Pod Insights Money Guy Show Is THIS a Secret Investing Hack? About this episode "What are the money guys opinions on leveraged stocks? Maybe I’m missing something, but wouldn’t a 2x leverage S&P stock be a great investment in the long run?"
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:07 Speaker 00 All right, next up is a basic bedazzlers question.
0:10 Brian Preston? Yeah, I like that. I like y'alls names. You know, take something we've shared and kind of jazz it up a little bit.
0:16 Speaker 02 Bedazzling, you would say?
0:19 Speaker 00 He says, "I'm getting a high deductible health plan at 25. Work contributes $3,000 at the start of the year, but the HSA provider has high fees, limited funds, and about 0% in cash. Can I open a Fidelity HSA, roll over the amount, and contribute there instead?"
0:40 Speaker 02 Potentially. So, we see this all the time. A lot of times with employers, there will be a specific provider that sponsors the HSA program. So, if you participate in the health plan, and you opt for the high deductible, and you get access to the HSA, the employer's gonna say, "We're gonna put money in your HSA, and we're gonna put in $3,000 if you select this plan." Some plans say, "Hey, you have to leave the money there unless you use it. You can't roll it over." Some plans are not captive like that. Some plans, once your employer puts it in, you can then roll that money to a provider like a Fidelity, and if 3,000 isn't the max, you can begin contributing up to the max in that outside HSA. Even if the plan doesn't let you move the 3,000 over, there's nothing
1:25 Speaker 02 wrong with having multiple HSA accounts. We have a lot of clients who do this. They'll have one at the company with the provider, so they get the employer money, and they have another that they fund. The one caveat I would say is, if you're funding it with after-tax dollars, like from your checking account, you may be missing out on some payroll tax savings, because if you fund it through your paycheck, you save not only the triple tax advantage, but get a quadruple tax advantage through the payroll savings. You have to weigh the pros and cons. Either way, what you don't want to do is you don't want to walk away from that $3,000 employer contribution, because that's free money.
1:59 Brian Preston? Yeah, without a doubt. So, you know, the only thing I'd add, I think Beau covered pretty much everything, is just go talk to your HR or your benefits people, just to find out if it's a captive plan, or if you actually... Have the opportunity for even them to contribute to different plans. I would think though, probably because I'm the one that does payroll still, working on getting rid of that in 2025. Is that I like going to one plan because it just makes administering payroll simpler. But Bo gave you great advice on those ways that you can still win on getting the free money. Because that's a lot of money and that's great that your employer does that. And don't forget, you can also advocate, you know, now be polite.
2:35 Speaker 02 That's right.
2:36 Brian Preston? That's the thing is nobody wants, you know, somebody telling them how horrible their plan is with the high fees. And pour some sugar on that and try to, you know, show them, you know, there are other providers out there that are much more cost effective. Have much better cash earning options, have much more better investment options. You gave the example of fidelity, maybe compare and contrast, show that to your employer and ask if there's some way that they can take that to the current provider to sharpen their pencils up a little bit. Or even consider changing who the HSA provider is for your company. Nothing wrong with being an advocate for you and your coworkers.
3:12 Speaker 02 It's great.
3:12 Speaker 00 Great. Well, basic bedazzler, congrats on getting your HSA started so early and hopefully that helps. If you would like a money guy Tumblr, you can email money or winner at moneyguy.com.
3:23 Brian Preston? But how did she say it?
3:24 Speaker 02 Money.
3:24 Speaker 00 Money at moneyguy.com.
3:26 Brian Preston? I thought she said chicken for a minute and I was like, oh, I fall into that trap too. Winner winner.
3:31 Speaker 00 Chicken dinner.
3:32 Speaker 02 Oh, she had to finish it. She had to finish it.
3:34 Brian Preston? Yes, it's kind of like, no, I'm gonna mess it up.
3:41 Brian Preston? You're not gonna do it? Okay, I'm sorry. It's all right, Bo, you just do what you want.
3:44 Speaker 02 Was that, what are you doing? Was that shaving a haircut? Is that what you're doing?
3:47 Brian Preston? I don't know if that's what it is, but you know, you always go.
3:51 Speaker 02 That's the finish. I like that.
3:52 Brian Preston? Yeah, you didn't do the finish.
3:53 Speaker 02 Bop, bop, bop, bop.
3:55 Brian Preston? Yeah, okay. Thank you. Was that Nick or Nick?
4:01 Brian Preston? I'm not percussion, I'm not a drummer. I know I've got multiple drummers. This is the problem. You live in Nashville, everybody here plays an instrument, like professionally. Like Megan here, which you don't know, is Megan probably plays like six instruments. We totally poached her out of like running an orchestra or something like that. And then, um, we've got drummers, we've got one, two drummers that can play. But you play any instruments, Nick?
4:28 Speaker 02 He's a vocalist.
4:30 Brian Preston? Vocalist?
4:31 Speaker 02 Look at that.
4:31 Brian Preston? We got a whole lead singer here. That does not surprise me.
4:34 Speaker 02 We're gonna have a Money Guy band in no time.
4:35 Brian Preston? Matt, what do you play?
4:37 Speaker 02 Nothing.
4:37 Brian Preston? Why are you living in Nashville? We poached you here?
4:42 Speaker 02 Why are you living in Nashville? That's hilarious.
4:44 Brian Preston? Matt, you play any instruments?
4:45 Speaker 02 No.
4:46 Brian Preston? Yeah, I don't either. Well, no.
4:48 Speaker 02 You can play the keyboard.
4:49 Brian Preston? I, I, I took several years of piano. I love music, but it's one of those things when you realize you don't have the talent, you're just a fan.
4:58 Speaker 02 Um, my, so my oldest daughter, she's nine, uh, one of the gifts, uh, sweetheart, if you're listening, uh, don't listen right now because I'm about to ruin something for you. One of the gifts we're getting her for Christmas, um, is a keyboard and I'm actually pretty excited about it. She started taking some, like, I think it'd be so cool if my kids could play it because I never got to do that. I think that'd be, and I've heard that like piano keyboard is probably like one of the best ones to start a kid on.
5:20 Speaker 00 Yeah, it's a great place to start. That's what I started on.
5:22 Brian Preston? And it probably, I don't know, if, if your kids can understand music well, it, it helps with the math minded focus too. Because you know, if you think about the way notes are structured and keys, um, a lot of it translates into math and I love that. Uh, uh, even as a kid playing the piano, I thought it was so cool.
5:39 Speaker 02 It was all mathematical.
5:40 Brian Preston? If you were trying to figure out how to change, you just had to go further down or up and it was just cool seeing math in, in action.
5:47 Speaker 02 Do they still do the recorder in school?
5:49 Speaker 00 Yeah.
5:50 Speaker 02 I played that.
5:52 Brian Preston? Give me a break.
5:52 Speaker 02 What? That counts.
5:55 Brian Preston? He said, I feel like we're on Revenge of the Nerds and the jocks showed up and, you know, I played the recorder.
6:01 Speaker 02 I did play the recorder.
6:02 Speaker 00 I feel like we've got to have Brian bring out the piano at the Christmas party.
6:04 Speaker 02 Oh, there we go.
6:06 Brian Preston? You know, I embarrassingly, you know, I fancied myself a piano player at one point, like I said, before I realized this whole talent thing. And then I was at some event and I played like the two or three songs that I knew. And then somebody really knew how to play the piano showed up and I was like, gosh, I shouldn't have done that. Why didn't I, why didn't I get on that piano? So no, I won't do that, especially in Nashville.
6:27 Speaker 02 Yeah.
6:27 Brian Preston? In Nashville, you don't, when you see an empty instrument, don't get on it.
6:31 Speaker 02 Don't go up to it.
6:31 Brian Preston? Unless you have like platinum albums, which by the way, there are people in this office that have platinum albums. You don't touch any instrument in Nashville because you don't know who's in the room with you.
6:41 Speaker 00 Fair enough.
6:42 Brian Preston? No, it's, it's true. Around here, you have to be very careful. I mean, down the street is probably somebody who wrote some magical song and you never know what somebody has around here.
6:52 Speaker 02 It's fact.
6:54 Speaker 00 All right. You ready for the next question?
6:55 Speaker 02 Yes, ma'am.
6:56 Speaker 00 All right.
6:56 Speaker 02 People are coming up with a money guy band names and they are hilarious. Sorry, keep going.
7:01 Speaker 00 This is from Joe H. He says, what are the money guy's opinions on leveraged stocks? Maybe I'm missing something, but wouldn't a 2X leverage S and P stock be a great investment in the long run?
7:14 Brian Preston? What, what's the, I, cause you're the CFA. And I remember you and I, when we figured out, we messed around with triple leveraged stuff for a while. There's a time disintegration. What, what's the component that we quickly figured out that adds the element of these leveraged funds that you gotta be very careful of?
7:31 Speaker 02 Yeah. Well, let me, the term you look for is time decay.
7:34 Brian Preston? Time decay. There it is. I knew there was some, I needed a CFA to sit around me to make me feel smarter or dumber.
7:39 Speaker 02 Conceptually, it makes all the sense in the world. If the S and P is great, then double S and P must be better and triple S and P must be the even the best. I know, right? Over the long term, the S and P has returned for the last like 50 or 60 years, something like 10.3% annualized. So if I just go buy a triple levered S and P fund, that probably means that I'm going to make 30% annualized, right? Wrong. Unfortunately, the way that these products are structured, the way that they're able to triple the performance is because they're using derivatives and levered pieces in order to amplify that return. Well, the problem is, whenever you get into options, or whenever you get into any
8:22 Speaker 02 type of derivative, there's often a time component associated with it. And so what happens is, is they buy the product and the time begins to decrease, and they have to go buy another product to reset the time, and buy another product. And a lot of these products, reset on a daily basis. So what is the eighth wonder of the world?
8:39 Brian Preston? Compounding interest.
8:40 Speaker 02 Compound interest. One of the things that you lose when you move to a double levered or triple levered type holding, is you lose the benefit of compounding through time, because there's a reset on a daily basis. So the only time you really quote unquote make money on these is if you catch a momentum string, or you have a bunch of large up days in a row, or a number of up days in a row. You can do well on these, but in my opinion, this is not investing. This is gambling. This is no different than going to the newspaper and picking the penny stocks that look the most attractive and buying those to see if you happen to hit one. So in my opinion, levered investing, or using levered type products, is not a great way to build wealth,
9:22 Speaker 02 because it's not a long-term wealth building strategy, in my opinion. It is a timing strategy, and I think that timing is very, very difficult to do over the long term.
9:31 Brian Preston? So I completely agree with you. This is not investing. This is completely speculating. But I will, to throw off something, because remember, we have a no hypocrite policy around here. I do think if you're at step eight of the financial order of operations, the stock market gets completely crushed. I'm talking about, we're in full-on bear market territory. You start seeing the disconnect between valuations and the price that things are trading at. Not investing. That's still, this is not what you're doing with your Roth money, your 401k, and stuff like that. This is not, you know, it's not eating money. This is vacation money I'm talking about. But the same money that you would take to Vegas or anything else, when you get into those unique times,
10:10 Brian Preston? it is kind of interesting that you could gamble within step eight. Not foundational. Play around, I could, in a small portion, small portion. I gave too much, didn't I?
10:24 Speaker 02 Agree to disagree. No, I'm kidding. Yeah, that's 100%. But it's no different than if you're going to pick up a hobby. If you want to go, you're into step eight and you want to go spend money on golf at the country club, you can do that. You can do leverage.
10:34 Brian Preston? It's better than playing roulette.
10:36 Speaker 02 It's better.
10:36 Brian Preston? Because you are playing, it's a momentum play, it's a timing play. But there are times, I often say this in life, opportunities present themselves big enough that you can drive a truck through them. And I do think sometimes, now, here's what you, let me go and tell you the emotional side of this. When we get to a period where the market is down 25 to 30%, and everybody, everybody's going to be looking for the exits. And, and you're going to be, and you're like, those guys want to, they do what? Because emotionally, you're going to feel like that's the craziest thing ever. So, but it's kind of a fun contrarian thing. Financial mutants are probably wired in a unique way. But don't get too crazy with it.
11:13 Speaker 02 Here's the problem that I have with these kind of, can I keep going on this? Because since you, since you gave them a little nugget, I want to rip that nugget away from them. The problem with, let's say the market does go down 20, 30, and there are, there's an opportunity there. What you have to figure out, if you're going to do this, if you're going to go with a lever product.
11:29 Brian Preston? I know where you're going to say, because this is true.
11:30 Speaker 02 You have to figure out your exit point. Okay, I know I'm getting in at the right point, but I also have to get out at the right point. Again, because it's not a long-term holding. Even if you hit it exactly right, but you end up holding it too long, the value of your holding will decay through time. So again, it's a timing thing. You know what I get really excited about when the market goes down 20, 25, 30%? Just dumping it into the S and P 500.
11:52 Brian Preston? It is true.
11:53 Speaker 02 Just buying the low-cost index.
11:54 Brian Preston? Because here's, here's, let me go and tell you the drama I've created for myself when I've played with this type of junk, is that we even, if you hit it right, and you start making money, you'll start saying, after you double your money or triple your money, and I've talked about this before, you're like, maybe I should get out. If you do get out, and then you continue to watch it go up, you go.
12:13 Speaker 02 What did I do?
12:14 Brian Preston? Cuss the day that you sold it. And then what if you get in this thing, and then it continues to get its teeth kicked in? Because by the way, that, that decay part, or the, the amplification of the day transaction, and realize when those markets, when we reach periods where a market's down 20%, it's not uncommon to have a 3% to 4% swing in the market.
12:32 Speaker 02 In a day, yeah.
12:33 Brian Preston? Apply that by 3%. You quickly see, oh my gosh, I just lost 12% of my money in one day. It kind of really can be a punch to the gut. So you're right, emotionally, these things can wreck havoc on you. And what I think about is that I know the times I've played with them. These things are less than probably a quarter of 1% of my net worth, but yet they will completely 100% impact my happiness for the day. That's probably a dumb thing to get yourself into.
13:06 Speaker 00 For sure. All right. Thank you so much, Joe, for your question. If you would like a Money Guy Tumblr, you can email [email protected] . Now I'm in my head about it.
13:15 Speaker 02 She didn't write that, Tom. She didn't think about it.
13:17 Brian Preston? You can tell we are complete dorky nerds when it comes to this money stuff. Because I mean, confessionally, a lot of the things you guys think about, we've thought those same things too.
13:27 Speaker 02 Yep. A lot of mistakes that we see you guys or hear you guys make are ones that we've made or seen clients make in the past is why we're able to sit in a position of authority and saying, hey, there's a better way to do money. We're just trying to help you figure it out, maybe faster than we did or faster than a lot of our clients did. You know what one of the best ways to figure out how to do money better is?
13:49 Brian Preston? Buy Millionaire Mission or the Financial Order of Operations course?
13:52 Speaker 02 Both of those are true. I was gonna say subscribe right now to the channel. So that we know that you are out there. We love getting to create this content. We love getting to do this for you. We love you showing up every Tuesday to hang out with us. We do not take it for granted. In this season of thankfulness, we are so thankful for that. If you're not going to moneyguy.com, go check it out. Go check out the resources. Go buy Brian's book for his birthday. It's all that he wants for his birthday from you guys.
14:20 Brian Preston? Not a hippopotamus?
14:21 Speaker 02 Not a hippopotamus.
14:23 Brian Preston? Guys, we absolutely have a blast. And Bo said it right. I do think we're in a season of being thankful for you guys. I pinch myself all the time. I know I'm another year older today. 50, 51 hits different than 50. I hate telling people how old I am because I'm hoping you'll look at me and go, man, that's a good looking 37 year old. But you probably don't think that. But still, you know, it's one of those things you leave out there. My watch doesn't think that either when it gives you your, your physical, your fitness age. But it's, um, it is one of those things. We're very thankful for you guys. I'm just so blessed that every day we get to create content. We get to work with people all across the country. We don't take it for granted. This abundance cycle is real. I mean, we completely
15:07 Brian Preston? give it away to you, let you kind of learn, apply, grow. And I just know it. You don't even have to go looking for it. But if you do what we share with you, your life will get complicated for good reasons. It's going to, all good problems to have, but you're gonna say, hey, I remember these guys mentioning some of this stuff. I remember who planted the seeds of this success. Why not pay it forward with the abundance cycle? And we'll be, we'll leave the light on the front porch for you. We'll be waiting. I'm your host, Brian Preston, Mr. Bo Hanson, Money Guy team, out.
15:38 Speaker 03 The Money Guy Show is hosted by Brian Preston. Abound Wealth Management is a registered investment advisory firm regulated by the Securities and Exchange Commission in accordance and compliance with the securities laws and regulations. Abound Wealth Management does not render or offer to render personalized investment or tax advice through The Money Guy Show. The information provided is for informational purposes only and does not constitute financial, tax, investment, or legal advice.
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