Wealth Building Tips From Todd Tresidder of FinancialMentor.com

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Todd Tresidder has done it all – He ran a hedge fund in the 90’s and built up and sold a real estate empire before the housing crash.

After becoming financially independent at the age of 35, Todd created a wildly successful financial mentoring site, FinancialMentor.com.

I love Todd’s analytical approach to trading, investing, and building wealth. And he doesn’t just speak from theory – he’s done it himself and helped thousands of people.

In This Episode, You’ll Learn:

  • How to understand and overcome the biggest challenge people face with achieving financial independence
  • Why risk management is the most important thing for people to think about when investing in any paper asset, real estate, or business
  • How Todd built his coaching business and how he gets over 100,000 hits a month to his site

Links & Resources From This Episode:

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Hey guys! In this episode of Pathways to Wealth, I have a really interesting and impressive guest, Todd Tresidder of Financial Mentor.com. Todd became financially independent at the age of 35. He sold his hedge fund that he was trading in the late 90s and then built up a real estate empire in the early 2000s and sold before the market crashed.

Now, you hear a lot of stories of people that are like, “Yeah, I was in real estate and then I got crushed by the bubble.” This guy has timed markets really really well and he now has built up a really impressive mentoring practice and coaching business around financial planning and retirement and there’s a lot of people that talk about retirement and financial planning but Todd is one of the guys that I actually respect and that really knows his stuff and has proven that his framework actually works.

And so, in this interview, he’s going to talk about how he times those different markets, the different asset classes like paper assets, like stocks, real estate and business and through our conversation, you’ll understand how he has timed each one and I like to listen to this interview a couple of times because what seems like a very casual conversation, he’s actually just dropping incredible knowledge bombs. With that said, here’s Todd.

Chris Dunn: Alright, hey everybody. Welcome back to Pathways to Wealth. I'm your host Chris Dunn and this episode we have Todd Tresidder, the founder of Financial Mentor.com. Todd, thanks for being here. How’re you doing?

Todd Tresidder: Good. Thanks for having me on the show Chris.

Chris: Yeah, awesome to have you. So I've actually been following your site for several months now and I just love your content about financial planning and the pyramid that you have set up to help people achieve wealth.

Todd: It’s not a pyramid scheme. Let’s be clear about it. It’s a pyramid like you’d have on the back of a dollar bill, not a pyramid.

Chris: Exactly, exactly. You sign up three people and then know three people sign up three people— No, so yeah, I love your philosophy and I know on your site you even have your definition of true wealth and that’s something that I really like to hone in on and focus on. Todd, why don’t you go ahead and fill everybody in on your background and what you think everybody should know about you.

Todd: Well, my background is hedge fund investing specifically quant, so all statistical record timing risk management methods in the financial markets. I sold the hedge fund in 1997-98. The reason I gave it a two-year period because it was a payout of over a period of years and then I went into real estate investing. At one point I had—I started to diversify my portfolio, I had 160 apartment units, had a bunch of houses, had a bunch of land. I had a company that got houses and property on back taxes, just for the back taxes alone working the taxing system. Then I had more conventional real estate investments. Got really uncomfortable in the 2005-2006 period. Every person was coming to me wanting to get rich in real estate that was really a bubble. I was having a hard time even finding qualified tenants for my buildings because basically nobody could get a loan, I mean it was just crazy and so I started selling and I sold everything. I sold every last piece of property I had by the 2007 top. It took me about a year to a year and a half to sell everything.

Chris: Where were those properties?

Todd: They were out in the Midwest mostly.

Chris: Okay. And all multifamily or kind of a mix between that and single?

Todd: Mostly multifamily. Stuff I got as single was through the taxing system and I got some large tracks of property through the taxing system as well but mostly multifamily and then so I sold everything, sold the taxing business. That’s all another story in itself and the only house I had was my personal residence during the down time. Anyway, I guess that’s it. Basically, I'm a quant investor on the paper asset site, love real estate, learned some lessons, good and bad, and I'm an entrepreneur. I've been a serial entrepreneur since childhood.

Chris: Nice. So what happened after you sold out of real estate? What have you done with your time since then?

Todd: Built Financial Mentor. That was part of the thing. I really got uncomfortable with financial leverage. I thought financial leverage was an accident waiting to happen which turned out to be true. I didn’t realize how good my timing would be because you really never know. I just knew I didn’t want to own leveraged real estate assets during the downturn. I wanted to unwind it before the downturn and I didn’t care if I had less money on the table. I just wanted it done. Turned out it was almost exact but that’s luck.

And then, what I've done since, part of the whole reason I did that is I really want to build Financial Mentor which is my site, financialmentor.com and the whole idea behind that was I wasn’t okay going to my grave without having given it my best shot. I’d had it as kind of a cute little boutique coaching site since 1998 and then it always ranked for terms like financial coaching, money coach, key terms that would fill a coaching practice and I had. I’d had a nice little boutique coaching practice but I got introduced to WordPress a few years too late, but nonetheless, got introduced to WordPress and realized that I could do this, that I could actually build this kind of dream I had and so I started doing it and I've been doing it ever since. And so that’s what I focused on, focusing on time leverage, technology leverage, different types of leverage and not having financial leverage.

Chris: Nice. I want to talk about Financial Mentor but I want to go back to your days a quant trader. What were you trading and what types of trades were you taking and what did that look like when you had your hedge fund?

Todd: Yeah. I’d be deemed the position trader. There are positions that could run upwards for months, rarely over a year but they would run upwards of months. Rarely were they short term. They would only be short term if they were losers in a big way because the risk management would kick in and it would unwind the position, so I was trading pretty much everything. Back then, it was mutual fund switching. It was before the big mutual fund marketplaces like Schwab and all these other ones where you could—it was all inside of a platform so you’d have an account inside of a mutual fund company and you can trade the funds within there.

This is before the days of Eliot Spitzer, our great vaunted man of ethical genius who then got taken down by prostitutes. He is the one who got the bad name on market timing with mutual funds but we were doing very ethical stuff. It was all within the rules. We weren’t breaking any rules. So we did that. I'm one of that rare 5% that traded commodity futures profitably. I had some commodity futures type stuff.

Probably, the only thing I haven’t done is auctions. I haven’t really worked with auctions much but I did futures, stocks, I had a long and short equity market mutual fund.

Chris: Did you trade electronically or was this prior to the E-minis.

Todd: Well no, E-minis weren’t in existence. I was at the bridge time, so all that stuff, the electronic platform scenario will become prevalent so I did a lot of stuff in the early days with phone and then moved outwards.

Chris: Was it fully automated or were you like—

Todd: I don’t inflict any human judgment whatsoever. All the human judgments and development of methodology, I don’t put any of my own personal stuff in between me and the management of the money. If I did, I’d be broke by now.

Chris: Let’s give everybody your overarching philosophy when it comes to building wealth and what is Financial Mentor about or is there a theme that you have that you could wrap everything up into a few—

Todd: Can you wrap this up in a neat package Todd? That's where it came from, you know, I was financially independent at age 35. Anybody looking at a camera now can see I've got a gray beard and gray hair, all of that. I'm clearly a lot older than that now, so this is a solid 20 years ago that I was financially independent and it was unusual and people want to know why. How did I do it? What was so different? And you got to go back in time, this is the good old days in the stock market and this is going up into 2000, top it was ’97, and people are really nuts the NASDAQ was going crazy. The internet bubble was on and everybody wanted hot stuff tips and I would just curl up in a ball and people would hit me in a cocktail party conversation and think I was some big trading genius or something and had all this stuff, and it’s like, “No, you're not even looking at it right.” They didn’t even have the basis for asking reasonable questions.

Then so I would avoid everything. My wife got really tired of it. At one point, she’s just like “Why do you give these standoff-ish answers? Why do you avoid these conversations?” She said, “You spent all this time figuring stuff out. It totally worked. It changed your life. Why don’t you help some people with it?”

And so, about that time, I ran into a guy named Corey Rudl which most people don’t know that name now but he was one of the early pioneers of internet marketing and I saw one of his first presentations and he blew me away with his understanding of the internet and what it meant to our future and this was back in ’96 or ’97 and I was just like, “Wow.” This guy, he painted a vision that really blew me away. And so that’s when I got Financial Mentor. Obviously, to get that URL, that was a long time ago.

Chris: Yeah.

Todd: And so, I opened the doors on that and just did a little boutique coaching practice and just tried to figure out could I help ordinary people produce extraordinary financial results and it took me a while because I didn’t realize how much I had assimilated and how many assumptions I had of my own understanding of this stuff. It’s one thing for you to do something yourself. It’s another thing to be able to teach people how do it from broad cross sections of life and turn it into a universal system. And it took me years before I developed what I now call Seven Steps to Seven Figures which is where the business is going now. I'm turning it into a product-based because the coaching long since sold out. I don’t have any space for clients or anything like that.

Chris: So you're trying to leverage with products so you don’t have to do the one-on-one time thing.

Todd: Yeah, yeah. From a business plan standpoint, you could use that language. I like to think of it as I'm trying to help more people at a better price point. It’s a leverage I can afford to—by putting Todd in the box—essentially, I'm trying to put Todd in the box. I'm trying to get this stuff out there in a format that delivers more efficiently so I can get the knowledge to people at a better price point and reach more people, serve more people, and yeah, that’s a smart business plan too as well.

Chris: Yeah, absolutely. I love that. You talk about leverage and I get the sense that you don’t like financial leverage so much but you do use that word a lot. What does leverage mean to you and why is it important?

Todd: Well, leverage is getting more grander results, more better different results with less of your own stuff whether that’s time, money, whatever your resources are, it’s how to get more results, so you leverage the time, money, technology, network, whatever it is knowledge of other people’s resources and other resources outside of you. That’s how you produce more with less of your own.

Chris: Nice, nice. Now, whenever it comes to retirement, I feel like a lot of people my age, millennials, are just kind of clueless. We lived through the 2008 bubble and financial crisis and a lot of people don’t trust financial advisers and they don’t have a plan for retirement. What would you say to somebody who’s in their 20s without a clue where to even begin to save for retirement?

Todd: Well, I have a post on my site that’s retirement planning checklist for any stage of life and it’s free on the site. It’s not a pitch or anything. It’s just right there and I actually break it down by age groups and so in the age group you're specifically saying, in your 20s, the main thing is just work on your earning capacity and work on controlling your expenses and finding happiness in a lifestyle so you build this gap between spending and earning and then focus on your incapacity because that’s going to have your highest return because then you have a whole lifetime for earning and it’s a lot easier to save a whole lot of money when you make a lot in the first place.

So if you're pulling a six-figure income, it’s not that hard to save a high percentage of that income and if you look, if there’s another person who will say anyone can retire in 10 years or less and all it is, is it goes through the mathematics of how money builds up and what savings percentage results and how long until you have enough to support your spending infinitely and it’s really just straightforward math. Everything I teach is all engineered approaches. It’s not voodoo or googoo or anything like that. It’s all engineered mathematics and this is how it actually works.

Anyway, for the long answer to your question to your question is focus on your incapacity and build a gap between spending and earning and start saving and start compounding. This is goes into the compounds wealth equation. There’s a terminal wealth equation and the early stage of that terminal wealth is governed by your savings rate as a percent of your income, and then the latter stages is where your return on investment out of inflation is the determining factor.

And so, the second piece that people want to do is they want to start developing their investment knowledge but first work on your earning capacity. Really develop that earning capacity, get that gap, so that you increase your savings as a percent of your income.

Chris: So make more money and save more money and then when you have more money, you can investment more.

Todd: Yeah, then start learning your investment chops and do it with those early savings. Don’t think, “Oh, I'm just going to delegate this to my local financial planner down the street,” at the “such and such” office, so I'm not going to name names because we don’t want lawsuits, but don’t think that’s how it’s going to go down. Recognize that you're going to have to be self-responsible for your investing and this is one of the insights I had very early on was, if you want to be financially independent, truly financial independent, then you have to become an investment expert. You have to know investing.

Chris: Yeah, yeah, I agree. It’s not something that you just want to trust the salesman to do for you. What does financial independence to you? I think that can mean different things to different people. Does that mean, having enough money to never work again, having enough cash flow to cover your expenses?

Todd: Passive income exceeds expenses.

Chris: Keep it simple.

Todd: Yeah. Think about it. Your passive income from your investments, and by the way, investments is a term I'm using loosely. There are three asset classes. You’ve got business, business ownership, business entrepreneurship; you’ve got real estate, direct ownership of real estate; and you’ve got paper assets. Those are your three asset classes. The income that any of the combination of those three throws off that isn’t requiring your time to produce it, we’ll call passive income. It’s not totally passive but it allows you have a lifestyle you want. When that number exceeds your expenses, you're infinitely financially independent. And the other thing too is you can then take it up a notch and say when it covers your expenses and it throws a little bit in for continued savings growth, then you're really in a good position.

Chris: Then it’s like perpetual growth.

Todd: Yeah. And then the other thing too is if you can do it where it comes from a variety of sources, that you're not dependent upon any one source, that’s much much better as well.

Chris: Nice. Is there an asset class that you think is good right now or regardless of timing, good for somebody to start with?

Todd: No. I don’t think there is any one specific answer. They're all different for different people that have different skill sets. It’s something I teach in—there’s a course I have, so I said Seven Steps to Seven Figures, of course I have called step three which is Designing Your Own Wealth Plan and in that course, it goes through the characteristics of the asset classes and matching of it to your own skills, your abilities, your interest so that you choose the correct asset class for your strategy.

So let’s take an example, I've got a client who’s an anesthesiologist and the guy’s producing half a million a year and he comes to me thinking he’s going to raise his income through business entrepreneurship and stuff and I'm like, “No, let’s just focus on the investment side and translating it from your current income over to the asset category.” There are ways to get better translation, better tax advantages. There are ways to compound that money better but you’ve got a long road to harvest if you think you're going to outpace your anesthesiologist income. You're far more better off just clocking more hours as an anesthesiologist. So that’s an example of the wealth plan for somebody in that position.

And then, I've had an attorney who came to me. He had a very large successful practice, large staff, and was paying off quite a bit of money on office space and so part of his wealth plan was he bought a large office complex of which the firm itself guaranteed the rent on the full square footage. They basically took the lease on the full square footage, so he personally was guaranteed the income harvesting out of his firm and then he sub-leased out amounts of it to take the pressure off the attorney firm so it was heads he wins, tails he wins and that property alone was enough for him to retire on.

Chris: Really? Wow.

Todd: Yeah. That’s an example and then in the meantime, he’s doing all the traditional financial planning as well but that was an old brainer because as long as he’s going to be in business as an attorney and he had a long term for that, as long as he’s going to be in that business, that real estate was going to work for him. The way way he did it, he had enough money going to the firm that the banking relationship gave him an extraordinary loan on the property in order to keep his banking business. That was a rare example of a commercial loan deal coming through at a really good value.

Chris: Nice. It’s definitely a personal thing and whenever you're talking to people or evaluating somebody’s situation, is it more about where that person is in their time horizon in life or market cycles or their personal opportunities or all of the above wrapped into one thing?

Todd: Yeah, it’s all the above. The attorney example I gave you is in Texas and so Texas real estate was a good value at the time that this decision was made. If he was in San Francisco, I don’t know if that decision would’ve been as much of a no brainer or New York. So you’ve got to look at the various dimensions of it and make sure that each piece of the puzzle makes good business sense. It’s not cookie cutter but there are principles. The principles are universal but it’s not complex either. You’ve only got so many variables of which you name the most of them but you’ve got to look at the client’s resources, skills, abilities. You look at where they are now. You look at where they want to go and you map out a path to get there to bridge that gap, I call it bridging the gap. You’ve got to figure a plan to get there and you’ve got to tie in their resources in what they're doing in that lifespan to do that and you’ve got to engineer it all back with numbers to make sure it works and you’ve only got three asset classes to work with. You’ve got paper assets, real estate, and business. And so, it’s not that complicated but you got to do it right and what’s funny is I've been doing this for 15 years with people and I've been doing it this way for—because to me it was just logical and obvious, that’s the way it’s got to get done.

Chris: Yeah, you had the framework.

Todd: Yeah and so I've been doing it with clients forever and I did a marketing class one time and I went back and I was supposed to interview past clients and find out what they loved about working with me and I kept hearing about my wealth plan. I kept hearing about this wealth plan process I took people through, they go back in say “I'm still working off it Todd and I'm still producing results and I showed family and I showed friends and they’ve never seen anything like it.” I was so close to it I had no idea. To me, it was just obvious. This is what I start with every client, why wouldn’t you do it this way. Of course it’s where you start.

Chris: Right. So what’s the biggest challenge or hurdle or mistake that people make when they're trying to become financially independent?

Todd: Wow. Is there one? I think risk management would have to be, if one had a bubble to the top, it’s not being prudent about risk management. Let’s be honest about this. This is not easy. It’s not complicated. The principles are simple. You make more than you spend, invest the difference wisely. Everything you know about wealth building, one sentence, make more than you spend, invest the difference wisely. Okay. That’s everything you need to know about wealth building. It’s not complicated but the strategy and the details on how you implement every one of those which is make more, spend less, invest wisely.

Chris: And don’t lose it.

Todd: Then it gets interesting. And so now, you're going into this principle of risk management and what I found is that everybody has hardship, everybody makes mistakes, we all have setbacks and what really distinguishes people to succeed is they managed the risk when everything goes wrong so that they can make higher highs and higher lows, so they're progressively compounding and growing with consistency and it’s that consistency that produces the results. Anyway, I think if there’s one thing that stands out, it’s not being prudent with risk management. That’s the big mistake.

Chris: Whenever we talk about risk management, are you talking about when you're in a trade and you have a stop-loss or are there different types of risk management that you think most people should be paying attention to that maybe they're not?

Todd: Well yeah, this goes back to each asset class. The principle is universal. I'm going to sound repetitious but that’s because this stuff is not complicated, but you just got to know what you're doing.

The principle of risk management is universal. It’s built in the math of how wealth compounds and so what it is, is that losses and gains are asymmetric to the compounding equation and so it’s like a 50% loss requires 100% gain to get back to even. Whereas a 10% loss only requires about 11.1% gain to get back to even. And so what happens is it’s asymmetric, the larger the loss, the bigger difference in the game required to get back to even and the numbers get out of control once you pass about the 20% to 30% loss range. And so, this is just built into the math of how everything compounds whether you're growing wealth in real estate, you're growing it in business entrepreneurship or you're growing it through trading. It’s all the same thing.

The principle is universal, how you apply it is different. So the paper assets, yeah you could have exit points, stop-losses. In real estate, for example when I was doing the apartment buildings, I was buying them with non-recourse financing, so each one was held in its own entity. Each one was a standalone business and my downside was limited to my down payment or whatever funds I chose to put into it because the only recourse the lender had was to the property itself. And so that was a form or risk management that I protected my other assets and I insulated each building from the other buildings. So that would be an example of putting out the practice because with real estate you don’t have exit because it’s a joke in real estate. Real estate never goes down. It just goes on liquid. That’s an old joke. Now nobody catches it because everything in real estate does go down but if you go back 10 years nobody believed it could go down and so the joke was real estate never gets down just gets to liquid.

The point is you don’t have an exit discipline with real estate because when the market gets hammered, it gets to liquid, you can’t just dump it so you have to manage your risk in real estate in different ways. That’s just recognizing the characteristics of each asset class. This is entrepreneurship. That’s how you manage risk and that’s going to be unique for each business but the principle is going to be the same and so you just have to look at each piece and figure it out and figure out how to constantly compound and grow and control. Like in Financial Mentors as an example, I don’t have huge downside risk because most of my time and cost are extremely controlled and the margins on each seller are almost 100% and so that’s part of the reason I built the business. I don’t have to grow the wealth and so the income is very nice but I don’t want to do something that jeopardizes everything I've already created.

Chris: Right. Let’s talk a little bit about Financial Mentor as a business and what that looks like. I think it’s really interesting that you got that domain so early compared to—that domain now would be insanely expensive and just looking at the site, you built the content really really well and you got your funnel down. What do the economics look like? What’s your funnel like?

Todd: Well, I'm not sure what you mean by the funnel because it’s actually in transition. There are multiple businesses inside that business if you really dig into it because you’ve got revenue stream off the calculators which is a source of traffic, so it’s revenue producing traffic. You’ve got the original conversion process which was the coaching which was highly effective to a point that I was way overbooked on the practice and had to shut it down and now you see the funnel getting redirected into the Seven Steps to Seven Figures course series which is where the whole business is going and the coaching will eventually be a high-end backend product or whatever. I have to figure out what I'm going to do with it.

I'm not sure if I'm answering your question. There are multiple ways in which it structured. Basically, people come in for free through the free newsletter. I give away free bonuses, I give away free courses, a free e-book and that’s just a relationship building tool. There are real products, real value, and it’s all given away and then that builds relationship, I get a certain following and then eventually they convert to a paid product if they want to take the next step.

Chris: I love it and you did answer the question. It seems like you’ve shifted from the one-on-one coaching to productizing the seven steps, and I love how you’ve ranked for a lot of important keywords. You’ve got just a really really nice layout. I want to talk a little bit about—

Todd: Here’s the funny side. I just want to throw something in there. The way I look at it is I've done 80% that produces 20% of revenue, now I'm finally doing the 20% that produces 80% of revenue. I've spent all these years building the platform and so now it’s a solid platform. It’s got six figures of traffic monthly and it’s got all these different things going on and now I'm finally building the products. It’s like, I did all of this work and I had nothing to sell anybody, it’s just like the most stupid thing. I had the luxury of doing that but—

Chris: Well it’s funny. A lot of people try to do it backwards. They try to build products without having any foundation or any traffic, so once you have the traffic, productizing and turning on the money can be easy if you have the right products.

Todd: Just to show, I inserted two or three sentences in red on a totally junky sales letter. I mean the copy is good and the sales letter is for the content going to be published. Probably, by the time this series is published, the step 3 sales letter will be all designed and formatted because I have the finished design for it it’s just not implemented. They’ll get them pretty soon. But anyways, so it’s just text only, no buy buttons, no ability to buy it whatsoever and I put two or three sentences in red ink at the top that just said, “Hey I'm going to put together a founder’s group. I finally got this course available. If anyone’s interested, email me, and this is the price.” I violated every rule, hard to buy, there’s no promotion, there was no design that were done professional and within a week to a week and a half it was sold out. And a lot of it was cold traffic, people that didn’t even know me, people who were just stumbling on it, saw the red ink and wrote me immediately.

Chris: I think a couple of things is probably the reason why is the site gives trust. You have the content. It doesn’t look a cheesy salesy thing. That’s interesting though that you said the traffic was cold though. Did you mail your list for that too is that mostly—

Todd: This is a good story. I mailed the list an article. I'm always about trying to add value, so I'm not just going to mail a promotional piece, so I sent an article and in the article, I added some sentences in red to that one as well. It was in the article that just said something like, “Hey I'm finally going to go live with the course here coming up and if you're interested go over to the sales letter over here” which then had the couple of sentences of red in this rough draft. I'm just like let’s just see what happens. Crickets. Crickets. And you know from when you send an email that basically the lifespan of it in terms of your list is about two days. It takes about two days for most people to filter through and then it is just almost no traffic going through. I think I had one or two sales off of that email in the first couple of days and then I picked up the remaining. It sold out at 30, I only wanted 30 in the group just so that each was given personal attention. It’s like a founders’ group, a beta test group and I want to work with people closely, so I limited it to 30. The remainder of the people just found it by stumbling on it.

Chris: Interesting, interesting. Well, that says a lot for your organic traffic. I'm sure you have a lot of people that just come and peruse and go through the content.

Todd: Yeah. I think the list will convert too. I just didn’t do it right. A lot of people I ask, I asked, “Did you even see it in the newsletter?” Because some of the people that found it were on my newsletter list, and they were like, “No, I never even saw it.” I never heard the offer. It was just so buried in the article nobody can even see it because I was just trying to be low key. I was worried too many people would convert.

Chris: [Crosstalk 00:31:27]

Todd: Yeah I was worried it was going to be—because I was only taking 30 people. I was just trying to bury it and hide it and just see if I could keep it small and then there were crickets and I thought. “Oh my gosh, I am so off base” I just blew this and then every day there was one, two…one, two, three…day four— they just kept trickling in day after day within a week and half it was sold out. I was like “whoa.”

Chris: Let’s give a lesson for somebody that looks at this and says I'm a financial adviser or maybe it’s not financial related at all but I want to build an authority site with content. What was the biggest challenge that you’ve had in building this, the site traffic specifically, and what kind of suggestion would you give somebody that’s maybe starting something similar.

Todd: Well, content marketing is the best way to go but it’s a long game. Do not kid yourself that you're going to go produce an epic content that’s suddenly going to surface up and you're going to be on the map. There are a few guys that can do that but they are extremely rare and they get some lucky breaks and they hit a few key people with large audiences and they are incredibly good. They're just really good at what they do. For most of us humans it’s a long game. It’s been a long game for me. I've always wondered where that big break's going to happen and instead, it’s just relentlessly brick by brick by brick. It’s just relentless persistence.

Chris: I agree, the SEO/content play is long. You got to put in the time and it’s not an overnight thing for sure.

Todd: Well, just building an authority site. You're building authority that’s a massive network of links and people talking about you and you have to produce good stuff or people won't want to talk about it or link to it, so it’s a lot of work to produce good stuff and give it away for free. It’s a tough game. The whole internet riches thing, it’s real but don’t kid yourself. It’s not simple. It’s not a quickie. it’s get rich quick. It’s hard work.

Chris: Yeah. I completely agree. I want to turn our focus back to the markets real quick and just see if you have any forecasts or predictions.  I'm not asking where the Dow going to be in a year but as far as asset classes go, because it seems like you're a guy that’s pretty good at timing, you timed when to get out of the hedge fund, you timed when to get out of the real estate, do you see any big 5 or 10-year moves or shifts you think that you think would be good for people to either get into or get out of?

Todd: Okay. It’s a fun conversation. First of all, let me preface everything with I don’t bet a dime on my own forecast. All of my money is at risk on quantitative work with disciplined risk management, so anything I say today could be inconsistent with a position I actually have in the future or it can be consistent with it. I'm giving my honest belief but I just want to be really clear that I have quantitative risk management behind everything I do and I could be in or out of a position at any point in time. With that said, I don’t forecast anything in the sense that none of my work requires a forecast. That’s one of the tenets I teach about how investing is done properly. Any investment strategy that requires a forecast is by definition invalid in my world because the future is unknowable and if the future is unknowable, then you can't–

Chris: [Crosstalk 00:34:55] based on statistics.

Todd: Yeah. That’s what we’re going to do. I'm trying preface what I'm saying so people really understand where I am coming from here. With that said, there’s one really interesting asset class which is gold and gold stocks and the reason for that is they got five consecutive down years to pay on the index [If you look down anywhere from 85% to 90%. I'm a bit exaggerating, anywhere 80% to 90% belows depending on the index you look at and the other key thing is five down years there’s only one asset class that has had consecutive down years and that was coal and that was that six year preceded a very long bull market.

And that ties in with a whole another thing that’s very interesting. The whole world right now thinks that by the dip, by the dip, like you hear it right now the markets were recording this on January 26, 2016 and we’ve had a nice little downturn in the first part of January. Everybody wants to buy the dip. I have no idea if we are off to the races again, if the Federal Government has yet another cutie rabbit to pull out of their hat to prop things up one more round to artificial new highs or not, I can't forecast that. That’s government venture I don’t know but what we do know is the markets in the top decile evaluation at least now and it was in the top 6% to 7% near the highs and that’s a setup for their markets as well as a setup for low compound returns over 10- to 15-year time horizon.

What happens is we’re in a world where everyone thinks they should buy the dip. They're trained to do that because the government comes in and bills out every decline with lower interest rates and monetary policy or whatever. And so, I always look for the thing that nobody’s looking for that is not just plausible but actually likely, and the thing that strikes me that no one’s looking for that’s not only plausible but likely is inflation. If we actually got inflation, I have no idea if we’ll see deflation collapse before an inflation arise but given that the government’s hell bent on creating an inflation, it’s just a question of time until they succeed and what form and when you get inflation, now they don’t have the power of loaning interest rates because they control the short end of the curve but they don’t control the long end of the curve, and so the long end of the curve is not government controlled, its market controlled.

And so, I look at that and I go, that’s a way which valuations could move permanently lower. In a rising interest rate environment, if you go from stable loan inflation with stable loan interest rates to a rising interest environment, that’s a way in which you can get a downturn. It stays down. It’s also an environment where you can get fundamental shifts in what asset classes become the dominant asset classes.

That’s the same thing I looked at before I exited real estate. You can look at just an insane relationship with supply and I cannot believe that little downturn that we had in the beginning of January was greeted as a buying opportunity almost universally by the public and by the media.

Chris: Yeah. Well, if you look at the past several years, every single dip has been met with a V bottom and my whole attitude towards that was, “Well, it works until it doesn’t.” But I think, thinking of the markets in a broader perspective, you do have to consider all of those things that you were talking about like government intervention and interest rates and potential for inflations.

Todd: They can have another rabbit out of the hat. They can kick the can down the road again. There’s nothing says that they can’t. I’d never would’ve guessed they’d be this successful kicking the can down the road but there’s going to be a point in which they're going to try to kick the can, the can doesn’t move. When that happens—

Chris: [Crosstalk 00:37:56] back into gold or do you see something else possibly—

Todd: I don't do anything from a fundamental standpoint, I mean, everything would be supported by the math and the methodology. I'm just giving you—I'm as intrigued by all this stuff as anybody so I'm telling you how my mind looks at it and how I'm intrigued by it and the scenarios that I see but I don’t put a penny of risk at it until pieces come together and the position is established.

Chris: Yeah and so for anybody that’s listening to this, most of the audience knows that I'm in agreement with you on that that I like to fully test and really quantify any investment that I make but it is kind of fun and interesting I think to maybe speculate a little bit and just weigh the possibilities and the probabilities of what could happen but that doesn’t necessarily mean, and this is where I think a lot of people get this wrong, is they forecast, they have a prediction and then without any other data backing it, they put money on the line. They risk it and I think that’s why a lot of the talking heads on CNBC are coin flip, hardly any of them are actually accurate because they're just making forecast and predictions based on guesses.

Todd: Yeah. I have been watching CNBC in years and years and years. To me, it’s financial porn. I don’t have time to waste on that kind of stuff. There’s a relationship between valuation and drawdown and there’s a relationship between previous drawdown from highs and mathematical expectancy over a meaningful time period of 5, 10, 15 years. And so, you’ve got some really interesting setups here and you’ve got really polarized thinking within the investment community. And so I think we’re in a very interesting setup. I have no idea though if they're going to kick down the road one more year or not, but as far as I'm concerned, they kicked this can down about as far as they can, but they’ve surprised me so far. Maybe they’ll kick it one more time. I don’t know.

Chris: Interesting, interesting. Well, thanks for your perspective on that. Now it’s time for five to thrive. Basically, five questions that can help our listeners understand how you built your business and how to build wealth from your perspective. The first thing that I want to ask and this might be a little different for everybody is, are you in the camp of you got to focus all your efforts on one thing or diversify and have multiple streams of income?

Todd: Both. I'm a classic economist. In order to create something, you have to focus. But then once you focus, then it opens up avenues to diversified sources of income but the initial game plan— You want to focus to become such an expert. You add something that’s so valuable to others. They’ll gladly pay you for it and they’ll pay a premium for you because you're the expert. So you want to delve and become the expert, the go-to person in a chosen field that adds value. As Sonia Simona of Copyblogger says, “Don’t become an expert at naked mole rats.” Nobody’s going to pay you for it but if you become an expert at a specific programming techniques or marketing or copywriting or whatever that is and you become the go-to guy, command, get income for it, and then you can figure out multiple streams of income come off the backend of that once you're a highly paid, highly skilled, highly valued person.

Chris: I love it, I love it. What book would you—

Todd: By the way, I actually have an article on my site called Multiple Streams of Income Revealed and it goes through that whole explanation of how it works and people […]

Chris: Nice. I’ll go ahead and link that up, Multiple Streams of Income Revealed.

Todd: Yeah, so what I do is I try to debunk the traditional approach to multiple streams of income. Everything say you got to get out and suddenly get great at business and real estate and paper asset investing, they got to build all these income streams and when they get their business, they're going to do 14 income streams in it, diversify it. All of this is like, “Nah, it’s not quite the way it works with practice.” And so it goes through it and it explains that, yeah the principle is there but you got to apply it a certain way for it to work.

Chris: What book would you say is required reading for investors?

Todd: Required reading for investors? Well, the book I write eventually but it’s not out yet. I look at investment reading because there is so much that is wrong in so much stuff that I look at it as if, I mean, you can see at the back here, you can see the book shelves, those have been empty the couple of rounds and they just keep filling up. I've literally sold hundreds and hundreds of books on eBay. I sell them by the case. To me, if I can get one good tidbit or one good idea out of a book, I consider it a success. Is there one book I would recommend? No. I can't think of one. If you ask me for an entrepreneurship book, I can give you one of those.

Chris: Let’s go with that.

Todd: Okay. I recently read Essentialism by McKeown and I thought that was excellent. Another one that I love is The War of Art by Steven Pressfield. That one’s brilliant. Those are two good books, not traditionally considered in the world of entrepreneurship but they're dead on.

Chris: Yeah. Typically, it’s the ones that aren’t obvious that are the best for entrepreneurship or investing. I think a lot of entrepreneurship books can translate into investing especially a lot of the mental side of things, like Trading in the Zone or the Mental Game of Poker, I think those types of things apply in both industries.

Todd: Well, the War of Art is all about dealing with your resistance, overcoming your personal resistance which everybody confronts as they try to move their life forward. I deal with it coaching all the time with clients. I deal with it with myself. I'm dealing with it right now when building up this course. Even if I teach, I'm not immune to it. We all have to have it and we all deal with it, we all confront it. And then the Essentialism, it’s all about in today’s society, there is more opportunity and more things that we can handle, and so it’s all about boiling down to those most essential things that make the biggest difference.

Chris: Nice. I love that. Keep it simple and get rid of all the noise.

Todd: Yeah.

Chris: Do you have a favorite quote or a mantra that you tend to live your life by?

Todd: Yeah. Actually, let me read one from here on the [unintelligible 00:45:13] my old monitor’s over here. I love this one by Andy Warhol, “Being good in business is the most fascinating kind of art, making money is art, and working is art, and good business is the best start.”

Chris: Nice.

Todd: Yeah, I love that one you know. I've got several more on the monitor if you want more but that one’s probably a good one to leave you with.

Chris: Yeah, that’s a great one. Final question, what does true wealth mean to you?

Todd: True wealth is about freedom and fulfillment. It’s not really about money. No one sets out because they want more money. What they want is what they think money will give them and so true wealth is recognizing that the thing you really wanted was freedom in the first place and the reason you pursued financial freedom is because you projected your desire, that internal value for freedom onto an external thing called money, and so when you pursue true wealth, you really own that the value is freedom itself and it’s an internal experience and how you create that in your life.

Chris: I love it. Freedom and fulfillment. That’s a good place to leave it off. Todd, any final words of wisdom or pieces of advice for somebody that wants to become either an entrepreneur or an investor? I know we kind of hit it from both angles today and we jumped back and forth quite a few times but any final thoughts that you want to leave everybody with?

Todd: Yeah, life is an adventure. Go with it. I said it earlier in the interview, the whole reason I'm doing financial management was I wasn’t okay taking it to my grave. It wanted to give it a shot. I wanted to go for the adventure, bumps, bruises, and all. And so life’s an adventure, go with it. You're going to die anyway. So why not just go for it.

Chris: Absolutely. I love it. Todd, where can people reach out to you? Obviously, Financial Mentor, anything else?

Todd: No, that’s it man. Financial Mentor.com is my hub, that’s more than enough. That’s focus right? We talked about focus.

Chris: That’s it.

Todd: Anyway, that’s my hub, that what I build, and that’s where everything is and you can find social medial profiles from there, but my focus really is the site. That’s what I love.

Chris: Cool. So we’ll link all that up guys in the show notes. Todd, thank you so much for being on the show. I know people are really going to get a lot out of this. You definitely have a wealth of knowledge and have been in a lot of different industries from trading to real estate and now internet businesses, so I love it.

Todd: Alright. Thanks for having me on the show Chris. I really enjoyed talking with you.

About The Author

Chris Dunn is the founder of Skill Incubator. He is an active investor and entrepreneur with the mission of helping people learn Skills to thrive in today's economy. Chris spends his time testing and building multiple streams of income and investing the profits. Read more here.