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details. That

0:59

sounds so 20th century. Come on. Well, but

1:01

think about it for a minute. Most

1:03

of the equipment at radio stations is still

1:06

pretty much 20th century technology. Let's escape

1:08

the 19th, I guess. OK.

1:10

It is. Remember, it's that thing called

1:13

broadcasting. You remember that, right? It's

1:15

not narrow. You and I stepped in the

1:17

studio right after Franklin Roosevelt finished one of

1:20

his fireside chats and have been here since.

1:22

So, yeah. I got it. Yeah, we we

1:24

we're old. In other words, we're old. We're

1:26

old people. But we're old people here

1:29

to help you old people and the

1:31

young people to manage

1:33

money better than

1:36

ever before, because

1:38

there are a lot of people

1:40

who are doing you dirty in the financial industry.

1:43

You know, think about this for a minute. I

1:45

was thinking about this when I read this story

1:47

that Tom is going to talk a little more

1:49

about when

1:51

I started as a stock broker

1:53

selling very highly

1:56

loaded mutual funds, some as high as eight and

1:58

a half percent to get in. I

2:01

worked out of a very

2:03

fancy office. No

2:05

expense was spared to

2:08

give our clients the

2:10

VIP treatment that they

2:12

thought they needed to

2:15

feel like we were doing

2:17

something for what now

2:19

seems to be a

2:22

ridiculously large percentage of

2:25

the client's money.

2:29

The numbers, frankly, when you read this,

2:32

you don't even believe it. I

2:35

read it and I'm going, really? I

2:38

didn't realize there were so many

2:40

hands out on Wall Street that

2:42

huge chunks of

2:44

your money

2:47

are not getting to you. In

2:50

fact, if you go back a few years,

2:53

it's absolutely deplorable. This

2:56

comes from our friend Jason Swig, who

2:59

writes regularly and I think, and

3:01

wonderfully, honestly about this

3:04

industry, which sadly not very many

3:06

people do. Not very many people even do

3:08

in the Wall Street Journal anymore. There used to be a lot more of

3:10

this, but that's reduced too.

3:13

According to Jason, intermediaries, this

3:15

direct quote, mutual funds and

3:17

stockbrokers regularly raked off one-sixth

3:19

of the gain on stocks

3:21

for themselves. Now I

3:23

looked that up because I was curious. I couldn't remember the exact

3:25

percentage. Do you know what percentage that is?

3:28

One-sixth? Well, yeah, because one-fifth

3:31

is 20%. So it's

3:33

about 18%. Oh,

3:36

16. You're right. I

3:38

got to do the math. A lot. I was

3:40

doing that in my head. I did it badly. Yeah. The

3:43

reason he wrote this piece is, guess what?

3:45

Wall Street's figured out that you have voted

3:48

with your feet and are now moving to less

3:51

Expensive mutual funds, very inexpensive index style exchange

3:53

traded funds. And So they say, wait, whoa,

3:56

whoa, whoa, whoa, whoa, whoa, whoa, whoa. Go

4:00

all over there. We got some ideas for

4:02

a the to Wow! These are really cool

4:04

arm and you need to be part of

4:06

them. You've heard of such as well as

4:08

alternately Assad is. As

4:11

Big Big Big because you haven't made money

4:13

in stocks and bonds for the last thirty

4:15

years. Maloney ah which would have

4:17

made a lot more and these special

4:19

things dawn that would have really do

4:22

stuff he returns and if you want

4:24

to be a part of the gang

4:26

here again and really on the inside.

4:29

You. Gotta, You gotta put some of

4:31

your money in these alternative funds runs.

4:35

How got a bit? The fact

4:37

of the matter is, they want

4:39

to get back to those glory

4:42

days when nobody ask questions, nobody

4:44

asked brokers and mutual phone companies

4:46

and all of the intermediaries how

4:48

much money they were making. And

4:50

is it any wonder that all

4:53

of the brightest minds from the

4:55

best schools in America wanted to

4:57

get those M B, A degrees

4:59

and standard to this day, still

5:01

to some extent work for Wall

5:04

Street because. It was easy money.

5:06

And it was money that you could

5:08

peel off almost. Undetected.

5:11

Regularly and if you. Have

5:14

we mentioned alternative funds would could

5:16

invest money in all kinds of

5:18

wacky private assets as it is

5:20

is never ending. There's all kinds

5:22

of ideas Lasik comes up with.

5:24

What? Tens or hundreds of them

5:27

every week. But. The One: You may

5:29

also know about a thing called hedge funds

5:31

because they get a lot of publicity. According

5:33

to this study, this is every dollar of

5:35

return they generated from Nineteen Ninety Five to

5:37

Twenty Sixty. That's funds

5:39

harvested, sixty four sets and mechanic

5:42

my performance v is slightly had

5:44

some leading headphones expenses of even

5:46

risen to as much as. Five.

5:49

To seven for said ah

5:51

year. wow that is unconscionable

5:53

through is it truly is and if

5:56

you wanna get if you want to

5:58

get a feel for just What

6:00

is happening? Where all of that money of

6:02

yours is going? You

6:05

really owe it to yourself to at

6:07

least watch an episode or two of

6:09

the Showtime series Billions. Oh, yeah for

6:12

sure you see the way the other

6:14

half lives. Billions

6:16

was written by people in the

6:18

industry or who studied

6:21

the industry. One of them Andrew

6:23

Ross Sorkin from the New York Times Really

6:26

really really pithy stuff. Of course, it's

6:28

written as a drama and it's dramatized

6:31

But the reality is there are

6:34

lots of people like this who

6:36

are getting rich on Your

6:38

back and providing you with little or

6:41

nothing in return At

6:43

least in comparison to what they're

6:45

making without putting much

6:47

of anything at risk. They're not at risk You

6:50

are what a wonderful way to make money. I'll

6:52

let them take the risk and I'll make all

6:54

the money Well, and

6:56

again the end of this article is

6:58

absolutely wonderful Where this

7:01

I didn't realize what back to 1940? Um a

7:04

stockbroker named Fred Shwed. It's

7:06

great I'm

7:09

Fred Shwed. Fred Fred. Published his

7:11

classic Financial satire. Where are

7:13

the customers yachts? Oh, was that Fred Shwed

7:15

who did that? That's what it says I

7:17

thought it was Bernard Baruch who said that.

7:20

I'd rather have because that's more You know,

7:22

that's a better name than Fred Shwed. Ah,

7:25

but at the end of each trading day

7:27

Shwed joked investment managers allocate their assets Between

7:30

themselves and their clients by taking all the

7:32

money and throwing it in the air He

7:35

said everything that sticks to the ceiling belongs

7:38

to the clients so

7:40

unless the Advisors had a peanut butter

7:42

and jelly sandwich or something for lunch

7:44

should probably most of it fell. Sorry

7:47

to say that's some powerful imagery Indeed,

7:49

I don't remember sticky money. Yeah,

7:52

um, but the reality is though

7:55

You can avoid all of this. It's the

7:58

Thing is it is so easy. For

8:01

you to avoid paying all

8:03

of these fees and making

8:05

these people risks, you can

8:08

just say no to them.

8:11

And just say

8:13

yes to low

8:15

cost, diversified. Passively

8:18

managed exchange traded funds

8:20

which have fees and

8:22

expenses. Across the

8:25

board. Is is it

8:27

out every which direction of.

8:29

Far less than half a percent in almost

8:32

all cases. Of far less

8:34

I and every just going to buy a

8:36

broad index funds. Bomb. In

8:38

his exit it down there are just a few

8:40

basis Point Zero Point. Something right? and

8:43

you're awake. Zero, Zero Five. Zero Point

8:45

Zero Way Way Way way down roots.

8:47

And and what? your? because you're doing

8:49

it if you do authority to yes,

8:51

you don't even have transaction costs internally

8:53

where somebody is making and of money

8:55

up, buying and selling stocks in the

8:57

portfolio of edges hold them so you

8:59

don't have a lot of people. Taking

9:02

songs of your money and that's

9:04

one of the things that makes

9:06

investing today. So.

9:08

Much better. Or me looking

9:10

back at these numbers from the past

9:13

on the spreads. The amount of money

9:15

Wolford was making versus the the market

9:17

were astronomical and you can really take

9:19

that away now. But. But the

9:21

thing is, you've gotta be paying attention right?

9:23

And me because of what the article correctly

9:26

points out, his Wall Street's rolling out the

9:28

red carpet. You're going to get excited because

9:30

this is something that a why don't own

9:32

that down. Just told me don't this brought

9:34

index. That's a very exciting I want to

9:37

be in these odds. He's cool stuff that

9:39

you know, private equity and Us loans and

9:41

all this other sort of sexy things that

9:43

I want to have some of my money

9:45

exposed to. And you

9:48

don't wanna do this. That's the message

9:50

at the end of the day because

9:52

is going to be expensive for you

9:54

as gonna make someone else eight a

9:56

lot of money and it's harder. It's

9:58

hard for many people. Do not

10:00

want a distorted say cheese shredded funded the

10:03

three the last ten years, right? People rushed

10:05

into exchange traded funds because I think because

10:07

they think there's some. Huge qualitative

10:09

difference to them. And other

10:11

words, If she traded funds

10:14

are holding a lot of the same assets that

10:16

a mutual fund holes and in some cases are

10:18

less expensive, but not in every case. And

10:21

you know by on and everything is that

10:23

there are exceptions to the of it to

10:25

good as new. It's neat, it's cool and

10:27

so people have rushed into those. I

10:30

don't think without really thinking about a by

10:32

society or gotta be in those exchange heard

10:34

of answered the really you need a

10:36

big part of that problem though Tom is

10:39

the people who are the the go between.

10:41

Between. Wall Street. And the

10:44

consumer. The ultimate consumer. The

10:46

investors. Those people. Are

10:49

both brainwashed by the people that

10:51

they deal with and by their

10:53

own greed? They're blinded by their

10:56

own greed, so that in most

10:58

cases and I do believe this

11:00

fervently in there are studies to

11:02

back it up. I believe that

11:04

in most cases, those who give

11:06

financial advice do. Terrible.

11:09

Self. Interested self serving.

11:12

Advised that makes a whole

11:14

lot of other people rich.

11:17

At. Your expense. And did you give the phone

11:19

number out who? by the way, we are?

11:21

No. but I was gonna do that. Eight

11:23

By Nine Three Five Talk is our phone

11:25

number. Eight Five Five Nine Three Five Eighty

11:27

Two Fifty Five. You. Are. Invited

11:30

to call us and ask

11:32

us questions about the things

11:34

that you run into in

11:36

your financial wise. We want

11:38

to help you stop. Falling.

11:42

For these pitchers who purchased by

11:44

the way, they're powerful. Because.

11:46

There's so much money involved they

11:48

can afford to fine tune and

11:51

homes of perfect pitch, and they

11:53

know which buttons to push that

11:55

are most likely to get you.

11:57

To do something. An hour.

12:00

I'm going to chastise the Washington State

12:02

Legislature. I know we air in Seattle,

12:04

but we're heard cross the country because

12:06

they had a bill that was. Look

12:09

like was going to passers gonna be a

12:11

requirement for personal finance a course in high

12:13

school before at require you had to take

12:15

this to graduate and then the last minute.

12:18

right? Side he die it went. Went

12:20

out for some arguments and this is

12:22

the kind of thing that you know

12:24

that we got to have. People need

12:27

a basic education so they don't get

12:29

sucked into. these two are now. no

12:31

no, no, it was. You know, go

12:33

nuts, you know. And I've talked about

12:35

this. The problem is if you mandates

12:37

is. The folks in leader

12:39

in the government don't know who

12:41

to go to their that are

12:44

going to the guy at Ameriprise

12:46

or a Jones or Lpl or

12:48

Raymond as zones guy out of

12:50

that guy they know they believe

12:52

is in investing expert who was

12:54

in fact just an expert sales

12:57

person. Through. But this

12:59

at least was a start the that they

13:01

were out. Something about all those courses that

13:03

are taught at Bellevue Community College or off.

13:06

Whichever. Community College up their selves,

13:08

your Congressmen yes, Bellevue About and

13:10

their their courses taught by in

13:12

Bozeman. For versatile the are you

13:14

know what they are? They're just

13:16

sales pitches in disguise. Learned about

13:18

well disguised. Send. The get

13:20

zig zag the have the authority of

13:23

being taught at. A college

13:25

the out on going to college cool

13:27

and I guarantee and those you those

13:29

schools do not have a clue. Know

13:32

how did how did how to

13:34

tell the difference between someone who

13:36

is truly an agitator and looking

13:39

out for their for the clients

13:41

and their students best interests and

13:43

someone who is there to sell

13:45

somebody and equity. Indexed, a

13:47

new, etc, etc, etc. hard

13:49

and a of investments or

13:51

some other. Garbage.

13:53

L. Garbage. Folks, I'm going to just

13:56

come out and say it. Index The

13:58

New at Ease Our. The

14:00

looted complicated, opaque. Harass.

14:06

Or your music. Say bye

14:08

bye Nice revived. talk to their phone

14:11

number Call as a five Five Nights

14:13

revive a two Five Five despite technical

14:15

difficulties of we persevered push through and

14:17

we're here. Try to help you sort

14:19

of scaly five, five nine, three by

14:21

agencies if you. Are

14:30

real? And and real Caesar comments on

14:32

are charging. Go

14:35

get him! Welcome back to the

14:38

are talking real money radio show

14:40

and suit podcasts on Dawn Tom

14:43

is over there. We're here to

14:45

help truly help you better understand

14:47

money and. The. Answer

14:50

is. The.

14:52

Answers. Are easier than

14:54

you might think they really are. It's

14:56

not as complicated as so many wants

14:59

you to believe because won't one of

15:01

the biggest problems as. If.

15:04

It's not complicated. They know

15:06

if it's not complicated, They.

15:09

Don't need you. They.

15:13

Are you don't emerge as of The answer is

15:16

yes yes. If it hadn't gone because it's do

15:18

you need their help Oh you could voices on

15:20

your own. Exactly so are very

15:22

good as the point of the matter is

15:24

some and your i'm sorry I'm i'm trying

15:26

to tweet or Auschwitz show started a little

15:28

late today so or. A got wasn't

15:31

on us but now we get things fixed up. But

15:33

yeah you're right that has one of the day wasn't

15:35

on us. If it's similar way to blame dying at

15:37

a sissy so you don't have to have, you don't

15:39

have to hire somebody to help be right? Because then

15:41

I got it figured out. Don't.

15:43

Need Don't need your help. And. The thing

15:46

is is that those who want to

15:48

help you and we talked about them

15:50

there was one in an article recently

15:52

in Barons. Now. why

15:54

barons does articles like this are

15:56

beyond me but i've always questioned

15:59

the wisdom of Barron's. I

16:01

don't think it is a very

16:03

good publication, personally. But

16:07

they had an article recently about

16:10

an investment advisor who

16:14

is independent but works with Raymond

16:17

James. And this

16:19

guy, the

16:21

headline, get this headline, tell

16:24

me what's wrong with this headline. According

16:27

to this guy, retired investors

16:30

can benefit from actively

16:32

managed funds. It's

16:34

all in the timing. Oh,

16:37

Barron's, what an irresponsible headline. And

16:39

you read through the quote and

16:44

the quote from the gentleman is, we're

16:46

asset allocators, that means they're trying

16:48

to decide where to put the money, and

16:51

mostly use actively managed,

16:53

low-cost institutional mutual funds.

16:56

In his terms, there are some really good

16:58

mutual fund managers and costs have come down

17:00

over the years. Now, he did

17:02

mention a couple of funds for his company. Yes, he

17:04

did, and I looked them up. And

17:07

are they inexpensive? Well,

17:09

one of them he named was

17:11

the AB, now this is actively

17:13

managed, the AB

17:15

Large Cap Growth Fund.

17:18

The ticker is APGYX.

17:21

APGYX. So

17:24

I, of course, looked that up. On Morningstar, I know a

17:26

lot of you ask, well, where do you look this stuff

17:28

up? I look them up

17:30

on Morningstar. He's going to morningstar.com and

17:33

look any of this up. It is

17:35

a wonderful resource. It truly is. So

17:37

he's saying it uses low-cost, actively

17:39

managed funds. Well, this is one

17:42

of his favorite funds, so he must use

17:44

it. It's from Alliance Bernstein, that's what the

17:46

AB stands for. Their

17:48

expense ratio is six-tenths

17:50

of one percent per year. Now,

17:52

let's take them in equivalent. You

17:54

could own the Vanguard S&P 500

17:56

for $0.0. which

18:00

is a very similar fund portfolio-wise.

18:02

They both lean large company growth

18:05

stocks. However,

18:15

this fund is even a little bigger and a

18:18

little growthier and they are, well, go ahead. According

18:29

to this advisor, what this fund

18:31

does versus the index is somebody

18:33

really smart at Alliance Bernstein has figured

18:36

out which stocks are overpriced and you

18:38

invest less in them. For

18:40

example, he uses the Tesla and

18:43

says, Tesla has gone straight up, which it hasn't,

18:45

but it's gone way up in the last five

18:47

years. So the fund

18:49

manager is underweighting that because it's already had its

18:51

run. So it's time to get out. And what

18:54

we're here to tell you is he

18:56

doesn't know that anymore. More than Don does. What's

18:58

going to happen to Tesla starting on Monday? We don't know.

19:02

No, what this advisor

19:04

misses is he

19:06

believes that you can look at past

19:08

performance and somehow tell due

19:11

to the fact that this fund has

19:13

actually done, has done

19:15

pretty well in the past. It's

19:18

beaten the index, but it's also

19:20

done it with a more focused,

19:22

far more focused portfolio of how

19:24

many in the S&P 500? I think it's 500 companies.

19:26

Good. Good. Yeah. Thank you. I'm learning. I

19:29

think you got that one right, slowly. How many equity holdings

19:31

are in this fund? I didn't look it up at all.

19:33

Would you guess if yes? I'll say 75. Try

19:37

54. All right. So only 10.

19:40

Tightly focused portfolio, which actually increases

19:42

your risk because now you have

19:44

greater risk of loss if any

19:47

one security goes down. So, but

19:49

the reality is based on really

19:51

detailed research that apparently this guy

19:54

didn't read, most

19:57

funds don't feel index.

20:00

Come and done are talking real

20:02

money. We're

20:07

a really great user. We're

20:12

talking real money. I

20:15

just want to make one more

20:17

comment about the lies that brokers

20:19

tell. And they're subtle lies. They're

20:21

really, really subtle. This advisor out

20:23

of Alaska who was highlighted in

20:25

Barron's, he said

20:27

in this article, that

20:30

the share classes, the no-load

20:32

share classes he uses, the

20:35

institutional, only cost 10

20:38

to 15 basis points more than an

20:40

index fund. And what is a basis

20:42

point? A 1 to

20:44

100 of a percent. Okay.

20:48

So he's saying for that extra 10

20:50

basis points, you're getting an active overlay.

20:53

Wait a minute. His three favorite

20:55

funds were the

20:57

Alliance Bernstein Fund at .6.

21:00

Love their fares, by the way. The

21:02

Janis Henderson Midcap Fund

21:04

at .76. That's

21:07

more than 10 to 15. And an

21:10

MFS International Fund at .83. Do

21:14

you see the lie that he told? What does an index,

21:17

what is a true index fund or

21:19

ETF cost in any of those? Less

21:21

than one-tenth of one-tenth, probably. Yeah, one-tenth.

21:24

You can do it anywhere. He wouldn't

21:26

be lying if they were two-tenths of

21:28

a percent or less. But

21:31

in this, our 25 basis points are... No,

21:33

that's six times more. He's

21:35

absolutely lying. Okay, but

21:37

that's on the reporter. No,

21:39

but this is what clients hear. The advisors

21:42

say that, well, I'm only

21:44

charging you a little more than index funds. No,

21:46

you're not. You're lying. That's

21:49

a lie. And we just looked

21:51

at a portfolio, by the way, where

21:53

we compared the exchange-traded funds that we

21:56

tell people to go use versus a

21:58

portfolio that someone had in America. The

22:00

Barn. And. Thousands of

22:02

dollars a year. A difference between assume

22:04

that that people never see that they

22:06

think I'm not for you, Don't feel

22:08

your pain and ah yes you are

22:10

spawn. just ride out the door every

22:12

time. Eight five five nine three Five

22:14

talk. That is our phone number. We

22:16

wanna talk to you and your Europe

22:19

next. Welcome to the program! The

22:23

morning I I get to them for new.

22:26

So I wanted to. The. Just. Such

22:28

a little bit on the arm item

22:30

that you brought up in Washington schools

22:33

regarding on. The. Legislature turning

22:35

down adding the visa

22:37

requirements for. I

22:40

guess life skills on it's own eyes

22:42

were didn't When you twelve. Yeah,

22:44

something similar to that. So course

22:46

we have requirements. her. Mouth

22:49

graduation right the up to get to a certain level

22:51

in order to be able to read all your credit.

22:54

So. One of the absence of she

22:57

had her senior year was either and he

22:59

he said plath or should be capable of

23:01

your life Math class. Which

23:04

was offered that is when he twelve when

23:06

she was in high school and. Wow,

23:09

it sounded almost like what

23:11

you were talking about was

23:14

more focused on investment. And

23:16

was. Included investments but

23:19

it also included study by the

23:21

home how do you understand interest

23:23

rates of he balances Chef but.

23:26

How do you understand your taxes? Things.

23:29

Like that every thing that honestly everybody

23:31

should be required. Tests: Sankyo hi annoyance.

23:33

I don't know that that's a lot

23:36

different than what this current bill had

23:38

had suggested. Jewel? I'm not sure. It's

23:42

not for that. Class was an elective

23:44

which is disappointing near. I agree. You

23:47

know personally it should be a requirement

23:49

in in high school anywhere in the

23:51

nation. Every kids have to take the

23:54

class. And I'm in a

23:56

hottie gone by Your first car would use

23:58

for down payment. would be interesting. Would you

24:00

credit score gonna do for a of these

24:02

kids are graduating with no clue how to

24:05

live in the world. Are far

24:07

more complicated. Financial and. Yeah

24:10

No. I think you're spot on. We read

24:12

from illegally. We. Completely agree. I

24:14

mean, and the interesting thing is,

24:16

then where does the conversation take

24:18

place? Oh. Well that's up to

24:20

you at home office, at home. Survey.

24:23

After survey shows people are more comfortable talking

24:25

about their sex lives and they are talking

24:27

about money. And. I doubt I'm in to

24:30

sit there with my six year old daughter and talk to

24:32

her. my set of life. So

24:34

as we don't yeah I mean it's so

24:36

but that's the primary schools thinking about a

24:38

month or who's taken this on. I mean

24:40

you're right Jewel that the people walk up

24:42

there are no idea. So the investing is

24:44

part of it. You're right. But you need

24:46

to know how and can even say this

24:48

and he your bank balance that our that

24:50

or or bank out there. Are you sure?

24:52

Because I have to ask me for attack

24:54

and I said i don't think I have

24:56

one I didn't even know how to do

24:58

that. As you might almost that Al gore. They'll.

25:03

Be aware with your resume were being

25:05

plans of the education and when it

25:07

happens we wanted to be broadly based

25:09

financial education Just like you said where

25:11

you get those skills that you if

25:13

you go on in the world and

25:15

you don't know what's your credit report

25:17

your credit score is why you need

25:19

to know it. And. Why credit

25:22

to less? Oh so this seats are

25:24

for as others so much Creative race

25:26

of Emma Watson I don't want. I

25:28

never ever want to see another stock.

25:31

The second Class By and you will

25:33

You Will and Isis as of people

25:35

believe. That. Think that way, do

25:37

you so much for your opinion and for

25:39

time? And And Eight Five Five Nine Three

25:42

By talk is our phone number. Eight

25:44

Five Five Nine Three Five Eight To Five

25:46

Five Of Us. We

25:48

we try to help out in

25:51

small ways here, but ah, it's

25:53

gonna take some major changes. We've

25:55

gotta put it in schools. Why

25:57

not put it in school one

25:59

or two. The be financially successful

26:01

live on the a couple. A

26:03

leg of a by by banks

26:05

and eighty two Sichuan. You

26:13

suffer from hodgepodge. Writers and on

26:15

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27:01

Eight Hundred Three Eight, Six, Three Zero,

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Zero, Four. Hundred much of

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this is not a real disease or treating,

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it has been shown to improve mood, reduce irredeemably

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27:14

To are really during finals of these there.

27:21

During the break I was reading about that legislation

27:23

to teach financial education and Washington High schools. T

27:25

v the different really based good came down to

27:27

get this is the weather had to be a

27:29

requirement whether or not it had to be are

27:32

quite not just an elective you had to pass

27:34

it's a graduate they are not gonna do that

27:36

and that with I really came down to. The.

27:39

How what they were going to teach

27:41

what other curriculum would actually be a

27:44

match with the devil is in those

27:46

details. Indeed it owes his acquired our

27:48

i mentioned that how it's.the up makes

27:50

all the difference. The game I've I

27:52

did you see where it originated from

27:55

the legislation. for a young man

27:57

in the tri cities like an eighteen year

27:59

old said Well, OK,

28:02

well, even better, because I did my four years

28:04

in Walla Walla. But I mean, the

28:06

thing is that that's he said

28:08

that you got to do this for young kids.

28:10

OK, apparently you don't. So sorry. Well,

28:12

but again, it was

28:14

legislative maneuvering more than

28:17

real serious problems. The

28:20

bill was passing both House, the House and the

28:22

Senate. And the last minute, the

28:24

chair of one of the committee said, not so much.

28:27

855-935-TALK. Call

28:30

us. We'd love to talk with you. And

28:33

Taylor, you're next. Welcome to Talking Real

28:35

Money. Hey,

28:38

Taylor. Taylor

28:41

Taylor. Hey, how's it going? Good. What's up?

28:46

Oh, just trying to figure out a few things. OK.

28:50

How can we help? So

28:53

I have an IRA. Yeah,

28:57

it's a crop duster where I'm at. There's

29:01

a IRA. And

29:04

I'm trying to figure out where my broker

29:06

is making money off of me. Oh,

29:10

this is going to be fun. Oh, man.

29:12

I love stuff like this. Where

29:15

is it invested? Yeah,

29:17

no, where is it invested? What's

29:19

it invested in? I don't know. Well,

29:22

it's American funds. Oh, OK.

29:24

That's easy. And then they

29:27

have another, I don't know who the

29:29

broker works under. I don't know

29:31

the name of it right off the top of my head.

29:33

That doesn't matter. That part doesn't matter. Because this is so

29:36

easy. This one's really easy. How much

29:38

do you have in your IRA? I

29:42

think it's around 70. OK. This

29:44

is really easy. Every time

29:46

you put money into one of those

29:48

American funds, 5.75% of your money is

29:54

sliced off and paid out

29:56

to the broker in the brokerage firm. And?

30:00

And then every year

30:03

0.25% is

30:05

taken out and paid to the broker or

30:07

the brokerage firm. And? No,

30:09

that's how they made their money. Oh, okay. But

30:12

the mutual fund then charges on top of

30:14

that. Oh, yeah, yeah, yeah, yeah, yeah. Very

30:16

expensive. But the broker makes

30:18

their money off the commission and what is

30:21

called a trailer or

30:23

a trailing 12B1 fee, 12B1

30:25

fee or, oh gosh,

30:28

what's the other name? Right? No,

30:30

that's not right. There's another name I can't remember.

30:33

Does that make sense? Yes,

30:37

yeah, I'd have to re-listen

30:40

to exactly, but it's making sense. Yeah, if

30:42

you look at the prospectus of any of

30:44

those American funds. Is there any way where

30:46

I could streamline

30:50

it and do like

30:52

self-directed? Of course.

30:55

You could do it yourself so

30:57

easily. You could move this money

30:59

to Vanguard or Schwab or Fidelity

31:01

or any of a number of

31:03

discount brokerage firms and put

31:06

it into either

31:08

ETFs or no load

31:10

mutual funds. We give you one. And build

31:12

a one. Yeah, how old are you? Early

31:17

30s. Early 30s. This is

31:19

easy. How's it invested? Is this

31:21

all in stock funds

31:23

or are you investing in stocks and bonds? Stock

31:27

funds, I think it's a large

31:30

cap, mid cap and small cap and maybe... That

31:32

sounds difficult. Maybe there's like... International.

31:35

Socially responsible or something. Oh,

31:37

maybe. Yeah, that might be

31:39

what falls under. You want to simplify this. Yeah.

31:42

You really want to simplify it. You want to

31:45

simplify it and you could even literally do it

31:47

with one fund and

31:49

give yourself greater diversification

31:52

than what you have right

31:54

now with no commission going

31:56

in. Thank you. Yeah.

31:59

And with less than half... of the annual

32:01

fee of the American funds. And

32:04

there's a couple ways to go here if you're willing

32:06

to do it. Wait, Tom, we'll give you the name

32:09

of two funds. You should go at least check out.

32:11

Now they're going to be, just like the portfolio you

32:13

have now, volatile. When markets

32:15

go down, they're gonna go down. And

32:18

the trick to self-managing is

32:20

to steal yourself against declines. Realize

32:22

that declines will happen and that

32:24

when you're in your 30s and

32:26

still adding money to your IRA,

32:29

declines are good. You want the market

32:31

to go down when you're contributing. You

32:34

want it to go up when you're

32:36

withdrawing. So here's a couple ideas for

32:38

you. There are two fund families that

32:40

we think would make sense. One is

32:42

Dimensional Funds. And they

32:44

have a Global Equity Exchange Traded

32:47

Fund that operates under the

32:49

ticker DFAW. That

32:55

is one fund. It holds a

32:57

basket of somewhere around 10,000 stocks.

33:01

It kind of leans a little bit too small into value

33:03

stocks. Nothing for you to worry about, but it does it

33:05

at a very low expense. And as Don correctly points out,

33:08

no commissions, no secret back payment, and

33:10

none of that nonsense. That's one. And

33:13

then you could also explore Avantis's

33:15

similar product, A-V-G-E, the

33:20

Avantis Global Equity Fund. Again,

33:22

one exchange traded fund holds a basket

33:24

of nine or 10,000 securities

33:26

around the world. Does

33:28

it at a low cost, no commissions.

33:30

Either of those, frankly for you, Taylor,

33:33

would do the job for a long time

33:35

and would get you out of

33:37

that nasty nest of people that

33:39

are selling you high expense commission-based

33:42

products. Yeah, because those American funds,

33:44

they run six tenths, seven tenths,

33:46

eight tenths of a percent per

33:48

year in fees. These

33:50

two ETFs cost, well,

33:53

one, the DFA ETF is 0.25, a

33:56

quarter of one percent, and the Avantis

33:58

is 0.25. two, three, a little

34:00

less than a quarter of one percent. Far,

34:03

far, far less. And

34:06

frankly, we expect them to outperform

34:08

not just due to the cost,

34:10

but better diversification and sort of

34:12

owning more small in value as

34:14

well. And greater diversification also reduces

34:16

your risk of total loss to

34:18

zero, essentially. It really

34:20

does. You can't lose your whole portfolio unless

34:23

the entire global economy collapses. And

34:27

then just to repeat, who is

34:29

your top recommendation to purchase

34:31

those through? Is that a

34:34

broker? What do you call

34:36

that? It's a custodian, a

34:38

brokerage firm. We use

34:40

Schwab. A lot of people

34:42

love fidelity. I

34:45

think those are probably your two best bets. We

34:48

used to tell you Vanguard, but because of their

34:50

service issues of late, that probably wouldn't be the

34:53

first stop. I would go to Charles Schwab. You

34:55

just go to schwab.com, open an account. They'll

34:57

help you move the money over from your friends

35:00

at American Funds or whatever brokerage you're on. Yeah,

35:02

and that's the only thing. They will do it

35:04

for you. They will actually go get the

35:06

money and move it over for you. All you have to

35:08

do is give them the account information and sign something, and

35:10

they'll take care of it. You don't even have to call

35:12

the broker and make them mad. Okay. All

35:16

right. That's some good information. I'll

35:19

do a little bit more research and hopefully we'll move

35:21

on. All right, Taylor. Thanks so much

35:23

for calling. We appreciate you. 855-935-TALK,

35:25

our phone number. Tom,

35:27

you're up. Welcome to Talking Real Money. Tom?

35:31

Yes, hello. How are you? Good, sir.

35:34

What's up? Well, I

35:36

have a rollover IRA. It's

35:46

an annuity now. It will be out of surrender

35:48

in less than a year. It's

35:50

for about $110,000. So

35:53

I'm thinking of dividing it up into

35:55

three parts that you've talked about over

35:57

many of your

35:59

shows. A domestic, true

36:02

to stock market index fund,

36:04

an international one, and my

36:07

question is the third part instead of...

36:09

Say what? Hold on to that

36:11

third part question for me for just a minute because

36:13

we've got to take a quick break. We'll be right

36:16

back. Tom and Don are talking real

36:19

money. For your real life and real

36:21

future Tom and Don are talking real

36:23

money. And along with

36:25

Tom number one and Tom here. We also

36:28

have Tom number two. Tom's on

36:30

the line. Tom's got an annuity that's getting

36:32

out of surrender and he's thinking about doing

36:34

something really smart and that is getting it

36:36

out of that annuity and rolling it into

36:38

some index oriented

36:40

mutual funds, right? Yeah,

36:43

or ETF, whatever. Or ETF. Yeah,

36:46

same idea. One way to go, better

36:49

versus the other between

36:51

ETF and mutual fund. ETFs tend

36:53

to have a slightly lower expense ratio. Tend

36:56

to, just a little. And

36:59

under any circumstance you can buy them free. Sometimes

37:01

people still charge you to buy a mutual fund.

37:04

Sometimes it's weird, but just

37:06

because of where the world is today, I would

37:08

use the exchange traded fund. I would too. I

37:10

think the whole world is moving toward ETFs and

37:12

I think regular funds are going to eventually be

37:16

almost forgotten and anachronism. So what

37:18

was your question? Okay.

37:21

So the third part, the first part I

37:23

think you got, like

37:25

let's say hypothetically a third, a third, a third.

37:29

Between the domestic index fund,

37:32

total stock market index fund, the international

37:34

one. The third part is where my

37:36

question is. I think

37:38

you usually recommend getting some of it

37:40

into bonds. I'm 60 years old. My

37:45

question is instead of

37:47

bonds because they haven't done

37:49

that well lately and they have no money.

37:52

I knew this was coming. Yeah, we both knew the same

37:54

thing. We knew you were going to say that. They haven't

37:56

made money. So why would I put my money in both

37:58

from a thing? All right, let him finish.

38:00

Go to your corner, go. All right,

38:02

go ahead, Tom. And

38:05

I know CDs fluctuate year

38:07

to year, but I'm thinking maybe for

38:09

the first year, at least

38:11

since they're still getting around 5%, wouldn't

38:14

it be wise to put the remaining

38:17

third into a CD and

38:19

then reevaluate after a year? You're

38:22

trying to market time. You

38:26

truly are trying to market time. Now, if

38:28

you said, I am going to create a

38:30

CD ladder that I will stick with for

38:32

the rest of my life, no matter what

38:34

happens to interest rates, I would have said,

38:36

that, sir, is a good strategy. Or

38:40

you get a bond fund because you

38:42

cannot look back at how bond

38:44

funds or any fund has done.

38:47

The only thing that matters is what might it do

38:49

going forward? And the nice thing about

38:51

bond funds is that they're buying new bonds.

38:53

And they're there for the stability, not for

38:56

the income, not for the return. And by

38:58

the way, here's a bet for you. In

39:00

a year, we're gonna be going, look at

39:02

all the money bond funds made this year

39:04

because interest rates went down. That's just a

39:06

bet. Over

39:09

the long haul, over the long haul,

39:11

the bond fund has still made more

39:13

than CDs, than

39:15

money markets, than high yield savings over the

39:18

long haul. So I would still do a

39:20

third, as you say, US, a

39:22

third international, and a third in

39:24

the BND total bond. Still

39:27

what I would do, I would have to avoid the tendency to get

39:29

myopic. We look back at

39:31

the recent past and go, it's gonna be

39:33

like that for a little while longer. I'll

39:35

know when it's not. You won't know when

39:37

it's not. Right,

39:40

but from my perspective, I'm just

39:42

thinking, the two thirds of

39:44

it with the domestic and the international,

39:47

that's where I'm quote, unquote, gambling a

39:49

little bit with the money with the

39:51

risk. And the final third

39:54

is a low or no risk

39:56

type of situation. What

40:00

a bond fund is, sir. Don't, Tom,

40:02

a bond fund is low or no

40:04

risk. It

40:06

can go below zero, though, can it? A

40:10

bond fund can go below zero. Government bonds? Wait,

40:12

no. The U.S. government's defaulting on returns?

40:14

Returns can be negative, yes. Returns

40:16

can be negative. But we've

40:18

only seen a negative return out of

40:21

the last several decades in two years,

40:23

and it was small. The

40:25

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