← The Clark Howard Podcast
The Clark Howard Podcast
11.11.25 Ask An Advisor With Wes Moss
00:35:12
Top 10 'Overvalued' Cities and Second Act Career: A One-in-a-Million Story
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- [00:00]
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- [00:41]
Wes Moss
Welcome to Ask An Advisor. I'm Krista Dibiaz here with Wes Moss. Hey Krista D. And in your lovely.
- [00:47]
Krista Dibias
Jacket, your still I'm liking this fall weather blazer jacket.
- [00:51]
Wes Moss
Yeah, it's pretty awesome. And today on Ask an Advisor we will get to your questions which you can ask@class clark.com ask and also you're going to talk about the housing market, which good news for buyers, not so good for sellers anymore. The market has shifted.
- [01:09]
Krista Dibias
Yeah, it's a buyer's market.
- [01:11]
Wes Moss
Yeah.
- [01:12]
Krista Dibias
In a lot. Most of the country.
- [01:14]
Wes Moss
And then I'm excited to hear this story. I don't know what it is, but it's about a second act.
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Krista Dibias
So one in a million second act career.
- [01:21]
Wes Moss
Okay.
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Krista Dibias
It's almost so crazy that it's hard to. It's somewhat unrelatable but very relatable all at the same time. And it's a good lesson.
- [01:31]
Wes Moss
Someone in their 50s taking on a very unusual career. And I love the idea of second careers and second acts.
- [01:37]
Krista Dibias
And I do too. I'm always looking for good stories around this and we found one.
- [01:40]
Wes Moss
I just read something today. It's so weird. I got this notification from this website and it had this blurb about how some people have five careers in their lifetime and how you should never be afraid to try new things. And so I'm very. We're in, we're living in a simulation potentially.
- [01:57]
Krista Dibias
Well, you somewhat have gone from radio to podcast.
- [02:00]
Wes Moss
I mean sort of. I was a web producer when I started out my career. I've, I've definitely worked across media for sure, but I've stayed in media and thank goodness what a career I've had with Clark. But I did have so many jobs before I actually started this career.
- [02:15]
Krista Dibias
When were you, how old were you when you started in radio?
- [02:17]
Wes Moss
Oh Gosh, I was 25. 25 or 20. Yeah, 20. 25 was a web producer but before that, I. When I first got out of college, I joined a temp agency and I had a lot of different temp jobs. Receptionist. I categorized art. I was a barista and I started babysitting when I was 11. And I always had jobs in high school.
- [02:39]
Krista Dibias
Yeah, art categorization.
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Wes Moss
Yeah. I worked tons of retail through college and food service. And I've done a lot of jobs. I was always someone who liked to work.
- [02:48]
Krista Dibias
So I'm with you.
- [02:50]
Wes Moss
So we are going to talk about both those things. We're going to start out with the housing market.
- [02:55]
Krista Dibias
Let's talk about housing. And I guess I'll couch this by saying some of these markets that I'm going to talk about, we're in a unique spot. And I looked at, I found a. A good way to track overall buyers and sellers when it comes to housing. And when you have an imbalance like we do today, it's the most extreme buyer's market we've seen in a very, very long period of time. So I'm not saying that people are ready to look at, move and go somewhere else, but there are some good deals and I think the deals are going to continue to get better. So I want to talk about the top 10 or 15 cities that have the biggest imbalance. So many sellers, in some cases 150% more sellers than buyers. And what does that mean? That means you have a buyer's market. You've got a lot of people saying, please buy my house. And that's very different from what it was. If you go back to 2020 to all the way to 23. We had a ton of buyers. We had 2.5 million buyers and we had 1.5 million sellers. So it was a seller's market. It was a great time to sell your place. And it's almost completely inverted now. It's taken a long period of time. This goes all the way back to 2020. Here we are in the end of 2025. But this is new data from Redfin. There are 1.4 million home buyers right now. That's the lowest level since 2013. We have way less buyers because prices are still expensive. And we've seen started to see some prices come down, but it's still really expensive to buy a house right now because of housing inflation. At the same time, there are almost 2 million sellers. So 2 million people trying to sell, only 1.4 million people trying to buy. That's 36% more sellers than buyers. And the widest gap we've seen is in over A decade. And the question is, where, Wes, where should I go if I'm looking? And when do you think about moving geographically? It's such a big deal. You're not going to just look at a list of cities with good deals and then say, hey, well, let's move. But it's at least worth considering and understanding and knowing. So I'm going to start with. I want to get to that list. That's the candy. Let me go through some of the spinach first. Let's just do the. We've got to talk about the most expensive markets. I think that's important to look at. They're mostly where you would expect. It's California, it's New York, it's Seattle.
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Wes Moss
Is Boston not on there? I'm surprised.
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Krista Dibias
Boston is on there at number 9 out of 10. Most expensive. The median. This is median. So of course there's way more expensive homes than this, but the median is about $740,000. And that's actually one of the very few. And I think this is a 200, 300 cities in this. In this that I sorted by. It's one of the very few balanced markets still. And New York, New York, New York, New York is still somewhat balanced. But then the rest of these super expensive markets are all buyer's markets. California, San Diego, California. Los Angeles, California Anaheim, San Francisco, San Jose. Seattle, Washington is still on the list. That's a buyer's market. So it's. It's the expensive Northeast and then it's the west coast, and that's nothing new. Now, at the same time, what are. What are the least expensive markets? The least expensive, let's call it number. Because this is near my hometown. One, two, three. Number five, least expensive. Philadelphia, Pennsylvania, at $285,000 is the median home price. It is a buyer's market there. St. Louis and Cleveland. 270, 250. So still very affordable, median wise. Number two, least expensive place, Metro in America. Pittsburgh, Pennsylvania.
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Wes Moss
A very cool city.
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Krista Dibias
It is a very cool city.
- [06:46]
Wes Moss
It really is.
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Krista Dibias
This is where you start to say, well, wait, that's a really cool city and it's really inexpensive. Houston, by the way, is number 15 or number 10, 331,000. Median in Detroit, 204. The least expensive of the group, but we're the best.
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Wes Moss
Had a real renaissance, hasn't it? Like over the.
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Krista Dibias
I spent a lot of time in Michigan. Yeah, the. I still. I don't know if I'd be buying in Detroit necessarily, but there are lots of great Areas right around there that I think are great. I was talking to Clark the other day and I said something about Michigan and how it could be magical in the summer. And he just like fell off his seat. He's Michigan Mark. Gotta join me in the summer. All right, where are the best deals? Here's what I think is it's interesting. In Nashville, Tennessee, there are essentially double the amount of sellers and buyers. There's 100% more sellers than buyers. Now prices year over year are still up a little bit. But that relationship, you'd almost have to see prices start to come down. Tampa, Florida. 101% more sellers than buyers. Now prices have started to come down there. Median is 370 grand, but prices are down about 1% year over year. Jacksonville, San Antonio, West Palm Beach. Austin, Texas. 124% more sellers than buyers. And then you get to the top two and where you've got to start seeing prices come down. They're down a little bit year over year. But I could see this becoming more dramatic. Fort Lauderdale, 151%.
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Wes Moss
And probably a lot of that. Right. Aren't there issues with the condos in Florida are like really struggling because of the new rules and all the assessments.
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Krista Dibias
You've got new rules, assessments, you have weather, weather on top of weather. And it just is that much more expensive to live there beyond just the home price. And that's. And you really. What we saw is we had a disproportionate amount of people go down to Florida, go down to Texas during COVID and this is unwinding. And then the number one imbalance in the country for major Metro is Miami, Florida. 160% more sellers than buyers. And it's time to maybe just at least take a look. Think about it. Now that you know these lists, we never know where we're gonna end up. Either for a work booth where we can find a deal or for an early retirement.
- [09:12]
Wes Moss
There you go. All right, Are you ready for some questions?
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Krista Dibias
Sure.
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Wes Moss
Jessica is in one of those expensive states, New York. Jessica says, I don't know if she's in New York City.
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Krista Dibias
Who knows? It's so hyperlocal. Hard to just say a state. True.
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Wes Moss
All right, so Jessica, although her area code does indicate New York City, she says, I think it's important for Wes to clarify that the Fed may be the fuel line for the overall economy, but it does not control mortgage rates. Last September of 24, the Fed cut rates by a whopping half percentage point and. And mortgage rates shot up in Fact, The Fed cut three times between September 24th and the end of the year, a total of 1%. And after shooting higher than stayed right around 7%. The Fed is all about short term rates and mortgages loosely follow 10 year treasuries. Too many people are waiting to buy a home crossing their fingers that mortgage rates will drop when the Fed cuts. But wow, were we disappointed when that didn't happen last year. Anyway, I think it's worth explaining. People just hear the headlines and not the truth.
- [10:14]
Krista Dibias
Jessica, it's a really good point and I think you're bringing up, this is important is that yes, mortgage rates loosely follow the ten year treasury, but a lot of people don't track the ten year Treasury. But that's where we, if you look at the two charts, the 10 Year treasury and mortgage rates, they're usually going to go somewhat in lockstep. But when the Fed cuts, you're right, you can see these adverse, almost the opposite. What do you would expect? Now a lot of that is because we talk so much about what the Fed is going to do, the market, pre prices, reruns, front runs, what they think the Fed is going to do. And I have a, I have a chart here that is mortgage rates, Fed and 10 year Treasury. And if you go to September of 2024, the Fed cut a half a percent, then another quarter, then another quarter, 1, 2, 3. So it was a full 1%. And to your point, Jessica, mortgage rates went from close to six up to seven. But before that, if you go back four or five months prior to those cuts happening, mortgage rates went from seven down to call it closer to six. So the market essentially knew the Fed was going to start cutting. So rates came down, mortgage rates came down. And if you look at mortgage rates and overlay that with the 10 year treasury, that's a much closer relationship. I think it's important to note. Where do we stand today? We're at about six and a little less than six and a quarter on the average 30 year fix. Remember we were over seven at the beginning of 2025. So Fed has cut somewhat this year. They just cut again this month. They cut again, they cut last month. So rates have come down. We've seen from seven down and now two and a quarter. But to Jessica's point, I wouldn't be waiting for the Fed to do a cut just to see the mortgage rates moving. I think that we've already seen a nice mortgage relief for sure. Okay, still high but, but much better than it was.
- [12:19]
Wes Moss
But historically it's not terrible. I mean, they're pretty good. I mean, it's been so much higher mortgage rates. I mean, I know that. Yeah.
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Krista Dibias
But no, almost. Not much in our lifetime. I remember my thinking my first mortgage was. Every time you turn mortgage, my first mortgage was 10%. My version in mine, I think was six and a half or seven.
- [12:35]
Wes Moss
Yeah, mine was like seven and a half or eight. Yeah. Greg in Florida says I'm retired with about 500K in my TSP. In 2026. The TSP will offer in plan conversions if the expense ratios are about equal. Can you go through the pros and cons of staying in tsp vs rolling it out to Vanguard? What am I missing? Is it just erisa?
- [12:57]
Krista Dibias
Erisa? Here's the thought. ERISA governs private employer retirement plans. The TSP is a federal plan. But Greg's right. There's a lot of protection when it comes to if you get sued or creditors coming after you. There's a high level of protection in the TSP plan, Thrift Savings Plan, but there's also a lot of protection at the state level in IRAs. Now, it does depend on what state you are and there's some nuances, but generally they both have a really high level of protection against either bankruptcy or, and there's some limits, obviously, the amount that gets protected and or creditors. So they're both, I think, really safe options. Tie goes to tsp, probably even a little, little more stringent when it comes to protection. I think the bigger question for you, Greg, is just you want options. The cost if you go to TSP is ultra low in cost. Vanguard's ultra low in cost. The TSP has a very limited. TSP is like a great restaurant that has five things on the menu and they're all good and you really don't need much more than that. Every time I go to a restaurant with a few good things on menu, I say, why would you have a menu of 200 things and you go to a place, they have 200 things on the menu and like five are good and the other 195 are okay. TSP is kind of like that. They just. They have five real index options that cover a lot of the world. And if you want to keep things really simple, you can still get a lot of balance. You've got two safety options, fixed income, which is corporate. It's a lot like the aggregate bond index. And you have an all government fund and then three stock choices, essentially large, us, small and international. You can get the same thing in Vanguard, but then there's a lot of other options. I think it's mostly just around optionality. The safety of the two are similar, pricing of the two are similar. But you just get a lot of options with Vanguard. And two, you can get some help, you can get some service and you can get some, you get a human to talk to. And if you want they have an advisory program that's a really low annual percentage and you get some planning around it. And I think that might be something to look into.
- [15:19]
Wes Moss
Okay. And then this one came in from Pamela in California. Wes, where should investors move their money when the interest rates go down? You stated that they go down overnight. And I'm 61, I'll retire in four to five years. I've moved 30% of my money into dry powder, 10% into bonds and 60% in stocks. Thank you for all the great advice over the last couple of years. I only wish I would have found this podcast years ago.
- [15:43]
Krista Dibias
Pamela, it's never too late. No, never, never too late at all. She essentially has a 60% stock portfolio. Pamela, you have about 60% in stocks. The dry powder, I want to clarify this a little bit. You essentially have 30% in cash, 10% in bonds. To me, dry powder doesn't have to be just cash. It can be a bond oriented ETF fund however you want to invest in it, or individual bonds. But if you're 30% of your 40, so three quarters of your dry powder is in cash, it's already probably seen a lowering in yield because the Fed has just cut rates twice over the last call it two months. So you've already had that probably adjust lower. And why you would potentially rather have fixed income or a bond oriented fund is that if you've got a five year bond or the average is five years and it's paying 4%, remember you have that somewhat locked, locked in. And if rates go down to 3 for the from the fed funds rate or 2, that would be kind of extreme from where we are today. But you still are getting the 4% or 4 and a half percent from the bond that you locked in. So that's the whole point of having not just cash because it adjusts on almost instantly to where the Fed sets rates. The reason we have fixed income is that you should have a longer lock in like, like a longer term CD, right? A 30 day CD is going to fire and reset. A five year CD keeps that same rate for the whole duration. And that's why the way I look at some of this, your dry powder can be in some in fixed income bonds that have longer periods of time where you get a better you locked in a higher interest rate.
- [17:28]
Wes Moss
Awesome. Okay, we're going to take a quick break and then we come back Second act careers.
- [17:33]
Krista Dibias
Oh we've got a one in a million second career.
- [17:40]
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- [18:13]
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- [19:18]
Krista Dibias
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- [19:29]
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- [20:19]
Krista Dibias
Welcome back to Ask an Advisor. Wes Moss along with Krista Dibias. Second act careers.
- [20:26]
Wes Moss
I can't wait to hear this.
- [20:27]
Krista Dibias
You used to be a barista. We learned that at the beginning of the show. You babysat barista. You're an art categorizer.
- [20:34]
Wes Moss
I did tons of retail jobs. I was an RA also in college. I worked in the resident advisor. Yeah. So you got free room and board.
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Krista Dibias
Yeah.
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Wes Moss
And yeah.
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Krista Dibias
Were you a tough ra? Were you. Is it like a disciplinary thing?
- [20:48]
Wes Moss
I mean you have to. Yeah, you have to like kind of patrol and stuff. But more than that, I wouldn't be.
- [20:53]
Krista Dibias
Messing around if you were my radio. I would make sure I was totally in line if I were in college and dorm.
- [20:58]
Wes Moss
You're supposed to be a support system. Oh, support. I had freshmen the first year as an RA and that was more support. And then I was an RA for sophomores my senior year and that involved a little more watching out for danger. Yeah, stuff like that.
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Krista Dibias
I believe it. Well, let's talk about. So I don't know if you ever are going to revisit some of these careers, but this is a story about a 58 year old named Tom Sillo. And his second act career was really pursuing something that was something that he felt slipped him by. And it was a purpose that he missed and always had this desire to kind of make up for this lost time. And this is Tom Sillo. This is a true story. It was in the Wall street journal. He's 58 years old. He's from my home state of Pennsylvania and he's in lycoming or Williamsport, Pennsylvania. And there's a college there called Loming College. He's 58 years old and he is playing college football.
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Wes Moss
What?
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Krista Dibias
For the Lycoming College Warriors. That not crazy.
- [22:08]
Wes Moss
That is crazy.
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Krista Dibias
He's not the water boy. He's not a coach.
- [22:11]
Wes Moss
I was going to say he's not.
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Krista Dibias
An instructor in the weight room. He is playing football on the team.
- [22:17]
Wes Moss
Wow. So they're not technically.
- [22:18]
Krista Dibias
He's been on their jv. It Seems like. But he may have already gotten some snaps on varsity. We don't know. And this is real. It's not. It was not some publicity thing. This is a guy. And I'm going to say that this sounds crazy and I have a warning here. As I was writing, this was kind of warning slash smiley faces that it reminds us this is a one in a million. And I'll tell you about his. He's this guy who stayed in shape. This is not somebody who's like, oh, I think I'm going to get in shape. He's already A big guy, 6ft tall, 220 pounds, always stayed really in shape in the gym. So he's in there. He started in shape, so it was a possibility. I mean, it seems nuts. He's almost 60 years old. But to me, it's just a reminder that this is, yes, kind of a one in a million second act career. But it's a nudge, I think, for the rest of us to just push ourselves a little bit further than we might think right out of the gate. Your second act, it doesn't need to be like the next Netflix series, which this could be. It just needs to stretch us beyond our comfort zone. And knowing that somebody has done something this seemingly extreme, I think it just helps us all push a little harder when thinking about what could I do next? The real life story is here, is that he's. He worked for the city, basically Parks and Recs and rec for a long time, City parks department. And he always worked out, kept strong. I think he did some competitive weightlifting. So he's a lot of stature for Tom Sellow. £220. And he met. I don't know how he got the meeting that'll be in the Netflix series, I'm sure, but he met with the coach of the Lycoming warriors, like college Mike Clark. And Mike's 54, Tom's 58. They're sitting down, he's like, I want to meet with you, coach, and I'd like to play football. And he goes, what do you mean? He was like, what are you talking about? What do you mean? You're 58, man. So I want to play football. He didn't even play high school football because he had a. He had a drug and alcohol problem when he was in his teens. And he fell into the wrong crowd, he fell off track. And he never got to do something that he, deep down, he always wanted to do, but he didn't even have the shot to do it. So maybe part of his Life working out. He kind of was making. He was trying to do something to make up for that. But I guess he's looking at these 18 year old kids. He said, look, I'm just as big and just as strong as a lot of these kids. How can I not just play nose tackle? It's possible. Crazy, but possible. Mike Clark eventually took him serious, even though seriously thought it was a joke. He said, well, let's see how you do in the weight room. Let's come meet the kids. And these 18 year olds are like, what is this? Is this guy a new coach is what? And he's in the weight room and he's stronger than most of the 18 year olds. He's like. And they're like, they call him the animal. So he's a super tough guy, he's super strong, he's in shape. And yes, he is sore and he's stretching and he's doing ice baths. But he also has an nil deal from an arthritis cream, which of course he does. We'll probably see him on an Icy Hot commercial along with Shaq.
- [25:26]
Wes Moss
That's awesome. Good for him. That's amazing.
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Krista Dibias
So it's an unfinished purpose that Tom's solving for. I think we all got that. If you really think about there's something that you missed out on in your life that you probably wanted to do and you never got a chance to do it.
- [25:41]
Wes Moss
Yeah, there's someone we work with and he is. He's always wanted to be able to kick a field goal. I don't know if it's an extra point length or what it is, but he's been working on it all year, like in his 50s.
- [25:54]
Krista Dibias
Sounds like Tom Sella wanted to make the kicking team. Never could because he was, he was working or I don't know what it was.
- [26:01]
Wes Moss
I've been doing this thing lately. I have a friend who owns a food shop. Like it's a little food shop and you can eat there. And she also goes to farmer's markets on Saturdays and sells food and she's been short staffed. And so some Friday nights I've been going there and I work until like, you know, 11 or 12. Yeah, I help cook the food for the farmer's markets. I'm not, I'm being paid in like tacos and other food. But I love the two ladies I'm working with and we play music and it's been super fun for me to do something totally different where I'm just like working, working, working. I mean, I get it's it's so. You get so hot in there and you're just cooking. And I'm learning how to cook new things, and it's been a blast for me to just change it up.
- [26:40]
Krista Dibias
Check this out. I'm ringing the bell. The. That is awesome. But look, look. This is. Work can be fun. I know from our research that we don't want to be working in retirement because we have to, and we need the extra money. That's not. That is not good for our overall happiness. We want to be able to be doing something that's fulfilling a sense of purpose. And what Tom is doing is doing that. It's a. It's. He's feeding his purpose in a lot of ways. This keeps us feeling young in his case, probably on both ends of the extreme. Feel really young playing college football. Probably feel really old after you've done a game. The community and connection is extraordinary with this entire team. They didn't like the idea of it in the beginning. Now they love this guy. And then the challenge that keeps us active and keeps us curious and keeps us learning. And you put all that together. It's hard to. It is hard. And I've done some recent research around this. Retirees, even if they've got some second acts and they've got core pursuits, they do struggle. They don't. Very few of them say they're doing great when it comes to their sense of purpose. It's hard to really. A lot of the folks I've surveyed say they. They feel pretty good about it. But it's kind of rare for somebody to say, yeah, I have an awesome or great sense of purpose in my retirement years. Let's just keep thinking about that.
- [28:02]
Wes Moss
Okay. We'll go to questions. AJ In Oklahoma wrote, hello, Wes. I recently got a substantial raise at work. This has started my wife and I on smart ways to steward our money. We have lofty goals and a general plan to achieve those goals. But I feel really unsure how to begin, and I question if it's a good plan. Would a financial advisor be beneficial for us, or should we educate ourselves on how to reach our goals? Thank you.
- [28:25]
Krista Dibias
I think the Clark Howard show.
- [28:27]
Wes Moss
Yeah.
- [28:27]
Krista Dibias
Ask an Advisor can start to help. AJ Let me do a. I probably need one of these cards to always be able to quickly know exactly the amount of money per year times the number of years, times the rate of return gets you to what. But I do have the one for a million dollars memorized. If you want to do that in 20 years, think about this. 20 times 25 times 6 equals a million bucks. And what am I doing there? I'm doing 20 years. So if you're 50, 30 in by age 50, 20 years times 25k per year, call that 2 grand a month times a 6% ROR rate of return, that gets you roughly to a million bucks. The thing about this, no matter what age you are, well, even if you're, if you're under 50, you can do 23,5 into a 401k. Just that maxing out, if you were to do that for 20 years times an average of 6%, which hopefully is low for the US stock market, maybe more for a balanced portfolio, mathematically does get you there to a million. And people like goalposts, people like targets, and I like having a target of a million or a million and a half or 2 million or whatever that number is. Because then you can quickly back up, do the math and know, well, I can just, I can try to solve this puzzle little by little. Over time I'm going to just make sure, Krista, that I'm doing this math right. I'm going to do the right thing.
- [29:57]
Wes Moss
Yeah, do the math. And while you're doing that, I just want to say, I mean, good for you, AJ for thinking about this raise and the way you are. Because so many people, I mean, I've probably done this in the past, years ago too. You think, oh, could I get a bigger house now? Could I get a new car, whatever it is. And you really want to utilize this raise to, to build your future. And I think that's awesome.
- [30:21]
Krista Dibias
I just got 975k. Yeah. So just think of it this way. 20 years at 25k a year, at a 6% rate of return, you're at a million bucks. If you were to get a 7% rate of return over that period of time, it'd be more like a million one.
- [30:36]
Wes Moss
All right. Alex in Michigan says, I recently retired and was wondering what Wes thinks of TIPS and a TIPS ladder.
- [30:43]
Krista Dibias
Alex in Michigan, your favorite. This kind of one of my favorite states. So TIPS Treasury Inflation Protected Securities. These are U.S. treasury bonds that give you a little bit of a yield and an inflation adjustment for whatever CPI is. If you think of you have a $10,000 in TIPS, inflation's 3% for the year. You get a 1% rate of return on that, or let's say the yield is 1 1/2% for the tip, which is again, they're usually, treasury inflation protected securities are going to usually have a lower yield than a regular treasury because you Also get the inflation bump up. So if inflation's three and your coupon or your yield was one and a half now you're at 4.5%, your value adjusts higher. Your 10,000 now is 10,300 after the 3% CPI. And these are Treasuries, so they're highly safe. You're just gambling, usually getting a lower rate, banking that there's going to be inflation, interestingly. And you can buy these directly, they come in 5 and 10 and 30 year maturity. If you're going to buy actual tips, I think you've got to go to treasury direct to do that. But there are also lots of ETFs or funds that do this for you. So you can just buy a tip related bond ETF and it's doing that for you. Now if you look at tips, tip ETF versus the general market and on total or the overall bond market, think the Barclays Aggregate Bond index. They look pretty darn similar on a total return basis.
- [32:20]
Wes Moss
Okay. Nate in Florida says, hey Wes, love the show. You often talk about incorporating dividend investing into a retirement portfolio and income strategy, and it makes sense. But I also hear counterarguments, including the fact that dividends aren't really free money, but instead a reshuffling of value because the company's stock price typically drops by the dividend amount when paid out. Can you help me better understand some of the mechanics of dividends and why dividend investing is a good retirement income strategy versus alternate investing approaches?
- [32:51]
Krista Dibias
So first of, Nate, you bring up a good point, is that if a company is paying out their shareholders a dividend, let's just say they have $100 million on the balance sheet and their dividend's 20 million. That gets paid out to thousands and thousands of folks. There's 20 million less at the company. So in a vacuum, that company has just had it's essentially spent money. It's spent it, it's cash out to.
- [33:16]
Wes Moss
You kind of profit sharing in a way. If you think about it, that is.
- [33:19]
Krista Dibias
One way to look at it. Yeah. So in a vacuum that is somewhat true. And I will also say even though I'm a, I'm a big believer in dividend investing, it is not. Investing is philosophical in some ways. You could make an argument that companies that never pay anything out because every dollar is going back into growth, growth, growth, they don't pay a dividend. We've seen a lot of wonderful stocks that are that way. So there's no right or wrong answer. There's just different ways or styles of looking at the market and looking at equities. But to me, dividend investing is very much about discipline and financial health and slightly more mature or methodical growth. When a company starts paying a dividend they loathe to ever cut is a terrible sign that a company would ever lower their amount they're paying out. The goal of a company is to just raise it year after year after year. And that really instills a lot of financial discipline to the company. They still have to grow because they want to grow their cash flow so they can continue to raise the dividend. So to me you get a lot of other intangibles. You may get a business not growing quite as fast, but there's a lot of discipline and there's some maturity typically in that business. And the board is holding the management their feet to the fire to say, look, we're raising the dividend. That's the way we do this. And companies that are able to do that, there is something about that predictability that I really like. And over time you can see similar returns from dividend companies and the total return versus companies that are growth oriented. It's just slightly two different roads to travel to get somewhere. I think the dividend paying companies do particularly well when you get closer to retirement and you do need to take money out sometimes. That dividend itself, that cash flow can be a pay the bills be really comforting from an investment perspective and it can help you be a more patient investor. If you're growth only, the only way you're going to make money is appreciation. You don't wait for the appreciation. So if you're in a big dip, it's not a time to take from a growth oriented company that's down 20 or 30%. But a dividend, even though a dividend stock may be down in price, it doesn't mean the dividend amount should go down unless they cut, which they don't like to do. Company. So two different ways of looking at it. You're not wrong on the shifting of value when a company pays out a dividend, but I think both can work. Remember, all after the same formula. Total return equals growth plus income. I like to have a little of both to get to total return.
- [35:57]
Wes Moss
Okay, well, that's it for us. This week on Ask an Advisor. Clark will be back tomorrow with a brand new episode of the Clark Howard Show. Thank you so much for being with us. Hope the rest of your day is great. Thank you so much, Wes.
- [36:09]
Krista Dibias
Thank you, Krista.