In this episode, I continue my conversation with Cullen Roche to explore the 10 fundamental principles every investor needs to understand before building their portfolio. Moving beyond which portfolio to choose, Cullen breaks down how to actually invest properly, covering everything from understanding what you’re really doing when you buy stocks, to managing costs, to navigating the behavioral traps that derail most investors.
We dive deep into why you’re a saver (not an investor), how diversification is the only free lunch in finance, and why beating the market is nearly impossible even for professionals. Cullen shares hard-won wisdom about managing risk, controlling what you can control, and building realistic expectations that will help your portfolio survive the inevitable market turbulence ahead. This is essential listening for anyone who wants to invest with confidence and avoid the costly mistakes that plague most portfolios.
Key Takeaways
When you buy stocks on the secondary market, you’re not financing companies or investing in production—you’re simply reallocating your savings by buying someone else’s stock.
Over 20 years, more than 95% of active fund managers underperform a simple index fund, proving that beating the market is extraordinarily difficult even for Wall Street’s smartest investors.
The biggest fee you’ll ever pay isn’t your financial advisor—it’s inflation, which silently erodes your purchasing power and must be factored into every investment decision.
Real, real returns (after inflation, taxes, and fees) are what actually matter, not the headline 10-12% stock market returns you hear in the financial media.
When a stock or asset generates 60% returns in a single year, you create “price compression” that increases your sequence risk and behavioral risk going forward.
Understanding your needs versus wants and controlling your liabilities is often more important than asset management when building long-term wealth.
Long-duration bonds are terrible matching assets for long-term expenses because those expenses are unpredictable—you’re better off taking diversified stock market risk over 20+ year horizons.
Resources
Cullen’s Books:
Chapters
Note: Timestamps are approximate and may vary across listening platforms due to dynamically inserted ads.
(0:00) Introduction
(0:30) You’re a saver, not an investor
(4:15) Why real wealth usually comes from businesses and skills
(8:30) Behavioral risk: fear, FOMO, and overconfidence
(14:00) Why beating the market is harder than it looks
(22:00) When “winning” investments become dangerous
(32:45) Diversification and understanding what you own
(44:30) Managing uncertainty and imperfect information
(1:02:00) Why simple portfolios are easier to stick with
(1:22:00) Long-term discipline and investing for real life
Thanks to our sponsors!
Policy Genius
Secure your family’s future with Policygenius. Head to policygenius.com to compare life insurance quotes from top companies and see how much you could save.
Mint Mobile
Quit overspending on wireless with 50% off Unlimited premium wireless. Plans start at $15/month at mintmobile.com/paula
Indeed
Don’t leave hiring to chance, hire better and work better with Indeed. Visit indeed.com/credit
MasterClass
Enjoy 15% off any annual membership at masterclass.com/afford
Gusto
Get three months free when you run your first payroll. Head to gusto.com/paula.
