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Speaker 1: Tonight in terms of your money, what should go where

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Speaker 1: and how much? The real art of asset allocation you're

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Speaker 1: listening to simply money presented by all Worth Financial Lumbob

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Speaker 1: sponseller along with Brian James Well. A lot of us

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Speaker 1: know the basics. Stocks go in this account, bonds in

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Speaker 1: that one, but how much today or tonight the strategic

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Speaker 1: way investors should think about how much of each investment

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Speaker 1: type goes into each kind of account for growth, for

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Speaker 1: taxes and long term control. In other words, what each

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Speaker 1: account is built to do. And it really is an art,

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Speaker 1: and this is why we are so pleased to have

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Speaker 1: an absolute artisan in this area. Brian James Brian Well

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Speaker 1: talk us through what we're actually talking about here in

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Speaker 1: terms of portfolio construction.

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Speaker 2: What we're talking about is tax treatment. Right, These different

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Speaker 2: types of account get treated differently by the IRS. There

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Speaker 2: are three different types of tax treatment. There is pre tax,

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Speaker 2: which a lot of people are aware of from their

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Speaker 2: four oh one k's everything I put in there, I

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Speaker 2: don't pay taxes on the year that I got it

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Speaker 2: the year that I received that income because I chose

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Speaker 2: to do that. But I'll pay taxes on the back

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Speaker 2: end and then of course there is the roth side,

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Speaker 2: which is the opposite. I do not get a deduction

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Speaker 2: this year, but everything happens inside that account will grow

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Speaker 2: tax free. And then when I pull it out, provided

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Speaker 2: I've met some basic limitations, some basic requirements, then it

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Speaker 2: comes out tax free. Then the third part is what's

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Speaker 2: known as after tax, meaning these are the accounts that

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Speaker 2: are just exposed to tax every year. They'll spit out

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Speaker 2: of ten ninety nine. If you want to sell something,

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Speaker 2: you'll look you'll be looking at capital gains and that

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Speaker 2: kind of thing. So therefore, different types of assets are

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Speaker 2: better built for different types of accounts. So traditional iras

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Speaker 2: and four oh one k's this is the pre tax side.

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Speaker 2: Whenever you hear the word traditional, think pre tax. These

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Speaker 2: are good for income generating investments like bonds, since ordinary

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Speaker 2: income tax applies anyway. So a creative idea I've thought

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Speaker 2: that I'm going to implement for myself is I'm going

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Speaker 2: to carve out over time, I'm going to carve out

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Speaker 2: a chunk of my wroth IRA so that when I retire,

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Speaker 2: my emergency fund can sit in a you know, a

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Speaker 2: four or five percent yielding money market fund, but it's

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Speaker 2: tax free to me, so it won't really matter that

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Speaker 2: that's you know what it is. This is the versus

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Speaker 2: leaving in a highyield savings account than paying income taxes

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Speaker 2: on it, giving away a chunk of it. So I

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Speaker 2: haven't actually done that yet. Check in with me after

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Speaker 2: I retire and we'll see if I follow through it.

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Speaker 2: But that's an idea that I have. Then you get

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Speaker 2: your taxable broker's accounts better that This is better for

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Speaker 2: tax efficient assets like exchange traded funds, individual stocks with

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Speaker 2: capital gains, and assets maybe that you're going to donate

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Speaker 2: or gift. So this is these are for efficient, growth

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Speaker 2: oriented type assets that aren't going to spit out really

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Speaker 2: much in capital gains at all, you know, and and

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Speaker 2: if but if it's also an individual stock and you're

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Speaker 2: sitting on that gain, well then you you don't have

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Speaker 2: to pay anything on that gain until such time as

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Speaker 2: you actually sell it. So the real magic in all

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Speaker 2: this is is the mix. How are you going to

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Speaker 2: combine all these things together? How much of your broke

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Speaker 2: growth bucket goes on the roth side tax free, and

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Speaker 2: how much of your fixed income should be sheltered in iras?

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Speaker 2: And more probably what percent of your taxable income should

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Speaker 2: stay liquid or accessible in case of an emergency.

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Speaker 1: All right, and we've got three hypothetical situations to walk

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Speaker 1: through tonight that illustrate the points that Brian just outlined.

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Speaker 1: Let's take scenario one, the tax sensitive business seller. Somebody

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Speaker 1: that just sold a business. Let's say his name is John,

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Speaker 1: he's sixty two, he just sold a business. He's got

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Speaker 1: a six and a half million dollar net worth, has

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Speaker 1: three and a half million dollars in taxable funds, two

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Speaker 1: million dollars in a rollover IRA, and a million dollars

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Speaker 1: sitting in a ROTH. These folks are planning to retire soon,

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Speaker 1: so they want to avoid spikes in taxable income. So

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Speaker 1: here's a potential strategy. And just as a as a

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Speaker 1: disclaimer here, there's no one size fits all strategy to this.

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Speaker 1: The point of this segment tonight is just get us

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Speaker 1: to think about different scenarios, apply it to your own situation,

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Speaker 1: and down with your CPA and your advisor and talk

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Speaker 1: about what actually works for you. But here's here's a

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Speaker 1: hypothetical strategy in the WROTH. Let's stick with aggressive growth stocks.

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Speaker 1: Let it grow tax free, highest growth assets go there

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Speaker 1: for obvious reasons. You pay nothing in taxes if and

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Speaker 1: when that money ever comes out of the WROTH IRA

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Speaker 1: in the IRA account itself, the regular IRA, well, we

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Speaker 1: want mostly bonds and income oriented assets that you know,

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Speaker 1: slows down the aggressive growth of that account and gets

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Speaker 1: those future require minimum distributions under control from a tax

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Speaker 1: standpoint later. And then in the taxable brokerage account, maybe

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Speaker 1: some municipal bonds, some tax managed ETFs, some dividend stocks,

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Speaker 1: you know, maybe a direct indexing strategy. These people are

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Speaker 1: also thinking about WROTH conversions, so you know, minimizing taxable

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Speaker 1: income now is key. And oftentimes after the first couple

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Speaker 1: of years, after a big taxable event like a business sale,

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Speaker 1: you know, these folks do drop down in to a

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Speaker 1: lower tax bracket and that's a perfect time to consider

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Speaker 1: Roth conversions. Brian welcomes to another scenario.

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Speaker 2: Yeah, real quick, I want to weigh in on just

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Speaker 2: a thought there. It's not easy. This is sort of

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Speaker 2: perfect scenarios. It's not necessarily easy to get to these positions.

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Speaker 2: You still have to take your risk tolerance into account,

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Speaker 2: so you know, I wouldn't say we're talking one hundred

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Speaker 2: percent of your traditional IRA in bonds and income assets.

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Speaker 2: That's not the point. We're simply trying to If you're

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Speaker 2: going to optimize, there are different assets that make more

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Speaker 2: sense in different tax treatments, but it'll never be perfect anyway.

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Speaker 2: So yeah, moving on to the second scenario. Here we've

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Speaker 2: got Now we've got the aggressive accumulator. This is somebody

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Speaker 2: in their mid forties. This is where we spend most

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Speaker 2: of our time, most of our working careers, just growing

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Speaker 2: the pile. That's really the goal. So this fake couples

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Speaker 2: in their mid forties. They're high earners. They've already got

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Speaker 2: a net worth of three and a half million dollars

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Speaker 2: and it's continuing to grow. One point two million dollars

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Speaker 2: worth of taxable assets meaning not in an IRA, not

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Speaker 2: a four to one K one and a half on

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Speaker 2: pre tax traditional retirement accounts, and about eight hundred thousand

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Speaker 2: dollars in the WROTH. So here's a good strategy for them.

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Speaker 2: So in that ROTH, like we said, we're going to

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Speaker 2: go one hundred percent aggressive growth because that's the one

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Speaker 2: that comes at the back of the line since it's

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Speaker 2: going to come out tax free. We want to give

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Speaker 2: that the most runway to grow as possible. So that's

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Speaker 2: the last one we're going to tap into. So be

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Speaker 2: aggressive with it, let it fly, set it up in

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Speaker 2: something that you trust, and ignore it. This is where

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Speaker 2: you're going to be your small cap holdings, emerging markets,

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Speaker 2: your longer term theme, some more aggressive type positions, and

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Speaker 2: the tax deferred side. This is where our US large

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Speaker 2: caps are going to live, and maybe some international stocks,

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Speaker 2: you know, to kind of balance that out. So if

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Speaker 2: you smush those together, you've got a pretty good portfolio.

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Speaker 2: You've got some aggressive stuff, and you've got some of

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Speaker 2: the more stable dividend paying asset growers and so forth.

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Speaker 2: Then finally in a taxable account exchange traded funds that

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Speaker 2: focus on indexes. Therefore, there's not a whole lot of

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Speaker 2: activity happening on the inside to spit out capital gains.

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Speaker 2: Maybe some private credit positions and a little single stock

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Speaker 2: alpha which which frequently happens with people at this asset level. Anyway,

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Speaker 2: that's where we want to work around that, because if

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Speaker 2: that single stock does take losses, then they could potentially

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Speaker 2: deduct those against other gains and things that they have.

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Speaker 2: But the whole point of this, remember these are young

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Speaker 2: accumulator type people because they don't need this money for

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Speaker 2: twenty years. They're going to lean into growth and tax efficiency.

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Speaker 2: That's different from the couple we're going to talk about next, Bob.

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Speaker 1: Yep and scenario three is the income focused retiree that

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Speaker 1: is charitably inclined. So let's take a couple eight seventy.

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Speaker 1: They're retired, they're worth a little over five million dollars.

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Speaker 1: They want income now, and they do have charitable goals.

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Speaker 1: They've got two million dollars in a taxable account, two

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Speaker 1: million dollars in a traditional IRA, and a little over

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Speaker 1: a million dollars in a roth IRA. Here's a potential

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Speaker 1: strategy for them. In the IRA, we want to hold

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Speaker 1: a conservative bond ladder for predictable income and also predictable

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Speaker 1: require minimum distributions. In the WRATH, still some growth, but

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Speaker 1: keep it balanced, intended to leave hopefully this account to

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Speaker 1: their errors, never touch it during their lifetime. And then

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Speaker 1: in the brokerage account, the taxable brokerage account, tax efficient income,

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Speaker 1: maybe some preferred stocks, some dividend stocks, and then layer

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Speaker 1: on a donor advised fund for some charitable giving, you know,

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Speaker 1: to take advantage of maybe doubling up on some you know,

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Speaker 1: year end charitable gifts with appreciated stocks and a donor

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Speaker 1: advice fund to get you over and above that standard

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Speaker 1: deduction amount to take full tax advantage of the charitable

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Speaker 1: giving that you're doing. This is a steady income driven

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Speaker 1: strategy with some really smart tax and legacy planning baked in. Again,

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Speaker 1: these are three examples. As Brian says, it's not it's

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Speaker 1: there's no black box, you know approach to this, but

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Speaker 1: it's it's worthy of discussion with your advisor and your

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Speaker 1: CPA and putting your money in a place where it

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Speaker 1: can be the most tax efficient for you while still

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Speaker 1: meeting your risk in income and growth goals.

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Speaker 2: Yeah. And then the thing that makes us a little

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Speaker 2: bit a little bit hard too is, of course, if

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Speaker 2: you're going to look at this and say I want

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Speaker 2: to follow that to the you know, to kind of

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Speaker 2: to the letter of the law, well you're going to

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Speaker 2: generate a bunch of taxes while you're trying to be

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Speaker 2: tax efficient. And obviously that's not a very efficient approach either.

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Speaker 2: Not to mention, it can make a lot of sense

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Speaker 2: when you reach a certain time period, as I think

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Speaker 2: we've mentioned once or twice, to start doing rough conversions.

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Speaker 2: When you get into that window where you've got low

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Speaker 2: income and therefore a low bracket, well then you may

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Speaker 2: want to purposely create some taxable activity to start to

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Speaker 2: convert some of those pre tax assets over to the

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Speaker 2: raw side. So again this these types of things should

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Speaker 2: be thought of as a small or a short term

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Speaker 2: sacrifice in exchange for a longer term benefit. And there's

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Speaker 2: a lot of moving parts to this. You need to

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Speaker 2: make sure it makes sense for you and also look

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Speaker 2: at the other side, or look at all of your situation,

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Speaker 2: because everything you do is going to affect your ten forty.

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Speaker 2: You need to sit down with your fiduciary advisor and

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Speaker 2: your tax prepare and make sure that everybody's on board

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Speaker 2: with whatever steps you're going to take so that you

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Speaker 2: don't have a nasty surprise in April. But these are

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Speaker 2: the steps that I think are worth it exploring, even

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Speaker 2: if you do nothing but learn about them and decide,

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Speaker 2: you know what, that's not for me, because the worst

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Speaker 2: thing that can happen is you feel like you missed

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Speaker 2: an opportunity and you find something you should have done

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Speaker 2: five years ago. I'd rather people learn about it now

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Speaker 2: and shoot it out of the sky as the dumbest

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Speaker 2: idea they've ever heard. Because then I can say, as

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Speaker 2: an advisor, great, you understand it, you understand the pros

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Speaker 2: and cons, and you want nothing to do with it.

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Speaker 2: That's great. I've done my job. But that will help

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Speaker 2: me find that people who didn't understand it never heard

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Speaker 2: of it, and it's the greatest idea that they've ever had.

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Speaker 2: And so again, understand the pros and cons of the

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Speaker 2: steps you might take, and understand how it's going to

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Speaker 2: move your situation in the right direction.

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Speaker 1: Yeah, and Brian, you know, to the excell point you

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Speaker 1: made a few minutes ago, you don't have to do

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Speaker 1: this in one fell swoop and totally upend your entire

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Speaker 1: portfolio just to get you to these prescribed components in

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Speaker 1: each account. Like we talked about, these are just examples.

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Speaker 1: And the good thing about working with a proactive advisor

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Speaker 1: is we're helping you look ten, fifteen, twenty years down

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Speaker 1: the road. You know, to get to a tax efficient result.

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Speaker 1: You don't have to get there in one day or

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Speaker 1: one month. So if we know where we want to

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Speaker 1: be two or three years from now, based on your

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Speaker 1: personal objectives, we can ease you into that allocation approach

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Speaker 1: and make sure we don't you know, create a time

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Speaker 1: bomb from a tax standpoint in year one just to

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Speaker 1: say hey we got there. Well we you know, we

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Speaker 1: might have done more damage than good in the first year,

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Speaker 1: you know, with it while trying to get to a

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Speaker 1: place ten years from now. That's no good for anybody.

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Speaker 1: So it can be a gradual approach. But have the

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Speaker 1: discussion with your advisor and we can ease into that

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Speaker 1: right kind of allocation over time if needed.

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Speaker 2: And if you're thinking about taking some of these steps

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Speaker 2: that are going to cause some taxation, remember this is

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Speaker 2: the right time to be thinking about it, because over

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Speaker 2: the next fourteen months there are three tax years. So

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Speaker 2: if you've determined what you want to do, remember just

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Speaker 2: over the next you know, over a month and a half,

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Speaker 2: you can get into two tax years a little bit

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Speaker 2: now and then a little bit in January, and then

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Speaker 2: a short twelve months after that you'll be in another taxi. So,

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Speaker 2: as Bob mentions, you can spread this stuff out, and

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Speaker 2: again you get three years worth of tax activity over

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Speaker 2: just a fourteen month period, So understand what that impact

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Speaker 2: is and how you should spread that hit out.

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Speaker 1: Here's the all worth advice. You don't just need to

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Speaker 1: know what investments you own, you need to know how

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Speaker 1: much of each kind of investment to put in each

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Speaker 1: type of investment account. That's how you build smarter, tech

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Speaker 1: savvy wealth that actually supports your long term goals. Coming

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Speaker 1: up next, we're going to explore a portion of a

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Speaker 1: portfolio that most people have, but most or many don't

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Speaker 1: have any understanding of whatsoever, and we're talking about bonds.

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Speaker 1: You're listening to Simply Money presented by all Worth Financial

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Speaker 1: on fifty five KRC the talk station. You're listening to

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Speaker 1: Simply Money presented by all Worth Financial on Bob Sponseller

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Speaker 1: along with Brian James. If you can't listen to Simply

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Speaker 1: Money live every night, subscribe and get our daily podcasts.

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Speaker 1: And if your friends or family could use a little advice,

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Speaker 1: let them know us about us as well, including our podcast.

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Speaker 1: Just search Simply Money on the iHeart app or wherever

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Speaker 1: you find your podcast. Straight ahead of six forty three,

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Speaker 1: we tackle your biggest money questions, including what to do

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Speaker 1: with a pile of post business sale cash, whether private

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Speaker 1: credit belongs in your portfolio, and if using an options

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Speaker 1: caller makes any sense whatsoever. All right, Brian, Amazon is

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Speaker 1: selling some bonds. We're used to, you know, stock offerings,

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Speaker 1: but Amazon and a lot of these other tech companies

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Speaker 1: have been selling some bonds lately, and they have raised

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Speaker 1: a ton of money to do. So what's going on here?

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Speaker 2: Yeah, this is this is kind of interesting to me

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Speaker 2: because bonds or companies selling bonds, that's a very nineteen

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Speaker 2: fifties type of a thing to do. And it's now

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Speaker 2: finally reads the technology industry, which has always been go

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Speaker 2: go growth and all that. I remember sometime in the

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Speaker 2: last jeez, I don't know to maybe I guess it's

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Speaker 2: probably been ten fifteen years when Apple started paying a

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Speaker 2: tiny dividend. Apple's not going to be known anytime soon

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Speaker 2: as an income generating stock, but there is a dividend

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Speaker 2: there because it's a growth company. Their job is to

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Speaker 2: go invent new things, find new markets to sell them to,

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Speaker 2: and those kinds of things. That's what a growth company is,

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Speaker 2: and I would put Amazon in that same class. But

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Speaker 2: now we've reached a point where this industry has gotten

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Speaker 2: so big and has gotten so much power, they're looking

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Speaker 2: to arrange their finances a little bit different, more differently,

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Speaker 2: and again kind of go into some back to some

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Speaker 2: old school methods. So Amazon raised about fifteen billion dollars

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Speaker 2: and this is its first US dollar bond offering it

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Speaker 2: about three years, so not the first time they've done it,

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Speaker 2: but adding to a spree of jumbo debt sales by

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Speaker 2: technology firms, they're all racing to chase artificial intelligence. Everybody's

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Speaker 2: looking for money under every couch cushion to build artificial

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Speaker 2: intelligence competitiveness. So the proceeds of this, which are about

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Speaker 2: three billion dollars, maybe a little more than that, they're

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Speaker 2: going to be doing everything from acquiring artificial intelligence firms,

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Speaker 2: capital expenditures to build those up and then as well

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Speaker 2: as share buybacks. This according to people with knowledge of

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Speaker 2: the of that matter.

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Speaker 1: Brian, I've got an opinion of what's going on here.

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Speaker 1: Let's I'd love to know if you agree or disagree. Well, hey,

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Speaker 1: look we've got an aging baby boom population and people,

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Speaker 1: you know, see these tech companies. And I've had more

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Speaker 1: than a few clients come to me and say, hey,

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Speaker 1: I'd love to participate in this whole AI thing, but

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Speaker 1: I can't handle fifteen percent twenty percent volatility in my portfolio.

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Speaker 1: How can I participate in some of these you know,

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Speaker 1: great up and coming or established companies and not take

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Speaker 1: as much risk. And I think that's what you know,

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Speaker 1: companies like Google and Amazon are tapping into let people

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Speaker 1: get some return without owning the stock and the stock

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Speaker 1: volatility in the process. I mean, let's face it, we're

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Speaker 1: you know, we've got tech earnings you know coming out

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Speaker 1: you know every day now, Navidio, you know that stock

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Speaker 1: people have no idea where that thing's gonna go. H

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Speaker 1: heading into the earning earnings and out Smith. So my

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Speaker 1: point is to get into some investment grade debt in

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Speaker 1: companies that are established with great free cash flow. That's

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Speaker 1: a great opportunity for some of our older, more conservative investors.

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Speaker 2: Yeah, I would agree with that. And this isn't Amazon's

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Speaker 2: not alone. So Google parent Alphabet, right remember Alphabet is

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Speaker 2: the own owner behind Google. They sold about twenty five

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Speaker 2: billion dollars worth of debt in the US and Europe.

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Speaker 2: Meta the Artist formerly known as Facebook thirty billion for them,

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Speaker 2: and then Oracle, a little older school infrastructure company. They

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Speaker 2: raised about eighteen billion dollars back in September. So again,

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Speaker 2: let's remember real quick what a corporate bond is, right,

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Speaker 2: Old we're starting to remember what they are because interest

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Speaker 2: rates are now finally respectable again, where people were relying

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Speaker 2: on only stocks for a very long time. A bond

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Speaker 2: is debt. A company borrows money from you. They will

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Speaker 2: pay you an income stream. Let's say it's maybe five

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Speaker 2: percent or something like that, and then when that debt

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Speaker 2: comes due on the maturity date, you get your money back.

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Speaker 2: What they do with that money you don't necessarily benefit from.

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Speaker 2: If they invent the next great artificial intelligence tool or

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Speaker 2: something like that, that just means your bond fund or your

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Speaker 2: bond that they owe you is that much more reliable.

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Speaker 2: They'll be able to pay it off. But if it goes,

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Speaker 2: you know, gangbusters on the growth side, that helps the stock.

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Speaker 2: It doesn't affect the bond other than probably making it

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Speaker 2: a little more reliable. But your return was already kind

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Speaker 2: of set in stone via the interest rate and getting

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Speaker 2: your money back. Now, these don't always work out. Bonds

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Speaker 2: can fail just like anything else, and probably the biggest

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Speaker 2: example we have of that is Enron. Back in two

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Speaker 2: thousand and one. This was the company down in Houston

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Speaker 2: that basically was trading a lot of energy and after

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Speaker 2: it was revealed that they had been using some really

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Speaker 2: crazy accounting loopholes, hit billions of dollars worth of debt,

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Speaker 2: a lot of off book transactions, little LLCs and little

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Speaker 2: things spread out all over the place that they weren't

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Speaker 2: actually claiming that they had, but they used that to

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Speaker 2: hide their debt and inflate their earnings. And not only

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Speaker 2: did that take Enron down, it took Arthur Anderson, one

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Speaker 2: of these then big four financial accounting firms, and it

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Speaker 2: costs about eighty five thousand jobs. World colms slightly behind

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Speaker 2: that again, an accounting fraud took them down, and then

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Speaker 2: Lehman Brothers is probably the whopper. These are all companies

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Speaker 2: that had bonds out there, and there's risk in these

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Speaker 2: types of things. But that's why you want to be

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Speaker 2: have a diversified portfolio of bonds, just like you have

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Speaker 2: a diversified portfolio stocks.

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Speaker 1: Yeah, and this is why it's good, I think in

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Speaker 1: most cases, and I think most investors understand, when you're

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Speaker 1: looking at credit quality of these bonds, it's good to

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Speaker 1: have a professional taking a look at this stuff to

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Speaker 1: evaluate credit quality, the balance sheet of the companies, the

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Speaker 1: free cash flow of the companies, because as a bondholder.

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Speaker 1: In order for you to get your interest payment, this

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Speaker 1: company has to have some free cash flow. If they're

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Speaker 1: just selling bonds to just finance this growing and growing

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Speaker 1: pile of debt, all all the companies you mentioned back

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Speaker 1: in the early two thousands, you know, you might be

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Speaker 1: buying into an absolute disaster. And I remember seeing the

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Speaker 1: high yield credit market just get imploded back in the

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Speaker 1: early two thousands and again back in the housing crisis.

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Speaker 1: You know the saying, go there ain't no free lunch.

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Speaker 1: So if somebody's offering a high yield, you know, a

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Speaker 1: really high yield, don't just be enticed by that. You

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Speaker 1: got to look under the hood at what the actual

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Speaker 1: credit quality these companies are so you can get your payments. Now,

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Speaker 1: let's pivot into a more conservative way to invest in bonds,

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Speaker 1: and that's good old treasury bonds Brian.

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Speaker 2: Yep Treasury bonds, good old mom and pop, grandma and grandpa.

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Speaker 2: Reliable issued by the US federal government, considered one of

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Speaker 2: the safest investments you can make on the face of

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Speaker 2: the earth because it's backed by the full faith in

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Speaker 2: credit of the United States. The United States government has

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Speaker 2: never defaulted on its bonds knock on wood here, so

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Speaker 2: that investment is considered low risk compared to everything else

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Speaker 2: you can do. This doesn't mean you can't lose money.

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Speaker 2: Things happen. Bond prices and interest rates move around, and

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Speaker 2: so when prevailing interest rates rise, bond prices will fall.

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Speaker 2: And we're coming out. Weare in the opposite situation right now,

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Speaker 2: but just be aware things do move.

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Speaker 1: Here's the all Worth advice when choosing bonds for your portfolio.

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Speaker 1: Match the duration to your timeline, focus on quality over yield,

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Speaker 1: and make sure your bond allocation compliments your overall investment

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Speaker 1: strategy and financial plan. You've worked your way up the

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Speaker 1: corporate ladder and made great money, but opportunity comes calling

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Speaker 1: in the form of an executive position should you move

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Speaker 1: up the ladder. We'll talk about the quote unquote executive

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Speaker 1: dilemma next with our career expert Julie Bauki. You're listening

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Speaker 1: to Simply Money presented by all Worth Financial on fifty

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Speaker 1: five KRC the talk station. You're listening to Simply Money

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Speaker 1: presented by all Worth Financial on Bob Sponseller along with

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Speaker 1: Brian James. Joined tonight by our career expert Julie Bauki Julie, thanks,

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Speaker 1: as always for carving out some time for us. Tonight.

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Speaker 1: We want to talk about something we're gonna call the

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Speaker 1: executive dilemma, staying put versus jumping to the next big,

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Speaker 1: big thing. Let's say you're in a great role right now.

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Speaker 1: You love your job, you're obviously doing very well at it,

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Speaker 1: but opportunity comes knocking. What's the right move and how

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Speaker 1: do you evaluate whether to make a move?

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Speaker 3: Yeah, I can kind of speak in generality because I've

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Speaker 3: worked with a lot of people in this situation, and

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Speaker 3: the first question I would ask is why would you

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Speaker 3: consider this move? So, in other words, what are the

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Speaker 3: compelling things about this move? And sometimes what I find

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Speaker 3: when people start listing out compelling things more salary, a

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Speaker 3: higher level title, My next question would be, are you

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Speaker 3: sure that those are the things that really matter to you?

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Speaker 3: Because it's very it's very ingrained in us that jumping

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Speaker 3: for the next big thing, more money, more title equals

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Speaker 3: more happiness and career satisfaction. But I know for sure

432
00:21:44,600 --> 00:21:48,879
Speaker 3: that's not true. And so when you look at why

433
00:21:48,880 --> 00:21:51,119
Speaker 3: did that why did that role appeal to you in

434
00:21:51,119 --> 00:21:54,360
Speaker 3: the first place, and then ask yourself, are those things

435
00:21:54,400 --> 00:21:56,600
Speaker 3: that really matter to me at this point. I always

436
00:21:56,600 --> 00:21:58,600
Speaker 3: start from a point of what matters most to you

437
00:21:58,680 --> 00:22:01,480
Speaker 3: right now in your life and then bring the career

438
00:22:01,520 --> 00:22:04,600
Speaker 3: conversation into it. And because if you are going to

439
00:22:04,640 --> 00:22:07,480
Speaker 3: get that bigger title and more money, does it also

440
00:22:07,520 --> 00:22:09,200
Speaker 3: mean that you have to travel more? Does it mean

441
00:22:09,240 --> 00:22:11,160
Speaker 3: you have to work weekends? And how does that fit

442
00:22:11,240 --> 00:22:15,040
Speaker 3: into what your priorities are? And so it's so that's

443
00:22:15,080 --> 00:22:17,920
Speaker 3: the big question is why would you And then take

444
00:22:17,920 --> 00:22:22,080
Speaker 3: a look at what is it about where you are

445
00:22:22,160 --> 00:22:26,080
Speaker 3: now that might be sticking in your gut as to

446
00:22:26,119 --> 00:22:28,440
Speaker 3: why it even makes sense to look for something else?

447
00:22:28,480 --> 00:22:31,199
Speaker 3: And what are you missing where you are? If you

448
00:22:31,240 --> 00:22:35,639
Speaker 3: could change some things about your current situation, would that

449
00:22:35,840 --> 00:22:38,800
Speaker 3: solve that? Would that solve that? It's you're getting to

450
00:22:38,840 --> 00:22:41,600
Speaker 3: move on. So I think it's a really good critical

451
00:22:41,640 --> 00:22:45,159
Speaker 3: analysis of the why behind both where you are, the

452
00:22:45,200 --> 00:22:48,800
Speaker 3: whys and the what both behind where you are and

453
00:22:49,400 --> 00:22:52,320
Speaker 3: what the opportunity is in front of you is really

454
00:22:52,400 --> 00:22:55,119
Speaker 3: really important because we can get super caught up in

455
00:22:55,280 --> 00:22:57,280
Speaker 3: yeah but it's a director title, Yeah but it's a

456
00:22:57,359 --> 00:23:01,280
Speaker 3: VP title without really thinking about what am I getting up?

457
00:23:01,359 --> 00:23:03,680
Speaker 3: What am I giving up to get that and then

458
00:23:03,760 --> 00:23:07,240
Speaker 3: how does that work against what my whole life priorities

459
00:23:07,280 --> 00:23:09,359
Speaker 3: are right now? So a career decision has to be

460
00:23:09,440 --> 00:23:12,080
Speaker 3: made on a bigger platform than in a vacuum.

461
00:23:12,880 --> 00:23:15,120
Speaker 2: Julie, I think a lot of people learn the hard

462
00:23:15,119 --> 00:23:17,359
Speaker 2: way exactly what you just said, because we get this

463
00:23:17,480 --> 00:23:19,840
Speaker 2: so ingrained in us that I got it. If I'm

464
00:23:19,880 --> 00:23:22,760
Speaker 2: getting off of this position, well, clearly I'm fantastic. Obviously

465
00:23:22,800 --> 00:23:25,119
Speaker 2: they love me, and I should take advantage of these benefits.

466
00:23:25,160 --> 00:23:27,359
Speaker 2: But people do tend to learn the hard way that whoops,

467
00:23:27,400 --> 00:23:29,520
Speaker 2: maybe I caught my limit. Maybe I don't want that

468
00:23:29,560 --> 00:23:31,520
Speaker 2: next level because my other things in our life have

469
00:23:31,560 --> 00:23:34,040
Speaker 2: taken priority. So how do people unwind it? For those

470
00:23:34,080 --> 00:23:35,639
Speaker 2: people who feel like they may have done that in

471
00:23:35,680 --> 00:23:37,760
Speaker 2: that position, how can what's what are some ways to

472
00:23:37,840 --> 00:23:38,320
Speaker 2: unwind that?

473
00:23:39,600 --> 00:23:42,200
Speaker 3: Yeah, so you're saying like, if you've already taken that.

474
00:23:42,240 --> 00:23:44,680
Speaker 2: Role, Yeah, and you didn't, and you just didn't occur

475
00:23:44,720 --> 00:23:46,280
Speaker 2: to you that, you know what, I didn't really want

476
00:23:46,320 --> 00:23:48,320
Speaker 2: this extra level of work. I just didn't think it through.

477
00:23:48,359 --> 00:23:49,840
Speaker 2: I just thought it was another accomplishment.

478
00:23:49,960 --> 00:23:51,720
Speaker 3: So the first thing, it kind of depends on a

479
00:23:51,720 --> 00:23:53,960
Speaker 3: lot of things. If you have so let's say you

480
00:23:54,000 --> 00:23:58,880
Speaker 3: have a very stable career history. You've worked a long

481
00:23:58,920 --> 00:24:02,320
Speaker 3: time at one place, you've jumped to this other place,

482
00:24:02,640 --> 00:24:05,080
Speaker 3: and you've been there nine months to a year, and

483
00:24:05,119 --> 00:24:07,680
Speaker 3: you say, this isn't exactly what I thought it was

484
00:24:07,720 --> 00:24:14,440
Speaker 3: going to be. You can successfully and confidently pivot at

485
00:24:14,440 --> 00:24:20,240
Speaker 3: that point versus a person who's had three two year

486
00:24:20,359 --> 00:24:23,600
Speaker 3: jobs in a row. Now you have to Now it

487
00:24:23,720 --> 00:24:26,320
Speaker 3: starts to be what story does your career tell? And

488
00:24:26,359 --> 00:24:28,760
Speaker 3: that's what I would add, because you want to picture yourself.

489
00:24:29,280 --> 00:24:32,160
Speaker 3: You're now interviewing for a new job beyond the one

490
00:24:32,160 --> 00:24:34,680
Speaker 3: that you took by accident. You've got to explain yourself.

491
00:24:35,000 --> 00:24:38,119
Speaker 3: You've got to explain your career. And it's perfectly okay

492
00:24:38,160 --> 00:24:42,400
Speaker 3: to say. So they contacted me, it sounded like exactly

493
00:24:42,440 --> 00:24:45,400
Speaker 3: what I wanted. When I got there, I realized that

494
00:24:45,520 --> 00:24:48,360
Speaker 3: Zava la bah blah. I've done a lot of thinking

495
00:24:48,520 --> 00:24:50,920
Speaker 3: and now I know exactly what I want, and which

496
00:24:50,960 --> 00:24:54,200
Speaker 3: is why I applied for this role. And so that

497
00:24:54,200 --> 00:24:58,000
Speaker 3: that is just that's a good explanation. But if you

498
00:24:58,119 --> 00:25:01,560
Speaker 3: are somebody who has a history, if you are somebody

499
00:25:01,560 --> 00:25:06,040
Speaker 3: who has a history of jumping without really thinking about

500
00:25:06,240 --> 00:25:07,920
Speaker 3: what I've done and Therefore you have kind of a

501
00:25:08,000 --> 00:25:10,720
Speaker 3: checkered history. You probably need to take a breath and

502
00:25:10,800 --> 00:25:15,040
Speaker 3: build up, build up some capital there where you are

503
00:25:15,119 --> 00:25:17,120
Speaker 3: so that as you move to the next thing, you've

504
00:25:17,119 --> 00:25:18,800
Speaker 3: got a better story to tell. So it's kind of

505
00:25:18,840 --> 00:25:21,199
Speaker 3: a big fat It depends. It's really what does your

506
00:25:21,200 --> 00:25:22,680
Speaker 3: whole career story say about.

507
00:25:22,520 --> 00:25:25,560
Speaker 1: You, Julie. I want to go back to the situation

508
00:25:25,640 --> 00:25:29,359
Speaker 1: where somebody's, you know, considering a move, they haven't pulled

509
00:25:29,359 --> 00:25:31,879
Speaker 1: the trigger yet, and they're wondering how to evaluate this.

510
00:25:32,000 --> 00:25:33,879
Speaker 1: And I'm going to make an assumption here. You correct

511
00:25:33,920 --> 00:25:37,600
Speaker 1: me if I'm wrong. Oftentimes people just haven't been coached

512
00:25:38,119 --> 00:25:40,920
Speaker 1: on how to walk into that you know, the boss's

513
00:25:41,000 --> 00:25:44,480
Speaker 1: office or the executive suite, and just be clear about

514
00:25:44,480 --> 00:25:47,879
Speaker 1: what you love about working where you are a couple

515
00:25:48,000 --> 00:25:50,560
Speaker 1: things that you would like to see tweaked. And I think,

516
00:25:51,000 --> 00:25:54,480
Speaker 1: especially in today's labor market where it is really hard

517
00:25:54,560 --> 00:25:59,399
Speaker 1: to find good, seasoned, hard working people, aren't people amazed,

518
00:25:59,560 --> 00:26:03,000
Speaker 1: you know, if they're coached by someone like you on

519
00:26:03,080 --> 00:26:06,199
Speaker 1: how to go in and broach that conversation. Oftentimes you

520
00:26:06,240 --> 00:26:08,920
Speaker 1: can walk out of that office, you know, if your

521
00:26:09,119 --> 00:26:13,359
Speaker 1: if your requests or reasonable, getting exactly what you really

522
00:26:13,440 --> 00:26:16,520
Speaker 1: need to be truly happy where you are, instead of

523
00:26:16,560 --> 00:26:20,480
Speaker 1: making a completely you know, new move and complete jump

524
00:26:20,520 --> 00:26:23,719
Speaker 1: to a new company. Am I am I on target

525
00:26:23,760 --> 00:26:24,240
Speaker 1: there at all?

526
00:26:24,680 --> 00:26:27,960
Speaker 3: Yes, A very much. So we always say try to

527
00:26:28,000 --> 00:26:31,400
Speaker 3: fix it where you are first, because jobs are just painful,

528
00:26:31,680 --> 00:26:34,800
Speaker 3: and transitioning to a new, unknown job, as exciting as

529
00:26:34,800 --> 00:26:36,920
Speaker 3: it may sound on the surface, can also be really

530
00:26:36,920 --> 00:26:41,520
Speaker 3: painful and surprising. And so getting it doing that, doing

531
00:26:41,560 --> 00:26:44,920
Speaker 3: that clarity, that looking at everything that's on your plate

532
00:26:44,960 --> 00:26:49,200
Speaker 3: and saying and really saying, what do I like about

533
00:26:49,240 --> 00:26:52,399
Speaker 3: my current role? What are the things that if I

534
00:26:52,440 --> 00:26:54,840
Speaker 3: had a magic wand and can move them off my plate,

535
00:26:55,000 --> 00:26:58,800
Speaker 3: I would? What would I like to see more of

536
00:26:59,400 --> 00:27:03,359
Speaker 3: less a in my role? And how how do I

537
00:27:03,480 --> 00:27:07,040
Speaker 3: then approach that. Once you get clarity on that, then

538
00:27:07,240 --> 00:27:09,919
Speaker 3: you have a better Then you have a framework. Then

539
00:27:09,960 --> 00:27:12,919
Speaker 3: you have talking points to go in and say, you know,

540
00:27:13,080 --> 00:27:16,080
Speaker 3: I've been in this role as COO for three years

541
00:27:16,440 --> 00:27:20,760
Speaker 3: and what I really love is integrating new ideas, new systems,

542
00:27:20,840 --> 00:27:26,200
Speaker 3: new technologies, and then working across the organization to help

543
00:27:26,240 --> 00:27:28,720
Speaker 3: implement those and bring those delights. I do get to

544
00:27:28,720 --> 00:27:30,520
Speaker 3: do some of that in my role, but as I

545
00:27:30,600 --> 00:27:33,040
Speaker 3: look at my next role, I would love to be

546
00:27:33,160 --> 00:27:38,359
Speaker 3: more involved in those types of initiatives. And that's the

547
00:27:38,440 --> 00:27:42,600
Speaker 3: kind of conversation that you should be having. And we

548
00:27:43,160 --> 00:27:46,760
Speaker 3: are so afraid to have those conversations because we feel

549
00:27:46,800 --> 00:27:49,120
Speaker 3: like it's going to make us look less than committed

550
00:27:49,840 --> 00:27:52,760
Speaker 3: or that we're going to automatically end up on the

551
00:27:52,840 --> 00:27:55,719
Speaker 3: layoff list. And you've try to assess your situation. If

552
00:27:55,760 --> 00:27:57,879
Speaker 3: you have the type of leader who you feel like,

553
00:27:57,920 --> 00:28:00,840
Speaker 3: it really is risky to have those conversations, and that

554
00:28:00,920 --> 00:28:03,280
Speaker 3: might be different than if you feel like somebody your

555
00:28:03,359 --> 00:28:06,399
Speaker 3: leader really is open to you, you are valued, and

556
00:28:06,440 --> 00:28:09,520
Speaker 3: your leader is looking to retain you. I think it's

557
00:28:09,600 --> 00:28:13,000
Speaker 3: up to you to go in and begin that conversation

558
00:28:13,320 --> 00:28:16,160
Speaker 3: about what next might look like for you. Leaders are

559
00:28:16,240 --> 00:28:19,600
Speaker 3: so busy and yet they should be coming to you

560
00:28:19,720 --> 00:28:23,800
Speaker 3: and initiating these conversations, but they aren't because they're getting squeezed.

561
00:28:23,960 --> 00:28:26,600
Speaker 3: And I always say, the career fairy isn't coming. And

562
00:28:26,600 --> 00:28:29,119
Speaker 3: so if you want more or different out of your career,

563
00:28:29,640 --> 00:28:31,719
Speaker 3: start where you are. Try to get it where you are,

564
00:28:31,800 --> 00:28:33,399
Speaker 3: or at least put a plan together to get it

565
00:28:33,400 --> 00:28:36,879
Speaker 3: where you are, especially in a job market like we're in,

566
00:28:36,960 --> 00:28:39,920
Speaker 3: that's always going to be the place where it's going

567
00:28:40,000 --> 00:28:41,720
Speaker 3: to be least stressful to move.

568
00:28:42,560 --> 00:28:45,240
Speaker 1: That is great advice. Julie, you're listening to Simply Money

569
00:28:45,320 --> 00:28:48,520
Speaker 1: presented by all Worth Financial on fifty five KRC, the

570
00:28:48,880 --> 00:28:56,720
Speaker 1: talk station. You're listening to Simply Money presented by all

571
00:28:56,720 --> 00:29:00,200
Speaker 1: Worth Financial. I'm pop sponsorller along with Brian James. You

572
00:29:00,240 --> 00:29:02,479
Speaker 1: have a financial question you'd like for us to answer.

573
00:29:02,600 --> 00:29:04,840
Speaker 1: There's a red button you can click while you're listening

574
00:29:04,920 --> 00:29:07,720
Speaker 1: to the show. If you're listening on the iHeart app,

575
00:29:07,800 --> 00:29:11,280
Speaker 1: simply record your question and as always, it will come

576
00:29:11,360 --> 00:29:14,959
Speaker 1: straight to us. All right, Brian, get ready for Colin

577
00:29:15,120 --> 00:29:18,520
Speaker 1: and Marymont. He says, we've been passive investors for years,

578
00:29:19,160 --> 00:29:22,800
Speaker 1: but all the megacac tech names dominate the index. Now,

579
00:29:22,840 --> 00:29:26,760
Speaker 1: how do you stay diversified when the index itself gets

580
00:29:26,840 --> 00:29:30,080
Speaker 1: top heavy? I love this question from Colin. It means

581
00:29:30,120 --> 00:29:32,040
Speaker 1: he's paying attention, he's on top of things.

582
00:29:32,040 --> 00:29:35,120
Speaker 2: What do we say to Colin congratulations on knowing how

583
00:29:35,120 --> 00:29:37,880
Speaker 2: indexes worked. That's exactly one of the concerned. This wasn't

584
00:29:37,880 --> 00:29:40,120
Speaker 2: a problem that we you know, thirty years ago, we

585
00:29:40,200 --> 00:29:42,520
Speaker 2: just didn't have this type of an issue. Because the

586
00:29:42,520 --> 00:29:45,920
Speaker 2: indices were a little more balanced out. But the economic

587
00:29:45,960 --> 00:29:47,720
Speaker 2: growth in this country, in this world has been so

588
00:29:47,880 --> 00:29:50,560
Speaker 2: technology driven in the past several decades that, yes, this

589
00:29:50,680 --> 00:29:52,600
Speaker 2: is a real problem. So the S and P five

590
00:29:52,680 --> 00:29:55,600
Speaker 2: hundred today is the most concentrated it's been since the seventies.

591
00:29:55,880 --> 00:29:58,360
Speaker 2: The top seven or eight tech giants now make up

592
00:29:58,400 --> 00:30:01,000
Speaker 2: more than a third of the entire end. Some estimates

593
00:30:01,000 --> 00:30:03,160
Speaker 2: have it up to forty percent. So if you might

594
00:30:03,160 --> 00:30:05,560
Speaker 2: think you're diversified just because you own that index fund,

595
00:30:05,640 --> 00:30:07,280
Speaker 2: but you might just be tied to a handful of

596
00:30:07,600 --> 00:30:10,160
Speaker 2: megacap stocks, so you know, just make sure you don't

597
00:30:10,160 --> 00:30:13,000
Speaker 2: have you don't have to abandon passive investing. Just add

598
00:30:13,040 --> 00:30:16,320
Speaker 2: these guardrails. Consider an equal weight S and P five

599
00:30:16,400 --> 00:30:19,600
Speaker 2: hundred exchange traded fund, same five hundred companies, except it

600
00:30:19,760 --> 00:30:23,240
Speaker 2: spread evenly across all five hundred versus the bigger they are.

601
00:30:23,280 --> 00:30:25,240
Speaker 2: The big the bigger the company is, the more of

602
00:30:25,280 --> 00:30:28,280
Speaker 2: a portion of the capitalization it makes up. And then

603
00:30:28,320 --> 00:30:31,080
Speaker 2: also look for some MidCap and small cap index funds,

604
00:30:31,160 --> 00:30:33,760
Speaker 2: and that'll fill in what that top heavy index is missing.

605
00:30:33,800 --> 00:30:35,640
Speaker 2: It'll the S and P five hundred is never going

606
00:30:35,720 --> 00:30:38,720
Speaker 2: to have small and MidCap it's literally the five hundred

607
00:30:38,760 --> 00:30:40,880
Speaker 2: largest companies in the United States, which tend to be

608
00:30:41,120 --> 00:30:42,960
Speaker 2: among the largest in the world too. So if you've

609
00:30:42,960 --> 00:30:45,400
Speaker 2: set add separate MidCap and small cap funds, that's going

610
00:30:45,480 --> 00:30:47,280
Speaker 2: to spread out some of that risk, and as we've

611
00:30:47,320 --> 00:30:50,680
Speaker 2: mentioned frequently, add some international stocks to the mix. Twenty

612
00:30:50,720 --> 00:30:52,440
Speaker 2: twenty five has been a very different year as the

613
00:30:52,560 --> 00:30:55,640
Speaker 2: US has chosen to portray itself differently from a trade

614
00:30:55,680 --> 00:30:58,280
Speaker 2: standpoint to the rest of the world. International stocks are

615
00:30:58,280 --> 00:31:00,360
Speaker 2: on the run, and if you don't have any your portfolio,

616
00:31:00,440 --> 00:31:02,160
Speaker 2: make sure they're in there. So great excuse to make

617
00:31:02,200 --> 00:31:04,240
Speaker 2: sure that you are balanced overall in terms of your

618
00:31:04,280 --> 00:31:08,760
Speaker 2: asset allocation. Tom and Cincinnati Bob Tom says his CPA

619
00:31:08,800 --> 00:31:12,120
Speaker 2: has been talking about harvesting gains quote unquote before any

620
00:31:12,120 --> 00:31:14,960
Speaker 2: potential tax changes, but their advisor, who is a different person,

621
00:31:15,000 --> 00:31:17,520
Speaker 2: obviously says to hang on and wait for this step

622
00:31:17,600 --> 00:31:19,960
Speaker 2: up in cost basis. In other words, don't do anything,

623
00:31:20,000 --> 00:31:21,840
Speaker 2: just wait until you're dead and then your kids will

624
00:31:21,840 --> 00:31:25,240
Speaker 2: inherit it capital gain tax free. I'm sure he didn't

625
00:31:25,280 --> 00:31:27,160
Speaker 2: say it like that, but that's anytime you're talking about

626
00:31:27,160 --> 00:31:29,040
Speaker 2: step up, you're not talking about you you're talking about

627
00:31:29,040 --> 00:31:31,520
Speaker 2: your airs. So he's asking, how do families make these

628
00:31:31,560 --> 00:31:34,880
Speaker 2: decisions when these rules keep changing, they keep moving the goalpost, Bob.

629
00:31:36,080 --> 00:31:38,400
Speaker 1: Yeah, this is a tough one for me to answer.

630
00:31:38,440 --> 00:31:40,080
Speaker 1: I don't want to get in the middle of, you know,

631
00:31:40,160 --> 00:31:43,960
Speaker 1: discussions that it sounds like aren't going on between your

632
00:31:44,000 --> 00:31:47,280
Speaker 1: CPA and your advisor, Tom. That'd be my first thing

633
00:31:47,360 --> 00:31:49,080
Speaker 1: is you guys all need to get in the same

634
00:31:49,200 --> 00:31:52,800
Speaker 1: room and have a financial plan. And the proverbial saying

635
00:31:52,880 --> 00:31:55,440
Speaker 1: don't let the tax tail wag the dog, I think

636
00:31:55,520 --> 00:32:00,480
Speaker 1: applies here if your CPA is talking about potential tax

637
00:32:00,560 --> 00:32:03,000
Speaker 1: change as well. I don't think we're going to get

638
00:32:03,040 --> 00:32:06,040
Speaker 1: many tax changes tax law changes here for the next

639
00:32:06,040 --> 00:32:08,520
Speaker 1: few years at least. I mean, who knows what happens,

640
00:32:08,880 --> 00:32:11,600
Speaker 1: you know, in the next administration and what have you.

641
00:32:11,680 --> 00:32:14,120
Speaker 1: So you've got a window here where we do have

642
00:32:14,240 --> 00:32:17,440
Speaker 1: a little bit of clarity on tax policy. And to

643
00:32:17,560 --> 00:32:21,960
Speaker 1: Brian's point, you might be passing up some real opportunities

644
00:32:21,960 --> 00:32:25,040
Speaker 1: here by just standing pat and waiting until you die.

645
00:32:25,120 --> 00:32:27,600
Speaker 1: As Brian said, So I think number one, I think

646
00:32:27,640 --> 00:32:29,440
Speaker 1: you guys all need to be you know, in the

647
00:32:29,640 --> 00:32:32,080
Speaker 1: in the same room or at least on the same

648
00:32:32,200 --> 00:32:36,640
Speaker 1: zoom call comparing an actual financial planning strategy, And there

649
00:32:36,720 --> 00:32:41,400
Speaker 1: might be different reasons for harvesting some gains now, you know,

650
00:32:41,520 --> 00:32:45,920
Speaker 1: to support income or gifting strategies. There might be some

651
00:32:46,040 --> 00:32:48,400
Speaker 1: charitable giving opportunities that you might be able to take

652
00:32:48,440 --> 00:32:51,800
Speaker 1: advantage of to just eliminate some of these taxable gains altogether.

653
00:32:51,880 --> 00:32:56,280
Speaker 1: And there might be a gradual approach of moving out

654
00:32:56,280 --> 00:32:59,880
Speaker 1: of some of these low cost based assets gradually over

655
00:32:59,880 --> 00:33:03,760
Speaker 1: time through direct indexing strategies or things like that. So

656
00:33:04,400 --> 00:33:07,800
Speaker 1: I can understand why you're confused, Tom. You know, if

657
00:33:07,840 --> 00:33:10,440
Speaker 1: everybody isn't at least in the same room or on

658
00:33:10,480 --> 00:33:14,479
Speaker 1: the same zoom call, you know, putting an actual strategy together,

659
00:33:15,000 --> 00:33:17,800
Speaker 1: you know, you're left being you know, confused and getting

660
00:33:17,840 --> 00:33:20,920
Speaker 1: conflicting advice. And that's really no good for anybody. So

661
00:33:21,040 --> 00:33:24,600
Speaker 1: I hope that helps. Ethan and Covington says, we're thinking

662
00:33:24,640 --> 00:33:28,320
Speaker 1: about adding private credit to our portfolio, but the lack

663
00:33:28,400 --> 00:33:32,800
Speaker 1: of transparency worries me. What's the smartest way for regular

664
00:33:32,840 --> 00:33:37,640
Speaker 1: investors to evaluate one of these illiquid investment opportunities?

665
00:33:37,640 --> 00:33:39,920
Speaker 2: Brian, yeh, here we go with that word private again.

666
00:33:40,000 --> 00:33:42,920
Speaker 2: Is these assets are booming Normally we associate this with

667
00:33:43,000 --> 00:33:45,960
Speaker 2: private equity, which is just buying up small companies that

668
00:33:46,000 --> 00:33:49,160
Speaker 2: aren't publicly traded. But now we're also talking to these

669
00:33:49,240 --> 00:33:51,360
Speaker 2: days about private credit, which which is really the kind

670
00:33:51,360 --> 00:33:54,719
Speaker 2: of the bond side of the private equity movement. These

671
00:33:54,760 --> 00:33:58,080
Speaker 2: are just loans and things to to to businesses that

672
00:33:58,200 --> 00:34:00,560
Speaker 2: don't have the size or for whatever reason, don't want

673
00:34:00,560 --> 00:34:04,040
Speaker 2: to participate in the public market. So private credit has exploded.

674
00:34:04,080 --> 00:34:07,000
Speaker 2: It's now over a two trillion dollar market. Good reason

675
00:34:07,040 --> 00:34:08,920
Speaker 2: for this. You can get higher yields out of this,

676
00:34:09,320 --> 00:34:12,480
Speaker 2: less sensitivity to interest rates because they're not publicly traded

677
00:34:12,520 --> 00:34:14,799
Speaker 2: so there aren't markets to move them around as much,

678
00:34:15,000 --> 00:34:17,440
Speaker 2: and access to loans traditional banks aren't willing to make

679
00:34:17,480 --> 00:34:19,520
Speaker 2: because they've got their rules to follow too. But for

680
00:34:19,600 --> 00:34:22,440
Speaker 2: everyday investors, the trade off is usually ill liquidity and

681
00:34:22,520 --> 00:34:26,840
Speaker 2: less transparency, as Ethan's calling out specifically. So just that

682
00:34:26,880 --> 00:34:29,080
Speaker 2: doesn't mean that doesn't make these bad investments. There are

683
00:34:29,120 --> 00:34:31,480
Speaker 2: things you should know about them, know exactly what you're

684
00:34:31,520 --> 00:34:34,960
Speaker 2: being paid for. Higher yields sound great, but they're compensating you.

685
00:34:35,000 --> 00:34:36,560
Speaker 2: The reason they exists is because you have a little

686
00:34:36,600 --> 00:34:38,680
Speaker 2: less liquidity and you're taking a little more credit risk.

687
00:34:38,920 --> 00:34:41,040
Speaker 2: So these are compliments to other things that should be

688
00:34:41,040 --> 00:34:43,799
Speaker 2: in your portfolio. And if you can't articulate where that

689
00:34:43,840 --> 00:34:46,840
Speaker 2: return comes from, if it's if you can't understand at

690
00:34:46,880 --> 00:34:49,520
Speaker 2: all leverage and distress loans, real estate backing, that kind

691
00:34:49,520 --> 00:34:51,799
Speaker 2: of thing, you might want to reconsider. Look at the

692
00:34:51,840 --> 00:34:54,400
Speaker 2: structure of it, not just the sales pitch. Is this

693
00:34:54,480 --> 00:34:57,080
Speaker 2: a fund that marks its own assets? Are they the

694
00:34:57,120 --> 00:34:59,759
Speaker 2: ones deciding what the assets are worth? And how often

695
00:34:59,760 --> 00:35:02,080
Speaker 2: do they do that? And what are the redemption limits?

696
00:35:02,080 --> 00:35:04,400
Speaker 2: Are these things frozen up you can't get to it?

697
00:35:04,600 --> 00:35:07,959
Speaker 2: Oftentimes there are then they can legally refuse withdrawals during

698
00:35:08,000 --> 00:35:11,280
Speaker 2: times of stress. And make sure you understand the manager quality.

699
00:35:11,320 --> 00:35:13,160
Speaker 2: And to try to get any kind of history you

700
00:35:13,160 --> 00:35:15,160
Speaker 2: can get. It may not be possible to go all

701
00:35:15,239 --> 00:35:16,880
Speaker 2: the way back to two thousand and eight. That's getting

702
00:35:16,880 --> 00:35:18,400
Speaker 2: to be a long time ago now, but if you

703
00:35:18,440 --> 00:35:20,360
Speaker 2: can get that kind of answer, you should take a

704
00:35:20,360 --> 00:35:22,759
Speaker 2: look at that. So just look under every stone for

705
00:35:22,800 --> 00:35:26,359
Speaker 2: all the information you can get. Ethan really super quick

706
00:35:26,400 --> 00:35:28,200
Speaker 2: from Alan Levin and Bob. He says they got a

707
00:35:28,200 --> 00:35:30,240
Speaker 2: lot of cash after they just sold a rental property.

708
00:35:30,280 --> 00:35:32,040
Speaker 2: What do they do with that lump sum without feeling

709
00:35:32,080 --> 00:35:34,040
Speaker 2: like they're dumping into the market at a wrong time.

710
00:35:34,760 --> 00:35:37,879
Speaker 1: Well, great, great question. Now here's the answer. Brian talked

711
00:35:37,880 --> 00:35:40,560
Speaker 1: about this yesterday, this exact same topic and did a

712
00:35:40,600 --> 00:35:43,520
Speaker 1: great job. I think first segregate your long term capital

713
00:35:43,600 --> 00:35:46,320
Speaker 1: from your short term capital needs. And I would say

714
00:35:46,440 --> 00:35:49,839
Speaker 1: for longer term capital, the numbers bear this out based

715
00:35:49,880 --> 00:35:52,600
Speaker 1: on historical data. You know, just put it in there,

716
00:35:52,760 --> 00:35:55,560
Speaker 1: invest it. Yes, you got to take on some maybe

717
00:35:55,560 --> 00:35:58,160
Speaker 1: short term volatility, but you're going to come out ahead

718
00:35:58,480 --> 00:36:00,719
Speaker 1: in the long run by just pushing this money to

719
00:36:00,760 --> 00:36:05,520
Speaker 1: work and investing it responsibly. By the same token, if

720
00:36:05,520 --> 00:36:09,480
Speaker 1: you're somebody that cannot handle short term volatility, you know,

721
00:36:09,520 --> 00:36:12,680
Speaker 1: with your long term capital three four five percent pullback,

722
00:36:12,840 --> 00:36:14,839
Speaker 1: then you might want to stage it in over time.

723
00:36:15,000 --> 00:36:17,839
Speaker 1: So it has to do with the economic result over

724
00:36:17,920 --> 00:36:22,359
Speaker 1: time versus your investment temperament and risk tolerance. And that's

725
00:36:22,400 --> 00:36:25,520
Speaker 1: a good discussion to have with your advisor prior to

726
00:36:25,600 --> 00:36:28,800
Speaker 1: pulling the trigger on anything. Hope that helps. All right, Next,

727
00:36:28,840 --> 00:36:31,880
Speaker 1: Brian has his bottom line on what's going on in

728
00:36:31,920 --> 00:36:35,160
Speaker 1: the gig economy these days. You're listening to simply Money

729
00:36:35,160 --> 00:36:38,120
Speaker 1: presented by all Worth Financial on fifty five KRC, the

730
00:36:38,440 --> 00:36:44,680
Speaker 1: talk station Let's get this thing moment. You're listening to

731
00:36:44,680 --> 00:36:47,680
Speaker 1: Simply Money, presented by all Worth Financial on Bob's fonseller

732
00:36:47,719 --> 00:36:52,000
Speaker 1: along with Brian James. Well, rumor has it, Brian, you've

733
00:36:52,040 --> 00:36:55,239
Speaker 1: been out there moonlighting as a DJ down in one

734
00:36:55,239 --> 00:36:58,720
Speaker 1: of your favorite high school haunts in over the Rine.

735
00:36:58,960 --> 00:37:01,600
Speaker 1: Is that true? Are you out there engaging in the

736
00:37:01,640 --> 00:37:04,120
Speaker 1: gig economy? Tell us what it's like out there.

737
00:37:04,440 --> 00:37:07,480
Speaker 2: I think you're referring to the Warehouse from the next

738
00:37:07,600 --> 00:37:10,719
Speaker 2: im as my high school hangout that I literally went

739
00:37:10,800 --> 00:37:12,960
Speaker 2: to one time and you'll never let me forget it.

740
00:37:13,000 --> 00:37:15,640
Speaker 2: But I am leading the charge. I'm going to revive

741
00:37:15,760 --> 00:37:18,440
Speaker 2: soft Rock down at the Warehouse and over the Rhine.

742
00:37:18,719 --> 00:37:21,440
Speaker 2: Last night we had literally six or seven people interested

743
00:37:21,480 --> 00:37:24,399
Speaker 2: in that. So anyway, gig economy, right, That's what we're

744
00:37:24,440 --> 00:37:27,719
Speaker 2: kidding around about here is side jobs. So not a

745
00:37:27,719 --> 00:37:30,120
Speaker 2: lot of our clients deal in this kind of thing,

746
00:37:30,120 --> 00:37:31,760
Speaker 2: but they a lot that More and more, I'm dealing

747
00:37:31,760 --> 00:37:33,719
Speaker 2: with clients who come in with questions about their kids

748
00:37:33,760 --> 00:37:35,759
Speaker 2: and their relatives and their loved ones who are doing

749
00:37:35,800 --> 00:37:39,720
Speaker 2: this kind of thing. So some research says that overall

750
00:37:39,760 --> 00:37:42,640
Speaker 2: total compensation. This comes out of Forbes. Total compensation rose

751
00:37:42,680 --> 00:37:45,640
Speaker 2: about three point eight percent and twenty four inflation was

752
00:37:45,640 --> 00:37:48,080
Speaker 2: only two point nine percent, and that's leaving only a

753
00:37:48,120 --> 00:37:51,000
Speaker 2: small margin of additional buying power for people. Households are

754
00:37:51,000 --> 00:37:53,400
Speaker 2: feeling squeezed and they're trying to find new ways to

755
00:37:53,440 --> 00:37:56,560
Speaker 2: make money, and hence, you know, enter the whole gig economy.

756
00:37:56,719 --> 00:37:58,880
Speaker 2: Finding a side job or some kind of little business

757
00:37:58,880 --> 00:38:00,920
Speaker 2: on the side. This can be a good thing. You

758
00:38:00,920 --> 00:38:03,239
Speaker 2: can use your gig income not only for extras, but

759
00:38:03,239 --> 00:38:06,600
Speaker 2: potentially you know, building or treat it like a project

760
00:38:06,719 --> 00:38:09,040
Speaker 2: source of income. If you or your loved ones is

761
00:38:09,040 --> 00:38:11,480
Speaker 2: trying to build up an emergency fund and you just

762
00:38:11,560 --> 00:38:14,239
Speaker 2: can't carve out enough money on the side from your

763
00:38:14,280 --> 00:38:17,680
Speaker 2: primary gig, then something on the side can be just

764
00:38:17,760 --> 00:38:19,400
Speaker 2: for that purpose. I want to build up I know

765
00:38:19,480 --> 00:38:21,520
Speaker 2: I need three months, six months, nine months worth of

766
00:38:21,560 --> 00:38:24,000
Speaker 2: income so that I can accomplish my emergency fund goal.

767
00:38:24,360 --> 00:38:25,600
Speaker 2: Then do that. It can be a great way to

768
00:38:25,680 --> 00:38:28,360
Speaker 2: do it. That income is segregated, it comes out on

769
00:38:28,400 --> 00:38:30,640
Speaker 2: the side, and then you can carve that out a

770
00:38:30,640 --> 00:38:32,440
Speaker 2: little more easily than trying to squish it into the

771
00:38:32,440 --> 00:38:35,399
Speaker 2: regular budget. Another thought that comes up all the time

772
00:38:35,400 --> 00:38:37,800
Speaker 2: for my clients worried about their family members. Is my

773
00:38:37,880 --> 00:38:39,400
Speaker 2: kid's got a lot of credit card debt and we

774
00:38:39,440 --> 00:38:40,880
Speaker 2: want to swoop in and pay it off, But I

775
00:38:40,920 --> 00:38:43,000
Speaker 2: also don't want to teach that lesson that will always

776
00:38:43,040 --> 00:38:45,640
Speaker 2: be there to kind of fix it. Well, then again,

777
00:38:45,680 --> 00:38:48,000
Speaker 2: those kids, those young folks can start looking for a

778
00:38:48,040 --> 00:38:51,400
Speaker 2: side job to get that tackled and get that paid

779
00:38:51,400 --> 00:38:55,320
Speaker 2: down and never go that route again, you know, because

780
00:38:55,600 --> 00:38:57,480
Speaker 2: this is the situation that we all get and we

781
00:38:57,480 --> 00:39:00,040
Speaker 2: want to fix. So these side gigs can be a

782
00:38:59,840 --> 00:39:01,960
Speaker 2: little bit bumpy. Of course, you never know where the

783
00:39:01,960 --> 00:39:03,759
Speaker 2: work is going to come from. They often don't come

784
00:39:03,800 --> 00:39:06,279
Speaker 2: with benefits such as retirement plan, health insurance. That's what

785
00:39:06,360 --> 00:39:08,279
Speaker 2: makes it a side gig. But at the same time

786
00:39:08,320 --> 00:39:11,320
Speaker 2: it can be a reliable source of outside income and

787
00:39:11,640 --> 00:39:14,000
Speaker 2: not the worst idea for somebody who needs that that

788
00:39:14,080 --> 00:39:15,919
Speaker 2: Lextra little bump. Do you ever run across this bob?

789
00:39:16,600 --> 00:39:20,040
Speaker 1: Well, occasionally, but one idea popped into my head, and

790
00:39:20,080 --> 00:39:22,680
Speaker 1: I know you love my random ideas, so I'll lay

791
00:39:22,680 --> 00:39:25,279
Speaker 1: it on you. Hey, occasionally were running too people, you know,

792
00:39:25,360 --> 00:39:27,840
Speaker 1: especially young folks that say, hey, I'm in a job,

793
00:39:27,920 --> 00:39:30,359
Speaker 1: right now where I'm making pretty good money. It's paying

794
00:39:30,400 --> 00:39:33,120
Speaker 1: the bills. But this is not my, you know, long

795
00:39:33,239 --> 00:39:36,399
Speaker 1: term thing that I want to be doing forever. Going

796
00:39:36,480 --> 00:39:38,600
Speaker 1: out and finding one of these side gigs. If you

797
00:39:38,640 --> 00:39:41,360
Speaker 1: do it strategically, it's a way to try on a

798
00:39:41,440 --> 00:39:44,680
Speaker 1: different job or a different career path that and see

799
00:39:44,960 --> 00:39:46,920
Speaker 1: how you really like it. If you do it for

800
00:39:47,000 --> 00:39:49,400
Speaker 1: five or ten hours a week instead of quitting your

801
00:39:49,440 --> 00:39:52,879
Speaker 1: current job, it might be that entree to the next

802
00:39:52,880 --> 00:39:55,160
Speaker 1: step in your career path. Just a thought out there.

803
00:39:55,640 --> 00:39:58,400
Speaker 1: Thanks for listening tonight. You're listening to Simply Money, presented

804
00:39:58,440 --> 00:40:00,600
Speaker 1: by all Worth Financial on fifty five k r C,

805
00:40:01,080 --> 00:40:02,040
Speaker 1: the talk station