 The investment doesn't correctly fit your profile. Now you may be forced to react in a certain way, which is the wrong reaction. I think people want to get rich quick and they want to get rich fast. And so they put their money on certain investments and then they just hope it goes up to a thousand. But if you look fundamentally at what Warren Buffett says and these great investors, really risk is a function of the price you pay for the investment. Hi, Chloe here and welcome back to Real Talk, where I have the opportunity to interview brilliant investors, successful entrepreneurs, content creators and many brilliant people. Over here we discuss how they got to where they are, the key strategies behind their success and engage in real and sometimes even challenging conversation with them so that we can all learn from their experience and become better investors and better individuals. Today, after opportunity of interview professional fund managers, Charles Zimmeros, SLS Alexander Tackle, they are the portfolio manager of Anthem Advisors based in Miami, managing over $100 million of fund. I first met them earlier this year when I flew to the US, Omaha to attend Warren Buffett's Buckshire AGM. They were super generous with their time, we spent one hour talking about investing and from the conversation I can see that they are truly passionate about investing and afterwards it kept in touch and finally I managed to schedule another interview and have them here so that you can learn from them as well. During this interview, they shared about their investing approach in this high inflationary environment, their view on the ever-rising US debt ceiling, the advantage of being a retail investor versus a professional fund manager, as well as some of the most useful investing books that they have ever read that have helped them in their investing career. I hope you will enjoy this conversation and learn from Charles and Alexander as much as I did, so let's roll the conversation. Hello Charles, so good to see you. Hello. And hi, Annex. Hi Chloe, it's a pleasure to be here. Thank you so much for having us. I just want to start off with the first question, because as investors, you are where you are today, but definitely your past has definitely contributed to who you are today. So I'm very curious to know how do you think your childhood and your upbringing influence your relationship with money and spark your interest in investing in the first place? Maybe I can get Charles to share with us your process and a little bit more about yourself as well. I got involved in or I got interested in investing from my brother, who was about 11 years older than me. And so he was already working by the time I was in middle school. And my brother wanted to get a job on Wall Street, so my brother read the Wall Street Journal every day and he showed me how to read the stock quotes. Back then, the quotes were in fractions. So it would be, for example, $20 and two-thirds, for example. So the quotes were one-sixteenth, even up to one-thirty seconds. They didn't quote it in .05 how they do today. So that's that piqued my interest. And my brother actually went to Wall Street. He worked for Solomon. I worked for Bank of America, a few others. And that's how my interest I followed through with my brother's footsteps. And I understand that you used to be a lawyer, right? So what caused you to change your career to pivot from law to investing? I think I was always interested in investing. My undergrad diploma was in finance. So I understood the basic principles of finance, but I wanted to go into the profession. And so I actually met Alex and we started working together. Alex had a career. His career was always in finance. I always studied finance and was interested in it and investing and stock investing in my spare time. And then I took many years of study and turned it into this partnership with Alex and Ansem as well. Now, I also want to find a little bit about Alex. What trigger you were sparked your interest in investing? My father is an economist. He worked in the public sector and in my family, studying was always akin toward the academic pursuits rather than the commercial pursuits because my father worked in the public sector. So when I was a child, I used to pick up his MBA books and his economic books and read them. And realized there's an entirely separate application of finance and economics, specifically in the private sector. Involting the pursuit of the capital markets, investments in the capital markets. I followed a different route, although my foundation was laid by my father's academic studies. And then subsequently thereafter, I studied finance in the county and an undergrad and then pursued an MBA and then a master's in taxing trade. And I met Charles early in my career, very early, I think in my first year. And he has been involved in shaping my understanding, my career as well as coming together with him and partnership as well later on in life. But Charles's development of his financial, the application of his financial expertise has been a big guiding factor in my life, Charles. I think creation later on you will share a little bit more about the wisdom that Charles shared with you over the years as well. And I'm so very curious in terms of when it comes to investing, it's about constant learnings, right? So are there any books in your life that really have created a huge impact on you, your investment style, as well as your way of living as well? And I do understand Charles read a lot, right? So what are some of the books that have impacted you so far? I say if you're a big fan of Warren Buffett and you've looked at some of the annual letters, there's a book that really put it all together for me. It's Warren Buffett Ground Roles, Jeremy Miller. This book talks about how Warren Buffett got started and his partnership. So before Berkshire Hathaway, he was running Investment Partnerships, which is very like a fund manager. He was basically running a hedge fund. And this book really put it together for me and his Warren Buffett stinking. And this gentleman did a great job. So I would recommend this book if you wanted to, this really, this was a great book if you want some more Warren Buffett reading. I would say that another book that really was recently good was The Most Important Thing by Howard Marks. This gentleman, Howard Marks, and it was actually, Warren Buffett actually said, hey, here's a book that's very helpful. This book helped me understand that, I think, one of the key takeaways. If you want to be successful in investing and you really want to get outsized returns or better than the market returns, you not only have to be right, but you have to basically, the market has to have it wrong and you have to have it right. So this gentleman goes through and he explains it. He gives you the securities market line. He gives you a chart to look at and his stinking. He's running an excellent hedge fund, this gentleman. I would say that understanding a little history is critical as well. So you've got Warren Buffett and putting his methodology and value investing in place with Jeremy Miller. You've got Howard Marks, who's giving you a little bit extra. I would say that any book on the history of the U.S. stock market that can show you about the crashes and can show you how the market went down, any book that could give you, this is a particularly good one by Scott Nation. He's a CMBC contributor, but walks you through. This book is particularly good because I think you're going to learn a lot about how the stock market functions. That is not obvious how the stock market actually functions. And his interviews with people and what he looks through, this is going to help you understand how the market really works, stuff you would not see on a normally or you would never know about, even if you read every thing. This is a great book. I would also say that anything, this particular writer, Galbraith, he wrote extensively about the Great Depression and what led to that and the mistakes that were made. And I think he talks about euphoria. So you notice that I've got value investing and then several books about market crashes. And what it comes to find out is what you can see, I think you'll start to conclude that the crashes can be, how to respond in a crash, I guess. What sort of leads to them? And it's really human behavior that I think leads to stock market crashes. And then once you understand why the crashes are occurring and why markets go up and the valuations get really high relative to what the fundamental valuations are, you then can sit back and you can say, how should I respond to this, to these risks? And how can I actually profit from it? So now you're profiting when other people are not making money, when they're losing money. And that's what Warren Buffett says. He says, when other people are greedy, I'm fearful. When other people are fearful, I'm greedy. And these books will help you understand that. I would say really quickly, if you wanted to get in the mind of another fund manager and you wanted a value investor, this would be the acquirers multiple. We can put links to these, but this gentleman runs a fund the symbol ZIG. I'm not recommending it, but you should take a look at it. I'm not recommending any investment. Joel Greenblatt, if you want to learn how to invest on cash flow, any of Greenblatt's book, if you want to get into the mind of another value investor, I would say Bill Ackman's book, Confidence Game by Christine Richards, who's a Bloomberg reporter. So that details Bill Ackman's. And also it deals with short selling too, which is helpful. Should you be short selling stocks or should you just be long only? Which we're long only. And I think another great value investor would be David Einhorn. So fooling some of the people. And I would recommend these books. That would give you a base line. There's also a book that Bill Ackman recommends called The Quality of Earnings. So if you don't, I think I spent, I'm also actually a certified public accountant. And I got that to learn how to read financial statements. So I think that if you have a base understanding, it isn't a tremendous amount of reading. And you have the base understanding, maybe you read the book, The Quality of Earnings, and try to really focus on trying to read a lot of annual reports and look how to read some financial statements. And you could, you now are in the game and you know how to invest, I think. I think you can, and then some basic financial principles is what I applied to it. That is truly amazing. And you can see how much Charles read, like he really read berociously, right? Like recently, I'm just reading this book by Gotham Bates. He talked about this author, author of The Joys of Compounding. He actually talked about we as investors should read multidisciplinary. And you can see that for Charles, even though he very specialized investing, but he also looked into the history of it. And that's how you build up your knowledge over time as well. And he said that it's just the foundation. Like it's constantly learning, constantly evolving as well. I'm just very curious. Do you think history, since you talk about some of the history in the stock market, some of the books I just shared, do you think history tend to repeat itself? And how do you use history as a guidance for you to, like what you say, in your investing approach, how do you in the stock crash, which we actually are, we were just experiencing like the one year long market crash for last year. And how do you use that to help you and your fund as well? Since you are managing people's fund, how do you use that so that you can track the market carefully and safely? Our frequent saying, we say, history doesn't repeat itself, but it often rhymes. And that's a quote from the famous Mark Twain, American author. We view investing as an amalgamation of the acquisition of companies within various portfolio strategies that are managed for our clients within their separately managed accounts. So we have two jobs, two roles. One of them is to manage the individual strategies, the individual investment strategies, and to identify and make investments into very sound companies and monitor that strategy as time goes by, as well as determine the placement and the use of these strategies to determine if they are suitable for our clients to help them accomplish their goals. So not only are we portfolio managers, but we're also registered investment advisors. So when you ask, does history repeat itself? It oftentimes does repeat itself in the form of very similar cycles, not just within the way the markets receive information and react to the information, but the way our clients do. And that's a very important distinction because as much as this business is about identifying attractive companies to acquire, it is also about managing emotions, managing the emotions of our clients, managing our own emotions, and cheering makes sound investment decisions that will pay off in the long run. And I think it's, I think you guys definitely have a lot more stress as compared to normal retail investors because right now you are not just managing your own wealth, you are managing other people's wealth as well. How do you cope with the emotion that you will face? How do you maintain emotional control and stability? Amount these chaotic market news and everything. I think it begins at the beginning of the investment process. So in other words, what we try to do is select investments that will try to actually specifically accomplish a goal of an individual investor as opposed to just absolute return. So putting people, matching people with investments that have the characteristics that are correct for that individual. Now, if somebody is a long-term investor and they've purchased the security at the right price and it's matched with them, then if the security goes down in value, the emotion says I need to sell it because everyone's telling me it's really cheap. However, so that would be market risk. I would call that just general volatility or market risk. The correct response to market risk is old. You don't sell, you just hold. You could even buy more. That's what Warren Buffett is telling you. You should probably consider buying more. So when you're faced with a risk, there is a correct response to that risk. But if you work correctly, match with the investment or the investment doesn't correctly fit your profile, now you may be forced to react in a certain way, which is the wrong reaction. So it goes back to how do you respond to the market crash? You should because it's very difficult to time the market. It's impossible. It involves a forecast and it's very difficult. If you're good at forecasting things, then you must be able to see the future. I'm not good at that. But if the client says I have 10 years, I'm saving money for retirement or I have 10 years to a investor, this piece of my portfolio, even if you were going to buy a hedge fund and even if it's the hedge fund, the best hedge fund bank, you would only put a small percentage of your portfolio in there anyway, because it lacks liquidity. That's number one. Most hedge funds you're not going to have liquidity. So you actually have liquidity risk. So if you have liquidity risk in the investment, then you need a longer holding period. Because if you need that money and you're forced to sell, you will take a loss. And what is investing? What are we trying to do here? As Warren Buffett would say, we're putting money out and we expect to get back more money than we receive. So the question is, what are you going to get? When are you going to get it? And how certain are you that you're going to get it? So that's really at a very high level what we're trying to help the clients do. So we help them on the wealth management side and say, apart from just a fund manager that says, oh, you have money to give me, take it. Now I'm just focused on the investment side. I'm not worried about you personally, but on the wealth management side, we're actually worried about you personally, making sure it's correct for you. And then on the fund management side or the portfolio management side, we're trying to help you select investments that will accomplish your goals and make sure you don't make bad decisions with respect to those investments and make sure you, it's once you get on a roller coaster, if you're afraid of roller coasters, you can't get off halfway up. So maybe we should have said, okay, is this the right roller coaster for you? It's the same thing with investing. And that's what Alex and I are trying to explain. We start in the beginning and make sure it's correct for you. And we do have three equity portfolios that we manage, but it shouldn't any given person have all of their money or some of their money in there. That's up to their individual risk dollars. So we can help with that too. I absolutely love that because a lot of times investors always say, oh, tell me why it's the stock to buy. But actually what you say, everybody is different. They are at different live stages. They have different objectives and goals. Not the stock cannot fit into everybody's portfolio. And that's why suitability and sitting is so important that the clients need to know, like we as investors, we need to know our temperament as well as our need, our goals. And then you as a portfolio family manager, you will tailor and make sure that it's a suitable portfolio to begin with so that the clients can have that piece of mind as well. Am I understanding it correct? Yeah, it's all about like suitability. You could have the best hedge fund strategy in the world and it's making 100%. But if the client signed an agreement that they can't get their money out for five years, what good is it? Might as well be a billion dollars. If you need the money for surgery, it's totally worthless to you. So you may end up taking a loss if you have to liquidate that otherwise illiquid investment. So getting people structured in the right wealth management strategy for them is the first piece. And then the second piece is the actual portfolio management. Is Berkshire Hathaway correct for you? If Berkshire Hathaway, it belongs in, it could belong in anybody that would be willing to take equity risk. Berkshire Hathaway would be good stock to hold. So now Warren Buffett is managing just that piece of that money for you. He's not telling you how to manage your entire strategy of your life. Because if you need a surgery or something and you need the money, you need time off from work or you had a vacation planned or you needed to buy a new car or the money you needed for a house, maybe that's near-term money that didn't belong in the stock market to begin with. And I'm so very curious, just now you mentioned about, like you have three portfolios, right? Can I ask if you don't mind sharing if the other three portfolios are US-based or do you invest in overseas companies as well? Why I'm asking is because there are so many investors. For example, Ray Dalio, he talked about the rise and fall of different nations, even countries over time. And we all know that for the past many decades, US has been a rising power. But right now with the change of the economy, it seems that US, it seems to be on the decline while other countries, for example, China seems to be rising. So do you diversify your portfolio in different countries? Or if not, why is it still US-centric? Okay, I think the companies that we've invested in are globally, they have global exposure. But I think the listings, the actual equities in these equity portfolios are listed on the New York Stock Exchange and NASDAQ. And that helps reduce some risk for our clients who are generally US-based clients. So if a client had, like Warren Buffett, for example, did not go to Japan until he was able to have some operations in that currency, really. He had some foreign investments, but I think when, if we have clients operating in a certain jurisdiction, then that would be the best place for them to start investing. Whereas if it's a US-based client, the US is the easiest and the best place because they don't have any currency risk. If you're investing in a listing that is strictly on a foreign currency, you now have currency risk. And Alex and I, what we talk about is, how do we reduce risk? How do we get the most amount of return with the lowest amount of risk? The focus is very different because many people out there, like even many retail investors, their focus is how do I make the most money from the stock market? But what you guys are thinking is, how do I reduce your risk? And it's just like what Charlie Munger said, tell me how I will die and I will not go there. How what is it? I will not go there. And I think when you know how to manage risk, the upside will tell by itself. And I think it's a very important mindset shift. So maybe Alex or Charles, you can elaborate how exactly do you approach so that you can really mitigate your risk. Fundamentally, if you're going to select, if you're going to go into equity space and you have a long enough time horizon because by the way, you could get, I think people want to get rich quick and they want to get rich fast. And so they put their money on certain investments and then they just hope it goes up to a thousand. But using the method we're using, there's a lot of opportunity to make a fortune in the US stock market. And it's because as opposed to, we're not compensated to sell people products. We're compensated as a percentage of AUM. So as a percentage of what we manage on behalf of the clients. But if you look at, if you look fundamentally at what Warren Buffett says and these great investors, really risk is a function of the price you pay for the investment. But in other words, the same investment, the higher the price you pay for something, the riskier it becomes. First of all, the more money you're risking. But the more it takes for the investment to actually pay you back your money. So the lower and therefore the lower you can pay for an investment, the lower the risk. Now that implies, what I'm saying is it implies you actually look at the underlying investment. What is it? What's the asset? You're not just buying something and hoping it grows up in value and sell it to somebody else. Not worrying about what they're doing in the underlying corporation. You actually, we actually are, we are concerning ourselves with, what is the underlying company doing? What do they sell? Where do they sell it? Is management good at what they do? Is management's compensation structure aligning their interests with the company? Is the company long-term focused? So the critical thing is, I think one critical thing is the company profitable. Did it just have a bad order? Is the company profitable? What does it do? How much profit is it going to make? How certain are we that the company is going to continue that? And then the question is, based upon prevailing interest rates, is this a reasonable price that we're paying? The last piece that is often overlooked is, what is the company actually doing with its excess money? So if the company is profitable, by death it means it has extra money laying around, lashed over. What is the corporation actually doing with that money? Because that can make a big difference in boosting your return. And a lot of people don't realize if the stock price goes down and you could hold and the corporation made a lot of money, the corporation can actually buy back at some stock. Yes. Oh, I think Charles, for him, it's a little bit lacking. It's okay. But if I do a quick summary, you can see that while he, like you guys really go through very deep analysis into every single company that you invest in. And I'm also very curious, maybe I hear from Alex first, like when you're talking about portfolio, right? If so many of our, because most of my listeners, my viewers, my community members, they are individual investors. Do you have any suggestion for them in terms of what should be the right size of the portfolio in terms of how many holdings? Because you as fund managers, you have a team working together with you guys can really have like delegate so many research into different people. But if it's individual investor, what should be the right portfolio size? How many stocks? So they're still manageable by the same time still diversify the risk? That's a good question. So ideally a lot of portfolios there is that in order to diversify and not unsystematic risk, you have to hold at least 20 to 30 securities. Our portfolio strategy generally tend to hold around 15 new amounts. One of our larger overlay portfolios is about 94 securities. We evaluate not just one particular financial statement and evaluate the cycle of capital management, capital allocation. We evaluate years of decision-making with prior management, current management, etc. But we also make an effort to participate in analyst calls or in schools. And we also make it an effort to reach out to management and talk to them a little bit about their capital allocation decision-making, understanding the true drivers of the business. And we do this with not only the companies that we hold, but we do this with companies that we're interested in. This is a key differentiating factor because some of the best investments we've ever made were when we understood at a very detailed level the full work into the business and the key drivers of what lead us to believe or have an expectation of the continuity of their cash flows in the future. That the likelihood of us receiving our these earnings and cash. It's very important, very important because once you understand that and you're able to question the management of these companies, you're able to get a sense from their understanding as practitioners of how they, as business managers, how they will handle the risk that they are buying in their financial reports, which can't stress our... Charles has been telling me for the last 15 years we've got to read the risk and the risk disclosures within the financial statements. And I find that too few people actually take the time like Charles does to read them. And this has been a process, this has been a habit he's been inculcating in our process for many years. Very interesting. So this, since it leads up to the retail investor versus fund managers, right? So I just want to ask Charles, do you think there's a certain advantage that fund managers, you guys enjoy versus retail investors that we don't have? Advice versus what are the advantages that we retail investors have, but you guys don't? And let's say there are more advantages being a fund manager, just like what Alex is saying, that you guys can talk to the management of the company, which a lot of times we retail investors, we can't really do that. Then how do we still ensure that we can still invest safely and wisely as well in this day and age? I think the advantage to being a retail investor is you, is the retail investor can go into any market and invest anywhere, whereas as a licensed person, we're limited to where we can go. Now, that's also a disadvantage because retail investors probably shouldn't be invested in certain markets, although they can, just because they're allowed to do it, you shouldn't touch, in my opinion. I think the big advantage is I get to do this as a full-time job, and it is the full-time job, and if I don't do it well, I'm going to get fired. And I think if the big disadvantage to retail is that I've seen is the retail investor doesn't treat it as a job. I see a lot, not every, but I see a lot of retail investors. They like to just put money on certain ideas as opposed to if they were treating it. If you lose money, you're going to lose your job. If people treated it like that, I think they would be less negligent how they invest. I think they would take more care. And I think to the one point that Alex, because I have more time, the other thing that we do is we do look at the competitors. So if you like a company and you like an idea, a lot of people talk about artificial intelligence, for example. But my question would be, okay, how is the company going to make money at it? And I think it's an easier way to invest that if you look at business that's profitable, it's got a name and they're making money. And then just you have an open mind enough to say, let me consider the competitor. What is there? So if you consider Microsoft, let's say, for example, you should also look at app and other competitors as an example and say, okay, how are they doing well? And then apart from, am I just investing in an idea or am I actually investing into a stream of profitable cash flows? I think most people would find more success and they'd reduce their risk and still get a great return, if not probably better than most of the other ideas they have. If they just treated investing in stocks as if the equity was like a bond and they just said, because what's the difference between a stock and a bond? Bonds have a fixed payment schedule where stocks are, and they have a fixed time period where you get your money back, where stocks are just, they're indefinite and they don't have a fixed payment schedule. However, you can say, if the company is going to earn this much money and I can buy at this price, that'd be pretty reasonable. And there's some growth in there that you may, because you're not going to get growth with bonds. There's no growth, it's all fixed. So you have, as an equity holder as Warren Buffett has always said, you get excess returns. So I think that's our process. Even if you're not, I could say for the retail investor, how do you protect yourself? Okay, you don't have time to do this all day. Then you should be looking at selecting a fund manager that shares your beliefs. And that can explain to you why they're doing what they're doing, or at least in writing explains. So if you don't have time to, you don't have 40 hours a week, you're working a job, you should try and find someone who can invest in accordance with what works for you and what you like in your style. And that will help you be successful. And that way you can evaluate them and make sure their compensation structure, make sure whoever's managing your money you're helping you, is compensated more when you do better and less when you do worse. Not just designed to sell you something. Absolutely. And I really enjoy what you just shared just now. If we ask into retail investors, we treat it so seriously that if we lose money, we get fired, that we will definitely protect our money and invest it with more caution. And I think if we are able to cultivate that, a lot of our mistakes don't need to be made because in the first place, we won't go and do that extra, take that extra risk. And I really, I think that's a very good reminder. Now, next question I want to ask Charles is, because the stock market for the US, it has like a solid 12-year run, but that is due to there's a low interest rate, a lot of liquidity injected. However, with the current high inflationary environment and the US government tightening it, and we also don't expect to have red cards coming soon. So how do you think investors should approach this market? Should we be lowering our expectations for return? Because recently, during the Berkshire AGM, Charlie Munger did mention that for value investing, he and the Warren Buffett have different way of looking at it. Charlie think that the rate of return, we should expect less, but Warren Buffett still think that it will be a good way ahead. So what's your view on that? I have not adjusted my expected rate of return downward because I think in theory, in theory, if the raising interest rates in theory does, the idea is to really match supply and demand, but it does the borrowing costs do go higher. And I don't, I'm not a good forecaster. But what, so in theory, if you, in theory, if you just raise one thing, you just raise interest rates, then things should slow down. However, I think the audience ends up being it's much more complexion, it's much more dynamic. Other things can adjust. So even though the costs of borrowing are higher, there may be other things that happen that make life or operating a business cheaper. For example, they could lower tax rates. That could be a possibility. So if you raise interest rates, lower tax rates, or they lower tariffs or do other things, then that may have the opposite effect of what just raising interest rates by itself. But I think maybe it's the near term rate is what we're talking about. The very short term rate has been raised. I think the longer term rates have looked like, and I'm talking to a 30 year rate, has stayed the same. So I think in the near term things probably there's a lot of volatility and dislocation and problems in the near term that are probably coming down the pike. But over the longer run, my thinking is that I have no change in expectations, plus companies can adjust. Just like what Charles said, like he's super humble. He said that he cannot predict the future. So he doesn't want to put his attention on is the interest going to hike or it's going to drop. He doesn't want to focus on things that he cannot control. He wants to focus on things that he can control, which is analyzing the company, really talking to the management, understanding them, understanding that business model does this suit their investing criteria. And that's when they will decide to invest in terms of understanding all this within something that they can't provide. I think that it's a very valuable reminder once again. Now, my next question for you will be like, since, okay, once again, we're talking about the US economy, right? I know it's macro, it's a macro factor. But do you have concern regarding the rising debt ceiling? Like it just keep on going on and on. Then if you have concern, then apart from buying the business under value, do you do any form of protection to mitigate this risk? As it stands today, the debt is higher than it has been in the past of the USA and probably of many other countries. But I think if the USA's debt was not actually denominated in US dollars, if we were using another currency, I think it could be a much bigger problem. So with countries whose debt the country operates in its own currency and then it issues debt that's denominated in the US dollar, which in that case, it would be a foreign currency to that country. I think that that's a situation where probably that would be more risk than just the United States having 110 or 120 percent of its GDP and denominated debt. And it's growing too at a very high rate because the higher the government rate, the higher the US government or any government raises its interest rates, the higher the borrowing costs for it. And the United States is just refinancing and borrowing costs. So I think as we're going right now, I don't see an issue. I think if the borrowing costs get spiral up too high, then the question... Because there's a lot of demand right now. It's like a pro cyclical thing. Higher the US government makes the rate, the more debt that it has. Because the US government's funding it with its own debt. However, the more investor demand there is because people want high rates of return and it is considered to be risk-free in a debt that's guaranteed by a government. And the United States is a very large economy. It's one of the top three largest economies. If not number one largest economy and EU, these are very large economies. They're very stable, strong legal systems, strong governments, and they are going to make good on the debt payments. So I think that as long as the investor demand is there from the investment side into the bond side, I think that it's not going to be a problem. It just creates a messy situation. Obviously, it needs to be dealt with down the road should you continue to have as high of a debt. That sort of thing. But I think as long as there are investors that are willing to... Japan is a big investor in the United States debt. Other countries buy other countries' debts. As long as the countries are willing to do that, that should not be a problem the way we're going. Borrowing something unforeseen, and I can't predict. Because we have the temperament and we know how to respond to certain types of risk, the biggest issue with us has been where the investment... The client doesn't... Our clients don't believe that the investment matches their risk. But even though it does. So the client has a long timeframe to save. And the market goes down, let's say. The correct response is just maintain your allocation. Maintain your asset allocation. Do not sell. But something the clients believe, I need to sell because the world's coming down and everything like that. And you should really just hold the investment just wait or even buy more. If you really want to get wealthy, buy more if it's a good investment. But you shouldn't really make a move. And I think where the client doesn't necessarily understand that they can accept that type of risk, that's where... Those are the incidents where it's that type of incident. And where the client is, Alex, where the client really... I'll tell you where the client really is overly conservative with their investments. Let's say it's a young person and they want to buy bonds. They're not going to generate to talk a rate of return that they need to retire, generate wealth and have a long timeframe for that money. Then what happens is they under invest, they see the market performing well and they go, oh my gosh. And then they become... They start engaging in risky behavior in the market or people respond to how the market and they start engaging in too, they de-risk too much. When we started with them, when we started it, day one, the risk matched what they were able to handle and the risk of the investment matched their goals. That's when you could have... That's why a lot of the hedge funds and other funds have lockup provisions at them. Because if, for example, the clients want to get out, guess what? It's a polled fund and you want to leave, they're going to have to sell some of the securities. If they go into the market and they have to sell a significant number of securities, they could push the price down. And that would hurt other investors who are still in the fund and who want to stay in it. So they have a lockup provision that says you can't leave. Then my question would be, if you needed that money, why did you get in that to begin with? You can't get off the roller coaster halfway up. And then so I think that the incidents, the problems have come where the clients have called us up and said, we need to get out of this or like, you should not. And that has been a problem. It's like you're in turbulence on the plane, right? You're on an aircraft and you're in a turbulence. And then you go up to the pilots and start knocking on the door. I'm going to fly this thing now. And okay, first of all, you don't really know how to fly. And second of all, you're telling me how to fly. And the pilot's been doing it all day. You're like, maybe you should just listen to the pilot. He just puts a seatbelt sign on, you should be getting in your seat. That's what you should be doing. So I think it's that type of example. And those are the incidents where people's response to certain market events, causes them to have losses. Yeah. So once again, it's like the temperament, right? And it takes a lot of experience and wisdom to cultivate that kind of temperament, right? Even like the clients themselves, they don't manage their portfolio, but when they see their portfolio in red, then that's when they panic. And then the panic usually it's, it's the very mistake that they are going to make. And that's why it's so important. Once again, it's like, we only firstly invest the money. We should be able to set aside, like we don't ever touch whatever some that we need in case of emergency. And then secondly is for the amount of money that you are invested in, is it a suitable portfolio? And it must come turned with yourself. I think a lot of times it's when you talk to your clients, it seems that at first they come with agreement, but then later on they realize that they disagree because when the market is volatile, they start to dissuade from what originally agreed. So clients that we as investors must come to turn with our decision as well. I think that's very important. That is why the working knowledge of the security market line is very important. We use that as a work in example whenever the client throws a particular idea that is not in their portfolio. We use the security market line as like a way for us to benchmark pay. You said that you were this type of risk and we stress test your financial plan to determine whether or not this type of risk is appropriate. Now you say you want to go further out on the security market line in order to take additional risk one because I've read about it in some sort of article. Now you want to take more risk to kind of accomplish your goal. Is it suitable? Is it worth it? Basically you start, it's giving you, this axis is giving you return and this is giving you your risk, right? So you're starting here at the risk-free rate. So you basically have no risk, but you get some return. As you start going out in municipal bonds, you go out to equities, and then you actually get the real estate and private equity and hedge funds and things like that. So you can see that now this is just the way this is drawn, but effectively depending on the security you're in, you're getting more return, but as the amount of return you're getting worth the additional risk that you're adding additional risk. You're not just adding one risk, you could potentially be adding more than one risk. So the question is this, first of all, is it suitable for me? And then second thing, is there like a value added? You can see as you go up this axis, are they actually adding value? And then is the risk appropriate? And that's what these charts, if you read this is Howard Marx's book, and he goes into that. And then that's how you can fundamentally, but I think what everyone who's on this and even me, I still look at it. I'm going to find somebody who's going to do this for me, and I'm going to hire them on a pay them a fee. Is the fee reasonable? Are they getting compensated? And are they investing in accordance with what? My ideals, and are they taking the appropriate amount of risk? And that's what the retail person's job is. I see. Well, let's thank you so much for both of you coming to share your experience and your wisdom today. And if people want to find out more about you and your work, like where can they go to? So in general, our firm is part of a larger registered investment advisory firm called Bellpoint Asset Management. So our firm, Anthem Advisors, we managed between about 120 to 130 million within the much larger kind of ecosystem of Bellpoint Asset Management. And Bellpoint manages around 2 billion, 2 to 3 billion between retail and institutional. We're always here to talk to people. We love talking to anybody that's interested to learn. And I'm particular to find out how they're, how to reach their financial goals by investing into the market. That's the most important part. That's the most important takeaway. Thank you so much. And in the meantime, maybe it's our work. Yes. Did someone want to ask a question? Yes. Yes. That's why I want to open up this floor. This question time, if you guys have questions, I think it's very generous of both Charles and Alex to really want to spend more time with you guys. Thank you for this session. I'm very new. As Chloe knows, I just bought a couple of stocks. I'm very new in this area. So I was a bit hesitant to ask questions or something like that. But when I listened your talk and I learned you guys, because I read a lot of self-development books and all those kind of books, you guys actually doing the same thing. When I thought about fund manager, and I was thinking you only talk about money, stock, and then but it's all about mindset and those kind of things. So I think I feel like it's all connected. But one more thing, even I bought couple of stocks, I keep checking the brokerage account every day. And then I kind of imagine how you guys, whenever people put more money in, how do you, even you are handling other people's money? And then you say you try to separate your emotion from the work and everything, but how do you keep that mindset or, I don't know, I just feel like how do you manage your feeling and mindset? And then so I don't check my brokerage account every hour. Because our approach, we try to buy stocks for longer periods of time and we try to look 10 years down the road. If the company that you bought was, you bought it for a reasonable price and you felt like it was a good investment to make and that the company is doing well and it's, and you anticipate it's going to do well, let's just say it could have a bad quarter, it could have a bad year. But if the company is strong and you felt like you paid a good price for it, there's no need to check on a daily basis what's going on with it other than to monitor the performance of the company in general. But if the, because the share price really tells me nothing, if the share price goes down, I don't get scared as it goes up, I don't get happy. I just, the share price itself is just, if it goes down, it's just presenting an opportunity to invest more. If you like the share 20, why wouldn't you probably like it better at 10, right? So you would probably consider buying more than, but on a personal level, if you hold just a few stocks, maybe I would say, are you sufficiently diversified in that, what does that money mean to you? What are you trying to accomplish and are you sufficiently diversified? Or are you trying to run that like a hedge fund? Is that what you're trying to do? You're trying to run it like a hedge fund and just get access, return and just, or are you trying to actually, what are you trying to do with this money? The long term investment in the 10 years prime, so I can have a, just adding for my retirement, adding something for my kids, and then so it's not really, I don't expect just some kind of, but quick, quick extra cash. That's why I joined the BOS, yes. Okay, so you're, it sounds right, it's that price goes down dramatically. You frankly should consider buying more if it's a good investment or you have the double the position, but that's, if the price of the security goes down, you can see Alex has computer screens behind him, that he's actually monitoring a lot of positions, but we're not just monitoring the price, we're monitoring news that comes out and things like that and the filings. So if an opportunity presents itself that the price goes down, we would consider buying more of the security because that's how you could really do well, but you hope that the company would be buying its own shares back. So that's what I would say, I think that if the price goes down, barring something else, if you can, if it's, if you bought something good that you really, and you think it's going to be a very strong company or it's going to do very well in the future, then the price goes down. It's just, now you're looking at it as just an opportunity to buy more shares and you say, do I buy more? And then you hope that the company buys some. But you maintain the position if you don't need the money. That's what I would say. That's great. Thank you. Yeah. And I think once again, because Su Yong, she is very new, but I think most of the money, you really get started. So just like what Charles said, really rig more because as you rig more, you cultivate a lot more wisdom, right? There's so many great authors, investors have written so many great books. And as you expose yourself to their mindset, that will stabilize you more and more. And it's always a journey, it's a process and you're definitely on the right track. All right. Another question from Sabrina. So Sabrina is asking, how do you decide how many percentage of fund to be allocated in each sector? Like for example, in tech, in real estate, commodity, do you do portfolio allocation in different sector based on different percentage or how does that go? In our initial equity portfolio, I tried to select more than 50 securities. And the reason for that was because of the amount of money that we would be putting into this would be pretty large. So we need enough, there are certain characteristics of certain securities that, for example, if you're operating a large gap and investment in Apple or a large gap company, they can handle a huge amount of money. So it's okay to concentrate your investment sometimes if you can handle the risk. But when you're in some of the securities that we're in, they have smaller market caps, a few of the securities, they have lower volumes and they have lower market caps. So the amount of money that we could potentially push into that company could be or invest in the company into those securities, it's a factor to consider, I think Alex is better at looking at that than me. But if you think about it, the more securities you have, the more money you'll need. So I'll give you an example, if you have 50 securities and you do $1,000 each possession, because some of the securities could be $500 per purchase, $300, more than $300 just for one share. So if you have 50 securities, then probably the minimum portfolio size would be $50,000. But on a regular basis, we would be investing $100,000, $500,000 every time we put money into these. So if you're investing smaller amounts of money, say $10,000, you can have fewer securities and you could have 10 securities. So it's a function of, we try to have as many, because the positions, really the clients really, it's not appropriate to concentrate all their money in just a few securities. So I think the number of securities we try to invest again to find the best securities and diversify it, but also while having sufficient number of securities that can handle the amount of money we're investing. Does that tend to answer that, Sabrina? Hi, yeah, I just wanted to say, actually it's more like, in terms of a retail investor, some small investors like us, when we look at what kind of stocks are companies to trade in. You understand, of course, the real estate, real estate companies, type companies, commodities, it's just, of course, you don't put your eggs on in one basket, but it's like how many percent you think we should diversify? You can say, okay, we should look at 50 securities or fighting less if we have less funds to invest in. But out of the 50 securities, do you think that, for a retail investor, we don't know exactly like how much a sanitation should confront on each sector. Kind of thing, is there a guide that you think that we should consider? In that respect. If you're a retail investor, I would say, put no more than one to two percent of the portfolio in any one's security to basically diversify. Now, the more concentrated you get, the greater your return, but also the greater your risk for loss. But I'd say that if, and depends on your risk tolerance too, but I'd say for most people, if they, if any one security, really we're talking about, I think, idiotic risk, we're talking about specific company risk. So if you had 50 securities in your portfolio, let's say, and you have no position would be greater than two percent. It's the person, if you said to yourself, if I lost two percent of that money, would I, how would I feel? Would I be totally upset? Maybe not. So if, if the answer is yes, then you have to question yourself. So I would put no more in any one position that I would be willing to lose. If the entire position, you would get a goose egg on the entire position. So if that's one percent for you, Sabrina, then I would say no more than one percent. I, it's tough to give a specific recommendation because I need to know your personal risk tolerance. And I'd have to ask you a bunch of questions, but I would say one to two percent is reasonable because it's, the entire company went bankrupt and you lost two percent. Maybe you wouldn't be that upset, but if you lost 40 percent, you might be upset. So that's why I say, keep it to one to two percent and if you can handle that risk. Yep. Thanks. Thanks. Yeah. Yeah. Basically, I'm in the real estate sector. So I do realize a lot of my holdings are in the real estate segment. So I thought, yeah, we should think about, and for me personally, I should think about diversification more into other sectors, instead of that, without understanding a lot of the sector is very hard to really understand what goes behind the mechanics of the company, like what's the profit drivers and stuff. Yeah. So then you could go broad market. You could buy an ETS when Alex said the broader market would be a way to help diversify while getting some additional exposure. You're diversifying your lower and your return. That's why Berkshire is so interesting because it's basically a diversified holding company and by buying one security, you're getting a very broad diversification that a very solid company. That's why people like it. They can hold a high percentage or a net worth because at the end of the day, one of the things we look at, we don't just look at cash flow and performance. I think on the individual security selection level, we look at what would we get if the company stopped doing business tomorrow? What would you actually receive? If anything. And that's one thing to look at if, but of course, if you're buying broader market indices and you have a longer holding period, that could help you diversify out your portfolio. Yeah. Yeah. Great. You get good advice. Thank you so much. Thank you. All right. So once again, just like Charles and Alex, different people are different. So you need to understand your goals, your needs, your life stage right now and what is the money that you can afford to lose and afford to invest and what is the money that you cannot. Different people's portfolio structure will be completely different. So I think the suitability is the most important thing. So continue to stay invested and continue to most importantly read to cultivate that right mindset and happy and safe investing as well. So thanks so much for watching. All the links about the speaker as well as the resources shared have been included in the description below. And if you have any questions, thoughts or insights from the interview, feel free to share with me in the comment section below. If you enjoyed today's episode, you may also be interested in to check out some of the episodes over here to continue your learning journey. 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