Episode Transcript
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Speaker 1 (00:05):
Tonight, you're gonna hear our take on the difference between
an actual investment and a fad. You're listening to simply Money,
presented by all Worth Financial Ammi Wagner along with Steve Ruby.
I think this is actually a hard thing to wrap
your brain around. I think back to when cryptocurrency became
all the rage, right, and I think because people were
(00:26):
talking about it so much, not necessarily understanding it as
an investment.
Speaker 2 (00:30):
Right.
Speaker 1 (00:31):
There were not regulations around it. We didn't have a
lot figured out. But because everyone was talking about it,
many people who weren't invested felt like they were missing out.
I can't so many people come on our radio show
and talk about this, and people would stud me in
the grocery store. I think I should be in crypto.
Why because everyone's talking about it?
Speaker 3 (00:49):
Yea, it's a fad, yes, right right?
Speaker 1 (00:51):
Yeah, people are talking about it because it's a fad,
not because it's a solid investment.
Speaker 4 (00:57):
Yeah.
Speaker 2 (00:57):
I mean crypto in and of itself. There are many
different coins out there. It's not just Bitcoin, it's not
just etherorium. There are thousands of different coins that you
can buy into. Most of them are fads. Yeah, And
that was the case over the years, for a lot
of people got caught up in bitcoin when they shouldn't
have been. Again, fat at the time. I think it's
(01:19):
got a little bit more staying power at this point. Yeah,
but it's still a very speculative investment. So let's look
back over time to talk about some of the trends
that we've seen as far as what is a fad
and what might not be all the way back to
you know, thirty years ago, almost at this point that
the dot com bubble first and foremost.
Speaker 1 (01:38):
It's like, when you think we this is a new,
great thing, sometimes you have to look backwards to realize, actually,
the concept of brand new fad investments really isn't new
at all. Look at the dot com bubble, right, So
the late nineties you had total fomo if you knew
anyone who was heavily concentrated in that tech sector.
Speaker 3 (01:58):
Because their story was a really good one.
Speaker 1 (02:01):
It was a really strong one as an investor, right, Like,
you know, the returns year after year skyrocketing, skyrocketing, and
then all of a sudden ninety nine hit two thousand
and that bubble burst. I have talked to people who
had plans for an early retirement based on their tech
stock investments loops, they worked another twelve years longer than
(02:24):
they were planning because when that bubble burst and they
were so heavily concentrated in that one particular sector, what
seemed like a sure fire, you know, safe bet investment ended.
Speaker 3 (02:35):
Up being anything but that.
Speaker 2 (02:36):
Yeah, I mean, if it had the word internet in
its name, then it was then I mean then it
could not lose. And these were startups with no profits,
no viable business models. It was literally a name kind
of like you could make. There could have been an
Amy and Steve coin. There still could be. We could
make that today for crypto. So, you know, the dot
(02:56):
com bubble, there was obviously a couple of companies that
made it through that that are very successful today, but
the majority of them, I mean, the Nasdaq was down
eighty percent, Yeah, when the bubble burst. How about beanie babies.
You strike me as somebody that had a collection of
hundreds of beanie babies.
Speaker 1 (03:10):
I never had a collect Why are you denying hundreds
of beanie babies?
Speaker 3 (03:14):
But I'm actually glad that you brought this up.
Speaker 1 (03:16):
I think we can laugh about the concept of beanie
babies as an investment. But I know many people who
back in the day would camp out overnight for the
next big beanie baby or whatever it was, because they
were sure that that I don't even know ten dollars
investment that they were making was going to be worth
hundreds and hundreds of dollars down the road.
Speaker 3 (03:36):
I still know people.
Speaker 1 (03:38):
Who are holding on to beanie babies just so sure
that at some point they're going to make a comeback.
Speaker 3 (03:44):
There's actually a term for this. It's called the greater
full theory.
Speaker 1 (03:47):
And essentially what it is is there has to be
a greater full than you who is going to pay
that greater price that you think that.
Speaker 3 (03:59):
Killer whale b baby is.
Speaker 1 (04:01):
More right, Like, there has to be someone out there
who thinks there is value in something that is really
a stuffed animal.
Speaker 2 (04:09):
Yeah, And I mean the prices is in the secondary
market for beanie babies, some of them reached thousands of
dollars for the rare items. But then what happened is
the company that made them increased production, and the rarity
of a lot of these things actually went down to
the point where you know, you have people still sitting
on orcas. I guess that they're hoping are going to
skyrocket and value one of these days.
Speaker 1 (04:29):
That probably never was a whale beanie baby, I don't know,
that's what it came up with.
Speaker 2 (04:32):
Off the topics, that's the one that you have twenty
of twenty orcas sure exactly, housing bubble, so two thousands
this one. Obviously, people have a need to be in
a home, they need shelter. This is a little bit
different because it wasn't necessarily speculative to the same level
as beanie babies. But there were loose lending practice practices.
(04:53):
There were the creation of securities that you could speculate
on the housing bubble, you know, financial derivatives drive and
drove that, and that led to a skyrocket of home prices,
and there we were a lot of homeowners defaulted on
their loans that quite frankly, many of them shouldn't have
gotten in the first place.
Speaker 3 (05:12):
Essentially, the housing market became a house of cards.
Speaker 1 (05:14):
Right, if you could fallg a mirror, you could get
a mortgage for a half million dollar house. I mean,
there was no research being done on can people actually
afford these prices? And yeah, to your point, there were
then investments, right, you can invest in these mortgage, and
it is the result of that the house of cards
absolutely came falling down. At the time, it seemed like
(05:36):
you could do no wrong right buying a home. But
when you look back in each of these scenarios, there
were fundamentals that were missing. There were things that you
could point to and say, this doesn't look quite right.
Yet there was a buzz around it that cost so
many people to overlook the fact that the situation was
not fundamentally sound. You're listening to simply money presented by
(05:59):
all Worth Financial, I mean Wagner along with Steve Ruby.
Is it an actual investment or is it just a fad?
Speaker 3 (06:05):
There are so many.
Speaker 1 (06:07):
It's interesting because you think about investments, you think about
four ow and ks and iras, and this is what
gets you from where you are now to hopefully retirement someday.
And it seems like this shouldn't be as trendy or
as fad oriented as my fifteen year old in basketball shoes.
Yet yet I think the same thing applies. Things come
(06:29):
in and out, and there are certain people that are
going to jump on them every time. And I would
just caution you, as we have looked backwards at different
fads and in the issues that they've created for so
many of the investors, is you have your own plan, right,
your own long term financial plan in any new investment
that's coming down the pike, hold it up, look at
it through that lens. Right, Is this going to help
(06:51):
me get to retirement? Is this going to help me
pay for my daughter's wedding or my son's college tuition someday?
If the answer is probably not or.
Speaker 3 (07:00):
Maybe but we're not quite sure, you.
Speaker 1 (07:02):
Know, then you're probably betting on something that you saw
on social media or some crazy headline about someone hitting
it big with the memestock, right, And so then there's
also yolo bets, which is, you know, go all in,
put take everything out of your four oh one k
put it on this meme stock, which, by the way,
these companies are never ever fundamentally sound.
Speaker 2 (07:23):
That's the whole point of it with a memestock.
Speaker 3 (07:25):
Hey, yeah, let's talk about meme stocks.
Speaker 2 (07:27):
Yeah, memestocks. This is a craze that started in twenty
twenty one. There was writing on the wall after COVID
shut down places like movie theaters, for example, and so
that's AMC and then game stop brick and mortar location
selling video games because you could just buy them online,
I guess right there, and you don't even have to
go to a store. People couldn't go to movie theaters.
(07:47):
So a lot of hedge funds saw the writing on
the wall and they shorted that, meaning they sold stock
that they didn't own on margin, waiting for the prices
to drop so that they could then fill that order
and realize a profit. And these people on Wall Street Bets,
which is a subreddit on Reddit, got together and they said,
all right, let's make a short squeeze happen. So they
(08:08):
got together and they bought a whole bunch of these
shares of AMC and game Stop, waiting for the price
to go up, up, up, and the hedge funds had
to eventually by buy that short position at a huge loss,
which was when the stock went up, and that caused
the prices of skyrocket. So there were a handful of
(08:29):
individuals that made a ton of money off this. There's
a lot of people out there too that said, all right,
this stock looks like it's great because it's going up,
up up, so I'm going to buy it, and they
bought at the top and lost their shirts.
Speaker 1 (08:41):
One thing that you could almost bet on with speculative
or gambling right investments like this, or by the time
that you've heard of it, you've probably already lost the opportunity.
Speaker 3 (08:52):
You know, by the time it reaches you right behind
the time.
Speaker 1 (08:56):
It reaches the normal average person and you start hearing
people talk about it, it's gone.
Speaker 3 (09:01):
The opportunity is gone.
Speaker 2 (09:02):
I saw some of this happening in real time. Yeah,
I did, just for fun. You know, I looked at
I had looked at that subreddit in the past. I
was like, these guys might be onto something.
Speaker 3 (09:13):
And then so there's did you jump in?
Speaker 2 (09:16):
And I don't. I don't regret it either. Yeah, but
technically had I been, had I done that, which is,
it would have been the wrong decision. There's no I
have no regrets of not doing that. I don't. I
really don't, because it's it's it's just it was such
a dumb idea, right that it was like, all right,
there's like a one percent chances works, and I watched
(09:37):
it work. I was like, Okay, well they got it.
Good for them. I feel really terrible for the people
that didn't.
Speaker 1 (09:42):
And jumped in afterwards, exact right, and you know, non
fungible tokens NFTs. People were just so dang bored during
the pandemic, had nothing to do day trading surge, right,
meme stock surged in these non fungible tokens, which are
essentially digital images that people were paying for like it
was a picasso.
Speaker 3 (10:04):
You know, we're going through the roof.
Speaker 1 (10:06):
No one's really even talking about these anymore because you're
not a fad. Yeah, I mean those were such a
flash of the pan. People were talking about them for
like four months.
Speaker 2 (10:13):
Yeah, you just don't get it. Amy, this is a
great opportunity. I just don't hop on right now and
buy your NFTs. So you know, what do we need
to look for? What's different between a fad? I mean,
obviously we've talked about that, but focus on something that
you know will have staying power. Yeah, first and foremost,
I mean renewable energy. You know, it's been something that's
been steadily growing due to global demand, environmental priorities. People
(10:37):
do have those, and this is an investment that is
not necessarily a fad anymore. But at one point it
might have felt like one. Sure, but it does have
staying power for example.
Speaker 1 (10:47):
Yeah, same with AI, Right, I mean AI is like,
oh my gosh, right, you've got in video right now,
like all the rage kind of driving the market. And
for people who are like, well wait a second, this
is the fad, right, this is brand new. No, if
you were really paying attention, AI has been in the
conversation for years now and in now we have now
(11:07):
we're using it, we're talking about it in a daily basis.
Many companies are figuring out how to use it to
make processes easier for their employees.
Speaker 4 (11:16):
Right.
Speaker 1 (11:16):
There's even concern it could take over jobs for certain
sectors and certain kind of positions. And so you know, AI,
if you look at the fundamentals of these businesses, they've
been around for years, right, They've been developing things, they have,
you know, strong leadership, all the kinds of things that
you would look out if you looked under the hood
(11:37):
at an investment and said does this make it?
Speaker 2 (11:40):
Does a company have revenue profit, good profit margins, low
debt levels. You know, these are the fundamentals that are underlying.
You know, if you look at all of those details
for AMC and game Stop, you're not you look under
the hood, you're not going to sell anything that's a
great investment.
Speaker 1 (11:53):
Yeah, meme sucks absolutely did not make sense. Yet people
were buying them because people we're talking about them. And
if you are at a holiday party, there's holiday season,
a basketball game, whatever, and people are talking about some
kind of investment, they're usually not talking about it because
(12:14):
it is slow and steady and grows over time. They're
talking about it because it's sexy and new and the
latest greatest thing, and it likely.
Speaker 3 (12:25):
Is more of a gamble.
Speaker 2 (12:26):
If there's witty super Bowl commercials led by celebrities.
Speaker 3 (12:29):
Run the other direction. Yeah fast. Here's the all Worth advice.
Speaker 1 (12:32):
By focusing on staying power fundamentals, track records aligning with
your personal goals, you should feel more confident in telling
a worthwhile trend, a real investment from a passing fad.
Coming up next, a major bank makes a declaration to
investors that has us saying, duh, We've been saying that
for a long time. You're listening to Simply Money presented
(12:53):
by all Worth Financial here on fifty five krs the
talk station. You're listening to Simply Money presented by all
Worth Financial. I mean you Wagner along with Steve Ruby.
If you can't listen to our show every night. You
don't have to miss a thing. We have a daily
podcast for you. Just search simply Money on the iHeart
app or wherever you get your podcasts. Coming up at
(13:15):
six forty three, we're going to delve into charitable giving
techniques that will also right win win lower your tax burden.
Speaker 2 (13:22):
It's been a.
Speaker 1 (13:23):
While, actually since we've had any news of an airline
filing for bankruptcy. Yet here we are Spirit Airlines filing
for bankruptcy right now.
Speaker 2 (13:33):
Yeah, overcome by stronger competition for budget fares and the
carrier's own hefty debt obligations. Oops. Obviously stuff like that
can lead to bankruptcies.
Speaker 4 (13:43):
You know.
Speaker 2 (13:43):
They did say that all passengers can use all tickets,
credits or loyalty points as normal. The important thing to
know is that you can also continue to book and
fly now in in the future. So they made it
clear that they're still operating as a company. They're just
doing a restructuring of the debt behind the scenes.
Speaker 1 (13:59):
I think could be interesting to see how this one
plays out, and also some more perspective here. Spirit's actually
the first major passenger airline a file for bankruptcies, and
American airlines.
Speaker 3 (14:08):
Back in twenty eleven. So when I said it's been
a while, it's been a while.
Speaker 1 (14:12):
Okay, So we found this interesting and also funny, so
we're gonna make fun of.
Speaker 3 (14:17):
It right now.
Speaker 1 (14:18):
Goldman Sachs just issued some what they call guidance for
investors with stocks at record highs.
Speaker 3 (14:25):
Here's what they're saying, you, as.
Speaker 1 (14:28):
An investor, should probably start making plans to diversify.
Speaker 3 (14:33):
But I'm bomb.
Speaker 2 (14:34):
Yeah, great advice, Thank you, Goldman Sacks, with all that
power and all that all the revelation right there, Yeah,
all the thinking heads behind the scenes. Their advice is diversify.
Good Yeah, good, good job. You get a pad on
the back.
Speaker 4 (14:47):
Yeah.
Speaker 3 (14:47):
How much are their paychecks? Exactly? Incredible exactly and it hears.
Speaker 1 (14:52):
What in a note write Their analysts, led by Peter Roppenheimer,
said the sharp increases in stock valuation seen over the
previous years have left little space.
Speaker 3 (15:02):
For further gains.
Speaker 2 (15:04):
Sounds a little alarmist, Yeah, I mean, do.
Speaker 1 (15:06):
They have a crystal ball there in their offices? No,
of course they don't. You know, markets are going to
go up and markets are going to go down. Yes,
you're always going to be right when you tell people
markets are going to go down because the answer that is,
eventually they will. But you should be diversified for a
thousand different reasons. And what we've seen over the past
year or two is greed could have led you in
(15:29):
the direction of wait a second, starting to pay attention
to the financial headlines. And there's six seven companies that
seem to be in the headlines all the time. By
the way, those have been dubbed the Magnificent seven. VideA, Tesla, Alphabet,
Google right among them. Yeah, exactly, exactly. And because everyone's
(15:49):
talking about them. We were just talking about fad investments
a few minutes ago. Because everyone's talking about them, I
think greed kind of creeps into the equation here, and
maybe if I want these huge returns that everyone's talking about,
I should be more focused on these kinds of investments.
And then when the Magnificent seven isn't so magnificent anymore,
(16:09):
you're not reaping rewards.
Speaker 3 (16:11):
You're paying a major price tag for that.
Speaker 4 (16:13):
Yeah.
Speaker 2 (16:13):
I mean, they come out and they give this guidance
about the importance of diversification. They do use some facts
to back up that feedback, you know, the S and
P five hundred in the past year, if we're looking
at it year over year, has gone up thirty percent. Yeah,
in the year over year, you know, that's one of
the best years that we've seen in quite some time. Obviously,
(16:34):
the market has been on a tear. So if you're
in just the S and P five hundred, which is
primarily driven by the Magnificent seven because it's market cap weighted,
then they're talking about maybe pivoting to something that's equal weighted,
which means the five hundred companies in the S and
P five hundred would have an equal opportunity to have
a pull on the underlying price of that index fund.
(16:55):
You know, there's a little bit of merit to that.
But this is also assuming that people weren't already diversified.
Speaker 3 (17:00):
There's another revelation.
Speaker 1 (17:01):
High levels of concentration have now left investors vulnerable to disappointments.
Speaker 3 (17:07):
Duh, of course they have.
Speaker 1 (17:09):
That's why being concentrated in anyone's stock or sector can
always lead to disappointments. You're gonna have some really high highs,
but you're also going to expose yourself to the possibility
of some really low lows. I don't know how many
times I can say this.
Speaker 3 (17:24):
It's like slow and steady will win this race.
Speaker 1 (17:28):
I was with some friends of mine over the summer
in he's probably five ten years away for retirement, and
he was kind of had this perspective of I have
had so many friends through the years who have jumped
on these kinds of fads, right into certain sectors, into
certain companies, gone all in. And he said, I listened
to them at dinner parties talking about life changing whatever
(17:50):
it was.
Speaker 3 (17:50):
And then they lost their shirts and he said, I
never got to tell the good stories. But I'm going
to have a great retirement.
Speaker 2 (17:56):
That sounds a lot better. I prefer the great retirement.
That absolutely when we think about what Goldman here is saying, uh,
it's almost an argument to rebalance. I mean that's really
what it is. Yeah, because if you if you which
you should already have a diversified mix, meaning some of
your investments are going to do really well, some of
them aren't in any given time, and periodically you have
(18:18):
a responsibility. And this is what professional money managers do too,
that they they have ice in their veins. And why
I say that is because the the emotional decision that
many folks make if they're making decisions on their own
with their investments. Is they look at the ones that
are down and they sell them and they buy the
ones that are up, which is the exact opposite of
what you should be doing. You sell the ones that
(18:38):
are up to buy the ones that are down because
the ones that are up aren't always going to be up,
and the ones that aren't that are down aren't always
going to be down. So you're you're buying low and
you're selling high. And that's precisely what you have an
opportunity to do right now when the markets are high,
because chances are if you haven't made any changes of
your investments, you've had what's called portfolio drift and your
asset allocation isn't what you thought it was. So if
we want to try to give Goldman some credit here,
(19:01):
it's almost like they're saying, hey, rebalance.
Speaker 3 (19:04):
But they're not saying hey, rebalance.
Speaker 1 (19:06):
They're saying, hey, you might be too focused in one
particular sector and maybe what you should be is invested
in a lot of different companies. Right well, duh, I mean,
if you've listened to our show for more than three minutes,
we have been saying this for years now. The secret
isn't figuring out that Nvidia is the next big tech
(19:28):
stock because of AI and all the revolutionary things it's
going to do to how we work and everything we do. No, No,
it's just being diversified. And in some points those kinds
of companies for whatever reason, and we've seen it right,
some doj investigations into certain companies like this or whatever.
Those stock prices go down, and the slow and steady
(19:48):
ones that weren't necessarily sexy right value stocks.
Speaker 3 (19:53):
You know, things like that, those end up being the winners.
Speaker 1 (19:56):
So what's the answer for you have a little bit
of money in all of them? Right, here's the all
Worth advice. It took until now for a huge bank
to tell you to have a diversified portfolio. Ah, we've
been giving you this advice.
Speaker 3 (20:07):
For years now.
Speaker 1 (20:08):
Coming up next, we're breaking down what is the true
cost of home ownership. You're listening to Simply Money presented
by all Worth Financial here in fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial and Amy Wagner along with sty Ruby. If
you are one of those people who has been waiting
(20:29):
to buy or.
Speaker 3 (20:30):
Sell or both a new home.
Speaker 1 (20:33):
Over the past several maybe months or a couple of years,
as interest rates have been.
Speaker 3 (20:38):
Higher, you've probably been waiting for mortgage rates to go down.
Speaker 1 (20:41):
Joining us tonight, as our credit expert scares Britt, it's
been interesting because we've been just waiting for the Fed
to lower interest rates, thinking that mortgage rates might also
go down at the same time, and we're still waiting.
Speaker 4 (20:56):
Yes, it can be very frustrating when everyone tells you, hey,
rates are going to go back down into the fives,
you know, in a year or two years, and then
of course all this stuff that happens all around the
world that affects the bond markets, that affects our mortgage
rates can sometimes put a little kink in your plans.
(21:17):
You know. I do feel like, you know, things have
gotten better a little bit from the you know, from
the period of time where rates were all the way
up into the eights. They've kind of come back down
and now they're hovering closer to seven percent, and we'll
see what world events affect the markets and see if
we can get our rates, you know, if they do
start to continue to go back down, and that going down,
(21:40):
if they can go down a little bit that really
has a huge impact on affordability for homeowners and potential homeowners.
Speaker 2 (21:49):
And you know, we've been talking about it for a while,
that mortgage interest rates. We were spoiled for a long time.
You know, we're not going to see him go back
down to two and a half percent. You know, it's
going to go lower than seven. It's just taken a
little bit longer than I think everyone was anticipating. So,
you know, some other hidden cost of homeownership. I think
a lot of first time home buyers that they're focusing
(22:10):
solely on the mortgage payment anyways, but there's some other
costs included that sometimes folks just don't think about exactly.
Speaker 4 (22:18):
You actually do your calculations based on Okay, I'm going
to borrow, you know, two hundred thousand dollars or three
hundred thousand dollars to purchase this home, and you figure
out what the mortgage payment's going to be. Well, the
mortgage payment itself, just the principal and interest payment may
be very affordable, but there are other things that are
(22:42):
going to be included in the cost of ownership. You
have property taxes, you have homeowners insurance. If you're not
putting twenty percent or more down on a conventional loan,
you might have private mortgage insurance, and there also could
be homeowners association fees or condo fees that are also
associated with that home ownership. So when you break all
(23:05):
that down, you know that easy you know, thousand or
fifteen hundred dollars payment might really be eighteen hundred to
twenty three hundred dollars.
Speaker 3 (23:14):
And I think there's a lot of people who have
been and there are a lot of people.
Speaker 1 (23:17):
Who have been waiting right for mortgage rates to go down.
And as they're waiting, I like that you're bringing up
this point, which is, let's look at the total cost of.
Speaker 3 (23:27):
Ownership and go into this with eyes wide open.
Speaker 1 (23:29):
So if you're going to sit on the sidelines, I
don't think enough people look at it this way. But
when you're you're talking to first time home buyers, what's
the conversation that you're having with them about understanding what
they're all in cost is going to be?
Speaker 4 (23:44):
Yeah, first off is going through what we just discussed.
You know, all of the costs that are going to
go into that home ownership, and you know you have
taxes and insurance, and you know, private mortgage insurance, and
then you also have different types of loan products. Right now,
some folks, you know, have been utilizing adjustable rate mortgages
(24:04):
in order to kind of get into the home. You know,
do the old uh you know, date the rate and
uh uh you know, marry the house, but date the rate,
you know, and hope that rates come down to where
you could refinance and say, you know, if you have
a five to one arm, you know, you have five
years to kind of watch the market and have an
opportunity to refinance. You know. So some people are doing that.
(24:25):
But the other the other stuff to look at is
not not just looking at the total monthly mortgage payment,
but also making sure that people are ready for the
upfront cost of purchasing a home. You know, there's due
diligence to be done. You know, you're going to need
money upfront, not just for your down payment you know,
at closing, but you're gonna need money for an appraisal,
(24:48):
which can run you know, five or six hundred dollars.
You're going to need the first year's homeowners insurance premium upfront.
You're going to probably want to do an inspection on
the home to make sure that there aren't hidden defects
that could cost a lot of money down the road. So,
you know, having some money up front even before closing
is important knowledge for people to be prepared for because
(25:09):
some folks, uh, you know, I have I had someone
that went into contract the other day and they didn't
realize that they were going to have to put up
earnest money on the contract.
Speaker 2 (25:23):
Surprised, It's like, well, who's earnest and have to pay him?
Speaker 4 (25:30):
Yes, exactly, So you know understanding you know the you know,
the overall just expense of becoming a homeowner. You know
the moneies that you need upfront for the earnest money,
for the you know, the upfront homeowners insurance, the inspections,
the appraisal, all of that. And then yes, there are
going to be closing costs on the mortgage as well
that you need in addition to your down payment. So
(25:52):
you know, all of that is what I go through
with a with a borrower to make sure that they're
going in it with their eyes wide open.
Speaker 2 (25:59):
And I think if you've been, it may be a
root awakening as far as utilities and different services are
concerned that you need to pay for you know, higher
electric bills, gas, water, trash collection, Internet is something we're
all used to here. Cable maybe, but but some of
these other expenses, especially if you're moving into like a big,
older home for example, that might not be the most
(26:19):
energy efficient. I think you might be surprised with some
of the costs associated with that.
Speaker 4 (26:24):
Exactly. You not only have you know, the mortgage and
taxes and insurance and PMI and homeowners association, but you
now you know, if your utilities used to be included
in your rent, well they're not going to be as
a homeowner. And you also may have some other, you know,
repairs that now you're going to be responsible for rather
(26:46):
than calling a landlord and saying, hey, you know my
syntney's fixed, Well, you're the landlord now as the homeowner. Yeah,
you get to go.
Speaker 3 (26:55):
Root awakening there.
Speaker 1 (26:57):
You know, it's been a brutal it's been brutal housing
market for first time home buyers, people who five six
years ago could have jumped in. Rates were lower, there
was more inventory. We just came out of this pandemic
where homes were going in the matter of hours and
there were bidding wars.
Speaker 3 (27:17):
What does the market look like now? For first time
home buyers. Is it still tough for them to get in?
Speaker 4 (27:24):
Well, I can tell you it's improved in that you know,
some of the you know the really crazy multiple offers
where you know, a market, a home would go on
the market and literally they would get ten offers and
you know, half of them would be above asking price
and that sort of thing. Some of that has calmed
down now in the in the in the first time
home buyer range price ranges, you're still sometimes are getting
(27:47):
into multiple offers. But you know, the first time home
buyers that were getting approved preapproved for like say FAH
loans or you know first time home buyer programs like
you know the UH Home Run and Home Possible, those
programs where people were going to be putting as little
as three percent down or three and a half percent
down and they didn't necessarily have a lot of extra
(28:09):
you know, money available to put down above asking price
and that sort of thing. A lot of them got
kind of locked out during that crazy time. And you're
finding that sellers are much more willing right now to
entertain those borrowers and those offers now because a lot
of those really crazy above you know, above asking prize
(28:30):
offers have kind of gone away. So now that part
has improved tremendously for first time home buyers that you know,
they're they're being looked at, their offers are being you know,
entertained much more now. But with rates being where they are,
and with so many folks with student loan payments and
a lot of extra debt and large car payments, you know,
(28:52):
with the higher rates, that makes it pretty expensive, and
that part has been working against first time home buyers.
Speaker 1 (28:59):
Yeah, half period of time for first time home buyers.
We appreciate your insights as always.
Speaker 3 (29:04):
Bird Scarce, our credit expert.
Speaker 1 (29:06):
You're listening to Simply Money and presented by all Worth
Financial here in fifty five KRC the talk station. You're
listening to Simply Money presented by all Worth Financial. I
mean you Wagner along with Steve Rube. You have a
financial question you just can't figure out for yourself. There's
a red button you can click on while you're listening
to the show. You'll find it right there on the
(29:26):
iHeart app. Record your question. It's coming straight to us.
Speaker 3 (29:29):
We'll help you figure it out. And straight ahead. The
number one trait that all the best places to retire
have in common.
Speaker 1 (29:37):
If you are thinking about moving anywhere else in retirement,
you're gonna want to stay tuned for that. Okay, when
it comes to charitable giving, right, most of us do
this because we love the way it makes us feel.
Speaker 3 (29:49):
We love to make a difference.
Speaker 1 (29:51):
You know, there's certain charities I think that are near
and deared out to all of our hearts. But if
you can give money and make a difference and also
help yourself a little at the same time, I'm calling
that a win win.
Speaker 2 (30:05):
Yeah, these are conversations that fiduciary financial planners have with
the folks that they work with all the time. We're
talking about charitable giving strategies that can effectively poke Uncle
Sam in the eye with a stick. That's a saying
that I like. I think a lot of us enjoy
doing that because we're also helping charitable causes at the
same time. So first one that we talk about are
(30:27):
called donor advised funds, which is like a charitable investment account.
You contribute assets. It could be cash, it could be stocks,
you'd be real estate. Typically I see these funded oftentimes
with highly appreciated shares of some kind of stock. In
this region, Anyways, we see a lot of that with
Procter and Gamble. For example, maybe you inherited some Procter
and Gamble shares cost basis is real low. You can
(30:48):
use that to fund your donor advice fund. You receive
an immediate tax deduction, and then over time you actually
recommend grants to different charities directly from your donor advice fund.
In the meantime, you're getting tax free gains inside of
that account. And the strategy is typical that you are
going to what I call bunch your tax filing. If
you typically take the standard deduction and you open it
(31:11):
most people do, yeah. And if you open and fund
a donor advice fund in a given year, the idea
here is that you're kind of looking forward a few years,
maybe several years into the future, and lumping all of
your contributions into that donor advice fund, in which case
you will itemize that year for a higher tax benefit
on top of already donating your low cost basis shares.
Speaker 1 (31:32):
These can also make a lot of sense if you've
had a heck of a year, right, whether it's an inheritance,
a major bonus, and all of a sudden you're like,
wait a second, I'm gonna higher tax bracket. You know,
it could make sense to donate some money this year.
You can donate to your point, Steve more in that
year than you would maybe in years.
Speaker 3 (31:52):
Past or years moving forward.
Speaker 1 (31:53):
You don't have to make decisions about where that money
actually goes. It's just kind of a waiting room for
charitable giving. It goes into that donor advice fund. It
can grow there. You can wait. You know, if you've
got kids that are younger and you want to wait
until they get older and figure out what they're really
interested in, where their hearts lie as far as charitable
you can wait as long as you want to figure
(32:15):
out where that money is going to go, so you
can take the immediate tax benefit of that.
Speaker 3 (32:19):
At the same time you can hold off on making
that decision.
Speaker 4 (32:23):
Yeah.
Speaker 2 (32:23):
So this is a strategy for really any age. And
when we talk about what are called qualified charitable distributions,
normally this is for folks that are already taking their
required minimum distributions off of an IRA for example of
pre tax dollars, a rollover IRA from your four to
one K, or a pension rollover. Although you can't actually
start qualified charitable distributions the year you turn seventy and
(32:45):
a half. What this means is and then this number
goes up periodically. Currently it's one hundred thousand dollars. You
can take one hundred thousand dollars directly from your IRA
and give it to a charity of your choosing, with
paying no taxes on that distribution. This is a huge
benefit because there's folks out there that don't necessarily.
Speaker 3 (33:02):
Spend that income.
Speaker 2 (33:04):
Yeah yeah, they don't spend enough or they don't need
the income, and it puts them in a situation where
now they're seventy three years old. In a few years
at'll be seventy five when it's time for rm ds
and you're forced to take out those distributions. But if
you're giving money on a weekly basis to your church
or other organizations, you could just pivot how you're giving
it and give it directly from your rm DS, right
from your IRA rather than cash. And that saves taxes
(33:28):
by not having to pay them on the distribution.
Speaker 1 (33:30):
Well, and to your point, you're if you're already giving
these donations, it's just a different way to give the donation,
so you're having the same impact or possibly greater impact.
At the same time, there's more tax benefits to this,
you know, Stephen, we talk all the time about fiduciary
financial advisors. I think for so many people, when you're
in your working years, it's about accumulating, right, But when
(33:52):
you when you flip that switch into retirement, it is
how do I be as tax efficient as possible? And
I know it sounds I don't like we've got ice
in our veins and we're talking about charitable giving, but
also the fact that you can do it and have
a benefit to you, But it just makes sense, right,
if you're gonna make these donations or you're gonna have
to pay these taxes, how's the way that we can
(34:13):
How is what's the way that we can marry the
two and make it as tax efficient for you as possible?
Speaker 4 (34:17):
Yeah.
Speaker 2 (34:18):
Charitable remainder trust is another one. This is where you
support a cause while still generating income. This is done
by transferring assets into the charitable remainder trust. You receive
a partial tax deduction and then the trust pays you
or it could be another designated beneficiary income each year.
When the term of the trust ends, then all of
(34:38):
the money in that trust goes to the charity of
your choosing, so it doesn't have the same level of
flexibility is maybe a donor advice funder doing qcds, But
it does give you an opportunity to generate income off
of those assets in life.
Speaker 3 (34:52):
Yeah, I mean a few thoughts on these.
Speaker 1 (34:53):
It's kind of like how an annuity would work, right,
You've get that guaranteed income. Not all charities have these
said up, so if you're interested in looking into these,
make sure you do your research first to see if
that charity actually gives you the option for charitable remainder trust.
But yeah, this can make sense, and I think the
key here is to understand you have options. Here's the
all Worth advice. Whether you want flexibility, tax efficiency, or
(35:17):
a mix of income and giving, there are tools out
there that can help you make a positive impact. Coming
up next, what all of the best places to retire
have in common. You're listening to Simply Money presented by
all Worth Financial here in fifty five KRC the talk station.
You're listening to Simply Money presented by all Worth Financial.
(35:38):
I me Me Wagner along with Steve Ruby. You know
we've been doing this for a long time. Helping people retire.
And I've heard all kinds of reasons why people are
going to move somewhere else in retirement. Maybe it's affordability,
although we've got that here, healthcare, desirability, weather, somewhere else, taxes,
job market, you name it. But apparently, according to research,
(35:59):
there is one un trait that trumps all of those things.
Speaker 2 (36:03):
Happiness. Yeah, I'll talk about it. I thought you you were,
you were passing it right here.
Speaker 1 (36:07):
It was like setting you up.
Speaker 3 (36:08):
You were at the moment.
Speaker 2 (36:09):
And then I blew it. Happiness. Happiness is that thing
that is the most important. And this is according to
US News and Worlds Report. It ranked the best place
as to retire Naples, Florida, Virginia Beach, Virginia, and New
York City. So this is interesting because you know this,
this doesn't take into consideration necessarily the expenses of living
(36:29):
in a place. You're like, how does New York end
up on the top of the list with all the taxes,
the crowds. It's an interesting study because it looks at
things through the lens of happiness being the number one criteria.
Speaker 3 (36:41):
Yeah.
Speaker 1 (36:41):
So it looked at people forty five and older and said, okay,
what matters most to you if you're thinking about a
retirement destination. Yeah, and in part of that equation, yes,
is how to stretch your dollar. But more than that,
the response was, how much enjoyment do I get from
that place? I just came back from Florida?
Speaker 3 (36:59):
Was there over the weekend?
Speaker 1 (37:00):
I got a lot of enjoyment from the weather. Come
back here, it's Bunker's weather.
Speaker 3 (37:06):
You know, it's great.
Speaker 2 (37:08):
How is your commute this morning?
Speaker 3 (37:09):
Exactly?
Speaker 1 (37:10):
Not even talking about that, but you know, I understand
putting this lens on top of things now. I do
think there's also some logistical considerations that need to go
with these things, like, for instance, if Florida is your
dream and in the past that has been mine as.
Speaker 3 (37:25):
Well, so I get that. Have you looked at the
cost of home.
Speaker 1 (37:29):
Insurance right of insuring your home in this state of Florida?
These days, some insurance companies will not even ensure.
Speaker 3 (37:34):
You if you live anywhere near the coast.
Speaker 1 (37:35):
So again, practical considerations, But happiness is at the top
of the list of what are you looking for in retirement.
Speaker 2 (37:42):
It's interesting because when we've talked about these in the past,
it's usually focused on some mix that's tied in heavily
with affordability. But when we'll look at it through the
lens of happiness, that actually some of the top places
to live New York City, Washington, d C. San Francisco
all very expensive places to live, but they still ranked
high in the list A one hundred and eleven.
Speaker 4 (38:01):
Uh.
Speaker 2 (38:02):
I agree with that, but one of the main reasons
because we had the highest score in housing affordability. But
come on, happiness, there's a lot of going on in
this city.
Speaker 1 (38:11):
I was talking to some clients of mine a few
days ago who lived in Washington, DC, and I was like,
how are you guys liking it?
Speaker 3 (38:17):
It was a litany of complaints. Right, it's crazy, it's crowded,
it's overpriced, it's this, it's that. And I'm like, okay,
but there's museums. But the grandkids are here.
Speaker 1 (38:27):
Oh yeah, there is your happiness card, right, and I
think if moving somewhere that's more expensive, and because the
grand kids are there, again, it's really all about happiness.
Speaker 3 (38:37):
Thanks for listening.
Speaker 1 (38:38):
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five KRC, the talk station
Tonight, you're gonna hear our take on the difference between
an actual investment and a fad. You're listening to simply Money,
presented by all Worth Financial Ammi Wagner along with Steve Ruby.
I think this is actually a hard thing to wrap
your brain around. I think back to when cryptocurrency became
all the rage, right, and I think because people were
(00:26):
talking about it so much, not necessarily understanding it as
an investment.
Speaker 2 (00:30):
Right.
Speaker 1 (00:31):
There were not regulations around it. We didn't have a
lot figured out. But because everyone was talking about it,
many people who weren't invested felt like they were missing out.
I can't so many people come on our radio show
and talk about this, and people would stud me in
the grocery store. I think I should be in crypto.
Why because everyone's talking about it?
Speaker 3 (00:49):
Yea, it's a fad, yes, right right?
Speaker 1 (00:51):
Yeah, people are talking about it because it's a fad,
not because it's a solid investment.
Speaker 4 (00:57):
Yeah.
Speaker 2 (00:57):
I mean crypto in and of itself. There are many
different coins out there. It's not just Bitcoin, it's not
just etherorium. There are thousands of different coins that you
can buy into. Most of them are fads. Yeah, And
that was the case over the years, for a lot
of people got caught up in bitcoin when they shouldn't
have been. Again, fat at the time. I think it's
(01:19):
got a little bit more staying power at this point. Yeah,
but it's still a very speculative investment. So let's look
back over time to talk about some of the trends
that we've seen as far as what is a fad
and what might not be all the way back to
you know, thirty years ago, almost at this point that
the dot com bubble first and foremost.
Speaker 1 (01:38):
It's like, when you think we this is a new,
great thing, sometimes you have to look backwards to realize, actually,
the concept of brand new fad investments really isn't new
at all. Look at the dot com bubble, right, So
the late nineties you had total fomo if you knew
anyone who was heavily concentrated in that tech sector.
Speaker 3 (01:58):
Because their story was a really good one.
Speaker 1 (02:01):
It was a really strong one as an investor, right, Like,
you know, the returns year after year skyrocketing, skyrocketing, and
then all of a sudden ninety nine hit two thousand
and that bubble burst. I have talked to people who
had plans for an early retirement based on their tech
stock investments loops, they worked another twelve years longer than
(02:24):
they were planning because when that bubble burst and they
were so heavily concentrated in that one particular sector, what
seemed like a sure fire, you know, safe bet investment ended.
Speaker 3 (02:35):
Up being anything but that.
Speaker 2 (02:36):
Yeah, I mean, if it had the word internet in
its name, then it was then I mean then it
could not lose. And these were startups with no profits,
no viable business models. It was literally a name kind
of like you could make. There could have been an
Amy and Steve coin. There still could be. We could
make that today for crypto. So, you know, the dot
(02:56):
com bubble, there was obviously a couple of companies that
made it through that that are very successful today, but
the majority of them, I mean, the Nasdaq was down
eighty percent, Yeah, when the bubble burst. How about beanie babies.
You strike me as somebody that had a collection of
hundreds of beanie babies.
Speaker 1 (03:10):
I never had a collect Why are you denying hundreds
of beanie babies?
Speaker 3 (03:14):
But I'm actually glad that you brought this up.
Speaker 1 (03:16):
I think we can laugh about the concept of beanie
babies as an investment. But I know many people who
back in the day would camp out overnight for the
next big beanie baby or whatever it was, because they
were sure that that I don't even know ten dollars
investment that they were making was going to be worth
hundreds and hundreds of dollars down the road.
Speaker 3 (03:36):
I still know people.
Speaker 1 (03:38):
Who are holding on to beanie babies just so sure
that at some point they're going to make a comeback.
Speaker 3 (03:44):
There's actually a term for this. It's called the greater
full theory.
Speaker 1 (03:47):
And essentially what it is is there has to be
a greater full than you who is going to pay
that greater price that you think that.
Speaker 3 (03:59):
Killer whale b baby is.
Speaker 1 (04:01):
More right, Like, there has to be someone out there
who thinks there is value in something that is really
a stuffed animal.
Speaker 2 (04:09):
Yeah, And I mean the prices is in the secondary
market for beanie babies, some of them reached thousands of
dollars for the rare items. But then what happened is
the company that made them increased production, and the rarity
of a lot of these things actually went down to
the point where you know, you have people still sitting
on orcas. I guess that they're hoping are going to
skyrocket and value one of these days.
Speaker 1 (04:29):
That probably never was a whale beanie baby, I don't know,
that's what it came up with.
Speaker 2 (04:32):
Off the topics, that's the one that you have twenty
of twenty orcas sure exactly, housing bubble, so two thousands
this one. Obviously, people have a need to be in
a home, they need shelter. This is a little bit
different because it wasn't necessarily speculative to the same level
as beanie babies. But there were loose lending practice practices.
(04:53):
There were the creation of securities that you could speculate
on the housing bubble, you know, financial derivatives drive and
drove that, and that led to a skyrocket of home prices,
and there we were a lot of homeowners defaulted on
their loans that quite frankly, many of them shouldn't have
gotten in the first place.
Speaker 3 (05:12):
Essentially, the housing market became a house of cards.
Speaker 1 (05:14):
Right, if you could fallg a mirror, you could get
a mortgage for a half million dollar house. I mean,
there was no research being done on can people actually
afford these prices? And yeah, to your point, there were
then investments, right, you can invest in these mortgage, and
it is the result of that the house of cards
absolutely came falling down. At the time, it seemed like
(05:36):
you could do no wrong right buying a home. But
when you look back in each of these scenarios, there
were fundamentals that were missing. There were things that you
could point to and say, this doesn't look quite right.
Yet there was a buzz around it that cost so
many people to overlook the fact that the situation was
not fundamentally sound. You're listening to simply money presented by
(05:59):
all Worth Financial, I mean Wagner along with Steve Ruby.
Is it an actual investment or is it just a fad?
Speaker 3 (06:05):
There are so many.
Speaker 1 (06:07):
It's interesting because you think about investments, you think about
four ow and ks and iras, and this is what
gets you from where you are now to hopefully retirement someday.
And it seems like this shouldn't be as trendy or
as fad oriented as my fifteen year old in basketball shoes.
Yet yet I think the same thing applies. Things come
(06:29):
in and out, and there are certain people that are
going to jump on them every time. And I would
just caution you, as we have looked backwards at different
fads and in the issues that they've created for so
many of the investors, is you have your own plan, right,
your own long term financial plan in any new investment
that's coming down the pike, hold it up, look at
it through that lens. Right, Is this going to help
(06:51):
me get to retirement? Is this going to help me
pay for my daughter's wedding or my son's college tuition someday?
If the answer is probably not or.
Speaker 3 (07:00):
Maybe but we're not quite sure, you.
Speaker 1 (07:02):
Know, then you're probably betting on something that you saw
on social media or some crazy headline about someone hitting
it big with the memestock, right, And so then there's
also yolo bets, which is, you know, go all in,
put take everything out of your four oh one k
put it on this meme stock, which, by the way,
these companies are never ever fundamentally sound.
Speaker 2 (07:23):
That's the whole point of it with a memestock.
Speaker 3 (07:25):
Hey, yeah, let's talk about meme stocks.
Speaker 2 (07:27):
Yeah, memestocks. This is a craze that started in twenty
twenty one. There was writing on the wall after COVID
shut down places like movie theaters, for example, and so
that's AMC and then game stop brick and mortar location
selling video games because you could just buy them online,
I guess right there, and you don't even have to
go to a store. People couldn't go to movie theaters.
(07:47):
So a lot of hedge funds saw the writing on
the wall and they shorted that, meaning they sold stock
that they didn't own on margin, waiting for the prices
to drop so that they could then fill that order
and realize a profit. And these people on Wall Street Bets,
which is a subreddit on Reddit, got together and they said,
all right, let's make a short squeeze happen. So they
(08:08):
got together and they bought a whole bunch of these
shares of AMC and game Stop, waiting for the price
to go up, up, up, and the hedge funds had
to eventually by buy that short position at a huge loss,
which was when the stock went up, and that caused
the prices of skyrocket. So there were a handful of
(08:29):
individuals that made a ton of money off this. There's
a lot of people out there too that said, all right,
this stock looks like it's great because it's going up,
up up, so I'm going to buy it, and they
bought at the top and lost their shirts.
Speaker 1 (08:41):
One thing that you could almost bet on with speculative
or gambling right investments like this, or by the time
that you've heard of it, you've probably already lost the opportunity.
Speaker 3 (08:52):
You know, by the time it reaches you right behind
the time.
Speaker 1 (08:56):
It reaches the normal average person and you start hearing
people talk about it, it's gone.
Speaker 3 (09:01):
The opportunity is gone.
Speaker 2 (09:02):
I saw some of this happening in real time. Yeah,
I did, just for fun. You know, I looked at
I had looked at that subreddit in the past. I
was like, these guys might be onto something.
Speaker 3 (09:13):
And then so there's did you jump in?
Speaker 2 (09:16):
And I don't. I don't regret it either. Yeah, but
technically had I been, had I done that, which is,
it would have been the wrong decision. There's no I
have no regrets of not doing that. I don't. I
really don't, because it's it's it's just it was such
a dumb idea, right that it was like, all right,
there's like a one percent chances works, and I watched
(09:37):
it work. I was like, Okay, well they got it.
Good for them. I feel really terrible for the people
that didn't.
Speaker 1 (09:42):
And jumped in afterwards, exact right, and you know, non
fungible tokens NFTs. People were just so dang bored during
the pandemic, had nothing to do day trading surge, right,
meme stock surged in these non fungible tokens, which are
essentially digital images that people were paying for like it
was a picasso.
Speaker 3 (10:04):
You know, we're going through the roof.
Speaker 1 (10:06):
No one's really even talking about these anymore because you're
not a fad. Yeah, I mean those were such a
flash of the pan. People were talking about them for
like four months.
Speaker 2 (10:13):
Yeah, you just don't get it. Amy, this is a
great opportunity. I just don't hop on right now and
buy your NFTs. So you know, what do we need
to look for? What's different between a fad? I mean,
obviously we've talked about that, but focus on something that
you know will have staying power. Yeah, first and foremost,
I mean renewable energy. You know, it's been something that's
been steadily growing due to global demand, environmental priorities. People
(10:37):
do have those, and this is an investment that is
not necessarily a fad anymore. But at one point it
might have felt like one. Sure, but it does have
staying power for example.
Speaker 1 (10:47):
Yeah, same with AI, Right, I mean AI is like,
oh my gosh, right, you've got in video right now,
like all the rage kind of driving the market. And
for people who are like, well wait a second, this
is the fad, right, this is brand new. No, if
you were really paying attention, AI has been in the
conversation for years now and in now we have now
(11:07):
we're using it, we're talking about it in a daily basis.
Many companies are figuring out how to use it to
make processes easier for their employees.
Speaker 4 (11:16):
Right.
Speaker 1 (11:16):
There's even concern it could take over jobs for certain
sectors and certain kind of positions. And so you know, AI,
if you look at the fundamentals of these businesses, they've
been around for years, right, They've been developing things, they have,
you know, strong leadership, all the kinds of things that
you would look out if you looked under the hood
(11:37):
at an investment and said does this make it?
Speaker 2 (11:40):
Does a company have revenue profit, good profit margins, low
debt levels. You know, these are the fundamentals that are underlying.
You know, if you look at all of those details
for AMC and game Stop, you're not you look under
the hood, you're not going to sell anything that's a
great investment.
Speaker 1 (11:53):
Yeah, meme sucks absolutely did not make sense. Yet people
were buying them because people we're talking about them. And
if you are at a holiday party, there's holiday season,
a basketball game, whatever, and people are talking about some
kind of investment, they're usually not talking about it because
(12:14):
it is slow and steady and grows over time. They're
talking about it because it's sexy and new and the
latest greatest thing, and it likely.
Speaker 3 (12:25):
Is more of a gamble.
Speaker 2 (12:26):
If there's witty super Bowl commercials led by celebrities.
Speaker 3 (12:29):
Run the other direction. Yeah fast. Here's the all Worth advice.
Speaker 1 (12:32):
By focusing on staying power fundamentals, track records aligning with
your personal goals, you should feel more confident in telling
a worthwhile trend, a real investment from a passing fad.
Coming up next, a major bank makes a declaration to
investors that has us saying, duh, We've been saying that
for a long time. You're listening to Simply Money presented
(12:53):
by all Worth Financial here on fifty five krs the
talk station. You're listening to Simply Money presented by all
Worth Financial. I mean you Wagner along with Steve Ruby.
If you can't listen to our show every night. You
don't have to miss a thing. We have a daily
podcast for you. Just search simply Money on the iHeart
app or wherever you get your podcasts. Coming up at
(13:15):
six forty three, we're going to delve into charitable giving
techniques that will also right win win lower your tax burden.
Speaker 2 (13:22):
It's been a.
Speaker 1 (13:23):
While, actually since we've had any news of an airline
filing for bankruptcy. Yet here we are Spirit Airlines filing
for bankruptcy right now.
Speaker 2 (13:33):
Yeah, overcome by stronger competition for budget fares and the
carrier's own hefty debt obligations. Oops. Obviously stuff like that
can lead to bankruptcies.
Speaker 4 (13:43):
You know.
Speaker 2 (13:43):
They did say that all passengers can use all tickets,
credits or loyalty points as normal. The important thing to
know is that you can also continue to book and
fly now in in the future. So they made it
clear that they're still operating as a company. They're just
doing a restructuring of the debt behind the scenes.
Speaker 1 (13:59):
I think could be interesting to see how this one
plays out, and also some more perspective here. Spirit's actually
the first major passenger airline a file for bankruptcies, and
American airlines.
Speaker 3 (14:08):
Back in twenty eleven. So when I said it's been
a while, it's been a while.
Speaker 1 (14:12):
Okay, So we found this interesting and also funny, so
we're gonna make fun of.
Speaker 3 (14:17):
It right now.
Speaker 1 (14:18):
Goldman Sachs just issued some what they call guidance for
investors with stocks at record highs.
Speaker 3 (14:25):
Here's what they're saying, you, as.
Speaker 1 (14:28):
An investor, should probably start making plans to diversify.
Speaker 3 (14:33):
But I'm bomb.
Speaker 2 (14:34):
Yeah, great advice, Thank you, Goldman Sacks, with all that
power and all that all the revelation right there, Yeah,
all the thinking heads behind the scenes. Their advice is diversify.
Good Yeah, good, good job. You get a pad on
the back.
Speaker 4 (14:47):
Yeah.
Speaker 3 (14:47):
How much are their paychecks? Exactly? Incredible exactly and it hears.
Speaker 1 (14:52):
What in a note write Their analysts, led by Peter Roppenheimer,
said the sharp increases in stock valuation seen over the
previous years have left little space.
Speaker 3 (15:02):
For further gains.
Speaker 2 (15:04):
Sounds a little alarmist, Yeah, I mean, do.
Speaker 1 (15:06):
They have a crystal ball there in their offices? No,
of course they don't. You know, markets are going to
go up and markets are going to go down. Yes,
you're always going to be right when you tell people
markets are going to go down because the answer that is,
eventually they will. But you should be diversified for a
thousand different reasons. And what we've seen over the past
year or two is greed could have led you in
(15:29):
the direction of wait a second, starting to pay attention
to the financial headlines. And there's six seven companies that
seem to be in the headlines all the time. By
the way, those have been dubbed the Magnificent seven. VideA, Tesla, Alphabet,
Google right among them. Yeah, exactly, exactly. And because everyone's
(15:49):
talking about them. We were just talking about fad investments
a few minutes ago. Because everyone's talking about them, I
think greed kind of creeps into the equation here, and
maybe if I want these huge returns that everyone's talking about,
I should be more focused on these kinds of investments.
And then when the Magnificent seven isn't so magnificent anymore,
(16:09):
you're not reaping rewards.
Speaker 3 (16:11):
You're paying a major price tag for that.
Speaker 4 (16:13):
Yeah.
Speaker 2 (16:13):
I mean, they come out and they give this guidance
about the importance of diversification. They do use some facts
to back up that feedback, you know, the S and
P five hundred in the past year, if we're looking
at it year over year, has gone up thirty percent. Yeah,
in the year over year, you know, that's one of
the best years that we've seen in quite some time. Obviously,
(16:34):
the market has been on a tear. So if you're
in just the S and P five hundred, which is
primarily driven by the Magnificent seven because it's market cap weighted,
then they're talking about maybe pivoting to something that's equal weighted,
which means the five hundred companies in the S and
P five hundred would have an equal opportunity to have
a pull on the underlying price of that index fund.
(16:55):
You know, there's a little bit of merit to that.
But this is also assuming that people weren't already diversified.
Speaker 3 (17:00):
There's another revelation.
Speaker 1 (17:01):
High levels of concentration have now left investors vulnerable to disappointments.
Speaker 3 (17:07):
Duh, of course they have.
Speaker 1 (17:09):
That's why being concentrated in anyone's stock or sector can
always lead to disappointments. You're gonna have some really high highs,
but you're also going to expose yourself to the possibility
of some really low lows. I don't know how many
times I can say this.
Speaker 3 (17:24):
It's like slow and steady will win this race.
Speaker 1 (17:28):
I was with some friends of mine over the summer
in he's probably five ten years away for retirement, and
he was kind of had this perspective of I have
had so many friends through the years who have jumped
on these kinds of fads, right into certain sectors, into
certain companies, gone all in. And he said, I listened
to them at dinner parties talking about life changing whatever
(17:50):
it was.
Speaker 3 (17:50):
And then they lost their shirts and he said, I
never got to tell the good stories. But I'm going
to have a great retirement.
Speaker 2 (17:56):
That sounds a lot better. I prefer the great retirement.
That absolutely when we think about what Goldman here is saying, uh,
it's almost an argument to rebalance. I mean that's really
what it is. Yeah, because if you if you which
you should already have a diversified mix, meaning some of
your investments are going to do really well, some of
them aren't in any given time, and periodically you have
(18:18):
a responsibility. And this is what professional money managers do too,
that they they have ice in their veins. And why
I say that is because the the emotional decision that
many folks make if they're making decisions on their own
with their investments. Is they look at the ones that
are down and they sell them and they buy the
ones that are up, which is the exact opposite of
what you should be doing. You sell the ones that
(18:38):
are up to buy the ones that are down because
the ones that are up aren't always going to be up,
and the ones that aren't that are down aren't always
going to be down. So you're you're buying low and
you're selling high. And that's precisely what you have an
opportunity to do right now when the markets are high,
because chances are if you haven't made any changes of
your investments, you've had what's called portfolio drift and your
asset allocation isn't what you thought it was. So if
we want to try to give Goldman some credit here,
(19:01):
it's almost like they're saying, hey, rebalance.
Speaker 3 (19:04):
But they're not saying hey, rebalance.
Speaker 1 (19:06):
They're saying, hey, you might be too focused in one
particular sector and maybe what you should be is invested
in a lot of different companies. Right well, duh, I mean,
if you've listened to our show for more than three minutes,
we have been saying this for years now. The secret
isn't figuring out that Nvidia is the next big tech
(19:28):
stock because of AI and all the revolutionary things it's
going to do to how we work and everything we do. No, No,
it's just being diversified. And in some points those kinds
of companies for whatever reason, and we've seen it right,
some doj investigations into certain companies like this or whatever.
Those stock prices go down, and the slow and steady
(19:48):
ones that weren't necessarily sexy right value stocks.
Speaker 3 (19:53):
You know, things like that, those end up being the winners.
Speaker 1 (19:56):
So what's the answer for you have a little bit
of money in all of them? Right, here's the all
Worth advice. It took until now for a huge bank
to tell you to have a diversified portfolio. Ah, we've
been giving you this advice.
Speaker 3 (20:07):
For years now.
Speaker 1 (20:08):
Coming up next, we're breaking down what is the true
cost of home ownership. You're listening to Simply Money presented
by all Worth Financial here in fifty five KRC the
talk station. You're listening to Simply Money presented by all
Worth Financial and Amy Wagner along with sty Ruby. If
you are one of those people who has been waiting
(20:29):
to buy or.
Speaker 3 (20:30):
Sell or both a new home.
Speaker 1 (20:33):
Over the past several maybe months or a couple of years,
as interest rates have been.
Speaker 3 (20:38):
Higher, you've probably been waiting for mortgage rates to go down.
Speaker 1 (20:41):
Joining us tonight, as our credit expert scares Britt, it's
been interesting because we've been just waiting for the Fed
to lower interest rates, thinking that mortgage rates might also
go down at the same time, and we're still waiting.
Speaker 4 (20:56):
Yes, it can be very frustrating when everyone tells you, hey,
rates are going to go back down into the fives,
you know, in a year or two years, and then
of course all this stuff that happens all around the
world that affects the bond markets, that affects our mortgage
rates can sometimes put a little kink in your plans.
(21:17):
You know. I do feel like, you know, things have
gotten better a little bit from the you know, from
the period of time where rates were all the way
up into the eights. They've kind of come back down
and now they're hovering closer to seven percent, and we'll
see what world events affect the markets and see if
we can get our rates, you know, if they do
start to continue to go back down, and that going down,
(21:40):
if they can go down a little bit that really
has a huge impact on affordability for homeowners and potential homeowners.
Speaker 2 (21:49):
And you know, we've been talking about it for a while,
that mortgage interest rates. We were spoiled for a long time.
You know, we're not going to see him go back
down to two and a half percent. You know, it's
going to go lower than seven. It's just taken a
little bit longer than I think everyone was anticipating. So,
you know, some other hidden cost of homeownership. I think
a lot of first time home buyers that they're focusing
(22:10):
solely on the mortgage payment anyways, but there's some other
costs included that sometimes folks just don't think about exactly.
Speaker 4 (22:18):
You actually do your calculations based on Okay, I'm going
to borrow, you know, two hundred thousand dollars or three
hundred thousand dollars to purchase this home, and you figure
out what the mortgage payment's going to be. Well, the
mortgage payment itself, just the principal and interest payment may
be very affordable, but there are other things that are
(22:42):
going to be included in the cost of ownership. You
have property taxes, you have homeowners insurance. If you're not
putting twenty percent or more down on a conventional loan,
you might have private mortgage insurance, and there also could
be homeowners association fees or condo fees that are also
associated with that home ownership. So when you break all
(23:05):
that down, you know that easy you know, thousand or
fifteen hundred dollars payment might really be eighteen hundred to
twenty three hundred dollars.
Speaker 3 (23:14):
And I think there's a lot of people who have
been and there are a lot of people.
Speaker 1 (23:17):
Who have been waiting right for mortgage rates to go down.
And as they're waiting, I like that you're bringing up
this point, which is, let's look at the total cost of.
Speaker 3 (23:27):
Ownership and go into this with eyes wide open.
Speaker 1 (23:29):
So if you're going to sit on the sidelines, I
don't think enough people look at it this way. But
when you're you're talking to first time home buyers, what's
the conversation that you're having with them about understanding what
they're all in cost is going to be?
Speaker 4 (23:44):
Yeah, first off is going through what we just discussed.
You know, all of the costs that are going to
go into that home ownership, and you know you have
taxes and insurance, and you know, private mortgage insurance, and
then you also have different types of loan products. Right now,
some folks, you know, have been utilizing adjustable rate mortgages
(24:04):
in order to kind of get into the home. You know,
do the old uh you know, date the rate and
uh uh you know, marry the house, but date the rate,
you know, and hope that rates come down to where
you could refinance and say, you know, if you have
a five to one arm, you know, you have five
years to kind of watch the market and have an
opportunity to refinance. You know. So some people are doing that.
(24:25):
But the other the other stuff to look at is
not not just looking at the total monthly mortgage payment,
but also making sure that people are ready for the
upfront cost of purchasing a home. You know, there's due
diligence to be done. You know, you're going to need
money upfront, not just for your down payment you know,
at closing, but you're gonna need money for an appraisal,
(24:48):
which can run you know, five or six hundred dollars.
You're going to need the first year's homeowners insurance premium upfront.
You're going to probably want to do an inspection on
the home to make sure that there aren't hidden defects
that could cost a lot of money down the road. So,
you know, having some money up front even before closing
is important knowledge for people to be prepared for because
(25:09):
some folks, uh, you know, I have I had someone
that went into contract the other day and they didn't
realize that they were going to have to put up
earnest money on the contract.
Speaker 2 (25:23):
Surprised, It's like, well, who's earnest and have to pay him?
Speaker 4 (25:30):
Yes, exactly, So you know understanding you know the you know,
the overall just expense of becoming a homeowner. You know
the moneies that you need upfront for the earnest money,
for the you know, the upfront homeowners insurance, the inspections,
the appraisal, all of that. And then yes, there are
going to be closing costs on the mortgage as well
that you need in addition to your down payment. So
(25:52):
you know, all of that is what I go through
with a with a borrower to make sure that they're
going in it with their eyes wide open.
Speaker 2 (25:59):
And I think if you've been, it may be a
root awakening as far as utilities and different services are
concerned that you need to pay for you know, higher
electric bills, gas, water, trash collection, Internet is something we're
all used to here. Cable maybe, but but some of
these other expenses, especially if you're moving into like a big,
older home for example, that might not be the most
(26:19):
energy efficient. I think you might be surprised with some
of the costs associated with that.
Speaker 4 (26:24):
Exactly. You not only have you know, the mortgage and
taxes and insurance and PMI and homeowners association, but you
now you know, if your utilities used to be included
in your rent, well they're not going to be as
a homeowner. And you also may have some other, you know,
repairs that now you're going to be responsible for rather
(26:46):
than calling a landlord and saying, hey, you know my
syntney's fixed, Well, you're the landlord now as the homeowner. Yeah,
you get to go.
Speaker 3 (26:55):
Root awakening there.
Speaker 1 (26:57):
You know, it's been a brutal it's been brutal housing
market for first time home buyers, people who five six
years ago could have jumped in. Rates were lower, there
was more inventory. We just came out of this pandemic
where homes were going in the matter of hours and
there were bidding wars.
Speaker 3 (27:17):
What does the market look like now? For first time
home buyers. Is it still tough for them to get in?
Speaker 4 (27:24):
Well, I can tell you it's improved in that you know,
some of the you know the really crazy multiple offers
where you know, a market, a home would go on
the market and literally they would get ten offers and
you know, half of them would be above asking price
and that sort of thing. Some of that has calmed
down now in the in the in the first time
home buyer range price ranges, you're still sometimes are getting
(27:47):
into multiple offers. But you know, the first time home
buyers that were getting approved preapproved for like say FAH
loans or you know first time home buyer programs like
you know the UH Home Run and Home Possible, those
programs where people were going to be putting as little
as three percent down or three and a half percent
down and they didn't necessarily have a lot of extra
(28:09):
you know, money available to put down above asking price
and that sort of thing. A lot of them got
kind of locked out during that crazy time. And you're
finding that sellers are much more willing right now to
entertain those borrowers and those offers now because a lot
of those really crazy above you know, above asking prize
(28:30):
offers have kind of gone away. So now that part
has improved tremendously for first time home buyers that you know,
they're they're being looked at, their offers are being you know,
entertained much more now. But with rates being where they are,
and with so many folks with student loan payments and
a lot of extra debt and large car payments, you know,
(28:52):
with the higher rates, that makes it pretty expensive, and
that part has been working against first time home buyers.
Speaker 1 (28:59):
Yeah, half period of time for first time home buyers.
We appreciate your insights as always.
Speaker 3 (29:04):
Bird Scarce, our credit expert.
Speaker 1 (29:06):
You're listening to Simply Money and presented by all Worth
Financial here in fifty five KRC the talk station. You're
listening to Simply Money presented by all Worth Financial. I
mean you Wagner along with Steve Rube. You have a
financial question you just can't figure out for yourself. There's
a red button you can click on while you're listening
to the show. You'll find it right there on the
(29:26):
iHeart app. Record your question. It's coming straight to us.
Speaker 3 (29:29):
We'll help you figure it out. And straight ahead. The
number one trait that all the best places to retire
have in common.
Speaker 1 (29:37):
If you are thinking about moving anywhere else in retirement,
you're gonna want to stay tuned for that. Okay, when
it comes to charitable giving, right, most of us do
this because we love the way it makes us feel.
Speaker 3 (29:49):
We love to make a difference.
Speaker 1 (29:51):
You know, there's certain charities I think that are near
and deared out to all of our hearts. But if
you can give money and make a difference and also
help yourself a little at the same time, I'm calling
that a win win.
Speaker 2 (30:05):
Yeah, these are conversations that fiduciary financial planners have with
the folks that they work with all the time. We're
talking about charitable giving strategies that can effectively poke Uncle
Sam in the eye with a stick. That's a saying
that I like. I think a lot of us enjoy
doing that because we're also helping charitable causes at the
same time. So first one that we talk about are
(30:27):
called donor advised funds, which is like a charitable investment account.
You contribute assets. It could be cash, it could be stocks,
you'd be real estate. Typically I see these funded oftentimes
with highly appreciated shares of some kind of stock. In
this region, Anyways, we see a lot of that with
Procter and Gamble. For example, maybe you inherited some Procter
and Gamble shares cost basis is real low. You can
(30:48):
use that to fund your donor advice fund. You receive
an immediate tax deduction, and then over time you actually
recommend grants to different charities directly from your donor advice fund.
In the meantime, you're getting tax free gains inside of
that account. And the strategy is typical that you are
going to what I call bunch your tax filing. If
you typically take the standard deduction and you open it
(31:11):
most people do, yeah. And if you open and fund
a donor advice fund in a given year, the idea
here is that you're kind of looking forward a few years,
maybe several years into the future, and lumping all of
your contributions into that donor advice fund, in which case
you will itemize that year for a higher tax benefit
on top of already donating your low cost basis shares.
Speaker 1 (31:32):
These can also make a lot of sense if you've
had a heck of a year, right, whether it's an inheritance,
a major bonus, and all of a sudden you're like,
wait a second, I'm gonna higher tax bracket. You know,
it could make sense to donate some money this year.
You can donate to your point, Steve more in that
year than you would maybe in years.
Speaker 3 (31:52):
Past or years moving forward.
Speaker 1 (31:53):
You don't have to make decisions about where that money
actually goes. It's just kind of a waiting room for
charitable giving. It goes into that donor advice fund. It
can grow there. You can wait. You know, if you've
got kids that are younger and you want to wait
until they get older and figure out what they're really
interested in, where their hearts lie as far as charitable
you can wait as long as you want to figure
(32:15):
out where that money is going to go, so you
can take the immediate tax benefit of that.
Speaker 3 (32:19):
At the same time you can hold off on making
that decision.
Speaker 4 (32:23):
Yeah.
Speaker 2 (32:23):
So this is a strategy for really any age. And
when we talk about what are called qualified charitable distributions,
normally this is for folks that are already taking their
required minimum distributions off of an IRA for example of
pre tax dollars, a rollover IRA from your four to
one K, or a pension rollover. Although you can't actually
start qualified charitable distributions the year you turn seventy and
(32:45):
a half. What this means is and then this number
goes up periodically. Currently it's one hundred thousand dollars. You
can take one hundred thousand dollars directly from your IRA
and give it to a charity of your choosing, with
paying no taxes on that distribution. This is a huge
benefit because there's folks out there that don't necessarily.
Speaker 3 (33:02):
Spend that income.
Speaker 2 (33:04):
Yeah yeah, they don't spend enough or they don't need
the income, and it puts them in a situation where
now they're seventy three years old. In a few years
at'll be seventy five when it's time for rm ds
and you're forced to take out those distributions. But if
you're giving money on a weekly basis to your church
or other organizations, you could just pivot how you're giving
it and give it directly from your rm DS, right
from your IRA rather than cash. And that saves taxes
(33:28):
by not having to pay them on the distribution.
Speaker 1 (33:30):
Well, and to your point, you're if you're already giving
these donations, it's just a different way to give the donation,
so you're having the same impact or possibly greater impact.
At the same time, there's more tax benefits to this,
you know, Stephen, we talk all the time about fiduciary
financial advisors. I think for so many people, when you're
in your working years, it's about accumulating, right, But when
(33:52):
you when you flip that switch into retirement, it is
how do I be as tax efficient as possible? And
I know it sounds I don't like we've got ice
in our veins and we're talking about charitable giving, but
also the fact that you can do it and have
a benefit to you, But it just makes sense, right,
if you're gonna make these donations or you're gonna have
to pay these taxes, how's the way that we can
(34:13):
How is what's the way that we can marry the
two and make it as tax efficient for you as possible?
Speaker 4 (34:17):
Yeah.
Speaker 2 (34:18):
Charitable remainder trust is another one. This is where you
support a cause while still generating income. This is done
by transferring assets into the charitable remainder trust. You receive
a partial tax deduction and then the trust pays you
or it could be another designated beneficiary income each year.
When the term of the trust ends, then all of
(34:38):
the money in that trust goes to the charity of
your choosing, so it doesn't have the same level of
flexibility is maybe a donor advice funder doing qcds, But
it does give you an opportunity to generate income off
of those assets in life.
Speaker 3 (34:52):
Yeah, I mean a few thoughts on these.
Speaker 1 (34:53):
It's kind of like how an annuity would work, right,
You've get that guaranteed income. Not all charities have these
said up, so if you're interested in looking into these,
make sure you do your research first to see if
that charity actually gives you the option for charitable remainder trust.
But yeah, this can make sense, and I think the
key here is to understand you have options. Here's the
all Worth advice. Whether you want flexibility, tax efficiency, or
(35:17):
a mix of income and giving, there are tools out
there that can help you make a positive impact. Coming
up next, what all of the best places to retire
have in common. You're listening to Simply Money presented by
all Worth Financial here in fifty five KRC the talk station.
You're listening to Simply Money presented by all Worth Financial.
(35:38):
I me Me Wagner along with Steve Ruby. You know
we've been doing this for a long time. Helping people retire.
And I've heard all kinds of reasons why people are
going to move somewhere else in retirement. Maybe it's affordability,
although we've got that here, healthcare, desirability, weather, somewhere else, taxes,
job market, you name it. But apparently, according to research,
(35:59):
there is one un trait that trumps all of those things.
Speaker 2 (36:03):
Happiness. Yeah, I'll talk about it. I thought you you were,
you were passing it right here.
Speaker 1 (36:07):
It was like setting you up.
Speaker 3 (36:08):
You were at the moment.
Speaker 2 (36:09):
And then I blew it. Happiness. Happiness is that thing
that is the most important. And this is according to
US News and Worlds Report. It ranked the best place
as to retire Naples, Florida, Virginia Beach, Virginia, and New
York City. So this is interesting because you know this,
this doesn't take into consideration necessarily the expenses of living
(36:29):
in a place. You're like, how does New York end
up on the top of the list with all the taxes,
the crowds. It's an interesting study because it looks at
things through the lens of happiness being the number one criteria.
Speaker 3 (36:41):
Yeah.
Speaker 1 (36:41):
So it looked at people forty five and older and said, okay,
what matters most to you if you're thinking about a
retirement destination. Yeah, and in part of that equation, yes,
is how to stretch your dollar. But more than that,
the response was, how much enjoyment do I get from
that place? I just came back from Florida?
Speaker 3 (36:59):
Was there over the weekend?
Speaker 1 (37:00):
I got a lot of enjoyment from the weather. Come
back here, it's Bunker's weather.
Speaker 3 (37:06):
You know, it's great.
Speaker 2 (37:08):
How is your commute this morning?
Speaker 3 (37:09):
Exactly?
Speaker 1 (37:10):
Not even talking about that, but you know, I understand
putting this lens on top of things now. I do
think there's also some logistical considerations that need to go
with these things, like, for instance, if Florida is your
dream and in the past that has been mine as.
Speaker 3 (37:25):
Well, so I get that. Have you looked at the
cost of home.
Speaker 1 (37:29):
Insurance right of insuring your home in this state of Florida?
These days, some insurance companies will not even ensure.
Speaker 3 (37:34):
You if you live anywhere near the coast.
Speaker 1 (37:35):
So again, practical considerations, But happiness is at the top
of the list of what are you looking for in retirement.
Speaker 2 (37:42):
It's interesting because when we've talked about these in the past,
it's usually focused on some mix that's tied in heavily
with affordability. But when we'll look at it through the
lens of happiness, that actually some of the top places
to live New York City, Washington, d C. San Francisco
all very expensive places to live, but they still ranked
high in the list A one hundred and eleven.
Speaker 4 (38:01):
Uh.
Speaker 2 (38:02):
I agree with that, but one of the main reasons
because we had the highest score in housing affordability. But
come on, happiness, there's a lot of going on in
this city.
Speaker 1 (38:11):
I was talking to some clients of mine a few
days ago who lived in Washington, DC, and I was like,
how are you guys liking it?
Speaker 3 (38:17):
It was a litany of complaints. Right, it's crazy, it's crowded,
it's overpriced, it's this, it's that. And I'm like, okay,
but there's museums. But the grandkids are here.
Speaker 1 (38:27):
Oh yeah, there is your happiness card, right, and I
think if moving somewhere that's more expensive, and because the
grand kids are there, again, it's really all about happiness.
Speaker 3 (38:37):
Thanks for listening.
Speaker 1 (38:38):
You've been listening to Simply Money, presented by all Worth
Financial here on fifty five KRC, the talk station
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