Question Feast

SPEAKER_04 0:05

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

SPEAKER_01 0:11

You know what's great about Fridays? Well, two things. One, of course, I get to answer all these great questions, which is my favorite part of the job. It always has been. When I started in talk radio, I mean, it was all collar-driven, question-driven, idea-driven.

Friday Q&A Kickoff

SPEAKER_01 0:28

I mean, I started in talk radio, I think it was 1985, so 41 years doing talk. And then when I went on to uh to do the old Ways and Means Committee and then the Don McDonald Show on Business Radio Network, I I hated having guests. I just hated that. And I loved it when the network got big enough that it was like even in the middle of the night, even at 1 a.m., we would just get non-stop calls. Just absolutely great calls, lots of wonderful questions. You know, I was flipping through the Morning Star book or the SP books and looking stocks up and just I I loved answering questions. And then the show just kind of morphed into all questions all the time because the numbers were really good. So uh that's why I like doing it. The other reason I like doing it is the numbers are really good. It's funny, almost every week, the most downloaded episode of Talking Real Money is the Friday QA show. So that tells me you like it too. So it's not just me. But if you really like it, then you really need to send me some questions. Speak me some questions. And guess what? I've made it even easier for you. I switched web host for the uh Talking Real Money website, and I redesigned a website that's really simple and clean and podcast centric. Doesn't have doesn't have a lot of the other stuff. It's really podcast focused. But it does have the buttons on the side to ask questions, to type them in, or there's an in the lower right-hand corner of every single page. You don't even have to go to a form. You just click on the microphone button when the spirit moves you and speak your question. And then you get to listen to it. If you don't like it, you can re-record it. And then remember, when I get it, I use modern technology to make you sound really good. I mean, really good. Uh it's not like a crappy old call. It's really good. So uh do that. Send in those questions at talkingrealmoney.com. Just speak them. Just

New Novel Update

SPEAKER_01 2:41

do it. Uh and uh the other thing, the other reason I'm happy it's Friday is because it's been a full week since my new novel came out. The Line Uncrossed, uh, a fictional story based on the life of my great-great-grandfather John Anderson. And uh it's just been great. Uh heartening, I guess is the best word. Uh the sales have been really pretty darn good for a historical fiction book. I mean, I don't have a benchmark, but I feel good about it. I mean, I'm not never will I make big bucks on this. Never. But it is selling. People are buying it, and I think most of those people are probably you guys. So I can't even begin to tell you how much I appreciate it. It really is an honor to see people responding. And by the way, the reviews have been really, really good. I've even gotten a couple of uh really good professional reviews, like one from Kirkis, that uh and Kirkis can be really hard on independent authors, um, but it's it was really good. It was really good. Uh they called it a thoughtful, considered reflection of a boy at war and all he endured, and uh liked the writing style and gave it a get it verdict, which isn't as good as their star, but it's next to their star. It means it's one of their favorite books. So I hope you get a chance to read it. You can read it for five bucks. As a matter of fact, you can read it for five bucks along with three other stories, two of which I wrote to accompany the book. And you can get those for the same price as the ebook on all the ebook services. You just go to donmcdonald.com and you can uh get it for five bucks and download it right there. So check it all out or get the book

Answering Your Questions

SPEAKER_01 4:34

book. Now let's get to the questions, questions that came in at talkingrealmoney.com. We have five of them because we here's how it works. I had 10 questions when I went to check, so I'm using five of them, so there are five for next week. If I had 12 questions, I would have used six this week

CD Ladders In Retirement

SPEAKER_01 4:52

and six next week. But I only had 10, so it's five this week, five next week, and here's the first of the five.

SPEAKER_05 4:57

Hi, Don. This is Ed in North Carolina. You have shared that you have part of your fixed income in a CD ladder. I'm curious about why you prefer that. Is that the money you would use during retirement if there was a big market downturn where both stocks and bonds declined? And if so, would you rebalance the funds into the CDs right away? If you could explain how your CD ladder factors into your withdrawal strategy during retirement, I'd really appreciate it. I love the show. Thanks.

SPEAKER_01 5:24

Well, first, let me start. Uh I I'm I'm a I'm an advocate of a total with uh total portfolio withdrawal strategy. So the first thing I'm gonna do is take out monies that have been in the process of rebalancing. I'm gonna use those first rather than buying into something else. I'm gonna spend those. But yeah, my well, the first source of capital is my immediate cash. That's the money in high yield savings uh beyond all the others, then I'll I'll tap into that and then I'll replenish that. Uh CDs, I don't have a CD ladder in a vacuum. I have a CD ladder combined with uh a couple of bond funds. So I have bond funds and a CD ladder. It's just to have a variety of things. I love the certainty of a CD ladder. I love the fact that in any given year, 20% of my money is coming due, and then I immediately roll it back out to the next longest C D, unless, of course, I need that money to replenish my cash. So it's it's it's all automatic. It all has to be automatic. And that's why CD ladders are really hard for a lot of people because people want to second guess it. They hear on the news that, well, interest rates are going up, so I'm gonna wait just a little while before I renew that five-year CD. I maybe I can get a fraction of a percent more. It's not worth it. You have to do it automatically. But yeah, pretty much the the CD ladder is part of my oh, what is my allocation now to fixed income? I'm thinking it's around 40 percent. I haven't done the numbers recently, but I think I have 40 percent in bonds and CDs and and uh high yield savings, then about 60 percent in equities. And that's about half and half between bond funds, bond ETFs, and the CD ladder. Maybe a little higher. If you throw the high-yield savings into the C D ladder, it may be a little higher on the more fixed income side of things, but um pretty much spread around. I like just spreading it around and taking advantage of the reduced volatility that this disciplined, disciplined diversification can get you. You gotta keep the discipline, though. Thanks for the question. Send yours in at talkingrealmoney.com. Just speak them. That means you click on the microphone button. You'll see the microphone button on every page. Click it, start talking. That's all there is to it. So easy. Here's

Why Hold Bond Funds

SPEAKER_01 8:03

the next one.

SPEAKER_03 8:04

Hi, Tom and Don. Thank you very much for your great show. I've been listening the past few months, and I had a general fixed income question for you. My sense is that in general you view the equity portion of a portfolio to represent the growth part and the bond portfolio to be the safety or the breaks portion of a portfolio. I surmise that this means that you generally are not looking for any substantial return from the bond part of the portfolio, but also use it instead for minimal volatility or to minimize volatility of the overall portfolio. I therefore wonder why it is that you sometimes recommend something simple like BND or a total bond market fund for the bond portion of a portfolio rather than something short-term, like a short-term bond allocation or maybe a CD ladder. Tom has said that he himself does CD ladders, but I wondered what you thought about using something like BND as the fixed income portion of a portfolio. I understand that the volatility of such a fund is profoundly lower than an equity fund, but do you think it provides the adequate safety that bonds are used for in an overall portfolio? Thanks so much for taking this question.

SPEAKER_01 9:13

I do, and as I mentioned, this is funny, these came in one right after the other. So I'm just taking them in order. But as I mentioned, I'm the one with the CD ladder. I do a C D ladder, I do high yield savings, I do BND, and I also have an international bond fund. So I have a little bit of everything. Uh yeah, though, would I be comfortable if it was just BND? Probably. Probably. But, you know, again, what I'm doing for my portfolio, and then, you know, for my wife if I'm not around, is creating a portfolio that's even slightly less volatile by having the combination of BND, where I have the potential to possibly get a little higher yield if rates are rising or have been rising, potentially. It's going to lose some value there. But I have a little bit of everything. And that's really what I'm going for. I'm just going for a little bit of everything that give me that gives me really good diversification and that gives me some greater stability so that in a major downturn, one of the big 2008 kind of downturns, my portfolio isn't likely to decline more than about 20 to 30, maybe 35%, worst case scenario, which is something from which I can recover. You know, a 50% decline just seems too painful. That's why you've got to have the bonds or the CDs. Tom just does the bonds. That's all. He thinks they're fine. He doesn't mind that little bit, teeny tiny bit of extra volatility. I guess I don't mind it either. I'm just kind of hedging some of it out. And it's something I don't mind doing, I kind of like doing, and uh I keep the discipline. That's the key. Whatever you do, it just has to be disciplined. If you like the lower volatility of short, short, intermediate bond funds, then go with a short, short, intermediate bond fund. Uh but BND, because it's so well diversified, it ends up being an intermediate maturity fund overall. But it does have some longer bonds, which in a big portfolio like that haven't added a lot of volatility. Thanks for the other fixed income question. Now let's see if we have another fixed income

Pensions And Asset Allocation

SPEAKER_01 11:28

question.

SPEAKER_06 11:28

Hi, Don. My wife and I are both 70. We have 1.2 million, excluding the house, in a 55-45 stock-to-bond ratio. We receive $55,000 a year from Social Security and my pension. Right now we're still working part-time, making about $40,000 a year on a side gate we really like. I was uh putting my stats into AI, and they said that because of the money I receive every month from the pension and social security, that my ratio is actually 25 stocks and uh 75% bonds. I was wondering how you feel about looking at it that way. Um I really don't need to take any more volatility because uh right now we're making more money than we spend every year, and I don't have to touch any of the investments, anyways. But I was just wondering how you felt about including the um present money coming in as part of the stock-to-bond ratio. Thanks.

SPEAKER_01 12:33

Yeah, we don't turn uh an income stream into a assumed asset. Uh that's just that's old school thinking, old school financial planning, which in that school of planning, you owned bonds for their income. That was the only reason you owned bonds. You won't you had it you had a uh a growth side and you had an income side. Uh that's not what we believe. We believe you own bonds or CDs or other fixed income securities. And boy, this is the topic for today. We believe you own those to reduce volatility. Your pension doesn't reduce volatility in your portfolio. This is about keeping investors invested. If you're 55-45 in your portfolio and the market declines 50%, you are going to lose. You're going to see your portfolio go down by about 28, 27%. A much less painful number than seeing it decline by 50%, or if you increase your stock allocation, maybe 40%. I think whatever uh again, it's a AI is not very good at financial planning yet. The present value of a guaranteed pension, it resembles a bond allocation in that it provides an income that bonds would provide, but it does not do a darn thing about that frightening portfolio volatility, which we believe is the one thing that gets most investors in trouble and makes it hard to own equities in a portfolio. It's that big, big drop that occasionally happens, maybe once a generation, but when it does, it scares the living daylights out of people. They panic, they overreact, and people did just that in 2008. So no, the AI was wrong. Ish. We got another question. Let's

Reverse Glide Paths

SPEAKER_01 14:29

go to it.

SPEAKER_00 14:29

Tom and Don. I'm wondering if any of the fund companies offers a fund that works like a reverse target date fund. I want to start out more conservative, but be on a glide path that gets more aggressive as I age. My goal is to take less risk in the early years of my retirement when I may possibly want to spend more out of my portfolio. As time goes on and I do less and less, I foresee needing more needing my portfolio less and will want to pass it on to my kids and grandkids. Thank you.

SPEAKER_01 15:06

I'm pretty sure I know where you got this idea. This was a wacky piece of research done by wacky to me, by uh uh Kitsis and uh Wade Fow at the New York Life School of Economics. Where is his bread buttered? Anyway, uh this is a crazy idea. Uh think about it. I mean, let's just take it to its obvious extreme. You're 85 years old, and your advisor says, Oh, uh, by the way, it's time to up your uh equity allocation again and make your portfolio even more scary in a downturn. Most people, here's the thing: there's there are numbers and then there's psychology. And you can't, it's hard, you can, but it's hard, to factor psychology into the equation. I do not know many people in their latter years, 70s, 80s, who are comfortable with a more aggressive portfolio than they had when they were in their 30s or 40s. I gotta tell you, when you're younger, you think maybe, yeah, okay. Um, but when I was younger, I had much more aggressive positions than I have today. And I have, and I get the market, I have reduced the volatility in my portfolio. Because even though you think you may want to leave it to your heirs, you also may find that long-term care costs have gone way beyond anything you ever expected, and you need every penny you've saved over the years to pay for that. And you're probably gonna regret not going for a higher return when you're young and building those assets up more over those years. And because here's the thing about our futures they're uncertain. We don't know what they're gonna look like. So you've got to take into account worst-case scenarios, and I think a reverse glide path is just a silly, silly, silly idea. And you know what's silly enough? You know it's pretty silly when given that everybody's making an ETF for everything, they haven't made one. I don't think there'd be much demand. But thanks for the question.

Business Or Market Investing

SPEAKER_01 17:34

And let's grab the last one for the day. Came in at talkingreal money.com, just click on that microphone. It's so easy. Just do it. You know you can do it. Here we go.

SPEAKER_04 17:43

Hi, this is James from Virginia. Um, I was just curious uh if you had any insight on how you guys uh balanced um you know investing in yourself or you know the business compared to uh just putting money into the market uh with you guys being entrepreneurs, um, and I'm sure in your industry, like many, there are lots of things that you could you know put money into to try to grow the bri business, you know, whether that be software or marketing or adding staff or associates. Uh and I was just kind of curious how you uh balanced that. Thanks.

SPEAKER_01 18:15

Good news is we don't anymore. Now, when we started Vestry and when we were building Vestry, yeah, pretty much everything went back into Vestry. We didn't make a lot of money, uh, but we were building a business and we were younger then, which made it more comfortable to be scary, and we were willing to take the risk. Uh now I am starting to take money out of the business. Remember, we merged with another company. They are now in charge of all the growth strategy. Appello Wealth, that's their job. We're both employees of Appello Wealth, but uh we don't make those decisions anymore. We are owners of a portion of Appello Wealth, but as of this year, I am slowly beginning to liquidate my ownership in the company. Uh, and I'm doing it very slowly because of tax planning, and I'm also doing it now so that uh when I do decide that I want to retire from the job, from the income stream that the job provides, and the health insurance that the job provides, I don't get killed with Irma. Because with you know, with big capital gains, Irma can be a mean thing. I was gonna call her a name, but I'm keeping this non-e broadcasting, nice clean stuff. Uh so we don't anymore. It really depends. It depends on your situation, on your age, what the prospects are for the business. I mean most wealth in this country is built by growing a business. But more wealth is lost by trying to start a business. It's dangerous. And I have to tell you that in the past I mean, pr previously, Tom and I had many entrepreneurial businesses that made some money and then lost some money. They the the first time we really made money on a on a business was Vestery. Made consistent money. And then, you know, kind of did well and cashed out or are cashing out at the end. Uh so it's it's a very, very personal question. And only you are going to know the right answer. You and I have to tell you, if you're building a business and trying to invest, you probably want to have a good financial planner helping you with both ends of the spectrum. Somebody who's got some some uh even maybe some accounting experience or access to really good accounting people to help you figure out the best course of action from a variety of angles. Hey, thanks so much for all the great questions. I just love getting them. And it's so easy for you to ask them. Just go to talkingrealmoney.com, click the microphone. They sound really good, particularly when I process them through AI. And then every Friday you get to hear the answers. And, you know, the longest you're going to wait is like three weeks. Because we have to do everything ahead. Uh we we don't do these on the day they air or even the week they air because they have to run, because we're part of an investment advisory firm which is regulated by the Securities and Exchange Commission, everything has to go through a compliance process and that takes time. So uh we're not real timely, but hopefully that doesn't matter for most of the things because we're not a timely kind of show. We're not telling you what to do today. We're telling you to to do stuff for the rest of your life. And if you need a little more involved help, since Tom and I started Vestry, we're A long, long time ago. Wow, that time went fast. Uh, we have been offering our listeners at you truly, honestly free meetings with 100% fiduciary, non-commissioned advisors, non-commissioned advisors, who will not push you into becoming a client. They will help you in a free meeting. Now, if you want them to help you past that one meeting, or maybe sometimes if they're really nice a couple, uh, you should hire us. I mean, we do good work and we do it for a fair fee. So you should hire us. But otherwise, you know, get some stuff for free. Go to talkingrealmoney.com and click on the button that says meet an advisor. There's all kinds of stuff now at talkingrealmoney.com. By the way, you can also write there on the main page, just put in your email address. That's all the information we want. We don't sell it. And every single time I post a new podcast, you will, within 30 minutes of it going up, get an email reminding you to listen. Telling you what it's about. Thanks for being there. Tell a friend or two, or 10 or 20. And remember, every single weekday except holidays, Tom and I are talking real money.

SPEAKER_07 23:15

The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and our subjects change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions.

SPEAKER_02 23:29

Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy.

SPEAKER_07 23:38

Information presented on the podcast is not personalized investment advice from Oppello Wealth. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee future results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Real Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy or sell any financial products or securities. Instead, the program is provided as a public service by Appello Wealth, a fee-only registered investment advisor.

SPEAKER_02 24:11

See AppelloWealth's ADV Part 2A on our website for information regarding Appellos, fees, and services.

SPEAKER_07 24:16

Appello Capital, LLC, DBA Appello Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered, or excluded or exempt from registration requirements. Registration with the SEC or any State Securities Authority does not imply a certain level of skill or training. Appello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast.