked about

[1:09:18] Shannon Warwick: dangers of being tied up, and well, maybe we didn't hit on it directly as dangers, but being tied up in illiquid assets, and I think it leads us into this, this talking point of, um... We've talked about entrepreneurial endeavors that frequently can lead to a lack of, um, liquidity, and that's, you know, when we were starting the podcast, we were talking about we'll get to, we'll get to the life raft, um, project. So this is a good time to talk about that.

[1:09:46] Shannon Warwick: But going back, we've talked about entrepreneurial endeavors that have frequently led to a lack of liquidity and the potential negative impact that that can have at home. So can you speak about this concern, ways to address it, hit again on that money over the wall, what we mean by that? Um, yeah, so let's, let's talk about that, just the danger of being illiquid and the, the impact that it can have at home.

[1:10:13] Ryan Warwick: Yeah, I mean, I think-

[1:10:16] Shannon Warwick: But I mean, and maybe we talked about it enough

[1:10:18] Ryan Warwick: ... we, yeah, I wouldn't go, I won't go deep because I really think we did. I, I loved what you said. I mean, it would bring up a ton of emotions.

[1:10:25] Shannon Warwick: Mm-hmm.

[1:10:26] Ryan Warwick: I, I think the message I'd wanna send to people listening- Mm-hmm... is that this is actually really common.

[1:10:35] Shannon Warwick: Oh, yeah, absolutely.

[1:10:36] Ryan Warwick: And, and so it's something we have to proactively address,

[1:10:42] Ryan Warwick: and the, the power of throwing money over the wall, which is to say let's get some, some of that free cash flow that the business is generating.

[1:10:52] Shannon Warwick: Mm-hmm.

[1:10:53] Ryan Warwick: And I'll say this, you know, I'm sitting down with an entrepreneur. The money that you throw over the wall,

[1:11:00] Ryan Warwick: even if we invested in the, in companies, it, for growth- Mm-hmm... is not going, is, is likely to not generate the same return as if you keep it in the business. Mm-hmm. So this goes back to the question of

[1:11:18] Ryan Warwick: should we always have every dollar invested so that it's getting the highest return, and that answer is, is clearly no.

[1:11:25] Shannon Warwick: Mm-hmm.

[1:11:26] Ryan Warwick: We wanna throw that over the wall because it gives so much peace, and safety, and confidence to know that, hey, if something happened over here on this, on the business side, if a crisis came, if, you know, some market disruption happened- Mm-hmm... things happen.

[1:11:44] Shannon Warwick: I'm gonna offer that what you just said is contrary to advice that most people are getting today, and it's also very much, it goes against the grain of I think what we intrinsically believe to be true.

[1:11:55] Ryan Warwick: That we should always be using-

[1:11:57] Shannon Warwick: Looking for the highest return

[1:11:58] Ryan Warwick: ... people are, generally speaking, always trying to get the highest return.

[1:12:02] Shannon Warwick: Yeah.

[1:12:03] Ryan Warwick: Yeah. A- and, and we've just shown that if that's what you're doing,

[1:12:10] Ryan Warwick: when something unexpected happens, whether that's in your life, an unexpect- unexpected event where you have to liquidate something that may be as illiquid- Mm-hmm... you might have to take a big loss, okay? Mm-hmm. That, that hurt. Um, so having emergency funds or, you know, safe money as, as we like to call it, um, is, is absolutely critical to a-

[1:12:35] Shannon Warwick: Do you-

[1:12:35] Ryan Warwick: ... an overall sound strategy.

[1:12:38] Shannon Warwick: So I think this is a great, great way to

[1:12:42] Shannon Warwick: start closing things down here, but so this is The Worth Beyond Wealth podcast.

[1:12:47] Ryan Warwick: Yeah.

[1:12:49] Shannon Warwick: So bringing us back to, I always ask you what is the thing that you really want a listener to take away from what we chatted about today? What is the thing that you want a listener to take away from what we've chatted about today through that lens, liquidity in the lens of worth beyond wealth?

[1:13:06] Ryan Warwick: Yeah.

[1:13:06] Shannon Warwick: And I think what you were just talking about-

[1:13:08] Ryan Warwick: Well, I, I think-

[1:13:09] Shannon Warwick: ... probably is a great I think... a great way to segue there.

[1:13:12] Ryan Warwick: You know, when I think, uh, let's, let's talk about wealth, it- then it- it's, it's how do I grow wealth? How do I get more of it? How do I build the biggest net worth I possibly can? Mm-hmm. Worth beyond wealth is, is the recognition and, and having the balance to say,

[1:13:29] Ryan Warwick: all of my dollars all of the time should not be directed at trying to get the highest return.

[1:13:34] Shannon Warwick: Yeah.

[1:13:35] Ryan Warwick: Actually-

[1:13:36] Shannon Warwick: Exactly

[1:13:36] Ryan Warwick: ... having dollars that are invested for safety and liquidity

[1:13:41] Ryan Warwick: protects me so that the dollars that are invested for growth and wealth- Mm-hmm... can stay invested. Mm-hmm. Because

[1:13:51] Ryan Warwick: the biggest problem people have, the thing that will hijack everything else,

[1:13:57] Ryan Warwick: is having to sell when things are down. Having to sell. Right. Right. Charlie Munger, who was Warren Buffett's long-term business partner, who's- Mm-hmm... who's passed away,

[1:14:12] Ryan Warwick: said it this way: "The first rule in compounding is to never interrupt it unnecessarily." Mm. Okay? So if we have whatever we decide, 60, 70, 80%, we might even have 90%, um, for people who are in retirement, it just depends on the logistics and, and their emotions, but whatever money is invested in, in risk-based growth assets- Mm-hmm... we need to let stay in risk-based growth assets. And the only moment we wanna sell those is when they're at highs or when we're, when we have growth in them, and, and then we can take it and, and rebalance or, or go use the money for something we wanna spend on. But that's, that's such a critical quote. The... And, and I think his second rule, uh, is see rule one. So, so never unnecessarily interrupt the compounding of, um, of your investments.

[1:15:13] Shannon Warwick: Yeah. And I think there's so much sweetness in, in what we're closing with because really

[1:15:21] Shannon Warwick: what we're saying, what you're saying is not always going after that next

[1:15:28] Shannon Warwick: big thing, not always having to get the highest return, creating safety within the home by that money being thrown over the wall. All of these things are really leading to investing in peace at home. Yeah. And that-

[1:15:41] Ryan Warwick: That's worth beyond wealth

[1:15:41] Shannon Warwick: ... is worth beyond wealth. Yeah. Yeah. Yeah. Exactly. Thank you. Yeah. Thank you. I appreciate you as always, and, um-

[1:15:49] Ryan Warwick: Thank you for listening to the Worth Beyond Wealth podcast. If you liked this podcast, please like, share, and subscribe. The highest compliment you could give would be sharing this with a friend. Thank you. The opinions expressed in this program are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual or any specific security. RW Investment Management LLC, DBA RW Investment Management, is a registered investment advisor. Testimonials given by current clients are not in exchange for compensation. This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where RWIM and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by RWIM unless a client service agreement is in place. RWIM is not a legal or tax advisor.