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Carl Stuart takes text and caller questions on low-cost index ETF’s, Roth vs traditional IRAs, and gold as a portfolio investment.
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 [00:00:02] This is Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart Investment Advisors. Call or text him with your questions at 512-921-5888. Now, here’s Carl.
Carl Stuart [00:00:21] Welcome to Money Talk, I’m Carl Stewart and you’re listening to KUT News 90.5 and on the KUT app. If you’re a first time listener, welcome. For everybody else, as you know, we’re in our 32nd year coming up on our beginning of our 33rd year in January. 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 great idea to call or text early in the broadcast giving me what I hope will be ample time to do my best to answer your questions. We have all of our lines available 512-921-5888. I got this text earlier today this from from Akshay. He said we spoke last Saturday regarding the overall benefits of investing income as a 28 year old. And resisting the societal messages to consume. I just wanted to reach out and thank you for your advice and perspective on the matter. I think that it is important for many young people to hear such realistic advice. Thanks and thanks for putting on the show each week. You’re very welcome. So I also got a text that I answered frankly just too frantically and so I’m going to read this as well. By the way, 512-921-5888 Curl Why did Morgan Stanley switch me from mutual funds to individual stocks? They said they mirror my previous investments. Well, without knowing the specifics, I’m pretty sure what they did was they moved you from mutual fund to something called a separately managed account. And these are managed accounts, typically of individual stocks and also possibly individual bonds, but they’re not a mutual fund. They have lots of different stocks and bonds. Sometimes they’re a specific strategy, like let’s say a growth strategy or an income strategy or a balance strategy. But rather than buying a mutual fund or whether it’s actively managed or an index fund, there’s a manager or a group of managers running a portfolio and you’re getting a tiny slice of that. So what you’ll begin to see when you get your monthly and quarterly statements from Morgan Stanley. As you’ll see, you have 19 shares of Microsoft and 42 shares of Disney and 17 shares of UnitedHealthcare. And what’s happening is they will buy a large amount of a particular stock and then they will separate it out into the various owners of the accounts. That’s why it’s called a separately managed account. In my 48 year career, I have not seen any data that indicate that returns are better. With mutual funds or exchange traded funds or separately managed accounts At least sometimes separately managed accounts are suggested for people who are investing in a taxable environment meaning not an IRA a 401k or anything or Roth and that is because they then have the ability to take losses in other words Because they have individual stocks they can from time to time sell those lots of the stocks in which they have a loss and book that loss to either offset capital gains that they get when they sell stocks or bonds for profit or to distribute to you. Again, I want to emphasize it’s not either better or worse in my experience, but I did say this last week and I would say it again, the fact that you asked me the question and that someone didn’t explain to you that they were doing this, going to do this, that’s a bad thing. That that shows a lack of communication and I’d be very upset about that if I were in your shoes Thanks, you’re listening to money talk on KUT news 90.5 and the KUT app call or text 5 1 2 9 2 1 5 8 8 8 here is the text. Hi Carl I have a diversified portfolio of stocks and bonds. Is there a place for gold if so What percent would you recommend? And in what form? Exchange traded funds, physical or gold mining, exchange traded funds. Many thanks. Well. I’ve had a long and interesting history with gold. And that’s because I began in this profession in January of 1979 and we had been through something called the OPEC oil embargo and we’d been through something called stagflation where the economy was stagnant but we also had inflation. And it was a very good time to be. An energy investor because prices were rising, Houston and Texas, and much of the Southwest was booming. Farmland also is another commodity, so certain commodities had done very well, and gold was doing very well as well. We’d had very high inflation, and as a result, gold was a terrific investment in the decade of the 70s. It peaked in about 1980, as I recall. And frankly, it was just a terrible investment for a very long time. And what happened was that Paul Volcker came in as the head of the Federal Reserve and took it to be his mandate to break the back of inflation and inflationary expectations. And he ran interest rates up over 18%, as I recall. Certainly, if you wanted to buy a house, you had to pay double digit. I remember buying a house. In Austin in the summer of 1978 and feeling grateful that my mortgage was 9 and 7 eighths percent because they subsequently went up above 10 percent, maybe even to 12 percent, I’m not quite sure. But as inflation came down, the price of gold stagnated and it did for a very long time. And there were people recommending gold, gold bullion, gold coins, and gold mining sucks. And I really became very skeptical. Generally, the argument was you’ve got to have this as protection against a collapse in the economy. You’ve got get your gold coins and get yourself some dehydrated food and a shotgun and head for the hills. I guess I’m just too much of an optimistic person to believe that that was a good idea. The stock market really was in bad shape. That bottomed in about August of 1982. But then we had a bull market that went from the August of 1982 to March of 2000. That’s a long time. However, as we got into the 2020s, I kept encountering people whose opinions I respected, many of them on Wall Street, who really believed that gold did belong in a portfolio, but up until a few years ago, you either had to buy the bullion, which was just, it’s really an illiquid asset. Coins were a bad idea because you’re paying more than the price of gold because you are buying from the broker and there’s minting costs and when you sell you get less than the price gold because again there’s a broker just like with real estate and so you were left with the mining companies. What I observed was in periods when gold was doing very well the mining company did better than the price of gold, and when the price of gold was doing poorly. The mining companies did worse. It was very hard to know which mines to buy because it’s a little bit like buying oil and gas. Each exploration company may have a different cost of production based on what they paid for the reserves and based on the nature of the reserves and how easily they can get the oil or the natural gas out of the earth. It’s the same way with gold. And so generally people would buy mutual funds that own gold mining companies. I’m okay with that. But with the invention of exchange traded funds, you can actually own the gold because they’re legally a trust and you’re a beneficiary of the trust. But like other exchange traded fund, they trade during the day and they trade at the underlying price of gold and they actually own gold. In fact, if you own one of these exchange traded funds, you’ll see a little bit of a sale of a tiny share of a share each month and that goes to pay for the storage of the gold. Is really a very efficient way to own gold and it’s gotten to be extremely cheap. You can buy exchange traded funds that cost 0.09% or 0.10% of expense ratios and they’re tax efficient. So that’s the background. Now is there a place for gold? I think the answer is yes. I don’t proposed to know what’s going to happen to the rate of inflation, what’s going to happened to the value of the dollar, or what’s going to happens to interest rates. But I think as a store of value and given everybody’s concerns about the federal debt, I think it’s a reasonable thing to have a small position in gold. Now, what do I mean by small? I think between five and 10% would be plenty. We had a huge year in 2025. I’ve never personally, had an exchange rate of fund or mutual fund that was up 64 percent before. And as of today, the one that I own is down 5.77 percent. So it doesn’t go up every year. But I think as a non-correlating asset, and the best example of that was in 2022, when the Standard& Poor 500 was down 19 percent, and the NASDAQ, where we have a lot of tech stocks, was down 33 percent. Bonds were down between 13 and 14% and gold was flat. So it really worked as a non-correlating asset. Thanks for the question. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Hi, Carl. My name is Josh. I recently graduated from college. Student, hook them. That managed to make it out with no student loans. Congratulations. As well as a fair amount of savings. More or less $5,000 in high yield savings, approximately $20,000 in an individual brokerage, mostly U.S. Index ETFs. I’ve yet to find a job using my degree and I’m working in hospitality, which keeps the bills paid, but not much left over to save. What are my best moves to make my saved money work for me while I’m not contributing much to it? Should I open an IRA and transfer funds to it, If so, how much? Or what other options do I have? Well, first of all, congratulations on graduating from college and graduating with cash. That’s pretty remarkable. So I think the fact that you’ve got emergency money of approximately 5,000 is terrific and that you’re making your ends meet now. To answer your question regarding an IRA, you have to be willing to say goodbye to the money for a very long time because if you take the money out before you’re 59 and a half, You’re going to pay income tax plus a 10% penalty. IRAs were set up for long-term savings for retirement. If you’re willing to do that, putting money in some of your 20,000, and there would be a reasonable thing to do. I would tell you, if you think about that and you’re willing to live, live with the loss of liquidity. I’d also take a look at a Roth IRA. And the reason is that other retirement accounts have a point in a owner’s life. Or she or he has to take the money out and you have to pay the taxes whereas in a Roth IRA you don’t have that thing called a required minimum distribution like an IRA it grows without any current taxation and it’s subject to the same fifty nine and a half rule so if you have a college degree it’s entirely plausible that there will come a time in your life which will be a good thing because you’ll be making a good income. But you’ll be making too much money to do a Roth. There’s an income limit that will not allow you to do a Roth, right now you can do money in an IRA and because you’re not making a lot of money, it’s probably going to be tax deductible to you that may or may not matter because of the standard deduction, but I still would prefer the Roth IRA if I were your shoes. I like the idea that you’re in U.S. Stock ETFs. I would add that I think you should have an allocation to international stock exchange traded funds. My kind of going assumption today is 75-25 stock, domestic, international. Frankly, at your young age, you can lean into international a little more. Over the last decade or so, they have underperformed U.S. Stocks, so that makes them, in my view, a little bit more attractive. Thanks for the text. You’re listening to Money Talk on KUT News, 90.5, and the KUT app. And by the way… You can catch past shows at kut.org slash money talk. You just go to the kut dot org and there’s a, you’ll see right there all the podcasts and you can click on and listen to any of the ones that we have. Also, you can go to other places and get wherever you get your podcasts. Today, the number to call or text is 512-921-5888. Hey Carl, I recently retired and have a pension. An IRA and a Roth IRA. What is your opinion of the 60% stock, 40% bond mix for my IRA, 40 percent bond seems too conservative? Thanks, Tim. Tim, I’m inclined to agree. I think that 60% for stock, forty percent bond has been around for a long time. I’ve been in this profession for 48 years and it preceded my getting into this profession. And There’s a difference between longevity and life expectancy. Life expectancy takes into account all the people in our country, for example, including people who perhaps don’t have adequate health care or access to quality health care. People who have life-shortening habits like cigarettes, smoking, or obesity. And so I think people who have done what you’ve done and have a pension and an IRA and a Roth have to count on being living a very long time. And so you need to know three things. Regular listeners know exactly what I’m going to say. You’d like to know how long are you going to live, what’s going to happen to the cost of living, and what will be the rate of return on your investments. Unfortunately, you don’t know the answers to any of those. About the only thing you do know is that the likelihood is the cost living is not going to stay flat and it’s not gonna go down. So then you ask yourself, what’s the long-term? Challenge to my retirement savings and it is a decline in purchase power and by having bonds are not designed to outperform inflation they’re designed to be in many cases but not all 2022 is an example not correlated positively to stocks they’re tended to be they are less volatile they deliver current income which you can reinvest easily in a bond fund or bond funds but 60% for someone in your situation. Since I’m assuming you’re in your sixties, you need to plan on living into your nineties. I agree with you. 60 40 feels a little conservative for me. I’d be comfortable at 70 30 for someone in your situation. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Nobody’s calling this afternoon. All of our lines are available. 512-921-5888. Here’s a text, Hi Carl, I have about $150,000 in cash and in a high-yield savings account and looking to put at least $100,000 into some sort of investment account. I’m 47 years old, not wanting to take huge risks, but would like a better yield than what I’m getting in the regular savings, which is currently about 3.2%. What do you suggest? Thank you. So I’m going to take you through. A list of investment options, starting with the lower risk going to the higher risk. You could put money in a diversified bond fund portfolio. I like three different types of funds, and here I’m not naming funds, I’m using the Morningstar categories, a short-term or ultra-short-term bond fund, a core bond fund and a multi-sector bond fund. The Ultra Short Bond Fund. Will buy anything one, two-year maturities, maybe up to three-year maturities. The core bond fund will buy in the intermediate five to eight years, and the multi-sector, as the name implies, can go anywhere, whether domestic or foreign, long, intermediate or short, and various credit qualities. And I think an example of why I like that is actually going on right now. Through yesterday if you had owned the exchange traded fund that follows the bloomberg aggregate bond index which is the kind of standard and poor five hundred analog in the bond market you’re flat it was down zero point zero one percent uh… And the short the short bond fund that i follow was up three point five three percent if you take the dividend payments from the last twelve months and into yesterday’s price. It has a trailing 12-month yield of 4.1%. That’s pretty terrific. The core bond that I happen to follow, not surprisingly, is flat down 0.3. It has the dividend yield, again, using that same calculation of 4,3%. And the multi-sector has a dividend of 5.6, and it’s flat for the year of 0.28. Now. The risk is interest rates keep going higher and that will put downward pressure on the bonds, but it will over time deliver for you, and based on my experience, a better total return. You’re a young person, and I would encourage you to invest in human innovation, better known as the global stock market. So what I would do is I would get into a dollar cost averaging program. I would start with saying, what’s my ultimate blend or asset allocation? Let’s just pretend that you’re willing to put, start very, very conservatively. And so let’s say, put 35% in the stock market. Well, that’s $35,000. Why don’t you start by putting $5,000 every month over the next seven months. And the good news is the stock Market is likely to go to heck in the hand basket at some time during there. And you’ll be buying more shares with the 5,000 set it up on automatic from your, from your checking or savings account. Pick a day, don’t look at the stock market, do 75% of that in an exchange-traded fund that follows all U.S. Stocks and 25% that does it internationally. Start slowly like that. Based on history, you’ll do better than the 3.2% by quite a bit. If you get to the point where you’ve got some comfort, you will be able to increase that equity or stock allocation. That’s what you ought to do in my view. You’re listening to Money Talk. It’s time for me to take a break. Have all of our lines available, call or text 512-921-5888, I’ll be back.
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KUT Announcer: Laurie Gallardo [00:21:34] This is Money Talk with Carl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Carl.
Carl Stuart [00:21:48] Welcome back. You’re listening to Money Talk on KUT News 90.5 and the KUT app. When you have a financial or investment plan in question, give me a call or shoot me a text at 512-921-5888. Well, I’m going to bloviate here until you call up. You see, all I had to do was just threaten and somebody sends in the text. Great. Hi Carl, thanks for your show. You Welcome! I’m trying to avoid dividends in my taxable brokerage account. I have some exchange traded funds for foreign developed markets in my Roth. You mentioned two, since they start with V, I suspect they’re Vanguard ETFs, VEA and VPL. These have relatively high dividend yields. They also have high tax cost ratios. Thus, it would seem to me to make sense to have these ETFs in a Roth. However… I am missing out on foreign tax credits by having them in the Roth instead of, I think you mean, I misread this. However, am I missing out in foreign tax credit by having the Roth in the taxable account? Would their foreign taxable credits make them better to have in my taxable brokerage account? I have the same question for individual stocks that are foreign companies that pay relatively high dividends. I you know, I have not typically been an investor who focuses on dividends. I just see dividends as part of a total return and I’m surprised that you have these ETFs that have high dividends. I think the S&P 500 dividend yield is around 1%. If that’s the case, that’s not very high dividends so I’d have to look and see. I would think… Since you’re in Vanguard, I would look at the VOO, which I believe is the S&P 500 or the VTI, which is the total international, since you’re already in Vanguard. I’m not recommending, as my lawyers well know. As regards foreign securities, I have seen people own the all-international ETF, and I’ve not seen any kind of and tax credits associated with it. I haven’t owned individual stocks in so many years. I don’t feel qualified to really talk about that, but I suspect that, yeah, I think I would stay internationally. I would probably do the total international. The problem I have when slicing and dicing, let’s say emerging markets or Europe or Asia or South America is they tend to be very similar in volatility in my experience. To individual stocks, which I’m not fond of, so I like the broadest base, and then if I want to take a rifle shot in a much smaller portion, I can use more focused ETFs by just haven’t had an issue with the tax credits. I’m sorry I couldn’t be more helpful. You’re listening to Money Talk on KUT News 90.5 and the KUT App. Call or text 512-921-5888. Hi Carl. What is your take on the dollar reset and going to the digital dollar? I’ve heard lately that the government plans to take our cash and give us a payout in digital currency and an exchange rate, yet I’m determined, yet undetermined. It said this event will occur before the Democrats take office. What’s your thought? I think it’s absolute and total baloney. It’s simply not going to happen. The government’s not going have the ability to do that because a substantial portion of the outstanding treasuries aren’t even held by the U.S., held by U. S. Citizens. They’re held by central banks around the world. They are not going to stand for that. Does it make sense to have a digital dollar? Of course it does. But does it make sense to force people to that? No. It doesn’t have anything, in my view, to do with Democrats or Republicans. I just think that that’s not going happen. I’d really question though. The veracity of the source, be very cautious when you read these kinds of extreme things as my experience, they’re always wrong. Always is a big word, but I haven’t seen one that comes to pass. So I would not lose a moment’s sleep about that. Thanks for the text. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Here’s a call. Rick, you are on the air. How may I help?
Rick [00:26:39] I really enjoy your show. I’ve been learning a lot from you over the past few months. I have a question. I’m new to this stock and investment, you know, guide membership with fidelity and I’ve dabbled and dabbeled. I don’t really understand what I’m doing. I just kind of messed around with some money and stuff. I heard you talk about single stocks. I also heard you talking about portfolios and having a whole portfolio of stocks that have managed for you. For somebody like me that’s a novice starting out trying to learn how all of this works. Do you, is it better for me to just get some kind of single stock or just kind of play like I’ve been playing Fidelity or is it to get a whole bunch that are in a portfolio and let them do it? Yeah, yeah.
Carl Stuart [00:27:25] Well, I can tell you my life experience. When I started doing this, I was encouraged by the firm where I worked at the time to buy individual stocks. And I learned a painful lesson that… You can own a quote good company, but bad things can come along and the stock price can drop precipitously. Uh, I, you probably heard me say this over the last few months. Dell computer was a fantastic stock. It made a lot of people wealthy in Texas and around the world, but it, but it also collapsed, uh, from around, I recall. $70 and it went private at $10 and 50 cents and you lost a lot of money if you hadn’t gotten out of it before then So you can lose a lot money in individual stock more than in a port than in Mutual fund or an exchange traded fund the second thing is you can own a good company But it may not deliver an attractive return for years I’ll give you a specific example back in the not back in 1990s when Dell and other technology companies were doing terrific in the stock market. People would call me on the radio and say, I go to the Whole Foods store and it’s packed and they’re building stores all over the country, but the stock just lays there. It’s just dead in the water. What the heck is going on? And then those technology stocks peaked in March of 2000 and collapsed and there was a period of time when Whole Foods market was a terrific stock. The problem is you and I don’t know when that market leadership is gonna shift and change. And then the third problem is you can’t know everything about everything. You can’t be an expert on energy and on healthcare. You can be an experts on consumer non-durables. You can tell whether Coca-Cola is a better stock to buy than PepsiCo. So I just don’t buy individual stocks and I would not do that. What you want to do is put money in regularly and you want to own, you start basically basic with two exchange traded funds. They’re very, very inexpensive to have. Fidelity has these. One would be called a total stock market and the other would be call the total international and I like 75 in the first one and 25% in the second one and you wanna do that until you have a substantial portfolio and the markets are gonna go up and down, you put money in regularly so when the market’s down you’re buying more shares only after you’ve gotten a large portion. In there, do you ever consider buying anything else in the stock market? If you do, then you want to buy either exchange traded funds that focus on a smaller portion of the stock or you want buy mutual funds that have active managers, whether they’re at Fidelity or someplace else, but you want to get, it’s like building a house. You want to have the foundation and they got to have a solid foundation. And the foundation is going to be those two exchange traded funds. And that’s how I would start if I were you, Rick.
Rick [00:30:38] That makes sense. I appreciate that. Thank you.
Carl Stuart [00:30:40] You’re very welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Tim, you are on the air. How may I help?
Tim [00:31:01] Carl, last year you were talking a lot about gold.
Speaker 6 [00:31:06] Mhm
Tim [00:31:06] portfolio, and it seemed like it was going up, up, up, and you were talking about it. But the price has crashed. What’s going on? Why did the price crash, and is it still good to have?
Carl Stuart [00:31:20] I wouldn’t, it’s down a little over 5% this year, Tim. That’s long ways from a crash. Long ways from the crash. The exchange trade to fund that I use year to day through yesterday is down 5.77%. And that’s after being up 64% last year. That’s a regression or a reversion to the mean. That’s not at all unusual for a commodity to come down like that. I think Gold belongs as a permanent part of a portfolio. And when it goes up 64%, if you’re an active investor, you should be selling some of that gold on the way up. You should have a target in your portfolio, whatever it is, 5, 6, 7, 8%. And when you get a 60% gain and you want to be an active investors, peel off some of that gold and put it in the underperforming parts of your portfolio. I don’t see anything that has convinced me. That I should get out of my gold position. Frankly, the opposite. I continue to think gold as a small piece of a non-correlating asset that tends to do well in inflationary times, no guarantee, tends to be well when the dollar goes down and tends to well when interest rates are lower. But I would still have it, but I would just say to you, it has nowhere close to a crash, it’s down a little over 5% and I’m. Perfectly willing to live with that Tim
Tim [00:32:50] Okay, if the price went down if the prices down now does that are you thinking that we’re really going to have lower inflation going forward?
Carl Stuart [00:32:59] I don’t think that you can make that conclusion. I think part of it is you’ve got a, you had a huge run. I mean, silver was up 140%, gold was up 64%, year to date silver is down 27%. That’s right, five times more than silver than gold, gold is down 5%. You got, that’s the nature of commodities, they’re extremely volatile. I don’t think you can read into that inflationary expectations. We’re now five years in. With inflation above the federal reserve target of 2%. We just had a print of great job growth. The economy’s in terrific shape. We have stable, we have lower unemployment, lower job openings. And it’s just we’re in a kind of a solid economy. And I just don’t see the case for sharply lower inflation. No, I don’t think I don’t see that occurring from based on what I’m reading.
Tim [00:33:55] And does the gold do better than treasuries over the long run?
Carl Stuart [00:34:00] No. I think that it has a different return pattern than treasuries. Treasuries are very straightforward. They are absolutely correlated to interest rates. In rising rate environments like the 70s, they were a terrible investment. In falling rate environments, like the 80s, there were terrific investments. By and large, over time, when you buy a treasury or a mutual fund that buys treasurys, whatever your starting yield is. For example, right now, the 10-year treasury is around 4.5%. Based on history, if you bought the 10 year treasury today, your return is likely to be that starting yield. So where you get in trouble is when interest rates for 10 year treasuries were under 2%, right? And people bought the ten year treasury and now the yield’s 4.50%. Yeah, they’re underwater or they’re gonna get their principal back, but they’re under water because rates rose. So I think they have very different, you’re never going to get a 64% move upward in U.S. Treasuries. They’re just apples and oranges. They’re different asset costs and belong in a different part of your overall portfolio.
Tim [00:35:13] Okay, thank you.
Carl Stuart [00:35:14] You bet. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Call or text 512-921-5888. Here we go. Colleen, you’re on the air. How may I help?
Colleen [00:35:33] Um, I ain’t know nothing about stocks I inherited from my parents over 20 years ago. Yeah. Um, my parents were very conservative. My mother actually inherited Detroit Edison stock from her grandmother. Ha ha ha ha!
Carl Stuart [00:35:52] That’s a terrific story, I love it!
Colleen [00:35:55] Okay so that’s what got my father interested in stock because my mother got to spend whatever she inherited yeah on whatever she wanted to spend the money on well i haven’t spent i haven’t spend a dime of the interest, I bought more stock.
Carl Stuart [00:36:17] Good for you.
Colleen [00:36:18] It’s not Detroit Edison anymore. I’ve forgotten what they’ve renamed it, but I just call it DTE anyway. That’s right. But besides that, my dad got interested, so he got Prudential. Yeah. He bought things in medicine. He bought thing electrical, water. He bought the necessities of life. Yeah, yeah. The necessities. All earned wonderful interest, and I inherited a whopping $35,000 in stocks. Over the years, I have pulled three different times to go to trips overseas. I pulled six grand each time to cover my husband and myself. And most recently, I paid for a used car. I pulled $25,000. Out. I still have 70,000 in stock. Okay. So do I keep it going and just pull it out when I want to? Yes.
Carl Stuart [00:37:24] Yes, yes, absolutely. You are a perfect example of investing in human innovation and as a result it’s created wealth for multiple generations. I might not pick the stocks that you’ve picked or inherited, I might pick individual stocks, I may pick mutual funds but that doesn’t matter. If I had your situation, you’re getting the ability to have daily liquidity. When you sell these, you’re paying a lower tax rate, not income tax, a capital gains rate. That’s a wonderful story, and if I were in your shoes, I’d keep doing precisely what you and your ancestors did, if I was you, Colleen.
Colleen [00:38:05] Cool now my problem is my mother needed nursing home care, right? My dad Anticipated that because her grandmother needed nursing care. So he invested in nursing home insurance if you will
Carl Stuart [00:38:23] Yeah, right, long-term care insurance.
Colleen [00:38:25] Yes, and we used it for my mom. My dad bought it for himself as well. However, he only lasted 12 days.
Carl Stuart [00:38:35] Yeah, that’s the thing about buying it, yes.
Colleen [00:38:38] Yeah, so I’m anticipating, my husband didn’t want to invest in that, so, I’m finding myself thinking that I might need it.
Carl Stuart [00:38:52] I would tell you, I think it’s too late. That long-term care insurance has gone through a real transition. When it first came out, when your parents had it, it was such a new thing. The insurance companies didn’t know the important things. They didn’t how long people were going to live, and they didn’t what was going to cost, the health care was going to cost. And as a result of that, insurance companies lost a lot of money, a lot big ones quit doing it? Uh… They just got out of the business altogether because they were losing so much money and the ones who stayed in the business made sure that they did they re they diminish the benefits the diminished the term that uh… How long it lasts and they raise the premiums very high uh… At you and i see here that you’re seventy five years old i think it’s it i doubt i doubt that you you can do your homework but you’re going to be shocked at how expensive it is I would, in your shoes, I would not recommend it.
Colleen [00:39:52] Okay, so keep my stocks going.
Carl Stuart [00:39:54] Yes!
Colleen [00:39:54] I’ll defend them as I will.
Carl Stuart [00:39:56] Yeah, that’s exactly right. Okay. Thanks for calling. Thank you very much. You’re welcome. Bye bye. Bye bye, I love this show. You’re listening to Money Talk and it’s time for me to take a break. Time for you to call or text 512-921-5888. I’ll be back.
Jimmy Maas [00:40:19] 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 non-profit 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 [00:40:51] This is Money Talk with Karl Stewart. Call or text him with your questions at 512-921-5888. Now, here’s Karl.
Carl Stuart [00:41:05] Welcome back, you’re listening to Money Talk. Who was that guy on the radio? You’re listening, you know, it’s fun. It’s, I never get over how weird it sounds to hear yourself like that. You’re listen to Money talk on KUT news 90.5 and the KUT app and I forgot to mention that you can always listen to previous broadcasts by going to KUT.org slash Money Talk or wherever you get your podcasts. Right now, call or text 512. 921-5888. Here’s the text. Carl, could you please talk about the difference between managing your own retirement accounts and hiring a firm such as Pioneer Wealth Management to help? Is it really worth the cost? That’s a terrific question. Uh, and I’m not responding regarding Pioneer wealth. They’re sponsor of our broadcasts and I am totally, this is arm’s length. I’m, not talking about them. Okay. The, this, is the first thing. And a lot of times people don’t think about this and make a mistake. The first thing is, do you have the time and the interest and the desire to manage your own investment portfolio? Because the answer is pretty straightforward, I do or I don’t. The tricky part is, when you have four good years like we’re experiencing now with almost double digit returns each year, it makes investing a lot more fun. But when you have a down year, like 2022… When the stock market is down between 19 and 33%, that’s a lot less fun. What I’ve observed in my career is that there are people who have more of a hands on personality and people that have a more of, I’m not interested in this. I want to do something else. And that’s the first and foremost thing, because if you hire an investment advisor, you should take their advice. Otherwise don’t hire them. The worst, the most unhappy people in my experience are the ones who hiring a manager and then, and then they’re constantly second guessing or why did you do this? Or I read about this in the newspaper or what about that? And it, and it’s a bad experience. The other worst experience is you think this stuff is easy and you, and you like it because you have a good four years and then the market collapses. And you can’t sleep at night and it ruins your quality of life and you should never be doing that yourself. I used to do my own income taxes and I got that blood curdling letter with the address the Internal Revenue Service. I decided I have no business doing my own taxes because I’m getting audited because I made a mistake. And I know that if I want to go out and find an accountant, that if go to five different local accountants. They’re going to charge roughly the same thing because that’s a competitive marketplace. So wherever you go to go to a wealth management firm, the fees are going to be similar. The question is, is it, is that right for you? They should explain to you their investment strategy and they need to explain it and learn words that make sense to you. Then it, and then also you need to understand what’s a happy, healthy client relationship look like. And last, not first is the fee. And to finish your question, is it really worth it? The answer is, it depends first and foremost on your personality. I believe that a good investment advisor who does her job keeps you on your plan. When you want to do something that’s not to your long-term benefit, she keeps you from, obviously it’s your money, but she persuades you not to do it. That’s worth a lot of money in my view, if you’re that type of person. Thanks for the text. You’re listening to Money Talk on KUT News 90.5. And the KUT app. Call or text 512-921-5888. Here is a call. John, you are on the air. How may I help?
John [00:45:09] Yes uh… I i am uh… My mom purchase have you ever heard of white partners investors scribe at the biggest fraud in texas history my sweet mom purchase but convinced to purchase six policy fifty thousand dollars each uh… By a salesman posing as a you know financial advisor so into a thousand around two thousand three You purchased six. Policies of fifty thousand dollars each for my benefit and soon after every year uh… They send high payments for each policy and if you do not make the payments you lose the entire policy now there’s two policies remaining i as the beneficiary one policy has a value of only eighty six thousand and if you deduct the fifty thousand my mom paid it only has a relative value of thirty six thousand payments have been made to a company called north star life investors they it’s it’s a it’s criminal fraud if i don’t make the payment of businesses eighteen thousand due January 19th, then… I lose the policy. If I make it, then it’s $18,000 that will drain out of my bank account. I’m in the hole hundreds of thousand dollars because it’s a giant scam and criminal fraud. So I believe I need to go to the FBI or the Attorney General’s office because there’s no way for a financial gain, and the payments are excessive due to the small value. Of the actual policy.
Carl Stuart [00:47:03] So John, do you have a question, please?
John [00:47:05] Yes you think this is uh… A crime that uh…
Carl Stuart [00:47:09] I’m sorry, no, I’m not a lawyer, but no, it’s a terrible, terrible thing that happened. But I don’t see any legal recourse because if it’s been sold to another company, it is a going concern. She was sold a terrible life insurance product and they’re telling you if you don’t pay this huge premium, you’re going to lose the death benefit. But if they do this year after year You’re better off to refuse to pay it and walk away from it. That’s the logical thing to do, but it’s not a criminal enterprise based on what you told me. It’s a terrible life insurance product. And what’s happening is the cash value is declining and they’re charging you more to keep that $50,000 death benefit. Don’t do it, walk away form it.
John [00:48:01] No, and what happens is by default they only pay 13 cents on the dollar.
Carl Stuart [00:48:07] 13 cents is better than zero because you’re going to keep putting money in so I mean there’s
John [00:48:11] Yeah, I realize that now. After analysis, in your opinion, I’m in agreement with you, but if you Google it up, life partners, investors, it’s considered the biggest fraud in Texas history. So I thought there had to be some type of criminal.
Carl Stuart [00:48:27] Yeah, I have, I am not, you’re welcome to, you welcome to go talk to an attorney, but I’m not aware of any other recourse. Frankly, John, I’m sorry. I appreciate your opinion. Thank you so much. Okay. Thank you. You’re welcome. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. 512-921-5888. Chris, you are on the air. How may I help?
Chris [00:49:03] The and four fifties money market yeah super heavy on money market because I’ve kind of been scared about where to put things yeah I’m just looking for advice because I feel like I’m missing out
Carl Stuart [00:49:23] Yeah, you are. There’s no question that the one thing about those money market funds, which should be short-term cash investments, is after inflation and after taxes, or just after inflation even, they’ll have a negative return. What you want is to have several millions of dollars by the time you retire, not a million dollars, which is what you have. And so you need to stay
Chris [00:49:53] Unfortunately, in a situation, I’m a widower now, a single parent with three kids. Oh boy
Chris [00:50:00] So things have changed quite a bit. I’m not gonna have maybe the income that I’ve had the last 20 years. So I’m trying to be smart about it, but I’m gonna be honest with you. I’m worried about getting back into the market and the AI bubble bust and me lose my tail on it. So that’s my concern.
Carl Stuart [00:50:21] I would just tell you that in my 48 years of doing this, there’s always been good reasons to be frightened. I tell people, if you’re not worried, you’re not paying attention. I share your concern about AI. I think any thoughtful person would. But if I told you four years ago, Chris, that inflation would go to 9%, that Russia would invade Ukraine, that oil would go to $100 a barrel. And that we would have a war in Iran, and then told you that the stock market would be up 15 to 20% each year. You just say, Carl, that’s never going to happen. And that’s what precisely happened. You were not, you’re old enough, it wasn’t that long ago when COVID hit, and it looked like the whole global economy was coming apart. And people who invested by the headlines, and sold their stocks or didn’t invest in the stocks, made a lifetime mistake. It is time for you to come up with a strategy and to do it slowly and methodically and you need to have, at your age, ultimately you need have somewhere between 55 and 65% in equity stocks and the balance probably in a combination of three different short, intermediate, and longer-term bond funds. In your 401k, if they have target date funds, you need to pick a target date that is further out than your actual retirement age so you get more allocation to equities because if you don’t do that, because your income is going to be less, you’re going to have a very hard time either helping out your kids for education or being able to retire. So you’re too heavily in cash. The outlook for AI is frightening and The world’s a scary place, but I would tell you, you need to invest. You just need to say, okay, six months from now, I’m going to be even more conservative. Nine months from, now I’m gonna have across my, all my different accounts, I am going to have 50% in stocks. I am gonna have 70, 75% in an exchange, and I am talking not your 401k because you to use the menu you’re given. I’m going to have 70-75% in something called a total stock market exchange traded fund and the balance in the total international fund. I’m gonna either do this on my own or I’m go and engage in advisory. That’s a whole separate situation. But you need to get on the bandwagon of human innovation. The outlook is scary. Take your time. And dollar cost average. You know, you get every the 15th of every month or the nearest business day, you put in one ninth of what you’re going to have in the stock market because the odds are the stock markets going to go down. We are having, this is our fifth consecutive year of positive returns for stocks. That seldom happens, seldom happens. But it’s actually to your benefit if you get up the courage to do this and the market goes down for the next year. That’s going to be good for you because you’re going to get lower prices, but your fear has been your enemy. You have paid a huge opportunity cost by not being invested in the stock market. It always has a scary part to it. Do it slowly, but do it right away if you want to meet your objectives, in my view Chris.
Chris [00:53:58] That’s great advice, I do appreciate it and a lot of the reasons I have this so much in the money market is because I have sold off some of the profits.
Carl Stuart [00:54:07] Exactly. Over the last year. Okay. Get back in. Take your time, but get back in
Chris [00:54:14] And what do you think about, you know, mutual funds and such?
Carl Stuart [00:54:19] I much prefer mutual funds and exchange traded funds. Start with index, if you’re going to do it yourself, start with index funds. You can use any of the big custodians, Fidelity, Schwab, Vanguard, and do those two funds I said. I use Schwab. I use Swab kind of for everything. They’re very easy. Okay. Schwab has a total market fund, total U.S. Market, and a total international. So does Fidelity and so does Vanguard. Use that. Get into that monthly thing for the next six to nine months. Yes.
Chris [00:54:52] Well, I appreciate the advice, and I’m going to take it. I’m gonna go ahead and jump in on Monday.
Carl Stuart [00:54:57] Good for you. Thanks for calling. You’re listening to Money Talk on KUT News 90.5 and the KUT app. Let’s see some text here. Hi Carl, I really like listening to you. Thank you. I work at a startup and have some options I can exercise as 6 cents per share and the firm market value is $5. Congratulations. Should I exercise those options given that my company may have an initial public offering in the next few years. In order to benefit from a lower tax rate, long-term capital gains, should I just sell to cover if the IPO happens? I wouldn’t wait for the IPO. I would exercise, I don’t know, you know, the dollar value, but if you’re going to keep getting them, then you should keep exercising it and selling. You don’t want to get out of it completely, but here you are. Your biggest investment is your career, it’s with your company. This is another huge investment. I’m not suggesting that you get out of it, but waiting for an IPO that could be years in advance is an extremely risky situation. There’s even talk now about Anthropic pulling back from its initial public offering, which was going to happen frankly momentarily. I’ve seen people that had these kinds of stock options back in the late 90s. They held on and then the internet bubble burst and they ended up with nothing. So, I would exercise some of those. I would see if I thought I was going to have additional options provided to me. If I was, I’d be more aggressive in selling it. If I thought these were all that I was gonna get, then I would sell a substantial portion, 25 to 35% of them if I were in your shoes. Thank you. Carl, let’s just see here. I don’t know. I love your show. I’m late 50s and I’ve started pretty late savings, so I’m not where I want to be in investing. I’ve got about $550,000. I had an advisor who encouraged me to only do Roth. Right now I max my 401k but it’s not a great salary. I invest one half traditional and one half Roth. What would you agree that I should stick to a Roth? I think it’s hard to know that. I think that it really kind of depends. There are multiple variables. I’m going to take your question next week so I encourage you to listen. Time for me to go. I want to thank Alyssa for doing her usual terrific job. Thank you for listening and as I just told this text person Be sure next Saturday at 5, tune in to Money Talk.
KUT Announcer: Laurie Gallardo [00:57:31] You’ve been listening to Money Talk with Carl Stewart. Carl Stewart is an investment advisor representative of Stewart 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.
