https://www.youtube.com/watch?v=c5Lw12PXkgU

1 00:00:00.000 --\> 00:01:00.000 what's going on everyone my name's alex
from ozzie and i am the host of the show owner of allen prestige labs
gym launch 120 million in sales um in 44 45 months um and i have nothing
to sell you so what i want to talk about today is something that i think
is really important i get a lot of questions about and it's about
long-term short-term investing some big pitfalls and i just want to
share with you some of the mistakes that i've made in this kind of
transition that i've been through going from kind of ceo to kind of
investor slash capital allocator right so the first thing is i want to
share some some some stats with you that i found really interesting i
think it was fidelity uh did a study it was either fidelity or charles
schwab did a study on which investor profiles and activity yielded the
best returns uh in terms of total portfolio value right and this was in
stocks and they found that there were two categories far outpaced
everyone else let me tell you what they were the first

2 00:01:00.000 --\> 00:02:00.000 and highest performing uh portfolio
activity were people who had purchased stocks and then died and so as a
result there was no more activity in their account and their accounts
outperformed everyone else the second highest were people who purchased
uh accounts or purchased stocks for the account and then had forgotten
their password as a result had not done any trading and so for me i
think this is hilarious because it shows credible flaws in human
judgment and it also shows the power of compounding growth when buying
businesses in general because then you just get exposure because if you
think about this from across all of the accounts that they have then
across all of the accounts then they have equal exposure to ups and
downs etc so across all of those accounts which is just like taking an
index of the market the people who do the least amount have the most
money in the account now what i want to do is explain to you a mistake
that uh i made probably like two weeks ago uh

3 00:02:00.000 --\> 00:03:00.000 that cost me shoot i have to do the
math it probably cost me 200 grit yeah it tossed me 200 grand all right
so here's a 200 000 mistake that you don't have to make i'm gonna walk
you through the math all right so what i was doing um is i have in my
quote portfolio i guess it's not a quote portfolio it's my portfolio um
i have three to five percent of it uh in investable assets that i
candidly i just play around with and it scratches my entrepreneurial
itch and just me being a human being 95 it's actually 97 of my uh worth
is in really really stable stuff all right but i want to talk to you
about the five percent so here's the difference between holding versus
trading all right and this is something that is massively underlooked
and i'm hoping to at least convince one person who's listening to this
that if you look at the math you you see how quickly you shouldn't do
you shouldn't try and you shouldn't try and beat the market

4 00:03:00.000 --\> 00:04:00.000 um by by by trading all right and so
here's here's the first reality is that there's huge quantitative firms
that have hundreds of analysts who are trying to beat you and they they
make their money doing that um but the second one is a simple hundred
dollar example all right so let's say you have a hundred dollars all
right so this is our this is our initial capital all right i'm going to
give you two scenarios that we're going to walk through so in scenario
number one we're going to have our day trading example and let's say
that over x period of time you do really well now i'm just going to
ignore the fact that most people are just going to lose money all right
so that's that's probably like 75 of all of us are going to mess up
somehow and think we're going to beat it you know i'm going to quote by
the dip and then it just goes down by another 50 right but let's just
assume you double your money all right so your 100 becomes 200 all right
everyone's cool so let's just say that happens over a five year timeline
whatever all right now the point here

5 00:04:00.000 --\> 00:05:00.000 is that uh it doesn't really matter
because if you're in this as soon as you are doing this through trading
then the capital gains treatment gets thrown out the window and it
becomes regular income all right so you're taxed differently so this
hundred dollar gain right that you have here from 100 to 200 gets taxed
at uh 45 you know 43 whatever it is and so you have a uh an additional
let's see here so that means that after this whole period of time you're
gonna you're gonna be left with a hundred and uh forty sorry 155 dollars
all right sorry about that 155 which are left after tax all right post
tax now don't worry i'm going to show you a third scenario in a second
the second scenario is you do it and you instead of trading that whole
time you just earn the same amount 200

6 00:05:00.000 --\> 00:06:00.000 100 turns to 200 and candidly the my
all my passive stuff is out has outperformed my active stuff which is
hilarious but uh which just confirms this for me which is why i'm making
this video all right so let's just say that you still you make the same
hundred dollars all right we're good there hundred dollars but now it's
capital gains all right so instead of being left with 155 dollars we're
now left with a hundred and eighty dollars wow well that's bigger but
let me show you and this is the thing that kind of blew my mind um
because that's why i love looking at the math so much is well then how
much would i have to gain from day trading or trading on shorter terms
or swing trades or whatever um for this to be worth it right how how
much extra money would i have to make to outpace the fact that i'm i'm
getting this regular income tax treatment on my income all right so
here's what's crazy so in order for me to get to net eighty dollars
right

7 00:06:00.000 --\> 00:07:00.000 i would have to take that hundred
dollar investment and turn it into i did the math earlier it's um uh 245
dollars all right so that means that i would have to my growth here
would have to be 50 you know 45 percent higher right isn't that crazy in
order to yield because that times the regular tax treatment gets me 180
all right so if i'm comparing the two things if i want to be left with
180 option one is i buy something and i forget about it and then later
if i you know five years later i'm i sell it for whatever reason and i
am left with 180 because i only had to pay capital gains on it in
scenario in order for me to to just match that not even beat it i would
have to take my hundred dollars and turn it into 245 dollars and then
sell it and this is obviously

8 00:07:00.000 --\> 00:08:00.000 this whole time you're continuing to
flip things and buy things and buy things right and then after the
regular income tax i'd be left with 180 all right and so when i saw that
illustration it became so obvious to me because i had had some decent
gains in something um and so i decided to sell it and i actually ended
up selling it at a good time uh because it ended up going down because i
felt like it was getting overvalued um and so i thought i felt pretty
good about myself right and what ended up happening is uh the thing
ended up coming back up to exactly where i had sold it again and so if i
had literally just done nothing then i would have more money because now
i have to pay i have to pay taxes on regular income because i sold it
within a year and mind you again guys this is on my three to five
percent i don't touch anything that's that's not that all right so i'm
just being very clear and candid here nor do i recommend you do that so
if you

9 00:08:00.000 --\> 00:09:00.000 need the look if you need the itch then
i would say put your put three percent aside um for pure speculation
which is just like i'm which is basically just saying i'm a human being
and i'm an idiot and this is how i can manage my idiocy um but but when
you see the math spelled out like this between this is what smart people
do and this is what dumb people who don't make as much money do then it
makes me so much more inclined to just do what smart people do and take
all of that extra time and just do something else or just make money
with my extra time um one of my good friends he uh i've known him for 20
25 years and when i met him he was i think he was he was managing i mean
maybe five million dollars like not which in the finance world is not a
lot for management um and now 25 years later i think he manages 3.5
billion he's one of the most stable people that i know and when i talk
to him about this stuff he's like you need a hobby

10 00:09:00.000 --\> 00:10:00.000 and so i guess the message that i have
for everyone is maybe get a hobby and just let the money grow and
pretend you're a dead person and if you can't pretend you're a dead
person then throw away your password uh or give it to somebody that you
would be ashamed to ask for your password back uh so that you just don't
touch your stuff because ultimately you'll probably be you'll probably
end up getting higher gains a and b you'll get taxed less on those gains
so i hope that was valuable for you i hope this makes sense i hope you
get a laugh out of my 200 000 mistake that i just made in the last two
weeks um keep being awesome lots of love like subscribe and leave a
comment and i'll try and get back to everybody who does so keeping
awesome kitchen bye
