Latest / The Personal Finance Club Show / Immoral Vacations, Estate Planning, and ETFs vs. Mutual Funds | Ep 19

Transcript

Immoral Vacations, Estate Planning, and ETFs vs. Mutual Funds | Ep 19 · The Personal Finance Club Show

0:13
Welcome back to the Personal Finance Club show.
0:15
Hey, Jen. Yo.
0:18
I have a bit of a correction to make from a previous episode.
0:23
I was listening. I listened to our podcast
0:25
because I'm a raging narcissist. I love hearing the sound of my
0:30
own voice. Listen to it as I fall asleep.
0:35
And we're talking about couples and money in one of the previous
0:39
episodes. And and I said, you know, this
0:44
isn't my specific area of expertise.
0:45
That's not what I do the best. And you said, you know, remit.
0:50
And I said, yeah, I know remit. I've met him.
0:56
We're on a Dming basis. We're on friends.
0:59
He like probably knows who I am. And then I was listening at
1:02
listening back and I was kind of bragging about my Jenna's like
1:06
losing. She's that's a drink.
1:07
She's losing her shit right now. I was bragging about my
1:10
celebrity connection with Ramit, you know, author of you know how
1:16
or I will teach you to be Rich. And he's on Netflix.
1:19
He's on master class. And I was listening back to it
1:23
and you didn't say you know Ramit.
1:25
You said you're no Ramit, implying you're right.
1:32
Jeremy, you do suck at this stuff.
1:33
You're not as good as Ramit is, and you probably don't even know
1:36
him. I let you.
1:38
I let you roll with it. It's cool.
1:41
And then as I listened back to it, I heard you correctly.
1:43
I was like, oh, she didn't say you know Ramit.
1:46
She said you're no Ramit. It's all good.
1:50
Whoopsies. Sorry I am no remit funny and
1:56
apologies. It's just, it's just the
1:58
narcissist hearing what I want to hear.
2:00
No, it's totally fine. You know, it made for good
2:02
conversation and it's you know, it's very it, you know, it was
2:07
fine. I wrote or.
2:08
Maybe it's maybe it's your Internet connection, your
2:10
classically bad Internet connection.
2:11
I. Can't don't blame this on this.
2:13
One you know your no like what's 1 letter?
2:16
It's my pronunciation, my diction.
2:19
Yeah, this this North Carolina drawl that you have.
2:21
I can't. Yeah, you know me in my southern
2:23
drawl. That's exactly.
2:27
And we have one other big announcement.
2:29
If you follow on Instagram or you listen to last week, or
2:33
you're anywhere in the realm of a e-mail list or anything like
2:37
that, you know that we're in the white hot middle of our FIRE
2:42
crash course cohort. Yeah, sign up, period.
2:45
Just for one week, we're signing up.
2:47
Everyone who wants to do a crash course on financial
2:50
independence, retire early where you can track your net worth,
2:55
project your own early retirement date, learn about the
2:59
4% rule, optimize your portfolio, all this stuff you
3:03
know, don't be on the don't be at the bus stop waiting for the
3:06
retirement bus to come pick you up when you're 65.
3:08
Jen hates to sit and they'll get out there and run to financial
3:13
depends. And so if you want to sign up,
3:15
it ends on January 25th, which this is airing the 22nd.
3:19
So depending on how quickly you listen these, if it's already in
3:22
the past, sorry it's closed. You can't come to this one.
3:25
Maybe we'll do another one in the future and maybe not We
3:27
don't know yet, but and we're limiting it to 500 attendees
3:32
only. And so if you're not in the 1st
3:34
500, you're going to get locked out.
3:37
That's called perceived supply of perceived lack of supply,
3:42
except it's not perceived. It really is.
3:43
We are really getting. A We can only spread you so
3:45
thin, Jeremy. Exactly.
3:46
I know I'm going to have be touching 500 people.
3:49
It's all in Zoom so I'm. Not in Zoom, Yeah, don't worry.
3:51
Reach out of hand. OK, that's that.
3:55
Yeah, let's get into the show. OK, let's do it.
3:57
Let's get into our first segment.
4:03
Explain it like I'm 5. Are you 5 and are you listening
4:07
to this podcast? Well, if so, you're going to
4:09
love today's topic because it's really just, it's what 5 year
4:12
olds, I think love. 5 year olds love this topic.
4:15
They talk about it, Yeah. If you if you have a 5 year old
4:18
home, what is your 5 year old always thinking of Jen?
4:21
They're talking about estate planning.
4:23
Estate planning, 5 year old, you love it.
4:27
They're always saying they're like blippy blippy monster
4:30
trucks. Estate planning, that's what, 5
4:33
year olds. Say, I don't even know what
4:34
Blippy is. I'm not in the kids you.
4:35
Don't know what Blippy? Well, you don't have kids.
4:37
Blippy is, He's been. Major.
4:39
He's major. He's a YouTube sensation.
4:43
Oh, the kids are watching YouTube?
4:44
Yeah, that's right. OK, got it.
4:46
Well, this is not so much blippy, but it is more estate.
4:49
Let's talk about it. What is what does that mean?
4:50
What is estate planning? So I hate this term estate
4:54
planning because I think the term estate planning evokes this
4:58
image of a summer home in the South of France and you needing
5:04
to route it through some Swiss bank account to evade the US
5:09
estate tax. And and estate planning is just
5:12
for these like these like, you know, abstracts, Uber wealthy
5:16
people who are doing this sort of estate planning thing.
5:18
And that's like succession. Have you ever watched
5:21
Succession? No.
5:23
What is that, HBO? You might like that.
5:25
Wait, is that the one with the the like the rich kids and the
5:29
dad? I think it's.
5:30
About like the Murdoch family, right?
5:32
Like the five, Like the 5 million's the richest poor guy
5:34
or the poorest rich guy? Yeah, I probably would anyway.
5:38
They. Definitely had a lot of estate
5:39
planning to do, but this is not scary like that.
5:42
You don't have to be the Murdochs too.
5:43
No, no. I have a world to take care of
5:46
who always talks about estate planning.
5:49
All right, so so first of all, let's get the estate tax out of
5:52
the way. This is my favorite trivia
5:54
question I ask. I think I literally asked
5:56
Jonathan after this question on that I.
5:57
Can't remember. And she's now the third time.
5:59
She's probably going to get very close.
6:01
So when you die, the government charges an estate tax, all of
6:06
your stuff. Like let's say I have a bank
6:08
account with X amount of dollars in it.
6:11
And like, let's say I have a very, very simple financial
6:13
situation. It's one checking account.
6:14
All my cash is sitting there and I want to give it to my kids.
6:17
There's an estate tax when I die, when I pass it from me to
6:19
my kids, I pay the estate tax. But there's a lifetime estate
6:24
tax exemption, all of the gifts and everything you give
6:29
bequeathing upon your death to your kids as part of your
6:32
estate. There's a certain dollar amount
6:34
below which there's zero estate tax.
6:37
So basically the government's saying, hey, the first X dollars
6:41
you can give your kids for free, no estate tax.
6:43
The question is, per person, how much can you give your kids
6:47
either as gifts throughout their life or upon your death tax free
6:51
before you pay the estate tax? And Jen, what's your guess?
6:56
Yes, I feel like I either said 13 and it was 14 or vice versa.
6:59
So I feel like it's almost $14 million.
7:04
And you might have been right if this podcast was two weeks ago,
7:07
but now it's 2026 and it's now $15 million.
7:11
It's not a trick question. These things change and so.
7:14
$1,000,000 in the Oh my God that's crazy.
7:17
Yeah. And so I mean, this is, you
7:18
know, these are laws set by Congress and basically, and, you
7:22
know, and people who donate to Congress don't like their money
7:25
being a state taxed. And so they keep pushing this
7:28
higher because it's been, it's been getting higher a lot.
7:30
And you know, there's no guarantees of anything in the
7:32
future. But so far the trend is this has
7:34
been getting higher. So basically, if you die today,
7:37
you can give $15 million to your kids 100% tax free.
7:41
And you and your spouse can give $30 million to your kids tax
7:44
free. And so if you're ever being sold
7:48
something and the pitch is avoid the estate tax, they're not
7:54
going to mention this because they're basically lying to you.
7:57
They're saying you're, we're trying to get you scared about
7:59
something that you don't need to worry about.
8:02
And if you are I, you know, there's 1000 people listening to
8:04
this podcast or whatever it is we have, we're in the four
8:06
digits now. We've out the champagne.
8:09
I bet you there's someone listening to this podcast who is
8:13
not worth over 15,000,000 and maybe even over 30 million.
8:16
And to that person, like Congrats, you're crushing it.
8:19
But I just don't care that much about your estate tax to be you
8:23
know, like if you if you die with 32,000,000 and your two
8:28
million gets, you know, 30 million goes tax free for you
8:31
and your wife and the 2 million gets like a you know, 30% estate
8:35
tax and instead of getting 32,000,000 they get 31.6 million
8:38
whatever. Like, you know, that just that
8:41
doesn't light a fire inside of me in terms of like, changing
8:44
lives. In fact, like, I think probably
8:47
15 or 30 million is enough for your kids and you should be
8:49
focused on like, giving it away more when you're live.
8:52
So anyway, so that's the estate tax issue, which is like, don't
8:56
worry about it. If you have to worry about it,
8:58
Like, I don't care. This ain't this section for you.
9:01
OK, So what is estate planning? Estate planning is basically
9:05
just organizing your financial world in the case of your
9:09
eventual deaths if it's things like replacing income if you're
9:13
to unexpectedly die. So if you die with little kids
9:15
in your 30s, you don't want them to be now destitute.
9:19
So that's what like life insurance would be part of your
9:23
state plan. Buying a term Term not whole,
9:26
not permanent, not IUL, not variable, universal index, MPI,
9:30
blah blah blah. A term life insurance policy.
9:34
Also estate planning is transferring assets where you
9:37
want them to go upon your death. So if you have kids, if you
9:40
don't have kids, if it's going to your friends, your nieces,
9:42
your nephews, charity, making that plan and making it as easy
9:46
as possible. Another ensuring your children
9:48
if you have them are cared for. Same for pets, same for medical
9:52
end of life decisions, things like that.
9:55
And then organizing all of the stuff so that it is accessible
9:59
and ready to go, so that if you die either slowly or expectedly
10:04
or unexpectedly, your family can basically take this plan that
10:09
you made and execute it, act upon it.
10:13
And Jen, here's another trivia question.
10:14
Where should you put all this stuff that goes in your state
10:17
plan? On the Internet.
10:20
No, you know the right answer. Wait, what is the question?
10:24
Where so like your will, your trust your like the the
10:28
passwords, like where does all this stuff go?
10:29
So it's an easy place to find and you're dead box as as a soft
10:34
box on the end. I just post you just tweet it.
10:37
You go to truth Social, you get open up a truth social account
10:40
and say, dear world, this confirms that I bequeath.
10:44
No, don't put your legal documents on the Internet.
10:49
So yeah, a dead box. And a dead box is basically a
10:53
digital or physical folder where you organize all those estate
10:59
planning documents. And you can you can put things
11:02
in there like a net worth statement with all of your
11:04
banks, all of your investments, all of your assets, houses, cars
11:08
and all of your debts, credit cards, loans, mortgages, student
11:11
loans. You know you don't want your
11:12
family trying to do some forensic accounting to figure
11:16
out where all the stuff is upon your death, right?
11:19
You can put a list of your you can put a will and trust.
11:22
If you don't have one, you can make one.
11:23
They're just like kind of simple legal documents.
11:26
Trust and will.com is a simple online solution.
11:29
Or if you work for a company that offers legal services,
11:32
often they'll help you build a will and trust.
11:34
Or you can go into Yelp and find like local attorneys in your
11:38
area. The price for attorneys probably
11:41
is going to be like in the 2000 to $5000 range, like an online
11:46
option like trust and will.com is more like the 600 to $1000
11:50
range. I think.
11:51
Don't trust, don't count there. Don't hold me to that, don't
11:53
work there. And then maybe if you have it
11:55
for free through your employer, you could get it for free or
11:58
close to free insurance policies or, you know, car and home title
12:05
contact info for your lawyer and CPA account and device passwords
12:09
so that your family can find. Actually, I just, you know, had
12:12
a friend whose husband unexpectedly passed away early,
12:15
like totally unexpectedly. He was like fine posting his
12:19
Facebook, didn't went to bed, didn't wake up and and he was
12:23
like in the crypto and didn't. And we like, I literally went to
12:26
her house in like the weeks after he died to try to like
12:30
find his crypto because he didn't have a dead box with the
12:33
stuff in it. And we got insanely lucky
12:35
because he did have a password manager that was still logged in
12:38
on his browser plug in. Mine logs out so fast.
12:43
Exactly. I was like dude, you don't
12:44
understand how lucky this is and we were able to basically
12:46
download a spreadsheet of all of his passwords and but not for
12:50
that. I think his crypto would have
12:52
been lost forever and to the other.
12:55
So, you know, that's why a dead box is important.
12:58
And then also like a nice idea is to do photos and music for
13:02
your eventual celebration of life upon your upon your death.
13:06
If you want to like be remembered the way you want to
13:09
be remembered, go put the photos you want in there.
13:12
So yeah, that's what that's what estate planning is.
13:14
It's not the South of France summer home routing through a
13:18
Swiss bank account to evade estate taxes.
13:20
Estate taxes aren't your problem, most likely.
13:23
They ain't my problem. I'm pretty rich.
13:25
I'm not worried about estate taxes.
13:26
Jen's not as rich as I am, and she definitely not worried about
13:29
state taxes. Drag me.
13:32
I mean, none of us are, we're all under 15 or 30 million,
13:34
right? So, but it is, it is about
13:37
making a plan because if you die, you don't want to leave the
13:39
best. And by the way, we do have a
13:40
dead box like starter template. It's like kind of like a, it's
13:44
like got all the files you need, all the instructions, all the
13:46
checklists and then videos on how to do it.
13:49
And that's available on our website.
13:51
But also you get that for free if you sign up for the fire
13:55
crash course cohort. So we're giving you the dead
13:57
box. We're giving you the how to
13:58
money like a millionaire course. We're giving you the build
14:01
wealth by investing in the next funds course.
14:03
All of our courses, all of them are included, which are I think
14:06
a couple $100 if you were to buy them individually.
14:08
And you get the actual fire cohort, which is a six week
14:13
class with Jen and I recorded if you missed the sessions and it's
14:17
199 bucks. So you know, for 190 bucks a a
14:20
fraction of just what you know, the cheap trust or will option
14:24
would be you get to like go through all this stuff.
14:27
Yes, I'm doing the dead box with my mom.
14:29
Are you? Yeah, for torture for her.
14:33
I need to do my own, but dude, we're doing I should have done
14:36
it when I was home. I should have started it when I
14:37
was home. But we're doing it on Zoom.
14:40
We meet on Mondays at 5. It's it's, it's, it's it's
14:44
trying to get her to like do password managers on the phone
14:48
when there's like 2 step authentication and then like,
14:52
you know, just having her gather passwords and gather account
14:54
information. I'm just like.
14:55
Bro, but when you do that, are you often asking her questions
14:57
like do you have this or where is this or how many of that?
15:01
Yes right. And you know, I hope your mom
15:03
lives another 100 years and we're all, you know, become
15:07
immortal thanks to some sort of AI medical miracle.
15:12
But if your mom does pass one day, like Can you imagine trying
15:14
to do this without being able to ask her a question?
15:17
It's. Like, yeah, it's impossible.
15:19
So we're starting with her because my dad is impossible.
15:21
So I'm like, let me start with you and then we'll like travel
15:24
upstairs and be like, dad, do you think that you know, well,
15:27
like convince him. I'll be like, OK, I tried it
15:29
with my mom. My dad will have to do when
15:31
we're both home. Like we'll have to like hunker
15:33
down because he's just like he has an excel spreadsheet of
15:36
passwords. So we're going to have to like
15:39
really do some. He he might be easier in that
15:41
regard. But then the other stuff he's
15:43
like, I don't know, he's just men are funny about their like.
15:46
Yeah, that's true. But man, man, if you're
15:49
listening out there, man, come on.
15:50
Make it easy on your women. Make it easy on your kids.
15:52
Let's. Go.
15:53
I know. OK, but that's who's and your
15:56
men, OK? Yes, but I was thinking about so
16:01
the the courses are 69 each right 7070 and then the dead box
16:06
is 50. So if you don't have any of the
16:09
courses and you could do the cohort, you're basically getting
16:12
the cohort for like 10 bucks. Yeah, aren't the courses 99?
16:18
Oh, I'm thinking of sale courses.
16:19
So you're getting a huge deal. Right.
16:21
That's the sale price. Even on sale, it's it's like a
16:24
steal. And oh, by the way, by the way,
16:27
I know someone's listening. Like what if I already have the
16:28
course? If you already have the course,
16:29
we're going to send you a coupon code to basically give you an
16:32
even cheaper price to credit you for already having the course
16:35
since you don't have to rebuy. It Yeah.
16:37
So check out your e-mail. I'll be sending those out soon
16:39
or if by this point you already have them.
16:41
OK, cool. Shall we get into our next
16:43
segment? What's the next segment?
16:45
Money. Money.
16:48
Can I ask a dumb one? Yes, you can Ask a dumb person
16:51
and I will answer. OK this.
16:53
Is actually this is actually a really smart question.
16:55
This is like such a smart question.
16:56
I'm going to do my best to give the smart answer.
16:58
I love it. It's an audio question, which we
17:00
love. If you want to submit one, send
17:02
it to our Instagram or e-mail us at podcast at
17:05
personalfinanceclub.com. So let's listen to this together
17:07
and then Jeremy will answer. Hey Jeremy, Jen and everyone at
17:10
the Personal Finance Club. Love all of the content.
17:14
My name is Anthony, I'm a 35 year old New York City teacher
17:16
who maxed out their TDA last year which is our four O 3 BI.
17:21
Have no debt, we should retire early.
17:23
Don't really care about a reduced pension and all that but
17:27
I want to start investing in a brokerage in thinking about tax
17:31
diversification. I still plan on maxing out my
17:33
TDA which now has a Roth option as well.
17:37
I'm seeing a lot about not investing in mutual funds for
17:39
taxable brokerages and to use ETFs instead.
17:43
I believe I understand why when it comes to dividends and
17:46
capital gains, but is it that black and white if I'm starting
17:51
to invest in a brokerage? Should I be avoiding mutual
17:55
funds and looking at ETFs instead?
17:58
Thanks in advance. Thank you for the question,
18:00
Anthony. Great question.
18:02
Love Anthony crushing it by the way, 35 year old teacher in New
18:06
York maxing out his four O 3B trying to invest above and
18:11
beyond that in a brokerage account targeting early
18:14
retirement. This is like FIRE personified,
18:17
which is it's so easy. You know, last week or a couple
18:20
of weeks ago, we talked to Cilicia.
18:22
Love her, wish her the best, but she, I know I'm going to rag on
18:26
Cilicia some more. She had a $40,000 plus car, an
18:31
$800 a month car payment and had like $20,000 in her $27,000 or
18:35
something in her all of her investments combined.
18:38
Like she was upset and right, she had way more liabilities and
18:41
very few assets. Like Anthony is just crushing,
18:43
crushing, crushing where he's saying I'm going to like just be
18:46
maxing out these accounts. So, you know, broad strokes, way
18:50
to go Anthony. You're going to retire early,
18:51
you're going to be extremely wealthy.
18:53
You're crushing it. Congratulations.
18:56
Now your question is basically when I'm investing in a taxable
19:00
brokerage account ETF versus mutual fund, there's these like
19:06
everyone kind of like like flips their hair and says ETFs are
19:10
better, they're more tax efficient, yada, yada, yada.
19:13
And it's this implication that you're going to become way more
19:16
wealthy with ETFs and you're going to have this like huge tax
19:18
burden with mutual funds. Is that true?
19:20
So here's my answer. First, it's important to note
19:23
this conversation is irrelevant in tax advantage accounts.
19:27
Your IRA, your 4-O1K, your HSA, your TSP, your four O, 3B, any
19:33
of these accounts, it doesn't matter because tax efficiency
19:37
doesn't come into play because you don't get taxed on gains or
19:40
distributions and they're only, you're either taxed not at all
19:43
like in a Roth IRA or you're taxed on withdrawal, at which
19:46
point that stuff has already come out in the wash.
19:48
So this is only talking about taxable brokerage accounts.
19:52
So it's a little bit nuance. Do we need to have the nuance
19:55
Canon? The nuance?
19:57
The nuance H bomb? No, it doesn't make sense for
20:01
there to be any. What is the harm?
20:02
That is the least nuanced alarm I can think of.
20:05
The nuanced jackhammer. OK.
20:10
So a mutual fund is kind of like everybody pooling their money
20:15
into one big account and then that account buying a bunch of
20:18
stocks. And when someone wants to take
20:21
their money out, like they say, hey, give me my share.
20:24
They sell a bunch of stocks to get the cash and then they give
20:27
the person the money about. And then the way that is taxed
20:30
is everybody equally reports that distribution, the taxable
20:35
distribution on their taxes. Usually that doesn't happen.
20:39
Usually there's more income then outflow.
20:43
And so in normal years of of normal mutual fund, there really
20:48
is very little to no capital gains.
20:51
But something weird happened a couple of years ago with
20:55
Vanguard target date funds, which is like the perfect kind
20:58
of example to use of when this can become an issue.
21:02
And so Vanguard has these target date funds and they have, they
21:05
had, and this is kind of like a little bit of a tangent, but if
21:08
you're, if you're really nerdy, you're going to think this is
21:12
kind of interesting. If you're here for like the fart
21:14
jokes, just stay tuned for a couple minutes because they we
21:18
can't go that. Way it's inevitable.
21:20
Yeah, exactly. OK.
21:22
So what happened is Vanguard had two shares of their target date
21:26
mutual funds. They had like basic investor
21:30
share and then like an enterprise share or two classes.
21:34
So a basic investor class like individuals like you and me and
21:37
then like an enterprise class like Microsoft might hold in
21:40
their four O 1K for their employees.
21:43
And then to invest in the Microsoft style in enterprise
21:49
class, you needed like $100 million minimum investment.
21:52
So it's only for like massive, massive, massive companies.
21:55
And then Vanguard a couple years ago was like, hey, we should
22:00
lower our fees. We should make our funds
22:03
cheaper, more accessible, better.
22:05
And part of that we're going to lower this minimum.
22:07
So instead of 100 million, we're going to lower it to 5 million.
22:10
And so we're basically going to make the enterprise share class
22:14
of this mutual fund more accessible to like small medium
22:17
companies as opposed to just massive companies.
22:20
And when they did that, it sounds very innocent, like
22:26
they're trying to do the right thing.
22:28
And there was this massive, massive unintended side effect,
22:32
which was all of those companies that held between 5 million and
22:37
100 million in the investor share class now became eligible
22:43
for the enterprise share class. And so they said, great, let's
22:47
switch. So they sell all their investor
22:50
shares, they transfer all their money to the enterprise and then
22:53
buy all the enterprise shares. And so then that thing happened
22:56
that I said usually doesn't happen where a bunch of money
22:58
came out of this mutual fund all at once.
23:01
And then the mutual fund had to basically say, hey, we had this
23:06
big capital gain. We realized all of you are going
23:09
to realize that in your taxes. And so you might be saying,
23:12
well, you have to pay the taxes of the this coming up ditched.
23:15
Not really. So here's how it works for you.
23:17
By the way, Vanguard's like in the middle of a class action
23:19
lawsuit or this because, you know, investors or the litigants
23:25
are saying that they weren't looking out for their investors
23:28
when they did this and they're, I'm sure they're going to pay
23:30
out because this was a pretty massive effort.
23:32
But it sounds like this like horrific thing and you're paying
23:34
all these taxes. That's not really true.
23:36
So if you held the mutual fund version on that day and let's
23:39
say it was $100 a share, you like Google the share price,
23:42
that's just how much it would buy to cost to buy one share,
23:44
$100 a share. What happened is like 10% of the
23:47
people exited all the all these small new businesses and that's
23:51
so they had to sell 10% of the stocks inside to pay them out.
23:56
What happened is the share price then dropped from $100 a share
24:00
to $10 a share and then they paid a distribution to all the
24:05
shareholders. So if I owned $100 share, my
24:08
share price became $90.00 a share and they gave me 10 bucks
24:12
and so on the stock chart that year people are losing their
24:15
mind because the stock price dropped by 10%.
24:18
I was like, why this go down by 10%?
24:19
But on that same day they got a dividend of 10%.
24:24
And so on Tuesday it was $100 share, $0.00 dividend.
24:28
On Wednesday there's $9 share, $10 dividend.
24:30
Tuesday to Wednesday you still had $100 share.
24:33
But then there's a problem is when you file your taxes this
24:36
year, the government says, hey, you got a $10 dividend pay U.S.
24:41
tax on that $10 and you do have to pay that tax.
24:44
And so you might say that's tax you wouldn't have had to pay
24:46
otherwise. That's not quite true because
24:48
you would have to have, you would, you would have to have
24:50
paid it when you sold one day, but maybe just not that year.
24:54
And so you're not actually paying a tax you wouldn't have
24:58
paid otherwise because it's accounted for on your basis,
25:01
like your total gain, but you're paying a tax in a year you maybe
25:06
wouldn't have chosen to otherwise.
25:08
And so that's when people talk about mutual funds versus ETS.
25:12
I think that's kind of the crux of the issue, which is, which is
25:15
mutual funds. It's not really completely at
25:18
your discretion when you pay the tax on the gains because there
25:22
might be these more random distributions.
25:24
It's really uncommon. Also, it might not hurt that
25:27
much. Like I said, you're going to pay
25:28
that tax anyway and maybe paying it now is potentially even a
25:32
good thing. If you're in a lower tax bracket
25:33
now than you are when you sell in five years, maybe that's a
25:36
good thing. And so it, it definitely is
25:40
nuance, Canon nuance, blow horn nuance.
25:45
This nuance joke is Jen is getting less and less tickled.
25:50
By and. She started untickled by it.
25:52
I was like, I was like, what does nuance can that my brain
25:55
was processing, Yeah. All right, so, so yeah, that's
26:01
the difference. Net net result.
26:04
You know, when people just like say, oh, they're they're less
26:06
tax efficient, you know, don't do them.
26:07
I'm like, at the end of the day, you're probably going to have
26:10
about the same amount of money. And in fact, you could have more
26:13
money depending on your tax brackets, things like that.
26:15
And most likely it's very small to nothing.
26:18
This Vanguard situation I just described, which was like this
26:21
10% thing that was headline news in the Wall Street Journal and
26:25
is the subject of the big class action lawsuit normally doesn't
26:28
happen at all. And it's no, it's no different.
26:30
And so all I've said is that's what it is.
26:34
The good news is if you, if anything I said there strikes
26:38
you as a bad idea, you can just buy the ETF version.
26:41
ETFs are like readily accessible and brokerage accounts.
26:44
That's it. I just opened up custodial
26:48
accounts for my two children who got a cash gift for Christmas
26:54
and I decided to go with the mutual fund version.
26:56
And that is a taxable account even because it's a taxable
26:59
account for them. And I, and the reason I made
27:01
that decision was ETFs are a little bit harder to trade.
27:05
They're a little harder to automate.
27:06
They don't trade during the opening hours.
27:09
Mutual funds are just like, put the money in, forget about it.
27:11
And I think that simplicity is going to serve them better than
27:15
any risk of this, like nuanced tax issue over the years,
27:17
especially since they're young and they're in low tax brackets.
27:19
If they do have what distribution, they're going to
27:21
pay no tax on it, and so might as well.
27:23
And so, yeah, I went with the mutual fund version in that
27:26
case. But if you don't want to go with
27:27
the ETF version, but is it a big deal?
27:29
No. Gotcha.
27:31
It's a small deal. It gets the nuance.
27:34
What's like if you have like a little tiny symbol on your
27:37
fingers and you do a chime, It's like the nuance that's.
27:40
Not a little dinner. Chime none of this is a thing.
27:43
This whole, this whole podcast is not a thing, Jim.
27:46
It's all entirely made-up, so we have to go with it.
27:50
OK, don't get existential on us, All right?
27:54
Do we answer all of Anthony's question?
27:56
I think so. He was just basically asking is,
27:59
is the ETF thing that big of a deal in in taxable brokerage
28:04
accounts and I say no. OK.
28:06
All right. Shot, Anthony.
28:07
Great question. Thank you for the audio
28:10
question. We love those.
28:10
We haven't had a video question. I think we had.
28:12
Do we have one? Send, send, take a selfie, ask
28:16
your question, keep it like under 60 seconds. 30 would be
28:19
better. A selfie is a picture.
28:22
Selfie video. You can have a selfie video.
28:24
Take a selfie video. Maybe I didn't finish my thought
28:26
there. Take a selfie video.
28:28
E-mail it to podcast at personalscienceclub.com and
28:31
you're going to be like probably jump to the front of the line to
28:33
get your question answered. I am picking favorites just so
28:36
people know. Questions are flooding in.
28:39
Yeah, honestly. Both of our listeners are really
28:42
getting excited. OK, let's move on to our next
28:45
segment, Scroll Patrol. Scroll Patrol.
28:53
This is a video from the Internet that Jeremy has not
28:55
seen. I picked it.
28:55
I plucked it from the YouTube, actually YouTube short.
29:01
So Jeremy, click on that and we'll get your reaction in real
29:05
time. No 3 Airbnb's and this is how
29:07
much profit they've made me in the last 30 days.
29:09
We spent life on this property. OK, using short term rental
29:13
properties to basically hack your way into wealth and passive
29:17
income is probably one of the most popular subgenres of
29:21
personal finance. TikTok slash social media in
29:23
general, and I really don't want to come on here to like debate
29:26
the ethics of being a landlord generally.
29:28
But one thing that I feel like we need to be constantly
29:30
reminding ourselves is that the Airbnb ification of the real
29:34
estate market is absolutely destroying a lot of communities
29:37
around the world. Affordable housing is in massive
29:40
shortage across the world, but especially in these same hot
29:43
markets where people are going to be interested in accumulating
29:47
short term rentals that they can leverage for profit at the
29:49
expense of people who actually need to find housing in these
29:52
areas. And almost by definition,
29:54
they're not going to be the same people who are advocating for a
29:56
lot more affordable housing to be built, because that would
29:59
ultimately depress the value of these rental properties they're
30:02
hoarding. Cool.
30:03
So that was like a. You're reacting to a reaction of
30:07
a video. Yeah, so this is a reaction to a
30:09
stitch to a video where where layers deep into the real meta.
30:14
What's that movie with a little spinny top?
30:17
Inception. Yeah, Leonardo DiCaprio, who did
30:20
not win at the Golden Globes last night either.
30:22
We both were snubbed. Yeah us us and Leo joined the
30:27
ranks of non Golden Globe winners 2026 it's.
30:31
A We weren't even at the ceremonies.
30:32
I was like, really? Yeah, I know that's a big snub.
30:36
OK. So, you know, she's making the
30:37
case that basically investing in short term vacation rentals is
30:43
not moral because you're taking housing from people.
30:49
And I mean, I really, you know, I like her because I like that
30:55
mentality and she has empathy and she doesn't want people to
30:59
be homeless and wants people to have affordable housing.
31:01
And it's all, you know, it's all for the right reason.
31:05
I guess I'm very skeptical of the fact that the way we get out
31:09
of a housing crisis is through peer pressure into ignoring
31:15
financial incentives and, you know, saving housing for people
31:19
who need it that just cannot ever work.
31:25
You know, no amount of, you know, wagging your finger at
31:30
people who are trying to run vacation rentals is going to
31:35
have all of us, you know, collectively stop investing in
31:38
vacation rentals. Therefore low priced homes flood
31:42
back in the market. It just does not.
31:44
So you're saying somebody's going to do it?
31:45
Right. And if like and if this is, if
31:48
this is profitable, people are going to do it and, and it's
31:53
profitable for a reason because there's people vacationing there
31:55
and so there's a need there. And so the problem isn't that
31:57
like, you know, this young dude's being greedy, greedy with
32:01
three vacation rentals. The problem is that like there's
32:04
demand there, right? And I think the solution is a
32:08
free market solution, which is we need more housing.
32:11
And you know, she mentioned that she's like, you're not
32:14
advocating for affordable housing.
32:15
I, you know, I might disagree at that point.
32:17
I feel like people, you know, affordable housing is just
32:20
called housing. It's like you need to build
32:21
more, you need to zone it correctly, yada yada yada.
32:23
Like, you know, the same, same mentality of profit seeking, you
32:27
know, douchebag who's trying to own 3 Airbnbs is also a profit
32:31
seeking developer who's trying to turn, you know, a single
32:34
family home into a six Plex or is trying to rezone areas for,
32:39
you know, high rises. And that's how you get more
32:42
housing, right? And you know, also there's like
32:45
market effects here. Like, let's say all the Airbnbs
32:49
become super popular, like hotels suddenly by definition
32:52
become unpopular because they, you know, the, the flow must be
32:56
going somewhere and then maybe hotels are getting re
33:01
redistricted or rezoned as condos, right?
33:03
And so I just, I just feel like, you know, I love her.
33:07
I think she's nice. I think she's trying to do the
33:09
right thing and I, I love where her heart is, but it's kind of
33:11
like walking to a river and like putting your like waiting to the
33:15
river and like putting your hands on be like, no, guys like
33:18
don't do it. Like the river is going to flow
33:20
where the river is going to flow, because people are like,
33:22
you know, maybe she should be yelling at consumers who are
33:25
booking Airbnb is like, why are you booking an Airbnb?
33:27
If you're booking an Airbnb, you're, you know, you're taking
33:30
someones home. Maybe should be, she should be
33:32
yelling at people who like travel at all, because if you,
33:35
if you take out, if, if there's so many travellers that are
33:38
filling up hotels and Airbnbs, everyone who goes on vacation is
33:41
now at fault for their not being homes.
33:43
You know, it's, but it's all the same kind of like stop the river
33:46
guys and the river's going to flow where the river's going to
33:48
flow. We really need to be like
33:49
advocating for pro development, you know, and it sounds like I'm
33:53
like, Oh yeah, we like go help the developers.
33:56
It's just it's that always felt and like, you know, it feels
33:59
like everyone is listening with my voice and I was probably
34:01
trying to like, you know, take their little litmus test and and
34:05
see like, oh, is that guy, like is he a right wing douchebag?
34:08
Goes he a left wing like crazy or whatever.
34:12
And you know, I'm just I'm just a I'm just a middle of the road
34:15
Jeremy guy. But it does seem like sometimes
34:17
people say like, oh, don't do the Air B and BS thing, but
34:21
they're also like not in my backyard.
34:23
I don't want, you know, I don't want more high rises here.
34:26
I don't want more building here. I don't want to support
34:28
developers like you want to support developers like that's
34:31
what we need, more housing. So you know.
34:35
I also feel like there's a couple of major cities that have
34:37
stopped allowing your B and BS. I feel like New York might be
34:40
one of them. Yeah.
34:41
You know, and that's like a legislative approach.
34:44
And and I kind of think those are kind of like band aids.
34:48
It's like maybe instead of, you know, individual content
34:52
creators walk into a river being like, hey, guys with their hands
34:55
don't do this. That's like putting up like a
34:58
partially operational dam or something to stop the flow.
35:01
But it's usually, in my opinion, like short thinking, you know,
35:04
like, you know, another classic one is, is rent control.
35:09
It's like, yeah, rent control is great for or, or it creates
35:13
weird. I really like this river
35:15
metaphor I'm making up on the fly because do you?
35:17
Yeah. I really compliment my own
35:19
metaphor because it creates, it creates these like weird.
35:23
You know, you stop the flow there, but then it floods over
35:26
elsewhere. It's like, OK, maybe Airbnb stop
35:29
and maybe like, you know, these like boutique, the hotels start
35:34
popping up that or condos are getting sold and converted to
35:37
apartments or, you know, creates other incentives and, and the
35:39
flow pops out other way, other ways.
35:41
And so it's like, you know, just stopping the flow, whether
35:43
through peer pressure or, or even legislation.
35:46
I think it's kind of like trying to dam rivers and when in fact,
35:49
you should really be like, you know, building a river in the
35:52
direction you want to go in so that the river that the river
35:55
can flow that way. That's my take.
35:57
And so I'd say for her, you know, heart for her goals for
36:04
her purpose, I'd say 8 plus like I want housing too for her
36:08
approach. That's not what I think is
36:11
likely to work by peer pressuring people into not doing
36:14
Airbnb. So I give it AI don't know.
36:17
I don't want to give it a grade. It's going to make me sound
36:18
mean. I give it a pass.
36:22
Oh wow, it's not. That bad?
36:24
I was going to say like AB or AC or something, but like crazy.
36:27
You've never. Given Have you given anybody an
36:29
F? Yeah, I've given FS, or maybe
36:31
I've given D minuses. You don't give me really bad
36:33
ones though. You gotta give me more like
36:35
scams and stuff like that. It's sometimes, yeah.
36:37
Anyway, Yeah, OK, well, so B minus.
36:43
Sure. OK.
36:46
Sense trying to keep me from. Being like she, as if she's
36:49
watching this. Yeah, I'm not sure.
36:51
She's one of our two listeners who can't wait to see her.
36:54
Right? Right.
36:55
OK, OK, we'll allow it. All right, let's let's get into
36:58
our last segment of the episode. Money, money.
37:03
Jeremy had time today. OK, so we're in the comments
37:06
section. Jeremy, as you all know is
37:10
infamous on the Internet and so he gets lots of comments and you
37:14
recently, I think last week posted a month by month
37:18
performance of your investment portfolio for 2025.
37:21
Do you want to explain what we're seeing and we'll get into
37:23
this comment? Yeah, basically I put there's a
37:26
big table on the left hand side, the months January through
37:29
December, and then the middle com market change, what the
37:32
price did of My Portfolio that month and on the right side
37:36
dividends, how much it paid out in dividends.
37:38
And so the market change, the price change is like up some
37:42
months, down some months, and then the dividends are
37:44
consistently paying between 1000 and $28,000 a month.
37:47
And total, yeah, total market change. 2025, My Portfolio was
37:52
up $379,000 in share price and it was up $71,000 in dividends
37:58
for a total gain of $451,000. And so basically me doing
38:03
nothing, sitting on my hands, just, you know, my investment
38:06
portfolio doing what it's doing was up almost half, $1,000,000
38:10
last year between change of share price and dividends.
38:14
And that's great. That's this whole FIRE thing
38:16
we're talking about where we're doing the cohort on sign up ends
38:19
in three days, then 22nd. And that's what investing is all
38:24
about. It's about building the, you
38:25
know, the the golden goose big enough so that you can live off
38:29
the eggs forever. And then this commenter said.
38:33
Come back to all this. One's the dollar plunges.
38:35
No punctuation. That's how mad they were.
38:38
They can't even bother with a period.
38:39
Not exclamation, nothing. Yeah, this comment, I don't
38:43
think I actually really like to be complimentary at the
38:46
comments. I tried to find common ground,
38:48
but this one I don't think really makes sense because I
38:51
was, I was showing, you know, change in share price and
38:55
dividends. And they're saying come back to
38:58
all this once the dollar plunges.
38:59
When the dollar plunges, what that really means is there's
39:01
inflation, things cost more and maybe, you know, our dollar is
39:07
worth less than a euro. And so traveling abroad would
39:09
would be worth less and, and all those things.
39:12
If that's true, that's more reason to hold investments and
39:19
more reasons to not hold cash. And so if the dollar plunges, my
39:23
money is exactly where, you know, if I knew there was going
39:26
to be a dollar plunge, I could maybe do some sort of like
39:28
inflation hedge or something like that in the short term.
39:30
But, but generally speaking, for normal investors, if the dollar
39:33
plunges, that's why you want to be in investments, not in cash.
39:38
You know, if I have $1000 in cash and, and inflation double
39:42
s, then I can only buy $500 worth of stuff.
39:46
But if the if inflation double s, all the companies I own in my
39:51
investments are going to raise their prices and they're going
39:55
to profits are going to go up in dollars and then their share
39:58
price in dollars is going to go up.
40:00
And so let's say all the companies just do exactly the
40:03
same and simply just make up for inflation.
40:06
My investments will stay equal while the value of the dollar
40:09
will be in half. And so, you know, and, and we
40:13
can actually see this. There's an example that just
40:14
happened just last year, which is.
40:17
I recently posted the. Of the top ten countries with
40:23
the largest stock markets by market cap, which one's
40:26
performing the best? And and you know, the US had a
40:28
great year last year, up 17% of the US stock market in 2025, but
40:33
it was actually only ranked 8th, the top 10.
40:35
Canada was first with 36.5, Germany 36, UK 35, Switzerland
40:42
33 down and down to France at 7th, right ahead of us at 28.
40:47
So I kind of all these, you know, Western, westernized big
40:52
countries did much better than us because the dollar did
40:57
poorly. And, and another way to look at
40:59
that is, you know, for examples, if I own international stocks,
41:04
which I do and the dollar does poorly, those international
41:07
stocks are worth even more. It's like kind of like buying
41:09
EUR if, if a dollar is worth a dollar or a dollar is worth
41:13
€1.00 and the dollar plunges and I own a bunch of international
41:16
stocks in euros now those have gone up by double.
41:19
And so another reason why My Portfolio actually outperformed
41:23
the US stock market last year, because I own international
41:26
stocks and the dollar did plunge a little bit and went down about
41:29
I think 10 or 15% relative to the euro last year.
41:31
And so my international stocks did even better, as demonstrated
41:35
in this, you know, chart of how stock markets performed as
41:40
measured in U.S. dollars. And then Europeans actually
41:46
experienced the opposite. Some Europeans were like, what
41:49
you're saying the stock market, the S&P 500 went up 17% last
41:52
year. My S&P 500 ETF, which is
41:55
measured in euros, was pretty flat last year.
41:58
I think it was up like 5 or 6%. And they're like, and and
42:01
because they're kind of witnessing the opposite.
42:03
So what he really maybe should have said is wait until the
42:06
dollar goes sky high and we have deflation.
42:10
Dollars worth are way more than your stocks might be worth less.
42:13
But yeah, you know, I think this this commenter's pride is
42:16
saying, you know, shaking his first of the sky and say the
42:21
economy is doomed and, and just wait until the bad thing
42:24
happens. And, and I think that generally
42:27
speaking, doomsday predictors are right.
42:30
But that's there's an old adage where you know the the stock
42:35
market crash prognosticators have correctly predicted 29 out
42:41
of the last three crashes. Which means your favorite joke.
42:45
Yeah, it's hilarious. It's a math joke.
42:48
So they basically are saying, you know, 29 years in a row,
42:52
they're like, oh, this is the big one, this is the big one.
42:54
And they said, and then three years there was a crash in 29
42:57
years. And it's OK.
42:58
But you know, there's 26 years where there wasn't a crash in
43:00
the markets way up. And so so, you know, he's, you
43:03
know, one of these years he's going to be right.
43:05
And good for him or her. I mean, let's be honest, it's
43:09
him. I can't remember honestly.
43:12
I don't think we've ever like had a negative comment from a
43:15
female. Maybe it's like you don't know,
43:17
it's just not. It's just not likely to for
43:20
females to do for to be. Trolling on the Internet?
43:22
Yeah, I'll find you some trolls. So anyway, you know, I, I don't
43:25
think this is an accurate comment.
43:27
I think that you invest to protect yourself from dollars
43:31
crashing and inflation, things like that.
43:33
But they're going to be right, you know, one of these years
43:37
probably. And good for them.
43:38
I'm going to keep doing what I'm doing.
43:40
OK. And we're going to keep doing
43:41
what we're doing. That's right.
43:43
Here on the personal finance club show Boom.
43:46
Exactly. That's it.
43:47
Golden Globe snubby. Yeah, I know in 2027, that is
43:52
all. We have time for you today on
43:54
the Personal Finance Club show. Thank you for listening and
43:57
we'll see you next week. And if you want to get in on
44:00
that fire cohort, Joan join me and John live for six weeks, get
44:04
all of our courses, everything for 199.
44:06
The sale ends and the shopping cart closes on Sunday, January
44:11
22nd. And if you're listening to this
44:13
past, then ignore this. And if you're listening to this
44:16
past, then you know what you should do.
44:17
You should follow the 2 rules of Personal Finance Club.
44:20
Rule #1 live below your means and rule #2 invest early and
44:24
often. See you next time.
44:26
The personal finance club show is produced by Jeremy Schneider
44:28
and Jen Mundia, music by Essa Balu and Homie.
44:31
Send your questions to podcast at personalfinanceclub.com.
44:35
The Personal Finance Club show is Co hosted by Jeremy Schneider
44:38
who is a co-owner of Nectarine and SEC Registered Investment
44:42
Advisor. The views expressed on this show
44:44
are those of the hosts and guests and do not necessarily
44:47
reflect the views of Nectarine. Please refer to
44:49
hellonectarine.com for all relevant disclosures.
44:53
This podcast is for informational and educational
44:55
purposes only and should not be construed as personalized
44:58
investment advice or a solicitation to buy or sell any
45:01
security. Listeners should consult their
45:03
own financial, legal or tax professionals for advice
45:06
specific to their