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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your questions about all things retirement. My name is Mike Decker. I'm a licensed financial adviser who can even file your taxes. Now that said, please remember this is just to show I'm not giving you financial advice. Everything you hear should be considered, well, informational.
Mike:With me is my esteemed colleague, Mr. David Franson. David, thanks for being here.
David:Yep. Glad to be here.
Mike:David's gonna read your questions, and I'm gonna do my best to answer them. You can text your questions in right now to (913) 363-1234. That number one more time. (913) 363-1234. Let's dive in.
David:Hey, Mike. Should I be buying and holding stocks or investing in cheap S and P 500 ETFs like SPY and VOO for the long term?
Mike:I don't know. And the reason why I'm so transparent about that is they don't say what their age is, do they?
David:No. Yeah. This person could be like 30, or they could be 60.
Mike:They could be 80. What is your plan? What are the strategies you're trying to implement? And then what are the investments or products that you need to invest in to fulfill that plan? So there's a problem out there right now that we just assume, oh, the S and P 500, the best thing since sliced bread, SPY VOOR two ETFs, exchange traded funds, low cost.
Mike:You combine there. You got exposure to 500 stocks. I mean, it's like all over TikTok, Instagram, LinkedIn. It's oh, this is the only thing you need to do, and you're good to go. It's a good starting place for a portfolio in my opinion.
Mike:But you're taking risk, and these are large cap stocks, so large companies. Those are not always the highest producing. They've done well. They're probably among the better asset classes. But what do you want your money to do for you?
Mike:It's just to grow. That might be a good option for a simple plan. So if you're like A simple portfolio.
David:You're out of college, you're sort of in your first career, and you have an opportunity to put your salary deferral into SPY?
Mike:Yeah. That that's a good starting point
David:Okay.
Mike:To consider. But if you're retired, that's a lot of risk. I mean, I think about like 02/2008, the market was down. If you include the first couple of months of 02/2009, it was down 50%.
David:Yeah. I remember.
Mike:Do wanna put out all of your assets or most of your assets as something that can be down 50%? Because if it's down 50%, it requires a 100% return to break even. Maybe it's a three year stretch. So 02/2002, that was down 50% over three years. So not only was it painful, but it was drawn out for such a long period of time.
Mike:So generally speaking, going all in on one or two ETFs, not a good idea in my opinion. Pretty adamant about the opinion. Yeah. But this do it yourself, I just buy the S and P five hundred, and financial advisors are dumb. I get why people say that.
Mike:Frankly, it's because I think many people have been sold something they didn't understand and expectations weren't met. I think that there's been a lot of salesmanship and a lot less consulting in this industry. So according to the Gallup report, financial advisors, brokers, insurance agents, they're like down in the top 10 most distrusted. Really? And there's a reason for that.
Mike:You set expectations, they may not be communicated well, people may not understand what they're buying, and then they're disenchanted. So for example, many people over the past couple of years, specifically the last year, have become disenchanted with their adviser because they're saying, well, I didn't know bond funds could lose money. I thought bonds were safe. Bonds are safe. Bond funds are not.
Mike:Well, no one explained that to me. That's breaking trust. When we opt into oversimplified, over generalized traditional stuff that's just maybe not catered to the person, it's easy to have expectations not met. So I understand why people are looking for a way to do it themself, but just because there may be a few bad experiences or oversimplified experiences doesn't mean that it's all that way. Understanding what you're signing up for is probably one of the most important things a financial professional can do for someone, whether it's a one time consultation, analysis, or optimization report, a one time plan, but setting expectations is a very important thing.
Mike:You could say, I just wanna grow. This is for legacy purposes. Let's assume it's a retiree, and they wanna grow, grow, grow. Well, maybe that's enough risk. Maybe they want more risk.
Mike:Maybe they wanna do the s and p 500, and 10 more stocks or five more stocks, which would increase their growth potential. It would also increase their risk, but maybe that's what's right for them. Maybe it's too much of a roller coaster, and maybe they should do something like, I don't know, buffered ETFs or something else to just kind of level things out a little bit. Is this making sense?
David:Yeah. I think so. It depends on everyone's particular situation. And so if you're young and you have many years ahead of you, loss of runway, so to speak, you have time to grow through
Mike:You got time to recover.
David:If it goes down, you got time to recover. If you're older and you're already retired, there might still be potentially a place for something like these SPY VO in your portfolio, but it might not be the whole thing. Right?
Mike:Yeah. It's a part of an overall portfolio, but your portfolio should not dictate your plan. Plan dictates your portfolio. One of our rules here when we build a plan is that we diversify our assets by objectives. So let's say you've got 20% of your portfolio.
Mike:What's the objective here? Is it to pay income for these certain years? If that's the case, and they're early years in your plan, then those ETFs probably not a good fit. But if 20% of your portfolio, you don't need to touch for twenty years, and you know that, then maybe it is appropriate for that specific objective.
David:Mhmm. Yeah. I like that.
Mike:So again, plan, explore your efficiencies, and then it just S and P is a roller coaster. You gotta understand that and the risks associated with it. For everyone listening right now, if you're going, maybe I'm taking too much risk. I've got too much equities. I have been listening to TikTokers.
Mike:I am mostly an SPY or in the S and P 500. Maybe you're starting to realize that you're taking too much risk. Please call us. Whether you work with us or not, that's fine. You don't have to work with us.
Mike:But our offer here, the your wealth analysis that we do at no cost can really sober you up, and I mean that sincerely. When I think of my why or why I do this, big reason for it is I was kind of raised by my grandparents. I don't know if we've ever talked about this.
David:I think you mentioned them in your book. A little plug there for how
Mike:to retire on time. Yeah. The original copy.
David:Oh, okay. Yes.
Mike:Yes. I shortened it in the newest edition. But I was raised by my grandparents. My grandma was a teacher. She taught English, and my grandpa was a Boeing engineer.
Mike:Mhmm. K? Both had great jobs. They retired on pensions back when pensions were a thing, and social security, they had assets in the market just for the extra stuff. When my parents divorced, we moved in with my grandparents.
Mike:You know, the fact that they were there and they went through the .com crash, no problem. They went through 02/2008. It was all fine to them. They had a proper built plan. Granted, it was mostly pensions, but you can still create good plans.
Mike:They can sail through these market things. That's why I'm concerned about these people doing these oversimplified reaching for the stars growth strategy without realizing the risk. The past fifteen years of growth are unrealistic expectations that have now been set, and there could be a very harrowing wake up call for those who don't understand the risks they're taking with going all in on one or two ETFs like this. 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 podcasts.
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