Are Bonds Actually…Hurting Our Portfolios?

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Traditional retirement advice often suggests balancing stocks and bonds as you near retirement—but as two Rich Girls pointed out, bonds seemingly don’t have great returns. So are they still worthwhile? And if so, should you buy them? Plus, we respond to some critical feedback we received.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew content and additional fact checking comes from Scott Wilson.

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Mentioned in the Episode

• Personal Finance 101 free course

• BND ETF

• 4% Rule episode of The Money with Katie Show

• I-Bonds episode of The Money with Katie Show

• Paper from Ben Felix’s analysis on bonds in retirement

• Schwab article on diversification

• Got money stories? Share them (anonymously, if preferred) with us at moneywithkatie@morningbrew.com

• Hamilton Nolan interview on The Money with Katie Show

• Aja Barber interview on The Money with Katie Show

• “Is FI a Sign of a Problem?” episode on The Money with Katie Show

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Katie:

Welcome back rich people to the Rich Girl Roundup, the weekly discussion of the Money with Katie Show. As always, I’m your host, Katie Gatti Tassin, and every Monday Henah and I dig into an interesting money discussion. So before we get into it, I’m actually extremely excited about this week’s upcoming main episode. It’s about the index fund bubble and the issue that some people have pointed out with passive investing that we should probably be aware of. So I just think it’s one of the most interesting deep dives I’ve done in a long time. I’m really excited to share it with y’all. And it’s also one of those topics that I’ve been getting emails about from the very beginning of Money with Katie. So for several years I know that this has been on people’s minds, so that’s going to be great, on Wednesday.

But in the meantime, Henah, what are we talking about today?

Henah:

We’re talking about bonds. So this week’s question about asset allocation as you approach FI came from Rich Girl Abby. She said, “My husband and I currently have a majority of our portfolio and stock index funds about 90% stocks and 10% bonds. Overall, we are getting close to FI and are considering how to adjust this to maximize returns while balancing risk. I understand the conventional advice as you approach retirement is to shift your allocation from stocks to bonds to smooth out the risk. However, I’m wondering where this advice comes from and what alternatives may be possible because looking at the bond performance over time, it’s pretty unimpressive. If you look at the Vanguard Total Bond Market ETF, for example, this is trading at $75.44 cents a share as I write this. When I look at the max history on Google, it shows that in 2007, it was trading for $74.91 cents a share. So it looks like this actually loses money over time to inflation. My husband prefers to use the consumer staples index funds instead, which does make a lot of sense based on historical returns and the theoretical stability from a steady demand for these types of goods. What thoughts do you have?”

And so we also just coincidentally also got this question two days ago from someone named Danielle who wrote, “I’m in my mid-thirties and as such, have had some savings bond bought for me. They started to reach their full maturity over the last few years and I just deposited one today, a $100 bond bought for $50 and August 1994, which was valued at $164 when I brought it to the bank. So I started down a rabbit hole of figuring out how much that $50 would be worth today if the well-meaning relative had invested it in an index fund instead. It also made me think, are people still buying savings bonds? I could see that they’re still for sale electronically, but the rates are dismal. How is the system still functioning?”

There’s a lot to get into, but I think first we just want to start with the refresher of what bonds are. We do have a Personal Finance 101 course that teaches you all this if you want to join, but bonds are fixed income investments, so they’re usually issued by governments and corporations when they want to raise money. And so you’ll receive a fixed amount of interest when the money comes back to you or it fully matures. And so when they’re referring to that traditional retirement advice, it’s usually saying that by the time you approach retirement, you want to be closer to 60/40 stocks/bonds or 70/30 stocks/bonds. So I know there’s also a difference between bonds and bond ETFs, so can you walk us through that?

Katie:

Yeah, something that I should probably state upfront is that the fixed income market is, as far as I’m concerned, a lot more complex than the equities markets, like the relationship between interest rates and bond yields. So I would say that a truly technically robust definition of the difference between bonds and bond ETFs is probably a little bit above my paygrade as woman with a podcast.

But one thing that did jump out at me about this question was the inclusion about the fact that the Vanguard Total Bond Market ETF, which is ticker symbol BND, effectively looks as though it’s trading sideways. So worth $75 in 2007, worth $75 today.

The way that these fixed income funds work is a little bit confusing because when you buy an actual bond and you hold it to maturity the way that Danielle did in her question, you get the original money back at maturity, but along the way you get interest. So you have a defined amount of money that it is the yield that it is kicking back to you. But when you invest in bond ETFs like BND, those own a bunch of bonds and then they distribute the interest payments from those underlying bonds to shareholders. That ETFs yield basically reflects the average interest of all the underlying bonds. The primary difference insofar as I understand it, is that a bond ETF, like BND, does not have a single maturity date in the way that if you go purchase a bond, it will have a maturity date. And so it means that the price of that fund is affected by interest rates. So as interest rates go up, the price of that bond fund will go down and vice versa. So they noted 2007 to now if you watch the price of that fund, it kind of moves inversely with what the federal funds rate or what we colloquially call “the interest rate” is doing.

So all that to say, unlike an equity ETF, it is my understanding that solely looking at the price of the fund doesn’t really tell you that much about the performance because the purpose of owning the bonds is not for the bond fund to go up in value, but to generate a predictable yield or interest.

Henah:

Mmm.

Katie:

So that you have stability in the portfolio. If you wanted to check this, you could go to the Vanguard site and look at the page for BND, and rather than looking at the nav price, which is the $75.23, look at the 30 day SEC yield, which is 4.02% as of, let’s see, September 26th. So that will tell you what the fund is yielding on an annual basis, which is just more indicative of why you would hold the fund than the price. That would be my most casual normal person way of explaining the purpose.

And so to your point about traditional advice, traditionally we are told, yeah, you should increase exposure to bonds as you age because you are going to value that stability more. We know that the 4% rule research used between 50% and 75% large cap equity and then 25% to 50% US treasury bonds in order to run the back tests that supported a 4% safe withdrawal rate. But I think that that actually introduces a bit of a issue. We’re going to get to that right after a quick break.

So before I throw a wrench in all of this, Henah, any thoughts?

Henah:

Well, I’m vaguely reminded of our episode on I Bonds that I think we did back in 2022, and those were the days, it was one of my first months here, and I remember being like, what the F is an I bond? Like if Katie’s not buying it, I guess I won’t buy it. But we got a lot of angry comments from people when we first released that episode and how you chose not to go for I Bonds because everybody was trying to flock to safety as the market was crashing and interest rates and whatever. So can you remind us quickly about that episode, if someone wants to go find it?

Katie:

I sure can. That episode was basically intended to say, hey, what’s happening right now? What we are observing in the stock market during this big sell off of 2022 is exactly what all of the great investors warn us about, which is that the market is going down. There is a temptation to go to safety. There are these things called inflation indexed bonds that now that inflation is high, you can get a 9% return on your money and oh, isn’t that so great? Because look at what’s happening in the stock market. Everything is red, every dollar you put in is immediately taking a haircut.

And so yeah, we saw a lot of people saying, yeah, you should go be buying inflation indexed bonds, these I bonds. And my thought process at the time was, okay, if you’re already buying bonds in your portfolio and you want to change your allocation from whatever bonds you’re already buying to these ones that are going to give you 9%, alright, sure.

But what we shouldn’t do as investors is take the money that we would have invested during this downswing in the stock market and go move it somewhere else because the entire point of investing through a bear market is that you are getting those assets on sale, on sale and you’re going to benefit from the upswings. I called them a distraction and that made people really angry.

So in July, 2022, on the day that this episode went out, it was, let’s see, the S&P 500, the index was trading at 3,961. That same index today is worth 5,727. So my encouragement at the time was like, stay the course. If you are taking money that you would’ve been dumping into the stock market and you’re turning around and putting it in I bonds long-term, you are going to make less on that money in order to dollar cost average and get the positive benefits of dollar cost averaging. Now is the time that you really need to keep investing in that stock market and not be fleeing to safety if you are a 30-year-old that is trying to invest for retirement.

So that was kind of the thought process and that actually sets me up well for my big reveal wrench, which is a perspective from a guy named Ben Felix. People in the personal financial world who are really into this type of media, probably already know Ben Felix, he’s the cohost of a podcast called Rational Reminder. He’s also a fund manager at PWL Capital in Canada, and he’s very data-driven in his assessments. He’s really, really smart. And his perspective on bonds is that there is new research that suggests they actually hurt your retirement prospects.

Henah:

Ooh, spicy.

Katie:

Yeah, it’s a little spicy. He basically explains that bonds are included to reduce volatility, which is a psychological concern, not a financial one. And he says that volatility is not the best measure of risk and that risk should be measured at least in part as the probability of not meeting your consumption goals. Some translation from someone who does not have a CFP or a CFA and instead possesses a public relations degree: Basically if we’re only measuring risk as how hard it is to watch your portfolio go down, but we’re not measuring it from the perspective having as much money as possible later, we’re not really fully taking into account all of the considerations that we should be when making asset allocation decisions. And Ben did a video that used some data from a study that was put together that found a portfolio of 35% domestic stocks and 65% international stocks for the entire lifecycle of this individual. This retiree was optimal.

Henah:

So no bonds at all.

Katie:

So no bonds at all.

100% equity portfolio was technically the optimal outcome. Now in this study, domestic was true for whatever country you lived in. So there were I think dozens of countries including the US that they studied these outcomes in. And so obviously the results are going to be different depending on what country you’re in. But the TL;DR was regardless having 35% domestic stocks and 65% of international stocks across all these countries was technically the optimal outcome. And interestingly, the all stock portfolios produced better results overall and left tail results, which basically means even their worst case scenarios were better than the portfolios that had bond exposure.

Henah:

So even if you’re saying in like an prolonged bear market, this still was the outcome?

Katie:

I assume. So I didn’t dig into every single period they studied, but it was my understanding that the worst case scenarios across these different country specific domestic international splits ended up having better worst case outcomes. So yes, I would assume even in these bear markets, what was interesting is that even adding 5% to 10% bonds to the all equity portfolio resulted in worse overall outcomes.

Now, part of the reason that they think that this is the case is because at long time horizons, domestic stocks and bonds have relatively high correlations. So you’re not totally getting, at least as insofar as this study is concerned, you’re not really getting the diversification outcome that you would expect or that you would be thinking you would get by adding bonds. So I found that really fascinating.

I mean obviously the downside is that it is way harder psychologically to take this path because your portfolio is going to be exposed to a lot more volatility and obviously it’s using historic research in order to make these claims. So these are back tests. This is not a crystal ball, but overall I found it pretty and kind of a hole to poke in this conventional wisdom about adding bonds as you get closer to retirement.

Henah:

So I have two follow-up questions. Because one, I was reading this Schwab piece on diversification and it was saying that over the 30 years stocks posted an average annual return of 10.4% and bonds were 6.8%. But obviously those would vary widely year over year. So some year stocks were down 40% or up 40%, but bonds were far less variable. It was much more consistent.

So we often hear that bonds are going to be way better than sitting in cash, but a high yield savings account in today’s interest rate environment could easily also outperform bonds. So how should people think about that if they also know interest rates are going down, so high yield savings account like APRs are going to go down as well? Is that something where you’re like, take that a little bit into consideration or?

Katie:

It’s a great question and I think one that feels maybe more pertinent right now because of recency bias, we would probably not have been asking this just a few years ago. Obviously I can’t make specific asset allocation recommendations, but what I will say is that comparing the rates that high yield savings accounts are paying to bond yields is a little bit apples to oranges.

To your point, high yield savings rates can change at any time. There is no locked in rate. So when overall interest rates drop, so are the savings yields they’re going to drop too. So that means your high yield savings are super attractive right now for the first time in decades. But on the other hand, bonds and bond funds like BND, they do have yields that are more or less locked in. So even if they’re not as great this very instant as the high yield savings accounts are over the long term, you would expect to do better in high quality bonds.

So what should theoretically determine which one you’d choose is going to depend more on what that money is actually for. Do you need it in the short term? If the answer is yes, then yeah, high yield savings are going to be the better bet, but if you’re investing for the long term, if you’re holding for the long term, you are probably going to be better off putting that money in bonds. I am still personally a long way off from shifting my assets to a drawdown phase, so I really have not dedicated as much time to this question as I have dedicated to accumulation strategies and how do you get to FI. But I do think that Ben’s perspective and the papers that he is citing are pretty compelling and I’m just not sure how I will personally square them with, for example, Bill Bengen’s research that 75/25 was the best allocation for withstanding shocks at a 30 year drawdown. It’s possible he never tested a hundred percent equities. I’m not totally sure.

I think the question that most individual investors are going to have to weigh for themselves is how much volatility they think that they can handle and whether or not they believe they’re capable of having a 100% equities portfolio in retirement without basically playing chicken, without freaking out and pulling money out when the market is down. As we know, it’s very hard to do. And so to your point about high-yield savings accounts or other instruments that you might want to use for fixed income other than bonds, I think that that could be worth considering.

Henah:

So to both of their questions that are like, so who’s using bonds? Who’s buying bonds? This Reddit thread aptly surmised it, so I’m going to quote them. They said it better than I could: “Not all financial products are for people. Insurance companies and foreign governments have different needs than you do,” and as you said, the bond market is much bigger than the equity market. So bonds that individuals are buying may be very different than what corporations are buying for insurance companies. To their point, yes. But if you are reconsidering your asset allocation as you’re in your accumulation phase and want to shy away from bonds, I believe you do have an old episode on that that maybe from 2023, Katie, is that right?

Katie:

I don’t remember when we did that one, but I think that the main takeaway with if you are interested in maybe you’re listening to this, you’re still in your accumulation phase and perhaps you have more bonds than you would want. Something that I always think about is rebalancing on the buyer side. So rather than selling off assets and then reinvesting that money elsewhere, just as you add more, only adding more to the equity side such that your equities will continue over the years to crowd out, your bond allocation will get smaller and smaller and smaller by the very nature of the fact that you were adding more to the equities and the equities are growing faster.

One thing that our listener could do who mentioned that they’re a little bit wary of increasing their bond allocation but might not have a ton of time to do a lot of rebalancing, is they could always consider using their bonds first, like in their drawdown selling and using that money first such that the equity stay invested.

And obviously if you are feeling uncertain or you want professional advice on what your asset allocation should be, you could work with a fee only CFP and talk to ’em about something like a bond ladder or another type of fixed income instrument. It sounds like your husband has something that he might prefer, has done some research on an alternative, but that is something that you can always consider.

Henah:

Yeah, makes sense. Do you have anything before I move to a money story?

Katie:

No, let’s do it.

Henah:

Well, I have a twist for you because this week I got feedback.

Katie:

Oh, good. My favorite.

Henah:

If you do have money stories, we welcome all of them at moneywithkatie@morningbrew.com. We can keep them anonymous, but I find that they’re usually illustrative in sharing with the rest of the audience what they need to look out for. So send them in.

But this week we have some feedback. This person requested to remain anonymous, but they said, “As a frequent listener of the pod and reader of these newsletters, I notice often the final comment or conclusion is that some industry or player is causing the problems. For example, PE developers, big insert any industry here, I can clearly see the link, and I’m not suggesting that I disagree, but the pattern has become a staple of the content and is quite predictable. I often read—” I know, I was like, okay, I’ll just read through it really fast. Maybe she won’t notice.

Katie:

Straight to the heart.

Henah:

“I often read a paragraph or listen to a pod waiting for the big industry to blame at the end, seeing if I can guess the conclusion if it’s not already given away in the title.” Brutal. So they said, “I’m curious if one, this pattern is known and intentional. Two, a cop out, as always blaming the big industry seems a little easy. Social media commenters love to blame big whatever. I even heard of a recent pod joking that it’s big ice creams fault for something that was unrelated. Or three, true. I don’t know if the villain is always fleshed out, so I can’t say if I agree or not each time, but sometimes it’s just drop us to give a face to the cause of our frustration.”

Katie:

I would like to blame big podcasting for this critique.

Henah:

“I think it’s interesting so if this pattern is intentional or true, can you deep dive on which big industries you think are the main players causing the problems? Can we talk about how they’re connected, whether consumer preferences versus market conditions versus government policy comes into play? I’m interested to hear you flush this out more rather than provide ‘answer’ to a lot of the issues we’re facing. I would love to say burn it down and start over, but since we can’t, I’d rather understand the system and to better strategize how I want to play the game.”

Katie:

Well, first of all, I think it’s interesting that last line, that conclusion of since we can’t change the system, I’d rather understand how to strategize how I want to play the game. And this is the frustration that I think often accompanies learning more about systems level issues. I know I have definitely felt that way. I think in some ways I still feel that way and identify with that emotion that this person is describing. And they didn’t say it explicitly, but as you were reading the question, I kind of got this sense of, well, you’re blaming these industries, but what’s the solution? Since we can’t change the systems, why are we even talking about the systems?

And I think part of our goal over the last few years as a show, and I guess my goal as a writer is walking the line between on one side, understanding how the systems you exist within impact your life and on the other side how you can manage that in the meantime. And that’s sort of the balance. I feel like we are constantly trying to strike. Now whether or not you feel like we’re doing a good job of that, it’s obviously up for debate…

Henah:

Email moneywith—No, I’m just kidding. But I do think that in 2021 when I first found you and then in 2022, we had a totally different mission statement and it was much more just about money. It was about personal finance.

And now since the end of 2023, we’ve had a new mission statement, which is about kind of understanding where the political meets the cultural and being at the intersection of your individual choices within a broader system. So I understand what they’re saying, but I also think that is the balance that we’re trying to strike. And it’s a hard one because I think most people usually just stay in one lane, so to speak.

Katie:

Well, I guess that does answer the question of is it intentional that you’re pointing to these things? And so assuming I’m understanding what they’re asking correctly, yes, in that respect, it is intentional. But ideally the end goal of pointing out the ways in which this pattern that they’re picking up on, they’re like, oh, it’s kind of predictable. There’s always some industry. That pattern can be observed in everything from the way you feel when you walk into a Sephora, which was the subject of a essay a couple of weeks ago to the reason your veterinarian bills keep going up, to the labor law schema that dictates that you can be fired at any time for any reason. The ideal outcome of talking about these things is not that we walk away from the realizations and go, all right, well, that’s just the way it is. Hopefully it’s that we all better understand the way these systems impact us.

And I don’t know, I think the more that we can collectively begin to see the world in this way, the more we can, and I know this sounds cheesy, but identify ways to exercise our collective power. Because I don’t think you can fight something that you don’t understand. And I don’t think you can resist something if you don’t even realize that it is affecting you.

So to the question of deep diving, even more on the big industries that are causing the majority of the problems, I’m torn because I don’t think it’s necessarily industry specific. And in fact, I think that that’s probably why the reader has noticed the pattern though. If I had to name one that has had an excessively detrimental impact on American life, I’d probably say private equity.

But I think the reason this person feels as though we are often identifying similar themes that they find predictable across these industries is because in some ways that’s kind of the point. That it’s the what I would call the regulatory and financial incentives to which all industry is responding to that is creating these suboptimal outcomes across the board. So they might manifest differently in different places, which is why some weeks I’m going to write about biohacking bros and self-optimization being a response to structural precarity. And then other weeks we’re going to talk about theories for why they aren’t building enough houses.

But ultimately, at least in my current conception, this is always evolving. I’m always trying to learn more to refine this. But in my current conception of the world, these are all responses to the same underlying force, which is, and I hate to be predictable, but the incentives and rules of American capitalism.

Henah:

Oh, wow, how did we get here?

Katie:

How did we get here? How did we talk about the ultimate big such and such? It’s like because capitalism.

Henah:

It reminds me though, when Hamilton Nolan was on the show and he said how capitalism can be a poison, and all of the unchecked capitalism kind of seeps out and starts affecting you in every aspect of your life, whether or not you recognize that. You’ve also talked about the fact that sometimes focusing on our individual choices is overlooking the broader problem. But I think also in this case, it’s you singularly can opt out of these things, and that’s how multiple movements are made is by multiple people deciding to opt out. So whether that’s me with Amazon or you with Big Makeup.

Katie:

Big Sephora, big Bernard Arnault. I’m just going to keep getting uglier. And that’s a promise.

Henah:

I think this is an example of where you can be more cognizant of the things that are affecting you, and then also use that as a gateway to opt out of choices that are hurting you.

Katie:

Totally. And I think when you zoom out and you start to think about your individual life or your individual decisions that you’re making, not as reflective of a unique set of circumstances that is just driven by your individual preferences and your individual talents, but as a response to a broader set of rules and dynamics, I think you will see this pattern in everything. And I guess speaking personally, it has really helped me to understand the world around me better and just make sense of the world that I exist within. I think one of the original—

Henah:

You were going to say the context you exists within.

Katie:

Listen, coconut, coconut, coconut.

I think the original cliche thing that happened to me that kind of blew the lid off of all of this for me and started to have me go down these various rabbit holes and be like, oh my God, it’s all connected. It’s all the same. Which I think to this person’s defense, I think what they’re asking is rather than just gesturing at these things, can you actually go deeper in connecting them? So the answer is yes, and I want to say a little bit more about that.

Henah:

Wait, can I guess?

Katie:

Yes, please guess, what do you think was the origin story?

Henah:

The origin story I believe is probably your healthcare story where you got a $400 medical bill for a routine appointment. Is that right?

Katie:

Yes.

Henah:

Aha! Got ‘em.

Katie:

And then I read Nordic Theory of Everything, and then I dragged my husband to Scandinavia, and I just realized I really had a bit of an identity crisis that was like, holy shit. All of the things that I thought were just my unique personality tics and preferences and ideals are literally just internalized American exceptionalism and culture and capitalism and all of these things. I’m like, wait, this stuff isn’t innate to me. Look at what is outside of this country. I just had never left America up until my mid-twenties really. So that kind of opened my eyes to like, whoa, I really do be existing in the context and understanding that context is useful.

So all that to say, I do completely see this person’s point of like, well, isn’t it easy just to point to the big industry player and say like, oh, that’s the problem. But to the extent that it’s easy is almost part of the goal of calling these things out explicitly over and over again because the more we understand how to recognize who stands to gain and profit from our feeling a certain way or believing a certain thing, the more likely it is that we’ll be able to resist them.

And so whether that’s through actual organizing or through psychological fortification of things like, well, yeah, I know this store only exists to make me feel badly so that I buy something and because I can see exactly what they’re doing and exactly the psychological weak spots in me that they’re trying to tap into or the ideals that I have internalized about what it means to be a good, competent, productive person, I can resist it. I know that that’s what they’re doing, and so it’s going to zap their ability to influence my behavior. It kind of reminds me a little bit of what Aja Barber was talking about when we had her on talking about overconsumption and these kind of foregone conclusions that we have about what is a normal amount of consumption. And when you kind of understand American imperialism and how we kind of just push all of the problems into the global south, that way we can have cheap shit. You kind of go, oh wait, I don’t want any part of that. And yeah, that is an industry specific issue, but you can individually make different decisions.

Henah:

I’m also thinking of the beauty industry in the sense that when we were growing up, it was like cocaine thin models. Then we had the every size is beautiful. Now we’re kind of back to the thin model aesthetic, and there’s a future podcast in here somewhere about the rise of Ozempic.

Katie:

I was just going to say, and I’m like, and why are we back to the thin model because of Big Pharma!!!

Henah:

Ozempic and Wegovy and all the other, oh, my Kourtney Kardashians getting into—

Katie:

I was just going to say, can we talk about?

Henah:

Yes, the gummies that aren’t even regulated and fake?

Katie:

Lemme GLP-1. Like what?

Henah:

Yes, Lemme GLP-1. So I think that that has been a huge part of my own deconstruction as a woman of color. A lot of the beauty ideals in this country are based on historically European thin white women with blonde hair, blue eyes. And I know that you kind of discussed this a little bit with Taylor Swift and how people see her as the face of white beauty, but I think generally that is how I have deconstructed the messaging that I’m getting, is that the reason that people believe this is because they believe that is the correct ideal. Not that I’m actually objectively uglier.

Katie:

Totally. I think deconstruction is probably the best word that I would use for my own teasing out these different themes and how they’re connected. And there was so much in this question and this request that I really appreciated. I think even though it on the surface is like, well, is it just a cop out to blame these bigger forces?

Ultimately, my answer is no. It’s not a cop out. These forces are incredibly legitimate and powerful, and in naming and discussing them, we can take some of their power away. And so to that broader request of, can we talk more about how they’re connected? Yes, absolutely. We can. My goal with an upcoming episode that we’re actually working on right now is to demonstrate with a little bit more clarity and precision, how capitalism as a system produces these same predictable results across the board and how the state, so in other words, the policy that they referred to actually serves to reinforce those outcomes.

This idea of consumer preferences versus market conditions versus government policy as though those are different forces. I think they’re actually inextricably connected to one another.

Henah:

It’s one circle in the Venn diagram.

Katie:

Yes, it’s just one circle, but I think that those forces are, the fact that we even think about them as opposing is kind of a clue. You know what I’m saying? I think that they are super connected and they all serve to uphold one another. So I’m really excited about that episode. Hopefully it’ll be next week’s episode. But yeah, it’s definitely something that I am also trying to refine my understanding of and be able to be more specific about.

And yeah, at some point we do need to be able to shift to what are we going to do about this? But the timescale that we’re looking at to talk about changing really entrenched systems and regulatory regimes is probably larger than our lifetimes. And I think that’s why it can feel not worth focusing on. It’s like, well, if this isn’t going to be changed for me than why should I care? But I do think that that’s something that we have to, it’s playing the long game a little bit, and in the meantime we’ll be talking about asset allocation and how you can make sure that you can retire and all of those things, of course. But I think that it’s impossible for me now. It’s like once you see it, you can’t unsee it. Right. And I think that that’s what we’re dealing with.

Henah:

I guess I have a closing question for you. Do you think that 2021 Money with Katie would’ve ever seen you end up where you are now in some ways? Do you think the writing was always on the wall, that you were always going to get here eventually? Or was this just, you didn’t think it ever become, I don’t want to say radical, but just that you’ve reached a different part of your deconstruction?

Katie:

You know what, I think there was one thing that I did back then that told me the writing was on the wall, and it was an episode that I did in really early, I think I wrote it at the end of 2021, but it didn’t come out until early 2022: “Is financial independence a sign of a problem??

And the whole thesis of the episode was kind of the first time that I started to be like, wait, why am I obsessed with retiring early? Why am I obsessed with getting enough money to never have to worry again? Is this normal? Do other people feel this way? And what does it say about the state of work and life in the US that there is this small legion of millennials who’s obsessed with reaching financial stability and is willing to do anything to get it? And I think that was kind of the first moment that I was like, wait a second.

Maybe this thing that I thought was actually a manifestation of proactivity and hyper competence and discipline and all these things, that kind of code as being positive traits is actually a symbol of this deep underlying insecurity that we must feel that pushes us in this direction. And so I think that in some ways, the writing was on the wall, but I definitely, my original first year or two doing this where I was only focused on tactics was really, truly just because I did not know very much. All I knew was tactics. And it wasn’t until I started to understand the world around me that I was like, oh, wait.

Henah:

And then I joined and I changed your world. I rocked your world. No, I feel like it has been a really exciting journey for both of us to get to this place. And so I’m looking forward to where it goes from here.

Katie:

Oh, well, good. Yeah. My closing comment would just be that even though I feel like I feel frustrated and I’m on more of an emotional roller coaster now, the more I know and the more that I kind of reckon with the fact that everything that I had ingested about personal financial responsibility being the way, the truth and the light, the more that I learn, I do feel frustrated. And there is part of me that’s like, man, ignorance really was bliss. It was actually a lot easier to not know about any of this. And to just think that everything that happened to me was up to me and my control, and if I failed, it was all on me. Or if I succeed, it’s all on me. That was easier.

But I do think that things feel more intellectually honest now, even if I don’t have all the, and I feel a lot of pressure to have the answers, and I just, I don’t. But thank you for the questions and the feedback and the request this week. It’s appreciated. Thanks for engaging honestly with what we’re doing and being a frequent listener.

And that’s all for this week’s Rich Girl Roundup. So we’ll see you on Wednesday to talk about dun dun dun, the Index Fund Bubble. Bye!