Last updated on September 6, 2022

Chris Hutchins joins the podcast to discuss his strategy for asset allocation, which leans heavily on passive investing and optimizing earnings power rather than picking stocks. In this (admittedly) unorthodox episode he discusses some of his methods.

Content Highlights

• You probably can’t beat the market. Instead of trying to optimize the portfolio, why not optimize how quickly money can be put to work? Or maximize income from employment (5:55);
• Beating the market may be extremely difficult (if not impossible). but educating oneself is still invaluable along several lines that are discussed (8:07);
• How does Hutchins’ asset allocation break down exactly? (10:45);
• The guest is also a venture capitalist. What areas of technology is he particularly excited about right now? (12:35);
• What about the VC model itself? (21:30);
• Background on the guest (30:00);
• Not investing is as big a mistake as investing incorrectly. Some of the options (35:32);
• How important is liquidity? (38:44);
• What has the guest most worried right now? (42:06).

More Information on the Guest

• Twitter: @Hutchins;
• Website: WealthFront.com;
• Podcast website: AllTheHacks.com (includes links to podcast),

Quick Video Highlights

Transcript

Nathaniel E. Baker 0:35
I am here with Chris Hutchins, he is the head of new product strategy at Wealthfront. As well as, as the host of his own podcast called all the hacks. Now, Chris, this is a little bit of an unusual episode here, because your view is basically that people shouldn’t invest.

Chris Hutchins 0:55
I don’t think people shouldn’t invest, I just don’t think people should try to be investors, you know, per se, and like, you know, take it upon themselves to try to beat the market to try to figure it all out and figure the game out, I think, you know, there’s a strategy that I take on my own personal investments, which is like, I want to play the market, and I want to do it in the most optimal, efficient way. And then I like, you know, I want to whet the appetite of the excitement of investing and set aside a poor part of my portfolio to do that. And that’s in line with what I’m excited about more than it is about, you know, some perfectly tweaked asset allocation.

Nathaniel E. Baker 1:31
Okay. Now, this is interesting, because you are a serial entrepreneur, and you are, we talked about this a bit, an LP, actually. And so you have all people would think is in a position to optimize your portfolio, and make some investments and individual stocks, make some investments as a general partner, potentially, and some venture investments, some angel investments, but you don’t and certainly real estate, we keep hearing that real estate is the big way to build wealth in this in this country. The quickest way, but you don’t quite agree with that. Any of that either. Do you?

Chris Hutchins 2:06
Yeah, I mean, real estate’s this funny thing, right. Like, you know, I’ve been deep in this financial independence, retire early movement. I know a lot of people there. And everyone’s just like, I just want to save up just enough to buy another property and just enough to buy another property. And I’m like, Yeah, but REITs in my index, like, I have REITs, in my Wealthfront account, like, that’s great, but I don’t really want to go and be a landlord. Like buying rent, real estate is more than just owning real estate. It’s, you know, figuring out what to do with that real estate, and you can invest in a fund. And then it’s just a question of, well, do you want invest in a secret, you know, private REIT, or a public REIT, and which one’s more work and finding it and vetting it? So for me, it’s like, yeah, investing a lot of real estate in an index fund, but buying a property and becoming a landlord, and dealing with the, you know, problems of tenants is a mess that I don’t want to deal with. We’ve rented rooms out in the past and our house, and it’s just a mess. And then yeah, you can hire this property manager, but now you just stack up all that you stack up vacancy, you stack up this and like, is it actually going to outperform relative to the overhead you have? I have very little overhead, like in my Wealthfront account, where I put all my index out, like, I have very little overhead of managing that right? I chose a portfolio, have my asset allocation there, and I let it do its thing. Yeah.

Nathaniel E. Baker 3:20
And again, you are what is considered a or what will be considered a sophisticated investor. So you’ve had multiple exits here with these companies that you’ve started. And so but but you’re not, you don’t really go that route of of individual investing?

Chris Hutchins 3:35
No, I mean, to go further, like I ran a financial planning firm we had right 15 CFPs on staff, we were helping clients with, you know, I think about a million plus in income or in net worth. But I think there’s just so much more room for people in that demographic to optimize so many other financial things that in the long run will help them build wealth faster. You’ll like for example, when I got to my most recent job at work at Wealthfront will build product has like, instead of trying to optimize the portfolio and spending all the time there, what if we could help people optimize how quickly they could put their money to work. So like auto sweep their money into their account, set up faster recurring deposits, sweep excess cash, like those kinds of things are great, trying to help people figure out whether they could be earning more in their job. So you mentioned I have a podcast, you know, we had an episode we talked about how to negotiate and how you can negotiate for a raise, we talked about how to do side hustles and how to earn extra income. If you can add 10% to your net worth every year by saving money or by earning an investment return, obviously, the investment return would be a much lower lift. But a lot of times that’s not the same your portfolio might not be earning what you could earn starting up a side hustle, figuring out a way to monetize your free time better and so I think there are just a lot of ways that you could increase your bottom line and grow your net worth and the one that I think has the lowest likelihood of success is trying to tweak that, you know, portfolio to outperform the market, because the data just shows it doesn’t, it doesn’t usually work for most people.

Nathaniel E. Baker 5:10
Yeah. And that is kind of the unfortunate reality that we’re looking at here. And this is why I thought this would be good to bring this up here today, because now I realize I’m probably losing a lot of listeners. And, in fact, probably many people have already turned this off, because this is not why people listen to this podcast. But it bears saying, nonetheless, it’s worth saying that this is it is extremely difficult. And I’ve studied this, I’ve looked at just the act of management, especially with public money with public securities, and just how difficult it is, especially over time to beat the market. And so you know, just going the Bogle route and dropping it all into a low cost index fund. Maybe it is the way to go, and then worrying about other other areas of one’s life. It does, it does bear pointing out as much as I hate to do it,

Chris Hutchins 6:02
let’s give people some say, for the people that didn’t drop off, I think we can kind of there’s some places we can go that I think well won’t leave you feeling like, you know, we we’ve provided no value to that perspective. Because, honestly, your podcast, you know, there’s another podcast called macro voices, animal spirits, like there are three or four podcasts that dive into these, like Technical Investing, you know, macro economic topics, I love listening to them. So like, as someone who doesn’t actively buy oil futures, there’s nothing more fascinating to me than learning and listening about it, because it makes me a more informed investor. I also think there are ways to do this, you know, active investing or investing in alternatives that are still in line with a broader theme of I can’t beat the market. So I did an episode of all the hacks with Brian for Aldi. And he kind of outlined this stock investing planning process he runs where he makes a checklist, and he has a process for picking a stock. And he treats it as a long term investment. And you could almost argue that he’s just trying to build his own version of an index fund, not that he’s trying to be this crazy active manager that necessarily outperforms the market. He is trying to build an index fund that would outperform but, you know, he’s building a series of long term bets. So like, I was fascinated by that. And I don’t think that’s a terrible strategy. I just personally don’t want to spend the time to do what he does. But if someone’s listening to this and thinking, you know, I want to invest in stocks, definitely check that out. That was like a good story about that. But you don’t invest in individual stocks yourself, I have some individual stocks, some from the fact that, you know, I was a venture capitalists for at Google Ventures for a handful of years. And when companies went public, I got their socks, I was like, I just didn’t sell them. You know, a lot of them were in tech, in the last year, I baby regret in the last six months, maybe that I held on to them, right? So it’s starting to come back, there are companies that I just believe in, and believing in a company’s product and their future, and wanting to have a piece of that in my portfolio is very different than trying to actively trade and outperform the market with everything I have. So, you know, taking five 10% of my portfolio and putting it aside for making bets that I’m passionate about that I think could outperform is, is my strategy. But it’s a very different strategy than thinking I can outperform. It’s like Asher, I like making these bets, they might all do terribly, they might not. But they feed this desire, I think we all have to be passionately involved in what we’re investing in. And I can actually take more risk with that money, knowing that it’s not my whole portfolio, which is fun, I put some money in a winery, like, I would never do that with all my money. But if I set aside a risky thing, a risky pool of money that I can take bets with, I could do more fun things with it, and I’ve enjoyed it.

Nathaniel E. Baker 8:54
How does your asset allocation break down? And I’m not going to ask about individual stocks unless you want it. But but as you know, whereas, you know, the percent you have an index fund is and how does that break down versus stocks versus bonds? And then the percentage you have as a, I guess, as a GP or whatever, and how does that all break down? Can you are able to make a big picture? Yeah,

Chris Hutchins 9:14
I was like, Can I pull this spreadsheet up fast enough? Yeah. So it’s like 45% US stocks and indexes? Yeah, in indexes, and of that, I would say about maybe, maybe like 20% of it might be individual stocks and 80% has indexes. And but I don’t have individual stocks in all the other areas. So it’s probably another 30% 35% in international stocks. Oh 5% In real estate, almost all REITs another four ish percent in crypto, mostly because it was like point 5% Or point 1% A long time ago and and then another 5% in commodities all in index funds, timber mining energy that kind of stuff 2% alternatives. i Maybe it’s my long term horizon, maybe it’s interest rates, where they’ve been in the past, but bonds is like 1%. Okay. And then some cash. And then a couple other funds that I think we’re so diversified, maybe a couple more percentage and in funds that are so diversified that I can’t really like call them us are not interesting. All right. Well,

Nathaniel E. Baker 10:22
here’s a question for you. Because you’re, you’re we’re a VC. And you you said you were an early investor in crypto, you said in some other things? What are some areas of technology that you’re excited about now? Maybe not even necessarily from an investing perspective, but just from a pure technology perspective, from a, I guess, from a potential perspective, like what really has the potential to change the way we live? And the way we do things?

Chris Hutchins 10:51
Yeah, I mean, it’s, it’s not very contrarian to say that I think everything going on on the blockchain is interesting. Okay, I think that’s probably I want to make a strong distinction between that. And you know, buying Bitcoin, right? Like, I think there are a lot of use cases. When it comes to ownership, and traceability and residuals, I’ll take, you know, I’m definitely not gonna go out and say everyone should go by NF Ts, but this idea that an artist can create a piece of art, and I’m sure there’s debate on whether people think something digital, that you can copy, you know, his art, but, and say, when this thing trades in the future, I automatically get, you know, X percent of every sale, you know, you look at the most valuable pieces of art in the world. And those original artists are not participating in that at all. So the way the fact that you can create these entities and structures, you know, on top of technology, mostly on the blockchain, that create these new ways to run businesses, Dows, creating new ways that you can organize a business and have people collectively buy things and vote on things in a way that used to be like paperwork, you know, I just got this email, or I saw a tweet from Elon Musk the other day, it’s like, Hey, if you haven’t voted, you know, on all the Tesla shareholder meetings, here’s how you do it. And it’s like, Okay, I gotta go log into Interactive Brokers and find this note and then figure out, it’s like a mess. The fact that technology isn’t more a part of that is crazy. And so the idea that as you’re investing in companies, as you’re doing things, that that could actually kind of all tied to one single source of truth. That’s interesting to me. Okay. And I think I think there’s a lot I can’t predict what that will mean for us. I think it’s too early, but I just see the future. They’re being really, really interesting.

Nathaniel E. Baker 12:40
Okay. And are there any Have you seen any proposals any any decks, I guess, from blockchain companies, because you mentioned that your asset allocation? That doesn’t sound like there’s anything in blockchain?

Chris Hutchins 12:51
Right. Yeah. I mean, I consider, you know, owning some Aetherium to be like, a bet on that blockchain. And I think like it’s a promising blockchain. Do I have any individual investments in crypto companies? No, I don’t. I think, you know, a long time ago, I can’t remember there were all these companies getting acquired in the ad space, it was like double click and all that stuff. And I remember I picked one. And I was like, gosh, they’re all getting acquired. I don’t know enough about this, I’m gonna invest in this one. Because like, they’re all getting picked up. Well, I just picked the one that didn’t get picked up. And so like, I want to when I’m not certain of a specific value, I’m kind of playing broad. So for me, I think that if blockchain takes off right now, Aetherium is like a front runner for what that means. So for me, I’m like, let’s hold a little bit. Do I want to fill my portfolio with it? No, definitely not. So like that is that is my passive way of kind of betting that the blockchain will be interesting. I’m sure there are people listening that could say there are other tokens that might, you know, be a better bet or other Dows that I could participate in, that are owning pieces of different NF T’s like, yes. But for me, I, it’s I’m not, I don’t want to go that far down that rabbit hole.

Nathaniel E. Baker 14:02
Okay. You don’t think it’s a cyclical thing with these NF T’s and 1000, and Bitcoin and things like that? Things like that.

Chris Hutchins 14:08
I think, you know, there was a.com hype cycle, right? Everything was crashing, like, was that the end of the internet and web companies? No, but were there a lot of things that were overvalued, that took a long time to come back? Yeah. So do I think right now with what’s going on crypto, there’s gonna be a pause on a lot of exciting new projects getting tons of funding. Yeah, but do I think the ones that sustain and the ones that hold through are doing something really interesting? Yeah. Like a friend of mine started this, this company called Proof collective or proof, and they created an F t, that is a membership and they do all these partnerships with other artists and they’ve launched their own products. It’s super interesting. It’s been a chance for me to learn. Do I think that the Approve collective past which you know, is like, you know, now risen to almost six figures, do I think that it’s the best long term investment? No, no, I can’t say that. But I do think that their company is doing really interesting things that will be around for a while. And I don’t think it’s going to disappear. I just think in some ways, it’s good because a lot of the companies that maybe didn’t need to be around or weren’t doing things in the right way, like kind of kind of get washed aside, and the ones that stick around. You know, that’s awesome. And I think there’s always really good opportunity for entrepreneurs in a market crash and to start companies. So,

Nathaniel E. Baker 15:27
yeah, any particular needs you think other than the blockchain that

Chris Hutchins 15:31
I think we go through these waves, where there’s all these, you know, an app for everything, or a website for everything to now I have too many things. And so I think something is personal. I don’t have any beliefs or company to bet on right now. But I think right now, people are actually becoming a little overwhelmed with all of the options you have for ways to do things, platforms to communicate on, where I’m like, gosh, I would love something that kind of brings it all back together. So I think companies that start to bring together a lot of information are going to be interesting. And I think there’s enough of a pushback that it’s probably not going to be like Facebook and Google right now. That’s interesting. Like I could see something like if if a company like Evernote, were getting started again, and it could kind of pull everything together in a way that it’s your notes, your email, like makes life a little easier to operate. You can do things with one app, like I would love that product personally, instead of having one place to go communicate with people one place to send an email one pace to post social updates. Is there some way to bring it all together? I don’t know what that looks like. But I do think that we’re getting a little bit of fatigue with all these social networks, all these places to message right now. I think I have a chat going on with a different set of people on WhatsApp Signal, Telegram iMessage, SMS, email, Twitter, DMS, Instagram D. It’s like,

Nathaniel E. Baker 16:55
I have discord. Yeah,

Chris Hutchins 16:57
I’ve got discord, I got slack going. Like there’s at least a dozen ways that I’m communicating with people. And it’s overwhelming. I would love to see that somehow come together. And I don’t know who does it or you know how it happens. But it would make me very happy.

Nathaniel E. Baker 17:11
You know, you should do it is Apple, because they are the ones like you take mp3 technology, right? It existed before the iPod. But they all sucked all these devices, if you’re old enough to remember, they were just terrible. An Apple came along with the iPod. And all of a sudden, here’s something that actually work that people can actually use and the unity synced with iTunes and stuff. So that’s, you know, yeah.

Chris Hutchins 17:34
And I think apples realized enough bets that like, they’re just not going to try to win in social. So like, I think they’re not gonna go like what Facebook wanted to do this people be like, how you want too much information for your social and your ads, and all this stuff? I think Apple might have a better shot. But what about all these people I communicate that aren’t on an iPhone?

Nathaniel E. Baker 17:56
And also, yeah, just, you know, as a news guy from a content perspective, like getting like, you know, the old Google News groups or whatever, not the news groups, but the what do they call it was, I think my even Google News, you got all these another Google RSS reader, you get all these? You know, just some way of doing that? Because yeah, it’s all kind of disjointed. Now. I’m gonna just put it as maybe a decent job of getting it together. But anyway, that’s all yeah, that’s all pretty interesting.

Chris Hutchins 18:21
Yeah. So I know, that’s kind of some stuff I’m excited about. I’m excited about a lot of health related things. I don’t consider myself an expert here. But I just see a lot of smart people in Silicon Valley starting companies to do early detection of certain diseases, and, you know, being able to test treatments at on different, you know, different cancers, testing 1000s of different treatments, in, you know, a very short period of time to find very specific therapeutics for a person. Like, as someone who’s had multiple family members with different types of cancers, diseases, the idea that you could basically have a, I don’t know, like a therapeutic cocktail that’s specifically designed for your microbiome, DNA, blood type, etc, etc. That is really interesting. And I would love to see more people working on that, because I don’t know it’s a it’s a, you know, we’re all getting older, like, that is one known truth that I think we’re all focused on. So

Nathaniel E. Baker 19:25
yeah. Interesting. But to go back here, as if you don’t think that the whole VC model as an investor is very interesting or potential.

Chris Hutchins 19:36
I think it’s just a very, it has a risk profile that I think makes sense. I think a lot of these things like investing in venture capital, for example. That’s something that I think just investing there’s there’s not a good way to invest $1,000 in venture capital, right, like most of the most of these investment opportunities that are very sought after by ultra high net worth Are they don’t want to have 7000 customers, you know, signing up every day to participate. It’s much easier to deal with 10 endowments, and you know, a handful of ultra high net worth people than it is to deal with a million consumers. So I am somewhat skeptical of you know, so I don’t meet the minimums for most of these things. I’m not, you know, I’m not the Stanford endowment. So I don’t have that kind of budget. So I think to the extent you find a way, you know, through whatever network or friends or profession to get access to things, without all the extra fees that you get from platforms that distribute it, yeah, that’s interesting. So whenever I evaluate these things, it’s like, you know, there’s websites that make fractional real estate ownership, I’m like, how many layers of fees? And what is the fraction? What are the fees they’re charging, doing, if the fees they’re charging, or just to distribute it to the person, then it’s not as interesting. But if the fees are to do things like, you know, if it’s art or wine to store it, to market, it, like things that you know, as an individual you might not be able to do, they’re different. So I like whenever I’m looking at these platforms to kind of dig in and say, what are the fees going towards? Because sometimes, if it’s just an access fee, it’s going to eat into your returns, right? So you know, that you’ve spent time in the hedge fund world, it’s like, the fees are the are often the problem with the returns, it’s not actually the returns, it’s the fact that the fee adjusted return, can’t beat the market. But if the fees are going to do something that you couldn’t otherwise do, that technology paired with it allows now I’m kind of interested the fees are gonna go and and build a marketplace that allows for a more liquid secondary market for art or wine or something like that. That’s, that’s becoming interesting. Picasso is a company I’m super fascinated by because we were looking to buy a home. And we’re not looking to buy it. Sorry, let me we were looking for some way to go visit my parents who live in a part of the country where there’s just not a lot of Airbnb ease, because they’ve been, you know, kind of restricted. And we found a home on the site, Picasa, which you build a platform for fractional ownership of vacation homes. So we bought an eighth of a home that we have, now, they have a feat that marks up that home. And so Oh, my gosh, is, is that the worth it. But what the fee does is it goes to furnish the home in a way that’s kind of consistent with what a modern person might want in their home. They have a platform with technology that makes the booking process feasible. Like if you just had eight friends buy a house, you’d be arguing over who gets Christmas, who gets this. So if you look at what they’ve done with all the fees, they’ve actually turned it into a functional way to own an eighth of a house and be happy. And so I’m like, I’m fine paying that fee. And I actually consider it an investment because unlike a timeshare something like you can sell your share to someone else. So it’s a little bit of an investment that I can use. So I don’t know, that’s interesting to me. And I’m willing to pay a fee for something that’s like half investment half, you know, use if that fee goes towards providing some unique benefit.

Nathaniel E. Baker 23:11
Interesting, okay, cool. All right, what so it’s called Picasso and they are

Nathaniel E. Baker 23:15
so so you pay me by they source houses, and then they build an LLC, they have a technology platform to coordinate all the issues that you know, come up with booking and reserving and canceling and maintenance issues, that kind of stuff. And then they layer all that on top of it, they furnish it they and then they find eight people to buy it. And then they have a marketplace that they’ve built by now growing this company big enough, they now have a marketplace that if you don’t want it anymore, you can go sell it to that marketplace. So in fact, when we did ours, we bought it from someone who had bought his a year ago. And he made yes like a 20% return in a year because the real estate market was what it was. So I don’t know stuff like that is super interesting to me. That company is big enough now that I can’t go invest in it. But yeah, as soon as I saw it, I was like I would love to invest it. I haven’t reached out to them for my podcast. I was like, can we work together? I love your product. Like I’m an owner. Like get back to you. Yeah, well, I’m trying to see if we can work something out.

Nathaniel E. Baker 24:09
Cool. All right. Chris Hutchins, this is a really interesting conversation. I want to take a short break and give our sponsors a chance to be heard. And then come back and ask you some more questions. So hang out, don’t go anywhere. If you are a premium subscriber, don’t touch the dial. You will not get the break. We’ll be right back. In fact, we already are.

Nathaniel E. Baker 24:29
Welcome back everybody. Chris Hutchins here host of all the hacks and head of new product strategy at Wealthfront. Chris, this is the segment of the show where we ask our guests to talk more about himself and give us a bit of a take us back and how he came to investing in the first place or not investing in your case. And yeah, just how the whole thing started. And I mentioned you’re you’ve started a couple companies but take us back and how you got interested in all this and yeah, how you ended up At this current station in life,

Chris Hutchins 25:02
yeah, I mean, I’ll do the quick version. So when I was graduating college, I didn’t know what I wanted to do. And I had talked to a few friends. And they were like, well, the best job is investment banking management consulting. And I was like, Well, I guess I got to do that. So I went back to school and I walked into the dean’s office, I was like, You need to help me get a job in investment banker management consulting firm. And so I went down that path for a few months and ended up doing that as my job. And I realized that that’s the worst way to decide what you want to do is to let someone else tell you so I tried management consulting and investment banking didn’t like either. But I went to this event called Startup Weekend, where a bunch of people, software engineers, product people, marketing people ever were just hanging out trying to see what it would be like to start a company over the weekend like an internet company. And I was living in New York at the time, and I driven to Boston, and I was like, Oh, my gosh, this is the coolest thing in the world. Like we launched a product in a weekend. It was a silly product. It was like an app off for windows that would remind you to like stretch throughout the day. But it was a product that worked. And we like sent it to family members. And I was like, I want to do this. And everyone’s like, Oh, well, there’s a whole city where everyone works on companies like this. It’s in San Francisco. And I was like, I have to go there. So I moved out to San Francisco with a mission of like, I want to work at a startup. And I want to build technology companies and consumer products and worked at a handful of companies started one with some friends, we sold that to Google, I was fortunate at Google to get a chance to go work at Google Ventures and be a venture capitalist for three, four years, and go invest in early stage companies, probably 100 companies over that time. And then, you know, I’ve always been personally passionate about optimizing my financial life, and really my entire life. And so I was trying to think of what I wanted to do next. And every conversation I was having with people was all about what to do with money. They’re like, I don’t know what to do with my money. It’s stressing me out. You know, for anyone that doesn’t know, it’s the number one cause of stress and number one cause of divorce in America. And so I thought, what can I do? And my first hypothesis was, let’s try to make financial planning more accessible and affordable, because it’s this process where you take all the inputs of someone’s life, their budget, their spending their investments, and you try to help them come up with a plan. So I started this company called Grove, and we tried to make that process more efficient with software. And the good side was that our clients were really happy. The downside was that there weren’t that many of them. And the reason there weren’t that many of them is because the process of financial planning is really, really burdensome, and most people don’t want to make it a priority. Do I wish they did? Yes, will they know. And so we raised about $10 million. And about halfway through spending it, I realized that the best way to achieve our goals was not going to be to continue down the path of offering a human kind of hybrid software product. And I met the founder of Wealthfront. And we talked about what his vision was for self driving money. And what I’ve learned, and I was like, this seems like the best place that we can end up and so I joined and I started working on bringing that self driving money vision to life and building different types of software that could automate and optimize people’s financial lives, and help them build wealth through investing. And so I’ve been there for three years, and I’ve loved it and you know, enjoyed building that product. And last year, I started a podcast called all the hacks, which basically explores my passion for optimizing not just my finances, but my entire life. And so I’d say a third of the show dives into what I think is kind of the biggest opportunity to save money in your life for many people, which is cutting back on travel and leisure expenses. So we have a lot of content on optimizing your travel experiences, using credit card points to travel for free, getting deals, staying at hotels, all that kind of stuff. Quick, fun hack, if you ever book a hotel, and you book directly with the hotel, and you email the hotel that you’re coming and tell them you’re excited. I’ve seen like 50 plus percent success rate in getting hooked up by the hotel, as long as you booked direct, no Expedia, Orbitz kind of thing. About a third of the episodes are about money, like I’m passionate about saving money investing, learning about all the different aspects of financial optimization, where do you put your money? How do you save more efficiently, all that. And then the rest is all about life. We’ve had the director of the American negotiation Institute, we talked about negotiating, we’ve talked about career hacks, relationships, family stuff, like all those topics side hustles. And so each week, I just bring on an expert or I run an episode myself and we dive into all the deals, all the optimizations to help you upgrade your life, your money, your travel, and do it while spending less and saving more. And with the ultimate goal of taking all those extra savings. And while I don’t want to spend my whole life figuring out how to invest I do want invest that money and grow by well. So you know that that is what I do. You could check it out at all the hacks.com or your listen to podcasts. Now you can search all the hacks and reach out to me Let me know we think, what’s the number

Nathaniel E. Baker 30:01
one mistake or maybe the top three or whatever that people make when it comes to investing that you’ve seen?

Chris Hutchins 30:10
I mean, I think I’ll break down these seems so fundamental, but one mistake is not doing it. Right. I, you know, I said earlier, you know, if you’re making a lot of money, and you’re saving a lot, and you don’t have a lot of investments, picking the investments might not be the most important thing, right, like tweaking that, like little bit of return relative to tweaking the savings, but you should still invest the money, right? Like, I think leaving your money in a checking account that earns point 1% is probably not the most optimal thing to do with your money. So finding something to do with your money. So that it grows, is is a great option, right? Like, I think right now, well, Fred’s doing 2% on our cash account. So even if you’re not ready to invest in the market, and you want to earn 2%, you know, I think you dad is a great option. If you are investing, finding something, right, not overthinking it at the start, I think one mistake is trying to find the most optimal thing. So I like to say, Okay, go do the quick thing, and then decide if it’s worth your time to go from what’s quick to what’s optimal. And a lot of times people don’t so if it’s like, you know, if a target date fund is the easy approach, put your money in target date fund, and then decide whether you want to spend the time to go tweak that and do more, as opposed to starting with the baseline of nothing, and everything’s in cash, and I have to get the most optimal. It’s like maybe you could at 20 yourself there, unintentionally. So I think another one is, it’s not selling, or like people whose net worth is tied up into a stock at a company they own. And my quick trick there is just pretend you’ve sold it, and ask yourself if you’d rebuy it. So if you work at a tech company like Google, and you’ve got a million dollars a Google stock and you’ve got 20 grand in your bank account, ask yourself whether if by mistake, your brokerage firm sold your Google stock and said, Hey, now you’ve got a million dollars in cash. Do you want us to go buy, you know, like, or 1,020,000? Right? Like, because you just sold it? Do you want us to go buy a million dollars with a Google stock with like a 99.9% error net worth or not? And I think it’s a little easier to process that you wouldn’t want to be holding your entire net worth in one concentrated position than it is to say, Do I want to sell it? Because when you think about selling it, you’re like, is this the right price is now the right day. But if you flip it and say pretend you sold it, and they’re asking if you want to buy it, it’s a little easier. So I know, those are a few kind of common lessons, I think, help hurt. And I think the other thing is just not automating everything, right? Like, make it easy, like the time in the market, right is better than time in the market. So just make it easy sweep your money automatically when your paycheck comes in, you know, put your excess cash to work, have a threshold and say anytime my checking account goes over x, the rest is for investing and just automatically do that. I think things like that can have a huge impact far that far outweighs a lot of other things that you know, we might spend our time on, like, you know, browsing all these stacks, reading earnings reports, like when you have enough money that those decisions impact you, that is really great. But when you don’t just make sure you get the money in the market, like just invest it.

Nathaniel E. Baker 33:13
Yeah, interesting. Good point. What about keeping money liquid and having an emergency an account? And is there a typical size that you look to have? They’re like, how much do you need liquid? And by liquid? I mean, you can get it today or tomorrow?

Chris Hutchins 33:27
Yeah. So I think that, especially right now with rates where they are, right, like the last thing you want to be doing if you need to repair something in your house, or something happens is to be borrowing, right. And, you know, if you can’t get a loan, and you have to borrow on your credit card, you’re paying 20 something percent, that’s even worse. So I think the purpose of an emergency fund is to be in a situation where if you need money, you don’t have to borrow it. At least you don’t have to borrow it in an in an unpredictable way. So some people like to have their, you know, HELOC as a backup. But even that, you know, if you asked me two years ago, where I thought rates would be on heliox. And on Portfolio loans, I wouldn’t have said where they are today. And you know that interest adds up. So I like to make sure that I have you know, somewhere depending on your job stability, you know, three, six, if you’re a freelancer whose clients can all disappear, maybe it’s 12 Or maybe it’s even two years, but three to six months. If you have a steady job, maybe maybe a year if you don’t, it’s something I like to just keep very accessible. That doesn’t mean I want it earning point. 1% or point oh 1% in my checking account, right. Like I want it earning like I mentioned, Well, friends doing 2% Like I want it earning 2% I want it earning as much as I can, but I want it in cash so that if I need it for something, I have it and that’s something could be the medical bills you have if you have a child we just had another kid like there are expenses that come with that. You know, that could be a renovation, that kind of stuff but we had a sewage pump, it’s just not a fun thing to have to fix. But in our house go out, it’s like, well, that was not something I was planning on fixing. And you know, it’s not $20 to fix. And so that’s the kind of thing where you don’t want have to borrow. So I like to set that aside. I do think that if you’re careful with borrowing against your investments, it can be a great backup for liquidity. So I think right now, depending on where you go, there are a lot of options to borrow against your investment portfolio, it’s usually pegged to interest rates right now. So it’s not as low as it was in the past. But I think that, you know, if you keep that to a point that, you know, even a 50% market drop isn’t going to give you a margin call, it can be a good option for the short term, I don’t think it’s a good I don’t think anyone should be doing that indefinitely, because who knows where rates go, but if you if you need cash flow for two or three months, right, if you need to pay the IRS, and you’re not gonna have the money for a month, you know, I’d rather borrow from my portfolio, knowing what the interest is going to be for the next month or two, then sell my positions and be out of the market. Yeah. So I think, ideally, you’ve left the money you need in cash, but if not, you know, I think that’s a good option. And, or, I guess, I should say, it can be a good option. But you know, for me, I want to borrow like 20% or less of my portfolio, because I want zero net, you know, there’s no way to get to zero risk, but I want as close to zero risk as possible that I’m gonna get a margin call if the market crashes, because, you know, that would be the worst case scenario.

Nathaniel E. Baker 36:34
Right. Cool. All right. Last question, Chris. What are some things that keep you up at night, then have you worried be at a geopolitical Flashpoint or a market thing? Or something completely different? Yeah,

Chris Hutchins 36:45
I mean, I have a, I have a two month old. So what keeps me up at night is her but really, yeah, yeah, we literally, but for me, it’s interesting to everyone I know, is so worried about, you know, the market and why are we in a recession? Is it going to crash, what’s going to happen? And I think, because I’ve taken an approach to my investments of like, I just know that that’s gonna happen at some point. And so I built a portfolio and I’ve built an asset allocation that, you know, understand that that’s coming, kind of gives me peace. I’m like, I don’t care if there’s a giant, you know, I would prefer it not to be a mixture, I would much rather the market grow 50% This year, but if the market crashes, like, I’m expecting that to happen, if it happens, you know, I’m planning for it. And in some cases, it makes me feel, you know, much, much easier to sleep at night. I think when it comes to more geopolitical things, and this is, you know, we should not get into politics here. But like, you know, the kind of political issues that are happening all over the world. We’re recording this right now. And, you know, US officials are flying to Taiwan, and China is upset, like, I don’t love China being upset about things that we’re doing, like, those kinds of things keep me up at night. But fortunately, because I expect them to regularly happen in the world. Like my portfolio doesn’t keep me up at night.

Nathaniel E. Baker 38:01
Right. All right, good. Well, that’s a good place to stop here. Chris Hutchins, maybe in closing, just tell us where we can find out more about you. And the podcasts? We mentioned it, we’ll put all that in the show notes, of course.

Chris Hutchins 38:12
Yeah. I mean, if you want to come check out the podcast, all the hacks.com we also do a newsletter, you know, all of x.com/email Check it out, listen to whatever episodes you want, right? Like it’s not the kind of show where if something’s not, you have to listen. Every week, find the thing that is the topic you love. You want to travel for free. You want to learn all the hacks to get the best deals on hotels and flights. Go back start at the beginning episode one. You know, I love that we kick the show off with that. And if you want to check out what I’m working on, at Wealthfront, go to wealthfront.com Check out what the products we’re building.

Nathaniel E. Baker 38:45
Very cool. Well, thank you, Chris, for coming on the show was really great having a great conversation. And thank you all for listening. And we look forward to speaking to you again next time.