096 Versus “The Gathering Darkness” Part 5 – Support Ownership of Great Businesses by Fully Grasping Growth OF Income

The only investments you can passively own that feature an active refusal to lose money any longer than necessary are the shares of the great publicly traded businesses of the US and the world. For the best investments you can passively own that enable you to benefit from the increasing productivity and exponential innovation, are you guessed it? Shares of the great companies of the US and the world? This is why we own equities, or what we like to call shares of the great businesses of the US and the world.

Do you think money takes up more life space than it should? On this show, we discuss with and share stories from artists, authors, entrepreneurs and advisors about how they mindfully minimize the time and energy spent thinking about money. Join your host, jonathan Dio, and learn how to put money in its place and get more out of life.

Welcome back to Mindful Money. Today I'm going to give you a part five of our Versus the Gathering Darkness program. I'm making kind of a step-by-step case for owning publicly traded shares in the great companies of the US and the world. If you're just tuning in, five weeks ago I said two things First, that wealth is created by owning businesses and, second, the reason most people decide to not own or not own enough of the great businesses can be summarized as the Gathering Darkness. And then we describe the Gathering Darkness Again. If you're just joining us, that might be where you want to start. Four weeks ago, we talked about how naming a thing equities or the stock market instead of great businesses can affect how committed we are to owning them. It affects our understanding of the things that we own. Three weeks ago, we discussed the benefits of an adult memory for investors. It's always an issue of history versus headlines, so it's really important that you know your history. Two weeks ago, I laid out the first unique characteristic of rational profit seeking businesses. They're absolute refusal to lose money for any longer than necessary. And last week, sort of as a final thing, as I described the second of their unique characteristics the use of innovation.

This week I want to talk about the most important thing for all retirement income investors. I want to talk about growth of income. The vast majority I'd say over 95% of our clients and members hire us for one reason Retirement income planning. They're not alone. Whenever I ask an audience, I discover most people lack confidence that they're on the pace to accumulate enough assets to spin off a stream of income that rises to meet their rising cost of living and last the rest of their lives. This makes perfect sense, because neither the retirement income calculation nor retirement income management is simple. Our culture makes us, moves us to make really bad retirement income planning choices, and the consequences of making those bad choices are dire.

Most people enter our offices with a notion that they should be investing for growth or income, depending on their age. If they're younger, they believe they should be focused on growth and accumulation. If they're older, they're focused on income and distribution. Indeed, there is the ubiquitous, though wrong, rule of thumb stating investors should hold their age as a percentage of their portfolios in bonds or fixed income. In such a world, a 65-year-old retiring individual would hold 65% of their portfolio in bonds or fixed income. This is a horrible message. It's asking for trouble.

People who follow this advice are asking to run out of money in retirement. Why? Because fixing your income in a rising cost world is financial suicide. It's slow-motion suicide, but suicide nonetheless. Fixing your income means you will incrementally draw more and more from your principal as your costs rise and you will inevitably run out of money. If the goal is a retirement income that rises with your rising costs and lasts the rest of your life and totally unknown period of time, then fixing your income is a mistake.

The whole idea that we should invest for growth or income is a false dichotomy. It isn't growth or income. It never was. It is, of course, growth of income. Considering the long-term inflation rate of 3%, it will take $24,000 in your 30th year of retirement to purchase the exact same basket of goods that $10,000 purchased in the first year. This isn't an it'd be nice if thing.

Retirees must grow their income in retirement. The single best way to do so, as I'm sure you're coming to expect from me by now, is to hold the preponderance of our portfolios in shares of the great companies of the US and the world. This is why I've spent the last five weeks making the case as powerfully as I can make it that we should not fear, and should instead embrace, even love, owning shares in the great businesses of the US and the world. Because, first, the current episode of the Gathering Darkness the stuff that causes our fear is just that. It's the most recent blend of a negatively biased media narrative and a long, continuous line of narratives we collectively name the Gathering Darknesses. An adult memory enables us to recall prior episodes. Lack of an adult memory forces us to treat this episode as unique and different and horrible in some unprecedented way. It is not. Two, behind the scenes, during every episode of the Gathering Darkness, inconceivable progress is made in terms of both ever more efficient productivity and exponential innovation. Three, the only investments you can passively own that feature an active refusal to lose money any longer than necessary are the shares of the great publicly traded businesses of the US and the world. Four, the best investments you can passively own that enable you to benefit from the increasing productivity and exponential innovation, are you guessed it? Shares of the great companies of the US and the world? This is why we own equities, or what we like to call shares, of the great businesses of the US and the world. Today I wanna complete this series on versus the Gathering Darkness by tying the ownership of the great companies of the US and the world to the very rising income stream we all need in order to meet our rising costs of living in retirement.

The question I hope you're asking is why don't we know this? Why is this so foreign to us? And there are a ton of reasons. First, the human mind is biased towards the negative. Second, and this is, I think, the biggest reason, the media profits when we pay attention and they capture our eyes and ears with negative stories. We accept their stories out of fatigue or laziness. We don't understand what companies do, which is why we spent the last five or six weeks talking about it. We don't know that they protect our capital. We don't know how they harness human ingenuity. We focus on the wrong things, looking at the volatility of prices instead of the steadiness of revenues, earnings and dividends.

I am we are long term equity, meaning great companies of the US and the world investors. I am an equity investor because it is the best source of rising income from my own retirement and my children's inheritance and my own give back to the world. I am an equity investor because I know the companies I invest in will, as rational profit seeking entities, protect my capital when the going is rough and use increasingly efficient productivity and accelerating innovation to grow their revenues, their earnings and my dividends. It's what they do. It is reliable. That is my story and I'm sticking to it.

I hope you come back to these last six weeks of the gathering darkness and versus the gathering darkness. Whenever the doubt creeps in again, go back and review all six and know that your family's future is going to be much improved, having done so. So I've been doing this for almost 30 years, and not always, but certainly the vast majority of investors that I've worked with. When I start talking about the importance of owning equities for all the reasons I've mentioned in the last six weeks, I get pushback or pushback from some than others. Next week I want to summarize all of these objections into what I'm going to call the summary objection to owning equities or owning more equities. So look forward to next week. I see you there. Thanks for your attention.

Thanks for listening. All show notes for each episode, which includes a summary, key takeaways, quotes and any resources mentioned, are available at mindfulmoney. Be sure to follow and subscribe wherever you listen to your favorite podcasts and if you're enjoying the content and getting value from these episodes, please leave us a rating and review at ratethispodcastcom. Forward slash mindfulmoney. We'll be sure to read those out on future episodes.