10 Burst results for "Brian Feroldi"

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

07:12 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"On it. Because the pe ratio was too high the reason that your issue was so high is the company was rapidly reinvesting in itself to grow at sales team to build out a research and development team to expand internationally. All those things cost money because the company is still in hyper growth phase. It is not optimized for profits. it's optimized for growth when a company is optimized for growth profit margins is often very very small. So let's pretend that a company run an one hundred dollars in revenue. Maybe it's only keeping a dollar of that as prophet whereas if the business is fully optimized for prophets. It could probably keep ten dollars for fifteen twenty dollars as profit that means at the earnings of company are temporarily understated significantly because it's reinvesting so aggressively. The price to earnings ratio is significantly overstated. And that's why if you look back at some great growth companies. They often trade at four five thousand times earnings. That earnings that you're looking at is artificially low which makes the pe ratio artificially high once. I understood that you realize that. A pe ratio is only useful if a company is mature and fully optimized for profits. Then the earnings is a stable number that you can use to deduce the value of a business so in general when it comes to looking at high growth companies you have to know if the pe ratio is useful or useless and you can figure that out by thinking about what stage of growth the company is in. I recently interviewed researcher and author jim collins and one of my favorite principles of his. And i've been thinking about it a lot lately. Is this idea of the twenty mile march. So according to jim the greatest companies have something. He calls a twenty mile march and the easiest way to think about this. Imagine two people riding bikes across america. The first person rise twenty miles every single day without fail so through sunshine snow rain they power through and get their twenty miles in. The second person starts strong with forty miles in the first day but then they tire out so they only right ten. Maybe the second day then a storm comes in and they said okay. I'll sit out for the day. But then i'll i'll make tomorrow with fifty miles and you can probably tell how this ends. But essentially the consistent twenty meyler wins the race. And i think the important piece of this is the governance of the twenty mile marker meaning say the first bicyclist stops at twenty miles. Even if he's feeling great right so even if the sun is shining. I've got my twenty miles in. I'm gonna stop that kind of discipline and governance is really important and some of the principles you've laid out today. A reminding me of that starting with a point five percent allocation not letting it go over three percent etc. I'm kind of curious if this resonates with you. And maybe if you find any of these other twenty mile marches in your own life either personally or professionally kudos for interviewing jim collins. He is one of my favorite writers and business thinkers of all time. I just absolutely love all the work that he has done. And he had this principle that i absolutely love and anybody who is in the content creation game. Whether they're making a podcast they have a blog. They're on social media. This should really hammer home for them. Because it's really easy to start block started. Youtube channel started podcast. And get really excited about it. And you produce a ton of content in the first month two months maybe three months and then it becomes a grind and all of a sudden you start running out of ideas and your postings become inconsistent and that's especially true if you're not getting that feedback from people early on like if you're doing a lot of work but you're just not getting an audience it can be really disheartening. So i personally have a checklist that i make for myself every day where i say. Here's my exercise goal for the day. Here's my posting goal for the day. Here's my work goal for the day. Here's what i'm going to be eating for the day. And i really try and outsource my thinking about what i'm gonna do on any given day to a piece of paper in general i'm just a huge fan of writing things down. Write them down and make rules for yourself. You can make good rules for yourself when you're in a calm mood when you're thinking clearly when you can think about the term if you're in the eighth day this is especially true if you're investing if you have no rules for yourself and your feeling tired and stock you own is down and you're not in a good mood. It's easy to make mistakes. I know because. I've made about every mistake that you can possibly make so. I'm a huge fan of writing things down for yourself making rules and then once you have made the rules for yourself those rules become the boss of you. So yes. I really resonate with this concept of having consistent goals for yourself in executing them daily i try and execute health goals food goals relationship goals and investing goals daily but i do have a habit of overdoing things i will say i. I'm probably guilty of going fifty miles and then ten and then thirty so i probably should get better about being consistent. Twenty and stopping. That is a key part of. It is having having a stop but overall i would say. I'm fairly good at being consistent with the things that i do. I love brian. This has been a true pleasure. I've really enjoyed chatting with you today before. I let you go. I definitely want to make sure you have an opportunity to hand off to our audience where they can learn more about you. Follow along with what you're up to in any way you want to inform them about. I'm most active on twitter. That is my primary social media outlets. So i'm at brian for all the r. i n. f. e. r. o. l. d. i. I'm also putting a lot of time into my youtube channel. Which is also a brian. Raleigh and on that channel we take stocks that are recommended from the audience. And i put them through my checklist in real time. So if you're interested in learning about my checklist. And how i find the information you can subscribe there bryan. We should do this a lot more often. I really appreciate you coming on the show. Thank you. I would be happy to try. I had a lot of fun alright. Everybody that's all we had for you today before you go. If you're interested in filtering down from a wide universe of stocks to see what might be the best performing in the future a highly encourage you to also check out the investors podcast dot com or simply google t. I p finance initiative pop right up. Brian and i began our dialogue on twitter. So i highly encourage you to follow me and we can get in touch that way as well and with that be smart. Be safe and we'll see you next time. Thank you for listening to ti. P make sure to subscribe to millennial investing by the investors podcast network and learn how to achieve financial independence to access our show notes transcripts. Oh courses go to the investors. Podcast dot com. This show is for entertainment purposes. Only before making any decision. Consult a professional. This show is copyrighted by the investors. Podcast network written permission must be granted before syndication..

jim collins meyler jim youtube america brian twitter Raleigh bryan Brian google
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

08:18 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"Just because it says so. And i'm saying all this. Because buffett himself has evolved to some degree but he has said that he still like eighty five percent. Benjamin graham and fifteen percent fisher so the question that's coming to my mind is looking at your style today and how quantitative you are could you break it down in a similar way saying i'm kind of this kind of that now. Here's where i'm sitting from all the people. I've studied along the way i have been influenced by dozens of investors along the way. But if you kind of forced me to set okay who are the people that have influenced your style. The most i can name three number. One would be david gardner. Who is the co founder of the motley fool. His investing style is called rule breaking where he essentially looks for fast growing high quality companies. That could literally ten fifty one hundred x by them early. Hold them longer than anybody else. And you'll swing and miss a whole ton but on the off chance you find the next amazon or the fine. The next netflix which he did in one thousand nine hundred seven thousand two respectively are two thousand and three. Whenever net flix came became public the gains from those stock picks war all of the losses combined all of them. And if you look at his style he is someone that looks at valuation but will buy even in spite of an insanely high evaluation. So he has influenced my style. Greatly another one is motley fool. A member named tom angle. He's an unknown investors to a lot of people but he has been living off his portfolio for more than thirty years and his style is to buy great companies at better and better prices better and better value points over time so he takes valuation very seriously but he tries to find companies that he thinks can grow for ten twenty thirty years and then he tries to add to that company again and again and again at better better valuations over time that style really resonates with me he. Some of this influence me a lot. And then the final would be a guy named jeff fisher who is also from motley fool. He's one of their portfolio managers on their professional side. He runs hedge fund. His style is to exclusively invest in the highest quality businesses. That he could find. He's more along. The lines of a garp investor demands everything. You have to have great economics. You have to have a wide moat. You have to have a great management team. You have to have a great tam. You have to have a history of beating wall. Street's estimates lewis balancing sheet everything. He demands everything but when he finds those he's willing to buy them and own them for long periods of time and he has a phenomenal track. Record there are literally dozens of other people. That i've picked up stickers from here and there but you're forced me to say i would say Those three influenced me the most awesome and one of the other things. I've also curious about giving your checklist. Approach is what has most recently got new excited. What is the company that has scored maybe the highest that. You're doing research on. Maybe even right now that you're excited to get up in the morning and and grab your coffee and get into work on while the companies that score the best on my checklist. Their generally high quality businesses but. I don't get extremely excited about them. For example i'm really bullish on adobe systems it checks nearly every box look for in a great investment so i have a lot of my capital. That's major position for me but that's not a company that like super excites me. I'm going to buy this thing. And i'm pretty sure it's going to beat the market over long periods of time. I get the most excited. When i find small companies that i think could ten or twenty or thirty x and bay check a lot of the boxes that elephant for when they're still small but i understand upfront that they are highly risky so a company that really has my attention right now and has since i discovered it almost two years ago is a tiny little company. That's worth less than a billion dollars called similar scientific somewhere scientific trades over the counter so know that up front this is a very illiquid stock. So really do your research on it because the price can move around drastically but similar is focused on helping physicians to diagnose peripheral artery disease. So that is when there's a blockage in the arteries of the arms and legs. This is an incredibly common medical condition and it is significantly on diagnosed. The reason is it's a pain in the butt to diagnose this disease using traditional methods. what's similar did is. They created a little clip. That goes on your finger or your toes and it measures the flow of blood to each of your extremities and produces a report on a computer within five minutes that shows you how much blood is flowing to each of your extremities. In the case that blood is not flowing to one of them. Your doctor can then take action. Can he prescribed drugs. Maybe prescribed surgery and this can prevent people from having heart. Attacks prevent people from having strokes cardiovascular disease is the number one killer worldwide so somewhere technology makes something that is hard to diagnose easy to diagnose what fascinates me about this business is their business model. Yes they make this little hardware clip that goes on your fingers and toes. But they don't care about that they just want the doctor to have that the way this company makes money is by selling the reports that come with it so that takes a month hardware purchase and turns it into repeat purchase business and the economics of the small company are just fantastic. Last quarter company grew its revenue one hundred and twenty five percent to fourteen million dollars so again very very small still however the company is so extraordinarily efficient that it turned that fourteen million dollars in revenue into almost seven million dollars in profit. And that's after-tax profit so that's a net profit margin that his company has done of over forty percent. And if you look at the technology there's lots of reasons to believe that they bro ended above average rate for a long period of time. Now there's plenty of risks that worth noting here. This company has a few major customers that are out there as i said at trades counter counter so it stock is very illiquid but this is a company that every time i look at the report. I just wanna learn more about this business. You recently released a chart on twitter. That i really loved and it was basically breaking down five different stages of a company. So i'm curious when you talk about similar. Where do you think they kind of fall given that. They're such a small company today. Maybe walk us through the five stages where you think maybe someone similar sits and how we should think about valuation along the way so center is a bit of an outlier here. Because it's right. Now in the hyper growth phase and when a company is in hyper growth it is usually not profitable or its profits are very small so in this case it is growing rapidly the top line and it's growing rapidly the bottom line. That's kind of a weird dynamic so for a company like similar i think the pe ratio is usable because this company is fully optimized for prophets. One mistake that i see investors making over and over again and i made the same mistake myself for years is once they learn about the pe ratio. they think it's universally applicable to every company all the time and that is just a big mistake. If you're on the clock twenty years ago and look at some great gross stocks they had ratios. That were five hundred thousand two thousand. If the only thing you know is you have to buy been a pe ratio is below twenty automatically pass. I made this mistake myself with a company called salesforce dot com back in two thousand six. The company i was working for adopted. Salesforce dot com. This offer is incredible and if this software went down our commercial team would literally useless like it is important to us. But i at the stock and it had one hundred. Pe ratio and. i said well too expensive. Can't buy it and the stock twentyfold.

tom angle motley Benjamin graham david gardner buffett peripheral artery disease jeff fisher fisher netflix strokes cardiovascular disease amazon lewis adobe twitter
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

07:34 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"Selling a stock. Every big investments sake that. I've ever made all have the same. Wording common sell every single time that i've sold a company that has gone on to five x or ten or twenty x. It has cost me way more in an lost upside then. I gained from selling stock. That ben went down further fifty percent. Because i've done that several times. And i know people that have sold. Companies like netflix and that was literally a multimillion dollar mistake. When i see things like that and learned that the hard way. I have become reluctant sell. I have a bias towards holding and a biased against sell it so that is my general overview of selling however. That doesn't mean that. I am never sell and there are eleven reasons that will still a company. I'll take through them really fast. Number one is the most common and the most important. I was wrong. I thought blank about a company. I thought the thesis for owning a company was a it. Turns out that thesis was wrong. The company didn't execute like i planned on. If i'm wrong about a company i will take my tail between highlights admit defeat sell and move on number two if there's accounting regularities if i can't trust the numbers you're dead to me forever. Why why would. I bother with your stock number. Three if a company makes a massive acquisition that i don't like and relative size is important here so if a google spends a five billion dollars to buy a company it's relevant. Google is one trillion dollar company. A five billion dollar investment is no big deal if a five billion dollar company acquires another five billion dollar company. That's a big deal. And if i don't like that acquisition. That could be thesis changing. I will sell if i disagree. Number four would be. The thesis is complete and there's no compelling second act in other words the company execute against its original mission or its original property line and it hasn't developed a second business that will take growth to the next level so for companies organic growth rate. All the sudden starts to fall below say five percent because it's just running out of room to grow. I have no problem declaring victory selling that company and buying something else number five. If there's a mass exodus of management or glass door ratings plunge ak at a culture is really deteriorating. I'll sell number six if the company is too large for me also so for example if a really high quality business. Such as mastercard or amazon became fifteen percent of my net worth. I would say that's too much and start to trim that position number seven. If the company's valuation is stream compared to its opportunity. this is a really tricky one. If i think best case scenario for a company is it's it grows to be two hundred billion dollar company and right now. That company is trading at a very high valuation. And it's worth a hundred billion. That is a whole lot of risk taking on for only a potential double. In that case i would be willing to trim the company because i don't think the gains are justifying the wrist and i'm taking on number eight if i just lost interest in the business i no longer a follow it. I'll sell number nine. If it gets acquired. I'll sell number ten. If i need the money for my personal life aka the reason we invest in the first place i will sell and then finally for tax loss purposes. If i'm down big on stock and i just want to take the tax on it. I'll sell fantastic. Also curious about you know. You said you're a saver early on so i'm kind of curious about your position of cash and what that typically looks like compared to your portfolio do keep that in any relative balance that you watch closely or do you mind so much cash you sitting on at any given time. Yes so keep to cash balances and keep them separate on purpose. So the first cash amounts i keep is just my personal emergency fund. That is six months of expenses. That i just keep a set aside in a boring checking or savings account. Yes it's paying me nothing to keep in there but that's okay. The point of that capital isn't to earn return. The point of that capital is to help me sleep at night in case we had serious health setbacks or career setbacks or something like that i like knowing that that capital is there to get me through a six month period. So i don't consider that part 'cause capital investable in my portfolio. I typically keep my cash balance between half a percent and ten percent depending on what kind of opportunities on finding in the market and just the general evaluations that i see so if i've gone through a period where some of my companies have gotten bought out or i was just wrong. I have no problem selling those companies and then building up my cash position. And if i'm not buying anything that's screaming at me that you must buy. Today i have no problem with cash just sitting there and waiting but overall i like to keep the vast majority of my money that's investments invested even when markets are at all time highs because the market can continue going up and generally does sell. So i don't keep a huge cash balance. But i do keep some set aside for opportunities that emergency fund piece is incredibly prudent. And i know it's a very personal thing. A very relative. It reminds me a little bit of someone. Like bill gates at microsoft who wanted to have cash reserves that covered payroll for an entire year. Obviously a very conservative approach. Maybe not so much when you're coming microsoft that's money generating machine. But i digress. I'm curious how you think about the emergency fund a little bit further. Is it for you like a six month timeline of covering expenses. Or how do you kind of measure out what. The fund should be have a format that i had created that up on my twitter account in general. I think it's somewhere between three and six months for the average person and that really depends on your personal situation if you have a very predictable job and you have no dependence in any way and you could easily get another job if you lost your whatever reason i would say three months emergency fund is perfectly fine on the flip side if you are working in a volatile industry that's on the decline if it would be extremely hard for you to get another job if your house has one source of income and you have several kids that you need to support even if something disastrous has happened. I would go much more towards a six month. Emergency fund personally. I am conservative person financially especially with my personal finances for that. I keep closer to six months emergency fund. That just helps me feel good and good a night. You strike me. Someone who has taken the entire journey not the entire journey. I shouldn't say that much. But you've developed your own authentic style through you know after studying all of the classic text and it reminds me of when i went to the van gogh museum one time. Something that stuck with me. There was that van gogh started out painting landscapes and still lifes and when i looked at those landscapes and still lives. They were the best i've ever seen. I mean they were literally like as good or better as any other artists. And it's kinda where you start out or where he started out as an artist and then he just ventured off and became van gogh and did his own style. I think it's important for investors to do that for themselves and not just stick to some classic text.

Google netflix ben mastercard amazon microsoft bill gates twitter van gogh museum van gogh
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

07:43 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"From today's sponsor. I might not be a billionaire yet but after talking so many of them on the show. I've realized how important it is to start investing like they do so. What do billionaires invest in that you. Or i don't penthouse apartments. Private jets ultra luxury yachts. The list goes on but thanks to a recently enacted law one of their favourite asset. Classes is now available to all of us billionaires from rockefeller to bazo have poured hundreds of millions into this exclusive of investment. So what is it fine art. You heard me right. Fine art from monet. To warhol retail investors are flocking to this once unattainable asset class and. it's all thanks to one. Startup masterworks founded by a serial tech entrepreneur and lifelong art collector. They've single handedly changed the way we invest letting invest in the very same paintings available billionaires but at a starting point everyone can afford they hooked us up with forty seven passes to skip their wait list. So if you wanna snag a spa before it's too late had to masterworks dot com slash billionaires that's masterworks dot. Io slash billionaires. See important disclosures at masterworks. I o slash disclaimer. So growing up as a kid My father and mother just always wanted to teach myself and my sister about saving money and what was important and being able to save up for things that we really wanted to have and not just going out and spending money on nitin lloyd things. It really didn't matter so this is one of the reasons why i'm so excited about. Henry is because this is a tool for parents to help teach their kids all about financial literacy as they're growing up so this is a really neat tool where i went and i signed up for an account and i created a debit card for both of my kids and while we were going through the process my kids got to pick what kind of image. They wanted on their debit cards. And once it arrives you're able to manage their allowance. You're able to manage what's on the card. You can see what they're spending on the card through an app and they feel like they're an adult they feel like they're actually in charge and it's a great tool to kind of talk about what it is that they're saving their money for so get started at go. Henry dot com and get one free month with promotion code. Wsb which stands for. We study billionaires. That's one month free ago. Henry dot com promo code. Wsb starting to invest on your own can be incredibly intimidating. A lot of the brokerage houses have all the bells and whistles but most of us don't need our own bloomberg terminal on public dot com. You can invest with any amount of money. Invested in thousand dollar stocks with just one dollar that's because public dot com allows you to buy slices of shares. Which provides you more flexibility of what you can add to your portfolio but beyond that they make it fun by providing a platform where you can talk and follow along with all your friends. I personally love public dot com because the platform is incredibly easy and intuitive and not only can follow along with what my friends are investing. And i can also find other influential people and follow them as well when you invest with public dot com. You're never investing alone. They make it easy to collaborate and build confidence as an investor and another thing. I love about public dot com. It doesn't sell your trades. Third parties public dot com does not participate in payment for order flow. Which has become an industry standard practice that creates a potential conflict of interest between the brokerage and the customer. And right now. They're offering fifty dollars and free stock to get started in growing your portfolio. Just use the code billionaires when you download the app and let public dot com. No you heard it from us. Valid for us residents eighteen and up subject to account approval see public dot com slash disclosures not investment advice. All right back to the show that kind of begs the question of the leadership of company. 'cause i imagine that the you look at it as well on the checklist. How much weight do you put into. Who's actually running. The company manager and the ceo company is really important as is the culture of the company and the employees when you look over long periods of time it's really the decisions of management teams. The employees that lead to the execution of the business execution drives a financial results and the financial results drive the stock price. So the management team and a culture is really important on my one hundred point scale. I assign about fourteen points in total to the management team when it comes to judging management team as an outsider. You can't call these people on the phone. You can't go and visit the company and talk to employees some investors do that you have to look for shortcuts that indicate that a company has a great management team. A couple of ways. That i do that is by just asking well who is. Ceo of the company if the ceo is the founder that's tremendous signed to me because the founder of a business typically cares much more about the long term viability of the company. Then they do anything else. It is nearly impossible to found a company get all the way to the public markets and not be insanely rich like everyone that has done. That successfully is worth millions. Tens of millions of dollars at that point they could retire. They could stop working live on a beach for the rest of the life if they are choosing to remain the ceo of that company. Why would they do that. They must like running the company more than they just want the money from running the company so if a company is founder led that is a really good sign that i get points to. If can't be the founder. I wanna see that. The ceo has been at that company for ten or twenty years. Ideally starting at the bottom ranks and working their way up to the business so that is another really good sign because again that person has likely poured their heart and soul into the business. They like you have friends and family that work at the business with them and they really care about the long term health of the business not necessarily short term factors on the flipside. I don't like to invest in companies. Where the ceo was just hired free months ago from some other company and they are put in there to focus on earnings or improve operations that to is a bad sign so just the history of the ceo is something i look at another check is just how much of the stock do they own. This is just called skin in the game. You want to know that if the stock goes down you as a shareholder are going to be hurt but the ceo is going to be hurt way more than you are. So you want them to own a significant amount of stock. The third thing would be the glass door ratings so glass doors and online tool that you can go to just see what kind of reviews to the employees give. They can raise the the ceo anonymously if that ceo gets really high ratings and employees seem to really like looking for the company. That's a great sign if employees go on there and say our businesses going down. I hate the ceo and a company gets two stars out of five. That's a really bad sign that they're going to have a hard time attracting talent fine. I look at the mission statement of the company. How good is the company at communicating. Its mission to both employees ease into investors. And then lastly i look at the company's financial performance are they consistently meeting their targets. Are they consistently exceeding wall. Street's estimates wall street's expectations. That tells me that they understand how wall street works. And that's a really good sign so you'll get all five of those factors together. I think they give you a really good sense. Of is the person that's running this company in it for the long haul or are they just in it for the short game now. Another thing i'm curious about. Is your position sizing going to three percent or more and it begs the question of wind to sell which is a theme. I've been wrestling with also lately because there seem to be two schools of thought one is the market is inefficient. And if you have high conviction in the company should just keep building your.

Wsb nitin lloyd Henry monet rockefeller bloomberg wrestling
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

08:09 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"Master. Because if you learn anything about valuation it just makes sense. What's the thing. We're all tired by watching warren buffett. You wanna buy a dollar for eighty cents or sixty cents or fifty cents. That is all smart. Investing and if you're the type of investor that puts valuation. I you are just never going to buy the best growth socks on the market period because the best that grow socks in the market are almost always quote unquote insanely overvalued. The entire way up if you look back on the history of some of the greatest performing stocks of the last twenty years your amazon's your net flicks is your market accesses. They have historically traded at very high valuation multiples even twenty years ago and yet if you bought them twenty years ago and held even if you paid a very high valuation multiple you have significantly outperformed the market. How can that be well. The greatest growth stocks can grow for a far longer time period than any would would possibly give them. Credit for amazon. Came public twenty four years ago and it's consistently put up double digit growth. That entire time and yet in twenty twenty amazon grew another forty percent. If you were to run the clock two thousand or nineteen hundred. Nine and put that into excel spreadsheet. It would laugh at you. it would be like. What kind of crazy assumptions are you putting in here that this is going to grow for twenty years and then grow and other forty percent. But that's what's happened. Why because amazon is one of the highest quality growth companies in the history of the stock market. So when i've learned things like that. I have learned to de emphasize valuation. That doesn't mean. I don't look at it but i've learned to seriously deemphasize and it also depends on the stage and nature of a company if i find a company that is worth one billion dollars today and i do the work and i say i believe that this could be a twenty billion dollar company someday day. I'm just going to buy it. I don't really care about the valuation because the market cap is one billion and i think it could literally be a twenty bagger in a decade or so the valuation. I paid doesn't matter. What matters is am i right or am i wrong. If that company goes up to twenty and value initial evaluation i picked. We'll be irrelevant on the flip side. If you find a company that is big mature and much slower growing then valuation really matters so if you were going to buy a microsoft today a proctor and gamble today a coca cola. Today i would seriously emphasize valuation because their future is so predictable and so known but if you found a dynamic high-growth company that was trading at a one billion dollar valuation i would deemphasize valuation. So it's always about keeping it in mind but knowing when to emphasize it and went to ignore it a couple ideas come to mind from what you just said one of which is position sizing so from what i've heard about your style. It's very reminiscent of actually tom. Gainer who we've had on the show and it actually sounds like similar to even warren buffett's personal portfolio by that i mean it's pretty diversified and the position sizes are fairly small. Walk us through how you think about position sizing in general. I'm a big fan of diversification. Ione roughly seventy stocks or so. And when i am interested in building a new position in a company the first thing i ask is what is the risk reward ratio here if the company could be a ten plus bagger as i said i de emphasized valuation. But i'm going to build into that position very slowly because the odds that i'm wrong are really high. If a company is high risk and high growth the odds of that company flaming out a really high. So i would scale into it by using zero point five percent increments so i would devote point five percent of my portfolio into that stock on day. One then i would watch it. If the company was executing and the thesis was playing out. I would be happy to add to that company again and again and again in point five percent increments over time even if the price was higher because i care about the long term potential of the business and the business executing far more than i do about paying the perfect price to get in. So that's how. I would build a position. It was a very risky very volatile company if it was much more stable which sure predictable profitable company. I would be more willing to take a larger position into that company upfront. So a company. That i really liked this. Very big is adobe systems software company. That's been around for for decades. It checks so many boxes. And what i looked for an investment but that company is worth over two hundred billion dollars today so if i was going to build a position that company today given how mature and how high quality it is i will be more willing to devote a large portion of my portfolio to that company on day one so maybe i would build in one percent increments at a faster clip now. Once a company hits three percent of my portfolio. Either from me building the position with fresh capital war from just growing i stop. I don't add any more. At that point. It is up to the company to do the rest of the heavy lifting form. So if you look at my portfolio. Today my biggest positions are companies like ricotta lebron or tesla or amazon. Or docu sign an. I didn't go out and say to myself. I want these to be my biggest positions. I bought them slowly and through sheer price appreciation. They became my biggest positions. So i don't attempt to concentrate my portfolio. I let the market concentrate my portfolio for me. I love that you mentioned amazon a little bit ago. And i know that optionality plays a big role into your investment checklist and again it's one of those seemingly qualitative metrics. You've also said that. Businesses optionality is very underrated. So i wanna explore it a little bit more. How do you think about the optionality of a company. In general. When i think of the word optionality i think it's an ability of a company to produce new products or new services that open up new revenue opportunities for the company overtime and expanded total addressable market opportunity. You just called out. One of the most optional companies of all time amazon. When amazon first came out they sold books. What are they sell today. Everything including computer services through amazon web services. The number of businesses that amazon has entered successfully grown in over the last twenty. Five years is just standing so that to me is a classic example of optionality. And when you're thinking about that in real time asking yourself how optional did. I think this business is is a couple of things that you can look at the. I would just be the company's own history if you were investing amazon two thousand five you can look back and said wow. They started out books and they went to cds then. They went into movies now. They're getting into groceries and they're and they're succeeding. They have a history of entering new markets. And they have a history of launching new products and services company has established a history of rolling out new products and services. That's a really good indication that they're going to continue doing so into the future. Another thing you can just think about is the very dynamics of the business itself. Obviously if you're an e commerce company that's selling things online it doesn't take a tremendous amount of imagination to be like what other things could they sell online down the road other businesses. It can be harder to see that kind of optionality. But in general i think if you look at the company's own history and check to see if they have a history of launching new products and services that's a really good indication that they're going to launch even more products and services into the future. Let's.

amazon warren buffett Gainer Ione coca cola ricotta lebron microsoft tom
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

07:42 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"Our crowd dot com slash study. They small business leaders. Are you looking for an easier way to onboard and manage remote employees. Just works makes it easier for you to start run and grow a business. Let me tell you how just works can help your business. Just works is the ultimate. Hr platform for small and growing businesses with simple software an expert support for benefits payroll hr and compliance across the country. Small businesses with big dreams. Love just works for simplicity intuitive platform and time saving features whether your team is remote or in person you can give them access to national large group health insurance plans and manage on boarding payroll. Pto and compliance. All in one place where you can do it all but why do it all alone. Learn how just works can help with just works can onboard new employees with ease take the guesswork out of employment and tax regulations access national health insurance plans and save hours on time tracking the things with payroll. And don't worry. They have twenty four seven expert support soon. Find out how just works can help your business by going to just works dot com. That's just works. Dot com for more information. Do you wish there were more. Options for diversification in your portfolio does having your entire portfolio tied up in stocks or mutual funds. 'cause uneasiness or make you feel like you don't have control over your financial future especially in turbulent times already have a fear of missing out on hot asset classes such as crypto real estate or gold but don't have the cash on hand to invest. Not many people know you have the power to take control of your financial future by investing your retirement account in areas that you're excited passionate about from a returns perspective. The numbers don't lie. Historically alternative assets have resulted in better returns than public market investments by big margins the secret to unlocking investment freedom is opening a self directed account with a company that will allow these investments and knows how to handle them equity trust company was named the best overall self directed. Ira company for twenty twenty one by investor pedia equity trust helps you unleash your potential as an investor with knowledgeable reps and technology to make this new experience. Easy unleash your investing potential with equity trust. Learn more at. Www dot investor unleash dot com slash billionaires to get started that's www dot investor unleashed dot com slash billionaires. All right back to the show. Will you mentioned they're scoring a competitive moat. Which is obviously a very qualitative element of stock. So i'm really interested in that. How do you go about quantifying something qualitative like that. A whole bunch of things in investing are just qualitative. It's a judgment. It's something that you're going to have to just get a feel for for example. How wide is apple's moat pretty wide. Why is it why well you could argue that. There is network affects amongst their users. You could argue that. They're switching costs. Once you get used to the phone. You could argue that. They have a durable cost advantage to their size and their scale. You could argue that. They have a very strong brand name and all those things are working together to give apple a moat. But to your point how do you take that. And you convert that into a number. That's what my system attempts do i know going in that is just a limitation of my system. In fact if you took my exact system and use the same stock to to different people the scores would be different because we're judging from different perspectives. I'm okay with that. And i accept that that is a reality of my system but as long as i am scoring things consistently amongst companies. I'm pretty happy with the final output. But to your point there's absolutely a ton of subjectivity. Here i'm also curious. If you're updating the score on a regular basis with companies obviously new earnings come out or new news comes out. are you rerunning it. The company through the mill and spitting out a new number on a quarterly basis. Or something like that. Very few quarterly reports will significantly change a company's number. That's by design. I've set it up so that the scores stay relatively consistent over a period of time but investing is dynamic. There is news that come out that significantly changes the invest ability of a company over time. I'm generally putting in a lot of work upfront. Whenever i'm thinking about making an investment and steadily updating the score every six months year or even two years but if i find a company that scores extremely well on my checklist tra- me on that zero to one hundred score any copy scores over eighty s. A very very good score. The chances that that number is gonna fall precipitously is actually pretty low. But again i think. The value of my checklist isn't necessarily. The output is not exactly the score. The real value is forcing yourself to go through a consistent process. Because what you learn about a company along. The way is far more valuable than which is saying this company. A seventy five versus other ones that seventy seven. Therefore the seventy seven is an automatic by it's about the process of learning and consistently going for this with each company. Also wondering how you distill down from this amazingly wide universe of stocks to begin with right especially for those who maybe have a full-time job. They don't have all day every day to just pick through stocks. How do you filter down into a reasonable amount of stocks to begin investigating. Do you have certain sectors or industries that you think are your circle of competence and you start there or walk us through that. Yeah in general if you're going to be an individual stock picker one of the trade offs that you're making is it's time intensive process so if doing this process sounds like torture too you just index and call it a day. My system is designed. Because i love everything about investing. I love it. When i find a company that i've never heard of before and i get to research it like that. Process actually makes me happy so that would be a thing. One that i would say the way that i the way filtered down is by i have a few resources that generally feed me. Stock ideas the motley fool being one. There's some people that i follow on twitter for example and i just keep a ever growing ever expanding watchlist of ideas from there. I tend to focus most of my time and effort on two sectors of the market healthcare and technology and just the dynamics of those two sectors. They tend to score the best on my checklists. So if you pitched me a company and said hey. This is an oil and gas company. I can almost immediately dismiss it as an idea like that is just outside my circle of companies but by taking any company through a few simple checks upfront. I can tell if i want to research it. Further for example one simple. Check that i deal with. Every stock is to just see how the stock has done since it came public if company since it came public is beating the market substantially. That's a really good sign. In my opinion. I think that winners tend to keep on winning and losers tend to keep on losing plenty of exceptions. Of course however if you give me a stock the very first thing i do is i just throw it into a chart and just say is stuck beating the market since ipo and over the last five years if yes that automatically takes to further consideration if it's horrifically lost to the market i would just automatically pass so i do have a couple of filters liked that that kind of separate from the chaff. Initially from there. I will do the work and put it through my research process. Anything spits out a very low score. I kind of just dismiss forever. So it's just a process of finding a few trusted sources to come up with ideas vetting those sources consistently and putting out a consistent list of companies that score very well and then focus my attention on them.

pedia equity trust apple twitter
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

08:09 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"Do you believe in manageable debt overall. I recognize that debt is just a fact of life for most people and when it comes to your credit score. I myself use credit cards. I love credit cards. They make paying convenience. You get perks for having them. But i pay my credit cards off every single month and always have and always will and when it comes to things like mortgages or student loans or auto loans. I recognize that those things are tool that people use to get things that they want when they don't have the capital to do so but overall my general philosophy is more closely aligned to dave's than anything else. I'm a big believer in eliminating all your debt including mortgage. I recognize that. That's not always. Mathematically the smartest thing to do especially when interest rates are three percent or even below the math clearly says leverage your mortgage to the hill and invest that money and and pocket the spread mathematically. That makes eight. That makes a ton of sense. So it doesn't make sense to pay off your mortgage early if you're just looking at the numbers however the numbers and the emotions that you're going to live through are just two different things reason a big fan of paying down your mortgage is because for most people mortgage is their largest monthly expense. And it's a fixed monthly expense meaning. It doesn't matter what's happening in your personal life. That is an expense that has to be paid in service monthly by paying off your mortgage early. You are permanently reducing your largest expense permanently. You are making your future self more anti fragile. Because you're lowering your your fixed costs forever. So that gives you more flexibility down the road to do what you want with your money so again financially. I understand a lot of people. Say i'm never paying off my mortgage especially interest rates this low for me. I accept the fact that by paying off your mortgage early it is dumb. Mathematically but i think it's incredibly smart emotionally. I like that. I think a lot of people. They'll too recognize. Also the option to pay double principal every month to help expedite that payment of your mortgage and also reducing your interest by typically half almost by doing and. That's one of those things. Those little tricks in life that i feel like not enough people know about when it comes to financial wellness one downside to paying off your mortgage early by doing it that way once. The money is in the mortgage company. You can't ever get it out. So one other idea is to take that double principle that you've made and put it into cds or a checking account or something like that and continually build up that amount until you can wipe out the mortgage in one. Go that way. If you need access to that money beforehand you can still have emergency access to it. Another idea is to take that money and invested in the stock market and once that account balance is bigger than your mortgage than say. Okay that's it. I'm switching it and paying it off so there are numerous ways to do it. That still give you flexibility. But overall i think that if you had a paid off mortgage you'll just live a happier financial life and if you have one i love it. And let's talk about the stock market. You have developed an investing checklist and it makes sense to use a checklist to enter any investment. It's one of those things. In my opinion that seems to be simple but not easy to actually be disciplined enough to follow through every time. I'd love for you to walk us through your investment checklist and also may be explained to us. How you've adopted each step along the way so i've been buying and selling stocks for more than fifteen years. I use word buying and selling stocks specifically because i would say if only been investing for about thirteen years the first few years of me having money in the market. I had no idea what i was doing. And i made every mistake that you can possibly make with investing so i've learned by consistently losing money. What not to do so. I know how painful those lessons can be about. Eleven years ago twelve years ago i became a paying member of the motley fool and through interacting with them. My financial and investing knowledge just really skyrocketed in motley fool has discussion boards that are four paying members only and on there is just incredible information that other members who have been investing for long periods of time freely post and. It's just unbelievable. The knowledge that you can soak up simply by learning from other investors. That have been doing this for a long time. Now once you become a member like did you have dozens. If not hundreds of stock ideas that are thrown at you at any given time and i just became overwhelmed with. How do i keep track of what i'm interested in and i was trying to do all this in my head i'd be like this company is growing fast but this other one has a bigger addressable market opportunity and this other one is small but i like the ceo of this other one better. Which do i buy. And it just became chaos trying to manage all this in my head. I finally became smart enough to write down the things that i'm looking for in an investment and write down the things that i'm trying to avoid in an investment in overtime. Thanks you feedback from other other investors. It evolved into the checklist that exists today. And just to give you a quick overview checklist spits out a score from zero to one hundred and i have a number of different categories and each category has a certain amount of points assigned to and i take any stock that i've never heard of and i go top to bottom on my checklist and i'm looking at the financials judging the moat assessing the potential of the business. I'm thinking about the dynamics between the company and its customers. A masking revenue is recurring and high margin. Who's running the company. Do they have skin in the game etc. And then once i get a positive score then i go through the risks section and i subtract points for things that i don't like for example. I don't like it when a company gets its revenue from just a few customers. That's called customer concentration. I don't like it when a company doles out stock options and dilutes investors seriously over long periods of time. So i have a list of attributes that i'm looking for. I have a list of attributes that i want to avoid and by taking companies through this consistently. It's spits out a score on the other side that tells me whether a stock meets the majority of the criteria. I'm looking for or i should just be avoided from there. I'll take the highest scoring companies to me are the highest quality companies that are on the market and i try to get them into my portfolio at advantageous crisis. The latter is hard to do and requires a whole bunch of nuance. But that's my general philosophy on an this take a quick break and hear from today sponsor all around the world tech companies are innovating and returns for investors. Our crowd analyzes companies across the global private market selecting those with the greatest growth potential. Then brings them to you there. 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dave Ipo
"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

We Study Billionaires - The Investors Podcast

06:56 min | Last month

"brian feroldi" Discussed on We Study Billionaires - The Investors Podcast

"To the investors podcast. I'm your host trae lockerbie end today. We've got brian for all the on the podcast brian. Welcome to the show try. Thanks so much for having me man. I am so excited to talk with you mainly because i've been following you on twitter for a long time. I love the content. You've been posting the first opportunity that came to my mind in speaking with you was exploring the idea of financial wellness which is a term. I really love really resonates with me. But i'd like to hear from you. How do you define financial wellness. I'm a big believer in mission statements. And i wasn't for a long time and one of my co hosts on my youtube channel. Brian still has really instilled in me. The power of having a great mission statement. Great mission statements. Once they are crafted correctly are like a north star that you used to make all decisions around so after a lot of time thinking about it. I made my professional mission statement to spread financial wellness. And i picked every word there with extreme care and my career mission like i said is to spread financial wellness. What does that even mean. I think when you say the term wellness and think about health it makes sense if somebody has huge muscles would you automatically assume that they're healthy or that they're well well. It's an indicator of health and wellness. But if that same person smoke cigarettes and had terrible relationships and ain't nothing but junk food and was depriving themselves of nutrients in some other way all in an effort to just show the biggest muscles possible. I wouldn't say that that person is well that same concept. I think should be implied to your finances. People that follow me on twitter. Most think of me as a stock picker and one of the thing. That's just a lot of fun to talk about in the stock market is high growth stocks. Right stocks have the potential to go up hugely but that to me is like candy of finance. That's the thing that's really fun. And engaging to talk about. But i think that is so much less important than thinking about your finances. Holistically in fact. I'm a firm believer that what you do with your personal finances is at least ten times more important than what you do with your investing finances. So when i say financial wellness. I think it's about thinking of your entire financial picture and includes. How much money do you make. How much of your expenses do you know what those numbers are. Do you have is your personal balance sheet filled with cash assets and devoid of debt. Do you have a will. Do you have insurance. You have an estate plan and yes do you have your investments optimized for long term growth thinking about all those things collectively to me is financial wellness. I love that. Yeah when you think about wellness. I think of it like a spectrum as you said where there's not anyone panacea so you'll owing and mean stocks shouldn't be the panacea that gets you to financial freedom. You're talking about that blocking and tackling that foundation and setting the table of sorts for success. So maybe i have to ask you your own personal journey to discovering this for yourself. How did you arrive at this mission statement. That you've come up with my natural inclination is just to be a saver. I was just born that way. And i think some people are just born. Natural savers and others are born natural. Spenders i was just blessed for. I don't know why to always have that. Benton me to save money with that basic foundation when i graduated college i didn't know much about money at all. I was taught. And i say that with air quotes the same thing that most americans taught about money in school. Nothing nothing at all the most important money lessons that i learned where learn mostly by observing my parents who are my financial role models and they never sat me down and taught me lessons but they themselves were pretty good stewards of money. They always had money coming in. They always had a savings rate. They weren't flashy with their money by any sense so from that. Just pure osmosis. I kind of picked up those habits. Plus i think it was just genetically programmed in to be that way when i graduated college. My dad handed me the book richdad or dead. Which is the first time i ever read a book that talked about the basic principles of money. Which is everybody's in business for themselves. The rich don't work for money. Financial education is extremely important. You can become financially independent by saving investing diligently. I don't agree with everything. That's covered in that book by a long shot. But i will forever be indebted that book because it kick started an absolute love of all things related to personal finance money and investing and from there. I just went on a never ending. Binge to consume the highest quality financial content. That i could find. And i just love everything about money. Investing and personal finance and money is the one of the two subjects that affects every area of your life whether you want it to or not the other is your health and despite effecting so much about your life. It's largely a taboo subject. It's something that people are uncomfortable to talk to with each other which is just crazy to me. It'd be like what kind of exercise routine do you do if that was like taboo topic or what kind of food are you eating tonight but money is incredibly important and we are just all a lot of people are naturally programs to do money the wrong way we're program to be consumers to go out and to buy things and we compare ourselves to others so it's really easy to do the wrong thing with your money and since my passion is researching and learning about money myself. I'm a big fan of spreading that knowledge to other people. You know we have that in common actually rich dad. Poor dad was the seminal book for me as well. The kind of kickstarted. My interest in all of as well that and of a musician at the time and i went to an event where they had me fill out a retirement calculator like what i couldn't even start the page because my income was so inconsistent in anyway one concept. You mentioned there that i wanted to touch on was the idea of debt. And maybe more importantly the idea of manageable debt potentially so one concept i've struggled with is the idea of zero debt since i have a mortgage and car loan for example so i know there's folks like dave ramsey who are obviously angeles of living a debt. Free life paying down debt before you do anything else but the rub for me. Is that like you said. The entire economy is built on credit. So you know if you want to save up to buy a home you have to rent somewhere. In the meantime in order to rent you have to have a good credit score typically and have a good credit score you have to have some credit lines open etc so i guess i'm kind of curious to hear your thoughts on what's your opinion on debt and.

trae lockerbie brian twitter Brian youtube Benton dave ramsey
"brian feroldi" Discussed on Motley Fool Answers

Motley Fool Answers

44:21 min | 1 year ago

"brian feroldi" Discussed on Motley Fool Answers

"The. Multiple answers I'm out Southwick and I'm joined, is always by broke camp. Personal Finance expert here at the Motley Fool. Hey, BRO, well! Hello Alison. It's the July mailbag where we answer your questions and this month it's with the help of multiple analyst Jason Moser. Should you buy a house now? What is modern portfolio theory and also here Jason's thoughts on a lot of stocks all that and more on this week's episode of Molly fully answers. Jason thanks coming back. <hes> you know I mean i. told you you invite me. I'M GONNA. Be here every single time. Thanks for having me back. I mean we appreciate it because we know you're a busy man, and so we do appreciate that you carve out time for us in our little show, don't. Always always make time for those important people in my life rule number one make time for allison and Bro I love. It sounds like a good one to me. Everybody wins. All right well, I guess we should just get into it, so the first question comes from Darren I've subscribed to the full for over a year and I'm really pleased with the service. I would like to know your thoughts about my holdings in Shop Affi- I've bought several times over the last three years, and it's now over thirty five percent of my portfolio and I. Don't know if I should continue holding or trimmed down. What would you advise a good problem to have I was gonna say that exact same thing? That's a good problem have? In a very glad, you have subscribed to our services in your really pleased. That's that's what we aim to to do. We aim to please help you make money and so yeah. This is one of those situations that we will find ourselves in from time to time as investors. A nice problem to have but something you do need to address at some point because it is going to be a little bit different for everybody. In so coming from the perspective of I, also own shop, a Fi stock in it's it's a wonderful investment. It certainly is taking up a bigger. Part of my portfolio a not at thirty five percent where you are. I think for me. It really does boil down to. That sleeping at night test in other words, you need to be able to go to sleep at night without worrying about this kind of stuff, and if you feel like shop, a Fi represents too much. Of your portfolio if you feel like you're overly allocated their, then, you may need to consider pulling it back a little, but now I mean it's. It's I think it's always important. Note you know. It's a big difference between building up a position buying a position to make this size to make this type of allocation in your portfolio. It's another thing entirely to have position grow into beat into becoming that size i. mean that that is that is in a little bit of a different dynamic there, so people all the different ways, some sometimes folks will, they will just sort of looking at it from the house money, concept or you. You just sell enough shares to recoup your initial investment, and then you let the rest of it go. Some people are perfectly fine with thirty five percent. Some people are not. They want a pair back so i. do think you need to kind of figure out what helps you sleep at night I do think that shop by a great business. I think the biggest risk in only shop, if I right now is valuation, just because it's dominating, it's space, but it's not making any money yet, and it's probably going to be a little while until they do <hes> so that valuation risk is there, but ultimately yeah I think determine. Where you feel most comfortable with it, and if you feel like you need to put a little bit of that money off the table, and he thirty five percents a lot, certainly very understandable. If they've said something you need to do if you do decide to pair it back a little bit. You've made multiple purchases, so you can identify the shares to sell to manage the tax consequence if this isn't a brokerage account and not an IRA. All right next question comes from Steven. If you are forced into unemployment, you are paying federal income taxes on unemployment payments are not contributing to social security nor to Medicare. How does this affect your future calculation of social security benefits and can one contribute to the social security fund during unemployment to mitigate any adverse effects on benefits, it is a little bit adding insult to injury, but you do owe federal income taxes on your unemployment benefits, and if your state charges has a state income tax, you probably have to pay state tax on that, although there are a handful of states that exempt unemployment benefits, so that's good news. And by the way you, you could have taxes withheld from your unemployment benefits you file. This form called form w four V. if you want, they withhold ten percent, or you can do quarterly estimated payments if you wanNA avoid that big tax bill at the end of the year, but if you're strapped for cash is probably just better to get the money now worried about your taxes later <hes> Eh. Stephen notes out. You do not pay payroll taxes. Those are the things that go into social security and Medicare so. So. It could result in a lower social security benefit, however, keep in mind that social security is based on your thirty five highest earning years, so if you enter the workforce at say twenty two and you work until you're mid to late sixties. That's more than forty years where the working so hopefully. If you miss out, if this year is not so good somewhere among those other forty, five or so years, you've had thirty five really good year so that this year won't be that big of a deal. So it probably will be okay. And then to address the last question. Unfortunately, no, you cannot make voluntary contributions to social security. There is at least one academic working paper out there. That suggested that people could buy into social security by like extra credits as opposed to contributing to your 401k, but so far that has not been passed by Congress I had an ex. Question comes from Sam. I heard to stocks discussed on another full podcast. When I read articles about them, it mentions they are thinly traded. I have two questions one I'm sure my position would still be quite small so I think I'd still be able to get in and out, but are there other things I should think about when it's a thinly traded stock and question number two. Is there a certain amount of? Daily volume you like to look for when considering a stock foreign investment. What volume do you want to see to not be? Quote thinly traded stock. Yes very good question in thinly traded stock just refers to the either the amount of shares or the dollar volume of shares that would trade on any given. Market Day and so. The. Thinly traded stock. The the problem is that you may not necessarily able to buy and or sell at the prices. You necessarily think you might be able to in other words when you look at a stock's price and you're looking through the. What what's going on throughout the day on the market, you'll see that did ask spread, which is essentially the bid. Ask spread is it's what someone's willing to pay for the stock versus what someone is asking to be paid for the stock? Because you know you have a buyer and a seller on on in every transaction they're. Normally most cases, these business business bread is very tiny, the couple of pennies maybe for most stocks because they're. They're heavily traded right there. There are plenty of dollar volume. But there are a lot of smaller companies small caps in particular in in you know a micro cap, specifically that don't necessarily meet these kinds of thresholds, and so you definitely have to be aware of that now I'll go back in time just a little bit, too. When we were running the service here at the fool called million dollar portfolios Roman Romani portfolio that we help manage members, and it was never really a problem, but we did have a condition in there. We were always looking for at least ten million dollars in average. Trading volume total daily volume now understand I'm not saying the number of shares saying the amount of money so basically shares times price, but we're always looking for at least ten million dollars. That wasn't set in stone it. It was an idea for us. It wasn't ever really a problem because we had a very diversified portfolio with a number of different types of companies, but when you're looking for smaller companies, you would've just keep that in mind that did ask. Spread is is something that <hes> just because it says the stock is twenty dollars. That doesn't necessarily mean you'll pay twenty dollars if there is a a big spread there between the bid, and the ask in so I think whenever you're considering stocks that have any lighter trading volume or thinly traded stock. Just be sure to use limit orders. Limit Orders of let us stipulate the price that you are willing to pay for or that you're willing to. To accept a if you're selling a limit, order is just a really good way to protect yourself from any unwanted surprise thinly traded stocks. You might not always necessarily get them when you want them, so you might have to lead that limited are in there for a little while, but but a limit order is a great way to protect you from any unwanted surprises. Next question comes from Randall. I'm in my late thirties now, but earlier in my life. I was very very bad with my money. Collection Calls Welfare and bankruptcy or not strangers to me. I've been at the bottom then I met the love of my life, and she convinced me to turn things around ten, and a half years later and I have done a complete one eighty, I took control of our finances rebuilt my credit and started investing and listening to all you find folks all. I opened it investing account with the goal of saving and building enough a down payment on a home. I'm happy to say we've now reached that goal. I recently sold at a profit because I didn't want that. Money tied up in the market. If we are close to needing it for a house, but now that we're here, I'm not sure what to do. We currently rent a basement apartment and our neighbors general living situation are less than ideal to put it mildly. So, we're champing at the bit to jump into the housing market that being said the experts have been calling for a drop in the housing market for a while, and that was before the pandemic hit now I'm worried that if we buy right away a year or two or three from now, interest rates will spike, and we could be put in a difficult situation. I live near Toronto. Canada or the housing market is already highly inflated in relation to the rest of the country should I be worried? While Randall first of all congrats on turning your financial life around love hearing success stories like that so good job on that. So I'll start with my standard answer with the rent versus buy decision, and that is just pull up spreadsheet and compare the all in cost of renting, including what you could earn on the money that use for down payment versus the all in cost of buying including the opportunity cost of putting down payment as opposed to having invested as well as insurance and taxes and maintenance, and all that stuff and project, where you might be in five to ten years based on various scenarios on what happens to stocks, if you. Rent an invest the down payment versus what happens to? What you'd look like depending on where home prices go. Generally speaking. If mortgage rates go up, that could way down on real estate prices we did see mortgage rates. Go Up for a bit a few years ago, but the housing market did find, but you could certainly envision a scenario where rates went much much higher, making houses, much less affordable and prices would have to adjust. But I don't expect that to happen anytime soon. I think we're. GonNa have low rates for awhile, but beyond that I don't know I've given up trying to predict where interest rates are going or even paying attention to people who try to predict where interest rates are going, so who knows? That said since you live in Canada. I thought I'd check. In where rates are these days and I and I got a brief reminder that things are actually different in Canada so I did a little bit of research. And then realize I had reach out to someone who knows, I reached out to Canadian Motley fool analysts Jim Gillies, and he had some thoughts so first of all just for you non-canadians out there. It is really different so in America. We get this thirty year mortgage than we have the same payment for thirty years. It's fixed. They don't have that in Canada. What's the most common is a twenty five year? But only the first few years or fixed. And then adjusts so in that context you can understand why Randall is worried about interest rates going up because over the next depending on which alone he gets the most popular is a five year fixed, and then you basically have to go get a new loan probably. So that put that in context, a little more, but also Toronto, really is crazy expensive. Vs from the end of last year that put it as the most overvalued real estate market in the world behind Munich. As Jim pointed out in our call here in the US we had our housing peak in two, thousand, six, two, thousand seven, and then we had what he called a reset, which is basically prices came down significantly candidate and have that slight downturn at home prices, but then they just kept on going up, so it really is different there, so when Jim explain all this to me, the difference in mortgages and the difference in home prices. Frankly he was inclined to say to this guy. You Might WanNa rent for while more and see what happens, but he also had the good advice of okay. What if you buy in prices? Come Down Fifteen percent twenty percent. What if they come down to a point where he upside down? You owe more than the home is worth. Are you okay with that? If. You're okay with that. Maybe it's okay to do that. But it certainly sounds like dicey situation than if someone were telling me like I'm thinking of do this in Dubuque Iowa or something like that. <hes> couple of other differences. In case you're curious about Canada in the US. Your mortgage is portable in Canada south. You Buy A. Get the five year mortgage, but then move get to take the mortgage with you for the next house and <hes> interest is not tax deductible. US Look at you, Robert, broke? Camp Can Canadian real estate experts there you go. Next! Question comes from Chris. I was on twitter the other day and saw that one of your contributors Brian Feroldi tweeted that he doesn't believe in a long list of technical trading terms and then modern portfolio theory. Can you help me understand what not believing an MP? T with mean this? He believed that diversification doesn't reduce risk. Also every financial adviser I've ever talked to his preached empty, so I would love to hear the counterargument. Jason you're not Brian for all the. Question I am not Brian for all the do get the talk of Brian Pretty good bit though. I I must admit I. Don't know what he said here in regard to modern portfolio theory and all of these technical trading arms. But I think I can take a guess. Generally speaking I agree with them, and I think you could sit there and look up the portfolio theory in you know read about it as much as you want. Just go to google modern portfolio theory, and you can dig right in there, but in a nutshell ultimately, what modern portfolio theory is the intention behind it? It's meant to reduce risk while maximizing returns. It assumes that investors don't like risk. They prefer less risky portfolios to riskier ones in order to achieve a certain level of return so right there. I kind of kind of lost me right there because I don't believe that every ever investors risk averse I think some investors have a very. Healthy, appetite for risk, and frankly I would say I got a pretty high tolerance for risk when it comes to investing, made it just because of what I do for a living but I. You know to me I like having that trade off least unhappy. Happy to take some risks there. If I feel like that upside, it's going to be potentially worth. So with modern portfolio theory, it introduces a lot of fancy math in the form of variances and correlations in order to come up with this. Quantifiable, investing strategy that ultimately helps reduce risk while allowing the investor to achieve. Certain returns in. Maybe it works for some not I'm not dismissing it personally I. Don't use it, I don't personally subscribe to it I. Don't need it. I think honestly for us. In a really believe it's extends to to most people in our full universe is that is individual investors I think a more meaningful way to reduce risk. is to just extend your timeline like invest longer. So like Tom Gardner said a number of years back when we were. Working on Motley, fool one basically take your take the time line that you think you want to own any individual stocks you buy shares of starbucks and I plan on owning it for you know five years. Okay, we'll just double it. Cloning it for ten in all of a sudden right there. You've given yourself more time. Time is one of the big advantages we have is individual investors. Money managers don't have that advantage, Wall Street done generally handed abandoned, either, but if you can be patient and just invest in good businesses. That risk really starts to come down over time. There are plenty of studies out there. That show that risk comes down the longer you hold onto those stocks, which into me, just renders modern portfolio, theory, more or less not useful mean on things, not useful for everybody, but it's not useful for me and <hes> based on Chris. Question <hes>. It sounds like a agree with what Brian was saying there. We think I'll add to. That is I agree that risk is really not that much of a consideration if you are saving for retirement. But once you are in retirement man, and just say like you know what the market's not I'm going to extend my time highs in ten years. Because you need to spend money in that situation, I think diversification is important. It's important to have assets that don't always move the same direction at the same time. For some fools. That's just as simple as keeping any money need the next five years in cash, so you're right out any ups and downs, and that can be fine. But I. do think it makes sense to have. A mix of investment so that right now, technology stocks are doing very well, and we hope that continues to do well, but we remember was that happened in two thousand from two thousand to two, and there were down for quite a while anyone who retired in one, thousand, nine, hundred nine, or so it was very happy to have some small caps value maybe a. A little international, some reits to ride out the storm Yeah I think we talk about that often like recognizing where you are as an investor in life, are you in the grow your wealth stage, or are you in the protector stage, because they are two very different strategies, and we're all hopefully going to be in both of them at one point or another right? I personally and still on the grow your wealth stage I. Think we all probably are, but you will at some point get to where you need to focus on protecting the wealth that you've made so that you can then have that money to spend, and that definitely will dictate your investment strategy things that you're invested in and whatnot. Generally speaking I do like the idea for people who are just risk averse and have this notion that investing is just too risky. I mean the fact of the matter is not investing as far away greater risk like not investing. You will never grow your money if you don't the best, so if if if risk is a problem, I think generally speaking. Along the lines of diversification idea that that bros. talking about him, he just invest in invest in SNP index fund is something that just follows the progress and p. you know you're going to be participating in and if you look at that over the over the stretch of time, their five ten twenty thirty years, I mean that trend does go one way. It, but clearly the older you get, the more you need to start focusing on protecting your wealth, and that will change the way you view things. Right next question comes from Alex from Alexandria if I buy Muny bonds from another state in my IRA. Is it still taxable and Alexander with who we have a bond on and we do have a bunch. I know Alex up super excited about having a bunch on in Alexandria to I can't believe I haven't been there. It's like two miles from my house, but we still haven't been oh i. know because there's a global pandemic going on and we. saw. Alyx if we buy me bonds from another state in my IRA is still taxable. Bro, help him out or her or so Muny Barnes. People Invest Immunity bonds because they're free of federal taxes and in many cases. If you're buying bonds issued by the place you live, they might be free of state and local taxes, so that can be doubly triply tax free. That's why people buy 'em. There are some times, however that if you own immune, abound outside of an IRA. Pay Taxes and this surprises some people. There's something called the minimum tax. If you buy immunity bond at a discount, and then it matures at par. If you buy a distress, Muny bond for like you put an eight thousand dollars, and you sell it later for ten thousand dollars as a capital gain. You'll be taxed on that. So, there are some times when you would pay taxes on media. Now, Alex is asking what if it's an IRA? Do I have to worry about paying tax interest. If it comes from another state and the answer is no, you won't have to worry about that. The only thing I would say is. Generally speaking immune bond already has built in tax advantages, so you wouldn't keep it in an IRA, unless there's the example of the stuff I was saying previously like for. It's one of those exceptions when him UNIBOND would result in taxes than you might WanNa keep it an IRA, but generally speaking. If you're going to buy Muny Bond, keep it out of an IRA. Next question comes from Boone. I just did my first. Roth conversion and looked at that old account for the first time in. There was the expected dividend producing fund I remembered, but there was a stock chesapeake energy that I had completely forgotten about since I purchased the stock in two thousand, six fifteen. It's down way down like eight point five percent off the purchase price. What should I do with it now? It's in a tax deferred accounts so I. Don't think the loss is realized until I. Start to pull money out of the account and that might not. Not Be for fifteen years current value of all my shares will be about one percent of the value of the account after the conversion. Do I sell in the very little value? I had left and depend on E. Trade to keep up with lost for me or should I hold on based on the slim chance. The stock will be worth more in the next ten years. Oil Stocks do act unusually on occasion, only oil stocks. Stock everything else makes that usually. Chesapeake has been really. Interesting Story to follow and frankly. I don't I. Don't know that I would look at it today. As a business that I'd WANNA own so typically if I. You know I think it was yet idea. Didn't sound like a position are actively building united investment didn't work out. I mean that that happens to all of us. We don't get them all right. We have a philosophy here at the full. A lot of do we like to? Water flowers and pull the weeds, and that's just a nice way of saying. Add to our winners in to get rid of losers in. This I think is more than likely slated to continue being a loser I mean. Chesapeake has lost a lot of value. In it does sound like based on when you purchased this, these is absolutely busted I mean. There there are all sorts of reasons to sell one of them is if you thesis busted and the reason why you invest in the company is is no longer the case, and I would he probably is the case with Chesapeake so to me like you know, you could sit there and let it go, but but what's the goal trying to get back to even, or are you trying to get back a couple of bucks for me a lot of times? I'll I'll take a little opportunity here and there to just go ahead and pull those weeds sell it. Be Done with it. In even though it's just unique out a little bit value there, you can still take that money and do something more productive with it. So. Yeah T to me. I can't tell you to buy or sell obviously, but I can certainly understand. Selling in this case, but I you know. As as oil and natural gas energy can can turn around. This is going to be one that has a lot of headwinds in in. You might be waiting a very long time <hes> to to get any of this money back. I point out here that I it seems that maybe boone has a slight misunderstanding of how taxes in aries work because he talked about realizing the loss when he takes the money out and trade keeping track of the loss for him, it sounds to me that he thinks that he can write the loss off whence he takes the money out. That may not be the case, but just to be clear. One of the great benefits of an IRA is you don't pay taxes on the gains, interest and dividends from year to year. But. One of the drawbacks is. You can't take a capital loss on that as well so there's really no no way to benefit on your tax return from this loss. Next question comes from Benjamin. You recommend seeing a fee. Only financial adviser for check in every so often I know there is the Garrett planning network and others to help find an advisor. But what questions do you ask? And what answers do you listen for when trying to find one that is worth his or her one hundred fifty to two hundred fifty per hour. So I would say start first with asking yourself some questions. What are you looking for? You could go for the whole launch. Lada where someone is managing your money analyzing retirement plan helping new save and a five twenty nine. Maybe even doing your taxes with some financial planners do help with the state planning, or are you looking for something more targeted? You just want advice about am I saving enough for retirement, or are you close to retirement? You're like I just WanNa make sure that I'm doing right when terms like choosing my Medicare plan and claiming social security at the right time, so first of all just be very clear of what you're looking for. Then if it involves investments in any way, you WanNa, make sure that you find someone who is at least in the general same area philosophically and I say this, because many financial planners are hardcore index. And if you come to them as a motley fool, listener member with a lot of individual stocks. They may say okay. I'll give you some general asset allocation guidance, or they'll say I don't care if you like to pick. Stocks are not my advises, sell the stocks and go to index funds, so you want to make sure that if you're gonNA, ask for any sort of investment. Advice that you wanna find someone who's someone somewhat at least aligned for what you're looking for. Once, you've got that then. Just asked some of the typical stuff. You might expect so credentials certified financial planner. Are they a CPA either their personal financial specialist. How long they've been in the business. There are lots of people who. <hes> have not been in the business very long. Even though they're not young people, a lot of people choose financial planning as a second career, which I think is great, but just because someone may be look like they're in their forties or fifties. Sixties doesn't mean they've been in the business that long, and you WANNA. See if they've worked with someone like you right so if you have. Maybe. You have a large amount of wealth large income huge portfolio. You WanNa make sure that they have experienced with dealing with those issues, but on the flip side to if if you have, are you know middle income, decent size portfolio, but nothing too complicated. You don't WanNa. Go to someone who's used to dealing with someone who's wealthier partially because those people charge a lot more. You want to find someone who's kind of a little more lined up with what you're doing. Then make appointments with three folks. All of them will do get do free. Get acquainted means, and you're just looking for someone who you feel comfortable with. Since, you mentioned Garrett Big Fan of the Gary Planning Network and other is is not for the National Association of Personal Financial Advisers. But Garrett on their website has a how to choose an adviser section. Just Google attitude visor Garrett Planet Network has a great chapter from a dummies book that they wrote about how to choose adviser, and they have a good questionnaire that you can print out in US asking lots of good questions of financial planner. It's tough. Choosing a financial planner like my mom just went through that Bro! Is You know and she didn't really have a lot of options in Boise Idaho. Maybe two and one of them, she I never called her back, and never got back her, and the other one was just so busy just so busy, and just she just never. It's it can be rough. Finding a financial planner can be I. Think what we'll see is one of the consequences of this. Of the coronavirus pandemic. Just, like we are all used to working from home, many financial advisors and financial planners an now working from home. So in what they're doing is they're becoming licensed in more states. So, if you are more comfortable, working with someone over zoom remotely I think you don't have to stick with someone in your area. You can go beyond your locations, but you know some people don't feel comfortable that if if they're going to have someone managing their life savings, they want to be able to meet them in person. That's just a personal choice. All right next question comes from twitter. Is that right from sully what I hear? Okay? I just listened to the episode mentioning Your Weakness Two. Shopping carts and Tj, Maxx that me or you Jason. Accused me. Thoughts on the stock. If I had a war on Amazon, basket would be Costco TJ maxx Home Depot tractor supply. What would be your basket against online retail? That's funny. Well okay, listen I wouldn't have basket against online retail, because online retails where it's at. The whole idea. The whole idea behind the basket approaches to find a long term trend that you feel like the world is headed toward and so the war on cash basket, for example that was always one about people using cash war, <hes> traffic payments now with that said I get the spirit of the question some going to answer it because I do like some of these ideas. And I I would definitely include Costco in their <hes> in Home Depot's well. Home Depot gets a lot of my money. Doesn't, but they have a very loyal fan base of customers that just are happy to renew year in year out. So I love those membership models there, so costco and a Home Depot for sure <hes> you know I'm going to give a little shout at my wife Robin I. Know that she would approve of my adding target to the mixer. She hasn't been raving about targets APP and ordering on the APP the able to go to the store. Just pick it up right there <hes>. I've talked with Ron Gross on more than one occasion about target and how this really has. Become a twenty first century resale right they're doing. They're doing everything online and in physical stores. What they call Alma Channel and then my fourth and I'm GONNA. Take this. You probably aren't expecting this when Alison. I'm GonNa Shock and all you. I'm ready. I'm ready Alta. We're going. Make up my I know my daughter's love. It ugly ugly Mug like this. What do I know about makeup? Tell you what. Get! A House with two daughters and a wife. That's what I know about make. There's a lot of it in an Ulta is a really really good business. They actually have a very nice diversified revenue stream. They've got the salon a`dynamic of the business which encourages people to go there <hes> they do have an online business. They have an augmented reality function there at where you can actually like. Try things on makeup to see how it looks. Mary Dillon just a phenomenal other adults of that's my fourth, their Ulta but they I appreciate the spirit of the question I like the idea I'm not saying this is the basket. I'm not tracking this basket in a not a not backing this basket, but in the spirit of the question if I had to develop. A basket, such as this one I think it'd go with those four. Yeah, I mean I guess you just have to think about what retail out there is something that you would still physically go to. Because the actual retail experience is being in the space is the experience and what you're there for? And I know I mean before Corona virus we I would go to target and just just couldn't believe how much money I had spent from walking through a few of the aisles. TJ Max is just a phenomenal business I mean what they've done through the years. Is really capitalized on the nature of the business, the advantage they have in that treasure hunt kind of nature like you go to TJ Max, maybe not necessarily looking for something, and then you end up finding a lot of things, and it can be a little bit lumping at times, but but generally speaking like management's a very good job of running that business, and they know how to exploit the advantage of experience. I think they're online game. Though I think they could probably get something going with online, and they just have not have not yet and so I. Haven't since Corona Virus for example. I haven't spent a single dollar there, but I continue to still shop at. Home Depot I. Think Yeah! We still shopping at home depot because we're doing. You know you gotta buy lumber somewhere. And I know my grandparents out in my my inlaws out in rural Virginia. They love tractor supply store, but that's not. That's not in <hes> where we live, but. Still New deck at the house there allison. I mean you, can you see? A big exposed beam behind me and some drywall work that needs to happen. Have lots of drywall work that needs to happen now though. Yeah Anyway get to that. All right next question comes from Matthew. I got married to my amazing wife nine days ago in a small Kobe nineteen wedding in our front yard after we postponed it from its original date in April all. It was definitely different, but still very special. My question is in relation to this wonderful event. My salary has been at a level that has allowed me to fund a roth. Ira I love the optionality of it, but after marrying my bad ass, wife are combined. Salaries are now over the limit that would allow me to fund the Roth. IRA does this affect occur immediately? Do I need to now open up a traditional. IRA and begin funding it or do I have until the end of the year. Matthew wants a Roth Bachelor party one last. Well Matthew I have bad news. When it comes to most things in taxes, your status and your age and things like that depends on where you are on the last day of the year, said if you're married on the last day of the year, you were considered married for the whole year. So that means if you contributed started contributing to a Roth IRA for twenty twenty. You need to call up your brokerage. Firm and re characterize that as a traditional. Now don't have any other traditional IRA, as it's very easy to do the back door, Ross which we've talked about before you can just google it or even when you call the brokerage, just say I want to do the backdoor. Roth and they'll tell you what to do. If, you have other traditional IRA as you can still do. It just becomes more complicated and you'll probably pay more taxes. So you, but you may not be totally out of luck and I should say that's only if you have a traditional IRA doesn't matter if your wife has traditional areas. One exception by the way <hes> of of what I just said. In terms of tax status and last day of the year is distributions from retirement accounts before it's age fifty nine and a half, you actually have to be age fifty nine and a half to avoid that ten percent early distribution penalty, unless some of the many exceptions that are out there exist. Right next question comes from Warren Warren Buffett. Maybe I don't know that's why I was thinking. He's asking about coq, so maybe maybe. Once James Opinion on coke. By? Or hold? Wants to now. I'd give buffet night give. Kiesel Warren of the same advice and I would say. For some I'm not buying it. Not Buying it I'm not holding it if I own it. I guess that means sell it. Even Atlanta Georgia person like you i. feel like it's almost sacrilege. I am pretty close to probably not being ever even invited back. But the facts are the facts. Okay, I mean you do have to look at the stock itself has been ain't bad stockton for the last five years. I mean I do understand why when you look at it what they do, I mean they have. Four hundred master brands, and less than fifty percent of them are the big global brands that are actually responsible for almost all of their revenue when I say almost only ninety eight percent, so it's a business. It's very reliant on on. You know a small portfolio of really successful grants. The problem is now. We've always talked about cocoa beans such a great distribution story and that's true. They've got a distribution network. It's just phenomenal, but the problem is now. They're what they're distributing is is being seen as not so good for you in so you're seeing them. Have it into to essentially pivot away from what you know brought them all of the success for all these years. Years in soda and that that's not going to change I. Mean you're always GonNa have people to drink soda? People are not to drinking as much soda going forward in the numbers of just kind of the kind of shown that through that through the quarters in the years of Coca, Cola and Pepsi Pepsi. Has the salty snacks division, which I've always been very. Impressed by I, mean I love a good Cheeto, and so I mean anytime you can throw a bag of those cheetos in my Patriot Amok GonNa, turn it their coq. Interrupting, but I think this is also very important point. You tried the Jalapeno White Cheddar crunchy cheetos. The White Shit or so. I've tried to Jalapeno ones but I've not seen the white Cheddar White Cheddar Jalapeno crunchy cheetos. Don't get the puffy. The poofy ones are not as good, but the crunchy white Cheddar Jalapeno Cheetahs. them by them. They're amazing. I have to back. Pain you. I'll get those next time. I promise I, mean Eh. One. crunchy wants the puffy ones, so that people won't you're not? You're not seeing poopie. Who using poofy Joe Copy? We'll be <hes>. Coca doesn't have that dynamic of their business. They don't have that dynamic to their business, and they've suffered from that Pepsi's Pepsi's outperform coca-cola over the last several years. It's not safe. Pepsi or coke get it back. I'm sure they probably can. But what I am saying is I think there are a lot of better ideas out there, and so I wouldn't be putting new money into Coca Cola and frankly if I did own it. I probably would look at selling it and you know if you've got a beverage company, maybe own starbucks. It seems like the science coming out in support of coffee, right? It's coming and telling you that these sodas. They're gonNA. Make you fat. Coffee, it could extend your life. It could help you live longer. SMART Mexican looking this a starbucks as well is. That sounds like study from the copy roasters of America. Do! Something that Chris Hill sent me the other day. that. We sleep at night. I'm glad I've been drinking coffee as long as I have God knows what I would look like otherwise. You're a good looking man. Rick. good-looking next question comes from. A. I'm trying to save money for my kid's College. Fund while the five nine is a great option. I'm limited to investing in mutual funds, which means at best I'm going to get what the market gets assuming I do some sort of low cost index fund and I be a capital F. Fool investor have been doing much better than the market in the last three years of being a member of. Of Stock Advisor Enroll breakers, even during this pandemic mess by listening to every full podcast and following David and Tom's and yours and every one else's in the full universe. My portfolio of about one hundred stocks is up here today. Thirty percent to the market's down five percent as of day as of today weighed down by three sluggish five to nine plants that are also down five percent each. I feel like throwing away money by using the five to nine, and not being allowed to select my own great companies in which to invest. What's more, my understanding is that the five to nine does not count as an asset for the kid when applying for student aid, but the coverdale does. So I come to you with a simple question. Can I have my cake and eat it, too? What if I wanted to use the coverdell to buy individual stocks? Until the child is nearing college? At which point I then converted to a five to nine. This allows me to get better returns and avoid it being an asset for financial aid and get the favorable tax benefit. So, chose this question, because first of all Dune does a good job explaining the benefits of the coverdell over the five twenty nine, you can buy individual stocks. You can buy and sell them all day long. We recommend that, but you can. Whereas with the five twenty nine, you can only make two changes to the investments a year, and it's all mutual funds. So. That's you did a good job of explaining that. I will point out with the coverdell. It's gotta low contribution limit of only two thousand dollars a year, so for some people save more for college, but they can max out to cover it out, but then put the rest in a five twenty nine. One thing that doomed does not have quite right. Is The financial aid treatment the financial aid treatment? Coverdale's and five twenty nine is identical. They're treated as assets of the parent, not the kid that is favourable from a financial aid perspective. It's not negligible doesn't mean it doesn't have any effect on financial aid, but it's better than an asset that is owned. By the kid. He can. Transfer money from the Coverdell to the five twenty nine. If for some reason, he decides to do that, but you can't transfer it. The other way around so were convinced to try out the covered. You have money in a five twenty nine. You can't move it from the five twenty nine. To the coverdale. What other interesting thing that he pointed out is that he is doing very well with his investments, and he owns about one hundred stocks. We get this question a lot. Either on the show, or on the full live that we run every day for members of full services, and that is how many stocks should I own, and if I owned too many are not just owning index fund watering down my returns, but here's an example if someone owns a one hundred stocks is still crushing the market. Idol last question comes from Cameron thoughts on the valuation of Stone Co in light of the corona virus for a fragile country like Brazil. This could be the tipping point after so many other headwinds. But how does that affect stone? coz Business Jason I. Don't even know what Stone Co is. What is still business? Yes, don't Coz a payments company that's focused on Latin American markets in Brazil and particular in so <hes>. I guess it could be. Draw you can draw a parallel to to a with square through pay pal at, but generally speaking I mean it's payments. Company focused on Latin America. Primarily Brazil. Is the big money making market kind of like Marco Libra, they're. In I, I, it's a it's. A NEAT opportunity, <unk> gained a lot of headline recently, when and it was, it was seen that Berkshire hathaway. Warren Buffett's company Berkshire hathaway taken a five percent position in the company, which is pretty considerable <hes> i. Think in the near term. You have to acknowledge the fact that. They're gonNA, be some real headwinds in in Brazil particularly because of the pandemic I mean. The flip side of that is role in same boat kind of in that regard. The entire world is dealing with it, so it's not specifically you know it's. It's not particular to one economy or one country some. To get hit harder than others I, do feel like Brazil. Be at a place where they can recover from this given <hes>. You know some of the other businesses in the area. I mean that that that I think is. Who knows ultimately how? That's GONNA shake, but generally speaking. I think the move away from cash towards cashless. Transactions in and financial software that's not stopping if anything, this hastens that which which is what I think, Cameron's talking about there and <hes> for a company like stone. Co, neither are other companies in the space pags bureau in roquetas libra to <hes>, but you know moving money around is a big big market opportunity, and there's nothing that says they won't be able to expand well beyond the Latin American markets, too, so I I'd say cautiously optimistic I mean I

Molly Jason allison Darren
July Mailbag with Jason Moser

Motley Fool Answers

44:21 min | 1 year ago

July Mailbag with Jason Moser

"The. Multiple answers I'm out Southwick and I'm joined, is always by broke camp. Personal Finance expert here at the Motley Fool. Hey, BRO, well! Hello Alison. It's the July mailbag where we answer your questions and this month it's with the help of multiple analyst Jason Moser. Should you buy a house now? What is modern portfolio theory and also here Jason's thoughts on a lot of stocks all that and more on this week's episode of Molly fully answers. Jason thanks coming back. you know I mean i. told you you invite me. I'M GONNA. Be here every single time. Thanks for having me back. I mean we appreciate it because we know you're a busy man, and so we do appreciate that you carve out time for us in our little show, don't. Always always make time for those important people in my life rule number one make time for allison and Bro I love. It sounds like a good one to me. Everybody wins. All right well, I guess we should just get into it, so the first question comes from Darren I've subscribed to the full for over a year and I'm really pleased with the service. I would like to know your thoughts about my holdings in Shop Affi- I've bought several times over the last three years, and it's now over thirty five percent of my portfolio and I. Don't know if I should continue holding or trimmed down. What would you advise a good problem to have I was gonna say that exact same thing? That's a good problem have? In a very glad, you have subscribed to our services in your really pleased. That's that's what we aim to to do. We aim to please help you make money and so yeah. This is one of those situations that we will find ourselves in from time to time as investors. A nice problem to have but something you do need to address at some point because it is going to be a little bit different for everybody. In so coming from the perspective of I, also own shop, a Fi stock in it's it's a wonderful investment. It certainly is taking up a bigger. Part of my portfolio a not at thirty five percent where you are. I think for me. It really does boil down to. That sleeping at night test in other words, you need to be able to go to sleep at night without worrying about this kind of stuff, and if you feel like shop, a Fi represents too much. Of your portfolio if you feel like you're overly allocated their, then, you may need to consider pulling it back a little, but now I mean it's. It's I think it's always important. Note you know. It's a big difference between building up a position buying a position to make this size to make this type of allocation in your portfolio. It's another thing entirely to have position grow into beat into becoming that size i. mean that that is that is in a little bit of a different dynamic there, so people all the different ways, some sometimes folks will, they will just sort of looking at it from the house money, concept or you. You just sell enough shares to recoup your initial investment, and then you let the rest of it go. Some people are perfectly fine with thirty five percent. Some people are not. They want a pair back so i. do think you need to kind of figure out what helps you sleep at night I do think that shop by a great business. I think the biggest risk in only shop, if I right now is valuation, just because it's dominating, it's space, but it's not making any money yet, and it's probably going to be a little while until they do so that valuation risk is there, but ultimately yeah I think determine. Where you feel most comfortable with it, and if you feel like you need to put a little bit of that money off the table, and he thirty five percents a lot, certainly very understandable. If they've said something you need to do if you do decide to pair it back a little bit. You've made multiple purchases, so you can identify the shares to sell to manage the tax consequence if this isn't a brokerage account and not an IRA. All right next question comes from Steven. If you are forced into unemployment, you are paying federal income taxes on unemployment payments are not contributing to social security nor to Medicare. How does this affect your future calculation of social security benefits and can one contribute to the social security fund during unemployment to mitigate any adverse effects on benefits, it is a little bit adding insult to injury, but you do owe federal income taxes on your unemployment benefits, and if your state charges has a state income tax, you probably have to pay state tax on that, although there are a handful of states that exempt unemployment benefits, so that's good news. And by the way you, you could have taxes withheld from your unemployment benefits you file. This form called form w four V. if you want, they withhold ten percent, or you can do quarterly estimated payments if you wanNA avoid that big tax bill at the end of the year, but if you're strapped for cash is probably just better to get the money now worried about your taxes later Eh. Stephen notes out. You do not pay payroll taxes. Those are the things that go into social security and Medicare so. So. It could result in a lower social security benefit, however, keep in mind that social security is based on your thirty five highest earning years, so if you enter the workforce at say twenty two and you work until you're mid to late sixties. That's more than forty years where the working so hopefully. If you miss out, if this year is not so good somewhere among those other forty, five or so years, you've had thirty five really good year so that this year won't be that big of a deal. So it probably will be okay. And then to address the last question. Unfortunately, no, you cannot make voluntary contributions to social security. There is at least one academic working paper out there. That suggested that people could buy into social security by like extra credits as opposed to contributing to your 401k, but so far that has not been passed by Congress I had an ex. Question comes from Sam. I heard to stocks discussed on another full podcast. When I read articles about them, it mentions they are thinly traded. I have two questions one I'm sure my position would still be quite small so I think I'd still be able to get in and out, but are there other things I should think about when it's a thinly traded stock and question number two. Is there a certain amount of? Daily volume you like to look for when considering a stock foreign investment. What volume do you want to see to not be? Quote thinly traded stock. Yes very good question in thinly traded stock just refers to the either the amount of shares or the dollar volume of shares that would trade on any given. Market Day and so. The. Thinly traded stock. The the problem is that you may not necessarily able to buy and or sell at the prices. You necessarily think you might be able to in other words when you look at a stock's price and you're looking through the. What what's going on throughout the day on the market, you'll see that did ask spread, which is essentially the bid. Ask spread is it's what someone's willing to pay for the stock versus what someone is asking to be paid for the stock? Because you know you have a buyer and a seller on on in every transaction they're. Normally most cases, these business business bread is very tiny, the couple of pennies maybe for most stocks because they're. They're heavily traded right there. There are plenty of dollar volume. But there are a lot of smaller companies small caps in particular in in you know a micro cap, specifically that don't necessarily meet these kinds of thresholds, and so you definitely have to be aware of that now I'll go back in time just a little bit, too. When we were running the service here at the fool called million dollar portfolios Roman Romani portfolio that we help manage members, and it was never really a problem, but we did have a condition in there. We were always looking for at least ten million dollars in average. Trading volume total daily volume now understand I'm not saying the number of shares saying the amount of money so basically shares times price, but we're always looking for at least ten million dollars. That wasn't set in stone it. It was an idea for us. It wasn't ever really a problem because we had a very diversified portfolio with a number of different types of companies, but when you're looking for smaller companies, you would've just keep that in mind that did ask. Spread is is something that just because it says the stock is twenty dollars. That doesn't necessarily mean you'll pay twenty dollars if there is a a big spread there between the bid, and the ask in so I think whenever you're considering stocks that have any lighter trading volume or thinly traded stock. Just be sure to use limit orders. Limit Orders of let us stipulate the price that you are willing to pay for or that you're willing to. To accept a if you're selling a limit, order is just a really good way to protect yourself from any unwanted surprise thinly traded stocks. You might not always necessarily get them when you want them, so you might have to lead that limited are in there for a little while, but but a limit order is a great way to protect you from any unwanted surprises. Next question comes from Randall. I'm in my late thirties now, but earlier in my life. I was very very bad with my money. Collection Calls Welfare and bankruptcy or not strangers to me. I've been at the bottom then I met the love of my life, and she convinced me to turn things around ten, and a half years later and I have done a complete one eighty, I took control of our finances rebuilt my credit and started investing and listening to all you find folks all. I opened it investing account with the goal of saving and building enough a down payment on a home. I'm happy to say we've now reached that goal. I recently sold at a profit because I didn't want that. Money tied up in the market. If we are close to needing it for a house, but now that we're here, I'm not sure what to do. We currently rent a basement apartment and our neighbors general living situation are less than ideal to put it mildly. So, we're champing at the bit to jump into the housing market that being said the experts have been calling for a drop in the housing market for a while, and that was before the pandemic hit now I'm worried that if we buy right away a year or two or three from now, interest rates will spike, and we could be put in a difficult situation. I live near Toronto. Canada or the housing market is already highly inflated in relation to the rest of the country should I be worried? While Randall first of all congrats on turning your financial life around love hearing success stories like that so good job on that. So I'll start with my standard answer with the rent versus buy decision, and that is just pull up spreadsheet and compare the all in cost of renting, including what you could earn on the money that use for down payment versus the all in cost of buying including the opportunity cost of putting down payment as opposed to having invested as well as insurance and taxes and maintenance, and all that stuff and project, where you might be in five to ten years based on various scenarios on what happens to stocks, if you. Rent an invest the down payment versus what happens to? What you'd look like depending on where home prices go. Generally speaking. If mortgage rates go up, that could way down on real estate prices we did see mortgage rates. Go Up for a bit a few years ago, but the housing market did find, but you could certainly envision a scenario where rates went much much higher, making houses, much less affordable and prices would have to adjust. But I don't expect that to happen anytime soon. I think we're. GonNa have low rates for awhile, but beyond that I don't know I've given up trying to predict where interest rates are going or even paying attention to people who try to predict where interest rates are going, so who knows? That said since you live in Canada. I thought I'd check. In where rates are these days and I and I got a brief reminder that things are actually different in Canada so I did a little bit of research. And then realize I had reach out to someone who knows, I reached out to Canadian Motley fool analysts Jim Gillies, and he had some thoughts so first of all just for you non-canadians out there. It is really different so in America. We get this thirty year mortgage than we have the same payment for thirty years. It's fixed. They don't have that in Canada. What's the most common is a twenty five year? But only the first few years or fixed. And then adjusts so in that context you can understand why Randall is worried about interest rates going up because over the next depending on which alone he gets the most popular is a five year fixed, and then you basically have to go get a new loan probably. So that put that in context, a little more, but also Toronto, really is crazy expensive. Vs from the end of last year that put it as the most overvalued real estate market in the world behind Munich. As Jim pointed out in our call here in the US we had our housing peak in two, thousand, six, two, thousand seven, and then we had what he called a reset, which is basically prices came down significantly candidate and have that slight downturn at home prices, but then they just kept on going up, so it really is different there, so when Jim explain all this to me, the difference in mortgages and the difference in home prices. Frankly he was inclined to say to this guy. You Might WanNa rent for while more and see what happens, but he also had the good advice of okay. What if you buy in prices? Come Down Fifteen percent twenty percent. What if they come down to a point where he upside down? You owe more than the home is worth. Are you okay with that? If. You're okay with that. Maybe it's okay to do that. But it certainly sounds like dicey situation than if someone were telling me like I'm thinking of do this in Dubuque Iowa or something like that. couple of other differences. In case you're curious about Canada in the US. Your mortgage is portable in Canada south. You Buy A. Get the five year mortgage, but then move get to take the mortgage with you for the next house and interest is not tax deductible. US Look at you, Robert, broke? Camp Can Canadian real estate experts there you go. Next! Question comes from Chris. I was on twitter the other day and saw that one of your contributors Brian Feroldi tweeted that he doesn't believe in a long list of technical trading terms and then modern portfolio theory. Can you help me understand what not believing an MP? T with mean this? He believed that diversification doesn't reduce risk. Also every financial adviser I've ever talked to his preached empty, so I would love to hear the counterargument. Jason you're not Brian for all the. Question I am not Brian for all the do get the talk of Brian Pretty good bit though. I I must admit I. Don't know what he said here in regard to modern portfolio theory and all of these technical trading arms. But I think I can take a guess. Generally speaking I agree with them, and I think you could sit there and look up the portfolio theory in you know read about it as much as you want. Just go to google modern portfolio theory, and you can dig right in there, but in a nutshell ultimately, what modern portfolio theory is the intention behind it? It's meant to reduce risk while maximizing returns. It assumes that investors don't like risk. They prefer less risky portfolios to riskier ones in order to achieve a certain level of return so right there. I kind of kind of lost me right there because I don't believe that every ever investors risk averse I think some investors have a very. Healthy, appetite for risk, and frankly I would say I got a pretty high tolerance for risk when it comes to investing, made it just because of what I do for a living but I. You know to me I like having that trade off least unhappy. Happy to take some risks there. If I feel like that upside, it's going to be potentially worth. So with modern portfolio theory, it introduces a lot of fancy math in the form of variances and correlations in order to come up with this. Quantifiable, investing strategy that ultimately helps reduce risk while allowing the investor to achieve. Certain returns in. Maybe it works for some not I'm not dismissing it personally I. Don't use it, I don't personally subscribe to it I. Don't need it. I think honestly for us. In a really believe it's extends to to most people in our full universe is that is individual investors I think a more meaningful way to reduce risk. is to just extend your timeline like invest longer. So like Tom Gardner said a number of years back when we were. Working on Motley, fool one basically take your take the time line that you think you want to own any individual stocks you buy shares of starbucks and I plan on owning it for you know five years. Okay, we'll just double it. Cloning it for ten in all of a sudden right there. You've given yourself more time. Time is one of the big advantages we have is individual investors. Money managers don't have that advantage, Wall Street done generally handed abandoned, either, but if you can be patient and just invest in good businesses. That risk really starts to come down over time. There are plenty of studies out there. That show that risk comes down the longer you hold onto those stocks, which into me, just renders modern portfolio, theory, more or less not useful mean on things, not useful for everybody, but it's not useful for me and based on Chris. Question It sounds like a agree with what Brian was saying there. We think I'll add to. That is I agree that risk is really not that much of a consideration if you are saving for retirement. But once you are in retirement man, and just say like you know what the market's not I'm going to extend my time highs in ten years. Because you need to spend money in that situation, I think diversification is important. It's important to have assets that don't always move the same direction at the same time. For some fools. That's just as simple as keeping any money need the next five years in cash, so you're right out any ups and downs, and that can be fine. But I. do think it makes sense to have. A mix of investment so that right now, technology stocks are doing very well, and we hope that continues to do well, but we remember was that happened in two thousand from two thousand to two, and there were down for quite a while anyone who retired in one, thousand, nine, hundred nine, or so it was very happy to have some small caps value maybe a. A little international, some reits to ride out the storm Yeah I think we talk about that often like recognizing where you are as an investor in life, are you in the grow your wealth stage, or are you in the protector stage, because they are two very different strategies, and we're all hopefully going to be in both of them at one point or another right? I personally and still on the grow your wealth stage I. Think we all probably are, but you will at some point get to where you need to focus on protecting the wealth that you've made so that you can then have that money to spend, and that definitely will dictate your investment strategy things that you're invested in and whatnot. Generally speaking I do like the idea for people who are just risk averse and have this notion that investing is just too risky. I mean the fact of the matter is not investing as far away greater risk like not investing. You will never grow your money if you don't the best, so if if if risk is a problem, I think generally speaking. Along the lines of diversification idea that that bros. talking about him, he just invest in invest in SNP index fund is something that just follows the progress and p. you know you're going to be participating in and if you look at that over the over the stretch of time, their five ten twenty thirty years, I mean that trend does go one way. It, but clearly the older you get, the more you need to start focusing on protecting your wealth, and that will change the way you view things. Right next question comes from Alex from Alexandria if I buy Muny bonds from another state in my IRA. Is it still taxable and Alexander with who we have a bond on and we do have a bunch. I know Alex up super excited about having a bunch on in Alexandria to I can't believe I haven't been there. It's like two miles from my house, but we still haven't been oh i. know because there's a global pandemic going on and we. saw. Alyx if we buy me bonds from another state in my IRA is still taxable. Bro, help him out or her or so Muny Barnes. People Invest Immunity bonds because they're free of federal taxes and in many cases. If you're buying bonds issued by the place you live, they might be free of state and local taxes, so that can be doubly triply tax free. That's why people buy 'em. There are some times, however that if you own immune, abound outside of an IRA. Pay Taxes and this surprises some people. There's something called the minimum tax. If you buy immunity bond at a discount, and then it matures at par. If you buy a distress, Muny bond for like you put an eight thousand dollars, and you sell it later for ten thousand dollars as a capital gain. You'll be taxed on that. So, there are some times when you would pay taxes on media. Now, Alex is asking what if it's an IRA? Do I have to worry about paying tax interest. If it comes from another state and the answer is no, you won't have to worry about that. The only thing I would say is. Generally speaking immune bond already has built in tax advantages, so you wouldn't keep it in an IRA, unless there's the example of the stuff I was saying previously like for. It's one of those exceptions when him UNIBOND would result in taxes than you might WanNa keep it an IRA, but generally speaking. If you're going to buy Muny Bond, keep it out of an IRA. Next question comes from Boone. I just did my first. Roth conversion and looked at that old account for the first time in. There was the expected dividend producing fund I remembered, but there was a stock chesapeake energy that I had completely forgotten about since I purchased the stock in two thousand, six fifteen. It's down way down like eight point five percent off the purchase price. What should I do with it now? It's in a tax deferred accounts so I. Don't think the loss is realized until I. Start to pull money out of the account and that might not. Not Be for fifteen years current value of all my shares will be about one percent of the value of the account after the conversion. Do I sell in the very little value? I had left and depend on E. Trade to keep up with lost for me or should I hold on based on the slim chance. The stock will be worth more in the next ten years. Oil Stocks do act unusually on occasion, only oil stocks. Stock everything else makes that usually. Chesapeake has been really. Interesting Story to follow and frankly. I don't I. Don't know that I would look at it today. As a business that I'd WANNA own so typically if I. You know I think it was yet idea. Didn't sound like a position are actively building united investment didn't work out. I mean that that happens to all of us. We don't get them all right. We have a philosophy here at the full. A lot of do we like to? Water flowers and pull the weeds, and that's just a nice way of saying. Add to our winners in to get rid of losers in. This I think is more than likely slated to continue being a loser I mean. Chesapeake has lost a lot of value. In it does sound like based on when you purchased this, these is absolutely busted I mean. There there are all sorts of reasons to sell one of them is if you thesis busted and the reason why you invest in the company is is no longer the case, and I would he probably is the case with Chesapeake so to me like you know, you could sit there and let it go, but but what's the goal trying to get back to even, or are you trying to get back a couple of bucks for me a lot of times? I'll I'll take a little opportunity here and there to just go ahead and pull those weeds sell it. Be Done with it. In even though it's just unique out a little bit value there, you can still take that money and do something more productive with it. So. Yeah T to me. I can't tell you to buy or sell obviously, but I can certainly understand. Selling in this case, but I you know. As as oil and natural gas energy can can turn around. This is going to be one that has a lot of headwinds in in. You might be waiting a very long time to to get any of this money back. I point out here that I it seems that maybe boone has a slight misunderstanding of how taxes in aries work because he talked about realizing the loss when he takes the money out and trade keeping track of the loss for him, it sounds to me that he thinks that he can write the loss off whence he takes the money out. That may not be the case, but just to be clear. One of the great benefits of an IRA is you don't pay taxes on the gains, interest and dividends from year to year. But. One of the drawbacks is. You can't take a capital loss on that as well so there's really no no way to benefit on your tax return from this loss. Next question comes from Benjamin. You recommend seeing a fee. Only financial adviser for check in every so often I know there is the Garrett planning network and others to help find an advisor. But what questions do you ask? And what answers do you listen for when trying to find one that is worth his or her one hundred fifty to two hundred fifty per hour. So I would say start first with asking yourself some questions. What are you looking for? You could go for the whole launch. Lada where someone is managing your money analyzing retirement plan helping new save and a five twenty nine. Maybe even doing your taxes with some financial planners do help with the state planning, or are you looking for something more targeted? You just want advice about am I saving enough for retirement, or are you close to retirement? You're like I just WanNa make sure that I'm doing right when terms like choosing my Medicare plan and claiming social security at the right time, so first of all just be very clear of what you're looking for. Then if it involves investments in any way, you WanNa, make sure that you find someone who is at least in the general same area philosophically and I say this, because many financial planners are hardcore index. And if you come to them as a motley fool, listener member with a lot of individual stocks. They may say okay. I'll give you some general asset allocation guidance, or they'll say I don't care if you like to pick. Stocks are not my advises, sell the stocks and go to index funds, so you want to make sure that if you're gonNA, ask for any sort of investment. Advice that you wanna find someone who's someone somewhat at least aligned for what you're looking for. Once, you've got that then. Just asked some of the typical stuff. You might expect so credentials certified financial planner. Are they a CPA either their personal financial specialist. How long they've been in the business. There are lots of people who. have not been in the business very long. Even though they're not young people, a lot of people choose financial planning as a second career, which I think is great, but just because someone may be look like they're in their forties or fifties. Sixties doesn't mean they've been in the business that long, and you WANNA. See if they've worked with someone like you right so if you have. Maybe. You have a large amount of wealth large income huge portfolio. You WanNa make sure that they have experienced with dealing with those issues, but on the flip side to if if you have, are you know middle income, decent size portfolio, but nothing too complicated. You don't WanNa. Go to someone who's used to dealing with someone who's wealthier partially because those people charge a lot more. You want to find someone who's kind of a little more lined up with what you're doing. Then make appointments with three folks. All of them will do get do free. Get acquainted means, and you're just looking for someone who you feel comfortable with. Since, you mentioned Garrett Big Fan of the Gary Planning Network and other is is not for the National Association of Personal Financial Advisers. But Garrett on their website has a how to choose an adviser section. Just Google attitude visor Garrett Planet Network has a great chapter from a dummies book that they wrote about how to choose adviser, and they have a good questionnaire that you can print out in US asking lots of good questions of financial planner. It's tough. Choosing a financial planner like my mom just went through that Bro! Is You know and she didn't really have a lot of options in Boise Idaho. Maybe two and one of them, she I never called her back, and never got back her, and the other one was just so busy just so busy, and just she just never. It's it can be rough. Finding a financial planner can be I. Think what we'll see is one of the consequences of this. Of the coronavirus pandemic. Just, like we are all used to working from home, many financial advisors and financial planners an now working from home. So in what they're doing is they're becoming licensed in more states. So, if you are more comfortable, working with someone over zoom remotely I think you don't have to stick with someone in your area. You can go beyond your locations, but you know some people don't feel comfortable that if if they're going to have someone managing their life savings, they want to be able to meet them in person. That's just a personal choice. All right next question comes from twitter. Is that right from sully what I hear? Okay? I just listened to the episode mentioning Your Weakness Two. Shopping carts and Tj, Maxx that me or you Jason. Accused me. Thoughts on the stock. If I had a war on Amazon, basket would be Costco TJ maxx Home Depot tractor supply. What would be your basket against online retail? That's funny. Well okay, listen I wouldn't have basket against online retail, because online retails where it's at. The whole idea. The whole idea behind the basket approaches to find a long term trend that you feel like the world is headed toward and so the war on cash basket, for example that was always one about people using cash war, traffic payments now with that said I get the spirit of the question some going to answer it because I do like some of these ideas. And I I would definitely include Costco in their in Home Depot's well. Home Depot gets a lot of my money. Doesn't, but they have a very loyal fan base of customers that just are happy to renew year in year out. So I love those membership models there, so costco and a Home Depot for sure you know I'm going to give a little shout at my wife Robin I. Know that she would approve of my adding target to the mixer. She hasn't been raving about targets APP and ordering on the APP the able to go to the store. Just pick it up right there I've talked with Ron Gross on more than one occasion about target and how this really has. Become a twenty first century resale right they're doing. They're doing everything online and in physical stores. What they call Alma Channel and then my fourth and I'm GONNA. Take this. You probably aren't expecting this when Alison. I'm GonNa Shock and all you. I'm ready. I'm ready Alta. We're going. Make up my I know my daughter's love. It ugly ugly Mug like this. What do I know about makeup? Tell you what. Get! A House with two daughters and a wife. That's what I know about make. There's a lot of it in an Ulta is a really really good business. They actually have a very nice diversified revenue stream. They've got the salon a`dynamic of the business which encourages people to go there they do have an online business. They have an augmented reality function there at where you can actually like. Try things on makeup to see how it looks. Mary Dillon just a phenomenal other adults of that's my fourth, their Ulta but they I appreciate the spirit of the question I like the idea I'm not saying this is the basket. I'm not tracking this basket in a not a not backing this basket, but in the spirit of the question if I had to develop. A basket, such as this one I think it'd go with those four. Yeah, I mean I guess you just have to think about what retail out there is something that you would still physically go to. Because the actual retail experience is being in the space is the experience and what you're there for? And I know I mean before Corona virus we I would go to target and just just couldn't believe how much money I had spent from walking through a few of the aisles. TJ Max is just a phenomenal business I mean what they've done through the years. Is really capitalized on the nature of the business, the advantage they have in that treasure hunt kind of nature like you go to TJ Max, maybe not necessarily looking for something, and then you end up finding a lot of things, and it can be a little bit lumping at times, but but generally speaking like management's a very good job of running that business, and they know how to exploit the advantage of experience. I think they're online game. Though I think they could probably get something going with online, and they just have not have not yet and so I. Haven't since Corona Virus for example. I haven't spent a single dollar there, but I continue to still shop at. Home Depot I. Think Yeah! We still shopping at home depot because we're doing. You know you gotta buy lumber somewhere. And I know my grandparents out in my my inlaws out in rural Virginia. They love tractor supply store, but that's not. That's not in where we live, but. Still New deck at the house there allison. I mean you, can you see? A big exposed beam behind me and some drywall work that needs to happen. Have lots of drywall work that needs to happen now though. Yeah Anyway get to that. All right next question comes from Matthew. I got married to my amazing wife nine days ago in a small Kobe nineteen wedding in our front yard after we postponed it from its original date in April all. It was definitely different, but still very special. My question is in relation to this wonderful event. My salary has been at a level that has allowed me to fund a roth. Ira I love the optionality of it, but after marrying my bad ass, wife are combined. Salaries are now over the limit that would allow me to fund the Roth. IRA does this affect occur immediately? Do I need to now open up a traditional. IRA and begin funding it or do I have until the end of the year. Matthew wants a Roth Bachelor party one last. Well Matthew I have bad news. When it comes to most things in taxes, your status and your age and things like that depends on where you are on the last day of the year, said if you're married on the last day of the year, you were considered married for the whole year. So that means if you contributed started contributing to a Roth IRA for twenty twenty. You need to call up your brokerage. Firm and re characterize that as a traditional. Now don't have any other traditional IRA, as it's very easy to do the back door, Ross which we've talked about before you can just google it or even when you call the brokerage, just say I want to do the backdoor. Roth and they'll tell you what to do. If, you have other traditional IRA as you can still do. It just becomes more complicated and you'll probably pay more taxes. So you, but you may not be totally out of luck and I should say that's only if you have a traditional IRA doesn't matter if your wife has traditional areas. One exception by the way of of what I just said. In terms of tax status and last day of the year is distributions from retirement accounts before it's age fifty nine and a half, you actually have to be age fifty nine and a half to avoid that ten percent early distribution penalty, unless some of the many exceptions that are out there exist. Right next question comes from Warren Warren Buffett. Maybe I don't know that's why I was thinking. He's asking about coq, so maybe maybe. Once James Opinion on coke. By? Or hold? Wants to now. I'd give buffet night give. Kiesel Warren of the same advice and I would say. For some I'm not buying it. Not Buying it I'm not holding it if I own it. I guess that means sell it. Even Atlanta Georgia person like you i. feel like it's almost sacrilege. I am pretty close to probably not being ever even invited back. But the facts are the facts. Okay, I mean you do have to look at the stock itself has been ain't bad stockton for the last five years. I mean I do understand why when you look at it what they do, I mean they have. Four hundred master brands, and less than fifty percent of them are the big global brands that are actually responsible for almost all of their revenue when I say almost only ninety eight percent, so it's a business. It's very reliant on on. You know a small portfolio of really successful grants. The problem is now. We've always talked about cocoa beans such a great distribution story and that's true. They've got a distribution network. It's just phenomenal, but the problem is now. They're what they're distributing is is being seen as not so good for you in so you're seeing them. Have it into to essentially pivot away from what you know brought them all of the success for all these years. Years in soda and that that's not going to change I. Mean you're always GonNa have people to drink soda? People are not to drinking as much soda going forward in the numbers of just kind of the kind of shown that through that through the quarters in the years of Coca, Cola and Pepsi Pepsi. Has the salty snacks division, which I've always been very. Impressed by I, mean I love a good Cheeto, and so I mean anytime you can throw a bag of those cheetos in my Patriot Amok GonNa, turn it their coq. Interrupting, but I think this is also very important point. You tried the Jalapeno White Cheddar crunchy cheetos. The White Shit or so. I've tried to Jalapeno ones but I've not seen the white Cheddar White Cheddar Jalapeno crunchy cheetos. Don't get the puffy. The poofy ones are not as good, but the crunchy white Cheddar Jalapeno Cheetahs. them by them. They're amazing. I have to back. Pain you. I'll get those next time. I promise I, mean Eh. One. crunchy wants the puffy ones, so that people won't you're not? You're not seeing poopie. Who using poofy Joe Copy? We'll be Coca doesn't have that dynamic of their business. They don't have that dynamic to their business, and they've suffered from that Pepsi's Pepsi's outperform coca-cola over the last several years. It's not safe. Pepsi or coke get it back. I'm sure they probably can. But what I am saying is I think there are a lot of better ideas out there, and so I wouldn't be putting new money into Coca Cola and frankly if I did own it. I probably would look at selling it and you know if you've got a beverage company, maybe own starbucks. It seems like the science coming out in support of coffee, right? It's coming and telling you that these sodas. They're gonNA. Make you fat. Coffee, it could extend your life. It could help you live longer. SMART Mexican looking this a starbucks as well is. That sounds like study from the copy roasters of America. Do! Something that Chris Hill sent me the other day. that. We sleep at night. I'm glad I've been drinking coffee as long as I have God knows what I would look like otherwise. You're a good looking man. Rick. good-looking next question comes from. A. I'm trying to save money for my kid's College. Fund while the five nine is a great option. I'm limited to investing in mutual funds, which means at best I'm going to get what the market gets assuming I do some sort of low cost index fund and I be a capital F. Fool investor have been doing much better than the market in the last three years of being a member of. Of Stock Advisor Enroll breakers, even during this pandemic mess by listening to every full podcast and following David and Tom's and yours and every one else's in the full universe. My portfolio of about one hundred stocks is up here today. Thirty percent to the market's down five percent as of day as of today weighed down by three sluggish five to nine plants that are also down five percent each. I feel like throwing away money by using the five to nine, and not being allowed to select my own great companies in which to invest. What's more, my understanding is that the five to nine does not count as an asset for the kid when applying for student aid, but the coverdale does. So I come to you with a simple question. Can I have my cake and eat it, too? What if I wanted to use the coverdell to buy individual stocks? Until the child is nearing college? At which point I then converted to a five to nine. This allows me to get better returns and avoid it being an asset for financial aid and get the favorable tax benefit. So, chose this question, because first of all Dune does a good job explaining the benefits of the coverdell over the five twenty nine, you can buy individual stocks. You can buy and sell them all day long. We recommend that, but you can. Whereas with the five twenty nine, you can only make two changes to the investments a year, and it's all mutual funds. So. That's you did a good job of explaining that. I will point out with the coverdell. It's gotta low contribution limit of only two thousand dollars a year, so for some people save more for college, but they can max out to cover it out, but then put the rest in a five twenty nine. One thing that doomed does not have quite right. Is The financial aid treatment the financial aid treatment? Coverdale's and five twenty nine is identical. They're treated as assets of the parent, not the kid that is favourable from a financial aid perspective. It's not negligible doesn't mean it doesn't have any effect on financial aid, but it's better than an asset that is owned. By the kid. He can. Transfer money from the Coverdell to the five twenty nine. If for some reason, he decides to do that, but you can't transfer it. The other way around so were convinced to try out the covered. You have money in a five twenty nine. You can't move it from the five twenty nine. To the coverdale. What other interesting thing that he pointed out is that he is doing very well with his investments, and he owns about one hundred stocks. We get this question a lot. Either on the show, or on the full live that we run every day for members of full services, and that is how many stocks should I own, and if I owned too many are not just owning index fund watering down my returns, but here's an example if someone owns a one hundred stocks is still crushing the market. Idol last question comes from Cameron thoughts on the valuation of Stone Co in light of the corona virus for a fragile country like Brazil. This could be the tipping point after so many other headwinds. But how does that affect stone? coz Business Jason I. Don't even know what Stone Co is. What is still business? Yes, don't Coz a payments company that's focused on Latin American markets in Brazil and particular in so I guess it could be. Draw you can draw a parallel to to a with square through pay pal at, but generally speaking I mean it's payments. Company focused on Latin America. Primarily Brazil. Is the big money making market kind of like Marco Libra, they're. In I, I, it's a it's. A NEAT opportunity, gained a lot of headline recently, when and it was, it was seen that Berkshire hathaway. Warren Buffett's company Berkshire hathaway taken a five percent position in the company, which is pretty considerable i. Think in the near term. You have to acknowledge the fact that. They're gonNA, be some real headwinds in in Brazil particularly because of the pandemic I mean. The flip side of that is role in same boat kind of in that regard. The entire world is dealing with it, so it's not specifically you know it's. It's not particular to one economy or one country some. To get hit harder than others I, do feel like Brazil. Be at a place where they can recover from this given You know some of the other businesses in the area. I mean that that that I think is. Who knows ultimately how? That's GONNA shake, but generally speaking. I think the move away from cash towards cashless. Transactions in and financial software that's not stopping if anything, this hastens that which which is what I think, Cameron's talking about there and for a company like stone. Co, neither are other companies in the space pags bureau in roquetas libra to but you know moving money around is a big big market opportunity, and there's nothing that says they won't be able to expand well beyond the Latin American markets, too, so I I'd say cautiously optimistic I mean I

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