The Clark Howard Podcast – Detailed Summary of Episode: June 24, 2025 – "Ask An Advisor With Wes Moss"

Release Date: June 24, 2025

Introduction

In this episode of The Clark Howard Podcast, host Clark Howard teams up with Krista Dibias and guest advisor Wes Moss to delve into pressing financial questions from listeners. The episode primarily focuses on two significant topics: FOMO Freddy and Dry Powder, followed by a comprehensive Q&A session addressing various personal finance concerns.

FOMO Freddy: The Pitfall of Fear of Missing Out

[00:56 – 04:03]

Wes Moss introduces the concept of FOMO Freddy, a hypothetical character representing the all-too-common investor driven by the fear of missing out on lucrative investment opportunities. Freddy is portrayed as the quintessential party-goer who incessantly discusses high-performing investments, urging others to jump on the bandwagon without considering the fundamentals.

• Key Points:

  • Momentum Investing Risks: Freddy often promotes investments based solely on their recent performance, such as innovative ETFs or booming tech stocks, without assessing their intrinsic value.
  • Historical Context: Moss references the housing bubble of the early 2000s and the volatility experienced by companies like Peloton, illustrating how FOMO-driven investments can lead to significant losses once the initial momentum fades.
  • Cycle of Hype: As more investors follow Freddy, the asset’s price becomes detached from its fundamentals, eventually leading to a sharp decline when the hype subsides.

• Notable Quote:

  "FOMO Freddy is not only the life of the party, but he's also dangerous to your portfolio because he is dripping on you." — Wes Moss [02:30]

Dry Powder: Building a Safety Net for Financial Stability

[08:39 – 29:38]

The discussion transitions to Dry Powder, a metaphor for maintaining a reserve of safe and liquid assets to protect one's investment portfolio during market downturns.

• Key Points:

  • Definition: Dry powder refers to safety assets that are easily accessible and designed to bridge financial gaps during volatile market periods.
  • Purpose: It serves as a buffer to avoid selling off investments during market lows, thereby preserving long-term growth potential.
  • Minimum Requirement: Moss recommends having enough dry powder to cover three years of annual spending, ensuring financial security even in prolonged bear markets.
  • Asset Types: Includes cash, CDs, money market funds, short-term Treasuries, corporate bonds, municipal bonds, and stable value funds.
  • Interest Rates Correlation: The yield on dry powder assets should align with the current federal funds rate to maximize returns without compromising safety.
  • Psychological Benefits: Having dry powder provides peace of mind, enabling investors to stay committed to their investment strategies without succumbing to panic during market swings.

• Notable Quote:

  "The dry powder is to get you through even these longer bear markets that take a while to recover." — Wes Moss [25:00]

Q&A Session

1. IRA Transfer Concerns Amid Market Volatility

[09:12 – 14:15]

Listener: Donna from Virginia is 64 years old, planning to retire with a sizable IRA in a workplace account. She is apprehensive about transferring her funds due to potential market misses during the rollover process.

• Wes's Advice:

  • Market Timing Myth: Emphasizes that missing just a few of the market’s best days can significantly impact long-term returns.
  • Transaction Strategies: Suggests completing the transfer during periods of lower market volatility (VIX between 15-20) to minimize risks.
  • Alternative Approach: If extremely nervous, consider transferring funds gradually over several months to reduce exposure to any single market movement.

• Notable Quote:

  "There is no magic solution to being able to have money moving from institution to institution and it's going from funds into cash that needs to be reinvested." — Wes Moss [10:38]

2. Managing Treasury Direct Accounts

[14:07 – 16:15]

Listener: Barrington from North Carolina inquires about handling a $10,000 Treasury Direct account and whether to maintain or reinvest the funds.

• Wes's Recommendations:

  • Reinvestment Strategy: Once Treasury securities mature, reinvest in similar safe instruments or use the funds to bolster a Roth IRA.
  • Dry Powder Inclusion: Treasury Direct holdings can be part of one’s dry powder, offering high safety and liquidity.

• Notable Quote:

  "If you're in a brokerage account or even an IRA and it's moving to another IRA, it can stay exactly invested as it is." — Wes Moss [09:57]

3. Evaluating Market-Linked Notes for Retirement

[16:15 – 19:51]

Listener: Brooke from Massachusetts is considering market-linked notes within a newly converted IRA for downside protection but has concerns about their viability.

• Wes's Insights:

  • Credit Risk: Highlights the importance of the issuing institution’s creditworthiness, referencing the Lehman collapse as a cautionary tale.
  • Liquidity Issues: Notes that market-linked notes are illiquid, making them difficult to sell without significant discounts.
  • Complexity vs. Safety: While these notes offer attractive on-paper benefits, their complexity and associated risks make them less favorable compared to simpler, more liquid safety assets.

• Notable Quote:

  "If you're going to take on credit risk, you're going to see some real volatility." — Wes Moss [35:07]

4. Bonds in a Retirement Portfolio

[29:38 – 36:22]

Listener: Brandon from Tennessee, 39 years old, is considering moving from a target-date fund to a more aggressive three-fund portfolio, questioning the necessity of bonds.

• Wes's Recommendation:

  • Age Consideration: At 39, Brandon can opt to forego bonds in his investment portfolio, relying instead on dry powder through I bonds.
  • Investment Flexibility: Suggests redirecting bond allocations into U.S. or international equities or exploring other sectors like real estate to diversify beyond the S&P 500.
  • Strategic Allocation: Encourages maintaining a robust equity portfolio complemented by a solid dry powder reserve.

• Notable Quote:

  "In your 30s, you don't necessarily need bonds. You can handle market volatility and you've got your dry powder with I bonds anyway." — Wes Moss [30:39]

5. Tax-Exempt Bonds for High Earners

[36:22 – 40:10]

Listener: Justin from New York seeks advice on whether to continue using S&P 500 index funds or switch to an advisor-recommended smart-weighted portfolio that purportedly mitigates tech stock concentration.

• Wes's Perspective:

  • Advisor Value: Stresses the importance of aligning with a fiduciary advisor who prioritizes the listener’s best interests.
  • Index Fund Costs: Points out that some target-date funds carry higher fees, potentially eroding returns over time.
  • S&P 500 Composition: Acknowledges the heavy weighting in tech stocks within the S&P 500 but notes the significance of tech in the broader economy.
  • Diversification Benefits: Supports exploring diversified investment strategies that don’t overly concentrate on any single sector, like technology.

• Notable Quote:

  "I think there's some real value in equal weighting things and not having 40 or 50% in tech, maybe having 20 or 30% and having exposure into the other sectors of the market." — Wes Moss [37:03]

Conclusion

The episode provides invaluable insights into avoiding common investment pitfalls such as succumbing to FOMO Freddy and emphasizes the importance of maintaining dry powder for financial resilience. Through detailed listener questions, Wes Moss offers tailored advice on IRA transfers, Treasury Direct accounts, market-linked notes, portfolio diversification, and the strategic use of tax-exempt bonds. The discussions underscore the significance of informed, disciplined investment strategies over reactive, emotion-driven decisions.

Additional Notes

• Notable Quotes with Timestamps:
  • FOMO Freddy Dangers:

    "FOMO Freddy is not only the life of the party, but he's also dangerous to your portfolio because he is dripping on you." — Wes Moss [02:30]

  • Importance of Dry Powder:

    "The dry powder is to get you through even these longer bear markets that take a while to recover." — Wes Moss [25:00]

  • IRA Transfer Strategy:

    "There is no magic solution to being able to have money moving from institution to institution and it's going from funds into cash that needs to be reinvested." — Wes Moss [10:38]

  • Credit Risk in Market-Linked Notes:

    "If you're going to take on credit risk, you're going to see some real volatility." — Wes Moss [35:07]

  • Diversifying Beyond Tech:

    "I think there's some real value in equal weighting things and not having 40 or 50% in tech, maybe having 20 or 30% and having exposure into the other sectors of the market." — Wes Moss [37:03]

This comprehensive summary encapsulates the critical discussions and expert advice shared in the episode, providing clarity and actionable insights for listeners aiming to navigate their financial journeys effectively.