Talking Real Money - Investing Talk
Financial talk radio veteran, Don McDonald and former host of Serious Money on PBS, Tom Cock, join forces to talk about real money issues. In each episode, they solve real money problems, dole out real investing (not speculating) advice, and really explain the financial issues that effect all of us. Plus, it's actually fun! Talking Real Money is a podcast designed to provide the real help we all need to enjoy a really great future. Call in with your questions anytime at 855-935-TALK (8255).
Talking Real Money - Investing Talk
The Year of the Stock Picker. Again.
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
Wall Street has declared yet another “year of the stock picker.” Don and Tom examine Morningstar and SPIVA data showing how few active large-cap funds beat their benchmarks—and why high fees, trading costs, taxes, short horizons, and fierce competition keep the odds tilted toward low-cost diversification.
Then Greg asks where stocks and bonds belong while he begins Roth conversions. The discussion covers asset location, small-cap value exposure, international diversification, tax brackets, IRMAA, and keeping the portfolio’s overall risk level intact.
Finally, they tackle an all-U.S. Roth for a 20-year-old, a couple’s pre-retirement glide path, and a pricey Fidelity target-date fund that can be replaced inside a Roth without creating a tax bill. Stay through the end for a money-music bonus.
0:37 — The “year of the stock picker” returns
2:41 — Active funds trail their benchmarks again
8:30 — Why passive keeps winning
13:29 — Asset location for Roth conversions
22:09 — Should a 20-year-old invest only in the U.S.?
23:59 — Reducing risk before retirement
28:24 — Escaping an expensive target-date fund
31:53 — Reviews, inflation, and a money-music bonus
Talking real money, Mambo. I'm talking real
Music and Market Myths
SPEAKER_05money. It's the song of the day. Hey, hey, hey, you know? Music is an important part of our lives, I think. It's right up there. It's one of the ways I kind of uh relax and center myself. Music. It's great. And we're uh serenading you with music. As a matter of fact, you want to stay tuned after the episode for a little surprise. Just stay tuned after it.
SPEAKER_01A little surprise? I think it's a lot of surprise, actually. So it's a little surprise.
SPEAKER_05Uh welcome to Talking Real Money, the podcast. I'm Don. That's Tom. We've been talking real money for a very, very, very, very, very long time because we're old codgers. And today we're going to talk about a uh something that forty years ago was highly controversial and now is accepted fact. It's accepted. And yet the industry refuses to well give up. And that is the smart money, the smart minds on Wall Street w continually fail to beat the dumb money or the disciplined money or the academically oriented money.
SPEAKER_01Once again, the numbers are in, Tom, and they say well before they get to the numbers, let me quote show you how smart these people really are. This is somebody at Capital Group, which I think runs American. Yeah. This is why. This is why they've done so well. This is the quote. It's really important to recognize that if you get the direction of travel on that travel theme wrong, the risk is outsized.
SPEAKER_05What does that mean?
unknownI have no idea.
SPEAKER_01If you get the the the what? Give me that again. The trains leaving the station without you or something. You really want me to read it again? No, you really don't read it.
SPEAKER_05I didn't get it. So I really wanted to read it.
SPEAKER_01It's really important to recognize that if you get the direction of travel on that theme wrong, the risk is outsized.
SPEAKER_05So if you make a mistake picking stocks, you lose money. Okay,
Active Funds Still Lose
SPEAKER_05got it. Yes.
SPEAKER_01Okay. Which apparently he's giving a lot of advice to the people picking the stocks. Ah, because the numbers are in Morningstar just out. As of the end of the This is active versus passive. Correct. Traditional active. 27% of traditionally active U.S. large cap equity funds beat their benchmark, the passive fund alternatives in the 12 months ending June 30th. Okay, that okay. Wait, wait, wait, wait, wait, wait. 104?
SPEAKER_05If 27 beat Yeah.
SPEAKER_01Didn't 72 lose? I think it's 73, but we're not counting. Uh here's the more in the in the decade through June, the decade, I think that's 10 years, 13% of traditionally active large cap funds beat their benchmarks. So one out of ten. Remember, you had to pick those in advance.
SPEAKER_05Right.
SPEAKER_01And you had to hold on to them for those ten years to make sure it worked.
SPEAKER_05And over 20 years, it's it's even worse than that, according to Spiva.
SPEAKER_01This is Morningstar's data that just came out, hot, literally, off the press. Um and here's the part that that that that's gonna matter to them. Uh while those funds, we just mentioned American funds, which is the largest traditionally active management.
SPEAKER_05Yeah, it's absolutely the largest traditionally active.
SPEAKER_01It makes them a lot of money. I mean, if you run the number, if they have all those billions of dollars and they're charging 80 basis points, 0.80, it's a lot of money. But um someone at State Street pointed this out. If you look at active equity mutual funds, they've had outflows every year consistently since 2015. That's a losing trend. I didn't read this beforehand. That's a losing trend only compared to the New York Jets. I could insert, I could insert my football team though.
SPEAKER_05I'm sorry, Las Vegas Raiders, LA, whatever. I don't know where they're from.
SPEAKER_01Exactly. It doesn't really, doesn't really matter because they're not going anywhere anyway.
SPEAKER_05Soon they'll be the Oklahoma City Raiders or something.
SPEAKER_01I mean, the fascinating thing is if you ask these people today, why should they be enthusiastic about you know active managers? Oh, because it's different now. Because AI disruption has created a stock pickers market. Just how to pick them. That's why you can't pick the right one.
SPEAKER_05But wait, shouldn't AI be able to beat the active managers because it's smarter? I don't know.
SPEAKER_01No, they're talking about AI disruption in the fact that you can pick the the best stocks out of the, you know, over other.
SPEAKER_05Only until they are not. And here's the other thing that that I love to add into all of this argument. So uh SPIVA says now that 79% of active U.S. stock funds, traditionally active, outperformed over 20 years. So, you know, two out of ten, and all of these basically don't or do basically do outperform. So wait, so say that again, two out of ten. Two out of ten.
SPEAKER_01Okay. Which is higher than this number because this is one out of ten.
SPEAKER_05Wait, no.
unknownYeah.
SPEAKER_01You said it was twenty-seven percent. Well, I'm saying over ten years. Thirteen percent in ten years. So very small number.
SPEAKER_05Very small number. So let's use that. Let's say you got the ten percent that outperform. How many of those outperform not because they're skilled or smart, but because they just happen to pick the right stock at the right time? How many of you honestly, when you're truly honest with yourself, bought a stock at one point in your life that did either really well or really badly, and you know for a fact that neither one of those outcomes was because of your skill set, that you weren't lacking or having any kind of skill. It was just luck one way or the other, right? I mean, that's what it usually is. Put your hands up. Luck.
SPEAKER_01Look at all those hands. There are a lot of people that agree with you there. But here's the thing: T. Row Price just announced quote, conditions have shifted to favor active investing. AI means active stock selection will become increasingly important, according to Janice Henderson. Finally, active managers can participate and join the passive money makers, according to Jeffries. Uh so all of these companies are telling you, okay, it might have been tough the last decade, it might have been tough the last two decades, might have been tough the last 100 years, but this is now truly an active fun picker's stock pickers' market. Do you know why, by the way, Don? This is that's it's in the article, it points out very clearly why. Because stock market dispersion, that's the divergence between performance and individual stocks, has soared to the highest level in decades. That means you should be able to pick the winners and not own the losers, right? It just hasn't happened that way, that's all.
SPEAKER_05I I seem to remember, and I could be wrong, but I think I have good perspective because I have been doing a an investing show of some kind for for uh 38 years.
SPEAKER_01Yeah. You counted that up. That's cute.
SPEAKER_05Yeah. Um so I just did a little checking to make sure I my memory was right. Um, but I looked back and I found that uh in 1998 Forbes called that the year of the stock picker.
SPEAKER_01No, always is, right?
SPEAKER_05Um I found an article where they claimed that 2010 was the year of the stock picker. 2012 was the year of the stock picker, 2013 was the year of the stock picker, 2014, 2017, 2019, 2020, 2022, 2023, 2024, and 2026 have all been the years of the stock picker. And add to that now 2027. It's gonna be the year of the stock picker, I bet.
SPEAKER_01And this is also the year of the goat. I don't know how appropriate that is for the year of the stock picker, but uh throw that in there when you're
Why Passive Keeps Winning
SPEAKER_01thinking about it. All right, so what does all this mean? Well, I tell you what it means to the industry is more money is now in passive instruments than in the traditionally active. Flows into low-cost passive exchange traded funds are gonna hit a trillion in net inflows for the first time this year, showing how dominant they've all been. And you know, I love to look at the reasons why. Why can't you pick stocks? Well, you have to be able to see the future, right? Or you have to know something. You have to know something. The bigger part, if you step back and look at it, and most of the academics will agree, is cost. The fact that you're paying, what did I just say? I mean, American fund's average equity charge now is 75 basis, 0.75, 0.8.
SPEAKER_05I'd have to look at it.
SPEAKER_01It's not cheap. I mean, we just looked at it, didn't we look at an American funds? No, I guess that was a fidelity actively managed target date fund that charges 0.83. I mean, so that's an uphill climb because if you're only paying 0.15 or less, I mean, you can own total market for less than 10 basis points. The starting point is so much further ahead for the people running the passive or index style than it is the active, that uh right out of the gate, you have a huge advantage. That's one. Number two, again, I think overlooked, not considered. There's a cost when you buy and sell stocks. Now, American funds probably does that pretty inexpensively and much more frictionless than I would, but they're still paying something. And there's a cost of taxation, right? All those things, all those factors that go into increasing the cost of operating the fund. So there's not just the fee they're charging, it's the internal operating expense there. And here's the other one, Don, that I think gets overlooked. The short-term nature of active funds. I think you had a jingle once, it was a jingle somewhere, talking about quarters. The fact that if you're running a fund, every quarter you need to look good because that's just the nature of the business. As opposed to you and I, we don't have to look good every quarter. Well, we look good all the time. But but our port portfolio.
SPEAKER_05Well, we always look good on the radio or on a podcast. We look so good in audio.
SPEAKER_01Because we still have that picture from 1998.
SPEAKER_05Yeah, so the thing is No, that picture was taken during the last retire meet.
SPEAKER_01Okay. I feel better. But the short-term nature of this business and especially active fund management ensures that things have to be done quickly. You don't have to do that when you're managing your own portfolio. It's a huge advantage. Because remember, they get a what's the word they use? Clean up their portfolio at the end of the quarter, window dressing, whatever it is. Yeah, to make it look good. Oh, I had a great quarter. Um, those are important facts. But then the other one, and I think dimensional funds talked about this recently. There's more competition than ever in active management. There's hedge funds, there's private management, there's all the funds, et cetera. There's never been more smart people working on picking the right stocks, timing markets, being in the right sectors than ever before, and they're not doing it.
SPEAKER_05Do you know why they do it? Why don't they give up after years and years, literally decades, of uh being killed by passive or uh academically based active funds? Why don't they just throw in the towel? What would what would be the logical answer for that?
SPEAKER_01It has something to do with it green, and you can snap it if you haven't.
SPEAKER_05The average additional fees generated by active managers uh run in the United States run somewhere around $100 billion a year. That's crazy. We're talking real money there. Real money. And by the way, I looked up the average annual American fund speech. It's kind of hard to determine because C shares can skew it high.
SPEAKER_01Good point.
SPEAKER_05Yeah. Uh but if you look at just their A shares, it's gonna be about sixty basis perhaps.
SPEAKER_01But still, when you compare that to owning the total market at Vanguard for is it six or seven? I mean, it's a tenth of the cost. So that adds up. And it makes it a steep hill to climb.
SPEAKER_05Yeah, really steep hill to climb. So what you want to do is um stop trying to beat the market. You can't if they can't be smarter than the market and they're not, then how do you think you're gonna be smarter than the market, really? And if you have questions about your market intelligence, well, go to talkingrealmoney.com and speak them in with the microphone thing, and they'll be on Friday, or type them in, and then Tom gets them. And some of those he actually uh some of you he actually called.
SPEAKER_04Well now, here is Paul.
Roth Asset Location Tips
SPEAKER_01Let's go to Westlake, Ohio, and Greg is the seventh caller. No, you're not not seventh caller. The first caller today. How's it going? Okay, very good. Good to hear from you. My pleasure. Absolutely. How can we help? Take in the question.
SPEAKER_02You betcha. Um a question is about the best place uh for assets in my portfolio. Um I had my portfolio set up a few years ago through Vanguard's um personal advisor service when I retired. And the advisor put me into uh BTI, VXUS, BND, and BNDX between my taxable uh account, rollover IRA, and a Roth IRA. Um now my Roth IRA said the VXUS, the international equity. That's the loan thing that's that's in there. So now I'm I'm self-managing now. And uh I plan to start taking, start doing uh Roth conversions this year. Uh would it best be best to keep the Roth just DXUS uh ETF or should I diversify with some VTI or possibly add some VBR?
SPEAKER_01Yeah, that's a really great question. I mean, here's in a general sense, and I'm sure you know this, but asset location is very important. And in the Roth, you would it would be best to have the riskiest assets. Um you mentioned VBR, for example. Um, I'd prefer to see an AVUV because it has greater tilt to small into value than VBR. But those are the kind of things, yes, you would want in your Roth because it should grow the fastest, then it's gonna have the most variability, volatility, but uh the upside should be greater. So as much of that as you can pack into that Roth, yes. So if I was making conversions, then yeah, I'd be moving money from my IRA to my Roth and buying more of those things. But overall, and I'm sure you know this too, you want to make sure that you have the stock to bond ratio that will achieve your you know return to what you're trying to make within your risk tolerance. So you don't want to move, you don't want to change that just based on having more stuff in your Roth that's risky, right? You want to, if you're if you're 6040, you want to remain a 6040, right? That makes sense. So yeah, and I would that would be the first thing I'd figure out. It'd say I have, you know, whatever number of dollars, I want to be 60-40. So therefore, 40% of the money needs to be in bonds. The best place for the bonds, as you I'm sure are also aware, would be the IRA, because the interest they pay is not going to be taxable. It's simply going to, you know, stay there in the IRA. And then when you take the money out eventually or convert it, you pay tax on that. So that's the best place to have the you know, sort of interest-bearing stuff like bonds. Taxable should be more in stocks, and Roth certainly should be the riskier stocks. You mentioned, as it said, VBR, something like that. But that's how I would play it. First decide on the overall asset allocation, and then the location would be secondary. But your your thinking is correct there, yes.
SPEAKER_02Okay. Yeah, I I've been um you know pretty much keeping it the same as you know what the fella uh with Vanguard put me in. Um now, as far as like uh the um uh small cap value, about what percentage of the equity uh would you put in there? Because right now I I've got my equity is 60, again, US 60, uh international 40.
SPEAKER_01Yeah, I mean, if I was gonna just make it simple, then I would take the 60 divide it in half, basically. And I'd probably, or or maybe, maybe two-thirds of it is in the US and one-third's international, if you really want to make it simple. But then I would divide it. This is where it gets a little trickier. I would probably, if I was doing this on my own, divide that money between bigger stocks like the S P 500 and international large cap and smaller stocks like the aforementioned VBR and an international small cap value fund, so that you have a balance between big and small value and growth. You want to have all those things in there. So it gets a it would be get to be a little harder. Um, and you have some exposure. The the the the problem you face a bit is when you're using a VT or VTI, you have some exposure to that small and value, just not as much as we'd like you to have. So maybe instead of going full tilt, dividing that in half, maybe you just take a quarter of the money and put that in one of those small cap value funds, A V U, V, VBR, something like that, still leaving three quarters in the total market because you don't want to get too far out of, you don't want to have too much in the small cap value because some there's times when that goes out of favor too. You just want to have a balance of those things. So maybe, maybe the right thing here to keep it simple would be, you know, two-thirds in the US, one third international, and then out of those, that stock part, have you know, uh three quarters in the larger and then I mean in the total market, and one quarter in the small cap value, both US and internationally. Okay.
SPEAKER_02Does that make sense? Yeah, yeah. Um I mean with the Roth, you basically you kind of want that to be kind of more risky because it's gonna be the last thing you're gonna need.
SPEAKER_01Last thing, but also tax-free growth. That's the other thing people overlook. It's like, well, that's gonna grow. I mean, I don't plan on ever spending my Roth, hope to leave it to my kids. And you hope that that grows a ton. You sound like a similar type of person to me. So I mean, you just that grows and grows and grows tax free, and then you hand it to somebody else, or you spend it at the end of your life. So that really for me, that makes total sense to have the riskier assets in that location.
SPEAKER_02Would you would you leave any of it to any of your listeners?
SPEAKER_01Oh, you got you got a specific bank account I can just send that over to M Ring. Is that easy for you?
SPEAKER_02All right. Yeah. I mean the only thing I, you know, you talk about taxes, uh I'm looking at, you know, for next year. Like I say, it's the first time I'm doing the the role the uh Conversion. Conversion. Yeah. So uh I mean I should be in safe harbor because uh my tax was pretty low last year. And this this year I started uh my pension. Yep. And so they've been taken out of the pension. As long as they as long as they're withholding more out of the the the the pension than I paid last year, you know, for taxable. I should be okay. You don't want to relax.
SPEAKER_01Yeah, you don't want to bust the bracket, and you don't want to you don't want to get Irma involved in your situation here either. Both of those. Pay attention to both of those. I think I'm pretty far from Irma, but you're in a great place. Yeah, I mean I then I would just sort of slowly move that, you know, uh that IRA over to the Roth every year, make the conversions, and then look at your tax years as they come along and say, I've got this much space to do more, I'm gonna do a few little move a little more money over. But it sounds like you're making a lot of good decisions to me.
SPEAKER_02I I haven't heard that in a long time.
SPEAKER_01Oh, well, then I'm gonna be the let me be the first to congratulate you on that. So listen, thanks for listening. Thanks for reaching out to us, and it's great to have you on the program. Yeah, thanks. Thanks for all you and Don do. Appreciate it, Greg. Take care. All right, be well.
SPEAKER_02Bye-bye.
SPEAKER_04He's got them on paper. On paper. He's got them in hand, in hand. He printed them out like folks used to do and reads them out loud just for you.
SPEAKER_05Yep, yep, yep, yep, yep. He does do the written ones too. Yeah, yeah. He mumbo's his way into the written questions.
SPEAKER_01The idea of me doing them, you don't do not even want to think about that.
SPEAKER_05I certainly don't want to see it. I know I don't want to see it.
SPEAKER_01You know, I just saw this movie the other night, Normal Illinois, but I guess I think it was normal Minnesota.
SPEAKER_05It was normal Minnesota with uh with Bob Odenkirk, whose new his new genre is lots of blood and gore.
SPEAKER_01It was gratuitous. Yeah, it's not you don't even it doesn't even bother you at the end. Like another guy's head got blown off. Yeah, okay, whatever.
SPEAKER_05Yeah.
SPEAKER_01Uh the character's not very sympathetic.
SPEAKER_05So it was enjoyable. There was a lot. I'm glad I I didn't watch it with Debbie would have. She would have walked out. Um but apparently he really needs Vince Gilligan again.
SPEAKER_01Yeah. Well, don't we all? If I had a TV show,
All-Domestic Portfolio Debate
SPEAKER_01uh anyway, this this comes from Normal Illinois. Matt writes thoughts on an all-domestic portfolio for retirement for a 20-year-old. That's a long that's like a 40-year portfolio. Here's the suggestion. Twenty uh 75% VTI and 25% AVU fee. Money is in a ROS IRA. AVUV, AVUV, AVUV. Don't watch out for those A V U V rays, because they can really get you. Um no, I don't like this. Why?
SPEAKER_05No, why, Oxy? It's the it's the home field bias. It's just well, it's America. You should just invest in America. Well, I'm telling you, we have a really we've we've been having, and I'm not making this a comparison for you to uh predict the future, but we we're we're going through a similar period to that that we went through in the late 90s when the stock market was just hot year after year. The domestic market was hot year after year after year, and people poured money into technology stocks, kinda like they're doing now. And the next decade, and I'm not saying this is gonna be the case for the next decade, but the next decade was bad.
SPEAKER_01But remember the last year you made more by being exposed to international than the US.
SPEAKER_05Right. And that's the thing. Yeah. The through from 2000 to 2010, if you didn't have international in your portfolio, you lost money in the S P 500 for for a solid decade. A solid decade of losses. Now if that's not a case for having global investments, I I don't know what is. That diversified.
SPEAKER_01Yeah, okay, but also in terms of having two funds in this portfolio for a 20-year-old. A V G E. Yeah, you get the one fund. You don't need to buy two because you have to rebalance it. Yeah, it's simple. It really is. A V G E. Simple or DFAW.
Retiring With Sequence Risk
SPEAKER_05D F A W. Either way.
SPEAKER_01Uh, Joe from Lansdale, Pennsylvania. Hello, gentlemen. My wife and I are both 55 and like to retire in four and a half years at age 60. Can you imagine retiring so young? Anyway, uh, we have 3.1 million in retirement savings invested, 70% in stock ETFs, 30% fixed income. Approximately two-thirds is traditional, and one-third is in Roth. We contribute $70K per year to Roth investments. Good for you.
SPEAKER_06Yeah, that's cool.
SPEAKER_01Our goal is to have $4,860,000. Sounds like you will. I mean, you know, but they're they uh so using the 4% rule, they can withdraw $160,000 per year to cover our expenses and cost of health insurance. By my calculations, we can reach that goal with an average annual return of 3.75% plus the annual investments to help mitigate here's the question to help mitigate the sequence of return risk in our early retirement years. What do you think about shifting to say 40 percent in stocks, 60 percent in fixed income? Remember, now they're in a 70-30 for the next five years, and then moving three percent annually back to stocks for the following ten years. So it's a lot of work. 70-30 at age 70. I don't know.
SPEAKER_05I have an idea. Why don't you just go to like 60-40 or 50-50?
SPEAKER_01I think you to today.
SPEAKER_05Yeah, just do that now, just reduce the risk exposure. That that reduces your risk in the early years. Have plenty of, by the way, have plenty of uh of liquid money so that if we have a you know short-term downturn in the market, you don't have to touch anything. You just touch your emergency money.
SPEAKER_01But um, plus, in fact, in that portfolio is going to be selling bonds and buying stocks. It may be a difficult time for stocks. I don't know. It could be an odd time to be doing that kind of thing, that rebalancing. I'd be worried.
SPEAKER_05Well, I I I would just not go to that much trouble. That just sounds like a lot of people. And there's nothing, there's there's really nothing that that speaks to that strategy. There's no academic research that says this is gonna be better. The best thing you can be is in the market to the extent you one can stand to be in it, and two, need to be in it. So you need to balance that that need to be in it with your desire to be in it. Uh it you said you need a 3.75 percent return, is that right? Yeah. You don't have to be aggressive. You could go 40-60 and just stay there.
SPEAKER_01And start with that and do that now.
SPEAKER_05The best you can be is be all that you can be. I would work my way gradually toward it because getting that rebalancing done could be a good thing.
SPEAKER_01You start with the 70-30 that he is now, maybe and maybe go five percent a year.
SPEAKER_05Yeah, just go a little a year until you get down to 40-60 or 50%. When you get to the 40-60 by the time you're 60.
SPEAKER_01I and I really struggle with people that have more than half of their money in bonds. I i you're it's fine if you think you've won the game and you don't want to reduce the bigger.
SPEAKER_05Well, but you see, that's but he basically said that he won the game.
SPEAKER_01Yeah. Okay.
SPEAKER_05All I need is 3.75.
SPEAKER_01Which is a very slight return.
SPEAKER_05And we talk about that a lot. Your risk profile is your risk tolerance and your risk need. Why take more risk than you need?
SPEAKER_01Buy uh put it all in 30-year treasury bonds that are now paying 5.3%.
SPEAKER_05Well, the yield curve is no longer flat.
SPEAKER_01No.
SPEAKER_055.3%. It's not inverted. That's normal. That's the way it used to be when long bonds paid more than short bonds. Remember? Remember those days?
SPEAKER_01By the way, I asked our our crack um uh portfolio staff today about why, because I know there's gonna come up. Maybe I should ask you, because you have you're the answer, man. Why the US government is so headstrong on supporting the yen.
SPEAKER_05The importance of the Japanese economy uh in the Asian world order, yeah. Because of China's great power. And uh yeah, no, I we we're supporting it to keep their economy afloat.
SPEAKER_01Okay. Good answer. I don't know if that's a right answer, but I think that's the right answer.
SPEAKER_05It's gotta be the right answer because unless there's a fix-in and somebody's getting paid off.
SPEAKER_01Oh, not in today's world. No, all right. Alexandria, Virginia, you got one more time for one more squeeze in here? Okay. It's a podcast. There's no clock. I could be here for days. Uh don't,
Transferring a Costly Roth
SPEAKER_01don't, don't even think about it. Matt from Alexandria, Virginia. My mom has her Roth account with an advisor she set up 20 years ago and never touched. She hasn't received any services from that advisor in 10 plus years. After looking at the investments and seeing she's paying 0.83 for a target date fund, we want to move that.
SPEAKER_05Wait, wait, do say that number again for a target date fund.
SPEAKER_01Which I think you could buy for one quarter of that cost, basically anywhere else. Uh, we want to move that to Vanguard where she has other accounts. Okay, that's good thinking, Matt. My understanding is the investments would be transferred directly from Fidelity to Vanguard without being cashed first. But my question is how that works when they're being transferred from an institutional share class to a do-it-yourself individual account. There's no matter. She'll be contacting Vanguard to get the answer as well, but I thought it might be nice to hear. By the way, this he didn't a Roth. So she could just sell it on the Roth and turn around and buy whatever she wanted at the other account. There's no reason to transfer it anyway. Why would you transfer it?
SPEAKER_05Yeah, you wouldn't need to.
SPEAKER_01No.
SPEAKER_05Um the fund?
SPEAKER_01Can I give you the fund name?
SPEAKER_05Yeah, give me a please, because I I'm just you said it.83, yeah.
SPEAKER_01The fund name is the Fidelity Advisory Freedom 2025. Fidelity advisor Class A shares, so that means you paid a commission too.
SPEAKER_05All right. So one, let's start with the very beginning of the note. It's not an advisor anymore, it's a salesperson. That's why you haven't heard from them because they're not making another sale. They don't get paid to service, they get paid to sell. Yeah. They got 5.75% from her up front. That was it. They're done. They're not going to call again unless it's time to sell to sell that and buy something else for another commission. So don't expect them to contact you. They're not a fee-only advisor. They're just not. This is one of the things I hate about Fidelity sometimes.
SPEAKER_01They're on both sides.
SPEAKER_05They're the aisles.
SPEAKER_01They do.
SPEAKER_05And I don't like that. Be one or be the other. You know, at least T Row Price and Janice and American funds are honest that they're broker-sold products. And that point eight three, let's put that in perspective. You said you could get in for a lot less elsewhere? I imagine. Well, let's take a look at a Vanguard target retirement fund.
SPEAKER_012025?
SPEAKER_05Okay. Okay.
SPEAKER_01They're pretty much all the same. Probably a 60-40 or something in that area.
SPEAKER_05Yeah. What would you guess the expense ratio might be?
SPEAKER_01In the high teens, is it? I don't know.
SPEAKER_05No, it's actually one tenth of the Fidelity. Eight basis points. Eight basis points. I mean eight one hundredths of one percent.
SPEAKER_01That's outrageous that you've been there for twenty years. But that's over and done. So here's what I would do, Matt. I would just simply sell the fund at Fidelity, move the money, there's no tax ramification of that, move the money over to the new Roth setup at Vanguard. And if it has to be a target date fund, then buy the 2025 Vanguard target date fund for Don just said eight versus point and no load.
SPEAKER_05You know, and that's what the the this industry fascinates me. All of these people are are kind of unnecessary anymore. You you can buy this on your own. You don't need a salesperson selling it to you for five and three quarter percent. You don't need an advisor in most cases, if this is your whole portfolio, this is all you know, you don't need anybody advising you at this juncture in your life until your life gets more complicated. You can do this on the cheap. And you should. It's only smart. That's what the theme of today's show is. And that's what our little surprise that I created relates to coming up after the uh the the show ends. So you get all the money information, and then if you want to hang around for the bonus afterward. And by the way, many of these uh bonus things are available at talkingrealmoney.com. All right, it's a money, it's a money music bonus. Okay.
SPEAKER_01Are you gonna get nominated for one of those music choice awards or something? Or how do you think that's a good idea?
SPEAKER_05No, I doubt it. Not when you get helped by AI.
unknownYou know?
SPEAKER_05I'm getting better at writing the lyrics though. I I'm really getting better at writing lyrics. Oh, those lyrics are outstanding. This one I kind of like. Oh, and I'm I'm working on one. You're gonna love this one. My my working title is hold on, let me make sure I can That stakes not free.
SPEAKER_01Uh
Reviews, Inflation, and Wrap-Up
SPEAKER_01I'm having fun. I think it's great in the comments. So far, by the way, I have not gone to our online reviews. I gotta look at that.
SPEAKER_05Well, I just got a note from a woman today. She said, I love the music because it gives me a another reason to listen every day.
SPEAKER_01Okay. But I want to go online and see if anybody said, What's with this music?
SPEAKER_05No, no, actually, no one has.
SPEAKER_01Okay.
SPEAKER_05So please don't go write that just because I go I go into the reviews. You know, I don't look very often.
SPEAKER_01But I was on vacation, as you know, so I was looking at them when I was there.
SPEAKER_05You were looking at them, let's see. Yeah, we all we uh I'm just gonna go to the reviews and see how Dan, quit writing those stupid songs all the time. I love this one. This is from someone who speaks Spanish. Uh me encanta el programa. Oh, thank you.
SPEAKER_01That's very kind.
SPEAKER_05Saludos des day. Uh great prog podcast. I've been hearing since the pandemic. Learned a lot. So and then the then then and then here's the of course our our the this is the same person who continues to write reviews. Same person. Uh they don't like the fact that we don't like crypto. These guys continue to keep their heads in the sand and refuse to look at the world around them. Just a lazy put-together show. Avoid it.
SPEAKER_01Yeah. Well, I'm i if it's gonna be crypto or the sand, my head's gonna go real deep. I can tell you that. But you keep burying me.
SPEAKER_05And then and then the rest are pretty good. And then, oh yeah, here's one of the regular ones. These guys had a good run with the 60 40 port 40 portfolio, but they're they're missing how the bond side hasn't been working.
SPEAKER_01I just looked, by the way, last three years, an intermediate term bond strategy made guess what? Total return? About four percent a year.
SPEAKER_05That's what it makes. That's what it's always made, and we've never claimed it was likely to do anything else.
SPEAKER_01We are not in a period of what you would have to say high inflation. Inflation averages going back to the 1930s, about 3% a year. So to be in an inflation period of time when it's about four is not high inflation. Now it's far higher than it was earlier this decade. Sure. That was unusually low inflation. I have lived through high inflation. Double digit inflation. In the early 80s.
SPEAKER_05That's I had a 13% mortgage on average.
SPEAKER_01My first mortgage 13.5%. So when people say, well, mortgage rates are really high. No, they're not at 6.5%. Now they're higher certainly than they were at zero or two or whatever like that. Well, two.
SPEAKER_05I looked it up. Two at like two and three eighths was the low.
SPEAKER_01Okay. So they're higher than that, but they're not high. So, at any rate, we could argue semantics, I suppose.
SPEAKER_05But fair enough.
SPEAKER_01Hey, you you want to.
SPEAKER_05But if you'd like some free help, go to talkingrealmoney.com, click on meet an advisor. There will be no charge and no obligation and truly no high pressure sales pitch, although that's what the steak dinner people say too. Um we're we're just saying, we're just telling the truth. And if you want to ask us questions, click on the button that says ask a question or click on the microphone for the um the Friday QA thing that I do. And remember, I'm Don, that's Tom, and we're talking real money.
SPEAKER_03Once every dollar had a genius attached to it. Name on the door, a corner office, a man who read the tape. It came down from the mountain with a list, and the list had twelve names on it. We pay them old, we paid 'em gladly. One percent, two percent, whatever it took because how could it be otherwise? How could smart not be done? How could cry and not be sitting still? He was on the couple and the food, he had a name, he had a streak, he had a wall story, and every quarter, the letter came. Explain and always explain why the deer was the didn't count. But somebody actually somebody sat down and added up. When he did all of it, every fun. Nobody's better than Nobody. Twenty years out, and we're all of them. And the handful still standing up in Look exactly like what a lock looks like. Exactly like what a luck looks like. Ten thousand people in a field. Tell them all the foot coins. And home, everyone's the tails, then do it again. And again, and again, don't want it to standing. Don't want it always still standing. Give them a magazine cover. Give them a fun, kill them the body. So on the whole street, on every window one, they almost nothing, never look away. Stop hunting for the metal. There is no man who does before you hand it over. Come on, hear us. Talking real money. It's better more than the brain. It's better more than the brain. Nobody's better than talking real money. We're talking real money.
SPEAKER_00The opinions and views expressed on this podcast were current on the date recorded. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and our subjects change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. Although information and opinions given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Information presented on the podcast is not personalized investment advice from Apello Well. The views and strategies described may not be suitable for everyone. This podcast does not identify all the risks, direct or indirect, or other considerations which might be material to you when entering any financial transaction. Past performance does not guarantee future results, and profitable results cannot be guaranteed. We hope you realize that the information provided on Talking Rail Money is for informational, educational, and hopefully enjoyable purposes only. The podcast is not trying to get you to buy or sell any financial products or securities. Instead, the program is provided as a public service by Appello Wealth, a fee-only registered investment advisor. Please see Appello Wealth's ADV Part 2A on our website for information regarding Appello's fees and services. Appellate Capital, LLC DBA Appello Wealth, is an investment advisory firm registered with the Securities and Exchange Commission. The firm only transacts business in the states where it is properly registered or excluded or exempt from registration requirements. Registration with the SEC or any State Securities Authority does not imply a certain level of skill or training. Appello does not provide tax or legal advice, and nothing either stated or implied here should be inferred as providing such advice. Thanks for listening, and please visit talkingrealmoney.com for more information and important disclosure related to performance of any specific index or fund quoted in this podcast.
