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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire On Time, the show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire On Time, which you can grab today digitally for free on retireontime.com, or you can go to Amazon and buy a paper copy. My name is Mike Decker. I'm the author of the book, How to Retire On Time, but I'm also a licensed financial adviser, insurance agent, and tax preparer, which means when it comes to financial topics, we can talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational, educational, as in not financial advice. If you want financial advice, you can request your wealth analysis from me and my team today by going to www.yourwealthanalysis.com. With me in the studio today is mister David Franson. David, thanks for being here.
David:Yep. Glad to be here.
Mike:David's gonna
Mike:read your questions, and I will do my best to answer them. You can text your questions in at any time during the week by texting (913) 363-1234. Again, that's (913) 363-1234, or you can email us at heyMike@howtoretireontime.com. Let's begin.
David:Hey, Mike. What sectors or stocks do you think are worth investing in right now? Maybe define, like, what are some examples of sectors? Like, I think we've all heard that. Like, if you happen to graze past, like, CNBC or something like that.
Mike:The Kiplinger article, how to properly diversify your assets.
David:Yeah. That's right.
Mike:So I subscribe to Charlie Munger and his quote that says broad diversification is badness because it inherently requires you to invest in mediocre companies, which will give you mediocre returns. And sectors and all these these jargon terms, let's just quickly define them. When you do a basic portfolio, you need to fill out the suitability, whatever assessment questionnaire thing, and they pump out a portfolio of large cap, mid cap, small cap, emerging markets, international, and then the bond funds. You got your your corporate bonds. You've got your treasuries.
Mike:You've got your high yield bonds, which are basically junk bonds. You you got all these terms, and people don't really understand, I think at least, what they actually mean. K? So let's get rid of all of that jargon for a second and just speak plainly.
David:That sounds great.
Mike:K? So when you look at investing, and I am not telling you to invest in this, everything I'm about to say is a great start to your research. Let me be very clear about that.
David:Thank you.
Mike:K? This is not a show of investment advice. This is a great place for research. A lot of my personal research and what's developed my thesis and how to invest was based on the term creative destruction. What is creative destruction?
Mike:Creative destruction is when there's a new invention of technology, So some sort of tool that can create a higher yield or higher profits with less effort. For example, think back in the day when we're having to farm by hand. That was rough. Mhmm. The tractor was invented.
Mike:Did the tractor do a lot of good for the farming community? Yeah. You betcha. So that was considered a creative destruction. It put a lot of people out of work, but what happened to those people?
Mike:They got different jobs and they grew their lives hopefully and things were fine. What happened when the computer was invented? We experienced creative destruction. Jobs were redefined. We accelerated productivity, and we continue to accelerate productivity.
Mike:Why was the internet a huge boom in the market? Because it accelerated our abilities to just do day to day life. Right now, we are on the precipice of creative destruction in my opinion, and it's again AI, it's robotics, and then it's all of the other companies that can facilitate AI and robotics and so on. So let me just open this up a little bit. I do not believe it's appropriate to go all in on one thing.
Mike:Let me give you an example. I love x because x is where I find what dumb money is doing. Uh-huh. Dumb money is the self proclaimed investment philosopher that believes he knows everything, and he's smarter than Warren Buffett. He's your uncle or cousin that said, well, I invested in Nvidia, and I'm richer than you now, and I timed it right, and I am the best investment adviser ever.
Mike:Well, you are not gonna repeat that probably ever in your lifetime. K? I saw a post on X recently that said, I am now all in on Nvidia and Palantir. And I went, oh, boy. Does this kid have a wild ride in front of him Okay.
Mike:Coming up. Yeah. I mean, look at the so the .com, Internet was a great thing, but in the nineties, it got overpriced, and then it corrected. I think the Nasdaq went down 70%. Woah.
Mike:How would you like to buy Nvidia and Palantir? And then it corrects. I don't know if it's gonna happen or not, but let's say it goes down 70% because it was overpriced and they've gotta digest a few things. Let's say that were to happen. That's a lot to stomach.
Mike:It is. So I am not telling people, this is not investment advice, but I'm not saying go do your research and only invest in robotics and AI. I'm saying understand the creative destruction of these new technologies and how they actually operate. So our in house CFA, Kevin, brilliant guy, we were chatting the other day about Marriott. And he had a very interesting bit of insight.
Mike:He says, you know what Marriott is? I said, the hotel company. He says, no, it's not. Oh. So what do you mean?
Mike:Yeah. You know, Bonvoy, I love Marriott. He goes, no. They're a management company that facilitates the booking and the experience for all of the other people that buy hotels under the Marriott name. He says, now think about all of the AI and the advantages that this new technology will bring to their management as a company.
Mike:Interesting. And then my mind started to wander all the data of their different companies and how AI could affect them and help their profits, help their efficiency. Yeah. Some people will be displaced from their jobs, but that creative destruction helps people then reassess what are they gonna do, and then they find different jobs and hopefully their better jobs. Did you ever see Willy Wonka and the Chocolate Factory, that new one with Johnny Depp?
David:I have. Yes.
Mike:One of my favorite parts of that movie is towards the end when Charlie's dad loses his job because he he doesn't work on the the candy line anymore, but then he now gets a better job. He fixes the robots on the candy line, so he gets paid more. He's got a a higher in demand skill set, and he's got more freedom and more money in his life. That's hopefully what creative destruction can do. But okay.
Mike:I digress. So you want to diversify in a sense, and this is Ray Dalio's premise. Ray Dalio's a brilliant all seasons kind of investor. But if you haven't read his book Principles, great book. But he's gonna recommend, and I I subscribed to this, that maybe you wanna have a little bit across different types of industries.
Mike:Okay. So for example, maybe you're looking into something in the financial sector space, where AI could benefit from it, but it's not subject to tariffs as much. It's not subject to all of the different nuance. It's it's its own thing. K?
Mike:And then maybe you go with something to consumer. And maybe you're buying Walmart or Costco or something else, because would AI affect those companies in the experience? Yeah. In their operations? Could robotics help them?
Mike:So, yes, it it could. They're big enough. They can invest in that. But Amazon so you're looking to spread out from companies that maybe have different different lanes, but they're good quality companies. You've got a good basket of those kinds of companies, but they also could benefit from AI, that they're forward thinking companies.
Mike:Is this making sense?
David:Yeah. I think so. Yeah. Absolutely. Because those companies like Costco, Walmart, they're they're not selling AI themselves, but they can use it to track their inventory or doesn't Amazon have, like, robots that are now picking the products out of their warehouse to prepare them for shipment?
Mike:Or It's so cool. Yeah. Little Roombas, industrial sized Roombas. Yeah. But people are still packaging stuff up, which is fine.
Mike:And then eventually, those jobs might get replaced with robots. That's crib destruction. It's a very normal thing. The worst thing that I think people can do is resist that. I think the best thing a human can do in their career is to understand, I have a job.
Mike:It's making income. Now what's my next step? We want to grow as people. Right. But this is how I like to think of how to invest.
Mike:Can you spread it out among a basket of stocks, or you could buy SPY and you know how broad indexing diversification as well, but overweighting the things that you believe and you understand, but they're not all related. So if you just bought Palantir and Nafidia, and you really wanted a roller coaster, let's say there's new regulation, or let's say DeepSeek is true, and just destroy the what we think those companies are worth, that's a rough situation. That's risky. It's very risky, but you pepper in other companies in there. That's the idea behind it.
David:Okay.
Mike:For a good starting place though, just to research stuff you wouldn't necessarily know to research, This is the cheat sheet. You go to ETFs that are thematic. So a theme of an ETF, you could do a theme of an ETF around construction or real estate. An ETF around energy, an ETF around you you pick a theme or an industry. K?
Mike:And then you look up in that ETF, the holdings, all the different companies they have. So if you wanna look up AI and robotics, you could look up the ETF BOTS, b o t z. Should you go all in on BOTS? No. Should you buy the ETF BOTS?
Mike:I'm not saying any of that. But if you looked it up, you could find all of the stocks that they're investing. You'll see Nvidia in there, but you'll see other companies, and then you can start to research those other companies and determine for yourself if that's something you wanna invest in or not. Mhmm. That's one that's fixated or focused on robotics and artificial intelligence as a thematic index.
Mike:So there's a
David:lot of research to be done, and how much time could one devote to this? It seems like they could fill their entire evening and weekend on it. And do they
Mike:want to? Is it worth it? The biggest, I think, misconception is when someone retires and they want to invest, they think that they can do it, is that they're going to say, I can spend thirty minutes in the morning and have sufficient research. That's not enough. It really isn't.
Mike:You're gonna oversimplify things. You could get lucky. You could do some broad investing. You could, you know, have some indexes and just kind of read the news and keep up on it. But to make an informed decision, it takes a lot of research, lot of time to understand what you're investing in, in my opinion, to do this appropriately.
Mike:Mhmm. So to to say, I can just casually do this, you're either in, or you're paying someone to do the research for you.
David:And it's probably okay either way. Right?
Mike:It's fine either way. I mean, you could pay for newsletters. I don't recommend that, because many newsletters will they'll pat themselves on the back and just have selective memory of what their good choices were, but kind of forget the bad recommendations or mentions. It's it's kind of the wild west, but you could pay for research if you wanted to. You could pay for an adviser to do it for you if you believe in their thesis and how they invest, their investment strategies, and all that.
Mike:You could do it yourself. There are many people that will say, hey. I just want 50,000 for me to play with in retirement because I like doing it, but I don't wanna bank my entire success on me doing it myself. But I think there is something to be said about being aware of what you're investing in. I think there's something to be said about being aware of the markets and what's going on.
Mike:But to say that you can do this quickly, if you figured out how to do this quickly, let me know. We spend an enormous amount of time and money Uh-huh. On research to do this correctly. And it goes back to Dunning Kruger, which I talk about a lot. It's when you don't know the right questions to ask, that's when you get blindsided.
Mike:And those who don't have sufficient experience don't know the right questions to ask. If you don't know the right questions to ask, you will overestimate your abilities. And let me just prove this point here. The last fifteen years or so, the bond market stunk. It was miserable.
Mike:Interest rates were historically low. Loans, the ten year treasury, they were all very, very low, and so bond funds made basically no sense. Almost all of the growth, in my opinion, was really found in the stock market and real estate as well, but real estate's its own beast in the alternative space. So we have now gotten used to this idea that, oh, you just buy the stock market, everything works out well. Okay.
Mike:Remember, the stock market goes flat for ten plus years, happens every twenty years or so, February, '19 '60 '5, '19 '20 '9, '19 o '6. What if we went to another flat market? What if you're just saying, hey. I can invest in this. You buy SPY, QQQ, VOO, VUG, these broad indexes and say, I've got it.
Mike:Equities. That's the way to go, and I can do it myself. And you're not paying attention to the other indicators saying, hey. I think we might be in a flat market cycle. What if you didn't build your portfolio to be able to hedge against a flat market cycle?
Mike:What if you're not getting the memo that right now Goldman Sachs, Merrill Lynch, and I forget the other company are saying we could be in a flat market cycle right now. We could receive a horrible correction. I think we haven't actually digested fully the amount of money that we printed and put into the economy. That's gonna have a gross correction that would be very difficult to stomach. Recession at least.
Mike:Now when is that gonna happen? No one knows.
David:True.
Mike:You know, it's like you eat too much. You might not feel that bad at first Yeah. But give it an hour. Indigestion sets in. Yeah.
Mike:You eat too much ice cream, at some point, you're gonna fill it. If you take a hundred dollar bill, most of the dollars that were printed I forget the statistic. It's either over 50%, I think, of those dollars were printed in the last decade, decade and a half.
David:That's wild.
Mike:We have grossly overprinted money. Now why did we do it? We can talk for hours about the nuance of that. Deep breathable. Was it right?
Mike:Was it wrong? Hindsight's 2020. It's really easy to criticize people. But look, I get that people were panicked. I get why they did it.
Mike:Mhmm. Do I agree with it? No. I don't wanna be that guy that's critical of of history. Sure.
Mike:But every action has a consequence, and I do not believe we have fully paid the consequence of it, which is why I believe there's a high probability of a flat market cycle. So everyone going all in on equities over the next ten years, what if you got a zero return over a ten year period of time? How do you stay retired with that? So, again, the question I appreciate the question. I think it is important to have stocks as a part of the portfolio.
Mike:I think it is important to invest in the market because no one knows the future, but to only do that is oversimplification, to only go in on AI and robotics, I think, is not proper diversification. And to assume that only those companies that only do semiconductor or chips or robots, that's its own set of risks. Other companies can benefit from it too. So let's not oversimplify with just the cliff notes of what's going on, bank everything on a couple of stocks, and then hope it works out. Retirement is too risky.
Mike:If you're 20 years old, go for it. Yeah. That's not investment advice.
David:No. No.
Mike:No. Do your research. Sure. But I'm saying when you're retired or near retirement five years away, it's not worth it. Your job is not to get rich.
Mike:Your job is now to stay rich. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist.
Mike:Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.