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June 26, 2022

100. Smart Investing in a Volatile Market with Joseph Hogue

100. Smart Investing in a Volatile Market with Joseph Hogue

Join Mike Cavaggioni with Joseph Hogue on the 100th episode of the Average Joe Finances Podcast to discuss how to invest smartly in a volatile market. Joseph is an investment analyst and influencer on YouTube and four blogs discussing investing, making money, and personal finance. He talks about his journey into the world of finance.

In this episode, you’ll learn:

  • A brief background about Joseph
  • The core-satellite investment strategy
  • Get rid of FOMO; discipline yourself
  • How Joseph stays calm amid stock market fluctuations
  • Good side hustles to explore
  • And much more!

About Joseph Hogue:
Born and raised in Iowa, Joseph Hogue graduated from Iowa State University after serving in the Marine Corps. He worked in corporate finance and real estate before starting a career in investment analysis. Joseph has appeared on Bloomberg and CNBC and led a team of equity analysts for a venture capital research firm. He holds a Master’s Degree in Business and the Chartered Financial Analyst (CFA) designation.

Find Joseph Hogue on:
Website: https://mystockmarketbasics.com/
YouTube: https://www.youtube.com/channel/UCbKdotYtcY9SxoU8CYAXdvg
Facebook Group: https://www.facebook.com/groups/3083628104983203

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Transcript

Average Joe Finances:

Hey, welcome back to the average Joe finances podcast. I'm your host, Mike Cavaggioni, and today's guest is Joseph Hogue from the highly viewed YouTube channel let's talk money. I just want to point something out real quick that his channel was actually the first finance or investing related content that I started watching on YouTube ever, and it was something I talked with him the last time we tried to do this interview, Joseph, I really appreciate the flexibility and you coming back on to have this conversation, thanks for joining us today,

Joseph Hogue:

Mike. Pleasure to be here. Thanks for having me. I don't know whether, me being the first YouTuber you ever watched is just a matter of me being an old timer and being around for a little bit or what, but, but that's cool. That's really fun to hear.

Average Joe Finances:

Yeah, absolutely man. It was before I even started my own personal finance journey when I was just looking up different things and I came across this dude with a bow tie on just putting out this really good information. I'm like, oh man, this is this. I could listen to this. And then my wife came around the corner. She's whatcha watching? And I'm like, oh, this guy's pretty cool.

Joseph Hogue:

And a bow tie.

Average Joe Finances:

Yeah. And he's sitting here talking about the stock market and index funds and REITs and all stuff I was interested in. So I was like, I think I'm going to hit subscribe. So yeah. Subscribe to your channel. It's been absolutely awesome. And I think, after you, I started following like our rich journey and then a couple others, like Graham Stephan and all that. But you were the first man and I just wanted to point that out because there was just something about your channel that stuck out to me and I'm pretty sure it was the bow tie.

Joseph Hogue:

Awesome. Great to have you in the community. Thank you.

Average Joe Finances:

Yeah, absolutely. Hey, the first question I'd like to ask you is the same question I ask everybody that comes on the show. Can you share a little bit about yourself, share your story. How did everything get started for you? So I want to talk about how you got started investing in the stock market, how you got started with your YouTube channel, and then from an understand, looking at your shadow box behind you there too. And you've talked about it before in your channel, but you were also, you also served in the Marines. So if you could rewind back as far as you want to go, but we'd like to know who Joseph Hogue is.

Joseph Hogue:

Sure. Originally from Des Moines, Iowa, right there in the bread basket, bro, born and raised, went into the Marine Corps, got out, into, went to college, did the whole college thing. And just immediately started working as a commercial real estate analyst and immediately fell in love with investing, right? That idea of, putting your money to work in, instead of just putting it in a savings account and watching it grow, your money is going to grow for you and you can actually own a piece of companies, right? You can own a apple, you can own Google. And so I got pretty heavily into investing, worked, worked as a venture capital analyst to set up a sell side research department for a venture capital firm, worked in private wealth management, worked a lot of those equity analysts, ideas or areas. I got my charter financial analyst designation in 2011. And, quickly realized that working as a professional analyst or venture capital analyst and in private wealth, you're only dealing with maybe the top 1% of wealth earners out there. Those are really the only ones that can afford those services a lot of times. So in 2014, decided to go off onto my own, start my own websites to really connect out there with, with main street and. And, I guess I could back up a little bit, even further while I was in the Marine Corps, started investing in 1999, which I think is really proven precious right now because obviously 1999 was the best time to, to start investing. Because we all know what happened like a year after that. Now I can have that connection with a lot of people that have just started investing over the last couple of years and are now seeing that same thing, seeing the market drop out of, of their stocks and out of their investments. So have felt that pain and really taken a lot of, my, my own personal investing journey onto. But, going back to the story, I was, I started the blogs, really wanting to connect with main street investors out there, bring what I'd learned in venture capital, investing, private wealth management to, to main street, loved doing the blogs, there's always something missing there, right? With just writing to somebody reading, reading a blog. So I started on YouTube in 2017 and the growth has just been exponential. It's great. Being able to connect on that face-to-face level with people out there growing the community to over 550,000, get about 1.5 million views on the videos each month. And it's great to be able to connect with people and build that community. That's a little bit closer than maybe somebody just reading a blog. So I love being on YouTube.

Average Joe Finances:

Yeah, absolutely. And it's funny because before I started this podcast, that's I did the same thing. Like I started off as a blog and I was just sharing Hey, this is what I'm doing in my own personal journey to beat debt, start investing and know, start building my wealth. And a buddy of mine approached me and said, Hey, I know you like talking. I know you like talking to people. I guess it's the New York and me. So he's like, why don't you start a podcast and just, start talking to people, share, bring them on your show, share what they're doing, talk about what you're doing. And I'm like, yeah, maybe when I retire from the Navy, I'll do that. And he said, he's ah, just do it now. Even if you only do one a month, I'm like, all right, fine. But if I'm going to do it, I want to release one episode a week. So that's what I committed to. And I've been doing it ever since. And it started off very slow. And now the podcast is blossoming. Not quite to the same level that your YouTube channel is, but I feel very good about it because I feel like I'm making an impact and a difference. I want to touch on something that you said to that, that I thought was impactful. How you changed your focus on working, as an analyst, working with those top 1%, group. And you wanted to reach out to the middle guy, to the middle class, or who we call the average dose. And, I really respect that you went off, you took a risk, and went off on your own to start your own. And, because you wanted to help impact, make a bigger impact to other people to help them get, started in the right direction. So I just want to say, I definitely appreciate that Joseph. Oh,

Joseph Hogue:

sure. And, not to sell myself short, but it was a little bit for me to, I never really connected with that top 1%. It's not where I come from. Growing up, fairly, not dirt poor, but on the, not on the wrong side of the track, but on the track itself. It was nice to get back to talking to people that I could connect with and I could relate to as well. So a little bit for me, because I just didn't fit in with that one, 1%. But, but yeah, it's been great. Being able to really help, the regular main street investor, rather than the people that really don't need the help anymore.

Average Joe Finances:

Yeah, absolutely. Okay, Joseph, so I want to point something else out to that you talked about, you said that you started investing back in 99, right? So we know what happened in 2000, y2K the first apocalypse that we've all gone through in our lifetime, which absolutely nothing happened except for, the stock market going crazy. What was that like for you? What kind of what kind of emotions and experience that you have, like when you first got started, like you're in 1999, and then all of a sudden it's boom, what was that like for you?

Joseph Hogue:

Sure. I think fortunately for me, I guess maybe for a lot of investors out there, I still had, decades left to invest. I really, as a Marine corporal doesn't get paid a whole lot, so I wasn't really investing that much. I didn't have a lot to lose when the market dropped out. But it did teach me a lesson and it is frustrating when you start investing where, and during a period, when everything's goes, it goes up, over the last couple of years, we have not seen, more than a 5% dip in stocks, more than maybe two or three times. And typically it happens at least two times a year. So I think a lot of investors, like I was back in 1999 are brought up on the idea that stocks are only going up and you're going to be rich, just by playing that momentum investing strategy and momentum investing is great because it works until it doesn't, until the market really drops out and leaves those momentum stocks behind. So it is so frustrating to, to really have your world view of the S of stocks and investing, challenged like that and really thrown out like that. You really start, you go through all those levels of, the, what is it, the seven stages of grief, right? Where it's denial, then it's, then it's fear and then it's a blaming and bargaining and all that. And, it really is something that, something like that, trying to figure out what happened. And honestly, for a lot of us, for a lot of investors, it's just a learning experience that a lot of people have to go through. I've, I think 10 years as an equity analyst, the CFA chart co curriculum. All that professional experience. And I think probably the biggest lessons that I've learned and that I share on the channel are the ones that I've learned just as a personal investor, just a, as a, as an investor, myself, those mistakes that I've made, like that moment of strategy, when to get out of that, dollar cost averaging into a stock all the way down and losing a lot of money, things like that.

Average Joe Finances:

You bring up some very great points here and especially with the whole momentum investing, and this is something that we've seen in the past. Actually, since the pandemic started, we've seen a lot of that because people like, riding these trains and we saw what happened with the whole Reddit thing and wall street bets and all that. That was bonkers and it made some people a lot of money. But at the same time, there's other people that got in. At the end of the hype and they paid the price. I was actually recently watching, another YouTuber. W I mentioned them before Graham Stephan, he had a guest on his show, the doge coin millionaire, and they were talking about, he's oh, I'm holding it, I'm holding it. And he went from 3 million down to 300 K like in the past couple of weeks. Something like that is, is very impactful. And sometimes you just gotta know when to let go and just be like, Hey, I'm gonna, I'm going to chalk this one up as a loss and move on. And sometimes you need to know like one, it is safe to hold, right?

Joseph Hogue:

Yeah. And you can never really know. I think at any level I used to have a, actually a gunny in the Marine Corps that, that used to tell me, show me an income and I'll show you how to live above it. Any income I'm sure that doge coin millionaire at $3 million, he was thinking, hell, if this thing keeps going, I'm at 10 million before the end of the year, that kind of thing. And never know exactly when to pull back on that kind of strategy. I will say one thing that I've found since making the mistakes myself that is really helpful is when that momentum strategy really comes into, into Vogue and comes back. And what we're talking about here is you're just basically just investing in the stocks that they're going up, which is, some at Thai entire investing strategy over the last three years, I can just so frustrated through the comments on the videos over the last couple of years, because I would do a video, analyzing a stock saying it's a good stock. And then all I would get in the comments was, oh, why not just invest in Tesla? It's always going up, and it does until it doesn't. And so that's that strategy just investing in what has worked and there's some technical analysis you can put behind it. Basically it is just that, and it tends to work very well for periods. My, my experience was with, it was in 2000 and, So I believe it was 2000. Yeah, 2005. I was, I was working as a, working as an equity analyst. Actuary just started dabbling in that. And it was, playing, playing some momentum socks on my own, had planned on going down to Louisiana. My mom had volunteered down there after hurricane Katrina to try to rebuild everything and I was going to visit her for mother's day. And over the three months before that, I was just, I was up like $38,000, on, on some momentum stocks, just a handful of momentum stocks doing really well. And I remember because over that weekend, over, over the four days that I was there, which included two, two market days, I lost, I think something like $17,000, 17, $18,000, when that momentum strategy started breaking down, and yeah, there are no sides there. There's no warning ahead of it. What I will say since, since then, what I've learned to do is yeah, you can buy those momentum stocks. You can invest in those, but periodically take some money out and put it in the rest of your portfolio, your long-term portfolio. So basically you're taking some profits off the table. And it's up to you when you decide to do that. I would formalize it though in a written plan, because otherwise, if you just tell yourself you're going to do it every six months, you get to that six months and you act now, I want to live to let this ride. I want to keep going. So you formalize it right in a plan and say, okay, every three months, every six months, I'm going to go into the, my Mo momentum stocks. Take some money off the table. There it take some of those profits and put it into some of these long-term stocks really lock in those profits, basically. So you know, when that momentum strategy fails, because it always does, what people are experiencing right now has been experienced multiple times over decades and decades of investing by myself and many others. It does happen. It history repeats. It just does. So that's something that, that I think, a lot of momentum investors can take with them is taking some profits off the table periodically. Yes. It sucks to take those profits off in those momentum stocks keep on going, but it will lock them in. Whereas, a lot of people are finding out over the last year that those profits have just evaporated.

Average Joe Finances:

Yeah, that's a great point. And it's exactly the direction I wanted to steer this conversation. Because I wanted to talk about, what kind of investment strategy you have because you've experienced this several times. And you've especially went with the whole momentum and with what happened in 2005 with Katrina, right? You got to feel that pain firsthand with an immediate hit to your profits, just over a four day weekend with only two of them being trading days. So that's absolutely bonkers. So you lost what half your profits in a two day period really. When you're looking at stuff like that, there's, there's different ways that you can invest it, whether it's the momentum that you were talking about before, but then there's also ways that are a little bit safer, but you're also still getting really good gains and you're still getting, you're still attacking with compound interest, right? You're still able to build your wealth and do things that way. And one of the ways that I see you talk about on your channel too, and one of the things I really enjoy about what you talk about is you actually sit down and you'll analyze, you'll go through, Hey, here's the 10 best REITs for you to invest in this year. Here's the top five, index funds you should be looking at this year and here's why, and you break it down and you make it easier for the viewer to understand why it is that you're picking these, funds or REITs, or even sometimes individual stocks I've seen a couple of those. So what is the quarter set, the core satellite investment strategy and why do you like it so much?

Joseph Hogue:

Sure, first I want to tell you a dirty little secret, of YouTube and blogging and, probably podcasting too. A lot of these, the influencer base, the content based investing kind of things, and, CNBC TV as well. We need to get people to come back to the videos or the podcasts and that we have to, as times, as bad as it seems, sensationalized investing, give them those listicles, the seven best, growth stocks to buy right now. Attention grabber. Yeah. It's just a game that, that you have to play to be able to get people, to your message. Within that message, what I like to do is kind of trick people almost and give them that why you're doing this and how you're doing this. So when my videos. Aren't so much that seven best stocks to buy right now. That's the hook. The message that I want to get across to people is, in each video, how are you doing this? Why are you doing this to make you a better investor? So you can really bake, basically take that knowledge and, and go with it on your own when you're able to. So that's one thing, so just understand whenever you're watching a YouTube, CNBC, internet, whatever you're watching with investing, try to find the why and the how of a, of investing rather than just the easy, okay. What stocks should I pick right now? That's probably one of the best pieces of advice I can give people as far as learning how to invest the core satellite strategy though. Yeah, my favorite probably my favorite strategy, because it is so simple. It is it's takes so much stress out of investing and it's really one of the core, one of the, one of the basic ideas of investing. Within this. Okay, you've got your overall portfolio, your net wealth, right? And you break that down into, maybe 50% of your money, 50, 60, even as high as I've seen, even as high as 65, 70 5% of your money. And you have in just, a very core group of, of ETS of funds, right? And those are very diversified. They're across different asset classes. So you've, maybe you have some stock funds, some bond funds, real estate funds, things like that. And what that's doing is it's giving you the, just those broad market returns in those asset classes, right? So you're diversified across different assets, stocks, bonds, real estate, maybe even some, some commodities and things in there. And within some of those, maybe within the stock funds, that's diversified across dividend stocks, growth stocks, things like that. So the majority of your portfolio is very much diversified and very much just market returns, just slow and steady wins the race right now with the remaining portion of your portfolio. And with that core part of your portfolio with mine anyway, there's sometimes months I'll go without even looking at some of those ETFs, because I know there are so many stocks in there. There are so many bonds and different investments that, news about any one company isn't going to affect the ETF very much. It isn't going to crush it any ETF, right? Those ETFs, those funds are just giving me those market returns. And I don't really have to worry about them on the other part of your portfolio, that 35%, that's where you start. That's where you can invest in individual stocks. And, and you can even separate that into different parts. I've got some socks that are my long-term, a stress-free buy and hold forever socks. That I hold. And then I do have a portion of my portfolio that kind of scratches that itch. We talk about trading and momentum strategy and some of the momentum stocks that you don't necessarily want to hold forever, but you really like the story right now and you think they're going up and you're gonna make a lot of money. It's not something you want to put a lot of money from your portfolio in, having that maybe five or 10% of your wealth or of your portfolio in those types of investments that you can play around with, you have fun. That is going to free you from doing that kind of trading and that kind of investing and stock picking with your entire portfolio. And ruining it, right? Because if you're in this core part of your portfolio where those ETFs or those long-term stocks that you want to hold forever, if you're in there trying to satisfy that itch of a stock analysis and stock-picking by buying and selling those all the time, you're just going to wreck your portfolio and you're going to wreck those longterm returns, right? So I've got maybe that five or 10% of my money in those stock traded trading ideas, the shorter term ideas that I really enjoy doing, and, keeps my hands off the other part of the portfolio. In this other part though, so maybe 20%, 25% of your portfolio, you've got those long-term, those long-term stocks, those stocks that you think can do a little bit better than the market returns can do a little bit better than some of these ETFs, and their industry, right? Those are your best of breed companies, your companies that are, really changing the way we live. And you think they're going to be the next Amazon or the next, the next apple or something like that. And what this does is where that core part of your portfolio you're getting the market returns. You're getting a stress-free really hands-off, part of investing that, that has really proven to do very well. With the satellite portion, maybe have two or 3% in each stock. So you really only have 10 or 15 stocks that you really believe in one, this just, it frees up a lot of time, right? You don't have to look for that next hot stock all the time. You're not looking for 50 stocks to fill your portfolio. You've only got space for maybe 10 or 15 stocks. So you can really do the analysis. You can really get behind these stocks and, and just keep investing in those. You don't have to add new stocks all the time. So it really reduces the time necessary to actually analyze stocks and follow stocks and things like that. Plus, it gives you a little bit of discipline, if you're only investing in maybe 15 individual stocks within that part of your portfolio, then, you, they better be the best ones out there. They're the ones that you believe in the very most, you're not wishy-washy on them because, because you've put the time in and those are really your best of 3 picks.

Average Joe Finances:

Those are all fantastic points. Joseph definitely appreciate that. And I want to point something out too, that you had mentioned the, for that momentum, right? You said, maybe five to 10% is what you're going to use, towards those, but, and they should be companies or stocks that you believe in, that you truly believe are going to grow. For whatever reason it is that you believe that they're going to grow. Now, I wanted to ask you, so as you're going through all this, let's say your momentum stocks are just out there crushing it. Let's say you got an early on Tesla and that 5% of your wealth that you invest into Tesla has now become 15% of your wealth because of how well it did. When would you decide to rebalance or kind of shift, some of those funds around to get that back down to the five to 10%.

Joseph Hogue:

Great question. Yeah. Great question. And I would use it as a percentage of your wealth kind of idea. I generally tell people or recommend that you don't have more than 10% of your wealth in any one individual stock because, face it, there are the Enrons out there. They are, there are the companies that you have committed fraud other Wells Fargo's, things like that, but there's also a sense. Bad things happen to good companies as well. It can be a great company. And one person at the top can, can set a core corporate culture of fraud or do something, so you never want one stock to really be that, that decider on your portfolio, if you lose 10% of your portfolio, it's very hard to come back from that. Be able to make them make up the returns in the rest of your stocks. If you may, if you lose two or 3% of your portfolio, eh, it sucks, but it's still, it's not something that, that is going to destroy your returns for years to come. So I would have no more, I would generally have no more than three to 5% of my money in any one individual will stock, if it is growing, if I am going to let it run. Then generally when it does get to that 10% level, then I started seriously looking at, cutting it back to 5% and, and putting that, basically like we talked about what those growth stocks, locking that profit in by putting it in some of those longer term picks.

Average Joe Finances:

That's fantastic points, and just getting to the point where you get to look at your portfolio, sit back and just rebalance and say, all right, I made this much, this has been great, fantastic returns. I'm now going to take some of my profits out and invest it into those ETFs and index funds that are more comfortable and that are steady. So that's a great point.

Joseph Hogue:

A lot of people, a lot of people will reply to that, especially okay. With that example of Tesla, a lot of people will reply well. Yeah. But if I had taken, half of my Tesla stake out and, locked in those profits, put them in something else, over the last couple of years, I still, I would have missed out on a lot of upside. And that's the risk you face, but. You never know where at, on that upside you are. Tesla itself has given us a many opportunities, many tops, over the last, just five years, really just look at all the top, all the peaks, where it has then fallen 20 or 30%. So you never really know where you're at in that cycle, for that stock. And I would just feel much more comfortable with yeah. Taking those profits out. Okay. Every once in a while infrequently, and then, waiting for that opportunity. That's not to say that, if, if it doesn't fall 20 or 30% that you can't take some of that money back out, that you put in those long-term stocks and put it, put it in there to, to really ride it up again.

Average Joe Finances:

Yeah, Joseph that's a great point. And I think this comes down to the, that key word that you mentioned earlier, and that's, where you can discipline yourself and, that's where the discipline is going to come in because you could sit here and say, oh, it's just, I pulled some of those, my profits out of Tesla, and then it just kept going up and going up, you got to get rid of the FOMO and you got to discipline yourself. Cause I, I did this myself. I, there, there was one particular stock that I invested in that I said, okay, this is great. They had acquired three other companies. They were, a power company, a battery company, they acquired three other companies, the stock price doubled. I said, oh man, I doubled my money. I sold it all took all the profits. What I should have done is sold, got it back down to what I initially invested because it 25 X over the next three months. And I would've just left it alone. And it was only a $2,000 investment. No, sorry. A $4,000 investment. I doubled it to $8,000. If I would have just left it alone, it would have been $500,000. If I would have just, taken my profits out and left it alone, it would've been $250,000. So it's the little things like that, where I was, and this is when I was really new into this and I wasn't really like paying attention to things like that. And I didn't have that good core discipline going on. And it's one of those things that I look back at and I just go, ah, but I was like, you know what, I can't sit here and live with regrets, not even a single letter, that you start making these bad decisions.

Joseph Hogue:

That hindsight gets everybody. It is something that everybody goes to, everybody's got a story like that. But then, And you tend to remember those stories because of course, they affect you so much and what you could have had what you could have made. But then you don't necessarily remember the stories where yeah, you did get out of a stock, you stopped watching it. And you don't really realize that stock then dropped, 30 or 40 or 50%, because you really, you stopped watching it, things like that. So you w where you did make that very good, timely decision. And I think it just comes down to, yeah. That moderation, not necessarily selling all of the stock, but just selling it back, locking in some of those profits, letting some of them run and having that discipline, I think, one thing. Oh, I think one of the biggest lessons I'd like to be able to teach people is how to have that discipline without the pain. Because military guys like us, we know discipline comes from pain. You learn that discipline from, from your, from the pain of training and from the pain of your mistakes. And it's, it's the same with investing, but it doesn't have to be there. There has got to be a way that we can teach investors, that discipline of what to do and you know how to do it in the process without them having to basically commit the same mistakes that we ourselves make.

Average Joe Finances:

Yeah, that's a great point. And, and going along the lines here, talking about discipline right now, Hey, I could look back at that and say, you know what, Hey, I made a hundred percent profit, I doubled my money, Hey, I'm cool with that. But at the same time, just looking at the bigger picture when it comes to discipline itself, especially with the market right now, with how it is, it's been very volatile. And we see a lot of, people just trying to say, ah, the world's ending and this and that, their hair's on fire. Or for guys like you and me, they get, burn marks on the top of their head here. Cause the hair's already burned off. It happens. So that's why wear a hat, man. So when you see you're in these situations, like you've been through this a couple of times, right? In the nineties, late nineties, early two thousands, and then also 2008 timeframe. And now with what's happening, how do you stay calm when you see such big drops or big fluctuations in the stock market? What is it that keeps you comfortable with your portfolio?

Joseph Hogue:

Yeah. Mike, not to sound callous and I hate, I hate saying this, but I kinda don't right kinda was it hashtag not really or whatever it is, because, cause I know there are people out there that, that are losing a lot of money that, and especially the ones that are so close to retirement that, that don't have that time to, to build that money back. But, staying calm, I'm loving it. I, it just completely blows my mind that people love to invest, love to push as much money as possible into stocks as the market is going up. But then they panic and freak out when the market starts coming down and they stopped. This is the best time to invest. The market is giving you discounts on stock prices, and that's not saying that the market isn't going to continue to go down or that you should push all your money in right now, because I think having a formal strategy of when you're going to invest in how you're going to invest really, really optimizes it. But, but yeah, if you look at any stock chart over the last 50, 100 years, whatever, the only thing that is 100% guaranteed, is that the stocks will rise again. They will reach a new peak, sometime in the future. Right? And a lot of times that's not that long, bear markets average since 19, 1956, we've gone through 12, 12 bear markets. So 20% or more down from the peak, and it's only average nine months, right? Even some of the longer ones, maybe 18 months, that's only a year and a half compared to, the bull market that's averaged about 54 months. The best time to invest is now when stocks are discounted, because you're getting them at better prices than they were a year ago. And those stocks are going to produce those returns, right? We a year or two ago, all the big bulge bracket banks, JP Morgan Stanley, Goldman Sachs, they were all screaming about how stocks were so expensive, that it was likely that we were only going to get a 4% annualized return over the next 10 years. Now stocks are coming down so much that you do have the opportunity to get those 10 and 12% annualized returns now because you're buying at a lower level. Yeah, I would just say, do not panic. Don't get panicked out of this market. Don't push all your money in right away. And we can talk about a strategy for that. But, but just realize that this is the best time to invest.

Average Joe Finances:

That's a fantastic point. I, it makes me think back to March of 2020, we see how long that lasted a month. And then the 23 days, the stock market just skyrocketed. It was absolutely bonkers. We went from the pandemic starting and every, since everyone saying, oh, this is it. And home prices, everything was selling cheap, everything was on sale. And then like you said, 23 days later, everything skyrocket, rocketed, not only the stock market, but the housing market, just everything just jumped. Huge. That's another thing, like you said, the whole discipline thing. So actually I want to get into that a little bit. Cause you had mentioned, different strategies, like when you see these dips in the stock market. So if we could talk about that, and I think I know where you're going to go with this, but I'd like to hear your thoughts on, for somebody that's getting ready to start investing in the stock market today, with everything that's going on. What's a good way for them to invest right now with the market as volatile as it is.

Joseph Hogue:

Sure. Whether it's someone that's just started investing or has been investing, I think just having a formalized strategy of when you're going to buy into stocks is really helpful. And what that means is basically you look at something like the S and P 500 index, which is at $3,900 or 3,900. Right now it was at 48 18 at the top. So it's right about 19% down from the peak. Now we know that, bear markets have averaged 28, 20, 28%, down from the peak in the past, ones there followed by a recession a little bit more so 30 to 35. We know that the last two recessions I in 2008 and then 2000 or the last two big bear markets were down like 50%. So if you just take that into perspective. Okay. So what I want to do is I want to set markers on the S and P 500 and say, okay, you know what, I'm going to invest a little bit now because the market's already down almost 20%. I want to put some of them, some of my money to work, but I want to save some of it back. So when the S and P 500 gets down to you say 3,500, which I think would be something like 20, 27%, maybe 3,400, I think is 27, 28% down from the peak. So that would be that bear market average, then I'm going to invest maybe a third of my cash. And you're not investing in the market itself that, that index, but you're investing in the stocks that you really love. Those long-term stocks that you want to buy. You're just using the index as a marker, but you're in, you're taking maybe a third of your cash, putting it in those stocks that you love, then you're going to wait. You're going to wait. If the market comes down to maybe 2,900, which I think would be something like 40% or show, maybe 35. From the peak, then you're going to invest another third of your cash. And what this does is it doesn't say that you're trying to time the market and find that, that, that low, that very trough in the market, but you're just putting your money to work at different intervals here. So one, you have money working for you, right? Just in case the market does start rebounding into that new next bull market. Because like you said, 2010 or 2020, all those when the bear market does end and when stocks do start rebounding, they rebound fast, right? So you want your money working for you. But you don't want, necessarily want to push all your money in just in case it keeps on falling, right? So you do have money working for you. You've got cash set aside to be able to take advantage of those lower prices later on. So it's kinda the best of both worlds. What it also does is probably more important though. It keeps people from being their own worst enemies and it keeps them from basically tearing their hair out or having it go gray, for our, on our perspective, because a lot of investors they'll watch the market every single day. Wondering, should I invest now? Is this it is this low. And they'll just panic and basically push all their money in and there'll be cash all in, within a week or two, because they just can't take the stress. What this kind of a formal strategy does is it takes that stress out because you've got a plan and you're going to follow it, right? You don't have to work, watch the market every day. You just watch to see if the S and P has hit those levels where you're going to start investing part of that money. So it's a great strategy and it takes the stress out, takes, it, takes the guesswork out of investing and then gives you that opportunity to invest a little bit now, and then at different periods to take advantage of those prices.

Average Joe Finances:

Joseph, those are fantastic points, especially when you talk about just taking away the stress. Cause I think that's probably one of the biggest thing, especially for the people that listen to my show that, they finally got themselves out of consumer debt and they started investing and they're like, Hey, I want to go all in on something, I'm scared. I'm nervous. You don't have to go all in on something. Wow. Like Joseph said one third, and just, and then wait a little bit then another one-third and just keep it like that. So you've got cash reserves just in case. And at the same time, you're putting your money to work because we all know keeping your money in your savings account. It's not doing anything especially with inflation the way it is right now. Advertise, we're seeing it over 8%, but we know it's really more than that. So if you're not getting at least an 8% return, you're losing money.

Joseph Hogue:

And I'd add to that, a lot of people are saying, yeah, that sounds great, but I'm already all in, or I don't have much money to invest. Another thing I would suggest is just realize, okay, what kind of an opportunity this is, to invest in stocks at these discount prices and as stocks fall further now is the time to look at some of those, some of those side hustles or some of those passive income ideas or anything, call it a part-time job if you want, but just, commit yourself to even three months, three months, save up an extra $3,000 or so really, really put your nose to the grindstone and save up that money because you do have those that opportunity doesn't mean you have to take on a part-time job. Doesn't mean you have to do this for more than a few months, but do it. Save up that money and be able to take advantage of these prices. Even if you are already in all cash in your, already all invested in your portfolio, you don't have any cash to invest. I'd say take that opportunity right now to start investing. Because again, when the market sells off like this is the time you make money.

Average Joe Finances:

Yeah, absolutely. I want to touch on something that you just brought up and this was actually something I wanted to discuss with you as well. Was you had mentioned side hustles, and building up other passive income and so there's different ways to do that. I know you did it through your blog, right? You also wrote some books and you had some book sales and everything, and now you've got your YouTube channel, which provides a nice little side income as well. So what you know, for somebody again, that's looking to start investing and they don't just quite have the money to do it from there, nine to five and they're living paycheck to paycheck. What would you say are some good side hustles they could explore to try to start building a side income to take that money and invest.

Joseph Hogue:

Sure. There's a lot of things I would say, some of the most obvious like blogging, YouTube, a lot of those, it takes, it can take quite a while to actually start making, start making money on that. In this instance, or in this example, you would want something where you can start making money, pretty well immediately. So it's probably going to have to be a little bit more on the traditional side, of working for an hourly wage, something like that. Now I will say, you can do just about anything online these days, so think of, things, typical traditional jobs that you would do except you know how to do them online. So you can try that. Another one and probably the one that worked fastest for me was that self publishing idea. And everybody says, I don't know how to write. I don't know what I would write about. Everyone has a book in them. Okay. Anything you do, on a daily basis, you are an expert in that. And people want to know about it. Whether it's underwater basket weaving, there are actually courses, video courses online about underwater basket weaving and they get sales. So don't say that you don't know, that people wouldn't don't want to know what you know right now what's more important here, I think is especially with self-publishing right. The power of self publishing really is that, you can put a book together in, two or three months, put it on the world's largest e-commerce platform on Amazon that already gets billions of views a month. If you start your own blog, you start your own YouTube channel. You're going to hear crickets chirping for the better part of a, six months,, but you get your, you publish self, publish your book on Amazon and you got immediately immediate sales, right? I was making. Within the first six months, I had two books out on Amazon. I was making with a $500 a month, within the first six months. And so it's a very fast income generator that you can do. One thing I would say about, what to write about and how to do that, focus on is more important, your own personal journey and sharing that, than it is actually, what you're teaching somebody to do, right? Because cause yeah, the internet is free. People can go to the internet and learn how to do something, within 30 minutes. But what they buy your books for, what they buy those books on Amazon for is that personal journey. And someone they can relate to, relate to their story, how they did it and make that story their own. So really, pick something you're passionate about talking about, maybe have a little bit of expertise in that, that you've done for awhile, a hobby or something. And write about that and share your own personal story in that great way to. Yeah, really quickly start making money. So that's one example. There's a whole lot of, a lot of examples out there.

Average Joe Finances:

Just cause there, there are, like you said, I see a lot of people that even do they start, on Upwork or Fiverr, they just start doing like little side gigs. Things like that. If you are good at writing, you can write blog posts for other blogs and have them pay you. I've seen a lot of media that app.

Joseph Hogue:

Social media poster.

Average Joe Finances:

I have a social media manager that I pay that takes care of my stuff for me. And it's fantastic. And I found them on Upwork and it's, it's something that you can do as a side hustle, being a virtual assistant little things like that, but I really liked what you did with the self publishing and one of these days I'm going to get off my butt and write myself a book as well. And, and try that out for myself. But yeah, that's awesome stuff, man.

Joseph Hogue:

And we're not talking about, we're not, again, we're not talking about a part-time job, another, another nine to five or something here. Okay. We're talking maybe five hours a week, 10 hours a week at most, really just, just take the opportunity that you've got right now to make that extra money over the next three or six months, to be able to invest that. Because again, that money is going to multiply many times. Many times over, as the stock market does eventually rebound and hit those new highs.

Average Joe Finances:

That's the beauty of compound interest. It's the reason why it's the eighth wonder of the world. And if you're investing in dividend stocks, that's another passive income right there as well. Now you're going to get paid quarterly or monthly or annually, depending on what it is. That's, make some extra money and employ that money to work for you. So you can work less in the future. That's the way it is, do the hard work now. So you can take a break and rest a little bit in the future. And the thing is you don't, everybody has it in their head too. Like most Americans do that, you have to work and you have to, wait until you're in your sixties to retire and you really. You really don't, you can, if you put in the hard work for a good five to 10 years, you can retire at a very young age and I've seen so many people do it, that it's there, the whole thing behind the fire movement and things like that. Now, I tend to stay away from the RE part of. Fire, I like the financial independence part, the retire early. That's great. I, I'm 38 and I'm hitting financial independence this year and I don't, I want to keep going.

Joseph Hogue:

That's one thing I think fire is overrated, honestly, because people get to retire, people get to retirement

Average Joe Finances:

shirt, I'm wearing the shirt.

Joseph Hogue:

People get to retirement, whether they're 38 or whether 68 and then they're sitting there in their underwear on their La-Z-Boy everyday thinking, what the hell do I do now? There's only so much, price is right. you can watch. Okay. So you get it. I think happiness is finding something that you enjoy doing and that somebody is going to pay you to do, yeah. And yeah, it's going to seem like a D job every once in a while, but you're still going to have that passion for it. And yeah. Focus on finding what you enjoy doing and what you could see yourself doing until they put you in the ground. And you don't even worry about retirement, build that up slowly. Okay. You can do you do your nine to five, you do with the side hustles, whatever you want to do in the meantime, but spend a few hours every week. Just thinking about that passion project that you want to do. I really want to create that mastery in that and start getting paid for it, because then you don't even worry about it. Then you won't even have to worry about the money.

Average Joe Finances:

Yeah. Can you really consider it work? If it's something you enjoy doing? I talk to them that all the time on this podcast and that's why I'm like. I love real estate. I love investing in real estate. And when I retired from the Navy, I'm going to continue doing that and my podcast. And that's what I'm going to do because that's my passion. And I'm going to continue doing that and continuing, helping other people also as a financial coach. So it's little things like that, you get this passion about and you get fired up about, and Hey, if you can make some money while doing it that's even better. Okay. I want to kind of transition this cause we're running out of time here, into something that we do called the final round. It's where we ask the same four questions to everyone that comes on the show. We touched on one already, but we're going to maybe go get a little more specific with that as well. But if you're ready to go, we'll get this party started.

Joseph Hogue:

Sure.

Average Joe Finances:

Okay. Let's go. All right. So the first question of the final round is what's the biggest mistake you've ever made.

Joseph Hogue:

Biggest mistake. Okay, I'm gonna, I'm gonna come off, investing here because I think probably the biggest mistake I've made, taught me. It taught me so much. It was really, there was in 2000 and 2003, 2004. I was doing very well in real estate. Of course, naturally everyone was, doing a really well in real estate buying houses, buying fixer-uppers right. Fixing them up and then renting them out. And then I would, I would cash, refinance them, take money out after fixing them back up, put that into buying more. So I, I had seven real estate properties, in my early twenties and I was managing those while going to school and while working full time. And so the cashflow was there. And what did I do? I went out and bought a $40,000 port new shiny red convertible, Porsche Boxster, always, always wanted the car, always thought they looked really awesome and thought it would make me look so great. And, and what really didn't, it turned some heads, it did attract some people, but it was the wrong type of people. And it did teach me a lot of things about, materialism and lifestyle creep. One thing, I think those things that you buy, especially the very expensive things, they don't really measurably add to your life, but more importantly, that idea of lifestyle creep, where as you start making more money, then somehow magically mysteriously your expenses start going up, to meet that level. I have doctor friends, lawyer, friends, and such making hundreds of thousands of dollars a year that can't save a dime that can't seem to save, say save enough to invest can't even max out their IRA or their, their retirement contributions because they just don't have the money. Their expenses have gone up, every year, that they've been making money. And these are the same people that lived just fine on their internist, intern a salary of 20 or $30,000 a year. So really watch that lifestyle creep, and those expenses. If it's something, if you can attack that and, live a little enjoy life, but not let those expenses go up as much as your income every single year, you can really get to a point where you are saving a lot of money. If you're doing some of these side hustles or if you're starting your own online business and your income is going up, 10, 20% a year that is possible, especially with a business and your expenses are only going up, maybe two or three or 5% a year, you get to a point where you're saving 50% of your money, hundreds of thousands of dollars a year, and you're making, you're basically punching your ticket. You can do whatever you want for the rest of your life. So I really watched that, that lifestyle creep because, I learned the hard way that, those expenses, again, tend to match, tend to rise, to match your income if you let it..

Average Joe Finances:

Fantastic point, Joseph and I wrote that one down too. Cause I, you hear that a lot. Lifestyle creep is something that, that happens to a lot of people when you start making more money, know more money, more problems, that's how it goes. And, you have lifestyle creep on top of this inflation creep that we have going on right now. And it really puts you in a tough spot. So that's a great point. And, definitely glad you learned from that, with the Porsche. All next question. This is going to tie into that these kind of all tie into each other. And, what is something that you've learned that you wish you knew when you first started?

Joseph Hogue:

Okay. All right. That's probably going to tie into what we were talking about previously, where, limits position limits on your stocks. So this is. 2000. And I want to say, I want to say 2014, something like that, 2012, maybe 2013, 2014. And, if you rewind all the way back there, the, the coal stocks, right? The coal miners, and that were just getting absolutely crushed, energy prices were coming down. A lot of these fossil fuel prices were coming down and, all the coal miners were just getting crushed. But I looked at it and I was like, okay, we are still using coal for about 40% of our electricity generation. We're not going to wean ourselves off of this thing in a year. And these miners are rock bottom prices. I picked the most stable of the breed, the largest, with the market exposure, which was Peabody energy P ticker BTU at the time. And, and started investing in that, I figured, Hey, eventually this has got to rebound. These are at fire sale prices, and that's where I want to be buying right by. And when other people are selling and when there's blood in the streets. So I started. And, and it keeps going down. And what the most investors reaction was what I did. And you dollar cost average down, right? If you buy it at a hundred, it drops down to 80, then, you need it to go up 25% to get back to a hundred, right? If you buy again and your cost of it, your average cost comes down to 90. Then you only need it to come up. You know what 12% right. To a, to, to break even and start making a profit. So I started dollar cost averaging down and kept on dollar cost. Averaging now kept on investing, until this was something like, 20, 30% of my portfolio, this one stock, and of course, eventually Peabody energy did file bankruptcy and the shareholders who were wiped out and I lost upwards of about $30,000 on that one, and it's taught me so many lessons. One is that, okay, dollar cost averaging is fine. Even on the way up, everyone wants to buy, buy more of their stock on the way down, but you just buy it on. If you, if it's a stock you love and a stock, you're going to hold for decades by, at anytime, every few months. But, but dollar cost averaging down is fine, but with those position limits in mind. Okay. Because again, bad things happen to good companies. Companies do file bankruptcy and survive. A lot of people investing in the airlines right now. There will always be an American airlines. There will always be a Southwest or Delta or things like that, but what they don't realize is a lot of these companies, American airlines in particular has filed bankruptcy before, and there is still an American airlines. There will still be an American airlines. You're right. But there may not be those shareholders, sticking around. So understand that, companies can go away through bankruptcy and. And you really do have to watch that debt load, but, bigger picture here is just never to have more than about 10% of your money in that stock. Okay. Your dollar cost averaging down, you're buying more hoping to take advantage of those dips, but you've got to cut it off at some point. If a stock is 10% of your portfolio, you got to say, okay, you know what, that's enough. I've averaged down. If it does rebound, then that's what I'm hoping for. That's great. But if it keeps on falling, I can not commit any more money to this stock. So it really taught me a lot about that. As well as what to watch for in some of these, falling knife stocks, these value stocks, right?

Average Joe Finances:

That's definitely a great lesson learned for sure. That kinda really like between that and the biggest mistake you've ever made, man, that's some really good lessons learned, that you've had over your lifetime of investing.

Joseph Hogue:

It's the biggest lessons are always the ones from pain, right?

Average Joe Finances:

Yeah, absolutely. And again, we, be both being in the military. We understand that wholeheartedly, okay. So the next question is, and we touched on this a bit already. So if you want to get a little more specific, you can, but do you have any tips or tricks that you would recommend to someone that is just getting started today? So let's say somebody who just paid off their consumer debt, they just got themselves to a good spot where they don't have credit card debt anymore, and they want to start investing and start building their. What kind of tips would you recommend to them?

Joseph Hogue:

Sure. We could go back over all the things we talked about, like realizing that a bear market is the best time to invest a way strategists to invest. I think one of the most important ideas though, is really one of the most basic is to understand that investing is just as much about. You know that consistency and that habit of investing as it is, about the returns and when you invest in how you invest and all that, just building that habit of every month, taking a part of your paycheck, putting in an investment account, even if you're not, you're just sitting at, in cash, waiting to invest in stocks or bonds or whatever you do in that account, but just have the habit of just moving some money from savings, from your check into your investing account every month, because so many people, they try to, they try to do it manually or, they'll say, okay, you know what? I really don't have the money this month, but I'm going to do double next month. And then of course they don't have the money next month either. It is so important just to build that habit of moving that money. Because, like you said, compounding, it will grow. I think I saw a statistic that Warren buffet has made more money in the last, since he's turned 65. So it was about 15 years more money in the last 15 years, just on compounding than he did in the entire previous 50 years of investing. I started investing something like when he was 14, made more money. It just in the past 15 years, just because, if you're making 10% off of $60 billion at $6 billion a year, you're making right. So you get to a point where all that money, that, that habit that you built up over the years investing every month adds up. And now the money you're making on that every year is just phenomenal.

Average Joe Finances:

Yeah, it gets to the point where you can even spend what you're making a compound interest, even if you tried your hardest. No, that's fantastic. Yeah. Awesome. Awesome. All right. So one more question for the final round and, I'm going to ask this based off of, so besides your own, do you have a favorite business investing or real estate related book or podcast or.

Joseph Hogue:

Sure. Okay. So I'd have to say probably a book, and it's only because I am such a history nerd and when my love of history and, my passion for investing and that kind of thing, kind of meat, it's really the perfect combination. So I found a book it's called the history of the United States in five stock market crashes. It's written by Scott nations. He's a contributor there on CNBC, and he really goes over a five of the biggest stock market crashes. I think it starts with 1907, the 19 90, 29, of course, 2008. He covers, he covers like 1989 and then one other one, the.com bubble. And he really paints, an inclusive entire picture on each one of these. And it's just, it's a great story. If you do dig in a little bit deeper and really think about it, think about it thoughtfully, then you can find commonalities and it can teach you a lot about investing, but just reading it just for the story alone is just amazing because you'll read things in there that are just crazy. Especially the 19, the 1907 and the 1929 crash leading up to those, he covers generally covers about 10 years leading up to the crash and then causes and that kind of thing. And it's just amazing how the markets worked back then. Some of the things people were doing insider trading, a lot of things that are illegal now. Which is commonplace, back then, it's just a great story to read. So that's a history of the United States, in five stock market crashes.

Average Joe Finances:

Awesome. Yeah, I wrote that one down. That's definitely for you that scratches a couple inches. So for your history and also your investing, itch there, awesome. All right. So that's it for the final round, but I do have one more question for you, Joseph, and this is probably the most important question of all and, for the people that have been listening to this episode, they're like, oh my goodness. I really liked what Joseph was putting out. I already follow his YouTube channel because he's awesome. I'm a bow tie nation member. Where can people find more information about you? Can you share your website, social media, all that.

Joseph Hogue:

Yeah. I loved it. Love to see people in the community they're on YouTube. So that's a given, but, I've also got the blog, my stock market basics.com and that's really where I'm sharing a lot of the just, what, just what it says, the style, the basics of the stock market. Now don't, over-complicate investing because there's so much there that can be so easy. And so stress-free, so I really try sharing that on the blog. We've got a weekly new. Absolutely free goes out Sunday night, really just the, what I'm watching in the markets that week stocks I'm watching, things like that. So if you go to pretty much any of the videos on the YouTube channel, within the description, you'll find a link to that. So that weekly newsletter, you'll also find the, the private, within the newsletter. I've got a link to the private Facebook group, which is the let's talk money, group there on Facebook again, just a great community to be in. Learn, but, and talk back and forth with other investors.

Average Joe Finances:

Fantastic. So Joseph, I'm going to make sure I have all those links in the show notes to make it easier for everybody so they can just click away or copy and paste. Hopefully they're not trying to do that while they're driving. And, yeah, so this has been absolutely phenomenal. I had such a blast talking with you. This is like a dream interview for me because I've been following your content for awhile. So I really appreciate you taking the time to chat with me and with your flexibility, with how much, we've had the change, the interview time with recent events that I've had going on. So I definitely to say

Joseph Hogue:

the last couple of years have been crazy.,

Average Joe Finances:

Yeah

Joseph Hogue:

sure.

Average Joe Finances:

But Hey Joseph, absolute pleasure. Wishing you the best. And, I know you've got a lot going on your end. We talked about it off camera. I know right now you're doing the ex-pat thing and moving back to the states. So I'm really excited for you with your next move and, really hope to see, some more amazing things coming out of your channel. So I just want to say again, thank you. And Aloha from Hawaii.

Joseph Hogue:

Mike it's my pleasure.

Joseph Hogue, CFA Profile Photo

Joseph Hogue, CFA

Chief Awesome Officer

Born and raised in Iowa, Joseph Hogue graduated from Iowa State University after serving in the Marine Corps. He worked in corporate finance and real estate before starting a career in investment analysis. He has appeared on Bloomberg and CNBC and led a team of equity analysts for a venture capital research firm. He holds a master’s degree in business and the Chartered Financial Analyst (CFA) designation.

Joseph left the corporate world in 2014 to build his online businesses, first through creating websites and later through his YouTube channel, Let's Talk Money. He's since grown the community to over 550,000 and reaches more than 1.8 million people a month through the blogs, YouTube and a weekly market newsletter.