1 00:00:14,400 --> 00:00:18,560 Speaker 1: Tonight, what stock market participants think they know right now 2 00:00:18,680 --> 00:00:21,639 Speaker 1: and why that can tend to matter more than the 3 00:00:21,680 --> 00:00:24,439 Speaker 1: headlines you're listening to Simply Money, presented by all Worth 4 00:00:24,480 --> 00:00:28,440 Speaker 1: Financial on Bob's fonseller along with Brian James. Well, if 5 00:00:28,440 --> 00:00:31,720 Speaker 1: you're like us, you're getting tired probably of these daily 6 00:00:31,800 --> 00:00:35,080 Speaker 1: swings on Wall Street and the stock market, with every 7 00:00:35,120 --> 00:00:39,360 Speaker 1: press conference, missile strike, you know, any all the happenings, 8 00:00:39,360 --> 00:00:42,080 Speaker 1: the coming and goings over in the Middle East. You know, 9 00:00:42,120 --> 00:00:46,239 Speaker 1: the market moves and moose, you know pretty appreciably. You know, 10 00:00:46,240 --> 00:00:48,559 Speaker 1: we're seeing inter day moves of you know, one to 11 00:00:48,640 --> 00:00:51,280 Speaker 1: two percent sometimes on a daily basis here over the 12 00:00:51,360 --> 00:00:54,240 Speaker 1: last week or so. But here's what might surprise you. 13 00:00:54,320 --> 00:00:58,840 Speaker 1: The market is actually forward looking, not reactive, and if 14 00:00:58,840 --> 00:01:02,720 Speaker 1: you don't understand that, you're likely going to misread what 15 00:01:02,840 --> 00:01:05,399 Speaker 1: is happening right now. Let's get into this, Brian. 16 00:01:06,080 --> 00:01:08,240 Speaker 2: So, I think something people should learn to pay attention 17 00:01:08,319 --> 00:01:09,679 Speaker 2: to is something called the vix. 18 00:01:10,480 --> 00:01:11,080 Speaker 3: V IX. 19 00:01:11,120 --> 00:01:13,480 Speaker 2: You're gonna hear it a lot during times like this, 20 00:01:13,600 --> 00:01:15,720 Speaker 2: whenever the market is bouncing, and like Bob said, whenever 21 00:01:15,720 --> 00:01:18,679 Speaker 2: there are scary headlines, the VIX is going to go up. 22 00:01:18,760 --> 00:01:20,680 Speaker 2: We want the VIX to go down because it is 23 00:01:20,720 --> 00:01:22,560 Speaker 2: it's something we call the fear index. 24 00:01:23,160 --> 00:01:24,880 Speaker 3: That oversimplifies it. 25 00:01:24,840 --> 00:01:26,440 Speaker 2: But it is a way to come to kind of 26 00:01:26,520 --> 00:01:28,640 Speaker 2: quantify how our investors feeling. 27 00:01:28,959 --> 00:01:31,400 Speaker 3: When the VIX is dropping, that is generally a good thing. 28 00:01:31,400 --> 00:01:33,319 Speaker 2: When the VIX is rising, that's a bad thing because 29 00:01:33,360 --> 00:01:35,360 Speaker 2: the market will very much move in the opposite direction. 30 00:01:35,520 --> 00:01:38,920 Speaker 2: So what it does. The VIX measures expected volatility in 31 00:01:38,959 --> 00:01:41,840 Speaker 2: the S and P five hundred over the next thirty days. 32 00:01:42,280 --> 00:01:45,679 Speaker 2: And the keyword there is expected volatility, like Bob said, 33 00:01:45,880 --> 00:01:48,640 Speaker 2: not what just happened, but what investors think is coming. 34 00:01:48,640 --> 00:01:50,559 Speaker 3: Because as Bob just said, it's forward looking. 35 00:01:50,880 --> 00:01:53,400 Speaker 2: This is derived from options pricing, so it's based on 36 00:01:53,440 --> 00:01:57,040 Speaker 2: what big institutional investors are willing to pay to hedge risk. 37 00:01:58,080 --> 00:02:01,160 Speaker 2: We may not want to be pert anticipating in options 38 00:02:01,200 --> 00:02:03,960 Speaker 2: for speculative purposes, but that can be that market can 39 00:02:04,000 --> 00:02:05,920 Speaker 2: be a great place to look for to just to 40 00:02:05,920 --> 00:02:10,320 Speaker 2: get an idea for overall, what does what do speculators 41 00:02:10,320 --> 00:02:13,080 Speaker 2: think is coming? Because that does play a role overall 42 00:02:13,120 --> 00:02:15,200 Speaker 2: in the psychology of the market. It's really no different 43 00:02:15,240 --> 00:02:18,880 Speaker 2: than so, yeah, it is interesting to think about in 44 00:02:19,240 --> 00:02:22,200 Speaker 2: over the very short term, the days and weeks coming up. 45 00:02:22,320 --> 00:02:23,960 Speaker 2: Nobody knows what the market is going to do, but 46 00:02:24,000 --> 00:02:26,200 Speaker 2: we can definitely get a feel for what the attitude 47 00:02:26,200 --> 00:02:29,480 Speaker 2: of people is for what might happen. Again, like I said, 48 00:02:29,639 --> 00:02:32,600 Speaker 2: no different than looking at Vegas for what people think 49 00:02:32,600 --> 00:02:35,200 Speaker 2: about the outcome of the next Reds game. Bob, I 50 00:02:35,200 --> 00:02:36,960 Speaker 2: know you're your sports guy. What do you think about that? 51 00:02:37,280 --> 00:02:39,320 Speaker 2: Does the VIX compare? Is that a good analogy? 52 00:02:40,480 --> 00:02:42,320 Speaker 1: I think it's a pretty good analogy, you know, for 53 00:02:42,400 --> 00:02:44,760 Speaker 1: anybody out there. And we're not trying to turn people 54 00:02:44,880 --> 00:02:48,600 Speaker 1: into sports gamblers or day traders or option traders. But 55 00:02:49,160 --> 00:02:50,760 Speaker 1: you know, what we're trying to do is help people 56 00:02:50,919 --> 00:02:56,120 Speaker 1: understand how this forward, forward looking stuff works. And as 57 00:02:56,160 --> 00:02:58,959 Speaker 1: you've already pointed out, the VIX or volatility index is 58 00:02:59,000 --> 00:03:01,880 Speaker 1: a good measure that, so I think the analogy fits here. 59 00:03:02,080 --> 00:03:05,000 Speaker 1: For example, you know, for anybody that bets on fan 60 00:03:05,120 --> 00:03:08,359 Speaker 1: duel or DraftKings or whatever, the line on a Bengals 61 00:03:08,400 --> 00:03:12,720 Speaker 1: game or a Reds game might be X before kickoff 62 00:03:12,880 --> 00:03:15,680 Speaker 1: or the first pitch is thrown, and what we often 63 00:03:15,760 --> 00:03:18,639 Speaker 1: see is as the game progresses, things can get out 64 00:03:18,680 --> 00:03:21,399 Speaker 1: of line. You know, the Bengals, let's say they could 65 00:03:21,400 --> 00:03:23,519 Speaker 1: be favored by seven points and then all of a 66 00:03:23,560 --> 00:03:26,000 Speaker 1: sudden at the end of the first quarter they're down 67 00:03:26,040 --> 00:03:29,560 Speaker 1: by fourteen. Well, the line moves. You know, people are 68 00:03:29,600 --> 00:03:33,000 Speaker 1: pricing a bet on the Bengals based on what has 69 00:03:33,120 --> 00:03:36,080 Speaker 1: happened in the in the short term past, and then 70 00:03:36,160 --> 00:03:39,720 Speaker 1: what is expected to happen in the future. And oftentimes 71 00:03:39,920 --> 00:03:43,520 Speaker 1: live betting these games can get you a much better 72 00:03:43,600 --> 00:03:47,040 Speaker 1: line than you would have gotten before kickoff. Bringing this 73 00:03:47,160 --> 00:03:49,840 Speaker 1: back to the investment world, and this is where you know, 74 00:03:49,880 --> 00:03:52,440 Speaker 1: I want people to try to understand this because whether 75 00:03:52,560 --> 00:03:54,800 Speaker 1: or not you're going to engage in trading the vics 76 00:03:54,880 --> 00:03:58,120 Speaker 1: or trading options or anything like that. You know, even 77 00:03:58,160 --> 00:04:03,600 Speaker 1: in some of these annuity contracts, indexed annuities or life 78 00:04:03,640 --> 00:04:09,200 Speaker 1: insurance contracts that have caps involved and downside protection involved, 79 00:04:09,280 --> 00:04:13,280 Speaker 1: this is exactly what insurance companies are doing behind the scenes, 80 00:04:13,320 --> 00:04:17,760 Speaker 1: and that's why you'll see those upside caps get decreased 81 00:04:18,160 --> 00:04:21,760 Speaker 1: and the price of protection go up because the insurance 82 00:04:21,800 --> 00:04:25,120 Speaker 1: companies have to price risk. You know, whether we want 83 00:04:25,160 --> 00:04:28,839 Speaker 1: to talk about betting or risk, it's all the same thing. 84 00:04:29,240 --> 00:04:33,840 Speaker 1: What is the cost of buying protection in a potentially 85 00:04:33,960 --> 00:04:37,000 Speaker 1: volatile market? And that as you've already pointed out, Brian, 86 00:04:37,080 --> 00:04:41,080 Speaker 1: that's really what that VIX indicator is going to signal. 87 00:04:41,160 --> 00:04:45,000 Speaker 1: What is the cost of risk going up or down. 88 00:04:45,400 --> 00:04:48,720 Speaker 1: You know, we talk about sometimes about buffer ETF strategies, 89 00:04:48,880 --> 00:04:52,000 Speaker 1: you know, on this show and with our clients, and 90 00:04:52,040 --> 00:04:55,920 Speaker 1: that's where our investment team is running a strategy based 91 00:04:55,960 --> 00:04:59,800 Speaker 1: on options embedded in these portfolios to buy down south 92 00:05:00,120 --> 00:05:04,760 Speaker 1: side portfolio risk and during periods of volatility, you can 93 00:05:04,839 --> 00:05:09,760 Speaker 1: benefit from volatility if you already have your protection in place. 94 00:05:09,880 --> 00:05:13,839 Speaker 1: So yeah, it's you know, bring in this, try to 95 00:05:13,839 --> 00:05:18,120 Speaker 1: simplify this. The VIX index is something people should probably 96 00:05:18,240 --> 00:05:22,240 Speaker 1: at least become aware of because that's how risk is 97 00:05:22,360 --> 00:05:26,799 Speaker 1: priced and it's just interesting to watch during these volatile times. 98 00:05:26,960 --> 00:05:29,120 Speaker 3: So let's watch it. So here, let's talk about what 99 00:05:29,120 --> 00:05:29,760 Speaker 3: the VIX has done. 100 00:05:29,800 --> 00:05:31,440 Speaker 2: Now that we've gone over what it is, let's talk 101 00:05:31,440 --> 00:05:34,320 Speaker 2: about what it has done recently. So late last week 102 00:05:34,360 --> 00:05:37,000 Speaker 2: we had a hard spike up to thirty thirty one. 103 00:05:37,040 --> 00:05:39,400 Speaker 2: That's kind of the quote unquote price of the VIX. 104 00:05:39,720 --> 00:05:42,040 Speaker 2: That is, that's the territory where we start to worry 105 00:05:42,040 --> 00:05:44,120 Speaker 2: there's going to be, where we start to assume there's 106 00:05:44,120 --> 00:05:46,719 Speaker 2: going to be stress involved, and that really happens to 107 00:05:46,760 --> 00:05:50,039 Speaker 2: come along with markets pricing in two percent daily moves 108 00:05:50,120 --> 00:05:52,160 Speaker 2: up or down. Remember this is the VIX is of 109 00:05:52,240 --> 00:05:55,480 Speaker 2: volatility index. Volatility means up and down right, so it 110 00:05:55,520 --> 00:05:58,080 Speaker 2: can go both directions. So when when we're at where 111 00:05:58,080 --> 00:06:00,760 Speaker 2: we were last week, then that means that investors are 112 00:06:00,760 --> 00:06:03,679 Speaker 2: assuming probably two percent daily moves, which is a pretty 113 00:06:03,680 --> 00:06:06,239 Speaker 2: pretty big swing. Has seen a lot of those lately 114 00:06:06,279 --> 00:06:07,960 Speaker 2: because we have a lot of scary headlines, but those 115 00:06:07,960 --> 00:06:10,440 Speaker 2: are a pretty big swing during the day during during 116 00:06:10,480 --> 00:06:13,440 Speaker 2: these days. So early this week we had some quick 117 00:06:13,440 --> 00:06:17,480 Speaker 2: compression down into the mid twenties as headlines kind of stabilized, 118 00:06:17,560 --> 00:06:20,800 Speaker 2: and then we were, you know'd kind of hoping maybe 119 00:06:20,839 --> 00:06:22,520 Speaker 2: we were coming out of this a little bit now. 120 00:06:22,880 --> 00:06:25,159 Speaker 2: You know, President Trump's speech last night didn't do a 121 00:06:25,160 --> 00:06:28,000 Speaker 2: whole lot to assuage many fears that this is going 122 00:06:28,080 --> 00:06:29,080 Speaker 2: to end anytime soon. 123 00:06:29,160 --> 00:06:30,719 Speaker 3: So we were we have a little bit of a 124 00:06:30,720 --> 00:06:31,440 Speaker 3: spike today. 125 00:06:31,800 --> 00:06:34,839 Speaker 2: So you know, this is basically tied to geopolitical risk, 126 00:06:34,880 --> 00:06:37,680 Speaker 2: and this is of course the Iran conflict and oil volatility. 127 00:06:38,360 --> 00:06:39,800 Speaker 3: The VIX is still above its. 128 00:06:39,680 --> 00:06:41,720 Speaker 2: Long term average, even though earlier this week it's kind 129 00:06:41,760 --> 00:06:43,599 Speaker 2: of calmed down a little bit, has not been below 130 00:06:43,680 --> 00:06:46,920 Speaker 2: twenty since late February, so we are you know, go figure, 131 00:06:46,920 --> 00:06:49,599 Speaker 2: that's really kind of when all this started in terms 132 00:06:49,680 --> 00:06:53,280 Speaker 2: of the shocks to the oil world out there. So 133 00:06:53,720 --> 00:06:55,920 Speaker 2: not too surprised that we're that we're having a bumpy 134 00:06:55,960 --> 00:06:57,599 Speaker 2: ride right now and probably have a little bit of 135 00:06:57,600 --> 00:06:59,640 Speaker 2: waste to go on this one, I'd say, yeah. 136 00:07:00,240 --> 00:07:03,280 Speaker 1: And to throw one more point out there about volatility 137 00:07:03,320 --> 00:07:05,840 Speaker 1: and how it impacts markets. I mean, you know, we've 138 00:07:05,839 --> 00:07:08,640 Speaker 1: also been talking about on this show. There's been some 139 00:07:08,640 --> 00:07:12,760 Speaker 1: some whisperings and some noise out there around liquidity risk, 140 00:07:12,880 --> 00:07:16,160 Speaker 1: especially in the fixed income markets. So when when when 141 00:07:16,360 --> 00:07:20,760 Speaker 1: portfolio managers have a lack of liquidity in their portfolios, 142 00:07:21,200 --> 00:07:24,840 Speaker 1: they're going to buy options protection, you know, to hedge 143 00:07:24,920 --> 00:07:27,840 Speaker 1: against that lack of liquidity. And that's a form of 144 00:07:27,880 --> 00:07:32,040 Speaker 1: protecting the portfolios when to keep them from having to 145 00:07:32,200 --> 00:07:35,720 Speaker 1: sell stuff, you know, and try to sell stuff in 146 00:07:35,760 --> 00:07:38,120 Speaker 1: the case of private credit that they might not be 147 00:07:38,160 --> 00:07:40,440 Speaker 1: able to sell because of lock up period. So there's 148 00:07:40,480 --> 00:07:43,800 Speaker 1: a lot of moving parts with this, and this is 149 00:07:43,800 --> 00:07:46,960 Speaker 1: why we're just trying to introduce the VIS index and 150 00:07:47,000 --> 00:07:48,880 Speaker 1: why it might be something you might want to take 151 00:07:48,920 --> 00:07:52,200 Speaker 1: a look at periodically. Let's take a look at a 152 00:07:52,240 --> 00:07:54,600 Speaker 1: good example of this. And we always tend to talk 153 00:07:54,640 --> 00:07:57,960 Speaker 1: about worst case scenarios. I mean, here's one, the Great Recession. 154 00:07:58,600 --> 00:08:02,120 Speaker 1: This is a perfect example of why trying to move 155 00:08:02,200 --> 00:08:05,760 Speaker 1: your portfolio or trying to predict what's going to happen 156 00:08:06,160 --> 00:08:08,560 Speaker 1: can really trip you up and cost you a lot 157 00:08:08,560 --> 00:08:11,160 Speaker 1: of money if you think about it. The market didn't 158 00:08:11,240 --> 00:08:14,280 Speaker 1: wait for things to get better before it turned around 159 00:08:14,440 --> 00:08:16,920 Speaker 1: back in two thousand and nine. You know, just as 160 00:08:16,960 --> 00:08:19,800 Speaker 1: a reminder, the market bottomed in March of two thousand 161 00:08:19,800 --> 00:08:22,080 Speaker 1: and nine, and this is after the S and P 162 00:08:22,200 --> 00:08:25,960 Speaker 1: five hundred had dropped by more than fifty percent. No 163 00:08:26,000 --> 00:08:29,040 Speaker 1: one was feeling good about anything back there. There was 164 00:08:29,160 --> 00:08:33,800 Speaker 1: risk of bank failure, you know, insurance company failure, all that, 165 00:08:34,080 --> 00:08:36,800 Speaker 1: but lo and behold, things just turned around on a 166 00:08:36,920 --> 00:08:39,720 Speaker 1: dime in March of nine. No one saw it coming. 167 00:08:40,080 --> 00:08:42,160 Speaker 1: And for those that said, well, I'm going to move 168 00:08:42,200 --> 00:08:45,320 Speaker 1: all my money to cash and quote unquote wait until 169 00:08:45,400 --> 00:08:49,040 Speaker 1: things get better, they really missed out on a massive 170 00:08:49,040 --> 00:08:52,160 Speaker 1: whipsaw back to the upside. And that's when we talk 171 00:08:52,200 --> 00:08:54,720 Speaker 1: about Brian. You know, we try to help people make 172 00:08:54,800 --> 00:08:58,600 Speaker 1: mistakes from which they really can't recover from, and a 173 00:08:58,640 --> 00:09:01,880 Speaker 1: lot of people that went to back then lost a 174 00:09:01,920 --> 00:09:04,480 Speaker 1: lot of money. You turn a temporary loss into a 175 00:09:04,520 --> 00:09:07,560 Speaker 1: permanent loss at that point, and that's what we're trying 176 00:09:07,559 --> 00:09:08,520 Speaker 1: to help people avoid. 177 00:09:08,920 --> 00:09:11,240 Speaker 2: Yeah, and I think that is that that remains. And 178 00:09:11,280 --> 00:09:12,719 Speaker 2: maybe this is the case for you too, but I 179 00:09:12,720 --> 00:09:16,160 Speaker 2: don't want to speak for you. The the formative period 180 00:09:16,280 --> 00:09:20,079 Speaker 2: of my entire career, the iconic moment there was two 181 00:09:20,120 --> 00:09:22,560 Speaker 2: thousand and eight, when I think it was just a 182 00:09:22,720 --> 00:09:28,040 Speaker 2: real come up into the idea that things aren't always perfect. 183 00:09:28,320 --> 00:09:29,840 Speaker 3: So we had had prior to that. 184 00:09:29,840 --> 00:09:31,199 Speaker 2: We have I talked about this all the time, but 185 00:09:31,240 --> 00:09:32,959 Speaker 2: we had the eighties and the nineties where really nothing 186 00:09:33,000 --> 00:09:35,000 Speaker 2: bad happened, and then the tech bubble burst in two 187 00:09:35,000 --> 00:09:37,199 Speaker 2: thousand and one, two thousand and two, we had September eleventh. 188 00:09:37,520 --> 00:09:39,480 Speaker 2: I think we were still convinced that that was still 189 00:09:39,520 --> 00:09:42,800 Speaker 2: at that point that the crazy markets were still kind 190 00:09:42,800 --> 00:09:44,439 Speaker 2: of an anomaly because we could blame it all on 191 00:09:44,480 --> 00:09:47,439 Speaker 2: the terrorist attack that we didn't really expect to happen again. 192 00:09:48,120 --> 00:09:49,760 Speaker 2: But then that led up to two thousand and eight, 193 00:09:49,880 --> 00:09:53,400 Speaker 2: which which was something that was driven ultimately by by 194 00:09:53,440 --> 00:09:57,480 Speaker 2: greed and the lack of regulation in the mortgage industry, 195 00:09:58,120 --> 00:10:01,720 Speaker 2: with people chasing too many returns, too many returns without 196 00:10:01,760 --> 00:10:04,640 Speaker 2: really paying attention to risk, and that gave us two. 197 00:10:04,520 --> 00:10:05,000 Speaker 3: Thousand and eight. 198 00:10:05,040 --> 00:10:07,679 Speaker 2: And then then what came after that was this fear 199 00:10:07,880 --> 00:10:10,199 Speaker 2: there that it's coming around again. Two thousand and eight 200 00:10:10,280 --> 00:10:11,840 Speaker 2: is not done with us. You know, as we were 201 00:10:11,840 --> 00:10:13,800 Speaker 2: talking about earlier this week, that went through for the 202 00:10:13,800 --> 00:10:16,680 Speaker 2: next five or six years. People were still talking about. 203 00:10:17,720 --> 00:10:20,240 Speaker 2: You know, even in twenty thirteen, five years later. Twenty 204 00:10:20,240 --> 00:10:22,440 Speaker 2: thirteen had some things happened that made us think that, oh, 205 00:10:22,480 --> 00:10:24,280 Speaker 2: here comes this is it, this is it, But it 206 00:10:24,320 --> 00:10:26,480 Speaker 2: never came to pass. In twenty thirteen, you wouldn't look 207 00:10:26,480 --> 00:10:28,040 Speaker 2: out on a chart and figure out that it was 208 00:10:28,040 --> 00:10:30,600 Speaker 2: all that scary of the year other than that sort 209 00:10:30,640 --> 00:10:33,880 Speaker 2: of black cloud feeling of dread hanging over people's heads. 210 00:10:33,920 --> 00:10:35,920 Speaker 2: And I remember that it took years for people to 211 00:10:35,960 --> 00:10:38,640 Speaker 2: get more confident, despite the fact that the market had 212 00:10:38,640 --> 00:10:41,400 Speaker 2: come up significantly since that bottom in March of two 213 00:10:41,440 --> 00:10:44,600 Speaker 2: thousand and nine. And I do have clients that literally 214 00:10:44,600 --> 00:10:46,800 Speaker 2: sat in cash right up until we started working together. 215 00:10:47,160 --> 00:10:50,000 Speaker 2: From I have two cases like this from two thousand 216 00:10:50,040 --> 00:10:52,880 Speaker 2: and eight basically panicked and went to cash and sat 217 00:10:52,920 --> 00:10:56,800 Speaker 2: that way until early twenty twenty. And then the reward 218 00:10:56,880 --> 00:10:59,440 Speaker 2: for that was, you know, getting comfortable, getting back in, 219 00:10:59,520 --> 00:11:02,360 Speaker 2: understanding to have a plan this time, and understanding market history. 220 00:11:02,520 --> 00:11:06,240 Speaker 2: And unfortunately, because the market thinks it's funny, we immediately 221 00:11:06,280 --> 00:11:08,440 Speaker 2: had the COVID recession come out of the out of 222 00:11:08,480 --> 00:11:11,480 Speaker 2: left field. That had nothing to do with economics or 223 00:11:11,679 --> 00:11:15,120 Speaker 2: profitability or anything. It was just an outside stimulus and 224 00:11:15,200 --> 00:11:17,520 Speaker 2: so extremely scary for people to get back in. The 225 00:11:17,559 --> 00:11:20,680 Speaker 2: market does seem to have a sense of knowing when 226 00:11:20,679 --> 00:11:23,480 Speaker 2: somebody has regained their confidence and needs to be knocked 227 00:11:23,520 --> 00:11:24,040 Speaker 2: down again. 228 00:11:24,200 --> 00:11:26,319 Speaker 3: That's why we always say just just stay. 229 00:11:26,080 --> 00:11:29,120 Speaker 2: Involved and understand the history and know what to anticipate 230 00:11:29,280 --> 00:11:30,520 Speaker 2: when the headlines get crazy. 231 00:11:30,880 --> 00:11:34,960 Speaker 1: Well, yes, stay involved with your longer term money. You know, 232 00:11:35,000 --> 00:11:40,040 Speaker 1: the saying goes the advancement of the stock market is permanent. 233 00:11:40,840 --> 00:11:44,160 Speaker 1: The temporary declines are temporary. And that's where you got 234 00:11:44,200 --> 00:11:46,840 Speaker 1: to have your buckets of money aligned accordingly so you 235 00:11:46,880 --> 00:11:50,959 Speaker 1: have enough dry powder and non risk oriented cash to 236 00:11:51,120 --> 00:11:55,200 Speaker 1: weather through these short term storms. And that's what keeps 237 00:11:55,240 --> 00:11:57,760 Speaker 1: people from making these massive moves that can hurt them 238 00:11:57,760 --> 00:11:59,959 Speaker 1: in the long term. Here's the r Worth advice. Mark 239 00:12:00,000 --> 00:12:05,160 Speaker 1: markets move on expectations, not headlines. Focus on your plan, 240 00:12:05,880 --> 00:12:10,960 Speaker 1: not your or anyone else's predictions. Well, Apple just turned 241 00:12:11,080 --> 00:12:14,360 Speaker 1: fifty years old? Is it still a great investment? We'll 242 00:12:14,360 --> 00:12:16,840 Speaker 1: talk about that next. You're listening to Simply Money, presented 243 00:12:16,880 --> 00:12:20,280 Speaker 1: by all Worth Financial on fifty five KRC, the talk station. 244 00:12:23,320 --> 00:12:25,520 Speaker 1: You're listening to Simply Money that if I'm all Words 245 00:12:25,600 --> 00:12:29,000 Speaker 1: Financial on Bobspon Seller along with Brian James. If you 246 00:12:29,040 --> 00:12:32,199 Speaker 1: can't listen to Simply Money live every night, go ahead 247 00:12:32,200 --> 00:12:35,480 Speaker 1: and subscribe and get our daily podcasts. Just search Simply 248 00:12:35,520 --> 00:12:39,880 Speaker 1: Money on the ipart app or wherever you find your podcast. 249 00:12:40,679 --> 00:12:43,600 Speaker 1: Are you sitting on cash and not sure where that 250 00:12:43,760 --> 00:12:48,400 Speaker 1: cash belongs? We'll tackle that, plus how tax loss harvesting 251 00:12:48,559 --> 00:12:51,960 Speaker 1: really works, and what to do if the market drops 252 00:12:52,200 --> 00:12:56,520 Speaker 1: right after you retire. Well, Brian, Apple just turn fifty 253 00:12:56,600 --> 00:12:59,160 Speaker 1: years old, and think about this. If you had invested 254 00:12:59,280 --> 00:13:03,880 Speaker 1: one thousand in Apple stock right at it's IPO in 255 00:13:04,000 --> 00:13:07,640 Speaker 1: nineteen eighty, you'd be sitting on two point six million 256 00:13:07,720 --> 00:13:11,200 Speaker 1: dollars today. That's the kind of wealth creation that you 257 00:13:11,200 --> 00:13:15,680 Speaker 1: know generates some we'll say multi generational wealth. That changes 258 00:13:15,679 --> 00:13:20,240 Speaker 1: the picture significantly. But the question we want to talk 259 00:13:20,240 --> 00:13:23,240 Speaker 1: about today is where should Apple fit in your portfolio 260 00:13:23,400 --> 00:13:26,200 Speaker 1: now and into the future, if at all. 261 00:13:27,520 --> 00:13:29,440 Speaker 3: Yeah, So there's good chances already in there. 262 00:13:29,440 --> 00:13:31,920 Speaker 2: Whether you own the stock or not, you probably have 263 00:13:32,040 --> 00:13:34,439 Speaker 2: it within some sort of you know, whether you own 264 00:13:34,440 --> 00:13:36,160 Speaker 2: it directly or not, you have it in some sort 265 00:13:36,200 --> 00:13:38,600 Speaker 2: of index based fund. Probably it's going to be pretty 266 00:13:38,640 --> 00:13:40,280 Speaker 2: tough to avoid as one of the one of the 267 00:13:40,440 --> 00:13:43,440 Speaker 2: big players out there. But Apple is one of the 268 00:13:43,440 --> 00:13:46,720 Speaker 2: best stories that this country, the capitalism has ever generated, 269 00:13:46,760 --> 00:13:49,559 Speaker 2: one of the greatest investing stories of all time, because 270 00:13:49,559 --> 00:13:51,559 Speaker 2: it didn't just grow right. It didn't just start in 271 00:13:51,640 --> 00:13:55,440 Speaker 2: nineteen seventy seven nineteen seventy six and just begin steadily 272 00:13:55,480 --> 00:13:58,320 Speaker 2: become what it is today. It had to reinvent itself 273 00:13:58,360 --> 00:14:02,000 Speaker 2: over and over again, including firing and rehiring the late 274 00:14:02,040 --> 00:14:04,559 Speaker 2: Steve Jobs as the leader of the company. So began 275 00:14:04,679 --> 00:14:07,040 Speaker 2: with Macintosh in the eighties, which was really the first 276 00:14:07,120 --> 00:14:10,840 Speaker 2: computer that people could take home that actually caught fire 277 00:14:11,080 --> 00:14:15,000 Speaker 2: and became popular because it was marketed to the average 278 00:14:15,040 --> 00:14:19,080 Speaker 2: person versus being marketed to engineers. Then, of course cal 279 00:14:19,160 --> 00:14:21,240 Speaker 2: Long came the iPod in the early two thousand. This 280 00:14:21,920 --> 00:14:24,920 Speaker 2: was kind of the beginning of the resurgence that became 281 00:14:25,000 --> 00:14:27,520 Speaker 2: the iPhone in two thousand and seven, and that has 282 00:14:27,600 --> 00:14:30,000 Speaker 2: led to an awful lot of the things that we 283 00:14:30,080 --> 00:14:32,280 Speaker 2: know today the way we live our lives today. So 284 00:14:32,760 --> 00:14:35,400 Speaker 2: the iPhone alone still makes up more than half of 285 00:14:35,440 --> 00:14:37,720 Speaker 2: Apple's revenue, even though iPhones are kind of old news. 286 00:14:37,760 --> 00:14:39,440 Speaker 2: Now we're on what I think, what are we on 287 00:14:39,560 --> 00:14:41,360 Speaker 2: thirteen fourteen generating maybe sixteen? 288 00:14:41,720 --> 00:14:45,200 Speaker 1: We're at seventeen We had seventeen, see like the seventeen 289 00:14:45,320 --> 00:14:49,160 Speaker 1: plus plus plus or seventeen point four something like that. Yeah. 290 00:14:49,280 --> 00:14:51,040 Speaker 2: See, I'm an android guy, so I don't keep that 291 00:14:51,160 --> 00:14:53,320 Speaker 2: much up on it, but I like the business story here, 292 00:14:53,880 --> 00:14:56,360 Speaker 2: you know. So the staying power is kind of crazy there, 293 00:14:56,360 --> 00:14:58,720 Speaker 2: And of course there's much more to it than the devices. 294 00:14:58,760 --> 00:15:01,640 Speaker 2: There's the whole ecosystem. And once you get sucked into that, 295 00:15:01,720 --> 00:15:03,600 Speaker 2: you can't get back out. It's really hard to want 296 00:15:03,640 --> 00:15:05,960 Speaker 2: to get back out. So you've got your iPhone, Apple Watch, 297 00:15:06,000 --> 00:15:08,720 Speaker 2: Airpod's MacBook. That's all the hardware, and then you've got 298 00:15:08,760 --> 00:15:11,200 Speaker 2: all of the Remember we used to just call it iTunes. 299 00:15:11,240 --> 00:15:14,480 Speaker 2: Well that's now a much larger it's iCloud, and it's 300 00:15:14,480 --> 00:15:17,520 Speaker 2: a much larger effort to keep you inside that kind 301 00:15:17,520 --> 00:15:19,480 Speaker 2: of walled garden there, and a lot of people have 302 00:15:19,680 --> 00:15:22,360 Speaker 2: signed onto that, and therefore Apple is where it is now. 303 00:15:23,160 --> 00:15:26,040 Speaker 1: Yeah, I think nobody was really talking about that term 304 00:15:26,160 --> 00:15:30,240 Speaker 1: ecosystem until Apple really created it. I mean, let's face it, 305 00:15:30,240 --> 00:15:33,080 Speaker 1: they got people involved in the as you said, the 306 00:15:33,160 --> 00:15:36,560 Speaker 1: laptop computers, then it went to the iPhone, the watches, everything, 307 00:15:36,960 --> 00:15:41,040 Speaker 1: saving pictures, saving videos, and people get addicted to that 308 00:15:41,240 --> 00:15:44,120 Speaker 1: ecosystem and it's really hard to cut the core. I 309 00:15:44,120 --> 00:15:46,880 Speaker 1: know you did, but other people are just married to 310 00:15:46,920 --> 00:15:51,400 Speaker 1: that ecosystem. And that's the beauty of the Apple technology 311 00:15:51,440 --> 00:15:52,840 Speaker 1: and the Apple brand. You know. 312 00:15:53,800 --> 00:15:57,080 Speaker 2: A funny, quick, funny story, because you mentioned that I 313 00:15:57,120 --> 00:15:58,880 Speaker 2: cut the cord and got it, I actually never got 314 00:15:58,880 --> 00:16:02,320 Speaker 2: into the ecosystem. And it's not because I was anti Apple. 315 00:16:02,360 --> 00:16:05,000 Speaker 2: It's because I was so cheap. I can't remember. I 316 00:16:05,000 --> 00:16:06,680 Speaker 2: think it was AT and T Apple K. You can 317 00:16:06,720 --> 00:16:09,000 Speaker 2: only get an iPhone through AT and T. And I 318 00:16:09,120 --> 00:16:12,240 Speaker 2: was so in love with my grandfathered old sprint plan 319 00:16:12,320 --> 00:16:14,200 Speaker 2: that came along with a whole bunch of perks that 320 00:16:14,280 --> 00:16:16,000 Speaker 2: I just did stayed out of it even though I 321 00:16:16,000 --> 00:16:17,920 Speaker 2: was definitely interested in it, but I wasn't ready to 322 00:16:17,960 --> 00:16:21,000 Speaker 2: give up my extra twenty bucks a month or whatever 323 00:16:21,040 --> 00:16:22,680 Speaker 2: it would have cost me at the time, because I'm 324 00:16:22,680 --> 00:16:25,080 Speaker 2: stubborn and frugal, Bob. That's why I never got into 325 00:16:25,080 --> 00:16:26,480 Speaker 2: the whole iPhone craze. 326 00:16:26,920 --> 00:16:29,880 Speaker 1: Well, stubborn and frugal can be a good thing when 327 00:16:29,880 --> 00:16:34,000 Speaker 1: building wealth, So yeah, stick to your frugal West Sideways. 328 00:16:34,040 --> 00:16:34,640 Speaker 1: There's maybe we. 329 00:16:34,600 --> 00:16:37,560 Speaker 2: Should change change the all Worth financial to stubborn and 330 00:16:37,640 --> 00:16:38,800 Speaker 2: frugal LLC. 331 00:16:39,720 --> 00:16:43,080 Speaker 1: All right, here's what we really want to remind folks 332 00:16:43,120 --> 00:16:46,560 Speaker 1: about Apple. And sometimes we run into this Brian with people. 333 00:16:47,000 --> 00:16:50,680 Speaker 1: You know, you've got these huge gains on your spreadsheet 334 00:16:50,920 --> 00:16:54,280 Speaker 1: or your account statement, and you think, just because you 335 00:16:54,320 --> 00:16:58,080 Speaker 1: can stare at a you know, fifteen to sixteen hundred 336 00:16:58,160 --> 00:17:02,480 Speaker 1: percent gain in a position that really accumulated over the 337 00:17:02,560 --> 00:17:06,560 Speaker 1: last twenty or thirty years, you just continue to stare 338 00:17:06,600 --> 00:17:08,840 Speaker 1: at that and say, hey, this is a winning position 339 00:17:09,320 --> 00:17:11,560 Speaker 1: that I'm never going to sell, never get out of. 340 00:17:12,160 --> 00:17:14,600 Speaker 1: And people lose sight of looking at, well, what is 341 00:17:14,640 --> 00:17:17,080 Speaker 1: this stock done over the last three years, five years, 342 00:17:17,160 --> 00:17:21,280 Speaker 1: ten years, comparing that to what a more diversified portfolio 343 00:17:21,359 --> 00:17:23,800 Speaker 1: would have delivered. And that's really the point we want 344 00:17:23,840 --> 00:17:27,240 Speaker 1: to make as a reminder, this whole Apple story in 345 00:17:27,320 --> 00:17:30,320 Speaker 1: terms of return was not a straight line. Apple, like 346 00:17:30,359 --> 00:17:34,439 Speaker 1: everything else, got absolutely crushed during that dot com bubble 347 00:17:34,480 --> 00:17:37,600 Speaker 1: back in the early two thousands. There were real moments 348 00:17:37,600 --> 00:17:40,920 Speaker 1: when people thought the company might not make it. Yeah, 349 00:17:40,920 --> 00:17:43,160 Speaker 1: and they weren't a big things lay right. 350 00:17:43,400 --> 00:17:45,440 Speaker 2: I mean back then, Apple did not have a big 351 00:17:45,480 --> 00:17:47,520 Speaker 2: browser that everyboy can use. It's all started with a 352 00:17:47,560 --> 00:17:49,880 Speaker 2: company called Netscape, if you remember that, way back when 353 00:17:49,960 --> 00:17:53,040 Speaker 2: that was the original browser. Windows took it over with 354 00:17:53,119 --> 00:17:55,960 Speaker 2: Internet Explorer. I remember that being a huge splash. Apple 355 00:17:56,040 --> 00:17:58,840 Speaker 2: was kind of nowhere to be found really until they 356 00:17:59,160 --> 00:18:01,480 Speaker 2: perked up with the iPod and a thousand songs in 357 00:18:01,520 --> 00:18:04,600 Speaker 2: your pocket. But that didn't happen until after the initial 358 00:18:04,680 --> 00:18:06,480 Speaker 2: dot com bubble came and went. 359 00:18:06,560 --> 00:18:07,439 Speaker 1: It took a while for. 360 00:18:07,960 --> 00:18:10,480 Speaker 2: Apple to really establish their place as a player. And 361 00:18:10,480 --> 00:18:13,439 Speaker 2: again the iPhone was really where it became, where that 362 00:18:13,480 --> 00:18:16,200 Speaker 2: ecosystem developed. But again, Apple was really nowhere to be 363 00:18:16,280 --> 00:18:17,840 Speaker 2: found during that first wave. 364 00:18:18,600 --> 00:18:21,159 Speaker 1: Yeah, and to your point about having the thousand songs 365 00:18:21,160 --> 00:18:23,800 Speaker 1: in your pocket, let's face, I'm sure you've got three 366 00:18:23,880 --> 00:18:25,359 Speaker 1: thousand songs in your. 367 00:18:25,240 --> 00:18:27,200 Speaker 3: Palsand don't waste my time, bob. 368 00:18:27,280 --> 00:18:30,119 Speaker 1: And it's even smaller, okay, but you can get the 369 00:18:30,200 --> 00:18:32,760 Speaker 1: songs in your pocket on all kinds of devices now, 370 00:18:32,880 --> 00:18:36,440 Speaker 1: say pictures all that. It's ubiquitous. And so the real 371 00:18:36,520 --> 00:18:39,280 Speaker 1: point here is you always want to be looking at 372 00:18:39,320 --> 00:18:43,359 Speaker 1: the future, not the past, in evaluating, you know, the 373 00:18:43,480 --> 00:18:47,200 Speaker 1: extent of which any singular position, you know, how much 374 00:18:47,200 --> 00:18:50,560 Speaker 1: of a waiting it should have in your portfolio, you know, 375 00:18:50,680 --> 00:18:53,600 Speaker 1: in Apple's case, and I'm not predicting the stock's gonna 376 00:18:53,600 --> 00:18:56,280 Speaker 1: tank or anything like that, but I think it's pretty 377 00:18:56,280 --> 00:18:58,800 Speaker 1: common knowledge out there on Wall Street that Apple's a 378 00:18:58,840 --> 00:19:02,159 Speaker 1: little bit behind some of the major competitors, you know, 379 00:19:02,280 --> 00:19:05,360 Speaker 1: like Microsoft and Google and on the whole AI thing, 380 00:19:05,800 --> 00:19:09,600 Speaker 1: you know. And so if you were, if you remain 381 00:19:09,680 --> 00:19:11,880 Speaker 1: a one trick pony for long enough, you're gonna get 382 00:19:11,920 --> 00:19:15,119 Speaker 1: you're gonna get passed up in terms of opportunities elsewhere. 383 00:19:15,560 --> 00:19:17,760 Speaker 1: That's really the point that we're trying to make here 384 00:19:17,880 --> 00:19:21,600 Speaker 1: is always be looking forward, not backward. Make sure not 385 00:19:21,840 --> 00:19:25,520 Speaker 1: one stock, even with a tremendous return, is just sitting 386 00:19:25,560 --> 00:19:29,640 Speaker 1: there taking up too big of a percentage of your portfolio. 387 00:19:29,840 --> 00:19:32,560 Speaker 1: Because you might be missing out on opportunities you know 388 00:19:32,680 --> 00:19:35,800 Speaker 1: going forward. Here's the all word device. Great companies don't 389 00:19:35,840 --> 00:19:40,240 Speaker 1: always mean great investments at every stage. Make sure you're 390 00:19:40,320 --> 00:19:43,960 Speaker 1: exposure to Apple or any other stock actually fits your 391 00:19:44,000 --> 00:19:49,480 Speaker 1: plan today, not just its past performance. Wealth can open 392 00:19:49,680 --> 00:19:52,199 Speaker 1: many doors, but it could also make it harder to 393 00:19:52,280 --> 00:19:57,560 Speaker 1: say no. We'll help you set clear, confident boundaries without guilt. 394 00:19:58,040 --> 00:20:00,639 Speaker 1: Coming up next, you're listening to Simply My, presented by 395 00:20:00,640 --> 00:20:03,800 Speaker 1: all Worth Financial on fifty five KRC the talk station. 396 00:20:08,320 --> 00:20:10,800 Speaker 1: You're listening to Simply Money presented by all Worth Financial 397 00:20:10,800 --> 00:20:14,800 Speaker 1: on Bob Sponseller along with Brian James. When you've achieved 398 00:20:14,800 --> 00:20:19,920 Speaker 1: financial success, it often comes with some unspoken expectations, perhaps 399 00:20:19,920 --> 00:20:25,439 Speaker 1: from friends, extended family, even distant acquaintances. Whether it's a 400 00:20:25,480 --> 00:20:28,639 Speaker 1: request cost sign alone for example, or invest in a 401 00:20:28,680 --> 00:20:33,439 Speaker 1: business idea or fund of family members emergency. Saying no 402 00:20:33,680 --> 00:20:38,439 Speaker 1: can feel awkward at best and guilt inducing at worst. Brian, 403 00:20:38,560 --> 00:20:42,240 Speaker 1: I've had situations like this come up several times over 404 00:20:42,080 --> 00:20:44,520 Speaker 1: the years and years I've been doing this. What about you? 405 00:20:45,040 --> 00:20:47,160 Speaker 2: Oh yeah, absolutely, it comes up all the time within 406 00:20:47,280 --> 00:20:50,120 Speaker 2: family dynamics. So we all want to support our children 407 00:20:50,240 --> 00:20:52,760 Speaker 2: and our our our siblings and our extended families when 408 00:20:52,760 --> 00:20:55,520 Speaker 2: we can. Stuff happens, life happens to everybody, and it's 409 00:20:55,520 --> 00:20:57,719 Speaker 2: good to have that family network around you that can 410 00:20:57,800 --> 00:21:00,719 Speaker 2: kind of step in. However, it can totally backfire. 411 00:21:00,760 --> 00:21:01,080 Speaker 1: Of course. 412 00:21:01,119 --> 00:21:03,080 Speaker 2: We all run into these horror stories every now and then. 413 00:21:03,119 --> 00:21:04,960 Speaker 2: I think, I think, really, the one that jumps off 414 00:21:05,000 --> 00:21:06,679 Speaker 2: the page to me is co signing alone. 415 00:21:06,720 --> 00:21:08,800 Speaker 3: I have I have just never heard of a situation 416 00:21:08,840 --> 00:21:09,560 Speaker 3: where this ended. 417 00:21:09,560 --> 00:21:11,720 Speaker 2: Well, if you're asked to co sign alone, that means 418 00:21:11,760 --> 00:21:13,720 Speaker 2: whoever is asking you has been turned down by the 419 00:21:13,720 --> 00:21:16,840 Speaker 2: banks unless someone else's credit can back them up. That 420 00:21:16,960 --> 00:21:19,440 Speaker 2: means that the banks out there think that this person 421 00:21:19,480 --> 00:21:20,680 Speaker 2: is not gonna be able to pay these bills. And 422 00:21:20,720 --> 00:21:22,720 Speaker 2: if you're co signing alone, then you are you are 423 00:21:22,760 --> 00:21:24,840 Speaker 2: on that loan as if you were borrowing the money yourself. 424 00:21:24,880 --> 00:21:26,800 Speaker 2: That you don't have any more protection than if you 425 00:21:26,840 --> 00:21:30,119 Speaker 2: were literally borrowing or signing for that mortgage your absolute self. 426 00:21:30,320 --> 00:21:32,480 Speaker 2: So just know that if you agree with the bank 427 00:21:32,520 --> 00:21:34,320 Speaker 2: that maybe this person isn't going to be good for it, 428 00:21:34,359 --> 00:21:36,160 Speaker 2: then you are probably gonna get stuck with that bill. 429 00:21:36,760 --> 00:21:40,360 Speaker 1: Well, maybe, without getting too off on a religious tangent, 430 00:21:40,520 --> 00:21:44,400 Speaker 1: maybe that maybe that's illustrative of why in the Bible 431 00:21:44,520 --> 00:21:47,680 Speaker 1: it warns us against co signing for other people's loans. Right, 432 00:21:47,720 --> 00:21:51,440 Speaker 1: maybe God, even Jesus pretty smart after all. All right, hey, 433 00:21:51,800 --> 00:21:54,040 Speaker 1: but the point we're trying to make here is constantly 434 00:21:54,160 --> 00:21:57,120 Speaker 1: saying yes to other people when they know you've got 435 00:21:57,160 --> 00:22:00,280 Speaker 1: some money, and they think, well, he or she's got 436 00:22:00,320 --> 00:22:02,760 Speaker 1: a lot of money. It doesn't matter they can quote 437 00:22:02,800 --> 00:22:08,040 Speaker 1: unquote afford it. It can set unsustainable expectations and quietly 438 00:22:08,160 --> 00:22:12,400 Speaker 1: erode your own autonomy over your own money. And that 439 00:22:12,600 --> 00:22:17,720 Speaker 1: emotional weight that you carry around could be exhausting, leading 440 00:22:17,760 --> 00:22:22,360 Speaker 1: to resentment or burnout or just fracture relationships if it's 441 00:22:22,400 --> 00:22:23,479 Speaker 1: not managed correctly. 442 00:22:23,680 --> 00:22:25,639 Speaker 2: Yea, and so I think, so get creative, right, It 443 00:22:25,680 --> 00:22:27,520 Speaker 2: doesn't have to be a hard no. It can, first 444 00:22:27,560 --> 00:22:30,000 Speaker 2: of all, be not right now. Or let let's pretend 445 00:22:30,040 --> 00:22:32,119 Speaker 2: you I'll give an example of this from a real client. 446 00:22:32,200 --> 00:22:34,399 Speaker 2: So how we found the solution. So let's say that 447 00:22:34,680 --> 00:22:36,400 Speaker 2: you know, the client's kid wants to buy a house 448 00:22:36,400 --> 00:22:38,040 Speaker 2: and the banks aren't willing to lend at a at 449 00:22:38,080 --> 00:22:40,400 Speaker 2: a reasonable rate. So the client says, well, I'll step 450 00:22:40,440 --> 00:22:43,160 Speaker 2: in all co sign the mortgage and we'll go from there. Well, then, 451 00:22:43,280 --> 00:22:45,720 Speaker 2: obviously we've talked about what exposure that lead. So what 452 00:22:46,200 --> 00:22:48,840 Speaker 2: if the compromise point is, Okay, you're not happy in 453 00:22:49,560 --> 00:22:51,520 Speaker 2: your apartment right now, it's not big enough or whatever. 454 00:22:51,600 --> 00:22:53,639 Speaker 2: What if I gave you an extra few hundred dollars 455 00:22:53,680 --> 00:22:56,280 Speaker 2: every month, actually making an investment versus taking on a 456 00:22:56,359 --> 00:22:58,840 Speaker 2: much more massive risk, buy you some time, get you 457 00:22:58,880 --> 00:23:00,919 Speaker 2: in a nicer place, and then I will work with you, 458 00:23:01,080 --> 00:23:03,639 Speaker 2: child of mind, to get your finances looking better so 459 00:23:03,680 --> 00:23:05,159 Speaker 2: that maybe the next two or three years you can 460 00:23:05,160 --> 00:23:06,960 Speaker 2: do it without my help. That's kind of a middle ground, 461 00:23:06,960 --> 00:23:09,520 Speaker 2: and it's actually an investment of dollars that you won't 462 00:23:09,520 --> 00:23:10,960 Speaker 2: see again. But at the same time, it might be 463 00:23:11,000 --> 00:23:12,840 Speaker 2: a lot better than putting yourself a risk for several 464 00:23:12,920 --> 00:23:14,760 Speaker 2: hundred thousand dollars should your kid not be able to 465 00:23:14,760 --> 00:23:15,399 Speaker 2: make that payment. 466 00:23:15,680 --> 00:23:17,600 Speaker 1: I like where you're going there, because there's there's a 467 00:23:17,640 --> 00:23:21,560 Speaker 1: big difference between just saying flat out no and never 468 00:23:21,720 --> 00:23:24,280 Speaker 1: helping a loved one or a child or what have you, 469 00:23:24,560 --> 00:23:28,840 Speaker 1: versus partnering with that loved one to help, you know, 470 00:23:28,920 --> 00:23:32,080 Speaker 1: whether you say coach them or counsel them or assist 471 00:23:32,119 --> 00:23:37,520 Speaker 1: them in becoming financially responsible. And you know, help them 472 00:23:37,600 --> 00:23:41,879 Speaker 1: bridge that gap between just learning about money and getting 473 00:23:41,920 --> 00:23:44,159 Speaker 1: them to where they can manage their own affairs. And 474 00:23:44,160 --> 00:23:47,679 Speaker 1: that's really what we're talking about here, coaching people to 475 00:23:47,720 --> 00:23:53,000 Speaker 1: be responsive, responsible versus just enabling them to have what 476 00:23:53,040 --> 00:23:55,880 Speaker 1: they feel they want or deserve. That that's what we're 477 00:23:55,880 --> 00:23:57,080 Speaker 1: really trying to get into here. 478 00:23:57,280 --> 00:23:59,800 Speaker 2: Yeah, for sure, And again you are not rejecting the person. 479 00:24:00,080 --> 00:24:02,199 Speaker 2: You're not saying no. You're saying no, but and then 480 00:24:02,240 --> 00:24:03,920 Speaker 2: come up with a solution that could get him across 481 00:24:03,920 --> 00:24:04,600 Speaker 2: the finish line. 482 00:24:04,800 --> 00:24:07,119 Speaker 1: You're listening to simply money presented by all with Financial 483 00:24:07,160 --> 00:24:10,400 Speaker 1: Lambob Sponseller along with Brian James. Let's get into how 484 00:24:10,440 --> 00:24:14,080 Speaker 1: to maybe prepare to say no in a in a 485 00:24:14,320 --> 00:24:18,320 Speaker 1: dignified way for everyone. And this comes down to some 486 00:24:18,359 --> 00:24:22,800 Speaker 1: communication and advanced planning. I like things like this. Try 487 00:24:22,840 --> 00:24:26,320 Speaker 1: some responses like hey, I care deeply about you, but 488 00:24:26,359 --> 00:24:29,960 Speaker 1: I've made a commitment to keep financial matters separate from 489 00:24:30,000 --> 00:24:33,000 Speaker 1: personal relationships. I think that's a good line to use 490 00:24:33,080 --> 00:24:36,359 Speaker 1: when we're dealing with maybe parties outside of our family, 491 00:24:36,440 --> 00:24:39,680 Speaker 1: where we just get we get bombarded with requests from 492 00:24:39,800 --> 00:24:43,800 Speaker 1: charities and other people coming at us asking for money. 493 00:24:43,520 --> 00:24:44,960 Speaker 2: And I think what you're really talking about there is 494 00:24:44,960 --> 00:24:47,359 Speaker 2: just just have a policy, sit down and think in advance. 495 00:24:47,400 --> 00:24:50,760 Speaker 2: If you think this is coming, then then give yourself 496 00:24:50,840 --> 00:24:52,959 Speaker 2: some time to figure out what do I really believe here? 497 00:24:53,000 --> 00:24:55,480 Speaker 2: What is my policy as to whether I would do this? 498 00:24:55,560 --> 00:24:57,399 Speaker 2: And I'm not talking about something necessarily if write down 499 00:24:57,440 --> 00:24:59,560 Speaker 2: unless that works for you to kind of cement it 500 00:24:59,560 --> 00:25:02,239 Speaker 2: indo your brain, But just give some forethought and then 501 00:25:02,359 --> 00:25:04,480 Speaker 2: then you'll know how to respond rather than stuttering and 502 00:25:04,480 --> 00:25:05,679 Speaker 2: stammering when the question arises. 503 00:25:06,160 --> 00:25:09,200 Speaker 1: Here's another good response. You could say something like, hey, 504 00:25:09,320 --> 00:25:13,000 Speaker 1: this isn't something I can support financially, but I'm happy 505 00:25:13,080 --> 00:25:16,920 Speaker 1: to help brainstorm other solutions with you. You're inviting that 506 00:25:17,000 --> 00:25:20,280 Speaker 1: person into more of a relationship to coach them through 507 00:25:21,000 --> 00:25:24,240 Speaker 1: helping them solve some of their financial problems versus just 508 00:25:24,320 --> 00:25:27,520 Speaker 1: pulling out the checkbook and writing a check and hoping 509 00:25:27,600 --> 00:25:28,440 Speaker 1: it all works out. 510 00:25:28,640 --> 00:25:31,240 Speaker 2: And you shouldn't feel pressure to answer right away, right 511 00:25:31,280 --> 00:25:33,160 Speaker 2: And I think of a quick yes or a quick 512 00:25:33,240 --> 00:25:35,880 Speaker 2: no tells this person one of two things. A quick 513 00:25:35,920 --> 00:25:37,040 Speaker 2: guess says, well, hey. 514 00:25:36,840 --> 00:25:37,359 Speaker 1: This is easy. 515 00:25:37,400 --> 00:25:38,840 Speaker 2: This, I guess is just how the world works, and 516 00:25:38,880 --> 00:25:41,520 Speaker 2: it's just easy to get money. A no will tell 517 00:25:41,520 --> 00:25:43,720 Speaker 2: them this person doesn't care about me, So tell them, 518 00:25:43,760 --> 00:25:45,439 Speaker 2: even if you already know your answer, tell them, I 519 00:25:45,440 --> 00:25:47,400 Speaker 2: need to think about this. This is a huge decision 520 00:25:47,480 --> 00:25:49,520 Speaker 2: and both of us are going to be impacted by 521 00:25:49,560 --> 00:25:51,080 Speaker 2: it one way or another, and I really have got 522 00:25:51,119 --> 00:25:52,719 Speaker 2: to put some thought into this. Then you can come 523 00:25:52,760 --> 00:25:54,480 Speaker 2: back with your response, even if you already knew what 524 00:25:54,480 --> 00:25:55,920 Speaker 2: it was. Give it some time to percolate. 525 00:25:56,640 --> 00:25:58,439 Speaker 1: Yeah, and one other thing to point out here, you 526 00:25:58,480 --> 00:26:01,720 Speaker 1: don't owe anyone more more than maybe a you know, 527 00:26:01,920 --> 00:26:04,919 Speaker 1: few second explanation. If you get into a twenty minute 528 00:26:04,960 --> 00:26:07,520 Speaker 1: explanation on why you don't want to give them money, 529 00:26:07,800 --> 00:26:10,680 Speaker 1: the longer you just drivel on and talk and talk 530 00:26:10,720 --> 00:26:15,000 Speaker 1: and talk, you know, it quickly comes across. As you're rationalizing, 531 00:26:15,119 --> 00:26:18,960 Speaker 1: you feel guilty and uncomfortable. And the way you're managing 532 00:26:18,960 --> 00:26:21,760 Speaker 1: yourself through this is just by talking and talking and 533 00:26:21,840 --> 00:26:24,000 Speaker 1: talking about all the reasons why you're gonna say no. 534 00:26:25,080 --> 00:26:27,800 Speaker 1: That can make that other person feel very uncomfortable as well. 535 00:26:27,840 --> 00:26:28,840 Speaker 1: And there's no need to go. 536 00:26:28,800 --> 00:26:30,359 Speaker 2: There, and we can find out that there's a lot 537 00:26:30,400 --> 00:26:32,359 Speaker 2: more to a relationship like that. Suddenly it becomes not 538 00:26:32,400 --> 00:26:34,520 Speaker 2: about money. It becomes about interpersonal stuff. 539 00:26:34,720 --> 00:26:37,240 Speaker 1: Yeah. And then lastly, and I tell clients all this 540 00:26:37,320 --> 00:26:40,800 Speaker 1: all the time, Brian, blame me, Blame your financial advisor. 541 00:26:41,640 --> 00:26:44,040 Speaker 1: For those that work with a financial advisor, they can 542 00:26:44,200 --> 00:26:47,720 Speaker 1: serve as a helpful buffer in these conversations as well. 543 00:26:47,960 --> 00:26:50,720 Speaker 1: You heard it here, folks, it's Bob's fault. Well, but 544 00:26:50,960 --> 00:26:55,520 Speaker 1: referring financial request to your advisor, you know, puts that 545 00:26:55,760 --> 00:26:58,639 Speaker 1: buffer if it needs to be there between you and 546 00:26:58,680 --> 00:27:01,840 Speaker 1: your money. And yeah, yeah, you can blame somebody else, 547 00:27:01,880 --> 00:27:05,480 Speaker 1: someone your fiduciary advisor that's looking out for you, and 548 00:27:05,680 --> 00:27:08,520 Speaker 1: let the financial advisor come up with that quick twenty 549 00:27:08,520 --> 00:27:11,080 Speaker 1: second response on why we can't go there where we 550 00:27:11,200 --> 00:27:14,320 Speaker 1: all know we're being asked to make a decision that 551 00:27:14,400 --> 00:27:16,479 Speaker 1: might not be in the best interest of all parties. 552 00:27:16,520 --> 00:27:19,520 Speaker 1: Here's the all Worth advice. Protecting your well starts with 553 00:27:19,600 --> 00:27:23,199 Speaker 1: setting boundaries that align with your values, because saying no 554 00:27:24,040 --> 00:27:28,000 Speaker 1: is sometimes the smartest financial decision you can make. Coming 555 00:27:28,080 --> 00:27:31,520 Speaker 1: up next, see if you can separate fact from fiction 556 00:27:31,760 --> 00:27:34,880 Speaker 1: before it costs you big time. You're listening to Simply Money, 557 00:27:34,960 --> 00:27:38,240 Speaker 1: presented by all Worth Financial on fifty five KRC. The 558 00:27:38,680 --> 00:27:43,840 Speaker 1: talk station. You're listening to simply money. It's going to 559 00:27:43,840 --> 00:27:47,200 Speaker 1: buy all Worth Financial and bomsponseller along with Brian James. 560 00:27:47,840 --> 00:27:49,879 Speaker 1: Do you have a financial question you'd like for us 561 00:27:49,880 --> 00:27:52,480 Speaker 1: to answer. There's a red button you can click while 562 00:27:52,480 --> 00:27:54,600 Speaker 1: you're listening to the show. If you're listening to the 563 00:27:54,640 --> 00:27:59,239 Speaker 1: show on the iHeart app, simply record your question and 564 00:27:59,280 --> 00:28:03,000 Speaker 1: it will come to us. All right, Brian, Brandon and 565 00:28:03,040 --> 00:28:05,880 Speaker 1: Amy are out there. They say, we're both sixty one. 566 00:28:06,359 --> 00:28:09,720 Speaker 1: We have almost four million dollars put away, which is great, 567 00:28:10,080 --> 00:28:13,520 Speaker 1: but nearly all of it is in traditional iras. Are 568 00:28:13,520 --> 00:28:17,919 Speaker 1: we setting ourselves up for a huge tax spike later on? 569 00:28:18,720 --> 00:28:21,159 Speaker 2: Well, Brandon, Amy, the way you phrased this question, I 570 00:28:21,200 --> 00:28:23,640 Speaker 2: feel like you've caught Wino this and you're pretty darn 571 00:28:23,680 --> 00:28:25,840 Speaker 2: sure that you are there is something coming, but maybe 572 00:28:25,840 --> 00:28:28,000 Speaker 2: you're just not exactly sure what it is. So the answer, 573 00:28:28,160 --> 00:28:30,359 Speaker 2: and don't kick yourself too hard. You didn't make a mistake. 574 00:28:30,520 --> 00:28:33,240 Speaker 2: This is just the reality of how things work. Yeah, 575 00:28:33,440 --> 00:28:36,119 Speaker 2: at this point, with three point eight million dollars or 576 00:28:36,160 --> 00:28:39,400 Speaker 2: most of that in traditional iras pre tax right' that's 577 00:28:39,440 --> 00:28:42,480 Speaker 2: what traditional is the fancy word for pre tax iras. 578 00:28:42,560 --> 00:28:45,080 Speaker 2: You've never paid taxes on those dollars. Then you are 579 00:28:45,120 --> 00:28:48,360 Speaker 2: looking at something called a required minimum distribution, which if 580 00:28:48,400 --> 00:28:50,600 Speaker 2: you're sixty one now in twenty twenty six, that will 581 00:28:50,640 --> 00:28:54,120 Speaker 2: be age seventy five for you, at which point you'll 582 00:28:54,120 --> 00:28:57,280 Speaker 2: need to pull out somewhere in the neighborhood of four 583 00:28:57,280 --> 00:28:59,400 Speaker 2: to five percent. Unless they change the rules, which they 584 00:28:59,440 --> 00:29:01,080 Speaker 2: haven't in a very long time. They move the age, 585 00:29:01,080 --> 00:29:03,920 Speaker 2: but the math tends to stay the same. So at 586 00:29:04,000 --> 00:29:07,840 Speaker 2: three point eight million dollars now, that is thirteen fourteen 587 00:29:07,920 --> 00:29:10,080 Speaker 2: years from now for you, So there's a really good 588 00:29:10,200 --> 00:29:13,240 Speaker 2: chance that that can be seven or eight million by 589 00:29:13,320 --> 00:29:16,840 Speaker 2: the time that you that you actually hit that eight 590 00:29:16,960 --> 00:29:19,800 Speaker 2: So at that point you again you need to take out. 591 00:29:19,840 --> 00:29:22,080 Speaker 2: Like I said, four to five percent. It's not a herd. 592 00:29:22,160 --> 00:29:24,720 Speaker 2: There's an algorithm behind this. It's a complicated formula, but 593 00:29:24,720 --> 00:29:27,280 Speaker 2: that's a ballpark number. So if you've got seven million 594 00:29:27,320 --> 00:29:30,440 Speaker 2: dollars fifteen years from now, when you are under require 595 00:29:30,520 --> 00:29:32,800 Speaker 2: minimum distribution rules, then you're going to need to be 596 00:29:32,840 --> 00:29:35,760 Speaker 2: pulling out about three three hundred and fifty thousand dollars. 597 00:29:36,200 --> 00:29:39,320 Speaker 2: That's not the tax that is what needs to come out, 598 00:29:39,400 --> 00:29:42,560 Speaker 2: So that's the income that is what will be taxed. 599 00:29:42,920 --> 00:29:45,160 Speaker 2: So you know, some of this will already happen anyway. 600 00:29:45,440 --> 00:29:47,600 Speaker 2: The R and D the M stands for minimum. You 601 00:29:47,640 --> 00:29:49,920 Speaker 2: may be taking out some anyway just to live your lives, 602 00:29:49,920 --> 00:29:52,800 Speaker 2: and I hope you do that. You know so, but 603 00:29:53,000 --> 00:29:54,920 Speaker 2: so it may just be circling back before the end 604 00:29:54,920 --> 00:29:56,400 Speaker 2: of the year to make sure you've taken out that 605 00:29:56,480 --> 00:30:00,600 Speaker 2: full retired a full complete amount during retirement. It will 606 00:30:00,640 --> 00:30:04,200 Speaker 2: impact something called IRMA. Nobody loves this, but IRMA is 607 00:30:04,320 --> 00:30:07,320 Speaker 2: a calculation that is used in determining what your Medicare 608 00:30:07,400 --> 00:30:10,840 Speaker 2: premiums will be two years later. So one of the 609 00:30:10,880 --> 00:30:13,920 Speaker 2: risks that you have is that you'll permanently be at 610 00:30:13,960 --> 00:30:16,280 Speaker 2: a higher Medicare premium level, which there may or may 611 00:30:16,360 --> 00:30:18,640 Speaker 2: not be much you can do about that. You can 612 00:30:18,720 --> 00:30:23,120 Speaker 2: look into Roth conversions, which is voluntarily paying taxes now 613 00:30:23,160 --> 00:30:27,440 Speaker 2: to offset future tax growth, and there's a lot of 614 00:30:27,440 --> 00:30:30,000 Speaker 2: math involved there in pros and constant anything you do. 615 00:30:30,200 --> 00:30:32,240 Speaker 2: So I would highly recommend that you get with your advisor, 616 00:30:32,240 --> 00:30:34,000 Speaker 2: take a look at that financial plan and make sure 617 00:30:34,040 --> 00:30:36,200 Speaker 2: that you're on pace for it to get done what 618 00:30:36,280 --> 00:30:38,760 Speaker 2: you need, and then look at whether Roth conversions might 619 00:30:38,760 --> 00:30:43,040 Speaker 2: help you with that problem. Larry down South in Independence Kentucky. 620 00:30:43,080 --> 00:30:45,720 Speaker 2: Larry's got about three hundred thousand dollars that's sitting in 621 00:30:45,760 --> 00:30:47,920 Speaker 2: a savings account, earning interest, and he's just wondering, Bob, 622 00:30:47,960 --> 00:30:50,160 Speaker 2: at what point is that just a drag on the plan? 623 00:30:50,240 --> 00:30:54,400 Speaker 1: Are they overdoing it with cash? Well, it depends, Larry, 624 00:30:54,440 --> 00:30:57,080 Speaker 1: on what your plan needs to do in terms of 625 00:30:57,160 --> 00:31:00,600 Speaker 1: earnings to support your long time you know, long term 626 00:31:00,640 --> 00:31:03,920 Speaker 1: financial goals. So you know, for some people, sitting on 627 00:31:04,000 --> 00:31:06,920 Speaker 1: three hundred thousand dollars in cash is right where they 628 00:31:06,960 --> 00:31:10,440 Speaker 1: need to be. It's a great you know, hedge against 629 00:31:10,440 --> 00:31:14,160 Speaker 1: downside volatility like what we're experiencing right now. For others, 630 00:31:14,880 --> 00:31:17,960 Speaker 1: if you're parking too high of a percentage of your 631 00:31:17,960 --> 00:31:21,720 Speaker 1: overall portfolio in cash, well, then over time you're gonna 632 00:31:21,760 --> 00:31:24,960 Speaker 1: you're gonna underperform taxes and inflation on that money. You're 633 00:31:24,960 --> 00:31:28,120 Speaker 1: not gonna grow any real net worth. And then when 634 00:31:28,160 --> 00:31:31,400 Speaker 1: you start to pull money out to live on during retirement, 635 00:31:32,080 --> 00:31:35,800 Speaker 1: you know, especially inflation adjusted income, that's where you can 636 00:31:35,840 --> 00:31:38,280 Speaker 1: see the drag on your long term plan. So my 637 00:31:38,360 --> 00:31:41,160 Speaker 1: advice would be to sit down with somebody and actually 638 00:31:41,200 --> 00:31:44,440 Speaker 1: create a financial plan if you don't already have one, 639 00:31:44,880 --> 00:31:47,320 Speaker 1: and then and then sit down and determine is it 640 00:31:47,360 --> 00:31:49,520 Speaker 1: really a drag or is it not. And that's going 641 00:31:49,600 --> 00:31:51,840 Speaker 1: to be based on what your income needs and goals 642 00:31:51,880 --> 00:31:54,880 Speaker 1: are and what the rest of your overall portfolio looks like. 643 00:31:55,520 --> 00:31:58,640 Speaker 1: All right, Don and Kenwood says, our advisor mentioned tax 644 00:31:58,680 --> 00:32:02,120 Speaker 1: loss harvesting, but we only have about four hundred thousand 645 00:32:02,120 --> 00:32:06,920 Speaker 1: dollars in a taxable account. Is that strategy really impactful 646 00:32:07,040 --> 00:32:09,280 Speaker 1: at that level? Meaning is this too small of an 647 00:32:09,280 --> 00:32:12,040 Speaker 1: account to benefit from tax loss harvest harvesting? 648 00:32:12,080 --> 00:32:15,680 Speaker 2: Brian, Well, I mean, I think any anything helps, right, 649 00:32:15,720 --> 00:32:18,600 Speaker 2: It's just really the magnitude of the impact that it has, 650 00:32:18,680 --> 00:32:22,480 Speaker 2: so so it's not really a game changer four hundred 651 00:32:22,480 --> 00:32:24,600 Speaker 2: thousand dollars. That's said, if this is my situation, I'm 652 00:32:24,600 --> 00:32:26,560 Speaker 2: still looking at it because I'll take every last nickel 653 00:32:26,560 --> 00:32:28,360 Speaker 2: that I don't have to pay to the irs that 654 00:32:28,400 --> 00:32:31,160 Speaker 2: I can that I can legally avoid paying the irs. Right, 655 00:32:31,480 --> 00:32:33,920 Speaker 2: So here's how to think about it in the right context. 656 00:32:34,200 --> 00:32:36,959 Speaker 2: Tax loss harvesting course only applies to your taxable account. 657 00:32:36,960 --> 00:32:39,160 Speaker 2: We're not talking iras roth iras. A lot of people 658 00:32:39,200 --> 00:32:41,920 Speaker 2: have only those tax advantage or timent accounts. So if 659 00:32:41,960 --> 00:32:43,560 Speaker 2: that's the case, for you don't really spend too much 660 00:32:43,600 --> 00:32:46,880 Speaker 2: time thinking about tax loss harvesting. But in this particular case, 661 00:32:47,840 --> 00:32:49,880 Speaker 2: we're talking about maybe you know, just over ten percent 662 00:32:49,880 --> 00:32:54,600 Speaker 2: of a total portfolio, so that naturally limits the overall impact, 663 00:32:54,640 --> 00:32:57,920 Speaker 2: but you know, within that four hundred thousand, the benefit 664 00:32:57,960 --> 00:33:00,960 Speaker 2: is going to depend a year to year on market conditions. 665 00:33:01,280 --> 00:33:03,479 Speaker 2: So you might have whether in the year where markets 666 00:33:03,480 --> 00:33:05,640 Speaker 2: are really choppy or down, kind of like right now, 667 00:33:05,680 --> 00:33:08,360 Speaker 2: if you invested in some things in January, you might 668 00:33:08,360 --> 00:33:11,160 Speaker 2: be looking at some decent losses in some of those positions, 669 00:33:11,160 --> 00:33:15,240 Speaker 2: maybe ten twenty thousands, possibly more. Those can offset future 670 00:33:15,280 --> 00:33:18,320 Speaker 2: capital gains and up to three thousand dollars of ordinary 671 00:33:18,400 --> 00:33:21,200 Speaker 2: income every year. So that said that three thousand dollars, 672 00:33:21,200 --> 00:33:22,800 Speaker 2: you know, if you're in a twenty five percent bracket, 673 00:33:22,840 --> 00:33:24,080 Speaker 2: well you might be able to get seven hundred and 674 00:33:24,080 --> 00:33:27,040 Speaker 2: fifty maybe a thousand bucks back every year just off 675 00:33:27,080 --> 00:33:30,720 Speaker 2: of deducting off your ordinary income whatever is not offset 676 00:33:30,720 --> 00:33:33,880 Speaker 2: by other capital gains. So there is real value, but 677 00:33:34,000 --> 00:33:36,920 Speaker 2: typically measured in thousands of dollars per year, not really 678 00:33:37,000 --> 00:33:40,240 Speaker 2: tens of thousands. So where I'd be thinking about this, 679 00:33:40,320 --> 00:33:42,240 Speaker 2: it still has value though, so I'd still think about 680 00:33:42,280 --> 00:33:45,920 Speaker 2: it in terms of portfolio rebalancing, diversification, those kinds of things. 681 00:33:46,040 --> 00:33:48,760 Speaker 2: If you know there's already a problem where your portfolio 682 00:33:48,800 --> 00:33:51,280 Speaker 2: is out of whack in some direction, and that, as 683 00:33:51,280 --> 00:33:53,080 Speaker 2: we talk often here, a lot of people are way 684 00:33:53,120 --> 00:33:56,040 Speaker 2: overweighted on the large cap technology side of things. If 685 00:33:56,080 --> 00:33:58,040 Speaker 2: that's the case for you, then you could potentially look 686 00:33:58,120 --> 00:34:01,640 Speaker 2: under the hood and make some changes anywhere and look 687 00:34:01,680 --> 00:34:04,560 Speaker 2: for opportunities to take losses to offset any gains you 688 00:34:04,640 --> 00:34:06,880 Speaker 2: might have to generate. Also, if you happen to have 689 00:34:06,960 --> 00:34:11,840 Speaker 2: roth conversions alongside this, you can't The losses won't offset 690 00:34:11,920 --> 00:34:14,680 Speaker 2: conversion income directly, but they can reduce the taxes on 691 00:34:14,719 --> 00:34:16,520 Speaker 2: your other gains that you might need to pay those 692 00:34:16,560 --> 00:34:19,279 Speaker 2: taxes on the conversion. So it's not necessarily a one 693 00:34:19,320 --> 00:34:22,240 Speaker 2: trick pony. You can combine all these techniques into something 694 00:34:22,239 --> 00:34:24,120 Speaker 2: that makes a lot of sense for tax purposes. Don't 695 00:34:24,120 --> 00:34:27,360 Speaker 2: worry too much about only focusing on the loss harvesting 696 00:34:27,400 --> 00:34:29,400 Speaker 2: piece that might support other techniques. 697 00:34:30,600 --> 00:34:33,040 Speaker 1: How much do you know about the target date fund 698 00:34:33,160 --> 00:34:35,520 Speaker 1: you might be invested in within your four to one 699 00:34:35,600 --> 00:34:38,960 Speaker 1: K plan. There are some major misconceptions out there, and 700 00:34:39,000 --> 00:34:42,080 Speaker 1: we'll talk about what those are next. You're listening to 701 00:34:42,120 --> 00:34:44,640 Speaker 1: Simply Money presented by all Worth Financial on fifty five 702 00:34:44,719 --> 00:34:51,520 Speaker 1: KRC the talk station. You're listening to Simply Money presented 703 00:34:51,520 --> 00:34:55,600 Speaker 1: by all Worth Financial on Bob Sponseeller along with Brian James. Well, 704 00:34:55,640 --> 00:34:58,040 Speaker 1: if you've listened to this show for any amount of 705 00:34:58,080 --> 00:35:01,560 Speaker 1: time now, we hope you have knowledge at least knowledge 706 00:35:01,600 --> 00:35:05,000 Speaker 1: of what a target date fund actually is. There are 707 00:35:05,040 --> 00:35:08,360 Speaker 1: some benefits of it, especially if you're a younger investor, 708 00:35:09,080 --> 00:35:12,120 Speaker 1: but it's likely worth shying away from as you get 709 00:35:12,160 --> 00:35:15,239 Speaker 1: older and your net worth you know, begins to or 710 00:35:15,400 --> 00:35:19,040 Speaker 1: continues to grow. But for many out there, there's still 711 00:35:19,080 --> 00:35:22,600 Speaker 1: a lot of confusion about what these target date funds 712 00:35:22,640 --> 00:35:25,719 Speaker 1: are and actually the moving parts within them. And that's 713 00:35:25,719 --> 00:35:26,920 Speaker 1: what we want to cover tonight. 714 00:35:26,960 --> 00:35:30,560 Speaker 3: Brian yep, and what's triggering this? And I think this 715 00:35:30,600 --> 00:35:31,240 Speaker 3: is very interesting. 716 00:35:31,280 --> 00:35:32,880 Speaker 2: I was excited when we saw that we had come 717 00:35:32,960 --> 00:35:34,799 Speaker 2: up with this piece of data because it tells me that, 718 00:35:35,239 --> 00:35:37,520 Speaker 2: you know that people still aren't quite on board with 719 00:35:37,560 --> 00:35:40,200 Speaker 2: how all this stuff works. So let's take advantage of 720 00:35:40,200 --> 00:35:42,680 Speaker 2: the platform we have here to help clear up some confusion. 721 00:35:43,000 --> 00:35:46,839 Speaker 2: American Century Investments did a survey of about fifteen hundred people. 722 00:35:46,880 --> 00:35:49,800 Speaker 2: This is last year, twenty twenty five, fifteen hundred people 723 00:35:49,840 --> 00:35:53,400 Speaker 2: in workplace retirement plans, and they found that about thirty 724 00:35:53,400 --> 00:35:56,520 Speaker 2: percent of them thought that a target date fund somehow. 725 00:35:56,160 --> 00:35:58,080 Speaker 3: Guaranteed that they wouldn't lose any money. 726 00:35:58,360 --> 00:36:01,440 Speaker 2: Obviously, that's not the case, you know, because target date 727 00:36:01,440 --> 00:36:05,040 Speaker 2: funds are simply looking at your age, your potential point 728 00:36:05,040 --> 00:36:09,000 Speaker 2: of retirement, and arranging a portfolio that will adjust itself 729 00:36:09,080 --> 00:36:11,600 Speaker 2: over time as we get closer and closer to retirement. 730 00:36:12,239 --> 00:36:15,080 Speaker 2: Apparently thirty percent of people weren't aware of that. Forty 731 00:36:15,120 --> 00:36:17,320 Speaker 2: percent of them didn't know if they were even invested 732 00:36:17,360 --> 00:36:19,680 Speaker 2: in target date funds at all, or maybe thought their 733 00:36:19,680 --> 00:36:21,960 Speaker 2: employer's plan didn't even offer them. To me, that's that's 734 00:36:22,000 --> 00:36:24,520 Speaker 2: more telling than anything else. Some people have no idea 735 00:36:24,520 --> 00:36:25,600 Speaker 2: what the options even. 736 00:36:25,480 --> 00:36:27,839 Speaker 1: Are, and that and I want to jump in here 737 00:36:27,880 --> 00:36:30,360 Speaker 1: and guess as to why this data came out the 738 00:36:30,400 --> 00:36:33,319 Speaker 1: way it is. I mean, Brian, you know a lot 739 00:36:33,360 --> 00:36:36,000 Speaker 1: of time. You know, I'm going back five ten years ago. 740 00:36:36,600 --> 00:36:39,960 Speaker 1: You know, the default, the default investment option in these 741 00:36:40,000 --> 00:36:43,480 Speaker 1: retirement plans was more or less of a fixed you know, 742 00:36:43,640 --> 00:36:47,920 Speaker 1: interest type of investment. And along came you know, Arissa 743 00:36:47,960 --> 00:36:50,520 Speaker 1: and everybody else saying, well, if you just park people 744 00:36:50,560 --> 00:36:53,160 Speaker 1: in cash equivalent assets, they're not going to have any 745 00:36:53,239 --> 00:36:56,319 Speaker 1: long term growth. YadA, YadA, YadA. So you know, a 746 00:36:56,320 --> 00:36:59,200 Speaker 1: lot of a lot of evolution in these retirement plans. 747 00:36:59,280 --> 00:37:02,520 Speaker 1: Put they started to use target date funds or more 748 00:37:02,640 --> 00:37:06,239 Speaker 1: balance funds as the default provision, with the assumption of 749 00:37:06,640 --> 00:37:08,719 Speaker 1: you know, we're gonna be big brother here and know 750 00:37:08,800 --> 00:37:10,759 Speaker 1: what's best for people. We're gonna put them in a 751 00:37:10,800 --> 00:37:14,400 Speaker 1: balance you know, maybe sixty percent stock forty percent bond 752 00:37:14,440 --> 00:37:18,759 Speaker 1: portfolio so that people, if they don't pay attention to this, 753 00:37:18,880 --> 00:37:21,160 Speaker 1: will at least have some growth. And I think that's 754 00:37:21,200 --> 00:37:24,000 Speaker 1: where thirty to forty percent of the people out there 755 00:37:24,280 --> 00:37:27,160 Speaker 1: completely missed that this has been going on, and those 756 00:37:27,160 --> 00:37:29,839 Speaker 1: are the people that get surprised when they see any 757 00:37:29,960 --> 00:37:33,759 Speaker 1: volatility whatsoever in their retirement plan. Just a hunch on 758 00:37:33,840 --> 00:37:35,839 Speaker 1: my part is someone. 759 00:37:35,719 --> 00:37:37,880 Speaker 2: Yeah, I think there's a lot of realities that matter 760 00:37:37,920 --> 00:37:39,799 Speaker 2: of fact, that reminds me of a story from very 761 00:37:39,840 --> 00:37:42,040 Speaker 2: early in my investing career when I was helping out 762 00:37:42,080 --> 00:37:44,439 Speaker 2: at Perspective. Didn't end up working with them and don't 763 00:37:44,440 --> 00:37:47,879 Speaker 2: miss them at all. A company that was looking at Oh, 764 00:37:48,000 --> 00:37:50,920 Speaker 2: this this kinda kind of blow your mind, probably frankly 765 00:37:50,920 --> 00:37:52,480 Speaker 2: make you a little mad. I'm still mad about It's 766 00:37:52,480 --> 00:37:54,160 Speaker 2: one of those things that popped into my head twenty 767 00:37:54,239 --> 00:37:56,439 Speaker 2: years after the fact that I went, wow, I'm still 768 00:37:56,440 --> 00:37:58,920 Speaker 2: mad about that. They haven't interacted with these people anyway. 769 00:37:59,120 --> 00:38:01,600 Speaker 2: Company had a retirement plan, and their big thing was 770 00:38:01,640 --> 00:38:03,879 Speaker 2: they wanted to be big brother. They wanted to care 771 00:38:03,960 --> 00:38:06,759 Speaker 2: for their employees, so they demanded that this whole thing 772 00:38:06,840 --> 00:38:08,440 Speaker 2: sit in nothing but treasury bonds. 773 00:38:08,680 --> 00:38:09,960 Speaker 3: And this was all for a while. 774 00:38:09,960 --> 00:38:11,960 Speaker 2: Well, the stock market is risky, and we don't want 775 00:38:11,960 --> 00:38:13,440 Speaker 2: people to take that kind of risk, so we're going 776 00:38:13,480 --> 00:38:16,040 Speaker 2: to keep it in nice safe things. These gentlemen owned 777 00:38:16,120 --> 00:38:19,479 Speaker 2: a multi multimillion dollar company that was their retirement plan. 778 00:38:19,680 --> 00:38:21,520 Speaker 2: Their employees were stuck in a four to oh one 779 00:38:21,600 --> 00:38:23,960 Speaker 2: k that spit out four or five percent for ten 780 00:38:24,000 --> 00:38:26,600 Speaker 2: to twenty years. If I worked there, we'd be talking 781 00:38:26,600 --> 00:38:29,040 Speaker 2: to heavy duty about those fiduciary rules and how you 782 00:38:29,120 --> 00:38:32,200 Speaker 2: hosed me for my working career supporting you in your 783 00:38:32,280 --> 00:38:33,320 Speaker 2: multimillion dollar company. 784 00:38:33,360 --> 00:38:34,759 Speaker 3: I'm still mad, Bob, still mad. 785 00:38:35,239 --> 00:38:37,239 Speaker 1: It's good that you have this show to bent Todd. 786 00:38:37,520 --> 00:38:41,520 Speaker 1: Here's the all Worth advice make sure your allocation, tax strategy, 787 00:38:41,560 --> 00:38:45,080 Speaker 1: and risk level are customized to your needs and your 788 00:38:45,200 --> 00:38:49,600 Speaker 1: actual financial plan, not just your age. Thanks for listening tonight. 789 00:38:49,640 --> 00:38:52,080 Speaker 1: You've been listening to Simply Money, presented by all Worth 790 00:38:52,120 --> 00:38:55,080 Speaker 1: Financial on fifty five KRC, the talk station