The Clark Howard Podcast: Ask An Advisor With Wes Moss - DeepSeek Shockwave: What It Means for the Economy and Your Investments

Release Date: February 4, 2025

In this enlightening episode of The Clark Howard Podcast, host Clark Howard welcomes financial advisor Wes Moss for an insightful "Ask An Advisor" segment. Together with co-host Krista Dibiaz, Wes delves into critical financial topics, offering valuable advice on navigating economic shifts and optimizing personal investments. The conversation is structured around two primary themes: the Army of American Productivity and the enduring importance of Diversification in investment portfolios. Additionally, Wes addresses a series of listener questions, providing tailored solutions to common financial dilemmas.

1. The Army of American Productivity

Timestamp: [01:02] – [09:10]

Wes Moss introduces the concept of the Army of American Productivity, emphasizing its pivotal role in driving the U.S. economy and affecting retirement accounts. He attributes the nation's sustained growth to an "underlying current or tide, almost like this gravitational force" that boosts productivity continuously (01:49). Despite only about 31% of Americans loving their jobs—a statistic highlighted from a Gallup poll—Wes identifies three main motivators that keep the workforce productive:

• Fear: The necessity to earn a living to meet financial obligations.
• Optimism: The belief that future improvements and better opportunities lie ahead.
• Purpose: Finding meaningfulness in one's work beyond monetary rewards.

Wes explains that this relentless drive fosters innovation, lowers costs, and elevates the standard of living, ultimately enhancing the economy and stock market performance.

Notable Quote:

"There's gotta be something, some underlying current or tide, almost like this gravitational force in the United States that just makes us more and more productive." — Wes Moss [01:49]

2. The Importance of Diversification in Investments

Timestamp: [22:32] – [29:10]

Transitioning to investment strategies, Wes underscores the timeless principle of Diversification. He argues that maintaining a diversified portfolio is essential to mitigate risks associated with single securities or specific market sectors. Wes outlines several layers of diversification:

• Security Selection: Ensuring no single company constitutes more than 10% of the portfolio.
• Sector Diversification: Spreading investments across various industries to avoid sector-specific downturns.
• Size Diversification: Including companies of different market capitalizations (mega cap, large cap, mid cap, small cap) to balance growth and stability.
• Geographical Diversification: Investing internationally to capture global market growth and reduce dependence on the U.S. economy.
• Strategy Diversification: Incorporating different investment styles, such as growth and value investing, to optimize returns.

Wes points out that media narratives often tempt investors to concentrate their holdings in booming sectors like technology, which can lead to significant losses when those sectors experience downturns. He emphasizes the need for a multi-layered diversification strategy to ensure long-term financial stability.

Notable Quote:

"One of the things that kind of a guiding light when it comes to financial advice... is to just try to make things as simple as possible." — Wes Moss [22:42]

3. Listener Questions and Expert Advice

Wes Moss addresses a variety of listener-submitted questions, offering expert guidance tailored to individual financial situations.

a. Roth Conversion Strategy for Linda in Indiana

Timestamp: [09:16] – [14:02]

Linda, aged 56, inquires about the benefits of performing a Roth conversion given current tax conditions. Wes advises a thoughtful approach:

• Roth Conversions: Can be advantageous, especially with several years remaining before Required Minimum Distributions (RMDs) kick in.
• Tax Planning: Suggests spreading the conversion over multiple years to avoid jumping into higher tax brackets, likening the strategy to a "lock system" that utilizes each tax bracket efficiently.
• Inherited IRA: Recommends handling the inherited IRA within the 10-year distribution window, potentially completing this over the next two to three years before initiating Roth conversions.

Notable Quote:

"You can think of it as utilizing these brackets, like the lock system, being careful to not go to the next higher one." — Wes Moss [11:28]

b. Short-Term Parking for Home Down Payment by Brian in Oregon

Timestamp: [14:02] – [21:42]

Brian seeks advice on where to safely park $50,000 intended for a home down payment. Wes recommends:

• Money Market Funds: Emphasizes safety and liquidity, suggesting government-backed money market mutual funds.
• Government Bond ETFs: Advises caution with ETFs offering returns significantly above the Federal Reserve's rate, as they often entail higher risks.
• Risk Assessment: Highlights the importance of matching investment choices with safety needs, especially when funds are earmarked for imminent use.

Notable Quote:

"You can almost look at the yield of every product you're looking at and if it's way above the fed funds rate, they're taking on extra risk." — Wes Moss [14:19]

c. Brokerage Account Protections for Andrew in Iowa

Timestamp: [17:19] – [21:42]

Andrew expresses concerns about the safety of his retirement accounts if his brokerage firm were to fail. Wes clarifies:

• SIPC Insurance: Explains that the Securities Investor Protection Corporation (SIPC) provides up to $500,000 per named account, including a $250,000 limit for cash, protecting against brokerage firm failures.
• Asset Separation: Reassures that investments are held separately from the brokerage's assets, minimizing risk in the event of the firm's insolvency.
• Best Practices: Advises sticking with reputable, large brokerage firms to ensure maximum protection and reliability.

Notable Quote:

"SIPC doesn't care about that. They only care if the brokerage firm fails. Someone new takes over." — Wes Moss [21:42]

d. Custodial Roth IRA for Young Entrepreneurs Josh in North Carolina

Timestamp: [29:10] – [33:00]

Josh seeks guidance on setting up a Custodial Roth IRA for his six-year-old twins who have successfully run a produce stand. Wes provides the following insights:

• Eligibility: Twins must have earned income to qualify for a Roth IRA; their $1,000 earnings over two years meet this criterion.
• Documentation: While formal tax returns may not be necessary for children, maintaining a ledger of earnings is essential to prove income.
• Investment Strategy: Recommends broad market stock funds over target-date funds for young investors, allowing for greater growth potential over time.
• Platform Choice: Endorses Vanguard as a suitable institution for setting up custodial accounts.

Notable Quote:

"There's no reason he shouldn't be able to do that." — Wes Moss [31:00]

e. Advisor Fee Structures for Douglas in Connecticut

Timestamp: [33:00] – [36:20]

Douglas is exploring fee-only fiduciary advisors and prefers an hourly rate over asset-based fees. Wes outlines:

• Fee-Only Advisors: While some advisors offer purely hourly rates, many combine hourly fees with assets under management (AUM) fees to sustain their business models.
• Garrett Planning Network: Suggests utilizing resources like the Garrett Planning Network or the National Association of Personal Financial Advisors to find advisors who align with his preferred fee structure.
• Sustainability: Notes the challenges advisors face in operating solely on hourly fees, such as the need for continuous client engagement.

Notable Quote:

"There's not that many people that are purely hourly. Even if they're hourly, they typically will say, well, I'm $250 an hour, but it's a minimum of 10 hours." — Wes Moss [33:29]

f. Bonds vs. Cash in Retirement Portfolios for John in Florida

Timestamp: [36:20] – [38:29]

John questions the necessity of including bonds in his retirement portfolio, given that money market funds offer similar yields without the volatility of bonds. Wes responds:

• Historical Performance: Highlights that over extended periods, bonds have generally outperformed cash, providing better returns.
• Interest Rate Dynamics: Explains that bonds offer fixed interest payments that can be advantageous if the Federal Reserve lowers rates, whereas money market rates adjust downward.
• Asset Allocation: Emphasizes the importance of including bonds as part of a diversified portfolio to balance risk and return over the long term.

Notable Quote:

"History has shown us in most, most, most scenarios and time periods we're looking at, bonds over time should give you an overall better rate of return than money just sitting in cash." — Wes Moss [38:03]

Conclusion

In this episode, Wes Moss provides a comprehensive examination of the factors influencing the American economy and personal investment strategies. By elucidating the concept of the Army of American Productivity and reinforcing the critical role of diversification, Wes equips listeners with the knowledge to safeguard and grow their financial assets effectively. The detailed responses to listener questions further underscore the importance of personalized financial planning and strategic investment choices.

Listeners are encouraged to implement these insights to achieve greater financial security and navigate the complexities of the modern economic landscape with confidence.

For more expert financial advice and money-saving tips, visit www.clark.com.