RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:00:01]
BRIAN: Welcome to Safer Retirement Radio, where you get the transparency you deserve. With over 35 years of experience in finance and investing, we help you stay up to date on market news and retirement strategies. I’m Brian James Decker, owner and founder of Decker Retirement Planning, and host of Safer Retirement Radio. With me is my cohost and one of the advisors here at Decker Retirement Planning, Clayton Bradshaw.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:00:27]
CLAYTON: So today on the show, we’re gonna be talking about the recent rollercoaster that the market’s gone through. We know that in the last week or so, we’ve heard that COVID is starting to spike again, and states are gonna be slowing down, opening up, or reversing some of their decisions. Um, so we’re gonna talk about as a retiree, as someone who’s approaching retirement, what you can do to avoid being drug down when the market’s taken a dive. But also, we don’t want people to sit out those rises and miss out on those gains. So, we’re gonna be talking as well today about what you can do to be able to participate in up markets. In other words, to make money. So, Brian, what have you been seeing over the last few weeks with COVID, and what have you been hearing from the states?
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:01:10]
BRIAN: Well, with the markets, they react to three things. Lower interest rates, but we’re almost at zero on that, so that was a tailwind. Now that’s a headwind. The second thing is the Fed. Fed is alive and well. Pumping trillions of dollars. And number three is earnings. Stock corporate earnings peaked, would it surprise you if I told you, two years ago? Two years ago. So, earnings have not been supporting the market. Interest rates kind of. We’ve had the ten-year treasury go from one point eight, to point six, where it is right now today.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:01:49]
CLAYTON: Historic all-time low.
BRIAN: All-time low. Anything below two percent, we’ve never seen before, ever. Since 1940, that was a two percent tenured treasury and then we went higher from there. But now, we’re below two percent. So, from here, it’s on the backs of the Fed, which the Feds shot most of its bullets. So, now it’s on the backs of corporate earnings. So, when the announcement came out, or the fear came out, that there might be a second shut down because of these COVID spikes, last Thursday the markets dropped eighteen hundred points. Do you remember this? Seven percent in one day.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:02:28]
CLAYTON: Yeah, it was a big swing.
BRIAN: Right, and so, what we wanna make sure that we emphasize to clients is, is your portfolio able to number one, handle that? And number two, what a smart way to have your portfolio set up so that if the markets go higher, you benefit, but if the markets go lower, you’re protected. That’s how our clients are at Decker Retirement Planning.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:02:53]
CLAYTON: Right, well, and I think the reason we wanna bring this up is because we’re still very much on this rollercoaster ride with the market. It’s been up, it’s been down. I mean the NASDAQ just hit new highs again over the last couple of weeks after having taken a thirty percent drop. It’s dropped and it’s popped back up, but now with COVID potentially shutting everything down again, it just leaves the future more and more uncertain. And we don’t have control over what the market’s gonna do, right? We don’t have control over what people are gonna spend at businesses and what the Fed’s gonna do. But what we do have and what you retirees that are listening have, is you’ve got control over what you do with your assets, and how you choose to invest them and to manage them.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:03:37]
CLAYTON: And we wanna talk about those different aspects. Because it’s important to know that you can be protected against market losses, for your income, but you can also make money when the market’s up. You don’t have to sacrifice one or the other. I think some people, Brian, you’ve probably seen this, they feel like they’ve got to pick one or the other. I’ve got to protect it all and throw it in an income annuity, that’s terrible. Or, I’ve gotta be all at risk and then just sweat every night hopin’ the market doesn’t drop.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:04:04]
BRIAN: Well here’s what happens with lower interest rates. When we have lower interest rates, there’s people who say, “Do I really want to lock up a ten-year CD for one-point one percent?” That’s the current rate right now. One-point one percent. When I know that Occidental Petroleum’s dividend is three.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:04:25]
BRIAN: So, what’s happening is those people are going into the markets. They’re taking more risk when interest rates are lower, and that’s putting a higher valuation on the stock market. So, is it a good time to be in the market? Well, based on interest rates in the Fed, it’s not. The valuations of the market are only exceeded by 1999. We’re above 1929 levels when it comes to market valuations. So, is it an expensive market? Yes.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:04:58]
BRIAN: But it’s based on current interest rates. A lot of people, a lot of retirees are forced into the market to try to get a better rate, than what they’re being offered for CDs, treasuries, corporate agencies, municipals. Those are not paying much at all. So, they’re in the markets. Now, sadly, the high dividends stocks, Clayton you know, are energy and real estate. Energy in February, the only time this has ever happened. The March contract for energy futures went negative. That’s never happened before. Do you remember this?
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:05:40]
BRIAN: Negative. And real estate. Is real estate safe? Heck no. You go into any strip mall or any shopping mall, if they’re even open, and you’ll find boarded up about a third of the mall.
CLAYTON: Yeah, well I keep seeing the articles that it’s talking about how renters, because no one’s buying from these shops, renters aren’t able to pay their rent, and then you’ve got, it’s just trickling up to the now, whoever’s holding that responsibility of the mortgage. And they’re not gonna be able to pay it, and then you’re gonna default, and then banks are gonna run into issues. So, it’s this potential snowball effect of an issue because people aren’t spending money.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:06:20]
BRIAN: So, let’s talk about solutions. In a retiree’s portfolio, there’s three parts. One there’s cash. Two there’s safe money, and three there’s risk. Let’s see if we can do this in ten minutes. You think we can?
CLAYTON: Well, if you’re listening, you’re gonna get the highlights because the plans that we put together are very comprehensive. And while everything that clients see ends up on one page, what goes in behind it is very detailed. So, we’re just gonna be giving the overview today, of these different aspects. These three different parts.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:06:49]
BRIAN: That’s a great point, Clayton. On one page, on one spreadsheet, on one income plan, they have income optimization, they know to the per month how much they can draw. With a cost of living adjustment, they know on one page the amount of money that they should convert from an IRA to a Roth. They have risk minimization, they have performance optimization, where each bucket is optimized based on performance.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:07:20]
BRIAN: They have tax minimization, and they have liquidity options that they can move around to make sure that they’re comfortable with the amount of liquidity. All of that is on one sheet of paper as a final solution. That’s pretty cool.
CLAYTON: Yeah, I love putting these plans in front of folks, couples, and individuals that are getting ready to retire, or have retired, or still trying to figure it out. I put it in front of them and they see the answers right in front of them. They know, “Okay, I can do it.”
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:07:53]
BRIAN: Can I retire, or do I need to still work? Either answer is good news because if you retire prematurely, you’re gonna find out in your mid-seventies that you have to go back to work and that’s not a good time to find that out.
CLAYTON: Yeah, and that’s the other thing I love about these plans is, in putting them together, you get people that they’ve enough assets and we help organize it the right way on the plans so that they can enjoy their retirement the way they want to, and do the things they’ve always dreamed of. And then I’ve done it for other folks that they’re a couple more years away then they thought they were going to be.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:08:32]
BRIAN: So, we’re talking about something that we should tell people about. So, the two things that aren’t a plan. One, a pie chart is not a plan. A diversified description of mutual funds in large-cap, mid-cap, small-cap, growth value, international merging markets, indexes, ETFs, cash, precious metals, all of that stuff, is not a retirement plan.
CLAYTON: Well, and this. So, the pie chart, this is, I mean, I see these a lot with 401(k)s that people have owned for 20 and 30 years. Through 20s 30s and 40s, as you’re trying to accumulate money, you can put it in a pie chart. And it works. It gets…
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:09:12]
BRIAN: For accumulation.
CLAYTON: For accumulation, right. But, in retirement, it leaves you guessing.
BRIAN: On how much income you can draw.
CLAYTON: Right, exactly.
BRIAN: Or how much Roth to convert.
CLAYTON: Or, how much liquidity you’ve got.
BRIAN: Or taxes.
CLAYTON: Yeah, your taxes. I mean, and that’s the thing. So, we talked about those three different types, those three different aspects of a plan, or where the money should be on a plan. So, what are those again? Brian, you got emergency cash. You got your safe money. And you’ve got your risk money.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:09:41]
BRIAN: Correct. Let’s talk about all three. So, now in six minutes, we’re gonna cover all of those. So, one, we’re gonna give you the name of eight FDIC banks that instead of your Bank of America, or Wells Fargo, or Chase, paying you zero point zero something, here’s a way to have that FDIC, where you’re earning one percent or more. We used to say, just a few weeks ago, one point eight. Do you remember that?
CLAYTON: Yeah, it’s been droppin’. It’s been droppin’ pretty quick. But you said earlier that a ten-year CD is one point one. So, for reference, we’re gonna be talking about what these banks are and what their returns are. So, what’s the list?
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:10:22]
BRIAN: Correct. So, the list is Ally, Goldman Sachs, they go by Marcus now. There’s CIT. There’s Capital One. There’s Discover. There’s Synchrony. There is American Express. And the last one, the newest one to the list is Nationwide. They have an FDIC bank. Those all pay. It’s easy to navigate to on the website. They’re online, FIDC banks. They all pay over one percent for your liquid savings, checking accounts. Incredible information.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:11:01]
BRIAN: So that’s for your safe money. I’m sorry, for your cash.
CLAYTON: For your cash, your emergency cash.
BRIAN: For your safe money, you have a choice of getting a ten-year treasury, at point six. Or CDs at one point one. Or municipal bonds, I just looked at them this morning, at one point two. Why would municipal taxable bonds, this is the interesting question, pay higher than a taxable CD right now?
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:11:34]
BRIAN: It’s because, you’re getting paid a low amount, but the risk, the default risk is never been higher because the states have never had more debt than they do right now. With the business closure with COVID, they’ve never had more risk than right now. And so municipal yields have gone up recently. Normally tax-free is always lower than taxable. Because of the tax benefit. But we’re seeing that right now. So, you’re getting paid less than ever before, and taking more risk than ever before, on municipal bonds. That’s kinda interesting.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:12:08]
BRIAN: So, you have a choice of one percent basically, or you can look at the fixed index annuities that are averaging, and we’ve done the research. We go through the databases to find the best. There’s a lot of junk out there. There’s a lot of things that we wouldn’t touch because of high fees, low caps, low. I’m getting into the weeds a little bit. But, there’s a lot of stuff that’s not client-friendly, but there’s four or five that we’ve found that are averaging over six percent. Now, this is a no-brainer. On your safe money, if you have later principal guaranteed accounts, that kick in monthly income, and your making five, six percent, on that safe money when your alternative is one, that is a no brainer.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:12:56]
BRIAN: That’s a reason that someone. Well, now we’ve given people two reasons to call us. One is to have us create their plan so that they can see what you were talking about. And two is to find out more about these. Both banks and insurance companies offer these. Equity-linked CDs or equity-indexed accounts.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:13:17]
CLAYTON: Well, right. And the reason that we know where these different highest yielding or highest paying institutions are, and what they’re offering is because we’ve scoured the databases, we’ve done the research. There are, I mean, I know that you mentioned the safe money. There are thousands of options and combinations to go through to find out where the best place to maximize the safe money is. The amount of options is immense. So, we’ve spent the time. We’ve gone through it so we know, and so we stay on top of this all the time. Because we’re research based. We’re math based, and research focused. So.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:13:57]
BRIAN: And the database we use is Wink. Just so everyone knows. Goes through all the bank and insurance offerings from cash, one to three, three to five, five to seven, and seven to ten-year investments. We look at all of that.
CLAYTON: Yeah. And so, and if anybody’s curious about what those options might look like because there are options that aren’t good fits for some people. And so that’s the other side of it too is, you’ve got thousands of options, but then everybody’s different with their needs for a retirement plan. And fitting that together, for people that aren’t in the industry, and even for what we see people that are in the industry. A lot of the other guys, they don’t put the time in like we do. So, and then our last category, anything else on safe money before we touch on risk?
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:14:40]
BRIAN: No, let’s spend two minutes on risk. So, you have a choice of indexing, which by the way, there’s three brilliant ideas supporting indexing. This is where you buy the S and P, you buy the NASDAQ index, you buy the EFA, you buy the emerging market. You buy the indexes. ‘Cause most money managers and mutual funds aren’t beating the indexes every year. So why not buy the indexes. Based on performance reasons you should. Let’s use the S and P for example. Eighty-five percent of money managers and mutual funds underperform the S and P every year, according to Vanguard. It’s probably a true statistic.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:15:18]
BRIAN: So, for performance reasons, buy the S and P. Number two, you’re diversified among five hundred of some of the best companies in the world. Number three cost to buy to SPY, the ETF for S and P 500, is five basis points.
CLAYTON: It’s incredibly cheap.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:15:37]
BRIAN: It’s almost free. So those are the three reasons why you should index. There’s one reason why we don’t do it, for our retired clients and don’t recommend it. And that’s there’s no downside protection. So, a few months ago, the S and P lost 30 percent in five weeks. Breathtaking drop. Fastest drop ever in history. Faster than 1929. And those retired clients that were indexing took that full hit. There’s no downside protection. So, what we do, back to the indexes, and being math based, we’ve gone through the databases, and we’ve found that the best performing net a fee, risk managers, are all, you’re gonna have to help me with the jargon, computer trend following models.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:16:26]
BRIAN: So, when the trend is up like it’s been since March of 2009, the trend has been higher. It follows that trend higher in the markets. You’re along the markets, you make money as markets go up. But when the markets go down like they did in February 19 to March 25, these indexes can go to cash or they can make money as markets go down. So, the clients’ risk is less, they have downside protection, and they participate in the upmarket and have protection in the down markets. Markets are two-sided markets.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:17:06]
BRIAN: They go up, and they go down. These strategies have been around for 20 years, they show up as the leaders of the best performers, so we as fiduciaries and being math based, going through the databases, pull those out and use those for our clients for their risk money. So, in 2020, this year, when the markets were down 30 percent, I remember looking where we were year to date, do you remember this? We were up six percent. It’s not a lot. But we weren’t down.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:17:40]
CLAYTON: Right. And, with these, and I know these, I mean, these models, they’re highly technical and so we don’t wanna get into how they operate, but I know that some of the listeners out there wanna understand more about it, ’cause they, I mean, they eat this up. And so, we’ll show you what managers we use. We’ll show you their fact sheets. We’ll go through the details behind it, and, I mean, we eat this stuff up, we’ll geek out on it as much as you want to. But give us a call, because we wanna make sure that with any plan that we put together that you’re optimizing every aspect of the plans. So, your safe money, your emergency cash, your risk money, we wanna make sure that you know about all of the options.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:18:19]
CLAYTON: You know about everything that’s out there. Because in putting this plan together, we wanna make sure that our clients have comfort and confidence that in retirement they’re gonna be okay. And that’s the point of the plans we put together, is to help them see that. So, to get ahold of us, give us a call. Our number’s 833-707-3030. Again, that number is 833-707-3030. Give us a call. And we just do a quick 15-minute call. It’s virtual, there’s no obligation. We’ll go over a few things with you, get to know you and see if you want to talk more and get into more detail, we’re happy to do that.
RR S4 E8 HOW TO MAXIMIZE BEING IN THE STOCK MARKET [00:18:58]
CLAYTON: But again, we just wanna make sure that everybody has all the information before they make their decision. And even for people that are happy with the guy or gal, the other person that they’re working with. I recommend everybody to get a second opinion, and you can’t get a second opinion from the person who gave you the first opinion, right? So, give us a call and we’ll take a look. Again, that number, 833-707-3030. Brian, it’s a lot of fun doing these shows. It’s been great to kinda talk through. Today we talked through safe money, emergency cash. We talked through risk money. So, we look forward to next week.
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