The Fagan Financial Report

February 9th, 2025

Episode Transcript

Speaker 1 (00:01):
Good morning, and welcome to the Capital District's Money and
Investment Program. You're listening to the Fagan Financial Report. I'm
Dennis Fagan, sitting here with my son Aaron, as we
do every Sunday right here in news to K ten
and one O three one WGY. Today we're gonna kind
of kind of broaden this whole thing out, this whole
show out, and give you food for thought on a
number of fronts. One is speculation. Two is is this

(00:23):
the stock market bubble? An article by Steve Goldstein, a
comment from Ben Carlson, I will never worship a number
in my portfolio green lights. David Einhortz says the markets
are broken and getting worse. A little bit beyond the
news with MFS, which we talk about on a fairly
regular basis, has a zero trading quest. The Internet caused

(00:45):
investors some things and beyond the four percent rule. So
that is the That is the agenda for the show.
The gist, the gist spelling the New York Times the
agenda for the show.

Speaker 2 (01:00):
So let's start off with that. Aaron, how are you? First?
And good? Can't can't complain you know what I mean?
Doing well? Happy to be happy to be here, happy
to be alive, you know, wake up.

Speaker 3 (01:08):
Every day ying from an email. So do you hear
the dings?

Speaker 2 (01:14):
One off our listeners here the ding email? But all right, so.

Speaker 1 (01:19):
Speculation needs a promise, Okay, it needs a dream, and
this is you know, just scribble this down. Quite often,
when reality does not live up to the dream and
the bloom comes off the rows, speculation, speculation obviously goes away.
It's very difficult for reality to live up to the dream.
And that's quite that's that's why quite often you have

(01:40):
biotech stocks, speculative stocks, plug power kind of kind of
go parabolic to the upside because it's the dream that
people have.

Speaker 2 (01:50):
Hey, this time it's different.

Speaker 1 (01:52):
This tree can grow to the sky and then you know,
and that's kind of a little bit of a fear
I have in the current market environment that some of
these investments and we stay with them. We're a growth
at a reasonable price. The acronym is GARB type of investors,
so buy and large. We don't buy in large large,
we don't speculate. Probably the biggest speculation speculation we probably

(02:14):
have ever invested in, probably two percent of some people's portfolios,
is bitcoin.

Speaker 3 (02:18):
I would think, yeah, yeah, yeah, yeah, obviously with but
you know, I think it's tough now, you know, and
just with the ease of the Internet and and everything.
You know, even just I'm on Reddit a lot. There's
like Wall Street bets, so people you know, up or
down will post what they did, and it's a lot

(02:38):
of options. You know, a guy turned ten thousand dollars
into two million, a guy turned a thousand bucks into
a million.

Speaker 2 (02:44):
You know.

Speaker 3 (02:45):
Then you have the other side of that too, you know,
there's you know, then there's another subreddit called race to
ten million where people are trying to you know, save
as much as they can to retire. So I think,
you know, and you know, I actually talk about it
with Doug a Loocke. Doug has to U three kids,
but two in high school, and you know, just with
the social media and you know, everyone sees where their

(03:08):
friends are, and you know, you're always comparing yourself to
others and everyone has always done that, but now it's
just exemplified because it's right in your face all the time.
So everyone's thinking, oh, why can't that be me? Why
can't I be the one to buy a plug power
at one? And it go to one hundred or whatever
stock you want to name. So I think it's harder

(03:28):
and harder, you know, to to to live your own life,
you know, take your own life path. And I think
it's easy to try to take a to cut corners,
you know, don't think that it's possible, you I think,
I think it's hard, you know, I think it's I
think it's really hard for everyone out there. And I
think you know what you can do, and like what

(03:48):
I do for myself sor I'm joining on is like
you really have to be disciplined, you know, you have
to not get too confident. You have to know you
have to be very self aware with what biases that
you have psych logically to protect yourself against. And I
think that's the biggest one. You know, you have to
know your faults and protect yourself against your faults. And
I'm talking about you know, life, but also most event

(04:10):
investing as well. You know, so you kind of have
to put safeguards up for yourself to make sure that
you don't do the wrong thing that will really jeopardize
your future.

Speaker 1 (04:21):
So what are what are what are some of those
safeguards And you know, do you have any of the
top of your head, or or I have a top
couple at the top of my head.

Speaker 3 (04:29):
Yeah, like you know, don't have x don't have more
than x percent in your portfolio in one stock, don't
have more than x percent of your portfolio in one sector. Psychologically,
I know that if I'm getting up and checking a
single price stock at four am or whenever the whatever
that exchanges futures open, that you probably have too much

(04:51):
in that stock. So, you know, those are a few
that I have just off the top of my head
that I really try to do to to to I
don't I've never bought or sold an option in my life.
I stick away from options, you know, things like that.

Speaker 1 (05:07):
You know, we can, we can certainly we use other
methods to preserve you know, balance an asset allocation matter
matter or asset allocation rather than models, you know, you know,
they work within ranges within an asset class. You know,
so if you if you have a portfolio and the
appropriate level is sixty five to seventy five percent in
the stock market, stay within that range. Don't go above

(05:29):
that when things get really you know, feeling great about
the market, and don't go below that when things hit
the fan. With the market, so stay within those. Have
a plan, have a well designed, well thought out plan
to do with yourself or somebody like us. Yeah, and
work within that plan and have that plan migrate really

(05:49):
evolve as.

Speaker 2 (05:51):
Your needs change.

Speaker 1 (05:51):
And keep in mind that your needs probably aren't aren't
going to change that often. You know, you may have
you know, when you're younger forty forty five, you may
have college. You know, college expenses that you need to
set aside. You may have housing expenses or whatever. But
most of the time people are just planning and saving
for financial freedom.

Speaker 2 (06:10):
Some big items come along the.

Speaker 1 (06:11):
Way, like college, like high school, like maybe braces for
your kids, like the good things like trips and holidays
and entertainment, and then you know that you have to
decide how to spend your money. But by and large,
you have you know, those three or four big events
in your life which which necessitate changes or were your
portfolio migrates. And one of them, like let's say, would

(06:34):
be retirement. You know, if you're planning for financial independence,
when you're within let's say, seven or eight years of retirement,
you should scale your portfolio backlab But I'm sixty three, No,
I'm not retiring, but I have about seventy percent. My
wife and I have about seventy percent of our account
in the stock market, thirty percent working too, So you
still have that, but I would fifty maybe maybe sixty

(06:55):
forty is your classic retirement portfolio.

Speaker 2 (06:57):
You know.

Speaker 3 (06:58):
And I think one that you taught me that always
sticks in my head is you're gonna make mistakes, make
the small mistakes. And I think that's really important in
investing as well. And you know, even just for myself.
You know, I can't sit here and tell people I
don't speculate on things, because I do. But you try
to not put more than two you know, don't put

(07:18):
more than two percent of your money in some speculative things. So,
you know, try not to speculate. If you're gonna make
the mistake, make the wrong mistake, live within your means.

Speaker 1 (07:28):
You should do a three day weight on mistakes, Like
if something goes way down, we'll wait to see what happens.

Speaker 2 (07:33):
For try not to.

Speaker 3 (07:34):
Buy things or you know, try not to buy things
because of earnings or before because.

Speaker 2 (07:39):
Of the news.

Speaker 3 (07:40):
Yeah, you know, so you say you like to have
a you know, in a three day weight on major
breaking news, whether it be earnings, a new product or
something like that to come out before you jump on something,
because sometimes when you let's say, uh, you know Tesla
just said. If Tesla says, hey, we're gonna have a
driverless car soon, take a second to see to take

(08:03):
a second to actually analyze that and don't buy something
just because one piece of news.

Speaker 1 (08:07):
Broke And because you talked about social media right off
the top, and you know, I was going to talk
about FOMO fear of missing out.

Speaker 2 (08:15):
There's so much of that. Yeah, there's so much of so.

Speaker 1 (08:18):
And I know we talk about this, but a lot
of investing doesn't come down to numbers. It comes down
to temperament. And you can see the business networks take
all news, which is all justifiable and maybe it's market moving,
but for the short term, you know, and most of

(08:39):
the market moves. That's that people that they talk about
in the news are are after the fact. This is
why this happened, or that's why that happened. Look, I
can tell you why it rained yesterday or snowed yesterday,
or whatever the case may be. The key is what's
going to happen tomorrow, and what's going to happen you know,
not tomorrow for the market, but in the future, I

(09:00):
would say, we're not that concerned about tomorrow. You know,
over the next you know, three four or five, seven years,
I can tell you what happened yesterday. So what happens
is the news spends so much time about talking about
what happened yesterday or what's going to happen tomorrow, which
you know, the past is obviously very predictable. The future

(09:21):
is is they people try to predict a bit, but
it's literally unpredictable. The market goes up fifty percent of
the time little over fifty and down a little under
fifty percent of the time. So they take something which
is longer term, which is very predictable, and they break
it down into segments that aren't predictable, so that you
think that the people on TV or they're listening to
in the radio are able to predict these moves. You

(09:43):
listen to their advice and then you take it, even
if perhaps it may not be in your best interest,
so you know, just be careful of fear of missing out.
And I also said Eric that zero trading costs really
has has enabled everybody the platform on their phone, the
trading platform on the phone, it's at their computer at work.
You know, when you have your when you can get

(10:04):
to that trade whenever you want, wherever you want. Think
about how often your emotions might trump your intellect. Yeah,
impatiens might get the better of you. As relative to patients,
you might, they might become addicted to the gamification of it.

Speaker 3 (10:17):
Yeah, checking it, checking your account. That's what I think
you have to do as much as possible, is you
put a system in place to take out your emotions
so you don't become reactionary just to things that you
shouldn't be. And that that's the stock mark because as
you said, you know I could I could make a
trade on my phone right now in less than thirty seconds.

Speaker 2 (10:38):
I see it on CNBC once in a while, Well
what are you doing. I just bought this. I just
put that. They're on TV, you.

Speaker 3 (10:43):
Know, or you'll see you'll see people on CNBC come
in with like final trades and then you'll see that
trade from a client come through our desk minutes after, right.
So much so it's like, okay, you know, so a
lot of people aren't even doing their all to the listeners.

Speaker 2 (10:58):
What do you mean, Well, well, so so.

Speaker 3 (11:01):
We can see trade. We can see you know, we
trade obviously for clients, but clients can trade their own
accounts as well.

Speaker 2 (11:06):
It's highly discouraged, but we see it's getting worse.

Speaker 3 (11:10):
More and more the more people are shops making everyone
have a shroub alliance, so everyone has shop alliance on
their phone once they learn that there's a trade button,
you know, uh, you're seeing it more and more often.
So once a lot of times, you know, you see
someone recommend a stock on CNBC, and then you see
some you know on our alerts, so and so place
to trade in their own account, which we can see

(11:31):
on TOB So I'm not really doing their own due
diligence with you know, with with uh, with with buying ourselves.

Speaker 1 (11:38):
I think, you know, I think we're in a bubble phase.
And bubble has negative connotations, but if you look at
a bubble like a balloon before a balloon burst, it's
still a bubble, right, it's just smaller and it's bigger, bigger,
bigger toil stretches. So I think we're in probably the
first third to middle innings of it. You know, and
and and and you just got and and as as

(12:01):
people get you know, As these get ramped up and
people get greedier and greedier, which is a natural emotion,
they tend to overweight their portfolio into just things that
are going up, and they kind of ignore good sound
investment principles at Aaron talked about probably ten minutes ago,
which is diversification amongst different stocks, diversification amongst different industries,

(12:25):
diversification amongst different regions, countries, and diversification amongst different asset classes,
all meeting your goal, All all designed to meet your goal.
And if you're not doing that, certainly we're there to help.
But anyways, let's move on. Some things I'm never going
to do by Ben Carlson. And I picked up this
and I don't know when it's written, but quite a bit,

(12:47):
and just one thing stuck out in my head. I
will never worship a number in my portfolio. He goes
on to say, I've witnessed far too many people get
hung up on their portfolio's market value to the point
where they can't force themselves to spend their own money
for fear of falling below a certain threshold.

Speaker 3 (13:04):
Yeah, you know, and you know, and we don't sell annuities,
but that's one of the reasons why.

Speaker 2 (13:12):
I don't.

Speaker 3 (13:13):
You know, sometimes you recommend innu it is just for
the fact that spend some of your money. It's almost
forcing people to spend some of their money because you're
much more likely to spend the money if it comes
in as an income stream as opposed to a distribution
in your portfolio. Because, yeah, you see a lot of
people that you know are always scared to spend their money.
And I can count on one hand since I've been here,

(13:37):
half of one hand probably people that ran out of
money that weren't planning on running out of money.

Speaker 1 (13:42):
And you also would say, like what we do, No,
we don't work with annuities. We're not big fans of them.
They do have their place, and I'm not going to
get into that. That's not the purpose of the statement. So,
but I just did meet with somebody who, look, there
there's people who You can't be a saver for your
whole life accumulating good chunk of money. What do you're
sacrificing for these times? If you're sixty or sixty five

(14:05):
or seventy, you're sacrificing for things to do. I don't
know how many times I've heard somebody say, you know,
we're doing all right, we don't need that money. They
might have a million dollars sitting there, and you know,
a four percent distribution rate on a million dollars just
forty thousand dollars a year. That's thirty six hundred bucks
a month or so whatever the case may be, or
thirty four hundred.

Speaker 2 (14:26):
Dollars a month.

Speaker 1 (14:28):
You know, even if if we're taking extra thousand dollars
just to provide a cushion to do the things you
want to do, because eventually, if you don't spend this
money and armageddon doesn't come, you know, it's not going
to go to something fun. It's going to either go
to your kids, or it's going to go to you know,
you know, nursing, homestay or whatever. And you certainly need
money for that, and we definitely plan for that. But

(14:49):
you got it's a lot of people have difficult time
transitioning between saving saving saving and all of a sudden, okay,
you know, maybe now maybe want to We've worked our
whole life, let's let's start, you know, within reason, taking
a four or five percent distribution rate from this money. Look,
if you're if you have a million dollars and I
and the rule of thumb is a four percent distribution rate.

(15:12):
But you need you want to take fifty thousand dollars,
I have ad it. I would say to you, look,
you know, as long as you realize that, you know,
I mean, you may die with seven hundred thousand or
eight hundred thousand or six hundred thousand rather than a million,
because you know, you're you might be peeling a little
bit off the top and if you're good with that,
you know so being so, just to touch a little
more on that four percent rule, air, uh, you know,

(15:35):
to talk a little bit about the four percent rule
that was designed a long time ago.

Speaker 2 (15:40):
And then what that.

Speaker 1 (15:41):
Rule says is that and I forget who was the
uh the mathematician of the financial.

Speaker 3 (15:48):
Player as a financial planner, Yeah, that came up with
the rule.

Speaker 1 (15:51):
It says you add up all your investments through a
four percent of that total to your first year of retirement,
and subsequent years you adjust that dollar amount for inflation,
and by foul is, you have a very high.

Speaker 2 (16:01):
Probability of not outliving your money during the thirty.

Speaker 3 (16:03):
Basically, this four percent rule is is that it lasts
thirty years if you somehow captured every single horrible of
financial event in history, but it should last well past that.
And the four percent is adjusted for inflation. So if
inflation's ten percent, the following year, it's four point one percent.
And you know, you kind of tell clients that as well.

(16:25):
I think it's important to ask clients and ask yourself,
like when you are in retirement and a on a
you know, fixed fixed budget or you know, fixed distribution path,
how much money? What do you want when you die?
Let's say you have a million dollars and you have
two kids. You know you have to ask yourself how
much do I want to leave them? What if you
only want to leave them five hundred grand, Well maybe

(16:47):
you can take seven percent out, Maybe you can take
six percent out. So I think every situation is different
for everyone, and and I think you have to you
have to really think you know what you want, and
you know, you know how much money you want to
leave someone, because you know that's it's the four percent
rule is tough because you know you work so long
to you know, to save all this money that you

(17:09):
know you almost get scared of losing it. And it's
almost you have to like rewire your brain to spend it.

Speaker 1 (17:17):
Yeah, you know, And I would say when when you
say that, you know what you want to leave your kids,
you know, Like I've been in this business since nineteen
eighty three and I'm sixty three, so forty two years,
and I don't know I'm gonna this is I'm assuming
that this is about anecdotally, this is what I've seen, okay,

(17:38):
and this is what I'm approximating. People my age, people
are the generation above me. Their houses are worth less
than mine because they might have bought them, and houses
got bigger and bigger, you know, as you know, when
I was in the eighties, all right, all of a sudden,
people put up bigger and bigger houses, so that my

(18:00):
mom and dad lived in a very modest house. My
two brothers and I shared one bedroom, my three sisters
shared another. That doesn't happen today, you know what I mean.
So they lived in modest houses. So their house might
be worth two hundred and fifty thousand dollars or three
hundred people sixty three or so. Their houses might be
worth the average today in the States maybe five hundred

(18:20):
thousand dollars. So if you have a house that's paid
for and you're retiring for five hundred thousand dollars, and
you have a million dollars in your combined four o
one ks and the like. Most most of the time
both parties were working. Now you said, all right, and
most people have two kids. Now, so if you wanted
to leave, you know, a million dollars to your kids

(18:41):
in the aggregate, well half of that's in your house.
The other half then you then you have a million
dollars in your four one K. That allows you to
spend that million down to five hundred. Now you leave
five hundred thousand from the four to one K, you
leave a five hundred thousand from the house, and there's
your million. So allows you freedom when you consider your
primary residence. So obviously a lot of people are in

(19:02):
that position, and I understand that. But the second half,
the second thing you should do, and I you know,
absent a health issue, I call it a second half
of your sixties item to addressing that is, think about
putting your house into an irrevocable trust to protect that
from the vagaries of a nursing home care.

Speaker 2 (19:18):
And so I would look at that and consider that.

Speaker 1 (19:22):
But I think you know what we try to do
for our clients there is broaden out their perspective, broaden
out their way that they think of their assets and
what their assets can do for them. But you're right,
they need to decide how those assets, how secure they
want those assets, and how definitively they want those assets,
what percentage of those assets they want to flow down

(19:42):
to their kids and grandkids.

Speaker 2 (19:45):
You know, Yeah, it's tough.

Speaker 3 (19:48):
It is tough, tough because you know, like anything, you know,
with thro routine, it says what take it takes three
weeks to learn something new and have it become you know,
party have routine and a habit doing something for forty years.
Trying to break that habit and that habit is you know, saving,
saving your four un k, growing your four one k,
and you're used to seeing it, you know, seventy five

(20:10):
percent of the time market's going up, so you know,
you're used to seeing it grow, watching it grow, and
then you kind of go cold turkey from from that
income stream and that growth. It's hard to you know,
completely flip the switch and then say hey, you know
it's time to spend down down these assets. It's it's
so it's so uncomfortable.

Speaker 1 (20:29):
I think we also live you know, people we've met with,
would you agree with this? People that are sixty five,
seventy seventy five live they live in constant fear of
a health calamity, you know, it's or a calamity. And
someone said, and it sticks out my mind, Well I've
got one hundred thousands the bank, But what do you

(20:49):
have that for? What if the roof goes? Yeah, that's
pretty you know, yeah, a lot of moneyful. But I
think people live in fear of armageddon.

Speaker 2 (20:55):
I don't know.

Speaker 1 (20:55):
If I don't know if this the movement away from
UH defined benefit plans to define contribution plans like a
fourth through or four one K where all that risk
is now on the shoulders of the individuals has led
to that, or just the UH you know, the mistrust
that's coming down of the government and social security and

(21:15):
the like. I don't know, but I think people live
in fear of calamity and the arm again. And the
problem is if it doesn't come, you're gonna die with
a lot of money and a lot of regrets.

Speaker 3 (21:23):
And if it does come in private lot, yeah, yeah,
worse things to worry about.

Speaker 1 (21:27):
You make the move you make, You make the moves
at that time and life, you know, and then so
our job is say, okay, these are all of your
options and if armageddon does come, this is what happens.
Oh geez, I'm gonna be okay. Yeah, you are gonna
be okay. Or these are the steps you can take.
Not gonna be perfect, but these are the steps you
can take.

Speaker 2 (21:46):
You know.

Speaker 3 (21:46):
And I think sometimes when we use financial planning software
for and you know you've win some you know Monte
Carlo Analysis that gives you one hundred scenarios, and we
use money Guide Pro, but it always tells you what
would have happened during nineteen twenty eight, if you invested
night before Black Monday in nineteen eighty seven, and what's
your portfolio would have done during two thousand and eight.
And sometimes you're like, oh, that's not bad. You know

(22:07):
I got to come I can come back from that.
And I think, you know, you try to run worst
case scenarios for people so that they know that, hey,
you know, I can get through this even if there's
a semi armor. Get in.

Speaker 1 (22:21):
And I think when you right, when you when you
look at those money that money Carlos simulations, which does
one hundred or thou does a thousand different or whatever
different simulations, thousand different simulations, I think that you'll get
a good feel. So, you know, if you're a client
of ours and you want to want to run something
like that, we certainly can do it and then address

(22:41):
like a withdrawal ratio, you know, however you want to
handle that. But that's so that's one other thing in
Ben Carlson talked about worshiping and number. The problem with
the worshiping and number in your portfolio. People say, well,
look when I my portfolio gets to five hundred thousand
dollars unvertiring, Well think about that. It's getting to five
hundred thousand dollars for two reasons. Specifically, you're putting money

(23:04):
into it and the market's going up. So you got
So what I say is lop twenty percent off your portfolio.
That that that hunt that number, and and that's the
number you should be comfortable with retiring at, you know,
not Let's say your goal is a million dollars, Well,
can you retire an eight hundred thousand dollars? If the
answer is yes, you know, then you know, work with

(23:26):
work with a million, you know, but assume you only
have eight hundred thousand dollars. A couple of things he
said in there. I will never let AI engulf my
entire life, and that is the big issue right.

Speaker 2 (23:37):
Now, you know.

Speaker 1 (23:39):
So anyways, yeah, all right, that'll just about what got
about another minute ago.

Speaker 3 (23:44):
It's the first half so ten seconds, all right, yeah,
all right, that's about it.

Speaker 2 (23:48):
All right.

Speaker 1 (23:48):
It's ten thirty on the station you dependify for news,
weather and information news stuck E ten and one oh
three one w g Y, Good morning, and welcome back
to the second half hour of the Capitol District Money
and Investment Program. You're listening to the Fagan Financial Report
in Dennis Fagan sitting here with my son Aaron, as
we do every Sunday right here in nos K ten
and one of three one W one A three point

(24:09):
one w GI. So, you know, I think we get
into the weeds so much, you know, non farm payrolls, CPI,
consumer perce INEX, Producer price Index, gross domestic product.

Speaker 2 (24:19):
That's and that's all good earnings, you know, and the like.

Speaker 1 (24:22):
But this this show is could we broadened it out
a little bit, you know, thinking off the top of
our head, trying to get in get into your thought
process and our clients thought process. I've been in this
business since nineteen eighty three. Our company has been in
was founded in nineteen eighty nine, So this is our
thirty sixth year in business. It being there, it will
be thirty fifth and change August. I think twenty first.

(24:46):
Aaron's been here since twenty eleven. We're fiduciary and we're
really trying to obviously do what's in our client's best
interest in a numerical situation, but also look at them holistically,
look at them as people, and look at some of

(25:06):
the pitfalls that prevent them from really enjoying the opportunity.
And people come in here and I'm retiring, Man, what
an opportunity to now do what you want to do.
But then it occurs to me in the back of
my head. I heard a statement one time and then
not too distant past saying, oh my god, if TikTok

(25:27):
is banned, what am I gonna do during the movie?
And I was like, so people have a hard time adjusting,
you know. They they're the phrenetic pace that we've led,
you know, is difficult sometime for people to get over
that and slow down. It's almost like a detoxification of
that frenetic pace. So I understand what's going on, you know,

(25:48):
but we've got to get past that. Yeah, something to do,
something to do, you know, watching watching Jude and as
May is some of the funnest times I have your
your two kids because it just takes you off of that.

Speaker 3 (26:01):
Hopefully you're more present. Yeah, you have to be present
or they'll fall down the stairs or something.

Speaker 2 (26:06):
The other night, you know, they were.

Speaker 1 (26:08):
He was drinking out of the faust and and just
just his pure happiness of drinking out of the foster.
You've got that little guard that comes down that like
the little thing he loves. We're gonna go to the
river and drink. And also he's out to the river
and drink, pretending he's an elephant or whatever zebra. So anyways, uh,
and that's what I wish for for all of our clients.

Speaker 2 (26:26):
And I know we both work hard at that air, but.

Speaker 3 (26:28):
Yeah, you know, me and Lauren just you know, yeah,
you put your kids to bed, you get and you
get in bed or whatever, you go outstairs, you watch TV.
You watch TV and your schull on your phone. It's
like it's constant, like you know, not one TV's enough.
You need to and it's just h you know, you
just were just kind of rewiring our brains to be
less patient. And and it's it's kind of scary. It's

(26:49):
scary to have kids grow up in that because I
think I was kind of like the last generation to
really not you know, we had cell phones in college,
but you can only text on them. Really phone calls
you didn't have. Yeah, I had. I had a Facebook.
I think Sam created Facebook, and I remember at Banks
and she created one. You had to be in college,
so you had to be going to a college.

Speaker 2 (27:09):
So and that was when two turned out.

Speaker 3 (27:12):
Yeah, so you know, you always had And me and
Lauren are talking about this at dinners. You know, these
were always issues for people, but the issues now are
just right in your face all the time, and.

Speaker 2 (27:22):
It's it's it's it's addictive. I'm not I'm as bad
as anybody.

Speaker 1 (27:26):
I often say, I'm like the doctor who smokes, you
know what I mean, I'm telling you not to smoke.

Speaker 2 (27:30):
I'm telling you to get off your phone. But here
I am.

Speaker 3 (27:32):
Yeah, you know, I was always you know, look at
my phone sitting next to me right now, you know,
I mean I don't even look at it. If I
look at my phone, you're looking at you look at
me like racking.

Speaker 2 (27:44):
That's because you do get tracked.

Speaker 3 (27:45):
Computer in front of me. I gotta you know, even
at work, you at your computer, you got the call phone.

Speaker 1 (27:49):
Yeah, but you know so And this is like I'm
sure this just sounds like an old guy talking because
it is.

Speaker 2 (27:54):
But when I was a kid, we had one TV. Yeah,
so I.

Speaker 3 (27:59):
When we only had one TV growing up.

Speaker 2 (28:01):
So the world is getting the world is getting bigger,
not smaller. Well, what do you mean.

Speaker 1 (28:05):
We have so many ways to communicate, Yes, but we
all go our different ways. You know, the world was
The world is getting bigger right now because in the
in the evenings, people come home, they're on their phones.
They're really separate. They're together. Maybe physically maybe they're not,
maybe they're in their rooms, but mentally they're apart. But
when I was a kid, we were all watching. There
were three stations one room. I had five brothers and sisters,

(28:27):
my mom and dad, and you're all there watching. Now
it's not like that. And I do think that's some
of the world's problems. But you know, we're certainly not.
College is so only gonna get worse. Uh, not speaking worse,
but David einhard talking a little bit about the markets,
and you know, and you know, I don't want to
get into the specific of where the market is right
now because we're trying.

Speaker 2 (28:47):
To keep this bread.

Speaker 1 (28:48):
But I know he's he's been somewhat concerned, says I
view the markets as fundamentally broken. Passive investors have no
opinion about value. They're going to assume every everybody else
has done the work. And and and you know, I
think at one point he's right in as much that
better businesses appreciate market capitalization goes up, and therefore they

(29:11):
command a larger percentage of the S and P five
Hunter because it is a market capitalization weighted index. But
on the other hand, you know, and and and we're looking,
you know, if you look at the Dow Jones Industrial Average,
which is is almost as diversified now, if not more
diversified than the S and P five Hunter, because it

(29:31):
has some sickle the Dow Jones industrial leverage.

Speaker 3 (29:33):
And you know, we talked a lot about the transition
from you know, SMP broad market et s uh to
the Dow just because you know, they have some opinions
really on you know what what they what they want
in there. You know that also said, you know the

(29:54):
the the the Dow has so much less technology, so
you know, you get worried when you have so much
percentage of what's the.

Speaker 1 (30:03):
Percentage now the technology, communication services and consumer and in
the in the.

Speaker 3 (30:09):
Right yeah, yeah, between the communication services and you look
at the Dow and it's about twenty two percent. So
you know, I would argue right now, if you were saying, hey, Aaron,
you're retired right now, you got to put all your
money in one one one something, I would pick the Dow.
Although it might you might not get the performance that
the S and P gets, at least you get the diversification.

Speaker 2 (30:30):
And what's what's s eviden The DPT about is.

Speaker 3 (30:34):
About me one point five percent.

Speaker 2 (30:38):
So that's not that entire as.

Speaker 3 (30:40):
S and P S and P at one point one
seven percent. So but the Dow is is uh obviously
just a more diverse portfolio of into cy than than
the than the.

Speaker 2 (30:55):
S and P.

Speaker 3 (30:55):
Five.

Speaker 1 (30:56):
He goes on to say, the emphasis on earnings growth
is distorting market. You have these companies and all they
do is they manage these expectations right, and they beat
and they raise, and they beat, and they raise, and
they beat and they raised, and they're pretty good companies.
And the next thing, you know, they're trading at you know,
fifty five times earnings even though they're growing at GDP
plus two percentage points or something like that. That's kind

(31:17):
of gamification of the way that the marketstructure has changed.
It's all managing expectations.

Speaker 2 (31:22):
Yeah, you know, so.

Speaker 1 (31:26):
He goes says that growth can be undervalued as well,
but lamented the fact that value players have become marginalized.

Speaker 2 (31:33):
We are such marginalized players.

Speaker 1 (31:35):
And he's a value investor in terms of the amount
of trading that goes on and the trading volume is
what commands the trading volume really are growth stocks and
gamification of the stock market.

Speaker 3 (31:45):
I agree with him on a lot of things, but
you know, it's almost like, I don't know, he's a
value investor, you know, right, So the move to passive
investing hasn't been the best for him, and you know
it kind of you know, he's probably arguing that, you know,
it's taking the the art and the science out of

(32:05):
out of investing, but it's also democratized investing. It's it's
had to happen. All right, so you're gonna not give
people pensions anymore. But but now you're gonna also pooh
pooh in passive investing. So you know, I think it's
just a natural progression of finance. And uh, you know,
Ron chernow right, wrote a really great book called I

(32:28):
don't know, it's called The Death of the Banker, and
it's a series of essays and he talks a lot
about that. How you know it Originally it was you know,
mutual funds that everyone was so mad about. Uh, then
it was you know, et s, and then it's passive investing.
So it's always gonna be something that's disrupting something else previously. Ah,

(32:49):
And I think that's just the natural uh progression of
of of you know, a business sector or even life.

Speaker 2 (32:58):
You know.

Speaker 3 (32:58):
I do believe that the gamification of the market has
been has not been the best thing for the market.
But you could also say, hey, sixty five percent of
people own stocks in some form now, as opposed to
however much twenty percent thirty years ago.

Speaker 2 (33:14):
You know, so it's.

Speaker 3 (33:15):
Really and it's the only way for people to retire too, right,
what else, you know, what else, there's no other option
as the you know, corporations can continue to take away
pensions and put the stress onto the employee.

Speaker 2 (33:29):
Right, and the responsibility the great couple of a couple
of things.

Speaker 1 (33:33):
And then we'll get into tips for avoiding the top
twenty common investment mistakes from the Certified Financial Analysts Institute CFA.

Speaker 2 (33:42):
To finish up the show, we've got you know what
do we got left here?

Speaker 1 (33:45):
Probably I'll be all fifteen and stuff. I just want
to say with this whole trying to food for thought
for the listeners, there's a fine line between confidence and recklessness,
confidence and arrogance, yeah, caution and fear, discipline and emotion.

Speaker 2 (34:04):
And I think.

Speaker 1 (34:06):
Investing is a discipline, right, just like any other discipline.
And when you when you when you pull emotion into
that you know, arrogance, caution, cautious.

Speaker 2 (34:19):
But then do you.

Speaker 1 (34:20):
Trade with with with a fear in mind? And you
said in the first half of the show, I believe
there that you know, you know fear indicates perhaps that
you're not you're not you're not informed enough to invest
on your own, or you're overweighted in one specific specific
stock or sector or asset class that if something goes wrong,

(34:45):
you know, you worry for your for your well financial wellbeing.
So if you're if you're appropriate allocated, if your portfolio
is appropriately allocated for your objectives, and using history as
a guide with like a Monty Carlo simulation, if you're
going to be fine, then you've got no worries. Now,

(35:06):
if farmageddon comes, you know, you still did the best
you could do, you know, so I don't think you
plan for them again. But but my point with this
whole little spiel is make sure that you're not confusing
a discipline with with some some emotions. Like you know,

(35:27):
there's between confidence and recklessness with with the portfolio, you know,
and just kind of always uh.

Speaker 3 (35:33):
Back to you want to be confident, but you want
to have guidelines. You want to be able to admit
when you're wrong too.

Speaker 2 (35:38):
That's a good uh guidelines is the is the way
to intel?

Speaker 3 (35:41):
You know a few years ago, in like twenty twenty four, right,
a few years ago, I was pretty confident that intel,
you know, but you have to times you have to
cut the cord and mits you're wrong and move on
because the business of being wrong, you know.

Speaker 1 (35:54):
They go this is this is the business of mistakes
and recognize it's hard to try to make the big one,
and I don't know, well, you know, it's it's you.
You're gonna make mistakes all the time because no matter
what you do, if you sell something, it certainly isn't
the exact bottom.

Speaker 2 (36:07):
Probably you know, you're not going to get the exact
bottom there.

Speaker 1 (36:09):
You know a lot of people say, well leave the
bottom ten percent in top ten percent to somebody else,
you know, so don't bottom fish and try to get
out before there's a blow off top. I think we're
sometimes where the difficult part is when something goes down,
deciding when to sell.

Speaker 3 (36:28):
You know, Yeah, that's the hardest part of our job
from the investment standpoint, is uh is selling you know,
whether it be because a stock has gone up or
gone down, because again, you know you're usually not going
to get that. It's even hard to get the top
five ten percent, you know, very hard. So I think
that's obviously the hardest. And usually when you sell it,
and if you do get the top right, it's you know,

(36:50):
like let's say you sell it to a stock at
the top, you're like, oh, I actually got the top right.
More than likely five years from now, it's not going
to be the top right right now, the top for now.

Speaker 2 (37:00):
The temporary time.

Speaker 1 (37:01):
And you can have tractical tactical sides to your investments,
tactical trading where you're trying to catch a move and
then then you let it go.

Speaker 3 (37:08):
But I think when you invest in stocks or etf
so you know, every time you buy something, you have
to ask yourself, what do you expect out of this?
You know, what movements do you expect out of this?

Speaker 2 (37:18):
Right?

Speaker 3 (37:18):
So you know, sometimes you buy a stock like a
Palanteer or like you know, I expect this to be
one of the biggest companies in the world one day,
and then you then you buy something that maybe like
a value stock, like you know, if I get twenty
or thirty percent out of this that that'll be good.

Speaker 1 (37:31):
Or if I get this six percent divit and it
doesn't go down, I'm going to get a couple of
points above a bond and I'm also going to get
hopefully some dividend appreciation things like that. Yeah, all, yeah,
I look at stocks like like modes of transportation. There's jets,
you know, there's trains, there's cars, there's bicycles, and you know,
and you expect some to go at different paces and

(37:52):
some to yield different things, you know what I mean,
But that whole portfolio should meet your expectations. What do
you expect from the entire portfolio? Well, I expect the
dividend of a couple percent. I expect appreciation of maybe
five or six percent, so my total return is seven
or eight percent.

Speaker 2 (38:07):
I expect this type of volatility, you know. So that's
how you kind of craft the portfolio.

Speaker 1 (38:13):
CFA Institute Robert Stammer is the CFA Director of Investor Education.
When learning how to invest is important to learn from
the best, but it also pays to learn from the worst.
These top twenty most common mistakes have been compiled to
help investors know what to watch out for. If any
of these mistakes sound familiar, is likely time to meet
with a financializer. Financial advisors make the mistakes still, Yeah,

(38:36):
so don't kid yourself, you know, you know, and I
think failing to do anything enough. You're always you're always
you know, this is unless you have one stock in
the every day if unless that one stock is the
number one perform the SPF I've wanted, you know, you're
always second guessing yourself. But number five in there was
what we just talked about, having some disciplines and buying

(38:58):
high and selling low, leaving the leaving the middle of
the top ten percent to somebody else to bottom. The
fundamental principle investing is to buy low and sell high.
So why don't so many investors do the opposite. I
think we've probably beaten that to a dead horse. Instead
of rational decision making, many investment decisions and motivated by
fear or greed. And I think that's that's what we
talked about. So I don't want to I don't want
to kill that one. You want to pick one of

(39:18):
those out there, and and you just want me to
pick one out or how do you want to handle this?

Speaker 3 (39:23):
I think did you talk about failing to diversify enough?
Not really, but go ahead talk about I think the
more you get towards retirement, the more you need to
diversify and have have you know, obviously not maybe not losers,
but yeah, you know you always have some losers in
your portfolio. If you have a portfolio that's or laggards.

(39:43):
Let's say, well the market that that has a diversified portfolio,
and you know we talk about it all the time.
You know there's two stages to get the accumulation and
the distribution stage of your financial life. And you know,
when you're in that distribution phase, you know you need
you have to protec yourself, you know, obviously, because if
you're wrong, you're really jeopardizing the rest of your life.

(40:05):
And what is the goal in financial independence?

Speaker 2 (40:07):
Right, Well, it's not.

Speaker 1 (40:08):
It's not a competition, it's right, it's financial independence. But
when the market's rocking and rolling, you're gonna regret the
fact you have any bonds, right, And when the market's down,
you're going to regret the fact you.

Speaker 2 (40:17):
Have any stocks.

Speaker 1 (40:19):
But the key is to look past all that and
appropriately allocate your assets within that number.

Speaker 2 (40:26):
Failure to diversify.

Speaker 1 (40:27):
Often investors think they can maximize returns by taking a
large investment exposure in one security or sector. We talked
a bit about that, but this puts it succinctly, I think.
But when the market moves against such a concentrated position,
it can be disastrous. Disastrous. Too much diversification and too
many exposures can also affect performance. Yeah, the best course

(40:47):
of action is to find a balance, you know.

Speaker 3 (40:49):
And I think that if you're in retirement, you have
to find or you know, however, in retirement, not in
retirement risk what your I guess, risk timer is your
risk tolerance. I guess you've got to find a benchmark
that you're happy with, and you've got to correlate to that,
whether it be seventy eighty ninety percent. I think correlation

(41:09):
to things that have you know, some historical metrics that
you can actually take some historical data and draw some
conclusions from is extremely important as well. So you know,
we try to you know, correlate in between the S
and P and and the Nasdaq S and P really
is you know, we try to have you know, sixty
seventy percent correlation to that because we know that over time,

(41:32):
the S and P five hundred does you know, ten
to eleven percent per year. We're not saying that's going
to happen going into the future, but we're going to
say that's our that's the most most data we can
get from from any indices. And I think you know
that that's important for people. And you know, it's not
only the SMP. It can be the DOW. It can
be Vanguard Welling Team that's a sixty thirty portfolio. It

(41:54):
could be a sixty forty portfolio. But you know, you
want to really correlate, but you know, to to something
and and and let that dot.

Speaker 1 (42:03):
Early your reliability and predictability to portfolio, you know, And
and I think after such a big move we've had
in the market, you know, maybe moving forward, the S
and P five hundred does seven percent a year and
and the bonds do four. So if you've got sixty
percent of let's say, have one hundred thousand dollars, and
you have sixty percent of your money in the stock

(42:23):
market and the stock market does seven percent, you have
got forty percent in the bond market, and that does
a four percent, you're basically going to get a five
point eight percent rate of return if you're taking a
four percent distribution rate. That covers that, and then it
covers for inflation adjustments of makes it let's say two
and a half percent a year, and you're fine. And
then then at some point in time, let's say you're

(42:43):
sixty sixty three, sixty four, at some point in time,
maybe inflation begins to eat away at that portfolio a
little bit. But also at some point in time, you know,
invariably think of your own life.

Speaker 2 (42:54):
Listeners out there.

Speaker 1 (42:55):
You know, it's not it's slightly, but it's not guaranteed
that both you and your partner, if you're lucky enough
to have one, get to be into the passive stage
of your retirement is like seventy eight. You know, usually
someone gets sick, someone passes away cognitively, they're not capable physically,
they're not capable, they just don't feel like doing things.

Speaker 2 (43:15):
Somebody.

Speaker 1 (43:15):
The prime of your retirement life might be the fifteen
years from sixty three to seventy eight. Knock on wood,
if you're lucky. Yeah, So plan for those and expect
costs to go down other than you know, the parabolic
potential cost of a nursing home care or and then
kind of take care of that. One of the things
I wanted to mention too, where it is focusing too

(43:36):
much on taxes, focusing too much on the Medicare Premium
adjustment IERMA.

Speaker 3 (43:41):
Yeah, yeah, we see that a lot of times. You know,
people are almost mad at their performance and taking maybe
some capital games because it affects the irma by twenty
dollars a month, thirty dollars a month, So you know,
that's obviously that's you know, obviously can be you know,
you had something that you really shouldn't focus on.

Speaker 1 (43:59):
Or not doing things that you want to do because
it might push you a little bit into the next bracket.
Remember the brackets aren't aren't oh man, I just.

Speaker 2 (44:09):
Said that word. They're not. They don't go back to
dollar one, all right.

Speaker 1 (44:13):
They basically the twenty two percent bracket starts at let's
say one twenty five if you're married gross income. It's
not retroactive to dollar one, all right. So focusing too
much on taxes. Taxes are consideration, you know, incremental, incremental rights,
incremental above that.

Speaker 2 (44:28):
Right. Uh so.

Speaker 1 (44:32):
You uh, basically you don't want to focus taxes are consideration.
They're not the driving force. You know, you're funding your lifestyles,
the driving force with something that's feasible, giving your financial
a wherewithal, and you take taxes in the consideration so
you're not overpaying and all that should meet with your
estate planning needs and the like, like a rough ira

(44:54):
what you want to leave to your children, if anything,
you know what your thoughts are on that that would
impact then how from what sources you pull money from?
When you take your Social Security trust accounts and the like.

Speaker 3 (45:05):
You know, and I think one that we talk about
all the time, and we see a lot from clients,
and I think a lot of times clients get you know,
obsessed with dividend yield and chasing dividend yield. I think
that's a big one. You know, a lot of times,
you know, people are you know, saying, hey, you know,
I'm seeing this as a six seven percent dividend yield.
And you know, the reason why why companies have dividend

(45:27):
yield are to attract investors. And sometimes when you see
seven eight nine percent dividend yield, you really got to
look under the hood and say, hey, why is this
so high? Why do they need investors to buy this
stock that we own? And usually there's fundamental problems underneath
the hood.

Speaker 1 (45:43):
Right, So I think I think you're right in one respect,
you know, I think you look at reasonableness, all right,
and reasonable dividend, in my opinion, differs by industry.

Speaker 2 (45:54):
Utilities pay a little bit higher.

Speaker 1 (45:56):
Dividend because they kick regulated util it kicks off predictively,
predictability free cash flow, all right, But if that dividend
gets above reasonableness, Let's say the ten year treasure notes
trading at four and a half percent. If that gets
to you know, five six, seven, eight percent, you're right,
I think that the company is trying to attrac. And

(46:17):
then the higher the yield gets above what what is reasonable,
the more stock like that dividend becomes or that interest payment.

Speaker 2 (46:26):
Becomes of it's from a bond, you know, the more
valid volt till it becomes.

Speaker 1 (46:29):
So you've just got to be careful about chasing yield
because you've got to get a ten percent dividend yield,
and that's bond could go down twenty percent in value.
You know, if it sounds you know, I stay with
the old. If it sounds too good to be true,
it probably is. And that's that's what I would buy,
you know, because you know, we we've always said we've
invest in stocks for growth, in bonds for income, when

(46:52):
you know we are not We don't have the capabilities
to invest. We can use some mutual funds or ETFs,
and we do to invest in bonds for growth. You know,
we know what we have. We want predictability and income
from the bonds. We want to take the risk with
the stock side. Maybe we get some income if that's
the goal of the client. Maybe we don't But anyways,
that would be that I think in the last thing,

(47:13):
there's twenty of these on there. If you want to,
just email us at Faganasset dot com and please ask
for the tips for avoiding the top twenty common investment mistakes.
It's very enlightening. Like I said, I've been in the
business forty years and I find them in letting also
find them refreshing to look at from time to time
to kind of solidify things so that we were not
making these same mistakes, you know, letting emotions get in

(47:36):
the way. It's one so working with the wrong advisor.
An investment advisor should be your partner and achieving your
investment goals. The ideal financial professional and financial service provider
not only has the ability to solve your problems, but
shares a similar philosophy about investing and even life in general.

(48:00):
The benefits of taking extra time to find the right
advisor far outwigh the comfort of making a quick decision.
And that's kind of the job that we apply for
every weekend and every day when we work for our clients. Anyways,
that'll just about do us. Give us a call during
the week a five eight, two seven four check us
out on the web at Faganasset dot com. Like us

(48:22):
on Facebook, we put a snapshot out every Wednesday or
excuse me, chart out every Wednesday for our clients with
some explanations that you can take a look at. If
you want that, just email us at that faganasset dot com.
And Sunday we have a snapshot that goes out at
eight o'clock every morning.

Speaker 2 (48:36):
Samantha does it and it's about a two or three

Speaker 1 (48:39):
Page synopsis of the market right now, have a great
day air, take ca care