September 12, 2025 • 40 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down the latest Consumer Price Index report and what it means for your wallet, discuss why Oracle is suddenly the market’s newest darling, and explain what a drop in mortgage rates could mean for both buyers and refinancers. They also explore Robinhood’s push into social investing, whether alternative strategies like gold and copper are smart diversifiers or just the latest trend, and walk through three practical steps for managing an over-concentrated stock position. Plus, on the anniversary of 9/11, they reflect on the market’s resilience in the face of tragedy and what lessons investors can take from it today.
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Speaker 1 (00:00):
You're about it, Donald Trump, crashing economy.
Speaker 2 (00:02):
Economy is in a solid position. Talk about it. Fifty
five krs the talk station.
Speaker 1 (00:17):
Tonight, New inflation numbers, a new darling of the stock market,
and how to deconcentrate a stock position in three specific steps.
You're listening to Simply Money, presented by all Worth Financial
on Bob spun Seller along with Brian James Well Brian,
last night we broke down the latest inflation report from
the business side, how much companies are spending. Tonight we
(00:39):
flip the script script and we look at how much
we the consumers out there are spending. Brian break break
down the latest CPI report for US.
Speaker 3 (00:48):
Yesterday was PPI Producer Price Index from the business point
of view. Today we talked about CPI Consumer Price Index
headline CPI for August.
Speaker 4 (00:56):
The reason we're talking about it.
Speaker 3 (00:57):
He was two point nine percent, which simply means we're
paying two point nine percent more for all the stuff
at the cash register than we were at this time
last year.
Speaker 5 (01:04):
That's not bad. It's a little bit higher.
Speaker 3 (01:06):
Than July, but not really any cause for alarm on
an inflation standpoint. So as we as we know every
time we talk about this, We got to talk about
something called the core CPI. The FED really likes to
look at the core CPI, which strips out food and energy,
and a lot of people object to that from a
standpoint of, well, those are two kind of important things
that I have to pay for, so maybe we should
watch the prices on those. But the reason they do
(01:28):
that is because those things can be very seasonally volatile
as well.
Speaker 4 (01:33):
As you know, energy is a speculative.
Speaker 3 (01:34):
We talk about oil and all that kind of stuff
that can be very speculative, which can be volatile for
reasons that have nothing to do with inflation, just those
specific one.
Speaker 1 (01:41):
And there's geopolitical stuff that impacts the price of oil
too on a short term basis, So I can understand
why they want to strip that out because it is volatile.
Speaker 3 (01:50):
But go right, because we just we want to get
a clear picture for what is the overall, what's the undercurrent.
That's why there is the CPI, but there's also the
core CPI.
Speaker 4 (01:57):
We have both of them anyway.
Speaker 3 (01:58):
Core CBI for August was three point one percent, which
was exactly as forecasted, and that is the same as July.
So it's behind these numbers is that the index for
shelter housing prices rose about point four percent in August.
That was the largest factor in the all items monthly increase.
In other words, we look at everything, the biggest of
the needle mover was housing. Food was up about a
(02:19):
half a percent, and that's in general. Food at home
was up point six percent. That was is interesting. We're
seeing a little more of an increase for people eating
at home. Food away from home, you know, your Applebee's
trip that was only up by about point three percent.
Speaker 4 (02:32):
So some some.
Speaker 5 (02:33):
Decent numbers here.
Speaker 3 (02:34):
Nothing to be super alarmed about, but very indicative of
what's to come here. We'll see next week with interest
rate meetings.
Speaker 1 (02:41):
Yeah, another interesting thing from this report, at least to me,
airline fares were part of the mix, with that index
jumping five point nine percent in one month after rising
four percent in July.
Speaker 5 (02:54):
I don't know whether this is seasonal.
Speaker 1 (02:56):
People probably trying to squeeze in, you know, some trips
before school starts and all that, but you know, five
point nine percent jump in airline fares is significant.
Speaker 5 (03:06):
It also looks like auto costs are starting to tick
up again.
Speaker 1 (03:09):
New vehicles rose by point three percent, while use cars
and trucks rose by one percent, But the real sting
Brian was in motor vehicle maintenance of repairs that jumped
by two point four percent. Mercifully and thankfully, motor vehicle insurance,
which has been on the rise, was flat for the month,
so hopefully that's leveled out for a while.
Speaker 5 (03:31):
That's right. So we've also got jobless claims to talk
about this week.
Speaker 3 (03:34):
So applications for unemployment benefits were up to the highest
level in almost the four years, and that so that
indicates that that layoff activity might be on the rise.
Companies are starting to respond to what they're seeing a
little bit with regard to the economic activity and concerns
about tariffs and so forth, and atle bit of a
sharp slowdown in hiring too. Initial claims were up about
(03:55):
twenty seven thousand to two hundred and sixty three thousand
for the week ended September six.
Speaker 5 (04:00):
Fed.
Speaker 3 (04:00):
Of course, as is their job, they're analyzing all this
information in but it really really seems clear that we're
going to see an interest rate cut next week, probably
in the range of twenty five basis points.
Speaker 5 (04:08):
But I will swear that I never said that. If
I am wrong of course.
Speaker 1 (04:13):
Yeah, I mean I could we all know the markets
pricing in you know, over a ninety percent probability now
of just a quarter point rate cut. There are those
clamoring out there for a half point rate cut.
Speaker 5 (04:24):
I think that's wishful thinking at this point.
Speaker 1 (04:27):
At least, it seems to me like they're gonna cut
by a quarter and they're going to talk about continuing
to watch the data and we might get a couple
more quarter point drops before the end of the year.
But like you said, who knows, And it is very
dangerous to speculate, predict and base short term investment decisions
on what we think is going to happen to interest rates.
(04:48):
That's usually a losing proposition to try to guess what
the Fed's gonna do. All right, you're listening to Simply
Money presented by all Worth Financial on Bob Sponsorer along
with Brian James, another story we're following the company making
all the headlines all over the place today. No, it's
not Navidia, it's not Amazon or Meta or Tesla, it's Oracle.
Speaker 5 (05:10):
Brian. What is going on with Oracle, Bob?
Speaker 3 (05:13):
What's going on with Oracle is that Brian is having
flashbacks to the nineteen nineties in early two thousands when
Oracle was one of because that was one of the
original sort of internet infrastructure companies. This goes back that
Oracle has been present in all of the Internet booms
that we've ever had.
Speaker 4 (05:28):
It seems like, and are you.
Speaker 1 (05:30):
Are you going to talk about a personal Brian James
tax loss harvest from back in the nineties.
Speaker 3 (05:36):
No, that was a company called CMGI that I put
I think I put a thousand bucks into it, sold
it for two thousand and called, declared myself Warren Buffett.
Had I held on to it for a little bit longer,
my thousand would have been worth two hundred and fifty thousand.
Had I held on to it for another year beyond that,
my two hundred and fifty would have been worth zero
because it failed in two thousand and two. That's when
I decided to become a financial planner and not so
much internet stock jockey, but anywayting So, yeah, but back
(06:01):
to today's headline.
Speaker 5 (06:01):
So what's going on with Oracle.
Speaker 3 (06:02):
Oracle, of course is a big it's a big company
that they're known for database software, enterprise software, cloud services.
Think of stuff like Microsoft Azure, Google Cloud.
Speaker 4 (06:11):
Oracle has their own two big, huge company.
Speaker 3 (06:14):
Now they're the world's biggest chip maker, a four point
two trillion dollar titan of technology. They were up and
coming player in artificial intelligence way back in the spring
of twenty three, and they had a massive revenue forecast
tied to their demand for their AI powering processors. On
that day, the stock added about two hundred billion dollars
and really hasn't ever looked back. Well, that was two
(06:35):
years ago, so why are we talking about it today.
Oracle just revealed they have a huge backlog of contracted
AI computing work, in other words, more of the same
that they've apparently been a little hush hush about. So
that adds to a nearly four fold game bob in
the shares since the launch of chat GPT in November
twenty two. The chat GPT is, though, it is the
sort of the bell weather of this whole AI swing,
(06:57):
because when that company came out, when those tools became
a bailable, things just started moving extremely rapidly in this space,
and the Oracle is no stranger to it.
Speaker 5 (07:06):
Yeah.
Speaker 1 (07:06):
Another interesting key key, at least to me, of Oracle
success is that, unlike other firms, out there. They are
not out there developing their own large AI models that
compete with potential clients. They're smart about this. Their neutral
status gives it significant advantages. It has partnerships with Microsoft, Google, Amazon,
(07:27):
which lets Oracle databases run in the clouds. Brian, this
is a smart strategy. Partner with everybody out there that's
really building this stuff out and have revenue streams coming
from all sources. And by the way, Oracle founder Larry
Ellison just became the world's richest person for the first time,
surpassing Elon Musk's nearly year long rain in the top
(07:50):
spot among billionaires.
Speaker 3 (07:52):
Yeah, and I think this is interesting, and I feel
like I've abused this analogy for whatever reason a lat
but Oracle is in a position to benefit from AI
without actually being at the forefront of aiither. Like you said,
they're just supporting everybody. So the analogy that I always
use is the gold Rush of eighteen forty nine. The
people who made all the money in the gold Rush
were not the gold diggers. It was Levi's who designed
(08:13):
really tough pants for people to wear while they were
digging around, crawling around the rocks and digging up gold.
It was Wells Fargo that invented a way to move
money across the country, which was literally horses and stagecoaches
way back in the day. But they built that network
to move money across to support all the people that
were going out there. Studebaker made wheelbarrows of all things,
and that eventually became the car company that was relatively famous,
(08:35):
you know, the half a century later. But in any case,
the whole point of this is that Oracle is in
a position to simply support the major players out there.
So if one of those major players fails and goes away,
that's fine. That doesn't hurt Oracle because they're building tools
that all of them can use.
Speaker 4 (08:49):
It's pretty darn smart.
Speaker 3 (08:50):
And that's why Larry Ellison owns an island and a
lot of money.
Speaker 5 (08:55):
Yep.
Speaker 1 (08:55):
All right, We've got some news on mortgage rates tonight,
and thankfully the news is good. Mortgage demand jumped to
the highest level in nearly three years. The average interest
rate for a thirty year fixed rate mortgage with conforming
loan balances, which is now about eight hundred and six
thousand dollars or less, decreased to six point four to
(09:17):
nine percent from six point six four percent. We talk
about this all the time, Brian. Once those rates get
below seven, activities starts to be generated and low and
behold it's happening again. Talk about mortgage applications.
Speaker 3 (09:33):
Yeah, absolutely so so applications to refinance home loans jumped
about twelve percent for the week and has about a
third higher than the same week one year ago. So
if you think about this, this is the backlog of
people who may have been disappointed that they didn't get
into any kind of a mortgage before rates started to
go up. And I guess we're what three four years passed,
the golden days of mortgages where you could get one
(09:55):
sometimes even under three percent. Well, those days are over,
but that doesn't mean people haven't been buying houses and
having to live their lives, but they've been doing it
at sometimes seven seven and a half percent. Well, now
rates are getting low enough that those mortgages that are
only maybe three or four years old are being considered
for refinance. So this maybe we'll get to a point
where we go back to where we were I don't know,
(10:16):
ten twelve years ago, where you would refinance three times
in the year just because it made sense because rates
were dropping. I don't think that's on the horizon right now,
but that's definitely the situation we're in.
Speaker 5 (10:26):
There are two things that drive mortgage rates up and down.
Speaker 3 (10:29):
It is not a decision by the Fed directly that
has an impact, but it's the overall market really the
ten year treasure. You're going to keep your eyeballs on
that you can kind of tell where mortgage rates might
go if you're in a situation where you're gonna need one.
But to applications for purchase mortgages, we're up about seven
percent for the week and twenty three percent versus that
same week a year ago, So a lot of activity there.
(10:50):
But if you're somebody who has put a mortgage in
place over the last three years, time to start paying
attention to potentially get yourself a new rate. You can
do two things with that. You can either just have
some month savings, which we all love, or stick to
the payment you've been making and that mortgage is going
to be paid off a little bit faster because you
got lower interest rate in the mix.
Speaker 1 (11:08):
Yeah, good news for sure, and hopefully these rates continue
to come down a little bit and get more people,
especially those first time buyers into homes that they can afford,
and you keep the wheels of capitalism moving all right,
Robinhood Goes, Social Gold Goes AI are non traditional investments
the next big thing or just the next big risk.
(11:30):
We'll discuss that next. You're listening to Simply Money presented
by all Worth Financial on fifty five KRC the talk station.
Speaker 6 (11:38):
Yes he's all Worth Financial, a registered investment advisory firm.
Any ideas presented during this program are not intended to
provide specific financial advice. You should consult your own financial advisor,
tax consultant, or a state planning attorney to conduct your
own due diligence.
Speaker 1 (11:57):
You're listening to Simply Money presented by all Work Financial
on Bob Sponsller along with Brian James.
Speaker 5 (12:03):
If you can't listen.
Speaker 1 (12:04):
To Simply Money live every night, subscribe and get our
daily podcasts. You can listen the following morning during your
commute or at the gym. And if you think your
friends or family could use some financial advice, tell them
about it as well. Just search Simply Money on the
iHeart app or wherever you find your podcast. Straight ahead
of six forty three How to d risk a concentrated
(12:25):
stock position in three simple steps.
Speaker 5 (12:29):
All right.
Speaker 1 (12:30):
You may know Robinhood is the app that turned day
trading into a pandemic pastime. Well, now they're taking things
a step further, introducing a social media network inside the
trading platform.
Speaker 5 (12:43):
Brian fill us in here.
Speaker 1 (12:45):
You're one of these millennial type dudes that loves all
this stuff. What do you think of Robinhood and the
newest evolution of their.
Speaker 5 (12:53):
Software, Bob?
Speaker 3 (12:54):
If we've met, maybe we should go grab lunch sometime
and you can you can get to know me a
little bit now. So, yeah, what's happening here is they're
building a social media inside the trading apps. You're now
gonna be able to follow your friends, share trades, and
treat investing kind of like you're on you're on Instagram,
and just make it all social media all the time,
right out of the This is right out of the
Reddit and the TikTok playbook, but wrapped inside a broker's account.
Speaker 5 (13:15):
Bob, I'll be honest as a business idea.
Speaker 3 (13:18):
Uh, I kind of get it because obviously people like
to talk about this stuff. If if you're ever moved
to go down a rabbit hole, go on Reddit's Wall
Street bets. Uh, subreddit, and you're gonna read. You're gonna
read a lot about a lot of sad people. It's
mostly what they call lost porn, which is simply sharing
exactly how much money they've lost on a daily basis.
Speaker 4 (13:36):
A lot of it is that.
Speaker 3 (13:38):
But in any case, now you're gonna be able to
do it right alongside the place where you're actually placing
your trades instead of bouncing back and forth. I think
it's a pretty good idea by Robin Hood.
Speaker 5 (13:46):
I think it's a.
Speaker 3 (13:46):
Terrible idea for really anybody to get into this other
than treat this stuff like fantasy football. It's fun, there's
nothing wrong with doing it with a reasonable amount of money.
But at the same time, you know, just don't don't
get to too over overly in it, just like anything else.
Speaker 1 (14:01):
Well, Brian, as I read that story, I noticed that
you can you can link your friends up so everybody
can share what they're trading, I guess in real time.
And then, like you said, like fantasy football, there's a
leader board to see who's quote unquote winning. I don't
know what could what could possibly go wrong under these
different scenarios, Brian, you know.
Speaker 5 (14:23):
It's gonna be interesting.
Speaker 3 (14:24):
I'm gonna rubberneck this whole thing and it will be
fascinating to watch because I love the One of my
favorite books of all time is the uh, the Madness
of Crowds and the Popular Delusions or whatever. Books written
about two hundred years ago, but it talks about, uh,
the things like what what crowds get together and do
with when group think results? Uh? And this is literally
putting groupthink on steroids because it will be real time.
(14:48):
So and so just bought this. Well, I bet everybody's
gonna follow him. It's gonna be a way. It's quickly
gonna be a way to speculate and to be It's
gonna easily provide ways to pump and dump.
Speaker 5 (14:57):
Right, you don't have to call people from a boiler
room anymore, and can.
Speaker 3 (15:00):
Vinsom to buy things. They can just watch what you
do with your little bits of money. Very smart people
will write algorithms that will automate all this. They'll get
the herds to follow them, and uh, it's that's what's that.
Those are the headlines is gonna come out of it.
But any case, you know, it's gonna.
Speaker 5 (15:13):
Be watch hey for for day traders.
Speaker 1 (15:15):
I think this stuff is wonderful because when you're when
you're doing short term trading, you're looking for short term
volatility any place you can find it. And if we've
got a bunch of you know, teenagers on their couch
causing game stop to climb forty five minutes and then tank,
that's a wonderful thing.
Speaker 3 (15:35):
I think there's gonna be very little discussion of hey,
did you hear pray off.
Speaker 5 (15:40):
Of the stupidity of others? All right, in all seriousness.
Speaker 1 (15:43):
For younger investors just getting started, I think this is
engaging stuff. I mean to learn about investing. And you know,
even Robinhood said they want to democratize investing even more,
get more people involved, and I think that's wonderful. But
for high net worth investors, I think it's a distraction
at best, and at worst it can be a real
(16:04):
trap because as we all know, groupthink is not a strategy.
Speaker 4 (16:08):
Yeah, I want to throw one more thought on it.
Speaker 3 (16:10):
Two again, for those for you younger folks who are
thinking about getting involved in these things, there's nothing wrong
with it, right, Just know what you're getting into, Tuddy.
If you touch the hot stove once, you're learning. If
you touch it twice, you're stupid. But at the same time,
build something in the background that is more traditional, more reasonable.
And the reason I say this because I've had a number,
for whatever reason, the last couple of years, I've had
a number of adult children of my clients come in
(16:32):
and they've been chasing crypto for like fifteen years and
sometimes okay and sometimes not great. Nobody has made a
bazillion dollars. If that's the case, they're probably not wanting
to talk to me. But in any case, make sure
that you have something traditional in the background.
Speaker 4 (16:45):
Do this with a small portion of the assets.
Speaker 5 (16:47):
You're listening to.
Speaker 1 (16:48):
Simply money presented by all Worth Financial on Bob Sponseller
along with Brian James. All Right, let's zoom out a
little bit here. Robinhood's move is just one signal in
a much bigger shift we're seeing across the board in
the investment world, a shift toward non traditional investing. Another
example of this gold, copper and commodities. Brian, I mean,
(17:09):
let's face it, gold just hit record highs.
Speaker 3 (17:12):
YEP, copper itself is suddenly being talked about as an
AI metal, meaning let's assume that copper is being built
into all these video cards and things that have been
sold to that started with crypto mining and now.
Speaker 5 (17:23):
Has moved into AI.
Speaker 3 (17:25):
So investors are piling into this and not just as
a hedge against inflation. Right, Any stock is a hedge
against inflation, right, A balanced portfolio, we'll do that for you.
But this is a way to ride the tech boom
in a totally different asset class.
Speaker 5 (17:37):
You know, what do we think about this?
Speaker 4 (17:38):
Are we throwing money?
Speaker 3 (17:40):
It's interesting that people are looking at these types of
things suddenly and deciding that this is a better investment.
While we're sitting here, the stock market itself is at
an all time high and has been for several weeks
and frankly most of the.
Speaker 5 (17:50):
Year, and for frankly most of its existence.
Speaker 4 (17:52):
The market goes up and not down.
Speaker 3 (17:54):
So all this speculative activity on all these things is
is just that it's speculative.
Speaker 4 (17:59):
The herd's going to go the other direction on you.
Speaker 3 (18:01):
And if you're just we're talking about it now because
it's already a headline. If you're hearing us talking about
it and thinking about investing because you heard it on
the radio, it's probably the wrong time. We're simply reacting
to what we see out there in the market. So
whether it's a digital platform or tangible assets, the question
is still the same. Are these alternative strategies smart diversifiers
or are we just chasing what's hot?
Speaker 4 (18:22):
Bob, what do you think of that?
Speaker 5 (18:23):
Well, I mean, I'm not against any of this stuff.
Speaker 1 (18:26):
They're just there are inherent dangers in piling too much
money into any volatile asset class. And you know, the
danger isn't just losing money, it's straying from your long
term financial plan that's already working. Your money should have
a job. It shouldn't be scrolling Robinhood to just see
what's trending. But on the other hand, non traditional doesn't
(18:48):
mean bad. There's a bunch of non traditional strategies out there.
We talk about direct indexing all the time. Most people
don't even know what that is, but our industry evolves,
different tools come out, different ways to invest or available.
The key difference is a lot of these newer strategies
(19:08):
that we talk about on this show. There are strategies
that are designed with discipline and have an actual track
record behind them, not just what everybody's talking about on Robinhood.
You know, treating investing like fantasy football.
Speaker 3 (19:24):
Right, And I would say, just to kind of lay
out a little more what I would consider to be
traditional investing.
Speaker 4 (19:29):
Kind of the.
Speaker 3 (19:31):
Bare roots definition of it is buying an S and
P five hundred fund and sitting on it and ignoring it.
That is not a bad strategy, by the way, but
that to me is traditional. All these other things are
tweaks in different directions where you should understand the benefits of.
For example, direct indexing has to do with more efficient
tax loss harvesting those kinds of things, but it still
follows the same rough principles as the S and P
five hundred bufferdtfs will be a little better in bad times,
(19:54):
but will leave some on the table in good times.
They all have their different tools. Those are non traditional approaches,
but these are all all strategies designed with discipline, based
in the history of the markets.
Speaker 1 (20:04):
Here's the all Worth advice. When you have real money
at stake, you don't need a trendy strategy. You need
a thoughtful, time tested, disciplined one.
Speaker 7 (20:12):
All right.
Speaker 1 (20:13):
We had a call or ask recently if he should
switch his four to one K from roth to pre tax.
But the real answer may be something you've never even
heard about. We'll break that down and explain why it
could be a huge opportunity for some of you out there.
You're listening to Simply Money presented by Allworth Financial on
fifty five KRC, the talk station.
Speaker 8 (20:34):
We call them every day Millionaire every day listen to
Dave Ramsey Rich people ask how much? Both people ask
how much down? And how much a money? With days
seven start asking how much?
Speaker 2 (20:46):
On fifty five KARC the talk station. It's the iHeartRadio station.
Speaker 1 (20:57):
You're listening to Simply Money presented by Allworth fin Answer
on Bob's Fun Seller along with Brian James. Do you
have a financial question you'd like for us to answer.
There's a red button you can click while you're listening
to the show right on the iHeart app Simply record
your question and it will come straight to us. And
speaking of questions, we've actually got a live caller tonight.
(21:18):
John has called in and John, thanks for joining us tonight.
Speaker 5 (21:22):
What's on your mind and how can we help you?
Speaker 7 (21:24):
Perfect No appreciate you guys having me on Love the Show.
My question is really related to four oh one k contributions,
so just a little bit of context. My wife and
I both max are four to one K contributions. We
are in the highest tax bracket so and that's you know,
above thirty seven percent. Both my wife and I contribute
(21:48):
to a ROTH contribution and we have been for years,
and so my question is, you know, I know the
debate of whether it should be pre tax or ROTH.
We just always wanted to, you know, have as much
savings and WROTH as we possibly can, and we're both
very good savers, and so just wanted to get your
(22:08):
guys's perspective on if we should switch to a pre
tax for one KA try contribution and then you know,
obviously get some tax savings, or if we're kind of
okay contributing into it to a WROTH for.
Speaker 4 (22:22):
A one K Okay, Yeah, that great detail there, John.
Speaker 3 (22:25):
So quick question for you is you didn't bring this up,
so I assume that otherwise cash flow is okay. You're
not really worried about getting the bills paid in all that,
You're just trying to find the most efficient way, most
e fficient place for that surplus income to land.
Speaker 4 (22:37):
Do I have that correct?
Speaker 7 (22:39):
That's correct. We still save regularly into a tax like
a taxable brokerage account as well. So if we were
to switch into a change this to a traditional and
get more tax savings, I would probably just save that
into a into a taxable brokerage account to be honest.
Speaker 3 (22:54):
Okay, gotcha. Well that's a great, great situation. So congratulations
for putting yourself there. You have a lot of opportunity
ahead you. So the first thing that comes to mind is,
first off, I'll say, here's my personal perspective. So I'm
fifty one, and I spent the first several decades of
my career shoving money into my pre tax four oh
one k.
Speaker 4 (23:13):
Cus that's all there was.
Speaker 3 (23:14):
And as I sit here and do my job that
I've been doing for about thirty years now, that's what
I run across people with an enormous amount of money
on the pre tax side and maybe a little bit
of ROTH because they came to it later.
Speaker 4 (23:23):
It simply wasn't an opportunity.
Speaker 3 (23:25):
It was really really only became an option to do
inside of a four oh one K I would say,
starting twenty ten and later, because that is a plan
by planned decision, your employer, your company has to decide
to allow ROTH contributions to the four oh one K,
and they have to pay lawyers to redo a document
that governs the whole plan. So that's why it didn't
become available on day one, like when roth iras came
(23:46):
available to everyone. So that's that's kind of what I'm
kind of guessing. That's maybe a little bit of what
you're facing too. But you're right, Yeah, the pre tax
side is great. Of course, it sounds like you're in
a bracket where you're in about the highest bracket there is,
so pre tax savings would be lovely and I think
probably makes some sense there.
Speaker 4 (24:02):
Now you mentioned Roth contributions.
Speaker 3 (24:04):
You are I want to clarify you are specifically referring
to Roth contributions to the four oh one K You're
not doing roth irays outside, correct?
Speaker 7 (24:12):
We do we contribute to a traditional IRA and then
do the back door for both myself and my wife.
Speaker 3 (24:18):
Okay, well you just said the key word there because
this is when I read when I when I heard
your question and kind of what we were going to
be talking about, my mind went straight to something that
I super super super hope you can do. Have you
ever heard of a mega back door four oh one
K roller.
Speaker 7 (24:34):
I've heard of it. I'm not sure if my employer
allows it or not, but be helpful to get some
some additional background.
Speaker 3 (24:40):
For sure, Yeah, you bet, absolutely so this could be
a fantastic opportunity or for you, or it's going to
be a big tease because you'll find out you can't
do it.
Speaker 4 (24:47):
But at the very least it's worth looking into.
Speaker 3 (24:50):
So let me let me kind of walk through the
details here at the end of this if you look
of First of all, let me ask you a quick question.
Speaker 4 (24:56):
Can I ask how old you are or if you're
over under fifty?
Speaker 2 (24:58):
Yeah, I'm a thirty eight.
Speaker 4 (25:00):
All right, So you got some time to go.
Speaker 3 (25:02):
So the reason I asked is because if you're over fifty,
you'll be able to do a little more in terms
of catchups. But for now, we'll keep it as it
is where we are right now. But the gist of
what I'm about to say is that you could potentially,
if the planets line up correctly for you, which we're
about to walking through, you could potentially be putting a
way up to sixty nine thousand dollars as somebody who
is under fifty into your four oh one K. So
(25:25):
there are a lot Most people are familiar with the
two flavors of tax treatment inside right, we can do
ROTH or we can do pre tax. You've been talking
about that already in this call. There is a third
flavor called after tax, which is a little bit of
both of them. You can choose and sometimes they call
it a voluntary contribution. There's lots of weird IRS risso
words attached to it. But you put the money in,
(25:46):
you do not get a deduction. That's the after tax part,
and if you leave it as such, if you leave
it as an after tax contribution, any growth that occurs
will happen on the pre tax side, So it's kind
of in that case, it's kind to the worst of
both worlds. You put the money in and you don't
get any deduction for having done so, and the growth
is creating a little more of an ordinary income taxable
(26:09):
overhang over time, so putting it in as an after
tax contribution is not the that's the first step. The
second step is an IRS rule that went into place
in twenty fifteen that basically said that you are allowed
to roll over any after tax contributions directly into a WROTH.
So when you combine your normal twenty three thousand dollars
that you can put in. That's the limit for everybody.
(26:30):
You can choose WROTH or pre tax on that. Your
company may throw in a match. We have to account
for that too, if your company does profit sharing, does
a match or whatever. Let's all make up a number.
Let's pretend that that's an extra twenty thousand dollars. So
now we're at forty three. That means in that particular case,
you can choose to put in another twenty six thousand
in the after tax bucket and then immediately convert that
(26:51):
to WROTH.
Speaker 4 (26:52):
Does that make sense? So far?
Speaker 7 (26:55):
It does? It does?
Speaker 3 (26:57):
So here's the rub your plan. It's so every plan
is a different animal, right. A plan four oh one
K plan is actually a trust that comes with an
instruction manual called a summary Plan description. And these are
probably documents that very few people ever bother to go
and read unless you're a financial nerd like Bob and I.
But what that will dictate is do you have the
ability to make that kind of contribution? First, that's the
(27:17):
first requirement. Second, it has to be able. You have
to be able to make a rollover of it. Sometimes
they'll allow you to do a rollover within the plan.
There are you know, the Catillac of this whole thing
is a you know, Fidelity sometimes offers these plans where
you can set this up to happen how automatically. In
other words, the conversion happens as soon as you get
paid the next day, and it just jumps through all
the hoops automatically. I think I've seen one of those
(27:39):
in my life. Other plans will allow you to do it,
but it's much more manual process, involving paperwork and actual
wet signatures. So and then the final If you can
keep it in the plan, that's great. It's also possible
that your custody and your four O one K may
require that you roll it into a wroth ira, which
you've already got out there. So in this case you
could just dump it into your own your roth I
(28:01):
raised as they stand, this would be worth looking into.
This would be separate, of course, for both you and
your wife. It is a per company, per decision whether
they're going to allow these types of bells and whistles,
but I'm hearing about them more and more so I
would look into that just to see if that's even
an option for you. I know that's not a direct
answer question. If you can do that, then what I
would do is, yeah, go ahead and flip the other
(28:22):
side to pretext. You're gonna high bracket, so take whatever
you can get, do the twenty three pre tax, and
then do the rest of it on the ROTH side.
Speaker 7 (28:30):
Okay, Yeah, that makes a lot of sense.
Speaker 1 (28:32):
So John, the key is to get that summary Plan
description document.
Speaker 5 (28:37):
You know, they they're required to give that to you.
Speaker 1 (28:39):
Just contact your HR department have them email that to
If you did that, you know, first thing in the morning,
you'd probably have it by lunchtime.
Speaker 5 (28:48):
I got a couple other questions for you. Do you
and your wife have children?
Speaker 2 (28:52):
We do?
Speaker 7 (28:54):
We have two children, Yeah, young, both under six.
Speaker 5 (28:57):
How long do you plan on working?
Speaker 1 (29:00):
Like you and your wife have, you know, very high
incomes and your wonderful savers. What are your plans for retirement?
When do you plan to stop working? And then what
are your plans in terms of dividing up your wealth
down the road between your kids and perhaps other family
members and perhaps charities. What are your thoughts on how
(29:20):
long you plan to work and how you see dividing
up you know, the wealth that you're doing a great
job of building.
Speaker 7 (29:27):
Yeah, lots of good questions. I would say my wife
similar age is probably would like to retire sooner rather
than later, in the next couple of years if possible,
and I would probably work, would like to work into
my mid fifties. Probably sixty would be a base case
(29:48):
for retirement. So that's kind of the go ahead plan
I think. Look honestly, in terms of distribution of wealth,
you know, hopefully we continue to save like we're doing
and have a good nest egg. I think, just the
way I was raised, I don't plan on I'm honestly
leading a lot for my kids, not not not zero.
(30:11):
But our plan is to have a really nice retirement,
stend it, you know, go on ice vacations, you know,
potentially buy a second home. You know, it probably gives
them to charity. But just enjoy the savings that we did,
and you know, enjoy the time and experiences with my kids.
Speaker 5 (30:29):
But I don't.
Speaker 7 (30:30):
I don't plan to leave a lot for my children.
Speaker 5 (30:33):
Fantastic.
Speaker 1 (30:34):
The reason behind my questions is it might make a
lot of sense just to sit down with you, with
you and your wife, with a good fiduciary advisor, and
just map out some different scenarios, you know, as far
as how long you plan to work, what income assumptions are,
what you plan on spending when you do retire, and
just run some different scenarios based on what Brian talked about,
(30:56):
what's the what's the best way to do this giving
your individual goals, because if you can have some a
pile of money in all these different buckets, that opens
up a wonderful set of opportunities for gifting to kids,
gifting to charity, saving taxes. I'd highly recommend you sit
down with somebody and just start mapping out some scenarios,
(31:20):
just so you know what the opportunities are now, so
you can get out in front of this thing before
you build up a massive tax bill that you can't
control once those require minimum distributions rear their ugly head,
you know, in thirty to forty years from now.
Speaker 7 (31:38):
Yeah, that makes a lot of sense.
Speaker 5 (31:39):
Track.
Speaker 7 (31:39):
I don't know a lot about those mandatory retirement distributions
quite yet, just because I haven't quit. You're gotten there yet.
But it's a very good point.
Speaker 3 (31:48):
You're doing a good job of handle. The best thing
to do is not to have too much on the
pretext side. That doesn't happen on the roth side. So
if you do want to look into that, you can
find that summary plan description. You should be able to
find it in like there should be a documents section
of your four oh one k It's maybe a sectually
never look in, but it'll have all those governing documents.
Speaker 5 (32:04):
All right, Well, thank you for your time. It's wonderful
to have you on the show.
Speaker 1 (32:07):
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC, the Talk Station.
Speaker 2 (32:13):
During the week we get a little dirty.
Speaker 4 (32:16):
Mud, dirty mud, dirty.
Speaker 2 (32:18):
Really nasty. But on the weekend we get dirty in
the mud, dirt everything to get your yard plans in
garden growing.
Speaker 9 (32:29):
And Monday, when you notice dirt under your fingernails, you
know you're doing it right.
Speaker 2 (32:34):
But I call you get dirty, Get Growing. Ron Wilson
Saturdays at six on fifty five k the Talk Station.
If you're looking for a faminions are welcome to here.
I do think he is too old to run.
Speaker 9 (32:48):
In twenty twenty four, fifty five KRC, the Talk Station,
you're listening to Simply Money, presented by all Worth Financial
on Bob Sponsorer along with Brian James.
Speaker 1 (33:02):
Do you have a financial question you'd like for us
to answer. There's a red button you can click while
you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to us. Tonight,
we want to talk about over concentrated stock positions, and
oftentimes these are not the result of hasty decisions. Many
times it's the byproduct of good things, loyalty, inheritance, or
(33:26):
just long term discipline success.
Speaker 5 (33:29):
But here's the hard truth.
Speaker 1 (33:30):
Concentration, if left unattended to over time, creates risk in
and of itself, and we want to talk about how
to address at risk a little bit tonight, Brian, let's
walk through three steps that we walk clients through to
handle situations like this.
Speaker 3 (33:48):
Well, like with many challenges of life. Step one is
awareness of it in the first place. So take a
look at your overall exposure and your overall risk of
not only your portfolio, but at the topic we're discussing
here is if you've got a lot of one stock, well,
how much of your portfolio does it make up?
Speaker 5 (34:02):
Good rule of thumb is ten percent.
Speaker 3 (34:04):
If you have too much, or if you have a
concentrated position that makes up more than ten percent of
your portfolio, that's a bit of a red flag. Now
let's be clear here, I'm not talking about if you
have a balanced ETF or a broad based mutual fund
index fund type of thing that is not a concentrated position.
We're talking about one individual stock, you know, one company
that can have anything can happen over time.
Speaker 5 (34:26):
Good and bad.
Speaker 4 (34:27):
But good news and bad news can come from anywhere.
Speaker 3 (34:29):
So if you have one stock that's going to eat
all that risk and that can be a problem. So
understand how that concentrated position behaves and relative to your
other holdings. If you've got other things in there that
kind of offset, they move maybe a little bit differently
than your concentrated position, and maybe it's no big deal,
but if that stock moves in sync with your overall
broader portfolio, with the broader market, you may have less
diversification than you think if it's going to do the
(34:51):
same thing as the overall market anyway. Plus it has
the risks of any individual company that can be.
Speaker 5 (34:56):
A risk to you.
Speaker 3 (34:56):
So make sure you understand what will happen if it
loses twenty thirty percent of its bat something like that.
Speaker 1 (35:01):
Well, and Brian, I know you do this with all
your clients that are in this situation, you do a
great job of it. One of the great things we
can do with software is we can stress test portfolios
and actually simulate what would happen to your overall coordinated
financial plan if this large concentrated position fell by say
twenty thirty forty percent. Because this stuff does happen, sometimes
(35:25):
people want to bury their head in the sand and well,
this could never happen to my company, but it happens
to any company. So the first step, as you called out,
is just simulate what could happen and make sure that
the financial plan can withstand it. And oftentimes if people
simulate some of this stuff in advance, the light the
light bulb goes on and says, yep, maybe we should.
Speaker 3 (35:47):
Address this situation. Yep, And so let's let's talk about
what are we going to do about it. Whether there's
there's a good acronym here to to kind of give
you some options to think about the Hope's framework hopes
so h stands for halded nothing ignore it. Sometimes you
know that might be the right thing to do, or
maybe you're gonna wait for a better tax or something
like that, but at the same time, just be aware
(36:07):
of it. Second would be an option strategy. That's the
oen hopes. There are tools like protective puts, covered calls callers.
Those are different tools. Most people when they hear options,
they think of speculation. Yes they can be used for that,
but they also can be portfolio insurance against the ups
and downs. The P is for philanthrop really give it away.
If you have appreciated stock, and this is in a
taxable account, not an IRA, then you can avoid the
(36:29):
capital gains by giving it to a charity directly versus
selling it and giving them cash. If you are charitably
inclined anyhow, this is the best way to go anyway.
You get a better tax benefit because you get to
avoid the capital gain, and the charity, of course doesn't
pay in taxes either, so they won't eat a gain
when they sell.
Speaker 5 (36:44):
Ease stands for exchange funds.
Speaker 3 (36:46):
There are tools and products out there that will allow
you to put your giant chunk of stock into a
pool with other people's giant chunks of stock and then
receive a percentage share back of the entire portfolio.
Speaker 4 (36:56):
That's an exchange fund, and.
Speaker 3 (36:58):
Then the other one is burn it, sell it with
You can phase the sales over multiple tax years, and
as we're sitting here in September, we can get into
three tax years over sixteen months. Sell something now in
Q four, sell something anytime in twenty six, and then
sell something again in January. Three tax years to spread
that hit out over just a sixteen month period.
Speaker 5 (37:19):
Yeah, and then step three.
Speaker 1 (37:20):
While you're doing all this rebalancing and repositioning, now, use
that as an opportunity to redefine what your proper asset
allocation should be. Now that you've got more flexibility and liquidity,
revisit your personal ideal mix of stocks, fixed income, real
estate and alternatives. Align your investments with your updated time horizons,
(37:41):
income needs, and growth goals.
Speaker 5 (37:45):
Here's the all Worth advice.
Speaker 1 (37:46):
Concentration may have built your wealth, but diversification is what
will protect it for the long haul. Coming up next,
what one of the most devastating days in American history
can teach us about financial resiliency. Listening to Simply Money,
presented by all Worth Financial on fifty five KRC the
talk station, Hey.
Speaker 5 (38:06):
Folks, this is Gary Sullivan.
Speaker 2 (38:07):
Information and of course not just one sided view.
Speaker 9 (38:10):
News that affects you at the top end to bottom
of the hour, fifty five KRZ, the talk station.
Speaker 1 (38:20):
You're listening to Simply Money, presented by all Worth Financial
on Bob spun Seller along with Brian James Well. Today
does mark the twenty fourth anniversary of the September eleventh attacks,
a day that obviously changed our country forever, and Brian
it also serves as a reminder of just how resilient
the stock market can be. Walk us through some of
(38:42):
the historical perspective or data on what actually happened with
the markets after September eleventh.
Speaker 3 (38:48):
Right. Obviously, yes, we lost, we lost three thousand good
souls there, and that's really the focus of this of
this day of memory. But at the same time, the
world does continue and we all have to carry our
families through it and move on, and the stock market
plays a role in that. So what happened that day
or that week was markets closed for four trading days,
longest shutdown since the Great Depression. Federal authorities decided it
(39:09):
was just going to cause too much panic and we
needed to figure out exactly what was going on. But
when trading finally resumed, there was a lot of pent
up demand to get out, as you might suspect, So
the Dow Jones dropped about seven percent in a single day,
at about fifteen percent for the week. But the world
keeps turning and everybody got back to We eventually got
back to normal, going back to work and started paying
our bills and taking care of our family. So within
(39:29):
just a few months, the market had clawed its way back.
Very powerful example that even after moments of national tragedy
and uncertainty, markets have the ability to recover faster than
most people expect.
Speaker 4 (39:40):
And we've seen this time and time again.
Speaker 3 (39:41):
So what that means is that the headlines of the moment,
whether it's geopolitical tension, maybe it's elections, or even some
kind of tragedy, all that stuff can rattle markets. But
history shows us that resilience is built into the market.
We've been through it before, we'll get through it again.
Stay the course. The odds are overwhelmingly in your favor
over time.
Speaker 5 (39:58):
Here's the all worth advice.
Speaker 1 (39:59):
Mark gets can and will take hits, but patience, perspective
and a long term plan or what turns short term
uncertainty into long term success.
Speaker 5 (40:08):
Thanks for listening.
Speaker 1 (40:09):
Tune in tomorrow and we'll talk about a portfolio personality
test and how to get on the same page, Financially.
Speaker 5 (40:16):
With your partner and more.
Speaker 1 (40:18):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the talk station Who Wants.
Speaker 2 (40:24):
To Be Rich?
Speaker 8 (40:25):
We call them every day millionaire, every day listen to
Dave Ramsey. They typically say one of the things that
turned their life around was when they started looking at
purchasing something rich. People ask how much broke people and
I've been both brother okay broke. People ask how much
down and how much a month?
Speaker 7 (40:47):
Tonight at seven oh six started asking how much On
fifty five KRZ, the talk station, fifty five
You're about it, Donald Trump, crashing economy.
Speaker 2 (00:02):
Economy is in a solid position. Talk about it. Fifty
five krs the talk station.
Speaker 1 (00:17):
Tonight, New inflation numbers, a new darling of the stock market,
and how to deconcentrate a stock position in three specific steps.
You're listening to Simply Money, presented by all Worth Financial
on Bob spun Seller along with Brian James Well Brian,
last night we broke down the latest inflation report from
the business side, how much companies are spending. Tonight we
(00:39):
flip the script script and we look at how much
we the consumers out there are spending. Brian break break
down the latest CPI report for US.
Speaker 3 (00:48):
Yesterday was PPI Producer Price Index from the business point
of view. Today we talked about CPI Consumer Price Index
headline CPI for August.
Speaker 4 (00:56):
The reason we're talking about it.
Speaker 3 (00:57):
He was two point nine percent, which simply means we're
paying two point nine percent more for all the stuff
at the cash register than we were at this time
last year.
Speaker 5 (01:04):
That's not bad. It's a little bit higher.
Speaker 3 (01:06):
Than July, but not really any cause for alarm on
an inflation standpoint. So as we as we know every
time we talk about this, We got to talk about
something called the core CPI. The FED really likes to
look at the core CPI, which strips out food and energy,
and a lot of people object to that from a
standpoint of, well, those are two kind of important things
that I have to pay for, so maybe we should
watch the prices on those. But the reason they do
(01:28):
that is because those things can be very seasonally volatile
as well.
Speaker 4 (01:33):
As you know, energy is a speculative.
Speaker 3 (01:34):
We talk about oil and all that kind of stuff
that can be very speculative, which can be volatile for
reasons that have nothing to do with inflation, just those
specific one.
Speaker 1 (01:41):
And there's geopolitical stuff that impacts the price of oil
too on a short term basis, So I can understand
why they want to strip that out because it is volatile.
Speaker 3 (01:50):
But go right, because we just we want to get
a clear picture for what is the overall, what's the undercurrent.
That's why there is the CPI, but there's also the
core CPI.
Speaker 4 (01:57):
We have both of them anyway.
Speaker 3 (01:58):
Core CBI for August was three point one percent, which
was exactly as forecasted, and that is the same as July.
So it's behind these numbers is that the index for
shelter housing prices rose about point four percent in August.
That was the largest factor in the all items monthly increase.
In other words, we look at everything, the biggest of
the needle mover was housing. Food was up about a
(02:19):
half a percent, and that's in general. Food at home
was up point six percent. That was is interesting. We're
seeing a little more of an increase for people eating
at home. Food away from home, you know, your Applebee's
trip that was only up by about point three percent.
Speaker 4 (02:32):
So some some.
Speaker 5 (02:33):
Decent numbers here.
Speaker 3 (02:34):
Nothing to be super alarmed about, but very indicative of
what's to come here. We'll see next week with interest
rate meetings.
Speaker 1 (02:41):
Yeah, another interesting thing from this report, at least to me,
airline fares were part of the mix, with that index
jumping five point nine percent in one month after rising
four percent in July.
Speaker 5 (02:54):
I don't know whether this is seasonal.
Speaker 1 (02:56):
People probably trying to squeeze in, you know, some trips
before school starts and all that, but you know, five
point nine percent jump in airline fares is significant.
Speaker 5 (03:06):
It also looks like auto costs are starting to tick
up again.
Speaker 1 (03:09):
New vehicles rose by point three percent, while use cars
and trucks rose by one percent, But the real sting
Brian was in motor vehicle maintenance of repairs that jumped
by two point four percent. Mercifully and thankfully, motor vehicle insurance,
which has been on the rise, was flat for the month,
so hopefully that's leveled out for a while.
Speaker 5 (03:31):
That's right. So we've also got jobless claims to talk
about this week.
Speaker 3 (03:34):
So applications for unemployment benefits were up to the highest
level in almost the four years, and that so that
indicates that that layoff activity might be on the rise.
Companies are starting to respond to what they're seeing a
little bit with regard to the economic activity and concerns
about tariffs and so forth, and atle bit of a
sharp slowdown in hiring too. Initial claims were up about
(03:55):
twenty seven thousand to two hundred and sixty three thousand
for the week ended September six.
Speaker 5 (04:00):
Fed.
Speaker 3 (04:00):
Of course, as is their job, they're analyzing all this
information in but it really really seems clear that we're
going to see an interest rate cut next week, probably
in the range of twenty five basis points.
Speaker 5 (04:08):
But I will swear that I never said that. If
I am wrong of course.
Speaker 1 (04:13):
Yeah, I mean I could we all know the markets
pricing in you know, over a ninety percent probability now
of just a quarter point rate cut. There are those
clamoring out there for a half point rate cut.
Speaker 5 (04:24):
I think that's wishful thinking at this point.
Speaker 1 (04:27):
At least, it seems to me like they're gonna cut
by a quarter and they're going to talk about continuing
to watch the data and we might get a couple
more quarter point drops before the end of the year.
But like you said, who knows, And it is very
dangerous to speculate, predict and base short term investment decisions
on what we think is going to happen to interest rates.
(04:48):
That's usually a losing proposition to try to guess what
the Fed's gonna do. All right, you're listening to Simply
Money presented by all Worth Financial on Bob Sponsorer along
with Brian James, another story we're following the company making
all the headlines all over the place today. No, it's
not Navidia, it's not Amazon or Meta or Tesla, it's Oracle.
Speaker 5 (05:10):
Brian. What is going on with Oracle, Bob?
Speaker 3 (05:13):
What's going on with Oracle is that Brian is having
flashbacks to the nineteen nineties in early two thousands when
Oracle was one of because that was one of the
original sort of internet infrastructure companies. This goes back that
Oracle has been present in all of the Internet booms
that we've ever had.
Speaker 4 (05:28):
It seems like, and are you.
Speaker 1 (05:30):
Are you going to talk about a personal Brian James
tax loss harvest from back in the nineties.
Speaker 3 (05:36):
No, that was a company called CMGI that I put
I think I put a thousand bucks into it, sold
it for two thousand and called, declared myself Warren Buffett.
Had I held on to it for a little bit longer,
my thousand would have been worth two hundred and fifty thousand.
Had I held on to it for another year beyond that,
my two hundred and fifty would have been worth zero
because it failed in two thousand and two. That's when
I decided to become a financial planner and not so
much internet stock jockey, but anywayting So, yeah, but back
(06:01):
to today's headline.
Speaker 5 (06:01):
So what's going on with Oracle.
Speaker 3 (06:02):
Oracle, of course is a big it's a big company
that they're known for database software, enterprise software, cloud services.
Think of stuff like Microsoft Azure, Google Cloud.
Speaker 4 (06:11):
Oracle has their own two big, huge company.
Speaker 3 (06:14):
Now they're the world's biggest chip maker, a four point
two trillion dollar titan of technology. They were up and
coming player in artificial intelligence way back in the spring
of twenty three, and they had a massive revenue forecast
tied to their demand for their AI powering processors. On
that day, the stock added about two hundred billion dollars
and really hasn't ever looked back. Well, that was two
(06:35):
years ago, so why are we talking about it today.
Oracle just revealed they have a huge backlog of contracted
AI computing work, in other words, more of the same
that they've apparently been a little hush hush about. So
that adds to a nearly four fold game bob in
the shares since the launch of chat GPT in November
twenty two. The chat GPT is, though, it is the
sort of the bell weather of this whole AI swing,
(06:57):
because when that company came out, when those tools became
a bailable, things just started moving extremely rapidly in this space,
and the Oracle is no stranger to it.
Speaker 5 (07:06):
Yeah.
Speaker 1 (07:06):
Another interesting key key, at least to me, of Oracle
success is that, unlike other firms, out there. They are
not out there developing their own large AI models that
compete with potential clients. They're smart about this. Their neutral
status gives it significant advantages. It has partnerships with Microsoft, Google, Amazon,
(07:27):
which lets Oracle databases run in the clouds. Brian, this
is a smart strategy. Partner with everybody out there that's
really building this stuff out and have revenue streams coming
from all sources. And by the way, Oracle founder Larry
Ellison just became the world's richest person for the first time,
surpassing Elon Musk's nearly year long rain in the top
(07:50):
spot among billionaires.
Speaker 3 (07:52):
Yeah, and I think this is interesting, and I feel
like I've abused this analogy for whatever reason a lat
but Oracle is in a position to benefit from AI
without actually being at the forefront of aiither. Like you said,
they're just supporting everybody. So the analogy that I always
use is the gold Rush of eighteen forty nine. The
people who made all the money in the gold Rush
were not the gold diggers. It was Levi's who designed
(08:13):
really tough pants for people to wear while they were
digging around, crawling around the rocks and digging up gold.
It was Wells Fargo that invented a way to move
money across the country, which was literally horses and stagecoaches
way back in the day. But they built that network
to move money across to support all the people that
were going out there. Studebaker made wheelbarrows of all things,
and that eventually became the car company that was relatively famous,
(08:35):
you know, the half a century later. But in any case,
the whole point of this is that Oracle is in
a position to simply support the major players out there.
So if one of those major players fails and goes away,
that's fine. That doesn't hurt Oracle because they're building tools
that all of them can use.
Speaker 4 (08:49):
It's pretty darn smart.
Speaker 3 (08:50):
And that's why Larry Ellison owns an island and a
lot of money.
Speaker 5 (08:55):
Yep.
Speaker 1 (08:55):
All right, We've got some news on mortgage rates tonight,
and thankfully the news is good. Mortgage demand jumped to
the highest level in nearly three years. The average interest
rate for a thirty year fixed rate mortgage with conforming
loan balances, which is now about eight hundred and six
thousand dollars or less, decreased to six point four to
(09:17):
nine percent from six point six four percent. We talk
about this all the time, Brian. Once those rates get
below seven, activities starts to be generated and low and
behold it's happening again. Talk about mortgage applications.
Speaker 3 (09:33):
Yeah, absolutely so so applications to refinance home loans jumped
about twelve percent for the week and has about a
third higher than the same week one year ago. So
if you think about this, this is the backlog of
people who may have been disappointed that they didn't get
into any kind of a mortgage before rates started to
go up. And I guess we're what three four years passed,
the golden days of mortgages where you could get one
(09:55):
sometimes even under three percent. Well, those days are over,
but that doesn't mean people haven't been buying houses and
having to live their lives, but they've been doing it
at sometimes seven seven and a half percent. Well, now
rates are getting low enough that those mortgages that are
only maybe three or four years old are being considered
for refinance. So this maybe we'll get to a point
where we go back to where we were I don't know,
(10:16):
ten twelve years ago, where you would refinance three times
in the year just because it made sense because rates
were dropping. I don't think that's on the horizon right now,
but that's definitely the situation we're in.
Speaker 5 (10:26):
There are two things that drive mortgage rates up and down.
Speaker 3 (10:29):
It is not a decision by the Fed directly that
has an impact, but it's the overall market really the
ten year treasure. You're going to keep your eyeballs on
that you can kind of tell where mortgage rates might
go if you're in a situation where you're gonna need one.
But to applications for purchase mortgages, we're up about seven
percent for the week and twenty three percent versus that
same week a year ago, So a lot of activity there.
(10:50):
But if you're somebody who has put a mortgage in
place over the last three years, time to start paying
attention to potentially get yourself a new rate. You can
do two things with that. You can either just have
some month savings, which we all love, or stick to
the payment you've been making and that mortgage is going
to be paid off a little bit faster because you
got lower interest rate in the mix.
Speaker 1 (11:08):
Yeah, good news for sure, and hopefully these rates continue
to come down a little bit and get more people,
especially those first time buyers into homes that they can afford,
and you keep the wheels of capitalism moving all right,
Robinhood Goes, Social Gold Goes AI are non traditional investments
the next big thing or just the next big risk.
(11:30):
We'll discuss that next. You're listening to Simply Money presented
by all Worth Financial on fifty five KRC the talk station.
Speaker 6 (11:38):
Yes he's all Worth Financial, a registered investment advisory firm.
Any ideas presented during this program are not intended to
provide specific financial advice. You should consult your own financial advisor,
tax consultant, or a state planning attorney to conduct your
own due diligence.
Speaker 1 (11:57):
You're listening to Simply Money presented by all Work Financial
on Bob Sponsller along with Brian James.
Speaker 5 (12:03):
If you can't listen.
Speaker 1 (12:04):
To Simply Money live every night, subscribe and get our
daily podcasts. You can listen the following morning during your
commute or at the gym. And if you think your
friends or family could use some financial advice, tell them
about it as well. Just search Simply Money on the
iHeart app or wherever you find your podcast. Straight ahead
of six forty three How to d risk a concentrated
(12:25):
stock position in three simple steps.
Speaker 5 (12:29):
All right.
Speaker 1 (12:30):
You may know Robinhood is the app that turned day
trading into a pandemic pastime. Well, now they're taking things
a step further, introducing a social media network inside the
trading platform.
Speaker 5 (12:43):
Brian fill us in here.
Speaker 1 (12:45):
You're one of these millennial type dudes that loves all
this stuff. What do you think of Robinhood and the
newest evolution of their.
Speaker 5 (12:53):
Software, Bob?
Speaker 3 (12:54):
If we've met, maybe we should go grab lunch sometime
and you can you can get to know me a
little bit now. So, yeah, what's happening here is they're
building a social media inside the trading apps. You're now
gonna be able to follow your friends, share trades, and
treat investing kind of like you're on you're on Instagram,
and just make it all social media all the time,
right out of the This is right out of the
Reddit and the TikTok playbook, but wrapped inside a broker's account.
Speaker 5 (13:15):
Bob, I'll be honest as a business idea.
Speaker 3 (13:18):
Uh, I kind of get it because obviously people like
to talk about this stuff. If if you're ever moved
to go down a rabbit hole, go on Reddit's Wall
Street bets. Uh, subreddit, and you're gonna read. You're gonna
read a lot about a lot of sad people. It's
mostly what they call lost porn, which is simply sharing
exactly how much money they've lost on a daily basis.
Speaker 4 (13:36):
A lot of it is that.
Speaker 3 (13:38):
But in any case, now you're gonna be able to
do it right alongside the place where you're actually placing
your trades instead of bouncing back and forth. I think
it's a pretty good idea by Robin Hood.
Speaker 5 (13:46):
I think it's a.
Speaker 3 (13:46):
Terrible idea for really anybody to get into this other
than treat this stuff like fantasy football. It's fun, there's
nothing wrong with doing it with a reasonable amount of money.
But at the same time, you know, just don't don't
get to too over overly in it, just like anything else.
Speaker 1 (14:01):
Well, Brian, as I read that story, I noticed that
you can you can link your friends up so everybody
can share what they're trading, I guess in real time.
And then, like you said, like fantasy football, there's a
leader board to see who's quote unquote winning. I don't
know what could what could possibly go wrong under these
different scenarios, Brian, you know.
Speaker 5 (14:23):
It's gonna be interesting.
Speaker 3 (14:24):
I'm gonna rubberneck this whole thing and it will be
fascinating to watch because I love the One of my
favorite books of all time is the uh, the Madness
of Crowds and the Popular Delusions or whatever. Books written
about two hundred years ago, but it talks about, uh,
the things like what what crowds get together and do
with when group think results? Uh? And this is literally
putting groupthink on steroids because it will be real time.
(14:48):
So and so just bought this. Well, I bet everybody's
gonna follow him. It's gonna be a way. It's quickly
gonna be a way to speculate and to be It's
gonna easily provide ways to pump and dump.
Speaker 5 (14:57):
Right, you don't have to call people from a boiler
room anymore, and can.
Speaker 3 (15:00):
Vinsom to buy things. They can just watch what you
do with your little bits of money. Very smart people
will write algorithms that will automate all this. They'll get
the herds to follow them, and uh, it's that's what's that.
Those are the headlines is gonna come out of it.
But any case, you know, it's gonna.
Speaker 5 (15:13):
Be watch hey for for day traders.
Speaker 1 (15:15):
I think this stuff is wonderful because when you're when
you're doing short term trading, you're looking for short term
volatility any place you can find it. And if we've
got a bunch of you know, teenagers on their couch
causing game stop to climb forty five minutes and then tank,
that's a wonderful thing.
Speaker 3 (15:35):
I think there's gonna be very little discussion of hey,
did you hear pray off.
Speaker 5 (15:40):
Of the stupidity of others? All right, in all seriousness.
Speaker 1 (15:43):
For younger investors just getting started, I think this is
engaging stuff. I mean to learn about investing. And you know,
even Robinhood said they want to democratize investing even more,
get more people involved, and I think that's wonderful. But
for high net worth investors, I think it's a distraction
at best, and at worst it can be a real
(16:04):
trap because as we all know, groupthink is not a strategy.
Speaker 4 (16:08):
Yeah, I want to throw one more thought on it.
Speaker 3 (16:10):
Two again, for those for you younger folks who are
thinking about getting involved in these things, there's nothing wrong
with it, right, Just know what you're getting into, Tuddy.
If you touch the hot stove once, you're learning. If
you touch it twice, you're stupid. But at the same time,
build something in the background that is more traditional, more reasonable.
And the reason I say this because I've had a number,
for whatever reason, the last couple of years, I've had
a number of adult children of my clients come in
(16:32):
and they've been chasing crypto for like fifteen years and
sometimes okay and sometimes not great. Nobody has made a
bazillion dollars. If that's the case, they're probably not wanting
to talk to me. But in any case, make sure
that you have something traditional in the background.
Speaker 4 (16:45):
Do this with a small portion of the assets.
Speaker 5 (16:47):
You're listening to.
Speaker 1 (16:48):
Simply money presented by all Worth Financial on Bob Sponseller
along with Brian James. All Right, let's zoom out a
little bit here. Robinhood's move is just one signal in
a much bigger shift we're seeing across the board in
the investment world, a shift toward non traditional investing. Another
example of this gold, copper and commodities. Brian, I mean,
(17:09):
let's face it, gold just hit record highs.
Speaker 3 (17:12):
YEP, copper itself is suddenly being talked about as an
AI metal, meaning let's assume that copper is being built
into all these video cards and things that have been
sold to that started with crypto mining and now.
Speaker 5 (17:23):
Has moved into AI.
Speaker 3 (17:25):
So investors are piling into this and not just as
a hedge against inflation. Right, Any stock is a hedge
against inflation, right, A balanced portfolio, we'll do that for you.
But this is a way to ride the tech boom
in a totally different asset class.
Speaker 5 (17:37):
You know, what do we think about this?
Speaker 4 (17:38):
Are we throwing money?
Speaker 3 (17:40):
It's interesting that people are looking at these types of
things suddenly and deciding that this is a better investment.
While we're sitting here, the stock market itself is at
an all time high and has been for several weeks
and frankly most of the.
Speaker 5 (17:50):
Year, and for frankly most of its existence.
Speaker 4 (17:52):
The market goes up and not down.
Speaker 3 (17:54):
So all this speculative activity on all these things is
is just that it's speculative.
Speaker 4 (17:59):
The herd's going to go the other direction on you.
Speaker 3 (18:01):
And if you're just we're talking about it now because
it's already a headline. If you're hearing us talking about
it and thinking about investing because you heard it on
the radio, it's probably the wrong time. We're simply reacting
to what we see out there in the market. So
whether it's a digital platform or tangible assets, the question
is still the same. Are these alternative strategies smart diversifiers
or are we just chasing what's hot?
Speaker 4 (18:22):
Bob, what do you think of that?
Speaker 5 (18:23):
Well, I mean, I'm not against any of this stuff.
Speaker 1 (18:26):
They're just there are inherent dangers in piling too much
money into any volatile asset class. And you know, the
danger isn't just losing money, it's straying from your long
term financial plan that's already working. Your money should have
a job. It shouldn't be scrolling Robinhood to just see
what's trending. But on the other hand, non traditional doesn't
(18:48):
mean bad. There's a bunch of non traditional strategies out there.
We talk about direct indexing all the time. Most people
don't even know what that is, but our industry evolves,
different tools come out, different ways to invest or available.
The key difference is a lot of these newer strategies
(19:08):
that we talk about on this show. There are strategies
that are designed with discipline and have an actual track
record behind them, not just what everybody's talking about on Robinhood.
You know, treating investing like fantasy football.
Speaker 3 (19:24):
Right, And I would say, just to kind of lay
out a little more what I would consider to be
traditional investing.
Speaker 4 (19:29):
Kind of the.
Speaker 3 (19:31):
Bare roots definition of it is buying an S and
P five hundred fund and sitting on it and ignoring it.
That is not a bad strategy, by the way, but
that to me is traditional. All these other things are
tweaks in different directions where you should understand the benefits of.
For example, direct indexing has to do with more efficient
tax loss harvesting those kinds of things, but it still
follows the same rough principles as the S and P
five hundred bufferdtfs will be a little better in bad times,
(19:54):
but will leave some on the table in good times.
They all have their different tools. Those are non traditional approaches,
but these are all all strategies designed with discipline, based
in the history of the markets.
Speaker 1 (20:04):
Here's the all Worth advice. When you have real money
at stake, you don't need a trendy strategy. You need
a thoughtful, time tested, disciplined one.
Speaker 7 (20:12):
All right.
Speaker 1 (20:13):
We had a call or ask recently if he should
switch his four to one K from roth to pre tax.
But the real answer may be something you've never even
heard about. We'll break that down and explain why it
could be a huge opportunity for some of you out there.
You're listening to Simply Money presented by Allworth Financial on
fifty five KRC, the talk station.
Speaker 8 (20:34):
We call them every day Millionaire every day listen to
Dave Ramsey Rich people ask how much? Both people ask
how much down? And how much a money? With days
seven start asking how much?
Speaker 2 (20:46):
On fifty five KARC the talk station. It's the iHeartRadio station.
Speaker 1 (20:57):
You're listening to Simply Money presented by Allworth fin Answer
on Bob's Fun Seller along with Brian James. Do you
have a financial question you'd like for us to answer.
There's a red button you can click while you're listening
to the show right on the iHeart app Simply record
your question and it will come straight to us. And
speaking of questions, we've actually got a live caller tonight.
(21:18):
John has called in and John, thanks for joining us tonight.
Speaker 5 (21:22):
What's on your mind and how can we help you?
Speaker 7 (21:24):
Perfect No appreciate you guys having me on Love the Show.
My question is really related to four oh one k contributions,
so just a little bit of context. My wife and
I both max are four to one K contributions. We
are in the highest tax bracket so and that's you know,
above thirty seven percent. Both my wife and I contribute
(21:48):
to a ROTH contribution and we have been for years,
and so my question is, you know, I know the
debate of whether it should be pre tax or ROTH.
We just always wanted to, you know, have as much
savings and WROTH as we possibly can, and we're both
very good savers, and so just wanted to get your
(22:08):
guys's perspective on if we should switch to a pre
tax for one KA try contribution and then you know,
obviously get some tax savings, or if we're kind of
okay contributing into it to a WROTH for.
Speaker 4 (22:22):
A one K Okay, Yeah, that great detail there, John.
Speaker 3 (22:25):
So quick question for you is you didn't bring this up,
so I assume that otherwise cash flow is okay. You're
not really worried about getting the bills paid in all that,
You're just trying to find the most efficient way, most
e fficient place for that surplus income to land.
Speaker 4 (22:37):
Do I have that correct?
Speaker 7 (22:39):
That's correct. We still save regularly into a tax like
a taxable brokerage account as well. So if we were
to switch into a change this to a traditional and
get more tax savings, I would probably just save that
into a into a taxable brokerage account to be honest.
Speaker 3 (22:54):
Okay, gotcha. Well that's a great, great situation. So congratulations
for putting yourself there. You have a lot of opportunity
ahead you. So the first thing that comes to mind is,
first off, I'll say, here's my personal perspective. So I'm
fifty one, and I spent the first several decades of
my career shoving money into my pre tax four oh
one k.
Speaker 4 (23:13):
Cus that's all there was.
Speaker 3 (23:14):
And as I sit here and do my job that
I've been doing for about thirty years now, that's what
I run across people with an enormous amount of money
on the pre tax side and maybe a little bit
of ROTH because they came to it later.
Speaker 4 (23:23):
It simply wasn't an opportunity.
Speaker 3 (23:25):
It was really really only became an option to do
inside of a four oh one K I would say,
starting twenty ten and later, because that is a plan
by planned decision, your employer, your company has to decide
to allow ROTH contributions to the four oh one K,
and they have to pay lawyers to redo a document
that governs the whole plan. So that's why it didn't
become available on day one, like when roth iras came
(23:46):
available to everyone. So that's that's kind of what I'm
kind of guessing. That's maybe a little bit of what
you're facing too. But you're right, Yeah, the pre tax
side is great. Of course, it sounds like you're in
a bracket where you're in about the highest bracket there is,
so pre tax savings would be lovely and I think
probably makes some sense there.
Speaker 4 (24:02):
Now you mentioned Roth contributions.
Speaker 3 (24:04):
You are I want to clarify you are specifically referring
to Roth contributions to the four oh one K You're
not doing roth irays outside, correct?
Speaker 7 (24:12):
We do we contribute to a traditional IRA and then
do the back door for both myself and my wife.
Speaker 3 (24:18):
Okay, well you just said the key word there because
this is when I read when I when I heard
your question and kind of what we were going to
be talking about, my mind went straight to something that
I super super super hope you can do. Have you
ever heard of a mega back door four oh one
K roller.
Speaker 7 (24:34):
I've heard of it. I'm not sure if my employer
allows it or not, but be helpful to get some
some additional background.
Speaker 3 (24:40):
For sure, Yeah, you bet, absolutely so this could be
a fantastic opportunity or for you, or it's going to
be a big tease because you'll find out you can't
do it.
Speaker 4 (24:47):
But at the very least it's worth looking into.
Speaker 3 (24:50):
So let me let me kind of walk through the
details here at the end of this if you look
of First of all, let me ask you a quick question.
Speaker 4 (24:56):
Can I ask how old you are or if you're
over under fifty?
Speaker 2 (24:58):
Yeah, I'm a thirty eight.
Speaker 4 (25:00):
All right, So you got some time to go.
Speaker 3 (25:02):
So the reason I asked is because if you're over fifty,
you'll be able to do a little more in terms
of catchups. But for now, we'll keep it as it
is where we are right now. But the gist of
what I'm about to say is that you could potentially,
if the planets line up correctly for you, which we're
about to walking through, you could potentially be putting a
way up to sixty nine thousand dollars as somebody who
is under fifty into your four oh one K. So
(25:25):
there are a lot Most people are familiar with the
two flavors of tax treatment inside right, we can do
ROTH or we can do pre tax. You've been talking
about that already in this call. There is a third
flavor called after tax, which is a little bit of
both of them. You can choose and sometimes they call
it a voluntary contribution. There's lots of weird IRS risso
words attached to it. But you put the money in,
(25:46):
you do not get a deduction. That's the after tax part,
and if you leave it as such, if you leave
it as an after tax contribution, any growth that occurs
will happen on the pre tax side, So it's kind
of in that case, it's kind to the worst of
both worlds. You put the money in and you don't
get any deduction for having done so, and the growth
is creating a little more of an ordinary income taxable
(26:09):
overhang over time, so putting it in as an after
tax contribution is not the that's the first step. The
second step is an IRS rule that went into place
in twenty fifteen that basically said that you are allowed
to roll over any after tax contributions directly into a WROTH.
So when you combine your normal twenty three thousand dollars
that you can put in. That's the limit for everybody.
(26:30):
You can choose WROTH or pre tax on that. Your
company may throw in a match. We have to account
for that too, if your company does profit sharing, does
a match or whatever. Let's all make up a number.
Let's pretend that that's an extra twenty thousand dollars. So
now we're at forty three. That means in that particular case,
you can choose to put in another twenty six thousand
in the after tax bucket and then immediately convert that
(26:51):
to WROTH.
Speaker 4 (26:52):
Does that make sense? So far?
Speaker 7 (26:55):
It does? It does?
Speaker 3 (26:57):
So here's the rub your plan. It's so every plan
is a different animal, right. A plan four oh one
K plan is actually a trust that comes with an
instruction manual called a summary Plan description. And these are
probably documents that very few people ever bother to go
and read unless you're a financial nerd like Bob and I.
But what that will dictate is do you have the
ability to make that kind of contribution? First, that's the
(27:17):
first requirement. Second, it has to be able. You have
to be able to make a rollover of it. Sometimes
they'll allow you to do a rollover within the plan.
There are you know, the Catillac of this whole thing
is a you know, Fidelity sometimes offers these plans where
you can set this up to happen how automatically. In
other words, the conversion happens as soon as you get
paid the next day, and it just jumps through all
the hoops automatically. I think I've seen one of those
(27:39):
in my life. Other plans will allow you to do it,
but it's much more manual process, involving paperwork and actual
wet signatures. So and then the final If you can
keep it in the plan, that's great. It's also possible
that your custody and your four O one K may
require that you roll it into a wroth ira, which
you've already got out there. So in this case you
could just dump it into your own your roth I
(28:01):
raised as they stand, this would be worth looking into.
This would be separate, of course, for both you and
your wife. It is a per company, per decision whether
they're going to allow these types of bells and whistles,
but I'm hearing about them more and more so I
would look into that just to see if that's even
an option for you. I know that's not a direct
answer question. If you can do that, then what I
would do is, yeah, go ahead and flip the other
(28:22):
side to pretext. You're gonna high bracket, so take whatever
you can get, do the twenty three pre tax, and
then do the rest of it on the ROTH side.
Speaker 7 (28:30):
Okay, Yeah, that makes a lot of sense.
Speaker 1 (28:32):
So John, the key is to get that summary Plan
description document.
Speaker 5 (28:37):
You know, they they're required to give that to you.
Speaker 1 (28:39):
Just contact your HR department have them email that to
If you did that, you know, first thing in the morning,
you'd probably have it by lunchtime.
Speaker 5 (28:48):
I got a couple other questions for you. Do you
and your wife have children?
Speaker 2 (28:52):
We do?
Speaker 7 (28:54):
We have two children, Yeah, young, both under six.
Speaker 5 (28:57):
How long do you plan on working?
Speaker 1 (29:00):
Like you and your wife have, you know, very high
incomes and your wonderful savers. What are your plans for retirement?
When do you plan to stop working? And then what
are your plans in terms of dividing up your wealth
down the road between your kids and perhaps other family
members and perhaps charities. What are your thoughts on how
(29:20):
long you plan to work and how you see dividing
up you know, the wealth that you're doing a great
job of building.
Speaker 7 (29:27):
Yeah, lots of good questions. I would say my wife
similar age is probably would like to retire sooner rather
than later, in the next couple of years if possible,
and I would probably work, would like to work into
my mid fifties. Probably sixty would be a base case
(29:48):
for retirement. So that's kind of the go ahead plan
I think. Look honestly, in terms of distribution of wealth,
you know, hopefully we continue to save like we're doing
and have a good nest egg. I think, just the
way I was raised, I don't plan on I'm honestly
leading a lot for my kids, not not not zero.
(30:11):
But our plan is to have a really nice retirement,
stend it, you know, go on ice vacations, you know,
potentially buy a second home. You know, it probably gives
them to charity. But just enjoy the savings that we did,
and you know, enjoy the time and experiences with my kids.
Speaker 5 (30:29):
But I don't.
Speaker 7 (30:30):
I don't plan to leave a lot for my children.
Speaker 5 (30:33):
Fantastic.
Speaker 1 (30:34):
The reason behind my questions is it might make a
lot of sense just to sit down with you, with
you and your wife, with a good fiduciary advisor, and
just map out some different scenarios, you know, as far
as how long you plan to work, what income assumptions are,
what you plan on spending when you do retire, and
just run some different scenarios based on what Brian talked about,
(30:56):
what's the what's the best way to do this giving
your individual goals, because if you can have some a
pile of money in all these different buckets, that opens
up a wonderful set of opportunities for gifting to kids,
gifting to charity, saving taxes. I'd highly recommend you sit
down with somebody and just start mapping out some scenarios,
(31:20):
just so you know what the opportunities are now, so
you can get out in front of this thing before
you build up a massive tax bill that you can't
control once those require minimum distributions rear their ugly head,
you know, in thirty to forty years from now.
Speaker 7 (31:38):
Yeah, that makes a lot of sense.
Speaker 5 (31:39):
Track.
Speaker 7 (31:39):
I don't know a lot about those mandatory retirement distributions
quite yet, just because I haven't quit. You're gotten there yet.
But it's a very good point.
Speaker 3 (31:48):
You're doing a good job of handle. The best thing
to do is not to have too much on the
pretext side. That doesn't happen on the roth side. So
if you do want to look into that, you can
find that summary plan description. You should be able to
find it in like there should be a documents section
of your four oh one k It's maybe a sectually
never look in, but it'll have all those governing documents.
Speaker 5 (32:04):
All right, Well, thank you for your time. It's wonderful
to have you on the show.
Speaker 1 (32:07):
You're listening to Simply Money, presented by all Worth Financial
on fifty five KRC, the Talk Station.
Speaker 2 (32:13):
During the week we get a little dirty.
Speaker 4 (32:16):
Mud, dirty mud, dirty.
Speaker 2 (32:18):
Really nasty. But on the weekend we get dirty in
the mud, dirt everything to get your yard plans in
garden growing.
Speaker 9 (32:29):
And Monday, when you notice dirt under your fingernails, you
know you're doing it right.
Speaker 2 (32:34):
But I call you get dirty, Get Growing. Ron Wilson
Saturdays at six on fifty five k the Talk Station.
If you're looking for a faminions are welcome to here.
I do think he is too old to run.
Speaker 9 (32:48):
In twenty twenty four, fifty five KRC, the Talk Station,
you're listening to Simply Money, presented by all Worth Financial
on Bob Sponsorer along with Brian James.
Speaker 1 (33:02):
Do you have a financial question you'd like for us
to answer. There's a red button you can click while
you're listening to the show right on the iHeart app.
Simply record your question and it will come straight to us. Tonight,
we want to talk about over concentrated stock positions, and
oftentimes these are not the result of hasty decisions. Many
times it's the byproduct of good things, loyalty, inheritance, or
(33:26):
just long term discipline success.
Speaker 5 (33:29):
But here's the hard truth.
Speaker 1 (33:30):
Concentration, if left unattended to over time, creates risk in
and of itself, and we want to talk about how
to address at risk a little bit tonight, Brian, let's
walk through three steps that we walk clients through to
handle situations like this.
Speaker 3 (33:48):
Well, like with many challenges of life. Step one is
awareness of it in the first place. So take a
look at your overall exposure and your overall risk of
not only your portfolio, but at the topic we're discussing
here is if you've got a lot of one stock, well,
how much of your portfolio does it make up?
Speaker 5 (34:02):
Good rule of thumb is ten percent.
Speaker 3 (34:04):
If you have too much, or if you have a
concentrated position that makes up more than ten percent of
your portfolio, that's a bit of a red flag. Now
let's be clear here, I'm not talking about if you
have a balanced ETF or a broad based mutual fund
index fund type of thing that is not a concentrated position.
We're talking about one individual stock, you know, one company
that can have anything can happen over time.
Speaker 5 (34:26):
Good and bad.
Speaker 4 (34:27):
But good news and bad news can come from anywhere.
Speaker 3 (34:29):
So if you have one stock that's going to eat
all that risk and that can be a problem. So
understand how that concentrated position behaves and relative to your
other holdings. If you've got other things in there that
kind of offset, they move maybe a little bit differently
than your concentrated position, and maybe it's no big deal,
but if that stock moves in sync with your overall
broader portfolio, with the broader market, you may have less
diversification than you think if it's going to do the
(34:51):
same thing as the overall market anyway. Plus it has
the risks of any individual company that can be.
Speaker 5 (34:56):
A risk to you.
Speaker 3 (34:56):
So make sure you understand what will happen if it
loses twenty thirty percent of its bat something like that.
Speaker 1 (35:01):
Well, and Brian, I know you do this with all
your clients that are in this situation, you do a
great job of it. One of the great things we
can do with software is we can stress test portfolios
and actually simulate what would happen to your overall coordinated
financial plan if this large concentrated position fell by say
twenty thirty forty percent. Because this stuff does happen, sometimes
(35:25):
people want to bury their head in the sand and well,
this could never happen to my company, but it happens
to any company. So the first step, as you called out,
is just simulate what could happen and make sure that
the financial plan can withstand it. And oftentimes if people
simulate some of this stuff in advance, the light the
light bulb goes on and says, yep, maybe we should.
Speaker 3 (35:47):
Address this situation. Yep, And so let's let's talk about
what are we going to do about it. Whether there's
there's a good acronym here to to kind of give
you some options to think about the Hope's framework hopes
so h stands for halded nothing ignore it. Sometimes you
know that might be the right thing to do, or
maybe you're gonna wait for a better tax or something
like that, but at the same time, just be aware
(36:07):
of it. Second would be an option strategy. That's the
oen hopes. There are tools like protective puts, covered calls callers.
Those are different tools. Most people when they hear options,
they think of speculation. Yes they can be used for that,
but they also can be portfolio insurance against the ups
and downs. The P is for philanthrop really give it away.
If you have appreciated stock, and this is in a
taxable account, not an IRA, then you can avoid the
(36:29):
capital gains by giving it to a charity directly versus
selling it and giving them cash. If you are charitably
inclined anyhow, this is the best way to go anyway.
You get a better tax benefit because you get to
avoid the capital gain, and the charity, of course doesn't
pay in taxes either, so they won't eat a gain
when they sell.
Speaker 5 (36:44):
Ease stands for exchange funds.
Speaker 3 (36:46):
There are tools and products out there that will allow
you to put your giant chunk of stock into a
pool with other people's giant chunks of stock and then
receive a percentage share back of the entire portfolio.
Speaker 4 (36:56):
That's an exchange fund, and.
Speaker 3 (36:58):
Then the other one is burn it, sell it with
You can phase the sales over multiple tax years, and
as we're sitting here in September, we can get into
three tax years over sixteen months. Sell something now in
Q four, sell something anytime in twenty six, and then
sell something again in January. Three tax years to spread
that hit out over just a sixteen month period.
Speaker 5 (37:19):
Yeah, and then step three.
Speaker 1 (37:20):
While you're doing all this rebalancing and repositioning, now, use
that as an opportunity to redefine what your proper asset
allocation should be. Now that you've got more flexibility and liquidity,
revisit your personal ideal mix of stocks, fixed income, real
estate and alternatives. Align your investments with your updated time horizons,
(37:41):
income needs, and growth goals.
Speaker 5 (37:45):
Here's the all Worth advice.
Speaker 1 (37:46):
Concentration may have built your wealth, but diversification is what
will protect it for the long haul. Coming up next,
what one of the most devastating days in American history
can teach us about financial resiliency. Listening to Simply Money,
presented by all Worth Financial on fifty five KRC the
talk station, Hey.
Speaker 5 (38:06):
Folks, this is Gary Sullivan.
Speaker 2 (38:07):
Information and of course not just one sided view.
Speaker 9 (38:10):
News that affects you at the top end to bottom
of the hour, fifty five KRZ, the talk station.
Speaker 1 (38:20):
You're listening to Simply Money, presented by all Worth Financial
on Bob spun Seller along with Brian James Well. Today
does mark the twenty fourth anniversary of the September eleventh attacks,
a day that obviously changed our country forever, and Brian
it also serves as a reminder of just how resilient
the stock market can be. Walk us through some of
(38:42):
the historical perspective or data on what actually happened with
the markets after September eleventh.
Speaker 3 (38:48):
Right. Obviously, yes, we lost, we lost three thousand good
souls there, and that's really the focus of this of
this day of memory. But at the same time, the
world does continue and we all have to carry our
families through it and move on, and the stock market
plays a role in that. So what happened that day
or that week was markets closed for four trading days,
longest shutdown since the Great Depression. Federal authorities decided it
(39:09):
was just going to cause too much panic and we
needed to figure out exactly what was going on. But
when trading finally resumed, there was a lot of pent
up demand to get out, as you might suspect, So
the Dow Jones dropped about seven percent in a single day,
at about fifteen percent for the week. But the world
keeps turning and everybody got back to We eventually got
back to normal, going back to work and started paying
our bills and taking care of our family. So within
(39:29):
just a few months, the market had clawed its way back.
Very powerful example that even after moments of national tragedy
and uncertainty, markets have the ability to recover faster than
most people expect.
Speaker 4 (39:40):
And we've seen this time and time again.
Speaker 3 (39:41):
So what that means is that the headlines of the moment,
whether it's geopolitical tension, maybe it's elections, or even some
kind of tragedy, all that stuff can rattle markets. But
history shows us that resilience is built into the market.
We've been through it before, we'll get through it again.
Stay the course. The odds are overwhelmingly in your favor
over time.
Speaker 5 (39:58):
Here's the all worth advice.
Speaker 1 (39:59):
Mark gets can and will take hits, but patience, perspective
and a long term plan or what turns short term
uncertainty into long term success.
Speaker 5 (40:08):
Thanks for listening.
Speaker 1 (40:09):
Tune in tomorrow and we'll talk about a portfolio personality
test and how to get on the same page, Financially.
Speaker 5 (40:16):
With your partner and more.
Speaker 1 (40:18):
You've been listening to Simply Money, presented by all Worth
Financial on fifty five KRC, the talk station Who Wants.
Speaker 2 (40:24):
To Be Rich?
Speaker 8 (40:25):
We call them every day millionaire, every day listen to
Dave Ramsey. They typically say one of the things that
turned their life around was when they started looking at
purchasing something rich. People ask how much broke people and
I've been both brother okay broke. People ask how much
down and how much a month?
Speaker 7 (40:47):
Tonight at seven oh six started asking how much On
fifty five KRZ, the talk station, fifty five
Simply Money News
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