Why Half of Them Have No Mortgage and Still Win

Sean Weisbrot: You've spent a long time working with people who have made a lot of money, whether it's first generation, second gen, third generation, and I am really curious to understand. Not only how they've made the money, but more importantly how they've kept the money and how they've grown the money. Because it's something that a lot of people happened, uh, have this happened to them where they have this liquidity event where before that they were poor, basically they didn't have any experience with a lot of money. And then all of a sudden this money is dumped into their lap and they just dunno what to do with it. And unfortunately, especially in lottery and athletes, a lot of people they. End up blowing all of the money that they've made and we want to inspire people to become financially literate. And so I would love to spend some time talking with you about that. Uh, so I'd love to know more about what you've learned and if you have a framework or a structure for that, then you know, we could go through that.

Tad Fallows: Yeah, that's a fantastic question. And I would say, I do think it depends to some degree, how you came into the money. How much of a concern this is? I think there is this widespread conception of, okay, you know, lottery winners are five years later, much more likely to be bankrupt in the general population. And that probably is true, but I think to some degree, if you look at lottery winners, or if you look at people who become pro athletes at the age of 23, you kind of have a selection bias there toward the people who are probably least prepared to handle a sudden windfall. You have somebody either who just, you know, 22, 23. Any one of us, our brains aren't fully mature, uh, by that point. And, you know, you've had very little life experience and you have, you've never paid your own bills. So I think there, you're just coming in with. You're, you know, going, there's no training wheel session, then lottery winners, you know, by definition it's people who are buying lottery tickets, the ones who are suddenly getting this. So they probably don't have the most rational, um, economic framework to begin with. So I think, you know, if you, if you're coming from a background at, which is significantly more common for somebody who generates significant wealth as, let's say, an entrepreneur. Maybe you are a high paid employee at a tech firm, you're a high paid employee at a hedge fund. Those people have a, have a leg up there. Both have probably a little bit longer in their career and have more of this exposure to basic financial concepts. So the first thing is, I would say, I wouldn't panic if you're in this situation saying, oh, by default I'm gonna blow it. And now I have to go hire Goldman Sachs and pay them 1% of my money every year just to prevent me from my being my own worst enemy. It's perfectly fine if you wanna do that, but if you talk to the. Wealth management industry, that's the only option. Whereas I would say that is a reasonable option and perfectly fine for those who want it. But also people are very capable of managing their own money, even if it has two more zeros than it used to have. Um, that said, I think in terms of, hey, what are the basics that people ought to do, um, to protect from mistakes? I'd say there's a few things. Um, and maybe I'll start with some of the ones that are a bit less obvious, maybe less sexy. One is to think about your insurance plan. Um. One of the last things people wanna think about next to perhaps estate planning, which I can cover next, but if you think about your insurance plan, you know, um, there are a set of what they call very high net, high net worth, or very high net worth carriers. If you've heard names like Chubb, pure Berkeley, one a IG, and they are really designed for people whose liabilities might be okay. I own a $5 million house, not a $500,000 house. Or if I am getting sued by somebody, they see me as deep pockets. And so as a $10 million judgment, and you're gonna have a different kind of, uh, liability there. And this insurance is a bit more expensive, but we're not talking 10 times more expensive. You're maybe gonna spend twice as much as going with a mainline carrier, like an Allstate or a State Farm. Um, but really one thing I think you'd wanna do is find a broker who doesn't work for any one company. Not a so-called captive broker, but somebody who will. Rate shop across all of them, but who is specifically focused on high net worth clients and just say, Hey, I need a basic insurance package. Again, this is nothing crazy. It's the stuff you're familiar with in terms of home insurance, auto insurance, et cetera. Although one key thing being umbrella insurance, a lot of people would not historically have umbrella, and basically what that means is your normal insurance goes up to, let's say half a million of liability. It kicks in for literally another five or $10 million of liability above that, and it's shockingly cheap. We're talking maybe a thousand dollars a year, $2,000 a year to get five or $10 million of extra coverage. So very unlikely you'll actually have this problem. But in that circumstance where something terrible does happen and you have a $5 million judgment, you'll be very glad you spent a thousand dollars a year to be covered against that. So insurance is one piece.

Sean Weisbrot: Hey, business leaders and marketers, what if your brand could be featured right here? This ad spot could be yours. This channel is watched by a dedicated audience of ambitious founders, executives, and professionals who are actively looking for tools and services. To help their business grow. If you wanna put your brand in front of this highly dedicated audience, that's difficult to reach. I'm currently looking for a few strategic partners for the channel. To learn more about sponsorship opportunities, click the link in the description. Let's grow together real fast. I want to ask you about this 'cause this is something that's relevant for me now. Apparently my parents took out an insurance, a life insurance policy, a 20 year term life insurance policy on me 12 years ago when I was living in China. Yeah, because they were concerned about, you know, if I, something happened to me, if I got really ill or if I died, they'd have to cover the funeral costs and the, you know, going there and taking my body and all of this stuff. And they want me to take over the policy now that I'm married. And so I'm looking at this and I'm like, what am I supposed to do with this policy? It's got six years after that. Like I'll be 40 soon. You know, so I, I'm like, do do people have these life insurance policy? Like do you hear these ultra high net worth individuals talking about life insurance? And like, do they put them into trust? Do they put beneficiaries, individuals? Like that stuff is super confusing.

Tad Fallows: It's a fantastic question. I'd say the first thing, and if somebody takes away one thing from this, do not buy whole life insurance. The only person who is trying to sell you whole life insurance is someone who's getting a commission on whole life insurance. So you mentioned term that's of course a different beast from, uh, whether they call it whole life variable life index, universal life. All fancy ways of saying that you're gonna pay a whole lot of commission and get something you don't really need. But wi within the term world, I think that really comes down. And this again, should be quite cheap if you're, if you're 40 and you want, I don't know, let's say a million dollars of coverage, we are not looking at 5,000 a year or 10,000 a year. You're, you're looking at, yeah, more like a thousand or 2000 a year for that coverage. And that really just comes down to, do you have, if you were to get hit by a bus tomorrow. Is that gonna be a problem for someone else? Clearly it's a problem for Sean, but do you have enough money that your wife will be fine with just what's in your brokerage account? Or do you have little kids and now you know your wife needs to raise those little kids and you're gonna need an extra $4 million in order to get them through high school and college. That's really the way to think about it is what time horizon will it be a problem for somebody that you care about if you pass away? And what is the gap between the assets that you're gonna leave and the assets that are required? So it could well be somebody with a lot of money, maybe if somebody has five or $10 million, but now they've bought three houses and they've got four kids and they've got, you know, a set of people who are counting on them. Maybe they really do need until their kids get through college or something like that. Um, a significant policy, but I would say. If you are single or if you have enough money that. When you pass away that that estate by itself is enough, then at that point you don't really need term insurance. Um, and you know, I was not this idea of quote permanent insurance. I don't, you know, there's plenty of podcasts out there that really go down a rabbit hole on it, so you, we probably don't need to cover that too much more here. But what, what I will say by way of a data point is in our community of about 7,000 people who are either very high or ultra high net worth and, you know, pretty sophisticated in these things, pretty much nobody carries. One of these permanent life insurance. There's a very special exception to that, something called private placement life insurance, which is really more of a tax planning vehicle than it is an insurance policy. But, um, you know. We're talking a million dollar minimum for something like that. So if, if you haven't been thinking about it, it's probably not relevant to you. But you probably will have at some point a broker come and talk to you about whole life insurance. And um, you know, I can tell you that 90 well north of 90% of people in the situation decide that's not a good trade off for them.

Sean Weisbrot: Okay. So then in the interest of time, uh, I guess let's go on to the next thing that you were thinking about.

Tad Fallows: Yeah. Yeah. I mean, I would say estate planning is another one that nobody wants to think about, but you should at least do the basics on and, and. There simplistically, there's a few documents, there's your will. Okay, what's gonna happen to my kids? Most importantly, and some other things like that, if you pass away. And then there's things, um, there's something called a revocable trust, which really just simplifies the estate process. Um, if you pass away, there's some more complicated things where you get into things like irrevocable trusts, which if you're in a situation, at least for your US listeners, there's a $30 million estate tax limit. Um, more people will probably end up going over that than they think. 'cause someone with $10 million today, if they're age 40, they're probably gonna have more than $30 million by the time they pass away. 'cause they have a lot of compounding in front of them. So you don't have to have more than 30 million today. But if you just do the math and say, okay, over 30 years, I might have 10 times the money. If you have 5 million today, you might actually get there. So think about it. Um, and that I'm not gonna walk through a, Hey, here's the exact playbook. But of course it depends on the person. But I think making a point. Of talking to a, a lawyer who specializes this and they'll have a pretty straightforward playbook. Unless you're trying to get really fancy and put bells and whistles on it, you're not gonna rack up a massive bill for doing this. But it's something that's always better to be done earlier and you wanna just go ahead and, and work with a lawyer to set a basic practice there. So I would say that's kind of your infrastructure and logistics. We could talk a little bit more about the investments, which are probably, you know, the sexier thing to talk about, um, to begin with. But, sorry, I think you had a question there, Sean.

Sean Weisbrot: I was just gonna say in like. One sentence for each. Yeah. Type. Can you explain the difference between a revocable and ir? Obviously the term irrevocable and irrevocable are obvious, but what's the difference in the reasons why you would do one versus the other, like in a few sentences?

Tad Fallows: So a revocable trust does not really do anything or come into play until you pass away. All it does is that in some states, when you pass away, if you don't have anything, then a judge goes through this probate process and you're just paying a bunch of legal fees and you're taking six or 12 months where assets where you wanted them to end up. If you have a revocable trust when you pass away, it kind of comes to life and simplifies that process. An irrevocable trust, as it sounds like it's irrevocable, but it's a much more significant document where, you know, you, Sean, are actually giving money away today. You're putting this trust. You can't control it the same way you used to. You can't get it back the same way you used to. And that might sound terrible. And you know, people don't like that aspect. What they do like is from a liability perspective. If you suddenly defraud me and I sue you, that's not actually your money anymore. So I can't get that money from you because it's in this trust. And from estate planning purposes, that money is out of your estate today. So if you put an Nvidia share in there today, and it's worth $1, and then 10 years from now it's worth a hundred dollars, you're not, your estate doesn't get taxed in that appreciation. It just, um, gets taxed. Or the value that you put in that.

Sean Weisbrot: Okay. So another question about infrastructure before talking about investments, domestic versus foreign companies, trusts, bank accounts, um, especially there's a lot of Americans I imagine in your community. Some of them may be living in the us, some of them may not be. How are they on average thinking about this for tax purposes, for liability, uh, for, you know, for legal purposes and whatnot?

Tad Fallows: Yeah, I think there is some, there's some set of advisors who will advise you get really cute and be like, oh, Seth, this trust in the Cook Islands, because nobody can ever, ever, ever come after you there. Things like that. I think that's a pretty dangerous thing to do. The only reason that's relevant, if you are doing something really shady and any proper legal system would come after your assets and now you've parked them in the Cook Islands, but you know one that's probably not ethical to begin with. Second, you're then trusting the Cook Islands legal system to protect your millions of dollars. And I think the risk that you did something really shady is probably smaller than that. Something shady happens in one of these shady countries, and now you don't have the recourse to a first world developed legal system, um, to, to protect yourself. So I think that is a bit, um, I, I, I don't know many people who actually follow that. Within, let, let's just talk about the US for a second. Within there, there's different states that have different rules. There's a sub in, you talk to any lawyer, they'll tell you, okay, you know, Nevada, South Dakota, Alaska, there's a Delaware, there's a few of these that are sort of better than, uh, structured than others. If you're working within a US state, it's basically the same thing. Um, and you're having a very reputable framework. So I would just follow my lawyer's advice there. I think I have trust in Alaska and Nevada. Um. In terms of, uh, you know, outside the us that's really something where it's probably gonna be dangerous for, you know, me to be giving advice. I think if you live in Portugal and you have certain Portuguese implications, it depends on citizenship and a bunch of stuff, which is probably universal advice is more likely to, to lead someone astray.

Sean Weisbrot: Okay. I guess I was coming at it from the point of view of what have you heard of your community members doing, even if it's not legal advice.

Tad Fallows: So I would say most of them keep their stuff within us and. Within the place where they, the jurisdiction, where they live, if they're in the us they keep their stuff in the us they're not taking advantage of, um, you know, foreign legal regimes. I think if you're in Europe, it's probably a a little bit more specialized, partly because they don't have the global taxation. So as a US citizen, if I move to Mon, I'm still paying US taxes. We are really the outlier there. If a French citizen moves to Monaco, they're no longer paying French taxes, they're just paying Mons taxes, which is nothing. Um, so I think there, there is more playing around with those things amongst, um, people outside the us but I would say even they tend to stay within relatively established, developed countries. Maybe if you're going to Switzerland or Monaco or Luxembourg, but they're not going to your jurisdictions of convenience like. You know, Tuvalu or, or, uh, Micronesia, something like that. I think that's different a bit from if you are investing, there's, which is probably way too much detail investing in certain, uh, private equity vehicles. They're often domiciled in something like the Cayman Islands to avoid certain tax treatment. That's different from really like your own estate. That's more of a corporate thing for particular investments. That's not your holistic estate. Moving to the Caymans.

Sean Weisbrot: Okay. And so what have you seen from your community members on average in how they structure their portfolio to, so I guess are, are they on average thinking about growth or preservation? Like what, what's more important to them? Growth or preservation right now?

Tad Fallows: Yeah, fantastic question because I think anyone rational could look at this in one of two ways. You could say, alright, if I've been fortunate enough. That I have, let's say, five times as much money as I need, you could either say, well, there's no need to take risks today. I can put it all in muni bonds. I can clip a 2% coupon and that's gonna cover myself, you know, for the next 40 years. And I'm done here. I never, I sleep well at night. Or you could say, Hey, I have enough money that I could put it all in a triple never Nasdaq, NASDAQ fund. And even if it drops two thirds, I still have plenty of money. And I think my expected value 30 years from now is much higher by doing that. And so I'm gonna go highly risk on. I'm gonna accept the volatility and basically get paid for that volatility in the form of, of high returns at the end. I don't think there's a right answer to that. I think that is largely a personality question. Now to your question, Hey, what do people do in practice? In practice, they take a much more risk on approach. I, we do a, um, annual asset allocation benchmarking survey and ask, Hey, between. Stocks, bonds, cash, crypto, private credit, private equity, oil and gas, et cetera. Where do you keep your money? And I would say the bond allocation is well south of 10%. So if you hear of a quote, typical portfolio being 60 40 in practice, I'll call equity like so instruments with a high expected return, but higher expected volatility are more like, um. Real estate's, maybe a quarter or a third of the portfolio, and then equities are almost the entire rest in just a sliver in cash and bonds. The flip side is, it's not what I just said of, hey, a triple levered NASDAQ thing that's just, you know, uh, volatility to the moon. People actually are quite conservative on taking out debt and leverage. So your typical member, if they have a net worth of a hundred dollars. They'll maybe have $5 in bonds, but they'll also have under $10 in borrowing. So half our members don't have a mortgage at all on their house. Um, they basically say, Hey, what money I do have, I'm gonna put in a high return instrument and I'm gonna be okay with the volatility, but I'm not gonna risk the money I have for money I don't need. So they're not gonna take out, you know, debt that is total their net worth to double their exposure and take the risk that a down market actually could cause them to go bust and set back to zero. Which I think is a pretty rational approach. Um, because if you put your money in stocks, maybe they drop 50%, but if you can handle that and you're not levered, you'll be fine. They'll come back from that 50% over the next decade. Whereas if you borrowed 50% and they dropped 50%, you'll get a margin call and you're left with nothing and you can never come back from nothing.

Sean Weisbrot: Something that's interesting to me, I've heard of only recently is like, basically let's say you've got 5 million in, in, uh, in your portfolio and someone is willing to give you a one and a half million dollars loan or a $2 million loan. You kind of mentioned it, but basically. Let's say the cost is 5% a year, and you know that you can put all of that money into an eight to 12%, you know, high dividend ETF, would, would people do that or would they avoid that?

Tad Fallows: Some people do it. I would say a key thing you said there is they're borrowing the amount. They're borrowing, I think borrowing 10 or 20% of your portfolio. Is perfectly fine because the way these loans work is, let's say you have for simple math, a million dollar portfolio, you are allowed to have debt depending on the brokerage you're working with of, let's call it 50, 60% of that. Um, so let's say it's 60%, you can have 600,000. Now if your portfolio falls by half, the amount you're allowed to borrow will fall from 600,000 to 300,000. 'cause a consistent ratio. So if you borrowed half in the beginning, you're at a high risk of getting this margin call. If it, if it falls, if you only borrowed 10% to start with, so you only borrowed a hundred dollars, the market would have to drop from a million all the way down to just 150,000. If you get margin called and you know, even the Great Depression, that would be a sort of surprising scenario. So I think the 10 to 20%, there's plenty of people who do that, and that's not particularly aggressive. I think if you get over that for any sustained period of time, people in general don't do that because there's just too much risk from the volatility. In terms of how they use it. Some people use it just to juice their returns by a little bit, as you said. Okay, I'll borrow 10% and I'll put 10% more into, maybe it's just a broad index fund. Maybe it's a dividend stock. Philip Morris or Altria is paying 7% and I'm borrowing it 5%, so I can clip that coupon over time, I'll do fine. I think that's reasonable. What's probably more common is to see that as an emergency fund, because you could say, Hey, I need to have 10% of my money in cash at all times. For opportunistic investments, for risk of, you know, a medical problem for something I want to buy, et cetera. But if you have that perpetual 10% in cash, that's going to drag down your long-term returns quite significantly over a long period of time. If instead you say, Hey, I have the ability to access literally the same day, half a million dollars outta my million dollar brokerage account, I don't need to keep cash anymore. I can just wire myself the money if I need it, and then I'll pay it back on my own schedule. That's actually a pretty common usage. And part of the reason I think that you see such a low allocation to cash is that cash is not a good long-term investment. You are almost always losing money relative to inflation, or if you are making money, it's di minimis compared to what you could make elsewhere. So they avoid that cash drag, but keep the flexibility, which that, that's the way that I use my, uh, portfolio line of credit.

Sean Weisbrot: So when these people are thinking about this risk on type investment, as you were saying, they, they tend to be more aggressive. What are they looking for? What are they investing in?

Tad Fallows: Um, a lot of that is gonna come down to, you know, personal nature broadly. I would say there's two ways that people approach this. One, and this might be your, you know, classic engineer mindset is, I'm gonna look at this in a really rigorous way. I'm gonna do research and say these 10 assets have this 10 historical returns, and they have this correlation to each other. I'm willing to accept, you know, there's the so-called efficient frontier for every extra percentage point of volatility that you're willing to accept. How much extra return are you expecting to get? And they'll have a very strategic, I'm gonna reallocate my portfolio every quarter to keep each percentage in line and this much in domestic stocks, as much in international, this much in precious metals, et cetera. Um. That in theory, I think is a great practice and in practice, maybe a quarter of people do it that way. What I think is more common if you're really talking to people is they take a little bit less strategic and a little bit more opportunistic approach of, okay. I heard about a great private equity investment. I'm gonna put 1% of my money or 3% of my money that p investment, and then maybe next month I see this other opportunity here. Or I really like, you know, Bitcoin's falling 80% and I'm a believer in Bitcoin. I'm gonna, you know, add, put one or two or 3% of my money into Bitcoin. Um, and so they will look at it more from a ground up level of individual investments they like and as long as their portfolio. Aggregate is somewhat reasonable. Let's say they put a bunch of money into Bitcoin, that 10 x, they're probably gonna trim that position to, you know, keep it at a allocation, uh, that lets them sleep at night, but not, you know, consistently rebalancing toward these, um, optimal dynamics. Uh, I would say that's probably the more common one in terms of the kinds of investments that, the specific things that people are investing in. Um, public equities for everybody or almost everybody, is gonna be the biggest piece of their portfolio. I think if you are somebody who's not very high net worth, so let's say if you have a hundred thousand portfolio, really public stocks are the best way to do that. 'cause you can get in at any minimum price and you're gonna get very good returns in the long term. If you start to get into a seven or an eight figure portfolio, people, we, you do find that there are so-called alternative asset or their private market exposure goes up in correlation with their net worth. So whereas your average person with a million dollars may have, I don't know, five or 10% alternatives. As they get to maybe being a 10 million or 20 million or 50 million portfolio, their private equity, um, allocation is gonna go up significantly. And basically it's the, what private equity versus public equity mean is right there in the name. Public equity means that you own a share of a public company like Apple or like Microsoft, whereas private equity is you own a share of a private company. So you can't go to the New York Stock Exchange and actually buy and sell that. It's a lot more illiquid. But if you look, you know, we could get into a debate about this, but I think it's fair to say that on average, historically the returns of private equity have been somewhat higher than public equity. Um, not three or four times as high, but if public equity is delivering eight to 10%, maybe private equity is delivering 10 to 12%. It may sound di minimis, but if you say, Hey, an extra 2% a year on a million dollars for 20 years, that actually compounds to, to being real money. So

Sean Weisbrot: are. Are they holding an asset? Like you said, when they see that the profit looks nice, they'll take it out, and then are, are they taking it out because they have conviction and there's another investment they wanna move that money into? Or are they taking it out and then looking for an opportunity and sitting on the cash or moving it into something safer while they're looking for that opportunity? Like how do, how do they manage that portfolio?

Tad Fallows: Yeah. Again, you know, different people, different approaches. But if I took the median or the modal person. They are probably more trimming a position when it has been too successful and just become an a, a element of their portfolio that's making them nervous. They say, okay, I made this great beta Nvidia, but is now half my net worth is in Nvidia. I still like the company, but I just don't feel comfortable with half my net worth being there. There could be some Black swan event tomorrow that causes that to fall by 50%. I'm gonna be really unhappy if that happens. I think that's the more common thing of people say, Hey, this is just too big. I'm gonna trim it and I'll look for somewhere else to put it. Um, your most strategic person who's probably not me, but you know, there, there are these people out there, is gonna take a little bit more of that disciplined, okay? I now found opportunity number four, which is more attractive than opportunities one, two, and three. So I'm gonna sell a little bit of one, two, and three and rebalance into four. And, you know, uh, again, improve my kind of, uh, total portfolio composition there. I just wouldn't hold yourself to that standard. It, you know, maybe you, that's sort of a journey. You try and get there over time. But I think a lot of people are more in that just, I'm gonna sell something when either I lose convict, it becomes too big, or I lose conviction in the stock. They might say, Hey, I was a big believer in Apple, but now Steve Jobs passed away and I don't like this Tim Cook character. Now, in retrospect, that was a terrible choice. Tim Cook was great, but you know, stuff can change. Or maybe you say, Hey, I, I don't, I've got a bunch of Altria stock I inherited, but I think cigarettes hurt people, so I'm gonna sell that Altria stock just because I don't feel good owning it. There could be a lot of reasons to do that. Um, now one thing that's interesting is especially if you're in this concentrated position, which is fairly common in our community of somebody either started a company or they've been an employee at a company that's done very well for a long time, so now they have a huge amount of any of the names you think of, Google, Microsoft, Facebook, Nvidia, et cetera, where that was most of their compensation is now they have this stock that represents too much of their portfolio. And then the challenge with that is you could say, okay, it's clear I should trim this, I should sell some. But I'm gonna incur a huge tax bill if I do this. How do I trim this position without paying a million dollars of taxes here? And there are a couple of ways to do that simplistically, um, basically three things you could do. One is if you're charitably inclined, you can give that money away. And so if you donate a million dollars of Apple stock, you'll get full tax credits for having donated a million dollars. But you don't have to pay for the appreciation that went from you paid. A thousand to buy it and it's now worth a million. You never pay the kind of tax on the gain, but you get a tax benefit on the donation part. So you still have less money you had before to be clear, you gave away the money, you don't have it. But if you wanted to support a cause anyway, that's a much more efficient way to rebalance your portfolio and provide that charitable sort support you want. Um, so that's a fantastic thing to do. Um, and a donor advised fund is often a good way to do that. So one is to give away the appreciate stock. A second one is what's called an exchange fund. What that looks like is, let's say I've worked at Exxon, you've worked at Apple and a third person over here has been working at Bank of America, and all three of those stocks have gone up. Each of us is over allocate to our own stock, but we basically form a pool. I put in a million dollars of Exxon. You put in a million of Microsoft, he puts in a million of Bank of America, and then we each own a third of this now diversified portfolio of stocks and actually the way the laws work, at least in the US after a certain number of years, I believe it's five or seven years. You can take out a third of each of those shares and you never actually had to sell any of them. So you become diversified without actually having a sales transaction. Um, and if you look online, there's different, just look for exchange Fund, there's different providers that offer exchange funds. Uh, a third option is what's called direct indexing. And indexing, as I'm sure you're familiar, is basically if you want own the s and p 500, you're getting exposure to 500 companies. This is in the name or the Fs E 100 in England's roughly a hundred companies. Now direct indexing is, rather than buying just a a portfolio from Vanguard, you actually directly buy every one of those 500 shares. I might say, well, that seems like a lot of complexity for no real point. But the value of that becomes today I buy 500 shares, but then just the nature of the markets, some will go up and some will go down. So let's say Exxon goes up and Chevron goes down. They're gonna be highly correlated. But what happens is you can sell your Chevron shares and recognize a loss on Chevron and then buy Exxon shares in their place. So your, your portfolio returns won't really change because in the future when Exxon goes up, Chevron's gonna go up at the same pace. So you'll get the same long-term returns, but you're able, as you go to continually sort of recognize and lock in these gains and you can use that to then offset the. The, uh, gains that you're making when you sell your concentrated position. So over a course of several years, you're able to make those sales and deconcentrate your position and basically manufacture offsetting losses so you don't have a big tax bill along the way. And again, if you look up direct indexing, for example, there's a company called Fre, um, who I've worked with a bit to, uh, to manage that.

Sean Weisbrot: Is there anything I haven't asked that you feel is really important to share?

Tad Fallows: Um, I would say the last thing is. To, if you're in this position of having a significant wealth change or windfall to recognize two, recognize one, that nothing important is really going to change. And what I mean by nothing important is let's say you have a. Bad relationship with your kids. Adding a bunch of money to that is not gonna turn that into a good relationship. Or hopefully you have a good relationship with your kids or a good relationship with your spouse. Adding a bunch of money is not gonna change that good relationship. Same thing. If you are healthy or unhealthy, adding a bunch of money. If you're happy or unhappy, it's not gonna change that. So I think that in some way, you know, if you look at all the things people in our community discuss, it's the same thing that they were discussing before. How do I raise my kids? Well, you know, what, what are good? How do I stay healthy? That kind of stuff. You know, how do I find meaning in my life? It's not, um, you know, those fundamental changes. And then, and so I'd say don't kind of put pressure on yourself in that way. I would say the flip side is also don't feel a pressure to just do something quickly. A lot of people will advocate taking a six or a 12 month cooling off period. Don't make any major investments. Don't make any major purchases. You often hear this advice after somebody's spouse passes away that, you know, widow shouldn't say, sell her house within the first 12 months. Really see if she likes living there independently before deciding to sell it. And I would say it's the same thing here. I think there can be some temptation of, oh my goodness, now I'm managing $10 million. I'll throw a million dollars here, a million dollars there at this cool venture capital fund or this cool private equity fund, and then after six months you've actually put half your money into stuff you didn't really research that well and aren't necessarily happy with those decisions. So I would just start a little bit smaller. Put 1% or half a percent to position, not five or 10%. So you get a little exposure and experience and, and decide what you'd like without having made huge investments or again, huge spending. I wouldn't spend half my money buying a new house. I would either take my time or make some smaller purchases, um, relative to whatever that amount of net worth is.

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