December 29, 2021 • 14 mins
In this deep dive, John shares his insights on stocks that anyone can start with, high-risk and low-risk stocks, understanding your risk capacity for investment, determining investment objectives, tax-free bonds, and getting involved in investing with as little as $250.
John Burnett is a financial services executive with over 20 years of experience at some of the world’s top financial services and business information companies. He is the managing director and founder of 1 Empire Group, a business consulting and communications firm. In addition, John is an adjunct assistant professor at NYU, teaching business management and strategy, and he regularly appears on Fox Business and international stations to discuss topics related to business, investments, the economy, and policy.
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Guest IG: @iamjohnburnett
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Guest Website: 1 Empire Group
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I'm Tanya Sam and welcome to the Money Moves podcast.
Howard by Green. Hey everybody, and welcome back to Money Moves.
Right now, we're going to keep diving into the world
of investing, and I hope you have your pens and
(00:20):
papers ready. Who am I kidding? Welcome? I hope those
Google docs and notepad apps are ready to jot down
the hot information we're about to drop. There's a lot
about investing in markets that many of us don't understand.
Even those who have mastered the basic fundamentals and are
experienced with their stock options could always stand to learn
(00:41):
a little bit more. We're going to be joined by
our expert, who was going to teach us more about
how we go about investing and for the more experienced investors,
secret tricks of the trade. Today's deep dive into investing
is brought to you by our partners at MasterCard, bridging
the Wealth Gap together with Green. So let's bring in
(01:01):
our expert. A business executive with over twenty years experience
in the financial services industry, John Burnett has held leadership
roles at City, Merrill, Lynch, Morgan Stanley and SMP Global.
As I mentioned before, John is now the managing director
and founder of the consulting firm One Empire Group. John,
thank you so much for joining us on Money Moves.
(01:23):
Take me back outside a little bit. Can you just
give us some more ideas of different types of investments
that people are always hearing about that people might have
been afraid to ask about. You have preferred stocks that
then you have regular stocks, right, some of them have
different risk profiles. There are some stocks that are high growth, right.
(01:45):
Usually those are for really uh investors that have a
high level of risk risk tolerance, that are more aggressive
with their portfolio. So hold on one second, I'm going
to back you out right here. When we're talking about stocks,
we're talking about company ease that have basically value assigned
to their company. They've divided it all up, kind of
(02:06):
chopped it up like a pizza into stocks, and you
can then purchase these stocks and have ownership in this company.
And as the company grows and gets bigger and bigger
and bigger, so does the value of your stock and
in turn the money that's associated with that. Is that
kind of a good way to put that? Absolutely, Let's
just use Apple as an example. Perfect right over the years,
even before Apple started paying dividends, right, because they didn't
(02:28):
always pay dividends. That stopped ran up right, right, and
then it actually split, so the price came down. That
was an entry point for people that may not be
able to afford a five share stock. Yeah, we just
happened with Tesla this year, did we Not a lot
of stocks do that? Right? So I had I had
(02:50):
owned Apple, and I'm not touting Apple here, but but
I but I owned I still own Apple, but I
had a few thousand years right, and then when it
actually did that reverse split, I mean, I meanfore split,
then um, it came down. I think it was four
to one, h five to one, I forget how mean right,
but it came down to about I bought more shares, right,
(03:14):
and then the Apple is still paying a dividend, which
means that that you get these little baby shares as
I call them. Right. Consider that almost like you know,
interest even though it's not classified, it's interests. You're getting
additional shares. So not does your original investment go up
in value? Hopefully those additional dividend shares that you didn't
(03:35):
even have to pay for goes up. You know, loving money,
it goes hand in hand based upon principle. People rushed
into intimate relationships, but they don't even really take the
time to understand themselves. So that's why I use the
relationship model. Right, So before you go in, understand how
(03:57):
much how much risk? What your risk tolerance is, are
you conservative, moderate, or aggressive? Then understand your risk capacity?
How much can you afford to lose? Capacity? Folks, there's differences, right,
This is the levels. These are the gems capacity. How
much can you afford to lose? Are we talking like, hey,
I might not be able to drink my Starbucks every
(04:18):
day which adds up, or I'm gonna lose my house.
There's a big difference, you know. And everybody, I will say,
most of us have some tiny bit of their income
that they can shave off to save and invest for
their future. Oh I'm going to leave it up to
the individual because, like I said, the billionaire hast the
loose right, right. But the thing is is understanding how
(04:42):
much you can afford to lose and that is by
by um by a time metric. Right. So if you
are saving for a house, or you want to pay
for college tuition or whatever your goals are, if you
need that money in three years. Your time horizon is
three years, got it? If the market goes south, right,
(05:06):
and usually it rebounds, but we don't know how long
it will take. You might exhaust those three years, So
your risk capacity for that time frame is low. But
maybe you started investing five years ago, so so when
you started out, your risk capacity was higher. But as
(05:26):
you get closer to the time in which you you
expect to to harness that investment, your risk capacity is lower.
And you also need to understand your your investment objectives.
This is a creative question. Objectives. This is what I
want to know. Yeah, like what you know? People also
ask like why am I investing? But what understanding your
(05:49):
investment objectives? And I mean it's diverse. Like I think
you talked a little bit about timelines. They're like, hey,
I would like to put a little bit of money
into something, but I know I'm going to need it
back in two years because that's when I need to
start college. So understanding your investment objectives. So you said
time is one of those factors that goes into their
the amount. What else do we need to look at?
(06:11):
You know, understanding that that that you know just looking
at stocks? Are you a value investor. Are you a
a high growth investor? High growth requires you to take
on more risks usually that that's more of an aggressive
UH mindset. With the way I like to explain it, right,
because a lot of people drive. Before you get on
(06:33):
the investment highway, play the service road for a little while, learn,
learn how to invest, save some money. Then when you
when you're ready, because you don't need a whole lot
of money to enter the market, right, but you need
to understand yourself, so you know, when you get on
that highway, start out and rightly, don't try to go
(06:56):
all the way to the to go really fast, right
and invest in things that might be your understanding. So
start off in the right lane. The right line I
consent I call conservative. Then the middle lane is monret.
Then the left lane is for those investors that are
well skilled, and let's not talk about the h O
(07:17):
V lane that's for really accredited investors. But in that,
in that a conservative let's say portfolio is let's say
more so invested into UH income driven vehicles like high
grade bonds for the backup, John, You're you're losing me here.
(07:39):
I'm still on the on ramps. So let's take me
back to this analogy because I liked it. How do
I even get involved in investing? So I'm on the
on ramp, I'm like, okay, I got some money tucked away, Like,
let's let's go through, walk me through those baby stacks.
So you're in a service road and you started to
(07:59):
save money at a reasonable interest rate. Then you want
to open up an investment account right where you can
actually create stocks or buy bonds or other fixed income products.
So so you're actually going onto the ramp to get
on the highway to drive in that right lane. So
you could open a brokerage account. There are a lot
(08:19):
of brokerage accounts that you can start off minimum investment,
so this is actually quite accessible. Sorry you said, I
can start off in a brokerage investing account with two
two hundred fifty hundred. They're they're different investment minimums, right,
So so so the hurdle right or the barrier is
(08:42):
not really high. But guess what, it's almost like an infomercial.
But wait this more. The thing is many of these
high profile investment platforms they don't even charge commission on stocks,
so you could actually trade stocks commission free. Can you
mean an example of one of those I think I
know what you're talking about, but I'm totally comfortable with
(09:04):
the name drop here because I want people to walk away,
you know, so that they're they're merging into the lane. Now,
there's one app that people use that was in the
in the headlines about a month ago, so ago, I
don't want to save their name, but everyone's gravitating towards them,
and they don't even offer research. These other platforms like Fidelity,
(09:26):
like Charge Charles Schwa right, they have low barriers some
of them. Some accounts even have zero minimums. You start off,
you invest, and you if you want to buy chares
in a company, it's it's zero commissions. Even if you
even if you buy stocks that pay dividends and you
want to reinvest those dividends back into the stock instead
(09:49):
of taking the cash dividend, they don't even charge you
for buying additional shares to add to your portfolio. So
so the barriers the entry aren't so low. All people
have to do is focus on budgeting, getting the money right,
then getting onto that ramp, driving driving the right lane.
(10:12):
Invest into certain stocks, whether it be UH also bonds,
and here's the catch regarding bonds. Most people don't know.
We gotta learn the tasket. Tell me about bonds because
I feel like it's it's one area where you know,
we don't talk about a lot. So what what state
do you live in? I'm in Georgia? Okay, So let's
say if if you if you're a Georgian right, and
(10:34):
you want to buy a state bond or buy um
a local district bond in your state, guess what is
triple tax free? Triple tax free exactly state bonds usually,
this is how state bonds usually work. Now, if you're
(10:56):
in Georgia, you want to buy a New York bond,
where I am your subject to taxation. If you buy
a bond in your home state, the federal government will
not tax the the the the interest. Then you're helping
helping out your own state. So the state and the
(11:17):
local tax that you would normally pay on an investment
in terms of the interest is triple tax free. So
let's so let's just say let's say let's say you
earn a hundred dollars in interest on that bond, you
don't have to pay tax on it. Let's say you're
in a thirty percent tax bracket. So normally state federal,
(11:40):
local as up to let's just say that in an example,
you would have to pay thirty dollars of the one hundred.
But if you buy in state bonds, is triple tax free. Hey,
tell me about some of the other types of investments
that you're excited about. Uh, you know, I'm really a
stock stock person. But if but, if, but if I
(12:01):
was to were advised individuals who are contemplating what what
investments they should get in, and if they're a little
bit more on a conservative or moderate side, I would say,
you know, look at some preferred UH stock of different
companies that have a triple A rating, which means they're
(12:21):
they're not without risk, but they have lower Right, So
you have preferred then you have UH index funds. Right.
So let's say you you like a lot of stocks
within the SMP, and you see that the SMP is
constantly going up, right, So you can buy it index
fund of the SMP five hundred, so you actually own
(12:44):
through and by that index fund, you own five hundred
little pieces of shares in those five companies, right. Or
you can just buy a mutual fund that might invest
in let's say one hundred uh companies. John, So you've
introduced something new here. Mutual funds. We talked again. We
(13:05):
had um state bonds. Now, tell me more about a
mutual fund and talk to me about the risk profile
of that. By large, they are stocks, so it does
come with a certain level of a risk. But if
you buy a mutual fund that's say focuses on technology,
they might invest into fifty to two two, let's say
(13:27):
sixty different companies within that technology space. Right, So so
you remove the burden, so to speak, of trying to
figure out which which technology company to to invest in.
I feel like I like that. That feels like you're playing.
You're spreading your money out and hoping for the best return. Right.
(13:49):
You're you're diversifying your risk of my risk tolerance. It's
not it's not a guarantee, right because can't go down
and if stocks go down, then that mutual fund goes
down and value. But it's a way like but if
some stocks go up and some stocks go down, you
might still end up with a slight gain or a
(14:11):
slight loss, but it kind of spreads your risk. John,
this is so perfect. I feel like I'm I'm ready
to merge I want to get in it to win
it and make the Money Moves necessary. Thank you so much,
you dropped so many gems today. Thank you so much
for tuning in Money Moves audience. If you want more
or a recap of this episode, please go to the
Bank Greenwood dot com and check out the Money Moves
(14:33):
podcast blog. Money Moves is an I Heart Radio podcast
powered by Greenwood Executive produced by Sunwise Media, Inc. For
more podcast on iHeart Radio, visit the I heart Radio app,
Apple Podcast, or wherever you get your podcasts from.
I'm Tanya Sam and welcome to the Money Moves podcast.
Howard by Green. Hey everybody, and welcome back to Money Moves.
Right now, we're going to keep diving into the world
of investing, and I hope you have your pens and
(00:20):
papers ready. Who am I kidding? Welcome? I hope those
Google docs and notepad apps are ready to jot down
the hot information we're about to drop. There's a lot
about investing in markets that many of us don't understand.
Even those who have mastered the basic fundamentals and are
experienced with their stock options could always stand to learn
(00:41):
a little bit more. We're going to be joined by
our expert, who was going to teach us more about
how we go about investing and for the more experienced investors,
secret tricks of the trade. Today's deep dive into investing
is brought to you by our partners at MasterCard, bridging
the Wealth Gap together with Green. So let's bring in
(01:01):
our expert. A business executive with over twenty years experience
in the financial services industry, John Burnett has held leadership
roles at City, Merrill, Lynch, Morgan Stanley and SMP Global.
As I mentioned before, John is now the managing director
and founder of the consulting firm One Empire Group. John,
thank you so much for joining us on Money Moves.
(01:23):
Take me back outside a little bit. Can you just
give us some more ideas of different types of investments
that people are always hearing about that people might have
been afraid to ask about. You have preferred stocks that
then you have regular stocks, right, some of them have
different risk profiles. There are some stocks that are high growth, right.
(01:45):
Usually those are for really uh investors that have a
high level of risk risk tolerance, that are more aggressive
with their portfolio. So hold on one second, I'm going
to back you out right here. When we're talking about stocks,
we're talking about company ease that have basically value assigned
to their company. They've divided it all up, kind of
(02:06):
chopped it up like a pizza into stocks, and you
can then purchase these stocks and have ownership in this company.
And as the company grows and gets bigger and bigger
and bigger, so does the value of your stock and
in turn the money that's associated with that. Is that
kind of a good way to put that? Absolutely, Let's
just use Apple as an example. Perfect right over the years,
even before Apple started paying dividends, right, because they didn't
(02:28):
always pay dividends. That stopped ran up right, right, and
then it actually split, so the price came down. That
was an entry point for people that may not be
able to afford a five share stock. Yeah, we just
happened with Tesla this year, did we Not a lot
of stocks do that? Right? So I had I had
(02:50):
owned Apple, and I'm not touting Apple here, but but
I but I owned I still own Apple, but I
had a few thousand years right, and then when it
actually did that reverse split, I mean, I meanfore split,
then um, it came down. I think it was four
to one, h five to one, I forget how mean right,
but it came down to about I bought more shares, right,
(03:14):
and then the Apple is still paying a dividend, which
means that that you get these little baby shares as
I call them. Right. Consider that almost like you know,
interest even though it's not classified, it's interests. You're getting
additional shares. So not does your original investment go up
in value? Hopefully those additional dividend shares that you didn't
(03:35):
even have to pay for goes up. You know, loving money,
it goes hand in hand based upon principle. People rushed
into intimate relationships, but they don't even really take the
time to understand themselves. So that's why I use the
relationship model. Right, So before you go in, understand how
(03:57):
much how much risk? What your risk tolerance is, are
you conservative, moderate, or aggressive? Then understand your risk capacity?
How much can you afford to lose? Capacity? Folks, there's differences, right,
This is the levels. These are the gems capacity. How
much can you afford to lose? Are we talking like, hey,
I might not be able to drink my Starbucks every
(04:18):
day which adds up, or I'm gonna lose my house.
There's a big difference, you know. And everybody, I will say,
most of us have some tiny bit of their income
that they can shave off to save and invest for
their future. Oh I'm going to leave it up to
the individual because, like I said, the billionaire hast the
loose right, right. But the thing is is understanding how
(04:42):
much you can afford to lose and that is by
by um by a time metric. Right. So if you
are saving for a house, or you want to pay
for college tuition or whatever your goals are, if you
need that money in three years. Your time horizon is
three years, got it? If the market goes south, right,
(05:06):
and usually it rebounds, but we don't know how long
it will take. You might exhaust those three years, So
your risk capacity for that time frame is low. But
maybe you started investing five years ago, so so when
you started out, your risk capacity was higher. But as
(05:26):
you get closer to the time in which you you
expect to to harness that investment, your risk capacity is lower.
And you also need to understand your your investment objectives.
This is a creative question. Objectives. This is what I
want to know. Yeah, like what you know? People also
ask like why am I investing? But what understanding your
(05:49):
investment objectives? And I mean it's diverse. Like I think
you talked a little bit about timelines. They're like, hey,
I would like to put a little bit of money
into something, but I know I'm going to need it
back in two years because that's when I need to
start college. So understanding your investment objectives. So you said
time is one of those factors that goes into their
the amount. What else do we need to look at?
(06:11):
You know, understanding that that that you know just looking
at stocks? Are you a value investor. Are you a
a high growth investor? High growth requires you to take
on more risks usually that that's more of an aggressive
UH mindset. With the way I like to explain it, right,
because a lot of people drive. Before you get on
(06:33):
the investment highway, play the service road for a little while, learn,
learn how to invest, save some money. Then when you
when you're ready, because you don't need a whole lot
of money to enter the market, right, but you need
to understand yourself, so you know, when you get on
that highway, start out and rightly, don't try to go
(06:56):
all the way to the to go really fast, right
and invest in things that might be your understanding. So
start off in the right lane. The right line I
consent I call conservative. Then the middle lane is monret.
Then the left lane is for those investors that are
well skilled, and let's not talk about the h O
(07:17):
V lane that's for really accredited investors. But in that,
in that a conservative let's say portfolio is let's say
more so invested into UH income driven vehicles like high
grade bonds for the backup, John, You're you're losing me here.
(07:39):
I'm still on the on ramps. So let's take me
back to this analogy because I liked it. How do
I even get involved in investing? So I'm on the
on ramp, I'm like, okay, I got some money tucked away, Like,
let's let's go through, walk me through those baby stacks.
So you're in a service road and you started to
(07:59):
save money at a reasonable interest rate. Then you want
to open up an investment account right where you can
actually create stocks or buy bonds or other fixed income products.
So so you're actually going onto the ramp to get
on the highway to drive in that right lane. So
you could open a brokerage account. There are a lot
(08:19):
of brokerage accounts that you can start off minimum investment,
so this is actually quite accessible. Sorry you said, I
can start off in a brokerage investing account with two
two hundred fifty hundred. They're they're different investment minimums, right,
So so so the hurdle right or the barrier is
(08:42):
not really high. But guess what, it's almost like an infomercial.
But wait this more. The thing is many of these
high profile investment platforms they don't even charge commission on stocks,
so you could actually trade stocks commission free. Can you
mean an example of one of those I think I
know what you're talking about, but I'm totally comfortable with
(09:04):
the name drop here because I want people to walk away,
you know, so that they're they're merging into the lane. Now,
there's one app that people use that was in the
in the headlines about a month ago, so ago, I
don't want to save their name, but everyone's gravitating towards them,
and they don't even offer research. These other platforms like Fidelity,
(09:26):
like Charge Charles Schwa right, they have low barriers some
of them. Some accounts even have zero minimums. You start off,
you invest, and you if you want to buy chares
in a company, it's it's zero commissions. Even if you
even if you buy stocks that pay dividends and you
want to reinvest those dividends back into the stock instead
(09:49):
of taking the cash dividend, they don't even charge you
for buying additional shares to add to your portfolio. So
so the barriers the entry aren't so low. All people
have to do is focus on budgeting, getting the money right,
then getting onto that ramp, driving driving the right lane.
(10:12):
Invest into certain stocks, whether it be UH also bonds,
and here's the catch regarding bonds. Most people don't know.
We gotta learn the tasket. Tell me about bonds because
I feel like it's it's one area where you know,
we don't talk about a lot. So what what state
do you live in? I'm in Georgia? Okay, So let's
say if if you if you're a Georgian right, and
(10:34):
you want to buy a state bond or buy um
a local district bond in your state, guess what is
triple tax free? Triple tax free exactly state bonds usually,
this is how state bonds usually work. Now, if you're
(10:56):
in Georgia, you want to buy a New York bond,
where I am your subject to taxation. If you buy
a bond in your home state, the federal government will
not tax the the the the interest. Then you're helping
helping out your own state. So the state and the
(11:17):
local tax that you would normally pay on an investment
in terms of the interest is triple tax free. So
let's so let's just say let's say let's say you
earn a hundred dollars in interest on that bond, you
don't have to pay tax on it. Let's say you're
in a thirty percent tax bracket. So normally state federal,
(11:40):
local as up to let's just say that in an example,
you would have to pay thirty dollars of the one hundred.
But if you buy in state bonds, is triple tax free. Hey,
tell me about some of the other types of investments
that you're excited about. Uh, you know, I'm really a
stock stock person. But if but, if, but if I
(12:01):
was to were advised individuals who are contemplating what what
investments they should get in, and if they're a little
bit more on a conservative or moderate side, I would say,
you know, look at some preferred UH stock of different
companies that have a triple A rating, which means they're
(12:21):
they're not without risk, but they have lower Right, So
you have preferred then you have UH index funds. Right.
So let's say you you like a lot of stocks
within the SMP, and you see that the SMP is
constantly going up, right, So you can buy it index
fund of the SMP five hundred, so you actually own
(12:44):
through and by that index fund, you own five hundred
little pieces of shares in those five companies, right. Or
you can just buy a mutual fund that might invest
in let's say one hundred uh companies. John, So you've
introduced something new here. Mutual funds. We talked again. We
(13:05):
had um state bonds. Now, tell me more about a
mutual fund and talk to me about the risk profile
of that. By large, they are stocks, so it does
come with a certain level of a risk. But if
you buy a mutual fund that's say focuses on technology,
they might invest into fifty to two two, let's say
(13:27):
sixty different companies within that technology space. Right, So so
you remove the burden, so to speak, of trying to
figure out which which technology company to to invest in.
I feel like I like that. That feels like you're playing.
You're spreading your money out and hoping for the best return. Right.
(13:49):
You're you're diversifying your risk of my risk tolerance. It's
not it's not a guarantee, right because can't go down
and if stocks go down, then that mutual fund goes
down and value. But it's a way like but if
some stocks go up and some stocks go down, you
might still end up with a slight gain or a
(14:11):
slight loss, but it kind of spreads your risk. John,
this is so perfect. I feel like I'm I'm ready
to merge I want to get in it to win
it and make the Money Moves necessary. Thank you so much,
you dropped so many gems today. Thank you so much
for tuning in Money Moves audience. If you want more
or a recap of this episode, please go to the
Bank Greenwood dot com and check out the Money Moves
(14:33):
podcast blog. Money Moves is an I Heart Radio podcast
powered by Greenwood Executive produced by Sunwise Media, Inc. For
more podcast on iHeart Radio, visit the I heart Radio app,
Apple Podcast, or wherever you get your podcasts from.
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