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We invest in large companies, small companies, value companies, international companies, emerging markets, etc. We practice discipline when investing in all of these asset classes. If we want 20% of a portfolio allocated to large value, we maintain that percentage.We also practice strategic rebalancing. If something has an upward momentum, we set tolerance zones. If we go above or below those tolerances, we buy or sell. We practice discipline. Why? I share more in this episode of Best in Wealth.[bctt tweet="Discipline in asset allocation means sticking to your plan—no matter the headlines. Find out why this matters in today’s investing landscape. 🎧 #AssetAllocation #InvestingDiscipline #BestInWealth" username=""]Outline of This Episode [1:02] The importance of reading the full story [3:13] Why we practice discipline in asset classes [8:00] Taking a look at the big picture [11:02] Developed markets vs emerging markets [13:23] A disciplined approach to investing matters
Why we practice discipline in asset classesBy the end of the third quarter of 2024, the S&P 500 was up almost 20%. It’s up another 6% since then. The S&P 500 is one of our best-performing asset classes. If we’re just reading the headline, “The S&P 500 is doing the best,” we might think we should put more money in. But hindsight is 2020.And if we’d listened to the experts, many of them said that small-caps were going to perform the best in 2024. But small-caps are only up a little over 10% after the third quarter. It’s also gone up 6–8% since then but is still underperforming the S&P 500.If we’d listened to the experts, we’d be tempted to put more money into small-caps. But that’s not the right decision either. We need to remain disciplined to our plan for each asset class.[bctt tweet="The S&P 500 is up, but that doesn't mean we chase momentum. Strategic rebalancing is key! Learn how to stay disciplined in your investment choices. #InvestingStrategy #AssetClasses #WealthManagement" username=""]Taking a look at the big pictureLooking back 95 years, the small-cap index has done better than the large-cap index. We call this the small-cap premium. However, it comes with more risk. Because of the risk, investors demand a higher average return for owning smaller companies.Our portfolios skew more large than small because of the risk. However, we do want to capitalize on some of those returns—but not because of headlines.If you choose something riskier, it won’t always do better. On average, stocks do better than bonds because they’re riskier—but it doesn’t mean stocks always beat bonds.Developed market small-caps on average bean developed markets large-caps by about a percent and a half per year. Small-caps over the last 20 years perform better than large-caps in emerging markets.Remember, past performance is no guarantee of future results. Have small-caps have underperformed large-caps in the recent past? Yes. Does that mean we abandon small-caps? No? Does that mean the premium is gone? We don’t think so.A disciplined approach to investing mattersWe need to investigate every headline that we read because they don’t tell the full story. If we’re just reading the headlines, we might make an emotional decision about asset allocation. We can’t try to guess which asset class will do the best. When we do that, we’re putting our family and our future in jeopardy. A disciplined approach to investing matters. Learn more in this episode of Best in Wealth.[bctt tweet="Reading the full story helps you make smarter choices. Get the full breakdown on disciplined investing in today’s episode of Best in Wealth! #InvestingInsights #BestInWealthPodcast" username=""]Connect With Scott Wellens -
Ever wondered where you rank financially among Americans? Curious about what it takes to join the top 5% in income or net worth?Every three years, the Fed surveys the finances of American households, tracking assets, debt, and more. One of the things they cover is who landed in the top 5% of both income earned and net worth.In this episode of Best in Wealth, I will share the income that puts you in the top 5% of income earners by age, what lands you in the top 5% of net worth by age, and why none of it matters. Don’t miss it![bctt tweet="Are you in the top 5% of income-earners or net worth? Learn what it takes in this episode of Best in Wealth! #PersonalFinance #FinancialPlanning #Wealth #WealthManagement " username=""]Outline of This Episode [1:15] Getting into the University of Wisconsin Madison [3:21] The income that puts you in the top 5% of income [11:12] Individual versus household income [12:00] The income that puts you in the top 5% of net worth [17:21] Are you in the top 5% of income or net worth?
The income that puts you in the top 5% of earned income by ageDo you land anywhere in these brackets? 18-29: If you earn $156,732 or more, you are in the top 5%. You are just launching your career and starting to earn an income. 30-39: If you earn $292,927 or more, you are in the top 5%. You are getting more established in your career and perhaps started a business or received a promotion. 40-49: If you earn $404,261 or more, you are in the top 5%. Maybe you continued to receive promotions or your business grew. 50-59: If you earn $598,825 or more, you are in the top 5%. The 50s are your highest potential for earnings years. Maybe you sold your business or became the CEO of a company. 60-69: If you earn $496,139 or more, you are in the top 5%. You may be retired and living on social security and your investments during these years. 70 or older: If you earn $350,215 or more, you are in the top 5%. Most people in their 70s probably are not working any longer and that income is being derived from Social Security, pensions, and investments.
What does it take to be in the top 5% of households? If you earn $499,000 or more, at any age, you are in the top 5% of all income earners.[bctt tweet="What income puts you in the top 5% of earned income by age? I hash out the numbers in episode 253 of Best in Wealth! #wealth #retirement #investing" username=""]The income that puts you in the top 5% of net worthWhat does the top 5% of net worth look like in each age group? 18-29: $415,700 or higher 30-39: $1,104,100 or higher 40-49: $2,500,000 or higher 50-59: $5,001,600 or higher 60-69: $6,684,220 or higher 70 or older: $5,860,400 or higher
Your net worth is far more important than your income. You can make all of the money in the world but if you do not save anything, your net worth will never increase. It will stay zero.Secondly, you can earn a lot less than the top 5% of income earners and still save enough to be in the top 5% of net worth.Are you in the top 5% of income or net worth?It is okay if you do not fall into any of these categories—they can be very skewed. Numerous factors impact these numbers. Secondly, these numbers don’t matter. If you have the right retirement plan for you, you will have the retirement of your dreams regardless of whether or not you land in the top 5%.[bctt tweet="Are you in the top 5% of income or net worth? Does it matter? Let’s hash it out in this episode of -
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Did you know that anyone can say they are a financial advisor? They may not be licensed or experienced. So how do you know who to trust?In this episode of Best in Wealth, I will break down the three types of people who put “financial advisor” on their business cards, what the letters after a financial advisor's name mean, and how a fee-only financial advisor is compensated for their services.Knowing all of these things will help you determine what type of advisor is right for you to help you achieve a successful retirement.[bctt tweet="Did you know that anyone can say they’re a financial advisor? They may not be licensed or experienced. So how do you know who to trust? Find out in episode 252 of Best in Wealth! #Retirement #Investing #PersonalFinance " username=""]Outline of This Episode [1:08] High expectations do not leave room for satisfactory outcomes [6:17] The 3 types of people who put “financial advisor” on their business cards [19:14] How fee-only financial advisors charge for their services [22:34] What do the letters after a financial advisor's name mean? [24:17] Work with someone you can build a connection with
The 3 types of financial advisorsThree different types of people typically put “financial advisor” on their business cards: Insurance Sales Representative: They are required to be licensed to discuss or sell insurance. Their main goal is to sell you life insurance (typically whole life insurance that can be invested and earn dividends and be used for retirement). Is someone who can only sell life insurance acting in your best interest all of the time? How could they be? They make a commission on the insurance product that they sell you. Registered Representative/Broker-Dealer: They take an exam to be “registered” to sell securities, mutual funds, life insurance policies, etc. They are paid by commission, much like insurance representatives. Or they will recommend a mutual fund where they get a percentage (annual 12B1 fees and more). They are also not fiduciaries. Investment Advisor Representative: They must take a securities exam that also covers laws required to act as a fiduciary. An investment advisor is prohibited from collecting commissions. The fees they collect come directly from the client. They can call themselves fee-only representatives.
I am a fee-only Investment Advisor Representative. I do not co-mingle with insurance sales representatives or registered representatives. It removes any conflict of interest. I am not beholden to any company. I must act in the best interest of my clients. Most financial advisors are dually registered. They may have an insurance or broker license.Listen to find out what questions you have to ask an advisor to find out if they are strictly an Investment Advisor Representative.[bctt tweet="In this episode of Best in Wealth, I’ll break down the three types of people who put “financial advisor” on their business cards and why it matters. #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]How fee-only financial advisors charge for their servicesThere are four primary ways a fee-only advisor might get paid: Hourly: You hire a financial advisor to create a financial or retirement plan and you pay them for the hours it takes to do the job. It is a short-term relationship. One-time planning: A one-time plan may cost you $5,000–$7,000, which you pay once. They deliver the plan and you write them a check. It is a short-term relationship. Monthly retainers: The advisor might charge a couple hundred dollars a month, depending on the complexity of your plan. This may be great for someone who needs... -
Do we care who wins the election? Does it actually impact our investments? The issues at stake matter to each of us for different reasons. Most Democrats think things will be better if a Democrat is voted into office. Most Republicans likely feel that things will fare better with a Republican in office. But does who wins the election actually matter when it comes to your investments? I will break it down in this episode of Best in Wealth.[bctt tweet="Does the outcome of the presidential election impact your investments? I share the surprising answer in episode #251 of Best in Wealth! #Investing #FinancialPlanning #WealthManagement " username=""]Outline of This Episode [1:08] September is never a good month in the stock market [4:02] Stock market statistics during each presidency [15:32] What do we do with this information? [20:17] Can a President influence the stock market?
Stock market statistics during each presidency for the last 100 yearsWe have had 17 presidents since 1926. Nine of the presidents were red, eight were blue. How did the stock market fare during their presidencies? Calvin Coolidge (Republican) was President from 1923-1926: If you invested $1 the day he became president, that dollar would’ve turned into $2.33. Herbert Hoover (Republican) was president from 1929-1933, during the Great Recession: Inflation was -0.7%. The annual GDP was negative 7.5%. Your $1 would have dwindled to $0.28. Franklin D. Roosevelt (Democrat) was president from 1933-1945: Democrats controlled the Senate and the House. Unemployment was 25.6%. The average GDP was 9.4%. Your $1 doubled twice and then some—becoming $4.61. Harry Truman (Democrat) was President from 1945-1953: Max unemployment was 7.9%. He inherited the end of Hoover’s recession. Annualized inflation was 5.4%. The average GDP was 1.3%. Your $1 turned into $3.10. Dwight Eisenhower (Republican) was President from 1953–1961. Max unemployment was 7.5%. The average inflation was 1.4%. The average GDP was 3%. There were three different recessions during his term in office. Your $1 turned into $3.05. John F. Kennedy (Democrat) was President from 1961-1963. Democrats controlled the House and Senate. Max unemployment was 7.1%. The average inflation was 1.2%. The average GDP was 4.4%. Your $1 turned into $1.39. Linden B. Johnson (Democrat) was President from 1963-1969. Democrats controlled the House and Senate. Max unemployment was 5.7%. The average inflation was 2.8%. The average GDP was 5.3%. Your $1 turned into $1.66. Richard Nixon (Republican) was President from 1969-1974: Democrats controlled the House and Senate. Max unemployment was 6.1%. The average inflation was 6%. The average GDP was 2.8%. Your $1 stayed $1. Gerald Ford (Republican) was President from 1974-1977: Democrats controlled the House and Senate. Max unemployment was 9%. The average inflation was 6.5%. The average GDP was 2.6%. There was a huge recession when he first started. Your $1 turned into $1.51. James (Jimmy) Carter (Democrat) was president from 1977-1981: Democrats controlled the House and Senate. Maximum unemployment was 7.8%. The average inflation was 10.2%. The average GDP was 3.3%. Your $1 turned into $1.55. Ronald Reagan (Republican) was president from 1981-1989: Democrats controlled the House and the Senate was mixed. Max unemployment was 10.8%. The average inflation was 4.2%. The average GDP was 3.5%. Your $1 turned into $2.89. George H. W. Bush (Republican) was President from 1989-1993:... -
I frequently talk about what you should do to prepare for retirement and how to handle the years leading to retirement. But I rarely talk about what to do during retirement because I have not experienced it. [bctt tweet="Retirement will be different than you expect. How? Learn more in episode #250 of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username="wellensscott"]So when I came across Fritz Gilbert’s article, “6 Lessons from 6 Years of Retirement,” I knew I had to talk about it. In the article, Fritz talks about the surprising things he has learned six years into retirement. I will cover the fascinating lessons in this episode of Best in Wealth.Outline of This Episode [1:06] Thank you for being loyal listeners! [1:36] What should you do during retirement? [4:52] Lesson #1: Retirement is complex [7:47] Lesson #2: Retirement changes with time [10:45] Lesson #3: Retirement will be different than you expect [14:17] Lesson #4: Your priorities will change throughout retirement [17:45] Lesson #5: Your mindset matters a lot [18:58] Lesson #6: Retirement can be the best years of your life
Lesson #1: Retirement is complex When you retire, you have far fewer external influences than during your working years. Money issues are top-of-mind during the early phase of retirement. It is scary moving from collecting a paycheck for 30+ years to starting to live off of your nest egg. But Fritz believes that true value comes by figuring out all of the non-financial issues in retirement.[bctt tweet="Your mindset matters a lot in retirement. Find out why in episode #250 of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username="wellensscott"]Lesson #2: Retirement changes with time Your experience will change as you move from the honeymoon stage to more advanced stages. The changes will last for years and will be different than what you expect. Your retirement plan will change. Your new reality requires a new approach. Embracing the challenge is part of the fun. Why not enjoy the new life? You get to experiment as you face the changes. Lesson #3: Retirement will be different than you expect I spend a lot of time talking about retirement goals with my clients. Whether it is traveling,... -
I believe there are three rules that every family steward should follow when it comes to investing. In theory, these rules are “easy” to follow—but living by them is not. Secondly, these rules will not surprise you. That does not make them any less important. So in this episode of Best in Wealth, I will share what each rule is and you will discover why you have to follow them.[bctt tweet="📣 What are my 3 BIGGEST rules for investing? Find out in episode #249 of Best in Wealth! #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]Outline of This Episode [1:06] The 3 rules for dating my daughters [5:31] Rule #1: Do NOT try to time the market [11:12] Rule #2: Do NOT focus on the headlines [13:53] Rule #3: Do NOT chase past performance
Rule #1: Do NOT try to time the marketWhether it is a bad day in the stock market or upcoming elections, it can be easy to let your emotions get to you and think, “Maybe I should get out of the market right now.” It is easy to sell everything and get your money out.However, it is far harder to decide when to put the money back in. No one ever thinks about the second half of the equation. Do you have an investing philosophy? What is your system? When will you get your money back in the market?The S&P 500 has been rolling. It was up 15% last quarter. Small Value was negative for the year. Wouldn’t it be tempting to take the money from your small value and move it into the S&P 500? But Small Value has done far better this quarter. You would have lost out on that money.John Bogle—The Founder of Vanguard—spent over 70 years on Wall Street. He’s famously known for saying, “I’ve never found anyone who can successfully time the market.” There is a reason for that.[bctt tweet="🚨 Do NOT try to time the market. Why? Check out episode #249 of Best in Wealth for the answer. #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]Rule #2: Do NOT focus on the headlinesIt is too easy to become enamored with popular stocks that get media attention. For example, the Magnificent Seven has risen in popularity (Google, Apple, Facebook, etc.) for the last 10 years. They have done amazingly well in 2023 and 2024.However, once companies hit the “top 10,” their returns tend to decline. Just because you read a headline about a company does not mean it will perform better. What you have read about is already priced into the market. You must separate what you are seeing on the news from your investment.Rule #3: Do NOT chase past performanceYou might be inclined to choose investments based on past returns. You expect top-ranked funds to continue to deliver their best performance. We see this time and time again with new investors. They do not know where to start. The only information they have in front of them is past performance. So they choose what has had the best performance recently.But research shows that most funds that are ranked in the top 25% don’t remain in the top 25% over the next five years. Only about 1-in-5 mutual funds stayed in the top-performing group. The lesson? A fund’s past performance offers limited insight into its future returns.As family stewards, how do we shift our focus? What do we want to do instead? Listen to hear my thoughts.[bctt tweet="📣 One of my biggest rules for investing: Do NOT chase past performance. Learn why in episode #249 of Best in Wealth! #investing #PersonalFinance #FinancialPlanning #WealthManagement" username=""]Connect With Scott Wellens Schedule a discovery call with Scott Send a message to Scott... -
When we decided my wife was going to get a new vehicle, I knew we needed to test drive the vehicle she wanted: A Jeep. She had never driven a Jeep before. She had never experienced what it was like driving something with the doors off. So I knew she needed to get behind the wheel to see how it felt. Let me tell you, our Jeep-buying experience was a wild ride!In this episode of Best in Wealth, I will share our experience, and how I ultimately purchased my wife her dream Jeep at the best price possible. Don’t miss it![bctt tweet="My wife and I just bought a brand new Jeep. I detail how I negotiated the best price in episode #248 of Best in Wealth! #FinancialPlanning #WealthManagement #Jeep" username=""] Outline of This Episode [1:11] Growing our health alongside our wealth [2:46] Walking into the dealership [9:17] The moment everything went wrong [12:23] Asking for the best price [17:17] Purchasing my wife’s Jeep
Walking into the dealershipWhen we walked into the dealership, we test-drove a Jeep with the salesman. He immediately pushed us to sit down, crunch some numbers, and make a deal happen. But I knew we would not be making an emotional purchase that day, and I immediately let him know we were not going to move quickly.My wife told him that if negotiation was necessary, all communication had to go through me. The next day, this salesman started bombarding my wife with text messages, emails, and phone calls. Not surprising.She responded and said she wanted to test-drive a hybrid with the doors and top off. We set up a day and time. We walked to the Jeep and he showed us how he had taken the doors off. But he had not taken the top off because it was a “Two-person job.”We took it for a spin with the doors off and it was really cool. It was a great ride. My wife decided she wanted a Jeep. But, yet again, he had her test drive a Jeep that wasn’t a hybrid. My wife had a list of non-negotiable specifications that she wanted from the Jeep, including it being a hybrid. We knew that a hybrid wasn’t on their lot.This salesman had done enough for us that I knew I would buy the Jeep through him if he could match the best price that I could find. That’s when everything went wrong.[bctt tweet="We just bought my wife a brand new Jeep. Why’d we buy new? How’d we get the best price possible? I share my #negotiation secrets in this episode of Best in Wealth! #FinancialPlanning #WealthManagement #Jeep" username=""] The ridiculous askHe brought us inside to talk to his sales manager. The sales manager told us that finding my wife’s perfect Jeep was like finding a needle in a haystack. So he asked us to commit that we would buy the Jeep from them before he located it! He would only negotiate at that point. You should never commit to anything before you negotiate and land on a price. It was completely backward, so we walked out the door.Buying my wife’s JeepI immediately went home, sat down at the computer, and found five different Jeeps fitting my wife’s specifications within five minutes.I emailed all five dealerships asking them to email me their best price on the Jeep. Every dealership called me right away. One said, “We do not negotiate over the phone, you have to come in.” I crossed them off my list.The other four dealerships gave me their price within 12 hours. But I did not know if what I was quoted was the best deal. So I took the three best prices and sent them all a text saying, “Congratulations. You made it to the top three with your initial offers. If you would like to sweeten the deal, I’m giving you one final chance. I’m buying a Jeep in the next 48 hours and buying it from the person who has the best price.”One said, “That was my best price,” but the other two sweetened the deal. They took more money off. One... -
I am often asked how much a family should spend on vacations. While that is entirely personal, most experts recommend that 5–10% of your net income can be spent on vacations.Many factors may change this number. Maybe you have a large family or your kids are into expensive sports. You might not have that income to spend on a lavish vacation.But to spend any amount on a vacation, you need to budget. You cannot go into debt. So how do I do it? I will share a great strategy in this episode of Best in Wealth.[bctt tweet="✈️ How much should you spend on vacations? How do you budget for them? Learn more in this episode of Best in Wealth! #PersonalFinance #VacationPlanning #WealthManagement" username=""]Outline of This Episode [1:04] We are heading on vacation to Europe! [2:38] How much you should spend on vacation [6:48] How we budget for vacations [8:20] Be aware of luxury creep [10:02] Be aware of entitlement creep [11:33] Do not be a vacation scrooge
How to budget for a vacationYou cannot go into debt to purchase a vacation. I have done it. I had a great time. But when I got home, the guilt and regret sunk in. That is why I firmly believe you need to have a spending plan.We set a monthly budget. Then, we have a separate spreadsheet that lists all of our non-monthly line items. It covers things like Christmas gifts, oil changes, car insurance, and vacations.All of these items are added up. If the number is $12,000, we divide it by 12, and save that money in our “escrow savings account.” Every time a non-standard monthly expense comes up, we use that money to pay for it. Those things will not disrupt our budget.[bctt tweet="🗺️ How do you budget for a vacation? I share my family’s strategy in episode #247 of Best in Wealth! #PersonalFinance #VacationPlanning #WealthManagement" username=""]Be aware of luxury creepIf you are going to Disney, there are a lot of different hotels to choose from in Orlando, right? You can stay at the Holiday Inn and Suites or choose from numerous luxurious hotels and resorts. Do not let yourself get lured in. Budget within your means.I spent a lot of time budgeting for our trip to Europe and I have saved for a couple of years. We are working within our budget. When it is all said and done, I will be proud. I am getting to spend time with my family within the budget I have set.Be aware of entitlement creepDo not let entitlement justify overspending on vacation. You are grinding every day at your job. You are exhausted being a parent. You deserve a vacation. But do not spend too much because you “deserve” it. It will eat you up inside.It is not about keeping up with the Joneses. Just because your neighbor stayed at a five-star hotel and was waited on hand and foot does not mean you should. Do not allow yourself to be talked into something you cannot afford.You know who you are. You are listening to a financial podcast. You are a budgeter. But you cannot be afraid to take a vacation. A vacation is investing in your family, investing in improving your mental health, and investing in lasting memories. Remember, vacations with your loved ones are an appreciating asset.[bctt tweet="⭐ Don’t let entitlement justify overspending on vacation. You deserve a vacation. But let’s keep it within budget, shall we? Learn more in episode #247 of Best in Wealth! #PersonalFinance #VacationPlanning #WealthManagement" username=""]Connect With Scott Wellens Schedule a discovery call with Scott Send a message to Scott -
There are a lot of huge decisions you have to make in life. What career are you going to choose? Will you get married? Will you have kids? Will you buy a home? There are many more. But there are not many bigger than this question: When are you going to retire? Maybe that is your only huge decision left. Have you really thought about it yet? Because if you are going to retire early, we have to plan for it. In this episode of Best in Wealth, I cover four huge questions you have to consider to help you make one of the biggest decisions of your life.[bctt tweet="🚨 In this episode of Best in Wealth, I ask 4 questions that will help you decide when to #retire. Check it out! #Retirement #RetirementPlanning #FinancialPlanning" username=""]Outline of This Episode [1:02] What big choices have you made in your life? [2:33] What the 2024 Retirement Confidence Survey tells us [9:48] 4 things to consider when contemplating early retirement [11:04] Question #1: Why do you want to retire early? [12:34] Question #2: What is your plan for retirement income? [15:00] Question #3: Do you have a plan for health insurance? [18:00] Question #4: When are you going to collect Social Security?
What the 2024 Retirement Confidence Survey tells usDeciding when you are going to retire is an enormous decision to make. Americans are not mandated to retire at a certain age. Certain milestones may make the decision easier. Age 62: This is when you are first eligible for social security (though you will take a big hit on benefits) Age 65: This used to be the full retirement age (and is still the age when you are eligible for Medicare) Age 67: This is when you can collect your full retirement benefit from Social Security Age 70: If you wait until 70 to retire, you can collect a larger social security benefit
A recent survey suggests that most people want to retire in their mid-60s. In reality, many retire earlier. It may be due to downsizing, deteriorating health, etc. According to the 2024 Retirement Confidence Survey, the median expected retirement age is 65. Only 28% of people expect to retire at this age (up 23% from last year). Most retire closer to age 62.52% of current workers are expecting to retire gradually. 36% are expecting to retire all at once. Yet 74% of current retirees had a full stop to work and only 18% engaged in a gradual transition. These are all things to consider when deciding what age to retire.[bctt tweet="📣 What does the 2024 Retirement Confidence Survey tell us about when and how people are actually retiring? Get the details in this episode of Best in Wealth. #Retirement #RetirementPlanning #FinancialPlanning " username=""]Why people like to retire earlierIf you had to choose now, when would you retire? Many people want to retire earlier than the traditional mid-60s. Why? People like to retire earlier to enjoy time while they are healthy and physically active. They can travel everywhere they have been waiting to go. They can play pickleball.As a financial advisor, we play a huge role in helping clients consider the ramifications of their choice (based on both financial and lifestyle factors). When we are helping our clients contemplate early retirement, there are many things to consider.When we onboard clients, we have meetings about investment planning, retirement income strategies, tax strategies for retirement, and insurance and estate planning. That’s before someone is officially signed as a new client.4 things to consider when contemplating early retirementHere are four things we consider that may help you make this decision if you are doing this on your own:... -
I make a spending plan for our family every single month. We account for every dollar coming in and going out. But what about the things that happen quarterly and annually? We add up all of those expected expenses at the beginning of the year and calculate the total approximate cost. That money will be saved every month to go toward those expenses. That is how we allocate money for things like Christmas and birthdays, too.We budget $300 for each daughter’s birthday party and $200 for a present and save for it monthly. But last year, we bought pizza, cake, snacks, etc. Our daughter requested that we take her friends to brunch the next morning. We ended up spending far more than we had budgeted.Now we need to save more in the remaining months of the year to make up for going over budget. When I have to do this, we have to lower our spending or it will not balance out. I vowed that it would not happen again. So this year, we did things a little bit differently. Listen to this episode to learn a unique way you can teach your kids how to budget.[bctt tweet="🎉 In episode #245 of the Best in Wealth podcast, I share a unique way you can teach your kids how to budget that they’ll enjoy, too! #PersonalFinance #Budgeting #FinancialPlanning" username=""]Outline of This Episode [0:35] Why my kids had to take a personal finance class [2:55] Why I make a spending plan every month [5:05] Budgeting for my daughter’s birthday [9:09] How I taught my daughter to budget [18:37] The powerful lesson my daughter learned
What I plan on doing differently this yearMy daughter was talking with my wife about her plan for her birthday and I knew I needed to interject. That is when a lightbulb went off in my head.I asked her to share what she wanted to do for her birthday. She planned to have 10 of her friends over for a sleepover. She wanted to decorate our basement with banners and balloons. She wanted to take her friends out for pizza and ice cream. She also wanted to take them to an escape room. Lastly, she wanted to give her friends a cool party favor.I’m sweating profusely at this point, starting to get nervous about my plan. But I took a deep breath and said, “That all sounds great.” I then proceeded to tell her that we had $300 saved for her birthday party and $200 for her birthday present.I told her that she got to plan her party down to the last detail—but that she had to stay within the $300 budget. Even better, if she spent under $300 on the party, I would take the extra money and put it toward her birthday present.But I told her that there was a catch: If she spent more than $300 on her party, it would be deducted from her birthday present. [bctt tweet="💡 I asked my 14-year-old daughter to plan her birthday party and gave her a specific budget to work with. It was a game-changer. Learn why in this episode of Best in Wealth! #PersonalFinance #Budgeting #FinancialPlanning" username=""]My daughter’s real-life experience with budgetingShe had to calculate how many friends she wanted to invite and how much it would cost for pizza and ice cream for all of them. She had to find out how much the escape room would cost. She had to calculate how much the decorations would cost.She wanted to get her 10 friends Owala water bottles for party favors. She excitedly said, “They’re cheaper than Stanley’s—only about $30 a piece.” And I said, “Eva—what’s $30 x 10?” Her smile faded when she realized the water bottles alone would eat her entire budget.So she got to work. She decided they would not do the escape room. She would get ice cream that was on sale at our local grocery store. We would buy pizza from Costco. She priced out birthday decorations on Amazon. She also decided to invite only her closest friends so she could still get each of them an Owala water bottle. -
Why are we worried about the world, the economy, the stock market, and our investment accounts? The stock market started the year great. The S&P 500 was up over 10% at the end of the first quarter. But the stock market has dropped steadily in the first 19 days of April.My business Partner, Brian, wrote an article titled “The Wall of Worry.” In this episode of Best in Wealth, I will cover some of the details of his article and share why family stewards can take a deep breath.[bctt tweet="How can you overcome concerns about the stock market, inflation, and the geopolitical climate? I share some statistics to calm your nerves in this episode of Best in Wealth! #Investing #FinancialPlanning #WealthManagement" username=""]Outline of This Episode [2:29] Why is everyone so worried? [3:52] The market reacted to inflation [9:52] The geopolitical climate [15:03] What do we know?
The market reacted to inflationThe financial markets saw a great start in 2024. US stocks raced to almost 10% gains in the first quarter. Things have since been dropping, almost back to where we started. We saw the same pattern in 2023.The inflation report released in March reported a 3.5% annual rate—higher than expected. It also likely closed the door on a June interest-rate cut by the Fed. That news made the stock market drop quickly in April. Why?The stock market had priced in six interest rate cuts in 2024. But because inflation ticked higher, the expectation has shifted to maybe three cuts. Market participants are clearly worried.In June 2022, CPI inflation was at its peak at 9.1%. It’s dropped every quarter since. In June 2023, we were down in the threes. In March, it was 3.5%. When you look at the report, you will see progress.Battling inflation is a messy process. We should consider ourselves fortunate that inflation has fallen as much as it has, without a catastrophic event happening in the economy or labor market. We have avoided a recession so far.The average rate of inflation over the last 100 years is 3%. Our latest inflation rate was 3.5%. The Fed wants the inflation rate to be 2%. But 3% inflation might be the “new normal.”[bctt tweet="worrying? I share some thoughts in this episode of Best in Wealth! #Investing #FinancialPlanning #WealthManagement" username=""]The market reacted to the geopolitical climateStocks were up while bonds and oil were down as Brian wrote this article on Monday the 15th. It was the opposite of what we thought would happen.What were past reactions to major geopolitical events? They might surprise you: In the six months following the onset of WWI in 1914, the DOW dropped 30%. The market closed for six months. But it rose more than 88% in the following year—the highest annual return on record. Hitler invaded Poland on September 1st, 1939, beginning WWII. When the market opened, the DOW rose 10% in a single day. The DOW Jones lost 1% and remained calm during the 13 day period of the Cuban Missile Crisis in 1932. The stock market opened up at 4.5% the day after JFK was assassinated and gained more than 15% in 1964. Stocks fell sharply after the 9/11 attacks, dropping 15% in the two weeks following the tragedy. The economy was already in a deep recession. Within a couple of months, the stock market had gained back all of its losses. The US invaded Iraq in March 2003. Stocks rose 2.3% the following day and finished the year with a gain of more than 30%.
When the geopolitical climate is uncertain, it causes us to feel anxious and can lead to panic. But it rarely pays off to make portfolio changes in reaction to geopolitics. Why? We do not know what is going to happen.The more we dwell on it, the more our minds go to worst-case scenarios. While we might be right about our predictions, -
The mutual fund landscape is complex, with thousands of choices. In fact, at the end of 2023, there were 4,722 US-domiciled funds that we could choose from. Of those, 2,043 were from US equities, 1,124 were international funds domiciled in the US, and over 1,500 were bond funds.If you add all the money from these funds, it totals 10.6 trillion dollars. $5.4 trillion is in US equity funds, $2.1 trillion is in international equities, and $3 trillion is in bond funds. Whew.If you decide to buy an ETF or mutual fund, you are spreading out your risk (as opposed to buying individual stocks). But how do you choose between the thousands of options? Should you choose between the thousands of options?My goal is to help you understand the landscape of mutual funds so you can make informed decisions in this episode of Best in Wealth![bctt tweet="In this episode of Best in Wealth, I dive into the mutual fund landscape and how it works. Give it a listen! #wealth #investing #FinancialPlanning #WealthManagement" username=""]Outline of This Episode [1:08] Did you fill out an NCAA bracket? [3:32] The mutual fund landscape [6:21] What is an active mutual fund versus an index fund? [11:28] Actively managed funds aren’t performing well [16:48] Are you an active or passive investor? [18:02] Is there a better way?
What is an index fund?An index fund is your first option for investing in a mutual fund. An index fund tracks indexes, such as the S&P 500 or Russell 3,000. You are buying “the market.” You will receive the return of that market (minus expenses and tracking error). If you want to do better than an index fund and do better than the average of the stock market, you hire someone to manage it for you (i.e. buy into an actively traded fund).[bctt tweet="What is an index fund? I cover the basics of mutual funds (and how many there are to choose from) in this episode of Best in Wealth! #wealth #investing #FinancialPlanning #WealthManagement" username=""]What is an active mutual fund?An active fund is your second option for investing in a mutual fund. You have the option to buy that fund through your brokerage account or 401k. Active funds have a mutual fund manager and a team of people making decisions on the fund’s behalf. The manager is the “expert.”They look at all of the publicly traded companies and choose the ones that will be in the fund. That manager and his/her team might decide to sell some of those companies. You are hiring this manager to do well, to beat the market. But how do you know if they are doing well?The University of Chicago’s Center for Research and Security Prices is a great place to start. They looked at every single publicly traded company and created indexes to see how the market was doing. They are how we learned that the US stock market averaged a 9% return per year.But this throws a wrench in things: It is not looking good for the actively traded funds.Actively managed funds are not performing wellOn 12/31/13, there were 3,022 funds available to choose from. As of 12/31/23, only 67% of those funds still exist. Why? Those 33% were not performing well. When we look at winners, looking back 10 years, only 25% of the experts beat the market. You only have a 25% chance of selecting an actively managed fund that will beat the market.15 years ago, there were 3,241 funds and only 51% of them survived and only 21% of them had beaten their benchmark. Only 45% of the funds that existed 20 years ago survived. Of the 2,860 funds available 20 years ago, only 18% have beaten the market.What does this tell me? Actively managed funds are not doing any better than index funds. Chances are, whether you buy into an index fund or an active fund, it is not always... -
The #1 issue most people face when it comes to retirement is running out of money. Secondly, most people want to live the best retirement that they can. If there is anything left, they will gladly give it to their children—but it does not need to be millions of dollars.Too many people are dying with too much money and never got to live out the retirement of their dreams. You have been saving your entire life. You should not be scared to spend the money and fear it running out. So how do we make sure that does not happen? I will share some of the common solutions—and our strategy at Fortress Planning Group—in this episode of Best in Wealth.[bctt tweet="The #1 issue most people face when it comes to retirement is running out of money. How do we solve for that at Fortress Planning Group? Learn more in episode #242 of Best in Wealth! #retirement #RetirementPlanning #WealthManagement" username=""]Outline of This Episode [1:07] Spending money in your retirement [2:49] The two central issues with retirement income [4:38] Solution #1: Purchase an annuity [5:50] Solution #2: Live off your dividends [8:00] Solution #3: The 4% rule [10:04] Solution #4: Guyton and Klinger’s Guardrails [15:30] Utilizing risk-based guardrails
Solution #1: Purchase an annuityAn annuity has the potential to give you steady income until you die. Let’s say you give $1 million to an insurance company in exchange for monthly payments. It might be $4,000-$6,000 per month. But when you pass away, the insurance company keeps your money.If the insurance company goes out of business, you lose those monthly payments. Many people still use annuities to fund their retirement. The biggest drawback is that most people do not think about inflation. That money will not go as far in 20 years.Solution #2: Live off your dividendsLet’s say you have $1 million and you decide to buy a company that is paying a nice dividend. Let’s just say you are receiving a 5% dividend or $50,000 a year to live off of. But most people do not know that dividends can go down. Secondly, when the stock price fluctuates, your $1 million could lose value. Someone who invested in Wachovia Bank lost everything when they filed bankruptcy. The investment became worthless.[bctt tweet="Can you fund your retirement by living off your dividends? I share why this isn’t the wisest decision (and what we do instead) in this episode of Best in Wealth! #retirement #RetirementPlanning #WealthManagement" username=""]Solution #3: Follow the 4% ruleStocks can gain value over their lifetime. The 4% rule means that if you have $1 million, you could live off of a 4% withdrawal from your portfolio the first year. Every year, you take an inflation adjusted raise. If inflation is 10%, you withdraw $44,000. If you do that, your purchasing power stays the same. Bengen looked at every 30-year period in history and 93% of the time, the 4% rule works. What about the other 7% of the time? What doesn’t the 4% rule solve for?Solution #4: Guyton and Klinger’s GuardrailsGuyton and Klinger’s Guardrails try to solve for both running out of money and dying with too much money. They propose that a 4% withdrawal can be too small of an amount. They usually start with withdrawals of 4.5–5%. How is their process different?If you start with $1 million and the portfolio goes to $1.2 million, you give yourself a raise as well as an adjustment for inflation. And if your portfolio goes down to $800,000, you have to be willing to take a pay cut until the portfolio gets back above your lower guardrail.When you take raises when your portfolio is doing well, it solves the issue of dying with too much money left. You rely on your guardrails to dictate what you do.But we do not entirely use this strategy—or any of these strategies—at Fortress Planning... -
What is a Roth conversion? Should you do a Roth conversion? When is the best time to do a Roth conversion? If questions like these have been circulating in your mind, this is the episode for you. I will break down when doing a Roth conversion might make sense for you (and why your CPA might not like it) in this episode of Best in Wealth.[bctt tweet="What is a Roth conversion? Should you do a Roth conversion? I share my expert opinion in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]Outline of This Episode [1:03] There are some great CPAs out there [3:56] What is a Roth 401K or IRA? [7:41] Should you do a Roth conversion? [9:37] When to do a Roth conversion [13:37] Why you should work with a financial advisor
Understanding Roth conversionsYour money is either taxable, tax-deferred, or tax-free. Taxable money might be held in a savings account or brokerage account. You may collect interest and dividends. Taxes are due in the year those things happen.Tax-deferred accounts are traditional IRAs, traditional 401Ks, and other retirement plans. You’re contributing money to get a tax break. The money grows and you have to pay taxes on the earnings you make.A tax-free account—like a Roth IRA or 401K—means you contribute after-tax money. You also do not pay taxes on the distributions (because you already paid the taxes).You can convert some of a traditional IRA or 401K and convert it into a Roth account. But all of those dollars are taxable. If you make $100,000, a Roth conversion might land you in the 22% tax bracket (and likely the next one or two brackets above that).It may not be wise to do a large Roth conversion when you make a good amount of money. So when should you?Should you do a Roth conversion?If you have deferred money in a Roth IRA, you can do a conversion. But should you? When would you consider it? There’s no easy answer and it will be different for everyone. But there are some circumstances in which it might be better.For example, if you lost your job, took a sabbatical, or did not earn as much money and you are in a low tax bracket because of it, it might be a great time to do a Roth conversion. If your income level is lower, you can convert some over at a lower tax rate than when you made the contribution.[bctt tweet="Should you do a Roth conversion? I break down why it’s not a one-size-fits-all answer in this episode of Best in Wealth! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]Roth conversions cannot be undoneBefore doing a Roth conversion, consult with a CPA or Financial Advisor. Why? Because it cannot be undone. Let’s say you are taking a sabbatical or recently got laid off. So you decided to convert $50,000 of your traditional IRA.But two months later you are offered a job you cannot refuse. You get a sign-on bonus of $100,000. Suddenly you are making $300,000 a year. That $50,000 that was going to be taxed at 10% is now in the 32% tax bracket. Ouch. In the old days, you could move it back—you cannot do that anymore.So if you are on a sabbatical or lost your job, wait until later in the year before doing a Roth conversion.When should you do a Roth conversion?Retirees who have a long runway before receiving social security or taking required minimum distributions and those with large traditional accounts can consider it. If you can live on your taxable account and there is no other taxable income coming in, you can do conversions over years at a lower tax rate. Once you start collecting social security, it can be more difficult to do conversions because it may increase your tax rate. That is why you need to work with a financial advisor. -
David Booth—the Executive Chairman and Co-Founder of Dimensional Fund Advisors—recently wrote an article entitled “Uncertainty is Underrated.” In this episode of Best in Wealth, I will read this intriguing article and share why I agree that—while it sounds scary—uncertainty has a positive impact on our lives.[bctt tweet="Uncertainty is underrated. I share why the impact of uncertainty is positive in this episode of Best in Wealth. #wealth #investing #WealthManagement" username=""]Outline of This Episode [1:23] The blue cruise function on my F150 [3:11] David Booth’s article on uncertainty [10:36] Life is one cost-benefit analysis after another [13:22] How to manage risk: What to do (and not do) [19:31] Why you need to know the basics about uncertainty
Uncertainty is why we see stock market returnsWithout uncertainty, there would be no 10% annualized return on the stock market. How?According to David, “If there was no uncertainty, returns would be predictable and there would be no difference between putting your money in a savings account or investing it in the stock market.” Risk makes potential rewards possible.When you have money in your savings account and it is earning interest, it is certain that you will receive interest payments. The stock market is different. It is a roller-coaster. The S&P 500 was down 18.5% in 2022 and up 26% in 2023 (which is not abnormal).Uncertainty simply means that we do not know—from day-to-day, week-to-week, or month-to-month—what those returns will look like. Everyone is guessing.Over time, the stock market has delivered a 10% return. The reason we see a higher rate of return in the stock market is only because of the uncertainty.[bctt tweet="Without uncertainty, there’d be no 10% annualized return on the stock market. How? I share the reasons in episode #240 of the Best in Wealth podcast! #wealth #investing #WealthManagement" username=""]Life is one cost-benefit analysis after anotherWhat is loss aversion? It is the premise that a loss can feel twice as painful as a gain of an equal amount. It might be one reason why uncertainty is underrated. An 18% drop in the stock market feels twice as bad as when the stock market goes up 18%.David points out that “Because of uncertainty, life is one cost-benefit analysis after another, and we have no choice but to manage risk.” We cannot ignore it or eliminate it entirely, nor would we want to. But what we must do is prepare for it.And humanity is no stranger to uncertainty. We have to make choices every day and those choices are how we manage risk. David points out that we cannot control the weather. But if it looks like it is going to rain, we might carry an umbrella around. The cost is the weight of the umbrella but the benefit of that cost is staying dry.He shares that “When it comes to investing, you cannot manage stock market returns, but you can manage the risk you take.”How to manage risk: What to do (and not do)So how do we get better at managing risk? What not to do: Do not try to predict the unpredictable by trying to time the market or pick winning stocks. Many of us struggle with the desire to time the market. But we cannot time it. When we try, it is a loser’s game. You will likely leave a lot of money on the table. What to do: Diversify your portfolio to reduce risk and capture return. Secondly, figure out the amount of risk that you are comfortable with. You should invest and be prepared for a range of outcomes.
When you have a plan that you can depend on—and experience uncertainty—the more likely you are to succeed long-term.We have all been managing risks and rewards our entire lives. Some years are better than others. But we stick around to see what... -
If you opened up and looked at your 401k statement, chances are that some of your investments are international. You are investing in companies outside of the United States. If you are invested in a target date fund, it is almost certain. It may be in mutual funds or ETFs. It may be in developed or emerging markets through reliable stock exchanges.But should you own companies outside of the US? Emerging markets in developing countries have not moved much in the last 10 years. The US has had quite a run. Why would you invest internationally? These are all good questions to ask. I will do my best to answer them in this episode of Best in Wealth.[bctt tweet="Should your retirement portfolio be diversified internationally? I cover why the answer is “YES” in this episode of Best in Wealth! #Investing #Retirement #RetirementPlanning #WealthManagement" username=""]Outline of This Episode [2:21] Should I be internationally diversified in my retirement portfolio? [4:58] You are likely investing internationally already [7:05] Investing internationally creates a diversified portfolio [8:44] How the US ranks compared to other countries [16:25] Other asset classes performed well [17:59] Another reason to be internationally diversified
You are likely investing internationally alreadyWhat kind of car do you drive? If you drive a GM, a Ford, or a Tesla, they are domestic-based companies. You are likely invested in them, too. Many car manufacturers are based internationally. BMW, Mercedes, Volkswagen, Porsche, etc. are owned by a German company. Chrysler, Jeep, and Dodge companies are owned by companies in Italy. The list goes on.We know these cars. Most of the cars we buy and drive every single day are sold by companies that exist outside of the United States. There are many outstanding companies located outside of the US. And if you are invested in them, you’re investing internationally.Investing internationally creates a diversified portfolioYou know that we do not try to time companies, sectors, countries, international vs. US—we do not time anything. Instead, we diversify your portfolio at a risk level you are comfortable with. We make sure it fits within your retirement plan. A well-diversified portfolio sets you up for a greater chance of success, without big swings. The more asset classes we can add—including international investments—the smoother the “ride” will be.[bctt tweet="Reason #1 you should invest internationally: Investing internationally creates a diversified portfolio. Why else should you diversify? Find out in episode #239 of Best in Wealth! #Investing #Retirement #RetirementPlanning #WealthManagement" username=""]How the US ranks compared to other countriesIt may surprise you that the US is not the only big “player” in the stock market. There are what we consider 45 “reliable” stock exchanges globally. Where did the US rank out of the 45 international stock exchanges in the 4th quarter of 2023? We were not #1. Poland actually produced the best returns. The US ranked #20, about the middle of the pack. Let’s look at some more numbers: What about the full calendar year? Hungary, Poland, and Greece were up over 50% in 2023. The S&P 500 was up 26%. The US ranked 13th. Thailand and Hong Kong stock exchanges ranked last. From 2010–2020, the US did really well. But during that decade, the #1 country was New Zealand. The US was ranked #2. What about 2000–2009? This was a rough time in the US. We started the decade with the Doc-Com bubble. We ended it with the Great Recession. The top two countries were Brazil and the Czech Republic. Greece, Finland, Japan, and the United States ranked at the bottom.
If you started the 2000–2009 decade with $1 million, you ended it with about $900,000. Not good. But if you had -
How often should you look at your investments? Some of my clients look at their investments every day. Some look weekly, monthly, quarterly, annually—and some never look at them. So what is my answer? It depends. After listening to this episode of Best in Wealth, you will know how often you should check on your investments (based on you).[bctt tweet="How often should you look at your investments? Some of my clients look at their investments every day. Daily, monthly, weekly, quarterly, or annually? I share my surprising answer in this episode of Best in Wealth! #Investing #Invest #RetirementPlanning" username=""]Outline of This Episode [2:18] Whole30: The importance of consistency and discipline [6:51] The third-best tennis player in the world [9:52] The track record of the S&P 500 [17:51] What looking at the S&P 500 tells us [20:55] How many times should you look at your portfolio?
The third-best tennis player in the worldLet’s talk about tennis for a minute. Roger Federer was one of the top three tennis players of all time. He is elite. Of the millions of tennis players who grew up playing, got scholarships, and played the best they possibly could at the pro level, Roger was one of the best. Roger won 20 Grand Slam Men’s Single titles, the 3rd most of all time. He is the only player to win five consecutive US Open titles. He won 40 consecutive matches at the US Open. He is the second male player to reach the French Open and Wimbledon finals in the same year for four consecutive years. He is the only male player to appear in at least one Grand Slam Semi-Final for 18 consecutive years. He won eight Wimbledon titles.
He is one of the best to ever play the game. But what does any of this have to do with investing?[bctt tweet="What does the third-best tennis player in the world have to do with #investing? Find out in this episode of Best in Wealth! #Investing #Invest #RetirementPlanning" username=""]The track record of the S&P 500Let’s switch gears and talk about the S&P 500 (which you can not invest in but it is a benchmark). The S&P 500 has had an amazing track record. The average return is a little over 10% per year. But what does that mean? What does a 10% return look like?Let’s compare the S&P 500 to a high-yield savings account. A 10% return means that every seven years, your money will double. If you have $1 million in investments—and actually earn 10%—it will be $2 million in seven years.The rule of 72 says that if you divide 72 by your interest rate, that is the number of years it will take to double. So if you put your money in a high-yield savings account—likely earning around 4.5% right now—it will take 16 years to double. That is why we need to invest in some things that will grow faster—even faster than a high-yield savings account.What does any of this have to do with Roger? In tennis, each time someone serves the ball, you are playing for a point. When you get enough points, you win the set. When you win enough sets, you win the match.He is one of the best players ever—but he only won a point 54% of the time. Roger won 75% of his sets. And Roger won 81% of his matches. You are probably thinking, “Scott—how does this have anything to do with how often you should look at your investments?” Stick with me.[bctt tweet="What does the S&P 500 and Roger Federer have in common? I share some surprising facts in this episode of Best in Wealth! #Investing #Invest #RetirementPlanning" username=""]What looking at the S&P 500 tells usThe S&P 500 plays a game every time the stock market is open. How often is the S&P 500 positive or negative? Let’s call a positive result a “win” and a negative return a “loss.”... -
BRICS is an acronym that denoted the emerging economies of Brazil, Russia, India, China, and South America. The stock market returns were really good. The economies were expected to continue to explode. So people started pouring into the BRICS. Many people who invested did poorly because they were late to the game.Before BRICS, it was popular to invest in the Nifty Fifty (the 50 most popular companies). News columnists are always looking for the next bright, shiny object. The current “Shiny object” is the Magnificent Seven.What is the Magnificent Seven? How do they perform compared to the US stock market? How is the Magnificent Seven performing year-to-date? Will the stock returns persist? I share what you need to know about the Magnificent Seven in this episode of Best in Wealth.[bctt tweet="Should you invest in the Magnificent Seven? I share some research (and my personal opinion) in this episode of Best in Wealth! #investing #PersonalFinance #FinancialPlanning" username=""]Outline of This Episode [1:27] Investing in the BRICS and the Nifty Fifty [4:07] What are the Magnificent Seven? [7:01] How well are the Magnificent Seven doing? [11:03] Will their high performance continue? [16:54] Should you invest in the Magnificent Seven?
What are the Magnificent Seven?The Magnificent Seven consists of seven companies in America that are doing the best. It probably won’t surprise you that the companies are: Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Tesla, and Meta. These companies have performed very well in 2023.At the end of July, the stock market was doing well. The US stock market return (mostly the S&P 500) was up over 20%. The next few months were horrible. November and December have improved. The S&P 500 was up 24.5% when I recorded this episode.What if we took that 20% return and stripped out the Magnificent Seven companies? The return would go from 20.3% to 10.8%—almost halved. Seven companies—out of 4,000—comprised almost half of the return. Unbelievable.How well are Magnificent Seven doing?These companies have done well in 2023. Secondly, they are so big that when they perform well, it will shock the US Market compared to smaller companies doing well.Ending 12/14/2023, these company’s returns are astounding: Apple: Up 58.4% YTD Microsoft: Up 52.74% YTD Google: Up 48.5% YTD Amazon: Up 71.78% YTD Tesla: Up 132% YTD Facebook: Up 167% YTD Nvidia: Up 238% YTD
Isn’t that Magnificent? But we saw outsized performance just like this in the BRICS, when compared to the US stock market.[bctt tweet="How well are Magnificent Seven doing? Will they continue to perform? What does the research tell us? Learn more in episode #237 of Best in Wealth! #investing #PersonalFinance #FinancialPlanning" username=""]Will their high performance continue?The Magnificent Seven have been performing well for a long time. In his article, “Magnificent 7 Outperformance May Not Continue,” Wes Crill and his team share that they do not believe the high performance will continue.Looking at annualized returns in excess of the US market before and after joining the top 10 largest US stocks, starting in January 1927–December 2022. 10 years before, the average return was 12% 5 years before, the average return was 20.3% 3 years before, the average return was 27%
However, things changed significantly after joining the top 10. 3 years after, the average return was 0.6% 5 years after, the average return was -0.9% 10 years after, the average... -
Charlie Munger was the Vice Chairman of Berkshire Hathaway and Warren Buffet’s right-hand man. He quit a well-established law career to become Warren Buffet’s partner, transforming a textile company into the successful firm Berkshire Hathaway is today. Charlie passed away last week at the age of 99. He was a prolific author and investor and full of wisdom.Warren Buffet described Charlie as the originator of their investing approach. In this episode of Best in Wealth, I will share eight of his quotes, both simple and profound, that every investor can learn from.[bctt tweet="In this episode of Best in Wealth, I share eight of Charlie Munger’s best life lessons. Don’t miss his words of wisdom! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]Outline of This Episode [1:04] Who have you learned from? [2:24] Charlie Munger’s Life Lessons [5:18] Lesson #1: Embrace life-long learning [6:34] Lesson #2: Remain optimistic [8:46] Lesson #3: Accept risk to get rewarded [10:44] Lesson #4: Munger’s formula for success [11:57] Lesson #5: Buy wonderful businesses at fair prices [14:18] Lesson #6: Help others know more [15:08] Lesson #7: Do not be driven by envy [16:23] Lesson #8: Spend your life well
“Lifelong learning is paramount to long-term success.”You should always be learning more. Anyone you know who is highly successful is committed to learning. You must be humble enough to admit that you do not know everything. Can one of your major goals for the new year be learning more? Reading more books? What doors will open for you when you focus on learning on growth?Another thing that Charlie said was “The best thing a human being can do is to help another human being know more.” If I am going to encounter somebody, I want to learn from them. Secondly, I want them to learn something—hopefully good—from me. Why not learn from each other?[bctt tweet="“Lifelong learning is paramount to long-term success.” We can learn a lot from the words of Charlie Munger. Check out this episode of Best in Wealth to hear more! #wealth #retirement #investing #PersonalFinance #FinancialPlanning #RetirementPlanning #WealthManagement" username=""]“If I can be optimistic when I’m nearly dead, surely the rest of you can handle a little inflation.”This was something Charlie said in the 2010 annual Berkshire Hathaway meeting. In 2010, inflation was running higher. He was around 86 at the time. What happened to us when inflation rose in 2023? We felt like the world was ending. How we should behave should always be the same. If he can be optimistic, we can handle a little inflation. There will always be something else to overcome, right?Charlie also said, “If you are not willing to react with equanimity to a market price decline of 50% two or three times a century, you are not fit to be a common shareholder and you deserve the mediocre result you are going to get.”If you cannot stay composed when a market declines 2–3 times a century, you cannot handle a high-risk stock portfolio. This happened during the Great Recession and in 2009. Return and risk are directly related. If you want more of a return, you have to accept more risk.Charlie's most important architectural feat was designing Berkshire“Forget what you know about buying fair businesses at wonderful prices. Instead, buy wonderful businesses at fair prices.”This means buying value companies. At Fortress, we like to use book value. Wonderful businesses can be expensive and trade at high multiples. Their book value and stock value are far apart. Those are considered growth companies.But if wonderful businesses have fallen on rough times—like airlines during the Covid pandemic—it is a wonderful business selling at a fair... -
Over the last three years, US net worth has increased drastically. But it is taboo to talk about money with family and friends, let alone net worth. But don’t you want to know how you are doing relative to your peers? If so, this is the episode of Best in Wealth for you. In this episode, we break down the numbers to see how you are doing compared to the average American.[bctt tweet="What is the average net worth of US households with age factored in? Find out what the numbers are—and why it matters—in this episode of Best in Wealth! #wealth #PersonalFinance #WealthManagement" username=""]Outline of This Episode [2:23] Average net worth by age [4:18] What is net worth? [5:15] What is the average net worth of US households? [6:57] What is the median net worth of US households? [7:40] The average and median net worth by age bracket [9:19] Are you on track with the median or average? [13:50] Your goal depends on your goals
What is net worth?Your net worth is your assets minus your liabilities. It is everything you own—your house, car, stocks, rental properties, retirement accounts, etc. minus anything you owe to others (credit card debt, student loan debt, mortgage, car loans, etc.). Net worth today includes adjustments for inflation.What is the average net worth of US households?The average net worth of US households in 2022—across all age groups—was $1,059,000, an increase of $200,000 from the average net worth in 2019. It seems high, right? The typical American is not walking around with a million-dollar net worth. So what is happening?The average net worth is skewed by the outliers. If nine people walked into a bar with an average net worth of $10,000 and Elon Musk walked in—whose net worth is north of $200 billion—the average net worth in the bar would skyrocket to over $20 billion.That is why you have to look at median net worth. Half of households will fall above or below that line. The median net worth of US households is $192,700. That is 1/5th of the average net worth—but still an increase of about $50,000 since 2019. But these figures do not adjust for age which is the most crucial variable we need to control for.[bctt tweet="What is the average net worth of US households? I share the interesting numbers (so you know where you stand) in this episode of Best in Wealth! #wealth #PersonalFinance #WealthManagement" username=""]The average and median net worth by age bracketHere is the average net worth by age: Under 35: $183,000 35–44: $548,000 45–54: $971,000 55–64: $1.5 million 65–74: $1.8 million 75+: $1.6 million
But the average net worth is skewed by the richest of the rich. So what is the median? Under 35: $39,000 35–44: $135,000 45–54: $247,000 55–64: $364,000 65–74: $410,000 75+: $335,000
Are you on track with the median or average?If you are listening to this podcast, you likely earn over the average salary in the United States (which is $50,000). If you are making $100,000+, look at the median net worth to see how you compare. If you are looking to overachieve, look at the averages.If you are in the top 10% of incomes, we need a realistic number for you. If you are in the 90th percentile of income earners, and you are 45–54, you should aim for $1.9 million. If you are 55–64, you should shoot for $2.9 million. Are you on track?Listen to hear what the rest of the brackets should look like for high achievers. Because we all want to be ready for retirement, right?[bctt tweet="What is your net worth? Do you know where it should be at your current age? Listen to this episode of Best in Wealth to learn more! #wealth... - Se mer
