Qs and Stuff

SPEAKER_03 0:05

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

Introduction to the Podcast

Portfolio Diversification Discussion

SPEAKER_01 0:11

You know, it seems like every week it gets to be Friday again. Guess that's just the way it's supposed to go. Hey everybody, welcome to the QA edition, the Friday show. I'm Don McDonald on Talking Real Money, and you're listening. Thanks for doing that. If you have questions, well, we like answering those questions. The ones that you record at our contact form at talkingrealmoney.com or the Ask Us a Question button, those end up on this Friday podcast, usually a couple of weeks after you record them in with your device. Either your phone or your computer or whatever it might be. And even if the quality of your device is terrible, I'm gonna make you sound good. So ask your questions if they have something to do with money. And well, you know, most everything we do does, with a particular emphasis on investing and building a better retirement. But money, money, it's in the name. Talking real money. Now we'll talk fake money, but we're gonna make it real. So one way or another, it's gonna end up real money. And again, go to talkingreal money.com with your questions. You can also call us too, and we will talk with you in one of our other podcasts. And that number is 855-935 TALK, 855-935-8255. So asking your questions, getting your answers is incredibly easy. And those questions have been coming in in really great quantities. Thanks so much. That allows us to have another multi-question, like I think six today question Friday edition of the podcast. So let's get to that first question.

SPEAKER_00 1:53

Okay, Don, here's another question. This one is about the Paul Merriman 10 fund ultimate buy and hold portfolio. For years, we've invested proportional to the market or somewhat close to it. This includes our foreign and domestic ratios. But after all these years, it finally occurs to me that the Paul Merriman 10 fund, which is what we are thinking of converting to, is very far from representative of the market. That might seem like a basic realization, but I was hoping you could talk a little bit about the difference between, quote, being the market and being well diversified. Since these two things seem to be at odds with each other. Thanks.

Voice Acting and Personal Anecdotes

SPEAKER_01 2:35

Well, Paul is very passionate about the small value tilt component of a portfolio. Now there's there's some really good evidence that overweighting small cap stocks and value stocks provides or has provided, we have to be very careful with our tents, has provided better returns over time. A portfolio over a hundred years that was all small cap value, made uh uh a lot more than just the US stock market, for example. So Paul more heavily overweights small and value than we suggest on this show. We go far more conservatively here than Paul does. Now, we don't often suggest just owning the market. We want you to own something that resembles the market, but just owning the market is still gonna overweight you in the standard and Porsche 500 because of market cap weightings. So we want to overemphasize small in value a little bit. We also want to make sure that you have your international exposure. Even if it's just 30%, I'd prefer to see a little more. Uh, but we don't go as far as Paul's portfolio because we believe a couple of things. One, for most people, and we're talking about his equity portfolio. This is not with bonds. Uh for most people, it's one, too aggressive and two, really hard to manage because you're rebalancing all of these 10 asset classes all the time. So it's it's not something that we are advocating, but it's not something we're opposed to either. We think it's a it's a great way to do it if you don't mind the work and you don't mind the higher degree of risk, because there will be more risk. That's why small cap and value outperform large and growth, because value stocks tend to be undervalued assets, therefore, companies that have had some problems, or uh companies that uh that you know have fallen from grace for a while. And small companies, well, they're the upstarts, and many of those fail. So it takes a strong stomach to be in both of those asset classes on a really high level. That's why we like to suggest things like AVGE, which kind of accomplishes something similar, but with a little less craziness, or DFAW, the dimensional funds version of a total market, total global market fund, which again emphasizes small cap and value, but not to the same extent. So uh we like Paul, we like his teachings, we just think it's too hard, and we don't suggest it to most of our people. Now let's grab our next question.

SPEAKER_05 5:23

Hi, Don. This is Jim in Cincinnati. Was that your voice I heard on some of the ads for the special exhibit Auschwitz not long ago, not far away, at the Cincinnati Museum Center? If it was, you should be proud to be associated with it in any way. It's an extremely well done and an extremely important exhibit.

Concerns about Bread Savings

SPEAKER_01 5:46

Wow. You've outed me. Uh yeah, that that was me. I was hired to do the uh the Auschwitz uh exhibit uh when it first uh was presented in Boston, and then when it moved, then I was uh uh they asked me to re-read the copy for the uh for the Cincinnati exhibit. And everything I've read says it's a magnificent moving, magnificent. I don't even know if that's a good word, uh powerful moving exhibit. Of course it is. Um and I was very proud to be a part of it, and I got a little bit of a paycheck for it, too. So it was doubly satisfying. But yes, that was me in my role as voice actor. And if you want to check out some of my voice acting for fun, go to donmcdonnell.com. There I have samples of all kinds of things I've done. Not all of them, but just a few that I picked out that I thought were kind of cool. So yeah, check them out. And and uh and thank you for for uh bringing that up because that was a uh that was a a great moment when I got picked to do that. Now let's grab another quick money question.

SPEAKER_04 6:52

Hello. I've been a member of Bread Savings Banking for quite a while. Recently I referred a friend to them. The friend did a research for reviews of the bank and was horrified. Have you seen the reviews? Apparently, you're limited how much of your own money you can take out in a month from them. Also, they are partners with Community Bank and have several credit cards they manage, which has been a lot of problems for people. Thank you.

SPEAKER_01 7:29

Well, one of the things I've discovered with reviews is that they tend to be partially right. There's there there's truth and then there's less than truth. Uh and let me see if I can address these. The withdrawal limit. Yeah, initially, when you start the accounts, they have withdrawal limits. And I think that's an anti-fraud tool, but I've been with them for such a long time, I don't believe I have any limits. As a matter of fact, uh I know that I can transfer large amounts because I've done so uh and I've done actually I've done some big ones through ACH, but if you wanted to do like the whole account, like it was uh, you know, six figures, you could do that through a wire transfer and they wouldn't stop you. It's your money. They're not going to stop you. ACH withdrawals are a different thing, and those vary. But uh as for the anger over comenity, yeah, comenity is a uh a subpar lender. They write credit cards for a lot of different institutions. Although they've moved up and are are doing bigger cards, they're still considered to be like the lenders uh last resort for a lot of people. Uh why I'm with bread? Two reasons. The high yield, and that's probably because of the comenity bank connection, because they're making more money on interest, and two, their FDIC insured up to a quarter of a million dollars. So I don't care if they went broke. I'm still gonna get my quarter of a, or I don't have a quarter of a million there, but I'm still gonna get my money out if I want it. And yeah, I did have limits on how much I could transfer per day when I started the account, but after several a couple of years, I think I've been there a couple of years now, those limits have been lifted. So yeah, there are bad reviews, but I'm not there for the customer service. I'm really not. I do everything online, and it's just moving money in, moving money out as I need it. That's all it's there for. That's what a high yield savings account to me does. Thanks for your question or your comments or both, and let's do the next one that came in from talkingrealmoney.com on the button that says ask a question, and then it was spoken into a microphone like this.

Retirement Tax Planning Strategies

SPEAKER_07 9:36

Good afternoon. My husband and I are about to retire in the next 12 months, and we are looking for someone to help us solely with the tax planning and withdrawal strategy to minimize Irma and um the cost of Medicare. And I'm not sure who we can talk to. Everyone I've reached out to so far wants to manage our assets, which we are currently not looking for help with. Um if you could let me know how we find a trusted retirement advisor who specializes in tax planning and withdrawal strategy and Medicare, uh, I would very much appreciate it. Thank you.

FAFSA and Investment Considerations

SPEAKER_01 10:28

You know, I'd probably start, since this is all about taxes, really, with a CPA who's just going to charge you on an hourly basis, or maybe even an enrolled agent. I mean, this is an area where they uh they can provide some expertise because their specialty is just taxes. So those are a couple of places. The other thing you could do is instead of getting a registered investment advisor who manages your assets, there are registered investment advisors who work solely on an hourly basis, don't take custody of your money, so therefore they have no interest in giving you managerial advice, only uh uh telling you how to move what from where to and for what reason. So um and the the of the of the three, the cheapest is probably gonna be an enrolled agent, if you can find somebody who uh who will do that. But uh otherwise a uh a CPA or an hourly fee financial planner, certified financial planner, RIA, that kind of thing. And you're just gonna ha I wish there was a a resource where I could say, go here and you'll find a great one. There isn't. Most of the resources out there are filled with a lot of mediocre and even bad ones. So there are no great resources because everybody wants to think they're the best and most aren't. But but enrolled agents are are IRS licensed and they're tax specialists, and they're more they're more focused on planning, I think. It's at least it's an area to explore. Good luck and thanks for sending in your question. I really appreciate it, and we still have more to come. Here's the next one.

SPEAKER_02 12:14

Hi, Don. This is Andrew. I was wondering if it was a good idea to go from investing in Roth to traditional if on the FAFSA form it would change my income enough to allow my children to get a Pell Grant. Thank you.

Selling Mutual Funds and ETFs

SPEAKER_01 12:28

It sounds like it would make sense, doesn't it? Because the FAFSA is looking at AGI, your adjusted gross income. However, they figured this out because they figured people would do this. So what they do is they adjust your income by the amount of the traditional IRA contribution, and then they add back in the amount of the traditional IRA contribution, effectively canceling it out. Except in some very rare cases that I'm not going to get into because they're highly specific, and we're about generalized advice. So in most cases, this I believe is a strategy that will not work. They already figured out that people are trying to game the system, and uh so they uh eliminated it. You adjust your AGI and then you add it right back into your AGI. I don't know why it reduces it in the first place, but it I it does from a tax standpoint. Thanks for the question. Again, send in your questions at talkingrealmoney.com on the contact form. You can type them and they'll get answered somewhere along the way in one of the podcasts, or you can speak them into your microphone and they get answered on the Friday QA podcast, which is this one that we're doing right now. And I think Yeah. We've reached the final question for the day.

SPEAKER_06 13:55

Hi, Don and Tom. This is Les from Geek Harbor, Washington. I made sure to speak in the question so that Don could hear me appreciate Tom for his dad jokes.

SPEAKER_01 14:06

All right, well, you forgot that I do the editing, so I could just get rid of you completely and not take your question or anything and get rid of that part you just spoke. But being the nice guy that I am, I'll just leave it here and take your question.

SPEAKER_06 14:22

I have a question about selling mutual share or ETF funds from a brokerage account. Assuming I need to sell some shares to pay for an expense from a brokerage account. Is it reasonable to sell the shares that are at minimal uh capital gain to avoid taxes rather than selling any shares at a loss and wait instead for those shares to come up in value? This is assuming that I do not want a tax loss harvest and that my portfolio consists only of broad-based index funds. It would seem that shares that are at a current loss, we would be able to wait over time and they should come back so that we do not have to um realize a capital loss unnecessarily or prematurely. Thanks again for taking time to answer my question.

Final Thoughts and Resources

SPEAKER_01 15:19

Yeah, you can. You can specify shares. It's a very, very powerful uh tax planning tool. There are basically three ways to account for the sale of securities in a brokerage account. One is the typical one is first in, first out. First shares you bought are the ones you sell. That's the default setting for most brokerage accounts. To get rid of that, you have to go in and change your selling settings. And I think, if I remember correctly, with Schwab, you um you actually there's a you you go into your account settings, I believe, and you can select your cost basis method. I think they even have a tool. I've never used it, but I think they have a tax lot uh selling tool, you know, that that that where they pick which ones are best. Oh but you can put in specific identification method, I believe. And uh then before the trade settles, you select which shares you're selling. That then allows you to control what your capital gain is with a with a high degree of specificity. So yeah, absolutely. Do that. I think when you sell it, you um there's a there's gonna be something that comes up that lets you select your lots for tax selling. Um that might be something you you ask a Schwab rapper, a Fidelity rapper, a Vanguard rapper, whom who whomever you have. But yeah, absolutely. That is allowed by the IRS. You get to pick which ones you sell. Then, you know, the other ones still have their cost basis. It doesn't change their cost basis, but it allows you to pick which ones you want to use so that you can reduce that capital gain now and maybe take it later. Thanks for the questions. All of the great questions. I really appreciate them. Thank you so much for listening and for following the new podcast and for putting up with some of the uh the little quirks we've had. We changed to a new hosting service. And uh while I really love working with them, there have been a few little bugs that I had to work out. And by the way, if you're one of those people, this is just a little technical thing, if you're one of those people who likes to download MP3s of podcasts, which I didn't think anybody did anymore, uh, you need to subscribe to the podcast email because that's the only place where the button actually exists that lets you download the MP3 of the episode. So you have to subscribe, go to talkingrealmoney.com, it'll say subscribe to the newsletter. It's just a daily email when I put up a new episode. So keep listening, keep telling friends, keep sending in your questions at talkingrealmoney.com. If you need more help than we can give you in the course of a podcast, this is why we have, since Tom and I started Vestry many years ago, always offered anybody who asks free, totally free, really free help. One of our advisors will take some time and help you understand what you have, what you might do better, answer your questions, help you see if you're on the right track for the future, whatever it might be. Yeah, we're not going to manage your money, because that's what we get paid to do, but we will help and we won't try to sell you anything, and it won't cost you anything. Just go to talkingrealmoney.com and click on the button that says meet an advisor. Or if you just want to ask questions, ask a question. And please keep spreading the word, and please keep listening to Talking Real Money.

SPEAKER_03 18:59

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