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Welcome to personal finance for long-term investors, where we believe Benjamin Franklin's advice that an
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investment in knowledge pays the best interest both in finances and in your life. Every episode teaches you personal
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finance and long-term investing in simple terms. Now, here's your host, Jesse Kramer. Hello and welcome to
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Personal Finance for Long-Term Investors, episode 132. My name is Jesse Kramer. By day, I work at a fiduciary
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wealth management firm helping clients nationwide. You can learn more at bestinterest.blog. blog/work. [music]
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The link is in the show notes. By night, I write the best interest blog and I host this podcast. I also put out a
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weekly [music] email newsletter. And all those projects help busy professionals and retirees avoid mistakes and grow
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wealth by simplifying their investing, their taxes, and their retirement planning. Today is our 14th Ask Me
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Anything episode, and this is going to be a fun one. As some of you know, I keep a a running list of possible AMA
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questions. The list is now long enough that for the most part, I'm going to try
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to weave some sort of underlying theme into each AMA episode. And today, this AMA episode is going to focus on
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controversial and misunderstood topics from the world of financial planning and investing. Some questions came from blog
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readers and podcast listeners just like you, who submitted them to my email, jesse at bestinterest.blog. Other
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questions came from a LinkedIn post I made where I kind of uh previewed that I'd be recording this episode and a
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bunch of people chimed in with their ideas. But we'll cover topics today like
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dividend investing, individual bonds versus bond funds, tax planning versus tax avoidance, kind of the gray area
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there, buying the dip as it's called as an investment strategy, and a few more.
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But first, before we get into the fun stuff, we'll do a quick review of the week. This one is from Carowind 21, who
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says, "A numbers-based approach, five stars. I love how Jesse goes beyond the
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basics and actually crunches the numbers. A great listen for DIYers and those who are data driven." Well,
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Carowwin, thank you very much for the five-star review and the kind words. You can shoot me an email to
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[email protected] and I'll get you hooked up with a supersoft podcast t-shirt. The first
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question today comes from Goran. And Goran says, Jesse, in episode 127, you explained the 4% rule and how dividends
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are part of it. But I got puzzled when you said that dividends are not free. What do you mean by that? I've heard
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that when a company pays out a dividend on that day, allegedly the stock price drops by the dividend percentage. But
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why? For example, if Apple makes uh $1 billion in a quarter, pays out $100 million in dividends, and stashes 900
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million under a mattress, shouldn't that trigger the price to go up as the investors would reinvest dividends and
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create a demand for a stock? Not that any of it matters as much as what Tim Cook will say during the investors
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conference. Maybe you can provide some insights on one of your future episodes. Well, Goran, yeah, great question. And
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here we go. First, I'm going to explain kind of the myth around the way dividends work and and dividend
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investing as a practice and then I'll explain the truth once I explain the myth. So, let's say you own a share of
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Apple. Very good. It's currently trading at about $250 per share and it has a
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dividend yield of about.42%. And if you do some quick math,42% of $250 is just about precisely $1. So,
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every year you could expect that Apple will pay you about a dollar for being an owner. That's your dividend. and you
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still own the stock on top of receiving that $1 dividend. And next year you'll
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get another dollar, maybe even a little more. And the year after that, another dollar, maybe even a little more. So you
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still own the stock and you're getting this income stream in the form of dividends. And that dividend income
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stream is one of the main ways that stock owners receive their return on investment. Dividends are a wonderful
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thing. But here's the question at the heart of this myth. If instead of giving
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you that dollar in the form of a dividend, if Apple decided to hang on to that dollar instead, what would happen
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to Apple's stock price? Now, it might be a challenging question to conceptualize
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because Apple is such a huge company and it's so complex. So, let's do what every
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finance and economics lesson does starting in elementary school. Let's examine a lemonade stand. You know, you
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help your daughter open a lemonade stand and you're trying to understand how much
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her business is worth. She's got a table. She's got a picture of lemonade.
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She's got some signs. She's built this positive reputation in the neighborhood
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and that's worth something too. She's making sales every day and all those
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future sales are worth something too to the business. But then let's imagine she
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tells you, "Hey dad, I also have $10,000 sitting in cash here in my cash register
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from all the sales I've made." Well, that money is certainly going to go onto
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her business balance sheet, and it's definitely worth something. And I hope you all agree with me that we must
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somehow account for the $10,000 sitting in her cash register if we're taking an
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accurate snapshot of the business value. In fact, that's probably the easiest
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part of her business to value, right?$10,000 in cash is worth $10,000 to the business. But what if she said,
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you know, hey, Dad, rather than keeping this $10,000 in the cash register, I'm
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going to distribute these profits out to the owners. And that's you, my dad, and
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that's me, your daughter. So, so me and you, dad and daughter, are now going to
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receive the $10,000 into our personal accounts, and the the business cash register no longer has the $10,000
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inside of it anymore. Well, listeners, that is essentially a dividend distribution. The owners of the business
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just received profits in the form of money in their pocket. But is the business worth as much after the
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distribution as it was before? Well, the the booth is the same, the table is the
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same, the pitcher and the signs and the reputation and the future sales, they are all the same for this lemonade
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stand, but the cash register that once held $10,000 now holds nothing. So, pretty clearly the business is identical
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minus $10,000 in value. That dividend payment that your daughter made was not free for the business. This is such a a
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simple idea really. The owners received $10,000 because the business lost $10,000. It wasn't free. It wasn't magic
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money. It wasn't something for nothing. And there are some investors out there
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who don't quite grasp that. Now, now why? I would say because in their mind,
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they they do still own the booth. They own the picture. They own the signs. They own the reputation, all the future
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sales. They still own those things exactly like they owned them before. That's absolutely true. But the company
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valuation, including the stock price itself, absolutely incorporated the company's cash on hand. In corporate
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finance lingo, they might call it CCE, cash and cash equivalents. That is usually its own line item on a on a
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corporate balance sheet. And if you look at the CCE before and after a dividend payment is made, you will see the CCE
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drop by exactly the amount of that dividend payment. It's simple subtraction. There's nothing magical
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going on here. And if you are rationally evaluating that business, you will take
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that reduction in in cash and cash equivalents into account. But back to Goran's example, he said, "If Apple
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makes a billion dollars, puts $900 million under a mattress into its cash and cash equivalents, then pays out
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hund00 million in dividends." Goran was asking, "Shouldn't the stock price go up
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because, well, in Goran's mind, and he's and he's right to some extent, right?
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They now have more in CCE than before. They have more in cash than before because they took $900 million and and
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stuck it under the mattress. But we need to ask, where did the billion dollars in
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revenue come from?" And I would argue that the $1 billion arrived because uh
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future revenue or what was previously called future revenue was realized and became current revenue. And from an
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analysis perspective, that money didn't appear out of nowhere. Investors already
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had that future revenue incorporated into the stock price. Like Warren Buffett would say, he he would say, you
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need to discount all future revenue that a company might make. So that $1 billion, Goran, it was already
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incorporated into the stock price. And all that happened was the the $1 billion moved from it'll be here next quarter.
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So maybe it's worth a tiny bit less than1 billion because we need to discount it. So it moves from that state
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into a column that now says okay the $1 billion is literally in our hands and now it's worth a full $1 billion. And
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that's simply how it works. So I hope that to some extent explains why dividends aren't free, right? It's it's
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money moving from the cash register of the business into the pockets of the owners. But therefore, it's value that's
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disappearing from the balance sheet of the business. And therefore, the value of the business has to drop when a
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dividend payment is paid out. And then even if a company puts more money into cash after a good quarter, the question
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really is, well, was that good quarter already part of the of the stock valuation, right? Did the company
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predict it was going to have that good quarter? all the investors took that into account and then that's what ended
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up happening. That's what drives a stock price. Now, if the good quarter happened
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and nobody was expecting it, that's the kind of thing that could cause a stock
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price to actually go up. It's when those future expectations of a company are
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actually incorrect. And if they're incorrect to the upside, you're probably
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going to see a stock price that goes up. But anyway, excellent question, Goran. I
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hope I answered it sufficiently. Okay, the next question is going to be about individual bonds versus bond funds.
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Recently, a reader, John, wrote in and said, "Jesse, I'm not sure why people
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would buy traditional bonds if you can get a similar yield in an ETF, which is more liquid." But then again, lots of
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readers, lots of listeners will write in and say something like, "Well, Jesse, my
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bond funds, they took a beating in 2022, and some of them are still lower in value now than they were 3 or 4 years
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ago. Yet, individual government bonds, they will always return to par. I'm always going to get my full money back
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out of a government bond." So, why would you ever want to own a bond fund that
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can lose value and stay down when instead you can own a government bond that's always going to get back to its
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par value? So, it's an excellent question. I will link an article if you'd prefer to read through this and
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take your time, an article I just wrote. But anyway, this is a nuance topic, but
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since most retirees either own bonds right now or future retirees will own some bonds during their retirement, it's
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definitely a topic worth delving into. And when we peel back the onion over the next few minutes, I hope you realize
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that this question is equivalent to, or at least I would say it's equivalent to,
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would you rather buy your eggs one at a time or would you rather buy them by the
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dozen? It doesn't change the egg. It doesn't change the meals you could make
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with the egg. It doesn't change the space in your fridge. They are the same eggs. And so really, that's the question
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that we want to ask today. Think of it that way. And now we'll dive into the
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details about whether retirees should own individual bonds instead of bond funds or vice versa. The root of the
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issue is that individual bonds mature, eventually an individual bond will return its face value back to its owners
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plus interest along the way. And if interest rates go up and bond prices fall, the owners of those individual
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bonds, they tend to think, well, that's okay. My my bond price maybe it fell
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according to Bloomberg, but I'm just going to hold my bond to maturity and get the full value back. So the bond
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owners, they feel like they can ignore the current price. And I would argue that's borderline imaginary. They are
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choosing to ignore the current price because they know someday way out in the future, maybe in a few months, most
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likely in a few years, they can get their full value back. But bond funds, bond funds don't mature. They only
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return interest. To get your capital back out of a bond fund, you would need to sell shares of that fund, possibly at
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a loss. The same interest rate hike that the individual bond owners ignored. It feels much harder to ignore when it's a
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bond fund. Okay. Okay, well let's pause. What is a bond fund? What does a bond
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fund hold? Isn't it nothing more than the sum of many individual bonds? And if
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people have convinced themselves to ignore the price changes in individual bonds, why can't we do the same thing
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with a bond fund? Well, I think there's one vital difference between individual
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bonds and bond funds. And as far as I'm concerned, this is the only difference
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that actually matters in this conversation, right? This is the only difference that holds any water in this
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conversation. And the difference is that bond funds and those who run them, they
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tend to reset the funds duration regularly. Most individual investors on the other hand will only do so
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sporadically. Okay, now that is a very jargony statement I just made. But what exactly does it mean? Let's take for
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example BSV, the Vanguard short-term bond ETF. It holds a bunch of 1 to5year US Treasury bonds and currently it has
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an average duration of 2.6 years. Duration, as a reminder, is a measure of interest rate sensitivity. The higher
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the duration, the more sensitive an asset like a bond is to an interest rate change. Every day the the individual
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bonds inside of BSV because again BSV is a fund has a bunch of individual bonds in it. So every day the individual bonds
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get one day closer to maturity. Every day the overall duration of BSD ticks downward. Everything's getting one day
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closer to maturity. And if the managers over at Vanguard, right, if those fund managers stood by and did nothing, the
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fund would eventually completely mature and return all of its capital to its owners. But BSV has a job. And that job
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is not to reach maturity. Its job is to maintain a duration in that mid 2.x range. That's the purpose of this
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specific tool. And there are a bunch of investors out there who depend on it. who depend on BSV to maintain that
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predefined purpose. The reason why they hold BSV in their portfolio is because they want something with that duration
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of 2.x years. So to accomplish this, the fund managers over at Vanguard, they are
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going to regularly trim a little here, trim a little there, reinvest some of the fund income into probably longer
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duration bonds to offset the remaining bonds as they shimmy their way toward maturity. That's how bond funds like BSV
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work. They are on a very regular basis resetting their durations. But now let's
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compare that to Joe Retiree. You know the DIYer out there maybe like some of you Mr. DIY bond ladder. Joe might have
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$50,000 in each of one and two and three and four and 5year Treasury bonds. That's his bond ladder. And every day
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Joe's bond ladder gets one day closer to maturity. Every day the overall duration
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of Joe's bond exposure ticks downward. But unlike the fund managers at BSV, Joe
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really doesn't care about that. In fact, it's actually probably what Joe had in
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mind in the first place. To him, it is a feature. It's certainly not a bug. Joe
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wants his one-year treasury to mature soon. He wants that capital to fund his retirement. Then, he's going to
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rebalance his portfolio to free up 50,000 new dollars, and he's going to buy a new shiny 5-year bond with that.
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And that's the lading that he has in mind. That's how a bond ladder works.
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But now let's pause because did you kind of catch what just happened there? Joe
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retiree is doing exactly what the BSV fund manager is doing. He's resetting his duration, but Joe is only doing it
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once a year. He's taking the new $50,000 essentially that just matured from his
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one-year bond and he's circling back around and buying a 5-year bond with it,
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getting his ladder to exactly where it was before. Um, duration wise, the BSV manager is probably doing it like once a
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week, but Joe, Mr. DIY ladder, he's doing it once a year. That's the only
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difference is how frequently they're resetting their duration. Other than that, bond funds and individual bond
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ladders are essentially the same. Okay, real quick aside, and then we'll get
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back to the main show here. Would you rather purchase a 10-year bond that costs $1,000 and is yielding 2%. Or a
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10-year bond that costs $900 and is yielding 3%. I know it would probably help if you could write this down and do
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the math, but it is a trick question. They lead to the same result because 10 years from now, in both cases, you would
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have $1,200 in hand from either bond. And yes, that the specific cash flows might be different. And if we apply a
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discount rate, the end result might be slightly different. But please, you know, accept this example for what it
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is. My point here is that price and interest rate are these counterveiling forces. The the price of your bonds
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might be down, but that's because the yield has increased in an equal but opposite way. And if the price of your
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bonds rises, that's because the the yield of those bonds has decreased. And that's just cold mechanical math. Bond
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math is very cold mechanical math. And the reason why I'm saying all this is
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because I know some of you might be saying, Jesse, everything you've said makes sense to me, but my bond funds,
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their prices are still down from 2022. And that's totally true. If you look at
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a chart for Agg, A is a kind of this mid duration bond fund. It's the duration
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for what it's worth is about 6 years. A is still down 15% from 2022. It still
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hasn't recovered. Although I will say its owners have been receiving a nice income stream along the way. But a is a
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fund and the managers of that fund are consistently resetting its duration. If Joe Retiree had built something like a
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12-year bond ladder in 2022, its duration would also be about 6 years, the equivalent to agg. And if Joe
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Retiree had done that, where exactly would his bond ladder be right now? I can tell you his longer duration
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individual bonds would have taken a beating in 2022 and they would still be underwater. And Joe could make himself
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feel better by saying, "Well, they don't feel underwater to me because I'll just
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wait 6 7 8 more years until they mature." And that's fine if it makes Joe
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feel better. But mathematically, Joe's revolving bond ladder has matched a in
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this case step for step along the way. Joe rebalances his ladder once a year, whereas the A rebalances much more
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frequently. That's the only difference. Other than that, the cash flows are the
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same. The portfolio values are the same. The yields are the same. Everything is the same. Bond funds are collections of
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individual bonds. A retirees bond ladder is exactly the same. Aside from any tracking error due to rebalancing
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frequency or aside from any, you know, discrepancies due to maybe the fund just holding different types of bonds. You
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know, maybe it has some corporates instead of all treasuries or something like that. But other than those things,
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we shouldn't expect any significant differences between individual bond ladders and bond funds. So, excellent
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question, John. Thank you for writing in. I hope that answered your question. Here's a quick ad and then we'll get
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back to the show. I love getting your questions and some of you ask me questions about the wealth management
00:18:03
firm I work for in Rochester, New York. Others ask about the best interest blog and this podcast, Personal Finance for
00:18:08
Long-Term Investors, which operate without advertising, without pushy sales, and with no payw walls. How can
00:18:13
the blog and podcast stay afloat without me dumping my own money into it? Well, to answer both those questions, I want
00:18:18
to point you to episode 78 of Personal Finance for Long-Term Investors. I intentionally recorded episode 78 to
00:18:24
shine light on those topics and inform you how you are actually helping and can continue helping these projects carry
00:18:29
forward. So, if you've ever been curious about the business of my blog and podcast, or if you're curious about my
00:18:35
day job in wealth management, please check out episode 78 and let me know what you think. On to the next question
00:18:40
here. Jennifer wrote in and said, "Jesse, my husband and I have saved and invested about $3 million over the past
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35 years. Or more accurately, we've saved about 1 million of that and the rest is due to market growth.
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Compounding is an amazing thing. But here's our struggle. Is tax planning just a way for well-off people to not
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pay their fair share?" Jennifer, very good question, and here's the way I see
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it deep down. Everybody pays taxes for the most part. I think if you're not paying taxes, you're either very low
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income or you're probably doing something illegal. I know there are stories out there and you maybe you can
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hear the hesitation in my voice. I know there are stories out there about kind of ridiculously rich people not paying
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any taxes due to interesting corporate accounting. And that very well might take place. In my personal experience,
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I'm not working with anybody who's the CEO of of a Fortune 500 company or or
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anyone who's making, you know, tripledigit millions a year, but somehow it's all not technically income and
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therefore they don't pay any tax. I mean, that stuff might be going on, but for the most part, everybody pays taxes.
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99% plus of people work hard for decades of their lives and working people pay income taxes. Now, most of us pay other
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kinds of taxes, too. And while everybody I don't think anybody likes to see their
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tax dollars used on things that they perceive as bad or stupid or just inefficient, I would also argue that
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many of us are happy with paved roads and firefighters and after school programs for atrisisk youth. But you're
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right in one way, Jennifer. You have presumably built up this nice little account out there of pre-tax retirement
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dollars. I'm making an assumption. I'm assuming that some of your $3 million
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are pre-tax. And you're hearing a lot of people like me offer up ways that you
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could pay 0% or 10% or 12% taxes on those dollars instead of 24 or 32 or 35% taxes on those dollars. And now part of
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the question might be, is it fair that you might be paying less tax when working people are paying more tax? Now
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I'm going to lean toward no because you already went through the period of your
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life where you were paying more tax during your working years. like you already went through that phase. So from
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that point of view, I don't see necessarily any sort of, you know, moral or ethical quandry as far as maybe you
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are paying less tax than the people who are actively working. But then you could
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say, well, what about the poor sap who who never listens to this podcast? He might be stuck paying more than you
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simply because he didn't know any better. And I mean, on that front, I'd
00:21:09
say I'd love to educate that poor sap. But until he finds that education, until
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he educates himself on these topics, he's going to be paying somewhat of an ignorance tax. And that idea of an
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ignorance tax, it exists everywhere, not just in the world of retirement planning. In fact, we're probably all
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paying various forms of ignorance taxes every day. It's just that we don't know
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any better. Part of the problem with being ignorant is you're not even aware
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you're ignorant in the first place. You know, in your question, Jennifer, you
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mentioned the idea of compounding. And you know, is it fair? In the same way, we could ask, "Is it fair that you and
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your husband discovered and seized upon the magic of compounding 35 years ago while other people never realize it in
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the first place?" I would argue that you're receiving the reward of having
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discovered something very valuable long ago and maybe other people are paying some form of ignorance tax for not
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realizing that in the first place. So, is it a moral issue? Is an ethical issue? I don't think so. It's probably
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just an education issue. I think it's one of the reasons why I think to myself
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that an investment in knowledge pays the best interest is that by kind of learning these things and applying them
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in our own lives and maybe doing a little part here or there to make sure that other people know them too, we can
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all benefit from some form of of better financial education. And the important thing here too when it comes to taxes,
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tax planning versus tax avoidance, there are certain things you can do in the tax
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world that are either very gray. Like maybe uh someone at the IRS could find them illegal or just are straight up
00:22:33
black and white. That is an illegal thing. And nothing we talk about here on this podcast at least is even close to
00:22:39
the gray part. We are always on the good side of the fence and by a long shot. So, I'm sure there are certain tax quote
00:22:47
unquote tax planning ideas out there that flirt with some form of gray illegality. I wouldn't recommend doing
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that. I would get uh good tax planning ideas from a CFP and then I'd run them
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by your CPA. As long as it's legal and as long as it's kind of, you know, on
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the legal side by a good margin, I think you have absolutely nothing to worry about. That's my two cents. Thank you
00:23:08
for that question, Jennifer. And now we're going to go to a question from Kyle. Kyle says, "Jesse, I see market
00:23:13
crashes as opportunities. I contribute to my 401k on a regular basis and that gets invested, but then I take about
00:23:19
$500 a month and that $500 it sounds like has gone up over time. So maybe at one point it was a couple hundred a
00:23:25
month. Now it's $500 a month." Kyle takes $500 a month and it goes into his
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opportunity fund, which sounds to me like a like a bank account. Then whenever the market takes a sharp drop,
00:23:36
I dip into that opportunity fund to invest. I guess I'm smart enough to realize that people like you think I'm
00:23:42
wrong for doing this, but I'm not smart enough to understand why. That's okay.
00:23:47
Kyle says he's smart enough to realize that some people think he's wrong, but
00:23:50
he doesn't understand why he's wrong. So, he's asking, "Could you please
00:23:53
explain it in a way I'd understand?" Kyle, thank you for the question, and
00:23:56
that's a great question. It comes up pretty often, and I think the explanation here is pretty
00:24:00
straightforward. So, you take $500 a month, you put it into your opportunity fund, and presumably that opportunity
00:24:07
fund is something like a high yield savings account earning 3% per year right now. Excellent. And then what is
00:24:13
the rest of the market doing in the meantime? Is it growing at 3% like your bank account? Is it growing at more than
00:24:18
3% or is it growing at less than 3%. And I hope you would agree with me that on average the market and your portfolio
00:24:26
will grow at a rate faster than the 3% in your opportunity fund. So at least up front your opportunity fund seems to be
00:24:33
kind of losing ground to the market. But wait, you say, you know, because you are
00:24:38
waiting for a period of time when the market drops sharply, 10%, 20%, 30% or more. And we know that during that
00:24:45
specific period, you'll be very happy that your opportunity fund was earning
00:24:49
3% while the rest of the market dropped 20%. So you're losing on the front end
00:24:55
because we know the market will tend to outperform your opportunity fund over time. But then you've got to be winning
00:25:01
on the back end because when the market drops, you're really glad you've had
00:25:05
money sitting there in the bank account. And so really the question comes down to
00:25:09
does the winning portion that we just described more than make up for the losing portion that we just described?
00:25:15
And it's actually pretty easy to find that out because if we were to back test
00:25:19
that strategy over historical markets, if we were to look at, you know, S&P 500
00:25:24
price history or NASDAQ price history or the Russell 3000 price history and just
00:25:29
try to back test one of these strategies, we could find out if you were losing more than you were winning
00:25:35
or vice versa. Now, what would you find out? Well, you would see pretty clearly that this strategy that the losing would
00:25:41
be not only more frequent, but would be more consequential than the winning. Or in other words, that those short periods
00:25:47
of winning, the times where buying the dip actually seems to work out, they wouldn't be consequential enough to make
00:25:54
up for all the losing you would be doing on the front end. Now whether your opportunity fund is some tiny fraction
00:26:00
of your investing dollars or a huge fraction of your investing dollars, those dollars will over history have
00:26:06
been losing dollars instead of winning dollars. And and we don't really want
00:26:09
that. Now, could you create some sort of specific niche rules to improve your odds or some some rules to maybe win
00:26:18
during a historical back test? I'm sure you could. I've heard some things before
00:26:21
where, you know, maybe you would change the opportunity fund depending on the PE
00:26:25
ratio of the market. The theory there being if the market is overpriced or underpriced, maybe uh your your
00:26:30
opportunity fund strategy would be more or less effective. Maybe you could make your decisions based on the Buffet
00:26:36
indicator, which is a fraction of the total stock market value against the gross domestic product of the US. You
00:26:42
could whatever. You could look at rates of inflation. You know, you could put more money in during the odd months or
00:26:46
the even months, something quacky like that. You could look at the astrology signs on and on and on and on. And I'm
00:26:51
sure some of those rules might improve your odds. Some of those rules might even prove to be effective when examined
00:26:58
in hindsight. And if you want to pursue those rules, more power to you. I personally don't uh in my portfolio or
00:27:05
in my practice use any rules like that. And I think buying the dip on net is just a losing game. So I don't uh I
00:27:11
don't partake in it. But thank you for the excellent question, Kyle, because I
00:27:14
think it's always good to review that question and use it as a uh as a learning opportunity. And the next
00:27:19
question is from Derek. Derek says, "Is tax loss harvesting just a thing that
00:27:23
advisers say when they're trying to get somebody to sell out of a bad stock position and make it sound like a
00:27:28
strategy?" Derek goes on to say, "Here's my logic. If I have a target asset
00:27:33
allocation, presumably over the long term, all of the components will be profitable. But in the intermediate
00:27:38
term, if one fund, say bonds, is showing a loss, the act of rebalancing would have me sell some of my stock fund and
00:27:46
invest the proceeds into the bond fund to reestablish my desired asset allocation. That sounds like the
00:27:51
opposite of tax loss harvesting to me. Of course, when the time comes to enjoy the fruits of my investments, I see
00:27:57
there's definitely an advantage to considering the tax basis of whatever funds I'm selling. It just sounds to me
00:28:02
like there's a lot more discussion than necessary on the loss harvesting topic.
00:28:05
Yeah, Derek, you make a really good point and if I can summarize what you're
00:28:08
saying, you're basically saying that smart rebalancing is often the opposite
00:28:12
of tax loss harvesting. Rather than selling your losing positions at a loss, you buy more of your losing positions. I
00:28:19
mean, that's what rebalancing is. And you are absolutely correct on that front. However, I will say I don't think
00:28:24
that's necessarily how most financial planners position tax loss harvesting.
00:28:28
Instead, they say this. If Dererick invests $1,000 a month into his taxable brokerage account and he is dollar cost
00:28:34
averaged into say VTI into that ETF for years and years and years and then one year the markets drop pretty
00:28:41
significantly. While many of Dererick's individual past purchases are still definitely going to be at a profit
00:28:46
because he's been investing for years and years and years, some of his most recent purchases of VTI, they will be
00:28:52
sitting at a loss. The monthly purchase he made 3 months ago, well that's going
00:28:55
to be at a loss now because the market just dropped. So the idea is can we harvest those losses and then
00:29:01
immediately reinvest those dollars into something similar like a VO. That is how
00:29:06
I think tax loss harvesting is usually positioned Derek. So it's not rebalancing. It's just that we're we're
00:29:12
selling some assets that are at a losing position in order to use those losses somewhere in the portfolio. But the
00:29:18
question is how are we going to use those losses? Now that to me is the the allimportant question and I would wager
00:29:25
that that many advisers, many content creators in this financial planning, retirement planning space, they don't
00:29:31
realize just the minimal impact, the very very small impact that these losses have except in a few corner cases. And
00:29:39
what are those corner cases? Well, the main one, the big one is a corner case where you would be or should be tweaking
00:29:46
your allocation anyway. So here are some examples. You inherited a lake home from
00:29:50
your uncle. Nice. Good for you. We're sorry your uncle passed away. And since
00:29:54
you've inherited it, it's appreciated in value and but it's a nuisance. You've
00:29:58
had it for a few summers. You don't use it. It's kind of just a nuisance and
00:30:02
you're looking to sell the lake home. And you sell it, but it's appreciated in
00:30:05
value. So, it's going to trigger some capital gains for you. Well, if you have
00:30:09
losses sitting in your portfolio, you can tax loss harvest in your brokerage account and use those losses to offset
00:30:16
the gains from the lakehouse. So again, going back to the corner case that I described, it happens in a place where
00:30:21
you would be or should be tweaking your allocation anyway. And in this particular scenario, we're saying, well,
00:30:27
you want to sell the lakehouse anyway. So, if you're going to sell it anyway,
00:30:31
you might as well see if there's an opportunity to do some tax loss harvesting somewhere else and use those
00:30:36
losses to offset the gains. Or here's another one. You work for Google and you've been wanting to sell some of your
00:30:41
concentrated Google position for the good of your portfolio. you know, you own too much Google, so you would be and
00:30:47
you should be tweaking your asset allocation anyway, you need to deconentrate from Google. So great, if
00:30:54
you can tax loss harvest and use some of those losses to offset the gains, that's
00:30:58
a wonderful thing. So in other words, if your financial plan suggests that you ought to be making a change anyway, then
00:31:04
you can look into tax loss harvesting and it'll likely be a terrific net positive for you. But if your financial
00:31:11
plan or your portfolio suggests that you ought to be staying the course and you decide to tax loss harvest, all you're
00:31:17
going to be doing is reassigning your cost basis from one good asset to another good asset and postponing your
00:31:24
capital gains tax bill to a later date. Now, technically speaking, postponing your capital gains bill to a later date
00:31:30
is worth something positive, but it's not worth very much and it's usually not
00:31:34
worth the hassle. The juice in this case is not worth the squeeze. So again, tax
00:31:38
loss harvesting can be good. I I do think it's probably oversold in your defense, Derek. The real, if we want to
00:31:44
call it like a metric of merit or the real question we ought to be asking ourselves is, would I be making some big
00:31:50
change in my financial plan or in my portfolio anyway? And if the answer is yes, then you can say, oh well, do I
00:31:56
have an opportunity to also tax loss harvest and use those losses to offset some gains? Thank you, Derek, for that
00:32:03
excellent question. And now the next question is a kind of a two-parter from Cody Garrett and Derek Tharp. Both of
00:32:08
whom are very much uh respected voices in the world of financial planning. And this came from my LinkedIn post that
00:32:14
they responded to. So Cody Garrett, he basically says that peace of mind is a bad reason for someone to pay down a
00:32:20
lowinterest mortgage. His argument basically is that the math is so clear that you should not pay down a
00:32:26
lowinterest mortgage. It's kind of a copout to say that peace of mind is the
00:32:30
reason why you're doing it. But then Derek Tharp kind of had a bit of a rebuttal and he said, you know, hey,
00:32:34
should we be telling clients or other people, should we be telling people what their goals ought to be? So, in other
00:32:40
words, you know, right, Cody is saying if you're a long-term investor and you
00:32:44
have a 3% mortgage, while it might feel good to pay down that mortgage, that's
00:32:47
still not a good enough reason to do so because more times than not, long-term investing is going to be financially
00:32:53
better. The spreadsheet will clearly say that that's a better thing. But then
00:32:55
Derek is saying, well, if a family has a goal of say being debtree or owning their house in full or or something
00:33:03
similar to that, should we be sitting here as outsiders or as their financial planner and saying like, "No, no, no.
00:33:09
Trust me, you don't want that to be your goal?" And to me, this begs an even
00:33:13
bigger question that I'll I'll sometimes laugh about with clients. And that
00:33:17
bigger question is just that it's not my job. I don't think it's any financial
00:33:21
planner's job to tell you whether owning a boat is good or bad. To tell you whether taking a trip to Thailand is
00:33:27
good or bad or whether spending $100,000 to to redo your kitchen is good or bad.
00:33:33
That's not my job. It's it's certainly not my job to layer my personal value
00:33:38
judgments onto your spending, onto your decisions, or onto your goal setting. It's just not my job to do that. My job
00:33:45
though is to educate you on the trade-offs, to explain to you the various opportunity costs of the options
00:33:51
in front of you, and quite often to explain to you that one choice might be mathematically better than the other.
00:33:56
And if I'm really good at my job, I will even instill in you how much better one
00:34:01
choice is than the other. Some choices are, you know, kind of like a 5149 split where there's really not that big of a
00:34:08
difference. Sure, maybe one is technically slightly better on paper, but let's be honest, 51.49 is pretty
00:34:13
darn close to 50/50, but other choices are it's going to be like someone who
00:34:17
wants to max out their credit card so that they can go gamble at the casino. It's just a very obvious bad choice or a
00:34:22
very, very obvious good choice. So, I think that's where I fall on this conversation where, you know what, I do
00:34:27
think that it's right for me to explain if someone does want to pay down their
00:34:31
low interest mortgage, I'll explain to them the pros and cons of doing so. And
00:34:36
I might explain to them that all us being equal, a spreadsheet might not agree with that choice. But I also want
00:34:41
to understand where they're coming from. And if they're the kind of person who
00:34:44
says, you know what, my entire life I've hated the idea of having debt. I never
00:34:48
want to have any debt on my balance sheet. No amount of spreadsheets are going to tell me that having debt is a
00:34:52
good thing. Well, for that person, I think paying down a low interest mortgage is the right thing to do. So
00:34:57
anyway, thank you Cody and Derek for that one. The next one is from Phil. Phil is a fellow uh financial adviser
00:35:02
and Phil said that his controversial take is uh don't hire an adviser just S&P and chill. And anyway, I like that
00:35:09
one, Phil. But listeners, I've already talked about that one pretty in-depth.
00:35:12
So, if you want to go back to episode 81, uh you can hear some specifics about the 100% S&P 500 portfolio. And then you
00:35:20
can go back to episode 124 for my kind of deep dive answer on whether DIY finance afficados should consider hiring
00:35:27
any sort of outside advisory help. Here's a quick ad and then we'll get back to the show. I send a free weekly
00:35:33
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That's right, a free weekly email that thousands of people like you are already
00:36:13
reading, a free white paper to help you plan for retirement. And you can sign up
00:36:17
for free at bestinterest.blog. This next one we actually will get into some detail here on the next one. John
00:36:23
wrote in and he said that his controversial take is that Roth conversions are oversold, that asset
00:36:29
location is oversold, and that tax planning in general is oversold. I really like this one, and in fact, I
00:36:35
think I've discussed it, you know, in before to some detail. I've had some
00:36:39
pretty serious conversations with serious people about the Roth conversion that they think they want to make and
00:36:45
I've told them, hey, I think this is a bad idea. You know, where did this idea
00:36:49
get into your head in the first place? And the answer they give me is usually, well, aren't Roth conversions just like
00:36:54
universally a good thing? Anyway, back on episode 127, I shared a story of a woman who sold the idea of buying a
00:37:00
fixed indexed annuity under the guys that doing so would open up doors for her to then execute Roth conversions. In
00:37:07
other words, Roth conversions were the sizzle that this particular insurance company was using to sell their stake,
00:37:13
the fixed index annuities, to this woman. Roth conversions are a great tool. Plenty of people at some time in
00:37:21
their long-term investing journey would benefit from using Roth conversions, but
00:37:25
Roth conversions are one of many things in financial planning that have a distinct Goldilock zone. And this is
00:37:31
actually a good idea that I think I'll turn into an article or a future podcast
00:37:34
topic at some point in more detail. The Goldilock zone, you know, not too hot, not too cold, just right. And one key
00:37:39
aspect of Roth conversions is not overdoing it because overdoing it can absolutely end up being worse than not
00:37:46
doing any Roth conversions at all. The idea of a Roth conversion is to intentionally move income from some
00:37:52
future highinccome year into a very low income year. But if you overdo it, if you overdo your Roth conversions, you
00:37:59
will accidentally turn your, you know, very low income year into a high income year because you've pulled in too much
00:38:06
income. So that is not what we want to do. Anyway, so yes, Roth conversions certainly can be overdone. I might agree
00:38:11
with John in terms of the fact that I think sometimes they are used as a selling point to take action and it's
00:38:17
not always the right thing. Like Roth conversions are not universally good in all in all scenarios. And John also
00:38:22
mentioned um asset location. This one is definitely oversold, at least in my opinion. I'm not sure I've ever seen
00:38:28
someone seriously try to sell asset location strategies while also providing a real number to describe the benefit of
00:38:35
doing so. So some quick definitions, right? Asset location refers to strategically placing your assets,
00:38:41
stocks, bonds, whatever into the quote unquote right account, the right location to achieve smart tax benefits.
00:38:48
The simplified logic is that bonds for example, which create lots of taxable income. Well, those should go into a
00:38:53
qualified account where that taxable income isn't actually counted against you. Isn't actually taxable, right? It's
00:38:59
a qualified tax-free account. Whereas a lower income producing asset like a growth stock, well, that should go into
00:39:07
your taxable account because even though the the income is counted against you there, we already defined this growth
00:39:12
stock as being a lowinccome asset. It's kind of matching up that the the lowinccome assets should go into taxable
00:39:18
accounts. The highinccome assets should go into qualified accounts. And I'll
00:39:22
just pause there, I guess, before I tell you the problem because on its face, don't get me wrong, that is a good idea.
00:39:27
It's a good thing to do. And and sure, you know, all else being equal, if you
00:39:31
got everything else done, all your ducks in a row, you might as well get asset location done, too. The problem is that
00:39:37
asset location just has a relatively low or small benefit. It's on the order of
00:39:42
like.1% to 2% per year. In other words, if you think of someone who initially has a equal waiting across all their
00:39:50
different accounts, you know, taxable, traditional, and Roth, and then you compare that to someone where the only
00:39:55
thing they are trying to do is optimize their tax location, and you compare their long-term investing results over
00:40:01
time, you would find that the tax location optimizer has a better after tax return of something like.1% to 2%
00:40:09
per year. And that's not nothing. It's certainly worth examining, but this is
00:40:13
not something that's going to alter your life. And and there are lots of things
00:40:16
in financial planning that can move the needle that much, if not much more. And the problem or the the important note is
00:40:22
that asset location has a lot of externalities attached to it. It can introduce liquidity and accessibility
00:40:29
and timeline issues into your financial plan because you're you're intentionally
00:40:33
kind of moving around assets into these very specific accounts. And for example,
00:40:37
one thing I'm a major proponent of is that your kind of shortest duration assets should be readily available for
00:40:43
you to spend. Usually meaning some sort of, you know, short-term bond. But here we are with asset location and we're
00:40:49
putting all of our short-term bonds into our qualified accounts, into our traditional accounts and Roth accounts.
00:40:54
I will say usually for most people it would be into their traditional account. But at the same time, an optimal
00:41:00
withdrawal strategy does not have you pulling on your traditional account first. has you pulling on your taxable
00:41:05
account first. So that right there, there's this kind of timeline mismatch with the rest of your financial plan.
00:41:11
Asset location can also introduce rebalancing problems for for some of the same reasons. How are you supposed to
00:41:16
rebalance across accounts if you only are supposed to hold bonds in your traditional account and you're only
00:41:21
supposed to hold stocks in your taxable account? It causes friction as I already
00:41:25
mentioned with optimal withdrawal strategies. Similar friction can be caused in estate planning due to the
00:41:30
different rules governing how taxable accounts and qualified accounts get passed down to heirs. So anyway, asset
00:41:35
location is a place where the juice might not be worth the squeeze. And I do think when I see people really pushing
00:41:41
hard on asset location, I question whether they've thought through kind of the full, you know, long-term
00:41:47
multi-deade ramifications of of optimizing your portfolio in that way. So John, thank you for your question on
00:41:52
that one, and I'd be interested to know what what you think about my answer. The
00:41:56
next one's from Wilson. Wilson says, "Once you have enough assets, why would
00:41:59
you still hire an AUM adviser, an assets under management adviser? Why wouldn't
00:42:03
you just hire a flat fee adviser?" Quick uh definitions for those who aren't
00:42:07
familiar. Assets under management, AUM, that's a type of adviser who might say,
00:42:11
"I charge you 1% of your assets or 75% of your assets." So, every year, their
00:42:16
annual fee is based on a percentage of the assets that the adviser is managing. Flat fee, as the name might imply,
00:42:23
usually just means a a price is quoted to you. I charge you $8,000 a year. I charge you $12,000 a year, regardless of
00:42:30
the assets I'm managing. That is my flat fee. Both of those fee arrangements can
00:42:35
still be fee only. It can be the only way that an adviser charges their fee. And I see that definition messed up
00:42:41
actually a lot online. Again, that that fee only word says uh an adviser, it's
00:42:46
the only way they charge fees. And usually and and still in in today's kind of financial services industry and
00:42:52
landscape, most feeonly advisers fall under the AUM model. It's the only way
00:42:56
they charge fees. They are fee only. It is an AUM fee. But yes, there is a growing tide of what might be called
00:43:03
adviceonly advisers who either charge hourly. They don't actually manage assets. They're advice only. And they
00:43:09
charge hourly or they charge flat fees. There's kind of a bit of a mix and a
00:43:13
match. And I totally understand. Let me say this too. totally understand from the consumer point of view why it's so
00:43:18
confusing because I even see other professionals messing up the verbiage and I can see some people right now the
00:43:24
way I just described it to you I could see some people coming back to me and saying Jesse I actually think you got
00:43:28
that one wrong I'm pretty sure I got it right but if you think I got something
00:43:31
wrong let me know so again Wilson is saying once you have enough assets why would you still hire an AUM adviser why
00:43:37
wouldn't you just hire a flat fee adviser and I think what Wilson's saying
00:43:40
here is I think it was Jennifer who asked us a question a few minutes ago and Jennifer's question had to do with
00:43:45
the difference between tax planning and tax avoidance. And her story was that she and her husband have saved up $3
00:43:50
million over their careers. They're retiring with $3 million. So, I think what Wilson is saying is, well, listen,
00:43:55
if a adviser is going to come in and charge Jennifer 1%, that's $30,000 a year and Jennifer could probably go find
00:44:02
a flat fee adviser for again 8 or 10 or 12 or maybe $15,000 a year. There's I
00:44:08
think Wilson's saying that she could probably save some money. So, great question. Fees are an incredibly
00:44:12
important topic. I have lots of thoughts on fees as you've probably already heard
00:44:16
and you know as long as they're not too too biased. I really enjoy hearing people share their thoughts on the
00:44:21
various fee structures in this industry whether it's an adviser and how they
00:44:24
charge fees or whether it's a a client and how they perceive or you know how
00:44:28
they pay fees or how they perceive the different fee structures that are out there. And I do think when it comes to
00:44:33
this whole fee debate because it is a debate and it's been to some extent beaten to death but I think of one of
00:44:39
Warren Buffett's famous apherisms. He said that price is what you pay and value is what you get. And of course, he
00:44:45
was talking about stocks. You know, price is what you pay, value is what you get with a stock. But I think that
00:44:49
applies here. And I I sit here and I think to myself, if I charged people 1.5%, 1% or.5%.
00:44:57
If I charged them a flat fee of 20K a year or 10K a year or less or more, or if I charged them, I don't know, $1,000
00:45:05
a month or $500 an hour. All those different ways of pricing, right? Those are all different prices. But I think to
00:45:11
myself, in all those different price scenarios, would the value I deliver be any different? You know, would my
00:45:17
knowledge be different? Would I care about people more or less? And the answer to those questions is I don't I
00:45:22
don't think so. I think the value I deliver would be the same. I could see in some situations maybe the time I have
00:45:28
to deliver advice might be different. If if I'm charging more, I get to work with
00:45:32
fewer clients and I get to devote more time and energy to them. If I'm charging
00:45:37
less, I might have to work with more clients to kind of make the business model work and I might have less time.
00:45:42
So, I think that's an important difference. But as far as, you know, my my knowledge, my desire to help, my
00:45:48
care, I think a lot of the value is the same for me personally, regardless of the price that I'm charging. So, then I
00:45:55
put myself in your shoes, Wilson, or the shoes of someone who's looking to work
00:45:58
with a financial adviser. And I think you need to really care about both the value and the price. Obviously, you
00:46:03
know, all else being equal, we all need to be very fee conscious. There's no
00:46:07
doubt about it. One of my friendly acquaintances, Wilson, he's this upper level executive at a publicly traded
00:46:12
company that you absolutely would have heard of. And I'd reckon this guy is probably making, you know, a million
00:46:18
dollars a year or more, a smart guy, nice guy, all the things. And he occasionally likes to pepper me with
00:46:24
financial planning questions. And I've asked him, well, hey, do you work with a
00:46:28
financial planner? and he told me he works with the same, you know, 70-year-old Northwest Mutual Insurance
00:46:34
guy that his uncle introduced him to 30 years ago when he got out of college. And to me, I hear that story and it's a
00:46:40
little bit blasphemous. You know, I'm not a huge fan of of Northwest Mutual and the whole life insurance products
00:46:47
and the annuity products. And at the same time though, going back to this high net worth executive who's kind of
00:46:52
the character in my story here, this this person I know, he told me in no uncertain terms, Jesse, I would trust
00:46:58
this guy with my life. So my point is there is some value there in the relationship itself. I think it's hard
00:47:05
to express that value on a spreadsheet. It's certainly not tangible. It's
00:47:08
intangible. Now, just because it's intangible doesn't mean we should be okay with a 2% AUM fee or a 10%
00:47:15
commission on an insurance product or a, you know, I would say I would argue a whole life insurance product in the
00:47:20
first place or all the other questionable ways that financial advice can be charged for. I don't think that
00:47:25
we have to make excuses for that. But I will say that I think there is a lot of value in the relationship and the trust
00:47:31
itself. And I guess just wrapping things up and and gathering my thoughts here, Wilson, it's to go back to what I said a
00:47:36
minute ago. I think it's really important for you to definitely think about both the price and the value. You
00:47:41
you have to think about both. And again, as investors, we all need to be conscious of fees. Absolutely. And we
00:47:47
all need to make sure that whatever fees we are paying, we're getting requisite
00:47:51
value out of paying those fees. So that's probably the hard part for you. I think I think understanding the price is
00:47:56
the easy part when you're determining if you want to go out and seek professional
00:48:01
financial advice, or at least it should be the easy part, right? If fees are ever confusing to you in some way, it
00:48:06
probably says more about the fees that are being charged and the people who are charging them than it says about your
00:48:12
math skills. Like fees should be very easy to understand conceptually. The value is probably the harder part
00:48:19
because I think there is a pretty wide spectrum of advice and advisors out there. That's your challenge is to make
00:48:25
sure that you're getting enough value for the price that you're paying. So,
00:48:28
thank you for that question, Wilson. And now we're going to pivot to Alex. Alex
00:48:31
had a great question. This is again a question or a controversial take. You could say a controversial question and
00:48:37
it is when you read balance, aren't you by definition selling what's good and
00:48:41
buying what's bad? And of course you kind of are and who in their right mind
00:48:45
would want to sell something that's good and buy something that's bad? You can
00:48:49
kind of hear me laughing to myself cuz there's this Homer Simpson quote where
00:48:52
Homer's son Bart says, "This is the worst day of my life." And then Homer
00:48:57
says, "Oh, this is the worst day of your life so far." And I think something
00:49:01
similar applies here to your portfolio because the funny Simpsons joke is that life can always get worse. But I think
00:49:06
the important takeaway for us is that your portfolio has done X and Y and Z so far. And when you rebalance, you're
00:49:14
selling what's been good so far and you're buying what's been bad so far.
00:49:18
Because if you do it right, and I think this we actually talked about this with one of the questions earlier today. If
00:49:23
you do it right, hopefully you're filling your portfolio with assets that you believe in over the long run. and
00:49:28
you understand that some of these assets will both over and underperform over different shorter periods of time. You
00:49:35
believe in the assets in the long run, but you know over the short run there's
00:49:38
going to be over and underperformance. And you understand that reversion to the mean is this strong undercurrent in
00:49:44
investing. You also understand that trees don't grow to the sky. As they say, nothing goes up forever. Everything
00:49:49
has an upper limit. And when you rebalance, you're taking all of those ideas into account. You're saying, I
00:49:54
like everything I own. Some things have done much better than others over this recent short period of time and my
00:50:00
belief is that such outperformance doesn't continue forever. I don't know
00:50:04
exactly when the outperformance will stop but eventually it will. And in order to account for that fact while
00:50:10
also accounting for my own ignorance about the specific timing. The smartest thing I can do right now is create
00:50:16
rules. Right? Rules about how to rebalance, how and when I'm going to rebalance and then follow those rules
00:50:21
really strictly in, you know, in 60 seconds. That is the theory behind rebalancing. Technically speaking,
00:50:27
you're selling what's good and you're buying what's bad. But you're only
00:50:31
selling what's been recently good and you're buying what's recently been bad
00:50:35
because deep down inside, if you've done it right, you you think that everything
00:50:39
you own is going to be good over a long enough period of time. You just don't
00:50:42
know exactly what those periods of time are going to look like. You're ignorant
00:50:45
to that fact. And so, you have to set up rules and then follow them. Thank you, Alex, for the excellent question. And
00:50:50
now, I think this is the final question today. It is. We're going to go to Crystal. And Crystal said, "Jesse,
00:50:57
market commentary. This is literally just one person's comments on the market." And I think Crystal is right.
00:51:02
It's kind of funny. You know, in a market full of millions of investors and trillions of dollars, we're going to put
00:51:07
a microphone in front of one person and allow them to share their opinions. Yes,
00:51:12
my own workplace has CNBC on in the break room. And well, I think it's much better than having on ESPN or The Price
00:51:19
is Right or the Golden Girls reruns. CNBC makes sense. But sometimes I'm walking in to get my morning coffee and
00:51:25
I watch the TV for a minute and I think this is just entertainment, right? This is not education. Going back a couple
00:51:31
months ago, one of the podcast reviews that a listener like you wrote for me, they included a line where they said,
00:51:36
"This is not an exciting podcast, but it is very educational." And I thought,
00:51:41
"Good. I don't want this to be like paint drying, you know? I don't want it
00:51:44
to be that boring, but I also don't want this podcast to be your dopamine fix."
00:51:49
Because I mean, here's a little tell or a little story. You know, next time you
00:51:52
have CNBC on, watch it all the way through the commercial break, right? Don't turn the channel at the commercial
00:51:57
break. And you'll see some advertisements for Vanguard and Schwab and stuff like that. And that's all
00:52:02
good, but you're going to see a lot of ads that are selling gold to senior citizens that are selling option
00:52:08
strategies to young gambler types. You'll see some lady named Diane who's
00:52:12
selling her husband Roger's stock picking service. I'm dead serious. because Roger is too busy in the back
00:52:17
picking winning stocks to appear in the commercial himself. So, he has his wife Diane come sell the service for him. I
00:52:23
mean, come on, right? Market commentary, in my view, is kind of part of this whole galaxy. And, you know, that the
00:52:30
CNBC, the investing galaxy. And I say galaxy intentionally because it's, you
00:52:35
know, a collection of many, many different things that all technically orbit around the same black hole. That's
00:52:40
what a galaxy is. And what's that black hole exactly? I guess I'm not sure in
00:52:44
this metaphor. It's probably some combination of the economy and the stock market or just money in general. You
00:52:50
know, that's the black hole. That's the big pull. That's the thing that's
00:52:52
sucking us all in. And when I see CNBC, when I hear the market commentary that Crystal's calling out here, they are
00:53:00
closeish to the center of the galaxy. And there's a lot of gravitational pull
00:53:05
on them. The pull of whatever is in that black hole is warping what CNBC and those market commentators decide to say.
00:53:12
And I'll certainly admit I am within that galaxy, too. And I think so are you
00:53:17
because you're here listening. But I very much want to be way on the outskirts of the galaxy. I want to be
00:53:22
really far away from the black hole. I want the effects of that gravity to be pretty minimally felt and not too
00:53:29
warping of what I have to say. And so you won't hear my market commentary about, you know, the prognostications
00:53:35
about the 2026 market returns because I think that the only rational answer ends
00:53:40
with I don't know. So, thank you for the excellent question, Crystal. And again,
00:53:44
all of you, thank you for the amazing AMA ask me anything questions. Please keep them coming. You can submit
00:53:49
questions by sending me an email. The email address is [email protected]. And while you're there on the blog, make
00:53:55
sure you sign up for the free weekly email newsletter. I think we're a little
00:53:59
bit north of 41 or 4,200 subscribers right now. And as always, thank you for listening to Personal Finance for
00:54:05
Long-Term Investors. >> Thanks for tuning in to this episode of Personal Finance for Long-Term
00:54:10
Investors. If you have a question for Jesse to answer on a future episode, send him an email over at his blog, The
00:54:17
Bestin Interest. His email address is [email protected]. Again, that's jessevestinterest.blog.
00:54:25
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00:54:42
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00:54:47
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