1 00:00:06,920 --> 00:00:10,039 Speaker 1: Tonight a deep dive into why you might not have 2 00:00:10,160 --> 00:00:13,880 Speaker 1: experienced a drop in your portfolio despite what the quote 3 00:00:13,960 --> 00:00:17,640 Speaker 1: unquote headline data might suggest. You're listening to simply Money 4 00:00:17,720 --> 00:00:20,920 Speaker 1: presented by all Worth Financial. I'm Bob Sponseller along with 5 00:00:20,920 --> 00:00:25,360 Speaker 1: Brian James. It seems to happen every single time something 6 00:00:25,480 --> 00:00:29,680 Speaker 1: triggers the market to generate some short term volatility up 7 00:00:29,760 --> 00:00:32,319 Speaker 1: or down. People don't tend to mind it much when 8 00:00:32,360 --> 00:00:34,400 Speaker 1: it goes up, but boy did people get nervous when 9 00:00:34,440 --> 00:00:39,680 Speaker 1: it goes down. But savvy investors don't panic. Why Because 10 00:00:39,720 --> 00:00:42,440 Speaker 1: when you read a headline, it paints a picture that 11 00:00:42,640 --> 00:00:46,800 Speaker 1: most of the time likely does not include you. Let's 12 00:00:46,840 --> 00:00:48,160 Speaker 1: get into why, Brian. 13 00:00:48,560 --> 00:00:51,680 Speaker 2: What's happening out there in the background generally isn't what's 14 00:00:51,680 --> 00:00:55,120 Speaker 2: happening in your foreground, So that there's the default. Every 15 00:00:55,120 --> 00:00:58,720 Speaker 2: time we have turbulence, Dow drops eight hundred points, markets plunge, 16 00:00:58,800 --> 00:01:01,840 Speaker 2: markets sore, Dow drop some other thousand points on fears 17 00:01:01,880 --> 00:01:03,560 Speaker 2: that the war in Iragan is going to drag on 18 00:01:03,600 --> 00:01:06,640 Speaker 2: all these different things. So hopefully you know the Dow 19 00:01:06,720 --> 00:01:08,840 Speaker 2: Jones is only comprised of thirty companies. 20 00:01:08,880 --> 00:01:10,720 Speaker 3: Hopefully that's not too big of a shock. We don't. 21 00:01:11,480 --> 00:01:13,959 Speaker 2: We don't talk about it as much anymore. The S 22 00:01:14,000 --> 00:01:18,200 Speaker 2: and P five hundred is a much better thermometer of 23 00:01:18,200 --> 00:01:21,119 Speaker 2: what's going on in the markets because it contains five 24 00:01:21,160 --> 00:01:24,200 Speaker 2: hundred companies, hence the name. The Dow doesn't say Dow thirty, 25 00:01:24,520 --> 00:01:27,080 Speaker 2: but it is only thirty companies, and it does tend 26 00:01:27,080 --> 00:01:29,720 Speaker 2: to be a little little more conservative than the S 27 00:01:29,720 --> 00:01:31,720 Speaker 2: and P five hundred. And by the way, if you 28 00:01:31,760 --> 00:01:33,840 Speaker 2: only have thirty companies in your portfolio, that's a bit 29 00:01:33,880 --> 00:01:36,480 Speaker 2: of an issue. You might have a diversification problem anyway. 30 00:01:36,959 --> 00:01:39,360 Speaker 2: Most likely you don't if you own exchange traded funds 31 00:01:39,440 --> 00:01:40,760 Speaker 2: or mutual funds, which most people. 32 00:01:40,959 --> 00:01:42,800 Speaker 3: That's the approach they've taken. In the four to one case. 33 00:01:42,840 --> 00:01:46,720 Speaker 2: The vast majority of wealth is already is already diversified. 34 00:01:47,080 --> 00:01:49,600 Speaker 3: You know, maybe maybe not properly necessarily, but it's not 35 00:01:49,680 --> 00:01:52,080 Speaker 3: all in one index. So that's a big reason to 36 00:01:52,120 --> 00:01:53,640 Speaker 3: ignore the noise over the Dow. 37 00:01:53,720 --> 00:01:56,200 Speaker 2: It's just it's just the oldest index that we have, 38 00:01:56,280 --> 00:01:58,080 Speaker 2: and that's that's why we tend to focus on it 39 00:01:58,120 --> 00:01:58,440 Speaker 2: so much. 40 00:01:59,360 --> 00:02:01,440 Speaker 1: Brian. Don't you think one of the reasons for that 41 00:02:01,600 --> 00:02:04,480 Speaker 1: is the media can jump on that topic because the 42 00:02:04,960 --> 00:02:08,320 Speaker 1: index is valued so highly, So you know, when we 43 00:02:08,320 --> 00:02:10,960 Speaker 1: could talk about a one thousand point drop or a 44 00:02:11,040 --> 00:02:14,040 Speaker 1: nine hundred and sixty seven point drop, it seems like 45 00:02:14,480 --> 00:02:17,800 Speaker 1: the sky is falling, when in reality, you know that 46 00:02:18,000 --> 00:02:20,880 Speaker 1: generally speaking, we're talking about a one to you know, 47 00:02:20,960 --> 00:02:23,880 Speaker 1: one and a quarter percent drop, when when the media 48 00:02:24,000 --> 00:02:27,240 Speaker 1: might suggest everything's going haywire. Don't you think that's part 49 00:02:27,240 --> 00:02:30,240 Speaker 1: of this? Is it? It can drive listeners, it can 50 00:02:30,280 --> 00:02:34,400 Speaker 1: get people to watch these shows, and then unfortunately some 51 00:02:34,520 --> 00:02:37,920 Speaker 1: people panic and don't really understand what's really going on. 52 00:02:38,400 --> 00:02:41,880 Speaker 2: Yeah, and I think that portfolio swe or that thought 53 00:02:41,919 --> 00:02:45,840 Speaker 2: swings the other way too, which is to say that 54 00:02:45,720 --> 00:02:48,560 Speaker 2: the Dow gets so much more attention, we make a 55 00:02:48,560 --> 00:02:50,600 Speaker 2: bigger deal out of it when it crosses milestones. Wasn't 56 00:02:50,600 --> 00:02:53,560 Speaker 2: that long ago the dal Jones was at fifty thousand, 57 00:02:53,720 --> 00:02:55,920 Speaker 2: and ultimately that's meaningless. It just happens to be a 58 00:02:55,960 --> 00:02:57,880 Speaker 2: number with a lot of zeros behind it. But we 59 00:02:57,919 --> 00:03:00,480 Speaker 2: get excited about silly things because we're just human beings. 60 00:03:00,880 --> 00:03:02,560 Speaker 3: We don't get as excited about. 61 00:03:02,320 --> 00:03:05,480 Speaker 2: The S and P when it breaks its various milestones 62 00:03:06,160 --> 00:03:08,080 Speaker 2: because it's just a smaller number. Right at the end 63 00:03:08,120 --> 00:03:09,639 Speaker 2: of the day. We're just a bunch of trained monkeys. 64 00:03:09,680 --> 00:03:12,120 Speaker 2: We're more impressed by a bigger number. Now is older, 65 00:03:12,160 --> 00:03:14,639 Speaker 2: Therefore it can hit fifty thousand s and P five 66 00:03:14,720 --> 00:03:17,480 Speaker 2: hundred is in the six thousand ranges, in the mid sixes. 67 00:03:17,200 --> 00:03:19,800 Speaker 3: Right now, and it has been for a little while. 68 00:03:20,360 --> 00:03:23,280 Speaker 2: Both of them are near all time highs, which isn't 69 00:03:23,320 --> 00:03:25,680 Speaker 2: a major shock, right, That's the way the market works. 70 00:03:26,280 --> 00:03:28,840 Speaker 2: People get spooped by that markets at an all time high, 71 00:03:28,880 --> 00:03:30,280 Speaker 2: that must mean it's about to come down. 72 00:03:30,320 --> 00:03:30,960 Speaker 3: No, it doesn't. 73 00:03:31,320 --> 00:03:34,040 Speaker 2: That doesn't mean anything, because the market goes up, not down. 74 00:03:34,200 --> 00:03:36,640 Speaker 2: Everybody has seen the long term charts of the stock 75 00:03:36,720 --> 00:03:39,880 Speaker 2: market and we know which direction it goes left or right, 76 00:03:40,360 --> 00:03:42,440 Speaker 2: So that means the market is usually at an all 77 00:03:42,440 --> 00:03:44,880 Speaker 2: time high. That's nothing to panic about, and it doesn't 78 00:03:44,920 --> 00:03:47,360 Speaker 2: mean we're about to go over the cliff. I hear 79 00:03:47,440 --> 00:03:50,280 Speaker 2: this occasionally as I'm sitting down reviewing financial plans with people. 80 00:03:50,320 --> 00:03:52,800 Speaker 2: Should we get more conservative? Markets at an all time high, 81 00:03:52,960 --> 00:03:55,800 Speaker 2: Well that was three years ago, is true two years ago, 82 00:03:56,520 --> 00:03:58,800 Speaker 2: and had we gotten conservative, we would have left a 83 00:03:58,800 --> 00:04:00,920 Speaker 2: lot of money on the table. Let's just make sure 84 00:04:00,920 --> 00:04:04,160 Speaker 2: we know what this specific pile of dollars is assigned 85 00:04:04,200 --> 00:04:06,840 Speaker 2: to do and then let it do its job. The 86 00:04:06,840 --> 00:04:08,600 Speaker 2: way to be thinking about that the types of things 87 00:04:08,640 --> 00:04:11,680 Speaker 2: you were looking at these indices for should be your 88 00:04:11,680 --> 00:04:14,320 Speaker 2: longer term money. We're not worried about the shorter term. 89 00:04:14,360 --> 00:04:16,800 Speaker 2: We've addressed that another way. If we're operating off of 90 00:04:16,800 --> 00:04:17,760 Speaker 2: a well thought out plan. 91 00:04:18,520 --> 00:04:20,719 Speaker 1: Yeah, and just maybe to drive this point home a 92 00:04:20,720 --> 00:04:23,120 Speaker 1: little bit further, as I was listening to you talk 93 00:04:23,160 --> 00:04:25,560 Speaker 1: about this, I just had I just pulled up a chart, 94 00:04:25,880 --> 00:04:27,760 Speaker 1: a six month chart of the S and P five 95 00:04:27,880 --> 00:04:31,440 Speaker 1: hundred and believe it or not, we closed yesterday almost 96 00:04:31,560 --> 00:04:35,040 Speaker 1: exactly at evaluation on the S and P where the 97 00:04:35,120 --> 00:04:39,559 Speaker 1: S and P was sitting on September nineteenth of twenty 98 00:04:39,640 --> 00:04:43,720 Speaker 1: twenty five. So how many people were panicking, you know, 99 00:04:43,839 --> 00:04:46,520 Speaker 1: during the middle of September that the market was going 100 00:04:46,600 --> 00:04:50,279 Speaker 1: to tank. Not many. But here we are today. You know, 101 00:04:50,320 --> 00:04:53,400 Speaker 1: we've got headline risk, we've got you know, obviously, you know, 102 00:04:53,520 --> 00:04:57,160 Speaker 1: geopolitical risk in Iran, which we're not making light of whatsoever. 103 00:04:57,640 --> 00:05:00,560 Speaker 1: But I think from a valuation standpoint, it is important 104 00:05:00,800 --> 00:05:03,480 Speaker 1: to drive home here we're sitting right at levels that 105 00:05:03,520 --> 00:05:05,400 Speaker 1: we were at, you know, in the middle to the 106 00:05:05,440 --> 00:05:08,520 Speaker 1: third week of September. This thing has not fallen out 107 00:05:08,520 --> 00:05:11,400 Speaker 1: of bed, you know, at all. And meanwhile, you know, 108 00:05:11,480 --> 00:05:15,080 Speaker 1: the fundamentals of the market provided that we get this 109 00:05:15,240 --> 00:05:18,200 Speaker 1: oil stuff under control, and you and I talked about 110 00:05:18,200 --> 00:05:22,040 Speaker 1: that yesterday with our you know, chief investment officer Andy Stout. 111 00:05:22,880 --> 00:05:24,880 Speaker 1: You know this, We're not making light of the strait 112 00:05:24,960 --> 00:05:27,760 Speaker 1: of or removed situation. We've got to get oil and 113 00:05:27,839 --> 00:05:30,599 Speaker 1: natural gas moving through there. It's about twenty percent of 114 00:05:30,640 --> 00:05:34,599 Speaker 1: the global supply. But the market seemed to be pricing 115 00:05:34,640 --> 00:05:37,680 Speaker 1: in that this is going to get resolved here sooner 116 00:05:37,800 --> 00:05:40,720 Speaker 1: rather than later. Meanwhile, we just came out of an 117 00:05:40,760 --> 00:05:44,919 Speaker 1: earning season where you know, earnings results surprise to the upside, 118 00:05:45,000 --> 00:05:48,840 Speaker 1: analyst upside, you know estimates. You know, we're looking at 119 00:05:49,480 --> 00:05:52,760 Speaker 1: twelve year earnings estimates up about thirteen and a half 120 00:05:52,920 --> 00:05:55,040 Speaker 1: percent for the S and P five hundred. So if 121 00:05:55,080 --> 00:05:58,479 Speaker 1: we can get this thing under control with petroleum prices, 122 00:05:58,960 --> 00:06:01,360 Speaker 1: the overall economy looks pretty good. And I think that's 123 00:06:01,400 --> 00:06:04,440 Speaker 1: why you have not seen you know, markets tank. Here. 124 00:06:04,760 --> 00:06:06,479 Speaker 1: The other thing that I want you to walk through 125 00:06:06,520 --> 00:06:10,360 Speaker 1: here for a few minutes is what a true diversified portfolio, 126 00:06:10,800 --> 00:06:13,240 Speaker 1: not just piling it all into tech stocks or the 127 00:06:13,320 --> 00:06:17,200 Speaker 1: S and KE How that's benefiting investors so far in 128 00:06:17,279 --> 00:06:20,560 Speaker 1: twenty twenty six, just like it did in twenty twenty five. 129 00:06:21,720 --> 00:06:23,719 Speaker 2: That's an important point. And the other thing I would 130 00:06:23,839 --> 00:06:25,280 Speaker 2: want to make sure that that people are aware of it. 131 00:06:25,440 --> 00:06:28,720 Speaker 2: We have had a shift, a significant shift in what 132 00:06:28,760 --> 00:06:31,200 Speaker 2: the market is paying attention to, what investors are looking 133 00:06:31,240 --> 00:06:34,080 Speaker 2: at and what I'm what I'm specifying there is for 134 00:06:34,080 --> 00:06:35,640 Speaker 2: a long time, and I've heard this from a lot 135 00:06:35,640 --> 00:06:38,040 Speaker 2: of people over the past twenty years. I don't need 136 00:06:38,040 --> 00:06:40,279 Speaker 2: anything but the US market. I just need the S 137 00:06:40,320 --> 00:06:42,640 Speaker 2: and P five under That's it. Nothing else matters because 138 00:06:42,800 --> 00:06:44,559 Speaker 2: the S and P five hundred dominates everything. 139 00:06:44,560 --> 00:06:45,679 Speaker 3: And that's been a true statement. 140 00:06:46,200 --> 00:06:48,960 Speaker 2: And even within that, within the S and P five hundred, 141 00:06:49,000 --> 00:06:52,520 Speaker 2: it's been the seven big technology stocks. That has been 142 00:06:52,560 --> 00:06:55,760 Speaker 2: true for a couple of decades now, but it's not 143 00:06:55,839 --> 00:06:57,600 Speaker 2: been true for these last couple of years. As the 144 00:06:57,680 --> 00:07:00,720 Speaker 2: United States has repositioned itself in how it wants to 145 00:07:01,000 --> 00:07:04,080 Speaker 2: be perceived by the rest of the planet, the rest 146 00:07:04,120 --> 00:07:06,040 Speaker 2: of the planet has decided that hey, maybe we can 147 00:07:06,320 --> 00:07:08,479 Speaker 2: work with each other and not rely on the United 148 00:07:08,520 --> 00:07:12,080 Speaker 2: States for absolutely everything. So we are seeing the international 149 00:07:12,080 --> 00:07:16,760 Speaker 2: stocks are continuing to outperform the US stocks, and that's 150 00:07:16,760 --> 00:07:20,360 Speaker 2: for a logical reason. They're simply forging new business relationships 151 00:07:20,480 --> 00:07:23,960 Speaker 2: and they're finding new profit opportunities among each other. And 152 00:07:24,480 --> 00:07:26,560 Speaker 2: I don't know that this is necessarily a bad thing. 153 00:07:26,560 --> 00:07:29,040 Speaker 2: It's just a reshuffling of the deck. A properly diversified 154 00:07:29,040 --> 00:07:32,240 Speaker 2: portfolio should have a good chunk in international anyway, because 155 00:07:32,280 --> 00:07:35,720 Speaker 2: the market will occasionally abandon what it's become accustomed to 156 00:07:35,840 --> 00:07:39,240 Speaker 2: and move elsewhere where it finds a better deal, and 157 00:07:39,440 --> 00:07:40,760 Speaker 2: that's kind of the whole point. 158 00:07:40,520 --> 00:07:40,880 Speaker 3: Of the thing. 159 00:07:41,000 --> 00:07:44,400 Speaker 2: So make sure that you have those international allocations. If 160 00:07:44,400 --> 00:07:47,160 Speaker 2: you're somebody who abandoned everything but the S and P 161 00:07:47,240 --> 00:07:49,200 Speaker 2: five hundred years ago, you're going to want to log 162 00:07:49,240 --> 00:07:51,240 Speaker 2: into that four one K, log into those investments that 163 00:07:51,280 --> 00:07:53,080 Speaker 2: maybe you haven't looked at for a while. Make sure 164 00:07:53,080 --> 00:07:54,640 Speaker 2: you've got a good balance of things in there. We're 165 00:07:54,640 --> 00:07:57,960 Speaker 2: also seeing small cap value outperformed. That's not something that 166 00:07:58,120 --> 00:08:00,280 Speaker 2: happens all that often, so make sure you've got a 167 00:08:00,280 --> 00:08:01,880 Speaker 2: decent chunk on those sides too. 168 00:08:02,280 --> 00:08:04,000 Speaker 3: Really, this is a story of rebalancing. 169 00:08:04,320 --> 00:08:07,680 Speaker 2: Things move in different directions at different times, but a 170 00:08:07,680 --> 00:08:09,560 Speaker 2: lot of times we can get lulled to sleep and 171 00:08:09,560 --> 00:08:12,160 Speaker 2: not pay attention. The last three years, that's exactly what 172 00:08:12,240 --> 00:08:14,720 Speaker 2: it's been the last year, not so much. Need to 173 00:08:14,720 --> 00:08:16,640 Speaker 2: be paying attention and make sure we're balanced across all 174 00:08:16,640 --> 00:08:17,760 Speaker 2: these different choices. 175 00:08:18,560 --> 00:08:20,760 Speaker 1: Yeah, the other thing I think that's been going on here, 176 00:08:20,800 --> 00:08:23,000 Speaker 1: and you and I have been talking about this for months, 177 00:08:23,160 --> 00:08:25,400 Speaker 1: you know, going back into the late summer early fall 178 00:08:25,440 --> 00:08:28,600 Speaker 1: of last year. You know, we talked it seemingly almost 179 00:08:28,640 --> 00:08:32,680 Speaker 1: every day, reminding people to not get over allocated to 180 00:08:32,800 --> 00:08:36,200 Speaker 1: these big you know, big cap tech stocks, the MAGS 181 00:08:36,240 --> 00:08:39,720 Speaker 1: seven stocks, and you know, looking at the performance of 182 00:08:39,800 --> 00:08:44,079 Speaker 1: international small cap what have you, different asset classes. You know, 183 00:08:44,160 --> 00:08:49,040 Speaker 1: eventually market money's gonna move to a perceived valuation, you know, 184 00:08:49,280 --> 00:08:52,120 Speaker 1: risk and reward scenarios. So even in the S and 185 00:08:52,200 --> 00:08:54,760 Speaker 1: P I mean, forty percent of the sales of S 186 00:08:54,840 --> 00:08:58,280 Speaker 1: and P five hundred companies comes from outside the United States, 187 00:08:58,600 --> 00:09:01,280 Speaker 1: So it is a global eCOM. I mean, we are 188 00:09:01,400 --> 00:09:05,600 Speaker 1: all dependent on one another. Even though the companies domicile 189 00:09:05,720 --> 00:09:09,360 Speaker 1: in the United States, a big chunk of sales happens overseas. 190 00:09:09,400 --> 00:09:12,720 Speaker 1: But back to that international argument and the small cap 191 00:09:12,920 --> 00:09:16,199 Speaker 1: value argument. I mean it was just on a valuation basis, 192 00:09:16,640 --> 00:09:20,920 Speaker 1: these things were ignored for several years and were relatively 193 00:09:21,040 --> 00:09:24,840 Speaker 1: inexpensive to large cap growth stocks. And that's a rotation 194 00:09:25,040 --> 00:09:29,120 Speaker 1: that we've seen, Brian, forever, you know, throughout our careers, 195 00:09:29,160 --> 00:09:31,520 Speaker 1: both of ours, and we'll always see that. I mean, 196 00:09:31,520 --> 00:09:33,360 Speaker 1: you're eventually going to get a little bit of a 197 00:09:33,480 --> 00:09:37,400 Speaker 1: rotation when things are perceived to be overly expensive. And 198 00:09:37,440 --> 00:09:39,640 Speaker 1: I think that's what's happened, you know, last year and 199 00:09:39,720 --> 00:09:43,240 Speaker 1: so far this year in this international and small cap space. 200 00:09:43,280 --> 00:09:45,800 Speaker 1: And it's probably going to continue. You know, money is 201 00:09:45,840 --> 00:09:49,160 Speaker 1: always going to move to where it's treated best. 202 00:09:49,520 --> 00:09:50,559 Speaker 3: Yeah, I couldn't agree more. 203 00:09:50,720 --> 00:09:52,400 Speaker 2: And again, the moral of the story is make sure 204 00:09:52,400 --> 00:09:53,520 Speaker 2: you have a plan. That's why there has to be 205 00:09:53,559 --> 00:09:55,720 Speaker 2: a plan behind this. There's only so many things you 206 00:09:55,720 --> 00:09:57,880 Speaker 2: can control about your own financial situation. 207 00:09:58,360 --> 00:09:59,360 Speaker 3: You can control or. 208 00:09:59,320 --> 00:10:02,520 Speaker 2: The very the very least, be aware of your spending. 209 00:10:03,000 --> 00:10:05,320 Speaker 2: You don't have too much control over social security, but 210 00:10:05,360 --> 00:10:07,920 Speaker 2: it tends to be fairly reliable. Pensions tend to be 211 00:10:07,960 --> 00:10:11,960 Speaker 2: fairly predictable. Of course, barring a crisis. Those things you 212 00:10:12,000 --> 00:10:14,440 Speaker 2: can all have good solid knowledge of the market. No 213 00:10:14,440 --> 00:10:16,320 Speaker 2: nobody gets to know what's going to happen next. That's 214 00:10:16,320 --> 00:10:18,199 Speaker 2: just not how it works, So you have to build 215 00:10:18,200 --> 00:10:20,120 Speaker 2: that into your plan. That's why we talk about stress 216 00:10:20,120 --> 00:10:23,040 Speaker 2: testing so much. Run your plan is if nothing bad 217 00:10:23,080 --> 00:10:25,480 Speaker 2: ever happens again, everything's wonderful, and then do the same 218 00:10:25,520 --> 00:10:28,320 Speaker 2: thing again and maybe knock down your financial assets by 219 00:10:28,320 --> 00:10:30,360 Speaker 2: twenty percent or so. That's going to make you feel 220 00:10:30,440 --> 00:10:33,080 Speaker 2: much more confident in the event of some kind of 221 00:10:33,080 --> 00:10:36,240 Speaker 2: market downturn. At the worst time, which is right after 222 00:10:36,280 --> 00:10:38,560 Speaker 2: you've retired, you've made that decision, you've pulled the trigger, 223 00:10:38,600 --> 00:10:40,360 Speaker 2: and then the market decides to kick you around a 224 00:10:40,360 --> 00:10:43,160 Speaker 2: little bit. That does happen to people, but if properly 225 00:10:43,200 --> 00:10:45,960 Speaker 2: planned out, is if properly stress tested, it shouldn't be 226 00:10:46,000 --> 00:10:48,320 Speaker 2: too much of a shock because you don't want to. 227 00:10:48,320 --> 00:10:49,480 Speaker 3: Have regret over that decision. 228 00:10:49,480 --> 00:10:53,560 Speaker 2: That is a huge decision, and you'll question it anyway 229 00:10:53,600 --> 00:10:56,480 Speaker 2: because it's a stressful one, but it really is more 230 00:10:56,480 --> 00:10:59,160 Speaker 2: difficult when the market doesn't want to cooperate with us. 231 00:10:59,200 --> 00:11:01,079 Speaker 3: So just make sure you understand what. 232 00:11:00,960 --> 00:11:03,600 Speaker 2: That can look and feel like, and then also reflect 233 00:11:03,600 --> 00:11:05,760 Speaker 2: on the fact that it's one thing to play with 234 00:11:05,880 --> 00:11:09,360 Speaker 2: numbers in an online calculator it's another thing entirely to 235 00:11:09,480 --> 00:11:11,559 Speaker 2: live with it because you'll be so if it does 236 00:11:11,600 --> 00:11:13,200 Speaker 2: happen to you, and it can, it doesn't mean you 237 00:11:13,200 --> 00:11:13,720 Speaker 2: made a mistake. 238 00:11:13,760 --> 00:11:14,720 Speaker 3: It's just life. 239 00:11:14,960 --> 00:11:18,600 Speaker 2: Because you'll be surrounded with scary headlines and friends and 240 00:11:18,640 --> 00:11:21,320 Speaker 2: family who are panicking and telling you you're not panicking enough. 241 00:11:21,840 --> 00:11:23,840 Speaker 2: How could you possibly retire in this type of a market, 242 00:11:23,920 --> 00:11:26,160 Speaker 2: so on and so forth. So just remember the numbers 243 00:11:26,160 --> 00:11:27,720 Speaker 2: are one thing, the emotions are another. 244 00:11:27,880 --> 00:11:28,200 Speaker 3: Entirely. 245 00:11:29,200 --> 00:11:32,040 Speaker 1: I think you make a great point here, Brian Dovetailing 246 00:11:32,080 --> 00:11:35,560 Speaker 1: an actual financial plan and you really need one with 247 00:11:35,840 --> 00:11:39,720 Speaker 1: stress testing is what gives people peace of mind. Case 248 00:11:39,760 --> 00:11:42,800 Speaker 1: and point. When we're having meetings with our clients right now, 249 00:11:43,040 --> 00:11:45,640 Speaker 1: and I've seen you do this with clients. You'll go 250 00:11:45,679 --> 00:11:48,800 Speaker 1: ahead and knock the portfolio down eighteen twenty two percent, 251 00:11:48,880 --> 00:11:51,280 Speaker 1: what have you, even though that's not what's going on 252 00:11:51,400 --> 00:11:54,440 Speaker 1: right now. We will do it on paper or on 253 00:11:54,480 --> 00:11:57,600 Speaker 1: that computer model and just get people's reaction. You know, 254 00:11:57,640 --> 00:11:59,800 Speaker 1: are you really going to be upset or want to 255 00:12:00,080 --> 00:12:03,160 Speaker 1: change your whole life or allocation if we do get 256 00:12:03,400 --> 00:12:06,360 Speaker 1: you know, increased volatility. And it's great to have those 257 00:12:06,440 --> 00:12:10,880 Speaker 1: discussions before it happens rather than after the fact, because 258 00:12:10,920 --> 00:12:13,880 Speaker 1: after the fact is when people can make these emotional, 259 00:12:14,280 --> 00:12:18,520 Speaker 1: fear driven decisions from which they sometimes can't recover from. 260 00:12:18,600 --> 00:12:21,640 Speaker 1: Here's the all Worth advice. Your portfolio is not just 261 00:12:21,720 --> 00:12:25,920 Speaker 1: one index. Focus on a good diversified portfolio and a 262 00:12:26,000 --> 00:12:30,439 Speaker 1: comprehensive financial plan to go with it, not just daily headlines. 263 00:12:31,080 --> 00:12:34,480 Speaker 1: Coming up next, the silent wealth killer that can sabotage 264 00:12:34,559 --> 00:12:39,400 Speaker 1: high earners and most importantly, their sense of financial freedom. 265 00:12:39,600 --> 00:12:42,200 Speaker 1: You're listening to Simply Money presented by all Worth Financial 266 00:12:42,240 --> 00:12:50,800 Speaker 1: on fifty five KRC the talk station. You're listening to 267 00:12:50,840 --> 00:12:54,000 Speaker 1: Simply Money presented by all Worth Financial on Bob Sponseller 268 00:12:54,040 --> 00:12:56,880 Speaker 1: along with Brian James. If you can't listen to Simply 269 00:12:56,920 --> 00:12:59,640 Speaker 1: Money live every night, go ahead and subscribe and get 270 00:12:59,679 --> 00:13:02,920 Speaker 1: our day podcasts. Just search Simply Money on the iHeart 271 00:13:02,920 --> 00:13:07,720 Speaker 1: app or wherever you find your podcasts. Are your investments 272 00:13:07,800 --> 00:13:11,839 Speaker 1: actually working or are they just expensive? And when it's 273 00:13:11,880 --> 00:13:15,720 Speaker 1: time to reduce risk, what's the smartest move and smartest 274 00:13:15,720 --> 00:13:17,679 Speaker 1: way to do that. We're gonna break all that down 275 00:13:17,760 --> 00:13:21,640 Speaker 1: straight ahead. There's an article making the rounds that really 276 00:13:21,679 --> 00:13:25,320 Speaker 1: did catch our attention, and it suggests and this surprised me, Brian. 277 00:13:25,440 --> 00:13:29,959 Speaker 1: It suggests that households earning catch this between three hundred 278 00:13:30,160 --> 00:13:33,920 Speaker 1: and five hundred thousand dollars a year are more likely 279 00:13:33,960 --> 00:13:39,079 Speaker 1: to report living paycheck to paycheck than households living on 280 00:13:39,240 --> 00:13:42,120 Speaker 1: fifty to one hundred thousand dollars a year. This comes 281 00:13:42,160 --> 00:13:46,480 Speaker 1: straight from a Goldman Sachs survey. It seems, you know, 282 00:13:46,640 --> 00:13:49,760 Speaker 1: flat out insane to me. But let's let's break it down. 283 00:13:49,960 --> 00:13:51,680 Speaker 1: I guess maybe I shouldn't be surprised. 284 00:13:51,840 --> 00:13:53,800 Speaker 2: Well, yeah, I mean that again, this kind of thing 285 00:13:53,920 --> 00:13:56,000 Speaker 2: keeps us employed, I think, doesn't it makeing sense of 286 00:13:56,080 --> 00:13:59,760 Speaker 2: things that don't so from a financial perspective, so you know. 287 00:14:00,040 --> 00:14:01,520 Speaker 3: Yeah, So let's review what Bob just said. 288 00:14:01,559 --> 00:14:04,360 Speaker 2: Households earning between three and five hundred thousand dollars a 289 00:14:04,400 --> 00:14:07,000 Speaker 2: year are more likely to report living paycheck to paycheck 290 00:14:07,080 --> 00:14:11,320 Speaker 2: than households earning fifty to one hundred. That's completely counterintuitive, right, right, 291 00:14:11,440 --> 00:14:12,720 Speaker 2: it must be the other way around. 292 00:14:13,200 --> 00:14:14,040 Speaker 3: Well that's not the case. 293 00:14:14,040 --> 00:14:16,880 Speaker 2: This is not an income problem, right, This isn't all 294 00:14:16,880 --> 00:14:19,000 Speaker 2: these poor people making three to five hundred thousand dollars 295 00:14:19,000 --> 00:14:21,720 Speaker 2: a year need to have more income? Not necessarily, sure, 296 00:14:21,720 --> 00:14:23,600 Speaker 2: that would solve it. This is more a problem with 297 00:14:23,680 --> 00:14:27,000 Speaker 2: lifestyle creep. It's a behavioral problem. So lifestyle creep is 298 00:14:27,040 --> 00:14:30,120 Speaker 2: what happens when that's when you're spending basically goes straight 299 00:14:30,200 --> 00:14:32,080 Speaker 2: up with your income. Soon as you get that raise, 300 00:14:32,600 --> 00:14:34,720 Speaker 2: the house gets bigger, the targets a little nicer. You 301 00:14:34,760 --> 00:14:36,400 Speaker 2: sell the business, and then all of a sudden your 302 00:14:36,400 --> 00:14:39,880 Speaker 2: fixed costs multiply, And it doesn't. It isn't the boon 303 00:14:40,040 --> 00:14:42,840 Speaker 2: that it seemed like it one day would be way 304 00:14:42,840 --> 00:14:44,920 Speaker 2: back when you thought about I can sell this business. 305 00:14:44,920 --> 00:14:46,720 Speaker 2: I grow it to X, and I'll sell it for Y, 306 00:14:46,800 --> 00:14:48,760 Speaker 2: and then all my problems will be solved. Well, you'll 307 00:14:48,800 --> 00:14:51,840 Speaker 2: have all the same problems if you allow your spending 308 00:14:52,200 --> 00:14:53,800 Speaker 2: to expand to fill the. 309 00:14:53,720 --> 00:14:54,520 Speaker 3: Space that it's in. 310 00:14:54,640 --> 00:14:56,480 Speaker 2: Right, So, I always think of spending as kind of 311 00:14:56,520 --> 00:14:57,800 Speaker 2: a kind of. 312 00:14:57,760 --> 00:14:59,360 Speaker 3: A gas versus a solid. 313 00:14:59,440 --> 00:15:01,480 Speaker 2: Right Remember high school chemistry, when you learn that a 314 00:15:01,520 --> 00:15:03,840 Speaker 2: gas is something that expands to fill the space that 315 00:15:03,840 --> 00:15:06,120 Speaker 2: it's sitting in. That's what spending can be if it's 316 00:15:06,120 --> 00:15:09,000 Speaker 2: not properly a babysat as and all of a sudden, 317 00:15:09,040 --> 00:15:12,120 Speaker 2: you know your social circle, you're paying attention to what 318 00:15:12,160 --> 00:15:14,840 Speaker 2: other people are doing. Then you come into a windfall, 319 00:15:14,880 --> 00:15:17,440 Speaker 2: sell the business, an inheritance or something like that, and 320 00:15:17,520 --> 00:15:20,160 Speaker 2: rather than that getting added to your capital stack of 321 00:15:20,200 --> 00:15:22,000 Speaker 2: things you can live off for the rest of your life, 322 00:15:22,120 --> 00:15:25,880 Speaker 2: it gets invested into something that gives you a somewhat 323 00:15:25,920 --> 00:15:29,240 Speaker 2: shorter term boost in your own self confidence and things 324 00:15:29,360 --> 00:15:31,760 Speaker 2: like that. So the private schools, country clubs, all those 325 00:15:31,800 --> 00:15:36,560 Speaker 2: types of things can quickly consume that windfall money. 326 00:15:37,440 --> 00:15:40,160 Speaker 1: Brian it, As I listened to you talk, this reminds 327 00:15:40,240 --> 00:15:42,640 Speaker 1: me of a story. I'm going back now twenty five 328 00:15:42,720 --> 00:15:46,680 Speaker 1: years ago when my wife and I bought a house 329 00:15:46,720 --> 00:15:49,960 Speaker 1: out and this is back during the buildout of all 330 00:15:50,000 --> 00:15:53,840 Speaker 1: the mc mansions out there in the northern part of Mason, 331 00:15:53,880 --> 00:15:56,600 Speaker 1: which is where we raised our three sons. And I 332 00:15:56,640 --> 00:15:59,080 Speaker 1: got home from work one night at around six o'clock. 333 00:15:59,120 --> 00:16:02,120 Speaker 1: I'm just taking the for a walk and trying to 334 00:16:02,160 --> 00:16:05,400 Speaker 1: relax a little bit. And I'm walking through, you know, 335 00:16:05,440 --> 00:16:08,960 Speaker 1: a newer part of the subdivision. They're actually building bricking 336 00:16:09,040 --> 00:16:14,480 Speaker 1: and roofing homes, and this actually a brick layer. You know, 337 00:16:14,520 --> 00:16:16,760 Speaker 1: he's getting ready to pack up his truck and go home, 338 00:16:16,800 --> 00:16:19,560 Speaker 1: and I'm walking down the street and he's like, Hey, 339 00:16:19,680 --> 00:16:22,000 Speaker 1: can I ask you a question, and I said sure, 340 00:16:22,960 --> 00:16:26,080 Speaker 1: and he I never forgot this. He said, how come 341 00:16:26,160 --> 00:16:29,400 Speaker 1: none of these houses have any furniture in them? And 342 00:16:30,200 --> 00:16:33,280 Speaker 1: I just laughed out loud because we're He and I 343 00:16:33,360 --> 00:16:35,320 Speaker 1: stood in a driveway and we looked at it. We 344 00:16:35,360 --> 00:16:37,720 Speaker 1: looked at a couple of houses on the street, and 345 00:16:37,760 --> 00:16:41,600 Speaker 1: they got twin you know, five series brand new BMW's 346 00:16:41,760 --> 00:16:44,520 Speaker 1: and just paid you know, a healthy chunk of change 347 00:16:44,520 --> 00:16:47,200 Speaker 1: for a new house. And they were maxed out. They 348 00:16:47,240 --> 00:16:49,960 Speaker 1: had no money to even buy a dining room table 349 00:16:50,040 --> 00:16:53,320 Speaker 1: or kitchen table or put drapes on the windows. And 350 00:16:53,400 --> 00:16:56,880 Speaker 1: this guy, who you know, was was probably in that 351 00:16:57,080 --> 00:16:59,640 Speaker 1: at that time thirty to fifty thousand dollars a year 352 00:16:59,680 --> 00:17:02,560 Speaker 1: categor or it just rocked his world. He did not 353 00:17:02,760 --> 00:17:05,240 Speaker 1: understand that because and I bet you he got in 354 00:17:05,320 --> 00:17:08,440 Speaker 1: his truck, you know, after we talked, and he drove 355 00:17:08,480 --> 00:17:11,480 Speaker 1: home to his family, probably sat down with a family 356 00:17:11,560 --> 00:17:15,720 Speaker 1: dinner with actual silverware and plates and curtains on the windows, 357 00:17:15,720 --> 00:17:18,520 Speaker 1: and had a nice evening. Meanwhile, all of us out 358 00:17:18,600 --> 00:17:21,879 Speaker 1: in the McMansion, you know, territory out and Mason are 359 00:17:21,920 --> 00:17:25,399 Speaker 1: stressing about how to make the BMW and mortgage payment. 360 00:17:25,480 --> 00:17:28,880 Speaker 1: I never forgot that. I thought it was I thought 361 00:17:28,920 --> 00:17:30,880 Speaker 1: it was both funny and sad at the same time. 362 00:17:31,080 --> 00:17:32,880 Speaker 2: Yeah, then I bet that truck was paid off too. 363 00:17:32,920 --> 00:17:35,639 Speaker 2: You know, it doesn't matter how much you earn your there, 364 00:17:35,640 --> 00:17:37,400 Speaker 2: It doesn't matter how much you earn. It doesn't matter 365 00:17:37,440 --> 00:17:39,760 Speaker 2: how big your pile is. What matter is, what matters 366 00:17:39,840 --> 00:17:40,160 Speaker 2: is how. 367 00:17:40,080 --> 00:17:40,760 Speaker 3: Much you spend. 368 00:17:41,080 --> 00:17:43,120 Speaker 2: I have clients, you know, some clients that have ten 369 00:17:43,160 --> 00:17:45,359 Speaker 2: million dollars and they're not gonna make it because they 370 00:17:45,440 --> 00:17:48,080 Speaker 2: live like they have twenty five million dollars. Also clients 371 00:17:48,080 --> 00:17:50,000 Speaker 2: with a half million dollars who were just fine because 372 00:17:50,000 --> 00:17:51,080 Speaker 2: they live within their means. 373 00:17:51,080 --> 00:17:52,359 Speaker 3: So the pile is irrelevant. 374 00:17:52,440 --> 00:17:54,680 Speaker 2: The spending, the stream of income that needs to come 375 00:17:54,680 --> 00:17:57,159 Speaker 2: out of it is extremely relevant. Let's talk through a 376 00:17:57,240 --> 00:17:59,600 Speaker 2: quick example here. You know, for example, lets say let's 377 00:17:59,600 --> 00:18:02,479 Speaker 2: say you kill You've accumulated four million dollars. Right on paper, 378 00:18:02,520 --> 00:18:05,440 Speaker 2: you're wealthy. But if that lifestyle requires three hundred and 379 00:18:05,440 --> 00:18:08,280 Speaker 2: fifty thousand dollars a year after taxes to sustain, we're 380 00:18:08,320 --> 00:18:10,960 Speaker 2: talking spending, not income. So we got to create income 381 00:18:11,000 --> 00:18:13,680 Speaker 2: higher than that to pay the man. That's not freedom. 382 00:18:13,760 --> 00:18:17,680 Speaker 2: Using a conservative four percent withdrawal framework, that four million 383 00:18:17,720 --> 00:18:19,920 Speaker 2: dollars can only support about one hundred and sixty thousand 384 00:18:19,960 --> 00:18:21,600 Speaker 2: dollars per year before tax. 385 00:18:21,680 --> 00:18:22,879 Speaker 3: That's a pretty big gap. 386 00:18:23,280 --> 00:18:25,040 Speaker 2: So so what's the result here? 387 00:18:25,080 --> 00:18:26,120 Speaker 3: What do people do? Well? 388 00:18:26,160 --> 00:18:28,719 Speaker 2: They sometimes stay in that job longer than they wanted to. Right, 389 00:18:28,760 --> 00:18:30,479 Speaker 2: they don't have they don't get to call their own 390 00:18:30,520 --> 00:18:32,720 Speaker 2: shot as to when they're going to retire. Sometimes they'll 391 00:18:32,760 --> 00:18:35,879 Speaker 2: take more investment risk than they should to try to 392 00:18:36,119 --> 00:18:40,200 Speaker 2: try to make ends meet, delaying transitions, you know, rationalizing 393 00:18:40,200 --> 00:18:43,520 Speaker 2: concentrated stock positions. Well, this Amazon or this you know, 394 00:18:43,560 --> 00:18:46,120 Speaker 2: Apple or whatever the thing is has done so well, 395 00:18:46,200 --> 00:18:47,960 Speaker 2: I'm just going to sit on it and rely that 396 00:18:48,040 --> 00:18:50,399 Speaker 2: it's going to continue to do that. And then all 397 00:18:50,440 --> 00:18:52,679 Speaker 2: of a sudden, the market decides that it's going to 398 00:18:53,600 --> 00:18:57,240 Speaker 2: not cooperate with you, and you've compounded the problem, you know, 399 00:18:57,320 --> 00:18:59,760 Speaker 2: overextending in any kind of deal, just chasing high returns, 400 00:18:59,760 --> 00:19:01,920 Speaker 2: and this is all to support a lifestyle that. 401 00:19:01,920 --> 00:19:03,639 Speaker 3: Maybe they don't need in the first place. 402 00:19:03,640 --> 00:19:05,880 Speaker 2: And this is not to wag our finger in anybody's faces, 403 00:19:06,119 --> 00:19:08,320 Speaker 2: but if you're going to be stressed out by your 404 00:19:08,359 --> 00:19:10,520 Speaker 2: own financial situation, you're going to be stressed out by 405 00:19:10,560 --> 00:19:13,920 Speaker 2: the headlines, then we're perhaps relying a little too much 406 00:19:14,040 --> 00:19:16,919 Speaker 2: on the overall capital markets and less on what we 407 00:19:16,960 --> 00:19:20,080 Speaker 2: can control, which is our own personal spending habits. 408 00:19:20,680 --> 00:19:23,960 Speaker 1: And this is an important reminder here is while you're 409 00:19:24,000 --> 00:19:28,240 Speaker 1: building out your quote unquote lifestyle and fixed expenses, before 410 00:19:28,400 --> 00:19:31,360 Speaker 1: you build all that out ahead of time, sit down 411 00:19:31,400 --> 00:19:35,119 Speaker 1: with a good fiduciary financial advisor, another set of eyes 412 00:19:35,160 --> 00:19:38,000 Speaker 1: and ears that can be objective, and look at your 413 00:19:38,080 --> 00:19:41,879 Speaker 1: long term goals and the you know, the long I 414 00:19:41,960 --> 00:19:43,600 Speaker 1: heard this phrase as soon as I got in this 415 00:19:43,680 --> 00:19:47,960 Speaker 1: industry thirty five years ago. Make sure to pay yourself first, 416 00:19:48,359 --> 00:19:50,800 Speaker 1: meaning get those savings plans, those four to one k 417 00:19:51,000 --> 00:19:55,000 Speaker 1: contributions in place first before you just go out and 418 00:19:55,040 --> 00:19:57,479 Speaker 1: spend every dime that you have and then wake up 419 00:19:57,480 --> 00:19:59,600 Speaker 1: in your mid forties and wonder how this is all 420 00:19:59,680 --> 00:20:02,399 Speaker 1: going to wor work. It's really hard to dig out 421 00:20:02,440 --> 00:20:04,920 Speaker 1: of that lifestyle creep if you don't get a plan 422 00:20:04,960 --> 00:20:07,640 Speaker 1: in place, you know, at the outset here. So here's 423 00:20:07,680 --> 00:20:11,520 Speaker 1: the all worth advice. Don't let your lifestyle rise faster 424 00:20:11,960 --> 00:20:16,320 Speaker 1: than your financial freedom. Protect your optionality of your money first, 425 00:20:17,000 --> 00:20:21,399 Speaker 1: upgrade your lifestyle. Second. Why is it important to update 426 00:20:21,400 --> 00:20:24,760 Speaker 1: a state planning documents, even if you think your situation 427 00:20:25,040 --> 00:20:28,240 Speaker 1: and wishes really haven't changed. We're going to dig into 428 00:20:28,280 --> 00:20:32,399 Speaker 1: that next with all Worth estate Planning expert. You're listening 429 00:20:32,480 --> 00:20:35,240 Speaker 1: to Simply Money presented by Allworth Financial on fifty five 430 00:20:35,320 --> 00:20:41,679 Speaker 1: KRC the talk station. You're listening to Simply Money presented 431 00:20:41,680 --> 00:20:45,360 Speaker 1: by all Worth Financial on Bob Sponseller along with Brian James. 432 00:20:45,440 --> 00:20:49,760 Speaker 1: Joined tonight by Allworth's senior estate planner in our private 433 00:20:49,960 --> 00:20:53,560 Speaker 1: client group, mister Paul Schwarz. Paul, I know you're a 434 00:20:53,640 --> 00:20:56,760 Speaker 1: very busy man. Thank you for making time for us tonight, 435 00:20:56,880 --> 00:20:58,760 Speaker 1: and we want to ask you to just, you know, 436 00:20:58,960 --> 00:21:01,760 Speaker 1: cover I think what to us is kind of a 437 00:21:01,800 --> 00:21:04,679 Speaker 1: common sense thing that we seem to be running into 438 00:21:04,960 --> 00:21:08,040 Speaker 1: more and more often when clients come in, either new 439 00:21:08,080 --> 00:21:13,040 Speaker 1: clients or existing clients for review meetings, and it's the old, 440 00:21:13,359 --> 00:21:17,639 Speaker 1: you know, discussion about estate planning documents, and you know, 441 00:21:17,800 --> 00:21:20,200 Speaker 1: more often than not they'll come in and say, yeah, 442 00:21:20,359 --> 00:21:23,600 Speaker 1: I had these things done, you know, twelve, fifteen, twenty 443 00:21:23,680 --> 00:21:27,080 Speaker 1: years ago. I don't see any reason to change them. 444 00:21:27,200 --> 00:21:30,919 Speaker 1: Nothing's changed with our objectives, with our family, everything's fine, 445 00:21:31,119 --> 00:21:35,080 Speaker 1: so we can check that box. And I know Brian 446 00:21:35,240 --> 00:21:37,480 Speaker 1: when you and I, you know, get under the hood 447 00:21:37,480 --> 00:21:39,399 Speaker 1: here a little bit and start asking the kind of 448 00:21:39,480 --> 00:21:42,560 Speaker 1: questions that need to be asked. Sometimes we find that 449 00:21:43,760 --> 00:21:47,119 Speaker 1: ignorance is blissed when it comes to a state planning documents. Paul, 450 00:21:47,200 --> 00:21:49,640 Speaker 1: walk us through what you see, because you're the one 451 00:21:49,640 --> 00:21:52,520 Speaker 1: that ends up having to deal with these situations and 452 00:21:52,920 --> 00:21:56,479 Speaker 1: talk to clients and get things properly updated. What are 453 00:21:56,520 --> 00:21:59,720 Speaker 1: most of the common things you see when people come 454 00:21:59,800 --> 00:22:03,359 Speaker 1: in then say at the outset, you know, everything's fine, 455 00:22:03,400 --> 00:22:05,159 Speaker 1: we don't need to touch it, blah blah blah. And 456 00:22:05,200 --> 00:22:07,600 Speaker 1: these we're sitting with fifteen year old documents. 457 00:22:08,800 --> 00:22:09,359 Speaker 3: Well, what I. 458 00:22:09,359 --> 00:22:13,040 Speaker 4: Always tell people is please review your documents every two 459 00:22:13,119 --> 00:22:13,919 Speaker 4: to five years. 460 00:22:14,080 --> 00:22:15,440 Speaker 3: And it doesn't have to. 461 00:22:15,400 --> 00:22:19,240 Speaker 4: Be because of a major life event. You know, it 462 00:22:19,240 --> 00:22:22,399 Speaker 4: could be because of a new birth or adoption. It 463 00:22:22,440 --> 00:22:24,879 Speaker 4: could be because of the death of a spouse, the 464 00:22:24,960 --> 00:22:28,919 Speaker 4: death of maybe your primary executor, your success or trustee, 465 00:22:28,960 --> 00:22:31,760 Speaker 4: even one of your agents on a durable power of 466 00:22:31,800 --> 00:22:35,640 Speaker 4: attorney or a healthcare power of attorney. And maybe maybe 467 00:22:35,720 --> 00:22:38,840 Speaker 4: there were financial changes that occurred over the years that 468 00:22:38,840 --> 00:22:42,639 Speaker 4: that you know, you might want to change some of 469 00:22:42,680 --> 00:22:45,439 Speaker 4: your documents because of that. And then The final reason 470 00:22:45,480 --> 00:22:48,640 Speaker 4: always is because the law changes and the law always changes, 471 00:22:48,680 --> 00:22:51,960 Speaker 4: and because of that, maybe we just want to make 472 00:22:52,000 --> 00:22:56,119 Speaker 4: sure that what you have currently in place is pursuing 473 00:22:56,200 --> 00:22:59,120 Speaker 4: to consistent law the way it is today and your 474 00:22:59,160 --> 00:22:59,840 Speaker 4: intentions of. 475 00:22:59,800 --> 00:23:03,040 Speaker 3: To Paul, what about what about moves? 476 00:23:03,080 --> 00:23:05,440 Speaker 2: So you know, I, if I wrote my will twenty 477 00:23:05,520 --> 00:23:07,199 Speaker 2: years ago when I lived in Ohio and now I'm 478 00:23:07,240 --> 00:23:09,600 Speaker 2: a snowbird down in Florida, what kind of challenges can 479 00:23:09,640 --> 00:23:10,000 Speaker 2: that bring? 480 00:23:10,000 --> 00:23:11,600 Speaker 3: If I've changed my residence. 481 00:23:13,320 --> 00:23:16,360 Speaker 4: It can bring big changes, but it especially brings changes 482 00:23:16,400 --> 00:23:20,640 Speaker 4: not necessarily with your revocable trust or your wills. Every 483 00:23:20,680 --> 00:23:24,920 Speaker 4: state recognizes the other state laws. But where I see 484 00:23:24,960 --> 00:23:27,639 Speaker 4: it really impacted is on your health care power of 485 00:23:27,720 --> 00:23:30,840 Speaker 4: attorney and your durable power of attorney, because not all 486 00:23:30,920 --> 00:23:36,840 Speaker 4: hospitals or doctors or financial institutions are going to necessarily 487 00:23:36,960 --> 00:23:39,960 Speaker 4: accept an out of state durable power of attorney or 488 00:23:40,040 --> 00:23:42,080 Speaker 4: health care power of attorney or living will. 489 00:23:42,720 --> 00:23:44,359 Speaker 2: Is there a way to have one written in a 490 00:23:44,400 --> 00:23:47,119 Speaker 2: more general manner that I can rely upon or should I? 491 00:23:47,160 --> 00:23:47,440 Speaker 3: Should? 492 00:23:47,440 --> 00:23:49,399 Speaker 2: It just always be something that I take care of 493 00:23:49,400 --> 00:23:50,840 Speaker 2: as soon as I move. I need to turn on 494 00:23:50,880 --> 00:23:52,840 Speaker 2: the electric in the new house and get my new 495 00:23:52,880 --> 00:23:54,720 Speaker 2: health care power attorney updated to this date? 496 00:23:54,920 --> 00:23:56,720 Speaker 4: Is there any way to keep that a little simpler? 497 00:23:57,920 --> 00:24:00,520 Speaker 4: I think it's important to get it out up to date. 498 00:24:00,600 --> 00:24:02,280 Speaker 4: It doesn't have to be the next day that you 499 00:24:02,400 --> 00:24:07,679 Speaker 4: move necessarily. Hopefully something there's there's no emergency, or something 500 00:24:07,760 --> 00:24:12,000 Speaker 4: doesn't happen necessarily that quick. But yeah, I always think 501 00:24:12,000 --> 00:24:14,600 Speaker 4: it's a good idea to have it reviewed and to 502 00:24:15,680 --> 00:24:18,080 Speaker 4: and to speak to a local attorney that could give 503 00:24:18,080 --> 00:24:21,199 Speaker 4: you better advice on whether you need new estate planning 504 00:24:21,240 --> 00:24:22,040 Speaker 4: documents or not. 505 00:24:23,440 --> 00:24:25,840 Speaker 1: Paul on that power of attorney topic, you know, Brian 506 00:24:25,920 --> 00:24:28,040 Speaker 1: talked about the you know where people move to a 507 00:24:28,040 --> 00:24:31,679 Speaker 1: different state. But again, when we're talking about these twelve, fifteen, 508 00:24:31,720 --> 00:24:33,880 Speaker 1: twenty year old documents, correct me if I'm wrong here, 509 00:24:33,920 --> 00:24:36,280 Speaker 1: but a lot of times when these documents were drafted, 510 00:24:36,760 --> 00:24:39,679 Speaker 1: the client's children are minors. You know, they can't serve 511 00:24:39,880 --> 00:24:42,840 Speaker 1: in a power of attorney, you know, capacity, either for 512 00:24:42,920 --> 00:24:46,440 Speaker 1: healthcare or financial. So isn't a second reason to get 513 00:24:46,440 --> 00:24:49,760 Speaker 1: these things updated in addition to maybe moving to a 514 00:24:49,800 --> 00:24:52,000 Speaker 1: different state, or even if you didn't move to a 515 00:24:52,040 --> 00:24:54,520 Speaker 1: different state, is just to take a look at you know, 516 00:24:54,680 --> 00:24:57,800 Speaker 1: most people want one or more of their kids, correct 517 00:24:57,840 --> 00:25:00,520 Speaker 1: me if I'm wrong here to serve as a successor 518 00:25:00,600 --> 00:25:03,600 Speaker 1: power of attorney in the event that their spouse can't 519 00:25:03,640 --> 00:25:07,000 Speaker 1: serve in that role. Is that right? You're exactly right, Bob. 520 00:25:07,040 --> 00:25:10,359 Speaker 4: And that's probably the most common thing that I see 521 00:25:10,640 --> 00:25:13,840 Speaker 4: is the kids are grown now. They had named either 522 00:25:13,960 --> 00:25:19,080 Speaker 4: a friend or a brother and sister as the backup executor, successor, 523 00:25:19,119 --> 00:25:22,679 Speaker 4: trustee or agent for power of attorney, and now that 524 00:25:22,680 --> 00:25:25,560 Speaker 4: their kids are in their twenties or even younger thirties, 525 00:25:26,640 --> 00:25:29,320 Speaker 4: they do want to name one of their children as 526 00:25:29,440 --> 00:25:32,480 Speaker 4: that successor to them. 527 00:25:32,600 --> 00:25:35,760 Speaker 1: Hey, Paul, talk about asset titling, because I know Brian 528 00:25:35,800 --> 00:25:37,800 Speaker 1: and I run to this, run into this all the time. 529 00:25:38,119 --> 00:25:42,400 Speaker 1: Just yesterday in fact, Yes, Well, people spend good, hard 530 00:25:42,440 --> 00:25:44,720 Speaker 1: earned money to sit down with an attorney and get 531 00:25:44,760 --> 00:25:47,760 Speaker 1: great documents drafted. And yeah, Brian and I were in 532 00:25:47,800 --> 00:25:50,159 Speaker 1: a meeting yesterday, you know, with a client, and he 533 00:25:50,240 --> 00:25:54,000 Speaker 1: asked the question, He's like, hey, tell me which assets 534 00:25:54,040 --> 00:25:58,200 Speaker 1: today are owned in this trust that you had drafted, 535 00:25:58,600 --> 00:26:01,760 Speaker 1: and we both got a deer in the headlights, look back, 536 00:26:02,080 --> 00:26:04,719 Speaker 1: you know, back, coming back at us, And the answer 537 00:26:04,880 --> 00:26:09,320 Speaker 1: is nothing. So do you find that often, Paul in 538 00:26:09,359 --> 00:26:12,520 Speaker 1: your work. Where Hey, getting the documents done is just 539 00:26:12,600 --> 00:26:14,679 Speaker 1: step one of this whole thing. Then you got to 540 00:26:14,720 --> 00:26:17,160 Speaker 1: take a look at how your assets should be titled, 541 00:26:17,520 --> 00:26:21,159 Speaker 1: update beneficiaries accordingly. Isn't that real? The job's really not 542 00:26:21,280 --> 00:26:24,480 Speaker 1: finished until that part of the estate plan is updated 543 00:26:24,480 --> 00:26:24,880 Speaker 1: as well. 544 00:26:24,960 --> 00:26:28,800 Speaker 4: Right, Getting the documents done is only fifty percent of 545 00:26:28,840 --> 00:26:33,359 Speaker 4: the work. How your assets are titled and designated is 546 00:26:33,400 --> 00:26:36,960 Speaker 4: probably just as critical. If you have a revocable trust 547 00:26:37,040 --> 00:26:39,800 Speaker 4: and you do not fund it correctly, your revocable trust 548 00:26:39,840 --> 00:26:42,040 Speaker 4: will act just like a will and go through the 549 00:26:42,040 --> 00:26:47,000 Speaker 4: probate process. So yes, it is so important to look 550 00:26:47,000 --> 00:26:50,159 Speaker 4: at all your beneficiary designations. Whether it's the title to 551 00:26:50,240 --> 00:26:54,000 Speaker 4: your house, whether it is retirement assets like a four 552 00:26:54,080 --> 00:26:57,560 Speaker 4: oh one k ira four oh three B, and whether 553 00:26:57,640 --> 00:27:01,440 Speaker 4: it's your your brokerage account, whether it's your bank accounts 554 00:27:01,440 --> 00:27:05,000 Speaker 4: like your savings, your checking, your money market, your CDs. 555 00:27:05,440 --> 00:27:08,320 Speaker 4: All of those need to be reviewed along with the 556 00:27:08,359 --> 00:27:11,720 Speaker 4: beneficiary designation or the transfer on death or payover on 557 00:27:11,800 --> 00:27:17,240 Speaker 4: death designation to make sure that your intent and to 558 00:27:17,359 --> 00:27:20,400 Speaker 4: follow through with the you know, avoiding probate and make 559 00:27:20,440 --> 00:27:22,960 Speaker 4: sure that those assets pass according to your wishes. 560 00:27:23,440 --> 00:27:25,560 Speaker 2: So yeah, matter of fact, Bob reminded me, I actually 561 00:27:25,560 --> 00:27:27,199 Speaker 2: had two meetings yesterday. There was the one you and 562 00:27:27,200 --> 00:27:28,760 Speaker 2: I were both in, and then I met with another 563 00:27:28,800 --> 00:27:30,560 Speaker 2: client on my own that had. 564 00:27:30,400 --> 00:27:31,320 Speaker 3: The exact same problem. 565 00:27:31,320 --> 00:27:33,600 Speaker 2: And Paul I swear it's probably three out of four 566 00:27:33,640 --> 00:27:35,560 Speaker 2: meetings where we uncover the fact that there is a 567 00:27:35,600 --> 00:27:38,080 Speaker 2: trust and people are kind of confidently saying, yeah, I 568 00:27:38,160 --> 00:27:39,919 Speaker 2: got my stuff done. I'm an adult, I got all this, 569 00:27:40,000 --> 00:27:42,040 Speaker 2: I got my all of my documents arranged. Well, what 570 00:27:42,080 --> 00:27:44,280 Speaker 2: does the trust own? Huh know what to do what 571 00:27:44,320 --> 00:27:46,840 Speaker 2: you're talking about? So well, yes, obviously I think we've 572 00:27:46,880 --> 00:27:48,280 Speaker 2: beaten that horse to death. But the other thing I 573 00:27:48,320 --> 00:27:51,040 Speaker 2: wanted to get your thoughts on was real estate. How 574 00:27:51,080 --> 00:27:52,760 Speaker 2: hard is it and what is It's one thing for 575 00:27:52,800 --> 00:27:54,119 Speaker 2: me to go to my bank and set up a 576 00:27:54,160 --> 00:27:57,119 Speaker 2: TOD or a pod payable on death transfer on death 577 00:27:57,240 --> 00:27:59,240 Speaker 2: for my investments, my financial accounts, that's easy. 578 00:27:59,240 --> 00:28:01,600 Speaker 3: It's usually peace paid. How does it work when I'm 579 00:28:01,640 --> 00:28:04,480 Speaker 3: dealing with the deed to my house? Is that a 580 00:28:04,520 --> 00:28:06,439 Speaker 3: hard process? How do I jump through those hoops? 581 00:28:07,359 --> 00:28:09,680 Speaker 4: Usually you need to get an attorney involved, and they'll 582 00:28:09,680 --> 00:28:11,040 Speaker 4: need to file what's called a. 583 00:28:11,080 --> 00:28:12,040 Speaker 3: Quit claim deed. 584 00:28:12,160 --> 00:28:15,520 Speaker 4: So it's just a deed that transfers from you or 585 00:28:15,560 --> 00:28:18,760 Speaker 4: you and your wife as joined tenants into your revocable trust. 586 00:28:19,040 --> 00:28:22,040 Speaker 4: It's a pretty simple process. It's a two page document 587 00:28:22,080 --> 00:28:24,199 Speaker 4: where you'll get a new deed. The deed will be 588 00:28:24,200 --> 00:28:26,280 Speaker 4: in the name of your trust, and then the deed 589 00:28:26,320 --> 00:28:29,080 Speaker 4: gets filed in the county recorder's office. 590 00:28:28,800 --> 00:28:29,400 Speaker 3: Where you live. 591 00:28:29,840 --> 00:28:33,000 Speaker 4: It's a pretty simple process and a pretty inexpensive process. 592 00:28:33,040 --> 00:28:37,120 Speaker 1: Also. All right, lots of good stuff tonight, Paul, thank 593 00:28:37,160 --> 00:28:39,800 Speaker 1: you for spending time with us. You're listening to Simply 594 00:28:39,840 --> 00:28:42,720 Speaker 1: Money presented by all Worth Financial on fifty five KRC, 595 00:28:43,240 --> 00:28:50,040 Speaker 1: the talk station. You're listening to Simply Money presented by 596 00:28:50,040 --> 00:28:53,200 Speaker 1: all Worth Financial on Bob Sponsorer along with Brian James. 597 00:28:53,560 --> 00:28:56,160 Speaker 1: You have a financial question you'd like for us to cover. 598 00:28:56,280 --> 00:28:58,719 Speaker 1: There's a red button you can click while you're listening 599 00:28:58,720 --> 00:29:01,920 Speaker 1: to the show right on iHeart app. Simply record your 600 00:29:02,000 --> 00:29:05,640 Speaker 1: question and it always comes straight to us. All right, 601 00:29:05,680 --> 00:29:09,800 Speaker 1: Brian lenn and Mason says, our bond funds have similar 602 00:29:09,920 --> 00:29:14,320 Speaker 1: yields but very different durations. Great question. How do I 603 00:29:14,440 --> 00:29:20,040 Speaker 1: decide whether shortening duration actually reduces risk or just shifts 604 00:29:20,040 --> 00:29:20,480 Speaker 1: the risk? 605 00:29:21,280 --> 00:29:22,320 Speaker 3: Well, this is a great question. 606 00:29:22,400 --> 00:29:24,600 Speaker 2: And first of all, I think that we need to 607 00:29:24,680 --> 00:29:26,560 Speaker 2: kind of define some terms here. So a lot of 608 00:29:26,560 --> 00:29:29,360 Speaker 2: times we think of duration as well that simply must 609 00:29:29,400 --> 00:29:31,840 Speaker 2: just be the the time frame of the bond fund 610 00:29:31,880 --> 00:29:33,560 Speaker 2: that I'm considering, and that's not really the case. 611 00:29:33,640 --> 00:29:35,800 Speaker 3: Duration is actually a specific. 612 00:29:35,280 --> 00:29:41,120 Speaker 2: Metric that is a that is that combines the velocity 613 00:29:41,120 --> 00:29:43,080 Speaker 2: of the income that's coming out of it with the 614 00:29:43,120 --> 00:29:46,280 Speaker 2: time that's left in that bond. So, for example, if 615 00:29:46,480 --> 00:29:48,520 Speaker 2: there's a bond out there with a good credit quality 616 00:29:49,040 --> 00:29:52,080 Speaker 2: and in a decently high or higher than average interest rate, 617 00:29:52,720 --> 00:29:55,240 Speaker 2: duration matters less than something that had that has a 618 00:29:55,440 --> 00:29:57,440 Speaker 2: that is lower credit quality or has a lower. 619 00:29:57,240 --> 00:29:58,400 Speaker 3: Income stream coming off of it. 620 00:29:58,520 --> 00:30:01,240 Speaker 2: So anyway, so in that case, you know duration that 621 00:30:01,320 --> 00:30:03,600 Speaker 2: sounds like a technical detail, but it's really a proxy 622 00:30:03,640 --> 00:30:05,960 Speaker 2: for what kind of risk you're choosing to take. 623 00:30:06,040 --> 00:30:08,120 Speaker 3: So let's throw some numbers at this. Again. 624 00:30:08,200 --> 00:30:10,080 Speaker 2: Duration is not just a word that refers to time. 625 00:30:10,080 --> 00:30:12,360 Speaker 2: There's a couple of things. A fund with a bond 626 00:30:12,360 --> 00:30:14,640 Speaker 2: fund with a duration of two is going to lose 627 00:30:14,720 --> 00:30:17,640 Speaker 2: roughly two percent if the rates rise one percent. A 628 00:30:17,680 --> 00:30:20,920 Speaker 2: fund with a duration of seven loses about seven percent. 629 00:30:20,760 --> 00:30:21,440 Speaker 3: Under the same move. 630 00:30:21,520 --> 00:30:24,120 Speaker 2: So these are approximate numbers, but it does give you 631 00:30:24,160 --> 00:30:26,840 Speaker 2: an idea for the scale of what we're talking about here. Therefore, 632 00:30:26,920 --> 00:30:30,320 Speaker 2: shortening duration clearly does reduce that interest rate risk, but 633 00:30:30,360 --> 00:30:33,760 Speaker 2: it doesn't eliminate it. It simply reallocates it. You're simply 634 00:30:33,800 --> 00:30:38,000 Speaker 2: trading price volatility for reinvestment risk. Short duration funds, well, 635 00:30:38,000 --> 00:30:40,640 Speaker 2: they don't move around very much, but they constantly mature 636 00:30:40,680 --> 00:30:42,560 Speaker 2: and reinvest the things that are inside them. 637 00:30:42,840 --> 00:30:44,320 Speaker 3: Rates drop, your income drops. 638 00:30:44,400 --> 00:30:46,360 Speaker 2: If you've got longer duration bonds that are of course 639 00:30:46,400 --> 00:30:49,520 Speaker 2: locking in those higher yields for a longer time. Don't 640 00:30:49,600 --> 00:30:52,040 Speaker 2: just look at the yields. That yield similarity can be 641 00:30:52,080 --> 00:30:56,000 Speaker 2: misleading as you're comparing your investment choices. Longer duration that 642 00:30:56,040 --> 00:30:59,640 Speaker 2: means more volatility today, but more certainty of income. Shorter 643 00:30:59,720 --> 00:31:03,800 Speaker 2: toration means more stability today, but less certainty of future yield. 644 00:31:03,840 --> 00:31:06,400 Speaker 2: So just think you know your shorter term high yield 645 00:31:06,440 --> 00:31:08,480 Speaker 2: savings accounts, money market funds, well, those are going to 646 00:31:08,520 --> 00:31:11,640 Speaker 2: have a shorter duration, you know, a more stability. You're 647 00:31:11,640 --> 00:31:13,160 Speaker 2: not going to watch them move up and down very 648 00:31:13,200 --> 00:31:15,520 Speaker 2: much in the shorter run. But at the same time, 649 00:31:15,600 --> 00:31:16,880 Speaker 2: just think of where they were A couple of years 650 00:31:16,920 --> 00:31:19,240 Speaker 2: ago versus now. They're still better than you know, the 651 00:31:19,360 --> 00:31:22,160 Speaker 2: zero percent rates we had not long ago, but we're 652 00:31:22,200 --> 00:31:24,760 Speaker 2: down from the five percent plus yields you used to 653 00:31:24,760 --> 00:31:26,000 Speaker 2: be able to get your checking accounts. 654 00:31:26,040 --> 00:31:27,000 Speaker 3: So hope that. 655 00:31:27,000 --> 00:31:29,640 Speaker 2: Helps a great question there, So we're going to move 656 00:31:29,680 --> 00:31:33,240 Speaker 2: on to Alex and Hebren. Alex's question is he's starting 657 00:31:33,280 --> 00:31:36,240 Speaker 2: to understand whether their portfolio's biggest risk is really related 658 00:31:36,280 --> 00:31:38,440 Speaker 2: to the market or is it liquidity risk. What's the 659 00:31:38,480 --> 00:31:40,600 Speaker 2: difference between those and how do you make decisions? 660 00:31:41,600 --> 00:31:44,400 Speaker 1: Well, Alex, the way I'd answer that question is it 661 00:31:44,440 --> 00:31:47,959 Speaker 1: depends on your financial plan and most importantly, you know, 662 00:31:48,040 --> 00:31:50,600 Speaker 1: it all comes down to what does your money need 663 00:31:50,600 --> 00:31:52,640 Speaker 1: to do for you and when? And here's what I 664 00:31:52,720 --> 00:31:56,560 Speaker 1: mean by that market risk. If you own something in 665 00:31:56,600 --> 00:32:00,000 Speaker 1: your portfolio that could drop, you know, twenty twenty five 666 00:32:00,000 --> 00:32:04,080 Speaker 1: five percent, well, most people psychologically, in their mind, that's 667 00:32:04,160 --> 00:32:06,640 Speaker 1: now a liquidity issue because you're not going to sell 668 00:32:07,000 --> 00:32:09,480 Speaker 1: at a twenty to twenty five percent loss. That can 669 00:32:09,520 --> 00:32:13,040 Speaker 1: feel the same as owning an ill liquid investment like 670 00:32:13,080 --> 00:32:17,000 Speaker 1: a rental property or a private credit or private equity 671 00:32:17,040 --> 00:32:20,120 Speaker 1: type investment where you do have liquidity lockups. So I 672 00:32:20,160 --> 00:32:22,920 Speaker 1: always go back to you know, as you're constructing your 673 00:32:22,960 --> 00:32:27,160 Speaker 1: financial plan, time horizon is so important again. You want 674 00:32:27,200 --> 00:32:32,000 Speaker 1: to know which portions of your portfolio need to do 675 00:32:32,080 --> 00:32:35,240 Speaker 1: what and when. So the key here is to make 676 00:32:35,280 --> 00:32:38,120 Speaker 1: sure in the short term and I'll define for investment 677 00:32:38,240 --> 00:32:41,360 Speaker 1: risk you know, purposes, you know, maybe a three three 678 00:32:41,360 --> 00:32:44,160 Speaker 1: and a half year time horizon. Make sure you have 679 00:32:44,360 --> 00:32:48,360 Speaker 1: enough liquidity in your portfolio to weather a storm, whether 680 00:32:48,440 --> 00:32:51,280 Speaker 1: it comes from market risk or lock up in some 681 00:32:51,320 --> 00:32:55,440 Speaker 1: of your investments, meaning have other investments available in your 682 00:32:55,440 --> 00:32:59,200 Speaker 1: portfolio to do that shorter term job for you. And 683 00:32:59,280 --> 00:33:01,720 Speaker 1: that way, hope fully, you know, if your risk is 684 00:33:01,760 --> 00:33:04,680 Speaker 1: spread out and you've got a good financial plan, you 685 00:33:04,720 --> 00:33:07,680 Speaker 1: can really mitigate both of those risks, you know, if 686 00:33:07,680 --> 00:33:10,160 Speaker 1: you've got money to work with in the short term. 687 00:33:10,440 --> 00:33:12,640 Speaker 1: All right, we got time for one more. Emily and 688 00:33:12,720 --> 00:33:16,960 Speaker 1: Lovelin says, we've added some alternative investments to diversify. But 689 00:33:17,080 --> 00:33:21,280 Speaker 1: I don't fully understand what job they're supposed to be doing. 690 00:33:21,560 --> 00:33:22,640 Speaker 1: How do I think about that? 691 00:33:22,840 --> 00:33:24,600 Speaker 2: Well, first off, I love the fact that that she's 692 00:33:24,640 --> 00:33:28,760 Speaker 2: referring to she's kind of a differentiating between the jobs 693 00:33:28,760 --> 00:33:29,960 Speaker 2: of these various piles of money. 694 00:33:30,040 --> 00:33:32,600 Speaker 3: Right the different things that you own. 695 00:33:32,640 --> 00:33:35,080 Speaker 2: Everything has a different job, and its job is not 696 00:33:35,160 --> 00:33:38,960 Speaker 2: always to be out performing everything else. That the recognition 697 00:33:39,000 --> 00:33:41,440 Speaker 2: that everything has a different job to take care of 698 00:33:41,560 --> 00:33:44,080 Speaker 2: is a great sign of an understanding of the importance 699 00:33:44,080 --> 00:33:47,320 Speaker 2: of diversification. So let's talk about the different jobs that exist. 700 00:33:47,360 --> 00:33:50,520 Speaker 2: First of all, you know growth, if you want your 701 00:33:50,520 --> 00:33:54,000 Speaker 2: money to grow. Obviously, that's an important component of any portfolio. 702 00:33:54,040 --> 00:33:55,760 Speaker 2: That's going to be your stock market of course, stock 703 00:33:55,800 --> 00:33:58,600 Speaker 2: and type investments. Stability, we need that when the growth 704 00:33:58,600 --> 00:33:59,280 Speaker 2: isn't working out. 705 00:33:59,480 --> 00:34:00,280 Speaker 3: Those are bombs. 706 00:34:00,520 --> 00:34:03,400 Speaker 2: Liquidity would be cash and short term bonds. And then 707 00:34:03,520 --> 00:34:06,320 Speaker 2: a fourth job that tends to come up as inflation protection, 708 00:34:06,680 --> 00:34:09,280 Speaker 2: and that's things that tend to hold value when purchasing 709 00:34:09,320 --> 00:34:11,160 Speaker 2: power it starts to fall apart, such as a real 710 00:34:11,280 --> 00:34:14,120 Speaker 2: estate for example. So as we get into alternatives, what 711 00:34:14,160 --> 00:34:16,640 Speaker 2: are we talking about here, Well, we're getting into private equity, 712 00:34:16,719 --> 00:34:21,439 Speaker 2: venture capital. That's something that's in the growth category there. 713 00:34:21,440 --> 00:34:24,919 Speaker 2: So that's going to enhance your long term returns over time. 714 00:34:24,960 --> 00:34:27,719 Speaker 2: Beyond the public markets, you are definitely trading liquidity and 715 00:34:27,760 --> 00:34:29,840 Speaker 2: transparency though that's the private part. You're not gonna be 716 00:34:29,840 --> 00:34:31,160 Speaker 2: able to see inside these black boxes. 717 00:34:31,280 --> 00:34:31,680 Speaker 3: Very well. 718 00:34:32,320 --> 00:34:35,080 Speaker 2: There are also hedge funds and absolute return strategies that 719 00:34:35,120 --> 00:34:38,520 Speaker 2: are looking to deliver equity like returns but with lower volatility. 720 00:34:38,520 --> 00:34:40,880 Speaker 2: That's still in the growth category, but it dips a 721 00:34:40,920 --> 00:34:44,840 Speaker 2: toe in the stability side of things. Real estate private 722 00:34:44,840 --> 00:34:47,919 Speaker 2: real estate transactions, those are alternatives as well, and those 723 00:34:47,960 --> 00:34:51,200 Speaker 2: can behave in a manner that offsets, like we said, inflation. 724 00:34:51,320 --> 00:34:54,160 Speaker 2: And then of course you've also got commodities, managed futures 725 00:34:54,160 --> 00:34:57,680 Speaker 2: and those kinds of things. Each of those those exist 726 00:34:57,719 --> 00:35:01,480 Speaker 2: to hedge inflation and outperform when the market undergoes stress. 727 00:35:01,520 --> 00:35:03,440 Speaker 2: And again I would put that in the same category 728 00:35:03,440 --> 00:35:05,359 Speaker 2: as we as we referred to it as real estate. 729 00:35:05,400 --> 00:35:07,400 Speaker 2: Each of these has moving parts beyond what you're a 730 00:35:07,480 --> 00:35:10,240 Speaker 2: customed to make sure you understand before you invest. 731 00:35:11,239 --> 00:35:13,920 Speaker 1: Coming up next, we got one more listener question that 732 00:35:14,040 --> 00:35:16,720 Speaker 1: we receive that I think is such a great question. 733 00:35:16,840 --> 00:35:19,359 Speaker 1: I think it's worth spending a few minutes on. So 734 00:35:19,400 --> 00:35:21,800 Speaker 1: we're going to dive into that one next. You're listening 735 00:35:21,840 --> 00:35:24,200 Speaker 1: to Simply Money presented by all Worth Financial on fifty 736 00:35:24,280 --> 00:35:33,799 Speaker 1: five KRC the talk station. You're listening to Simply Money 737 00:35:33,880 --> 00:35:36,480 Speaker 1: presented by all Worth Financial on Bob sponseller along with 738 00:35:36,520 --> 00:35:41,040 Speaker 1: Brian James. Well, Brian, we received another listener question that 739 00:35:41,080 --> 00:35:43,440 Speaker 1: we didn't have time to cover in the last segment, 740 00:35:43,480 --> 00:35:45,200 Speaker 1: and I thought it was such a good one that 741 00:35:45,239 --> 00:35:47,440 Speaker 1: it's worth diving into this for a few minutes. And 742 00:35:47,480 --> 00:35:51,080 Speaker 1: the question came to us from Paul in Columbia Tusculum, 743 00:35:51,120 --> 00:35:54,400 Speaker 1: and he says, Hey, I'm trying to understand whether lowering 744 00:35:54,520 --> 00:35:58,879 Speaker 1: risk should come from changing our investments or changing how 745 00:35:58,920 --> 00:36:01,800 Speaker 1: do we how we spend and how do you compare 746 00:36:01,840 --> 00:36:05,359 Speaker 1: those two? And I love that question because this goes 747 00:36:05,480 --> 00:36:08,320 Speaker 1: right to the heart of what a true financial planning 748 00:36:09,360 --> 00:36:13,600 Speaker 1: process and ongoing dialogue should be. Brian, I feel like 749 00:36:13,640 --> 00:36:16,839 Speaker 1: we've talked about the term stress testing three or four 750 00:36:16,880 --> 00:36:20,920 Speaker 1: times on tonight's show, and I think Paul's question, you know, 751 00:36:21,000 --> 00:36:22,879 Speaker 1: goes right to the heart of this. I think it's 752 00:36:22,960 --> 00:36:26,160 Speaker 1: great to sit down with people because I think people 753 00:36:26,280 --> 00:36:28,840 Speaker 1: have a couple things in mind. They want to be 754 00:36:28,880 --> 00:36:31,960 Speaker 1: able to spend and enjoy their money to the extent 755 00:36:32,000 --> 00:36:34,799 Speaker 1: that their plan will allow, but they also want to 756 00:36:34,800 --> 00:36:37,600 Speaker 1: be able to sleep at night, you know, depending on 757 00:36:37,640 --> 00:36:40,840 Speaker 1: how much volatility we have in the markets. And I 758 00:36:40,840 --> 00:36:44,000 Speaker 1: think it's great to just run different scenarios, and this 759 00:36:44,080 --> 00:36:46,120 Speaker 1: is what you and I do all day long for 760 00:36:46,239 --> 00:36:49,600 Speaker 1: clients to just show them, hey, here's what can happen 761 00:36:50,040 --> 00:36:53,239 Speaker 1: to your long term financial plan if you know, in 762 00:36:53,280 --> 00:36:55,320 Speaker 1: the early years of retirement we get hit with a 763 00:36:55,400 --> 00:36:58,839 Speaker 1: down market or a healthcare scare or something like that, 764 00:36:59,239 --> 00:37:01,439 Speaker 1: and just have a dialogue. And I think the other 765 00:37:01,520 --> 00:37:03,960 Speaker 1: thing to keep in mind is this does not have 766 00:37:04,040 --> 00:37:07,799 Speaker 1: to get etched in stone in year one, meaning set 767 00:37:07,800 --> 00:37:10,520 Speaker 1: it and forget it financial planning. This is why we 768 00:37:10,600 --> 00:37:15,080 Speaker 1: do at least an annual review, comprehensive review with everyone 769 00:37:15,200 --> 00:37:19,040 Speaker 1: to talk about these exact things, because your financial plan 770 00:37:19,440 --> 00:37:22,719 Speaker 1: and your risk tolerance most of the time can and 771 00:37:22,760 --> 00:37:27,399 Speaker 1: will evolve as you just navigate through life and go 772 00:37:27,440 --> 00:37:32,479 Speaker 1: through different market scenarios, health scenarios. You know, you deal 773 00:37:32,520 --> 00:37:36,160 Speaker 1: with grandkids, you deal with lifestyle changes. This to me 774 00:37:36,320 --> 00:37:39,840 Speaker 1: gets the heart, gets to the heart of why comprehensive 775 00:37:39,840 --> 00:37:43,480 Speaker 1: financial planning is so important for people and why it's 776 00:37:43,560 --> 00:37:47,320 Speaker 1: critical to have a good fiduciary advisor walk you through 777 00:37:47,680 --> 00:37:49,920 Speaker 1: you know that discussion. I know you've got I know 778 00:37:50,000 --> 00:37:52,120 Speaker 1: you do a great job in this area. And he 779 00:37:52,200 --> 00:37:54,160 Speaker 1: thoughts you would add to this question from. 780 00:37:53,960 --> 00:37:55,160 Speaker 3: Paul Well I did. 781 00:37:55,200 --> 00:37:58,280 Speaker 2: First off, want to commend Paul for realizing he's obviously 782 00:37:58,280 --> 00:38:01,040 Speaker 2: been looking at things, and he's realized that there's far 783 00:38:01,120 --> 00:38:04,799 Speaker 2: more to financial planning than simply throwing it all in 784 00:38:04,840 --> 00:38:06,399 Speaker 2: the stock market and just letting it ride there. 785 00:38:06,600 --> 00:38:07,479 Speaker 3: I look all the time. 786 00:38:08,200 --> 00:38:10,520 Speaker 2: There are Reddit sites out there that talk about financial planning, 787 00:38:10,520 --> 00:38:12,440 Speaker 2: online forums, all these kinds of things, and there is 788 00:38:12,480 --> 00:38:15,319 Speaker 2: a or the bogel Head site for example. All these 789 00:38:15,320 --> 00:38:18,560 Speaker 2: are valuable resources, but the drum beat is always just 790 00:38:18,600 --> 00:38:20,440 Speaker 2: throw it in an index fund, because that's cheap, and 791 00:38:20,440 --> 00:38:22,960 Speaker 2: that's all you'll ever have to do. Well, I don't 792 00:38:22,960 --> 00:38:25,320 Speaker 2: really mind that for the first twenty thirty years. 793 00:38:25,880 --> 00:38:26,879 Speaker 3: It might be a little long, but. 794 00:38:27,080 --> 00:38:30,719 Speaker 2: For the first several decades, but eventually you're gonna face 795 00:38:30,760 --> 00:38:32,600 Speaker 2: some decisions. You have to make decisions, and if you 796 00:38:32,680 --> 00:38:35,160 Speaker 2: haven't prepared for how you will make decisions, let alone 797 00:38:35,200 --> 00:38:37,560 Speaker 2: the decisions themselves, then you're gonna be kind of left 798 00:38:37,560 --> 00:38:40,759 Speaker 2: out in left field winging it. So I'm glad that 799 00:38:40,800 --> 00:38:43,840 Speaker 2: Paul has recognized it's not just about growth growth, growth, 800 00:38:43,920 --> 00:38:46,240 Speaker 2: There are other decisions to be made, many other factors 801 00:38:46,280 --> 00:38:46,920 Speaker 2: pay attention to. 802 00:38:47,520 --> 00:38:49,880 Speaker 1: Thanks for listening tonight, you've been listening to Simply Money, 803 00:38:49,920 --> 00:38:53,200 Speaker 1: presented by all Worth Financial on fifty five KRC, the 804 00:38:53,560 --> 00:38:54,160 Speaker 1: talk station