For many people, the thought of planning one’s financial future evokes fear and anxiety. Not only is there a lot to think about and plan for, but there is so much information out there telling us what we should do, it can be overwhelming deciphering it all. Plus, how do we know which strategies are right for us? P.J. DiNuzzo understands this feeling of pressure and overwhelm firsthand.  After losing his father at an early age he felt crushed by the weight of financial pressure and trying to navigate the complex jungle of investing.

This stayed with him and he set out to ensure this didn’t happen to others. For the last 31 years, he’s helped people architect their life plan and feel confident about their financial future. And in his new book, The Seven Keys to Investing Success, P.J. brings the collective wisdom of world-class institutional investment strategies down to a personal level. In today’s episode, P.J. walks us through his seven keys to help you feel empowered to make smart money choices to live your best life. Enjoy.

Miles Rote: Hey everyone, my name is Miles Rote and I’m excited to be here today with P.J. DiNuzzo. Author of The Seven Keys to Investing Success. PJ, I’m excited you’re here. Welcome to the Author Hour podcast.

P.J. DiNuzzo: Hey Miles, thanks for having me. Thank you.

Miles Rote: Yeah, of course. Let’s get started by just telling us a little bit about your background and what inspired you to write this book?

P.J. DiNuzzo: Long story short, I have always been good with numbers, even on probabilities, that’s why my lines always worked, from studying baseball cards as a little kid in grade school. I always had in my heart to help other people, and you don’t know what your calling’s going to be in life, where you’re going to end up using your skills that you were given. From helping other people and from my background, what I was good at, I got into the wealth management area of the world–financial planning and investing.

It really came up with my father, who was one of 13 children. His family had no more than high school educations and I saw the challenges. He had gone through five or six different stockbrokers and different advisors and actually, he had a life-shortening episode because of the stress that he was under. With his situation, I feel, if he had had a proper advisor and if he had good, solid financial advice, good financial planning and wealth planning advice, he would have lived actually a much longer life.

So, it’s very personal to me and once I saw that I just never wanted to see that happen to another person again. I started helping family, friends, and relatives, and I officially started my practice in 1989 with zero dollars and grew to where we are here now, 31 years plus later.

You Can’t Start Too Early

Miles Rote: First of all, that’s a beautiful story and very inspiring as far as wanting to help others and save other families and people from having your experience. Who should read this book? Is it people getting into retirement now or starting to think about retirement?

P.J. DiNuzzo: Miles, ideally, I tell folks that preretirement would be ideal. I talk to client’s children and grandchildren. They’ll ask me, “P.J., can you talk to my son or daughter or grandchild?”

I’ve told them the same thing for decades that if you want to know what your financial plan is, your retirement plan is for the future and your financial independence, go and take a look at the closest mirror, you’re looking at it. You can never start too early, you can start in your teens, your 20s, to get into good savings habits and good spending habits.

This book is definitely for folks in preretirement, but to be more pragmatic, it would really be that last five to 10-year stretch coming down the runway approaching retirement. The ideal time for someone to really start focusing on this is a good decade out before retirement.

Miles Rote: What would you say to people that do have that stress response when they’re thinking about retirement or financial planning–someone like your father who felt overwhelmed trying to think about those things? What do you tell people who when they start to think about financial planning, just shut down?

P.J. DiNuzzo: It is and it can be overwhelming. One of the things that we have to be very sensitive to in meetings is that we’re dealing with individuals who are highly successful, college professors, engineers, architects, attorneys, CPAs, folks across the professional spectrum. These are women and men who are very successful with their career but personal finance and everything that goes around it, regarding preparing for retirement, having a successful retirement, and being able to maintain your lifestyle while maintaining peace of mind is a very daunting task, it’s very challenging.

Miles Rote: What you offer in order to take that stress away is creating a life plan. What does that look like? Define a life plan for us.

P.J. DiNuzzo: We discuss having a financial wellness life plan, and we’ve said for decades that an idiot with a plan can be the genius without a plan. That’s really where a lot of people get into the ditch right off the bat is they don’t have a plan, they don’t have a guiding north star to follow. That’s why I lay it out in my book as practically as I can with my 31 years of experience, it can be a do it yourself or for individuals who are uncomfortable delegating anything to an advisor, they could follow the basic elements of my book. This book would explain everything to them that they would need to make sure that they have a plan.

While other folks, when they take a look at all of the moving parts involved, it becomes obvious to them that they do have what we call a delegator personality and that this is something that they’re going to need to delegate to a professional.

Miles Rote: The best part of your book in my opinion is you walking through the seven keys of financial success and I’m excited to dive into some of those. But before we do, you just mentioned a couple of types of different investors and I’d like to clarify that for people listening. In your book, you talk about three types of investors–a delegator, a validator and a do it yourselfer. Can you walk us through those?

P.J. DiNuzzo: It’s very important. These are again things that if you were a professional, you would never take a moment to think about what is my high net worth personality, my DNA, how do I think? The delegators are individuals, again, professionals typically, but they are comfortable in handing off the keys. I have one of the images in the book of driving a car. Pretty much everyone knows how to drive a car, but in this case, they want to be chauffeured, they want someone else driving and watching the road 24/7.

Those delegators could typically be family stewards. Those are folks that are sensitive first and foremost to their children, grandchildren, and loved ones.

The next biggest, largest category of delegators will be independents, these are folks that see money as the vehicle for them to live a life that they want to without having to worry about running out of money to do what they want to when they want to.

Then the third category of delegators are what are classified as phobics. That definition could sound a little pejorative, it’s not meant to be, but they don’t like thinking about money, they’re uncomfortable about it, they want everything taken care of but the more they think about it, the more anxiety that’s involved. They are a classic delegator personality also.

And on the other end of the continuum would be the do it yourselfers. You have folks that want to go into an expensive furniture store and buy everything assembled and have it shipped to them. And you have folks who want to go into maybe an IKEA and they are the do it yourselfers and don’t mind spending the weekend building a rocking chair or whatever else it may be.

Miles Rote: Yeah, that totally makes sense. What about the validators? What do the validators look like?

P.J. DiNuzzo: Validators are typically in the middle, they sort of have one foot in the boat and the other one on the dock, they may end up delegating some of their portfolio. I think it will resonate with almost anyone, that they will see the definitions of those nine high net worth personality types are, and they can identify themselves and really know from an investment perspective your personal finance DNA. How you make decisions and what your feelings are around money. I have said, for decades, and one of our sayings in the practice has been that if I were to ask 100 clients what this money means to you, I would get 100 different answers.

It needs to be customized, in every case, for every household, to their unique personality. Everyone’s got a unique personality, unique objectives, and goals that they want to accomplish. And what we refer to at the DiNuzzo Wealth Management as their best life. Our goal is to help everyone live their best life possible but there are different definitions for everyone. It’s mission critical to understand what’s different from household to household.

Miles Rote: It’s different for each person and each household but by following the seven keys, that you lay out in your book, people can create a plan that works for themselves. Let’s dive into those. The first key actually has to do with a type of investor you are, it’s do it yourself or delegate. Walk us through that first key a little bit?

P.J. DiNuzzo: Miles, again, the delegators were the ones that I mentioned, the family steward, the independents, and the phobics, and those are really 95 or 99% of our firm’s clients with the over 700 million dollars we manage at our practice, we’ve got close to like 2,500 accounts–95 to 99% of all of those are one of those three high net worth personalities of delegators.

That’s really what we focus on here but when I wrote the book, I wanted to be able to help anyone who picked it up to help them move forward and improve their personal financial life. Those do it yourselfers can use the book as a how-to manual and I think they can be very successful within their comfort zone of not hiring anyone else and literally doing it themselves.

Miles Rote: Beautiful. Now, that takes us to the second key. Whether you’re doing it yourself or you are having a delegator, you have to have a plan.

P.J. DiNuzzo: First and foremost, you have to have a plan, having discipline is the key. One of the quotes I have in the book is to think marriage and not dating. This is long term–you want to have a plan that you can stick to and live by. The average retirement period for the average household is typically 30 years after they are done working. So again, a very long period of time, hopefully even longer for the listeners who are listening. But having a plan is the most important variable for long term success.

Miles Rote: Let’s drill down on that a little bit because you underline the importance of discipline. I think that’s really important to mention here because you can create a plan and then if you’re not sticking to it and being disciplined with it, the plan essentially goes out of the window. When do you know whether we should modify that plan or just stick to our guns? When it comes to investing, our emotions can take over a lot of times and that can really get in the way of the plan.

P.J. DiNuzzo: Yes, we like to place the investments on the back end of what we do, so to speak. We’ve trademarked the DiNuzzo Financial Wellness Life Plan and we tell folks that that is the vehicle and it is going to get them safely and securely and happily through the rest of their life.

The fuel for the plan is the investments, but from the investments on through the state plan portion, the long term care plan portion of the portfolio, the risk management, the tax planning–taxes are arguably the largest variable in play going forward with trying to pay the lowest possible amount of taxes in your lifetime. You have to have a strategy for each of these key elements, especially around investments.

I mention later in the book that the media knows what your weaknesses are, these are two extreme ends of our emotions–greed and fear–and basically every article that’s written is written to get to your emotions and to pull you one direction or the other.

Neither greed nor fear are of any help to an individual trying to have a successful financial wellness life plan for the rest of their life.

Have a Plan

Miles Rote: Right, that’s why being able to have that plan, know that it’s there, and then just let it go and stick with it can be so helpful.

P.J. DiNuzzo: One great point you just made there, just to elaborate, is that again, the benefit if someone is a delegator, the challenge I could see in folk’s eyes that is very straight forward is that when they’re working through the retirement plan, it’s the first time that they’ve retired.

I mean, everybody basically retires one time. At DiNuzzo Wealth Management, we have retired thousands of times. Again, it’s just a big difference from how you build out a plan even if you know that you need one. There’s a lot of moving parts and complexity and it can be a challenge for an individual.

Miles Rote: Right, that’s where you can help remove that overwhelm and stress that people have when they start to consider these things.

P.J. DiNuzzo: Yeah, if they have the right personality type, yes, that’s where we could be of assistance.

Miles Rote: Let’s help people out with the third key and defining the difference between strategic versus tactical.

P.J. DiNuzzo: Strategic versus tactical–that’s one thing about finance, there are all these fancy words for everything. An integral part of our plan–there are other advisors who I’ve seen that have some variation of this–but it’s our bucket approach.

We want folks to know exactly how much they need in what we would call their war chest, and the key part of their war chest is the cash reserve bucket. Then their needs are for food, clothing, shelter, healthcare, transportation, education, and then their wants bucket, the wants are for all the discretionary spending, vacation travel, dining out, all the extra. Then the top bucket is for dreams and wishes. That is too large of a topic to do a deep dive on but knowing how much your unique food, clothing, and shelter is, and having a more conservative portfolio set up for that need, and customization across the board is really what’s key. I did want to mention our bucket approach that we have been applying very successfully for over 30 years.

Miles Rote: That is really helpful, and as you mentioned, you don’t have to be ten years away from retirement, but thinking about your financial life in general all of the time and putting it through that frame and those buckets is really helpful.

P.J. DiNuzzo: Again, if I am talking to one of our client’s children or grandchildren, I discuss that cash referred bucket, their war chest, even if they are right out of college, and making sure that they have six months of cash in their bank account for a cushion. I mention that to them even in their early 20s.

Miles Rote: Even as someone in their 30s, it makes me prioritize and think about my life from a high-level overview, as opposed to feeling just in the weeds of it all looking at my bank account. It is more zooming out and having a strategy around my life.

P.J. DiNuzzo: You can build that structure for you, which again is the base of the plan. That is what we discuss as the footer foundation.

Miles Rote: Beautiful. Okay, I think this is really helpful for people. So, let’s jump into that third key with the strategic versus tactical.

P.J. DiNuzzo: The executive summary here Miles is that there are two ways of trying to invest in the stock market from a global perspective. You can either try to outsmart everyone or you can harness that collective genius, as I refer to it, of the entire market and that’s been our approach for 31 years–to harness the collective genius of everyone.

Every security is priced on a second by second basis. There is a violent collision so to speak of mental firepower and computer firepower. There are a seller and buyer on opposing sides of every trade and we refer to that as price discovery, and the markets go through that dynamic exercise globally on a second by second basis. I feel that that is the best estimation of true value for individual security or an asset class.

We believe in efficient market theory and index as a result of that, versus trying to outsmart the stock market. Again, that is another key part of a plan because if you are going to try to hop in and out of the market or hop in and out of different investments or try to pick the best stock out of the sheet of stocks you’re looking at, that is a whole other layer of complexity and that could really be a challenge for you long term.

Miles Rote: Right, so is this key really focused on trying to place the odds in your favor, essentially?

P.J. DiNuzzo: Yes, and every fork in the road is how I’ve explained it to clients. We think there are a couple of dozen forks in the road which, first of all, you want to know what the challenge for those forks is. I wish I could say that when you came to the first fork in the road that if you turn left instead of right you have a 100% probability of success. You have a very high probability of success over time, and that is why you have to believe in your plan.

However, if you have an 83% probability when you make a left-hand turn at the first fork, that is where we are going to go. There is nothing magical about those probabilities. That one single fork in the road or two, when you compound that over a couple of dozen forks in the road, you are making the best most educated and informed decision possible. That is where the key comes, the discipline, as you mentioned Miles, really comes from one of my key mantras, which is control what you can control.

So, by us making all of those proactive decisions, I tell folks in 31 years of doing this, I have never seen an individual fail with their plan if they controlled what they could control. I have seen a lot of people with a lot of head trash and a lot of bad thoughts going through their heads and a lot of anxiety and a lot of uncertainty and worrying about things that are beyond our control.

Not taking care of things that are within their grasp that they could control, that’s typical when you see a broken plan. Unfortunately, if you talk about talking people off the ledge or trying to get in their mind right because they are obsessed and worrying about things that they have no control over while leaving things unattended that are within their control and that could place them in a lot better position.

Miles Rote: Right. It is almost as if the more people try to control the things they can’t control and they don’t have success doing that, they feel then disempowered. So, when it comes to things that they actually could control they feel disempowered to focus on those things.

P.J. DiNuzzo: In a lot of cases, it is the low hanging fruit Miles. These things can easily place the favorability on your side. They are missing some low hanging fruit, because like you said, their mind is not right. They’re overwhelmed with things that none of us can control. That is the overwhelming mentality.

Miles Rote: Right, well this leads us right to your fourth key and I am starting to see why they are in this order. So, the next key is maximizing reward versus risks. So although we can’t predict everything with absolute certainty, as you mentioned, you can hit these forks in the road and each time, when you are making the choice where you are placing the odds in your favor that compounds and you start to maximize reward versus risk.

P.J. DiNuzzo: Yes. So, this is one that seems to be sort of plain vanilla or almost mundane to some folks but yet, by far and away a super majority of cases that I look at individuals are grossly under diversified. The challenge with that is most folks don’t have a plan, and if you are diversified, what we know is that something in your portfolio will not be working almost by definition every year.

When folks look at their portfolio, they tend to look at it almost like if you are looking at your garden. And then say, “Well that looks like a weed to me, I am going to pull that weed.” You need to have confidence in your investments over the rolling market cycles. The US positions that we place in our clients’ portfolios, we know what they’ve done for US large stocks or large values, small and small value, and there is over a 90 year track record. Internationally there is over a 50 year record for these, what we call asset classes–unique areas of the stock market.

One point on top of this as I am talking sort of technical here or empirically but on the other side, the behavioral side, my entire life of investments, myself, my mother’s portfolio, my grandchildren’s 529 plans, I invest exactly the same as what I recommend to my clients. I tell folks, I’m not saying I’m any smarter than anyone else, but we eat our own cooking three times a day. Everything that I recommend to my clients I am doing myself especially first and foremost starting with how we invest, how we diversify, and being indexed. That is why I always like to share that with the audience.

Keys to Success

Miles Rote: I think that is important. Cooks that don’t eat at their own restaurant is always a sign that maybe you shouldn’t be either.

P.J. DiNuzzo: A little bit of a red flag there.

Miles Rote: So, before we jump into the fifth key, which talks about indexing versus active investment management, what is the difference between those two?

P.J. DiNuzzo: Yeah, I started to touch on it with a couple of questions ago Miles in that there is that big global decision of am I going to try to outsmart other people in the stock market or am I going to invest along with that collective wisdom? So, if you believe that the stock market is efficient as we do at our practice then you would want to index your portfolio and hire the best index manager.

Now without getting too far in the weeds, we have had an extensive relationship with Dimensional Fund Advisors, since we are empirically biased that we want the longest track record possible for anything we’re doing. So, having a 90-year track record for US investments, 50-years plus for international, and knowing that basically two out of three times to three out of four times over a 10-year period of time, the index is going to perform for the active manager.

Things really broke loose during my career at Vanguard, which is a little blip in the radar screen 31 years ago. They have now grown to be the largest mutual fund company on earth because of indexing. Even a handful of years ago it came out that Warren Buffett, in his estate documents, that if he pre-deceased his wife, he put everything into an index. So, he figured, “Hey, this is the best lock picker on earth.”

When you are planning for 30 plus years and or maybe 50 or more if you are younger, you are planning for 30 plus years for a reasonable life expectancy. This is your financial wellness life plan that needs to guide you for the rest of your life. Again, it is our core belief at our practice that you definitely want to place these probabilities for success on your side for the rest of your life.

Miles Rote: So, once you have done all of that and you have gotten to a certain place and you have chosen the different paths or you have someone helping you, you get to the sixth key. That is really about, as you term it, rebalancing. It is rules for buying and selling your investments. What does that look like once we’ve arrived there?

P.J. DiNuzzo: I think it gets back to that discipline, Miles that you’ve mentioned earlier and just how critical that is. I think everyone, even at the most rudimentary level has heard the phrase, sell high and buy low. Sometimes people can chuckle over that but it is very challenging to perform that trade because every time we’re making a trade at our portfolio management team, for example, we’re selling what has done to best and run up the most and we are buying, basically speaking, what is underperformed the most.

You’ll get questions, especially from newer clients who haven’t gone through a cycle or anything, to one of our financial wellness life coaches at the practice, “Why are you making this trade, this is up 30 or 40% this year and you are buying this other one that is maybe down three or 5%?” Again, it gets back to that discipline, we believe that properly rebalancing a portfolio by forcing yourself to sell high and buy low and maintaining an even keel, that you’re going to come out ahead of the game over the long run.

Miles Rote: Yeah, just thinking about this for myself, managing my emotions through all of this would definitely be the hardest part of it all. It seems like the 7^th key is basically critical for each key that we go through.

P.J. DiNuzzo: An equally important key at that tie for number one is managing your emotions and again, we know that we need the discipline to do that, but I think it is almost nearly impossible if you don’t have a plan. If you don’t have a well-thought out plan where you don’t have any dark corners in your personal financial house, as we refer to it, and that you know everything in all four corners.

Managing your emotions is easily in a tie for the most important key that you need for long term success.

Miles Rote: Well, thank you for helping people build these plans and not feel overwhelmed and as though like the world is crashing down on them by being able to provide systems for people to plan their retirement. I think it is really important, so thank you for writing this book–writing a book is no joke. Congratulations on that. If readers could take away one or two things from your book, what would they be?

P.J. DiNuzzo: Just really to think long and hard. It is the largest financial decision that you’ll make in your life. Unfortunately, a lot of people will spend more time researching the purchase of a new car, or heaven forbid, maybe even a new refrigerator than they do spending on their plan. As I state at the beginning of the book, one day you will wake up and it will hit you like a ton of bricks that you have to have a plan.

I am just imploring the listeners to start to think about this. You can never start too soon. You can be in your teens, or in your 20s and start thinking about your financial independence and building and developing good long-term habits so that you can live your best life.

Miles Rote: PJ, thank you for the work that you do. This has been such a pleasure and I am so excited for people to check the book out. Everyone, the book is called, The Seven Keys to Investing Success, and you can find it on Amazon. P.J., besides checking out the book, where can people find you?

P.J. DiNuzzo: They can find us at dinuzzo.com. That is DiNuzzo Wealth Management, again, www.dinuzzo.com.