02.10.26 Ask An Advisor With Wes Moss

Summary

The Clark Howard Podcast: Ask An Advisor with Wes Moss (02.10.26)

Date: February 10, 2026
Host: Clark Howard
Guest: Wes Moss (Financial Advisor)

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Overview

This episode is a special "Ask An Advisor" session, featuring money expert Clark Howard and guest Wes Moss. Together, they dive deep into crucial personal finance topics, emphasizing their mission to help listeners "save more, spend less, and avoid getting ripped off." The main themes include the persistent impact of inflation, investment strategies for various retirement scenarios, the risks associated with employee stock ownership plans (ESOPs), the debate between growth and value stocks, and tailored answers to listener questions about real-world financial choices. The episode stands out for its approachable, candid style and practical wisdom.

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Key Discussion Points & Insights

1. The Comeback Pattern of Inflation

[02:04 – 09:35]

• Inflation isn't always "over" when rates fall:
  Wes Moss explains that after a major inflation surge (like post-pandemic), there's a historically clear pattern—87% of the time in major economies, a second inflation wave returns within 3 to 5 years, regardless of the original cause.

  • “87% of the time, once we get a 6% inflation rise, it comes back within three to five years.” — Wes Moss [05:29]

• Why does this happen?

  • Business Pricing Behavior: After a shock, companies respond quickly to inflation by raising prices, but consumers are slow to adjust and resist higher costs until they eventually acclimate.
  • Labor Market Reaction: As higher prices become the new normal, employees eventually demand higher wages, which then creates further inflationary pressure.

• Real-life examples:
  Increases in the price of everyday items like burritos serve as a tangible sign of this phenomenon.

  • “The burrito used to be 6 and now it's 12. I'm just not going to buy it. I can't get used to it.” — Clark Howard [06:16]

• Advice:
  Don’t become complacent when inflation rates drop; remember, previous price increases are ‘stacked’ and embedded in the economy. This is a core reason to invest—to protect your purchasing power over time.

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2. Listener Q&A: Retirement Strategy and Tax Efficiency

[09:35 – 12:53]

• Question: Mike, preparing for retirement at 59, seeks advice on drawing down multiple retirement accounts with a focus on tax efficiency.

• Wes’s Guidance:

  • Use periods of lower income before Social Security starts to convert traditional 457 plan assets to a Roth account, maximizing conversions within the 24% tax bracket.
  • “Utilize everything you can in that 24% bracket, Mike. ... Now is the time to do that.” — Wes Moss [11:08]
  • On 457-to-401k conversions for withdrawal control: Not necessary unless you want to draw only from bond funds, but it's generally fine to withdraw proportionally unless retiring before 59.5.

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3. ESOP Pitfalls and Illiquidity

[12:53 – 17:33]

• Question: Lori is concerned about a major drop in the value of her husband’s private-company ESOP.

• Discussion:

  • Private ESOPs are risky—it’s essentially a concentrated bet on a single (often illiquid) stock.
  • Major declines can result from business downturns or from many employees retiring simultaneously, triggering forced buybacks and valuation pressures.
  • “ESOPs are just like investing in one stock. ... A lot can go wrong with a private company.” — Wes Moss [16:36]
  • Employees can—and should—request Form 5500 and financial disclosures to better understand the plan’s status.

• General Rule:

  • Diversify: Don’t let company stock (even in ESOPs) exceed 10% of your portfolio. More is riskier.

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4. Asset Allocation in Retirement—Stocks vs. Bonds

[17:33 – 19:06]

• Question: Larry asks if, with 100% stock ETFs in retirement, he needs to add bonds.

• Wes’s View:

  • If fixed income covers expenses and you have 3 years of cash reserves, there’s no need to increase bond holdings, provided you can tolerate volatility.
  • “You do want to invest it appropriately. If you have a high risk tolerance ... I don't see you needing to go beyond the stock ETFs.” — Wes Moss [18:20]
  • “You already do have a piece of the pie ... your dry powder is your safety asset.” — Wes Moss [18:50]

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5. Growth vs. Value Stocks: Red Apples and Green Apples

[21:41 – 29:49]

• Explanation:
  Wes uses apples as an analogy:

  • Growth stocks = “Red, shiny apples”—sexy, high-flying, reinvest heavily, low dividends.
  • Value stocks = “Green, tart apples”—reliable, mature, steady dividends, lower growth.

• Growth Example: Amazon's early years, plowing all revenue into expansion instead of profits.

  • “He said, we’re just doing it at a much larger scale than anyone has ever done.” — Wes Moss [25:19], recalling Bezos’ interview.

• Market Trends:
  Growth and value stocks have alternated as market leaders over the decades. Recent years favor growth, but value has shown momentum lately.

• Investment Philosophy:

  • “It’s nice to have both ... when growth stocks aren’t doing well, I feel I’m really glad I own value and dividends.” — Wes Moss [29:14]
  • As you near retirement, it’s wise to shift somewhat toward value/dividend payers for stability and income.

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6. Deploying Large Sums: Lumpsum vs. Dollar-Cost Averaging

[29:49 – 33:55]

• Question: Matt, a disciplined saver sitting on a large inheritance, worries about market overvaluation and timing.

• Counsel:

  • Don’t try to outsmart the market—waiting for a dip could mean missing years of returns.
  • Stretch your time horizon: "You have 40, 50 years of investing, Matt. ... just stretch out the time horizon and put the inheritance money to work." — Wes Moss [33:11]
  • Dollar-cost average (split investing over 12–18 months) to reduce anxiety about market timing.

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7. Buffered Notes/Structured Products: Hidden Pitfalls

[33:55 – 37:38]

• Question: Scott considers a “buffered account” (structured note) to limit downside over 6 years but cap gains.

• Critique:

  • The downside protection looks attractive but is rarely needed for a six-year S&P 500 horizon; you’re essentially paying hefty fees and losing dividends and liquidity.
  • True risk: If the issuing bank fails (like Lehman Brothers in 2008), you could lose everything—regardless of market performance.
  • "It sounds like it’s about the market, but it’s not. It’s a note, it’s an obligation of the company. ... When Lehman went under, those notes went to zero dollars." — Wes Moss [36:37]
  • Bottom line: Avoid these products—stick with direct market investing.

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8. Lump Sum Pension Payout vs. Annuity

[37:38 – 41:06]

• Question: Dennis, forced into early retirement, seeks advice: Lump sum pension payout or monthly payments?

• Answer:

  • The monthly payout is okay, but the lump sum provides flexibility and, with a direct IRA rollover, defers taxes.
  • “As long as you do a rollover into a retirement account, then you’re fine on taxes, Dennis.” — Wes Moss [40:38]
  • Make sure to roll directly into an IRA, avoiding immediate taxation and keeping options open.

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Notable Quotes & Memorable Moments

• On Inflation’s Lasting Impact:
  "Even though the rate is fine, it’s the accumulation of all that inflation that makes the burrito still $12."
  — Wes Moss [08:42]

• On ESOPs:
  "It is a very, very important thing to understand is that ESOPs are just like investing in one stock. ... A lot can go wrong with a private company."
  — Wes Moss [16:36]

• On Growth vs. Value:
  "It’s nice to have both. ... They come together and they make one giant market with two very different components."
  — Wes Moss [29:14, 29:44]

• On Investing Lumpsums:
  "Think about it. Two or three years ago, if you received an inheritance and you left it in cash ... you’ve missed almost 100% return."
  — Wes Moss [31:50]

• On Structured Products:
  "You’re paying someone to impose a restriction on you. ... All you’re doing is paying for them to impose restrictions on your money. I think that answers the question."
  — Wes Moss [36:14, 37:20]

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Timestamps for Important Segments

• Inflation patterns & investing rationale: [02:04–09:35]
• Retirement portfolio withdrawal strategy: [09:35–12:53]
• ESOP dangers & legal recourse: [12:53–17:33]
• Retiree asset allocation & dry powder: [17:33–19:06]
• Growth vs. value stocks (apples analogy): [21:41–29:49]
• Deploying large sums (timing vs. averaging): [29:49–33:55]
• Structured notes / buffered accounts: [33:55–37:38]
• Lump sum pension rollover advice: [37:38–41:06]

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Tone & Style

Clark and Wes maintain a relaxed, friendly, and practical tone. Wes blends clear explanations with memorable analogies (“apples”, “financial burritos”), and both hosts answer listener questions directly, often using vivid real-world examples.

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In Summary

This episode shines as a practical financial Q&A, steering listeners through complex issues like the shadow of inflation, retirement drawdown strategies, unseen risks in ESOPs and financial products, and the constant challenge of market timing. The actionable guidance—anchored in historical patterns and behavioral wisdom—encourages informed, patient, and diversified investing for financial independence.

Transcript

[Sponsor/Announcer]

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[Clark Howard]

Welcome to Ask An Advisor where we here at Team Clark go deeper on all things investing. All of the Clark Howard shows are trying to help you save more, spend less, avoid getting ripped off. And we really focus on the save more and spend less, spend less.

[Wes Moss]

How do we do it in a smarter way, particularly on the investment side, which is I think why I'm here today.

[Clark Howard]

Yes. So we are going to be talking about, as I understand it, inflation is the first topic today.

[Wes Moss]

We're going to talk about the patterns of inflation and what history shows us about inflation coming back. And then we are talking about growth versus value stocks.

[Clark Howard]

Right. Which we've never done on this show.

[Wes Moss]

Yeah, we've never done it here. And we really think of the market as one big market. But it's really there's so many layers and this would be the first major layer to really understand the two sides of one big market, they're kind of polar opposites. We hear a lot about inflation being over. And I've been a big believer in the productivity boom that we've started to see and how that could help us not have to revisit the inflation that we saw back in 2022. But remember, after the pandemic, we had all these different shocks, if you will. There was the shock that the supply chain shut down for a period of time, then took a long time for them to come back, and that made everything less available and more expensive. We saw monetary stimulus from the Federal Reserve to try to help the economy through the pandemic. So they dumped a bunch of money on the system and that created this really large wave of inflation that we all remember and, and we're all really still feeling. And I think that's a big point about this. There's an economic study and had a great conversation with one of my favorite economists very recently about the history of inflation. Once we get a surge, then we beat it, then what happens? And the pattern is actually very, very clear, not just in the United States, but around the world. If you look at any time we've seen inflation surges, and these are for large developed economies of over 6% almost 90% of the time, that big inflation comes back within three to five years. And that is a little eye opening. Now, the whole reason we're investing to begin with is to beat inflation. It gets a lot of press when it's running in the 4, 5, 6% range. We remember we were at 9% inflation briefly a couple of years ago, but it's always there. And it's always the reason that we're investing to try to protect our purchasing power. But it gets really unsettling when it gets to these higher numbers that we've all recently lived through. And again, I'm talking about the rate, the annual rate of change. The reality is that, and this is a big part to this story, is that why 87% of the time that inflation wave comes back is because in the inflation rate might go back down to 2 or 3%, but the impact on us as humans and consumers doesn't go away and eventually creates more inflation because it's embedded into society. So that's the statistic. 87% of the time, once we get a 6% inflation rise, it comes back within three to five years. Well, why? There's two reasons. One, businesses and by the way, the shock that creates the inflation doesn't matter. So it could be an oil shock, it can be a pandemic, it can be a natural disaster. We saw this in, if you remember, in a tsunami in Japan. It knocked down a nuclear power plant. It really created economic chaos. So what doesn't really matter what the shock is, that creates the inflation, it's the subsequent knock on effects that bring it back. And here they are, number one companies, once they feel inflation pressure and they have to adjust to it because prices can adjust very quickly within a week, one board meeting and prices can go up. Over the course of a month or a quarter, they can go up pretty significantly. But humans do not get used to price changes quickly, statistically. Think about this. You go into a cafe, you're used to paying $4 for a sandwich or for lunch, and now all of a sudden it's $9. You say, I'm not, I can't, I can't, I'm not doing it. I can't get used to that. It's because we as humans are anchored to price levels, not as percentage changes. Yeah, not at the rate of change.

[Clark Howard]

For me, burrito prices just shocked me.

[Wes Moss]

Burrito at Chipotle?

[Clark Howard]

Well, not just Chipotle. Like there's lots of burrito places.

[Wes Moss]

Yeah, it's like a $12 burrito.

[Clark Howard]

12 minimum.

[Wes Moss]

The burrito used to be 6 and now it's 12. I'm just not going to buy it. I can't get used to it. But guess what? In three to five years, humans get used to it and we kind of cave into the higher prices. And that's just psychologically not everyone. But that's statistically and psychologically what happens to human price behavior. We're anchored and then we eventually get used to it. But it takes several years. So one, companies get jumpy and reactive to inflation shocks so that if there are any price movements higher or to their input costs, after we have this first wave inflation, companies will quickly raise prices. So that's the first reason we sometimes see inflation come back. But a bigger piece of the equation is that once the inflation rate goes back down, and today we're at 2.7% inflation, that's pretty benign. But none of the prior inflation went away. It's just stacked on top of itself like a mountain. So even though the rate is fine, it's the accumulation of all that inflation that makes the burrito still $12. And after a while, and this takes a long period of time, people fight for higher wages and say, I just can't afford the $12 burritos. Unless what? Unless my wages go up and what we end up seeing in the economy, think about how long this takes to manifest. The board can raise prices in a day, but for, let's say a union or a group of workers to get higher wages, that can take years. So what have we seen over the past couple of years that are big labor fights? We saw ups, 300 plus people essentially say, I'm not working until I get much higher wages. Company eventually caved. They now have all higher wages. The longshoremen on the east coast, the longshoremen had not gotten a raise for a very long time. They just struck a deal that they're going to get a 62% raise over the next six years. So over 10% per year raise because cumulatively they said as a group we can't keep up. We cannot pay for the $12 burrito unless our wages go up. So labor wages, which is a massive part of the economy and the biggest input cost for any company, they eventually cave and say, well, you've got to have more money in your pocket or else you're no longer going to work for us. We saw this with big, big wage increases at Costco. We saw Pratt and Whitney, the big industrial engine maker. Big 3000 folks got a very big wage over the next couple of years. We've seen companies give catch up bonuses because inflation's been so bad. So inflation happens, we get a shock and it happens immediately. Humans feel the reverberations over the course of years and eventually knock on the door and say, I need higher wages. And that is historically why 87% of the time, once we had an inflation shock, the wave comes back three to five years later. All right, so we might think, oh, inflation's dead, we're back to 2.7%. Let's just not get too complacent around that. And that's the whole reason we invest to begin with. So we'll continue to talk about it.

[Clark Howard]

Right? Okay. Well, Mike in California sent this question and I love hearing Wes on the show. I hope to retire in 2026 at the age of 59. I'm blessed to have a pension. I'll have about $150,000 in a brokerage account, 800k in 457 plans and 350k in Roth money. One, what is the most tax efficient strategy to supplement my pension in a 24% tax bracket from these accounts? And two, I have a balanced portfolio in my 457 plans. But withdrawals from these plans will draw from all of the investments, not just the bond funds. Should I convert the 457 to a 401 so I can draw directly from bond funds?

[Wes Moss]

Well, okay, so he is, you've got 150 brokerage, 800 in a retirement type account, 457, very similar taxation to a 401k or 403 and then 350 into the Roth. But Mike also mentioned this 24 bracket, and he is retiring, let's call it later this year. And when he does that, if he's able to convert now, it's probably not the whole 800,000, but he's young, Mike. You're young. You're 57. You've got a ways to go before Social Security will kick in. Whether you choose it at 62 or you wait all the way to your full retirement age, which is probably closer to 67 and change, you've got a long stretch here where your income will be a little bit or even significantly less because you can manage your income. So when you're in that window, Mike, what I think you can really look at doing is chipping away at that $800,000 in the 457 to get as much of it into the Roth converting while staying in that 24% bracket. So if you are, I'm using Roth numbers here, it's about 200k. If you're single, it's about 400k. Once you go from the 24 and you spring up to the 32 bracket, you want to utilize everything you can in that 24% bracket, Mike. So if your income, if you, if you as a couple are making 200, but the bracket goes all the way up to 400, you've got room of almost $200,000 to convert and still be in the 24 bracket. And now is the time to do that. Do you need to roll the 457 into a 401k just so you can pull from the bond funds? Remember when we're withdrawing money from an investment standpoint, so no longer a tax conversation here, but more keeping your balance. It's fine most of the time to be drawing proportionally from your investments, meaning you're pulling some from the stock allocation, some from the bond allocation. It's really when the markets go down is when you want to be able to pull from your dry powder section. The 457 is structured so that it only comes out proportionally. Then I don't see much downside now that you're already almost. You're 57 now the only downside would be that it's 59 and a half before you can withdraw. So I wouldn't do the 457 conversion right now. I'd be waiting until I was. Let's call it a little bit older in order to move the 457 to the 401k.

[Clark Howard]

All right. Lori in California sent this one in. My husband's employer offered an ESOP esop. When we tried to diversify, we were told that the program of 15 years had been suspended and then terminated. His shares suddenly dropped in value from $280,000 to $76,000. We haven't been able to get help from the Department of Labor nor from attorneys. It seems that if we don't have resources to protect our rights, employers can break the law as much as they please. Is there any advice you have for others so this doesn't happen to them? And ESOP is. Employee stock option plan is ownership. Ownership, usually.

[Wes Moss]

And this is for private companies. So, Laurie, 90 plus percent of ESOPs are for private companies. There's good and bad to that. It allows people, employees to be able to participate in the growth of the private company. Unlike being at a, at a publicly traded company where you have a stock, call it a stock ownership or a purchase plan. And I've seen this work out well over the years for some families, but it just totally depends on how the private company you're working for is doing. The downside of this, Lori, is that it's one stock. So think about whenever you're in an ESOP plan and you've got 50,000, 100,000, almost 300,000 like you guys did, it's the same as having that much money in one stock, except it's private and it makes it a little more, much more illiquid and it's really subject to the valuation. An independent valuation company comes out and said once a year and says, I think this is worth X. There's X amount of shares, so each share is worth Y. And that's how you end up with what your valuation is. So it's a riskier proposition when you have a lot of your retirement savings in one esop. So first of all, you can have the business risk of the company just going, becoming less profitable. They lose a big contract or two, the industry changes, and it's just like owning a stock that faces headwinds and it goes down. The other thought of this is that when I've seen this happen, when you have a whole bunch of people wanting to retire at the Same time the company has to buy back those shares. So it's a harder process to get cash out of an esop. And sometimes if you've got a bunch of people all wanting their value, it drains the company financially. And that in itself brings down the value.

[Clark Howard]

Wow.

[Wes Moss]

I don't know if the company is doing something wrong. You have the right, Laurie, to a Form 5500 that shows the, that gives you an idea of what's happening with the valuation of the company. You can get, you should be getting a disclosure document or statements of the company financials if you've been there. If you're 55 plus and you've been in a company for 10 years, it is required for these companies to allow you to diversify. And I don't know if that is one of the things that has been an issue here, but I think the larger issue, and this is a tough situation, Lori, for you guys, is that when you end up in one company or one stock, it's not unheard of at all for the value to go down by 50% or in this case something like 70%. It is a very, very important thing to understand is that ESOPs are just like investing in one stock. And a lot can go wrong with a private company. So I would just be very, very careful. I doubt what they're doing is against the law. I don't know all these, I don't know if they're doing something that is untoward.

[Clark Howard]

So form 5500, you can you tell them you want that, you want, you.

[Wes Moss]

Want that, and you want the disclosure documents for the financial information and the valuation of the company.

[Clark Howard]

Now, I don't know if you have a similar rule, but Clark has always said when it comes to company stock in your portfolio, he recommends not going over 10%.

[Wes Moss]

That is a good general rule of thumb. It's hard to argue with that. The world we live in has become a little more concentrated. Think about this. If you just own the s and P, 540% of your money is in 10 stocks.

[Clark Howard]

Yeah, yeah.

[Wes Moss]

So just the general market now has become very concentrated. And I've seen people build great value in private companies and it does become 20, 30 or even 40%. Just know that it gets really risky. Anything beyond that 10% line.

[Clark Howard]

All right. Larry in Ohio sent this one in. My wife and I both retired last year. Our income covers 110% of our expenses. We have enough cash for three years of expenses. We've always and still have 100% of our retirement broad based in broad based ETFs, do you see any reason we need to have bonds in our portfolio?

[Wes Moss]

Larry, the short answer here is no. You have what I would call an infinite time horizon. If you have Social Security one, Social Security two pension and that covers 110% of your expenses, you don't have any time horizon because you're not even drawing from your money now. It doesn't mean you don't want to use your money over time. So you do want to invest it appropriately. If you are have a high risk tolerance, you're totally fine with market fluctuation for an all stock portfolio down 30% and you won't panic. Promise me that, Larry. Then I don't see you needing to go beyond the stock ETFs. But here's the other thing. You have three years worth of dry powder which is probably money market and short term bond funds. So you already do have bonds. So Larry, you already do have a piece of the pie. Maybe you're not looking at that way, but look at your dry powder and your investments all as one pie chart. So you probably already do have a percentage. I think because you have the three year number, three years worth in safety assets, you're good to go. And as long as you have a high risk tolerance, I don't think you need to diversify from your stocks into even more bonds.

[Clark Howard]

All right, and straight ahead you're going to talk about growth versus value stocks. We'll get to more of your questions. We'll be right back.

[Sponsor/Announcer]

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[Clark Howard]

We all have moments when we could have done better. Like cutting your own hair. Yikes. Or forgetting sunscreen so now you look like a tomato. Ouch. Could have done better. Same goes for where you invest. Level up and invest smarter with Schwab. Get market insights, education, and human help.

[Wes Moss]

When you need it.

[Clark Howard]

Learn [e-mail].

[Don McDonald]

Here's a question worth asking. Is your financial advisor always legally required to put your interest first? If you don't know the answer, you need to listen to Talking Real Money. I'm Don McDonald, my co host Tom and I have spent decades helping everyday investors understand the truths Wall street would rather you never learn. We're consumer advocates, not industry cheerleaders. We believe in low cost, broad diversification, and keeping things simple because complexity is how they pick your pocket. Plus, we answer listener questions on almost every episode, so bring yours. You're already a podcast listener, which means you're just a quick search away. Look up Talking Real Money or visit talkingrealmoney.com that's talking real money dot com. Let us help you build a more secure future by Talking Real Money. Talking Real Money is an educational, podcast, hosts or affiliated with a registered investment advisor. For disclosures, visit talkingrealmoney.com welcome back to Ask an Advisor.

[Wes Moss]

I'm Wes Moss, along with Kristinibias, and today we're talking about two polar opposites inside of one big stock market. Last time I checked, this is not Mad Money. You know that show? I do remember that show Jim Cramer Buy. So he has all those sound effects. People call him in and say, what do you think about this stock? What do you think about it? And he listens for about 15 seconds and gives an answer like that, I'd either buy it, I'd sell them. That's not what we do here, by the way. I do love that show. Jim Craver is a legend. He is the greatest of all time when it comes to financial comment, particularly around stocks. We're just not like that here. We are broader based and I know that our listener base is much more intentional around broad market indices, high diversification, total stock market indices. And that is great. And those are two polar opposite ends of investing. One is let's find every stock buying and selling, and one is let's just own the whole market. And that really does work well over time. Get rich slow in an uncomplicated way. But even though I agree with that, which total market indexes, we can't just say that's it. There's nothing else to invest in except just owning the total stock market. There's more to it than that. I own individual stocks, I own sectors, individual sectors through ETFs. There are a lot of different layers to investing. Let's just go one layer deeper. And that is. And again, even if you're a total stock market investor and you own an index, you should still know that they're very likely two very different kinds of companies in that index. So we're going to go beyond small, mid and large here and go a layer deeper. And that has to do with two areas of the market, growth and value. So we're going to start there. And think of it. All stocks are apples. Growth stocks are the red shiny ones. They are the cosmic crisp of apples. They look pretty, they're sexy, they're sweet. That's the growth stock. On the other side of the equation, the value stock is the Granny Smith. It's not a bad apple, but it kind of looks stuffy. It's a green apple.

[Clark Howard]

They have less sugar on them.

[Wes Moss]

They have less sugar, they're a little tart and they're not as jumpy, if you will. If we're comparing apples here, and that's two sides of the market. So let's explain what it actually means from a stock perspective. A growth stock relative to value. And when I say value, I also would. When I write about this, I find myself writing value dividend, value dividend. Because even though a growth stock can pay a dividend, it rarely pays much of a dividend and they're not known for dividend payments and you don't usually own them because of the dividends. On the other side of value oriented company is a company that's more mature, slower growth, and you do part. The dividend component is a big part of it. So let's talk about the red, the green apple. The red apple is it grows faster, it's less profitable today, pays little to no dividends, trades at a higher overall price relative to what it's earning. There's a great clip from the early 2000s of Jay Leno and Jeff Bezos from Amazon. And Bezos must have been still in his 20s. And he's so goofy when he's sitting there and he's laughing and Leno's laughing. He said, this Amazon company, he goes, I feel like it just loses more money every year and the stock keeps going up. He's like, can you please explain that to me? And Bezos is laughing kind of like this giddy 20 year old. He goes, yeah, we're now he goes, in history, there have been companies that have lost money over time before they eventually became profitable. He said, we're just doing it a much larger scale than anyone has ever done.

[Clark Howard]

I've seen that.

[Wes Moss]

Yeah, you've seen that clip, which is a classic example of a company that was taking every last dollar and plowing it back into growth. They didn't want to grow at a nice 12 to 13% clip per year. They wanted to grow at 25, 30, 50, 70% a year. And you own that stock, that red shiny apple for eventual profitability. And the market gives you time and patience for that. That is the growth, growth, go go side of the market. Now let's go to the other side of the continuum. The value dividend stocks, the green apples, if you will. These are more mature companies. They're strongly profitable today. They're making money today. Their growth rate is much slower. 7, 8, 9, 10% a year. Then they trade at lower price to earning multiples. So their size, the price times all stocks outstanding relative to what what they're earning is a lower number as an example. So I use Amazon as the ultimate growth, growth, growth example, particularly from when they were a younger company to think of businesses that sell potato chips and toothpaste and razors and beer and insurance and banking services. Could you double potato chip sales this year? If you're a giant potato chip company, probably not. You're not going to grow at 100%. Could you grow at 6%?

[Don McDonald]

Sure.

[Wes Moss]

And if it's a profitable business, sure. But it's a very, very different model. The green apple versus the red. I'm going to give you some numbers. And I looked at the Russell 1000 Growth Index and the Russell 1000 Value Index, the dividend index or the growth the value index. Its dividend is just at about 2%. Still not crazy high. But it's 2% relative to the Russell 1000 growth index that pays about a half a percent dividend. So the value index is three, almost four times higher from a cash flow perspective. Very, very different profile of company. The PE multiple trades at almost 30 times for the growth index versus 17 for the value index. 70% higher, 70% more expensive relative to to what they earn. The price to sales ratio 5 versus 2 between the red and the green apple. Price to book 10 versus 2. Again, you're paying more for growth companies expecting them to continue to grow faster so there'll be profitability way out into the future. Think of it this way. Value companies think of that as Bird in hand, growth company, two birds in the bush. Now, if you look over the course of time, they've traded places on the racetrack. If you go back to the year 2000 all the way to about 20 2008. Value one, value one, go between 2010 to 2017, they're pretty equal. Growth in value stocks did about the same. But then we've gone into the 2020s and beyond. Growth has really won the day. So growth is one beating value pretty handily until only very recently. Call it the last six weeks or so, we've seen value companies perk back up and have some real momentum. So at this stage I think it's important and I'm not saying that you should own one over the other. I do believe though, as you get closer and closer to retirement or in retirement, you do want to start. My opinion on this is you do want to start migrating towards more dividend oriented companies, more mature, a little more stable companies. But over the course of time just know that they do trade places and oftentimes and I think about this because I own both. When growth stocks aren't doing all that well, I feel I'm really glad I own value and dividends. And when value stocks aren't doing well, it's comforting to say, well, I do own growth companies as well. So it's nice to have both. But I think more importantly, and the reason why I want to do this red versus green apple segment is just to understand the very, very different sides of the, of the overall market. They come together and they make one giant market with two very different components.

[Clark Howard]

Okay, we will go to some more questions now. Matt in Wisconsin sent this one in. My wife and I live significantly below our means and although we do not own a house, we are very content renting at the moment. We save the majority of our income and are satisfied with what we have. We, we are starting.

[Wes Moss]

They save the majority of their income.

[Clark Howard]

We're starting a family soon and want the financial independence to do what we want when we want. Currently we save about $6,000 per month and I'm struggling to determine where to invest it. In addition to our ongoing savings, we also received a large inheritance in the past few years. So we're sitting on a significant amount of dry powder and I'm unsure how to best deploy it. Typically I would invest in VTI for, but given how historically overvalued the market appears, I'm hesitant to do so. At the same time, I worry the market could continue climbing and that perhaps this time is different. What guidance would you offer in this situation? Additionally, I've been reading the Intelligent Investor by Ben Graham. Do you recommend the strategies outlined in his book? Part of me feels I should spend more time looking for undervalued stocks since the market as a whole feels overvalued and heavily weighted toward tech.

[Wes Moss]

It's heavily weighted towards the red apples at this point and Benjamin Graham talked about the green ones. And that's exactly what your question is here. Matt. Matt, you have the classic conundrum that every investor, quite frankly we face every single day. You're facing the same problem that we face every day. Is that, gosh, the easy part of the low hanging fruit here, $6,000 a month, keep putting that in your index, keep putting that in a stock oriented index, you're not going to use it for a long time. And, and that feels easier, doesn't it? What's harder is that you have a big chunk of money. You got an inheritance. I don't know what it is, it's $100,000 or it's $500,000. It almost feels reckless to go ahead and put it to work. But think about it. Two or three years ago, if you received an inheritance and you left it in cash because you're worried about the market being overvalued, you've missed almost 100% return. 100 return.

[Clark Howard]

Wow.

[Wes Moss]

Because guess what, the market was kind of overvalued back then. Now it's still kind of overvalued. Guess what though? Earnings have grown. Earnings have grown significantly. So it's not really much more overvalued today than it was a couple of years ago. By the way, valuation, when you're looking at that price relative to what companies are earnings, even though over really long periods of time, think 10 and 20 years, they do have, there is some correlation. So if you're overpaying for stocks, they don't do as well over time. They're real. Valuation is a really bad, shorter term timing tool. One year, three year, five years, you can have overvalued indices as an example and they still are override three years later and five years later. So the valuation is kind of the, is the sneaky, it's the sneaky return killer for keeping people out. And quite frankly it works. It's a double edged short. It also works on the other side where it draws people in when things get really overvalued. So you're worried about missing out and not getting invested, but you're worried about getting invested and having the market go down. Again, we're all faced with that. Every day I think of this silly putty. Take your time horizon and stretch it out. Stretch out your horizon. You're thinking, well, what if it goes down over the next year? I put it to work. It goes down, Matt. You guys are young. You're talking, you're still. Whenever somebody mentions the word fire, that means you're young. You're. I don't know if I don't think you said how old you were, but you're probably 40.

[Clark Howard]

They're thinking of starting a family.

[Wes Moss]

You've got 40, 50 years of investing, Matt. So just I'm here to remind you, stretch out the time horizon and put the inheritance money to work to feel more prudent. And this is a totally prudent thing to do as an investor. Just map it over the next 12 months, put it to work. Dollar cost average in what you want to invest it in and do it over the course of 12 to 18 months.

[Clark Howard]

Scott in Indiana says, could I get Wes thoughts on buffered accounts? My financial advisor wants to move 300k out of my 457 into a buffered account for a 6 year holding period that will cap any downturn at 20% and upturn at 90% in an S&P fund. I'm 60 years old and already collecting my military pension and I have brokerage accounts, high Yield Savings Account, 401A savings bonds and physical precious metals. I plan to take Social Security at 62 upon retirement from the police department. During the six year hold period, I will have access to only 10% of my portfolio per year barring any major hospital stays.

[Wes Moss]

Sounds really good, doesn't it? That sounds like a tasty burrito.

[Clark Howard]

Also sounds like he put his life in the line in the military and now as a police officer.

[Wes Moss]

God bless you, Scott. Thank you for your service and hopefully I can help on this one. The reason I say financial burrito is that this is a packaged product and it sounds good. On the surface it's plus. I get 90% of the upside, but I protect myself 20% of the downside. If you think of it that way, it sounds really good, doesn't it? How often is the s and P500 since you're locked up for six years, essentially you have to hold it. How often is the s and P500 down over six years? 20. How often is it down 20% over a six year period? The answer is almost. I don't know if it's ever happened in the history of the world. So no wonder you can have a buffered note that does that. It almost. It's a very rare occurrence that could ever happen. It's very rare for the S&P 500 to even be slightly negative over a full six year period. It can happen, it has happened. But it's way less than 5% of all scenarios. So the six year hold is. What is it doing? It's psychologically forcing you to have a longer time horizon, but you're paying for that. So you're paying someone to impose a restriction on you. And that's why I don't love these. Here's the other thought, is that $300,000 is a lot for one. Would you buy, would you invest $300,000 into one company bond? I wouldn't. And that's exactly what you're doing with a buffer note, because whatever bank you're with, they're the ones issuing the note. So it sounds like it's about the market, but it's not. It's a note, it's an obligation of the company. It's a debt instrument. You know who's a huge, huge issuer of buffered notes? Back in 2005, 6, 7, it went bankrupt. Lehman Brothers.

[Clark Howard]

Oh, wow.

[Wes Moss]

Lots of buffer notes. They were about the s and P500, 90% upside, minus buffered, 20% of the downside. When Lehman went under, those notes went to zero dollars. So your 300 grand had nothing to do with the market at that point, so went to zero. So you have no liquidity. And what they're doing for every grand, let's say they buy a zero coupon bond for 800, that's going to mature at 1000 in six full years. They take the other 200 bucks and they buy protection on the downside and they buy a call on the S&P 500. And by the way, you don't get to hold your dividends, so they take your dividends too, which over six full years is at least 8 to 10% in total return. And they use that cash, which you don't get to by, let's say either the upside or the downside protection. So it's the perfect financial product because it sounds so good, but all you're doing is paying for them to impose restrictions on your money. I think that answers the question.

[Clark Howard]

Okay, Dennis in North Carolina says, I'm 62 and recently became a victim of corporate greed. My company laid me off after 26 and a half years of employment with them. They've offered a completely ungenerous severance package I'll received roughly 65k before taxes. I plan to use some of that money to max out my Roth for 2025 and this year because I won't be able to contribute to it afterwards since I will no longer be working because of my age, I will be able to get the small pension that I have with them. It will be roughly 57k. If I take the combination lump sum plus 100% joint and survivor pop up annuity, I would get $5740 as a lump sum and then $283 a month. And, and if I die, my wife would get this 283amonth. The problem would be taxes. All of this money will be received in 20. This year, 2026. I'm also going to start taking early Social Security which will bring in roughly $2,000 a month. If you think that taking the lump sum is better, where can I transfer this money so that I don't have to pay taxes? Right now I have my 401k and.

[Wes Moss]

A small Roth IRA at Fidelity Dennis, age 62. Yeah, your company probably. I mean this is just a, this is a tough spot because you're probably were eyeing retirement in the next couple of years but they really have forced it upon you. And you're right, companies do this constantly and they try to mask it with nice words like restructuring or surplusing. That's my favorite one. We're going to surplus you because we have a surplus of humans.

[Clark Howard]

So.

[Wes Moss]

So we're going to get rid of some of the humans. Really it's a layoff. And they're doing it because they're managing their bottom line and that is corporate America. And you are going to get 65K. But really this is about your lump sum. The 283 per month times 12 is 3396 a year. Divided by your pension offer of 57,000. You end up right at 9.6 divided by 57. You get right on the money at 6%. So you're right on the 6% line. It's not the worst deal ever. And the pop up makes it even a little bit better than that. I'd still be leaning more towards the cash. Take the lump sum. That's what I would do. And you're worried about the taxes. But just remember, and this is why people get confused about it is that you take the monthly amount, of course you're gonna get taxed on it every month. You take the lump sum, you roll it into a retirement plan, you roll it into an IRA, so you get this big chunk of 57,000, but it all goes in under the confines, stays in a crock pot, if you will. And it stays untaxed because you haven't pulled any money out. It's just gone into a retirement account. So you do not have to if you as long as you do a rollover into a retirement account, individual retirement account, then you're fine on taxes, Dennis. So you don't have to worry about a big tax bump that may impact I don't know if it would impact your Roth contribution eligibility or not, but that's where I would lean. I'd lean towards the lump sum, make sure it goes into a retirement account. That way you're not having a giant boost in income in this year when you're now trying to save every penny because you're forced early into retirement.

[Clark Howard]

Okay, well, that does it for us today. I hope that you heard something that made you maybe think more about your own finances, investment choices, or that you just learned something you want to share with a friend. And if so, that you'll share this episode. And also, if you're not already subscribed, wherever you watch or listen, please do that for us. We appreciate it so much and hope you have a great rest of your day.