Investing in the Stock Market (Your Overall Financial Plan)

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Today on Wealth Office Hours, I'm talking about the stock market and how it plays a part in your overall financial plan. I’ll cover market trends, asset allocation strategies, why high-net-worth investors are increasing exposure to alternative assets, the pros and cons of public market investing, target date funds vs. the S&P 500, and more! I’ll also discuss the best-performing investments of 2025, common investing mistakes, and the ideal order of investing to build long-term wealth.

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Transcript

SPEAKER_01 0:10

Welcome everyone to Wealth Office Hours Live. Excited to be with you today talking about the stock market. It has been at all-time highs. We are peak earnings in the stock market. Many of you have been investing it. Many of you have avoided it. I want to talk about it today. This is a place where a lot of people are invested. I think some people are overinvested. And I think some people are a little too scared to invest in it because it's been a roller coaster. But the good news is if you've been in the stock market, it is up right now. So we want to talk about it, break it down, what's going on in the market, and also give some general education about how to think about the stock market. I'm not going to be giving investment tonight. I'm not going to be telling you what specific stock to buy, but I want to put it all in context to your overall wealth building plan because let's be honest, a public stock portfolio, whether this is ETFs or mutual funds or individual stocks, is going to be part of 99% of people's overall wealth building plan. The question is, how much of it is going to be part of your wealth building plan? If you've been on my channel, you're familiar with my companies, you know I love private assets, alternative assets, using your IRA or 401k into an invest in those types of assets. But publicly traded assets are a great vehicle. There's some benefits to them. There's also some cons. We'll be breaking down that through today's episode. Now, please like and comment if you're tuning in today. If you've got questions, ask them, throw them in the comments on the YouTube channel. Jordan is here. He'll be grabbing those and asking any live questions for me. You can also download the slide deck. So I've got a pretty impressive slide deck today, compliments of Jared on my team. Um, and I was part of it. Okay. I helped giving ideas and what I actually did want to talk about. Okay. Um, and also we'll give a shout out to Claude as well. Okay. I don't know who Claude is. He's a new employee in the office. He's been getting a lot of recognition. I think he might be employee of the month this year. I don't know. It's like Claude did this. I was like, who is this guy? I don't where does he sit? I don't know. Okay. All right. See, he's in the Phoenix office? Yeah. Okay. All right. Um, let's talk about. I just think that was pretty funny, actually. I like that. I was I should surprise myself sometimes. Um, all right. Well, let's dig into it. Here's the market. This is some of the highs you can see here. The SP 500, that is the main index a lot of people think about when they think about the stock market. That reached all-time highs on May 5th. I don't even know today if we reached another one. Um, but we've been seeing significant returns. People have been investing the SP 500 this year in 2025. You've seen a 16% return since 2024 and 2024 and 23. There's also incredible returns in the stock market. Now, AI trades and a lot of artificial intelligence agencies, you've probably heard about the Mag 7, the Nvidia's, Amazon, um, Google, all these companies that have a lot of the new AI products or the infrastructure providing them are making a ton of money and have a ton of future earnings and growth ahead of them. And that has been driving a lot of the stock market. There's many other things to that, but that's the quick, short, and sweet of it that most people are talking about. Now, as we think of the stock market, it's not just individual stocks. A lot of people are invested in the stock market through either an ETF, a mutual date, a mutual fund, a target date fund, or maybe they're just buying individual stocks. So I grabbed just a couple of the winners and losers in 2025, just to kind of outline this. You may be invested in an ETF. And the SP 500 itself, you can buy the ETF for that, which is SPY. But the best performing ETF was actually ARC, Autonomous Technology and Robotics ETF. That's Kathy Wood. She's a pretty famous investor that manages that fund, but it had the best returns in all of 2025. Now, as you'll see, you're never gonna see never. It is very rare that you will see an ETF or a mutual fund have a 100% type return where you're doubling your money. Now, could you get that in real estate or an alternative asset? Yes. Do you have more risk in those assets? Maybe. You probably do, in fact. But an ETF, this is a basket of multiple companies. This isn't just one stock that they bet on in that ETF. They're betting on a lot of companies that are in that technology or robotic space. And so, in inside each ETF or mutual fund, there's a different basket of stocks and companies that they're investing in. That's important because most people own a mutual fund or an ETF as they're building wealth or a target date fund, particularly in their IRA or 401k account. But the important thing I want to talk about is the individual stocks that are comprised in there. Sometimes stocks do well, sometimes they don't. This is important because as we're trying to decide how to invest, how do I know whether I'm picking the winners or losers? Nike, for example, down 25% in 2025. Maybe you watch Nike and you like Nike gear and you're like, seems like it's a good company in selling. Why did its stock go down 25% a year? Okay. There's a lot of things happening underneath the hood in companies that we may not be aware of. Um, and there's a lot of expectations built up in companies, again, that it's not easy to readily see. Because you can see, even a company like Nike, they can be down 25% in the year. And if you put all your money in that stock because you just love Nike gear, well, it was a bad year for you in 2025. All right, let's talk about stock in relation to other assets for 2025 at least, and for annual performance, because you can put your money in different stuff. Like, I don't just have to put my money, this is my personal cash or my IRA or 401 cash, into just the stock market. Now, if you look at a 10-year window, private equity has outperformed the stock market. All right, private equity would include like big private equity, small private equity. And even within private equity, there's funds that have done really well, and there's some that have actually funds that have actually done not so well. But this is generalized indexes of the private equity space. Annual returns over a 10-year window is 16.2%. Now, the stock market, which again has had an incredible run the last couple of years, it's had a good year this year and last year, that that would comprise large cap and small cap. I mean, those are parts of the stock market. Now, the best asset last year wasn't private equity. It wasn't stock, it wasn't real estate, it was actually gold, precious metals. Who would have thought gold was coming in at 2025 as the number one asset? And the reason I'm bringing up all these other assets here is most people just think about the stock market when they think of investing. I don't want you to do that. Even though I'm happy the stock market's up, I invest some of my money in the stock market, a portion of my investments and wealth is in the stock market. But that's not where we all need to be. If we look at last year, gold outperformed the stock market. If you look at a 10-year window, private equity outperformed the stock market. So, and if you look at other periods of time, real estate outperforms the stock market. And now this is in a general sense. There's one important thing, though, that I want to say about the stock market that is different than other assets. The stock market is probably the most difficult asset to pick winners and losers in. The reason it is difficult to quote unquote beat the market or find the one stock that is going to outperform every other stock is you are competing against Wall Street, against millions of other investors with access to the same information and who can take the same few keystrokes to buy or sell something. It is very hard to beat all of those people at that type of a game. You're also competing with AI. You're competing with quantitative traders and people utilizing all these different technologies to go trade and beat you for pennies on certain trades. So as an individual stock investor picking stocks, it can be a place to be, but it is actually, I think, the very most difficult place to beat the market. Now, can I beat the market in real estate? Yeah, it's easier to beat the market in real estate. Every market is local. You can have an edge in a market, you can have insider information on deals and opportunities that other people might not be aware of. And it's illegal to make money on that insider information in private assets. I can have insider information on a real estate deal or a small business I want to invest in. That's okay. You just can't have insider information, which is illegal when you're investing in the stock market. And insider information would be information about the public company that is not publicly made available. All right. So because I can be at an information advantage, an experience advantage, a contact advantage, a market advantage, there's certain assets, whether it's real estate, small business, other private assets, a lot of things that people do with self-directed IRAs that are company directed IRA, actually, you can, it is, it is, I shouldn't say easier. It is more likely that you can beat the market, so to speak, because you have an additional opportunity to find the better deals and find the upside. All right, now let's go to um I want to talk about uh trying to beat the market to an individual stocks. So within the stock market investing, there's another way you can invest in the stock market, which is essentially through a hedge fund. You can invest in a private fund that is a hedge fund, and most hedge funds are trading stocks. All right, they're like a super mutual fund in the sense that I'm investing in this fund. There's a sophisticated manager of that fund who's getting compensated for assets under management, and they get a share of the profits if they make money. And what what they're doing here is they're buying and selling stocks. Think of billions, Billy, was it? Uh no, Axelrod. What's his name? Axelrod on billions. David Axelrod? No. That doesn't sound right. That's like a musician. Yeah. Or what is it? Um, Bobby Axelrod. There we go. Zero help here in the audience. Did any of you guys watch Billions? No, apparently not. Okay. All right.

unknown 10:51

Is this a picture on TV?

SPEAKER_01 10:54

It was a TV show. Oh, no. You didn't watch that on Showtime or HBO? No. Oh, yeah, watch it. Okay. That's put that on your list, Jordan. You'll actually like it. All right. Anyways, the guy runs a hedge fund. Okay, that's what I'm trying to say. They're buying and selling publicly traded companies. Now, these guys are trying to beat the market. When most people say the market, they're talking about the SP 500 fund. And the SP 500 fund is the uh 500 most successful companies in America. And it's just like, just bet on them. Bet on the winners, pretty much. Um, they're the big companies and just go bet on them. Now, Warren Buffett, probably the the most, I shouldn't I shouldn't say probably, uh the most successful and well-respected and listened to investor of my lifetime, probably of yours too here, um basically came out in 20, in 2008. He made a bet in 2008, a 10-year bet. And he said, if any hedge fund out there can beat the SP 500 fund over 10 years, net of their fees, and produce an overall return greater than what any American could just get by buying the SP 500, he would donate a million bucks to charity, the charity of your choice if you run the hedge fund. But if you lost and you took him up on this bet, you had to give a million dollars to the charity of Warren Buffett's choice. Now he made that bet and he had four hedge fund managers take him up on it. Now you can show the chart here. The SP 500 there over that 10-year window had a 126% return. The best hedge fund manager that came close, the closest, wasn't even close. Not even half of what the SP 500 would have returned, which you could just buy easily in a mutual fund or an ETF. Now, are there hedge funds, hedge funds that outperform? Absolutely. But the typical hedge fund, and the point of Warren Buffett's bet and this 10-year challenge, which was well publicized, was it is very hard to beat the stock market. And his message to most investors was stop trying to beat the market. Invest, let get your money in, let it compound and grow over time. And when we're talking about the stock market, the SP 500 fund is likely the place to be. And why is that? Because it's got the 500 best companies in America, and just go bet on the winners. Peter Malouk, another guy that I listen to when it comes to investing, particularly in the stock market. He's CEO of Creative Planning, one of the most well-known registered investment advisory firms out there. And as an advisor, he's very well known. Um, wrote a book called The Path. I'd highly recommend that for anyone. Um, but he talked about the S P 500 fund and how this is kind of like the default choice when you don't know what to invest in. And that's how I feel. And that's actually what I do with a lot of my investment dollars. If I don't have a great investment, I have high conviction for, or I sell an investment, I like to just go invest in the SP 500 fund. And then I wait. And when I find a better deal, which is what I do and I'm always trying to do, I sell out the SP 500 fund and I go invest into the better asset that I believe is going to outperform that. Now, for me, that's not the stock market. And you might be someone that loves the stock market and you might know it and you can outperform the SP 500, and that's for your wealth building journey. That ain't for mine. Okay. Um, I might invest in a business, in a real estate deal, in crypto and precious metals and a private fund. I mean, those are the different things I've invested in. And I do that when I feel like the opportunity is right for that specific asset. The timing makes sense because real estate's cyclical too, by the way. Like real estate didn't do well last year, but you'll have years when the real estate market would be up 20%. And that was the incredible year to buy. And the next year's 10%. And you would have wished you were in real estate instead of in the stock market. And that's just on a general sense, let alone any outliers. Okay, now everybody is going to approach this differently. And I want to try and bring in some pros and cons here, but I also want to think about what does it look like for you investing in the stock market versus investing in alternative assets. Now, I think there are different classifications of people who have a higher appetite for alternative assets, who want to go do the work and find those higher performing assets on a risk-adjusted return basis than what they can otherwise get in the stock market. But the nice thing about the stock market is it's getting to first base with investing. If I'm at least investing in the stock market, and when I get there, let's say I do the S P 500 fund. A lot of great advice from people to say that's where you should go. That's what I do with my money. Again, not investment advice, but let's at least start there as a basis. Once I get there and I'm invested, my money's growing. It's compounding, it's going to multiply over time, right? And that's the point of wealth building is let me work hard, accumulate assets in my job or in my business, set the money aside and invest it. But don't just let it sit in your bank account doing nothing because you've got analysis paralysis. Get it invested in something. Now that could be the SP 500 fund, and that's where a lot of people start with the stock market. Sadly, too many people stop there, in my opinion. They get there because it's easy, because you had to type in a few keystrokes into your computer and say, buy Apple or buy the SP 500 and whatever it is, and they just stay there forever and they do nothing else. Now, that's good. Like I said, you got the first base, you got a single. That's good. You keep doing that, you're gonna eventually be scoring some runs. But if we look at these, this allocation here, you might be like investor A if you're in that in that boat. 80% of your money and wealth is in the stock market. 20% is in non-stock market assets or quote unquote alternatives. And that could be real estate, that could be private funds or private companies, private equity, that could be cryptos or precious metals. Now, what we're starting to see, and what we've seen, and what I've seen over my career, is a shift of investors that are more in the B category. Investor B category is I think where we're sitting now, and where a lot of successful smart investors are, where maybe 60% of their net worth is in the stock market, and the other 40% is in alternative assets. Again, real estate, private equity. Now that might be the right balance for you. I think that's a common place you're starting to see Americans get to. There's been lots of reports on this. Even JP Morgan themselves, the most Wall Street of Wall Street places, did a report and said, hey, the 60-40 portfolio of 60% stocks, 40% bonds is kind of dead. It's more like a 40-30-30 of 40% stocks or inequities, 30% alternatives, maybe 30% of bonds or fixed income. So they're they're bringing in alternative assets to their practice for their typical clients because they've seen the power of driving better returns and greater returns. Now, investor C here is probably the person we see a lot that I get a lot because that's what we attract is investors who really love alternatives. These are entrepreneurial people, real estate investors. 80% of their net worth is in alternatives. Only 20% is in the stock market. And this is actually where you see a lot of ultra-high net worth people. Once someone gets above a 25, 50 million of net worth, they start having a much lower percentage of their wealth in the stock market. They're investing in more private assets that can create greater returns. And there's lots of studies out there. I think I have some here showing the percentage of people's wealth based on their net worth level. And the bottom line here is you know, the more you have in overall net worth, the higher percentage of your net worth is invested in alternative assets. Obviously, you've got more money to invest, but also of that more money that you have, you put a higher percentage into alternative assets. So where you see an ultra high net worth person putting 34% into alt versus 13% of someone who would be average uh quote unquote high net worth. All right, now I want to come back to the stock market here for a second. Um, and I want to talk about, I want to hit one more point. I want to get to some pros and cons. And of course, we'll take any of your questions here, any of you guys live. Stock market, investing, tax, legal strategies, whatever you want to hit, I'm here for it. Okay. That's what this, that's what wealth office hours is. Here's one of the reasons I've been concerned about the stock market. And what I've heard from a lot of our investors, successful investors, I have large accounts at our company directed IRA, clients that are making a lot of money at my law from KQS lawyers and are trying to save on taxes. Basically, the people I'm trying to listen to, you know, to figure out what's going on, what decisions should I be making, and should I be thinking about as I'm helping other clients? If we think of the stock market, in 1996, there were 8,000 companies that were publicly traded that you could buy in the stock market. Right now, there's around 4,000 publicly traded companies. Think about that. Our company's GDP and our total economy has probably 3X'd since that time. It is like probably triple the size. But the amount of companies that are publicly traded that you could buy in a brokerage account or with most people in their brokerage IRA or their 401k account, it is now only 4,000. It is cut in half. So we have more money, more dollars to invest than we've ever had, probably triple the amount we had back in 1996, and we have half the amount of companies we can put them into. No wonder stock market valuations are going up. We're forced to put more money that we have and able to invest into less companies. There's a number of reasons why that's happened. A lot of companies don't want to be publicly traded. There's more scrutiny, there's a lot of regulatory stuff they got to do. They stay private longer. SpaceX, many companies you're familiar with, Stripe, OpenAI, a lot of these big companies now that are hundreds of billions of value, possibly trillions of SpaceX or no OpenAI. These are some of the could be some of the biggest value companies in America. Least in the top 25, they're private. These are not companies that did a big tech IPO early on. They've stayed private. They've wanted to be private and control their destiny. And who owns those shares? People investing in alternative assets. They're the ones that bought it when they were small, when these companies were small. These are private equity funds that you could be investing into. These are startups you could be investing into. And so we've seen this shift of companies don't go to the stock market anymore. SpaceX apparently was going to have an IPO this year. We'll see. Um I don't know about OpenAI. I don't know. They haven't doing IPO? I don't know. Probably not. They got too many, yeah, they got too many lawsuits going on. Um, so uh but but I think this is a really critical stat that gets overlooked is the fact that there are less publicly traded companies. Now, what do we have more of, too? We have less publicly traded companies, but what do we have more of? We have more ETFs and mutual funds. Well, that doesn't make any sense. What are the assets in ETFs and mutual funds? These same 4,000 publicly traded companies, they're just bundling up, and you can unshare that side, they're just bundling up the same companies in different little bundles and packages. And so there's a concern for many investors that there are less companies, less value to be found in the stock market, because there's only 4,000 of them. There's millions of investors scouring the internet and on Bloomberg and the Wall Street Journal and Robinhood and every place where they're getting all their information about how to invest in the stock market, competing over the same stuff. Well, when you go out to the alternative asset world, it's not as crowded. Now you have to hunt a little bit though. Okay. This is not like going into the grocery store and picking up an investment off the shelf, which is what you can get with the stock market. I mean, it's frankly, it's just as easy to buy stock right now on your phone as it is to like check out and buy something on Amazon. So um, so they definitely made it easy. But just because it's easy isn't doesn't mean that's how you want to do it. And alternative assets take work, right? I've got to go put my time into that real estate deal or that private fund. I've got to go look at it. I got to talk to people, I gotta learn stuff, I gotta do some due diligence. But if you're the hunter type and you're allocating into alternative assets, you get the reward for that. Okay. Publicly traded companies, a lot of the public assets, you're getting the scraps. The value adjustments are already priced in. If you have an angle on a company that's going to be successful in the future, well, guess what? Everybody else thought it was going to be successful in the future. So the price of the share is super expensive. So you couldn't really buy it at a discount. So you really have to be ahead of everybody and you're thinking about where value's coming from a company. Okay. Um, that was me waving my hand to say um uh that's too much of Matt on that topic. All right. A couple more points I want to make. Okay. There's I've got some things obviously I wanted to say on this. I think a lot of people, if you have a 401, and let me let me frame it up this way. I think a lot of people who are invested in the stock market don't even know what they're invested in. If you're someone that had a 401k at work and you went in and you did not pick what your 401 is invested into, but you filled out a form that says, hey, I'm 45 years old. I want to retire when I'm 65. My investment risk tolerance is conservative, medium, you know, aggressive. And then you filled out that form and you didn't do anything else. Guess what your 401k owns? It owns something called a target date fund. You probably don't know what that is, but what Wall Street did is they created this fund product that said, for people who won't take the time to even think about how to invest their retirement account, let's put a default thing they can own. It's called a target date fund. Now, this is an example of someone who is 45 years old. I'm 45 here, wants to retire in 20 years at age 65, common date to retire. What happens in a target date fund is they will allocate more money in your early years. So right now, at 45, for example, here, into stocks and what they would be called public equities. Okay, you're investing in companies. Over time, though, you're gonna have less and less stock in your portfolio. So at the time you're in your 60s, you're gonna have maybe 40% or 50% of your portfolio in stocks, and the rest is gonna be in bonds or fixed income that just have a rate of return that they pay to you. All right. And that is taking down the risk tolerance because the stocks can go up and down, but the bonds are gonna pay a fixed rate of return to you. Now you can obviously trade bonds as the market goes up and down, but um but the conservative approach is I just want the guaranteed type fixed income coming in. So you may actually have a target date fund in your 401k if you haven't been paying attention and you didn't actually make investment choices when you enrolled in your 401k with your employer. So that's what a target date fund is. They call it this glide path here that over time it will shift. Now, if you're someone who's 55 and you started in your company's 401k, you're gonna have a lower percentage going to the stock market. If you're someone who's 25 and maybe your first job there you have where you have a 401k, you're gonna have a much higher percentage in the stock market versus bonds. All right, so that's target date funds. Um, I want to just put this all in perspective for everybody. I talk so much about alternative assets here, and I feel like I needed to talk about the stock market for a day, at least one day. Okay, we're doing it today. Um, and uh note the all-time highs that we have seen in the stock market, and also try and put in perspective in what's going on in the stock market. What are your options? What are the assets there? How are people investing in the stock market versus investing into other alternative assets? All right, now let's talk about some pros and cons here. On the pro side, the nice thing about the stock market is it's easy to invest in, right? We're doing a few keystrokes, we're buying that publicly traded asset. It also has moderate and consistent returns over time. It usually makes money. Now the market goes up and down, and some years you're down, some years you're up. But over time, it does go up. It doesn't have insane returns, and I'm just saying overall here, talking about the SP 500, of course. It doesn't have incredible returns, but over time you're getting an 8 to 10% return, and that's proven annualized for the SP 500 over time. So we're getting good returns, not the best you can get, but good. The other pro to the stock market is it is liquid, right? I can sell out of a position and have the cash tomorrow. So it's highly liquid compared to some other assets where you do not have the ability to sell it and have the money available next day in cash. The last point here, in terms of the pros, is it's passive. If you're someone that doesn't want to be involved with your money, you don't want to be engaged in the investments, the stock market is probably the right thing for you. And there's different ways, of course, to approach the stock market. But passive investing or maybe hiring an advisor that helps you on other private assets could be a way around that. But for people who are very passive, don't like looking at investments, don't get excited about it, don't want to go out and do the hunt and the work to find assets that can overperform the stock market, passive investing, that's a plus for you and important, and that's definitely a pro to the stock market. Now let's take the cons to the stock market. First, it is kind of hard to beat the market in the sense that me picking individual stocks in the stock market, it's hard to beat. So the general sense is, and this was the Peter Maluk, this is the Warren Buffett, is if you're investing in the stock market, don't try to beat the market. Just buy the market. Just buy the SP 500 fund, for example. And um, and the reason I listed that as a con is in other assets, there are ways to beat the market. Take real estate as a most common example in another place where people invest. The real estate market, again, is local. It's competitive. You can hustle, you can find deals, you can have contacts, you can learn strategies. There's ways you can improve your situation and your likelihood for success in private assets that you're not going to be able to do as much in the stock market. So it's easier to beat the market in private assets. Also, a con is there is a concern of overvaluation. So I was talking about the 8,000 publicly traded companies in 1996 to around 4,000 approximately now. We're investing more money into the stock market for half the amount of companies than we had 30 years ago. That doesn't sound right. No wonder the PE ratios, the price to earnings ratio, and the price of stocks compared to their earnings has gone up so much. There's less supply of stocks, so the price has gone up. Next con. The value opportunities are priced in. In a lot of investments, whether you're investing in small business or real estate, there's oftentimes to find value plays and be a quote unquote value investor. I can find an asset, improve the asset, um, and the asset's worth more and I can sell it for more later. In the stock market, that's very hard to do. Warren Buffett was actually a value investor. But even he has a hard time investing in the stock market now and tells you that because there's not that much value opportunities. They think it is already overpriced. And so it's hard to find value in the stock market. Uh, next con volatility. Even though your money is liquid, because it is liquid, it is also volatile. With liquidity becomes volatility. Because anybody can take their money out, sometimes you'll have people who take a negative view on the market. That gets contagious. There could be something happening in the world, a war, something in the economy, and the market plummets. Now, those things can also get realized, and you have the volatile, and people have greater confidence that there's going to be stability or that a war may be ending. Hint, hint, Iran, and why the stock market's been at all-time highs, possibly. And then you see the prices jump back up. So stuff in the world, news, economics, policy, can create volatility in public markets where those things don't affect other asset classes as much. And then the last con, which is, I think, the most applicable to most investors out there, is they are overconcentrated. It's not that they shouldn't be investing in the stock market, it's that they've invested too much of their money in the stock market. They're overinvested in the stock market. I'm I've I've talked to a lot of clients. Many of them they're like in New York or LA, and they're like, I don't own anything but publicly traded assets. I don't even own a home because I rent in these types of markets. So I can't even count my home equity or anything, then be count that as real estate in my portfolio and wealth building. And so because people are overinvested in the stock market, their entire net worth is reliant on where the stock market is going. And I think that's a dangerous place to be. It is better to be diversified outside of the stock market into other assets. And that may be one way to look at investing in alternative assets. The other way is to think of where I can get better returns than the stock market. And sometimes, again, the mentality of you, which is kind of the way I approach it, is I invest in the stock market. For me, I'm just doing the SP 500 fund for the most part. Sometimes I do the QQQ. There's reasons on that here, which is which is the NASDAQ. But but what's happening is I'm investing in that, not because I'm staying there, but because I'm waiting for the next investment opportunity, which I do typically find, that I then deploy that money out of that brokerage account. So, but I want to stay invested, and it's the default place when you don't have a better deal to go. If you're new at investing in, if you're new at investing in general, the stock market is a great place to go. It is easier to get access to. Everyone can do it from the Robin Hoods of the world to most of brokerage, you can have an app on your phone, and and and that's provides great access to start investing and again get on first base. Get there, let your money get invested, and let's have it start compounding. Now you might stay there. You might keep a big portion of your wealth there and get onto alternative assets later. And if you've uh if this is the first episode, by the way, that you watch the Wealth Office Hours Live or your first introduction of my channel, I have tons of content on other alternative assets and videos on whether it's investing in real estate or private companies, how your IRA can even invest in these assets. We've had stuff on crypto and precious metals. I hold an alt asset summit once a year. This one is the next one is coming up October 22nd. Okay. October is it 21st and 22nd?

SPEAKER_00 35:45

I think 22nd, 23rd.

SPEAKER_01 35:46

Okay, 20, October 22nd, 23rd. Um, this will be in Costa Mesa, California. You can sign up now, actually. We're selling tickets now, altassetsummit.com. We go over all the alternative assets. We do not talk about the stock market. Sometimes have advisors there that will talk about how to coordinate your alternative asset investing and private assets with your stock portfolio and your overall financial plan. But it's a training about how to learn about other alternative assets, whether it's oil and gas, precious metals, crypto, private equity, real estate. And within real estate, that's multifamily or commercial or storage or hotels, single-family rentals. There's all different types of things, even within the real estate asset category. All right, let's see if we have questions here. I did have some other questions that came in already in advance, but I did say live questions get priority if we have any.

SPEAKER_00 36:38

And we do. Uh we've got some good ones that are related to sort of our business too. So uh Stormbreaker always brings it with the good questions. Uh he asks, Matt, I've been told to invest in a Vanguard SP 500 index ETF fund. Can I do that while I'm self-directing my Roth solo 401k? Absolutely.

SPEAKER_01 36:56

So even here at Directed, most people don't come to us at Directed IRA. That's my our my company, Directed IRA, where we provide self-directed IRAs that can invest in any asset allowed by law. So you could buy real estate, you could buy crypto, you can invest in a private fund, precious metals. But a lot of clients, when they're between deals or they're waiting for a deal, they just want to get invested in the market. And you can absolutely do that. So you can buy an ETF or a mutual fund with your account at directed IRA. You can do it right in your client portal. Um, or you can call us and we can help you walk you through it on the phone. So, and uh, and that would probably be, in fact, that might be one of the most common assets that we have is a Vanguard SP 500 fund. Those are because the Vanguard is known as a low fund provider. So, or sorry, a low fund, a low fee provider in their funds. Um, and which which is important. And um, I even have a slide here on just like fees, by the way. Um, which you can see, some of these fees will really eat into your returns. Um, but Vanguard, which has their target date funds, they have SP 500 funds, they have an ETF. Um they're they're known as a low-fee provider.

SPEAKER_00 38:11

All right, I'm gonna give Stormbreaker a two for one because he has a question that I think will segue into content that we're gonna be doing here soon. Hint, hint. Um, after funding all your retirement accounts in full, in your videos, you say to invest in a taxable brokerage account. How do I draw from that at age 60 plus? Borrow against it or pay to withdraw? Ooh, okay.

SPEAKER_01 38:33

All right. This is a great question. When you think about a taxable brokerage account and you're buying stocks, ETFs, mutual funds, whatever you're doing, let's say that you invested in that thing over 20 years and you put, I don't know, 400 grand into it over time. Of money you put into it, right? You didn't get a tax deduction for that 400 grand. It's just, it's a brokerage account, right? Um, but now that the all the stock in there is worth, let's say it's worth 900,000, okay, 20 years later. And you've got a $500,000 capital gain. So if I want to sell some of that stock, let's say I want to sell, um, let's say it's actually worth $800,000 so I can do the math easier. Okay. So let's say it was $400,000 you put into it, it's now worth $800,000. And let's say that you want to sell $100,000 of it. All right. Well, when you sell $100,000, half of that is a return of the money you put in. The other half is capital gain, which is at a long-term rate that maxes out at 20%. Now, if you're someone that's retired, there is a way you can sell that stock and pay zero tax. If you're married, filing joint, and you have less than $98,000 of taxable income, so you're not working anymore, you don't have a business, you don't have any other income, and you're like, I just need $100,000 this year. I'm gonna sell some of my stock in my taxable brokerage account, you could do that. In fact, in this example, you could sell $200,000 because only $100,000 of that would be taxable to you. So I could take that $200,000 that year to go live on and enjoy. $100,000, it would be taxable as a capital gain. But if I don't have any other income, that's the only income I have, my capital gain rate is zero. All right, so the capital gain rate is zero for anyone that makes more less than 98k a year, married, filing joy. And I think it's around 46 or something for anyone single. Now that's all income. That's your wage income, okay, that's your investment income, that's your capital gain income. So I'm assuming you don't have a job at this point. You are retired at 60. Now, once you're over a couple hundred grand, though, and we can drop some of these brackets in, um, you're gonna be paying the 20% rate. So maybe you've got like some traditional IRA money, some Roth money. Maybe wait on that. Let that money come out later. Let's hold off on that. Don't start drawing on it yet. Dip into that taxable brokerage account, and you could get up to a hundred grand of capital gain income and actually pay zero tax. So, um, so I think that's a way, and I did, by the way, put out a video on YouTube on um how to basically use your funds in retirement and be strategic about it. So go check out my YouTube channel. We can maybe share my YouTube channel. I mean, some of you might be watching on LinkedIn. I do put this other places, so um geez. Uh, but let's maybe share it, find that video so we can share that link on um uh how to access these funds in the right order when you're in retirement. And it's all about the tax game, you know, because if you think about your Roth account, we probably want to access that last because it's totally tax-free. But maybe we want to dip into it in years if we're in a high bracket because that money's not taxable, it doesn't go under taxable income. There's a lot of things to think about here, but I love that question on the brokerage account.

SPEAKER_00 41:53

All right, any other live ones? Uh, we do. Well, this is a stock-specific question. It's gonna test our knowledge of AI here. Um, how do I invest in the picks and shovels of AI? Ooh, great question.

SPEAKER_01 42:04

I mean, NVIDIA, that's probably the best.

SPEAKER_00 42:07

When people say the picks and shovels, it means like define what picks and shovels are.

SPEAKER_01 42:11

Yeah, picks and shovels might not basically mean like, you know, if you're instead of investing in the mining company in the gold, invest in the company that provides the picks and shovels to the miners. Um, so same with AI here, rather investing in the AI companies that you might perceive to be overvalued, you know, open AI, anthropic, whatever they are, all private, by the way, still. But you could be investing in, you know, Google, they they're gonna have their own form of AI, although not gonna be a majority of their income for a long, long time. Maybe it will at some point. But the picks and shovels would be NVIDIA. That's why it was the best performing stock. I mean, they're providing the processing power for AI and for all these AI companies. They're all big buyers from NVIDIA. So now there's other companies in that, you know, realm besides NVIDIA that are providing that processing power for AI. There's energy companies. There's frankly a lot of construction companies and businesses building the data centers. There's lots of different plays on this of people who are having to build the infrastructure around AI. I think another way to think about it with AI, though, if you're looking at the stock market and where else to invest, and you see the potential of AI, but you don't necessarily want to buy the AI companies, and a lot of them are private. You can't, you know, you'd have to buy them in the stock market. You can still access them though. There's other private ways to get access to them. Let's say you wanted to go in the stock market. Is well, what are the companies that are going to benefit from AI? What are the businesses and industries where AI is going to provide significant value? Like, I don't know that AI is going to provide value in all companies, but there's definitely businesses where it will provide a significant value. So um there's lots of different opinions on that of where that could be. Just let's Take just take one idea here for a second. Uber. Right? I don't know there's gonna be anybody driving Uber cars in three years, maybe five. In Phoenix here, we have Waymo. I know it's Waymo is not everywhere, but everyone here loves Waymo, would rather take a Waymo than an Uber or a Lyft, and it Waymo is more expensive. But if you're a company like Uber, let's say, that has the infrastructure, has users, and they're already on this of terms of getting out their autonomous cars, like that could be a huge cost savings because they're not having to pay the drivers, and they're gonna get this um this transportation method out there. So um that's just one way to think about it. Not saying that's necessarily the best, but just you know, just think through how is this AI going to be used and what companies benefit from it. And I think the robotaxis is probably the easiest one that is a very commercialized product right now, but it's using a lot of artificial intelligence and technology to drive the car as if a human would.

SPEAKER_00 45:03

Love it. Uh, and I should give credit uh for that question, whistletone. Thank you. I haven't seen you on here, so appreciate the question. Um we have one more that is uh solo 401k related. Yeah. Uh in my Raw Solo 401k, can I buy land and build a home and sell it under a year tax-free to and to reinvest? I've been watching some of your videos that say max is two to three a year. Thank you.

SPEAKER_01 45:25

Yes, absolutely. So solo 401k, by the way, for anyone who's like, what's what's this guy talking about? It's a 401k plan you can have if you're self-employed, you have your own business with no other employees. Iris lets you create this solo 401k, which can have a Roth account in it. You can put up to 72 grand a year into this thing as new contributions, and you can invest it and self-direct it into real estate private companies. You could do stock market too, of course. But in this example, yes, that solo 401k could buy land, build a property, and sell it for profit. Now, there's a tax that can apply to retirement accounts when they are selling assets that are deemed to be inventory. And there's an and there's a tax called U-Bit that will apply to a 401k or it could apply even to an IRA. So in this example, that's what that question's about is is this U-Bit tax gonna get triggered? When you think of your Roth account, Roth 401k, Roth IRA, you're thinking tax-free, right? And I love that. But if I got to pay this U-Bit tax, that's a 37% tax. Not so excited anymore about this Roth account, right? Because I got to send 37% out of this new tax I've never heard of called U-Bit. Well, U-Bit only applies to retirement accounts where they're in the business of something. So you'd have to be deemed your 401k have to be deemed in the business of real estate. Is building and flipping one home the business of real estate? Likely not. Is buying a house, fixing it up, and flipping it the business of real estate? Likely not. If I did that three or four times a year, five, is that the business of real estate? Probably. And now your retirement account would have to pay this U-bit tax. So if it's happening once a year, like in your example there, I don't see that being an issue. I don't see U-Bit tax applying. Um, I do have a whole chapter in my book, by the way, the self-directed IRA handbook. Third edition's out. All right, if you haven't got that yet, third edition is out. Um, the latest edition, all updated with all the most recent tax rulings, um, pronouncements from the IRS, tax court cases are updated in there as well. I do have more examples from the first two editions as well. So check out the book. It's got a whole chapter on UBIT with some of the citations and cases if you want to uh dive deeper in that subject.

unknown 47:41

All right. Let's see prepared questions.

SPEAKER_01 47:43

All right. Okay, let's do two prepared questions here. We might wrap it up a little bit earlier here. Um let's take a couple of these questions. So um this was from Chris Ma 1212. What about starting a trust and then investing the money into ETFs, treasury shorts or stocks to grow the money left for your kids? Can you offer some guidance? So what I would recommend is when you're investing, and let's say you're using a brokerage account, um, you're buying ETFs or stocks, um, or treasuries, doesn't matter, you're you're buying these publicly traded assets, is the trust is going to be the beneficiary on your account. So when you open that account, you had to list who gets this account when you die. Now you might put your spouse or your kids on there, but if you want to coordinate your estate and make sure your kids get these assets passed down without having to go to probate court, and you want some controls on how that wealth continues to be invested and benefit your kids once you pass away, that would be using a trust. But you don't need to put the brokerage or investment account in the name of the trust. It can be in your name, but you need to list the beneficiary of the account as your family trust, revocable trust. That's what I do with mine. That's what we're doing with all of our clients. Like when we're working with our clients in our law firm at KQS Lawyers, that's what we're doing, is we're setting up their estate plan, we're setting up their trust. By the way, if you need that done, reach out to KQS Lawyers. We do it for clients across the country. But that's the best way to coordinate it. Just list the trust as the beneficiary. And then the terms in your trust is where you're going to specify how you would want that money to stay invested once you pass on, or whether you want it to be distributed and sold to your heirs. Now, a lot of people like to have the funds stay invested and provide a stream of income to their kids, particularly if their kids are under a certain age. Maybe there's a full distribution out to them once they reach an age. Um, so there's different ways to think about it. Um, but uh uh I think just listing the trust of the beneficiary is the best way to go. All right, this is a question from okay. This this might be a little tricky one. This is a tax question. Um, this is from Mike T, 7756. Said the SP 500 average gain is 10% a year. Why sell it at a loss within a year versus buying and holding long term to harvest the future gains? Okay, so this this was a comment because I had been talking about tax lost harvesting. So tax lost harvesting is a way when the stock market goes down, and let's say let's say that you bought S P 500 fund, Apple stock, whatever. Let's say you bought it at $100 a share. But let's say that after you bought it, the market went down and now it's only worth 80 bucks a share. And let's say you bought um what'd that be, a thousand shares. So it's a hundred thousand and now it's down to eighty thousand. Well, what you can do is you can sell that stock at eighty thousand and take a twenty thousand dollar loss. And you can use that loss to offset other taxable gains you might have in your stock portfolio with other trades. So I can lock in that loss. Now I can also roll that loss forward to future years. So it didn't, I didn't really lose 20 grand. I mean, I I've I've this the stock has already gone down one way or the other. I'm just locking in the loss. I should say you've already lost the 20 grand. It's already gone down. Now there is a rule though that says you cannot immediately rebuy the same asset. So if I bought Apple at 100 grand, or let's say, let's say, let's take the question specifically, the SP 500, and it went down, it went from down, my position went from 100 grand down to 80 grand, and I sell and I take a $20,000 loss. I can do that. I get to use that loss on my return. It can carry forward for future years. That's smart. I'm banking this loss that's gonna help me offset some taxable income later, or even in the current year if I have other gains. But I can't rebuy the SP 500 fund immediately. I'd have to wait 30 days. That's something called the wash sale rule. Basically says if you want to take a loss on a stock, you can't immediately rebuy that same stock or ETF within 30 days. So what if most people do? Maybe the stock market could rebound in 30 days and now it's back up at 100 grand and you lost out. Great. You got the tax loss, but you lost out on the rebound. So a lot of people will buy a similar but different of enough asset. Maybe this is the QQQ. That's the NASDAQ 1000, I think. Is that the QQQ? 100. The NASDAQ 100. Okay, there you go. So it's different from the SP 500, but that could qualify where I could put that into my portfolio and I could trade out that later into the SP 500 fund if I want. Um, but that could be a way some people will do that. And again, this is not meant to be investment advice here, but if you want to lock in the tax loss and get reinvested in the market, that would be what tax loss harvesting is. But you cannot rebuy the exact same ETF or stock. You've got a 30-day window where you have to do it, which is dangerous, frankly, because the market could rebound. So you want to reinvest in something else. Maybe it's something that follows your same investment thesis, or it's another broad brace, broad based ETF in the market. If you're just kind of investing in the market, not trying to quote unquote beat the market. All right. Well, remember the slides you can download at the link below. Um, thank you everyone for being on here for Wealth Office Hours Live. Um, the and I also have a guide. Oh, I forgot about the guide. I got a slide for it too, by the way. Show the slide. Um, but I do have my ideal order of investing guide. If you have not checked this out, this is the ideal order of investing where I talk about how to think about using your money and where to invest the dollars. We hear a lot about taxable accounts and non-taxable accounts. There's so many options out there from 401ks to IRAs to Roth IRAs to kids Roth IRAs to 529s. We've even got Trump accounts now. We just talked about brokerage accounts, investing in the stock market for quite a bit. What about alternative assets or rental property? When do I pay down my debt? Well, I try to answer all of those questions in my ideal order of investing guide. I think it does a great job of it. So go ahead and click that. You can download that ideal order of investing um guide. And a lot of people have had we've had great feedback on it as being a very helpful way to think about where to start and where to go next. All right, you don't have to master it all. Just worry about what you got to do right now to get started and what you're gonna be doing next. Stay focused on that, and that's where you're gonna have success. Okay, thanks again for everyone for being on. We will see you next week. Actually, we are off next week. I take that back. We will see you in two weeks. We are typically here every Thursday at four. Make sure you're subscribed to the channel, though, that you'll get notifications when we do go live. Thanks for watching. We'll see you next time.