January 15, 2026 • 19 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian tackle one of the most common mistakes they see this time of year: letting taxes dominate your investment decisions. With tax season officially beginning January 26th and a slightly restructured tax code, they explore how fear of the IRS can lead investors to stay paralyzed—often sitting on highly appreciated stocks or annuities simply because they don’t fully understand the tax implications. Plus, they reveal how 34 billionaires got it wrong when trying to predict the stock market in 2025.
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Speaker 1 (00:05):
Tonight some hidden risks of letting the tax tail wag
the doult In speak.
Speaker 2 (00:10):
When it comes to making investment decisions.
Speaker 1 (00:13):
You're listening to Simply Money pres by all Worth Financial.
I'm Bob sponseller along with Brian James.
Speaker 2 (00:18):
Well.
Speaker 1 (00:19):
Taxes are top of mind for almost everyone right now.
The IRS just announced that filing season opens on January
twenty six. Brian, I know we got a lot of
clients that can't wait to get that turbo tax thing filed.
They're already collecting and monitoring their spreadsheets as we speak.
So January twenty six is the big day. And on
(00:39):
top of the normal tax filing and everything we do
every year, Americans are facing a slightly changed tax code
shaped by the one big beautiful bill that was passed
in twenty twenty five, and some folks are saying this
could possibly mean noticeably higher tax refunds for many. But
this moment also raises a bigger question, and that's what
(01:00):
we want to get into tonight. Our tax is dominating
the way we all make investment decisions, Brian, and I
think for a lot of us the answer is yes.
Speaker 2 (01:10):
Oh absolutely it is.
Speaker 3 (01:11):
And I think it's because taxes can be the boogeyman
Bob because people don't really know exactly the mechanics of
how they work and how they're different. Accounts are affected
by it, and it's always something we've been raised to
believe you should try to avoid at any and all costs,
and that really causes people to literally do nothing for
years and years and years because of the absolute terror
they have over what the irs might do if they
(01:32):
simply sell this one piece of something that they've had
for a long time. You and I actually had a
meeting yesterday with somebody where we were super terrified of
this one annuity that they have but has a bunch
of game built up into it. But as we explained it,
it's really no different to pull money out of that
thing than it was out of.
Speaker 2 (01:47):
Their pre tax ira that used to be there. Four
to one. Okay, it's no different.
Speaker 3 (01:51):
But they've been absolutely terrified to touch it simply because
they didn't understand. All they knew is that taxes were
hanging over their head. Of course, that happens. Everybody's got
that nobody's going to get away with, and there's no
to fill out a form or a piece of paper
or your tax are throw the right way where the
irs will say, oh, nope, you're getting off scott free.
You don't know any taxes. That's not how it works.
Speaker 2 (02:07):
But a lot of people simply don't know that kind
of Well.
Speaker 1 (02:10):
The good thing about that meeting you and I had yesterday,
and I sat there and watched you explain this thoroughly
to this lady who had actually she and her husband
and walked in the door. She had some very specific
things she wanted to talk about in terms of, you know,
remodeling their home, gifting to.
Speaker 2 (02:26):
Kids, all that.
Speaker 1 (02:27):
And as I watched you just explain how this really works,
and more importantly aligned it aligned the whole discussion along
the lines of their actual financial goals, not just worried
about their tax return.
Speaker 2 (02:40):
I could see the temperature come down in the room.
Speaker 1 (02:42):
She was a much more relaxed and walked out very
comfortable with the strategy. Uh. And it's not like you're
gonna We're gonna blow out of this asset and really
blow up their tax return. But you know, I think
the point you were making, and it was a great one,
is hey, it's okay to use some of this money.
Speaker 2 (02:58):
Yeah, your own dollars yes, I googled it. You're allowed.
Speaker 1 (03:03):
Another thing, you know, Brian, that that I know you
and I both run across a lot of times is
people have assets, individual stocks in particular that they've owned
maybe for ten, twenty fifteen years, and they have huge gains,
especially some of these big cap tech stocks. And I
think a lot of people just love to look at
that spreadsheet and see that, you know, three hundred and
(03:25):
fifty six percent gain, and just in their heart and
mind they say, yep, that's one of my winners.
Speaker 2 (03:30):
No way, and you know what, we're going.
Speaker 1 (03:32):
To touch that because I want to stare at that
three hundred and fifty six percent return.
Speaker 3 (03:37):
And when you that sounds like a very specific example, well.
Speaker 2 (03:40):
I'm throwing out an a.
Speaker 1 (03:42):
But when you pull up a stock chart and take
a look at how that particular stock that, yeah, I
am thinking of a specifical answer, how.
Speaker 2 (03:50):
Its performed over the last one or two years. The
stock's actually down. It's not performed well.
Speaker 1 (03:56):
It has underperformed the market, which as we all know,
has been going game bus. Yet you know, this client
had no idea that was going on, nor did they care,
because they're just fixated on that twenty year return there,
and I'm going to guess.
Speaker 3 (04:09):
They're probably hung up on the well, A, it's done
so well, I shouldn't ever give it up. And B
I don't really know what the taxes are going to be.
I just know there's going to be a lot of them.
So and a lot of people get in. And those
are the exact words I got back. This one's done well.
I'm never giving it up. Yeah, those are the exact words.
And my response when that comes up with my clients, Bob,
is Okay, then we can't count it as an asset
(04:29):
if it's something, if it's a piece of artwork you're
going to hang on the wall and stare at, then
it cannot help you financially. Guess what, you're poor. We
have to be some That doesn't mean blow out of
the whole thing. But if you are terrified of these
things and you're never willing to touch it, then it's
not an asset for you.
Speaker 2 (04:43):
You have to get past that.
Speaker 3 (04:43):
If you really want to pretend you know that this
is something you don't need, well.
Speaker 1 (04:47):
This is probably a good time to mention some strategies
for situations like this, where you know, once we have
the discussion and somebody realizes, yeah, I probably should rebalance
or at least protect that position, that stock position, and
I and I don't want to pay the taxes, but
I also don't want it to fall by fifty percent,
(05:08):
you know, if and when we get another severe correction.
Some things that we do for people, you know, a
couple of things that come to mind. You can take
that stock and drop it in to a tax loss
harvest you know, direct indexing strategy where some short term
gains are being harvested in the background while we have
periods of volatility, and that allows the portfolio managers to
(05:30):
kind of, you know, lightly trim that position over time
with no capital gains exposure because we have some losses
to offset it. Another more, you know, slightly more sophisticated
strategy is you could put some collar protection around it.
You know, you sell it out out of the money call,
which helps pay for insurance, to buy a put option
(05:51):
on that stock. You know, you're not selling the stock,
but if it falls in value, the value of your
put option goes up, and you've protected the value of
that position in portfolio.
Speaker 2 (06:01):
And that move.
Speaker 3 (06:02):
Protects you from the whims of any one individual company
because anything can do anything at any given time. Just
ask Procter and Gamble people what happened when Dirk Yager
was named CEO twenty five years ago.
Speaker 2 (06:12):
Didn't go so well.
Speaker 3 (06:13):
Great company, but they hit a bad period there and yeah,
so the I think the concern here is not so
much the risk of any one company. It's just the
idea that if you're going to have this much of
your assets tied up into one stock, you're no longer
worried about the market, or you're what's my balance my
asset allocated portfolio.
Speaker 2 (06:31):
Well, if you've got eighty percent tied up in a
couple of tech stocks, you don't care about the overall market.
Speaker 3 (06:35):
You better be on those conference calls, listening to what
those people are talking about and reading every word that
the analysts have to say. If that is your current
financial plan, because it does not relate to the overall economy,
it relates to a handful of companies.
Speaker 2 (06:46):
If you're not going to protect otherwise, all.
Speaker 1 (06:48):
Right, well, getting away from just that one or two
concentrated stock situation. You know, in general, folks are just
looking for some smart, you know, proactive tax planning because
as we talk about all the time, Brian, and this
is no knock on CPAs or tax professionals, but generally speaking, they.
Speaker 2 (07:08):
Are in a reactive mode.
Speaker 1 (07:10):
They take in all your information that you get in
January and February, they plug it into tax software and
they tell you how much you owe in taxes. That's
tax preparation, that's not tax planning. There are a lot
of good CPAs, and we work with many of them
where we partner with them and our clients to get
into some actual proactive tax planning, dovetailing that with a
(07:33):
client's investment strategy and cash flow and retirement planning strategy.
Speaker 2 (07:38):
Brian walk us through some of the things that.
Speaker 1 (07:40):
We do that really do add value to a client
situation regardless of.
Speaker 3 (07:44):
What the market does. I like the way you put that, Bob.
A tax prep is very different from tax planning. This
is tax prep season, right. Tax planning will be what
you want to do after tax prep, so that do
you ensure that whatever you just went through doesn't happen again?
What can I be doing through the balance of twenty
twenty six so that they don't get the outcome that
I didn't particularly like.
Speaker 2 (08:02):
From twenty twenty five. That's planning ahead. Now.
Speaker 3 (08:05):
Don't go to your CPA right now and say hey,
let's do some tax planning. They're going to say, nope,
we'll talk about that in May because they're about to
enter their extremely busy season. But what are we talking
about here, well, tax planning, and we already hinted it at.
One of these things is, first off, tax loss harvesting.
And yes, we did talk about this all through the
fourth quarter. It's a little early in the year to
worry about tax loss harvesting for twenty six because we're
(08:25):
two weeks in. But tax loss harvesting basically means paying
attention to the individual holdings you have and using the
ones that may not be sitting at a game position.
Maybe they're sitting at a loss position. Sell them because
you get to take a deduction or offsets some other
gain you may have elsewhere in your situation. Another one
is roth conversions and the timing of your income. So
if you have lower income years, and this often happens
(08:47):
immediately after somebody retires, if you've got a decent nest
egg built up, you may be able to retire and
literally not generate any income you're not working. Maybe you
haven't turned on your Social Security or your pensions spigots yet,
you're just spending down assets. That's going to be the
lowest tax bracket you've seen in years. I do not
personally believe that it's a good idea to celebrate. A
lot of people come in and they'll say, I'm I'm
(09:08):
only paying eight percent taxes this year, and I'm going,
what are you doing?
Speaker 2 (09:10):
Why would you do that?
Speaker 3 (09:11):
You know, pay fifteen and convert some stuff to ROTH
take advantage of the opportunity.
Speaker 2 (09:16):
That's some money to keep from paying a thirty two
percent bracket in six years.
Speaker 3 (09:20):
Exactly because when you're seventy three or seventy five, depending
on when you were born, r MD season hits required
minimum distributions. Now you're permanently in a higher bracket because
of those pre tax assets. So don't ignore the opportunity
of that income time.
Speaker 1 (09:33):
Well, you mentioned the tax loss harvesting, and I'm going
to harken back again to that meeting you and I
did together yesterday.
Speaker 2 (09:39):
Oh we're hearkening today, are we? We are harketing? You
got this sosaurce out this. I'm using my three syllable words.
Speaker 1 (09:45):
But the client walked in and one of their questions was, Hey,
we've got this tax smart investing thing on our account,
can you give us evidence that this is actually working?
And I wanted to make two points, and we made
them yes yesterday in that meeting. Number One, A lot
of times people have a hard time behaviorally, if they're
(10:05):
managing this stuff on their own, from ever taking a loss,
because by hitting that button in that sell button and
taking the loss, you're kind of admitting defeat. And especially men,
we don't like to do that. Our ego gets wrapped
up a little stubborn. When you've got an algorithm or
a strategy or a portfolio management team working in the
background with all emotion removed, they can do that very easily,
(10:28):
keep the portfolio fully invested.
Speaker 2 (10:30):
And you know, for this.
Speaker 1 (10:31):
Particular client and a lot of our clients last year,
you know, very balanced portfolio. They were up seventeen eighteen percent,
and we were able to show them the tax bill
you're going to get next month is about five hundred
dollars in taxable gain and they're like, yep.
Speaker 2 (10:48):
I got it, thank you. Now, what kind of makes sense.
Speaker 1 (10:49):
That they would never have been able to do that
or wanted to do it on their own, but having
these plans in place right now makes a huge difference.
Speaker 3 (10:57):
And that's because of not only the emotional component, but
it's also that takes some pretty heavy duty analytical stuff
because you have to dig deep into the portfolio, into
each and every tax lot holding of each and every
position that you have to find those opportunities, and then
then you layer on that emotional component of I don't
want to sell this. It has lost money. I can't
stand that.
Speaker 2 (11:14):
Well.
Speaker 3 (11:15):
The most comfortable people with their financial plans realize that
sometimes it rains and it's okay to just jump in
the puddles and deal with the situation at hand, take
the loss and the opportunity.
Speaker 1 (11:24):
That provides another opportunity that you always comes up at
the end of the year.
Speaker 2 (11:29):
So I'm going to talk about it in January.
Speaker 1 (11:31):
Hopefully people that are aged seventy and a half and
over are listening to this, and it's for folks that
do regular charitable giving. Please use your IRA r M
D amount to do some of that. Talk to your
advisor now and help coordinate a strategy have that happen
throughout the year. It's a very tax advantage strategy to
(11:52):
use instead of writing a check, dropping that cash and
the offering plate. Not enough people are taking advantage of that.
It's called a qualified charitable distribution.
Speaker 3 (12:01):
You have qualified charitable distributions. Also, donor advised funds, appreciated securities.
These are all keywords you should understand before you ever
write a check to a charity. There are much more
tax efficient ways to benefit the charity the exact same way.
Speaker 1 (12:13):
Help yourself and help the charity. Here's the all Worth advice. Remember,
the most successful investors aren't the ones who minimize every
tax bill. They're the ones who make coordinated, intentional decisions
that compound into long term after tax strength and growth.
Coming up next, something a group of billionaires had in
common in twenty twenty.
Speaker 2 (12:34):
Five that should serve as a lesson for all of us.
Speaker 1 (12:38):
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station.
Speaker 2 (12:49):
You're listening to Simply.
Speaker 1 (12:50):
Money presented by all Worth Financial on Bob Sponsorer along.
Speaker 2 (12:53):
With Brian James.
Speaker 1 (12:54):
If you can't listen to Simply Money live every night,
subscribe and get our daily podcasts. And if you think
your friends or family could use some financial advice. Well
let them know about us as well. Just search simply
money on the iHeart app or wherever you find your podcast. Well,
twenty twenty five proves something yet again that tends to
(13:14):
happen every single year, Brian. No matter how much money
you have, how many experts you hire, or how many
screens are on your trading desk, you still cannot predict
the direction of the stock market. And twenty twenty five
was no different. We've got some actual data to back
that up.
Speaker 3 (13:32):
Yeah, so this is data coming from Forbes magazine. They
pulled thirty four billionaires at the beginning of last year.
That kind of surprises me. Billionaires are taking magazine questionnaires.
But whatsever whatever, that's what We're simply restating what we
see out there in the media. So big name investors.
It includes real estate, tycoons, headfund managers, a little bit
of everything. And with a simple question, what do you
(13:52):
think the S and P five hundred will return in
twenty twenty five? Well, how did these smart people with
gigantic piles of money do thirty five Some of them
thought the market was going to be down, somebody as
much as twenty percent, another thirty five percent, we're looking
only for single digit gains. Only seven out of thirty
four or you know, one out of five twenty percent
correctly guessed that the market was going to be up
between ten and twenty percent. So the point of this, right,
(14:14):
these are people who did something right somewhere along the way,
because now they are billionaires with a B. But most
of them either underestimated the market or we're just flat
out negative and pessimistic. Not super surprising. That's actually pretty telling, Bob,
because this level investor, with everything that they have, it
gets it wrong most of the time. So what hope
do the rest of us have at guessing at it?
Speaker 2 (14:35):
Well, not much hope at all.
Speaker 1 (14:36):
I've got a couple thoughts on why these billionaires are
so far off, and Brian, we run into that not
with billionaires, but with people that own businesses or very
focused in leadership in a specific industry, whether they're doctors
or you know, owners of closely held businesses or what
have you, high level executives. A lot of these folks
(14:56):
are used to running things in a particular company or
business and they're very good at what they do, laser
focused on that particular company or industry, and they and
they got tunnel vision and that that's how you get
to be a billionaire as you stay focused, diligent, and
you get after it year after year, but you don't
have a real broad view of the overall economy sometimes,
(15:19):
and and you and I run into this with you know,
with folks that are extremely intelligent, way smarter than you
and I would ever be, but they're they're very focused
on a specific company or industry and they kind of
can't see the forest for the trees sometimes when making
these kind of bold predictions. And yeah, it's just very interesting.
It goes back into behavior, you know, investment or financial behavior.
Speaker 2 (15:43):
We're all prone to it.
Speaker 1 (15:44):
We all have presuppositions and biases that we you know,
we we carry around with us all day every day.
Speaker 2 (15:50):
Yeah, that's exactly right.
Speaker 3 (15:51):
And so so let's go through some of these individual
people who got it right, who got it wrong, and
what's their background here. So one of the interesting names
on here is real estate mogul Larry Connor.
Speaker 2 (15:59):
He's interesting to me because he's local.
Speaker 3 (16:01):
If you're ever up in the South Dayton area, you'll
see buildings under the Connor group. Well, he's a pretty
successful real estate investor, and he was right on the
predictions for the market last year. And some other folks,
David Hoffman, who's also buying the Pittsburgh Penguins, he got
it right on the wrong end of this a Florida homebuilder.
Speaker 1 (16:20):
Imagine that we have a good gear and have enough money,
you know, take my investment gains for twenty twenty five,
and hey, go.
Speaker 3 (16:27):
Buy an NHL tea yup, stop, buy loaf of bread,
bottle of milk, stick of butter, and an NHL team
on the way home from work.
Speaker 2 (16:33):
You know, that's how we do this. Well, let's talk
about how Let's talk about the big firms, right.
Speaker 3 (16:36):
We listened to a lot of the big financial institutions
because they have a pretty loud megaphone when it comes
to their opinions. Bank of America was looking for a
ten percent return, Goldman and Morgan Stanley were predicting about
seven and a half percent. Vanguard tends to be pretty socialist,
if you will, democratic, and surveyed the public and got
six point four percent back. Everybody, all of those big
institutions were under the actual sixteen percent return that we
(16:59):
got in twenty twenty five.
Speaker 1 (17:00):
Those estimates from the big firms, and I'm not knocking them.
They're they're being responsible. But Brian, every year their prediction
is somewhere between seven and ten percent.
Speaker 2 (17:11):
Why is that.
Speaker 1 (17:12):
It's because over the last they every ninety years, that's
what the market does.
Speaker 2 (17:15):
So they're just being responsible.
Speaker 1 (17:17):
I mean, shoot, they if Goldman came out and said
I think the market's going to be down seventeen or
up thirty.
Speaker 2 (17:23):
Four this year, they'd lose a lot of respect in
a hurry.
Speaker 3 (17:26):
So I don't knock these firms now, No, not at all.
Speaker 1 (17:28):
They got to put a number out there because these
media folks are sticking a microphone in their face and
during the first week of January.
Speaker 3 (17:35):
If you're listening to this thinking we're bashing individuals or
financial institutions for not knowing what the market is doing,
then you're not listening closely enough.
Speaker 2 (17:41):
Our point is you cannot know. Nobody knows.
Speaker 3 (17:44):
These are some of the smartest brains in the world
thinking about finances, and they're all over the map in
terms of what they think is coming and versus what
actually happens.
Speaker 1 (17:52):
Yeah, let's talk about what some of the big winners
are stockwise, and these are stocks we've mentioned throughout the
past year, and the video was up thirty nine percent
last year, Pallenteer was up one hundred and thirty five percent,
robin Hood up two hundred percent, and XP was up
thirty eight percent. Only two of these picks went down Tannebell,
(18:12):
a beverage company in Indonesia, and the I Shares Bitcoin
Trust ETF was down on the year as well. A
lot of people thought bitcoin was going to go to
the moon last year. And if you over allocated to
that asset class, just like any other asset class, you know,
you're sticking your nose out there and you better be
right or you're going to be disappointed if things don't
(18:33):
go your way.
Speaker 3 (18:33):
Yep, those picks came from that same Forbes survey where
they also Forbes also asked these individual billionaires for one
recommendation each what's something you would buy? And of the
eighteen stocks named, only two of them lost value in
twenty twenty five that Bob just mentioned. So yeah, it's
interesting to say, you know, these people probably don't really
even think about individual securities. They didn't make their billions
of dollars by playing the market. They're doing other things
(18:55):
in various industries.
Speaker 1 (18:57):
Yeah, they're not buying the Uh, they're not buying the
XP why and dollar cost averaging?
Speaker 3 (19:01):
Yeah, they don't think about much about their four o
one ks very often so for the rest of us mortals.
Speaker 2 (19:06):
If we're not gonna make a prediction for the market,
what should we be doing? Brian? As we enter twenty
twenty six, don't screw it up? Right.
Speaker 3 (19:13):
The rules for twenty six is the same as they've
been forever. Don't make a mess of your credit, save
more than you spend, and don't panic when the market wabbles.
Do that for thirty years, and you will have some
problems similar to these billionaires.
Speaker 1 (19:26):
Or as one of these billionaires put it, if we
could perfectly predict the stock market, we wouldn't be billionaires,
we'd be trillionaires. Here's the world that would be right,
It would be great. Here's the all Worth advice. If
billionaires can't call the market, you shouldn't try either. Build
a plan that works no matter what the market does
from year to year. Thanks for listening tonight. Xavier basketball
(19:47):
is coming at you. Next go Musketeers.
Speaker 2 (19:50):
Get it done.
Speaker 1 (19:51):
Tonight, you've been listening to simply money presented by all
Worth Financial on fifty five KRC.
Speaker 2 (19:56):
The talk station
Tonight some hidden risks of letting the tax tail wag
the doult In speak.
Speaker 2 (00:10):
When it comes to making investment decisions.
Speaker 1 (00:13):
You're listening to Simply Money pres by all Worth Financial.
I'm Bob sponseller along with Brian James.
Speaker 2 (00:18):
Well.
Speaker 1 (00:19):
Taxes are top of mind for almost everyone right now.
The IRS just announced that filing season opens on January
twenty six. Brian, I know we got a lot of
clients that can't wait to get that turbo tax thing filed.
They're already collecting and monitoring their spreadsheets as we speak.
So January twenty six is the big day. And on
(00:39):
top of the normal tax filing and everything we do
every year, Americans are facing a slightly changed tax code
shaped by the one big beautiful bill that was passed
in twenty twenty five, and some folks are saying this
could possibly mean noticeably higher tax refunds for many. But
this moment also raises a bigger question, and that's what
(01:00):
we want to get into tonight. Our tax is dominating
the way we all make investment decisions, Brian, and I
think for a lot of us the answer is yes.
Speaker 2 (01:10):
Oh absolutely it is.
Speaker 3 (01:11):
And I think it's because taxes can be the boogeyman
Bob because people don't really know exactly the mechanics of
how they work and how they're different. Accounts are affected
by it, and it's always something we've been raised to
believe you should try to avoid at any and all costs,
and that really causes people to literally do nothing for
years and years and years because of the absolute terror
they have over what the irs might do if they
(01:32):
simply sell this one piece of something that they've had
for a long time. You and I actually had a
meeting yesterday with somebody where we were super terrified of
this one annuity that they have but has a bunch
of game built up into it. But as we explained it,
it's really no different to pull money out of that
thing than it was out of.
Speaker 2 (01:47):
Their pre tax ira that used to be there. Four
to one. Okay, it's no different.
Speaker 3 (01:51):
But they've been absolutely terrified to touch it simply because
they didn't understand. All they knew is that taxes were
hanging over their head. Of course, that happens. Everybody's got
that nobody's going to get away with, and there's no
to fill out a form or a piece of paper
or your tax are throw the right way where the
irs will say, oh, nope, you're getting off scott free.
You don't know any taxes. That's not how it works.
Speaker 2 (02:07):
But a lot of people simply don't know that kind
of Well.
Speaker 1 (02:10):
The good thing about that meeting you and I had yesterday,
and I sat there and watched you explain this thoroughly
to this lady who had actually she and her husband
and walked in the door. She had some very specific
things she wanted to talk about in terms of, you know,
remodeling their home, gifting to.
Speaker 2 (02:26):
Kids, all that.
Speaker 1 (02:27):
And as I watched you just explain how this really works,
and more importantly aligned it aligned the whole discussion along
the lines of their actual financial goals, not just worried
about their tax return.
Speaker 2 (02:40):
I could see the temperature come down in the room.
Speaker 1 (02:42):
She was a much more relaxed and walked out very
comfortable with the strategy. Uh. And it's not like you're
gonna We're gonna blow out of this asset and really
blow up their tax return. But you know, I think
the point you were making, and it was a great one,
is hey, it's okay to use some of this money.
Speaker 2 (02:58):
Yeah, your own dollars yes, I googled it. You're allowed.
Speaker 1 (03:03):
Another thing, you know, Brian, that that I know you
and I both run across a lot of times is
people have assets, individual stocks in particular that they've owned
maybe for ten, twenty fifteen years, and they have huge gains,
especially some of these big cap tech stocks. And I
think a lot of people just love to look at
that spreadsheet and see that, you know, three hundred and
(03:25):
fifty six percent gain, and just in their heart and
mind they say, yep, that's one of my winners.
Speaker 2 (03:30):
No way, and you know what, we're going.
Speaker 1 (03:32):
To touch that because I want to stare at that
three hundred and fifty six percent return.
Speaker 3 (03:37):
And when you that sounds like a very specific example, well.
Speaker 2 (03:40):
I'm throwing out an a.
Speaker 1 (03:42):
But when you pull up a stock chart and take
a look at how that particular stock that, yeah, I
am thinking of a specifical answer, how.
Speaker 2 (03:50):
Its performed over the last one or two years. The
stock's actually down. It's not performed well.
Speaker 1 (03:56):
It has underperformed the market, which as we all know,
has been going game bus. Yet you know, this client
had no idea that was going on, nor did they care,
because they're just fixated on that twenty year return there,
and I'm going to guess.
Speaker 3 (04:09):
They're probably hung up on the well, A, it's done
so well, I shouldn't ever give it up. And B
I don't really know what the taxes are going to be.
I just know there's going to be a lot of them.
So and a lot of people get in. And those
are the exact words I got back. This one's done well.
I'm never giving it up. Yeah, those are the exact words.
And my response when that comes up with my clients, Bob,
is Okay, then we can't count it as an asset
(04:29):
if it's something, if it's a piece of artwork you're
going to hang on the wall and stare at, then
it cannot help you financially. Guess what, you're poor. We
have to be some That doesn't mean blow out of
the whole thing. But if you are terrified of these
things and you're never willing to touch it, then it's
not an asset for you.
Speaker 2 (04:43):
You have to get past that.
Speaker 3 (04:43):
If you really want to pretend you know that this
is something you don't need, well.
Speaker 1 (04:47):
This is probably a good time to mention some strategies
for situations like this, where you know, once we have
the discussion and somebody realizes, yeah, I probably should rebalance
or at least protect that position, that stock position, and
I and I don't want to pay the taxes, but
I also don't want it to fall by fifty percent,
(05:08):
you know, if and when we get another severe correction.
Some things that we do for people, you know, a
couple of things that come to mind. You can take
that stock and drop it in to a tax loss
harvest you know, direct indexing strategy where some short term
gains are being harvested in the background while we have
periods of volatility, and that allows the portfolio managers to
(05:30):
kind of, you know, lightly trim that position over time
with no capital gains exposure because we have some losses
to offset it. Another more, you know, slightly more sophisticated
strategy is you could put some collar protection around it.
You know, you sell it out out of the money call,
which helps pay for insurance, to buy a put option
(05:51):
on that stock. You know, you're not selling the stock,
but if it falls in value, the value of your
put option goes up, and you've protected the value of
that position in portfolio.
Speaker 2 (06:01):
And that move.
Speaker 3 (06:02):
Protects you from the whims of any one individual company
because anything can do anything at any given time. Just
ask Procter and Gamble people what happened when Dirk Yager
was named CEO twenty five years ago.
Speaker 2 (06:12):
Didn't go so well.
Speaker 3 (06:13):
Great company, but they hit a bad period there and yeah,
so the I think the concern here is not so
much the risk of any one company. It's just the
idea that if you're going to have this much of
your assets tied up into one stock, you're no longer
worried about the market, or you're what's my balance my
asset allocated portfolio.
Speaker 2 (06:31):
Well, if you've got eighty percent tied up in a
couple of tech stocks, you don't care about the overall market.
Speaker 3 (06:35):
You better be on those conference calls, listening to what
those people are talking about and reading every word that
the analysts have to say. If that is your current
financial plan, because it does not relate to the overall economy,
it relates to a handful of companies.
Speaker 2 (06:46):
If you're not going to protect otherwise, all.
Speaker 1 (06:48):
Right, well, getting away from just that one or two
concentrated stock situation. You know, in general, folks are just
looking for some smart, you know, proactive tax planning because
as we talk about all the time, Brian, and this
is no knock on CPAs or tax professionals, but generally speaking, they.
Speaker 2 (07:08):
Are in a reactive mode.
Speaker 1 (07:10):
They take in all your information that you get in
January and February, they plug it into tax software and
they tell you how much you owe in taxes. That's
tax preparation, that's not tax planning. There are a lot
of good CPAs, and we work with many of them
where we partner with them and our clients to get
into some actual proactive tax planning, dovetailing that with a
(07:33):
client's investment strategy and cash flow and retirement planning strategy.
Speaker 2 (07:38):
Brian walk us through some of the things that.
Speaker 1 (07:40):
We do that really do add value to a client
situation regardless of.
Speaker 3 (07:44):
What the market does. I like the way you put that, Bob.
A tax prep is very different from tax planning. This
is tax prep season, right. Tax planning will be what
you want to do after tax prep, so that do
you ensure that whatever you just went through doesn't happen again?
What can I be doing through the balance of twenty
twenty six so that they don't get the outcome that
I didn't particularly like.
Speaker 2 (08:02):
From twenty twenty five. That's planning ahead. Now.
Speaker 3 (08:05):
Don't go to your CPA right now and say hey,
let's do some tax planning. They're going to say, nope,
we'll talk about that in May because they're about to
enter their extremely busy season. But what are we talking
about here, well, tax planning, and we already hinted it at.
One of these things is, first off, tax loss harvesting.
And yes, we did talk about this all through the
fourth quarter. It's a little early in the year to
worry about tax loss harvesting for twenty six because we're
(08:25):
two weeks in. But tax loss harvesting basically means paying
attention to the individual holdings you have and using the
ones that may not be sitting at a game position.
Maybe they're sitting at a loss position. Sell them because
you get to take a deduction or offsets some other
gain you may have elsewhere in your situation. Another one
is roth conversions and the timing of your income. So
if you have lower income years, and this often happens
(08:47):
immediately after somebody retires, if you've got a decent nest
egg built up, you may be able to retire and
literally not generate any income you're not working. Maybe you
haven't turned on your Social Security or your pensions spigots yet,
you're just spending down assets. That's going to be the
lowest tax bracket you've seen in years. I do not
personally believe that it's a good idea to celebrate. A
lot of people come in and they'll say, I'm I'm
(09:08):
only paying eight percent taxes this year, and I'm going,
what are you doing?
Speaker 2 (09:10):
Why would you do that?
Speaker 3 (09:11):
You know, pay fifteen and convert some stuff to ROTH
take advantage of the opportunity.
Speaker 2 (09:16):
That's some money to keep from paying a thirty two
percent bracket in six years.
Speaker 3 (09:20):
Exactly because when you're seventy three or seventy five, depending
on when you were born, r MD season hits required
minimum distributions. Now you're permanently in a higher bracket because
of those pre tax assets. So don't ignore the opportunity
of that income time.
Speaker 1 (09:33):
Well, you mentioned the tax loss harvesting, and I'm going
to harken back again to that meeting you and I
did together yesterday.
Speaker 2 (09:39):
Oh we're hearkening today, are we? We are harketing? You
got this sosaurce out this. I'm using my three syllable words.
Speaker 1 (09:45):
But the client walked in and one of their questions was, Hey,
we've got this tax smart investing thing on our account,
can you give us evidence that this is actually working?
And I wanted to make two points, and we made
them yes yesterday in that meeting. Number One, A lot
of times people have a hard time behaviorally, if they're
(10:05):
managing this stuff on their own, from ever taking a loss,
because by hitting that button in that sell button and
taking the loss, you're kind of admitting defeat. And especially men,
we don't like to do that. Our ego gets wrapped
up a little stubborn. When you've got an algorithm or
a strategy or a portfolio management team working in the
background with all emotion removed, they can do that very easily,
(10:28):
keep the portfolio fully invested.
Speaker 2 (10:30):
And you know, for this.
Speaker 1 (10:31):
Particular client and a lot of our clients last year,
you know, very balanced portfolio. They were up seventeen eighteen percent,
and we were able to show them the tax bill
you're going to get next month is about five hundred
dollars in taxable gain and they're like, yep.
Speaker 2 (10:48):
I got it, thank you. Now, what kind of makes sense.
Speaker 1 (10:49):
That they would never have been able to do that
or wanted to do it on their own, but having
these plans in place right now makes a huge difference.
Speaker 3 (10:57):
And that's because of not only the emotional component, but
it's also that takes some pretty heavy duty analytical stuff
because you have to dig deep into the portfolio, into
each and every tax lot holding of each and every
position that you have to find those opportunities, and then
then you layer on that emotional component of I don't
want to sell this. It has lost money. I can't
stand that.
Speaker 2 (11:14):
Well.
Speaker 3 (11:15):
The most comfortable people with their financial plans realize that
sometimes it rains and it's okay to just jump in
the puddles and deal with the situation at hand, take
the loss and the opportunity.
Speaker 1 (11:24):
That provides another opportunity that you always comes up at
the end of the year.
Speaker 2 (11:29):
So I'm going to talk about it in January.
Speaker 1 (11:31):
Hopefully people that are aged seventy and a half and
over are listening to this, and it's for folks that
do regular charitable giving. Please use your IRA r M
D amount to do some of that. Talk to your
advisor now and help coordinate a strategy have that happen
throughout the year. It's a very tax advantage strategy to
(11:52):
use instead of writing a check, dropping that cash and
the offering plate. Not enough people are taking advantage of that.
It's called a qualified charitable distribution.
Speaker 3 (12:01):
You have qualified charitable distributions. Also, donor advised funds, appreciated securities.
These are all keywords you should understand before you ever
write a check to a charity. There are much more
tax efficient ways to benefit the charity the exact same way.
Speaker 1 (12:13):
Help yourself and help the charity. Here's the all Worth advice. Remember,
the most successful investors aren't the ones who minimize every
tax bill. They're the ones who make coordinated, intentional decisions
that compound into long term after tax strength and growth.
Coming up next, something a group of billionaires had in
common in twenty twenty.
Speaker 2 (12:34):
Five that should serve as a lesson for all of us.
Speaker 1 (12:38):
You're listening to Simply Money presented by all Worth Financial
on fifty five KRC, the talk station.
Speaker 2 (12:49):
You're listening to Simply.
Speaker 1 (12:50):
Money presented by all Worth Financial on Bob Sponsorer along.
Speaker 2 (12:53):
With Brian James.
Speaker 1 (12:54):
If you can't listen to Simply Money live every night,
subscribe and get our daily podcasts. And if you think
your friends or family could use some financial advice. Well
let them know about us as well. Just search simply
money on the iHeart app or wherever you find your podcast. Well,
twenty twenty five proves something yet again that tends to
(13:14):
happen every single year, Brian. No matter how much money
you have, how many experts you hire, or how many
screens are on your trading desk, you still cannot predict
the direction of the stock market. And twenty twenty five
was no different. We've got some actual data to back
that up.
Speaker 3 (13:32):
Yeah, so this is data coming from Forbes magazine. They
pulled thirty four billionaires at the beginning of last year.
That kind of surprises me. Billionaires are taking magazine questionnaires.
But whatsever whatever, that's what We're simply restating what we
see out there in the media. So big name investors.
It includes real estate, tycoons, headfund managers, a little bit
of everything. And with a simple question, what do you
(13:52):
think the S and P five hundred will return in
twenty twenty five? Well, how did these smart people with
gigantic piles of money do thirty five Some of them
thought the market was going to be down, somebody as
much as twenty percent, another thirty five percent, we're looking
only for single digit gains. Only seven out of thirty
four or you know, one out of five twenty percent
correctly guessed that the market was going to be up
between ten and twenty percent. So the point of this, right,
(14:14):
these are people who did something right somewhere along the way,
because now they are billionaires with a B. But most
of them either underestimated the market or we're just flat
out negative and pessimistic. Not super surprising. That's actually pretty telling, Bob,
because this level investor, with everything that they have, it
gets it wrong most of the time. So what hope
do the rest of us have at guessing at it?
Speaker 2 (14:35):
Well, not much hope at all.
Speaker 1 (14:36):
I've got a couple thoughts on why these billionaires are
so far off, and Brian, we run into that not
with billionaires, but with people that own businesses or very
focused in leadership in a specific industry, whether they're doctors
or you know, owners of closely held businesses or what
have you, high level executives. A lot of these folks
(14:56):
are used to running things in a particular company or
business and they're very good at what they do, laser
focused on that particular company or industry, and they and
they got tunnel vision and that that's how you get
to be a billionaire as you stay focused, diligent, and
you get after it year after year, but you don't
have a real broad view of the overall economy sometimes,
(15:19):
and and you and I run into this with you know,
with folks that are extremely intelligent, way smarter than you
and I would ever be, but they're they're very focused
on a specific company or industry and they kind of
can't see the forest for the trees sometimes when making
these kind of bold predictions. And yeah, it's just very interesting.
It goes back into behavior, you know, investment or financial behavior.
Speaker 2 (15:43):
We're all prone to it.
Speaker 1 (15:44):
We all have presuppositions and biases that we you know,
we we carry around with us all day every day.
Speaker 2 (15:50):
Yeah, that's exactly right.
Speaker 3 (15:51):
And so so let's go through some of these individual
people who got it right, who got it wrong, and
what's their background here. So one of the interesting names
on here is real estate mogul Larry Connor.
Speaker 2 (15:59):
He's interesting to me because he's local.
Speaker 3 (16:01):
If you're ever up in the South Dayton area, you'll
see buildings under the Connor group. Well, he's a pretty
successful real estate investor, and he was right on the
predictions for the market last year. And some other folks,
David Hoffman, who's also buying the Pittsburgh Penguins, he got
it right on the wrong end of this a Florida homebuilder.
Speaker 1 (16:20):
Imagine that we have a good gear and have enough money,
you know, take my investment gains for twenty twenty five,
and hey, go.
Speaker 3 (16:27):
Buy an NHL tea yup, stop, buy loaf of bread,
bottle of milk, stick of butter, and an NHL team
on the way home from work.
Speaker 2 (16:33):
You know, that's how we do this. Well, let's talk
about how Let's talk about the big firms, right.
Speaker 3 (16:36):
We listened to a lot of the big financial institutions
because they have a pretty loud megaphone when it comes
to their opinions. Bank of America was looking for a
ten percent return, Goldman and Morgan Stanley were predicting about
seven and a half percent. Vanguard tends to be pretty socialist,
if you will, democratic, and surveyed the public and got
six point four percent back. Everybody, all of those big
institutions were under the actual sixteen percent return that we
(16:59):
got in twenty twenty five.
Speaker 1 (17:00):
Those estimates from the big firms, and I'm not knocking them.
They're they're being responsible. But Brian, every year their prediction
is somewhere between seven and ten percent.
Speaker 2 (17:11):
Why is that.
Speaker 1 (17:12):
It's because over the last they every ninety years, that's
what the market does.
Speaker 2 (17:15):
So they're just being responsible.
Speaker 1 (17:17):
I mean, shoot, they if Goldman came out and said
I think the market's going to be down seventeen or
up thirty.
Speaker 2 (17:23):
Four this year, they'd lose a lot of respect in
a hurry.
Speaker 3 (17:26):
So I don't knock these firms now, No, not at all.
Speaker 1 (17:28):
They got to put a number out there because these
media folks are sticking a microphone in their face and
during the first week of January.
Speaker 3 (17:35):
If you're listening to this thinking we're bashing individuals or
financial institutions for not knowing what the market is doing,
then you're not listening closely enough.
Speaker 2 (17:41):
Our point is you cannot know. Nobody knows.
Speaker 3 (17:44):
These are some of the smartest brains in the world
thinking about finances, and they're all over the map in
terms of what they think is coming and versus what
actually happens.
Speaker 1 (17:52):
Yeah, let's talk about what some of the big winners
are stockwise, and these are stocks we've mentioned throughout the
past year, and the video was up thirty nine percent
last year, Pallenteer was up one hundred and thirty five percent,
robin Hood up two hundred percent, and XP was up
thirty eight percent. Only two of these picks went down Tannebell,
(18:12):
a beverage company in Indonesia, and the I Shares Bitcoin
Trust ETF was down on the year as well. A
lot of people thought bitcoin was going to go to
the moon last year. And if you over allocated to
that asset class, just like any other asset class, you know,
you're sticking your nose out there and you better be
right or you're going to be disappointed if things don't
(18:33):
go your way.
Speaker 3 (18:33):
Yep, those picks came from that same Forbes survey where
they also Forbes also asked these individual billionaires for one
recommendation each what's something you would buy? And of the
eighteen stocks named, only two of them lost value in
twenty twenty five that Bob just mentioned. So yeah, it's
interesting to say, you know, these people probably don't really
even think about individual securities. They didn't make their billions
of dollars by playing the market. They're doing other things
(18:55):
in various industries.
Speaker 1 (18:57):
Yeah, they're not buying the Uh, they're not buying the
XP why and dollar cost averaging?
Speaker 3 (19:01):
Yeah, they don't think about much about their four o
one ks very often so for the rest of us mortals.
Speaker 2 (19:06):
If we're not gonna make a prediction for the market,
what should we be doing? Brian? As we enter twenty
twenty six, don't screw it up? Right.
Speaker 3 (19:13):
The rules for twenty six is the same as they've
been forever. Don't make a mess of your credit, save
more than you spend, and don't panic when the market wabbles.
Do that for thirty years, and you will have some
problems similar to these billionaires.
Speaker 1 (19:26):
Or as one of these billionaires put it, if we
could perfectly predict the stock market, we wouldn't be billionaires,
we'd be trillionaires. Here's the world that would be right,
It would be great. Here's the all Worth advice. If
billionaires can't call the market, you shouldn't try either. Build
a plan that works no matter what the market does
from year to year. Thanks for listening tonight. Xavier basketball
(19:47):
is coming at you. Next go Musketeers.
Speaker 2 (19:50):
Get it done.
Speaker 1 (19:51):
Tonight, you've been listening to simply money presented by all
Worth Financial on fifty five KRC.
Speaker 2 (19:56):
The talk station
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