1 00:00:04,920 --> 00:00:09,160 Speaker 1: Tonight, is there an AI bubble? And if so, could 2 00:00:09,160 --> 00:00:12,280 Speaker 1: it possibly pop? In twenty twenty six, you're listening to 3 00:00:12,320 --> 00:00:15,200 Speaker 1: Simple Money, presented by all Worth Financial on Bob's spondseller 4 00:00:15,240 --> 00:00:18,439 Speaker 1: along with Brian James. But Brian, before we get into 5 00:00:18,440 --> 00:00:21,040 Speaker 1: talking about money, which is really the purpose of this show, 6 00:00:21,079 --> 00:00:24,439 Speaker 1: I've got to ask, how was Santa Con? I heard 7 00:00:24,480 --> 00:00:27,800 Speaker 1: you had an elaborate costume, all planned out. You spent 8 00:00:27,880 --> 00:00:31,600 Speaker 1: the whole afternoon trudging around in six inches of snow 9 00:00:31,880 --> 00:00:33,240 Speaker 1: in downtown Cincinnati. 10 00:00:33,479 --> 00:00:35,159 Speaker 2: Tell us about Santakan. 11 00:00:35,159 --> 00:00:37,720 Speaker 3: Santon, how did I was incognito? 12 00:00:37,800 --> 00:00:41,160 Speaker 4: I went as missus clause just to kind of change 13 00:00:41,159 --> 00:00:42,519 Speaker 4: things up a little bit. So I don't I don't 14 00:00:42,520 --> 00:00:43,680 Speaker 4: believe anybody spotted me. 15 00:00:43,640 --> 00:00:46,400 Speaker 2: Though, So you you actually did go? 16 00:00:46,960 --> 00:00:47,680 Speaker 3: No, I did not go. 17 00:00:47,760 --> 00:00:51,160 Speaker 4: I mean what you're talking about, I'm not that Brian. 18 00:00:52,479 --> 00:00:54,360 Speaker 4: I know you're taking shots at me. I have no 19 00:00:54,400 --> 00:00:56,680 Speaker 4: idea what you're talking about to take shots to move 20 00:00:56,720 --> 00:00:57,280 Speaker 4: on beyond that. 21 00:00:57,400 --> 00:01:00,560 Speaker 1: Okay, all right, let's get back to talking about AI 22 00:01:00,800 --> 00:01:03,920 Speaker 1: and a possible tech bubble in twenty twenty six. It 23 00:01:04,040 --> 00:01:08,319 Speaker 1: is a question that's coming up in certain media circles. 24 00:01:08,520 --> 00:01:11,880 Speaker 1: You know, fund managers are talking about rebalancing for twenty 25 00:01:11,920 --> 00:01:14,880 Speaker 1: twenty six. People just want to know, Hey, is this 26 00:01:14,920 --> 00:01:17,440 Speaker 1: bubble gonna pop? You know, we've talked about this all 27 00:01:17,520 --> 00:01:20,840 Speaker 1: year long, Brian, the concentration of returns so far in 28 00:01:20,920 --> 00:01:24,960 Speaker 1: twenty twenty six, and just these handful of big cap 29 00:01:25,040 --> 00:01:29,959 Speaker 1: tech tech companies that have really driven the overall performance 30 00:01:29,959 --> 00:01:32,839 Speaker 1: of the Nasdaq and S and P five hundred this year. 31 00:01:33,400 --> 00:01:35,679 Speaker 1: Is it time to just pull the plug on AI 32 00:01:35,800 --> 00:01:36,840 Speaker 1: and move elsewhere? 33 00:01:37,760 --> 00:01:39,560 Speaker 4: Well, you know, I don't know that we could ever 34 00:01:39,560 --> 00:01:41,240 Speaker 4: get to definitively say anything like. 35 00:01:41,200 --> 00:01:43,760 Speaker 3: That on just any particular topic. We're all just guessing. 36 00:01:43,760 --> 00:01:45,920 Speaker 4: But the reason we're talking about this the current state 37 00:01:45,920 --> 00:01:47,640 Speaker 4: of affairs is that we've been on quite a. 38 00:01:47,640 --> 00:01:49,000 Speaker 3: Run since twenty twenty two. 39 00:01:49,120 --> 00:01:51,000 Speaker 4: Twenty twenty two was one of the ugliest years we've 40 00:01:51,000 --> 00:01:53,000 Speaker 4: ever had in stock market, and the last three have 41 00:01:53,080 --> 00:01:56,560 Speaker 4: been some pretty good years. So about thirty trillion dollars 42 00:01:56,600 --> 00:01:59,640 Speaker 4: has been driven by the world's biggest tech companies since then, 43 00:02:00,240 --> 00:02:03,800 Speaker 4: Alphabet which is Google, Microsoft, and firms that are that 44 00:02:03,800 --> 00:02:06,360 Speaker 4: are that are benefiting from spending on all this AI stuff. 45 00:02:06,920 --> 00:02:10,960 Speaker 4: The names you hear a lot Nvidia, Broadcom, electricity providers 46 00:02:10,960 --> 00:02:12,440 Speaker 4: such as Constellation Energy. 47 00:02:12,639 --> 00:02:15,160 Speaker 3: Oracle is back in the mix. That's an old name from. 48 00:02:15,040 --> 00:02:18,640 Speaker 4: The original Internet bubble way back when in the late nineties. 49 00:02:18,639 --> 00:02:21,080 Speaker 3: Oracle was part of all that uh and uh. 50 00:02:21,560 --> 00:02:23,560 Speaker 4: But now we've seen, you know, late last week we 51 00:02:23,600 --> 00:02:25,160 Speaker 4: had a sell off in Video, which has been a 52 00:02:25,240 --> 00:02:27,640 Speaker 4: darling of the stock market for the last several years, 53 00:02:28,000 --> 00:02:31,239 Speaker 4: and Oracle shares after they reported exactly how much money 54 00:02:31,280 --> 00:02:34,240 Speaker 4: they're spending on AI. And then investors are just getting 55 00:02:34,240 --> 00:02:36,440 Speaker 4: to the point where they're saying, wait, where are the returns? 56 00:02:36,440 --> 00:02:38,560 Speaker 4: You know, some of this is starting to smell a 57 00:02:38,600 --> 00:02:42,160 Speaker 4: little bit like when we came to the realization that 58 00:02:42,200 --> 00:02:46,960 Speaker 4: the original Internet companies weren't necessarily all going to survive, 59 00:02:47,000 --> 00:02:49,280 Speaker 4: and there was kind of a reordering of things in 60 00:02:49,360 --> 00:02:52,680 Speaker 4: the one two stock market bubble, and then when that burst, 61 00:02:52,680 --> 00:02:55,239 Speaker 4: we had we had the survivors and the ones that 62 00:02:55,280 --> 00:02:58,079 Speaker 4: didn't quite make it. And that it's starting to smell 63 00:02:58,080 --> 00:02:59,800 Speaker 4: a little bit, Bob like, that's what we're headed toward 64 00:02:59,800 --> 00:03:00,480 Speaker 4: here with AI. 65 00:03:01,520 --> 00:03:04,320 Speaker 1: Yeah, I think the key point here is valuation. You've 66 00:03:04,320 --> 00:03:06,560 Speaker 1: got to look at the valuation of these companies, and 67 00:03:06,600 --> 00:03:10,040 Speaker 1: by valuation I mean a price earnings ratio and what 68 00:03:10,200 --> 00:03:12,200 Speaker 1: a lot of people are starting to ask, is Yep, 69 00:03:12,320 --> 00:03:16,040 Speaker 1: we've spent trillions and trillions of dollars built, building out 70 00:03:16,120 --> 00:03:19,080 Speaker 1: or investing in you know, this coming growth in AI 71 00:03:19,240 --> 00:03:21,880 Speaker 1: and the infrastructure that goes into it. When are we 72 00:03:21,919 --> 00:03:26,160 Speaker 1: going to see actual earnings that justify the cost of 73 00:03:26,200 --> 00:03:30,760 Speaker 1: all this infrastructure's infrastructure spending and Brian, you know, you 74 00:03:30,840 --> 00:03:33,240 Speaker 1: go through some of those companies that you listed off, 75 00:03:33,280 --> 00:03:38,520 Speaker 1: there is a tremendous difference in pe ratio between these 76 00:03:38,640 --> 00:03:42,480 Speaker 1: various tech companies, and I think that's what people are 77 00:03:42,480 --> 00:03:45,720 Speaker 1: starting to talk about and look at and to say 78 00:03:45,760 --> 00:03:48,240 Speaker 1: nothing of the debt structure. You know, you look at 79 00:03:48,240 --> 00:03:51,960 Speaker 1: a company like open Ai, you know, the creator of 80 00:03:52,080 --> 00:03:58,240 Speaker 1: chat GPT, they continue they they have never had positive earnings, profits, 81 00:03:58,480 --> 00:04:02,440 Speaker 1: positive cash flow of kind. They continue to hemorrhage money 82 00:04:02,920 --> 00:04:06,680 Speaker 1: and they're they're funding this future on the come growth. 83 00:04:06,760 --> 00:04:07,720 Speaker 2: Based on debt. 84 00:04:07,840 --> 00:04:10,360 Speaker 1: And it's some At some point people are gonna want 85 00:04:10,360 --> 00:04:12,800 Speaker 1: to see, you know, a return on investment in the 86 00:04:12,840 --> 00:04:14,480 Speaker 1: form of positive earnings and. 87 00:04:14,480 --> 00:04:15,640 Speaker 2: Positive cash flow. 88 00:04:16,160 --> 00:04:18,320 Speaker 1: And I think that's what people are starting to talk 89 00:04:18,320 --> 00:04:21,200 Speaker 1: about here heading into twenty twenty six, because there are 90 00:04:21,240 --> 00:04:25,080 Speaker 1: going to be some winners and losers and probably some 91 00:04:25,240 --> 00:04:29,960 Speaker 1: elevated volatility as we turn flip the calendar to twenty 92 00:04:30,000 --> 00:04:30,599 Speaker 1: twenty six. 93 00:04:31,040 --> 00:04:34,479 Speaker 4: That and competition is heating f too. So Alphabet has 94 00:04:34,560 --> 00:04:37,040 Speaker 4: a Google. Alphabet is Google, and they've got their own 95 00:04:37,440 --> 00:04:41,919 Speaker 4: Gemini model for AI and open ai themselves. They're planning 96 00:04:41,960 --> 00:04:44,200 Speaker 4: to spend one point four trillion in the coming years, 97 00:04:44,600 --> 00:04:48,320 Speaker 4: and you know, so, so the the concerns. 98 00:04:47,800 --> 00:04:49,719 Speaker 3: There and open Ai is kind of the bellwether. 99 00:04:49,800 --> 00:04:52,560 Speaker 4: That's chat GPT, that's the company behind chat GPT, which 100 00:04:52,600 --> 00:04:54,000 Speaker 4: is the most well known name, I think in. 101 00:04:53,960 --> 00:04:54,280 Speaker 3: All of this. 102 00:04:55,000 --> 00:04:58,479 Speaker 4: But they're they're that company expects to burn about one 103 00:04:58,560 --> 00:05:00,920 Speaker 4: hundred and fifteen billion dollar dollars over the next four 104 00:05:01,000 --> 00:05:04,680 Speaker 4: or five years before generating actual green profits in twenty 105 00:05:04,720 --> 00:05:08,040 Speaker 4: twenty thirty, which was that came from a report back 106 00:05:08,080 --> 00:05:11,520 Speaker 4: in September. But right now they're generating way less revenue 107 00:05:11,560 --> 00:05:14,480 Speaker 4: than their operating costs are coming in. They haven't had 108 00:05:14,520 --> 00:05:17,119 Speaker 4: any problem though, getting generating that excitement right. The stock 109 00:05:17,120 --> 00:05:19,080 Speaker 4: market does love a bubble. We love something to get 110 00:05:19,120 --> 00:05:22,640 Speaker 4: super wound up about. And so they collected more recently 111 00:05:22,680 --> 00:05:25,440 Speaker 4: forty billion dollars from an investment group out of Japan 112 00:05:25,480 --> 00:05:28,640 Speaker 4: called soft Bank and some other investors earlier this year. 113 00:05:29,000 --> 00:05:31,919 Speaker 4: In Vidia, as for their part, they pledged to invest 114 00:05:31,960 --> 00:05:34,839 Speaker 4: as much as one hundred billion dollars in September. And 115 00:05:35,279 --> 00:05:38,159 Speaker 4: so remember in Nvidia it makes the hardware that open 116 00:05:38,200 --> 00:05:42,120 Speaker 4: AI uses to create the artificial intelligence and bring that 117 00:05:42,160 --> 00:05:45,000 Speaker 4: to end users. So in Nvidia obviously has invested interest 118 00:05:45,040 --> 00:05:47,520 Speaker 4: in this is going well, and they've been throwing money 119 00:05:47,520 --> 00:05:50,599 Speaker 4: at the at the companies that are making the bridging 120 00:05:50,640 --> 00:05:53,200 Speaker 4: the gap between the end user and the hardware, and 121 00:05:53,720 --> 00:05:56,280 Speaker 4: so that there are some concerns that maybe they're throwing 122 00:05:56,279 --> 00:05:58,040 Speaker 4: a little bit too much money out there across too 123 00:05:58,040 --> 00:06:02,279 Speaker 4: many different players and that could create some circular financing 124 00:06:02,279 --> 00:06:03,200 Speaker 4: out there in the industry. 125 00:06:03,200 --> 00:06:03,440 Speaker 2: Though. 126 00:06:04,480 --> 00:06:07,320 Speaker 1: Yeah, I think one thing to look at going into 127 00:06:07,320 --> 00:06:10,440 Speaker 1: twenty twenty six is, you know, AI is starting to 128 00:06:10,480 --> 00:06:14,120 Speaker 1: become ubiquitous everywhere. You don't have to be in an 129 00:06:14,160 --> 00:06:19,560 Speaker 1: AI or chip company to benefit from the whole topic 130 00:06:19,600 --> 00:06:22,480 Speaker 1: of AI. What I mean there is you're going to 131 00:06:22,560 --> 00:06:26,880 Speaker 1: start to see companies who invested properly and wisely in AI, 132 00:06:27,040 --> 00:06:28,920 Speaker 1: and I don't care what sector they're in. 133 00:06:29,320 --> 00:06:30,760 Speaker 2: Hopefully you're going to start to. 134 00:06:30,640 --> 00:06:35,599 Speaker 1: See these companies benefit from that in the way of productivity. 135 00:06:36,000 --> 00:06:38,440 Speaker 1: And if you have interest rates continuing to come down, 136 00:06:38,600 --> 00:06:41,320 Speaker 1: you know, you're starting to see financial companies benefit, You're 137 00:06:41,320 --> 00:06:44,720 Speaker 1: starting to see small cap companies benefit. There's going to 138 00:06:44,800 --> 00:06:47,599 Speaker 1: be some profits made from this, and the profits might 139 00:06:47,720 --> 00:06:51,640 Speaker 1: come in unsuspecting places in twenty twenty six. And I 140 00:06:51,640 --> 00:06:54,200 Speaker 1: think the real message we're trying to send home here, 141 00:06:54,560 --> 00:06:56,440 Speaker 1: and Brian, you and I have been talking about this 142 00:06:56,520 --> 00:07:00,640 Speaker 1: for weeks now, is make sure you're diversified, make sure 143 00:07:00,680 --> 00:07:03,120 Speaker 1: you trim some of these gains when you've had them, 144 00:07:03,480 --> 00:07:07,520 Speaker 1: and position yourself accordingly to maybe bring down the overall 145 00:07:07,680 --> 00:07:11,560 Speaker 1: valuation of your portfolio, because there will be some good 146 00:07:11,680 --> 00:07:13,720 Speaker 1: values here coming in twenty twenty six. 147 00:07:14,120 --> 00:07:16,680 Speaker 2: You know, as we have interest rates. 148 00:07:16,480 --> 00:07:20,120 Speaker 1: Come down, regulation come down, that can all be a 149 00:07:20,160 --> 00:07:23,480 Speaker 1: great environment for stocks as long as you don't pay 150 00:07:23,600 --> 00:07:26,640 Speaker 1: up too much for earnings. And that's really the message 151 00:07:26,680 --> 00:07:30,040 Speaker 1: of this segment is some of these things have gotten 152 00:07:30,120 --> 00:07:33,160 Speaker 1: way out of whack in terms of you know, forward 153 00:07:33,200 --> 00:07:37,920 Speaker 1: looking pe and diversification needs to take place here. If 154 00:07:37,960 --> 00:07:40,560 Speaker 1: you haven't done it already or don't have a good 155 00:07:40,600 --> 00:07:44,720 Speaker 1: fiduciary financial advisor that's doing this on an ongoing basis, 156 00:07:44,760 --> 00:07:47,960 Speaker 1: you know, just rebalancing and looking for value and good 157 00:07:47,960 --> 00:07:49,800 Speaker 1: places to invest moving forward. 158 00:07:50,160 --> 00:07:52,560 Speaker 4: Yeah, and I think we're starting to see that that 159 00:07:52,720 --> 00:07:56,000 Speaker 4: happening at the business level of this industry as well. 160 00:07:56,040 --> 00:07:58,440 Speaker 4: So the reason Oracle is in the position that's been 161 00:07:58,480 --> 00:08:01,560 Speaker 4: in is because there behind they made a huge pivot 162 00:08:01,600 --> 00:08:04,040 Speaker 4: to cloud computing kind of seeing this coming. What their 163 00:08:04,040 --> 00:08:06,880 Speaker 4: goal was was to rely on the infrastructure that they 164 00:08:06,880 --> 00:08:09,920 Speaker 4: had already built over decades and build these cloud computing 165 00:08:09,960 --> 00:08:12,680 Speaker 4: services because AI, of course, this isn't something that lives 166 00:08:12,680 --> 00:08:16,080 Speaker 4: inside your laptop you've got on your desk. It lives elsewhere, 167 00:08:16,080 --> 00:08:18,520 Speaker 4: and that's where the data processing happens. So Oracle is 168 00:08:18,560 --> 00:08:22,520 Speaker 4: building up that sort of infrastructure to do that out there, 169 00:08:22,560 --> 00:08:24,600 Speaker 4: and so of course they need to build a lot 170 00:08:24,600 --> 00:08:26,800 Speaker 4: more data centers. That's going to require a lot of money. 171 00:08:27,040 --> 00:08:31,320 Speaker 4: That then Oracle is financing that by selling bonds. Selling 172 00:08:31,320 --> 00:08:33,280 Speaker 4: a bond is debt if you're a company that's basically 173 00:08:33,360 --> 00:08:36,000 Speaker 4: borrowing money from investors. So that's going to put pressure 174 00:08:36,040 --> 00:08:38,960 Speaker 4: on any company because now the bondholders have to be 175 00:08:38,960 --> 00:08:43,199 Speaker 4: paid interest on a schedule, unlike equity investors who basically 176 00:08:43,240 --> 00:08:45,120 Speaker 4: throw hope to throw a bunch of money in on 177 00:08:45,120 --> 00:08:47,480 Speaker 4: the ground floor and then get back out, you know, 178 00:08:47,480 --> 00:08:49,160 Speaker 4: get out of the elevator when it's on the hundredth 179 00:08:49,200 --> 00:08:51,800 Speaker 4: floor or something like that, versus debt, which will require 180 00:08:51,880 --> 00:08:55,800 Speaker 4: cash flow to pay the interest on. So that part 181 00:08:55,800 --> 00:08:57,559 Speaker 4: of that is the reason that Oracle stock took a 182 00:08:57,640 --> 00:09:01,079 Speaker 4: hit last week after they reported significantly higher capital expenditures 183 00:09:01,120 --> 00:09:03,880 Speaker 4: than we're expected because of these types of investments. 184 00:09:04,040 --> 00:09:06,960 Speaker 3: So Oracle is making a big bet on AI. 185 00:09:07,120 --> 00:09:09,120 Speaker 4: They think that's where everything's going to be, but they 186 00:09:09,120 --> 00:09:11,480 Speaker 4: are doing in a way that's going to require their 187 00:09:11,559 --> 00:09:14,320 Speaker 4: customers to be gendered to be cash flow positive a 188 00:09:14,320 --> 00:09:16,439 Speaker 4: lot sooner than we were really anticipating. 189 00:09:17,559 --> 00:09:20,280 Speaker 1: Yeah, and we want to reiterate here, this is not 190 00:09:20,440 --> 00:09:22,840 Speaker 1: the same thing as the dot com bubble we saw 191 00:09:23,000 --> 00:09:26,319 Speaker 1: back in the late nineties early two thousands. I mean, 192 00:09:26,360 --> 00:09:30,719 Speaker 1: even today big tech valuations they're high, but the magnitude 193 00:09:30,720 --> 00:09:33,760 Speaker 1: of these gains from AI are nothing like what happened 194 00:09:33,840 --> 00:09:37,040 Speaker 1: during the development of the Internet. Case in point, if 195 00:09:37,080 --> 00:09:39,600 Speaker 1: you take a look at the tech heavy Nasdaq one 196 00:09:39,720 --> 00:09:42,559 Speaker 1: hundred index right now, it's priced at about twenty six 197 00:09:42,679 --> 00:09:48,320 Speaker 1: times projected profits. According to the last research and data 198 00:09:48,360 --> 00:09:49,000 Speaker 1: we looked at. 199 00:09:48,840 --> 00:09:50,240 Speaker 2: From Bloomberg. 200 00:09:51,320 --> 00:09:54,200 Speaker 1: Going back to the early two thousands, we got to 201 00:09:54,280 --> 00:09:57,800 Speaker 1: an eighty times pe multiple of the Nasdaq one hundred 202 00:09:57,920 --> 00:10:00,680 Speaker 1: before the whole thing came crashing down during the dot 203 00:10:00,679 --> 00:10:05,200 Speaker 1: com bubble. So we're speaking in broad brushes here overall. 204 00:10:05,520 --> 00:10:07,040 Speaker 1: You know, if you look at it, I don't think 205 00:10:07,080 --> 00:10:10,120 Speaker 1: this market is really super inflated. 206 00:10:10,200 --> 00:10:11,960 Speaker 2: I think you just got to be choosing in what 207 00:10:12,040 --> 00:10:12,680 Speaker 2: you look at. 208 00:10:12,720 --> 00:10:16,240 Speaker 1: For example, you look at a company like Palanteer Technologies, 209 00:10:16,760 --> 00:10:19,160 Speaker 1: this thing is trading at one hundred and eighty times 210 00:10:19,320 --> 00:10:24,480 Speaker 1: estimated profits right now. You can find much better value elsewhere. 211 00:10:24,960 --> 00:10:29,319 Speaker 1: You know, even Navidia, Alphabet, Microsoft companies that you've already 212 00:10:29,320 --> 00:10:31,760 Speaker 1: talked about in this segment, Brian, they're all trading at 213 00:10:31,840 --> 00:10:34,040 Speaker 1: multiples below thirty times earnings. 214 00:10:34,160 --> 00:10:37,000 Speaker 2: That's not cheap, but it's not nearly. 215 00:10:36,760 --> 00:10:41,200 Speaker 1: At bubble type you know, valuations that we saw back 216 00:10:41,240 --> 00:10:44,160 Speaker 1: before the tech bubble in the early two thousands. 217 00:10:44,200 --> 00:10:45,839 Speaker 2: So again it's just you. 218 00:10:45,840 --> 00:10:48,520 Speaker 1: Got you gotta kind of do some stock picking here, 219 00:10:48,559 --> 00:10:51,120 Speaker 1: and that's what you rely on good managers to do. 220 00:10:51,720 --> 00:10:53,800 Speaker 2: Uh, we're just calling out here, you know. 221 00:10:53,800 --> 00:10:59,280 Speaker 1: As overall reallocation, don't get don't let your portfolio get 222 00:10:59,360 --> 00:11:02,440 Speaker 1: hits to these wagons that have been going straight up 223 00:11:02,520 --> 00:11:05,200 Speaker 1: in twenty twenty five, and assume that's going to go 224 00:11:05,240 --> 00:11:07,920 Speaker 1: on forever, because you might be in for a rude 225 00:11:07,920 --> 00:11:11,120 Speaker 1: awakening if and when we get a little pullback here 226 00:11:11,160 --> 00:11:12,479 Speaker 1: in the overall market. 227 00:11:12,640 --> 00:11:12,840 Speaker 2: Yeah. 228 00:11:12,840 --> 00:11:14,760 Speaker 4: I think the other interesting thing that's happening is these 229 00:11:14,800 --> 00:11:18,400 Speaker 4: countries companies are investing in infrastructure. You also have the 230 00:11:18,559 --> 00:11:22,160 Speaker 4: rising depreciation expenses, so you build these data centers, and 231 00:11:22,320 --> 00:11:25,439 Speaker 4: of course they did everything depreciates and that does result 232 00:11:25,520 --> 00:11:28,240 Speaker 4: in an expense that ultimately does hit the income statement. 233 00:11:28,320 --> 00:11:31,800 Speaker 4: So put some numbers behind that, Google, Microsoft, and Meta, 234 00:11:31,840 --> 00:11:35,240 Speaker 4: which is Facebook. They combined for about ten billion dollars 235 00:11:35,240 --> 00:11:38,240 Speaker 4: in depreciation costs in the final quarter of twenty twenty three, 236 00:11:38,559 --> 00:11:41,160 Speaker 4: and then that went to twenty two billion dollars in 237 00:11:41,160 --> 00:11:43,480 Speaker 4: the quarter that just ended here in this past september. 238 00:11:43,640 --> 00:11:46,160 Speaker 4: That's expected to be about thirty billion by this time 239 00:11:46,200 --> 00:11:48,400 Speaker 4: next year. And so what happens the end result of 240 00:11:48,440 --> 00:11:50,480 Speaker 4: all of that is that puts pressure on buybacks and 241 00:11:50,480 --> 00:11:52,920 Speaker 4: dividends because the stockholders are going to want to want 242 00:11:52,920 --> 00:11:56,959 Speaker 4: their cash back to reflect that reality. So in twenty 243 00:11:56,960 --> 00:11:59,800 Speaker 4: twenty six, both Facebook and Microsoft are expected to have 244 00:11:59,840 --> 00:12:03,040 Speaker 4: negative cash for negative free cash flow once they've accounted 245 00:12:03,080 --> 00:12:06,719 Speaker 4: for their shareholder returns at Google might break even on this, 246 00:12:07,200 --> 00:12:10,320 Speaker 4: but regardless, that could be a little bit of a 247 00:12:10,320 --> 00:12:11,880 Speaker 4: breather for all of this based on the. 248 00:12:11,880 --> 00:12:13,440 Speaker 3: Growth we've seen in the last ten years. 249 00:12:13,920 --> 00:12:15,040 Speaker 2: Here's the all Worth advice. 250 00:12:15,120 --> 00:12:18,720 Speaker 1: AI isn't going anywhere but heading into twenty twenty six, 251 00:12:18,800 --> 00:12:22,760 Speaker 1: make sure your portfolio is nice and diversified so it 252 00:12:22,840 --> 00:12:27,200 Speaker 1: can capitalize on that future growth and be protected from 253 00:12:27,200 --> 00:12:32,360 Speaker 1: any potential downturn. Coming up next, why worldwide portfolio growth 254 00:12:32,559 --> 00:12:36,120 Speaker 1: might be hiding some risks and why now's the time 255 00:12:36,160 --> 00:12:39,680 Speaker 1: to check in on your personal financial plan. You're listening 256 00:12:39,720 --> 00:12:42,160 Speaker 1: to Simply Money presented by all Worth Financial on fifty 257 00:12:42,200 --> 00:12:44,240 Speaker 1: five KRC the talk station. 258 00:12:50,600 --> 00:12:51,800 Speaker 2: You're listening to Simply. 259 00:12:51,559 --> 00:12:54,440 Speaker 1: Money presented by all Worth Financial on Bob's sponseller along 260 00:12:54,480 --> 00:13:00,280 Speaker 1: with Brian James. From emotions clouding, downsizing decisions to high 261 00:13:00,280 --> 00:13:04,679 Speaker 1: income investors, hying tax efficiency to cash flow rental properties 262 00:13:04,720 --> 00:13:07,520 Speaker 1: in Northern Kentucky, We're going to try to tackle all 263 00:13:07,559 --> 00:13:10,200 Speaker 1: of that and more straight ahead at six forty three. 264 00:13:10,960 --> 00:13:14,160 Speaker 1: There's a stat that caught our eye here recently, global 265 00:13:14,240 --> 00:13:18,040 Speaker 1: assets under management. That's all the money managed by investment 266 00:13:18,120 --> 00:13:21,240 Speaker 1: firms has hit a record high of one hundred and 267 00:13:21,240 --> 00:13:25,800 Speaker 1: forty seven trillion dollars, and that's trillion with a T, Brian, 268 00:13:25,880 --> 00:13:28,440 Speaker 1: It stands to reason to me, at least, you know, 269 00:13:28,520 --> 00:13:31,960 Speaker 1: the market's at all time highs, so maybe assets under 270 00:13:31,960 --> 00:13:35,240 Speaker 1: managed management should be at all time highs as well. 271 00:13:35,280 --> 00:13:37,440 Speaker 2: Is there anything to worry about here, Brian? 272 00:13:38,040 --> 00:13:40,440 Speaker 4: Well, there's always another side to every story we look at, 273 00:13:40,520 --> 00:13:42,319 Speaker 4: right So on the surface, that looks like a win 274 00:13:42,440 --> 00:13:44,719 Speaker 4: for everybody. That means portfolios are up, our four O 275 00:13:44,760 --> 00:13:48,160 Speaker 4: and k's are growing markets basically at an all time high. 276 00:13:48,200 --> 00:13:51,079 Speaker 4: The AI fuel tech rally has lifted a lot of boats. 277 00:13:51,640 --> 00:13:53,320 Speaker 4: But here's the other side of this, the surge and 278 00:13:53,400 --> 00:13:56,200 Speaker 4: assets under management. That's not really just about the market performance. 279 00:13:56,200 --> 00:13:59,200 Speaker 4: It also reflects how much money is chasing returns right now. 280 00:13:59,400 --> 00:13:59,800 Speaker 2: We see this. 281 00:13:59,840 --> 00:14:03,280 Speaker 4: Every time the market does hit a new high, people 282 00:14:03,320 --> 00:14:06,000 Speaker 4: assume that it's going to continue on forever. And you 283 00:14:06,000 --> 00:14:07,800 Speaker 4: know they were that was right two years ago, it 284 00:14:07,840 --> 00:14:09,680 Speaker 4: was right one year ago, which means to be seen 285 00:14:09,720 --> 00:14:12,000 Speaker 4: what will happen now? But that is a human reaction. 286 00:14:12,080 --> 00:14:13,760 Speaker 4: We do see how much we do see more money 287 00:14:13,760 --> 00:14:17,400 Speaker 4: flowing in it sort of uh becomes a self fulfilling prophecy, 288 00:14:17,559 --> 00:14:21,400 Speaker 4: but that introduces risk, especially if you're not regularly rebalancing 289 00:14:21,480 --> 00:14:22,960 Speaker 4: or revisiting that financial plan. 290 00:14:24,600 --> 00:14:27,200 Speaker 2: I'm always you know, going off popic here a little bit. 291 00:14:27,280 --> 00:14:31,320 Speaker 1: I'm always interested in how this quote unquote assets under 292 00:14:31,360 --> 00:14:35,080 Speaker 1: management number is even calculated. Case in point, if you've 293 00:14:35,120 --> 00:14:39,640 Speaker 1: got a you know, fiduciary financial advisor that manages client assets, 294 00:14:39,640 --> 00:14:42,200 Speaker 1: they're going to count up the assets they manage. Well, 295 00:14:42,920 --> 00:14:46,200 Speaker 1: they put those assets into ETFs or mutual funds or 296 00:14:46,240 --> 00:14:50,120 Speaker 1: annuity sub accounts, and those firms all count those assets 297 00:14:50,160 --> 00:14:53,160 Speaker 1: as assets under management. So, Brian, don't you think this 298 00:14:53,160 --> 00:14:56,840 Speaker 1: one hundred and forty seven trillion dollars represents assets that 299 00:14:56,880 --> 00:15:00,800 Speaker 1: are maybe double or triple counted Because everyone wants to 300 00:15:00,840 --> 00:15:04,720 Speaker 1: talk about how much money they manage or assets under management. 301 00:15:04,760 --> 00:15:07,600 Speaker 1: Everybody wants to rack up that number and talk about 302 00:15:07,640 --> 00:15:08,400 Speaker 1: how big it is. 303 00:15:08,720 --> 00:15:10,160 Speaker 2: Am I am I off base there? 304 00:15:10,400 --> 00:15:11,280 Speaker 3: Now that's a great point. 305 00:15:11,640 --> 00:15:15,200 Speaker 4: Yeah, Because we manage assets for people, we sometimes use 306 00:15:15,240 --> 00:15:16,680 Speaker 4: exchange traded funds. 307 00:15:16,360 --> 00:15:18,000 Speaker 3: And those are run by asset managers. 308 00:15:18,000 --> 00:15:20,960 Speaker 4: So yeah, it's potentially could be double counting some things 309 00:15:21,000 --> 00:15:21,280 Speaker 4: out there. 310 00:15:21,280 --> 00:15:22,320 Speaker 3: I hadn't thought about it that way. 311 00:15:22,360 --> 00:15:24,600 Speaker 4: I think that's a great thought worth poking around at. 312 00:15:24,760 --> 00:15:27,040 Speaker 4: But I think I think that the larger point remains 313 00:15:27,040 --> 00:15:30,080 Speaker 4: the same, which is we know that that that when 314 00:15:30,080 --> 00:15:32,400 Speaker 4: the market hits an all time high several years in 315 00:15:32,400 --> 00:15:35,080 Speaker 4: a row, more and more money just tends to flow 316 00:15:35,080 --> 00:15:37,480 Speaker 4: into it right up until there's it's time to take 317 00:15:37,520 --> 00:15:40,000 Speaker 4: a step back. And you know, we don't see anything, 318 00:15:40,040 --> 00:15:42,240 Speaker 4: you know, on the horizon imminent. But at the same time, 319 00:15:42,280 --> 00:15:43,800 Speaker 4: the whole point is we never really see it on 320 00:15:43,840 --> 00:15:44,280 Speaker 4: the horizon. 321 00:15:44,320 --> 00:15:45,200 Speaker 3: That doesn't work that way. 322 00:15:45,360 --> 00:15:47,280 Speaker 4: We have to be prepared for what the market's going 323 00:15:47,320 --> 00:15:49,200 Speaker 4: to give us when it decides it wants to take 324 00:15:49,240 --> 00:15:51,880 Speaker 4: a pullback, and that does not entail let's try to 325 00:15:51,920 --> 00:15:53,000 Speaker 4: dodge the oncoming train. 326 00:15:53,080 --> 00:15:54,000 Speaker 3: Things don't work that way. 327 00:15:54,920 --> 00:15:58,040 Speaker 1: Yeah, let's get back to some practical advice here. What 328 00:15:58,080 --> 00:16:01,200 Speaker 1: we're really talking about is rev it your financial plan. 329 00:16:01,280 --> 00:16:03,880 Speaker 1: Look at what your cash flow needs and wants are, 330 00:16:04,440 --> 00:16:06,800 Speaker 1: what your money needs to do for you and when, 331 00:16:07,320 --> 00:16:09,920 Speaker 1: and just make sure you have a strategy heading into 332 00:16:09,920 --> 00:16:13,480 Speaker 1: twenty twenty six that accomplishes that even if and when 333 00:16:13,920 --> 00:16:17,720 Speaker 1: we get a little bit of portfolio volatility. Let's talk 334 00:16:17,760 --> 00:16:20,160 Speaker 1: about some ways to do that. Brian, what are some 335 00:16:20,280 --> 00:16:22,960 Speaker 1: practical steps here heading into the new year to make 336 00:16:22,960 --> 00:16:26,400 Speaker 1: sure our financial plan is up to date regardless of 337 00:16:26,400 --> 00:16:29,040 Speaker 1: what happens in the short term with market volatility. 338 00:16:29,360 --> 00:16:32,640 Speaker 4: Well, rebalancing, that's what it's like a drum beat around here. 339 00:16:32,640 --> 00:16:33,800 Speaker 3: We say this all the time. 340 00:16:34,320 --> 00:16:36,280 Speaker 4: But when that market gave you gives you gains, that 341 00:16:36,400 --> 00:16:38,960 Speaker 4: smart move is to rebalance. Treat that as a non 342 00:16:39,040 --> 00:16:40,840 Speaker 4: optional thing. 343 00:16:40,680 --> 00:16:41,360 Speaker 3: You have to do. 344 00:16:41,880 --> 00:16:43,720 Speaker 4: And so the whole point of that is trimming back 345 00:16:43,760 --> 00:16:46,240 Speaker 4: what has grown too fast and then taking those dollars 346 00:16:46,320 --> 00:16:48,400 Speaker 4: and putting them into areas that haven't grown as much. 347 00:16:48,560 --> 00:16:51,080 Speaker 4: That so basically what you're literally doing there is you're 348 00:16:51,080 --> 00:16:53,960 Speaker 4: selling at the high and buying at the low, moving 349 00:16:53,960 --> 00:16:55,240 Speaker 4: across those different assets lids. 350 00:16:55,240 --> 00:16:56,560 Speaker 3: It's really all a rebalance is. 351 00:16:57,080 --> 00:16:58,680 Speaker 4: But if you don't do it, then you're you're just 352 00:16:58,720 --> 00:17:02,440 Speaker 4: simply allowing your portfolio to run itself. Your portfolio maybe 353 00:17:02,440 --> 00:17:04,840 Speaker 4: three or four years ago might have been sixty forty, 354 00:17:04,880 --> 00:17:07,399 Speaker 4: but there's a sixty percent stocks and forty percent punds. 355 00:17:07,600 --> 00:17:10,360 Speaker 4: There's a good chance with this rally that you might 356 00:17:10,359 --> 00:17:12,080 Speaker 4: be more like seventy five twenty five. 357 00:17:12,119 --> 00:17:14,720 Speaker 3: Now, you didn't choose to make your portfolio more aggressive. 358 00:17:14,760 --> 00:17:17,840 Speaker 4: But that's the way the asset allocation drove it, and 359 00:17:17,920 --> 00:17:19,560 Speaker 4: so that might not be the That might be too 360 00:17:19,640 --> 00:17:21,920 Speaker 4: much of a roller coaster for you. And if you're 361 00:17:22,119 --> 00:17:24,720 Speaker 4: the thought against that sometimes as well, this is winning 362 00:17:24,720 --> 00:17:26,000 Speaker 4: and I don't want to sell what's winning. 363 00:17:26,080 --> 00:17:26,800 Speaker 3: And that makes sense. 364 00:17:26,800 --> 00:17:29,040 Speaker 4: But now you're talking, you're thinking with emotion, you're not 365 00:17:29,119 --> 00:17:31,920 Speaker 4: planning for things. The one guarantee that we can give, 366 00:17:32,160 --> 00:17:34,800 Speaker 4: one of the very few guarantees that we get to give, ever, 367 00:17:35,160 --> 00:17:37,320 Speaker 4: is that the market is going to step back. We 368 00:17:37,359 --> 00:17:40,280 Speaker 4: will will will will lose money at some point. That's 369 00:17:40,359 --> 00:17:42,680 Speaker 4: going to happen, and it's going to hurt a lot 370 00:17:42,720 --> 00:17:45,240 Speaker 4: more if you if you felt like if you felt 371 00:17:45,320 --> 00:17:47,639 Speaker 4: like we had somehow exited the risk of that and 372 00:17:47,640 --> 00:17:50,880 Speaker 4: that wasn't a problem anymore, versus anticipating it and being 373 00:17:50,920 --> 00:17:54,040 Speaker 4: ready to pivot when that when, when that happens. So 374 00:17:54,080 --> 00:17:55,720 Speaker 4: now is the time to go ahead and take some 375 00:17:55,760 --> 00:17:58,000 Speaker 4: of the risk off the table, to take it out 376 00:17:58,000 --> 00:17:59,879 Speaker 4: while it's there, right where the market is at an 377 00:17:59,880 --> 00:18:00,720 Speaker 4: all time high. 378 00:18:00,760 --> 00:18:02,639 Speaker 3: This is the time to rebalance. If you have not 379 00:18:02,720 --> 00:18:03,560 Speaker 3: done so recently. 380 00:18:04,359 --> 00:18:08,879 Speaker 1: Yeah, let's face it, behavior here still matters, and recency. 381 00:18:08,400 --> 00:18:09,960 Speaker 2: Bias is a real thing. 382 00:18:10,040 --> 00:18:12,600 Speaker 1: In other words, people look at their statements heading into 383 00:18:12,640 --> 00:18:14,800 Speaker 1: the end of the year and maybe things that they've 384 00:18:15,080 --> 00:18:17,560 Speaker 1: owned to your point in the prior segment, going back 385 00:18:17,600 --> 00:18:20,520 Speaker 1: to you know, twenty twenty two, we've had a heck 386 00:18:20,560 --> 00:18:22,480 Speaker 1: of a run in a lot of these companies, and 387 00:18:22,560 --> 00:18:26,480 Speaker 1: people are very reticent to make any change, and they 388 00:18:26,560 --> 00:18:29,000 Speaker 1: just assume that what has worked over the last three 389 00:18:29,119 --> 00:18:32,840 Speaker 1: years is just going to keep on humming along unabated. 390 00:18:32,960 --> 00:18:35,720 Speaker 1: And that's really what we're calling about calling out here. 391 00:18:35,880 --> 00:18:39,240 Speaker 1: It never works that way, Brian. There's always kind of 392 00:18:39,240 --> 00:18:41,440 Speaker 1: a reversion to the mean, and that's why you might 393 00:18:41,480 --> 00:18:44,119 Speaker 1: want to not only rebalance, but maybe look at some 394 00:18:44,240 --> 00:18:47,320 Speaker 1: asset classes that you had not considered in the past. 395 00:18:47,680 --> 00:18:50,680 Speaker 1: A good example of that is international stocks. Nobody wanted 396 00:18:50,720 --> 00:18:54,120 Speaker 1: to talk about that, you know, for probably five years 397 00:18:55,040 --> 00:18:56,560 Speaker 1: heading into twenty twenty five. 398 00:18:56,760 --> 00:18:59,600 Speaker 2: Lo and behold, it's been the best performing asset class 399 00:18:59,640 --> 00:19:00,000 Speaker 2: this year. 400 00:19:00,520 --> 00:19:02,879 Speaker 1: Some other things that you know, we talk to folks about, 401 00:19:02,960 --> 00:19:08,080 Speaker 1: maybe consider some private equity, some private credit, some buffered strategies, 402 00:19:08,280 --> 00:19:10,840 Speaker 1: things like that that are kind of not front and 403 00:19:10,920 --> 00:19:13,960 Speaker 1: center here and haven't been talked about in the financial media, 404 00:19:14,520 --> 00:19:16,840 Speaker 1: but can make an awful lot of sense to building 405 00:19:16,840 --> 00:19:21,480 Speaker 1: a truly diversified and protected portfolio heading into the new year. 406 00:19:22,400 --> 00:19:24,399 Speaker 3: Yeah, I couldn't agree more. I think this is really 407 00:19:24,680 --> 00:19:25,720 Speaker 3: a great time of year to. 408 00:19:26,200 --> 00:19:28,320 Speaker 4: Take stock of all these different things and make sure 409 00:19:28,320 --> 00:19:29,520 Speaker 4: that you're doing what you need to do. 410 00:19:30,560 --> 00:19:34,080 Speaker 1: Here's the all Worth advice. A rising portfolio can create 411 00:19:34,320 --> 00:19:39,240 Speaker 1: hidden risks. Smart planning keeps your goals ahead of the 412 00:19:39,280 --> 00:19:43,520 Speaker 1: headlines coming up next. Why just rebalancing could be holding 413 00:19:43,520 --> 00:19:47,080 Speaker 1: your portfolio back. You're listening to Simply Money presented by 414 00:19:47,119 --> 00:19:50,680 Speaker 1: all Worth Financial on fifty five KRC, the talk station. 415 00:19:55,000 --> 00:19:57,640 Speaker 1: You're listening to Simply Money presented by all Worth Financial 416 00:19:57,640 --> 00:19:59,920 Speaker 1: on Bob Sponseller along with Brian James. 417 00:20:00,960 --> 00:20:03,399 Speaker 2: Well, you've probably heard it before. In fact, we just 418 00:20:03,440 --> 00:20:04,880 Speaker 2: talked about it a few minutes ago. 419 00:20:05,119 --> 00:20:07,960 Speaker 1: Make sure you rebalance your portfolio once or twice a 420 00:20:08,040 --> 00:20:10,040 Speaker 1: year and you'll be fine. 421 00:20:10,480 --> 00:20:14,120 Speaker 2: And for the average investor, that's usually decent advice. 422 00:20:14,400 --> 00:20:16,720 Speaker 1: But if you've got a little bit more money here, 423 00:20:16,760 --> 00:20:20,800 Speaker 1: and you've got specific tax plans or liquidity needs or 424 00:20:20,800 --> 00:20:25,159 Speaker 1: what have you coming up in twenty twenty six, rebalancing 425 00:20:25,240 --> 00:20:29,440 Speaker 1: is just maintenance. It might not be the optimal strategy. 426 00:20:29,560 --> 00:20:32,560 Speaker 1: And while it keeps your portfolio aligned to your risk 427 00:20:32,640 --> 00:20:37,320 Speaker 1: target allocation, it doesn't help you adapt to new tools, 428 00:20:37,680 --> 00:20:41,159 Speaker 1: new risks, new ways to be more tax efficient. And 429 00:20:41,160 --> 00:20:43,199 Speaker 1: that's what we want to get into you here, Brian, 430 00:20:43,280 --> 00:20:45,560 Speaker 1: the nuances on how. 431 00:20:45,320 --> 00:20:47,800 Speaker 2: To rebalance, how to restructure your portfolio. 432 00:20:48,600 --> 00:20:51,760 Speaker 4: Let's talk about what rebalancing does and doesn't do. But 433 00:20:51,880 --> 00:20:53,439 Speaker 4: so first we got to give it some credit. So 434 00:20:53,520 --> 00:20:55,879 Speaker 4: re rebalancing does prevent you from taking on way too 435 00:20:55,960 --> 00:20:58,439 Speaker 4: much risk when the market runs, because when stocks go 436 00:20:58,520 --> 00:21:00,880 Speaker 4: way up, it dudges you back towards that original mix 437 00:21:01,119 --> 00:21:03,800 Speaker 4: as you're taking profits out of one area and putting 438 00:21:03,800 --> 00:21:05,440 Speaker 4: it into areas that haven't done as well. That's just 439 00:21:05,520 --> 00:21:08,480 Speaker 4: good discipline, but it's also reactive. It's based on what 440 00:21:08,560 --> 00:21:10,719 Speaker 4: already happened. You're looking at the past and saying this 441 00:21:10,720 --> 00:21:13,320 Speaker 4: thing has grown too big and this thing is not enough. 442 00:21:13,440 --> 00:21:15,360 Speaker 4: So what it doesn't do is help you take advantage 443 00:21:15,359 --> 00:21:18,760 Speaker 4: of today's landscape or plan for what's coming next. So 444 00:21:18,880 --> 00:21:21,879 Speaker 4: let's talk about the tools. What can we do about this? 445 00:21:21,920 --> 00:21:24,200 Speaker 4: What resources do we have now that maybe we didn't 446 00:21:24,200 --> 00:21:27,040 Speaker 4: have in the past. So the portfolio has evolved, there 447 00:21:27,040 --> 00:21:29,240 Speaker 4: are new options out there. If all you're really doing 448 00:21:29,320 --> 00:21:32,520 Speaker 4: is rebalancing a sixty forty portfolio with the goal of 449 00:21:32,560 --> 00:21:35,000 Speaker 4: reducing the level of risk and reducing the volatility to 450 00:21:35,080 --> 00:21:38,280 Speaker 4: something you're more comfortable with, then perhaps buffer ETFs could 451 00:21:38,320 --> 00:21:40,480 Speaker 4: be a better example for you. These are things that 452 00:21:40,520 --> 00:21:42,800 Speaker 4: are designed to let you participate in equity growth but 453 00:21:42,920 --> 00:21:47,440 Speaker 4: have some built in a downside protection in terms of 454 00:21:47,520 --> 00:21:50,119 Speaker 4: mitigating some of the roller coaster ride that the stock 455 00:21:50,119 --> 00:21:52,800 Speaker 4: market can be, or better yet with One of my 456 00:21:52,840 --> 00:21:55,520 Speaker 4: favorite things to think about is direct indexing. That's huge 457 00:21:55,600 --> 00:21:57,679 Speaker 4: right now for high net worth investors. So instead of 458 00:21:57,960 --> 00:22:01,880 Speaker 4: buying a single exchange traded funder mutual fund, you literally 459 00:22:01,920 --> 00:22:05,520 Speaker 4: hold hundreds of individual stocks that represent whatever index a 460 00:22:05,560 --> 00:22:08,439 Speaker 4: given fund or ETF might be following as well. So 461 00:22:08,520 --> 00:22:11,240 Speaker 4: this gives you the ability to harvest tax losses at 462 00:22:11,280 --> 00:22:14,120 Speaker 4: the individual security level. Because you literally have all these 463 00:22:14,119 --> 00:22:17,720 Speaker 4: individual securities in your account, you can customize the exposure 464 00:22:17,760 --> 00:22:20,160 Speaker 4: and you can be a lot more strategic about the holdings. 465 00:22:20,320 --> 00:22:22,480 Speaker 3: This used to be very labor. 466 00:22:22,240 --> 00:22:26,240 Speaker 4: Intensive, and there's nothing magical that wasn't happening before, but 467 00:22:26,320 --> 00:22:29,680 Speaker 4: it's something that can be delivered at scale now nowadays, 468 00:22:30,119 --> 00:22:32,439 Speaker 4: as opposed to in the past when it was a 469 00:22:32,480 --> 00:22:34,600 Speaker 4: lot more work and just way too expensive for any 470 00:22:34,600 --> 00:22:36,680 Speaker 4: company to kind of keep track of all the different 471 00:22:36,680 --> 00:22:39,160 Speaker 4: accounts with that many positions sitting in there. 472 00:22:39,720 --> 00:22:41,880 Speaker 1: Yeah, Brian, let's dig into that a little further here, 473 00:22:41,920 --> 00:22:44,440 Speaker 1: because this literally, literally is an. 474 00:22:44,400 --> 00:22:47,440 Speaker 2: Evolution in the asset management business. 475 00:22:47,480 --> 00:22:50,200 Speaker 1: You know, over the last several years, you know, gone 476 00:22:50,240 --> 00:22:53,240 Speaker 1: to the days where we just rebalance a sixty forty 477 00:22:53,320 --> 00:22:56,160 Speaker 1: mutual fund portfolio because you you know, and we talk 478 00:22:56,200 --> 00:22:58,639 Speaker 1: about this all the time, you lose a lot of 479 00:22:58,720 --> 00:23:02,320 Speaker 1: tax control by just sitting there in a mutual fund portfolio, 480 00:23:02,400 --> 00:23:05,400 Speaker 1: even if you do rebalance. The name of the game 481 00:23:05,480 --> 00:23:08,560 Speaker 1: here is to have some tax lost harvesting going on, 482 00:23:09,040 --> 00:23:12,600 Speaker 1: you know, behind the scenes in your taxable accounts. Using 483 00:23:12,600 --> 00:23:15,639 Speaker 1: an ETF portfolio is one way to do that. But 484 00:23:15,840 --> 00:23:17,760 Speaker 1: you know, to your the point you just made, if 485 00:23:17,800 --> 00:23:21,520 Speaker 1: you get into a direct indexing situation, you can do 486 00:23:21,640 --> 00:23:25,760 Speaker 1: tax loss harvesting literally on steroids by owning the individual 487 00:23:26,040 --> 00:23:30,080 Speaker 1: stock positions in that portfolio and those you know, by 488 00:23:30,119 --> 00:23:32,879 Speaker 1: having all those things going on in the background, it 489 00:23:32,920 --> 00:23:36,840 Speaker 1: can it can add something we call tax alpha to 490 00:23:37,080 --> 00:23:40,159 Speaker 1: a portfolio that has nothing to do with the actual 491 00:23:40,200 --> 00:23:42,879 Speaker 1: return of the stock market or the individual stocks in 492 00:23:42,920 --> 00:23:46,439 Speaker 1: the portfolio. It's just taking advantage of the tax code 493 00:23:46,720 --> 00:23:49,479 Speaker 1: in a very proactive way. And that that is a 494 00:23:49,600 --> 00:23:53,600 Speaker 1: huge evolution from just setting a calendar based, you know, 495 00:23:53,720 --> 00:23:58,359 Speaker 1: quarterly or semi annual rebalancing situation on your old mutual 496 00:23:58,359 --> 00:24:00,520 Speaker 1: fund account that you've owned for four years. 497 00:24:01,000 --> 00:24:03,159 Speaker 4: So let's take a take a real life example through this. 498 00:24:03,200 --> 00:24:06,240 Speaker 4: So let's picture somebody worth maybe about six million dollars 499 00:24:06,960 --> 00:24:10,560 Speaker 4: rebalancing like clockwork every six months, just staying disciplined and 500 00:24:10,640 --> 00:24:12,359 Speaker 4: doing what they were taught to do over the years. 501 00:24:12,560 --> 00:24:14,480 Speaker 4: But that but they feel like that wasn't helping them 502 00:24:14,480 --> 00:24:17,880 Speaker 4: reduce volatility or increase income in retirement. Not to mention, 503 00:24:17,960 --> 00:24:20,840 Speaker 4: the tax burden kept going up as well, obviously not 504 00:24:20,840 --> 00:24:22,520 Speaker 4: not really having the impact that they want. So what 505 00:24:22,560 --> 00:24:25,480 Speaker 4: they could do there is use that custom index portfolio 506 00:24:25,520 --> 00:24:28,360 Speaker 4: to generate the tax losses to off offset gains they're 507 00:24:28,359 --> 00:24:30,880 Speaker 4: having elsewhere. That would help with the tax burden and 508 00:24:31,600 --> 00:24:34,560 Speaker 4: reallocating to those buffer dtfs could protect them better when 509 00:24:34,560 --> 00:24:37,960 Speaker 4: the market ultimately turns down eventually. That's not just rebalancing, 510 00:24:38,000 --> 00:24:41,760 Speaker 4: that's a conscious, educated decision to put a strategy in place. 511 00:24:41,800 --> 00:24:44,040 Speaker 4: That will directly address some of the bigger concerns that 512 00:24:44,040 --> 00:24:46,879 Speaker 4: they've had. So let's talk about when when can rebalancing 513 00:24:46,920 --> 00:24:49,920 Speaker 4: work against us? Well, let's not forget rebalancing. Of course, 514 00:24:49,960 --> 00:24:51,800 Speaker 4: what we're doing is we're selling something that has done 515 00:24:51,840 --> 00:24:53,760 Speaker 4: well well. Guess what if it's a taxable account, that 516 00:24:53,760 --> 00:24:55,520 Speaker 4: means we're gonna pay a little bit of taxes. So 517 00:24:55,560 --> 00:24:57,560 Speaker 4: that's why we need to be smart about how and 518 00:24:57,600 --> 00:25:00,679 Speaker 4: when we do this. You know, so time matters, and 519 00:25:00,720 --> 00:25:03,400 Speaker 4: you can combine different goals. For example, if you are 520 00:25:03,720 --> 00:25:07,040 Speaker 4: planning a large charitable gift or maybe a donor advised contribution, 521 00:25:07,560 --> 00:25:09,399 Speaker 4: that might be a better time to pair that with 522 00:25:09,440 --> 00:25:11,879 Speaker 4: a sale of some of these appreciated positions. If you 523 00:25:11,880 --> 00:25:16,280 Speaker 4: don't donate the appreciated positions themselves outright, rebalancing before that 524 00:25:16,680 --> 00:25:19,280 Speaker 4: and not having an offsetting tax type of a transaction 525 00:25:19,680 --> 00:25:22,000 Speaker 4: may cost you a lot of money unnecessarily. So make 526 00:25:22,000 --> 00:25:24,720 Speaker 4: sure you understand how all these different strategies work together, 527 00:25:24,840 --> 00:25:29,040 Speaker 4: charitable donations and portfolio rebalancing, and you can do it 528 00:25:29,040 --> 00:25:29,600 Speaker 4: almost for. 529 00:25:29,600 --> 00:25:31,880 Speaker 3: Free with the right type of situation. 530 00:25:32,880 --> 00:25:36,320 Speaker 1: No great point. Here's the all worth advice. Rebalancing keeps 531 00:25:36,320 --> 00:25:40,840 Speaker 1: you honest. Rebalancing with an actual strategy keeps you ahead 532 00:25:40,840 --> 00:25:41,320 Speaker 1: of the game. 533 00:25:41,880 --> 00:25:45,560 Speaker 2: Coming up next, are ever popular? Ask the advisor segment. 534 00:25:45,600 --> 00:25:48,080 Speaker 1: You're listening to Simply Money presented by all Worth Financial 535 00:25:48,119 --> 00:25:56,840 Speaker 1: on fifty five KRC the talk station. You're listening to 536 00:25:56,840 --> 00:26:00,320 Speaker 1: Simply Money presided by all Worth Financial on Bob'sponseller with 537 00:26:00,320 --> 00:26:03,560 Speaker 1: Brian James. You have a financial question you'd like for 538 00:26:03,680 --> 00:26:05,800 Speaker 1: us to answer. There is a red button you can 539 00:26:05,840 --> 00:26:09,280 Speaker 1: click if you're listening to the show on the iHeart app. 540 00:26:09,400 --> 00:26:12,880 Speaker 1: Simply record your question and it will come straight to us. 541 00:26:13,600 --> 00:26:16,920 Speaker 1: All right, Brian. Leading us off tonight is Tom from Marymont. 542 00:26:16,960 --> 00:26:20,439 Speaker 1: He says, our advisor said, we have quote unquote embedded 543 00:26:20,600 --> 00:26:24,879 Speaker 1: risk in funds that look diversified. How do you uncover 544 00:26:25,000 --> 00:26:28,359 Speaker 1: those risks that don't show up until the market drops? 545 00:26:28,480 --> 00:26:29,720 Speaker 2: Great question from Tom. 546 00:26:30,119 --> 00:26:33,560 Speaker 4: Yeah, So when an advisor says there is embedded risk 547 00:26:33,600 --> 00:26:36,520 Speaker 4: in a portfolio, they're referring to something that looks diversified 548 00:26:36,520 --> 00:26:39,359 Speaker 4: on paper but behaves very differently when markets fall. And 549 00:26:39,400 --> 00:26:41,480 Speaker 4: so here's how you can spot that these risks that 550 00:26:41,520 --> 00:26:44,199 Speaker 4: only show up during the bad times under stress. So 551 00:26:44,240 --> 00:26:47,520 Speaker 4: first off, look at factor exposure, not just tickers these 552 00:26:47,560 --> 00:26:50,040 Speaker 4: two funds with different names may may both load up 553 00:26:50,040 --> 00:26:51,480 Speaker 4: heavily on the same risk factors. 554 00:26:51,520 --> 00:26:52,240 Speaker 3: They could be all. 555 00:26:52,119 --> 00:26:54,480 Speaker 4: Growth, all tech, or all small cap or something like that. 556 00:26:55,080 --> 00:26:57,439 Speaker 4: And twenty twenty two, for example, investors learns that a 557 00:26:57,440 --> 00:27:00,040 Speaker 4: lot of quote unquote diversified growth funds were a e 558 00:27:00,040 --> 00:27:02,159 Speaker 4: actively the same trade, and if you looked at the 559 00:27:02,200 --> 00:27:04,600 Speaker 4: factors underneath them, you would have seen that these funds 560 00:27:04,640 --> 00:27:07,639 Speaker 4: would really move basically in the in the in the 561 00:27:07,680 --> 00:27:10,960 Speaker 4: same direction. So you look at the correlations and down 562 00:27:11,000 --> 00:27:14,600 Speaker 4: markets too, not just average correlations. Things that seem uncorrelated 563 00:27:14,600 --> 00:27:17,159 Speaker 4: in normal times often snap together and all move the 564 00:27:17,160 --> 00:27:20,720 Speaker 4: same direction whenever the panic hits. So these I would 565 00:27:20,720 --> 00:27:23,359 Speaker 4: look at historical stress tests using periods like two thousand 566 00:27:23,400 --> 00:27:25,159 Speaker 4: to two thousand and two that was the Internet bubble 567 00:27:25,560 --> 00:27:28,200 Speaker 4: eight and then March of twenty twenty and just understand 568 00:27:28,200 --> 00:27:31,159 Speaker 4: what that portfolio had did did in those types of timeframes, 569 00:27:31,440 --> 00:27:33,560 Speaker 4: and that'll give you a much better feel for whether 570 00:27:33,600 --> 00:27:36,240 Speaker 4: it's really going to provide you the diversification that you're 571 00:27:36,320 --> 00:27:38,840 Speaker 4: that you're seeking. There, all right, so let's move on 572 00:27:38,920 --> 00:27:41,200 Speaker 4: to a Brian and for Thomas Brian says, we finally 573 00:27:41,240 --> 00:27:43,680 Speaker 4: added bonds back to our portfolio after a long I 574 00:27:43,720 --> 00:27:47,200 Speaker 4: guess a long period of sitting out on the sidelines there. 575 00:27:47,440 --> 00:27:50,880 Speaker 4: But he's concerned about credit risk versus interest rate risk, Bob, 576 00:27:50,920 --> 00:27:52,880 Speaker 4: how do you balance the two without guessing at. 577 00:27:52,760 --> 00:27:57,280 Speaker 1: That, well, two totally different things, and let's get into it, 578 00:27:57,359 --> 00:27:59,439 Speaker 1: you know, because a lot of folks continue to be 579 00:27:59,520 --> 00:28:03,480 Speaker 1: confused about how bonds work. So credit risk, Brian, is 580 00:28:03,560 --> 00:28:07,320 Speaker 1: basically just the the risk that the company or the 581 00:28:07,359 --> 00:28:10,120 Speaker 1: government entity is not going to be able to make. 582 00:28:10,119 --> 00:28:11,040 Speaker 2: Their interest payment. 583 00:28:11,200 --> 00:28:13,639 Speaker 1: So you do want to look at credit quality of 584 00:28:13,680 --> 00:28:16,320 Speaker 1: the underlying bonds in your portfolio. Hopefully you have a 585 00:28:16,400 --> 00:28:19,720 Speaker 1: good fiduciary advisor helping you do that. That's really what 586 00:28:19,880 --> 00:28:23,280 Speaker 1: credit risk is. And if you if you get attracted 587 00:28:23,280 --> 00:28:26,159 Speaker 1: too much to the yield on these corporate bonds and 588 00:28:26,200 --> 00:28:29,119 Speaker 1: don't look at the underlying credit rating, you know, you 589 00:28:29,160 --> 00:28:32,040 Speaker 1: couldn't could be in for a surprise, you know, because 590 00:28:32,040 --> 00:28:35,720 Speaker 1: sometimes these high yield bonds can can act more like 591 00:28:35,880 --> 00:28:40,720 Speaker 1: stocks than bonds, and the in the more uh less 592 00:28:40,800 --> 00:28:43,280 Speaker 1: volatile asset class that I think you're seeking. You know, 593 00:28:43,680 --> 00:28:46,080 Speaker 1: people tend to go into bonds because they want less 594 00:28:46,160 --> 00:28:49,840 Speaker 1: volatility and they like that yield on that regular interest 595 00:28:50,360 --> 00:28:53,040 Speaker 1: interest payment. So that's what we're talking about with credit risk, 596 00:28:53,800 --> 00:28:56,880 Speaker 1: the interest rate risk that is a function of the 597 00:28:56,960 --> 00:29:00,080 Speaker 1: movement up or down of interest rates, which all all 598 00:29:00,120 --> 00:29:03,720 Speaker 1: of us have far less control over. So my advice 599 00:29:03,800 --> 00:29:06,040 Speaker 1: there is to you know, this is where you'll hear 600 00:29:06,080 --> 00:29:09,600 Speaker 1: the term laddering a bond portfolio. Don't put all your 601 00:29:09,600 --> 00:29:13,320 Speaker 1: eggs in one basket and guess which way interest rates 602 00:29:13,360 --> 00:29:15,240 Speaker 1: are going to move in the short term, because as 603 00:29:15,240 --> 00:29:19,400 Speaker 1: a reminder, the price of bonds moves inversely to the 604 00:29:19,400 --> 00:29:21,840 Speaker 1: movement of interest rates, and that's why people like to 605 00:29:21,920 --> 00:29:25,800 Speaker 1: use a laddered bond approach. Spread out your interest rate 606 00:29:25,920 --> 00:29:28,600 Speaker 1: risk over time. Have a little short term, have a 607 00:29:28,600 --> 00:29:32,560 Speaker 1: little intermediate term, have a little longer term debt, and 608 00:29:32,840 --> 00:29:36,320 Speaker 1: the yield will change a little bit with you know, 609 00:29:36,560 --> 00:29:39,560 Speaker 1: how you position that bond portfolio, and then you've kind 610 00:29:39,560 --> 00:29:43,560 Speaker 1: of kind of revolving maturity of those bonds over time, 611 00:29:43,640 --> 00:29:46,880 Speaker 1: and that helps spread out that interest rate risk and 612 00:29:47,400 --> 00:29:51,040 Speaker 1: hopefully that helps define the terms here that we're dealing with. 613 00:29:51,400 --> 00:29:54,480 Speaker 1: And again, bond portfolios, if you get into bonds, make 614 00:29:54,480 --> 00:29:57,280 Speaker 1: sure you have somebody helping you here so you don't 615 00:29:57,280 --> 00:30:00,280 Speaker 1: get whipsawed around and buy something or too more such 616 00:30:00,280 --> 00:30:04,280 Speaker 1: of one thing that might create, you know, more volatility, 617 00:30:05,040 --> 00:30:07,360 Speaker 1: which is what most people are trying to avoid in 618 00:30:07,400 --> 00:30:10,440 Speaker 1: the first place by venturing into bonds. Hope that helps, 619 00:30:10,760 --> 00:30:13,440 Speaker 1: all right, David and Hamilton Brian. He says, we're thinking 620 00:30:13,480 --> 00:30:17,680 Speaker 1: of downsizing, but the emotional attachment to our home is 621 00:30:17,920 --> 00:30:21,760 Speaker 1: very strong. How do you waive a lifestyle shift against 622 00:30:21,840 --> 00:30:24,520 Speaker 1: the financial benefit of downsizing. 623 00:30:24,840 --> 00:30:26,760 Speaker 4: Well, yeah, that's a that's a great question. I think 624 00:30:26,800 --> 00:30:28,960 Speaker 4: all of us will go through this at some point. So, yeah, 625 00:30:29,000 --> 00:30:30,640 Speaker 4: what you're running into is, I think a lot of 626 00:30:30,720 --> 00:30:34,120 Speaker 4: us function from, you know, without stopping to think, uh 627 00:30:34,200 --> 00:30:36,520 Speaker 4: that that we operate from the assumption that, well, I 628 00:30:36,520 --> 00:30:38,440 Speaker 4: could save a little money if we downsize the house, 629 00:30:38,480 --> 00:30:41,400 Speaker 4: and that is almost never ever true. So uh but 630 00:30:41,440 --> 00:30:44,720 Speaker 4: that but regardless, Uh, you know, here's the components that 631 00:30:44,760 --> 00:30:46,680 Speaker 4: go into this decision. Having walked a lot of people 632 00:30:46,680 --> 00:30:48,480 Speaker 4: through it and really just kind of listened as they 633 00:30:48,560 --> 00:30:51,760 Speaker 4: talk themselves through it, that that's rarely about square footage, 634 00:30:51,760 --> 00:30:54,040 Speaker 4: and a lot of it can be about identity, the routine, 635 00:30:54,080 --> 00:30:56,760 Speaker 4: the memories you have. So it's it can be challenging 636 00:30:56,800 --> 00:31:00,440 Speaker 4: to separate the emotional value from the economic value that move. 637 00:31:00,520 --> 00:31:03,280 Speaker 4: So having a structured approach really helps with it. Figure 638 00:31:03,320 --> 00:31:04,680 Speaker 4: out what what do you want? What do you want 639 00:31:04,680 --> 00:31:07,000 Speaker 4: your lifestyle to be like? But a lot of times 640 00:31:07,000 --> 00:31:09,360 Speaker 4: that starts with what is my lifestyle like now? And 641 00:31:09,400 --> 00:31:11,680 Speaker 4: then figure out what the next ten and fifteen years 642 00:31:11,720 --> 00:31:12,120 Speaker 4: look like? 643 00:31:12,240 --> 00:31:12,840 Speaker 3: Mobility. 644 00:31:12,880 --> 00:31:14,400 Speaker 4: Do you need to be close to family, What are 645 00:31:14,400 --> 00:31:16,840 Speaker 4: your travel plans going to be? How much tolerance do 646 00:31:16,840 --> 00:31:18,960 Speaker 4: you have for mowing the lawn and fixing stuff around 647 00:31:18,960 --> 00:31:21,040 Speaker 4: the house, and so forth. You know, because a house 648 00:31:21,040 --> 00:31:23,520 Speaker 4: that once fit a family lifestyle may not match that 649 00:31:23,560 --> 00:31:24,920 Speaker 4: next chapter you've got coming up. 650 00:31:25,320 --> 00:31:26,200 Speaker 3: So the second, now that. 651 00:31:26,120 --> 00:31:28,680 Speaker 4: You know what you're shooting for, quantify the true cost 652 00:31:28,800 --> 00:31:33,120 Speaker 4: of living that way in this same house that you're in. 653 00:31:33,200 --> 00:31:36,600 Speaker 4: So you're talking about property taxes, insurance, maintenance, utilities, and 654 00:31:36,600 --> 00:31:38,320 Speaker 4: all that kind of stuff. The capital you've got tied 655 00:31:38,360 --> 00:31:40,760 Speaker 4: up in the house. A lot of owners underestimate how 656 00:31:40,840 --> 00:31:43,560 Speaker 4: much liquidity and annual cash flow are locked in those 657 00:31:43,600 --> 00:31:45,760 Speaker 4: four walls of that house. Turning a six to eight 658 00:31:45,840 --> 00:31:49,600 Speaker 4: hundred thousand dollars house into investable capital vestable capital sometimes 659 00:31:49,600 --> 00:31:51,920 Speaker 4: can be a good move if you can truly find 660 00:31:51,960 --> 00:31:54,800 Speaker 4: a way to maintain the lifestyle that you want and 661 00:31:54,880 --> 00:31:56,960 Speaker 4: have less invested in the home that you're living in, 662 00:31:57,320 --> 00:32:01,800 Speaker 4: and then finally run that sostet spending sustainability tests figure 663 00:32:01,800 --> 00:32:05,040 Speaker 4: out two scenarios staying in my current home versus unlocking 664 00:32:05,120 --> 00:32:08,320 Speaker 4: that equity, lowering the ongoing expenses, and so forth, because 665 00:32:08,320 --> 00:32:11,479 Speaker 4: in a lot of cases, downsiding downsizing can extend your 666 00:32:11,520 --> 00:32:16,760 Speaker 4: portfolio longevity by many years, but particularly when future healthcare 667 00:32:16,800 --> 00:32:19,440 Speaker 4: or long term care costs are included. So lots of 668 00:32:19,480 --> 00:32:21,520 Speaker 4: things to think about. But that's a challenging question for 669 00:32:21,680 --> 00:32:24,640 Speaker 4: that many of us are going to run across Paul 670 00:32:24,760 --> 00:32:27,400 Speaker 4: and Anderson. Paul says they're in a high tax bracket 671 00:32:27,400 --> 00:32:29,840 Speaker 4: and their investments are generating more income than they thought 672 00:32:29,840 --> 00:32:31,720 Speaker 4: it would. So how do you build a strategy that 673 00:32:31,800 --> 00:32:34,080 Speaker 4: keeps those returns high but those taxes low. 674 00:32:34,120 --> 00:32:37,680 Speaker 1: Bob Well, Paul, First of all, if your investments are 675 00:32:37,720 --> 00:32:42,120 Speaker 1: generating more income than you expected, that's on the surface 676 00:32:42,160 --> 00:32:44,080 Speaker 1: a good thing. It means you're making money, and we 677 00:32:44,120 --> 00:32:47,200 Speaker 1: should never complain about making money. But I think giving 678 00:32:47,200 --> 00:32:50,320 Speaker 1: into the whole tax efficiency topic, you know, it's hard 679 00:32:50,320 --> 00:32:53,920 Speaker 1: to tell from your question where the income is coming from. 680 00:32:53,960 --> 00:32:57,240 Speaker 1: It could be coming from you know, require minimum distributions. 681 00:32:57,720 --> 00:33:00,720 Speaker 1: It could be coming from taxable bonds. It could be 682 00:33:00,800 --> 00:33:04,920 Speaker 1: coming from capital gain distributions from mutual funds that we 683 00:33:05,200 --> 00:33:08,480 Speaker 1: you know, can't always control or rarely control. So I 684 00:33:08,480 --> 00:33:11,160 Speaker 1: think we got to identify where that income is coming 685 00:33:11,240 --> 00:33:15,600 Speaker 1: from first and then make some gradual adjustments to you know, 686 00:33:15,760 --> 00:33:17,800 Speaker 1: increase the after tax. 687 00:33:17,520 --> 00:33:19,240 Speaker 2: Return of your portfolio. 688 00:33:19,320 --> 00:33:20,880 Speaker 1: And like I said, it could be coming from a 689 00:33:20,920 --> 00:33:24,080 Speaker 1: lot of different ways. If it is an R and 690 00:33:24,200 --> 00:33:27,760 Speaker 1: D issue, you know, consider if you are charitably inclined 691 00:33:27,800 --> 00:33:30,240 Speaker 1: and give money to charities every year, you use some 692 00:33:30,320 --> 00:33:33,680 Speaker 1: of those rm ds to give money directly to the charities, 693 00:33:34,040 --> 00:33:36,360 Speaker 1: and that could lower your tax bill. If it's a 694 00:33:36,400 --> 00:33:40,680 Speaker 1: bond situation, you know, evaluate the after tax return of 695 00:33:40,800 --> 00:33:44,800 Speaker 1: taxable bonds versus municipal bonds. And if it is capital 696 00:33:44,840 --> 00:33:49,560 Speaker 1: gains from mutual funds, look at gradually adjusting that taxable 697 00:33:49,600 --> 00:33:55,120 Speaker 1: portfolio into more tax efficient ETFs or direct indexing strategies 698 00:33:55,200 --> 00:33:57,840 Speaker 1: like ones we've talked about earlier in the show today. 699 00:33:58,160 --> 00:33:59,040 Speaker 2: Hope that helps. 700 00:33:59,720 --> 00:34:02,680 Speaker 1: If if something happened to you tomorrow, would your family 701 00:34:03,280 --> 00:34:06,880 Speaker 1: know exactly what to do with your state planning documents? 702 00:34:06,920 --> 00:34:09,080 Speaker 1: This is an important topic that we're going to talk 703 00:34:09,120 --> 00:34:12,560 Speaker 1: about next because some families have all the right stuff 704 00:34:12,600 --> 00:34:15,800 Speaker 1: in place, but their airs don't know where to find 705 00:34:15,840 --> 00:34:17,520 Speaker 1: the documents that they had prepared. 706 00:34:17,560 --> 00:34:19,120 Speaker 2: We're going to cover all that next. 707 00:34:19,560 --> 00:34:22,160 Speaker 1: You're listening to Simply Money presented by all Worth Financial 708 00:34:22,239 --> 00:34:29,000 Speaker 1: on fifty five KRC the talk station. You're listening to 709 00:34:29,040 --> 00:34:32,040 Speaker 1: Simply Money presented by all Worth Financial on mob Sponseller 710 00:34:32,080 --> 00:34:35,320 Speaker 1: along with Brian James. Now, as we wrap up tonight, 711 00:34:35,440 --> 00:34:39,400 Speaker 1: just a reminder sometimes the smallest details in your financial 712 00:34:39,400 --> 00:34:43,799 Speaker 1: life are the ones that create the biggest headaches, especially 713 00:34:43,920 --> 00:34:49,160 Speaker 1: for those you love. Tonight's overlooked detail, do your adult 714 00:34:49,320 --> 00:34:53,359 Speaker 1: children actually know how to access your estate planning documents 715 00:34:53,400 --> 00:34:56,960 Speaker 1: if something were to happen to you, Brian, We try 716 00:34:57,000 --> 00:34:59,680 Speaker 1: to have this conversation with folks all the time. Some 717 00:34:59,719 --> 00:35:02,600 Speaker 1: people listen, some people just put it off or don't 718 00:35:02,640 --> 00:35:05,719 Speaker 1: listen at all, but it really is a thing out there. 719 00:35:05,719 --> 00:35:08,520 Speaker 1: You've got to make sure that people know where to 720 00:35:08,640 --> 00:35:12,400 Speaker 1: find your stuff when the day comes where the estate 721 00:35:12,840 --> 00:35:16,440 Speaker 1: actually has to be settled and assets need to be 722 00:35:16,520 --> 00:35:20,040 Speaker 1: distributed to airs. It's a very important topic to cover, 723 00:35:20,680 --> 00:35:24,120 Speaker 1: and with the holidays coming up and families getting together 724 00:35:24,200 --> 00:35:27,080 Speaker 1: here over the holidays, now is a great time to 725 00:35:27,160 --> 00:35:29,680 Speaker 1: make sure you have this topic covered with your family. 726 00:35:30,320 --> 00:35:31,799 Speaker 4: Yeah, so at the end of the day, you know, 727 00:35:32,239 --> 00:35:34,480 Speaker 4: a lot of people are really worried about I want 728 00:35:34,520 --> 00:35:36,080 Speaker 4: to make sure I get my estate plan set up, 729 00:35:36,120 --> 00:35:38,520 Speaker 4: get all my documents, my will, my trust, my power returney, 730 00:35:38,520 --> 00:35:40,040 Speaker 4: all that kind of stuff when we get that in place. 731 00:35:40,680 --> 00:35:43,040 Speaker 4: But tend to forget the idea that these are just 732 00:35:43,120 --> 00:35:45,680 Speaker 4: pieces of paper. So you need to know where these 733 00:35:45,719 --> 00:35:48,520 Speaker 4: things live because somebody is going to have to go 734 00:35:48,600 --> 00:35:51,400 Speaker 4: track down that information so that they can sell your 735 00:35:51,400 --> 00:35:53,200 Speaker 4: state and take care of the things that the way 736 00:35:53,200 --> 00:35:53,960 Speaker 4: that you wanted them. 737 00:35:54,040 --> 00:35:56,960 Speaker 3: So so what do we do here? 738 00:35:57,000 --> 00:35:59,680 Speaker 4: So let's here's a quick example, real story from somebody 739 00:35:59,680 --> 00:36:01,680 Speaker 4: that we know. This client passed away very suddenly, had 740 00:36:01,680 --> 00:36:04,239 Speaker 4: everything all buttoned up legally like I just described, but 741 00:36:04,320 --> 00:36:06,080 Speaker 4: the kids didn't know the name of the law firm 742 00:36:06,080 --> 00:36:07,799 Speaker 4: that was sitting on the on the paperwork, and it 743 00:36:07,840 --> 00:36:09,880 Speaker 4: took about six months to sort out who the what 744 00:36:09,920 --> 00:36:12,520 Speaker 4: the basic access was because the law firm did not 745 00:36:12,719 --> 00:36:14,560 Speaker 4: was not aware that this person had passed away. 746 00:36:14,880 --> 00:36:16,799 Speaker 3: It wasn't a bad plan, but no one had talked 747 00:36:16,800 --> 00:36:17,160 Speaker 3: about it. 748 00:36:17,200 --> 00:36:19,680 Speaker 4: There wasn't a folder that says, call the ABC law 749 00:36:19,680 --> 00:36:22,279 Speaker 4: firm because they will be the ones to act as 750 00:36:22,360 --> 00:36:27,040 Speaker 4: the as the go between between the documentation in those 751 00:36:27,680 --> 00:36:31,480 Speaker 4: in those airs. But another case we had where an 752 00:36:31,520 --> 00:36:34,040 Speaker 4: executor knew exactly where the documents were, which is a 753 00:36:34,080 --> 00:36:36,760 Speaker 4: good thing, but didn't know the passwords to the financial accounts, 754 00:36:36,800 --> 00:36:39,319 Speaker 4: so tens of thousands of assets just sitting there kind 755 00:36:39,320 --> 00:36:41,840 Speaker 4: of locked up. Well, probate played out and because of 756 00:36:42,200 --> 00:36:45,040 Speaker 4: some things that weren't retitled, had to go through probate, 757 00:36:45,080 --> 00:36:47,879 Speaker 4: which means the bank won't talk to you know, the 758 00:36:47,880 --> 00:36:51,359 Speaker 4: the heirs until the probate process has approved who gets what? 759 00:36:51,880 --> 00:36:53,200 Speaker 2: So how do we avoid this? 760 00:36:53,280 --> 00:36:55,200 Speaker 3: Well, here here's the next movie. You should make. 761 00:36:55,440 --> 00:36:58,040 Speaker 4: Set of meeting or maybe even just a casual conversation 762 00:36:58,120 --> 00:37:00,799 Speaker 4: with your adult children who are sp actually whoever your 763 00:37:00,840 --> 00:37:03,120 Speaker 4: executor is, because they're the ones who will be communicating 764 00:37:03,160 --> 00:37:05,879 Speaker 4: anyway on your behalf. Let them know where things are, 765 00:37:06,239 --> 00:37:08,440 Speaker 4: who the key contacts are, and what you want them 766 00:37:08,440 --> 00:37:11,640 Speaker 4: to understand, even putting together a letter of instruction that 767 00:37:11,880 --> 00:37:14,319 Speaker 4: lays all this stuff out. The documents are here in 768 00:37:14,360 --> 00:37:17,520 Speaker 4: this safe deposit box, or they're in this firebox in 769 00:37:17,560 --> 00:37:21,200 Speaker 4: the basement or whatever where the financial accounts are the 770 00:37:21,280 --> 00:37:23,960 Speaker 4: names of the professionals and organizations that you're working with. 771 00:37:23,840 --> 00:37:25,920 Speaker 3: CPAs financial advisors and so forth. 772 00:37:26,120 --> 00:37:28,120 Speaker 4: All that can be much more helpful than the trust 773 00:37:28,120 --> 00:37:31,200 Speaker 4: document itself, because more often than not, at least one 774 00:37:31,239 --> 00:37:34,000 Speaker 4: of those people has a copy of the document as well, 775 00:37:34,280 --> 00:37:36,800 Speaker 4: so that can be enormously helpful to getting things settled 776 00:37:36,960 --> 00:37:38,040 Speaker 4: when that time comes. 777 00:37:39,080 --> 00:37:40,879 Speaker 2: Yeah, Brian, and you know this well. 778 00:37:40,920 --> 00:37:42,839 Speaker 1: I mean, for a lot of our clients that we 779 00:37:42,920 --> 00:37:45,640 Speaker 1: work with, they have us manage a lot of their assets, 780 00:37:45,640 --> 00:37:47,920 Speaker 1: but some people manage some assets themselves. 781 00:37:48,000 --> 00:37:50,719 Speaker 2: They've got some accounts, you know, they're set up with. 782 00:37:50,760 --> 00:37:53,960 Speaker 1: Online brokerage firms or mutual fund firms that they've owned, 783 00:37:54,080 --> 00:37:57,560 Speaker 1: you know, forever, and there's passwords that are necessary to 784 00:37:57,560 --> 00:38:00,399 Speaker 1: get into those documents. We don't have those pass we're 785 00:38:00,400 --> 00:38:03,839 Speaker 1: not allowed to have them, but you better make sure 786 00:38:03,880 --> 00:38:06,600 Speaker 1: your family has them so as to your point that 787 00:38:06,640 --> 00:38:09,040 Speaker 1: you just made, those assets don't just sit there for 788 00:38:09,120 --> 00:38:12,320 Speaker 1: months and months while people figure out how to find 789 00:38:12,440 --> 00:38:16,000 Speaker 1: access to the accounts so they can be properly administered. 790 00:38:16,320 --> 00:38:19,400 Speaker 1: Here's the all Worth advice. Your legacy depends on more 791 00:38:19,719 --> 00:38:23,839 Speaker 1: than just your money. It depends on your proactive communication. 792 00:38:24,480 --> 00:38:25,520 Speaker 2: Thanks for listening tonight. 793 00:38:25,560 --> 00:38:27,719 Speaker 1: You've been listening to Simply Money, presented by all Worth 794 00:38:27,719 --> 00:38:30,680 Speaker 1: Financial on fifty five KRC, the talk station