Peter Mallouk recalls when he first learned of Jonathan Clements and how the two became close friends before introducing a clip show of Jonathan’s finest Down the Middle wisdom. He also shares the plan for Down the Middle moving forward amid Jonathan’s continued health struggles.
Hosted by Creative Planning’s Director of Financial Education, Jonathan Clements, and President, Peter Mallouk, this podcast takes a closer look into topics that affect investors. Included are in-depth discussions on financial planning issues, the economy and the markets. Plus, you won’t want to miss each of their monthly tips!
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Transcript:
Peter Mallouk: Hi, this is Peter Mallouk, President of Creative Planning, and we are Down the Middle. This is the first time I’ve ever done this introduction, and if you think it’s weird to hear it this way, it’s even stranger for me to deliver it this way. Jonathan Clements is hanging in there, but he has really been struggling lately. He wanted me to send his best to all of you and said the most fun and invigoration he had in the latter part of his career was doing this podcast. Jonathan, as many of you know who have been following this podcast for years, you know that he’s always focused on enjoying life and helping people think about how to maintain their quality of life in the future by being fiscally sound. Jonathan was diagnosed with terminal cancer over six months ago, and he has been really struggling with it of late.
Many of you noticed on the last podcast his voice struggled a bit and on occasion he needed a moment to gather his thoughts. But to me, he delivered the same wisdom with grace that he always has. It’s not going to be the same doing this podcast without Jonathan Clements. As with everything at Creative Planning, including for me, there is always a backup plan to ensure continuity for all of our clients and friends. And next month, Jeff Stolper, our Director of Financial Education, will be joining me as well.
Jonathan Clements has been a dear friend of mine for a long time — one of the very few people in this industry that I have looked up to, and I would put him on par with John Bogle, the founder of Vanguard, and Warren Buffett. And I put him in that group because he had an incredible ability to speak in plain English, to take complex subjects and make them simple. And he cared very deeply about helping the typical person, the average person, navigate the unnecessary complexities of wealth management. He really was passionate about trying to simplify things for people so that they could be empowered enough to take action to put themselves at a better place.
The first article I read from him was in Money Magazine. Later he was at the Wall Street Journal, and I read him for many, many years before I became an advisor. He was one of the few writers that got me interested in the profession, and partially because he made it so accessible and understandable to somebody who at the time didn’t have that background. When Creative Planning started to become successful enough that I would even have the courage to call somebody like him to look at a partnership, he was the very first call, and I was so pleasantly surprised when he said that he loved the idea and that he wanted to be a part of it.
One of my favorite parts of my month was this short podcast Jonathan and I did together, and I know all of you are joining me and thinking about Jonathan, his wife and his kids, and praying for them. I know he would be accepting all those good wishes from all of us.
As I was thinking through the subject for today, I thought there’d be nothing better than to look back on some of what I consider the best moments of Jonathan Clements on the Down the Middle podcast. And with that, here’s the greatest hits of some of his finest wisdom.
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Peter: I’ve got to say that I read you for many, many, many years, the Wall Street Journal, was very excited to meet you a few years ago and met for the first time.
Jonathan Clements: And now disappointment has set in.
Peter: No, no, no. Then I heard you talk and I was surprised by the accent. And so I bet there are thousands of people that have read your column for years and years and years and weren’t aware of that. How often do you get that or am I the only person that has brought that up?
Jonathan: Only a couple of times a day.
Peter: Oh, really? All right.
Jonathan: I’ve been accused of being Australian. I’ve been accused of being South African, but I was actually born in London, but my parents moved to the United States when I was age three. So I actually grew up speaking with an American accent, and then when I was 10, I was packed off to boarding school in England and there they beat the American accent out of me and this is what I ended up with.
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Jonathan: And I think one of the things that you mentioned about giving is hugely important, because even if you don’t give yourself permission to enjoy this money, there is enormous pleasure in giving away money. We know from the research that being generous is a huge source of happiness. People assume that spending money on themselves is going to deliver greater happiness than spending it on other people. But the research tells us that just the opposite is true, that if you are generous with your time, you go and volunteer at the weekend, that that’s going to be a whole lot more fun than sitting at home and doing something that you personally enjoy. Similarly, giving money away, whether it’s to charity or to your children, sort of gives me great pleasure, and when I see other people doing it, they tell me that it also gives them great pleasure. And why not give it now? Because if you give it to your kids and you see them be so grateful that you’ve helped them ease their financial worries, you’re enjoying it now while you’re alive.
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Jonathan: Really, it’s not about making or losing money, it’s really about our aversion to regret. We just loathe the idea that we’re going to take this chunk of money, throw it to the financial markets, and see the stock market drop the next day. And it’s the pain of regret rather than the pain of the actual financial loss that really deters us from acting right away. But, as you say, the stats say just get that money into the market.
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Jonathan: A lot of people look at their portfolio and say, “Oh, I want better performance.” And so they start off thinking, “Well, I’ll have to buy better mutual funds or buy better stocks.” But if you really want to improve your portfolio’s performance, nothing’s guaranteed. But the sure way to do it is to simply increase your allocation to a diversified portfolio of stocks. If you have more in stocks and that is a diversified collection of stocks, to the extent that the stock market rises over time, does better than bonds and does better than cash, you’re going to get better portfolio performance. But if you go out and you bet more on some aggressive mutual fund or some hot stock, the odds are you’ll take that risk and you will not get rewarded.
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Jonathan: One of the things that was emphasized to me is the value of doubt, and that is doubt in your ability to anticipate the future, the ability to guess which way the broad market is going, to guess which sectors of the market are going to do well. I mean, sure, there are certain things that you should not have doubt about. You should not have doubt that holding down investment costs is a good idea. You shouldn’t have doubt that managing taxes is a good idea, that diversification is a good idea, that stocks are going to triumph over the long run, but you should have doubt about your ability to forecast what’s going to happen in the weeks and months ahead, and people who got most badly burned were those people who had really strong convictions about which sectors were going to soar or sink and what was going to happen in the broad market. Having doubt turned out to be an enormously valuable quality.
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Jonathan: If you’re an individual investor, you are in a sense accountable to no one. So if you’re a little bit early, so what? The only person you have to blame is yourself and the only person you’re accountable to is to yourself, so yeah, take advantage of it, and if the market keeps going down, invest some more, save some more. It’s a great moment to be an investor.
***
Jonathan: And the solution is actually always the same. You still want to own stocks for the long run. You just want to make sure that you can get to the point where you enjoy those long run returns. So you own a broadly diversified stock portfolio, growth in value, large and small, U.S. and foreign. And then you make sure that if over the next few years there’s a problem because inflation spikes upwards or because there’s a recession or because there’s a compression of valuation, that you have enough in conservative investments to give you a bridge to get there. And all of portfolio-building essentially comes down to that. We can get sophisticated and say, “Well, you should have some real estate in there.” Who knows? Maybe you should have a small percentage in Bitcoin, maybe you should have some gold. Whatever it is, you can get super, super clever. But in the end, that is what portfolio building comes down to: making sure that you’re in the stocks for the long run and having a bridge to survive the periods when they’re not doing well.
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Jonathan: Something that we’ve also mentioned quite frequently on this podcast is if you want to give appreciated stock, but you want to give maybe more than your charitable budget is for 2025 and you’re thinking about giving two or three years’ worth of charitable contributions, you may want to use that appreciated stock to fund a donor-advised fund. Put a big chunk of that stock into the donor-advised fund in 2025 and you might use it to fund your charitable contributions for the next three years.
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Jonathan: What am I trying to do with the months ahead? More than anything else, I just want to get the most out of every day. That’s tougher than you might imagine. I mean, we’re always getting distracted, even when we’re healthy, by the hassles of everyday life, by people who irritate us and so on. And to try and set that aside and enjoy every day to the fullest extent possible is difficult. But that’s what I’m trying to do and hoping to do in the months ahead. And when I think about what it is that’s going to give me pleasure in the months ahead, you know, there are a number of things. One is I want to spend as much time as I can with the people I love. I still want to do the work that I think is important. You know, I love writing and editing. I have this little website I run. I want to keep running it and keep posting new articles. This is important to me. This is what makes me feel fulfilled. It made me feel fulfilled before I was sick. And why give it up now? This is the stuff that I really enjoy.
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Jonathan: So they often talk about happiness and the various components, and there is your set point, the activities that you intentionally engage in, and your life circumstances, how much money you make and so on. And there’s some debate about how this three-part pie chart divvies up, but in terms of the innate part, the set point part is generally said to be 50 to 80% of happiness. So if you want to boost your happiness, you have to focus on the other two things, which is your life circumstances and the intentional activities that you engage in. So things that Peter was talking about, expressing gratitude, volunteering, socializing, and so on, those are the things that can potentially boost your happiness even if you feel like your happiness set point is too high or too low depending on how you want to look at it.
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Jonathan: You should ask family members, were there any specific personal possessions that they want from your estate. Obviously if you’ve got a Picasso hanging in the living room, that should be in the will. But for everything else, all the sort of minor stuff that you have around the house, you know that could be handled with a simple list that might be appended to your letter of last instructions. As I’ve learned over the years watching people settle estates, these possessions, it’s often of insignificant value, have an import that’s far beyond their monetary value, and you simply don’t want your family fighting over this stuff after you’re gone. So for goodness’ sake, find out their wishes now.
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Jonathan: You know, I think there’s an important psychological element here. We all notice when we go to the grocery store, we go to the restaurant, we go to the car dealership and the prices are up, but we don’t really notice when prices come down. And you mentioned laptops. I mean, I remember 20 years ago the rule of thumb was whatever laptop you wanted to buy, it was going to cost you 2,000 bucks. Today you can go and buy a laptop for less than a thousand and it’ll be vastly superior to the one that you could have bought 20 years ago and it costs a fraction of the amount. And yet we don’t really appreciate that. We don’t notice the deflation in our lives. We only notice when prices are going up.
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Jonathan: Well, everybody emphasizes the importance of getting a will. Probably for most listeners of this podcast, their biggest asset is their retirement accounts, which means that the beneficiary designations on those retirement accounts are going to determine where the bulk of their assets go upon their demise. So those beneficiary designations are really more important than having a will, though you, of course, you should have both. Check those beneficiary designations and just make sure that you’re not about to leave all your money to your ex-husband.
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Jonathan: One thing that I did, which was not a success, was back in the late 1990s, I want to say, TIAA-CREF came out with a series of low-minimum mutual funds. And I thought, okay, let’s me and my two kids each pick a fund, and, you know, it was like $250 to open the account and $50 minimum, and they could pick the fund and we would track the performance and I would show them the account statements and they would learn something about investing and the power of regular contributions.
It was a complete flop. And I think the reason it was a complete flop beyond the fact that the notion was maybe too sophisticated for the kids at that point was they were playing with my money. There was not the financial stakes there. So whether they were in first place or third place, it didn’t really matter. And then on top of that, of course, if you go back to the late1990s, it was a time when taking ridiculous risk was rewarded. So my son, who happened to pick the high-growth fund, did the best, but do I really want him to have all his money in high-growth funds going forward? No, but that’s sort of the message that came through. So after a little while, I pulled the plug on that and I think I rolled the money into some other funds that they had that were better diversified, but that was not something that I would recommend to parents.
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Jonathan: What matters is what you focus on. And so when people who are well-off, rich, whatever term you want to use, are asked about their happiness, they think about the fact that they’re financially secure and that prompts them to say that they’re happy. So by the same token, if you want to make yourself feel happier, think about what you’re focusing on. If you’re focusing on what’s going on in the Middle East or what’s going on in the down date in the stock market, you’re not going to be happy. But if you focus on the good things in your life, your kids, your grandkids, your neighbors, your church, whatever it is, that will boost your happiness.
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Jonathan: I mean, I do believe we’re here to serve others. Doing what I feel is good work, work that helps other people, that brings me joy. I mean, it’s the reason I get out of bed every morning and immediately sit down in front of a laptop and corresponding with people and so on. I just want to be helpful. And as you said, it’s not because I’m really looking forward to being a big help to other people. It’s because it’s what makes me feel good. There is a great pleasure in helping other people.
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Peter: Thank you, Jonathan, for all of that wisdom. We’re all thinking about you and praying for you. I am Peter Mallouk and we are Down the Middle.
Disclosure: This show is designed to be informational in nature and does not constitute investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.
