Kersten Wealth Management Group - Money Sense 1-25-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Cent. You're listening to the
advisors of Kristen Wealth Manager Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today. As the market continues
to rally, Brad, we're seeing this January effect a little
bit later in the month, and we talked a couple
of weeks ago about being a little bit concerned at
the markets didn't really have that post Christmas rally, the

(00:22):
Santa Claus rally, But then first five days were up.
Kind of textbook January. Really, if you look at the
historical up and down of a average January, the low
day is typically in the middle of the month. First
five days were up, which is another sort of rule
of thumb for the year. Then we had this lull
in the middle of the month, and then the market
just took.

Speaker 2 (00:42):
Off leading into the inauguration after and this week the
week of the inauguration, with the S and P five
hundred getting back to an all time high on Thursday,
a closing high above sixy one hundred, but getting there
with the market leaders again doing all the heavy lifting.
Tech and tech related sectors back to their all time
highs up a lot since the election. We'll talk about

(01:03):
some of those details.

Speaker 1 (01:05):
Yeah, and and is tech is tech back? If I
look at the tech, well there's a lot of different tech. Yeah,
I mean sectors. You can look at you look.

Speaker 2 (01:11):
At the CUES, you can look at the SMP Growth Index,
or just look at individual sector excel K.

Speaker 1 (01:19):
Which is the tech sector is just under the all
time high. But I think the cues are still quite
a bit away. The Triple CUES, which is the NASZAQ
one hundred from the mid December high, from the from
the all time high. Yeah, yeah, all time high bed
the mid December high, but yeah, they are they are
pretty The CUES hit their high in mid December at

(01:41):
five thirty eight. They're at five thirty two. So yes,
one percent, little more than one percent. But if you
look at some of the other other indexes that we follow,
the Dow Jones hit its peak of forty five fourteen,
forty five fourteen, so it's about five hundred points away still.
So the Dow has recouped, but the S and P

(02:01):
really is the only index. Then when you look at it,
let me check the MidCap index. The MidCap index may
be very very close. No, it's still way off the
MidCap index. How about this, Brad, The MidCap index hit
six hundred and twenty is it five ninety eight? So
still twenty two points on six hundred three or half percent? Yeah,

(02:22):
and the small caps are even further. So it'd be
nice to see that broadening participation. But also if you
look at the leaders this year, not only from the
sector standpoint, but.

Speaker 2 (02:33):
The allocations, thatway is mid growth leading the way, and
so it's it's the mid size or not the megacap tech,
but the mid size tech giving you a couple more percent.
And yeah, when you look down at that mid growth
or even small growth doing the same, it's just that
broadens out the sectors a little bit. When you're looking
at that those asset allocations, it's not just pure tech
but some of those other sectors. But you're hearing the

(02:55):
talk of marketing at all time high. You're hearing the
talk of what the markets dones to see election. I
think a lot of people are going to get their
year end statement and while they're up since that year end,
they're going to say, well, what about what about December?
Well we were up a lot in November, we gave
up a little bit in December, you're back to probably
your all time high for the most part if you're
well allocated, but that since election is very concentrated. There's

(03:19):
four sectors still negative since the election real estate, materials,
consumer staples, and healthcare down four five, four and three percent,
so negative since the election. Not everything's up. A few
sectors are pretty flat, utilities and energy, and then you
have tech up seven and a half, Financials up nine

(03:39):
and a half, consumer discretionary fifteen and a half, communication
services seven and a half, and industrial six. So you
really do have to have had a concentrated portfolio. The
S and P five hundreds somewhat a concentrated index right now,
since all the growth is in the tech related spaces,
that's the overweight in that. Yeah, I mean a three

(04:00):
and a half percent month is that's a big month.
I mean that's where we sit right now, right, Yeah,
up three and a half.

Speaker 1 (04:06):
Well, actually after today it's even further because this is
this is through yesterday. That I mean, that's a big
month historically U and the leaders you mentioned the leaders
since the election are one of the top three.

Speaker 2 (04:18):
So in order, consumer discretionary, financials, tech and communications services
are neck and neck at seven and a half and
then Industrial. So it's interesting.

Speaker 1 (04:27):
It's quite a bit different from December thirty first. From
December thirty first, the leaders are number one. Energy from
December thirty first at six point six, followed by Industrial
six point five, and then Materials at five point five.
So not even Tech. So Materials since the election negative

(04:49):
five and they're up five point five this year. So
from election day to the end of the year, materials
we're ten and a half eleven down. Yeah, and not
not only that, Brad, but year to date on tech
under perf forming the S and P five hundred, which
hasn't happened in quite a while, only two point seven
on the on the positive side for tech.

Speaker 2 (05:07):
So I know I'm mentioning it because there's so much
talk on online, there's so much talk on the news
of the market doing well. Not if you get overly concentrated,
you're not. You have the potential to have been negative
since the election, to had been negative last year. If
you were in the wrong bonds the last two years,

(05:28):
you could be negative. There are they're not. Everything is up.
It is not in everything rally. We have had pockets
of everything rally, but there for the most part, there's been.
It's been a pretty concentrated rally for two and a
half years. It it even when we have new leadership,
it has fizzled. And if you stuck your neck out
there and went overly concentrated on a sector, you got

(05:50):
overly concentrated on individual stocks. If you thought you had
it all figured out and you were gonna do some
mean coin or crypto, you definitely could have some show
arply negative performance. Not everything's up. You had to be
properly allocated the last two years, and I think this
twenty twenty five is going to be much of the same.
When the market is moving up, you can be a

(06:11):
little bit more concentrated, and then you can't. You can't
go too long. You have to think about protecting because
we're gonna have a little bit more volatility this year.
And we already seen it just in this short period
of time in January up, then giving it up, and
then back up all and all in a three week period.
I just do not understand why.

Speaker 1 (06:30):
You know, it's the continuous you know, by the by
the biggest of the big concentrated you know, megacap seven
or what do they call them, The magnificent seven. And
that's fine because it's worked, okay, but it's it's not
that easy, folks. It is not that easy when you
look at it. And and if I look twenty five

(06:52):
years ago, for example, Brad, and we look at the
top five companies in the S and P five hundred,
only one of them is still in the top five.
So then you look at the top five today, which
is Apple, Nvidia, Microsoft, Google, Apple probably I said Apple, Oh, okay, Google, Facebook,

(07:16):
All tech names I believe are in the top five, Tesla, okay.
But if I look at the top five twenty five
years ago, Microsoft was number one, General Electric, Intel, Walmart, Exxon, Cisco.
Now all those companies are still around.

Speaker 2 (07:29):
Yeah.

Speaker 1 (07:29):
Now some they're in the top twenty, like an AOL
is completely gone. But some of those, like Intel in
the in the tech space, but went fifteen years of
nowhere in during summer. They may even have It had
a two hundred million dollars market cap in nineteen ninety nine.

Speaker 2 (07:45):
It may have the same market cap today. It might
be less.

Speaker 1 (07:48):
Yeah, while you're looking that up, I just want to
talk about these top five because if you're gonna go
off history and if I go nineteen eighty, and if
I go nineteen seventy, and if I go nineteen sixty,
top five, it would have gone on from Sears and Kodak,
AIG was in there, AIG and then it would have
changed to IBM was in the top five at one

(08:09):
point in time. But if the top five every ten
years is drastically.

Speaker 2 (08:14):
Changing, why is this time different?

Speaker 1 (08:16):
Why would the top five be the same ten years
from now? It wouldn't make any sense. But if you
went back to nineteen ninety nine, I know what people
would have said. Top five in the S and P
five hundred, Microsoft, General Electric, Intel, Walmart, x On, Cisco.

Speaker 2 (08:31):
That's actually the top six. Those are your every own
them forever stocks. Yeah, right way.

Speaker 1 (08:37):
I don't think you would have done terrible owning those
because those are all still significant companies, but you wouldn't
have outperformed.

Speaker 2 (08:45):
You would un diversified portfolio. No, And you mentioned Intel,
Microsoft is the Intel's market cap is ninety three billion, Okay,
so you're talking about twenty five years ago. It got
cut in half in the last twenty five one hundred
and ninety seven billion. That is crazy.

Speaker 1 (08:57):
Yeah, So in looking at the top five today and
let's even give it the benefit of the doubt. Let's
say out of the top five or six, two or
three of them are going to be the intels of
the future.

Speaker 2 (09:10):
Okay, okay, you'd be hard pressed to find the one
at which which ones, which you're going to get cut
in half, Which one or two are still going to
be in the top five, and which one or two
will just underperform the market bioty, because what whatever one
would lead you to believe is no, no, it's just forever,
just forever these seven Yeah, just forever. No, that's not
how it works. So you know, and we're gonna in
our next segment, we're going to get back to why

(09:33):
it's not easy, because we're starting to get the feelings
of what you get at most market at all time
high periods, which is everybody telling you investing is easy.
It's easy. Now it should feel easy.

Speaker 1 (09:46):
And I would I would also make the argument that
it is easier when you're accumulating your wealth, when you're
accumulating your retirement savings, it's easier.

Speaker 2 (09:55):
It is much more.

Speaker 1 (09:57):
Difficult in retirement. And we're going to talk about in
the next segment, Brad changing gears a little bit. Did
you notice did you see Trump did the hiring freeze. Now,
I actually think this is good news because a lot
of the job gains in the last year or two
of the Biden administration actually came from government. He was
just loading up on employees. Trump did the job freeze.

(10:19):
But as we saw a couple of weeks ago, we're
back to the bad news as good news.

Speaker 2 (10:25):
Okay, We're gonna start.

Speaker 1 (10:26):
Seeing bad numbers from people leaving government work, and it's
gonna come through on the unemployment number. Okay, because not
only they have a job freeze, but people are gonna
start leaving because they got to they can't work from
home anymore. And so we're gonna start seeing higher unemployment numbers,
which I hate to say, it is a good thing. Yeah,
because now it's gonna give the Fed wiggle room to

(10:47):
cut rates more.

Speaker 2 (10:48):
That's true, and the market does want to see rates lower, yes,
longer term.

Speaker 1 (10:52):
Mean you look two weeks ago, was it two weeks
ago now when the jobs number came out and it
was weaker than expected, and the market rallied because the
market is saying, okay, now the Fed has room if
if the unemployment rate keeps coming down and the and
it looks like the economy from an employment standpoint is
just rip roaring. What's the Fed gonna do? Oh we
can't we can't cut right, we can't cut right. So

(11:13):
I was a little thing that I kind of thought
about as I saw that job freeze number. By the way,
liberals are going crazy Trump doing the freeze. He's not
the only one that did it. Presidents Carter and Reagan
both instituted hiring freezes when they were when they took office. Uh,
with Carter halting recruitment three times in his four year term.

(11:35):
But you know, must be a Jimmy Carter passed away
recently and all the liberals are, oh, he was the
greatest ever. Well, then Trump does something which is actually normal,
and people lose their minds.

Speaker 2 (11:45):
Yeah, they think it's an alt right thing. Uh. And
yet yeah, many presidents have done in the past. I'll
say something else too, Brad about the S and P
five rond. I've been thinking about this for some time,
but I really hope S and P comes in and
breaks up the tech sector into at least two more
areas well. It certainly can you know tech tech is

(12:08):
part of every other sector. What they technically could do
is get rid of the tech sector entirely and just
say where do you fall in in the other ten sectors.

Speaker 1 (12:16):
Tech fall consumer, tech, consumer yep, tech, business, tech, healthcare, tech, banking.

Speaker 2 (12:23):
You're right, you're right.

Speaker 1 (12:24):
If they could literally just fold it into the other sectors,
I actually think that that would be tremendously bullish for
the overall SMP five hundred. Yeah, or or to break
it up. I mean, there's just tech companies that do
very very different things, even the biggest ones. Apple's not
in the same business as Microsoft, yet they're in the
same sector.

Speaker 2 (12:42):
Yeah, you got software and call it a utility, and
Apple's a utility now they have they have revenue from
a number of different sources like like the app store
and music and things like that. But they're your utility.
You're not. You're not canceling your bill, just like you
weren't going to cancel your your AT and T bill
back in nineteen ninety five. I wouldn't mind seeing a

(13:04):
tech Staples, a tech Staples and that where Apple fall.
That would be where where Apple falls could even be
where we're Microsoft falls. You know, there's a there's an
index called the Technology dividend index, which a lot of
times is comprised of the more boring technology names. And
I mean even within technology, you have semiconductors, you have software,

(13:25):
you have it services, you have communications equipment, so there
is a lot. But even in the tech dividend space,
it's the top holdings are broadcas. This is not a
recommendation to buyer sell any of these names. Broadcom, Microsoft, IBM,
Texas Instruments, Oracle, Taiwan Semiconductor. I mean that certainly is
a tech staple, as I and I said, but to

(13:45):
get away from the thirty four percent weighting of tech
and break it up, because like even the communications services
sector that has a lot of tech in it, well
most of it used to be in tech. They broke
that off here recently. Tesla is in consumer discretionary. Okay,
people would argue that that's got as a tech component.
I just I want to get away from the conversation

(14:08):
that's tech is too big of the SMP and if
we broke it up, we could stop talking about it. Yeah. Well,
I think we already need to be away from the
top ten making up too much of the market. These
top ten are all conglomerates, Nvidia and Tesla are probably
the only ones that aren't, but even they have bought
or made significant investments in other companies. It's a different

(14:29):
market today with these larger companies. They have to figure
out where to spend all their revenue, and they don't.
They can't do it by growing organically, so they buy
up every competitor and that's how they grow, and they
they end up being one hundred different companies by the
time they're the age of Microsoft.

Speaker 1 (14:44):
One more thing to recap for We take our first
break here Brad Earnings and our market commentary this week
talks about earnings and what to expect. Earnings numbers have
been pretty good. Go to our website Kristenwel dot com com.
Click on the link for the market commentary under publications
and you can see the Q four earnings preview mix
of solid growth and uncertainty. Right now, we have seventy

(15:04):
s and P five hundred companies reporting, so we have
a twelve point seven percent increase right now. Seventy six
percent are beating with an average beat of eight percent.
On the upside, financials are doing the best right now
and they have the strongest growth. They have fifty percent
earnings growth and fourteen percent of financials are surprising to

(15:25):
the upside. Next week we get the big tech names.
That's the big test, So you have Apple, Amazon, Microsoft, Facebook,
and Tesla all next week, so we'll get the We
have the financials test the week before past the test
did really well. Then we have the tech test coming up.
But some of these other areas are starting to contribute
as well. If you look at the overall SMP five

(15:46):
hundred for Q four, the estimate was only five point
seven excuse me, yeah, five point that's Q three SII
twelve point one. We're at twelve point seven. So we're
running a lid of expectations on earnings and the estimates.
We'll see if they come down, but they're pretty solid
all year long. So but the other area that's starting

(16:09):
to pick up some slack, uh consumer discretionary healthcare is
expected to have double digit earnings for the fourth quarter.
Even utilities are expected to have double digit earnings for
the fourth quarter, and that can be found in our
commentary at kirstenwealth dot com.

Speaker 2 (16:23):
So we'll see.

Speaker 1 (16:24):
I mean, I think you're gonna get a lot of
these post earnings post earnings conference calls, and the CEOs
are gonna be talking about Trump, right.

Speaker 2 (16:33):
There's no question about it.

Speaker 1 (16:34):
Whether they're going to talk about tariffs or talk about
that would probably be the one negative. But I'm hearing
a lot more positive.

Speaker 2 (16:41):
Oh, I think that you're gonna you're gonna see surprise
positive statements. He spoke on Thursty and mergers and acts.
He spoke at Thursday at Davos. They had him on
the screen and it was CEOs from all different industries
and foreign leaders and even in the Q and A.
I was shocked at how positive they were. Nobody was
with a gotcha question. Everybody was We're looking so forward

(17:03):
to working with you. Everything's going to be great. The
positivity coming out of what I deem to be a
very liberal conference in Switzerland really shocked me on Thursday,
and the market actually moved. Sometimes you see these these
things like a speech like that, and you get a
big swift move in the middle of the day there
and we say, are we backfilling that story? Pretty obvious

(17:25):
that the market liked what they were seeing out of
the speech.

Speaker 1 (17:28):
That thing as you're hearing and you know, FT's the
Federal Trade Commission was suing everybody. Okay, anytime anybody wanted
to do a deal, the Federal Trade Commission was suing everyone,
and the CEOs are talking, is okay, we can now
do deals again without the fear of getting sued by
the federal govern.

Speaker 2 (17:45):
Well, that was a little bit of the talk, and
Davos was that Europe is going to have to step
up because if it's going to be an easier environment
in the US to get things done and make deals
and and get approval for things, Europe is going to
have to give up give up there there, whether it's
green issue, the green issues that are holding things up,
or just being a non business friendly environment. They're going

(18:07):
to lose out on every every new deal and everything
that's going to create a job. And so they're gonna
have to fall in line.

Speaker 1 (18:14):
Yeah, and they don't have to worry that the government's
going to come after him. And the best example I
saw is the FTC was worried that there was going
to be a monopoly when Spirit Airlines merged with Jet Blue,
and then Spirit they deny it and Spirit goes bankrupt and.

Speaker 2 (18:32):
So we end up with one discount airline. Job play.

Speaker 1 (18:34):
Quite frankly, if Jet Blue was going to buy Spirit.
They were probably gonna make it better, right, Spirit couldn't
be any worse. But one last thing before we take
our first pause. I did hear that Trump is considering,
which I'm one hundred percent for. He's considering bringing back
the incandescent light bulb.

Speaker 2 (18:49):
Did you hear this? No?

Speaker 1 (18:50):
Yes, okay, So no more LEDs that say they're going
to last twelve years and fail in two. I don't
even like the light that the LEDs sput off, not
that spiral one, the spiral one that's awful light. Not
only well, I don'ly know that that one's an LED
that might have been a different technology. But the other thing,
too is I don't know if you notice in your house,
when I have these LEDs and you put them on
a dimmer one as bright as all get out, the

(19:13):
other one's like you can hardly see it. There's no consistency.

Speaker 2 (19:16):
Absolutely.

Speaker 1 (19:17):
I like the old bulbs. I have three kitchen lights
with old incandescent bulbs. I moved into my house in
two thy and eleven and I've never replaced the light bulbs.

Speaker 2 (19:28):
And these are the lights that you dim. That's part
of the reason is if you dim that and they're dimmable,
and they're incandescent bulbs, and they've been there for fourteen years.
And I tell you none of these LED's so little
tongue in cheek, but I wouldn't mind if the old
style light bulbs came back. Plus they're about what oh
quarter to the cost.

Speaker 1 (19:47):
So we're to take our first pause we get back,
we're going to talk about markets and investing here in
a little bit of talk. It's really easy when we
go through one, two, three years in a row that
are good, people start feeling like and forget about the
selloff period and they forget that the market ever goes down.

(20:07):
So we talk about that when we get back from
the break. You're listening to Money since Kevin and Brad
Kurston will be right back. Welcome back to the show.
You're listening to the advisors of Kirsten Wealth Management Group.
Kevin Kirsten and Brad Kirstin happy to be with you today.
As a reminder, we are professional financial advisors and our
officers are in Perrysburg. Give us a call throughout the
week if you will set up a consultation to review
your financial plan, whether you're just getting started, which we're

(20:29):
going to talk about here, well on your way or
already in retirement, which is the trickiest part, and we're
going to talk about that as well. Four one nine
eight seven two zero zero sixty seven or check us
out online at kirstenwealth dot com.

Speaker 2 (20:42):
Starting to think that things.

Speaker 1 (20:43):
Are easy now, Brad, we have clear skies and it
brings me back to I'm sure we've said it on
the show, but one of my favorite analogies in terms
of having a financial advisor, having someone guide you along
the way. Many people think when we have two three
years in a row that it starts looking easy to
be an investor. And in some ways it is easier,
as I mentioned, when you're accumulating wealth, but when you're

(21:07):
in retirement, you need that financial advisor, you need that pilot.
I would argue that you could fly the most complicated
plane if the pilot does all the work to take off,
get you a cruising altitude. He could hand you the
yoke and say I want you fly this thing. I'm
just gonna take a nap. I'm just gonna take a nap,
and you might fly it for a couple hours, especially
if you have good weather and say this is pretty easy.

(21:29):
I don't even know if I need this pilot anymore.
But that's not why you have the pilot. Not only
do you have the pilots for the takeoff and landing,
but you have the pilots for when things go wrong.

Speaker 2 (21:38):
Yeah, and you have to steer around weather, you got
to elgin fails, you have a bird strike, all these
things that could go wrong. Same thing with a financial advisor.
And by the way, in a six hour flight, you
might not need the pilot at all. You might fly
twenty times before you really need the pilot. Okay, the
same thing with a financial advice you might go three

(22:01):
four years before that advisor really is doing his thing
or her thing. Yeah. If you have lack of volatility
and all you're doing is looking at monthly statements, guess what.
The only monthly statement you got last year that where
we kind of ended on a low was December. The
March cell off came and went, and you really didn't
feel it on your statement. The August sell off was

(22:23):
at the beginning of the month. By the end of
the month you were almost flat. Didn't really feel that one,
and so you'd have thought twenty twenty four was an
easy one. And you thought, and you would have thought,
oh geez, my advisor maybe just screwed up December. Well,
volatility when you get to the third year comes a
little bit more often. And if you're the type that
would panic when you see a big sell off, or

(22:44):
if you're the type that now we're hearing, why don't
I just own more of that thing that's working. The
last three times that we've made significant adjustments to portfolios,
it's to get rid of the thing that is up
the most. We held the Nazaq couldques off the twenty
twenty two bottom for a little over a year when
they were up sixty percent, And I think a lot
of people, when we were showing them what we're getting

(23:04):
rid of, were saying, why are you getting rid of
the thing that's up the most? Same thing now I'm
talking to people about the thing that's up the most,
saying this is the thing that's making us most nervous.
But most people don't do that. They look at the
thing that's up the most and say, if I had
just owned all of my portfolio in that and just
kept it, I'll do I'll do fine, right, because it
always goes up and.

Speaker 1 (23:25):
It brings you the question that I had this week,
which was looking at portfolio performance and then looking at
the Nasdaq one hundred QQQ and saying, why don't I
just own this? It's done the best. Now, in some ways,
if you're accumulating wealth and you have enough time, which
is the most important component of your retirement plan is
how much time do you have till you need the money,

(23:46):
then being.

Speaker 2 (23:46):
More aggressive or even being concentrated's okay.

Speaker 1 (23:49):
And so but you can have the same stretch of time.
So we're gonna look at the exact same stretch of time,
the exact same sequence of those returns, the peak of
the Nasdaq in nineteen ninety nine to today. Now, let's
start with someone who's accumulating wealth for retirement. Okay, let's
say that person has already accumulated a million dollars and

(24:13):
unfortunately they invested at what at the time looked like
some pretty bad timing.

Speaker 2 (24:20):
But oh well, at the time, people would have said,
look what's done, so well, I'll just invest everything in.
The thing that's done had the best ten year return
and the best fifteen return the Nasdaq one hundred.

Speaker 1 (24:30):
Because the comment I got this week is even if
the Nasdaq has another crash like it did in the
two thousands, I don't have to worry because it recovered.
And in some ways, if you're a buy and hold
or a person who is continuing to add to your
investments or add to your four oh one k, that
is true as long as you can stomach the down.
But let's talk about just a buy and hold investor

(24:52):
what they would have gone through in the year two thousand.
So just the buy and hold. You're not putting in,
you're not taking out. You start with a million dollars,
you invest at the peak, you had bad timing. A
year later you were at four hundred and fifty six thousand.
A year after that you're at three hundred and seven.
This is the this is the vaunted NASDAQ one hundred. Yes,
and at that period of time it was the best

(25:13):
index by far. It was large cap weighted, it was
growth and tech weighted, and just like today, it's the
it's the number one sector of the last five, ten
and fifteen. So here you are a million to four
hundred and fifty to three hundred to one hundred and
ninety one thousand, and at the low it was even worse.
It was around one hundred and fifty thousand. At the
low n it was an eighty five percent loss in

(25:36):
the Nasdaq one hundred.

Speaker 2 (25:37):
So I'm doing year ends and you're going from a
million to one hundred and ninety one thousand. Okay, Now,
if you're stuck with it, which first asked this question,
could you have stuck with it right or would you
have said it's all broken? Would you have bailed? Yeah,
because if you had stuck with it, and we'll get
to this at the end, it would have worked. Yeah.
So if you stuck with it, a year later, you're
at two eighty five, and at the end of the

(25:58):
twenty of oh four, you're at three to fifteen, you're at
three twenty, you're at three forty two, you're at four
oh six at the end of two thousand and seven,
working your way back, and now you give it up again.
Now you're down. It's two thousand and eight, you're two
thousand and eight, you're at four oh six, and now
a year later you're at two thirty five. So a
million dollars invested in the Nasdaq one hundred and eight

(26:19):
years later, you are still down seventy five percent or
two hundred and thirty five thousand. Now would you have
stuck with it? That's the question, right, Probably not? So
Here you are, you're starting, you're going to claw back.
Now from two thousand and nine all the way to
twenty and sixteen, you go two thirty five to three,
sixty two, four to thirty one, four, forty three, five, eighteen,

(26:39):
big jumps. Here now seven hundred, eight hundred, nine hundred,
nine hundred and fifty thousand at the end of sixteen,
and at some point in twenty seventeen, seventeen years later,
you get back to your your where you invested at
the peak. So it took you seventeen years. Yeah, did
you get back? Yeah you did, but you were in
an overly concentrated index that was had its best performance

(26:59):
of all time, and you invested at the peak. It
took you seventeen years to get back. Now, how have
you done since? Pretty good. You went to a million
two forty five. Eighteen was a down year of one percent,
so you gave up a little. Then nineteen and twenty
and twenty one big years million seven two point five,
three point two, and then you gave it up again.

(27:20):
You gave up fifty percent from hid to low, and
in twenty twenty two, then the Nasdaq was down about
thirty six or seven percent. I have it here somewhere.
It was down thirty three percent of the calendar year.
And so you back down to two point one. So
from three point one to two point one, now the
last two years three point basically only a double at
that point, and now you go three point two and
now four point one. So did you go from a

(27:41):
million to four point one? Yes, it took you twenty
four years, and for seventeen of those years you were
underwater three different times. You gave up more than fifty
percent of your total. Yeah. I don't think too many
people stuck with it with their entire portfolio. And I
think that's the error is people were saying, if only

(28:02):
I didn't have a ten percent allocation to large growth
or a twenty percent allocation of large growth, I had
one hundred percent allocation to large growth, and I used
the Naszak one hundred. What could go wrong? Well, a
lot of investors who did that in the late nineties
early two thousands know what could go wrong. You could
stay underwater for decades and maybe not live long enough

(28:23):
to see your portfolio get back to where it was,
especially if you're ready to retire. So if you look
at that, yes, it recovered, you could look at that
in hindsight. But would you have stuck with it is
the big question. But if you had, you'd be fine. Now,
even better than buy and hold would be. What better
would be that you're adding to it, so you're younger

(28:43):
and you're able to add to it. So let's say
that's all you were using in your four to one
K and you're investing the maximum and it's twenty three thousand,
five hundred, and you start with a million or invested
twenty three thousand, five hundred, you still had that same
performance that took you from even with additions, from a
million to two hundred and twenty one, so a little higher.
But because you're still adding, you get back there a

(29:04):
lot quicker. You get back to that million point twelve
and a half years later because you were adding money
at the bottom and you're adding money on the way down.
And where do you get to Instead of four million,
you get to eight point eight million because you kept
adding all along the way.

Speaker 1 (29:19):
And when I say that it's easier when you're accumulating wealth,
the reason it's easier is because if you're adding to
your portfolio over the last twenty some years.

Speaker 2 (29:28):
Some of those dollars went in at the bottom.

Speaker 1 (29:30):
Did a seventeen year period where the Nasdaq went nowhere
hurt you, No, it didn't hurt you at all. You
had a seventeen year period you were adding, you were
buying at the bottom. It didn't hurt you. It's even
better if you were over fifty and you had the
max contribution of thirty thousand in that period of time,
and you were contributing thirty thousand a year throughout the

(29:53):
early two thousands when the NASDAK crashed.

Speaker 2 (29:55):
Yeah, you get back all to your million, gets back
to a million about a year or quicker. And at
the end of this twenty four period year period you
get to ten million dollars. But it was because you
were adding thirty thousand a year. But that's again, that's
a long period of time to endure going all the
way down and all the way back up because you
were overly concentrated in the thing that's done the best.

(30:16):
And would you have stuck with it? Is the true question.
I was trying to get to the calendar year returns
of the sixty to forty portfolio. Here it is right here.

Speaker 1 (30:26):
You mentioned that in that period of time, Brad from
two thousand, the NASDAK got cut in half three times.

Speaker 2 (30:34):
Well, in two thousand it was down from from high
to low in one year. It was yeah, it was
fifty four percent in one year, but eighty five it
was down high to low.

Speaker 1 (30:42):
By the way, to put it in perspective on fifty
percent losses, Okay, what do you have to do to
go down eighty five? You go down fifty, then you
go down another fifty, and you're still not there.

Speaker 2 (30:52):
That's seventy five. That's seventy five. Yeah. Yeah, So the
Nasdaq in this twenty four year period, from its highest
to lowest in any period of time, went down more
than fifty percent three times. If you ad at least.

Speaker 1 (31:05):
Forty percent in the bond index and you had the
not the Nasdaq but a more broad based SMP five
hundred type fund, you would have went down fifty percent
exactly zero times. And your worst year actually, strangely enough,
would have been twenty twenty two at sixteen percent. But
you would have eliminated a lot of those losses. And
we're going to talk about that when you're in distribution

(31:26):
mode in retirement. Why that's so important. But back to
the conversation I had, because and listen, I understand there's
a certain amount of mentality when you get to retirement,
especially if you've invested in growth oriented names. It's like,
what got me here? Yeah, I'm gonna stick with the
horse that got me here. And so let's take our
let's take our next pause. So we talked about buy
and hold of the NASDAQ one hundred extraordinarily painful. Okay,

(31:50):
this is the pilot getting you through the storm. You
had a lot of turbulence, you didn't like it, but
you made it, but you made it there. Okay, Now
I'm going to talk about now you're not going to
use the pilot in retirement because you feel like you've
figured it all out and you're gonna crash the plane
and you don't know why. Because we're gonna do the
exact same sequence of returns twenty four year period in

(32:11):
the Nasdaq, but instead of buy and hold or instead
of additions, we're gonna do your You're gonna have a
retirement withdrawal, and we're gonna see how that works out.
Take our next pause. You're listening to Money Sense Kevin
and Brad Kirsten will be right back. Welcome back to
the show. You're listening to the advisors of Kirsten Wealth
Management Group, Kevin Kirsten and Brad Kirsten. Brad, we were

(32:31):
talking about the question I got during the week about
the Nasdaq one hundred QQQ.

Speaker 2 (32:36):
It's just easy. Just buy that, set it and forget it.

Speaker 1 (32:40):
And then the person even said to me, if I
buy the Nasdaq one hundred, there's no guarantees of anything,
but and I just forget about it for twenty years,
will I be okay? Yes, But there's a lot of
different things that can happen in your specific circumstance that
can change that.

Speaker 2 (32:54):
So we looked at buying it and doing nothing, at
not adding, not subtracting. We looked at buying and adding
a four one K contribution or a max four one
K contrut Great, it works, fine, you were hurting for
a while, but it worked. It worked out.

Speaker 1 (33:06):
Now let's talk about the disaster scenario and why when
I give the pilot example, I talk about how when
you need the pilot is when the tough decisions happen.
And in your lifespan of building wealth. That tough decision
is in retirement. It gets so much trickier in retirement.
So let's say someone retires and had bought the Nasdaq
one hundred and done so well they wanted to stick

(33:28):
with it. But now they build up a million dollars
and they want to take a five percent withdrawal. Hey,
this thing's average double digits per year. I heard from
Dave Ramsey that I can buy a growth portfolio, it's
gonna average.

Speaker 2 (33:41):
Ten, and I can take out eight. He recommends you
can take out way more than you should. That's right.

Speaker 1 (33:46):
So let's do it with the Nasdaq one hundred, which
is a growth portfold.

Speaker 2 (33:50):
And at this point, at the end of two thousand,
this thing's probably averaged eighteen for the last ten years.
It's probably averaged fifteen for the last fifteen years prior
to that. So why would a five percent withdrawal rate
not work? So let's start with that with a million,
take out fifty thousand a year, and never change it.
How long does it last? Same sequence of returns you
start at the end of the start of two thousand,

(34:10):
we are doing the identical return return. So the calendar
years are negative fifty four. Actually it's the two thousand
peak to the end of the year. Is what I did,
negative fifty four, negative thirty two, negative thirty eight. And
then you have some good returns forty nine to ten
and et cetera. The same exact returns. But if you
take fifty thousand out, never change it. You run out

(34:32):
of money by two thousand and five. Okay, you'll only
make it six years.

Speaker 1 (34:37):
Brand The Nasdaq recovered all the way by twenty and sixteen.

Speaker 2 (34:42):
But you're fifty thousand after one year turned into a
twelve percent withdrawal. Then it turned into a nineteen percent withdrawal.
Then it was thirty eight percent of your account. Then
it was forty two percent of your account. Now it
went from thirty eight to forty two percent of your account.
In an up year, the market was up forty nine percent,
but because you're withdrawal rate was so high, you didn't

(35:02):
go up.

Speaker 1 (35:03):
Not only that, Brad, but by the fourth year, you've
pulled two hundred thousand out of this portfolio. That when
the when the Nasdaq one hundred recovers, that two hundred
thousand is not in there to recover because you took
it so these sequence of returns and if anybody is
curious about this topic, call our office and we can
explain it or just google it. Do sequence of returns

(35:26):
risk in retirement, and it is one of the most
important topics that you can research in retirement.

Speaker 2 (35:32):
And so the next question would be, well, how low
is my withdrawal rate have to be if I'm investing
in something so concentrated, something so volatile. Let's take it
down to three percent. Okay, Now, the thing at this
point is averaged fifteen percent for over a decade, and
we're ninety nine to two thousand. We're only gonna take
We're only gonna take three percent thirty thousand a year.
So here we are a million, and now we're down

(35:54):
to four hundred and forty thousand, all the way down
to running out of money by the end of two
thousand and nine. So now we have two different big
downturns in there, but a lot of big years. You
have a fifty percent year, you have a forty nine
percent year, some huge up years. But the problem is
your three percent withdrawal one year later turns into seven,
turns into eleven, turns into nineteen. Pretty soon it's twenty five,

(36:16):
thirty fifty percent of your portfolio you're taking out because
we never change it, and so you run out of
money in this scenario ten years later. And so even
though you were a nice conservative three percent withdrawal rate,
because you were in a concentrated, very volatile index, you
bought it the peak a.

Speaker 1 (36:31):
Good index, don't get me wrong. Yeah, it's a good index.

Speaker 2 (36:34):
Yeah, but you had your whole portfolio there, and you
ran out of money in ten years. The question then
is how low does it have to be. Let's look
at one percent withdrawal rate. We just take ten thousand out,
and in that case you don't run out of money,
but it does take you all the way till the
end of twenty twenty. Takes you twenty years to get
back over that million level. But you were taking only

(36:55):
one percent of year withdrawal rate out the peak. It
gets to six percent two different times, but six percent
isn't so high that you can't recover. So it goes
from one to two to three to six, hangs out
at about a four percent withdrawal rate for a while,
goes back up to a six percent withdrawal rate at
the end of two thousand and eight and then kind
of steadily goes down and the whole account recovers. But

(37:15):
is that what you're thinking in retirement? Are you thinking,
I want to be in the most aggressive index, but
I'll take my withdrawal rate down to one percent? Most
people are saying, I'll invest in aggressively that way you
can take a higher withdrawal rate out. And that's not
what history would tell you. History would tell you the
sequence of returns on more concentrated volatile indexes mean you

(37:36):
have to take less out as a percentage so that
you can recover.

Speaker 1 (37:39):
And so when you're looking at this sequence of returns
risk and you're taking distributions in retirement, the most important
thing is not how much money you make in the
up year. The most important thing is how little do
you lose in the down year, okay, because that allows
you to recover more quickly. This is why people default

(38:01):
to sixty forty stock to bond portfolios in retirement.

Speaker 2 (38:04):
Or fifty to fifty.

Speaker 1 (38:05):
Because if you're million and you invest five hundred thousand
in the market and five hundred thousand in treasury bonds, okay,
you're living on those treasury bonds in the first one two, three, four, five,
six years. And if the market has a downturn, you
don't have to sell your stocks at a loss. Does
that mean giving up upside in up years, Yes, but

(38:25):
you have no choice. You have no choice because even
in this wonderful index, the Nasdaq one hundred, which had
a great run over twenty four years, a million dollars
turned into four million.

Speaker 2 (38:37):
But three fifty percent downturns over the course of your
retirement are killers for the portfolio. They can they can
take you from you're in good shape to you're out
of money.

Speaker 1 (38:46):
I had somebody recently who said to me, yeah, but
look at the last five years. I hate to break
the news if you were taking a withdrawal, you're not
around for the last five years. You're out of money, Okay.
And so the most important thing is tomize your losses,
not to maximize your games. Yes, you want to make
a return so you can keep up with inflation. We

(39:06):
often talk about this on this show. Absolutely, you have
to have some growth. You have to have some growth.

Speaker 2 (39:12):
Great, let's make it that. Let's make it a good percentage,
a small enough percentage of the portfolio that you never
have to touch that part. If it's ten or fifteen
percent of your portfolio. You can make that your forever
piece of the portfolio to keep up with inflation, the
growth part of your portfolio, and only sell the rest
of it. That's fine.

Speaker 1 (39:28):
Let me put it a different way, and each of
us talk to clients a little bit differently, Brad, But
let me let me put it to you this way.

Speaker 2 (39:34):
What is the shortest.

Speaker 1 (39:35):
Time period if someone came to you that you're comfortable
investing the money in a one hundred percent stock allocation.

Speaker 2 (39:42):
Oh, I say five years. I would say five, but
it very it would vary. If we've had a downturn, sure,
I would say three. Yeah. Yeah, it's coming out of
twenty twenty two. The market already dropped twenty five percent.
If so, even to at that point, I'd say, okay,
I've pick for pretty confid. But in it we're in
a market at an all time high like today.

Speaker 1 (40:04):
Anywhere year anywhere, But coming off a down year, you're
gonna say five years, right, yeah, okay, yeah. So if
if the typical rule thumb by the way, some periods
are longer. You look at two thousand to two thousand
and thirteen, that was thirteen years oh eight took six years.
So but under normal circumstances, you get yourself to a
very high probability of success if you have given at

(40:26):
least five years. And yet people get to retirement and
they don't think about their withdrawals as money they're gonna
need in the next five years. They just look at
their overall portfolio. But if you needed fifty thousand in
the first year, and let's just look at fifty thousand
by itself, and someone came to you and said, hey, Brad,
I'm gonna give you fifty thousand dollars and I want

(40:47):
you to send that back to me in twelve equal
installments over the next year, what are you gonna invest
it in.

Speaker 2 (40:53):
The money market? Of course? Yeah.

Speaker 1 (40:55):
Yet people want to stay one hundred percent invested in
stocks because we write to the right till the end
of their whole life. Yeah, because until they have a downturn,
they don't understand the sequence of returns risk when you're
pulling money out. So I like to look at it
not as a stock rule of thumb allocation. Look at
it like, if I can put aside five six, seven

(41:19):
years of my needs, I can invest the rest in
the stock mark in a well diversified portfolio.

Speaker 2 (41:24):
Yeah. The only caveat to that would be there are
some people that retire and say, I don't need any
of this money. Okay, well, then we can be a
little bit more aggressive.

Speaker 1 (41:32):
That's a different scenario too. I have a pension. We're
both teachers, or we're both you know, firefighters or police,
and we had pensions. But we have this other money.
And if you have the tolerance for these kinds of swings,
you'll do great because you don't need that money necessarily
to live on. But if you're going to use your
retirement funds for your living expenses, then you got to

(41:53):
set aside a good amount, even if that means, like
in twenty twenty four or twenty twenty three, giving up
some of that upside because you have money.

Speaker 2 (42:02):
Infix. Let's take our last pause here, we come back.
There's a lot of people that have a lot of
ideas about investing based on the their political leanings, and
they get the investment wrong or the idea is just
flawed from the get go. I want to talk about
a few of these. We're going to compare Biden's performance
and Trunk's performance with some of the ideas that people
are telling me they think are good ones under Trump.

(42:22):
You're listening to the advisors of Kerson Wealth Management Group,
We'll be right back and welcome back. You're listening to
the advisors of Kriston Wealth Mananster Group, Brant and Kevin
here with you. If you're listening on Ihearten didn't hear
any of our ads or on our podcast and heard
some weird ads. I know there's a lot of weird
ones that filter in there. We're a competing ad yeah,
sometimes we see that. We are professional financial advisors in Perrysburg, Ohio.

(42:42):
Give us a call at our Perry'sburg office and we'll
be happy to sit down with you. I give you
a second opinion, or if your approaching retirement, kind of
let you know all the ideas that we talk about
here and how it fits in with your portfolio. Four
one nine eight seven to two zero zero six seven
or eight one eight hundred eight seven five one seven
eight six ben awhile so I give you that eight
hundred number. That's right, Kevin. A lot of people have

(43:02):
ideas about how to invest based on politics. A lot
of times we spend a lot of time debunking all
of this and just saying it shouldn't matter. It usually
starts with this phrase, well, obviously, yeah, you're right, it does. Well,
let me give you a well obviously that somebody just
just just told me this week, I'm gonna give you
eight years worth of returns here, okay, in order, and

(43:24):
I'm gonna well, in order of there was one This
was one president here, negative forty nine, negative seventeen, negative
nine positive twelve. Okay. That was one president. The other
president was sixty nine point seventy five negative thirty three
positive thirty positive fifty nine. Okay. So just so happens

(43:46):
that one of those four years was positive twenty one
percent average aniel and the other was negative twenty one percent,
almost exact same performance, I mean, almost to the tenth
of negative to positive negative twenty one positive twenty one okay.
So this was There's an index four. There's indexes for
all kinds of Chinese stocks. This particular one is Chinese

(44:06):
technology stocks, not a recommendation or to buy or sell.
But the k Web index is Chinese Internet or Internet
and technology. And most people would say, well, Trump is
tough on China, Trump hates China. Well, the positive performance
of positive twenty one percent average annual with one negative
year and four huge years were Trump's years twenty sixteen,

(44:28):
twenty seventeen, eighteen, nineteen to twenty and the negative performance
Biden's easy on Chinese, letting everybody just roll over us.
You know they're gonna they're gonna they're gonna take over
this or that, and uh, you know, Biden's not could
do anything about it. Well, negative, the negative performance negative
twenty one average annal were the four Biden years. So

(44:48):
you think you know what the market reaction is gonna be.
You have a great idea, but we don't know that
what the or or maybe it doesn't matter at all.
Maybe this is just because those stocks were doing well
and then they weren't doing well and had nothing to
do with politics, or maybe the unintended consequences of a
political leanings have something to do with it, and you're

(45:09):
not thinking about it correctly. The point being, and I
ask people what they think the performance would have been
better or worse under Trump or Biden. They get it
wrong every time because they think Trump tough on China,
and yet the performance was the exact opposite. Let me
do this on a couple others, because all of these
would be ones that would surprise people. One of these presidents,
Trump or Biden had solar stocks go up by seventy

(45:32):
percent seventy four, and one had solar stocks go up
by seventy or up by seventy, down by seventy. Okay.
Under Biden solar stocks fell by seventy. Under Trump they
went up by seventy. Okay. Now does everybody get that
one wrong. We're measuring that by the Tan ETF the
Tan index, which is solar stocks and Trump up, Biden down.

(45:56):
Everybody gets that wrong. I've already mentioned this a lot,
the only negative sector on or Trump or energy. And
everybody says, well, what about the drillers, what about small caps? Well,
the large cap oil and gas went down thirty under Trump,
small cap oil and gas went down seventy four. The
drillers went down fifty. Okay, they all went down. So
you think you have a good idea, You're wrong on

(46:17):
what it would do to the stock performance. Under Biden,
it doesn't matter if it was large or or small.
A small cap index and the drillers went up one
hundred percent. The large cap oil and gas in the
four years went up one hundred and fifty. But I
thought he hated oil and gas. He's tough on him, right,
he didn't let him do anything. Prices went straight up.

(46:38):
So you're you don't need to overthink it, Okay, just
be just be an investor in every You don't need
to pick winners and lose. No, it goes back to
the you got to get away from the gambling philosophy. Yeah, okay.

Speaker 1 (46:50):
People love to figure something out when they're gambling, and
when they're right, even if it's not the reason they
were right, it makes them happy. And I'll give you
an example, like someone would love to be like the
other night, you know, Lebron was at the was at
the Ohio State game, and I think I saw him,
might have he might have been drinking a little bit.

Speaker 2 (47:09):
And then he's gotta.

Speaker 1 (47:09):
Fly all the way back to LA and I mean
he's gonna be jet lag. He flew from he flew
from Atlanta to LA And.

Speaker 2 (47:18):
Then when it works, they're like, I knew it. I
knew it. It has nothing to do with the reason
why he had a good game or a bad game.
And it's even the same thing here. Okay, this could
all be incidental. The point being you're wrong. Okay, I
remember you can gamble when you're eighteen, right, I remember
when we were eighteen, go down to Florida Sarasota for
spring break, visit our grandparents, and Grandpa Paul says, we're

(47:39):
going to the dog track. And his theory was, we're
gonna go watch and see if one of them takes
a number two. If they take a number two, we're
gonna bet a buck on him. And when that would work,
he thought he had the system figured out, and it
was just hilarious. But this is the equivalent to watching
the dog take a dump and you think you got

(48:00):
it figured it out. Think you got it figured out. Okay,
that's all it is.

Speaker 1 (48:03):
I saw a quote come across by Twitter and it
was actually related to someone who posts about financial things,
and it was Sir Francis Bacon. And we'll close with
this and this. Maybe I have doubts to a fault
when it comes to investing, but it's always served me well.
And it is if a man begins with certainties, he
will end in doubt. But if a man is content
to begin with doubts, he shall end in certainties. People

(48:25):
are so certain of Trump or Biden, or liberals or
conservatives are going to do something to the market. Start
with doubts, start with skepticism. It will serve you much
better in your investing life. Thanks for listening, everyone. We'll
talk to you next week.

Speaker 2 (48:45):
You've been listening to Money since brought to you each
week by Kirsten Wealth Management Group. To contact Dennis, Brad
or Kevin professionally, call four one nine eight seven to
two zero zero six seven or eight hundred eight seven
five seventeen eighty six. Their email I address is Kirstenwealth
at LPL dot com and their website is Kirstenwealth dot com.

(49:05):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual. To determine which investments may be appropriate
for you, consult with your financial advisor prior to investing.
Securities are offered through LPL Financial member FINRA SIPC