Welcome to Retire Smart Austin. My name is Cynthia de Fazio, and I’m joined today by Phil Capriotti, senior of Empower Wealth and tax. And to our viewers at home, we know that you think a lot about investing. You’re thinking about your investment styles and what you do, and how do you make those decisions with what to invest in? Well, I’m going to talk to Phil today about an article I found about eight killer mistakes when it comes to investing. Let’s see if you’re making any of those, and if you can correct those today. Phil, how are you today?
I’m marvelous. It feels so good to be back on the set with you. Every single show is like another little mini masterpiece. I had a client actually tell me that come in and say, We don’t, you know, I actually had folks that we’ve been watching you for three years. We finally decide we didn’t call we click the QR code, nice. We don’t want to really talk to anybody. We just wanted to come and talk with you. Yes. And I was like, yeah, just go ahead and do that. If you’re apprehensive, or you have a telephone fright or anything like that. You don’t like to dial, push the buttons, 888-818-6557, then just snap that QR code and go ahead and book, book your appointment, but book your complimentary consultation right online.
Sure, because so many people have questions, but maybe they’re busy when they’re watching the show, right? They’re running out the door, but being able to click on that QR code makes it so simplistic, you don’t have to talk to anyone right at that moment. You can put your information in at your leisure, and then someone will get back to you when you’re ready.
Our staff will call you if you do it on a Sunday, which most folks do after they’re watching either listening to either our radio show or watching either one of our TV shows. They’ll do it later on, and then we call first thing Monday morning, either Erica or Jenna or Diana or Kristen, one of the gals, which might have the best administrative staff in the country. As far as I’m concerned, they’ll call and they’ll kind of fine tune exactly what type of service it is or questions you have that need to be asked so they can put you with the right advisor. Many times, it’s me, it could be my son, it could be Chris, it could be Jenna. It could be a number of different advisors, but at any rate, yeah, don’t forget the QR code.
I love that, Phil, thank you for mentioning that this morning. Sure, so many things are driven by emotion in life, and I know that when it comes to investing that can be something that’s also driven from an emotional perspective. I was able to come up with eight killer mistakes. I actually found this online, so I want to get your opinion on all of these as we break these down for the viewers at home, one of the top eight killer mistakes would be under diversification. Phil, why is that an issue? Being under diversified?
Yeah, under and or lack of diversification is extremely important because it’s a big, huge, wide world. The same way your 401(k) is not- many 401(k)s are not properly diversified. There simply aren’t enough choices. So being under diversified or not diversified at all is a big mistake, and it really has to do with, in my opinion, number of variables. Number one would be knowledge, not knowing what to diversify. Maybe you’re watching Mr. Crane, or maybe you’re watching one of the other business hosts, either Fox Business or Bloomberg, which we get a lot of information, but it’s one dimensional. If you’re looking for that new hot stock or the new topic or the new or the new strategy, you really want to take a look at everything, and you have to be diversified, or that’s a major mistake. Normally, what happens with lack of diversification is too many eggs in one basket syndrome, and what that means is you’ll own, and I see this a lot when we run our Morning Star Report for clients with our portfolio observation and analysis, it’s lack of diversification. They’ll have maybe 20, 30, 40, different mutual funds that are totally the same. Their names are different, but the diversification, they’re all using the same companies. They’re all using the same companies. So. So we want to put together a stock portfolio, but we want to make sure that we’re not under diversified, or over or not diversified. So, with that being said, that’s a problem. Why is it a problem? The biggest problem is your portfolio goes up and down just as quickly. So, when we see the swings in the market, your portfolio. When the tide is high, all the boats float. But when we start to see turmoil, when we start to see stress, when we start to see riots in the streets, wars, when we start to see overspending, a number of different variables, it only takes one little it only takes one little event to happen to break it to cause a collapse. Sure, we believe that we’re going to see a financial 2008 like collapse, because it’s similar, and a lack of diversification can- will kill a retirement plan, as sure as God made green apples and every other color of Apple. Fact of the matter is, it has to be diversified, and many folks who want to do or do it themselves first don’t have enough knowledge, expertise and analysis to do it, to do a complete job. They do a good job, but not as good as it could be.
Well, Phil, I want you to do a deep dive into number two, because I think this is interesting. We talked about under diversification, but number two of the eight killer mistakes would be over diversified. So, let’s talk a little bit about that. Would that be your investor that just puts like $100 here, $100 there. What are they talking about with over diversification? Over
Diversification, to me, means a number of different things, but especially investing in all markets. So, we’re talking about international we’re talking about emerging markets, we’re talking about and we’re taking a shotgun approach. Now the reason that this is a can be a major problem and is a major problem. Give you an example. Over the last year, the last 10 years, we have had international stocks plummet. I mean, they have just plummeted so and nothing against China, Asia, any Europe, any of those. But the fact of the matter is us, large cap and upper mid calves have really won the show if you were diversified with a lot of these foreign equities that did extremely poorly. What happened was it watered down your returns. So, during any particular stage in your investing, in your investing life, we want to look at sectors, and we want to look at markers, markets that are over performing the S and p5 100. If we want to use that for a benchmark, we don’t need to over or under diversify or over diversify, however you want to look at it by investing in markets that are not doing well now because their negative or mediocre performance will drag down your overall portfolio’s performance. Wow.
Well, Phil, for today’s show, this was to be the perfect time for you to give away the portfolio review to the viewers at home. What do you think?
Yeah, it’s beautiful. You know, we’ve done over 1000 Morningstar, professional, institutional Morningstar report, portfolio analysis and recommendation observations, and this is extremely important. Now understand, please, understand, we are the one of the very, very few advisory firms, registered investment advisory firm, licensed fiduciary, that do this complimentary. Many advisors don’t even run Morningstar reports on their own portfolios. Our Morningstar reports are done by certified financial planners and certified financial analysts. They are bean counters. They look at this portfolio and basically help you connect the dots. The idea behind this morning star report is to help you understand number one, is your portfolio diversified enough? Is it under diversified? Is it over diversified? How much risk is in it when we see the next financial crisis, which could be coming quite soon, with commercial real estate dropping as it is and the debt rising as much as it is. How is your portfolio going to respond? Is it going to drop 30% 40% some we see as high as 50% so the Morning Star Report will help you analyze what your risk is, how diversified your portfolio is, and then what recommendations we make. We do all of this without asking for $1 any compensation or the promise to work with us. So, pick up the phone, or if you’re call reluctant, hit the QR code and just either tell the operator if. Calling or wait for our call. Let us know in the notes what is your primary interest, and we will either fast track you, and if you’re not in a hurry we won’t, but calling get that complimentary. I don’t know how long we’re going to be continue to do it. We’ve done well over 1000 close to about 1500 different clients, different portfolios, and I haven’t had one complaint. By the time we’re finished, the clients are like, Oh my gosh, thank you. I never had this done before. I’ve worked with three different advisors. My advisor in Ohio never did it. My advisor in California, Colin, get it, and I’ll tell you this, you will not regret it. A portfolio observation and analysis and a professional, institutional Morningstar report, we’ll explain it, and you’ll get the entire copy.
Phil, thank you so much to our viewers at home. That number to call is on your screen, 888-818-6557, what you’re calling in for today is truly that portfolio X ray, just like going to the doctor if you think you have a broken bone. Wouldn’t you want to have that X ray? Well, why not do the same thing when it comes to your retirement planning, to your investment strategy? Let’s see what’s going on inside that portfolio. You may be very surprised to learn that you’re taking too much risk, or perhaps not enough risk. Then number to call, 888-818-6557, or if you have your smartphone handy, go ahead, grab that. It’s even simpler. Just click on that QR code at the bottom corner of your screen that will take you right to Empower Wealth and tax landing page. You can claim your spot with Phil and his team. Accordingly, we’re going to take a very short commercial break here and retire smart Austin, but we’re going through the eight killer mistakes when it comes to investing. We’ve already covered under diversification and over diversification. You’re keeping track at home. We’re going to dive into number three when we return.
One of the secondary reasons I got into the tax business. Is my very first job. It was an usher at a movie theater. So back in my day, since the baby boomer, people would come, we would tear their ticket, and we would walk them down, see them, and then come back. So up until that point, I was getting $5 a week for allowance, and I’m telling you, I was like an indentured servant. My brother was allergic to grass and pollen, so I had to do all the lawn work. I had to do all of the works. And matter of fact, so I get my first check. I get 37 and a half hours. I’m making $2.10 an hour. This check’s going to be close to $80 I look at the check, and I sticker shock. $41.78 $41.78 I’m good at math. That’s not adding up. I go over to the manager. He says, oh, Phil. He says, flip to check around federal income tax, state income tax, FICA tax, all of these different taxes. So that was my first lesson at 15 about how important paying taxes are. And by the way, I think that anyone that has paid taxes every year for 50 years, by the time they’re 75 they should be tax free. I don’t care where they put their money. That’s my belief. I believe we’ve done our fair share.
Welcome back to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti, senior of Empower Wealth and tax. And we’re talking all about eight killer mistakes when it comes to investing. So, this next one, Phil, number three, I want to talk about it’s euphoria. And I go back to what Warren Buffet says. And Mr. Buffett, if you’re watching, please forgive me if I mess this one up. But you say, be fearful when others are greedy. Be greedy when others are fearful. So, is that tying into euphoria?
Absolutely, absolutely. So, a perfect example of that was back in 2007 no matter what type of piece of real estate you bought because of the government policies back then, you could, and you’re, you know all about real estate. You could buy real estate, no money down. People were flipping them. They were buying real estate, getting checks to buy real estate. Well, that caused the real estate market to shoot through the roof. Yes. Well, not only that, policies, back in the day, political policies, not being able to approve a loan for someone who might be under privileged, the banks were actually threatened with their FDIC charter being revoked if they didn’t issue these loans. We knew eventually that they were going to have to package them with good loans, and we knew that that part of the market was going to collapse. Yes, we could tell by the policies. It took years, but it did. We’re seeing the same thing now, but Warren Buffett is absolutely right. So, getting back to his point, everybody was happy, and everybody was doing well, and yet I. We love it. We’re going to roll this house, flip this house. Fact of the matter is, we started getting way out of real estate right around the summer 2007 and by September of 2007 our clients’ portfolios were diversified primarily into cash and cash like a clip equivalence investment grade, corporate bonds, treasuries, that type of thing, three, three and a half percent was good. And October 15 was when we had the subprime mortgage collapse. Bear Stearns went down, and the market went like this. So, from October 15, ‘07 straight through the entire year of ‘08 to the beginning of March ‘09 the S&P 500 dropped 52% folks know your history like last week’s show. Absolutely so everybody was happy and lucky and euphoric, and we went, Whoa. The policies are telling us something different. Let’s take risk off the table. So, while everybody’s portfolios went like this, our portfolios had a drawdown of somewhere around 5% to like 8% and then what do we do? By the time everybody was scared to death because they had already lost 30, 40, 50% they wanted to stay out of the market. They were moving to cash. We got in, and we took advantage of that. So, Buffett is absolutely true. It’s a fact. It is a natural fact. You need to have education, and it comes back to not being diversified, or being diversified enough or not enough, you have to understand history, and you have to understand how it affects your portfolio’s management. This is one of the reasons that we’re very, very big on tactical and active portfolio management.
That’s perfect. Phil, the next one I want to tie into, actually, you mentioned it panic. So, this is when people took everything out of the stock market, put it in coffee cans and buried it in the backyard. Let’s talk about panic and how that affects investment.
The problem exists when this happens: the market drops 5% okay, I’m getting worried. Now, understand, on a Million Dollar Portfolio, many of our clients are into 235, and up. But I’m just saying A Million Dollar Portfolio market drops 5% let’s say it does that in a week, and we’ve seen that happen. Oh, my God, my portfolio lost 50,000 now we equate it to a monetary value, 50 grand, not 5% no longer percentage. Now it’s a monetary value now it’s okay. It will come back. Now it’s down 10% I’m down 100% I can’t afford to get out, not paying attention to all of the data that tells us it’s time to move to the sidelines. Now it’s down 15-20, this is what happened in 2008 now people are afraid to get out, and you start to eventually, when it hits 20 to 30% you see panic selling, and that loss of 200 250 300,000 keeps people out of the market. They’re not only paying, they’re now concerned that they’re not going to have enough money to go through retirement. And this is what happened with a lot of folks that were getting ready to retire and had their 401K’s in very limited funds and stuck there and stayed there or managed their own accounts. So, with that being said, it’s important to really understand, I’m going to say, use the Buffet Theory and work with an advisory firm that implements the Buffet Theory. Because he’s a sharp they don’t, they don’t call him the- what is it? The Marvel of Omaha? No, it’s not that the clairvoyant, something will have to do. What is it- the Oracle, the Oracle of Omaha! Actually, you’re absolutely right. So, it’s extremely important. You’re too emotional when the market starts cratering, you get too emotional. So, if you’re managing these portfolios themselves, or not managing them at all, which is really worse, give us a call. Click the QR code, dial, 888-818-6557, 888-818-6557, let’s run that Morning Star Report. Let’s have an intelligent, calm, collective conversation in our office to determine what your goals are, what your fears are, and what you want to overcome through a tax efficient retirement income plan bill.
Thank you so much to our viewers at home, there is a number to call on your screen, 888-818-6557, you’ve worked your entire life to get to the retirement years, and we’re talking about some eight killer mistakes that are coming into play when it comes to investing. Well, how does that impact your overall retirement plan? What does that trajectory look like? If you’re unsure, call in today. 888-818-6557 or if you have your smartphone handy, go ahead, grab it, click on that QR code the bottom corner of your screen. You can actually schedule your time accordingly with Phil and his team, and it’ll take you right to their landing page. We’re talking all about the eight killer mistakes in investing. We have several more to get through when we return.
We know the market is going to get worse from here. This is the biggest monthly decline in 10 years. People’s 401K’s took a major hit.
My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway?
This was the fourth worst contraction in history.
So how are you two doing?
Your financial future doesn’t have to be uncertain. I’m Philip Capriotti, CEO of Empower Wealth and tax if you amass the nest egg, it’s time for a financial advisor to help you reach your retirement goals. This is one of the greatest tax windows in history, now is the time to take advantage of this tax discount while we can we specialize in retirement income planning, tax mitigation, estate planning and so much more so plan your retirement right Call now for your own complimentary portfolio review and tax analysis.
Welcome back to Retire Smart Austin. My name is Cynthia de Fazio, joined today by Phil Capriotti, senior of Empower Wealth and tax. And we’re talking about some eight killer mistakes when it comes to investing. Phil, I want to jump in just because I don’t want to waste time here today. But number five is speculating, not investing.
Yeah, that’s, that’s the key. And a lot of folks do that. Not so much. The do it yourselfers do it a lot. You know, they get the tip from whether it’s Bloomberg or one of the you know, financial gurus, or they, maybe they went to a workshop. The fact of the matter is, speculating can work. But again, you need to have resources, aside from your retirement income plan, resources that you’ve that that you have earmarked for, for spending in retirement, for speculation. Okay, many times we see folks speculate in real estate, and real estate is a great way to hedge against inflation, no doubt about it, but the fact of the matter is, it’s not liquid. So, in down markets like we’re seeing now, when interest rates go up, what happens? We have serious issues. So, we have supply sides that are a problem, in other words, getting wood, steel, all of these things for building new homes. And when you take a look at speculating, I’ve had folks say, you know, I’m cash poor, I have a lot of real estate, and I have a lot of commercial real estate, but you know what, my rentals are down 50% so you’re speculating in one particular area, is really not a good thing. You really need to, need to be diversified. And if we’re going to look at real estate, real estate, to just be honest with you, there are times where we may have five or 10% within real estate, different ETFs, REITs, things of that nature, that are relatively liquid. Now our real estate exposure is down to about 1% why? Because the real estate market is getting pummeled. So, you need to be able to be nimble. You need to be able to move in and out of sectors that are doing well during the current economic, geopolitical and so on environments.
Sure, sure. Makes sense. Well. Phil, this next one investing for yield instead of total return.
Insane. And I’ll give you a perfect example. 2022 folks that were investing for yield got clobbered. What happened? Okay? Well, the Federal Reserve, we pulled out of our bond portfolios because of common sense and knowing basic economics, when interest rates go up like they did in 2022 folks that were investing in yield, especially long term yield, long term treasuries, we saw interest rates go up significantly because of the runaway inflation we were experiencing, and the bond values dropped 20 25% in addition to that, the stock market dropped. So, when you have raising interest rates and you have the stock market dropping because of the sell off of increasing interest rates, you have a double whammy going on. So, a lot of so a lot of folks, okay, when you’re investing just for yield to one dimensional, we need all of the above approach. And folks, if you’re investing simply for yield, you need to come in and you need to take a look at that, that especially nowadays. So, with that being said, I don’t like that normally, it will work. But now a lot of the experts are saying bond portfolios. If you’re heavy in bond portfolios, Look out below, wow. There’s a time to be in them. There’s a time to be light in our exposure to them.
Okay, Phil, thank you so much. Next one, letting cost basis determine investment approach.
Okay, all right, so that is such a great topic. I don’t want to sell my taxable investments because my cost basis is so low. I bought that stock 20 years ago, 15-30, years ago, and there’s so much growth in it. Let me tell you something. Number one, you have to be aware changing tax codes is going to change that entire paradigm. So, what I’m talking about is, first of all, you should be tax harvesting monthly. Folks. Once a month is what we do with our taxable accounts. I want to be able to take losers off the table, sell it against some of my winners, to now have a 0% tax bracket where I can create new capital to invest in other investments. Maybe it’s AI, maybe it’s ship manufacturing, I don’t know. Maybe it’s the new robots that are going to be helping us around the house. But point is, you that’s not an excuse if your financial advisor is doing tax harvesting on a more creative and a more aggressive manner. Okay, one other thing tax increases you’ve seen the long-term capital gains. This current administration wants to raise it up to 44.3% I was reading a new tax bill, and I literally, I had to take a tag event. Remember those things used to be. I was getting upset getting I was getting upset stomach, reading it. And so, with that being said, said, yeah, you have to, you have to move further past that.
All right, just a little over a minute left, though, but we have to get number eight leverage. Number eight leverage.
My dad used to tell me, and my mom used to tell me, never buy anything that you don’t have the cash to pay for.
My mom said the same thing.
So, we’re and that’s the secret to success, and that’s the secret to building long term and generational wealth leveraging. A lot of folks have made millions leveraging, and a lot of folks have lost their entire world leveraging. So be very careful. Again. Many folks, I see folks go to these they go to these little workshops about leveraging, and they think they know it all. Seek the advice of a trained professional. Give us a call.
Phil. Thank you to our viewers at home. We went through the eight killer mistakes when it comes to investing. We hope that you’re not making any of those, but if you are, you can correct them today by calling into Phil and his team, 888-818-6557, grab. Your smartphone, click on that QR code that’ll take you right to the landing page for Empower Wealth and tax. Be safe, be happy and be blessed. We’ll see you back one week from today. Take care now.
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