August 1, 2025 • 17 mins
"Hey Mike, I’m getting tired of watching the markets each day. I can’t get past the fear of another market crash. Any tips?” Discover a new way to consider your investments and portfolio. There’s a good chance the market will crash a couple of times during your retirement. Learn about how to maintain the right mindset.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welcome to How to Retire On Time, a show that
answers your retirementquestions. Say goodbye to the
oversimplified advice. This showis all about getting into the
details so so you can determinewhat is right for you. As
always, text your questions to(913) 363-1234. And remember,
this show is not financialadvice.
It's information to continueyour exploration. With me in the
(00:26):
studio today, mister DavidFransen. David, thanks for being
here. Yes. Hello.
Thank you. David's gonna readyour questions, and I'll answer
them. Let's jump in.
Speaker 2 (00:34):
Hey, Mike. I'm getting tired of watching the
markets each day. I can't getpast the fear of another market
crash. Any tips?
Speaker 1 (00:42):
Yeah. In the book, I talk about diversification in a
different way. So when I talkabout diversification,
specifically, I'm trying toaddress diversifying your assets
by objectives and not investmentambiguity. Here's what that
means. When you're invested inthe market, many people think,
well, it all should be kind ofin the same category, and then
(01:03):
it will just overall smooth out.
Like, things will just magicallywork out. I do not agree with
that sentiment. I do not agreein the generic portfolio that
you're diversified with largecap, mid cap, small cap, which,
by the way, most people can'teven answer what that means.
Emerging markets, international,blah blah blah blah, bunch of
(01:23):
jargon. They say, why do youhave that?
Why aren't you supposed to havethat? Who said? That's what
everyone does.
Speaker 2 (01:29):
I'm just going back in my mind as you're talking
now, like, I'm in a previousjob.
Speaker 1 (01:33):
Yeah. But remember when you're in the call center?
Yeah. Your first job was a callcenter for a financial
Speaker 2 (01:37):
job. Record keeping for four zero one k plans.
Right? Yeah. Employer sponsoredplans.
Speaker 1 (01:41):
Yeah.
Speaker 2 (01:41):
So, know, they A
Speaker 1 (01:42):
little bit of a throwback?
Speaker 2 (01:43):
You just yeah. You just get these, like, menu. Go,
okay. Here are my options. Oh,here's some small cap, large
cap, emerging markets.
Just like you said, I guess Ishould put a little bit here,
little bit here, a little bitthere. Right?
Speaker 1 (01:53):
Then because that's what everyone does.
Speaker 2 (01:54):
And then you don't really know why now that you're
mentioning it. I'm like, oh, whydid I do that? I just because I
thought I was that's what I wassupposed to do.
Speaker 1 (02:00):
Yeah. We're trying to be smart and diversify Yeah.
Without understanding whatdiversification actually means.
So the general rule of thumb fordiversification is if you put
all your eggs in one basket,you've increased your risk. That
means you've increased yourgrowth potential, but that
increase of growth potentialincreases your downside risk.
That right there is one of themost misunderstood topics in
(02:22):
finance in my opinion. Here'swhy. When it comes to your
actual investments, when do youneed the money? If you need the
money in one, two, three, fouryears, why are you putting in
stocks or bond funds that canlose money? A CD, a treasury, a
buffered ETF, which has upsidepotential but no downside risk,
(02:45):
you know, it resets year overyear.
These other types of investmentsor products give you more
predictability that the moneythat you need will be there when
you need it to be there. So Ihave a client that just sold
their house, and they said, whatshould we do with the 600,000 in
cash? Put it in a high yieldsavings account because they're
gonna buy a house later on thisyear. Why would they put it in
(03:07):
the market risking that it couldgo up? Sure.
10%, 20%, whatever it could do,or it could go down 20%, or
whatever the market does. Maybeit does nothing. But do you
really want that risk based onthe timeline of when you need
the money? Because that's thefirst part. First off,
diversification.
Do you really want a little bitof everything? And why? Because
(03:29):
the more the morediversification you have, the
less growth potential you have.If the objective is your money
is to grow, the more you have,the less growth you have. Like,
it's like you're almostcontradicting yourself in your
objectives and how you'reinvesting.
And then the second part isunderstanding what risk actually
is. The risk of if you need itin the short term, it might not
(03:51):
be there. So you don't want allof your assets at risk, in my
opinion, in retirements. So youclear on those two?
Speaker 2 (03:57):
Absolutely. Yes. Like, when when do you need the
money? And so for some people,if they're retiring now, they
need money for income now.
Speaker 1 (04:03):
Yeah. So let's take the first five years of your
retirement, which are the mostcritical years. Here's a couple
of ways you could solve it ifyou're gonna diversify your
portfolio by objectives. Maybethe first five years, do a CD
ladder. Most people can go tobankrate.com, look up some CDs,
and do a CD ladder on their own.
They don't need a financialadviser to buy CDs or to figure
(04:23):
that out. Maybe you do a bondladder. So you go out on your
brokerage, Fidelity, Schwab,whoever, and you buy a bond that
matures in one year, a bond thatmatures in two years, a bond
that matures in three years, andyou just spend it down. Maybe
you want little bit upsidepotential. And so maybe you have
the first three years.
The first year is a CD that yeartwo and three is a bond ladder,
(04:45):
and then after that, year fourand five, your income comes from
a buffered ETF. And maybe youfound a buffered ETF just
hypothetically that has up to 7%of the upside of the S and P,
but no downside. So you shouldhave a little bit more upside
growth, but you don't have haveit every year, but you don't
need it for four years. Do yousee how we're just we're taking
okay. Here's the objective.
Here's the income that I needfor this year, and here's how
(05:09):
I'm gonna invest it so that whenI need the money, I'm not gonna
need to touch it. It's therewhen I need it, and it's close
enough based on the risk thatI'm comfortable taking. This is
a totally different thoughtprocess that many people getting
closer to retirement do not gothrough the exercise. Because
here's what typically is said,as well, if the markets are up,
(05:29):
you know, we'll just take alittle bit here with dividends,
and then maybe we'll sell someof these stocks, the
underperformers, and blah blahblah blah blah. And if the
markets are down, maybe we'lltake income from your bond
funds.
Well, what if the bond fundslost money?
Speaker 2 (05:42):
So it seems like a lot of maybes in there.
Speaker 1 (05:43):
Yeah. It's this kind of oversimplified advice where
you're just kind of explainingaway, well, you know, we'll
figure it out then. It's notproactive at all. It's very much
like, well, don't ask medetailed questions because I
don't really wanna answer thembecause I can't promise returns,
which no one could promisereturns.
Speaker 2 (06:01):
Right.
Speaker 1 (06:01):
Anyone's promising you returns, it's better be
about a CD or a treasury
Speaker 2 (06:05):
Yeah.
Speaker 1 (06:05):
At a fixed rate, because anything else is just
wrong. You can't do it. But it'sit's almost like, hey. No.
Here's here's the portfolio I'msupposed to sell, or here's the
portfolio.
This is how it works. And, like,let's not get too detailed
because no one really knows thefuture. That's horrible advice,
because you can diversify yourassets more specifically by very
(06:25):
detailed objectives. This is whywe do planning first and the
portfolio second, is to figureout your needs first, figure out
the seasons or the timelines ofwhat your assets are supposed to
do. Now the reason why I say allthat, is because this individual
right here is probably trying totime the market.
They're probably trying tofigure out every little detail
that they need, so they don'tscrew it up, because all their
(06:46):
assets are probably in kind ofone type of investment,
typically in the stock market,because that's where you have
the most growth potential, butyou have the most risk. And
they're trying to figure it outeach day, and that's a lot of
stress. That's a lot ofpressure.
Speaker 2 (06:57):
Right.
Speaker 1 (06:57):
And what if you get it wrong? It's you know, just
the lifestyle you have for therest of your life. It's your
entire life savings that you mayhave screwed up.
Speaker 2 (07:05):
Yeah.
Speaker 1 (07:05):
So for the first five years, maybe struck and you
could buy, by the way, a lot ofpeople don't know this, you
could buy a period certainannuity. Here are two options. A
SPIA, single premium instantannuity. You could just
basically say, hey, insurancecompany. I want a CD ladder, but
I want you to do it for me.
What's the going rate? You putthe money in there, and
(07:27):
instantly you're gettingpayments for the next five
years. That's the easier optionthan going through all the work
at the bond ladder or the CDladder, and it's kind of
comparable. Typically, I mean,you gotta shop these things
around, but maybe you just solveit that way. There's also a
fixed index annuity that you canbuy with a five year period
certain.
So maybe you don't know when youwanna retire, but you know you
wanna retire in the next coupleof years. So you just put enough
(07:49):
money into a fixed index annuitythat when you wanna retire, you
then turn on the next five yearsof income, period certain. So
whether you're alive or someoneelse, you die and someone else
is gonna get it, you're gonnathere's guaranteed five years of
payments. Someone's going to getthat money. That's why it's
called period certain.
You're getting it or someone'sgetting it. It's not the
lifetime income that everyonetalks about. That's a different
(08:10):
way to approach it. You can say,okay. Well, if markets typically
recover within a couple ofyears, now I've got enough
breathing room for them torecover.
So then you have to take therisk part of your portfolio and
ask yourself, do you wanna be anactive trader, or do you wanna
be a long term investor? Here'sthe difference. When you invest
(08:31):
in the market, you're looking athigh quality companies that
you're gonna buy and forgetabout it for five to ten years.
You are not gonna look at it. K?
And this is the intelligentinvestor by Benjamin Graham, who
was Warren Buffett's mentor.Great book. Read chapter 11
specifically on how to evaluatethese companies. If And there's
(08:52):
an emotional element, readchapter eight. Chapter eight
talks about how to bridle youremotions.
When the markets go down, knowthat they're gonna recover. K?
It's talking about having goodcompanies with good leadership
with good financials that you'rebuying at a good price. K? And
the first metric is you'relooking at a price earnings
ratio that's low, as in, like,nineteen, twenty, maybe 30 x.
(09:14):
That's that's the threshold youtypically would look at based on
Benjamin Graham's thoughtprocess. You might not
understand what that reallymeans, but start looking at
stocks and ask yourself, what'sthe price earning ratio? There
it's available. Yahoo Financewill tell it to you. And if it's
like twenty, thirty, maybe it'sa good deal to have that stock.
If it's 500 Mhmm. Maybe there'sa bit of a red flag there.
Speaker 2 (09:38):
K. Palantir. Yep. For those who know.
Speaker 1 (09:42):
Yeah. Well, and the reason why I say that is meme
stocks typically have a highprice earnings ratio. So like
for some stocks, have like a 500price to earnings ratio. It
means that their company revenuewould have to increase by 900%
before the current price of thatstock makes sense.
Speaker 2 (10:01):
Okay. So this is maybe like a newer company that
has promise for the future, andtheir so their stock is high
now, but they're not making anymoney.
Speaker 1 (10:08):
Yeah. They don't have Lot of hype. Lot of
expectations. Be cautious ofthose. And then you have
companies like Nvidia, the priceearnings was super high, but
they kept up with theexpectation and did an
incredible job.
And because of that incrediblejob, their price earnings, I
think, is around, like, fifty,fifty x or something like that.
(10:29):
So they were able to digest theexpectations. That's why I think
that the biggest company in theworld right now, they have the
highest market cap at least. Butyou're looking at fundamental
analysis, and then you can let'ssay you don't wanna dive into
the details of all of this. Youjust wanna buy index funds.
K. You can buy an index fund andjust set it and forget it. That
would be John Vogel, the founderof Vanguard, who did the common
(10:49):
sense investor, which is anothergreat book. And that just talks
about buying index funds likeSPY or VOO, that buys the S and
P five hundred. You can buy theNasdaq one hundred, so more
concentrated, but more growthpotential.
That's the Nasdaq one hundred.That's the top companies in the
Nasdaq, which is an index or atrading marketplace as well,
(11:11):
however you wanna define it, butQQQ is the ticker for that.
These are options that areavailable to you, but if you're
a long term investor, you'rebuying it and you're letting it
go. The active trader, you'relooking for a trade that's gonna
make sense for a couple ofmonths or a week, and then
you're moving on to the nextdeal. That takes a lot of time,
(11:32):
a lot of effort.
Both of them take a lot of time,a lot of effort, but one is a
little bit easier to stomachthan the other one. So you just
gotta ask yourself, what are youwilling to put into it? What do
you expect to get out of it? Andare you willing to spend the
appropriate time for theinvestment responsibility, or do
you want someone else to do itfor you? That's really what
(11:54):
you're asking.
And then if you want someoneelse to it for you, are you
gonna go to a robo investor andpay like point one, point two,
point three, whatever the costis for that? Are you gonna go to
an adviser, then they're gonnacharge anywhere from 1% to 2%
for their services, and youjudge them by based on their net
of fee performance, or you needgo someone like us where it's a
(12:16):
flat fixed fee of, like, 4 to$600 a month, regardless of how
much money you have, to do thisjob. And we do active management
for stocks, momentum as well. Wealso do fundamental analysis
like Warren Buffett would do,and we diversify by strategies
for the long term investments.But the point of this is saying,
it sounds like theresponsibilities and his
(12:39):
lifestyle and his plan and theportfolio expectations, the
responsibilities, he's not inalignment of what he would want
or what he would need.
The expectations aren't reallythere. So there's just there's
some things out of the way. Andso either he needs to or she
needs to move into a longer terminvestment situation where
you're buying and setting andforgetting, knowing how you're
(12:59):
gonna take income with otherassets for the first couple of
years of retirement so you don'thave to be in it every single
day, or you hire someone to doit for you. These things don't
magically work themselves out.You can't have your cake and eat
it too.
So what option is there for you?But typically, when people are
stressed about their finances,they're trying to time the
market. They're trying toactively trade. They're trying
to be this sophisticatedinvestor, and it takes a lot of
(13:21):
time, a lot of effort toactively manage, even the
fundamental analysis. I mean,you really gotta understand the
company.
Too many people, well, in myopinion, say, well, what are the
stocks everyone talks about?Let's just buy those. There was
a I think Roger Ibbotson, whowas one of the cofounders of
Morningstar, did an I think itwas him that did an interesting
(13:43):
study. Maybe it was BobSchiller. I can't remember who
it was.
But, anyway, they did a study onhot stocks and cold stocks. The
hot stocks are like the memestocks, ones that are often
talked about, and the volatilityand the probability people get
them wrong is quite high, thecold boring stocks tend to
actually do pretty okay. Not notthis boring stocks that don't do
(14:05):
well. Like, you think of, likewhat's a good example?
Speaker 2 (14:08):
Of a cold boring stock?
Speaker 1 (14:09):
I'm not giving investment advice here. Right.
Right. I'm not telling you tobuy these companies, but you
look at a company like theSouthern Company. SO is the
ticker.
It's just a utility company.Very boring. Has reasonable
returns. That's a pretty neatdeal. Or you can look at another
part of the energy sector likeCEG, Constellation Energy
(14:30):
Corporation.
They're focused on renewableenergies, but also nuclear. They
got the three mile island dealwith Microsoft. They're building
a nuclear plant. If you look atthe energy usage that we're
probably gonna need in Americato keep up with AI, you might
favor some long term investmentswith the energy corporations,
but that one's gonna favornuclear. And you have to look
(14:51):
at, well, why did they misstheir earnings recently, and and
why the stock drop in here, andwhat's the long term play?
What's the intrinsic value of acompany that is able to create
and manage nuclear plants? Andare you okay with that? Are not
okay with that? And how theyplay into the green energy as
well because they're also doingthat? Or do you go to Chevron,
CVX.
And a Chevron and then do youblend the two? So you don't just
(15:14):
buy random companies and hope itworks out. You've gotta
understand and really almostdate the companies and
understand what you're buyingand is the intrinsic value, the
long term play, does it makesense, or has it kind of already
run its course?
Speaker 2 (15:27):
And so if you do this, if you sort of know what
you're investing in, maybe youlose some of that fear because
you you're not sort of payingattention. The the market ups
and downs won't hurt you as badbecause you know, well, I know
why I'm in that, and I know I'vegot time.
Speaker 1 (15:41):
Yeah. If they've got good financials, okay. The short
term blip, like the markets dayto day is a voting machine. It's
just noise. Long term, highquality companies with good
financials, lower debt shouldrecover just fine.
So who cares about the day today drama? That's what this is
intended to do, and and may givethis person some peace of mind
(16:03):
if they transition to this. Itdepends. I personally believe
that there is no perfectstrategy. I believe in blending
active management with stockpicking, momentum models with
fundamental analysis like whatwe just talked about, and buying
some of the indexes.
I think that's the best of allthe worlds because you're
diversifying by thoseobjectives, but that's just my
opinion. That's all the timewe've got for the show today. If
(16:25):
you enjoyed the show, considersubscribing to it wherever you
get your podcast. Just searchfor how to retire on time.
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cycles or if you're missing taxminimization opportunities that
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overall risk while potentiallyincreasing your overall growth
(16:46):
and lifestyle flexibility. Thisis not your ordinary financial
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to learn more and get started.
Welcome to How to Retire On Time, a show that
answers your retirementquestions. Say goodbye to the
oversimplified advice. This showis all about getting into the
details so so you can determinewhat is right for you. As
always, text your questions to(913) 363-1234. And remember,
this show is not financialadvice.
It's information to continueyour exploration. With me in the
(00:26):
studio today, mister DavidFransen. David, thanks for being
here. Yes. Hello.
Thank you. David's gonna readyour questions, and I'll answer
them. Let's jump in.
Speaker 2 (00:34):
Hey, Mike. I'm getting tired of watching the
markets each day. I can't getpast the fear of another market
crash. Any tips?
Speaker 1 (00:42):
Yeah. In the book, I talk about diversification in a
different way. So when I talkabout diversification,
specifically, I'm trying toaddress diversifying your assets
by objectives and not investmentambiguity. Here's what that
means. When you're invested inthe market, many people think,
well, it all should be kind ofin the same category, and then
(01:03):
it will just overall smooth out.
Like, things will just magicallywork out. I do not agree with
that sentiment. I do not agreein the generic portfolio that
you're diversified with largecap, mid cap, small cap, which,
by the way, most people can'teven answer what that means.
Emerging markets, international,blah blah blah blah, bunch of
(01:23):
jargon. They say, why do youhave that?
Why aren't you supposed to havethat? Who said? That's what
everyone does.
Speaker 2 (01:29):
I'm just going back in my mind as you're talking
now, like, I'm in a previousjob.
Speaker 1 (01:33):
Yeah. But remember when you're in the call center?
Yeah. Your first job was a callcenter for a financial
Speaker 2 (01:37):
job. Record keeping for four zero one k plans.
Right? Yeah. Employer sponsoredplans.
Speaker 1 (01:41):
Yeah.
Speaker 2 (01:41):
So, know, they A
Speaker 1 (01:42):
little bit of a throwback?
Speaker 2 (01:43):
You just yeah. You just get these, like, menu. Go,
okay. Here are my options. Oh,here's some small cap, large
cap, emerging markets.
Just like you said, I guess Ishould put a little bit here,
little bit here, a little bitthere. Right?
Speaker 1 (01:53):
Then because that's what everyone does.
Speaker 2 (01:54):
And then you don't really know why now that you're
mentioning it. I'm like, oh, whydid I do that? I just because I
thought I was that's what I wassupposed to do.
Speaker 1 (02:00):
Yeah. We're trying to be smart and diversify Yeah.
Without understanding whatdiversification actually means.
So the general rule of thumb fordiversification is if you put
all your eggs in one basket,you've increased your risk. That
means you've increased yourgrowth potential, but that
increase of growth potentialincreases your downside risk.
That right there is one of themost misunderstood topics in
(02:22):
finance in my opinion. Here'swhy. When it comes to your
actual investments, when do youneed the money? If you need the
money in one, two, three, fouryears, why are you putting in
stocks or bond funds that canlose money? A CD, a treasury, a
buffered ETF, which has upsidepotential but no downside risk,
(02:45):
you know, it resets year overyear.
These other types of investmentsor products give you more
predictability that the moneythat you need will be there when
you need it to be there. So Ihave a client that just sold
their house, and they said, whatshould we do with the 600,000 in
cash? Put it in a high yieldsavings account because they're
gonna buy a house later on thisyear. Why would they put it in
(03:07):
the market risking that it couldgo up? Sure.
10%, 20%, whatever it could do,or it could go down 20%, or
whatever the market does. Maybeit does nothing. But do you
really want that risk based onthe timeline of when you need
the money? Because that's thefirst part. First off,
diversification.
Do you really want a little bitof everything? And why? Because
(03:29):
the more the morediversification you have, the
less growth potential you have.If the objective is your money
is to grow, the more you have,the less growth you have. Like,
it's like you're almostcontradicting yourself in your
objectives and how you'reinvesting.
And then the second part isunderstanding what risk actually
is. The risk of if you need itin the short term, it might not
(03:51):
be there. So you don't want allof your assets at risk, in my
opinion, in retirements. So youclear on those two?
Speaker 2 (03:57):
Absolutely. Yes. Like, when when do you need the
money? And so for some people,if they're retiring now, they
need money for income now.
Speaker 1 (04:03):
Yeah. So let's take the first five years of your
retirement, which are the mostcritical years. Here's a couple
of ways you could solve it ifyou're gonna diversify your
portfolio by objectives. Maybethe first five years, do a CD
ladder. Most people can go tobankrate.com, look up some CDs,
and do a CD ladder on their own.
They don't need a financialadviser to buy CDs or to figure
(04:23):
that out. Maybe you do a bondladder. So you go out on your
brokerage, Fidelity, Schwab,whoever, and you buy a bond that
matures in one year, a bond thatmatures in two years, a bond
that matures in three years, andyou just spend it down. Maybe
you want little bit upsidepotential. And so maybe you have
the first three years.
The first year is a CD that yeartwo and three is a bond ladder,
(04:45):
and then after that, year fourand five, your income comes from
a buffered ETF. And maybe youfound a buffered ETF just
hypothetically that has up to 7%of the upside of the S and P,
but no downside. So you shouldhave a little bit more upside
growth, but you don't have haveit every year, but you don't
need it for four years. Do yousee how we're just we're taking
okay. Here's the objective.
Here's the income that I needfor this year, and here's how
(05:09):
I'm gonna invest it so that whenI need the money, I'm not gonna
need to touch it. It's therewhen I need it, and it's close
enough based on the risk thatI'm comfortable taking. This is
a totally different thoughtprocess that many people getting
closer to retirement do not gothrough the exercise. Because
here's what typically is said,as well, if the markets are up,
(05:29):
you know, we'll just take alittle bit here with dividends,
and then maybe we'll sell someof these stocks, the
underperformers, and blah blahblah blah blah. And if the
markets are down, maybe we'lltake income from your bond
funds.
Well, what if the bond fundslost money?
Speaker 2 (05:42):
So it seems like a lot of maybes in there.
Speaker 1 (05:43):
Yeah. It's this kind of oversimplified advice where
you're just kind of explainingaway, well, you know, we'll
figure it out then. It's notproactive at all. It's very much
like, well, don't ask medetailed questions because I
don't really wanna answer thembecause I can't promise returns,
which no one could promisereturns.
Speaker 2 (06:01):
Right.
Speaker 1 (06:01):
Anyone's promising you returns, it's better be
about a CD or a treasury
Speaker 2 (06:05):
Yeah.
Speaker 1 (06:05):
At a fixed rate, because anything else is just
wrong. You can't do it. But it'sit's almost like, hey. No.
Here's here's the portfolio I'msupposed to sell, or here's the
portfolio.
This is how it works. And, like,let's not get too detailed
because no one really knows thefuture. That's horrible advice,
because you can diversify yourassets more specifically by very
(06:25):
detailed objectives. This is whywe do planning first and the
portfolio second, is to figureout your needs first, figure out
the seasons or the timelines ofwhat your assets are supposed to
do. Now the reason why I say allthat, is because this individual
right here is probably trying totime the market.
They're probably trying tofigure out every little detail
that they need, so they don'tscrew it up, because all their
(06:46):
assets are probably in kind ofone type of investment,
typically in the stock market,because that's where you have
the most growth potential, butyou have the most risk. And
they're trying to figure it outeach day, and that's a lot of
stress. That's a lot ofpressure.
Speaker 2 (06:57):
Right.
Speaker 1 (06:57):
And what if you get it wrong? It's you know, just
the lifestyle you have for therest of your life. It's your
entire life savings that you mayhave screwed up.
Speaker 2 (07:05):
Yeah.
Speaker 1 (07:05):
So for the first five years, maybe struck and you
could buy, by the way, a lot ofpeople don't know this, you
could buy a period certainannuity. Here are two options. A
SPIA, single premium instantannuity. You could just
basically say, hey, insurancecompany. I want a CD ladder, but
I want you to do it for me.
What's the going rate? You putthe money in there, and
(07:27):
instantly you're gettingpayments for the next five
years. That's the easier optionthan going through all the work
at the bond ladder or the CDladder, and it's kind of
comparable. Typically, I mean,you gotta shop these things
around, but maybe you just solveit that way. There's also a
fixed index annuity that you canbuy with a five year period
certain.
So maybe you don't know when youwanna retire, but you know you
wanna retire in the next coupleof years. So you just put enough
(07:49):
money into a fixed index annuitythat when you wanna retire, you
then turn on the next five yearsof income, period certain. So
whether you're alive or someoneelse, you die and someone else
is gonna get it, you're gonnathere's guaranteed five years of
payments. Someone's going to getthat money. That's why it's
called period certain.
You're getting it or someone'sgetting it. It's not the
lifetime income that everyonetalks about. That's a different
(08:10):
way to approach it. You can say,okay. Well, if markets typically
recover within a couple ofyears, now I've got enough
breathing room for them torecover.
So then you have to take therisk part of your portfolio and
ask yourself, do you wanna be anactive trader, or do you wanna
be a long term investor? Here'sthe difference. When you invest
(08:31):
in the market, you're looking athigh quality companies that
you're gonna buy and forgetabout it for five to ten years.
You are not gonna look at it. K?
And this is the intelligentinvestor by Benjamin Graham, who
was Warren Buffett's mentor.Great book. Read chapter 11
specifically on how to evaluatethese companies. If And there's
(08:52):
an emotional element, readchapter eight. Chapter eight
talks about how to bridle youremotions.
When the markets go down, knowthat they're gonna recover. K?
It's talking about having goodcompanies with good leadership
with good financials that you'rebuying at a good price. K? And
the first metric is you'relooking at a price earnings
ratio that's low, as in, like,nineteen, twenty, maybe 30 x.
(09:14):
That's that's the threshold youtypically would look at based on
Benjamin Graham's thoughtprocess. You might not
understand what that reallymeans, but start looking at
stocks and ask yourself, what'sthe price earning ratio? There
it's available. Yahoo Financewill tell it to you. And if it's
like twenty, thirty, maybe it'sa good deal to have that stock.
If it's 500 Mhmm. Maybe there'sa bit of a red flag there.
Speaker 2 (09:38):
K. Palantir. Yep. For those who know.
Speaker 1 (09:42):
Yeah. Well, and the reason why I say that is meme
stocks typically have a highprice earnings ratio. So like
for some stocks, have like a 500price to earnings ratio. It
means that their company revenuewould have to increase by 900%
before the current price of thatstock makes sense.
Speaker 2 (10:01):
Okay. So this is maybe like a newer company that
has promise for the future, andtheir so their stock is high
now, but they're not making anymoney.
Speaker 1 (10:08):
Yeah. They don't have Lot of hype. Lot of
expectations. Be cautious ofthose. And then you have
companies like Nvidia, the priceearnings was super high, but
they kept up with theexpectation and did an
incredible job.
And because of that incrediblejob, their price earnings, I
think, is around, like, fifty,fifty x or something like that.
(10:29):
So they were able to digest theexpectations. That's why I think
that the biggest company in theworld right now, they have the
highest market cap at least. Butyou're looking at fundamental
analysis, and then you can let'ssay you don't wanna dive into
the details of all of this. Youjust wanna buy index funds.
K. You can buy an index fund andjust set it and forget it. That
would be John Vogel, the founderof Vanguard, who did the common
(10:49):
sense investor, which is anothergreat book. And that just talks
about buying index funds likeSPY or VOO, that buys the S and
P five hundred. You can buy theNasdaq one hundred, so more
concentrated, but more growthpotential.
That's the Nasdaq one hundred.That's the top companies in the
Nasdaq, which is an index or atrading marketplace as well,
(11:11):
however you wanna define it, butQQQ is the ticker for that.
These are options that areavailable to you, but if you're
a long term investor, you'rebuying it and you're letting it
go. The active trader, you'relooking for a trade that's gonna
make sense for a couple ofmonths or a week, and then
you're moving on to the nextdeal. That takes a lot of time,
(11:32):
a lot of effort.
Both of them take a lot of time,a lot of effort, but one is a
little bit easier to stomachthan the other one. So you just
gotta ask yourself, what are youwilling to put into it? What do
you expect to get out of it? Andare you willing to spend the
appropriate time for theinvestment responsibility, or do
you want someone else to do itfor you? That's really what
(11:54):
you're asking.
And then if you want someoneelse to it for you, are you
gonna go to a robo investor andpay like point one, point two,
point three, whatever the costis for that? Are you gonna go to
an adviser, then they're gonnacharge anywhere from 1% to 2%
for their services, and youjudge them by based on their net
of fee performance, or you needgo someone like us where it's a
(12:16):
flat fixed fee of, like, 4 to$600 a month, regardless of how
much money you have, to do thisjob. And we do active management
for stocks, momentum as well. Wealso do fundamental analysis
like Warren Buffett would do,and we diversify by strategies
for the long term investments.But the point of this is saying,
it sounds like theresponsibilities and his
(12:39):
lifestyle and his plan and theportfolio expectations, the
responsibilities, he's not inalignment of what he would want
or what he would need.
The expectations aren't reallythere. So there's just there's
some things out of the way. Andso either he needs to or she
needs to move into a longer terminvestment situation where
you're buying and setting andforgetting, knowing how you're
(12:59):
gonna take income with otherassets for the first couple of
years of retirement so you don'thave to be in it every single
day, or you hire someone to doit for you. These things don't
magically work themselves out.You can't have your cake and eat
it too.
So what option is there for you?But typically, when people are
stressed about their finances,they're trying to time the
market. They're trying toactively trade. They're trying
to be this sophisticatedinvestor, and it takes a lot of
(13:21):
time, a lot of effort toactively manage, even the
fundamental analysis. I mean,you really gotta understand the
company.
Too many people, well, in myopinion, say, well, what are the
stocks everyone talks about?Let's just buy those. There was
a I think Roger Ibbotson, whowas one of the cofounders of
Morningstar, did an I think itwas him that did an interesting
(13:43):
study. Maybe it was BobSchiller. I can't remember who
it was.
But, anyway, they did a study onhot stocks and cold stocks. The
hot stocks are like the memestocks, ones that are often
talked about, and the volatilityand the probability people get
them wrong is quite high, thecold boring stocks tend to
actually do pretty okay. Not notthis boring stocks that don't do
(14:05):
well. Like, you think of, likewhat's a good example?
Speaker 2 (14:08):
Of a cold boring stock?
Speaker 1 (14:09):
I'm not giving investment advice here. Right.
Right. I'm not telling you tobuy these companies, but you
look at a company like theSouthern Company. SO is the
ticker.
It's just a utility company.Very boring. Has reasonable
returns. That's a pretty neatdeal. Or you can look at another
part of the energy sector likeCEG, Constellation Energy
(14:30):
Corporation.
They're focused on renewableenergies, but also nuclear. They
got the three mile island dealwith Microsoft. They're building
a nuclear plant. If you look atthe energy usage that we're
probably gonna need in Americato keep up with AI, you might
favor some long term investmentswith the energy corporations,
but that one's gonna favornuclear. And you have to look
(14:51):
at, well, why did they misstheir earnings recently, and and
why the stock drop in here, andwhat's the long term play?
What's the intrinsic value of acompany that is able to create
and manage nuclear plants? Andare you okay with that? Are not
okay with that? And how theyplay into the green energy as
well because they're also doingthat? Or do you go to Chevron,
CVX.
And a Chevron and then do youblend the two? So you don't just
(15:14):
buy random companies and hope itworks out. You've gotta
understand and really almostdate the companies and
understand what you're buyingand is the intrinsic value, the
long term play, does it makesense, or has it kind of already
run its course?
Speaker 2 (15:27):
And so if you do this, if you sort of know what
you're investing in, maybe youlose some of that fear because
you you're not sort of payingattention. The the market ups
and downs won't hurt you as badbecause you know, well, I know
why I'm in that, and I know I'vegot time.
Speaker 1 (15:41):
Yeah. If they've got good financials, okay. The short
term blip, like the markets dayto day is a voting machine. It's
just noise. Long term, highquality companies with good
financials, lower debt shouldrecover just fine.
So who cares about the day today drama? That's what this is
intended to do, and and may givethis person some peace of mind
(16:03):
if they transition to this. Itdepends. I personally believe
that there is no perfectstrategy. I believe in blending
active management with stockpicking, momentum models with
fundamental analysis like whatwe just talked about, and buying
some of the indexes.
I think that's the best of allthe worlds because you're
diversifying by thoseobjectives, but that's just my
opinion. That's all the timewe've got for the show today. If
(16:25):
you enjoyed the show, considersubscribing to it wherever you
get your podcast. Just searchfor how to retire on time.
Discover if your portfolio isbuilt to weather flat market
cycles or if you're missing taxminimization opportunities that
you may not even know exist.
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overall risk while potentiallyincreasing your overall growth
(16:46):
and lifestyle flexibility. Thisis not your ordinary financial
analysis. Learn more about YourWealth Analysis and what it
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