DISCLAIMER: This is an interview with a friend and should be read as such. For professional investing advice, please consult your personal financial advisor. This interview should in no way be construed as professional investing advice for your personal portfolio. You are responsible for your own money, not me or Greg Hull.

I sat down at Chipotle with Greg and Charlie (who was just tagging along). I bought a burrito bowl, half asada/half pollo, with BLACK BEANS and a tortilla on the side. They got vegan burrito bowls (hold the cheese, sour cream and meat), which seemed to defeat the purpose:

Lance Schaubert: So how long’ve you been at this finance stuff?

Greg Hull: Since I was about fifteen.

LS: Fifteen years old. We did the math and how many hours did it total up to?

GH: A lot.

LS: Eighteen thousand?

GH: [nods.]

LS: Eighteen thousand hours. So you’re almost an outlier twice over. Take that Malcolm Gladwell.

GH: One sec, just got a comment on my status. [laughs.] “You don’t have to eat vegan to be healthy, ya hippie!” [laughs.]

LS: [laughs.] People are violent against that around here.

GH: It’s funny how bad it can get.

LS: It’s so political and emotional for them.

GH: But yeah, I’ve been doing finance since I was about fifteen. I started because my dad started and started with a book by Wade Cook—

LS: Wade Cook!

GH: –called Stock Market Money Machine and he detailed how to do options, covered calls and all that in the book. His strategy was a lot more aggressive than what I am now, but that’s basically what got me started.

LS: So he’s doing 15% calls or what?

GH: He’s doing uncovered calls and all kinds of crazy stuff. His basic mentality was to find rolling stocks, not buy-and-hold stocks, but rolling stocks where the chart would go between certain prices and to ride those until they stop rolling. You could do covered calls. Buy the stock low. Then when it went up, sell it. Then when it goes back down, you won’t get called out on it. So it would be doing this [does THE WAVE with his hand]. Which is a good strategy, but it’s risky. You can lose too much money doing it that way. I I lost too much money doing it that way.

LS: Those are dividend paying stocks?

GH: I mean you can do it with dividend paying stocks too but he was just. . . any stock.

LS: So why not mutual funds?

GH: Mutual funds are the lazy man’s way. Why would I pay someone else to do something poorly when I can do it myself sometimes better?

Charlie Arnold: It’s the American way.

LS: [laughs hard.]

GH: [chuckles. laughs.]

LS: [cackles.] That’s funny. Like the other day at Panera, you got really. . . ticked off at this guy trying to sell this old lady on mutual funds. Why is that a problem?

GH: Because any mutual fund, any person doing mutual funds, will tell you mutual funds are doing well if they average above 12% rate of return. The S&P 500 is kinda the benchmark of investing and the S&P 500 over the last 20-25 years has averaged a 12% rate of return. So that’s kind of a benchmark for people. If you don’t do at least as well as the S&P 500, you could at least throw your money in the S&P 500 and make your money in the S&P 500 and call it good. A lot of times, what you find is people are taking their money and putting it into bonds or mutual funds or whatever and they’re not making a large enough return. They have to at least make 12% to make anything because the average rate of inflation is 4%. So if you have $100 now, a year from now that $100 is only gonna be worth $96 dollars just because of inflation.

LS: Right.

GH: Your buying power on your $100 is going down by 4% every year. If you don’t make at least 4% every year, you’re losing money.

LS: So if someone’s putting back 500 bucks a month, it really doesn’t matter if it’s in savings.

GH: Right. Because that 500 bucks a month is losing 4% each year or 3% if you’ve got a really good savings account that gives you 1%.

LS: So even after the best case scenario on these 3% bonds, they’re still losing $60 on $6,000 a year.

GH: Right, in buying power. Not necessarily losing it as much as not being able to buy as much with it.

LS: Well yeah. But that’s still losing.

GH: Right.

LS: If a Cheerios box is. . . well it’s only 60% full of Cheerios now, and—

GH: [laughs.]

LS: chips. I hate chips. Chip bags three gallons tall and—

GH: [laughs.]

LS: open it up and there’s like five chips in it, friggin Santitas and Mission and Doritos.

GH: [laughs.] Yeah, in essence with a mutual fund – most mutual funds aren’t even generating a 12% rate of return.

LS: Aren’t?

GH: Aren’t. That’s why the benchmark is 12%. You’re a phenomenal money manager if you can make 12% rate of return. You’re considered great. When I tell people I could do twelve percent in one month they laugh.

LS: [laughs.]

GH: You know?

LS: I used to.

GH: It’s a matter of perspective. The wealthy are paying somebody to make them wealthier.

LS: Right.

GH: But they know what they’re doing with their money. They just don’t have the time to do it themselves. When a wealthy person hires a money manager and the money manager doesn’t do well, they know exactly why. They can do all those things themself, but they just don’t have the time. They could hire somebody to do it for them because it’ll save them time.

The poor hire a money manager because they don’t know what they’re doing. He can do whatever he wants. If he only generates you 12% annually, he’s phenominal because you couldn’t do it yourself. But if you educate yourself and you know what you’re doing, then a 12% rate of return is ridiculous.

LS: So it really has to do with stopping, pulling back and critically thinking and reflecting on what’s going on in the market as opposed to giving it over to someone else.

Join us for part two on Ask the Experts