← The Clark Howard Podcast
The Clark Howard Podcast
06.03.25 Ask An Advisor With Wes Moss
00:43:02
Investing in Gold: Smart Move or Mistake? and Will Entry-Level Jobs Disappear?
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- [00:00]
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- [00:57]
Krista Dibiaz
Welcome to Ask an Advisor. Where we here at Team Clark go deeper on all things investing with fiduciary. Wes Moss. So good to see you, Wes. Today's topics are great. I feel like a lot of people are going to be interested in both of these things. First, gold, gold, gold. I like gold. Austin Powers. Everyone asks. I mean we get so many questions about gold. I've heard Clark's take. Very interested to hear your take. I don't know what it is yet. And then later, something that Clark and I have kind of gone around and around about AI and I also would throw in robotics jobs and jobs. There was a recent headline that over half of 50% of white collar jobs could be lost in the next entry level.
- [01:41]
Wes Moss
But still it's a giant number. I did the math on that. It could be. If that comes true, 50% of entry level jobs in the next five years could be 9 million jobs in jeopardy.
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Krista Dibiaz
So we're going to talk about that as well.
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Wes Moss
Okay, well, let's get going. Let's, let's start with gold. Look, gold's been around for thousands and thousands of years. So it's, this is nothing new. We all know exactly what gold is. Of course, I think most of our listeners and viewers know that you can invest in gold. There's a couple different ways to do it. You can buy gold bars, gold coins, gold bullion, so physical gold, keep it in safe. Or you can buy an ETF that tracks gold. And there's several ways to do that. So it's very accessible today. The question is, is it a good asset class? And there really is some controversy around that. And I would say not really controversy, just there's Not a consensus that it's a, a great long term asset or not. So what's I think most interesting more recently is the price of gold has gone up pretty dramatically as we sit here today. It's around $3,300 per ounce. When I, in the early years of the investment business go back 25 years, gold just lingered and lingered and lingered. There was a period of time that was almost a 25 year slog that gold went from 500 an ounce and filtered down a little bit and then went back to 500 all over the course of 25 years. And so essentially flat. And remember, gold doesn't pay any sort of dividend. There's no interest, there's no dividends, actually cost to store it. So I think that the re emergence of interest around gold is because the price has gone up a lot lately. So people are saying, wait a minute, why, why don't I own more gold? So I wanted to just look at a chart, I think that tells the story about the price of gold because again, you're owning it as a store value and for some appreciation, again you're not getting any income. So how should you own it? How much should you own? And there's no perfect answer. This is just kind of my opinion on this. The first thing I would go back to and I've thought about for the last 25 years is what is Warren Buffett's opinion on gold? And he has famously said a bunch of lines over the years because again, he has never really owned gold. I think there was a period of time where he owned one of the gold mining companies, but that was a relatively brief period of time. Is that gold? What does gold do? It just sits there and it stares at you. One, two. Not only do you not get paid from gold, but you have to pay somebody to store the gold. So it actually costs money. It's like reverse rent to own gold. The next line that I always remember, I think is fascinating is that he would, Warren Buffett would rather, he said he would rather own all the farmland in the US versus all the gold in the world. That's pretty serious statement. Now again, when he looks at it, you own farmland, you've got crops and you've got something coming in and you've got income coming in every year. And whether you do the math on that or not, that's just emblematic of how this guy thinks about it. So he's been consistent for 50 years plus about not really wanting to own gold. However, the gold industry is massive price of Gold has gone up. So people are interested in it. If I were to look at a chart and just tell the real story, I mean, this is what's happened. If I go back to call it 1980, approximately gold hit 500 bucks an ounce and then over the Next call it 25 years, it filtered down to 300, $350 an ounce, only to get back to 500 in around call it 22,005. So 1980 to 2005 gold went from 500 to 500. So you didn't make any money. In fact, you were losing money for a lot of that period of time. Then it kind of rebounded. Then from 2000 to 2011, it had a big run and went from 500 to 1700 an ounce. Then it went back down to 1100 an ounce and. And now it's kind of shot up to 3,300 an ounce. So the reason, if you zoom completely out, what is that rate of return? If you would have just bought it back in the let's call it 1980 and just held it until about where it is today, it would be about an 8.4% rate of return. Pretty good. So if you look at the economic history, if you've had the patience and you've held it this whole period of time, so that was super long term hold. You made money. It's hard to argue. The problem is when you have an asset that is supposed to be a store of value, it doesn't necessarily act like that when you've got that much volatility. So I think that if you're going to own gold, I would be prepared for some pretty serious volatility. Here's some of the numbers. 80% spike in the 73 to 75 recession. A 50% loss from 1980 to 82, a 30% jump in 2020, a 35% loss from 2011 to 2015 and a 65% gain from 2020. So that to me doesn't sound like a sleepy asset. Over time it sounds like a sleepy asset. 8, 8.4% pretty good. Just know that it's volatile. The other thing that I have to give gold credit for, if I go back and look at recession period. So when the economy's not doing well and people are nervous and scared and stocks are not necessarily doing well, gold does hold up pretty well. So if you look at periods of time during recessions, Krista, these are the shaded lines. Back in the 70s, gold pretty flat. The early part of the 90s, pretty flat during the recession. 2000 pretty flat during the recession, during the financial crisis, relatively flat. So I will give it credit as a, as an asset that you can invest in. It does seem to kind of hold up when the economy is getting nerve wracking. But it's also not this perfect elixir. I remember hearing a gold commercial, I think it was on the radio and it said gold, you know, buy gold for inflation, buy gold for deflation. Buy gold in a bad economy, buy gold in a good economy. There's this thought that it's this perfect asset that does, does well no matter what. That's just not true. It's super volatile. But it has been good over time. So knowing if, if you take all that into account. My take on it is, first of all, I know that some people want to own physical gold and I don't blame, I don't blame investors for doing that. You literally want the gold bars and you want to put them in a safe and that nobody can take that away from you. So I get that more logistically where I've invested in gold ETFs, so that I think is my preferred way to do it. It's still a financial derivative that tracks the price of gold. Supposedly it is backed by physical gold. I haven't been to the Fort Knox or wherever it's held to see it. But the gold ETFs, at least some of the gold ETFs are really, supposedly backed by physical gold. So my take on it is 5% ownership of your total investment pie is totally okay. If you really, really like some sort of quiet asset during tough economic times, knowing it's going to be volatile, other times maybe even go up to 10%. That's too rich for my blood, but I'm okay with five. So that's my take, 5% gold.
- [09:01]
Krista Dibiaz
Paul in Illinois said with the dollar and the stock market absolutely getting trampled and with all this talk of the world moving back to the gold standard, would it make sense for me to move some or most of my 401k funds into an IRA gold account? I have 13 years until retirement.
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Wes Moss
See, this is the other thing about gold. It has this literal, this attraction shine to it. And when people think about it, they think, well, should I just put everything in it? I think that's a total mistake because it's not the perfect asset that always steadily goes up. So if you put your whole retirement, if you have $500,000 in retirement, you put the whole thing in gold. Well, it could go down 20%, it could go down 30, 40%. So it's really not quite like being completely invested in stocks. It's more like being invested in one stock. So that's the way I look at this is. So I absolutely know, in my book, my opinion is that you don't want to just put everything in gold. And that's actually how I often get the question. It's not, hey, should I add some gold? It's should I go to gold? If you want safety and you want stability during rough economic times, then short term treasuries to me are a safer place to do it. There should be almost no volatility. You get some income. 3, 4 today, close to 5% for long term treasuries, but let's call it 4 for intermediate treasuries. That to me is safety. So I don't think it's advisable to be jumping all into this one asset that is more volatile than people really think.
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Krista Dibiaz
You know what makes me nervous about it too, it's just the fact that they now can create lab created diamonds that are chemically identical to diamonds. And the price of and the value of diamonds and the lab created diamonds is going to go down and down and down in my opinion. I don't think they're going to be very special anymore at all. And I just think if they can do that now, can they create, are they going to be able to create any, you know, in a lab, any precious metal or other thing in the future? And I could see that happening.
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Wes Moss
There's very few things that we can't recreate in the world today, including movies. And there's a million. Look, there's been fool's gold since the gold rush, right?
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Krista Dibiaz
And.
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Wes Moss
But I don't know of that happening yet.
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Krista Dibiaz
But the idea of it was supposed to be, it's supposed to be a finite resource, which is why we had the standard. And I think that that's potentially at risk.
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Wes Moss
I have read that all the gold in the world put together would melt down into the size of an Olympic swimming pool.
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Krista Dibiaz
Wow.
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Wes Moss
I don't know if that's true, but I've read that many a time.
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Krista Dibiaz
All right, next question's from Tom in Florida. I have a commercial property that I will be closing on in June this month. I do not want to do a 1031 exchange, but rather just pay the capital gains and cash out, then put the money in an investment that is fairly safe. I would like to get 7% or better on the return. Any suggestions?
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Wes Moss
So, first of all, that's super realistic, Tom getting 7% is very realistic. But there are different ways to think about getting to that 7%. The total return equation we're all looking for in the world is super simple. It's G +I growth + income. So if you have 7% in income and 0% in growth, you get there. If you have 7% growth, you have 0% in income, you get there. What you do have to look out for is that if something is paying 7%, then anything over 4 in the world we live in today, you're taking on a lot of risk. And it's a lot to get to five and a lot to get to six and even more to get to seven. So if you're looking for a real estate like investment that just pays income of 7%, totally possible to do, but you're looking at a riskier situation to do that. You're looking at almost a private. You could find a private deal where you owned a building that's maybe paying 7%. The problem with that, it's not all that liquid. And again, you don't have to do it in a 1031 exchange. You could literally buy into a private credit fund or a private real estate fund and that's where you're getting that higher yield. You really lose liquidity doing that. So once you put an investment in something that's a private deal that can be illiquid for 5, 7, 10 years, you should get compensated for that. But 7% is more like is really a high yield or junk bond yield. Right now if you were to buy a high yield ETF that's all junk bond, C rated bonds and lower, then you can get around 7%. Problem is what happens to the price of that ETF or the price of junk bonds. So there are definitely ways to do it. But if you're looking for that much current income, it really takes a lot of risk to do so. And you just have to. All you have to look at is where's the 10 year Treasury? 10 year treasury is around 4.4, so you're almost double that. That takes on a whole lot of risk. The other thing to think about is just a balanced stock bond portfolio. Look at what the market's done over time. It's averaged around or slightly more than that percent over time. A balanced portfolio of equities and fixed income should over time also do 10%. What you're going to get there most likely, and again, no one knows the future is a little bit of G and a little bit of I. You get a little bit of growth A little bit of income and that could add up to the 7% you're looking for over time. But it's, it's hard to find just a steady 7% clip or coupon without taking a lot of risk realistic, but a lot of different ways to do it.
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Krista Dibiaz
Okay. And Lulu in New York says, I'm 66 and already retired. I recently.
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Wes Moss
What a cool name.
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Krista Dibiaz
I know.
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Wes Moss
Lulu in New York.
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Krista Dibiaz
I recently decided to move my 401k into a traditional brokerage IRA account to access more investment options. I transferred 1.8 plus million to a traditional IRA account 1.8 million to a traditional IRA account in late February. But my 401k provider did not allow me to do a like to like transfer. So all the funds are held in a money market fund which pays 3.6% interest due to the volatility of the market. In the past few months, I have not made any investment moves. Now the market is back to where I left it. The question is how should I get back to into the market so I know my money can continue to grow. I don't need to withdraw any money from this account until my rmd.
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Wes Moss
So Lulu, this is such a, this is real life. You do a rollover, you don't really have access. Takes a little time before your money shows up from 401k into an IRA and most of the time it does come over as cash. So then it presents you with one fresh challenge, which Lulu lived. Well, probably in the middle of the tariff storm in 2025 and markets are dropping like a rock. And Lulu's thinking, well, maybe I should get invested here because the market's on sale. However, you're nervous because the market is dropping like a rock. You're thinking, well, it's down 20%, maybe it's going to be down another 20%. So it makes investing really hard during those scary times. Even though we know always in retrospect, well, wait a minute, it was down 20. Sort of just bought it then. So first step, of course, is to get your long term plan. So know that long term, you, Lulu, feel comfortable with an allocation. Let's say it's 50% to stocks and the other 50% to fixed income. Maybe it's some gold, maybe it's some of these other areas. I think of them as alternative income classes that also give you exposure to the commodity space. Not just gold, but other commodities. Probably should have said that during my talk about gold. There's other commodities besides gold. So once you have that and you're comfortable with that plan, that's really the first step. Then you know that long term, this is the way I want to be invested. And again, that's the first step then because we don't know the yo yo ness of the market. The last correction really bear market almost. And almost full recovery or full recovery happened within six weeks. Down for two to three weeks, up for two to three weeks. And you look around say, wait a minute, we're back. We're back to where we were. If you had just taken a six month nap, you wouldn't have seen the market. You rip Van Winkle for six weeks. So there's no perfect way to time this. And emotionally it's hard to get $1.8 million to work when you're collecting a nice 3.6% in money market. So the only way I know to do it, because this is really behavioral investing, this is an emotional question. So you figure out the math, the allocation, this is where I want to go. And then you just do this over an appropriate period of time. The way I look at it is that you do this over six months. Dollar cost average in not just the market, but the whole allocation. So the way I typically do it, there's no perfect way to do this. You could do it equally. I think it's 16 or 17% per month for six months. You're at 100%. I like to do the first quarter. Do 25% means you have 75% left over five months to do 15%. You're at 100. And there's no perfect way to do this. You could do 10% a month for 10 months, but I like to do this over six. You might want to do it over a longer period of time. It smooths out where you're buying into all these different asset classes over the course of markets going up and down and you end up with a more of an average price that's dollar cost averaging. So Lulu, it's a good problem to have. You've got tons of money saved for retirement. You do want to get it invested. But easiest way to do it both statistically, math wise plus human behavior, is to set a plan to do it over the next six to 10 months.
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Krista Dibiaz
Okay, we're gonna be right back and we're gonna talk about AI and jobs.
- [18:42]
Wes Moss
AI and jobs.
- [18:43]
Krista Dibiaz
We have more questions too. And if you wanna ask a question, go to clark.com ask.
- [18:48]
Don MacDonald
Hi, I'm Don MacDonald from the Talking Real Money podcast. Simple, honest financial advice is hard to find because there are too many people in the financial services industry and even the media or say anything to get your money well, for decades my co host Tom and I have been trying to help people better manage money on the radio, TV and in our podcasts. About five times a week we share simple, low cost advice on building the wealth you need to enjoy a better future without making your broker richer. And ironically, you broker Listening to Talking Real Money could not be easier because you're already listening to a podcast. Just search for talking real money on your podcast service or ask your smart speaker. Give us a try. You have absolutely nothing to lose except a few minutes of time and you might just discover something to help you enjoy a more prosperous and secure future along with a simpler present. Just visit talkingrealmoney.com or search for talking real Money in this podcast service. It's that easy.
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- [21:24]
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- [21:26]
Wes Moss
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Wes Moss
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- [21:54]
Wes Moss
Welcome back to Ask an Advisor, Wes Moss, along with Krista Dibiaz. I was listening to somebody or somebody was asking me the other day about this and they were like, oh, that, I love that Krista. What's her last name? Dibiase. What is it? It's Christa Dibiaz and they love you on this show, so it's very sweet, fun.
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Krista Dibiaz
Not everyone does, but that's, that's the way it goes every time. Just don't read the comments.
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Wes Moss
It's real Krista, not AI Krista. And at least for now, it's real me and not AI me. And that's what I wanted to talk about. This has been in the the ethos now for a while, but recently the CEO of Anthropic and Anthropic is one of the big think of them as OpenAI. OpenAI does chatgpt. Anthropic does perplexity. So they're one of the leaders in AI. The CEO came out, this is an interview with Axios and said that he believes that 50% of all entry level white collar jobs in the United States will go away over the next one to five years. Like Screech, stop the record. Whoa. And now he's not saying this to kind of talk his book, if you will, which means just talk about how great his company is he's using to kind of raise the awareness of this, of the potential for that. And it's a very real question that I've been hearing about in the media. And I really wanted just to give my take on this because there's no right answer because we can't see five years into the future. But I am taking it seriously. First of all, I did the math on this. The U.S. labor force, about 167 million people, if you just look at the 25 to 34 year old group, let's call that more likely to be entry level. 50% of those are, let's call them service or white collar type jobs that could be impacted. It's about 8 or 9 million jobs that could, could go away if he's right. We don't know if he's right. But if he's right, within five years, that's 8 million job displacements. It's a really big number that would take unemployment to over 10, almost 20%. The question is, what do we do about it? First of all, could he be right? Maybe he could be right. I'm usually very optimistic about the economy, so I'm not going to brush this off and say, oh well, more jobs will be created than are lost. I'll get to that in a minute. But the reality here is that he could be right. And the way I look at this is that I think the analogy for this is there was a major earthquake in the middle of the ocean from 300 miles out. And the tsunami is coming, it is going to hit the shore. And the people that are on the shore need to understand. And the people on the shore, coders, entry level coders, entry level copywriters, entry level writers for marketing companies. It's really a long list. Anyone that's doing Excel work for a company or entry level analysis, first couple of year jobs instead of having 10 people on a team to do all that analysis, there may only be five people. Because now one person utilizing the tools with an AI can do the job of two people, three people, maybe even five people. So it stands to reason that he's not crazy to say this. The way I look at it is this. Every time we've had a big innovation, the industrial revolution, the printing press, cars, trains, anytime. The Internet.
- [25:26]
Krista Dibiaz
The Internet. I was going to say every time.
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Wes Moss
There'S been a big seismic change, cyclical, a giant change. It has caused disruption and it's. And we've lost jobs, but we've created more jobs than we had lost. So the economy actually grew during those technological revolutions. Anything brand new that really changes thing is attack. It's a technology that's something new. So it stand to reason that is. He may be right. The anthropic. See, you may be right that that many jobs get lost. But what he's not saying is how many jobs could be gained. So we could lose 8 million jobs, but we could have 10 million new jobs. But imagine just the disruption to do that. So this is an assignment. I've written about this and I actually am making my kids write about this. One of mine is a high schooler. So by the time he gets out of college and call it six years or approximately, this will have happened already, this change. So I think the answer for all of us is to sit down and understand our industry. Because the question about AI and taking jobs is going to be different for every single industry and then every job within the industry. So I think it's important for all of us to kind of do a roadmap and say, okay, could my job be impacted? And if it's impacted, what are the other jobs that could be impacted or lost at the same time in that same exercise I'm having my kids do, this is again a thought experiment. But I want them to understand this is the reality of the world we live in. What are 10 jobs that could be created even though these jobs are lost? So let's think about what could be created next. I also want them to think. And my 13 year old asked me, we're driving back from a lacrosse tournament, we had a lot of fun time. And he goes, he said, dad, what jobs are going to be here in the future? As we talked it through, anything that's a necessity. So think food, energy, power, anything that's physical. Think real estate as an example. And anything that has to deal with human emotion. Because the one thing you can AI, at least in the not so distant future, I cannot see it replacing. Even though you could say, well, I could have an AI therapist and it can talk to me and I can. In the end, a lot of jobs are both science, human, they are math and they are people. And those jobs, we just cannot replace relationships with a computer screen. We can't replace relationships completely. Maybe a little bit with what Elon Musk is talking about having a robot in our house to walk around, do our dishes, cook our meals. He just this week said there could be a million of these things.
- [28:06]
Krista Dibiaz
Well, how great would that be for the elderly who struggle?
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Wes Moss
It could be good.
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Krista Dibiaz
Yeah.
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Wes Moss
So if you're elderly, it'd be nice to have a chatty robot hang out with you every day.
- [28:15]
Krista Dibiaz
Well, and just do tasks that maybe are more difficult because the cost of long term care is so astronomical. I could see that being extremely helpful eventually.
- [28:24]
Wes Moss
But it won't replace a relationship.
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Krista Dibiaz
No.
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Wes Moss
And, and so much of business in the service and advanced economy we have in the United States is relationship based. And I just don't see how that gets replaced. Human emotion will never go away if you're an industry where part of your job is that I don't think it goes away. So do your own inventory on what could be lost, what could be gained, and what areas are AI proof. At least proof. Ish. And I think my larger takeaway is that here's what I think will happen again. We'll see. You can check the tape in five years and see if I'm right. Every new innovation has allowed us to tackle incrementally bigger problems. So think about industrial revolution making things faster. We were already making things, but we were making faster. That's the size of a stone. We solved for the stone. Then the Internet came and it connected the entire world and made everything more efficient. That's a boulder. We moved a giant boulder to change the economy. I think the same thing happens here, except now we're trying to move mountains. Meaning think about the big societal problems that are just too big to even to chip away at. Think infrastructure in the United States. We've got every bridge and every road needs work, it needs help, but it's too overwhelming to actually tackle. Think about the curing of diseases and the sequencing of genomics. And some of those tasks are so big that they're almost insurmountable. They're mountains that we're barely moving. And there's a lot of those problems that I can think of that we just don't have the manpower, we don't have the money to move. And I may allow us to start moving those. And those are the jobs I can see getting created. And we don't know them today. How is AI going to help us rebuild all of our infrastructure in the United States? I don't know. Maybe it builds smart cities and we reroute traffic so we have less potholes. And what are all the jobs tied to that? What if you could identify all the bridges that really need work over the next two years, whereas before we couldn't even figure that out. So I think that the longer term creation of jobs is in bigger problems to be solved. I know it's hard to envision what they're gonna be, but I just don't think we're gonna be sitting around in five years with no jobs and us just hanging out in a society where.
- [30:49]
Krista Dibiaz
In a virtual world.
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Wes Moss
In a virtual world. I just. Even though you can make a great case to do that, I just don't.
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Krista Dibiaz
Wow, you've given me hope. I have to say, nobody else has given me hope around this, but you've definitely given me some hope today. I think about it. Okay, Speaking of AI, this question came in from David in Florida. He has been watching videos of people running AI companies warning about the jobs going away. And so he says it'd be great if you could do a segment on what investment choices one should start considering now for that new world where stock markets are probably going to have issues.
- [31:24]
Wes Moss
This again. So great question. Wait a minute. If jobs are going to go away, what's that mean for the economy? Or if new jobs are created, who's going to win that battle. You know, one example would be, I think about what Salesforce did. Salesforce is a software company that does CRM customer or customer relations management. And it's a way to keep track of all your customers and notes and reminders of when to speak to hu. It's a super useful technology, but it's really complicated to integrate to any given company. So what happened when people started to really use robust, not just Salesforce, but robust CRM software? A whole new job was created at most companies, really a whole industry to serve companies, to make sure that the software was implemented in the right way. It didn't necessarily take away jobs. It made everybody more efficient and it added new jobs because now we're using more software to be even more efficient. Now you can argue that really robust CRM because now let's say a particular person at a company can have 50 accounts as opposed to 25. And you can say, well, that's going to be terrible. We're going to be so efficient that Johnny can have 100 accounts because we're so much more efficient. There's going to be less jobs. Well, there was a whole nother job created an industry around making sure that software worked. The challenge we have, you have, Don, is figuring out what companies will emerge with many industries or bigger industries. We don't know that yet. And it's hard to just. This is so new and so transformative artificial intelligence in so many different areas in almost any industry. We don't know what's going to emerge as successful business. So in my opinion, as opposed to saying, well, AI is going to revolutionize the world, I'm going to invest in AI companies. I think that is a little bit too targeted and you're dealing with big economic change and transition. The best way to at least know you're going to capture at least who's winning is to own the whole market. And it kind of goes back to index investing that you own all 500 companies as opposed to two or three you think are going to be the winners. Because someone within that 500 or that thousand, depending on the size of the index of the ETF, somebody's going to emerge as a winner. And the way to really capture that is to be a broad index investor. That again, there's a good idea in a lot of different economic environments. But it's even more so, I think in times of economic transition. So broad stock ETFs that cover all industries. I have preference to that versus just trying to find a few AI companies.
- [34:15]
Krista Dibiaz
And if you want to ask a question, go to clark.com Ask Lucas in California says what would happen if they got rid of the weighted index and everything was equally weighted, especially ETFs. Would that help calm these fears of an ETF bubble at all?
- [34:30]
Wes Moss
You know, Lucas, you bring up this real point about market being bubble oriented. A little bit of it has to go back to AI I just talked about. You got a few players that are facilitating the technology behind all that. And those companies were already well established. They are already gigantic and now they're even more gigantic. They're mega, mega, ultra mega caps. Think about the semiconductor companies. Think about the big. Think about what Alphabet just did with Alphabet just did. One thing I didn't mention is VO3. Have you heard of VO3? The creation of. My kids and I were watching some of the examples of what VO3 can do, which is from Google Labs that all create whole movies that are completely realistic without any people. So these are companies that already have this giant head start and they have the money to do it. And you've seen, I'm not saying to run out and buy Alphabet here, but indices are weighted towards the biggest companies and that's been a worry. If everything were to be equally weighted and there's lots of ETFs that'll do that where you, you own the same percentage of every company as opposed to 10% in 1 or 30% in the top 10, that would really change markets. So it could happen and you can do it. That's the other great thing is an investor can invest in equal weighted sectors. You can either buy the individual sectors, you buy an ETF that has the sectors equally weighted, or you can buy an ETF that has stocks equally weighted. I actually do that in some of my investing, so I don't think it's a bad idea. But the market for cap weighted indices is so gigantic. It's a multi trillion dollar industry. Just the S&P 500. There's I don't know how many ETFs there are that track that it would take a century or 50 years worth of investing. Everybody now changing and moving towards these equally weighted industries or indexes or investments in order to do that. So on a big picture it's not going to happen. It's always going to be weighted towards the big companies. The good news is you don't have to participate in that and you can be more equally weighted and balanced.
- [36:41]
Krista Dibiaz
Okay. Okay. This question's from Don in North Carolina. Hello, Wes. Welcome to the new addition to The Clarkies. That's what Clark fans call themselves.
- [36:50]
Wes Moss
Clarkies. Got it. Thank you, Don.
- [36:52]
Krista Dibiaz
We enjoy your weekly insights. We're in the process of moving to a new home and our current home is fully paid off. We contribute fully to our retirement accounts and have sufficient money saved there. We have an emergency money saved in cash equivalents to last one year. Our question is whether to sell this house for about 460k and pay off our new home or rent this house for about $2,300 a month and cover the mortgage of the new home of about the same $2,300. The HOA fee plus yearly property taxes comes to about $5,000 a year.
- [37:26]
Wes Moss
And they're in retirement. This is down in North Carolina.
- [37:30]
Krista Dibiaz
We contribute fully to our retirement accounts. So no, I don't think they are retired.
- [37:35]
Wes Moss
You know, look, I think it's a question of leverage and work. And what I mean by that is work. It's work, physical, manual work. To own a second home and collect the rent and make sure it's up to standards, plumbing, roof, ac. It's a mini job. I think owning one investment property is a mini job. It's not that big of a deal. It does get to be a really big deal when you've got five houses. So know that one I think is super manageable for most people, if you like doing it. That's the other thing. You kind of have to like having an investment type property because your primary home, if you don't sell and you move in a new home, technically you're what used to be your primary is now an investment property. So treat it as such. If you like doing that and you're Getting decent rent, $2,300 a month on an asset that is, well, let's call it around $400,000 it sounds like. And you're getting 24k a year, you're getting about 5%. Let me make sure I'm doing my math here. I'm just assuming it's around 400, that's a 2,300 times 12 is 27,000 divided by 400,000. My denominator could be wrong, but that's a 7% gross return, maybe a 4% net return. So it's not a bad investment. And then that doesn't count the appreciation of the home over time. That's the second part of the answer here, which is leverage. This is if you hold on to it, you are now creating leverage in your financial situation because that one's paid for. But you'll have to get a new mortgage for the new house. So you still have debt and the more leverage, the more overall assets you can have and the more nominal dollars you get for the same rate of return. Meaning that if everything goes up by 5%, if you got two houses, you have appreciation on 400 plus 400 on 800,000. So if you're getting some rent and getting some appreciation, then it's not crazy to keep both. It's just some work. And just understand that you now put everything in a slightly riskier situation, not crazy risk. What I will say is that through my research, happy retirees don't have a mortgage on their primary home. So it sounds like you've got some years before doing that. Just note that when you get into retirement, it's a huge mental burden off of your plate to no longer have a mortgage on your primary home. So just consider that into the future. That would be the more conservative route to go. Sell your old house, pay off the new one. That's a really easy, low stress, conservative way to do it. Giving up a little leverage. So if you're young enough and you want to do it. I like the rental option.
- [40:17]
Krista Dibiaz
All right, that does it for us today. Thank you, Wes, for all that. I think this was a great show. I hope everyone enjoyed it and you learned something. Please share this episode with a friend if you think they'd like to hear it and subscribe if you haven't already subscribed, wherever you listen or watch on YouTube. YouTube.com clark thank you so much for being with us. Have a great day and Clark will be back tomorrow.