What's in store for you:

1. Photo From My Life
2. Life Thought:
3. Financial Thought:
4. Good Sh*t

Photo From My Life:

Life Thought:

At age 10, I had a terrible realization. I remember it vividly:

I wasn't going to become a professional athlete. Up until that point, I was convinced. But, it hit me like a ton of bricks.

Now, at the ripe age of 32, I've had another realization. I'm not going to do something remarkable with my life. Sure, it sounds a bit depressing, but it's true. I'm not going to cure cancer. I'm not going to build a billion-dollar company. I'm not going to be remembered past my grandkids' generation. Let me be clear - I never thought this was a likely outcome, but I always thought there would be a 0.0001% chance.

So what caused me to finally accept this (obvious) fact?

I don't want it. I don't care enough. This is another unsettling feeling that I haven't come to terms with quite yet. But, what I do know is that I no longer care about the grandiose.

What do I care about?

Being famous in my own house. Making the people I interact with on a daily basis feel good. Helping people whenever I'm given the opportunity. Enjoying a quiet morning with tea. Sitting on the dock watching the sunset. Laughing with friends. Raising my son with love and empathy. Driving a Hinckley Picnic Boat.... okay, maybe that one is a fantasy.

That is my happy life.

Financial Thought:

This is my first love story post about direct indexing (aka custom indexing). The world has slowly shifted away from active management (stock picking), and my bet is that this will only continue. There are countless studies that show just how hard it is to consistently outperform the market over a 30+ year investment life. Sure, a smart investor may be able to win during a specific market cycle or with one strategy, but it's hard to do over a long period of time.

A key challenge with this active-to-passive shift we're seeing is that individuals are left with what I call the "hangover portfolio." Here's the scenario:

• Joe Smith lives in NYC and started working with an advisor (we'll call him Stock-Picking Stan) 12 years ago. Stan built a portfolio of 50 stocks
• Stan's portfolio has dramatically increased in value, but has underperformed a broader passive portfolio.
• Joe Smith had an epiphany. He saw the light and wanted to transition to a passive portfolio.

This is good news, right? Not necessarily. To transition this portfolio to ETFs, Joe will have to sell his stocks and pay the taxman. This is exactly what we don't want. For a $1m portfolio with a cost basis of $750k, Joe would be responsible for $65-75k of taxes.

So, here's the power of direct indexing:

Using technology, we can "absorb" Joe's portfolio and analyze the stocks that he already owns to add additional stocks so that his overall exposure mimics whatever index he wants to track. It won't be perfect - we'd expect to see some tracking error (a fancy way of saying performance discrepancy vs. the index). However, over time we'll be able to realize tax losses in this strategy and bring Joe's portfolio much closer to the index without paying a large tax bill.

Good Sh*t:

How to Build a Kick Ass Life: If you choose to absorb one piece of content that I recommend this year, please let it be this one.

I'm often asked about my weird career and entrepreneurship journey. It all comes down to building a life that lets me escape "the matrix." That's literally the only way I can describe it. If you want a far better discussion about how to build the best life possible, watch this talk which you can find on YouTube.

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