Episode Transcript
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Speaker 1 (00:03):
Tonight, are you paying attention to what we would call
long standing rock solid investing principles even in the midst
of crazy market volatility. We've got some new numbers for you,
and I'm pretty excited about these. You're listening to Simply Money,
presented by all Worth Financial Ammy Wagner along with Bob Sponsor.
You know, Bobb, you are a longtime coach, baseball coach,
(00:27):
and I'm going to put this in your terms. You've
watched games before where your player you're liked. Did you
learn anything in practice? On the flip side, I'm sure
you've seen games where it's like, oh, yes, we practiced this,
and when it came down to it and emotions were
high and we were in a game, we executed flawlessly.
Speaker 2 (00:47):
Right.
Speaker 1 (00:48):
I like to think investors have been paying attention and practice.
Speaker 2 (00:52):
Yeah. And when you're coaching high school kids, Amy, you
get that every extreme and everything in between, emotions run high.
You've got a son that plays high school basketball right now,
so you know exactly what I'm talking about. I get it,
and you and I often get worried about what are
investors in general doing during times of volatility? What are
(01:14):
our clients doing? During this time, and we've got some
good news to share. Amy, before I get into it,
to me, the news we're about to share proves one
of two things. Either. Number one, millions of people are
listening to this show every night, which means you and
I deserve a big raise. People are doing what any
(01:36):
god fearing, red blooded Americans should have been doing last week,
and that's preparing to watch the Master's golf tournament.
Speaker 1 (01:44):
Which was coincidentally one of my favorite Masters tournaments of
all time. But yeah, they're focusing on the right things
and not the wrong things. Anecdotally, So you and I
are doing these shows in the midst of all this
market volatility, and really we have our finger on the
pulse of what our clients are doing. And I have
to say, I'm so impressed. Right, our clients are well educated,
(02:05):
they're smart long term investors, and they were not blowing
up our phones. They were not freaking out, they were
not walking up to the ledge saying take me out
of that. I had none of those calls. But now
we have some data in that shows it's not only
our smart all wor than clients clients, it's a lot
of smart long term investors. This data coming out of Vanguard,
(02:25):
and they tracked the behavior of their self directed clients. Right,
these are clients who are making their own decisions about
what they're putting into their investment accounts and their retirement
accounts in what they're taking out. And they looked specifically
at the time period between April third and April ninth, which,
if you will recall, was a little bit volatile.
Speaker 2 (02:47):
Yeah, and here's the great news. Only eight point four
percent of self directed traders executed trades on any of
those days. Yes, so they sat there, they stuck to
their plate. They either weren't paying attention or doing something else,
which I highly doubt, or they were sticking to their
you know, long term plan. Most investors who did make
(03:08):
trades during those days again we're talking about April third
through April ninth. Uh, they only traded on one of
those five trading days, and on a nearly five to
one margin. They were buying, not panic selling. So that's
all good news to hear.
Speaker 1 (03:24):
That's fantastic news. It's like, you know, you talk about
these things day in and day out, and you hope
that investors are getting it, because I do know they're
exposed to some crazy headlines recommending, you know, here's the
sector to be in this year, and this person says,
here's the top twenty stock picks of twenty twenty five ires.
That's what you're seeing in a lot of media places
(03:45):
where you're going for financial news and money advice, yet
you're not acting on that. You are looking at long
term kind of rock solid basic principles of how do
you build wealth over time? And according to this snow
app shot in time, investors are getting it right.
Speaker 2 (04:04):
We got some data from another big self directed you know,
investing firm too, Charles Schwab, and on April third, the
first day of big market losses, Schwab did log a
very busy day of trading, but most investors did not
panic sell at all. In fact, they were buying way
more than they were selling during that week. So that's
(04:26):
other good news, and that's why, you know, things rebounded,
and we've been saying it amy. I mean, in eight
and a half percent drop in the stock market, while unsettling,
it's not catastrophic, it's not disastrous disastrous, and it's in
fact slightly above the normal intra day entry year drop
(04:48):
of fourteen percent. Every single year you know going back
to nineteen twenty six. So this is this is not
you know, abnormal what we've seen.
Speaker 1 (04:58):
But if you're like me and can't remember what you
ate for lunch yesterday or where you parked your car
by the time you come back out from Kroger, you
may not remember exactly what happened during this week as
investors were making these decisions. Let me remind you Wednesday,
April second, this is when President Trump announced sweeping tariffs
on all countries. Right, we are moving forward to that.
(05:19):
In response to that, the next day, the DAL, Jones
shed nearly seventeen hundred points, SMP and NASDAK had their
worst day since twenty twenty. Think back twenty twenty. We
were entering into a global pandemic. Our economy was shutting down,
and we had a million unknowns on our platter. As investors.
(05:40):
Next day, April fourth, China, well, they start talking about
retaliatory tariffs. The DAL shed another twenty two hundred points.
The Nasdaq descended into a bear market, meaning down from reese,
down twenty percent from recent highs. Monday, the seventh, Trump
doubles down on tariffs, stock closed lower. The market slid
further on April eighth, right, and then let's get to
(06:03):
the ninth. This is when Trump paused most of all
of this tariff campaign. This is when many of us
exhaled an All three stock market indexes marked huge gains.
That is one week in the life of an investor.
It feels like what I'm talking about should have happened
over the course of one year, but that was just
one week. You're listening to simply Money presented by all
(06:23):
Worth Financial Immi Wagner along with Bob Spawnseller. How did
you react during this one week snapshot in time April
third through the following week when we were reacting on
the daily to new headlines, new developments, new panic in
the stock market. And what we're seeing from the data,
(06:44):
and this is from a number of large companies where
your investments are held, is that you really didn't panic.
You stayed the course. Less than ten percent of investors
even made changes buying or selling anything on those days.
This is fantastic news. If I was going to give
how investors responded a report, this is a solid, solid maybe.
(07:08):
And what we saw was people weren't necessarily panic selling,
they were buying. What were they buying Navidia number one
bought stock during that time, Amazon, Apple, Tesla. You know,
these are the companies that did drive the great returns
over the past couple of years, but also investors purchase
shares in indexed exchange traded funds. Maybe the learning here
(07:30):
is that if you were invested in individual stocks, too
much volatility, right, but now you're broadening your diversification over
say it's the S and P five hundred, the five
hundred biggest companies that are making up the American economy.
So hey, maybe some of these changes that were actually
seeing investors making during this time were in response to
what happened, but they were the best thing to do
(07:52):
as a longbuster.
Speaker 2 (07:53):
Yeah, it used to be back in the old days
when all we could buy were individual stocks and mutual funds.
You know, mutual funds trade at the end of the
trading day. You get the four o'clock closing price whether
you're buying or selling. And now with the advent of ETFs,
people can and do you know, make changes intra day
while the market is open. Both individual self directed investors
(08:15):
and our investment management team here at all Worth can
do that during the day, and they do do that
during the day as well, So all good things. You know,
we live to fight another day. Who knows what's going
to happen next week.
Speaker 1 (08:28):
Yeah, and you know, thinking about one of the recent
things we talked about was, hey, if you are moved
to do something because of fear or greed during this time,
here's a list of questions to ask yourself, right, you know,
am I making decision based on fear or greed? Or
is this smart? Long term strategy? Here from black Rock
(08:49):
right analysis the day did showed that investors were asking
themselves not what should I sell, but what should I buy?
Seeing this is the opportunity that legitimately it is as
a long term investor. I had someone in my office yesterday, Bob,
who said, I hope things continue to go down. I
don't mind if we see two thousand and seven, two
thousand and eight levels, because I also know what happened
(09:11):
after that. And I was thinking, wait, hold a second,
hold your tongue on that one.
Speaker 2 (09:15):
That's probably a guy that had a bunch of cash.
You know, he had a nice stash of cash and
he had a nice emergency fund built up, right, I
mean the old phrase cash is king.
Speaker 1 (09:25):
Yeah, an incredibly high risk tolerance, but also a strong
understanding of the fundamentals of the markets, how they work,
and how to take advantage of that as a long
term investor.
Speaker 2 (09:37):
Sounds like he has a great advisor exactly.
Speaker 1 (09:41):
I'm not necessarily saying, hey, let's get down to where
we were in seven O. I don't want to live
through that again, but I am. I feel really good
to see that investors are seeing, Hey, when markets are down,
this is really a sale and if I have money
on the sidelines, I can buy in get more shares
of these large companies that will find a way through
(10:03):
these tariffs, that will find a way to continue to
make money and will ultimately rebound from any volatility that
we're seeing right now.
Speaker 3 (10:11):
Yeah.
Speaker 2 (10:11):
I think this is a great reminder, and your meeting
with your client, you know, illustrates this. It's a great
time to remind folks to tune out the noise, tune
out all the headline clicks, and stick with your long
term financial plan and take it advantage of these short
term opportunities to buy low.
Speaker 1 (10:32):
Yeah, and then diversification, right, are you properly diversified? Seeing
that people are buying into these index ETFs makes me
feel really good. Diversification is not going to eliminate your risk,
but it is going to reduce the impact of one
area tanking. Right if tech was way up and then
tech goes way down, you're not necessarily exposed to all
of that downside because you're more diversified than that. And
(10:54):
then I think, listen, this is the message that investors
have gotten, and it is do not try to time
the market. Just going back to that week snapshot in time.
You don't have to look back any further than that
as an investor to say if you would panic to
pulled out of the markets right before President Trump announced
a ninety day reprieve on all of this, and markets
(11:15):
had their best day that we've seen as far as
a rebound in the history of the markets. Can you
imagine if you had made that decision the day before,
the night before, Bob, and then watch that rebound and
you were on the sidelines for it.
Speaker 2 (11:29):
Yeah, to use your baseball coach analogy, I'd be throwing
ball buckets against the back of the dugout. That's what
I'd be doing. Yeah, which I've done before. By the way,
I'm not proud of it.
Speaker 1 (11:40):
I'm sure you're speaking from experience there. Yes, yes, maybe
I might be throwing ball buckets, and you should because
that's a knee jerk reaction right to investing and it
didn't pay off in the long run. There's other things
that you can do right rebalancing when necessary, making sure
you've got proper cash reserves, putting that money in the
(12:01):
same amount on the same day every month. It's what
you're doing to your four oh one k likely it's
called dollar cost averaging. Some day's markets are going to
be down, some day's markets are going to be up.
But over time it's going to smooth out that volatility
and you're gonna get the money into the market. Here's
the all Worth advice listen, stay focused on your long
term goals, not short term market noise. Volatility is normal.
(12:25):
Discipline builds wealth, and apparently investors are getting that message
coming up next way. Having too much stock in one company,
even if it's one of our favorite local companies, could
be dangerous. We've got some examples for you to think through.
You're listening to Simply Money, presented by all Worth Financial
here on fifty five KRC the talk station. If you're
(12:48):
looking to simply Money presented by all Worth Financial Imi
Mei Wagner along with Bob's spawn Seller. If you can't
listen to our show every night, well there's a lot
going on, a lot of headlines out there. You don't
want to miss a thing. We've got a daily podcast
ask for you search simply Money. It's on the Iheard
app or wherever you find your podcast. And also maybe
you've heard something on here that you need to share
with a friend, Share our podcast with them. Straight ahead
(13:11):
at six forty three, we're taking lots of questions you
have about all of this market volatility. Is it a
good time for wealth conversions? And also what exactly is
tax loss harvesting? We talk about it, we'll explain it. Then. Okay,
we have some great companies headquartered right here in Cincinnati.
Huge fan of all of them. I'm born and raised here, Bob,
(13:33):
as are you. And these are teams that we always
root for, companies that we always root for. But I
also often see that maybe investors root a little too much.
And by that I mean maybe your paycheck is coming
from this company, and also you own a lot of
company stock. Great if that company is doing well, but listen,
anything can happen to any company at any point in time.
(13:57):
So today we're going to talk about Quoger. We're not
picking on Kroger. I love this company, but there have
been some situations recently that could impact investors in Kroger,
and I think it's important to talk through this kind
of is an overarching lesson of the risk you take
on if you own any concentrated positions in any companies,
(14:18):
regardless of which ones they are.
Speaker 2 (14:21):
Yeah in the headline, And this is I think the
point you're trying to make here, Amy, before we get
into it, is things can come out of left field
that no one ever saw coming that can cause volatility
in any stock. Here's here's the latest with Kroger. And
I don't even know who this person is. Amy, You're
gonna have to help me here. Jewel the singer is
suing Kroger. She's a Grammy nominated singer. Come on, I
(14:45):
don't know, I don't know anything.
Speaker 1 (14:48):
You're dating yourself here, responsory.
Speaker 2 (14:50):
I've already admitted I'm old, So I'm I'm trying to
make a point here. Okay, So she and her promotion
company are suing Kroger over this wellness themed festival that
they co branded and built together back in twenty eighteen,
and I guess Kroger pulled out of it or what
(15:11):
have you, and she's claiming millions of dollars of damages
and suing Kroger. I took a look at the stock
chart at Kroger this morning. I mean it's trading at
her near all time highs. So I think, what's happening
here is my wife. I see the amount of grocery
bags that come into my home. Heck, well, Kroger, I'm
(15:32):
going to put my money on my wife to prop
up the stock price of Kroger over any lawsuit from
Jewel who I don't even know. Helped me out here,
Amy Okay.
Speaker 1 (15:42):
So Kruger was looking in twenty eighteen to start a
wellness festival and kind of get their name out there
and a presence in that space. I have been to
this over the course of the last few years. It
was canceled last year because of terrible weather. But they
bring in me your celebrity names from all over the place,
(16:02):
They do panels, they give away lots of free stuff.
It's a really cool event. And when they were coming
up with this for the first time. Somehow their paths
did cross with Jewel, and she said, listen, I'm gonna come.
I'm gonna do this. Don't pay me for it. I
want part ownership of this festival moving forward. Then Kroger
decided to part ways with Jewel later on, and now
she's suing them. Is that going to drop the stock price?
(16:25):
Probably not. I mean to your point, Bob, these headlines
are out right now and Kroger's currently trading at all
time highs. But let's dig a little bit deeper here,
because also recently in the headlines, we had a major
shakeup and the leadership of Quoger. This one surprised me.
CEO Rodney McMullen had been there forever for a long time,
(16:48):
and this is a guy whose steelry is he started
out as a bad boy within Kroger at the end
of the checkout lines and now he's the CEO. And
then we recently heard he stepped out pretty much overnight.
Speaker 2 (17:04):
Yeah, And I think the point here is things do
come out of left field. And I think the point
you're trying to make here, and all joking aside, it's
a great one. If you've got a highly concentrated position
in any company you know, like Kroger, like Procter and Gable,
like anything that you love, and it's gone up for
years and it's at at or near all time highs.
(17:26):
Periodically take an opportunity to trim some of those gains
so that your overall allocation doesn't get too out of
whack and too skewed to any of these companies because
things can and do happen, and some news will move
the stock. Other news will not move the stock. But
you don't want to be left, you know, watching a
(17:47):
twenty to thirty percent decline and read the story two
weeks later, and wonder what happened, you know, and so
be proactive on taking advantage of opportunities to diversify your portfolio.
Speaker 1 (18:00):
Yeah, I mean looking forward right this Friday, This is
when McMullen is supposed to give some deposition at a
law firm downtown this Friday about what happened. And we
don't know. All we know is that Kroger said, listen,
it violated some code of conduct. It has nothing to
do with the financials of this company. Everyone has been
incredibly tight lipped, but as information about this likely will
(18:23):
inevitably come out, that could change things. I'm not saying
it will listen. Several several years ago, I got really
nervous for Kroger. This is when Amazon announced that they
were coming into the grocery space by buying Whole Foods,
and I thought, oh, this is going to be bad.
Kloger was so resilient during that time, made such smart moves,
(18:44):
got into every time I drive into my neighborhood, there
are Kroger Drugs delivering groceries to people's houses. They were
really smart, got into that space quickly and built it up.
This is a company that I think man for the
long term, absolutely great company, but we don't know what's
going to happen from day to day on any company
that we love. Right, we also see Procter and Gamble.
(19:07):
A lot of people coming into our offices with concentrated
positions and Procter and Gamble. I've seen Medpace right, great
local companies that are absolutely growing. But anything can come
from out of left field, and so I think as
an investor it's really important to understand, Yeah, can I
own part of it? But we would say reasonably maybe
ten percent of your overall portfolio is made up of
(19:30):
any individual's doc and beyond that, let's get some diversification
in here.
Speaker 2 (19:36):
Well in The good news is we've got strategies and
ways to do this without subjecting people to huge capital
gains exposure. And we've talked about some of that in
the past, and we'll get into that in future segments.
But there are ways yes to responsibly diversify yourself out
of these concentrated positions without writing a huge check to
(19:58):
the irs.
Speaker 1 (19:59):
Here's the advice a highly diversified portfolio. It's designed to
whether storms, random ones, even ones that occasionally batter your
favorite companies coming up next to what celebrities might be
able to teach us about estate planning. You're listening to
Simply Money, presented by all Worth Financial. Here on fifty
five KRC the talk station. You're listening to Simply Money
(20:23):
and presented by all Worth Financial. I Memi Wagner along
with Bob Sponseller, one of my favorite shows when I
was growing up. And I'm not going to do the
impression of Robin Leech, but oh please, I cannot even begin.
You can do it if you want to. Lifestyles of
the Rich and Famous. I mean, it was just amazing.
The yachts and the ways that they live. Well, we're
(20:44):
going to pivot that on its head tonight and we're
going to talk about death styles of the rich and famous.
Doesn't sound exciting, but I do think that when we
lose someone in the headlines that everyone knows and has
maybe followed their career for years, you can learn a
lot about state planning, what to do, what not to do.
So joining us tonight with this perspective on the death
(21:07):
styles of the rich and famous is of course our
state planning expert, Mark Reckman from the law firm of
Wood and Lamping. All right, Mark, we're just going to
let you take hold here.
Speaker 3 (21:16):
Well, you know, in my line of work, I sort
of track these things, and it's always interesting to see
someone famous that has died or has handled their estate
in an interesting way. Often what amuses me about this
is that these people have accumulated often a lot of money. Yeah,
just as often they've done little or nothing to plan ahead.
(21:38):
And one of the things that and some of them
plan ahead, but they don't plan ahead very well. These
people often have very complicated lives and very complicated relationships,
and of course it's reflected in their estate plan The
one that I want to talk about first is Anthony Boudain.
He's the guy who travels around and eats unusual items
on television. Yeah, and then he's been a factor on
(22:02):
TV for oh, I don't know what thirty years. He died.
This has been probably about ten years ago now. He
died and he left a will, and in his will
he had directed his executor to set up a trust
for his minor daughter. His daughter is no longer a minor,
but she was at the time, and the trust was
(22:24):
the last until she was twenty five or thirty. Now
that's a good move, especially considering the size of his estate.
According to the probate records, he was worth about sixteen
million dollars, but interestingly enough, only about one point two
million dollars of his estate actually went through probate. That's
good because what it means is that he worked with
(22:46):
his lawyer to find a more streamlined way to set
this trust up with a little less probate court involvement.
That saved a fair amount of time and money. Here's
the rub. He picked his estranged wife and put her
in charge of the trust, and I presume he did
that with full knowledge the problem was, of course, that
(23:06):
he was a strangeman his wife for good reasons, and
she was not the right person for doing that job,
and it created a great deal of stress and conflict
between his daughter and her mother actually, and of course
what that meant was that there was a lot of conflict. Now,
one of the interesting things about that estate is that
(23:27):
one of his largest assets, or one of his larger
surprise assets, was frequent flyer miles.
Speaker 1 (23:34):
I guess that makes sense, and he's traveling everywhere for.
Speaker 3 (23:36):
Work, that's right, And they do have value, as all
of us know who've used them. In his case, he
had millions of these miles, and under the laws, under
the rules of these frequent flier programs, sometimes you can
leave those in a will or a trust and lead
them to someone else. They're transferable. So one of the
things I have told my clients over the years is
(23:58):
that if you're the kind of person accumulates lots of
these miles, it's a good idea to familiarize yourself with
the rules of each one of those programs and figure
out a way that your miles don't die with you,
because they can be worth tens of thousands of dollars.
Speaker 1 (24:13):
You know, Mark, you're talking about this trust that Anthony
Bodain had. There are different kinds of trust and wondering
in this situation, what's what's the good kind of have?
What's the not so great kind of have?
Speaker 3 (24:26):
They're basically two kinds of trusts. They are testamentary trusts
and what we call living trust A testamentary trust is
one that's set up after your diet. It's set up
by your executor under the supervision of the probate court,
and they're commonly used for people with minor children because
they're commonly used in cases where you're not really expecting
(24:47):
to die while your child is still young, so younger
people are frequently using testamentary trusts. A living trust is
a trust that you set up while you're alive, and
as a result, it's already in place. When you die,
you transfer your funds into that trust. During your lifetime,
you control the trust yourself. You live off of the
(25:08):
assets that are in the trust, but at the time
of your death everything's already in place. As a result,
the trust is not supervised by the probate court. That
gives you a great deal of more flexibility. It's a
lot easier to operate. But it also means that there's
it's extra important when you set up a living trust
(25:29):
that you pick a trustee that you can rely on.
That might be a bank, that might be a trust company.
It might be a spouse, it might be a child.
But take someone who's well suited. Just because you love
them doesn't mean that they're going to be a good trust.
Trust manager what we call a trustee. A trustee has
to know how to invest money, or at least how
(25:49):
to hire someone who knows how to trust how to
invest money. They need basic accounting skills. They've got to
see to it the tax returns are filed. They have
to be good with paperwork, which is actually a skill.
I know we all laugh about that and how easy
and what a nuisance paperwork is, but actually it is
an individual skill and those who have it can get
(26:11):
along a lot better and get a lot more out
of their assets.
Speaker 2 (26:14):
Hey, Mark, I know you came equipped with several real
life stories, you know, from rich and famous folks. What's
another one? Another story, another estate planning story that has
really caught your eye.
Speaker 3 (26:26):
The one that I find interesting to me is Paul Newman.
You know, Paul Newman, of course, was the movie star
and race car driver, and he created a brand of
salad dressings Newman's Salad Dressings and salsas, and they actually
did pretty well. And interestingly enough, when he set this
thing up, he set up a charity and all of
the all of the this was a non profit, so
(26:50):
there was no stock. He didn't own it, but he
did set up this charity. He was the member of it,
and he elected the board and he elected the person
to run it, and it really did a great job.
He died in two thousand and eight and at that
point Newman's own that's what they called the company. All
of that was left to a private foundation that he created,
(27:12):
and that foundation still operates. Now Here was the rub
The IRS rules do not permit a private charity to
own one hundred percent of a commercial enterprise, and making
solid dressings and salsa is clearly a commercial enterprise. And
so the rationale is to prevent people from putting profitable
(27:33):
businesses into a foundation to avoid taxes. Now, that's not
what Newman was trying to do. He was trying to
do a good thing, and so as a result, nobody
wanted to enforce the law against Newman's Own because the
gesture was such a good gesture. So the Congress got
involved and they amended their tax rules, and they amended
(27:57):
the rule to create what they now called the new
Human Rule. And this is in the Internal Revenue Code,
section forty nine forty three G. And what that rule
says is that you can, in fact put a profitable
business into a foundation one hundred percent. But they've created
six special rules, special conditions, and of course the Newman's
(28:19):
Own meets all of these conditions. They have to own
all of the stock. The stock has to be acquired
by gift. All the income from the foundation must be
distributed to a charity each year, and it cannot be
controlled by the contributor. But I found that whole story
to be interesting and just.
Speaker 1 (28:36):
It is interesting, And I also think, Mark, we have
to take into account. If I don't get a state
planning right, there's not going to be the Wagoner rule.
It works for Paul Newman, it may not work for
the rest of us. So make sure that your estate
planning is in good shape. It is an act of love.
I always say this for your loved ones. Great insights
as always from our estate planning expert Mark Krakman from
(28:56):
the law form of wood and Lamping. You're listening to
Simply Money, presented by all Worth Financial here in fifty
five krs the talk station. You're listening to sim Blue Money.
If you some of my all Worth Financial I mem
Me Wagner along with Bob spawn sell Er. Do you
have a financial question? Maybe you and your spouse are
not on the same page, or it's just keeping you
(29:16):
up in the middle of the night. There's a red
button you can click on while you're listening to the show.
It's right there on the iHeart app. Record your question.
It's coming straight to us and we're getting straight to
your questions now. First question is from a niche In
Mason who wants to know what should I be watching
for as a sign that maybe all this volatility is easy.
Speaker 2 (29:38):
Well in each one thing that you can look at
and a lot of people look at this. I know
portfolio managers look at it. We look at it in
the Good News. It's very free and easy to look
at this, and it's called the vis symbol VIX. You
can pull this up on like Yahoo Finance. Look at
a chart of VIIx and what you'll find is the
(30:00):
daily fluctuation of the volatility index, and the volatility index
is something that stock options are priced off of every day.
So for example, during all this craziness over the last
seven to ten days, we saw the VIC spike into
the mid to high fifties, which was about the point
we were at during COVID. For example, as of this morning,
(30:22):
at least I looked at it. You know, when I
came into the office this morning, it was back down
to thirty one. Now does that mean the coast is clear?
Absolutely not. What you want is you want to see
that VIX just calm down and settle in and not
be spiking up and down. And it usually will sit
around the eighteen nineteen twenty range and not fluctuate a
(30:44):
whole lot. That's when you can know that, at least
for the time being, things have settled down a bit.
Speaker 1 (30:51):
I'm a little nervous though about why aniche is asking
this question. I'm wondering if the question is asked because
we pulled my out of the markets, and now we're
trying to figure out when volatility might stop to put
the money back in, and you know, the VIX or
no measure is going to tell us when the best
(31:12):
days and the market might be coming often on the
heels of the worst days. So I think, yeah, the
vix is a good thing to look at maybe over time,
to see have we settled and do we feel like
we've settled. But I really hope you're not making any
major money decisions based on when the volatility started or
when you think it might stop, because nobody has a
crystal ball.
Speaker 2 (31:31):
Well, it could also be that a niche is a
huge Jewel fan and she's just concerned about the short
term movement of Kroger stock. That could be it, too.
Speaker 1 (31:40):
Amy, I knew you were going to have to go
back to Jewel at some time in the show. I'm
just going to go straight to Dan and cattering now.
I listen to your podcast every day. It's incredibly helpful.
But you talk about tax loss harvesting, and I'm having
a really hard time understanding what that exactly is. Can
you please break it down for me? This is a
great question for Dan.
Speaker 2 (32:01):
Well, Dan, first of all, what you need to understand
is Amy and I get on here every day and
try to make these concepts as difficult to understand as possible,
so that you'll call us and hire us as your advisor.
Speaker 1 (32:13):
That's the opposite of what we do.
Speaker 2 (32:15):
Because you can't possibly do this and understand this on
your own. Dan. No, in reality, let's try to break
this down. During periods of volatility, different components of your
portfolio are going to go down in price. We've seen
that happen over the last couple weeks. One way to
take advantage of tax loss harvesting, let's just use a
(32:35):
broad index like the S and P five hundred. The
S and P five hundred drops goes down temporarily, but
we want to stay fully invested at all times. Like
we've talked about, Well, you can just swap out of
one S ANDP related ETF and go simultaneously into another one.
Stay fully invested, but you've harvested that tax loss to
(32:57):
use against future gains laid on. And the result of this,
over a reasonable period of time is you can make
the taxable the tax bill that you've got to pay
on your non IRA portfolio go down significantly because we
could constantly offset gains with losses and not have to
(33:19):
write the IRS a check at the end of the year.
Speaker 1 (33:21):
Yeah, this is an incredibly good strategy on tax efficiency.
And I find this is one that a lot of
investors miss. Right, you'll push money into that taxable account,
you'll you'll see it growing. But when you go to
take money out of that, right, you're gonna have to
pay long term capital gains on that. If you can
harvest losses and that you can be a lot more
(33:42):
tax efficient, uh in doing so. So this is a great,
really smart strategy, and it's not one that you got
to pull off on your own. This is a great
thing to partner with a fiduciary financial advisor and make
sure they're helping you figure out the best strategy for
this for you.
Speaker 2 (33:56):
All Right, here's one for you, Amy, because I know
you're actively involved in this time of strategy with you
with your clients. You know all the time, and you
talked about this John and Hyde park As. I'm thinking
about doing a Wroth conversion, but I don't know how
much to convert. How do you determine that number?
Speaker 1 (34:13):
I wake this question especially during this week. Right, we
just passed tax Day. So now we have your tax
returns for twenty twenty four, and that's a great place
to start, right, you can look at that, look at
your income from last year. We have a tool that
we use where we can look at what you spent
or what you had coming in last year, and then
(34:35):
set up another scenario for this year, look at the changes.
But essentially what it comes down to is how do
we fill up maybe your current tax brackets, give yourself
a little little wiggle room there at the top, and
then tell you what the bill might be to go
ahead and convert that money to a wroth. So it's
a great time to do roth conversions because in this
(34:56):
market volatility you converted a time when markets are down.
You're converting more shares at a cheaper price. But you've
got to do the calculation. This is not a do
it yourself, try this at home proposition. This is a
work with a fiduciary financial advisor. And then I also
say let's run this by your CPA. At the same time,
(35:17):
it's really smart to get several sets of eyes on
this before we trigger the strategy, which can be a
great strategy.
Speaker 2 (35:25):
Yeah, that's well said. Let's go to Pam and fort Wright.
Pam is asking, how do I know whether I should
take my pension as a lump sum or as an annuity.
Speaker 1 (35:35):
You can do some math on this first of all,
So there's a math component of this. There's also a
mirror component of this, which is know yourself and taking
a lump sum. If that means you're going to spend
it all at once, then you probably want to take
it over time as an annuity. So run the numbers
and know yourself. Coming up next, are you getting a
tax refund? How are you going to spend it? What
(35:58):
other Americans say they're going to do with all this
market volatility. Next, you're listening to Simply Money presented by
all Worth Financial. Here on fifty five KRC, the talk station.
You're listening to Simply Money presented by all Worth Financial.
I mean you, Wagner along with Bob's bawd seller. You
may check your bank account and in your future and
have significantly more or a few thousand more, maybe a
(36:21):
few hundred more than was sitting in there the day before,
in the form of your tax refund. Bob, I know
lots of people who the second they know exactly how
much is going to be hitting that account, they've already
mentally spent it. But people are saying they might do
something different with their money this year.
Speaker 2 (36:40):
Well, I know what I'm gonna do with mine. I'm
going to go out and buy six iPhones with different
colors on the back of the case, one for each
day of the week because these iPhones might go up
in price at any date because of these tariffs.
Speaker 1 (36:53):
Okay, that's what my teenagers might say or might be
a proponent of, But really they're not going out in buying,
at least they're not saying they're going to buy smartphones.
The National Retail Federation looked at, listen, what are people
planning on doing with their tax refunds? Half almost half,
so they're going to put their money this year toward savings.
Just a year ago it was less than a third.
(37:16):
So this is I think trending in the right direction.
We're not oh, what's the next big thing that we
can buy or that's going to fund our summer vacation.
It's let's make a longer term impact with this money.
Now people say they're going to do that, we'll see
if they actually do YEA one.
Speaker 2 (37:31):
Third respond also said they wanted to use their refund
reduced debt, compared with just twenty percent who said the
same thing a year ago. So you know, like these
numbers we were talking about with investor behavior during the
recent volatility. This if, to your point, Amy, if people
actually do what they say they're going to do, this
is good news. Clean up your balance sheet, lower your debt,
(37:53):
be lower your debt, be responsible. This is good, good
stuff to hear.
Speaker 1 (37:57):
But I'm going to throw something else out there, and
it is for those of you who look forward to
this tax refund every year and then decide what you're
going to do with it, you have to understand what
that money actually is. It is you gave the money
to Uncle Sam. Uncle Sam holds onto it for a
year for you, and then regifts it to you. Think
of what you could have done with that money instead
(38:18):
if you had invested it and retained control over it.
So I would say, rather than getting a tax refund,
maybe your goal should be either owing a little bit
of money or zero dollars. How do you get as
close to that as possible?
Speaker 2 (38:32):
Well, and for you folks out there that are not
already clients of Amy Wagner, you could have and should
use that refund to fully fund your health savings account.
Speaker 1 (38:42):
There you go. That's exactly a fantastic point, yes, but
really it's an understanding listen. If I'm getting a tax
return every year, it's probably not the way to look
at it. You know, you can file a new Form
W four with your employer adjust how much you're withholding
based on your specific tax situation. But understand, the goal
is not you give Oncle Sam as much money as
(39:04):
you possibly can and then wait for it to come
back to you. The goal is that you retain control
of your money and invest it the best way that
you see fit. Thanks for listening. Tune and tomorrow we
will talk about how to survive a bear market, broken
down by how old you are You've been listening to
Disimply Money, presented by all Worth Financial here on fifty
five KRC, the Talk station
Tonight, are you paying attention to what we would call
long standing rock solid investing principles even in the midst
of crazy market volatility. We've got some new numbers for you,
and I'm pretty excited about these. You're listening to Simply Money,
presented by all Worth Financial Ammy Wagner along with Bob Sponsor.
You know, Bobb, you are a longtime coach, baseball coach,
(00:27):
and I'm going to put this in your terms. You've
watched games before where your player you're liked. Did you
learn anything in practice? On the flip side, I'm sure
you've seen games where it's like, oh, yes, we practiced this,
and when it came down to it and emotions were
high and we were in a game, we executed flawlessly.
Speaker 2 (00:47):
Right.
Speaker 1 (00:48):
I like to think investors have been paying attention and practice.
Speaker 2 (00:52):
Yeah. And when you're coaching high school kids, Amy, you
get that every extreme and everything in between, emotions run high.
You've got a son that plays high school basketball right now,
so you know exactly what I'm talking about. I get it,
and you and I often get worried about what are
investors in general doing during times of volatility? What are
(01:14):
our clients doing? During this time, and we've got some
good news to share. Amy, before I get into it,
to me, the news we're about to share proves one
of two things. Either. Number one, millions of people are
listening to this show every night, which means you and
I deserve a big raise. People are doing what any
(01:36):
god fearing, red blooded Americans should have been doing last week,
and that's preparing to watch the Master's golf tournament.
Speaker 1 (01:44):
Which was coincidentally one of my favorite Masters tournaments of
all time. But yeah, they're focusing on the right things
and not the wrong things. Anecdotally, So you and I
are doing these shows in the midst of all this
market volatility, and really we have our finger on the
pulse of what our clients are doing. And I have
to say, I'm so impressed. Right, our clients are well educated,
(02:05):
they're smart long term investors, and they were not blowing
up our phones. They were not freaking out, they were
not walking up to the ledge saying take me out
of that. I had none of those calls. But now
we have some data in that shows it's not only
our smart all wor than clients clients, it's a lot
of smart long term investors. This data coming out of Vanguard,
(02:25):
and they tracked the behavior of their self directed clients. Right,
these are clients who are making their own decisions about
what they're putting into their investment accounts and their retirement
accounts in what they're taking out. And they looked specifically
at the time period between April third and April ninth, which,
if you will recall, was a little bit volatile.
Speaker 2 (02:47):
Yeah, and here's the great news. Only eight point four
percent of self directed traders executed trades on any of
those days. Yes, so they sat there, they stuck to
their plate. They either weren't paying attention or doing something else,
which I highly doubt, or they were sticking to their
you know, long term plan. Most investors who did make
(03:08):
trades during those days again we're talking about April third
through April ninth. Uh, they only traded on one of
those five trading days, and on a nearly five to
one margin. They were buying, not panic selling. So that's
all good news to hear.
Speaker 1 (03:24):
That's fantastic news. It's like, you know, you talk about
these things day in and day out, and you hope
that investors are getting it, because I do know they're
exposed to some crazy headlines recommending, you know, here's the
sector to be in this year, and this person says,
here's the top twenty stock picks of twenty twenty five ires.
That's what you're seeing in a lot of media places
(03:45):
where you're going for financial news and money advice, yet
you're not acting on that. You are looking at long
term kind of rock solid basic principles of how do
you build wealth over time? And according to this snow
app shot in time, investors are getting it right.
Speaker 2 (04:04):
We got some data from another big self directed you know,
investing firm too, Charles Schwab, and on April third, the
first day of big market losses, Schwab did log a
very busy day of trading, but most investors did not
panic sell at all. In fact, they were buying way
more than they were selling during that week. So that's
(04:26):
other good news, and that's why, you know, things rebounded,
and we've been saying it amy. I mean, in eight
and a half percent drop in the stock market, while unsettling,
it's not catastrophic, it's not disastrous disastrous, and it's in
fact slightly above the normal intra day entry year drop
(04:48):
of fourteen percent. Every single year you know going back
to nineteen twenty six. So this is this is not
you know, abnormal what we've seen.
Speaker 1 (04:58):
But if you're like me and can't remember what you
ate for lunch yesterday or where you parked your car
by the time you come back out from Kroger, you
may not remember exactly what happened during this week as
investors were making these decisions. Let me remind you Wednesday,
April second, this is when President Trump announced sweeping tariffs
on all countries. Right, we are moving forward to that.
(05:19):
In response to that, the next day, the DAL, Jones
shed nearly seventeen hundred points, SMP and NASDAK had their
worst day since twenty twenty. Think back twenty twenty. We
were entering into a global pandemic. Our economy was shutting down,
and we had a million unknowns on our platter. As investors.
(05:40):
Next day, April fourth, China, well, they start talking about
retaliatory tariffs. The DAL shed another twenty two hundred points.
The Nasdaq descended into a bear market, meaning down from reese,
down twenty percent from recent highs. Monday, the seventh, Trump
doubles down on tariffs, stock closed lower. The market slid
further on April eighth, right, and then let's get to
(06:03):
the ninth. This is when Trump paused most of all
of this tariff campaign. This is when many of us
exhaled an All three stock market indexes marked huge gains.
That is one week in the life of an investor.
It feels like what I'm talking about should have happened
over the course of one year, but that was just
one week. You're listening to simply Money presented by all
(06:23):
Worth Financial Immi Wagner along with Bob Spawnseller. How did
you react during this one week snapshot in time April
third through the following week when we were reacting on
the daily to new headlines, new developments, new panic in
the stock market. And what we're seeing from the data,
(06:44):
and this is from a number of large companies where
your investments are held, is that you really didn't panic.
You stayed the course. Less than ten percent of investors
even made changes buying or selling anything on those days.
This is fantastic news. If I was going to give
how investors responded a report, this is a solid, solid maybe.
(07:08):
And what we saw was people weren't necessarily panic selling,
they were buying. What were they buying Navidia number one
bought stock during that time, Amazon, Apple, Tesla. You know,
these are the companies that did drive the great returns
over the past couple of years, but also investors purchase
shares in indexed exchange traded funds. Maybe the learning here
(07:30):
is that if you were invested in individual stocks, too
much volatility, right, but now you're broadening your diversification over
say it's the S and P five hundred, the five
hundred biggest companies that are making up the American economy.
So hey, maybe some of these changes that were actually
seeing investors making during this time were in response to
what happened, but they were the best thing to do
(07:52):
as a longbuster.
Speaker 2 (07:53):
Yeah, it used to be back in the old days
when all we could buy were individual stocks and mutual funds.
You know, mutual funds trade at the end of the
trading day. You get the four o'clock closing price whether
you're buying or selling. And now with the advent of ETFs,
people can and do you know, make changes intra day
while the market is open. Both individual self directed investors
(08:15):
and our investment management team here at all Worth can
do that during the day, and they do do that
during the day as well, So all good things. You know,
we live to fight another day. Who knows what's going
to happen next week.
Speaker 1 (08:28):
Yeah, and you know, thinking about one of the recent
things we talked about was, hey, if you are moved
to do something because of fear or greed during this time,
here's a list of questions to ask yourself, right, you know,
am I making decision based on fear or greed? Or
is this smart? Long term strategy? Here from black Rock
(08:49):
right analysis the day did showed that investors were asking
themselves not what should I sell, but what should I buy?
Seeing this is the opportunity that legitimately it is as
a long term investor. I had someone in my office yesterday, Bob,
who said, I hope things continue to go down. I
don't mind if we see two thousand and seven, two
thousand and eight levels, because I also know what happened
(09:11):
after that. And I was thinking, wait, hold a second,
hold your tongue on that one.
Speaker 2 (09:15):
That's probably a guy that had a bunch of cash.
You know, he had a nice stash of cash and
he had a nice emergency fund built up, right, I
mean the old phrase cash is king.
Speaker 1 (09:25):
Yeah, an incredibly high risk tolerance, but also a strong
understanding of the fundamentals of the markets, how they work,
and how to take advantage of that as a long
term investor.
Speaker 2 (09:37):
Sounds like he has a great advisor exactly.
Speaker 1 (09:41):
I'm not necessarily saying, hey, let's get down to where
we were in seven O. I don't want to live
through that again, but I am. I feel really good
to see that investors are seeing, Hey, when markets are down,
this is really a sale and if I have money
on the sidelines, I can buy in get more shares
of these large companies that will find a way through
(10:03):
these tariffs, that will find a way to continue to
make money and will ultimately rebound from any volatility that
we're seeing right now.
Speaker 3 (10:11):
Yeah.
Speaker 2 (10:11):
I think this is a great reminder, and your meeting
with your client, you know, illustrates this. It's a great
time to remind folks to tune out the noise, tune
out all the headline clicks, and stick with your long
term financial plan and take it advantage of these short
term opportunities to buy low.
Speaker 1 (10:32):
Yeah, and then diversification, right, are you properly diversified? Seeing
that people are buying into these index ETFs makes me
feel really good. Diversification is not going to eliminate your risk,
but it is going to reduce the impact of one
area tanking. Right if tech was way up and then
tech goes way down, you're not necessarily exposed to all
of that downside because you're more diversified than that. And
(10:54):
then I think, listen, this is the message that investors
have gotten, and it is do not try to time
the market. Just going back to that week snapshot in time.
You don't have to look back any further than that
as an investor to say if you would panic to
pulled out of the markets right before President Trump announced
a ninety day reprieve on all of this, and markets
(11:15):
had their best day that we've seen as far as
a rebound in the history of the markets. Can you
imagine if you had made that decision the day before,
the night before, Bob, and then watch that rebound and
you were on the sidelines for it.
Speaker 2 (11:29):
Yeah, to use your baseball coach analogy, I'd be throwing
ball buckets against the back of the dugout. That's what
I'd be doing. Yeah, which I've done before. By the way,
I'm not proud of it.
Speaker 1 (11:40):
I'm sure you're speaking from experience there. Yes, yes, maybe
I might be throwing ball buckets, and you should because
that's a knee jerk reaction right to investing and it
didn't pay off in the long run. There's other things
that you can do right rebalancing when necessary, making sure
you've got proper cash reserves, putting that money in the
(12:01):
same amount on the same day every month. It's what
you're doing to your four oh one k likely it's
called dollar cost averaging. Some day's markets are going to
be down, some day's markets are going to be up.
But over time it's going to smooth out that volatility
and you're gonna get the money into the market. Here's
the all Worth advice listen, stay focused on your long
term goals, not short term market noise. Volatility is normal.
(12:25):
Discipline builds wealth, and apparently investors are getting that message
coming up next way. Having too much stock in one company,
even if it's one of our favorite local companies, could
be dangerous. We've got some examples for you to think through.
You're listening to Simply Money, presented by all Worth Financial
here on fifty five KRC the talk station. If you're
(12:48):
looking to simply Money presented by all Worth Financial Imi
Mei Wagner along with Bob's spawn Seller. If you can't
listen to our show every night, well there's a lot
going on, a lot of headlines out there. You don't
want to miss a thing. We've got a daily podcast
ask for you search simply Money. It's on the Iheard
app or wherever you find your podcast. And also maybe
you've heard something on here that you need to share
with a friend, Share our podcast with them. Straight ahead
(13:11):
at six forty three, we're taking lots of questions you
have about all of this market volatility. Is it a
good time for wealth conversions? And also what exactly is
tax loss harvesting? We talk about it, we'll explain it. Then. Okay,
we have some great companies headquartered right here in Cincinnati.
Huge fan of all of them. I'm born and raised here, Bob,
(13:33):
as are you. And these are teams that we always
root for, companies that we always root for. But I
also often see that maybe investors root a little too much.
And by that I mean maybe your paycheck is coming
from this company, and also you own a lot of
company stock. Great if that company is doing well, but listen,
anything can happen to any company at any point in time.
(13:57):
So today we're going to talk about Quoger. We're not
picking on Kroger. I love this company, but there have
been some situations recently that could impact investors in Kroger,
and I think it's important to talk through this kind
of is an overarching lesson of the risk you take
on if you own any concentrated positions in any companies,
(14:18):
regardless of which ones they are.
Speaker 2 (14:21):
Yeah in the headline, And this is I think the
point you're trying to make here, Amy, before we get
into it, is things can come out of left field
that no one ever saw coming that can cause volatility
in any stock. Here's here's the latest with Kroger. And
I don't even know who this person is. Amy, You're
gonna have to help me here. Jewel the singer is
suing Kroger. She's a Grammy nominated singer. Come on, I
(14:45):
don't know, I don't know anything.
Speaker 1 (14:48):
You're dating yourself here, responsory.
Speaker 2 (14:50):
I've already admitted I'm old, So I'm I'm trying to
make a point here. Okay, So she and her promotion
company are suing Kroger over this wellness themed festival that
they co branded and built together back in twenty eighteen,
and I guess Kroger pulled out of it or what
(15:11):
have you, and she's claiming millions of dollars of damages
and suing Kroger. I took a look at the stock
chart at Kroger this morning. I mean it's trading at
her near all time highs. So I think, what's happening
here is my wife. I see the amount of grocery
bags that come into my home. Heck, well, Kroger, I'm
(15:32):
going to put my money on my wife to prop
up the stock price of Kroger over any lawsuit from
Jewel who I don't even know. Helped me out here,
Amy Okay.
Speaker 1 (15:42):
So Kruger was looking in twenty eighteen to start a
wellness festival and kind of get their name out there
and a presence in that space. I have been to
this over the course of the last few years. It
was canceled last year because of terrible weather. But they
bring in me your celebrity names from all over the place,
(16:02):
They do panels, they give away lots of free stuff.
It's a really cool event. And when they were coming
up with this for the first time. Somehow their paths
did cross with Jewel, and she said, listen, I'm gonna come.
I'm gonna do this. Don't pay me for it. I
want part ownership of this festival moving forward. Then Kroger
decided to part ways with Jewel later on, and now
she's suing them. Is that going to drop the stock price?
(16:25):
Probably not. I mean to your point, Bob, these headlines
are out right now and Kroger's currently trading at all
time highs. But let's dig a little bit deeper here,
because also recently in the headlines, we had a major
shakeup and the leadership of Quoger. This one surprised me.
CEO Rodney McMullen had been there forever for a long time,
(16:48):
and this is a guy whose steelry is he started
out as a bad boy within Kroger at the end
of the checkout lines and now he's the CEO. And
then we recently heard he stepped out pretty much overnight.
Speaker 2 (17:04):
Yeah, And I think the point here is things do
come out of left field. And I think the point
you're trying to make here, and all joking aside, it's
a great one. If you've got a highly concentrated position
in any company you know, like Kroger, like Procter and Gable,
like anything that you love, and it's gone up for
years and it's at at or near all time highs.
(17:26):
Periodically take an opportunity to trim some of those gains
so that your overall allocation doesn't get too out of
whack and too skewed to any of these companies because
things can and do happen, and some news will move
the stock. Other news will not move the stock. But
you don't want to be left, you know, watching a
(17:47):
twenty to thirty percent decline and read the story two
weeks later, and wonder what happened, you know, and so
be proactive on taking advantage of opportunities to diversify your portfolio.
Speaker 1 (18:00):
Yeah, I mean looking forward right this Friday, This is
when McMullen is supposed to give some deposition at a
law firm downtown this Friday about what happened. And we
don't know. All we know is that Kroger said, listen,
it violated some code of conduct. It has nothing to
do with the financials of this company. Everyone has been
incredibly tight lipped, but as information about this likely will
(18:23):
inevitably come out, that could change things. I'm not saying
it will listen. Several several years ago, I got really
nervous for Kroger. This is when Amazon announced that they
were coming into the grocery space by buying Whole Foods,
and I thought, oh, this is going to be bad.
Kloger was so resilient during that time, made such smart moves,
(18:44):
got into every time I drive into my neighborhood, there
are Kroger Drugs delivering groceries to people's houses. They were
really smart, got into that space quickly and built it up.
This is a company that I think man for the
long term, absolutely great company, but we don't know what's
going to happen from day to day on any company
that we love. Right, we also see Procter and Gamble.
(19:07):
A lot of people coming into our offices with concentrated
positions and Procter and Gamble. I've seen Medpace right, great
local companies that are absolutely growing. But anything can come
from out of left field, and so I think as
an investor it's really important to understand, Yeah, can I
own part of it? But we would say reasonably maybe
ten percent of your overall portfolio is made up of
(19:30):
any individual's doc and beyond that, let's get some diversification
in here.
Speaker 2 (19:36):
Well in The good news is we've got strategies and
ways to do this without subjecting people to huge capital
gains exposure. And we've talked about some of that in
the past, and we'll get into that in future segments.
But there are ways yes to responsibly diversify yourself out
of these concentrated positions without writing a huge check to
(19:58):
the irs.
Speaker 1 (19:59):
Here's the advice a highly diversified portfolio. It's designed to
whether storms, random ones, even ones that occasionally batter your
favorite companies coming up next to what celebrities might be
able to teach us about estate planning. You're listening to
Simply Money, presented by all Worth Financial. Here on fifty
five KRC the talk station. You're listening to Simply Money
(20:23):
and presented by all Worth Financial. I Memi Wagner along
with Bob Sponseller, one of my favorite shows when I
was growing up. And I'm not going to do the
impression of Robin Leech, but oh please, I cannot even begin.
You can do it if you want to. Lifestyles of
the Rich and Famous. I mean, it was just amazing.
The yachts and the ways that they live. Well, we're
(20:44):
going to pivot that on its head tonight and we're
going to talk about death styles of the rich and famous.
Doesn't sound exciting, but I do think that when we
lose someone in the headlines that everyone knows and has
maybe followed their career for years, you can learn a
lot about state planning, what to do, what not to do.
So joining us tonight with this perspective on the death
(21:07):
styles of the rich and famous is of course our
state planning expert, Mark Reckman from the law firm of
Wood and Lamping. All right, Mark, we're just going to
let you take hold here.
Speaker 3 (21:16):
Well, you know, in my line of work, I sort
of track these things, and it's always interesting to see
someone famous that has died or has handled their estate
in an interesting way. Often what amuses me about this
is that these people have accumulated often a lot of money. Yeah,
just as often they've done little or nothing to plan ahead.
(21:38):
And one of the things that and some of them
plan ahead, but they don't plan ahead very well. These
people often have very complicated lives and very complicated relationships,
and of course it's reflected in their estate plan The
one that I want to talk about first is Anthony Boudain.
He's the guy who travels around and eats unusual items
on television. Yeah, and then he's been a factor on
(22:02):
TV for oh, I don't know what thirty years. He died.
This has been probably about ten years ago now. He
died and he left a will, and in his will
he had directed his executor to set up a trust
for his minor daughter. His daughter is no longer a minor,
but she was at the time, and the trust was
(22:24):
the last until she was twenty five or thirty. Now
that's a good move, especially considering the size of his estate.
According to the probate records, he was worth about sixteen
million dollars, but interestingly enough, only about one point two
million dollars of his estate actually went through probate. That's
good because what it means is that he worked with
(22:46):
his lawyer to find a more streamlined way to set
this trust up with a little less probate court involvement.
That saved a fair amount of time and money. Here's
the rub. He picked his estranged wife and put her
in charge of the trust, and I presume he did
that with full knowledge the problem was, of course, that
(23:06):
he was a strangeman his wife for good reasons, and
she was not the right person for doing that job,
and it created a great deal of stress and conflict
between his daughter and her mother actually, and of course
what that meant was that there was a lot of conflict. Now,
one of the interesting things about that estate is that
(23:27):
one of his largest assets, or one of his larger
surprise assets, was frequent flyer miles.
Speaker 1 (23:34):
I guess that makes sense, and he's traveling everywhere for.
Speaker 3 (23:36):
Work, that's right, And they do have value, as all
of us know who've used them. In his case, he
had millions of these miles, and under the laws, under
the rules of these frequent flier programs, sometimes you can
leave those in a will or a trust and lead
them to someone else. They're transferable. So one of the
things I have told my clients over the years is
(23:58):
that if you're the kind of person accumulates lots of
these miles, it's a good idea to familiarize yourself with
the rules of each one of those programs and figure
out a way that your miles don't die with you,
because they can be worth tens of thousands of dollars.
Speaker 1 (24:13):
You know, Mark, you're talking about this trust that Anthony
Bodain had. There are different kinds of trust and wondering
in this situation, what's what's the good kind of have?
What's the not so great kind of have?
Speaker 3 (24:26):
They're basically two kinds of trusts. They are testamentary trusts
and what we call living trust A testamentary trust is
one that's set up after your diet. It's set up
by your executor under the supervision of the probate court,
and they're commonly used for people with minor children because
they're commonly used in cases where you're not really expecting
(24:47):
to die while your child is still young, so younger
people are frequently using testamentary trusts. A living trust is
a trust that you set up while you're alive, and
as a result, it's already in place. When you die,
you transfer your funds into that trust. During your lifetime,
you control the trust yourself. You live off of the
(25:08):
assets that are in the trust, but at the time
of your death everything's already in place. As a result,
the trust is not supervised by the probate court. That
gives you a great deal of more flexibility. It's a
lot easier to operate. But it also means that there's
it's extra important when you set up a living trust
(25:29):
that you pick a trustee that you can rely on.
That might be a bank, that might be a trust company.
It might be a spouse, it might be a child.
But take someone who's well suited. Just because you love
them doesn't mean that they're going to be a good trust.
Trust manager what we call a trustee. A trustee has
to know how to invest money, or at least how
(25:49):
to hire someone who knows how to trust how to
invest money. They need basic accounting skills. They've got to
see to it the tax returns are filed. They have
to be good with paperwork, which is actually a skill.
I know we all laugh about that and how easy
and what a nuisance paperwork is, but actually it is
an individual skill and those who have it can get
(26:11):
along a lot better and get a lot more out
of their assets.
Speaker 2 (26:14):
Hey, Mark, I know you came equipped with several real
life stories, you know, from rich and famous folks. What's
another one? Another story, another estate planning story that has
really caught your eye.
Speaker 3 (26:26):
The one that I find interesting to me is Paul Newman.
You know, Paul Newman, of course, was the movie star
and race car driver, and he created a brand of
salad dressings Newman's Salad Dressings and salsas, and they actually
did pretty well. And interestingly enough, when he set this
thing up, he set up a charity and all of
the all of the this was a non profit, so
(26:50):
there was no stock. He didn't own it, but he
did set up this charity. He was the member of it,
and he elected the board and he elected the person
to run it, and it really did a great job.
He died in two thousand and eight and at that
point Newman's own that's what they called the company. All
of that was left to a private foundation that he created,
(27:12):
and that foundation still operates. Now Here was the rub
The IRS rules do not permit a private charity to
own one hundred percent of a commercial enterprise, and making
solid dressings and salsa is clearly a commercial enterprise. And
so the rationale is to prevent people from putting profitable
(27:33):
businesses into a foundation to avoid taxes. Now, that's not
what Newman was trying to do. He was trying to
do a good thing, and so as a result, nobody
wanted to enforce the law against Newman's Own because the
gesture was such a good gesture. So the Congress got
involved and they amended their tax rules, and they amended
(27:57):
the rule to create what they now called the new
Human Rule. And this is in the Internal Revenue Code,
section forty nine forty three G. And what that rule
says is that you can, in fact put a profitable
business into a foundation one hundred percent. But they've created
six special rules, special conditions, and of course the Newman's
(28:19):
Own meets all of these conditions. They have to own
all of the stock. The stock has to be acquired
by gift. All the income from the foundation must be
distributed to a charity each year, and it cannot be
controlled by the contributor. But I found that whole story
to be interesting and just.
Speaker 1 (28:36):
It is interesting, And I also think, Mark, we have
to take into account. If I don't get a state
planning right, there's not going to be the Wagoner rule.
It works for Paul Newman, it may not work for
the rest of us. So make sure that your estate
planning is in good shape. It is an act of love.
I always say this for your loved ones. Great insights
as always from our estate planning expert Mark Krakman from
(28:56):
the law form of wood and Lamping. You're listening to
Simply Money, presented by all Worth Financial here in fifty
five krs the talk station. You're listening to sim Blue Money.
If you some of my all Worth Financial I mem
Me Wagner along with Bob spawn sell Er. Do you
have a financial question? Maybe you and your spouse are
not on the same page, or it's just keeping you
(29:16):
up in the middle of the night. There's a red
button you can click on while you're listening to the show.
It's right there on the iHeart app. Record your question.
It's coming straight to us and we're getting straight to
your questions now. First question is from a niche In
Mason who wants to know what should I be watching
for as a sign that maybe all this volatility is easy.
Speaker 2 (29:38):
Well in each one thing that you can look at
and a lot of people look at this. I know
portfolio managers look at it. We look at it in
the Good News. It's very free and easy to look
at this, and it's called the vis symbol VIX. You
can pull this up on like Yahoo Finance. Look at
a chart of VIIx and what you'll find is the
(30:00):
daily fluctuation of the volatility index, and the volatility index
is something that stock options are priced off of every day.
So for example, during all this craziness over the last
seven to ten days, we saw the VIC spike into
the mid to high fifties, which was about the point
we were at during COVID. For example, as of this morning,
(30:22):
at least I looked at it. You know, when I
came into the office this morning, it was back down
to thirty one. Now does that mean the coast is clear?
Absolutely not. What you want is you want to see
that VIX just calm down and settle in and not
be spiking up and down. And it usually will sit
around the eighteen nineteen twenty range and not fluctuate a
(30:44):
whole lot. That's when you can know that, at least
for the time being, things have settled down a bit.
Speaker 1 (30:51):
I'm a little nervous though about why aniche is asking
this question. I'm wondering if the question is asked because
we pulled my out of the markets, and now we're
trying to figure out when volatility might stop to put
the money back in, and you know, the VIX or
no measure is going to tell us when the best
(31:12):
days and the market might be coming often on the
heels of the worst days. So I think, yeah, the
vix is a good thing to look at maybe over time,
to see have we settled and do we feel like
we've settled. But I really hope you're not making any
major money decisions based on when the volatility started or
when you think it might stop, because nobody has a
crystal ball.
Speaker 2 (31:31):
Well, it could also be that a niche is a
huge Jewel fan and she's just concerned about the short
term movement of Kroger stock. That could be it, too.
Speaker 1 (31:40):
Amy, I knew you were going to have to go
back to Jewel at some time in the show. I'm
just going to go straight to Dan and cattering now.
I listen to your podcast every day. It's incredibly helpful.
But you talk about tax loss harvesting, and I'm having
a really hard time understanding what that exactly is. Can
you please break it down for me? This is a
great question for Dan.
Speaker 2 (32:01):
Well, Dan, first of all, what you need to understand
is Amy and I get on here every day and
try to make these concepts as difficult to understand as possible,
so that you'll call us and hire us as your advisor.
Speaker 1 (32:13):
That's the opposite of what we do.
Speaker 2 (32:15):
Because you can't possibly do this and understand this on
your own. Dan. No, in reality, let's try to break
this down. During periods of volatility, different components of your
portfolio are going to go down in price. We've seen
that happen over the last couple weeks. One way to
take advantage of tax loss harvesting, let's just use a
(32:35):
broad index like the S and P five hundred. The
S and P five hundred drops goes down temporarily, but
we want to stay fully invested at all times. Like
we've talked about, Well, you can just swap out of
one S ANDP related ETF and go simultaneously into another one.
Stay fully invested, but you've harvested that tax loss to
(32:57):
use against future gains laid on. And the result of this,
over a reasonable period of time is you can make
the taxable the tax bill that you've got to pay
on your non IRA portfolio go down significantly because we
could constantly offset gains with losses and not have to
(33:19):
write the IRS a check at the end of the year.
Speaker 1 (33:21):
Yeah, this is an incredibly good strategy on tax efficiency.
And I find this is one that a lot of
investors miss. Right, you'll push money into that taxable account,
you'll you'll see it growing. But when you go to
take money out of that, right, you're gonna have to
pay long term capital gains on that. If you can
harvest losses and that you can be a lot more
(33:42):
tax efficient, uh in doing so. So this is a great,
really smart strategy, and it's not one that you got
to pull off on your own. This is a great
thing to partner with a fiduciary financial advisor and make
sure they're helping you figure out the best strategy for
this for you.
Speaker 2 (33:56):
All Right, here's one for you, Amy, because I know
you're actively involved in this time of strategy with you
with your clients. You know all the time, and you
talked about this John and Hyde park As. I'm thinking
about doing a Wroth conversion, but I don't know how
much to convert. How do you determine that number?
Speaker 1 (34:13):
I wake this question especially during this week. Right, we
just passed tax Day. So now we have your tax
returns for twenty twenty four, and that's a great place
to start, right, you can look at that, look at
your income from last year. We have a tool that
we use where we can look at what you spent
or what you had coming in last year, and then
(34:35):
set up another scenario for this year, look at the changes.
But essentially what it comes down to is how do
we fill up maybe your current tax brackets, give yourself
a little little wiggle room there at the top, and
then tell you what the bill might be to go
ahead and convert that money to a wroth. So it's
a great time to do roth conversions because in this
(34:56):
market volatility you converted a time when markets are down.
You're converting more shares at a cheaper price. But you've
got to do the calculation. This is not a do
it yourself, try this at home proposition. This is a
work with a fiduciary financial advisor. And then I also
say let's run this by your CPA. At the same time,
(35:17):
it's really smart to get several sets of eyes on
this before we trigger the strategy, which can be a
great strategy.
Speaker 2 (35:25):
Yeah, that's well said. Let's go to Pam and fort Wright.
Pam is asking, how do I know whether I should
take my pension as a lump sum or as an annuity.
Speaker 1 (35:35):
You can do some math on this first of all,
So there's a math component of this. There's also a
mirror component of this, which is know yourself and taking
a lump sum. If that means you're going to spend
it all at once, then you probably want to take
it over time as an annuity. So run the numbers
and know yourself. Coming up next, are you getting a
tax refund? How are you going to spend it? What
(35:58):
other Americans say they're going to do with all this
market volatility. Next, you're listening to Simply Money presented by
all Worth Financial. Here on fifty five KRC, the talk station.
You're listening to Simply Money presented by all Worth Financial.
I mean you, Wagner along with Bob's bawd seller. You
may check your bank account and in your future and
have significantly more or a few thousand more, maybe a
(36:21):
few hundred more than was sitting in there the day before,
in the form of your tax refund. Bob, I know
lots of people who the second they know exactly how
much is going to be hitting that account, they've already
mentally spent it. But people are saying they might do
something different with their money this year.
Speaker 2 (36:40):
Well, I know what I'm gonna do with mine. I'm
going to go out and buy six iPhones with different
colors on the back of the case, one for each
day of the week because these iPhones might go up
in price at any date because of these tariffs.
Speaker 1 (36:53):
Okay, that's what my teenagers might say or might be
a proponent of, But really they're not going out in buying,
at least they're not saying they're going to buy smartphones.
The National Retail Federation looked at, listen, what are people
planning on doing with their tax refunds? Half almost half,
so they're going to put their money this year toward savings.
Just a year ago it was less than a third.
(37:16):
So this is I think trending in the right direction.
We're not oh, what's the next big thing that we
can buy or that's going to fund our summer vacation.
It's let's make a longer term impact with this money.
Now people say they're going to do that, we'll see
if they actually do YEA one.
Speaker 2 (37:31):
Third respond also said they wanted to use their refund
reduced debt, compared with just twenty percent who said the
same thing a year ago. So you know, like these
numbers we were talking about with investor behavior during the
recent volatility. This if, to your point, Amy, if people
actually do what they say they're going to do, this
is good news. Clean up your balance sheet, lower your debt,
(37:53):
be lower your debt, be responsible. This is good, good
stuff to hear.
Speaker 1 (37:57):
But I'm going to throw something else out there, and
it is for those of you who look forward to
this tax refund every year and then decide what you're
going to do with it, you have to understand what
that money actually is. It is you gave the money
to Uncle Sam. Uncle Sam holds onto it for a
year for you, and then regifts it to you. Think
of what you could have done with that money instead
(38:18):
if you had invested it and retained control over it.
So I would say, rather than getting a tax refund,
maybe your goal should be either owing a little bit
of money or zero dollars. How do you get as
close to that as possible?
Speaker 2 (38:32):
Well, and for you folks out there that are not
already clients of Amy Wagner, you could have and should
use that refund to fully fund your health savings account.
Speaker 1 (38:42):
There you go. That's exactly a fantastic point, yes, but
really it's an understanding listen. If I'm getting a tax
return every year, it's probably not the way to look
at it. You know, you can file a new Form
W four with your employer adjust how much you're withholding
based on your specific tax situation. But understand, the goal
is not you give Oncle Sam as much money as
(39:04):
you possibly can and then wait for it to come
back to you. The goal is that you retain control
of your money and invest it the best way that
you see fit. Thanks for listening. Tune and tomorrow we
will talk about how to survive a bear market, broken
down by how old you are You've been listening to
Disimply Money, presented by all Worth Financial here on fifty
five KRC, the Talk station
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