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Sound Financial Group - Bothell, Washington


SFB040 Illusions of Investing Part 6 - Passive Structure Investing Theory

| November 01, 2016
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Episode Summary

This is the last episode in the investing illusions series. Paul does a quick recap of the past five illusions he has gone over. One of the common problems that happens to someone after they’ve become aware of an illusion is that they fall right back into another one. To avoid this, Paul discusses what is a good investment philosophy on this week’s episode. There are four crucial components to passive structure investing that he and his team use when helping a client design their portfolio.

What Was Covered

  • 02:25 - Paul does a recap of the last 5 investing illusions.
  • 04:25 - The way most people deal with illusions is by running faster into another illusion.
  • 06:35 - So, how do Paul and his team help clients with their investments?
  • 07:10 - Paul has four components to consider in his investment strategy, that help create transparency and best returns, and help clients avoid getting into an investing illusion.
  • 08:00 - The first component is the understanding that free markets work. You wouldn’t be able to sell an iPhone for $10,000 in this market. The same thing holds true in the stock market.
  • 12:20 - The second component is modern portfolio theory. This theory was created by Harry Markowitz back in the 1950’s. In this theory, Markowitz presented a new way to handle portfolio design and risk reduct
  • 17:55 - The third component is actually four factors in one. There have only been four factors that have proven to generate long-term rates of return on our portfolios. Paul quickly breaks down what these fou
  • 24:40 - However, these four factors aren’t the only points to consider when trying to build a successful portfolio.
  • 25:15 - The fourth and final component of the passive structure investing model is the coaching and education that Paul and his team provide.
  • 30:00 - Between 1984 and 2013, the S&P 500 received 11.1% rate of return each year, but the average investor only received 3.69%. Why is that?
  • 34:20 - You want to have an academically allocated and globally diversified portfolio.
  • 38:30 - Do you even know if you’re getting market returns with your current portfolio?
  • 39:40 - Are you ready to build and design a good life? Feel free to contact Paul’s team!


"What would change the price of a stock is unknown and unknowable information."

"If we’re taking risk, we need to take risk that we’re compensated for."

"91-92% of someone’s total rate of return in a portfolio will come from asset allocation."

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