Simply Money

Episode Transcript

Speaker 1 (00:05):
Tonight, what could be the biggest risk to your floora
one K over the next few months, plus should you
aim for seven percent annual return on your investments. There's
a number of questions we will be answering for you tonight.
You're listening to Simply Money, presented by all Worth Financial
Immi Wagner along with Steve Ruby. One major indicator of
how the economy is going, how the markets are moving,

(00:28):
is the job market. Job market can be whether a
big indicator of whether we're moving toward a recession or
away from them, and we just got the latest numbers
from November. All Work chief investment Officer Andy Stout is
joining us right now. Andy, is there a reason to
be concerned based on what you see here?

Speaker 2 (00:49):
I wouldn't say there's a major reason to be concerned.
On the jobs before, I would also say, though it
wasn't a very good jobs before, especially when you look
at the various as specs and specifically the unemployment rate.
So that's the one that really kind of stood out
to me. But in terms of does it make me
worried about the future of the economy the next six months, No,

(01:14):
not really. I mean, beyond that, it's it's really more
challenging to get a reading on whether or not the
economy will expand or contract and by how much. But
near term, the job picture wasn't good and there are
some implications for it, but it doesn't really you know,
result in anything that can probably like likely push us
into a recession or anything like that.

Speaker 3 (01:36):
So what else came out this week that the Fed
is looking at, especially as we move towards the end.

Speaker 2 (01:41):
Of the year here, Well, the big one is going
to be that job's report. So when you look at
the data under the hood, you see that it actually
the unemployment rate rose from four point one percent to
four point two percent. That may not seem like that
big of a deal, right, but it was a what
I'm calling it a week four point two percent because
it was really close to rounding to four point three percent,

(02:01):
was like four point two four six, so point four
percent away from And it's really just that number that
people fixate on, right, So if you see a four
point three versus a four point two, it's going to
seem a lot worse going from four to one to
four to three versus four one to four two. But
when you send it out, yeah, it's certainly not as
strong as that four point two looks at face value.

(02:23):
And the other thing that I don't like about that
unemployment rate is it increased for all of the wrong reasons.
Because it can increase for good reasons, like, uh, maybe
the number of people entering the labor force increases and
as the result, there's more people unemployed if that increases
a quick rate. But the problem was the number of

(02:45):
employed people fell, the number of unemployed people rose, and
the labor force shrink, So all of those things result
in the unemployment rate increasing. So what the government does
a Bureau of Labor Statistics, specifically, they survey individuals. They
ask them, you know, do you have a job? Are
you looking for work? And three hundred and fifty five

(03:08):
thousand people said that was a number of employee people
who said they were no longer employed. The people who
said they lost a job was one hundred and sixty
one thousand or unemployed, And then you had one hundred
and ninety three thousand saying I'm not looking for work anymore.
As a result, you got that increase. So, I mean,
it was a bad part of that report.

Speaker 1 (03:27):
So Andy, we've got the Fed, our nation Central Bank
meeting next week with the final either rate cuts staying
where we are moving raids up before the end of
the year. As they digest this information and everything else
that you look at, what do you think they're thinking
right now?

Speaker 2 (03:47):
Well, I think the Federal Reserve is thinking that they're
going to maybe cut rates right now. The data that
we got from last week. I mentioned the unemployment. The
other part of that jobs report, by the way, was
that employers said they hired more people. They actually said
they hired two hundred and twenty seven thousand people. So

(04:08):
that's where the government's talking to business is not individuals,
so there's a different group that they're actually speaking with.
So from that perspective, it wasn't bad, and it was
a rebound from the October month, which was marketingly lower
thanks to the hurricanes Helene and Milton. But when you
think about the Federal Reserve and what they're looking at
and what they're trying to do, and what they're trying

(04:30):
to do is really lower rates right now. But they
don't want inflation to re accelerate. And when you look
at this inflation data that we've been getting over the
past couple of months, it hasn't been improving like it
had been prior to that. When I'm talking like go
back twelve months or so ago, you know, we had

(04:51):
seen this marketed improvement and now it's just kind of
leveled off and we haven't really gone anywhere since then.
On the inflation front.

Speaker 3 (04:58):
That expectation has been set clearly for quite some time
that it was going to be difficult to get across
the finish line as far as the Fed's target than
key goal, yeah, for inflation is concerned. But you know,
we have another report coming out this week. Let's hear
your insight on that.

Speaker 2 (05:15):
Yeah, So we're going to get the CPI or the
Consumer Inflation Report on Wednesday, and this is the last
major economic release that has any real possibility of swaying
what the Fed does. So right now there's eighty seven
percent chance at the Fed will reduce rates by a
quarter point on December eighteenth. So this inflation report CPI

(05:39):
is expected to show that total inflation increased point three
percent in November. Also, core inflation, which excludes food and
energy prices, increased point three percent. Now, if that comes
to fruition, what that would mean is that the headline
inflation number would have ticked up from two point six

(06:01):
to two point seven on a year or a year basis,
two point seven percent increase, core inflation would be three
point three percent higher over the past year. That's higher
than what the FED really wants it to be obviously,
so we're not seeing that. We're not seeing the trajectory
or that disinflation momentum continue. It's kind of stalled out.
And when you think about the Federal Reserve and these reports,

(06:25):
if we get something higher than that point three percent,
maybe zero point five, let's just say it comes in
really high, you know, I think you get something like that,
the Fed probably does not cut in December at its
next meeting. Now, also, if you get some sort of
massive revision to the prior months to data, that could
also affect what the Federal Reserve does. Now, I think
the base case is they do cut rates, and that's,

(06:46):
you know, good thing, because there's some weakness in the
job market, which we already talked about, but they might
not be able to cut if inflation comes into up.

Speaker 1 (06:55):
You're listening to simply money presented by all Worth Financially
Mami Wagner along with Steve Ruby, we are joined at
every Monday by our Chief investment Officer, Andy Stout. Should
you be worried about your four oh one K what's
going to impact it over the course of the next
few months as we round out twenty twenty four, Andy
is telling us, you know, what is the FED trying
to digest? Now, Andy, I want to pivot a little
bit to politics. Stick with me here. In the weeks

(07:19):
leading up to the election, we watch a lot of
sport ball in my house, her husband, my son is constant,
and there were so many different ads on the TV,
and I just like, I cannot wait until this election
is over, and then I would go to work and
I would have investors that we're concerned about if this
candidate gets into office or that candidate gets into office. Okay,

(07:39):
fast forward to now we know who the president elect is.
But what I'm finding is I'm still talking to investors
who feel very partisan about their money, meaning either they
really like the outcome of that election and they want
to go all in, or they do not like the
outcome of the election and they want to back I

(08:01):
want to get your take on that, and if you're
seeing that in any place in the broader economy, Yeah.

Speaker 2 (08:09):
Actually seeing exactly that in the broader economy. So one
thing that we look at pretty closely as consumer sentiment,
which is how people feel about the current state of
the economy and what their expectations are. And specifically the
University of Michigan, they did a consumer sentiment survey and

(08:30):
we saw an increase. The numbers are kind of weird
to interpret, but it rose from an aggregate level from
like roughly seventy one to seventy four. Okay, we'll just
keep it at that. It increased. Now, the thing was,
and this probably doesn't come as as pride, especially considering
what you were just saying, is that it was split

(08:52):
by political party. So the nice thing that the University
of Michigan does is they separated out, like what do
Republicans think what a democrats? And republic sentiment soared from
sixty nine point one to eighty one point six. That's
a huge move, by the way. Meanwhile, Democrat sentiment plummeted
from eighty one point three to seventy point nine, So

(09:16):
they pretty much went in the exact opposite directions by
extreme magnitudinal shifts, and as a result, you know, the
aggregate increased a little bit seventy one to seventy four.
But it was really just Republicans feeling a lot better
about things and Democrats feeling a lot worse about things.

Speaker 1 (09:32):
And from an investor's standpoint, what give me your concern there?

Speaker 2 (09:38):
Well, from an investor standpoint, I mean, I'm honestly not
concerned one way or another. I mean, if you just
look back over the past.

Speaker 1 (09:45):
Wait, but when you look at investors who are so
right polarized one way or another, we've seen this time
and time again making really emotional decisions about how they're invested.

Speaker 2 (09:57):
Well, yeah, I mean that's the problem because when you
do that, what you're doing is you're going to ignore data,
ignore history, and when you make some sort of emotional decisions,
you're going to miss out on things. So why don't
you just for the people who are worried about the
new administration coming in, here's a statistic for you. So
from when the day of the Trump election in November

(10:19):
of twenty sixteen to November of twenty twenty, when he
was voted out, well, guess what, the S and P
five hundred was up seventy percent. So if you were
that worried about the world coming to and end. Then
you would have missed out on a seventy percent rate
of return, which is just mind boggling.

Speaker 1 (10:35):
Yeah.

Speaker 2 (10:36):
Now, conversely, Biden's November twenty twenty to November twenty four
eighty two percent. It doesn't matter, Republican Democrat. What matters
is corporate profits and earnings.

Speaker 1 (10:48):
Good perspective, Andy. Coming up next, the company that sent
many of its workers into a financial ruin is back
in the headlines. We'll tell you why, plus ways to
take control of your four oh one k Right now,
you're listening to Simply Money, presented by all Worth Financial.
Here in fifty five krs the talk station. You're listening

(11:09):
to Simply Money presented by all Worth Financial. I mean
you Wagner along with Steve Ruby. If you can't listen
to our show every single night, you don't have to
miss a thing. We've got a daily podcast for you.
Just search Simply Money on the iHeart app or wherever
you get your podcasts. Coming up, six p forty three,
we're playing everybody's favorite game, retirement fact or Fiction. We're
talking about annual returns, index funds, and much more. This

(11:34):
does not seem possible to me, but it was actually
twenty years ago when the company Enron collapsed, went bankrupt.
It was a whole thing.

Speaker 3 (11:44):
The whole thing is a good way to put it in.

Speaker 1 (11:45):
It was a whole thing. And now I think the
question is is Enron making a comeback?

Speaker 3 (11:51):
No? No, But you may have noticed or heard through
the grape vine one way or another on Monday, twenty
third anniversary the company going bankrupt the website Ron dot com.
Law Yeah. So first glance, it seems to be kind
of a rebranding of you know, one of the most
infamous companies in modern history. But yes, yeah, Instead it's

(12:12):
a more of an elaborate joke than anything else.

Speaker 1 (12:15):
Group kind of known as sort of parenting things like this.
They're bringing this Enron site back. The company is not
making a comeback. But I think the larger story here
is this is a really important reminder that a company
from the outside can look like it's bulletproof. I mean
from outside investors. During that time before Enron collapsed, it

(12:39):
looked like the company was only going one direction, and
that was up. And then the house of cards fell,
and for anyone who was trying to figure out what
that next big company is, right to go all in
on one stock one company, Remember Enron.

Speaker 3 (12:55):
Yeah, so we're taking a joke and we're turning it
around to it about diversification. Don't sit in one single
company stock or else you might lose your shirt.

Speaker 1 (13:05):
Yeah, that's the short of it here. Yeah, enjoy the jokes, right,
but don't be the butt of the jokes by going
all in on one company. There's social media posts about
Enron and things like that going around. They're not real.
They're funny, but it's not funny to you if you
are actually invested in Enron at that time. Not a
laughing joke at all. Have you looked at your four
to one K balance recently? Where does it sit in

(13:27):
relation to other people? I don't normally like to compare
myself or tell anyone to compare yourself to others, But
I think when you're looking at these balances on these accounts,
one thing you can take away is am I behind?

Speaker 3 (13:40):
Yeah? So each of your Vanguard releases, it releases a
report called How America Saves and it details how much
money people pretty much just have in their four on
one ks and they're looking at obviously Vanguard four one
K plans and in twenty twenty four. Now, the average,
which can be skewed by higher balances amongst the between
the ages of fifty five and sixty four years old,

(14:03):
is about a quarter million dollars. Now, that's the average
median is a more accurate representation of the typical worker savings,
and what we're looking at there is somewhere around ninety
thousand dollars.

Speaker 1 (14:16):
Ouch. Yeah. Ouch. We talk about what used to be
the three legged stool that many of us could count
on in retirement, and that was a pension from your boss,
social security from the government, and then you are only
really accountable for one of those legs, and that was
your four to one k. Well, many of you don't
have a pension anymore. Social Security is becoming a more

(14:40):
wobbly leg on that stool, and so that means your
four oh one k is more and more important if
there is ever a point where you hope to gain
financial independence. Eighty seven thousand dollars for those who are
on deck for retirement right fifty five to sixty four.
For many, this is the decade leading up to retirement

(15:02):
is not going to get you the retirement of your dreams.
In fact, it's might get you about a couple of years.

Speaker 3 (15:07):
Yeah, yeah, I mean if you're lucky. Social Security was
never meant to replace your entire income. It was forty
percent was the target. And more we're kind of landing
now is rather than a three legged stool, it's more
like a one and a half legged stool, or maybe
maybe a pogo stick.

Speaker 1 (15:24):
Actually it is a pogo stick.

Speaker 3 (15:26):
Yeah, that's your four to one K. So we need
to make sure that we're making the best possible decisions
that we can with our four oh one K. And
first and foremost is making sure that you get the
free money that you're able to capitalize on via the
company match.

Speaker 1 (15:38):
No your four oh one K. This is my pet peeve.
If you spend more time every year planning your summer
vacation than you do understanding your floral one K, you're
probably never going to get where you need to go,
and especially if that floural one K is the vehicle
that's going to get you there. You said get your
company match. Do you even know what your company match is?

(16:00):
Is one question. You should be putting every possible dollar
into that account to get every dollar that's going to
be free from your boss. That should be a no brain.

Speaker 3 (16:09):
This is I would argue almost no matter what's happening
financially outside of your four oh one K two, you
owe it to yourself in the future. You are to
find a way to make sure that you are putting
enough in to get the free money, even if there's
a debt situation. I mean, you need to make sure
that you're getting everything you can out of your four

(16:30):
oh one K, you know, especially if.

Speaker 1 (16:31):
You're in your twenties. To your point, if you've got
student loan debt, you could say, well, I'm going to
put every dollar possible to paying off the student loans,
and that's a great way to attack that. But what
you're doing is you're missing out on several years of
that free money that your boss would be putting into
the four to one K and the compounding, right, the
magic of compounding that would take place over over that time.

(16:52):
So yes, you need to get the company natch, regardless
of how old you are. And then second know the
vesting schedule. And that means the average person jumps jobs
about twelve times over the course of your career. That's
a lot of first of all four to one K
plans to keep up with. But secondly, you need to
know whether that company match the money that your boss

(17:13):
has put into that four oh one K is fully vested,
meaning if you were to jump ship and go, we'll
cross the street or somewhere else. Now are you taking
every penny with you? Or is there money you're leaving
on the table now? In my past years ago, I
made this mistake. Steve Ruby will tell you he's never
made a financial mistake.

Speaker 3 (17:32):
I waited until I was vested.

Speaker 1 (17:33):
Now, you're so smart, never done a bad thing with
money in your life. I have made this mistake, and
it hurts, and I unintentionally made it. I made the jump.
I didn't look at the vesting schedule, and then I
was like, wait a second, someone has made a mistake.
Here the full money didn't move over. I had some
enraged phone calls to benefits people in someone in the

(17:53):
HR department, only then to be completely embarrassed because I
moved before that money couldn't come with me.

Speaker 3 (18:00):
What's wrong with you? Amy, didn't you look at your
vesting schedule?

Speaker 1 (18:02):
That mistake was allmine. I blame it on my youth.
I was in my twenties. Don't make that mistake.

Speaker 3 (18:08):
No, Please, don't get this is a real thing that
you need to take into consideration, because if you're thinking
about jumping ship to another job where you know the
grass might be a little bit greener you think it is,
and you have maybe three more months until one hundred
percent of the company match becomes yours, maybe stick it
out and get that free money, because this is all
tied to the match essentially the vesting.

Speaker 1 (18:31):
Also, many plans now offer the opportunity for you to
put money into ROTH, dollars into that four one K
at least know whether your plan offers this and whether
it makes sense for you that company match is not
going to go into WROTH. But if you are in
your lower earning years, I actually like to put dollars
into WROTH now, even if I'm in higher earning years.

(18:52):
Why because I love the opportunity for that money to
grow tax free, right to be invested tax free. So
this is at least something worth knowing. Is this an
option in your plan and does it make sense?

Speaker 3 (19:02):
And remember that WRATH money is not subject to required
minimum distribution, So you're diversifying the future tax liabilities a
little bit and planning ahead when you're when you're doing
pretax and wrath combined or maybe just one or the
other depending on your current tax situation.

Speaker 1 (19:15):
And we're at the end of twenty twenty four on
in twenty twenty five, can you push the namil a
little bit in that four to one K? Can you
bump up what you're putting in by one percent two percent?

Speaker 3 (19:25):
Challenge yourself.

Speaker 1 (19:26):
Yes, you may think you can't. Once the money's going
into that four oh one K, you aren't. You're not
going to miss it, especially.

Speaker 3 (19:31):
If you get a cost of living adjustment. You get
a little three percent bump one percent in your FOURKA.

Speaker 1 (19:36):
Rather than lifestyle creep in the form of a nicer vacation,
give yourself a nicer retirement someday. Here's the all Worth advice.
Fuel up your four to one K as much as
you can. It often holds the most amount of investment
dollars that you're ever going to have in your portfolio.
Coming up next, we're going to help you build your
personal brand in twenty twenty five. Why is that important?

(19:56):
We'll get into that next. You're listening to Simply Money,
presented by all Worth financi Well here in fifty five krs.
The talk station you're listening to simply money presented by
All with Financial Ammi Wagner along with the Steve Ruby
end of twenty twenty four. Are you thinking about maybe
making some career changes in twenty twenty five. If so,

(20:18):
here's a question for you. What's your personal brand? Have
you even thought about that before joining us tonight? Is
our expert in all things related to your career? Julie
Bauki from Julie on the Job. Julie, when we think
about building a brand, first of all, do you think
people are even aware that that's what we're doing when
we're working?

Speaker 4 (20:39):
You know, the whole concept of having a brand is
something we typically associate with products. Yeah, and when you
start applying it to yourself, you really think about it.
In the workplace, in the job market, you are a
product that a company can decide whether to invest in
or not, whether to quote unquote put on their show.

(21:00):
And I think we get really caught up in this. Well,
I'm just a hard worker. I just do what I'm
supposed to do, and you know, and so what I
like to do is say, let's maybe reward that. Let's
say maybe it's not your brand, but what is your
professional reputation? It really is the same thing. And so
if you're good at a certain thing, if you are

(21:22):
someone who is always prepared for a meeting, you're never
prepared for a meeting. You're someone who's prepared to take
on difficult challenges or not. It's that becomes that's part
of your reputation. It's what people are saying about you,
and your reputation really becomes your brand, and it will
impact your ability to get the promotions and the jobs

(21:42):
and the courage you want if not carefully managed.

Speaker 3 (21:46):
You know, some of this almost sounds like office politics
a little bit, which I've certainly seen over the course
of my career. Depending on how you present yourself or
don't present yourself might have an effect on how you
move up the wrong in your work.

Speaker 4 (21:59):
Yeahsolutely, there's no doubt. I mean, we've all worked with
people that you know are in high up positions. Do
you look at them and say, how in the world
to hear she get there? Because? Right? And so, yeah,
there's some level of relationship building, some level of managing up.
But kissing, whatever you want to call it, that's part

(22:20):
of It's part of that building and managing relationships. Now
there are certainly people who do that, and they are
also people who aren't necessarily great at what they do,
and so those are the empty suits. We talk about
empty suits. But what I would tell anybody when you
think about there's I just saw a stat that said
fifty percent of people are looking to change jobs right now.

(22:41):
And so the advice I'd give you is, first of all,
what are you known for? What are you known as,
what do people come to you for? What are you
good at? Those are the things that you want to
move toward. And if you think you're really good at
managing really complex projects with a lot of moving parts,
but no one who's worked with you on such projects

(23:04):
also believes that you're good at that, then you probably aren't.
And so brand or reputations really what if people say
about you when you're not in the room and everything awareness.

Speaker 1 (23:14):
I was going to say, somebody think they're good at something,
but they're not right. And so if you're looking at
kind of defining or creating or refining your brand next year,
I'm imagining it's starting with being aware of actually how
you appear in the workplace.

Speaker 4 (23:31):
Yeah, so the first thing to do is really figure
out what are you good at And this seems like
a really simple question. It isn't. It's we are so
I don't know if it's Americans or what it is.
If it's a generational thing, but we are so not
good at saying I'm good at this. It feels really uncomfortable.
But if you're changing jobs, if you're angling for a promotion,

(23:53):
if you're trying to show your value at work, part
of that not part of it. Really, the core of
it is understanding what is valued about you. Is it
the fact that you run a really tight meeting, that's
a great skill? Is it you know something else? Is
that your ability to solve really really difficult tech problems.
Are you someone who knows how to bring people together?

(24:16):
And so getting really clear on who you are is
is not just something you reserve for the job search.
It's also something that you should be able to answer
at any point because that understanding what your value is
to the organization, to your department is part of how
you It's part of your brand, it's part of what

(24:38):
people say about you, and it's how you position yourself
for a new opportunity. And we all we all have
we all know to some extent what we're good at
and what we're not and just start there. And then
part of it too is make sure that how you
see yourself is in line with the way others see you.
And so we look at things like performance appraisals we

(24:59):
feedback to Again, what do we get good feedback on?
What are we constantly told we need to work on?
The clues are all there, it's just putting it into
an understanding and really frankly being able to share it
and willing to share it.

Speaker 3 (25:12):
So once we have that insight and we kind of
define define our brand and have a better understanding of
what we're good at and kind of implement some of
that feedback, I think probably from their important to set
some goals for yourself too to leverage that.

Speaker 4 (25:25):
Yeah. Yeah, so it's when we think about let's say
you're in a job search. One of the questions you're
always told you have to be able to answer is
tell me about yourself, And if you think about it,
your personal brand statement is the answer to tell me
about yourself. But we don't really we just try to
get past that question and we don't give it a
lot of thought. So if I am good at A,

(25:48):
B and C, what does that mean for me, what
does that qualify me to do? What can I do
with that? Do I want to do that? And then
once you're confident about what you bring to the table,
you can having conversations with people. I want to do
more of this. I really like this. I have gotten
great feedback on this. This is really where I want
to go at my next step. Anything less than that

(26:09):
is really just waiting for somebody else to make those
decisions for you, and that's just that's never a good
strategy in any part of life.

Speaker 1 (26:16):
Jillie, Do you hope that someone kind of just picks
up on your brand or are there proactive things that
you can do to help manage it or get that
messaging out there?

Speaker 4 (26:28):
So I think part of it is you have to
be once you are able to say, here's what I'm
good at, Here's what people value about me, here's what
I've been told where I really excel. The next question
then is once you have your arms around that and
you're really comfortable sharing that and you're confident that you
are what you say about yourself is consistent with the

(26:50):
way others see you, the next question is where do
we go for Where do we go from here. Do
I want to use that? Do I Once I get
clarity on what I really like and what I'm really
good at, That's the lane you always want to stay in.
So do you want to stay in a different stay
in your department and move up around? Do you want
to move to a different department. Do you want to
change companies? Do you want to change careers? It's that

(27:11):
self knowledge that the core of everything we do from
a career standpoint. And this doesn't mean you always have
to change jobs. I think if you like the company
you work for and you're generally satisfied there, start having
those conversations with with your your leader and other leaders
and ask them how you can you know, how can
I continue to expand the scope of what you do

(27:32):
but also contribute at a higher level to the organization.

Speaker 3 (27:36):
How important is digital presence in this day and age
when it comes to your brand?

Speaker 4 (27:42):
It depends on your job. There are certain there are
certain jobs where so almost everybody has some level of
presence online. Maybe it's you know, maybe it's x, maybe
it's faced book, maybe it's Instagram or TikTok. And you

(28:03):
have to if you're going for some sort of marketing job,
or a job that requires a high level of customer facing,
customer facing work or high engagement, then yeah, it is.
It is important that you at least understand how it works.
The other side of that, though, the thing that is
typically the problem is people don't manage their online their

(28:26):
online presence, and they don't understand that when you when
you whatever you put out, their stays forever and people
see it, and people are making decisions about you. Is
this the person I want to hire? Is this the
person that I want to sit in the queue next
to me? Is this the person I want coming into
my home to help me with this? All of those decisions,

(28:47):
all of that, every place you show up becomes a
part of your personal brand and your your potentially your
current employer and your potential future employers are absolutely looking
at that and deciding, is this person a loose cannon? No?
Is this person the person that's going to come in
and not be able to build relationships with people who

(29:09):
maybe who don't think the way they do. And so
you've got to take a look at all of that
as well, because people make decisions about you. People you've
never met make decisions.

Speaker 1 (29:17):
You are a brand there, Yeah, you're a brand what
it is and manage it, especially if you're looking at
switching careers. In twenty twenty five. Great advice it always
from Julie Balki. Julie on the job. You're listening to
Simply Money presented by all Worth Financial here in fifty
five krs the talk station. If you're listening to Simply

(29:41):
Money presented by all Worth Financial, I mean me Wagner
along with Steve Reeb. You have a financial question you
need a little help with. We can help you out.
There's a red button you can click on while you're
listening to the show. It's right there on the iHeart app.
Record your question. It's coming straight to us and straight ahead.
The one thing you might want to do with your
portfolio right now and right now, it is time to

(30:01):
play everyone's favorite game, Retirement Factor. Fiction. We're all over
the place tonight, a lot to get to We'll get
to it now. First up, back to or fiction. Mister Ruby,
you should aim for seven percent annual returns on your
investment fiction.

Speaker 3 (30:17):
I mean yeah, you need to aim for the sweet
spot for maximizing returns while minimizing your risk. What I'm
talking about is a risk adjusted rate of return, how
comfortable you are with taking risk. We can aim for
huge returns, but that means it's going to have a
very large standard deviation, which is the swing between possible
gains and losses, to the point where it may not

(30:40):
be sustainable emotionally for the investor to actually stay invested. So,
you know, picking a particular target and then aiming for
that is not what I would advocate. I would say,
you know, here's your financial plan, here's the risk you
need to take to meet your goals. Here's the risk
you can afford to take base in your financial situation.
But we can't take too much risks so that again

(31:00):
you don't make so that you do end up making
an emotional reaction when when something happens in the market.

Speaker 1 (31:07):
I had a newer client in my office recently. We
were looking at their financial plan, and there's a place where,
toward the end you can kind of dig into the
details of here's how much we're expecting in an annual
return every year or so, what taxes look like, here's
what your expenses might look like based on inflation. And
he kept looking at that expected annual return and it
was like five point six percent. He was like, wait,

(31:28):
this is terrible, This is terrible, and I was like, actually,
it's great. This is what you want to do. You
want to assume a really conservative rate of return and
if your plan still works, meaning there's dollars left when
you guys get to your nineties, great. If you get
a seven percent return or a ten percent or a

(31:49):
twenty seven percent rate of return, great, that's just gravy. Yeah,
But if your plan works, and that's what you want
to do, you want to aim to build a plan
that has really concerned rates of returns so that you
can sleep well in retirement, regardless of whether markets are
way up or whether markets are down.

Speaker 3 (32:06):
It's a form of stress testing. When you assume a
lower rate of return and a plan, then it means
that your plan can afford to see lower rates of returns.
Fact or fiction. Index funds are always the best investment choice.

Speaker 1 (32:19):
Fiction. They're usually a really great investment choice for a
few reasons. If these are exchange traded funds, then they're
usually lower fees, lower costs associated with them. They're often
well diversified. But it depends on what index you're tracking. Right,
If it's the Dow, well that's only thirty stocks, and

(32:40):
you would probably need to be more diversified than that. So,
as a general idea, funds that track indexes pretty good,
but not your best. Overall, you need to be far
more diversified than any one index, even if it's the
S and P five hundred.

Speaker 4 (32:55):
Yeah.

Speaker 3 (32:55):
And if you're doing some kind of strategy like direct indexing, ye,
then you're not actually owning an index fund. You're owning
a portion of the investments individually that make up that index. So,
for example, the Brussel three thousand represents total market in
the US, and you know, you could do a direct
index fund where you own three or six hundred individual
stocks and then you tax lost harvest continually within that strategy.

(33:19):
You can't do that when it's an index fund. So
you know, there's strategies where you're not using index fund,
you're using individual stocks.

Speaker 1 (33:25):
For example, factor fiction, the sixty forty portfolio is dead
of fiction.

Speaker 3 (33:32):
I mean this is I've seen articles on why that's
no longer going to make your money live longer than
you do, oftentimes trying to sell an annuity. So there
can be an agenda behind some kind of an article
like that that's that's loud on purpose, but you know
sixty forty portfolio is designed. It's oftentimes what folks will

(33:56):
find themselves transitioning into and they move from the emulation
phase of retirement to the distribution phase where you're actually
starting to take money out of your investments. And the
whole point there is to allow it to keep up
with inflation without subjecting your overall mix to too much risk.
You know, if you see something that says sixty forty

(34:18):
portfolios dead, there's probably an agenda behind it. Yeah, trying
to sell you something that you probably don't need.

Speaker 1 (34:24):
I will say on the flip side, I have seen
some forty sixty portfolios recently, and the conversation I'm having
with those people is we talk about inflation being the
silent killer. Are you taking on enough risk for those returns?
That forty percent of your portfolio being exposed to the market.

(34:44):
Is that enough for you to outpace inflation? So when
you get kind of south of fifty to fifty, I
do get a little bit worried about that.

Speaker 3 (34:54):
I agree. I think there's such thing as too little
risk and inflation is the silent killer. Fact or fiction.
Growth stocks always overperform value stocks over time fiction.

Speaker 1 (35:05):
In fact, we have dug into this and looked at
research and if you want to look at the best sector, right,
if you wanted to invest your money in the nineteen
twenties through today and would have made the most money,
it's actually small cat value where your money should have been.
Who would have picked that right? And I think that
that goes to say I'm not saying right now you
should go all in on small cap value, but I

(35:26):
think it's important to understand small cap value historically has
done better than anything else. So when you're going all
in on growth stocks because they're the sexy ones in
video Tesla alphabet, they are the tech companies that everyone's
talking about, well, sometimes other sectors can also be the
little engine that could over time. And so you've got

(35:47):
to be well diversified outside of what anyone portfolio coming
up next, there is one move you may want to
make with your portfolio before this year is over. We'll
tell you what it is next year. Listening to Simply
Money presented by all Worth Financial here in fifty five
KRC the talk station, I mean Amy Wagner along with

(36:10):
Steve Ruby. End of the year, we've been talking a
lot lately about things that you can do to get
your financial house in order. One of those things is
rebalancing your portfolio. Yeah.

Speaker 3 (36:21):
Rebalancing is when you take some of the investments that
have maybe done well in your mix, you sell them
and you buy some of the ones that have done
poorly if you have a diversified mix.

Speaker 1 (36:29):
Can you stop right there. You said something that's counter
to what a lot of people want to do. Oh yeah,
you just said sell winners and buy losers.

Speaker 3 (36:39):
Absolutely. I mean I've had meetings over the span of
my career where people will come in and have a
list of, you know, three investments, and they'll sit down
and be like, all right, Steve, I want to sell
this one, this one, and this one. And we pulled
up the investments and we look and those are the
three that are down. Yes, Like all right, Well, what
you're asking to do is sell it a loss when
those ones are going to be up, you know, next year,
the following year. So you know, that's one of the

(36:59):
benefits of professional money management. YEP advisors will strategically rebalance
to capitalize on fluctuations that naturally happen within your investment mix.

Speaker 1 (37:11):
One of the first things that we do when a
new client is coming on to work with us at
all Worth is we go over a risk tolerance questionnaire
with you. Right, we figure out and this is what's
your goldilocks point where you can both eat well and
sleep well. How much risk can you take on and
still be able to sleep at night. That's kind of
our guiding light when we figure out what your investments are,

(37:31):
how those should be built, right, what stocks versus bonds.
Once we figure that out, we invest your money in
that way. Now, the stock market has been on a
bit of a tear over the past couple of years.
I don't know if you've been paying attention to that,
but likely you now have more money on the stock
side of your portfolio.

Speaker 3 (37:48):
I sure hope you do.

Speaker 1 (37:48):
Anyways, Yeah, that feels great until markets head south.

Speaker 3 (37:53):
Yeah. So what happens over time when you're not rebalancing
is called portfolio drifts. So maybe you thought you had
a sixty percent stock forty percent bond portfolio growth with
income relatively conservative. There's plenty of folks that I know
that are in their nineties that have sixty forty mixes.
But you haven't rebalanced in two years. Maybe your sixty
forty is now closer to seventy five percent stock. And

(38:15):
then when the markets do have a correction, which will happen,
you lose more than you are anticipating even possible. So
coming in and rebalancing periodically, which again means selling the
ones that have done better and buying the ones that
have done poorly. When you have that diversified mix, is
a great way to make sure that you are having
your money work as hard as it should for you
without putting it in too much risk.

Speaker 1 (38:36):
Now, to be clear, I'm not saying and I know
you're not either, Steve, this is something you do once
a week, once a month. This is we're talking about
end of the year. If you haven't done this yet
this year, this is a good time to check. Maybe
once twice a year. You shouldn't constantly be rebalancing.

Speaker 3 (38:52):
Momentum is also helpful too when the markets are going
up and you let them do their thing. But you know,
I would argue at least once a year to bring
things back to neutral.

Speaker 1 (39:02):
Absolutely, and for people who work with us, right, this
is something that Andy Stouter, chief investment Officer, is constantly
keeping an eye on. And when portfolio start to drift right.
We will rebalance that here. If you are a di wire,
this is definitely something worth looking into to make sure
you're not moving too far in a direction you never anticipated.
Thanks for listening. We hope you're going to tune in tomorrow.

(39:23):
We're talking about the dues and don'ts of gifting your money.
You've been listening Disimply Money presented by all Worth Financial
here on fifty five KRC, the talk station