Simply Money

Episode Transcript

Speaker 1 (00:04):
Night he threatened to do it, and sure enough he did.
Kind of President Trump talking tariffs you're listening to simply
when he presented by all Worth Financial and Amy Wagner
along with Bob Sponseller. You had a lot of nervous
clients recently wondering about tariffs. If this happens, what's it
going to mean for the stock market? The economy kept saying, ah,

(00:24):
you know, have negotiation tactics. You know, he's a brilliant negotiator.
And then over the weekend I actually was like, oh,
maybe these are not actually negotiation tactics.

Speaker 2 (00:34):
Maybe he's going to follow through.

Speaker 3 (00:35):
I missed love him or hey them, Amy. At least
we can't say President Trump is.

Speaker 2 (00:39):
Boring, never ever boring. So what is happening here? What
is the latest?

Speaker 1 (00:44):
Joining us? Is all worst Chief Investment Officer and these
out keeping a close eye on.

Speaker 3 (00:50):
All of this.

Speaker 1 (00:52):
I mean, you know, he said he was going to
do it, He followed through, People came to the table,
markets reacted.

Speaker 2 (00:58):
I don't know all the things today.

Speaker 4 (01:00):
Yeah, it's been quite a wild ride, Amian.

Speaker 5 (01:02):
But when we closed out last week President Trump talked
about signing some tariffs, market had a little bit of
volatility on Friday, not too bad. I think they thought
he might have been kidding about that. But if anyone
was paying attention to his first term, he doesn't really
kid around too much. Yeah, now, no, I mean he

(01:23):
follows through on what he's going to say, and that's
what he did.

Speaker 4 (01:26):
On Saturday. He assigned an.

Speaker 5 (01:29):
Order to impose tariffs of twenty five percent on all
Mexican products, twenty five percent on Canadian non energy products,
ten percent on Canadian energy products of oil think of oil,
and ten percent on Chinese products. Now, this, as you
probably know, caused the markets to get a little jittery

(01:49):
this morning. He saw the Dow down about six hundred
points when the bell opened. But shortly thereafter, Mexico even
though they originally said they were going to retaliate with
their own tariffs, which probably wouldn't be a good thing
because Trump also said there's a retaliation clause in there
where if a country retaliates with Harris, he'll just add
more tariffs to it. So what ended up happening, though,

(02:13):
was basically what Trump wanted. Essentially, Mexican President Claudia Shanebaum
came to Trump and said, hey, let's work together.

Speaker 4 (02:21):
Let's see what we can figure out. And she agreed
to put.

Speaker 5 (02:25):
Ten thousand Mexican troops at the northern border to help
stop the illegal flow of undocumented migrants and illegal drugs
like Fittanel. And this is exactly what Trump was looking for.
Now that allowed Trump to delay tariffs on Mexico for
one month.

Speaker 4 (02:43):
Mexico's not out of the woods, but they are delayed.
And now what's.

Speaker 5 (02:48):
Going to happen over the next month is they're going
to work on other negotiations to improve the trade flow
between the two countries. So when you think about what
President Trump is trying to do with all of these tariffs,
there's essentially three things that he wants to do now.
The first, and this is what we just saw with

(03:09):
the Mexican president. The first is to use terriffs as
a weapon when dealing with other countries. President Trump believes
economic sanctions they're overused and not nearly as effective as
they had been historically. So when we think about what
he's doing, he's using tariffs as a negotiating tool and
not aligned with stopping the flow of undocumented migrants and drugs.

Speaker 4 (03:31):
Into the US. And obviously it worked right, Mexico quickly.

Speaker 5 (03:36):
I don't want to say cave, but came to the
table and you know, basically gave Trump what he wanted.

Speaker 4 (03:41):
Now, so that's the first reason.

Speaker 5 (03:44):
Now, the second reason is to counter unfair trade practices. Now,
Trump wants to shrink the trade deficit with the other countries,
and tariffs would certainly help there. Now, another way that
they can help counter unfair trade practices is to encourage
companies to essentially retool their supply chains and onshore some facilities,

(04:05):
so bringing manufacturing back to the US. That's another area
that Trump was looking for. And the third reason is
to generate revenue. Now, it's no secret that the US
government runs a massive fiscal deficits. So in other words,
they're spending more than they're taking in. And for the record,
this happens under every single president's going.

Speaker 4 (04:25):
Second time pretty much. Now, that means tarffs could help
reduce that deficit. It also, really, really.

Speaker 5 (04:31):
Critically, it allows Trump the flexibility to cut taxes because remember,
he wants to cut taxes. One of the highlights of
his first presidency was the reduction of the personal income tax,
and a lot of that sets to expire at the
end of this year and extending that's going to be
one of his main priorities. And when he was on
the campaign campaign trail, he also talked about cutting the

(04:54):
corporate tax rates from twenty one percent down to fifteen percent.
That one might be more challenging to push through. You know,
time hotel so recap real quick. For three reasons. Trump
likes tariffs negotiating tool to remedy unfair trade practices and
to raise revenue.

Speaker 3 (05:12):
All right, Andy, what I really want to know is
on your way to the office today, we know you
love Canadian bacon. When you stopped at Starbucks to get
your Canadian bacon breakfast sandwich. Was had the price gone
up by twenty five percent this morning?

Speaker 4 (05:28):
No, not yet.

Speaker 1 (05:30):
You know it will give them a minute.

Speaker 5 (05:33):
It'll it'll take a bit of time for those tariffs
to have an impact on that price now. But you know,
if everything were to have happened, because you know, get
in Mexico's not either one, Let's just say, hypothetically, buff
that all the tariffs happen, and then there's the expected
retaliation that would happen as well. What that would mean

(05:54):
would be that each person out there would be spending
about eight hundred dollars more a year as they shop,
So I mean, make no mistakes, this would have an
impact on inflation. It would raise the Fed's preferred inflation
measure estimates are point seven percent from two point eight
to three point five percent. But again, you know, as
we i've already seen today, it's a very dynamic, it's

(06:16):
very fluid, it's going to change, So don't get too
attached to these numbers. You see that economists are putting
out there about the world coming to an end because Amy,
as you said at the very beginning, Trump's a really
good negotiator, and these already basically taken around one with Mexico,
and I have a good feeling, or not a good feeling,
but I have a feeling that if Canada doesn't come

(06:39):
to the table like Mexico did, Trump will have no
problem keeping those tariffs in place, eventually forcing Canada's hand.

Speaker 4 (06:47):
Because yes, this would hurt the US.

Speaker 5 (06:49):
Economic growth estimates are about a one point two percent
shave off the GDP, which is you know, billions of dollars, right,
But it would hurt Canada a lot more, easily pushing
them into a reception relatively quickly, So Canada definitely has
the incentive to come to the table and negotiate. So, yes,

(07:11):
these numbers can be scary and kind are scary when
you think about it. I mean, a family enforcementning thirty
two hundred dollars more a year, many of them don't
have that.

Speaker 4 (07:19):
That's that's that's eye popping, right. But things will change
and will probably change relatively quickly.

Speaker 1 (07:27):
You're listening to Simply Money presented by all Worth Financial.
I Meami Wagner, along with Bob Spondseller and Andy's Stout,
our chief investment officer here at all words, as we
are digesting trying to digest news of the tariffs, as
it is so fluid in changing constantly. You know, we're
talking about what a good negotiator President Trump is. Would

(07:47):
not want to sit down and play poker with him, right,
I mean it would be a really tough game to play,
you know. And the problem with trying to figure out right,
his next play is not only do you have all
of these these countries that are trying to figure out
what the next play is, but also the Federal Reserve,
our nation central bank having to make decisions and they

(08:10):
cannot see the cards that he's playing or what's in
his hand.

Speaker 3 (08:14):
Yeah, and a couple of things I read over the weekend.
I mean, correct me from wrong, Andy, But some of
his cabinet appoint appointees who are going to be coming
onto his cabinet to negotiate trade deals. Those folks even
haven't been confirmed by the Senate yet, so they're not
even in their jobs. So you know, if you looked
into your crystal ball, and we're not holding you to

(08:36):
this because nobody can predict, you know, the mind of
President Trump, how long you think this is all going
to take before we get some things settled and it
all shakes out here.

Speaker 5 (08:46):
Well, I thought it would be longer than a couple
of hours when it came to me. Who knows, But
you know, I would say to you, you know the
point on the Federal Reserve, and they don't know either.

Speaker 4 (08:58):
I mean, they met last as expected.

Speaker 5 (09:01):
They left interest rates unchanged in a range of four
and a quarter to four point five percent. And this
is after they had hiked i'm sorry, cut rates in
the prior three meetings by a total of one percentage point.
So we have seen the Fed past and they've essentially
taken this wait and see approach because you know they
have a dual mandate that's stable inflation and full employment.

(09:25):
You could argue the labor markets in a pretty good
shape with the unemployment rate at four point one percent.
We'll get an update, by the way, on that on Friday, Colm.
I think it's going to say at four point one percent,
but we shall see. But the labor markets in a
pretty good space. Inflation, they also want stable prices. That's
not stable when you look at where we're at right now,
we're still at two point eight percent. That's the the

(09:47):
feds preferred inflation measure core PCE, and it's been in
this range of upper two s the lower threes for
the past quite quite a few months really, so the
Federal Reserve they have paused because they need to see
more progress on inflation, and they haven't seen that recently. Now,
the issue is if all these tariffs do go into effect,

(10:09):
think of it as the impact happening in two different timeframes.
The first time frame will be a shock to inflation
on the upside. Now that means the others definitely won't
be cutting rates. I mean they could even high rates
in that scenario, depending on how aggressive it gets. However,
I don't think they will because of the second time frame.
That second time frame is the economic impacts start to

(10:32):
come through, and that's where you see the economy start
to slow, in which case the Fed would probably be
more inclined to lower rates in that situation to try
to keep the economy aflow, because what we have seen
is that even though inflation is really really hard to kill,
the FED would prefer that people still have jobs and
don't get laid off, So they'd want to keep the
economy aflow. So when you think about what the Federal

(10:55):
Reserve is going to do, they're waiting.

Speaker 4 (10:58):
They need to see what President Trump this is going
to do.

Speaker 5 (11:00):
When Chair Powell was talking last week in his press conference,
he avoided political issues.

Speaker 4 (11:05):
He steered clear.

Speaker 5 (11:07):
He made it very very transparent that they are not
going to accept policy based on what might happen.

Speaker 3 (11:16):
Yeah.

Speaker 1 (11:16):
I think a good point here to make, too, Andy,
is you know Powell was appointed by President Trump and
his first presidency, in his first administration, so he maybe
understands better than anyone how to run the show when
someone else is running the show. So I think maybe
that wade and see approach makes obviously a lot of
sense right now. Will continue to keep an eye on

(11:38):
this and certainly keep you posted on how we think
it's going to impact not only your four one K,
but all of us on Main Street with what we're
going to have to pay a lot to keep track of.
Here coming up next, making fun of some folks who
make some pretty big paychecks on Wall Street and are
making some claims that they know the future when it
comes to investing. You're listening to Simply Money, presented by

(11:59):
all Financial Here in fifty five KRC the toxation. You're
listening to Simply Money presented by all Worth Financial. I'm
Amy Wagner along with Bob's Bond Seller. If you can't
listen to our show every night, you don't have to
miss a thing we talk about. We have a daily
podcast for you. Just search Simply Money. It's right there

(12:20):
on the iheartapp or wherever you get your podcasts. And
coming up at six forty three, we are testing your
knowledge of stocks and bonds as we play everyone's favorite
fact or fiction. I've looked at a lot of research
through the years about how to pick investments active funds
versus passive funds.

Speaker 2 (12:41):
In overwhelmingly.

Speaker 1 (12:43):
The research comes in the side of one thing, and
that is it's incredibly difficult to pick stocks and to
beat the overlying market. Bob, I'm thinking about a call
I had late last week with someone younger investor who
has been in actively managed funds for a long time,
and he's like, you know, every time I talk to

(13:04):
someone I want to believe in, like their method of picking,
and you know, it sounds so good, and then I
look at the end of the year, like how they've
done compared to the market, and they never beat the market.

Speaker 2 (13:14):
Well, not surprising there.

Speaker 3 (13:16):
Yeah. In another one of these studies came out, you know,
over the weekend and talking about you know, eight investments
or eight stocks that were most overweighted by the world's
big money managers ended up generating a return that was
significantly less than the S and P five hundred and amy.
Every year and every month and every week that we
look at these things, the answer is pretty much always

(13:39):
the same. To your point, it's incredibly difficult to pick
quote unquote winners that out you know, outperform the market.
And that's why you know, over eighty percent of all
actively managed funds underperformed their given bench park NETA fees
and we talk about that all the time, and that's
why we favor, know, working with a fiduciary advisor using

(14:02):
low cost, more index oriented ETFs. Let diversification be your friend,
let low fees be your friend, and you end up
coming out ahead doing it that way, rather than piling
into the predicted quote unquote winners.

Speaker 1 (14:17):
Yeah, this particular project, right that they asked a bunch
of you know, really smart, allegedly muckety MUCKs, right who
are on Wall Street and have fantastic degrees and lots
of letters after their names, you know, to pick the
stocks for the year and kind of to pick the
ones that they thought were going to be winners and
the ones that they thought were going to be not
so great. And the not so great stocks actually did
better than the ones that they were absolutely excited about.

(14:39):
And I think that just it just goes back to
making the point it is really really difficult to get
these things right.

Speaker 3 (14:46):
They're still incredibly smart people, they still do an incredible
amount of work. They have analysts on the ground visiting
these companies. You know, they're doing all the right things,
but you know, for reasons like that, we're talking about
today with tariffs and deep Seak last week coming out.
I mean, there's just things that happen that upset the

(15:07):
all apple cart, particularly in the short term, and it
just makes it very tough to pick these winners consistently,
and the risks far outweigh the benefits of diversification.

Speaker 4 (15:22):
You know.

Speaker 1 (15:22):
My concern maybe not for those who listen to the
show because we talk about this all the time, but
when you come across articles like this right where you
know Bank of America is serving hundreds of the world
leading money managers, right, that's that's weighty. You want to
kind of put.

Speaker 2 (15:39):
Some stock into what they're saying.

Speaker 1 (15:41):
You look at their degrees and we were talking about
Ivy League schools, and we're talking about Wall Street, and
we're talking about you know, paychecks that have so many
zeros on them, like my eyes would water, Right, That's
that's who these people are. And I think if you
apply that same those same kind of levels of criteria
to other things, like if you were looking at doctors, right,

(16:02):
you would be like, oh, these doctors have done all
this research, like you know, for this health consideration. But
it's just different in this world of money because you know,
for doctors who are doing research, they know how the
body is going to perform based on certain things. We
do not know what could be coming out of left
field when it comes to global economies and one company

(16:24):
upsetting an entire sector, right, they just don't have this information.
So as an investor, even though it sounds like, gosh, well,
if they're making these predictions, I should jump on this.
You know, No, you should have a long term plan and.

Speaker 2 (16:39):
You should invest according to your long term plan.

Speaker 3 (16:42):
Yeah, And I'm thinking, you know, economists and weathermen or
whether people are folks that they have the luxury of
coming on every day giving great expert opinions, being wrong
more than they're right, and they still stay employed and
still make a lot of money. It's a beautiful business,
this model, to the.

Speaker 1 (17:01):
Ind I have another example of this, And you know,
I'm a big college basketball person. Right when it gets
close to March every year, you start to have these
people who've watched you know, eight million hours of tape
on these teams, and they're making predictions on this point
guard in this offense and this player right, and then
then the whole tournament plays out and everyone's favorite loses

(17:24):
out in the second round and in some cinderella team comes.

Speaker 2 (17:27):
That's more in line with.

Speaker 1 (17:29):
What happens with these big companies that make up the
S and P five hundred and the American economy.

Speaker 3 (17:35):
Yeah. And it's like it's like our you know, your
six year old niece winning the college twenty you know,
college basketball pool because she picked to win the national
champion the team that had the cutest looking uniforms, or
she liked the color of their shoes, so she picked
that team. It's no different.

Speaker 1 (17:52):
Yeah, And I think that's what you have to keep
in mind when you're looking at this. In fact, now
we've got the January Bank of America Securities Survey and
it's showing, you know, bonds and cash, energy stocks, they're
kind of staying listen, we're underweight in these, not excited
about these, you know.

Speaker 2 (18:11):
Who knows.

Speaker 1 (18:12):
I go back to some dimensional fund some DFA research
that we've seen going back to the nineteen twenties, and
if you were to invest in any single asset class
that's going to get you ahead of everything else, what
would it be.

Speaker 2 (18:27):
It's small cap value stocks.

Speaker 1 (18:29):
Small cap value stocks have done better than any other
asset class through the years. Now there's certainly years when
they've been weighed down. Why would you not go all
in on small cap Well, because you don't know what's
going to happen in the future, which is why diversity
is incredibly important.

Speaker 3 (18:43):
Well, and they talk about small cap value and again
over the long, long, long term they're right. But gosh,
you look at the last few years, what's been the
best performing sector? But pole are opposite. Yes, large size,
megacap gross stocks, that's it's been. So it's very tough,
you know. That's our point. It's very tough, and you're

(19:05):
adding unnecessary volatility, risk and oftentimes under performance by trying
to be right every single year. It's very tough to do.

Speaker 2 (19:17):
Here's the all Worth advice.

Speaker 1 (19:18):
Just remember the darling investments of today could be tomorrow's losers,
and vice versa. Make sure you are diversified and you
stay on track with your own financial plan. Coming up next,
investment solutions for those who lose a little sleep when
there's some market volatility.

Speaker 2 (19:34):
We'll get into that.

Speaker 1 (19:35):
You're listening to Simply Money presented by all Worth Financial
here on fifty five krs the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
you Wagner along with Bob Sponseller, we often talk about
the price of admission into the markets, meaning you get
to take advantage of the upside of when these companies

(19:57):
are doing really well. But also there's going to be
a few times when you're checking that four oh one
k and that balance is going to be down. But
from time to time I come across some investors who
just struggle so much with a lot, like cannot sleep
at night if they think they're going to lose any
money from their investments.

Speaker 2 (20:16):
Of course, no one wants to do that.

Speaker 1 (20:18):
But these Bob are conversations we're having all the time.
Andy Stalder, chief investment Officer, coming back tonight, as we
talk about kind of investment solutions.

Speaker 2 (20:27):
Right if this is something.

Speaker 1 (20:29):
That sounds familiar to you, maybe you lose sleep over this.

Speaker 2 (20:32):
I want you to listen up.

Speaker 1 (20:33):
We have maybe some potential suggestions for you.

Speaker 2 (20:37):
Andy.

Speaker 1 (20:38):
Several several years ago, we weren't necessarily talking about these
things as options, but we have some.

Speaker 2 (20:44):
We do have some options for investors right now.

Speaker 5 (20:48):
Yeah, there's quite a few. When you think about what's
out there in terms of investment solutions, there's a schmorgasport. Now,
when you think about client needs and client concerns, certainly
the concerns of I know I need to be invested.

(21:08):
I know I want to be invested, but I know
the market's out to get me. So as soon as
I go in, the market's.

Speaker 4 (21:13):
Going to go down. And I'm so ol right.

Speaker 5 (21:16):
I mean, I think that's just a typical mindset that
a lot of people have, And.

Speaker 4 (21:20):
It could happen.

Speaker 5 (21:21):
Market could go down, but obviously with the longer run,
you're better off staying invested regardless of those short term pullbacks. Now,
if you have some real concern and like you're losing
sleep at night, but you know you need to have it,
so you still want that stock market upside without the
full risk of the downside.

Speaker 4 (21:39):
You know a couple of solutions as that come to mind.

Speaker 5 (21:42):
One is what we call structured notes and another it's
called buffer ETFs, and they both behave very similarly. They
both give you that upside market participation participation, but amiz
that downside risk, So you may not get all of
the market upside. If the market goes up fifty percent
in a year, you may not get all of it. Conversely,

(22:02):
the market goes down ten twenty percent, you won't get
all of that as well. So essentially you're getting a
floor on the downside and a bit of a ceiling
on the upside. And ideally this would help, you know,
reduce your daily stress, right, so you don't have to
worry about those market swings. You don't have to really
worry about, oh, what are our futures doing today, or
what's going on with the economy.

Speaker 4 (22:23):
It's a little bit more of a set it and
forget it approach.

Speaker 5 (22:25):
So on the structured note side of things and the
buffered ETFs they behave similarly from that perspective where you
have a cap and a floor. Now the big difference
is i'll call liquidity and maybe also knowing what you're
going to get. So structure notes those are really more

(22:46):
than anything else or like a note issued by a bank,
I think like JP Morgan as if an example.

Speaker 4 (22:52):
Then they're essentially.

Speaker 5 (22:53):
Guaranteeing you that you'll get the floor and the ceiling
based on whatever underlying stock market that structure noticed Tito.
So it could be like the S and P five hundred, right,
so if the S and P five hundred goes up
ten percent, maybe you get all ten percent. If it
goes up twenty percent, maybe some only get ten percent.
But if it goes down ten percent, maybe you only
lose two percent. So there's going to be like a

(23:15):
floor in the ceiling, and it's going to you'll get
that payout, you know, assuming JP Morgan doesn't go wonder
because nothing's ever guaranteed. But when you look at it
from that perspective, it's pretty safe and you know what
you're going to get, and it has a set start
date and a set end date. Now, the difference with
a buffer ETF is that it's you get daily liquidity
I meaning you can go trade it on a stock

(23:36):
exchange and get in and out, and theyn't have similar terms. However,
to really enjoy that buffer of the floor and the ceiling,
you need to hold it for You need to look
at i should say, over one year time horizons and
you'll see a little bit more wiggle room, but you
should be getting pretty close to what you're expecting.

Speaker 3 (23:57):
So Andy, when you when you talk about you know
the fact that the buffer ETFs do have daily liquidity,
but you strongly suggest and especially with the strategy that
you and your team developed here at all worth. When
you get into that strategy holding it for at least
one year, talk about the why behind that. You know,
usually when people have the option for daily liquidity, the

(24:19):
next question is, well why should I hold that for
a year? Talk about the benefits of that.

Speaker 4 (24:24):
Well, when you.

Speaker 5 (24:25):
Think about the holding it for a one year period,
you have to understand what the ETF is actually invested in.
And it's invested in stock options, which can be very complex.
But they're going to have time frames depending on the ETF,
but they're going to have time frames that roll for
every year. Could be March to March, April to April,

(24:47):
May to May. So the point of these ETFs is
to capture that floor and ceiling.

Speaker 4 (24:54):
Over that one year interval.

Speaker 5 (24:56):
Now you know one of the things that you know
can add some value and I think is really inter saying.
One way that we look at it from like a
i'll call it a tactical rebalancing position, is that we
look to essentially optimize upside potential while keeping that downside
protection in place. So you know, for example, as the
market rises in value, you know what you could do

(25:18):
is reallocate those ETFs, so you could have like a
May s and P five hundred series and two you
might move it to a July series. So what you're
trying to do, because we do this here internally, just
you know, it's an algorithmic UH smart trading process that
we have built in. We can reallocate the ETFs to

(25:39):
essentially reset that downside buffer and lock in gains and
allow us to maintain whatever downside buffer we were looking at.
Maybe it's ten percent, maybe it's fifteen percent, while at
the same time taking advantage of market growth.

Speaker 4 (25:52):
So as the.

Speaker 5 (25:53):
Market rises, we're going to reallocate the ETFs to reset
the buffer and lock and gains.

Speaker 4 (25:59):
Now market declinines, what we would do is we.

Speaker 5 (26:02):
Would stay invested for a bit to exhaust the majority
of that buffer and then reallocate the ets to increase
participation in the upside. Now, I know that can sound
somewhat complicated and complex because well.

Speaker 3 (26:15):
And as you explained it, you know, the thought that
comes to my mind is the old kids don't try
this at home exactly. You know, this is what it's
great to have you and a team you know, that
are monitoring this all day, every day, and you know
when to make the adjustments, and you do it for
these strategies that we have in place, and so the

(26:36):
client doesn't have to think about it. It's being done
for them and I love that.

Speaker 5 (26:41):
Yeah, and it's a It can be really powerful and
provide that peace of mind, and that's key. So with
these buffer etss, I mean that's where when I mentioned liquidity,
So you can if you want, if you choose like, hey,
I don't want these buffer ets anymore for whatever reason,
maybe you need to go, you know, buy a house
or whatever it is, you can sell them that day

(27:02):
and the trade just like a stock. So it's very
easy to get in and out with a structured note,
you know. I think the advantage of a structure note
is it's more certain what you're going to get at
the end of the day because you're not getting to
see the inter day volatility. With that being said, they
do have maturity dates because technically they're a note or
a bond if you will, issued by a bank, so

(27:23):
you can sell them, but it might you might not
be able to sell them as quickly as you could
the ETF.

Speaker 4 (27:31):
So if you if you value liquidity, that's where the buffer.

Speaker 5 (27:35):
ETFs come into play. If you value significantly significant certainty.
I should say that's where the structured notes come to play,
but they do the same thing. It's just kind of
depends whether or not you want to have that certainty
a little bit higher or that liquidity a little bit better.

Speaker 3 (27:49):
Yeah.

Speaker 1 (27:49):
I don't think you have to be a sophisticated investor
right for this to make sense for you. But I
will go back to the point of don't try this
at home. Either one of these could be fantastic options.
And this is a look yourself in the mirror kind
of proposition. If you do lose sleep when there's volatility
in the markets, there are options. I would suggest finding

(28:10):
a financial advisor that you can trust of.

Speaker 2 (28:12):
Fiduciary to partner with.

Speaker 1 (28:13):
But certainly if you're working with someone, bring up these
options if you are someone who really really cannot just
ride the waves of when the markets are down. Great perspective,
as always from our Chief investment Officer, Andy Stout. You're
listening to Simply Money presented by all Worth Financial here
in fifty five KRC the talk station. You're listening to

(28:36):
Simply Money presented by all Worth Financial. I'm Amy Wagner
along with pobspond teller. If you're good at financial question
you can't.

Speaker 2 (28:42):
Figure out, we can help you out.

Speaker 1 (28:44):
There's a red button you can click on while you're
listening to the show. It's right there on the iHeart
Apple cord. Your question, it's coming straight to us. And
along those lines of getting to your questions, it's time
to play fact or fiction. Maybe we can answer some
of them. Now we're testing your knowledge of stack and bonds.
Let's get to it, mister spondseller. Fact or fiction.

Speaker 2 (29:04):
The majority of stock.

Speaker 1 (29:05):
Market gains over time come from a small percentage of companies.

Speaker 3 (29:09):
That's actually a fact, and I was curious, so I
actually did some research on this just to come up
with more specifics if you look. And a lot of
this depends on the timeframe with which you want to
look at it. But let's just pick ten years. So
over the last ten years, the top ten to twenty
percent of performing stocks contributed eighty to ninety percent of

(29:32):
the total return of the S and P five hundred.
The flip side, the bottom fifty percent of stocks in
the index contributed only twenty to forty percent of the
total return. So yes, a small you know, a relatively
small number of stocks tends to contribute, you know, a
large percentage of the gains, you know, over a reasonable
period of time.

Speaker 1 (29:52):
Some other perspective I just want to throw in here, right,
this is why we've been talking about the Magnificent seven,
right so much over the past couple of years. They
have been driving those magnificent returns we've all seen in
our four one case over the past year. So at
the same time, there's lots of research that shows that
by the time that a company like Nvidia becomes a
household name, the major growth that it's seen has already

(30:16):
been exhausted. I don't know if that's the case with
that particular company, But the reason why you want to
be diversified is because tomorrow's in Vidia's tomorrow's companies that
could be fuelling major growth will hopefully be somewhere in
your portfolio, maybe something that you're not paying attention to today,
but man, tomorrow, you're going to be really glad that
you got it in there.

Speaker 3 (30:37):
All right.

Speaker 2 (30:38):
Here's another one fact or fiction.

Speaker 1 (30:40):
If a stock has a low price to earnings ratio,
it's automatically a good value investment.

Speaker 4 (30:46):
That's fiction.

Speaker 3 (30:47):
And you know the reason it has a low price
to earnings ratio is it's it has a low price.
And you know, we talk about this all the time.
What matters is earning's earnings earnings, and I will say
what matters more than anything is earning's growth. I like
to look at price divided by earnings growth, because if

(31:10):
a stock's not growing it's earnings, it's probably not going
to go anywhere in a hurry. And I know a
lot of these low pees stocks have high divinends, and
that's attractive to people. And you know, people like the
idea of buying things on a discount. But a company
that is growing at three times the rate of a

(31:31):
company that's not growing, it's going to warrant a higher price,
and most of the time for a very good reason,
as long as that growth continues.

Speaker 1 (31:40):
You brought up dividends, So I'm going to throw this
one at you. Factor fiction. Stocks with high dividend yields
always the best investments, that's fiction.

Speaker 3 (31:50):
One thing you got to watch with high dividend yielding
stocks is the movement movement of interest rates. So you
know we've noticed this in recent years. When you see
interest straight start to spike, the price of a lot
of these high dividend paying stocks will fall because now
all of a sudden, government bonds or less risky investments

(32:11):
are worthy competition for these high dividend stocks that because
of the earnings component, they can be more volatile. So
you got to be careful there making a broad based assumption.

Speaker 1 (32:24):
I had some.

Speaker 2 (32:25):
People in my office recently.

Speaker 1 (32:28):
Who had built, over the course of several years, a
dividend strategy to replace.

Speaker 2 (32:36):
All of their income.

Speaker 1 (32:37):
And when it works, it works great. But you know,
my concern for them as investors is you know something
you know fundamentally changing that and all of a sudden
it's a house of cards. And so I like dividend
stocks is a portion right of maybe potentially your portfolio,

(32:58):
especially for those who are retired and unfixed incomes, that
these can make sense, but don't I don't. Dividend producing
companies are not the ones that we typically see.

Speaker 2 (33:07):
A lot of growth from.

Speaker 3 (33:08):
That's right, and you know that's a longer conversation, but
you know, I think we've made our point here.

Speaker 2 (33:15):
Factor fiction.

Speaker 1 (33:15):
Government bonds generally considered to be safer than corporate bonds.

Speaker 3 (33:19):
That would be a fact generally, and it's because with
government bonds there is no credit risk if you believe
that the United States government is going to remain in
existence and not default on their bonds, Whereas when you
loan your money to a company, you are taking on
the credit risk of that company. So that's why, generally speaking,

(33:42):
government bonds are going to be safer than corporate bonds,
and that's why they generally yield a little less or
sometimes a lot less than a corporate bond.

Speaker 1 (33:51):
Coming out next, we are taking you inside.

Speaker 2 (33:53):
Bob's World of Wealth.

Speaker 1 (33:55):
You're listening to Simply Money, presented by all Worth Financial
here in fifty five KRC, the talk station listening to
you Simply Money because I'm my all Words Financial, I'm Emmy.

Speaker 2 (34:10):
Wagner, along with Bob's Sponsorller.

Speaker 1 (34:12):
Money, Money, Money, we can only be talking about one thing.
This is Bob's World of Wealth. Bob, lay it on us.
What do you got for us?

Speaker 3 (34:21):
Well, this isn't a very exciting topic to cover, but
I think it's a very important topic to cover, and
one that I just see coming up far too often
in meetings with clients that I've worked with for years
and years and years, and also with prospective new clients.
And that's the whole idea of dovetailing beneficiary designations with

(34:43):
your legal documents, and we'll start at the top. The
one you know, I think misunderstanding that's out there frequently
is that your will is going to or your trust,
well especially your will is going to have anything to
do with how you're iras in your four oh one
k's passed down to your beneficiaries. So the big reminder

(35:05):
here is that iras and retirement plans do not go
through probate. Therefore, they do not pass through your will.
And even if you've taken the time to do a
great will and a great trust, all that matters is
what's listed on that beneficiary form, both primary and contingent beneficiaries.

(35:26):
That's number one, and I find people remain very confused
about that, and that's something that you have to be
checking often. You know, whether you do this yourself or
work with an advisor, you know you've got to be
looking at those beneficiary designations and make sure those are
current and up to date with what your true wishes are.

Speaker 1 (35:47):
Let me give you an example of where this can
really go right. So say you were married for ten
fifteen years. You had a couple of jobs during that time.
So a couple of old four to one k's and
you just whatever, didn't pay a lot of attention to them,
but they're you know, significant assets growing through the years,
got divorced, got remarried, never changed the beneficiaries on those

(36:10):
old four one ks, because hey, you now have an
updated estate plan with your new spouse, right your new
husband or wife, and you've got a will or a trust,
and so that's you know, I think in a lot
of people's thinking, that will supersede anything that I filled
out one hundred years ago when I had this old job,
in this old.

Speaker 2 (36:27):
Four oh one K.

Speaker 1 (36:29):
And then something happens to you, and the bad news
for your loved ones and your new spouse is that
that old four one k with that beneficiary that never
got updated, doesn't matter what's in your will, does not
matter what's in your trust, It is going to them.

Speaker 4 (36:47):
Yep.

Speaker 3 (36:48):
And I want to touch on one other thing. You know,
when you do name beneficiaries, and now we're mainly talking
about contingent beneficiaries because I think most people, especially those
that are married, you know, we all know enough to
name our spouse. Our surviving spouse is the one hundred
percent primary beneficiary. What can get a little tricky and

(37:08):
confusing for people is the contingent beneficiaries. And I want
to bring up a Latin term called per stirpies, and
what that means in the Latin is by branch. Here's
what I mean. You know, for example, my wife and
I have three sons. I've named my wife as primary beneficiary,
my three sons equally as contingent beneficiaries per stirpies. So

(37:33):
what that means is, at the time that my wife
and I pass away, let's just say one of our
three kids is no longer living, that that child's portion,
if you will, is going to go to his children.
If you don't have that per sturpiees named the child
that passed away, his family is completely disinherited from that account.

(37:58):
You know, it's just going to go who whoever's left
gets the money split fifty to fifty instead of thirds.
So again it all comes down to personal preference. But
make sure you've talked about this and reviewed it so
that your beneficiary form actually reflects what you want to happen.

Speaker 1 (38:14):
It's state planning incredibly important to make sure that your
wishes are carried out after you're no longer here. Thanks
for listening. You've been listening to Simply Money, presented by
all Worth Financial here on fifty five KRC, the talk
station