November 20, 2025 • 40 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian break down the true art of asset location—why it’s not just about what you invest in, but where you hold those investments. They walk through real-life scenarios for high-net-worth investors, explaining how to use pre-tax, Roth, and taxable accounts to build smarter, tax-savvy portfolios. Then, a surprising move from tech giants: Amazon, Alphabet, and Meta are flooding the market with corporate bonds. Why now? And what does that mean for income-focused investors?
Plus, career expert Julie Bauke joins the show to unpack the “Executive Dilemma”—when to stay, when to jump, and how to evaluate your next big move. Also: tech-heavy indexes, the rise of private credit, and what to do with a lump sum after selling a rental property. And Brian's surprising take on the gig economy.
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Episode Transcript
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Speaker 1 (00:06):
Tonight in terms of your money, what should go where
and how much? The real art of asset allocation you're
listening to simply money presented by all Worth Financial Lumbob
sponseller along with Brian James Well. A lot of us
know the basics. Stocks go in this account, bonds in
that one, but how much today or tonight the strategic
(00:28):
way investors should think about how much of each investment
type goes into each kind of account for growth, for
taxes and long term control. In other words, what each
account is built to do. And it really is an art,
and this is why we are so pleased to have
an absolute artisan in this area. Brian James Brian Well
(00:51):
talk us through what we're actually talking about here in
terms of portfolio construction.
Speaker 2 (00:56):
What we're talking about is tax treatment. Right, These different
types of account get treated differently by the IRS. There
are three different types of tax treatment. There is pre tax,
which a lot of people are aware of from their
four oh one k's everything I put in there, I
don't pay taxes on the year that I got it
the year that I received that income because I chose
to do that. But I'll pay taxes on the back
(01:17):
end and then of course there is the roth side,
which is the opposite. I do not get a deduction
this year, but everything happens inside that account will grow
tax free. And then when I pull it out, provided
I've met some basic limitations, some basic requirements, then it
comes out tax free. Then the third part is what's
known as after tax, meaning these are the accounts that
are just exposed to tax every year. They'll spit out
(01:37):
of ten ninety nine. If you want to sell something,
you'll look you'll be looking at capital gains and that
kind of thing. So therefore, different types of assets are
better built for different types of accounts. So traditional iras
and four oh one k's this is the pre tax side.
Whenever you hear the word traditional, think pre tax. These
are good for income generating investments like bonds, since ordinary
income tax applies anyway. So a creative idea I've thought
(02:00):
that I'm going to implement for myself is I'm going
to carve out over time, I'm going to carve out
a chunk of my wroth IRA so that when I retire,
my emergency fund can sit in a you know, a
four or five percent yielding money market fund, but it's
tax free to me, so it won't really matter that
that's you know what it is. This is the versus
leaving in a highyield savings account than paying income taxes
(02:21):
on it, giving away a chunk of it. So I
haven't actually done that yet. Check in with me after
I retire and we'll see if I follow through it.
But that's an idea that I have. Then you get
your taxable broker's accounts better that This is better for
tax efficient assets like exchange traded funds, individual stocks with
capital gains, and assets maybe that you're going to donate
or gift. So this is these are for efficient, growth
(02:43):
oriented type assets that aren't going to spit out really
much in capital gains at all, you know, and and
if but if it's also an individual stock and you're
sitting on that gain, well then you you don't have
to pay anything on that gain until such time as
you actually sell it. So the real magic in all
this is is the mix. How are you going to
combine all these things together? How much of your broke
growth bucket goes on the roth side tax free, and
(03:04):
how much of your fixed income should be sheltered in iras?
And more probably what percent of your taxable income should
stay liquid or accessible in case of an emergency.
Speaker 1 (03:13):
All right, and we've got three hypothetical situations to walk
through tonight that illustrate the points that Brian just outlined.
Let's take scenario one, the tax sensitive business seller. Somebody
that just sold a business. Let's say his name is John,
he's sixty two, he just sold a business. He's got
a six and a half million dollar net worth, has
three and a half million dollars in taxable funds, two
(03:35):
million dollars in a rollover IRA, and a million dollars
sitting in a ROTH. These folks are planning to retire soon,
so they want to avoid spikes in taxable income. So
here's a potential strategy. And just as a as a
disclaimer here, there's no one size fits all strategy to this.
The point of this segment tonight is just get us
to think about different scenarios, apply it to your own situation,
(03:59):
and down with your CPA and your advisor and talk
about what actually works for you. But here's here's a
hypothetical strategy in the WROTH. Let's stick with aggressive growth stocks.
Let it grow tax free, highest growth assets go there
for obvious reasons. You pay nothing in taxes if and
when that money ever comes out of the WROTH IRA
(04:20):
in the IRA account itself, the regular IRA, well, we
want mostly bonds and income oriented assets that you know,
slows down the aggressive growth of that account and gets
those future require minimum distributions under control from a tax
standpoint later. And then in the taxable brokerage account, maybe
some municipal bonds, some tax managed ETFs, some dividend stocks,
(04:42):
you know, maybe a direct indexing strategy. These people are
also thinking about WROTH conversions, so you know, minimizing taxable
income now is key. And oftentimes after the first couple
of years, after a big taxable event like a business sale,
you know, these folks do drop down in to a
lower tax bracket and that's a perfect time to consider
(05:04):
Roth conversions. Brian welcomes to another scenario.
Speaker 2 (05:07):
Yeah, real quick, I want to weigh in on just
a thought there. It's not easy. This is sort of
perfect scenarios. It's not necessarily easy to get to these positions.
You still have to take your risk tolerance into account,
so you know, I wouldn't say we're talking one hundred
percent of your traditional IRA in bonds and income assets.
That's not the point. We're simply trying to If you're
going to optimize, there are different assets that make more
(05:29):
sense in different tax treatments, but it'll never be perfect anyway.
So yeah, moving on to the second scenario. Here we've
got Now we've got the aggressive accumulator. This is somebody
in their mid forties. This is where we spend most
of our time, most of our working careers, just growing
the pile. That's really the goal. So this fake couples
in their mid forties. They're high earners. They've already got
a net worth of three and a half million dollars
and it's continuing to grow. One point two million dollars
(05:51):
worth of taxable assets meaning not in an IRA, not
a four to one K one and a half on
pre tax traditional retirement accounts, and about eight hundred thousand
dollars in the WROTH. So here's a good strategy for them.
So in that ROTH, like we said, we're going to
go one hundred percent aggressive growth because that's the one
that comes at the back of the line since it's
going to come out tax free. We want to give
that the most runway to grow as possible. So that's
(06:14):
the last one we're going to tap into. So be
aggressive with it, let it fly, set it up in
something that you trust, and ignore it. This is where
you're going to be your small cap holdings, emerging markets,
your longer term theme, some more aggressive type positions, and
the tax deferred side. This is where our US large
caps are going to live, and maybe some international stocks,
you know, to kind of balance that out. So if
(06:34):
you smush those together, you've got a pretty good portfolio.
You've got some aggressive stuff, and you've got some of
the more stable dividend paying asset growers and so forth.
Then finally in a taxable account exchange traded funds that
focus on indexes. Therefore, there's not a whole lot of
activity happening on the inside to spit out capital gains.
Maybe some private credit positions and a little single stock
(06:55):
alpha which which frequently happens with people at this asset level. Anyway,
that's where we want to work around that, because if
that single stock does take losses, then they could potentially
deduct those against other gains and things that they have.
But the whole point of this, remember these are young
accumulator type people because they don't need this money for
twenty years. They're going to lean into growth and tax efficiency.
That's different from the couple we're going to talk about next, Bob.
Speaker 1 (07:18):
Yep and scenario three is the income focused retiree that
is charitably inclined. So let's take a couple eight seventy.
They're retired, they're worth a little over five million dollars.
They want income now, and they do have charitable goals.
They've got two million dollars in a taxable account, two
million dollars in a traditional IRA, and a little over
(07:39):
a million dollars in a roth IRA. Here's a potential
strategy for them. In the IRA, we want to hold
a conservative bond ladder for predictable income and also predictable
require minimum distributions. In the WRATH, still some growth, but
keep it balanced, intended to leave hopefully this account to
their errors, never touch it during their lifetime. And then
(08:02):
in the brokerage account, the taxable brokerage account, tax efficient income,
maybe some preferred stocks, some dividend stocks, and then layer
on a donor advised fund for some charitable giving, you know,
to take advantage of maybe doubling up on some you know,
year end charitable gifts with appreciated stocks and a donor
advice fund to get you over and above that standard
(08:24):
deduction amount to take full tax advantage of the charitable
giving that you're doing. This is a steady income driven
strategy with some really smart tax and legacy planning baked in. Again,
these are three examples. As Brian says, it's not it's
there's no black box, you know approach to this, but
it's it's worthy of discussion with your advisor and your
(08:46):
CPA and putting your money in a place where it
can be the most tax efficient for you while still
meeting your risk in income and growth goals.
Speaker 2 (08:56):
Yeah. And then the thing that makes us a little
bit a little bit hard too is, of course, if
you're going to look at this and say I want
to follow that to the you know, to kind of
to the letter of the law, well you're going to
generate a bunch of taxes while you're trying to be
tax efficient. And obviously that's not a very efficient approach either.
Not to mention, it can make a lot of sense
when you reach a certain time period, as I think
we've mentioned once or twice, to start doing rough conversions.
(09:18):
When you get into that window where you've got low
income and therefore a low bracket, well then you may
want to purposely create some taxable activity to start to
convert some of those pre tax assets over to the
raw side. So again this these types of things should
be thought of as a small or a short term
sacrifice in exchange for a longer term benefit. And there's
(09:39):
a lot of moving parts to this. You need to
make sure it makes sense for you and also look
at the other side, or look at all of your situation,
because everything you do is going to affect your ten forty.
You need to sit down with your fiduciary advisor and
your tax prepare and make sure that everybody's on board
with whatever steps you're going to take so that you
don't have a nasty surprise in April. But these are
the steps that I think are worth it exploring, even
(10:00):
if you do nothing but learn about them and decide,
you know what, that's not for me, because the worst
thing that can happen is you feel like you missed
an opportunity and you find something you should have done
five years ago. I'd rather people learn about it now
and shoot it out of the sky as the dumbest
idea they've ever heard. Because then I can say, as
an advisor, great, you understand it, you understand the pros
and cons, and you want nothing to do with it.
That's great. I've done my job. But that will help
(10:22):
me find that people who didn't understand it never heard
of it, and it's the greatest idea that they've ever had.
And so again, understand the pros and cons of the
steps you might take, and understand how it's going to
move your situation in the right direction.
Speaker 1 (10:33):
Yeah, and Brian, you know, to the excell point you
made a few minutes ago, you don't have to do
this in one fell swoop and totally upend your entire
portfolio just to get you to these prescribed components in
each account. Like we talked about, these are just examples.
And the good thing about working with a proactive advisor
is we're helping you look ten, fifteen, twenty years down
(10:56):
the road. You know, to get to a tax efficient result.
You don't have to get there in one day or
one month. So if we know where we want to
be two or three years from now, based on your
personal objectives, we can ease you into that allocation approach
and make sure we don't you know, create a time
bomb from a tax standpoint in year one just to
(11:17):
say hey we got there. Well we you know, we
might have done more damage than good in the first year,
you know, with it while trying to get to a
place ten years from now. That's no good for anybody.
So it can be a gradual approach. But have the
discussion with your advisor and we can ease into that
right kind of allocation over time if needed.
Speaker 2 (11:38):
And if you're thinking about taking some of these steps
that are going to cause some taxation, remember this is
the right time to be thinking about it, because over
the next fourteen months there are three tax years. So
if you've determined what you want to do, remember just
over the next you know, over a month and a half,
you can get into two tax years a little bit
now and then a little bit in January, and then
a short twelve months after that you'll be in another taxi. So,
(12:01):
as Bob mentions, you can spread this stuff out, and
again you get three years worth of tax activity over
just a fourteen month period, So understand what that impact
is and how you should spread that hit out.
Speaker 1 (12:11):
Here's the all worth advice. You don't just need to
know what investments you own, you need to know how
much of each kind of investment to put in each
type of investment account. That's how you build smarter, tech
savvy wealth that actually supports your long term goals. Coming
up next, we're going to explore a portion of a
portfolio that most people have, but most or many don't
(12:34):
have any understanding of whatsoever, and we're talking about bonds.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. If you can't listen to Simply
Money live every night, subscribe and get our daily podcasts.
(12:58):
And if your friends or family could use a little advice,
let them know us about us as well, including our podcast.
Just search Simply Money on the iHeart app or wherever
you find your podcast. Straight ahead of six forty three,
we tackle your biggest money questions, including what to do
with a pile of post business sale cash, whether private
(13:20):
credit belongs in your portfolio, and if using an options
caller makes any sense whatsoever. All right, Brian, Amazon is
selling some bonds. We're used to, you know, stock offerings,
but Amazon and a lot of these other tech companies
have been selling some bonds lately, and they have raised
a ton of money to do. So what's going on here?
Speaker 2 (13:41):
Yeah, this is this is kind of interesting to me
because bonds or companies selling bonds, that's a very nineteen
fifties type of a thing to do. And it's now
finally reads the technology industry, which has always been go
go growth and all that. I remember sometime in the
last jeez, I don't know to maybe I guess it's
probably been ten fifteen years when Apple started paying a
tiny dividend. Apple's not going to be known anytime soon
(14:03):
as an income generating stock, but there is a dividend
there because it's a growth company. Their job is to
go invent new things, find new markets to sell them to,
and those kinds of things. That's what a growth company is,
and I would put Amazon in that same class. But
now we've reached a point where this industry has gotten
so big and has gotten so much power, they're looking
to arrange their finances a little bit different, more differently,
(14:25):
and again kind of go into some back to some
old school methods. So Amazon raised about fifteen billion dollars
and this is its first US dollar bond offering it
about three years, so not the first time they've done it,
but adding to a spree of jumbo debt sales by
technology firms, they're all racing to chase artificial intelligence. Everybody's
looking for money under every couch cushion to build artificial
(14:48):
intelligence competitiveness. So the proceeds of this, which are about
three billion dollars, maybe a little more than that, they're
going to be doing everything from acquiring artificial intelligence firms,
capital expenditures to build those up and then as well
as share buybacks. This according to people with knowledge of
the of that matter.
Speaker 1 (15:05):
Brian, I've got an opinion of what's going on here.
Let's I'd love to know if you agree or disagree. Well, hey,
look we've got an aging baby boom population and people,
you know, see these tech companies. And I've had more
than a few clients come to me and say, hey,
I'd love to participate in this whole AI thing, but
I can't handle fifteen percent twenty percent volatility in my portfolio.
(15:28):
How can I participate in some of these you know,
great up and coming or established companies and not take
as much risk. And I think that's what you know,
companies like Google and Amazon are tapping into let people
get some return without owning the stock and the stock
volatility in the process. I mean, let's face it, we're
you know, we've got tech earnings you know coming out
(15:51):
you know every day now, Navidio, you know that stock
people have no idea where that thing's gonna go. H
heading into the earning earnings and out Smith. So my
point is to get into some investment grade debt in
companies that are established with great free cash flow. That's
a great opportunity for some of our older, more conservative investors.
Speaker 2 (16:12):
Yeah, I would agree with that. And this isn't Amazon's
not alone. So Google parent Alphabet, right remember Alphabet is
the own owner behind Google. They sold about twenty five
billion dollars worth of debt in the US and Europe.
Meta the Artist formerly known as Facebook thirty billion for them,
and then Oracle, a little older school infrastructure company. They
raised about eighteen billion dollars back in September. So again,
(16:33):
let's remember real quick what a corporate bond is, right,
Old we're starting to remember what they are because interest
rates are now finally respectable again, where people were relying
on only stocks for a very long time. A bond
is debt. A company borrows money from you. They will
pay you an income stream. Let's say it's maybe five
percent or something like that, and then when that debt
comes due on the maturity date, you get your money back.
(16:54):
What they do with that money you don't necessarily benefit from.
If they invent the next great artificial intelligence tool or
something like that, that just means your bond fund or your
bond that they owe you is that much more reliable.
They'll be able to pay it off. But if it goes,
you know, gangbusters on the growth side, that helps the stock.
It doesn't affect the bond other than probably making it
a little more reliable. But your return was already kind
(17:15):
of set in stone via the interest rate and getting
your money back. Now, these don't always work out. Bonds
can fail just like anything else, and probably the biggest
example we have of that is Enron. Back in two
thousand and one. This was the company down in Houston
that basically was trading a lot of energy and after
it was revealed that they had been using some really
crazy accounting loopholes, hit billions of dollars worth of debt,
(17:37):
a lot of off book transactions, little LLCs and little
things spread out all over the place that they weren't
actually claiming that they had, but they used that to
hide their debt and inflate their earnings. And not only
did that take Enron down, it took Arthur Anderson, one
of these then big four financial accounting firms, and it
costs about eighty five thousand jobs. World colms slightly behind
(17:58):
that again, an accounting fraud took them down, and then
Lehman Brothers is probably the whopper. These are all companies
that had bonds out there, and there's risk in these
types of things. But that's why you want to be
have a diversified portfolio of bonds, just like you have
a diversified portfolio stocks.
Speaker 1 (18:14):
Yeah, and this is why it's good, I think in
most cases, and I think most investors understand, when you're
looking at credit quality of these bonds, it's good to
have a professional taking a look at this stuff to
evaluate credit quality, the balance sheet of the companies, the
free cash flow of the companies, because as a bondholder.
In order for you to get your interest payment, this
company has to have some free cash flow. If they're
(18:36):
just selling bonds to just finance this growing and growing
pile of debt, all all the companies you mentioned back
in the early two thousands, you know, you might be
buying into an absolute disaster. And I remember seeing the
high yield credit market just get imploded back in the
early two thousands and again back in the housing crisis.
(18:58):
You know the saying, go there ain't no free lunch.
So if somebody's offering a high yield, you know, a
really high yield, don't just be enticed by that. You
got to look under the hood at what the actual
credit quality these companies are so you can get your payments. Now,
let's pivot into a more conservative way to invest in bonds,
and that's good old treasury bonds Brian.
Speaker 2 (19:21):
Yep Treasury bonds, good old mom and pop, grandma and grandpa.
Reliable issued by the US federal government, considered one of
the safest investments you can make on the face of
the earth because it's backed by the full faith in
credit of the United States. The United States government has
never defaulted on its bonds knock on wood here, so
that investment is considered low risk compared to everything else
you can do. This doesn't mean you can't lose money.
(19:42):
Things happen. Bond prices and interest rates move around, and
so when prevailing interest rates rise, bond prices will fall.
And we're coming out. Weare in the opposite situation right now,
but just be aware things do move.
Speaker 1 (19:53):
Here's the all Worth advice when choosing bonds for your portfolio.
Match the duration to your timeline, focus on quality over yield,
and make sure your bond allocation compliments your overall investment
strategy and financial plan. You've worked your way up the
corporate ladder and made great money, but opportunity comes calling
in the form of an executive position should you move
(20:16):
up the ladder. We'll talk about the quote unquote executive
dilemma next with our career expert Julie Bauki. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
presented by all Worth Financial on Bob Sponseller along with
(20:37):
Brian James. Joined tonight by our career expert Julie Bauki Julie, thanks,
as always for carving out some time for us. Tonight.
We want to talk about something we're gonna call the
executive dilemma, staying put versus jumping to the next big,
big thing. Let's say you're in a great role right now.
You love your job, you're obviously doing very well at it,
(20:59):
but opportunity comes knocking. What's the right move and how
do you evaluate whether to make a move?
Speaker 3 (21:06):
Yeah, I can kind of speak in generality because I've
worked with a lot of people in this situation, and
the first question I would ask is why would you
consider this move? So, in other words, what are the
compelling things about this move? And sometimes what I find
when people start listing out compelling things more salary, a
higher level title, My next question would be, are you
(21:29):
sure that those are the things that really matter to you?
Because it's very it's very ingrained in us that jumping
for the next big thing, more money, more title equals
more happiness and career satisfaction. But I know for sure
that's not true. And so when you look at why
did that why did that role appeal to you in
(21:51):
the first place, and then ask yourself, are those things
that really matter to me at this point. I always
start from a point of what matters most to you
right now in your life and then bring the career
conversation into it. And because if you are going to
get that bigger title and more money, does it also
mean that you have to travel more? Does it mean
you have to work weekends? And how does that fit
(22:11):
into what your priorities are? And so it's so that's
the big question is why would you And then take
a look at what is it about where you are
now that might be sticking in your gut as to
why it even makes sense to look for something else?
And what are you missing where you are? If you
could change some things about your current situation, would that
(22:35):
solve that? Would that solve that? It's you're getting to
move on. So I think it's a really good critical
analysis of the why behind both where you are, the
whys and the what both behind where you are and
what the opportunity is in front of you is really
really important because we can get super caught up in
yeah but it's a director title, Yeah but it's a
(22:57):
VP title without really thinking about what am I getting up?
What am I giving up to get that and then
how does that work against what my whole life priorities
are right now? So a career decision has to be
made on a bigger platform than in a vacuum.
Speaker 2 (23:12):
Julie, I think a lot of people learn the hard
way exactly what you just said, because we get this
so ingrained in us that I got it. If I'm
getting off of this position, well, clearly I'm fantastic. Obviously
they love me, and I should take advantage of these benefits.
But people do tend to learn the hard way that whoops,
maybe I caught my limit. Maybe I don't want that
next level because my other things in our life have
taken priority. So how do people unwind it? For those
(23:34):
people who feel like they may have done that in
that position, how can what's what are some ways to
unwind that?
Speaker 3 (23:39):
Yeah, so you're saying like, if you've already taken that.
Speaker 2 (23:42):
Role, Yeah, and you didn't, and you just didn't occur
to you that, you know what, I didn't really want
this extra level of work. I just didn't think it through.
I just thought it was another accomplishment.
Speaker 3 (23:49):
So the first thing, it kind of depends on a
lot of things. If you have so let's say you
have a very stable career history. You've worked a long
time at one place, you've jumped to this other place,
and you've been there nine months to a year, and
you say, this isn't exactly what I thought it was
going to be. You can successfully and confidently pivot at
(24:14):
that point versus a person who's had three two year
jobs in a row. Now you have to Now it
starts to be what story does your career tell? And
that's what I would add, because you want to picture yourself.
You're now interviewing for a new job beyond the one
that you took by accident. You've got to explain yourself.
(24:35):
You've got to explain your career. And it's perfectly okay
to say. So they contacted me, it sounded like exactly
what I wanted. When I got there, I realized that
Zava la bah blah. I've done a lot of thinking
and now I know exactly what I want, and which
is why I applied for this role. And so that
that is just that's a good explanation. But if you
(24:58):
are somebody who has a history, if you are somebody
who has a history of jumping without really thinking about
what I've done and Therefore you have kind of a
checkered history. You probably need to take a breath and
build up, build up some capital there where you are
so that as you move to the next thing, you've
got a better story to tell. So it's kind of
(25:18):
a big fat It depends. It's really what does your
whole career story say about.
Speaker 1 (25:22):
You, Julie. I want to go back to the situation
where somebody's, you know, considering a move, they haven't pulled
the trigger yet, and they're wondering how to evaluate this.
And I'm going to make an assumption here. You correct
me if I'm wrong. Oftentimes people just haven't been coached
on how to walk into that you know, the boss's
office or the executive suite, and just be clear about
(25:44):
what you love about working where you are a couple
things that you would like to see tweaked. And I think,
especially in today's labor market where it is really hard
to find good, seasoned, hard working people, aren't people amazed,
you know, if they're coached by someone like you on
how to go in and broach that conversation. Oftentimes you
(26:06):
can walk out of that office, you know, if your
if your requests or reasonable, getting exactly what you really
need to be truly happy where you are, instead of
making a completely you know, new move and complete jump
to a new company. Am I am I on target
there at all?
Speaker 3 (26:24):
Yes, A very much. So we always say try to
fix it where you are first, because jobs are just painful,
and transitioning to a new, unknown job, as exciting as
it may sound on the surface, can also be really
painful and surprising. And so getting it doing that, doing
that clarity, that looking at everything that's on your plate
(26:44):
and saying and really saying, what do I like about
my current role? What are the things that if I
had a magic wand and can move them off my plate,
I would? What would I like to see more of
less a in my role? And how how do I
then approach that. Once you get clarity on that, then
(27:07):
you have a better Then you have a framework. Then
you have talking points to go in and say, you know,
I've been in this role as COO for three years
and what I really love is integrating new ideas, new systems,
new technologies, and then working across the organization to help
implement those and bring those delights. I do get to
(27:28):
do some of that in my role, but as I
look at my next role, I would love to be
more involved in those types of initiatives. And that's the
kind of conversation that you should be having. And we
are so afraid to have those conversations because we feel
like it's going to make us look less than committed
(27:49):
or that we're going to automatically end up on the
layoff list. And you've try to assess your situation. If
you have the type of leader who you feel like,
it really is risky to have those conversations, and that
might be different than if you feel like somebody your
leader really is open to you, you are valued, and
your leader is looking to retain you. I think it's
up to you to go in and begin that conversation
(28:13):
about what next might look like for you. Leaders are
so busy and yet they should be coming to you
and initiating these conversations, but they aren't because they're getting squeezed.
And I always say, the career fairy isn't coming. And
so if you want more or different out of your career,
start where you are. Try to get it where you are,
or at least put a plan together to get it
(28:33):
where you are, especially in a job market like we're in,
that's always going to be the place where it's going
to be least stressful to move.
Speaker 1 (28:42):
That is great advice. Julie, you're listening to Simply Money
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm pop sponsorller along with Brian James. You
have a financial question you'd like for us to answer.
(29:02):
There's 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 as always, it will come
straight to us. All right, Brian, get ready for Colin
and Marymont. He says, we've been passive investors for years,
but all the megacac tech names dominate the index. Now,
(29:22):
how do you stay diversified when the index itself gets
top heavy? I love this question from Colin. It means
he's paying attention, he's on top of things.
Speaker 2 (29:32):
What do we say to Colin congratulations on knowing how
indexes worked. That's exactly one of the concerned. This wasn't
a problem that we you know, thirty years ago, we
just didn't have this type of an issue. Because the
indices were a little more balanced out. But the economic
growth in this country, in this world has been so
technology driven in the past several decades that, yes, this
is a real problem. So the S and P five
(29:52):
hundred today is the most concentrated it's been since the seventies.
The top seven or eight tech giants now make up
more than a third of the entire end. Some estimates
have it up to forty percent. So if you might
think you're diversified just because you own that index fund,
but you might just be tied to a handful of
megacap stocks, so you know, just make sure you don't
have you don't have to abandon passive investing. Just add
(30:13):
these guardrails. Consider an equal weight S and P five
hundred exchange traded fund, same five hundred companies, except it
spread evenly across all five hundred versus the bigger they are.
The big the bigger the company is, the more of
a portion of the capitalization it makes up. And then
also look for some MidCap and small cap index funds,
and that'll fill in what that top heavy index is missing.
(30:33):
It'll the S and P five hundred is never going
to have small and MidCap it's literally the five hundred
largest companies in the United States, which tend to be
among the largest in the world too. So if you've
set add separate MidCap and small cap funds, that's going
to spread out some of that risk, and as we've
mentioned frequently, add some international stocks to the mix. Twenty
twenty five has been a very different year as the
US has chosen to portray itself differently from a trade
(30:55):
standpoint to the rest of the world. International stocks are
on the run, and if you don't have any your portfolio,
make sure they're in there. So great excuse to make
sure that you are balanced overall in terms of your
asset allocation. Tom and Cincinnati Bob Tom says his CPA
has been talking about harvesting gains quote unquote before any
potential tax changes, but their advisor, who is a different person,
obviously says to hang on and wait for this step
(31:17):
up in cost basis. In other words, don't do anything,
just wait until you're dead and then your kids will
inherit it capital gain tax free. I'm sure he didn't
say it like that, but that's anytime you're talking about
step up, you're not talking about you you're talking about
your airs. So he's asking, how do families make these
decisions when these rules keep changing, they keep moving the goalpost, Bob.
Speaker 1 (31:36):
Yeah, this is a tough one for me to answer.
I don't want to get in the middle of, you know,
discussions that it sounds like aren't going on between your
CPA and your advisor, Tom. That'd be my first thing
is you guys all need to get in the same
room and have a financial plan. And the proverbial saying
don't let the tax tail wag the dog, I think
applies here if your CPA is talking about potential tax
(32:00):
change as well. I don't think we're going to get
many tax changes tax law changes here for the next
few years at least. I mean, who knows what happens,
you know, in the next administration and what have you.
So you've got a window here where we do have
a little bit of clarity on tax policy. And to
Brian's point, you might be passing up some real opportunities
(32:21):
here by just standing pat and waiting until you die.
As Brian said, So I think number one, I think
you guys all need to be you know, in the
in the same room or at least on the same
zoom call comparing an actual financial planning strategy, And there
might be different reasons for harvesting some gains now, you know,
to support income or gifting strategies. There might be some
(32:46):
charitable giving opportunities that you might be able to take
advantage of to just eliminate some of these taxable gains altogether.
And there might be a gradual approach of moving out
of some of these low cost based assets gradually over
time through direct indexing strategies or things like that. So
I can understand why you're confused, Tom. You know, if
(33:07):
everybody isn't at least in the same room or on
the same zoom call, you know, putting an actual strategy together,
you know, you're left being you know, confused and getting
conflicting advice. And that's really no good for anybody. So
I hope that helps. Ethan and Covington says, we're thinking
about adding private credit to our portfolio, but the lack
(33:28):
of transparency worries me. What's the smartest way for regular
investors to evaluate one of these illiquid investment opportunities?
Speaker 2 (33:37):
Brian, yeh, here we go with that word private again.
Is these assets are booming Normally we associate this with
private equity, which is just buying up small companies that
aren't publicly traded. But now we're also talking to these
days about private credit, which which is really the kind
of the bond side of the private equity movement. These
are just loans and things to to to businesses that
(33:58):
don't have the size or for whatever reason, don't want
to participate in the public market. So private credit has exploded.
It's now over a two trillion dollar market. Good reason
for this. You can get higher yields out of this,
less sensitivity to interest rates because they're not publicly traded
so there aren't markets to move them around as much,
and access to loans traditional banks aren't willing to make
because they've got their rules to follow too. But for
(34:19):
everyday investors, the trade off is usually ill liquidity and
less transparency, as Ethan's calling out specifically. So just that
doesn't mean that doesn't make these bad investments. There are
things you should know about them, know exactly what you're
being paid for. Higher yields sound great, but they're compensating you.
The reason they exists is because you have a little
less liquidity and you're taking a little more credit risk.
So these are compliments to other things that should be
(34:41):
in your portfolio. And if you can't articulate where that
return comes from, if it's if you can't understand at
all leverage and distress loans, real estate backing, that kind
of thing, you might want to reconsider. Look at the
structure of it, not just the sales pitch. Is this
a fund that marks its own assets? Are they the
ones deciding what the assets are worth? And how often
do they do that? And what are the redemption limits?
(35:02):
Are these things frozen up you can't get to it?
Oftentimes there are then they can legally refuse withdrawals during
times of stress. And make sure you understand the manager quality.
And to try to get any kind of history you
can get. It may not be possible to go all
the way back to two thousand and eight. That's getting
to be a long time ago now, but if you
can get that kind of answer, you should take a
look at that. So just look under every stone for
(35:22):
all the information you can get. Ethan really super quick
from Alan Levin and Bob. He says they got a
lot of cash after they just sold a rental property.
What do they do with that lump sum without feeling
like they're dumping into the market at a wrong time.
Speaker 1 (35:34):
Well, great, great question. Now here's the answer. Brian talked
about this yesterday, this exact same topic and did a
great job. I think first segregate your long term capital
from your short term capital needs. And I would say
for longer term capital, the numbers bear this out based
on historical data. You know, just put it in there,
invest it. Yes, you got to take on some maybe
(35:55):
short term volatility, but you're going to come out ahead
in the long run by just pushing this money to
work and investing it responsibly. By the same token, if
you're somebody that cannot handle short term volatility, you know,
with your long term capital three four five percent pullback,
then you might want to stage it in over time.
So it has to do with the economic result over
(36:17):
time versus your investment temperament and risk tolerance. And that's
a good discussion to have with your advisor prior to
pulling the trigger on anything. Hope that helps. All right, Next,
Brian has his bottom line on what's going on in
the gig economy these days. You're listening to simply Money
presented by all Worth Financial on fifty five KRC, the
(36:38):
talk station Let's get this thing moment. You're listening to
Simply Money, presented by all Worth Financial on Bob's fonseller
along with Brian James. Well, rumor has it, Brian, you've
been out there moonlighting as a DJ down in one
of your favorite high school haunts in over the Rine.
(36:58):
Is that true? Are you out there engaging in the
gig economy? Tell us what it's like out there.
Speaker 2 (37:04):
I think you're referring to the Warehouse from the next
im as my high school hangout that I literally went
to one time and you'll never let me forget it.
But I am leading the charge. I'm going to revive
soft Rock down at the Warehouse and over the Rhine.
Last night we had literally six or seven people interested
in that. So anyway, gig economy, right, That's what we're
kidding around about here is side jobs. So not a
(37:27):
lot of our clients deal in this kind of thing,
but they a lot that More and more, I'm dealing
with clients who come in with questions about their kids
and their relatives and their loved ones who are doing
this kind of thing. So some research says that overall
total compensation. This comes out of Forbes. Total compensation rose
about three point eight percent and twenty four inflation was
only two point nine percent, and that's leaving only a
(37:48):
small margin of additional buying power for people. Households are
feeling squeezed and they're trying to find new ways to
make money, and hence, you know, enter the whole gig economy.
Finding a side job or some kind of little business
on the side. This can be a good thing. You
can use your gig income not only for extras, but
potentially you know, building or treat it like a project
source of income. If you or your loved ones is
(38:09):
trying to build up an emergency fund and you just
can't carve out enough money on the side from your
primary gig, then something on the side can be just
for that purpose. I want to build up I know
I need three months, six months, nine months worth of
income so that I can accomplish my emergency fund goal.
Then do that. It can be a great way to
do it. That income is segregated, it comes out on
the side, and then you can carve that out a
(38:30):
little more easily than trying to squish it into the
regular budget. Another thought that comes up all the time
for my clients worried about their family members. Is my
kid's got a lot of credit card debt and we
want to swoop in and pay it off, But I
also don't want to teach that lesson that will always
be there to kind of fix it. Well, then again,
those kids, those young folks can start looking for a
side job to get that tackled and get that paid
(38:51):
down and never go that route again, you know, because
this is the situation that we all get and we
want to fix. So these side gigs can be a
little bit bumpy. Of course, you never know where the
work is going to come from. They often don't come
with benefits such as retirement plan, health insurance. That's what
makes it a side gig. But at the same time
it can be a reliable source of outside income and
(39:11):
not the worst idea for somebody who needs that that
Lextra little bump. Do you ever run across this bob?
Speaker 1 (39:16):
Well, occasionally, but one idea popped into my head, and
I know you love my random ideas, so I'll lay
it on you. Hey, occasionally were running too people, you know,
especially young folks that say, hey, I'm in a job,
right now where I'm making pretty good money. It's paying
the bills. But this is not my, you know, long
term thing that I want to be doing forever. Going
out and finding one of these side gigs. If you
(39:38):
do it strategically, it's a way to try on a
different job or a different career path that and see
how you really like it. If you do it for
five or ten hours a week instead of quitting your
current job, it might be that entree to the next
step in your career path. Just a thought out there.
Thanks for listening tonight. You're listening to Simply Money, presented
by all Worth Financial on fifty five k r C,
(40:01):
the talk station
Tonight in terms of your money, what should go where
and how much? The real art of asset allocation you're
listening to simply money presented by all Worth Financial Lumbob
sponseller along with Brian James Well. A lot of us
know the basics. Stocks go in this account, bonds in
that one, but how much today or tonight the strategic
(00:28):
way investors should think about how much of each investment
type goes into each kind of account for growth, for
taxes and long term control. In other words, what each
account is built to do. And it really is an art,
and this is why we are so pleased to have
an absolute artisan in this area. Brian James Brian Well
(00:51):
talk us through what we're actually talking about here in
terms of portfolio construction.
Speaker 2 (00:56):
What we're talking about is tax treatment. Right, These different
types of account get treated differently by the IRS. There
are three different types of tax treatment. There is pre tax,
which a lot of people are aware of from their
four oh one k's everything I put in there, I
don't pay taxes on the year that I got it
the year that I received that income because I chose
to do that. But I'll pay taxes on the back
(01:17):
end and then of course there is the roth side,
which is the opposite. I do not get a deduction
this year, but everything happens inside that account will grow
tax free. And then when I pull it out, provided
I've met some basic limitations, some basic requirements, then it
comes out tax free. Then the third part is what's
known as after tax, meaning these are the accounts that
are just exposed to tax every year. They'll spit out
(01:37):
of ten ninety nine. If you want to sell something,
you'll look you'll be looking at capital gains and that
kind of thing. So therefore, different types of assets are
better built for different types of accounts. So traditional iras
and four oh one k's this is the pre tax side.
Whenever you hear the word traditional, think pre tax. These
are good for income generating investments like bonds, since ordinary
income tax applies anyway. So a creative idea I've thought
(02:00):
that I'm going to implement for myself is I'm going
to carve out over time, I'm going to carve out
a chunk of my wroth IRA so that when I retire,
my emergency fund can sit in a you know, a
four or five percent yielding money market fund, but it's
tax free to me, so it won't really matter that
that's you know what it is. This is the versus
leaving in a highyield savings account than paying income taxes
(02:21):
on it, giving away a chunk of it. So I
haven't actually done that yet. Check in with me after
I retire and we'll see if I follow through it.
But that's an idea that I have. Then you get
your taxable broker's accounts better that This is better for
tax efficient assets like exchange traded funds, individual stocks with
capital gains, and assets maybe that you're going to donate
or gift. So this is these are for efficient, growth
(02:43):
oriented type assets that aren't going to spit out really
much in capital gains at all, you know, and and
if but if it's also an individual stock and you're
sitting on that gain, well then you you don't have
to pay anything on that gain until such time as
you actually sell it. So the real magic in all
this is is the mix. How are you going to
combine all these things together? How much of your broke
growth bucket goes on the roth side tax free, and
(03:04):
how much of your fixed income should be sheltered in iras?
And more probably what percent of your taxable income should
stay liquid or accessible in case of an emergency.
Speaker 1 (03:13):
All right, and we've got three hypothetical situations to walk
through tonight that illustrate the points that Brian just outlined.
Let's take scenario one, the tax sensitive business seller. Somebody
that just sold a business. Let's say his name is John,
he's sixty two, he just sold a business. He's got
a six and a half million dollar net worth, has
three and a half million dollars in taxable funds, two
(03:35):
million dollars in a rollover IRA, and a million dollars
sitting in a ROTH. These folks are planning to retire soon,
so they want to avoid spikes in taxable income. So
here's a potential strategy. And just as a as a
disclaimer here, there's no one size fits all strategy to this.
The point of this segment tonight is just get us
to think about different scenarios, apply it to your own situation,
(03:59):
and down with your CPA and your advisor and talk
about what actually works for you. But here's here's a
hypothetical strategy in the WROTH. Let's stick with aggressive growth stocks.
Let it grow tax free, highest growth assets go there
for obvious reasons. You pay nothing in taxes if and
when that money ever comes out of the WROTH IRA
(04:20):
in the IRA account itself, the regular IRA, well, we
want mostly bonds and income oriented assets that you know,
slows down the aggressive growth of that account and gets
those future require minimum distributions under control from a tax
standpoint later. And then in the taxable brokerage account, maybe
some municipal bonds, some tax managed ETFs, some dividend stocks,
(04:42):
you know, maybe a direct indexing strategy. These people are
also thinking about WROTH conversions, so you know, minimizing taxable
income now is key. And oftentimes after the first couple
of years, after a big taxable event like a business sale,
you know, these folks do drop down in to a
lower tax bracket and that's a perfect time to consider
(05:04):
Roth conversions. Brian welcomes to another scenario.
Speaker 2 (05:07):
Yeah, real quick, I want to weigh in on just
a thought there. It's not easy. This is sort of
perfect scenarios. It's not necessarily easy to get to these positions.
You still have to take your risk tolerance into account,
so you know, I wouldn't say we're talking one hundred
percent of your traditional IRA in bonds and income assets.
That's not the point. We're simply trying to If you're
going to optimize, there are different assets that make more
(05:29):
sense in different tax treatments, but it'll never be perfect anyway.
So yeah, moving on to the second scenario. Here we've
got Now we've got the aggressive accumulator. This is somebody
in their mid forties. This is where we spend most
of our time, most of our working careers, just growing
the pile. That's really the goal. So this fake couples
in their mid forties. They're high earners. They've already got
a net worth of three and a half million dollars
and it's continuing to grow. One point two million dollars
(05:51):
worth of taxable assets meaning not in an IRA, not
a four to one K one and a half on
pre tax traditional retirement accounts, and about eight hundred thousand
dollars in the WROTH. So here's a good strategy for them.
So in that ROTH, like we said, we're going to
go one hundred percent aggressive growth because that's the one
that comes at the back of the line since it's
going to come out tax free. We want to give
that the most runway to grow as possible. So that's
(06:14):
the last one we're going to tap into. So be
aggressive with it, let it fly, set it up in
something that you trust, and ignore it. This is where
you're going to be your small cap holdings, emerging markets,
your longer term theme, some more aggressive type positions, and
the tax deferred side. This is where our US large
caps are going to live, and maybe some international stocks,
you know, to kind of balance that out. So if
(06:34):
you smush those together, you've got a pretty good portfolio.
You've got some aggressive stuff, and you've got some of
the more stable dividend paying asset growers and so forth.
Then finally in a taxable account exchange traded funds that
focus on indexes. Therefore, there's not a whole lot of
activity happening on the inside to spit out capital gains.
Maybe some private credit positions and a little single stock
(06:55):
alpha which which frequently happens with people at this asset level. Anyway,
that's where we want to work around that, because if
that single stock does take losses, then they could potentially
deduct those against other gains and things that they have.
But the whole point of this, remember these are young
accumulator type people because they don't need this money for
twenty years. They're going to lean into growth and tax efficiency.
That's different from the couple we're going to talk about next, Bob.
Speaker 1 (07:18):
Yep and scenario three is the income focused retiree that
is charitably inclined. So let's take a couple eight seventy.
They're retired, they're worth a little over five million dollars.
They want income now, and they do have charitable goals.
They've got two million dollars in a taxable account, two
million dollars in a traditional IRA, and a little over
(07:39):
a million dollars in a roth IRA. Here's a potential
strategy for them. In the IRA, we want to hold
a conservative bond ladder for predictable income and also predictable
require minimum distributions. In the WRATH, still some growth, but
keep it balanced, intended to leave hopefully this account to
their errors, never touch it during their lifetime. And then
(08:02):
in the brokerage account, the taxable brokerage account, tax efficient income,
maybe some preferred stocks, some dividend stocks, and then layer
on a donor advised fund for some charitable giving, you know,
to take advantage of maybe doubling up on some you know,
year end charitable gifts with appreciated stocks and a donor
advice fund to get you over and above that standard
(08:24):
deduction amount to take full tax advantage of the charitable
giving that you're doing. This is a steady income driven
strategy with some really smart tax and legacy planning baked in. Again,
these are three examples. As Brian says, it's not it's
there's no black box, you know approach to this, but
it's it's worthy of discussion with your advisor and your
(08:46):
CPA and putting your money in a place where it
can be the most tax efficient for you while still
meeting your risk in income and growth goals.
Speaker 2 (08:56):
Yeah. And then the thing that makes us a little
bit a little bit hard too is, of course, if
you're going to look at this and say I want
to follow that to the you know, to kind of
to the letter of the law, well you're going to
generate a bunch of taxes while you're trying to be
tax efficient. And obviously that's not a very efficient approach either.
Not to mention, it can make a lot of sense
when you reach a certain time period, as I think
we've mentioned once or twice, to start doing rough conversions.
(09:18):
When you get into that window where you've got low
income and therefore a low bracket, well then you may
want to purposely create some taxable activity to start to
convert some of those pre tax assets over to the
raw side. So again this these types of things should
be thought of as a small or a short term
sacrifice in exchange for a longer term benefit. And there's
(09:39):
a lot of moving parts to this. You need to
make sure it makes sense for you and also look
at the other side, or look at all of your situation,
because everything you do is going to affect your ten forty.
You need to sit down with your fiduciary advisor and
your tax prepare and make sure that everybody's on board
with whatever steps you're going to take so that you
don't have a nasty surprise in April. But these are
the steps that I think are worth it exploring, even
(10:00):
if you do nothing but learn about them and decide,
you know what, that's not for me, because the worst
thing that can happen is you feel like you missed
an opportunity and you find something you should have done
five years ago. I'd rather people learn about it now
and shoot it out of the sky as the dumbest
idea they've ever heard. Because then I can say, as
an advisor, great, you understand it, you understand the pros
and cons, and you want nothing to do with it.
That's great. I've done my job. But that will help
(10:22):
me find that people who didn't understand it never heard
of it, and it's the greatest idea that they've ever had.
And so again, understand the pros and cons of the
steps you might take, and understand how it's going to
move your situation in the right direction.
Speaker 1 (10:33):
Yeah, and Brian, you know, to the excell point you
made a few minutes ago, you don't have to do
this in one fell swoop and totally upend your entire
portfolio just to get you to these prescribed components in
each account. Like we talked about, these are just examples.
And the good thing about working with a proactive advisor
is we're helping you look ten, fifteen, twenty years down
(10:56):
the road. You know, to get to a tax efficient result.
You don't have to get there in one day or
one month. So if we know where we want to
be two or three years from now, based on your
personal objectives, we can ease you into that allocation approach
and make sure we don't you know, create a time
bomb from a tax standpoint in year one just to
(11:17):
say hey we got there. Well we you know, we
might have done more damage than good in the first year,
you know, with it while trying to get to a
place ten years from now. That's no good for anybody.
So it can be a gradual approach. But have the
discussion with your advisor and we can ease into that
right kind of allocation over time if needed.
Speaker 2 (11:38):
And if you're thinking about taking some of these steps
that are going to cause some taxation, remember this is
the right time to be thinking about it, because over
the next fourteen months there are three tax years. So
if you've determined what you want to do, remember just
over the next you know, over a month and a half,
you can get into two tax years a little bit
now and then a little bit in January, and then
a short twelve months after that you'll be in another taxi. So,
(12:01):
as Bob mentions, you can spread this stuff out, and
again you get three years worth of tax activity over
just a fourteen month period, So understand what that impact
is and how you should spread that hit out.
Speaker 1 (12:11):
Here's the all worth advice. You don't just need to
know what investments you own, you need to know how
much of each kind of investment to put in each
type of investment account. That's how you build smarter, tech
savvy wealth that actually supports your long term goals. Coming
up next, we're going to explore a portion of a
portfolio that most people have, but most or many don't
(12:34):
have any understanding of whatsoever, and we're talking about bonds.
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC the talk station. You're listening to
Simply Money presented by all Worth Financial on Bob Sponseller
along with Brian James. If you can't listen to Simply
Money live every night, subscribe and get our daily podcasts.
(12:58):
And if your friends or family could use a little advice,
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Just search Simply Money on the iHeart app or wherever
you find your podcast. Straight ahead of six forty three,
we tackle your biggest money questions, including what to do
with a pile of post business sale cash, whether private
(13:20):
credit belongs in your portfolio, and if using an options
caller makes any sense whatsoever. All right, Brian, Amazon is
selling some bonds. We're used to, you know, stock offerings,
but Amazon and a lot of these other tech companies
have been selling some bonds lately, and they have raised
a ton of money to do. So what's going on here?
Speaker 2 (13:41):
Yeah, this is this is kind of interesting to me
because bonds or companies selling bonds, that's a very nineteen
fifties type of a thing to do. And it's now
finally reads the technology industry, which has always been go
go growth and all that. I remember sometime in the
last jeez, I don't know to maybe I guess it's
probably been ten fifteen years when Apple started paying a
tiny dividend. Apple's not going to be known anytime soon
(14:03):
as an income generating stock, but there is a dividend
there because it's a growth company. Their job is to
go invent new things, find new markets to sell them to,
and those kinds of things. That's what a growth company is,
and I would put Amazon in that same class. But
now we've reached a point where this industry has gotten
so big and has gotten so much power, they're looking
to arrange their finances a little bit different, more differently,
(14:25):
and again kind of go into some back to some
old school methods. So Amazon raised about fifteen billion dollars
and this is its first US dollar bond offering it
about three years, so not the first time they've done it,
but adding to a spree of jumbo debt sales by
technology firms, they're all racing to chase artificial intelligence. Everybody's
looking for money under every couch cushion to build artificial
(14:48):
intelligence competitiveness. So the proceeds of this, which are about
three billion dollars, maybe a little more than that, they're
going to be doing everything from acquiring artificial intelligence firms,
capital expenditures to build those up and then as well
as share buybacks. This according to people with knowledge of
the of that matter.
Speaker 1 (15:05):
Brian, I've got an opinion of what's going on here.
Let's I'd love to know if you agree or disagree. Well, hey,
look we've got an aging baby boom population and people,
you know, see these tech companies. And I've had more
than a few clients come to me and say, hey,
I'd love to participate in this whole AI thing, but
I can't handle fifteen percent twenty percent volatility in my portfolio.
(15:28):
How can I participate in some of these you know,
great up and coming or established companies and not take
as much risk. And I think that's what you know,
companies like Google and Amazon are tapping into let people
get some return without owning the stock and the stock
volatility in the process. I mean, let's face it, we're
you know, we've got tech earnings you know coming out
(15:51):
you know every day now, Navidio, you know that stock
people have no idea where that thing's gonna go. H
heading into the earning earnings and out Smith. So my
point is to get into some investment grade debt in
companies that are established with great free cash flow. That's
a great opportunity for some of our older, more conservative investors.
Speaker 2 (16:12):
Yeah, I would agree with that. And this isn't Amazon's
not alone. So Google parent Alphabet, right remember Alphabet is
the own owner behind Google. They sold about twenty five
billion dollars worth of debt in the US and Europe.
Meta the Artist formerly known as Facebook thirty billion for them,
and then Oracle, a little older school infrastructure company. They
raised about eighteen billion dollars back in September. So again,
(16:33):
let's remember real quick what a corporate bond is, right,
Old we're starting to remember what they are because interest
rates are now finally respectable again, where people were relying
on only stocks for a very long time. A bond
is debt. A company borrows money from you. They will
pay you an income stream. Let's say it's maybe five
percent or something like that, and then when that debt
comes due on the maturity date, you get your money back.
(16:54):
What they do with that money you don't necessarily benefit from.
If they invent the next great artificial intelligence tool or
something like that, that just means your bond fund or your
bond that they owe you is that much more reliable.
They'll be able to pay it off. But if it goes,
you know, gangbusters on the growth side, that helps the stock.
It doesn't affect the bond other than probably making it
a little more reliable. But your return was already kind
(17:15):
of set in stone via the interest rate and getting
your money back. Now, these don't always work out. Bonds
can fail just like anything else, and probably the biggest
example we have of that is Enron. Back in two
thousand and one. This was the company down in Houston
that basically was trading a lot of energy and after
it was revealed that they had been using some really
crazy accounting loopholes, hit billions of dollars worth of debt,
(17:37):
a lot of off book transactions, little LLCs and little
things spread out all over the place that they weren't
actually claiming that they had, but they used that to
hide their debt and inflate their earnings. And not only
did that take Enron down, it took Arthur Anderson, one
of these then big four financial accounting firms, and it
costs about eighty five thousand jobs. World colms slightly behind
(17:58):
that again, an accounting fraud took them down, and then
Lehman Brothers is probably the whopper. These are all companies
that had bonds out there, and there's risk in these
types of things. But that's why you want to be
have a diversified portfolio of bonds, just like you have
a diversified portfolio stocks.
Speaker 1 (18:14):
Yeah, and this is why it's good, I think in
most cases, and I think most investors understand, when you're
looking at credit quality of these bonds, it's good to
have a professional taking a look at this stuff to
evaluate credit quality, the balance sheet of the companies, the
free cash flow of the companies, because as a bondholder.
In order for you to get your interest payment, this
company has to have some free cash flow. If they're
(18:36):
just selling bonds to just finance this growing and growing
pile of debt, all all the companies you mentioned back
in the early two thousands, you know, you might be
buying into an absolute disaster. And I remember seeing the
high yield credit market just get imploded back in the
early two thousands and again back in the housing crisis.
(18:58):
You know the saying, go there ain't no free lunch.
So if somebody's offering a high yield, you know, a
really high yield, don't just be enticed by that. You
got to look under the hood at what the actual
credit quality these companies are so you can get your payments. Now,
let's pivot into a more conservative way to invest in bonds,
and that's good old treasury bonds Brian.
Speaker 2 (19:21):
Yep Treasury bonds, good old mom and pop, grandma and grandpa.
Reliable issued by the US federal government, considered one of
the safest investments you can make on the face of
the earth because it's backed by the full faith in
credit of the United States. The United States government has
never defaulted on its bonds knock on wood here, so
that investment is considered low risk compared to everything else
you can do. This doesn't mean you can't lose money.
(19:42):
Things happen. Bond prices and interest rates move around, and
so when prevailing interest rates rise, bond prices will fall.
And we're coming out. Weare in the opposite situation right now,
but just be aware things do move.
Speaker 1 (19:53):
Here's the all Worth advice when choosing bonds for your portfolio.
Match the duration to your timeline, focus on quality over yield,
and make sure your bond allocation compliments your overall investment
strategy and financial plan. You've worked your way up the
corporate ladder and made great money, but opportunity comes calling
in the form of an executive position should you move
(20:16):
up the ladder. We'll talk about the quote unquote executive
dilemma next with our career expert Julie Bauki. You're listening
to Simply Money presented by all Worth Financial on fifty
five KRC the talk station. You're listening to Simply Money
presented by all Worth Financial on Bob Sponseller along with
(20:37):
Brian James. Joined tonight by our career expert Julie Bauki Julie, thanks,
as always for carving out some time for us. Tonight.
We want to talk about something we're gonna call the
executive dilemma, staying put versus jumping to the next big,
big thing. Let's say you're in a great role right now.
You love your job, you're obviously doing very well at it,
(20:59):
but opportunity comes knocking. What's the right move and how
do you evaluate whether to make a move?
Speaker 3 (21:06):
Yeah, I can kind of speak in generality because I've
worked with a lot of people in this situation, and
the first question I would ask is why would you
consider this move? So, in other words, what are the
compelling things about this move? And sometimes what I find
when people start listing out compelling things more salary, a
higher level title, My next question would be, are you
(21:29):
sure that those are the things that really matter to you?
Because it's very it's very ingrained in us that jumping
for the next big thing, more money, more title equals
more happiness and career satisfaction. But I know for sure
that's not true. And so when you look at why
did that why did that role appeal to you in
(21:51):
the first place, and then ask yourself, are those things
that really matter to me at this point. I always
start from a point of what matters most to you
right now in your life and then bring the career
conversation into it. And because if you are going to
get that bigger title and more money, does it also
mean that you have to travel more? Does it mean
you have to work weekends? And how does that fit
(22:11):
into what your priorities are? And so it's so that's
the big question is why would you And then take
a look at what is it about where you are
now that might be sticking in your gut as to
why it even makes sense to look for something else?
And what are you missing where you are? If you
could change some things about your current situation, would that
(22:35):
solve that? Would that solve that? It's you're getting to
move on. So I think it's a really good critical
analysis of the why behind both where you are, the
whys and the what both behind where you are and
what the opportunity is in front of you is really
really important because we can get super caught up in
yeah but it's a director title, Yeah but it's a
(22:57):
VP title without really thinking about what am I getting up?
What am I giving up to get that and then
how does that work against what my whole life priorities
are right now? So a career decision has to be
made on a bigger platform than in a vacuum.
Speaker 2 (23:12):
Julie, I think a lot of people learn the hard
way exactly what you just said, because we get this
so ingrained in us that I got it. If I'm
getting off of this position, well, clearly I'm fantastic. Obviously
they love me, and I should take advantage of these benefits.
But people do tend to learn the hard way that whoops,
maybe I caught my limit. Maybe I don't want that
next level because my other things in our life have
taken priority. So how do people unwind it? For those
(23:34):
people who feel like they may have done that in
that position, how can what's what are some ways to
unwind that?
Speaker 3 (23:39):
Yeah, so you're saying like, if you've already taken that.
Speaker 2 (23:42):
Role, Yeah, and you didn't, and you just didn't occur
to you that, you know what, I didn't really want
this extra level of work. I just didn't think it through.
I just thought it was another accomplishment.
Speaker 3 (23:49):
So the first thing, it kind of depends on a
lot of things. If you have so let's say you
have a very stable career history. You've worked a long
time at one place, you've jumped to this other place,
and you've been there nine months to a year, and
you say, this isn't exactly what I thought it was
going to be. You can successfully and confidently pivot at
(24:14):
that point versus a person who's had three two year
jobs in a row. Now you have to Now it
starts to be what story does your career tell? And
that's what I would add, because you want to picture yourself.
You're now interviewing for a new job beyond the one
that you took by accident. You've got to explain yourself.
(24:35):
You've got to explain your career. And it's perfectly okay
to say. So they contacted me, it sounded like exactly
what I wanted. When I got there, I realized that
Zava la bah blah. I've done a lot of thinking
and now I know exactly what I want, and which
is why I applied for this role. And so that
that is just that's a good explanation. But if you
(24:58):
are somebody who has a history, if you are somebody
who has a history of jumping without really thinking about
what I've done and Therefore you have kind of a
checkered history. You probably need to take a breath and
build up, build up some capital there where you are
so that as you move to the next thing, you've
got a better story to tell. So it's kind of
(25:18):
a big fat It depends. It's really what does your
whole career story say about.
Speaker 1 (25:22):
You, Julie. I want to go back to the situation
where somebody's, you know, considering a move, they haven't pulled
the trigger yet, and they're wondering how to evaluate this.
And I'm going to make an assumption here. You correct
me if I'm wrong. Oftentimes people just haven't been coached
on how to walk into that you know, the boss's
office or the executive suite, and just be clear about
(25:44):
what you love about working where you are a couple
things that you would like to see tweaked. And I think,
especially in today's labor market where it is really hard
to find good, seasoned, hard working people, aren't people amazed,
you know, if they're coached by someone like you on
how to go in and broach that conversation. Oftentimes you
(26:06):
can walk out of that office, you know, if your
if your requests or reasonable, getting exactly what you really
need to be truly happy where you are, instead of
making a completely you know, new move and complete jump
to a new company. Am I am I on target
there at all?
Speaker 3 (26:24):
Yes, A very much. So we always say try to
fix it where you are first, because jobs are just painful,
and transitioning to a new, unknown job, as exciting as
it may sound on the surface, can also be really
painful and surprising. And so getting it doing that, doing
that clarity, that looking at everything that's on your plate
(26:44):
and saying and really saying, what do I like about
my current role? What are the things that if I
had a magic wand and can move them off my plate,
I would? What would I like to see more of
less a in my role? And how how do I
then approach that. Once you get clarity on that, then
(27:07):
you have a better Then you have a framework. Then
you have talking points to go in and say, you know,
I've been in this role as COO for three years
and what I really love is integrating new ideas, new systems,
new technologies, and then working across the organization to help
implement those and bring those delights. I do get to
(27:28):
do some of that in my role, but as I
look at my next role, I would love to be
more involved in those types of initiatives. And that's the
kind of conversation that you should be having. And we
are so afraid to have those conversations because we feel
like it's going to make us look less than committed
(27:49):
or that we're going to automatically end up on the
layoff list. And you've try to assess your situation. If
you have the type of leader who you feel like,
it really is risky to have those conversations, and that
might be different than if you feel like somebody your
leader really is open to you, you are valued, and
your leader is looking to retain you. I think it's
up to you to go in and begin that conversation
(28:13):
about what next might look like for you. Leaders are
so busy and yet they should be coming to you
and initiating these conversations, but they aren't because they're getting squeezed.
And I always say, the career fairy isn't coming. And
so if you want more or different out of your career,
start where you are. Try to get it where you are,
or at least put a plan together to get it
(28:33):
where you are, especially in a job market like we're in,
that's always going to be the place where it's going
to be least stressful to move.
Speaker 1 (28:42):
That is great advice. Julie, you're listening to Simply Money
presented by all Worth Financial on fifty five KRC, the
talk station. You're listening to Simply Money presented by all
Worth Financial. I'm pop sponsorller along with Brian James. You
have a financial question you'd like for us to answer.
(29:02):
There's 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 as always, it will come
straight to us. All right, Brian, get ready for Colin
and Marymont. He says, we've been passive investors for years,
but all the megacac tech names dominate the index. Now,
(29:22):
how do you stay diversified when the index itself gets
top heavy? I love this question from Colin. It means
he's paying attention, he's on top of things.
Speaker 2 (29:32):
What do we say to Colin congratulations on knowing how
indexes worked. That's exactly one of the concerned. This wasn't
a problem that we you know, thirty years ago, we
just didn't have this type of an issue. Because the
indices were a little more balanced out. But the economic
growth in this country, in this world has been so
technology driven in the past several decades that, yes, this
is a real problem. So the S and P five
(29:52):
hundred today is the most concentrated it's been since the seventies.
The top seven or eight tech giants now make up
more than a third of the entire end. Some estimates
have it up to forty percent. So if you might
think you're diversified just because you own that index fund,
but you might just be tied to a handful of
megacap stocks, so you know, just make sure you don't
have you don't have to abandon passive investing. Just add
(30:13):
these guardrails. Consider an equal weight S and P five
hundred exchange traded fund, same five hundred companies, except it
spread evenly across all five hundred versus the bigger they are.
The big the bigger the company is, the more of
a portion of the capitalization it makes up. And then
also look for some MidCap and small cap index funds,
and that'll fill in what that top heavy index is missing.
(30:33):
It'll the S and P five hundred is never going
to have small and MidCap it's literally the five hundred
largest companies in the United States, which tend to be
among the largest in the world too. So if you've
set add separate MidCap and small cap funds, that's going
to spread out some of that risk, and as we've
mentioned frequently, add some international stocks to the mix. Twenty
twenty five has been a very different year as the
US has chosen to portray itself differently from a trade
(30:55):
standpoint to the rest of the world. International stocks are
on the run, and if you don't have any your portfolio,
make sure they're in there. So great excuse to make
sure that you are balanced overall in terms of your
asset allocation. Tom and Cincinnati Bob Tom says his CPA
has been talking about harvesting gains quote unquote before any
potential tax changes, but their advisor, who is a different person,
obviously says to hang on and wait for this step
(31:17):
up in cost basis. In other words, don't do anything,
just wait until you're dead and then your kids will
inherit it capital gain tax free. I'm sure he didn't
say it like that, but that's anytime you're talking about
step up, you're not talking about you you're talking about
your airs. So he's asking, how do families make these
decisions when these rules keep changing, they keep moving the goalpost, Bob.
Speaker 1 (31:36):
Yeah, this is a tough one for me to answer.
I don't want to get in the middle of, you know,
discussions that it sounds like aren't going on between your
CPA and your advisor, Tom. That'd be my first thing
is you guys all need to get in the same
room and have a financial plan. And the proverbial saying
don't let the tax tail wag the dog, I think
applies here if your CPA is talking about potential tax
(32:00):
change as well. I don't think we're going to get
many tax changes tax law changes here for the next
few years at least. I mean, who knows what happens,
you know, in the next administration and what have you.
So you've got a window here where we do have
a little bit of clarity on tax policy. And to
Brian's point, you might be passing up some real opportunities
(32:21):
here by just standing pat and waiting until you die.
As Brian said, So I think number one, I think
you guys all need to be you know, in the
in the same room or at least on the same
zoom call comparing an actual financial planning strategy, And there
might be different reasons for harvesting some gains now, you know,
to support income or gifting strategies. There might be some
(32:46):
charitable giving opportunities that you might be able to take
advantage of to just eliminate some of these taxable gains altogether.
And there might be a gradual approach of moving out
of some of these low cost based assets gradually over
time through direct indexing strategies or things like that. So
I can understand why you're confused, Tom. You know, if
(33:07):
everybody isn't at least in the same room or on
the same zoom call, you know, putting an actual strategy together,
you know, you're left being you know, confused and getting
conflicting advice. And that's really no good for anybody. So
I hope that helps. Ethan and Covington says, we're thinking
about adding private credit to our portfolio, but the lack
(33:28):
of transparency worries me. What's the smartest way for regular
investors to evaluate one of these illiquid investment opportunities?
Speaker 2 (33:37):
Brian, yeh, here we go with that word private again.
Is these assets are booming Normally we associate this with
private equity, which is just buying up small companies that
aren't publicly traded. But now we're also talking to these
days about private credit, which which is really the kind
of the bond side of the private equity movement. These
are just loans and things to to to businesses that
(33:58):
don't have the size or for whatever reason, don't want
to participate in the public market. So private credit has exploded.
It's now over a two trillion dollar market. Good reason
for this. You can get higher yields out of this,
less sensitivity to interest rates because they're not publicly traded
so there aren't markets to move them around as much,
and access to loans traditional banks aren't willing to make
because they've got their rules to follow too. But for
(34:19):
everyday investors, the trade off is usually ill liquidity and
less transparency, as Ethan's calling out specifically. So just that
doesn't mean that doesn't make these bad investments. There are
things you should know about them, know exactly what you're
being paid for. Higher yields sound great, but they're compensating you.
The reason they exists is because you have a little
less liquidity and you're taking a little more credit risk.
So these are compliments to other things that should be
(34:41):
in your portfolio. And if you can't articulate where that
return comes from, if it's if you can't understand at
all leverage and distress loans, real estate backing, that kind
of thing, you might want to reconsider. Look at the
structure of it, not just the sales pitch. Is this
a fund that marks its own assets? Are they the
ones deciding what the assets are worth? And how often
do they do that? And what are the redemption limits?
(35:02):
Are these things frozen up you can't get to it?
Oftentimes there are then they can legally refuse withdrawals during
times of stress. And make sure you understand the manager quality.
And to try to get any kind of history you
can get. It may not be possible to go all
the way back to two thousand and eight. That's getting
to be a long time ago now, but if you
can get that kind of answer, you should take a
look at that. So just look under every stone for
(35:22):
all the information you can get. Ethan really super quick
from Alan Levin and Bob. He says they got a
lot of cash after they just sold a rental property.
What do they do with that lump sum without feeling
like they're dumping into the market at a wrong time.
Speaker 1 (35:34):
Well, great, great question. Now here's the answer. Brian talked
about this yesterday, this exact same topic and did a
great job. I think first segregate your long term capital
from your short term capital needs. And I would say
for longer term capital, the numbers bear this out based
on historical data. You know, just put it in there,
invest it. Yes, you got to take on some maybe
(35:55):
short term volatility, but you're going to come out ahead
in the long run by just pushing this money to
work and investing it responsibly. By the same token, if
you're somebody that cannot handle short term volatility, you know,
with your long term capital three four five percent pullback,
then you might want to stage it in over time.
So it has to do with the economic result over
(36:17):
time versus your investment temperament and risk tolerance. And that's
a good discussion to have with your advisor prior to
pulling the trigger on anything. Hope that helps. All right, Next,
Brian has his bottom line on what's going on in
the gig economy these days. You're listening to simply Money
presented by all Worth Financial on fifty five KRC, the
(36:38):
talk station Let's get this thing moment. You're listening to
Simply Money, presented by all Worth Financial on Bob's fonseller
along with Brian James. Well, rumor has it, Brian, you've
been out there moonlighting as a DJ down in one
of your favorite high school haunts in over the Rine.
(36:58):
Is that true? Are you out there engaging in the
gig economy? Tell us what it's like out there.
Speaker 2 (37:04):
I think you're referring to the Warehouse from the next
im as my high school hangout that I literally went
to one time and you'll never let me forget it.
But I am leading the charge. I'm going to revive
soft Rock down at the Warehouse and over the Rhine.
Last night we had literally six or seven people interested
in that. So anyway, gig economy, right, That's what we're
kidding around about here is side jobs. So not a
(37:27):
lot of our clients deal in this kind of thing,
but they a lot that More and more, I'm dealing
with clients who come in with questions about their kids
and their relatives and their loved ones who are doing
this kind of thing. So some research says that overall
total compensation. This comes out of Forbes. Total compensation rose
about three point eight percent and twenty four inflation was
only two point nine percent, and that's leaving only a
(37:48):
small margin of additional buying power for people. Households are
feeling squeezed and they're trying to find new ways to
make money, and hence, you know, enter the whole gig economy.
Finding a side job or some kind of little business
on the side. This can be a good thing. You
can use your gig income not only for extras, but
potentially you know, building or treat it like a project
source of income. If you or your loved ones is
(38:09):
trying to build up an emergency fund and you just
can't carve out enough money on the side from your
primary gig, then something on the side can be just
for that purpose. I want to build up I know
I need three months, six months, nine months worth of
income so that I can accomplish my emergency fund goal.
Then do that. It can be a great way to
do it. That income is segregated, it comes out on
the side, and then you can carve that out a
(38:30):
little more easily than trying to squish it into the
regular budget. Another thought that comes up all the time
for my clients worried about their family members. Is my
kid's got a lot of credit card debt and we
want to swoop in and pay it off, But I
also don't want to teach that lesson that will always
be there to kind of fix it. Well, then again,
those kids, those young folks can start looking for a
side job to get that tackled and get that paid
(38:51):
down and never go that route again, you know, because
this is the situation that we all get and we
want to fix. So these side gigs can be a
little bit bumpy. Of course, you never know where the
work is going to come from. They often don't come
with benefits such as retirement plan, health insurance. That's what
makes it a side gig. But at the same time
it can be a reliable source of outside income and
(39:11):
not the worst idea for somebody who needs that that
Lextra little bump. Do you ever run across this bob?
Speaker 1 (39:16):
Well, occasionally, but one idea popped into my head, and
I know you love my random ideas, so I'll lay
it on you. Hey, occasionally were running too people, you know,
especially young folks that say, hey, I'm in a job,
right now where I'm making pretty good money. It's paying
the bills. But this is not my, you know, long
term thing that I want to be doing forever. Going
out and finding one of these side gigs. If you
(39:38):
do it strategically, it's a way to try on a
different job or a different career path that and see
how you really like it. If you do it for
five or ten hours a week instead of quitting your
current job, it might be that entree to the next
step in your career path. Just a thought out there.
Thanks for listening tonight. You're listening to Simply Money, presented
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For more than 30 years The River Cafe in London, has been the home-from-home of artists, architects, designers, actors, collectors, writers, activists, and politicians. Michael Caine, Glenn Close, JJ Abrams, Steve McQueen, Victoria and David Beckham, and Lily Allen, are just some of the people who love to call The River Cafe home. On River Cafe Table 4, Rogers sits down with her customers—who have become friends—to talk about food memories. Table 4 explores how food impacts every aspect of our lives. “Foods is politics, food is cultural, food is how you express love, food is about your heritage, it defines who you and who you want to be,” says Rogers. Each week, Rogers invites her guest to reminisce about family suppers and first dates, what they cook, how they eat when performing, the restaurants they choose, and what food they seek when they need comfort. And to punctuate each episode of Table 4, guests such as Ralph Fiennes, Emily Blunt, and Alfonso Cuarón, read their favourite recipe from one of the best-selling River Cafe cookbooks. Table 4 itself, is situated near The River Cafe’s open kitchen, close to the bright pink wood-fired oven and next to the glossy yellow pass, where Ruthie oversees the restaurant. You are invited to take a seat at this intimate table and join the conversation. For more information, recipes, and ingredients, go to https://shoptherivercafe.co.uk/ Web: https://rivercafe.co.uk/ Instagram: www.instagram.com/therivercafelondon/ Facebook: https://en-gb.facebook.com/therivercafelondon/ For more podcasts from iHeartRadio, visit the iheartradio app, apple podcasts, or wherever you listen to your favorite shows. Learn more about your ad-choices at https://www.iheartpodcastnetwork.com
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com