BIO: Mike Koenigs is a serial entrepreneur with five successful exits, a 19-time bestselling author, and a top strategist for founders post-exit.

STORY: Mike invested big in a SaaS startup set up for success, but infighting brought it to its knees.

LEARNING: Character is bigger than charisma.

Mike Koenigs is a serial entrepreneur with five successful exits, a 19-time bestselling author, and a top strategist for founders post-exit. He helps build powerful personal brands in just one week and pioneers Generative AI for executives, speaking at elite events like Abundance 360, MIT, and Tony Robbins’ gatherings.

Mike learned about a SaaS startup from a client with whom he had spent time and had gotten to know, like, and trust him. So, when the client introduced Mike to this deal, he got interested.

The startup looked great, so he invested a substantial amount of money and then doubled down because it got even better.

The basic premise was that it was a pool. The founders would find SaaS companies with customers, momentum, technology, and a bit of a moat. They had much experience and success, such as a 10x dividend to investors in three years.

Unfortunately, the two founders started fighting. One of them locked the other one out of everything. They had the majority and equal shareholding, making infighting even worse. The remaining partner started emptying the coffers.

Someone doing the books became a whistleblower and revealed the shenanigans going on. The partner was siphoning off money, building a house, going on big trips, using private jets everywhere, etc. It got uglier and uglier, causing the shareholders to file lawsuits, and the FTC got involved. Years have gone by, and things are still shut down.

• Time kills deals.
• Character is bigger than charisma. Crooked founders will gut you faster than any market downturn.
• Put all that money into index funds and let it compound.

• The only way to invest as an angel investor is to invest in 10 startups. Don’t do it if you are not prepared with the money and time to do that.

Unless you’re a full-time VC with deal flow, customer channels, or an exit mapped out, keep your money in things you can control. If you’re a shareholder, your best exit is for a big company to come and buy what they believe is money at a discount.

Mike recommends learning to build a brand that will elevate everything you touch for the rest of your life. He suggests reading his book, Your Next Act: The Six Growth Accelerators for Creating a Business You’ll Love for the Rest of Your Life, to help you build your brand. He also recommends immersing yourself in AI and learning how to use it effectively.

Mike’s number one goal for the next 12 months is to become an international citizen. He wants to continue living his beautiful life in multiple locations and working with more entrepreneurs worldwide.

In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 34: Bear Markets: A Necessary Evil.

LEARNING: Investors must view bear markets as necessary evils.

In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over 30 years as the head of financial and economic research at Buckingham Wealth Partners to help investors. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.

Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 34: Bear Markets: A Necessary Evil.

In this chapter, Larry explains why investors must view bear markets as necessary evils. He says that if stocks didn’t experience the kind of bear markets that we have, investors would be very unhappy.

Larry further explains that the most basic finance principle is the relationship between risk and expected, but not guaranteed, return. So, the higher the risk, the higher the expected return, which means that if the risk is high, investors will apply a bigger risk premium, which will lead to the denominator in the formula of the Net Present Value. The numerator is the expected earnings. The denominator is the risk-free rate plus the risk premium.

Larry highlights historical bear markets, noting the U.S. has experienced losses exceeding 34% during the COVID crisis and 51% from 2007 to 2009. He argues that these losses are essential for investors to demand higher risk premiums. The very fact that investors have experienced such significant losses leads them to price stocks with a large risk premium.

From 1926 through 2022, the S&P provided an annual risk premium over one-month Treasury bills of 8.2% and an annualized premium of 6.9%. If the losses that investors experienced had been smaller, the risk premium would also have been smaller. And the smaller the losses experienced, the smaller the premium would have been.

In other words, the less risk investors perceive, the higher the price they are willing to pay for stocks. And the higher the market’s price-to-earnings ratio, the lower the future returns.

The bottom line, Larry says, is that bear markets are necessary for the creation of the large equity risk premium we have experienced. Thus, if investors want stocks to provide high expected returns, bear markets (while painful to endure) should be considered a necessary evil.

However, Larry notes that it is during the periods of underperformance that investor discipline is tested. Unfortunately, the evidence suggests that most investors significantly underperform the stock market and the mutual funds they invest in. The underperformance is because investors act like generals fighting the last war.

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BIO: Jeff Sarti, CEO of Morton Wealth, leads a firm managing over $3 billion in assets. With a mission to empower better investors, Jeff helps clients achieve their financial goals while supporting employees in their career growth.

STORY: Jeff bought a few dot-com companies, thinking it was smart and safe because he bought the big brands. All of the companies dropped 90%+.

LEARNING: Don’t let greed, FOMO, and a lack of imagination drive you to a bad investment.

Jeff Sarti, CEO of Morton Wealth, leads a firm managing over $3 billion in assets. With a mission to empower better investors, Jeff helps clients achieve their financial goals while supporting employees in their career growth. A CFA charterholder, Jeff shares his insights through his Perspective newsletter. His expertise emphasizes challenging the status quo and fostering long-term, resilient investment strategies.

In the late 90s, during the dot-com boom, Jeff had just started making a bit of money. He bought a few dot-com companies, thinking it was smart and safe because he bought the big brands. All of the companies dropped 90%+ after a while.

• Don’t let greed, FOMO, and a lack of imagination drive you to a bad investment.
• Always do your research.

• When prices get untethered from earnings growth, our expectation of the future is what matters.

The only way you can learn is by doing and making mistakes. But before you start doing, do the research, understand the underlying risk factors of your investments, and don’t take shortcuts.

If you do, at least know you’re speculating and not investing. Keep that speculative piece of your portfolio small. It’s always a good idea to balance speculative investments with more traditional, long-term investment strategies for a more secure financial future.

Jeff recommends checking out resources on his website, such as his investment guides and market analysis, and signing up for his quarterly newsletter if you want financial education.

He also recommends reading Thinking Fast and Slow by Daniel Kahneman and books by Morgan Housel to understand how emotions drive investment decisions.

Jeff’s number one goal for the next 12 months is to continue traveling the country with his investment team, uncovering some new niche opportunities.

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