Ep. 2014: The Inflation You Feel

SPEAKER_04 0:44

Well, the price is right here on Talking Real Money. I'm John McDonald, along with Tom Cock, and today we're going to talk about prices.

Prices, Trees, and Inflation

SPEAKER_04 0:52

Yes, the prices you pay for stuff and life and sustenance and shelter and transportation and education and all those other shuns. Christmas trees. Christmas trees. Just bought one.

SPEAKER_03 1:09

Just bought one. You didn't buy a Christmas tree yet. Yeah, I just did. It's 16 feet. It's uh one of those electric ones. It's gonna be out in front of the house, you know, out on the road.

SPEAKER_04 1:19

Oh, you actually you bought a Christmas tree on the house?

SPEAKER_03 1:21

I have been asking for one of these for like 20 years, and she goes, This year I'll finally let you have it. Did you get it from Balsam Hill? No, I don't know where she got it from. She, you know, you know, okay, this is the difference between me and my wife. You know this. I would take five minutes, I go to Amazon.com, click on the first one I saw. How long do you think she spent on looking for one of those, you know.

SPEAKER_04 1:39

Days.

SPEAKER_03 1:40

Yeah, it's some hours after hours after.

SPEAKER_04 1:42

We have a Balsam Hill tree. Yeah. And while they're pricey, they are extraordinary. They have the most beautiful fake tree. And I have not been compensated for this message. In any way. But it's expensive. And I guess, I'm guessing I if I had to buy a new one, good news is they last a little while, and their warranty is amazing. Um I'm guessing if I bought one this year, though, I would probably pay a lot more money, wouldn't I?

SPEAKER_03 2:14

Yeah, you would. Uh this is something that is either at the front of people's minds or they just

Inflation’s Rising Costs

SPEAKER_03 2:21

forget about it totally. We're talking about Well, it's too depressing. Oh, it is. Inflation. Um and this comes up an article recently about places where inflation has skyrocketed and then other places where it hasn't. Let's just put in a general sense. So I went back and looked since 1990. $100 in 1990 now is uh the buying power today costs about 260.

SPEAKER_04 2:45

So 36 years ago, because I got married in 91, which is my 35th anniversary.

SPEAKER_03 2:50

2.6% average annual inflation, which is historically that's pretty actually pretty low. Now it's been pretty bad. This is not a political statement, these are the numbers, really since about 2020-21. So being political, dude. Anything, anything's political. God, I'm gonna be happy when that's over. I guess when I die. Uh, but the thing is pretty much I know, but the thing is, so it hasn't been that bad, but the last six or seven years have. And some parts, as the article pointed out, have been far worse. By the way, we'll talk about how to protect yourself, which is astounding the numbers you can get by buying things that are a good inflation hedge. But let's talk about some of these specific parts of the economy that have gone up dramatically. Yeah.

SPEAKER_04 3:36

Okay, let's talk about inflation for a minute. There's inflation, the official number. Oh, yeah. And there's the inflation because everyone I talk to says, it's so much more expensive now. Everything is more expensive. And I I could see it in my life. We we have our trees trimmed like every three or four years because it's Florida. They grow. Um, and three years ago, to trim the same trees was $3,000. Yeah. This year we got a bid of $6,000. Wow. Three years ago? Doubling over three years. Part of the problem is a little political, though, because I've noticed and I've I've talked to some of these contractors, they're having a harder time hiring guys who will are willing to climb on roofs and up in tree weeks.

SPEAKER_03 4:23

Yeah, the guys that are willing to do that.

SPEAKER_04 4:26

Yeah. I'm not saying anything about where they come from. Uh, yeah, let's not. Okay. What do you say? Yeah. You know, yeah. All right, but let's talk

What’s Getting More Expensive?

SPEAKER_04 4:34

about some of these areas. But prices on a lot of things have gone up more than the rate of inflation.

SPEAKER_03 4:40

And I'm right at the tip of the spear with one of them that's been the highest inflation since 1986. That is higher education.

unknown 4:50

Six.

SPEAKER_03 4:51

Oh, it's gone up like crazy. Since 1986. That's right. Okay, wait a minute.

SPEAKER_04 4:55

Six X. So six times. So regular inflation is like, what'd you say, two and a half times? Yeah, two and a half. Since nineteen ninety. This is six times.

SPEAKER_03 5:05

Six times.

SPEAKER_04 5:06

More than double the rate of inflation.

SPEAKER_03 5:08

Mm-hmm. That's bad. Healthcare, about four X. I mean, again, that's you know, a heck of a lot more than uh than just the standard inflation. And by the way, so I guess it's a good question for you. In your mind, sure. Yeah, for you, why not? Okay. I don't know which year you're referring to. It could be the listener you. I guess it could be them too. This because this is this is an interesting

How Inflation Is Measured

SPEAKER_03 5:34

point. When you the government reports inflation, they don't include everything.

SPEAKER_04 5:39

No, they don't.

SPEAKER_03 5:40

They do not. Sometimes they break out even something like that. Like there are different kinds of inflation. There's core inflation.

SPEAKER_04 5:45

Yeah, like they take out energy and food, which is well, I spend a lot of money on eating.

SPEAKER_03 5:49

I know. So my question to you is when we're talking about inflation, what should and should not be included?

SPEAKER_04 5:59

Everything?

SPEAKER_03 6:00

Yeah, I think it should be.

SPEAKER_04 6:01

I mean, don't you think? Should it be everything?

SPEAKER_03 6:04

But core excludes food and energy costs we just mentioned. And then you got the PCE price index, which I don't even know what that is, but that's some separate measure that the Federal Reserve uses. Um so i the PCE is a lot lower, by the way, than than the core inflation I mentioned just a minute ago. But the point of all this is, frankly, what the heck do you do about it?

SPEAKER_04 6:31

Uh-huh. You can't do it.

SPEAKER_03 6:34

Well, there's a few things you can.

SPEAKER_04 6:35

Do you can't change it. No, you can't change it. No, you can't. It's hard. I'm just I want to get through the through the the various I I just want to understand, though, the price indexes. Okay. I'm just trying to figure these out. Okay, so we have core CPI. Yep. Which is different than CPI. The CPI, CPI, CPI. Includes those other food, gasoline, utilities rent, medical care, other consumer. It's all consumer spending except for taxes. They're not in that. No. Okay. So core CPI excludes food and energy.

SPEAKER_03 7:15

What you're paying taxes? I'm sorry.

SPEAKER_04 7:18

I just wrote a big check. Well, I didn't write a check. I did an electronic payment. Yeah. Silly.

SPEAKER_03 7:26

So that's A1.

SPEAKER_04 7:27

Yeah. Okay. Then there's headline PCE. Okay? Yeah. Ready? That includes food and energy. It covers broader consumer spending than CPI. That includes health care benefits paid by the employers included in the code.

SPEAKER_03 7:44

Oh, that like health care benefits.

SPEAKER_04 7:46

Right. Yeah. And then core PCE, which excludes food and energy. So there we have the big four. Yeah.

SPEAKER_03 7:52

I think the broader the better, because I think it's more honest.

SPEAKER_04 7:56

I I agree. And I think who knows?

SPEAKER_03 7:59

This always gets back to what is Headline PCE. Yeah. I mean, because you and I, uh, you are a far bigger spender than healthcare than I am. I frankly don't spend much on healthcare. I mean, I I never reach the my deductible or whatever on my own.

SPEAKER_04 8:14

Well, I mean, I I don't usually reach mine except in the year when I had spinal surgery. But my wife is. But my wife does have a lot of people. Right, that's what I'm saying. So it's not conscious, yeah.

SPEAKER_03 8:23

Yeah, that's not an issue in my household. Yeah. Mine not. So if you exclude an I think, well, then that's not honest to those people. Trevor Burrus, Jr.

SPEAKER_04 8:31

And how big was the jump in health care over above over inflation? About four. Four X. Four. So almost double. Trevor Burrus, Jr.

SPEAKER_03 8:39

Almost double. I mean, this is and it I think I just read that the premiums for plans next year are going up like another like eight percent or something.

SPEAKER_04 8:48

And that's much higher than the rate of inflation.

SPEAKER_03 8:51

Much higher than the rate of inflation. Housing's gone up a lot. Childcare, I mean, some of these places, Disney Pass has gone up quite a bit.

SPEAKER_04 8:58

Disney raised prices like mad. They just figured we are going to keep cranking up prices until people stop coming.

SPEAKER_03 9:06

Yep. And they're apparently still show up. They don't care. They just keep coming. Remember, we talked about this how when we were all in Southern California, right, this summer after we had to make the adjustment, leave Shillan and do all that stuff, which someone brought up recently. Hey, that was pretty cool that you left Shillan. We all went to Southern California. And everybody's because you were dying of smoke inhalation. Exactly. Everybody except one person went to Disneyland. You would be the exception. Although my pulls on my heart a little bit, I saw the picture of all of them standing there together. I was like, eh, I should have been in that picture. But um but $200 and it was, I think it was $261 or something for the whatever the pass was.

SPEAKER_04 9:47

A Florida resident annual pass with only blackouts at Christmas is $1,200.

SPEAKER_03 9:54

You know, and when I get together with my family at Christmas, I'm going to be the blackout guy for sure. I'm hoping.

SPEAKER_04 9:59

Yeah, we don't go. We don't go to the parks around Christmas. No, no, no.

SPEAKER_03 10:03

I'm I would like to be blackout. I was like blacked out. That's all.

SPEAKER_04 10:06

So that's what you do with the holidays.

Ways to Keep Up With Inflation

SPEAKER_03 10:08

That's exactly all right.

SPEAKER_04 10:09

So what can we do about inflation? Apparently you have a solution. It's good to know.

SPEAKER_03 10:13

I do. You could buy more TV sets. Yeah, no, it's a much better. They are a lot cheaper.

SPEAKER_04 10:22

They are a lot of people. You can get like a 5,000-inch TV for $12.

SPEAKER_03 10:27

Including installation. Including installation.

SPEAKER_04 10:30

Here's how cheap these big old TVs are at Costco.

SPEAKER_03 10:34

No, you can get, I think, an $86-inch TV for $1,200.

SPEAKER_04 10:39

Oh, I can beat that.

SPEAKER_03 10:41

Okay. Well, pardon me. I think that's what I read the other day. I don't need a new TV, as you know, so I'm good. Here's the other one you can buy more of, which hasn't gotten cheaper, but it hasn't gone up nearly as much as the core rate of inflation. Guess what it is? Do you know what it is? Food. Really? Yeah. Food in a gen. Now, generally, meat, some of the other parts have gone up a lot more. But food in a general sense, no, it has not kept up with the core rate of inflation.

SPEAKER_04 11:08

Oh, dude, I can get an 85-inch how much? 4K TV at Costco. Happy holidays. For $799. I guess I was. Oh no, here's a Samsung, even better. Should have refreshed more of it. On sale right now.

SPEAKER_03 11:31

Well, I got the outdoor Christmas tree. That's enough this year. I think that's it.

SPEAKER_04 11:35

Oh, I think you need to step up. Wait, let's see if you can do what's the biggest? Let's find the biggest.

SPEAKER_03 11:40

Is it like a hundred-inch thing or something?

SPEAKER_04 11:41

I'm gonna find the biggest one at Costco. I'm on Costco.

SPEAKER_03 11:43

There's one other thing about inflation, by the way, that I think everybody we should all pay attention to. Because we see this so regularly.

SPEAKER_04 11:49

Okay.

SPEAKER_03 11:50

People have a tendency, if they were making if their income was $150,000 a year and it goes to $180, guess what happens? They have a tendency to spend that other $30,000. Oh, sure. Watching expense creep is really important. Now it's is it easy? No, because I got more money in my pocket, I should be able to go do XYZ. But that's another way to sort of you can't beat inflation, but staying up with it and not getting uh consumed. But I will add one other. You already know this because we talked about this pre-show. Guess how much the S P 500 went up since 1990.

SPEAKER_04 12:28

A lot. I don't remember the number.

SPEAKER_03 12:30

8,500%.

SPEAKER_04 12:32

8,500%. Correct. Wow. Wait, isn't that um wow? Yeah. Eight, it's a wait.

SPEAKER_03 12:41

Eight five, it's actually eight, five, one, one. Wow. Totally.

SPEAKER_04 12:46

That's a lot more than inflation.

SPEAKER_03 12:48

Yes. So had you taken some of your money, saved it, put it in, and you know we're gonna recommend being in more than just the S P 500, so we put that out there, you would be what we call well ahead of inflation.

SPEAKER_04 13:02

So more importantly, the inflation hedge, we talk about inflation hedges and how you buy, you need to buy uh tips or you know, whatever it is. The stock market has been a better inflation hedge.

SPEAKER_03 13:16

Way better. Way, way better. And the thing is, when I see still, and I looked it up again yesterday, guess how much is currently in savings account or checking account that pay basically nothing? It's $11 trillion.

SPEAKER_04 13:32

See, I don't know the number. And so that's a lot of money.

SPEAKER_03 13:34

It's just about being efficient. We just met with somebody yesterday that's had $200,000 sitting around in their checking account for like five years.

SPEAKER_04 13:42

Do you know how many Q-LED 100-inch TVs you're leaving on the table?

unknown 13:47

Exactly.

SPEAKER_03 13:48

Which is where it should be probably.

SPEAKER_04 13:50

Do you know how much how much is the hundred-inch TV? Oh, I'll say $1,500. Oh, $1,699.

SPEAKER_03 13:57

Okay, that was close. 100 inches? I don't have a wall big enough to do that. Wait a minute. 100 inches. Isn't that like eight feet? Well, 100 divided by the eight. 96, yes, it's eight feet. That's nuts. Wow, that's huge.

SPEAKER_04 14:11

So you could you could lie inside the screen. You could just lay it on the ground and use it as a cot.

SPEAKER_03 14:18

If I had that in my house, I'd never get anything else done. I'd be watching something.

SPEAKER_04 14:23

That's why I wear my Vision Pros when I watch my foot TV.

SPEAKER_03 14:28

Exactly. All kidding aside. Yes, pay attention to your expenses. Yes, watch expense creep, but be properly invested at all moments because that's been the best hedge against rising prices that I know of.

SPEAKER_04 14:42

All right, that he knows of, and I I can't think of any others. And so I think it's time

Susan’s Retirement Portfolio

SPEAKER_04 14:47

for questions. Oh, look, Tom's gonna go get the phone.

SPEAKER_03 14:49

We go to New Hartford, New York, where we find Susan, who now joins us on Talking Real Money. Hi, Susan. Thanks for being part of the program.

SPEAKER_01 15:00

Hey, Tom. Uh thanks for having me. And uh just had to quickly, just quickly say that, you know, I'm really sorry that I waited so long to become a listener. I've oh, the free education has been just amazing. And uh my husband thinks I'm completely obsessed, which I kind of am. Um in my own.

SPEAKER_03 15:18

Okay, both, by the way. That's okay. And for both cases, that's fine. That that's just that's good. So yeah, no, we're glad to have you on board. So uh how can we help you today?

SPEAKER_01 15:28

Really focusing on um, of course, this financial education is totally been kicked into high gear. I turned 61 actually a few days ago, and I'm circling the drain on work. I'm I'm a state employee, and um I will be retiring when I'm 62 and getting my pension uh after 22 years of service with the state, and uh really, really looking forward to spending more time with my grandkids and uh my daughters, et cetera, um, who are all local, which is wonderful. Um so my question, I actually got referred to um uh prudential, am I allowed to say that? Umfits. And, you know, someone who a good friend of mine really trusts. And then she actually, I actually got referred from the woman that she trusts to a different lady who, you know, we did a phone call, and you know, about 30 minutes or so into the phone call, I realized this lady does not compliment my style at all. Um, not at all. So she had a few like kind of off-the-wall suggestions as far as like taking care of the small balance of student loans that my husband and I uh still have for one of our daughters. And um, and you know, it just the things just didn't click with me. And then she was like saying something about, you know, looking at my my uh deferred comp portfolio and uh an opinion on, you know, the the glide path on that and suggesting that I do something, uh take a little bit of money and do something a little bit more aggressive with it. And uh, and so she's talking about as she's going on, and I had to stop her, and I'm like, oh, are you talking is this an annuity? You know, and she said, Well, yeah, it's a uh buffered index.

SPEAKER_03 17:25

Humiliating. Well, those are the worst.

SPEAKER_01 17:27

I I listen, I I've been like I said, I'm obsessed. I've been, you know, doing double time here trying to figure out my finances again, trying to be reassured about what I'm gonna do moving forward. And literally my brain just unplugged from the conversation as soon as she confirmed what I because she was opaque about it in the beginning, not naming it, of course, as as as I'm sure user, yeah, of course, that's what they do. And um, so I kind of stopped listening and I was like, oh crap. I was already kind of turned off of, you know, she wanted me to like borrow against my deferred comp to pay off the student loans. And I'm like, why the heck would I do that? That doesn't make sense. You know, it no, it totally didn't make sense to me. And I'm like, oh, she's she's really rubbing me the wrong way. So I I so I got that with a call, but I got thinking about her little aggressive suggestion, and I thought, I you know, I've been in this, I've been in this um retirement 2030 trust with T Row Price a hundred percent since twenty two years ago since I signed on.

SPEAKER_03 18:36

Yeah.

SPEAKER_01 18:36

Yeah, I've been in it the entire time.

SPEAKER_03 18:38

So what is it by the way? Do you happen to know, Susan, what that asset allocation is today in terms of stock to bond ratio? Is it maybe uh 60% stocks or 50% stocks or something in the area?

SPEAKER_01 18:49

It's like it's like 55 phones. Okay, okay. It's really, it really is sort of, you know, sort of like an 80-year-old one instead of a 60-year-old one. Okay.

SPEAKER_03 18:59

We'll go with you on that one. Okay, fair enough.

SPEAKER_01 19:01

Right, right. Hey, I've been listening. I've been listening. So I pay attention. So when she said it it sort of hung on to, you know, it sort of rattled around a little bit, and I got looking because I've always been so shy about this, you know, uh, you know, second guessing myself. Sure. So what I did was I went in into my defer comp, the webpage, the website rather, and poked around a little. And I did find some of the things that on the show y'all have referred to occasionally. Um I found an integrated US small cap growth equity fund and also a global, you it says US global, so I'm I was a fidelity product. So they sounded like they were a little bit more and I and I thought, why wouldn't I just reallocate what's already what I've already got in instead of giving her this annuity money, which is insane, you know? So I'm like, why why couldn't I just reallocate? Because I didn't hate the idea. So that's kind of what I was thinking. I already did that. I did the new contributions only allocation, changed to 90%, kept it in the target date fund for 90%. And then I just did five percent and five percent. So just like a still kind of a little old lady-ish, I guess. And uh then I got thinking, gee, should I reallocate the whole thing? Should I should I just go for it, you know? So but that was the question I wanted to ask you.

SPEAKER_03 20:32

Yeah,

Pension Income and Portfolio Allocation

SPEAKER_03 20:33

that I didn't want to good question, by the way. So just to go backwards a little bit here, um, are you gonna be eligible for a pension or is this going to supply the income? No, I've I've got a pension. Yeah, good question. Sorry. So and you're gonna be eligible for social security as well.

SPEAKER_01 20:49

That is, and uh, my husband is the greater wage earner on our home. Okay. And uh he has indicated is willing to go to 67. I'm not sure. We've had some health troubles in the last couple of years. He he got a diagnosis that he's got a great prognosis, I want to say. Okay. Okay. Yeah, m maybe he's gonna do 65 instead. So we ran a bunch of numbers on him.

SPEAKER_03 21:12

Okay. On him waiting on taking social security, maybe you take yours a little earlier.

SPEAKER_01 21:17

Yeah, yeah.

SPEAKER_03 21:18

That probably works. Kind of. So I mean by the reason yeah, that makes sense. And the reason I asked is again, you already have then three annuities, right? You've got the two Social Securities plus the pension.

unknown 21:31

Exactly.

SPEAKER_03 21:31

Yeah, so if anybody tried to sell me a pension, I'd say, I mean, an annuity, I'd say, well, I already have three. Thank you very much. I'm I bought I bought that already. But back to your question about sort of further allocating your portfolio. The fact is, in that T Row price fund, you own small cap growth stocks. You own some international stocks. The idea there in that is to have a diversified portfolio. The only real asset class you're probably you're probably underweight to the things that we would prefer you. overweight small cap value emerging markets value international large and small things like that so you have some exposure to them but not as much as I'd like here'd be my sugg I mean you're gonna leave this behind then in the plan when you retire is that the is that the thinking I am I'm I'm entitled to do that and I was planning on doing I was that's what I was gonna do because hey listen because I didn't I didn't have a relationship with anyone sure that I could do anything yeah that makes sense so then I probably would if I was going to add one fund and by the way I would just add it I wouldn't just be doing a little bit at a time if I was going to make this part of my asset allocation I would fix it so that it is complete part of my asset allocation today. But I would probably there only one class I would really add and then you you mentioned small growth. I'd prefer small value if they had that because that's a better performing asset class than small growth. But I would just take a small I would still do 95% in the target date and 5% in a small cap fund. If the only one they have is the small cap growth I guess I'd do that but I'd prefer small cap value. But I wouldn't mess around with the other stuff because that's a you do already have some global in there in the um I mean international in the um in in in the target date etc. So I wouldn't mess with that but I'd love to see you add a little more small cap growth or value if that was available inside of the plan. Those would be the places. Yep but I would do it right away I wouldn't just say well I'm gonna add a little bit now I'm gonna add a little bit I would I would go ahead and fix the asset allocation to include that overall situation. So it's 95% in the T Row price uh target date fund and five percent in the small caps. Does that make sense?

SPEAKER_01 23:44

Absolutely again like I I 5% I could tolerate that.

SPEAKER_03 23:49

Yeah right that's gonna give you it should give you a little more up it's gonna give you a little more volatility but again as you said the portfolio overall still fairly conservative at half basically in stocks and half in bonds. So I'm totally comfortable with you adding a little bit of that. So you're saying to just go for it I wouldn't wait around I would just I would however you fix that asset allocation I would tell them I want to fix it all now to a 95 five and then moving forward yeah all contributions would come in at 95 five correct all right that was my that was my uh hesitation. Though you sound like you're do you're doing a great job you know and uh boy I we really do appreciate you listening and reaching out to us.

SPEAKER_04 24:33

If you have anything else you let us know I I absolutely will Tom this has been a phenomenal uh experience thank you again so much and again I went back I went back in time um back to 2020 so I fast forwarded a little bit through that because that was oh PTSD but you know I got to 21 and I'm I'm like catching up the show that's a lot of fun I went back I went all the way back I'm listening to your you know to the retired that's retire me never oh man that's going that's getting great memories I was I looked a lot younger then too just so you know back in 2021 whole bunch though not Don but I did of course so it goes you look great thank you so much thanks for being part of the program really appreciate you coming on today you take care all right thanks and Hubet bye bye and how do you end up on the phone with Tom Well it's so easy all you need to do is send him a question. You send him a question then he gets on the phone with you or he answers it on the show. You just go to talkingrealmoney.com and then you uh type in your question at ask a question or you can speak them for the Friday podcast using the mic button in the corner and we'll get your questions answered which is something we really enjoy doing. So do that for us. Go to talkingrealmoney.com ask your questions or even meet with one of our advisors for free for nothing with no obligation and no high pressure sales pitch. Now Tom likes paper and likes your questions and he combined the two into paper questions. It's kind of like a Reese's peanut butter cup you know the chocolate

Questions About Bonds and Withdrawal Rates

SPEAKER_04 26:08

in my peanut butter peanut butter in my chocolate.

SPEAKER_03 26:11

In this case though we're talking about water because we're going to Calistoga California isn't that aren't they known for their water there or something wagons. They went across the country in those I don't know where that is in California Conestoga. Oh pardon me George I can't believe how far off I was on that one. I thought it was so close. Uh George writes us in a recent podcast you answered a question about the safety of purchasing a 30 year bond yielding five to satisfy the four percent withdrawal strategy. This struck me as missing the fact that four percent rule provides you you can increase the amount each year by the rate of inflation. Yeah I definitely we knew that we we knew it has to have said was yes it would still you're still going to make the four but that doesn't you'll make more than the four. And you'll cover the inflation for a little while too Yeah he says assuming my math is right I think that with a three percent inflation rate a five percent yield doesn't cover the annual four percent withdrawal rate after nine years that works for a period of time.

SPEAKER_04 27:10

It works for n for nine years. And it falls behind further plan is die in nine years perfect.

SPEAKER_03 27:15

Exactly that's my plan obviously you get a bit of a cushion for seven years when you can bank for the future and if the inflation rate drops to two good we didn't by the way we didn't suggest that as a strategy. No somebody wrote us and said what do you think of this and we said sure go ahead but because it doesn't have enough growth in it.

SPEAKER_04 27:32

Right you got to have some growth every portfolio we believe let's make this real clear right up front we believe every portfolio should have some equity in it diversified equity every portfolio. However just because we believe it doesn't mean you want to do it or will do it.

SPEAKER_03 27:49

No just don't have 200,000 sitting in your checking account um he says the suggestion safe strategy doesn't quite add up to me is my math wrong no George your math is correct love the water from Calistoga it's as they have springs yeah okay I think so I was just yeah God I'm just hoping for springs I do all right let's

Comparing International Funds

SPEAKER_03 28:13

uh this comes from Portland Oregon Roger writes could you please compare and contrast Fidelity Vanguard and Avantis that sounds compare and contrast uh I got my blue book out and start writing here um international funds from Fidelity Vanguard and Avantis I'm following your Fidelity 3 fund portfolio but it seems Fidelity does not have as many funds as compared to Vanguard but Fidelity has a better return. I'm a bit of a Vanguard averse as they are getting money grabby I don't know what that means. Thanks Don and Tom I've been listening to Don since his radio does back in California. Thank you for your reply Ron and John I guess he was being funny there have a wonderful day.

SPEAKER_04 28:54

That was a joke okay I get it that's good okay so the three funds we're gonna three funds we're gonna use we we got to use a fund at Fidelity.

SPEAKER_03 29:01

I got the fund F S FTI I got F S P S X Fidelity International Index Fund three basis points that came up okay that's cheaper than the one I found which was FTIA check but okay that's good yeah that's an index fund it holds a basket of international stocks okay developed and emerging and it's only three basis points 0.03 cheap cheap cheap cheap the one I looked at was six basis points six one hundreds of one percent did you use VXUS?

SPEAKER_04 29:31

Uh I used VTIAX Oh you use the fund yeah the fund okay what was the expense ratio on VTIAX?

SPEAKER_03 29:39

Nine basis points VXUS is five basis points and what's we'll get to the returns in a minute then you go to the Avantis product A V N Mm which is the Avantis Total International a lot more expensive okay but let's a lot more that's it's a lot more I know but six times higher I know when you're at three basis points or 31 because somebody wrote us and criticized this about you guys still recommend Avantis and Dimensional when it's cheaper at Vanguard and and Infidelity. It is but in a big picture sense it we're really honestly I know it's it adds up but we're really talking about pennies here it's not very much.

SPEAKER_04 30:18

And we here's what why we suggest Avantis and Dimensional they we are going to assume based on some really robust research that they can find a way over decades to generate more than that extra quarter of a percent they charge every year. The reason they charge that is because they build more complex portfolios than a pure index.

SPEAKER_03 30:47

And so what has been the three year return on the VXUS because I only had the VTIAX for Fidelities while you're looking that up F SPSX total international index of three basis points charge 19.9% a year for the last three years which sounds wonderful and is good but then when you go to the Avantis product AVNM remember Fidelity came in just a hair under 20 the AV and three year return 22.3% a year not saying it will outperform every year not even under for 10 year periods who knows but it's outperforming currently by right at 2%. I know which is a lot more than that extra quarter of a percent and how about VXUS VXUS I have I I looked through September 30th and you must have looked through October through September 30th VXUS was 20 percent 20.10 well VX VTIAX 20.8 yeah so and F T I H X was 20.27 yeah so it's outproduced by a little bit we don't know into the future if it will continue to but that's where that's a judgment every person has to make yeah we prefer to make that one but you don't have to it's we are not looking at it from a purely fee basis.

SPEAKER_04 32:17

It's not just fees. Fees are important boy are they important. But when we get down here below half a percent then it they start becoming less important and as long as we're not tripping into truly active management um these the the Avantas and the dimensional funds are still a form of passive they're a rules based not a feelings based approach yeah that's good good questions keep them coming we've got a lot of questions here let's see what's the the breakdown yeah oh yeah if you uh let's see a V X US has more in China than Navantis does um in Taiwan or actually China China okay because Taiwan's Taiwan's about the same between the two of them yeah they that's been on a real yeah Taiwan's about the same right AV and M has more South Korea which is also due to the semiconductor and they have a lot less in China.

SPEAKER_03 33:24

Okay mainland China so these are judgments that people have made right so yeah they they're they're saying I feel like yeah they all they are all fine funds and any would be fine. Our preference would be to use a Vantus in dimensional doesn't have to be yours.

SPEAKER_04 33:40

Uh do you have a room in your house that doesn't have a TV Tom did you need it? Actually I there are rooms without TVs did you find me something I found you a deal this is a really good deal um here's a 32 inch that's how remember back when we used to think a 27 inch was huge huge crazy okay this is bigger than your 27 inch console television of old console television 1960? No 70 I was selling them in the 80s okay pardon me so I used to work in the electronics department at JCPenney and I was selling console 27 inch color TVs. I love it. I remember hitting the box here you go and I remember we were selling those things for like a thousand bucks you know because they had a stereo in them and all that stuff they were really expensive. You can get yourself a 32 inch QLED high def TV for $130.

SPEAKER_03 34:37

What? $130 where is that Costco Wow that's crazy I don't need any more televisions and I don't need to watch any more television. I try to limit it to an hour a day with my wife we always have one show we watch together and then about 40 minutes a day when I do my workouts. That's it.

SPEAKER_04 34:53

And then I have my ridiculously overpriced seven and a half inch television you've got a television right there in your hand which I heard is getting some criticism for cracking or something well they have they had a few of their yes bleeding edge you're always going to face something. But Apple just says give it back we'll give you Apple's support is incredible.

SPEAKER_03 35:12

Yeah.

SPEAKER_04 35:13

So I just give you another one to you fair enough. All right questions you go to talkingrealmoney.com to ask them you can speak them or type them. If you want somebody to take a look at that messy portfolio you have and see if you have a case of hodgepodgitis which we haven't talked about in ages then go to talkingrealmoney.com click on meet and advisor and uh you won't have to pay us. You can just get some help for free. And we won't manage your money for the rest of your life for free. That will cost you.

SPEAKER_03 35:44

Nor will you get the planning around taxes and income and estate and all that shit. But you will get help.

SPEAKER_04 35:50

Absolutely go to talkingrealmoney.com click on meet and advisor. Please follow the podcast on your favorite podcasting service tell a friend or two leave us a nice review if you like us.

SPEAKER_00 36:04

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