Money Talk with Carl Stuart

Carl Stuart takes caller and text questions on strategies for minimizing capital gains taxes, evaluating the value of home care work, options for investing money for a child’s future, and advice on various investment vehicles like money market funds, bond funds, and private equity funds.

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 Announcer: Laurie Gallardo [00:00:01] This is Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:00:20] Welcome to Money Talk. I’m Karl Stuart, and you’re listening to KUT News 90.5 and on the KUT app. Money Talk is a broadcast about the world of financial and investment planning, where you always determine our agenda by calling or texting 512-921-5888. It’s a terrific idea to call or text early in the broadcast. Give me a chance to do my best to answer your question. I take today’s calls first and then today’s texts and then texts that I haven’t had the opportunity to answer in the past. So we’re gonna get started. Five, one, two, nine, two one, five, eight, eight eight. Here we go. This is from last week. Hello, Carl, this is Moses. I have some equities that are super appreciated over 2000% capital gains. I will have a significant capital gains tax when I sell them in the future. What are some good strategies to try to minimize or avoid the tax altogether? There’s almost no strategy to eliminate. And there is one kind of arcane strategy where you can take highly appreciated securities and put them into a fund that has other securities. And then you own that fund and you don’t have a capital gain. And you have to be. Very comfortable with that strategy and understand that eventually when you sell shares there, you’ll be subject to a gain and a tax, but also that you understand the securities that are in that fund. The other thing is the capital gains tax is a flat tax, meaning that it stops at a certain level regardless of your income. The top level is 20% plus 3.8, 23.8. If you have more than I think $250,000 of income filing jointly, but also the top bracket for your income is 37%. So if you like the outlook for the security, one thing you can do, not to eliminate, but at least to minimize it, is to make sure that you don’t throw yourself necessarily into a higher bracket by looking at what your income is. And then how much of additional capital gain you can take without throwing yourself into a higher income tax. You know, the brackets are like 22 and 24, and I think then 35. So there’s a big jump from 24 up to 24 to 32, that’s correct. So if you like the outlook and you’re willing to hold for a longer period of time, then what you can do is stage the sale of that security over time to keep at least. Your income tax liability at a lower level. The other thing is, if this represents a large portion of your stock holdings, generally speaking, you can, there’s two ways to think about this. If you’re right and you have a lot of it, obviously it can make you a wealthy person, but you also then take on huge additional risk, even in concentrated portfolios of mutual funds. The portfolio might have as few as 25 to 35 names, but they wouldn’t have more than 5%, maximum 6% in any particular name. So if you’ve got 25 or 35% of your equity allocation to one stock, I would certainly start the process of selling it. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call with your questions or text me at 512-921-5888. And you can catch past shows at kut.org slash Money Talk. All right, let me see another text here. How do you figure out the value of your home care work? I am a new mom who is currently working part-time and taking care of my son at home part- time. I have a choice between continuing a part-ime job or taking a full-time job for about $25,000 more per year. Is it financially worth it? Well, I’m not an expert on childcare. That’s for darn sure. Ask my kids. I would say that you would just start to do some research online to determine, first determine what it is you want, what type of service you want. How many hours a week, for example. And if, depending on the age of your child, if there are other skills that you want this person to have, if it’s a preschool child, which I presume it is, are there other skills you’d like this person to have? For example, would you like this person. To be bilingual so that your child grows up hearing two languages, just to use as an example. I had a family member who did that. Then you can then price that out and determine whether or not it’s a good idea to take on more work. The other thing is, and I think this is really important, is the whole emotional decision. Where do you think you’re going to feel the most fulfilled? I would guess, not being a mom, I don’t know this, Some people cherish that time and do not see it as a liability. Other people who perhaps had a really rewarding, fulfilling career before they gave birth to a child might really find that it’s frustrating to spend all that time. I think that’s absolutely worth putting together with the financial consideration to determine what you should do. Really interesting question. I’ve been doing this 31 plus years and that’s the first time I’ve had that question. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. Here is our first caller. Andrew, Andrew, you’re on the air, how may I help?

Andrew [00:06:38] Yes, Carl. Appreciate you taking the call. We have a five-year-old son, and occasionally grandparents or others want to say, hey, can we give him some money, put money away? And my question really is in terms of the vehicle to do so. We don’t want him to be tied where he has to spend it on education or something like that when he turns 16 if he wants to buy a car or anything. So just curious. Obviously, we could put in a savings account, but is there Better place to put that money where he has options as he gets older

Carl Stuart [00:07:08] Yes, I think there is. You have two options. One, you can open a custodial account. That’s not my favorite option, but you can. You’re the custodian, or your spouse is, and that property then belongs to your child. You invest the money. Any dividends or realized capital gains would be taxable to you as a joint tax payer, joint filer. And then when he reaches 21, it’s legally his money under what’s called the Uniform Transfer to Minors Act. And if he wants to buy a car at 16 and you think that’s a good idea, you can do that. There’s no limit as to what the money can be used for. The other one, which frankly I like, is you simply open a separate account in an investment account and you can style it, your family name. And called it in an education account, the John Doe Education account or the John and Mary Doe education account. And you invest the money. I like this one. You invest in tax-efficient exchange traded funds that don’t pay capital gains, probably low dividends because you’re investing in something like the S&P 500 index or the total international market and the total domestic market. It grows over time because he’s got lots of time. So the odds are really with him and with you all. And then when you sell it, you sell at the more favorable capital gains rate. The other thing is, it’s plausible. You don’t know, cause child’s only five years old. Some really good things could happen and some really bad things could happened. The bad things are pretty obvious. Sex, drugs, rock and roll. The good things are he may be a terrific athlete and or terrific student. And decide that he doesn’t want that car and is looking forward to getting a scholarship to go to college. So you retain complete control and you can spend it as you would like. I like that better because it doesn’t revert to your son at 21. I don’t know about you, but if I got a pile of money at 21, let’s just say I might not have made the best choices.

Andrew [00:09:25] Sure. Yeah, absolutely. Yeah. I mean in terms of so as I think about this basically I would just set it up as a regular Investment account separately and just kind of know in my head. Hey, that’s his money

Carl Stuart [00:09:37] Yes, and that way it’s also there if grandparents or aunts or uncles or godparents want to give money, you’ve got this separate account called an education account and you can even talk with those prospective donors about it in that fashion. Okay, great. Well, I appreciate it. Thank you so much. You’re welcome. Thank you, Andrew. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512. 921-5888. And if you wanna see money talk in person, ah, what a chance, what thrill. You can at the first ever KUT Festival, which is coming up on May 1st and May 2nd. Join me and the rest of the KUT staff at the UT Austin campus for live music, thoughtful speakers, engaging panels, and more. You can grab your passes now and check out the speakers and performers. At kutfestival.org. Once again, the number to call or text 512-921-58. Julie, you’re on the air, how may I help?

Julie [00:10:49] Hi. I have a large medical expense coming up. Basically, I need to have about $84,000 for surgery. It was initially going to be one surgery. I had a second MRI. They found I need a second surgery. I’m going to a doctor who does not take insurance. Most people dealing with jaw surgery TMJ don’t because the only one through my insurance I’m proved of Um, it’s only recently graduated med school. I’m trying to figure out what I should do. I have about 41 in savings, that was for the first surgery. I have six months left for my orthodontic treatment to get the other 42,000. And I’m tryin’ to figure whether I should take like Cherry or another company’s medical loans, personal loan. I have savings in just a regular Robinhood account. That could cover it and trying to figure out what a mix of things I should do to make up the other 42k.

Carl Stuart [00:12:01] Yeah, so I would think about the prospective rates of return on the various pools of capital. And I would start with the pools of capitol that have the least attractive return. So if I have money, I’m making this up obviously, say in a savings account where I’m getting very little, that’s the first place I’m gonna get it. If I have in your Robinhood account invested in the stock market, That’s going to be probably over the next five years. Your highest return. So that would be the last one I would turn to. I would break it down in that fashion if I were you and think about it in that way. Because it sounds like you have various pools of capital and that’s how I would approach it if I ran your shoes, Julie.

Julie [00:12:48] Okay, I um, I don’t have enough capital though. So if I Add some loans, would you recommend? Um one of those medical loan companies over a regular personal loan or should I just try to borrow money? From you know relatives where I could pay it back at zero percent interest. Yeah, that’s yeah. Yeah I will pay them.

Carl Stuart [00:13:07] Yeah, yeah. Yeah, you’re second. I’m glad you brought that last one up. The people who love you and wanna help you have the financial capability to help you. And they know that you’re a person of integrity and that you will pay then back. That’s absolutely the first place to go. No question about it. And then personal loan would require, of course, you’ve gotta have collateral, you’ve got to look like a good loan risk to the financial institution. But I suspect the medical ones specialize in people who are really in trouble and they don’t have enough money. And while I’m not familiar with that business, I suspect it’ll be pretty high interest rate because they’re working with people who have no other choice.

Julie [00:13:53] Yeah, they’re they’re actually low interest rate, but there’s a lot of gotchas in the terms and conditions where they can Back charge interest on the entire loan if you make any little mistake Yeah, so I was thinking of a HELOC or a second mortgage before tapping one of those

Carl Stuart [00:14:11] Yeah, well, I think if you’ve got equity in your home and the friends and family don’t work, then certainly because you’ve good collateral, that would be more attractive, I agree with you. Okay, great, thank you. Okay, you’re very welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. When you have a financial or an investment planning question, call five or text five one two. 921-5888 Mike, you’re on the air. How may I help?

Mike [00:14:47] Yeah, Carl, just wanted your warning suggestions, opinion on the private equity funds that the brokerage firms are selling now. I read one article that said, well, no, this is just a prettied up mutual funds that brokerage firm is selling with a pretty bow on it in order to replace them with their fee income. They’re losing because so many people have gone to low index funds, ETF funds. And just wanted you thought and opinion on.

Carl Stuart [00:15:17] So for everybody else, the private markets, private equity invests in operating companies, private credit invests in debt of operating companies. So private equity has a long history. It has been pretty much the territory of larger institutions, I’ll bet, I have no way of knowing, the Teachers’ Retirement System or the University of Texas Investment Management Company. Probably have significant investments in private equity. They can do that because they basically, their time period is forever and they don’t need to have 100% liquidity. And so the private equity returns over the last 25 years have been exceedingly high, full stop. The odds of those returns staying at that level going forward in my opinion are slim and none. There are two or three reasons for this. First of all, there’s a lot of data that indicate that the really strong returns in private equity are in the smaller deals. In other words, they might raise $200 million instead of $2 billion, and they would be investing in companies in pieces of maybe 25 or $35 million. If you’re a very large institution selling to individual investors, then you’ve got to find deals where you can put in $150 million and to move the needle on returns. So I think the kinds of private equity that will be available to individuals, I have no reason to think that they’re somehow shady deals. I just think the return expectations will be less than the historical returns. They ought to be higher to even consider doing it. They ought to be higher than what you can get in the stock market, because there’s something in finance called the liquidity premium, which means I should be able to have a better return because I’m giving up my daily liquidity. If I can’t get a better returned, then I should have no business investing in it. And finally, while they do have high fees, there’s no question that historically the people who run these funds get a two, what’s called a 2%… Fee on the assets and then 20% on the growth. And that’s what’s made a lot of private equity people very, very wealthy. Here’s my 47-year experience, Mike, and that is even the good, honest deals, the best deals are not the ones that you’re gonna see because those deals, there’s plenty of demand for those from the teacher’s retirement system, from you, Tim, so the deals that come to the public. Are not necessarily bad deals, but they’re lower return deals. And my final comment is there’s so much money sloshing around looking for return, both at the institutional and at the individual level. I’m very skeptical about the future returns for this. And liquidity matters. Right now, there’s some fear in the financial markets around private credit. And some firms are, you can get your money out. A little bit at a time, but they’re not obligated to let you have your money. And so once people decide for whatever set of reasons, the war in Iran or the outlook for artificial intelligence or whatever, and they want their money out, they can’t get it. If it’s in an index fund or a bond fund, they can get their money. Yes, Wall Street’s been under pressure. The asset management business has been under the pressure. Because fees have been following. So it’s a complicated, I would tell you the other thing is the average investor, and I include myself, would have no way of valuing the underlying prospective investments. You just don’t know. And so I’m, I color me skeptical. I mean, if it were my money, I wouldn’t not do it.

Mike [00:19:29] Yeah. Okay. Well, that helps a whole lot. I appreciate it very much.

Carl Stuart [00:19:33] You’re very welcome, Mike. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. It’s time for me to take a break. We have no incoming calls or new texts, so it’s a perfect time to do one of those at 512-921-5888. There’s a text. You

Jimmy Maas [00:20:05] Money Talk airs every Saturday at five o’clock on KUT News 90.5 FM on the KUT app and at KUT.org. This podcast is produced by KUT and KUTX Studios as part of KUT Public Media, home of Austin’s NPR station and the Austin Music Experience. We are a nonprofit media organization. If you feel like this is something worth supporting, set an amount that’s right for you and make a donation at supportthispodcast.org

KUT Announcer: Laurie Gallardo [00:20:36] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:20:49] Welcome back. You’re listening to Money Talk on KUT News 90.5 and the KUT app. When you have a question, call or text, you just heard that text, at 512-921-5888. And if you’d like to listen to previous shows or you have friend or a colleague who you think would enjoy Money Talk, they can go to kut.org slash Money Talk and listen to those. 512-921- 5888, here we go. Hi there, I’m a great fan of your show, thanks. I might come see you at the live event. Well, people say I have a great face for radio. My question, I have some money and I want a regular return from it every month, like $250. What is the best investment? The first thing you wanna think about is what level of risk am I willing to take? So if you say I want something that the nominal value never changes, then I would suggest a money market mutual fund. There are three kinds. They’re called prime, government, and treasury. I like the one called government. All the big asset management companies have these. The ones like a Charles Schwab or Fidelity or Vanguard. They have daily liquidity And they will pay you interest based on what interest they’re making on the short-term debt instruments that they own. Government bonds, government agency bonds like Fannie Mae and Freddie Mac are high-grade corporate securities. And as interest rates change, so will the return on the fund. If interest rates rise over time, so will fund return. And if interest rates fall over time so will their returns. You have daily liquidity, so you can set that up to where you have the money withdrawn every month, you choose what day, and goes directly to your banking accounts called an ACH. That is the simplest and I would say safest if you want no risk. Other than that, you can do bond funds. Bond funds pay dividends on a monthly basis. You can take at that, or if the dividend’s more than you want, you can reinvest the dividend. Once again, you have daily liquidity and you have some market risk. So this year, so far, with the war in Iran and the high price of oil, bonds are down. Now, what does that mean, down? Well, the index for bonds is down 0.71%. And so you do have some fluctuation, but you don’t, now what’s the worst that could happen? Probably a repeat of 2022 when the bond market was down between 13 and 14%. That’s a lot if you’re worried about safety. But if you have a short-term bond fund, a short term investment grade bond fund that I follow right now has, if you take what’s called the trailing 12 months yield, you look at what the dividend’s been over the last 12 months by price yesterday, the yield was 4.50%. Money market funds are probably around 3.6, 3.7. Anything more than that would be in the equity market. By the tone of your text, I doubt that that would not be what you’d be interested in. I hope that’s helpful. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888. And as I mentioned in the first segment, if you’d like to see Money Talk, how about in person? You can can at the first ever KUT Festival. It’s coming up on May 1st and May 2nd. Join me and the rest of the KUT staff on the UT campus for live music, thoughtful speakers, probably then include me, engaging panels, and more. You can grab your passes now and check out the speakers and the performers at kutfestival.org. 512-921-5888. Here is a call. Brenda, you’re on the air. How may I help?

Brenda [00:25:07] Hello. Hi. Yes. Hi, thank you for taking my call. You’re welcome. I have a question about transfer on death and payable on death, which I’m taking a class, financial advising class, and I have never heard of TOD and POD. Can you please expound on those?

Carl Stuart [00:25:31] Sure.

Brenda [00:25:32] Where are they? Are they in my will or are they in the financial? Yeah, I’m very in the dark

Carl Stuart [00:25:40] So I can speak to transfer on death. I think payable on death is the phrase that might be used by a bank, for example. But transfer on debt, so when you have a securities account, not an IRA or a Roth IRA, but what we call a taxable account in your name. So you have a Brenda account at Vanguard or bring the Brenda account, individual account at Morgan Stanley, okay? You can put in that. You can say Brenda and then transfer on death, and you can identify the person or people who will get those assets upon your death. If it’s more than one person, you can put the percentage of the assets that they get. If you have a joint account, then you don’t have a transfer on debt until the, so let’s suppose a person is married and they have a couple, they have joint account. Then when the first spouse dies, They change that from a joint account to an individual account with a transfer on debt. Now, if you have other assets that need to go through the probate process, that’s fine. But if you an account that says transfer on death, that does not need to through probate. That’s what a transfer-on-death is. I’m assuming that payable-on death has the same feature of not going through probates, but I’ve never worked with POD, only TOD, and that’s my understanding, Brenda.

Brenda [00:27:10] Okay, so if I am married and so that account would go.

Carl Stuart [00:27:16] You would go to your husband.

Brenda [00:27:18] We go to my husband

Carl Stuart [00:27:19] If he was still alive, and then it was not. Right, yeah, since you’re both living, you don’t have a TOD. You wait until one of you has passed away, and then there’s one person left, and then, it’s a TOJ, because there’s no transfer on the death of the first person.

Brenda [00:27:37] Well, what about if we both die in a car wreck or something, then wouldn’t you want to have a TOD?

Carl Stuart [00:27:43] Yeah, I don’t know. I’m not a lawyer. There’s no TOD on a joint account to the best of my knowledge. Certainly, if that were the case, you wouldn’t even want to put that in the will, how you’d like the assets to go.

Brenda [00:27:56] All right. Well, thank you. I appreciate that.

Carl Stuart [00:27:58] You bet, you’re very welcome. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-588. Julia, you’re on the air, how may I help?

Julia [00:28:17] Hi, Carl. Thanks for taking my call. You’re welcome. I am the financial or the responsible party for my stepmother’s finances. She has dementia, unfortunately. She just turned 76 and her retirement funds are pushing me to take a guaranteed life payment. Um, and right now we’ve got her retirement fund set up to reinvest any dividends and, you know, it sounds like a good deal when they offer you this big lump sum check every month, but I’m concerned that at 76 dementia, that it, you, know, she’ll be lucky to live another 20 years and I’m, I’m just trying to make the right choice to do what’s best for her and maybe one day have an inheritance.

Carl Stuart [00:29:12] That first of all, you’re doing the right thing. Congratulations on taking care of her. I would, just based on what you’ve told me, I would not do that guaranteed lifetime. That is an insurance product. And I’ve given her probably shorter life expectancy and the fact that she has other assets. I think the reason to do the guaranteed life is because a person doesn’t have a lot of assets and or she has a long life expectancy, and there’s a real risk of running out of money, then putting money in that contract saying, okay, so it goes away, or mostly goes away when she dies, is okay because we need the guaranteed higher income. If you don’t need the guarantee higher income from that because of other assets, and you’d like to see the ability of her leaving an inheritance, I would absolutely not do the guaranteed life product if I were you.

Julia [00:30:11] Very helpful. Thank you for confirming my suspicions. And I love your show. Thank you for helping us all as non financially literate people out.

Carl Stuart [00:30:23] You’re very welcome. I love that. I love to do that. You’re welcome. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-588. Cathy, you are on the air, how may I help?

Cathy [00:30:44] Hidey-ho, Carl! Okay i have not lived a very uh i’ve just lived mentally during life and now i’m getting up in my ages now all my life you uh produced a will so when you died you know i assets and everything could be divided but now i am being told oh no you need to get a trust because that will will tax like my house is paid off to go to my kids, that will be taxed. And they’re saying you go back to a lawyer and a will doesn’t count like it used to, you need to now have a trust fund set up.

Carl Stuart [00:31:31] I’m really glad you called. That’s absolutely not true.

Cathy [00:31:34] Absolutely not true you

Carl Stuart [00:31:37] You do not need a trust. You have a simple, straightforward will where you identify who gets what. You can say, I want my three children to get a third each of my assets, or I want daughter or granddaughter to have that particular piece of furniture, or I wanna a certain amount of money to go to my church. You have all the power in that. I can’t think of a reason based on what you’ve told me why you shouldn’t have a text.

Cathy [00:32:09] Thank you. Because I mean, I don’t have any stock or we’re basic. And so I just wanted to make sure because they were like, get to a lawyer, you know, because I’m 69 and he’s 73. And they’re like, Oh my God, you’re going to be taxed. What are you doing? That’s not true.

Carl Stuart [00:32:30] Yeah. Yeah. You’re not. Yeah, you’re getting very bad advice. Don’t do that. Whatever you do, don’t do it.

Cathy [00:32:35] I will not. Oh, Carl, you are my Alka-Seltzer in life! Thank you!

Carl Stuart [00:32:42] Thank you, buh-bye. That’s a new one. I’ve been doing this over 31 years and never been known as an Alka-Seltzer. I like that. We did get a caller who said, you can do a transfer on death on a joint account. I did not know that. And I will just say, I’m not an expert on these things. And the way this has been worked in business that I’ve seen. Is a married couple doesn’t have a TOD until the first person dies. That’s my life experience. I assumed that was the way it had to be, but I could be mistaken on that. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. And here we go. Hamilton, you’re on the air. How may I help?

Hamilton [00:33:34] So I’ve got a life insurance policy I got when I had a new child or you know, my first child and I’ve been paying on it for however long and she’s pretty much off payroll and there’s another one a little bit behind her but almost off payroll. Do I still need life insurance or should I quit spending money on that? At this point they’re pretty much on their own. Am I wasting my money now?

Carl Stuart [00:33:59] Pretty terrific question. I’m gonna answer your question, but I haven’t answered this question in a long time, and so I’m going to expand on it, because I think a lot of people need to hear this. Years ago, a life insurance professional, for whom I have great respect, explained it this way. There are three reasons to have life insurance. One is because you’re going to have a taxable estate. Well, that doesn’t affect most people, because you’ve got to have over $15 million in net assets before you have an estate tax. But let’s suppose you had you had a ranch worth a lot of money and when you died, your heirs were gonna have to sell it to pay the estate tax. Then there’s a thing called the irrevocable life insurance trust and you set it up so when you die, the life insurance proceeds show up to pay these state tax. The second one is what would be business continuation. You and I have been successful and have five dry cleaning establishments and we’re 50-50 partners. It’s each of ours biggest asset. You buy life insurance on me, I buy life assurance on you. I die, the life insurance benefit shows up because you’re the beneficiary, I’m the insured. You then have the money to pay off my wife or my heirs. Okay, that’s gonna be around forever if we assume the business is successful. Then you need forever insurance, which is whole life insurance. Then there’s the third kind. So I was in your situation. But there was a point of time when we had three children, ages nine, six, and three, and my wife had more than a full-time job taking care of those kids. And I was the sole wage earner. If I had died, she’d have had a real problem. And so we needed life insurance to cover those potential liabilities during the time that those kids were dependent upon us. Today, they’re grown and gone. We don’t have liabilities. And if I died, she would, because of our savings and investments, she’d be okay. So I don’t need the insurance, but I needed it for a while. So that’s when you buy term insurance for 20 years or 25 years. It sounds like based on what you’ve said, you’ve taken care of that liability by taking care of your kids, and now they’re older and out of the house. So in my view, based on which you told me, you do not need the assurance.

Hamilton [00:36:23] Kind of what I was thinking, but I thought I should get a second opinion.

Carl Stuart [00:36:26] Thank you. Of course, you bet Hamilton, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Call or text 512-921-5888 and catch past shows at kut.org slash Money Talk. We’re coming up on me taking another break so rather than get started on this call, this is a good time for you to call or text 512-921-5888, I shall return.

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KUT Announcer: Laurie Gallardo [00:37:51] This is Money Talk with Carl Stuart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.

Carl Stuart [00:38:05] Welcome back to Money Talk, I’m Carl Stuart, and you’re listening to KUT News 90.5 and the KUT app. When you have a financial or investment plan in question, call or text 512-921-5888. I am taking calls, but I did see this text and it’s timely. Hi Carl, are you going to be speaking at the Kut Festival? Which day? Or are we lucky enough to get two days? We’re going to speak, I’m going, when I say we, we’re gonna have the KUT staff there. My friend Jimmy Moss, if you’ve listened to any of our, shall we say, Evergreen shows, so they’re a lot of fun, Kenny and I have a good time. We’re gonna do it in front of a live studio audience. The audience can ask questions and we can do, I’ll do my best, but if they don’t, Kenny and and I will have a lot, I keep saying Kenny, I keep thinking Jimmy Moss. Jimmy Moss I apologize, got the name wrong. But it is on Saturday. I do not have the specific time yet, but we’re gonna do Money Talk on Saturday just like we do every week. Five, one, two, nine, two one, five, eight, eight eight. Here we go. Tim, you’re on the air. How may I help?

Tim [00:39:22] Hey Carl, I am, I love your show, appreciate all the good advice you provide, I think it’s a great community service. I am fully invested in the market and probably a little bit overly aggressively, I don’t know, all of our money is in mutual funds, spread across a number of funds. And so the question is, if you wanted to be, what would you suggest as a, still getting a decent rate of return, but more of a conservative investment?

Carl Stuart [00:40:04] Because you’re an investor, I’m gonna answer this at a higher level and I’m going to use Morningstar categories simply because I don’t make specific fund recommendations on Money Talk. I would say there are a couple that have had pretty interesting track records. So one, and these are Morningstar Categories. One of them is called Equity Market Neutral or Market Neutral. These are funds whose objective is to deliver a positive return regardless of whether the stock market is rising or falling. So while this is a very short time period and past performance is no guarantee, I was looking. So I’m using exchange traded funds to show where the market is. This is through yesterday. The Vanguard total stock market’s down 6.32% year to date. The iShares, I mean, the Spyder S&P 500 down 6.76 and the Fidelity NASDAQ ETF ONAQ is down 9.43. And the equity market neutral fund that I follow is up 4.05. So when you look at that spread, that’s a 10 to 15 point difference in returns in a down market. I would look at, that would be my first choice. Then if you want something else that has good returns in very bad times, you want to look at trend following, something called managed futures. I will tell you that this is more like homeowners insurance. So I will give you an example. 2022 was a bad year for stocks and a bad year for bonds. S&P down 19%, the NASDAQ down 33%. And bond market down between 13 and 14. The two I follow were up 16% and 17%. Year to date, they’re up 8% and 4.6%. But they can be stinkers when there’s no real trend to follow. You’re better off in your stock portfolio. So I would say one of them is more steady. That’s the equity market neutral. The other one in tough times can be really, really helpful to a portfolio. Those are the two places that I would consider if I were in your shoes.

Tim [00:42:32] Thank you very much. Appreciate the information.

Carl Stuart [00:42:34] You’re very welcome, Tim. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-588-. Marianne, you’re on the air, how may I help?

Marianne [00:42:53] Hi, hi, Carl. I can’t believe I’m on the air. I was just listening to your program and I actually am having, you know, sort of wondering what to do with, so in May, I’m most probably going to be selling my home to an investor and with the proceeds, I am not sure what to do. I wanted to definitely earn some interest but be low risk. I’m wondering if I should wire it to a brokerage or wire it just to a bank and open CDs or I just, any kind of advice.

Carl Stuart [00:43:30] So here, I’m gonna give you three choices based on your question. You can do a CD ladder, L-A-D-D E-R, where you can take, how much do you guess or you know will be, what will be the sales proceeds? How much money?

Marianne [00:43:44] So I, well, I’ve got the set price at 375 and I’d probably add another from my own savings 25 so that it would be just 400 and then maybe split between, so it’s still FDIC insured would I need to.

Carl Stuart [00:44:00] No, don’t worry about that. You just go with a solid bank. If you’re worried, go with one of the bigger banks because they keep people’s millions upon millions of dollars of people’s money and way above it. The second thing is you can go to a smaller bank, which is what I do, and they will take your money and put it out into CDs at other banks. And so you can take your 400,000 and go to that bank and get it CDs as well. But let’s take the 400,000. You take the four hundred thousand and you put a hundred thousand in a six month, then in a 12 month, and then in an 18 month, and then a 24 month CD. Interest rates are gonna go up and down. Historically, the longer term one will have a better return, not guaranteed. But every six months, $100,000 comes due. You don’t need the money, you take the accumulated interest and you go buy a 24-month one. Because it’s now back to 18 months. It’s a CD ladder. You keep your FDIC insurance and the principle doesn’t change. That’s a choice. The second choice is the Money Market Mutual Fund. They invest in high quality securities. There are three kinds, prime, government, and treasury. The government one’s my favorite, invests in US treasury securities and government agencies like Fannie Mae and Freddie Mac. They keep the price at a dollar a share. You have absolutely one day liquidity, you go with big companies like Charles Schwab, Vanguard, Fidelity, they sponsor those, they’re not gonna let these things fail and they maintain a dollar share and you will have today maybe 3.6, 3.7%, you can check them out online. If rates go up, returns will slowly go up. If rates goes down, returns will slightly go down over time. That’s one and then the third one would be to put together a- portfolio of bond funds you’ll get higher returns and you should expect some modest risk with those and so if you’re not comfortable with any fluctuation then don’t do those because periodically the bond market can go down if we have high oil prices longer and we have more inflation interest rates could go up and that would push down the price of the bonds you get monthly dividends and you reinvest the dividends in those so those are the three things that come to my mind, Marianne.

Marianne [00:46:28] Okay, thank you. Yeah, I think the lower risks of first two are probably best to you. So you would just go to one bank and do the whole thing with one. It would be like a CD ladder just with one bank. And do you get more with a credit union?

Carl Stuart [00:46:44] I don’t know about that, I’m not gonna say. I just know because I bank personally at a smaller bank and I know that they have a product where they can ship out anything over 250 into other CDs. That’s a program that small banks have, community banks, local banks, regional banks, so that they can compete with the big banks. They can offer FDIC insurance on more than $250,000.

Marianne [00:47:11] Can I ask what bank you use, the smaller bank? No, you cannot.

Carl Stuart [00:47:13] No, you cannot. Yes, you can answer, but I will not answer.

Marianne [00:47:18] It’s not higher risk with a smaller bank if they were to belly up or something.

Carl Stuart [00:47:26] It would not be a risk because you still have your FDIC insurance.

Marianne [00:47:29] Okay, gotcha. Okay, I appreciate it. Thank you so much.

Carl Stuart [00:47:33] You’re very welcome, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and on the KUT at, excuse me, caller text 512-921-5888 and you can catch past shows at kut.org slash Money Talk. Sandra, you’re on the air. How may I help?

Sandra [00:47:57] Yes, Carl. Thank you again for your information recently regarding the sale of my mom’s house. Thank you. And the money market government account is where I’m going to go. We’re still working on it. But the question I had is you, the lady that you spoke with about the wheel. My mom had the same thing. She had all she had. In assets was the house, and then the money, the house was to be split between the kids and no other assets or debts. The problem is they said that it has to go through probate. And with me being older, I’m looking at how should I prepare better for… My house that I own for my kids. So it doesn’t have to go through it. Thousands of dollars a lawyer and all the expense because going through this process, we had to pay a great deal of taxes on the house. We had- Taxes? Yeah, the house was paid off. We had to pay 35,000.

Carl Stuart [00:49:23] So you must not have sold it right after she passed away.

Sandra [00:49:27] Well, we did. We waited a year, but what we found out is that she paid her taxes, but she didn’t completely pay all of them. And she was told by the county tax office to just keep, as long as you pay something, it’s okay. Well, they went back and gave penalties when I tried to sell the house.

Carl Stuart [00:49:51] Okay, there’s two or three things going on here. That’s why you paid money. Because if she had no liabilities and you sold that house soon after she died, the tax on that transaction is zero. It’s zero because your cost base, when you die, your kids inherit your house. There doesn’t matter what you paid for it. Their cost is the value at the time of your death. So if they sell it and it hasn’t appreciated since you died, there is no tax on that, zero, no tax. Well…

Sandra [00:50:31] That’s good to know because I have a couple of agencies, one called OwnWell, they said we can reduce your taxes.

Carl Stuart [00:50:44] I’m sorry, pardon me to interrupt you, that’s a different kind of tax. I’m talking about paying tax on the gain in value on your house.

Sandra [00:50:54] Oh, I see.

Carl Stuart [00:50:55] This is the gain on your value in your house. So you have a house, it’s worth more than you paid for it, okay? When you die, your kids don’t have to pay any money on the gain in value from when you bought it.

Sandra [00:51:11] Okay cdn that he had that t o t you were to transfer and that

Carl Stuart [00:51:16] Yeah, that’s true.

Sandra [00:51:17] Needs to be in the wheel.

Carl Stuart [00:51:19] Well, if that’s the asset, I’m not a lawyer, but I have plenty of friends who have been the executors of wills. And it’s very simple in Texas. And it is very inexpensive, very inexpensive. Texas has one of the fastest, cheapest probates in the United States. It’s not complicated unless you have a complicated estate and you do not have a complicate estate. And so-

Sandra [00:51:48] Correct.

Carl Stuart [00:51:48] So do not let somebody talk you into doing a living trust or spending a lot of money to avoid probate because you’re trying to avoid something that’s cheap and fast. And so an adult child will be able to go to the courthouse, get the necessary documents, and then you’ll be able to go and sell the house because it’ll show that they own the house. And the only taxes would be if the house had appreciated in value. After your death.

Sandra [00:52:20] Yeah, no, it actually…

Carl Stuart [00:52:23] Well, then there’s no taxes in your case, but no taxes. So we’re talking about taxes on the gain. We’re not talking about property taxes or any other kind of taxes.

Sandra [00:52:33] Yeah, we had to pay property tax.

Carl Stuart [00:52:35] That yeah, that’s a different deal. Yeah, yeah

Sandra [00:52:38] Yeah, but they did say, and me being in Texas, they did say that it had to be probated. And I agree with you. I’ve seen that it’s not, they said, unless you had some kind of ladybird.

Carl Stuart [00:52:58] Right, and I don’t know enough about that to have an expertise, but that’s, see if you can put that, if you could have the house ownership of transfer on debt, okay?

Sandra [00:53:09] All right, I will. Thank you for clarifying.

Carl Stuart [00:53:11] Okay, Sandra, thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Let me answer some texts here. Let’s just see. Hello, Carl, I’m retired and was surprised that my social security benefits were taxed in my 2025 return. I thought, just a second, something’s going on here. I thought. That social security benefits would be untaxed by the big beautiful bill. Will they be taxed next year? No, the big, beautiful bill did not change that. Above a certain amount, your social security benefit are in fact taxed. That’s my understanding. Carl, can you explain life insurance? I’m 34, healthy female, but I’m not asking in case I die. I’ve seen a lot on social media on how to use that money while I’m alive. I’m just unsure how. You only need life insurance if upon your death, somebody is in real financial trouble. So if you were, if you’re a healthy female and you’re single, you probably don’t need life assurance. If you need life for a specific period of time and then the liability goes away, you have a child, the child grows up and goes away. Then you don’t life insurance for a long time, you buy something called term insurance. You only need, it’s called whole live. If you have a permanent liability that needs to be funded upon your death. So there’s nothing on social media that suggests, if this suggests you need life insurance without knowing your personal situation, then don’t pay any attention to it. Those are the reasons you would have life insurance. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and on the KUT app. Hi Carl, with the stock market at a low, It seems like a good time to get stocks on sale. I have no desire to do deep research on individual stocks. One, is it a good to invest? And two, any recommendations of what types to invest in mutual funds? Something else? Thank you. Yes, well let’s remember what Warren Buffett says. I get fearful when others are greedy, and I get greedy when others aren’t fearful. So I congratulate you on getting greedy when others were fearful. It is a good a time to invest. Determine how much money you want to invest. If it’s a sizable sum, divide it into four parts and invest a quarter of it now, wait six weeks and do the same thing again and wait six week and wait 6 weeks. That way, if the war continues and the stock market keeps going down, you’ll be buying at ever better prices. If the market’s flat, it won’t matter. If the markets goes up, you’ll glad that you put some to work now. I would invest in, if you’re a do-it-yourself investor, I would an inexpensive, tax-efficient, exchange-traded funds that follow large amounts of the stock market. My favorite would be a total stock market fund and a total international fund. And I would get 60% to 70% in the total domestic fund and the balance in the total international funds if I were you. That’s how I would do it to get started. Well, you’ve been listening to Money Talk. I don’t think that I’m gonna have time to do it justice to another text or another call. So let me just remind you that if you’d like to see Money Talk in person, you can on the first ever KUT Festival coming up on May 1st and May 2nd. Join me and the rest of the KUT staff on the UT Austin campus for live music, thoughtful speakers, engaging panels and more. Grab your passes now and check out the speakers and performers at kutfestival.org. I wanna thank Mark for doing his usual terrific job as producer. Thank you for listening and to remind you next Saturday to be sure and tuned into Money Talk at five o’clock. Have a good week.

KUT Announcer: Laurie Gallardo [00:57:23] You’ve been listening to Money Talk with Carl Stuart. Carl Stuart is an investment advisor representative of Stuart Investment Advisors. And this is KUT and KUT HD1 Austin.

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