It’s Episode 127 and the economic data just keeps coming in better than better. We literally had inflation dropping faster than anyone anticipated. Bank earnings came in better than expected. The numbers look good. Employment is strong. This week we have our colleague and Certified Financial Planner™, Courtney Garcia, We’re going to talk about what pitfalls may lie ahead in the economy, what you have to watch out for, and the mistakes you might be making that you need to adjust given where the economy is.
On The Tipping Point, we’re going to talk about paralysis by analysis. There are a lot of things stopping you from making the right financial decisions on your path to financial independence.
Investing is hard..
but it’s harder if you’re waiting for someone to wave the “all clear” flag.
The news seems to still be negative and yet the market is approaching an all-time high – climbing the wall of worry. But many people are missing out because they’re listening to the news where they’ve been calling for a recession for a year and a half now. But the chance of a recession is becoming less and less likely.
While people were waiting for the all-clear sign to get invested – they missed a huge upswing since the middle of October.
”.. you want to make sure you stay invested because usually when people are worried it's the best time to be invested.
Courtney Garcia
What’s in your portfolio?
We do 30-50 proposals a month, so we see a lot of portfolios and we see how other financial firms have set them up. It seems they talk about diversification, but that’s not what their clients are getting. When you look under the hood they’re heavily weighted in large-cap growth stocks.
”I mean, they don't believe in diversification. They sell it and then they invest their clients in one asset class.
Bob Payne
The Nasdaq 100 and S&P 500 are heavily weighted in a handful of stocks
Just 10 stocks make up 60% of the Nasdaq while 8 stocks account for 30% of the S&P. Tech has had this magnificent move and the hot money tends to go into what’s been working lately. But as a long-term investor, this can be risky and a mistake. That’s why diversification makes so much sense, not just to own other companies, but to own dividend flow, like REITs (real estate investment trusts) that pay almost 4.5%. Pipelines are yielding close to 6%. International stocks, 4%.
”I did a proposal for a prospective client a few weeks ago.. it turned out like 40% of his portfolio was in Apple because all those different funds had the exact same thing.
Chris Payne
People think they’re diversified, but they’re not
A lot of people don’t realize they may be disproportionately invested in one asset class. Maybe they may have several different mutual funds or ETFs with different names, leading them to believe their investments are spread out. But when you look under the hood you discover they’re invested in pretty much the same things.
”..those 8 stocks that have been leading this rally so far are taking up a majority of people's funds right now. And they have no idea.
Courtney Garcia
”it's kind of hidden everywhere.. tech in your portfolio. And you've got to diversify that risk because, we have an old saying, you live by the sword, you die by the sword.
Ryan Payne
The Tipping Point
Paralysis by Analysis
Payne Points
We have found that one of the challenges with managing people’s wealth and trying to set them up for financial independence is sometimes they just don’t make a decision at all. With so much information out there, it becomes paralysis by analysis. It can become very overwhelming with so many decisions to make.
”..people don't plan to fail, they fail to plan..
Bob Payne
Look at it analytically, not emotionally
There are so many decisions along the way on important things like:
- When do you plan to retire?
- Should you take social security early? Is it better to wait till 70?
- What about insurance?
- Should you have a more aggressive portfolio? Or a more conservative portfolio?
That’s why it’s so important to sit down and run through your financial plan.
”.. especially important with things like Social Security where there's a million different ways to take it.
Chris Payne
The decisions should happen throughout your lifetime
When you’re younger and you’re just having kids, you need to look at things like life insurance and employment insurance – things for protecting your family. Then as you’re heading into retirement, you have a completely different set of issues like Social Security, estate planning, and protecting your assets if the markets go down when you’re retired. And this is why it’s important that at every stage you continue to get this updated.
”You don't want to just put a plan in place and just start investing. It's something you need to look at every single year..
Courtney Garcia
Jargon and Information Overload
You would think that social media and the internet would be great resources where we can research things to base decisions on. But it seems to be the opposite. In fact, because there’s so much information and so much bad information, we find that people actually make worse decisions now.
And then there’s the jargon..
Our industry is just full of jargon and fancy terms. You can turn on the financial media, and it just sounds so complicated. It’s very overwhelming for anyone who’s trying to make decisions.
The bottom line is it shouldn’t be that complex and overwhelming, you should be able to understand what your plan is, it’s not rocket science.
”.. if it feels complicated, it's probably not a very good strategy..
Ryan Payne
Hidden Facts of Finance
AAA estimated that 43.2 million people traveled by car over the 4th of July weekend. That’s 4% above 2019. GasBuddy said a gallon of unleaded gasoline averaged $3.49. That’s 35% higher than in 2019. The American Farm Bureau estimated a July 4th party of ten cheeseburgers, pork sides and dessert came in at $67.72. That’s up 14% since 2019 and down 3% from last year.
Sports like sprinting, which requires speed, power, and maximum oxygen consumption, athletes tend to peak in their mid-twenties. In endurance sports such as marathons, the peak is typically reached around 40, and in tactical low-impact sports like sailing and equestrian competition athletes compete at elite levels in their fifties.
Elon Musk has said that Twitter’s revenue this year would be around 3 billion. That’s down from 5 billion in 2021. If Meta were to add an incremental 5 billion in revenue in 2024, basically the entire size of Twitter’s business, it would only boost Meta’s total revenue by less than 5%.
