Pod Insights The Clark Howard Podcast 07.22.25 Ask An Advisor With Wes Moss About this episode 10 Financial Myths That Are Costing You Money Are you falling for common financial myths that are holding back your wealth? Fiduciary financial advisor Wes Moss debunks 10 prevalent financial misconceptions that could be costing you big time! 10 Investing Myths That Are Costing You Money Plus, Christa shares your #AskWes questions and Wes gives his take. All this and more on the July 22, 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: BOOKS BY WES MOSS / Wes Moss, CFP® Learn more about your ad choices: megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices
Transcript 0:00 Speaker 00 With USAA, members can get up to 10% in savings by bundling auto and home insurance in one place. Quit adding up insurance providers, start adding up savings. Visit usaa.com/bundleautopro property to see how much bundling could save you.
0:14 Speaker 01 Restrictions apply.
0:20 Speaker 02 Welcome to Ask an Advisor. Krista DeBias here with the Wes Moss.
0:24 Speaker 03 Wes Moss. Hey Krista.
0:26 Speaker 02 Hello. We are going to talk investing as we do every single week on Tuesdays. Share it with a friend if you are subscribed to our YouTube channel, youtube.com/Clark and wherever you're listening. If you could follow the podcast, it really helps us out and share with a friend.
0:42 Speaker 03 All right. So we're going to be diving into a long list of Q and A today, which I love and kind of inspire. They're inspiring, I would say the questions are. Keeps me on my toes, makes me think. And today I wanted to just talk about investment myths. There's so many of them. I mean, maybe we probably do 100 of these, but really let's just do, I think 10 that just jump out. When I was sitting down, kind of thinking this through, these are like the first 10 I got to. I think I couldn't stop at 10. So I have a bonus one and another bonus one, but I think we're going to get to five right now. And then we'll do the other five a little bit later in this same episode. But let's start with 10 investment myths.
1:20 Speaker 02 All right.
1:21 Speaker 03 First of all, what gets said oftentimes can sound right and make sense. Of course that sounds right, but can be totally pretty misleading or mostly untrue. And that's why it's a myth. And there's a lot of them when it comes to the investing world, but most of these sound like good ideas and they sound pretty much right. And maybe in some instances they do apply, but for the most part, I think they mislead folks or they take people down the wrong path. So here are a couple of them and I'll say them as if they really are true. So number one is you've got to be rich or wealthy to really invest.
1:58 Speaker 02 Mm hmm. It's super intimidating for so many people.
2:01 Speaker 03 Number two, investment timing is everything. Really? How about this? Cash is king, especially in uncertain times. Of course that's true. Or is it a myth? Number four, bonds are, they're safe. Maybe sometimes they are, sometimes they're not. Myth number five, the stock market is like gambling. Who's gonna argue with that? Stock market is like gambling. Well, is it? So those are the five, and let's just talk these through. You have to be rich to invest. There was a time, and a lot of these have some legacy or anchor of truth. And then, and the world has changed, and we still hear something said 50 years ago.
2:43 Speaker 03 Well, isn't it still a way that you grow up and it kind of passes down to generation, generation? It sticks a little bit, but there was a time when it was only really wealthy investors who had a stockbroker on Wall Street that could afford to put extra money away and actually buy shares in a company. And that's just, that's just not true at all anymore. It's not for a select, super wealthy audience. There's been great democratization when it comes to investing, particularly in anything in the public markets. It used to be a hundred dollars a share to buy a stock, or 50, or ridiculous commissions. And then the big discount brokers came along and they went down to $50 and $25,
3:28 Speaker 03 then $15 and $12 and $9 and $0. So trading costs have been virtual eliminated. So you don't have to spend a lot of money to invest. You're investing the money and it's not necessarily, you don't have a big chunk going to someone else as a middleman. The online investment companies have totally brought down, have brought down the walls on not just stocks, but on all sorts of categories, stocks, commodities, et cetera. It even used to be true not all that long ago that to get into private company deals was only for the really rich. It's the hundred millionaires and the billionaires, and they're the only people that can get into the private markets. There have been a flurry of companies
4:09 Speaker 03 that have brought even private investing down to minimum investment here, a million bucks, if you want to get into this private company deal. There are several companies that brought that down to $5,000 or $10,000. So the walls of isolation for the super rich have been mostly destroyed. And investing is not just for the rich. Investing can be accessed by anyone that wants to really be an investor.
4:36 Speaker 02 Proven by so many people over the years, on Clark's birthday episode, so many people wrote in thanking him where they started with so little. I mean, that's just get rich slow, right? It's investing, dollar cost averaging and.
4:50 Speaker 03 It really, I've seen it work so many times. Folks not making a ton of money, saving a little bit, but they're doing it. It's not the fastest investor. It's the investor with the most endurance. Number two, time means everything. That, of course, time means everything. Would I rather buy a stock? Or get into the market when it's down 20% than up 20%? The answer is that timing can help, but is timing is not everything in the stock market. Participation is everything. So it kind of relates back to the first one. Participation is, first of all, you cannot ever have perfect anything when it comes to timing. The markets are too erratic. I mean, they will react on a headline, a word, a social media post.
5:33 Speaker 03 There's no way to ever time. If we thought it was hard to time it 20 years ago and 10 years ago, it's got to be even harder today. So erratic in any given day because of headlines and news and media. So timing can help you, but because we can't ever have perfect timing over and over and over and over again. You have to default to the, what I think is the next best thing, and that's participation. Meaning that as long as you're participating for large chunks of time, and we're talking about the general equity markets here. That's really what matters and that's what gets people rich. Timing is not everything. It may be something. But it is not everything in investing. Number three, cash is king. Cash is king.
6:14 Speaker 03 Every time there's a crisis, I think COVID, the housing crisis, even the tariffs earlier this year. And we're still in that world, but the market meltdown reaction to that. Invariably, you're going to have people come on television and say, I've been in cash and cash is king. Okay. You can't argue that you want to have some cash. But if you're an investor that is sitting out all the tough spots in the market in cash, the market leaves you behind. And when it recovers, you do not get that cash to work by and large, because the market leaves you, the cash investors behind. Cash over time as well has, it's been an okay rate of return, depending on which period of time you're looking at it. It's been 2%, 3%
6:57 Speaker 03 a year on average. That really barely keeps up with inflation. If you're a long-term cash investor, and of course, we need to have some cash and some safety money, but if that is your overall investment strategy, it's not going to keep up with inflation over time. So cash is not kidding. It's good in measured doses. For, bonds are always safe. Well, in some cases, really short-term, ultra-high-quality US government bonds, they are known as the risk-free rate. But there's a lot more to it than just short-term government bonds. There are intermediate-term and longer-term bonds. And the longer the duration of a bond maturity, so a 30-day bond, I would say that's
7:41 Speaker 03 very, very safe. A 30-year bond, that'll move in price as much as a stock will. Very erratic in price, because you're way out on the seesaw. And as rates go down, those prices can go up, rates go up, there's a long-term bond can go way down in price. Not to mention, the credit quality of bonds, and not every bond is going to have the ability to pay its owners back. If you have a company that's doing well, all of a sudden, it's not doing well, it could have problems paying interest and paying you back on maturity. So not all bonds are safe. Some bonds can be really safe. Some bonds can be really risky. Number five, the stock market
8:21 Speaker 03 is like gambling. In the really short term, I would say that is true, is that in any given day, the market is a gamble. We don't know, even if you have good earnings numbers, stocks can still go down. And you've, I think my company's going to do really well this quarter, and they do. Stock down 8%. So there is an element of, of risk and high uncertainty, a little bit like gambling in any given day, week, even in any given year. But over time, it's not that the house always wins. There's, there's not a house.
8:53 Speaker 02 Right.
8:54 Speaker 03 It's your money. It's your house.
8:56 Speaker 02 In fact, over time, if you're broadly invested, the house doesn't win, right? I mean, if there were a house, you win.
9:03 Speaker 03 Yeah, but implying that there's like somebody else wins like a casino.
9:06 Speaker 02 No, no, it's totally.
9:08 Speaker 03 Maybe if you, you think the big investment companies, they take rake money off of it. There's much less of that today.
9:14 Speaker 02 Like if you gamble in a, in a casino, you're set up statistically to fail. But if you dollar cost average your money and you stay in the stock market over a long period of time.
9:23 Speaker 03 The odds are in your favor.
9:25 Speaker 02 Your favor, right?
9:26 Speaker 03 Not the house. So it's the, in a lot of ways, it is the, if you're in it for a long period of time, which by the way, is the opposite of gambling. The longer you gamble, the more you lose.
9:34 Speaker 02 Yes.
9:35 Speaker 03 The longer you invest, the more over time we win. So it's really, that is quite a myth that stock market is like gambling.
9:41 Speaker 02 All right, and we'll go to questions. This one came in from David in Georgia. I have most, if not all of my investments or retirement accounts in mutual funds and would like to know where I'm in terms of allocation for my overall portfolio. Do you know of a free app or website calculator that would be able to tell me what the percentage breakdown of my portfolio is in terms of stocks, bonds and cash?
10:03 Speaker 03 Okay, this has changed a lot over the years too. So David's in mutual funds. Where can you get analysis? There was a time, I mean, I don't know if this was 15 years ago. I remember Morningstar, which still does a great job of what you're doing. So what David's trying to do here is if I've got 10 mutual funds or five mutual funds, and they all have different stocks and they're, all those funds are different. Wouldn't it be nice to be able to see what the whole pile looks like? Top 10 holdings, overall yield, if there's a bond portion to the allocation. What's the duration? Is, are the short-term, intermediate, long-term bonds? What's the duration of those bonds? I've got seven different funds, but what are really the, if I opened up the hood, what are the holdings?
10:46 Speaker 03 And there, there are tools that will do this. The, there was a time, I remember you didn't even have to sign up. You could just plug these things in and get a nice report. That is not the case anymore. So the yes, there are some free sites, but everyone that I've ever checked, you still have to sign up and make an account. So Empower does this, Sigfig does this, Morningstar still does this, but you still have an account. So and the reason you have to have an account and you have to either type in or upload your holdings and then you can get this great report that shows everything David is looking for. The catch is that they're going to be calling you and dripping on you because they're looking at your assets too, and they want you as a client.
11:31 Speaker 03 The one way I think around that would be maybe you sign up for a month on something like Morningstar at a really nominal fee for the month. Utilize the tools and you don't have to keep being a subscriber the whole year. Now there's one more way to do this. And this is pretty much brand new in the last year. And I would say again, pretty much no cost. If you already are using artificial, if you're already using an LLM like perplexity, Claude or GPT. It's remarkable at how they can x-ray different ETFs, different mutual funds for you. And what you used to have to use a service for, you can ask a language model or and use AI and get everything you're look, almost anything you're looking for.
12:16 Speaker 03 Here are 10 funds, you can get the duration, the yield, top 10 holdings, top 25 holdings, average market sizes, industry sectors, all through just using AI.
12:27 Speaker 02 Wow. All right. Here's a question from Daniel in Iowa. I've heard the saying comparison is the thief of joy. This saying sums up how I feel about my retirement savings when I listen to financial podcasts and I hear about people half my age with more money than I'll ever be able to save. For context, I'm 43, I make $50,000 a year. I have around $110,000 in my Roth IRA, 110,000 in a brokerage account, and 15,000 in my company 401k. I'm able to max out my Roth IRA every year and plan to do so with the catch up after age 50 until 66 or so. Contributes 16% of my pay to my company 401k with a 50% match up to 6%.
13:10 Speaker 02 I've looked at all the retirement calculators and to be honest, I'm not sure I believe them when most say that I will have about a million to one and a half million in savings by age 66, based on a 7% return. I know that isn't a lot of money, but it probably enough to retire. But that being said, what would you suggest to avoid comparing what I have to what others have and not feel like a failure when looking at what others have done in a small amount of time compared to what's taken me years to save this much?
13:38 Speaker 03 Daniel.
13:39 Speaker 02 I bet a lot of people feel like that. And doesn't Daniel have more than most people will ever have right now?
13:44 Speaker 03 Daniel, you're way ahead of what you think.
13:48 Speaker 02 Yeah.
13:48 Speaker 03 And now, I don't have this perfectly memorized in my brain, but the Federal Reserve does this survey of consumer finances and you can go in there and I think the last time they updated the historical version that you can use is 2022. So it's been a couple of years, but in the category that goes, I think it's 35 to 45, you're double the retirement savings of a lot of people. So you may feel like you're behind, but you're ahead when it comes to the average. And I think you're probably four or five X above the median. Remember, the average is always going to be higher because, and this goes back to,
14:29 Speaker 03 and I love this, comparison is the thief of joy. You're so right about that. So I'm even playing into that by saying, well, you're actually, if you really do want to compare yourself to America, you're way ahead when it comes to the median number. You're way ahead and you're even ahead when it comes to the average or the median. Now, we just compared. So that's the thief of joy. So I shouldn't even have done that, but I just, that's the reality.
14:53 Speaker 02 Well, I think in this way, it's probably a good positive thing.
14:56 Speaker 03 You're doing really well. And I'm not, based on looking around, but the only thing that we see, all we see are home runs. Nobody writes about singles and doubles. I read an article recently about three friends that started a chicken truck in LA.
15:15 Speaker 03 One was a stand-up comedian and it was his idea. I've never done any, like, just not a business guy. $900. They started with $900. They sold three meals on their first night. It was like the hot chicken. I can't remember the name. Dave's Hot Chicken, something. Now they have 300 locations. They did 7, 600 million in revenue and projected to 1.2 billion. Just got bought by a private equity firm for a billion dollars.
15:39 Speaker 02 Wow.
15:40 Speaker 03 That's a story.
15:41 Speaker 02 Mm-hmm.
15:42 Speaker 03 Are they gonna write about Daniel who's, you know, saving 7% a year in his 401k? I guess. We're talking about it. But the world is full of home grand slams, really grand slam stories, not singles and doubles. The reality is 99.9% of people that are going to end up wealthy are gonna get there through the singles and doubles, singles and doubles for a long period of time. That doesn't count. So you're also comparing yourself to people who get inheritance, people who can get lucky, right place, right time. Imagine if you were even the first 1,000 people that worked at Facebook. Well, those people are all multi-hundred
16:24 Speaker 03 millionaires because they happened to work at a company that mushroomed and was a mega grand slam. So those numbers skew the averages because there's a few of them that have a ton of money. And that's just not the reality. That is, it's possible, but the vast majority of people are not in those situations.
16:43 Speaker 02 I would also say he's comparing himself to other listeners of financial podcasts who are making it on the air. And I mean, I'm stunned. I've worked with Clark for 28 years. I'm stunned by what I hear some people have accumulated at their ages too. I mean, you're, people who are listening and writing into financial podcasts are really, really tuned. They're engaged and they are doing everything they can. And so that's definitely skewed too. I love listening to it because it inspires me to do more, but I definitely don't feel like I need to be Clark or them. I just do the best I can for me. And it sounds like he is on track and doing amazing with his salary, maxing out the Roth, all these things. I mean, wow.
17:22 Speaker 03 It would be great to do a survey and understand the average net worth of financial show podcast listeners to the general population. I bet you it's 3, 4, 5x.
17:30 Speaker 02 Super skewed.
17:32 Speaker 03 If you're listening to financial, radio, podcasts, television, watching, you're probably have saved double, triple, quadruple the population. That would just be my guess. But then we go back to, and here's why the numbers, the questions that we've been getting over the last year, they don't surprise me at all. When somebody writes in and says, I have $4 million or $5 million, I'm not surprised at all. Because anybody that's been listening to something like this for 25 years, they're going to probably get there. Maybe not 5 million, but Daniel, if you, those calculators, I've seen them happen in real life, over and over and over and over and over again. If you're maxing out your 401k,
18:11 Speaker 03 you're saving 10 or 20% a year, 500,000 bucks a month, at 7% a year, when the equity markets have really done much more than that over time. That's just the math. It's hard to see it when you're at 50 grand and 200 grand, but all of a sudden, you're at a million, and the market's up 20%. Now you're at 1.2 million, just made $200,000 in new net worth. It took you the first 10 years to get there, and it happened in a year. So that goes back to the compounding. It gets really evident in the later years. Hard to see in the early years, but you're doing amazing. And just have faith, keep doing it. The system will eventually work over time.
18:52 Speaker 02 All right. This is from Derek in New Jersey. Is a whole life policy a good way to plan for a special needs child? I have enough term insurance and am also contributing to an ABLE account. I pay $775 a month for a $500,000 death benefit with a long-term care rider. Am I better invest in cash in an index fund, or stay with the whole life policy? Of note, I am a high income earner.
19:17 Speaker 03 First of all, the ABLE account, which is a state account that I think in Georgia, it's stable, Georgia State, ABLE, stable. That allows for you to, you and family members to contribute a certain amount for someone that has a disability. So you're already doing that, which it sounds like for your son, which is amazing. If I'm doing some math here on $775 a month times 12, it's $9,300 a year you're putting towards a whole life policy. And if you did that for 30 years, you'd have contributed $279,000 to the policy. So that if you pass away, you get 500, if you contribute that long, you're putting in more than half of what you're getting back.
20:02 Speaker 03 And over a really long period of time, if you look at the internal rate of return on that, it's very low, really low. You'd probably be 50, 75, 100% higher if you were doing that same 775,000 and you were doing some sort of broad market index over the next 30 years. Now, we don't know the, I would say it would be much higher if you were investing that money in equities over time versus the most you can make, no longer the caveat, as he can't be here for it, it would be 500. It's certainly not in my book, a really good way to maximize your investment return over time. Now, there is some stability to that. And yes, you can borrow from the cash value in your whole life policy.
20:46 Speaker 03 So it's not all bad and all wrong, and it can serve some sort of role or place in your overall planning. And maybe it's even more important if something does happen in earlier in life. And that's why we buy life insurance so that your son is taken care of with that insurance money and your family. So I'm not saying it's a bad thing, but it's covering you in that shorter period of time.
21:09 Speaker 02 But isn't that what term life is for?
21:11 Speaker 03 Right. And that's why I don't do any whole life myself. I've always just done term. It's the least extensive way to cover the risk. And that's really what insurance, life insurance is all about, of you not being here to be able to continue to earn for your family. So I like to maximize the insurance for the least amount of cost, which is just term. And then you would have much more money left over to invest that. That's by term, invest the difference. That's the way I look at doing it. So may not all be wrong because you're doing a lot of different things here. You're doing the ABLE account, you're doing the whole life policy, but that's a lot of money to be putting in every year for a whole life policy when you could be putting it in markets over time.
21:52 Speaker 02 All right, we're going to take a quick break. And when we come back, you're going to get to the rest of those investing myths.
21:58 Speaker 03 Myths. What if a myth, if a myth is a lie, does that make it true? I don't know. When we come back, we'll find out.
22:05 Speaker 02 Okay.
22:07 Speaker 03 Welcome back to Ask an Advisor. I'm Wes Moss, along with Krista DBS. We've got some more myths to go through.
22:14 Speaker 02 I know. I'm looking forward to that. And I have more questions for you as well. And if you have a question for Wes or for Clark Howard, you can go to Clark.com/ask.
22:22 Speaker 03 You know, I guess a myth is just, it really is, it's not a lie necessarily. It's a story that people believe that's not fully true. And that's what these are. There, there is a little bit of truth to them, but they're not completely true. And they're, they overgeneralize. And I think that can be, that could hurt us as investors. So the number six on the list here, if the market goes down, you've lost money. If the market goes down, you've lost money. Sounds true. I should wait to invest until things feel better. Okay. Past performance tells you everything you need to know when it comes to investing. Real estate, real estate always goes up, doesn't it? That's a myth, of course. And then you need to beat the market to win. Wouldn't it be
23:07 Speaker 03 nice to beat the market? That's the only way you really win. Again, all myths. We'll start with the first one of the markets down, you've lost your money. So on paper, again, there's, there's partially true, you have less value in your investment account because of 100, goes from $100,000 down to $90,000. And we also know that one of the, the most popular benchmark, it's not the S and P 500, it is our own personal high watermark. That's what we're looking at as investors. So my account got up to $101,000. I'm always going to remember it got it to 101. So if it's anything less than that, if it's at 93, then I've quote, lost money in my, in my brain. And the reality
23:47 Speaker 03 Here is that very rarely will you ever be sitting at your high watermark. There'll be a day when the market, your account maybe makes a new high, or maybe another day it makes a new high, but it invariably is, is going to be dipping from that and then eventually catching up. So it's this escalator with lots of drops along the way. And if the market is down, no, you haven't lost money if you haven't sold, because a temporary loss does not mean it's a permanent loss. And that's why I think that is a myth. I've lost money. Well, not yet. You haven't sold. Stay invested to recover over time. I shouldn't wait till things calm down. It's the most, I hear people say that every day, every day.
24:31 Speaker 03 Should we just wait till these tariffs are all cleared up and everything's, we're not dealing with this mess anymore? Well, when it comes to equity investing, that strategy, it's almost the opposite is true. It's really, if you look at in the most recent big correction, the time that you really wanted to be invested, and again, I'm going against my timing myth here. But if you're really looking at markets were at their worst, or the best time to be buying, or not selling out at least, was when we had maximum uncertainty. Volatility index, when it peaked at 55 earlier this year, the markets have almost been, been up ever since as the volatility has come down. So if we're waiting for no more uncertainty and everything to be cleared up,
25:17 Speaker 03 you're missing those times to be invested when you get a rebound. So that's another myth. Past performance tells you everything we need to know. So there is something to this. Past performance, I think, does matter. Why is Warren Buffett so popular? Because if you look at his investment history, it's been tremendous. So that matters and that's should not be discounted. We invest in the S and P 500 because we see over the last 20, 50, 100 years, it's done about 10, 10, 11% a year. So that past performance matters, but. Past performance really does not predict future results all the time, particularly in the shorter run. And I've seen several studies that show five-star mutual funds that are
26:01 Speaker 03 five-star because they had really good performance that invariably dropped down to one or two-star funds because they had really good performance, but it's because they were somewhat in the right place, the right time. They were lucky in a trend and then the trend goes the other way. So when it comes to picking a particular investment, yes, I think a super long-term track record is helpful, but if you're looking at an active mutual fund and you're relying on a team to be picking stocks, it sometimes can even be the opposite is that they did really well, but it means now they're not going to do well because they were caught in a nice tailwind that can, and winds can change. Real estate always goes up. If you look generally
26:44 Speaker 03 over time, again, just like most investment assets, whether it's the stock market, whether it's gold, whether it's bonds, if you look over a really long, when I do this, I'm thinking about a chart. A chart like this doesn't really help. A chart like this really helps.
26:58 Speaker 02 So you had little hands chart like this and then big, wide.
27:01 Speaker 03 Big, wide hands.
27:02 Speaker 02 For those listening.
27:03 Speaker 03 Long-term chart I'm looking at is that real estate has been pretty darn steady in an uptrend. However, we've had some massive, we remember the housing crisis. The housing prices peaked in 2006 and they went down for almost two and a half, three straight years. Housing prices went down nationally 35%. That's the average house. And then we saw some towns were really bubbly cities like Las Vegas and Miami and some towns in California where we saw real estate prices drop by 50%, 60%, sometimes 70%. So there is this nice feeling of if I buy real estate, I own an asset and I get some utility out
27:43 Speaker 03 of it, but it doesn't mean that the prices always go up. They go up over long periods of time. That's something that we can count on, but in anything that's a year, two, three Absolutely. That's a myth and it always goes up.
27:56 Speaker 02 Sure. And if you, you know, you had the, the recent run up in real estate for so many people, you know, if you're new to the market and you see that happen, you might think, oh, this is a no brainer. But yeah, if you've been a long-term real estate investor or homeowner, you know that the ebbs and flows are real. And then the cost of owning a home, you have to think about that as well. A lot of times we don't think about that. The yearly maintenance costs, I mean, all the things.
28:21 Speaker 03 Property taxes.
28:22 Speaker 02 Yeah, the taxes. So.
28:24 Speaker 03 It'd be tremendous, which can outweigh the appreciation. Your property taxes can outweigh, so the cost of carry can be outweighed by the appreciation. Myth number 10, you need to beat the market to win. And this reminds me of one of our questions, I think, earlier today or over the last couple of weeks is, are people thinking, gosh, it would be if the markets does 10 and I can do 11 or 12 or 15, then that's really how I can win. And the reality is here, that's another version of perfection. It's almost the cousin of great, perfect timing is beating the market. Those cousins, they're not completely unattainable, but they're very unlikely that it's going to work out that
29:07 Speaker 03 way over time. You might beat the market in a given year or even a given couple of years, but it's really hard to continue to do that consistently over time. And you don't need to do it to win. When you do a retirement calculator, even though the stock market is averaged, call it 10%, a little more than that over a long period of time, even if you run those numbers at 7%, and if I think about just the mathematical rule, which is, well, how long does it take money to double to certain percentages, the rule of 72, you divide 7.2 into 72 and you get 10. That means if you're averaging 7.2% a year, just mathematically, you double your money in 10 years. And that leads to winning. Your 100 goes to 2, your 2
29:50 Speaker 03 goes to 4, and then your 4 goes to 800, and that's not with contributions. And that's only if you get that 7, 7.2% rate of return. So it's very realistic. To really win financially and you don't need 10% a year to get it.
30:07 Speaker 02 Okay.
30:08 Speaker 03 The quick bonus, which is my overarching theme is that happy retirement is all about money.
30:12 Speaker 02 Oh, yes. That's so true. I know that only because of you, because of all your.
30:17 Speaker 03 Happy retirement, either part of it is true, half of it is about money and the number one financial concern we have in this world. And it's tied, it's tied with number two, you would think would be number one. I would think number one is health.
30:30 Speaker 02 Right.
30:30 Speaker 03 Health and wellness. That should be number one. But in my recent research tied for number one, and actually even slightly higher, if I'm looking granularly is financial concerns.
30:43 Speaker 02 Will I run out of money?
30:44 Speaker 03 Well, that's even, that's a different one, but my overall financial concerns in retirement weigh on Americans just as much as will my health hold up? So money is really important just because it allows us to have comfort and a lack of anxiety and economic freedom and it allows me to do the things that I want to do, which is the other half of retirement, which is our core pursuits are our new purpose in retirement, which are all the things that we love to do. It doesn't need to be saving the world. It does need to be a full, robust schedule of the things you love to do and spend time to do it. And it takes some capital, it takes some assets to be able to do that. So money is an important part of retirement, but it's only half of the equation.
31:26 Speaker 02 I guess you would add on, and we don't have to go through it all. We've talked about it, but the happiest retirees, like you're saying, it's not really all about money. It's about those core pursuits, you know, everything about your life.
31:35 Speaker 03 It's important to have some level of money, but we get also diminishing marginal returns or happiness per new dollar at a certain point.
31:45 Speaker 02 I'm not even near retirement, but you've got me thinking about what pursuits am I going to have in retirement to stay happy?
31:51 Speaker 03 What core pursuits are you going to develop, curate and? Explore, so you want a bench of these core pursuits? And then what is your social network going to look like? Because those two components are social network, your family and your friends. Those three things, your core pursuits, your social network, family, friends. They cannot be understated. It is just as important as the money side of the equation.
32:17 Speaker 02 All right, we'll go to questions. Darren in Tennessee wrote in with this one. I professionally manage retirement accounts with Vanguard for me and my wife. The accounts include rollover 401ks, IRAs, active 401ks, brokerage accounts with cash, stocks, bonds, et cetera. We are still contributing every week above and beyond our 401ks. I get e-statements constantly that I don't have time to read. Total in the accounts is excess of $4 million. My question is, should I have someone audit my accounts every once in a while? Hopefully they're like a bank and they rarely screw up. What do you think? Am I asking for trouble?
32:53 Speaker 03 The short answer is no. You don't need to hire an audit firm or even a CPA to do this, but you should be looking at your statements every month or
33:04 Speaker 02 And Vanguard has an advisor you could go to too.
33:06 Speaker 03 Well, it sounds like he's in the Vanguard advisory program.
33:09 Speaker 02 Yeah, yeah, must be, right?
33:11 Speaker 03 So Darren, here's what I'm thinking is that first of all Vanguard, I've never heard of anything that's really, I've never known of a mistake or an issue with Vanguard. I just have not known that. And they, knock on wood, and I'm sure there are mistakes, but they're such a big asset management company. I would think if there is one, they will rectify it for you. And this is why you do want to pay attention to your statements. Think of this, if you're in the professionally managed group, and I don't know what you're getting charged for that, but let's call it a third of a percent is one fee that you could be charged. On $4 million, a third of a percent, it's approximately 12 grand a year. Now, it may be divided up in all your different accounts that are being managed,
33:57 Speaker 03 but if your fees are 15 and your accounts are at four, then there's something wrong. If your fees are 5,000 a year for the professionally managed fees and your account's 5 million, then Maybe I wouldn't ask them any questions.
34:11 Speaker 02 Right.
34:13 Speaker 03 But the, the reality here is that you really do want to have a general idea of the numbers seem to make sense. And when something starts to not make sense, that's when you make a call and you try to get a real answer. And, and that takes not really an audit firm to do so. I think that's you as an investor can go through and just make sure that the fees and charges in those accounts line up. You're able to log it. This is the other, I think, advantage today to see if something's off. We could look at our accounts every day. I mean, if the market's up 20% in a year and your account is down for the year, maybe something, there's something wrong or you're, and I don't, I think it'd be less about a mistake and more about some sort of miscommunication. Hey, I thought I was doing, I thought I was in mostly stock
34:57 Speaker 03 funds. Turns out I was in all bond funds and bonds went, were flat or down this year and stocks are up 20%. I think it's more likely that you would have a mistake. It's a miscommunication between you and the firm versus they're charging you some giant number that our money's leaving the account. Again, watch for all of that, but I think it's highly unlikely you're going to have to deal with it. More likely it's a miscommunication and that is why it's nice to be able to log in, look once a day, once a week, once a month, so that you know you're not off track.
35:31 Speaker 02 All right. Patrick in New York says, my wife and I are maxing out our 401k, but also contributing to a retirement vacations brokerage account. When we haven't any extra change to add, we're 35 now, so hoping to find a long-term portfolio for the money. Currently, we have about $42,000 in a Schwab Intelligent Portfolio Robo Investor, but after reviewing the performance, it looks like investing in just the S and P 500 would have significantly better returns. Plus, they keep a good chunk of assets in cash, $3,000 currently, which we don't love. My question, would you cut ties with all of the funds in Robo Investors, sell and reinvest elsewhere, or just keep that money invested with the robot and start fresh with a new
36:15 Speaker 02 brokerage account and try to earn better returns via good old fashioned, low-cost index funds? Not sure of the implications on liquidating a seemingly complex brokerage account. Thank you.
36:26 Speaker 03 Patrick, have you had the robo? Again, there's lots of different ways to be invested in a robo. There's 10, 20, 30 different ways usually. If you've had it for a while, you probably have a fair amount of gains. And I would be hesitant to close it down and do something else because you might have a bunch of taxes in order to do so. By the way, I love that you have a vacation brokerage account. How cool is that?
36:48 Speaker 02 I know.
36:49 Speaker 03 And it's already 42 grand. I mean, that's a lot of vacation. That's a lot of really nice trips, especially as you let that grow over time. So that's, first of all, I think it's cool that you're doing it that way. I love when people are bucketing money. It removes a little bit of our guilt when we want to spend it. Most of these robos do hold some cash. And maybe one way they make a little bit extra money, but most of them now, and I'm not talking in particularly here about the one you mentioned, but they usually pay you commensurate cash rates. So if rates are at 3.5%, usually your robo cash should be at 3.5% too. So it shouldn't be that it's just sitting there doing nothing. And that may be part of a strategic allocation,
37:29 Speaker 03 but it's not a balanced portfolio with some cash, which that's what, almost 7%? And bonds and US international, that's probably, there's really no way that would keep up with the S and P 500 because it's not the S and P 500. So over time, it's really hard for a balanced portfolio to keep up with a fully exposed, fully maxed out, no holds barred, stock equity portfolio. That's the whole market. And it's hard for a balanced portfolio to beat that. I wouldn't fold it down and pay a bunch of taxes in order to do something else. But what I would do, if you don't love this kind of an account, open another one and start contributing to that one.
38:12 Speaker 03 And then, yes, John Mogul, Clark Howard, Krista, we would all be proud if you're doing low cost index funds.
38:19 Speaker 02 All right. And this one comes in from Aaron in Ohio. I like to auto invest in VFI X in my Vanguard brokerage account, but it's not a smooth process to donate shares to my non Vanguard donor advisory fund, DAF.
38:34 Speaker 03 A DAF fund, yeah.
38:35 Speaker 02 I'm thinking of using a brokerage account somewhere else, but would it cost me more to purchase VFI X outside of Vanguard? I know that that fund and other Vanguard funds are tax like ETFs. Would auto investing in an ETF at somewhere like Fidelity or Schwab be an option? Anything else you would recommend?
38:55 Speaker 03 So again, a mutual fund is five symbol, five letters and ETF is usually three. So you can tell the difference between the two. You can usually, you can own these mutual funds that are, let's call it Vanguard in TWAB or Fidelity, there are most of those funds are all available, but you may end up with a transaction charge for those and that's usually 25 bucks or $30 somewhere in that neighborhood. So it does give you a little barrier to entry and the very easy answer to that is that ETFs shouldn't have that problem because ETFs are treated just like stocks and you don't have a commission or a fee to buy them. And there should be no reinvestment fee as you're reinvesting your dividends and there
39:38 Speaker 03 should be no problem when you're transferring, well, less of a problem when you're transferring money from an ETF to the DAF or the donor advised fund. Now it's, I think it's really simple to have a donor advised fund and a brokerage account in the same company. That makes it super easy. That's how I do it. So if you just go to an ETF portfolio versus mutual fund, you're bringing down the, the friction in the scenario of getting money into your donor advised fund. So I think ETFs are, are actually a really good answer.
40:13 Speaker 02 Okay. Well, that, that does it for us today on Ask an Advisor. Thank you for being with us. Hope you have a great rest of your day. Clark will be back tomorrow with a brand new episode.
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