July 9, 2026 • 28 mins
In what may be our last quiz, ever, Tom turns the tables and puts Don in the hot seat with a Wall Street Journal high-school personal finance quiz—covering the Magnificent Seven, Roth IRAs, TIPS, efficient markets, yield curves, market risk, and dollar-cost averaging. Don does reasonably well, but not without protesting a dubious “debt avalanche” question and getting tangled up in a couple of accounting and risk terms. After the quiz-show nonsense, the guys tackle a listener question from Joseph in Pennsylvania: should your stock/bond allocation be based on a fixed percentage of your portfolio, or should it be driven by how many years of spending you want buffered in safer assets? Tom and Don explain why the answer depends on more than just income needs—it also depends on your emotional tolerance for volatility, your need for growth, and the role fixed income plays in helping you stay invested when markets get ugly.
0:22 Tom becomes quizmaster and introduces the Wall Street Journal high-school personal finance quiz
2:12 Question 1: Which stock is not part of the Magnificent Seven?
3:47 Question 2: Which retirement account does not require withdrawals at a certain age?
5:09 Question 3: TIPS, STRIPS, Series I bonds, and inflation-adjusted principal
6:58 Question 4: Debt payoff strategies and the disputed “debt avalanche” answer
9:13 Question 5: Efficient market hypothesis
10:12 Question 6: What an inverted/downward-sloping yield curve says about future rates
11:25 Question 7: Return on equity math and a heavily leveraged company
12:56 Question 8: What it means when net present value equals zero
14:44 Question 9: Why putting your emergency fund in stocks creates market risk
16:52 Question 10: Unsystematic risk versus broad market risk
18:57 Question 11: Dollar-cost averaging
20:06 Tom and Don wrap up the quiz and revisit the “debt avalanche” controversy
21:11 Listener question from Joseph in State College, Pennsylvania
21:34 Should bond allocation be based on a fixed percentage or on years of spending?
22:07 Risk tolerance vs. risk profile: why income needs are only part of the equation
23:26 Why a 5-year spending buffer in safer assets can make sense in retirement
24:13 The emotional role of bonds and fixed income during market declines
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:05):
We're gonna do a really great financial future.
Tom and Don are talking realmoney.
SPEAKER_02 (00:15):
Ladies and gentlemen, welcome to another
exciting game show on TalkingReal Money.
Thanks for joining us as we askpertinent financial questions of
you, the audience, and one ofthe hosts of Talking Real Money.
And today, filling in as thequiz show host, ladies and
gentlemen, please welcome Mr.
(00:38):
Tom Cock.
SPEAKER_01 (00:44):
You almost got the FIFA goal thing going there for
me.
Oh, that was really good.
That was really good.
Just in time for the World Cup.
This is a high school personalfinance quiz from the Wall
Street Journal.
Testing your own.
SPEAKER_02 (00:56):
I did the adult quizzes, and Tom is doing the
child quiz.
SPEAKER_01 (00:59):
That's about more than.
Does that tell you anything?
Exactly.
Test your knowledge against20,000 students.
That's a lot of students.
SPEAKER_02 (01:10):
Okay, so you're quizzing me today.
So I'm not sure.
I'm the one who has to besmarter than a teen year old.
SPEAKER_01 (01:18):
Yeah, exactly.
So um and there's some actuallysome pretty good.
SPEAKER_02 (01:21):
I have not read this quiz.
I do not know the answers.
SPEAKER_01 (01:23):
This is there's some pretty hard questions here.
Do you have the correct answersthere?
So that's I have no idea.
One of them I are I differ withtheir answer, so we'll see what
you what you do.
SPEAKER_02 (01:32):
So are you ready, Don?
I am ready, Tom.
Okay.
No small talk, no introducingour contestant.
SPEAKER_01 (01:40):
You know, where you from Celebration Florida.
I hear you keep bees.
How how long have you beenmarried?
How long have you been married?
I hear you live in a swamp.
How long have you been married?
SPEAKER_02 (01:53):
I I've been married for 35 years.
SPEAKER_01 (01:55):
And they said it would never last.
Thank you, Don.
Let's get to the questions, huh?
Okay.
SPEAKER_02 (02:02):
How's that?
Is that better?
No.
That was not better.
SPEAKER_01 (02:04):
All right.
Question number one.
SPEAKER_02 (02:05):
I'm just going to give you a pass on that one.
SPEAKER_01 (02:07):
Do I get the music and all the rest of the stuff?
No?
That's in post.
SPEAKER_02 (02:12):
Oh no, we okay.
Wait, I do have the live withthe I do have some of the music.
I just don't the game show musicwill have been added in post.
No, no, no, no, no.
Wait.
I've got okay, go ahead.
I've got all the buttons now.
Except I'm not going to know ifI have the right answer.
You're going to have to tell methat before I can do the
ding-ding ding.
SPEAKER_01 (02:28):
So no dings.
So, but question number one.
unknown (02:31):
Number one.
Okay.
SPEAKER_01 (02:32):
Which of these is not in the Magnificent Seven
group of tech stocks?
Not the not.
SPEAKER_02 (02:39):
See, this is a negative question.
SPEAKER_01 (02:41):
And you've got to pick A, B, C, or D.
SPEAKER_02 (02:43):
A, B, C.
SPEAKER_01 (02:44):
Which of those is not in the uh in the Magnificent
Seven?
C.
SPEAKER_02 (02:48):
I'm just guessing.
SPEAKER_01 (02:49):
That's a good guy.
That's actually I don't knowwhat the answers are.
Well, I thought I've got to givethe names of the company.
Yeah, that'd be a good idea.
I'm really bad at that.
SPEAKER_02 (02:57):
You're a terrible game show host.
I'm doing this from now on.
This is why.
Tom, you're fired.
A is Apple.
SPEAKER_01 (03:04):
B is Apple.
C is Palantir, and D is Tesla.
Oh.
I was right.
You were right.
That's kind of scary.
Don McDonald was right on thefirst one.
Palantir is not a member of theMethodist.
I don't think I can name themall.
Alphabet.
(03:25):
They already had that one.
Alphabet Apple Tesla.
SPEAKER_02 (03:28):
Nvidia?
SPEAKER_01 (03:30):
Yeah, I think we got it now.
All right, number two.
He's one for one, ladies andgentlemen, working on a special.
What do you get for winningthis, by the way?
SPEAKER_02 (03:38):
The chance to end the podcast early.
Go home and do somethingpositive.
SPEAKER_01 (03:44):
Exactly.
All right, number two.
Which of the followingretirement accounts doesn't,
does not have a requirement tobegin withdrawals at a certain
age?
Is it A, Roth IRA B, traditionalIRA, C, traditional 401K, or D,
all of the above.
Does not have a requirement tobegin withdrawals at a certain
(04:07):
age.
SPEAKER_02 (04:07):
The correct answer is A, Roth IRA.
SPEAKER_01 (04:12):
That is absolutely 110% correct.
Well done.
Where do you hail from?
SPEAKER_02 (04:20):
I hail from various places around the country.
SPEAKER_01 (04:23):
No, but I mean, as a kid, where'd you grow up?
Come on, tell us.
SPEAKER_02 (04:26):
Well, I didn't, I did, I didn't.
I grew up a year here.
I didn't.
Actually, I'm still not grownup, even at almost 70.
Uh I lived a year here, a yearthere.
Colorado Springs, I guess.
Okay, we'll go with that.
SPEAKER_01 (04:37):
A lot of snow in Colorado Springs.
Thanks for answering.
No, there really isn't.
There really isn't a lot ofthings.
No, there really aren't.
SPEAKER_02 (04:47):
It's the Air Force Academy, but the I'm the host.
I don't like to be corrected onmy own show.
Air Force Academy cadets justthey get to fly trainers.
That's all.
There aren't any good jetsthere.
SPEAKER_01 (04:56):
I don't like to be interrupted on my own show if
you don't mind.
Can you see the Rockies?
The Rockies are right next door.
SPEAKER_02 (05:06):
You can see Pike's Peak right from your front door.
SPEAKER_01 (05:09):
Beautiful place.
SPEAKER_02 (05:10):
If it faces west.
SPEAKER_01 (05:11):
I love it.
All right.
Number three, U.S.
government bonds whose principalvalue adjusts based on the
consumer price index are knownas Treasury Inflation Protected
Securities or tips.
B separate trading of registeredinterest and principal
securities strips.
Ooh.
Which I favor over drip.
Anyway, uh C, series I think.
(05:33):
Do we have tips, strips, anddrips?
No, we don't.
Series I bonds or D linkers.
Which should not be confusedwith stinkers either, by the
way.
SPEAKER_02 (05:45):
Wait, what was the question?
Because there must be a trick inthe world.
U.S.
SPEAKER_01 (05:47):
government bonds whose principal value adjusts
based on the consumer priceindex are known as A.
Treasury inflation protectedsecurities, or tips, separate
trading of registered interestand principal of security
strips, series I bonds orlinkers.
SPEAKER_02 (06:05):
I may get this one wrong because there are two that
are inflation driven.
But I think, I think that theone that adjusts its principal,
I think that's the key word inthere, means A tips.
SPEAKER_01 (06:21):
That's exactly right, Don.
Well done.
Well done.
By the way, where did youformulate your interest in
money?
How did you decide to be, youknow, always enjoyed spending
it?
Enjoyed spending it.
Very good.
Great answer, Don.
That's a great answer.
SPEAKER_02 (06:34):
Thank you for that.
SPEAKER_01 (06:35):
All right.
SPEAKER_02 (06:40):
They kind of do it at the commercial break in the
middle.
SPEAKER_01 (06:42):
Oh, we'll be right back.
We don't have one of those.
Oh, okay.
SPEAKER_02 (06:45):
Because we are now the commercial free podcast.
Have you noticed, by the way,listeners, have you noticed
we're commercial free?
SPEAKER_01 (06:51):
Yeah, you could write a nice review for that, if
nothing else.
All right, number four.
SPEAKER_02 (06:56):
Four.
SPEAKER_01 (06:56):
Got it.
Yeah.
Sarah wants to pay down herdebt.
Good for sure.
She chooses to start paying offthe debt with the highest
interest rate first, then movingto the next highest interest
rate.
What is the method of this debtrepayment called?
Number one, or number one, A,sorry, pardon me.
Um, the debt snowballing method,B, the debt avalanche method, C,
(07:19):
the zero interest down method,or D, the high to low method.
Is it debt snowballing, debtavalanche, zero interest down
method, or the high to lowmethod?
What you I have no idea.
SPEAKER_02 (07:31):
I think the debt snowball is where you pay off
your smallests first.
I'm pretty sure that's thething.
Yeah, so I'm gonna go with uh D.
SPEAKER_01 (07:42):
You're wrong there.
It's the debt avalanche method,which I've never heard of
before.
SPEAKER_02 (07:46):
I know.
When it's something you've neverheard of, and you're in the
financial industry.
Wait a minute.
Hold on.
I am going to challenge thejudges on that one.
You're gonna ask for ask for anappeal.
SPEAKER_01 (07:59):
I'm gonna go to New York and when we come back from
the break, we'll ask.
SPEAKER_02 (08:03):
If with the debt avalanche, now avalanching down
on your perfect score.
I I I just I I think somebodymade that up.
I think the quizer made that up.
I think you're right.
SPEAKER_01 (08:17):
It doesn't say who oh, let's see.
Uh National Personal FinanceChallenge hosted by the Council
for Economic Education.
Some very smart person.
I've never heard thatexpression.
I've only heard of debtsnowball, which is what you said
earlier.
SPEAKER_02 (08:31):
Yeah.
The debt snowball is DaveRamsey.
Debt.
Okay, wait a minute.
What were the four choices?
SPEAKER_01 (08:41):
Snowball, avalanche, zero interest down method or
high to low method.
SPEAKER_02 (08:46):
Okay, actually the debt avalanche, somebody they
the and no one no one knows who.
But the only it's not innecessarily in the common
vernacular.
It's actually more often calleddebt stacking.
So I'm sorry, but I I think Ithink that question is is
disqualified.
SPEAKER_01 (09:06):
Wrong.
You're wrong, Don.
We're going to go to the nextquestion.
Number five.
I'm sorry.
Um not your show.
What hypothesis states that allpublicly available information
is already available in astock's price?
Is it a efficient markethypothesis?
B adaptive market hypothesis, C,market sentiment hypothesis, or
(09:28):
D, fractal market hypothesis.
SPEAKER_02 (09:31):
Fractal market hypothesis.
That's a pretty good one.
I like this.
It's pretty creative.
Yeah, very creative.
But not creative enough.
You've got this one.
No, I know this one.
I could just drag this out for awhile.
A you're correct.
SPEAKER_01 (09:46):
It is A.
Very good, very good, very good.
Well, tell us a little bit aboutyour family.
SPEAKER_02 (09:49):
So I have a hundred percent on this quiz so far.
SPEAKER_01 (09:52):
We're not giving you a hundred percent, but tell us a
little bit about your family.
SPEAKER_02 (09:56):
I challenge this.
I'm sorry.
I'm tell us a little bit aboutyour family.
I'm not no no, I'm not talkinganymore until you change the
rules.
SPEAKER_01 (10:02):
All right, let's go to the next question.
Don't trust, therefore, the hosteither.
Uh, next question.
What does a downward sloperingslopering?
Sloping yield curve usuallyindicate about expected future
interests.
SPEAKER_02 (10:18):
Wait a minute, isn't that a yoga position?
SPEAKER_01 (10:20):
I think it is downward interest.
Downward sloping, yeah.
If I start, you don't want togo.
Uh what does it what does adownward sloping yield curve
usually indicate about expectedfuture interest rates?
A, nothing.
Rates will stay the same.
B, rates will fall.
C, rates will rise, or D, rateswill fall, and then quickly rise
again from the ashes like aphoenix.
SPEAKER_02 (10:42):
Okay.
Two of those are just plain olddumb.
SPEAKER_01 (10:44):
Dumb, yeah.
SPEAKER_02 (10:45):
Um but it's a downward sloping yield curve.
They called it the yield curve.
That's right.
Okay, well then that meansexpectations are for lower rates
in the future.
So it's lower rates.
Is that right?
SPEAKER_01 (11:01):
Rates will fall.
Is that your final answer?
Yes.
And you are absolutely 100%correct.
Rates will fall.
Now they're not going to fallfor you and I, but they're going
to fall in this silly quiz.
Uh this one's kind of hard, soyou've got to listen carefully.
Oh, I don't know.
Telling you right now, becauseI'm mad about the whole quiz.
It's only missed one, which ispretty good.
SPEAKER_02 (11:20):
I've missed zero.
SPEAKER_01 (11:22):
The argument continues.
Um, a company has a capitalstructure of$80 million in debt
and$20 million in equity.
$80 million in debt,$20 millionin equity.
Ooh, that's bad.
This year the company reported anet income of$17 million.
What is the company's return onequity?
$17 million on$20 million inequity and$80 million in debt.
(11:45):
$85% is A.
B is$24%.
C is$17.
D, none of the above.
SPEAKER_02 (11:53):
Well, they have no equity.
I mean, they have no equity.
They're in debt.
There's no equity.
SPEAKER_01 (11:59):
They have only$20 million in equity.
SPEAKER_02 (12:01):
Huh?
SPEAKER_01 (12:02):
They have they you can get the equipment.
SPEAKER_02 (12:03):
Yeah, they have 20 million in equity, but they got
80 million in debt, so they'rethey're uh net negative.
They're leveraged up.
Oh, they're way too leveragedup.
Yeah.
But the problem is, is I don'tknow all this accounting stuff.
SPEAKER_01 (12:15):
So you're going with A85, B24, C17, or D, none of the
above.
SPEAKER_02 (12:24):
I must ponder.
Then you're going to argue aboutthe music anyway.
SPEAKER_01 (12:32):
There's a limit here.
This is next time.
SPEAKER_02 (12:34):
I'm probably going to get my first one wrong now.
SPEAKER_01 (12:36):
Finally.
Okay.
Yeah.
SPEAKER_02 (12:37):
I'm going to go D.
SPEAKER_01 (12:39):
That would be incorrect.
It is A, 85%.
85%.
17 million on 20 million.
SPEAKER_02 (12:45):
Oh, it's so it's 85% of the 20 million that are the
80 million don't need to be ableto do that.
Even though they really don'thave any net equity because
they're broke.
Yeah.
This company's broke.
SPEAKER_01 (12:55):
All right.
The next one.
What does it mean when aninvestment's NPV or net present
value is equal to zero?
SPEAKER_02 (13:04):
You know, I had to study this when I took the seven
and the sixty-five.
But what am I I'm supposed toknow?
I don't remember what netpresent value even is anymore.
Go ahead.
SPEAKER_01 (13:14):
You can use your landline and call your charming
wife.
SPEAKER_02 (13:18):
I'll just ask ChatGPT.
SPEAKER_01 (13:21):
Net present value.
What does it mean when aninvestment's NPV or net present
value is equal to zero?
Is it A, the investment's valuehas dropped to zero.
B the investment will incur aloss.
C, the investment will breakeven, or D, the investment is a
bad one.
A bad one there, Don.
Did you try to do a Scottishaccent?
SPEAKER_02 (13:40):
Because you failed.
SPEAKER_01 (13:41):
A bad one.
Oh, let's see, a bad one.
SPEAKER_02 (13:48):
That was a bad one.
That was a bad one.
We got to bad one in.
I always love that one.
Let's see.
So I we we got a hard actually.
You got a net present value ofwhat?
SPEAKER_01 (13:59):
Zero.
What does it mean when aninvestment's net present value
is equal to zero?
Does it mean that the value hasdropped to zero?
The investment will incur a lossif you're not going to be able
to do that.
SPEAKER_02 (14:09):
Wait, here's the correct answer.
Wait, let's do this again.
unknown (14:12):
Yes.
SPEAKER_02 (14:13):
Let me think about that, Tom.
Okay, here's the correct answer.
It doesn't matter.
Net present value of zero iswhat was C's what was the answer
for C?
Breaking even.
What was the answer for B?
Incur a loss.
It doesn't have a present value.
Its net present value is zero.
Is that one of the answers?
SPEAKER_01 (14:33):
What's your final answer?
What's your no?
What's your final answer?
SPEAKER_02 (14:35):
It's not worth anything.
SPEAKER_01 (14:38):
No, it will break even.
SPEAKER_02 (14:42):
Okay.
unknown (14:43):
All right.
SPEAKER_01 (14:44):
What is next?
All right, I don't even care.
SPEAKER_02 (14:46):
This is a stupid question.
SPEAKER_01 (14:48):
Okay, let's try one more that I think you can get.
All right?
Yeah.
SPEAKER_02 (14:53):
No, I'm not I have no hope now.
I'm depressed.
I don't want to do the showanymore.
SPEAKER_01 (14:56):
Question number eight.
An individual invest theirentire emergency fund in
equities, those are stocks, tomaximize the returns.
I'm trying to help you here alittle bit, so don't put me
down.
This strategy exposed them towhat kind of risk?
Is it A.
Investment risk?
B market risk.
C credit risk or D, interestrate risk.
SPEAKER_02 (15:19):
Wait.
A was investment risk.
SPEAKER_01 (15:23):
B is market risk.
C is credit risk, or D isinterest rate risk.
Well, it's B.
Duh.
That's absolutely 110% correct.
SPEAKER_02 (15:35):
Well, yeah.
I mean, that's what it's called.
I know.
That's the risk you take whenyou go into the market.
It's called market risk.
SPEAKER_01 (15:41):
You and your wife were once stock brokers.
Why did you decide to leave thatbusiness?
SPEAKER_02 (15:48):
Because I didn't like the ethics of it.
unknown (15:52):
Okay.
SPEAKER_01 (15:52):
This is part of the game show.
We're just having a littlediscussion here.
That's what they do.
SPEAKER_02 (15:55):
Because I mean, because I was stupid, I went
from six figures to uh to four.
SPEAKER_01 (16:00):
The radio business.
Wow, to four?
SPEAKER_02 (16:02):
Literally, I went from six figures to four a year.
Okay.
All right.
Thank you.
Because I'm stupid.
SPEAKER_01 (16:07):
Clearing that up.
Um so you know nothing aboutmoney, basically.
All right, the tenth question.
This by the way, if you getthis.
SPEAKER_02 (16:13):
I was the financial editor of the Business Radio
Network.
SPEAKER_01 (16:16):
That's true.
Um I can verify that.
Uh but here's the the bad news.
SPEAKER_02 (16:20):
From the financial desk at the Business Radio
Network, I'm Don McDonald.
So this is That's what I had todo in tenth grade.
I had to retake all of 10thgrade again.
SPEAKER_01 (16:33):
You gotta get this one right.
So focus, please.
Focus.
SPEAKER_02 (16:36):
Hey, I know I wasn't very focused in tenth grade.
Go ahead.
This is it.
This is it?
This is the last one.
SPEAKER_01 (16:40):
No, this is there's only nine.
There's one more.
Uh which of the following doesnot describe unsystematic risk.
Okay, right?
SPEAKER_02 (16:52):
A pigeon does not describe specific risk.
SPEAKER_01 (16:58):
Company specific risk.
Idiosyncratic risk, C,diversifiable risk, or D broad
market risk.
SPEAKER_02 (17:06):
I didn't even pay any attention to what the
question was.
SPEAKER_01 (17:08):
This is why you're gonna be stuck in tenth grade.
What was the question again?
Which of the following does notdescribe unsystemic risk?
Is it a company specific risk?
B idiosyncratic risk, D,diversifiable risk, or D broad
market risk.
SPEAKER_02 (17:27):
That one seems blatantly obvious once you pay
attention.
Yes.
And I think I may have paidattention this time.
As opposed to 10th grade.
Yeah.
When I did not.
And I'm gonna go with A.
SPEAKER_01 (17:42):
And your answer is 100% wrong.
It's D, broad market risk.
SPEAKER_02 (17:49):
Which is something I think you studied a lot in tenth
grade, but that's a lot of Yeah,well, no, it wasn't so much
broads then.
SPEAKER_01 (17:56):
It was uh give me the question again.
Which of the following does notdescribe unsystemic risk?
Oh, unsystemic risk.
See, it's kind of confusing.
SPEAKER_02 (18:10):
I honestly was thinking systemic risk.
That was you're not being asked.
SPEAKER_01 (18:16):
If you get this one right, you move on to 11th
grade.
Econ A.
SPEAKER_02 (18:23):
I don't think we even had econ in high school,
but go ahead.
SPEAKER_01 (18:26):
So didn't they call it like uh No, they didn't we
didn't have it.
The young ladies had to take,you know, what was it?
Home economic.
It was home ecome.
SPEAKER_02 (18:33):
It was home economics.
SPEAKER_01 (18:36):
The young ladies.
SPEAKER_02 (18:38):
Whoa.
Yeah, and the boys did metalshop.
SPEAKER_01 (18:41):
They did.
And I was terrible.
I should have done home egginstead.
All right, here we go.
Making that metal box, did youhave to make one of those?
SPEAKER_02 (18:47):
No, I did wood shop instead of.
SPEAKER_01 (18:49):
I would have been bad.
I would have been bad.
SPEAKER_02 (18:51):
I did wood shop, and I I still have like the scars.
SPEAKER_01 (18:54):
I would have had no fingers.
All right.
SPEAKER_02 (18:56):
But I hit myself with the hammer.
SPEAKER_01 (18:58):
Number 10, very important.
unknown (18:59):
Okay.
SPEAKER_01 (19:00):
An investor contributes a fixed dollar
amount into an index fund everymonth, regardless of market
conditions.
What investment strategy is?
SPEAKER_02 (19:08):
Dollar cost averaging, final answer.
SPEAKER_01 (19:10):
And he's absolutely right.
It was dollar cost averaging orfixed contribution method,
momentum investing or valueinvesting.
You got that one right?
Congratulations, sir.
You move on to the 11th gradeand you win behind what's door.
A.
Would you like to pick that orstick with what you've already
won?
SPEAKER_02 (19:28):
We're moving on to questions.
SPEAKER_01 (19:31):
I'm done with this part of the show.
SPEAKER_02 (19:33):
We wasted 19 minutes on that.
SPEAKER_01 (19:36):
I feel bad.
That was not a very good quiz.
No, no, no, it was okay.
It just had to be a good one.
Well, there's some things inhere though for a high school
kid.
SPEAKER_02 (19:42):
I'm telling you, the dead avalanche I disagree with.
I'm sorry.
SPEAKER_01 (19:47):
I've never heard of it.
SPEAKER_02 (19:48):
The last answer, which was the high to low.
I mean, that's as makes as muchsense in in common usage because
who calls it the dead avalanche?
I honest to God, there is noevidence online that anybody
calls it that.
Nobody.
SPEAKER_01 (20:05):
Should I go to the questions over your
contestation?
SPEAKER_02 (20:08):
I would I would tell the Wall Street.
I'm going to appeal to New York.
SPEAKER_01 (20:11):
We'll see what they say.
SPEAKER_02 (20:13):
All right.
Now here's the thing.
SPEAKER_01 (20:15):
Yeah.
SPEAKER_02 (20:16):
The best part of the show you have to wait 19 minutes
for, or now at this point, over20.
SPEAKER_01 (20:20):
Yeah.
SPEAKER_02 (20:20):
And that's your questions and uh our answers,
which precedes the end.
It's the part of questions.
SPEAKER_01 (20:31):
So get to it.
SPEAKER_02 (20:33):
We're running low.
It's summer, it's the summerdoldrums.
I know.
We need to understand.
We'll be calmed in the warmsouthern waters.
Um oh my gosh, speaking of warmsouthern, I did an interview for
a thing today.
Yeah.
And we did it outside.
Do you know it's really hot andhumid in Florida in June.
SPEAKER_01 (20:52):
It's only until late September.
SPEAKER_02 (20:56):
No, until the middle of October.
You know when the weather turnsin Central Florida?
October, right around October15th.
SPEAKER_01 (21:02):
Until then, I came there that one time in July, and
I'm never going back in thesummer.
Sticky.
SPEAKER_02 (21:07):
All right, let's let's let's see.
Send your questions in attalkingrealmoney.com.
You type them in or you speakthem in, and if you type them
in, then Tom somehow getsinvolved like this.
SPEAKER_01 (21:17):
And the question comes from State College,
Pennsylvania, Joseph.
He writes, Dan and Tom.
Apparently you heard the quiz.
He's changing your name.
Normally the allocation ofstocks to bonds is stated in
terms of percentage portfolio,80, 20, 70, 30.
My question (21:35):
should the allocation consider your yearly
expense?
Meaning, should you have anamount in bonds that gives you a
five to seven year spendingbuffer if stocks go down?
So if I spend$100,000 a year,should I limit my bond exposure
to five to six hundred thousand?
So what this means as myportfolio grows, the bonds
become a smaller percentage ofthe following and not a fixed
(21:56):
percent.
Hope my question is clear.
In other words, Yeah, no, I getit.
I think Yeah, I th I I thinkit's a very important thing.
SPEAKER_02 (22:10):
Yeah, because then you have the buffer technically
because it's only a portion ofthe overall equation.
And that's why we try to talk inrisk uh the a term called risk
profile as opposed to just risktolerance.
Uh if we were talking justpurely risk tolerance, then no,
that doesn't whatever yourincome is does not matter.
(22:31):
Risk tolerance is about yourpsychological ability to
withstand the outrageous slingsand arrows of massively
declining prices in the stockmarket.
You need a fixed income portionof your portfolio to enable you
to perceive your portfolio asbeing less volatile because it
actually reduces the overallportfolio volatility.
(22:53):
Even if your stock portion goesdown a lot, your bonds tend to,
or your fixed income buoy thevalue of the portfolio.
So the income really doesn'taccomplish that.
If you had a huge income and100% of your money in stocks and
the market went down 50 percent,you're gonna see your portfolio
as declining by half.
That hurts people.
(23:14):
So your risk profile includesyour need for income, your need
for growth, and your ability tostand it.
And so those all have to betaken into account, making this
uh only part of only a partialsolution to the problem.
Trevor Burrus, Jr.
SPEAKER_01 (23:28):
Yeah, I think it's a partial solution.
I think during the withdrawalphase in your retirement, it's a
good idea.
I like the idea of having fiveyears of something stable there
in case the market has a verydifficult stretch so that you
can draw from that.
That's not an unreasonablething.
What you're saying is really atthe end of the day, most of
these decisions are made, I hateto admit it, about feelings
(23:49):
about how you feel about yourmoney and watching it go up and
go down.
And uh that's why we do stufflike the risk quiz.
That's why when we do work forpeople, we spend a lot of time
getting to know them.
It's it's 100%, yeah.
SPEAKER_02 (24:02):
Given the nature of human beings, the emotions must
always be factored in.
You are not a uh Klingon orwhatever Spock.
What was Spock?
SPEAKER_01 (24:18):
He was a I should know that, but I didn't
remember.
No, Klingons were the bad guys.
SPEAKER_02 (24:23):
The Romulans were bad guys too.
Um Spock! How can I drive menuts?
Oh no You just failed anotherquiz question.
SPEAKER_01 (24:32):
Oh no, no.
SPEAKER_02 (24:33):
Well, how did I I was a huge Star Trek fan when I
was younger.
Um Vulcan! Like Vulcanizedrubber.
I thought of tires.
Vulcan.
Vulcan.
Okay.
I'm sorry.
I'm before we go.
SPEAKER_01 (24:46):
Before we go, I just heard from New York about your
appeal, and they give it asnowball's chance in hell that
you'll be able to overcome that.
So sorry.
SPEAKER_02 (24:55):
How about an avalanche?
SPEAKER_01 (24:57):
They'd love to bury you in an avalanche for your
criticisms, but they're notgoing to.
SPEAKER_02 (25:02):
I don't like the quiz.
I'm done.
Do we have any more questions oris that it?
SPEAKER_01 (25:06):
That's it, man.
SPEAKER_02 (25:07):
Okay, so send your questions in at
talkingrealmoney.com.
SPEAKER_01 (25:11):
We take a lamb.
SPEAKER_02 (25:12):
Meet an avalanche.
Um if you want some help, we'llgive it to you for free.
Promise.
All you have to do is just clickon the button that says meet an
advisor and set up anappointment with an advisor.
Except for Tom, who's going tobe on vacation all summer.
SPEAKER_01 (25:25):
Basically, yeah, that's right.
And you don't that's the funnything.
Okay, here's the thing.
What's funny about it?
It's very serious.
SPEAKER_02 (25:31):
No, it's it's hysterical because you're
leaving the Puget Sound areaduring the only period when it's
nice.
I know.
I'm leaving my lake place justin time for the weather too.
Schedule your vacations when theweather is like me.
I'm going away in the summer.
I know.
SPEAKER_01 (25:48):
I have this kid, as you know, that's uh that's been
tying me down here for 18 years.
She is now out.
So I can change my vacationschedule.
SPEAKER_02 (25:56):
Oh, you've booted her?
You kicked her out.
SPEAKER_01 (26:02):
She said, I'm never returning from California.
SPEAKER_02 (26:04):
So Well, and who can blame her?
SPEAKER_01 (26:06):
I both reasons personal and weather and all
those things related.
I wouldn't come back.
SPEAKER_02 (26:11):
All right.
So what's she studying incollege?
SPEAKER_01 (26:13):
Speaking of psychology or psychiatry.
SPEAKER_02 (26:16):
Oh, maybe MD?
SPEAKER_01 (26:18):
I at least advanced degree, yeah.
SPEAKER_02 (26:21):
Wow.
I gotta keep working.
You're gonna keep working for along time.
Exactly.
Which doesn't make you happy,but still.
My daughter just got hermaster's, and it was not cheap.
No, it's not cheap.
Not at NY flipping you.
But anyway, she had to pick ahigh-end school.
Well, yours did too.
Oh, you think?
Yeah.
Hey Dad, can I go to the mostexpensive undergrad program in
(26:43):
America, please?
SPEAKER_01 (26:44):
She's not there, but it's close.
Very close.
It's very close.
SPEAKER_02 (26:48):
All right, everybody.
Thanks for listening.
Thanks for being a part of it.
Please tell a friend or two.
And uh please, please let usavoid future quizzes.
Pray for no more quizzes, okay?
No, quizzes are fun.
It's just better when I givethem to Tom than Tom gives them
to me.
I know.
Because he asks all thesepersonal questions.
It's none of his damn business.
(27:12):
Think about it.
What are we supposed to be doinghere?
What are we supposed to bedoing?
I'll tell you, I'll give you theanswer.
SPEAKER_00 (27:17):
And talking real money.
The opinions and views expressedon this podcast were current on
the date recorded.
Opinions, estimates, forecasts,and statements of financial
market trends that are based oncurrent market conditions
constitute our judgment and oursubjects change without notice,
including any forward-lookingestimates or statements which
are based on certainexpectations and assumptions.
Although information andopinions given have been
obtained from or based onsources believed to be reliable,
(27:38):
no warranty or representation ismade as to their correctness,
completeness, or accuracy.
Information presented on thepodcast is not personalized
investment advice from ApelloWell.
The views and strategiesdescribed may not be suitable
for everyone.
This podcast does not identifyall the risks, direct or
indirect, or otherconsiderations which might be
material to you when enteringany financial transaction.
(28:06):
The podcast is not trying to getyou to buy or sell any financial
products or securities.
Instead, the program is providedas a public service by Apello
Wealth, a fee-only registeredinvestment advisor.
Please see Apello Wealth's ADBPart 2A on our website for
information regarding Appello'sfees and services.
A public capital LLC, DBA ApelloWealth, is an investment
advisory firm registered withthe Securities and Exchange
Commission.
(28:27):
The firm only transacts businessin the states where it is
properly registered or excludedor exempt from registration
requirements.
Registration with the SEC or anystate securities authority does
not imply a certain level ofskill or training.
Apello does not provide tax orlegal advice, and nothing either
stated or implied here should beinferred as providing such
advice.
Thanks for listening, and pleasevisit talkingrealmoney.com for
more information and importantdisclosure related to
(28:48):
performance of any specificindex or fund quoted in this
podcast.
We're gonna do a really great financial future.
Tom and Don are talking realmoney.
SPEAKER_02 (00:15):
Ladies and gentlemen, welcome to another
exciting game show on TalkingReal Money.
Thanks for joining us as we askpertinent financial questions of
you, the audience, and one ofthe hosts of Talking Real Money.
And today, filling in as thequiz show host, ladies and
gentlemen, please welcome Mr.
(00:38):
Tom Cock.
SPEAKER_01 (00:44):
You almost got the FIFA goal thing going there for
me.
Oh, that was really good.
That was really good.
Just in time for the World Cup.
This is a high school personalfinance quiz from the Wall
Street Journal.
Testing your own.
SPEAKER_02 (00:56):
I did the adult quizzes, and Tom is doing the
child quiz.
SPEAKER_01 (00:59):
That's about more than.
Does that tell you anything?
Exactly.
Test your knowledge against20,000 students.
That's a lot of students.
SPEAKER_02 (01:10):
Okay, so you're quizzing me today.
So I'm not sure.
I'm the one who has to besmarter than a teen year old.
SPEAKER_01 (01:18):
Yeah, exactly.
So um and there's some actuallysome pretty good.
SPEAKER_02 (01:21):
I have not read this quiz.
I do not know the answers.
SPEAKER_01 (01:23):
This is there's some pretty hard questions here.
Do you have the correct answersthere?
So that's I have no idea.
One of them I are I differ withtheir answer, so we'll see what
you what you do.
SPEAKER_02 (01:32):
So are you ready, Don?
I am ready, Tom.
Okay.
No small talk, no introducingour contestant.
SPEAKER_01 (01:40):
You know, where you from Celebration Florida.
I hear you keep bees.
How how long have you beenmarried?
How long have you been married?
I hear you live in a swamp.
How long have you been married?
SPEAKER_02 (01:53):
I I've been married for 35 years.
SPEAKER_01 (01:55):
And they said it would never last.
Thank you, Don.
Let's get to the questions, huh?
Okay.
SPEAKER_02 (02:02):
How's that?
Is that better?
No.
That was not better.
SPEAKER_01 (02:04):
All right.
Question number one.
SPEAKER_02 (02:05):
I'm just going to give you a pass on that one.
SPEAKER_01 (02:07):
Do I get the music and all the rest of the stuff?
No?
That's in post.
SPEAKER_02 (02:12):
Oh no, we okay.
Wait, I do have the live withthe I do have some of the music.
I just don't the game show musicwill have been added in post.
No, no, no, no, no.
Wait.
I've got okay, go ahead.
I've got all the buttons now.
Except I'm not going to know ifI have the right answer.
You're going to have to tell methat before I can do the
ding-ding ding.
SPEAKER_01 (02:28):
So no dings.
So, but question number one.
unknown (02:31):
Number one.
Okay.
SPEAKER_01 (02:32):
Which of these is not in the Magnificent Seven
group of tech stocks?
Not the not.
SPEAKER_02 (02:39):
See, this is a negative question.
SPEAKER_01 (02:41):
And you've got to pick A, B, C, or D.
SPEAKER_02 (02:43):
A, B, C.
SPEAKER_01 (02:44):
Which of those is not in the uh in the Magnificent
Seven?
C.
SPEAKER_02 (02:48):
I'm just guessing.
SPEAKER_01 (02:49):
That's a good guy.
That's actually I don't knowwhat the answers are.
Well, I thought I've got to givethe names of the company.
Yeah, that'd be a good idea.
I'm really bad at that.
SPEAKER_02 (02:57):
You're a terrible game show host.
I'm doing this from now on.
This is why.
Tom, you're fired.
A is Apple.
SPEAKER_01 (03:04):
B is Apple.
C is Palantir, and D is Tesla.
Oh.
I was right.
You were right.
That's kind of scary.
Don McDonald was right on thefirst one.
Palantir is not a member of theMethodist.
I don't think I can name themall.
Alphabet.
(03:25):
They already had that one.
Alphabet Apple Tesla.
SPEAKER_02 (03:28):
Nvidia?
SPEAKER_01 (03:30):
Yeah, I think we got it now.
All right, number two.
He's one for one, ladies andgentlemen, working on a special.
What do you get for winningthis, by the way?
SPEAKER_02 (03:38):
The chance to end the podcast early.
Go home and do somethingpositive.
SPEAKER_01 (03:44):
Exactly.
All right, number two.
Which of the followingretirement accounts doesn't,
does not have a requirement tobegin withdrawals at a certain
age?
Is it A, Roth IRA B, traditionalIRA, C, traditional 401K, or D,
all of the above.
Does not have a requirement tobegin withdrawals at a certain
(04:07):
age.
SPEAKER_02 (04:07):
The correct answer is A, Roth IRA.
SPEAKER_01 (04:12):
That is absolutely 110% correct.
Well done.
Where do you hail from?
SPEAKER_02 (04:20):
I hail from various places around the country.
SPEAKER_01 (04:23):
No, but I mean, as a kid, where'd you grow up?
Come on, tell us.
SPEAKER_02 (04:26):
Well, I didn't, I did, I didn't.
I grew up a year here.
I didn't.
Actually, I'm still not grownup, even at almost 70.
Uh I lived a year here, a yearthere.
Colorado Springs, I guess.
Okay, we'll go with that.
SPEAKER_01 (04:37):
A lot of snow in Colorado Springs.
Thanks for answering.
No, there really isn't.
There really isn't a lot ofthings.
No, there really aren't.
SPEAKER_02 (04:47):
It's the Air Force Academy, but the I'm the host.
I don't like to be corrected onmy own show.
Air Force Academy cadets justthey get to fly trainers.
That's all.
There aren't any good jetsthere.
SPEAKER_01 (04:56):
I don't like to be interrupted on my own show if
you don't mind.
Can you see the Rockies?
The Rockies are right next door.
SPEAKER_02 (05:06):
You can see Pike's Peak right from your front door.
SPEAKER_01 (05:09):
Beautiful place.
SPEAKER_02 (05:10):
If it faces west.
SPEAKER_01 (05:11):
I love it.
All right.
Number three, U.S.
government bonds whose principalvalue adjusts based on the
consumer price index are knownas Treasury Inflation Protected
Securities or tips.
B separate trading of registeredinterest and principal
securities strips.
Ooh.
Which I favor over drip.
Anyway, uh C, series I think.
(05:33):
Do we have tips, strips, anddrips?
No, we don't.
Series I bonds or D linkers.
Which should not be confusedwith stinkers either, by the
way.
SPEAKER_02 (05:45):
Wait, what was the question?
Because there must be a trick inthe world.
U.S.
SPEAKER_01 (05:47):
government bonds whose principal value adjusts
based on the consumer priceindex are known as A.
Treasury inflation protectedsecurities, or tips, separate
trading of registered interestand principal of security
strips, series I bonds orlinkers.
SPEAKER_02 (06:05):
I may get this one wrong because there are two that
are inflation driven.
But I think, I think that theone that adjusts its principal,
I think that's the key word inthere, means A tips.
SPEAKER_01 (06:21):
That's exactly right, Don.
Well done.
Well done.
By the way, where did youformulate your interest in
money?
How did you decide to be, youknow, always enjoyed spending
it?
Enjoyed spending it.
Very good.
Great answer, Don.
That's a great answer.
SPEAKER_02 (06:34):
Thank you for that.
SPEAKER_01 (06:35):
All right.
SPEAKER_02 (06:40):
They kind of do it at the commercial break in the
middle.
SPEAKER_01 (06:42):
Oh, we'll be right back.
We don't have one of those.
Oh, okay.
SPEAKER_02 (06:45):
Because we are now the commercial free podcast.
Have you noticed, by the way,listeners, have you noticed
we're commercial free?
SPEAKER_01 (06:51):
Yeah, you could write a nice review for that, if
nothing else.
All right, number four.
SPEAKER_02 (06:56):
Four.
SPEAKER_01 (06:56):
Got it.
Yeah.
Sarah wants to pay down herdebt.
Good for sure.
She chooses to start paying offthe debt with the highest
interest rate first, then movingto the next highest interest
rate.
What is the method of this debtrepayment called?
Number one, or number one, A,sorry, pardon me.
Um, the debt snowballing method,B, the debt avalanche method, C,
(07:19):
the zero interest down method,or D, the high to low method.
Is it debt snowballing, debtavalanche, zero interest down
method, or the high to lowmethod?
What you I have no idea.
SPEAKER_02 (07:31):
I think the debt snowball is where you pay off
your smallests first.
I'm pretty sure that's thething.
Yeah, so I'm gonna go with uh D.
SPEAKER_01 (07:42):
You're wrong there.
It's the debt avalanche method,which I've never heard of
before.
SPEAKER_02 (07:46):
I know.
When it's something you've neverheard of, and you're in the
financial industry.
Wait a minute.
Hold on.
I am going to challenge thejudges on that one.
You're gonna ask for ask for anappeal.
SPEAKER_01 (07:59):
I'm gonna go to New York and when we come back from
the break, we'll ask.
SPEAKER_02 (08:03):
If with the debt avalanche, now avalanching down
on your perfect score.
I I I just I I think somebodymade that up.
I think the quizer made that up.
I think you're right.
SPEAKER_01 (08:17):
It doesn't say who oh, let's see.
Uh National Personal FinanceChallenge hosted by the Council
for Economic Education.
Some very smart person.
I've never heard thatexpression.
I've only heard of debtsnowball, which is what you said
earlier.
SPEAKER_02 (08:31):
Yeah.
The debt snowball is DaveRamsey.
Debt.
Okay, wait a minute.
What were the four choices?
SPEAKER_01 (08:41):
Snowball, avalanche, zero interest down method or
high to low method.
SPEAKER_02 (08:46):
Okay, actually the debt avalanche, somebody they
the and no one no one knows who.
But the only it's not innecessarily in the common
vernacular.
It's actually more often calleddebt stacking.
So I'm sorry, but I I think Ithink that question is is
disqualified.
SPEAKER_01 (09:06):
Wrong.
You're wrong, Don.
We're going to go to the nextquestion.
Number five.
I'm sorry.
Um not your show.
What hypothesis states that allpublicly available information
is already available in astock's price?
Is it a efficient markethypothesis?
B adaptive market hypothesis, C,market sentiment hypothesis, or
(09:28):
D, fractal market hypothesis.
SPEAKER_02 (09:31):
Fractal market hypothesis.
That's a pretty good one.
I like this.
It's pretty creative.
Yeah, very creative.
But not creative enough.
You've got this one.
No, I know this one.
I could just drag this out for awhile.
A you're correct.
SPEAKER_01 (09:46):
It is A.
Very good, very good, very good.
Well, tell us a little bit aboutyour family.
SPEAKER_02 (09:49):
So I have a hundred percent on this quiz so far.
SPEAKER_01 (09:52):
We're not giving you a hundred percent, but tell us a
little bit about your family.
SPEAKER_02 (09:56):
I challenge this.
I'm sorry.
I'm tell us a little bit aboutyour family.
I'm not no no, I'm not talkinganymore until you change the
rules.
SPEAKER_01 (10:02):
All right, let's go to the next question.
Don't trust, therefore, the hosteither.
Uh, next question.
What does a downward sloperingslopering?
Sloping yield curve usuallyindicate about expected future
interests.
SPEAKER_02 (10:18):
Wait a minute, isn't that a yoga position?
SPEAKER_01 (10:20):
I think it is downward interest.
Downward sloping, yeah.
If I start, you don't want togo.
Uh what does it what does adownward sloping yield curve
usually indicate about expectedfuture interest rates?
A, nothing.
Rates will stay the same.
B, rates will fall.
C, rates will rise, or D, rateswill fall, and then quickly rise
again from the ashes like aphoenix.
SPEAKER_02 (10:42):
Okay.
Two of those are just plain olddumb.
SPEAKER_01 (10:44):
Dumb, yeah.
SPEAKER_02 (10:45):
Um but it's a downward sloping yield curve.
They called it the yield curve.
That's right.
Okay, well then that meansexpectations are for lower rates
in the future.
So it's lower rates.
Is that right?
SPEAKER_01 (11:01):
Rates will fall.
Is that your final answer?
Yes.
And you are absolutely 100%correct.
Rates will fall.
Now they're not going to fallfor you and I, but they're going
to fall in this silly quiz.
Uh this one's kind of hard, soyou've got to listen carefully.
Oh, I don't know.
Telling you right now, becauseI'm mad about the whole quiz.
It's only missed one, which ispretty good.
SPEAKER_02 (11:20):
I've missed zero.
SPEAKER_01 (11:22):
The argument continues.
Um, a company has a capitalstructure of$80 million in debt
and$20 million in equity.
$80 million in debt,$20 millionin equity.
Ooh, that's bad.
This year the company reported anet income of$17 million.
What is the company's return onequity?
$17 million on$20 million inequity and$80 million in debt.
(11:45):
$85% is A.
B is$24%.
C is$17.
D, none of the above.
SPEAKER_02 (11:53):
Well, they have no equity.
I mean, they have no equity.
They're in debt.
There's no equity.
SPEAKER_01 (11:59):
They have only$20 million in equity.
SPEAKER_02 (12:01):
Huh?
SPEAKER_01 (12:02):
They have they you can get the equipment.
SPEAKER_02 (12:03):
Yeah, they have 20 million in equity, but they got
80 million in debt, so they'rethey're uh net negative.
They're leveraged up.
Oh, they're way too leveragedup.
Yeah.
But the problem is, is I don'tknow all this accounting stuff.
SPEAKER_01 (12:15):
So you're going with A85, B24, C17, or D, none of the
above.
SPEAKER_02 (12:24):
I must ponder.
Then you're going to argue aboutthe music anyway.
SPEAKER_01 (12:32):
There's a limit here.
This is next time.
SPEAKER_02 (12:34):
I'm probably going to get my first one wrong now.
SPEAKER_01 (12:36):
Finally.
Okay.
Yeah.
SPEAKER_02 (12:37):
I'm going to go D.
SPEAKER_01 (12:39):
That would be incorrect.
It is A, 85%.
85%.
17 million on 20 million.
SPEAKER_02 (12:45):
Oh, it's so it's 85% of the 20 million that are the
80 million don't need to be ableto do that.
Even though they really don'thave any net equity because
they're broke.
Yeah.
This company's broke.
SPEAKER_01 (12:55):
All right.
The next one.
What does it mean when aninvestment's NPV or net present
value is equal to zero?
SPEAKER_02 (13:04):
You know, I had to study this when I took the seven
and the sixty-five.
But what am I I'm supposed toknow?
I don't remember what netpresent value even is anymore.
Go ahead.
SPEAKER_01 (13:14):
You can use your landline and call your charming
wife.
SPEAKER_02 (13:18):
I'll just ask ChatGPT.
SPEAKER_01 (13:21):
Net present value.
What does it mean when aninvestment's NPV or net present
value is equal to zero?
Is it A, the investment's valuehas dropped to zero.
B the investment will incur aloss.
C, the investment will breakeven, or D, the investment is a
bad one.
A bad one there, Don.
Did you try to do a Scottishaccent?
SPEAKER_02 (13:40):
Because you failed.
SPEAKER_01 (13:41):
A bad one.
Oh, let's see, a bad one.
SPEAKER_02 (13:48):
That was a bad one.
That was a bad one.
We got to bad one in.
I always love that one.
Let's see.
So I we we got a hard actually.
You got a net present value ofwhat?
SPEAKER_01 (13:59):
Zero.
What does it mean when aninvestment's net present value
is equal to zero?
Does it mean that the value hasdropped to zero?
The investment will incur a lossif you're not going to be able
to do that.
SPEAKER_02 (14:09):
Wait, here's the correct answer.
Wait, let's do this again.
unknown (14:12):
Yes.
SPEAKER_02 (14:13):
Let me think about that, Tom.
Okay, here's the correct answer.
It doesn't matter.
Net present value of zero iswhat was C's what was the answer
for C?
Breaking even.
What was the answer for B?
Incur a loss.
It doesn't have a present value.
Its net present value is zero.
Is that one of the answers?
SPEAKER_01 (14:33):
What's your final answer?
What's your no?
What's your final answer?
SPEAKER_02 (14:35):
It's not worth anything.
SPEAKER_01 (14:38):
No, it will break even.
SPEAKER_02 (14:42):
Okay.
unknown (14:43):
All right.
SPEAKER_01 (14:44):
What is next?
All right, I don't even care.
SPEAKER_02 (14:46):
This is a stupid question.
SPEAKER_01 (14:48):
Okay, let's try one more that I think you can get.
All right?
Yeah.
SPEAKER_02 (14:53):
No, I'm not I have no hope now.
I'm depressed.
I don't want to do the showanymore.
SPEAKER_01 (14:56):
Question number eight.
An individual invest theirentire emergency fund in
equities, those are stocks, tomaximize the returns.
I'm trying to help you here alittle bit, so don't put me
down.
This strategy exposed them towhat kind of risk?
Is it A.
Investment risk?
B market risk.
C credit risk or D, interestrate risk.
SPEAKER_02 (15:19):
Wait.
A was investment risk.
SPEAKER_01 (15:23):
B is market risk.
C is credit risk, or D isinterest rate risk.
Well, it's B.
Duh.
That's absolutely 110% correct.
SPEAKER_02 (15:35):
Well, yeah.
I mean, that's what it's called.
I know.
That's the risk you take whenyou go into the market.
It's called market risk.
SPEAKER_01 (15:41):
You and your wife were once stock brokers.
Why did you decide to leave thatbusiness?
SPEAKER_02 (15:48):
Because I didn't like the ethics of it.
unknown (15:52):
Okay.
SPEAKER_01 (15:52):
This is part of the game show.
We're just having a littlediscussion here.
That's what they do.
SPEAKER_02 (15:55):
Because I mean, because I was stupid, I went
from six figures to uh to four.
SPEAKER_01 (16:00):
The radio business.
Wow, to four?
SPEAKER_02 (16:02):
Literally, I went from six figures to four a year.
Okay.
All right.
Thank you.
Because I'm stupid.
SPEAKER_01 (16:07):
Clearing that up.
Um so you know nothing aboutmoney, basically.
All right, the tenth question.
This by the way, if you getthis.
SPEAKER_02 (16:13):
I was the financial editor of the Business Radio
Network.
SPEAKER_01 (16:16):
That's true.
Um I can verify that.
Uh but here's the the bad news.
SPEAKER_02 (16:20):
From the financial desk at the Business Radio
Network, I'm Don McDonald.
So this is That's what I had todo in tenth grade.
I had to retake all of 10thgrade again.
SPEAKER_01 (16:33):
You gotta get this one right.
So focus, please.
Focus.
SPEAKER_02 (16:36):
Hey, I know I wasn't very focused in tenth grade.
Go ahead.
This is it.
This is it?
This is the last one.
SPEAKER_01 (16:40):
No, this is there's only nine.
There's one more.
Uh which of the following doesnot describe unsystematic risk.
Okay, right?
SPEAKER_02 (16:52):
A pigeon does not describe specific risk.
SPEAKER_01 (16:58):
Company specific risk.
Idiosyncratic risk, C,diversifiable risk, or D broad
market risk.
SPEAKER_02 (17:06):
I didn't even pay any attention to what the
question was.
SPEAKER_01 (17:08):
This is why you're gonna be stuck in tenth grade.
What was the question again?
Which of the following does notdescribe unsystemic risk?
Is it a company specific risk?
B idiosyncratic risk, D,diversifiable risk, or D broad
market risk.
SPEAKER_02 (17:27):
That one seems blatantly obvious once you pay
attention.
Yes.
And I think I may have paidattention this time.
As opposed to 10th grade.
Yeah.
When I did not.
And I'm gonna go with A.
SPEAKER_01 (17:42):
And your answer is 100% wrong.
It's D, broad market risk.
SPEAKER_02 (17:49):
Which is something I think you studied a lot in tenth
grade, but that's a lot of Yeah,well, no, it wasn't so much
broads then.
SPEAKER_01 (17:56):
It was uh give me the question again.
Which of the following does notdescribe unsystemic risk?
Oh, unsystemic risk.
See, it's kind of confusing.
SPEAKER_02 (18:10):
I honestly was thinking systemic risk.
That was you're not being asked.
SPEAKER_01 (18:16):
If you get this one right, you move on to 11th
grade.
Econ A.
SPEAKER_02 (18:23):
I don't think we even had econ in high school,
but go ahead.
SPEAKER_01 (18:26):
So didn't they call it like uh No, they didn't we
didn't have it.
The young ladies had to take,you know, what was it?
Home economic.
It was home ecome.
SPEAKER_02 (18:33):
It was home economics.
SPEAKER_01 (18:36):
The young ladies.
SPEAKER_02 (18:38):
Whoa.
Yeah, and the boys did metalshop.
SPEAKER_01 (18:41):
They did.
And I was terrible.
I should have done home egginstead.
All right, here we go.
Making that metal box, did youhave to make one of those?
SPEAKER_02 (18:47):
No, I did wood shop instead of.
SPEAKER_01 (18:49):
I would have been bad.
I would have been bad.
SPEAKER_02 (18:51):
I did wood shop, and I I still have like the scars.
SPEAKER_01 (18:54):
I would have had no fingers.
All right.
SPEAKER_02 (18:56):
But I hit myself with the hammer.
SPEAKER_01 (18:58):
Number 10, very important.
unknown (18:59):
Okay.
SPEAKER_01 (19:00):
An investor contributes a fixed dollar
amount into an index fund everymonth, regardless of market
conditions.
What investment strategy is?
SPEAKER_02 (19:08):
Dollar cost averaging, final answer.
SPEAKER_01 (19:10):
And he's absolutely right.
It was dollar cost averaging orfixed contribution method,
momentum investing or valueinvesting.
You got that one right?
Congratulations, sir.
You move on to the 11th gradeand you win behind what's door.
A.
Would you like to pick that orstick with what you've already
won?
SPEAKER_02 (19:28):
We're moving on to questions.
SPEAKER_01 (19:31):
I'm done with this part of the show.
SPEAKER_02 (19:33):
We wasted 19 minutes on that.
SPEAKER_01 (19:36):
I feel bad.
That was not a very good quiz.
No, no, no, it was okay.
It just had to be a good one.
Well, there's some things inhere though for a high school
kid.
SPEAKER_02 (19:42):
I'm telling you, the dead avalanche I disagree with.
I'm sorry.
SPEAKER_01 (19:47):
I've never heard of it.
SPEAKER_02 (19:48):
The last answer, which was the high to low.
I mean, that's as makes as muchsense in in common usage because
who calls it the dead avalanche?
I honest to God, there is noevidence online that anybody
calls it that.
Nobody.
SPEAKER_01 (20:05):
Should I go to the questions over your
contestation?
SPEAKER_02 (20:08):
I would I would tell the Wall Street.
I'm going to appeal to New York.
SPEAKER_01 (20:11):
We'll see what they say.
SPEAKER_02 (20:13):
All right.
Now here's the thing.
SPEAKER_01 (20:15):
Yeah.
SPEAKER_02 (20:16):
The best part of the show you have to wait 19 minutes
for, or now at this point, over20.
SPEAKER_01 (20:20):
Yeah.
SPEAKER_02 (20:20):
And that's your questions and uh our answers,
which precedes the end.
It's the part of questions.
SPEAKER_01 (20:31):
So get to it.
SPEAKER_02 (20:33):
We're running low.
It's summer, it's the summerdoldrums.
I know.
We need to understand.
We'll be calmed in the warmsouthern waters.
Um oh my gosh, speaking of warmsouthern, I did an interview for
a thing today.
Yeah.
And we did it outside.
Do you know it's really hot andhumid in Florida in June.
SPEAKER_01 (20:52):
It's only until late September.
SPEAKER_02 (20:56):
No, until the middle of October.
You know when the weather turnsin Central Florida?
October, right around October15th.
SPEAKER_01 (21:02):
Until then, I came there that one time in July, and
I'm never going back in thesummer.
Sticky.
SPEAKER_02 (21:07):
All right, let's let's let's see.
Send your questions in attalkingrealmoney.com.
You type them in or you speakthem in, and if you type them
in, then Tom somehow getsinvolved like this.
SPEAKER_01 (21:17):
And the question comes from State College,
Pennsylvania, Joseph.
He writes, Dan and Tom.
Apparently you heard the quiz.
He's changing your name.
Normally the allocation ofstocks to bonds is stated in
terms of percentage portfolio,80, 20, 70, 30.
My question (21:35):
should the allocation consider your yearly
expense?
Meaning, should you have anamount in bonds that gives you a
five to seven year spendingbuffer if stocks go down?
So if I spend$100,000 a year,should I limit my bond exposure
to five to six hundred thousand?
So what this means as myportfolio grows, the bonds
become a smaller percentage ofthe following and not a fixed
(21:56):
percent.
Hope my question is clear.
In other words, Yeah, no, I getit.
I think Yeah, I th I I thinkit's a very important thing.
SPEAKER_02 (22:10):
Yeah, because then you have the buffer technically
because it's only a portion ofthe overall equation.
And that's why we try to talk inrisk uh the a term called risk
profile as opposed to just risktolerance.
Uh if we were talking justpurely risk tolerance, then no,
that doesn't whatever yourincome is does not matter.
(22:31):
Risk tolerance is about yourpsychological ability to
withstand the outrageous slingsand arrows of massively
declining prices in the stockmarket.
You need a fixed income portionof your portfolio to enable you
to perceive your portfolio asbeing less volatile because it
actually reduces the overallportfolio volatility.
(22:53):
Even if your stock portion goesdown a lot, your bonds tend to,
or your fixed income buoy thevalue of the portfolio.
So the income really doesn'taccomplish that.
If you had a huge income and100% of your money in stocks and
the market went down 50 percent,you're gonna see your portfolio
as declining by half.
That hurts people.
(23:14):
So your risk profile includesyour need for income, your need
for growth, and your ability tostand it.
And so those all have to betaken into account, making this
uh only part of only a partialsolution to the problem.
Trevor Burrus, Jr.
SPEAKER_01 (23:28):
Yeah, I think it's a partial solution.
I think during the withdrawalphase in your retirement, it's a
good idea.
I like the idea of having fiveyears of something stable there
in case the market has a verydifficult stretch so that you
can draw from that.
That's not an unreasonablething.
What you're saying is really atthe end of the day, most of
these decisions are made, I hateto admit it, about feelings
(23:49):
about how you feel about yourmoney and watching it go up and
go down.
And uh that's why we do stufflike the risk quiz.
That's why when we do work forpeople, we spend a lot of time
getting to know them.
It's it's 100%, yeah.
SPEAKER_02 (24:02):
Given the nature of human beings, the emotions must
always be factored in.
You are not a uh Klingon orwhatever Spock.
What was Spock?
SPEAKER_01 (24:18):
He was a I should know that, but I didn't
remember.
No, Klingons were the bad guys.
SPEAKER_02 (24:23):
The Romulans were bad guys too.
Um Spock! How can I drive menuts?
Oh no You just failed anotherquiz question.
SPEAKER_01 (24:32):
Oh no, no.
SPEAKER_02 (24:33):
Well, how did I I was a huge Star Trek fan when I
was younger.
Um Vulcan! Like Vulcanizedrubber.
I thought of tires.
Vulcan.
Vulcan.
Okay.
I'm sorry.
I'm before we go.
SPEAKER_01 (24:46):
Before we go, I just heard from New York about your
appeal, and they give it asnowball's chance in hell that
you'll be able to overcome that.
So sorry.
SPEAKER_02 (24:55):
How about an avalanche?
SPEAKER_01 (24:57):
They'd love to bury you in an avalanche for your
criticisms, but they're notgoing to.
SPEAKER_02 (25:02):
I don't like the quiz.
I'm done.
Do we have any more questions oris that it?
SPEAKER_01 (25:06):
That's it, man.
SPEAKER_02 (25:07):
Okay, so send your questions in at
talkingrealmoney.com.
SPEAKER_01 (25:11):
We take a lamb.
SPEAKER_02 (25:12):
Meet an avalanche.
Um if you want some help, we'llgive it to you for free.
Promise.
All you have to do is just clickon the button that says meet an
advisor and set up anappointment with an advisor.
Except for Tom, who's going tobe on vacation all summer.
SPEAKER_01 (25:25):
Basically, yeah, that's right.
And you don't that's the funnything.
Okay, here's the thing.
What's funny about it?
It's very serious.
SPEAKER_02 (25:31):
No, it's it's hysterical because you're
leaving the Puget Sound areaduring the only period when it's
nice.
I know.
I'm leaving my lake place justin time for the weather too.
Schedule your vacations when theweather is like me.
I'm going away in the summer.
I know.
SPEAKER_01 (25:48):
I have this kid, as you know, that's uh that's been
tying me down here for 18 years.
She is now out.
So I can change my vacationschedule.
SPEAKER_02 (25:56):
Oh, you've booted her?
You kicked her out.
SPEAKER_01 (26:02):
She said, I'm never returning from California.
SPEAKER_02 (26:04):
So Well, and who can blame her?
SPEAKER_01 (26:06):
I both reasons personal and weather and all
those things related.
I wouldn't come back.
SPEAKER_02 (26:11):
All right.
So what's she studying incollege?
SPEAKER_01 (26:13):
Speaking of psychology or psychiatry.
SPEAKER_02 (26:16):
Oh, maybe MD?
SPEAKER_01 (26:18):
I at least advanced degree, yeah.
SPEAKER_02 (26:21):
Wow.
I gotta keep working.
You're gonna keep working for along time.
Exactly.
Which doesn't make you happy,but still.
My daughter just got hermaster's, and it was not cheap.
No, it's not cheap.
Not at NY flipping you.
But anyway, she had to pick ahigh-end school.
Well, yours did too.
Oh, you think?
Yeah.
Hey Dad, can I go to the mostexpensive undergrad program in
(26:43):
America, please?
SPEAKER_01 (26:44):
She's not there, but it's close.
Very close.
It's very close.
SPEAKER_02 (26:48):
All right, everybody.
Thanks for listening.
Thanks for being a part of it.
Please tell a friend or two.
And uh please, please let usavoid future quizzes.
Pray for no more quizzes, okay?
No, quizzes are fun.
It's just better when I givethem to Tom than Tom gives them
to me.
I know.
Because he asks all thesepersonal questions.
It's none of his damn business.
(27:12):
Think about it.
What are we supposed to be doinghere?
What are we supposed to bedoing?
I'll tell you, I'll give you theanswer.
SPEAKER_00 (27:17):
And talking real money.
The opinions and views expressedon this podcast were current on
the date recorded.
Opinions, estimates, forecasts,and statements of financial
market trends that are based oncurrent market conditions
constitute our judgment and oursubjects change without notice,
including any forward-lookingestimates or statements which
are based on certainexpectations and assumptions.
Although information andopinions given have been
obtained from or based onsources believed to be reliable,
(27:38):
no warranty or representation ismade as to their correctness,
completeness, or accuracy.
Information presented on thepodcast is not personalized
investment advice from ApelloWell.
The views and strategiesdescribed may not be suitable
for everyone.
This podcast does not identifyall the risks, direct or
indirect, or otherconsiderations which might be
material to you when enteringany financial transaction.
(28:06):
The podcast is not trying to getyou to buy or sell any financial
products or securities.
Instead, the program is providedas a public service by Apello
Wealth, a fee-only registeredinvestment advisor.
Please see Apello Wealth's ADBPart 2A on our website for
information regarding Appello'sfees and services.
A public capital LLC, DBA ApelloWealth, is an investment
advisory firm registered withthe Securities and Exchange
Commission.
(28:27):
The firm only transacts businessin the states where it is
properly registered or excludedor exempt from registration
requirements.
Registration with the SEC or anystate securities authority does
not imply a certain level ofskill or training.
Apello does not provide tax orlegal advice, and nothing either
stated or implied here should beinferred as providing such
advice.
Thanks for listening, and pleasevisit talkingrealmoney.com for
more information and importantdisclosure related to
(28:48):
performance of any specificindex or fund quoted in this
podcast.
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