You’ve done everything right. Emergency fund, employer match, maxed-out retirement account, boring diversified index funds quietly compounding in the background. And now some part of you is wondering: is there a next level? Financial educator Brian Feroldi joins Paula Pant and Jesse Cramer for a genuinely useful gut-check on whether picking individual stocks is a smart next step, a fun hobby, or a trap dressed up as ambition, and how to tell the difference before you put real money on the line.
What You’ll Walk Away With
- The single question that determines whether you’re actually ready to buy individual stocks: do you have real interest in the process, not just the potential payoff
- Why working in an industry doesn’t automatically make you qualified to invest in it
- The real statistics behind stock picking: roughly two-thirds of individual stocks underperform the market average
- Why losing money on your first few stock picks might be the best possible outcome, and why winning right away can be dangerous
- A clear framework for position sizing, so a stock-picking hobby never puts your actual financial plan at risk
- The real opportunity cost of stock picking as a “side hustle,” and why it competes with your time as much as your money
- Why a great company and a great stock investment are often two completely different things
Why This Matters Now
There’s a point in a lot of people’s financial journeys where the basics start to feel almost too simple, and that itch to do something more advanced is worth taking seriously, not dismissing. But “more advanced” doesn’t automatically mean “individual stocks,” and jumping in without genuine interest or a clear framework can turn a healthy curiosity into an expensive mistake. Knowing honestly whether you’re drawn to the actual process of researching and following businesses, not just the idea of beating the market, is the difference between a rewarding new hobby and a costly detour from a plan that was already working.
From the Basement
A tight, competitive trivia round on Bank of America’s 1958 “Fresno Drop,” the unsolicited mass credit card mailing that eventually led to the creation of Visa, shakes up the year-long standings in a genuinely dramatic way.
Resources Mentioned
Personal Finance for Long-Term Investors podcast — Jesse Cramer’s show
Stock Simplifier — Brian Feroldi’s AI-powered stock research tool
Why Does The Stock Market Go Up? by Brian Feroldi — Brian’s bestselling book on how the market works
Afford Anything podcast — Paula Pant’s show
Our Topic: Are you ready to graduate from index funds and start picking individual stocks?
During our conversation, you’ll hear us mention:
- Index fund basics
- Individual stock picking
- Investor readiness
- Financial foundations
- Investing interest
- Research commitment
- Stock analysis
- Portfolio sandboxes
- Position sizing
- Skin in game
- Stock simulators
- Investor temperament
- Industry expertise
- Insider knowledge
- Business analysis
- Capital allocation
- Accounting fundamentals
- Financial statements
- Competitive advantages
- Simpler businesses
- Investing boredom
- Investor humility
- Dunning-Kruger effect
- Stock market skew
- Investing goals
- Dividend income
- Portfolio volatility
- Stock valuation
- Diversification
- Concentration risk
Our Contributors
A big thanks to our contributors! You can check out more links for our guests below.
Brian Feroldi
Another thanks to Brian Feroldi for joining our contributors this week! Hear more from Brian on his show, Brian Feroldi Podcast at Brian Feroldi – Podcast – Apple Podcasts.
Learn how you can demystify finance by visiting his website at Demystifying Finance | Brian Feroldi.
Check out his book Why Does The Stock Market Go Up?: Everything You Should Have Been Taught About Investing In School, But Weren’t.
Jesse Cramer
Another thanks to Jesse Cramer for joining our contributors this week! Hear more from Jesse on his show, Personal Finance for Long-Term Investors – The Best Interest, on Spotify.
Learn how you can work with Jesse by visiting The Best Interest – Invest in Knowledge.
Paula Pant
Check out Paula’s site and amazing podcast at AffordAnything.com
Follow Paula on Twitter: @AffordAnything
Doug’s Game Show Trivia
- How many unsolicited credit cards did Bank of America send out during the 1958 “Fresno Drop”?
Mentioned in today’s show
Join Us on Monday!
Tune in on Monday when Joe and OG tackle their top five clues your advisor might not be the best fit.
Miss our last show? Check it out here: Lynda Gratton: What If You Live to 100? Here’s How to Actually Plan For It SB1898 | Stacking Benjamins.
Written by: Kevin Bailey
Episode transcript
[00:00:00] opener: You should look into the bond market. That’s where the money is
[00:00:03] Joe: Invest in junk bonds
[00:00:05] opener: Jules, it’s high yield bonds. Do I tell people you’re in junk waitressing?
[00:00:15] Doug: From the basement of the YouTube headquarters, it’s The Stacking Benjamins Show
[00:00:30] Doug: I’m Joe’s mom’s neighbor, Doug, and index funds. So boring, am I right? Is it time to graduate from index funds to literally anything else? We’ve got answers. But that’s not all. We’ll also answer who’s scoring a point in our year-long trivia challenge. The race is heating up. We’ll see which competitor can lock in today’s question.
[00:00:53] Doug: And now, a guy who we always question whether he should be allowed outside mom’s basement, it’s Joe Saul-Sehy.
[00:01:10] Joe: Hey there, Stackers. And I just gotta wonder, w- why is that, Doug? Why do we, why do we wonder whether I should be let outside mom’s basement? Of course I should be. Yeah,
[00:01:19] Doug: a guy with a rap sheet as long as yours? No. You’re
[00:01:22] Joe: right. How are you, man?
[00:01:24] Doug: You know, I’m not… I’m, I’m somewhere between majestic soaring eagle and shopping cart with one bad wheel.
[00:01:30] Doug: I’m somewhere- Oh, that’s
[00:01:31] Joe: not good …
[00:01:32] Doug: between those guardrails.
[00:01:33] Joe: It’s good that it’s Friday. So you’re coming in hot. Time to relax and have some fun.
[00:01:38] Doug: Right on. Let’s do it.
[00:01:40] Joe: So why don’t we bring out the people we’re having fun with, and we’ll start off in Manhattan, where it’s already sweater weather here in mid-September.
[00:01:47] Joe: Sweater weather. Paula Pant is here. How are you?
[00:01:49] Paula: I’m great. How are you doing?
[00:01:51] Joe: I’m fantastic. You know, uh, we’re gonna talk about graduation, Paula. Do you remember your graduation day?
[00:01:58] Paula: Yes. Well, my most recent graduation was in 2023.
[00:02:01] Joe: Oh, see?
[00:02:01] Paula: So that, that was- It, it
[00:02:02] Joe: took her 47 seconds to mention her latest graduation.
[00:02:06] Paula: Yeah. Well, I, I didn’t mention where it was from. I just said my latest graduation.
[00:02:09] Doug: Did they give you the whole stack of finger paintings that you had done throughout the year?
[00:02:14] Paula: Finger paintings, Best Nap Time award.
[00:02:17] Doug: Right, maybe some pasta art.
[00:02:19] Paula: Yeah, runs with scissors. Uh, yeah.
[00:02:22] Joe: Running with scissors is the scary one ’cause-
[00:02:26] Joe: Paula, I’ve been around you for a number of years, and Paula with scissors kinda scares me a little bit.
[00:02:30] Paula: Really? Oh, the- Podcasts with scissors.
[00:02:36] Joe: Everybody back away. It’s gonna be a fun episode. I’m glad you’re here to help us talk about graduation. And a guy who is, uh… Uh, uh, I don’t know how I taught graduation and Jesse Cramer at the same time.
[00:02:48] Joe: But Jesse, pretend I said something. I, I connected the dots well. Do you remember your vag- your day of graduation?
[00:02:56] Jesse: Well, yeah, uh, they call it… They don’t call it graduation. It’s you achieve your freedom, they give you your stuff back- … and you get to go home. They have a different word
[00:03:07] Doug: for it. They dump the manila folder out upside down.
[00:03:08] Doug: That’s good. Your watch falls out. You
[00:03:09] Jesse: don’t have to wear orange anymore. You get to wear something other than orange.
[00:03:13] Joe: I remember, Jesse, early in my financial planning career, you know, we’d all had long days. We were all new advisors trying to grow their business, and so we went out to, like, a TGI Friday just to grab a beer together.
[00:03:25] Joe: And we, we settle on this topic, things your clients don’t wanna hear you say. And one of them was, “So just as I’m getting bailed out…”
[00:03:34] Jesse: Yeah. Uh, I can’t meet you there. It’s, uh… Well, never mind. I won’t, I won’t go with that one. It’s too
[00:03:40] Doug: close to, uh-
[00:03:42] Joe: Right. And good news. A guy who got bailed out just soon enough that he could podcast with us today.
[00:03:49] Joe: No, that’s horrible. He’s the man who teaches the world how to invest in stocks on the internet. Oh my God, Brian Feroldi’s back. How are you, brother?
[00:03:58] Brian: Doing great, Joe. How are you doing? The one and only guy that teaches people on the internet about stocks.
[00:04:03] Joe: You are the only guy, yeah.
That’s
[00:04:04] Brian: right.
[00:04:05] Joe: And the good news, Brian, is none of your competition ever makes you roll your eyes, I’m sure.
[00:04:10] Brian: Absolutely not. Nope, nor are they ever wrong.
[00:04:13] Joe: Exactly. ‘Cause I’ve seen some of those TikTok channels that I’m like, “Really? That’s what we’re going with and calling education these days?”
[00:04:19] Brian: Absolutely, yes. TikTok is a fascinating place, but not, not a great place to get stock recommendations.
[00:04:25] Joe: Well, thanks for coming back.
[00:04:26] Joe: Do you remember your graduation day?
[00:04:28] Brian: Yeah, I, I graduated from three different schools, and they got gradually less fun. High school, tons of fun. College, you know, at least I wore, like, a cap. Grad school, it was like I got a letter in the mail. That was graduation.
[00:04:42] Joe: Fantastic.
[00:04:43] Brian: Thanks for the money. Yeah.
[00:04:44] Joe: Well, that’s what I was gonna say.
[00:04:45] Joe: It’s in reverse order of the amount you paid too, I’m sure.
[00:04:49] Brian: Yeah.
[00:04:49] Joe: Yeah. Isn’t that wild? Quick graduation story, Brian, about our family. They told the graduates at the University of Texas when my son Nick graduated, they said, you know, some of the names in engineering are… B- I mean, they have a worldwide base of people that they pull from to go to an international school, like the University of Texas at Austin, and they said, “Please, to help out the person, spell out your name phonetically.”
[00:05:16] Joe: So Nick, instead of putting C Hi, which people always butcher, he put C-H-I. Hmm. So my son, when he got ready to walk across the stage, the person said, “Nicholas Chi.”
[00:05:36] Joe: They were fooled by their, by their own device, so. That’s
[00:05:39] Brian: amazing.
[00:05:41] Joe: Graduation’s fun. Well, why do I keep bringing up graduation? The reason is in Doug’s open. You know, we’re told there’s this progression with money, right? First you figure out how to save, and then you get your emergency fund, and then you start investing.
[00:05:54] Joe: And for most people, somebody smart eventually says, “Buy diversified low-cost index funds and get on with your life,” right? That’s great, but then as Brian you know as a guy who teaches this all the time, something weird happens. You get better with money. You start learning more. You become more confident, and eventually you start wondering, “Am I supposed to graduate from index funds?
[00:06:18] Joe: What’s next? Is there something that’s next?” Well, Brian Feroldi’s here. He teaches people, some people, what the next step is or maybe they should put the brakes on. Paula Pant’s here, who talks about thinking about your thinking, right? Should we reexamine w- why we think? And, and Jesse, you’re the guy that models everything, all of this, right?
[00:06:38] Joe: So I feel like we got three great unique points of view, plus Doug’s point of view, which is always the wild card in any discussion. So we’re gonna hear from this phenomenal team today on do we graduate, should we graduate, if we do, how do we do it? We’re gonna hear from them in just a second, but first we have some sponsors who help us bring this to you for the value price of free.
[00:07:00] Joe: Three times a week, we’re gonna hear from them, and then Brian, Jesse, Paula, Doug, and I, we’re gonna dive into graduating, in quotes, with your money
[00:07:17] Joe: All right, Brian, let’s start with you, man, to kick this off. Index investing, you know, sometimes it just feels too easy, right? Is buying individual stocks, is that actually the advanced course, or is it being smart enough to leave your index funds alone as the advanced course?
[00:07:37] Brian: Index funds are amazing. I mean, uh, Jack Bogle is on my Mount Rushmore of biggest philanthropists of all time with how much money he transferred from Wall Street to ordinary people by, uh, inventing index funds.
[00:07:49] Brian: When people that have very little interest in the market or know nothing ask me, “Hey, what should I invest in?” My answer is always the same thing, “Just stick with index funds.” But there are some people out there that are really strange, like myself, that are just fascinated by all things market, business, formation, competitive advantage, and people like me enjoy the process of learning about business, following the markets, researching companies.
[00:08:17] Brian: So if you have the personality that is just naturally interested in business, then I say you can absolutely graduate to buying and holding and analyzing individual stock. Which is like I view as a never-ending fun puzzle to solve, and if you do solve it well, uh, you can earn a big pile of money for doing so.
[00:08:36] Brian: But do you have to solve this puzzle? Do you have to graduate? Absolutely not, and most people shouldn’t even bother.
[00:08:41] Joe: I think that’s the good news. I mean, the last time you were on, I think you said something like 98% of people, Brian, shouldn’t bother. Like, just please, God, don’t.
[00:08:49] Brian: Mm-hmm. Yeah.
[00:08:50] Joe: Yeah,
[00:08:51] Brian: that- that’s about right, and it b- that’s because in my experience, only 2% of people are interested in ac- are actually interested in the topic.
[00:08:58] Brian: Right. Right? Just some people have no interest at all, and that would make them completely normal, just like I personally have no interest at all in real estate. That’s not a market that I should have anything to do with. It just doesn’t interest me. But the stock market does interest me. So to me, that’s, that’s the only price of admission you have to pay, interest.
[00:09:16] Joe: Well, th- that’s funny. Remember how I said early in my career, Brian, I went to this TGI Fridays, and it was things people don’t wanna hear their advisor say? Something I’d love to hear Paula Pant say is, “You know what, Brian? Real estate doesn’t interest me either.” That’s two of us.
[00:09:33] Paula: But I think Brian is getting at something important, which is that often there’s this idea out there that you might have a side hustle such as, I don’t know, selling candles on Etsy, and you might also invest, such as owning rental properties or buying individual stocks.
[00:09:49] Paula: But really, your investments, to do well at them, you need to have the same level of interest, engagement, like the same level of being in it as you would if, if you had an Etsy store or if you had a graphic design company that you ran on the side. Like any- any… Essentially, we’re talking about the world of side hustles.
[00:10:12] Paula: We’re talking about the world of multiple streams of income. It’s just that when we get to investing, it’s a, it’s a subset of the side hustle universe that people don’t think of as side hustles because it’s an investment. But it, it requires the same level of engagement.
[00:10:28] Joe: So wait, are you saying that buying individual stocks could be a side hustle?
[00:10:31] Paula: Yeah.
[00:10:33] Joe: Interesting. Jesse, you’ve gotta have some people that come in to see you, and they’re like, “Wait a minute. Whoa, whoa, whoa, Mr. Financial Planner Guy. Three index funds? That’s gonna do it?” Like, where’s the sexiness, right?
[00:10:46] Jesse: Yeah, I mean, the s- the sexiness, I guess, in most of my cases is sometimes there’s, uh, sometimes we sprinkle in a little, you know, dimensional Avantis.
[00:10:54] Jesse: Sometimes there’s a little factor tilt in there on top of the index funds. But my personal philosophy, and, and the way I manage my own money, doesn’t involve any individual stocks. Okay, are there exceptions? Sure, there are exceptions. For example, I think one thing we could talk about today would just be, like, the sandbox.
[00:11:12] Jesse: If someone really wants to scratch that itch and they’re like, “Hey, I subscribe to everything that Brian does. I really appreciate his, his bottoms-up approach to evaluating businesses, and, uh, I’m gonna pick 20 stocks and I’m gonna take, like, 5% of my portfolio, 5%, and within that 5%, I’m gonna own 20 individual companies just to scratch my itch to play around in the sandbox a little bit because it’s something I find fun.”
[00:11:38] Jesse: I’m cool with that, as long as we size that sandbox appropriately, as long as we build the financial plan, like, as long as the financial plan still works even with the sandbox’s existence. Because for all I know, this person following Brian’s rules is gonna be great, and, and they might even… That, that sandbox might perform better than the rest of the portfolio.
[00:11:59] Jesse: But a lot of people out there, they watch my uncle, Jim Cramer, on CNBC for, like, eight minutes a week, and they’re like, “Well, Jim Cramer told me to buy Starbucks, so I’m gonna buy Starbucks.” And that to me is a recipe for some sadness. So I think that’s the way a lot of people approach buying individual stocks, and I think that’s something that we probably want to avoid.
[00:12:21] Joe: Well, l- let’s dive into that. I never thought about him being your Uncle Jim.
[00:12:25] Jesse: Thanksgiving’s really awkward.
[00:12:27] Joe: It is. Well, ’cause it was right there this whole time we’ve been working together the last couple years, Jesse, and I’ve never once had you say, “Sell, sell, sell.” I want the button. We gotta get the- I
[00:12:35] Jesse: tr- I try to go down a different…
[00:12:37] Jesse: Uh, I try to present myself differently than him. And then if you throw in there, as you can see right now, the listeners can’t see, but Doug’s my stepdad. So between me, Doug, and Jim Cramer, I mean- I just started shaking … just think of the holiday. Just think of the
[00:12:50] Joe: holidays. Can we k- can we even keep podcasting after that horrible image?
[00:12:53] Joe: I don’t know. Uh, longtime listeners know how much we love games at Stacking Benjamins, and I wanna play a game, which is are you ready to graduate beyond index funds? ‘Cause you guys talked about there might be a place. It might be… Paula said it might be a side hustle. Jesse said size it up. You know, maybe, maybe not.
[00:13:10] Joe: Brian said, well, if you’re the 2% of people. So let’s go through some scenarios. Are you ready to graduate? So I’m gonna ask all three of you, should this person graduate? Should they keep learning, right? Don’t start investing yet, but maybe they’re on the path. They’re partway there. Or is index and go live your life like totally forget about this idea of graduation?
[00:13:32] Joe: All right? So those are the rules. So let’s talk about student number one. I wanna get each of your votes, and then I’ll come back to you. So don’t give me any commentary. Just give me your vote. Student number one is Sarah. Sarah’s 28 years old. She maxes out her Roth IRA. She gets her employer match. She has an emergency fund.
[00:13:51] Joe: All of her investments are in index funds. She wants to start buying stocks because investing has become her favorite hobby. She just thinks that investing is a ton of fun, so she wants to do a little more. Brian, what’s your vote?
[00:14:06] Brian: Yes.
[00:14:08] Joe: Graduate.
[00:14:10] Paula: Graduate.
[00:14:10] Joe: Yes. Paula?
[00:14:12] Paula: Yes. Graduate.
[00:14:13] Joe: Jesse?
[00:14:16] Jesse: Permission granted.
[00:14:18] Joe: Wow.
[00:14:19] Joe: Three for three. Brian, what’s going on here? Why do you think it’s okay for Sarah to go to the next step?
[00:14:26] Brian: Sarah’s got her financial life in order. She’s mastered the art of making money, h- generating an income. She’s mastered the art of setting aside a portion of it. She’s got her retirement in a really good place.
[00:14:38] Brian: And you said the magic word to me, which was she’s interested in the topic. Mm. Mm-hmm. That, to me, is the only thing that you need, plus a little bit of money to do it. That, to me, is the only criteria that I really care about because, uh, you have to have the interest to actually study businesses, to actually learn what’s important, to learn how to analyze them, to go out and make buying, sell decisions, to follow the companies and to see how they’re doing.
[00:15:02] Brian: That requires effort to do the right way. So if you’re not willing to do that effort, no problem. Just stick with index funds. But if you’re interested enough to do that effort, and you’re like a weirdo like me that finds that topic endlessly fascinating, then absolutely, go ahead and buy individual stocks.
[00:15:19] Joe: Jesse, I love what, uh, Brian’s talking about because back when I was an advisor, I would have these clients that would buy them a one-off. Maybe they’d listen to your Uncle Jim, and they’d go buy a couple things. But to Brian’s point, they didn’t have enough interest to stay in it, and then it’s, you know, five, six, seven years later, and I’m telling them the garden has weeds all over it.
[00:15:37] Joe: We gotta start doing some heavy duty weeding. What was your thought process when you heard about Sarah, Jesse?
[00:15:43] Jesse: Well, I think that she’s doing a lot of the saving really, really well, and I think a- any long-term investor, e- especially as young as Sarah is at 28, I mean, saving is one of the biggest things that she can control.
[00:15:56] Jesse: And so the idea that she’s gonna continue saving, that she’s gonna continue owning these index funds, and then using some of her future savings, she’s going to start investing in individual stocks, I say that’s great. And, and like Brian just alluded to, and I, I think there’s probably something that’s true for Brian, it’s true for Sarah, and it’s true for the people who take this seriously, that a year from now, if I look at Sarah’s portfolio, and I’m like, “Sarah, you, you own Costco.
[00:16:21] Jesse: W- why do you own Costco?” I bet you she could explain to me why.
[00:16:25] Brian: Mm.
[00:16:25] Jesse: Whereas a lot of those clients that you just pointed out, Joe, who have all the weeds in their garden, if you say like, “Oh, you, you have some shares of Lockheed Martin here. Why, why is that?” They’d be like, “I don’t know. I think I bought it, you know.
[00:16:37] Jesse: My neighbor mentioned it eight years ago.”
[00:16:38] Joe: Right.
[00:16:39] Jesse: It’s like, man, what a terrible reason.
[00:16:40] Joe: Uncle Jim said it was good.
[00:16:42] Jesse: Exactly, exactly. And, and that, I think that really matters, and I think anyone who goes, anyone who graduates down this path needs to be constantly kind of refreshing and recycling their rationale to say, “Do I still want to own this?
[00:16:55] Jesse: Is this still a company worth owning for the long run?” And, and some people have that temperament, and some people don’t.
[00:17:02] Joe: Paula, rather than ask for a me too on that one, let me start with you with student number two, all right? Mm-hmm. Mike. Mike is 42. He’s a great saver, reads the Wall Street Journal every day, cannot explain the difference between an income statement and a balance sheet.
[00:17:19] Paula: Hmm. Well, is that the end of Mike’s profile?
[00:17:22] Joe: That’s it.
[00:17:23] Paula: Okay. That’s
[00:17:23] Joe: it.
[00:17:24] Paula: Well, that’s a solvable problem. So long as Mike is willing to learn, then yes, start the learning process so that he can better evaluate stocks.
[00:17:35] Joe: But should he? Should he?
[00:17:37] Paula: If he’s willing to learn, then yes.
[00:17:40] Joe: Yeah. Brian, it seems to me that if he reads the Wall Street Journal every day but he doesn’t really care, is there any ROI there?
[00:17:49] Brian: Well, to me the question you’re really asking is, does he have the green light from us to graduate and beyond these things? Yes. And Paula just said it. To me, green light. Absolutely. Uh, in fact, the fact that he doesn’t know how to read an income statement or a balance sheet might be because he’s just not motivated to do so.
[00:18:05] Brian: Um, I, I liken the stock market or individual stocks to a lot like a seventh-grade ba- Little League baseball game. It’s like I don’t care about Little League at all, but if my kid was in the game, boy would I pay attention and be rooting for them. So sometimes putting a little bit of money into a stock that you’re interested in generates the interest to actually follow about and to learn about accounting.
[00:18:29] Brian: Because when that stock falls and you’re like, “Why is this happening?” That can be the actual, um, impetus to actually learn about, well, how to read an income statement. What is a balance sheet? How do those things work? And I think as long as you position size correctly so that if that investment goes to zero, it doesn’t really impact your financial life at all, uh, I say go for it.
[00:18:50] Joe: Based on that analogy, you, I would think, don’t like the stock simulators where you don’t have any money invested.
[00:18:58] Brian: They’re, uh, uh, fine for learning and for starting out and for learning the, the mechanics, but to me, skin in the game is how you actually really learn something.
[00:19:06] Joe: I do. I think what, man, the difference in my investing style when I had skin in the game versus using one of those stock simulators was night and day, Brian.
[00:19:15] Joe: Like, my decision-making became so much more emotional at that point.
[00:19:19] Brian: Okay. Well, that’s how you learn about yourself and if you have the temperament to actually and be a real investor, right? It’s one thing to do it theoretically and to simulate a loss, it’s an entirely different thing to have your net worth actually go down in front of you.
[00:19:31] Joe: All right, Jesse, h- here’s another fun one. Amanda. Let’s talk about Amanda. Amanda is an engineer in the semiconductor industry. She knows the industry up and down. She sees products and trends long before most consumers do. Should she be investing in individual stocks that have to do with semiconductors?
[00:19:55] Jesse: Uh, no. Um, well, I don’t know, is red herring the right, the right term here, where it’s she knows the industry and, and she sees the trends before anyone else That, i- immediately I thought there of like, well, as long as she’s not insider trading, then, then what she’s doing at least isn’t illegal. Just because she works as an engineer in the industry, does she understand the financial statements of these businesses?
[00:20:19] Jesse: Does she actually understand the, the risks that some of these businesses are facing in terms of the competitive moats, the, you know, them versus their competitors and, and that kind of thing? And okay, what, why do I hesitate here? Well, I was an engineer, not in the semi industry. I was an engineer in the aerospace industry.
[00:20:37] Jesse: And from my little chair in Rochester, did I have the capability to determine L3Harris versus Northrop Grumman versus Lockheed Martin versus Boeing? Not really. I mean, I knew the one little thing that I was working on at my defense contractor, but I didn’t know nearly enough, at least from my point of view.
[00:20:54] Jesse: I di- I don’t think I knew nearly enough to accurately try to predict which of those companies would end up on top. So that I, yeah, I would hesitate for Amanda here.
[00:21:04] Joe: Yeah. Brian, I saw you nodding your head.
[00:21:07] Brian: Yeah. Just because you work in an industry, if you are hyper-specialized into one thing, when, when you’re buying an individual stock, the thing that you’re trying to learn is business analysis and capital allocation.
[00:21:20] Brian: Those are skills that you can learn and develop yourself, but they are not skills that most people at companies possess. I myself have worked at companies and talked to executives at companies, so people that are in the C-suite. And when I was working there, they knew that I was interested in, in stocks and business and stuff like that, and they would ask me extremely basic accounting questions that I would answer for them.
[00:21:44] Brian: So these were people that were extremely accomplished- Wow … at, say, sales and marketing or human resources or engineering, and that’s what they knew really well. But they did not understand the fundamentals of accounting. And to me it’s like that, that is like table stakes for, for analyzing if a business is good or not.
[00:22:01] Brian: So to Jesse’s point, yeah, just because you work in an industry doesn’t mean that you necessarily have the skill set to analyze, to analyze your industry the way that an analyst would.
[00:22:10] Joe: But that also should give a lot of our stackers hope, Brian, that you know what? People think that Amanda has a leg up because she works there.
[00:22:17] Joe: You’re saying not necessarily so. Even if I’m an outsider in an industry, I can grasp the financials enough to make a yes/no buy decision.
[00:22:26] Brian: Yeah. But, um, just because she might not be extremely knowledgeable about analyzing semiconductor stocks, I guarantee you she can analyze Domino’s versus Chipotle, right?
[00:22:36] Brian: Like, there are things that we all know as consumers that businesses that are much easier to analyze, so much simpler, and we can tell the difference as a consumer between, well, that’s a product that I like to buy versus that one because you’re on the consumer end of things. Whereas you can get extremely detailed and technical on when you get into like the semiconductor space or the cybersecurity space or the biotechnology, uh, space.
[00:22:57] Brian: So just some industries are way easier to analyze than others are. And if you’re just dipping your toe into the water, it’s much better to stick to simpler businesses than complex ones.
[00:23:07] Joe: Even I know the difference between Domino’s and Chipotle. I mean, one’s a food company, one’s a weight loss company, right?
[00:23:13] Brian: You
[00:23:13] Joe: got it. Is it- That’s
[00:23:14] Brian: exactly right.
[00:23:15] Joe: W- was that too long ago? I don’t know. Paula, it’s interesting. You hear this all the time, right? I mean, I hear this all the time, I think you hear it all the time, that, “Hey, I work in the industry. Why wouldn’t I invest in companies like mine?”
[00:23:29] Paula: Mm. Well, to answer that, and also to piggyback off of what Brian just said, here’s an example from the world of real estate that I think has parallels and carries over.
[00:23:39] Paula: When I first started investing in real estate, I remember my best friend called me, and she was like, “There are all of these real estate agents and general contractors who are not able to make good money as rental property investors. What makes you think that you could do it if all of these real estate agents can’t?”
[00:23:59] Paula: And, and that really got to me. I was 27 years old. I… And I was like, “Oh, man, that’s a great point. What makes me think I can?” And so I went out and got a real estate agent license, largely driven by that imposter syndrome and driven by the idea that, like, maybe if I got a license, I would know more about real estate, and that would help me be a better investor.
[00:24:20] Paula: And what I found was, eh, it didn’t do that at all. Agent training is extremely specific, and you learn about this very, very narrow subset. You learn an extremely narrow subset of skills. Essentially, you learn how to fill in the blanks on a bunch of pre-printed legal forms. That’s really what the training is.
[00:24:39] Paula: There is nothing inside of that training that teaches you how to analyze a property for its investment potential. Like, that’s not it.
[00:24:49] Joe: It’s much more the business of the transaction than the actual asset.
[00:24:53] Paula: Exactly. So there’s absolutely nothing within that training that would give you the knowledge or the judgment to be able to say, “Hey, I think that property is going to…
[00:25:03] Paula: Property A is going to be a better investment than property B.” That was something that had to be completely self-learned, and I wouldn’t have known that had I not gone through agent training and gotten a license and come out the other end of it being like, “Wow, that didn’t help me at all.”
[00:25:18] Joe: That’s it?
[00:25:18] Paula: Yeah.
[00:25:19] Paula: Yeah.
[00:25:19] Joe: Yeah.
[00:25:20] Paula: You know, I think that has parallels here. Oftentimes when you learn a skill set that allows you to work inside of an industry, what you know often is a highly specialized, very specific skill set about some narrow component of the industry, which is totally different than being an industry analyst.
[00:25:43] Joe: I’ve got one more scenario. Jesse, we’ll start with you on this one, ’cause this is another one that I see fairly often. Dave has $1.2 invested, all in index funds. He’s 57 years old, wants to retire 64, 65, and he’s bored He’s bored. He thinks, “Shouldn’t there be something more than this?” Graduate to individual stocks?
[00:26:12] Jesse: Uh, because he’s bored. I don’t think so. I mean, nothing… I, I don’t know enough about Dave, I guess. Uh, based on your description, yeah, I think nothing from the description makes me go, “Oh yeah, Dave’s ready. Dave’s ready.” He’s bored enough, right? He’s bored enough to do it. Buy
[00:26:28] Doug: a Corvette, Dave.
[00:26:29] Jesse: Right. Right. I think maybe Dave’s a step away, and going back to, um, I forget actually who, what…
[00:26:37] Jesse: Was it Mike? Was that, like, was that- Yeah, Mike … the individual? Going back to Mike who was reading The Wall Street Journal where I didn’t answer for Mike, but my thought was, “Well, Mike, go off and learn how to tell the difference between a balance sheet and an income statement, and then dive in.”
[00:26:51] Joe: If there were only somebody online that taught that stuff.
[00:26:53] Jesse: Exactly. That’d be great. Exactly, and that’s where I think for Dave, it’s like, all right, Dave, good for you. Go out there and put in some work. And granted, maybe… And, and then I’ll pass off the baton. I could see anyone, and, and maybe this is where Brian’s answer from before comes in, which is like, Dave, absolutely you’re ready.
[00:27:10] Jesse: Get some skin in the game first, and then you will feel, uh, incentivized to learn. And I just, I just would flip those around. I’d be like, Dave, why don’t you learn first, and then put some money on the line? But-
[00:27:22] Joe: Yeah …
[00:27:22] Jesse: that’s the thought.
[00:27:23] Joe: Yeah, so maybe, maybe keep going and see if he’s interested. Keep learning, but not investing yet.
[00:27:28] Joe: Yeah. Brian, I was clearly referring to your channel, ’cause I love all the lessons on these things that you dive into. If only there were somebody like Brian Feroldi teaching this online. Does Dave just need a hobby?
[00:27:40] Brian: Yes. That’s exactly what Dave needs, right? Investing is a great activity. It’s a lot of thinking.
[00:27:47] Brian: It’s a lot of studying if that’s like your, your… Again, it’s a subject that, that just interests you. But Dave sounds like maybe he should take up pickleball, maybe some golf, maybe fishing, maybe going on a hike, maybe playing tennis. I hear that’s really a lot of fun. Um, but, uh, a- again, if he’s not naturally interested, if he’s not naturally drawn to the markets, don’t just try and fill boredom by picking individual stocks.
[00:28:09] Brian: Although, if he does choose to do that, just make sure you size it correctly. If he’s worth $1 million or whatever, and he takes five grand and puts it in and he loses it all, great, you learned a lesson about yourself. So if you are gonna do it, uh, position size. I, I’ve been online long enough to see some people that are in their 50s that start picking stocks as a side hustle, and they go all in because they’re so convinced- Oh my God
[00:28:35] Brian: of some, some stock- Oh my God … like right from, from the get-go. Absolutely. And then they don’t know anything about analysis. The first stock that comes along, they’re like, “Yeah, that’s the one. How could, how could I lose?” If that’s you, please don’t, please don’t do that. That’s a horrible idea. You don’t wanna put your nest egg into individual stocks as a brand-new beginner just because you have money, right?
[00:28:56] Brian: So if you are gonna get into it, there’s no rush. Position sizing is everything. Just do an amount of money that is there to, um, that you care, but that if, if it goes completely south, your life won’t be impacted.
[00:29:10] Joe: So Brian brought this up a few times that apparently size matters, so we’re gonna talk about how do you position size- I knew he
[00:29:16] Doug: couldn’t
[00:29:16] Joe: resist it
[00:29:16] Joe: in the second half- … of today’s discussion. If I didn’t bring it up, Doug was going to. It was gonna happen. I also wanna ask some more specific and pointed questions about if you’re going to graduate, graduating to, how do you study these things? We’ve got so much more to talk about, but at the halfway point of every Stack of Benjamins Friday episode, we have this year-long competition going on between our three frequent contributors, Paula, Jesse, and OG.
[00:29:45] Joe: And Brian, today you’re playing for Team OG, and that means some good news and some bad news, my friend. You want the good news or the bad news?
[00:29:52] Brian: Give me the bad news first.
[00:29:53] Joe: The bad news is you are in first. Actually, I will give you- … the first bad news, which is you are first, which sadly, and I hate this when somebody joins us just from time to time, a few times a year like you do, Brian, that you’re gonna have to guess first, so that kinda sucks.
[00:30:08] Joe: But you’ve got a nice lead. Uh, Doug, what’s the score right now?
[00:30:11] Doug: N- no, he does not, Joe. He has anything- Oh, does not have a nice… Oh … anything but a comfortable lead. The 2026 trivia season is one you’re gonna tell your grandkids about ’cause it is getting all hot up in here. We’ve got OG, and today Brian with 10 points in the lead, but nipping at the heels, both Jesse and Paula have nine points.
[00:30:35] Doug: This is as good as it gets.
[00:30:36] Joe: 10-nine-nine right now.
[00:30:40] Doug: That’s
[00:30:40] Joe: right. Wow, no pressure, Brian, to keep the lead. No pressure at all today.
[00:30:44] Brian: Don’t worry, I feel none.
[00:30:46] Joe: That’s right. So Brian’s gonna go first because Jesse beat Paula last year. That means Paula still has the advantage and gets to guess last. We call it an advantage, but Paula- Pity
[00:30:56] Joe: is it really? It’s
[00:30:56] Doug: really pity.
[00:30:59] Joe: We st- we still wonder. We need a question. Doug, you’ve got the question. What are we talking about today?
[00:31:06] Doug: Hey there, Stackers. I’m Joe’s mom’s neighbor, Doug, and today was a wild one in financial history. It was on this day back in 1958 when Bank of America did something that, at the time, was almost unthinkable.
[00:31:20] Doug: In an experiment called the Fresno Drop, they mailed live pre-approved credit cards to people in and around Fresno, California. The Fresno Drop reminds me of what happens to my credit score every time the Sizzler introduces a new rewards program. Anyway, think about this. One day you walk out to the mailbox expecting the electric bill and the new Sears catalog with a spicy little underwear section, and instead there’s a bank saying, “Hey, here’s some money we haven’t discussed.
[00:31:49] Doug: Try not to ruin your life.” What could possibly go wrong? Turns out, quite a bit. The launch was a mess, but that little experiment eventually evolved into the credit card network we know today as Visa. So that’s today’s question, just how many unsolicited credit cards did Bank of America send out during the Fresno Drop?
[00:32:11] Doug: I’ll be back right after I see if Joe’s mom can extend me a line of credit for happy hour at the Sizzler. It’s two for one shrimp night, but unfortunately my wallet is, like, zero for zero on money.
[00:32:22] Joe: Oh, that’s not good. You got to get that solved. While he’s solving that problem, Brian, the Fresno Drop, Visa, Bank of America at the time, sending out all kinds of unsolicited credit cards, how many?
[00:32:35] Brian: Hmm. Well, Fresno is a city that I’ve heard of, which means its population is probably a couple hundred thousand, but I know that when credit cards first came out, they were highly selective with who they gave them to, so I’m gonna go with
[00:32:48] Joe: 25,000. 25,000 people kicks it off. Jesse, what do you think about that?
[00:32:54] Joe: That too high or too low?
[00:32:56] Jesse: My initial instinct was much lower than that, but partially that’s maybe because I don’t know how big Fresno is, and also this was 1958, and was it smaller then? I’m just gonna go with a, a smaller number in general. I’m gonna say, uh, 3,500. 30-
[00:33:16] Joe: 35,000. Yeah … 3,500. Yeah. So big. Yep. Big difference.
[00:33:21] Joe: Boy Paula, you got 25,000
[00:33:25] Paula: and 3,500. Wow. Okay. So the answer would relate to how big is Fresno in 1958, and of the Fresno inhabitant, uh, how, how many would qualify? Well, and I don’t know the answers to any of those I’ve got two options. I think two. I’ve got two good options. One is I could just aim for the middle, take the average and aim for the middle.
[00:33:53] Paula: The other is that I could capture the upside. I’m a little tempted to capture the upside, ’cause that gives me more numbers
[00:34:00] Joe: You think they’re going crazy with the credit cards?
[00:34:02] Paula: I mean, if it developed its own nickname, the Fresno Drop, if it developed a nickname that persisted throughout history, then it was probably a big launch that went nowhere.
[00:34:15] Paula: So yeah, I’m gonna go 25,001.
[00:34:21] Joe: 25,001. Well, this is interesting. Brian at 25,000, Jesse at 3,500, way different, Paula at 25,001. Who’s gonna capture it? Are we gonna have a tie for first place? Is OG/Brian gonna pull ahead? We’re about to find out. We’ll be right back. All right, Brian, you opened this at 25,000, but Paula took the upside.
[00:34:44] Joe: Maybe not bad news. You still got a lot of room below 25,000. Feeling good?
[00:34:49] Brian: Uh, no. No, I’m not feeling good.
[00:34:53] Joe: That’s very honest. That’s why, that’s why we like Brian. Jesse, you’re, you’re down there at 3,500 bucks. Yeah. Paula made a point, said, “Would they call it the Fresno Drop if it was a small number?”
[00:35:04] Jesse: I mean, the logic makes a lot of sense, but as soon as, as soon as Paula said that, you know, something inside her made her think that, my odds shot up.
[00:35:15] Jesse: So- I’m feeling great …
[00:35:19] Joe: and by the way, for people who are new to Stacking Benjamins, that is not a rip on the fine Paula Pant. That is a rip on Paula Pant’s track record- … of gut feelings and the fact that they rarely pay off. So yeah, the Kelce bet on this, Jesse, just changed completely. Paula, you’ve got the upside.
[00:35:37] Joe: Feeling good?
[00:35:38] Paula: I got scissors. I got scissors, Joe. Oh,
[00:35:42] Joe: man. Well, does Paula have to cut somebody, or are we gonna have a new champion, a new tie champion? We don’t know. Doug knows. Doug, who’s taking this thing home?
[00:35:56] Doug: Hey there, Stackers. I’m happy hour shrimp lover and guy who just got the green light from Joe’s mom that she’s buying Joe’s mom’s neighbor, Doug. What’s better than a line of credit? Free money. At least that’s how I understand credit cards. I mean, Joe keeps telling me that’s not how they work, but explain this.
[00:36:13] Doug: I hand the waiter a piece of plastic, he gives it back to me, and I leave with two beers and a shrimp appetizer. If that’s not free money, I don’t know what is. Sure, apparently once a month somebody sends you a letter asking for some of it back, but that’s a problem for future Doug, and that guy’s not near as much fun as present Doug.
[00:36:30] Doug: He’s always trying to ruin present Doug’s Friday. Speaking of great Fridays, which one of our contributors is about to have one? Let’s find out. Before the break, I told you about Bank of America’s 1958 experiment that eventually helped give birth to what we know today as Visa. In what’s now called the Fresno Drop, the bank mailed unsolicited credit cards to a whole bunch of unsuspecting people in and around Fresno, California.
[00:36:58] Doug: So how many people suddenly opened their mailbox and discovered that Bank of America decided they needed a credit card? Well, the correct answer was 56,500 more than what Jesse guessed. No way. 35,000 more than what Brian guessed. You don’t say. And just 34,999 more than what Paula guessed, which means Paula is today’s winner, ’cause Bank of America sent out 60,000 cards.
[00:37:27] Doug: Congratulations, Paula. Wow. It’s happening,
[00:37:31] Joe: people. It’s happening. What is going on here?
[00:37:32] Paula: That means I’m tied with OG for first. She is tied. For first.
[00:37:37] Joe: For people that are new to the Stacking Benjamins show, this only happens on January 1st of each year. That she and OG are tied.
[00:37:45] Paula: When the score is zero, zero,
[00:37:46] Joe: zero.
[00:37:46] Joe: Yeah, I can’t remember a time- Yeah … Paula, when you’ve been tied for first this late in the year.
[00:37:50] Paula: Yeah. Tied for first.
[00:37:52] Joe: What the hell is happening here? Unbelievable.
[00:37:55] Paula: If I ever tie, it’s always tie for last.
[00:37:57] Joe: Exactly. And you’re excited when you’re tied for last.
[00:38:01] Paula: I am, yeah. That’s a promotion, ’cause usually I’m firmly last.
[00:38:04] Paula: Yeah. No tie. So if I get promoted up to a tie for last, that’s a huge promotion. Tied for first.
[00:38:10] Joe: Unbelievable. And Paula-
[00:38:11] Paula: Wow …
[00:38:12] Joe: last year’s champion, Jesse Kramer, in last by himself.
[00:38:17] Paula: Wow
[00:38:18] Joe: What’s going on there?
[00:38:19] Jesse: It’s lonely back here. Flashing the pan. It’s quiet. It’s cozy though. It’s cozy. Paula has really done up the place.
[00:38:27] Jesse: I mean- … the surroundings are terrific. She’s had- The aesthetics … a lot of time to
[00:38:30] Doug: decorate.
[00:38:31] Paula: The coalition to defeat OG, which Jesse and I formed last year- It’s
[00:38:34] Jesse: true …
[00:38:35] Paula: that could still stand. Like, Jesse, between, between your score and my score, that, that’s like firmly first.
[00:38:41] Jesse: Correct. And, and the o- I mean, we’ve got two great contenders this year.
[00:38:46] Jesse: We’re about to enter the home stretch, the fourth quarter-
[00:38:48] Paula: Yeah …
[00:38:49] Jesse: with the coalition having two opportunities to, uh, defeat Darth Vader. Things are feeling pretty good.
[00:38:56] Joe: Two weeks away from the fourth quarter. We’ll find out. Right now, though, we’re gonna find out about graduating from index funds. Paula, let’s, uh, since you’re the champ today-
[00:39:08] Joe: let’s start with you. You know, somebody is ready to, one of those people that you and Brian and Jesse gave the green light to, to start graduating, what do they need to know before they buy stock number one?
[00:39:21] Paula: Mm. The first thing to really internalize is that you have a lot of unknown unknowns. Before you begin this process, be humble, know that you’re a beginner, approach this with a beginner’s mind, and seek to learn how to do it properly.
[00:39:40] Paula: And I say that because I know people, and I’m thinking of, of one person in particular. This person is that quintessential, like, Buddy said something at the proverbial water cooler, gets caught up in a hype cycle, and doesn’t know enough to understand how little he knows. A bunch of buddies hype something up, and so then he puts a disproportionate amount of his money, of which he doesn’t have very much, into this one thing for no reason other than it got hyped.
[00:40:10] Paula: And so you just don’t wanna be that person. And if you talk to this particular person, he doesn’t understand how little he knows. Mm. Like, he thinks that he can give you a reason why he bought this stock. He’s like, “Well, I, I do have a reason, you know, it’s…” And, and then he gives you all of the, like, hype re- the- these really flimsy hype reasons.
[00:40:31] Joe: It sounds like, Jesse, part of what Paula’s talking about is kind of a healthy amount of fear, right? The fact that there is a increased risk of loss if I’m going with one company. Fear a good thing to feel when you’re first starting out?
[00:40:44] Jesse: Yeah, like fear and humility, I think, is another attribute that Paula was alluding to.
[00:40:48] Jesse: And I’ll tell you, Paula, the only thing more dangerous than what Buddy’s doing and, like, losing for Buddy to lose money, if Buddy actually makes money- Oh, God … that’s probably gonna be even- Yeah … more dangerous to his long-term prospects, ’cause he’s going to get this false positive that he knows what he’s doing, and that it’s easy- Mm
[00:41:07] Jesse: and that he needs to listen to the hype next time. And, and so anyway, that’s where people can really get in over their heads, out over their skis. But a little bit of fear, a little bit of humility. One thing that jumped to mind when you were asking the question, Joe, is this understanding of the numbers, and there’s a- professor out in Arizona, Fersum binder.
[00:41:26] Jesse: Do you know who I’m talking about, Brian? He- Hendrick Fersum binder. Does that name ring a bell? Nope. He’s done some interesting studies on, like, the entire history of the stock market. One cool one that always sticks out to me is that if you look at, you know, 100 years individual stock data, and the, the average compounded return is, like, 10.1% per year, and that’s a number that might resonate with a lot of listeners.
[00:41:48] Jesse: Like, oh, yeah, 10% a year. About 28% of the stocks in his study beat 10% per year, and about 72% underachieved 10% a year. And so that goes back to that whole needle in the haystack idea, which is to say that, you know, the idea that you might pick a winning stock isn’t 50/50. There’s a lot of skewness in the stock market, and the odds are somewhat stacked against you.
[00:42:13] Jesse: And, and so again, going in with some of that underlying kind of statistics and probability knowledge goes a long way.
[00:42:20] Joe: I like that. I like the focus here, too, Brian, on mindset. But tactically, where do I begin?
[00:42:26] Brian: To me, the first thing that you should ask yourself before you buy any stock is, “What’s my goal?
[00:42:32] Brian: What am I trying- I thought- … to achieve?” I thought you were gonna
[00:42:34] Joe: pull a Clint Eastwood and say, “Do you feel lucky, punk?” Do
[00:42:36] Brian: you feel lucky? That’s it. Yeah,
[00:42:38] Joe: right.
[00:42:38] Brian: This is something that so many people skip over. To me, the reason to buy an individual stock is because it’s giving you something different than the index fund is giving you.
[00:42:50] Brian: Index funds are broadly diversified, no research, very low cost, easy to own, and they generate a return of roughly 10% compound annual growth rate when measured over the appropriate time period, which is decades. But sometimes there are reasons to buy individual stocks because they give you something that the index can’t.
[00:43:09] Brian: The most common reason that people buy individual stocks is unlimited upside. Upside. They want a huge upside potential, which is a completely valid reason to, to buy a stock, but some people buy individual stocks ’cause they want more income than the index is providing. The, uh, total stock market index fund dividend yield right now is, like, 1.3% or something like that.
[00:43:32] Brian: That’s not a lot of income. There’s lots of dividend stocks out there that pay much higher yields than that. Some people might want lower volatility than the index. There are individual stocks that have lower volatility than the entire index in general, especially now that the indexes are so heavily weighed towards large technology stocks.
[00:43:52] Brian: So first question to ask is, “What do I want? What, what is my goal with this?” And again, for most people, the answer is infinite upside potential now is what they really want when they’re buying an individual stock. But th- once you have established your goal, the next thing to do is just answer some extremely basic questions about the company.
[00:44:10] Brian: What, what does it do? How does it make money? Why do customers buy from that company and not from the competitor? What are its growth prospects over a long period of time? Who’s in charge? What’s its valuation? If you don’t know the answer to any of those questions, learn how to answer them.
[00:44:31] Joe: Is it a mistake thinking that a company that’s a great company is also a great stock?
[00:44:36] Brian: It can be, and that can be one of the most challenging things about buying individual stocks. Take a company like SpaceX right now, which came public a couple of months ago. SpaceX, by all accounts, is like an N of one business. Truly phenomenal in so many, or so many respects. But when that company came public, it was worth $1.5 trillion, trillion with a T dollars, and I think it traded up to, like, $2 trillion on its first day.
[00:45:05] Brian: So people that are buying SpaceX expecting a 10X return on that are basically saying, “This company is gonna be worth half of US GDP for it to pay-” Wow. “… for it to generate a 10X return.” So SpaceX is a phenomenal company on many levels, but I don’t think when people buy SpaceX, that’s not necessarily what they understand they’re betting on.
[00:45:29] Brian: You’re betting on it becoming worth tens of trillions of dollars for it to generate the return that people want. So great companies can be horrible investments. That is absolutely true.
[00:45:41] Joe: I love just a little bit of math there goes a long way. Like, can I really achieve anything with this company? Paula, I wanna go back to your friend.
[00:45:49] Joe: I think you made an excellent point here that we should probably get back to, which is how much competence do I need before- Mm … this knowledge gives me an actual advantage rather than just enough confidence, like your friend has, to be dangerous?
[00:46:05] Paula: Yeah. Well, there’s the Dunning-Kruger curve, right? Where when you’re a very beginner, a complete beginner at something, you don’t know enough to understand how little you know.
[00:46:15] Paula: And so at the beginning of something, you tend to be overconfident, a natural human trait, right? We tend to be overconfident in the beginning because we don’t know enough to understand the complexity of something. Joe, you and I know podcasting, many people believe that it… You, oh, what? You just show up to a mic.
[00:46:35] Paula: It takes an hour a week. Right. So you don’t know enough to know what you don’t know, and then as you begin to learn about something, you eventually learn enough to understand how little you know, and then you go into a bit of, like, this pit of despair, where you realize how big and complicated the field is.
[00:46:51] Paula: The hill
[00:46:52] Joe: becomes a cliff.
[00:46:53] Paula: Right. Yeah, exactly. And you gain this appreciation and respect for the complexity of this, this field, and there’s a little bit of despair where you’re like, “Oh, I really…” It’s a very humbling, like, I don’t know anything. You start to come out of that a little bit as you learn more and more and you gain up some confidence, and you’re like, “Cool, I am, like, solid intermediate right now.”
[00:47:17] Paula: And I think wh- when you get to that level, I think you’re good. You’re, you’re ready to start- Being a practitioner and making decisions and really throwing yourself into it and being, you know… Because then what’s gonna happen after that, as you develop increasing expertise, you are increasingly going to be a little bit like, “Oh, I don’t know anything again.”
[00:47:37] Paula: And that’s naturally what tends to happen. Like, the more you become an expert in something, the more you just lose touch with how deep your expertise is because you’re aware of the gap between where you are and where you could be. But I
[00:47:49] Joe: love this idea. If you haven’t felt this, like, pit of despair in your stomach, you don’t know enough.
[00:47:55] Joe: Like, Mm. Yeah … that’s actually a good thing. Oh, you’re at this pit of despair? High five. You’re almost there. Exactly. Yeah.
[00:48:02] Paula: Yeah, yeah.
[00:48:03] Joe: That is interesting. Jesse, it’s funny looking at, you know, some of the things that Brian talks about online. He talks about how two-thirds of individual stocks underperform their benchmark.
[00:48:13] Joe: Is that something that’s important to know ahead of time before you get into individual stocks, that the deck is two-thirds against you?
[00:48:20] Jesse: Yeah. I, I think that’s an important thing to know. Just, again, it sets that expectation of, right, if, if you go out… And, and whether you want to just pick one stock because you believe in it for some reason, or maybe you come from a portfolio approach and you say, “I’m gonna build a portfolio of 25 stocks,” or whatever the number is.
[00:48:38] Jesse: Knowing whatever that statistic is, one-third o- overperform, two-thirds underperform. I mean, knowing that two-thirds of your 25 picks are likely going to underperform the benchmark is a good thing to know upfront. It’s probably one of many metrics that you could use to judge yourself against. One could just be the overall performance of your portfolio.
[00:48:59] Jesse: Another one could be how many of your picks overperform or underperform. I think another one, I’m no expert here so I’d really lean on Brian for this, is, like, how many of your theses… Is that the right word, right? How many of your theses actually play out in actuality? You know, I am buying Starbucks because of reason one and reason two and reason three.
[00:49:19] Jesse: And how many times can you look back 12 months from now and be like, “Oh, I was right, and my price target was accurate, too, and everything worked out,” versus how many times are you gonna be like, “Oh, yeah, I wasn’t expecting Chipotle to get their customers sick with all these foodborne illnesses”? Like, when was that?
[00:49:35] Jesse: Like, 10 years ago? Right. Five years ago, Chipotle, you
[00:49:38] Joe: know? Too soon. Still too soon.
[00:49:39] Jesse: Correct, correct. I could use a, a… Anyway, things don’t always play out the way you want, and the idea that you make an investment upfront with a particular idea in your head, it’s worth tracking that and, and journaling for lack of a better term to measure your own performance and your own ideas.
[00:49:55] Joe: Brian, y- you brought up, uh, in the first half of the show that, uh, putting the right amount of money when you’re first starting out is a super important thing. What is that right amount of money? How do I begin to get my head around that?
[00:50:06] Brian: Uh, it’s different for everybody, right? That depends on your net worth, your savings rate, your comfort level with risk, and all kinds of other factors.
[00:50:13] Brian: I can tell you that about half of my net worth is in individual stocks, but I’ve built that up slowly over the last 20 years, and- Sure … I am extremely interested in this subject. But you wouldn’t start there. If you were just starting out from… I would not start there if I was starting from scratch. Or, or, well, I guess it depends, again, on how much money you have.
[00:50:30] Brian: If you are, again, maxing out your 401and you- you have your financial life in order aside from that, uh, there’s nothing wrong with putting a couple hundred or a couple thousand dollars. That’s how I started. And Jesse, to Jesse’s point, Jesse’ll be happy to know, when I first started buying individual stocks, I lost my shirt.
[00:50:47] Brian: I, like, everything I bought, pretty much I lost money on. And I view that as the best tuition that I’ve ever paid. And to your point, if it worked out immediately for me, I would’ve just steamrolled that into more and more and thought that I knew everything, and that would’ve probably led to bad things. So yeah, there is something to losing money immediately as a good filter for, “Hey, do you still like this?”
[00:51:10] Brian: “And should you stick with it?”
[00:51:11] Jesse: There’s, Brian, there’s the thing, um, the AI wonder kid, Leopold-
[00:51:16] Brian: Mm-hmm …
[00:51:16] Jesse: who blew up recently.
[00:51:17] Brian: Yep.
[00:51:17] Jesse: Like, I heard someone in the aftermath of his hedge fund blowing up, someone out there said, “The right amount of times for any investor to blow up is once.”
[00:51:25] Brian: Mm-hmm.
[00:51:26] Jesse: Y- you need one time- Mm-hmm
[00:51:27] Jesse: where you lose your shirt to be like, “Oh, right. This has consequences if I don’t get it right.” Yep. Hopefully it never happens to you more than once, but having it- And he did it
[00:51:34] Brian: with hundreds of billions, uh, tens of billions- Yeah … of other people’s money- Yeah … I’m pretty sure. Correct. So talk about feeling bad, right?
[00:51:41] Joe: Yeah, somebody else’s cash, that’s not the way we wanna do it.
[00:51:43] Brian: Yep.
[00:51:44] Paula: And the day that it all blew up was his wedding day. His wedding
[00:51:47] Jesse: day.
[00:51:47] Brian: Mm.
[00:51:47] Jesse: Shakespearean.
[00:51:49] Joe: Yeah, we don’t want that to happen. Uh, another question, Brian, before we say goodbye to you, which is, you know, we talk about diversification. Obviously, to Jesse’s point, I think you would advocate having more than one stock, one thing that you’re- you’re investing in.
[00:52:03] Joe: But when do you own so many that it’s just, like, a really bad index fund?
[00:52:09] Brian: That, uh, again, it depends on your overall asset allocation. If 100% of your portfolio was individual stocks, you definitely need 25 or more, more than that. But if 95% of your net worth is in index funds, I have no problem with you owning two or three, or however many you can track.
[00:52:27] Brian: Because again, if they blow up on you, you’re playing with such a small amount of your portfolio that your, your net worth is fine. But to me, if you’re going to be using a small amount of your portfolio, you probably want around a- about five or so, enough that you can track them and that you’re interested in following them, but not too many that your portfolio becomes, uh, wild.
[00:52:45] Brian: And the way that J- Jesse brought up that great stat before, the way that I like to think about stock picking is it’s a roll of the dice. You have about a one in six chance of buying a really great stock, and you have about a two in six chance of losing your shirt, and the other three numbers are kind of like below average returns or slightly above it.
[00:53:06] Brian: So before I started, I thought it was a coin flip. Either I beat the market or I lose to the market. I think a dice roll is a much better mental model to keep in mind.
[00:53:13] Joe: Those statistics go all the way back to, I remember reading Peter Lynch’s book, Beat the Street, and he was talking about how one winner, Brian, makes up for a lot of losers.
[00:53:21] Joe: And, and a guy is, who is, people who don’t know Peter Lynch don’t know this, know just w- a phenomenal investor, a fantastic investor, and yet, Brian, he lost a lot more often than I think most people know.
[00:53:32] Brian: He also owned thousands of individual stocks as, as part of his portfolio. But yeah, that’s exactly how the market works, and which is why buying everything is such a good idea, ’cause you’re guaranteed to get those few mega winners into your portfolio, and they more than pay for all of the losses.
[00:53:51] Brian: Speaking from personal experience, I’ve bought dozens of stocks that have lost me money. I’ve never had 100% loss, but I’ve come real close. And every single loss that I had combined is lower than the amount of money I’ve made on just Netflix. So my Netflix gains have more than offset all of my losses, and I’ve taken plenty of losses combined.
[00:54:16] Brian: That’s how the math of investing works.
[00:54:18] Joe: Oh, that’s great. Paul, uh, you know, we always talk about on Afford Anything th- you’re thinking about your thinking. If somebody’s thinking now, “Okay, I think I’m ready to graduate. Time to start buying individual stocks,” let’s talk about the other side of this coin.
[00:54:31] Joe: What’s the opportunity cost here? Like, what am I giving up by starting to devote a lot more time and attention to my portfolio?
[00:54:38] Paula: Well, so to go back to the side hustle analogy, if you are really investing the time in learning how to do this properly, that necessarily means that you’re not putting that same amount of time into some other opportunity.
[00:54:54] Paula: And, and for the sake of making this a simple example, let’s just assume that you’re cross-comparing money-making opportunities, right? Because individual stocks are a money-making opportunity. So if you’re gonna focus on individual stocks, it means necessarily you are likely not going to focus on building out an Amazon store and, uh, getting into e-commerce on Amazon, and you’re probably not going to focus on rental property investing, and you’re probably not going to focus on, uh, owning storage units or mobile home parks, or opening an Etsy shop, or becoming a service provider like a freelance or a consulting service provider.
[00:55:33] Paula: Like, these are all… They’re all money-making opportunities. Pick one. Pick one at a time, right? Like, over the span of your life, you can do multiple things, but you’ve got to sequence them, ’cause, you know, you can do many things, but not simultaneously.
[00:55:49] Joe: Yeah, no, you’re not gonna do three things well.
[00:55:51] Paula: Right.
[00:55:52] Joe: Jesse, I think there’s gotta be also an opportunity cost maybe on your personal life.
[00:55:56] Jesse: Yeah. Good, uh… So Paula can appreciate this one. The house that I lived in in grad school, there were six of us, six of us like graduate students living in a house in like the cool neighborhood of Rochester, and it recently went up for sale.
[00:56:11] Jesse: And I looked at it, and I looked at the price that it was at least on the market for, and I thought about what we paid in rent, and I’m like, “Man, Paula would really like these ratios,” right? Mm. You would, you would really like that ratio, Paula. And I’m, I’m kinda noodling on it, and then it’s like, wait a second.
[00:56:26] Jesse: Do I wanna commit the time that it would take to be the landlord, to fix up this house to, to manage the tenants and the whole list? Like, I’ve got kids at home. I’m trying to run my own business, too. And so again, for me, it was like even if it was a great investment, I just thought of the time committed to it, and I couldn’t make that work.
[00:56:44] Jesse: And similarly here, I, I just think that if you’re gonna commit this amount of time to picking individual stocks, you probably either need enough money at risk to really move the needle. I mean, Brian can tell you. Like, you… If, if Brian’s Starbucks or, uh, uh, Netflix rather, if Brian’s Netflix pick was like one share, it’s like, no offense, who cares?
[00:57:06] Jesse: You know? One share, 20x’d, who care? You have to put some money at risk to actually make that time commitment worthwhile, or you just have to get this wonderful intrinsic benefit-
[00:57:18] Joe: Right …
[00:57:18] Jesse: that this feel-good of scratching that itch, ’cause if it’s not one of those things, then, then it might not be worth it.
[00:57:24] Joe: Yeah, because Jesse, I was thinking, and Brian, we’ll give you the last word on this, that even if you don’t make money, you know, it’s the one share. And to Jesse’s point, what’s it worth? Part of me is like- Let’s say I, it, I underperform the market by 2%, by a healthy number, but it’s my favorite hobby. I mean, how great is that?
[00:57:46] Brian: Yeah. If you literally get joy out of doing the research and following companies, then there, there is a payoff from that. It’s just that most people do not get joy out of it. When they, when they pick up a newspaper, the financial section is the one they skip over. I know I did before I cared about any of this, so.
[00:58:03] Joe: But you’re one of those sickos on the other side of that now.
[00:58:05] Brian: I, I am definitely a sicko like that. I, I go to investing conferences. I talk stocks with my friends. It’s just something that fascinates me, and there is a small cadre of people out there that are in the exact same boat as I am. It is something you can do as a side hustle, but you do have to put in the time, especially upfront, to really learn, uh, the, the fundamentals of how business works.
[00:58:27] Brian: And I will say one other thing. One thing that investing does do for you, if you do it for long enough and you actually study businesses, you learn about business. You learn about entrepreneurship. You learn about the principles of what makes for quality companies and not quality companies. So it does pay off in your job, like your career, if you can speak intelligently about business models and stuff like that.
[00:58:49] Brian: Like in my past career, people learned that I learned accounting, and I explained to people when we reported earnings what it meant, and I was explaining this to, like, again, upper management how that works. So I think that would’ve been favorable to my career had I chosen to stay- … in the, uh, in the working world.
[00:59:05] Brian: But, um, I do think that you can learn a lot about business by becoming an investor.
[00:59:09] Joe: Brian talks about this at parties. So, um, we will link to this in our show notes. If you’d like to hire Brian for your next party or bar mitzvah- … where he will regale everyone with business facts, uh, he’s probably available.
[00:59:23] Joe: Thank you, guys. That was a great discussion about graduate, not graduate. And I think even based on the people hanging out with us here, we got some people who are excited, some people are like, “I don’t have the time. Not for me.” Fantastic place to end up. Brian, let’s start with you because not only have you been teaching lots of people those basics that we talk about for a long time, and you’ve got a lot of cool tools, you’ve a brand new tool that you’ve just created that, uh, you and I both are slightly excited about.
[00:59:51] Joe: Can you tell everybody about it?
[00:59:53] Brian: AI has changed the game when it comes to stock research. It used to be you had to really dig into SEC filings to, like, understand what does a company do, who’s in charge, what are its competitive ad- advantages. So I’ve, I’ve been using AI to help me analyze stocks for better part of a year.
[01:00:08] Brian: I built a tool called Stock Simplifier, and you can put any stock in there. It goes out, reads the SEC filings for you, and brings back the information to you in, like, an easy to understand way.
[01:00:19] Joe: Wow, that’s fantastic. And it’s at stocksimplifier.com is my understanding. That’s
[01:00:24] Brian: it.
[01:00:25] Joe: Brian, thanks so much for hanging out with us.
[01:00:27] Joe: Let’s find out what’s going on with Jesse and with Paula. Jesse, what’s coming up on personal finance for long-term investors?
[01:00:35] Jesse: I think our next episode is an ask me anything episode compiled around some people’s early retirement questions. So, uh, some tax planning and early retirement, portfolio construction, I think healthcare planning.
[01:00:49] Jesse: Just some good fire and, and early retirement questions.
[01:00:53] Joe: Awesome. And that’s at Personal Finance for Long-Term Investors, wherever you find the finest podcasts, such as Afford Anything. Paula Pant, what’s going on at Afford
[01:01:03] Paula: Anything? On Afford Anything, this is the 18th of September. You and I, Joe, are at FinCon right now.
[01:01:09] Joe: And Jesse.
[01:01:10] Paula: And, and Jesse. And Brian. No, not Brian.
[01:01:13] Joe: Not
[01:01:13] Paula: Brian. And not Doug.
[01:01:15] Joe: Doug’s not coming?
[01:01:16] Paula: One star. But on the Afford Anything podcast… So last week we had an interview with Michael Hinkson that ran on September 11th. Michael Hinkson is a 9/11 survivor, and, uh, he is blind. And so he tells the story about descending 78 flights of stairs.
[01:01:31] Paula: He was on the 78th, uh, floor of the North Tower at 8:46 AM when the first plane hit. It’s a story of fear. It’s a story of persistence. It’s a story of teamwork, because a lot of people were starting to really get scared. It’s an amazing interview. If you didn’t catch it on September 11th, I would encourage you to listen to it.
[01:01:52] Joe: That’s wild, and that’s at the, uh, Afford Anything podcast, wherever the finest podcasts are found. All right, big thanks to everybody who hung out with us today on YouTube, where we make the show. It’s always fun. We make these shows on Monday, and it’s always fun to pretend it’s Friday. So if you wanna join us on a Monday, uh, come on out.
[01:02:11] Joe: We’re generally here at about 4:00 Eastern Time. Do the math on whatever time zone you’re in. All right, everybody, that’s it for us. Doug, you’ve got it from here, man. What should we have learned on today’s show?
[01:02:24] Doug: Well, Joe, first, take some advice from our guest, Brian Feroldi. Get some skin in the game.
[01:02:30] Doug: Investing in an individual stock could be the impetus you need to get interested in learning about corporate finances.
[01:02:37] Joe: I’m not sure that’s exactly what Brian meant, but why don’t we go ahead and run with that, Doug. What’s your second one?
[01:02:42] Doug: Second, don’t forget what Paula said. Step away from the candle-making kits and selling crystals on Etsy.
[01:02:49] Doug: Investing can be your side hustle. Just don’t dive into the deep end right away. But the big lesson, when Joe’s mom says you’ve got the green light on the shrimp appetizer at The Sizzler, get it in writing. Turns out what she meant was she’s extending me a line of credit with repayment terms so bad I gotta get a loan to pay off the loan.
[01:03:11] Doug: So if you’re listening and can loan a guy a few bucks at a reasonable interest rate, meet me at The Sizzler. I’m buying Thanks to Brian Feroldi for joining us today. You’ll find Brian’s new Stock Simplifier tool at the easiest URL ever, stocksimplifier.com. That’s how it’s done, Jesse. Walking the dog? I got you covered.
[01:03:33] Doug: We’ll link to it in our show notes at stackingbenjamins.com. Thanks to Paula Pant for hanging out with us today. You’ll find her fabulous podcast, Afford Anything, wherever you listen to finer podcasts. And finally, thanks to the Jesse Cramer for joining us today. You’ll find his FILTI podcast, Personal Finance for Long-Term Investors who May or May Not be Interested in Investing, wherever you’re listening to it.
[01:03:59] Doug: What the… That’s right now. Go subscribe. You’ll love it. I don’t know, there’s so many words. I don’t know when to stop with his title. This show is the property of SP Podcast, LLC, copyright 2026, and is created by Joe Saul-Sehy. You’ll find out about our awesome team at stackingbenjamins.com, along with the show notes and how you can find us on YouTube and all the usual social media spots.
[01:04:26] Doug: Come say hello. And oh yeah, before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s mom’s neighbor, Doug, and we’ll see you next time back here at the Stacking Benjamins show
Leave a Reply