The chart above shows the growth of $100,000 invested between the average equity investor and the S&P 500 Index for the past 30 years (through 2021).

This is one of the best charts to display whenever someone asks if you should sell your entire investment portfolio.

Even the best investors get caught up in market timing or news headline gyrations. The simple fact is a person that invested $1,000,000 30 years ago in the S&P 500 and just held would have a portfolio of over $2 million. The average equity fund investor has vastly underperformed, with a portfolio almost 2/3 lower.

Success in investing is more behavioral than it is intellectual. This is the #1 rule of investing. You must have the discipline, self-control, and commitment to a longer-term plan to succeed in investing. What you invest in does not matter if you lack these behavioral traits. You will likely underperform the market. As Warren Buffett put it: “The stock market is a device which transfers money from the impatient to the patient.”

The depressing fact is that the average investor does not have the mental and emotional strength to ride out downward market cycles. The proof is in the numbers.

Human behavior is not going to change anytime soon. If more people had self-discipline and patience, the world would not need financial advisors, fitness trainers, life coaches, etc.

Here are a few assumptions I have made about investing. I don’t think I will change my mind on these, but you never know:

You will likely underperform the market if you lack emotional stability or patience. The questions of what individual stocks or indexes you invest in are irrelevant until you correct your behavior. The good news is that you do not need an MBA from Harvard to be a great investor. The bad news: human behavior is learned throughout a person’s lifetime. Learning good behavior or unlearning bad behavioral decisions is much more complex than learning how to read a company balance sheet.

If you have the right temperament, you shouldn’t invest in indexes. It is a waste of your abilities. People do not build wealth by seeking the average return of the market. The one negative aspect of indexes that does not get enough attention is that you are not learning about valuations or actual investing.

Investing in fixed-income assets like I Bonds is bad for most people. Investing in something like I Bonds is terrible if you have a long-term horizon. $10,000 in I Bonds will likely return you about $750 in profit after taxes. $750 is not life-changing money. This profit is equivalent to doing a side hustle, which doesn’t require holding $10,000. When people run toward fixed-income assets, it is typically a sign of a scared investor. The lost opportunity cost of tieing your money in something like this for a decade or longer is massive. Those with a high net worth aren’t giving I Bonds the time of day. Putting your first $10,000 in I Bonds is bad for beginning investors trying to build their wealth because this isn’t a wealth-building activity.

Do not worry about hedging. Buy-and-hold investors should not even consider hedging. Until you have a sizeable portfolio in the seven figures, be laser-focused on growing it. Stop copying institutional investors and hedge funds. The games they play differ entirely from what most retail investors should do.

The Stock market is not a giant casino. And investing in stocks is not equivalent to buying lottery tickets. Comparing the two will likely lead beginners not to invest altogether. There is a fundamental difference between betting $10,000 on one spin of roulette vs. investing $10,000 in a company like Alphabet, which has a market cap of over $1 Trillion.

Starting your own business is hard. From LendingTree: “18.4% of private sector businesses in the U.S. fail within the first year. After five years, 49.7% have faltered, while after 10 years, 65.5% of businesses have failed. I admire those who want to start their own business because it is tough to do so. From an ROI standpoint, I would instead invest in public companies led by some of the most innovative people in the world rather than use my capital and build a company from scratch. If everyone had this mindset, we would have far fewer entrepreneurs worldwide. It also goes against the ingenuity of American ideals and prosperity. I find it peculiar that many business owners are admired as go-getters and entrepreneurs, yet stock-pickers are labeled risk-seeking gamblers. Based on statistics, entrepreneurs who start a business from scratch have worse odds of getting a higher ROI than long-term investors.

Watching CNBC can be toxic for your health. You can include all financial news channels. Most financial experts say it is impossible to predict short-term movements in the stock market, yet CNBC brings on people who make predictions on the stock market and the economy in the short term. Much news/data is delayed or irrelevant to your investment portfolio and strategy. Often you are better off holding and doing nothing instead of reacting to every earning report or news headline. My advice is to focus more on the history of financial markets and events and less on forecasts.

Great investing is a lonely journey. Having conviction is difficult when everyone – the media, family, friends, neighbors, and random people on the internet says what you are doing is wrong. Imagine being an investor in Tesla. For years you had investment managers predicting Tesla going bankrupt or the company being a giant scam. Even despite the epic performance of the company, the same critics do not say they were wrong; they just say Tesla investors got lucky. It is important to remain optimistic in the long view. You can save like a pessimist and be worried in the short term but remain optimistic in the long term.

Despite challenging macroeconomic headwinds, I bought more stock in RVLV. I have never sold any shares since I started buying in 2019.

Potential investors can come up with several reasons to not buy stocks. They are missing out on a massive opportunity here. Current share prices are undervalued. It does not reflect the massive growth in sales and customers.

Q2 2022:

“In Canada, net sales quadrupled in just the past 6 quarters.”

“For the trailing 12-month period, net sales per active customer were $488, an increase of 9% year-over-year. This data is quite encouraging, considering that new customer growth has been really healthy for the past several quarters, and that revenue per customer tends to increase significantly over time.”

“I’m especially encouraged by the increased engagement with our compelling video content on TikTok and Instagram reels. In the second quarter, new views of our Titan more than doubled sequentially compared to the first quarter of 2022 and nearly tripled year-over-year.”

Revolve isn’t an apparel company. That’s what Wall Street doesn’t get. They utilize trend-forecasting algorithms and social media marketing like no other clothing company.

High Profit-Margin Business: Think Lululemon. A rare e-commerce business that churns consistently free cash flow. They will continue operating while their competitors fall or get acquired.

Impressions: More people are viewing Revolve TikTok content today than when people were forced to stay in their homes during the pandemic. The amount of impressions Revolve makes on TikTok is creating long-lasting high-value customers. To reach a bigger audience, you go on TikTok or Instagram Reels. Legacy apparel companies are still utilizing traditional advertising.

A company like Louis Vuitton was founded in 1854. Think about how long it took for them to create a premium brand name. Revolve is making quick progress, unheard of for a new luxury fashion brand not based in New York, London, Milan, or Paris.

Share prices of Revolve will be significantly higher five years from now. I am buying and holding because the exponential growth is happening now. Exponential growth in net sales and customers will eventually translate to exponential growth for investors. Stomach the volatility now to reap the rewards in the future.

Lemonade just reported Q2 earnings, and the results were impressive. The critical piece I took from the earning call was their sales from cross and upselling:

What this means:

Cross-sells and upsells cost the company nothing. For example, Lemonade insurance is available in Florida for renters, pet, and term life insurance. When they eventually rollout homeowners, condos, and car insurance, they have current customers ready now in Florida to buy those products, just waiting for an e-mail or tweet.

Lemonade will still need to acquire new customers, which is unavoidably expensive, but the cross-selling from every new product rollout creates a pathway toward profitability:

The upshot is that even as we continue to launch new products in new
territories to new customers, we have turned a corner. We expect our losses
to peak this quarter (Q3), and to continue to shrink thereafter, charting a
clear path to profitability.

Increased cross-selling and upselling = increased profits without increasing spending.

Think of it like this: McDonald’s best-selling items are french fries, but who orders just fries? Typically people buy fries with a Big Mac, double cheeseburger, or coke. McDonald’s wouldn’t be as profitable if they just sold fries. Look at renters insurance as the fries for Lemonade.

Renters’ insurance alone won’t make Lemonade profitable or a big winner, but it does provide them with a lot of data for their AI to analyze and become more intelligent. It is also very likely if you need renters insurance, you will need pet, term life, or car insurance, at least one of those products. Customers with renters insurance typically need homeowner/condo insurance when they eventually buy a home.

Customers love Lemonade. They wouldn’t buy more products if they did not like the company. The market has several options for insurance products. For current customers to buy more products from Lemonade, show a loyal customer base and a sticky product ecosystem.

For a restaurant, you need to get customers inside the doors and hope the food, staff, and atmosphere do the rest and keep them coming back. Lemonade needs to follow that same path: Get customers into their product ecosystem and hope what separates them from other insurance companies keeps them as lifetime customers, owning several different policies.

The great news is that Lemonade has a lot of markets they have yet penetrated. The earning call presented fantastic information for the long-term picture. The company is derisking and growing at the same time. If they have all the products consumers need and want, I can one day see Lemonade as the one-stop shop for all things insurance. I will eagerly observe how this company grows in the next few years.

The stock is down mainly because of intense macroeconomic factors and expected slowing consumer demand. The apparel section is primarily discretionary spending. If higher fuel prices and operating costs hit big players like Walmart and Amazon, a smaller company like Revolve will get hit even harder.

After listening to the earning call, my conviction has not changed. The company is still strong in the long term. I did not hear anything that indicates this company is in trouble, and they have a strong chance of coming out strong if the United States enters into a deep recession.

My takeaways from the earning call:

Key metrics are healthy: Revenue, Active Customers, Total Orders Placed, and Average Order Value.

The company is still growing, which is obviously important from a growth company. net sales were $290 million, which was lower than the $294.6 million expected. Not a big deal.

 The Revolve brand is centered around consumers looking and feeling great and living their best life. And certainly, right now, consumers aren’t feeling that way.

Net income was the biggest issue, which can be attributed to rising fuel costs. Fuel prices have hit California harder than any other state, and Revolve is based out of Los Angeles. They can offer 1-day delivery time frames for many regions surrounding the Los Angeles fulfillment center.

The good news is that obvious macroeconomic headwinds will likely dissipate when inflation decreases. I believe current fuel prices are unsustainably high. Revolve is also operating its first east Coast fulfillment center, which should improve delivery times for customers on the east coast.

I did not hear anything on the call indicating a weakening long-term picture. In the short term, the company is challenged due to macroeconomic pressures. Still, from a quantitative standpoint, sales, revenues, and free cash flows are significantly higher from just three years ago.

This company would survive a recession:

The cash position on our balance sheet at quarter end was more than five times higher than our cash position three years ago — on June 30, 2019, just after we completed the IPO. And this cash generation was purely operational, without external financing. A clear and powerful indicator of our operating strength and scale.

Our team and technology are battle tested and have emerged stronger through this volatile period, and we are primed and ready for what lies ahead.

Companies you need to worry about during a recession do not generate free cash flow, do not have a pathway towards profitability, and have a lot of debt on their balance sheet.

Revolve is cash flow positive and has zero long-term debt. They are also not issuing new shares, which would dilute current shareholders. What I like about Revolve is that they have a clear pathway towards growth without having to sacrifice their balance sheet. I see this as good marriage between growth and value investors: Good long-term growth/revenue with stable financials.

There is no doubt that Revolve would suffer during a recession, and they would likely see a slowdown in sales. That’s not surprising, as if a best-in-class company like Amazon is getting hit during uncertain economic times, nearly every other company in the consumer discretionary sector would likely do worse. I am confident that a company like Revolve could navigate a recession due to its strong balance sheet. They have a lot of flexibility and options if the economy worsens. They also have a growing/loyal customer base, and most importantly, their demographic is affluent, a demographic which would be less affected by a worsening economy.

The covid lockdowns, in my opinion, were a more significant existential risk to Revolve than a looming recession. I would be more worried for companies like Farfetch or Allbirds (unprofitable, debt on the balance sheet) in this type of investing environment.

Revolve is a long-term winner:

And across the business, we will continue to invest heavily in our proprietary technology, which we view as a significant competitive advantage. Mike’s team is constantly building out internal technology to drive increased conversion rates and revenue, greater operating efficiencies, and an even better experience for our customers. For instance, within just the past few months, the technology and data science teams have developed proprietary internal applications that leverage machine learning and our rich data set to further optimize the customer experience and drive further operating efficiencies through enhanced fraud detection and package optimization. And on the site, we continue to elevate our personalization, product recommendations and search functionality, and recently launched an application that leverages machine learning algorithms to dynamically, and in realtime, recommend outfits for our customers to “complete the look.” We are in the early innings of leveraging AI technology with some exciting projects in the pipeline that we believe will both drive revenue and operating efficiency in the months ahead.

However, with the demand trends shifting during the second quarter, as discussed, our inventory balance ended the quarter in a place that is higher than we would like. While we feel good about the quality of inventory, the overall balance is elevated and we are working diligently to bring it back in balance.

I have talked about Revolve to death in the past and do not want to rehash things already repeated; however, the company has proven it is operationally efficient in managing its inventory.

Revolve is dealing with a slightly elevated inventory balance which is understandable given the supply-chain bottleneck and fizzling demand for consumer discretionary spending. Compare that to Walmart, which reported excessive-inventory issues. Walmart has a $356 billion market cap. A company of that size should be operating much more efficiently. Kudos to Revolve and their leadership for navigating these uncertain times and not having a glut of unsold dresses.

Lastly, Revolve is a winner because the most considerable thing Wall Street has wrong about them is labeling them as apparel only. They are building communities through social media and live events worldwide. Disney’s brand is so strong because they are not a product company. They sell experiences. I am not saying Revolve is on the same scale as Disney, but I could see them being on par with Lululemon, which has a $40 billion market cap.

Revolve can become a premier lifestyle brand and generate revenue through new avenues with a strengthening brand. Revolve ability to engage with consumers through social media and in-person events is unique. Very few apparel companies are doing this. It has a customer-centric approach through data, which keeps them on the pulse on what’s trending. Revolve has created a simpatico relationship with consumers, influencers, and designers on their platform, which not even Amazon has accomplished. They all love Revolve! Here is a recent quote from Khloé Kardashian, who partnered with Revolve through her Good American brand: “We love Revolve, we love their aesthetic, everything that they have to say, and then the fact that they’re picking up the core pieces of Good American in more sizes means a lot to us. And it’s a different set of eyes that get to see Good American and see how inclusive and fabulous we are.”

Recap:

• Operational excellence in inventory management: think like the Amazon of dresses.
• A strong balance sheet is unique for a company of its size.
• The trends show customers are most willing to buy clothing online over any consumer product.
• Growing loyal and engaged consumers through social media and in-person events.
• Personal brand momentum.
• Companies like Nordstrom and Macy’s cannot duplicate Revolve’s business model due to their bloated size (real-estate/# of employees).
• Proximity matters: Competing fashion companies would have trouble duplicating Revolve’s success if they were based outside of Los Angeles.
• Somewhat recession-proof. Default risk is very low, and they will have less competition if their less profitable competitors crumble during a recession.
• Still in the early innings of growth. Revolve is still very regionally-based. They will be significantly more profitable once they can reach nationwide and global reach.

Disclosure:

The most important thing I focus on is buying into quality companies. Valuation is important, but it is a secondary concern. I remember the famous quote from Benjamin Graham, “In the short run, the stock market is a voting machine, in the long term, it’s a weighing machine.” The actual stock price does not reflect the quality of a business and the work they do every day. Revolve is one company that I invest in because I see current shares being massively undervalued. Share prices do not reflect the quality of the business in its current state and are certainly not what they could be in the future. With my time horizon, I believe the probability is high that I will reap the rewards of what I have invested.

On a larger maco investment note, I am a long-term investor. As a long-term investor, I will suffer through nasty cycles where my portfolio suffers steep declines. In times of economic downturns, my portfolio will get crushed. I do not hedge my account. I do not buy on margin. My portfolio is mainly equity. I invest like this because I understand it is impossible to time the market. There is never a clear precursor to signal a market bottom or top. By having a long-term trajectory, I am fully guaranteed to participate when the economy starts expanding and companies rebound.

When I invest in a company, I ask myself two questions: Would I want to work there myself, and would I be okay being paid in company shares vs. a salary? The answer is two yes’s for Revolve. Employees are willing to work for bad companies as long as they are compensated well. The only reason why someone would be paid in shares of stock vs. a fixed salary is if they believed in the quality of the business. Revolve is a quality business. I have a long position in Revolve and may buy more shares soon. I have not sold one share in my portfolio since I bought the stock in 2019.

Searches for the term ‘recession’ have spiked in June and July on Google Trends. More and more “experts” are calling for a recession; some say even a great depression. So many things are going wrong in the world:

• Inflation
• War in Ukraine
• Gas prices
• Tech Stocks are down 50-90%, and it could keep going down further
• Cryptocurrencies are down big, and exchanges are collapsing
• Supply Chain issues

Did I miss anything? Despite all the uncertainty, I am still investing. Life is full of uncertainty, but this is nothing new. Is life more uncertain now than it was when the United States invaded Iraq or during the Cuban missile crisis? What about when Japan attacked Pearl Harbor? I do not know but consider the four most dangerous words in investing: “This time is different.“

If your net worth has fallen 30% or more because you own stocks Like Netflix or Zoom, I feel for you. Are we at the bottom? I don’t know. Stock prices can continue to fall.

It sucks buying individual stocks for the right reasons (profitability, free cash flow, revenue growth), yet the price goes down…… a lot.

As an investor, not much has gone right. The majority of investors have seen their portfolio kneecapped in 2022. You are probably in the red unless you invested in certain energy stocks or the energy sector. 

As a new investor, you may have concluded investing is a game of regulating and maintaining your emotions. You are right. For long-term investors, you have to remain optimistic about the economy. It’s easy to be pessimistic, but from a long horizon, the market has punished investors/non-investors who are overly bearish on the economy.

Market corrections and even recessions are regularly occurring events. Even asset bubbles are normal. Nobel laureate economist Robert Shiller, who is also predicting a recession, said:

One problem with the word bubble is that it creates a mental picture of an expanding soap bubble, which is destined to pop suddenly and irrevocably. But speculative bubbles are not so easily ended; indeed, they may deflate somewhat, as the story changes, and then reflate.

Speculative bubbles don’t just pop – they may deflate and reflate

Successful investing is mainly psychological:

The stock market is a game of psychology. In the long run, stocks generally going up doesn’t prevent many investors from panic selling. People, in general, are victims of the external environment around them. Since the sentiment is that the economy is going into recession, it makes sense to sell everything and avoid further losses, right?

• Financial advisors generally advise against investing in individual stocks, yet financial news channels dedicate large segments of their reporting to individual stocks.
• No matter how intelligent and well-informed people are, that doesn’t make them more patient, less greedy, or level-headed during times of panic.
• Nearly every investor, even good ones, suffers from recency bias. It is incredible how much different the sentiment changed just one year ago!

The Milgram experiment showed that almost two-thirds of people would kill someone with electricity if an authority figure told them to do so. The Stanford Prison Experiment showed rather disturbing results. In a less extreme example, many people know how unhealthy it is to drink alcohol. A recent study revealed zero health benefits for young adults who drink alcohol.

If you understand the general rules of investing, anyone can be successful. Investing is not like basketball; if you want to be as good as Stephen Curry, you need particular abilities and talent. Investing is much more a game of chance and probabilities. Those that succeed are not the most intelligent people. Successful investors are those that understand the rules of the game. They have patience and impulse control.

I have said this before, and I will likely repeat this but investing is difficult mainly for the reasons above. I have read behavioral financial studies showing that stocks going down can cause you physical pain. Long-term investing is challenging because human psychology works against us. Being knowledgeable about the risks of alcohol doesn’t change how it makes you feel when you drink an alcoholic beverage. Knowing the ins and outs of a company and its financials may not prepare you for what you will feel when the stock price falls 50%.

Luck and happenstance play a significant role in investing:

No matter how smart you are. No matter how much research you do, chance plays a big factor in investing. Whether you invest in single stocks or indexes, your portfolio performance is based on many external events beyond your control.

• Apple nearly went bankrupt in 1997. They were 90 days from bankruptcy until Microsoft made a $150 investment in Apple. Since 1997, the stock has appreciated over 90,000%
• Yahoo turned down $1 million to buy Google in 1998. In 2002 Yahoo turned down $5 billion to buy Google. Yahoo only wanted to pay $3 billion.
• Yahoo offered to buy Facebook for $1 billion, which Mark Zuckerberg declined.

We can play the “What If” game forever; however, even the best investors cannot deny that luck plays a major factor in their success.

Why I invest in individual stocks:

Many financial advisors advise against investing in individual stocks. They say investing in a few stocks is riskier than an index or mutual fund that tracks the stock market.

Being a former financial advisor myself, I can tell from experience that most financial advisors err on protecting your wealth rather than growing your wealth.

There is fundamentally nothing wrong with investing in index or mutual funds, however;

• You are guaranteed average/mediocre gains. There are no outsized gains.
• Passive index investing is essentially dumb money or investing on autopilot. There is no analysis of the fundamentals or valuations of companies.
• Safety in this type of investing is a myth. The S&P is down over 20%. The Nasdaq is down over 30% this year. There is no guarantee the indexes will rebound.
• Meta, Amazon. Apple, Netflix, and Alphabet make up about 19% of the S&P 500. Investing in an index that mirrors or follows the S&P is heavily weighted in just five companies.

My point is the majority of passive funds are overcrowded with money flowing toward the same stocks. It is dumb money. Although there is some safety in following the herd, and easier to mentally digest for the average investor, it locks you into mediocre returns.

Do not just look at numbers:

The art of investing comes from the idea that you have to value things that do not yet exist. The irony is that it is impossible to predict the future, but successful investors must make educated guesses. I try to ignore predicting stock prices but predict emerging social trends or technological advancements.

That’s why it is important to invest in “garbage” companies. To overperform the overall market, you have to take actual risks and speculate. The stock market is fluid; there are no guarantees that current stalwarts or trends will stay the same in the next decade.

When you look at the stocks most widely held by ETFs like Apple or Microsoft, they already returned outsized gains and are most likely overvalued. There is a prominent place for these types of stocks in your portfolio as you can look at them like a ballast; however, owning just these companies is not enough to be a solid investor.

• Bellwether companies can decline and fall.
• Garbage companies can emerge and become the next Tesla or Apple.
• Since they are unprofitable, they can be oversold and undervalued.
• Outsized gains are created while holding unprofitable companies transforming into profitable companies.
• All it takes is a few winners to offset the losses of stocks that underperform a diversified index.

Soley looking at numbers or accounting metrics to value a stock is silly. It would be like a baseball scout evaluating players based on statistics and not watching games in person. Imagine dating people solely based on their net worth, credit score, or income. A considerable amount of subjective analysis is involved in life, including evaluating the value of companies.

Importance of being an optimist in the long-term:

If you hear someone say the stock market will not produce any meaningful gains in the next decade or we will enter a global recession, remember the odds are not in their favor.

I cannot guarantee that the stock market will go up in the long term but based on history, it is a strong probability.

In our society, optimistic views have been considered naive or doe-eyed. Pessimistic views have been viewed as intelligent or enlightening.

Famous psychologist Rollo May wrote in his book Love and Will that “depression is the inability to construct a future.” If you are sad or panicked due to what is happening with the financial markets, it would probably make you more likely to have trouble seeing what the world will look like in 2026 or 2027. The key is sticking with a plan and not deviating from it.

Anytime in our history during times of despair or destruction, it has created opportunities for a rebound and urgent problem-solving.

Many people are poor at saving money and spend on frivolous things:

From CNBC: Of those earning $250,000 or more, 30% live paycheck to paycheck.

From The New York Times: A recent study by Fidelity Investments found that 45 percent of people aged 18 to 35 “don’t see a point in saving until things return to normal.” In that same age group, 55 percent said they have put retirement planning on hold.

If you are living paycheck to paycheck on a 250k salary or spending $3,000 a week on single bagel app deliveries, you shouldn’t be thinking about investing.

Famous American feminist Gloria Steinem said, “the first problem for all of us, men and women, is not to learn, but to unlearn.” Consistently overspending is a recipe for disaster. Getting on a budget will require people to unlearn years or even a lifetime of bad habits.

I am investing. Many disagree with me; however, investing seems prudent vs. buying a car above its MSRP price or going on an overpriced vacation that will likely be more stressful due to global labor shortages.

Closing thoughts: Have a plan and stay optimistic.

Long-term investors,

Day Traders,

Professional Poker Players,

Sure it seems we speak different languages; however, whatever category you fit in, if you want to be successful, you need a plan and stick with it.

Most importantly, the best investing advice I can provide is to STAY OPTIMISTIC.

There is no evidence to suggest that our economy or humanity has peaked. It may seem naive to be optimistic, but it will pay off in the long run. Today is the best time to be alive in the history of humanity.

“Humanity can address a lot of the suffering that occurs in the world and make things a lot better. I think a lot of times people are quite sort of negative about the present and about the future, but really if you are a student of history, when else would you really want to be alive?” – Elon Musk

“The world is getting better, even if it doesn’t always feel that way.” – Bill Gates

“I’ll repeat what I’ve both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history.” – Warren Buffett

One of the best ways to earn free money is to sign up for bank bonuses. They are relatively easy to get and require minimal time. Usually, you need to move money around from a different bank, set up a direct deposit, or make a few debit purchases.

Some of the bigger banks require a deposit of $10,000+ in new money to get a $100 bonus. I have seen direct deposit requirements of $5,000 or more monthly! Here are three fintech banks offering sign-up bonuses that are easy to obtain, requiring just a few tasks. All of these banks have:

•  No monthly fees or minimum balance requirements! You can have $1 in your account and not be charged a pesky maintenance or service fee.
• Easily transfer money in/out to a different bank.

I found three fintech banks offering easy-to-obtain sign-up bonuses, which can help during times of high inflation and a possible looming recession.

Spiral:

Earn $50 HERE

• Get $50 when you open a qualifying checking account, deposit at least $200 in the first 30 days, and maintain an account for at least 90 days.
• Bonus will be paid into your Checking account within 30 days of meeting the criteria.
• When you deposit money in your checking account, 0.25% will be moved to a separate account that will be donated to a charity of your choice. Remember, 0.25%, not 25%.
• There is a $7 inactivity fee if you do not have any activity in your account for 90 days.
• The Spiral app is only available on iOS; however, you can sign-up for an account on your computer.

Verdict:

There is no direct deposit requirement, and you can transfer $200 to your account for an easy $50. The charity/social good aspect is not a big issue, and it’s only 0.25%. The inactivity fee is annoying. You can just transfer $1 in your account every three months to avoid this, but with so many other fintech banks not charging such a fee, I will likely cancel my account after a year. Spiral offers a solid bank bonus for those who do not want to go through a dd requirement.

Varo

Earn $50 HERE

• Spend $20 within 30 days of opening your Varo account. You will need to wait until you receive the physical debit card.
• The bonus posts quickly, about 4-7 business days after meeting the spending requirement.

Verdict:

That is it. There is not much else to explain. The hardest part about this bonus is waiting for the debit card in the mail. Varo is an excellent beginner bank, and its interface is easy to navigate. I will hold onto this bank, and in the future, perhaps they will offer a direct deposit bonus.

Albert

Earn $500 HERE

*The $500 bonus has been reduced to $150. I would suggest anyone looking into this to wait for the bonus to increase. Albert reminds me of Cash App, they have a lot of generous cash back offers, such as 20% off at Whole Foods and 15% off at Etsy.

⓵ Sign up as a new Albert Cash member
⓶ Set up direct deposit with Albert Cash
⓷ After Cash signup, receive a qualifying deposit of $200 or more every 30 days for 90 consecutive days
⓸ Use your Cash card to spend $100 or more on goods or services every 30 days during the same 90-day period

Verdict:

This bonus will take a little more work; however, for $500, it’s well worth it. Typically, receiving $500 from a bank requires a deposit of $1,00,000+ or monthly deposits of $5,000+. I would snatch up this bonus asap as it will likely downgrade to $250 or $150.

When you sign up for Albert Cash, you will have to subscribe to their monthly subscription, Albert Genius, and the minimum amount is $6 a month. The bad news is I couldn’t find a way to bypass the Albert Genius screen. The good news is you can cancel or deactivate Albert Genius immediately after signing up. The first month is free, so there is no charge anyway. Per an e-mail I received from Albert Support, activating a Genius subscription is unnecessary to get the bonus. There is also an auto-saving feature that you can pause.

The great thing about these banks is that they all have referral programs that allow you to refer others using your own link. You can refer your spouse or partner, potentially earning both of you another sweet bonus. You can double or even triple the amount you can earn from bank bonuses.

For a few minutes of work consisting of transferring money, spending on bills you already pay for and linking your account through a direct deposit, you can easily earn $1,000 or more per year. $1,000+ isn’t life-changing money, but if you are one of many that complain they do not have any money to invest, here is a possible new stream of income.

If you have any questions or concerns about bank account bonuses, please let me know!

It is one of the more exciting times to be an investor. Prices have been slashed, but the underlying thesis for many of these companies remains the same. Speculative companies with massive growth potential are still…. speculative; however, the downside risk has dissipated significantly. If these companies can still maintain their growth rates or have healthy cash balances, the risk of losing money on these investments in the long term has fallen dramatically.

Lemonade is a company whose stock has been obliterated in this market; however, the thesis remains the same:

• Become the preeminent insurance company in the 21st century.
• Create a digital insurance company with a different business model from traditional insurers. This model is powered by AI, telematics, and behavioral economics.
• Turn insurance into a social good in society vs. a necessary evil. Completely change how people buy and manage insurance.

Key Metric to determine if Lemonade will succeed:

Customer Growth and Retention:

There are four key advantages traditional insurance companies have over Lemonade:

1. More customers: This will lead to stabilized loss ratios. They have clients spread through all 50 states, which minimizes their risk from black swan events.
2. Monopoly on good customers: The customers they have are older and wealthier. They are not likely to swap insurance companies due to their loyalty.
3. Established brand name
4. Stable cash balance

There is nothing Lemonade can do in the short-term about 2-4. However, Lemonade has quickly been able to find new clients. The problem is that rental and pet insurance are niche markets. Most of Lemonade’s clients are first-time insurers and are not considered profitable. The good news is these clients will eventually become profitable, which will lead to lower churn rates. Again, they won’t be able to poach away customers from legacy insurers. Those are loyal customers that won’t leave anytime soon. Lemonade MUST keep bringing in new millennials and Gen Z who care less about the status quo and enjoy Lemonade’s simple user interface, transparency, and social good aspect.

What is REALLY exciting about Lemonade’s future growth is the data from Illinois:

I believe Lemonade car will be their flagship product. You have pets, renters, homeowners, life, and car as an amalgamation. Each product is valuable; however, when you bundle them all together, they have a symbiotic relationship, which allows for cross-selling.

It does not take much brainpower to realize that if Lemonade can offer its full suite of products nationwide, you will see higher bundle rates and lower churn rates as we saw in Illinois.

Imagine if you couldn’t subscribe to Netflix if you lived in California, Texas, Florida, and Texas? Evaluating Lemonade when car insurance isn’t available yet in states with the most licensed drivers creates an incomplete picture. The Metromile acquisition won’t be completed until Q2 of 2022, so we could see a rapid number of new markets in this year’s back half.

I view three critical metrics for an insurance company to succeed:

• Continuously add new customers
• Retain current customers
• Underwriting.

I firmly believe that Lemonade will continue adding customers at a healthy growth rate as they have done from inception. I am confident they can retain these customers as they are popular and highly rated. They will address their churn rate by becoming a one-stop-shop for insurance. What Square is to banking, I could see Lemonade becoming to the insurance industry.

The growth is essential because for Lemonade to become profitable, they need to achieve the law of large numbers and have economies of scale. The more customers they have, the more intelligent and efficient their AI/Machine becomes in evaluating risk and underwriting. Customer growth is, thus, mandatory for the company to stabilize.

The unknowable factor is if Lemonade can effectively improve its underwriting and implement AI effectively. They have better technology. They collect 100x more data points per customer. The question is if they can use that data and technology effectively to create a profitable business. Unfortunately, we won’t find this out until they have more customers. They are also an early-stage growth company which means they have yet to reach economies of scale, and its goals are targeted toward the future, not current growth. I have confidence in their leadership and decision-making; however, taking insurance from scratch to compete with giants like State Farm will take several years to unfold.

The underwriting process is the most significant question mark for Lemonade and all other neo insurers. Here is an excerpt to explain how complicated underwriting is:

The practice of underwriting insurance is a fine mixture of art and science. To be successful, it takes a lot of common sense, even more experience and a well-rounded team of experts. Time and practice are the true keys to the profitable underwriting of life, health and disability insurances. As you can probably imagine, factors such as age, gender, occupation risk, financial viability and adverse health history play significant indicators in the underwriting of most insurance. But other, lesser obvious factors come into play when working in the specialty-risk side of the life and health marketplace.

The Nuances of Specialty-Risk Underwriting

The industry is ripe for massive disruption. It is inefficient and outdated, but entrenched companies are massively profitable. Companies like Lemonade, Root Insurance, and Hippo Insurance have slowly chipped away on legacy insurance. If you are still skeptical about this insurance revolution, consider what Elon Musk just recently said:

“The car insurance industry is incredibly inefficient,” Musk told attendees of the All-In Summit in Miami, which he joined virtually for almost 90 minutes. “You’ve got so many middle entities, from insurance agents all the way to the final reinsurer, there’s like a half-dozen companies each taking a cut.”

Tesla Bets It Can Bring Down Insurance Costs, Make Driving Safer

Tesla underwrites its own policies. They are entering auto insurance more aggressively. Will they succeed? I am not sure. The more this industry is disrupted, the better chance companies like Lemonade can take massive market share away from legacy insurers. If Telsa does become a major insurance company, they are only in one market dealing with Tesla vehicles. Lemonade has the entire insurance market.

I look at Lemonade like a small fire. Once it spreads, it can do so rapidly at an uncontrollable rate. Lemonade’s operating team runs in a very autonomous and frictionless way, which is why they have had success in an industry that typically moves at the speed of molasse. It’s like their version of “Move fast and break things.” I look at them more like a tech company than an insurance company.

From an operational standpoint, Lemonade moves from how to get from point A to D while others companies are moving from point A to B. This kind of thinking makes them misunderstood, and if you do not like volatility, you shouldn’t invest in Lemonade. If you can stomach the roller coaster over the next few years, Lemonade could be a big-time winner in this space.

After reading this Reddit post, I thought of one of the best Warren Buffett quotes: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”

If you are “playing” stocks, you are gambling, not investing. Go to a casino or bet on your sports if you want to gamble. People can gamble with stocks, but you need an actual specialized strategy and skillset to succeed.

Most people do not know where the market is going in the short term. Most long-term investors say it is not even possible to make these predictions. There is more safety in buying ETFs; however, ETFs, Indexes, and Mutal Funds most likely tank along with individual stocks in a recession or a sharp downward market.

An investor’s best friend is time. I remember an investor telling me a story about buying stock in Netflix in 2011. The stock price cratered by 80% because they hiked the cost of their service by more than 60%.

If you had bought Netflix stock at the high of 2011 and saw your shares crash 70-80%, you would still be up by 300-400% today! If the stock price can recover, you are likely back up over 1,000%, as you were in 2021.

Watching a stock you sold soar x1,000% in price is a terrible feeling. Imagine if you bought into Netflix and believed in their streaming service plans back in 2011….. but due to fear, you completely sold out and missed out on all those gains. That is the worst type of pain you can experience. Even worse than watching a stock price fall to rock bottom. Imagine how the co-founder of Apple felt who quit and sold his 10% of Apple back to Steve Wozniak and Steve Jobs for $800 in 1976.

If you are playing with stocks do not forget these are real businesses run by real people. By owning just one share, you are a shareholder of the company. Most games you play produce binary events, winner or loser. Business is quite a bit more multifaceted. There could be several winners or several losers. Some companies can lag for decades and eventually become grossly profitable.

Always remember time is the most powerful force in investing. It makes little things grow big and big mistakes fade away.

Phoenix Suns (1) vs. Dallas Mavericks (4)

Jerry Bembry: Suns in 6

Kendra Andrews: Suns in 6

Jamal Collier: Suns in 7

Nick DePaula: Suns in 6

Nick Friedell: Suns in 6

Kirk Goldsberry: Suns in 6

Israel Gutierrez: Suns in 6

Tim Legler: Suns in 6

Andrew Lopez: Suns in 6

Zach Lowe: Suns in 6

Tim MacMahon: Suns in 7

Bobby Marks: Suns in 6

Dave McMenamin: Suns in 5

Kevin Pelton: Suns in 7

Omar Raja: Suns in 6

Jorge Sedano: Suns in 6

Ramona Shelburne: Suns in 7

André Snellings: Suns in 5

Marc J. Spears: Suns in 6

Ohm Youngmisuk: Suns in 7

“The greatest shortcoming of the human race is our inability to understand the exponential function.”

― Physicist Albert Bartlett

Since I’ve been asked a lot:

Buy stock in several companies that make products & services that *you* believe in.

Only sell if you think their products & services are trending worse. Don’t panic when the market does.

This will serve you well in the long-term.

— Elon Musk (@elonmusk) May 1, 2022

Elon Musk recently tweeted a brilliant yet straightforward investing strategy that can make you wealthy. “Since I’ve been asked a lot: Buy stock in several companies that make products & services that you believe in. Only sell if you think their products and services are trending worse. Don’t panic when the market does.”

Simple yet powerful.

Most of the supposed long-term investors are gone during this sharp market sell-off.

Growth stocks or high beta volatile companies have gotten out of favor with the “experts,” fund managers, and retail investors. Just tune in to CNBC and hear how the market will continue to go lower and high-flying stocks like Shopify and Nvidia have no bottom. Ironically, just six months ago, the same people said these were must-own stocks in an investor’s portfolio. Everything is selling off despite the quality of earnings.

Stocks go up. People say buy, and you buy;
Stocks go down. People say sell, and you sell.

Welcome to Wall Street.

Listening to the herd will lead to mediocre results. Macroeconomic headwinds have become more important than fundamental metrics, and everyone should mostly be in cash or defensive positions. Haven’t you heard? High-growth tech stocks are uninvestable for the next six years!

Although Musk offers solid value-investing advice, few people can follow it. That is because humans are, by nature, poor investors.

Why do so many people sell all their holdings during steep market drops and move into bonds, gold, and cash?

It’s easy to be a long-term investor during a bull run. It’s easy to buy and hold stocks when everything is going up.

There is only one reason to buy a stock. There are several reasons why someone sells. Fear drives most selling decisions, especially during this market downturn. Humans are good at surviving, so the justification for selling stocks when they are down big would be like our brain telling us to take our hand off the stove.

There is a cognitive dissonance that investors deal with daily. When the market goes up, people often experience euphoria. Emotions can come into play, and we become seduced by market gains. During euphoria, everything works. If stocks keep going up 5% every day, they must be doing well, and people start justifying buying stocks at ridiculously high evaluations. When the script flips and the market goes down, fear creeps in. We become obsessed with falling prices and sell stocks of companies that are fundamentally intact as a way to end the pain we are feeling. This fear can lead us to sell stocks at ridiculously low evaluations.

These cycles of market emotions are why it is crucial to have a level head if you are a long-term investor. I try to always stay in the optimistic stage of market cycles. Not too despondent to avoid all risk and not too euphoric and disregard valuation.

Think of investing as trying to maintain homeostasis. Homeostasis, from the Greek words for “same” and “steady,” refers to any process that living things use to actively maintain fairly stable conditions necessary for survival. In our everyday life, we often make the best decisions in homeostasis. Think of a time when you have gotten little sleep, didn’t eat anything for a prolonged period, or were sick. That’s not the best state to be making important life decisions.

There is constant chatter and noise from the market that moves us away from homeostasis for a prolonged amount of time. Times like these allow investors to start making irrational decisions based on emotion instead of sound logic.

Human tendency to conform, especially when in large groups, is terrifying. Propaganda machines leverage this throughout human history.

The way out is to think freely, detached from the divisive narratives of the day that masquerade as universal truths.

This often feels lonely.

— Lex Fridman (@lexfridman) May 1, 2022

People may fear selling their entire portfolio because they don’t want to see it go to zero. That’s irrational and highly unlikely. Ask someone who fears flying why they drive to work every day when the risk of getting in an automobile crash is significantly higher than being in a plane crash.

No matter how much sense it makes to fly, we wouldn’t want someone with an intense fear or phobia of flying to get on a plane because it makes more logistic sense. It could put someone in an uncontrollable downward spiral. Investing is the same way. If you cannot manage your anxiety, you should consider not investing. Long-term investing requires you to feel uncomfortable. The emotional aspect of investing is just as important, if not more than the technical aspect. In times like this, thinking critically, building conviction, and ignoring the herd mentality are necessary, making you vulnerable. We start seeing who has the temperament and those that sell out and leave the market altogether.

Regarding technology stocks like Amazon and Shopify, yes, consumer behavior is returning to where it was in 2019. Recently we have seen e-commerce slow down, but this isn’t a secular decline. It may seem like that, but I would chalk that up to significant pent-up demand for going outside due to the pandemic. Growth is going back to the trend line before the pandemic, but not below it. Do not mistake this as a secular trend as a peak for e-commerce and a significant comeback for physical stores. I question any analyst who thinks there will be a long-term decline in people shopping online, playing video games, or streaming. These activities trended upwards before the pandemic and will continue to do so in 2023 and beyond.

Today stocks are cheaper and more reasonably valued. Many of these companies are fundamentally okay, in much better shape than 2-3 years ago. Tesla and Apple reported stellar earnings and met most analysts’ expectations. In this market, that doesn’t matter. Their stock prices fell massively.

Eventually, the mood will change, and fundamentals will matter again. Expectations and comps will be so low that companies will easily beat earning expectations, likely causing their stock prices to rebound.

My advice? Relax. Any long-term investor will go through dark times. Bad stuff happens if you are in the game for the long term. It is unavoidable. Like in life, you get sick, lose a job, get dumped, divorced, etc. Pain is a part of life. The great thing about investing is that the probability of you “winning” is very high with time as the greatest weapon against noise and sentiment. Ultimately the market will return to its homeostasis as it always does.

The last point I want to cover is that investing in single stocks is too risky compared to a broad-based, passively managed index fund. You have to look at it from a risk-reward tradeoff like all investing. When you invest in an index, you are striving for average results. It is investing on autopilot. To strive for certainty is to doom oneself to mediocrity. There is nothing wrong with mediocrity as that can still net you six or seven figures. The risk is low-medium, with the reward being medium-high. With single stocks, the risk is medium-high, with the reward being high-exponentially high. There are no outsized returns investing in a broad U.S stock index fund. Most ambitious people do not strive for just average results in school, life, professionally, personally, etc. Why is it acceptable to be an average investor, especially when exponential gains are possible? The two greatest weapons an investor has is time and temperament. If an investor of single stocks uses those two controllable weapons in their favor, the risk profile decreases significantly.

Morgan Housel is a partner at The Collaborative Fund, an expert on behavioral finance and history. He is a wealth of sage advice during times like this. Here are some of the best quotes I have found from his blog:

The world is governed by probability, but people think in black and white, right or wrong – did it happen or did it not? – because it’s easier.

If you said something will happen and it happens, you were right. If you said it will happen and it doesn’t, you’re wrong. That’s how people think, because it requires the least amount of effort.

Every investor is making a bet on the future. It’s only called speculation when you disagree with someone else’s bet or time horizon.

When there are no recessions, people get confident. When they get confident they take risks. When they take risks, you get recessions. When markets never crash, valuations go up. When valuations go up, markets are prone to crash. When there’s a crisis, people get motivated. When they get motivated they frantically solve problems. When they solve problems crises tend to end.

Good times plant the seeds of their destruction through complacency and leverage, and bad times plant the seeds of their turnaround through opportunity and panic-driven problem-solving.

One of the Navy SEALs from the Bin Laden raid wrote a book about his life in the military. Technical skills are important to be an effective soldier, he wrote, but “one of the key lessons learned early on in a SEAL’s career was the ability to be comfortable being uncomfortable.” Same in investing.

Collaborative Fund

Best of luck to anyone reading this. Just remember, you can sell your entire portfolio to avoid further losses. You aren’t guaranteed to participate in the recovery. You would have to time the market perfectly. A long-term investor is guaranteed to suffer through steep losses but is also guaranteed to reap the rewards of an eventual recovery. Some people do not believe a recovery is coming. Stocks are in the doghouse indefinitely. If you believe this, then yes, you should sell your portfolio. However, you are betting against America’s prosperity, which Warren Buffet has recommended not to do. Do you want to bet against America in the long term? That seems like a losing bet.