Simply Money

Episode Transcript

Speaker 1 (00:06):
Tonight, we have a very simple message for you, although
we understand it's not an easy one.

Speaker 2 (00:12):
Stay calm and carry on.

Speaker 1 (00:14):
You're listening to Simply Money, presented by all Worth Financial
Imani Wagner along with Bob Spawd Seller.

Speaker 2 (00:19):
All Right, fess up. How many times have you looked
at your four oh and k balance recently?

Speaker 3 (00:23):
Right?

Speaker 2 (00:23):
It's all over the place. You might need a drama meine.

Speaker 1 (00:26):
I'll tell you one person who does not, our chief
investment Officer, Andy Stout. There is ice water in his veins.
And you want a chief investment officer who understands market patterns,
historical data and exactly what's going on here. Andy, really
glad that you are joining us today. I'd love to
get kind of your thoughts because we've come off of

(00:47):
this amazing high on the markets where the only way
things were going.

Speaker 2 (00:50):
Were up, and now we've had some volatility.

Speaker 4 (00:55):
When you look at what's been going on, Amy, it's
certainly been a wild ride. Now to your point, this
is something that is relatively common. I mean, you look
at the historical pattern and you see a similar script.
So for instance, when you can look at back at
basically any period in time and The first thing that

(01:16):
you're going to see is that fear rises, people get worried,
and then those investors they panic and they sell. Volatility spikes,
markets fall, and then you know what happens every single time,
market stabilize, then they recover one.

Speaker 2 (01:33):
Hundred percent of the time.

Speaker 5 (01:34):
Right, But Andy, isn't it different this time?

Speaker 3 (01:37):
I mean, we've got tariff talk every day, the price
of eggs is up fifty percent, down twenty five percent.

Speaker 5 (01:44):
It's different this time, right, Andy?

Speaker 4 (01:46):
Four of the most dangerous words of investing right there.
Thank you Bob for teeing that line up. So is
it different this time? You'll hear those four words at
basically any point time, whether things are going really good
or really poorly. For instance, think back in the late
nineteen nineties, markets were skyrocketing, specifically tech stocks. The Internet

(02:09):
craze was, you know, the big fad. And what happened
because it was different this time. Evaluations didn't matter. We
just didn't understand that the Internet was going to be
this explosive growth engine. Well, Nasdaq felt pretty hard in
the following years. Well what about twenty twenty, let's look
at the other the spectrum the world was coming to
and end COVID made us all go work from home

(02:31):
and stay sheltered up and avoid contact with every other
human being because you know it's different this time. Well,
guess what we recovered?

Speaker 3 (02:41):
All right, Andy, we have not had to discuss this
for quite a while now, but I know you and
your team monitor and create something called a recession scorecard.
Here at all worth, please explain the things that you
and your team are looking at and what is that
showing us right now the recession scorecard.

Speaker 4 (03:02):
So what we're looking at here to determine the risk
of an economic slowdown because we're looking at leading economic indicators.
These are data points that move before the broad economy moves,
and specifically we've already identified multiple of these data points,
and what they show is that by and large, risk

(03:24):
is kind of at a medium level, so it's not
too high, it's not too low. But basically there's things
to watch out for, but we're not there yet. Just
for instance, even though the yield curb, that's the most
famous leading indicator, that's the difference between two year treasury
rates and ten year treasury rates, even though that's not
inverted right now, meaning long term rates or higher than

(03:46):
tor term rates, it had been recently inverted. That's something
we're still watching, but overall it's showing a medium level.
So when we look at the economic situation out there, yeah,
there's uncertainty, Yes, there are unknowns. However, we're really at
a point where you might say growth is slowing a
little bit, but we're not near a recession yet.

Speaker 1 (04:08):
Any I think the best thing during times like this,
right when we forget what volatility like this feels like,
is a little perspective. Was talking to someone last week
and we were making the point that where we are
right now, at least at the end of last week,
was essentially where the S and P five hundred was
last September. So no one was complaining last September about

(04:29):
the new highs that we are seeing.

Speaker 2 (04:30):
We essentially step back in time six months.

Speaker 1 (04:33):
No one, of course wants to go backwards, but you know,
the sky is not falling.

Speaker 2 (04:37):
I'd love to hear your perspective.

Speaker 4 (04:40):
Yeah, I think what you're talking about there is a
combination of a few different behavioral a situation. So when
we think about like behavioral finance, one thing that just
stood out right there is a recency bias. So yes,
You're absolutely right Amy that what happened that where we
were in September is not too far from where we

(05:02):
are here. The difference is markets had been heading up.
Now what we see is that markets are struggling a
little bit, and when you think about that, you often
just get stuck in a feeling that what happened recently
will keep happening in the longer term, And yes, we
might see more volatility. Honestly, it wouldn't surprise me too
much if we saw some more volatility, given that there

(05:23):
really hasn't been a blood in the streets moment. We
haven't really seen too much panic out there now when
you think about that the backdrop, it also wouldn't surprise me, though,
if market's rebounded and recovered from here. In order for
that to happen, what we would need is really no
surprises from either the Federal Reserve when they meet this
week or in economic data that comes out. We need

(05:45):
to see some stabilization from that perspective. So there's definitely
a couple of paths the market can take, and then
will really depend on how the data and market news progress.

Speaker 1 (05:58):
You're listening to Simply Money presented by oh Worth financially
Memi Wagner along with Bob Sponseller. We are joined by
Andy Stout, our chief investment officer, as we often are
on Mondays. By the way, you know, he manages twenty
five billion dollars, so he does take leoss attention to
market volatility. Andy, you just mentioned the Federal Reserve our
nation Central Bank meeting this week.

Speaker 2 (06:17):
What are your thoughts on that.

Speaker 1 (06:19):
Do we expect that there could be any surprises or
what are you thinking?

Speaker 4 (06:25):
There will be no surprises when it comes to interest rates,
So there's basically a ninety nine percent chance that they
leave interest rates alone, and we can see that based
on market pricing, so where certain securities are training at,
so that won't happen barring some sort of left field
event in the next two days. Now, with that said,

(06:46):
that doesn't mean there won't be surprises, Amy, So there's
other things that we're going to be looking at this
week besides interest rate levels. First, we have FED Chair
Jerome Palace post meeting press conference. He's going to get
grilled on many different things, from tariffs to inflation, job market,
and that's just one of the I'll call it the

(07:08):
three big other associated events with the FED meeting. The
second is the Federal Reserves update of their Summary of
Economic Projections, and what this will probably show is that
the Federal Reserve expects inflation to be a little bit
higher for longer than what they anticipated in their last
quarterly update, which was in December. And on the economic

(07:32):
growth front, you know, we do expect them to lower
GDP esmens. Now, the third and probably the most interesting one,
at least from my perspective, is the dot plot. Now,
other than just sounding fun to say, I mean dot plot.
I mean, who doesn't like a little bit of rhyming
when it comes to financial jargon? Doctor Seuss, Doctor SEUs,

(07:53):
that's right. But what it really shows you is where
different FED members think interest rates should be at the
end of upcoming count underd years. And this is one
of the most important tools when it comes to the
markets pricing in what could happen we go back to December,
the last one, we saw that the market was pricing
in essentially three quarter point rate cuts in the for

(08:17):
this calendar year. Now, what's probably going to happen this
time or two quarter point rate cuts? Excuse me, what's
going to happen this time is probably either two or one,
because inflation has to stay elevated, and there is growing
concern about, you know, what tariffs could do to inflation
for various FED members. So when we look at that

(08:40):
one or two, that can be a close call. If
we see two, that's probably a good thing for the markets.
If we see one, that couldn't do some volatility.

Speaker 3 (08:48):
All right, Andy, you sound pretty calm, cool and collected here.
This is why we call you around here, cool hand.

Speaker 5 (08:55):
Andy.

Speaker 3 (08:55):
Is there anything that is worrying you right now or
you base basically just sitting in your office twiddling your
thumbs filling out your NCAA tournament bracket. Is there anything
that you are worried about or that's concerning you at
the moment relative to the US economy.

Speaker 4 (09:15):
Honestly no, but it's maybe not for the reason that
you think. I mean from a behavioral perspective, and I
think this is a good thing that many investors should have.
Control what you can control. You're not going to be
able to control what the markets do. Now, you can
have a situation and a plan in place for how
things develop, and we absolutely have those. We have multiple

(09:37):
scenarios based on how things could develop and what that
might mean for portfolios, But you can't control all of that,
So focus on what I can control, you know, allows
me to sleep at night, just to be quite honest
with you know, I guess that has helped me earn
that nickname, which I've never heard before. Nonetheless, you know,
just focusing on that, understanding how things work, understanding market patterns,

(10:02):
that certainly helps anyone to really remain calm, you.

Speaker 1 (10:05):
Know, Andy for our investors right that work with Alworth,
you've made some slight tweaks to how certain things are invested.

Speaker 2 (10:13):
We don't need to get into super.

Speaker 1 (10:14):
Details here, but I'd love some like high level thinking
of how maybe you're you're looking at investments.

Speaker 4 (10:20):
Now.

Speaker 2 (10:20):
I agree with you.

Speaker 1 (10:22):
Nobody should be changing, you know, making a huge change
to their financial plan. But what kinds of things are
you looking at and what changes have you maybe made, you.

Speaker 4 (10:32):
Know, some of the things we've looked at for you know,
certainly not every investor out there is that focus on
higher quality stocks. So if you just think about the
Magnificent seven and the high flyers, you know, led by
Navidia and Microsoft and the like, they have soared last
year and they were responsible for about half of the

(10:54):
S and P five hundred, it's you know, roughly twenty
five percent return. But if you look at this year,
that magnific and seven, they're down about twenty percent at
least from their December highs. Meanwhile, the SMP five hundred
from its February highs is down ten percent, So there
you're not seeing as much of a decline because the
other four hundred and ninety three stocks have hung in

(11:18):
there a lot better than what the Magnificent seven has,
So focusing on quality has been really important to us.
Also on the bond side, what we have done is
we have actually shortened duration a little bit, meaning buying
a little bit more short term bonds for again, not
every portfolio out there, it depends on your own personal situation,

(11:38):
but for those that you're allocated in a certain way,
we have looked at reducing duration, focusing on twitter points
because interest rates have dropped a lot over the past
a few weeks and we wanted to take advantage of that.

Speaker 2 (11:52):
Here's the all Worth advice.

Speaker 1 (11:53):
Listen, there's a lot going on, we understand, please keep calm,
ignore the noise, stay your own of course, comeing up next,
what if we told you that this recent market volatility
could actually.

Speaker 2 (12:04):
Be a benefit.

Speaker 1 (12:06):
Silver linings what savvy investors can learn. Next, you're listening
to Simply Money presented by all Worth Financial. Here in
fifty five KRC the talk station. You're listening to Simply
Money presented by all Worth Financial. I mean you Wagner
along with Bob sponseller. If you can't listen to our
show every night, you don't have to miss the thing

(12:27):
we talk about.

Speaker 2 (12:27):
We've got a daily podcast for you. Just search Simply Money.
It's on the iheartapp or wherever you get your podcasts.
Coming up at six forty three. We are separating fact
from fiction when it comes to Roth accounts, Umbrella insurance,
and a lot more.

Speaker 1 (12:42):
I think oftentimes when you hear about scams, financial scams,
anything to do with your money, you often think like, oh,
they're not maybe they're targeting my parents, they're targeting the elderly.
But I would then point you to some new data
coming out from bank Rate.

Speaker 3 (12:58):
Yeah, this is kind of a surprising and a scary,
kind of shocking and scary serving one in three US
adults thirty four percent to be exact, have experienced some
kind of financial fraud or scam just within the last
twelve months since January of twenty twenty four, and among
those folks, two and five have actually lost money. That's

(13:22):
a lot of people amy and it's spread across all
different generations, so it's certainly something to pay attention to here.

Speaker 1 (13:30):
There are so many issues with these scams, but one
of them is that once you have fallen victim, research
also shows you are so much more scared because you
feel like the likelihood of becoming a victim again. It
just felt so easy to become a victim the first
time that it can happen all over again.

Speaker 2 (13:46):
I recently had.

Speaker 1 (13:47):
Someone in my office who had gotten some paperwork thinking
that maybe she had inherited a significant significant amount of money.

Speaker 2 (13:57):
And when I started to hear some red flat in.

Speaker 1 (14:00):
How this person was talking, I kind of brought up
the concept of a scam.

Speaker 2 (14:06):
In her reaction was why would anyone do that? Why
would anyone do that to me?

Speaker 1 (14:10):
And you know, there's no understanding why people are choosing
to other than to make money and because they're heartless
and cold and they don't care. But I do think
that these stats are ie opening from the perspective of Hey,
it's not just your parents that you need to be
keeping an eye out for.

Speaker 2 (14:26):
It's you.

Speaker 1 (14:27):
It's coming on your phone, it's coming in your email,
it's coming any way that they.

Speaker 2 (14:30):
Can get to you.

Speaker 3 (14:32):
Yeah, and now here's some great news. Almost nine and
ten Americans have taken some kind of measures to protect
themselves from scams just in the last year. So it
seems like the news is getting out. People are starting
to pay attention. I mean, obviously a lot of people
have been hit by this stuff, so they are taking
steps to protect themselves. Nine and ten have done so,

(14:54):
So things seem to be moving in the right direction.
But you know, the scammers get more sophisticated all all
the time, especially with AI.

Speaker 5 (15:02):
And all the you know, emerging technologies.

Speaker 3 (15:04):
So you really got to watch out on clicking links
talking to people on the phone. I mean we talk
about this all the time, Amy, the number of links
that come in. Yeah, you know, just on a phone,
you know, your package didn't get delivered properly, hit this link,
Bam you can get nailed, you know, just in one
little moment of weakness or being in a hurry.

Speaker 1 (15:26):
Absolutely, I want to switch gears now to the headlines
right there, have been crazy headlines and markets have been
crazy volatile lately. I mean, if if you want to
say this is roller coaster, right, you've been up and down,
up and down, up and down more times than you
want account over the past few weeks.

Speaker 2 (15:41):
We get that.

Speaker 1 (15:42):
But I would say for most people, the emotion that
you feel during that time is a little bit of fear. Right,
you're focusing on the losses, You're focusing on what's going
to happen next. And I would say, hey, maybe step back.

Speaker 2 (15:56):
From that a little bit, because you could be looking
at this the wrong way. There could be some opportunities
in all of this volatility for you as an investor.

Speaker 3 (16:06):
Yeah, volatility for long term investors creates tremendous buying opportunities.

Speaker 5 (16:11):
Again for long.

Speaker 3 (16:13):
Term investors, So the key is having a good financial
plan in place where you can segregate your short term
money from your longer term money. And then that longer
term money that you want invested for five, ten, fifteen,
twenty thirty years. When we get these you know, pullbacks
ten to eight, whatever percent it is, that's a great

(16:35):
time to rebalance your portfolio. In the good news, Amy,
we just talked to Andy Stout, our chief investment officer
here at all Worth. They're doing that for our clients
on a regular basis, every single day, not to mention
the tax benefits of doing some tax loss harvesting in
the background. So for long term investors that can avoid

(16:56):
the fear in the news headlines and everybody trying to
to you know, scare you, these times can be tremendous
opportunities to juice your return over the long term.

Speaker 1 (17:07):
I ask yourself this, When you go into a store
and you're buying I don't know, clothes, shoes, whatever it is,
do you start with the most expensive rack in the
store or do you go to the sale rack.

Speaker 2 (17:18):
Me I go to the sale rack. Sometimes I go
to the clearance rack. Give me the.

Speaker 1 (17:22):
Cheapest deal, give me the best deal possible. And I
do not understand, Bob, why when it comes to buying
stocks right, buying ownership and companies, when things are on sale,
investors get nervous.

Speaker 2 (17:34):
It is an opportunity.

Speaker 1 (17:35):
And I can tell you in twenty twenty and in
times when we've seen volatility, many times I'll say to
you know, I think of Steve Sprovac when he was
co hosting the show with me, we would say, okay,
once we finish the show, we're both we've got a
little bit of money on the sidelines.

Speaker 2 (17:49):
We're buying in because we're getting a good deal.

Speaker 1 (17:52):
And I think far too often we forget that when
markets go down.

Speaker 3 (17:57):
Well, and we've seen the actual evidence this year within
the last four to six week we just talked about it.
The one sector of the account of the US stock
market that is actually up for the year, large cap value,
the boring you know, old stay dividend paying companies that
no one really wanted to talk about over the last

(18:18):
three years.

Speaker 2 (18:19):
Not exciting, not sexy.

Speaker 3 (18:21):
Yeah, it's the difference between you know, a professional and
an amateur. The professionals know, you know, when it's time
to go and buy some of this stuff on sale,
as you said, and that's you know, that's working. And
again the good news is you can avoid all this
noise and have some seasoned pros doing this for you,

(18:42):
you know, like our team here at all Worth and
other good fiduciary money managers, and the rebalancing should be
happening on a regular basis and that smooths out your
volatility and it and you don't have to stay up
at night worrying about this stuff.

Speaker 2 (18:57):
Here's the all Worth advice.

Speaker 1 (18:58):
Volatility doesn't necessarily have to be It actually can be
a powerful too tool to help you create wealth if
you're approaching it the right way, right with a clear
strategy and also a long term focus. Coming up next,
some investment solutions for those who have a really good
net egg and may want some untraditional diversification.

Speaker 2 (19:15):
In your portfolio.

Speaker 1 (19:16):
You're listening to Simply Money presented by all Worth Financial
here in fifty five KRC the talk station.

Speaker 2 (19:27):
You're listening to.

Speaker 1 (19:28):
Simply Money presented by all Worth Financial. Immi Wagner along
with Bob Spondseller. I think alternative investments are being talked
about more by investors today than maybe in recent years,
and certainly during this time of market volatility. Right many
investors are saying, wait, is there is there somewhere else
where I can put maybe part of this portfolio that

(19:51):
might be heading in a different direction than the market.
So joining us is our chief investment officer, Andy Stouts
with his perspective, how are we looking at all investments
from an all Worth perspective?

Speaker 2 (20:02):
Andy, I'd love to hear from you on this.

Speaker 4 (20:05):
So when investors think about their investment mix, it's typically
sixty forty, right, how much do I have in stocks?
Often it's sixty percent. How much do I have in bonds?
Forty percent? Now that may not be best for everyone. Now,
certainly it does work for a lot of people. You know,
if your financial plan and your risk tolerance aligned with that,

(20:27):
that's wonderful. Now there are other opportunities out there, though,
when you think about in the investment environment, specifically in
alternative assets. So these are things that aren't really stocks
or bonds, and also, and very importantly, they don't have
the same liquidity as stocks and bonds do. So when
you hear about alternative assets, it's it's not necessarily a

(20:50):
bad thing or necessarily a good thing, but it's really
important to understand the risks because you do have risk,
but with risks come potential benefits above and beyond which
you might be able to get from normal stocks and bonds.

Speaker 3 (21:03):
Andy, when we talk about adding alternative asset classes to
a mix, correct me if I'm wrong here, But isn't
it about all about looking at getting the highest rate
of return per unit of risk from a portfolio, meaning
finding non correlating asset classes that are gonna maybe cushion
volatility while not giving up return. Is that the general

(21:25):
idea here on what we're trying to accomplish for clients
and investors.

Speaker 4 (21:29):
That's exactly right, Bob. So when you're thinking about alternative
assets and the different asset classes, they behave differently. So
when you hear alts, just like when you hear stocks,
there's different types of asset classes within allts. Like within
stocks you have maybe technology stocks, financials, healthcare. Within alternative
assets you have things like private equity, private debt, private

(21:52):
real estate, infrastructure, hedge funds. I mean, there's numerous investment
types and when you think about you want them to
add them to a portfolio that's complementary. So to your point, Bob,
you do essentially improve the risk adjusted rate of return,
So you want to get a higher return for a
lower level of ESK or you know, conversely, you just

(22:17):
want to have that. Technically it's called a sharp ratio.
But we're not going to get into the weeds here.

Speaker 5 (22:22):
All right.

Speaker 3 (22:23):
Well, so getting specific about the current environment we're in,
you know, coming off a period of time here where
when we've talked about this ad nauseum, these magnificent seven
stocks going to the roof over the last few years
and now comprising over thirty percent of the S and
P five hundred and now then pulling back a little bit,
what are some of the alternative asset strategies that are

(22:45):
making sense and you're seeing makes sense in actual.

Speaker 5 (22:49):
Portfolios right now?

Speaker 3 (22:50):
What are you seeing come across your desk right now
that seems to make a lot of sense to you.

Speaker 4 (22:57):
There's a few, and probably I can honestly make a
case for any of them almost at any point in time.
But when you look at today's environment, you think about
interest rates being at decent levels, Well, yes, that's absolutely true.
Now if you look at the private and that's good
for bonds fixed income, But if you look at the

(23:18):
private credit or private fixed income, if you want to
think about it that way, you're actually going to be
getting higher interest rates. Now again comes with less liquidity
and a little bit more volatility, but it's also shown
to have more upside potential. Now on the private equity side,
that's something where it really you need to be more
comfortable with volatility or upside and downside risk. So a

(23:41):
lot of the private equity structures and funds that we've
been looking at lately. You see stable returns. Now, these
typically you only get a price once a month at
the end of the month, so you're not seeing that
intra month volatility. But with that said, when you look
at it over a period of time, even during volatile
periods like in twenty twenty two, for since, many of
them have performed better than what much better than the

(24:04):
broad stock and bond markets have done. So those are
some of the ones that we're looking at.

Speaker 1 (24:09):
Andy, I appreciate you explaining the trade offs right, because
with any investment, right, there's pros and cons and it's
really really important to educate yourself on Okay, you might
be able to get right a higher return, but there's
going to be a trade off for that, and you know,
to your point, maybe less liquidity, more volatility. I think
when a lot of people hear all investments, knee jerk

(24:31):
reaction nowadays might be cryptocurrency, you know, I think you know.

Speaker 2 (24:36):
Joe Strucker, a producer, called me over the weekend.

Speaker 1 (24:38):
He had just been at an event where a younger
investor had said, yep, I've got fifty thousand dollars and
it's all in cryptocurrency. Want to get your thoughts on that, right,
that is not what we're necessarily talking about here, not
saying crypto is good or bad, but any of these
kind of alternative investments have a police in your portfolio.

Speaker 2 (24:57):
They should not be your.

Speaker 1 (24:58):
Entire portfolio, even during times like right now when markets
are volatile.

Speaker 4 (25:04):
When you look at the history of bitcoin, just as
one example of digital assets, what you've seen is that
it goes on these magnificent runs, but then you also
see it followed by years where they decline eighty percent,
pretty much wiping out most of people's investment. Now, if
you have a longer time horizon and a smaller allocation

(25:27):
to your point amy you know, certainly you know a
little bit of exposure there can make some sense. But
really being diversified across alternative assets is another really smart
move because you don't want to just have all in one,
you know, private equity fund or just one area. You
want to be diversified with infrastructure, with private debt, with
hedge funds, and the other thing I do want to mention,

(25:49):
just to make sure that we put this out there,
is when you're looking at these alternative asset funds. They
are typically more expensive than other traditional investment types, so
you need to make sure you will fully understand those expenses,
and if you're looking at any sort of past returns
from those funds, make sure they're net of all fees,

(26:09):
so you understand what the fund has at least historically delivered.
Not that there's any guarantee for the future, of course,
but you've got to remember that.

Speaker 3 (26:17):
It's really important you took the words out of my mouth, Andy,
because some of the big objections I've heard of these
type of asset classes and seen myself over decades is
they are more expensive and they can tend to be
less liquid. Can you talk about how liquidity and expenses
have tended to trend in recent years more in favor

(26:39):
of investors, you know, say over the last three to
five years.

Speaker 4 (26:43):
So if you go back five ten years, you might
have heard a two and twenty or even got three
and twenty. What that means is that there's let's stick
with the two and twenty. There's a two percent annual
management fee that the investor will get charged, and then
essentially twenty percent of the profits. Sometimes there's this high
water mark, which means the fund has to be above
a certain level. Sometimes there's not, so you have to

(27:05):
really look at that very closely. Now what we're seeing
with a lot of investments is no longer necessarily a
two and twenty Now it's more of like a one
point two five and maybe twelve and a half or
something like that. So these alternative assets, they still charge
a higher fee. One point twenty five is higher than
which are going to get on pretty much any ETF
that's out there which is an exchange traded to fund.

(27:27):
You might see average fees around there about anywhere from
point oh five to point five percent, not one point
twenty five percent, So it is higher from that perspective.
And you do have the mansion fees, but those have
come down over time, and again just make sure you
fully understand them, because these investments aren't without risk. But

(27:47):
you know, focusing on maybe some of the bigger name
brands that are out there as opposed to some fly
by night fund that your neighbor is starting up, it
might be a better way to go about it.

Speaker 1 (27:58):
These are the conversations that we are having with some
of our investors at all Worth.

Speaker 2 (28:02):
When it makes sense, I would.

Speaker 1 (28:03):
Say, if this sounds like something that's appealing to you
as an investor.

Speaker 2 (28:08):
This may not be a do it yourself proposition.

Speaker 1 (28:10):
You may want to work with a professional here, a fiduciary,
just to make sure you're thinking through all the potential
trade offs. Again, alternative assets can make a lot of sense.
You just want to make sure you're educated on them,
as we always appreciate our Chief Investment Officer, Andy Stout,
spending time to educate all of us on alternative assets.
You're listening to Simply Money presented by all Worth Financial
here on.

Speaker 2 (28:29):
Fifty five KRC, the talk station.

Speaker 1 (28:36):
You're listening to Simply Money presented by all Worth Financial.
I mean you ignore along with Bob Sponseller.

Speaker 2 (28:40):
Do you have a financial question? It's just bugging you.

Speaker 1 (28:42):
You can't figure it out. Maybe you and your spouse
can't get on the same page with things. We can
help you figure it out. There's a red button you
can click on while you're listening to the show right
there on the iHeart app.

Speaker 2 (28:51):
Record your question.

Speaker 1 (28:53):
It's coming straight to us and we're getting straight to
fact or.

Speaker 2 (28:57):
Fiction, mister spond seller, fact or fiction.

Speaker 1 (29:00):
You should always invest dollars in a row account before
a traditional I ra.

Speaker 5 (29:06):
That's fiction.

Speaker 3 (29:08):
You know, we we never like to use the word
always around here, amy because everything needs to be customized
to you know, a client or investor's unique customized financial plan.
So the first thing you want to be looking at
here is what tax bracket are you in now? And
what tax bracket do you expect to be in? You know,
when you retire or when you take a break from working,

(29:31):
you know you're going to have a window where you
can pull some money out of taxable accounts and pay
taxes at a low tax rate.

Speaker 5 (29:39):
So for high.

Speaker 3 (29:41):
Income high earners, you know, it still makes sense to
do it the old fashioned way and defer, defer, defer
those taxes. So that's why we don't say always use
a wroth first. There's a way to do both though,
and we talk sometimes about this mega backdoor wroth concept.

(30:02):
You know, this is an outstanding opportunity for folks in
a very high income bracket to do both. Do the
pre tax savings and then if you've got some room
left and how much you can put in your company
retirement plan. That's a way to use the after tax
account and then immediately shove it into the wrath party
or four to one K. That's a beautiful strategy to

(30:22):
shelter you know, taxes long term.

Speaker 2 (30:24):
Yeah, great point, great point. A right factor fiction.

Speaker 1 (30:27):
Umbrella insurance provides coverage for legal fees even if you're
not at fault. This is fact, and this is a
great and very powerful tool.

Speaker 3 (30:37):
Right.

Speaker 1 (30:38):
You can accumulate a lot of wealth, and then anything
can happen if you.

Speaker 2 (30:42):
Are coaching one of your kids' sports teams and something
happens to one of the kids.

Speaker 1 (30:47):
I look in my backyard and my kids always joke
that I'm a fun sponge, but I see in one
yard behind us that they've got one of those ginormous
place ads next door a trampoline, and I think, oh
my goodness, if something were to happen, right.

Speaker 2 (31:00):
Lawsuits and you could lose everything.

Speaker 1 (31:02):
Umbrella insurance, you know, depending on what your net worth is, right,
you want enough to cover your net worth. And it's
not an expensive type of insurance, right, but it essentially
can be a game changer if a terrible event happens,
right you certainly this is not an everyday occurrence, but
it could happen, and this is a great way to

(31:23):
protect yourself.

Speaker 3 (31:25):
Yeah, this has coverage that I would just put in
the no brainer category.

Speaker 5 (31:29):
Yes, we all need to have.

Speaker 2 (31:30):
This agreed factor. Fiction.

Speaker 1 (31:34):
WROTH iras have required a minimum distribution to rmds once
you reach the age of seventy two.

Speaker 3 (31:40):
This is fiction, and this is one of the big
reasons why we do Roth conversions for our clients. You know,
case in points, say you're retiring your early sixties, you've
got till age seventy three until the required minimum distribution
start from your four to one K and r iras,
and you've got that period time where you might be

(32:01):
in a lower tax bracket. This is where we could
shift some money out of those iras and four to
one case into roths.

Speaker 5 (32:09):
Pay taxes now.

Speaker 3 (32:10):
At a very low tax rate, and that smooth things
out so you're not getting whacked with this big tax
bill in your late seventies and eighties. And then the
other beautiful thing is once that money goes into that WROTH,
there are no rm ds for the rest of your life.

Speaker 1 (32:27):
Yeah, it can be a great tool, and you know,
I think you probably as well as me. I see
a lot of clients coming into my office who have
just taken full advantage of those tax deferred accounts and
so they have significant, significant tax deferred funds.

Speaker 2 (32:41):
One thing that we can do if you.

Speaker 1 (32:43):
Are retiring maybe a few years before that RMD age
of seventy three, we can do some WROTH conversions in
that year to pull some of those assets out of
that tax deferred account into a WROTH account. Then we're
going to take advantage of that tax free growth right
in that account and less endowment to Uncle Sam at
the same time. So that can be a great strategy

(33:05):
if you're a higher income earner once that salary falls
off the books, right once it's no longer coming in.
So there's lots of strategies here that you can really
really take advantage of.

Speaker 2 (33:15):
Fact or fiction. You can contribute to both a traditional
ira and a roth ira in the same year, but
total contributions across both accounts cannot exceed the annual limit.
And this is an absolute fact, right, you can put
money into both accounts where big fans of diversifying the
tax treatment.

Speaker 1 (33:32):
You just got to pay attention to the total amount
you're contributing to those iras together. It cannot be more
than the maximum that we're allowed in that year. Bob,
I want to give another one really fast fact or fiction.

Speaker 2 (33:44):
Tax diversification, as we talk about it all the time,
it really only helps in retirement.

Speaker 5 (33:50):
That's fiction.

Speaker 3 (33:51):
You always want to be looking at your tax situation,
and as your life evolves and your retirement savings and
planning evolves, you always want to be taking a proactive
look at any way that we can minimize your tax burden.
So you know, this is something we do with our
clients every single time every year when we do an

(34:12):
annual review with our clients. It's one of the big
value adds that we can produce for our clients. You
always want to keep your eye on taxes absolutely.

Speaker 1 (34:22):
Coming up next, we're taking a trip into Bob's world
of wealth.

Speaker 2 (34:26):
This is a deeper dive into tax loss harvesting.

Speaker 1 (34:30):
You're listening to Simply Money presented by all Worth Financial
here in fifty five KRC the taxation. You're listening to
your simply money you're presented by all Worth Financial. I
mean you igno along with Bob's sponseller. That music can
only mean one thing. We're taking a trip into Bob's

(34:51):
world of wealth. Bob, you want to talk about tax
loss harvesting, which is a fantastic strategy and I don't
know that all investors fully understand how to take advantage
of this.

Speaker 3 (35:03):
Yeah, Amy, I thought that might be a timely topic
given some of the recent volatility that we've had in
the markets. And we talk about tax smart trading and
tax loss harvesting all the time. What we really haven't
talked about a lot is why would you want to
do this? I mean, when people hear the word tax
losses and harvesting losses, that doesn't sound like a very

(35:25):
pleasant topic.

Speaker 5 (35:26):
So let's talk about those. Yeah, no, it's.

Speaker 3 (35:29):
Never good to lose, So let's talk about why one
would want to do this. Well, we've got these algorithms
running where you can stay fully invested in and just
swap out one asset in a similar asset class for another,
capture the loss. What would we do with that loss? Well,
a lot of times in diversified client portfolios, folks have

(35:51):
concentrated positions. We talk all the time about proctering hampible
stock ge Kroger, you know stocks that people have held
for you years and years and years and never want
to sell any because of the embedded long term capital gains. Well,
if you can have an algorithm running on the rest
of your portfolio where you can harvest some short and

(36:13):
long term capital losses. That allows us, on a tax
free basis, to just slice off little bits and pieces
of that appreciated concentrated stock position, and then over time,
over a responsible period of time, help our clients get
the diversification that they need. Another example might be if

(36:34):
folks are going to downsize their house in retirement and
they've lived in that home for years and years and years,
and their embedded long term capital gain is way above
what you can shelter under current tax law, you need
another source of losses to offset that gain. So that's
just two reasons, two examples of why we might want

(36:56):
to have some harvested losses to use later on in
the rest of our financial plan.

Speaker 1 (37:03):
Yeah. I mean those concentrated positions, they can almost hold
someone hostage, right because it's like, wait a second, now,
I'm getting nervous.

Speaker 2 (37:09):
You know this this I'm.

Speaker 1 (37:11):
My portfolio was married so much to this one particular stock.
I understand there's this there, but how do I get
out of it without blowing up a huge tax bill.

Speaker 2 (37:20):
Well that's a great strategy there, you know.

Speaker 1 (37:22):
And I think another thing too is, you know I
talk to investors all the time who want to retire
early before fifteen nine and a half. Right, So we
build up significant assets and those taxable accounts, having that
tax mart trading running in the background, there is also
locking in some losses to where when we start taking
distributions from those accounts, we can be really really tax
efficient in how we take those distributions and give a

(37:45):
ton of flexibility. So lots of options here, and I
think it's important to understand just you know, as an investor,
you can focus so much on what return you're getting,
but you are fully missing the vote because tax alpha.
Being really smart about how much you're paying to Uncle
Sam also has to be a big part of this equation.

Speaker 2 (38:04):
Thanks for listening.

Speaker 1 (38:05):
You've been listening to Simply Money, presented to by all
Worth Financial here on fifty five KRC the talk station