November 14, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian dig into Goldman Sachs’ bold prediction that the S&P 500 will hit 7,600 by 2026. But does this forecast actually mean anything for your financial plan? They explain why making decisions based on Wall Street predictions could derail your long-term goals. Plus, hear how high-net-worth investors can use strategies like direct indexing and buffered ETFs to protect against taxes and inflation. They also break down the looming tax impact of mutual fund capital gains distributions, how new credit card rules might hit your rewards, and why using your vacation days might be just as financially important as your investment decisions.
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Episode Transcript
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Speaker 1 (00:06):
Tonight, where is the S and P five hundred headed next?
One of the most influential investment banks in the world
apparently has that answer. You're listening to Simply Money, presented
by all Worth Financial on Bob Sponseller along with Brian James. Well, Brian,
we preach on this show all the time to never
act on media predictions or predictions from anyone for that matter.
(00:30):
But hey, because it's mid November, here come the projections
for twenty twenty six. Goldman sat Goldman Sachs appears to
be first out of the gate here, stepping up as
one of the first Wall Street banks to roll out
forecast for next year. Goldman strategists see the S and
P five hundred hitting seventy six hundred by the end
of twenty twenty six, roughly an eleven percent gain from here.
Speaker 2 (00:54):
Well, it is Q four tis this season to make
stuff up, so let's start talking about the next year
and what everybody things is going to happen. I'm going
to go ahead and commit us as a team, Bob
and Jason, our producer, to look at what predictions came
from last year and because I'm sure we did this
whole thing a year ago, and let's just see how
that all landed. But in any case, there's another one.
(01:15):
A team led by chief global equity strategist Peter Oppenheimer,
that's a name you might recognize from Oppenheimer Funds, has
come up with a long term forecast from the S
and P five hundred and to deliver a six and
a half percent annualized return over the next ten years.
That's slightly below their forecast of a seven point seven
percent annualized return for global equity. So what they're saying
there is they think that the trend that has started
(01:37):
in twenty twenty five of global equities outpacing the United
States the S and P five hundred is going to continue.
So that six and a half percent return comprises six
percent annualized earnings per share growth, one percent annualized decline
in valuations, and a one point four percent average divid
and yield. Smush all that together and you get their
opinion that global stocks are going to be a slightly
better place to be than the S and P five hundred.
Speaker 1 (02:00):
Not only do we get the bottom line prediction number,
we actually get a detailed breakdown over the next ten
years of precisely where the returns are gonna come from.
Speaker 2 (02:10):
It don't make stuff up one year in a row.
We make stuff up decades in a row.
Speaker 1 (02:14):
All right, it's not that great historically that you know
this six percent analyzed return forecast that would put us
in the twenty seventh percent tile of return since nineteen ninety.
The Goldman team says it's ten year SMP forecast includes
bearish and bullish cases in the range of three to
ten percent. Brian, you and I have both been doing
(02:36):
this a long time. Every year, you know, these people
come out and they predict that the stock market's gonna
go up seven to ten percent the next year. You know,
my reaction to that is, duh, that's that's what it
always does. That's what it's averaged, you know, forever. And
then they and then when they throw out this range
of three to ten percent, Shoot, we could all sit
(02:59):
and throw darts at a art board and come up
pretty close. I think this stuff is downright comical. I'm
surprised that these reputable investment banks even put themselves out
there with these kind of forecasts.
Speaker 3 (03:11):
Yeah.
Speaker 2 (03:11):
Well, nobody holds their feet to the fire and they're
they're They're honest human beings for the most part, just
like everybody else. So if if some if an analyst
is told to do their job or what else they
gonna do, They're gonna go do their job and write
these reports. But when when I get asked this question
in the process of financial planning, what do you think
the stock market's gonna do? Uh, my answer is always
h I believe the stock market is going to continue
to be the best place to have your super long
(03:33):
term money. But I'm not gonna put a number on it,
because who knows. It's the best combination of taking a
little bit of risk in exchange for better growth than
something that that is actually predictable. There's just there's just
really no getting around that. That's the way it's been
for hundreds of years. So I do not envision that
changing because it's driven by human greed. Anybody who is
(03:53):
at the head of a big company wants that company
to make more money. They're going to find ways to
do it, either by inventing new product and increasing the
bottom line, or resisting the reducing the expense it costs
to create their existing products and reduce increasing the profit margin.
That way, I don't see that ever, ever, ever changing.
That's how we've made money for thousands of years on
this planet.
Speaker 1 (04:14):
Totally agree. I think an interesting point that Goldman points
out is that the S and P five hundred indexes
net profit margin, the profit margin of these companies is
near record highs at thirteen percent presently. That's up from
five percent back in nineteen nineties. So obviously the market's
been driven by the integration of global supply change as
(04:34):
well as falling interest rates since the nineteen nineties. You know,
in aggregate, we had you know, a great period of
time where rates were pretty much coming down, you know,
for a long period of time, and then corporate tax
rates have come down. The strategists don't, though, expect those
tailwinds to continue to boost profits, you know, as much
going forward, because let's face it, rates you know, they've
(04:57):
come down a little bit in recent years. But I
I don't think we're going to get you know, interest
rates falling to zero unless we have a huge recession,
which would obviously impact the stock market. So it's just interesting.
I find it interesting to your point, you know, the
companies always find a way to make money, and a
thirteen percent net profit margin is pretty darn impressive.
Speaker 2 (05:19):
And another comment they made, I'm not going to beat
everybody about the ears with these numbers, because reading numbers
on the radio is just the best thing to listen.
Speaker 3 (05:26):
To when you're trying to just drive home.
Speaker 2 (05:29):
But the comment they made is they're assuming roughly no
change in corporate profit corporate profitability over the next decade,
you know, in quoting going forward, without a dramatic increase
in interest rates, in our sharp decline in corporate profitability,
we think it's likely that US equity valuations are going
to remain above long term averages, in other words, higher
for longer, is what this particular team is saying. So
(05:50):
let's not get too wound up over the fact that
valuations are slightly higher. I think there's more faith in
riskier investments than there has been in the past, so
we are willing to stick with them longer than we
used to, you know, say, thirty years ago.
Speaker 1 (06:04):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. Brian, you mentioned
taking a look back at history on how these predictions
have worked out. Well, let's look back, you know, going
back to twenty twenty three. Many strategists back then expected
a really rough year for the market, and a lot
of people were calling for an economic recession. Instead, the
(06:26):
market rallied meaningful, meaningfully, and thanks in part to this
whole AI and tech you know boom, A lot of people,
most people did not see the kind of year coming
in twenty twenty three that we actually saw. And then
obviously we most people have heard a lot of people
have heard of Robert Kiyosaki. He has repeatedly predicted major crashes,
(06:50):
comes out and predicts a major crash every year, and
we're still kind of waiting. How about this one? Going
back to September of nineteen ninety nine, syndic Hated columnists
James Glassman and economist Kevin Hassett actually wrote a book
in which they argued that stocks at that time were
significantly undervalued and concluded that there would be a fourfold
(07:13):
market increase with the dal Jones average going to thirty
six thousand by two thousand and two or two thousand
and four. Well, we all know what happened next the
tech bubble, where the Nasdaq promptly went down over fifty percent.
You know, in pretty fast order. It just it just proved,
(07:34):
you know. Imagine taking the time to write a book
about all this and then being so wrong.
Speaker 2 (07:40):
Yeah, And I remember at the time that Dow thirty
six thousand book came out, there was another one called
Dow fifty thousand. Guess which one sold more copies, Bob, So.
Speaker 1 (07:50):
Was that after that Harry Dentz book.
Speaker 3 (07:52):
Oh no, that's a whole other story.
Speaker 2 (07:53):
Harry Deff was a guy who wrote a book called
The Great Boom Ahead, and it happened right before it
came out, right before the big technology boom, and everybody
decided that he was the next prognosticator. He then wrote
a second book called The Roaring two Thousands and hasn't
been heard from since because the two thousands didn't exactly roar.
We had two and eight and it came out slightly different.
So all this is it's the hot hand of somebody
who made the right call at the right time, and
(08:15):
we all everybody is desperately looking for somebody who's just
gonna tell me what buttons to push, what levers to pull.
I just don't want to think, So please give me
a book that says doubt fifty thousand, and I'll just
do whatever Chapter twelve says.
Speaker 3 (08:25):
It doesn't work that way.
Speaker 2 (08:26):
We have to learn our history, and we have to
understand how our own situations apply to it, and be
willing to be flexible financial planning. Investing is far, far,
far more art than science, despite the presence of numbers
in ample supply.
Speaker 3 (08:40):
But it is way more about emotion and greed and
fear than anything else. You got to learn to ride
those waves, and it ain't gonna be found in a book.
Speaker 1 (08:48):
All right, Well, hey, I can remember sitting in an
industry conference back in I think two thousand. Harry Dent
was the keynote speaker, and everyone was just mesmerized. Was
hit with his talk on you know, fifty thousand and
all that the roaring two thousands, and people were waiting
in line to get his autograph and buy his book.
And it was all people, and these were industry professionals,
(09:11):
just mesmerized by Harry Dent walking out of that conference saying, Wow,
this guy has just you know, unlocked the keys to
the kingdom, so to speak. And we all know what
happened next, a huge crash in the market. All right,
let's shift to what we should be doing Brian, fourth
quarter of twenty twenty five, We've had a pretty good
year in the markets. Instead of listening to all these predictions,
(09:33):
what should we be doing as responsible investors with a
good solid financial plan.
Speaker 2 (09:39):
Well, I think it's making sure you understand what your
resources actually are. Look at your four oh and K,
look at your iras, your your streams of income that
could be social security, it could be a pension, maybe
you've got rental property businesses that kind of thing. Understand
what your resources are, and then more importantly, have a
separate coment conversation with either yourself or your spouse with
what are we trying to do with all this? That's
(10:00):
the hard part, right This is the heavy lifting. The
answer is not go find the thing that's just going
to give you a gigantic pile of money, because you
have no idea exactly how gigantic your pile of money
needs to be, because you haven't had the hard conversation,
which is, what do I want?
Speaker 3 (10:14):
How much do we need? What does it cost us
to live our lifestyle?
Speaker 1 (10:17):
How is our lifestyle.
Speaker 2 (10:18):
Going to change when we have nothing but time on
our hands, when we've retired, what are our priorities.
Speaker 3 (10:22):
Is it our kids, Do we feel like we're gonna
have to help them out a lot? Is it our parents?
Speaker 2 (10:26):
Maybe we have to help them charities, all of these
other types of things. Put numbers and price tags on
each and every one of these goals. Assign an inflation rate,
because whatever something costs now is not what it will
cost fifteen years from now, and then make sure you
are on a trajectory to get there. The answer isn't
just I need a bigger pile of money. It is
much more complicated than that. Understand what you yourself need.
Speaker 1 (10:48):
Yeah, And the only thing I'd add to that is
assign time horizons to when you're going to need the
money instead of thinking about, you know, predictions on what
the market's going to do in the next three, six,
nine or twelve months, because the downdrafts or the corrections
in the market, almost no one sees those coming. We
certainly don't, and most of these you know, highly paid
(11:09):
economists don't either. So you know, if you need that
money for short term needs like home repairs or tuition
or buying a new vehicle or something, even if you
think the market's going to go up thirty percent next year.
Don't swallow that bait and leave all that money at risk.
Get it into a different bucket that is not subjected
to short term volatility. Because the minute we think the
(11:31):
coast is clear and we go all in on risk assets,
we can usually get our you know, you know what
handed to us, and it's not a good situation to
go through. Here's the all Worth advice. Don't build your
plan around bold predictions, stick to the fundamentals and stay flexible.
That's how real financial freedom happens. You could owe taxes
(11:53):
on mutual funds even if you didn't sell one share,
and a credit card crackdown might be hitting your rewards
here in the coming weeks, months, and years. What's changing
and what to talk to your advisor about coming up next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
(12:18):
Simply Money presented by all Worth Financial on mob Sponsller
along with Brian James straight Ahead at six forty three.
From charitable trusts to rough conversions, we tackle your biggest
retirement questions and hopefully our answers could either save you
some money or make you some money. Well, it's mid November,
which means Thanksgiving, football, and yes, tech season is quietly
(12:41):
creeping up on all of us. If you're someone who
owns mutual funds in a taxable investment account, now's the
time to probably pay attention. Tell us why, Brian, tis
the season to.
Speaker 2 (12:53):
Be angry about your capital gains distributions because they happen
in Q four, mostly in December. If you own a
mutual fund, mutual funds are good tools to use, nothing
wrong with that, But a mutual fund is a sort
of an older structure to own a balanced investment that
hoholds a bunch of other things. And if that mutual
fund sells something it has owned for thirty years at
(13:14):
a gain and you just bought the thing six months ago,
well you're going to receive a distribution of that gain.
Going back to the beginning, this is why we love
exchange traded funds or ETFs because they don't have that problem.
So we're only referring to taxable accounts here, and we're
not talking about iras ross anything like that.
Speaker 3 (13:30):
Anything. This tax shelter does not apply to this.
Speaker 2 (13:32):
But if you own it in a trust or a
joint account, or an individual non IRA account. Then it's
going to spit out a year end capital gains distribution,
which they are required to do by law. That's probably
gonna get reinvested. You may not even notice it until
you get that big fat ten ninety nine B.
Speaker 3 (13:46):
In January here.
Speaker 2 (13:47):
So even if you just sat tight all year, didn't trade,
didn't touch anything, you might still owe taxes.
Speaker 1 (13:51):
So what should you do about this?
Speaker 3 (13:53):
Right now?
Speaker 2 (13:53):
Talk to your advisor and figure out if are any
of my mutual funds projecting large capital gains distributions and
if so, can we reposition into tax efficient ETFs or
funds that probably itself is going to be a taxable
move and it might be a short term sacrifice, but
a long term move to something that's gonna be a
little more efficient. But the big thing you can control
is hold off until you're to invest in these funds.
(14:14):
If you're thinking of adding more money, wait until after
those distributions go out. You are not not not missing
an opportunity because when those distributions go the share price
falls to account for them. So where you may gain
money from the distribution, you're gonna lose it in the
whole value. It's gonna net out, you will not miss
out on anything. It's better off not to eat that
a tax time. And then finally see if you have
(14:34):
any losses that you can go ahead and harvest proactively
sell a position at a loss to offset some of
those games.
Speaker 1 (14:40):
Just a reminder on where all this taxable activity comes
from within these mutual funds. Remember, these fund managers have
to you know, juggle a few balls in the air.
At the same time, you know, shareholders are always redeeming
shares for whatever purpose. You know, shareholders might want some
of their money to buy something with. So when they
when they sell shares of that fund, going to impact everybody,
(15:02):
even those that those that didn't sell anything. The other
thing is funds get rebalanced over over time. Let's face it,
these people are doing what you hope they're going to do,
is you know, maybe sell some things that have huge
gains and reposition and rebalance you know into stocks that
are down and they project are going to come back up.
So this is why you know the evolution of this
(15:24):
industry has moved such the ETFs are so much more
tax efficient with new money. Brian, you mentioned putting new
money into mutual funds after the capital gain is paid out.
I would advocate don't put new money into mutual funds.
Look at an ETF, look at a direct indexing strategy
where you can own individual stocks and have some tax
(15:45):
lost harvesting going on in the background. It's just a
much more tax efficient way to operate here in twenty
twenty five. You just need to upgrade how you're doing things.
It will save you a lot of money.
Speaker 3 (15:58):
That's a great point. You wouldn't buy black white TV.
Speaker 2 (16:00):
So if you got new money, don't put it in
mutual funds, put it in ETFs. They're gonna get you
the same result.
Speaker 1 (16:06):
All right. If you're among the folks holding premium credit cards,
think flagship travel reward cards, luxury concierge perks, and annual
feed cards. Brian, I know you love your concierge airport
lounge experience. You know, pay attention here because a new
settlement between Visa and MasterCard and US merchants could shake
(16:27):
up how those cards work, how merchants accept them, and
it might involve some hidden costs or rewards going away
in the future.
Speaker 2 (16:37):
Well, I did love my lounge access, but it's kind
of gone away with the way they've changed the rules and.
Speaker 3 (16:41):
They're packed with people nowadays.
Speaker 2 (16:43):
So but anyway, the story today is for more than
two decades, some of these large US merchants have kind
of challenged the the honor all cards rule. They obviously
would really appreciate if you'd use their store cards. So
what they're saying is that, you know, this is the
rule that says if a store accepts one Visa card,
they must accept all Visa cards.
Speaker 3 (16:59):
Therefore the same for Master Card.
Speaker 2 (17:01):
But as part of this settlement, these merchants are going
to have more flexibility to reject cards if they don't want,
or add a surch charge to a different type of
a card, specifically the higher fee ones that are tied
to rich rewards. Remember, the merchants that you are using,
that you're using your credit cards with, are paying to
give you access to that It costs sometimes two three percent.
That's why you'll see these little little restaurants, mom and
(17:21):
pop diners are saying that we'll charge you less if
you're going to pay us cash because they don't have
to eat that charge.
Speaker 3 (17:27):
So what should you do about this? How do we
going to react to this?
Speaker 1 (17:30):
Review?
Speaker 2 (17:31):
Those go to cards, the one you whip out every day.
Know exactly which premium cards you're using the most often,
what are their annual fees, and what are their benefits.
Make sure you're using all those benefits. If they're giving
you free streaming services, do you use it? Have you
signed up for it yet? If not, then don't convince
yourself you're getting a benefit out of it because you're not.
Keep an eye on those communications because they are telling you.
They're they're sending you junk mail. Sometimes they're telling you
(17:53):
in forming you of a change and a benefit. Maybe
some perk is going away. Point values are going to
be recalculated differently, or how you reach those points are
going to be recalculated. If you see those perks going away,
start to think about whether that card still has a
role in your portfolio, and if it doesn't, maybe keep
it open because it's a really old line that contributes
to your credit score.
Speaker 3 (18:13):
But that doesn't mean you have to use it.
Speaker 1 (18:15):
Brian, have you seen any evidence of rewards that you
folks have already earned airline miles or hotel points or
something like that, you know, starting to disappear? Are they
are they causing? Are some of these cards just saying well,
these points are expiring and going away. I'm talking about
stuff that people have already earned and are waiting to use.
Speaker 2 (18:36):
Yes, but they do it in a very creative way.
They don't just say Nope, your points are gone. Poof,
they're gone. All they do is change the calculation because
they know very well nobody's gonna read the junk mail
disclosure in the tiny print that says, hey, we're going
to use this algorithm instead of that algorithm. If you
have any questions, please call our one eight hundred customer
service line. They change the math to make it more
profitable to them, but people don't don't have the time
(18:56):
to figure out exactly what they've lost in terms of
how do I translate these points into dollars?
Speaker 1 (19:02):
Sounds like a fun way to spend the holidays, all right.
Coming up next, all Worth Chief Investment Officer Andy Stout
is back with solutions for investors who are looking to
boost their capital growth and their portfolio and protect themselves
from inflation. You're listening to Simply Money presented by all
Worth Financial on fifty five KRC the talk station. You're
(19:28):
listening to Simply Money presented by all Worth Financial on
Bob sponseller along with Brian James and our chief investment
officer here at Allworth, Andy Stout, is back with us
for this segment. Andy, you're here to talk about capital
and pre appreciation and inflation protection. Talk to us about
how to do that. What should we do with our
(19:49):
money to help it grow?
Speaker 4 (19:52):
Well, there are many things you can do. Obviously, we've
heard real estate, individuals, stocks, individual you know, some various
heads fund private equity. There's lots of ways that you
can you know, benefit from that, and we're happy to
go into any detail you want.
Speaker 1 (20:11):
But I would actually take a step back and I would.
Speaker 4 (20:14):
Say when you think about, you know, your investments and
growing over time, and obviously nothing can be guaranteed. Saying
that for our compliance department out there, so we don't
get our hands slapped, but taking taking a step back,
the biggest thing you can do is not get in
your own way. I mean, if you think about it,
(20:37):
we have a fear of missing out, and we tend
to panic and we go through this emotional roller coaster
if you will, and what ends up happening if you
just let your emotions guide your investment decisions is you
end up buying high in selling love, which isn't the
exact opposite thing of what you want to do. Now,
you know, don't need to make this a you know,
a lesson on behavioral finance or anything like that, but
(20:59):
you know, I would say one takeaway is that know
that you're not rational. People are not rational. We're driven
by our emotions. Have a plan ahead of time, and
stick to that plan, because otherwise you are going to
be essentially buying high and selling low. And I mentioned
some of the strategies that I talked about a second ago,
and we can dive into them here.
Speaker 1 (21:17):
But if you don't.
Speaker 4 (21:19):
Separate your emotions from your investments, you're going to end
up not probably not doing as well as you could
have otherwise, in spite of maybe having the best strategy
in the entire universe, it won't matter if you let
your emotions take over. And I mean, there's lots of
really good strategies out there. You know, we can look
at individual equity strategies. If you're really maybe focused on
(21:44):
getting income, you know, there's plenty of really good individual
stocks out there, and just make sure that if you
want income, they're focused on dividends and they're well diversified,
so you can exposure to multiple sectors and if you're
looking for something that's more total return, which I think
probably makes more sense because you can always make your
own dividends just by selling stocks.
Speaker 2 (22:04):
Andy, So I'm gonna shift because you're raising a question
here in my head inflation protection, and I'm thinking of
conversations I've had recently from people who are trying to separate.
I want to protect from from inflation, but I also
want to protect myself from the ups and downs of
the stock market. Now a lot of times, you know
those are those are almost mutually exclusive. You have to
(22:24):
accept a little risk on one side to somehow defer
the risk on the other side. So what would you
say to those people who were really sensitive to volatility
in the stock market you want to keep up with
inflation and trying to find a way to thread that needle.
Speaker 4 (22:39):
I would say, you can't have your cake and eat
it too. To your point, you know you have to
get something or give something up to get something. Another
famous line in the investing world is there is no
free lunch. So when you think about it from that perspective,
you do have to give something up, and you can
you can protect the downside and have plenty of potential upside.
(23:02):
And there's different strategies for that. They can involve stock options,
they can involve buffer ETFs, they can involve structured notes,
they can involve having a diversified portfolio that's just done
one hundred percent stocks. Maybe it's eighty twenty eight percent stocks,
twenty percent mods or forty sixty really whatever risk profile
are comfortable with. Because when I think about just the
overall investment strategies for people and trying to essentially get
(23:25):
that return they need to get to beat inflation and
have capital appreciation. The big thing is making sure you're
able to sleep at night, because if you're not able
to sleep at night, you're going to end up, you know,
making that emotional decision. So having that right risk profile
at the very onset is really key. So you have
individual stock strategies. You know, one thing that I think
is really good because you think about individual stock strategies,
you think about a diversified strategy of using ets and
(23:47):
mutual funds and that's all those are all great, and
you're looking for what i'll call alpha or a relative
outperformance to you know, whatever you're trying to achieve. But
there's also tax alpha as well, and that's something that's
very very powerful. So you could look at some direct indexes,
which what they look to do is they look to,
you know, generate some losses to offset gains and still
(24:08):
have that total return essentially matchine index on a pre
tax basis, but then beat it on an after tax basis.
So how you could do that is you still get
the exposure to your i'll call it your maybe some
housing stocks or whatever, or home improvement stocks, let's let's
use that example instead, and maybe home deep. It goes down,
so you sell home depot and you buy more lows
because they're going to move kind of together, and you
(24:30):
still get that same general exposure, but all of a
sudden you bank the loss and overall hopefully you.
Speaker 1 (24:35):
Still have gains.
Speaker 4 (24:35):
And then what you end up showing for your tax
report is the ability to lower that those realize gains
and lower how much you pay to the irs. So
there's a lot of really good strategies out there. And
the last one I'll mention besides like direct indexes and
already mentioned fund of funds, individual stocks, you know, private investments,
those have the potential for outperformance as well, Like private
(24:56):
equity is a really good example, private real estate another
really good example. Now those tend to be more complex,
and you got to make sure it's a line through
I risk tolerance and the suitability really is set up
to make sure that you understand how all those things work.
But there is the ability for those types of investments
to be what i'll call uncorrelated, meaning they may not
(25:18):
move with the broad market, but over time they still
have plenty of upsides. So you know, Brian just asked
that question a second ago about you know, kind of
like a minimizing some downside rest to a degree, still
have that upside here. I would say you could also
do it by looking at the correlation or things that
don't move together.
Speaker 1 (25:36):
All right, lots of good stuff to consider, and as always,
it's important to pair your risk tolerance with your goals
and it should all be part of a good comprehensive
financial plan that factors in both return, risk and tax planning.
You're listening to Simply Money presented by all Worth Financial
on fifty five KORC the talk station. You're listening to
(26:03):
Simply Money present up by all Worth Financial umpop Sponsorller
along with Brian James. You have a financial question you'd
like for us to answer, there is a red button
you can click while you're listening to the show. If
you're listening on the iHeart app, simply record your question
and it will come straight to us. Tom and Kettering
leads us off tonight. You know, all the way up
(26:24):
near Dayton. Love our listeners up in Dayton. Brian he says,
I've heard that rebalancing can trigger unnecessary taxes in taxable accounts.
How do you stay diversified without creating a big tax
problem every time you adjust or rebalance.
Speaker 3 (26:39):
That's a great question, Tom.
Speaker 2 (26:40):
This is one of those smart move but wrong account
issues that kind of keep it catches even experienced.
Speaker 3 (26:45):
Investors of off balance here.
Speaker 2 (26:48):
So rebalancing this is when you're selling your winners to
buy to buy some more losers, which sound doesn't sound
exactly right.
Speaker 3 (26:53):
But stuff goes up, stuff goes down may still be
a good investment.
Speaker 2 (26:56):
You might want to rebalance that way, but that's going
to keep your portfolio in line with your plan. But
in a taxable account, a good rebalance can trigger capital
gains taxes. So to stay diversified without overpaying Uncle Sam
make sure you're rebalancing inside your tax sheltered accounts. First
four to one k's iras roth iras. That's where move
The moves you make inside the account aren't taxable at all.
If it's a taxable account, use new contributions or perhaps
(27:20):
switch your dividends to cash, let them build up, and
then use that new cash to only buy to rebalance.
That's called cash flow rebalancing, versus actually selling something robotically
and then putting it putting it back into new positions.
If selling is necessary, look for positions that are sitting
at a loss to offset gains.
Speaker 1 (27:37):
That's tax loss harvesting.
Speaker 3 (27:38):
Tell me if you've heard us say that before.
Speaker 2 (27:40):
Or stay within those long term capital gains windows for
those lower rates. And so these are there are steps
you can take make sure. The real point here is
to make sure that you're you're having less of an
impact in your taxable account than you are in your
IRA when it comes to rebalancing your portfolio.
Speaker 1 (27:54):
So let's move to a.
Speaker 3 (27:55):
Bill in Indian Hill.
Speaker 2 (27:56):
Bill says he's got a few mutual funds in a
taxable account, and they keep shoving off these big capital
gains distributions.
Speaker 3 (28:02):
Hey, Bob, I think we just talked about this, did we.
Speaker 1 (28:04):
He did.
Speaker 2 (28:05):
He's wondering is it better to sell now and reset
into ETFs or just wait it out. I think that's
a great thing for people to start thinking about.
Speaker 1 (28:12):
Well, it's a great question, and it's a timely question.
I mean, Bill, we just talked about this, and I'll
use Brian's analogy. You know, it's time to gradually shift
from the black and white TV world into the plasma,
big screen color TV world. It doesn't mean you have
to take your black and white TV and smash it
on the driveway this afternoon. You can make a gradual change.
(28:34):
Here's what I mean. You know, have somebody sit down
with you and look at what are the annual you know,
distributions that you're likely to get from these mutual funds,
and what's your cost basis in these mutual funds, and
then evaluate how can we gradually unwind these mutual funds
in a taxable, responsible way and shift into the plasma
(28:55):
TV world of ETFs or direct indexing. The other thing
you can do is if you are charitably inclined and
you make annual distributions to charity, do that with low
cost basis mutual funds give those away to charities or
your donor advice fund rather than writing a check. So
between a combination of gradually moving, doing some tax loss harvesting,
(29:19):
and using maybe these low cost basis mutual funds to
do charitable giving, I think you can responsibly make that
shift out of the mutual fund world and into the
ETF or direct indexing world and not pay a boatload
of taxes in the process. Hope that Bob, yes.
Speaker 3 (29:35):
Plasma TVs were so like ten years ago.
Speaker 2 (29:38):
The new thing is O LED or maybe not something
LED anyway, but plasma yesterday, Bob yesterday.
Speaker 1 (29:45):
Well, I still like my plasma TV better than my
black and white TV. But I'm glad I've got you
around to keep me updated on technology and credit card points.
Speaker 3 (29:55):
Now we know that Bob still owns a black.
Speaker 1 (29:57):
And white TV. All right, Pa, please answer Ken's question
from Mount Washington. Ken says, I'm hearing more about using
charitable remainder trusts to diversify appreciated stock. How do those
really work and what's the trade off? And before you
answer that, Brian, just so you know, I've got a
beautiful seventy two inch TV hanging on my you know,
(30:20):
in my living room that I had to fight my
wife tooth and nail to allow me to hang on
the above the fireplace. She thinks it's too big. I
demanded that it be hung there because I want to
watch and be able to see my football and baseball games.
The thing was purchased in the last you know, six
to twelve months, so I don't know what they call it.
I just know it works well. The picture's great and
(30:41):
I love it. But please answer Ken's question.
Speaker 2 (30:43):
You heard it here first, Bob Sponzeller owns the only
black and white plasma TV in existence.
Speaker 3 (30:48):
So let's move on to let's move on to adult
talk here.
Speaker 2 (30:52):
And so we're talking about cheditable remainder trust, so charitable
remainder trust commonly known as a CRT, that that lets
you donate appreciated stuf without selling it first.
Speaker 1 (31:01):
Now, there's a lot of ways.
Speaker 3 (31:02):
You might do this.
Speaker 2 (31:03):
Donor advice funds play a role here too, but we're
talking about CRT specifically.
Speaker 3 (31:07):
The goal here is that you will.
Speaker 2 (31:08):
Avoid immediate capital gains tax and you still get a
steady income stream. You still own the stock in a
sense because you control it inside your trust. However, you
can take an income stream out of it. You can
no longer manage those accounts, or you don't actually own
the stock to vote those kinds of things. So the
trust though sells the stock tax free. It's a charitable
(31:29):
remainder trust. It itself is not taxed. It's going to
reinvest that full amount however you want. This is a
way to diversify things, to balance portfolio out, and it's
going to pay you that annual income and that's often
you know, that's written into the trust document, but it
might be five to seven percent of the trust value
when you pass away. This is the remainder part of
charitable remainder trust. Whatever is left goes to any charity
(31:50):
that could be an university, it could be a different
donor advised fund, or a local foundation or something. And
you've already designated that in the trust. You will say
at my death, here is the charity of final of receipt.
But in the meantime you can also use those assets
for different charities that you like as well. You also
get an immediate charitable deduction based on the projected remainder gift. Right,
(32:13):
So it's a calculation a present value of whatever that
might be worth in the future. So the trade off
is you lose access to the principle it is locked
into that trust, and the income is taxable when it's received.
You haven't turned you know, you haven't created a tax
free stream of income. You've simply taken one asset and
given the ability to spread it out, diversify it, but
out without paying capital gains. And you've benefited a charity
(32:34):
that you might already be inclined to do anyway. So
a little more complicated donor advice funds play a role
there too, So look at both of those options. Paul
in Montgomery, Paul says, with rates bouncing around, Bob, we've
got a ladder of CDs in short term treasuries. How
do you decide when to roll it versus just when
to lock something in for the long term and forget
about it.
Speaker 1 (32:53):
Well, the first thing is if we know where interest
rates are going, and when you know, we would all
know the answer to that question. And that's that's because
we don't know the answer to that question. That's why
people like to use a ladder strategy like it sounds
like you're doing, because we don't know what's going to happen,
and therefore we hedge our bets and we stagger it out.
So good for you for doing that already. You know,
(33:15):
my answer to your question is whether it's a CD
or treasuries or bonds, there's something called a yield to maturity,
which you can determine on a daily basis because the
prices of these CDs, if they're traded on the open market,
and short term treasuries they move daily with the movement
of interest rates. So you know, you can look at
all of your holdings and calculate what the yield to
(33:36):
maturity is, meaning if I hold these things to maturity
from now until when they mature, forget about where when
you bought them, from now until you mature, until they mature,
what's your yield going to be? And if there's a
couple of things that are really out of whack or
out of line with what you could do today by
redeeming that one, you know, treasury now and buying something else,
(33:56):
that's the time to make a move or roll as
you say. So, you know, I think you could sit
down on a case by case basis, look at every holding,
see if some things are out of whack and go
from there. Other than that, I think it's good to
just continue as one thing matures, you know, just continue
to ladder so you're not guessing on where interest rates
are going to go, and you've got a good sound
(34:18):
strategy in place, you know that takes advantage of all
interest rate environments. Hope that helps. Coming up next, how
skipping your vacation could cost you a lot more than
just a week at the beach. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC
the talk station. You're listening to Simply Money by all
(34:42):
Worth Financial, umbop spond seller along with Brian James. As
we wrap things up tonight, let's talk about something that
doesn't show up in the scorebook or on your four
to one case statement, but absolutely impacts your financial life.
And that's your time off. Brian, A new search came
out just you know, recently on this and these numbers
(35:04):
are pretty staggering. Let's get into it because I think
not enough people are using their time off, and I
think that's not a good thing.
Speaker 2 (35:12):
You know, I just did a survey in my own
household and fifty percent of my marriage hasn't taken all
of its vacation days. So, hey, hon are we going
to go to Savannah. We're still gonna do that because
we're kind of running out of time for the year.
But let's talk about a bigger survey, right, So this
is a new one that the nearly one in four
Americans didn't take a single vacation day this year.
Speaker 3 (35:31):
Not one.
Speaker 2 (35:31):
The top reason, well, I'm too busy. Number two, I'm
afraid of falling behind, which is kind of the same thing.
So let's be real, if you're listening to this show,
there's a real good chance you fall into that category
because you're stuck behind a steering wheel, steering at your
windshield on the way home. Maybe you run a business,
maybe you've got a leadership role, or you're still building
toward retirement.
Speaker 3 (35:48):
But here's the problem.
Speaker 2 (35:49):
Skipping that time off might feel productive in the short term,
but long term, it can get pretty expensive, right, Bob.
Speaker 1 (35:56):
I think it gets real expensive. And I can speak
from personal experience. You know, during the years, you know,
many years I own my own business, I rarely took
any time off, real time off, because I couldn't. I
had to take care of stuff myself. And it really
does take a toll, you know, over time. And I
think people that have taken a good, solid vacation understand
(36:18):
what I'm about to say. Even though it might feel
like you're going to come back at the end of
that vacation to a big to do list or pile
of emails or what have you, your brain is just sharper,
your mind is refreshed. You're just healthier, you're happier, you're
more effective in your job after you take some time off.
(36:39):
And I'm a big proponent of doing that. And again,
I think we can get on that. You know, we
can get on that hamster wheel for years and years
and years and forget about all that. And it really
does take a toll over time. So you know, your
paid time off is it's part of your compensation. You know,
if you work for a company, if you don't use it,
you're literally leaving money on the table. And I think
(37:02):
you gotta you gotta look at it that way. You're
leaving I would say, potentially some mental health on the table.
That's value, that's part of your overall wealth picture. And
for some companies it doesn't roll over, So if you
don't take it, it's gone.
Speaker 2 (37:16):
Not to mention, you're creating memories with the people you
care about. Nobody's gonna talk about how great that PowerPoint
was at your at your funeral, They're gonna talk about
the memories you created with them. So not only should
you be taking advantage of the of that time that
you have to not be a working drone you you're
also spending that time with your family and building those
relationships up, and that's far more important in the long
(37:38):
run anyway. So make sure you are not ignoring those
types of things, the opportunities that you have to build
something that really counts.
Speaker 1 (37:45):
And one more thing on that topic, if you're someone
that's approaching retirement, you know in the next couple, you know,
three five years, that's even more of a reason to practice. Now,
take a vacation and practice what being retired might look like.
How are you gonna use your time and energy and
have fun and fill up your day. And if you
don't know how to step away from work for a week,
(38:07):
how are you going to handle stepping away for thirty years.
That's another reason to use your vacation and use it
strategically and kind of practice for an upcoming retirement. Here's
the all Worth advice. Your time is one of your
most valuable assets. Protect it, use it and invest it wisely.
Thanks for listening tonight. You've been listening to Simply Money,
(38:28):
presented by all Worth Financial on fifty five KRC, the
talk station
Tonight, where is the S and P five hundred headed next?
One of the most influential investment banks in the world
apparently has that answer. You're listening to Simply Money, presented
by all Worth Financial on Bob Sponseller along with Brian James. Well, Brian,
we preach on this show all the time to never
act on media predictions or predictions from anyone for that matter.
(00:30):
But hey, because it's mid November, here come the projections
for twenty twenty six. Goldman sat Goldman Sachs appears to
be first out of the gate here, stepping up as
one of the first Wall Street banks to roll out
forecast for next year. Goldman strategists see the S and
P five hundred hitting seventy six hundred by the end
of twenty twenty six, roughly an eleven percent gain from here.
Speaker 2 (00:54):
Well, it is Q four tis this season to make
stuff up, so let's start talking about the next year
and what everybody things is going to happen. I'm going
to go ahead and commit us as a team, Bob
and Jason, our producer, to look at what predictions came
from last year and because I'm sure we did this
whole thing a year ago, and let's just see how
that all landed. But in any case, there's another one.
(01:15):
A team led by chief global equity strategist Peter Oppenheimer,
that's a name you might recognize from Oppenheimer Funds, has
come up with a long term forecast from the S
and P five hundred and to deliver a six and
a half percent annualized return over the next ten years.
That's slightly below their forecast of a seven point seven
percent annualized return for global equity. So what they're saying
there is they think that the trend that has started
(01:37):
in twenty twenty five of global equities outpacing the United
States the S and P five hundred is going to continue.
So that six and a half percent return comprises six
percent annualized earnings per share growth, one percent annualized decline
in valuations, and a one point four percent average divid
and yield. Smush all that together and you get their
opinion that global stocks are going to be a slightly
better place to be than the S and P five hundred.
Speaker 1 (02:00):
Not only do we get the bottom line prediction number,
we actually get a detailed breakdown over the next ten
years of precisely where the returns are gonna come from.
Speaker 2 (02:10):
It don't make stuff up one year in a row.
We make stuff up decades in a row.
Speaker 1 (02:14):
All right, it's not that great historically that you know
this six percent analyzed return forecast that would put us
in the twenty seventh percent tile of return since nineteen ninety.
The Goldman team says it's ten year SMP forecast includes
bearish and bullish cases in the range of three to
ten percent. Brian, you and I have both been doing
(02:36):
this a long time. Every year, you know, these people
come out and they predict that the stock market's gonna
go up seven to ten percent the next year. You know,
my reaction to that is, duh, that's that's what it
always does. That's what it's averaged, you know, forever. And
then they and then when they throw out this range
of three to ten percent, Shoot, we could all sit
(02:59):
and throw darts at a art board and come up
pretty close. I think this stuff is downright comical. I'm
surprised that these reputable investment banks even put themselves out
there with these kind of forecasts.
Speaker 3 (03:11):
Yeah.
Speaker 2 (03:11):
Well, nobody holds their feet to the fire and they're
they're They're honest human beings for the most part, just
like everybody else. So if if some if an analyst
is told to do their job or what else they
gonna do, They're gonna go do their job and write
these reports. But when when I get asked this question
in the process of financial planning, what do you think
the stock market's gonna do? Uh, my answer is always
h I believe the stock market is going to continue
to be the best place to have your super long
(03:33):
term money. But I'm not gonna put a number on it,
because who knows. It's the best combination of taking a
little bit of risk in exchange for better growth than
something that that is actually predictable. There's just there's just
really no getting around that. That's the way it's been
for hundreds of years. So I do not envision that
changing because it's driven by human greed. Anybody who is
(03:53):
at the head of a big company wants that company
to make more money. They're going to find ways to
do it, either by inventing new product and increasing the
bottom line, or resisting the reducing the expense it costs
to create their existing products and reduce increasing the profit margin.
That way, I don't see that ever, ever, ever changing.
That's how we've made money for thousands of years on
this planet.
Speaker 1 (04:14):
Totally agree. I think an interesting point that Goldman points
out is that the S and P five hundred indexes
net profit margin, the profit margin of these companies is
near record highs at thirteen percent presently. That's up from
five percent back in nineteen nineties. So obviously the market's
been driven by the integration of global supply change as
(04:34):
well as falling interest rates since the nineteen nineties. You know,
in aggregate, we had you know, a great period of
time where rates were pretty much coming down, you know,
for a long period of time, and then corporate tax
rates have come down. The strategists don't, though, expect those
tailwinds to continue to boost profits, you know, as much
going forward, because let's face it, rates you know, they've
(04:57):
come down a little bit in recent years. But I
I don't think we're going to get you know, interest
rates falling to zero unless we have a huge recession,
which would obviously impact the stock market. So it's just interesting.
I find it interesting to your point, you know, the
companies always find a way to make money, and a
thirteen percent net profit margin is pretty darn impressive.
Speaker 2 (05:19):
And another comment they made, I'm not going to beat
everybody about the ears with these numbers, because reading numbers
on the radio is just the best thing to listen.
Speaker 3 (05:26):
To when you're trying to just drive home.
Speaker 2 (05:29):
But the comment they made is they're assuming roughly no
change in corporate profit corporate profitability over the next decade,
you know, in quoting going forward, without a dramatic increase
in interest rates, in our sharp decline in corporate profitability,
we think it's likely that US equity valuations are going
to remain above long term averages, in other words, higher
for longer, is what this particular team is saying. So
(05:50):
let's not get too wound up over the fact that
valuations are slightly higher. I think there's more faith in
riskier investments than there has been in the past, so
we are willing to stick with them longer than we
used to, you know, say, thirty years ago.
Speaker 1 (06:04):
You're listening to Simply Money presented by all Worth Financial
on Bob Sponseller along with Brian James. Brian, you mentioned
taking a look back at history on how these predictions
have worked out. Well, let's look back, you know, going
back to twenty twenty three. Many strategists back then expected
a really rough year for the market, and a lot
of people were calling for an economic recession. Instead, the
(06:26):
market rallied meaningful, meaningfully, and thanks in part to this
whole AI and tech you know boom, A lot of people,
most people did not see the kind of year coming
in twenty twenty three that we actually saw. And then
obviously we most people have heard a lot of people
have heard of Robert Kiyosaki. He has repeatedly predicted major crashes,
(06:50):
comes out and predicts a major crash every year, and
we're still kind of waiting. How about this one? Going
back to September of nineteen ninety nine, syndic Hated columnists
James Glassman and economist Kevin Hassett actually wrote a book
in which they argued that stocks at that time were
significantly undervalued and concluded that there would be a fourfold
(07:13):
market increase with the dal Jones average going to thirty
six thousand by two thousand and two or two thousand
and four. Well, we all know what happened next the
tech bubble, where the Nasdaq promptly went down over fifty percent.
You know, in pretty fast order. It just it just proved,
(07:34):
you know. Imagine taking the time to write a book
about all this and then being so wrong.
Speaker 2 (07:40):
Yeah, And I remember at the time that Dow thirty
six thousand book came out, there was another one called
Dow fifty thousand. Guess which one sold more copies, Bob, So.
Speaker 1 (07:50):
Was that after that Harry Dentz book.
Speaker 3 (07:52):
Oh no, that's a whole other story.
Speaker 2 (07:53):
Harry Deff was a guy who wrote a book called
The Great Boom Ahead, and it happened right before it
came out, right before the big technology boom, and everybody
decided that he was the next prognosticator. He then wrote
a second book called The Roaring two Thousands and hasn't
been heard from since because the two thousands didn't exactly roar.
We had two and eight and it came out slightly different.
So all this is it's the hot hand of somebody
who made the right call at the right time, and
(08:15):
we all everybody is desperately looking for somebody who's just
gonna tell me what buttons to push, what levers to pull.
I just don't want to think, So please give me
a book that says doubt fifty thousand, and I'll just
do whatever Chapter twelve says.
Speaker 3 (08:25):
It doesn't work that way.
Speaker 2 (08:26):
We have to learn our history, and we have to
understand how our own situations apply to it, and be
willing to be flexible financial planning. Investing is far, far,
far more art than science, despite the presence of numbers
in ample supply.
Speaker 3 (08:40):
But it is way more about emotion and greed and
fear than anything else. You got to learn to ride
those waves, and it ain't gonna be found in a book.
Speaker 1 (08:48):
All right, Well, hey, I can remember sitting in an
industry conference back in I think two thousand. Harry Dent
was the keynote speaker, and everyone was just mesmerized. Was
hit with his talk on you know, fifty thousand and
all that the roaring two thousands, and people were waiting
in line to get his autograph and buy his book.
And it was all people, and these were industry professionals,
(09:11):
just mesmerized by Harry Dent walking out of that conference saying, Wow,
this guy has just you know, unlocked the keys to
the kingdom, so to speak. And we all know what
happened next, a huge crash in the market. All right,
let's shift to what we should be doing Brian, fourth
quarter of twenty twenty five, We've had a pretty good
year in the markets. Instead of listening to all these predictions,
(09:33):
what should we be doing as responsible investors with a
good solid financial plan.
Speaker 2 (09:39):
Well, I think it's making sure you understand what your
resources actually are. Look at your four oh and K,
look at your iras, your your streams of income that
could be social security, it could be a pension, maybe
you've got rental property businesses that kind of thing. Understand
what your resources are, and then more importantly, have a
separate coment conversation with either yourself or your spouse with
what are we trying to do with all this? That's
(10:00):
the hard part, right This is the heavy lifting. The
answer is not go find the thing that's just going
to give you a gigantic pile of money, because you
have no idea exactly how gigantic your pile of money
needs to be, because you haven't had the hard conversation,
which is, what do I want?
Speaker 3 (10:14):
How much do we need? What does it cost us
to live our lifestyle?
Speaker 1 (10:17):
How is our lifestyle.
Speaker 2 (10:18):
Going to change when we have nothing but time on
our hands, when we've retired, what are our priorities.
Speaker 3 (10:22):
Is it our kids, Do we feel like we're gonna
have to help them out a lot? Is it our parents?
Speaker 2 (10:26):
Maybe we have to help them charities, all of these
other types of things. Put numbers and price tags on
each and every one of these goals. Assign an inflation rate,
because whatever something costs now is not what it will
cost fifteen years from now, and then make sure you
are on a trajectory to get there. The answer isn't
just I need a bigger pile of money. It is
much more complicated than that. Understand what you yourself need.
Speaker 1 (10:48):
Yeah, And the only thing I'd add to that is
assign time horizons to when you're going to need the
money instead of thinking about, you know, predictions on what
the market's going to do in the next three, six,
nine or twelve months, because the downdrafts or the corrections
in the market, almost no one sees those coming. We
certainly don't, and most of these you know, highly paid
(11:09):
economists don't either. So you know, if you need that
money for short term needs like home repairs or tuition
or buying a new vehicle or something, even if you
think the market's going to go up thirty percent next year.
Don't swallow that bait and leave all that money at risk.
Get it into a different bucket that is not subjected
to short term volatility. Because the minute we think the
(11:31):
coast is clear and we go all in on risk assets,
we can usually get our you know, you know what
handed to us, and it's not a good situation to
go through. Here's the all Worth advice. Don't build your
plan around bold predictions, stick to the fundamentals and stay flexible.
That's how real financial freedom happens. You could owe taxes
(11:53):
on mutual funds even if you didn't sell one share,
and a credit card crackdown might be hitting your rewards
here in the coming weeks, months, and years. What's changing
and what to talk to your advisor about coming up next.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
(12:18):
Simply Money presented by all Worth Financial on mob Sponsller
along with Brian James straight Ahead at six forty three.
From charitable trusts to rough conversions, we tackle your biggest
retirement questions and hopefully our answers could either save you
some money or make you some money. Well, it's mid November,
which means Thanksgiving, football, and yes, tech season is quietly
(12:41):
creeping up on all of us. If you're someone who
owns mutual funds in a taxable investment account, now's the
time to probably pay attention. Tell us why, Brian, tis
the season to.
Speaker 2 (12:53):
Be angry about your capital gains distributions because they happen
in Q four, mostly in December. If you own a
mutual fund, mutual funds are good tools to use, nothing
wrong with that, But a mutual fund is a sort
of an older structure to own a balanced investment that
hoholds a bunch of other things. And if that mutual
fund sells something it has owned for thirty years at
(13:14):
a gain and you just bought the thing six months ago,
well you're going to receive a distribution of that gain.
Going back to the beginning, this is why we love
exchange traded funds or ETFs because they don't have that problem.
So we're only referring to taxable accounts here, and we're
not talking about iras ross anything like that.
Speaker 3 (13:30):
Anything. This tax shelter does not apply to this.
Speaker 2 (13:32):
But if you own it in a trust or a
joint account, or an individual non IRA account. Then it's
going to spit out a year end capital gains distribution,
which they are required to do by law. That's probably
gonna get reinvested. You may not even notice it until
you get that big fat ten ninety nine B.
Speaker 3 (13:46):
In January here.
Speaker 2 (13:47):
So even if you just sat tight all year, didn't trade,
didn't touch anything, you might still owe taxes.
Speaker 1 (13:51):
So what should you do about this?
Speaker 3 (13:53):
Right now?
Speaker 2 (13:53):
Talk to your advisor and figure out if are any
of my mutual funds projecting large capital gains distributions and
if so, can we reposition into tax efficient ETFs or
funds that probably itself is going to be a taxable
move and it might be a short term sacrifice, but
a long term move to something that's gonna be a
little more efficient. But the big thing you can control
is hold off until you're to invest in these funds.
(14:14):
If you're thinking of adding more money, wait until after
those distributions go out. You are not not not missing
an opportunity because when those distributions go the share price
falls to account for them. So where you may gain
money from the distribution, you're gonna lose it in the
whole value. It's gonna net out, you will not miss
out on anything. It's better off not to eat that
a tax time. And then finally see if you have
(14:34):
any losses that you can go ahead and harvest proactively
sell a position at a loss to offset some of
those games.
Speaker 1 (14:40):
Just a reminder on where all this taxable activity comes
from within these mutual funds. Remember, these fund managers have
to you know, juggle a few balls in the air.
At the same time, you know, shareholders are always redeeming
shares for whatever purpose. You know, shareholders might want some
of their money to buy something with. So when they
when they sell shares of that fund, going to impact everybody,
(15:02):
even those that those that didn't sell anything. The other
thing is funds get rebalanced over over time. Let's face it,
these people are doing what you hope they're going to do,
is you know, maybe sell some things that have huge
gains and reposition and rebalance you know into stocks that
are down and they project are going to come back up.
So this is why you know the evolution of this
(15:24):
industry has moved such the ETFs are so much more
tax efficient with new money. Brian, you mentioned putting new
money into mutual funds after the capital gain is paid out.
I would advocate don't put new money into mutual funds.
Look at an ETF, look at a direct indexing strategy
where you can own individual stocks and have some tax
(15:45):
lost harvesting going on in the background. It's just a
much more tax efficient way to operate here in twenty
twenty five. You just need to upgrade how you're doing things.
It will save you a lot of money.
Speaker 3 (15:58):
That's a great point. You wouldn't buy black white TV.
Speaker 2 (16:00):
So if you got new money, don't put it in
mutual funds, put it in ETFs. They're gonna get you
the same result.
Speaker 1 (16:06):
All right. If you're among the folks holding premium credit cards,
think flagship travel reward cards, luxury concierge perks, and annual
feed cards. Brian, I know you love your concierge airport
lounge experience. You know, pay attention here because a new
settlement between Visa and MasterCard and US merchants could shake
(16:27):
up how those cards work, how merchants accept them, and
it might involve some hidden costs or rewards going away
in the future.
Speaker 2 (16:37):
Well, I did love my lounge access, but it's kind
of gone away with the way they've changed the rules and.
Speaker 3 (16:41):
They're packed with people nowadays.
Speaker 2 (16:43):
So but anyway, the story today is for more than
two decades, some of these large US merchants have kind
of challenged the the honor all cards rule. They obviously
would really appreciate if you'd use their store cards. So
what they're saying is that, you know, this is the
rule that says if a store accepts one Visa card,
they must accept all Visa cards.
Speaker 3 (16:59):
Therefore the same for Master Card.
Speaker 2 (17:01):
But as part of this settlement, these merchants are going
to have more flexibility to reject cards if they don't want,
or add a surch charge to a different type of
a card, specifically the higher fee ones that are tied
to rich rewards. Remember, the merchants that you are using,
that you're using your credit cards with, are paying to
give you access to that It costs sometimes two three percent.
That's why you'll see these little little restaurants, mom and
(17:21):
pop diners are saying that we'll charge you less if
you're going to pay us cash because they don't have
to eat that charge.
Speaker 3 (17:27):
So what should you do about this? How do we
going to react to this?
Speaker 1 (17:30):
Review?
Speaker 2 (17:31):
Those go to cards, the one you whip out every day.
Know exactly which premium cards you're using the most often,
what are their annual fees, and what are their benefits.
Make sure you're using all those benefits. If they're giving
you free streaming services, do you use it? Have you
signed up for it yet? If not, then don't convince
yourself you're getting a benefit out of it because you're not.
Keep an eye on those communications because they are telling you.
They're they're sending you junk mail. Sometimes they're telling you
(17:53):
in forming you of a change and a benefit. Maybe
some perk is going away. Point values are going to
be recalculated differently, or how you reach those points are
going to be recalculated. If you see those perks going away,
start to think about whether that card still has a
role in your portfolio, and if it doesn't, maybe keep
it open because it's a really old line that contributes
to your credit score.
Speaker 3 (18:13):
But that doesn't mean you have to use it.
Speaker 1 (18:15):
Brian, have you seen any evidence of rewards that you
folks have already earned airline miles or hotel points or
something like that, you know, starting to disappear? Are they
are they causing? Are some of these cards just saying well,
these points are expiring and going away. I'm talking about
stuff that people have already earned and are waiting to use.
Speaker 2 (18:36):
Yes, but they do it in a very creative way.
They don't just say Nope, your points are gone. Poof,
they're gone. All they do is change the calculation because
they know very well nobody's gonna read the junk mail
disclosure in the tiny print that says, hey, we're going
to use this algorithm instead of that algorithm. If you
have any questions, please call our one eight hundred customer
service line. They change the math to make it more
profitable to them, but people don't don't have the time
(18:56):
to figure out exactly what they've lost in terms of
how do I translate these points into dollars?
Speaker 1 (19:02):
Sounds like a fun way to spend the holidays, all right.
Coming up next, all Worth Chief Investment Officer Andy Stout
is back with solutions for investors who are looking to
boost their capital growth and their portfolio and protect themselves
from inflation. You're listening to Simply Money presented by all
Worth Financial on fifty five KRC the talk station. You're
(19:28):
listening to Simply Money presented by all Worth Financial on
Bob sponseller along with Brian James and our chief investment
officer here at Allworth, Andy Stout, is back with us
for this segment. Andy, you're here to talk about capital
and pre appreciation and inflation protection. Talk to us about
how to do that. What should we do with our
(19:49):
money to help it grow?
Speaker 4 (19:52):
Well, there are many things you can do. Obviously, we've
heard real estate, individuals, stocks, individual you know, some various
heads fund private equity. There's lots of ways that you
can you know, benefit from that, and we're happy to
go into any detail you want.
Speaker 1 (20:11):
But I would actually take a step back and I would.
Speaker 4 (20:14):
Say when you think about, you know, your investments and
growing over time, and obviously nothing can be guaranteed. Saying
that for our compliance department out there, so we don't
get our hands slapped, but taking taking a step back,
the biggest thing you can do is not get in
your own way. I mean, if you think about it,
(20:37):
we have a fear of missing out, and we tend
to panic and we go through this emotional roller coaster
if you will, and what ends up happening if you
just let your emotions guide your investment decisions is you
end up buying high in selling love, which isn't the
exact opposite thing of what you want to do. Now,
you know, don't need to make this a you know,
a lesson on behavioral finance or anything like that, but
(20:59):
you know, I would say one takeaway is that know
that you're not rational. People are not rational. We're driven
by our emotions. Have a plan ahead of time, and
stick to that plan, because otherwise you are going to
be essentially buying high and selling low. And I mentioned
some of the strategies that I talked about a second ago,
and we can dive into them here.
Speaker 1 (21:17):
But if you don't.
Speaker 4 (21:19):
Separate your emotions from your investments, you're going to end
up not probably not doing as well as you could
have otherwise, in spite of maybe having the best strategy
in the entire universe, it won't matter if you let
your emotions take over. And I mean, there's lots of
really good strategies out there. You know, we can look
at individual equity strategies. If you're really maybe focused on
(21:44):
getting income, you know, there's plenty of really good individual
stocks out there, and just make sure that if you
want income, they're focused on dividends and they're well diversified,
so you can exposure to multiple sectors and if you're
looking for something that's more total return, which I think
probably makes more sense because you can always make your
own dividends just by selling stocks.
Speaker 2 (22:04):
Andy, So I'm gonna shift because you're raising a question
here in my head inflation protection, and I'm thinking of
conversations I've had recently from people who are trying to separate.
I want to protect from from inflation, but I also
want to protect myself from the ups and downs of
the stock market. Now a lot of times, you know
those are those are almost mutually exclusive. You have to
(22:24):
accept a little risk on one side to somehow defer
the risk on the other side. So what would you
say to those people who were really sensitive to volatility
in the stock market you want to keep up with
inflation and trying to find a way to thread that needle.
Speaker 4 (22:39):
I would say, you can't have your cake and eat
it too. To your point, you know you have to
get something or give something up to get something. Another
famous line in the investing world is there is no
free lunch. So when you think about it from that perspective,
you do have to give something up, and you can
you can protect the downside and have plenty of potential upside.
(23:02):
And there's different strategies for that. They can involve stock options,
they can involve buffer ETFs, they can involve structured notes,
they can involve having a diversified portfolio that's just done
one hundred percent stocks. Maybe it's eighty twenty eight percent stocks,
twenty percent mods or forty sixty really whatever risk profile
are comfortable with. Because when I think about just the
overall investment strategies for people and trying to essentially get
(23:25):
that return they need to get to beat inflation and
have capital appreciation. The big thing is making sure you're
able to sleep at night, because if you're not able
to sleep at night, you're going to end up, you know,
making that emotional decision. So having that right risk profile
at the very onset is really key. So you have
individual stock strategies. You know, one thing that I think
is really good because you think about individual stock strategies,
you think about a diversified strategy of using ets and
(23:47):
mutual funds and that's all those are all great, and
you're looking for what i'll call alpha or a relative
outperformance to you know, whatever you're trying to achieve. But
there's also tax alpha as well, and that's something that's
very very powerful. So you could look at some direct indexes,
which what they look to do is they look to,
you know, generate some losses to offset gains and still
(24:08):
have that total return essentially matchine index on a pre
tax basis, but then beat it on an after tax basis.
So how you could do that is you still get
the exposure to your i'll call it your maybe some
housing stocks or whatever, or home improvement stocks, let's let's
use that example instead, and maybe home deep. It goes down,
so you sell home depot and you buy more lows
because they're going to move kind of together, and you
(24:30):
still get that same general exposure, but all of a
sudden you bank the loss and overall hopefully you.
Speaker 1 (24:35):
Still have gains.
Speaker 4 (24:35):
And then what you end up showing for your tax
report is the ability to lower that those realize gains
and lower how much you pay to the irs. So
there's a lot of really good strategies out there. And
the last one I'll mention besides like direct indexes and
already mentioned fund of funds, individual stocks, you know, private investments,
those have the potential for outperformance as well, Like private
(24:56):
equity is a really good example, private real estate another
really good example. Now those tend to be more complex,
and you got to make sure it's a line through
I risk tolerance and the suitability really is set up
to make sure that you understand how all those things work.
But there is the ability for those types of investments
to be what i'll call uncorrelated, meaning they may not
(25:18):
move with the broad market, but over time they still
have plenty of upsides. So you know, Brian just asked
that question a second ago about you know, kind of
like a minimizing some downside rest to a degree, still
have that upside here. I would say you could also
do it by looking at the correlation or things that
don't move together.
Speaker 1 (25:36):
All right, lots of good stuff to consider, and as always,
it's important to pair your risk tolerance with your goals
and it should all be part of a good comprehensive
financial plan that factors in both return, risk and tax planning.
You're listening to Simply Money presented by all Worth Financial
on fifty five KORC the talk station. You're listening to
(26:03):
Simply Money present up by all Worth Financial umpop Sponsorller
along with Brian James. You have a financial question you'd
like for us to answer, there is a red button
you can click while you're listening to the show. If
you're listening on the iHeart app, simply record your question
and it will come straight to us. Tom and Kettering
leads us off tonight. You know, all the way up
(26:24):
near Dayton. Love our listeners up in Dayton. Brian he says,
I've heard that rebalancing can trigger unnecessary taxes in taxable accounts.
How do you stay diversified without creating a big tax
problem every time you adjust or rebalance.
Speaker 3 (26:39):
That's a great question, Tom.
Speaker 2 (26:40):
This is one of those smart move but wrong account
issues that kind of keep it catches even experienced.
Speaker 3 (26:45):
Investors of off balance here.
Speaker 2 (26:48):
So rebalancing this is when you're selling your winners to
buy to buy some more losers, which sound doesn't sound
exactly right.
Speaker 3 (26:53):
But stuff goes up, stuff goes down may still be
a good investment.
Speaker 2 (26:56):
You might want to rebalance that way, but that's going
to keep your portfolio in line with your plan. But
in a taxable account, a good rebalance can trigger capital
gains taxes. So to stay diversified without overpaying Uncle Sam
make sure you're rebalancing inside your tax sheltered accounts. First
four to one k's iras roth iras. That's where move
The moves you make inside the account aren't taxable at all.
If it's a taxable account, use new contributions or perhaps
(27:20):
switch your dividends to cash, let them build up, and
then use that new cash to only buy to rebalance.
That's called cash flow rebalancing, versus actually selling something robotically
and then putting it putting it back into new positions.
If selling is necessary, look for positions that are sitting
at a loss to offset gains.
Speaker 1 (27:37):
That's tax loss harvesting.
Speaker 3 (27:38):
Tell me if you've heard us say that before.
Speaker 2 (27:40):
Or stay within those long term capital gains windows for
those lower rates. And so these are there are steps
you can take make sure. The real point here is
to make sure that you're you're having less of an
impact in your taxable account than you are in your
IRA when it comes to rebalancing your portfolio.
Speaker 1 (27:54):
So let's move to a.
Speaker 3 (27:55):
Bill in Indian Hill.
Speaker 2 (27:56):
Bill says he's got a few mutual funds in a
taxable account, and they keep shoving off these big capital
gains distributions.
Speaker 3 (28:02):
Hey, Bob, I think we just talked about this, did we.
Speaker 1 (28:04):
He did.
Speaker 2 (28:05):
He's wondering is it better to sell now and reset
into ETFs or just wait it out. I think that's
a great thing for people to start thinking about.
Speaker 1 (28:12):
Well, it's a great question, and it's a timely question.
I mean, Bill, we just talked about this, and I'll
use Brian's analogy. You know, it's time to gradually shift
from the black and white TV world into the plasma,
big screen color TV world. It doesn't mean you have
to take your black and white TV and smash it
on the driveway this afternoon. You can make a gradual change.
(28:34):
Here's what I mean. You know, have somebody sit down
with you and look at what are the annual you know,
distributions that you're likely to get from these mutual funds,
and what's your cost basis in these mutual funds, and
then evaluate how can we gradually unwind these mutual funds
in a taxable, responsible way and shift into the plasma
(28:55):
TV world of ETFs or direct indexing. The other thing
you can do is if you are charitably inclined and
you make annual distributions to charity, do that with low
cost basis mutual funds give those away to charities or
your donor advice fund rather than writing a check. So
between a combination of gradually moving, doing some tax loss harvesting,
(29:19):
and using maybe these low cost basis mutual funds to
do charitable giving, I think you can responsibly make that
shift out of the mutual fund world and into the
ETF or direct indexing world and not pay a boatload
of taxes in the process. Hope that Bob, yes.
Speaker 3 (29:35):
Plasma TVs were so like ten years ago.
Speaker 2 (29:38):
The new thing is O LED or maybe not something
LED anyway, but plasma yesterday, Bob yesterday.
Speaker 1 (29:45):
Well, I still like my plasma TV better than my
black and white TV. But I'm glad I've got you
around to keep me updated on technology and credit card points.
Speaker 3 (29:55):
Now we know that Bob still owns a black.
Speaker 1 (29:57):
And white TV. All right, Pa, please answer Ken's question
from Mount Washington. Ken says, I'm hearing more about using
charitable remainder trusts to diversify appreciated stock. How do those
really work and what's the trade off? And before you
answer that, Brian, just so you know, I've got a
beautiful seventy two inch TV hanging on my you know,
(30:20):
in my living room that I had to fight my
wife tooth and nail to allow me to hang on
the above the fireplace. She thinks it's too big. I
demanded that it be hung there because I want to
watch and be able to see my football and baseball games.
The thing was purchased in the last you know, six
to twelve months, so I don't know what they call it.
I just know it works well. The picture's great and
(30:41):
I love it. But please answer Ken's question.
Speaker 2 (30:43):
You heard it here first, Bob Sponzeller owns the only
black and white plasma TV in existence.
Speaker 3 (30:48):
So let's move on to let's move on to adult
talk here.
Speaker 2 (30:52):
And so we're talking about cheditable remainder trust, so charitable
remainder trust commonly known as a CRT, that that lets
you donate appreciated stuf without selling it first.
Speaker 1 (31:01):
Now, there's a lot of ways.
Speaker 3 (31:02):
You might do this.
Speaker 2 (31:03):
Donor advice funds play a role here too, but we're
talking about CRT specifically.
Speaker 3 (31:07):
The goal here is that you will.
Speaker 2 (31:08):
Avoid immediate capital gains tax and you still get a
steady income stream. You still own the stock in a
sense because you control it inside your trust. However, you
can take an income stream out of it. You can
no longer manage those accounts, or you don't actually own
the stock to vote those kinds of things. So the
trust though sells the stock tax free. It's a charitable
(31:29):
remainder trust. It itself is not taxed. It's going to
reinvest that full amount however you want. This is a
way to diversify things, to balance portfolio out, and it's
going to pay you that annual income and that's often
you know, that's written into the trust document, but it
might be five to seven percent of the trust value
when you pass away. This is the remainder part of
charitable remainder trust. Whatever is left goes to any charity
(31:50):
that could be an university, it could be a different
donor advised fund, or a local foundation or something. And
you've already designated that in the trust. You will say
at my death, here is the charity of final of receipt.
But in the meantime you can also use those assets
for different charities that you like as well. You also
get an immediate charitable deduction based on the projected remainder gift. Right,
(32:13):
So it's a calculation a present value of whatever that
might be worth in the future. So the trade off
is you lose access to the principle it is locked
into that trust, and the income is taxable when it's received.
You haven't turned you know, you haven't created a tax
free stream of income. You've simply taken one asset and
given the ability to spread it out, diversify it, but
out without paying capital gains. And you've benefited a charity
(32:34):
that you might already be inclined to do anyway. So
a little more complicated donor advice funds play a role
there too, So look at both of those options. Paul
in Montgomery, Paul says, with rates bouncing around, Bob, we've
got a ladder of CDs in short term treasuries. How
do you decide when to roll it versus just when
to lock something in for the long term and forget
about it.
Speaker 1 (32:53):
Well, the first thing is if we know where interest
rates are going, and when you know, we would all
know the answer to that question. And that's that's because
we don't know the answer to that question. That's why
people like to use a ladder strategy like it sounds
like you're doing, because we don't know what's going to happen,
and therefore we hedge our bets and we stagger it out.
So good for you for doing that already. You know,
(33:15):
my answer to your question is whether it's a CD
or treasuries or bonds, there's something called a yield to maturity,
which you can determine on a daily basis because the
prices of these CDs, if they're traded on the open market,
and short term treasuries they move daily with the movement
of interest rates. So you know, you can look at
all of your holdings and calculate what the yield to
(33:36):
maturity is, meaning if I hold these things to maturity
from now until when they mature, forget about where when
you bought them, from now until you mature, until they mature,
what's your yield going to be? And if there's a
couple of things that are really out of whack or
out of line with what you could do today by
redeeming that one, you know, treasury now and buying something else,
(33:56):
that's the time to make a move or roll as
you say. So, you know, I think you could sit
down on a case by case basis, look at every holding,
see if some things are out of whack and go
from there. Other than that, I think it's good to
just continue as one thing matures, you know, just continue
to ladder so you're not guessing on where interest rates
are going to go, and you've got a good sound
(34:18):
strategy in place, you know that takes advantage of all
interest rate environments. Hope that helps. Coming up next, how
skipping your vacation could cost you a lot more than
just a week at the beach. You're listening to Simply
Money presented by all Worth Financial on fifty five KRC
the talk station. You're listening to Simply Money by all
(34:42):
Worth Financial, umbop spond seller along with Brian James. As
we wrap things up tonight, let's talk about something that
doesn't show up in the scorebook or on your four
to one case statement, but absolutely impacts your financial life.
And that's your time off. Brian, A new search came
out just you know, recently on this and these numbers
(35:04):
are pretty staggering. Let's get into it because I think
not enough people are using their time off, and I
think that's not a good thing.
Speaker 2 (35:12):
You know, I just did a survey in my own
household and fifty percent of my marriage hasn't taken all
of its vacation days. So, hey, hon are we going
to go to Savannah. We're still gonna do that because
we're kind of running out of time for the year.
But let's talk about a bigger survey, right, So this
is a new one that the nearly one in four
Americans didn't take a single vacation day this year.
Speaker 3 (35:31):
Not one.
Speaker 2 (35:31):
The top reason, well, I'm too busy. Number two, I'm
afraid of falling behind, which is kind of the same thing.
So let's be real, if you're listening to this show,
there's a real good chance you fall into that category
because you're stuck behind a steering wheel, steering at your
windshield on the way home. Maybe you run a business,
maybe you've got a leadership role, or you're still building
toward retirement.
Speaker 3 (35:48):
But here's the problem.
Speaker 2 (35:49):
Skipping that time off might feel productive in the short term,
but long term, it can get pretty expensive, right, Bob.
Speaker 1 (35:56):
I think it gets real expensive. And I can speak
from personal experience. You know, during the years, you know,
many years I own my own business, I rarely took
any time off, real time off, because I couldn't. I
had to take care of stuff myself. And it really
does take a toll, you know, over time. And I
think people that have taken a good, solid vacation understand
(36:18):
what I'm about to say. Even though it might feel
like you're going to come back at the end of
that vacation to a big to do list or pile
of emails or what have you, your brain is just sharper,
your mind is refreshed. You're just healthier, you're happier, you're
more effective in your job after you take some time off.
(36:39):
And I'm a big proponent of doing that. And again,
I think we can get on that. You know, we
can get on that hamster wheel for years and years
and years and forget about all that. And it really
does take a toll over time. So you know, your
paid time off is it's part of your compensation. You know,
if you work for a company, if you don't use it,
you're literally leaving money on the table. And I think
(37:02):
you gotta you gotta look at it that way. You're
leaving I would say, potentially some mental health on the table.
That's value, that's part of your overall wealth picture. And
for some companies it doesn't roll over, So if you
don't take it, it's gone.
Speaker 2 (37:16):
Not to mention, you're creating memories with the people you
care about. Nobody's gonna talk about how great that PowerPoint
was at your at your funeral, They're gonna talk about
the memories you created with them. So not only should
you be taking advantage of the of that time that
you have to not be a working drone you you're
also spending that time with your family and building those
relationships up, and that's far more important in the long
(37:38):
run anyway. So make sure you are not ignoring those
types of things, the opportunities that you have to build
something that really counts.
Speaker 1 (37:45):
And one more thing on that topic, if you're someone
that's approaching retirement, you know in the next couple, you know,
three five years, that's even more of a reason to practice. Now,
take a vacation and practice what being retired might look like.
How are you gonna use your time and energy and
have fun and fill up your day. And if you
don't know how to step away from work for a week,
(38:07):
how are you going to handle stepping away for thirty years.
That's another reason to use your vacation and use it
strategically and kind of practice for an upcoming retirement. Here's
the all Worth advice. Your time is one of your
most valuable assets. Protect it, use it and invest it wisely.
Thanks for listening tonight. You've been listening to Simply Money,
(38:28):
presented by all Worth Financial on fifty five KRC, the
talk station
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