Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
And one thirteen ten Wi b A and ask the
experts with Wisconsin Capital Management online their website whizcap dot com.
Speaker 2 (00:10):
That's wisc ap.
Speaker 1 (00:13):
Dot com, whizcap dot com all one word, great website
to learn more about Wisconsin Capital Management, what makes them unique,
how they could help you, and of course how you
can set up an appointment. All I got to do
is head on over the website whizcap dot com. That's
Wi s cap dot com. Joining this week from Wisconsin
Capital Management is Tom Plump, certified Financial Analyst.
Speaker 2 (00:32):
Tom.
Speaker 3 (00:33):
How you doing this week, Oh Sean. Great to be
talking to you on this beautiful autumn day in Wisconsin.
We're just excited to have a good chance to talk
about some subjects.
Speaker 1 (00:45):
Dear to our Heart, that's a we're going to talk
about a really important see speaking of dear to your hearts,
we're going to be talking this week about the role
of an investment advisor. And we've covered a lot, by
the way on this program, whether it's markets or the
power of comp hounding five to nine plans or off iras,
and of course how Wisconsin Capital Management leverages their expertise
(01:06):
and their analyzation and those and two investments to help
really benefit clients. And as mentioned, we're going to talk
this week about the role of an investment advisory, talk
about really important role in understanding how that role works.
And Tom, let's actually start off about with with that.
Just that very thing about, you know, finding the underlying
(01:27):
investments to best meet your client's goals. That's a really
important one, isn't it, Tom.
Speaker 3 (01:32):
Oh, it definitely is, Sean. You know, when we work,
we've tried it to understand not only how markets have
worked in the past, but all the factors that are
affecting the investment merits of individual stocks and bonds, how
the environment is evolving, and what items will affect these
investments and their return potential. We believe that then you
(01:56):
can construct a portfolio that helps your clients.
Speaker 1 (01:59):
And only talking this morning with Tom Plumb with Wisconsin
Capital Management online whizcap dot com. That's wiscap dot com.
Great website to learn more about Tom. Nathan who's with us.
He's got the week off, He's very lucky. Great timing
on that.
Speaker 2 (02:14):
Nathan.
Speaker 1 (02:14):
Of course, you can learn more about Nathan as well
online whiz cap dot com. Talking this week about the
importance of a working with a financial advisor and finding
the right advisor as well. And so obviously I know
something that's really important to you, Tom, and I often
mentioned heading over to the website whizcap dot com to
set up an appointments. You really work to get to
(02:36):
know and understand your client's needs, who they are, their resources,
their goals. That's really important to you, isn't it.
Speaker 3 (02:43):
Tom, Oh, it definitely is, because it defines basically the
time that they have for their investments to work, because
some investments are more volatile, for example, when you look
at shorter term times, but when you look at longer
term they may be much more predictable. So you need
to define for that client what their timeframe is, when
(03:07):
they're going to need this cash, how what their goals are,
what they want to accomplish with it, and then you
have to put it into the perspective of what the
market offers that.
Speaker 1 (03:18):
You know, one of the things I find very interesting,
and we'll talk about a little bit more about this,
but you know, one of the things I find very
interesting about what you guys do at Wisconsin Capital Management, Tom,
is there's like this balance of you know, this left
brain right brain, is there's obviously that part of your
brain that's got to be very analytical and very very
much numbers follow the facts, follow the data. But there
(03:39):
is obviously, uh, the the emotional and the creative and
the understanding side of this as well. And something, as
you know, I've gotten to know you and gotten to
know Nathan over the past few months really fascinates me
is how you guys are able to kind of men
meld those two, both the right and the left side
of the brain. And Tom, when we talk about some
of these some of these these resource available things, things
(04:00):
like investments, I know, they kind of kind of fall
into two main categories.
Speaker 2 (04:04):
Am I reading that right?
Speaker 3 (04:06):
Yep? Yeah, you are sean Basically you are either someone
who lends money to someone you basically trading your cash
for a promise that you'll receive a specific return for
a specific time. That's basically some type of debt. Fixed
income might be an insurance contract, but it's something where
(04:30):
your asset basically becomes somebody else's obligation. In other words,
they promised you something, They're going to meet those terms
if they can, and that's what the maximum that you
can get from that. The other type of investment is
either any type of what we call equity investments. It
(04:51):
might be an equity, might be your own firm, for example,
you might have your own business, but it also could
be private equity. But it's something where you take the
risk of ownership and for that risk, you expect to
get a return and probably a return that exceeds the
return you could get from a fixed income investment.
Speaker 2 (05:14):
Really fascinating stuff.
Speaker 1 (05:15):
And so as we talked this morning with Tom Plumb
with Wisconsin Capital Management talking about about really working with
and getting to know advisors a little a lot about
what they do at Wisconsin Capital Management as well, is
kind of breaking down some different these different investment categories
here with Tom door forget. If you want to learn more,
you can always head on over to Wisconsin Capital Management's website.
That's wiz cap dot com. That's wiscap dot com. That's
(05:40):
wiz cap dot com. Great website. There a great place too.
I've been listening to the program in the past couple
of weeks. You like it, gets know Tom and Nate
and the team a little bit more. They make it
real easy to set up an appointment right online. That's
wiz cap dot com. You can also listen back to
this in previous shows podcasts as well, where do things
like as we talk about kind of two distinct ones,
are there other like hybrid situations as well in this time?
Speaker 3 (06:03):
Oh yeah, And if Wall Street especially comes up with
some where they will promise you a specific rate to
return or that they'll limit a risk, they have some
type of participating CDs things like that. And actually some
insurance products will allow you to participate in the equity
(06:24):
markets to a degree. But remember every time that you
get a product from somebody, it's basically because they expect
that they're going to make more money on that investment
opportunities that they are exploring. Then they're paying you or
guaranteeing you for a return. So like an insurance company
(06:45):
might guarantee you a certain rate to return, but then
they going to take that money and they're going to
invest it and they definitely expect to leverage that money
into higher returns for the insurance company.
Speaker 2 (06:59):
Sounds bow, that's fairly interesting this morning, tom.
Speaker 1 (07:02):
So what about you know, when you own like an editor,
like a DBT or anything like that, what exactly how
does how does that part work?
Speaker 3 (07:09):
Then?
Speaker 2 (07:09):
For for the for the other part of this, of this,
of this conversation.
Speaker 3 (07:14):
Tom Well, again, the contracts can say what they can
be different, but what they really do is three things.
They guarantee you a rate to return if all the
terms of the contract are met. In other words, you
can you're lending them money under these terms because it's
(07:37):
an obligation of that company. And when we look at bonds,
for example, you can own their debt of a company,
and that debt you may feel comfortable because they say
they are going to pay you a maximum or a
specific way to return, but you know there's actually on
(08:01):
something as simple as that instrument like brow a bond
or a note or a CD. There basically are three
types of risk that you have to be condisant of.
One and the most important, of course, is the entity
making that promise that obligation has got to meet their obligations.
(08:22):
In other words, we call that default risk. If they
are unable to make it, or the company folds or
some reason, they don't meet their obligations. But there's also
two other risks that we like to talk about. One
is that that payment might not be competitive in the future.
(08:44):
We call this interest rate risk, where you may think
that you have a pretty attractive investment that pays you
a specific way to return for a specific period of time.
But then at some point the opportunit tunity is that
they if you had started in the future at a
(09:05):
higher interest right, that your investment's no longer competitive. We
call that one interest rate risk, and the third is
your purchasing power of the money paid back to you
in the future. It may be considerably less than you
accepted in the contract. When we look at the purchasing
(09:27):
power and we call that purchasing power risk.
Speaker 1 (09:30):
It seems like there's a lot of currents working against
you with some of this stuff. Tom and I think
it probably really reinforces the importance and working with the
right people, working with working with great people as well.
And Tom and the team at Wisconsin Capital Management, they'd
love to work with you. They'd love to get to
know you. If you head on over the website whiz
cap dot com. That's wiscap dot com. Great place to
(09:52):
start to get to know the team. Listen back to
this in previous shows. Podcast really important. If you want
to start that conversation, great day to do it. Head
on over the whisk dot com. You can set up
appointment right online. We're gonna continue our conversation with Tom
Plum of Wisconsin Capital Management. Now we've kind of gotten
some of these concepts down, we're gonna put a little
a little bit into action. We'll get the details from
Tom on how that's done. We will do that next
(10:14):
as ask the experts with Wisconsin Capital Management.
Speaker 2 (10:17):
And Tom Plump continues.
Speaker 1 (10:18):
Right here, I'm thirteen ten double U I B A
perfect and then we'll come back at that segment number
two and we are. We're doing great on time. So
we'll pick up here in three two and one thirteen
ten double UI B A and ask the experts with
Wisconsin Capital Management. Joined this morning by Tom Plum, chartered
(10:40):
financial analyst with Wisconsin Capital Management. You can learn more
about them right online. They've got a great website. It's
with cap dot com. That's wis cap dot com, that's
Wi s cap dot com.
Speaker 2 (10:52):
All one word. Head on over there.
Speaker 1 (10:54):
Now you can get to know the team. You can
listen back to this and also previous shows podcast. You
can share those also right from the website and set
up an appointment all online. It's a very powerful website.
I hope you get a chance to head on over
there today again that's wizcap dot com. That's wiscap dot com.
As we talked in that last segment about some very
you know, some basic concepts when it comes to investing
(11:16):
and working and working on investments, and Tom kind of
bringing you into this part of the conversation as we
as we understand those basic concepts, then let's talk about
how we apply that when you work with your investment
advisor and to of course meet investment goals.
Speaker 2 (11:31):
What goes on there?
Speaker 1 (11:32):
So kind of in simple terms, I guess we're thinking stocks, equities,
you know, those providing that high high return on investments.
There's also, of course no guarantee out there, and fixed
income you know, provides more stable but it's a little
more moderate. So bonds are there risks in that area?
Speaker 3 (11:49):
Tom, well as Sean. As we've said before, there's three
types of risk, and the default risk is a key one.
And what are you getting paid to take that risk?
In other words, the US government, for example, we're pretty
confident that they're going to pay us back if we
lend them money. So often that's called the risk free
(12:09):
ready to return. It's risk free in that there's not
a chance of default because they can print the money
when they want to, but it's still there are risk,
and those risks, as we're talking about, are the risk
of credit, and then follow that with the risk of
(12:30):
interest rate risk, and then obviously inflation risk. So just
for an example, let's say that we agree to lend
the federal government one hundred thousand dollars by buying a
US Treasury bond that will pay four percent annually for
the next twenty years. We know that they'll pay us back.
(12:50):
They're good for it because, as I said, they can
print the currency if they need to. But when you
think about what other the risk you might have with
a fixed income investment, just think about ten years from now.
We don't know what the interest rates are going to be,
what environment. So if ten years from now interest rates
(13:12):
were six percent on a ten year bond, that twenty
year bond we bought is now a ten year bond.
We had agreed to accept four percent interest rate on
it for the whole twenty year period of time, but
now the opportunity would be to get a six percent
bond for the remaining ten year life of that. So
(13:36):
when you think about that, nobody's going to give you
one hundred cents and a dollar for a four percent
bond when they can have a six percent bond for
the next ten years. That's the interest rate risk, and
that can be very, very profound. I often tell people
a story about elderly couple bought Treasury bond in nineteen
(13:58):
fifties to a forty year bond, where they thought that
will provide me with them funds I will ever need
in my life, and it's great savings, perfect credit. And
then in the nineties, excuse me, in the eighties, when
interest rates went up to sixteen percent, they needed that money,
(14:22):
so they sold their bonds at sixty cents on the
dollar because that's what they were worth in a higher
interest rate environment. And not only did they lose principle,
but the purchasing power from the nineteen fifties to the
nineteen eighties meant that that sixty cents on the dollar
(14:44):
that they received was only could buy about twenty cents
on the dollar when we look back at nineteen fifty dollars. So, oh,
I'm sorry, Sean.
Speaker 1 (14:55):
No, I was going to it sounds like it like
keeping up with their No, keeping up with something as
simple as inflation can be can be pretty detrimental here.
Speaker 3 (15:05):
Oh yeah. I mean, if you think about it, if
inflation averaged four percent a year, that means if you
hit one hundred thousand dollars in a bond, for example,
and you lent it at one hundred thousand dollars the
next year, the purchasing power would only get you ninety
six thousand dollars if we're four percent inflation, And if
(15:27):
you looked at that for twenty years, your purchasing power
would be down to forty four percent of the value
that you had when you originally invested. So inflation is
a significant risk for fixed income investments. That's one of
the reasons why at Wiscott's Capital Management we look at
(15:48):
our fixed income investments as a tool to moderate volatility
of equity investments. We know that the interest rate environment
that we'll see in the future is completely unpredictable, and
you want to be very careful when you try to
lock in a return because that return, as good as
(16:10):
it sounds today, may not be that good when we
look back.
Speaker 1 (16:14):
Talking this morning with Tom Tom Plumb with Wisconsin Capital
Management Online wiz cap dot com. That's wiscap dot com
and Tom before we get to a couple of things
before we wrap up. I didn't want to ask as
you were talking there too. It almost feels like what
you guys are doing at Wisconsin Capital Management. Obviously you're
managing assets and really offering guidance, but there seems to
(16:35):
be a lot of education as well and a lot
of a lot of knowledge to be shared. Is you know,
as I get a chance, and I'm very lucky to
get the chance to sit down and talk with you
and Nathan each week, I'm always learning something new and
I've got a guess for your clients. That's part of
the experience as well of working with you guys at
Wisconsin Capital Management.
Speaker 3 (16:53):
We hope so sean because we believe it's our client's
money and they can make and tell decisions on who
they're going to engage and understanding what the trade offs
on their investments. If we explain and share with them
our experience and our knowledge of the markets, that helps them.
(17:14):
Because it's not an investment plan that we create for us,
it's obviously something that we want for our clients. We
want them to understand it, we want them to feel
comfortable with it, and we want them to sleep at
night because of it?
Speaker 2 (17:31):
Does it hell?
Speaker 1 (17:31):
You mentioned that that last part, and I think sometimes
people overlook that is does it help? Because you know,
I think of the world that we're in right now,
and there's there's a lot of things going on. Having that,
you know, especially financial peace of mind and that trust
is it's got to be great having you know a local,
you know your local, you're here in town, you're here
in Wisconsin, You're available to people Wisconsin Capital Management. That's
(17:54):
going to go a long way too, is to give
folks peace of mind to understand that not only are
they working with a real person, they're working with real
people that are right here in their community. That's got
to be a great benefit to your clients as well well.
Speaker 3 (18:07):
We obviously can work with people across the country and
across the world, but it is really important to know
the people that you're working with, Understand what motivates them,
how they get paid, what's their interests in this whole arrangement,
and make sure that you feel that you can completely
trust that not that they don't have conflicts of interest,
(18:32):
but that they have an understanding of those conflicts of
interest and are dealing with them. To make sure that
the client comes first.
Speaker 1 (18:40):
Talking this morning with Tom Plumb with Wisconsin Capital Management.
Great day, Start that conversation, start that relationship. You can
head on over to wizcap dot com. That's wiscap dot com.
Great website, you're going to make an appointment right there.
Online you can learn more about Wisconsin Capital Management. You
can also listen back to this in previous shows. Again,
that all available to you at wizcap dot com. Mentioning
(19:02):
people across the country. Maybe you've got friends or family
in other states, or I know a lot of folks
this time of year maybe, or pack it up and
head and south for the season. Don't forget you can
always follow along at wizcap dot com. That's Wi scap
dot com. You can take us with you, and of
course Tom and the team would love to work with.
Speaker 2 (19:20):
You as well.
Speaker 1 (19:20):
Again, just head on over to the website whizcap dot com.
That's Wi s c ap dot com.
Speaker 2 (19:26):
Tom.
Speaker 1 (19:26):
It's always super informative and it's always a lot of fun.
You have a fantastic Dan. We'll do it all again
real soon.
Speaker 3 (19:32):
Thanks Sean, it's great to chat with you today.
Speaker 1 (19:35):
Chartered financial analyst Tom Plumb with Wisconsin capital management again.
That website whizcap dot com. That's Wi s cap dot com.
This is ask the Experts with Wisconsin, Wisconsin capital management
right here. I'm thirteen ten wuib A
And one thirteen ten Wi b A and ask the
experts with Wisconsin Capital Management online their website whizcap dot com.
Speaker 2 (00:10):
That's wisc ap.
Speaker 1 (00:13):
Dot com, whizcap dot com all one word, great website
to learn more about Wisconsin Capital Management, what makes them unique,
how they could help you, and of course how you
can set up an appointment. All I got to do
is head on over the website whizcap dot com. That's
Wi s cap dot com. Joining this week from Wisconsin
Capital Management is Tom Plump, certified Financial Analyst.
Speaker 2 (00:32):
Tom.
Speaker 3 (00:33):
How you doing this week, Oh Sean. Great to be
talking to you on this beautiful autumn day in Wisconsin.
We're just excited to have a good chance to talk
about some subjects.
Speaker 1 (00:45):
Dear to our Heart, that's a we're going to talk
about a really important see speaking of dear to your hearts,
we're going to be talking this week about the role
of an investment advisor. And we've covered a lot, by
the way on this program, whether it's markets or the
power of comp hounding five to nine plans or off iras,
and of course how Wisconsin Capital Management leverages their expertise
(01:06):
and their analyzation and those and two investments to help
really benefit clients. And as mentioned, we're going to talk
this week about the role of an investment advisory, talk
about really important role in understanding how that role works.
And Tom, let's actually start off about with with that.
Just that very thing about, you know, finding the underlying
(01:27):
investments to best meet your client's goals. That's a really
important one, isn't it, Tom.
Speaker 3 (01:32):
Oh, it definitely is, Sean. You know, when we work,
we've tried it to understand not only how markets have
worked in the past, but all the factors that are
affecting the investment merits of individual stocks and bonds, how
the environment is evolving, and what items will affect these
investments and their return potential. We believe that then you
(01:56):
can construct a portfolio that helps your clients.
Speaker 1 (01:59):
And only talking this morning with Tom Plumb with Wisconsin
Capital Management online whizcap dot com. That's wiscap dot com.
Great website to learn more about Tom. Nathan who's with us.
He's got the week off, He's very lucky. Great timing
on that.
Speaker 2 (02:14):
Nathan.
Speaker 1 (02:14):
Of course, you can learn more about Nathan as well
online whiz cap dot com. Talking this week about the
importance of a working with a financial advisor and finding
the right advisor as well. And so obviously I know
something that's really important to you, Tom, and I often
mentioned heading over to the website whizcap dot com to
set up an appointments. You really work to get to
(02:36):
know and understand your client's needs, who they are, their resources,
their goals. That's really important to you, isn't it.
Speaker 3 (02:43):
Tom, Oh, it definitely is, because it defines basically the
time that they have for their investments to work, because
some investments are more volatile, for example, when you look
at shorter term times, but when you look at longer
term they may be much more predictable. So you need
to define for that client what their timeframe is, when
(03:07):
they're going to need this cash, how what their goals are,
what they want to accomplish with it, and then you
have to put it into the perspective of what the
market offers that.
Speaker 1 (03:18):
You know, one of the things I find very interesting,
and we'll talk about a little bit more about this,
but you know, one of the things I find very
interesting about what you guys do at Wisconsin Capital Management, Tom,
is there's like this balance of you know, this left
brain right brain, is there's obviously that part of your
brain that's got to be very analytical and very very
much numbers follow the facts, follow the data. But there
(03:39):
is obviously, uh, the the emotional and the creative and
the understanding side of this as well. And something, as
you know, I've gotten to know you and gotten to
know Nathan over the past few months really fascinates me
is how you guys are able to kind of men
meld those two, both the right and the left side
of the brain. And Tom, when we talk about some
of these some of these these resource available things, things
(04:00):
like investments, I know, they kind of kind of fall
into two main categories.
Speaker 2 (04:04):
Am I reading that right?
Speaker 3 (04:06):
Yep? Yeah, you are sean Basically you are either someone
who lends money to someone you basically trading your cash
for a promise that you'll receive a specific return for
a specific time. That's basically some type of debt. Fixed
income might be an insurance contract, but it's something where
(04:30):
your asset basically becomes somebody else's obligation. In other words,
they promised you something, They're going to meet those terms
if they can, and that's what the maximum that you
can get from that. The other type of investment is
either any type of what we call equity investments. It
(04:51):
might be an equity, might be your own firm, for example,
you might have your own business, but it also could
be private equity. But it's something where you take the
risk of ownership and for that risk, you expect to
get a return and probably a return that exceeds the
return you could get from a fixed income investment.
Speaker 2 (05:14):
Really fascinating stuff.
Speaker 1 (05:15):
And so as we talked this morning with Tom Plumb
with Wisconsin Capital Management talking about about really working with
and getting to know advisors a little a lot about
what they do at Wisconsin Capital Management as well, is
kind of breaking down some different these different investment categories
here with Tom door forget. If you want to learn more,
you can always head on over to Wisconsin Capital Management's website.
That's wiz cap dot com. That's wiscap dot com. That's
(05:40):
wiz cap dot com. Great website. There a great place too.
I've been listening to the program in the past couple
of weeks. You like it, gets know Tom and Nate
and the team a little bit more. They make it
real easy to set up an appointment right online. That's
wiz cap dot com. You can also listen back to
this in previous shows podcasts as well, where do things
like as we talk about kind of two distinct ones,
are there other like hybrid situations as well in this time?
Speaker 3 (06:03):
Oh yeah, And if Wall Street especially comes up with
some where they will promise you a specific rate to
return or that they'll limit a risk, they have some
type of participating CDs things like that. And actually some
insurance products will allow you to participate in the equity
(06:24):
markets to a degree. But remember every time that you
get a product from somebody, it's basically because they expect
that they're going to make more money on that investment
opportunities that they are exploring. Then they're paying you or
guaranteeing you for a return. So like an insurance company
(06:45):
might guarantee you a certain rate to return, but then
they going to take that money and they're going to
invest it and they definitely expect to leverage that money
into higher returns for the insurance company.
Speaker 2 (06:59):
Sounds bow, that's fairly interesting this morning, tom.
Speaker 1 (07:02):
So what about you know, when you own like an editor,
like a DBT or anything like that, what exactly how
does how does that part work?
Speaker 3 (07:09):
Then?
Speaker 2 (07:09):
For for the for the other part of this, of this,
of this conversation.
Speaker 3 (07:14):
Tom Well, again, the contracts can say what they can
be different, but what they really do is three things.
They guarantee you a rate to return if all the
terms of the contract are met. In other words, you
can you're lending them money under these terms because it's
(07:37):
an obligation of that company. And when we look at bonds,
for example, you can own their debt of a company,
and that debt you may feel comfortable because they say
they are going to pay you a maximum or a
specific way to return, but you know there's actually on
(08:01):
something as simple as that instrument like brow a bond
or a note or a CD. There basically are three
types of risk that you have to be condisant of.
One and the most important, of course, is the entity
making that promise that obligation has got to meet their obligations.
(08:22):
In other words, we call that default risk. If they
are unable to make it, or the company folds or
some reason, they don't meet their obligations. But there's also
two other risks that we like to talk about. One
is that that payment might not be competitive in the future.
(08:44):
We call this interest rate risk, where you may think
that you have a pretty attractive investment that pays you
a specific way to return for a specific period of time.
But then at some point the opportunit tunity is that
they if you had started in the future at a
(09:05):
higher interest right, that your investment's no longer competitive. We
call that one interest rate risk, and the third is
your purchasing power of the money paid back to you
in the future. It may be considerably less than you
accepted in the contract. When we look at the purchasing
(09:27):
power and we call that purchasing power risk.
Speaker 1 (09:30):
It seems like there's a lot of currents working against
you with some of this stuff. Tom and I think
it probably really reinforces the importance and working with the
right people, working with working with great people as well.
And Tom and the team at Wisconsin Capital Management, they'd
love to work with you. They'd love to get to
know you. If you head on over the website whiz
cap dot com. That's wiscap dot com. Great place to
(09:52):
start to get to know the team. Listen back to
this in previous shows. Podcast really important. If you want
to start that conversation, great day to do it. Head
on over the whisk dot com. You can set up
appointment right online. We're gonna continue our conversation with Tom
Plum of Wisconsin Capital Management. Now we've kind of gotten
some of these concepts down, we're gonna put a little
a little bit into action. We'll get the details from
Tom on how that's done. We will do that next
(10:14):
as ask the experts with Wisconsin Capital Management.
Speaker 2 (10:17):
And Tom Plump continues.
Speaker 1 (10:18):
Right here, I'm thirteen ten double U I B A
perfect and then we'll come back at that segment number
two and we are. We're doing great on time. So
we'll pick up here in three two and one thirteen
ten double UI B A and ask the experts with
Wisconsin Capital Management. Joined this morning by Tom Plum, chartered
(10:40):
financial analyst with Wisconsin Capital Management. You can learn more
about them right online. They've got a great website. It's
with cap dot com. That's wis cap dot com, that's
Wi s cap dot com.
Speaker 2 (10:52):
All one word. Head on over there.
Speaker 1 (10:54):
Now you can get to know the team. You can
listen back to this and also previous shows podcast. You
can share those also right from the website and set
up an appointment all online. It's a very powerful website.
I hope you get a chance to head on over
there today again that's wizcap dot com. That's wiscap dot com.
As we talked in that last segment about some very
you know, some basic concepts when it comes to investing
(11:16):
and working and working on investments, and Tom kind of
bringing you into this part of the conversation as we
as we understand those basic concepts, then let's talk about
how we apply that when you work with your investment
advisor and to of course meet investment goals.
Speaker 2 (11:31):
What goes on there?
Speaker 1 (11:32):
So kind of in simple terms, I guess we're thinking stocks, equities,
you know, those providing that high high return on investments.
There's also, of course no guarantee out there, and fixed
income you know, provides more stable but it's a little
more moderate. So bonds are there risks in that area?
Speaker 3 (11:49):
Tom, well as Sean. As we've said before, there's three
types of risk, and the default risk is a key one.
And what are you getting paid to take that risk?
In other words, the US government, for example, we're pretty
confident that they're going to pay us back if we
lend them money. So often that's called the risk free
(12:09):
ready to return. It's risk free in that there's not
a chance of default because they can print the money
when they want to, but it's still there are risk,
and those risks, as we're talking about, are the risk
of credit, and then follow that with the risk of
(12:30):
interest rate risk, and then obviously inflation risk. So just
for an example, let's say that we agree to lend
the federal government one hundred thousand dollars by buying a
US Treasury bond that will pay four percent annually for
the next twenty years. We know that they'll pay us back.
(12:50):
They're good for it because, as I said, they can
print the currency if they need to. But when you
think about what other the risk you might have with
a fixed income investment, just think about ten years from now.
We don't know what the interest rates are going to be,
what environment. So if ten years from now interest rates
(13:12):
were six percent on a ten year bond, that twenty
year bond we bought is now a ten year bond.
We had agreed to accept four percent interest rate on
it for the whole twenty year period of time, but
now the opportunity would be to get a six percent
bond for the remaining ten year life of that. So
(13:36):
when you think about that, nobody's going to give you
one hundred cents and a dollar for a four percent
bond when they can have a six percent bond for
the next ten years. That's the interest rate risk, and
that can be very, very profound. I often tell people
a story about elderly couple bought Treasury bond in nineteen
(13:58):
fifties to a forty year bond, where they thought that
will provide me with them funds I will ever need
in my life, and it's great savings, perfect credit. And
then in the nineties, excuse me, in the eighties, when
interest rates went up to sixteen percent, they needed that money,
(14:22):
so they sold their bonds at sixty cents on the
dollar because that's what they were worth in a higher
interest rate environment. And not only did they lose principle,
but the purchasing power from the nineteen fifties to the
nineteen eighties meant that that sixty cents on the dollar
(14:44):
that they received was only could buy about twenty cents
on the dollar when we look back at nineteen fifty dollars. So, oh,
I'm sorry, Sean.
Speaker 1 (14:55):
No, I was going to it sounds like it like
keeping up with their No, keeping up with something as
simple as inflation can be can be pretty detrimental here.
Speaker 3 (15:05):
Oh yeah. I mean, if you think about it, if
inflation averaged four percent a year, that means if you
hit one hundred thousand dollars in a bond, for example,
and you lent it at one hundred thousand dollars the
next year, the purchasing power would only get you ninety
six thousand dollars if we're four percent inflation, And if
(15:27):
you looked at that for twenty years, your purchasing power
would be down to forty four percent of the value
that you had when you originally invested. So inflation is
a significant risk for fixed income investments. That's one of
the reasons why at Wiscott's Capital Management we look at
(15:48):
our fixed income investments as a tool to moderate volatility
of equity investments. We know that the interest rate environment
that we'll see in the future is completely unpredictable, and
you want to be very careful when you try to
lock in a return because that return, as good as
(16:10):
it sounds today, may not be that good when we
look back.
Speaker 1 (16:14):
Talking this morning with Tom Tom Plumb with Wisconsin Capital
Management Online wiz cap dot com. That's wiscap dot com
and Tom before we get to a couple of things
before we wrap up. I didn't want to ask as
you were talking there too. It almost feels like what
you guys are doing at Wisconsin Capital Management. Obviously you're
managing assets and really offering guidance, but there seems to
(16:35):
be a lot of education as well and a lot
of a lot of knowledge to be shared. Is you know,
as I get a chance, and I'm very lucky to
get the chance to sit down and talk with you
and Nathan each week, I'm always learning something new and
I've got a guess for your clients. That's part of
the experience as well of working with you guys at
Wisconsin Capital Management.
Speaker 3 (16:53):
We hope so sean because we believe it's our client's
money and they can make and tell decisions on who
they're going to engage and understanding what the trade offs
on their investments. If we explain and share with them
our experience and our knowledge of the markets, that helps them.
(17:14):
Because it's not an investment plan that we create for us,
it's obviously something that we want for our clients. We
want them to understand it, we want them to feel
comfortable with it, and we want them to sleep at
night because of it?
Speaker 2 (17:31):
Does it hell?
Speaker 1 (17:31):
You mentioned that that last part, and I think sometimes
people overlook that is does it help? Because you know,
I think of the world that we're in right now,
and there's there's a lot of things going on. Having that,
you know, especially financial peace of mind and that trust
is it's got to be great having you know a local,
you know your local, you're here in town, you're here
in Wisconsin, You're available to people Wisconsin Capital Management. That's
(17:54):
going to go a long way too, is to give
folks peace of mind to understand that not only are
they working with a real person, they're working with real
people that are right here in their community. That's got
to be a great benefit to your clients as well well.
Speaker 3 (18:07):
We obviously can work with people across the country and
across the world, but it is really important to know
the people that you're working with, Understand what motivates them,
how they get paid, what's their interests in this whole arrangement,
and make sure that you feel that you can completely
trust that not that they don't have conflicts of interest,
(18:32):
but that they have an understanding of those conflicts of
interest and are dealing with them. To make sure that
the client comes first.
Speaker 1 (18:40):
Talking this morning with Tom Plumb with Wisconsin Capital Management.
Great day, Start that conversation, start that relationship. You can
head on over to wizcap dot com. That's wiscap dot com.
Great website, you're going to make an appointment right there.
Online you can learn more about Wisconsin Capital Management. You
can also listen back to this in previous shows. Again,
that all available to you at wizcap dot com. Mentioning
(19:02):
people across the country. Maybe you've got friends or family
in other states, or I know a lot of folks
this time of year maybe, or pack it up and
head and south for the season. Don't forget you can
always follow along at wizcap dot com. That's Wi scap
dot com. You can take us with you, and of
course Tom and the team would love to work with.
Speaker 2 (19:20):
You as well.
Speaker 1 (19:20):
Again, just head on over to the website whizcap dot com.
That's Wi s c ap dot com.
Speaker 2 (19:26):
Tom.
Speaker 1 (19:26):
It's always super informative and it's always a lot of fun.
You have a fantastic Dan. We'll do it all again
real soon.
Speaker 3 (19:32):
Thanks Sean, it's great to chat with you today.
Speaker 1 (19:35):
Chartered financial analyst Tom Plumb with Wisconsin capital management again.
That website whizcap dot com. That's Wi s cap dot com.
This is ask the Experts with Wisconsin, Wisconsin capital management
right here. I'm thirteen ten wuib A
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