July 28, 2025 • 37 mins
Portfolio Pitfalls: 5 Mistakes You Can’t Afford to Make – Timing the market, lack of
international equity exposure, taking on too much investment risk, attempting to predict the
movement of interest rates, and lacking protection against inflation are just some of the mistakes many investors can make. Chris Boyd, Jeff Perry, and Russ Ball offer advice on these issues and others as they explore how common portfolio mistakes can derail retirement plans. See below a link to a related Morningstar article.
#financialplanning #investing #stocks #bonds #stockmarket #investormistakes #inflation
#markettiming #internationalinvesting #investmentrisk #interestrates
https://www.morningstar.com/personal-finance/5-investment-portfolio-mistakes-avoid
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome to Something More with Chris Boyd.
I'm Chris Boyd here with Jeff Perry and
Russ Ball, all of us from the AMR
team at Wealth Enhancement.
Thanks for joining us.
(00:43):
And today we're talking about the portfolio pitfalls,
five mistakes you can't afford to make.
When we think about financial planning and portfolio
management, it's a big part of what we
think about.
There are a lot of things to consider
when it comes to your investing.
So we're going to talk about a few
of them.
And candidly, there's so many possible things to
(01:05):
think about that you can really, there's a
lot of opportunities to go wrong when it
comes to investing.
So we'll at least try to help you
identify some of the things that you should
pay attention to.
You may know some, you may not.
So.
Chris, why don't you think one of the
least talked about, but maybe most valuable things
that a good financial advisor does is helps
(01:27):
you not make those mistakes.
Yeah, that's right.
You know, just avoiding mistakes is a big
way to get ahead.
Right.
Looking over the list, you know, if you're
a, and we're going to go through these
five and maybe a couple more, but these
are things that, you know, the average Joe
or Jane, when they're not a student of
(01:49):
the market or they're reacting emotionally, or they're
watching the news or to their neighbor that
come up and, you know, they're, they seemingly
make sense at the time in your mind,
but, you know, history is proven that most
of these don't.
Well, and I think particularly the first one,
when it comes to the, the notion of
(02:10):
timing the market or doing an all in
or all out kind of a mindset, this
one is one that is such an easy
one to make that, you know, we look
at the world and the news is bad
and there's an election looming, there's a war
happening, there's.
(02:31):
Tariffs.
Tariffs these days, right?
There's all kinds of variables that, you know,
pop up and create anxiety.
This time it's different.
This time it's different.
Yes.
Well, I think it's, it's, it's not to
say that there aren't times when we should
(02:52):
reassess our tolerance for risk.
And there's a difference in thinking about saying,
I, maybe I just don't want to go
through as much decline, which is inevitable when
I have investments that have risk.
And candidly, everyone who invests has investments that
(03:14):
have risk.
It's just a question of what risks you're
deciding to endure.
I'll give you an example.
What I mean?
Oh, I don't want to have risk.
I'm going to have CDs.
Well, guess what?
You, you have risk.
You have different risk.
You have risks of inflation or you're exposed
to the risk of asset depletion because you're
(03:35):
not making as much that opportunity risk in
a sense that you're, you're giving up performance
ultimately by trying to be more safe.
You may actually put yourself at more risk
of running out of resources because you're not
getting as an adequate rate of return to,
to meet your needs over time.
(03:56):
That's not to say that that can't be
a way they say, I want that low
risk.
That's fine.
But you might have to do more to
protect yourself from these other kinds of risks
that compared to someone who would invest in
a more diversified manner.
Let's say I don't want market risk.
You know, that's an understandable concern.
People worry about that.
(04:17):
And they think about these, these variables you
know, the news of the day that creates
that anxiety and say, you know, they have
the inclination to say, I'm, I'm just going
to get out.
I'll get back in when things settle down,
you know, never happens.
(04:40):
Things are never settled by No.
And usually if they are, you've missed the,
a meaningful part of your performance because markets
anticipate, they don't wait for something to be
resolved before they start to move.
So you know, when you time the market,
we've talked about this many times, I feel
(05:02):
like I'm broken record here, but you have
to be right twice, right?
You have to get out when markets are
high, but you have to get in when
markets are low.
And that's where most people falter when they
try to time things because they're not ready
to get in because they're of their anxieties
(05:22):
that are still out there.
So, you know, better to think about, look,
if you, if you feel anxious, you know,
if you want to make some adjustment on
the edges, I think that's a way to
scratch that itch without necessarily doing damage, you
know, that you can, you can moderate your
exposure to risk without saying I'm all in,
(05:45):
or I'm all out.
You know, as I started off, you know,
sometimes your tolerance for risk changes as we
age, we tend to want to have less.
So, okay.
Maybe you move yourself down a notch on
the asset allocation mindset.
Maybe that's an appropriate response to circumstances without
(06:07):
going overboard and really trying to time the
market of getting all in or all out.
If you have the right time horizon and
risk tolerance, your best bet typically is to
stay the course, you know, be invested.
(06:28):
But sometimes it's challenging to know if I've
got cash and I have these worries, should
I invest today?
Should I wait?
Have I missed the moment?
I'll wait for it to decline and then
I'll get in.
These are not generally the, it's so easy
to fall prey to these kinds of mindsets
(06:50):
that you tend to miss a lot when
you do that.
So, Russ, what's some of the ways that
people can try to respond to these kinds
of concerns?
Well, I just want to acknowledge what you're
saying in the idea that, you know, even
in my investing career, it's very easy to
(07:13):
get caught up in the present moment and
like, what's going on in the news?
What's going on with the, you know, big
investment bank prognosticators that say, like, this is
a good time to invest.
This is not a good time to invest.
And it's like, okay, like in that moment,
yeah, let me not put all my money
into the market because like, there's these predictions
that these things are going to happen and
they know what's going on.
And of course, the market just kind of
(07:34):
does its thing.
And then you turn around and you're like,
well, if I had invested that money, it
would have grown to X amount.
You know, we're in a moment where it's
easier to forget that sometimes it's difficult to
be an investor.
You know, when you look at the last
15 years, yeah, there've been disruptions, but they've
(07:57):
been short-lived.
You know, if you were an investor in
the 2000s, you had big declines that lasted
multiple years, 2000, 2001, 2002.
The recession took on, we had terror, we
had a lot of reasons why markets were
(08:19):
driven lower coming off the dot-com boom,
you know, irrational exuberance.
And so you got to a point where
it was a three-year slog and it
was tough to be an investor to see
accounts go down 50%.
(08:39):
Well, the good news is the market bottomed
and they started to come back and then
they came back.
And then we had 2007, the mortgage crisis,
the beginning of the financial crisis, another period
of time where markets went down and cut
(09:01):
in half, in that case, in short order
because of worry of systemic crisis, right?
Was the financial system really in jeopardy?
Fortunately, cooler heads prevailed, some good policy decisions
helped to mitigate those risks.
(09:23):
And we've had, you know, we had a
very prolonged low interest rate environment.
I was talking with someone the other day
and they're saying, gosh, I miss those low
interest rate environment for the mortgages and stuff.
And it's like, well, but that was the
backdrop of a real problem, a struggling economy.
We don't really want that.
(09:44):
I understand nobody wants higher mortgage rates, but
at the same time, we don't necessarily want
the need for this zero interest rate environment
because it was really implying the economy was
struggling.
So we've kind of gotten past a lot
of that, but we've been through experiences where,
(10:05):
you know, it takes many years for the
market to recover to its prior highs.
But over the last 15 years, maybe not
so much, right?
It goes down in the pandemic and it
comes back within a year, within months.
You know, we have these disruptions and they're
not long lived.
So, you know, I think we do have
(10:28):
to recognize that that's not always the case
that we have this rapid recovery.
And so it's understandable when people want to
be protective of principal because they may not
want to endure, let's say, a three year
decline and then maybe a three or four
year or five year recovery, you know, whatever
(10:49):
it might be.
And that can happen.
So that is reasonable to say, oh, maybe
I'll scale back my risk if I'm really
worried.
Oftentimes we hear it, we all hear this,
Jeff, right?
With retirees who say, I don't know if
I'm going to even be around that long,
you know, like five years, long-term, what's
(11:12):
long-term?
I don't have long-term, you know, who
knows, right?
They may actually, but they often think in
terms of, well, I don't know how long
I have, so therefore.
And sometimes that frees people up to say,
oh, I can take risk.
I've got enough.
I don't need to worry about it.
And other times I don't need to take
risk.
Why should I worry about having to have
(11:34):
the stress of the market?
You know, that kind of mindset.
Big picture, we want to be measured, deliberate,
not drastic in our makeup, in our movements,
in our revisions of our portfolio.
You want to comment on some of this,
Jeff?
(11:55):
You know, I think you had a good
outline of the markets, ups and downs.
And, you know, think about if you were
dollar-cost averaging all those years, you know,
when do you get in, right?
We'll talk about that first, maybe.
If you were dollar-cost averaging in those
ups and downs, you were buying more shares
of your investments, mutual funds or whatever, at
(12:17):
lower prices.
It would have been a good, great time.
You know, when you're younger and you see
these downturns, you should almost get excited, right?
Because you're buying things on sale and you
don't have to worry about, is this a
good month to invest?
Just invest every month.
So slowly building your, accumulating your assets.
And on the way out, similarly.
(12:39):
Exactly.
That's where I was going.
Go ahead.
Okay.
Sorry.
That notion that we do think markets are
going to rise over time.
You know, the broad direction trend of things
is to, to increase in value.
Companies will be more profitable ultimately.
So you were talking about dollar-cost averaging
(12:59):
and that, that works on the way out
too.
It does.
On the way in.
So sorry to interrupt.
No, there's no need for much extra on
that.
Just other than just sticking to your plan
and dollar-cost averaging in or out, you
know, slow and steady, have a plan, rely
on your financial plan and you will not
(13:21):
have to worry about those things.
I think the, you know, the concept or
the mistake of not timing the market is
maybe been, should be emphasized in the past,
I don't know, 10 years or so when
politics is driving so much of our conversations
and, you know, our emotions.
And so if you were worried about President
(13:44):
Biden, when he was elected, that the stock
market was going to be terrible, you were
wrong.
And if you were worried about when President
Trump was elected, the stock market was going
to crash.
You're wrong because the market isn't really about,
it's affected by policies that pass in Congress
and that are of the president, but long
term, the market's about corporate earnings and the
(14:06):
trend of interest rates, right?
I mean, how many times do we?
Yeah.
That's right.
And so policy certainly helps or hurts, you
know, tax policy or fiscal policy or stimuluses,
they affect those things.
But ultimately, you know, we talked about this
coming up to every election.
(14:27):
The data is clear that it really doesn't
matter long-term what political party is in
power, that it matters.
We've had these conversations with clients.
That's right.
As you said, Obama's coming into power.
People, I remember Republican clients were like, oh
my gosh, everything's going to hell.
Let's get out.
You know, Trump comes, was it Trump after
(14:49):
Obama?
Yeah.
Trump comes into power and, you know, the
Democrat clients are like, oh my gosh, this
is going to be terrible.
And Biden and so on, right?
You go back and forth and just this
anxiety that you outlined.
So if you get out at the beginning
of any of those administrations, you lost an
opportunity to have a good four years of
returns.
(15:10):
Whichever, whichever one it is, pick one.
So, you know, Mr. Bolu of Vanguard coined
the phrase, it's financial investing is successful based
upon your time in the market, not your
timing of the market.
And to Russ's point earlier, you know, you
see the talking heads on TV and you
(15:31):
can be totally convinced because they're at their
comments that you got to get out or
you got to get in because this is
it.
This is, this time is different.
And this guy, a woman knows what they're
talking about.
And it's just, it's just not proven through
history that.
We spent a lot of time on the
first of these five mistakes.
(15:51):
You know what?
It is the biggest, it's the biggest one.
Yeah.
I think it's the biggest, it's worthy of
that extra time.
But let's go on to talk about some
of the other mistakes.
So what are some of the other ones
that we want to talk about?
Another one we want to talk about is,
well, I don't know if I want to
talk about it.
I'm going to have a maybe contrary view
to the materials that we have, but a
(16:13):
mistake is not having enough international exposure.
Yeah.
So it is common.
It is, no matter what country you live
in, it is the norm to have a
home country bias.
Uh, you, you prefer the companies, you know,
and, uh, are your national brand familiarity, right?
(16:35):
Um, and the U S uh, the U
S represents a very large percentage of the
world economy.
U S companies do have, in many cases,
these mega cap companies that have international, uh,
earnings.
So they have an element of international exposure,
but, um, there is an argument to have
international investments, uh, differences in, um, multiples differences
(17:02):
in types of industries.
Um, the, uh, impact of, uh, currencies, uh,
there's, there's, um, reasons to think it might
be appropriate.
Now, you know, the, if you were to
compare, uh, an all stock portfolio that is,
uh, comprised of, uh, of the all country
(17:25):
world index, let's say an index that is,
uh, developed economies around the world.
Uh, you might expect to have somewhere around
60, 65% United States and 35 or
40% non-U S uh, most investors
do not really have that, uh, reflected in
(17:47):
that way that they've put their international exposure.
If that's by cap weight exposure across the,
across the globe.
Um, so, um, well, I think it's common
for people to have, um, a U S
bias.
Um, and we run into people who want
only U S, but, uh, we do think
(18:09):
it's, there's virtue in having some non-U
S we're seeing that this year is one
of the reasons, uh, you want some, uh,
that being said, we've also seen over the
last decade, um, U S has dominated performance
over many of the international funds that you
might utilize.
So, but the reason we are diversified is
(18:31):
because we don't know in a given year,
whether there's going to be better returns from
this way or that way.
So we want to have a blend of
things.
It's, it's really hard or impossible if you're
a diversified investor, not to have foreign exposure.
Um, if you invest, you know, in the
S and P 500, for example, which is,
(18:53):
you know, a part of most people's investments,
even if they don't know about it, um,
41% of the revenue of those S
and P 500 companies are from non-U
S sources, 59 are from purely U S
sources.
So even if you choose not to like
overtly choose not to want to have foreign
(19:14):
exposure, you have foreign exposure by how the
U S companies are impacted by their businesses
overseas.
Yeah.
It's, it's funny.
I, I, uh, remember going to a talk,
this was probably 20 years ago and the
portfolio manager was saying, well, you know, uh,
on the one hand, we've got Procter and
Gamble, it's a U S company, but it
(19:36):
derives.
And I don't remember what the number was,
but, um, you know, 60% of its
profits from overseas or whatever number is, forgive
me for not remembering.
And then they were like, but Unilever, well,
that's a foreign company, but that gets most
of its profits from the United States, you
know, whatever.
So, you know, it's an interesting dynamic where
(19:57):
you can run into these kinds of scenarios
where it's, um, it's not as, as, uh,
clear, where it's domiciled doesn't mean it's, you
know, and, but there's currency components of that.
Cause as you make profit overseas, but then
you, you turn that into dollars, what happens
and so forth.
(20:17):
Right.
So I'm not sure.
So when I was suggesting that this mistake
was not having enough foreign exposure, I think
the point is that a lot of people
don't have any, you know, and it's reasonable
to think that you should have some and
you should have how much, maybe that's part
(20:37):
of the art of your portfolio.
It's not necessarily a science always.
Right.
Right.
Uh, another common mistake that people make and
you touched on it in the beginning of
your comments, Chris is taking on too much
risk near retirement.
And, uh, I guess you could even say,
(20:57):
uh, as you age, right.
You know, it's just not, it's not just
because if you retire at 65, which is
a lot of people are retiring before that.
Yeah.
You know, as you noted, you have decades
likely to be an investor, to be an
investor.
Even if you're 65, we project males, you
(21:18):
know, we're just doing a, unless we have
a reason.
Otherwise when I'm projecting cash flows, we're predicting
to 92 for a male and 94 for
a woman.
So, you know, you're 27 years or 29
years that you will be needing to have
that money last maybe longer, hopefully longer.
And why, why those ages we, we use
(21:39):
the top 25 percentile, those who make it
to retirement, what's the life expectancy for men
and women.
If you're in the top 25 percentile, you
get to the early nineties, 92, 94.
So you are a long-term investor to
your point.
That being said, I think it is a
(22:02):
fair critique to think that there are oftentimes
people will try to race through the finish
line, the finish line being their retirement.
And it's go, go, go, go, go.
I got to build that nest egg full
speed ahead.
Damn the torpedoes full speed ahead.
And there can be times when, you know,
(22:25):
you have a bad timing and you know,
you're about to retire.
And then the market goes down, you know,
25, 30 percent and it takes three years
to recover.
That might cause you to have to push
your retirement a year or two in the
process to recalculate your numbers.
So you don't want to be, you don't
want to be ignoring your allocation as you
(22:46):
get closer to this retirement.
As you said, it's not as though you
suddenly retire and you take everything off the
table, but you don't necessarily want to overstate
your risk.
And I think there's a common inclination to
be very aggressive with investing because prior to
(23:06):
this time you're thinking I'm, you know, dollar
cost averaging I'm putting in and that kind
of mindset.
And I've seen it recently.
We had a conversation not long ago where
it's just that kind of thing where you
get a little nervous that someone's got, you
know, the bulk of it is stock and
you know, they're a year or two away
(23:27):
from wanting to pull the trigger.
And maybe that's, maybe that's getting to the
point where we start to want to scale
back a little bit.
Yep.
And, you know, developing a liquidity bucket is
we like to talk about.
Yeah, that's a really good point.
Such an important part here.
If you're going to be withdrawing stock and
(23:47):
you're retiring for your income, that's one story.
But if you have a liquidity bucket, meaning
money that's segregated away from equity investments, maybe
even away from bond investments, just cash.
And that's where you're going to be drawing
on a year or two, but you could
draw a year or two on those funds
without any market risk.
(24:09):
Maybe that's a different story, right?
Yeah, absolutely.
I have one other note on this and
Jeff, you've talked about this in the past
too, where, you know, you'll get a job,
you'll stay in that job for a long
time, have your 401k and you have a
S&P 500 fund in the 401k and
then kind of just don't touch it and
just wait until you retire.
(24:30):
And then if that's the case, if you're
not really like rebalancing or you don't have
that target fund that does it for you,
you could be really subject to that sequence
of return risk.
And the year after you retire, you're still
in that 401k, you haven't rolled it over
and you're all in S&P 500 and
then the stock market goes down.
So that's another plug to just keep track
(24:52):
of your investments in your 401k.
It's not really just like a set it
and forget it forever type of thing.
An analogy to this, if you're not ready
for retirement and maybe you're saving money for
your college, for your children, is you're save,
save, save and invest in a 529 and
you're getting close to the student going to
(25:13):
college.
As our listeners might know, this is very
relevant to my family at the moment.
And the funds that have been invested have
been doing really well, but you're going to
have to start paying tuition bills.
Do you leave it in that market exposure?
And maybe the bill comes due and we
just had a 20% market correction, which
(25:35):
is normal.
So it's the same kind of thinking when
you're getting into a new phase, whatever it
is, it doesn't have to be retirement.
It doesn't have to be college spending, but
it's prudent to de-risk a bit so
you don't get caught by market timing the
other way.
We talked about market timing.
Right.
(25:55):
I think that's really important not to overstate
your risk tolerance.
If you're timing, you have a finite time
on when that college tuition bill is going
to be due, right?
Okay.
I can maybe put it off a year
or two because of, you know, bad market
conditions and, oh, well, maybe we'll save it
(26:18):
for junior year instead of sophomore year or
whatever, you know, that kind of thing.
But yeah, you want a portfolio that probably
should be gradually reducing risk exposure so that
when the time comes that you need those
funds, you're not totally subject to the whims
of the market.
Right.
(26:38):
Think about if you were in that situation
and you're saving, you know, through the 2000s
and your child's going to school in 2007
or 8, you have a period there of
several years that you were going to wish
you took your...
More recently, I remember seeing someone who hadn't
been in an age-based plan and their
(26:59):
student in 2020, their students in college.
Right.
Well, you know, fortunately for them, you know,
markets recovered.
Right.
But it doesn't always, as we said, you
know.
Yeah.
So that's a great point.
So that whole issue of taking too much
risk.
I think a lot of times there was
another item was mentioned here was the issue
(27:21):
of interest rate risk.
Market timing with interest rate risk, right?
Yeah.
What's going to happen and how does that
affect my bond portfolio and how should I
be positioning my bonds?
Trying to take too much duration risk potentially
can be a challenge.
(27:44):
I think this is one of those examples
where bonds, more often than not, clients will
say, I just don't get bonds.
I don't understand.
It's not that it's all that complicated.
I understand what a bond is, but I
don't get how the whole bond market works.
You know, this whole relationship between interest rates
and prices.
And it's just, it's a little bit confusing
(28:05):
at times.
Right.
And when you think about the risks, okay,
there's interest rate risk and how that can
affect a bond pricing, but there's also credit
risk and how that can affect bond pricing.
And so oftentimes we'll see people take too
much of one type of risk or another.
Tracing yield perhaps.
(28:27):
Tracing yield, taking on too much credit risk,
or maybe going longer term on their bonds,
trying to get more yield and taking on
more interest rate risk that can fluctuate as
interest rates move.
So this is again, I think one of
those instances where working with someone can probably
(28:49):
add value.
If you just buy the aggregate index, you
know, you may not be exactly where you
want to be on the yield curve.
And there may be reasons to make adjustments
over time with what's going on in the
(29:31):
market.
So not having enough inflation protection is the
last mistake that the article we were referencing,
which was a Morningstar article.
We'll share that with our listeners and podcast
notes.
What do you want to say on this?
(29:52):
I mean, stocks, great way to manage interest
rate, the inflation risk, right?
Typically, historically, yeah.
Tends to help mitigate that risk.
We tend to get better returns and therefore
outpace inflation.
When it comes to specifically on the bond
side, there's a couple of bonds designed to
(30:15):
keep pace with inflation.
They don't always work the way investors expect,
a little bit convoluted, but you can think
in terms of inflation protected treasuries tips or
an I-bond.
Everybody went out and got I-bonds a
few years ago when inflation was really high.
Yeah.
(30:35):
We keep running into that.
I was smiling because Russ and I keep
with people who had them when the 9
% rate hit and it was pretty exciting.
They didn't realize they were variable rates.
Yeah.
It's not as good right now, but still,
it's a way to hedge that risk and
manage some of that concern with low risk
(30:58):
money.
I almost say no risk money.
Nothing's no, but there's nothing safer than a
government bond.
It's a government bond.
Think of akin to a savings bond in
terms of risk level, but this has an
inflation component to it.
Tips also are a form of treasury, but
(31:20):
keep in mind, there's varying degrees of maturity
dates.
Most people buy it through a bundle, through
a fund.
You can buy them directly individually as well.
These are ways.
I think this is another example, though.
Sometimes it's not as straightforward as it might
(31:41):
seem.
When I was looking at the materials and
saw this topic about basically inflation risk, I
thought of the individuals who are doing their
financial plan by themselves, perhaps, and they are
calculating how much they have for expenses and
if they retire, where their income comes from.
(32:02):
They have a kind of, oh, I have
enough money.
Let's put it in the mattress.
Not literally, but let's just take the risk
off.
Let's put it in the bank or spread
it around these banks where there's even insured
concerns that people have at banks.
They just don't appreciate the impact that inflation
has on your cash flow over decades.
(32:28):
That's a big risk.
In some ways, I think it's a bigger
risk than some of the risks that people
actually worry about.
Another one is where people will see the
CD rates, which are higher than they've been
over the last 20 years or more.
They'll say, okay, well, if I have this
much money and I put this much in
a CD and I just keep rolling them
(32:49):
into new CDs at 4% or 3
.5%, that should be good.
But not really thinking that CDs aren't always
going to be at that high rate.
Interest rates are going to change and so
are those CD rates.
Then inflation is going to continue and it
could be higher than whatever percent you're projecting.
Definitely, I think the article is just pointing
out stocks have been historically the best hedge
(33:12):
against inflation.
Yeah.
Are you really making ground with inflation when,
let's say you're getting that 3.5%
or 4%, but now you have to pay
tax and inflation is maybe somewhere around 3
% these days, a little bit below, but
getting close to 3% on the core.
Are you really making progress or are you
(33:35):
just treading water?
That's really what you should expect from a
CD is really to be somewhere around the
rate of inflation.
I want to add one other thing before
we wrap up, and that is the idea
of commodities.
We keep finding people thinking that the way
they're going to hedge risk is through gold
(33:56):
or precious metals or some kind of commodity
exposure.
As much as that can be a place
where it can help manage inflation, it's not
a riskless asset.
It's one of these situations where you should
think about commodities in a way that's similar
(34:16):
to a risk asset like an equity in
some respects, not moved by the same forces,
but there may be higher performance opportunity, but
we've seen for many years where it's been
somewhat unappealing returns.
When it comes to commodities, it's all driven
(34:37):
by perception of value, not by revenue and
earnings and profitability.
To that point, we're going to talk about
this more in a conversation with Brian Regan,
our firm's senior portfolio manager, our team's senior
portfolio manager in an upcoming episode.
(34:58):
We'll talk more about gold as an investment,
good, bad, indifferent, what to make of it
in the future.
Lots to consider.
We've scratched the surface.
We talked for over a half an hour
about just these five topics that can be
relevant to thinking about risk and mistakes you
(35:20):
want to avoid, but there are others and
there's always more.
It's not just on a macro level.
There's also what's happening in the world around
us, how to interpret that.
It's also on the investment level specifically.
It can be very challenging for someone to
navigate these kinds of issues as an investor,
(35:42):
and there's a lot of room for challenge,
mistakes to happen.
It's a good idea to get some assistance
along the way.
Work with a quality financial advisor who is
a fiduciary and can be a resource to
you, both as a counsel and thinking about
(36:03):
your financial plan, how it all fits together,
but also in the way you invest your
portfolio.
We offer a complimentary consultation and welcome you
to take advantage of that.
Give us a call, reach out, and we
hope to see you sometime soon.
Until next time, everybody, keep striving for something.
Thank you for listening to Something More with
(36:24):
Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
.com or call us toll-free at 866
-771-8901 or send us your questions to
(36:46):
amr-info at wealthenhancement.com.
You're listening to Something More with Chris Boyd
Financial Talk Show.
Wealth Enhancement Advisory Services and Jay Christopher Boyd
provide investment advice on an individual basis to
clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
to your specific situation.
(37:08):
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome to Something More with Chris Boyd.
I'm Chris Boyd here with Jeff Perry and
Russ Ball, all of us from the AMR
team at Wealth Enhancement.
Thanks for joining us.
(00:43):
And today we're talking about the portfolio pitfalls,
five mistakes you can't afford to make.
When we think about financial planning and portfolio
management, it's a big part of what we
think about.
There are a lot of things to consider
when it comes to your investing.
So we're going to talk about a few
of them.
And candidly, there's so many possible things to
(01:05):
think about that you can really, there's a
lot of opportunities to go wrong when it
comes to investing.
So we'll at least try to help you
identify some of the things that you should
pay attention to.
You may know some, you may not.
So.
Chris, why don't you think one of the
least talked about, but maybe most valuable things
that a good financial advisor does is helps
(01:27):
you not make those mistakes.
Yeah, that's right.
You know, just avoiding mistakes is a big
way to get ahead.
Right.
Looking over the list, you know, if you're
a, and we're going to go through these
five and maybe a couple more, but these
are things that, you know, the average Joe
or Jane, when they're not a student of
(01:49):
the market or they're reacting emotionally, or they're
watching the news or to their neighbor that
come up and, you know, they're, they seemingly
make sense at the time in your mind,
but, you know, history is proven that most
of these don't.
Well, and I think particularly the first one,
when it comes to the, the notion of
(02:10):
timing the market or doing an all in
or all out kind of a mindset, this
one is one that is such an easy
one to make that, you know, we look
at the world and the news is bad
and there's an election looming, there's a war
happening, there's.
(02:31):
Tariffs.
Tariffs these days, right?
There's all kinds of variables that, you know,
pop up and create anxiety.
This time it's different.
This time it's different.
Yes.
Well, I think it's, it's, it's not to
say that there aren't times when we should
(02:52):
reassess our tolerance for risk.
And there's a difference in thinking about saying,
I, maybe I just don't want to go
through as much decline, which is inevitable when
I have investments that have risk.
And candidly, everyone who invests has investments that
(03:14):
have risk.
It's just a question of what risks you're
deciding to endure.
I'll give you an example.
What I mean?
Oh, I don't want to have risk.
I'm going to have CDs.
Well, guess what?
You, you have risk.
You have different risk.
You have risks of inflation or you're exposed
to the risk of asset depletion because you're
(03:35):
not making as much that opportunity risk in
a sense that you're, you're giving up performance
ultimately by trying to be more safe.
You may actually put yourself at more risk
of running out of resources because you're not
getting as an adequate rate of return to,
to meet your needs over time.
(03:56):
That's not to say that that can't be
a way they say, I want that low
risk.
That's fine.
But you might have to do more to
protect yourself from these other kinds of risks
that compared to someone who would invest in
a more diversified manner.
Let's say I don't want market risk.
You know, that's an understandable concern.
People worry about that.
(04:17):
And they think about these, these variables you
know, the news of the day that creates
that anxiety and say, you know, they have
the inclination to say, I'm, I'm just going
to get out.
I'll get back in when things settle down,
you know, never happens.
(04:40):
Things are never settled by No.
And usually if they are, you've missed the,
a meaningful part of your performance because markets
anticipate, they don't wait for something to be
resolved before they start to move.
So you know, when you time the market,
we've talked about this many times, I feel
(05:02):
like I'm broken record here, but you have
to be right twice, right?
You have to get out when markets are
high, but you have to get in when
markets are low.
And that's where most people falter when they
try to time things because they're not ready
to get in because they're of their anxieties
(05:22):
that are still out there.
So, you know, better to think about, look,
if you, if you feel anxious, you know,
if you want to make some adjustment on
the edges, I think that's a way to
scratch that itch without necessarily doing damage, you
know, that you can, you can moderate your
exposure to risk without saying I'm all in,
(05:45):
or I'm all out.
You know, as I started off, you know,
sometimes your tolerance for risk changes as we
age, we tend to want to have less.
So, okay.
Maybe you move yourself down a notch on
the asset allocation mindset.
Maybe that's an appropriate response to circumstances without
(06:07):
going overboard and really trying to time the
market of getting all in or all out.
If you have the right time horizon and
risk tolerance, your best bet typically is to
stay the course, you know, be invested.
(06:28):
But sometimes it's challenging to know if I've
got cash and I have these worries, should
I invest today?
Should I wait?
Have I missed the moment?
I'll wait for it to decline and then
I'll get in.
These are not generally the, it's so easy
to fall prey to these kinds of mindsets
(06:50):
that you tend to miss a lot when
you do that.
So, Russ, what's some of the ways that
people can try to respond to these kinds
of concerns?
Well, I just want to acknowledge what you're
saying in the idea that, you know, even
in my investing career, it's very easy to
(07:13):
get caught up in the present moment and
like, what's going on in the news?
What's going on with the, you know, big
investment bank prognosticators that say, like, this is
a good time to invest.
This is not a good time to invest.
And it's like, okay, like in that moment,
yeah, let me not put all my money
into the market because like, there's these predictions
that these things are going to happen and
they know what's going on.
And of course, the market just kind of
(07:34):
does its thing.
And then you turn around and you're like,
well, if I had invested that money, it
would have grown to X amount.
You know, we're in a moment where it's
easier to forget that sometimes it's difficult to
be an investor.
You know, when you look at the last
15 years, yeah, there've been disruptions, but they've
(07:57):
been short-lived.
You know, if you were an investor in
the 2000s, you had big declines that lasted
multiple years, 2000, 2001, 2002.
The recession took on, we had terror, we
had a lot of reasons why markets were
(08:19):
driven lower coming off the dot-com boom,
you know, irrational exuberance.
And so you got to a point where
it was a three-year slog and it
was tough to be an investor to see
accounts go down 50%.
(08:39):
Well, the good news is the market bottomed
and they started to come back and then
they came back.
And then we had 2007, the mortgage crisis,
the beginning of the financial crisis, another period
of time where markets went down and cut
(09:01):
in half, in that case, in short order
because of worry of systemic crisis, right?
Was the financial system really in jeopardy?
Fortunately, cooler heads prevailed, some good policy decisions
helped to mitigate those risks.
(09:23):
And we've had, you know, we had a
very prolonged low interest rate environment.
I was talking with someone the other day
and they're saying, gosh, I miss those low
interest rate environment for the mortgages and stuff.
And it's like, well, but that was the
backdrop of a real problem, a struggling economy.
We don't really want that.
(09:44):
I understand nobody wants higher mortgage rates, but
at the same time, we don't necessarily want
the need for this zero interest rate environment
because it was really implying the economy was
struggling.
So we've kind of gotten past a lot
of that, but we've been through experiences where,
(10:05):
you know, it takes many years for the
market to recover to its prior highs.
But over the last 15 years, maybe not
so much, right?
It goes down in the pandemic and it
comes back within a year, within months.
You know, we have these disruptions and they're
not long lived.
So, you know, I think we do have
(10:28):
to recognize that that's not always the case
that we have this rapid recovery.
And so it's understandable when people want to
be protective of principal because they may not
want to endure, let's say, a three year
decline and then maybe a three or four
year or five year recovery, you know, whatever
(10:49):
it might be.
And that can happen.
So that is reasonable to say, oh, maybe
I'll scale back my risk if I'm really
worried.
Oftentimes we hear it, we all hear this,
Jeff, right?
With retirees who say, I don't know if
I'm going to even be around that long,
you know, like five years, long-term, what's
(11:12):
long-term?
I don't have long-term, you know, who
knows, right?
They may actually, but they often think in
terms of, well, I don't know how long
I have, so therefore.
And sometimes that frees people up to say,
oh, I can take risk.
I've got enough.
I don't need to worry about it.
And other times I don't need to take
risk.
Why should I worry about having to have
(11:34):
the stress of the market?
You know, that kind of mindset.
Big picture, we want to be measured, deliberate,
not drastic in our makeup, in our movements,
in our revisions of our portfolio.
You want to comment on some of this,
Jeff?
(11:55):
You know, I think you had a good
outline of the markets, ups and downs.
And, you know, think about if you were
dollar-cost averaging all those years, you know,
when do you get in, right?
We'll talk about that first, maybe.
If you were dollar-cost averaging in those
ups and downs, you were buying more shares
of your investments, mutual funds or whatever, at
(12:17):
lower prices.
It would have been a good, great time.
You know, when you're younger and you see
these downturns, you should almost get excited, right?
Because you're buying things on sale and you
don't have to worry about, is this a
good month to invest?
Just invest every month.
So slowly building your, accumulating your assets.
And on the way out, similarly.
(12:39):
Exactly.
That's where I was going.
Go ahead.
Okay.
Sorry.
That notion that we do think markets are
going to rise over time.
You know, the broad direction trend of things
is to, to increase in value.
Companies will be more profitable ultimately.
So you were talking about dollar-cost averaging
(12:59):
and that, that works on the way out
too.
It does.
On the way in.
So sorry to interrupt.
No, there's no need for much extra on
that.
Just other than just sticking to your plan
and dollar-cost averaging in or out, you
know, slow and steady, have a plan, rely
on your financial plan and you will not
(13:21):
have to worry about those things.
I think the, you know, the concept or
the mistake of not timing the market is
maybe been, should be emphasized in the past,
I don't know, 10 years or so when
politics is driving so much of our conversations
and, you know, our emotions.
And so if you were worried about President
(13:44):
Biden, when he was elected, that the stock
market was going to be terrible, you were
wrong.
And if you were worried about when President
Trump was elected, the stock market was going
to crash.
You're wrong because the market isn't really about,
it's affected by policies that pass in Congress
and that are of the president, but long
term, the market's about corporate earnings and the
(14:06):
trend of interest rates, right?
I mean, how many times do we?
Yeah.
That's right.
And so policy certainly helps or hurts, you
know, tax policy or fiscal policy or stimuluses,
they affect those things.
But ultimately, you know, we talked about this
coming up to every election.
(14:27):
The data is clear that it really doesn't
matter long-term what political party is in
power, that it matters.
We've had these conversations with clients.
That's right.
As you said, Obama's coming into power.
People, I remember Republican clients were like, oh
my gosh, everything's going to hell.
Let's get out.
You know, Trump comes, was it Trump after
(14:49):
Obama?
Yeah.
Trump comes into power and, you know, the
Democrat clients are like, oh my gosh, this
is going to be terrible.
And Biden and so on, right?
You go back and forth and just this
anxiety that you outlined.
So if you get out at the beginning
of any of those administrations, you lost an
opportunity to have a good four years of
returns.
(15:10):
Whichever, whichever one it is, pick one.
So, you know, Mr. Bolu of Vanguard coined
the phrase, it's financial investing is successful based
upon your time in the market, not your
timing of the market.
And to Russ's point earlier, you know, you
see the talking heads on TV and you
(15:31):
can be totally convinced because they're at their
comments that you got to get out or
you got to get in because this is
it.
This is, this time is different.
And this guy, a woman knows what they're
talking about.
And it's just, it's just not proven through
history that.
We spent a lot of time on the
first of these five mistakes.
(15:51):
You know what?
It is the biggest, it's the biggest one.
Yeah.
I think it's the biggest, it's worthy of
that extra time.
But let's go on to talk about some
of the other mistakes.
So what are some of the other ones
that we want to talk about?
Another one we want to talk about is,
well, I don't know if I want to
talk about it.
I'm going to have a maybe contrary view
to the materials that we have, but a
(16:13):
mistake is not having enough international exposure.
Yeah.
So it is common.
It is, no matter what country you live
in, it is the norm to have a
home country bias.
Uh, you, you prefer the companies, you know,
and, uh, are your national brand familiarity, right?
(16:35):
Um, and the U S uh, the U
S represents a very large percentage of the
world economy.
U S companies do have, in many cases,
these mega cap companies that have international, uh,
earnings.
So they have an element of international exposure,
but, um, there is an argument to have
international investments, uh, differences in, um, multiples differences
(17:02):
in types of industries.
Um, the, uh, impact of, uh, currencies, uh,
there's, there's, um, reasons to think it might
be appropriate.
Now, you know, the, if you were to
compare, uh, an all stock portfolio that is,
uh, comprised of, uh, of the all country
(17:25):
world index, let's say an index that is,
uh, developed economies around the world.
Uh, you might expect to have somewhere around
60, 65% United States and 35 or
40% non-U S uh, most investors
do not really have that, uh, reflected in
(17:47):
that way that they've put their international exposure.
If that's by cap weight exposure across the,
across the globe.
Um, so, um, well, I think it's common
for people to have, um, a U S
bias.
Um, and we run into people who want
only U S, but, uh, we do think
(18:09):
it's, there's virtue in having some non-U
S we're seeing that this year is one
of the reasons, uh, you want some, uh,
that being said, we've also seen over the
last decade, um, U S has dominated performance
over many of the international funds that you
might utilize.
So, but the reason we are diversified is
(18:31):
because we don't know in a given year,
whether there's going to be better returns from
this way or that way.
So we want to have a blend of
things.
It's, it's really hard or impossible if you're
a diversified investor, not to have foreign exposure.
Um, if you invest, you know, in the
S and P 500, for example, which is,
(18:53):
you know, a part of most people's investments,
even if they don't know about it, um,
41% of the revenue of those S
and P 500 companies are from non-U
S sources, 59 are from purely U S
sources.
So even if you choose not to like
overtly choose not to want to have foreign
(19:14):
exposure, you have foreign exposure by how the
U S companies are impacted by their businesses
overseas.
Yeah.
It's, it's funny.
I, I, uh, remember going to a talk,
this was probably 20 years ago and the
portfolio manager was saying, well, you know, uh,
on the one hand, we've got Procter and
Gamble, it's a U S company, but it
(19:36):
derives.
And I don't remember what the number was,
but, um, you know, 60% of its
profits from overseas or whatever number is, forgive
me for not remembering.
And then they were like, but Unilever, well,
that's a foreign company, but that gets most
of its profits from the United States, you
know, whatever.
So, you know, it's an interesting dynamic where
(19:57):
you can run into these kinds of scenarios
where it's, um, it's not as, as, uh,
clear, where it's domiciled doesn't mean it's, you
know, and, but there's currency components of that.
Cause as you make profit overseas, but then
you, you turn that into dollars, what happens
and so forth.
(20:17):
Right.
So I'm not sure.
So when I was suggesting that this mistake
was not having enough foreign exposure, I think
the point is that a lot of people
don't have any, you know, and it's reasonable
to think that you should have some and
you should have how much, maybe that's part
(20:37):
of the art of your portfolio.
It's not necessarily a science always.
Right.
Right.
Uh, another common mistake that people make and
you touched on it in the beginning of
your comments, Chris is taking on too much
risk near retirement.
And, uh, I guess you could even say,
(20:57):
uh, as you age, right.
You know, it's just not, it's not just
because if you retire at 65, which is
a lot of people are retiring before that.
Yeah.
You know, as you noted, you have decades
likely to be an investor, to be an
investor.
Even if you're 65, we project males, you
(21:18):
know, we're just doing a, unless we have
a reason.
Otherwise when I'm projecting cash flows, we're predicting
to 92 for a male and 94 for
a woman.
So, you know, you're 27 years or 29
years that you will be needing to have
that money last maybe longer, hopefully longer.
And why, why those ages we, we use
(21:39):
the top 25 percentile, those who make it
to retirement, what's the life expectancy for men
and women.
If you're in the top 25 percentile, you
get to the early nineties, 92, 94.
So you are a long-term investor to
your point.
That being said, I think it is a
(22:02):
fair critique to think that there are oftentimes
people will try to race through the finish
line, the finish line being their retirement.
And it's go, go, go, go, go.
I got to build that nest egg full
speed ahead.
Damn the torpedoes full speed ahead.
And there can be times when, you know,
(22:25):
you have a bad timing and you know,
you're about to retire.
And then the market goes down, you know,
25, 30 percent and it takes three years
to recover.
That might cause you to have to push
your retirement a year or two in the
process to recalculate your numbers.
So you don't want to be, you don't
want to be ignoring your allocation as you
(22:46):
get closer to this retirement.
As you said, it's not as though you
suddenly retire and you take everything off the
table, but you don't necessarily want to overstate
your risk.
And I think there's a common inclination to
be very aggressive with investing because prior to
(23:06):
this time you're thinking I'm, you know, dollar
cost averaging I'm putting in and that kind
of mindset.
And I've seen it recently.
We had a conversation not long ago where
it's just that kind of thing where you
get a little nervous that someone's got, you
know, the bulk of it is stock and
you know, they're a year or two away
(23:27):
from wanting to pull the trigger.
And maybe that's, maybe that's getting to the
point where we start to want to scale
back a little bit.
Yep.
And, you know, developing a liquidity bucket is
we like to talk about.
Yeah, that's a really good point.
Such an important part here.
If you're going to be withdrawing stock and
(23:47):
you're retiring for your income, that's one story.
But if you have a liquidity bucket, meaning
money that's segregated away from equity investments, maybe
even away from bond investments, just cash.
And that's where you're going to be drawing
on a year or two, but you could
draw a year or two on those funds
without any market risk.
(24:09):
Maybe that's a different story, right?
Yeah, absolutely.
I have one other note on this and
Jeff, you've talked about this in the past
too, where, you know, you'll get a job,
you'll stay in that job for a long
time, have your 401k and you have a
S&P 500 fund in the 401k and
then kind of just don't touch it and
just wait until you retire.
(24:30):
And then if that's the case, if you're
not really like rebalancing or you don't have
that target fund that does it for you,
you could be really subject to that sequence
of return risk.
And the year after you retire, you're still
in that 401k, you haven't rolled it over
and you're all in S&P 500 and
then the stock market goes down.
So that's another plug to just keep track
(24:52):
of your investments in your 401k.
It's not really just like a set it
and forget it forever type of thing.
An analogy to this, if you're not ready
for retirement and maybe you're saving money for
your college, for your children, is you're save,
save, save and invest in a 529 and
you're getting close to the student going to
(25:13):
college.
As our listeners might know, this is very
relevant to my family at the moment.
And the funds that have been invested have
been doing really well, but you're going to
have to start paying tuition bills.
Do you leave it in that market exposure?
And maybe the bill comes due and we
just had a 20% market correction, which
(25:35):
is normal.
So it's the same kind of thinking when
you're getting into a new phase, whatever it
is, it doesn't have to be retirement.
It doesn't have to be college spending, but
it's prudent to de-risk a bit so
you don't get caught by market timing the
other way.
We talked about market timing.
Right.
(25:55):
I think that's really important not to overstate
your risk tolerance.
If you're timing, you have a finite time
on when that college tuition bill is going
to be due, right?
Okay.
I can maybe put it off a year
or two because of, you know, bad market
conditions and, oh, well, maybe we'll save it
(26:18):
for junior year instead of sophomore year or
whatever, you know, that kind of thing.
But yeah, you want a portfolio that probably
should be gradually reducing risk exposure so that
when the time comes that you need those
funds, you're not totally subject to the whims
of the market.
Right.
(26:38):
Think about if you were in that situation
and you're saving, you know, through the 2000s
and your child's going to school in 2007
or 8, you have a period there of
several years that you were going to wish
you took your...
More recently, I remember seeing someone who hadn't
been in an age-based plan and their
(26:59):
student in 2020, their students in college.
Right.
Well, you know, fortunately for them, you know,
markets recovered.
Right.
But it doesn't always, as we said, you
know.
Yeah.
So that's a great point.
So that whole issue of taking too much
risk.
I think a lot of times there was
another item was mentioned here was the issue
(27:21):
of interest rate risk.
Market timing with interest rate risk, right?
Yeah.
What's going to happen and how does that
affect my bond portfolio and how should I
be positioning my bonds?
Trying to take too much duration risk potentially
can be a challenge.
(27:44):
I think this is one of those examples
where bonds, more often than not, clients will
say, I just don't get bonds.
I don't understand.
It's not that it's all that complicated.
I understand what a bond is, but I
don't get how the whole bond market works.
You know, this whole relationship between interest rates
and prices.
And it's just, it's a little bit confusing
(28:05):
at times.
Right.
And when you think about the risks, okay,
there's interest rate risk and how that can
affect a bond pricing, but there's also credit
risk and how that can affect bond pricing.
And so oftentimes we'll see people take too
much of one type of risk or another.
Tracing yield perhaps.
(28:27):
Tracing yield, taking on too much credit risk,
or maybe going longer term on their bonds,
trying to get more yield and taking on
more interest rate risk that can fluctuate as
interest rates move.
So this is again, I think one of
those instances where working with someone can probably
(28:49):
add value.
If you just buy the aggregate index, you
know, you may not be exactly where you
want to be on the yield curve.
And there may be reasons to make adjustments
over time with what's going on in the
(29:31):
market.
So not having enough inflation protection is the
last mistake that the article we were referencing,
which was a Morningstar article.
We'll share that with our listeners and podcast
notes.
What do you want to say on this?
(29:52):
I mean, stocks, great way to manage interest
rate, the inflation risk, right?
Typically, historically, yeah.
Tends to help mitigate that risk.
We tend to get better returns and therefore
outpace inflation.
When it comes to specifically on the bond
side, there's a couple of bonds designed to
(30:15):
keep pace with inflation.
They don't always work the way investors expect,
a little bit convoluted, but you can think
in terms of inflation protected treasuries tips or
an I-bond.
Everybody went out and got I-bonds a
few years ago when inflation was really high.
Yeah.
(30:35):
We keep running into that.
I was smiling because Russ and I keep
with people who had them when the 9
% rate hit and it was pretty exciting.
They didn't realize they were variable rates.
Yeah.
It's not as good right now, but still,
it's a way to hedge that risk and
manage some of that concern with low risk
(30:58):
money.
I almost say no risk money.
Nothing's no, but there's nothing safer than a
government bond.
It's a government bond.
Think of akin to a savings bond in
terms of risk level, but this has an
inflation component to it.
Tips also are a form of treasury, but
(31:20):
keep in mind, there's varying degrees of maturity
dates.
Most people buy it through a bundle, through
a fund.
You can buy them directly individually as well.
These are ways.
I think this is another example, though.
Sometimes it's not as straightforward as it might
(31:41):
seem.
When I was looking at the materials and
saw this topic about basically inflation risk, I
thought of the individuals who are doing their
financial plan by themselves, perhaps, and they are
calculating how much they have for expenses and
if they retire, where their income comes from.
(32:02):
They have a kind of, oh, I have
enough money.
Let's put it in the mattress.
Not literally, but let's just take the risk
off.
Let's put it in the bank or spread
it around these banks where there's even insured
concerns that people have at banks.
They just don't appreciate the impact that inflation
has on your cash flow over decades.
(32:28):
That's a big risk.
In some ways, I think it's a bigger
risk than some of the risks that people
actually worry about.
Another one is where people will see the
CD rates, which are higher than they've been
over the last 20 years or more.
They'll say, okay, well, if I have this
much money and I put this much in
a CD and I just keep rolling them
(32:49):
into new CDs at 4% or 3
.5%, that should be good.
But not really thinking that CDs aren't always
going to be at that high rate.
Interest rates are going to change and so
are those CD rates.
Then inflation is going to continue and it
could be higher than whatever percent you're projecting.
Definitely, I think the article is just pointing
out stocks have been historically the best hedge
(33:12):
against inflation.
Yeah.
Are you really making ground with inflation when,
let's say you're getting that 3.5%
or 4%, but now you have to pay
tax and inflation is maybe somewhere around 3
% these days, a little bit below, but
getting close to 3% on the core.
Are you really making progress or are you
(33:35):
just treading water?
That's really what you should expect from a
CD is really to be somewhere around the
rate of inflation.
I want to add one other thing before
we wrap up, and that is the idea
of commodities.
We keep finding people thinking that the way
they're going to hedge risk is through gold
(33:56):
or precious metals or some kind of commodity
exposure.
As much as that can be a place
where it can help manage inflation, it's not
a riskless asset.
It's one of these situations where you should
think about commodities in a way that's similar
(34:16):
to a risk asset like an equity in
some respects, not moved by the same forces,
but there may be higher performance opportunity, but
we've seen for many years where it's been
somewhat unappealing returns.
When it comes to commodities, it's all driven
(34:37):
by perception of value, not by revenue and
earnings and profitability.
To that point, we're going to talk about
this more in a conversation with Brian Regan,
our firm's senior portfolio manager, our team's senior
portfolio manager in an upcoming episode.
(34:58):
We'll talk more about gold as an investment,
good, bad, indifferent, what to make of it
in the future.
Lots to consider.
We've scratched the surface.
We talked for over a half an hour
about just these five topics that can be
relevant to thinking about risk and mistakes you
(35:20):
want to avoid, but there are others and
there's always more.
It's not just on a macro level.
There's also what's happening in the world around
us, how to interpret that.
It's also on the investment level specifically.
It can be very challenging for someone to
navigate these kinds of issues as an investor,
(35:42):
and there's a lot of room for challenge,
mistakes to happen.
It's a good idea to get some assistance
along the way.
Work with a quality financial advisor who is
a fiduciary and can be a resource to
you, both as a counsel and thinking about
(36:03):
your financial plan, how it all fits together,
but also in the way you invest your
portfolio.
We offer a complimentary consultation and welcome you
to take advantage of that.
Give us a call, reach out, and we
hope to see you sometime soon.
Until next time, everybody, keep striving for something.
Thank you for listening to Something More with
(36:24):
Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
.com or call us toll-free at 866
-771-8901 or send us your questions to
(36:46):
amr-info at wealthenhancement.com.
You're listening to Something More with Chris Boyd
Financial Talk Show.
Wealth Enhancement Advisory Services and Jay Christopher Boyd
provide investment advice on an individual basis to
clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
to your specific situation.
(37:08):
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
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