Is THIS a Secret Investing Hack?

Summary

Podcast Summary: Money Guy Show – "Is THIS a Secret Investing Hack?"

Release Date: December 23, 2024

Hosts:

• Brian Preston
• Bo Hanson

Overview:
In this engaging episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into advanced financial strategies, addressing listener questions and offering expert insights on optimizing Health Savings Accounts (HSAs) and the pitfalls of leveraged investing. The conversation is enriched with personal anecdotes, practical advice, and a touch of humor, making complex financial topics accessible and relatable.

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1. Optimizing Health Savings Accounts (HSA)

Listener Question: HSA Rollover Concerns
Timestamp: 00:07 – 03:25

Brian Preston introduces a listener query from "Bedazzler," who is considering rolling over their employer-contributed HSA due to high fees and limited cash options with their current provider. Bedazzler's employer contributes $3,000 annually to the HSA, but the existing provider offers minimal cash value and high fees.

Nick's Insight:
"There’s nothing wrong with having multiple HSA accounts. We have a lot of clients who do this. They'll have one at the company with the provider to get the employer money and another that they fund separately."
— Nick, [00:40]

He explains the nuances between captive and non-captive HSA providers, emphasizing the importance of retaining the employer's contributions while potentially opening a Fidelity HSA for better investment options.

Bo Hanson's Advice:
"Go talk to your HR or your benefits people to find out if it's a captive plan or if you actually have the opportunity for even them to contribute to different plans."
— Bo Hanson, [02:00]

Bo underscores the value of advocating for better HSA providers by presenting alternative options like Fidelity to HR departments, aiming to secure more cost-effective and growth-oriented plans for employees. He encourages listeners to leverage their collective voice to enhance their financial benefits.

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2. The Risks of Leveraged Investing

Listener Question: Leveraged Stocks as Investments
Timestamp: 07:00 – 13:06

Joe H. poses a question regarding the viability of investing in 2x leveraged S&P 500 funds for long-term gains, suggesting that multiplying the S&P's historical annualized return could yield significant profits.

Nick's Explanation:
"The problem is, whenever you get into options or any type of derivative, there's often a time component associated with it. They reset on a daily basis, so the only time you really make money is if you catch a momentum string or have a bunch of large up days in a row. It’s gambling, not investing."
— Nick, [07:34]

He elaborates on the concept of time decay and how daily resets in leveraged ETFs can erode potential gains over time, making them unsuitable for long-term investment strategies. Nick categorizes leveraged funds as speculative tools rather than reliable wealth-building instruments.

Bo Hanson’s Agreement and Caution:
"This is not investing, this is completely speculating. If you're considering it, it should only be a very small portion of your portfolio and treated as a hobby."
— Bo Hanson, [09:01]

Bo concurs with Nick, highlighting the speculative nature of leveraged ETFs. He warns about the emotional toll and potential financial setbacks caused by the volatility of these instruments, especially during market downturns. Bo advises using leveraged funds only as a minor, controlled part of one's investment strategy, if at all.

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3. Practical Financial Strategies and Listener Engagement

Applying the Financial Order of Operations
Timestamp: 13:06 – 15:36

As the discussion on leveraged investing concludes, the hosts transition into broader financial advice, emphasizing the importance of adhering to a structured financial plan.

Nick’s Encouragement:
"One of the best ways to figure out how to do money better is by Millionaire Mission or the financial order of operations."
— Nick, [13:49]

He promotes foundational financial strategies, such as the financial order of operations, to help listeners build wealth systematically and avoid common pitfalls. The hosts encourage listeners to engage with their resources, including subscribing to their channel and exploring their website for further guidance.

Bo Hanson’s Gratitude and Final Thoughts:
"We are very thankful for you guys. Every day we get to create content and work with people across the country. If you follow what we share, your life will get complicated for good reasons."
— Bo Hanson, [14:22]

Bo expresses heartfelt appreciation for the listeners, highlighting the reciprocal relationship between the hosts and their audience. He underscores the value of applying the shared financial principles to achieve a more fulfilled and secure financial future.

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4. Notable Quotes

• Nick on HSA Accounts:
  "Don't want to walk away from that $3,000 employer contribution. Cause that's free money."
  — Nick, [00:40]

• Bo on Leveraged Funds:
  "This is not investing, this is completely speculating."
  — Bo Hanson, [09:01]

• Nick on Leveraged ETFs:
  "Levered investing or using lever-type products is not a great way to build wealth because it's not a long-term wealth-building strategy."
  — Nick, [07:34]

• Bo on Financial Gratitude:
  "We're very thankful for you guys. Your life will get complicated for good reasons."
  — Bo Hanson, [14:22]

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5. Final Takeaways

• Optimize Your HSA:
  Explore the possibility of rolling over your HSA to a provider like Fidelity for better investment options while ensuring you retain employer contributions.

• Avoid Leveraged ETFs for Long-Term Investing:
  Recognize the speculative nature of leveraged funds and prioritize stable, long-term investment strategies over high-risk, short-term gains.

• Adhere to Financial Order of Operations:
  Follow structured financial plans and foundational strategies to build and sustain wealth effectively.

• Engage and Advocate:
  Communicate with your HR department about better financial benefit options and actively participate in enhancing your financial well-being.

Resources Mentioned:

• Visit moneyguy.com for more financial guides and resources.
• Explore the Millionaire Mission and financial order of operations for structured wealth-building strategies.

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Disclaimer: Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission. The information provided in this podcast is for informational purposes only and does not constitute financial, tax, investment, or legal advice.

Transcript

[Brian Preston]

All right, next up is basic Bedazzler's question.

[Bo Hanson]

Yeah, I like that. I like yalls names when y'all, you know, take something we've shared and kind of jazz it up a little bit.

[Nick]

Bedazzler would say.

[Brian Preston]

He says, I'm getting a high deductible health plan at 25 work, contributes $3,000 at the start of the year. But the HSA provider has high fees, limited funds, and and about 0% in cash. Can I open a Fidelity HSA, rollover the amount and contribute there instead?

[Nick]

Potentially. So we see this all the time. A lot of times with employers, there will be a specific provider that sponsors the HSA program. So if you participate in the health plan and you opt for the high deductible and you get access to the hsa, the employer says, hey, we're going to put money in your HSA and we're going to put in $3,000 if you select this plan. Some plans say, hey, you have to leave the money there. Unless you use it, you can't roll it over. Some plans are not captive like that. Some plans, once your employer puts it in, you can then roll that money to a provider like a fidelity. And if 3,000 isn't the max, you can begin contributing up to the max in that outside HSA, even if the plan doesn't let you move the 3,000 over. There's nothing wrong with having multiple HSA accounts. We have a lot of clients who do this. They'll have one, one at the company with the provider, so they get the employer money and they have another that they fund. The one caveat I would say is if you're funding it with after tax dollars, like from your checking account, you may be missing out on some payroll tax savings. Because if you fund it through your paycheck, you save not only the triple tax advantage, but get a quadruple tax advantage through the payroll savings. You have to weigh the pros and cons. Either way, what you don't want to do is you don't want to walk away from that $3,000 employer contribution. Cause that's free money.

[Bo Hanson]

Yeah, without a doubt. So, you know, the only thing I'd add, I think Beau covered pretty much everything, is just go talk to your HR or your benefits people just to find out if it's a captive plan or if you actually have the opportunity for even them to contribute to different plans. I would think, though, probably because I'm the one that does payroll, still working on getting rid of that in 2025. Is that I like going to one plan because. Because it just makes administering payroll simpler. But BO gave you great advice on there's ways that you can still win on getting the free money, because that's a lot of money, and that's great that your employer does that. And don't forget, you can also advocate. Now, be polite. That's the thing. Nobody wants somebody telling them how horrible their plan is with high fees. Pour some sugar on that and try to show them there are other providers out there that are much more cost effective, have much better cash earning options, have much better investment options. You gave the example of Fidelity. Maybe compare and contrast. Show that to your employer and ask if there's some way that they can take that to the current provider to sharpen their pencils up a little bit or even consider changing who the HSA provider is for your company. Nothing wrong with being an advocate for you and your coworkers.

[Nick]

That's great.

[Brian Preston]

Great. Well, basic Bedazzler. Congrats on getting your HSA started so early. And hopefully that helps. If you would like a Money Guide Tumblr, you can email Money or winner. Moneyguy.com.

[Bo Hanson]

How did she say it?

[Brian Preston]

Money, moneyguy.com.

[Bo Hanson]

I thought she was gonna say. I thought she said chicken for a minute, and I was like, oh, I fall into that trap, too.

[Brian Preston]

Winner, winner, chicken dinner.

[Nick]

Oh, she had to finish it. She had to finish it.

[Bo Hanson]

Yes. It's kind of like, no, I'm mess it up. You're not gonna do it. Okay. It's all right, bro. You just do what you want.

[Nick]

Was that. Were you doing. Was that shaving a haircut? Is that what you're doing?

[Bo Hanson]

I don't know if that's what it is, but, you know, you always go that.

[Nick]

That's the finish I like.

[Bo Hanson]

Yeah, you didn't do the finish. Yeah. Okay. Thank you. Was that Nick or Nick? I'm not percussion. I'm not a drummer. I know. I got multiple drummers. This is the problem. You live in Nashville. Everybody here plays an instrument, like, professionally. Like Megan here, which you don't know, is. Megan probably plays, like, six instruments. We totally poached her out of, like, running an orchestra or something like that. And then we've got drummers. We've got one, two drummers that can play in B. You. You play any instruments?

[Nick]

Nick, he's a vocalist.

[Bo Hanson]

Vocalist.

[Nick]

Look at that.

[Bo Hanson]

We got a whole lead singer here. That does not surprise me.

[Nick]

We're gonna have a money guy band.

[Bo Hanson]

Matt, what do you play?

[Nick]

Nothing.

[Bo Hanson]

Why are you living in Nashville? We poach you here.

[Nick]

Why are you living in Nashville? That's hilarious.

[Bo Hanson]

No. You play any instruments?

[Nick]

No.

[Bo Hanson]

Yeah, I don't either. Well, no.

[Nick]

You can play the keyboard.

[Bo Hanson]

I took several years of piano. I love music, but it's one of those things when you realize you don't have the talent. You're just a fan.

[Nick]

So my oldest daughter, she's nine. One of the gifts, sweetheart, if you're listening, don't listen right now because I'm about to ruin something for you. One of the gifts we're getting her for Christmas is a keyboard. And I'm actually pretty excited about it. She started taking some like, I think it'd be so cool if my kids could play in it because I never got to do that. I think that'd be. And I've heard that like piano keyboard is probably like one of the best ones to start a kid on.

[Brian Preston]

Yeah, it's a great place to start. That's what I started on.

[Bo Hanson]

And it probably now if your kids can understand music. Well, it helps with the math minded focus too because, you know, if you think about the way notes are structured and keys, a lot of it translates into math and I love that. Even as a kid playing the piano, I thought it was so cool.

[Nick]

It was all mathematical.

[Bo Hanson]

If you were trying to figure out how to change, you just had to go further down or up. And it was just cool seeing math in, in action.

[Nick]

Do they still do the recorder in school? Yeah, I played that.

[Bo Hanson]

Give me a. What?

[Nick]

That counts.

[Bo Hanson]

He said, I feel like we're on Revenge of the Nerds and the jocks showed up and, you know, I played the recorder.

[Nick]

I did play the recorder.

[Brian Preston]

I feel like we've got to have Brian bring out the piano at the Christmas party.

[Nick]

Oh, there we go.

[Bo Hanson]

You know, I, I, I, I embarrassingly, you know, I fancied myself a piano player at one point. Like I said before I realized this whole talent thing. And then I was at. And I played like the two or three songs that I knew. And then somebody really knew how to play the piano showed up and I was like, God, I shouldn't have done that. Why didn't I? Why did I get on that piano? So no, I won't do that. Especially in Nashville. Yeah, in Nashville you don't, when you see an empty instrument, don't get on it unless you have like platinum albums. Which by the way, there are people in this office that have platinum albums. You don't touch any instrument in Nashville because you don't know who's in the room with you?

[Brian Preston]

Fair enough.

[Bo Hanson]

No, it's. It's true. Around here, you have to be very careful. I mean, down the street is probably somebody who wrote some magical song, and you never know what somebody has around here.

[Nick]

It's a fact.

[Brian Preston]

All right, you ready for the next question?

[Nick]

Yes, ma'am.

[Brian Preston]

All right.

[Nick]

People are coming up with money guy band names, and they are hilarious.

[Bo Hanson]

Sorry.

[Nick]

Keep going.

[Brian Preston]

This is from Joe H. He says, what are the money guy's opinions on leverage stocks? Maybe I'm missing something, but wouldn't a 2x leverage S& P stock be a great investment in the long run?

[Bo Hanson]

Because you're the cfa, and I remember you and I when we figured out we messed around with triple leverage stuff for a while. There's a time disintegration. What's the component that we quickly figured out that adds the element of these leverage funds that you got to be very careful of? Yeah.

[Nick]

Well, let me. The term you look for is time decay.

[Bo Hanson]

Time. There it is. I knew there was some. I needed a CFA to sit around me to make me feel smarter or dumber.

[Nick]

Conceptually, it makes all the sense, Laura. If the S and P is great, then double S and P must be better, and triple S and P must be the. Even. The best. I know. Right. Over the long term, the S and P has returned for the last, like 50 or 60 years, something like 10.3% annualized. So if I just go buy a triple levered S and P fund, that probably means that I'm going to make 30% annualized, right? Wrong. Unfortunately, the way that these products are structured, the way that they're able to triple the performance, is because they're using derivatives and levered pieces in order to amplify that return. Well, the problem is, whenever you get into options or whenever you get into any type of derivative, there's often a time component associated with it. And so what happens is they buy the product and the time begins to decrease, and they have to go buy another product to reset the time and buy another product. And a lot of these products reset on a daily basis. So what is the eighth wonder of the world?

[Bo Hanson]

Compound.

[Nick]

Compound interest. One of the things that you lose when you move to a double levered or triple lever type holding is you lose the benefit of compounding through time because there's a reset on a daily basis. So the only time you really quote, unquote, make money on these is if. If you catch a momentum string or you have a bunch of large up days in A row or a number of updates in a row, you can do well on these. But in my opinion, this is not investing, this is gambling. This is no different than going to the newspaper and picking the penny stocks that look the most attractive and buying those to see if you happen to hit one. So in my opinion, levered investing or using lever to type products is not a great way to build wealth because it's not a long term wealth building strategy in my opinion. It is a timing strategy. And I think that timing is very, very difficult to do over the long term.

[Bo Hanson]

So I completely agree with you. This is not investing, this is completely speculating. But I will to throw off something because remember we have a no hip hypocrite policy around here. I do think if you're at step eight of the financial order of operations, the stock market gets completely crushed. I'm talking about we're in full on bear market territory. You start seeing the disconnect between valuations and the price that things are trading at. Not investing, that's still. This is not what you're doing with your roth money, your 401k and stuff like that. This is not, you know, it's not eating money, this is vacation money I'm talking about, but the same money that you would take to Vegas or anything else when you get into those unique times. It is kind of interesting that you could gamble with in step eight, not, not foundational play around. I could in a small portion. Small portion. I gave too much dinner.

[Nick]

Agree to disagree. No, I'm kidding. Yeah, that's 100%. But it's no different than if you're going to pick up a hobby. If you want to go, you're into step eight and you want to go spend money on golf at the country club, you can do that. You can do leverage.

[Bo Hanson]

It's better than playing roulette. It's better because you are playing. It's a momentum play, it's a timing play. But there are times I often say this in life. Opportunities present themselves big enough that you can drive a truck through them. And I do think sometimes. Now here's what you let me go and tell the emotional side of this. When we get to a period where the market is down 25 to 30% and everybody, everybody's gonna be looking for the exits and you're gonna be. And you're like, those guys want to do they do what? Because emotionally you're gonna feel like that's the craziest thing ever. So. But it's kind of a fun Contrarian thing. Financial mutants are probably wired in a unique way, but don't get too crazy with it.

[Nick]

Here's the problem that I have with these kind of. Can I keep going on this? Since you gave them a little nugget, I want to rip that nugget away from them. The problem with, let's say the market does go down 20, 30 and there are an, there's an opportunity there. What you have to figure out if you're going to do this, if you're.

[Bo Hanson]

Going to go with a lot of.

[Nick]

You have to figure out your exit point. Okay, I know I'm getting in at the right point, but I also have to get out at the right point again because it's not a long term holding. Even if you hit it exactly right, but you end up holding it too long, the value of your holding will decay through time. So again, it's a timing thing. You know what I get really excited about when the market goes down 20, 25, 30%, just dumping it into the S&P 500, just buying the low cost index.

[Bo Hanson]

Because here's. Let me go ahead and tell you the drama I've created for myself when I've played with this type of junk is that even if you hit it right and you start making money, you'll start saying after you double your money or triple your money. And I've talked about this before, you're like, maybe I should get out. If you do get out and then you continue to watch it go up, you go, what did I do? Plus the day that you sold it. And then what if you get in this thing and then it continues to get its teeth kicked in because by the way, that that decay part or the, the amplification of the day transaction. And realize when those markets, when we reach periods where market's down 20%, it's not uncommon to have a 3 to 4% swing in the market. You multiply that by 3%, you quickly see, oh my gosh, I just lost 12% of my money in one day. It kind of really can, can, can be a punch to the gut. So you're right. Emotionally these things can, can wreck havoc on you. And what I think about is that I know the times I've played with them, these things are less than probably a quarter of 1% of my net worth, but yet they will completely 100% impact my happiness for the day. That's probably a dumb thing to get yourself into for sure.

[Brian Preston]

All right, thank you so much, Joe for your question. If you would like a Money Guy Tumblr. You can email winneroneyguy.com now. I'm in my head about it.

[Nick]

She didn't write that time. She didn't think about it.

[Bo Hanson]

You can tell we are complete dorky nerds when it comes to this money stuff. Because I mean, confessionally, a lot of the things you guys think about, we've thought those same things too.

[Nick]

A lot of mistakes that we see you guys or hear you guys make are ones that we've made or seen clients make in the past. Is while we're able to sit in a position of authority and saying, hey, there's a better way to do money. We're just trying to help you figure it out. Maybe faster than we did or faster than a lot of our clients did. You know what? One of the best ways to to figure out how to do money better is.

[Bo Hanson]

By Millionaire Mission or the financial order of operations.

[Nick]

Course, both of those are true. I was going to say subscribe right now to the channel so that we know that you are out there. We love getting to create this content. We love getting to do this for you. We love you showing up every Tuesday to hang out with us. We do not take it for granted in this season of thankfulness. We are so thankful for that. If you're not going to moneyguy.com, go check it out. Go check out the resources. Go buy Brian's book for his birthday. It's all that he wants for his birthday from you guys.

[Bo Hanson]

Not a hippopotamus.

[Nick]

Not a hippopotamus.

[Bo Hanson]

Guys, we absolutely have a blast in both. Said it right. I do think we're in a season of being thankful for you guys. I pinch myself all the time. I know I'm another year older today. 50, 51 hits different than 50. I hate telling people how old I am because I'm hoping you look at me and go, man, that's a good looking 37 year old that you probably don't think that, but still, you know, it's one of those things you leave out there. My watch doesn't think that either when it gives you your physical, your fitness age. But it's, it is one of those things. We're very thankful for you guys. I'm just so blessed that every day we get to create content, we get to work with people all across the country. We don't take it for granted. This abundance cycle is real. I mean we completely give it away to you. Let you kind of learn, apply, grow. And I just know it. You don't even have to go looking for it. But if you do what we share with you, your life will get complicated for good reasons. It's going to all good problems to have, but you're going to say, hey, I remember these guys mentioning some of this stuff. I remember who planted the seeds of this success. Why not pay it forward with the abundance cycle and we'll leave the light on the front porch for you. We'll be waiting. I'm your host, Brian Preston. Mr. Bo Hanson.

[Megan]

Moneyguy Teen out the Moneyguy show is hosted by Brian Preston. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Moneyguy Show. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.