Ahmed Al Kiremli: Hi everyone, this is Ahmed Al Kiremli and welcome to Be Efficient Tv. The mission of this WebTV show is to boost the efficiency of your business and life through tips and tricks from leading experts. Today I have with me Todd Tresidder, he is the founder of financial mentor.com, he is an expert in money, investing, early retirement and wealth building, welcome to the show Todd.

Todd Tresidder: Thanks Ahmed, glad to be here.

Ahmed Al Kiremli: It’s a pleasure to have you on the show. So why did you quit your job as an investment hedge fund manager? To move to be a financial advisor?

Todd Tresidder: First of all I’m not a financial advisor but a financial coach and there are distinctions about that we can go into if you want. I left because I didn’t want my tombstone to read that I was great taking my rich clients a little bit richer adding that few percentage points to the bottom line of my wealthy clients, it just wasn’t my motivating goal in life. The only reason I got in the hedge fund business was that I wanted to learn how to invest, I want to understand how investing is done right. Once I achieve that outcome and no longer was a path of growth for me so I moved on to what is a path of growth for me which is helping ordinary people achieve extraordinary financial results.

Ahmed Al Kiremli: So usually you invest only in the stock market, what is the hedge fund to explain to some people, what is it about?

Todd Tresidder: Well hedge funds have been through evolution, when I was in the business they were called private placement partnerships we didn’t have a sexy term for them called hedge funds. These private placement partnerships used active investment strategies, a variety of active investment strategies and over time that got permuted, so hedge actually comes from the idea of hedging out market risk, so people were using long short equity market control and various other strategies to hedge out market risk, so that’s where the term hedge fund came in. Over time more and more styles developed including global macro which has nothing to do with hedge, it’s taking out right bets on various situations in the world. It’s changed to become a nontraditional asset class if you will. They developed in the hedge fund world you can develop different risk profiles with paper assets whereas in the traditional way of investing paper assets you develop a straight market risk profile.

Ahmed Al Kiremli: So it’s just focused on paper assets and commodities as well in the market?

Todd Tresidder: Not commodities because commodities can be one division, you can be a hedge fund that includes commodities as your asset mix or you might rotate through various asset mixes like stocks and bonds and commodities depending on where you are in the economic cycle. Each asset class offers different opportunities at different points in the economic cycle. Depends on what the hedge funds is doing, there are specific styles so it could be long short equity market neutral, there could be global macro, there could be arbitrage, there could be a lot of different types of strategies that these guys implement depending on what they consider their investment edge to be.

Ahmed Al Kiremli: Do you like this area of the paper assets, do you still invest in it or do you feel that – I feel always that regardless how much you learn it’s very difficult to predict where the market is going or to have control over the market not like when you have a business or you invest in real estate. So what’s your opinion about that?

Todd Tresidder: Paper assets is a totally different world, it’s building wealth in paper assets is completely different from the other two asset classes you mentioned, there’s three asset classes for building wealth. There’s real estate, owning your own business and paper assets and what I like to say about paper assets with clients is that it’s kind of like the Alice in Wonderland world where you go down the rabbit hole and he gets curiouser and curiouser. It doesn’t work at all like running your own business or investing real estate which are very intuitive. Your business common sense and intuition will do very well for developing a business and writing a real estate portfolio, they will cost you a fortune and paper assets. Paper assets the only people I know making consistent money use quantitative driven models, they understand how the game is put together and they played completely different from how traditionally it’s taught.

Ahmed Al Kiremli: So they try to put options or to manage the risk more?

Todd Tresidder: No, definitely not options trading. What I teach is principal mathematic expectancy which governs your compound returns and so you have to understand what drives positive mathematical expectancy and how to manage your portfolio to create positive mathematical expectancy which ultimately drives your compound returns. So it involves principles of risk management, understanding what even methodologies even have a positive expectancy, remarkably few do. And so it’s very different from…

Ahmed Al Kiremli: With your clients you focus on teaching them to invest in paper assets or the other categories as well?

Todd Tresidder: It depends on the client, again I’m a financial coach, I work with clients to build wealth so it depends on the client, their needs and what their advantages. So I’ll give the example, if a schoolteacher comes to me and wants to build wealth and they’ve got great handyman skills but as a schoolteacher they are making a fortune, but they have a couple months off each summer and holiday breaks and whatnot, that client might be a really great candidate for home fixer uppers where they tried to pick up a home every one or two years and fix it up and turn it into a long-term rental unit for positive cash flow. That might be a great strategy for that person. Another client comes to me and this guy is a successful entrepreneur, he’s running two separate businesses, he’s paying rent on both, he’s got staff, I work with him around acquiring the building that his businesses are housed in rather than wasting money on commercial rent. Maximizing his paper assets because he’s already busy building wealth through his business. He’s going to have a cash update on both those businesses so what he needs to do is just harvest the income he’s creating to do businesses and manage it and translate it into the asset category. So his needs are completely different from a schoolteacher who isn’t developing large assets and has to employ more leverage and bring in other principles to build wealth. So it really depends on the client and what their skills are, their resources and what will actually work for them to build wealth. It’s different for each person.

Ahmed Al Kiremli: If they don’t have any experience in investing, usually you advise them to go where to invest in which category?

Todd Tresidder: I don’t think there is a usual which if there is no experience in investing, clients need to – there is no usual answer like that, there’s three asset classes you can work with, which requires different skills, different abilities, different resources and think of them as tools in the toolbox, you pull out different tools depending on what you’re working on. So there is no usual answer, just as there’s not a usual tool you go to when building a house. If you need to cut wood you grab a saw. If you need to hammer the wood you grab a hammer. If you need to plane it you grab a planer, each one has its function and its attributes that work for a given situation so there is no easy answer.

Ahmed Al Kiremli: You have a unique mission as a financial mentor, what’s your mission or philosophy that makes you different than other mentors?

Todd Tresidder: The whole reason I got into this was I approach this game very differently from most people as you can already tell just from our conversation I spent a lot of time learning what works, what doesn’t and why. I noticed that nobody really has assembled this into a cohesive body of work. It’s like the old Indian folktale the three blind men and the elephant are you familiar with that one?

Ahmed Al Kiremli: No.

Todd Tresidder: It’s an Indian folktale, you’ve got three blind men, they are told to go up to the elephant, describe the elephant so the first one walks up and grabs his arms around the legs and I’ll spare you the goofy Indian imitation. So he walks up to the elephant’s leg and he says the elephant is like a tree trunk and the next guy walks up and grabs the elephant’s tail and says the elephant is like a giant rope and the third one grabs the elephant by the ear and says an elephant is like a giant fan. Each blind man is describing his experience of the elephant accurately but he’s missing the entirety of the elephant, he’s not wrong, he’s just contextually dealing with a half-truth. So that’s how wealth building works and that’s how most of what passes for investment advice works is most people have not put the work into understanding how the whole elephant is put together. There’s a lot of dimensions. You’ve got some people out there running around calling the secret, I don’t know if you’re familiar with one that film was all big, prosperity consciousness.

Ahmed Al Kiremli: Law of attraction.

Todd Tresidder: And guess what it’s good stuff. But it has its limits somebody else will come along and talk about the millionaire mind and the millionaire mindset and guess what it’s good stuff but he’s a blind man. You can go on and on with all these things, talk about stock options, blind man. Another guy will talk about it’s all in real estate, another blind man describing his aspect of the entirety of the elephant when in fact what really works is when you understand the elephant and you put the various moving pieces together and construct the entire elephant. Then you have the elephant called wealth. That’s why I got into the business, I spent a lot of years putting it together, my perspective is different from what I hear out there so I’m just crazy enough that I think I can help people, so I’m trying to put something together that helps people.

Ahmed Al Kiremli: So it 23 years old you are in debt and at 35 years old you’re financially free, how did you do that and what does financial freedom really mean?

Todd Tresidder: One question of time, first of all how did I do it is very simple I had a very high income as a hedge fund manager and I saved 70 or 80% of it. I saved most of it and invested it in the methodologies I developed as a hedge fund manager. So my path to wealth is no different than so many others out there, the difference was it didn’t really require feudalism because I had a very healthy income and on top of that as you correctly pointed out it was starting from age 23 so I came out of college and I never raised my lifestyle, I kept my lifestyle what it was as a college kid, I never suffered, I was making good money, I lived well but I saved most of it and before I knew it I was financially independent.

Ahmed Al Kiremli: 2^nd question, what’s the meaning of financial freedom?

Todd Tresidder: There’s a lot of different ways you can go about what’s the meaning of financial freedom, in a technical sense if you want me to define it, defining it is simply passive income exceeds expenses. That’s the definition of financial freedom, what’s the meaning of it, that’s a whole other question. What does it mean in your life, what does it do to you, how does a change what’s important, how do your values that you push down surface up, there’s a lot that goes into the question of what’s the meaning of it but if you want to know the definition, the definition is simply passive income exceeds expenses.

Ahmed Al Kiremli: In one interview I listen to you saying you retired and then you went for a vacation and discovered that vacation is kind of a job when you keep doing it in the same way. Tell us what did you discover about yourself and about the process, about the fulfillment in these areas?

Todd Tresidder: So when I sold the hedge fund business I was quote unquote retired, let’s put air quotes around it. I put on a backpack, I always wanted to backpack Europe and Middle East so I traveled for between five and six months. What I noticed was the first month and a half was just like I had always imagined it would be. It was just nirvana, so fantastic to just be on a permanent adventure living out of a backpack and carefree, just loving life. It was my new wife, we are cruising around this is our honeymoon we just got married and everything is fantastic and after about a month and a half I started noticing the patterns developing like this is before the euro, each time you come to a new country you would have to get your currency and then you go to a city to tour it and of course the church is the highest point in the city so you climb the church tower… The history of each country is built around war and politics so you go to museums and it’s all about the war and politics and history and it goes on and on the same thing over and over again. You feel like as you go from country to country it’s like Groundhog Day only slightly different culture. It was cool and I love to doing it but after a while it was like okay, at this point in the day we choose the restaurant for lunch, you choose this or that and I don’t want to sound ungrateful I loved it it was a fantastic experience but it also taught me that the whole idea that financial freedom is an endless vacation is a myth. When life becomes an endless vacation the vacation ceases to be satisfying. Vacation is fulfilling and enjoyable when it’s in the context of meaningful work. Because then it’s a break from meaningful work, when it becomes your life then that becomes your task to entertain yourself and that’s a very narrow focus, that’s a very self-indulgent focus of G what is my source of entertainment today, there’s no depth to it at all, there’s no meaning.

Ahmed Al Kiremli: So what’s the balanced vacation for you now, once a month, once a year or two months a year, after researching that and testing? What did you discover?

Todd Tresidder: It varies year to year, usually 3 to 4 months a year and it’s built pretty much around my kids schedule, I take a lot of time off in the summer, pretty much I just get the business to scrape by in the summer and just survive and then work a lot during the nine months of the school year, we just came off of the kids being out of school for holiday break here in the US so I was off for that, the year before I took four months off because I spent a month, I was out in the desert for a long camping trip in the desert and then I turned around and put on a backpack and hike the 250 miles of the John Muir Trail. I hiked from – backpacked from the bottom of the Yosemite Valley to the peak of Mount Whitney which is the highest peak in North America I believe. That’s called the John your trail is a famous trail here in Sierra Nevada. So it varies with the year what my goals are, what I’m trying to accomplish.

Ahmed Al Kiremli: The business doesn’t all depend on your blog and the website that you can do even if you are traveling or you like to focus when you are back home to work with clients?

Todd Tresidder: People know me, my clients are like please take your trip, they love it because now I’m living the life that I’m coaching them toward, my clients love it if I take a month off and as far as the blog goes and all that, you can either program the post in or as followers of my blog know, I’m rather erratic. I post when I have something to say and if I don’t have something to say I don’t post. I’m building up a body of content so if I miss a month I miss a month. It’s no big deal.

Ahmed Al Kiremli: That’s why you don’t use dates on the blog post which is very smart, you don’t feel rushed and under pressure that you have to keep posting, right?

Todd Tresidder: I think that’s a myth in blogging if you look at the people that feel like they have to post three times a week and that kind of thing, frankly I think that burns out your list and I don’t think that I have anything meaningful to say three times a week, I don’t think that if I had to sit down and write a post three times a week – almost everything that post regularly burns me out and I unsubscribe. I just pay attention to my own behavior, I want somebody that when they send me something it’s really good because if you’re interrupting my life with something in my inbox it better be good. My two cents worth.

Ahmed Al Kiremli: How does it work with your client, is there a membership fee or a monthly special program or do you charge per hour, how does it work?

Todd Tresidder: The business is in transition, when I originally started it was going to be a cute little boutique coaching practice and I was really curious, could actually help people? So I fumbled with it for years and then in recent years it took off if you’re on the site right now you’ll see that it’s actually closed I’m not even accepting clients now, he got completely out of hand and it overran my life and it was the complete opposite of what I intended, so the business has now grown to a point where I can no longer really work with one-on-one coaching clients, it’s just too much. So what I’m doing now is transitioning the entire business over to the group coaching model and the membership site model so I can reach more people. As it turns out because I’ve been doing this now for 15 years, I’ve pretty much broken it down to a systematic process, so I’m converting that systematic process, putting it into the seven steps to seven figures course and that’s where the whole business is going now. That’s where I’m taking everything. The seven steps to seven figures is the whole elephant I was using from the earlier discussion. That contains the entire body of knowledge and now I have to create that into the membership model.

Ahmed Al Kiremli: Can you brief us about the seven steps?

Todd Tresidder: Yeah, do you want me to go through each step one by one?

Ahmed Al Kiremli: Yeah please.

Todd Tresidder: Step one is basic financial planning, the stuff you get if you went to a normal financial planner, it’s getting your house in order so to speak. That’s kind of like a foundational piece, steps one and two are both foundation, it starts with the basic financial planning, just getting – you have to get to a point where you’re saving money, not going and that, you’ve got proper insurance, you’ve got your Is dotted and T’s crossed, that’s step one. Step two is what I call attitudes of the wealthy. What I’ve noticed is that people who build worth versus people who build that go deeper into debt, they have mirror opposite habits. The wealth or the debt is actually a mirror reflection of the habits and attitudes that a person has adopted and I fell into that by accident, what happened was I use to accept it clients, get out of debt clients I don’t anymore but I used to and I can remember there was a day where I had this completely opposite experience of clients, I’d have these wealth clients and that have debt clients they be juxtaposed during the day and it just struck me how completely opposite they were, not just their financial situation which was a clear opposite but…

Ahmed Al Kiremli: How they think.

Todd Tresidder: How they think, what their attitudes are, how they operate in their life, how they run their life. What I realized was the money was just a reflection, it was not the cause, the cause was the attitudes, so that’s step two, it teaches structured habits and attitudes and it layers them one week after another so you are building habits and attitudes that results in wealth over time. If you just got that step alone correct eventually you would get wealth because eventually you would mirror everything else that follows it. So step three is a wealth plan and the wealth plan is totally different from what you get from a financial advisor. It’s how I develop wealth plans and it’s not just if you buy these assets it compounds over the time according to these assumptions like you get from a financial planner, it goes into the three asset categories which you and I already discussed which is business, real estate and paper assets and it breaks it all down and then it converts it all into a timeline and what people say is when they are done with step three for the first time they actually believe wealth is realistically possible for them. Because it’s so structured and laid out and engineered, literally the word is engineered, the whole thing is engineered to a point where they realize if they do ask they will get why. So that step three, what happens is step four and five follow step three because once you start your wealth plan and implementing it then all the crap happens, all the stuff gets in the way of life so step four is about taking massive action, how to take massive action. It goes through the process of commitment and there’s two basic components, it’s the process of commitment and committing to those goals and then the second one is how to overcome your personal junk, your personal issues that are keeping you from achieving those goals. All that comes up once you get into limitation so you can’t put step for before three, you have to go through three, begin implementation on the structured plan and then for comes up. Five is all about creating structured environments that literally pull you toward your goal so it’s about how to structure your life so it literally pulls you toward your goal. Step six is expectancy investing, it’s how to compound your wealth properly using paper assets and step seven is the catch 22, wealthy, so what? Nobody ever really wants more money, what they want is what they believe many will buy them. Most people want whatever they perceive money will get them in their lives and so step seven is all about personal freedom, true wealth, living wealth.

Ahmed Al Kiremli: Saving, is it all about living below your means or is there another way to look at it?

Todd Tresidder: There’s two dimensions, you’ve either got make more or spend less because savings is the gap between what you make and what you spend. So you can go either way, frugal people will answer the question by saying you need to spend less, that’s a frugal answer and that’s the blind man and the elephant again. Somebody else who teaches entrepreneurs the path to wealth will say you need to raise your income level, neither one is wrong but they are both dealing with half-truths. You can go either way and smart people go both ways. They put them both to work so they try to raise their income and lower their expenses the same time. They try to maximize the gap. That’s what I did when I built my wealth, that’s how I saved 70% plus of what I was making. I never raised my spending despite an enormous income to where I could clearly afford more than I was spending but I just didn’t have the values for it. I didn’t need a Corvette or anything flashy I liked my truck. It’s just the way I am. So that’s it.

Ahmed Al Kiremli: And now when you have extra money you usually invest in what, assets? Paper assets or real estate, what do you like?

Todd Tresidder: Most of my extra money flows into paper assets, the business finally pays the bills now, first time in a long time the business pays the bills, again I did this for years and it never paid anything. But it has grown to a point now where it does pay the bills, so access income is flowing into paper assets and my intention depending on what goes on in the real estate market around here is I would like to own one large property. I got out of the property business in 2006 before the big decline and if there presents a deal that I can’t pass up I may get dragged back in kicking and screaming. But I’m not desperately in need of it, right now everything goes to paper assets.

Ahmed Al Kiremli: Capital gain versus cash flow, which would you like more and why?

Todd Tresidder: Ultimately financial freedom is about cash flow but if you take this to an extreme and you invest all in bonds or fixed income, eventually because I retired so young if I don’t get capital gains eventually inflation destroys the value of money. So is not an either/or, you have to have both.

Ahmed Al Kiremli: Is there a percentage to look at them like if I am buying a property how much should I prioritize the cash flow over that’s a capital gain?

Todd Tresidder: The example of property you want to prioritize cash flow because capital gain happens naturally because property will track inflation. It’s not perfect but over meaningful periods of time it tends to track inflation. That’s the source of the growth of valuable properties, the fact that our government is – I know you’re in Dubai but the government here in US is hell-bent on creating inflation, since they are the greatest debtor in the world. Real estate is a beneficiary of inflation, essentially real estate is a leverage play on inflation. That’s why real estate does well most of the time because most of the time the government succeeds in creating inflation and then every now and then you get deflationary periods because it’s leveraged basically wipes equity out. And so real estate is a leverage play on inflation. To answer your question when buying real estate you want to focus on the cash flow because capital gain net of inflation takes care of itself inherently as long as you buy the asset within reasonable growth areas and so on and so forth.

Ahmed Al Kiremli: How big is the inflation effect on the money that we save in the back?

Todd Tresidder: Well, that depends on what the inflation rate is. That depends on what your personal inflation rate is. Inflation is not like it’s taught, like most things we’re going to discuss here most stuff doesn’t work the way it’s taught. You actually have a personal inflation rate, my inflation rate probably reasonably matches government stats, I’m still dealing with home and acquiring stuff, raising kids, all that but take somebody who is retired, their personal inflation rate can be completely managed to be completely different from government stats, you might have your home paid for own your own furniture, on two cars and you are earning your food through a garden in the backyard.

Ahmed Al Kiremli: But if I have money in the bank and they are paying me 3% and inflation is 5%, what do you advise people to do, they don’t know how to invest…?

Todd Tresidder: Well it’s a problem. I mean if inflation exceeds your early return you can just put money… Basically this goes into a question of what is risk, because most people sit here and define risk as volatility of returns, so that would say that stocks are risky asset class and cash or money market funds is not risky but in fact if you look at – if you redefine risk as loss of purchasing power which is how I define it, I define risk as loss of purchasing power because that takes into capital loss as well as inflation risk. Then money markets or cash as you are describing this example is probably your riskiest investment. Now stocks become less risky, so you have to understand this stuff on a deeper level you can’t just take superficial understanding. So when somebody doesn’t not to invest, they need to learn how to invest. One of the things I teaches that there is a curve to building your wealth. A lifecycle to build your wealth and in the early period of the wealth building lifecycle, it’s most important in your savings rate in relation to your spending and then in the later stages of your wealth cycle it’s most important, your investment return net of inflation and so you’ve got to understand where you are in the lifecycle of wealth and you have to be prepared for when you get there. So if you turned to me and say somebody doesn’t know how to invest and they are in the later stages of the lifecycle and they have the money to be financially independent then they have a problem and they need to focus on their financial intelligence and developing their investment skill.

Ahmed Al Kiremli: Is mutual funds good or bad idea?

Todd Tresidder: There’s no asset class that’s a good or bad idea, you have to understand that each asset class has its own attributes and so you need to take the good attributes and use them wisely and minimize the problem attributes, taking mutual funds is an asset class to address your question, they are a great way to get into a diversified portfolio with a small amount of money. If you have $10,000 you can get a diversified portfolio through mutual fund. You can also spend too much on expenses if you buy one that is a high expense ratio. It may not have value added for that expense structure so then you buy low cost passive index mutual funds. In which case you are getting the diversification at a fair value and that’s a smart use of that asset.

Ahmed Al Kiremli: The question is when we look at the three difference vehicles of investments, in case I am learning to be an investor in one of these vehicles which is real estate commodities or paper assets or the business and then I can control it, the question about mutual funds is about you invest in some companies, are they going to invest for you and they, like you carry all the risk and they just share with you the profit in case there is a profit? And usually those companies sell this portfolio to people through salespeople who don’t understand investment, so that’s the point of the question that we should learn ourselves to invest in the paper assets market or in the stock market or we should give it to these companies to invest in on our behalf?

Todd Tresidder: No. Let me try to explain this, I see where you are going now, it’s not whether mutual funds are a good investment it’s whether taking a passive portfolio, is a passive portfolio a wealth building… Or learning it myself, should I give investments to somebody to invest on my behalf or the investment I should learned as a path myself because nobody will care as you care and you should learn investment, you should learn what is the difference between liability and asset and where to invest and what are the different vehicles for investment. Instead of just handing it over to somebody…

Todd Tresidder: Agreed. You can delegates the responsibility for your money but you can never – you can delegate the authority over your money but you can never delegate the responsibility for your money. If you believe that you can just hand your money to a financial advisor and they are going to build your wealth, I’m not a fan of that you might get lucky, you might get somebody who is generally really good that does have the capability but it’s rare. It’s very rare so you would be fighting the odds to take that approach. There’s even more to it than where you are heading, where you are going is can you do this passively and hand your money over to somebody and is that the right strategy? There is a whole other thing which is a passive portfolio can be a brilliant wealth building strategy based on valuation. You need to understand how valuation affects expected returns over a 10 to 15 year time horizon. So like right now in the United States it’s one of the most overvalued markets in the world, so as we record this it’s running at about 26K which is cyclically adjusted to price ratio, so the expected return on that portfolio on a passive portfolio in the US over time, 1015 your returns is low single digits with very high volatility, it’s not impressive at all. So again that’s just based on historical understanding and it’s also business common sense as to what it means to have a high valuation. Whereas turn that around if it was a low valuation right now, a passive portfolio can be a brilliant strategy as it was back in 1980. Back in 1981 valuations were cheap in the US and we were at the foot of an agreeable market, it was a brilliant wealth building strategy. People built extraordinary wealth in passive portfolios. You can’t just take an idea like that and just say it’s either this or that. As a true – it depends. You have to understand, you have to take your understanding to what I call a second level of understanding.

Ahmed Al Kiremli: Now when you teach your clients, you teach them to learn about the stock market or to invest in certain companies or like let other companies invest for them, but they should follow certain formula to track like when to get in or when to get out or how to manage emotional control or intelligence, what is your strategy how do you teach them to invest in paper assets market?

Todd Tresidder: On paper assets that step six I described earlier, I call that expectancy investing and I teach clients a comprehensive viewpoint on expectancy investing. It’s a soup to nuts process. If you look at the testimonials on it, they will be up on site probably in the next couple of months but you can go to my testimonials page of my coaching and find them there, people are saying I’ve been investing 30 years and I knew nothing. I can go on and on, it’s a comprehensive understanding of how investing actually works, once you have that, once you see it you can’t un-see it. Suddenly the elephant makes sense, you can contextualize all these half-truths people are throwing around. That’s what I teach, that’s what’s in the course it’s about a nine month course to get through.

Ahmed Al Kiremli: But a general perspective, is it buy and hold, is it get in and get out at a certain time, what is the strategy all about in general?

Todd Tresidder: It’s active investing so there is buying and selling but it’s not…

Ahmed Al Kiremli: It’s short-term, long-term, speculation?

Todd Tresidder: It takes 30 minutes a month, you have probably an average of about one round turn per asset class per year. It’s active but relatively inactive, it’s more active than buy and hold but it’s not like options trading or something crazy where you are in the market every day, you check in with some of its no big deal. And it’s just recognizing that not all periods of time and all asset classes and all things have the same expectancy and if you constantly align your portfolio to favorable expectancies over time it works in your favor. Also there are ways to actively manage risk and it has to do with math and how many compounds. You are asking me to take a nine month course and boil it down to a soundbite and it just doesn’t work. There is a comprehensive understanding, it’s multipronged and any sound but is just going to give you the ear of the elephant or the like of the elephant or the tale of the elephant. It’s not going to give you the whole elephant.

Ahmed Al Kiremli: What is the 4% rule?

Todd Tresidder: The 4% rule was originally created by – I’m coming short on his name. I don’t remember. That’s so funny.

Ahmed Al Kiremli: The concept is more important than the name.

Todd Tresidder: I know, I know the thing cold and I have one of those brain parts on the name but anyway the 4% rule says that it’s basically the minimum amount – the maximum amount you can safely spend from a portfolio annually without wiping the money out and the 4% rule came from research based on US data and so what I like to explain is that while the research was conclusive for the data it was done on the research itself is not conclusive and the 4% rule is a very dangerous generalization of a certain principle. What they were trying to do is define safe withdrawal rates and retirement, how much you can spend from your portfolio annually and there is no static number, if you take the 4% rule, Wade founded some really nice research where he took the 4% rule and applied it to international data and it failed 100% of the time. What we understand now is the US was basically what I call the economic prom queen of the economic world, we had no wars on our soil no political upheavals, no major problems and we became the industrial leader, with the expectation of US corporate culture throughout the world. So do you expect that to replicate in financial results, what happened the last 100 years is naïve at best, so 4% rule is an interesting structure it’s an interesting benchmark for understanding some principles that brings in ideas, a sequence of returns risks and other issues but it is not a rule. It is a guideline or a principal based on a certain data collection but it cannot be relied upon safely there is much more to understand. It varies greatly, what you can spend from your portfolio is more a function of valuation than most people understand at the beginning of the holding period.

Ahmed Al Kiremli: In plain English what is the difference between stocks and bonds?

Todd Tresidder: Stocks are equities, bonds or debt.

Ahmed Al Kiremli: What does that mean in terms of risk if we focus on risk what does that mean?

Todd Tresidder: Well it depends on how you define risk first of all, do you define risk as volatility of returns, do you define risk as risk of loss, do you define risk as risk of loss, do you define risk as loss of purchasing power? So it’s not even that straightforward, to really understand stocks and bonds, stocks are equities, you’re owning a piece of the company, your inequity holder, and owner. Bonds is just debt, sometimes secure, sometimes not depending on whether it’s a junk bond or a secure bond or whatever. Bonds are debt which the company owes you so you’ve lent the money and they have to pay it back to you plus interest. There is no such promise on equity, you are an owner of the company as the company grows you benefit from the growth of the company.

Ahmed Al Kiremli: But you lose it in case only the company or bank shuts down?

Todd Tresidder: You lose what?

Ahmed Al Kiremli: The bond, like if you buy a bond from a bank?

Todd Tresidder: You lose a bond in two ways, you lose a bond through inflation where you lose purchasing power and you lose on a bond through defaults if the person you want the money to or the company you want the money to, it’s no different from any other loan, if you lend the money and the lender doesn’t pay you back but the default and you lose money. That’s a simple way of understanding a bond. You are lending somebody or some company money and they need to pay it back plus interest. So you can lose to that or lose through loss of purchasing power.

Ahmed Al Kiremli: For the people who come to you and say that we have small income and we cannot save to invest, what do you advise them to raise capital to invest?

Todd Tresidder: So I’m unclear, you are saying somebody wants to begin investing but they can’t save any money?

Ahmed Al Kiremli: Yes.

Todd Tresidder: They need to either raise their income or lower expenses so they can start saving money. The only other alternative is they have to leverage somebody else’s money. If they don’t have money they have to get money from someone else to leverage. So you could do that in real estate or business, very hard to do in equities. Or paper assets but you can do it in real estate or business, you’d have to be very good at creating deals, so if you were a brilliant dealmaker in real estate and you had no capital, if you get a deal you can find capital, a good deal will find capital or if you are brilliant at building your business you can find capital, very hard to do in equities though. Public equities.

Ahmed Al Kiremli: What is 401(k) and who should invest in a?

Todd Tresidder: 401(k), first of all you don’t invest in 401(k)s, 401(k) is a legal structure that holds savings that is tax-deferred in the US. And so it’s basically tax-deferred earnings that go into a 401(k). Then from there it is invested in conventional investment products, so you aren’t really investing in a 401(k) you are putting money in a legal structure called 401(k) that has certain tax benefits and then that money is then getting invested in conventional paper assets.

Ahmed Al Kiremli: If we have somebody in debt and have let’s say 10 credit cards he should pay – how should he pay them, should you pay the minimum for all of them or should you pay them one by one what do you advise?

Todd Tresidder: Well that depends on the individual, there is a thing called the debt snowball, the debt avalanche. I have a calculator on my website called the debt snowball calculator or accelerated debt payoff calculator. You use it just for that situation and so the debt avalanche is the one where you prioritize from smallest to largest and so it’s the most emotionally satisfying one because you start paying the minimum payments on all the other debts and then you focus all money on the smallest one so you can start knocking out those credit cards as fast as possible so you finally get narrowed down to the largest one. That’s the most emotionally satisfying one so if you have a problem with discipline that’s probably the better choice to take. Mathematically it’s the wrong choice but this game is in mathematics it’s both – we are human so we have emotional issues as well as the mathematics of finance to respect. It depends on the individual. If you are wanting to do the math when you prioritize your debts according to interest rate, you put the highest interest rate debt first, focus all your pay down on the highest interest rate debt regardless of which one is the largest, so let’s create a crazy example, let’s say your mortgage is your highest interest rate debt, it’s not going to occur but I’m using it as an example. You would spend years and years paying down that mortgage before you ever got to your credit card debt, because that would be the mathematically correct thing to do to get rid of the highest interest rate.

Ahmed Al Kiremli: But banks won’t take legal actions, like always fees or monthly late fees and maybe later on after six months legal action, you should also continue with them?

Todd Tresidder: Yes the assumption in either the debt snowball or debt avalanche is making a minimum payment on all the debts. It’s when you concentrate the extra money that’s the difference. In order to pay off the debt you have to have money beyond just the minimum payment so it’s a question of where do you concentrate it, do you concentrated on the smallest ones to get rid of the most credit card – you just roll everything up and keep rolling everything up and that’s where the snowball idea comes from. You keep rolling all your payments into the next credit card and start knocking them out or do you start mathematically correct getting rid of the highest interest rate first regardless of its size? That’s the only question. As to how you do it. The rest of it is constant which is you make the minimum payments on all of them and roll up the extra amount to any given debt. Does that make sense?

Ahmed Al Kiremli: Yeah, sure. Can you explain to us the latte factor and how to manage it?

Todd Tresidder: The latte factor was popularized by Richard Bach, it’s a well-known phenomenon which is small periodic expenditures have a surprising impact on your budget, so latte came from the idea in the US, we have Starbucks everywhere I don’t know if you have them in Dubai but it’s high-priced coffee and so people have this habit of swinging by their couple of times a day and spending five dollars for a cup of coffee they could brew themselves for a lot less money. The idea was how much is that really costing you over your lifetime, that’s where the thing got dubbed the latte factor. It’s true for anything, you can use it for magazine subscriptions, storage locker fee, anything that’s not really delivering value for you that you can eliminate if you look at the compounded cost of that regular periodic small fee, 30 bucks a month for storage locker, five dollars for a coffee. If you do it often enough for a long enough period of time it can add up to millions of dollars literally so that’s what the latte factor is and there’s a calculator on my site called the latte factor calculator and he goes through and does all the math for you and you can put in all your periodic expenditures, put it in there, let it crunch the math for you is astounding. It will blow your mind.

Ahmed Al Kiremli: If somebody comes to you with an income of 2000 $3000 a month and he wants to retire early how long will it take them based on your strategies to retire?

Todd Tresidder: Your voice cut out when you’re asking that question. Can you ask that one more time?

Ahmed Al Kiremli: If someone comes to you with a $2000-$3000 income per month and he asks you to retire early, how long will it take him to retire based on your strategies, what do you advise them?

Todd Tresidder: That’s a function of his savings rate as a percentage of his income, there’s a post on my site called how anyone can retire in 10 years or less. So it’s not a question of how much income he has its how much he spends relative to his income which is his savings rate as a percent of his income. Anyone can retire in 10 years or less if they are willing to live on low enough relative to their income. That’s what that post goes through and explains, it breaks down and shows exactly how long it will take you for any given percentage of savings.

Ahmed Al Kiremli: What should we do before hiring a financial coach?

Todd Tresidder: I hate to keep redirecting you to the posts on my site but you’re asking me to do that, I have a post on my site about how to do a due diligence process on a financial coach, it’s one of the top ranked articles under the term money coach I think in Google, so you could Google it, it’s three steps to hiring the right money coach for you and then I even have a book out on Amazon called don’t hire a financial coach which is a funny title for a financial coach but it’s don’t hire a financial coach… Until you read this book. What it does is it explains the seedy side of my business, how big-name authors go out and create financial coaching back ends that really – back in products because they are lucrative but they are not really valuable, at least from the feedback I get from clients who have been through them. So – at least worth the money that was paid is a more politically correct way of saying it. So anyway the book is a consumer’s guide on how to understand financial coaching and if somebody just wants to know how to select a coach as your question asked there is an article on the site that walks them through step-by-step it’s called three steps to finding the right money coach.

Ahmed Al Kiremli: What are some of the investment frauds that we must avoid, some examples for that?

Todd Tresidder: Again I have a book on the subject called investment fraud and it’s – it does it so well, I didn’t do it because I thought it would be a bestseller, nobody wants to read about investment fraud and yet if you are going to build wealth you are going to run into it and it’s a subject you have to understand, again you can look at testimonials on my site, I’ve saved many customers from multiple investment frauds. They are fairly easy to recognize once you understand the principles of how it’s done, so there is an article on my site for free called 26 investment frauds you have to avoid or something like that. There is a variety of articles on the site for free about investment fraud, but basically there are certain principles that fraudsters follow to prey on people’s weaknesses around getting money for nothing, returns that are too good to be true that don’t obey financial common sense, on and on. It’s all this in the articles for free.

Ahmed Al Kiremli: How is the economy now and what is your prediction for it for the next five years?

Todd Tresidder: Well first of all one of the things I teach is that if your investment methodology requires a prediction about the future than by definition it is flawed because nobody can predict the future including me. I’m actually pretty good at it, we did a study when I was in the hedge fund business because we used all mathematically disciplined approaches to investing but I’m actually pretty good at quote unquote predicting the future I’m pretty in touch with what all the indicators are showing, things like that and I could actually out trade the approach about 70% of the time. The problem was when I was wrong I was wrong so much that the disciplined mathematical methodology would catch up and pass me every time, so I really proved out the approach I teach for investing. I don’t actually protect the future, I think my viewpoint, but I wouldn’t put – if you want my viewpoint it’s that we are walking a hair’s edge – a razors edge of stability right now, it’s manufactured stability based on government intervention and debt which is inherently unstable, and this thing can go either into a severe deflation or a severe inflation at any point, I’m not smart enough to predict when that’s going to be and for all I know we’re going to get both. In sequence. So I think that volatility is probably the safest bet going forward from here. I think we’re going to see volatility. I just don’t believe in predictions, I think it’s a waste of bandwidth.

Ahmed Al Kiremli: Why is money not the main source of happiness and how do we create happiness in our life?

Todd Tresidder: Is just based on experience, I’ve worked with a lot of wealthy people, my kids go to private school where there’s a lot of wealthy parents and I’m very clear that all the research is clear on it too, if you look at the relationship of money to happiness, there is a relationship and it’s pretty loose, it happens at the lowest end of the scale, once you are above base living standards you’ve got a comfortable existence, your happiness is not really a function of money, the other thing that’s proven by research is how you spend your money can bring happiness but money itself is not a source of happiness. So there’s some subtleties to the question but money does not bring happiness. It can reduce the friction in your life. You can buy your way out of things.

Ahmed Al Kiremli: What are your writing habits, how do you write efficiently?

Todd Tresidder: My writing habits suck. I’m a stint writer, when I’m into it I will get into it and completely lose track of time but I am managing a lot of different projects here, so I don’t just have the proper writing habit of sitting down each day at 9 o’clock in the morning, facing the screen and writing which is what great writers do. I managing the website and staff and different products and different projects and when I get down to write is here and there. So I’m not a great example of that.

Ahmed Al Kiremli: How many staff do you have and are all of them online or some of them off-line?

Todd Tresidder: Everybody is virtual. None of them are employees, they are all virtual assistants with multiple people they work with, I’m just one of many. I have three right now.

Ahmed Al Kiremli: How do you structure them like one does email and another does social media, how do you structure their work?

Todd Tresidder: Each has a special skill they bring to the table, something they are very good at that can benefit the business. So I have a technology person who does all the technology side of the business, I have a graphic design person and then I’ve got a general virtual assistant that includes the social media but other tasks as well.

Ahmed Al Kiremli: I noticed that you focus more on e-books more than a paper back books why is that and what is your experience with the publishing and self-publishing in this world?

Todd Tresidder: That was a mistake on my part actually. I would be better off if I had them all in print form. Some of the books are relatively short and I don’t feel comfortable putting them out in print form, so the variable annuity book, my whole goal was to reduce that concept and that issue down to is short as possible, originally it was going to be an article but it was too long for an article so it became a very short book I think 35 pages or something. I don’t feel right about putting that out in print form, shipping costs and all of that but I think it’s a mistake if I had it in print form it would sell better. The one book that is in print form has been through three generations, it began as a shorter book – all my books are written based on what I see as a need in the marketplace. The lead book that I created which is how much money do I need to retire which is my bestseller and has the most reviews and all of that, that book was based on the fact that every client I worked with approached the how much money do I need to retire question wrong. All of the material I had run across out there in the public domain by the time I wrote the book approached it wrong. I changed a lot of that through my promotion of the book as well as people reading the book, I’m fairly connected in the financial blogosphere, there are several hundred bloggers who have read the book now so more and more people are starting to approach the subject correctly but when that book was first written nobody approached correctly., I write a book based on a need so that book started out as 30 or 40 pages and became 60 and now it’s like 120 as I’ve made it more and more complete. So that’s why that book is in print form and does quite well in print form. My market wants print books so if I had them all in print form I would do better, it’s a mistake I’m making that I need to correct.

Ahmed Al Kiremli: How do you market for your books, do you depend on only Amazon or do you do some certain other steps when you launch a book, what are the steps that you do?

Todd Tresidder: The book exists solely on Amazon right now and that’s because Amazon owns the book market right now. I can go into a whole discussion on that if you want but basically Amazon dominates the market, it’s an 8020 rule that’s for the market is if anybody wants to find a book where do they go, they go to Amazon. So that’s where they’re located, how I launch them is a strategy around how you build awareness for the book and build traffic for the book and get the book to rank within Amazon’s marketing machine. The key is when you understand the Amazon game is that Amazon when you rank, Amazon is a brilliant marketing company and when you show up within their marketing algorithms they will bring you 10 times the business you can send them so everything I do is to drive sales through Amazon which then causes the book to rise to Amazon the tension and they cross market and multiply it out from there.

Ahmed Al Kiremli: So based on sales or reviews or are there other factors to rank the book let’s say when somebody searches for certain term?

Todd Tresidder: All of the above and more, everything you said and more. There are quite a few factors and obviously it’s just like any other algorithm, Amazon doesn’t reveal it but there are a lot of people who spend a lot of time studying it to try to understand it and so there are people who are far more expert than me on that subject that you could interview. Everything you listed as part of it, it’s sales, acceleration of sales versus decline of sales, how it ranks within its category, the author and his rank, the reviews and the quality of the reviews, the authenticity of the reviews, they weren’t bought, they can track them and see that they are actually from real buyers within the Amazon system and on and on. They are figuring it out. If you want to look at the Amazon ranking algorithm it’s very instructive to look at the lifecycle of the Google ranking algorithm. They started out with a really brilliant idea and then people manipulated it and got better and better and that’s what you’re seeing over at Amazon.

Ahmed Al Kiremli: Do you participate in any masterminds or do you recommend any masterminds?

Todd Tresidder: Absolutely yes right before he got on this call to record I was on a mastermind call and I highly value the mastermind, it’s one of the best ways to get out of your own head and to stay focused, I fully support masterminds but they have to be good. I’ve had masterminds that weren’t great and they are no longer there and I’ve got a great mastermind and we’re still there to this day five years later.

Ahmed Al Kiremli: Do you recommend any or how to participate in them is there anyone that you recommend particularly now?

Todd Tresidder: I’m sorry your voice cut out, is there anyone mastermind that I recommend?

Ahmed Al Kiremli: Yeah.

Todd Tresidder: Maybe we are using the term differently, masterminds are a community of people, usually 5 to 7, 4 to 7 people that need on a regular basis and they are masterminding together to support each other’s business growth. At least in the context of a business. You can’t really recommend one because that one is closed already, it’s a closed community. I know that Jamie Tardy puts out a product on how to develop masterminds, I don’t know if that is helpful for you. She is part of the mastermind I’m in and she puts out a product on how to develop masterminds.

Ahmed Al Kiremli: What is your daily work and life routine look like?

Todd Tresidder: It varies with if I’m on vacation or in work mode, it varies with the school year, it’s basically driven by my kids agenda. So my wife and I alternate workout days with getting the kids off to school, so every other day as my workout day and every other day I get the kids off to school and that’s the morning routine and then I try to be in the office by eight or nine in the morning and put in a full day. And that has changed quite a bit, when I first became financially independent I played on the game of workout in the middle of the day, I will get my exercise in the middle of the day but every other day I was pissing away half a day, it was destroying my productivity. You learn what works for you.

Ahmed Al Kiremli: Do you use any programs or recommend any software that makes you more efficient?

Todd Tresidder: Your voice cut out on that last word but I think it makes you more disciplined?

Ahmed Al Kiremli: More efficient.

Todd Tresidder: No, I’m probably your freak interviewee, I’m very disciplined. I’m still human but I basically look at – the way I work with myself as I look at what do I want, so I look at my year goals, my priorities and then I opined my life with them and I’m constantly checking to see if it’s aligned or not. The fact that I spent so much time coaching people, you almost can pull the coaching watch over your own life. It’s like you can pull it off, it’s there. I’m probably not a great example of what tools or what things would be efficient just because I spent so much time coaching people that I put that microscope on my own life as well.

Ahmed Al Kiremli: What are your other hobbies?

Todd Tresidder: Mostly outdoor recreation, outdoor recreation like I was sharing with you I went backpacking during a holiday break your I did a bunch of snow skiing with the kids, I enjoy books, quality movies – I’m a pretty simple guy, I love outdoor sports and reading and family and books.

Ahmed Al Kiremli: Top three movies?

Todd Tresidder: Travel, I enjoy travel.

Ahmed Al Kiremli: Top three movies.

Todd Tresidder: I’m enjoying the hobbit series right now with my daughter. I love Butch Cassidy and the Sundance kid from when I was a kid. And Harold and Maude.

Ahmed Al Kiremli: Top three books?

Todd Tresidder: You know, I’m going to play something off you here I’m not a big top three or top 10 list guy because it varies a lot, even top three movies it resonated flat with me when I was saying them, to pick out top three books, I just read a book called essentialism which I think is a great book and I’m reading Seth Godin’s book right now on choosing yourself that he’s just popularizing now through a different publishing model. That’s an interesting book. I think every book has its kernels to share, its wisdom to share and so I don’t really have a top three or whatever. It depends what I’m into at the time and what I’m learning and interested in is what makes a book good or not good. So to pick top, what was top five years ago isn’t top today.

Ahmed Al Kiremli: Who are your mentors?

Todd Tresidder: I don’t have any.

Ahmed Al Kiremli: Before?

Todd Tresidder: I don’t think of it that way, I don’t think of it as having a mentor. I learned from everybody where there is something to learn, I observe and I pay attention to what’s working and I bring in what can add value to my life but to say that I’ve got a mentor, that means something specific to me, that means I’ve got somebody I’m specifically working with as my guide for whatever next up I’m working on. I don’t have that.

Ahmed Al Kiremli: If you have the chance to ask your younger self and advise your younger self what would you advise your younger self?

Todd Tresidder: Don’t break with your disciplines. I’ve written quite extensively on my site about the mistakes I’ve made, so investing mistakes I’ve made are all breaking with a discipline of expectancy investing which I teach. Every now and then my ego gets in the way, my big brain gets in the way and I think I know something more than the methodology and it always bites me in the rear. So that’s my investing mistakes are done there and then in terms of business decisions it has to do with blindness is, where I get focused on looking at a decision in a certain way or a certain framework and it causes me to not see the whole picture properly. And that’s true for everybody by the way I’m just quite aware of it, I coach on it and I see that my own life where I make a mistake everybody does, it’s just a part of the human brain, it’s how our brains process information. So I’ve written a post on that one too, it’s called how smart investors make stupid mistakes or something like that, how smart people make dumb financial mistakes I think is what it’s called. It goes through extensively about this idea of how your brain can channel a certain thinking process and make it completely blind to the whole picture.

Ahmed Al Kiremli: Who are your favorite financial writers or financial experts that you follow their advice?

Todd Tresidder: Well I don’t follow anybody’s advice first of all because again I follow the models that I teach wishes expectancy investing. I’m not getting any advice from anyone or following any newsletters or anything like that. In terms of – I really don’t follow financial sites anymore. The people I’m learning from now are in completely different spaces, I think Cal Newport read some very interesting material on – you would be interested, I imagine you are if you write about efficiency, are you familiar with Cal Newport?

Ahmed Al Kiremli: No.

Todd Tresidder: Cal Newport has – it used to be study hacks but now it’s called Cal Newport.com and he writes a lot about efficiency productivity and he plays a lot of interesting ideas around the waist of time social media versus going deep into subjects which I find is very true in my work with clients about deep diving subjects, it’s also true in my life with my work. So the people I’m learning from our more with the stuff I’m confronting in dealing with right now, it’s not financial per se.

Ahmed Al Kiremli: What makes you really happy? What makes you really happy?

Todd Tresidder: My ego. Boy what makes me really happy? You know, again this question is almost like a top 10 things like what are the top three things that make me happy and I never resonate with those questions. What makes me happy is living according to my truth, following my path, becoming the best person I’m capable of becoming. It’s more of – what I think about what makes me really happy I think of a little spike on a chart like this was a happy day. That’s not what I’m working toward, I’m working toward a flatline of happiness that is sustainable and rising. That doesn’t lend itself to what makes you happy.

Ahmed Al Kiremli: What is that, is it like adding value, is it working with other people?

Todd Tresidder: Adding value, community, contribution. All of these things achieving the goals I set out to, my health because it’s hard to be happy when your health sucks. There’s all these pieces that fit together to create a happy life, but it’s not like what makes me happy is this and this.

Ahmed Al Kiremli: Last question how can people contact you?

Todd Tresidder: The hub of everything I do is financialmentor.com, that’s everything and you can find anything else from there.

Ahmed Al Kiremli: Thank you so much for this interview Todd I really appreciate it.

Todd Tresidder: Thank you, thanks for having me.

Ahmed Al Kiremli: Thanks everyone, be efficient and stay efficient and see you soon with another leading expert.

Word count 11883