Speaker 1: Episode three eighty seven, ETFs and index funds and bears.
Speaker 2: Oh my, Welcome to the Frugal Friends podcast, where you'll
Speaker 2: learn to save money, embrace simplicity, and live your life.
Speaker 2: Here your hosts Jen and Jill.
Speaker 1: Ha woo, I sang before we officially recorded, so that
Speaker 1: was in my head. Yeah, I'm sorry I threw you off.
Speaker 1: Welcome to the Frugal Friends Podcast. My name is Jen,
Speaker 1: my name is Jill, and we are not singers. We
Speaker 1: are podcasters who are just passionate about helping you understand
Speaker 1: how to spend money with intention and then where to
Speaker 1: put that money that's going to make the biggest impact
Speaker 1: for you. And that's the focus of today's episode.
Speaker 3: Not just saving but investment, which is usually one of
Speaker 3: the biggest areas of mystery for many of us. Once
Speaker 3: we kind of get these other things down, we've got
Speaker 3: a spending plan, we're paying down debt, and then there's
Speaker 3: this whole looming ets and index funs and bears oh my.
Speaker 1: Yes, especially the bears. The bears are a big one, right.
Speaker 1: So today we are expanding on our episode on the
Speaker 1: roth Ira challenge. You have about a month left to
Speaker 1: open and invest in your roth theray for twenty twenty three.
Speaker 1: There are so few times that you get a grace
Speaker 1: period from the government, and this is one of them,
Speaker 1: and so we want you to take full advantage if
Speaker 1: you have not maxed out your roth IRA for twenty
Speaker 1: twenty three. We also have the episode on and we
Speaker 1: re aired investing or saving your first one hundred K.
Speaker 1: So this is just a continuation on that, and we're
Speaker 1: not We're going to try to demystify some of these
Speaker 1: terms and make them accessible to you. Yeah, we're going
Speaker 1: to try to try to ourselves.
Speaker 3: Yeah, okay, I am Actually this is a little bit
Speaker 3: side note, but worth it. Started to read Psychology of
Speaker 3: Money because you've been recommending it to me for approximately
Speaker 3: six years, and in either the intro or the first chapter,
Speaker 3: he's talking about how new, relatively investing even is in
Speaker 3: the stock market, and I think it really helped to
Speaker 3: normalize why there can be so much confusion around it,
Speaker 3: mystery around it, and in part because it just hasn't
Speaker 3: existed for that long. Even your best investors are still
Speaker 3: baby in their understanding because this whole system is relatively
Speaker 3: in its infancy stage and still developing. Like roth iras
Speaker 3: we're not a thing until nineteen ninety eight. Yes, nineteen
Speaker 3: ninety eight, we were already born, hate to break it
Speaker 3: to you, We were nine well into our yes, yes,
Speaker 3: we were nine nine years old before so this all
Speaker 3: has been happening within our lifetime. So just to kind
Speaker 3: of help lay the framework, I think that was a
Speaker 3: helpful thing that that book pointed out. And also, and
Speaker 3: we'll talk about this. You know, ETFs are a relatively
Speaker 3: new thing. We are unfamiliar with it, but that doesn't
Speaker 3: mean that we have to feel bad about that. We're
Speaker 3: in part unfamiliar because it's it's new, yeah, in the
Speaker 3: grand scheme of.
Speaker 1: Things, and it is good to be wary of new things,
Speaker 1: especially in the financial industry. But these are some of
Speaker 1: the things that have stood the test of time, and
Speaker 1: with technology as it is, it doesn't take a long
Speaker 1: time for something to stand the test of time. So
Speaker 1: these are things that we trust, we you, and we
Speaker 1: are going to talk about them today as they pertain
Speaker 1: to your rath are specifically, we're not here to tell
Speaker 1: you if a rath ira is the best move for you.
Speaker 1: We're just here if you've already decided that the roth
Speaker 1: ira is a good move for you and you've just
Speaker 1: been putting it off, or maybe haven't invested as much
Speaker 1: as you can. Maybe you're getting a tax refund this
Speaker 1: month and you're looking for a really good place to
Speaker 1: put that money. Then this that's what we're trying to
Speaker 1: do here. But first, this episode is brought to you
Speaker 1: by International Women's Day. One time, I made a joke
Speaker 1: to a guy that I celebrate Exclusive Women's Day on
Speaker 1: May ninth, which is my birthday, and he sent me
Speaker 1: flowers on International Women's Day because he misunderstood me. So,
Speaker 1: if anyone has ever bought you flowers, you should get
Speaker 1: a high yield savings account, even if it's you who
Speaker 1: bought flowers for you. Frugal Friends podcast dot com slash
Speaker 1: c is our current recommendation for a highyield savings account,
Speaker 1: but it is it's good to have some savings.
Speaker 3: I have so many questions. Yeah, love love cit love
Speaker 3: high yield savings accounts. What when did this happen? Was
Speaker 3: this recent?
Speaker 4: No?
Speaker 3: Was this like a dating experience or was this a
Speaker 3: colleague who was just like trying to be It.
Speaker 1: Was an ex boyfriend who did not want to be
Speaker 1: an ex and maybe that's why I made the joke
Speaker 1: like the joke and bad taste, but that yeah, that's
Speaker 1: that's what that happened. Anyways. A couple good episodes to
Speaker 1: queue up after this would be episode three sixty one,
Speaker 1: what are mutual funds and what do they cost? We
Speaker 1: briefly touch on ETFs and index funds in there because
Speaker 1: they are relevant, and then episode two forty one Divesting
Speaker 1: Banking sustain We talk a lot about sustainable banking, credit
Speaker 1: unions and high field savings accounts, So those are some
Speaker 1: of the things that are helpful to know in the
Speaker 1: realm of managing your money. Again, we're not a podcast
Speaker 1: that We're not a general personal finance podcast where we
Speaker 1: talk about all of the different things about investing and
Speaker 1: managing money. We try to specifically focusing focus in on
Speaker 1: conscious consumption and intentional spending. But we don't consume consciously
Speaker 1: and spend intentionally for no reason. There are reasons behind
Speaker 1: why we do it, and we can pursue more of
Speaker 1: those when we are managing our money efficiently, and investing
Speaker 1: is one of the most efficient ways to manage your money,
Speaker 1: and this is what goes into those investment accounts are
Speaker 1: the index funds and the ETFs.
Speaker 3: So this first article is from nerd Wallet and it's
Speaker 3: titled index funds versus ETFs? What's the difference? So ETF
Speaker 3: stands for exchange traded funds, and index funds just is
Speaker 3: their index funds. And really all of these articles are
Speaker 3: saying there's a lot more similarities than there are differences,
Speaker 3: but there are some differences to be taking into consideration
Speaker 3: when when thinking through what's the best for me when
Speaker 3: it comes to investing. I will also say a lot
Speaker 3: of these articles will talk about index funds and ETFs
Speaker 3: in the sense of just regular day to day investing,
Speaker 3: and so we are specifically bringing the lens of investing
Speaker 3: for retirement. And I did find a sidebar helpful article
Speaker 3: from Investipedia that am putting into the outline. We're not
Speaker 3: going to go through this one, but I do think
Speaker 3: it's worth talking that, yes, you could just us invest
Speaker 3: in ETF, invest in an index one and it not
Speaker 3: be a part of your retirement plan. But for us,
Speaker 3: when we talk about investing on this podcast, we're primarily
Speaker 3: talking about investing for retirement. So what you can include
Speaker 3: in your portfolio four your roth IRA for your four
Speaker 3: oh one K And Investipedia did a helpful article on
Speaker 3: is an ETF a good fit for the four oh
Speaker 3: one K plan? And I will say my biggest takeaway
Speaker 3: from that article is them saying there's just a lack
Speaker 3: of familiarity with ETFs, that they can be a really
Speaker 3: good option. They're becoming more and more a part of
Speaker 3: people's four o one K portfolios, but people may not
Speaker 3: choose it because they're relatively new. They can introduce some
Speaker 3: complexities in record keeping that may require some different operational
Speaker 3: processes for four oh one K plans that I imagine
Speaker 3: we can ebb and flow with, But that the popularity
Speaker 3: of ETFs is growing and will probably continue to grow,
Speaker 3: so it's worth considering. It's worth becoming knowledgeable now on
Speaker 3: this possibility, because we don't want to choose something just
Speaker 3: because it's familiar if there is other options out there
Speaker 3: that could be beneficial to us. So I just wanted
Speaker 3: to state that at the onset, but then to be
Speaker 3: able to talk about index funds are a bit more
Speaker 3: familiar to us than ETFs are. But let's talk about
Speaker 3: the differences. So the first one listed in this nerd
Speaker 3: wallet article is that the minimum investment required for ETFs
Speaker 3: and index funds are different. ETFs will have a lower
Speaker 3: minimum investment than an index fund. Most of the time,
Speaker 3: it just takes investing the in an ETF the amount
Speaker 3: needed to buy a single share, and sometimes brokers will
Speaker 3: even offer fractional shares, so that's going to be less
Speaker 3: than an index fund. Both are still relatively quote unquote
Speaker 3: affordable to your average investor, but ETFs might even come
Speaker 3: at a lower minimum investment required.
Speaker 1: Yeah, I in the past have always talked about index
Speaker 1: because they are the thing I know the most about.
Speaker 1: But as I have grown, I've talked to more people,
Speaker 1: I've done more research. I've realized that because ETFs and
Speaker 1: index funds are so similar, the differences are very We'll
Speaker 1: talk about the differences, but they're they're so small, and
Speaker 1: the ETFs, even with the differences, may even have the edge.
Speaker 1: But the minimum investment required, I tell you, is the
Speaker 1: number one reason that I'm starting to recommend ETFs to
Speaker 1: people who are getting started. And obviously we're not financial advisors.
Speaker 1: We can't tell you what to invest in. This is
Speaker 1: all just from our experiences and our opinions. So it
Speaker 1: is really this minimum investment required. And so yes, Fidelity
Speaker 1: does offer some index funds with a with a low
Speaker 1: barrier to entry to get in. I think it's like
Speaker 1: ten dollars, but with ETFs you can start with one
Speaker 1: dollar and you can do it at any brokerage. Is
Speaker 1: It is really a game changer, I think, And so
Speaker 1: that's why we're doing more research on them and at
Speaker 1: you know, telling other people to do more research on them,
Speaker 1: because the barrier to entry is a lot lower. And
Speaker 1: I think when you're talking to your friends about investing,
Speaker 1: which you absolutely should, I think we should all be
Speaker 1: talking to our friends, our family, strangers, we should all
Speaker 1: be talking about investing to each other whatever we know,
Speaker 1: not feeling scared like we can't talk about it because
Speaker 1: we're not you know, professionals. This is accessible to everyone.
Speaker 1: It becomes more accessible the more people talk about it.
Speaker 1: And so even if you have index funds, talking to
Speaker 1: people who may not have started investing yet and knowing
Speaker 1: that difference will make it easier for other people to
Speaker 1: get started investing.
Speaker 3: Yeah.
Speaker 1: So the next difference is capital gains tax. So this
Speaker 1: is again this is something more I think relevant to
Speaker 1: regular investing, but outside of outside of or outside of retirement.
Speaker 1: But ETFs are more tax efficient than index funds by nature,
Speaker 1: and so this is a very like it's it's a
Speaker 1: very minor difference, but again it gives them a little
Speaker 1: bit of an edge over index funds. So like when
Speaker 1: you sell an ETF, you're typically selling it to another
Speaker 1: investor who's buying it, and the cash is coming directly
Speaker 1: from them, So capital gains taxes on that sale are
Speaker 1: yours and yours alone. To pay to get cash out
Speaker 1: of an index fund, you technically must redeem it from
Speaker 1: the fund manager, who will then have to sell securities
Speaker 1: and generate cash to pay you. So there's a middleman.
Speaker 1: It's it doesn't mean that the fund is actively managed.
Speaker 1: It means there's just a middleman selling the index fund
Speaker 1: like to when in the buying and the selling of it.
Speaker 1: So when this sale is done for a gain, the
Speaker 1: net gains are passed onto every investor because remember an
Speaker 1: index fund is a basket that it's a mutual fund.
Speaker 1: An ETF is not a mutual fund, but an index
Speaker 1: fund is, and so everybody's mutually funding this index fund.
Speaker 1: So those capital gains taxes are passed on to every
Speaker 1: investor that have shares in the fund, meaning you could
Speaker 1: owe capital gains taxes without ever selling a single share.
Speaker 1: This happens less frequently with index funds with actively managed
Speaker 1: mutual funds, So that's kind of where there's a little
Speaker 1: edge on actively managed funds. But I think the fees
Speaker 1: on actively managed funds definitely negate the tax savings. But
Speaker 1: from a tax perspective, etf generally have the upper hand
Speaker 1: over index funds. We are you know, most people I
Speaker 1: would think that buy index funds are buy and hold.
Speaker 1: So really the only selling you would have to worry
Speaker 1: about is, you know, people in retirement. That's theoretically obviously
Speaker 1: that's not reality, but so it's a minor edge, still
Speaker 1: an edge though.
Speaker 3: Yeah. The third kind of difference between an ETF and
Speaker 3: an index fund is the cost of owning them. That said,
Speaker 3: both can be very inexpensive from an expense ratio perspective,
Speaker 3: So the article describes that you can easily find funds
Speaker 3: that cost less than point zero five percent of your
Speaker 3: investment per year. But another thing to consider is looking
Speaker 3: for trade and commission. So if the broker does charge
Speaker 3: a commission for trades, you'll pay a flat fee every
Speaker 3: time you buy or sell an ETF, which could then
Speaker 3: lead to eating into some of your returns if you
Speaker 3: are trading regularly, and I think that that's a big
Speaker 3: if because ETFs. One of the things I was reading
Speaker 3: about is that a big difference between them and index
Speaker 3: funds is ETFs allow intra day trading, meaning it's regularly
Speaker 3: being assessed for value and can be traded throughout the day,
Speaker 3: whereas index funds can are only assessed at the end
Speaker 3: of the day. So that can lead to higher risk,
Speaker 3: higher reward with an ETF. Of course some downsides to
Speaker 3: that as well, but that's a big if. If you're
Speaker 3: trading it regularly, then you could have some of those
Speaker 3: trading commissions eat into your cost. But if you're just
Speaker 3: putting it part of your retirement investment portfolio, then you
Speaker 3: might not see too many high fees happening there. Yeah.
Speaker 3: They also describe that when buying ETFs, you'll also incur
Speaker 3: a cost called and I gotta really enunciate this one,
Speaker 3: the bid ask spread, And I do enjoy reading that.
Speaker 1: We are nine it is all the way back to
Speaker 1: when the bid ass Yes.
Speaker 3: Uh, so you won't see this when purchasing index funds,
Speaker 3: and it is usually very small. Their bid ass spread
Speaker 3: is pretty small, but if you're buying high volume broad
Speaker 3: market ETFs, it's gonna be a cost to consider.
Speaker 1: Yeah, so you've got your tax efficiency over on your atfs,
Speaker 1: but then you've got your no no bid ask spread
Speaker 1: over an index funds. These are very minor differences which
Speaker 1: makes them so similar. So I'll just cover some of
Speaker 1: the similarities that nerd wallet comes up with, and these
Speaker 1: are they're they're very similar, right, So diversification, you can
Speaker 1: get identical funds in index or ETF so you can
Speaker 1: get the SMP five hundred, you can get target date
Speaker 1: funds now as ETFs. You can get a total stock
Speaker 1: market or a total bond fund. Both are available in
Speaker 1: ETFs and index funds. Seconds that they're both very low costs,
Speaker 1: they're passively managed, and so the investments go with the
Speaker 1: index they're named after. So SMP five hundred is just
Speaker 1: a fund made up of all of the stocks in
Speaker 1: the SMP five hundred, all the companies in the SMP
Speaker 1: five hundred at the ratio that they make up the
Speaker 1: five hundred, the biggest five hundred. So again they're going
Speaker 1: to be low costs as compared to an actively managed fund.
Speaker 1: And then three is strong long term returns, and this
Speaker 1: is what we love. We're not day traders. We don't
Speaker 1: talk about trading options four X. We're not here to
Speaker 1: get rich quick off the stock market. We're here to
Speaker 1: get rich slow, and we do want to get rich,
Speaker 1: so that's why we buy and hold. We know that
Speaker 1: time in the market is more important than timing the market,
Speaker 1: and both index funds and ETFs have a long term
Speaker 1: track record. So this article is saying the annual total
Speaker 1: returns of the S and P five hundred has averaged
Speaker 1: around ten percent over the last ninety years. And since
Speaker 1: ETFs and index funds you can buy an S and
Speaker 1: P five hundred in each, that's kind of the return
Speaker 1: that you're going to see there. So actively managed funds
Speaker 1: they may perform better in the short term because fund
Speaker 1: managers make investment decisions based on current market conditions. But
Speaker 1: the improbability that those fund managers will make consistent market
Speaker 1: beating decisions over a long period of time, the studies
Speaker 1: show that it just can't be maintained. So it's just
Speaker 1: like us in our lives, you know, like we're gonna
Speaker 1: win a lot, but we're gonna lose just as much,
Speaker 1: you know, no matter how hard we try. No matter
Speaker 1: how good we are at what we do, you just
Speaker 1: can't nail it every time.
Speaker 3: And dodgeball is always going to hit you in the
Speaker 3: face on the playground.
Speaker 1: Sometimes at least one hopefully not every.
Speaker 3: Time for me, at least on for you. Stop. You know,
Speaker 3: I wasn't even playing. I'd be over on the slot
Speaker 3: dodgeball in the face.
Speaker 1: But yeah, So that's kind of the similarities and the
Speaker 1: difference is mainly to show you that the differences are
Speaker 1: very negligible. They are almost identical.
Speaker 3: And I will add, both ets and index funds bundle
Speaker 3: together many individual investments such as stocks or bonds into
Speaker 3: a single investment. So that's the diversification piece that you
Speaker 3: were talking about, Jen when that is something that's important,
Speaker 3: something that we recommend both do that. Okay, this next
Speaker 3: article is bringing in the bears.
Speaker 1: Oh my, so this is not this is not exactly
Speaker 1: what I had in mind when I named the the episode,
Speaker 1: but I am so glad that Goldie brought it in
Speaker 1: because we're we're not in a bear market right now,
Speaker 1: and that's fine.
Speaker 4: But.
Speaker 1: Very recently you yourself have experienced a bear market, whether
Speaker 1: you everyone, everybody listening to this sorry.
Speaker 3: You just like emphasize you yourself, and I'm like, okay
Speaker 3: about me, Jill.
Speaker 1: Everybody listening to this has experienced a bear market in
Speaker 1: your lifetime, whether you knew it or not, and so
Speaker 1: these are part of normal market cycles. And so we'll
Speaker 1: just touch us midgeon about bear markets and it can
Speaker 1: be and so these are what scare people away from investing,
Speaker 1: right That's why people don't. You don't want to put
Speaker 1: all your chips in the stock market basket because of
Speaker 1: this right here, the bears. And so we just want
Speaker 1: to maybe take away a little bit of the fear
Speaker 1: associated with it by giving you a few facts.
Speaker 3: I mean, this was my experience before we did our
Speaker 3: roth Ira Challenge episode and we did talk about this,
Speaker 3: so I would definitely recommend going back to that episode.
Speaker 3: But I have essentially only been investing in a bear market.
Speaker 3: Now I'm starting to see some returns, but you know,
Speaker 3: I'd been investing for three years and I'm like, Jen,
Speaker 3: it's not doing what I want to see it do.
Speaker 3: This really kind of sucks. What am I going to
Speaker 3: tell the people who listen to this podcast episode? Because
Speaker 3: it's not going that great for me? And so this
Speaker 3: is what we're talking about. These are the ebbs and
Speaker 3: flows of the stock market and what to do if
Speaker 3: that is the case, and the climate when you are
Speaker 3: beginning to invest, but also what to do how to
Speaker 3: maintain yourself in the midst of when we will inevitably
Speaker 3: hit that point again. And so the first point that
Speaker 3: they're making about this is what you just said, Jen,
Speaker 3: don't go all in all at once, don't put all
Speaker 3: your money into one singular place probably ever, but especially
Speaker 3: when you're in a bear market, when the stock market
Speaker 3: isn't doing phenomenally. And the problem with a bear market
Speaker 3: is that you can never tell whether you're at the beginning, middle,
Speaker 3: or end of it. You don't, none of us can
Speaker 3: tell the future. But just being aware of diversification forever
Speaker 3: and always.
Speaker 1: Yeah, And that's why we love ETFs and index funds
Speaker 1: is because they do offer that diversification. You can get
Speaker 1: a total stock market ETF or index fund and you're
Speaker 1: invested in literally every company that trades in the New
Speaker 1: York Stock Exchange. Then you can get an international stock
Speaker 1: market fund that includes all the international companies that trade
Speaker 1: on the Stock exchange. That's like Samsung, Toyota, a bunch
Speaker 1: of companies that you use on a regular basis are
Speaker 1: not American companies. And then you can get a bond fund,
Speaker 1: which is just you know, kind of being a debt collector.
Speaker 1: So there are a lot of options for diversifications that
Speaker 1: are made really easy when you choose these these funds,
Speaker 1: and so that kind of can protect you from going
Speaker 1: all in. But then again, you don't want to go
Speaker 1: all in all at once either, So you need to
Speaker 1: keep an emergency fund not invested, keep it in a
Speaker 1: high old savings account where you're not going to be
Speaker 1: worried about if the market's down and you need your
Speaker 1: emergency fund, you're not gonna be worried about losing money.
Speaker 1: So that's a really important thing. You need to have
Speaker 1: your emergency fund in a highield savings account invested. So
Speaker 1: the next part is build a portfolio small chunks at
Speaker 1: a time, and so this is something that ETFs.
Speaker 5: Really allow you to do.
Speaker 1: If you only have maybe fifty dollars a month to invest,
Speaker 1: it allows you to build a more diversified portfolio in
Speaker 1: smaller chunks. So if even when you're worried about being
Speaker 1: in a bear market, when the stock market's going down,
Speaker 1: a lot of people will say that it's on sale, right,
Speaker 1: So that is something you'll hear a lot, especially in
Speaker 1: the financial independence community. It's really fun to say when
Speaker 1: stocks are going up or when stocks start.
Speaker 3: To go down.
Speaker 1: But the average bear market is about fourteen months, so
Speaker 1: it's over a year, and we definitely experienced that in
Speaker 1: twenty twenty two. We experience just you know, a whole
Speaker 1: year of really poor returns and that's the and that's
Speaker 1: the average fourteen months. So it's fun to say that,
Speaker 1: but in reality, our behavior can can make us feel differently.
Speaker 1: So it's still important to take advantage of that quote
Speaker 1: unquote sale when times are rough and when times are
Speaker 1: good like they are right now, to be putting even
Speaker 1: like more in. Knowing that my natural propensity is going
Speaker 1: when we are when we do again enter into another
Speaker 1: bear market, which is inevitable, I'm going to want to
Speaker 1: put lesson. And so maybe you're fearless, maybe you go
Speaker 1: all in in the bear market, and that's great. If
Speaker 1: you are not fearless, and you know, I want to
Speaker 1: put a little lesson now when we're in good times
Speaker 1: like right now, we want to be putting more in.
Speaker 1: And that's another reason we're doing this, brother, they challenge
Speaker 1: right now in twenty twenty four because the FED is
Speaker 1: about to lower interest rates, and what that's going to
Speaker 1: translate to is it's gonna I can't speculate on the
Speaker 1: the economy or the stock marker. I don't feel comfortable
Speaker 1: to actually recording myself doing that.
Speaker 2: Yeah, I'm gonna get in over my head.
Speaker 1: But it has the potential to get some really great
Speaker 1: returns this year if you're doing if you're doing your
Speaker 1: investing in the first half of the year. So that
Speaker 1: is my prediction. I cannot say that. I'm not even
Speaker 1: a professional stock trader, so I'm not even marry half
Speaker 1: the time, you know, but that.
Speaker 3: Is jen you can send all your emails to please do.
Speaker 1: So that's kind of what we're saying is we're in
Speaker 1: a it's in a good time right now. So if
Speaker 1: you're the kind of person that's going to want to
Speaker 1: invest lesson a bear market, then take advantage of the
Speaker 1: good sunny times.
Speaker 3: Finances are also emotional. We can't, yeah, just know things
Speaker 3: and act on it. There are so many other factors
Speaker 3: that come into play. So but equipping ourselves with some
Speaker 3: of this knowledge that can help temper. Some of the
Speaker 3: emotional decisions that aren't going to be great for us
Speaker 3: is excellent. So they're talking about when in a bear market,
Speaker 3: focusing on positioning your portfolio for the next bull market,
Speaker 3: and when you're in a bull market, take advantage of
Speaker 3: the fact that things are going well, but be aware
Speaker 3: that there will be dips again and just kind of
Speaker 3: sustaining through through that storm.
Speaker 1: Even in bull markets, there are corrections that where the
Speaker 1: stock market will go down, you know, five to ten percent,
Speaker 1: it's not a bear because these are actually the people
Speaker 1: don't just say, oh, we're in a bear market because
Speaker 1: the stocks went down. They have to go down a
Speaker 1: certain percentage for it to be considered that. But even
Speaker 1: in the middle, you know, we'll have some small corrections
Speaker 1: on the way up, and you have to anticipate that
Speaker 1: and know that it's part of the journey. It's part
Speaker 1: of that ten percent. Realize like annual the gains over
Speaker 1: ninety years, the S and P five hundred, it takes
Speaker 1: into account all of the bull and bear and corrections
Speaker 1: we've had over ninety years, Like that's part of it.
Speaker 3: Yeah, And then lastly they are mentioning casting a wide
Speaker 3: net to catch potential winners. That's just another way of
Speaker 3: talking about diversification and just driving home this idea that
Speaker 3: when you buy a stock, you own the risk and
Speaker 3: the growth potential of that business. So if the business
Speaker 3: performs well, your shares rise and value. If not, your
Speaker 3: share values sink. So they're talking about casting that wide
Speaker 3: net of diversification, and they've described that if you diversify
Speaker 3: your portfolio with just as few as twelve stocks, that's
Speaker 3: that's great. But you can also do that through an
Speaker 3: et Yeah, through an index fund. You don't have to
Speaker 3: be picking and choosing twelve different stocks. You can have
Speaker 3: diversification through some of the things we've already talked about.
Speaker 1: Yeah, And the great thing about ETFs and index funds
Speaker 1: is if there is a sector that you love, like
Speaker 1: if you're in healthcare and you're passionate about healthcare or
Speaker 1: you're passionate about sustainability, you can choose ETFs and index
Speaker 1: funds that are sector specific. And that's really a preference thing,
Speaker 1: Like there's no strategy you know that I'm going to
Speaker 1: recommend to do that. That's really all playing around and
Speaker 1: whatever you're passionate about. But you have the power to
Speaker 1: leave out entire industries when you're investing uh and still
Speaker 1: get a broad range of investments using ETFs and index funds.
Speaker 1: They are so they have been so customized and so
Speaker 1: like really well done at this point, Like all you know,
Speaker 1: the brokerages are doing really great things with how they're
Speaker 1: designing these funds and how they're almost customizing them that
Speaker 1: there really is almost something for almost everyone. That's cool
Speaker 1: at this point.
Speaker 3: Yeah, do you have any final words for our friends on? Okay,
Speaker 3: I might want to look into some ETFs in my
Speaker 3: retirement portfolio. Where to begin?
Speaker 1: So, I would say going to your brokerage, your Fidelity, Vanguard, Schwab, whatever,
Speaker 1: and you know, kind of figuring out how to buy them.
Speaker 3: Use YouTube.
Speaker 1: There will be walkthroughs probably on your specific brokerage on
Speaker 1: how to purchase funds. Because I think the most important
Speaker 1: thing is when you put money into your wrath IRA,
Speaker 1: you then have to invest it.
Speaker 3: Right we all know that now, Yeah, we can.
Speaker 1: Always you can always exchange it for something else later. Right,
Speaker 1: You're not locked in when you an S and P
Speaker 1: five hundred ETF, that does not mean you own it forever.
Speaker 1: You can exchange it for whatever you want whenever you want,
Speaker 1: So the important part is to get in there and
Speaker 1: get it invested. Don't just leave it in the Essentially
Speaker 1: it's a high old savings account that's in the roth
Speaker 1: area where your money just sits until you invest it.
Speaker 1: So I'd say that's the most important thing is to
Speaker 1: get it into the roth IRA and get it invested
Speaker 1: before the deadline at least. I mean, honestly, you just
Speaker 1: have to get the money into that, you know, the
Speaker 1: special high old savings account before the deadline. But don't
Speaker 1: leave it there. Get it invested.
Speaker 3: Yeah, you know what, we also don't want to leave
Speaker 3: and we want to invest.
Speaker 1: We don't want to just sit there with this. We
Speaker 1: really want to utilize it. We want to invest it.
Speaker 3: The Bill of the week.
Speaker 2: That's right, it's time for the best minute of your
Speaker 2: entire week. Maybe a baby was born and his name
Speaker 2: is Williams. Maybe you've paid off your mortgage, maybe your
Speaker 2: car died and you're happy to not have to pay
Speaker 2: that bill anymore. That's bills, Buffalo bills, Bill Clinton. This
Speaker 2: is the bill of the week.
Speaker 5: Hi, Jen and Jail, This is Jodie and I have
Speaker 5: a Bill of the week. We had about fifteen hundred
Speaker 5: dollars left in our FSA for twenty twenty three and
Speaker 5: wanted to make sure to take advantage of that, and
Speaker 5: so we decided to take the money from our savings
Speaker 5: account and pay the balance of our daughter's Orthodonis bill.
Speaker 5: So we did that and that bill was paid. Then
Speaker 5: we took that receipt and submitted to our FSA and
Speaker 5: that money was back in our savings account like three
Speaker 5: days later. And then on top of that, we took
Speaker 5: the amount that we were paying every month, which was
Speaker 5: one hundred and forty five dollars, and since we don't
Speaker 5: have that bill anymore, we decided to just send that
Speaker 5: one hundred and forty five dollars straight into an IRA
Speaker 5: since we are used to paying that every month. So
Speaker 5: there is my bill of the week. Thanks Jen and
Speaker 5: Jil for everything you do.
Speaker 1: We did not listen to this before we put this
Speaker 1: in the episode. Thank you Jody for basically just saying
Speaker 1: everything we've been saying.
Speaker 3: Jody, you're doing the Chad inch.
Speaker 1: Yeah, and you found.
Speaker 3: Ways with it with money you already were allocating somewhere
Speaker 3: then getting smart with that how to reallocate it towards
Speaker 3: other goals. Just well done. I'm so glad that your
Speaker 3: daughter's orthodonic bill is paid off and now you're contributing
Speaker 3: more to your IRA. That's amazing.
Speaker 1: Yes, And people might ask, like, what's the benefit of
Speaker 1: using because you do put that money into the the FSA.
Speaker 1: It's it's really you save money on taxes when you
Speaker 1: do it that way, when you just funnel it to
Speaker 1: the FSA and then back. But fsays are use it
Speaker 1: or lose it. Hsas can actually like grow with you.
Speaker 1: So if they had had an HSA, they could have
Speaker 1: just saved the receipt from that and then let the
Speaker 1: money grow in the HSA triple tax advantage, so they say,
Speaker 1: I won't get into it, but and then use that
Speaker 1: money later, use that receipt later on when you take
Speaker 1: money out of the HSA after it's grown, then you
Speaker 1: just submit the receipt then and you get to benefit
Speaker 1: from all the growth of that money gets compound interest.
Speaker 3: I mean it sounds, Jody like you timed this all well. Yeah,
Speaker 3: I think it's worth highlighting some of those differences for
Speaker 3: anybody else listening in.
Speaker 1: Nobody asked, but I just thought i'd tell it. But yes, Jody,
Speaker 1: that's so great.
Speaker 3: Use it say hsa, oh my, that's a whole other episode.
Speaker 1: Okay, it'll it'll come later in the year. But yeah,
Speaker 1: using money that you already had allocated somewhere instead of
Speaker 1: using it just you know, giving your giving yourself the
Speaker 1: opportunity to increase your lifestyle if you don't need it,
Speaker 1: putting it towards your your IRA.
Speaker 3: It is fantastic, beautiful, well done. I'm celebrating. If you
Speaker 3: all listening, want to submit your bill about increasing your
Speaker 3: contributions to your retirement investment accounts or you're just Bill.
Speaker 3: You didn't even know how you found yourself here, but
Speaker 3: we're calling you out. You hear your name. Visit FRUL
Speaker 3: friends podcast dot com, slash Bill, leave us your bill,
Speaker 3: and now it's time for the round, all right.
Speaker 1: In the today's Vulnerability around Jill, can you share an
Speaker 1: unreasonable fear you have about bears?
Speaker 3: I love this question. It's so vague. It's like our
Speaker 3: Bill of the Weeks. I think I do have a
Speaker 3: lot of fears about bears, although I do love them.
Speaker 3: I'd love to see one out in the wild, although
Speaker 3: not really. I got so many bear stories. Do you
Speaker 3: I'm realizing I do, as you're asking me, this bear question,
Speaker 3: bear story. Okay, well it's a bear adjacent story with you.
Speaker 2: So I was in.
Speaker 3: Alaska one time. Oh yeah, and we were walking. We
Speaker 3: were on a walk, me and three other people and
Speaker 3: a dog, and it was just just before hibernation, so
Speaker 3: summer was just coming to a close. It was shoulder
Speaker 3: season pointing to my shoulder, shoulder season, so there were
Speaker 3: still bears out and about but getting the last bit sleepy.
Speaker 1: They were sleeping.
Speaker 3: Maybe, So we're all walking. One of the people who's
Speaker 3: walking with us lives there, so she kind of knows
Speaker 3: what's up. But as we walk, we hear the deepest,
Speaker 3: most guttural growl I have ever heard in my life.
Speaker 3: And if you would have told asked me previously, Jill,
Speaker 3: do you want to see a bear out in the wild,
Speaker 3: I would have said yes. I'll still say yes to
Speaker 3: this day. But from the comfort of my car. Actually
Speaker 3: we're out in the wild, even though we got four
Speaker 3: people and a dog with us. Immediate fear just crippling
Speaker 3: and radiating through my body, like it sounded so close,
Speaker 3: and this growl was so menacing, and we all stopped.
Speaker 3: Even the girl who's from Alaska was like, oh, what
Speaker 3: is going on. We were all in fight, flight, freeze,
Speaker 3: fawn mode, and then it quickly registers for the woman
Speaker 3: who's from Alaska. Oh no, that's not a bear, that's
Speaker 3: a bird. There's a bird in Alaska who growls like
Speaker 3: a bear. And how unfair is that?
Speaker 1: How unfair?
Speaker 3: Like not unfair for the bird, it's unfair for everybody. Yeah,
Speaker 3: probably including the bird in some ways. But that's how
Speaker 3: you're going to play with me and make a bird
Speaker 3: sound like a bear. It's unrealistic, one of God's many
Speaker 3: But it really did kind of highlight to me how
Speaker 3: I would respond if there was a bear. But then
Speaker 3: I do often think, and so when we were there,
Speaker 3: you know, they talk about how you want to respond
Speaker 3: to different bears, like black there's a whole poem about it.
Speaker 3: But like you want to like stand your ground with
Speaker 3: black bears, you want to play dead with brown bears.
Speaker 3: You want to just like give up on life with
Speaker 3: polar bears, like there's no telling, like that's it, you're
Speaker 3: done ended. But so brown bears, like the grizzly bears,
Speaker 3: are the ones who will drag you back to their layer,
Speaker 3: leave you there, and then come back later. So they're
Speaker 3: a little bit more smart about it. But if you
Speaker 3: play dead, you have chances of still living. So there
Speaker 3: are stories of people who will get dragged drug off
Speaker 3: by grizzly bears. They play dead somehow, some way and
Speaker 3: then are able to run off when the grizzly walks away.
Speaker 3: That's that is one of my most terrifying Like someday
Speaker 3: I'm gonna have to play dead in the midst of
Speaker 3: a grizzly bear. I don't think I could. I just
Speaker 3: I don't fear. I think I couldn't play to actually
Speaker 3: play dead. Wow, what about you?
Speaker 5: Oh wow.
Speaker 1: I have an unreasonable fear of falling from high places,
Speaker 1: so I won't stand near the edge of anything, even
Speaker 1: with adequately high railings. I just have a feel I
Speaker 1: have a fear of going over. And so when we
Speaker 1: see the bears at the zoo, I don't go near
Speaker 1: any edges because I have an unreasonable fear of falling
Speaker 1: over into the bear pit.
Speaker 3: Yeah, that's like for me intrusive thoughts. Not that I'm
Speaker 3: gonna fall over, but I'm going to jump in, Like
Speaker 3: there's gonna be something where my body compels me to
Speaker 3: jump in, and I'm not going to be able to
Speaker 3: stop myself, like I have those intrusive thoughts too. Yeah, yeah,
Speaker 3: I don't voluntary and some you know, my fears are
Speaker 3: birds that are bears, and.
Speaker 1: Yours you're just playing dead. No, your true fear we
Speaker 1: unpacked that, and your true fear is the fear of
Speaker 1: being able to play dead?
Speaker 3: Will I be able to play dead?
Speaker 4: So?
Speaker 3: The bird, though, is called a Bohemian wax wing, and
Speaker 3: it's aka the grizzly bear Bohemian waxwing. I would love
Speaker 3: to be a bohemian wax wing. Heavy International Women's Day.
Speaker 3: We just out here scaring people but still being birds.
Speaker 1: Yeah, well, thanks for listening to that tangent.
Speaker 3: Wow, that's a good lightning round. Thanks for listening everyone.
Speaker 3: We hope you're still here, although if you're not still here,
Speaker 3: that's okay too. Okay, I got what you need. We
Speaker 3: love being here with you, and we also love reading
Speaker 3: your reviews, especially when they're really kind, like this one
Speaker 3: that came from kJ Salmon. Oh, yeah, Samon, that's perfect.
Speaker 3: It's very Alaskan themed, on brand perfect, lots of helpful nuggets.
Speaker 3: It's another type of food I like. I really enjoy
Speaker 3: listening to Jen and Jil's idea on budgeting, saving, and spending.
Speaker 3: Not everything pertains to my financial life, but I find
Speaker 3: it interesting all the same. I also like that they
Speaker 3: cover a wide range of topics, from buying a home
Speaker 3: to a car to starting your own freelance business. It
Speaker 3: ends there. You're right, we are all over the boys,
Speaker 3: and we will talk about Bohemian wax wing aka Grizzly
Speaker 3: Bear parts and you just never know what you're gonna get,
Speaker 3: but hopefully some helpful investing entertainment.
Speaker 1: Yes, thank you so much for listening. If you enjoyed
Speaker 1: the show, please take a minute to leave a rating
Speaker 1: and review. If you've already rated and reviewed on Apple,
Speaker 1: head over to Spotify and leave us a rating. It
Speaker 1: helps potential new listeners know that the show is good.
Speaker 1: According to some people.
Speaker 3: The show is okay, yes, and worth it.
Speaker 1: Yes, it's five out of ten stars, five out a ten.
Speaker 3: See you next time.
Speaker 1: Frugal Friends is produced by Eric Sirianni.
Speaker 2: Huh.
Speaker 3: I don't think that's what people expected to get from us.
Speaker 1: I don't think it's what I expected to get from us.
Speaker 3: Do you want to know what I almost said as
Speaker 3: my first Lightning Round? Answer is Teddy Bears with cameras
Speaker 3: in them.
Speaker 1: Oh yeah, that is a legit fear. But when you're
Speaker 1: watching what is it Law and Order SVU or I
Speaker 1: think one of the episodes was they caught a perp
Speaker 1: because they had Teddy Bear with camera footage.
Speaker 3: Yeah, I guess I only have to be afraid of that,
Speaker 3: like if I'm a nanny doing shady stuff, but which
Speaker 3: you probably would be sometimes when I'm in other people's
Speaker 3: houses and like, where's the camera? Where's better be on
Speaker 3: my best behavior?
Speaker 1: You just if it's in the bathroom, you just put
Speaker 1: it face down. That's it, right, And then just the
Speaker 1: rest is, don't do illegal stuff on camera? Yeah, kind
Speaker 1: of like these people on TikTok and Instagram doing e
Speaker 1: lee and then recording them. Like I heard about this
Speaker 1: guy who was living in a storage unit and saving
Speaker 1: a lot of money and he was just recording and
Speaker 1: went viral his storage unit set up for living who
Speaker 1: and then he got evicted from the storage unit because
Speaker 1: it's against the terms of services on the storage unit.
Speaker 1: Sounds right, Yeah, And you were doing like you were
Speaker 1: saving so much money, you were doing so many.
Speaker 3: If you decided to record yourself, right and.
Speaker 1: Then and then you put the illegal stuff on the Internet,
Speaker 1: and that was your second mistake. The world has grace
Speaker 1: for first mistakes, but not for a second the Internet.
Speaker 1: I mean, not the world, the Internet.
Speaker 3: Yeah, I mean living in a storage units. That's an
Speaker 3: option I can't.
Speaker 4: Yeah.
Speaker 1: I think the moral of the story that I was
Speaker 1: learning from the Internet was that wait to post the
Speaker 1: illegal things that you're recording until after you're no longer
Speaker 1: doing them.
Speaker 3: That that'll be like us, all of the extra recordings
Speaker 3: that we have that we never released, all of our
Speaker 3: mic checks that are a little bit salacious at times.
Speaker 4: Where I sing, when this whole thing goes to crap implodes,
Speaker 4: as it inevitably will, when when the Frugal Friends hits
Speaker 4: its own extended bear market.
Speaker 1: When we become the vander Pump.
Speaker 3: Rules we are canceled.
Speaker 1: We're just going to release it all.
Speaker 3: Yeah, then won't give you even more reason to cancel us.