Ep. 1998: The S&P 500 or the Whole World?

SPEAKER_06 0:36

They snuck it in before October was done.

Oktoberfest Favorites

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I had to get the Oktoberfest song in before we ended.

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And I tell you what, that's my that's my new favorite for sure.

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That's your new favorite?

SPEAKER_05 0:47

That is, you know, generally you only I don't know.

SPEAKER_06 0:49

You like the aria? You like the opera. You like the uh Edwardi choir.

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Progressive rock one. You like the progressive rock?

SPEAKER_06 0:57

Well, I mean that's the financial physicist on.

SPEAKER_05 1:00

Yeah. It's really good. But this one, I don't know. It's the first time I've made you before the program play it twice. Because I really wanted to hear it again. I just love the I love the German, I love the umpa, the whole thing.

SPEAKER_06 1:09

I'll send you a copy.

SPEAKER_05 1:10

I'm sitting around listening at home.

SPEAKER_06 1:12

So if you want to listen to the the show intros, those of you who want to hear them again like Tom, uh, you just go to talkingrealmoney.com and on the right-hand column there's a button for listening to the music. Just go ahead and do

S&P 500 vs. World

SPEAKER_06 1:23

that. Hey everybody, welcome to the show. I'm Don. That's Tom, and we're here to guide you through the rocky path, through the mountains, over the hills and vales to a better financial future. Money is a confusing mess, and we want to make it less so. And a lot of what we talk about is investing. The best places to do it, the places that make the most sense, not the places that are likeliest to make you wealthy. And there is a great debate among sensible investors, uh diversified investors, set it and forget it investors, between the whole market and what we uh tend to call the market here in the United States the standard and poorest 500, Tom.

SPEAKER_05 2:15

Yeah, it this is a fascinating topic. Um, it comes up quite a bit when I talk to you uh in our audience. Oh, you weren't looking at me. You're looking at them. I know you're invested in the total market. I am. Which I'll say at the outset, so am I. I believe in greater diversification. I just think it makes sense if you think about it intuitively. Um, but there are those who say the S P 500 is good enough. That's the 500 largest American publicly traded companies. They account for about 80% of total capitalization of the U.S. stock market. That is that the about 80% of the value of companies as decided by investors is in the SP 500. So you're leaving 20% off the table there.

SPEAKER_06 3:00

So these are the 500 biggest companies in the United States based on the value of all of their stock. Not based on any other valuation. It is how much all of your stock added together at whatever the current price in price is is worth. And it's for a certain period of time. Companies can drop out or come into the S P 500. You don't fall off the bottom for a while just because your stock value goes down. They have to remove you and then replace you with somebody.

SPEAKER_05 3:31

Yeah, and I was going to ask you prior to this, and I forgot because I was stuck in meetings. Uh, I would wish I was stuck in this. I might just go to my office and tear that up loud. So uh for example, when SpaceX is added.

SPEAKER_04 3:48

Yeah.

SPEAKER_05 3:48

And I don't know when that's going. I think they decided to wait a year, I believe, because they look at not just market capitalization, but they look at liquidity standards, right? How much stock's available to trade. They look at profitability metrics, which I don't think SpaceX has ever made any money when you look at, you know, kind of the uh the top line minus all the expenses, before they add them. And as Don said, yes, somebody's got to leave for somebody to show up because it is Standard Force 500, right? Um, and there's nothing wrong with it. It's a very fine index. It's a good look at the larger companies in the United States of America, as I said.

SPEAKER_06 4:28

Well, it's a better index than saying the Dow Jones 30 industrial app.

SPEAKER_05 4:33

Or even, you know, even the NASDAQ, because that's where a lot of attention's been. Certainly the last 15 years, certainly going back to 2000 or so, where you know it was easy money to be made until the NASDAQ, what was it, 100 went from 5,000 to 1,000. So, I mean, it's the concentration risk there. So, should you the debate is should you just own the SP 500 or should you own the world? Now, we already stated our preference for owning the world. I just prefer it just allows me to sleep better knowing I'm diversified around the globe. There'd be people here that say, why? What you're not a good American? You're not a good American? What's wrong with you?

SPEAKER_06 5:14

It's not about uh uh patriotism.

SPEAKER_05 5:16

But meeple make it about that from time to time. Trust me. I I hear it. Um this is and this is from an Investopedia piece where they say, and this is interesting to me. The it says the SP 500 index fund often has less volatility than total market funds. Now think that through for a minute. What that's suggesting is a few stocks, not very diversified in my book, because by the way, when you own the globe, you own somewhere between 12 and 13,000 companies, is less volume. Now I looked it up. I went back and looked at a few places to see it's very close. It is very close, both in return in terms of return and in terms of the standard and horse or standard deviation, pardon me. I mean, it how much it goes up and down. Both they're the the two are very close, and returns are very close. And it somewhat depends on there's some nuance to all this who you ask, because now at IFA.com, thank you, Mark, for always having these numbers up. He actually doesn't have the SP up anymore. He has U.S. large cap um as an index. So it's not quite the S P 500. By the way, before I forget, did you get a chance to find out when we're adding our friend Elon Musk to the case? Oh, yeah, yeah. I didn't want to interrupt. You were on a roll.

SPEAKER_06 6:32

That would be nice. There well, there's a 12-month rule for the SP 500. You have to be public for 12 months. But you were right. There is also a profitability rule. Yeah. The a you must have positive GAAP earnings over the latest four quarters and the most recent quarter. So a year and a quarter. And SpaceX for 2026, for the first half of 2026 alone, has posted a 4.8 billion dollar loss.

SPEAKER_05 7:08

So, okay, so what you're saying is it's possible. And I think there will bend the rules because it's so big that they wouldn't even be in in a year, is what you're saying. Still, yeah, they could add it.

SPEAKER_06 7:18

They could. But the cor their rules, though, they have to I think those rules are pretty strict about the company.

SPEAKER_05 7:27

I guess we're about to find out. Because remember, they were talking about busting it when it went public because it was such a huge company.

SPEAKER_06 7:33

Yeah, huge company. I don't know. I don't know. I mean, really, I mean the time will tell, but wow, that kind of a price for a company that has posted huge losses. And really, I know space is the final frontier. But uh is there that much money?

SPEAKER_05 8:00

I mean, and you're you're saying that uh on its launch, it's been, you know, the liftoff has been kind of slow, is what you're saying here.

SPEAKER_06 8:07

Well, no, the the liftoff's been very good from a stock standpoint. Okay.

SPEAKER_03 8:11

Yeah, raising the money.

SPEAKER_06 8:13

But you know, it it looks good, but they're exploding when they hit the ocean, apparently, or something.

SPEAKER_05 8:18

Yeah, I saw that too. All right. So back to the so okay, so that's still on the sideline because if it was added today, it would be like the second or third largest company or something that has a huge market cap. I forget what it is, but it's large. And not that much of it still traded because there's still a lot of tie-ups, right? From people that owned shares for years, and then they have to wait for a period of time. So there's not much moving around of the stock, I guess. So at any rate, um, what are you to do? Because here's what I see with a lot of people. A lot of people own the S P 500, and then they own a total market fund, too. Now, I think they often forget that in that total market fund, guess what?

SPEAKER_06 8:54

A large hunk is in the S P 500. Maybe the largest hunk is in the S P 500 just because most, not all, global funds market cap weight. Exactly.

SPEAKER_05 9:09

So you still end up with 60% in the S P 500, 5% in U.S. small cap, and then the rest in international. And remember, by the way, home bias plays a huge role here. If you go to Germany, people have about 85 or 90% of their money, guess what, in German stocks. And they're sitting around playing the Yumpaw band over and over, drinking out of the Stein.

SPEAKER_06 9:32

I was massive. Uh I remember the across the street was a bigger.

SPEAKER_05 9:37

Go Raiders, by the way. Those Auckland Raiders are good.

SPEAKER_06 9:39

That had the a stock ticker on it. And it showed the new the New Zealand index. Didn't show the SP or the uh MSCI All-Country World Index. No, it showed the New Zealand Index, which I mean, how many stocks can be in the New Zealand?

SPEAKER_05 9:59

It's it's fairly limited. If you go to Japan, it's an even higher percentage that people have just invest in the Nikkei. Uh fascinating. And by the way, they had to wait like 35 years to get their money back just to get back to where they started in like 1990. Took forever. And that to me is a such a telling lesson to all of us because the United States, yes, it's been the best place for the last 20 odd years. Really, since, well, 2000, 2009. I know you're going to want to talk about that in a minute because I think it's a great example. But certainly since 2008, 9, 10, U.S. has been the best place to invest. No question. So people think, well, then it has to be in the future. Well, no, Japan was the best in the late 80s, and it then it went, as I said, went through 35 years of crummy. But think about when you're only investing in the SP, all the things you're giving up. You're giving up smaller companies, you're giving up smaller cap value companies, you're giving up the entire international market, including emerging markets, which have been the best, I think, still since uh going back like 50 years, and by the way, the far best the last year as well. Um, so to me, it's a no-brainer. This comes up regularly. I I mean, what how would you best explain this to people that say, no, I'll just be in the SP 500?

SPEAKER_06 11:20

Well, I would say consider the plight of New Zealanders who are in the New Zealand 50. 50. The New Zealand 50, because they don't have enough companies for a 500, not publicly traded anymore. And let me just give you the top 10 stocks.

SPEAKER_05 11:37

Because you're gonna know them right off the bat, right?

SPEAKER_06 11:39

You're gonna know these. Oh, yeah, you're gonna know these right off the bat. And yeah, okay. It's telling you how bad it is in a and it I'm using this to make an example. If people invest in their own country, they're leaving a lot of good companies on uh on the table. For example, if you just bought New Zealand stocks, your number one holding would be Fisher and PayCal Healthcare. Not Fisher Investments. No, Fisher and PayCal Healthcare. Okay. Wait, you're number two. Think about this for a minute as an investment. The Auckland Airport.

SPEAKER_04 12:13

It's taking off, I guess you could say.

SPEAKER_06 12:15

Meridian Energy, Infra Infratil, Mercury? Don't know. Contact energy, don't know. Main freight, probably freight, A2 milk, guessing a dairy company. The port of Taranga, hmm. A port. Are they known as good investments? Not generally, no. Stop going in and out of them. And then a company called Vector. I don't know any of those. As a matter of fact, I was going down the list of the 50. The only one, I think I knew two of them. Really? I think I knew two. More than I know. Uh well, no, you know Air New Zealand.

SPEAKER_05 12:54

I do, of course I know Air Zealand. Okay.

SPEAKER_06 12:56

And Westpac Banking. They're actually global, but they're based out of New Zealand.

SPEAKER_05 13:03

That's it. How has the index performed? Is it down under?

SPEAKER_03 13:07

Or is it bad.

SPEAKER_05 13:10

Ah,

Diversification Wins

SPEAKER_05 13:11

I mean, that would be the question. But it's fairly limited in the companies.

SPEAKER_06 13:14

So if you were just the thing about the S P 500. Exactly. It's 500 stocks, and yet you can own 10,000 with a global index. Why would you not own the 10,000? I think.

SPEAKER_05 13:29

Because I think people look at the returns of the last 15 years and say I would have made more in the S P 500.

SPEAKER_06 13:34

Yeah, but then, you know, I know that some of you young'uns weren't were just little ones or weren't alive in 2000.

SPEAKER_05 13:42

But the 2000-2009.

SPEAKER_06 13:46

Yeah, the 2000-2009 number, the S P 500 lost a little over 1% per year. Per year. Per year. For a basically a decade.

SPEAKER_05 13:56

Yeah.

SPEAKER_06 13:56

It lost a total of about 10%.

SPEAKER_05 13:59

Wow.

SPEAKER_06 13:59

Uh over 10 years. While a globally diversified portfolio, and I think at the time it was about 13,000 stocks. We have fewer stocks today. It was just under 7% per year.

SPEAKER_04 14:11

Per year.

SPEAKER_05 14:12

Per year.

SPEAKER_06 14:13

I mean, a decade. That's substantially better. It's a positive as opposed to a negative.

SPEAKER_05 14:20

And then since then, since basically, I I think I may have misspoke. Basically, since 2009 or 10, the U.S. market has vastly outperformed this global basket, right? For 15, 16 years, 17 years. So people just say, well, then that has to continue. I look at the other way like, no, the opposite would be. And by the way, the last year and a half, guess what's done better? International stocks, emerging market stocks, emerging market value, all those. Not to say we didn't know anything about what's going to happen tomorrow, but if you're looking at trends, these things have a way of coming to an end and the things shift.

SPEAKER_06 14:55

Not New Zealand's. The NZX 50. Uh-oh.

SPEAKER_05 14:58

Yeah.

SPEAKER_03 14:58

It's going down under.

SPEAKER_06 15:00

10-year average annual return is 6.6%. Although they give you something, if you're a New Zealand investor, you get a thing called an imputation credit. Not an amputation credit.

SPEAKER_03 15:13

I don't want to sign up for that.

SPEAKER_06 15:14

And for some reason, the government is subsidizing investing in New Zealand companies. So you get that's raised your return to almost 8% a year over 10 years.

SPEAKER_05 15:23

But maybe you're looking at it wrong because when you're on the underside of the globe, the returns up to the right is so you want to go down to the left? I don't know. You have to figure that out.

SPEAKER_06 15:31

So that's just drains. That's just drains. Not draining. One way or the other.

SPEAKER_05 15:38

All kidding aside. Corialis effect. Not Don Corialis. Oh, there's a there's a flashback. Um what do you I mean when you're an investor, would you rather be more diversified or less diversified? Number two.

SPEAKER_06 15:51

If you're a gambler, you want to be less diversified if you want to do that. You only want to buy the stocks go up. You want to be more diversified.

SPEAKER_05 15:56

Yeah, you only want to buy the stocks go up. When you're an investor, is it better to have your money uh invested in numerous currencies or one? Because the US dollar isn't always the dominant, I mean, it's you know still the currency of record, if you will, but it isn't always the best performer. I'd rather have it spread out among other places. And that brings me to number three. When you're investing in stocks, would you rather be all invested in one economy, the US and United States, or around the globe, not knowing that South Korea and Taiwan and some of those places will produce what do they produce the last? Oh, that's right, the chip thing. Um, and take off. We don't know that's coming. That's why I I again I trust diversification. I don't trust even 500 stocks. Sorry.

SPEAKER_06 16:44

Okay. Well, uh, with that said, now we turn to your questions. Now, Tom, uh, I know you love your paper, but sometimes you actually like to call people. Are you gonna call someone today? Yes, I am. All right. So, ladies and gentlemen,

Roth Conversion Strategy

SPEAKER_06 16:58

here's Tom calling one of you.

SPEAKER_05 17:02

Let's go to Salt Lake City where Mike joins us on Talking Real Money. Mike, thanks so much for being part of the program. How can we help you today?

SPEAKER_02 17:11

My pleasure. Um my question is really related to our Roth conversion strategy. Um, my wife and I are 65 and 64 year old years old, respectively. Um, we've been retired for about six years. Uh, we have approximately five million uh in various retirement and after tax accounts. Uh most of our living expenses are covered with other very secure income. And currently we have about 1.1 million in an IRA and 2.3 million in a Roth account. And we don't expect to have to draw on either of these accounts for at least the next 10 years. Uh so my focus has been primarily on tax efficiency today and going forward, with a goal of uh at least in my mind staying within that 12% federal tax bracket, and we've got a four and a half percent state tax. Um so uh with that in mind, um looks like we would convert between 50 and 60,000 a year, uh, which puts us right at the top of that 12% tax bracket with the current senior deductions, and some of those obviously will phase out in uh in two or three years. Um my concern is that even if we have a conservative estimate of the IRA account, maybe it grows five percent over the next decade, uh, probably not going to put much of a dent in the future RMDs. And the question comes down to um, do I need to be more aggressive with those Roth conversions, at least for the next five years or so until age 70 when my Social Security turns on.

SPEAKER_05 18:52

Yeah, you got a lot of moving parts there. I mean, I here's the thing. I love the 12% tax rate, so I wouldn't want to mess with that, although I don't like hearing I always forget the state you gotta throw on top of there. Um I so I wouldn't want to bust that. I think you correctly pointed that out that you don't want to go above that. That would be part one. Part two is I would have to have the cash to pay the tax, which it sounds like you do in a taxable type account.

SPEAKER_02 19:15

That's correct.

SPEAKER_05 19:16

Okay, so that's covered. Um, but as you correctly point out, with any growth over time, that's you're gonna be kind of back to the future here in 10 years when you have to start taking the money out. Um so it doesn't and and I guess the fact that it sounds like you have almost two-thirds of it in post-tax, you know, Roth or taxable anyway, uh, which is which is a lot. Um, and I gotta ask a question. Are you charitably inclined? I mean, is this money you could give away as a QCD? Uh you know, when you when you reach the uh required minimum distribution age?

SPEAKER_02 19:49

Absolutely. Uh that is uh one of the things that uh we will consider doing once we get to that 70 and a half age. Um the other thing that I uh failed to mention is what is also out in the future is a uh an inheritance. Maybe it's five, 10 years away. Um it's about $1.8 million, of which another eight of that $800,000 or so is gonna be inherited as pre-tax assets. So there's uh another uh variable to the equation, I guess.

SPEAKER_05 20:21

Yeah, which as you know will have to be drawn out in 10 years, and you can run the numbers. That's gonna be, you know, as much as perhaps $100,000 a year, that's gonna be taxable, that's gonna be kind of messy. I I guess at the end of the first, number one, the first rule is you got it covered, right? You don't want to bust the tax rate. Number two, you got the cash to pay for it. Number three, the is always the toughest part, kind of anticipating future tax rates. I try to take tax rates as they are today because we just don't know. I think you mentioned something about senior deductions coming off. Nobody uh never knows what tax policy is gonna be starting tomorrow. These things change very, very quickly. If it were my money, um, I wouldn't do this without a very careful running of you know calculation. And I do it probably annually. Um, and you know, because of the inheritance come in, that can change things, et cetera, et cetera. And there's if you're gonna do it on your own, Bolden, there's some other really good, you know, planning devices online where you can enter those numbers and kind of give you a feel for what it's gonna look like. Because I'm not sure. Because what at the end of the day, what you're really trying to do is game the tax system and save yourself in later years. I'm not sure that's gonna save you very much for the reason that you pointed out. Um, that with any growth, and it's gonna be, I mean, let's assume 5% growth, which is it's certainly been far greater than that. Uh, and you could put all your bonds in there, so that would keep it lower. But even at that, it's not going to save you that much. So I probably, here's what I probably do I'd probably do up to the 12%, not bust that, pay the tax on that, and use that strategy moving forward. But I would also run the calculation every year just to see what it might look like down the road. There's no perfect strategy here again when. And people are our clients. We run it every year to kind of see what it might mean, you know, for the next year of taxation, et cetera, and tax rate. But there isn't one sort of set it and forget it kind of uh our pardon me, uh Roth conversion strategy for the long haul. I just don't know of one.

SPEAKER_02 22:16

Yeah, understand.

SPEAKER_05 22:18

I think you're doing a lot of things right. I mean, I love the fact that you have the income. I mean, I think you should think about either gifting or, as I said, uh qualified charitable distributions at some point, um, those kind of things that would, you know, eliminate paying tax on that withdrawal that you have to make, support the charities you think are important. Um, but other than that, I don't see a whole lot of clear path here to just sort of fixing things so you can pay less tax in retirement.

SPEAKER_02 22:43

Well, I appreciate the the feedback. I think we're kind of heading down the right general path. I was just looking for uh another opinion just to kind of confirm or or question the strategy.

SPEAKER_05 22:53

Yeah, I think I think I can pretty well confirm it. Um again, I I I would probably undertake some of it as you discussed, pay the tax on that, and then sort of see how see what the world looks like as it continues moving forward.

SPEAKER_02 23:06

That sounds great.

SPEAKER_05 23:07

Thank you so much for being part of the program. Really appreciate you uh your willingness to be on here. I can I hope you'll tell others it wasn't that painful. And uh and please keep listening.

SPEAKER_02 23:17

Will do. I enjoy the show.

SPEAKER_05 23:18

Thanks, Mike. Take care.

SPEAKER_02 23:20

All right, thank you.

SPEAKER_06 23:21

Oh my gosh, that was so much fun. Yeah, I don't I don't know how you can top it with your paper questions. Uh that's just better that way. I but you gotta try anyway. It's required, it's in the contract. You must read paper questions. So read one for us, please.

Bonds, CDs, and Safety

SPEAKER_05 23:34

Yeah, I from Zaniesville, Ohio. Oh, I think it's Zanesville.

SPEAKER_03 23:38

I'd like I like saying Zanysville.

SPEAKER_04 23:40

Is there a Zanysville? There should be. No, there is just a Zanesville. Okay. Sorry, Mark. I think that's the heart of Amish country.

SPEAKER_05 23:47

I think you're right. It's a great question, too, by the way. I gotta say, Mark, thank you. Uh he says, Tom and Don, I appreciate all of your helpful information on the show. Thank you for genuinely caring for people's financial future. That's among the nicer comments we've ever gotten, actually. And that is true, by the way. We do care about your future. I have a question about the bond portion of my portfolio.

SPEAKER_06 24:08

First, if bonds, everybody has a question about the bond portion of their portfolio. Lately, lately, per se.

SPEAKER_05 24:13

Because it's going down. Uh, first, if it's gone down. First, if bond funds ETFs such as BND have an average annual return of 2.8% over the last 20 years, with the potential to lose money in a rising rate market, doesn't it make more sense to put my safe money, which is in bonds, into CDs paying 4.3%, or at least the money market account paying three and a half. Neither have a risk of loss and in a larger portfolio, say 400,000 on a 6040, that would be equal to about 14,000, 18,000 dollars a year. Am I missing something? No, you're not. Well, okay. Okay, but looking over the longer haul, bonds have made you more money, and Don's got-I know what he's gonna say. Yeah, you've had some volatility. That is true to be in a bond fund. I mean, we had it in what, 2022? The worst maybe ever. You have it going back to the Yeah, and that's the thing.

SPEAKER_06 25:11

Okay, before we before we paint bond funds with this really broad negative brush, you have to remember that recent performance is has been battered by one really bad year, 2022. That's right. C and D lost over 13% in 2022. Well, this is from a fund whose expected returns haven't been much more than three or four percent because of the bond market. Remember see, we forget. Remember when rates were low? Yeah. Remember, and you couldn't get more than like two percent or less uh uh on your uh for your money? I mean, it was really low. You could get two percent or less. I mean, I got a mortgage for two and three quarters, for heaven's sake. So I think this misses the whole point. Yeah, well here's the thing. One, BND doesn't have 20 years. I don't know where you got this 20-year return. It hasn't been around for 20 years, it hasn't existed. Uh BND's almost 20-year return is just over three percent. But that is hugely impacted by one year alone. If you take that one year out, that return goes up to about 3.6 percent. I used to be able to do that. Which when you have low interest rate years averaging that out, that's about right. That's about what you should have made.

SPEAKER_05 26:37

You're looking at fixed income the wrong way. Fixed income is there for portfolio stability. So can you get greater stability in bonds than you can in CDs or money? No.

SPEAKER_06 26:50

No, and that's the other side of this coin.

SPEAKER_05 26:53

Gotten less money.

SPEAKER_06 26:54

This is why I have BND and a ladder of CDs. I have both. Because B N D is going to give me a faster reaction. If rates rise, yeah, the value is gonna go down, but it's gonna give me a faster reaction in increasing its return as those shorter term bonds become due and they add in longer, higher yielding bonds to the portfolio. So I'm playing both sides of the issue. Uh I have the CDs for the absolute stability, but the trick in building a ladder of CDs lies in your ability to maintain the absolute discipline. People have not proven good at that. You think, here's what you think. Okay, yeah. Like this year, you got a CD come and do in your five-year ladder. It's come and do right now. And you're reading in the paper about how bond yields are gonna rise. They're gonna rise dramatically in the near future. And you're thinking, oh, I'm supposed to roll out to a five-year 4.3, but they're saying five or maybe six, and maybe if I just put it in money market at the same rate approximately, about that four point two, I can hold out for that five or six. Ah, you just broke the discipline. Yep. You just destroyed the whole concept because now you're timing the interest rate market, and that can end up being disastrous for you if you bet the wrong direction, which is just as likely, if not more so, than betting the right direction.

SPEAKER_05 28:27

Joe, I kind of like what you just said, you know, splitting the baby here, putting some in the a C D ladder, putting some in a bond fund. By the way, he also says, Do advisors collect an AUM fee on these type of accounts?

SPEAKER_06 28:40

Yes.

SPEAKER_05 28:40

Yeah, they do. Um and he says maybe that's why my advisors never mention them. Um, because if he said if they don't charge, then maybe that's why they've never mentioned.

SPEAKER_06 28:49

No, no, they if it if you're buying your ladder through your custodian, like you're buying, like I do, I buy it through Schwab, who's my custodian for my taxable account. Uh if I had an advisor running it other than me, which I don't do, I'm one of those people. Um yeah, they would get a portion of they would get a fee. Okay. Yeah. That's part of it.

SPEAKER_05 29:12

And by the way, I'm lazy and I don't want to deal with this. So I my fixed income is guess what is in It's all in B and D. Well, no, it's a couple of, but it's in funds. I don't I don't mess with that. Yeah, you're right.

SPEAKER_06 29:24

There's a short-term fund in there.

SPEAKER_05 29:26

Yep, exactly. We do a little more sophisticated than just B and D. But I don't have to, Don has to get up and deal with it. That's fine. I do that. I do. I do.

SPEAKER_06 29:34

Every year, every year I get a notification that my one year's coming due. And I just the minute it comes due, bang. I mean, literally, the day it comes due, you don't wait around. It immediately rolls to a five-year. Instantly. Because you can't play with this because we think we're smarter than the market. We're not. We're not.

SPEAKER_04 29:52

We're not. Get over.

SPEAKER_05 29:54

Inclination is all right. We're gonna squeeze one more in here from Park Ridge,

Risk Quiz Explained

SPEAKER_05 29:57

Illinois. Ed writes, perhaps it's obvious to others, but not to me. How does the risk quiz score relate to the stock to bond ratio? If I score to 59, does that imply I should hold a 59% stock, 41% bond portfolio?

SPEAKER_06 30:15

I wish it was that simple, but it's pretty close.

SPEAKER_05 30:19

Well, it's on the emotional side. That's not the financial side.

SPEAKER_06 30:23

Right, right. So what we what we do is we've we've added to the risk quiz a table that shows you about where you should be. When you get your risk quiz report, it says in there, you should probably be somewhere in this range. But where your portfolio is invested is not just based on risk tolerance, it's also based on needs. Capacity. And well, really, yeah, your risk, your risk profile. There's a c two things. Your your risk tolerance, that's how much you can stand. That's what the risk quiz shows you. It does not tell you how much risk you need to take. You may need to take more, or you may not need to take more, and you can go lower on your stock allocation.

SPEAKER_05 31:11

Ah, this gets back to yeah, how much do you need to make on the money? Yep. Because once you've decided on that number and your planner has, and you put it all in and run it a thousand times, it works, works, works, works. Then you can build the appropriate portfolio. Hopefully the risk quiz says, yeah, you should be comfortable with this much up and down.

SPEAKER_06 31:30

It's a guide, it's not an absolute uh uh whatever I meant. Roadmaps.

SPEAKER_05 31:37

So the holidays, by the way. I was thinking we would package that up and sell the home version, which includes electrodes. You could sell that for the holidays, I think be kind of the risk quiz with electrodes. Okay. We'll show you how to turn up the volume.

SPEAKER_06 31:51

I know that uh I've I've been watching uh reruns of uh of Boston Legal. And I know you and William Shatner both suffer from mad cow disease. But but dude, um having that ahead of the electrode joke like I use it here regularly when people come in.

SPEAKER_04 32:11

Do they do they chuckle? Yes, they do. It still works. I got about four. They call it polite tittering.

SPEAKER_03 32:17

Whatever. I'll take my titters and get the hell out of here.

SPEAKER_06 32:22

Speaking of young Frankenstein.

SPEAKER_03 32:24

Yeah, exactly.

SPEAKER_06 32:25

And the knocker.

SPEAKER_03 32:26

We'll please leave that. I'm sorry. That's it, I think, for today.

SPEAKER_06 32:30

God bless. All right. I think we have to go now. We do. We really we have to leave now. I'm sorry. Thanks for being a part of us, though. A part of us, a part of you. We're all together all the time.

SPEAKER_04 32:41

Imputation, sure.

SPEAKER_06 32:42

What are we doing when we get together? Well, we're talking real money.

Disclosure and Goodbye

SPEAKER_01 32:53

The opinions we've expressed in 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. 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. Information presented on the podcast is not personalized investment advice from Offello 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. Plus performance does not guarantee feature results, and profitable results cannot be guaranteed. We hope you realize that the information provided on TalkingRail 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 Apello Wealth, a fee-only registered investment advisor. See AppelloWelph's ADB Part 2A on our website for information regarding Appellos fees and services. Apello Capital, L L C D B A 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 SDC or any state securities authority does not imply a certain level of skill or training. Apello 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. And the lawyers get richer.