Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
You know, the Federal Reserve has held off on changing
lowering the federal fund rate, and probably the likelihood of
them actually lowering in September is much higher. I mean,
it's eighty percent. It's probably a pretty good chance that
is going to happen.
Speaker 2 (00:19):
But it still will.
Speaker 1 (00:20):
Continue to be economic data driven. And again the Fed
has what's called a dual mandate, which.
Speaker 2 (00:26):
Is two elements.
Speaker 1 (00:28):
They want to keep employment at a maximum level, and
they want to keep prices stable, which means low inflation
with prices and their targets two percent. And what we
saw in the last month's economic data in regards to
inflation is that it ticked up a little bit. It
was higher than expectations. And you know when you talk
(00:51):
about economic data, when you talk about corporate earnings, there's
two components of this. It's what is the actual data
and what was expectations? Right, So that matters. It matters
not only what was the actual number, but what were
people expecting. And you see this with earnings quite a
bit that a company has, you know, solid earnings, whether
(01:13):
it be revenue or profit, but it's below expectations and
that can really negatively impact what the outlook is either
for the economy or for a company. So you really
want to line that up, which is that you know,
whatever the expectation is, the actual number is greater than that,
(01:34):
and that helps to change things quite a bit when
it's positive. Now, when it's below like we saw this
month with the labor numbers, that's where it becomes more
problematic when you have that weakness of folks. We're having
an issue with our call online. But you can still
show us an email and that could be a really
effective way to ask a question. And as I always say,
(01:56):
there's no dumb or silly question except for the one
you don't ask. And the way you can send us
an email is just send it to ask Bouchet at
Bouchet dot com. That's asked Bouchet at Bouchet dot com,
and Bouche is felled b o U d h e
y dot com. That's b O U c h e y,
(02:19):
and it's asked Bouchet at Bruche dot com. So you know,
a lot to discuss is ed mentioned, a lot of
economic data, a lot of corporate earnings which you know
are really have been very strong certainly as you know,
if you're a listener, we're overweight in technology. We've been
overweight in technology for many, many, many years. And the
(02:43):
corporate earnings in general are coming out quite strong. They're
certainly coming out strong relative to what the expectations were
for earnings. And that goes back to what I talked
about before, which is it's not just what is the
data that's coming out, but how does that fear versus
expectations and what we talk about earnings. The other element
(03:04):
with this is what are they saying as we move forward?
And in general, these companies that are coming out are
saying that they see the next few quarters being quite strong,
both from a revenue perspective and from an earnings perspective. Now,
I will tell you, having worked in several public corporations
that in many cases, no different than.
Speaker 2 (03:26):
The FED or weather forecasters, corporate.
Speaker 1 (03:30):
CEOs can somebody somewhat be challenged as to really knowing
what's going to be coming down the pike. Right, So
you know, it is positive at least that they think
that things are going to be good, but that can
change quite quickly. But this is what you're seeing this
market rarely on, is that you know, corporate earnings are
good in general up until maybe yesterday or Friday with
(03:54):
the news and the labor markets. You know, things have
been moving forward even with the uncertainty of that the tariffs,
And this is where it's going to be become very interesting,
is to now we're really starting to see those tariffs
tick in. Actually, the amount of revenue coming into the
federal government from the tariffs has increased from ten billion dollars,
(04:16):
which was the run rate, up to thirty billion dollars
and it could become a bigger number from that. So
the thing to appreciate is, at some point another somebody's
paying that. And I've talked about this in one of
my blogs. Either it's you know, it's getting paid by
the company that's producing the goods and services, it's getting
(04:36):
paid by the company bringing in those goods, or it's
getting paid by you the consumer, right, or some combination
of those three. So you know, to have the amount
of tariffs increased by threefold, you know that can be
a negative impact either on profits because you can imagine
(04:58):
if you're a company bringing in those goods, if you're
going to cover some of that cost, well, that's going
to eat away your profits, or as we've talked about
before you're going to pass that on to consumers. But
one way or the other. Uh, that's where you know,
it can be a little bit problematic as far as
how it impacts the economy and the consumer. Let's see,
(05:20):
we got an email that came in. It's from Ray.
Speaker 2 (05:23):
Good morning, Ray.
Speaker 1 (05:24):
Would you be able to provide a commentary on B
I t O. I purchased some two years ago with
a grip and with number of shares has doubled. The
share price has leveled, but the account valued has doubled.
Speaker 2 (05:38):
U B I t Oh. So what I'm gonna do
is I'm.
Speaker 1 (05:41):
Gonna let my colleague du provide some color on that.
So I'm going to hop onto one other topic before
I throw this over to Ed on B I t O.
And that's one of the things I want to talk about,
which is, you know, I always tell our young colleagues
there's two things. One is, if you don't know something,
you say I don't know that, right.
Speaker 2 (06:02):
And this is just really good life advice, but it's
just always really important.
Speaker 1 (06:07):
Sometimes, you know, colleagues in general or younger colleagues feel
like they have to actually give an answer when they're
asked either by you know another team member or by
a client, and you know the if you don't know it,
don't fake it right, just say hey, I don't know
if I know the answer to that, let me come
(06:28):
back and tell you. The other thing is when you
make a mistake or you have something that's not quite right,
you want to talk about it. You want to say, hey,
you know what the advice I gave you or something
I said wasn't quite right. Let me explain a little
bit is to what the actual answer is. And I
bring this up because we have many of our clients
who listen to the radio program, and you know, we
(06:52):
love our clients, a lot of great, really smart folks. Well,
one of them works for being Why Melan. His name
is David. I'll just leave it at that. And on
the show a couple weeks ago that was doing, I
talked about State Street being one of the oldest and
biggest custodial banks, which it is. It is one of them,
but I think I may have inferred that it was
the oldest or the biggest, and it is not so David,
(07:16):
who works for BNY Mellon, that BNY Mellon is actually
the oldest. It started in seventeen eighty four, which I
believe is about ten years before State Street, and it
has fifty five trillion dollars in assets, which is larger
than State Street. And a fun fact that he pointed
out to me was that it was established in part
(07:39):
to look at the needs of Eliza Hamilton, who was
the wife of Alexander Hamilton, who started the US Treasury.
And so no, I did not know this, and now
you as listeners know this. That is actually BNY Mellon.
That's the oldest custodio bank. And the reason that I
had brought that up two weeks ago is just to
(08:02):
talk to people about how in general, when we talk
about custodios, financial custodials like those two banks or Charles
Schwab or Vanguard or Fidelity or even what's called b
and why Pershing, which is part of being y Melon
their custodia bank for rias, these custodial banks are probably
(08:23):
going to be around way longer than we'll be around.
And it really they run their businesses on fractions of
fractions of pennies and that's the goal. In general, they're
very conservative. And I brought up the idea that of
consolidating all your accounts under one financial cstodial UH provider,
(08:44):
and that it actually makes your life a lot easier
to do that, and that I would highly suggest doing
that versus you know, I've talked to some prospective clients
where they diversify based on their financial custodium and that
just makes your life a lot more complicated. And there's
really not a need to because again, these big financial
(09:06):
custodians really operate in a very conservative fashion, and I
would contrast that to any company where they're trading on
their accounts. And what an example of that is Merrill
Lynch Right, So Merrill, not only were they custodian and
a broker, but they were trading on their own accounts
(09:27):
and Ina they got themselves in trouble and that's where
a Bank of America has stepped in and take them over.
So just something to be aware of and also an
update on what I was telling you, all right, Ed,
I gave you a few minutes there were able to
look up anything on.
Speaker 3 (09:43):
B I t O for Ray. Yes, so B I
t O is actually a fund I'm familiar with. It's
one of the oldest ETFs. Honestly, it might have been
the first ETF that tracks bitcoin, so you know, certainly
from his perspective, he said he owned it for a
couple of years, he's definitely made some good money. Now
(10:06):
probably my biggest comment, as I'd say, since this one
has come out, there have been a slew of other
bitcoin tracking ets and now these newer ones that have
come out. You know, for other fun families, a lot
of them are a lot cheaper than B I t L.
You know, B I t O as an expense ratio
(10:27):
of about ninety five basis points for example. You know,
I'm looking at another one here called BTC that's got
an expense ratio of fifteen basis points. You know, certainly
if it's in a qualified account, I would think about
switching that over to lower cost fund. But overall, it's
been been a good couple of years and certainly been
(10:50):
a strong year today performance from bitcoin. You know, I
know we were talking a little bit before the show
just how we feel markets are a little bit risk
on right now, and one of the easiest ways to
track that is how is cryptocurrency doing. You know, typically
you really only doc cryptocurrency doing well when you know
retail consumers and traders have an appetite for risk.
Speaker 1 (11:17):
Great point, and I agree with you. I mean we talked,
now only do you see bitcoin doing well and the
other cryptocurrencies, but you see some of these mean stocks,
you know, which is these stocks that kind of really
get some traction with some of the retail investors on
robin Hood and they start taking off, and even when
some of the underlying fundamental data and information it's not
(11:39):
great for those companies, they really start to rally. And
also the IPO market. It's one company, Figma, which is
kind of in the Adobe space with doing creative work.
We have a client that was had used it before
and really spoke highly of it, and it came out
with its i PO of thirty three dollars and I
(12:01):
don't know exactly where it stands now, but I know
that as a Friday, that was maybe on Wednesday. As
a Friday, it was up to over one hundred and
fifteen dollars. So when you have IPOs that are coming
out and doing threefold or greater from where they came out,
to me, that's that's indicative of a stock market. It's
(12:23):
kind of risk on, you know, it makes you a
little bit reminiscent of the tech bubble days, and you know,
this company's there's reason for it doing so well in
part because you know, it basically can could potentially take
over a lot of Adobe's business using AI. This individual
(12:44):
is again a client of ours that is in that space,
just talked about how easy it is to use that.
You know, you don't have to have a lot of
training and you can really create some amazing.
Speaker 2 (12:54):
Stuff with it. So there is a real reason for.
Speaker 1 (12:57):
This company doing well. But with that set you have
to appreciate that right now it really has almost no earnings. So, uh,
there's certainly an element of risk buying into some of
these companies that have taken off quite a bit. But
I think it also just shows you that when you
talk about uh ai and what it's it going to
(13:18):
do for different companies and industries, uh, it's it's gonna
be quite dramatic. It is really going to impact industries
in a pretty dramatic way. And that's what you're seeing
in particular with these I pos they had anything to
do with AI.
Speaker 2 (13:35):
You know, I was in my.
Speaker 1 (13:36):
Twenties during the tech boom, and it was anything that
was dot com and companies just literally started flapping dot
com onto anything to kind of put it in that space.
So now it's anything that's AI based UH is really
taking off and railing. And so that's just, you know,
to me, kind of showing you a market that's kind
(13:57):
of kind of risk on.
Speaker 2 (14:00):
So we'll see how all this.
Speaker 1 (14:01):
Comes together depending on the economic views. But I think
the important thing to remember is we've talked about this before.
The economy is doing well, the labor markets a little
bit of weakness, but in general doing well. We talked
about the GDP growth that's up over three percent, which
is a great quarterly GDP growth. But the economy and
(14:22):
the markets are not one and the same. You know,
they're two different animals. So you've got to be aware
of those differences. And you know, we talk about this
all the time. You know, where do we stay in
with our session? I mean, we don't know and nobody does,
but you know, just because even if we were one,
recessions will happen. That's the important thing to remember. And
(14:43):
even when you have a recession, it's not a given
that the market has to completely creter. I mean, we've
seen a number of bear markets where they're just in
the last few years where the market is down by
twenty percent and it recovers from that. And the thing
to remember as well, I graduated from college and eighteen
ninety one, that was not a great economic time. It
(15:04):
was the market, the economy was in a recession, but
the really throughout that time there was a twenty percent
correction back in like nineteen ninety, but through ninety one
ninety two, the market really continued to move higher. And
so it is as I said before, it's not an
impossibility that you have a recession or you have economic
(15:25):
weakness and the market, you know, maybe takes a step back,
but you know, it's not a complete cratering. Folks, you're
listening to Let's Talk Money, brought to you by a
bruchet financial group. Well, we help our clients prioritize their health. Well,
we managed their.
Speaker 2 (15:41):
Wealth for life. Folks, come back.
Speaker 1 (15:44):
And join us and you can email us any questions
you may have. Good morning, folks. My name is Martin Shields.
I'm your host day for Let's Talk Money. I'm on
with my colleague Ed Wilhelm, who is one of are
trading analysts and he's here as well. So if you
have any detailed questions you want to ask about the economy, markets,
(16:08):
or any particular position, give us a call. Also, any
financial planning questions you have, as we talk about all
the time where our client's personal CFO. But I said
give us a call, but actually we're having issues with
the phone line. But you can email us at ask
Bouchet at Bouchet dot com. That is ask Bouchet at
(16:31):
Bouche dot com and Bouchet is spelled b O U
c h e Y dot com. Any questions you have,
give us, shoot us an email.
Speaker 2 (16:41):
And we can give you some thoughts.
Speaker 1 (16:43):
A few things I want to talk about from a
financial planning perspective. One of the things that is a
really interesting option for folks that are continuing to work
and they're older is that if you're working and contributing
to a four and K or a four to three
D plan, you do not have to do your require
minimum distribution out of that account. So, for example, right now,
(17:06):
the R and D age is eight seventy three, and
if you're seventy three, if you have assets in a
four and K plan, in a four or three B
and you're not working or in an IRA, you have
to take your required minimum distribution. Now that equates to
about one about three point five percent. That's about the average.
(17:28):
We start off as the amount that gets distributed, and
each year it's an equation provided by the IRS. It
increases over time, and the idea is that you, over
time will have fully distributed all the funds in your IRA. Now,
I will tell you that with our clients, if you're
able to do a good job growing those assets, that
(17:51):
doesn't happen, meaning that you don't diplenish those accounts. But
you know, it is one those things where if you're
have a four one K, have a four to three
B and you are working, you do not need to
take your RMD on those accounts. So that can be
(18:12):
really a really nice thing. Right, So you think about this.
You know, if you've been working for many years and
you know you have a million dollars or plus in
that one of those accounts, you're saving yourself a lot
of money for a couple different reasons. One, you're working
at that age and so that you're potentially not drawing
down your assets, and two you're not being forced to
(18:34):
take those assets out, so you're delaying the distribution of
those assets. Now, We just met with a prospective client.
This gentleman was working until he's eighty three years old.
And listen, I always talk about that, if you are
in good health, if you have a job that you like,
and he loved what he did, you could tell this
guy is a really smart guy. I mean for eighty
(18:56):
three he was, you know, he would have thought he
was maybe fifty three. And you know, that's a good
thing to continue working. You're making money, You have social
connections from the work, which many of us don't appreciate
those social connections, but they exist. You have a sense
of identity, I mean, all these positive attributes that exist
with work. Now, the one caveat I always put out
(19:18):
there is the level of stress.
Speaker 2 (19:20):
Right.
Speaker 1 (19:21):
You have to appreciate that stress is a negative period,
but as you get older, that stress, it can be
really bad for your health. So you want to be
very much aware of that. And you know, if you
have a job where you have a lot of stress.
You know, this is why I always tell other clients
that are maybe corporate executives or small business owners as
(19:43):
they get into their sixties or so, and I see
them and I talk to them, and I see that
level stress I tell them, listen, folks, you've got to
get a plan to retire. Actually, another client I was
talking with.
Speaker 2 (19:54):
He's through a four to one K plan. He heads up.
Speaker 1 (19:58):
He's the chief operating officer, has really tough job. And
I told him his date name happens to be David
as well. I said, listen, David, you've got.
Speaker 2 (20:06):
To retire you.
Speaker 1 (20:08):
This job is going to kill you. You know, just so
much stress. But if you can continue working and you're
engaged and you are sixty seventy three, it's great. You
don't have to take any R and D from that
for through B account or four one K account. Now,
the thing you have to remember is the year in
(20:29):
which you retire, you.
Speaker 2 (20:31):
Have to take an R and D.
Speaker 1 (20:33):
So what I mean by that is, let's say you
work all the way until November and you retire in November. Well,
guess what, you still have to take your full R
and D for that year. Now, you can delay until
April of the following year, but then you're.
Speaker 2 (20:49):
Gonna have to double up. You're going to take two
R and.
Speaker 1 (20:51):
D amounts in that following year, which I don't think
you want to do. But you have to be aware
of that, which is even if you work eleven months
or eleven months and a half the year in which
you retire, you have to take that R and D.
So that's a very important thing to remember when you're
kind of making decisions. We're going to go back to
(21:13):
the emails. We have an email from Joseph. Let's see here,
could you talk about the three tax free, tax deferred,
and tax advantage accounts when it comes to an ideal
mix in percentages that you should have or strive for. Also,
if you have time, when your accounts grow from let's
say one hundred.
Speaker 2 (21:33):
Thousand to two hundred thousand higher, once you just.
Speaker 1 (21:36):
Start thinking about from saying one, two or even three
ETFs inside them to more ETFs.
Speaker 2 (21:43):
And CA you talk about our approach.
Speaker 1 (21:45):
Well, there's a great questions, so let's just hit that
first part.
Speaker 2 (21:50):
So tax free accounts.
Speaker 1 (21:51):
Are ross right, So it could be a wraw FI array,
it could be a WROTH four and K pretty much
all four and K plans and for four to three
B plans either do or by twenty twenty six will
have a row component, which means you pay taxes on
those dollars now. But then when you put in that account,
it grows tax free, you never pay taxes even when
(22:14):
you take it out. Tax deferred is more your traditional
four and K traditional IRA, where you put those dollars
in you get the tax deduction, So basically they're going
to go in pre tax. They grow tax deferred, meaning
that you don't pay any income on any growth or
any tax on in any of the income, and you
don't pay taxes until you distribute them from the IRA
(22:38):
or from the four one K when you retire, and
then tax advantage. Really I mean, it's a brokerage account,
and you know brokes accounts kind of get a bad name,
but there's no reason to They can be managed very
tax efficiently, and you know, if you are doing a
good job, you can grow them quite a bit, and
(23:00):
that's what we've been able to do for our clients.
The other thing is with a tax or BROKEU account
is that you can take those dollars out at any point,
and that flexibility is really nice. You have to appreciate
that when you have moneys in a retirement account, whether
they be a WROTH or a traditional retirement account, you
can't access those those dollars. There's limitations and you could
(23:21):
be paying a ten percent penalty, whereas with that tax
account not a problem. The other thing is many people
put too many dollars into a get the pre tax
deduction into traditional four and K, and then they retire,
they have most of their dollars in there, and then
let's say they want to buy a house, a second
(23:42):
house or something, they want to pull out one hundred
thousand or two hundred thousand dollars out of there.
Speaker 2 (23:47):
You can't do that.
Speaker 1 (23:49):
You're going to be paying so much because it's taxes
ordinary income. You're going to be paying so much in
ordinary income tax to get those dollars out, whereas if
it's in a brokerage account, you can access that. So
to Joseph's question, Joe's question.
Speaker 2 (24:03):
What is the right mix? So it depends.
Speaker 1 (24:07):
All I would tell you is when you're younger, you
want to be sucking dollars away in a row as
much as you can. So in general, all your savings,
your four and K, your other savings should be you
should start with the ROF. And my kids are teenagers,
I haven't put it in the row because the thing
with the ROTH is you can access the principle amount
you're putting in there to any point, and you can
(24:29):
access up to ten thousand dollars tax.
Speaker 2 (24:32):
Free for your first home purchase. Right.
Speaker 1 (24:35):
So really it's a no brainer to be putting in
most of your savings into a ROF when you first start,
and then over time as you start earning more, you
should be putting dollars into pretax because you're in a
higher tax bracket. And then, as I mentioned all along,
if you can, you should be putting money into a
(24:55):
brokeras' account because it gives you the most flexibility. So
if I had a pick the right mix, it would
be something like forty percent in.
Speaker 2 (25:05):
A roth IRA.
Speaker 1 (25:07):
Let's just talk about as retirement time, forty percent to
fifty percent in a ROTH, another thirty percent to forty
percent in the pre tax, and then about twenty percent
into a brokerage account. That would be my ideal mix
when you hit retirement, as many dollars as you can
in the WROTH, some element in the pre tax, and
(25:29):
again around let's say thirty percent the pre tax, and
then around twenty percent uh into a broken account. Now
he has another question which says, as you grow, what
is the correct amount that you should have in ets?
So That's another great question. I mean, we have on
average around thirteen to fourteen to fifteen ETFs in an account.
(25:52):
But you know, we're tactical with our allocation, and all
I mean by that is we're making adjustments based on
what we're seeing in the markets, in the economy, and
we're you know, adjusting the allocation within a portfolio. If
you're being more passive with it, meaning that you're just
putting money in there and you're accumulating over time, you know,
(26:14):
you could probably get away with three, four or five
ETFs for a very long time. Uh you know, you
can you know, just be putting money away in the
broad US market, maybe a little international you know, you
want to have like us we do moneys in technology
or two QQ you know. So, I don't think it's
a function of, you know, the size of the account.
(26:38):
I think it's more a function of where do you
stand in your accumulation career, and you know, as you
get older, you may want to reduce the amount of risk,
so you start moving some dollars into.
Speaker 2 (26:53):
Uh more of.
Speaker 1 (26:54):
A bond account, so you know you can make that
adjustment over time. I'm going to let chime in as
well and if you have any thoughts on this, uh,
you know, as far as number of ETFs or anything
as far as an acid allocation. Uh what what do
you anything you want to add to what I just
said that.
Speaker 3 (27:12):
Joe, Yeah, I think you hit the nail on the head.
I would say for the passive retail investor, you know,
simplicity is best.
Speaker 1 (27:21):
Uh.
Speaker 3 (27:21):
You know, you don't need to try and get too
cute with it, so you can really get away I
would say with for the most part, probably three three holdings,
you know, S and P five hundred, and then a
Nasdaq fund like QQQ to overweight those large cap tech companies,
which you know, as we all know, that's where majority
of returns have come for the last two decades. And
(27:44):
then on the fixed income side, you know, again you
can get away with just buying agg which is going
to be the US Aggregate bond Index, you know, as
you want to transition some risk away from the stock
market and bounce.
Speaker 2 (27:56):
Out your portfolio. But simplicity is best.
Speaker 3 (28:00):
I think you can really get away with probably those three.
Speaker 1 (28:06):
Perfect perfect Now listen, I'm a big believer and I
say this often in the show. You keep things simple, folks.
If I see clients stumble, it's because they overthink things.
They really make things very complicated. And it doesn't mean
that you don't need to have the detail and really
kind of.
Speaker 2 (28:24):
Work through the details.
Speaker 1 (28:25):
But when you're making decisions, you really want to think
more from a high level perspective. And in anything in life,
if you can kind of boil it down to some
of the most simple elements, you tend to be successful,
both from a decision making perspective and a relationship perspective.
A lot of things in life, if you can keep
it simple, you'll find that you're going to benefit from that.
(28:48):
So I think I would encourage you to do that.
And again, you know, with our team, I mean, you
think about it. We've got a team of folks that
are constantly looking at all the economic data and corporate
earnings and everything, so we can be tactical. We can
make those moves and those changes, and that's what we
do for our clients. But for most people, you know,
(29:09):
and investment portfolio is not their job, right, They're not
spending forty fifty hours a week doing that, So keeping
it simple is just a.
Speaker 2 (29:17):
Great way to go.
Speaker 1 (29:18):
Folks. Again, if you have any questions, are call onlines
not working so well right now, so you can email
us at ask Bouchet at Bouchet dot com. Again, let's
asked Bouche at Bouchet dot com and it's b O U,
d H E Y dot com. Let's go on to
a few other topics. One of the things I want
(29:40):
to talk about is we see this quite often with clients,
and maybe mentioned this on the show before, but where
we where clients actually have been very successful at putting
dollars away into a taxable brokerage account that they have
maybe some need for liquidity. It could be a number
of different things, you know, buying a car, buying a boat,
(30:03):
you know, buying a home or second home. And that
liquidity need is in general for the short term period
time anywhere from you know, a month to a year
to two years, but not let's say a you know,
a fifteen to twenty thirty year mortgage type of situation.
But they need that liquidity. But they because we've done
job and mansion the portfolio, they don't want to sell
(30:25):
positions and occur a big capital games. So what we
do for them is we set up a margin loan,
which basically a margin loan is just a loan that
uses the assets in the portfolio as the collateral. Right,
So you think about that, when you get a mortgage loan,
you're using your asset, which is your home, as the collateral.
In this case, Schwab is offering that loan to the
(30:48):
client because they're using that asset, the portfolio, as the collateral.
And you can usually take anywhere from fifty to seventy
five maybe eighty percent of the value of the account
out as a margin loan. Now, where people, you know,
historically get themselves in trouble is you can use those
(31:09):
dollars to go ahead and buy more stocks and bonds,
and they get themselves leveraged up. That something happens in
the market and now they're leveraged on those holdings and
so the downside risk is increased dramatically. So really not
a great thing to do the leverage up in that regard.
But in cases that we see with our clients, they
(31:31):
just need this short term liquidity and we can negotiate
with Schwab, depending on the size of the margin rate,
to get a rate of around six six and a
half percent for our clients. And what's nice is there's
really no approval process beyond just us getting that lower
rate for our clients, and you can just draw the
(31:51):
money out. You don't have to be paying it back. Now,
you're going to be incurring interest on that when it's out,
but that's kind of a known but you know you
can pay it back whenever you want, and so you
have really a great amount of flexibility with it. Right,
So you think about that, you have your portfolio untacked,
is able to grow, You don't have to incur any
(32:14):
capital gains to access that cash, and then you can
take it out and then when you're done you don't
need that liquidity anymore. You can put it right back.
Speaker 2 (32:26):
Into that account and the margin loan goes away.
Speaker 1 (32:29):
So it really is a great way it's used properly.
I will put that caveat out there. You have to
really be smart with this, not get overly leveraged up
on anything in that regard. So just something a tool
to use if you needed that liquidity. And that goes
(32:50):
leads me into another topic I want to talk about,
which is when you're putting money into an investment, there's
a number of factors you want to consider. The first
one the top ones, is the risk and return equation.
Speaker 2 (33:03):
Right.
Speaker 1 (33:03):
If you want higher return, you need to take on risk, right,
and it can see that very clearly. The reason you
get nine to ten percent analyze return in the stock
market is that you have bear markets where you can
lose twenty percent and you know, I think the important
thing to appreciate with that is this is what we
tell our clients. If you're in a diversified portfolio of
(33:24):
that's well managed, you don't have capital risk, meaning that
you're the likelihood of you losing your capital it's pretty
close to zero because that means the markets at zero.
But you have market risk, and all that means is
there's going to be market volatility where the market can
go up or down, and it can go down by
twenty twenty five thirty percent. Right, it can happen. But
(33:47):
because of that risk, you can get nine or ten
percent analyze return at least you know that's where the
market is shown historically. So you've got to be aware
of any asset class, what is the risk and turn characteristics? Right,
And if you hear somebody talking about, you know, a
return that is higher than that, there's usually something that
(34:09):
you're giving up to get that. So for example, you
know sometimes people come and they talk about real estate
and managing you know, real estate, and how you know
they heard or they think they can get higher returns.
And I always tell them what you should be able
to get higher returns. You better get higher returns because
you're putting your time and effort into that asset class, right,
(34:32):
So you know you better beginning higher than the market
rate of return or otherwise you're you're not valuing your
time enough. The other thing is that your leverage usually
in real estate, that's what people have to appreciate is
and you know you can't have capital risks.
Speaker 2 (34:47):
Just talking to a.
Speaker 1 (34:48):
Gentleman on Friday, was at a St. Bonamacher event of
the Lake George Great event, and this gentleman bought this
property out of bankruptcy. You know whoever it was had
before they got over leveraged on their properties. So you
know you have to appreciate that there's that risk return.
The other elements that are important from an investment perspective
(35:09):
are transparency in liquidity right and you know this is
when we talk about annuities, right, So they have high fees,
they have not great transparency, and there's many times a
lock up period that can be nine, ten, eleven, twelve years, right,
so you don't have easy liquidity. One of the most
(35:29):
frustrating investments I know of because we deal this with clients,
is with tia cress, which many nonprofit organizations have. They
have an annuity element where to get that money out
of that annuity, and when you retire it takes you
ten years. You can take one tenth every year and
over ten years you get.
Speaker 2 (35:48):
Your money out.
Speaker 1 (35:49):
But when you're locking up your money for ten years
like that, that's the problem. You know, you really you've
got to get paid more if you're if you don't
have transparency, if you don't have liquidity, you know you've
got to get paid more for that. Or if you're
putting your own time and effort into an investment, you
(36:10):
better be getting paid more than that. And that's I
think it's important when you.
Speaker 2 (36:14):
Look at investments and make these.
Speaker 1 (36:16):
Decisions, that you look at all those criteria together. And
I think sometimes you know, especially as individuals are starting
to get knowledgeable, they don't tend to look at that,
or they just look at maybe a top return, top
line return and don't understand all the nuances. So just
really important to understand that. Let's move on.
Speaker 2 (36:38):
To another topic.
Speaker 1 (36:39):
But if you have any questions again, you can email
me at ask Bouchet at Bouchet dot com. We actually
have one that just came in from David. It says,
my four to three B has been sold and is
the process being transferred to self directed IRA? Should I
reinvest all this money at once at this point the
market or dollar cost average it.
Speaker 2 (37:00):
Into the market?
Speaker 1 (37:01):
Great question, David. So we have a really strong belief
that a couple of things. One is, when you have
dollars that have been invested, like you have with a
fourth V, you don't want to try to time the market.
And if these are long term dollars, meaning that you
know you've got a long time arising and you've got
the right allocation. So that's the two questions. Do you
(37:25):
have the right allocation or not? If you do, you
want to go ahead and right away by the market
by the same allocation you had before. Don't try to
get fancy with this because it will quite often not
work in your favorite. The other thing is if you
got cash and you're getting invested.
Speaker 2 (37:43):
You know there are two approaches.
Speaker 1 (37:44):
Really. One is you can put all that cash in
that once, or you can do what's called dollar cost averaging. Now,
if you look at it from a statistical perspective, the
data shows you should be putting all those dollars in
at once. It is by far the best way to
cons get better returns than dollar cost averaging. And dollar
cost averaging is simply when you put the dollars in
(38:07):
over let's say a three to six month period time.
You put a little bit in over time. Now, the
upside with the dollar cost averaging is that you can
take advantage of market volatility. So you know, in this
timeframe when we're at you know, all time highs. You
know you have some concerns over the economic data. You
know you want a dollar cost average, maybe take advantage
(38:29):
of that. Then go ahead and do that, But appreciate
that from a statistical perspective when you look at the data,
it's not the most effective way to get dollars in. Right.
The best way to get dollars in is to go
ahead and put it all at once and not think
twice about it. But to David's question, if you have
moneies that are already invested in an IRA or four
(38:51):
to three B, this should be a non decision.
Speaker 2 (38:54):
You don't want to.
Speaker 1 (38:55):
Be thinking at all as to hey should I hold on?
Should a dollar cost average? No thinking at all, You're
gonna have put those dollars right in. Those are long
term money dollars, and that is the most effective way.
And again it simplifies your life. You're not overthinking it. Well, folks,
it's been a great hour here with you. It's great
(39:16):
to have ed on the show as well. Hopefully you
learn a little bit to apply to your own personal situation.
I hope that you enjoyed this gorgeous summer day. I
know I plan on doing it. Yours a listening to
Let's Talk Money, brought to you by a Bouchet finance group. Well,
we help our clients prioritize their health while we manage
their wealth for life. Take care of yourself and take
(39:37):
care of each other, folks, SA
You know, the Federal Reserve has held off on changing
lowering the federal fund rate, and probably the likelihood of
them actually lowering in September is much higher. I mean,
it's eighty percent. It's probably a pretty good chance that
is going to happen.
Speaker 2 (00:19):
But it still will.
Speaker 1 (00:20):
Continue to be economic data driven. And again the Fed
has what's called a dual mandate, which.
Speaker 2 (00:26):
Is two elements.
Speaker 1 (00:28):
They want to keep employment at a maximum level, and
they want to keep prices stable, which means low inflation
with prices and their targets two percent. And what we
saw in the last month's economic data in regards to
inflation is that it ticked up a little bit. It
was higher than expectations. And you know when you talk
(00:51):
about economic data, when you talk about corporate earnings, there's
two components of this. It's what is the actual data
and what was expectations? Right, So that matters. It matters
not only what was the actual number, but what were
people expecting. And you see this with earnings quite a
bit that a company has, you know, solid earnings, whether
(01:13):
it be revenue or profit, but it's below expectations and
that can really negatively impact what the outlook is either
for the economy or for a company. So you really
want to line that up, which is that you know,
whatever the expectation is, the actual number is greater than that,
(01:34):
and that helps to change things quite a bit when
it's positive. Now, when it's below like we saw this
month with the labor numbers, that's where it becomes more
problematic when you have that weakness of folks. We're having
an issue with our call online. But you can still
show us an email and that could be a really
effective way to ask a question. And as I always say,
(01:56):
there's no dumb or silly question except for the one
you don't ask. And the way you can send us
an email is just send it to ask Bouchet at
Bouchet dot com. That's asked Bouchet at Bouchet dot com,
and Bouche is felled b o U d h e
y dot com. That's b O U c h e y,
(02:19):
and it's asked Bouchet at Bruche dot com. So you know,
a lot to discuss is ed mentioned, a lot of
economic data, a lot of corporate earnings which you know
are really have been very strong certainly as you know,
if you're a listener, we're overweight in technology. We've been
overweight in technology for many, many, many years. And the
(02:43):
corporate earnings in general are coming out quite strong. They're
certainly coming out strong relative to what the expectations were
for earnings. And that goes back to what I talked
about before, which is it's not just what is the
data that's coming out, but how does that fear versus
expectations and what we talk about earnings. The other element
(03:04):
with this is what are they saying as we move forward?
And in general, these companies that are coming out are
saying that they see the next few quarters being quite strong,
both from a revenue perspective and from an earnings perspective. Now,
I will tell you, having worked in several public corporations
that in many cases, no different than.
Speaker 2 (03:26):
The FED or weather forecasters, corporate.
Speaker 1 (03:30):
CEOs can somebody somewhat be challenged as to really knowing
what's going to be coming down the pike. Right, So
you know, it is positive at least that they think
that things are going to be good, but that can
change quite quickly. But this is what you're seeing this
market rarely on, is that you know, corporate earnings are
good in general up until maybe yesterday or Friday with
(03:54):
the news and the labor markets. You know, things have
been moving forward even with the uncertainty of that the tariffs,
And this is where it's going to be become very interesting,
is to now we're really starting to see those tariffs
tick in. Actually, the amount of revenue coming into the
federal government from the tariffs has increased from ten billion dollars,
(04:16):
which was the run rate, up to thirty billion dollars
and it could become a bigger number from that. So
the thing to appreciate is, at some point another somebody's
paying that. And I've talked about this in one of
my blogs. Either it's you know, it's getting paid by
the company that's producing the goods and services, it's getting
(04:36):
paid by the company bringing in those goods, or it's
getting paid by you the consumer, right, or some combination
of those three. So you know, to have the amount
of tariffs increased by threefold, you know that can be
a negative impact either on profits because you can imagine
(04:58):
if you're a company bringing in those goods, if you're
going to cover some of that cost, well, that's going
to eat away your profits, or as we've talked about
before you're going to pass that on to consumers. But
one way or the other. Uh, that's where you know,
it can be a little bit problematic as far as
how it impacts the economy and the consumer. Let's see,
(05:20):
we got an email that came in. It's from Ray.
Speaker 2 (05:23):
Good morning, Ray.
Speaker 1 (05:24):
Would you be able to provide a commentary on B
I t O. I purchased some two years ago with
a grip and with number of shares has doubled. The
share price has leveled, but the account valued has doubled.
Speaker 2 (05:38):
U B I t Oh. So what I'm gonna do
is I'm.
Speaker 1 (05:41):
Gonna let my colleague du provide some color on that.
So I'm going to hop onto one other topic before
I throw this over to Ed on B I t O.
And that's one of the things I want to talk about,
which is, you know, I always tell our young colleagues
there's two things. One is, if you don't know something,
you say I don't know that, right.
Speaker 2 (06:02):
And this is just really good life advice, but it's
just always really important.
Speaker 1 (06:07):
Sometimes, you know, colleagues in general or younger colleagues feel
like they have to actually give an answer when they're
asked either by you know another team member or by
a client, and you know the if you don't know it,
don't fake it right, just say hey, I don't know
if I know the answer to that, let me come
(06:28):
back and tell you. The other thing is when you
make a mistake or you have something that's not quite right,
you want to talk about it. You want to say, hey,
you know what the advice I gave you or something
I said wasn't quite right. Let me explain a little
bit is to what the actual answer is. And I
bring this up because we have many of our clients
who listen to the radio program, and you know, we
(06:52):
love our clients, a lot of great, really smart folks. Well,
one of them works for being Why Melan. His name
is David. I'll just leave it at that. And on
the show a couple weeks ago that was doing, I
talked about State Street being one of the oldest and
biggest custodial banks, which it is. It is one of them,
but I think I may have inferred that it was
the oldest or the biggest, and it is not so David,
(07:16):
who works for BNY Mellon, that BNY Mellon is actually
the oldest. It started in seventeen eighty four, which I
believe is about ten years before State Street, and it
has fifty five trillion dollars in assets, which is larger
than State Street. And a fun fact that he pointed
out to me was that it was established in part
(07:39):
to look at the needs of Eliza Hamilton, who was
the wife of Alexander Hamilton, who started the US Treasury.
And so no, I did not know this, and now
you as listeners know this. That is actually BNY Mellon.
That's the oldest custodio bank. And the reason that I
had brought that up two weeks ago is just to
(08:02):
talk to people about how in general, when we talk
about custodios, financial custodials like those two banks or Charles
Schwab or Vanguard or Fidelity or even what's called b
and why Pershing, which is part of being y Melon
their custodia bank for rias, these custodial banks are probably
(08:23):
going to be around way longer than we'll be around.
And it really they run their businesses on fractions of
fractions of pennies and that's the goal. In general, they're
very conservative. And I brought up the idea that of
consolidating all your accounts under one financial cstodial UH provider,
(08:44):
and that it actually makes your life a lot easier
to do that, and that I would highly suggest doing
that versus you know, I've talked to some prospective clients
where they diversify based on their financial custodium and that
just makes your life a lot more complicated. And there's
really not a need to because again, these big financial
(09:06):
custodians really operate in a very conservative fashion, and I
would contrast that to any company where they're trading on
their accounts. And what an example of that is Merrill
Lynch Right, So Merrill, not only were they custodian and
a broker, but they were trading on their own accounts
(09:27):
and Ina they got themselves in trouble and that's where
a Bank of America has stepped in and take them over.
So just something to be aware of and also an
update on what I was telling you, all right, Ed,
I gave you a few minutes there were able to
look up anything on.
Speaker 3 (09:43):
B I t O for Ray. Yes, so B I
t O is actually a fund I'm familiar with. It's
one of the oldest ETFs. Honestly, it might have been
the first ETF that tracks bitcoin, so you know, certainly
from his perspective, he said he owned it for a
couple of years, he's definitely made some good money. Now
(10:06):
probably my biggest comment, as I'd say, since this one
has come out, there have been a slew of other
bitcoin tracking ets and now these newer ones that have
come out. You know, for other fun families, a lot
of them are a lot cheaper than B I t L.
You know, B I t O as an expense ratio
(10:27):
of about ninety five basis points for example. You know,
I'm looking at another one here called BTC that's got
an expense ratio of fifteen basis points. You know, certainly
if it's in a qualified account, I would think about
switching that over to lower cost fund. But overall, it's
been been a good couple of years and certainly been
(10:50):
a strong year today performance from bitcoin. You know, I
know we were talking a little bit before the show
just how we feel markets are a little bit risk
on right now, and one of the easiest ways to
track that is how is cryptocurrency doing. You know, typically
you really only doc cryptocurrency doing well when you know
retail consumers and traders have an appetite for risk.
Speaker 1 (11:17):
Great point, and I agree with you. I mean we talked,
now only do you see bitcoin doing well and the
other cryptocurrencies, but you see some of these mean stocks,
you know, which is these stocks that kind of really
get some traction with some of the retail investors on
robin Hood and they start taking off, and even when
some of the underlying fundamental data and information it's not
(11:39):
great for those companies, they really start to rally. And
also the IPO market. It's one company, Figma, which is
kind of in the Adobe space with doing creative work.
We have a client that was had used it before
and really spoke highly of it, and it came out
with its i PO of thirty three dollars and I
(12:01):
don't know exactly where it stands now, but I know
that as a Friday, that was maybe on Wednesday. As
a Friday, it was up to over one hundred and
fifteen dollars. So when you have IPOs that are coming
out and doing threefold or greater from where they came out,
to me, that's that's indicative of a stock market. It's
(12:23):
kind of risk on, you know, it makes you a
little bit reminiscent of the tech bubble days, and you know,
this company's there's reason for it doing so well in
part because you know, it basically can could potentially take
over a lot of Adobe's business using AI. This individual
(12:44):
is again a client of ours that is in that space,
just talked about how easy it is to use that.
You know, you don't have to have a lot of
training and you can really create some amazing.
Speaker 2 (12:54):
Stuff with it. So there is a real reason for.
Speaker 1 (12:57):
This company doing well. But with that set you have
to appreciate that right now it really has almost no earnings. So, uh,
there's certainly an element of risk buying into some of
these companies that have taken off quite a bit. But
I think it also just shows you that when you
talk about uh ai and what it's it going to
(13:18):
do for different companies and industries, uh, it's it's gonna
be quite dramatic. It is really going to impact industries
in a pretty dramatic way. And that's what you're seeing
in particular with these I pos they had anything to
do with AI.
Speaker 2 (13:35):
You know, I was in my.
Speaker 1 (13:36):
Twenties during the tech boom, and it was anything that
was dot com and companies just literally started flapping dot
com onto anything to kind of put it in that space.
So now it's anything that's AI based UH is really
taking off and railing. And so that's just, you know,
to me, kind of showing you a market that's kind
(13:57):
of kind of risk on.
Speaker 2 (14:00):
So we'll see how all this.
Speaker 1 (14:01):
Comes together depending on the economic views. But I think
the important thing to remember is we've talked about this before.
The economy is doing well, the labor markets a little
bit of weakness, but in general doing well. We talked
about the GDP growth that's up over three percent, which
is a great quarterly GDP growth. But the economy and
(14:22):
the markets are not one and the same. You know,
they're two different animals. So you've got to be aware
of those differences. And you know, we talk about this
all the time. You know, where do we stay in
with our session? I mean, we don't know and nobody does,
but you know, just because even if we were one,
recessions will happen. That's the important thing to remember. And
(14:43):
even when you have a recession, it's not a given
that the market has to completely creter. I mean, we've
seen a number of bear markets where they're just in
the last few years where the market is down by
twenty percent and it recovers from that. And the thing
to remember as well, I graduated from college and eighteen
ninety one, that was not a great economic time. It
(15:04):
was the market, the economy was in a recession, but
the really throughout that time there was a twenty percent
correction back in like nineteen ninety, but through ninety one
ninety two, the market really continued to move higher. And
so it is as I said before, it's not an
impossibility that you have a recession or you have economic
(15:25):
weakness and the market, you know, maybe takes a step back,
but you know, it's not a complete cratering. Folks, you're
listening to Let's Talk Money, brought to you by a
bruchet financial group. Well, we help our clients prioritize their health. Well,
we managed their.
Speaker 2 (15:41):
Wealth for life. Folks, come back.
Speaker 1 (15:44):
And join us and you can email us any questions
you may have. Good morning, folks. My name is Martin Shields.
I'm your host day for Let's Talk Money. I'm on
with my colleague Ed Wilhelm, who is one of are
trading analysts and he's here as well. So if you
have any detailed questions you want to ask about the economy, markets,
(16:08):
or any particular position, give us a call. Also, any
financial planning questions you have, as we talk about all
the time where our client's personal CFO. But I said
give us a call, but actually we're having issues with
the phone line. But you can email us at ask
Bouchet at Bouchet dot com. That is ask Bouchet at
(16:31):
Bouche dot com and Bouchet is spelled b O U
c h e Y dot com. Any questions you have,
give us, shoot us an email.
Speaker 2 (16:41):
And we can give you some thoughts.
Speaker 1 (16:43):
A few things I want to talk about from a
financial planning perspective. One of the things that is a
really interesting option for folks that are continuing to work
and they're older is that if you're working and contributing
to a four and K or a four to three
D plan, you do not have to do your require
minimum distribution out of that account. So, for example, right now,
(17:06):
the R and D age is eight seventy three, and
if you're seventy three, if you have assets in a
four and K plan, in a four or three B
and you're not working or in an IRA, you have
to take your required minimum distribution. Now that equates to
about one about three point five percent. That's about the average.
(17:28):
We start off as the amount that gets distributed, and
each year it's an equation provided by the IRS. It
increases over time, and the idea is that you, over
time will have fully distributed all the funds in your IRA. Now,
I will tell you that with our clients, if you're
able to do a good job growing those assets, that
(17:51):
doesn't happen, meaning that you don't diplenish those accounts. But
you know, it is one those things where if you're
have a four one K, have a four to three
B and you are working, you do not need to
take your RMD on those accounts. So that can be
(18:12):
really a really nice thing. Right, So you think about this.
You know, if you've been working for many years and
you know you have a million dollars or plus in
that one of those accounts, you're saving yourself a lot
of money for a couple different reasons. One, you're working
at that age and so that you're potentially not drawing
down your assets, and two you're not being forced to
(18:34):
take those assets out, so you're delaying the distribution of
those assets. Now, We just met with a prospective client.
This gentleman was working until he's eighty three years old.
And listen, I always talk about that, if you are
in good health, if you have a job that you like,
and he loved what he did, you could tell this
guy is a really smart guy. I mean for eighty
(18:56):
three he was, you know, he would have thought he
was maybe fifty three. And you know, that's a good
thing to continue working. You're making money, You have social
connections from the work, which many of us don't appreciate
those social connections, but they exist. You have a sense
of identity, I mean, all these positive attributes that exist
with work. Now, the one caveat I always put out
(19:18):
there is the level of stress.
Speaker 2 (19:20):
Right.
Speaker 1 (19:21):
You have to appreciate that stress is a negative period,
but as you get older, that stress, it can be
really bad for your health. So you want to be
very much aware of that. And you know, if you
have a job where you have a lot of stress.
You know, this is why I always tell other clients
that are maybe corporate executives or small business owners as
(19:43):
they get into their sixties or so, and I see
them and I talk to them, and I see that
level stress I tell them, listen, folks, you've got to
get a plan to retire. Actually, another client I was
talking with.
Speaker 2 (19:54):
He's through a four to one K plan. He heads up.
Speaker 1 (19:58):
He's the chief operating officer, has really tough job. And
I told him his date name happens to be David
as well. I said, listen, David, you've got.
Speaker 2 (20:06):
To retire you.
Speaker 1 (20:08):
This job is going to kill you. You know, just so
much stress. But if you can continue working and you're
engaged and you are sixty seventy three, it's great. You
don't have to take any R and D from that
for through B account or four one K account. Now,
the thing you have to remember is the year in
(20:29):
which you retire, you.
Speaker 2 (20:31):
Have to take an R and D.
Speaker 1 (20:33):
So what I mean by that is, let's say you
work all the way until November and you retire in November. Well,
guess what, you still have to take your full R
and D for that year. Now, you can delay until
April of the following year, but then you're.
Speaker 2 (20:49):
Gonna have to double up. You're going to take two
R and.
Speaker 1 (20:51):
D amounts in that following year, which I don't think
you want to do. But you have to be aware
of that, which is even if you work eleven months
or eleven months and a half the year in which
you retire, you have to take that R and D.
So that's a very important thing to remember when you're
kind of making decisions. We're going to go back to
(21:13):
the emails. We have an email from Joseph. Let's see here,
could you talk about the three tax free, tax deferred,
and tax advantage accounts when it comes to an ideal
mix in percentages that you should have or strive for. Also,
if you have time, when your accounts grow from let's
say one hundred.
Speaker 2 (21:33):
Thousand to two hundred thousand higher, once you just.
Speaker 1 (21:36):
Start thinking about from saying one, two or even three
ETFs inside them to more ETFs.
Speaker 2 (21:43):
And CA you talk about our approach.
Speaker 1 (21:45):
Well, there's a great questions, so let's just hit that
first part.
Speaker 2 (21:50):
So tax free accounts.
Speaker 1 (21:51):
Are ross right, So it could be a wraw FI array,
it could be a WROTH four and K pretty much
all four and K plans and for four to three
B plans either do or by twenty twenty six will
have a row component, which means you pay taxes on
those dollars now. But then when you put in that account,
it grows tax free, you never pay taxes even when
(22:14):
you take it out. Tax deferred is more your traditional
four and K traditional IRA, where you put those dollars
in you get the tax deduction, So basically they're going
to go in pre tax. They grow tax deferred, meaning
that you don't pay any income on any growth or
any tax on in any of the income, and you
don't pay taxes until you distribute them from the IRA
(22:38):
or from the four one K when you retire, and
then tax advantage. Really I mean, it's a brokerage account,
and you know brokes accounts kind of get a bad name,
but there's no reason to They can be managed very
tax efficiently, and you know, if you are doing a
good job, you can grow them quite a bit, and
(23:00):
that's what we've been able to do for our clients.
The other thing is with a tax or BROKEU account
is that you can take those dollars out at any point,
and that flexibility is really nice. You have to appreciate
that when you have moneys in a retirement account, whether
they be a WROTH or a traditional retirement account, you
can't access those those dollars. There's limitations and you could
(23:21):
be paying a ten percent penalty, whereas with that tax
account not a problem. The other thing is many people
put too many dollars into a get the pre tax
deduction into traditional four and K, and then they retire,
they have most of their dollars in there, and then
let's say they want to buy a house, a second
(23:42):
house or something, they want to pull out one hundred
thousand or two hundred thousand dollars out of there.
Speaker 2 (23:47):
You can't do that.
Speaker 1 (23:49):
You're going to be paying so much because it's taxes
ordinary income. You're going to be paying so much in
ordinary income tax to get those dollars out, whereas if
it's in a brokerage account, you can access that. So
to Joseph's question, Joe's question.
Speaker 2 (24:03):
What is the right mix? So it depends.
Speaker 1 (24:07):
All I would tell you is when you're younger, you
want to be sucking dollars away in a row as
much as you can. So in general, all your savings,
your four and K, your other savings should be you
should start with the ROF. And my kids are teenagers,
I haven't put it in the row because the thing
with the ROTH is you can access the principle amount
you're putting in there to any point, and you can
(24:29):
access up to ten thousand dollars tax.
Speaker 2 (24:32):
Free for your first home purchase. Right.
Speaker 1 (24:35):
So really it's a no brainer to be putting in
most of your savings into a ROF when you first start,
and then over time as you start earning more, you
should be putting dollars into pretax because you're in a
higher tax bracket. And then, as I mentioned all along,
if you can, you should be putting money into a
(24:55):
brokeras' account because it gives you the most flexibility. So
if I had a pick the right mix, it would
be something like forty percent in.
Speaker 2 (25:05):
A roth IRA.
Speaker 1 (25:07):
Let's just talk about as retirement time, forty percent to
fifty percent in a ROTH, another thirty percent to forty
percent in the pre tax, and then about twenty percent
into a brokerage account. That would be my ideal mix
when you hit retirement, as many dollars as you can
in the WROTH, some element in the pre tax, and
(25:29):
again around let's say thirty percent the pre tax, and
then around twenty percent uh into a broken account. Now
he has another question which says, as you grow, what
is the correct amount that you should have in ets?
So That's another great question. I mean, we have on
average around thirteen to fourteen to fifteen ETFs in an account.
(25:52):
But you know, we're tactical with our allocation, and all
I mean by that is we're making adjustments based on
what we're seeing in the markets, in the economy, and
we're you know, adjusting the allocation within a portfolio. If
you're being more passive with it, meaning that you're just
putting money in there and you're accumulating over time, you know,
(26:14):
you could probably get away with three, four or five
ETFs for a very long time. Uh you know, you
can you know, just be putting money away in the
broad US market, maybe a little international you know, you
want to have like us we do moneys in technology
or two QQ you know. So, I don't think it's
a function of, you know, the size of the account.
(26:38):
I think it's more a function of where do you
stand in your accumulation career, and you know, as you
get older, you may want to reduce the amount of risk,
so you start moving some dollars into.
Speaker 2 (26:53):
Uh more of.
Speaker 1 (26:54):
A bond account, so you know you can make that
adjustment over time. I'm going to let chime in as
well and if you have any thoughts on this, uh,
you know, as far as number of ETFs or anything
as far as an acid allocation. Uh what what do
you anything you want to add to what I just
said that.
Speaker 3 (27:12):
Joe, Yeah, I think you hit the nail on the head.
I would say for the passive retail investor, you know,
simplicity is best.
Speaker 1 (27:21):
Uh.
Speaker 3 (27:21):
You know, you don't need to try and get too
cute with it, so you can really get away I
would say with for the most part, probably three three holdings,
you know, S and P five hundred, and then a
Nasdaq fund like QQQ to overweight those large cap tech companies,
which you know, as we all know, that's where majority
of returns have come for the last two decades. And
(27:44):
then on the fixed income side, you know, again you
can get away with just buying agg which is going
to be the US Aggregate bond Index, you know, as
you want to transition some risk away from the stock
market and bounce.
Speaker 2 (27:56):
Out your portfolio. But simplicity is best.
Speaker 3 (28:00):
I think you can really get away with probably those three.
Speaker 1 (28:06):
Perfect perfect Now listen, I'm a big believer and I
say this often in the show. You keep things simple, folks.
If I see clients stumble, it's because they overthink things.
They really make things very complicated. And it doesn't mean
that you don't need to have the detail and really
kind of.
Speaker 2 (28:24):
Work through the details.
Speaker 1 (28:25):
But when you're making decisions, you really want to think
more from a high level perspective. And in anything in life,
if you can kind of boil it down to some
of the most simple elements, you tend to be successful,
both from a decision making perspective and a relationship perspective.
A lot of things in life, if you can keep
it simple, you'll find that you're going to benefit from that.
(28:48):
So I think I would encourage you to do that.
And again, you know, with our team, I mean, you
think about it. We've got a team of folks that
are constantly looking at all the economic data and corporate
earnings and everything, so we can be tactical. We can
make those moves and those changes, and that's what we
do for our clients. But for most people, you know,
(29:09):
and investment portfolio is not their job, right, They're not
spending forty fifty hours a week doing that, So keeping
it simple is just a.
Speaker 2 (29:17):
Great way to go.
Speaker 1 (29:18):
Folks. Again, if you have any questions, are call onlines
not working so well right now, so you can email
us at ask Bouchet at Bouchet dot com. Again, let's
asked Bouche at Bouchet dot com and it's b O U,
d H E Y dot com. Let's go on to
a few other topics. One of the things I want
(29:40):
to talk about is we see this quite often with clients,
and maybe mentioned this on the show before, but where
we where clients actually have been very successful at putting
dollars away into a taxable brokerage account that they have
maybe some need for liquidity. It could be a number
of different things, you know, buying a car, buying a boat,
(30:03):
you know, buying a home or second home. And that
liquidity need is in general for the short term period
time anywhere from you know, a month to a year
to two years, but not let's say a you know,
a fifteen to twenty thirty year mortgage type of situation.
But they need that liquidity. But they because we've done
job and mansion the portfolio, they don't want to sell
(30:25):
positions and occur a big capital games. So what we
do for them is we set up a margin loan,
which basically a margin loan is just a loan that
uses the assets in the portfolio as the collateral. Right,
So you think about that, when you get a mortgage loan,
you're using your asset, which is your home, as the collateral.
In this case, Schwab is offering that loan to the
(30:48):
client because they're using that asset, the portfolio, as the collateral.
And you can usually take anywhere from fifty to seventy
five maybe eighty percent of the value of the account
out as a margin loan. Now, where people, you know,
historically get themselves in trouble is you can use those
(31:09):
dollars to go ahead and buy more stocks and bonds,
and they get themselves leveraged up. That something happens in
the market and now they're leveraged on those holdings and
so the downside risk is increased dramatically. So really not
a great thing to do the leverage up in that regard.
But in cases that we see with our clients, they
(31:31):
just need this short term liquidity and we can negotiate
with Schwab, depending on the size of the margin rate,
to get a rate of around six six and a
half percent for our clients. And what's nice is there's
really no approval process beyond just us getting that lower
rate for our clients, and you can just draw the
(31:51):
money out. You don't have to be paying it back. Now,
you're going to be incurring interest on that when it's out,
but that's kind of a known but you know you
can pay it back whenever you want, and so you
have really a great amount of flexibility with it. Right,
So you think about that, you have your portfolio untacked,
is able to grow, You don't have to incur any
(32:14):
capital gains to access that cash, and then you can
take it out and then when you're done you don't
need that liquidity anymore. You can put it right back.
Speaker 2 (32:26):
Into that account and the margin loan goes away.
Speaker 1 (32:29):
So it really is a great way it's used properly.
I will put that caveat out there. You have to
really be smart with this, not get overly leveraged up
on anything in that regard. So just something a tool
to use if you needed that liquidity. And that goes
(32:50):
leads me into another topic I want to talk about,
which is when you're putting money into an investment, there's
a number of factors you want to consider. The first
one the top ones, is the risk and return equation.
Speaker 2 (33:03):
Right.
Speaker 1 (33:03):
If you want higher return, you need to take on risk, right,
and it can see that very clearly. The reason you
get nine to ten percent analyze return in the stock
market is that you have bear markets where you can
lose twenty percent and you know, I think the important
thing to appreciate with that is this is what we
tell our clients. If you're in a diversified portfolio of
(33:24):
that's well managed, you don't have capital risk, meaning that
you're the likelihood of you losing your capital it's pretty
close to zero because that means the markets at zero.
But you have market risk, and all that means is
there's going to be market volatility where the market can
go up or down, and it can go down by
twenty twenty five thirty percent. Right, it can happen. But
(33:47):
because of that risk, you can get nine or ten
percent analyze return at least you know that's where the
market is shown historically. So you've got to be aware
of any asset class, what is the risk and turn characteristics? Right,
And if you hear somebody talking about, you know, a
return that is higher than that, there's usually something that
(34:09):
you're giving up to get that. So for example, you
know sometimes people come and they talk about real estate
and managing you know, real estate, and how you know
they heard or they think they can get higher returns.
And I always tell them what you should be able
to get higher returns. You better get higher returns because
you're putting your time and effort into that asset class, right,
(34:32):
So you know you better beginning higher than the market
rate of return or otherwise you're you're not valuing your
time enough. The other thing is that your leverage usually
in real estate, that's what people have to appreciate is
and you know you can't have capital risks.
Speaker 2 (34:47):
Just talking to a.
Speaker 1 (34:48):
Gentleman on Friday, was at a St. Bonamacher event of
the Lake George Great event, and this gentleman bought this
property out of bankruptcy. You know whoever it was had
before they got over leveraged on their properties. So you
know you have to appreciate that there's that risk return.
The other elements that are important from an investment perspective
(35:09):
are transparency in liquidity right and you know this is
when we talk about annuities, right, So they have high fees,
they have not great transparency, and there's many times a
lock up period that can be nine, ten, eleven, twelve years, right,
so you don't have easy liquidity. One of the most
(35:29):
frustrating investments I know of because we deal this with clients,
is with tia cress, which many nonprofit organizations have. They
have an annuity element where to get that money out
of that annuity, and when you retire it takes you
ten years. You can take one tenth every year and
over ten years you get.
Speaker 2 (35:48):
Your money out.
Speaker 1 (35:49):
But when you're locking up your money for ten years
like that, that's the problem. You know, you really you've
got to get paid more if you're if you don't
have transparency, if you don't have liquidity, you know you've
got to get paid more for that. Or if you're
putting your own time and effort into an investment, you
(36:10):
better be getting paid more than that. And that's I
think it's important when you.
Speaker 2 (36:14):
Look at investments and make these.
Speaker 1 (36:16):
Decisions, that you look at all those criteria together. And
I think sometimes you know, especially as individuals are starting
to get knowledgeable, they don't tend to look at that,
or they just look at maybe a top return, top
line return and don't understand all the nuances. So just
really important to understand that. Let's move on.
Speaker 2 (36:38):
To another topic.
Speaker 1 (36:39):
But if you have any questions again, you can email
me at ask Bouchet at Bouchet dot com. We actually
have one that just came in from David. It says,
my four to three B has been sold and is
the process being transferred to self directed IRA? Should I
reinvest all this money at once at this point the
market or dollar cost average it.
Speaker 2 (37:00):
Into the market?
Speaker 1 (37:01):
Great question, David. So we have a really strong belief
that a couple of things. One is, when you have
dollars that have been invested, like you have with a
fourth V, you don't want to try to time the market.
And if these are long term dollars, meaning that you
know you've got a long time arising and you've got
the right allocation. So that's the two questions. Do you
(37:25):
have the right allocation or not? If you do, you
want to go ahead and right away by the market
by the same allocation you had before. Don't try to
get fancy with this because it will quite often not
work in your favorite. The other thing is if you
got cash and you're getting invested.
Speaker 2 (37:43):
You know there are two approaches.
Speaker 1 (37:44):
Really. One is you can put all that cash in
that once, or you can do what's called dollar cost averaging. Now,
if you look at it from a statistical perspective, the
data shows you should be putting all those dollars in
at once. It is by far the best way to
cons get better returns than dollar cost averaging. And dollar
cost averaging is simply when you put the dollars in
(38:07):
over let's say a three to six month period time.
You put a little bit in over time. Now, the
upside with the dollar cost averaging is that you can
take advantage of market volatility. So you know, in this
timeframe when we're at you know, all time highs. You
know you have some concerns over the economic data. You
know you want a dollar cost average, maybe take advantage
(38:29):
of that. Then go ahead and do that, But appreciate
that from a statistical perspective when you look at the data,
it's not the most effective way to get dollars in. Right.
The best way to get dollars in is to go
ahead and put it all at once and not think
twice about it. But to David's question, if you have
moneies that are already invested in an IRA or four
(38:51):
to three B, this should be a non decision.
Speaker 2 (38:54):
You don't want to.
Speaker 1 (38:55):
Be thinking at all as to hey should I hold on?
Should a dollar cost average? No thinking at all, You're
gonna have put those dollars right in. Those are long
term money dollars, and that is the most effective way.
And again it simplifies your life. You're not overthinking it. Well, folks,
it's been a great hour here with you. It's great
(39:16):
to have ed on the show as well. Hopefully you
learn a little bit to apply to your own personal situation.
I hope that you enjoyed this gorgeous summer day. I
know I plan on doing it. Yours a listening to
Let's Talk Money, brought to you by a Bouchet finance group. Well,
we help our clients prioritize their health while we manage
their wealth for life. Take care of yourself and take
(39:37):
care of each other, folks, SA
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