02.18.25 Ask An Advisor With Wes Moss

Do you want to be a millionaire? Wes dives into the fascinating trend of "mini millionaires" and uncovers the secrets to their success. He explores data from the Federal Reserve and the Wall Street Journal, revealing the common traits of those achieving millionaire status. Are they earning massive salaries? How much does education matter? He breaks down the key factors. Plus, he revisits the timeless wisdom of "The Millionaire Next Door" and how its core principles still apply today. Also, Wes shares three powerful investing lessons from an interview with the legendary John Bogle, founder of Vanguard. Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the February 18, 2025, Ask an Advisor episode of the Clark Howard podcast. Submit your questions at clark.com/ask. We hope you enjoy our weekly Ask An Advisor episodes, in which Christa and Wes discuss investing and retirement savings in depth. Let us know what you think in the comments! Learn more about Wes: Wes Moss, CFP® Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

• 0:00Speaker 00

  At Edward Jones, we believe rich is about taking care of what gives your life meaning. That's why your financial advisor personalizes your plan to help you preserve your progress and create something that lasts. Let's find your rich. Edward Jones. Member SIPC.

• 0:15Speaker 01

  UKG is the workforce operating platform with unified HR, payroll, and workforce management, built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG, HR, Pay, and Workforce Management.

• 0:50Speaker 02

  Welcome to Ask an Advisor. I'm Krista DeBias.

• 0:53Speaker 03

  I'm Wes Moss. Hi, Krista DeBias.

• 0:55Speaker 02

  Great to see you, Wes. I'm excited about today's show. We're talking about what everyone wants to be, a millionaire. How do you become a millionaire? How many millionaires are there? There are a lot more than there used to be, right?

• 1:06Speaker 03

  It's interesting. It's still really hard in America to get to the point where we have financial freedom and financial security. And I write for Forbes.com, and I'm always looking at statistics around what we've saved in America. And the reality is, there's half the country still really has very little saved. And if you look at the bigger picture metrics, and Federal Reserve does this, there's lots of different government agencies that are trying to measure wealth. But the Fed, in their consumer survey, their survey of consumer finances, they do this every three years. There's a new one that's going to come out at the end of 25. So we still have this data was through 2022. But it's really kind of fascinating how many people are becoming millionaires. The Wall Street Journal called

• 1:51Speaker 03

  them mini-millionaires because they're looking at net worth here. It's not necessarily people having a million dollars in a bank account or an investment account, but overall net worth, it's gotten to be a really significant number. The numbers jumped a lot. And it jumped a lot from 2019 through 2022. And today, there are about 16 million.

• 2:12Speaker 03

  Or 12% of the population, millionaires, people that have a million dollar net worth. So the number is growing. The other thing that's really interesting, and I think this is skewed. So it's, it's an interesting number, but I think you gotta take it with a grain of salt. The average net worth family in America is a million bucks.

• 2:29Speaker 02

  Wow.

• 2:29Speaker 03

  Isn't that amazing?

• 2:30Speaker 02

  I'm shocked by that.

• 2:31Speaker 03

  It is. It is shocking. That's up 42% from 2019 where we were about $749,000. Just call it seven, three quarters of a million, two million. Now, that gets skewed big time by the billionaires of the world. You think about the musts of the world that are worth anywhere from a quarter of a trillion to approaching a half a trillion, depending on where his stocks are. So you get some giant outliers, Bill Gates, you know, the Forbes 400 list, and that skews. But the number is going in the right direction. And this group has a couple of things in common. The Wall Street Journal article lists seven things that this group, the new mini millionaires, how are they getting there?

• 3:14Speaker 03

  How are they building, building this net worth? It also reminds me of some of the core principles that were written about in The Millionaire Next Door, the Dr. Thomas Stanley and Bill Danko book that still, those traits still hold true to this day. So I wanted to go through some of these traits that come in. One, they have pretty good incomes, not tremendous, they're not making millions of dollars a year. But the group that has become millionaires, they make between 150 to 250,000 dollars a year. So they're making really good incomes, not ultra-high multimillion dollar hedge fund Wall Street incomes, right? That's number one. Number two, from some of these other reasons, because they're stock investors and they

• 3:54Speaker 03

  own their homes, they really were able to take advantage of the rise of the market from 2019 through 2022. That's a three-year period. So. During that period of time, their percentage growth of their net worth was even higher than the ultra-high net worth families in America. So this is the, again, this is the affluent group, but they're moving from emerging affluent to the affluent group. The traits around this, they saw their median net worth jump 69% during that period of time. Now, I went and looked at the stock market during that period of time. So if they 2019, then you had COVID hit early 2020,

• 4:35Speaker 03

  market went down 35%, and then we had a long recovery. But if you look at that period of time, it just so happens, and I don't think this is a coincidence, the S and P 500 total return was almost the same amount. It was 64% during that period of time, which is another reminder that this group has put money in their 401ks, they're investing in equities. Here are the statistics around that. 90% of that group reported that they own stocks. They own stocks directly. So it's, here we are in a world where we've got all this inflation and we're worried about prices going up. One of the few things that we can really do to outpace that and keep ahead of inflation is do invest alongside companies who can inflate also along

• 5:19Speaker 03

  with inflation. So that's, that's another trade. 87% of this group, homeowners. 87%. So again, those homes that they own are the equity in houses that we all know. It's a problem if you're a new buyer and you want to get into the housing market. But if you own a home that equity has certainly is very much risen over the last several years. The last trade, I'd say number seven on this list here, if you look at the group, 55 to 64, and this is where you've got 21% of this group because they've had more time than the whole population. They've had a lot more time to save. The percentage of those who have a net worth of a million bucks more than doubled

• 6:02Speaker 03

  to 45%, Krista, if they have a college degree.

• 6:07Speaker 02

  Wow.

• 6:08Speaker 03

  So again, these are the traits in common. That, that leads me to think about the, kind of the basics of the millionaire next door. One, live below our means. Two, spend our mind share when it comes to money on wealth building activities as opposed to consumption oriented. Number three, they're looking for financial independence as opposed to status, right? And I think that the listener base here of the Clark Howard Show, we know all about that here with Clarky, right?

• 6:38Speaker 02

  You don't want to be all flash, no cash.

• 6:39Speaker 03

  Is that what Clark says? No flash, all flash, no cash? And you think about Clark, I'm sure he can afford polo shirts that are more than five bucks at Costco, but he's not looking for status. He's looking for independence and he's kind of living that walk. And that's what millionaires do. They raise independent kids. The millionaire next door talked about how the majority of multimillionaire families in America, their kids are independents. It's not that they're not close to their kids, but they don't have to support their kids financially. And then really this comes down to work. And this is what I want to bring up about education. Thomas Stanley, Bill Danko of the millionaire next door say, look, education is great. And there is a direct

• 7:19Speaker 03

  correlation between wealth and education. But there are tons and tons of millionaire families in America that don't go to college. They don't necessarily have a degree because really what Trump's education is just hard work. It really comes down to hard work. It comes down to some common sense around where we can make a living, going back to those wealth building activities. I mean, a trade in the United States and you have a really high probability, I think today more than ever, of being a millionaire family. One of my favorite articles over the past year in the Wall Street Journal is about how private

• 8:00Speaker 03

  equity funds are buying up mom and pop businesses like HVAC companies, plumbing companies, pest control companies. And these companies are worth million dollars, two million, five million dollars. These are trades that historically don't think, well, I'm going to go into pest control, make a fortune. But it's happening and I think it'll continue to happen because these are good businesses and there are people that really work hard. So hard work trumps education, probably the combo of the two, Krista. Education and hard work, I think, leads to the propensity more wealth building activities. But those habits of millionaires, those who achieve it and stay millionaires from Millionaire Next Story, they still hold true today. And according

• 8:45Speaker 03

  to a survey of consumer finance by the Federal Reserve, it's working. And I cannot wait to see the 2025 study that'll capture 23, 24, 25. Well, it should be 2023, 24, and some of 2025. That's going to come out. I don't know when, but we'll update the numbers as soon as it comes out.

• 9:05Speaker 02

  For sure. And then more equity certainly built.

• 9:08Speaker 03

  My voice is a little scratchy. I've got four kids and somebody's always got something.

• 9:12Speaker 02

  Always, always. Yes, you are. You are in the weeds.

• 9:15Speaker 03

  Got some Clark water. It'll help.

• 9:18Speaker 02

  All right. We ready for some questions?

• 9:20Speaker 03

  Yeah, let's do it.

• 9:20Speaker 02

  This one came in from Holly in Arizona. Our question may be basic, but it has really been overwhelming to try and figure out an answer. Here's the gist. Our son is 18 and headed to college next year, and we also have a 15-year-old daughter who's a high school sophomore. In the near future, we've been told that we will likely inherit $1 to $2 million. Even writing that number is surreal to us. Our kids will each receive approximately an additional 60K to be used mainly for college. There are a lot of moving parts with regards to various accounts, money from various sources, et cetera, and we're concerned about making costly mistakes. In essence, however, our question is this. We are hoping to get ahead of this new financial situation we will find ourselves in. Who

• 10:03Speaker 02

  do we need on our team? We know that finding a fiduciary is important and we understand that concept, but who will we ultimately need on our team? A financial planner, an estate planner, CPA, an attorney? We are already overwhelmed thinking about it and don't want to make mistakes or ultimately hire the wrong people. We're in our 50s and want to be careful since retirement isn't too far off either. And P.S. The kids have a small 529 under our name, $15,000 each, but grandparents will be unable to open other 529s for them. Long story, but I mention it since you've suggested this in a previous show. It could have been Clark who suggested it in this case.

• 10:38Speaker 03

  Here's the good news. This is really solvable for Holly. It is overwhelming, right? If you're looking at, well, wait a minute. I just met with mom and dad and they're starting to talk about inheritance and it's a million. Now, that's a big range, a million to 2 million. That's a big range, but still a lot of money. And I know I've seen, I've had so many families over the years go through this. And if you're not super financially savvy and you haven't been the person that's been investing in different accounts or maybe helping mom and dad and you're new to all this and you're in your 60s or 50s, it feels really confusing, like you're bombarded. You've got all these accounts and then maybe it's real estate.

• 11:20Speaker 03

  And then how do you appropriately do the transfers and death certificates and letters of testamentary and probate court? It's a lot. So she sounds a little overwhelmed. I would start out by saying the team, and I love this concept. A lot of the questions over the last couple of months have made me think about this cadence. It's quarterback, CFP, who then drafts your offensive line, which is your CPA. And then you've got your defensive line, which is your estate planning attorney. And if you've got that team, that whole team, then the quarterback, which is your CFP or fiduciary, Certified Financial Planner, can help you find these people, pick them,

• 12:05Speaker 03

  and then start with a plan, financial cash flow retirement plan. Sure, they're going to be able to do the investments, but then coordinate the taxes and the estate with the estate planning attorney, tax with CPA. Now, in this situation, Holly, I think it maybe calls for some special teams. And the special teams would be the probate attorney. Now, not everybody needs to do this. You can handle as an executor of a will or an estate. A lot of times, people can do this on their own. If assets are in trust, it becomes pretty clear where they're going. Retirement accounts that usually have listed beneficiaries, that should be quick and easy. You deal with a financial institution.

• 12:49Speaker 03

  But it's not always that simple or straightforward. And, and if you've got a scenario where you've got lots of different assets, different accounts, maybe real estate, different beneficiaries, maybe the documents aren't fully updated and the beneficiaries aren't listed as they should be. And there's, these wealth transitions are rarely perfect. So what do you do? You call in special teams here. I think that's a probate attorney. So in your home state, wherever we live, we're going to want a probate attorney in that state.

• 13:20Speaker 02

  So in Holly's case, Arizona.

• 13:21Speaker 03

  And she's in Arizona, so she's going to want to find someone there. And that person can help make sure all the documentation gets set for the wealth transition. Go into the court hearings. If you're sitting in before a probate judge and trying to adjudicate what goes where, it's not going to cost a fortune typically to hire a probate attorney. And it sounds like for Holly, it might really be worth the peace of mind to do so. So I still think it's the same structure. See it, your CFP is a quarterback. You've got your CPA and your state planning attorney. But here, this particular situation calls for some special teams. That's the probate attorney that'll make sure she's not worried about missing something in a time of transition when the time comes.

• 14:05Speaker 02

  Okay. This one came in from Alex in Michigan. I'm retired and have a balanced portfolio. I was thinking about my fixed income. Bonds return usually when whatever the yield is, four to 5%, but with volatility. To avoid the volatility, what do you think of just putting fixed part of the portfolio in money market or CDs?

• 14:23Speaker 03

  Look, Alex, I've had the same thought. I think it's a super sensible question. I mean, if money market's paying four and bonds are paying four and a half, but my bonds can go up and down in value, just why not just do money market? I get it. The reality is statistically over time.

• 14:42Speaker 03

  Bonds have way outperformed cash. Whether you look at a 20-year period, a 40-year period, 100-year period. Bonds have won in almost every timeframe you look at. Now, there have been a few isolated periods. Like 2023, when rates went up a bunch and bond prices came down. That's a period of time where bonds didn't look so good. But they were also coming from a point where they weren't really paying a lot of interest. The US 10-year Treasury got down to almost 0% at one period of time. So, bonds didn't have a lot of gas in the tank. So, we had a period of time where it works like a seesaw. Rates go up, bond prices go down. That's what happened.

• 15:23Speaker 03

  But where we are now, rates have gone up enough that they're back to much more normal historical levels. The interest rate and bond interest yields are, in the bond world, we call it destiny. So, if you're starting at 4% or 5%, then you have a high likelihood of averaging a total return of that 4% or 5% of a time. And that's where rates are today. If you look at the US Treasury yield curve, you're not quite at 5%, but as you go out a little further, it's approaching that kind of 4 and 3/4 range. The problem with money market is the minute the Fed drops rates from, let's call it 4% to 2%, your money market will immediately adjust lower.

• 16:08Speaker 03

  So, now you're only getting 2%. But if that happens and you own bonds that are 4.5%, you still get to keep your coupon. And you've locked in a little bit longer period of time, depending on the duration of your bonds. A higher interest rate for a longer period of time. Oh, and then, by the way, if rates go down, right? The seesaw of rates is headed down. The price will actually get some appreciation. So, that's a dynamic historically, not in 100% of days or weeks or months, or even there are a few years, but over time, bonds healthily outperformed cash. The other thing is that we haven't had a ton of market volatility in the last couple of years.

• 16:50Speaker 03

  And now the rates are back to more historically normal, quote, "normal" levels. They're not super high, but they're not low anymore.

• 16:58Speaker 03

  They do give you that buffer and balance. Stock markets sell off. Money will typically run the bonds. That lowers rates, increases prices. So it has this balancing effect on your overall portfolio. So you can get a little bit of total return in bonds beyond just the interest. So totally logical question. I've asked myself the same thing. But longer term, sure, you're going to hold some cash. But I wouldn't have your hypothetically 40% bond or fixed income allocation dry powder. I wouldn't have the whole thing in cash by any means. Don't give up on bonds, Alex.

• 17:33Speaker 02

  All right, we'll squeeze in one more here from Michelle in New Jersey. I'm 63 years old and plan to retire at 67, my full retirement age. Currently, my retirement savings is so aggressive via payroll deductions that I don't have enough take home pay to cover my monthly expenses. So I'm actually withdrawing money from my retirement savings now to live off of. I'm saving more than I'm spending, but I'm not sure if this is a good idea. I know most of my retirement savings is growing tax free in a Roth, but some isn't, so I'm paying tax each year that I file. Do you have any advice for me? I actually feel stressed and scared, but I am saving.

• 18:10Speaker 03

  Michelle, this is crazy. Michelle's 63. She's got four more years to retirement. She's like, she's like an all in saver. And she's saving so much out of her paycheck that she's having to go and take money out of her retirement account. Michelle is in like this, she's in a tax vortex. So she's putting money in pre-tax, saving money on taxes, pulling money out of her retirement account and then paying taxes on that. It's a circular tax savings, tax expense, tax savings, tax expense. The good news is this, it's solvable because of course Michelle can lower

• 18:52Speaker 03

  her contribution percentage in her 401k or 403B. That's easy to do, Michelle. But the other thing here is that it's better to be an oversaver than overspender. So she's actually on the right side of this continuum here. So she's, she's okay. There is a situation where this could almost make some sense. It's that if she has a nice, healthy, free money match on her 401k, she is almost better to make sure she's doing the full match to get the free 100% benefit, depending on what the company's paying. So she's doubling her retirement money. So if that's the case, she does want to almost over save.

• 19:36Speaker 03

  So she gets the free money match in her 401k. And then she's saying, okay, well, I'll just supplement from taking money out of the, out of the retirement account. So that's the one instance where this actually could be genius. I would suspect that she's probably already getting the match and she's, because again, companies don't match on everything. They usually match a small percentage. So she's probably already doing that. But you don't want to create this tax for tax loop because you're already, probably she's already getting her free money match in the 401k. So just back off your percentage contribution in the 401k to the point where it at least makes your take home pay just enough to pay the bills. So you don't have to pull out of the retirement accounts.

• 20:19Speaker 02

  That's awesome. So don't fret.

• 20:21Speaker 03

  She could be doing something very genius here.

• 20:23Speaker 02

  I love it. Okay. I hope you loved that segment. And coming up next, Wes, you're going to talk about someone so many people love, especially the Bogle heads, John Bogle and some of his great strategies, right?

• 20:36Speaker 03

  Talk about a guy, guy who's helped more people become millionaires. I don't know if anybody's done more than Bogle for this. So we'll talk about kind of the three key lessons that I love from Bogle.

• 20:47Speaker 00

  At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters. So you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones. Member SIPC.

• 21:17Speaker 01

  UKG is the workforce operating platform with unified HR, payroll, and workforce management, built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity, enabling every worker to confidently take action as work happens. Because when work works, everything works. Learn more at ukg.com/work. UKG, HR, Pay, and Workforce Management. Welcome to the 50th Hunger Day.

• 21:49Speaker 04

  Witness the beginning of the revolution.

• 21:51Speaker 05

  Hey Mitch. You've been trying to take down these games from the start.

• 21:54Speaker 04

  Film for IMAX.

• 21:55Speaker 05

  Make them remember you.

• 21:58Speaker 04

  The Hunger Games: Sunrise on the Leaping, November 20th, rated PG-13.

• 22:03Speaker 06

  Are you ever shopping online and suddenly a discount that helps you save pops up? It makes your day, sometimes even your week. Want that feeling month after month? Well, new customers who save by switching their home and auto insurance to Progressive, save hundreds. Cue your happy dance. Get your quote today at progressive.com. Progressive Casualty Insurance Company affiliates and other insurers not available in all states.

• 22:30Speaker 07

  As wish lists grow, you know where to go. Head to Ulta Beauty. We have gifts they'll love from brands like Tato One and Rare Beauty by Selena Gomez. Shop beauty faves to give or keep from Shark Beauty, Sol de Janeiro, and more. Not sure what they want? You can't go wrong with Baumann, Clinique, or Redken. And don't forget to put yourself on the list. Book a salon moment or add a little more sparkle to your season. Shop holiday in-store or at Ulta.com. Ulta Beauty.

• 22:58Speaker 02

  Welcome back to Ask an Advisor.

• 22:59Speaker 03

  Who's the advisor? You or me?

• 23:01Speaker 02

  You, for sure. I am definitely not an advisor. I'm here to learn from you, Wes, as everyone else is.

• 23:07Speaker 03

  Do you feel like you know the answers to these mostly?

• 23:09Speaker 02

  I've learned a lot over the years working with Clark and then knowing you and working with you and people you know, but I feel like I learn something new every day, which is a great part of my job.

• 23:19Speaker 03

  You know, the other thing too, even though I've been doing this, I guess, since the 90s, the later 90s.

• 23:26Speaker 03

  The world is this evolution of the rules and they don't change dramatically overnight, but they keep changing every year. And there's nuances and that's the, I think, part of it is that if you're not constantly helping families, there's a big gap if you go for a while. So I've been doing this for a long time and I'm kind of impressed with the questions that we're getting. They're pretty deep. They're very interesting. So I think we have got a lot of good ones coming up.

• 23:54Speaker 02

  We do, and if you want to ask a question, you can go to Clark.com/ask and you can say if that question's for Clark or for Wes. And you're going to talk about John Bogle.

• 24:04Speaker 03

  Let's talk about Bogle. For all those Bogle heads out there, I was so fortunate on one of my radio shows, I got John Bogle on as a guest.

• 24:15Speaker 02

  Oh, wow.

• 24:16Speaker 03

  And this is right 10, he passed away in 2019. I still remember to this day and I remember thinking about, I think he gave me 10 lessons. So I've written about them. And what I wanted to pull out today is kind of my top three favorite, really quotes from him, but they're really lessons. And I don't know if there's been a measure of this, but speaking of advisors or people that have helped people gain wealth over time, I don't know if there's anybody that has probably done more for wealth building in America than John Bogle, John Jack Bogle.

• 24:52Speaker 02

  Founder of Vanguard, if you don't know.

• 24:54Speaker 03

  Founder of Vanguard and super controversial. When he first wrote his thesis on how most of Wall Street is full of expenses and investing through a broker, especially back then, call it 50 years ago. It wasn't super accessible. It was the wealthy, you had to have a lot of money, you had to have a broker, and then mutual funds are super expensive. And even though the returns were pretty good, because there were so much expenses, they often lagged behind what the market just did in general. So he said, wait, why not just invest in an index fund and be average? And his contemporaries were like, you're crazy. You're a Wall Street guy, basically telling the world that you should just invest in

• 25:37Speaker 03

  the index and keep costs low? And I mean, he was like a pariah for a while. So. Today, you fast forward 40 or 50 years and he's brought about the idea that we want to participate in markets and we want to have low cost. He's made it easier for the world to do that. So here are kind of the three lessons that I think are very important to remember from Bogle. One, be an investor, not a speculator. You could call him almost a hardliner extremist here. He says that anything that is less than a 10-year horizon is too short-term. You're a speculator. If you're not leaving your money, you invest

• 26:21Speaker 03

  your money, you shouldn't be thinking about touching that for 10 years. 10 years. It's a nice message to remind us that we know we can't control, we don't know what's going to happen in the next three months, six months, a year, even two or three. But over time, there's a super high likelihood that equity markets, fixed income markets are going to be in a better place or you'll have made money over that period of time. So if you look around some of the statistics around trying to miss out on bad investment days, which we all love to do, we think about this as kind of hopping in and out of the market. If you go back, the statistics are 1995 through 2023, the S and P 500 total return during

• 27:06Speaker 03

  that period of time was about 8.5%, just shy of 8.5%. If you were fully, fully invested the whole time, if you missed five days, five of the best trading days, which we never know when they're going to come. A lot of times it's after the market drops and the market spikes back up. You gotta be there for those days. You can't say, oh, that we've got a great day, I'm going to get back in. It doesn't work that way. You have to already be there. If you miss the five days, Krista, it's hard to even fathom this math.

• 27:36Speaker 03

  Five of the best days during that 29 year period, 7,400 trading days, it's 0.07% of the days, it drops your rate of return by 21%. So you go from almost 8.5% down to 6.6%. And if you miss the best 30 days out of almost 30 years, still a fraction of days, right? 0.4% of trading days, it basically wipes out your whole return, down to 2% over that whole period of time. So we want to be an investor and a speculator, and speculators hopping in and out, investors are in it for the long haul. Number two, control expenses and emotions. And that was his original thesis is if we could strip out the back then 2%

• 28:17Speaker 03

  or 2.5% or 3% in mutual fund costs, then shouldn't I do well just by being part of a broad market index? And the mutual fund managers try to beat that index anyway, but they have this 2% or 3% hurdle. Now, costs in general have come down because of the advent of the index fund, the low cost index fund. And then it got even less expensive with low cost ETFs. So if we can control our expenses, doesn't mean you can't pay for advice, and I think it can be valuable. It doesn't mean that you can't have a small amount of expenses to get the exposure you need. But if you're controlling them, that lack of expense helps your compounding over time. And of course, emotions, right? Part

• 29:02Speaker 03

  of controlling of our emotions is setting those long-term time horizons. John Bogle reminds us of doing that. And the quote there, "The greatest enemies of the equity investor are expenses and emotions." So let's control the expenses and control our emotions. The third lesson from Bogle, and I want to read this quote, because I think this is, it says so much, is that the greatest, the greatest enemy of a good plan is the dream, the dream of a perfect plan.

• 29:37Speaker 02

  Oh, wow.

• 29:39Speaker 03

  The greatest enemy of a good plan is the dream of a perfect plan.

• 29:43Speaker 03

  Stick to the good plan. This is what Bogle tells us to do. So this is also, I see this happen all the time. Questions we're getting where people are nervous, they're confused, they're, they look at the news today and the news scares them and they're thinking about today, next week and this year. They're not thinking about the next 10 years, right? So they put together a financial plan and it's an investment plan. And I've got a balance. Well, is my balance right? I don't know if the balance is quite right. It's never going to be right. In fact, it's never going to be perfect. So the dream of having this perfect plan that's going to go perfectly as planned is never going to happen. So what's better than a perfect plan, because

• 30:26Speaker 03

  a perfect plan doesn't exist, is just a good plan. Put together a plan, make sure it's well thought out and it's good. And that can get you started and get you so that you get momentum so you can be an investor for 10 years plus, not a speculator. And that's the three of my favorite lessons from John Jack Bogle, founder of Vanguard.

• 30:51Speaker 02

  Boy, I love, I especially love that third one. And it makes me think about the idea, you know, we're not going for perfection. It makes me think about how each of us, I mean, I imagine, I don't know if you've ever, you've ever had a bad, something you invested in that was unwise or you made an emotional decision. I know Clark has talked about, he's made some unwise investments in his past that taught him, I definitely have. And so we all have made mistakes or maybe you've gone in and out of the market or tried to time it. You know, that's just clean slate it, nobody's perfect. And then we just all need to look at that 10 plus year horizon.

• 31:24Speaker 03

  The other thing is that when it comes to the plan, I'm a believer of just getting something down on paper, literally a plan. You can get a 50-page color charts, financial analysis, cash flow, probabilities, and that's great. And that's a really good plan. But a lot of times, being able to have a timeline on a piece of paper, where we are today, where we are in the future, how much we have saved, how much we're going to save per year, when our social security kicks in, when our pension kicks in, assumed conservative rate of return, and voila, we've got a financial timeline that can actually be a pretty good roadmap.

• 32:05Speaker 03

  And you can do that in a half an hour at a conversation. That's good. You could do a full-blown financial plan, probably better, or really good. But let's get started to do something.

• 32:18Speaker 02

  All right, and we'll go to some questions now. This one's from Patrick in Illinois. I have around $100,000 in a Roth IRA and $185,000 in an individual taxable account, both in Schwab Intelligent Portfolio. The issue I have with Schwab in this case is they keep a sizable percentage of the money in cash, between 6% and 7% in each. And there is no option to change this with their robo-advisor model. I like the low fees and tax loss harvesting, but I hate that such a large percentage is kept in cash, oh, because I am 39 years old, and want that money to compound a bit faster. Should I move my ETFs to another robo-advisor? And if so, are there any that you suggest?

• 33:00Speaker 02

  Also, if I do, should I keep the same ETFs and just transfer them? Or do I sell them, move the cash to another financial institution with a robo-advisor, and let that AI software choose new ETFs? And finally, when searching for a robo-advisor, is it necessary that they offer tax loss harvesting?

• 33:19Speaker 03

  Wow. Patrick, no robo is perfect.

• 33:25Speaker 03

  No robo is perfect.

• 33:26Speaker 02

  No human is?

• 33:27Speaker 03

  They're robots, for goodness sakes. So of course, they're not going to be perfect. They're programmed. But look, there's a lot of good robo solutions out there. Schwab's is called Intelligent Portfolios. Wealthfront has one, Betterment has one, Vanguard has one. So there's a lot to choose from. Just know, if you give up on XYZ robo and move it to another, they're going to sell everything. They all say that they're going to try to look at your current ETFs and see if they fit in their they're all different. There's thousands of ETFs. They all use something different. If you move your accounts to another robo, they're going to sell everything or most everything.

• 34:10Speaker 03

  And you're going to have all these tax gains, long-term capital gains. That's a no-no. Now, if you're gonna move from one robo, and I'm not saying Schwab is bad or good, or the other one is better, the account to utilize of what he talked about was the Roth money because it would stay in a Roth account. There's no worry about taxes because it's all shielded under the Roth umbrella. That's where you could try out another investment solution for that particular account and you could avoid worrying about the tax side of it. That's how I would approach it if he's going to change. Secondly, the Schwab option is really inexpensive.

• 34:51Speaker 03

  Most of them have an annual percentage fee. Schwab's is different. It's either zero cost or I think the premium's something like 30 bucks a month. I don't use this, but I've read extensively about it. So it is a really low-cost solution. Part of the reason it's low-cost, they have to make up for it somewhere else. And because a lot of these brokerage companies are also banks, they're known to keep a fair amount of cash. Now, the cash is still invested. It's still a decent rate of return because rates are at a decent rate right now. But it is a high percentage. In fact, some of those portfolios I've read can go up to like 20, over 20% in cash. Now, you can pull it out, you can pull the cash

• 35:34Speaker 03

  out, but guess what? Next time they rebalance, they're going to rebalance to go back to where the cash was, probably. So you're not paying much in fees, but you're paying with the fact that not all your money's invested. So I still think if you're adding up all the variables, that's still a really good solution. It's giving you balance. There's so many different portfolios to choose from. I think it's worth exploring others. There's always other options. But I would not look at it for the brokerage account because there's going to be a huge tax consequence to do so.

• 36:08Speaker 02

  Okay. Bob in Florida says, because of the risk of someone getting into and cleaning out my Fidelity brokerage account, which contains about $500,000, I was thinking about opening, say, a Vanguard and/or Schwab account and spreading out my investments among the three companies. My concern is, will this create a taxable event? Or is there any way to simply change administrators of various mutual funds within my Fidelity account to other administrators such as Vanguard?

• 36:34Speaker 03

  Bob, look, it's a scary world. We're all worried about that.

• 36:37Speaker 02

  Right.

• 36:38Speaker 03

  So before I give advice on how to avoid that and not be worried about that, because there are millions of people that have millions and tens of millions in one institution, and they're not up at night worrying about it, getting cleaned out. That's part B. Part A is, if you do want to move and spread this out to other companies, you absolutely can do so, and you can do so with transfers in kind. So when you're moving financial institutions, you're using a process that moves stocks and ETFs as they are, so that those are called in-kind transfers.

• 37:21Speaker 03

  The cost basis comes over, the current shares come over, and you don't have to sell anything to move it typically to another account. Now, sometimes, if you've got proprietary funds at a particular company, I think he's at Fidelity, sometimes some of the mutual funds aren't held, or there's some complications around some of the proprietary funds going from one institution to another. Stocks, most mutual funds that are not proprietary, ETFs, bonds, almost everything can move as is. Once in a while, he can have some trouble with proprietary funds. But the way I would look at this is I would just make sure he's doing it in kind. That way he could open another account, another institution, not have to sell something in order

• 38:06Speaker 03

  to move it. Now, part B here is that we all have to be vigilant about our investment accounts, right? There are people out there every day, hundreds, thousands, millions of folks that are trying to access and get into people's accounts. Now, the big firms, which is Fradelli, Vega, Schwab, the big financial institutions have massive cyber teams that are always combating this. If you read about cases where people have kind of lost money, it's usually through human coercion or human error. Somebody says, hey, I'm from XYZ, your financial institution. Can you give me your password? Like, you should never do that. And these financial institutions

• 38:51Speaker 03

  are not going to call you and ask for your password. You should have dual factor authentication on your accounts. If you have accounts linked to, investment accounts linked to bank accounts, they should be in the same name so that they can't be moved to a third party. And you've got to be vigilant. You've got to be vigilant and know that when you're contacting your institution, they're not calling you and saying, hey, we've got an issue with your account. Can you help us log in? That's, that is a recipe for disaster. However, if you want to be super, if you, if you have the perception that it's safer to have it in other institutions, I'm not sure it's safer because now you've got, you're tracking different things and

• 39:36Speaker 03

  there's more entry points for people to mess with you. So I don't, I almost don't even like the thought of spreading things out just for that. I don't think it really helps. I think the vigilance, dual factor authentication, understanding they're not going to call you and ask for your password, or text you, those are the things that matter the most to keep the money in a safe institution. But if you're going to move, move in kind.

• 40:00Speaker 02

  Fantastic. And actually, one time years ago, I had an E-Trade account that had retirement funds in it, like quite a bit of retirement funds in it. And someone had, I used to check it every single day. I think this was before we even had to do a factor authentication. I luckily logged in every day because I logged in and saw someone had started to transfer all of the funds out of that account. And I caught it just in time. I was so lucky. No idea how they got the password.

• 40:28Speaker 03

  Oh, so somebody did get your password.

• 40:30Speaker 02

  Mm-hmm. Yeah. So have to be vigilant.

• 40:35Speaker 03

  This was more dual authentication.

• 40:36Speaker 02

  Right, right. This was years and years ago, but because I'm sort of anxious about checking my accounts every day, I was lucky in that case. I thought it was a little much that I used to do that, but I still do it, just to be sure.

• 40:48Speaker 03

  Right, and there's dual authentication where you're getting a text to your cellphone, of course, and then there's applications where you're getting this universal number that's linked to be able to log in. It's a real-time number.

• 40:59Speaker 02

  Pass keys, all sorts of stuff now.

• 41:01Speaker 03

  You have to use that.

• 41:02Speaker 02

  There's three-factor authentication now, so if you have that ability, use that as well. But that does it for us today on Ask an Advisor. Clark will be back tomorrow. Thank you, Wes.

• 41:12Speaker 03

  Thank you, Krista.

• 41:13Speaker 02

  This is great. I love doing this with you. I feel like this is a great compliment to everything Clark does. Your knowledge about investing, obviously being in the business, is invaluable to Clark's audience, so thank you very much. We will be back next week with a brand-new episode of Ask an Advisor. Have a great week, Wes.

• 41:30Speaker 03

  Thank you.

• 41:31Speaker 02

  Have a great day, everyone.

• 41:37Speaker 00

  At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones. Member SIPC.