What If It Did Work?
What If It Did Work?
From Market Chaos To Retirement Income
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You can grind for 30 or 40 years building wealth and still get taken out by one bad decade, one tax mistake, or one panic sell. That’s why we sat down with Ron Deutsch, a former Wall Street fixed income pro (Bear Stearns) and CFA who now helps families at Magnus Financial Group turn portfolios into durable retirement income machines, not stress machines.
We get practical about capital preservation and real-world risk tolerance, including why most people only discover their true comfort level after they lose money. Ron explains how he thinks about diversification when the S&P 500 is dominated by tech, why a long-term wealth management plan beats reactive trading, and how a small 1% to 5% “high beta” sandbox can keep the urge to speculate from infecting the rest of the portfolio.
Then we go deep on fixed income and the misunderstood power of bonds. Ron shares how individual bond portfolios, credit risk, preferreds, closed-end funds, and selective covered call strategies can produce meaningful yield, and why the classic 60/40 portfolio isn’t “dead” so much as dependent on what’s actually inside the 60 and the 40. We also talk alternatives, tax-efficient investing, loss harvesting, MLPs, and what entrepreneurs should do before a liquidity event so they don’t waste their one bite at the apple.
If you want clearer thinking about retirement planning, portfolio risk, and building income you can live on, subscribe, share this with someone nearing retirement, and leave a review. What part of your financial plan feels most uncertain right now?
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Cold Open On Holding Back
SPEAKER_00I never told no one that my whole life I've been holding back. Every time I load my gun up, so I can shoot for the star. I hear a voice like, who do you think you are?
SPEAKER_02All right, everybody, another day, another dollar, another one of my favorite episodes of my favorite podcast, because I am biased. What if it did work? Already five years. Wow. Gotta say, welcome back to the what if it did work. Today we're talking about something most people don't want to think about till it's just too late. You spend 30, 40 years building wealth, grinding, hustling, saving, investing, maybe taking some risk. Then suddenly the question changes from how do I grow it to how do I not lose it? Our guest today has seen both sides of the financial machine, spent decades inside Wall Street at firms like Bear Stearns and BP Parabus, structuring bond departments, analyzing risk at the highest level, earning his CFA, and operating where billions moved with the keystroke. Now at Magnus Financial Group, he helps individuals and families protect what they've built, create income in retirement, and avoid the landmines that can derail decades of work. You've ever wondered how safe is your portfolio really? Are bonds boring or are they just really just a secret weapon? And what does smart retirement planning actually look like in today's market? You're gonna love this conversation. Please welcome Ron Deutsch.
SPEAKER_01How's it going, sir? I'm good, Omar. How are you today? It's been a uh long today was a tough day in the markets, but in general, it's been a it's been a good good ride the last uh the last few months. And with the world, things are just changing so quickly now. It's it requires a lot of uh lot of on hands duty watching uh watching what's going on.
A Tough Market And Tech Concentration
SPEAKER_02Well, it I would say this year's been more challenging than most. The magnificent seven, six out of the seven are are in the red. They're not so magnificent anymore. Yeah, yeah. Before it was just easy. You just throw money at Tesla, Apple, Amazon, and just just ride it out and just you know, uh think that you're you're on the fast track to easy street. Now, now this this is where the real to me, this is where the real money takes shape because a lot of people have it the opposite, don't they, Ron? Where it it's more of let's buy high, panic, and sell lower.
SPEAKER_01That's that's a fair statement. Um, you know, we at my firm and myself take a more diversified approach. So, you know, whereas technology now is about 40% of the SP 500, um, we have tended to focus more on kind of the equal-weighted index, which basically is a much more diversified index. And as a result, we may, we don't, we will not typically make 30 or 40 percent in a big year when these tech stocks are flying. But at the same time, when the market's crashing like it did in 2022, we may only lose a quarter to a half of what the markets is as well. Capital preservation is a major tenet, what we do. Um, and the way the numbers work is you know, you know, if if a if a market goes down 50%, it's got to go back up 100% to break even. We try to manage money to limit that variability of returns. So as a result, diversification between asset classes, whether it be stocks, bonds, gold, altern other alternatives, or within the equity category as well, you know, I, you know, we'll overweight energy, for instance, we'll overweight industrials, we'll buy, you know, gold, et cetera, et cetera. So we we don't get caught up in the you know, what's the flavor of the day? We try to stick to our knitting, try to put together a long-term investment model, and one which we will, you know, we may tweak it a little bit each year, but in general, it's of a more of a long-term plan nature that we set things up. It's not a trading environment by any means. Um, and and that's next.
SPEAKER_02I'm sure you get that though. A lot of people they look at the advertisements from investors business daily about swing trading, all these high beta. Well, you know, why can't we why can't we go more, Ron, and and Palantir, and just load up on Broadcom and all these super sexy names that you know within the past six months to a year, they've just crushed it. And I I'm sure you've seen the reels. If you'd have only had ten thousand dollars invested in such and such, it would be like NVIDIA, wasn't it?
SPEAKER_01If you've only had 10,000 about 7,000 percent the last five years, correct.
SPEAKER_02Yes, exactly.
SPEAKER_01Now, I think you know, but the whole thing is is when we we when I get new clients coming, what we'll try to do after we go through our plan is if the client has the assets necessary, I have I've done this with a few of my clients, we'll set up a 5% high risk, high beta basket, basically, which will then play in a lot of the things that you're mentioning. The key is is to to to to to right size doing that as far as what what we do with. So, in other words, percentage-wise, we'll typically limit it to one to uh to five percent, maybe in the basket. With the rest of the portfolio, be more of the safe stuff. I'll give you an example if you'd like. Now I've got a retired woman of 80 years old who subscribes to Jim Kramer's investing club.
SPEAKER_02You know, well, you know, you're supposed you're you're supposed to do the opposite trade. You're supposed to short the stocks.
Diversification And The Drawdown Math
SPEAKER_01Unfortunately, you're you're you're probably right. So she used to call me every morning to do a trade. And finally, I realized because I watch CNBC also, I just watch it and I realized where all these ideas were coming from, and I finally confronted her with it. And yes, she's a member of it. So I said, look, woman, woman has about$8 million with me. I said, let's take 5% of your portfolio. We're gonna set up a separate account, and that's gonna be your daily trading account. And you can trade as much as you want with that account because I'd done the work with financial plan with her. And given that she's retired, the idea was to make when she came abroad aboard, was to create a kind of an ATM machine out of her portfolio, whereby the portfolio would create enough passive income that we'd cover all her expenses and she wouldn't have to worry about anything the rest of her life. And then the balance of it, we have some growth and some other things. And then she was so crazy about it, we set up this little 5% high risk basket, which for a year or two in 2020 with after COVID and 21, you know, she'd call me up telling me what the value of the account was all the time. And then 2022 came and I never heard from her again because that was the year when the markets absolutely crapped out. So she people people don't know what their risk tolerance is until they lose money, basically, Omar. And that's when you look at it.
SPEAKER_02Warren Buffett said it best with his his rules on on losing money. The the first rule is to make money, and then the second rule is to look at rule number one. Right.
SPEAKER_01But but it's when people lose money. And in fact, that's an important part of you know, when when I'm when we meet, when I meet a new client, the the one thing that I try to get to before I ever start investing a penny for them is what truly is the risk tolerance level that they really have. And people always think they can, they're they're more than happy to take more risk than they really are until they start losing money. And that's that's exactly that's a very big part of what we try to get to in the end.
SPEAKER_02Well, the the best part for what people don't realize, too, is when you watch CNBC, and it's not just Kramer, it's it's it's more like fast money.
SPEAKER_01Okay, so stop right there. One of the guys who I hired into our firm is a fast money guy. I'm not gonna say who it is, but he's he's become he he joined us and was my was helping uh actually, he's he's he worked for me for a while, still does too uh as a business development guy and now has become an advisor. And his approach is much different.
SPEAKER_02And I mean, uh one when you watch that show, I mean it it you you have to have big stones to uh yeah, high risk because they they're always talking about beta, everybody's chasing beta. So to me, I mean, I I definitely wouldn't I'm glad she watched the Jim Kramer and she wasn't thinking about doing spreads and and calls and and whatnot, and listening to the fast, fast money guys, and and you know, go go listen to Joe Terranova and just go and we we have to sell right now, but but we just bought like four days ago, right?
SPEAKER_01So yeah, well that that that's that's for a 1980s, 1990s go go brokerage type firm. We're we're a wealth manager, you know. We try to put long-term plans into place. Uh, we'll make adjustments, we'll make some tactical trades, but the idea isn't to flip into meta one week and flip back into uh to Amazon.
SPEAKER_02People do that though, and then they get burned. They it's like a hot stuff.
SPEAKER_01Buy high, sell low, right?
SPEAKER_02Yeah.
SPEAKER_01Uh exactly.
SPEAKER_02Exactly.
SPEAKER_01Those aren't the kind of clients, quite honestly, that I our firm or we really are looking to handle.
SPEAKER_02That's not there are firms that are like that, but that is not the kind of or or they'll just they'll just jump without even really doing any research. Right. Well, the magnificence is, yeah, sure, they're down now, but you know, it dollar cost average, the you know, if you bought it at this much, it's a it's for sale now. Let's buy it. Or hey, why can't Palantir go another 200, 300 percent? Well, because most stocks, you know, you you miss that run. Right.
SPEAKER_01I mean reversion. Yeah, that's exactly right. I mean, look, the the bottom line is that we're a wealth management firm. Um when we meet with with clients, the idea is to first sit down, get to know them, find out what their risk tolerance is, what their family life is like, what their values are, what their values are toward money, et cetera, et cetera. And then after we put all that together, um, make sure there's a personality, a cultural fit with the with the individual on both sides. Um, and after that, then the idea is to put together a balance sheet, an income statement, a cash flow analysis. And then off of that, find out how much risk they really want to take. Then we get to an asset allocation. And typically at our firm, we'll you we we have two in-house equity managers, but we use a lot of low-cost ETFs, a lot of sector ETFs to get you the exposure you need to the different different um asset categories and asset classes. Um, but we're an RIA. So we unlike the big banks where they're flipping stocks in and out, that's not what we do. We basically are looking, we're if I do trade to our clients, and we basically try to provide them with the lowest cost and the most objective advice they can possibly get.
The 5 Percent Trading Sandbox
SPEAKER_02So then you're you're you're actually servicing the clients. You're you're not like what most, well, I've got this guy, my guy.
SPEAKER_01No, no, no, no. But bottom line, okay, so that's the difference, too. Our firm is a mid-sized firm. Um, me and my partner are the ones who are accountable for every investment decision that goes into putting into a client's portfolio. So, unlike the bigger firms, like you just said, where you may have some interface representative you speak to, and then he's got 85 guys behind him who are putting, who are doing the numbers, and there's nobody who's accountable. So if things go wrong, what do you point the finger at? And that guy's gonna say, well, that wasn't me, it was those guys. With us, it's all it's all about, you know, customized service, it's about individual attention. Um, and and in all honesty, we probably provide more service and more individual service for the same price that for a lesser price than you're gonna get at most of the other firms. There are no commissions. We're never like I said, we're fiduciary. And bottom line is that you know, other than a management fee, there is nothing else that a client pays to us.
SPEAKER_02Well, and you're not putting people into no loaded funds. Like in the the world of uh brokerage accounts, usually, you know, people tend to load the American funds and those with with the the loads.
SPEAKER_01Well, yeah, and also very often, you know, we have an open architecture platform. So unlike the big banks, we do not receive any compensation for putting people into those funds from the fund company itself, which is a big difference. Most of the big banks, whether it be even the private we do private investments, hedge funds, we do real estate debt, we do venture capital, we do private equity. All the firms we deal with, we've done our own due diligence. And these are the guys that we like and think make sense. We do not get paid any kickback or any penny or any any money from any of them to do it, unlike the big banks, which you have to be on their platform, and they collect 20% of the management fees in typically that that are charged to the client. So there is a kickback, there's a there's a lack of objectivity that goes on there, which we do not have.
SPEAKER_02Now, Ron, been meaning to ask you this since uh I do know your background. What was it like working at Bear Stearns and what did it teach you about risk that most retail investors they'll just never really understand?
SPEAKER_01So okay. So I bear well, first of all, bear was a culture which is never going to be reproduced anywhere else on Wall Street again because it it would it was a true, it was a eat what you could kill kind of culture, simple as that. Now, I was not a retail broker there, I was an institutional salesman. Uh so I dealt strictly with um money managers, insurance companies, pension fund managers, you know, pretty much well, well-heeled, well-informed, well-educated people. So to get business done with them, I had to know what I was doing and be able to convey that idea and get them to see my point of view, why something made sense as a value. Um as far as the firm itself went, you know, it was a very tough culture. And I saw a lot of stuff go on where, you know, that was a commission-based business. So even though I had to, because I was dealing with smarter and more educated people, you know, you can't just take advantage of people. They're too smart. They're smarter than I am. Pimp, the guys at Pimco know a lot more. So I actually had to explain to them why my idea made sense. And if they bought into it, it's because it didn't make sense. Not because they just said, okay, I'll take it and I'm I got paid a lot of money to do it. It was not a financially motivated thing. But that being said, the retail side of Bear Stearns was a lot of the dirty stuff that went on. People were when when things couldn't get sold, they put extra commission in it and it gets sold to somebody. Fixed income specifically, which is a very opaque type of business, unlike stocks, bonds are not listed on exchange. It's hard to find prices of what things are worth. So when you as a client hire a hire someone to build a bond portfolio, the commissions that are chat are are jammed into those bonds tend to be fairly high. I, having the bond experience I have, at our firm, we don't get paid, as I said, anything beyond our management fee. So I build individual bond portfolios for clients, meaning that rather than just buying mutual funds, I'm actually buying the individual bonds. And I will make a I will build up SMAs with individual bonds. There's no markup involved because by law we're not allowed to do that. So clients are actually getting higher yields and wholesale prices on the fixed income instruments that we put into their portfolios. Um, we've been able to land a lot of clients because of that. Most firms you go to, they have to hire outside managers, or like you said, they'll use mutual funds where there's obviously a lot of fees and stuff locked uh put into there as well.
SPEAKER_02Well, those mutual funds, it it's uh win-lose. Well, when they yeah. Yeah, it it it's usually one size.
SPEAKER_01Tells a win heads the client loses, exactly.
SPEAKER_02Exactly. And and if if the client breaks even or you know, he comes out a winner and he doesn't notice that he was just scalped, then hey, never mind. That's icing on the cake.
Fiduciary Wealth Management Versus Hype
SPEAKER_01Yeah, but the more opaque the more opaque, non-transparent the product, the easier it is for the firm to make money. And like I said, at our firm, because of the way we're structured and being in RIA, uh, the only fee we collect is our management fee that a client pays us annually, basically. Um and that's it. So everything else is is is wholesale. And the idea is as the client makes more money, we do too, just because their assets grow. Our percentage of their assets stays the same. But if we grow the assets, then what our interests are aligned with our clients, basically.
SPEAKER_02Now you were talking about you you have that 80-year-old woman who's a client, she's retired. But what's the biggest mistake the pre-retirees that they usually make, especially now? Is it being one like heavily invested in high-risk stocks like tech?
SPEAKER_01I think, you know, I think, well, the people that I have a lot of pre-retirees, people in their early 60s who are approaching retirement, and then I've got a lot of retirees as well. Um, the pre-retirees, I don't see mistakes. And when they come to me, it's usually because they know full well they're getting to that point where they have to make a change. They're probably overly invested at that age, like you said, in aggressive, aggressive stocks, and they realize their salary is now going to go away. How are they gonna replace that that void of income that they're not getting anymore from that? So usually what it'll require is a complete overhaul between asset allocation, figuring out what kind of budget, like what are their long-term goals or their short-term goals? Because now they're entering a whole new stage of life, right? You're going from busy, active, et cetera, and working to no more work and no more income coming in. So we have to look at when do we start taking Social Security? Okay. Ten years from now, we're gonna be taking RMDs and our IRAs. What assets do what do we need to live on? What's our budget? Um, and then for me, you know, a big part of it is in we put together the balance sheet, we put together the income statement, and then we try to work backwards to figure out with what their needs are, how can we have the gener the portfolio generate initially the passive income needed to cover what they want to do from a goal standpoint, whether it be travel, whether it be just their living expenses, et cetera, et cetera. And off of that, we work backwards and try to figure out I'd work backwards and figure out what the best mix is of private-public investments between asset, uh, stocks, bonds, dividend payings, et cetera, et cetera. Um, many cases with entrepreneurs who have maybe just sold their business and have a block of stock, we may have to figure out a way to put an option strategy around it to so that we don't, we we can we can lock in some sort of gain that they have for the time being and figure out the best time to start selling it off from a tax standpoint. We don't want to sell it in the high-tax, high-income years. We want to do it when they're lower, et cetera, much like converting a Roth or anything like converting an IRA to a Roth IRA. So there's a lot of planning that goes into all this stuff. And and a big part of it for me, honestly, is if it's a big enough client, and if it's like an entrepreneur who might have just sold this company for$200 million, we try to build out a team of an advisor like myself. It's a quarterback, we bring in a tax accountant, we bring in a trusted estates and attorney, and we bring in a CPA. So it's basically try to build out a team of three or four people, and we try to have them quarterly meetings and put the whole strategy together. So it's it's what's best. That's in the case mostly of you know very well-to-do either entrepreneurs or families that that that that you know are having some sort of a change of life experience going on, too.
SPEAKER_02Now, Ron, speaking of entrepreneurs, when should an entrepreneur start thinking about wealth management?
SPEAKER_01Um probably just prior to the time that they're gonna close on whatever monetization event that they're going through, meaning either sale the business or if they're gonna IPO the business, you know, whatever, whatever that event is gonna be, um, is when they should start either looking for one or land one and start talking about what the ramification is gonna be. Because a lot of times right after that sale happens, you know, all of a sudden, you know, you get one bite of the apple and that's gonna be it. You got to make sure that you've already got some sort of strategy in place or at least the right people to give you the right advice to do it. I mean, that that's that's from a timing standpoint, you don't want to wait till after the fact. You want to do it before. It's kind of like, you know, when someone wins the lottery, it's the same thing. As soon as they went to the lottery, they they start buying, you know, they they send their, they buy a house for their parents. They do that's not what you want to get into because you you need to have a plan before you start doing that. And people, a lot of people, you know, get get newfound wealth and all of a sudden, you know, don't know what to do other than you know, think it's unlimited. And you know, we know how many sports athletes have taken all millions and millions of dollars and gone buffs, basically. And I've had two athletes, I've had two football players in the past who I I saw that happen to. I mean, the average life of a NFL player is about 3.4 years, and I had two guys who didn't last that long, and they got some signing bonuses, and you know, uh their agent told them that they had to call me every time before they make it made a withdrawal. And you know, sure enough, they both got injured, they both got cut, and now one's a shorter cook in New Orleans, and the other one, I'm not sure what happened to them, but that's it's the same type of idea. You need you need to have um smart people around you before you start doing anything.
SPEAKER_02Now, speaking of not only just athletes, but people in general, uh it we've heard about it. Uh we're we've we're we're all supposed to do this now, the traditional 6040 portfolio. Now in today's world, uh is that just old-fashioned? Is it dead, or is it really just misunderstood?
Bear Stearns And The Bond Reality
SPEAKER_01Well, 6040 uh is just two numbers. I mean it depends what's in the 60, and it depends what's in the 40. Like if the 60 is like you just said before, mostly technology mag seven stocks, it's a lot different and the 40 is US government bonds, it's a lot different mixture than having a 60% diversified portfolio versus a 40% Maybe, maybe take your I take a lot of my risk, believe it in the bond market. My 40% has a lot of high yield bonds in it. So I make up for some of the risk I'm not taking in equities and shifting over into bonds. And as a result, what that enables me to do is when my people enter retirement, the income levels I'm generating. I just had a client meeting tonight, actually, and you know, I'm averaging 7% to 8% on a bond portfolio with interest rates at three to four right now in the government market. Because I'm taking credit risk. I'm buying corporate bonds, I'm buying preferred stocks, I'm buying closed-end funds, I'm buying a lot of off-the-run things, which I know a lot about just given my old fixed income background, and enables me to generate much higher levels of income when people need it. And that's why a lot of my people with a lot less money have been able to last as long as they have, because the bottom line is that the the the fixed income portion of their portfolio has become a cash machine. And on the the the 60%, you know, are you buying growth stocks or dividend stocks? Again, it it it it's all these are all different uh different elements and recipe, and it depends on what there's no one size that fits all, even in a 60-40 portfolio, I guess is what I'm saying. It depends what your your what your ingredients are in it, so to speak. You know, and I've got clients who are 50-50, I have clients who are 70-30. And the funny thing is, is the 70-30 guy may not be more risky than 50-50 guy, depending on what's in it. Does that make sense?
SPEAKER_02Yes. And for the person looking for added income, yep. Is there ever a strategy of doing covered calls? Not not on high high beta stocks, because yeah, clearly you could it looks great when when you're getting that premium, but if it comes down like a crashing knife, you know, it it the so some sometimes that premium doesn't look as sexy.
SPEAKER_01Yeah, no, the the answer is we I'll write covered calls on, you know, individual stocks are not a big there are they're a small percentage, a medium percentage depending on many portfolios with ETFs being a lot of the other ones. However, as I mentioned before, uh closed-end funds, covered call strategies. I'll there's a couple of great covered call ETFs that I've found, which are have have protected on the downside, and they actually participate much more than most covered call strategies do on the upside because of the percentage that they actually write it. And that that's a good complement to a lot of the fixed income stuff. But like I said, um, I mean, another another actually, while we're on the topic in the way of equities, I mean, master limit partnerships are another thing, which are typically a staple in my portfolio. Those are basically um infrastructure stocks, uh oil and gas, natural gas, uh, petrochemicals, companies that build pipelines and do the actual transportation uh of energy. And because of because of tax specific tax laws with them, you know, I can generate 7 to 8% tax-free almost yields. You're only paying maybe 10% taxes. It's mostly considered return of capital or distribution there. So I can get very high after tax yields even on the equity side. And that's why when you said 60-40, that 60% can produce almost as much income at some point as as the fixed income side, which is part of you know my my my calculus when I'm doing things. But but there, that's that's an area which a lot of I think goes overlooked. It's not a big portion of the market, but it's a very, very attractive area. And and um quite honestly, it's it's it's it beats 30-year municipal bonds, believe it or not, even as a risk.
SPEAKER_02I mean, I think 30 30 municipal bonds can have a lot of risk in and people think, oh, oh, especially with the rates being so low, and you're low now.
SPEAKER_01So eventually, though, they're gonna go up.
SPEAKER_02Eventually they'll be up.
SPEAKER_01But imagine buying a 30-year tax-free muni bond with the rates super low and and you know, the rate spike, that that bond's worthless pretty much, because you can't you're gonna have to suck it up and loss, you know, take loss on it, or you just have to wait out 30 years, one or the other, but you're also locked into a very low rate. Well, that's why you know everyone says high net worth individuals should only be in munis. That's a that's a fallacy. You know, it's an absolute fallacy. And and there's lots of tax advantages. There are tax advantages even in taxable bonds, preferred stocks and whatnot, don't get taxed fully. There's a lot of there's a lot of nuances in the fixed income market that that I believe me and my firm, because of our depth and knowledge, uh, can add a lot to, and we do add a lot to our clients in that way. We're able to structure things on a on a pretty tax efficient basis with much higher yields than than most firms can get.
SPEAKER_02Well, Ron, you're gonna laugh. Uh back in the Stone Ages, only a couple of years ago, I was probably one of the last ones to have a paper subscription, uh, the daily newspaper. And there was uh here in South Florida a company that specialized in munis, and their ad was always for special, we specialize in munis for the high-end investor.
SPEAKER_01So that's why I had I I had a smirk when and and the fact of the matter too is when you read those ads, those firms when they sell those munis have probably already marked them up one or two points to begin with, anyway. So, whatever little yield you were getting before, you're probably getting an even littler yield on a net basis after that. Um, by the way, I I still read the New York Times and Wall Street Journal hard copy just to make you feel better. Okay, well then I feel better because I have my iPad, I've got all my papers downloaded.
SPEAKER_02It I I need the physical.
SPEAKER_01I need to I'm the same way as you.
SPEAKER_02Book, magazine, newspaper. I need to physically touch it. It's not the same reading it uh off the tablet.
Retirement Planning For Income And RMDs
SPEAKER_01I'm older than you, and I'm I'm with you on that one. I can read through it quicker too, because I know what to skip over electronically going through, it's a whole different ball game. But yeah, I'm I'm I'm above the stone age as well. And that's the way I'm gonna be the rest of my life, I think. I get on the train in the mornings. It's funny. I look at the whole row of people sitting, you know, in all the in my commuter train. I'm the only guy in the whole row where you see at the end of the day a newspaper, a paper newspaper on the floor next to him because I finished it. No one else, everyone else is on there, and I'm uh, you know, so whatever. Anyway, so that's neither here nor there, but but I'm I'm old-fashioned. And you know what? A lot of my clients like to read a hard, I PDF all my reports to them. A lot of them like come in the office and want to see a hard copy report. So paper is never gonna go away. I don't care what anybody says.
SPEAKER_02I I have to agree because you know it it it's just something completely different. It in fact, if if I want to read any type of news, even like if it's medical, if if I have to go to go see an oncologist, it's like, please give me a hard physical copy. I don't I don't want to open up a PDF or yeah, going to a portal. I know I've got that with my doctor's Q. Or, you know, a portal, let me create a password, let me create an account and all that.
SPEAKER_01Yes, yes, you forget it, you forget it, you gotta keep on putting new one in. I hear you, I hear you.
SPEAKER_02Uh so and it's I I love that you break it down so easy because usually of a lot of times people want to talk down. It's like they want to be that the doctoral professor speaking to to the the student when it comes to investing. It's like reads, REITs are not for you. That is so old. That's old school. You don't want to do that. There's other ways. And and and then, you know, it's like the the client, oh, it a lot of times when you talk to them like you know, they're their special ed or special needs, right? It I I mean, what type of relationship can you have instead of just you know, hey, we're you know, let me speak as we're equals. Right.
SPEAKER_01Well, I mean, I I I actually have when I go over reports with clients, it's not just how did you do? I actually have a breakdown by sector to show them, you know, here's where we did well. What does this mean? Well, here's why real estate did well, here's why they and and and and it's it's it's very detailed to the point where the client cares or doesn't care, but I'm happy to explain it to him. And like I said earlier, the more my clients understand what I'm doing, the less questions we'll get later. And also their expectations in a good or bad market are set at a fairly reasonable level. So they know what to expect if markets go down or not. Do you know how many phone calls I get like like we have like today? Today was a terrible day in the market, right? You know how many phone calls I got after the end of the day? Zero. My clients do not call me because they they can see on their statement how we did. Typically, we do better in a down market anyway. And number two is they've been with me long enough and they realize, you know, there's a there's a there's a level of trust in what I do, and and have I've been able to prove it year in, year out.
SPEAKER_02Well, Ron, imagine you'd be getting a bunch of calls if somebody had their money in Palantir and it's lost like uh 25%, I think, since the year started. Oh, easily. Yeah, they all have. Yeah, all that all of the the darlings of last year, you'd be you're you're you'd be like, can we postpone uh I need to answer like a thousand phone calls because people are bent and twisted. They they will they want to know why you know the market's down, but I'm really down uh to to start 2026. Right.
SPEAKER_01Well, it's been a tough year so far, but what I what I was I was also gonna bring up too is that you know, we've had these three great years in a row of 20% or so, give or take, 15 to 20 percent in the equity markets. Um, I don't think going forward the next five years, we're gonna have those kind of returns anymore. It's a big one.
SPEAKER_02Yeah, it's what it's history. It it if you look at a chart, what when have we had Camelot where like you know, 10 years of like you know, 20 to 30 percent?
SPEAKER_01And you know, I so so what I was gonna say was that's why earlier when I mentioned it, that's why even on the fixed income portion of the portfolio, there is I can I can I've been able to get almost equity-like returns of 78% a year there, which isn't that much lower than what you get. The historical equity return for the last 50 years in the SP is about nine. So if you're able to get seven or eight on your bonds, you don't have to roll the dice in a big way on the equity side to maintain a market-like return, but but but take a lot, a lot less risk. Um, and that's kind of what we do. The other thing we do also, and I do, is we do we do venture into alternatives. Now, I'm not talking this private credit crap that everybody reads about in the papers these days. It's blowing up. But we buy we we buy, you know, on the safer side, there's a couple of real estate debt firms, which all they do is secured real estate that's basically to sec only specific sectors, student housing, medical office space, multifamily, and self-storage. That's it. That's all we do, which are like pretty much recession-resistant types of things. Well, things that you need, like there's like consumer staple stocks.
SPEAKER_02Consumer staples uh it's like a necessity. It's not a lot of people.
SPEAKER_01Right. So the we've been the so there are pockets of alternative investments we invest in with a few different managers that we've already decided and doing for years that will hold up and have held up through all these bad times. During COVID, this stuff wasn't affected. During the 2018 problem, it wasn't affected. And even going back to 2008, 2009, people, when kids have student housing, the parents have to sign, and just let you know, they have they guaranteed the leases. So the risk on student housing exam, for example, is almost zero. It's basically, I mean, these kids have they there there's enough housing to do it, as an example. But all the other things I mentioned too, because of the aging the population, office medical space, especially down the southeast. I mean, you see HSS up here in New York, which is big, is now in Florida. You're in Florida. Yeah, you see HSS. I mean, all the New York guys are going down there because you know, it's an aging population. So we'd like to, I like to invest in demographic trends that are going the right way and whatnot. It sounds boring, but you know what? We grind at eight to nine percent on that stuff every single year.
SPEAKER_02Born equals wealthy. It's funny that we all, I mean, the mutual of you know, the oracle of Omaha retired and Charlie Munger's dead. But everybody thought all that investment strategy was boring. And look every yeah, but but right every time, like, oh gosh, that that's horrible. That's like and then when the the actual closing amount of how much Warren Buffett returned, it was like, holy smokes. Uh man, yeah, but that that's sure as hell boring.
SPEAKER_01And what you're both missing though, at the same time, when we talk about these returns, the risk aspect of it. The risk you're taking is so much lower. I mean, risk and return are the two are the two things that go hand in hand. So what people are telling you, well, my I got to return last year, this or that. Well, how much risk did you take doing it? No one ever, I mean, you know, it you're gonna laugh.
Entrepreneurs Before The Liquidity Event
SPEAKER_02It took me years to realize that because I the reason why I mentioned investors business daily was because oh, I love that swing trading left and right, but you know, paying that 40% to Uncle Sam uh uh after each short-term gain, and then I had to give the accountant the which charged me more because I that all the excess trading and having to watch and having to read and having to look at at the swing patterns and looking at charts and but but but but historically the chart was supposed to well you know it didn't. It took me years now. Now I'm more I it I'm a slow learner. It took me many years to keep it.
SPEAKER_01It's not what it's not always what you make, it's what you keep.
SPEAKER_02Exactly, exactly.
SPEAKER_01And that's why I said it initially that we are more of a wealth long-term manager where we're not flipping stocks to now just for that reason. We're very tax conscious. We try to harvest harvest losses during the year. So, for instance, during COVID, when you had that whoosh of three weeks where everything went down, you know, we I sold a bunch of things and swapped into similar things. So I I harvested a shitload of loss. Excuse me, I don't know if you can say that word. I harvested a bunch of losses for my clients, replaced it with similar securities. The markets recovered, my clients made X and they had these huge gains, these huge losses, we could then carry forward. So the next year, when when you said if you took gains, you didn't have to pay me taxes. So there's a tax-efficient way of doing it, and you just have to know, you know, that's part of of our strategy as well. But but you bring up a good point. Like I said, it's taxes are a big part of it. And and having a trading strategy and and even just you know, constantly either trading or just write writing short-term options and whatnot is fine.
SPEAKER_02It's an income and it and it does, it does um uh, you know, it's yeah, it it does until you Uncle Sam comes with with his handout. Correct, correct. He gives you that tax bill. That's right.
SPEAKER_01Why? And that's why I said earlier, too, from an income standpoint, MLPs are a great investment because, like I said, 90% of your return there is return to capital. So there's very little taxes there, and you're getting very, very high, you know, again, very high uh income yields on that stuff as well. So there's there's many ways to create tax efficient income. Um, and the idea of flipping stocks and you know, I mean, right now, you know, let's face it, the the whole market is made up of a lot of young kids who would, you know, everyone's got e-trade accounts now. Everybody's got got got got it all all the apps on their phone so they can trade all day long. That's what a lot of and a lot of these kids on your must get smacked with big tax bills, also. I mean, I can't speak for them, but but you know, even when you sell a long-term stock that you've had for 20 years, and you can, you know, I I sold some Google last year. It ran up a lot. I sold some that I had for 10 years, and I forgot forgot how big a gain, and you know, and I got this big capital gain. I got to pay this year as well. It's painful, you know, it really is. And I made a mistake because I should have done it the year before when I had generated losses. I didn't have losses last year. So I'm my worst, I'm my worst manager, by the way. My clients do better well. My wife always says, give your money our money to someone else because you can't manage our own money.
SPEAKER_02But Ron, imagine imagine the people uh it swung this high, a 70% return, Google, yeah, and sold short term, a 40% haircut on that. Unless you're the guy that only has a couple thousand dollars, any substantial amount, yeah, you better have harvested some losses or whatnot, because that bill is gonna hit you right in the face.
SPEAKER_01Exactly. And we we we do that every quarter. We try to go over portfolio, and now it's hard because the markets have got so much which bill, which which Jim Kramer, by the way, never he's like, Oh, yeah, pigs, you know, hey, sell it.
SPEAKER_02You know, you made 50%.
SPEAKER_01Yeah, but he does he does it all, I think, in his charitable trust, which I think is probably a tax-exempt entity.
SPEAKER_02So he can afford I so that's why he's like, screw it.
SPEAKER_01He can trade as much as he wants because it's it's in a charitable trust. But he sells people, he doesn't sell these people in their individual accounts, don't realize this.
SPEAKER_02And they'll imagine you know, you have a 50% return uh on like a six-month investment. Yeah, sell it. You you no pigs get you know slaughtered, but but you know, not the person that that takes a short-term gain.
SPEAKER_01Yeah, it's never you can protect yourself with that if if you're smart, which is you can use options, you buy, you buy, you lock it in with selling six-month or nine-month options again. I mean, there are ways to get around it, but they never tell you about that stuff because they're too busy coming up with the next great idea.
SPEAKER_02Of course, of course. This is the question I've I wanted to ask just because I wish I would have asked you this the day that I did sell my businesses, like about Stone Ages, five, six years ago, time flies when you're having fun. If if a Joe Peluca, an entrepreneur just like me, sells their business and they came to you for guidance on their newfound wealth, they move it on up to the big apartment in the sky like the Jeffersons, what's the first thing you you always discuss with them? Is it about preservation?
Rethinking 60 40 With Fixed Income
SPEAKER_01Yeah, but basically it's well, first I'm gonna ask them is well, what are your short-term to long-term goals? Like what do you what do you want now that you're in a different position? What what have you always wanted to do with yourself, either travel or assets or whatnot, both near-term and long term? And the next question is what the key here is if you get one bite at the apple, okay? We can't afford to blow it right now. Uh we're gonna try to set something up here where we can generate what you need to live off your rest of your life, but also keep a legacy for your kids, for whomever whomever else you want it. And that's kind of your call as well. I mean, that that's that's the point the most important thing is is to to to rein in people and make sure that they they understand we have to set up a budget so that they're within the the the the confines of what they they they have, basically. I mean, blowing it is is the biggest concern. I mean, I've got I've got a young kid who's an entrepreneur also of sorts, and when he came to me, he had$150,000 in debt all against his credit cards at 28%. And he had a securities account too. So I said, What are you doing? I said, Well, just taking a marginal loan at 6% and save yourself 23% for all this other stuff until we figure out a way to get this debt down. And then since then, I've gone in and found out he's got collectibles. He has a sneaker collection of 30 years, not 30 years, what am I saying? Sneaker collection where some of the sneakers are 30 years old, they're worth a lot of money. He's got physical gold, his grandfather left him. He's got bottles of wine. So I told him, look, we're gonna have to start liquidating some of your collectible stuff to pay off some of this debt because it's gonna be you can't, you can't afford your life at the rate things are going. So we're we're just re we're reorienting his whole life. He's been with me for about six months, but you know, it's taken me a little bit of a little while finally to get him to to agree to this stuff. But but it it's it's it's amazing just financial literacy and people understanding just how to how to it it people it it you need somebody, I guess is what I'm saying, you know, in in general. You really do. And the sooner, like I said at the beginning, you get someone to come in, sit down with you. You know, you gotta lay out your balance sheet, all your assets, what are all your liabilities, and what are your goals basically. And then from there you move it to cash flow and everything else. And then we we we put together about a 20-page plan, which shows year by year by year, based on inflation, based on your expenditures, what what you what your deficit or or surplus will be at the end of each year. And then we try to work backwards. I try to work backwards, how to figure out how to cover that that deficit if there is one and allow you to live your life as you want. It's it's a multi-stage process. It's not like a one, it's not one meeting. Okay, it's usually three or four meetings to like even get to the point of thinking of investing a penny of anybody's money.
SPEAKER_02Ron, why is it though most people are fine holding credit card debt at up to 30% instead of just borrowing on margin on their account?
SPEAKER_01Why are they?
SPEAKER_02Yeah, like like like if you I'm sure.
SPEAKER_01I don't think people are aware of people are people, you know, things like I mean, unless you're in the business margin and margin rates, and that uh I I just think it's just a lack of financial literacy, it's just a lack of education. I mean, it's a this business, the whole business of money management and and finit and wealth management, and you know, as I said before, there there are a lot of uneducated bad actors in it who wouldn't know what to do, but but there's a lot a lot of people are scared. They don't know what you know, money is a a scary thing. First you don't have it, then you have more than you've replaced you have it. Exactly. Right? It goes one extreme to the other. And then, you know, okay, now what do I do that I have it? And and and it's, you know, I mean, I know I mean my father used to keep hundreds of thousands in a chicken account, paying him nothing. I I finally said dad. So he gave it to me, and I've started invested to him, and now he's 94 years old, still going. And now he he just leaves all his money to me, and and and we we generate to pay for his he lives in a in a uh assisted living center, so I pay, I generate enough to pay for his rent every month there, and he doesn't need any more money than that. So the rest of it he's he wants to conserve to get to his grandkids when he passes away. So it's that's awesome. You know.
SPEAKER_02Ron, what's one mind shift, mindset shift people need to make about money the older they get?
SPEAKER_01The older they get. Well, the biggest thing I have found as people get older is that the the biggest mind shift is worrying that they're gonna outlive their money. That's that's that's the number one, the number one concern I hear from people until until then we've been together for a while. After they're with me for five or seven years and they see how the program works, then we've been able to to conquer bad markets and good markets, keep them going. Um that but that's typically the major concern people have when they're going into retirement or even as they get older for that matter, too. But but like I said, you know, um it's it's you know, once you're with someone and they make it they can show you that, you know, it's not a concern, it isn't a concern. But that that's probably the the major, the major question I get every time I get a new client who's either pre-retirement or in retirement. Do I have enough to make it to the next? And you know, too, obviously with medicine the way it is now and the ages, I mean my parents, like I just said, are in the early 90s, and they mean it. I mean, they had they're in better shape than I than I am. So I'm just saying, people are living so much longer now that you know the days of retirement 65 and figuring, all right, I got 15, 20 years left. Now it's like 30, 35 years. You know, so it's it's super important to to make sure that you've got, you know, first of all, you you project near-term any bad projection short-term, uh long term, but it's really important to to make sure that that you've got the right plan in place along those lines.
SPEAKER_02Now, Ron, what does financial freedom actually mean to you? Personally, yeah. That you see everybody has a different answer.
SPEAKER_01I that my dad's term once was when you've got enough fuck you money, then it's financial freedom. That was my dad.
SPEAKER_02That's that's the the honest answer.
Alternatives That Hold Up In Downturns
SPEAKER_01That was my my father 30, 40 years ago when I was he was a man ahead of his time. He was, he was, and then he was a not-for-profit guy too. It's not like he made my dad didn't make much money. He was a he worked for consumer reports and not-for-profit. But you know, financial freedom is basically, you know, enabling you to reach to to take care of those, whether it be yourself or your family members or or other people, and still be able to not worry every day about whether you have enough to to live on, basically. And that's about the best I can I can I can give it there. I agree. You know, for me, for me, financial freedom. I don't know if I'll ever have it. I've got I've got a special needs kid for one. And and then also, you know what? I mean, I'm like the Fed. I'm always the lender of last resort in my family. So I mean, I've got one kid who's started his own business the last couple of years after being in in the healthcare investing for years, and and you know, I've had to help him keep going, and now he's turning the corner. But I'm, you know, it until I'm until my, you know, it I don't know. I don't know. You know what? I enjoy what I do. I enjoy my clients. So I didn't even think of it as a job, to be honest with you. And I know that sounds like a bunch of BS, but my my clients are almost like my family. And, you know, it's it's it's it's a great feeling because as you get older, your kids don't care about you anymore, nobody does, and you want to matter to somebody. So I have my my my clientele and they're they're great. I love them.
SPEAKER_02Well, to me, this is a no-brainer, man, uh, on everything. You you you talk already, you talk the talk. These are your actual family members. You're in service, you you don't want anybody to outlive their money. You want them to have eventually the fuck you money as well. And for an entrepreneur, what advantages what you've been saying over and over, just working for you and your company with over just a typical large bank that because you know everybody hears about the large banks out there, the large institutions.
Taxes Loss Harvesting And Keeping Gains
SPEAKER_01Well, you know, as far as differential well, look, we we I had an entrepreneur, I'll give you I get the easiest way to I'll give you a quick story because I had a over a hundred million dollar uh family. Um he had started a chain of of senior living homes and whatnot in the Midwest, built it up for 20 years, and then sold it all out. And he had been with, I think it was Wells Fargo, maybe. I think as many well, Wells Fargo and JP Morgan, and they had put together like 80% stock portfolios, and it was in all sorts of their own funds, et cetera, et cetera. And he he was he turned 70 and said, you know, I'm at an age now where I don't need all this risk and whatnot. I want to change the whole thing around and do something different. And basically, you know, went into that, all right, I don't need to take all this risk um posture. And he called us in and basically we we sat down with him, we'd sat down with his wife and the family, and we went through, you know, why we thought a different kind of portfolio would make sense, different kind of allocation would. And he then had like a bake-off between us and the other two firms. Our firm is only 22 people, imagine about$2.7 billion. Obviously, the two banks are billions and trillions of dollars. But the difference was when we made the presentation, it was me and the head of the firm. And we work, he's a the guy who runs my firm, is a very big into retirement IRAs. Like he understands a lot of the nuances planning. I'm more of the investment guy. And between the two of us, we compliment each other well. The teams from the two big banks were teams of four people. It was like David versus Goliath, two, two groups of four and us two. And the difference was was they started, they they wanted to put all three of us through a QA about specific things. And it was interesting to see how these teams were more sales representatives for the bank than anything else. And when they came down to, all right, how would you construct a portfolio of to make us get the income we need? And it allowed me to go into my whole thing. I went to specifics, I had examples, I had this, I had that. These guys could were in no position, not just fixed income. Michael and went through the through the through the whole idea of trust, same trusts and retirement plants and whatnot. These people said, we'll get back to you, we'll talk to our like it was a typical, they were just the face of the firm. And bottom line is the products that they had these people in were a lot of their own products where they were making money hand over fist. We being independent fiduciary RIA, everything we told them we would do would be low cost, in their best interest, and we would not be be swayed to put money into any fund that was paying us because no funds can pay us because of the way we're structured. We're fiduciaries. And they were not. The bank, big banks are not fiduciaries by definition. And if you read, if you read the FINRA news, FINRA is one of the regulators, but you can read it. These guys get fined all the time for doing stuff that's just not, you know. Yeah, it's amazing how, you know, if you or I did some of the stuff they did, we'd get arrested. The big banks do it, they pay a fine, they move on to the next thing. And it happens all the time.
SPEAKER_02Well, Ron, I I trust you a lot more than Jamie Diamond. I appreciate that. I appreciate that. Ron, how where do people find you and how do they find just information to see if your you and your firm just an ideal fit?
SPEAKER_01Okay, so uh our website is magnusfinancial.com, uh M-A-G-N-U-Sfinancial.com. Uh I can be found on LinkedIn under Ron Ron Deutsch. Um and our you know, my my phone number, I don't know if we're allowed to give phone numbers or not, but you know, my direction go ahead. 914-384-4802. Um, and I can be reached 247, basically. But the bottom line is that um we were ranked last year, I think, as one of the top 30 growing RIAs in the country. The average IRA RAA registered investment advisor in the country is about$85 million. We've gone from when I started from eight years ago,$300 million, we're now$2.5 billion. We grew 20% last year alone. So we we've got great traction. And I will tell you, given that though, um the we we try to keep the number of clients to a limited number just because we don't want to grow too much and lose that that that that custom customized service and one-on-one client relationships that we'd like to have with our our our clients as well. So that would be be the best bet as far as how to get a hold of us.
SPEAKER_02Thank you, Ron. Thank you for your time. Thank you just for the experience and just all the nuggets. Uh, not only did you give to the viewers, but you gave to me. At times I can be selfish myself. So thank you. Thank you. And you're definitely in service. Thank you for being that that rare, fresh breath out there. And best of luck with everything, brother.
Financial Freedom And Where To Find Ron
SPEAKER_01I appreciate it. Thank you, Alright. It was a pleasure, and uh to your audience too. I hope to hear from one of you because I think that we we can make a difference to to any be people. Thanks again.