Money Talk with Carl Stuart

Market uncertainty tops the show with a look at whether and how to buy gold. Carl chats with callers and texters about US Treasuries in the current climate, the “right” mix of bonds in portfolios – and at what age you shift that mix. As well as using 529 plans or cash to pay for college while those 529s are lower and more.

The full transcript of this episode of Money Talk with Carl Stuart is available on the KUT & KUTX Studio website. The transcript is also available as subtitles or captions on some podcast apps.

[KUT] This is Money Talk with [Carl] Stuart. [Carl] Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s [Carl].

[Carl] Good afternoon and welcome to Money Talk. I’m [Carl] Stuart and you’re listening to KUT 90.5 and KUT.org. Welcome now in our 31st year here together, but our second week on KUT, I’m thrilled to be here. This is a broadcast about the world of financial and investment planning where you determine all of our agenda by calling or texting.

It’s always a terrific idea to call or text at the beginning of the hour, giving me a better chance to do my best to answer your questions. My rule is I take today’s calls first and then today’s texts, and then any texts from previous weeks that I have been unable to answer.

So, let’s get started. And a text come in, and it actually asks a rather interesting question.

[text message] [Carl], what are your thoughts on where gold goes from here? So, I’m going to answer your question, but I think it needs some context.

So, I’ve been around this investment and financial world for over 46 years. and early in my career, Gold Peak. uh… in nineteen eighty and it really was a terrible investment for years and years and years. And the only people that i saw who really recommending buying gold were also suggesting that you needed to build a shelter or move to the forest and get a shotgun and dehydrated food.

But uh… several years ago I started encountering people that I had high regard for portfolio managers, asset managers. who talked about the role of gold in an overall portfolio. And there’s been a big change in the way you and I can invest in gold. And I think it’s really been a huge positive. So back in the day when I was new in this endeavor, you either owned the bullion or the coins or the mining stocks. The bullion is really bulky and illiquid and you can’t slice off a piece. And the coins are expensive. because you’ve got to pay for the fact that there was a minting cost, and then you’re going to pay a high transaction fee.

Several months ago, I called five gold dealers in central Texas, and they were charging 10% to the price to buy or 10% of the price to sell, and that’s really expensive. And then you could buy the gold mining stocks or mutual funds or exchange traded funds that owned those stocks. but there’s not a one-to-one relationship between the price of gold and the mining companies.

And it’s a little bit like the energy business. Some energy companies have lower costs of production, others have higher. It’s the same way with gold. So one company might be profitable at $2,000 an ounce, and another one might not be profitable until $2500 an ounce. Plus, it’s been my experience that when we’re in a bull market for gold like we are now, frequently the gold mining stocks will do better than the metal. but in bear markets, it’ll do worse.

Along came exchange traded funds, technically exchange traded trusts, and there are two very large ones, and they own the actual gold, but they trade on a daily basis, frankly on a month, a minute-to-minute basis, and they’re quite inexpensive to own.

I never make recommendations on Money Talk. I’m just identifying these. I’m not telling you what to do. So, you can buy the symbol #GLD. which has an expense ratio of 0.40, or you can buy the symbol #IAU, which has and expense ratio 0.25, or if you add an M, M as in mini, to either of those, you get an even lower price share.

So now to your question. Gold has a lot of momentum. The moves in gold have been multiple years in duration. That’s not only up, but also down. — [sound] By the way, Jimmy and I were talking about this. You can hear those texts coming in, so thanks! — I would tell you there’s so much momentum behind gold that I think it has a considerable way to go. However, having said that, as far as I’m concerned, it’s in my portfolio — excuse me— it’s my portfolio, frankly, as kind of a hedge.

So, there are periods of time where stocks do poorly and bonds do poorly, not very often simultaneously as they did this week, but that happened in 2022. Bond index was down about 12 percent, the S&P was down over 20 percent, and the IAU was down 0.63, making that a real contributor to return. So, I think it belongs in a diversified portfolio, and personally I think that it has room to go.

Thanks for the text. You’re listening to Money Talk on KUT 90.5 and KUT.org.

[text message] [Carl], what is the U.S. exposure to a sell-off of treasuries owned by China cratering the value and the liquidity of the bond market?

I’m not gonna say it’s never gonna happen, but I would tell you that while they own a significant piece, they’re not the majority holder, certainly the Japanese and other central banks are. And it would also be really deleterious to the Chinese because it would really trash their balance sheet if they sold all of those holdings and the treasuries, as a result of that, crashed. That would be a huge self-inflicted wound. So, I really don’t worry about that. I understand the concern and I’m not suggesting that it’s not plausible, but I don’t think that that’s likely to happen.

Thanks.

[text] [Carl], as a long-time listener, I wish you the best going forward on KUT. Thank you. Question, please explain to us why in the current crisis Treasury bonds are going up in yield and down in price. Also, as I just mentioned, also I have about 15% of my retirement assets in a three-way split of bonds between ultra-short, core, and active multi-sector with the goal of preserving capital. So far, the decline in bond prices has been minimal for me, but are bonds still a safe haven looking forward?

Boy, that’s a terrific question. So, what happened in this crazy week? After the president announced on the 2nd of April his liberation day and the stock market absolutely collapsed, what occurred was people began to be concerned about inflation and that would cause rates to rise.

The other thing that happened that’s much more a mechanics of the market, there’s always a lot of debt and leverage participants. in the global stock markets. And so, we’d had a very good year in 2024, and there was a lot of leverage in stocks, particularly in the best performers with names like Nvidia. And when things started to go south, those leverage bets didn’t work, and those people became for sellers. And they had to look at what to sell, and they had collateral, usually in treasuries.

So, there was some forced selling of treasuries. There was also global concern that there could be rising inflation as a result of the Trump tariffs and those two things led to it.

Now you’ve asked a great question and I can tell you’re a long-time listener because you and I agree on a bond portfolio. So let me just spend a few minutes on this because I think it’s really important.

So, I’m a big fan of actively managed bond funds. I’m less a fan of actively managed stock funds and, as a result of that, I tend to own three different kinds of bond funds. And here I’m talking using Morningstar categories. One would be an ultra-short bond fund. These are all investment-grade bond funds. They’re all taxable bond funds and so it’s ultra-Short. And then a core bond fund, which is generally very close to the index, which is the Bloomberg AG. And then, a multi-sector, which as the name implies, can go about anywhere, whether it’s domestic or foreign. and can move its maturities and durations around. And to your point, looking today through what’s happened so far year to date, I see that the AG or the index, I’m using the iShares AGG, is up 1.12%. The ultra-short is, let’s see here, it was up 0.81, the core’s up 1.16, slightly above the AG, and the multi-sector. was up — let me see what that is as well — it was up 0.89. So, you’re right. Bonds have actually so far, even though they were hurt this week on a year-to-date basis when you consider that the S&P 500 using the ETF SPY is down 8.6% and the NASDAQ using Fidelity’s ONEQ is down 13%. But the kind of bond prices has been minimal for you.

Do I still think there is safe haven looking forward? I think the answer is yes. I think if you stay with investment grade, I still think that they are, and treasuries are a safe haven. I think that the risk in bonds today is the risk of stagflation, where we have the possibility of both a recession and rising inflation.

And then the question becomes, how will the Federal Reserve respond to that? Because the Federal reserve has a dual mandate, as we know. which is to keep inflation at a moderate pace and also have what they refer to as full employment. Most economists believe that when push comes to shove, if the treasury had to choose, they would choose the full employment over the inflation. They don’t want to do either, of course, but if they get enough data that we’re in a recession and unemployment is rising sharply. they’re likely to lower rates. So I think the risk of falling bond price as well is never out of the question. I think that risk of fall in interest rates, if that’s a risk, is a little bit greater.

Thanks for the text. You’re listening to Money Talk on KUT 90.5 and KUT.org.

Hi, you’re on the air, how may I help? I thought this was a call.

[caller] Yeah, yeah

[Carl] Okay, great, how may I help?

[caller] uh… last week uh… i don’t know uh… building that you gave me five I’ll shut up your portfolio. I did indeed. How can I get a copy of that?

[Carl] I’ve got good news for you. We’ve just set up a landing page that will let you go and listen to last week’s show. So here it is, it’s kut.org slash money talk. I’ll say that again, kut dot org forward slash money Talk. And I just heard about this before we went on the air today. So that’s where you can go. and listen to my five minute dissertation.

[caller] well my great i agree everything thank you all but or it it’s like and a couple of original for So you don’t have this written down at your firm.

[Carl] No, no, that’s off the top of my head from 46 years of trial and error.

[caller] Okay, and you you are you with?

[Carl] Okay, I usually don’t do this, but you asked directly you deserve to know so it’s it’s Stuart Investment Advisors. And there’s a lot there’s the landing page where you can go StuartAdvisors.com and you can see it there.

[caller] Yeah, okay. Well, is that in Austin? Okay, and awesome.

[Carl] Okay, you bet. Thanks for calling. Time for me to take a break. It’s a good time for you to call or text.

[KUT] This is Money Talk with [Carl] Stuart. Now, here’s [Carl].

[Carl] [Welcome back. I’m Carl Stuart and you’re listening to Money Talk on KUT 90.5 and kut.org. When you have a question, call or text. Here’s a text.

[text] Carl, my parents are looking to retire and given the turmoil in bond markets, We are looking for risk-free alternatives. Any suggestions with high returns that will beat inflation?

Well, the answer, the short answer is based on history, no. If you think about three major asset classes, you’ve got cash, bonds, or the fancy term fixed income, or stocks, the fancy-term equities. So, when you think this through, each of these has pros and cons. So, cache It has what we call nominal safety because the principle doesn’t change if it’s in your savings account or a money market account at your bank or a CD at your credit union. Well, that’s safe, right? The answer is over time, no, it’s not because the value is eroded by inflation and any income you get from it is eroding by inflation but it’s nominally safe. And you’re talking about your parents and so, I don’t know how old they are, but my experience is, some older people are uncomfortable with fluctuation in value.

So, if that’s the case, in today’s current environment, where short-term interest rates are relatively high compared to they have been for many years, I would look at a money market fund. That’s not a money-market account.

If you have an advisor, ask her. If you don’t, you can go to Charles Schwab, Vanguard, Fidelity. and look at their web page and look at money market funds, there are three types. The generic terms are prime and government and treasury. The prime invest in high grade corporate securities. The government invest in US treasuries and government agencies like Fannie Mae and Freddie Mac. And the treasuries invest in only treasuries.

While these are technically and actually and legally mutual funds. They don’t fluctuate in value. They sustain the net asset value at $1 per share, and there’s no charge to get in or charge to out. Now, nobody works for free, so there’s expenses associated with it, but the yield that you see quoted is the yield after those expenses.

Is this a fixed rate? The answer is no, it’s not. And the reason is if short-term interest rates rise, as they have, then over time, rates will return on. the money market fund will rise as well. If short-term rates fall, which they may well do in the next year or so, the returns will fall as well, but if you have to have nominal safety, a money market funds would be a place to go.

If they have a lot of money and they really don’t wanna have risk, then I would consider a CD ladder or a treasury ladder. By that I mean, let’s just use an example. Let’s suppose they have $100,000. You put $25,000 in a one-year. a two year, a three year, and a four year, or a six month, a 12-month, an 18-month, and 24-month. Usually, not always, the longer-term ones will have more yield than the shorter ones. They don’t need this money to live on. When that first one comes due a year from now, buy a new four year because last year’s four year is now a three-year. That’s a CD ladder. You can also do that with bonds. You can do that with treasuries. If you can check with your advisor or if you do this on your own, you could go to the same place as I mentioned. Now, in the long run, stocks are the place to be, but that just may be inappropriate for them. Thanks for the text.

You’re listening to Money Talk on KUT 90.5 and KUT.org. Okay, here’s another one.

[text] What is the best way for a young person teenager to invest their money?

So, this is a great question, and let me just get on my soapbox and say that if everybody started as a teenager, then the average American would be in a lot better financial shape.

What I would do is – presumably they don’t have all the money they’re going to invest – I’d set up an account first if you’re a do-it-yourself investor. Then you must have a relationship with like the name I usually use – I’m not recommending – Charles Schwab, Vanguard, Fidelity. They all have index stock index funds, a fund that will follow the SMP 500, a fund that will follow the Nasdaq, a fund that will follow the total stock market.

My personal favorite is the total stock market the one at Vanguard Symbol VTI. Not making a recommendation, but then your teenager could put the money in, because she or he has such a long time to invest.

When you look over just the full scope of American history, the two investments that actually outpace inflation are income producing real estate. That’s not a residential house, income producing real estate and common stocks, cuz you’re investing in common stocks which is human ingenuity. And I feel really good about that. So that’s how I would start.

Also, if they become really interested as a gift, I would buy a teenager a subscription to the Wall Street Journal. Because if you take the Wall Street Journal and all you do is read the headlines of the stories and then the articles that interest you are the first few paragraphs. Over a period of weeks and months, you will be shocked at how much you will learn and how much more knowledgeable you will be about what’s happening in the world. So thanks for the text.

You’re listening to Money Talk on KUT 90.5 and KUT.org.

We’ve got about two minutes till the break and I see that we have a caller and I don’t wanna have to close him or her down. So I’m going to move here to a text.

[text] Would you advise to currently not use a 529 plan for college expenses right now and use them for year three and four college tuition for a daughter at UT?

You know, I think if I had the ability to not tap the 529 plan now, that that probably makes a lot of sense. Because, and of course, I’m having to guess about how the 529 plan is invested, but if it’s invested primarily in stocks, as we know, every year out of every, every, once every three or four years, the stock market has a bad year. It had a bad year in 2022, so that’s less than three years ago. So that could happen. So, I like the idea of postponing it and taking your own cash reserves to fund it and giving it more time. So, I think that’s something that I would consider doing.

You’re listening to Money Talk on kut.org and kut90.5. Let’s just see here.

[text] Hi, Carl, I’m about 15 years from retiring. and still maintain a diversified 80% 20% stock bond split portfolio. I know that I should start getting more conservative as I reach retirement, but I still feel fairly comfortable with taking a little more risk. Would you recommend I shift the makeup in my portfolio sooner rather than later?

Well, it’s a great question, and we’re gonna take the news break at the bottom of the hour, and when I come back, I will answer that.

[KUT] This is Money Talk with [Carl] Stuart. Now, here’s Carl.

[Carl] Welcome back to Money Talk. A little growing pain here on KUT 90.5 and KUT.org. For 30 years, I had to take a break at the bottom of the hour for the news, and thank goodness I don’t have to do that here, so I’ll remember that next Saturday. You’re listening to Money talk on Kut 90. 5 and Kut.org. Because I’ve got calls now, I’m not gonna go to that text, because as you know, my policy is to take on the air calls first.

Hi, you’re on the Air with Carl, how may I help?

[caller] I have one 401k from a previous employer that I worked for for 20 years and I haven’t worked for them for 10 years and that has always performed fairly good, I like my pie. On my statement, it still lists the company that I used to work for and my name.

[Carl]] Yes.

[caller] and I also have some retirement with my current employer and a pension. I’m in a state system with CIA crap. So it’s a sort of a two-part question. Is it smart to merge those so that there is more money in just one big pool? But then the more concerning question is that original 401k with the original company. I’m concerned that that company is kind of falling apart and do I have any risk of being attached to that company name still being attached to that account?

[Carl] That’s a great question. So for everybody else, back in the day, a lot of companies offered what are called defined benefit pension plans, like TRS, for example, or ERS, hardly any of that exists in the private sector, but 401K plans, which are called defined contribution plans, are very, very popular. And if that company were to fail, for examples, to file bankruptcy, Your 401k would not be part of that. It is segregated, it is not on the company’s balance sheet. They do not hold the mutual funds or any securities. It’s held at something called a custodian.

So, you are not at risk if the company is in trouble. Now, having said that, I have found over my experience of 46 years, for most people, consolidating and making life simple, or simpler anyway, is a good idea. So, all things being equal, transferring your old 401k to your current 401k seems to me to be a reasonable thing. Now, the only reason I can think of not to do that would be if you had come to the conclusion that somehow the one in the former plan was better than the one you’re in now. That’s probably not likely because both of them have had to go through what’s called due diligence to select the funds from which to choose. And if you are also an institutional employee as you say you are, I’m highly confident that the fund choices in your current plan have been vetted and that they’re very low cost.

So based on what you’ve told me, if I were in your shoes, I would consolidate. It takes the anxiety of the financial health of the other company off the table. and you can now just look at one statement. So in my view, that’s what I would do.

[caller] Okay, that’s really, really helpful, and it’s very reassuring in a very tense time. Yes, it is.

[Carl] You’re very welcome. Thanks for calling. Bye. Bye You’re listening to money talk on news radio K L D. I did it. I didn’t I knew I was gonna do it I did the same thing last week. I apologize. I’ve been saying the other one for 30 years So I’m a slow learner. Let’s see to money. Talk. I’m looking at three screens here. So bear with me Let’s you know money talk. I can’t you t 90.5 or k ut org.

Hi, you’re on the air. How may I help?

[caller]] Hello, Carl. Thank you for taking my call. Okay, I bought some stocks of these drug manufacturing companies like Moderna, Envex, and stocks of travel, cruises, I got carried away that the prices were low and ever since they dropped down and down and I lost so much money on each of them, what am I supposed to do with

[Carl] Okay, so two or three things. I lost five things, yeah. Okay, first of all, if you have confidence, you must have had confidence in the companies when you bought them in the first place. So, the fundamentals, the business of the company, if the business, if Moderna’s business prospects, future prospects are still as good as they were when you brought them. then you’d probably be best to not sell them. But I must tell you that by owning a number of companies in the same industry, doesn’t matter whether they’re banks or energy companies or healthcare companies or consumer companies, that always takes in more risk because they can be out of favor for a long time.

So many years ago, in the 1990s, IT stocks were very very popular for five years and then they went down down down and didn’t fully recover for 15 years even though they were good companies because they had gotten so expensive, they’re so overvalued so what I would consider is I would reconsider why I purchased each of those companies number one and if I have lost confidence in any of those companies. based on their business, not on their stock price today, then it’s okay to go ahead and sell it. But otherwise, I would think about being patient because we’re in a period now of great uncertainty.

I don’t know how long this is gonna last. It’s likely to get worse. I want you to hear that. I’m not gonna be able to say be patient. It’s all gonna work out this year. I’d be shocked if it worked out this year. We’ve had two great years. We have huge global uncertainty about the outlook for the global economy. If you like the companies and they’re not speculative, they’re are not gamblers, you didn’t gamble on these.

You bought companies because you thought they had great products and you thought that they had a great potential. If you still feel that way, I would not sell them now. If you’re not confident, if your reasons for buying them have not turned out, if something’s changed besides the stock price… then it’s a perfectly reasonable thing to sell. That’s how I would approach it.

I wouldn’t buy more because you’re concentrating in one area, healthcare, and even though healthcare has historically been a domestic company, domestic industry, and not so sensitive to the economy, don’t buy health care because you are too concentrated right now. That’s what I would do if I were in your shoes.

[caller] Yeah, and these, these are, I bought them on my rough, so if I sell them, I cannot claim …

[Carl] Right, there’s no tax benefit to selling them at a loss in your Roth, you’re exactly right. So I would only sell them if I lost confidence or if I found something else that I thought had a better future coming, then I would consider trading.

[caller] That goes the same with cruise lines and you know

[Carl] Oh, yeah, I mean, sure. Look what happened back in March of 2020 when COVID hit. The stock market dropped over 40 percent in a matter of a few days. And then it came back 73 percent off its low. The bit that you know this, you’ve learned it the hard way. Stocks are volatile. They always have been and they always will be because they’re their liquidity. So I stand by what I said. OK.

[caller] Thank you so much, I appreciate your help.

[Carl] You’re welcome, thanks for calling. You’re listening to Money Talk on KUT 90.5 and KUT.org.

[text] Hi Carl, I’m about 15 years from retiring and still maintain a diversified 80-20 stock bond split portfolio. I know that I should start getting more conservative as I reach retirement, but still feel fairly comfortable with taking a little more risk. Would you recommend I shift the makeup of my portfolio sooner than later?

That’s a great question, and it applies to so many people. So, there’s two or three things to consider.

When you start thinking about retirement and retirement planning from a financial standpoint, we have to do this with humility. Why is that? because There are three things we don’t know. We don’t how long we’re gonna live. We don’ know what’s gonna happen to the cost of living. And we don’ what our return on our investment portfolio is going to be.

So, we start with that. But generally, people who are investors have access to quality healthcare, take care of themselves, get a regular checkup, and have long life expectancies. Because when you think about life expectancy in America, it’s for everybody. including people who don’t have access to quality healthcare, or people who lead unhealthy lifestyles. So, we’re really talking about longevity instead of life expectancy. And you have to plan a living to be 90 years old. And if you get too conservative too quickly and you don’t a lot of money, you could run into real trouble.

So, I have learned over my career that the idea that you ought to have, your age and bonds when you’re 65 doesn’t work out very well, unless you’ve got several millions of dollars. So, I tend to look at it as being, you’re a long-term investor. Now, 80-20, is that aggressive? Yes. Is it more aggressive than probably I would be? Yes. But if you’re comfortable with that, given my experience and given your longevity, and if you are a single person, you have to take care of yourself, and if your married, you have think about your spouse outliving you. If inflation goes to 3%, not unreasonable, you’ll need twice as much money because inflation will cause it to double in 24 years. So there you have it. I’d be cautious about going back to a more conservative allocation when you’ve been with this one for so long. Thanks for the text.

You’re listening to Money Talk on KUT 90.5 and KUT.org. Let’s see here.

[text] Carl, I have had an advisor for the past 12 years. Is it okay to switch to a fiduciary advisor?

Okay, this is really important. We have to understand how the delivery of financial advice occurs in this country. When you engage in an advisor, she can be paid transaction, or she can pay based on the value of the assets. The term financial advisor is not a term of law, so everyone can call themselves financial advisor. A person who earns sales charges or commissions is actually called a registered representative. A person who is an investment advisor is either under the state regulation or the Securities and Exchange Commission. They have fiduciary responsibility, which means that they must put your interest before theirs. They cannot earn any transaction-based compensation. And they have what the law calls a duty of care. And they get paid based on the value of the assets.

So, if the assets go down this year they get paid less If the assets go up next year, they get paid more. The other thing that these people have that I like is that it opens the whole world of mutual funds and exchange traded funds. They can buy one fund from Fidelity and another one from T. Rowe Price and another from PIMCO and on and on. They can by regular mutual funds, they can buy exchange traded fund. It really opens up the area and because of the nature of the compensation, their interests are aligned with yours.

So if they say, I’m gonna sell A and buy B on your behalf, you don’t have to think about their motivation. They’re doing it because they think that’s the best thing for you. So that long-winded answer comes to this answer. I have an advisor for the past 12 years. Is it okay to switch to a fiduciary advisor? The answer is you bet. Thanks for the text.

I’m going to take one more break. I know it’s not going to be for the news. And then I’m to come back. I’ll be back.

[KUT] Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Now, here’s Karl.

[Carl] Welcome back to Money Talk, I’m Carl Stuart and you’re listening to KUT 90.5 and KUT.org. And if you would like to hear today’s broadcast or last week’s broadcast you can go to Kut.org slash Money Talk. Here’s a text.

Hi Carl. I am investing for myself, I’m 70, and my adult son, who’s 40, who is low income and will inherit my money due to mild disability. He does not get any government benefits. How should I balance my asset allocation? Thank you. I think you gave me your name. That’s very thoughtful. Thank you, Jan. Well, you’re obviously not investing for a 70-year-old. You’re investing for 40-year-old. And so, his risk is the one I was talking about earlier that retirees have, that he lives a longer life and that the cost of care, particularly in his case, because of his mild disability, goes up, which seems like a perfectly reasonable assumption on my behalf.

So, you have to lean in to risk. Now, being a female, age 70, is pretty young, so I think you’re gonna be around for a long time. So, I would have a more aggressive allocation for him, in my view, without knowing any of the details. Instead of having maybe 55% or 60% in equities, I’d probably have closer to 65% or 70% in the equities. If you’re a do-it-yourself investor, then in that equity portion, I’d probably have 70, 75%, say 70% in U.S. equities, and probably the other 30% in international equities.

Where I could, I’d use index funds, exchange traded funds, they’re cheap and they’re tax efficient. If you are a person who enjoys the investment process, or you work with an advisor, in my view, there are some actively managed equity funds that will do better when the market declines and there’s some that do better when the markets rise. I’d put a little bit of money in those, but the majority I’d have passively.

Now, with the other 30%, this gets a little tough because this is a text. If you’ve listened to the entire broadcast today, then you know that I’m a fan of having a modest position in a gold exchange traded fund. I changed my tune on that about six or seven years ago and I’m pleased that I have. So, I’d probably have seven, 8% in a Gold Exchange Traded Fund. And then for ballast, I’d have the other in bonds. And as we talked about in an earlier text, I like passively managed index equity funds.

I like actively managed bond funds. The data indicate they cannot perform the passive. I like three kinds. These are Morningstar categories. I like ultra-short and I like core and I liked multi-sector. Those are all investment grade or mostly investment grade corporate and government bond funds and good luck.

You’re listening to Money Talk on KUT 90.5. let’s see.

[text] Hi Carl, I am 70, going to do required minimum distributions in three years. Do you can suggest converting the 401k and pension to Roth IRA in these three years? Gradually, if I do, what’s the tax consequence? Thank you, Teresa.

Great question, Teresa.

Let me take the easy part first. I probably would not convert the pension. It depends on your situation. If you’re one of these really unusual and lucky people, and we have more of them in Central Texas because of state government and the other major public institutions.

If you have a pension, do you have social security? If you have social security, look at 70, you know what those benefits are. Leave them alone because they’re not tied to the market, they’re no tied to bonds, they’re tied to stocks. Your risk is inflation. So you’re gonna be taking these RMDs in three years.

Did you convert your 401k to a Roth IRA now? I think the answer is yes. you’re going to be converting pre-tax money that was in your 401k so you want to keep track of where that puts you in your tax bracket because there’s not much change between 22 and 24 percent tax bracket but there’s a big gap at from 24 percent to 32 percent so just google the irs tax rates and see what would happen counting in your current taxable income from your pension and if you have Social Security, and then look at how much more you could take in taxable income without thrusting you into such a higher tax bracket. And if you can do that, then converting to a Roth does a couple of good things. And I think you know this is why you’ve asked.

Number one, Roth IRAs do not have required minimum distributions, which is terrific. And secondly, once you’ve been there five years from your first investment, when you take the money out, it comes out tax-free. So, it’s nice to have that if you’ve done a good job of planning and your pension and social security is enough to live on, not having that required minimum distribution turns out to be a terrific idea, and if you end up passing away with that money, your non-spousal beneficiary continues to get the money. They have ten years to take it out, but they also get it completely tax- So I think converting now is a very good idea. Now, if you have money left over when you hit required minimum distribution and you don’t need to live on, if you had philanthropic intent, whether it’s your academic institution or your religious institution or some other worthy cause, that’s a 501c3, you can always do qualified charitable distributions, QCDs, where you can take your RMD up to $100,000. and you can put that into those other institutions. Actually, you don’t have to wait for your RMD. You can do that at 70 and a half, but that’s something to consider as well. Thanks for the question.

You’re listening to Money Talk on KUT 90.5 and KUT.org. Okay.

[text] My gold allocation has risen to 11% from 8%. Is it okay to leave it for now?

Ha ha ha ha. I hate this question. Okay, I’m gonna answer it from an academic standpoint and I’m going to answer it from an emotional standpoint. The idea is to rebalance. So what does that mean? It means that, let’s just suppose that you had an allocation of 60% to stocks And you had 20 plus percent returns in your stock portion of your portfolio in 2023 and 2024. Now you have more than 60%. Well, and the way things are supposed to go is you sell some of that back to your allocation because after all asset allocation determines return and risk and then you take by definition your other assets whether that’s gold or bonds or event driven strategies or market neutral strategies. you add to them to get back to your target. Does that make sense? Absolutely. So you’ve gone from 8% to 11%. On a percentage basis, that’s like a 30% above your target, but I gotta tell ya, markets abhor uncertainty, and I can’t think of a more uncertain environment since the global financial crisis or COVID than the one that we’re in now. So would I put my finger on the scale Uh, and, uh, leave. leave myself at 11% I might do that for a while because gold seems to sure be in an uptrend and the outlook for stocks is really cloudy right now and I think it stays cloudy until we figure out what the new global trade order is and doesn’t look to me like we’re going to know that very darn soon. So I’d be okay with leaning into that if I were in your shoes. Thanks for the text. You’re listening to Money Talk on KUT 90.5. nkut.org. We’re running out of time so you better call 512-475-8600 or text 512 773-0564. Here is the text from last week. You mentioned shifting the proportion of stocks to bonds in my portfolio at certain times to reduce the short-term risk of volatility. How long does my portfolio, actually. take to solidify to reflect these changes? Is it days, weeks, or months? Thank you so much. Well, Mr. and Ms. Market decide that. You don’t know how long bonds are going to help you out because you don’t what’s happening in the other assets in your portfolio. Now go back to the COVID situation. Everything went to heck in a handbasket virtually overnight and all risk assets dropped, all risk assets dropped. You didn’t want to be. trying to sell a piece of real estate during that, any more than you wanted to have to sell your stock allocation. And if you had treasuries, they held up because people were scared. The same thing happened in the global financial crisis. The stock market dropped 40% measured by the S&P 500, real estate investment trust dropped 55% from peak to trough. And during that year plus, two-year period, those bonds held, if you were in treasuries, those bonds hold very, very good, held very, well. So it was a long time where they performed their job. Does that always work? No, as I’ve said earlier this afternoon, in 2022, just a short time ago, because the Federal Reserve was raising interest rates quickly and sharply, that caused downward pressure on bonds and downward pressure on stocks. So there’s no way to answer your question because it’s actually data dependent. It depends on what’s going on in the rest of the world and the rest your portfolio. I hope you’re still listening so I could answer that.

I have one more text and I think we’re going to be running out of time.

[text] I’m a first-time listener and love what I’m listening to.

Thank you.

[text] I have just started a new small business reconnecting with my family in Vietnam to start a dance heels shoe company. How will I be affected by these tariffs and what should I do to weather this storm?

I’m sorry to say that basically it looks to me like you’re going be really affected. Now, I have read in the news… that the Vietnamese government is negotiating with the Trump administration. They have talked about increasing from us their natural gas imports. They’re talking about increasing from us agricultural imports. But there’s no way that a country of that size could take in as much product from us as we take from them. But I’m afraid we’re in the early endings of this game.

I think you’ve got a great idea. but I think you’re gonna be really impacted. And so this is a time to keep your powder dry. This is not the time to take that risk. And I’m just sorry that this happened, because I think it’s a great idea. But in any case, that’s what I do. We have heard five pings this week, less than last week. Nancy in Pennsylvania. Well, next week we think with Nancy we’re gonna have one telephone number and we’ll stop the pings perhaps. Great show today,

I want to thank Mark (Fort) for his help and Jimmy (Maas and Rene Chavez), as well. And thank you for listening and remind you as always that next Saturday after the news at five, be sure and tune in to Money Talk.

This transcript was transcribed by AI, and lightly edited by a human. Accuracy may vary. This text may be revised in the future.