Ep 34: Learning Through Uncommon Sense

On This Episode

At first glance, each of these statements seem like basic common sense that everyone agrees with. But when we look at the way people actually behave with their money, it seems that common sense is actually a bit uncommon.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: Hey everybody. Welcome in to the podcast. This is Retirement Planning Redefined with John and Nick. Hanging out with me talking investing, finance, and retirement. Uncommon Sense is going to be our theme on this podcast. I’ve got some statements here that I think all of us agree are basic common sense. But yet when we go to do these things, we tend to do the opposite. We act a bit uncommon. So that’s going to be good. We’re going to have a fun conversation with this and stick around. We’re going to jump into that. But first let’s welcome the guys in and see what’s going on. John, how are you, buddy?


John: Good. How are you doing?


Speaker 1: Hanging in there pretty good. We were just chatting before we rolled the tape here on the podcast. A little sleepy. The kids did not want to cooperate last night. But other than that, things are going good for you?


John: Yeah, yeah. Things are going well.


Speaker 1: Very good. Very good. And Nick, how are you, my friend?


Nick: Doing pretty well. We’re staying busy. The heat is starting to settle in, in Florida here. So although I’d say we had a pretty awesome spring weather wise.


Speaker 1: Yeah.


Nick: The humidity is starting to kick in. So kind of a realization that John and I were talking about the other day, that we can’t believe it’s already between COVID, chaos of everything going on, that it’s already almost halfway through the year, so.


Speaker 1: Well, 2020 was like the longest decade ever, even though it was only a year.


Nick: Yeah.


Speaker 1: And then this year seems to be hauling pretty fast. So it’s going pretty quickly. Hey, speaking of the weather, actually, how did the event go? Last time, we did the podcast, the prior one, we chatted a little bit about the golf tourney you guys were working on. How’d that go?


John: It went really well. We ended up having about 108 golfers total, which we were told for a first event would be excellent.


Speaker 1: That’s awesome.


John: We hit that goal. And we’re just finalizing the numbers. But it looks like we’re going to be doing some pretty, a good size donations to Pepin Academies and then Southeastern Guide Dogs. So we’re excited about that. And we actually, the winning team’s going to get a nice invitational jacket, so we’re getting them sized up. So they’re excited about that. That was kind of a surprise to them. So at the end we had a tailor there, and getting their sizes and showed them the jacket and they were pretty excited about it.


Speaker 1: Very cool. So are you guys hustling and bustling all through that? Did you enjoy the process of putting an event together like that? And would you definitely do it again?


John: Nick, do you want to take that one?


Nick: Yeah. It was an interesting sort of a learning process. It’s always, just like anything else, there’s a lot of collaboration. And so, a lot of people, a lot of bodies required. And it’s a first-time event, having to get everybody on the same page and organized. It was a little chaotic. But ultimately we chatted about this in our meeting afterwards. Ultimately, I think the experience for the people that participated was smooth. And if you ask them, they wouldn’t have even noticed the things that we did as putting it on.


Speaker 1: Right.


Nick: The feedback that we received was good. A lot of money went to charity. So all’s well that ends well.


Speaker 1: The hallmark of a good event then if the participants think it’s great and it runs smoothly, they don’t need not know about the chaos. Right. That’s the way you know you’ve done a good job. So very cool. Well, kudos guys. Glad to hear that. I’ll be looking forward to some final numbers later.


John: Yeah, yeah. We had a very good team all around. So it was a truly team effort to get it done, so.


Speaker 1: That’s great.


John: It was good to work with everybody.


Speaker 1: That’s awesome. That’s great. I’m glad to hear that. And definitely look forward to hearing more about that in the future. But for now, let’s go ahead and jump into our topic this week. Again, like I said, guys, I’ve got some statements here, some basic axioms that we all hold to be accurate. I think we all would say that that’s common sense. We all agree with it. But yet what you guys see and what advisors see all across the country, a lot of times with these is people tend to do the opposite.


Speaker 1: So talk through that a little bit, what you see and maybe some ways to counteract that. And we’ll start with a classic, which is the buy low and sell high. You’re not going to find a single person that disagrees with that theory. We do that. I don’t know, gas shopping, right? Gas has been going up. So you’re like, oh, hey, I heard it’s 5 cents cheaper over at this station, and you’ll go over there. But when it comes to investing, it’s almost always the opposite: If you are undisciplined or don’t have a plan type investor where you panic and you do the wrong thing.


John: Yeah. And I think the reason why is really emotion. Investing becomes very emotional because it’s your money, it’s your nest egg. You’re going to see it there. So when that dives into it just, it’s very hard to make easy decisions. And a perfect example is the pandemic in 2020 when it started in March. Stocks dropped very fast. I think over like a two or three week period, there was an almost 30 to 40% drop of the S&P, and which is a great opportunity to buy stocks cheap. But what we’re hearing from some people it’s, hey, should I sell? And then really it should have been, should I be buying more into it? But against the uncertainty, the emotions of not knowing what’s going to happen. A similar thing happened in 2008. With the bank and liquidity concerns, same thing here. Stocks were dropping. Good time to buy. But the thought process and emotion made people do the reverse.


Nick: Yeah. And it’s tricky because intuitively sometimes you look at what’s happening and oftentimes by the time that most people in general, kind of in the general public, notice what’s happening, a lot of the volatility’s already happened. So in other words, once they notice it’s really going down, it’s already gone down a bunch and once they notice it’s going up, it’s already gone up a bunch. And so tend to be late on both sides, which is not good.


Nick: And John and I will kind of joke with each other where I’m definitely the more emotional one out of both of us and he’s less so. And so, we absolutely understand the emotions of things, and even being in day-to-day, it’s important to understand how it is. It really just kind of goes back to having a plan. And that’s what we try to do even back in, when everything went down with the pandemic is bring everybody back to the plan. Make them realize that, hey, we’ve got a plan for these sorts of things. These are unfortunate times. But we have these things baked in for happening, and so we’re just going to hold the line.


Speaker 1: Well, I think with emotion being the culprit there, that’s why working with an advisor in a good team is helpful. I’m not going to say you guys are disinterested. You obviously clearly care about your clients and what you do for them because it’s very important work. But at the same time, you can’t approach it with a little bit less passion, I suppose, or panic than the person might. Because to your point, John, it’s their money, right? And you guys are going to do the very best that you can for it. But it helps you make, it helps you look at things a little bit more objectively, I guess that’s where I’m trying to go with that. So.


John: Yeah.


Speaker 1: That’s a good way to do it. So, that’s one. Let’s go with a second one here. Not paying any more in taxes than we have to. Well, that’s like a duh, right? Nobody volunteers to sign up to … I don’t think anybody’s standing out on the street corner with a sign saying, Let me pay more taxes, please. Yet, when you guys start to look at things and you work with an advisor and a CPA and they start digging into people’s financial and retirement situations, often we are paying more than we need to be. We’re not being as efficient as we could be, I suppose.


Nick: Yeah. And some of the areas that we’ll see these sorts of things are, and again, this will tie into the emotional decisions, which we definitely understand money’s emotional. But as an example, somebody’s retiring or getting close to retiring, maybe they’ve got 80 to $100,000 left on their mortgage and they want to cash out a bunch of money from retirement accounts, and just pay it off quicker in one fell swoop. And they may not realize from a timing standpoint, number one, the impact that a large distribution like that could have on their taxes. And then the snowball effect that it might have on costs of Medicare or different things like that. So, having a strategy and always going back to the idea of planning long-term and having different types of accounts that have different types of taxation in retirement, it’s really important.


Speaker 1: Yeah. I would agree with you on that because taxes, there’s all those little things like, it’s not what we make, it’s what we keep, so on and so forth. But there is a lot more ways to be efficient when it comes to, especially for retirees and pre-retirees, when it comes to taxes. And of course, everything we’re seeing right now with increased spending and inflation and so on and so forth, taxes is going to continue to be a really integral part of our retirement plan. So it’s important to make sure that you’re working with somebody who is taking that into account.


Speaker 1: And another important part of this is keeping costs low, guys. Like I said earlier about the gas situation or bargain shopping, pretty much everybody’s looking at buy one, get one free, or 50% off things. We look for these kinds of things in all aspects of life. But then again, when it comes to investing, sometimes we’re not thinking about that. You’ll have the person say, I want to keep costs low. And my guy or gal only charges me 1%, and they’re really not taking into account everything else, as well, right?


John: Yeah. That’s absolutely correct. Again, it can be taking into consideration from a common sense standpoint. But sometimes there are better times to buckle down on certain things than others. And ultimately you’re just trying to make solid decisions with the information that you have available to you. So, it’s anybody. You mentioned inflation. It’s always interesting with things like that because anybody that has gone to the grocery store in the last two years, they know that things cost more. And so it doesn’t when it’s not talked about in the media as much or whatever. They might talk about it with their friends or complain about it with their spouse or something like that.


John: But then when it starts being talked about in the media, it catches up. So ultimately, I think people know that these sorts of things have been happening. But now that it’s being talked about more, in general, and there are other assets that are tracked more from a consumer price index and those sorts of things, to actually show inflation is a legitimate thing. Especially with all of the money that’s been being printed for the last decade, really. Now it’s a good time to reassess and make some smart decisions to keep costs down.


Speaker 1: Yeah. No, definitely. There’s hidden fees in all those little things, and that’s actually going to lead into my next one here. For example, I’m going to pull a grandma-ism, guys. Another one of these axioms we hear is “don’t put all your eggs in one basket”. And I’m going to take this from the standpoint of people who have a lot of the same thing, they’ll say, John or Nick, I’ve got 10 mutual funds that I got from 10 different companies, right. So I’m “clearly diversified” and I’m not getting charged very much. And they’re completely wrong in both of those counts.


John: Yeah. We see that a lot in the 401k space because a lot of that is the people are picking their own funds and they’ll do stuff like that where they’ll pick six, seven mutual funds or whatever. And they say, hey, “I’m diversified.” But in reality, they’re all similar type funds. So for example, they all could be large cap funds. So what that means is when the market goes up, they’re all going to do relatively the same thing. Give or take some percentage points on which one’s performing a little bit better. When the market goes down, they’re going to do the same thing.


John: The whole point of diversifying is so that the portfolio has some zig and zag. So kind of sounds weird to say this, but in reality, when something’s going up, you want something else going down or not doing what the other investment are doing. And that actually comes down to proper asset allocation where you have maybe some large cap funds, and then you also have some fixed income funds and some real estate. So everything’s not the same type of asset class. And that’s really what you want to focus on. On really diversifying is not just having multiple funds, but having the right mix of multiple funds.


Nick: And even in addition to that, diversify from the perspective of taxes. You don’t necessarily, we feel, end up in retirement with only having pre-tax money that’s going to be fully taxed at whatever bracket that you’re in, in retirement.


Speaker 1: Mm-hmm (affirmative).


Nick: These good examples currently, there’s a decent chance and we’ve been talking about it for years, but there’s a decent chance that taxes will go up. There’s a price for printing money for a long time. Whether it’s cutting taxes and more spending, et cetera, eventually there is going to be a price for that. So having options from the perspective of pre-tax money, broth money, a taxable brokerage account, what that utilizes capital gains, all these sorts of things end up really paying off down the road.


Speaker 1: A lot of times that whole diversification conversation comes back into play with people. And often what you guys find, John, to your point, you were talking about that a little bit is that somebody who’s got a lot of the same thing. There’s just a ton of overlap. And typically, it’s almost always large cap or something. And if you think about this year, right, small cap was outperforming large cap in the first quarter. And maybe you don’t have enough here and there. And that’s that point of that having a little bit. That’s when something’s going up, something is going down. Most people just don’t truly realize that. They think, oh, I’ve got a target date fund; I’m groovy. Or whatever that looks like. And then what ends up happening for the last one is that you have people then turn around and say, ooh, I want to jump in on dogecoin, or whatever, because Elon Musk made a tweet. And then the next week he makes another tweet and the thing tanks. And so market timing is virtually impossible.


John: Yeah, correct. Ultimately, you can’t do it. It comes back to what we talked about earlier. When people are trying to time the market, it’s really emotional of saying, hey, when’s a good time to get in or get out. And this was something that we saw a little bit about, not necessarily so much with the pandemic, a lot of people stayed the course and maybe because it happened so fast. But with the election at the end of last year, either way we saw people that were trying to pull out and time it depending on who won the election on when to get back in.


John: And unfortunately it didn’t work out. And it doesn’t work … Either way it doesn’t work out because it’s always so hard to say, hey, now is the right time because as we saw, the market went up. And then it’s like, well, do I go in now or do I wait until it goes down? And you can find over the last five or six, seven years, if you’ve been waiting, you’ve been waiting a long time to get back in. So it’s always best to have a plan and stick to your plan and make sure that you’re invested correctly so you can just stay the course of what you’re trying to do.


Nick: And even further with that, ultimately, if you decide that you’re going to exit and try to time it, the time that you have to then get back in, is usually the most basically, disgusting time to have to do it.


Speaker 1: When it hurts.


Nick: It’s the most painful time. It’s the time of the most chaos because that’s usually where the bottom is. And so it’s really difficult to try to time that.


Speaker 1: Yeah.


Nick: In fact, we’ve had conversations with clients before where we say, hey, our objective is to hold the line. If you want to exit, we’ll exit for you, but you got to tell us when to get back in. We’re not going to exit at your request and then move in at our determination.


Nick: If we’re going to exit, then you also have to let us know when to enter back in. And so sometimes we’ve found that, putting it in that, in those terms, ultimately ends up helping people just decide to hold the line. Once they realize like, oh, well, I’ve got to tell you when to get back in? Then that helps them realize, oh, okay, I get it. Like, I’m probably not going to be able to do that. Or by the time that I feel comfortable enough to tell you, it’s too late.


Speaker 1: Yeah. You’re right back at that emotional sticking point, right? To your point of it’s typically it’s painful or it’s the worst time, or it’s just really uncomfortable to do it. And of course, you’re trying to be right twice in something that is super, super fickle. So again, these are all some basic common sense things we can all agree on. And yet we tend to do the opposite. And that’s where it comes into play to really work with a team who does this day in and day out to help us through those things so that we don’t trip ourselves up. As the saying goes, “We’re often our own worst enemy.” So do yourself a favor if you haven’t done so. Have a conversation about your retirement journey and some of the things that we’ve covered today on the podcast.


Speaker 1: Reach out to John and Nick. As always, you should check with a qualified professional before you take any action on anything you hear anyway on our show or any others financially-related. So reach out to John and Nick at (813) 286-7776. That’s (813) 286-7776. Or stop by the website, pfgprivatewealth.com. That’s pfgprivatewealth.com. And don’t forget to subscribe to the podcast, Retirement Planning Redefined. You can find all the information right there at the website. Again to subscribe on Apple, Google, Spotify, whatever platform you like. I’m going to sign off this week for John and Nick and myself. So thanks for hanging out with us here on the show, and we’ll catch you next time on Retirement Planning Redefined with John and Nick.