May 1, 2024 • 37 mins
Embark on a financial journey with us as we explore financial accounts in the Roth IRAs world of mutual funds and index funds. Discover the importance of investing early and where. Engage with us through social media, suggest topics, and support the podcast for more insightful content.
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Episode Transcript
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(00:00):
Welcome to Adulting Decrypted.
We are your hosts.
I'm Gene, and I'm starting myfirst year of college.
I'm Ashton.
I'm a music performer, composer,and educator.
I'm Gene, a high school senior.
I'm Roscoe, the dad.
Those are my three sons, andthis is Adulting Decrypted,
where we discuss ways to becomeadults and the things we need to
(00:22):
know to be successful in life.
Today.
We're talking about Roth IRAdad.
Take it away.
Thank you.
And one Oh three.
What did we talk about?
A quick to finance one Oh three,just a quick reminder for the
listener.
And maybe for you guys, wetalked about the different types
of accounts.
We talked a little bit aboutchecking accounts basic savings
accounts.
CDs, what our CDs just thelocked in interest rate for a
(00:47):
set amount of time.
We talked about brokerageaccounts, brokerage accounts are
a way to buy stocks, E tradeRobin hood, those kinds of
things.
But today we're going to talkabout and that's what we told
the listener we're going to talkabout.
So part of that is the boys wereall.
These boys men whatever boys tomen without would have been a
good theme song for us boys Youguys don't know boys to men.
(01:10):
No.
Oh a little bit of flashback 90smusic I would thought you were
gonna go for be a man from Milanor like, oh, they come in out of
you That's oh, I like that.
We could do that.
We should do some of those asoutros No, but back to the back
to opening up an IRA I chose touse Fidelity.
(01:30):
Fidelity doesn't sponsor us.
We're just going to use Fidelitybecause that's where I put my
Roths.
That's where I hold my IRAs, myindividual retirement accounts.
And so it was easier for me towalk through it and explain to
you guys the different thingsabout an IRA.
So first off who else got theiraccount set up?
I got mine set up.
Awesome.
(01:50):
I got an account.
How did you get yours account?
Mom made me one.
And why is that Gideon, for thelistener?
Because I am under the age of18.
That's right, and so do you seewhat it's called there on the
screen?
Roth IRA for minor.
Gotcha.
Yeah, or custodial account isthe other thing, but yeah.
Roth IRA for minor.
Great.
(02:11):
Gene.
I made a little mistake when Ifirst originally made my
account.
I was off my social securitynumber by one number.
So it.
Did not like me and would notallow me to connect an account.
The other question is do youhave it in there now?
Are you ready to go?
Yes, it is correctly in there.
I am halfway through the setupprocess.
(02:31):
Awesome.
So Gene you learned that theywill not let you set up a IRA or
really fidelity wouldn'tvalidate your account, correct?
They kept saying hey, you needthree days come back and check
and see the status becausethey're going we don't recognize
this social security Number, isthat fair?
Yeah So Jean, since you're themost recent one setting one up,
where are you at now?
(02:52):
You went through, what did thelistener have to put in?
Do you guys remember a couple ofkey information's a social
security number?
So you needed that.
Anything else name, birthday.
Address all your basicinformation.
Awesome.
Okay, good.
Okay.
So gene now you're a few stepsin what what's that?
You asked me a question.
(03:12):
I said, hey, let's hold off.
Let's just walk the listenerthrough it.
What was the question?
Okay, so i'm starting theprocess of linking a bit And so
the question was should I clickfake wire or electronic funds
transfer?
Okay.
What did you do ashton?
Do you remember?
It's an electronic transfer.
So try that one gene.
(03:33):
Okay, I don't remember.
That's why I'm asking So thenthey're going to ask you to fill
out your bank account, probablyyour routing numbers.
That what you said, Ashton, andthen your bank account number.
Did it require mom was sayingsomething about it required some
extra digits than, than justyour normal login.
Do you remember having to do itmultiple times or were you able
(03:53):
to do it once?
Well, I think I remember havingto insert my bank account number
more than once.
And then having to like specifywhat I wanted to use the bank
account as or something GotchaAre you to that point yet gene?
Yes, i'm currently putting in mybank account number Awesome.
(04:13):
Okay, so now you go through andyou, you link your account,
Gene.
So you get through and you linkyour account, then it's going to
ask you to transfer some funds.
I assume that they did someverification code and they said
make sure that that one pennycomes and, and that it's your
bank account.
It took a couple days.
To get that set up?
Well, it was just about assimple as every other account
(04:35):
set up where it's like, youprobably have to confirm a cell
phone number.
You have to confirm an emailaddress.
it didn't have me send a smallamount than a large amount.
It just was like, make sure youtriple check this because once
you do it, it's, you're doneonce you do it, the money's
there.
So it's like, okay.
So I don't remember any extra.
(04:55):
Steps or processes.
Yeah, I do remember it just kindof the so the website is just
fidelity.
com I remember it being a littleweird They feel like they bury
the login Right at the very topof the page and it's kind of
confusing it kind of blends inbut then also like I remember
the setup like if you like touse Mac, you can't use it on
(05:17):
Safari.
You have to use Chrome I don'tknow why interesting.
Yeah, I just couldn't get it towork on Safari as well, but
that's not The only time thatthat happens for websites.
But yeah, so I had to, I had touse Chrome.
And then I just remember thefirst couple of times going in,
it was like, Oh, our servers aredown or like, try again later
(05:37):
sort of stuff.
So it just took a little bit ofpersistence and remembering to
do it, to get it done.
But once you get it in and youfigure out where the login
stuff, it's been pretty simplejust to like get back into.
Gotcha.
I don't ever remember the serverbeing done.
That's quite interesting.
Okay.
So once you set this up and youget under your accounts, you're
going to see that there'saccounts and trades planning and
(05:59):
advice news and researchproduct.
Did you see that across the top?
Yep.
It's all there.
Perfect.
Do you see your accounts?
I see my account.
Yes.
And do you see mom's accountGideon?
I assume so.
The retirement account.
Does she also, it should like arollover Roth or something in
her or Roth IRA or something inhers?
(06:19):
Yeah, I think so.
Okay.
Do you see yours?
Can you distinguish which oneyours is versus hers?
Yes, I can.
Okay.
Can you click on yours?
So you should now be under yourRoth IRAI should say like a
summary.
Is that the first?
Yeah, I'm under summary.
It'll lead you to positionsfirst.
Oh, does it really?
It did for me.
Just barely.
Ours both went to summary get inmine probably'cause we have some
(06:42):
set up in there.
Do you see a, under your Rothash?
Does it say cash?
Like says cash held in, in moneymarket or cash held at Fidelity?
I see something that saysbalance.
Okay.
Is that what you're seeing aswell?
Yeah.
I see my balance.
Yeah.
It's funny how different ours,but so if you go back over to
(07:02):
positions, yeah.
So positions has cash.
And then above it.
Perfect.
Yep.
That's what I'm looking at.
I have an overview and adividend view.
Gene, are you to that point yet?
I can see it, but it's stillgoing to take the one to three
business days.
Perfect.
And so what we're doing is we'reall open to Roth account and
(07:24):
we're going to fund it.
And then what's going to happenis right now initially it comes
into cash.
And I thought of this because Iwas reading a Reddit forum.
And somebody was prettyfrustrated because they said,
Well everybody said open up aRoth, so I went and opened up a
Roth.
But then I never made any moneyin it.
So right now do you see whereyours is just sitting in cash,
Gideon and Ashton?
Yep.
(07:44):
So right now that's literallylike having it in a checking
account.
What's nice about a Roth.
So this is a us based product.
A Roth is a tax paid product,meaning that you've already paid
the taxes on this product.
So this is after tax money.
So there's no real tax benefitof it when you put it in.
But there's a benefit when itcomes out, because now it'll
(08:06):
grow tax free.
And when you go to take it out,there'll be no taxes on this
money.
Does that make sense?
so any money that I make no needto pay taxes.
Correct.
and that's currently who knowshow long the federal government
will keep.
This is why I like Ross so muchis because 401k money.
When you put it into a 401k,we've talked a little bit about
this.
(08:26):
You're paying it before you paytaxes and there's an advantage
to that too But when you go totake it out all of it's taxed So
i've got both roth and 401kmoney and I think they're both
valuable to have So if you havean employer with a 401k sign up,
but still max out your rothafter you've hit your employer
max that they'll match so theynormally match So if I put in
(08:48):
five dollars, they're going toput in 50 cents for every
dollar, you know So if I put in500, they might put in 250 You
know and then say here's yourmatch and I matched it and then
you get to take it with you Butthe Roth is all after tax And so
the other advantage of that islet's say you do get in trouble
You can take out that cash thatyou've put in at any point time
(09:09):
in or in a Roth I didn't knowthat till about three years ago
Meaning that I was putting moneyin and I didn't know I could
pull it out But there'd be apenalty for taking it out,
right?
There's no penalty for takingout the cash you invested, only
the growth that happened.
Oh.
So that's why I love the Rothproduct because, and then
there's some other advantageswhen you go to buy a home, you
might be able to take out someof your principal plus your
(09:31):
interest.
The sad part is once you pull itout of the market, you can't put
it back in.
And so that's the downside of aRoth.
When you pull money out, can'tjust deposit more money or what
you can keep depositing, but youcan only go up to that max
allowed per year.
So right now for me, I can putin 8, 000 into a Roth account
sheer into an investment Rothaccount.
(09:52):
I think your guys's is lower.
You'd have to look, it shouldsay max somewhere maybe under
the Roth initial Roth.
It'll tell you how much you canput in.
I think it's 6, 500, but you'dhave to check.
It might be 7, 000 this year.
It changes based on the year andfederal government.
I'm going to throw this inbecause we've reached.
A point where I feel like I can.
(10:14):
I was really bothered because Icouldn't figure out what Roth
meant, but right here it says onkiplinger.
com, whatever that means, itsays, Roths are the youngsters
of the retirement savings world.
The Roth IRA is named after thelate Delaware Senator William
Roth, and it became a savingsoption in 1998.
So I was trying to figure outwhat R O T H stood for and it
(10:34):
was nothing.
It was the name.
So yeah, it goes back to what a401k is.
It's just a complicated taxrevenue code, right?
So Roth was probably the Senatorwho introduced it and said,
these are good.
Let's put them in to get morepeople saving would be my guess.
So thank you, Ashton.
I love that.
that actually gives us morecontext and it's federally
mandated how much you can putin.
(10:55):
so, as you're watching this, youjust want to hit your limit, if
possible, because it grows taxfree.
any more details needed on that?
Is everybody kind of bored todeath on, on that?
It says, the total contributionsyou can make each year to all of
your traditional IRAs and RothIRAs can't be more than 6, 500.
7,500 if you're 50 or older.
Yeah.
And I think that might beoutdated.
(11:17):
'cause this year it went up to8,000 for me, and I think this
one says this to your point,February 30th of 24.
Interesting.
from the IRS?
Yeah.
And that would've been for year23, not necessarily for year 24.
So.
they're just letting you know,but you can contribute to the
401k in addition to which iskind of cool I mean, you
(11:38):
probably know this but this ismore of a did you know for the
people?
It says you cannot contribute toa Roth IRA if your income
exceeds 161, 000 for singlefilers or 240, 000 for joint
filers yeah, because they don'twant to have the rich utilize
this As a way to get richer thisis for the middle class free
Correct because this growth isfor those of us in the middle so
(12:01):
that our finances can growfaster great point.
So listener if you make morethan that probably worth hiring
a financial advisor here's whereit got complicated for me.
So you've got a cash balance Sonow you got to say, okay, what
do I want to do with this?
Where do I want to invest it?
And I think we talked about thisa little bit, but real quick the
easiest way to think of it isthere's there's mutual funds and
there's index funds you And thenyou can buy an individual stock,
(12:24):
right?
So there's really three ways tobuy, but let's think about this
a little bit easier.
I heard an analogy the other daythat I really liked it.
It's like a bowl uh, candy.
And let's just think of thestock market as a candy M and M
is A type of candy, right?
Smarties is a type of candy.
Snickers is kind of candy,licorice.
So, to think about it this wayif you're to buy a stock, let's
(12:46):
just call it, you have a bigcandy bowl for your investment,
right?
If you were to buy one type ofM& M, now you can buy them in
individual colors, right?
So you're always buying a green,green M& M.
If you buy an individual stock,did you guys know you can buy an
individual color of M and M youlook confused in this world that
you have sounds great.
No, no, you really can.
(13:06):
You have to go to the M and Mstore in the, in the stock
analogy.
Yeah, I can.
That's I love it.
I love this world.
Give me all the red M& Ms,please.
Yep, the only downside is if youonly buy red M& Ms, what happens
if the rest of the world startshating red M& Ms?
They come out and they find outred dye kills and poisons you.
What happens to the value of allthese red M& Ms that you've
(13:26):
bought?
They drop in value, right?
Nope.
Yeah, nobody wants them.
Nobody wants them.
So So I was purchasing to resellmy M& Ms.
I wasn't purchasing to have myM& Ms.
I'm following the analogy.
I'm trying to connect it formyself.
That's a good point.
Yeah, yeah.
Good point.
So the question is, is the valueof this candy jar is so that you
can, can have cash or somethingto live off in the future,
(13:47):
right?
So if nobody wants your red Mand M's, nobody's going to trade
you for any additional stock,you're kind of stuck with this
red M and M every analogy breaksdown when you go too far.
Right.
I don't think it does.
It just, that's fine.
So let's say that the wholevalue of, having a mutual fund
is that you can then diversifythem by multiple.
Types of candy, not justdifferent colors of M& Ms, but
(14:09):
different types of candy.
So in this world, you're reallybuying different types of stocks
and a mutual fund and an indexfund.
So in that scenario, they'revery correlated mutual fund and
index funds are very correlated.
They're, tied at the hip, butwhat's different is a mutual
fund will be managed, meaningit's actively managed.
That means a human being islooking at it and they're making
(14:31):
trades Of this stock based onwhat they predict is going to
happen.
And so they carry what's calleda higher ratio, an expense
ratio.
And then an index fund has alower expense ratio.
Why?
Because it's managedelectronically.
Isn't that wild?
Okay, so let me see if I'vemissed the mark where I'm
(14:52):
starting to understand.
An individual, and I'm not goingto use an analogy, but just, I'm
just trying to understand.
Perfect.
An individual can go out and buystocks.
Ashton Allen can go buy stocks.
I can go buy stocks and say,I'll look at this right now.
I could go buy a oil stock,probably can't it's expensive,
(15:14):
but somebody could.
Yeah.
Okay.
So this, okay.
Let's look at the NASDAQ.
It's 15, 983 per stock, I'massuming is what that's telling
me right here.
Sure.
And so if I bought that and thenthe world decides it's less
valuable, I lose money reallyeasily.
Right?
Yeah.
I don't know that you can buy aNASDAQ stock.
(15:34):
Okay.
Okay.
Sure.
Because NASDAQ is normally it'sa mutual fund or an index fund.
And they're just trying to matchthe NASDAQ.
The NASDAQ already is a, and theS and P those are the two
biggest ones you'll hear thrown.
Okay.
So type in the word Ford in yourquote, right?
Ford motor.
This was a great example for mewhen I was in school.
Okay.
So Ford motor company, a veryestablished company.
(15:56):
When I was in school, Ford 40,50 bucks a share.
So I was super excited when Iwas offered the job at Ford
motor company.
The problem with Ford motorcompany is they are tied to a
very.
Strategic car company, right?
They know exactly what it is.
The problem becomes is you havethese.
coms that come out and they'reall of a sudden valued and they
get hyper growth.
(16:17):
You get your Amazons, you get, Imean, stuff that we don't even
know Google.
I mean, if you had about Googleback when I started at Ford, I'd
be wealthy, but I didn't.
So yes, I can go out and buy anindividual share in a company.
Gotcha.
so Roth was a bad example.
in the fidelity, I clicked onjust the market movers thing and
it just shows you all the onesthat have been changing a lot
(16:37):
recently.
Top one's Tesla and it says astock is 194 and 5 cents.
Okay.
Yes, I could go in there buy twoor three of those and if
tomorrow it goes up by 50percent I make money But if it
goes down by like 30 percent Ilose money, correct But since
the mutual fund it puts anentire collection of people's
(16:58):
money together it's managed bysomeone who's making stock moves
of a bunch of individual stocks,there will be gains and losses.
But since you're putting allyour money into this composite
index, rather than feeling allthe individual losses, it's kind
of the pain hurts less becauseyou're in a group of people.
(17:18):
You got it kind of, you got it.
And then, and then when side ofthat pain, there's two different
stack tiles, right?
The index.
Which is managed.
It's just set it and forgetabout it.
And then the other one is themutual fund, meaning they manage
it all the time and they'reactively trading that stock is
the easier way to look at thosetwo different ones, but your
scenario works for either mutualfunds or index funds.
(17:40):
So Ashton, let's go to a reallife example.
When will you retire?
When, when will you retire iskind of a baited question,
right?
But let's say that you want toretire at 65.
Yeah, that's not realistic.
Let's say 70.
What's 2025, 2024.
How old are you?
26, right?
So let's do 26 plus how manyyears till 70?
(18:02):
42 years to 68 Yeah.
So let's look at a 2068 fund.
Is that where the estimatedinterest comes from when it
comes to stuff like the NASDAQ?
Because like looking at like afive year graph, 10 year graph,
it rises steady.
Yeah.
Well, yes.
And no, ask that question again.
(18:23):
So I'm looking at the NASDAQright now.
Yep.
Okay.
Hold on.
Does everybody see whereAshton's at?
Look under quotes, type inNASDAQ.
So if you go, so you're insummary.
Yep.
So I'm going to, I just did viewall markets on the summary page.
Actually you can just click onthe NASDAQ on the summary page.
Yep.
And then if you go inside ofthat, it has this dot I X I C
(18:48):
thing where it's just a graphthat shows you over time.
And I went to the 10 yearversion of that graph, and over
10 years, it went from 4 grandto 15, or 16 almost.
Yeah, but it had dips in it atplaces, didn't it?
Yes, but does the Roth RAalways, like, promised that you
get.
A certain amount of money backby the time you get old.
(19:10):
No, it's like the big sellpoint, right?
Yeah, there's no promise of anyamount of money, but the this is
where you're picking the stockto get it to Anticipate how much
money it will make over time Soyou're absolutely right that 10
year that it's comparing it toIs saying if you invested in
this stock I think it says likea thousand dollars off to the
left or does it say threethousand?
To show that girl to say 14.
(19:32):
You said it showed 14.
Yeah, so like You 10 years agotoday it was 4, 000.
Okay.
Great.
And then today it's roughly 60.
Yeah.
It's giving you a hypotheticalgrowth of 10 year growth.
And yes, that's what you'rebanking on is that the stock
market's always going to go upover time, but you'll see the
(19:53):
dips where it drops down.
There's times that if you pulledyour money out, you would lose
that much money at that point intime.
an example of this is I put into some what's called a target
date fund.
So I put some of my money frommy Roth in a target date fund
three months ago, and right nowit's worth less than what I put
(20:14):
in.
So the money dropped.
But the anticipation in my bookis that that's a dip that we're
seeing, but we're gonna see thecomeback and the growth of that
stock.
And that's why I want you guysto get exposed to it now so you
can start investing and seeingwhat it's doing, so you start to
understand the concepts.
Because it was higher, thehighest it's ever been was
(20:34):
November of 21, and now it'strying to catch back up to that.
Correct.
Yeah.
So, and this is where this papermoney, you really haven't lost
it until you sell your stocks oryour shares or your, you know,
whatever you've invested in.
That's why these mutual fundsand index funds are so valuable.
So let's go and Ashton type intarget date in your search for a
(20:56):
quote.
And then type in, I think, whatdid I say, 2068?
There might be, let's see ifthat comes up with anything.
Everybody type in F T Jews andJean P is in Paul X is in.
Sexy.
Bruce.
Not even make sense.
Okay, do you see this one?
It's a higher risk.
It is a high risk.
Why?
Because right now, you're notlooking towards retirement.
(21:19):
You're not close to retirement,so you can let this fund grow.
So right now, if you look atthis over, look at the
Morningstar category rating,target date 2065, fund
inception.
So this is a fairly new one,right?
May.
Are you guys seeing that May11th at 23?
expense ratio is 0.
49, net is 0.
49.
(21:40):
so on and so forth.
But if you look, Ashton, thisgoes back to what you're saying.
Down here at the bottom, you cansee that it starts out at year
23 and then the blue line.
You see the blue line.
The blue line is the S and P500.
So it's going to lag behind theS and P it has been, but it's,
rising with this other rate.
So right now the life of thisone's 1953 If you look at what
(22:02):
they hold, if you go down toasset allocation, see how it
says that 54 percent in usequity, okay, and now look at
Fidelity series.
Sustainable US Market Fund.
It's gonna open up like a,what's called a portfolio, and
it's gonna tell you where it'sall located at.
Other options, see top 10holdings in this one is
(22:22):
Microsoft and.
NVIDA, I don't know who that is.
NVIDIA.
They're a computer chip company,actually.
Apple, Amazon.
they're telling you, look, we'reinvesting in these high You
okay?
What?
Oh, I thought you were asking aquestion.
so the top 10 holdings, it saysit takes up 25 percent or yeah,
(22:43):
25 percent of the totalportfolio.
So basically they're in all ofthese stocks, this holding is
and that will determine theaverage of all of those growth
percentage wise is what you canexpect to make over time.
Correct.
in theory though, if you were togo into and invest in all of
these individually on your own,could you then in theory make
(23:05):
more out of it?
Absolutely.
Absolutely.
But you do it because it'ssafer.
But yeah, cause what happens isyou don't have the type of
buying power.
So when Amazon takes a hit, Andapple has a growth month or a
growth sector It offsets theamazon loss and the apple growth
and so you you don't make asmuch on either end of that But
(23:26):
you don't lose as much on eitherend of that.
So if one of these big companiesLet's say nvidia all of a sudden
they produce millions of chipsthat are worthless And they
their stock takes a huge hityour growth this year might not
be as great But you didn't loseall your money, right?
And so the mutual fund thensince they have so many people
with money going into them.
(23:47):
They're able to balance out thehits so you don't make as much
but you don't lose nearly ashard because It's all just Wider
surface area.
I like that.
Yeah wider surface area.
That's great Okay, Yeah.
So what you're trying to dobetween all these index funds
and mutual funds is you'relooking for the right fund to
put your money in that you feelthe most comfortable with
action.
(24:07):
The nice thing about buyingthese, it's like buying a car.
You can trade it, sell it bymore of the same, as long as you
don't roll it out of your Rothor your qualifying retirement
account, it doesn't have anyimpact.
So the cool thing is you don'thave to necessarily pick right
today.
You just need to pick right moretimes than you pick wrong and
then you leave it in there andyou let it grow over time.
(24:30):
There's a couple other coolthings about this is there's
planning and advice up top.
You can type in kind of whatyour goals are.
This is like a fancy, rememberhow we pulled up the quick one
on like nerd wallet and we did aquick financial calculator.
How much money will I have whenI retire?
These are a little bit morefancy, So right now my score is
good for being able to retire.
(24:51):
and I can add in differentgoals, like at home, a college
emergency, saving, get aninvestment strategy of your
goal, you know, and therethere's all these different kind
of playing tools that you can goin there and figure out where
you want to put your money andhow you want to make your money
grow.
So a Roth IRA is built forretirement.
This is money that you put in,you leave it alone, and you hope
(25:13):
that you win more than you lose.
My personal learning that I havedone over the last three years
is I don't need a financialplanner because the problem is
they charge you two or 3%.
I've paid my financial plannerprobably over 25, 000 that the
problem is my investmentshaven't grown as much.
To offset that expense of payingthem.
(25:34):
So a couple of things to lookfor is you should be able to get
free financial advice on most ofthe stuff now in this day and
age, So keep that in mind.
The other one is avoid frontloaded funds or back loaded
funds.
You should never pay a load on afund.
You should buy index funds,worst case scenario, some mutual
funds.
So we're going to deep dive.
We're going to make a trade Typein actually Getting your young
(25:57):
right?
Yeah, large cap in your search aquote?
Fn ilx That one.
Zero large cap index fund.
That is a weird The question Iasked I'd like to ask you would
you like to buy into this fund?
The expense ratio is zero Idon't understand this fund.
I'm a little bit confused Itlooks pretty cool.
(26:18):
But right now it's a 30 percentreturn this year 11 three years
15 five years and 13 since thelife of the fund it has a four
star rating Yeah, I mean so it'san index fund fidelity zero no
transaction fees You could nowsee where it says buy this fund.
Yes up in the right corner Makesure you're using your money and
not mom's money, right?
(26:38):
Yep There's all these differentthings.
You could click a compare Andtry and buy a different one.
That's similar.
See where it says compare ashtonNot anymore.
I was in the purchasing phase.
That's the one you want to buyas well?
I don't know.
It's all lines at this point.
Yeah, it's fair.
It's going up too, so I can onlyassume that it's good.
(27:00):
It's not a bad front.
When is your retirement?
Did we decide?
That's, it's, Let's 65.
So the question is, do you wantto, do you want to keep looking
at your funds or not?
That's part of the question.
Like things that I could really,you could just find whatever you
want, right?
Well, yeah.
The question is how often do youwant to look at your
(27:20):
investments?
Not often.
Yeah.
You want to just put in, look, Iwant a hundred dollars to go in
every month and I want to knowthat it's automatically
investing in a certain area.
Okay.
Then you just want to pick afund, probably not a, not a
large cap fund, maybe, you know,but you can go high risk.
Why wouldn't you want to do alarge cap fund?
good question.
(27:41):
So if you look at what large capis, Domestic large cap is going
to be your big companies.
Tesla's Microsoft, thosecompanies that we just saw,
right?
Those are your large ones.
This one's in the large cap.
I see them.
Yep.
Apple video.
Yep.
So the only risk is that, thatthe economy goes soft and people
change their investments over tobonds.
(28:02):
And then all of a sudden you're,you lose any growth potential.
you're just put at more risk.
But if you're okay with thatrisk, I would be okay with it.
If I was you, there's no problembuying that fund.
So it's a risk because they'rebigger companies or it's a risk
because because risk, why?
Because it's still a mutualfund, Yes.
it's the biggest risk Ashton isif you never change it.
(28:23):
Let's say that now your moneygrows fast.
You're making They say about 12percent is average.
So let's say that your money'smaking 12% And you're like, Hey,
cool.
I forgot about it.
I keep putting money in becauseI don't want to be just a one
and done investor.
Right.
Let's say you invest 500 everyyear.
You know, you get ready toretire.
You're like, Holy cow.
I made, I have like 50, 000 inhere.
(28:44):
This is awesome.
And then the day before you goto retire, the stock market
takes a hit.
Microsoft drops, Amazon drops,everybody drops.
You could have 10, 000.
But wouldn't that be the samefor everything?
Not if you've gone in andchanged your investment
portfolio, because what happensis the money doesn't go away.
What happens is people pull outof the large cap companies, and
(29:05):
they transition over to the bondcompanies where they transition
to gold or to silver.
Something that's consistent onthe fall.
They're just trying to get somedifferent assets for that brief
moment of time.
Cause actually everybody'schasing the market, but if you
could wait then and say, look, Idon't need to retire today.
I can retire in three years.
Then your money's going to comeback and it's going to be huge
again.
So right now there, no realrisk.
(29:26):
You're just going to be puttingmoney in that feels like it's
wasted.
So you asked me right now,what's the downside?
There is no downside.
Invest, let it ride, especiallyas long as you've got an index
or a mutual fund where theexpense is low.
The bad thing where I lost somuch freaking money is that I
didn't know any better.
And so I was buying front loadedstocks.
Every time I put in a thousanddollars, they were taking, it
(29:47):
doesn't seem like a lot, but 57every time they're taking 57 and
I wasn't making that much moneyback because you were having
like financial planner orwhatever.
Correct.
And so that's why I'm sayingjust start putting money in and
watch your expense ratios andyour load costs.
I'm feel comfortable buying thatstock and let's see what it does
for six months.
Cause it doesn't matter.
You could at 27 you're 25, butwhen you hit 45, 55, you need to
(30:12):
start opening that up andchanging it.
Into something different becausewhat's could happen and it's
what a lot of people this is whya lot of people have a bad Taste
in their mouth.
We are going to have another 08right where the market just
sucks the wind out of everybodyA lot of people sold guess what
I did.
I bought more stocks Not morestocks.
I bought more mutual funds.
I kept buying.
(30:32):
Why did I keep buying?
I bought when covid washappening and the stocks were
getting hammered.
Why because it's gotta go backup I believed it was gonna go
back up.
And so all the stuff I bought Ibought at a discount You But
that's the dollar costaveraging.
And when you look at a dollarcost averaging model says, I'm
buying it cheaper, it's going togo up.
I'm going to make more.
I'm going to make it all back.
(30:53):
And so, yes, actually, you cango in and buy that large cap
fund right now and invest it,and then you can see what your
money does tomorrow, the nextday, two weeks, three weeks,
four months, five months,because then you get a chance to
try it and you can start tryingto figure out how you're
comfortable.
500 becoming 200?
100 and then in six months, it'sworth more in seven years.
(31:16):
It's worth more when I go backand look.
We have a different type of fundcalled an hsa health savings
account I just had it in anormal interest bearing account.
It was making no money It wasabout ten thousand dollars that
money's now worth thirty seventhousand dollars because I put
it in a more aggressive accountAnd that's been over just three
years So you have to decidewhere you're comfortable mr.
Investor And decide where youwant to put your funds.
(31:39):
I don't think I understand itenough right now to buy it,
right now, if you just leave itin cash, you might as well left
it in your bank account.
And so when I called myfinancial planner today, I just
said, Julie, as soon as we seethis other money come in, I need
to dump it quick into anotheraccount.
Cause I don't want it sitting incash.
I have enough cash, right?
So the trick is just to get itinto something to let it start
(32:00):
growing.
And you can buy two or threedifferent funds with that 500.
You can buy five differentfunds.
You're only limited by the costof the fund.
So this was a quick overview.
I hope there's some helpfulinformation in here.
Mutual funds, index funds, lookat your cost ratio, pick one
that you're comfortable with,invest your money and reach back
out to us on it in where all ofour social media accounts on
(32:21):
Facebook, Instagram, we have asubreddit, all the different
places where you want to talk tous, just look up adults and
encrypted and DMS.
For post and tag us we'd love tohear all of your different
experiences Thank you forlistening to this week's episode
of Adulting Decrypted.
We really enjoyed having thisweek's conversation and we hope
(32:41):
you did as well.
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(33:03):
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Welcome to Adulting Decrypted.
We are your hosts.
I'm Gene, and I'm starting myfirst year of college.
I'm Ashton.
I'm a music performer, composer,and educator.
I'm Gene, a high school senior.
I'm Roscoe, the dad.
Those are my three sons, andthis is Adulting Decrypted,
where we discuss ways to becomeadults and the things we need to
(00:22):
know to be successful in life.
Today.
We're talking about Roth IRAdad.
Take it away.
Thank you.
And one Oh three.
What did we talk about?
A quick to finance one Oh three,just a quick reminder for the
listener.
And maybe for you guys, wetalked about the different types
of accounts.
We talked a little bit aboutchecking accounts basic savings
accounts.
CDs, what our CDs just thelocked in interest rate for a
(00:47):
set amount of time.
We talked about brokerageaccounts, brokerage accounts are
a way to buy stocks, E tradeRobin hood, those kinds of
things.
But today we're going to talkabout and that's what we told
the listener we're going to talkabout.
So part of that is the boys wereall.
These boys men whatever boys tomen without would have been a
good theme song for us boys Youguys don't know boys to men.
(01:10):
No.
Oh a little bit of flashback 90smusic I would thought you were
gonna go for be a man from Milanor like, oh, they come in out of
you That's oh, I like that.
We could do that.
We should do some of those asoutros No, but back to the back
to opening up an IRA I chose touse Fidelity.
(01:30):
Fidelity doesn't sponsor us.
We're just going to use Fidelitybecause that's where I put my
Roths.
That's where I hold my IRAs, myindividual retirement accounts.
And so it was easier for me towalk through it and explain to
you guys the different thingsabout an IRA.
So first off who else got theiraccount set up?
I got mine set up.
Awesome.
(01:50):
I got an account.
How did you get yours account?
Mom made me one.
And why is that Gideon, for thelistener?
Because I am under the age of18.
That's right, and so do you seewhat it's called there on the
screen?
Roth IRA for minor.
Gotcha.
Yeah, or custodial account isthe other thing, but yeah.
Roth IRA for minor.
Great.
(02:11):
Gene.
I made a little mistake when Ifirst originally made my
account.
I was off my social securitynumber by one number.
So it.
Did not like me and would notallow me to connect an account.
The other question is do youhave it in there now?
Are you ready to go?
Yes, it is correctly in there.
I am halfway through the setupprocess.
(02:31):
Awesome.
So Gene you learned that theywill not let you set up a IRA or
really fidelity wouldn'tvalidate your account, correct?
They kept saying hey, you needthree days come back and check
and see the status becausethey're going we don't recognize
this social security Number, isthat fair?
Yeah So Jean, since you're themost recent one setting one up,
where are you at now?
(02:52):
You went through, what did thelistener have to put in?
Do you guys remember a couple ofkey information's a social
security number?
So you needed that.
Anything else name, birthday.
Address all your basicinformation.
Awesome.
Okay, good.
Okay.
So gene now you're a few stepsin what what's that?
You asked me a question.
(03:12):
I said, hey, let's hold off.
Let's just walk the listenerthrough it.
What was the question?
Okay, so i'm starting theprocess of linking a bit And so
the question was should I clickfake wire or electronic funds
transfer?
Okay.
What did you do ashton?
Do you remember?
It's an electronic transfer.
So try that one gene.
(03:33):
Okay, I don't remember.
That's why I'm asking So thenthey're going to ask you to fill
out your bank account, probablyyour routing numbers.
That what you said, Ashton, andthen your bank account number.
Did it require mom was sayingsomething about it required some
extra digits than, than justyour normal login.
Do you remember having to do itmultiple times or were you able
(03:53):
to do it once?
Well, I think I remember havingto insert my bank account number
more than once.
And then having to like specifywhat I wanted to use the bank
account as or something GotchaAre you to that point yet gene?
Yes, i'm currently putting in mybank account number Awesome.
(04:13):
Okay, so now you go through andyou, you link your account,
Gene.
So you get through and you linkyour account, then it's going to
ask you to transfer some funds.
I assume that they did someverification code and they said
make sure that that one pennycomes and, and that it's your
bank account.
It took a couple days.
To get that set up?
Well, it was just about assimple as every other account
(04:35):
set up where it's like, youprobably have to confirm a cell
phone number.
You have to confirm an emailaddress.
it didn't have me send a smallamount than a large amount.
It just was like, make sure youtriple check this because once
you do it, it's, you're doneonce you do it, the money's
there.
So it's like, okay.
So I don't remember any extra.
(04:55):
Steps or processes.
Yeah, I do remember it just kindof the so the website is just
fidelity.
com I remember it being a littleweird They feel like they bury
the login Right at the very topof the page and it's kind of
confusing it kind of blends inbut then also like I remember
the setup like if you like touse Mac, you can't use it on
(05:17):
Safari.
You have to use Chrome I don'tknow why interesting.
Yeah, I just couldn't get it towork on Safari as well, but
that's not The only time thatthat happens for websites.
But yeah, so I had to, I had touse Chrome.
And then I just remember thefirst couple of times going in,
it was like, Oh, our servers aredown or like, try again later
(05:37):
sort of stuff.
So it just took a little bit ofpersistence and remembering to
do it, to get it done.
But once you get it in and youfigure out where the login
stuff, it's been pretty simplejust to like get back into.
Gotcha.
I don't ever remember the serverbeing done.
That's quite interesting.
Okay.
So once you set this up and youget under your accounts, you're
going to see that there'saccounts and trades planning and
(05:59):
advice news and researchproduct.
Did you see that across the top?
Yep.
It's all there.
Perfect.
Do you see your accounts?
I see my account.
Yes.
And do you see mom's accountGideon?
I assume so.
The retirement account.
Does she also, it should like arollover Roth or something in
her or Roth IRA or something inhers?
(06:19):
Yeah, I think so.
Okay.
Do you see yours?
Can you distinguish which oneyours is versus hers?
Yes, I can.
Okay.
Can you click on yours?
So you should now be under yourRoth IRAI should say like a
summary.
Is that the first?
Yeah, I'm under summary.
It'll lead you to positionsfirst.
Oh, does it really?
It did for me.
Just barely.
Ours both went to summary get inmine probably'cause we have some
(06:42):
set up in there.
Do you see a, under your Rothash?
Does it say cash?
Like says cash held in, in moneymarket or cash held at Fidelity?
I see something that saysbalance.
Okay.
Is that what you're seeing aswell?
Yeah.
I see my balance.
Yeah.
It's funny how different ours,but so if you go back over to
(07:02):
positions, yeah.
So positions has cash.
And then above it.
Perfect.
Yep.
That's what I'm looking at.
I have an overview and adividend view.
Gene, are you to that point yet?
I can see it, but it's stillgoing to take the one to three
business days.
Perfect.
And so what we're doing is we'reall open to Roth account and
(07:24):
we're going to fund it.
And then what's going to happenis right now initially it comes
into cash.
And I thought of this because Iwas reading a Reddit forum.
And somebody was prettyfrustrated because they said,
Well everybody said open up aRoth, so I went and opened up a
Roth.
But then I never made any moneyin it.
So right now do you see whereyours is just sitting in cash,
Gideon and Ashton?
Yep.
(07:44):
So right now that's literallylike having it in a checking
account.
What's nice about a Roth.
So this is a us based product.
A Roth is a tax paid product,meaning that you've already paid
the taxes on this product.
So this is after tax money.
So there's no real tax benefitof it when you put it in.
But there's a benefit when itcomes out, because now it'll
(08:06):
grow tax free.
And when you go to take it out,there'll be no taxes on this
money.
Does that make sense?
so any money that I make no needto pay taxes.
Correct.
and that's currently who knowshow long the federal government
will keep.
This is why I like Ross so muchis because 401k money.
When you put it into a 401k,we've talked a little bit about
this.
(08:26):
You're paying it before you paytaxes and there's an advantage
to that too But when you go totake it out all of it's taxed So
i've got both roth and 401kmoney and I think they're both
valuable to have So if you havean employer with a 401k sign up,
but still max out your rothafter you've hit your employer
max that they'll match so theynormally match So if I put in
(08:48):
five dollars, they're going toput in 50 cents for every
dollar, you know So if I put in500, they might put in 250 You
know and then say here's yourmatch and I matched it and then
you get to take it with you Butthe Roth is all after tax And so
the other advantage of that islet's say you do get in trouble
You can take out that cash thatyou've put in at any point time
(09:09):
in or in a Roth I didn't knowthat till about three years ago
Meaning that I was putting moneyin and I didn't know I could
pull it out But there'd be apenalty for taking it out,
right?
There's no penalty for takingout the cash you invested, only
the growth that happened.
Oh.
So that's why I love the Rothproduct because, and then
there's some other advantageswhen you go to buy a home, you
might be able to take out someof your principal plus your
(09:31):
interest.
The sad part is once you pull itout of the market, you can't put
it back in.
And so that's the downside of aRoth.
When you pull money out, can'tjust deposit more money or what
you can keep depositing, but youcan only go up to that max
allowed per year.
So right now for me, I can putin 8, 000 into a Roth account
sheer into an investment Rothaccount.
(09:52):
I think your guys's is lower.
You'd have to look, it shouldsay max somewhere maybe under
the Roth initial Roth.
It'll tell you how much you canput in.
I think it's 6, 500, but you'dhave to check.
It might be 7, 000 this year.
It changes based on the year andfederal government.
I'm going to throw this inbecause we've reached.
A point where I feel like I can.
(10:14):
I was really bothered because Icouldn't figure out what Roth
meant, but right here it says onkiplinger.
com, whatever that means, itsays, Roths are the youngsters
of the retirement savings world.
The Roth IRA is named after thelate Delaware Senator William
Roth, and it became a savingsoption in 1998.
So I was trying to figure outwhat R O T H stood for and it
(10:34):
was nothing.
It was the name.
So yeah, it goes back to what a401k is.
It's just a complicated taxrevenue code, right?
So Roth was probably the Senatorwho introduced it and said,
these are good.
Let's put them in to get morepeople saving would be my guess.
So thank you, Ashton.
I love that.
that actually gives us morecontext and it's federally
mandated how much you can putin.
(10:55):
so, as you're watching this, youjust want to hit your limit, if
possible, because it grows taxfree.
any more details needed on that?
Is everybody kind of bored todeath on, on that?
It says, the total contributionsyou can make each year to all of
your traditional IRAs and RothIRAs can't be more than 6, 500.
7,500 if you're 50 or older.
Yeah.
And I think that might beoutdated.
(11:17):
'cause this year it went up to8,000 for me, and I think this
one says this to your point,February 30th of 24.
Interesting.
from the IRS?
Yeah.
And that would've been for year23, not necessarily for year 24.
So.
they're just letting you know,but you can contribute to the
401k in addition to which iskind of cool I mean, you
(11:38):
probably know this but this ismore of a did you know for the
people?
It says you cannot contribute toa Roth IRA if your income
exceeds 161, 000 for singlefilers or 240, 000 for joint
filers yeah, because they don'twant to have the rich utilize
this As a way to get richer thisis for the middle class free
Correct because this growth isfor those of us in the middle so
(12:01):
that our finances can growfaster great point.
So listener if you make morethan that probably worth hiring
a financial advisor here's whereit got complicated for me.
So you've got a cash balance Sonow you got to say, okay, what
do I want to do with this?
Where do I want to invest it?
And I think we talked about thisa little bit, but real quick the
easiest way to think of it isthere's there's mutual funds and
there's index funds you And thenyou can buy an individual stock,
(12:24):
right?
So there's really three ways tobuy, but let's think about this
a little bit easier.
I heard an analogy the other daythat I really liked it.
It's like a bowl uh, candy.
And let's just think of thestock market as a candy M and M
is A type of candy, right?
Smarties is a type of candy.
Snickers is kind of candy,licorice.
So, to think about it this wayif you're to buy a stock, let's
(12:46):
just call it, you have a bigcandy bowl for your investment,
right?
If you were to buy one type ofM& M, now you can buy them in
individual colors, right?
So you're always buying a green,green M& M.
If you buy an individual stock,did you guys know you can buy an
individual color of M and M youlook confused in this world that
you have sounds great.
No, no, you really can.
(13:06):
You have to go to the M and Mstore in the, in the stock
analogy.
Yeah, I can.
That's I love it.
I love this world.
Give me all the red M& Ms,please.
Yep, the only downside is if youonly buy red M& Ms, what happens
if the rest of the world startshating red M& Ms?
They come out and they find outred dye kills and poisons you.
What happens to the value of allthese red M& Ms that you've
(13:26):
bought?
They drop in value, right?
Nope.
Yeah, nobody wants them.
Nobody wants them.
So So I was purchasing to resellmy M& Ms.
I wasn't purchasing to have myM& Ms.
I'm following the analogy.
I'm trying to connect it formyself.
That's a good point.
Yeah, yeah.
Good point.
So the question is, is the valueof this candy jar is so that you
can, can have cash or somethingto live off in the future,
(13:47):
right?
So if nobody wants your red Mand M's, nobody's going to trade
you for any additional stock,you're kind of stuck with this
red M and M every analogy breaksdown when you go too far.
Right.
I don't think it does.
It just, that's fine.
So let's say that the wholevalue of, having a mutual fund
is that you can then diversifythem by multiple.
Types of candy, not justdifferent colors of M& Ms, but
(14:09):
different types of candy.
So in this world, you're reallybuying different types of stocks
and a mutual fund and an indexfund.
So in that scenario, they'revery correlated mutual fund and
index funds are very correlated.
They're, tied at the hip, butwhat's different is a mutual
fund will be managed, meaningit's actively managed.
That means a human being islooking at it and they're making
(14:31):
trades Of this stock based onwhat they predict is going to
happen.
And so they carry what's calleda higher ratio, an expense
ratio.
And then an index fund has alower expense ratio.
Why?
Because it's managedelectronically.
Isn't that wild?
Okay, so let me see if I'vemissed the mark where I'm
(14:52):
starting to understand.
An individual, and I'm not goingto use an analogy, but just, I'm
just trying to understand.
Perfect.
An individual can go out and buystocks.
Ashton Allen can go buy stocks.
I can go buy stocks and say,I'll look at this right now.
I could go buy a oil stock,probably can't it's expensive,
(15:14):
but somebody could.
Yeah.
Okay.
So this, okay.
Let's look at the NASDAQ.
It's 15, 983 per stock, I'massuming is what that's telling
me right here.
Sure.
And so if I bought that and thenthe world decides it's less
valuable, I lose money reallyeasily.
Right?
Yeah.
I don't know that you can buy aNASDAQ stock.
(15:34):
Okay.
Okay.
Sure.
Because NASDAQ is normally it'sa mutual fund or an index fund.
And they're just trying to matchthe NASDAQ.
The NASDAQ already is a, and theS and P those are the two
biggest ones you'll hear thrown.
Okay.
So type in the word Ford in yourquote, right?
Ford motor.
This was a great example for mewhen I was in school.
Okay.
So Ford motor company, a veryestablished company.
(15:56):
When I was in school, Ford 40,50 bucks a share.
So I was super excited when Iwas offered the job at Ford
motor company.
The problem with Ford motorcompany is they are tied to a
very.
Strategic car company, right?
They know exactly what it is.
The problem becomes is you havethese.
coms that come out and they'reall of a sudden valued and they
get hyper growth.
(16:17):
You get your Amazons, you get, Imean, stuff that we don't even
know Google.
I mean, if you had about Googleback when I started at Ford, I'd
be wealthy, but I didn't.
So yes, I can go out and buy anindividual share in a company.
Gotcha.
so Roth was a bad example.
in the fidelity, I clicked onjust the market movers thing and
it just shows you all the onesthat have been changing a lot
(16:37):
recently.
Top one's Tesla and it says astock is 194 and 5 cents.
Okay.
Yes, I could go in there buy twoor three of those and if
tomorrow it goes up by 50percent I make money But if it
goes down by like 30 percent Ilose money, correct But since
the mutual fund it puts anentire collection of people's
(16:58):
money together it's managed bysomeone who's making stock moves
of a bunch of individual stocks,there will be gains and losses.
But since you're putting allyour money into this composite
index, rather than feeling allthe individual losses, it's kind
of the pain hurts less becauseyou're in a group of people.
(17:18):
You got it kind of, you got it.
And then, and then when side ofthat pain, there's two different
stack tiles, right?
The index.
Which is managed.
It's just set it and forgetabout it.
And then the other one is themutual fund, meaning they manage
it all the time and they'reactively trading that stock is
the easier way to look at thosetwo different ones, but your
scenario works for either mutualfunds or index funds.
(17:40):
So Ashton, let's go to a reallife example.
When will you retire?
When, when will you retire iskind of a baited question,
right?
But let's say that you want toretire at 65.
Yeah, that's not realistic.
Let's say 70.
What's 2025, 2024.
How old are you?
26, right?
So let's do 26 plus how manyyears till 70?
(18:02):
42 years to 68 Yeah.
So let's look at a 2068 fund.
Is that where the estimatedinterest comes from when it
comes to stuff like the NASDAQ?
Because like looking at like afive year graph, 10 year graph,
it rises steady.
Yeah.
Well, yes.
And no, ask that question again.
(18:23):
So I'm looking at the NASDAQright now.
Yep.
Okay.
Hold on.
Does everybody see whereAshton's at?
Look under quotes, type inNASDAQ.
So if you go, so you're insummary.
Yep.
So I'm going to, I just did viewall markets on the summary page.
Actually you can just click onthe NASDAQ on the summary page.
Yep.
And then if you go inside ofthat, it has this dot I X I C
(18:48):
thing where it's just a graphthat shows you over time.
And I went to the 10 yearversion of that graph, and over
10 years, it went from 4 grandto 15, or 16 almost.
Yeah, but it had dips in it atplaces, didn't it?
Yes, but does the Roth RAalways, like, promised that you
get.
A certain amount of money backby the time you get old.
(19:10):
No, it's like the big sellpoint, right?
Yeah, there's no promise of anyamount of money, but the this is
where you're picking the stockto get it to Anticipate how much
money it will make over time Soyou're absolutely right that 10
year that it's comparing it toIs saying if you invested in
this stock I think it says likea thousand dollars off to the
left or does it say threethousand?
To show that girl to say 14.
(19:32):
You said it showed 14.
Yeah, so like You 10 years agotoday it was 4, 000.
Okay.
Great.
And then today it's roughly 60.
Yeah.
It's giving you a hypotheticalgrowth of 10 year growth.
And yes, that's what you'rebanking on is that the stock
market's always going to go upover time, but you'll see the
(19:53):
dips where it drops down.
There's times that if you pulledyour money out, you would lose
that much money at that point intime.
an example of this is I put into some what's called a target
date fund.
So I put some of my money frommy Roth in a target date fund
three months ago, and right nowit's worth less than what I put
(20:14):
in.
So the money dropped.
But the anticipation in my bookis that that's a dip that we're
seeing, but we're gonna see thecomeback and the growth of that
stock.
And that's why I want you guysto get exposed to it now so you
can start investing and seeingwhat it's doing, so you start to
understand the concepts.
Because it was higher, thehighest it's ever been was
(20:34):
November of 21, and now it'strying to catch back up to that.
Correct.
Yeah.
So, and this is where this papermoney, you really haven't lost
it until you sell your stocks oryour shares or your, you know,
whatever you've invested in.
That's why these mutual fundsand index funds are so valuable.
So let's go and Ashton type intarget date in your search for a
(20:56):
quote.
And then type in, I think, whatdid I say, 2068?
There might be, let's see ifthat comes up with anything.
Everybody type in F T Jews andJean P is in Paul X is in.
Sexy.
Bruce.
Not even make sense.
Okay, do you see this one?
It's a higher risk.
It is a high risk.
Why?
Because right now, you're notlooking towards retirement.
(21:19):
You're not close to retirement,so you can let this fund grow.
So right now, if you look atthis over, look at the
Morningstar category rating,target date 2065, fund
inception.
So this is a fairly new one,right?
May.
Are you guys seeing that May11th at 23?
expense ratio is 0.
49, net is 0.
49.
(21:40):
so on and so forth.
But if you look, Ashton, thisgoes back to what you're saying.
Down here at the bottom, you cansee that it starts out at year
23 and then the blue line.
You see the blue line.
The blue line is the S and P500.
So it's going to lag behind theS and P it has been, but it's,
rising with this other rate.
So right now the life of thisone's 1953 If you look at what
(22:02):
they hold, if you go down toasset allocation, see how it
says that 54 percent in usequity, okay, and now look at
Fidelity series.
Sustainable US Market Fund.
It's gonna open up like a,what's called a portfolio, and
it's gonna tell you where it'sall located at.
Other options, see top 10holdings in this one is
(22:22):
Microsoft and.
NVIDA, I don't know who that is.
NVIDIA.
They're a computer chip company,actually.
Apple, Amazon.
they're telling you, look, we'reinvesting in these high You
okay?
What?
Oh, I thought you were asking aquestion.
so the top 10 holdings, it saysit takes up 25 percent or yeah,
(22:43):
25 percent of the totalportfolio.
So basically they're in all ofthese stocks, this holding is
and that will determine theaverage of all of those growth
percentage wise is what you canexpect to make over time.
Correct.
in theory though, if you were togo into and invest in all of
these individually on your own,could you then in theory make
(23:05):
more out of it?
Absolutely.
Absolutely.
But you do it because it'ssafer.
But yeah, cause what happens isyou don't have the type of
buying power.
So when Amazon takes a hit, Andapple has a growth month or a
growth sector It offsets theamazon loss and the apple growth
and so you you don't make asmuch on either end of that But
(23:26):
you don't lose as much on eitherend of that.
So if one of these big companiesLet's say nvidia all of a sudden
they produce millions of chipsthat are worthless And they
their stock takes a huge hityour growth this year might not
be as great But you didn't loseall your money, right?
And so the mutual fund thensince they have so many people
with money going into them.
(23:47):
They're able to balance out thehits so you don't make as much
but you don't lose nearly ashard because It's all just Wider
surface area.
I like that.
Yeah wider surface area.
That's great Okay, Yeah.
So what you're trying to dobetween all these index funds
and mutual funds is you'relooking for the right fund to
put your money in that you feelthe most comfortable with
action.
(24:07):
The nice thing about buyingthese, it's like buying a car.
You can trade it, sell it bymore of the same, as long as you
don't roll it out of your Rothor your qualifying retirement
account, it doesn't have anyimpact.
So the cool thing is you don'thave to necessarily pick right
today.
You just need to pick right moretimes than you pick wrong and
then you leave it in there andyou let it grow over time.
(24:30):
There's a couple other coolthings about this is there's
planning and advice up top.
You can type in kind of whatyour goals are.
This is like a fancy, rememberhow we pulled up the quick one
on like nerd wallet and we did aquick financial calculator.
How much money will I have whenI retire?
These are a little bit morefancy, So right now my score is
good for being able to retire.
(24:51):
and I can add in differentgoals, like at home, a college
emergency, saving, get aninvestment strategy of your
goal, you know, and therethere's all these different kind
of playing tools that you can goin there and figure out where
you want to put your money andhow you want to make your money
grow.
So a Roth IRA is built forretirement.
This is money that you put in,you leave it alone, and you hope
(25:13):
that you win more than you lose.
My personal learning that I havedone over the last three years
is I don't need a financialplanner because the problem is
they charge you two or 3%.
I've paid my financial plannerprobably over 25, 000 that the
problem is my investmentshaven't grown as much.
To offset that expense of payingthem.
(25:34):
So a couple of things to lookfor is you should be able to get
free financial advice on most ofthe stuff now in this day and
age, So keep that in mind.
The other one is avoid frontloaded funds or back loaded
funds.
You should never pay a load on afund.
You should buy index funds,worst case scenario, some mutual
funds.
So we're going to deep dive.
We're going to make a trade Typein actually Getting your young
(25:57):
right?
Yeah, large cap in your search aquote?
Fn ilx That one.
Zero large cap index fund.
That is a weird The question Iasked I'd like to ask you would
you like to buy into this fund?
The expense ratio is zero Idon't understand this fund.
I'm a little bit confused Itlooks pretty cool.
(26:18):
But right now it's a 30 percentreturn this year 11 three years
15 five years and 13 since thelife of the fund it has a four
star rating Yeah, I mean so it'san index fund fidelity zero no
transaction fees You could nowsee where it says buy this fund.
Yes up in the right corner Makesure you're using your money and
not mom's money, right?
(26:38):
Yep There's all these differentthings.
You could click a compare Andtry and buy a different one.
That's similar.
See where it says compare ashtonNot anymore.
I was in the purchasing phase.
That's the one you want to buyas well?
I don't know.
It's all lines at this point.
Yeah, it's fair.
It's going up too, so I can onlyassume that it's good.
(27:00):
It's not a bad front.
When is your retirement?
Did we decide?
That's, it's, Let's 65.
So the question is, do you wantto, do you want to keep looking
at your funds or not?
That's part of the question.
Like things that I could really,you could just find whatever you
want, right?
Well, yeah.
The question is how often do youwant to look at your
(27:20):
investments?
Not often.
Yeah.
You want to just put in, look, Iwant a hundred dollars to go in
every month and I want to knowthat it's automatically
investing in a certain area.
Okay.
Then you just want to pick afund, probably not a, not a
large cap fund, maybe, you know,but you can go high risk.
Why wouldn't you want to do alarge cap fund?
good question.
(27:41):
So if you look at what large capis, Domestic large cap is going
to be your big companies.
Tesla's Microsoft, thosecompanies that we just saw,
right?
Those are your large ones.
This one's in the large cap.
I see them.
Yep.
Apple video.
Yep.
So the only risk is that, thatthe economy goes soft and people
change their investments over tobonds.
(28:02):
And then all of a sudden you're,you lose any growth potential.
you're just put at more risk.
But if you're okay with thatrisk, I would be okay with it.
If I was you, there's no problembuying that fund.
So it's a risk because they'rebigger companies or it's a risk
because because risk, why?
Because it's still a mutualfund, Yes.
it's the biggest risk Ashton isif you never change it.
(28:23):
Let's say that now your moneygrows fast.
You're making They say about 12percent is average.
So let's say that your money'smaking 12% And you're like, Hey,
cool.
I forgot about it.
I keep putting money in becauseI don't want to be just a one
and done investor.
Right.
Let's say you invest 500 everyyear.
You know, you get ready toretire.
You're like, Holy cow.
I made, I have like 50, 000 inhere.
(28:44):
This is awesome.
And then the day before you goto retire, the stock market
takes a hit.
Microsoft drops, Amazon drops,everybody drops.
You could have 10, 000.
But wouldn't that be the samefor everything?
Not if you've gone in andchanged your investment
portfolio, because what happensis the money doesn't go away.
What happens is people pull outof the large cap companies, and
(29:05):
they transition over to the bondcompanies where they transition
to gold or to silver.
Something that's consistent onthe fall.
They're just trying to get somedifferent assets for that brief
moment of time.
Cause actually everybody'schasing the market, but if you
could wait then and say, look, Idon't need to retire today.
I can retire in three years.
Then your money's going to comeback and it's going to be huge
again.
So right now there, no realrisk.
(29:26):
You're just going to be puttingmoney in that feels like it's
wasted.
So you asked me right now,what's the downside?
There is no downside.
Invest, let it ride, especiallyas long as you've got an index
or a mutual fund where theexpense is low.
The bad thing where I lost somuch freaking money is that I
didn't know any better.
And so I was buying front loadedstocks.
Every time I put in a thousanddollars, they were taking, it
(29:47):
doesn't seem like a lot, but 57every time they're taking 57 and
I wasn't making that much moneyback because you were having
like financial planner orwhatever.
Correct.
And so that's why I'm sayingjust start putting money in and
watch your expense ratios andyour load costs.
I'm feel comfortable buying thatstock and let's see what it does
for six months.
Cause it doesn't matter.
You could at 27 you're 25, butwhen you hit 45, 55, you need to
(30:12):
start opening that up andchanging it.
Into something different becausewhat's could happen and it's
what a lot of people this is whya lot of people have a bad Taste
in their mouth.
We are going to have another 08right where the market just
sucks the wind out of everybodyA lot of people sold guess what
I did.
I bought more stocks Not morestocks.
I bought more mutual funds.
I kept buying.
(30:32):
Why did I keep buying?
I bought when covid washappening and the stocks were
getting hammered.
Why because it's gotta go backup I believed it was gonna go
back up.
And so all the stuff I bought Ibought at a discount You But
that's the dollar costaveraging.
And when you look at a dollarcost averaging model says, I'm
buying it cheaper, it's going togo up.
I'm going to make more.
I'm going to make it all back.
(30:53):
And so, yes, actually, you cango in and buy that large cap
fund right now and invest it,and then you can see what your
money does tomorrow, the nextday, two weeks, three weeks,
four months, five months,because then you get a chance to
try it and you can start tryingto figure out how you're
comfortable.
500 becoming 200?
100 and then in six months, it'sworth more in seven years.
(31:16):
It's worth more when I go backand look.
We have a different type of fundcalled an hsa health savings
account I just had it in anormal interest bearing account.
It was making no money It wasabout ten thousand dollars that
money's now worth thirty seventhousand dollars because I put
it in a more aggressive accountAnd that's been over just three
years So you have to decidewhere you're comfortable mr.
Investor And decide where youwant to put your funds.
(31:39):
I don't think I understand itenough right now to buy it,
right now, if you just leave itin cash, you might as well left
it in your bank account.
And so when I called myfinancial planner today, I just
said, Julie, as soon as we seethis other money come in, I need
to dump it quick into anotheraccount.
Cause I don't want it sitting incash.
I have enough cash, right?
So the trick is just to get itinto something to let it start
(32:00):
growing.
And you can buy two or threedifferent funds with that 500.
You can buy five differentfunds.
You're only limited by the costof the fund.
So this was a quick overview.
I hope there's some helpfulinformation in here.
Mutual funds, index funds, lookat your cost ratio, pick one
that you're comfortable with,invest your money and reach back
out to us on it in where all ofour social media accounts on
(32:21):
Facebook, Instagram, we have asubreddit, all the different
places where you want to talk tous, just look up adults and
encrypted and DMS.
For post and tag us we'd love tohear all of your different
experiences Thank you forlistening to this week's episode
of Adulting Decrypted.
We really enjoyed having thisweek's conversation and we hope
(32:41):
you did as well.
If you ever want to comment onour topics, you can send us a
message through our websiteadultingdecrypted.
com, our email adultingdecryptedat gmail.
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at Adulting Decrypted.
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(33:03):
something your kid should know,send us a message on any of the
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(33:23):
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