• Matt Morizio

Behind the scenes: What I learned about the financial industry in 2019

Every year I enjoy reflecting on what I learned about the financial industry that you, the investor, should know to help you make better educated decisions with your money.

Huge emergency funds are emotionally pacifying, not financially prudent

Money emotionally controls so many people. That’s no secret. It’s been that way forever (even the Bible mentions money over 2,000 times).

So it’s not a surprise to me when people feel better having a huge “nest egg” as an emergency fund.

But in 2019 I actually played out a scenario where you invested your nest egg instead of keeping it in a savings account. And in my scenario, you need money from your account at the exact same time that the stock market concluded its worst decade in history.

In other words, your 12-month cushion was invested for the worst decade ever, and it’s exactly at that point you experience a catastrophe in your life and need the money.

Guess what? You come up about 3.5 months short - 8.5 months of bills instead of 12 - not great, but certainly not as bad as my industry makes it seem.

I recommend thinking about your money with your brain AND your heart, not just your heart.

Don’t let emotions dominate your financial decisions.

Options trading is a roller coaster

There isn’t anything deep with this realization - just that options are a wild ride! I’ve been down 60% and up 40% in a matter of months.

Trading options is not for the faint of heart. Unlike a well chosen stock or fund investment account, where the likelihood of losing all your money is miniscule, there is a very real possibility that your options account can go to $0 and you lose all your money.

I don’t advise investing in options with money you aren’t 100% ok with losing.

What you do today will change the trajectory of your life

In 2006, I was a 21 year old player in the Kansas City Royals minor league system chasing my dream of playing in the big leagues. I worked hard. I respected teammates, coaches, and front office staff. I ate right. I carefully selected who I trained with.

Every decision I made was through the lens of becoming a big leaguer.

And after 5 seasons I was released.

In 2019, the Royals told me they were rolling out a mentor program for their players, and out of any player in the last 15 years that came through the Royals organization, I was one of 3 men chosen as a mentor to launch the program.

I’m honored and humbled by the opportunity, and as I reflect on it, I realize it was how much care I put into everything I did during my time as a Royal - my conversations with teammates and managers, my work on the field, my community service events, etc - that gave me the opportunity today to pour into young men during the most transformational years of their life.

And it’s no different with finances. What you do with your money today will determine your long term future.

Be intentional with your decisions today. And care more than others. It may literally change your life.

Using life Insurance as a retirement plan (LIRP) is not a strategy I stand behind

I read David McKnight’s “The Power of Zero,” three times in 2019. The entire book outlines why and how to live a retirement in the 0% tax bracket using a combination of taxable, tax deferred, and tax free accounts, including life insurance.

It appealed to my emotions so deeply that I needed to know if I was doing my clients a disservice by NOT offering insurance as an investment vehicle. So I ran projections. Lots and lots of projections, and if you want to see the 15 pages of projections, send me an email. I’ll happily share them.

The bottom line? I can’t get behind using life insurance as a retirement plan. McKnight made some great points in his book that I will apply to my practice today, but using a LIRP is not one of them.

Instead, I like to use my investments as investments and my insurances as insurances.

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Investment advice offered through Beck Bode, LLC, a fee-only Registered Investment Advisor in the Greater Boston area.