Ep 18: True diversification (Financial Safari)
Diversification in financial planning does NOT mean having multiple mutual funds. Coach Pete explains what safe, effective diversification really looks like.
This week's episode is brought to you by Capital Financial Advisory Group. For all your retirement needs. Today on the Financial Safari, we have best selling author coach Pete Derrota in house. We're going to be discussing one of his books. Have you been talking to financial aliens? Elon Musk will not be joining us. This has nothing to do with Space six, but it does have everything you need to know about your retirement plan and more right here on the program. So stay tuned all that more when we return broadcasting from coast to coast. It's the financial safari with your host coach, Pete the Rudolph. You'll hear from some of the nation's top financial professionals. So stick around and find out how to make it through the jungle of the financial world right here on the financial Safari. And welcome into the Financial Safari consumer advocate Thomas Lipscomb, here in studio alongside coach Pete Dorota. Better known as America's wealth, financial and income coach, he's a best selling author, winner of multiple Emmy. EXP telly and quickly awards. It's always honored to have you here, coach. It's funny you mentioned Elon Musk in the intro Well, Peter de Amanda's. There's a 33 Musketeers. We have Elon Musk, Richard Branson and Peter Diamandis. Now of those three, which one of you never heard off the individual? You just said Peter Diamandis. Alright, So he was the vision or he had the vision behind Space six. We hear about Space six. He came up with the original Space six. He called the X Prize, and he had a $10 million. I think it's 10 million needed five or $10 million prize. Think it's $10 million prize for the first private company who could launch a rocket, haven't orbit the Earth and land back on Earth safely. Really well. And so when I talked to Peter, he said he didn't have 10 minutes. Yeah, go out and raise money. They talked to Elon Musk, Richard Branson. They were some of the main benefactors of people that funded the X Prize on, and I. We did a movie with Pierre de Amanda's A about about four or five years ago. Now called the Visioneer, it's available on Amazon prime and division. Ear basically has its Peter Demons story because he's a guy you never heard of, and to me and I've talked to Richard Branson. I've talked to you on Musk. I think that Peter Diamandis is smarter than those guys. Well, I would never say that to their face, but he really is. It's amazing what he what he knows. He's got a mechanical mind that I can't understand, right? Sort of like in the financial world. I have a financial mind that he can't understand. So everyone's good and something. And Thomas. That's why many times when we talk to financial advisors, it seems like we're talking a different language. It seems like you're talking to someone from a different country, maybe even a different world. That's why we say, Have you been talking to financial aliens? I love it, is very creative. You're very creative guy coaching. And let's just dive on it because you answer a few key questions in the book that I thought would be perfect for our viewers out there as well. So I'm just going, by the way, Yeah, tell me we're going to give copies of this book out during the show, so when you call in and then you want to have your no cost consultation done When you leave, you're gonna get a three book set. This is one of the three books you'll get, as well as a box set that has a DVD workbook, guidebooks, worksheets about your 41 K called the 41 K Survival box Set. It is valuable, folks. Toe, Have this in your hands in your library. At home? Yeah, absolutely. I've loved developing these resources with you. You've helped me a lot on their their treasure trove. They really are just full of educational knowledge to stay tuned for that. Folks will be talking about that shortly. S so the first thing that I have for you here is a question that I think a lot of folks out there would be interested in because we talk about diversification a lot on the program s. So the question is this your answer in chapter three? What does true diversification mean? Thio You and how do you explain this to folks that you work with diversification? Let's start with their What does diversification mean to you? It means something different to everyone. One guy said diversification means to me having a bunch of different mutual funds, E said. Well, That's diversification on the risk side, maybe, but there's no diversification on the safe side or income for future future income. That is lifetime. The court explore philosophy. We talked on the show a couple weeks ago about the core and explore philosophy. So diversification is just making sure you don't have all your eggs financial eggs in one financial basket. Okay, so talk to me about this because you mentioned mutual funds, and I think a lot of our viewers out there think, Well, I have a mutual fund. It's got these 12 stocks and and even more than that, I've got six mutual funds here, however many it is, so I feel diversified. Why? Why is that? Not people all know about their mutual funds. They know that they're in certain stocks. Hopefully, you dio, but there's a bunch of underlying stocks, so they'll tell you the top 10 holdings many times. We don't tell you about everything else. And so what we've seen in a bunch of different mutual, and so when someone comes in with a bunch of mutual funds, first thing we do is we analyze the mutual fund for you. We look behind the scenes and places you might not know where to look, to find out what's really in that mutual fund. So, like tomato sauce, if you went to the Tony Soprano's house, he wouldn't tell you what's in the gravy, right? They call the tomato sauce gravy right here, and they won't tell you what's in there. Well, mutual fund companies sort of like Tony Soprano, where they'll tell you what they used to have. But they never tell you what's currently in there a lot of times. So when you read that prospectus that tells you what was there. But they're constantly making moves so we could see many times what kind of moves they make. But here's why. You might not be diversified if you even if you have like, let's say, five different mutual funds. Sure, because mutual fund companies want to outperform the other mutual fund companies, or they wanna look like they're investing like that so they do what they call window dressing. At the end of the year, they'll buy and sell different stocks, or they'll reallocate the different assets in here to to buy the best performing companies of last year. So let's say you. They didn't have apple in their mutual fund. But this year they're gonna add it because Apple's been doing tremendous. So they So when we look at a lot of mutual funds, so many mutual funds have the same top 10 holdings. So you think you're diversified, You got five different mutual funds you think you're you're you're gonna be fine. But inside those five different mutual funds, some of the top 10 holdings are all the same. Eso Therefore, if Apple takes, let's say apples and all of those five. Even though you thought your diversified and Apple takes a tumble, you're not just gonna lose a little. You're gonna lose a lot now because you are basically more concentrated. So the exact opposite of diversification is concentration, and you have to wait too much money in certain stocks in certain places. So number one I don't like mutual funds to begin with. I think there a lot of internal expenses you don't need to pay. There's a lot of taxation issues again because they do this window dressing where they're buying and selling stocks to make themselves look better. They hand the tax bill to you if you remember If you're in that mutual funds very careful with mutual funds. I like managed accounts and I like E T f s'more than mutual funds. Now, it's not a blanket statement. There are some good mutual funds out there, but there a lot of bad ones out there. There are a lot of bad E T. F s out there. There are a lot of bad money managers out there, but a lot of bad investment advisors. So you need to get with independent fiduciary firm, in my opinion, that put your needs first and will custom design stocks and strategies based on what you want, not what they're selling. There you go. It really does make a lot of sense. Something that I learned early on from you was the power of working with a fiduciary, of course, but someone who is independent as well because this is if this is if you own the farm coach, as opposed to being sold a couple of cattle, that you didn't have to resell the people, it really is kind of like, you know what? Your cattle running away, either somebody stealing cattle eso we just have to be careful, and I know we get so bogged down in life with day to day activities and not really knowing what what's happening for what's really happening in the market. We hear what they want us to hear, but what's really happening. And so if you take a step back and you get true lifetime retirement diversification plans put in place, your money is not all gonna be in the same place. And it's not gonna be all in risk because we hear this term diversification. I think risk right away. When people come in and say We're diversified in the market, you're still in the market with all your money. How diversified are you? If the market goes the wrong way, you weren't and you don't want to find that out the day after. You want to know that the day before we call that the financial red zone that's age 50 and above I say 52 right around there in retirement or approaching retirement. The best time to know is when you could be informed. So we'll do that for anyone who calls right now. We'll do your true diversification strategy and put together your total retirement plan. That's fantastic, folks. Just call the number that you see on the screen or you can send us a text message to the text code you see on the screen would be honored to set you up with a meeting, a consultation, a true no cost consultation. There's no obligation either with Coach Peter, a member of the team. And as he mentioned earlier, we will also give you a copy of Have you been talking to financial aliens? It's absolutely fantastic. Resource. In addition to that coach you thrown out to other of your best selling books that will include as well as the 401 k survival. Siri's uh, this is a plethora of content, but what it's meant to do is help you traverse that financial red zone that 5 to 10 years before retirement, make sure questions like this that you truly understand what true diversification is as well as other concepts that we talk about here on the program. So again, call the number that you see on the screen or give us a text would be honored toe set up a time to be with you and make sure that you are on a secure path, but we're gonna take a break real quick, and we'll be right back with more from Coach Pete Dorota after this thing. Hi. You're probably wondering why I'm standing here next to an old time gas pump. Hi, my name is Greg Barren, and I serve the woman to community for capital Financial here. Capital Financial, we believe, and setting up a plan that's going to provide you with a true financial, Philip, just like you fill up your car at the gas station when you need it. So it's always gonna be there month after month after year after year. So if you want to take advantage of the financial Philip and meet with a professional who will create a one page financial review that will indicate if you're in need of a full blown financial plan, then give us a call right now and take the mystery out of financial plan. Welcome back into the program. Consumer advocate Thomas Lips come here with you alongside best selling author and Emmy winner coach Pete Neruda. We're here discussing one of his bestselling books. This is Have you been talking to financial aliens? A fantastic resource I appreciate you right now. You go through a lot of concept here. A lot of folks need to hear about. Let me tell you why I wrote this book. This was years ago, but there's seven or eight important questions that I kept getting answered, asked and answered. I answered all sure, Yeah, over and over again. Thomas and I wanted to make sure that it wasn't just me that was giving answers. So I interviewed 13 different financial planners, certified financial planners, all sorts of different designation kind of guys across the nation. And I got their feedback on these questions. So I got proper answers on these strategies. So it's not just me telling you what I think. It's everybody. Then I give my opinion, and, uh, in my opinion, on what they say and my recommendations on the's a very important topics, Absolutely. It makes a lot of sense, and I have a question here that I think eyes gonna impact a lot of people and may cause a lot of us. Thio want to move a little quicker. One of your seven financial blind spots that you talk about is procrastination, and so, folks, I do hope you're listening because this is something that could directly affect your wallet. Let's just be real about it. And the question is this. You're going to see where I'm going with us. In what circumstances would a Roth conversion for a client makes sense? What's a Roth? Sure, a lot of folks asked me, Coach, I hear about this Roth, and why should I do it? Why is my advisor tell me about it? Why hasn't my more importantly, why hasn't my advisor told me about it? The Roth is a way for you to have a tax free retirement income for the rest of your life. There you go, Roth IRA. Now what's the problem with the Roth? Well, the problem is very slight, but because of this one little problem, it's why many of you aren't in a Roth and who hasn't got that call from their accountant or C p. A. On April, let's say 10th, and they'll say, Hey, get ready to follow your return for you on April 15th, but you really need to put in $5000 or $6000 into an IRA account so we can reduce your income by $6000 or next year. We need to increase the amount you're putting in your 41 case. We could make your income look smaller and get this money put in. IRA. Well, you know what? The main problem is that you get a tax reduction for a regular IRA. You. Let's say you have a taxable income of $50,000 but you put $6000 into a regular IRA. Now your taxable income is only $44,000. You're only paying tax on 44,000 instead of the 50,000 Thomas. What's the big problem here? It's fun not to pay as much in taxes, right? Of course, you know what the main problem is. Eyes it that you have Teoh. You have to pay those taxes. At some point, there's always a catch. We're talking about the government giving you something. Give us on one side. They take it away Over here. The main problem is that $6000 that you've got to reduce on your taxes, you put it into your IRA, and now it grows for, let's say, 30 years, all right, and now it's, let's say, let's just pretend you never put any more money in that. $6000 grew to 50,000. Okay, so the 6000 you didn't have to pay tax on is now 50,000. You do have to pay tax on. And here's another zinger. We have no idea what the IRS tax codes gonna be in 30 years from now. Do we have? No, I almost can guarantee you we still will have an IRS. Do you think you have an IRS? Can I say I hope not. Hopefully they're not watching, Thomas said. Well, you're gonna get a knock on. My name is not on the screen right now, right? Eso It's fun. It's that immediate, gratis faction. I call where you get that very small tax write off, but now you have a gigantic tax bill in the future. It's almost like if you were a farmer and you saw a way in the distance, you out in the field one day and you saw like the smoke that happens. We're not smoke, but it's like you. You see this like a stirring dust cloud coming up in the air, and then it becomes queer. There's three big black SUVs coming into your farm, right? And so they all parked right in front of the barn. You got your little overalls on your your walking over to him. You got your your hat on. Whatever in the field, it's 95 degrees outside. You're gonna take a break anyway. Drink a little water. They all get out with their men in black sunglasses on. And they say, Mr Farmer Thomas, we're going to give you a choice. And the choice is we can tax you on the seed right now. You're planning and will never come back again. You'll never see us again on the seed you're planning year after year, we'll never you'll never see us again or well won't tax you today. But we're gonna come back every single year in the future and tax you on harvest time on whatever that's grown to. Whatever these little seeds have grown to, I don't care how many years of corn we're gonna tax you on each air. Corn? Sure. Would you rather pay the tax on a little bag of seed, or would you rather pay the tax every single year on the harvest? Well, assuming the tax rate is the same between the two. Obviously, I'd want to pay it on the seat as opposed, so I don't care what the tax rate to be in the future. Thomas. There's there's no way you win by delaying paying taxation. Okay, it makes you feel good. This year, we've all had those little decisions in life we made where it made us feel good for a little while and then regret the rest of our life Thistles one of them. So the main regret should be for you is you haven't found out about the Roth IRA. So what the Roth will dio it will let you put money away after paying tax on it. So let's say you have that $6000. You pay tax on it. So now you have 5000. Let's say you put the 5000 to the Roth IRA. Never pay tax on that money. Regardless, how much gross dio and when you pass away, if you pass away with a regular IRA a regular 41 K, that total amount is taxable to your next of kin. You should be able to stretch that amount over the lifetime. But now It's 10 years. They have to pay to all that tax in 10 years or less. Most of the Children below the money right when they get it. So they have a gigantic tax bill at the end of the year. So we have to be very careful about this. But the Roth IRA, the money you left when you died would be tax free. For them, it's like a life insurance policy. Okay, so tax free lifetime ain't done tax free distributions to your next. Again, the Roth makes so much sense every single adviser I I interviewed about that agreed with me. But every single adviser said the same thing. Coach. It's tough to get people to not want to take that immediate tax write off, even though they're killing themselves in the future. Yeah, and that's a very tough decision that I think people need to make who are watching out there. But at the end of the day, it's a decision that needs to be made, and again, I want I want to bring this back up again. You talked about taxes potentially going up in the future s so you're already let's take a time out. Let's do it. Yeah, We almost need to throw away that term. Potentially. Okay. Yeah. What has the government been doing lately? They've been firing the printing press up. What's our national debt? Now that that they admit to they can put it on the screen. It'll probably out of date in two seconds is funded and unfunded liabilities. We hear about this, it sounds it sounds non threatening. Funded, non funded. Who cares, Right? There's a general consumer. You should care. We've made so many promises. The government. We've promised everyone to get Social Security. We promised Medicare. We have all these giveaway programs. The money has to come from somewhere. Money that you haven't paid tax on and your IRAs. Your 41 case is over 20 some trillion dollars. Now, looking at everybody in America, the government's looking right at those accounts and saying, Gosh, we could pay off a lot of our debt if we raise taxes on retirement accounts. Don't think it's not gonna happen. So unfortunately, I think all retirement savings should be tax free anyway, because you know, the government. If the government made it smart, they would they would not have us depend on them. But what does the government want to dio? They want you to depend on them. So take advantage of the Roth IRA. Give a call right now. Let's do your very own comparison. Based on regular IRA regular 41 K. Roth IRA a. Roth 41 K. Let's put together proper strategy to have some of the money at least go into the Roth. Absolutely. Folks call the number that you see on the screen or give us a text would be honored to sit down with you. Coach Pete and this team are proud to offer our friends out. There are viewers out there. True financial understanding, common sense planning, straight talk instead of the double talk that you get out there often in the financial industry, you can tell here on this show we try to make this easy to understand. We try to break open topics and be as transparent as possible. That's the same experience that you're gonna have when you come in and meet with us to get that total retirement income plan. So again, call the number you see on screen shoot us. A text would be honored to meet with you and we do have to take a quick break. But stay tuned because there's more financial safari right after this. How much money can you afford to lose? That's the big question. Every person I sit in front of, I asked him, How much money are you willing to lose? And they say none. Absolutely none. Then I look at their finances and they are 95% in the red bucket, which can lose money. Hi, my name is Greg Barry in, and I probably serve the Wilmington Community for Capital Financial and we want to employ the bucket strategy for you so you don't lose money in your retirement. Yeah, yeah, yeah. Take advantage of meeting with a professional who will create a one page financial review that will indicate if you're in need of a full blown financial plan. Take the mystery out of financial planning by mapping out where you are now. All right. Welcome back into the financial safari. Consumer advocate Thomas Lips come here with you again. Alongside me is best selling author Coach Pete Dorota. That's what they call them Thomas, that is Now you have launched an entire website with many of your resource is and materials to help folks out there who are planning for retirement just be all the more prepared as they head into it. Too many people in my life, Thomas, not just the financial world but in the world in general have said they had some information, but you have to jump through a bunch of hoops to get it. Sure, I'm not lying about that, and you look at any where you were. You know, you have to keep clicking and reading and clicking, reading, and you get to somewhere and they want to sock you with some money. This is a chance for you to get totally free financial information that is valuable, not just some teas or stuff like I see a lot of folks out there. This is real stuff. These are some of the books I've written some of the help manuals I've written. You could go to Pete on demand dot com, p e. T on demand dot com, and there is a wealth of information no pun intended. There may be fun to tell, like All right, so one of things is you could get some of my audiobooks. Now you go to Amazon and buy him for, like, 20 bucks on Audible. Or you could go right there to Pete on demand dot com and download the audio books for seven baby steps for fine print fiasco. If you're buying a house, a car, if you're we're thinking about a mortgage or a timeshare or reverse mortgage. I wrote a book all about that, and I give you the fax on. We have an audio book for that. That's right. We do is fantastic. And you can get it by going again to Pete on demand dot com. One of our latest resource is that that folks out there absolutely love. We've seen a lot of people downloading this content is our Medicare cheat sheet that's on there as well. And what we've tried to do with that is take the 23 400 pages that the government put out. Somebody actually read this when we first put it out. It's only been out a couple of weeks, but they emailed said they had. They took a picture of all the government manuals they're trying right through. They said you took all these and consolidated down to something that made sense. It's not easy, but we did what we call the Cici. No, nothing. You're not cheating anything. You're cheating time because you're not gonna waste a lot of time and, ah, lot of frustrations going through all the government guidebooks, you and Greg Barry, and did a great job putting that together. Folks, it is valuable resource for anyone who is thinking about Medicare, the prescription drug plan, Medicare Advantage. Read about it so you don't make the mistakes. And a lot of mistakes are made that cost you thousands over your lifetime. If you make the wrong choices, I couldn't agree more. You want to save your money? That's that's what it comes down to. So that's there as well It is. Yeah. And again, all this stuff available for free on Pete on demand comment. Absolutely love that. Now on the program, we've been going through one of your books, which is also available on Pete on demand dot com. It's Have you been talking to financial aliens? It's a fantastic resource. I appreciate that. We've been able to break this open share some tips with our viewers out there, and I'd like to get back into it, has a picture of a radio studio there from, like, 15 years ago without the beard or anything. So you got to see that to get a little shot there. When I first started growing my beard four years ago, my daughter hated it. My daughter, Carrie. Oh, she was 10 years old. She said that she told my wife I don't like Daddy's beard. He's scary. Now she says, Daddy, please never shave the beard. Oh, that's what happens right there, Right? So yeah, well, I'm trying to me. Oh, eso eso No, I have a question for you here. You address it in chapter two of this book on. We've been hinting at at these things, but what are your favorite asset classes? Oh, ask that question. You asked that question where you put money, Where can I put my money where I can put it in stocks, bonds, mutual funds? I can put it in C. D s and nua tes real estate investment. Trust real estate. In general, there's so many places I could bear in the backyard if I want, And I actually had a farmer client years ago. We went out in the backyard and he dug up Mason jars and said, Well, you know, you need to take these this money when it stunk. Tom, take this down to the bank and put it in because we don't take cash, we're putting money in investments. That's that's like money wandering stuff right there. But he had never had never trusted anybody. So it's equipment putting it in the in the under the pillow of the full account. So all right, so asset classes, right? Where should we put our money? Well, when we're younger, we should take more risk. But we don't want to take a risk with no reason. And that's what I see. A lot of times, people say with my broker said, the more risk I take, the more I'm gonna gain. That's absolutely false. There's no guarantees. And then I've also heard Well, my broker said the markets average 10%. Or that's what a guy on the radio said. The market averages 10% a year. That's all you do is buy a mutual fund. They'll be fine until you by the mutual fund, and it doesn't do that. Okay, so come on, folks. There's there's no secret bullet. There's no golden goose out there. But there is proper combinations and combination of asset classes. Thomas. I like the theory and the theory. We practices, core and explore. Have some money in a core account that's an asset class and explore account, which is an asset class to the stocks bonds. Mutual explore can go up and down. The court could never go down. It's always has. It has growth potential. It has protection from financial termites, risk fees, commissions, market fluctuations. And then it has lifetime income you could never outlive. You know what the most important asset quest to me is that his lifetime income for the rest of your life you don't have to worry about you don't have toe. You don't have to depend on the stock market to financial retirement, because if you do that, your retirement could be fine. And then it could be not fine. If you do the core account, you're always going to get that financial Philip. That's a check delivered to your mailbox each and every year for the rest of your life. Regardless of what happens in the stock market, folks you will not believe this, Do you see it? Totally authorized. No dirty tricks, no gimmicks and is what it is. Insurance industry offers three financial Philip strategy which will give you a lifetime checks, insured money. You're not gonna have to worry about it ever going away. And you're not gonna have anybody pulling the carpet out from under you, right when you need the money the most. It's great. And I think a lot of folks out there just aren't aware that there are things like this that even exists. I know that this is something that I learned fresh from you on. I appreciate learning about it cause it's gonna help me in the future, but yeah, it was a fiduciary. That's what we have to do. We have to show you everything out there and then we show you what benefits you the most. Okay, yes, that's what fiduciary planning firm does. And folks, there's a lot of if you're if you're playing your calls themselves to broker or if they have something called a serious seventh, which is stockbrokers license. They're not of true. Fiduciary. Now 65 series 65 Investment adviser license is required to be or 66 is required to be a true fiduciary. And so we need to make sure that we understand what motivates our adviser. We as fiduciaries, cannot reach into your money and take commissions out. Okay, We can't take commission that. You'd be amazed how many people have come in with real estate investment trust where they put $100,000 in. But when they got their first statement, their value was 90 or 92,000 because the commission's came out of that money s. So now you're already playing from behind? Sure, I don't like playing from behind. I like having a lead and then isolating the bad things and making sure we keep that we going forward. We could do that. It's not as hard as you think. It is hard if you're dealing with someone who doesn't want you to know about. This isn't a true independent fiduciary planning firm. If they're working for one company, they're gonna be selling that company's products all the time. Now that may benefit some of you, but it may not benefit some of you. So what's more important having access to the whole financial universe or having access to a very small hallway. And that's all the broker can offer it to me. We need to put ourselves ahead on. We need to ask ourselves whose retirement or re funding ours or our brokers understanding asset classes and dealing with a firm that understands the proper combination of asset classes is valuable for you all the way through retirement. Thomas. It's 100. It's $1000 value, not $1000 value. The next 10 people call us believe for the week we will put together for you your very own true total retirement plan That will give you confidence all the way through retirement. Folks call the number you see on the screen or shoot a text message to the number that you see on the screen. And we would be honored to set you up with a total retirement income plan. Folks, that is it for the program. This show is absolutely flown by. I appreciate you being here. We will see you next week. Right here on the financial safari. Yeah, right. Okay. Yeah.