233 | Achieving Peace of Mind in Investing with Breanna Blaney

Hilary Hendershott: Welcome back to Love, your Money. I’m your host, Hilary Hendershott. Let’s talk about investing and mindset. How do you feel about investing? Is it stressful for you? Maybe it’s not right now because as of today, the global stock market is at or near an all-time high but how do you feel, for example, when you make investing choices, when you pay taxes associated with investing, or the thing we all fear, lose money in the stock market? Of course, my team and I are in the trenches with our clients, and I hear from people all the time who are maybe scared about the national or economic news, the presidential election. Sometimes they’re scared about the balances they see when they log in to their investment accounts. It’s really from our perspective as financial advisors really predictable, actually. When the stock market dips, people get afraid.

So, for years, the academics have studied the behavior that precedes more profitable outcomes in stock market investing. And it’s probably not a surprise to you that we do know, assuming you have a well-built investment portfolio, that staying the course tends to lead to the best outcomes. And just like that, I know that I’m safer on an airplane than I am on the freeway in a car. Yet I still sit white-knuckled on so many flights. I’m writing and rewriting what I expect to be my final communication to my loved ones, and wondering when I should send it. So, sometimes knowing doesn’t make the difference. So, I’m talking to my guests on Love, your Money today about how to cross that chasm. How can we choose a more peaceful and mindful experience of wealth building?

My guest today works for Dimensional Fund Advisors, which is an investment firm that I’m a huge fan of. Their mutual funds and ETFs are evidence-based. They have higher expected returns than most and are competitively priced, being based on Nobel Prize-winning research. But that’s not what we’re here to talk about today. Bre Blaney leads Dimensional’s efforts to explore the relationship between life and investing. Dimensional’s Life Invested program helps simplify the world of investing, integrating it into the bigger picture of your life so that you can not only invest better but live better. Imagine. Interestingly, Bre is also a holistic coach with over 1,000 hours of training in Yoga and Ayurveda, and she’s passionate about the intersection of mindfulness and finance.

If you enjoy this conversation, I’m asking you to please take three minutes, leave me a five-star rating and review today, and then forward this episode to a friend who really needs to hear it. That really helps us share the message with more women just like you.

[INTERVIEW]

Hilary Hendershott: Bre, welcome to Love, your Money.

Breanna Blaney: Hello, Hilary. I am so excited to be here. Thank you.

Hilary Hendershott: Yeah. I am really eager to talk about this topic because I feel like you’re taking it head on, and I feel like it’s something I kind of fear and fight with because, obviously, when my clients are afraid of investing and feel bad about investing, I feel bad but you’re just really gung-ho about it. So, I’m excited to talk with you. So, let’s talk about pursuing and even achieving more peace of mind in investing. If I were a friend of yours or an aunt of yours who is nervous or upset about the stock market or my own investments, how would you persuade me to think more like you?

Breanna Blaney: Wow. Hilary, it’s a big topic. And I think that it really starts with this idea that whether we realize it or not, we have a mindset. And a mindset is simply the way that we view the world or like make decisions. And so, all of us are coming to investing or really anything in our life with this mindset. And that mindset is something that has been shaped by our evolution as human beings but also just our experiences. Right? Like, what have your personal experiences been about money and investing, and what have we seen in the media? And so, in many ways, I think it’s okay to first start by saying like, “Hey, it’s natural. It’s okay. Whatever you’re feeling right now about money, about markets, that’s okay.” And I’ve heard you say this, I think as well, Hilary, just this sense that step one is like becoming aware of what’s happening here and now. Like, we’ve got to start with the current state.

And so, that really is what it is like step one is becoming aware of what is your mindset like what do you believe about markets and about investing? What has shaped your experiences around that? How can you become more aware of what your mindset even is, and how that may be influencing your decisions? From there, I think step two is really recognizing that you have a choice. And again, it sounds simple but it’s like, “Hey, I have a choice of how I get to view markets and evaluating whether that choice is actually supportive for you or not.” So, say you’re really fearful around markets and you’re like, “Okay. Every time the market goes down, I’m getting a pit in my stomach. I’m panicking.” Well, you can take a step back and recognize, “Okay. Like I have a choice. I don’t have to view markets this way,” believe it or not, even though it might feel that way and that everyone else…

Hilary Hendershott: Revolutionary thinking, Bre.

Breanna Blaney: Exactly. Revolutionary thinking. You don’t have to think that way. You can change your mindset, and you do have a choice. And it doesn’t have to be one that is of panic. And so, if you are evaluating your mindset, you look at markets, you’re like, “Okay. I have a lot of fear around this. This isn’t actually what’s supportive for me. I’m spending all of this time being worried about what’s happening in markets.” Then it’s time to take action to actually shift your mindset. And I think all of us as individuals, we have this responsibility to make informed decisions for ourselves, to take ownership of our mindset. And I think that I am really here to tell you and what Dimensional espouses, and what I personally espouse is that there is this other way, like there’s a sensible way to view markets, to view money, to view investing, and it’s actually a lot like a sensible approach to life.

It’s not so different than how it is to just simply live your life. And so, instead of being in that panic state, that fear state around markets being reactive, I mean, what happens in life when we’re reactive with it’s for our husband or…

Hilary Hendershott: Well, I’m in my lizard brain for sure. I often say things I regret.

Breanna Blaney: Exactly, exactly. And I think for most of us it’s like, yeah, maybe that’s not the best mindset to take to markets because we see how that plays out in other parts of our life. Well, that’s the same thing that really happens in the financial markets as well. And so, what if it’s actually totally natural for markets to go down and there’s no need for you to panic? Like, let’s rewrite that belief because when you’re investing in the stock market, like you’re receiving a return because of that risk, and so there’s just this opportunity to really rewire to take a different approach to markets.

Hilary Hendershott: Amazing. And so, how would you describe because this is different than how most people, even really smart people? I have lived in Silicon Valley and lots of the tech people who are very, very smart, they talk about the markets in smart ways, and yet they still panic. They still sell out and keep everything on the sidelines in cash. Why is this mindset or why is it that people have learned to think about markets so differently?

Breanna Blaney: It’s a big question, Hilary. I mean, it is. It’s so pervasive like in the media and just in our world like to approach markets in this way.

Hilary Hendershott: And I think it serves the media too because it keeps people tuning in.

Breanna Blaney: 100%. It’s like it’s the show. And if you can keep the show going, then people are going to continue to be there. But there really is this other way and I think that we’ve been conditioned that it is really this like chaotic state. And the thing is like we don’t necessarily know what we don’t know. So, I think that most of us aren’t really taught this in school and that often we’re kind of haphazardly picking up pieces along the way. I know that when I, I mean, I was never taught any of this in school. I learned that once I started my career, and I feel very grateful.

Hilary Hendershott: I didn’t see any classes in the catalog on how to think about investing.

Breanna Blaney: Exactly, exactly. And so, it’s like we’re kind of left up to just absorbing whatever we get exposed to. So, if our parents are thinking about this way or we grow up in Silicon Valley or whatever, whatever’s around us, that’s kind of what we’re being absorbed by. And so, the beauty and I can get into this as much as you think it’s relevant just like the history of finance. Like, there’s been an evolution of finance just like there’s been an evolution of ourselves as human beings. And so, when you think about like Investing 1.0, that was really more of this active management approach. And that’s what, I mean, they’re still very prevalent in some ways today. And that’s the approach of I can out-guess markets or I can predict what’s going to happen in markets.

And there was really a revolution in finance when we started to get more data around financial markets. And does this approach actually work? Can you actually outguess and predict and choose the next hot stocks? And really what the data shows is that it’s very challenging to do so.

Hilary Hendershott: Incredibly. And you have to be really fast and really smart.

Breanna Blaney: Well, it’s really much more luck than it is actually skill and it’s really hard to do that consistently again and again. And so, that really brought around the evolution of investing 2.0, which I’d say more of an indexing approach. And then investing 3.0, which I talk about is what Dimensional’s approach really is, which is the science of investing and how do we really work with markets and understand markets. And just like life is a science, investing is a science. And that we can actually take a scientific approach to markets in that way and that’s one that actually espouses much more peace of mind that allows you to just ride the waves of life, of markets with much more ease and calm.

Hilary Hendershott: Well, it’s been interesting for me to watch over my multi-decade career the sea change of thinking from, I mean, when I started, we were really convincing people of what you call Finance 2.0. It was like, “No, no, no, stop active investing. Let’s look at what this indexing thing is doing.” And we were sort of kind of pulling a little switcheroo, getting them into the Dimensional funds because nobody really understood what that was. But now this is the zeitgeist. I mean, many people understand the indexing, the wisdom of indexing. So, I certainly would love it if this is the next sea change if the next sea change is a sea change of empowerment and emotional mindset, being favorable to markets, working with markets. I’m really excited about this concept.

So, one of the things I know, people always want to talk to me about risk and they always talk about how much risk am I taking. And I say to them, you do realize risk means it goes down and up, right? But when people say risk, they really just mean down. They don’t mean up. So, nobody seems unhappy when the stock market is risky in the positive. How can we be more accepting of the fact that in order to earn that risk, in order to earn the profits that the stock market almost promises, if you do it right, that it does come with that temporary downside?

Breanna Blaney: I love, Hilary, and I touch upon this, you said like the stock market almost promises these returns and like, “Well, what do we mean by that?” And I like to even before we’re getting into about the risk it’s like, why would we even invest their money in the first place? Like, why do we expect positive returns in markets? And the reason is it’s like when you’re investing in the stock market, yes, you’re investing in stocks but you’re really investing in human ingenuity. You’re investing in humans, you and I, our ability to solve problems like to create solutions for people. And so, like that’s really inspiring and very optimistic. Again, kind of a different view than often we see in the media that there’s actually a reason to be optimistic. There is a reason that we see on average 10% returns in the stock market.

And that’s an empowering message because it’s like regardless of what happens, humans, we are problem solvers. We’re going to tackle what’s happening. And that’s on the microcosm of us as individuals. Like, what happens when you have a challenge that goes on in your business or your family? You just sit there and take it?

Hilary Hendershott: Yeah. I don’t, but it is miraculous what people have done, right? I mean, I struggle in my business every day but I look at the solutions people are creating. It’s like, wow, people are incredible.

Breanna Blaney: Exactly. And it’s like COVID or any of these big challenges in human history, we have figured out solutions like we’ve made life better for ourselves. And whether it’s the invention of the internet or the iPhone or AI, it’s inspiring to sit back and be like, “Wow. Look at what the humans just are capable of creating.” And that’s what you’re investing in when you’re investing in the stock market. And so, I say that message before we get even into the downs and ups because that I really feel like when I think about that, when I look at the stock market going down, that’s what I think about. All right. Well, the humans are going to find a solution to this problem, and eventually go back up.

Hilary Hendershott: And you don’t mean the finance teams to improve the earnings reports. You mean the actual underlying solutions, right? We’re producing shareholder and customer value day after day after day.

Breanna Blaney: Exactly, exactly. But, I mean, there’s a reason as human beings that we panic more when things are going down versus going up. Right? When you think about our evolution, when we’re roaming around the jungle and we’re faced by a lion or a tiger or bear like we’re trying to keep ourselves safe. It made sense that we have kind of more of this ingrained fear of losing and more of the behavioral side. It’s known as loss aversion. Like, we are conditioned to actually fear losing than an equivalent gain. And so, it makes sense that that’s out there but today most of us are not in life-threatening situations and we’re not needing to fear for our survival. And so, we have to start to again rewire that belief because if we’re stuck in that mindset, it can stop us from investing in the first place. It can limit our ability to actually get the returns that we deserve. And so, that’s really, I think, the mindset shift of not having to panic and worry when the market goes down, that that’s actually natural. That’s what’s allowing there to be that reward.

Hilary Hendershott: Yeah. I like the phrase “reward follows risk.” People right now are so enamored of high-yield savings accounts and I mean more power to them. I love my clients are earning interest and they weren’t before. I love that. Money is always better than no money but I find myself wanting to say that’s just going to keep up with inflation. You realize there’s no such thing as a free lunch, right? Like, the stock market always has higher expected returns. Your money should always be here, the money that’s earmarked for long-term usage. It’s so much so that my team’s like, “Well, you stop talking down our high-yield accounts?” I said, “Okay. Fine. It’s fine. Go do your savings accounts.”

So, one of the things that’s really the greatest thing about Dimensional is its relationship to being evidence-based. And I have this part when I have a presentation that I show new clients and I always say, “Look, I’ve made these big assertions that active management doesn’t turn out, that passive is the way to go or evidence-based is the way to go. So, I’ve made these big assertions. Of course, I have the data to back it up. And so, we go through a little bit of that. And this is an audio medium so it’s a little bit more difficult because you can’t show charts and slides. But if you would just say, what is the data that Dimensional leans on to make these bold assertions that we should feel good in good times and bad and that the stock market is a great place for our money?

Breanna Blaney: There’s, like you said, Dimensional is a data-driven firm. And so, we’ve got a lot of data to back this up. Every year, we run something called our fund landscape and that essentially we look at all of the active mutual funds and ETFs out there, and we look at their performance like what’s happened over the past 20 years. And so, that’s looking at the data from the past 20 years ending at the end of 2023, only 17% of active funds, ETFs, and mutual funds outperform their benchmark, only 17%.

Hilary Hendershott: And that’s their only job. That’s it, their job.

Breanna Blaney: I know. Like, the odds are in your favor. I mean, when you think about this, I love, our founder, David Booth, has this quote, “Judge yourself by the quality of your decisions and not the outcomes.” But like you have to be able to learn and put the odds in your favor. And so, when we’re looking at this data every year after year after year, these numbers don’t change significantly. They move a percentage point here and there but this has been consistent. And so, we see only 17% of active portfolios are outperforming their benchmark. Those are not odds that I want to take. I wouldn’t take that in anything in my life.

Hilary Hendershott: Take the under. Thank you.

Breanna Blaney: Exactly. And in contrast to me, it’s 77% of Dimensional’s portfolios have outperformed over that same time period. So, those are odds that I would take. That’s a significant difference in terms of that. And then when you’re investing in an index, you’re getting more market-like returns but you’re still underperforming benchmarks, net of fees.

Hilary Hendershott: Correct. And that’s what I like to remind people of is whenever you see the index’s returns, that’s not the returns the investors actually get.

Breanna Blaney: Yeah.

Hilary Hendershott: And, gosh, I just really feel like this message is so heartening, especially for women who have historically been really not just disempowered, but sometimes terrified of investing. Right? I see huge amounts of money in savings accounts. And I always say whenever I see that much cash, I know there’s fear. And they always say, “You got it. You hit the nail on the head.” So, I hope that this message is heartening for women. To make this a little bit personal, I do have a signature question that I ask every guest on the show, and that is if your money were writing you a love note, what would it be thanking you for?

Breanna Blaney: Oh, Hilary. It would be thanking me for my investment in myself and like my belief in myself and also like the time that I’ve taken to shape my mindset. Today, we didn’t get too much into like the whole topic of Life Invested but that’s really where my time has been spent at Dimensional now. And just more broadly, this whole intersection of life and investing and I really view it as this way to empower investors and the way that I personally found myself being empowered about investing as well is like, how do you take one mindset to your life? How do you take one philosophy to your life? And so, the way that I approach markets and money is very similar to the way that I approach my relationship or the way I make decisions, I mean, all of those things.

And I actually think like my money would be thanking me for that because there’s not this division and I think women in particular too often we’re finding ourselves feeling like divided, like we’re one person here and another person here, and we’ve got to be the best spouse and the best mom and like the best career professional.

Hilary Hendershott: Burning candle, all the ends.

Breanna Blaney: Exactly. And it’s like I’ve found so much solace for me personally. And how do you create one mindset that works across all of those things? And I think that my money personally would be thanking me for that, how have I taken the time to really invest in myself and take a sensible approach to the way that I use my money as well.

Hilary Hendershott: Very inspiring. Thanks for joining me on Love, your Money.

Breanna Blaney: Yes. Thanks, Hilary. It’s been great.