Markets Don't Care If News is Good Or Bad: Q1 2023 Financial Market Outlook & Review

How is inflation like Star Wars, and can the Fed tame it? What happened in the financial markets in 2022 and why do they perform better when people feel bad? Is the classic “60/40” stocks/bonds asset allocation model broken? Pure Financial Advisors’ Executive Vice President and Chief Investment Officer Brian Perry, CFP®, CFA charter, AIF® addresses these questions in this webinar.

Outline

00:00 – Inflation is like Star Wars
00:28 – Intro
01:38 – Are We Headed Towards a Recession?
04:45 – The Federal Reserve’s Response To Inflation
08:03 – Gold and Cryptocurrency as Inflation Hedges
10:49 – Long-Term Investing Despite Short-Term Challenges: S&P 500 Performance
14:47 – The Risk of Over-Concentration in the Stock Market
16:28 – Diversification & Small Value Vs. Large Growth
21:38 – Markets Don’t Care About Good or Bad News
24:44 – Inflation Drivers
26:19 – Inflation and Star Wars: Nowhere to Hide
28:08 – Is Real Estate a Good Inflation Investment?
28:55 – International and Emerging Markets
30:59 – The S&P 500 vs. Tech Stocks
32:33 – The Best Way to Invest in Stocks?
35:46 – Dollar Cost Averaging vs. Lump Sum Front Loading
38:09 – Endowment Style Portfolios
39:20 – Schedule a Free Financial Assessment
39:36 – Brian’s Portfolio Performance in 2022
40:31 – 2022 Bond Performance
42:29 – The Yield Curve: Understanding Interest Rate Risk and Bond Investing Strategies
46:49 – Does the 60/40 Asset Allocation Portfolio Still Work?
51:16 – The SECURE Act 2.0: New Rules for RMDs, Qualified Charitable Distributions, 529 Plans – and New Tax Planning Strategies
54:47 – Schedule a Free Financial Assessment
55:18 – Bond Funds vs. Bond Ladders
56:44 – Strategies for Investors of All Ages and Those Looking to Retire Soon?

Transcript:

Andi: Next question is from Darth Trader. “How do investors reconcile how stocks, bonds and real estate have all gone down while inflation has gone up? How rare is that in history? Pharma and energy have been somewhat of a safe haven but there haven’t really been many places to hide.”

Andi: Thank you all for joining us for this Quarter One Market Outlook with our Executive Vice President and Chief Investment Officer, Brian Perry, CFP®, CFA. Brian, thank you so much for joining us today. 2022 was quite a year.

Brian: Yeah. What’s that old Chinese curse/blessing ‘may you live in interesting times’? We’ve got it.

Andi: Here we are.

Brian: Here we are. And there’s also I mean, to stay on that same theme, there’s a pretty common saying that crisis equals opportunity. And supposedly the Chinese symbol for crisis and opportunity is the same. I’ve heard it said- I used to trot that around during the global financial crisis in 2008, 2009, and eventually I read somewhere that it actually is not true. It’s pretty catchy, right? So we’ll stick with it. And I don’t know if last year was a crisis, but it was certainly a lot of volatility, a lot going on. And really the goal today is to deconstruct that a little bit, talk about what happened last year, and maybe more importantly, what may happen in the year ahead. And then probably most importantly, what do you do with all that information?

Andi: Sounds like a plan.

Brian: Yeah. And we broke it down. I figured, questions and answers -as you can imagine, we’ve got several thousand clients, $4,500,000,000 in assets. We meet with a lot of people and we get a lot of questions. And I kind of filter them and try to group them into several categories, which I’ve put together on this slide deck. But obviously, as questions come in, Andi, feel free to kick them my way. I think you know what’s in here so we can kind of keep it with some flow. But please, people, this is your dime. This is your 45 minutes or an hour. It’s hopefully a really good use of your time, and it moves you closer to your financial goals. And we want you to get as much out of this as possible. So let’s dive on in with the starter. What’s the outlook for the economy? Is there going to be a recession? And here’s the important thing is that there’s a really common rule of thumb, which is that a recession is two consecutive quarters of negative GDP growth. And you’ll hear that on TV and in the media, and you’ll even hear that from economists and talking heads and people that are in the industry. They’ll come out and they’ll say, hey, a recession, it’s two consecutive quarters of negative GDP growth. By that definition, we actually had a recession last year because in the first part of the year we had two straight quarters of declining GDP growth, right? But here’s the problem. As with a lot of rules of thumb, it ain’t right. There’s all kinds of rules of thumb out there in the financial industry. You’re going to spend less in retirement than you did when you were working. I say no to most of that. You’re going to be in a lower tax bracket in retirement than when you were working. That’s usually not true. And it’s also not true that two consecutive quarters of negative GDP growth qualify as a recession. The way recessions actually are determined is by something called the National Bureau of Economic Research, or NBER for short, right? And they date recessions. They say, hey, it started on October 1^st and it ended on January 20^th, or something like that. And the way that they define it, is it’s a meaningful slowdown in broad economic sectors that last more than a couple of months. And in general, they really look at several large categories of the economy. And you can see them here on this slide. You can see that there’s things like non-farm payroll, real personal income, consumer spending, wholesale and retail sales, these really broad measures. And what they look for is a sustained decline in the economy and in these measures. And what you see here is that in the last 6 months, there’s one that’s flat, one that’s down, that’s real wholesale and retail sales, and every other one is actually up. And so what this points to is that based on the official definition, the official determiners of a recession, is that the economy has slowed in the last 6 months. These aren’t really big numbers, but the economy has not entered into a recession. Now, again, we’ll see if the NBER comes out and names a recession at some point. I do think economic growth is slowing. That’s the goal of what the Federal Reserve has been doing is to slow the economy. But there’s no guarantee that we either have been in a recession, are in a recession, or will go into a recession. Also, and this is really, really important to remember, stocks are a leading indicator. So even if we do go into a recession, that doesn’t mean that stocks automatically fall off a cliff. Stocks historically have led the economy, so the stock market will sell off, then the economy slows down or whatever. So I think that that’s really important to keep in mind.

But why is the economy slowing down? Why are we worried about a recession? Well, the root cause is inflation, and what happens is that inflation increases. So then the Federal Reserve, which has a dual mandate, their job is to foster full employment and price stability, right? And when you get really high levels of inflation, you don’t have price stability. So the Fed comes in, they raise interest rates, and in doing that, they’re trying to rein in inflation and slow the economy. So let’s talk about inflation. I should probably pause here. Do you think anybody’s noticed that there’s inflation? I don’t know. I feel like if we had a live audience, I’d get a chuckle out of that. You’ve all driven your cars, you’ve been to the food store, you’ve gone to a restaurant. You’ve all seen what inflation is. It’s the highest in my life. I’m 48 years old. This is the highest inflation I’ve ever seen. You know, last time we had inflation at these levels, I was in the first grade and I don’t remember. So the highest inflation we’ve had for a variety of reasons, right? Part of it is COVID, the shutdowns and then the reacceleration, reopening of the economy. It’s the act of going out and saying, hey, supply chains, things can’t get shipped. It’s Russia invading Ukraine. And what that did to energy prices and commodity prices more broadly, all contributing to very high inflation. And then it’s the Federal Reserve. And I’ve talked about this in the past, saying that inflation is transitory and that it was going to pass. So even at the beginning of last year, the Fed was still stimulating the economy, even with very high levels of inflation, expecting that to pass. When it became clear that it wasn’t going to, the Fed finally took action and tightened interest rates.

This is a long term chart of inflation over the last 100 years. A couple of takeaways here. One is you can see these various spikes and dips over time. Two is look from here on over. So over the last call it 50 years or so, 40 years, how much more stable inflation has been? Much less in the ways of peaks and valleys as financial controllers. So the Federal Reserve and other central banks have gotten better at monetary policy. You’ve seen less spikes and drops in inflation, but then of course, you see the big spike here over the last couple of years. And here’s a more recent chart. Over the last 12 months, inflation peaking at 9.1% as measured by the Consumer Price Index. Back in June, it’s dropped to 7.1% as of November. So we have seen inflation come off its highs. Part of that is due to measurement. When you’re measuring year over year, if you’re measuring from a very high level, all else being equal, the rate of increase is likely to decline. And part of that is that some of the supply chain issues, some of the shocks to energy prices, have worked their way through the economy. My personal view is that inflation has probably peaked. I don’t think that we’re on the way back up. I do think we’re on the way to either stabilizing or heading back down, but I don’t think we’re going back to where we were a couple of years ago at 1% or 2% inflation. I do think inflation is a little bit sticky, although the Fed is doing everything in their power to stamp it out. One other thing is that this is the Consumer Price Index, or CPI. The Federal Reserve, their preferred measure of inflation is actually something a little more esoteric. It’s called the PCE deflator, the personal consumption expenditures deflator. And that’s what they actually use to measure inflation. The numbers in that system, or in that measure, are a little bit different. But the story is the same of very high inflation. It’s peaked, it’s come down a little bit, but still at high levels. But just as an aside, that’s what the Fed likes to look at.

So then we get questions around different asset classes, right? And let’s start with some of the traditional kind of “inflation hedges” and then the nontraditional inflation hedges like crypto, right? And bitcoin here as a proxy for crypto. The idea was a couple of years ago, is cryptocurrency and inflation hedge? Well, I don’t know what the long-term future holds, but I will say that we’ve got the highest inflation in a couple of generations and bitcoin is down 70%. Right? So if you’re an inflation hedge, if you get generationally high inflation and then your asset falls 70%, you’re probably not a real inflation hedge. Bitcoin has rallied a little bit from these lows of under $17,000. It’s up at $21,000, $22,000. This isn’t meant to bang on cryptocurrency or bitcoin. I still do think that there’s some value to the underlying blockchain and potentially to digital currencies as well. But obviously they’re a really volatile asset class and clearly not a one-for-one hedge against higher inflation. And then the one that’s been around for a long time is gold, right? Everybody, hey, I’m going to buy gold. Buy it for when the end of times come, I’m going to run to the mountains. I’m going to live on my gold. Have you ever tried to eat gold? It’ll chip your tooth, right? They put it in your tooth to fill it. You can’t eat it, right? If you have to run to the hills, bring canned goods and then don’t forget a can opener, right? But if the end of times come, gold, it’s heavy, it isn’t going to do much for you. Well then what about inflation? Hey, inflation. Buy gold. I was driving home the other day and had sports radio on, on AM or whatever, and they played a commercial and it was some gold seller. They were selling gold bullion and coins and this and that, and at the end they did that boilerplate ‘past performance is no guarantee of future returns’. And the SEC or whoever regulates financial people makes you do that to protect you so that you don’t show really high returns and say, hey, that’s going to happen again and again. In this case, my thought was, thank God past performance is no guarantee of future returns because the past performance of gold has been awful, right? It’s done almost nothing inflation adjusted over the last century. And here it is. You’ve got inflation at all time highs in the last 50 years and you see gold down, down, down, down, down, right? So again, this classic, it’s had value for thousands of years. It’s an inflation hedge. No, it ain’t. In fact, in inflationary environments, gold may not be a good investment because what often encompass inflation is higher interest rates. One of the problems with gold is that you have to store it, physical gold. Well, the more you store it, the more you have to pay. And a lot of times you have to finance that and the rents are higher. Also with gold, it doesn’t generate any cash flows. So there’s an opportunity cost and the higher interest rates are, the higher the opportunity cost of holding gold instead of like treasury bills or something like that. What about stocks? And before we get there, let me see, Andi, are there any questions on the economy or inflation at this point before I dive into the stock and bond markets?

So let’s talk about stocks. Do we have to? Maybe I’ll just skip over this and go to bonds. Except do I have to talk about bonds, right? It’s hard to find anything that I can talk about that has good news from last year. But the good news is simply this- by way of preview, last year was not a good year for most investments. But as those values dropped, it presented maybe some opportunities for better long term- to get to Andi’s question- long term returns going forward, right? So what about stocks? Well, here’s the last 12 months. Keep in mind these numbers are as of January 4^th, when I built this slide. But you can see kind of several legs down. And one thing you’ll notice here is not just that stocks measured by the S&P were at one level, and then they were at a much lower level. So down kind of mid double digits on the year, mid-teens, but also how volatile, right? You fell, you rebounded, you fell, you rebounded, you fell, you rebounded, you fell, you rebounded. So, extreme volatility last year in financial markets, which I think in talking to a lot of clients and a lot of the public, unnerved people, more than, for instance, 2020 with COVID where markets fell. I mean, the S&P fell about twice as much in 2020 as it did last year. But it was a very sharp fall straight down and then a sharp rebound straight up, which I think people can stomach oftentimes a little bit better than this ongoing volatility we saw last year. But you’ve all heard it said 1000 times, focus on the long term. Don’t worry about what happened yesterday, last week, last month, or even last year. What about the long term? So let’s bring the lens out a little bit. Let’s look at what might have happened over the last decade in stocks. Here’s the S&P 500 as of January 4^th over the last 10 years. What do you see here? Well, what you see here is a long upward trend. ,You see COVID, you see another long upward trend, and then you see 2022 and then some volatility, right? But here’s the deal. The S&P has gone from below 2000 to about 4000. So more than doubled and then some, probably doubled and a half in the last 10 years, despite- let’s think about what’s happened in the last decade. Just in the last several years, you had COVID. For the first time in all of our lives, we were told we couldn’t leave the house. We had a global pandemic like we haven’t seen since the end of World War I. A global pandemic, global economic shutdown. Not a slowdown, a shutdown. We’ve had insurrection in the capital, we had a really contentious election, and then we had one when Russia invaded Ukraine, the first real land war in Europe since World War II. And then we had a really, really bad year for the stock market. And yet, over the course of a decade, you’re up about 2.5 X. I think that points to how important it is sometimes to remove yourself from the day to day. Andi was talking about some of some of the things I’ve written, and one of them was titled Ignore the Hype. And by that, it’s like, ignore the hype, ignore the media, ignore all the noise. Pull out, go from looking at this and, oh my God, why would anybody invest? If that’s what you’re seeing? That just looks like, I don’t know, like you need heartburn medicine or something, right? Pull back the lens a little bit and look at this. Doesn’t look so bad. Even with the end here not being great, we pulled it back even further. The picture would look even smoother. Investing is all about probabilities, right? The stock market is up roughly 70% of the years in history. It’s up about 52% of the days. Right. So on any given day, it’s almost a coin flip for whether or not the stock market is going to be up. In any given year, you have about a 7 out of 10 chance of making money. As you stretch that time horizon out to 5 years, 10 years, 20 years, the probabilities increase. And all you’re trying to do when you invest is find strategies that pay off more often than not and then stick with them.

When we talk about stocks, though, it’s not just a stock market, it’s a market of stocks. And what we see all the time is people that over concentrate. I work in tech. I’m going to invest in tech. OOH, tech’s done the best. You can’t go wrong with Tesla. I love those cars. You know what, you could go wrong with Tesla and people did. It was down 73% last year. The Dow. The Dow was down 7%. Tesla did 10 times worse last year than the Dow Jones Industrial Average. I’m not banging on Tesla. I’m not saying don’t own Tesla. I’m just saying when you put all of your money in one investment, in one sector, these are the 7 biggest tech companies last year. On average, they were down by half. How many of you have a portfolio that was down by half last year? How close are you to your financial goals today if you were down by half? We’ll talk in a few, in a little while, about a 60/40 mix or 50/50 diversified portfolio, you’re probably down 13% or 14%, 15%. That’s not good. I’ve yet to have a client come in and high 5 me and say, Brian, I was down 15% last year. Great year. But it’s a heck of a lot better than 50%. 15% you can recover. 50% you’re working until you’re 105. This is the danger of concentrating. Now, granted, these stocks did great in the years leading up to the pandemic. It caused people to pile into them. But past performance, getting back to gold, past performance is no guarantee of future results, good or bad. This right here is a warning. I wish I could make these numbers flash red, but I’m not that good at PowerPoint. My producer is terrible. If my producer could do a better job, these would be flashing. Thank you, Aaron.

What about different kinds of stocks? What about large and small companies, value stocks and growth stocks? So if you look here across the top, these are large companies. Think McDonald’s. Across the bottom, these are small companies. And when I say small companies, I don’t mean the local taco stand. Large company, McDonald’s. Small company, Shake Shack. There’s a heck of a lot of Shake Shacks out there, but not as many as McDonald’s. Growth companies, Tesla would be a classic growth company. It’s selling a lot more cars every year, but you pay a lot for that growth. Value companies are much more boring. Maybe they’re not selling something exciting. Maybe Johnson and Johnson would be a classic example. It’s selling a lot of Qtips or whatever. What you notice is, very- first of all, all these numbers are negative. Last year was, again, was not a good year in the stock market. But what you see is it depended on what kind of stock you owned, what kind of returns you got. Large growth companies were down 29% last year. Large value companies were down 7.5%. Andi, I should have told you to put up a poll. Everybody raise your hands if you’d rather have down 29%. Now raise your hands if you’d rather be down 7.5%. It’s not a trick question. Small companies value down 14.5%. Small growth down 26%. What would you rather be down? Different kinds of stocks have different performance. Oh, by the way, when we see somebody- so we offer free financial assessments for folks, and they bring in, you know, their taxes, and we go through the tax return, and we can usually identify two or 3 things they can do to position themselves to generate more tax efficient income in retirement. And then we go through their portfolios, their statements, and we say, all right, here’s what your portfolio looks like. Here’s a few thoughts on how you might get more diversification. Because everybody we talk to, they want to keep their money safe, and they want to generate a paycheck in retirement, and they don’t want to run out. What do you think we see is that most people are concentrated in a particular kind of stock, one of these kind of quadrants. Most people are right up here. The average person we see has about 70% of their money up here in these large growth companies. They have about 1% down here in the small value and 2% in the mid value and so on, right? So last year, those portfolios were concentrated to do a lot worse. Oh, and by the way, not all the time. Again, in the years leading up to the pandemic, the large growth companies did better. So by having diversification when it’s time to generate a paycheck, in the years when large growth does well, you sell some large growth stocks. In the years when large value does the best, you sell some large value. When small companies do the best, you sell small. So you get that opportunity even as you’re generating a paycheck, even if you’re not contributing to your accounts anymore, even if you’re generating income in retirement, you can still sell high. Buy low, sell high. It’s one of the number one rules of finance, right? So if you’re retired or if you’re looking to generate income, having more choice gives you more options to sell high. The second thing is, if you’re accumulating, if you’re trying to make money. Well over time, which kind of these stocks do you think have the highest return? Do you think it’s the large growth, or do you think it’s the small value? The truth of the matter is, it’s the small value. Over the last 100 years, the last 90 years, I should say, the small value has outperformed the large growth by about 13 X. So if you had $1 and you put it in small value versus large growth, you would have 13 times more money. Up here, if you invested it all in here, $1 would have turned into about $600,000, which is really, really good. Down here, it would have turned into about $8,000,000, which is really, really better. If you take nothing away from this presentation other than this, $8,000,000 is a better number than $600,000 when you’re talking about your portfolio. What about the stock market? Again, it was volatile. This chart looks at every year. The blue bar is what was the annual performance? Again, you could see about 7 out of 10 years the market is up. This goes back to 1980, but there’s plenty of down years. And then the red dot is what was the low point of the year. What I want you to notice is that as far as my eyes can tell, not a single year is the blue bar lower than the red dot. In other words, every single year, stocks fell at some point. 100% of the time, stocks had a decline during the year since 1980. Also, 100% of the time, stocks bounced off of that low and rebounded. They might still have ended down, but they rebounded. Even 2009, stocks fell 38%, but at one point they were down 49%. COVID, you were down 34%. You closed up 16%. Last year, yes, you were down 19% on the S&P, but at one point you were down 25%. Stocks tend to bounce, right. This is why people like me are always telling investors not to panic. Don’t sell out, don’t abandon hope at the bottom.

Here’s the other reason, when do you think stocks do the best? Is it when news is good or when news is bad? Is it when everybody’s happy with the folks in Washington? And that’s a trick question, because when is everybody ever happy with the folks in Washington? It’s guaranteed. Half of you hate them, half of you probably feel lukewarm about them, maybe a couple love them, right. It’s not when there’s political harmony. The economy is growing just right, not too strong. Everybody’s got a job. You ever see a Disney movie and they’re always walking and somebody’s singing, they’re yodeling in the forest and birds are flying around and there’s a squirrel on their shoulder? Usually when that’s going on, the stock market is about to collapse. If life feels like a Disney movie, sell. Here’s when things do better, is when times are bad. This chart looks at consumer confidence. How good do people feel in America? And then what were subsequent 12 month returns? So, depending on how somebody, the public felt, how the market do the next year, what you see is that there’s 8 peaks when people felt the best. There’s 8 bottoms when people felt the worst. In the year following the 8 peaks, the average return was 4%. In the year following the 8 bottoms, the average return was 25%. Again, 25%. 3 X more. 6 X more- excuse me, than the peaks. Markets do better when people feel bad. Why? When things are good, when you’re living in that Disney movie, everybody feels good. Everybody’s buying, everybody’s already invested. There’s nobody left to buy. And markets don’t care if news is good or bad. Let me say that again, because it’s a really, really, really, really important point, especially when you look at the world today. The financial markets don’t care if news is good or bad. What the financial markets care about is, is the news better or worse than expectations? The news can be bad, but if it’s less bad than it was last month, the market is going to go up. Why do you think stocks have, for the most part, rallied over the last couple of months? It’s not because the Fed isn’t raising interest rates anymore. It’s not because inflation is not high. It’s not because people aren’t worried about the economy. It’s because all of those things are less bad than they were 5 months ago or six months ago. Markets don’t care about good and bad. They care about better and worse. When people already feel really bad, the bar to do better for better news is much lower. Even I could hop over a really low bar. The Disney movie, when everybody feels great, now you’re talking about some Olympian trying to hurdle over it. That’s really hard to do. You can get really good news and it still disappoints. We’re going to shift to bonds, but before we do, any questions on stocks?

Andi: Yes, actually, we’ve got a number of questions that have come in, including we got a whole bunch on inflation. So let’s start at the top. “How much of a driver has federal government spending had on the rate of inflation and devaluing the US dollar?”

Brian: Yeah, probably not much to be honest. Pretty much every webinar we do we get at least one question on the federal deficit and federal spending. Things like the federal spending are not an issue until they are kind of thing. They usually reach a crisis or inflection point at some time and then it becomes an issue. To date it hasn’t really driven markets. The primary drivers of inflation again are coming out of COVID, supply chain disruptions and then supply side spikes from Russia and Ukraine I think are the primary drivers as well as a Fed that was behind the 8ball. Much more so than government spending. Obviously some of the government stimulus packages were sort of like fuel on the fire. I don’t think they were the root cause. But some of the spending not so much early in COVID but later in COVID I think contributed to it. As far as the devaluation of the dollar, the dollar hit the highest level in 35 years last year. So the dollar hasn’t been devalued. The dollar- actually I went to Europe last summer and the dollar was at par with the euro which it hadn’t been in years. And if you look at the dollar index it hit the highest levels last year since 1985. So most people around the world, most governments, including the US and most investors honestly, would like to see the dollar decline a little bit, soften a little bit and frankly for US investors that are globally diversified it would help performance. So the dollar has been stellar despite maybe perception.

Brian: Yes, it’s kind of like- we’ll continue the analogy, right? It’s kind of like the rebels trying to hide on that icy planet and then Darth Vader and his gang finds them and bombs the heck out of them and they have to run away again. There’s no place to hide. You can’t go to some ice planet and live there, what are you going to do? Right? Then they tried hiding in the jungle with the Ewoks and that didn’t work out. They kept coming and coming. All right, enough of the Star Wars analogies Darth Trader. I think that- look, is it pretty unusual? Yes, but there’s a cause and effect thing. What happens is that in the short-term inflation tends to drive everything down, right? Particularly when it’s unexpected inflation. And remember again back a year, 18 months, there was debate over whether inflation was transitory or not, and it turned out not to be. When inflation surprises to the upside, especially by a large amount, in the short run, it tends to drive everything down. You saw that in the 1970s and whatnot as well as obviously last year. So then you see stocks and bonds fall in real estate as well. As you start to stretch out the time horizon, I think that’s where there becomes a little bit of hope is that, again, markets normalize and prices normalize for inflation. And then companies with good earning power, real estate projects with good cash flows and even some bonds as those yields reset, become more attractive investments. But anytime you get a sharp spike in inflation, pretty much nothing’s going to do well.

Andi: Learned something new we did. Brian Perry is a Star Wars fan. “Is real estate-“

Brian: Not a big Star Wars fan. I know enough. I mean, it’s hard not to know Star Wars, right?

Andi: That is true.

Brian: But once again, I have days, they have lightsabers and stuff.

Andi: Next question is, “Is real estate a good investment during inflationary times?”

Brian: It depends. Again, it depends on a lot of things. What is your goal? If your goal is to flip the property, maybe not, because look at what’s going on with real estate right now. It’s really tough to argue that prices are achievable, especially in the single family space for the average buyer, just with mortgage rates where they are and prices where they are. If you’re looking at cash flow, it could be. Assuming you’ve owned a good property in a good market where you have pricing power to raise rents, it can be a good inflation hedge. But again, I think it depends on what you’re trying to accomplish. If you think inflation is going to stay high for a decade, then, yeah, I think anything that generates cash flow that you can reset on a regular basis is probably as good of a hedge as you’re going to find.

Andi: All right. And our next question is “What’s your take on international and emerging markets versus the US market going forward?”

Brian: Yeah, really good question. I love international markets right now. We’ve finally seen them- and this gets back to the question about the dollar, too. International markets have underperformed the US for a number of years and these things go in really long cycles. The current cycle of US outperformance is longer than most. And there’s really two main factors. One is if you look at the companies that have been driving markets, again, not last year, I already showed the performance of them, but in the years prior, financial markets have been the big tech companies, right? And the big tech companies are mostly concentrated in the US. And there’s more of a weight in indexes in the US to tech than international. So as tech outperformed, that drove the US to do better than international markets. And then the dollar, despite perception, has actually been very strong over the last 5, 7 years. And as it’s been strong, that hurts the return for US based investors buying international stocks. As we’ve seen those trends reverse, as we’ve seen tech underperform, and as we’ve seen the dollar soften over the last 3 or 4 months, you’ve seen international returns pick up. I also think Europe has been helped out by a relatively warm winter where there’s a lot of fears about their energy prices and what that will do to the economy given Russia’s invasion of Ukraine, relatively warm prices have given them a bit of excuse me- relatively warm weather has helped them out a little bit there. And then certainly in emerging markets, China reopening and moving away from their zero COVID policy has helped. I think the biggest factor is this, is when you look at valuations, right? I mean, just let’s take it as a given that there are great companies in the United States and abroad, Toyota, Nestle, Samsung, etc., to foreign companies, right? But when you look at valuations, relatively speaking, they’re much, much lower in foreign markets than they are in the US. Which makes me quite optimistic. Again, I don’t have a crystal ball as far as what’s going to happen next month, but I would definitely, for most people, recommend a global allocation right now. I think that will serve them well in the years to come.

Andi: We have a challenge for you. Somebody says, “Is it valid to compare tech stocks over the last year while just previously comparing the S&P over 10 years? Like time frames seems to be a better comparison. Thanks.”

Brian: Yeah, no, I think that’s a fair question, but I think let me step back and just reclarify the point I was trying to make. The point on the S&P was showing the one year and then the 10 year, just to say that, hey, you want to invest for the long term and not get too hung up in recent performance. And then, yes, I showed tech performance just for the last 12 months. But the point I was really trying to make was not that you shouldn’t own tech because it did bad last year. It was more around concentrations in portfolios, right? That if you’re going to concentrate and put 70% of your portfolio, or 50% in one company or one sector or one market, you need to really be able to withstand substantial volatility because it could go up a bunch. It could also go down a bunch, right. If you don’t care, if you’re 22 years old and you’re just going to close your eyes, throw all your money in it, and no matter how much it falls, you’re going to keep buying and you have conviction, then so be it. A lot of people aren’t in those circumstances, and if they see a 50% decline in their portfolio, they might abandon ship. So the point wasn’t that they haven’t been good investments for the last decade, that they won’t be good investments in the future. In another year, if this was 2009, I would have been showing that same chart, but I would have been showing banks, right? I would have been showing the performance of JPMorgan and Lehman Brothers and stuff. So it wasn’t a single out tech, it was more to beware concentrating in an industry. But I do like the challenge.

Andi: The next question actually refers back to something that you mentioned just a moment ago. “What’s the best way to invest in stocks? Single companies stabilizing or what?”

Brian: Yeah, the best way to invest in stocks depends. It’s kind of like asking me what’s the best way to redo your kitchen? I mean, what are you trying to accomplish, right? There’s individual stocks, there’s mutual funds, there’s ETFs, there’s direct indexing, separately managed accounts. Those are all vehicles. And at the end of the day, a vehicle is just a means to an end. So it really depends on what job. They all have, their pros and cons. As far as what’s the best way to invest, kind of like I pointed to, I think, a couple of things. One is we’re believers that most people should be globally diversified most of the time. And again, getting back to some of the relative valuations, I would say certainly right now. We’re big believers that people should have different kinds of stocks. So I showed the big, the small, value, growth, I think having those different types of stocks rather than being concentrated just in one sector or one type, both for diversification but also to take advantage of- it’s demonstrated through reams and reams of research around the world that smaller companies, less expensive companies and companies with higher quality balance sheets produce higher returns over time. And the research has won Nobel Prizes and it’s very, very compelling and thorough. So I want to tilt portfolios in that direction. But again, I don’t want to jump in with both feet just like I don’t want to be all in tech, I want to have some sort of balance. But those would be a couple of things. And then as far as vehicle, at the end of the day it’s really what you’re comfortable with and what will accomplish it. But the one thing I’ll say, and I think this is one of the biggest mistakes- I would throw out to everybody right now- answer this for yourself. Let’s take 10 seconds. I want you all to answer this. What rate of return do you require from your portfolio to meet your financial goals? That’s about 10 seconds. Have you been able to answer that? And if you can’t, why not? Because that’s the number one determinant of your investing, right? So if you haven’t run through your finances, looked at your future income and expenses, what kind of draws you’re going to need from your portfolio, kind of cash flow sources you have and been able to say, okay, I need to get X return from my portfolio in the coming years to meet my goals. Well, that’s where it starts. From there, what kind of stocks and where to invest, in bonds, in global. Everything flows from there. But what return do you need? And again, if you don’t know that question, figure it out. If you don’t know that answer, figure it out, because that’s where it all begins. Come talk to us. We’ll talk to you. We’ll give you some thoughts on that. But you need to know that or you’re never going to be successful, because you’re either not taking enough of a growth stance, which means you’re going to run short. It’s great. Hey, I’m going on vacation. I’m leaving from San Diego. I’m going to Disney World. And you run out of gas in Oklahoma. Whoops. Or you’re going to take too much risk. You’re gonna be like, oh, God, I need to I need to buy more stocks. I need to pile into- come on, I need to do this and that because I need to get 10%. Maybe you only need 5%. Now you’re up at night staring at the ceiling, oh, my God, my portfolio is collapsing. Because you’re taking more risk than you need. So you need to know what return is required to get where you want to go.

Andi: Excellent answer. You’re on fire today, Brian.

Brian: Boom. Drop the mic. I don’t have a mic.

Andi: Next question is- we’ve got a couple more before we get into bonds. “Can you please share any research you may have on long term returns, say 20 years, comparing dollar cost averaging throughout the year versus front loading investments at the beginning of each year?”

Brian: Yeah, that is an awesome question. I don’t have any kind of slides here. What I can tell you is this. Let’s circle back to what I said. Look at this chart, right? Again, what do stocks do most years? The answer is they go up. This is going back to 1980. What this means, if stocks go up most years, in any given year, you’re better off investing on January 1^st if the market is going to be higher on December 31^st rather than dripping it in each day or each month or something like that, right? So the math will tell you, I mean, I could cherry pick, right? I could say, hey, well, if I invested in 2007, I’d have been better off dollar cost averaging in instead of putting it all to work so I could find numbers that would support anything. But the reality is, because over time, stocks are an upward path, you’re going to be better off investing all at once in a lump sum versus dollar cost averaging. That’s what the numbers will tell you, all right? But of course, you’re not all robots. You’re not all C3PO. Going back to that well, right?

Andi: Perfect.

Brian: There’s emotion involved. And so I think it really depends on what you’re trying to accomplish and where you’re coming from. If you’re moving from one investment portfolio mix of stocks and bonds to another, put it all to work at once. You’re going like to like I mean, there’s differences. If you just inherited $2,000,000 or got a lump sum of some sort and you put it in, yes, the numbers will tell you that over time you’re going to be better off investing today versus dollar cost averaging. But you don’t care if you’re one of those times that the market goes like this. Now you’re scarred for life. You sell at the bottom, you’re beating, you’re flagellating yourself, oh, I was so dumb, why did I do that? Maybe dollar cost averaging makes sense at that point. The key though is this, dollar cost averaging only works if you come up with a plan and stick with it. I meet a lot of people- I’m going to dollar cost average. Okay, when are you going to start? Well, I don’t know. When things are more certain. They make one contribution, the market falls 2% and they don’t want to do it next month. That doesn’t work. You need to come up with a game plan and then actually follow it through or it’s not dollar cost averaging.

Andi: I got a couple of more questions that keep coming in.

Brian: They keep coming.

Andi: “Your thoughts about a strategic asset allocation for an endowment style portfolio in a taxable account needing about a 2% withdrawal for the current holder.”

Brian: I mean, that’s pretty-

Andi: Getting pretty specific.

Brian: I’m going to answer that really high level. And then if you want, let Andi know and we’re happy- we could talk offline because that’s pretty specific. When you start talking endowment style portfolio, essentially the connotation is that it’s got a more or less infinite time horizon. And so now getting back to the risks you can take, right? If I don’t need and you need a couple of percent a year, so you should be able to take a fair amount of risk. It really depends on what you’re trying to accomplish. But I would say in that portfolio, you can be pretty aggressive if you so choose and if temperamentally, you’re comfortable with that. I would want more stocks versus less. I would probably want more small companies, more value companies, because they have more expected return. I’d probably want more emerging markets because they have higher expected return. And again, depending on the level of assets, maybe I’m dipping into some alternatives where there’s some sort of illiquidity, but I’m getting paid for that illiquidity. I don’t need the money because it’s permanent capital. So I can surrender a little bit of access to my cash in exchange for hopefully higher returns over time.

Andi: And I’m going to put a link into the chat right now so that if you do want some more information, you want to talk one on one with somebody about your specific needs for your portfolio, you can go ahead and click that link and schedule a meeting so you can talk about it one on one. Got another question for you, another challenge for you, and then we’ll get into bonds. “How did your portfolio do last year?”

Brian: I was up like 50% or so.

Andi: Okay. The bond question, “With rates having been raised so much in the last years, seems to me that bonds may do well in the next several years. What are your thoughts?”

Brian: I like that because that’s a perfect, like, tee up the softball so I can go to talking about bonds.

Andi: There you go. Pitching it right to ya.

Brian: By the way, my portfolio was not up 50%. I was actually- so I don’t know exactly. I’d have to take a closer look. But I did a little a little better than the S&P just because I’m tilted similar to what we were talking about here. I try to eat what I talk about or what I cook. So I was tilted towards value companies, and because of that they did and I was also tilted towards international. And they did better, relatively speaking, than the S&P. So while my portfolio was down on the stock side, it wasn’t down quite as much as, let’s say, the S&P.

Andi: Right, let’s talk bonds.

Brian: Let’s talk bonds. I’m an old bond geek, right? So let’s talk bonds. Hence the Star Wars stuff. Right? So, yeah, rates went up a bunch last year. What does that mean going forward? First of all, let’s acknowledge just how bad last year was. This chart is really similar to the one I showed you with stocks. The bar is the annual performance. The red dot is how bad did bonds do during the year? But you’ll notice that almost every year has been positive. There’s only been a couple of negative years. Look at how much deeper the bar is here in 2022 for bonds than any other year. You dropped 13%. This is for the Barclays Aggregate. The previous worst year, you were down 3%, right? So you’re 4 times worse than in any prior year. Peak to trough, the market dropped 17%. This is just not a really bad year. It’s a historically bad year for bonds. A couple of reasons for that. One is interest rates obviously went up a bunch, like the question asked. But two is at the beginning of the year, yields were close to zero, so there was no income. There’s two components of bond return. One is the price movement. The other is the income. There wasn’t any income at the start of the year to offset the bond price movements, leading to just an abomination of a year, if you will. However, here’s a key thing, and there’s a bunch of numbers on this slide, but not all bonds are created equal, right? So look down here, I want to focus on- what is this? The column right in the middle, and it says Return 2022, and it comes down. Look at the difference at the top here between a two-year treasury that was down 4% and then a 30-year treasury that was down 33%, right. And this gets back to there’s not- just like all stocks aren’t created equal. All bonds aren’t created equal. The less risk you have from an interest rate perspective, the longer- the shorter the maturity, the less risk there is in your bond when interest rates rise. And so a two-year treasury, for instance, didn’t do nearly as bad as a 30-year treasury.

So one thing to consider is that when you invest in bonds, think about what type of bonds you own, right. How long are you investing? Look at the shapes, right? So these are the yield curves. So this is just plotting out in increments. Three months, one year, two year, 3 year, 10 year, 30 year. How long is the bond and then what is the yield? The blue line is the end of December from last year, December 31^st, 2022. The gray line is December 31^st, 2021. So a couple of observations. First of all, interest rates went up a bunch. You probably didn’t need me to tell you that, but there you go. I’m adding value. The second thing is, the gray shading is the range over the last decade. And what you can see is that we’re pretty close to the top of the range across the bond spectrum, right? So maybe that says, hey, compared to the rest of the last decade, I can get a lot more yield today than I could have at almost any point since 2012. That’s pretty good. I like that. The third point I want to make is this, is right now- you see this blue line where short yields are higher than long yields? That’s known as an inverted yield curve. And it’s relatively unusual. The shape at the bottom, this upside down fishhook, that’s what’s known as a normal yield curve. This condition exists probably 80% of the time. It’s always fluctuating a little, but this is the most normal. Where is this line steepest? That gray line? It’s steepest from, I don’t know, from 7 years in, 10 years in, right. And what happens is that if I go from two to 3 years and the line is steep, I’m getting a lot of extra return. If I go from 20 years to 21 years and it’s flat, I’m not getting a lot of extra return. What that means is you get more bang for your buck when the line is steepest. So most of the time you get the most bang for your buck in short and intermediate term bonds, you’re also controlling the amount of interest rate risk you take in your portfolio. That’s why we tend to suggest that people cluster their maturities in the short and intermediate term. When you get out longer here, you might get a little more yield, but you’re not often getting compensated for that. There’s a lot of built in demand for these longer term bonds as well from central banks, insurance companies, pension companies, which tends to suppress the yields. This is another way of looking at what I just talked about, which is the gray bar is the yield range over the last decade. The purple is the average over the last decade. And then the blue dot is where we are today. And we don’t need to read every line, but what you see is that most of these, the blue dot is pretty close to the top of the bar. So again, most kinds of bonds, you’re getting more return today than at almost any point in the last decade.

I like bonds. I’ll say it again, I like bonds. And I’m not ashamed to admit it. I got to be careful. I say that and people look at me dirty. But I like bonds. My name is Brian and I like bonds. You can get more yield for your bonds today than you can at almost any time in the last decade. You can get 3%, 4%, 5%. Last year was a painful one in the bond market, but for people that want income from their portfolios, it was nirvana. Think about the environment you lived in for the last decade where there was no income from the bonds. It’s really hard to meet your return goals when the bonds are getting zero. Now you can get some sort of return, right? That’s a good thing. This chart bears that out. All kinds of numbers on here, right? These are different kinds of portfolios, ultra short, short, intermediate, etc. Then the duration. So what’s the average maturity, how much interest rate risk, the current yield as of when we ran this at the end of the year. Then here’s some scenarios. What happens if rates rise 100 basis points, 50 basis points ,stay the same, fall, or rise? What you see is given how much more yield you have from bonds now, even if rates go up 100 basis points, shorter term bond portfolios are still getting positive returns. Rates could go up, you still get 5.5% from short term bonds or ultra short, 3% from short term. And even in longer term bonds, you’re only losing .5% or so, right? If rates go up 50 basis points, if rates are unchanged, you get positive returns. If rates go down 1%, you’re getting anywhere from mid single digit to double digit returns on bonds, right? That’s not a forecast, but the point is, the way bonds are positioned today, relative to 12 months ago, there’s a lot more income, a lot more return potential. And in most scenarios over the next 12 months, bonds are positioned to provide reasonable returns. Again, my name is Brian. I like bonds. I like international securities. I like diversification. I’d like it if I was popular at cocktail parties, but I say these kind of things and people run away. But it is what it is.

So last year, stocks and bonds both had a bad year and there’s been a lot of presses. Does a 60/40 portfolio still make sense? Let me caveat this heavily. I’m not saying a 60/40 portfolio is right for everybody. I’m not saying it’s right for most people. I’m just using this as an example. It’s a relatively common mix. But we have clients that are 100% stocks, clients that are 100% bonds, and everything in between. It’s all customized, right? But 60/40 is a common mix. It’s kind of a rule of thumb. And so there’s all this talk. Does the 60/40 portfolio still make sense? Is it dead? Well, a 60/40 portfolio is not the best approach. But before I get to something, look at this chart. So you get 2008 out to 2022, and then every year you have different asset classes stack ranked from best performer to worst performer. Let me pause and ask what the pattern is. Answer that for yourselves. Obviously we’re remote here, but what pattern is coming through on that chart? And if you see a pattern, by the way, if you’re wondering- if you’re actually seeing a pattern, maybe that time you went to Woodstock wasn’t such a great idea because there’s no pattern on here, all right? Just because something did good one year doesn’t mean it’s going to do good the next year. Just because something did bad one year doesn’t mean it’s going to do great the next year. Sometimes, like with real estate, well, let’s see an example here. Let’s see. Real estate in 2021 was the best. In 2022 it was the worst. But in 2014, real estate was the best. And in 2015 it was the best again. There’s no pattern, right? So the single best way to invest is to have a crystal ball. If you can predict what’s going to do the best each year, you pile into it. If you can predict what’s going to do the worst each year, you abandon it, right? But if you don’t have a crystal- first of all, if you have a crystal ball, why are you watching my webinar? Ask yourself that. If you have a crystal ball and you can perfectly predict what the market’s going to do, why are you wasting your time watching me right now? So I’m going to assume that none of you out there have a webinar. There’s 104 people on this thing. I’m going to assume none of you have a crystal ball. So then what do you do?

Well, look at the white chart with the white blocks with the line. That’s an asset allocation portfolio. That’s a mix of investments. So if you have a mix of all these things, what you notice is you’re never at the top. Bummer. But you’re also never at the bottom. Most people, what I found is if they’re trying to get to or through retirement, yeah, it’s nice to be at the top, but they don’t need to be. The problem is what they don’t want to be, what they cannot afford to be, is at the bottom. So if you can eliminate the bottom- uhoh, what did I do here? Breaking stuff- here can eliminate the bottom. You may not be at the top, but that’s okay. The fat middle will get you where you want to go. That’s why we recommend mixing different asset classes. As far as the 60/40, there’s a whole lot going on in this chart, but this is the performance of a 60/40 portfolio over the last 70 years. What I see here is that most years that portfolio was up, last year it was down 16%. Some other years it was down. Remember what I said earlier about investing being about probabilities? Find something that works and stick to it. If I have something I don’t know, you can count this, but how many up bars are there and how many down bars? If I get something that works most of the time, that’s pretty darn good. So to me, this where I don’t have a perfect crystal ball, but I know that some sort of asset allocation gets me the fat middle. Then this, which tells me that here is just a random 60/40 mix. This could be 50/50, 40/60, 70/30, whatever. The point being, a diversified portfolio, more years than not is up. Well, those two things tell me that

I don’t know exactly what the future holds, but some sort of diversified portfolio designed- here’s the key- designed to get me the rate of return I need to meet my financial goals. And again, you should know that number. What return do you need? Is going to be a good strategy going forward. Let me end on one more slide here and then we’ll take some more questions. Is what’s going to happen with my taxes? So we’re really focused here at Pure Financial on taxes- obviously investments, that’s what I’m talking about today.

We’re also extremely focused on taxes. And we had a big piece of tax legislation come out recently at the end of last year called the SECURE 2.0 Act. I’m going to touch on it really briefly. Like Andi said, we have a white paper on it. If you want information on any of this stuff, we usually charge several hundred dollars an hour to meet with people. Our time is valuable, but we also like to help people. And so if you want, having attended this webinar, to meet with one of my colleagues for free, let Andi know. We offer up free assessments where we’ll go through your tax return. We’ll identify some areas of opportunity to lower your taxes today. We’ll look for chances to reduce your taxable- your taxation of your retirement income down the road. We’ll take a snapshot of your statements. Again, we’ll look at your portfolio, make sure you’re not over concentrated somewhere you shouldn’t be, make sure you’ve got some weightings towards areas you should be concentrated in. We can take a look at your future cash flow. If you’re thinking Social Security or whatever, give you thoughts on that. Again, there’s no obligation to that, no cost. Usually we charge several hundred dollars an hour, but since you attended this webinar, we want to help you be successful. We’ll meet with you, fill out the form that Andi’s going to post. We’ll meet with you. We’ll run through you- through your finances with you, give you some thoughts on what you’re trying to accomplish, to where you want to go. Real high level on taxes.

The SECURE Act 2.0. Here’s a couple of highlights. This is another thing we can dive into you in that free assessment is some of the impact some of these things might have on you. One is that you can now take federal disaster distributions from your retirement plan and rather than having it count as taxable income in a given year, you can either pay it back over the course of 3 years with no taxes, or stretch the tax over 3 years. It’s similar to the old coronavirus distributions that they let you do. Oh, and by the way, given all the rain in Southern California, much of California across the board, much of California qualifies for this at this point. As you might know, there’s penalties if you don’t take your RMD. That’s why future planning for what your RMDs are going to look like, how to build tax diversification is so important. The penalty has been reduced and starting in 2023- so starting this year, if you were born in the 1950s, your RMD age increased to 73. A couple of years ago, it was 70 and a half, it went to 72. Now it’s 73. If you’re born 1960 or later, it’s now 75. Also qualified charitable distributions. So that’s a way, if you’re charitable, to put some or all of your RMD towards charity. It’s $100,000 limit now. It’s going to be indexed to inflation. And then starting next year, you’re going to be able to, for those of you over age 50, you can put a catch up provision in your IRAs. That amount that’s allowed is going to be increased. There’s also going to be a cessation of RMDs from Roth 401(k) Plans, which is a real benefit. And then- and this is important- for those of you saving for college, for education, 529 plans. You always have to be careful about how much you put in there. You don’t want to over fund it. You want to pay for college, but not get it locked in there where you can’t use it. There’s provisions now that some 529 plans can be rolled to Roth IRAs. So that’s something to look at as well. So that’s just a little bit on taxes. At the end of the day, with the goal being to build some tax diversification so you have money coming in from tax-free, taxable and tax-deferred sources at different tax levels so that you can control what tax rate you’re in, in retirement. Let’s do this. Like we said, if you want a free financial assessment, no cost, no obligation, contact us. We’ll set something up with one of my colleagues. Take a look at your taxes now and in the future, how you can generate tax efficient income. How can you build a portfolio without too much risk to generate that income? What kind of cash flow choices do you have? And most importantly of all, are you going to run out of money? People are more worried about running out of money than they are of dying. Are you going to run out of money? Do you have enough? And what rate of return do you need from your portfolio to get there? Again, let us know. We’re happy to meet with you. What questions do we have?

Andi: Okay, there have been a number that have come in. If you don’t get a chance to get your question answered before we have to wrap up in just a couple of minutes, go ahead and take advantage of that free financial assessment. All of your questions will be answered. All right, so I’m going to have to pick and choose here the best ones to answer before this ends. Let’s see. Getting to bonds. “Is there any benefit to holding a 7-year bond ladder versus bond funds if the duration of the fund is shorter than 7 years? Is there a breakeven time for deciding what to hold or not really?”

Brian: Yeah, that’s a pretty good question. So in general, you want your bond portfolio to have an average duration or an average maturity less than your time horizon. So if you’re like, hey, I need my money in 6 years, you want to have your average maturity less than 6 years. Maybe it should be 3 or 4, right? Because if that happens, even if rates go up, the math says that you’ll be better off regardless. In general, bond funds have some advantages over bond ladder. So bond funds get you more diversification. They often internally have lower transaction costs, lower bid ask spreads than you going out and buying or selling the bonds yourself. You can also, without getting overly complicated, you can roll down the yield curve. I don’t want to go into it, but that’s an important benefit. So a lot of times, just again, getting back to optimal versus the real world, the bond fund can be better, more optimal. Bond ladders are nice because they’re psychological comfort of knowing what you own, knowing when it matures. A lot of people, even if rates go up and the mark to market value of their individual bonds is declining, they don’t feel as bad because they know it’s going to mature. So it’s really, again, they’re different tools for different jobs. Either one can be effective. It’s really just your personality and what you’re trying to accomplish.

Andi: Okay, I’m going to combine these two into one. “How much of your recommendations apply to a retiree in their low to mid 70s? I assume they’re different from someone in their 60s or their 40s.” And then another question is, “What are your suggestions if somebody is hoping to retire in the near future?”

Brian: Yeah, I don’t think it’s dependent on age or retirement status. I think it’s really, again, it’s a function of sort of how much do you spend each year? how much money? and again, this gets back to- this is planning. You should do or talk to us, we’ll run through an assessment for you. But how much money do you spend each year? and what’s going to the impact of inflation on that over time? So how’s, how much are you going to spend next year? 5 years from now, 25 years from now? And then what kind of income sources do you have? Do you have pension, real estate, Social Security? Do you have decisions to make on any of those cash flow sources? If so, what’s the right decision and then what’s the shortfall? Or what’s the surplus? And then from there it’s like, okay, if there’s a shortfall, do you have enough? And how do you generate that income you need from your portfolio tax efficiently? If there’s a surplus, okay, well, eventually with retirement accounts, that income is still going to be forced out. So how can you minimize the amount of tax you pay in the future to either spend more for yourself or pass it on your heirs? Out of that process, you’re going to get to your required rate of return and that’s going to talk about what portfolio you should be in. Those things drive that decision. It’s not really so much- so the answer is yes, this all applies to somebody at 72 or 65 or 55 or 85, but it’s just how it’s going to apply. It’s going to depend on those factors much more than what your exact age is or whether you’re retired, frankly.

Andi: Once again, if you did not get a chance to have your question answered, go ahead and click that link that I put in the chat. Schedule a free financial assessment. For those that have been asking, yes, this has been recorded. We will be posting that in the next couple of days. So you want to keep an eye on your email so that you’ll see when that replay is available in case you missed anything you wanted to go back and review, anything. Brian, thank you so much for taking the time today. This has been a fantastic presentation. Hopefully everybody learned a great deal. And thank you all so much. Appreciate you joining us. We’ll see you again soon. Brian, thank you.

Brian: Thank you all.

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