Talking Real Money - Investing Talk
Financial talk radio veteran, Don McDonald and former host of Serious Money on PBS, Tom Cock, join forces to talk about real money issues. In each episode, they solve real money problems, dole out real investing (not speculating) advice, and really explain the financial issues that effect all of us. Plus, it's actually fun! Talking Real Money is a podcast designed to provide the real help we all need to enjoy a really great future. Call in with your questions anytime at 855-935-TALK (8255).
Talking Real Money - Investing Talk
The Market Hasn’t Sung Yet
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
The market’s long winning streak has investors wondering whether a crash is waiting in the wings. Don and Tom look at the S&P 500’s run, the lost decade that followed the 1990s boom, and why international diversification changed that outcome dramatically.
They also explain why market timing asks the impossible: missing the worst days sounds wonderful, but missing the best days can be devastating. The less theatrical answer is still the useful one—make a plan, understand your tolerance for risk, diversify broadly, and sit still.
Then it’s on to a near-retiree offered a portfolio stuffed with individual stocks, whether international bonds belong in a simple portfolio, why a professionally managed 20-fund portfolio is different from a DIY one, and how to rebalance when Roth and traditional accounts complicate the job.
3:33 — A historic market streak—and what might follow
4:31 — The lost decade diversification softened
7:08 — Why timing the best and worst days fails
9:22 — The boring answer: plan, diversify, be patient
14:04 — Individual stocks on the eve of retirement?
23:02 — A quick Celebration restaurant detour
24:28 — Do international bonds belong in your portfolio?
27:38 — When 20 funds are too many—or not
32:24 — Rebalancing across Roth and traditional accounts
Can I just say it then? Is it okay?
Market History Lessons
SPEAKER_05The stock market's not going to crash until the fat guy sings. Is that right? Is that what this episode's about?
SPEAKER_01Yeah, and and he just I mean, I thought that number that high note there near the end.
unknownShh.
SPEAKER_01Paid a lot for that, apparently. Yeah. I decided to throw some Italian in at the end. It's diversification is the truth, is what?
SPEAKER_05Oh, I thought I just ordered an extra terramisu. Okay.
SPEAKER_01Diversificone la varita. Uh anyway. Hey, welcome to Talking Real Money, the show that begins with the European version. And that was one I made a while ago, and I forgot to put it in the first one. It's hard to imagine that since you've made so many of them that you'd forget one, but yesterday's show, I hope some of you went clear to the end, because we're we're now occasionally, not on every episode, but occasionally we're going to drop a musical Easter egg in for uh for your drive to home or to work or your walk.
SPEAKER_05Please feel free to throw it at somebody. Uh you know, I will say, to your credit, to your credit, yeah, all the feedback, all of it still uh on the songs or the whatever you want to call them, the jingles, have been positive. So far. All positive. The people have met.
SPEAKER_01You know, I'm trying not to make AI slop. I really work hard on these. I I Nobody denies that. I play with the lyrics. I really do research too. I I like to find out about the music because I love learning stuff. I love to learn. Even at my Are you a lifelong learner, Don? I am a lifelong learner. Okay. And I'm, you know, I I learn about the a lot of music theory that I never knew because I never studied music theory. But it's some fascinating stuff about all the different um uh notes. Musical Notes. Um the word is escaping me, and and not not keys. It's you know, my lifeline, I call my brother. But different scales and things. Uh so it's just fascinating. I find it all fascinating. And uh, you know, I get to pick instruments, I get to go, I want a dulcimer there. How many times do you get to request a dulcimer?
SPEAKER_05Not many, and somebody who came in the office the other day who was effusively praising your songs, but she also said, It sounds like Don has a lot of extra time on his hands.
SPEAKER_01So Well, I'm not writing a book anymore. No, you're not. You know, books take a lot of time. Now I'm writing now. I'm writing music. Well, not really writing it. I'm conducting, you know, the best in the world. I'm conducting music. I'm not I'm not creating it, I'm conducting it. And uh oh, today we're gonna conduct you on a journey
Lost Decades Explained
SPEAKER_01back in time. We're gonna look back at markets that have done extremely well and then the inevitable declines that occur. And are we in such a situation right now? This is a question posed by the lovely and talented Jeff Summers at the New York Times. And, you know, like all of us, we have to fill time, he has to fill pages with words, and sometimes we find it a little interesting, or we want to take uh umbrage with it. So it's a little bit of both in this case. Yeah, I think that's true.
SPEAKER_05I uh it's pretty you forget some of the facts here that that he that are actual facts. You know, I don't think we're going back in time now to the 1990s, right? Well, first I'm gonna do the last three years. If the SP 500 uh gets double-digit gains this year, it'll be the first time in its history that it's had four straight years of double-digit gains. That's significant. No question.
SPEAKER_01That's as good as it's ever gotten, I guess. Exactly.
SPEAKER_05Umly three times has it ever, since 1928, done three in a row. Um now, the reason for the concern is the 1990s stretch when the SP 500 rose more than 20 percent each year from 1995 through 1999, was followed by what? Well, a very unpleasant time.
SPEAKER_01Not just an unpleasant time, an unpleasant decade for U.S. stocks.
SPEAKER_05Including the SP 500, which lost almost 57 percent of its value from 2007 to 2009. And uh more importantly, I think, because that that's that's a pretty significant downturn, right? That's not to be Well, that was the biggest downturn ever. Yeah, that's pretty bad. But I think more importantly than that is the fact that in the OTS, the 2000 through 2009, had you held the S P 500, you lost about 1% a year. Ah, maybe you ought to have held something different during that period. You coy little anyway. Uh yeah, you you ought to have done that because guess what? A portfolio that included things like international small cap value, which made 11.2 percent during the period.
SPEAKER_01Wait, 11.2% over the 10 years or 11.2% per year.
SPEAKER_05A year. Emerging markets value, 13.8 international small capital. Per year. Per year, 8.6. Guess what? If you diversified into some of those other things, you ended up making 6.2% a year instead of losing for the decade.
SPEAKER_01Instead of losing 1% per year over a full 10 years. So there there have literally been lost decades in in individual countries' stock markets, including your favorite ours.
SPEAKER_03Yeah.
SPEAKER_01That is a lesson that is oft forgotten. We had 10 years of of uh awful ought market. And not it ought not have been that awful if you had uh opted to uh Well, so here's the thing that's interesting about all these numbers.
SPEAKER_05Jeff can go out and find people like Capital Economics who say we envisage a the bubble inflating a bit more.
SPEAKER_01No, did they actually say envisage?
SPEAKER_05Envisage always. I threw an extra I in there. We envisage the bubble inflating a bit more during the rest of the year before bursting. Our year end 2026 and end 2027 forecast for the SP 500 are 8250 and 6500. That's okay. They envisage, they envisage couldn't they just say you take something to do that, or I don't know.
SPEAKER_01We guess, we guess, we're just you know spitballing it here. I know because that's all they're doing. We we envisage it almost sounds like they have a vision that oh, we just we went down, we uh we we we took some psychedelics and we had a vision.
SPEAKER_05That's what I'm saying. But do you have to take something to a vision? Uh so he and and Jeff goes into some other talks a few other people who say, yeah, the end is coming, it's near. But um he then also makes a very good point, and which is a a pretty good and I think balanced article. He looks at what if you're a market timer? What if you say, look, I'll just get out before the big downturn and then get back in.
SPEAKER_01Of course. That's the that's what everybody wants, because if I get out and then get back in later, I get to keep all the profits and I don't give any of them back. Exactly.
SPEAKER_05So um he talks to Sam Stovall, somebody that we know.
SPEAKER_01Oh, I've talked to Sam many times, yeah.
SPEAKER_051988 through uh 2025. Had you missed the 40 worst days, those really big days, you made about 18% a year. That's pretty much a good thing.
SPEAKER_01So miss uh miss a few good days, you make a lot. No, a few bad days. I mean, a few bad days you make a lot. Miss a few good days you miss. Yeah, okay.
SPEAKER_05Um however, on the other side, the flip side, on the other hand, as the economists like to say, if you missed the 40 best days in that period, guess what your return was? Uh, you already read this piece, you know.
SPEAKER_01I I don't remember. I think it was like four percent.
SPEAKER_05Uh closer to five, but uh four point eight. Yeah. So I mean this is the struggle, right? Knowing when to be in, when to be out, all of those things. And by the way, bonds did okay in that uh the OTS as well making 3.4 percent a year. Um so uh he asks the question, and I will ask you, sir. He asks it right here in this paragraph. I see it right. I'm sitting here waiting. Oh, you're waiting. I was waiting for the music.
SPEAKER_01So what no, there's only going to be music at the beginning and the end. That's it. That's very simple. I'm not putting middle music anymore.
SPEAKER_05It's too much work. Please answer
Stay Diversified, Stay Patient
SPEAKER_05the question. Uh so what is an investor to do, he says. What is an investor to do? So I put it to you, sir. I put it to you as the 38-year financial guru of the airways. Oh Lord. What is an investor to do? What do we do here?
SPEAKER_01The same old dull, boring thing. What do we do? Come on, wait, wait. Diversificase la varita. Um diversify. Is it real Italian? I didn't know. Okay. Yeah, it is really Italian. Wow, good for you. Uh diversify and be patient. That's it. That's it.
SPEAKER_05No, that's not true.
SPEAKER_01We went through all that trouble just for that. There's more? No, there's more. No, don't make it more complicated than it needs to be.
SPEAKER_05It's not more complicated, but it's more simple. How much more simple can you be than own the whole thing and sit still? Well, before you own the whole thing and sit still, you have a No, it's the plan.
SPEAKER_01Yeah, the plan. No, Tom, Tom, you turn people off instantly when you say you must plan. There are those of us who love spontaneity. We don't like the plan.
SPEAKER_05This is a guy who just took 14 people, moved them from Lake Shallan to Southern California.
SPEAKER_01You're never gonna let us forget your one moment of spontaneity in your entire life. Uh I moved the whole family from Lake Shallan where we were going to die of smoke inhalation to Los Angeles County. We just talked to somebody who was.
SPEAKER_05What county were you in? They stayed the entire time. At Shillan? Yeah. They were inside playing board games and uh okay.
SPEAKER_01You know, the smoke still gets in.
SPEAKER_05Maybe it got into them a couple of years ago. Anyway, uh having a plan because then you know before you invest any dollars how much you need to make, just had this discussion with somebody yesterday. Uh, rather than just saying I'll just be exposed to stocks. That makes no sense to me. None. It never has. Uh you've got to know that. Number two, you need to understand your emotions. This is why we have the risk quiz. Because you know if you find out that you can't handle the heat of a 60% downcrease. Exactly. Um, then you shouldn't be all in stocks. Because that could happen again. And you mentioned the one, I I think this is the problem in a the bigger picture for most investors is thinking long term and staying disciplined. Just talked to our clients about this the other day. That it's hard. It investing is hard in that way because you have to just, as you said, sit there and take it. It's not easy.
SPEAKER_01Because we're battling against our our crazy psyches. I mean, where do you think the term psychosis came from? It's our crazy psyches. We we a lot of us don't control our our emotions very well. And particularly when it comes to things like money.
SPEAKER_05Well, and there's a lot of messaging. There's a lot of push, there's a lot of people yelling at you that this is bad, it's gonna get worse, and you need to do something. That creates a lot of bad behaviors. So I'm not gonna do that.
SPEAKER_01So the the bottom line, though, really, the bottom line, we always say plan, but I know you're not gonna do that. But the the trick is whatever your allocation between stocks and bonds for your risk profile, just diversify. Don't get hung up on any one market or asset class or even two or three. You just own them all and quit worrying about it. That's the theme of many of my theme songs for the show. And they're good.
SPEAKER_05They're uplifting. Even though I don't understand half of them.
SPEAKER_01And oh, by the way, by the way, just want to let you know, I know you had some requests for heavy metal. Yes. We do have a we have a heavy metal theme coming up. I know.
SPEAKER_05It's really good.
SPEAKER_01For all of you heavy metal fans, ACDC hits. Yeah, I am it's it's sort of there. And I discovered, I'm not a big heavy metal fan. I discovered that there are multiple varieties of heavy metal in my research. There's the there's the Euro metal thing, and then there's sort of the the British heavy metal, uh, then the American, there's just various versions of it. Who knew?
Ask the Show
SPEAKER_01Who knew? Well, we know that you need somebody to talk with. We we know that. That's why we're here, and that's why we love love asking, asking, answering questions. I don't like it.
SPEAKER_05We love and asking them too.
SPEAKER_01We can ask them too. We like it when you ask them, and Tom loves it when you give him one that requires him to pick up the phone. You just go to talkingrealmoney.com and click ask a question, and you give him one of those questions that just kind of gets him going, and he'll pick up the phone and call you.
SPEAKER_05From Davenport, Florida. Jim joins us here on Talking Real Money. How are you doing, Jim?
SPEAKER_06Oh, we're doing pretty good, Tom. Thanks for thanks for listening to me today.
SPEAKER_05Um, absolutely my pleasure. I'm glad to know. I think looking at my map, Davenport's not that far from the sainted celebration, Florida. So uh you're close, you're closer to Don than probably I will be in the next five years. So I guess I don't know what to warn you, or I don't know how that goes, but and either way you should be aware of it. Let's just put it that way. So
Retiree Stock Concerns
SPEAKER_05that's for sure. What can we help you with?
SPEAKER_06Well, um so kind of uh my wife and I are looking to retire here within a year, and um we basically have a million-dollar portfolio and curious to know your feelings towards uh we used to have the we still do Schwab um intelligent portfolio, and we had access to a financial advisor. Um that kind of took that away. Uh, you might have read about that. And so as we're getting closer to really needing a a good withdrawal strategy and tax planning and all that neat stuff, it was time to start interviewing a a couple um um folks, the financial advisors, and uh and get a feel of what what's out there. And I was a little taken aback by um the first one that we talked to because they suggested in the portfolio, knowing that we were you know re retiring within the year, um of owning um oh well, in this case 30% put into individual stocks. Now, I'll just reel off some of these to let you know that these are these are like blue chip stocks. They're um Google, Nvidia, Meta, Apple, Broadcom, Chevron, Verizon, JP Morgan, Honeywell, Merc, Johnson Johnson, you know, Microsoft, et cetera. So there's like 20 of them. And and I was just wondering, first of all, that just seemed a l really high knowing that we're going to be retiring shortly. Um what is your feeling, your company's feeling too, towards having first of all, just owning individual stocks. I've never done that before. It's always been mutual funds or nowadays it's ETS. And uh and also doing so so close to retirement and you know getting the withdrawal strategy going.
SPEAKER_05Yeah, there's a couple of things here that are worth considering. I mean, sure, a fiduciary advisor can use individual stocks. Um, there's there's it their their licensing, their fiduciary status does not eliminate that as an investment choice. And my question to them would be why? Because people only use individual stocks for one reason, and that is they believe those stocks will make more than the broad market. Most fiduciaries use the funds you mentioned, broad index funds, or, you know, uh if you have to call them actively managed, they're, you know, rules-based, index-like, whatever it is, they're widely diversified. So very few fiduciary advisors would use that style. Um, so I'd have to know why. And I mean, and and I I personally wouldn't do it because I can't find anybody who can pick stocks. And we just did a recent podcast where I think it was 13% of the large cap funds over the last decade have done better than just owning the index. So that means you'd have to pick the right, you know, five or six stocks for the next decade. And I don't know anybody who knows, you know, is NVIDIA going to be better than Home Depot? I don't know, and I don't think they know. So I'd have to, I'd have to understand why they would do that. But then back to your other contention about your sort of near retirement. The near retirement part would really come down to how much in stocks and how much in bonds, the wood, and therefore how much I can afford to take out. Um, that would be something that a good the a good firm, the first thing they would do is write that plan to tell you, here's how much risk we feel you need to take for the next 30 years so your money survives. Taking that risk would be in stocks. Any advisor that's worth their weight is going to have a hard time defending an individual stock portfolio because it's like, have you done that? Have you been good stock pickers? Why am I in, you know, NVIDIA instead of Meta? Or what I mean, I don't what what to what end do you know what the future's gonna look like to put me in those stocks? So, yeah, there are not very many people that do that. There's some. It kind of harkens back to the old days of a broker dealer. When I look at portfolios from a Merrill Lynch, for example, they generally have a few, a few little index funds because they can say, yeah, you're in index funds. And then they have a few actively managed funds, and then they have a smattering, I think you said something about 30% of individual stocks. Because the back room has told them, well, these are really the winners. We want to be in the big, you know, we want to overweight to those because they're gonna make more. So, but that gets all the all of this gets back to a decision you need to make, Jim, about what you believe as an investor. We know what we believe. We've believed it for, you know, 35, whatever years. That is be broadly diversified, keep your costs low, and be as tax efficient as you possibly can. That's counter to any advisor that's going to say, well, yeah, kinda, but I think Home Depot is going to be better. I don't know that, and I don't think they know that. So I would rule them out based on that. Um, and oh, by the way, you asked about our firm. Our firm ascribes to the aforementioned strategy. It's wide diversification, U.S., international, big stocks, small stocks, growth, value, all those things. The right plan to support that, and you know, then keeping your costs in as low as you can and being as tax efficient. So I'm not I don't play in those waters. I know those waters because I used to have a TV show where I studied all these companies, read about them. I could never find anybody who could tell me anything more about what they're going to do in the next next day, year, or 10 years. So that's why I haven't done it. And I wouldn't, I wouldn't trust a firm that told me that because I don't I don't know what they would base that on, I guess.
SPEAKER_06I I kind of just wondered because both uh both of the ones that I interviewed are they're pretty young guys, you know, and you know, in the past 10 years, the market clearly still only gone up. And uh for the most part. I was wondering if maybe age had something to do with it.
SPEAKER_05It very well may. Yeah, I mean your confidence, you may be overconfident thinking, well, yeah, we had the little hiccup in, you know, 2020, but it came right back. We had the down year in 2022, but it came right back. So if you haven't really faced a bear market, but bigger than that would still be you have to be pretty arrogant, I think, to believe that you can pick stocks. Because the the track record now is so poor from the best and the smartest people, the people that spend billions of dollars on this and hire the PhDs and you know, study the satellite photos to tell you how many people are shocking me at Walmart, all those things. And they can't tell you what the best companies are going to be, including the greatest stock picker of all time. That would be a guy named Warren Buffett, who also tells you, yeah, I had my day, but just by an index fund.
SPEAKER_06Well, you have confirmed my my belief. So I uh I was uh it's very apprehensive about that first one. This and uh the second one was much, much less percentage-wise and more more than willing to just not do that and just kind of get it out of a uh single stock tech portfolio.
SPEAKER_05So yeah, no, and I would really anybody who proposes that, I'd have to I'd really scrutinize them as to what their investing philosophy is. Because again, if your philosophy is diversification, if your philosophy is keeping your costs low, and your philosophy is you know accepting market like returns, then you're just not buying. Individual stocks.
SPEAKER_06All right. I appreciate your time on that. That's uh it it's it's confirmed my my feelings, and I'm gonna move forward with that knowledge.
SPEAKER_05Good, good. I appreciate it. Please knock drop by. I know you're close by, drop by and knock on Don's door, make sure he gets out of his room at some point.
SPEAKER_06Hey, if you could ask Don a question for me, yeah, go right ahead. We've we we like to go up there every once in a while. That's only five miles and uh you know do some shopping and in restaurants. If but you know he's a big cheese up there, right? He's Yeah, oh yeah, yeah, he's basically the mayor of the city, I think, or something. So he just wants some uh restaurant recommendations. I mean we for Celebration Town Tavern, but if there's any others out there, please let us know of those.
SPEAKER_05I will get that. We will include that on an upcoming podcast. Rec restaurant recommendation for celebration. Jim, you can count on it.
SPEAKER_06I appreciate it so much, Tom. Thanks for uh letting me uh find your hear.
SPEAKER_05Indeed, really appreciate you listening, and we'll uh we'll talk again soon, I hope. Okay, you can't. Thanks, Jim. You take care. Bye-bye.
SPEAKER_01Why wait for another podcast when I can do it right here on this one? Uh yeah, Davenport's just down the road. And by the way, I keep telling Tom this, but it's not a city. It's not not a city. Uh it's just a it's a community. It's a census designated place. And I'm just the president of the HOA.
Celebration Restaurant Picks
SPEAKER_01Somebody had to do it. Uh places to eat in celebration. Uh Town Tavern is the place that people always go. I think Columbia is amazing. Columbia is a chain, uh, a few restaurants that started in Tampa or Ybor City in 1905. It's Cuban, kind of a Spanish food, very, very good place. And my new favorite hangout place is at uh new shopping center in celebration, and it's called Celebration Brewing Company. And I love the Celebration Brewing Company. They are terrific. Otherwise, in his never-ending quest to kill all the trees in the Pacific Northwest, he will print out your question, place it on a piece of paper. Remember how we used to do that back in the old days? We used to put things on paper, uh, and then he will hold it between his fingers, glance down at it through his old man reading glasses like mine, and speak the words on the page in the form of a question.
SPEAKER_05Yeah, this one comes from Patty Labelle, Florida, Justin. Who knew she got that big anyway, by the way? That's
International Bonds Debate
SPEAKER_05kind of surprising me. Hi, Tom and Don, in support of Tom's war on trees. Thank you for that, Justin. I love your show and consistency.
SPEAKER_01Okay, if he's from Florida, it's you know, it's like the Northwest. You can be anti-trees because they grow faster than you can cut them down.
SPEAKER_05Yeah.
SPEAKER_01But poor folks like, you know, on top of a mountain in the Rockies, those trees take a thousand years to grow like an inch.
SPEAKER_05Or I was just in Rome. I think they have a total of three trees. They might want to plant a few more. Uh, I love your show and consistency. Thanks you, thank you for all you do for everyone. That's very kind of you. You always talk about global diversification with stocks. We just did that, by the way. Why not the same with bonds? If I don't mind the work, how much of an ETF like B and DX could be paired with US bonds like BND or a CD ladder? How much in international bonds is too much, and what ETFs are funds besides BNDX would you also consider? Is adding municipal bonds to your brokerage account for diversification, not just for taxes, a good idea? What say you, sir, when it comes to international bonds?
SPEAKER_01I think it depends on where you are in your financial journey. If you're near the beginning of it and you're just using bonds to reduce the volatility a bit, why bother? Why bother? Uh one of the things the the biggest reason we want bonds in our portfolio is for stability. And you add a second helping of potential instability, volatility through currency exchange rates. You see, if you own B and D, it's denominated in dollars, so it will never be worth fewer dollars. It's always worth dollars. You don't have to turn it from euro into dollars at a higher or lower rate in the future. Um it it's it's not they can they can make your portfolio more diversified, but they also are a riskier proposition. Uh they are riskier in a variety of ways, and that is not what we want to add to our portfolio, generally speaking. I d I'm not I don't find them necessary in almost any instance. I mean, maybe you could add them when you when you're at those big 20 fund portfolios we've talked about.
SPEAKER_05Getting to that later, yes. Okay. So yeah, in our bond portfolios, if you have significant bond holdings, we do have some international bonds. Diversification, diversification, diversification. That's about it.
SPEAKER_01So Yeah, it reduces your I guess it it hedges your U.S. risk, your dollar risk. Yeah. Um but uh uh again, early on, why bother? I'm I'm a big fan of really keeping it simple. A stock fund that's really, really well diversified, like an AVGE or a DFAW, and a bond fund like BND or a tre a C D ladder that you can you run on your own or or a short-term, you know, or an intermediate term treasury bond fund of some sort, ETF, I think you're fine.
Too Many Funds?
SPEAKER_05Yep. Uh from Denver, Colorado, Lawrence writes, on a recent Friday QA, Tom indicated that an advisor might have 21 funds.
SPEAKER_01That's not you, that's me. I know. Friday QA, that's me. I know.
SPEAKER_05Tom indicated that an advisor might have 21 funds in a portfolio only to suggest that they are valuable. I was this came up in another program.
SPEAKER_01Yeah.
SPEAKER_05And I said, sometimes I see portfolios with a lot of overlap because the advisor can say, look, I picked, you know, X to make themselves look more important. You could never figure out how to manage 25 funds.
SPEAKER_01I it's hard. I it would be very hard to do. It would be hard. That's a that's a ponderous rebalancing process.
SPEAKER_05Yeah. Um, I found this very surprising because a while back I had an excellent review with Appella, which had no hard sell by hard sell, by the way. And I was shown a portfolio. He said that, not you. He said that. And I was shown a portfolio that Appella might suggest for me given my risk tolerance and other factors. I thought the suggested portfolio made a lot of sense. It didn't have 21 funds, but it did have 20. Can you speak to this apparent conflict?
SPEAKER_01That's not a conflict. It's for you as an individual. That's too many funds. Uh for a I I do think, and and okay, I am a little cynical. I do think that we may go to that many funds again because it it it makes us appear more valuable. Maybe. I don't know. I don't know the reasoning. I I mean that there's a there's a there's an academic reason for every one of them that can be made. Every one of them, there's a slight potential benefit to them, but the reality is who cares? You've got somebody else managing it for you.
SPEAKER_05Well, that's okay, that's part one. Part and I was gonna say that. But part two is yes, frankly, the people that manage them, we have an entire team, I don't know how many people it is, that look at these things every day, manage it every day, and are looking at the funds and all the things you could invest in. That's more work than you should be doing at home, frankly.
SPEAKER_01All they do is study the studiers who are studying the studies.
SPEAKER_05Looking at him who's looking at me. Yeah. The fact is that they have, because of the research, uncovered not us, but others, and now we use them things like momentum, things like profitability, that I don't think you at home should be trying to buy particular funds for. I'll put it that way.
SPEAKER_01Okay. Yeah, that is a great point. Let me take you back in time a little bit. When Tom and I first started in this.
SPEAKER_05Do you know how many years it's been now?
SPEAKER_01Uh 30?
SPEAKER_05No. Well, okay, in this particular outfit, 17.
SPEAKER_01Oh, yeah. Okay, but I mean going back to Merriman.
SPEAKER_05Going back to Merriman would be 1998, I think.
SPEAKER_01Yeah. So a long time. Almost. A long time. It's about 30 years.
Factors and Research
SPEAKER_01Um but back then, I remember the early days of the FAMA and French research. Yep. And it was really pretty much two-factor. Well, three. Stocks, you know, equities were a factor because they exposing yourself to equities. Exposing yourself to equities was one. Then overexposing yourself to value and to small companies.
SPEAKER_05With another term overexposure. Overexposure.
SPEAKER_01Uh that was it. That was those were the factors. Yes. And then they said there could be other factors. We just haven't seen them yet. Yep. And others kept doing research, including Fama and French, but many others, because there are a lot of academics out there. And they found and and this was when we first read the paper on this, and I remember this really clearly.
SPEAKER_05You were in the office, actually.
SPEAKER_01Yeah, we read this paper. Uh as a matter of fact, I think I brought it to you guys.
SPEAKER_05You may have. I didn't know.
SPEAKER_01I brought it in for the podcast, and I went, okay. Yep. More profitable companies are likely to make more money. Like I called it the duh factor. Yes. It holds. And and then there was momentum, and then I don't know, but but there these factors have been discovered. And when they are discovered and well vetted, then uh because we have advisors managing your portfolio for you, making sure it's done properly, we can add those factors to your portfolio, potentially increasing your returns. And it's only fractions of a percent. That's right. But a fraction of a percent here and a fraction of a percent there, and pretty soon you're uh what? Oh, talking real money.
SPEAKER_05Yeah, and and by the way, go back and look at some of those fractions the last couple of years, because things like momentum, they've been big drivers in the market the last two years. So don't overall.
SPEAKER_01That's why, that's why it's it's it's hard for you to do. We we we will never on this show ever, ever suggest to individuals a 20-fund portfolio. No, because it'll be hard to do.
SPEAKER_05Uh, we got time for one more.
Rebalancing in Retirement
SPEAKER_05Yeah. Alyssa Viejo, California, Kelly. A few years ago, my husband and I went to a fee-only advisor who created a financial plan for us. We followed his plan to create a diversified portfolio. We planned to rebalance the portfolio annually, but for the first couple of years, our percentages were so close to their targets that we didn't need to rebalance. This year was different. So I sat down thinking, this will be simple. Don and Tom say just sell the winners and buy more of the losers.
SPEAKER_01Yeah.
unknownYeah.
SPEAKER_01Okay. It's simple on paper.
SPEAKER_05Yeah, pretty straightforward, except that all the winners are in our Roth IRAs. Because also, and I'm this I'm adding this myself. We do suggest asset location as best as you can do. In other words, the riskier thing should be in Ross because you hope as best as you can do.
SPEAKER_01There's the qualifier.
SPEAKER_05Yeah, I know. So because when people come in all the time with bonds in their Roths and they could have them in their traditional, I say, that should be in the traditional Ross.
SPEAKER_01Yeah, but how do you get it there? Yeah, well, you have to sell one and buy another. But that's the thing. No, no, no. But how do you get it from the Roth? You can't. You can't take it out of the Roth.
SPEAKER_05No, no, no. You sell something in the Roth and then you buy something in the traditional to make the to build it. I don't understand what you're saying.
SPEAKER_01So anyway, what I'm saying is you Well, they could not you don't liquidate your Roth to move it into your brokerage account.
SPEAKER_05No, no, I was saying IRA. I say own those anyway. Okay. But the here's the question. We want to move funds out, we don't want to move funds out of the Roths, like you just said. The losers in the portfolio where the percentages are aiming for under what the plan suggests, all are things like bonds and money markets. So yes, you would expect stocks to come up faster than money markets and bonds, and they have. We don't want those in our ROS. We're both 16 looking retired 65. The question is, I guess, at hand here, how do you rebalance if, yes, all the one type of things are in one portfolio like Ross and other all the other things are in traditional or brokerage?
SPEAKER_01Then to avoid getting overweighted in equities, which is what you are right now, I'm sure that's the because they've done very well, you have to sell some of the equities in the Roth and buy a bond ETF in the Roth.
SPEAKER_05Yeah. You're gonna have to it's the asset location's not gonna be as pure as we would like it. But it but you're right, to hold to the correct stock-to-bond ratio, that's what you're gonna have to do.
SPEAKER_01And to me, that is more important than having a lot of stocks in the Roth. Um the right ratio is going to save you psychologically in the next downturn whenever it happens and however bad it might be. You've got to continue to have that. Or you or you what will happen is you'll get overweighted in stocks because they outgrow bonds always over time. They always have. And uh then whenever there's a big downturn, it's gonna hurt a lot more. There you go. We've reached the end of another episode. Oh, shit. Thanks for being a part of it. Tell your friends, tell your neighbors, tell your enemies. Hey, you know, help them out. Come on, it could patch the relationship. And uh and yeah, or not. Um and and maybe it they'll be so miserable you'll feel better about recommending us. Maybe they'll hate us, maybe they'll be those people who just hate us. Tell all your crypto enemies about us so they can hate us.
Listener Limits and Music
SPEAKER_01Um and then send in your questions at talkingrealmoney.com. Speak them with the little button. By the way, the little button in the corner, the speak the questions. I've neglected to mention this. There is a two-minute limit. Really?
SPEAKER_05So be You know, had I had that in my first marriage, I'd probably still be married. Probably two minute limit. Hindsight is quite good. That's a really good idea. That's smart.
SPEAKER_01And then, and as people keep saying, if you want to sit down with somebody and get a little bit more help, I know that one place two-minute limit. I know one place you could do that, and that's it with our firm Appella. We will let you spend some time with one of our advisors for free for nothing, and there is truly no high-pressure sales pitch. Really, honest. You just get info. And for that, click meet an advisor on our website. Oh, and by the way, now uh all the themes that have been played, all the musical themes that have been played, are now in a section at Talking Real Money. Look in the right-hand column. Uh it says what would you like to do? And you could say listen to the show music. There's a whole playlist of all the show music. If you love it so much, you can't get enough. Uh, and and I'm gonna start dropping in there some of my four and five-minute complete songs that are themed to different things, like I've I've got, I'm working on, it's almost done with the free steak dinner one. That it's called That Steak's Not Free. In what style? What genre? It's all of these are gonna be because the uh they're my album that I'm doing, the Talking Real Money album. So um the Talking Real Money music album, and it's all in the genre of sort of um modern cinematic art rock. Uh art rock.
SPEAKER_05That's an expression I've maybe never heard, so I'll look forward to that. It's so do they play back to back to back, or do you have to play them each individually? They play back to back to back to back to back. So you can just sit there at your desk and listen to it.
SPEAKER_01I sound clouded them. I don't know why. You don't even know what SoundCloud is, do you? Soundcloud is a place where musicians can put their music for free if you know it's less than two hours.
SPEAKER_05You're just waiting for the Grammys. So we'll see what happens.
SPEAKER_01No, because uh again, the the U.S. Copyright Office has basically said these are not copyrightable. So somebody could just steal. Even though I was the conductor and I created the lyrics and I came up with the idea, it doesn't matter. The copyright office says if it was written by a machine, it's not copyrightable. I don't care. I feel bad for you. I don't truly I truly don't care. So what do I care if somebody uses one of them? They're not making me any money. But but we hope we're making you money as we sit around here on this Little Here podcast.
Disclosure and Goodbye
SPEAKER_00The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions.
SPEAKER_02Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy.
SPEAKER_00Information presented on the podcast is not personalized investment advice from Apello Wealth. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee future results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Real Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy or sell any financial products or securities. Instead, the program is provided as a public service by Appello Wealth, a fee-only registered investment advisor.
SPEAKER_02See Appello Wealth ADB Party to A on our website for information regarding Appellate's fees and services.
SPEAKER_00Appello Capital, LLC, DBA Apello 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 of training. Appello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast.
