Wealth For Generations
Dive into the essentials of wealth management with Ian Weiner and Todd Whatley on Wealth For Generations. This podcast brings you concise, expert insights on investment strategies, retirement planning, Estate Planning and financial well-being. This dynamic team of a Certified Financial Planner and Certified Elder Law Attorney are perfect for anyone from beginners to seasoned investors, our episodes focus on empowering you with the knowledge to make informed financial and estate planning decisions. Join us for clear, friendly guidance to navigate your financial future with confidence.
Wealth For Generations
Mastering the Market: Balancing Risk and Security for Lasting Wealth and Empowerment
What happens when the stock market feels like a thrilling rollercoaster ride, and you're not sure when to get off? Join us as we explore the exhilarating world of investing with Todd Whatley, a certified elder law attorney, and Ian Weiner, a certified financial planner. Learn the art of navigating the current market, highlighted by Walmart's stellar performance amidst a prolonged bull run. You'll gain insights into the often-overlooked behavioral traps investors face, find out why blindly following past market successes can be risky, and discover the importance of a diversified, balanced investment strategy that withstands the test of time.
Picture this: a couple in their mid-sixties betting everything on a pharmaceutical penny stock and watching their retirement fund soar from $300,000 to $1.2 million within months. Bold moves like these can be game-changers, but they also underscore the delicate dance between risk and security in financial planning. Our episode sheds light on the critical concept of concentration risk and provides guidance on when to take calculated risks and when to focus on preserving your hard-earned gains. This story is an eye-opening reminder of the unpredictable nature of investing and the wisdom of balancing fortune with foresight.
Investing is not just about numbers; it's a deeply emotional journey. We delve into the psychological challenges of knowing when to cash in on your gains, using a real-life example of how greed can turn triumph into tragedy. It's crucial to have a well-defined plan and possibly a financial advisor to steer clear of emotional pitfalls. As you build your wealth and legacy, remember—extraordinary returns are rare, and the question of "how much is enough" is one every investor must confront. Tune in to gain valuable insights on building a resilient financial strategy and begin your journey toward lasting wealth and empowerment.
Welcome to Wealth for Generations, the podcast where you learn to grow, protect and preserve your wealth for generations. Our hosts on today's show are Todd Whatley, a certified elder law attorney, and Ian Weiner, a certified financial planner. Join us and our expert guests as we uncover the mindsets, tools and strategies to help you maximize your wealth and impact. Let's embark on this journey to secure your legacy. Please note this podcast is for informational purposes only and is not intended as financial or legal advice. Always consult with a professional regarding your specific situation.
Speaker 2:Hey there, welcome back. This is the Generations Wealth Partners podcast, and I am Todd Whatley and I am sitting here with a very fired up Ian Weiner. He is on one today. He is fired up because it's nerdy financial stuff going on out there.
Speaker 3:Hang with us. I'm going to make it easy for you. Hey Ian, how are you? Hey Todd, I'm doing well. This one's kind of been rumbling for a while. It's like a volcano and it's finally just you know, here we go, okay.
Speaker 2:So the current stock rate. Let me just kind of set this up because I'm sure I won't say much the rest of the podcast. So I've got to say something and earn my keep around here.
Speaker 2:So the current situation is we're sitting here in the middle of December earlier December of 2024, and the stock market just seems to be going kind of crazy, and particularly one of the biggest companies that we're very familiar with, walmart. In the last 12 months its stock has almost doubled and that's just completely unheard of. And then he saw a thread of a guy on the Internet who was on, I think, linkedin, and in his one year of experience of investing he's made somewhere between 20% and 40% of ROI.
Speaker 2:His language is not great His stocks have gone up 20 to 40%. Well, honestly, who's who's hasn't? If you know it, it it hasn't taken much skill to do well in the stock market. But people forget. Was it 2008, 2006?
Speaker 3:That was the real estate, a couple of really really good ones, yeah, so um, that's a couple of really, really good ones.
Speaker 2:It's easy to make money right now, but it's probably going to be difficult to continue that in the future.
Speaker 3:Boy, this is a really, really tricky one. There's going to be lots of people that scream at me about this one. It's okay, we can handle it. You know the the headline here is um, don't get, don't get too excited when things seem a little bit, a little bit too easy. Um, so there's a handful of things to to talk about here.
Speaker 3:Um, the headline is you need to make sure you know what you own in your portfolio. You need to make sure you know what you own in your portfolio. You need to make sure you know why you own it, what it costs to own it and what is the purpose of that money. What is the purpose of those dollars that are invested, or those stocks that those dollars are invested in, or the bonds, or the mutual fund, or the real estate, et cetera? How do you translate that into something meaningful for your life? Right, you know we have clients who they have way more money than they will ever spend. It's numbers on a screen for them? Yeah, and at a certain point, what? Why? How does that? It becomes no longer meaningful meaningful. So I got just a little bit. Is it just bragging rights at that?
Speaker 2:point. I think that's part of it.
Speaker 3:There's a lot of behavioral challenges around that. The question of what is enough is a really, really tough one, I'm sure.
Speaker 2:Enough is always double. I'm sure Elon Musk still thinks he may not have enough.
Speaker 3:That's interesting talking about that kind of stuff with my kids, but that's another story entirely. So, you know, I want you to ponder some of these things while we're in a period where you know the in in general, the, the U S stock market, has been on a bull run tear, historic bull run for the past 14, 15 years. This is this is technically the longest bull run in us stock history. Really, I didn't know that. Okay, so you know, we we look to history a little bit too, and before you say it in your head, before you say it this time, it's different. That's always what they say before. It becomes never different.
Speaker 3:Yeah, so, so before you go there, or your you know your your hot stock buddy goes oh, this time it's different, because of crypto, or because of tech, or because of this, that or the other thing. Beware, hubris.
Speaker 2:Beware, it just can't continue this way. Economy, I mean, there's there's rules, there are, you know, just like there's laws of nature that you can't just get around, there are laws of economy that have to be followed.
Speaker 3:And I don't want folks to hear this and hear that we're saying you know you need to panic, you need to sell everything. We're not saying you need to panic. We're not saying you need to sell everything. We're not saying to buy gold, we're not telling you to buy crypto. That's not the story here. The story is be thoughtful about this and don't assume that the next 15 years is going to look exactly like the last 15 years.
Speaker 3:And I think, if you're intellectually honest, you look at you, you take a step back and you go what are the odds that the next 15 years does look like the last 15 years? It doesn't happen like that historically. It really it just doesn't. Doesn't happen like that historically. It really it just doesn't. And so what that might cause you to do is reevaluate and rebalance the portfolio. That's really the goal is to go okay, do you? Does your current investment portfolio line up with what your ideal investment portfolio is? Is it well diversified? Is it low expense? Is it diversified across asset classes and across internationally? Most people that we run into that's not the case. They think it is, but it actually is not the case.
Speaker 2:But, ian, it's really cool to sit at the country club and say, oh, my portfolio is at 80%.
Speaker 3:Oh yeah, my guy's done this or that or the other thing.
Speaker 2:Yeah, and I'm sitting here saying well, mine's at 18.
Speaker 3:Do you know about the monkey fund? Have you heard about this? No, there was a fund. I want to say this was during the dot-com, but when they redid it around 2008, where they literally my understanding I wasn't there when this happened. You can, I don't know, we'll there when this happened. You can, I don't know. We'll look for the article about it. They would have monkeys that would throw darts at the wall and those are the stocks that they would buy and it did very, very well for a period of time, and so you know the country club store. Like I just want to tell you, fishing stories are fishing stories. They have the legend you know yeah.
Speaker 2:And then you know a year later when the stock market's terrible yeah, see what they say. Then it's like, oh, I'm up only 8% this year. And they're like, oh, yeah, I'm down 45%. You know it's. Yeah, you know it's, yeah. You know it's like. I like steady, I like, you know you might not, can brag as much, but you know a diversified portfolio time has shown that it it wins in the long run.
Speaker 3:It wins in the long run. And you know there's a lot of things. There's so many technical things we need to talk about there. Averages are really interesting when it comes to rates of return and people don't realize how complex and challenging those are. I'll tell a couple of investing stories as we go here, but what I just want folks to think about is just for example, we live in Bentonville, this is Walmart town. You have concentration risk beyond just the stock and you don't. Folks don't realize that and someone's going to say, well, walmart's not going anywhere. I'm not necessarily saying it's going anywhere, but you might be old enough to remember a little company called Sears.
Speaker 2:Huge Back when I was a kid, couldn't wait for the Sears catalog. Sears, was it Now.
Speaker 3:Kind horse sears. When's the last time you went to a sears store? Yeah, I mean, you know montgomery wards in in this huge in the 40s you might have known about a little company called standard oil yeah anybody have standard oil stock anymore.
Speaker 3:You know I I'm trying to, I'm trying to rattle you a little bit because I want you to think you know you have concentration risk If you're in Walmart. You know Walmart USA. You have concentration risk in your portfolio outside of just the stock holdings that you have. I'm not saying that you shouldn't hold Walmart stock. You can have plenty of it if you want, that's fine. But recognize that. You know the town that you live in is also, you know, in that same situation. And you know rising. You'll say, okay, well, rising tide raises all ships, it does. But what happens when the tide comes out? We've got to be thoughtful about this. And so there's a point that it makes sense to take the chips off the table, and you need to figure out when that point is. You know, maybe when the stock reaches all-time highs, that might be a time to consider that. You know, decide what you want to do with that.
Speaker 3:I'll tell a story about a. Well, it was a client that became a not client. Oh no, I may have told this story before, but I'm going to tell it again. Go again. The language is this gentleman. He grasped defeat from the jaws of victory, and this is one of the most painful but also instructive stories I've. I know, sure, and this is a real story, personally Real story.
Speaker 3:So had someone come in, this was I don't know five years ago, six years ago maybe came in early sixties, actually mid sixties husband and wife you know middle, middle-class folks they, their, their financial life had been about we'll save later. They always had something came up and so they were going to save later, right, and so they had not saved as much as they would have liked to in the 401k. Their entire retirement was in his 401k and their spending exceeded what that would have been able to cover. And so when we did some analysis, we found out that they were really not going to be able to retire in the time that able to cover. And so, when we did some analysis, we found out that they were really not going to be able to retire in the time that they wanted to. And sometimes we have to have that conversation. You know, the kids are going through college. We got to buy the new house, we got to pay the mortgage off. They had made a number of, in my opinion, missteps and instead of, you know, slowly and steadily putting money back in retirement accounts.
Speaker 3:They were dealing with the next thing and he found out that in his 401K he had the ability to use what's called the self-directed brokerage window. So some 401Ks allow this, where he could go and just pick individual stocks A lot of 401Ks they have 20 different mutual funds or whatever. He could actually pick individual stocks. A lot of 401ks, they have 20 different mutual funds or whatever. He could actually pick individual stocks. And he got a stock tip from the sun and he's like this guy's like mid-50s, about $300 in 401k and they spent more than that what he was going to produce so he can sell inside the 401k without paying taxes. And so he got a stock tip from the son.
Speaker 3:This was like a pharmaceutical stock, hot stock. I actually have it on my phone still because I track it. It's really interesting to me. I remember like this is the old the Roman emperor, after a big conquest, would have someone whisper in his ear remember that you are mortal, and I do this to myself. And so he bought this. It was a penny stock, pharmaceutical penny stock. He put every dime that he had. So talk about concentration, risk, right, I mean, this was, and you know so it was. It started about between 280 and 300 K and he bought the stock at like I don't know what it was like 60 cents or something a share, and so he had a lot of shares and the chart. I'll show you the chart when we get off. It's incredible he went from, and so this was in like March of that particular year.
Speaker 3:We were visiting. We're like, hey, we need to adjust some things. We didn't. You know, here's what we made a plan, here's what we need to do. We'll be able to work it out fine.
Speaker 3:Between then and September, october, he called, and it was one of the situations where sometimes we don't get to give good news to folks, and sometimes those are hard things. Sometimes you shoot the messenger. It kind of felt like that one, and so we said, hey, this is what you need to do and let us know if we can help. He calls up in the fall of that year, and so we said, hey, this is what you need to do and let us know if we can help. He calls up in the fall of that year and he goes hey, some stuff has changed and we want to come back in and talk. He was excited. We're like, okay, this is interesting. So he comes in, and it was like a Tuesday, he comes in on the next Tuesday or something, or it was like a Friday. He comes in the next, okay, and he's like it's like 800,000. And we're like, okay, well, we'll rerun the numbers, we'll come back in and in five months that's a significant change right.
Speaker 3:Yeah. So it was like Thursday or Friday to Tuesday or something. And he comes in and it was like 800,000 that Thursday or Friday. By the time he comes into the office, it's 1.2 million. Wow, so he had completely changed his life. Yeah, they were going to be able to fully fund their retirement on a guaranteed basis, never have to worry about anything again. Yeah, and their body language, her countenance was different. His spouse's countenance was totally different.
Speaker 3:Come in, we look at the plan. We go, okay, we're going to carve out some money for income. We're going to do this, that and the other. We're feeling good. What he had to do was go log in and sell a chunk of the stock, about a million bucks of the stock. Keep a little bit in there, you know, but we're going to carve out a million bucks cover their retirement and the rest. The balance, the $200,000 was going to be a moonshot If it went up, even more great If not. It wasn't going to affect them. Sounds like a great plan, made sense, it was a good plan.
Speaker 3:So that's like Monday or Tuesday of that week and we're all in the office we're buzzing about this because this is fascinating, this is, and we're all in the office we're buzzing about this because this is like fascinating, like this is going to be a heroic story that we get to tell because we're going to help them pull the chips off the table and it's going to save their retirement. Literally, got it and we get. It's like Thursday we're watching this thing. Thursday rolls around. Based on the calculations, it's not 1.2 million anymore, it's like 1.8. We're like hey, did you sell? He's like I've got to ride a little. And we're like just cart, you know you already made another $600,000. Carve a million out and let's you know. Yeah, and he goes. Okay, tomorrow, I'll do it tomorrow.
Speaker 3:Friday rolls around Went from 1.8, goes to $2.5 million. Oh, my God, he has. We call it a 10 bagger. He'd gone from 200,000 to two and a half million dollars. $1 million would have fully fun, the retirement of their dreams. He couldn't do it. He couldn't do it, he couldn't sell. Monday morning, over the weekend, bad news comes out. Monday morning he's down to 1.8.
Speaker 3:We're like it's fine, sell, take it all, take the money you are, you're rich beyond your wildest dreams. Yeah, he couldn't do it, todd. He couldn't sell. He wrote it down To 150, 200,000, hoping and praying that someday, some kind of way, and that I, I will never forget that as long as I live. Sure, and that is. That is the textbook story that has ruined. These things have happened many, many times and it happens with gambling and with different things. Right, but that is not I don't call it investing, that's speculating or gambling, really, you know. But he grasped defeat from the jaws of victory. 2.5. Yeah, they could have had $120,000 a year for the rest of their life and and gotten to do all the things that they wanted to do, but he just had to get a little bit more, just a little bit. What if he went to three?
Speaker 2:Was he OK.
Speaker 3:I am not aware of where they are. This is, you know, five or six years ago and the stock has never recovered. I mean it's, it's, it's lower than probably what he paid for it. I'll actually look it up while we're, while we're talking here, and so what? I don't want to happen. I don't want this to happen to you, I don't. I just uh, let's see. Okay, so you, you can see this chart. Uh, okay, so I was wrong. He bought it for like 58 cents, roughly 50 cents. It went up to as high as what's its all time high, like 10 or $12, I think, or maybe it was. No, it was like $5 and 68 cents. Maybe they must've done a split. It was, it was $10. It's trading now at 11 cents a share.
Speaker 3:So the question is when? What is enough? And if you're, you know the person who I'm going to befriend on LinkedIn, this young fellow who's done between 20 or 40 percent this year. He doesn't know how much he's done this year. Yeah, it's between 20 and 40. Yeah, I mean that's, you know, 100 percent difference. What's 100 percent difference between friends? Right, you know, this is a dangerous, dangerous game. And if you don't have a, because the truth is people think that it's not emotional, and it is always emotional. It is always emotional. And if you don't have a like, I have one client.
Speaker 3:I have one client that could navigate that. He has the ability to for a number of reasons. He has the ability to make decisions in the moment under extreme pressure, without emotion. I have one client that I trust to and he's done very well because of that that. I would trust that he would be able to, in that moment, think clearly and make that decision. I have one client. I have lawyer clients, doctor clients. I wouldn't trust anyone else to be able to do that candidly because it's exceedingly difficult. And so what's the plan? You have to make a plan when you are unemotional about what you're going to do in that situation. You want to talk about the value of a, of a good financial planner. What, what would it have been worth had we been able to execute that for him? What, what would the value be to their family? You can't put it.
Speaker 2:you can't put a dollar figure on it.
Speaker 3:Yeah, it could literally have changed their family's life for generations. That's part of why we do this show. So, yeah, we charge various fees, we earn our money. In that moment, it might be 10 years that we are billing that we don't spring into action, that we are billing that we don't spring into action. That one moment that we cannot predict when it's going to come is when we earn our fee a hundred times over, and whether or not you have an advisor, fine, have a plan to be able to address that. And if you're sitting there looking at your portfolio and it's doubled or tripled over the last couple of years, ask yourself how much is enough? And let's figure out the mathematical answer to that how much is enough and what's the plan to take those chips off the table and enjoy your life.
Speaker 2:You've got to rebalance, you've got to Jeez.
Speaker 3:So, anyway, I'm sorry to be depressing, but that is like holy cow, I mean like I don't know, and that was all within a week. Yeah, it was like basically a week and a half. I mean he had owned it for a little while but that really, that spike had happened and I mean I will show you on the, you'll see it. It's painful. So anyway, you know, if you're looking at the portfolio going, yeah, every year is going to be 40 percent. I got news for you. It is historically has not been the case. You know the the uh, the average. The average returns for us stocks from the time that I feel comfortable evaluating on average has been about 7% a year.
Speaker 2:Yeah.
Speaker 3:Anything above that now there's. You know there's different ways to calculate those averages. Anything above that is technically abnormal. It doesn't mean you're going to get 6% each year. Some years it's 10%, some years it's 4%, some years it's negative 40%, some years it's 80%. But to assume that every year is going to be just like the year that we've had, I think it's a critical error. And don't get caught in the same situation as our old friend here. So, boy, that's a tough one. If you're not sure what you own or how it works or what is enough, we have the technical tools to be able to answer that for you. That's what we do for our clients is we answer how much is enough, when is enough, when should you be able to retire and not worry about it anymore, and what's the plan to address that? We can work through all that stuff with you, yeah.
Speaker 2:We have some new software that will show you when you run out of money. Yeah, it's kind of cool, based on some assumptions you know how things are right now and we're pretty conservative. Pretty conservative assumptions will show when you run out of money and how different tweaks affect that. You know, there's a column of years. You see the red line. You're like, oh my goodness, and so you make these changes and we can push that red line down, hopefully outside of your life expectancy. I mean, that's kind of the goal and so, yeah, we would love to do that for you. So anything else.
Speaker 3:No, I think that's I've. I've beat that, beat that pretty hard.
Speaker 2:Okay, good, all right, thank y'all so much for joining us. You can give us a call at 479-601-4119. And you can go to our website, generation Wealth for Generations, the number four, wealthforgenerationscom, and there's a lot of good information there. And please subscribe to the podcast so that whenever we do a new one and we're going to be better I have set Mondays as my podcast days and we are going to do better about getting these out there consistently. So thanks for listening and we will see you next time.
Speaker 1:Thank you for joining us on Wealth for Generations. We hope today's insights inspire and guide you in your financial journey. Remember, the path to wealth and legacy is unique for each of us and we're here to help illuminate your way. Before we part, a quick reminder this podcast does not provide financial or legal advice. The content discussed is for informational purposes only. Please consult a financial planner or legal advisor for advice specific to your situation. Visit us at wwwwealth4generationscom for more resources and don't forget to subscribe to Wealth for Generations. Until next time, keep building your legacy, one decision at a time.