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Jordan Belfort, aka “The Wolf of Wall Street,” is back and he’s got a lot to say about the long-term benefits of … index funds?
No joke. The now-reformed former penny stock fraudster is out with a new book, “The Wolf of Investing,” in which he offers advice on how to safely invest for the long term. No phony IPOs or high-pressure sales allowed — just legitimate financial advice. Not only that, Belfort also tackles the “Wall Street fee machine” and offers a concise chapter on the history of Wall Street regulation.
InvestmentNews caught up with Belfort to learn more of his thoughts on investing, as well as try and find out where the modern-day wolves are hiding on Wall Street.
InvestmentNews: Your new book is called ‘The Wolf of Investing.’ Isn’t there some irony in asking the so-called ‘Wolf of Wall Street’ for legitimate financial advice?
Jordan Belfort: I think it is ironical. I resisted writing about Wall Street and how to make money in the stock market the right way for many, many years. And ultimately, I just got to a point where, after being on the speaking circuit and teaching mostly entrepreneurship and sales, I realized there is a need to discuss things like: What is the actual way to make money in the stock market — the right way, and without the nonsense of short-term trading and trying to time the market?
So I did a lot of research. And while I had invested this way myself, using indexing and a carefully balanced portfolio, the more research I did, the more shocked I was at how simple it was to build wealth over time.
IN: Do you feel that writing a book about legitimate financial advice is part of your penance, helping you make up for some of the criminal things you did in your past?
JB: You know, I didn’t look at it that way. But certainly it was on my mind that it was a gift and I was giving back, and sort of setting the record straight once and for all on that front. And everything else I’ve done since I went to jail has been in my opinion at the highest level of ethics. I’ve been helping people and serving people all over the world, helping them live more empowered lives financially. This was on point to what you are saying, as in: I have a platform, people follow me, here’s how you really build wealth in the stock market. And it started with watching my own family get destroyed in crypto in short-term trading. And that was the impetus for writing the book.
IN: Perhaps the biggest surprise to me in the book is that the Wolf of Wall Street is talking about index investing. And you’re a Jack Bogle fan. How did that come about?
JB: So when I first started writing the book, I knew it was going to be about indexing in general. That was the best strategy because it just empirically is, and all the research proves that. But when I started doing deep research, it seemed like every academic study out there points to the fact that trying to pick individual stocks or mutual funds, after all the fees and commissions and taxable events that occur, is a dead end.
You couldn’t do this in the ’70s. There was no way to invest in an index. So it really started in the ’80s. You now have the ability to invest in index funds and have a properly balanced portfolio. So it just seemed like the time is right. People need to know about this stuff, especially people who are in their 20s and 30. Everyone should know. But if you start now, you need a lot of money to build massive wealth over time in the stock market.
IN: You also give a history of Wall Street in the book and you talk about the origination of the SEC and its first commissioner, Joseph Kennedy, who was a stock market crook himself. Now, do you think that the fox running the henhouse is a good idea? Or, in other words, do people with your past have a better insight into how to fix the rules that they have previously broken?
JB: On some level, yes. But again, you know, what happened with the SEC, it wasn’t all Kennedy’s fault. He was facing an uphill battle from an institution that didn’t want to change. They had their fingers in every honeypot out there. And they were robbing the public blind and they resisted any change in any shape or form. So he was a good guy who was able to at least get enough trust on Wall Street to make some changes. But what ended up happening was there was a sort of two-tiered system where the big firms continued to rape and pillage the village almost with impunity while everybody else was being watched more closely.
IN: Let’s talk about Wall Street today. Where are the wolves? Are they in the crypto space? Where are the wolves attacking innocent investors today?
JB: Here’s the irony. There’s two sides to these big firms on Wall Street. There is the useful side where they create massive value and serve in this mission-critical function in the economy, which is to take companies public, provide credit through bond offerings. And that’s necessary. And they deserve all the accolades for creating that value. Then there’s the not-so-useful side where they create bubbles and they rape and pillage the village. And that’s where it gets really complicated. So big firms like Goldman do amazing things, but they’re also behind every massive fraud out there with a finger in every single pot. The institution itself has got major problems, but the individuals are probably decent people.
On the smaller firms, like the cryptos, you have Sam Bankman-Fried and such, and these are just like archcriminals. Some of these people were just out there to rob people blind. So the difference is the bigger firms also have very useful sides, while some of these smaller firms have no use at all.
IN: It sounds a little bit like you still have a chip on your shoulder from the small Stratton Oakmont versus the big Goldman Sachs. Would that be correct?
JB: Not a chip on my shoulder, just a reality that two wrongs don’t make a right. I never want to minimize the mistakes I made, but to think about what I was doing, they were doing things a hundred times worse at the bigger firms. That said, they also were doing some amazing things. Not that they were too big to fail, but it’s mission critical what they were doing, and they’re still doing it today.
The idea in my book is that there’s a way to take advantage of all this. Wall Street creates massive value. Right? How do you take advantage of all that massive value they create without getting into the trap of the Jim Cramer sort of thing where they trade out of different stocks and try to time the market, which is virtually impossible? So the book really shows you how to extract the massive value that Wall Street provides without getting caught in the trap of short-term trading and trying to time the market and the latest shiny object.
IN: Wall Street advisors today do so much more than simple stock trading, which is what you did back at Stratton Oakmont during your Wall Street career. Now they have to know about taxes. They need to know about wealth transfers. Do you think that you could be a financial advisor today?
JB: I could if I wanted to. One of the distinctions I make in my book is that stockbrokers are fairly useless. They really are. You don’t need to pick stocks. It’s ridiculous. But there is a need for financial planning. If I’m going to be buying, let’s say an S&P 500 index fund and some bonds or whatever investments I’m going to make, the question is: what types of accounts should I put them in? Should I put them in a Roth IRA or a 401(k)?
In other words, how do I manage my wealth to minimize my taxes and set myself up for a great retirement. That is very useful for a financial advisor. As soon as they cross over and start trying to pick stocks for you, or put you into vehicles that are actively managed, then that’s where I part ways with financial advisors.
IN: We’re here in Times Square and a lot of people complain that it’s been ‘Disneyfied.’ It’s too clean now and they miss the seedy underbelly. Similarly, a lot of that boiler room criminality has been washed away from Wall Street. Do you think that there’s a certain nostalgia for that seedy underbelly? Have things become too algorithmic on Wall Street? Too many financial planning and not enough individual stock trading anymore?
JB: I think the reality is that individual stock trading doesn’t work. You don’t make money like that. So at the end of the day, if you want to survive and thrive, you have to veer into indexing, which is where the money is made now.
That being said, I also say in the book that you want to speculate a bit. Healthy speculation is fine. If you want to take 5% of your money, or 10%, whatever you feel comfortable with and go speculate, then maybe you’ll make some money with it. But probably you won’t do as well as simply holding the right type of index fund and using long term compounding to get where you want to get.
IN: And not if that call comes from a boiler room on Long Island or in New Jersey, right?
JB: There’s no need for that anymore. It’s so simple now. You have platforms. You go online. You can open up an account online. You can check a few boxes. I take you through all of this in the book and how you can simply set yourself up for a massive success in the stock market by just buying a couple of different types of funds and just sitting back and doing nothing. It’s one of these things where less is more when it comes to investing.
IN: So finally, with regard to this new book, ‘The Wolf of Investing,’ can Leo play you in this movie? Because index funds are not very sexy.
JB: I have this running joke with my wife about a sequel to ‘The Wolf of Wall Street,’ and she says, ‘You don’t break the law anymore. You’re doing good things!’ It’s not as exciting as raping and pillaging and doing massive quantities of drugs. I don’t know if ‘The Wolf of Investing’ will be a movie, but I know what it will do for anyone who reads it. It’s going to radically improve their ability to make money over the long term and to retire with a huge nest egg.
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