Mutual Funds vs. ETFs, Bonds to Bourbon - 516

Summary

Podcast Summary: Your Money, Your Wealth – Episode 516: "Mutual Funds vs. ETFs, Bonds to Bourbon"

Release Date: February 11, 2025
Hosts: Joe Anderson, CFP® & Alan Clopine, CPA of Pure Financial Advisors
Guest: Jeremy Kastler, Founder and CEO of CaskX

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Introduction to Alternative Investments: Bonds to Bourbon

[00:00 - 01:08]
The episode kicks off with Big Al Clopine introducing the topics and listener questions for the day, setting the stage for a diverse discussion ranging from traditional investment vehicles like mutual funds and ETFs to alternative investments in whiskey and bourbon.

Special Feature: Investing in Whiskey and Bourbon with Jeremy Kastler

[01:08 - 12:17]

Jeremy Kastler joins the podcast to discuss CaskX, a platform that makes investing in whiskey and bourbon accessible and transparent for enthusiasts and investors alike.

• Understanding CaskX's Offering:

  • Jeremy Kastler explains that CaskX allows investors to purchase casks of new make whiskey, which are then aged for eight years. The investment covers storage, insurance, and taxes.
  • Notable Quote [02:14]: "We're not selling bottles of whiskey, but we're selling casks of new make whiskey which has just been filled."

• Valuation and Growth Potential:

  • Discussing the appreciation of whiskey as an asset, Jeremy highlights that, unlike volatile liquid assets, whiskey improves in value and flavor over time.
  • Notable Quote [02:21]: "Whiskey is one of the few asset classes that regardless of market conditions, it will increase in value."

• Investment Process:

  • Investors typically purchase a minimum of 24 barrels, with CaskX managing the investment for the eight-year duration.
  • Jeremy Kastler [03:25]: "We provide the opportunity for the investor to travel to normally Kentucky or Tennessee, meet the people behind these amazing whiskies."

• Returns and Liquidity:

  • Historically, barrel prices double after about four years, potentially reaching $7,000 to $8,000 after eight years.
  • The investment is categorized as a security, requiring investors to be accredited and imposing a minimum holding period of 12 months.
  • Notable Quote [08:13]: "We've seen historically after around about four years that prices will double around there."

• Risk Management:

  • Jeremy acknowledges risks such as distillery failures or barrel leakages but reassures that CaskX is fully insured and prepared to replace barrels if necessary.
  • Notable Quote [10:08]: "We are fully insured, although we're not fully insured at the current value. So we'll replace all the barrels if something happens."

Mutual Funds vs. ETFs: An In-Depth Analysis

[15:17 - 26:20]

The hosts delve into the listener's question from Mike in Colorado regarding the benefits and differences between mutual funds and ETFs, particularly concerning tax efficiencies and investment strategies.

• Key Differences:

  • Andi Last outlines three primary differences:
    1. Pricing Mechanism: Mutual funds are sold at net asset value (NAV) at the end of the trading day, whereas ETFs trade like stocks throughout the day.
    2. Tax Efficiency: ETFs generally produce fewer capital gains due to their "buy and hold" strategy, especially index-based ETFs.
    3. Flexibility: ETFs offer additional strategies such as hedging since they trade like securities.

• Joe Anderson's Insights:

  • Joe emphasizes the distinction between passive and active management, noting that passive funds (both mutual funds and ETFs) tend to be more tax-efficient and lower in cost.
  • Notable Quote [17:21]: "A lot of mutual funds are now passive, particularly the index funds. And some ETFs are now active."

• Listener Engagement:

  • Andi transitions into Lauren from Florida's question about approaching the fixed income portion of her investment portfolio.

Approaching Fixed Income Investments

[18:46 - 22:54]

Big Al Clopine and Joe Anderson provide strategic advice on fixed income investments, addressing the multitude of options available and recommending low-cost bond funds or municipal bonds for tax efficiency.

• Investment Options Discussed:

  • Individual Bonds
  • Bond Funds
  • Treasury Inflation-Protected Securities (TIPS)
  • Certificates of Deposit (CDs)
  • Municipal Bonds
  • Corporate Bonds

• Strategic Recommendations:

  • Joe Anderson advocates for bond funds or muni bond funds, especially for those in higher tax brackets.
  • Andi suggests that while individual bonds can be crafted into a bond ladder for steady income, they require significant expertise and effort.
  • Notable Quote [19:39]: "Individual bonds, it's a lot of work and there's a lot of expertise. I think that you need to build an individual bond ladder."

Listener Question: Asset Allocation in Retirement Planning

[22:54 - 27:44]

DJ from Missouri poses a complex question about using balance funds for asset allocation in a traditional IRA during the decumulation phase. The hosts discuss the merits and drawbacks of using balanced funds versus managing individual ETFs or mutual funds.

• Balanced Funds vs. Individual Fund Management:

  • Joe and Andi agree that while balanced funds offer simplicity, managing individual funds can provide greater control over asset allocation and rebalancing.
  • Notable Quote [25:29] Joe Anderson: "This way, if the stock market has a big correction, you don't want to be selling your stocks, you sell out of your bonds or cash or another asset class."

• Strategic Advice:

  • Andi recommends using separate funds for stocks and bonds to maintain control over rebalancing, thereby preserving the desired risk level.
  • Joe emphasizes the importance of not relying solely on pro-rata selling within a balanced fund during market downturns.

Final Listener Interaction and Closing Remarks

[27:44 - 31:46]

The hosts engage with additional listener questions, including Karen's inquiry about making a one-time "roulette" investment. Joe Anderson advises against using a broker for such ventures, recommending discount brokerages for self-directed investments instead.

• Discussion Highlights:

  • Karen's question about whether to hire a broker or use an online brokerage for a one-time stock purchase.
  • Andi's humorous interaction with Joe, discussing their personal preferences for bourbon and whiskey.

• Final Thoughts:

  • Joe Anderson underscores the speculative nature of single-stock investments, likening them to gambling.
  • Jeremy Kastler's segment is briefly revisited, with Andi and Joe lightheartedly discussing the challenges of investing in and consuming whiskey.

• Notable Quote [29:38] Joe Anderson: "AT&T was a really good one. Apple was a really good one. There's been numerous ones. You just have to pick the right one."

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Conclusion

Your Money, Your Wealth Episode 516 offers a comprehensive exploration of both traditional and alternative investment strategies. From the nuanced differences between mutual funds and ETFs to the intriguing prospect of investing in bourbon through CaskX, hosts Joe Anderson and Big Al Clopine deliver insightful, actionable advice tailored to a diverse listener base. Engaging with real-world scenarios and expert guest insights, the episode empowers investors to make informed decisions aligned with their financial goals and risk tolerance.

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Additional Resources:

• Investing Basics Guide: [Link in Episode Description]
• Financial Blueprint Tool: [Link in Episode Description]
• CaskX Website: caskx.com

Connect with Pure Financial Advisors:

• Free Financial Assessment: Call 888-994-6257 or visit the link in the episode description.

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Disclaimer: This summary is intended for informational purposes only and does not constitute personalized investment advice. Listeners are encouraged to consult with financial professionals before making investment decisions.

Transcript

[Big Al Clopine]

What are the benefits and differences between exchange traded funds and mutual funds? Mike in Colorado wants to know how should Lauren in Florida approach the fixed income portion of her investment portfolio? Would a balanced fund be good for asset allocation in the decumulation phase for DJ in Missouri? Plus, Karen wants to make a one time roulette investment. Should she hire a broker or do it herself? Join Big Al Spitball on investing from the basics to the Alternatives Today on youn Money, you, Wealth Podcast 516 we'll kick things off with something for ymydev legion of old fashioned drinkers. Today we're going to find out how you can put your money where your mouth is with our special guest Jeremy Kastler, the founder and CEO of CaskX, making investing in whiskey and bourbon more accessible and transparent for investors. I'm executive producer Andi Last with the hosts of youf Money, you, wealth, Joel Anderson, CFP and Big Al Clopind, CPA and Jeremy, those watching us on Spotify or on YouTube can see that you've got a wide array of spirits on the shelves behind you. How does somebody go from buying a bottle of their drink of choice to investing in barrels? Walk us through the steps.

[Jeremy Kastler]

Well, yeah, that's a great question. I mean, firstly, most of our investors are whiskey lovers so of course they love the idea of marrying their love of whiskey and of course their love of hopefully making money. So of course we connect with interested parties, we explain how the process works, the dynamics of invest into something that is tangible, that's real. So we're not selling bottles of whiskey, but we're selling casks of new make whiskey which as the name suggests has just been filled. They just pour the liquid in and we include eight years of storage and insurance and taxes within the price as well. So we sit down, we talk to them about why it's a safe bet if you like. We're not so much focused on the whiskeys that they pre to drink, it's more we'll recommend the whiskeys that we believe have good potential for growth.

[Joe Anderson]

Interesting.

[Andi Last]

Yeah, I see a little bottle of Pappy Van Winkle behind you. Does that have any opportunity for growth?

[Jeremy Kastler]

Well, yeah, price has gone up tremendously in the bottle market as well. I think a bottle sold for about $50,000 just recently, but that's indicative of the market as a whole. Whiskey is one of the few asset classes that regardless of market conditions, it will increase in value because as it's poured into the barrel day one, it's moonshine. It's very difficult you, you know, if you dropped it on the floor, it would, you know, it'd make a hole in the floor. Whereas over time, every day, it's improving flavor, it's getting better and better. So after four, six, eight years, it's very different than it was eight years previously. So it's a very safe asset in that sense. And you know that if market conditions stay the same or hopefully improve, then the asset will increase in value.

[Joe Anderson]

So Jeremy, how does this work for an investor? Do they buy a barrel, do they buy a fractional interest in a bunch of barrels or they buy a bunch of barrels, how does this work?

[Jeremy Kastler]

Sure. So the investor would normally buy a minimum of 24 barrels. Like I say, we, we manage the investment for that period of eight years. So it's a very, very simple process. We of course give the advice just as if you were buying a stock or a share. We look at the people behind the, the, the whiskey itself. Do we believe that they're good people going to grow the business, going to create a good product just like you buy a stocker share, you look at the CEO if you like, and then the, the investor of course makes that decision. Okay, I'd like to invest into this particular bourbon or whiskey. And we then do all the paperwork. Everything goes into the investor's name. It's all very secure, very safe. And we provide the opportunity for the investor to travel to normally Kentucky or Tennessee, meet the people behind these amazing whiskies, stir the corn, kind of be part of the process.

[Big Al Clopine]

So what happens at the end of eight years?

[Jeremy Kastler]

End of eight years, and it could be sooner, but we include eight years to give ourselves a good buffer. We look to exit the, the client. Of course, most bourbons that you'll see on the shelves, they don't actually make the bourbon. Most bourbons actually, or most brands buy the barrels in and bottle them the next day because they don't want to have to wait eight years to get paid. There's a huge market out there for age. Good aged bourbon from good distilleries that there's very little bourbon that gets to past four or six years old. So when it gets to that age, it's rare, it's desirable, it tastes great, and there's a, there's a huge market for it.

[Andi Last]

I got a question. So let's say I'm Knob Creek or whatever bourbon company that is with the barrels that you guys are putting together. So are they funding that up front or they're getting the. Explain to me how kind of the Genesis of how this stuff works or are the barrels made and then these big companies buy it and then they put in their special ingredients at the end as they bottle it, generally speaking.

[Jeremy Kastler]

So for a distillery, there's two types of distilleries. There's those distilleries that make their own whiskey have the resources to be able to age it for 6, 8, 10 years. Generally they're the, you know, the billion dollar companies as opposed to the less big operators. Then there's contract distillers who exclusively make barrels for other people to put into bottles later down the line. So we deal with a mixture of the two. It's a good way for the distillery to very quickly monetize their work. But when the barrels are sold to the brands, they would generally make a blend. It's not a case of right with some say Scotches, where they'll take one barrel and bottle it and release it. So what they're looking for is consistency over a long period of time from the same distillery. And, and that's where we also come in because we place orders every quarter. So for a, a brand that needs consistency over a number of years, they'll buy some from this quarter, some from that quarter, so on and so forth.

[Andi Last]

Let's say I buy 100 barrels.

[Jeremy Kastler]

Sure.

[Andi Last]

So, and then it's going to age eight years. And so each year I get a statement and who marks the price or how does that work?

[Jeremy Kastler]

Yeah, I mean, the entry level is $2,400 a barrel initially. And like I said, that includes all the storage, insurance and taxes, so on and so forth.

[Andi Last]

Can I just take the barrel and bring it home and drink it too?

[Jeremy Kastler]

Yeah, well, I guess so.

[Joe Anderson]

I want to wait a couple years.

[Jeremy Kastler]

I mean, you can make your own brand. You can bottle it yourself and take the bottles back home with you, should you wish. But you'd have to drink a lot of whiskey or have a lot of friends, I would say. Yeah. So we give, of course, regular updates, we give regular evaluations. We're looking at the market. As a broker, when's the best time to trade a client out? We would suggest, you know, it's not a short term hold, it's not something you buy today and sell in six months or sell in a year. You know, you're not going to make money that way. But certainly we say, look, hold for at least four years. If you can hold for six years or eight years, even better. And if you can do that, you'll no doubt see very good returns.

[Joe Anderson]

So that barrel that was maybe $2,400 six to eight years down the road. What might be the price or what have you seen in the past?

[Jeremy Kastler]

Yeah, we've seen historically after around about four years that prices will double around there. And if we get into eight years, you know, you could say somewhere around about the $7,000 to $8,000 mark.

[Joe Anderson]

Right.

[Andi Last]

Okay, so what is the liquidity of the investment? Let's say I buy the barrels and six months later I do need the cash. Is there a lockup period or how liquid is the investment?

[Jeremy Kastler]

Yeah, so we are governed by the sec, so it's considered a security. So the, the rules are very strict. First of all, we can only deal with accredited investors in the first place and you cannot sell the asset within one year. So you have to hold for a minimum of 12 months. Now after that, of course you've got the right to sell it. It would be a mistake because you, you know, you're not going to make any money after 12 months because nobody wants to drink one year old bourbon. Some of my relatives, maybe, some people do, but not around here they don't. The older it is generally the better it is. So if we're looking at a longer hold in these conditions, we're going to make more money. So I think it's important that we also help the distilleries to present their purpose in a good way because all our clients hold it for eight years. So when someone gets to drink, then they'll all be 8 years old and they'll all be delicious.

[Joe Anderson]

Hey, I've got a question. With any investment, where there's rewards, there's also risks. And it seems to me one of the risks would be lack of liquidity. So you've got to hold the investment long term. Certainly would be what the market would bear at the time of sale. But are there other risks too? Like does the barrels ever go bad or there are other, other kinds of.

[Big Al Clopine]

Risks and what happens if the interest wanes in the whiskey market?

[Jeremy Kastler]

Yeah, no, that's, that's a valid point. And I, when we first opened, because we're a security, I had to sit down and write 15 pages of risk factors. And I was, he would say, no, we need more. And I said, I can't think of any more. So I'm pretty good on risk factors. The distillery can blow up. I mean, you know, there's your obvious risk that, you know, it's a volatile substance and you know, it's great that it's tangible, but the tangible carries risks as well. We are fully insured, although we're not fully insured at the current value. So we're referring reinsured at replacement values because it would just be too difficult to do that. So if four years down the line, the distillery blows up, then we'll replace all the barrels and we'll start the eight years again. In terms of, yeah, there can be leakages in barrels, so on and so forth. It's unusual to be honest. But it can happen again if we see or we find a leakage in any of the barrels as an act of good faith, will replace them. Not even through the, through the insurance. The market itself, of course, although it does appreciate as it ages, it is affected by market conditions. There's been a tremendous bourbon boom over the last five, ten years or so. That doesn't look like stopping anytime soon. We're seeing more and more people drinking bourbon and enjoying it as their drink of choice.

[Big Al Clopine]

So that being the case with all those bottles behind you, if you were going to have a drink of choice, what would it be for you?

[Jeremy Kastler]

I mean, I love Papi Van Winkle. I really enjoy Bardstown. So I guess it's because we're talking about it all day and we're so enamored with the business itself that, yeah, even the bourbon tastes better.

[Andi Last]

Very good. Jeremy, where do people find you if they want to invest in some bourbon?

[Jeremy Kastler]

Yeah, they can come to caskx.com that's.

[Big Al Clopine]

Jeremy Kastler from Caskx. Thank you so much for taking the time. We appreciate it.

[Jeremy Kastler]

Lovely. Thank you for having me.

[Big Al Clopine]

Watch the full interview with Jeremy Kastler of CaskX, exclusively on our YouTube channel. Find the link in the episode description and learn how you can invest in barrels of bourbon by visiting caskx.com that's C-A-S KX.com Growing your wealth for retirement begins with some basic assumptions first, but many of us don't know what's true or false. Don't base your entire financial future on misconceptions that are largely considered to be facts. Learn some truths about investing Social Security, Medicare and Health savings accounts this week on YMYW TV as Joe and Big Al talk financial fact versus fiction and the truth may shock you. Click or tap the link in the episode description to watch YMYW TV to download the retirement readiness guide for for free and to share the show and the free resources with anyone you know who would enjoy some laughter with their financial education.

[Andi Last]

What's your favorite kind of bourbon?

[Joe Anderson]

I'm not really a bourbon guy.

[Andi Last]

You don't Ever not?

[Joe Anderson]

Well, I. I wouldn't. I. I mean, I used to drink Jack Daniels in college. I tried it.

[Big Al Clopine]

Didn't everybody?

[Joe Anderson]

Yes, I. I tried it in my 40s. I go, how did I ever drink this? But I will say I did go to a brand new whiskey distillery in Chicago when I was there a couple years ago, and I did kind of enjoy it, but I couldn't tell you what I enjoyed. I just. No, that's good. That's not. Whatever.

[Andi Last]

You've never had, like an Old Fashioned.

[Joe Anderson]

No, no. Yeah. I'm more of a beer and wine guy.

[Andi Last]

Okay.

[Big Al Clopine]

Joe, what's your favorite bourbon or whiskey?

[Andi Last]

Pappy Van Winkle.

[Joe Anderson]

Oh, there you go. That's. That's why.

[Big Al Clopine]

You know the really expensive one I.

[Andi Last]

Had, you just had I drink some of that bottle that he had behind him for Christmas.

[Joe Anderson]

Oh, okay.

[Andi Last]

Yes, it's very good.

[Joe Anderson]

Yeah.

[Andi Last]

Very smooth.

[Joe Anderson]

Yeah. Okay.

[Big Al Clopine]

Can you tell the difference between that and something else?

[Andi Last]

What's. What's that?

[Big Al Clopine]

Can you tell the difference between the flavor of the Pappy Van Winkle compared to some of the others? You'd be like, oh, yes, this is definitely Pappy.

[Andi Last]

No, I could never recognize it.

[Joe Anderson]

Like a test, blind test.

[Andi Last]

I would be like, wow, this is pretty smooth. Where. This is pretty smoky, or this is pretty. You know, this is burning my. My throat. Right. But no, I'm not. I'm not. I've had it twice in my life.

[Joe Anderson]

Oh, okay.

[Andi Last]

So. But it was good.

[Joe Anderson]

How about scotch? You like Scotch?

[Andi Last]

Nope, Nope. Not a big scotch guy.

[Joe Anderson]

Really? Because it's about the same.

[Andi Last]

No, I guess I would drink it.

[Joe Anderson]

If someone was put in front of you.

[Andi Last]

Yeah. You know, you're at a dinner or something like that, and they didn't have any Coors Lights.

[Joe Anderson]

I went to a Scotch tasting in Edinburgh when I was there in Scotland, and I actually didn't care for that either.

[Andi Last]

Yeah, I would not go to a Scotch tasting. Or I.

[Joe Anderson]

You could taste the different. There were different tastes from different regions, so I did pick up on that. But it's not something I would just do normally.

[Andi Last]

No, no, I don't taste, I drink.

[Joe Anderson]

You don't care about taste, do you? Got it.

[Andi Last]

We got Mike from Colorado goes. Hello, Joe. All right, Big Al, Andy. I've been a mutual fund investor for quite a while. Recently I'm reading ETFs may be better than mutual funds as they produce less capital gains and have other tax benefits. Vanguard and other Companies at both ETFs and mutual funds that seem to have identical goals and Holdings. Could you do a deep dive into the benefits and differences between ETFs and mutual funds? A deep dive? How deep you want us to go here?

[Joe Anderson]

Whole show sounds like pretty deep.

[Andi Last]

I'm going to probably give three differences.

[Joe Anderson]

Okay. All right, go for it.

[Andi Last]

All right, so mutual funds, they're sold at net asset value versus an ETF that is sold like a stock, like a security. Buy a stock right in the market, you buy a mutual fund, you purchase it at the close of business. The tax efficiencies of it. Yeah, I agree with that. ETFs again, but I think index funds. So if I'm looking at an etf, it's basically you're buying an index fund within that exchange traded fund. If I have an actively managed fund, those aren't necessarily tax efficient because there's buying and selling. As the mutual fund manager is changing the allocation within the stocks or bonds, whatever that they're doing, whatever strategy that they have inside the fund, where an exchange traded fund is going to buy all of the stocks within that exchange and they're going to hold on to those stocks until there's a reconstitution if a stock comes out or into the overall index. So that's why they're a little bit more tax efficient. But if you buy an S&P 500 mutual fund versus an S&P 500 exchange traded fund, really the major difference is, is that you could do some other things on the etf, like, you know, you could put some, you know, hedging on it or something like that. Because it trades like a security.

[Joe Anderson]

Right, Right. And I guess trading as a security, what that means is it has the price changes over the course of the day. Where a mutual fund, the price stays fixed until the end of the day. So that's the price you get whatever is at the end of the day. I think maybe a more important distinction is a passive fund versus an active fund. And I think most mutual funds used to be active, meaning a, a manager, investment manager is trying to time the market and beat the market by buying and selling. And that causes a lot of capital gains that show up on your 1099 at year end because you are responsible for the gains and losses of that portfolio. And a passive fund doesn't do that. It just buys and holds in general. Now a lot of mutual funds are now passive, particularly the index funds. And some ETFs are now active. So I think that's a more important distinction is a passive fund that just holds the market is going to Be much more, much more tax efficient and cheaper, by the way, because you don't have managers trying to figure out and time the market. So I would think about it that way. If you have an identical index fund versus the etf, to me there's not a lot of difference. I would probably favor the etf, but I can't say that there's much difference in my opinion.

[Andi Last]

Totally agree. What do we got? We got Lauren from Florida would love if you could do a show on how you approach the fixed income portion of the portfolio. Oh, we got the theme here going, Andy.

[Big Al Clopine]

It's investing. Yeah. And I want to know how much of your, your portfolio should be in alternative assets like Pappy.

[Joe Anderson]

Okay.

[Andi Last]

I'm trying to, trying to help my mother who just retired with the fixed income portion of her investments. And there's so many options, it's not clear what the best path is. Individual bonds, bond funds, TIPS, Treasury CDs, muni bonds, corporate bonds, Jenny Mae, short term, intermediate term. Bup, bup, bup. Bubble gum shrimp. Okay, Gumbo shrimp.

[Joe Anderson]

What do you think?

[Andi Last]

Yes, there are a lot of options and they're all good options. What I would do in most cases, go into a low cost bond fund.

[Joe Anderson]

Yeah, I agree with that. Or a muni bond if taxes are a problem.

[Andi Last]

Yes, you go into individual bonds. It's a lot of work and there's a lot of expertise. I think that you need to build an individual bond ladder. If you're looking to ladder bonds and get income from the coupons. And TIPS are fine, but you can buy tips through a mutual fund or an etf.

[Joe Anderson]

Yeah, TIPS can be more risky than you think, though.

[Andi Last]

True.

[Joe Anderson]

Yeah, they go up and down more.

[Andi Last]

Yeah, it's a Treasury, but it's protected with inflation. CD ladders. But that's a lot of work and it's all ordinary income. So is it in a retirement account? Is it not in a retirement account? Corporate bonds are great. You get a little bit higher yield, but you have more risk when you put money to corporate bonds. If you think about a bond, I guess maybe Lauren, what a bond is, is a loan. So you're lending your money, let's say, to a corporation, you're going to give them cash. And in return for that money that they're using to build better infrastructure or hire better people on their staff or whatever the case they need the money for, they're going to give you an interest rate. They're going to pay you 3%, 5%, 8%, whatever that is. And then at the end of the term of the loan. Let's say it's three or five or 10 years, you get your money back and then so you can take your money and invest in another corporation or you can invest in a municipality or you can invest in the government treasury or you could give it to a bank and they can lend it out and they're going to give you a fixed rate such as a cd. So just understanding maybe what the investment is can maybe help narrow in of what is the appropriate strategy or product. But I think in most cases just buy a mutual fund or ETF that's maybe short term in nature just to stay away from risk.

[Joe Anderson]

Yeah, I 100% agree. I like the bond funds. I like muni bond funds. If you are in a high tax bracket and I don't mind CDs, I don't know that you need to go to a huge CD ladder strategy. I mean just having a CD or two with different maturities now that interest rates are decent for CDs. But yeah, most people you just use bond funds.

[Big Al Clopine]

It's much simpler did you know that less than half of Americans have a solid understanding of basic investing terms and concepts? It's pretty tough to grow your wealth if you don't even know what tools and strategies are available, much less know how to use them to develop a long term financial plan. Our free Investing Basics Guide will give you a beginner's overview of asset classes from cash to fixed income, equities to commodities. Why does a basic 6040 portfolio generally outperform the average DIY investor? Learn more about how mutual funds and ETFs are different, or stocks and bonds for that matter. What kind of returns do they get and how much should you have of each? Find out. Click or tap the link in the episode description to download the Investing Basics Guide for free. Then try our Financial Blueprint tool for free too. Input your financial details like cash flow, assets and what you expect to spend in retirement and it'll output a detailed report with three scenarios that'll give you a clearer picture of where you stand on the path to retirement. Find the links for both the Financial Blueprint and the Investing Basics Guide in the episode description. Both free, both courtesy of youf Money, you, Wealth and Pure Financial Advisors.

[Andi Last]

All right, let's go to DJ from Missouri. Hey Andy, Big Al Joe, I know that you hear a lot, but I love your podcast. Don't ever retire, any of you. Oh Big Al, I have to stay. Yeah, you're knocking on retirement according to dj. Listen to you whenever I am when the new episode drops. What? I listen to you whenever I am. When the episode. Wherever, wherever I am.

[Joe Anderson]

Just when it drops, I'm there.

[Andi Last]

I'm stopping everything.

[Big Al Clopine]

She stops and she listens.

[Joe Anderson]

I'm taking a shower. I'm turning it on.

[Andi Last]

Turning it on. All right. I don't drive anything fancy and I rarely drink, but I share Big Al's love for all things outdoors. All things outdoors.

[Joe Anderson]

Okay, that is me.

[Andi Last]

Here is my question. Can a balance fund be a solid way to asset allocate for my traditional IRA during the decade accumulation phase? Some say that in the decumulation phase, the 60:40 balance fund for traditional IRA, not talking brokerage account isn't the best choice since one should be able to control what ETFs, mutual funds, they sell. In other words, one might choose to sell only a portion of their underlying funds and not some from all the funds if the stocks are down, for example. But the idea of having a fixed allocation that balances the risk and return of stocks and bonds suited to one's overall financial plan and risk tolerance with regular rebalancing seems like a lot of sense to me. When people sell off only a portion of their ETFs, mutual funds, they are likely to get their asset allocation out of whack while waiting for the market to rebound. That changes the risk level. If you do suggest that it is better to have individual funds in each asset class in a traditional ira, how long do you let your asset allocation stay out of whack? Let's say greater than 5% off. For example, if you are selling individual ETFs, mutual funds or in the long run, or is it just fine maintaining the 6040 globally diversified ETF in one's traditional IRA? Thanks for all your thoughts, DJ. Interesting question. Yeah, so DJs talking about maybe. All right, there's maybe a fund of funds or a target date fund or.

[Joe Anderson]

Yeah, or just a balance fund, a traditional balance fund that has stocks and bonds.

[Andi Last]

It's like, all right, well, the portfolio manager's managing the stocks.

[Joe Anderson]

They'll take care of it for me.

[Andi Last]

Do that. Or does it make sense to say I'm going to buy 60% of a stock fund and 40% of a bond fund.

[Joe Anderson]

Yeah. That way I can decide which to sell at the appropriate time.

[Andi Last]

I like the latter.

[Joe Anderson]

Me too. A little more work, though.

[Andi Last]

It is a lot more work, but.

[Joe Anderson]

You just have to know what your balances are. But I think a way to think about this is when you have, say, two or three funds, it's just when you need cash, you sell the one that's too high and you always stay in balance. Or maybe if they're exactly the right allocation, you sell 60% of stocks and 40% of bonds. If that's your allocation. Very simple. Just one extra step. But see, that way, if the stock market has a big correction, you don't want to be selling your stocks, you sell out of your bonds. If you're in a balanced fund, you're going to naturally be selling some stocks because they're included in that fund.

[Andi Last]

Right. Well, the markets are fine. It's a totally great strategy. It's great. They're rebalancing. All right. It's going to get back into whack using your words. But when it gets challenging. DJ is that all right, now you're retired and you have this balanced fund and you're taking a certain percentage out year. And then the market tanks. You drop 20, 30% that year and you still need your income from the overall fund. It gets very difficult to get caught back up because they're basically selling the share. And it could be pro rata, depending on what the distribution strategy is of the fund. But most likely you're selling stocks and that's the last thing you want to be selling, is stocks. You would much rather sell bonds or cash or another asset class.

[Joe Anderson]

Yeah. And I think you can do this with two mutual funds or two index funds, maybe three if you want to get some international. So maybe think about it as like a total U.S. stock market fund, maybe a total U.S. bond fund. And if you want to add a little international, have some of it be an international fund. And just whatever gets out of balance, whichever one has too much in it, that's the one you sell to take care of your cash flow needs for that month or that quarter or that year, however often you take your distributions.

[Andi Last]

Yep. All right, let's go. Hello, Joe and Al. I've been telling anyone who will listen to watch a TV show or listen to all your podcasts since 2019. Wow, hell of a trooper there.

[Joe Anderson]

Yeah, I'll say.

[Andi Last]

I received great advice from you regarding real estate and estate planning. You even picked one of my questions to air on your podcast. I believe you both had fun bantering back and forth with each other about my son in law situation. I enjoyed it at any rate. What? We'd make fun of her son in law, you think?

[Big Al Clopine]

Well, you wouldn't do that.

[Andi Last]

Different show. Yeah, it wasn't us. But she's got another question here. Okay, I'm retired and have some extra funds I'm willing to gamble with. Gamble in the 40s. Okay. 1940s.

[Joe Anderson]

Yeah, 1940s. That's what that would mean.

[Andi Last]

My aunt bought AT&T stock. Unfortunately, my uncle inherited. He sold it in the late 90s for a lot. I'm very interested in companies who supply the factory data centers being built all over the US For AI When I decide on which stock to buy, I just want to let it ride for about 10 years. All right, here's my question. Since I'm ignorant in stock buying, should I hire a broker for my one time roulette purchase or just open a brokerage account myself online with a well known company? All right. Sincerely, T Y I A What does that mean?

[Big Al Clopine]

Thank you in advance.

[Andi Last]

Oh, thank you in advance.

[Joe Anderson]

Very good.

[Andi Last]

All right, Karen.

[Joe Anderson]

Karen. Sincerely, Karen.

[Andi Last]

All right.

[Joe Anderson]

Okay.

[Andi Last]

No, just go to discount brokerage and buy it online.

[Joe Anderson]

Yeah, that's easy.

[Andi Last]

You go to Schwab, Fidelity, Vanguard, wherever.

[Joe Anderson]

Yeah, pick any one of those. I totally agree with that. And as far as the strategy, a.

[Andi Last]

Broker is not going to take your call.

[Joe Anderson]

No, I got $10,000.

[Andi Last]

I mean, even if it's 100 grand, I want to buy a single stock.

[Joe Anderson]

Yeah, they're not going to make any money.

[Andi Last]

Yeah, they'll be like, okay, great.

[Joe Anderson]

Here you go.

[Andi Last]

Thanks.

[Joe Anderson]

Here's the number to swap.

[Andi Last]

Here's a 1, 800 number.

[Joe Anderson]

As far as the strategy, you know what? AT&T was a really good one. Apple was a really good one. There's been numerous ones. You just have to pick the right one. See, that's the hard part here. You have to pick the right one.

[Andi Last]

Well, at least she's calling it right. She's saying it's gambling.

[Joe Anderson]

It's gambling. And that's exactly what it is. Now when it comes to AI, I agree this is an industry that probably has a lot of potential, so I can see this being a good place to be. But will you pick the right AI company? That's tough. Right? So maybe you do, maybe you don't. A single stock has the same expected return as the market. It's just a single stock could have a much wider range of returns, could be great, or you could lose all your money. So just be aware of that. When you do that, you use the word gambling. And I agree that's kind of what it is.

[Andi Last]

Oh, Aaron, you killed it. You pushed the camera button three times today. Sorry to keep you up from your nap, Andy. Wonderful job. Thanks for getting Mr. Castler from Cask X. Jeremy Castler.

[Joe Anderson]

Talking whiskey. Talking bourbon. You gonna invest in bourbon?

[Andi Last]

No.

[Joe Anderson]

You might drink it.

[Andi Last]

Oh, yeah, That's a problem.

[Joe Anderson]

Yeah.

[Andi Last]

Yeah. You might need a lot of friends. I don't know.

[Joe Anderson]

I think you got. You got just family right there.

[Andi Last]

Yeah, my mother, Ruthie, she's back in town. She's in town for like a month and a half.

[Joe Anderson]

All right.

[Andi Last]

Just probably need to get a barrel. All right, very good. Thank you all for listening. Keep the questions coming in. Appreciate the listenership. Without all of you, we would not have a. Not have a phone. I was gonna say, but not have a show.

[Joe Anderson]

Not have a show.

[Big Al Clopine]

The show wouldn't be a show without the listeners and the viewers.

[Andi Last]

Yeah. Well, I'm sure they listen to it on their phone sometimes.

[Joe Anderson]

Sometimes, yeah.

[Andi Last]

Except for that one couple that was listening to it at the dinner table.

[Big Al Clopine]

Table.

[Joe Anderson]

It happens.

[Andi Last]

All right, we'll see you next week, Joe Scott of your Money.

[Joe Anderson]

Bye.

[Big Al Clopine]

Next week on ymyw, Joe and Big Al spitball for Nancy in Washington state, Brian in Naperville, Illinois. Joy and her brother the Skipper in California. And they take a voice message from Mike in Colorado. Click or tap ask Joe and Big Al in the episode description to get your own retirement spitball analysis. But to really make the most of your money and your wealth in retirement, you definitely need more than a spitball. Schedule a free financial assessment with the experienced professionals on Joe and Big Al's team at Pure. It is free and they'll go deep to help you craft a financial plan that's especially customized to meet your tolerance for risk, your needs, and your goals in retirement. Click or tap the free assessment link in the episode description or call 888-994-6257 to book yours. You can meet online or in person. Person Pure Financial Advisors has 10 locations around the country now with more on the way you Money, you, Wealth is presented by Pure Financial Advisors, a registered investment advisor. This show does not intend to provide personalized investment advice through this podcast and does not represent that the securities or services discussed are suitable for any investor. As rules and regulations change, podcast content may become outdated. Investors are advised not to rely on any information contained in the podcast in the process of making a full and informed investment decision.