← Suze Orman's Women & Money (And Everyone Smart Enough To Listen)
Suze Orman's Women & Money (And Everyone Smart Enough To Listen)
Is This The Start of a Bear Market?
00:22:30
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Hi everybody. Suzio here. Now, what is the goal of money? The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account. It is essential for your financial foundation. So all of you should be participating in the Ultimate Opportunity savings account at Alliant Credit Union. Go to myalliant.com to find out more and be secure. September 7, 2025. Welcome everybody to the Women in Money podcast as well as everybody smart enough to listen. Susie O. Here. And today is Suzy School. But before I tell you about Suzy school, tomorrow is September 8th today. Did you know that? Of course you did. But did you also know that tomorrow, 15 years ago, Ms. Travis and I got married in South Africa. So we will be celebrating our 15th wedding anniversary. And you may be thinking, but Susie, gay marriage wasn't legal in 2010. Oh, it most certainly was in South Africa. And we happened to be there. I was speaking there and we decided, let's just get married. And it wasn't until five years later, really that in the United States, marriage equality came to be. But it is also possible, if we are not diligent, everybody, marriage equality in the United States may disappear. So do not take anything for granted. So now, before I go into Susie school, just want to make a few comments on these markets. Yes, they are volatile. They are going up, they are going down. And I will be the first to tell you that many of you most likely are going to get scared. And why? Because these are scary times and these markets can absolutely go down. They could go down another 10. Why? Because of the tariffs. We don't know about them still, all the lawsuits that are happening in the United States of America, the possibility of a government shutdown, what's going on with Gaza, with Ukraine. There are many scary things happening out there. So of course you possibly could be reading the headlines and going, oh my God, we're in another bubble. Everything's going to just crash. And will it? Will it not? I don't think so. But I do think it is possible that between now and maybe even the end of the year, who knows, that these markets could go down. However, it is not unusual like with the Internet bubble. And we're not in a bubble right now, believe it or not. But I am begging you for you to know that this near term volatility that we're all going to experience that's ahead of us is essentially a buying opportunity and it is not the start of a bear market. Do you hear me? And that the Truth of the matter is, all right, so maybe we won't end the year at 7,000. Maybe we're going to end it with the S and p at around 6,500. Okay? But I can tell you, in my opinion, in 2026, we're really going to see AI be adopted everywhere. Just everywhere. You know, technologically speaking, we're farther advanced really, if you think about it, than we were in the 90s when the Internet was just coming about. All of us now on some level do ChatGPT, we're aware of all of this, Google, everything. It's all AI. So it's just started to be adopted. And very shortly, especially starting next year, we're going to see it be bigger and better, in my opinion, than anything that happened with the Internet. So I'm just going to repeat right now, don't be afraid of volatility. Make sure you keep cash on the sidelines if things go down. Opportunity to buy. But this is not. This is not the start of another bear market, in my opinion. Okay? Just think about that. All right, are you ready for Suzy school? Let's take out your Suzy notebooks because today I'm going to have some numbers for you so you can compare. A little bit ago, actually, on August 29th, somebody by the name of Dr. E wrote in and this is what he said because at the end of his email, he says one of the men smart enough to listen, he says, dear Susie, nkt, I recently noticed that my husband's workplace retirement account is committing highway robbery when it comes to fees. Now, the reason that I've chosen this to do a Susie School out of it is that there are many of you out there that have a 401k, a 403b, a TSP plan at work. And do you know the fees that your employer is charging within your 401k plan by the mutual fund that they've allowed you to choose? And you need to know, because here's an example of it. There are very few funds he says, to be chosen from. And the lesser evil in the group is AANTX, which, by the way, everybody stands for the American 2060 Target Date Retirement Fund, Class A. Now, before I even go on, you know I don't like target date retirement funds and I'm going to show you why in just a few seconds. Okay, so the group aanTX charges a 5.75% load on the front end and has an expense ratio of 0.73%. Can you all write that down? A front end load of 5.75% and an annual expense ratio of 0.73%. He says this seems insane to me and maybe even unethical. His employer only does a 3% match anyway. Is it worth it, given the exorbitant fees, or should we just stick with a Roth IRA on principle instead of paying those crazy fees? Now, just to answer Dr. E quickly. No. Just keep investing up to the point of the match, and that's it. Not a penny more because it's still free money. So here's what I first want to teach you in the Susi school. And I haven't taught this in a long time only because I thought for sure everybody would know about it and that people really wouldn't put people in loaded mutual funds anymore. They just don't make sense. So, first of all, remember the 5.75% load that his husband had to pay? Imagine now write this down. That you invested $10,000. That's all. And there was a 5.75% load, which goes to who? The broker who sold you the funds. Now, what does that broker, financial person, that advisor, have to do with the performance of that fund? Absolutely nothing. It's like, for instance, you go and you buy a car, and a person selling you that car makes a commission for doing so. Now the question becomes, what does that person have to do with the performance of that car? And the answer to that question is, absolutely nothing. They're just selling it to you. Same thing with a financial advisor. If you buy a loaded fund. Now, number one, how do you know if it's loaded? It has the letter A or B on the back of their name. So in this case, the American 2016 target date retirement Fund, Class A, means that up front, they immediately take out 5.75% to pay the financial salesperson that sold you this fund. All right, now, what does that mean to you? Let's go back to where I started. Let's just say you put in $10,000 in one lump sum in this fund. The 5.75% of the amount that you put in comes to $575. All right? So let's just say on Monday, you decide you want to buy that fun. You buy that fun, and okay, everything's all right. But the next day, you've heard this podcast, and you go, I want to sell. And if that fund has not moved one penny, it's exactly the same price as it was the day before. You would get back only $9,425. Why? Because $575 went. Like I said, to pay the financial advisor you have to think about this. This fund has to go up at least 5 1/3% just for you to break even. So you are already down 5 1/3% on your money the second that you buy this particular fund that has this load. If you simply bought a fund known as a no load fund, doesn't charge you to buy it, doesn't charge you to sell it, if you bought it for $10,000 and you decided that you wanted to sell it the next day and it didn't change in price, you would get all $10,000 back. There's also something known as another type of loaded mutual fund called B shares. And B shares simply are they sell it to you under the pretense that there isn't a load, but there is. It's probably five and three quarters percent as well. Not only is there a load, but there's also something called a 12B1 fee. And it's actually more expensive in the long run than a share funds. So you have to know how these things work. Personally, I would never ever, ever buy a B share fund. So if some financial advisor says, hey, I have this mutual fund, it's not going to cost you anything and they give you the name and it has the letter B at the end of it, just get out of there. Don't do it, don't do it, don't do it. Now that was one problem with what Dr. E is talking about. Here was the load. So lesson one, do not buy a loaded mutual fund. If you're going to buy a mutual fund, simply buy a no load fund where there's no fee to buy or a fee to sell. However, I just want to put in a caveat here. You can buy a mutual fund or you can buy an exchange traded fund. I personally, as you know, if you've been listening, like exchange traded funds, far better. Better than mutual funds. And why is that? Because mutual funds can only be bought or sold at the end of the business day. An exchange traded fund which is identical in its holdings to a mutual fund can be sold anytime while the market is open. So I just want you to know that. However, in 401 s and retirement accounts, chances are you're only offered mutual funds. The expense ratio in this particular fund, the expense ratio is 0.73%. Now that doesn't seem like a whole lot of money, but I'm going to show you in a second how much it really is. Now why is there an expense ratio, an Expense ratio simply pays the expenses, so to speak, of that fun to keep it running. Because all funds and ETFs, by the way, have what's known as a portfolio manager. And that is like, let's go back to the car example for a second. That is like the mechanic that fixes your car, that keeps it running smoothly. And of course, you, you have to pay him or her, right? That is what the expense ratio is. In a mutual fund or an etf, the manager who's managing that fund gets paid to do so. In this particular fund, like I said, it's 0.73%. Now, just put a pin in all of that for a second. Over all the years that I've been doing this, I have said to you, I don't like target date retirement funds. And a lot of you go, why is that, Susie? It's so easy. I deposit my money and I never have to think about it again. Bingo. Do not be a lazy investor. Do not just say, oh, this will be easy, and I'm through with it. You have worked hard for your money. You have to make sure that your money works hard for you. And just putting it in a target date retirement account in most cases make no sense. Why? You don't invest according to age, everybody. You invest according to what's happening in the economy. So do you want all your money in the stock market if the economy is going down, down, down, everything's just going a whatever. No, not necessarily. Maybe you want more in bonds, especially if you know that interest rates are high and they're going to come down. There's times for bonds, there's times for equity, there's times for everything, but that's dictated by what's happening in the economy. And just because you're older, depending on your own financial circumstances, doesn't mean that therefore all the money in your retirement account should be in bonds. And that's possibly what would happen to you if you put the money in a target date retirement account, because as you get older to that date, they take you out of the stock market and put you more and more and more into bonds. And do you really need to be in bonds or do you need to be in stocks? Does it matter? And it does, but it depends on your individual circumstances. Dr. E's husband is probably only 30 years old because he happened to choose an American 2060 target date fund, which is what his projected retirement date is in his head, which is 35 years from now. So he's probably about 30 years of age. So that means we have 35 years that this money may be in this fund. Let's just first look at. And going back five years. That's all, just five years. What was the average annual rate of return for the aantx, the Target Date Fund versus the Vanguard Total Stock Market Index Fund? This is just going back five years, okay? The American fund that you're paying that 0.73% expense ratio for and the load averaged about 10.5 to 11%. The Vanguard total Stock Market Index Fund, on the other hand, averaged over the last five years 15%. Now again, I want you to think about that. So that would have been quite a bit of money difference. Now, let's compare apples to apples. All right? Let's just assume you put in $100,000. That's all. You never put in any more money, and you did it for 35 years, okay? So they both did the exact same gross return of 10%. Let's say that is true. Do you know over 35 years that the Vanguard Total Stock Market Index Fund, with an expense ratio of 0.04%, you would have $2,775,000? Not bad. That's what your 100,000 would have grown to. But the American Fund, at the expense ratio, remember, the return of 10% is identical. The American Fund, because the expense ratio of 0.73% you would have only $2,226,000. That is approximately a 5 to $600,000 difference simply because of Y, not the performance of the fund, but the expense ratio. So don't go telling me that a little expense ratio difference, in this case 0.04% versus 0.73% doesn't make a difference. It matters big time. And just so you know, as time goes on, obviously their American Funds won't be returning probably as much as the Vanguard Total Stock Market Index Fund. But just let's assume over the next 35 years they return the average of about 10 to 11% versus the 15 to 16%. Let's do one more example for you. Let's say you put in $100,000 and the Vanguard Total Stock Market Index fund averaged about 15% for the next 35 years versus the American funds, which averaged about 10% for the next, what, 35 years. Do you know? 35 years from now, you would have approximately $13,300,000 in the Vanguard Total Stock Market Index Fund versus about $2,800,000 in the Target Date Mutual Fund. That's about an $11,000,000 difference. Now, I'm not saying that would actually happen, but it's possible because as you're getting older, that Target Date fund is getting more and more conservative. So are you all understanding why I don't like Target Date mutual funds? Number one. And why an expense ratio really, really matters. If you can put those two things together with every single investment you make that you ask the question before you buy something, hey, is there a commission on this? Is there a load on this? Hey, what's the expense ratio? And just look at it and compare it to what the Vanguard Total Stock Market Index Fund has done over the past five years or so in comparison to what you're about to buy. I think the numbers will tell you what you should and should not be doing. And that is your Suzy School for today. So there's only one thing that I want you to remember when it comes to your money, and it is this. People first and foremost. Then money, then things. Now you stay safe and secure. Bye bye now.
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We are strong, we are wise we will not apologize we are here we will thrive Together we will rise we're the little bit of faith and everything it takes we are strong, we are together we will rise.
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Hi everybody. Suzy O here now. If you are looking for a way to start saving to get the most out of your money, I want you to go to myalliant.com, that's M Y A L L I A N T.com and look into opening an ultimate Opportunity savings account. Put in at least $100 a month, every single month for 12 consecutive months. Earn 3.10% interest on your money right now and get $100 at the end. Are you kidding me? It's the best deal out there. Start saving right now.
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Neither Suze Orman Media nor Susie Orman is acting as a certified Financial Planner Advisor, a certified financial analyst, an economist, cpa, accountant or lawyer. Neither Suze Orman Media nor Suze Orman make any recommendations as to any specific security, securities or investments. All content contained in this podcast is for informational and general purposes only and does not constitute financial accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any losses which may arise from accessing or reliance on information in this podcast and to the fullest extent permitted by law. We exclude all liability for loss, damages, direct or indirect, arising from the use of this information. The must have documents discussed in this podcast are legal documents created by a lawyer and distributed by Hay house.