Clickbait Investing

SPEAKER_02 0:05

You're gonna do a really great financial future. Tom and Don are talking real money.

Clickbait and Market Volatility

SPEAKER_04 0:12

Oh, hate clickbait. I hate clickbait. And yet I still read the stupid stuff. I do. It sucks me in because I go, come on, give me a break. What am I talking about? Well, we'll tell you in a minute because first I have to tell you what you're listening to, even though, you know, it's funny, it's not like radio. When you listen to a podcast, you've pretty much already chosen the show you're going to listen to. So it would I don't even know why we do an introduction. Really, we don't have to say this is talking real money because you see it on your screen on your device. Oh, oh, I'm listening to Talking Real Money. Yes, you are. I'm Don. You probably knew that too. That's Tom. Unless you're a first-time listener, you probably didn't know that. He, of course, hangs out in the model military aircraft museum of the R.

SPEAKER_03 1:00

Which is growing daily. I'm still. Yeah, but it's smaller than it used to be. Yeah, that's true. So the room is not growing, but the number of planes. I'm trying to finish the HE Oh, that's right. We got criticized for mentioning it. So we can't. HE 177, trying to get it done. It's a big project.

SPEAKER_04 1:15

Dude's obsessed with trees and World War II aircraft, really. Mainly World War II aircraft.

SPEAKER_03 1:21

What about soccer? We're just the World Cup and soccer.

SPEAKER_04 1:24

Okay, there you go.

SPEAKER_03 1:25

Now you got it covered.

SPEAKER_04 1:26

Do you have anything else you're interested? No, nothing. Well, that's about it. So that's about it. Welcome to the show. Don here, Tom there. Thank you for being there, wherever the heck you are, doing your dog walk or your car drive or whatever it is you're doing.

Bad Financial Headlines

SPEAKER_04 1:40

What do you think of articles like this? Here's a headline from a recent article from the goofy. It's lost its mojo. It's really over and they don't know it yet. Kiplinger personal finance thing. Which is too bad because it used to be a really great publication. Yeah, but they lost their touch. I think they lost their soul, actually. And you know, not just them. Money magazine lost its soul. Right. Barron. Well, no, Barron's had always lost its soul. They were always evil. They were always weird. Here's the headline. You're gonna you're gonna hear this and you're gonna go, oh, I gotta know what those are. The five top buy and hold investments to manage market volatility from Jeff Reeves, a journalist in air quotes. Financial journalist. I mean his bio is hysterical because it really does. It says nothing. It it's a it's a bio that says really absolutely nothing. Jeff Reeves writes about equity markets and exchange traded funds. A veteran journalist with extensive capital markets experience. Jeff is a good idea.

SPEAKER_03 2:53

Which we all have capital markets experience if you're an investor. Yeah. Covered.

SPEAKER_04 2:57

His work has appeared in respected outlets, including CNBC, Fox Business, Wall Street Journal, Digital Network, which it's different from the Wall Street Journal, by the way, USA Today and CNN Money. That just means that there's some sort of a, you know, here, write us 500 words, we'll give you a dollar a word or something.

SPEAKER_03 3:15

Yeah. But let's listen to this open. It's powerful. It's uh it it really reaches in and grabs you because it's so unusual. Market volatility, he writes, is the norm in 2026 with political uncertainty and inflationary pressures defining price moves in the first half of the year.

SPEAKER_04 3:33

Okay, that paragraph, that paragraph, you could you could substitute any year for 2026, and that paragraph would be just as applicable, no matter how far back or forward you go. You know, I could say market volatility will be the norm in 2027, with political uncertainty and inflationary pressures defining price moves. I I could say that. Yes, you could.

SPEAKER_03 3:57

But could you say the following? Where actually I kind of agree with them here. History shows that long-term wealth is not built by reacting to these short-term headlines. Rather, it's built by maintaining disciplined exposure to high-quality assets that grow your nest egg over time.

SPEAKER_04 4:14

And that is where the article should have ended. The logic there because everything that follows, well, not everything that follows, um, because he does say, you know, if you're picking assets based on predictions, that's a mistake. So you need to do a mix of stocks and exchange traded funds. So we've got three paragraphs that kind of work. And then he gets to his five recommendations. And by the way, this dude loves numbers. I looked up some of his other articles, and and I and they are voluminous. Uh they're not. So if he's only getting a dollar a word, he's probably okay then if he's writing a lot of it. Here are some of his recent articles. Ten can't miss dividend growth stocks to buy. Seven consumer ETFs to play the next big tax return spending spree. Five lesser-known energy ETFs to play oil, best ETFs for 2018, best gold ETFs and precious metals ETFs, and they all have a number in the title. All of them. By the way, there was an there was this is a debunked belief that numbers in titles help attract readers. I thought that was Paul Merriman's thing, too. That's what it was. Well, it was based on an article. It was based on an article Paul read about attention spans and that human beings didn't have uh more that goldfish had longer attention spans than we did. It turned out it was a debunked article. There's been massive amounts of uh academic research done into headlines. They actually research headlines.

SPEAKER_03 5:46

There's three studies that were done?

SPEAKER_04 5:48

Yeah, and they found that this that uh putting numbers in makes no difference. Oh, okay.

Five Volatility Picks

SPEAKER_04 5:53

I always thought it was a rule of three anyway, but okay. Ten, fine, whatever. So what are his suggestions, Tom, for stability in a volatile market?

SPEAKER_03 6:03

First of all, any stock or stock fund is not bought for stability. No, but he says low volatility. Yeah, well, okay. Number one, and this is a shocker, frankly, uh, because it's probably a fund you've never heard of, even though it just passed a trillion dollars under management. First ETF to do that. That would be VOO, the Vanguard S P 500. Oh, or as I call it, Voodoo. Voodoo. Um it's inexpensive, it has a great 10-year return. It's the S P 500. Thank you. Yeah, it's really not that good.

SPEAKER_04 6:39

It's 500 stocks. And, you know, like a third of it is just a few big companies.

SPEAKER_03 6:47

Yeah, a third is uh, I think 10 or maybe 11 companies total. And that'll get worse now with uh although I just read, I think I read this correctly today. The the SP 500 is now decided the SP has decided not to add SpaceX for a year to the SP 500.

SPEAKER_04 7:04

They didn't pander.

SPEAKER_03 7:05

Yeah, that's good. But here's the thing.

SPEAKER_04 7:07

So his first he do he comes out with a domestic equity fund, which I'm okay with that in concept. That's a good place to start, but it should have been VT or something similar, something broader, because he goes with a broader index for his next choice.

SPEAKER_03 7:24

Yeah, VXUS, the Vanguard Total International ETF. So here you're getting 88 companies with the SP 500, you're only getting 500 in the United States. It's kind of an odd option.

SPEAKER_04 7:36

Not 8,800.

SPEAKER_03 7:37

Says 8800, VXUS. You said 88. Oh, 88. Well, my mind's stuck on 88. Uh 8800. Thank you for correcting me. See, that's a lot of stocks. That's made that makes more sense to me. It does. Um, and by the way, when you do buy invest in there, 15% of the money goes to Japan, which I did not know, and uh UK and Canada get about 8% each, which is more than I would have thought. So, but any rate, that's a well-diversified fund. Again, it's inexpensive, and you basically get most of the international market buying a company, buying those companies out there.

SPEAKER_04 8:13

By the way, to me, that is the only good suggestion he makes in the whole article. I don't think the rest of them are any good, but go ahead. Tell us the rest of them.

SPEAKER_03 8:24

Next one is the XLV Healthcare Select Sector Spider Fund. Um, this is tied to the it's gonna surprise you, the healthcare sector in the United States. 60 really 60 healthcare stocks. Uh big pharma, of course, Eli Lilly, Johnson and Johnson, etc. Um, 10-year return is outstanding. Uh part pardon me, not uh 10-year return is great. I'm looking at the next one. I was gonna say not very good. In fact, I just looked that up that fund up and it was not very impressive. But you're getting exposure to the sector that just gonna it has to be great, Don, in the future because we all need healthcare, right?

SPEAKER_04 9:07

It doesn't have to be great in the future. And I I I gotta tell you, and that just because you mentioned the performance, I I went and looked because I wanted to see just how bad it was. And the at 10 years it looks pretty good. Um but if you look at VT, the Vanguard Total World Index, it did 13% over the period of diversification and you had lower cost.

SPEAKER_03 9:36

Nine and a half, lower standard deviation. So anyway, it doesn't make sense. But the next choice really, you gotta wonder uh This one bothered you how because this apparently came from the Department of Redundancy Department. Now remember, in the S P five hundred, you own a Wait a minute, isn't it the redundant Department of Redundancy Department? Whatever it is, they're redundantly passing out. Here's the thing with the SP 500, you have about almost 7% of your money in Apple stock. Pretty significant allocation to one company, frankly.

SPEAKER_04 10:09

Uh well, although if I look around me, I have I think that's true. You are the bulk of my studio is Apple Tech number. That's true.

SPEAKER_03 10:16

So you are you are the spokesman for Apple, but he recommends Apple stock. That's one of the five. That's one of the five. Crazy.

SPEAKER_04 10:28

And I think he's only doing it because the 10-year average annual return was 30%. That's got to be the only reason. That doesn't sound like stability with a 30% 10-year average annual return. But it has unmatched brand loyalty.

SPEAKER_03 10:41

Well, I I can attest to that. And it has a huge amount of cash on its balance sheet. Okay, fine. And he says it's it seems to be one of the best stocks to buy for the long run.

SPEAKER_04 10:54

Until uh something else usurps its position? Exactly. I mean, that's the way business works. That's why we don't bet on individual companies. Because it's not the individual companies individually that make the market a good place to invest long term. It's the economy, it's the it's the the sum of all of these individual companies. Because one rises and one falls, and we see it over and over again. Over regularly. I mean, like, you know, fifty years ago, IBM was the apple of the world, was the apple of our eye. Trevor Burrus, Jr.

SPEAKER_03 11:27

Exactly.

SPEAKER_04 11:28

And it ain't no more. Apple's the apple of our eye. Trevor Burrus, Jr.

SPEAKER_03 11:31

But did you say 30 percent a year for the last 10 years? Yes. Yeah. That alone would make me nervous because that's a pretty steep hill they're climbing. They're shh, can you keep it?

SPEAKER_04 11:41

Plus, they've lost their very, very, very successful CEO has uh is being replaced. And while John Turnus could be a great one, we don't know. We don't know. Have they gotten into the space market yet?

SPEAKER_03 11:55

That's whatever.

SPEAKER_04 11:56

No, they're not they're not going the Bezos must who has the bigger rocket race.

SPEAKER_03 12:03

We're not talking about that on this show.

SPEAKER_04 12:05

Well, uh No, they're going the new Glenn versus the never mind. I'm just Zuckerberg's.

SPEAKER_03 12:11

And they're all blowing up. His big boat just showed up in Seattle. Boat can even call it 347 foot boat. Somebody's asking me what it would look like on our lake. I said it'd fill it.

SPEAKER_04 12:21

Totally from one end to the other.

SPEAKER_03 12:22

Couldn't turn around. Uh okay. If that was a bit troubling, uh how about something like that? Yeah, we're still waiting for number five. Yeah, how about something that's a little more shiny and a little more exciting because it's had a great run, especially over the last year and a half. That would be iShare's Gold Trust. Um, talk about buying something after a great, I mean, it's gold has done very well recently, not as well this year. Um and he admits commodities don't have any fundamentals, but what they bring is a real-world value that cannot be disputed. I don't know what that disputed. I don't know what that because gold is only worth as much as the next guy says it's worth.

SPEAKER_04 13:02

Right. And the other thing about gold is I got I've got 2,000 years of history on gold. It's the only asset that I can really pull up 2,000 years of history, what it's been worth. And what gold was worth 2,000 years ago is almost exactly what gold is worth today. And here's the other thing about gold. This article is all about stability, right? Right? Wasn't that in the headline? Um, there was a mention of stability, yes. Yeah, he said these are investments to manage market volatility. Well, hmm, let's look back. In 2021, gold lost four percent. In 2022, gold lost a half a percent. Then in 2025, gold gained sixty-four percent. Yeah. That does not sound like managing volatility. That sounds like enhancing volatility to me.

SPEAKER_03 13:56

I think you're right. And I think this is a very silly portfolio, frankly. I I don't know. It doesn't feel like there's any anything other than rando picks. Um, and I gotta say, if the academics were to look at this, they would just be there'd be a lot of red ink.

SPEAKER_04 14:11

Like what I think You know, I I really when I read this, I I wasn't sure if we were going to talk about it or not. And then I went, yeah, it's that clickbait thing. We should talk about it because there's lots of it out there. And the reason I chose this was because at first glance, to me, it seemed totally random. It didn't seem well thought out, and it seemed to come from someone who really did not have any background in financial planning or investment research. Although he claims the contrary.

SPEAKER_03 14:47

Yeah, he does. Been around capital markets for a long

Trustworthy Research Sources

SPEAKER_03 14:50

time. Oh, okay, but leaving that portfolio aside, which I think we should hug up.

SPEAKER_04 14:54

I have hung out in Apple stores.

SPEAKER_03 14:56

That's I think it should be different. Does that make me a computer expert? Pretty much. But here's the question at hand. It comes up, people ask me on a regular basis, okay, this is from Kiplinger, they've jumped the shark, they're not who they used to be, and we have history with Nike Kiplinger, all that kind of stuff, and I like him. But the publication is not, again, a great place to go look for really good advice. But where is then? Yeah. What do you who do you trust? Can you trust, for example, the Wall Street Journal?

SPEAKER_04 15:26

Sometimes.

SPEAKER_03 15:27

That's what that's the tricky part, right? There's some very good stuff there. Jason Swag is good.

SPEAKER_04 15:32

Not very often.

SPEAKER_03 15:33

Nope. Market Watch, rarely. What about information from fund families like um Vanguard or DSP?

SPEAKER_04 15:40

I think you can trust I because uh again, once again, consider the source. Vanguard has been known for very good academically vetted uh papers and information. Uh Dimensional, uh uh all the information that Dimensional puts out is really well vetted and uh gr uh tremendously research.

SPEAKER_03 16:02

And it's not pornography, right? It's not meant to excite.

SPEAKER_04 16:05

No, as a matter of fact, it's meant to do exactly the opposite. If you read if you read Dimensional's papers, you'll go, wait, I think I need to read that again, because they're definitely not written at these clickbait articles are actually I I did a lot of research on this. The advice is to write them at a third grade level.

SPEAKER_03 16:25

They accomplished it here.

SPEAKER_04 16:26

Yeah. I mean, no, that's really what, and I gotta tell you, there's no way a third grader is gonna get most of what dimensional talks about.

SPEAKER_03 16:35

No, I think that's fair. Okay, but let's set that aside for just a moment then, too. But let me ask you this question, then, because at the end of the day, why would you be reading this article? The reason you'd be reading this article, and most people will admit it if you really press them, is the portfolio I'm in, I'm not sure it's the right one because it hasn't made enough money in the last 15, 20 years, or five years, or one year, whatever it is, and I may need to change.

SPEAKER_04 16:59

Well, and also the fact that people uh have been lately a little bit more scared than usual. We're always a little scared about something. And so they're looking around and they see that volatility portion of the headline, and they think, oh, great, five easy investments, I can just buy them and hold on to them, and my volatility will go down. And the funny thing is, is this the the the the opposite is true of most of this portfolio. There's very little stability in these ETFs. They're not built to be stable.

SPEAKER_03 17:31

There's not a bond fund here. No, nothing nothing gonna hold value in a really bad time in any way. Well, I mean, no reduction of volatility.

SPEAKER_04 17:40

Yeah, I mean, the incredible. We already said Apple at 30% a year, gold at 60 plus percent in one year after following a couple of years of negative returns. Uh uh the S P 500, which is not the market, it is a portion of the market. And then healthcare. There's nothing low volatility about most of this. It feels like a dartboard, like sort of throwing oh, I hit that.

SPEAKER_03 18:05

Oh, oh, and that may be that, sure.

SPEAKER_04 18:07

That may be. It maybe he has a template and he just fills in the blanks.

SPEAKER_03 18:11

So going back to the question I just asked, how do you then decide? Because if you're out looking, how do you decide on what would be a better portfolio? If I'm trying to find a better portfolio, how do you think that's what I'm saying?

SPEAKER_04 18:21

I wish it was easy. All all I can say is please listen to us. I I'm serious. Don't you don't ever need to become our client or anything, but please listen to us. Because what we're talking about is truly based on lots and lots of research. Now, is it r always right? No. We've never claimed to be always right, but at least we don't pander, and our shows don't have any clickbait in them. No. I tell you what it does have to be. We're not trying to titillate. What does it do? Yeah, no, and let by the way, when you do questions, um you you can send them in. You two ways to do it. You go to talkingrealmoney.com and you speak them. I'll do them on the Friday podcast, and I need a couple of those. Or you can type them, and then Tom will occasionally call you and have a conversation with you, or he'll um read them. Do you want to go with the reading?

SPEAKER_03 19:20

Is that what you're saying? I well, yeah, I saw you had them ready. Okay. I'm ready.

SPEAKER_04 19:24

Hold on, let's not do that. Let's let's go to I've got it because I've got your call.

SPEAKER_03 19:28

I wasn't sure.

SPEAKER_04 19:30

I'm gonna do this all over again. And Tom can uh either read them from his pieces of paper, which he loves to do, but he likes what he likes even more is to have a conversation

Trust for Grandsons

SPEAKER_04 19:42

with you.

SPEAKER_03 19:42

We're gonna go across Puget Sound to Bremerton, Washington, where we are gonna chat with uh Brian. Brian, thank you for uh being part of Talking Real Money. How can we help you today?

SPEAKER_01 19:53

Well, thanks for speaking with me. I you know enjoyed listening to the show. Just uh, you know, listen a lot. We guys would say you talked so much about different uh strategies, and I had perhaps a little bit of unique, although you've kind of touched on this before, but given I've got a little bit of a unique time horizon, I wanted to see how best he approached it and see what your thought was. So I've got uh you know a very uh charitable mother-in-law who was wanting to uh to gift um a chunk of her estate to her to my sons, um, her grandsons, and it's part of her estate plan. And so my wife and I will become trustees, a spendthrift trust for each of them. And so the trust will are to uh terminate by design in about 12 years when each of them turn 35, and and it's specifically the intent or the that uh the trust and therefore our uh fiduciary responsibility is to use the money now as we see fit for their support and um maintenance and um education and so forth. Um, and so I kind of struck with okay, how do I, you know, approach this and how do I invest it in a in a fiduciarily responsible manner, knowing that there's there are kind of two goals. One is to anticipate an unrealized need that may come up for school, or perhaps, you know, as they're in their young 20s and you know, in their late 20s, early 30s, getting married and wanting to buy a house. So that'd be a substantial withdrawal. And then the other one is that okay, it it expire it terminates it in 12 years, and it's not quite the same as retirement um like for a target date or or heading into off to college like at 529, but there's still that thought that it's got this dual objective for for investing, you know. So you invest for now and keep it stable, or do you invest for the future, or what is the right hybrid? So, as I you know, I think about what would be the bucket approach if I was to apply that kind of strategy. So I was kind of thinking what you all would think about that.

SPEAKER_03 21:53

Yeah, but well, first I think does your mother in law need any more friends? Because you know, I'm always looking for a couple friends and half a million dollars. Goes a long way. I think this is amazing. I think it's awesome. Makes me feel guilty about my grandkids. So I hope they're not listening. Um, so this is this is really great. So, you know, half a million dollars, and and that could have substantial growth in 12 years, right? I mean, you could get a double in that time. It could be a million dollars you're handing somebody at 35. What an advantage that would be. So yeah, your your question is kind of so with that in mind, you know, how should that be invested? And the the trust will be paying out something the next few years is what you're saying. It's but you're sort of standing between the kids and the money, basically, as trustee, to say, yes, the trust will pay this or no, it will not, correct?

SPEAKER_01 22:40

Correct. And and my thought is, you know, either both listening to you all and some other education I've done with myself, is it to, you know, not as as you all would say, not to let the tax dog tax tail weight the dog. You know, I intend to distribute some of the some or most, or if not all the income. I want to invest it, you know, in ETFs on the equity side so that, you know, whatever that may be, so that you know, we keep the taxable income on the trust down, distribute um dividends and whatnot to keep the taxes down, but still, and I'm you know, anticipating substantial growth and whatever equities I would invest in. Yeah. And so, yeah, it's but there still may be a need if they need a new car or if they're gone off to graduate school or something that we would make larger contribu or distributions.

SPEAKER_03 23:26

Yeah, so those things will come up and you'll need to create the cash for that. So that gets back to kind of your your the big picture, like so how much should be in something that doesn't have much volatility, like fixed income. Right. And how much is free growth?

SPEAKER_01 23:41

It strikes me a little bit as someone would approach it when they're in retirement, but I didn't know if that was the right way of thinking about it. And then, you know, well, you know, because that in so if you think about it that way, is it a more like a traditional 6040 split? Or it's an interesting concept or an interesting idea.

SPEAKER_03 23:58

Yeah, it's a it's a bit of a conundrum. But here's the way I would I mean, so if it's a half a million dollars, my take would be that if you if a hundred thousand of that was in fixed income, that would probably be enough to pay out anything that let's say a car or a house or something like that in the next 10 years or so, because you said it's 12 years. So that that would and that would be set aside that way. Then the rest of it would be aggressive because you want that to grow. Man, when you're 22, you're just hoping for you know great markets um, you know, for for those periods, that period of time. And by the way, it doesn't end at 35. You hope that at 35 they don't pull it all out and you know go to Las Vegas or something either.

SPEAKER_01 24:38

Um that's the spend trip part while they're in their 20s, but you know, yeah.

SPEAKER_03 24:43

Yeah, so so I probably would be pretty aggressive with that. Maybe 80. I don't love a target date fund in this circumstance because they usually the asset allocation is somewhat limited. Um I don't know that you need to go on a glide path really per se, because if you're gonna create a little bit of income off of it and pay that out, maybe pay out the dividends, that kind of thing, there's a little bit of there's a little bit of fun money there for them in their 20s. You want to have people that want to have a little fun. Um but if you had, you know, 20% of it as I say in fixed income, like a BND, and then you had 80% of it if you wanted to keep it really simple, like an AVGE or DFAW, you know, the global funds from Avantis or from Dimensional, that would give you the growth side. You'd hope for that would be 10, 11% a year. The fixed income, not gonna make much, but it's the balance and it's the money that's there if something were to come up. Um, and you certainly hope not many things would in your 20s, but they do, right? I mean, your life changes a lot in your 20s. Um, so that would give you the balance. I'd probably want to be that aggressive though, unless I really knew my kids well and said, look, they're gonna need X for a wedding or they're gonna need blank for a car or a house, then maybe you could you could shade that a little bit more and go, you know, 75% stock, 25% bond. But I really think like an 80-20, keep it simple. If you want a one fund stock solution, one fund bond solution, and you're kind of all set for the short and the longer term.

SPEAKER_00 26:12

Okay. That's kind of what I was thinking too, but there's just, you know, just good to get a second opinion, I guess.

SPEAKER_03 26:18

Yeah, no, and I think this is wow, what a what a wonderful, wonderful gift uh for a young person, too, to get them going at that age. I mean, the only other thing here that I'd love to see is some sort of regular financing of their, you know, uh tax-free interest. For example, Roth IRAs. I mean, if you're taking a little bit of that out, plug it into a Roth IRA for each one of them over time, that I think would be what a huge advantage if they could fully fund that for the next 10 years. Because then even if they did nothing after that, you're probably probably looking at millionaires there as well.

SPEAKER_01 26:51

Well, yeah, thankfully she's already started that. This is this is phase two of estate planning. So that already started last year with those annual uh contra or gifts, and then that would you know, or most of it went straight into five or pardon me, Roth IRAs that they each opened last year.

SPEAKER_03 27:06

So I love it. This is really great stuff. Um, man, I think that I I think your thinking is good here. Diversify, have some in fixed income, hope for great growth and hope for great markets during that period of time. And then man, what a what a great future for them. Super, super idea.

SPEAKER_01 27:22

Okay, well, good. Thanks for that information.

SPEAKER_03 27:24

Thank you for being part of the show. Appreciate you listening and hope we get to chat again sometime. All right, you have a great day. Thanks, Brian.

SPEAKER_04 27:31

And see, wasn't that a lovely conversation? Enjoyed it very much. See,

Listener Questions Return

SPEAKER_04 27:35

he enjoyed it, but he still likes reading the questions to me, particularly ones that I have not heard before, so he thinks he's gonna cut me.

SPEAKER_03 27:42

That's fair. And this one comes from Jay Mo in Seoul, South Korea.

unknown 27:48

Okay.

SPEAKER_03 27:49

I'm gonna read this in the Seoul, Soul. Wait, from South Korea. Yeah, I'm gonna read this in the original Korean, so you may need to translate a little bit. I need Chat GPT, hold on. Yes, something. Um, no, I'm not. Um, gentlemen, you are the last vestige of trustable call-in financial advice that I can reliably and entertainingly listen to. As you move into your new new, more produced and procured call format. Please take care to not become a clone of the now useless podcasts such as Jill on Money, where neurotic, delusional multimillionaires call into humble brag about their financial situations as if they have any real problems. Your show can't devol. I did not write this. Your show, I'm not, I'm not this creative. Your show can't devolve into a constant, can I retire? How am I doing? format. Please stay topic focused as you already are. Stay golden. Listeners all around the world are counting on you. I've called in before, and you have great advice about an actual problem I was having.

SPEAKER_04 28:50

Okay. One. It's not highly produced. No, it's not high. What you hear generally Unless there's a big glaring boo-boo on our parts. And that's a scientific term for uh mess up mistake. Then it just goes what you hear what we give what we do is what you hear. What do you hear? I don't you know, I I've had uh advice from some in the industry who don't supposedly know more about what they're doing for me to clean up all the ums and ahs and pauses and stumbles and but you know what? No. That if you give a show its personality.

SPEAKER_03 29:33

If you do that, it'll be about a 45-second podcast, too. And that's the other thing.

SPEAKER_04 29:38

It'd be so darn short. If we were just we just did the topic and no asides, uh uh no rambling. Yeah. So all right. You want a real question now? No, I'm sorry. That was too much fun. I don't want any more.

SPEAKER_03 29:50

That was a great

Measuring Advisor Performance

SPEAKER_03 29:51

question. Thank you. Or comment. Steve from Henderson, Nevada, a little closer to home. Financial advisor performance is the subject. Now remember what we just talked about? We did. How do I measure my financial advisor's performance? I'm with Schwab Wealth Management and I'm charged 0.56 of the portfolio value.

SPEAKER_04 30:08

Pretty cheap. That's really cheap.

SPEAKER_03 30:12

Well, depending on the size of the portfolio.

SPEAKER_04 30:14

But again, it depends on the level of advice you're getting, too.

SPEAKER_03 30:17

Ah, thank you.

SPEAKER_04 30:18

But how is Are you just getting portfolio?

SPEAKER_03 30:21

This happens on a regular basis. People call me up and they say my money's at fill in the blank, and I've only made, you know, eight percent a year for the last ten years.

SPEAKER_04 30:31

Here's the thing. I think we're trying to measure by the wrong yardstick or meter stick if we're metric. It's not about what they make you, it's about what they do for you. Because everybody's return should be different, because everybody's portfolio should be personalized. So it can't, you can't ret you can't just compare return to return to return to return, because if I have a very conservative bent and a very conservative portfolio, and really little or no need to take risk, I should have a very low returning portfolio, even if I'm paying my advisor 1%. Because it's the right portfolio for me. It's the right and wait, what else are you getting from that advisor?

SPEAKER_03 31:18

Ah, that's a good idea.

SPEAKER_04 31:19

Did you get a financial plan and ongoing help with planning? Did do you get regular rebalancing and hand holding? Do you get uh help with creating the income and managing it into retirement? Do you get direction on estate and tax planning and those kinds of things? If you're just getting portfolio management, then you don't want to pay much for that. No, no, no. But if you're getting life money management, pay more.

SPEAKER_03 31:47

What? If you're just getting that, right? If you're just getting the portfolio management, what would you what portfolio should they compare it to to say this is a good return or not a good return?

SPEAKER_04 31:58

You can't. I I'm s I I know this is a cop out answer, but you can't. I I can't say that uh a 30-year-old's 80-20 portfolio should should be at the same level as a 70-year-old's 40-60 portfolio. They're gonna be different. So you can't make that simple comparison. I think that's what most of us want to do. We want to be able to say, I want to compare this to this benchmark. Well, there is really no benchmark. It's got to be individualized. So here's the thing. If your portfolio is full of high expense, complex investments, then it's likely to be a more dangerous, more volatile at times higher yielding, at other times much lower yielding portfolio. If your portfolio is in low-cost, match the market kinds of products, that's what you should expect. To match, here's what you should expect. To match the underlying market. If you're a 40-60 investor and your portfolio is doing somewhere around what the historic average for a 40-60 portfolio is, then you're doing pretty well if you're getting all of those added services.

SPEAKER_03 33:09

Yeah, I think that's right. My takeaway always is number one, every return is idiosyncratic. Don't return is different than mine because money's been invested at different times, et cetera. It's not going to be the same. Number two, what you should know is the portfolio design and why it is. In other words, if it's a 6040, as you just mentioned, why is it a 6040? What am I trying to achieve in terms of return? How much risk volatility am I willing to accept? Number three, does the portfolio? This is the part that I think most people overlook. Does it include all the assets that you should own? Most of you own mostly big companies, growth kind of oriented portfolio. Big U.S.

SPEAKER_04 33:49

companies. Big U.S. companies.

SPEAKER_03 33:51

You do not have U.S. small cap value. You do not have emerging markets. You don't have emerging markets value. There's places that your money should be distributed and it's not being. That's the port that I would look at from the portfolio. When we analyze when we tell you, you really have to do that.

SPEAKER_04 34:08

I can adjust my my answer just a smidge. If you are in a portfolio and you've been with that advisor for a very long time, and it has done as well or slightly better than the index of that portfolio, a 6040, a balanced index, for example, versus a 6040 managed portfolio. If you're doing as well or better, then you're do uh your advisor is probably doing what your advisor should be doing.

SPEAKER_03 34:37

Yeah. Well, except again, I'm still going to want to look at those asset classes and make sure they're represented because there could be periods, by the way, probably like the last 10 years, where certain assets do better than others. So you could look like you're doing really well and then it wouldn't do very well because you're not properly diversified. So I'd say that's the same thing.

SPEAKER_04 34:53

Yeah, maybe the an even better answer is to look back at what that advisor's portfolio might have done or would have done over the last 50 years.

SPEAKER_03 35:00

Yeah, long periods of time. Yeah, I agree.

SPEAKER_04 35:03

So But look everybody wants an easy benchmark. Is my advisor doing worse or better? No, is your advisor giving you the services you need? That's what the answer is. Is your advisor giving you the services you need? You can't compare it. It's like saying, is my tax advisor getting me bigger refunds? Every good tax advisor should gift you the exact same refund. I actually stuck on the good tax advisor would try to figure out a way to keep you from getting refunds. Yeah, uh exactly.

SPEAKER_03 35:34

Pay what you owe as you go. I I think the bigger issue, frankly, is one you mentioned a couple minutes minutes ago, whose rocket is bigger. That's what at the end of the day you really want to know who's got the bigger rocket. And then after that, it's all conversation. Are you saying size matters?

SPEAKER_04 35:50

Just putting it out there. What does that have to do with advice? You know, I you made that joke unrelated to the current topic. A real non-sequitur there? Uh it's it's a redundantly redundant non-sequitorial sequitur.

SPEAKER_03 36:09

Kind of fits, though, I think.

SPEAKER_04 36:10

Right. Kind of well, with your the way your brain works, yeah. Kind of total fits.

Final Thoughts and Outro

SPEAKER_04 36:15

Totally fits. Well, look at that. We went way over time today, didn't we?

SPEAKER_03 36:19

Yeah.

SPEAKER_04 36:19

We're way over time.

SPEAKER_03 36:23

Big time.

SPEAKER_04 36:24

All right. What's you want to check stuff out? Go to talkingrealmoney.com. You want to ask us a question? Go to talkingrealmoney.com. You want to meet with one of our advisors for free for nothing with no obligation or no high pressure sales pitch? Go to talkingrealmoney.com. Just go to talking real money. If you're not listening to us, the rest of your life, you should be on talkingrealmoney.com. There's only two things you should be doing in your life anymore. Listening to Talking Real Money or visiting TalkingReal Money.com because we're Talking Real Money.

SPEAKER_02 36:51

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