Latest / Financial Survival Network / Satellite Approach to Investing with Derek Mazzarella, CFP #5958

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Satellite Approach to Investing with Derek Mazzarella, CFP #5958 · Financial Survival Network

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  My philosopher the mark is and in general is I try not to overly time
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  it. I tend to believe in more of a core satellite approach to investising.
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  So for those folks that don't understand the lego, essentially that means that
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  you pick your core holdings. So you are listening to Carrie Lutz's Financial Survival
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  Network where you get valuable information you just can't find anywhere else to thrive in
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  today's trying times. You need the Financial Survival Network now more than ever.
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  Go to Financial Survivalnetwork dot com and get your free newsletter and gift. Financial
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  Survival Network now more than ever. Welcome you are listening to and watching the
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  Financial Survival Network. I'm your host, Carrie Letz. Well, we got
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  with us today, Derek Mazaria. Derek, you're a dedicated certified financial advisor
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  and author and well, seems like a turning point in your life was two
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  thousand and eight the financial crisis. Tell us what happened then? What did
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  that? How did that change you? Sure? Well, so back in
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  two thousand and I was actually my first job out of college is working with
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  with AFLAC selling them something metal insurance and a lot of that is done through
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  the employer. So in two thousand and eight, I was actually still struggling,
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  not doing well, and I lost about a third of my book of
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  clients because most of them got laid off. So that really shaped a lot
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  of what I looked about today. And in two thousand and early two thousand
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  and nine I actually decided to jump in and become a financial advisor because someone
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  I was na working with thought we might be a good fit, and I
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  started working as a financial advisor basically ever since then. All right, so
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  what's your philosophy of the markets. My philosopher the markets and in general is
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  I tried not to overly time it. I tend to believe it more of
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  a core satellite approach to investising. So for those folks that don't understand the
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  lego, essentially that means that you pick your core holdings, so though for
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  most people it's going to be something like the SAB five hundred, and then
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  you lend kind of a mix of other asset class around it, things like
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  small cap and you know, virging markets and overseas accounts, and then you
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  make small tweaks and shifts based on essentially what your financial goals are, so
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  you can make some small tweaks around the edges. You know, I'm big
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  on analogy to carry, So how of the analogy I typically use is set
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  the house up, design it, then maybe rearrange the furniture and change the
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  drapes, but don't really you know, redo the kitchen, okay, And
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  how's that working for your clients? You know, I think it works out
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  really well. I think one of the things that it really helps solve is
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  a behavioral issue that we run into a lot with with markets, because in
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  the short term they can be incredibly violatile, and I mean this year is
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  probably a great example of that. You know, the beginning of the year
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  ripped, and then since July we really had a really big come down from
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  then, and we had an over ten percent drop from July on and then
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  we were one of the best Novembers we've ever had. So, you know,
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  people are overly emotional with their investing. There was multiple points where they
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  would have gotten out of the market and not stated all right, So looking
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  ahead here, we've had quite a rally atiot theories as to why I think
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  a couple leagues I think the market in some level what was a little over
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  sold. I think one of the things we look at when you look at
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  what happened the beginning of the year, at least the first half, was
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  a lot of that was really driven by seven companies, so a lot of
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  it allowed the other companies to catch up, you know. I think the
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  good news we've seen the inflation numbers start to trickle down from the high nine
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  point one percent, so that's positively impacting the market returns there. Earnings were
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  above average. I don't think they were excellent. I don't think there are
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  anything to write home about, but coming from a few quarters ago when we
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  had negative earnings, I feel like we're on at least a better path than
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  we were. You know, a lot of companies in twenty twenty two were
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  we're trimming the fat, so to speak, so they're doing some layoffs.
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  A lot of them have locked in debt that's fairly low interest rates. They
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  lodged in a bulk of money back in twenty twenty twenty one, so I
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  think for those reasons, we saw a bunch of the pullback. Plus the
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  treasury rates started to drop a little bit as well, so the idea that
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  hey, there's money elsewhere that's cheaper or that's lower risk, that is going
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  to get a good return, it's starting to drop too. So I think
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  when you look at all those factors, that's probably why the market started to
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  rebalance a rally a little bit in November. All right, So you think
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  it can keep going, Well, that's that's the magic question, Kerry.
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  So I think in general, yeah, well, i'd imagine it's probably gonna
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  meander for a bit. If I had a guess, I think the rally
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  was pretty sharp and quick, so that doesn't necessarily mean it's going to keep
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  going up. And you know, I think when you look at the economy
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  as a whole, you could probably point to a few things where there are
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  some risk points. You know, if unemployment starts to creep up at a
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  faster rate than expected, that can impact the market. If the Fed says,
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  you know, unequivocally, we're actually going to keep rates higher than people
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  think, because I think the market right now is pricing in a March or
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  April drop in rates, So we'll see if that happens. If that goes
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  sideways, then we'll never know, you know. So those those a few
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  of the things I look out for I think the other kind of big thing
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  to look out for is the amount of debt we have as a country.
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  That's thing that probably not enough people are talking about. So looking at how
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  is that going to impact spending in the future, that's definitely something to keep
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  an eye on for sure. All Right, So, yeah, the debt
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  is definitely out of control. Spending is out of control. Doesn't appear that
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  anybody wants to do anything about it, does it. No, I'd agree
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  with that, and I think that you can you can talk both sides about
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  that one, because I think if they're really serious about it, they really
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  look at what they're over spending money out and in different ways to the cut
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  costs. I mean, that's that's one of my jobs in general with individual
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  folks is how do you how do you look at what's what's working, what's
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  not working, and how do you make it changes. It doesn't seem like
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  they're really interested in making any changes on you know, either side, especially
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  with the mixed Congress. I mean, good luck at actually anything done.
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  So that's gonna be other challenge in terms of getting a budget in order.
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  In general, leave this for the short term, Yeah, so eventually something's
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  got to give, right, I would say, so. I mean,
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  one of the things I've been talking to a lot with clients in terms of
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  preparing them is the Tax Cuts of Jobs Act is going to expire in twenty
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  twenty six. So that means a number of people are going to have increased
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  taxes come twenty twenty six. So I'd imagine if the debt's still really high
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  and the spending is still high and I haven't done much with it, one
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  of the only only levers they can pull is getting more revenue in the door
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  daily. Way that the government really does that is taxes. So if they
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  say, look, we're just going to let this sunset and not you know,
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  reset the tax rates to wherever they are today and let that increase happen,
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  then that's one way it can impact potentially your listeners in terms of,
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  you know, maybe reducing their ability to spend because they are paying more taxes.
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  All right, Well, maybe maybe something will happen and we'll all be
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  surprised, Right, that's a possibility for sure. All Right, Hey,
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  so looking forward to the new year, with all this uncertainty, where do
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  you put your money? Well, honestly, Kerry, for me, that
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  that depends on where you are. It's really hard to say specifically. You
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  know, I still would believe in the market. If you're investing long term,
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  short term, you probably want to be in fixed investments, especially bonds
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  right now with this market environment. When the Fed does dromp interest rates,
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  those are well positioned to do our perform well because typically the increase a rate
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  dropping environment, you'll see positive bond returns in that cycle. Okay, so
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  bonds are back in fashion. What about higher yielding stocks, dividend stocks well,
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  so those tend to do poorly when there's higher interest rate bonds available,
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  So i'd watch off that. The thing that you would really want to focus
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  on, especially in a shakier marketing cycle like this, is now necessarily dividend
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  painting stocks for quality companies. So companies that have high free cash flow,
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  have cash on the books. Most of them often do pay dividends, but
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  they're not you know, quote unquote the high dividend paying stocks, So be
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  looking for some form of income with a little bit more of a kind of
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  risk buffer. Quality stocks are probably the way to go in that regard because
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  they tend to do well in shape here markets, and they still offer that
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  income potential for you, all right, and steady away from small cabs,
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  you know, not necessarily, because the one challenge you've seen with small caps,
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  especially in the past year and a half, is they tend to do
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  very poorly in higher interest rate environments because they tend to take on more debt
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  than a large cap stock would, and they take on debt that's not as
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  favorable. So they really tend to struggle with higher interest rates. So if
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  we see a rate drop coming in the future, that could be an opportunity
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  for folks to invest in small caps. You know, we've actually his steed.
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  From a valuation standpoint, small caps right now are actually at a pretty
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  i want to say historically lobal value, but they're relatively low value from where
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  they've been the last ten to fifteen years. All right, all right,
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  So anything else, any other pearls of wisdom you have for as Derek that
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  we can take to the bank here, you know, I think the other
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  thing I really just said it is the end of the We're getting close.
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  I would just really pay attention to some tax moves you can make, so
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  you know, with the volativity market, I would look at things like potentially
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  tax lost harvesting. You can look at, you know, making gifts to
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  folks, putting those last five Tory nine contributions in before the end of the
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  year, because those things, as much as we love the market investing,
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  those can really be something that we have control over and provide a positive ROI
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  for us of the long goal. So I'm just generally doing some tax plannings.
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  I think that I see is offer and overlook with a lot of folks.
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  All right, I think we got an idea of where you stand there.
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  People want to find out more about you, connect with you on the
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  web. How do you do that? Sure? So, as you mentioned,
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  I do have a book out that's called just Retire Already, So you
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  can go to just Retire Already dot com to either check the book out or
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  if you did want to work with me, or check me out even more.
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  I do have a contact page there, so feel free to reach out.
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  I'm also pretty active on LinkedIn and just Derek Mazarella on linked In there,
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  and that's probably the best two avenues to check me out. All right,
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  Hey, well, link to Derek sites on the show notes of this
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  interview on Financial Survival Network dot com. While you're there. Sign up for
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  our free newsletter. If you got any questions for Derek or myself, shoot
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  me an email kl atcarriluts dot com. Appreciate you coming on, Derek.
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  We'll talk to you again soon. Thanks, Kerry, appreciate it. I'm
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  great today. You thanks for listening to Carrie Lutz's Financial Survival Network your solution
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  to today's trying times. For the latest, go to Financial Survivalnetwork dot com.
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  Financial Survival Network now more than ever,