Flashback to 2015: This Investing Advice Still Makes Sense

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In this Motley Fool Answers episode from the vault (2015), Morgan Housel, senior analyst for Motley Fool One, joins us to talk about how to keep your emotions from sinking your wealth. We also discuss 2015 allegations about Amazon‘s toxic workplace culture.

© Provided by The Motley Fool Flashback to 2015: This Investing Advice Still Makes Sense

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Alison Southwick owns shares of Amazon. Robert Brokamp, CFP has no position in any of the stocks mentioned. Morgan Housel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Facebook, and Microsoft. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

This video was recorded on August 10, 2021.

Alison Southwick: We’re still on break, but that doesn’t mean you get a break from learning how to be awesome with your money. We’re heading back to 2015 when Morgan Housel, then Fool writer, now, New York Times best-selling author, joined us to talk about behavioral finances and biases that could be sabotaging your money. Everyone, to the time machine.

This is Motley Fool Answers. I’m Alison Southwick and I am joined today by Robert Brokamp, personal finance expert here at The Motley Fool. Hi Bro, how’re you doing?

Robert Brokamp: Great, Alison. How are you?

Southwick: I’m good. We have a great show today, because today, we’re going to talk about why you should care about a company’s corporate culture when you invest. Morgan Housel is going to join us to talk about five biases that are making you bad with money and Bro is also going to answer your questions about how to break up with your mutual fund. All that and more, on this week’s episode of Motley Fool Answers. 

The New York Times took Amazon to the woodshed over their corporate culture recently in an article. We’ve been used to seeing articles that tell you how awful it is to work in an Amazon warehouse, fulfilling orders and getting books and putting them in boxes, but this recent article talked about how being incorporated in Amazon is actually soul crushing and brutal, all that was in The New York Times, for example, working all hours, crying at your desk. Don’t even think about having kids. It was competitive to a fault. Lord of the Flies because I saw it in Florida.

Brokamp: No food.

Southwick: No free food. They even talked about that. I was just like, “Come on, I thought you were a tech company.” So I assume everyone at The Fool read this article because not only do we care about Amazon as investors, we also care about corporate culture. What did you think about the article?

Brokamp: My first reaction, whenever I see an article like this, it’s based a lot on anecdotes, right?

Southwick: They interviewed over 100 people.

Brokamp: Right.

Southwick: Former Amazon.

Brokamp: Right. In Amazon, I don’t know how many employees, but it’s in the tens of thousands. The point is, I think for any company you could find 100 people who have some sad tales to tell. Now, as you hinted at though, Amazon has already been in the news over the years for working conditions. So I think that’s part of why it was easier for people to believe some of this stuff. My first thought was a little skeptical in terms of how pervasive all this stuff is. But I didn’t think that, to a certain degree, I’m a little concerned that people will take this lesson from Amazon, and it was with Steve Jobs as well, is that for it to be a really successful company to take over the world, you have to be a little cutthroat. You have to be brutal. Steve Jobs had that reputation for being brutally honest with people and according to a New York Times article that Amazon, you are encouraged to rip apart people’s opinions. Now, if you’ve read some of the responses of Amazon employees, current and former, a lot of them saying that’s all a bunch of bull, might have happened here and there, but not everywhere. But to me, one of the concerns I would have is that people take this lesson. If you want to be a great company, you actually have to act like this.

Southwick: Right. It’s interesting to see some of the responses in the comments to people just being like, “Look, it’s work. Suck it up.”

Brokamp: That’s right.

Southwick: Right?

Brokamp: That’s right. One of my favorite lines was when some Amazon employee or executive pointed toward Microsoft and said, “We don’t want to run a country club.” Because they have all that nice stuff that you hear about at Google [Alphabet] and those companies and I am to say there’s a part of me that agrees with that. I mean, The Motley Fool bleeds its culture and we have lots of perks too and every once in a while, I think we, as a company, need to provide that, but it comes from a good place, so to speak, and that is many of our investors here believe that the culture of a company is reflected on how successful the company becomes and thus the stock price. If you make a good workplace for high-performing people, you’re going to have low turnover, they’re going to be willing to work hard for you, maybe even for less pay. But because of the company environment, the flexibility, something like that, is worth it. They stick with you and turnover at a company can be deadly because every time someone leaves and you have to hire someone, you have to train them up again and things like that. Which is another point that made me question a little bit about The New York Times article: if it’s that bad to work at Amazon, why aren’t the very smartest people avoiding them and going to Google and Facebook, and Microsoft, why would you choose Amazon if it’s that bad?

Southwick: Yeah. When I was reading the article and I was in the middle article I was like, “Boy, I wonder if I should keep investing in Amazon and then should buy stuff.” As I was reading the article, I knew that there were two boxes from Amazon sitting on my front stoop while I was reading it.

Brokamp: It is exactly what my wife said when I told her about this, Like, “It makes me not want to buy from them anymore.”

Southwick: Yeah. Do you really think you’re not going to buy from Amazon?

Brokamp: Basically, my bottom line is I want to see more about whether this happens or not. But would that affect, if this stuff turns out to be more true than not, with that affect whether I buy from Amazon? I think it would.

Southwick: Yeah. I just want to say to anyone who works at Amazon, if you’re listening, I really appreciate the work you do. I really love Amazon Prime, so thanks.

Brokamp: Yeah.

Southwick: If you are going through hell. Thank you for going through hell, so I can get stuff delivered in two days. That makes me sound like such a bad person. 

[…]

Today, we have Morgan Housel joining us.

Morgan Housel: Yes.

Southwick: Hey, thanks for coming. He is the senior analyst for Motley Fool One with an expertise in behavioral finance. Thanks for joining us today.

Housel: Thanks for having me.

Southwick: So what are we talking about when we talk about behavioral finance? Because it sounds like a college course that I maybe would have audited.

Housel: It does, but I think it’s really important. I think for decades and decades, almost essentially finance was taught as purely a math based subject. You learned the formulas and you plug your data into the formulas, and it gives you an answer and that’s finance. I think there’s a big appreciation in the last 10 or 20 years, that finance is much closer to something like psychology or sociology where what really matters, where you can really set yourself apart is by understanding and knowing and mastering your own mind. Most of that is just acknowledging and understanding the behavioral biases that everyone falls for. Just little tricks that your mind plays on yourself that steers people in the wrong direction in finance and investing.

Southwick: I’m so glad you did that, because that was a great segue into talking about the five biases that we’re going to talk about today.

Brokamp: How convenient.

Southwick: It’s almost like we planned this.

Housel: Almost. We actually did it though, it just happened.

Southwick: I don’t know. Let’s just pick five biases. Actually, there’s like many biases out there that impact us when we’re investing. But you are here to talk about five today for our listeners to consider when it comes to managing their money. The first one is the Dunning–Kruger effect.

Brokamp: I hope this has to do with Nightmare on Elm Street.

Housel: It does. What the Dunning–Kruger effect is, is when you are so unknowledgeable in such a novice at something that you don’t know how bad you are.

Southwick: The unknown unknowns.

Housel: The unknown unknowns. This is really just something that obviously afflicts people who are just starting out in investing and whatnot. There’s just really fascinating study done about 10 years ago where there’s a group of finance professors that asked a group of investors, how do you perform as an investor? What returns do you earn? They asked them and then they looked at their brokerage statements and saw how they actually performed, and the worst investors, people who earned the worst returns by far, were the worst up telling them what they thought their actual returns were. So these people were so bad at investing that they didn’t even have the skills or the knowledge to go and calculate how bad they were doing. They were so bad and they didn’t know how bad they were.

Southwick: But they were still happy.

Housel: But we see this a lot, I think, with new investors that they don’t know enough to know how bad they are, and they need someone to hold them, reveal the curtain, and show them how poorly they’re doing.

Southwick: Because it is easy to forget, especially in the market that we’ve been in, it’s easy to forget that, well, I don’t need to compare myself to the benchmark of the S&P. Look how awesome I’m doing. Then when I compare myself to the S&P, then it’s just ugly.

Housel: That was really true, I think in the late ’90s when a lot of people were earning what looked like high returns. Look, I earned 15%, 20% of my money, but that wasn’t a year when the S&P gained 35%. They think they were doing really well, they were doing really well, but when you pull back the curtain, and gain a little more knowledge about how well they should’ve been doing, it was a disaster.

Southwick: All right. Next one we’re going to talk about is the frequency illusion.

Housel: We were actually just talking earlier about, we thought there was a baby boom here at The Motley Fool.

Southwick: One of us thought there was a baby.

Brokamp: Maybe the one who was having a baby.

Housel: Then we brought up that no, there’s probably actually not, it’s just because maybe one of us was paying more attention to it. That’s exactly what the frequency illusion is, is that it seems like things happen more often once you start paying attention to it, but they’re not. I think a good example of this in investing is after the 2008 market crash, there was so much commentary about today’s volatile market, stock market, so volatile for years after that but the three years after the market crash in 2008 was below average volatility. It’s just we were paying more attention to it, because we were aware it’s from 2008. We see this a lot with shark attacks in the news. Once there was one, then we started reporting on them, shark attack here, and shark attack there.

Southwick: But right now, it’s like grizzly bear attacks.

Housel: But if you look at the data —

Southwick: It’s in the news all the time, grizzly bear attacks.

Housel: For a lot of that though, if you look at the data, it’s not that there’s more occurrences, it’s just that we start paying attention to it more often.

Southwick: Also, there’s a grizzly bear in my backyard. I don’t know why.

Housel: Right, and a shark in your pool.

Southwick: Right, I don’t know how it got there.

Brokamp: Let’s get both of them together, and see what happens.

Southwick: But I guess surprisingly, it’s always been there, and I’m now noticing it because it’s in the news. The next one we have is the curse of knowledge.

Housel: Yeah.

Southwick: I want to guess that it’s the opposite of the Dunning–Kruger effect. It may not.

Housel: No, it pretty much is. When you have people like stockbrokers, financial advisors, or college professors who don’t understand that average lay people think differently than them, and can’t understand the language, and jargon that they use.

Southwick: It sounds elitist.

Housel: It kind of is, yeah. The effect of it is you have stockbrokers that will sit down with their clients, and start throwing around all kinds of lingo. That might seem basic to the stockbroker, but the client has no idea what he’s talking about, and they’re too afraid to ask. Where we also see it a lot is with economic professors, who a lot of their theories in their models are based on this idea that all consumers will act rationally, and are perfectly informed. That’s the basis. That’s the foundation of their theories, when in reality, that’s total nonsense because most people don’t have the kind of math, and economical thinking, and experience that college professors do. It just leads a lot of people astray, because you have these finance professors, and stockbrokers who say, “This is how you should be acting in theory,” when the world works totally differently in practice.

Southwick: Right.

Brokamp: That’s part of the whole thing about biases. Really, the other word for it is mistakes, right?

Housel: I prefer but it sounds better.

Southwick: It sounds —

Brokamp: Both around mistakes, and that was part of the root of behavioral finance to begin with, is that there was this assumption for a long time that people who are rational have made the right decisions. Whereas actually, it turns out we’re mostly emotional. Most money decisions have to do with emotions, and feelings in my opinion, more than intellectual, rational decisions. That’s the basis of all of the stuff.

Southwick: We make the decisions with our emotions then we spend all this time trying to rationalize. They make it sound like it was actually a logical choice.

Brokamp: They’re trying to get the brain into it afterwards.

Southwick: After your God made the call. All right. The next one is called extreme discounting.

Housel: Right. That’s when you want a small reward today over a larger reward in the future.

Southwick: This sounds like the kids in the marshmallows study.

Housel: You know, I hate the marshmallow test.

Southwick: You hate the marshmallow test?

Housel: I hate the marshmallow test.

Southwick: Okay, so this is the one where they put some kids in a room, and they said, “You can have one marshmallow now, but I’m going to leave and come back, and if you don’t eat that marshmallow, I’ll give you two marshmallows.”

Housel: Right.

Brokamp: Yeah, and then they track those kids for decades, and the ones who were able to resist were smarter, better looking, and more successful, that kind of stuff.

Southwick: But Morgan hates this study.

Housel: I hate it for a couple of reasons. For one, it’s cited in every single psychology book.

Southwick: Which must be how I know it.

Housel: I feel like everyone who writes about it they’re like, “Oh, I found this crazy test, and it’s 9,000 times horrendous in the last year,” that’s the first reason. No. 2, there’s actually some evidence that it never really happened as people explained it. There were several different versions of the marshmallow test, and some journalists blended them together to make it a cool story. But if you go back and read the original literature, it’s not really as it actually happened. It’s similar, but it’s not as clean and simple. We’re going off track here, is that OK?

Southwick: We’re not going off track.

Housel: The third reason I hate the marshmallow test —

Brokamp: You don’t get a marshmallow.

Housel: This doesn’t get talked about a lot. But the kids who actually did well in the marshmallow test, it wasn’t because they had more self control, it’s because they distracted themselves. It wasn’t because they sat there, and looked at the marshmallow, and said, “I’m not going to eat that because I want another one.” The kids who were able to put it off are the kids who were so ADD that they put them in this room, and then they started playing with their shoes, and singing a song, and banging on the walls. That’s why they didn’t eat the marshmallow because they were distracted, not because they had patience.

Brokamp: The lesson is being ADD, that is the secret.

Housel: That’s what’s funny about it, being distracted is probably the opposite of patience or close to it.

Southwick: That’s true. I’m not going to try out the marshmallow study ever again.

Housel: I appreciate that.

Southwick: Morgan says it’s bunked.

Rick Engdahl: All fluff.

Housel: I appreciate that.

Brokamp: Thank you, Rick, the producer.

Southwick: Rick from the control room with the zinger. Tonight’s show is completely different, folks. Extreme discounting.

Housel: It’s wanting a small reward today over a bigger reward tomorrow. Some discounting is rational. But I think you have extreme discounting in investing where people who have 30 years before retirement are constantly focused and investing for returns of the next quarter or the next year. It’s just this extreme focus on the short term, when your goals are long term. You see, almost all money managers are graded by the quarter. How did you perform last quarter when most investors are investing for the next few years or decades? There’s this funny story from Larry Fink, he’s the CEO of BlackRock. He was having lunch with the president of one of the largest endowment funds in the world. The endowment funds said, “Our goals are generational. We’re investing for the next generation, and our grandkids’ generation,” and Larry Fink said, “That’s great. How do you measure your performance in the […] quarterly?” That’s extreme discounting, and it’s pervasive across investors, amateur or professional.

Brokamp: But fund managers are forced to do it. They shouldn’t agree. It’s because the investors are focusing on the quarter. As a fund manager, if you have a bad year, money is going to go out the door.

Housel: You’re fired. Money is the core. Eventually, you’re going to be fired.

Brokamp: Even though they know, they should be focusing long term therefore, because of the biases of the shareholders.

Housel: Right. It’s our problem.

Brokamp: It is true. In the end folks, it’s all your fault.

Housel: All extreme discounting is just intense focus on the short run when your goals are way longer down the road.

Southwick: Which at The Motley Fool, as long-term investors, our goals are way down the road at least three to five years.

Housel: Right.

Brokamp: Actually, we’re having a discussion earlier today with some colleagues about how if you worked in Richmond, and you want to get a job with Philip Morris, and same with some of the other companies, you had to smoke like you had to fit into the culture there. We thought about that short-term view of things. I’m going to smoke today to have this job. I’m going to pay for it [laughs] 20, 30 years down the road, but I want that job now.

Housel: But it’s like if I smoke, I’ll have this job in 20 years. But you won’t, because you’re smoking and you’re going to die.

Brokamp: That’s right. It’s an early retirement, folks.

Southwick: The last one we’re going to talk about is the bias bias. Did you make this one up?

Housel: Yes. I couldn’t think of a better name for it. But I think the bias, when I started writing about bias, I noticed that there were a lot of people who effectively said, “That’s cool, but this doesn’t apply to me.” I think that’s what the bias is thinking when you’re reading out behavioral psychology, behavioral finance, and all the mistakes people make. You think it’s something that applies to someone else, and not yourself. I think almost everyone thinks this. They read about extreme discounting, and frequency illusion. They think that’s something that other people will fall for, but I would never fall for that. I’m a long-term thinker. I will never do that, but almost everyone does. Daniel Kahneman, who won the Nobel Prize in economics for his work in behavioral finance, said something along the lines. I’m paraphrasing. He said something like, “When I’m doing this research, I realize that I’m writing about myself because of these mistakes that hurt other people.” The only difference between Kahneman and these people, is that he’s aware of it, and he understands what’s going on, but everyone is making the same mistakes.

Southwick: Is awareness the first step?

Housel: It’s the first step.

Southwick: Acknowledging you have a problem is the first step too.

Housel: That’s right. There definitely is an extent to, if you’re aware of these and you think about them, you come up with a plan that you can make yourself a better thinker, and help yourself versus where you were before. But I think a lot of these are natural biases that have been engrained through evolution that, I don’t think virtually anyone is going to completely cure themselves. But that’s where if you’re aware of them, you can set up your portfolio instead of your expectations to work around them, but you’re never going to get rid of them.

Southwick: Got to hack yourself.

Brokamp: In that vein, which bias do you find yourself falling for most often?

Housel: I think probably bias is bias.

Brokamp: You think you’re better than everyone else.

Housel: Yeah, but I think everyone does. No one wants to admit, I’m totally flawed and I’m a bad thinker, and I can’t control my emotions. Because I think if people thought that about themselves, they’d have a hard time making it through the day. Most people just to make it through the day have to think I’m making good decisions. That’s how you can wake up in the morning, and look at yourself in the mirror, and say, I’m making good decisions. But a lot of people don’t.

Southwick: Existential eggs of Morgan Housel.

Brokamp: I’m going to make a bad decision. 

Southwick: One after another. 

Brokamp: I’ve done enough with money as much as Alison will know. Compare money to diet, health and exercise and I’m often grabbing something, I’m about to eat it, and I know I shouldn’t. I know it’s not going to help me accomplish my goal of losing weight or staying in better shape or avoiding having three heart attacks like my dad. But I watch it in slow-motion coming toward my mouth, and I know I’m making that decision, but I do it anyway.

Housel: I know a lot of very smart financial advisors who are some of the smartest investors that I know, that give great advice and every time I hear them talk or write something I’m like, “This guide knows his own.” But then you become friends with them. You learn about their personal life. Their personal financial situation is a disaster. That’s all. It’s really easy to think you’re doing everything right and to be able to talk about how to do things right, but actually putting it into practice is harder than it looks.

Southwick: Before we go, Morgan, what’s your best piece of advice for our listeners for their next steps when it comes to mastering their biases. Is there maybe a book they can read or what do you think would be most helpful for our people?

Housel: Daniel Kahneman’s book, Thinking, Fast and Slow, is the combination of his life’s work. Is just an amazing book. Is a dense read, it’s not bedtime reading, It’s just an amazing look at the human mind and how we trick ourselves called Thinking, Fast and Slow.

Brokamp: Interesting thing about him is he has a financial advisor. Despite all he knows, he doesn’t manage at least all his own money. That’s a good thing too, if you get a trusted professional who can stop you when you want to make some of these big mistakes. It’s probably helpful too.

Housel: Funny story about his financial advisor too, he’s done very well, he won the Nobel Prize He gets paid a lot for speaking. Daniel Kahneman has done well for himself financially. Few years ago, he went to a financial advisor, and he said, “I don’t need to become richer. I just want to live out my days in comfort, but I don’t need to make any more money,” and his advisors said, “I can’t work with you.” He has had to find a new one. He uses that as an example of financial advisors not understanding the human element of risk-taking. Kahneman said, “I don’t have the psychology to handle a lot of market risk and I don’t need the money to begin with, so just keep me steady.” The financial advisors said, “That’s not what we do.”

Southwick: Yeah. I’m here to make you money.

Housel: Right. So he found someone else after that.

Southwick: Morgan, you had a running column in the Wall Street Journal which means that your face was what they call […]. They made you a little dot picture.

Housel: You know what’s crazy about that? They do those by hand.

Southwick: That is crazy.

Housel: The Journal started doing this 120 years ago, and then they just kept the tradition. They not only kept the pictures, but kept the original way of doing it, which is a guy in the back with a pen and just dot dot dot. It takes some 10 hours per picture to do it.

Brokamp: Were you happy with the results?

Housel: Not really.

Southwick: I’ve seen it. It doesn’t look like you. It looks like you with 20-30 pounds.

Housel: That’s what people say.

Southwick: It’s like chubby you.

Brokamp: You’ve been fatified.

Southwick: You’ve been fatified but I would still take financial advice from you, if that makes you.

Housel: Makes me feel better.

Southwick: If that makes you feel better. You maybe didn’t look as handsome as you are, but you still got the brains in there. Well, Morgan, thank you for joining us. This has been a lot of fun.

Housel: Thanks for having me.

Southwick: We’re going to have you back.

Housel: All right.

Southwick: We’re going to talk more.

Housel: Great. I work upstairs. So it’s no problem.

Southwick: Wonderful.

Housel: Good.

Southwick: Thanks. We have received a ton of mail from you guys, which is awesome. Here’s where I feel bad because it’s going to take us a while to get through all the letters, but we’re going to do our darnedest. The first question this week comes to us from Boris. He writes, “In my IRA accounts, I have funds from Vanguard, Amana, Royce, T. Rowe Price, Baron, Hennessy. It is a bit of a mess. Some funds I have kept for 15-20 years, others are relatively new additions. I was wondering if you can provide some suggestions and tips on deciding when to sell a fund. I normally look at performance compared to other funds in the portfolio, but it’s hard to compare across different sectors. I try to use the Morningstar rating, but each fund seems to have a handful of those as well. Do I look at the overall ratings?”

Brokamp: Great question, Boris. Morningstar is my go-to source for information about mutual funds. You can go to morningstar.com, you put a quote for the mutual fund, and then you hit the Performance tab. The important thing about evaluating the performance of a mutual fund is you have to compare it to similar funds. These extreme examples, you would never compare a bond fund to an S&P 500 index fund. You want to be comparing international funds to international funds, small-cap funds to small-cap funds. On that performance page, if you scroll down, you will see category rank. The lower the number, the better. So if you see that your fund is in the category rank of 10, that means it is in the top 10% of those funds for that category. You want to look at a longer-term period, at least five years, 10 years. But actually, studies show the number one predictor of future fund performance are expenses; so I would look first at expenses. You want below average expenses then look at performance.

Southwick: Below average is?

Brokamp: Below average while it depends on the type of fund it is. Morningstar will also, on the expenses, give a fee level. It will say low, below average, average high to do that. Then performance, management tenure, you want someone who’s been managing the fund for at least five years. The Morningstar star rating. Morningstar acknowledges that that is a backward looking analysis that is not necessarily predictive. It has some predictive characteristics a little bit, but for the most part, ignore the stars that just tells you what it did, not necessarily what it’s going to do.

Southwick: All right. Cool. This is when we segue into Sam’s question. Sam writes, “I’ve invested in mutual funds, but thanks to your advice, I’ve been thinking about transferring to lower-cost index funds.” That’s my yay. I’m putting in the yay. “The problem is that I get wet feet about paying thousands of dollars in income taxes for selling and rebuying such a large portion of my holdings. Do you have any soothing thoughts to help me take the plunge?”

Brokamp: Well, it’s a great question. It’s a bit of a dilemma. It depends on the tax bite because let’s say you have $10,000 in a fund. You sell it because of taxes, you have to pay a 1,000, so you’re left with 9,000. You’re really asking, should I have just kept 10,000 in the old investments or I’m going to be better off putting 9,000, now that I pay tax, into this new one? You have to basically think, how long will it take for that smaller investment in my new investment to overtake the other one. It really depends on the degree to which your current investment stinks compared to an index fund. If you have a fund that is high-cost, underperformed its benchmark by 2% or 3% a year, I would say do it for sure. I mean, if it’s a long-term holding you’re going to hold for five, 10, 15, 20 years, you’re going to be better off in the end. If you have a fund that is only marginally worse than a index fund. If it’s still below average costs, which many actively managed funds are, it may not be as compelling. 

The other thing to keep in mind is you don’t have to do it all at once. Chances are, you bought the mutual fund over different periods, you actually, let’s say you got into mutual fund through five different purchases. You’ve put in 2,000 in point, and 2,000 another point, and 2,000 another point. You actually can choose which of those portions to sell. One might have a huge capital gain, which would cause lots of taxes. The other one maybe it’s just the marginal capital gain, it wouldn’t cost you so much in taxes. You can tell the fund company, I just want to sell those shares. You don’t have to do it all at once. You can identify the shares, but you have to contact the mutual fund company on how to do that because each company has a little bit of their own way of letting them know. Otherwise, there is a default when you tell them to sell, and they’re going to choose the shares that you sold them and they may not be the best ones to sell from a tax perspective.

Southwick: Wonderful. Thanks, Bro.

Brokamp: My pleasure.

Southwick: Those were great answers. All right. Boris and Sam, hopefully that was helpful. That’s going to actually do it for today.

Brokamp: It is.

Southwick: That is all we have got for you. The show is edited by Rick Engdahl, with the music composed and performed by Dayana Yochim. Our email is answers.fool.com. I want to thank everyone who went to iTunes and gave us a review.

Brokamp: We love you.

Southwick: We love you. Thank you. For Robert Brokamp, I’m Alison Southwick. Fool on!

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