Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
Tonight. Are you a little freaked out by the markets
right now? All of this tariff talk, plus managing concentrated
stock positions and a whole lot more. You're listening to
simply money presented by all Worth Financial. I Meani Wagner
along with Bob Sponseller. If you are experiencing market freak
out right now, I think Bob, we should start by
(00:27):
saying you are probably not alone. What we now know
that we are heading into is a period of the
most extensive tariffs that our country has seen in the
last one hundred years. Markets like certainty, and we have
had anything but certainty over the past several weeks, in
certainly the past few days for sure.
Speaker 2 (00:48):
And I'll freely admit I'm surprised that we got to
the point we got to this morning, Amy. I mean,
we're now dealing with tariffs on a total of one
hundred and eighty countries and territories combined. This is not
just a little tit for tat with Mexico and China.
I mean, this is now the President's attempt to unilaterally
(01:08):
reset trade policy around the globe. So it is going
to be It is unsettling, It's causing people to take
a step back and say, wow, now what's going to happen.
So it's a bit surprising. And we've talked about this,
I think for four months now. You know a lot
of other people have as well, whether this is all
(01:30):
just a negotiating strategy by the President. And I'll freely
admit I thought we'd get a lot of this negotiating
out of the way before now, and we haven't. But
I would say as of this morning, negotiation season has
just begun. It's going to be an interesting next five
to six weeks. We deal with tax policy, corporate earnings.
(01:53):
You know, there's a lot. It's going to be a
very fluid situation in the US and global economy.
Speaker 1 (01:59):
You know, And I think it's worth breaking down what
happened yesterday when the President spoke, right, he kind of
started by saying that means they do it to us
and we do it to them. Very simple. Can't get
any simpler than that, talking about reciprocal tariffs. And initially
in those opening remarks, markets were like, Okay, well we
(02:19):
knew reciprocal tariffs were coming. This doesn't sound so bad,
and so markets actually kind of bumps up a little bit.
Then we actually got numbers. You know, you mentioned how
many countries, how many territories, and then we saw percentages.
What are those tariffs actually going to look like? Those
numbers in black and white where you texted me and said,
(02:41):
here's what I just saw right coming across on Twitter
or x those actual numbers. I think we're in excess
of what a lot of economists and you know, investors
were expecting. And as the result of that, you know,
we looked at a major selloff, you know, a little
bit of panic and I'm going to say, actually a
(03:01):
lot of panic in the markets.
Speaker 2 (03:04):
Yeah, I mean this will never change. Amy the stock
and bod market are the best leading economic indicators we have. This,
you know, it's these markets move basically, you know, in
accordance with what market participants think we're going to be
looking at six to twelve months from now. So even
(03:24):
though the President said, hey, we're only going to tear
if the other countries about half what they tear if us,
and that might seem mild, I think that those percentages
are above what most people were expecting. And then the
bigger point is, you know, as companies adjust and economy,
you know, countries adjust, they got to look at supply chains,
where they build plants and equipment, where they employ people,
(03:48):
how they ship good around the world. You can't just
move this behemoth called the global economy on a dime.
And people are scrambling right now to say, hey, what what,
what's going to happen here? And again, I think the
negotiations are just going to begin. And speaking of negotiations,
I think, again an opinion, this is part of a
(04:08):
broad strategy by the president linking up these trade policy
with trying to get tax cuts permanent, with trying to
remove you know, waste, fraud and abuse. However people want
to define that from the government, it's an all of
the above strategy. The problem is, in the short term,
it's going to be at least five to six weeks
(04:30):
until we get any kind of tax policy even ready
to vote for, you know. And in the meantime, these
tariffs are going in effect today and it's going to
create and is creating volatility.
Speaker 1 (04:42):
Yeah, you know, I have this conversation a lot with
my kids, right, you know, I have teenagers, and we
often have a end of the world events, right that
someone's not getting playing time enough playing time on the
basketball team someone's friend was not nice to them or
whatever it was, and we always kind of have the
conver station. This feels really bad right now, but we
(05:03):
might look at this a few months down the road
and have a different perspective on it. Maybe we've learned
from it, maybe we've grown from it. Maybe it was
the thing that needed to happen. I don't know where
we're going to end up with these tariffs. Nobody does,
but I do think it's important to understand what we
are experiencing right now at this point is short term volatility. Now,
(05:23):
there has been some research done where Americans said, hey, listen,
we knew this was coming. Slightly more than eight in
ten people who were just shopping knew about tariffs as
of February, just a couple of months before. In December
that number was far fewer. So it's like we're familiar
with the concept now everyone's talking about it. I think
(05:45):
where the fear is is kind of in the unknown, right, like,
where are we actually going with this in what's the
impact going to be? You're listening to simply money presented
by all Worth Financial, I mean me Wagner along with
Bob Sponseller another day more of talk. But this is
incredibly important because as an investor, you are probably checking
(06:05):
your four oh one K at least from time to time,
and if you've looked at it any time lately, you've
seen that it is down. The markets like certainty, and
this has been an incredibly uncertain time.
Speaker 2 (06:19):
Yeah, and a little bit of historical perspective. I mean
as recently as twenty eighteen when President Trump, you know,
when we talk about Trump one point oh tariffs. Yeah,
I mean, people forget this, but the market went down
almost twenty percent while all that stuff was going on,
and obviously it recovered. I'm not predicting a twenty percent decline.
I'm not predicting a short term recovery. But the point is,
(06:41):
and it's the point that you let off the show
with the market hates uncertainty, and when we have uncertainty,
the default is markets drop in the short term. But again,
it's time to have a long term financial plan. And
we've talked about this all year long too. You prepare
for volatility, hopefully in advance, and you have some diversified
(07:05):
pieces of your portfolio, cash bonds, you know what you're
doing great this year, by the way, and this is
how you weather these short term storms and are now
in position for maybe a longer hopefully and almost certainly
a longer term recovery.
Speaker 1 (07:20):
Well, to your point, this is kind of a case
in point, you know, for those investors who have concentrated
stock positions. I talked to someone recently who most of
his retirement and it's several million dollars is actually in
n Video stock. Well, that seemed like a great thing
because it was only going up for the longest time,
and when I kept saying, hey, listen, there's a risk
(07:41):
here that so much of your portfolio right is in
this one company. Oh but I believe in it, and
no one's saying it's not fundamentally sound or the future
of technology for this country and the global economy. But
right now that particular company is experiencing a lot of volatility,
and you know, I think, as we talk about listen,
(08:03):
this is what you build the boat for. Part of
building that boat is making sure that you are truly
properly diversified. You know, you mentioned bonds. Twenty twenty two
was this really really weird year where if you owned
a mix of stocks and bonds both were down, and
you know, I talk to people like, what's the point,
(08:24):
what's even the point of having bonds in my portfolio
because they're never going to bring in the returns that
stocks are and they're not even the shock absorbers that
they're normally supposed to be. Well right now, they are
absolutely acting as shock absorbers.
Speaker 2 (08:38):
Yeah, bonds are performing as they historically have performed and
are meant to perform to cushion stock market volatility. But
you know, going back to twenty twenty two, everything dropped
because we had nine percent inflation and the FED had
to come in and act and raise interesstraight seven times
to you know, tamp down inflation. And yeah, when that happens,
(08:58):
everything's going down except for cash. So I again, this
is where you want to be in a position where
you're not forced to make financial decisions based on a
short term liquidity need. And your only source of a
short term liquidity need is a tech stock where you
(09:19):
have to potentially sell it after losing twenty percent of
your money. And that's the whole purpose of a diversified
long term financial planning strategy. And this is what we
do for our clients all day, every day. Amy.
Speaker 1 (09:32):
Yeah, and sometimes a bad thing can also at the
same time be a good thing. So there was some
research done that said, hey, listen, a lot of American
consumers with tariffs and mine, have changed purchasing decisions. Right,
We've already been talking about the fact that the American
savings rate has been increasing, heading in the right direction,
while there's a lot of people who are saying, listen,
(09:53):
fifty five percent of consumers have changed what they're going
to buy, thirty six percent have altered or canceled vacation
hand plans, seventy percent are eating at home more often. Sometimes.
I also like to throw the BS flag on some
of this research. I think Americans we know what we're
supposed to say, but we don't always do what we're saying.
I don't know if you've been to a restaurant in
(10:15):
the past few weeks. I have. There's still a wait.
I don't know that people are actually changing their habits.
Yet we might. I think we might get to that point.
I think people are saying what they know they should
be doing. But if you are in fact cutting back,
that's never a bad thing. Increasing your emergency cash is
never a bad idea. And for those of you who
(10:37):
are close to retirement or just retired. Man, I get it,
like this feels like really terrible timing. But if you've
been smart about this and hopefully working with a fiduciary
to help you make these decisions, you have enough cash
that you should be fine for a year two years
where you're not pulling money out of your retirement accounts,
even if they are so well diversified. Right, don't pull
(10:59):
money out those accounts at losses, and you're not locking
in those losses. They're just on paper. We know that
one hundred percent of the time, right, markets do rebound,
and when they rebound it's to new highs. Then you
can fully take advantage of that without locking in any
of your losses. So it's we keep saying you build
the boat, but you do. And these are the steps
you take to make sure you're prepared for this, because
(11:21):
if it's not tariffs, it really is something else that
could be coming down the pike and it will create volatility.
It's a normal part of the I know it doesn't
feel normal right now, and I do not want to
downplay this is real. This is this is real what
we're experiencing right now. You know, again, the worst tariffs
our country has seen in one hundred years. Right, that's
(11:44):
a big deal. But there is always something coming down
the pike.
Speaker 2 (11:49):
Yeah, And you've talked about the long term, you know,
the stock market. I mean even in the intermediate term,
ninety percent of the time over any three year period,
the market is up. The key is do you have
a plan to have assets available in that intervening one
to three year you know, period of time, so you're
not freaking out. You know, you might be freaking out emotionally,
(12:11):
but you're not freaking out economically in terms of your
you know, checking account balance. Yeah, based on short term volatility?
Can I can I throw out a one positive thing
about all this?
Speaker 1 (12:22):
Let's see it.
Speaker 2 (12:23):
I mean, we we talked, we talked to Michelle Sloan yesterday,
our real estate expert. You know, interest rates on the
ten year you know, bonds have brought down interest rates
for thirty year mortgages already by a half a percent.
And I have not had time to look at where
mortgage rates have moved today, but uh, they're going to
be down a little bit. This might be an opportunity
(12:46):
for those first time home buyers who had to go
in and get mortgages at seven percent, you know we're
getting down. We're getting If we get down to that
six point one, six point two percent, that might be
a great time to pull the trigger on a refined
and lower your mortgage payment. And that's a tax decrease,
you know, to offset some of these tariffs.
Speaker 1 (13:07):
Look at Bob Spawnseller. He is not glass half empty,
he is glass half full. Here's the all Worth advice.
Making rash investment decisions based on news cycles or what's
going on right now can lead to costly mistakes. Next. Next,
the staggering amount of money parents are lending out to
their own children who are adults and the danger of that.
(13:29):
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. I Meani
Wagner along with Bob Sponseller. Coming up at six forty three,
we're going to offer some strategies for those who may
(13:49):
not have who may have too much of your portfolio
in one specific stock. We see this all the time.
Hello you procter and gamble lovers, We love them too,
But you can back yourself into a corner. We've got
some great strategies there. Here's a strategy that doesn't work.
Parents keeping the bank of mom and dad open once
(14:10):
your children are adults. I have this conversation and I
could tell you stories, Bob about some of my clans
who are so sweet, so generous to their children, and
they will one hundred percent, if they stay on this track,
end up living on those kids' couches in their nineties
because they will run out of money.
Speaker 2 (14:29):
Yeah, we saw a recent report that just came out,
and Amy, I never know what to make of these numbers,
but well, I'll state them and we'll talk about them.
About half of parents are still financially supporting their gen
Z and millennial offspring. The average contribution fourteen hundred and
seventy four dollars a month. That's a lot of money. Amy,
(14:49):
So you know, this assistance usually covers things like groceries, rent,
health insurance, you know, basic budgetary items. And again, to
put that in perspective, that's nearly eighteen thousand annually per child.
That's a lot of money. And I think you've already
made the point. You know, if you let this thing
get too far out of whack, now you're impacting your
(15:11):
own personal retirement security. And that's to say nothing of
the fact that a lot of folks that are you
know what we talk about the Sandwich generation. They're trying
to help out their kids at the same time that
they have aging parents that might need some help as well.
So it's it's a growing concern out there.
Speaker 1 (15:30):
Yeah, And I always say you to It's like when
you get on an airplane, you need to put your
financial oxygen mask on first. And I think, listen as parents,
and I get it. I love my kids, right, I mean,
from the moment I found out they were coming into
this world, I've wanted nothing to do but give them
and help them achieve everything they've ever wanted. However, I
(15:53):
have also always wanted to retire someday, and that has limitations.
How much we can help them has limitations. We just
hit this conversation in my house yesterday, and I'll tell
you where I fall on this. One of our kids
dropped a phone and the screen was no longer working right,
And so my husband goes to the cell phone store
(16:14):
or whatever, and they say, oh, you can get a
new phone right now for three more years. This child
happens to be twenty, and so I'm like, well, I'm
not paying for a cell phone for three more years.
We're going to pay till they're out of college, you know,
because she's got a really difficult class load, and I
don't you know, she's paying some bills but not credit
card bill. We even went to the point of making
(16:36):
sure that we knew that she could do bill share
when she graduates, so that even if she stays on
our plan, she is paying her part of it. That
might sound crazy, but it's not really, because my thought
has always been we're going to help you get to
and through college, and beyond that, you're really on your
own after that. One hundred percent of our focus financially
(16:58):
is on retirement and how we can live our best
lives in retirement. And for those who just oh, it's
a little bit here, it's a little bit there, please
sit down. Add up the actual numbers you're spending on
your adult children. You might get a whole new realization.
Speaker 2 (17:16):
Well, this study that we just came across, you know,
talks about exactly that amy working parents are spending more
than double on their adult children. We're talking about the
average person out there yeah, more than double on their
adult children. Then they are putting into their own retirement
accounts each month. So they're shelling out almost fifteen hundred
dollars a month, you know, to the adult child, while
(17:38):
only putting six hundred and seventy dollars per month into
their retirement savings plan. That's that's alarming. Yeah, it is.
Speaker 1 (17:45):
And listen, even with college, there are scholarships, there are grants,
there are loans. There are not those same opportunities financially
for you to retire. No one is going to say, hey,
Bob sponseller, you did a really great job of working
and you wrote a great essay, and so we're going
to give you a ten thousand dollars scholarship for your retirement.
(18:07):
Like that does not exist. It can for your kids.
So if you are making this decision about helping with college,
and you also know in the back of your mind
it could be to the detriment of your financial future,
it is a really easy conversation to have with your kids,
and it goes something like this, Hey, listen, I love you,
I would love to help you financially, but we've got
(18:28):
to figure out a way where you're actually going to
pay for this on your own or someday you're going
to have your own wife or husband and kids, and
I will actually be living on your couch day in
and day out, ringing a bell when my knees go
out and I can't get up to get my water. Right, like,
paint that picture for your children, And I'm kind of joking,
(18:48):
but kind of not. They'll find another way to pay
that bill.
Speaker 2 (18:52):
As soon as you created that mental picture for Grace,
she probably immediately developed a plan to replace her own
phone screen, right rather than having mom Yeah, exactly.
Speaker 3 (19:04):
Great parenting, Amy, And listen the research that you're talking
about four and ten, say listen, I'm going to stop
providing financial support within the next two years.
Speaker 1 (19:15):
I mean, how old are they already twenty eight? I
think if you have a conversation and listen, if you
were giving a lot of financial support. I'm not saying listen,
cut this off cold turkey, but say, hey, six months
from now, this is going to dry up for you.
Let's figure out what your plan is where you are
now covering your own car insurance and your own cell
phone bill. Again, in my house, no one is going
(19:37):
to be caught off guard that they're going to be
on their own when they graduate, because we've been having
these conversations for years and so they know what the
expectation is. Have the conversations with your children. Set the expectation.
If you listen, if you've got a money tree in
your backyard and you're going to have a fantastic retirement,
and also, can you know, pay for your kids for
that great great this this is not for you, for
(20:00):
the rest of us, mere humans, this is something you've
got to think about. Here's the all Worth advice. Support
your kids if you can or want to, but please
please not at the expense of your own financial future.
Next investment solutions for those who are scared to death
of the markets. You're listening to Simply Money presented by
all Worth Financial. Here in fifty five KRC the talk station.
(20:25):
You're listening to Simply Money presented by all Worth Financial.
I mean you wagnoralong with Bob Sponseller. We often talk
about the price of admission into the markets, meaning you
get to take advantage of the upside of when these
companies are doing really well. But also there's gonna be
a few times when you're checking that four oh one
k and that balance is going to be down. But
from time to time I come across some investors who
(20:47):
just struggle so much with the law. I cannot sleep
atnight if they think they're going to lose any money
from their investments. Of course, no one wants to do that.
But these, bob are conversations we're having all the time.
Andy Stalder, chief investment Officer, coming back tonight, as we
talk about kind of investment solutions.
Speaker 4 (21:07):
Right If this is.
Speaker 1 (21:08):
Something that sounds familiar to you, maybe you lose sleep
over this. I want you to listen up. We have
maybe some potential suggestions for you. Andy. Several several years ago,
we weren't necessarily talking about these things as options, but
we have some. We do have some options for investors
right now.
Speaker 5 (21:28):
Yeah, there's quite a few. When you think about what's
out there in terms of investment solutions, there's a schmorgasbord.
Now when you think about client needs and client concerns,
certainly the concerns of I know I need to be invested.
(21:48):
I know I want to be invested, but I know
the market's out to get me. So as soon as
I go in, the market's going to go down and
I'm sol right. I mean, I think that's just a
typical mindset that a lot of people have, and it
could happen, market could go down, but obviously, over the
longer run, you're better off staying invested regardless of those
short term pullbacks. Now, if you have some real concern
(22:11):
and like you're losing sleep at night, but you know
you need to have it, so you still want that
stock market upside without the full risk of the downside.
You know a couple of solutions that come to mind.
One is what we call structured notes and another is
called buffer ETF and they both behave very similarly. They
both give you that upside market participation participation, but amize
(22:35):
that downside risk, so you may not get all of
the market upside. If the market goes up fifty to
thirty percent in a year, you may not get all
of it. Conversely, the market goes down ten twenty percent,
you won't get all of that as well. So essentially
you're getting a floor on the downside and a bit
of a ceiling on the upside. And ideally this would
help you know, reduce your daily stress, right, so you
don't have to worry about those market swings. You don't
(22:57):
have to really worry about, oh, what are if you're
doing today or what's going on with the economy. It's
a little bit more of a set it and forget
it approach. So on the structured note side of things
and the buffered ETFs they behave similarly from that perspective
where you have a cap and a floor.
Speaker 2 (23:15):
Now the big.
Speaker 5 (23:16):
Difference is i'll call liquidity and maybe also knowing what
you're going to get. So structured notes those.
Speaker 2 (23:24):
Are really.
Speaker 5 (23:26):
More than anything else, or like a note issued by
a bank, I think like JP Morgan as an example,
Then they're essentially guaranteeing you that you'll get the floor
and the ceiling based on whatever underlying stock market. That
structure note is tied too. So it could be like
the S and P five hundred, Right, So if that'
S and P five hundred goes up ten percent, maybe
(23:46):
you get all ten percent. If it goes up twenty percent,
maybe some only get ten percent. But if it goes
down ten percent, maybe you only lose two percent. So
there's going to be like a floor in the ceiling
and it's going to you'll get that payout, you know,
assuming JP Morgan doesn't go wonder has nothing's ever guaranteed.
But when you look at it from that perspective, it's
pretty safe and you know what you're going to get,
and it has a set start date in a set
(24:08):
end date. Now, the difference with a buffered ETF is
that it's you get daily liquidity I meaning you can
go trade it on a stock exchange and get in
and out and don't have similar terms. However, to really
enjoy that buffer of the floor and the ceiling, you
need to hold it for. You need to look at
i should say, over one year time horizons, and you'll
(24:31):
see a little bit more wiggle room, but you should
be getting pretty close to what you're expecting.
Speaker 2 (24:37):
So Andy, when you when you talk about you know
the fact that the buffer ETFs do have daily liquidity,
but you strongly suggest and especially with the strategy that
you and your team developed here at all Worth, when
you get into that strategy holding it for at least
one year, talk about the why behind that. You know,
usually when people have the option for daily liquidity, next
(25:00):
question is, well, why should I hold that for a year?
Talk about the benefits of that.
Speaker 5 (25:04):
Well, when you think about the holding it for a
one year period. You have to understand what the ETF
is actually invested in, and it's invested in stock options,
which can be very complex. But they're going to have
time frames depending on the ETF, but they're going to
have time frames that roll for every year. Could be
(25:25):
March to March, April to April, May to May. So
the point of these ETFs is to capture that floor
and ceiling over that one year interval. Now you know
one of the things that you know can add some
value and I think is really interesting. One way that
we look at it from like a i'll call it
a tactical rebalancing position is that we look to essentially
(25:47):
optimize upside potential while keeping that downside protection in place.
So you know, for example, as the market rises in value,
you know, what you could do is reallocate those et
so you could have like a a May s and
P five hundred series, and two you might move it
to a July series. So what you're trying to do,
(26:09):
because we do this here internally, just you know, it's
an algorithmic smart trading process that we have built in.
We can reallocate the ETFs to essentially reset that downside
buffer and lock in gains and allow us to maintain
whatever downside buffer we were looking at, maybe it's ten percent,
maybe it's fifteen percent, while at the same time taking
(26:31):
advantage of market growth. So as the market rises, we're
going to reallocate the ETFs to reset the buffer and
lock and gage. Now, if the market declines, what we
would do is we would stay invested for a bit
to exhaust the majority of that buffer, and then reallocate
the ETFs to increase participation in the upside. Now, I
know that can sound somewhat complicated and complex because as
(26:55):
you explained it.
Speaker 2 (26:56):
You know, the thought that comes to my mind is
the old kids don't try this at home exactly. You know,
this is what it's great to have you and a
team you know, that are monitoring this all day every day,
and you know when to make the adjustments and you
do it for these strategies that we have in place,
and so the client doesn't have to think about it.
(27:17):
It's being done for them. And I love that.
Speaker 5 (27:21):
Yeah, and it's a It can be really powerful and
provide that peace of mind, and that's key. So with
these buffer ETFs, I mean that's where when I mentioned
the liquidity, so you can if you want. If you
choose like, hey, I don't want these buffer ets anymore
for whatever reason, maybe you need to go, you know,
buy a house or whatever it is, you can sell
them that day and they trade just like a stock.
(27:44):
So it's very easy to get in and out with
a structured note. You know. I think the advantage of
a structure note is it's more certain what you're going
to get at the end of the day because you're
not going to see the inter day volatility. With that
being said, they do have maturity dates because technically they're
a no or a bond if you will, issued by
a bank, So you can sell them, but it might
(28:06):
you might not be able to sell them as quickly
as you could the ETF. So if you value liquidity,
that's where the buffer ETFs come into play. If you
value significantly significant certainty, I should say, that's where the
structure notes come to play. But they do the same thing.
It just kind of depends whether or not you want
(28:26):
to have that certainty a little bit higher or that
liquidity a little bit better.
Speaker 1 (28:29):
Yeah, I don't think you have to be a sophisticated
investor right for this to make sense for you. But
I will go back to the point of don't try
this at home. Either one of these could be fantastic options.
And this is a look yourself in the mirror kind
of proposition. If you do loose sleep when there's volatility
in the markets, there are options. I would suggest finding
(28:50):
a financial advisor that you can trust, a fiduciary to
partner with.
Speaker 4 (28:53):
But certainly if you're working with someone, bring up these
options if you are someone who really really cannot just
ride the waves of when the markets are down. Great perspective,
as always from our Chief investment Officer, Andy Stout. You're
listening to Simply Money presented by all Worth Financial here
in fifty five KRC the talk station. You're listening to
(29:15):
Simply Money presented by all Worth Financial. I mean you
Wagner along with Bob Sponsell or do you have a
financial question it's keeping you up at night. There's a
red button you can click on while you're listening to
the show right there on the iHeart opp record your question.
Speaker 2 (29:27):
I have several I have several that are keeping me
up and can I hit the red button and email.
Speaker 1 (29:32):
You those Yes, I'll take your questions you take mine,
we'll get we'll solve all the world's problems. All right,
straight ahead, We're gonna help you. H next time you travel,
take that experience to the next level with technology, some
cool stuff you may have never even heard of it.
I'm coming across this more and more often, Bob. I
don't know about you, but someone who has saved, well,
(29:55):
maybe their grandparents had a particular stock or company that
they loved and their family has been invested in it
for years, or they just caught something a company when
it was on the upswing, and now they kind of
feel backed into a corner because if they were to
sell out of that position at all, they're going to
have a huge tax bill in the form of capital gains.
Speaker 2 (30:17):
Yeah. What I usually run into this situation. There's usually
two things going on with the clients I've dealt with
for years. The first one is emotional and the second
one is economic. And here's what I mean. Emotionally. A
lot of times folks have inherited these stocks, yep, from
parents and grandparents, and there's just, you know, for good reason,
there's just this emotional attachment to the stock. And my
(30:40):
advice is always, you know, stocks don't have feelings. Yeah,
and you know they're economic instruments. You want to be
in them if they're going up, and you want to
be out of them if they're going down. So we
got to remove, to the extent possible the emotion from
holding the stocks holding these stocks. Then there's an economic
component of this is how does that concentrated position, How
(31:04):
does that fold or meld into your overall financial plan?
Because if the financial plan is not going to work,
if we insist on adhering to these emotional feelings, well,
then we've got to make some changes, and people need
to be open to discussing them.
Speaker 1 (31:19):
Well, and I'm going to throw out another emotional attachment
that I see. And it's not necessarily that you have
inherited this position, or your grandma or your parents loved
this company. But sometimes it's you picked it yourself out
of all the companies out there, and it did really
well for you, and to let it go now when
it's gotten you from where you were ten years ago
(31:40):
to where you are now.
Speaker 2 (31:41):
Or you worked for the company, yeah, and you were
a big part of earning that growth, yep, because it
was a great company. You had a big part in
making it grow and you're very proud of that, and
for very good reason.
Speaker 1 (31:53):
Yeah, two concerns that I have if you are in
this situation. One is, of course that position go down, right,
and then you're losing a large part of what you've built.
But second, if you're not properly diversified, the next thing.
We don't know what the next company or sector is
going to be, but they're out there somewhere, and if
you're so concentrated in one position or one sector, you're
(32:17):
probably going to miss out on the next big thing.
So if this is you, you actually do have options.
One of those is you know, gradually diversifying over time,
you know, selling a little bit, you know, especially if
that company has to you know, has some down days,
some downtimes, right, that can be a great time to
do it, but over time, trying to move out of
(32:40):
that position slowly. This is not necessarily an overnight proposition.
Speaker 2 (32:46):
This is one of the big reasons why we advocate
in non IRA accounts using that tax alpha you know,
tax loss harvesting strategy, where we could, like in markets
like we're experiencing now right, there are opportunities to harvest
short term and long term losses and use those losses
to offset the embedded capital gains in these concentrated positions.
(33:09):
And now's a perfect time to implement those types of strategies.
Another one is just direct indexing, and again this is
a gradual approach where we can drop that concentrated position
into a more diversified portfolio with that tax loss harvesting
program operating in the background, and we just gradually, you know,
(33:31):
get us to where we need to be from a
diversification standpoint, not getting rid of one hundred percent of
the stock, but just making it a more responsible percentage
of your overall allocation.
Speaker 1 (33:42):
I was just talking last week to a group of
kind of higher net worth investors, many of them working with,
you know, fiduciary financial planners, and I said, hey, how
many of your advisors, you know that they're not working
with all worth. How many of your advisors have even
mentioned strategies like this? None of them, None of them had.
Indirect indexing can be a great option for you where
(34:02):
you're essentially buying all of these pieces of individual companies, right,
So you're buying individual stocks and then on days when
those when those companies take a hit, you sell out
of that position, you harvest that loss and you can
be super tax efficient in the future. Another conversation I'm
having is about a caller strategy. So this is when
I always say, and I think I got this from you, Bob.
(34:25):
Is this a sacred cow right? Is this something that
you just cannot let go of. If that's the case,
we can use options to give you some downside protection.
It's also going to cap a little bit of the upside, right,
that's how you pay for that downside protection. But in
a volatile market, that can help you sleep at night.
Speaker 2 (34:48):
Well, today's a great day to talk about why and
how that strategy works. So to try to keep this
as simple as possible, you sell, you simultaneously sell and
buy an option on the same stock. So you sell
a cover call, which means you're placing an upside floor
on your gains and you're collecting premium. Right now, you're
(35:08):
using some of that premium to buy put protection on
any downside movement.
Speaker 1 (35:13):
YEP.
Speaker 2 (35:14):
So in a day like today, let's take Apple. You know,
with all the tariff news on China, I think Apple
was going to open up down about eight percent today. Well,
if you had put protection paid for by your caller
cover call sale. You've fully protected the downside on that
Apple stock and continue to own the stock. It can
be a wonderful strategy to reduce volatility in your portfolio.
Speaker 1 (35:38):
You know what's interesting too, I often come across people
again in this area so generous. They've got a concentrated position,
they're afraid of it, right, and they also are giving
to their church or a charity out of their savings account.
And I'm like, hey, let's go ahead and give some
of that concentrated stock position as the gift as the donation.
And that can be also a great strategy. Here's the
(35:59):
all Worth advice. It's important to manage or diversify these
concentrated positions over time to protect your financial future. Next,
high tech tools that can enhance your next travel experience.
You're listening to Simply Money presented by all Worth Financial.
You're in fifty five krs the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
(36:19):
me Wagner along with Bob's sponsorer. One of my favorite
things to do is travel, and I know a lot
of my clients that I work with that's retirement goal.
And also while they're working, right, that's where they like
to spend their money sometimes, Bob. As we all know,
it can be a pain some you know delays, you know,
getting lost, losing luggage. There are some high tech things
(36:42):
that you can now have with you when you travel
that might make it a lot easier.
Speaker 2 (36:47):
Yeah, And as we look through this list of things,
I mean, this kind of blows my mind. I don't
have any of this stuff. I didn't even know it existed.
One of the things that jumped out to me was just,
you know, having a built in charger for my cell
phone in my suitcase in your life. Yeah, you probably
already owned three of these amys.
Speaker 1 (37:03):
I do not, but I have this anxiety every time
I check a bag that I'm never going to see
that bag again. And one of the things that you
can have with your luggage, it's called smart luggage, and
you mentioned built in charging ports, but can also have
GPS tracking and digital locks on it so you can
(37:24):
have a little more control, and then you can know
exactly where your bag is so that you don't have
to stress out while you're on the flight like I
always do. For those of you who are traveling internationally,
language translation apps portable Wi Fi hotspots where you don't
have to pay roaming charges like these are things that
should probably be a normal part of what you have
(37:44):
if you are someone who travels internationally on a regular basis.
Speaker 2 (37:49):
There's also some safety apps. You know, if you're traveling
overseas or in the mountains and you slip and fall
on the side of a mountain or something, there's features
that will let your life ones know, you know, the
proverbial I've fallen and I can't get up kind of thing.
You know, you can have that kind of technology in
your travel gear. It's amazing the stuff that's out there today.
Speaker 1 (38:10):
Yeah, and some things that you might already have, right
might we have Life three sixty. There's be Safe, there's noonlight.
Speaker 5 (38:16):
You know.
Speaker 1 (38:16):
I think about the fact my kids are in college.
None of them are traveling internationally right now, but I
have friends' kids who are doing study abroad, and this
is a great way where you can kind of sleep
at night knowing, Hey, they're in a totally different time
zone and I don't know what's happening, but I can
see exactly where they are. Thanks for listening. You've been
listening to simply money presented by all Worth Financial here
in fifty five KRC. The talk station
Tonight. Are you a little freaked out by the markets
right now? All of this tariff talk, plus managing concentrated
stock positions and a whole lot more. You're listening to
simply money presented by all Worth Financial. I Meani Wagner
along with Bob Sponseller. If you are experiencing market freak
out right now, I think Bob, we should start by
(00:27):
saying you are probably not alone. What we now know
that we are heading into is a period of the
most extensive tariffs that our country has seen in the
last one hundred years. Markets like certainty, and we have
had anything but certainty over the past several weeks, in
certainly the past few days for sure.
Speaker 2 (00:48):
And I'll freely admit I'm surprised that we got to
the point we got to this morning, Amy. I mean,
we're now dealing with tariffs on a total of one
hundred and eighty countries and territories combined. This is not
just a little tit for tat with Mexico and China.
I mean, this is now the President's attempt to unilaterally
(01:08):
reset trade policy around the globe. So it is going
to be It is unsettling, It's causing people to take
a step back and say, wow, now what's going to happen.
So it's a bit surprising. And we've talked about this,
I think for four months now. You know a lot
of other people have as well, whether this is all
(01:30):
just a negotiating strategy by the President. And I'll freely
admit I thought we'd get a lot of this negotiating
out of the way before now, and we haven't. But
I would say as of this morning, negotiation season has
just begun. It's going to be an interesting next five
to six weeks. We deal with tax policy, corporate earnings.
(01:53):
You know, there's a lot. It's going to be a
very fluid situation in the US and global economy.
Speaker 1 (01:59):
You know, And I think it's worth breaking down what
happened yesterday when the President spoke, right, he kind of
started by saying that means they do it to us
and we do it to them. Very simple. Can't get
any simpler than that, talking about reciprocal tariffs. And initially
in those opening remarks, markets were like, Okay, well we
(02:19):
knew reciprocal tariffs were coming. This doesn't sound so bad,
and so markets actually kind of bumps up a little bit.
Then we actually got numbers. You know, you mentioned how
many countries, how many territories, and then we saw percentages.
What are those tariffs actually going to look like? Those
numbers in black and white where you texted me and said,
(02:41):
here's what I just saw right coming across on Twitter
or x those actual numbers. I think we're in excess
of what a lot of economists and you know, investors
were expecting. And as the result of that, you know,
we looked at a major selloff, you know, a little
bit of panic and I'm going to say, actually a
(03:01):
lot of panic in the markets.
Speaker 2 (03:04):
Yeah, I mean this will never change. Amy the stock
and bod market are the best leading economic indicators we have. This,
you know, it's these markets move basically, you know, in
accordance with what market participants think we're going to be
looking at six to twelve months from now. So even
(03:24):
though the President said, hey, we're only going to tear
if the other countries about half what they tear if us,
and that might seem mild, I think that those percentages
are above what most people were expecting. And then the
bigger point is, you know, as companies adjust and economy,
you know, countries adjust, they got to look at supply chains,
where they build plants and equipment, where they employ people,
(03:48):
how they ship good around the world. You can't just
move this behemoth called the global economy on a dime.
And people are scrambling right now to say, hey, what what,
what's going to happen here? And again, I think the
negotiations are just going to begin. And speaking of negotiations,
I think, again an opinion, this is part of a
(04:08):
broad strategy by the president linking up these trade policy
with trying to get tax cuts permanent, with trying to
remove you know, waste, fraud and abuse. However people want
to define that from the government, it's an all of
the above strategy. The problem is, in the short term,
it's going to be at least five to six weeks
(04:30):
until we get any kind of tax policy even ready
to vote for, you know. And in the meantime, these
tariffs are going in effect today and it's going to
create and is creating volatility.
Speaker 1 (04:42):
Yeah, you know, I have this conversation a lot with
my kids, right, you know, I have teenagers, and we
often have a end of the world events, right that
someone's not getting playing time enough playing time on the
basketball team someone's friend was not nice to them or
whatever it was, and we always kind of have the
conver station. This feels really bad right now, but we
(05:03):
might look at this a few months down the road
and have a different perspective on it. Maybe we've learned
from it, maybe we've grown from it. Maybe it was
the thing that needed to happen. I don't know where
we're going to end up with these tariffs. Nobody does,
but I do think it's important to understand what we
are experiencing right now at this point is short term volatility. Now,
(05:23):
there has been some research done where Americans said, hey, listen,
we knew this was coming. Slightly more than eight in
ten people who were just shopping knew about tariffs as
of February, just a couple of months before. In December
that number was far fewer. So it's like we're familiar
with the concept now everyone's talking about it. I think
(05:45):
where the fear is is kind of in the unknown, right, like,
where are we actually going with this in what's the
impact going to be? You're listening to simply money presented
by all Worth Financial, I mean me Wagner along with
Bob Sponseller another day more of talk. But this is
incredibly important because as an investor, you are probably checking
(06:05):
your four oh one K at least from time to time,
and if you've looked at it any time lately, you've
seen that it is down. The markets like certainty, and
this has been an incredibly uncertain time.
Speaker 2 (06:19):
Yeah, and a little bit of historical perspective. I mean
as recently as twenty eighteen when President Trump, you know,
when we talk about Trump one point oh tariffs. Yeah,
I mean, people forget this, but the market went down
almost twenty percent while all that stuff was going on,
and obviously it recovered. I'm not predicting a twenty percent decline.
I'm not predicting a short term recovery. But the point is,
(06:41):
and it's the point that you let off the show
with the market hates uncertainty, and when we have uncertainty,
the default is markets drop in the short term. But again,
it's time to have a long term financial plan. And
we've talked about this all year long too. You prepare
for volatility, hopefully in advance, and you have some diversified
(07:05):
pieces of your portfolio, cash bonds, you know what you're
doing great this year, by the way, and this is
how you weather these short term storms and are now
in position for maybe a longer hopefully and almost certainly
a longer term recovery.
Speaker 1 (07:20):
Well, to your point, this is kind of a case
in point, you know, for those investors who have concentrated
stock positions. I talked to someone recently who most of
his retirement and it's several million dollars is actually in
n Video stock. Well, that seemed like a great thing
because it was only going up for the longest time,
and when I kept saying, hey, listen, there's a risk
(07:41):
here that so much of your portfolio right is in
this one company. Oh but I believe in it, and
no one's saying it's not fundamentally sound or the future
of technology for this country and the global economy. But
right now that particular company is experiencing a lot of volatility,
and you know, I think, as we talk about listen,
(08:03):
this is what you build the boat for. Part of
building that boat is making sure that you are truly
properly diversified. You know, you mentioned bonds. Twenty twenty two
was this really really weird year where if you owned
a mix of stocks and bonds both were down, and
you know, I talk to people like, what's the point,
(08:24):
what's even the point of having bonds in my portfolio
because they're never going to bring in the returns that
stocks are and they're not even the shock absorbers that
they're normally supposed to be. Well right now, they are
absolutely acting as shock absorbers.
Speaker 2 (08:38):
Yeah, bonds are performing as they historically have performed and
are meant to perform to cushion stock market volatility. But
you know, going back to twenty twenty two, everything dropped
because we had nine percent inflation and the FED had
to come in and act and raise interesstraight seven times
to you know, tamp down inflation. And yeah, when that happens,
(08:58):
everything's going down except for cash. So I again, this
is where you want to be in a position where
you're not forced to make financial decisions based on a
short term liquidity need. And your only source of a
short term liquidity need is a tech stock where you
(09:19):
have to potentially sell it after losing twenty percent of
your money. And that's the whole purpose of a diversified
long term financial planning strategy. And this is what we
do for our clients all day, every day. Amy.
Speaker 1 (09:32):
Yeah, and sometimes a bad thing can also at the
same time be a good thing. So there was some
research done that said, hey, listen, a lot of American
consumers with tariffs and mine, have changed purchasing decisions. Right,
We've already been talking about the fact that the American
savings rate has been increasing, heading in the right direction,
while there's a lot of people who are saying, listen,
(09:53):
fifty five percent of consumers have changed what they're going
to buy, thirty six percent have altered or canceled vacation
hand plans, seventy percent are eating at home more often. Sometimes.
I also like to throw the BS flag on some
of this research. I think Americans we know what we're
supposed to say, but we don't always do what we're saying.
I don't know if you've been to a restaurant in
(10:15):
the past few weeks. I have. There's still a wait.
I don't know that people are actually changing their habits.
Yet we might. I think we might get to that point.
I think people are saying what they know they should
be doing. But if you are in fact cutting back,
that's never a bad thing. Increasing your emergency cash is
never a bad idea. And for those of you who
(10:37):
are close to retirement or just retired. Man, I get it,
like this feels like really terrible timing. But if you've
been smart about this and hopefully working with a fiduciary
to help you make these decisions, you have enough cash
that you should be fine for a year two years
where you're not pulling money out of your retirement accounts,
even if they are so well diversified. Right, don't pull
(10:59):
money out those accounts at losses, and you're not locking
in those losses. They're just on paper. We know that
one hundred percent of the time, right, markets do rebound,
and when they rebound it's to new highs. Then you
can fully take advantage of that without locking in any
of your losses. So it's we keep saying you build
the boat, but you do. And these are the steps
you take to make sure you're prepared for this, because
(11:21):
if it's not tariffs, it really is something else that
could be coming down the pike and it will create volatility.
It's a normal part of the I know it doesn't
feel normal right now, and I do not want to
downplay this is real. This is this is real what
we're experiencing right now. You know, again, the worst tariffs
our country has seen in one hundred years. Right, that's
(11:44):
a big deal. But there is always something coming down
the pike.
Speaker 2 (11:49):
Yeah, And you've talked about the long term, you know,
the stock market. I mean even in the intermediate term,
ninety percent of the time over any three year period,
the market is up. The key is do you have
a plan to have assets available in that intervening one
to three year you know, period of time, so you're
not freaking out. You know, you might be freaking out emotionally,
(12:11):
but you're not freaking out economically in terms of your
you know, checking account balance. Yeah, based on short term volatility?
Can I can I throw out a one positive thing
about all this?
Speaker 1 (12:22):
Let's see it.
Speaker 2 (12:23):
I mean, we we talked, we talked to Michelle Sloan yesterday,
our real estate expert. You know, interest rates on the
ten year you know, bonds have brought down interest rates
for thirty year mortgages already by a half a percent.
And I have not had time to look at where
mortgage rates have moved today, but uh, they're going to
be down a little bit. This might be an opportunity
(12:46):
for those first time home buyers who had to go
in and get mortgages at seven percent, you know we're
getting down. We're getting If we get down to that
six point one, six point two percent, that might be
a great time to pull the trigger on a refined
and lower your mortgage payment. And that's a tax decrease,
you know, to offset some of these tariffs.
Speaker 1 (13:07):
Look at Bob Spawnseller. He is not glass half empty,
he is glass half full. Here's the all Worth advice.
Making rash investment decisions based on news cycles or what's
going on right now can lead to costly mistakes. Next. Next,
the staggering amount of money parents are lending out to
their own children who are adults and the danger of that.
(13:29):
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. I Meani
Wagner along with Bob Sponseller. Coming up at six forty three,
we're going to offer some strategies for those who may
(13:49):
not have who may have too much of your portfolio
in one specific stock. We see this all the time.
Hello you procter and gamble lovers, We love them too,
But you can back yourself into a corner. We've got
some great strategies there. Here's a strategy that doesn't work.
Parents keeping the bank of mom and dad open once
(14:10):
your children are adults. I have this conversation and I
could tell you stories, Bob about some of my clans
who are so sweet, so generous to their children, and
they will one hundred percent, if they stay on this track,
end up living on those kids' couches in their nineties
because they will run out of money.
Speaker 2 (14:29):
Yeah, we saw a recent report that just came out,
and Amy, I never know what to make of these numbers,
but well, I'll state them and we'll talk about them.
About half of parents are still financially supporting their gen
Z and millennial offspring. The average contribution fourteen hundred and
seventy four dollars a month. That's a lot of money. Amy,
(14:49):
So you know, this assistance usually covers things like groceries, rent,
health insurance, you know, basic budgetary items. And again, to
put that in perspective, that's nearly eighteen thousand annually per child.
That's a lot of money. And I think you've already
made the point. You know, if you let this thing
get too far out of whack, now you're impacting your
(15:11):
own personal retirement security. And that's to say nothing of
the fact that a lot of folks that are you
know what we talk about the Sandwich generation. They're trying
to help out their kids at the same time that
they have aging parents that might need some help as well.
So it's it's a growing concern out there.
Speaker 1 (15:30):
Yeah, And I always say you to It's like when
you get on an airplane, you need to put your
financial oxygen mask on first. And I think, listen as parents,
and I get it. I love my kids, right, I mean,
from the moment I found out they were coming into
this world, I've wanted nothing to do but give them
and help them achieve everything they've ever wanted. However, I
(15:53):
have also always wanted to retire someday, and that has limitations.
How much we can help them has limitations. We just
hit this conversation in my house yesterday, and I'll tell
you where I fall on this. One of our kids
dropped a phone and the screen was no longer working right,
And so my husband goes to the cell phone store
(16:14):
or whatever, and they say, oh, you can get a
new phone right now for three more years. This child
happens to be twenty, and so I'm like, well, I'm
not paying for a cell phone for three more years.
We're going to pay till they're out of college, you know,
because she's got a really difficult class load, and I
don't you know, she's paying some bills but not credit
card bill. We even went to the point of making
(16:36):
sure that we knew that she could do bill share
when she graduates, so that even if she stays on
our plan, she is paying her part of it. That
might sound crazy, but it's not really, because my thought
has always been we're going to help you get to
and through college, and beyond that, you're really on your
own after that. One hundred percent of our focus financially
(16:58):
is on retirement and how we can live our best
lives in retirement. And for those who just oh, it's
a little bit here, it's a little bit there, please
sit down. Add up the actual numbers you're spending on
your adult children. You might get a whole new realization.
Speaker 2 (17:16):
Well, this study that we just came across, you know,
talks about exactly that amy working parents are spending more
than double on their adult children. We're talking about the
average person out there yeah, more than double on their
adult children. Then they are putting into their own retirement
accounts each month. So they're shelling out almost fifteen hundred
dollars a month, you know, to the adult child, while
(17:38):
only putting six hundred and seventy dollars per month into
their retirement savings plan. That's that's alarming. Yeah, it is.
Speaker 1 (17:45):
And listen, even with college, there are scholarships, there are grants,
there are loans. There are not those same opportunities financially
for you to retire. No one is going to say, hey,
Bob sponseller, you did a really great job of working
and you wrote a great essay, and so we're going
to give you a ten thousand dollars scholarship for your retirement.
(18:07):
Like that does not exist. It can for your kids.
So if you are making this decision about helping with college,
and you also know in the back of your mind
it could be to the detriment of your financial future,
it is a really easy conversation to have with your kids,
and it goes something like this, Hey, listen, I love you,
I would love to help you financially, but we've got
(18:28):
to figure out a way where you're actually going to
pay for this on your own or someday you're going
to have your own wife or husband and kids, and
I will actually be living on your couch day in
and day out, ringing a bell when my knees go
out and I can't get up to get my water. Right, like,
paint that picture for your children, And I'm kind of joking,
(18:48):
but kind of not. They'll find another way to pay
that bill.
Speaker 2 (18:52):
As soon as you created that mental picture for Grace,
she probably immediately developed a plan to replace her own
phone screen, right rather than having mom Yeah, exactly.
Speaker 3 (19:04):
Great parenting, Amy, And listen the research that you're talking
about four and ten, say listen, I'm going to stop
providing financial support within the next two years.
Speaker 1 (19:15):
I mean, how old are they already twenty eight? I
think if you have a conversation and listen, if you
were giving a lot of financial support. I'm not saying listen,
cut this off cold turkey, but say, hey, six months
from now, this is going to dry up for you.
Let's figure out what your plan is where you are
now covering your own car insurance and your own cell
phone bill. Again, in my house, no one is going
(19:37):
to be caught off guard that they're going to be
on their own when they graduate, because we've been having
these conversations for years and so they know what the
expectation is. Have the conversations with your children. Set the expectation.
If you listen, if you've got a money tree in
your backyard and you're going to have a fantastic retirement,
and also, can you know, pay for your kids for
that great great this this is not for you, for
(20:00):
the rest of us, mere humans, this is something you've
got to think about. Here's the all Worth advice. Support
your kids if you can or want to, but please
please not at the expense of your own financial future.
Next investment solutions for those who are scared to death
of the markets. You're listening to Simply Money presented by
all Worth Financial. Here in fifty five KRC the talk station.
(20:25):
You're listening to Simply Money presented by all Worth Financial.
I mean you wagnoralong with Bob Sponseller. We often talk
about the price of admission into the markets, meaning you
get to take advantage of the upside of when these
companies are doing really well. But also there's gonna be
a few times when you're checking that four oh one
k and that balance is going to be down. But
from time to time I come across some investors who
(20:47):
just struggle so much with the law. I cannot sleep
atnight if they think they're going to lose any money
from their investments. Of course, no one wants to do that.
But these, bob are conversations we're having all the time.
Andy Stalder, chief investment Officer, coming back tonight, as we
talk about kind of investment solutions.
Speaker 4 (21:07):
Right If this is.
Speaker 1 (21:08):
Something that sounds familiar to you, maybe you lose sleep
over this. I want you to listen up. We have
maybe some potential suggestions for you. Andy. Several several years ago,
we weren't necessarily talking about these things as options, but
we have some. We do have some options for investors
right now.
Speaker 5 (21:28):
Yeah, there's quite a few. When you think about what's
out there in terms of investment solutions, there's a schmorgasbord.
Now when you think about client needs and client concerns,
certainly the concerns of I know I need to be invested.
(21:48):
I know I want to be invested, but I know
the market's out to get me. So as soon as
I go in, the market's going to go down and
I'm sol right. I mean, I think that's just a
typical mindset that a lot of people have, and it
could happen, market could go down, but obviously, over the
longer run, you're better off staying invested regardless of those
short term pullbacks. Now, if you have some real concern
(22:11):
and like you're losing sleep at night, but you know
you need to have it, so you still want that
stock market upside without the full risk of the downside.
You know a couple of solutions that come to mind.
One is what we call structured notes and another is
called buffer ETF and they both behave very similarly. They
both give you that upside market participation participation, but amize
(22:35):
that downside risk, so you may not get all of
the market upside. If the market goes up fifty to
thirty percent in a year, you may not get all
of it. Conversely, the market goes down ten twenty percent,
you won't get all of that as well. So essentially
you're getting a floor on the downside and a bit
of a ceiling on the upside. And ideally this would
help you know, reduce your daily stress, right, so you
don't have to worry about those market swings. You don't
(22:57):
have to really worry about, oh, what are if you're
doing today or what's going on with the economy. It's
a little bit more of a set it and forget
it approach. So on the structured note side of things
and the buffered ETFs they behave similarly from that perspective
where you have a cap and a floor.
Speaker 2 (23:15):
Now the big.
Speaker 5 (23:16):
Difference is i'll call liquidity and maybe also knowing what
you're going to get. So structured notes those.
Speaker 2 (23:24):
Are really.
Speaker 5 (23:26):
More than anything else, or like a note issued by
a bank, I think like JP Morgan as an example,
Then they're essentially guaranteeing you that you'll get the floor
and the ceiling based on whatever underlying stock market. That
structure note is tied too. So it could be like
the S and P five hundred, Right, So if that'
S and P five hundred goes up ten percent, maybe
(23:46):
you get all ten percent. If it goes up twenty percent,
maybe some only get ten percent. But if it goes
down ten percent, maybe you only lose two percent. So
there's going to be like a floor in the ceiling
and it's going to you'll get that payout, you know,
assuming JP Morgan doesn't go wonder has nothing's ever guaranteed.
But when you look at it from that perspective, it's
pretty safe and you know what you're going to get,
and it has a set start date in a set
(24:08):
end date. Now, the difference with a buffered ETF is
that it's you get daily liquidity I meaning you can
go trade it on a stock exchange and get in
and out and don't have similar terms. However, to really
enjoy that buffer of the floor and the ceiling, you
need to hold it for. You need to look at
i should say, over one year time horizons, and you'll
(24:31):
see a little bit more wiggle room, but you should
be getting pretty close to what you're expecting.
Speaker 2 (24:37):
So Andy, when you when you talk about you know
the fact that the buffer ETFs do have daily liquidity,
but you strongly suggest and especially with the strategy that
you and your team developed here at all Worth, when
you get into that strategy holding it for at least
one year, talk about the why behind that. You know,
usually when people have the option for daily liquidity, next
(25:00):
question is, well, why should I hold that for a year?
Talk about the benefits of that.
Speaker 5 (25:04):
Well, when you think about the holding it for a
one year period. You have to understand what the ETF
is actually invested in, and it's invested in stock options,
which can be very complex. But they're going to have
time frames depending on the ETF, but they're going to
have time frames that roll for every year. Could be
(25:25):
March to March, April to April, May to May. So
the point of these ETFs is to capture that floor
and ceiling over that one year interval. Now you know
one of the things that you know can add some
value and I think is really interesting. One way that
we look at it from like a i'll call it
a tactical rebalancing position is that we look to essentially
(25:47):
optimize upside potential while keeping that downside protection in place.
So you know, for example, as the market rises in value,
you know, what you could do is reallocate those et
so you could have like a a May s and
P five hundred series, and two you might move it
to a July series. So what you're trying to do,
(26:09):
because we do this here internally, just you know, it's
an algorithmic smart trading process that we have built in.
We can reallocate the ETFs to essentially reset that downside
buffer and lock in gains and allow us to maintain
whatever downside buffer we were looking at, maybe it's ten percent,
maybe it's fifteen percent, while at the same time taking
(26:31):
advantage of market growth. So as the market rises, we're
going to reallocate the ETFs to reset the buffer and
lock and gage. Now, if the market declines, what we
would do is we would stay invested for a bit
to exhaust the majority of that buffer, and then reallocate
the ETFs to increase participation in the upside. Now, I
know that can sound somewhat complicated and complex because as
(26:55):
you explained it.
Speaker 2 (26:56):
You know, the thought that comes to my mind is
the old kids don't try this at home exactly. You know,
this is what it's great to have you and a
team you know, that are monitoring this all day every day,
and you know when to make the adjustments and you
do it for these strategies that we have in place,
and so the client doesn't have to think about it.
(27:17):
It's being done for them. And I love that.
Speaker 5 (27:21):
Yeah, and it's a It can be really powerful and
provide that peace of mind, and that's key. So with
these buffer ETFs, I mean that's where when I mentioned
the liquidity, so you can if you want. If you
choose like, hey, I don't want these buffer ets anymore
for whatever reason, maybe you need to go, you know,
buy a house or whatever it is, you can sell
them that day and they trade just like a stock.
(27:44):
So it's very easy to get in and out with
a structured note. You know. I think the advantage of
a structure note is it's more certain what you're going
to get at the end of the day because you're
not going to see the inter day volatility. With that
being said, they do have maturity dates because technically they're
a no or a bond if you will, issued by
a bank, So you can sell them, but it might
(28:06):
you might not be able to sell them as quickly
as you could the ETF. So if you value liquidity,
that's where the buffer ETFs come into play. If you
value significantly significant certainty, I should say, that's where the
structure notes come to play. But they do the same thing.
It just kind of depends whether or not you want
(28:26):
to have that certainty a little bit higher or that
liquidity a little bit better.
Speaker 1 (28:29):
Yeah, I don't think you have to be a sophisticated
investor right for this to make sense for you. But
I will go back to the point of don't try
this at home. Either one of these could be fantastic options.
And this is a look yourself in the mirror kind
of proposition. If you do loose sleep when there's volatility
in the markets, there are options. I would suggest finding
(28:50):
a financial advisor that you can trust, a fiduciary to
partner with.
Speaker 4 (28:53):
But certainly if you're working with someone, bring up these
options if you are someone who really really cannot just
ride the waves of when the markets are down. Great perspective,
as always from our Chief investment Officer, Andy Stout. You're
listening to Simply Money presented by all Worth Financial here
in fifty five KRC the talk station. You're listening to
(29:15):
Simply Money presented by all Worth Financial. I mean you
Wagner along with Bob Sponsell or do you have a
financial question it's keeping you up at night. There's a
red button you can click on while you're listening to
the show right there on the iHeart opp record your question.
Speaker 2 (29:27):
I have several I have several that are keeping me
up and can I hit the red button and email.
Speaker 1 (29:32):
You those Yes, I'll take your questions you take mine,
we'll get we'll solve all the world's problems. All right,
straight ahead, We're gonna help you. H next time you travel,
take that experience to the next level with technology, some
cool stuff you may have never even heard of it.
I'm coming across this more and more often, Bob. I
don't know about you, but someone who has saved, well,
(29:55):
maybe their grandparents had a particular stock or company that
they loved and their family has been invested in it
for years, or they just caught something a company when
it was on the upswing, and now they kind of
feel backed into a corner because if they were to
sell out of that position at all, they're going to
have a huge tax bill in the form of capital gains.
Speaker 2 (30:17):
Yeah. What I usually run into this situation. There's usually
two things going on with the clients I've dealt with
for years. The first one is emotional and the second
one is economic. And here's what I mean. Emotionally. A
lot of times folks have inherited these stocks, yep, from
parents and grandparents, and there's just, you know, for good reason,
there's just this emotional attachment to the stock. And my
(30:40):
advice is always, you know, stocks don't have feelings. Yeah,
and you know they're economic instruments. You want to be
in them if they're going up, and you want to
be out of them if they're going down. So we
got to remove, to the extent possible the emotion from
holding the stocks holding these stocks. Then there's an economic
component of this is how does that concentrated position, How
(31:04):
does that fold or meld into your overall financial plan?
Because if the financial plan is not going to work,
if we insist on adhering to these emotional feelings, well,
then we've got to make some changes, and people need
to be open to discussing them.
Speaker 1 (31:19):
Well, and I'm going to throw out another emotional attachment
that I see. And it's not necessarily that you have
inherited this position, or your grandma or your parents loved
this company. But sometimes it's you picked it yourself out
of all the companies out there, and it did really
well for you, and to let it go now when
it's gotten you from where you were ten years ago
(31:40):
to where you are now.
Speaker 2 (31:41):
Or you worked for the company, yeah, and you were
a big part of earning that growth, yep, because it
was a great company. You had a big part in
making it grow and you're very proud of that, and
for very good reason.
Speaker 1 (31:53):
Yeah, two concerns that I have if you are in
this situation. One is, of course that position go down, right,
and then you're losing a large part of what you've built.
But second, if you're not properly diversified, the next thing.
We don't know what the next company or sector is
going to be, but they're out there somewhere, and if
you're so concentrated in one position or one sector, you're
(32:17):
probably going to miss out on the next big thing.
So if this is you, you actually do have options.
One of those is you know, gradually diversifying over time,
you know, selling a little bit, you know, especially if
that company has to you know, has some down days,
some downtimes, right, that can be a great time to
do it, but over time, trying to move out of
(32:40):
that position slowly. This is not necessarily an overnight proposition.
Speaker 2 (32:46):
This is one of the big reasons why we advocate
in non IRA accounts using that tax alpha you know,
tax loss harvesting strategy, where we could, like in markets
like we're experiencing now right, there are opportunities to harvest
short term and long term losses and use those losses
to offset the embedded capital gains in these concentrated positions.
(33:09):
And now's a perfect time to implement those types of strategies.
Another one is just direct indexing, and again this is
a gradual approach where we can drop that concentrated position
into a more diversified portfolio with that tax loss harvesting
program operating in the background, and we just gradually, you know,
(33:31):
get us to where we need to be from a
diversification standpoint, not getting rid of one hundred percent of
the stock, but just making it a more responsible percentage
of your overall allocation.
Speaker 1 (33:42):
I was just talking last week to a group of
kind of higher net worth investors, many of them working with,
you know, fiduciary financial planners, and I said, hey, how
many of your advisors, you know that they're not working
with all worth. How many of your advisors have even
mentioned strategies like this? None of them, None of them had.
Indirect indexing can be a great option for you where
(34:02):
you're essentially buying all of these pieces of individual companies, right,
So you're buying individual stocks and then on days when
those when those companies take a hit, you sell out
of that position, you harvest that loss and you can
be super tax efficient in the future. Another conversation I'm
having is about a caller strategy. So this is when
I always say, and I think I got this from you, Bob.
(34:25):
Is this a sacred cow right? Is this something that
you just cannot let go of. If that's the case,
we can use options to give you some downside protection.
It's also going to cap a little bit of the upside, right,
that's how you pay for that downside protection. But in
a volatile market, that can help you sleep at night.
Speaker 2 (34:48):
Well, today's a great day to talk about why and
how that strategy works. So to try to keep this
as simple as possible, you sell, you simultaneously sell and
buy an option on the same stock. So you sell
a cover call, which means you're placing an upside floor
on your gains and you're collecting premium. Right now, you're
(35:08):
using some of that premium to buy put protection on
any downside movement.
Speaker 1 (35:13):
YEP.
Speaker 2 (35:14):
So in a day like today, let's take Apple. You know,
with all the tariff news on China, I think Apple
was going to open up down about eight percent today. Well,
if you had put protection paid for by your caller
cover call sale. You've fully protected the downside on that
Apple stock and continue to own the stock. It can
be a wonderful strategy to reduce volatility in your portfolio.
Speaker 1 (35:38):
You know what's interesting too, I often come across people
again in this area so generous. They've got a concentrated position,
they're afraid of it, right, and they also are giving
to their church or a charity out of their savings account.
And I'm like, hey, let's go ahead and give some
of that concentrated stock position as the gift as the donation.
And that can be also a great strategy. Here's the
(35:59):
all Worth advice. It's important to manage or diversify these
concentrated positions over time to protect your financial future. Next,
high tech tools that can enhance your next travel experience.
You're listening to Simply Money presented by all Worth Financial.
You're in fifty five krs the talk station. You're listening
to Simply Money presented by all Worth Financial. I mean
(36:19):
me Wagner along with Bob's sponsorer. One of my favorite
things to do is travel, and I know a lot
of my clients that I work with that's retirement goal.
And also while they're working, right, that's where they like
to spend their money sometimes, Bob. As we all know,
it can be a pain some you know delays, you know,
getting lost, losing luggage. There are some high tech things
(36:42):
that you can now have with you when you travel
that might make it a lot easier.
Speaker 2 (36:47):
Yeah, And as we look through this list of things,
I mean, this kind of blows my mind. I don't
have any of this stuff. I didn't even know it existed.
One of the things that jumped out to me was just,
you know, having a built in charger for my cell
phone in my suitcase in your life. Yeah, you probably
already owned three of these amys.
Speaker 1 (37:03):
I do not, but I have this anxiety every time
I check a bag that I'm never going to see
that bag again. And one of the things that you
can have with your luggage, it's called smart luggage, and
you mentioned built in charging ports, but can also have
GPS tracking and digital locks on it so you can
(37:24):
have a little more control, and then you can know
exactly where your bag is so that you don't have
to stress out while you're on the flight like I
always do. For those of you who are traveling internationally,
language translation apps portable Wi Fi hotspots where you don't
have to pay roaming charges like these are things that
should probably be a normal part of what you have
(37:44):
if you are someone who travels internationally on a regular basis.
Speaker 2 (37:49):
There's also some safety apps. You know, if you're traveling
overseas or in the mountains and you slip and fall
on the side of a mountain or something, there's features
that will let your life ones know, you know, the
proverbial I've fallen and I can't get up kind of thing.
You know, you can have that kind of technology in
your travel gear. It's amazing the stuff that's out there today.
Speaker 1 (38:10):
Yeah, and some things that you might already have, right
might we have Life three sixty. There's be Safe, there's noonlight.
Speaker 5 (38:16):
You know.
Speaker 1 (38:16):
I think about the fact my kids are in college.
None of them are traveling internationally right now, but I
have friends' kids who are doing study abroad, and this
is a great way where you can kind of sleep
at night knowing, Hey, they're in a totally different time
zone and I don't know what's happening, but I can
see exactly where they are. Thanks for listening. You've been
listening to simply money presented by all Worth Financial here
in fifty five KRC. The talk station
Simply Money News
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
Ridiculous History
History is beautiful, brutal and, often, ridiculous. Join Ben Bowlin and Noel Brown as they dive into some of the weirdest stories from across the span of human civilization in Ridiculous History, a podcast by iHeartRadio.