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📈 While low-cost index funds like VTI and VXUS have been a game-changer for the average investor, outperforming 95% of actively managed funds, there's more to the story. In this episode, we're exploring a different, potentially more optimized way to invest your money.

🔍 We'll start by understanding the history of modern finance, including the Capital Asset Pricing Model (CAPM) and the emergence of beta as a measure of market risk. We'll also discuss how legends like Warren Buffett achieved their success, potentially through factor investing.

📊 Next, I'll introduce you to the concept of factor investing, explaining how factors like size, value, and profitability can drive returns. We'll look at the three-factor model by Fama and French and how it evolved into the five-factor model, offering a more nuanced understanding of market returns.

💡 But why isn't everyone using this strategy? We'll delve into the challenges and the importance of conviction in your investment strategy, especially during periods of underperformance.

📚 To bring theory into practice, I'll showcase real-world examples and comparisons of different portfolios over the past 25 years, including a Dimensional Funds Balanced Equity Portfolio and various Vanguard portfolios. You'll see how a factor-weighted approach has historically outperformed, even during tough times for value investing.

🤔 Should you jump into factor investing? We'll discuss who this strategy is best suited for and why a market portfolio might still be the best choice for DIY investors.

00:00:00 Intro
00:01:26 The Failure of Active Managers
00:02:41 History of Modern Finance
00:05:57 The Creation of Index Funds
00:07:53 The Financial Science
00:10:02 Explaining Warren Buffets Performance
00:11:10 Overview of Factor Performance
00:15:28 Performance Overview With Market Data
00:19:34 Conclusion

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📅 THE BASICS OF RETIREMENT PLANNING

Retirement planning has several steps, with the end goal of having enough money to quit working and do whatever you want. Our goal is to help people master retirement and retire without worry.

Step 1: Know when to start retirement planning. When should you start retirement planning? The earlier you start planning, the more time your money has to grow. That said, it’s never too late to start retirement planning. Even if you haven’t so much as considered retirement, don’t feel like your ship has sailed. Every dollar you can save now will be much appreciated later. Strategically investing could mean you won't be playing catch-up for long.

Step 2: Figure out how much money you need to retire, The amount of money you need to retire is a function of your current income and expenses, and how you think those expenses will change in retirement.

Step 3: Prioritize your financial goals. Retirement is probably not your only savings goal. Lots of people have financial goals they feel are more pressing, such as paying down credit card or student loan debt or building up an emergency fund.Generally, you should aim to save for retirement at the same time you're building your emergency fund — especially if you have an employer retirement plan that matches any portion of your contributions.

Step 4: Choose the best retirement plan for youA cornerstone of retirement planning is determining not only how much to save, but also asset allocation. It can make a massive difference in your retirement plan.

Step 5: Select your retirement investments. Retirement accounts provide access to a range of investments, including stocks, bonds and mutual funds. Determining the right mix of investments depends on how long you have until you need the money and how comfortable you are with risk. It’s often helpful to talk with an adviser to discover the right mix of stocks and bonds.

❣ SPONSORED No, this video was not sponsored.

⚠️ "DISCLAIMER:⚠️This is not financial or investment advice. This Channel is meant for EDUCATIONAL AND ENTERTAINMENT PURPOSE only. None of this is meant to be construed as investment advice, it's for entertainment purposes only. #retirementplanning #retirement #passiveincome