Create Tax Free Income – Kirk Chisholm Transcription:
This is the investor mindset podcasts. And I'm Steven pesavento. And for as long as I can remember, I've been obsessed with understanding how we can think better, how we can be better, and how we can do better. And each episode we explore lessons on motivation and mindset for the most successful real estate investors and entrepreneurs in the nation. To this idea between faith having belief that everything's going to work out and fear, worrying about everything, not working out. And it's two sides of the spectrum. Obviously, it's a lot happier to live over here, believing in everything, but there's that piece in the middle that brings you farther out of that fear space into a place where you're comfortable, you have a solid understanding, and that really comes down to getting educated. Welcome back to the investor mindset podcast. I'm your host, Steven Pesavento. And today in the studio, I've got a very special guest, Kirk Chism, how're you doing today Kirk?
Doing great. Thanks for having me on again, Steven.
Yeah, glad to have you back. We had you on early when we had first launched the show. So we're well overdue to dive in. For those of you don't know, Kirk. He's a principal and wealth manager at innovative advisory group who is an RIA, he's been providing financial advice since 1999. And he is really creative. When it comes to portfolio management, retirement investing, financial planning, and especially, he's an expert when it comes to using self directed IRAs to be able to invest in alternative assets. So we're gonna dive into everything that you need to know when it comes to self directed IRAs and some of the biggest things that people often trip over when they're doing that. With that said, Kirk, you're ready to dive into it.
Let's do it. Let's dive right in.
So tell the audience a little bit about the world of financial advising, and specifically how you really got into this space, and what you do with your clients.
I'll talk a little bit about kind of my background, because I think it'll get a little bit of color about how I got into the business and why. So I started in the business in December of 99, which, you know, if you think about it, there really wasn't much of a worst time I missed all of the early 2000s, all the 80s, all that big run up that we had in the market since the early 80s. And pretty much started in the first three years, the business market dropped every year. So that was a good introduction into the markets. And I think you know why you could say, Wow, that must have been terrible. I look at it the other way, I say this was great. Because what I learned was the value of risk management. And you know that, Steven, because you talk about this a lot, the value of risk management is knowing how to not lose money. Most people focus on how to make money. And they don't focus on how to not lose it. So our focus here at the firm is we have a risk management first philosophy, which is focused on risk management, take care of that, and then everything else is gravy. Because making money is not hard. Right? It's it's not easy, but it's not really hard. It's more, can you make sure you're not going to lose big if you can do that. And you know, you don't make a lot of money, that's fine. But if you lose money, it's so much harder to make it back and is much better just not to lose in the first place. So the first few years really colored that for me and pretty much the rest of my career. And of course, I lived through early 2000s, when the tech bubble burst, we lived through 2008, which also was another one which actually we were well prepared for it. We were we were out of the markets Well, a full year before the markets crashed, you know, so we were aware of that. And then you got all the other ones that happened since you got 2017, you got 2020, you got the early, I think it was 2011 when the flash crash, I mean, we've had all these little, you know, bubbles popping here and there. And if you're surprised by them, it's because you don't really understand what your investments are. So a lot of what we focus on is how to manage risk around any investment, whether it's traditional or alternative. And if you can do that right, then the world is your oyster. But the hard part is doing that. And the best part is because no one else is doing it. You know, it separates us as a firm, because most people think I'll just put money into a bunch of mutual funds and I'll be diversified. How'd that work for you last year didn't work very well, right? Well, that's because everything went down because everything got correlated. And in most people thought diversification works. It does most times. You know, Steven, you were just on my show. We were just talking about you know, about this topic. But this concept of half truths. half truths is something that sounds true. It's intellectually sound, it's academically sound, but it's not true 100% of the time, and that, that 90 That 1% or 5% of the time, that's where it's dangerous. And if you're not prepared for that, That's where it gets you into trouble. So buying hold is a great strategy when you're in a bull market. Right? You know, having a diversified portfolio of stocks and bonds is a good strategy. Unless it's 2022, or similar years where that sort of thing happens. Like, you just have to understand the risk. And if you do, and you're okay with that, then it's fine. But I think most people just don't understand the risk to begin with.
So I think a lot of people don't understand the risk, we were talking a little bit about people investing into alternatives, looking at only what the projected return is, rather than understanding what's the risk that's connected to that versus investing in another deal, that might have a better risk to return ratio. What I'm curious about is how do we go about thinking about protecting ourselves from risk, without going into the fear mode of not taking any action, because what I find is a lot of folks that I talked to, are very interested in taking back control their investments, taking back control of their ability to be able to grow their wealth, and taking back control of the ability to create income from their investments, that really gives them the ability to do whatever they want, whenever they want. But there's also that fear that comes along with it, that is really keeping people from actually taking action. So how do you go about addressing that?
That's a great question, Stephen. You know, I think one of the challenges I've seen is, people typically are in one or two ends of the spectrum, they're either on the greed spectrum, which is, how do we make the most money possible, so I can keep up with my friends and brag about it to people that I don't really care about who don't know, my financial situation, or in the other spectrum, which is, I don't want to leave my house, because I'm afraid that a bird is gonna fall in my head, like, you know, there's, there's these two ends of the spectrum that you have to, you have to find a healthy balance, right. And, you know, there's, there's a few different concepts we use, but there's this concept I like, which we call fragility, I didn't come up with it. And it seemed to loved it. But 2007, the markets were fragile. And we saw 2008, where they all imploded across the world, because the markets were fragile. People didn't understand the risks they're taking, they're taking way too many risks, and they didn't understand them. And then you know, and then things blew up. And people like what happened? Well, the other side of the spectrum is being anti fragile, which is basically you took advantage of that, and you made lots of money during 2008. Most people didn't, but that would be an example of antifragility. And then the middle, there's resilience. Now, resilience is a concept, which I like to think about is how do you create a resilient portfolio? I think, you know, I've thought about this a lot over the last bunch of years. And what it comes down was resilience as a mindset, it really comes down to how you think about it, you have to be, so think, here's a good example. COVID COVID happen, right? It sucked, like, you know, and no one escaped it. Unless you're sitting on a farm by yourself, everyone got affected by COVID one way, shape, or form or another, whether it's your kids stuck at home, you know, not playing with their friends, or you're getting depressed, because you can't go out or whatever it is, like we all got affected in some way. But if you were more resilient, if you're prepared mentally, not for COVID, but something like COVID, then you felt good about that, and you didn't like it, but you're just like, I'm in good shape, I'm gonna be okay. Whereas most people, I mean, how many people have like less than a month's worth of savings in the bank, some people have zero. I don't know how they got by, I really don't. But being resilient is being prepared for everything, and not knowing what's going to happen. But being prepared for multiple scenarios. So we call it scenario based thinking versus outcome based thinking. So outcome based thinking is, oh, it's going to be hot tomorrow, or the stock market's gonna go up. Or, you know, like, Oh, this is this one thing is going to happen, right? Like, you're, you're making assumptions, like, who's gonna win the next election? Well, this person is going to win. Well, that's scenario that's outcome based thinking that's assuming that you know, the future. Now, I don't know about you, Steven, I don't have a crystal ball. I can't tell the future. Most people think they can. Because they do. I wish I could write. Yeah, we wouldn't be talking we own islands next to each other hanging out, you know, you know, shoot volleyballs back and forth. But like, we're both working because we can't tell the future. And no one else can either. So the difference is, is most our brains work as outcome based thinking computers. Now, the better way to look at it is scenario based thinking. So what do we do if this happens? What do we do if this happens? What do we do if this happens? So like an election, right, the last presidential election, what do we do if Trump wins? We do if Biden wins, or the third scenario, which was very possible at the time was, what if it's unclear, right? What do we do? Like how do we react in the portfolio? How do we react with you know, somebody's household financials? Like how are we You're going to look at the situation and treat it differently. And because you look at those different scenarios, when one of them happens that you didn't expect, you're gonna be okay. So George Soros lost, I think it was like one or $2 billion by investing in the outcome that Hillary was going to beat Trump, which of course didn't happen. And he was extremely wrong, because he thought there's no way she's gonna lose. He was one of the more famous successful traders of our era. And he was clearly wrong. And he lost billions of dollars. And he obviously had that situation I know him. I know his style and styles like go all in but, but like his style, like went against him because he didn't have another scenario in his back pocket. And I think for most investors, we don't have billions of dollars in the bank that we can afford to make mistakes. So we need to be really careful about how to handle it. So circling back to your question.
Today's episode is sponsored by von Finch capital. If you're interested in investing alongside me in the same type of real estate opportunities that I personally invest in, then head over to Vaughn Finch capital and join their private investor network. You can do so at Vaughn finch.com/invest. Join me on that next deal. I look forward to seeing you on the inside. Thank you for listening to the investor mindset podcast. If you like what you heard, make sure to rate review, subscribe and share with a friend. Head over to the investor mindset.com to join the insider Club, where we share tools and strategies from the top investors and entrepreneurs and how to take it to the next level.